HL Deb 29 July 1982 vol 434 cc431-9

8.24 p.m.

Lord Glenarthur rose to move, That the draft order laid before the House on 5th July be approved.

The noble Lord said: My Lords, before I move to the substance of the order, may I start by saying that the second Motion in my name, relating to Northern Ireland, is substantially the same, and it may be convenient for your Lordships if I were to speak to that amendment now and move it formally afterwards. It may also help if I set the scene by considering briefly the present state of British Shipbuilders and its prospects.

In the mid-1970s the world market for ships went into deep recession. No shipbuilding nation escaped its effects. Restructuring and capacity reductions have taken place world-wide. British Shipbuilders was no exception and it is to its credit that it succeeded in making the necessary adjustments with little disruption. The corporation's activities have been reorganised by the chairman into five divisions with strengthened financial accountability. The measures which the corporation itself has taken have played a significant part in bringing about the large reduction we have seen in the past few years in the corporation's dependence on Government subsidy and finance.

There has been a striking improvement in the corporation's results. Losses have declined from £110 million in 1979–80 to the comparatively creditable result last year of £19.7 million loss. Merchant order books now stand at around 540,000 compensated gross registered tons compared to a low of 400,000 tons this time last year. British Shipbuilders have increased their market share to 2.5 per cent. of world new orders, which is the best result of any year since vesting day. Although British Shipbuilders have benefited from a modest upturn in the world market in 1981, these improvements have been achieved in what the chairman has described as "generally difficult trading conditions".

Unfortunately there is little sign of an improvement in market conditions. Indeed the outlook for merchant shipbuilding is now less encouraging than it has been for some months. The shipping market is flat, orders are scarcer and competition has stiffened. The offshore boom which started in 1980 seems to be coming to an end.

British Shipbuilders will have certain factors working in their favour in the future. The rules on credit for ship conversions have been relaxed. The European Commission have recently approved a further tranche of Intervention Fund which can be deployed by British Shipbuilders and equally by private sector builders in support of their tenders. British Shipbuilders and private sector companies are benefiting from the refurbishment of the merchant ships which have participated in the Falklands campaign. Moreover British Shipbuilders stand to gain from ship replacement orders—now under consideration—following the Falklands action and from the current naval reconstruction programme which is being pressed rapidly forward. In this connection, like other noble Lords I am very glad that the Cunard order, of which so much has been heard recently, has gone to Swan Hunter's. I know that the news was greeted with delight on Tyneside.

However, as British Shipbuilders well know, much effort will be needed to keep on course in progressing towards viability. British Shipbuilders are working hard to raise productivity and have made valuable advances in the past year or so. Between 1979–80 and 1980–81 productivity in merchant yards rose by 15 per cent. Much of this improvement has been due to higher capacity utilisation. This factor has now been almost fully exploited and productivity rises will be harder to achieve in the future. But British Shipbuilders are determined to make further progress. Against this background it would be prudent to prolong the Shipbuilding Redundancy Payments Scheme, but we must all hope that, in the chairman's words, British Shipbuilders take these conditions in their stride and press forward with the implementation of their plans.

I now turn to the order itself. When the Shipbuilding Act 1982 was before your Lordships last year my noble friend Lord Cullen of Ashbourne explained why the Government would need to take powers to extend the redundancy payments scheme for two years from 1983 to 1985. As I have indicated, we now think it opportune to do this, but I must stress that we are not motivated by a fear of serious redundancies facing the industry. The extension of the scheme is effected, very simply, by Article 2(2) of the order.

The more immediate objective of the order is to improve benefits granted under it. The scheme has proved itself very cost-effective. At a cost to date of around £55 million under this specific scheme some 20,000 employees have accepted redundancy, and there has been little industrial disruption in achieving this reduction. This compares with an annual saving of £150 million in British Shipbuilders' manpower costs; but it is clear that the scheme has been becoming less effective. This is in part linked with the value of the benefits available under it. Certain of these have remained unaltered since the introduction of the redundancy scheme in 1978 and inevitably have lost value. In particular, the lump sum of £300, which is all that is paid under the scheme to under-40s who accept redundancy, has lost value; to retain its purchasing power it would need to be nearly £500. British Shipbuilders have judged, and the Government have agreed, that it is desirable that the payments to the under-40s, though remaining only a lump sum, should reflect age, pay and length of service. Accordingly, by Article 2(3) we are replacing Article 3 of the old scheme. Under the new provisions a person of 25 with 5 years' service earning £100 per week will receive £1,000. At 39, with the same pay and 20 years' service, he will receive £4,450 in all. There is a minimum of £500, available to all those over 19 with at least one year's service.

The improvements we are making in payments to the over-40s are not so substantial but are nonetheless useful. In part, they are achieved by a larger age payment as set out in Schedule 1, but the main improvement is arrived at through the changes to the multiplier table in Schedule 2; that is to say, by means of the product of the figure in the second column of this table and the employees' previous weekly earnings. This usually provides the largest element in the lump sum, and is also the basis for calculating the total sum to be paid out in support payments, usually over a two-year period.

We feel it is right that the over-40s should be eligible for these support payments, because they face greater difficulties in finding new work. It might be for the convenience of your Lordships if I say that I have placed tables showing the effect of those changes in the Library rather than narrate examples now.

A further important change which we have made is in the new definition of previous earnings as set out in Article 2(1)(b) of the order. This change is designed to meet criticisms long made by the Shipbuilding and Allied Industries Management Association, which is the union representing middle management, and by others, that the terms of the scheme were not sufficiently attractive to the relatively highly paid. When the scheme was introduced in 1978 the maximum weekly earnings figure for the computation of scheme benefits was £100 per week—the same figure as then featured in the Employment Protection (Consolidation) Act for calculations of redundancy benefits. This figure has been increased annually for both purposes and now stands at £135. But the Government have decided that it is not desirable to continue to use the identical figure for this scheme.

The previous earnings figure is now set at one and a half times the Employment Protection Act figure—that is at present £202.50 per week. This has quite a substantial impact on the maximum entitlement under the scheme, which accordingly goes from £11,500 in all to £17,200; but I should point out that payment at this level will be exceptional and would be predominantly the effect of increasing the previous earnings maximum.

In addition to these changes of substance in the level of benefit, we have also made some more detailed amendments in the light of experience. The first of these is in Article 2(4). When a beneficiary under the scheme is entitled to only a modest level of weekly support, it seems desirable that it should be paid out in reasonably large—£20—weekly payments until it is used up. This is helpful to the unemployed worker—in some cases it may make him eligible sooner for supplementary benefit—and also it is administratively more convenient.

We are also revising the definitions within the previous scheme to ensure that those who work on mobile offshore installations are fully brought within the scope of the scheme—this is done by Articles 2(1)(c) and 2(1)(e). At present they are only partly covered. Construction of mobile offshore installations has become a central part of British Shipbuilders' work and it is only right that those so employed should share equally in all the rights under the scheme enjoyed by other British Shipbuilders' workers in their more traditional classes of work.

May I finally turn to two other technical amendments associated with British Shipbuilders' frequent practice of making payments of 12 of 13 weeks' pay in lieu of notice to its employees who have accepted redundancy. It has been suggested that such a payment may in some circumstances fall within the description of a company scheme as described in Article 11 of the present scheme. If so, payments made under it are deductible from payments made under the redundancy scheme proper. This would both be hard on the people affected and contrary to British Shipbuilders' interests, since they need the flexibility of being able to make available such payments in lieu as seem reasonable and appropriate. We are therefore, in Article 2(6) of the order before your Lordships, taking steps to ensure that such payments up to a maximum of 13 weeks do not rank as deductible under the main scheme.

Finally, linked with the questions of payments in lieu we also have a technical problem arising from another change, made in Statutory Instrument No. 315 of last year. This order changed one of the requirements for an unemployed beneficiary's eligibility for payments under this scheme from being that he was registered for employment, to his being eligible for unemployment benefit—or alternatively, falling within one of the seven classes listed under the definition of "unemployed person". My noble friend Lord Long said that no beneficiary would have his redundancy benefit clawed back as a result of this change; and comparable assurances were given in another place; but when we said this we had not taken into account one complex situation, arising when pay in lieu was granted by British Shipbuilders to a redundant employee for a period longer than the statutory notice period due to him under the Employment Protection (Consolidation) Act. We are taking action under the Appropriation Act to ensure that those affected receive scheme benefits in full, and to avoid this problem for the future and ensure that the assurances given to Parliament are scrupulously honoured, we are widening the definition of unemployed persons to include, as an eighth class, those who are in receipt of pay in lieu of notice for the day in question. This is achieved in Article 2(1)(d) of this draft order.

My Lords, I commend the order to your Lordships. In the Government's view, it is clearly right that given the less encouraging market, and the uncertainties facing the industry, the scheme should be prolonged and enhanced. My Lords, I beg to move.

Moved, That the draft order laid before the House on 5th July be approved.—(Lord Glenarthur.)

8.38 p.m.

Lord Blease

My Lords, I should like to thank the noble Lord the Minister for his explanatory outline of these orders. I readily agree, of course, that it would be for the convenience of the House if we consider both orders together. Although separate they are identical. The noble Lord has mentioned the introduction of these schemes in 1978 and the Shipbuilding Redundancy Orders have been before the House on several occasions since that date for amendment. The proposals before us provide for improved benefits and for the extension of the scheme to June 1985.

I understand that the improvements and the changes have been the subject of consultation and negotiations with the representatives of the Confederation of Shipbuilding and Engineering Unions, the management of British Shipbuilders, and the management of Harland and Wolff. My information is that there is general agreement between the unions and management about the proposals before us, and from this side of the House we readily approve the Orders. However, as the noble Lord the Minister has mentioned the present situation of the shipbuilding industry, I feel I would be remiss, and even wanting in my obligations from this side of the House, if I did not seize the opportunity to say a brief word about the serious position of the United Kingdom shipbuilding industry and about the difficult problems at Harland and Wolff, Belfast.

May I first take this opportunity of complimenting the noble Lord the Minister on the expeditious way that he carried out the provision of the information in the Library. I found copies of the detailed information available there. At the same time, I understand that a booklet may be published by British Shipbuilders and I feel that it would be useful, to get more details of the scheme when that booklet is ready, for it to be available in the Library.

To move on to what I see as the crisis situation, the noble Lord has mentioned something relevant to the situation in the United Kingdom shipbuilding yards. The problems were debated in some detail in another place on Monday, 26th July, and we know of the highly political type of crippling, unfair competition that United Kingdom yards have to face throughout the world. This was referred to by the Minister of State for the Department of Industry in another place during the debate on 26th July, at col. 860, and I quote what Mr. Lamont said: The problems arising from Korea and Japan cannot simply be dismissed as one of subsidies. I recently visited Korea and the Hyundai shipyard and saw the advantages there of modern equipment, lower wages and very high productivity. People work there on Saturdays and Sundays. They have tremendous advantages. It is not simply a question of subsidies. That is not the answer. We must strive to become competitive and improve our productivity". That quotation raises a number of fundamental issues. However, the crux of this matter was also mentioned in the same debate by the honourable Member for Jarrow, Mr. Don Dixon. Mr. Dixon claimed that we are not competing against the Japanese, Korean, German, French, Swedish or Italian shipyards, but that it is a political game. I agree with him that it is a political game. Sadly, it is a political game at home as well as on the international front.

With this background, we from this side of the House readily welcome the Government's decision that the "Atlantic Conveyor" replacement should be built in a United Kingdom shipyard. The fact that the Swan Hunter's Tyneside Shipyard—with their proven capabilities, their persistent and sophisticated lobby and their political "clout"—obtained the order to build this replacement vessel is to be welcomed. I wish Swan Hunter and the Tyneside workers well and I wish them every success in this matter.

Finally, I wish to say a brief word about the terrible employment problems of the Harland and Wolff Shipyard in Belfast. As I mentioned earlier, the benefits of this scheme to workers in Harland and Wolff are on parity with those for shipyard workers in British Shipbuilders. However, like workers in British shipyards, the Harland and Wolff workers and staff would much prefer to be involved with employment expansion prospects rather than contemplating redundancy payments. While this is more or less the situation in all shipbuilding areas, it is a chronic situation in Northern Ireland, with over 20 per cent. unemployment and no prospects for alternative work.

During the debate in another place the Minister of State for Northern Ireland (Mr. Adam Butler) stated with regard to the Harland and Wolff position—and here I quote form cols. 863 and 864 of the Official Report for another place, vol. 28, No. 162: But I cannot emphasise too strongly that the company's future, its salvation, lies not with the Government but in the hands of the company—management and workforce—itself. The Government cannot instruct owners to order ships from Belfast; only competitive prices, a reputation for prompt delivery and high-quality ships can do that. We cannot provide the company with a base-load of naval orders, because warship construction is not compatible with Harland and Wolff's facilities and skills. We have been advised by independent business men of the highest standing that Harland and Wolff's prospect of any major diversification, switching emphasis to non-marine engineering products, is virtually a non-starter. I repeat that Harland and Wolff's salvation is in the company's hands: if it cannot produce the ships that owners want promptly, and at the right price, no one in the company can count on a secure future of stable employment at Queen's Island. … The company—workforce and management—has a simple but very stark choice—cut costs or go under. No Ministers and no one who has the first idea of the position that Harland and Wolff holds in Northern Ireland want to see the yard close, but it can close itself through being uncompetitive, through not cutting its costs sufficiently and by not winning orders.—. I see no alternative to redundancies. They are essential in the battle for survival. Mr. Butler is known to be a hardworking, dedicated Minister, not afraid to speak his mind, but I am sure he will understand if I say that his statement is unlikely to lift the dull, dark gloom of despair which appears to have settled over the Belfast shipyard. Along with others in Northern Ireland, I do not accept that the Minister or the Northern Ireland Office can remove or distance themselves from their role or responsibilities in Harland and Wolff. I fully accept that the company, the management and the workforce have their respective parts to play in what Mr. Butler has termed "the battle for survival". If I may, I would with respect, remind the Minister, Mr. Butler, that Harland and Wolff is a state-owned enterprise. The Minister and the Government have a direct role and responsibility in Harland and Wolff.

I should like to close my remarks in support of this order by asking four questions of the noble Lord. Why has Harland and Wolff been allowed to drift along without the appointment of a managing director? In the light of the Minister's statement, why is there no evidence of an aggresive marketing policy by the company? What research and development is being undertaken? What action has the Minister and the Northern Ireland Department for Economic Development taken to promote and encourage the management and the workforce seriously and constructively to tackle the problems and the targets outlined in Mr. Butler's statement?

May I say that I do not expect the noble Lord to answer those questions this evening, but I should be grateful if he would perhaps deal with them through the normal channels and perhaps in some way have a suitable reply communicated to me at a later date. With that, my Lords, I support this order.

8.49 p.m.

Lord Glenarthur

My Lords, I am grateful to the noble Lord, Lord Blease, for his welcome of these redundancy payments schemes specifically, and for his comments on shipbuilding generally and on Harland and Wolff's particular problems. If I can first refer to the question of the note which was placed in the Library earlier and which the noble Lord said he had received, so far as the booklet is concerned this is a matter for British Shipbuilders. They will produce in due course, although I cannot say exactly when it will be available, a guide for the benefit of those who seek to take up the redundancy scheme. I can, of course, arrange for a copy of this to be placed in the Library. The noble Lord also referred to the "Atlantic Conveyor" and welcomed the news that the replacement was to be built on Tyneside. It might also be interesting for him to know that Harland and Wolff have tendered for engine work on the vessel.

The noble Lord raised various other points, of which naval orders was one. I think he probably knows that Harland and Wolff's facilities are not suited in all cases to the present-day building of warships because of the very high level of sophistication required in such vessels. The yard is, however, equipped to build and repair Royal Fleet auxiliaries and merchant vessels. The yard is on the Ministry's tender list for such work. I am sure that the noble Lord is aware of this.

In more general terms, the noble Lord asked about Harland and Wolff. He will be aware, as I stressed, that the acute depression which has affected the shipbuilding industry worldwide has not left Harland and Wolff untouched. The prospects for medium-term improvement are gloomy and demand for new ships, particularly new oil tankers and dry bulk carriers, which are the sort of ships which Harland and Wolff has a speciality in, is not expected to improve significantly until 1985, at best. As I said, this is the end of the market in which Harland and Wolff specialises, and it is particularly vulnerable to the fierce Far East competition which I described earlier.

The noble Lord pointed out that Harland and Wolff is owned by the Government. This Government, and previous Governments, have done an enormous amount to help Harland and Wolff survive and it is important that we remember that. The most recent evidence is the Government's success in obtaining the European Commission's agreement to a higher level of aid than is available for other United Kingdom shipyards. The European Commission have agreed to the amount of money available to subsidise new orders for Harland and Wolff remaining at £10 million, and to the rate at 18 per cent., which is 3 per cent. above that available to other United Kingdom yards. The company has received considerable financial support over the last 16 years.

If I may also refer to what my honourable friend the Minister of State said in another place on 26th July, he said that the Government have, recently agreed a package of aid for Harland and Wolff under which more than £47 million from public funds will be provided to the company in the current financial year. That comes on top of about £270 million of assistance in all forms which has been provided to Harland and Wolff since 1966, and the total is now equivalent to over £600 million at today's prices.—[Official Report, Commons, 26/7/82; col. 863.] In that case, I really do not think it is a fair charge to say that the Government have not done a very great deal to help Harland and Wolff. So far as its competitiveness is concerned, it faces a very competitive market which is depressed, and it specialises in large unsophisticated vessels. I do not think I need deal with that matter any more.

The noble Lord asked four questions, and the first was about the managing director. He asked why, in his view, Harland and Wolff is being allowed to drift without one. I can tell him that the search for a new managing director is still at an early stage. The company has employed a firm of consultants to help find suitable candidates, but no new appointment is expected to be made until later this year. Mr. Douglas Cooper, the deputy managing director since 1979, has been appointed acting managing director in the meantime.

The noble Lord was kind enough to say that he would allow me to write to him on the other points that he raised, which, of course, I will do. But I hope I have been able to give some assurance not only that the scheme, which he welcomes, is very appropriate at this particular time, but that Northern Ireland and its problems are forefront in the minds of the Government, and that they will do all they can to support Harland and Wolff in its difficulties. But I can only emphasise, again, that very much depends upon how Harland and Wolff help themselves.

Lord Blease

My Lords, before the noble Lord sits down, may I say this in case I was misunderstood. Certainly the monies that have been poured into Harland and Wolff are greatly welcomed. Indeed, I do not consider that it is a matter of cash. It is a matter of leadership, of, in some way, getting the workers and the management on target and getting them motivated to get on with the particular job. That is the sort of action which is required at this juncture.

Lord Glenarthur

My Lords, I am quite sure that my honourable friend the Minister of State for Northern Ireland will pay very close heed to what the noble Lord has said.

On Question, Motion agreed to.