MERCHANT SHIPPING (REPLACEMENTS) (Hansard, 5 December 1952)

§ Commander R. Scott-Miller (King's Lynn)

I welcome this opportunity of bringing to the notice of the House my concern at the increasing difficulties in the maintenance and replacement of our Merchant Navy. I am glad to see that the Financial Secretary to the Treasury has come to hear this Adjournment debate. One would normally expect the Minister of Transport and his Parliamentary Secretary, both of whom have been sailors, but this is considerably more of a financial debate than anything else.

This matter has been raised before. It is a rather curious coincidence that two years ago today, on 5th December, 1950, the matter was raised by the noble Lord, Lord Teynham, in another place. Judging by the continued disquiet in the shipping industry even today, it would appear that the fears entertained then have not yet been resolved.

None can deny that it is of great importance to the interests of this country that a strong and prosperous mercantile marine industry should be maintained. It is of importance to my constituents, because I represent a constituency in which there is a town containing one of the small ports of this country. The well being of King's Lynn depends to quite an extent on the prosperity of our coastwise shipping. Coastwise shipping itself depends on a strong and virile merchant navy which brings goods and services that we need to this country, which again are transferred from the major ports to the areas of consumption throughout the country by coastal shipping.

It is to us, an island nation, of double importance that our mercantile marine should prosper. Our national economy demands it, not only in war but in peace. We all know that it is especially so in war. The Merchant Navy has now become regarded as our fourth arm of defence. It is obvious that whilst we are embarking, at considerable inconvenience and sacrifice, on enormous defence expenditure, it is as well to remember that 2012 the whole of that re-armament building of ours would be impotent if we were to allow our merchant shipping to become diminished and to wither away.

The fighting forces depend to an enormous extent on the Merchant Navy. Our Navy would not be able to put to sea through lack of fuel if that fuel were not brought here in merchant ships; our Air Force would be grounded and our armies would become immobile. Beyond that, if we were denied the means of bringing food and raw materials to this country, those who man our fighting forces and those who supply them would be starved out. That explains the fact that in both world wars the prime strategy of the enemy was concentrated on the U-boat campaign. There is no doubt that in the last war the Battle of the Atlantic was the most important battle of all, and the nearest this country came to defeat was when more merchant ships were being sunk than could be replaced.

It is a sobering thought that in the last war more than a half of our 1939 tonnage was sunk through enemy peril. Of course that has been replaced, largely thanks to the splendid efforts of our shipbuilding industry and the men who work in it. The cost of replacement of those ships has been met very largely from the reserves of the shipbuilding companies. The Government war risks scheme fell considerably short of what was required to meet the cost of replacement, and the shipping companies have had to dip very largely into their financial reserves to replace those ships. The tonnage has been replaced to its 1939 level, but that is largely due to the building of tankers. The tonnage of dry cargo ships today is still less than it was in 1939, and it is the dry cargo fleet upon which we mainly depend for our overseas trade.

I know that the Financial Secretary to the Treasury will be the first to appreciate that it is most important that we should maintain the invisible exports which our shipping industry provides. I have heard it said that this year the figure of invisible exports from this source may be as much as £150 million. That is something which we wish to see maintained. Two-fifths of the cargoes carried in ships of the Merchant Navy are carried between places outside the United Kingdom, which shows that the Merchant Navy is making a great contribution 2013 through these invisible exports towards our balance of payments.

It is, of course, of paramount importance that we should maintain our Merchant Fleet. There was a time when we had a far greater proportion of the world's shipping than we enjoy today. In 1905 more than half the world's merchant fleet sailed and was owned by Britain and sailed under the United Kingdom flag the "Red Duster." I have had the privilege of sailing under the "Red Duster" and I know what a splendid lot of men they are who man and sail our ships today. We now own about one-fifth of the world's shipping, and that is a move in the wrong direction. We shall need to rely more and more on our overseas trade, and I want to see the Merchant Fleet of this country increased rather than diminished.

There is, however, another and perhaps more disconcerting feature. Of our fleet of foreign-going dry cargo ships, owned and registered in the United Kingdom, that remains, one-third of the vessels are more than 15 years old and a quarter are more than 20 years old, and of our coasting and home-trade vessels registered and owned in the United Kingdom 40 per cent. are more than 20 years old. The useful life of a dry cargo ship is 20 years, so it can be seen at once that there is a very large replacement problem facing this country today. That is the point to which I am coming.

The Civil Lord of the Admiralty is here, and he will appreciate the fact that the cost of building a ship today is three times what it was pre-war. Not only that—the cost of maintaining and running a ship is vastly in excess of what it was. The other day, on the occasion of the maiden voyage of the "Braemar Castle." which is the latest liner of the Union Castle Line. I saw the chairman of the company and he pointed out that it cost £2½ million to build that ship and he doubted very much whether she would be an economical proposition to run.

That is an indication of the situation facing our shipping industry today. It is not like other industries, which can be protected in our home market, and it does not want to be protected. It knows it has to compete in international markets and that the keen wind of international competition is blowing. It is 2014 ready and willing to take its place in world competition, but it is greatly concerned that the effect of taxation may be hampering its efforts in that direction. It is essential that the industry should have the best ships as well as the best men. It must have ships which are young and which can be kept young, and if it is to continue to play its full part in our national economy any shrinkage in its fleet must be avoided at all costs.

The fears of the shipping industry today are very clear shown from statements that have been made. It is having the greatest difficulty in paying for the cost of replacing its ships, which are rapidly becoming obsolete. This industry is different from other industries in this respect. In an ordinary industry one does not have to replace the whole asset at once. In a factory one replaces one's machinery by degrees. But a ship cannot be replaced by degrees. The whole asset has to be replaced at once and huge sums of money are required to do so. A far greater proportion of the capital of shipping companies is invested in ships than other industries invest in any particular item of capital equipment.

My hon. Friend may point out that there is a Royal Commission sitting on the whole question of taxation of profits and income. I readily admit that, and I know that the General Council of Shipping have made a case to the Royal Commission. I am not asking for legislation in this matter, because I know it would be out of order to do so in an Adjournment debate.

I would sincerely urge the Financial Secretary that, if it is at all possible, the Royal Commission should make a report on the shipping problem as soon as practicable. They are considering this question as it relates to the whole of industry throughout the country, and it may take some years before their answer is received. I submit that the problem of our Merchant Navy and of the shipping industry is far too urgent to await the results of this Commission, and if something could be done, by way of an interim report, perhaps, or by some other method, so that the case for the Council of Shipping could be met sooner than will be the case if the Commission are left to reach their complete conclusions, it would be not only a great help to the shipping 2015 industry itself, but would be a way to ensure that this replacement problem, which will confront the country within the next five years, can be proceeded with and that our Merchant Navy, upon which so much depends, can be rejuvenated and can continue the splendid work which it is doing today.

§ The Financial Secretary to the Treasury (Mr. John Boyd-Carpenter)

I am bound to say that I was a little surprised when my hon. and gallant Friend the Member for King's Lynn (Commander Scott-Miller) was good enough to indicate to me that he would like me to reply to the Adjournment this afternoon. Wide though the responsibilities of Her Majesty's Treasury no doubt are, I was inclined to think that the future of the Merchant Navy would come more appropriately within the Departmental purview of my right hon. Friend the Minister of Transport, but as my hon. and gallant Friend gave me an express summons, I am here to reply—and I have beside me, lest I get too far out to sea, my hon. Friend the Civil Lord of the Admiralty.

I was interested, as no doubt was the House, in my hon. and gallant Friend's speech, which came perhaps particularly appropriately from the representative in this House of the very ancient and very honourable seaport of King's Lynn. Like my hon. and gallant Friend, in dealing 2016 with this immense subject, particularly from the financial angle, I am under two very substantial difficulties. One is that to which he himself referred—the fact that taxation questions involve legislation and that legislation is, of course, out of order. Even if, by exercise of ingenuity, that hurdle could be surmounted, as it is sometimes possible to do in some modified degree, I should secondly be in the difficulty that taxation matters are matters for the Budget—and the hallowed formula that my hon. and gallant Friend will not expect me to anticipate my right hon. Friend's Budget statement would spring almost instinctively to my lips.

I must, therefore. I think, deal with this side of the matter to some extent, as my hon. and gallant. Friend will understand, by way of generalities, and I would begin by saying that, obviously, hon. Members on both sides of the House must be concerned about the future of our mercantile marine, which, as my hon. and gallant Friend says, plays a very significant part in our economy in time of peace and so decisive a part in our survival in time of war. It equally requires no emphasis that high taxation imposes certain disadvantages on this and on other economic activities, and equally that the Merchant Navy, like others, has now to face fierce and growing foreign competition.

But it would be absolutely wrong to express excessive gloom about either its present condition or its immediate prospects. As my hon. and gallant Friend has pointed out, the tonnage lost during the war has been more than replaced, with the result that the total tonnage available today is slightly more than the 1939 figure—a very remarkable achievement when the House recalls the immense losses which were inflicted on our merchant shipping by the methods which our late enemy saw fit to employ at sea.

Then it is the fact that the percentage which that represents of the world's active shipping is only 1 per cent. below what it was in 1939–25 per cent. as against 26 per cent.; which again, with the growth of various developments in the world today, is a very remarkable fact. It is perfectly true, as my hon. and gallant Friend said, that inside this total tonnage there has been a shift on the whole from small dry-cargo tonnage to tankers. On the other hand, some very fine ships of the passenger liner type have 2017 been produced since the war, of which. I think, most people in this country are very proud.

My hon. and gallant Friend referred to the extremely relevant question of the age of shipping, and he pointed out that a young—in the shipping sense—Merchant Navy was required. It may reassure him to know that, taking his own figure of 20 years as being the age at which a ship becomes an old ship, the percentage today of the old ships, over 20 years old, is slightly smaller than it was in 1939, whereas the percentage of those under 10 years of age—that is to say, comparatively new ships—is very nearly twice what it was in 1939; and, therefore, there is a clear indication that a remarkable job of replacement has been done.

As to the immediate future, the shipyards of this country have on the order books enough work in general to keep them occupied for four years to come, and out of those orders 3,900,000 tons of orders are in respect of contracts with British shipowners. Therefore, difficult though the problems are—and no one with any sense of responsibility would feel any complacency in the matter—there would seem to be no reason to suggest any very dramatic or serious development. The Merchant Navy has more than replaced its pre-war tonnage; it is more modern—much more modern than it was in 1939; and it has got 3,900,000 tons of shipping on order with the shipyards, which will be occupied for four years to come. It would seem, therefore, that any limitations on the replacement of tonnage are physical rather than financial.

As far as the taxation aspect is concerned, as my hon. and gallant Friend says, that is now before the Royal Commission. The industry is very well organised, and the General Council of British Shipping has given evidence to the Royal Commission on a number of points. It quite clearly would be inappropriate for me at this stage to say more than that the recommendation of the Royal Commission will have to be studied when it is produced. My hon. and gallant Friend referred to the possibility of a special report. I am inclined to think, though it is a matter entirely for the Commission, that it would be undesirable specifically to press for it, because these problems of taxation have 2018 to be looked at over our industrial system as a whole, and it is indeed the value of having a Royal Commission that the difficulties and problems of our industry are considered and examined as a whole, and can be looked at in a way that is much more difficult when it is a question merely of the ad hoc methods of Parliamentary or Governmental consideration. But we are naturally anxious to have the recommendations of the Royal Commission upon this subject, and anyone who is acquainted with the chairman of that body will appreciate that there will certainly be no avoidable delay.

We can also help in two other directions which ought not to be overlooked. The first is by seeking, in the course of international trade negotiations, to secure that restrictions on shipping are kept to a minimum. That is certainly an objective which, in view of the fact that we are still the greatest sea-going nation in the world, Her Majesty's Government have very prominently in their minds in the course of international discussions and negotiations.

Secondly, there is the fact that shipping more than any other industry stands to gain from every possible development of world trade. The more freely world trade flows the more ships will be required to carry it, and for that reason, as for many others, the future of the industry is very closely linked with the success of the present efforts of Her Majesty's Government to secure a greater freeing of the trade of the world.

In those ways I think that we can look with a certain confidence, though without complacency, to the future of this vital industry. I can assure my hon. and gallant Friend that we are at least as appreciative as he is of its fundamental importance. We realise that shipping means more to this country than perhaps it means to any other and that it is literally our life-line both in peace and war. We equally share as individuals the pride which everyone of our blood instinctively feels in the ships that sail under both the Red and the Blue Ensign and, of course, the men who man them.