BAE Systems

Tobias Ellwood Excerpts

Thursday 24th November 2011 Commons Chamber

[Mr Davis]

The right hon. Gentleman is absolutely right on both counts. It would suit the people whose minds we are trying to change very well if we fought against ourselves on party political or geographical grounds. Much as I look back with amusement and fondness on past cricketing experiences in the wars of the roses, those wars need not be repeated here and now.

[Mr Tobias Ellwood (Bournemouth East) (Con)]

My right hon. Friend makes a powerful argument, much of which I agree with, but in the interests of balance, will he concede that there is another side to the coin? The Apache helicopter, which we purchased, made by Boeing, was built in the UK, not by the American work force. We also make kit that is exported: the empennage—the rear section—of the F-35, designed for an American market, is made here, and the M777 Howitzer is made in this country and exported. There is another side to the coin.

[Mr Davis]

There is another side to the coin, but since my hon. Friend draws me on that point, I am afraid that on one side there is a pound, and on the other there is a ha’penny. I was the Public Accounts Committee Chairman for five years, and I looked at the issue in close detail, and I have to tell him that the Americans are far more aggressive and effective than we are when it comes to protection of their intellectual property.

The proposals have all sorts of strategic implications. One of the things that we looked at 10 years ago—I am probably not breaking too many secrets—was the advanced medium-range air-to-air missile. We were not even allowed technological knowledge of AMRAAM because of the Americans’ defences, and that made it less effective for us. This is quite an area of battle. Indeed, the previous Defence Secretary made quite an issue of this, as my hon. Friend the Member for Bournemouth East (Mr Ellwood) will know, and will understand only too well. We have not fought our corner very well, and I am afraid that BAE Systems is culpable, as part of that. It has been very poor in terms of its strategic decisions on civil and military aviation, and when it comes to protecting our intellectual property.

--- Later in debate ---

[Alan Johnson]

My hon. Friend is absolutely right. That is precisely the point. We can compare those two British companies. Around 96% of GlaxoSmithKline’s sales are abroad, but it is making a decision as a British company to invest in Britain and open manufacturing plants at a difficult time, and it is of course helped by the patent box that was agreed by the Labour and Conservative parties. It is an example that BAE should follow.

As thousands of highly skilled BAE employees contemplate a miserable Christmas, it is time for the company to engage properly with its work force in order to ensure that their important skills are retained in aerospace manufacturing and that aerospace manufacturing is retained on the Humber. We are 58 days into the statutory 90-day process, but there is no sign whatsoever that BAE is doing anything other than going through the motions. Indeed, the site director at Brough told my hon. Friend the Member for Kingston upon Hull North (Diana Johnson) only last week that nothing would change during this consultation process. He told her that they were going though the motions. When the 90 days end on Boxing day, it will still be 27 September as far as BAE’s plans are concerned.

The unions are working hard to hold the company to its statutory obligations. The union representatives involved are very good and need no advice from me, but if I was a union rep involved in the case, I would seriously consider seeking a protective order against BAE for its lack of engagement.

We believe that BAE’s three manufacturing sites should be retained. The company should stand by its loyal work force in difficult times, so that when the good times return it has sufficient manufacturing capacity in this country to deal with the extra work.

All the signs are that military aerospace will expand dramatically from about 2016. At the very least, BAE should adopt the intelligent proposals put forward by its own executive group at Brough in order to mitigate the significant risk inherent in the company’s plans by retaining crucial assembly and sub-assembly at Brough for the duration of the next Hawk acquisition contract, thereby saving about one third of the jobs until 2016.

[Mr Ellwood]

The right hon. Gentleman is making a powerful speech, but will he elaborate on his statement that the defence industry expects to expand with orders in 2016? From the angle that I see the issue, the United States, NATO countries and so forth are doing exactly the opposite: this is the area in which budgets are being cut; defence is being affected.

[Alan Johnson]

That is true, and I will turn to civil aerospace in a moment, but all the experts in the area, including the unions handling the situation, expect that from 2016 there will be an increase, particularly in Hawk orders. We are looking at the home of Hawk in Brough, and it is going through a difficult time, but most expect that, if we can get to 2016 and through the next difficult period in this country and throughout the world, there will be significant opportunities in military engineering.

The executive group at Brough has put forward a proposal to safeguard what is probably the Saudi Arabia contract, to ensure that there are no dangers to it and, therefore, to save about one third of the work force until 2016. There is a desperate shortage of necessary skills to meet booming demand in the commercial aerospace sector by companies such as Rolls-Royce and EADS, so the retention of some Hawk work should be combined with facilitating and incentivising the transfer of packages of commercial aerospace work to Brough. It is an attractive site, with exceptional access by air, sea and land. It has the machinery, the layout and the work force that commercial aerospace companies need, and it can be utilised without causing job cuts elsewhere.

It is time for fresh thinking. As the right hon. Member for Haltemprice and Howden has pointed out, we are in the crazy position of using taxpayers’ money to destroy skilled jobs in an economy that is desperate for high-value manufacturing to expand. It is time for an ethical and, even, patriotic approach by big profitable international companies, such as BAE, to the problems that this country faces. The Government have an important role to play in such a strategy, but the prime responsibility rests with the company.

I have a final quotation from Andrew Witty. He says:

“I…believe one of the reasons we have seen an erosion of trust…in big companies is they’ve allowed themselves to be seen as detached from society…They’ve allowed it to be perceived that it’s all about money.”

BAE needs to avoid being a “mid-Atlantic floating entity” and to demonstrate that it is a British company that cares about British society and British jobs. The work force at Brough have been loyal to BAE in difficult times. BAE needs to reciprocate that loyalty now.

--- Later in debate ---

[Mr Tobias Ellwood (Bournemouth East) (Con)]

It is a pleasure to be the final contributor to this important debate, and I begin, as others have done, by congratulating the right hon. Member for Kingston upon Hull West and Hessle (Alan Johnson) and my right hon. Friend the Member for Haltemprice and Howden (Mr Davis) on securing it. Some interesting messages have emerged from it, both for the Government and for BAE Systems.

My right hon. Friend began by highlighting the importance of these decisions and the impact they will have on families where redundancies are involved, not only in his constituency—in Brough, which I know well, as I was married just up the road in Kilnwick—but across the country, as 3,000 jobs are going. The defence manufacturing industry can be a ruthless and competitive business, and we must bear in mind the impact on individuals, families and communities. He also mentioned that Britain no longer makes jets. That is true, but we do make an awful lot of parts. We are part of various consortiums, and that is the way forward, as it is in the car manufacturing industry. It is difficult to think of aircraft that do not utilise engines from Rolls-Royce, wings from Airbus and so on. That is the way of the world and we can at least be proud of the extent to which we are part of the great defence consortiums.

The Minister was right to remind the House that this country still has the second largest defence industry in the world, and our share of exports has indeed increased in the past year. My right hon. Friend the Member for Haltemprice and Howden also mentioned the concern that jobs involved in putting together these products, particularly the Hawk, are going to India. He countered my intervention by saying that I was absolutely right and that although we do export the M-777 and the empennage—the rear end—of the F-35, perhaps BAE Systems could look more wisely at things, particularly future upstream developments such as the Mantis, the Taranis, the Type 26 and other intelligence, surveillance, target acquisition and reconnaissance—ISTAR—assets which could be built in the UK rather than elsewhere. He also made an important point about executive pay, and restraint could be shown there.

We are being affected by an economic slow-down and that does cause a review of budgets, not least in the United States. That is why we are affected by what is happening with the F-35B, because it is American orders that are having an impact on us. That is not a decision made by our Government. However, this Government have had to make some very difficult decisions. Along with other Departments, the MOD received a cut of 7.5%. In addition, as confirmed by the Audit Commission’s report in 2009, there was a £38 billion overspend on procurement projects that had to be contained.

That raises the question about the involvement of the Government: how far do any Government get involved in the decision-making process of the defence industry, particularly in securing orders? As has been mentioned, there is a decision to be made about whether to buy off the shelf or have procurement processes. The first step is to have a strategic defence policy and a review to make sure that there is clarity about where we want to go. Let us consider what happened in Afghanistan. The replacement of the Snatch Land Rover took some time, and the Cougar, Vector, Jackal, Mastiff and Ridgback were procured off the shelf and then, in one way or another, got rid of. At the same time, BAE Systems made the RG31, a mine protected vehicle used in South Africa, and the MRAP—mine resistant ambush protected—vehicles, which were used by the Americans, but both those were ignored.

Mention has been made of the Nimrod, but that is a very sad tale indeed. The first contract was signed in 1996 for delivery in 2003, but by 2010, when the coalition Government were formed, not a single aircraft had been delivered. The cost of each aircraft had also jumped from £133 million to £455 million, which is a huge increase. This aircraft was of course based on the Comet design—it was a 1960s design. That was an appalling procurement project and eventually it had to come to an end.

I shall end my contribution by saying that I am very pleased that we are having this debate, as there are huge lessons to be learned in the procurement process. I am pleased that we have come forward with a defence industrial strategy. Redundancies are always regrettable and I hope that BAE Systems and the Government will take heed of the various messages that have come from hon. Members on both sides of the House in this debate.

Question put and agreed to.

Resolved,

That this House urges BAE Systems to act to preserve the UK’s defence production skills base and, as a recipient of enormous resources over many years from the UK taxpayer, to deploy those resources in such a way as to protect the nation’s manufacturing capability.