Wednesday, 6 November 2013

Renationalise the Portsmouth Naval Shipyard

One of the more obvious and strategically disastrous side-effects of the bloated and ill-starred carrier program is that the Portsmouth Naval Shipyards are now threatened with closure. Its hard for our party to respond to this action: which is bad for the nation, really bad for the Royal Navy and atrocious for our seat of Portsmouth South, when the best we can offer as an alternative is our half-page pdf defence policy.

Thus how can the party effectively respond to this retrograde development, except by the valiant efforts of Gerald Vernon-Jackson, the Leader of the Council at  Portsmouth (a city controlled by us) and our MP there Mike Hancock. But, it is not difficult for me at all to respond. 

This is exactly the type of short-sightedness that prompted me to write a few weeks ago advocating the re-establishment of the Admiralty as a separate entity to the Ministry of Defence and the return to using the title of First Lord of the Admiralty. 

In response to the latest developments the party should be arguing for nationalisation of the BAE-owned facilities in Portsmouth. If BAE want to be a dog in the manger on this and not cooperate then suitable actions to "encourage" them to see the light should be taken. This is a perfect opportunity for the party to go in to bat for the interests of our constituents in Portsmouth (and potential ones in seats like Gosport). BAE should realise (or be taught) that the relationship between defence contractors and the defence establishment is symbiotic NOT predatory.  

I would attribute a direct linkage between the closure announcement and the cost overruns in the carrier program. The first of the carriers, Queen Elizabeth, is due to begin sea trials towards the end of the decade. A decision will not be taken until 2015 about whether the second carrier, Prince of Wales, will ever be operational; it could be sold or mothballed. The carriers were planned to be built by a consortium that included BAE.

This appears to be yet another example (HS2 anyone) of a "big toys" strategy that creates much collateral damage in its wake. The projected cost of the two carriers has risen by a further £800m to £6.2bn, according to a Financial Times report. The latest increase means the bill for the 65,000-tonne ships will be almost double the £3.5bn estimated when the project was agreed by the Labour government in 2007.

The Guardian today reported that the
Ministry of Defence said how BAE "rationalise their business" is a matter for the company. "Negotiations between the MoD and the Aircraft Carrier Alliance regarding the rebaselining of the Queen Elizabeth carrier programme are at an advanced stage," it said. "No final decisions [on the programme] have been taken." If the Admiralty had been re-established as we proposed elsewhere, could be realistically expect such a blase response as the Ministry of Defence offer here.

Apparently if shipbuilding is wound down at Portsmouth, the  Ministry of Defence will have to bear costs that could run into hundreds of millions of pounds under a 2009 agreement guaranteeing BAE a minimum of £230m a year in shipbuilding and support work over 15 years. The agreement can be cancelled, but the Ministry of Defence would be liable for closure costs and compensation to BAE for its lost investment. Renationalising the shipyards (in lieu of compensation to BAE) is the solution.

Beyond those directly effected there are an additional 2,900 BAE staff employed in the Portsmouth area on tasks that include maintaining, servicing and upgrading the Royal Navy ships at the naval base. The Guardian reports that their jobs are not expected to be affected by the announcement. The only rattling of the sabre these days is BAE making these threatening noises towards the clueless Ministry of Defence. BAE should be told if it doesn't play ball then the other functions related to servicing the Royal Navy shall also return to the Admiralty's control. 

The Tories' Minister of Defence Philip Hammond tried to deflect concerns about the rising costs by announcing that he has renegotiated the project to build the carriers on terms more favourable to the taxpayer. And seemingly in a fit of pique BAE have come out with this threat to shutter Portsmouth (and some Scottish yards).

A report a few days ago in the Financial Times, suggested the government would move that further cost overruns beyond the new £6.2bn baseline for the carriers will be split 50-50 between the Ministry of Defence (MoD) and the contractors – whereas previously they had fallen mainly on the government.

An MoD spokesman said: "Negotiations between the MoD and the Aircraft Carrier Alliance regarding the re-baselining of the Queen Elizabeth Carrier Programme are at an advanced stage.

"No final decisions have been taken and the department will make an announcement in due course."
 The shipyard announcements are clearly BAE's attempt to get ahead of the carve and blackmail the government into a backdown on the over-run sharing.

This all has the look of the old private sector shakedown where the latest ructions over the price escalation in the carriers threatens to kill one of the two carriers. So what do they do? Claim inadequate work, and then get the government to take some kneejerk measures to save the day, i.e. subsidies or holding fire on pushing back against cost overruns.

I would prefer to think that the carrier project is in the wrong hands and that the shipyards would be better off back in Royal Navy ownership. Its time to take the Portsmouth yards back into Royal Navy hands and say goodbye and goodnight to BAE. 

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