Mr Major’s Contribution as a Government Whip to the Ordnance Factories Debate – 21 May 1984

Below is the text of Mr Major’s Parliamentary contribution as a Government Whip to the Ordnance Factories Debate, made on 21st May 1984.

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The Parliamentary Under-Secretary of State for Defence Procurement (Mr. John Lee) We are drawing to the close of many hours of debate on the Bill from Second Reading, through 24 Committee sessions and Report stage to Third Reading. From the Opposition we have had – it was amply demonstrated tonight by the speeches of the right hon. Member for Llanelli (Mr. Davies) and by the hon. Member for Kingston upon Hull, North (Mr. McNamara)  – the usual mix of sarcasm and exaggeration. On Second Reading the right hon. Member for Llanelli made a ludicrous and disgraceful attack on private defence companies. He did not do so tonight, but he made equally dismissive comments about our overseas military sales – the £2.5 billion worth of goods that we sell overseas, the 150,000 jobs that are involved in defence exports, and the 40 per cent. of ROF products that are sold overseas.

By contrast, the contributions from my hon. Friends the Members for South Ribble (Mr. Atkins), for Nottingham, South (Mr. Brandon-Bravo) and for Bolton, West (Mr. Sackville) were models of balance, and I appreciate their support. The line of my hon. Friend the Member for Congleton (Mrs. Winterton) has been consistent, and she has maintained the family tradition of independence.

Security was mentioned repeatedly this evening, as it was many times in Committee. Security is continually kept under review, and we acknowledge the comments of the hon. Member for Walsall, South (Mr. George). Significant improvements in security arrangements are being made, but I cannot go into precise details at this stage. On Report the House had a full debate on our new proposals for security arrangements at ROF sites. To reiterate our position, we have taken powers in the Bill to enable Ministry of Defence police to remain at ROF sites for as long as we consider it necessary. Parallel to that, the ROFs will set up a company guard force to take on the responsibility of guarding ROF sites where that is considered appropriate. Our eventual aim is to replace Ministry of Defence police with company guard personnel. That will, of course, depend upon an assessment of the threat at various sites.

Several detailed questions were asked about the organisation and training of the new company guard force. It is far too early to give full answers to those questions. The Ministry of Defence will liaise closely with the ROFs on recruiting and training such a guard force, with the aim of creating a reliable and efficient organisation.

Much has been made of the fact that Ministry of Defence police have access to arms. The new company guard force will not be armed, but security arrangements must be cleared with local police authorities and contingency plans will be made for civil police support, where necessary, on each site. As the House knows, the civil police can draw arms should the position so warrant it. Contingency plans will include the possible need to call upon armed police. As the new company guard force is built up during the coming months, liaison arrangements with existing MOD police guards will be worked out. I emphasise that MOD policemen will remain subject to the ultimate control of my right hon. Friend the Secretary of State for Defence.

Foreign control has also been mentioned repeatedly during our debates. We have always made clear our intention that the new ROF companies should not come under foreign control. The best way to ensure that objective would be to have appropriate articles of association for the company once it ceases to be under Government control. Accordingly, we have drawn up drafts, which were made available to the Standing Committee which examined the Bill.

The draft articles require the company to maintain a register of shares held by people who are not British citizens. They limit the number of these shares to 15 per cent. of the issued share capital of the company and provide for a special share to be held by my right hon. Friend the Secretary of State. Even after he has disposed of the bulk of his shareholding, it will give him the power of veto over any attempt to change the articles in question. It will also enable him to veto the share of any substantial part of the business which is more than 15 per cent. of the value of the business, or produces more than 15 per cent. of the profits. It will be open for consideration at the time whether the Secretary of State should exercise that power in the case of a projected sale to a British interest, but he would certainly do so to prevent a sale to a foreign interest.

My hon. Friend the Member for South Ribble asked about the relationship between ROFs and International Military Services Ltd. Of the total IMS budget for 1984, ROF products account for approximately half the turnover, but less than 25 per cent. of the profits before tax. Most of that relates to the performance on contracts which were signed several years ago. On the new business budgeted for signature in 1984, ROF products represent only 25 per cent. of the contract value.

The hon. Member for Stoke-on-Trent, Central (Mr. Fisher) and my hon. Friend the Member for Renfrew, West and Inverclyde (Mrs. McCurley) asked about houses. My hon. Friend asked about farm tenancies. The rights of tenants will not be diminished and tenants whose houses are transferred to the company will enjoy all legal safeguards. The same applies to farm tenants. House properties that lie inside the ROFs’ perimeters will be transferred to the company together with the houses that fall within the safeguarded areas at the explosives ROFs. Those unaffected by safeguarding will remain with the MOD, except where the company requires the house or land on which they stand. The details of that arrangement are being worked out, together with what consideration should be paid for the properties where they represent an asset to the company.

The hon. Member for Stoke-on-Trent, Central asked about the valuation of the assets. As we made clear in Committee, it will not be possible to value every item of property and each right or liability which is to be transferred initially before vesting day. The precise identity of many of the assets cannot be ascertained until vesting day; for example, a large proportion of them in terms of value will consist of work in progress. Work is carried on in respect of such assets for the benefit of the trading fund until vesting day, and after vesting day for the benefit of the new company. It will therefore be necessary to make an inventory of these assets at vesting day, and only then can their precise value be ascertained. The same is true of some liabilities, such as payments due to suppliers.

During our proceedings right hon. and hon. Members have repeatedly and rightly referred to the long and distinguished history of the ROFs, the quality of their products and the loyalty, integrity and dedication of the work force at all levels. That must not prevent us from reviewing their structure and role in our evolving defence procurement strategy. The ROFs served our nation nobly in the past. Our proposals will ensure a strengthened organisation. It will consist of a holding company with four subsidiaries, considerably enhanced managerial, research and marketing resources, greater flexibility in recruitment and salary levels and, assuming privatisation by flotation of the whole, will give employees a real opportunity for the first time to invest and participate in the company.

The ROFs have a bright future, but they cannot be above criticism or change. The Government would be failing in their duty if, in the search for greater competition and efficiency in defence spending, they preserved the sheltered position relative to other defence contractors which the ROFs have historically enjoyed.

I am confident that the royal ordnance factories will respond to the challenge and opportunities, and I commend the Bill to the House.

Mr. McNamara rose –

Mr. Speaker Order.

Mr. McNamara Why, Mr. Speaker, will you now not give –

Mr. Speaker Order. I think that the Minister has sat down.

Mr. John Major (Huntingdon) rose in his place and claimed to move, That the Question be now put.

Question, That the Question be now put, put and agreed to.

Question put accordingly, That the Bill be now read the Third time.

The House proceeded to a Division –

Mr. McNamara (seated and covered) On a point of order, Mr. Speaker. May I humbly request information as to why hon. Members were not called to speak in the debate when there was still a minute of the allotted time to go?

Mr. Speaker The hon. Member had already spoken and therefore had exhausted his right to speak again. The Minister had sat down.

Mr. McNamara Further to that point of order, Mr. Speaker.

Mr. Speaker Order. If an hon. Member who had not spoken had risen to intervene, of course I should have called him.

Mr. McNamara If I had asked the leave of the House –

Mr. Speaker Order. The hon. Member did not ask the leave of the House.