SHIPPING AND SHIPBUILDING

HC Deb 19 June 1958 vol 589 cc1321-436

3.45 p.m.

Sir Frank Soskice (Newport)

The Opposition selected the subject of shipping and shipbuilding for the purpose of a probing debate, in order to review the present situation of those industries and to put a number of questions about the Government's intentions in relation to the industries.

We have not discussed these industries for a very long time. In March this year there was a most informative, debate on the subject in another place. Her Majesty's Opposition thought that in the circumstances it would be appropriate to bring these industries into review and to examine their present working and prospects, and to press the Government for a statement of intention.

One cannot look at the industries at all without being conscious at once of the effect of a world recession upon them. Shipping, obviously, is most sensitive to world movements of trade. I always think that figures in the form of statistics lead to the most lugubrious conclusions and that statisticians must be one of the most melancholy communities in the world, whether the statistics appear in a pass-sheet of one's own bank account or, as in this case, reflect the present situation of the industries that we are about to discuss.

I will try to avoid inflicting upon the Committee too great a plethora of figures, but the only way in which we can, with approximate accuracy, see the state of an industry is by seeing what the figures tell us. I also feel considerable trepidation in speaking of these two industries in the presence of so many hon. Members on both sides of the Committee who have spent many years in association with them. I confess to feeling some irritation sometimes when hon. Members make observations upon my own profession. I feel that if they knew us better they probably would not make them. I will accordingly do my best to avoid causing similar feelings of irritation to the many hon. Members who are so kind as to be here to listen to me.

Perhaps I might address myself to the first big feature of the situation. Obviously, it is the existing recession. The figures are eloquent and are worth looking at. Out of a total world merchant fleet of about 107 million tons, there is, I am informed, at present laid up a deadweight tonnage of 6 million, representing about 616 ships throughout the world. If one considered what is the underlying cause of that, one sees that present freight rates clearly give the reason for so many ships being laid up. They are the first melancholy tinge in the picture.

If one does what statisticians do, and assumes that 1952 represented 100—the Treasury Ministers are especially responsible if I inflict too much of this sort of thing on the Committee, because it is what they do and I am following their bad example—one sees that there has been a steady decline to a low rate which, in relation to that figure of 100, has dropped to 64 in February this year. In August, 1957, it was 86.9 in relation to the figure of 100 and with the exception of one in each succeeding month there has been a regular decline of shipping rates until they are now not very much above half what they were in 1952.

If one considers how that world shipping slump is reflected in our own merchant fleet, one finds an equally depressing picture disclosed by the figures got together by the statisticians. Perhaps I may summarise them, to make the point, by referring to three periods. If one starts with January, 1957, British ships to the number of 16 had been laid up, totalling about 32,000 tons. A year later, in January, 1958, that number had gone up to 108 ships, representing over half a million tons and, if one jumps from January, 1958, to March, 1958, the number of 108 has increased to 182 and the tonnage increased from over half a million tons to about 967,000 tons.

In the course of numerous debates on the general trade situation we have discussed the wisdom or otherwise of the policy of the Government towards recession. I feel sure we are glad to see the announcement made today of a further reduction in the Bank Rate. One would have thought that perhaps in the case of shipping, sensitive as it is to trade movements, it would be particularly unwise on the part of the Government to superimpose upon the world shipping slump an artificially created internal recession based upon restricted credit and a high Bank Rate—although I am glad to see it falling.

I wish to pass from the present slump situation, on which I have no particular question to ask the Minister, except what his anticipations are, how far he thinks the slump may go, and what steps the Government think they can take to arrest it before it goes too far and gets out of hand. I turn to the rather longer-term question of the shipping industry. If I may again inflict comparisons on the Committee I think that they may perhaps indicate the direction in which the industry is going.

For that purpose I wish to take three dates in the history of British shipping so that we may see how it has developed. For a reason which I do not quite understand, I think it customary to start with the year 1906. All comparisons I have seen start with that year, so I will follow suit. I then go to 1939—which is an intelligible date, immediately before the outbreak of the Second World War—and 1956, because that is one of the last years in relation to which complete figures have been got together.

In 1906, the world merchant fleet was 37½ million tons and the British share of it was 16½ million tons, representing 45 per cent. In 1939, the world total had gone up to 69½ million tons and the British share had gone up only to 18 million tons, representing a considerably reduced percentage of 26 per cent. When one jumps from 1939 to the third date I selected, 1956, one finds that British shipping had gone up to only 19½ million tons—I believe it has dropped a little since then—whereas world shipping had gone up by that time to 105 million tons. The British percentage had gone down to 18 per cent. That was the procession of decline from 1906, 45 per cent., 26 per cent., 18 per cent.

I recognise that no such comparison would be other than misleading unless one were to take into account that this country bore the brunt of two world wars and that its merchant fleet, in particular, was in the front line and suffered the most devastating losses. I have seen a figure, which perhaps the Minister will be able to confirm, suggesting that in the Second World War the losses of the British merchant fleet were in the region of 11 million tons. Therefore, in any comparison one makes one must take into account the losses we suffered in the First and Second World Wars, but it still remains a fact that with an increase in world tonnage of 67 million tons, all of which with the exception of 6 million tons is now gainfully engaged, the British share of the increase has been no more than 3 million tons.

I apologise for inflicting figures on the Committee, but I think that these figures are of importance because it could be said, at any rate at first sight, without explanation, that that shows a somewhat alarmingly disappointing increase in the proportion of British shipping as against world shipping. One has to take into account that a number of nations which started, as it were, almost from zero will make much more rapid progress in comparison with the progress of a country which started far from zero, far along the road, and, therefore, finds it perhaps not so easy to make noticeable progress as countries which start from the beginning of the road.

So that I should not be thought to be expressing only my own untutored and uninformed view, I have had recourse to views expressed by, I think, recognised authorities in the shipping world. In particular, I would cite to the Committee the view expressed by Viscount Simon in an article he wrote as President of the Chamber of Shipping of the United Kingdom, expressing his interpretation of the figures I have put before the Committee. If the Committee will forgive me, I wish to quote the words he used, because they give a picture which is not only informative in its terms, but obviously authoritative in view of the quarter from which it comes.

Viscount Simon said: The British Merchant Navy, totalling today about 19 million gross tons, is slightly larger than it was in 1939. At first sight this fact may appear to give us no cause for despondency. But if the position is examined more closely, we find that the British share of world tonnage (including 14 million gross tons of shipping laid up in the United States reserve fleet) has in those 18 years fallen from 26 per cent. in 1939 to 18½ per cent. in 1956. During this same period Sweden has increased her tonnage by over three-quarters, Norway, by two-thirds and Holland by a third. The United Kingdom fleet has meanwhile increased by no more than one-twelfth and, in fact, nearly half of that increase is due to the transfer of certain Canadian-owned ships from the Canadian to the United Kingdom registry. I cite that opinion, as I have said, to give the interpretation put upon the figures which I have produced by an authority who will be recognised on both sides of the Committee as expressing a reliable view.

The noble Viscount, in the debate to which I referred in another place, elaborated his description by saying that of the total increase of British tonnage, since 1939, of 1½ million tons, the breakdown showed an increase in the tanker fleet but an actual decrease of 1 million tons in our dry cargo fleet. He went on to break down that figure by saying that of the 2½ million tons increase in our tanker fleet, no less than 2 million tons represented tankers built by the large oil companies and operated on what the noble Viscount described as a kind of C licence basis.

Viscount Simon ended his speech by saying that our position had worsened, and I quote his words because they are weighty and carefully chosen: If it is serious now, it will be critical in the near future."—[OFFICIAL. REPORT, House of Lords, 20th March, 1958; Vol. 208, c. 359.] Therefore, when I refer to the melancholy conclusion to be drawn from figures, I think that it is apposite to bear in mind that the unskilled conclusion of a non-statistician does conform with the interpretation of a very big figure in the shipping industry.

That at once brings me to what is perhaps one of the major causes of alarm for those who view the future of the British merchant fleet, namely, those ships which are comprehensively described under the somewhat difficult term Pan-Lib-Hon-Co ships. I think that the whole Committee will know at once what is meant by that—ships registered under flags of convenience of various countries, Panama, Liberia, Honduras, Costa Rica—

Mr. C. R. Hobson (Keighley)

And Greece.

Sir F. Soskice

Anyway, fleets registered in those countries I have mentioned which are, owing to circumstances which, I think, the Committee have very fully in mind, in a position to compete with other merchant fleets on terms which cannot possibly be decribed as fair terms.

There again, I should like, if I may, shortly by reference to figures, to trace the growth of this menace. If I may again take the same course of looking at the years 1906, 1939 and 1956 and then adding the latest figures of April, 1958, the development of these fleets is really most startling. In 1906, there were not any; in 1939, not more than 750,000 tons, 1 per cent. of the world fleet and in 1956, when we had an increase to the extent of 1½ million tons, as I have previously indicated, these Pan-Lib-Hon-Co fleets had gone up to 10½ million tons and had reached a 10 per cent. proportion of the total merchant fleets of the world. When one goes to April, 1958, two years later, one finds that their total average had gone up to 14½ million tons and their proportion of the world's merchant fleet has gone up to 17 per cent.

If one looks at the total increase of world tonnage since 1939, it really is astonishing that the total increase is accounted for, as to no less than 43 per cent., by the increase in these Pan-Lib-Hon-Co fleets. When one sees which are the constituent countries in this rapid and remarkable growth, the figures given are most informative and somewhat depressing. Liberia and Costa Rica are prominent competitors, and I feel sure that the Committee will agree that while the Costa Ricans and Liberians are no doubt most estimable people they can hardly be said to have played a leading rôle in the development of world shipping in past decades. For instance, Liberia had 1,000 tons of shipping in 1948 and in 1951 the figure had gone up to 709 million tons. [HON. MEMBERS: "No."] I am sorry; that is the danger of figures. I apologise. I mean 709,000 tons. I will, if I may, courageously go on to 1954. The figure in 1954—I think I am right—was 3,206,000 tons and in 1957, 9,187,000 tons.

For a country with a population of about the size of the combined population of Manchester and Liverpool—and the feet of the population have been, as far as I know, solidly based on dry ground, as solidly as my own—that is a very remarkable achievement if it is, indeed, its achievement. It is owing to the remarkable characteristics of their maritime legislation which allows nationals of any country to register on the Liberian register ships built anywhere for a modest registration fee of 1 dollar 20 cents per net ton and an annual tax at 10 cents per net ton. I think that it is roughly true to say that one can register a substantial ship on the Liberian register for something under the cost of one journey through the Suez Canal. Our Merchant Shipping Act of 1894 is certainly far more stringent and rigorous in dealing with our own ships.

A serious feature of the situation, which we must take into account, is that these Pan-Lib-Hon-Co fleets are good ships—they are not in any sense "coffin" ships—are not so old as our own, and, to a large extent, are faster. An estimate was made in June. 1957, of the percentage of Pan-Lib-Hon-Co ships under five years' vintage and the figure was 36 per cent. If we make a similar test with regard to United Kingdom tonnage, the figure is only 22 per cent., and if we take the tanker tonnage of those fleets alone one-half were under five years of age and only one-third of our own United Kingdom tankers were as young as that.

Another feature to which I should -draw attention—I am speaking of December, 1956—is that if we look at the Pan-Lib-Hon-Co tanker fleets and our own tanker fleets, on an average the Pan-Lib-Hon-Co tankers are bigger and faster than ours, with an average tonnage of 23,400 tons as against the United Kingdom tonnage of 14,000 and with a speed of 15.4 knots as against our 13.2. This disparity in terms of age and in terms of speed is not being diminished inasmuch as Pan-Lib-Hon-Co owners are able to set by for purposes of capital investment moneys which other competing maritime owners have to set aside to pay taxes on the profits they earn. Therefore, their fleets will go on getting younger and younger in comparison with the fleets of other maritime countries.

If I may seek again to take refuge in an impartial and authoritative opinion I would quote from an O.E.E.C. report which is set out in the 1957 Annual Report of the Liverpool Steam Ship Owners' Association, because it does state clearly, I think, the situation, in relation to the existing legislation of Pan-Lib-Hon-Co countries, in which these owners find themselves. This is what the O.E.E.C. report says: The virtual freedom from taxation of ships sailing under flags of convenience enables many of the shipowners concerned so to arrange their business enterprises that their profits are not liable to taxation in this country. They are thus able to devote to the expansion and development of their fleets that proportion of their profits which their competitors in other countries have to set aside to meet tax requirements. This advantage is cumulative, since increased fleets earn increased profits which in turn provide for further increases in the fleets, and so on. The 'convenience' fleets are therefore in a position to grow and indeed are growing at a rate which the fleets of the maritime countries cannot match. This favourable position, coupled with periods of heavy demands for shipping space—particularly for tankers—has made it easy for the shipowners of the 'convenience' fleets to obtain substantial credits. I think it is, and is known to be, a fact that about 40 per cent. of these Pan-Lib-Hon-Co fleets are American owned and that about 53 per cent. are owned by Greek nationals largely financed from American sources, by American banks and American insurance companies, and that the United States, for reasons of policy, for which, I know, the right hon. Gentleman is in no sense responsible, but about which I should like to ask him for information, has treated these Pan-Lib-Hon-Co fleets on very favourable terms indeed.

To complete the citation, the report reads: This advantage enjoyed by owners of flags of convenience ships in being able to accumulate capital and to obtain large and often extended credits has already led to a faster growth of fleets under flags of convenience than of other fleets. This in turn, has led to a diminishing degree of influence on world shipping on the part of the maritime countries with their generally accepted standards of effective jurisdiction and authority. This is extremely serious in our case particularly, living as we do very largely upon our exports, visible and invisible. I have seen an estimate, the last figures, I think, being analysed in 1952. I take it from the authority to whom I have referred before, Viscount Simon. If we analyse the total amount as at that time, 1952, in terms of foreign currency earned by our own merchant shipping fleet, which is now menaced by these Pan-Lib-Hon-Co fleets, it is, in a year, £220 million plus a saving of about £197 million, a total earning and saving in foreign currency directly and indirectly of about £400 million a year.

If our economy is menaced by the threat of losing this important source of foreign currency earnings it is a serious situation not only from the point of view of the industry as a whole, but, in particular, from the point of view of the seafaring men engaged in these ships. It is pointed out by the International Transport Workers' Federation that in the case of these fleets there are few trade unions which can protect the seafarers engaged in those ships. There are no collective bargaining arrangements to ensure that their wages are protected and their living standards and working standards cared for. There is no protection in the event of a shipowner's suddenly reducing the wages of those who serve in those ships.

I believe I am right in saying that recently one of these Greek shipowners did reduce wages by some 20 per cent., there being no organisation capable of negotiating with regard to that reduction and resisting it. The I.T.F. characterises these Pan-Lib-Hon-Co ships as a menace to the traditional maritime navies and to the economy of the traditional maritime countries, international maritime standards and to the seafarers' wages and working conditions.

I think I am right in saying, and I would ask the Minister if I am right about this, that, so far, our cargo liners have not been really seriously affected by this competition. They are, I think, protected by conference rates, which move far more slowly than the tramp rates upon which these Pan-Lib-Hon-Co fleets operate. But I should like to put to the Minister this question: what are his estimates for the future? If they have not yet been seriously affected, what does the future hold in store for our cargo lines?

I should like to ask him, also, what is the measure of the threat to our tramp ships and our tankers. Would I be right in saying that about one-quarter of our tanker fleet remains in private hands, the rest either being owned by big oil companies or Government owned, and that the menace hangs over that one-quarter of our tanker fleet which remains in private hands plus the 2 million or so of tonnage of our dry cargo fleet? I should like to ask him if that is really the main point of weakness over which the threat impends.

Would I be right in thinking that our own merchant fleet, apart from our cargo liners, has survived the slump so far to an extent considerably better than the Pan-Lib-Hon-Co fleets? Would that be attributable in part to the fact that when profits are not being made the Pan-Lib-Hon-Co fleets do not enjoy the same tax advantage? Perhaps, also, it could be due to the fact that British owners, broadly speaking, prefer security in the form of time charters, whereas these Pan-Lib-Hon-Co owners try for and are able to obtain quick profits by spot charters. I should be grateful for any information that the right hon. Gentleman could give to the Committee upon that.

It is, I know, easy to state the problem. What is far more difficult is to state or suggest the remedy. I think that you would probably rule me out of order, Sir Charles, if I were to embark, on a Supply Day, upon any detailed discussion of one remedy which is suggested, namely, tax relief; but perhaps you will not say that I am trespassing beyond the bounds of order if I make one or two general observations about the kind of suggestion which is made.

I should have thought, and I should like to ask the Minister for his view upon it, that a suggestion for tax relief in this country to meet the difficulty would have very serious difficulties to overcome. One is that to make any serious impact upon the problem one would have virtually to abolish Profits Tax and Income Tax on all undistributed shipping profits. That would be a very radical change in our tax legislation, and if it were done it could hardly be done in the case of an industry which remained in private hands.

Surely, also, if it were considered as an appropriate remedy, it would introduce considerable confusion into our fiscal system, because the motor vehicle industry, to take one example, if it were exposed to severe and possibly unfair competition in the event of the setting up of a European Free Trade Area or Common Market, might seek to claim similar relief. Would it not also be open to this more general objection, that once one country started seeking to deal with the Pan-Lib-Hon-Co question by tax reliefs for its own shippers, the other countries would, as it were, engage in competition with it?

I believe I am right in saying that the West German Government have just announced a reduction of tax on 50 per cent. of shipping profits. Would the Minister not agree that one serious objection to a remedy of that kind would be that one would start an international race between various countries, each trying to give its own shippers more and more generous tax reliefs? Would he not agree, quite apart from anything else, that that would make it very difficult to contemplate tax relief as the appropriate remedy to deal with the Pan-Lib-Hon-Co menace?

Would it not be right to say that, really, the most hopeful remedy lies in international agreement? I wish I could find a word other than "Pan-Lib-Hon-Co". May I call it "flags of convenience" for a while? I am sure that it will relieve the nerves of hon. Members if I do. The only really hopeful approach is through the medium of international agreement. Would not hon. Members agree that there have recently been some extremely hopeful developments in this respect? I should like to refer to the 1948 Convention which set up what is called I.M.C.O.—the Intergovernmental Maritime Consultative Organisation—an organ of the United Nations, which is grappling with the problem of securing some international agreement on standards to be applicable to these flags of convenience fleets.

I should like to register the satisfaction which I think many hon. Members on both sides of the Committee will feel at the success of the Attorney-General in having Articles 5 and 6 inserted into the final text adopted by the conference at Geneva on international maritime law. For myself, I regard that as a starting point from which further international agreement can proceed. Article 5 lays it down that there must be a genuine link between the country where a ship is registered and its ownership, and that the country of registration must effectively exercise its jurisdiction and control in administration over technical and social matters affecting the ships and the crews of the ships flying its flag.

I should have thought that that was an important advance. I understand that it is very much welcomed by the trade unions responsible for the welfare of men serving on the ships, and they did at the ensuing conference, the forty-first Maritime Session of the International Labour Organisation, in Geneva, seek to implement those Articles by two recommendations seeking to bring it about that the flags of convenience countries will really bestir themselves in an effort to apply to crews and ships registered with them the same sort of minimum standards as are applicable to the crews of most traditional maritime countries.

A rather regrettable feature in relation to the recommendations agreed up at that session is that the United States and Greece did, as regards all the recommendations ultimately adopted, not perhaps actively oppose but abstained. It seems most unfortunate that the United States, with its immense influence, should be lukewarm or even act in opposition to efforts to procure some international co-operation to put an end to the sub-standards of these flags of convenience countries.

Mr. C. R. Hobson

Part of the war against sterling.

Sir F. Soskice

I want to put a specific question to the Minister about one final development which, I think, holds out hope. Is it not the fact that the Norwegian Government, having obtained full agreement from other Scandinavian countries as to the method of dealing with the flags of convenience ships, have recently prepared and sent to the British Government a memorandum containing proposals for dealing with the matter? Have the British Government received such a memorandum? My information is that, at any rate until 9th June this year, the British Government had sent no reply to the Norwegian Government, and that what I think is technically known as a "chaser" is on the way. Is the Minister aware that the purpose of the memorandum is to agree upon a form of procedure with a view ultimately to taking the matter up with the United States Government, in Washington?

This debate is to extend to shipbuilding. I have spent an inordinate time on shipping already, but I have one or two questions to put about the shipbuilding industry, and no doubt my hon. Friends will follow the matter up later. Is the position at the moment in the shipbuilding industry that orders on hand amount to about 6.3 million tons? I have seen different estimates. One estimate is that that tonnage is too high and that the appropriate figure is more like 5 million tons. Will the Minister agree that there are, nevertheless, disquieting features in the prospects for shipbuilding?

I believe that orders representing 6 million tons, amounting to, I think, about £900 million in value, are enough to keep the industry fully occupied for from three to four years, but, if one looks, for instance, at the first quarter of 1958, are there not certain disquieting features? Is it not a disquieting feature that, in the orders placed in the first quarter of 1958, there are no foreign orders at all, and is it the fact that, though the orders placed from this country total about 41,000 gross tons, that tonnage is more than wiped out by cancellations of orders previously placed far in excess of that? If that is the situation, is it not a cause for some alarm?

In the debate to which I have referred, Lord Mancroft stated that the present capacity of British shipyards was about 1¾ million tons, and that it was proposed that there should be expended in bringing the shipyards up to date and improving their facilities about £70 million in the next few years. Is it the fact, as the noble Lord said, that the limiting factor is still shortage of steel? The noble Lord said that the object was to increase the potential output of British shipyards to about 2 million tons by the expenditure of this £70 million, but he was doubtful whether the steel requirements could be adequately met, the target date being 1961. The Minister was doubtful whether that target date could be kept.

In particular, I should like a reply from the Minister to this question. If steel is really a limiting factor, when will the Government make up their mind about the new steel plant? We have pressed the Government over and over again for an answer on that, and we greatly hope that, if the Minister accepts that steel is a limiting factor in the expansion of our shipyards, the Government really will decide when they are to start building the new plant we have asked so much about and where it is to be.

I gather that, in any event, our output last year was under 1½ million tons. I think that the actual figure was 1,406,000. If that is the case, what is the point of increasing the potential output to 2 million tons? What are the Minister's expectations? When does he think that the 2 million ton potential of British shipyards will be fully taken up?

In conclusion, I should like to put to the Minister this question about shipbuilding prospects. Is it a fact that the output of Japanese shipbuilding had, by 1956, begun to overtake the output of British shipbuilding? Is that due to the fact, at any rate in part, that the Japanese Government is providing credits for Japanese shipbuilders which make it unnecessary for them to have to ask for the initial deposits that have to be asked for by British shipbuilders and which enable Japanese shipbuilders to give credit terms up to five years in length? A note of warning is sounded in a number of the financial papers dealing with shipbuilding which centres upon the inability of British shipowners to give fixed dates. Has the Minister anything to say on that point?

I should like the right hon. Gentleman to give his opinions generally about the likely developments in British shipyards. Is the 2 million ton potential likely to be achieved? If so, when, and, if it is achieved, is the industry likely to be kept fully occupied in the coming years? Although the industry is likely to be reasonably fully occupied in the next three or four years, would I be right in thinking that a serious menace may develop at the end of that time, largely because of Japanese competition? Has the Minister any proposals for dealing with that matter? I agree that he may say that it is very unfair of me to ask what he proposes to do in 1961, as it is most unlikely that either he or any of his colleagues will have any responsibility for doing anything except asking the kind of questions that I am asking today, only in a much better way. However, in the most unlikely event that he is where he is at the moment perhaps he would give us the benefit of his ideas.

I have asked a number of questions and apologise for having kept the Committee a long time. My excuse for this must be that these are two widely extended industries and that it is difficult to cover the ground in a shorter time.

4.33 p.m.

The Minister of Transport and Civil Aviation (Mr. Harold Watkinson)

I am at one with the right hon. and learned Member for Newport (Sir F. Soskice) when he says that too many statistics will not be helpful in this debate. Indeed, if selected carefully, statistics can prove a lot of very odd things. Although I shall have to use some statistics, I will at least try to analyse them and draw what conclusions I can from them.

The right hon. and learned Gentleman asked me a number of questions, as he was perfectly entitled to do. I think that most of them will be answered in the course of my speech. However, there is only one thing which is more dangerous than statistics, and that is speculation, either as to political futures or shipbuilding futures. Nevertheless, I shall certainly not go into the speculative field of what might happen to world trade or Japanese shipbuilding in four or five years time, although I will give the trends as fairly as I can.

The position as the right hon. and learned Gentleman has outlined it has been clearly stated—and I know he will accept it—in a number of recent speeches by prominent shipowners and other people interested in the industry. Therefore, I do not think I need go into the general problem which he has statistically presented. The first point that I want to deal with is, is the recession in shipping in any way concerned with affairs at home? For example, have we had a recession here which has had some effect on the shipping industry?

Before I come to that matter, I should give one figure which I think we ought to keep in mind during the debate because it gives about the best sense of proportion of the problem that we are discussing. I think that it is a little more up to date than the figure that the right hon. and learned Gentleman used. The present position, as accurately as I can obtain it, is that there are about 1.2 million gross tons of British shipping laid up, compared with the world total of laid-up shipping of over 8 million gross tons. That is the proportion with which we are dealing.

As to the impact of affairs at home on British shipping, it is worth considering our total tonnage of imports and exports. I give only two figures, because I do not want to get drawn into a vast mass of statistics. Let us consider the imports and exports for January-April last year compared with January-April this year. One will find that although we are talking about very large tonnages—over 42 million tons—there is a drop of only 300,000 tons between the two years. In other words, in 1957 the movement was 42½ million tons; this year it is 42,200,000 tons. Therefore it cannot be said—and I think we should be clear in our minds on this point—that the recession in the shipping industry derives largely from a decrease in our exports and imports.

As I have shown, in volume—and that is the thing that matters—they have been remarkably steady, and I do not think home economic policy can in any way be brought into this argument. Indeed, the reverse is the case, because the shipping industry depends on the maximum level of trade. It depends on expansion, flexibility and a successful economic policy. Therefore, the Government have certainly played their part in trying to expand exports, as we have done, in trying to keep a healthy position here at home. So I think that we can get that argument out of the way by saying that this is a world problem, as the right hon. and learned Gentleman fairly said. The economic policy of the Government at home, as far as it concerns our domestic affairs, has had very little effect upon the situation, and, I would say, none at all in making a major contribution to the shipping recession.

Although I know that the debate will range widely, I think that the main problem in the minds of most hon. Members is the problem of flags of convenience. I think I shall call them that because, although they have various odd names which are difficult to say, on the whole the basis of the difficulty is that they are a convenient way of evading taxation and evading responsibilities which, as I hope to show, should not be evaded either in the long-term interests of world trade or in the interests of seafarers and shipowners.

Let us look for a moment at the facts, because they are very interesting. Today, about 6 per cent. of the total tonnage of the British merchant fleet is laid up for lack of employment. The figure for world shipping is about 8 per cent. In other words, we have done rather better on average than the rest of the world. The total percentage for flags of convenience shipping is 21 per cent.—in other words, nearly four times as high.

That leads to a very important point. These fleets have been built up rapidly. Because they have offered quick profits they have been able to come in at a time of world boom in the carrying trade and they are proving extremely vulnerable to the present recession, far more vulnerable than the fleets of the main mercantile nations. There is some measure of comfort to be drawn from the fact that those shipping companies and nations that have tried to serve their customers all over the world, year in and year out, in good times and bad, have at least retained a lot more of the trade than those interests which have come in and tried to scoop a quick profit. They are now suffering from the recession in a much greater measure than the regular maritime nations.

Commander J. W. Maitland (Horncastle)

Is not it a fact that the United States of America, which has a considerable interest in the business of flags of convenience, has allowed shipowners who have been registered under flags of convenience to reregister under the United States and thereby get the benefit of both worlds?

Mr. Watkinson

I shall come to some of those problems presently.

Mr. C. R. Hobson

Tell us why.

Mr. Watkinson

Perhaps I may be allowed to continue. I hope not to be quite as long as the right hon. and learned Member for Newport, although this is a long and technical story. Perhaps we shall get on better if I develop the point I intend to make. My intention is to set out the Government policy, which is what I should do on this occasion.

Now, we come to the broad picture. I have said that on the whole this country has suffered a little less than the rest of the world. On the whole, the flags of convenience have suffered far more than anybody else. Let us for a moment analyse our own shipping position. The right hon. and learned Member has rightly said that we lost 11.5 million gross tons during the last war. We have now rebuilt our fleet to 18.9 million gross tons. Our fleet is still the largest active seagoing merchant fleet in the world and represents today one-fifth of the active world tonnage.

In the House of Commons we do not often debate shipping matters in the widest sense. Perhaps I might be allowed to say that those who, like myself, had the honour to serve at sea during the last war will never forget the bravery and courage and devotion to duty of those men who served in the Merchant Navy. [HOn. MEMBERS: "Hear, hear."] They were sunk time and time again in conditions of horror and danger. They never refused to go back to sea. Men who were sunk three or four times immediately volunteered to return as soon as they were landed as survivors. Their great bravery and courage is a living encouragement to us always to try to do what we can to foster this great industry.

I hope it will be understood, therefore, that I speak this afternoon as one who certainly intends, on behalf of the Government, to do all that he can to ensure that the British merchant fleet continues to expand and be prosperous, as it must for the very security and safety of our nation. Perhaps I should not have made that personal intervention, but I will now go on with my task of trying to analyse our present position.

I have said that although we have made this wonderful recovery, we have declined in relation to the fleets of the rest of the world. Therefore, our percentage share in an expanding world fleet has declined, for two reasons. One is that new nations always seem to demand two things. They seem to demand an airline which carries their flag and a mercantile marine which carries their flag. Whether those things are economic or profitable often does not seem to enter into the question. That is one reason why we have seen this expansion, particularly on the part of nations who have not previously had large, or, indeed, any, merchant fleets. Secondly, there is the problem of the flag of convenience and its 15 million gross tons which now sails, or is laid up, under that flag.

I should like to analyse quickly the position within our own industry. The right hon. and learned Member asked me about the position of liners, both cargo and passenger, and tramps. The whole position is changing. Liner tonnage has remained about the same as it was in our pre-war fleet-9.4 million gross tons at the end of May, 1958, as compared with 9.6 million gross tons in 1939. The passenger element, however, has dropped by about 1 million gross tons, although about the same number of passengers, or slightly more, are being carried because of faster ships and quicker turn-round.

Where the big development has come is in the tonnage of the cargo liner, which, as all hon. Members who take part in this debate will know, is a liner which carries either cargo or both passengers and cargo, and which runs to a fixed schedule. This total is now 6.6 million gross tons. That is the result of the change in trade and the result of merchandise and exports of all kinds now being required in the shortest possible time, and, indeed, of our export trade switching much more to things like motor cars and manufactured goods and away from things like coal.

The main factor in the decline of the United Kingdom tramp tonnage is to be laid at the door of two features. One is the decline in the coal export trade and the other is the temporary decline in the carryings of primary producing countries all over the world.

Within our industry, therefore, the position is that the passenger liner is holding its own and is doing so very successfully against enormous competition in the air. The cargo liner is expanding and improving its position, as one would expect it to do, because of the changing pattern of our exports. But because of the drop in the carriage of bulk cargoes, because of almost the ending of our position as an exporter of coal, the tramp position has declined. The coasting tramp position has declined also, because of the great increase in various methods of transporting goods by road and rail within the country. That is the position within our industry. I need add only that the tanker tonnage, which now totals 5.7 million gross tons, is the main element of increase in the British mercantile fleet since the war.

To sum up, what we see is an industry which is expanding in many sectors and which is much more efficient than it was in ships, particularly in passenger and cargo liner ships, which are the finest in the world. Although it is suffering some difficulties, largely out of its own control, it is a unified and efficient mercantile fleet and ready to play its full part in the world. The figures I have given show that even in difficult times, it rather more than holds its own.

Mr. H. A. Marquand (Middlesbrough, East)

The right hon. Gentleman said that he thought the fleet was ready to play its part in whatever may come. If it should happen that we were fortunate enough once again to expand our export trade in coal by a million or two tons, would we have adequate tramp shipping available for the purpose?

Mr. Watkinson

Yes, I understand, we would. That would not present any difficulty. The difficulty is presented by the problem of securing the trade.

I turn now to our customers. Here is the main reason for the present difficulties of the shipping industry, particularly the recession in the primary producing countries. There is no need for me to say amongst expert hon. Members that that has had this inevitable effect on our shipping industry, because nearly one-third of shipping earnings are derived from trade between countries outside the United Kingdom. It is not surprising, therefore, that ships are at present laid up and it is not surprising that at the moment the balance between supply and demand in shipping is out of gear.

To come to the Government's part in this: what are the Government doing to play their part, first, in trying to expand world trade again? In talks with the United States, at Prime Minister and all other levels, and in the visits which my right hon. Friend the President of the Board of Trade has made to many overseas countries, we have tried to do all we can to preach the gospel that the free world must now expand its trade again and that the whole future of the free world might depend upon the success of that operation.

In Montreal, towards the end of this year, the Finance and Trade Ministers of Commonwealth Governments will be meeting to see what new plans we can make to expand Commonwealth trade. Not only will that conference deal with Commonwealth trade, but it will try to consider the wider problem of expanding world trade. I can perhaps best sum this up by saying that it is the Government's policy to do everything they possibly can in any way open to them to try to reverse the declining trend in trade in the free world and to try to expand it again.

Mr. John Rankin (Glasgow, Govan)

Does that include the expansion of trade with China and Russia?

Mr. Watkinson

Certainly, it includes the expansion of trade with those countries, but I think our first job, particularly in Montreal in September, will be to see if we can expand trade between the Commonwealth countries. I do not for a moment rule out an examination of what can be done to expand trade with China and Russia.

To come to the more particular point, and to answer some of the questions which the right hon. and learned Gentleman asked me, we must consider what we should do about flags of convenience, because they are not removed by an expansion of world trade. Indeed, if it becomes much more profitable, flags of convenience shipping will come back into the picture. I think it is a fair statement that they might well prove creatures of boom rather than creatures of normal times. Certainly, this practice is not going to expand in times of recession.

What hopeful policies can we adopt on this front? I shall not bother to analyse the nationalities of the countries which run these ships. The largest single interest in flags of convenience is probably in the United States, with Greece second, but what I want to examine for a moment is what should be the attitude of the traditional maritime countries like our own to these flags of convenience and this form of tax evasion and evasion of due responsibilities. It is a difficult problem, because the traditional policy of our shipping is that of freedom.

I think any British shipowner would say that even in today's conditions, he gains far more from freedom to trade and order his ships where he likes in this world carrying trade than he would gain from a restricted world in which all sorts of controls and restrictions were placed upon this great industry. The difficulty is how does one square this freedom to participate in trade and take any opportunities that are offered with this problem, and, indeed, with the recognised international standards of safety and welfare which we all want to see maintained?

I think that, first, there is something to be done perhaps on the international front. I must say, so as not to mislead the Committee, that I do not think that it is the view of the Chamber of Shipping that there are great possibilities at the moment for international action; but I do not think that that should stop the Government—and I have told the Chamber this—from pursuing every possible means they can to try to get international agreement on this problem, but it is very difficult.

I think there are some points that we should bear in mind. First of all, these ships are not subject to proper merchant shipping legislation. I am not saying for a moment that their crew's conditions are bad, that their pay is low or that the ships are not modern, but the right hon. and learned Gentleman mentioned one case—and there are others—of the crews of these ships, when bad times come, suffering a sudden reduction in pay and a sudden deterioration in their conditions. That is something that we should watch very carefully. In that respect, we ought to try to pursue, as far as we can, any policy that would bring these ships up to the normal standards of pay and conditions which those of the maritime nations enjoy. I think there is some interest in, and that there may be some possibility of linking these ships more closely in some way that would make them more subject to proper conditions in that respect. I will return to that in a moment.

One other point that I want to make, which is a very serious one, is that these ships enjoy the freedom from taxation that goes in defence, yet they would be the first to demand protection if war or trouble ever came. They escape entirely the enormous burden which this country, America and other countries are bearing for the defence of the free world, and yet they would certainly have no hesitation at all in demanding help and assistance if the need came. That is another point which we should try to stress—that their position in that respect is one of repudiating clearly the responsibilities which they ought to be bearing as nationals of the country in which they live, wherever they may register their ships.

These two points are largely moral ones, and are only points that can be put forward in discussion and so on. It is fair to say that the Maritime Transport Committee of O.E.E.C. has studied the problem and was unable to suggest any positive solution at all. There is the hopeful possibility, as the right hon. and learned Gentleman said, of the law of the Sea Conference. Perhaps I might read a provision which was agreed upon at this conference: There must exist a genuine link between the State and the ship. In particular the State must effectively exercise its jurisdiction and control in administrative, technical and social matters over ships flying its flag. I know that the Maritime Session of the I.L.O. adopted a somewhat similar recommendation. The Government are studying this matter very carefully and with great interest. They think that the acceptance of these concepts of the genuine link and effective jurisdiction and control would be very desirable, if we could find some measure of agreement or some way of implementing them. I cannot say more than that.

Mr. David Jones (The Hartlepools)

Would the right hon. Gentleman confirm that, when that Convention was passed, the representatives of the American Government and the Greek shipowners abstained from voting?

Mr. Watkinson

I will leave my hon. Friend who will wind up the debate to answer that question. Whether they did or not does not alter the Government's policy; we attach great importance to these recommendations and would like to see what we could do to implement them.

Then we come to the question of what help can be given by the Government under their fiscal policy. It would be out of order to discuss taxation matters today, but I can go so far as to say that the General Council of British Shipping was asked by me some time ago to put forward its views on how we could best meet this menace. The Council has given me a long and detailed memorandum, but, here again, I do not want to mislead the Committee, and therefore I should say that the memorandum deals practically entirely with matters of taxation. As I have said before, the General Council finds it very difficult to suggest any measures of meeting this matter other than measures of further reductions of taxation and burdens of that kind.

Perhaps I may sum up this part of my speech by saying that I shall listen with great care to any proposals that hon. Members like to put forward in this debate. So far, the proposal put forward by the Conference on the Law of the Sea seems to the Government to be the most hopeful one, and we shall pursue it; but, as I have told the Chamber of Shipping, if it or any other responsible body or individual can bring forward some proposals by which we can assure proper standards and a proper measure of bearing the burden of these flags of convenience ships, they will be most carefully considered.

On Monday, I received a memorandum from the General Council with its proposals. I have had a preliminary discussion with the Council, and, as I told it, we will have to examine all these changes most carefully. I think I should say, as indeed the right hon. and learned Gentleman himself said, that the shipping industry cannot expect to be completely removed from the British taxation system. Obviously, therefore, any changes that can be made must be limited. But there is one matter which the General Council specifically raised with me on which I can give some good news.

In common with all other United Kingdom industries, British shipowners seeking to raise any substantial capital sums have had to seek the approval of the Capital Issues Committee. The effects of the restriction on credit which the Government imposed were, of course, felt by the shipping industry in the same way as by other industries. The shipowners have represented that for them the effects were especially severe by comparison with their foreign competitors, even including foreign owners building in United Kingdom shipyards. They have claimed, with justice, that they are essentially an export industry and that they should be able to have recourse to the sources of capital in this country best suited to their requirements.

The Government appreciate the force of these arguments, and I think that the shipping industry will now find that any Government restrictions on the sources from which it may raise capital in this country have now been removed. I need say no more at this stage except to emphasise that his is perhaps a sign of how willing the Government are to help wherever they possibly can. The concession which I have just announced meets at least one of the points which the General Council put forward in its recent memorandum.

I would only add that, of course, in the 1957 Budget, the shipping industry secured the very considerable concession of 40 per cent. investment allowance. This allowance, of course, is only just beginning to bear fruit. A shipowner acquiring a new ship, I am advised, is given tax-free allowances over the life of the ship which would amount to 140 per cent. of its cost. Of course, hon. Gentlemen may say, "If you are not building ships, you cannot get the concession." Of course one cannot, but a company with a reasonably steady building programme is relieved—and I think the shipping industry accept this—of many, and, indeed, perhaps most, of its competitive disadvantages.

Those companies which are going on with their building programmes, and that is what this concession was intended to help—the shipbuilding industry as well as the ship-owning industry—are deriving very great benefit, and a much greater benefit than any other industry can claim in this respect. Therefore, I do not think that the shipping industry can claim that it has not had a major taxation concession even though it is only just beginning to take effect.

These two measures, on the tax and the capital investment front of 40 per cent. which is now bearing fruit, and the concession on the capital issues side which I have announced, I think show that the Government mean to do all they can to help whenever they can possibly do so.

Mr. A. J. Irvine (Liverpool, Edge Hill)

Can the right hon. Gentleman say on how many occasions the Capital Issues Committee has turned down an application by a shipping company?

Mr. Watkinson

I cannot answer that question without notice. All I am saying is that this is a concession to which the shipping industry attaches importance and which it has received. That is my answer to those who say that we are not doing all we can to help the shipping industry.

There are other matters at which we are looking. There is, for instance, the Transfer Restriction Act, 1939, which still remains on the Statute Book, and the Voyage Licensing Regulations which. I know, are irksome to many owners. Both these Measures were strategic in origin and their removal might improve the competitive position of British shipowners. We are looking at these matters very carefully.

I assure the shipping industry that, if it is at all possible to do so, the Government will dispense with these powers. The same is true of control on the sale of ships for scrap. I know that there are two views on that, as on the sale of British ships to foreign owners. It is a difficult subject, but I think that we are all agreed that if we could get rid of the control at least on the sale of ships for scrap that would be an advantage to the industry. I hope that we shall be able to do so in the not too distant future.

Mr. Rankin

Will the right hon. Gentleman also bear in mind the sale of ships to Pan-Lib-Hon-Co?

Mr. Watkinson

I said that there were two views about the sale of British ships abroad, but, of course, when we get into that argument we have to remember that the shipowner will say, "I prefer freedom to trade as I like." Hon. Members should, and I think will, recognise that that is a principle that I do not think a single British shipowner would ever wish to give away—the principle of freedom to trade, the freedom to purchase or sell as he thinks best according to his commercial judgment.

The right hon. and learned Gentleman asked questions on one or two shipbuilding matters, with which I will deal very briefly because, no doubt, some other hon. Members will be dealing with the matter.

Sir F. Soskice

Before the right hon. Gentleman passes from shipping, can he answer the question which I put to him with regard to the approach from the Norwegian Government?

Mr. Watkinson

I am sorry. I should have done that. I am advised that the Norwegian document on flags of convenience, which was dated 16th June, was received by our Foreign Office yesterday.

Sir F. Soskice

The second one?

Mr. Watkinson

Perhaps it is the second one. I will certainly give the undertaking that we will look at it very carefully, and if it is, as the right hon. and learned Gentleman suggested, a second one asking for a reply, I will consult my right hon. Friend the Foreign Secretary with a view to seeing that it is given early consideration. That is the answer to that.

On the various shipbuilding points, the position at the moment is that we have an order book for 6 million tons which represents four years' work. The cancellations have amounted to one-quarter of a million tons. Of course, one of the difficulties—and, I think, the cause of some of the cancellations—has been the fact that up till now British yards have not always given as quick a delivery as their foreign competitors.

I am glad to say that the shortage of steel is no longer the limiting factor in that respect and that, except in quite exceptional conditions, there is no shortage of steel in the shipyards. I hope that will result in quicker delivery both on repairs and on new building. That might be the biggest single contribution at the moment which the shipbuilding industry could make to the prosperity of its own future—to be able to offer quicker delivery and a quicker turn-round on repairs.

In answer to the right hon. and learned Gentleman's question, the shortage of steel is not a limiting factor and is not now standing in the way of the industry working up to this target of 2 million tons. I have answered the question by saying that at the moment the shortage of steel is not the limiting factor.

Sir F. Soskice

That is not quite the question I put to the right hon. Gentleman. My question was, can he give us any indication of the Government's decision with regard to the new steel plant?

Mr. Watkinson

I do not miss the point. I understand that the right hon. and learned Gentleman has a constituency interest in the matter, but I am sure he would not expect me to give an answer to a question which does not concern me as a Departmental Minister—although it certainly concerns me as a member of the Government—in a debate in which it is not relevant. Therefore, I am afraid that the right hon. and learned Gentleman will have to wait for his answer. I accept that he has a definite constituency interest, and no doubt if I had such an interest I should be pressing it, too. He asked whether the shortage of steel was a limiting factor today in the production and repair of ships. I have given him the answer that it is not.

As to the question of Japanese shipping and its rival position, I think that on tankers it is fair to say that the Japanese are giving very long credit terms. Perhaps I should add that the whole operation of overseas credit is being looked at by my right hon. Friend the Chancellor. No doubt my right hon. Friend will take this example into account in his deliberations in the same way as he is taking into account aircraft and many other problems.

I would sum up by saying that the first thing we have to face is that this is the product of a world recession. However, we have the consolation that the British shipping industry appears to have stood up better to that recession than anyone else. There is also the consolation that it has dealt a major blow to those flag-of-convenience ships—to some owners who have plunged in in the hope of making big profits. They have taken on enormous building commitments which some of them do not now seem able to implement. While I do not say for a moment that the menance of the flag of convenience has disappeared, at least at the moment some operators of flag-of-convenience ships are learning a very salutary lesson.

For the future, the Government will do all they can to find ways of trying to see that these ships carry the proper responsibilities which we believe that they ought to bear, both for the conditions of their crews and for their terms of operation. They should also bear some of the responsibilities which the maritime nations bear for defence and many other things.

The Government will this year do all they can to try to start world trade again on an upward move, because in that lies much the greatest hope of the shipping industry. We shall also do what we can at home to help the industry to be more competitive and more efficient, and we have given some sign of our determination to do that in the 40 per cent. concession and in the capital issues concession.

The industry is going through difficult times, but it is efficient and it is competitive and it is standing these times well. I think that it has every right to look to the future with a reasonable and sober confidence.

5.11 p.m.

Mr. E. Shinwell (Easington)

We can all join with the Minister in expressing our gratitude to the men of the Merchant Navy for their gallant services during the last war. Those of us who were in the House or associated with the officers and men of the Merchant Navy during that period are aware of many tragic incidents. We also remind ourselves of their gallantry and behaviour, which was worthy of the Merchant Navy and was of great credit to the United Kingdom.

While I agree with the right hon. Gentleman on that issue, I was disappointed with his speech. I am convinced that my disappointment will be shared by the shipping industry. We have had plenty of statistical information in the debate, and statistics are valuable, but I think that it would be to the advantage of the Committee if we came to the crux of the problem, and in order to do that perhaps a little history may be of value.

I have taken part in almost every shipping debate in the House since 1922, except for the short period when I was absent and on one occasion during the last war when I declined to take part in a debate during a secret session. The right hon. Gentleman referred to the losses sustained by the United Kingdom in shipping during the war—about 11 million tons. This was part of the reason why I refused to take part in that debate, on the ground that the time had arived when the public should be fully informed about our losses and the responsibility placed on the right shoulders. I have also had some association for twenty-five years or more with seafaring interests and have learned quite a lot about shipping affairs.

The right hon. Gentleman made several statements which were slightly inaccurate. He is, of course, presented with a brief and he sticks to it; that is what we usually do when we are speaking from the Government benches for the Government.

I regret that the Ministry of Shipping was ever abandoned. We had something to do with the creation of that Ministry before the Second World War. It was then merged into the Ministry of War Transport, at the suggestion of many of us in the Opposition. I regard the shipping industry, with shipbuilding, as so vital in the interests of the United Kingdom that it would be of great value to concentrate both in a Ministry of Shipping. Now they are diversified. The right hon. Gentleman has responsibility, which he transfers to the Joint Parliamentary Secretary, as was the case in the old days when the mercantile marine was concentrated in the Board of Trade and the Parliamentary Secretary had responsibility for dealing with mercantile marine matters. In addition, the shipbuilding side is concentrated in the Admiralty. I think that this is a cockeyed arrangement and that we ought to put it right. In my opinion, it is responsible for a great deal of confusion and lack of direction which is so important in an issue of this character.

What is responsible for the present position? The right hon. Gentleman said that it was the recession and that when the recession disappears or diminishes, United Kingdom shipping will come back into its own. He forgets that when the recession disappears or diminishes Pan-Lib-Hon-Co ships will also come back into their own. We shall not drive them off the high seas and out of existence when the recession disappears. The danger will remain.

Who is chiefly responsible for the danger? Let us pinpoint it and make no mistake about it. It is the United States. I regret having to indulge in even a mild criticism of the United States, because I have a strong and profound belief in the value of Anglo-American co-operation, not only for the purpose of avoiding an international conflict or meeting an emergency, should it unhappily occur, but also for the purpose of economic stability throughout the world.

We cannot ignore what is happening at present or seek to put the blame on the wrong shoulders. The United States' accumulation of dry cargo ships and tankers in Pan-Lib-Hon-Co—that is to say, registered in Panama, Liberia, Honduras and Costa Rica—exceeds the accumulation of shipping by any other nation. The Greeks are next. Why do the United States indulge in this extraordinary conduct to the detriment of United Kingdom shipping? I cannot understand this sort of thing. There is a great deal of talk about Anglo-American co-operation in matters of atomic energy and fissionable material and international affairs, but what is the good of all that if by their action they destroy the value and the effectiveness of United Kingdom shipping?

Sir Roland Jennings (Sheffield, Hallam)

I agree with every word which the right hon. Gentleman is saying about the Americans, but could he tell me what remedy he has in mind?

Mr. Shinwell

But I have only just begun. I am sure that the hon. Member' will not take advantage of me in matters of this sort and will give me a chance. There is so much to say. I do not want to speak at great length because my hon. Friends and hon. Members opposite are anxious to speak. Hon. Members opposite have great knowledge of these matters, particularly the hon. and gallant Member for Barkston Ash (Sir L. Ropner) and the hon. Member for Yeovil (Mr. Peyton), and naturally they will want to speak.

We must speak quite bluntly and with the utmost candour to the United States. It is no use talking about international conferences, because if there are such conferences the very people who constitute the menace—the Greeks and the others—must be included; and does anybody suppose that they would agree to abandon their present methods of tax evasion? To speak of tax evasion is to address oneself very mildly to the subject. There is no taxation at all. That is the very purpose of the scheme.

The Paymaster-General suggested the other day—and I was very amused by it—and I note that the Minister of Transport repeats the suggestion today, that, after all, the British shipowners have nothing to complain of, because they get 40 per cent. investment allowance and 100 per cent. on top of that, making 140 per cent. That looks good, except that the shipowners do not believe that it is as good as the Government try to make out. I made inquiries. I was a little suspicious about it when I read it.

I found out what the shipowners had to say, and it is just as well that the Committee should know it. After hearing it, perhaps the right hon. Gentleman will change his mind. The Paymaster-General said: The shipowner operating under a flag of convenience and paying no taxation has no advantage in that respect over the British ow[...] who pays taxation but gets 140 per cent. of what he pays back again. We must bear in mind that if one pays no taxation at all one is much better off, even without some rebate, than somebody who has to pay tax. That is the first point.

But this matter goes much deeper than that, for the Paymaster-General went on to say: That being over and above the 100 per cent. depreciation, it means that if one spend £100 on replacing a ship not only does one get back the tax of £100 but in addition one gets tax on £40."—[OFFICIAL REPORT, 17th June, 1958; Vol. 589, c. 999.] Shipowners point out that this is misleading.

This refers only to tax rebates, and the owner will only recover the replacement-value of the ship over a far longer period and then, as they say, provided that he is operating at a profit, since during that time he is also dispersing a considerable amount of his income in taxation. It is quite misleading to suggest that the British shipowner has had an advantage because of this 40 per cent. plus 100 per cent. and I am sure that shipowners on the benches opposite will agree.

I am not suggesting that relief of taxation is the remedy. Nor do I believe that the shipowners want that, but we have to take account of the fact that every maritime nation engaged in shipping and shipbuilding indulges in a policy of subsidisation. The United States spends millions of dollars, even billions of dollars; but we have had enough of statistics. Let us deal with the facts. [Interruption.] Yes, people need to get the idea.

The United States, first of all, wants to build a great merchant fleet so that it can be available in time of war. It has been doing this for a long time. The Americans were responsible for building the Liberty ships.

Mr. Rankin

And selling them to the Greeks.

Mr. Shinwell

Shipowners in this country would have been glad to buy them, but what prevented them? I will come later to the profit gained by the Greeks and others as a result of running those ships.

During the 1930s, the period of recession because British shipowners could not meet their liabilities with the banks and the finance houses, the banks foreclosed and British shipowners had to sell what ships they had. These were bought by the Greeks and others who could afford to pay for them at low prices.

When it came to the matter of buying Liberty ships, British owners were refused permission to use dollars. Since the war many shipowners would have been glad to buy Liberty ships, but they were refused permission. Some of these ships were bought by Greeks and other foreign owners for about £100,000, and they were sold at the end of 1956 and in 1957 for £600,000 and more.

British shipowners have been suffering a great deal as a result of all this. It might be asked why I am concerned about the shipowners. I am not concerned so much about them, though there are very decent people among them, people no doubt of good education and social behaviour. I am concerned about the seamen. Unless British shipping is profitable, obviously the National Maritime Board can never agree to pay good wage rates.

There have been great improvements since 1911 when I was first associated with seamen. That was also the beginning of trouble. Men on deck were sailing to the River Plate for £3 a month, and men in the stokeholes of coal-burning ships sailed for £3 10s. a month. There have been many improvements in wages since, and vast improvements in accommodation. Some of our tramp ships and cargo liners have wonderful accommodation. There are none of those old forecastles and glory holes. Many of the men now have their own rooms and live like fighting cocks, and why not? There have been vast improvements, partly as a result of agitation, partly as a result of public opinion, and partly because we have some very enlightened shipowners in the country, to whom I pay tribute.

We must find a remedy for the situation. I shall tell the Minister and my colleagues on both sides of the Committee something which has not yet been mentioned in the debate, but which in my judgment is the real cause of the trouble. It is not so much flags of convenience. I am surprised that there has been concentration on flags of convenience, for which there is no immediate solution and perhaps no solution at all. The real trouble is flags of discrimination.

It means that if the United States enters into a contract to send goods into this country at our request, it insists upon discriminating to the extent of at least 50 per cent. being carried in American bottoms. The same applies to other countries. There is hardly a maritime country in the world, or any country at all, that does not operate the discrimination policy. We suffer far more from that policy than from the policy of flags of convenience.

How can we deal with that? I hope that the Joint Parliamentary Secretary will address himself to this subject and tell us how to find a remedy. I shall make a suggestion. I have said before that we have to be pretty straight with the United States in this matter. I wish we had a larger attendance in the Chamber, and some excitement and agitation, and that hon. Members had been stirred up to make a strong protest and let the United States know That we are sick and tired of the policy they have adopted and which in our judgment is to the detriment of British shipping.

That is the way to talk to friends and, if they are friends, they will understand. I know what international conferences are. I had experience of them when I was in Government. There is plenty of talkie-talkie, but not much action. They love talking. Well, so do we all. Therefore I do not attach so much importance to conferences but to going to the fountain head and saying that we will not stand for this any more. After all, if the Americans were reasonable about flags of convenience, and also about the discriminating policy they are attempting in connection with the carriage of cargo, it would be of inestimable value to this country. It would make all the difference in the world.

Now I come to another matter. I know the position is not as serious as some people make out and that we are inclined to exaggerate. Many shipowners are doing well. Many are making profits. Many are living on past profits. Let us not exaggerate the position, although it may become more dangerous. My right hon. and learned Friend the Member for Newport (Sir F. Soskice), in opening the debate, dealt with the decline in British tonnages since 1906, since the First World War, during the Second World War and since 1945. It is a serious state of affairs.

The only advantage we possess is that our ships are probably better and faster than others and have a greater capacity, although it is true that many ships registered in the countries about which we complain are good ships. I think the majority are only about five years old. Nor should we pretend that the conditions of the crews who sail in those ships are inferior to the conditions in our ships. It is not possible to get crews for those ships unless they are paid well, particularly if they happen to be Americans. The Greeks do not matter in this context.

Reference to the decline in shipping brings me to the subject of declining freights. This is also a serious matter. I will give the Committee one fact. About a year and a half ago shipowners could get 100s. per ton carrying coal from the United States to this country or to Europe. What are they getting now? Twenty-five shillings. There is no ship which can pay on that basis. It could not wash its face on that basis. At the very least it needs 35s. a ton, and even that presents great difficulties.

This reminds me that when the right hon. Gentleman was saying that British shipping was not so badly off and that, after all, there are many British ships sailing the high seas, I thought that a ship can sail the high seas but, if it has not got a sufficient cargo, how can the owner pay his way? Many British ships are sailing the high seas but with cargoes that are not satisfactory from the point of view of making profits or meeting depreciation charges. That is the position and the shipowners are well aware of it.

I hope the Committee will address itself seriously to this problem, because if there is a further decline in British shipping it will be serious for us. We have enough ships laid off at present. There are great economic problems confronting the country but we cannot afford to allow British shipping to go by the board. We must not allow that. My right hon. and learned Friend pointed out that a sum of about £400 million is gained from invisible exports and in other ways as a result of the operations of British shipping. That is of great value to us.

What is to be done? The first thing is that the Government must take their courage in both hands and must not be afraid. There is far too much timidity in matters of this kind and in international relations. We must say to the United States "This kind of conduct will not do. See the adverse effect on our shipping as a result of your behaviour", and we must try to get some agreement with them.

On the question of how we can help British shipping financially, many years ago I had something to do—together with a departed colleague of mine, David Kirkwood—with the agitation for the guarantee of credit facilities for the Cunarders. What a grand thing that turned out to be. If those credit facilities had not been provided at the time we should not have had the advantage of those two fine vessels during the war which were of such value to us and which were able to proceed on their missions without escorts.

Can anything be done on those lines today? I see that the West German Federal Government have now decided to subsidise their shipbuilding to the extent of 50 per cent. There is a competitive factor which we must face in the future. Cannot we do something like it? Perhaps credit facilities could be provided. I noticed what the right hon. Gentleman said about the relaxation of the Capital Issues Committee. That may be of value, but something more needs to be done and we ought not to be afraid to say what we want if we think it will be of value.

Do not let us be too mealy-mouthed about subsidies. We have subsidies for agriculture and we have had subsidies for other industries. We had them in 1925 for our mining industry, amounting to £25 million, which went into the pockets of the mineowners. There might be partial subsidies to enable the shipping industry to carry on when the money is required for replacing ships. I do not see why that policy should not be accepted.

I beg hon. Members on both sides of the Committee to interest themselves in shipping and shipbuilding. The Chancellor of the Exchequer in the course of the debate the other day said something which was commonplace and has been said thousands of times by various people, namely, that shipping is the life-line of our country. So it is; but if it is the life-line, let us hold on to it.

5.39 p.m.

Mr. John Peyton (Yeovil)

I agree profoundly and most warmly with most of what the right hon. Member for Easing-ton (Mr. Shinwell) has said. He never disappoints us by a lack of robustness and vigour. Today I particularly welcome his suggestion to the Committee and to the Government that this country should address itself to our American partners and allies. There can be no gainsaying American responsibility for the huge growth in flags of convenience fleets. In those circumstances, when we are seeing our own merchant marine undermined by that growth, there can be no forgiveness if we fail to address ourselves with the utmost directness and frankness to the American Government and nation. Incidentally, it was only yesterday that a report was brought to my attention to the effect that the American Government were introducing a measure into Congress to permit mortgage finance for foreign ships, which means that these flag of convenience fleets will get further aid.

A further point which the right hon. Gentleman touched on is the possibility of establishing a Ministry of Shipping. I do not know that I would go all the way with him on that, but at the moment I do not feel satisfied that we have any organisation which combines representatives of both the Government and the industry adequately to consider the many angles of the shipping problem.

As to the speech of my right hon. Friend the Minister of Transport and Civil Aviation, I very much welcome the concession which he was able to announce, and even more do I welcome the general sympathetic attitude shown throughout his speech. However, I felt that he was slightly optimistic, particularly in one respect when he said that the present shipping slump was seriously affecting the flag of convenience fleets. I would hazard a guess that much of the flag of convenience tonnage now laid up is of the older variety and that the new ships are not laid up. I should have thought that it was a commonplace and a triusm that in any future slump the chief supplier of the scrapyard and the chief occupier of the lay-up berth will be the owner of outdated tonnage. If the Pan-Lib-Hon-Co fleets are enabled to keep well ahead of the British Mercantile Marine there can be no doubt as to who will be in the lay-up berth in future slumps, and the present slump should not give us too great a confidence as to the effects of future recessions upon the shipping industry.

I have previously had the privilege of addressing the House on the question of flags of convenience, and I do not want to repeat what I have already said, except to say in a general way that this country cannot allow its Commonwealth and strategic interests to be prejudiced by the eclipse of the British Merchant Navy. As the right hon. and learned Member for Newport rightly said, in the light of our trading position it is unthinkable that we should contemplate—we cannot possibly contemplate—the huge adverse burden which would be thrust upon our balance of payments if the immense contribution which is made by the British Merchant Navy were to be withdrawn. There has been a steady decline, as the right hon. and learned Gentleman pointed out, over the last fifty years, and it has seemed that every year in recent years our share of world tonnage has declined by about ½ per cent. Also, whereas total world tonnage has increased by 50 million since 1950 the United Kingdom increase has been only 1½ million.

I recognise that it is very easy to pose this problem, but it is very much more difficult to solve it. I do not believe that we shall have a hope of solving it—certainly I am sure that there is no quick, off-the-cuff, ready-made solution available to anybody—unless an organisation, comprising representatives of all concerned, is set up to look at the problem from its many angles. I should like to remind the Committee of some of the angles and aspects involved.

Firstly, there is the slump in freights. Secondly, as the right hon. and learned Gentleman so rightly mentioned, there is the background of the losses of two world wars which it is so easy for us some years afterwards to ignore. We should pay tribute, as he did, to the tremendous efforts which were made in times of shortage of finance and other resources to recover from the devastation of war and regain the momentum of development.

Another factor which we should bear in mind is that this is very much of a pioneer industry. The industry was, in fact pioneered from this country. Pioneer industries have great traditions, but they are also inclined to gather a few relics with those traditions. It is only natural that an industry of that kind should have a good deal of outdated equipment, and when we add to that the effect of two world wars it may indeed constitute something of a handicap.

I believe that the Committee and the country are entitled to remind the industry what we expect from it. We expect to be assured that it still has the enterprise and initiative which launched the two "Queens" upon their long reign in the Atlantic. We are also entitled to remind it that in the these days of interdependence it is impossible to live in ivory towers.

I am never satisfied, or quite certain, about what arrangements are made to take account of modern developments in shipping and shipbuilding, what general, all-round consideration is given, for example, to the growth in the size of ships, to the new means of propulsion which are not very far away from us now, and to the provision of facilities for these ships. I know of the Milford Haven project and other projects, but I should be very interested to know whether there is yet any certainty when those facilities will be completed. In considering the problems of the shipping industry, and, immediately with them, the question of our imports of raw materials such as oil and iron ore, it is of the utmost importance that we should give simultaneous thought to the problem of how these big ships are to be handled. Consequently, we should like to have from the Government an assurance that their attention is constantly applied to the question of providing adequate port and docking facilities.

Another aspect which we must consider is the immense increase in our oil consumption. Is it likely, as has often been suggested, that our oil consumption over the next ten or twelve years will be doubled again? If so, who will carry the increased quantity into our ports? We know that we cannot rely with any assurance at all upon the Mediterranean communications; pipelines and the Suez Canal are uncertain. We have, therefore, to provide ourselves with an immense amount of tonnage to bring in that increased quantity of oil. I think it fair to observe that the oil companies themselves are not primarily carriers of oil. They are highly international affairs. That may be a good or bad thing in these days, but it is irrelevant to the debate. However, with this country's intimate dependence on oil, we cannot possibly afford to leave ourselves in a position where either the necessary tonnage is not available, or we have to pay a ransom price for it.

Another angle is that of taxation, but it would be out of order for me to go into that, although previous speakers have referred to it in general terms. We cannot possibly escape the fact that those who pay taxes cannot compete with those who do not—and I am sure that there will be little controversy about that. Yet that is the position in which the British Merchant Navy finds itself today. I need not remind hon. Gentlemen that both parties when in Government have taken remedial measures and have given exceptional treatment to the shipping industry, for the best of reasons, and the Government would do well to consider what further steps could be taken along that road, because they must satisfy themselves that taxation does not hamper the growth of an industry upon which our very survival depends.

I come to the subject of subsidies and discriminatory practices. The right hon. Member for Easington suggested that subsidies might be necessary. While tax concessions may be essential, I believe that it is necessary as long as possible to avoid resort to subsidies. They only involve a race and retaliation by others, and the longer we can keep ourselves in the position of non-subsidised enterprise, the stronger we shall be.

The flags of convenience fleets have struck a great blow at the principle of the genuine link between the country of registration and that of the actual control of the ship. Unless we recognise that this fact is bringing with it a wholly new development in maritime trade, we shall fail even to begin to tackle the problem. Certainly this practice is undermining all the traditions on which maritime countries have so far based themselves. If the trend develops and gets worse, as it may well do as the years go by, the shipping industry and the Government may have to be prepared to take another and very uninhibited look at the problem.

How far can the Government help, and in what way can they help? I am certain that one of the most important methods is to arrange for some co-ordinated examination of the whole problem which will fully take into account the various aspects which I have mentioned. Unless we do that, any decisions which we take and any opinions which we form will be only piecemeal and fragmentary, and ultimately we shall be forced back to our starting point and have to think out the whole matter again.

Undoubtedly the Government can also help in taxation, but I will not deal with that again. The right hon. Member for Easington was absolutely right when he said that we have to speak frankly to the Americans. We have to ask the Americans whether they understand the direct and inevitable consequences of their economic policy. Do they understand that by financing what has been described as a huge scab growth they are undermining the merchant fleets of their allies upon whose security their own security ultimately depends?

Mr. Cyril Bence (Dunbartonshire, East)

They understand that. They want to do it.

Mr. Peyton

I do not accept such a harsh construction.

In addressing ourselves to this problem, we do not help matters by launching great denunciations of the owners of the ships which sail under flags of convenience. They are men of great initiative and enterprise who have had the freedom of the seas given to them on a plate. They have also had made available to them by a benevolent uncle a great quantity of dollars and they have had the wit to exploit their position. They have done nothing dishonest or shabby, although they have done very well for themselves. It is idle and a waste of time to pursue them with vilification and abuse.

I also suggest that it is no good denouncing those countries which lend their flags to these fleets. I do not believe that an appeal to uphold the principle of a genuine link between the ship and the country of registration will have a devastating effect on public opinion in Liberia, nor do I think that it will stir the crowds in Panama and Honduras.

There are two things which we must have, a co-ordinated examination of the whole problem, with Government Departments bearing their share in a comprehensive discussion of these issues, and some assurance that, possibly when he next visits the United States, my right hon. Friend the Prime Minister will take the opportunity of not hesitating to acquaint the President not only with the undoubted effect of American policy upon the merchant fleets of America's allies, but with the strength of public opinion here about the effect on what is one of our most important industries. I very much hope that we shall be fully assured on those two points when the debate is concluded tonight.

6.0 p.m.

Mr. C. R. Hobson (Keighley)

It is a great pleasure to follow the speech of the hon. Member for Yeovil (Mr. Peyton), because I was associated with the Motion that he put on the Order Paper even before the matter was discussed in another place. The shipping industry is of vital importance to the people of Britain. As my right hon. Friend the Member for Easington (Mr. Shinwell) said, we depend upon it for our very survival.

I shall divide my speech into two parts. I shall deal briefly, first, with the shipping industry and, secondly, with shipbuilding, with which I was associated for many years, as a young man. I have the honour to be, and have been for many years, a member of the Amalgamated Engineering Union, which is responsible for the organisation of the bulk of the membership of the workers in the shipbuilding industry.

I want to take up one or two points made by the Minister. Many statistics have been thrown about, and the right hon. Gentleman himself gave us the tonnage of cargo liners. It was quite impressive, but I still think that there is a need for a great increase in the number of our cargo liners. They are competitive with those ships belonging to the flags of convenience; they are speedy, so that a quick return can be obtained from them, and if there is an emergency, which heaven forbid, they are probably the only ships afloat, other than the main passenger liners, which can outstrip submarines.

If we consider the tragic loss of tonnage in British shipping during the war we find that the loss among cargo liners, once the convoy system got under way and the sailing of ships was scheduled, was very much lower than in the case of any other form of merchantmen at sea. I want to see every encouragement given by the shipping companies to the construction of cargo liners.

We all want to expand trade. Ministers travel round the world to try to get more trade, and we welcome their efforts, but the sad fact is that some nations—fortunately not in the British Commonwealth—have a habit of insisting that up to 50 per cent. of their cargoes shall be carried in bottoms belonging to the State from which the cargoes in question have been bought. It is the normal American technique. Even when we were receiving Marshall Aid the Americans insisted upon 50 per cent. of the goods shipped to us under that scheme being carried in American ships.

Mr. Paul Williams (Sunderland, South)

Surely the point here is the hon. Member's reference to "at least 50 per cent." In practice, it is very often considerably more than 50 per cent.

Mr. Hobson

Yes. That reinforces my argument. I agree with the hon. Member for Yeovil and my right hon. Friend the Member for Easington that we must talk straight to the Americans. They will appreciate it, and they will like it. I am in favour of the American alliance, but true friendship and understanding can exist only if there is not this continual war against sterling. This was reflected in the struggle over Suez. It was to them a war for oil. There was not to be oil for £ notes; there was to be oil only for dollars.

The American shipping industry is pursuing precisely the same technique. Not only do the Americans subsidise the industry but, as has been said by every speaker today, they are largely responsible for support being given to the flags of convenience. I am informed that up to 95 per cent. of the capital invested in the countries of the flags of convenience is Wall Street capital. The Government are in a position to approach the American Government and tell them that they have gone far enough in the war against British shipping, which is really part and parcel of the war against sterling.

The Minister has referred to the shortage of steel. All those who know the state of the industry agree that there is no longer any shortage of steel plate, but there is some shortage of specialised steels. But they go more in the construction of turbine blades than in the construction of the actual vessels and, therefore, do not have much effect upon the ship builder. In this connection, I was very pleased to hear that the Minister appreciated that some of the delays in British shipyards, in the matter of delivery dates, were due entirely to the shortage of steel and not to the restrictive practices of the trade unions involved, which are frequently stated to be one reason why British shipyards cannot achieve the appropriate delivery dates.

The general tone of the Minister's speech was one of appreciation of the importance of the industry, and I think that he succeeded in convincing the Committee that his counsels would be for its development. Its importance is derived, first, from the thousands of workpeople engaged in the industry, in one way and another. Many trades are involved in the construction of ships. Secondly, there is the employment of seamen. From that point of view alone the industry is very important. It is also important because it saves foreign currency. About half our food is carried to this Country in British ships, with a corresponding saving of foreign currency. Further, the shipping industry earns foreign currency, both dollars and soft currency.

It is interesting to dwell on that point for a moment. Our imports and exports have never balanced since 1903—and that was before I was born. Any balance that has been achieved has been made up entirely by invisible exports—banking, insurance and shipping, with shipping the largest of those three. We are only too pleased to be told that British shipping is earning about £119 million in foreign currency each year.

Mr. Peyton

Not long ago my right hon. Friend the Chancellor gave a figure of £300 million for the last year, excluding tanker earnings.

Mr. Hobson

Yes, I am aware of that figure, and I have seen the explanation of it. There are many other hon. Members who wish to speak, however, so I will not give the answer now, although shall be only too happy to show the hon. Member the relevant calculations when I have finished speaking. I have been into the matter most carefully, and I can assure him that the actual figure in relation to what may be classed as invisible exports is £119 million.

Shipping is performing a yeoman service to the British economy. Even with all the invisible exports that we had before the war we were never even then able to balance our Budget. In fact, we sold over £127 million in gold or investments to balance our Budgets between 1936 and 1939, when the war broke out. Shipping is more essential to our economy now than it ever was, because we do not possess the investments that we had before the war. We must, therefore, do everything we can to encourage the industry. In 1937, British shipping earned roughly £105 million in foreign currency, and, in our present economic position, to achieve a comparable result we should have to earn about £400 million.

The welcome sign is that the size of the fleet has increased. That was pointed out again by my right hon. Friend the Member for Easington, whose association with this industry goes back a long time. Some hon. Members will recollect the verbal fights that he had across the Floor of this House many years ago in association with the late Lord Kirkwood and the late Arthur Greenwood. I am convinced that if there is a full understanding and appreciation of the problems with which we are faced, we can develop the industry considerably.

Much has been said about flags of convenience and no one knows the remedy. We are all agreed that we do not want any bias to be shown against them, because of retaliation. I agree with my right hon. Friend the Member for Easington that the conditions provided for the seamen in those ships are as good as in the best British ships, because the fleet is new. But I am not convinced that the rates of pay, other than those for the officers, are anything like comparable with the rates paid by British shipowners. There is also the point that there is something wrong, thoroughly wrong, with a system whereby these people are able to "pinch" skilled sea-going officers, without having to share in the expense of training them. That is something which adds to the unfairness of the burden.

A lot could be done at international conferences to see whether the international sea law could be improved. Perhaps the trade union movement, as such, could take some action, if the C.I.O. in America and the Scandinavian and our own trade unions appreciated the position. I see nothing particularly wrong in trade unionists being awkward when these ships come into British ports, if standards are not conformed with. I should like to see action of that character being taken, although I confess that that is the only positive suggestion which I can advance. I believe that the great international brotherhood of the trade union movement, when faced with a position where normal standards are not conformed with, could take action in self-defence.

Lord Mancroft, in another place, gave a wonderful example afforded by the "Olympia", which went on her maiden voyage to America amid a lot of "ballyhoo". It is as well to recall what the noble Lord said. The vessel was built on the Clyde by John Brown. She sailed for Greek owners under a Liberian flag. The crew were German; the barman came from Skegness. That is the sort of cosmopolitan crew that we get. But I am not concerned about these luxury liners, where conditions have to be good. There have to be good conditions at the Savoy Hotel and so there have to be good conditions in these vessels. I am sure that the large numbers of new tankers all conform with Lloyds, and that the rates of pay are reasonable. It is when we come to the small Greek tramp owner that the story is different. Their vessels are probably what remain of the old "coffin ships" and we should take a tough line with them.

The shipbuilding picture is quite rosy. The figures given by the Minister and other statistics prove that this industry is doing very well indeed. Certainly, the steps taken to modernise the shipyards have been considerable. I am sure that all hon. Members would wish to pay tribute to that. Without this modernisation we should not be able, as we still are able, to compete both with the Japanese and the Germans. The danger is that of this tonnage a large amount is tanker. While that may not affect the members of my trade union, because ships have still to be engined and auxiliaries must be supplied, it affects those in the finishing trades responsible for finishing vessels in the shipyards. I think that there we shall be letting ourselves in for trouble; indeed, there are already indications that that is likely to happen.

Reference was made to the construction of new liners. New orders are not too satisfactory. We may, as a nation, have to do something about that. The "Queen Mary" and the "Queen Elizabeth" were mentioned. These vessels are over twenty years' old and cannot go on for ever. There is need for liners of that calibre and capacity on the transatlantic route but I cannot imagine the Cunard or White Star or other companies being able to build liners of that size. It is not a good proposition for them. Yet there is prestige in it. The Americans subsidised the construction of the "America", but I do not want us to do it in that way. The recollections of my right hon. Friend the Member for Easington were refreshing when he reminded the Committee of the struggle, waged largely by the late Lord Kirkwood, in connection with the insurance of these vessels. It may well be that we ought to have talks with the larger shipowners with a view to seeing that more large and up-to-date liners are built and put on the transatlantic route.

I wish to refer to the position of ship repairs, about which we have heard little today. This is where the red light is showing. We have passed from the yellow light to the red light. Not so long ago I was taken round Wallsend by officials of my union and I was amazed. If we look at the statistics we see that the percentage of unemployed men is negligible. If one goes round the larger works, Parsons and places like that, on the Tyne, one will see that certain types of skilled labour are required. But the fact is that ship repairs are suffering from the slump. That is understandable when so much shipping is laid up, on the Fal and elsewhere.

Help could be given in this direction. I have never heard a satisfactory explanation—I never heard one even when I was an ordinary lay member of my trade union—of why so much ship repairing is done abroad. We have heard about Rotterdam, but there is not a big difference between the wages paid there and in this country. The work is done there slightly quicker, but they do not do the same job as is done on the Tyne. I know some of the tricks, I have seen them operated, but I will not weary the Committee with a description of them. In my opinion it is a foolish and shortsighted investment to send British ships abroad to be repaired.

I should like some assurance from the Minister about the repairs position. This is essentially a specialised job which is done very well indeed in this country. There are some shipowners, for example, the Post Office, which has cable ships, who send their ships to the Tyne for repair because of the type of work done and the speed with which it is carried out. I hope that we may get an assurance on this matter from the Civil Lord.

One thing that the British people can do is to build ships and sail them. I am sure that we shall always continue to do so and that the shipbuilding industry will grow, provided it gets a fair deal. I am not advocating an open subsidy. I know about the 40 per cent. investment allowance, but some people might consider, when discussing the taxation of industry, the rate of depreciation of vessels, and the fact that they now cost five times more than they did in 1939. I am sure that this industry has the best wishes of hon. Members on both sides of the Committee.

6.21 p.m.

Colonel Sir Leonard Ropner (Barkston Ash)

I am glad that the right hon. and learned Member for Newport (Sir F. Soskice) has returned to his place, because I would like him to know that, except when he embarked upon political prophecy, I agreed with almost everything he said.

I thought the speech of my right hon. Friend the Minister of Transport a little over-optimistic. I hope he will remain on the Government Front Bench during the course of my remarks, because I would like to pick up some of the points that he made.

I fear that it is inevitable that a debate of this sort is largely statistical and that there should be some repetition in the speeches. The right hon. and learned Member for Newport almost apologised for going back in history to 1906; I wish to trespass still further on the patience of the Committee by going back to 1900. In that year, more than half the total of the world's shipping flew the Red Ensign. Since 1900, there has not been a quinquennial period in which there has not been a reduction in the proportion of United Kingdom compared to world tonnage, until, by 1957—here I must repeat figures which have already been given—only 18 per cent. of world shipping was British. It was more than half in 1900 and is less than one-fifth in 1958.

The comparative decline in British shipping is by no means a new phenomenon. A large number of factors have contributed to the decline. They have not only been damaging in the past, but they are perhaps more damaging now, and they look like becoming even more pernicious in the future. I hope that I may remind the Committee of some of the ways in which the very existence of the British Mercantile Marine is being threatened.

Over a long period, other nations, with increasing frequency and with greater effectiveness, have devised methods of discriminating in favour of their own tonnage. More and more frequently other nations have sought, in trade agreements, to insert clauses which increase the difficulties of the British Mercantile Marine. They have, over a long period and an ever-widening field, completely reserved certain trades for ships flying their own flags and have become more and more inclined to subsidise their own shipping.

A new manifestation which is hurtful to the British Merchant Navy has already been mentioned during the debate, the determination of new nations, as an expression of nationalism, to acquire and run their own mercantile marine quite irrespective of economic considerations or of existing services. I learned only yesterday that during the last two years, a short period, about 20 trade agreements had been reached between various countries and all included a shipping clause which reserved the traffic between the two countries to ships of their own flags.

Right hon. and hon. Gentlemen on both sides of the Committee may ask, as many have, why, during the last half century, no Government has been able to do very much to assist the Merchant Navy, and why, for that matter, the British shipping industry itself has not been very forthcoming with remedial proposals. The answer is that up till recently the British Mercantile Marine had presented a bigger target than the fleets of any other country. Moreover, the trade which it has conducted has been more vulnerable than that of any other nation, in that it has carried a higher proportion of passengers and cargo between foreign countries in addition to that carried between this country and the Commonwealth and Empire. It has certainly been the policy of the British shipping industry and of successive Governments that the interests of British shipping were best served by efforts to minimise action by foreign nations calculated to restrict free and fair competition.

In addition to the difficulties which have been created by foreign Governments over a long period and with growing intensity, two world wars have been responsible for the wholesale massacre of British ships. I would join hon. Members who have already paid tribute to the courage and bravery of the Mercantile Marine. Perhaps a record of the losses sustained by my own fleet would be of interest to the Committee.

We started in 1875 with one little iron ship of 500 tons. By the beginning of 1914 and the First World War we had acquired and were running a fleet of 57 ships. At the end of the First World War only 21 of the 57 remained afloat. We built up a fleet again until by 1939, the beginning of the Second World War, its number was 45. In 1945, all but 11 of those ships were at the bottom of the sea. Nearly two-thirds of our ships were lost in the First World War and three out of four were sunk in the Second World War. All fleets suffered in the same way. The loss of so many ships by the British Mercantile Marine in two wars was completely calamitous.

Even that setback to the British Mercantile Marine is not the full story of the handicaps which arose out of war. The ships of the British Mercantile Marine which remained afloat were requisitioned and sailed at controlled rates. Of course, no shipowner complained that such was the case, but the ships of neutral countries, and, indeed, of Allied countries, were hired at rates which earned prodigious profits and enabled them to amass reserves by the use of which they have been able to modernise and greatly enlarge the fleets which now compete against us.

Even that is not the end of the havoc which arose from the war for, however willing the United Kingdom shipping companies may have been to pay increased insurance premiums on higher values, in point of fact they were not allowed to do so. Values were controlled, but not, of course, the price of new ships, subsequent to the termination of hostilities. As the price of a new ship in 1945 was about three times what it had been before the war, and is now about five times what it was in 1939, British owners were able to add to their fleets after the war only perhaps one ship for every three or four, or even five, which had been sunk during the war.

In reviewing the decline of British shipping over a considerable period, I must also remind the Committee that, certainly since 1916, the rate of direct taxation borne by British shipping has been on a scale considerably higher than that levied on the earnings of the majority of its competitors.

I have ventured to remind the Committee of what has happened over a considerable period because, except for the tragedy of war and the results of war, all these factors continue to operate against the British Mercantile Marine. I am sorry that the Minister of Transport, in replying to the right hon. and learned Member for Newport, although he mentioned the difficulties which arise out of flags of convenience, did not mention what the Government want to do and think they can do to meet these old difficulties, which continue in an ever extending form.

Every member of the Committee will know that since 1939 the British Mercantile Marine, with the merchant fleets of the traditional maritime nations, has had to meet intense and growing competition from an entirely new quarter. I refer, of course, to the rapidly expanding fleets of Panama, Liberia, Honduras and Costa Rica which until today I had known as Pan-Hon-Lib, but which the right hon. and learned Member for Newport has christened by the more phonetic name of Pan-Lib-Hon-Co. Is it Bonca or Honc? One reminds me of Monte Carlo and the other of old motor horns. However the combination may be pronounced, I am in the habit of using the term Pan-Hon-Lib. If it is not up-to-date, I hope that I may be forgiven.

It is altogether wrong to suppose that Pan-Hon-Lib ships are old, or shoddy, or ill-equipped, that the accommodation they offer for their officers and crews is below standard, or that the salaries and wages which are paid are low. That is not the case at all; in fact, British owners have complained that owners of Pan-Hon-Lib ships have enticed away our best officers and crews by paying wages which are higher than are paid to the British Mercantile Marine. Except in the case of the ships of the United States of America—which country, as has been mentioned, makes great use of flags of convenience—the advantage gained by ships flying such flags arises wholly from the fact that, however high their earnings, they pay virtually no taxation whatever.

When freight rates are high, when profits are high, that total exemption from taxation—which I think is always guaranteed for a minimum of twenty years and in the case of some of the Pan-Hon-Lib countries for thirty years—confers an overwhelming advantage on Pan-Hon-Lib ships. The extent to which foreign shipping is making use of flags of convenience is illustrated by the rapid growth of the practice. I repeat the figures. In 1939, those countries had, to all intents and purposes, no shipping at all, but by 1957—only last year—the figure stood at more than 14 million tons.

I do not think that it has been mentioned this afternoon, but so far as I have been able to ascertain there is a further 4 million or 5 million tons either under construction or on order for Pan-Hon-Lib countries. In only a very few years, perhaps three or four, fleets flying flags of convenience will in total exceed the tonnage of that of the United Kingdom, which at present, by only a very slight margin—and a margin which is being rapidly reduced—is still the largest mercantile marine in the world.

In Committee of Supply, Sir Gordon, it is not easy to raise matters which deal with taxation, but no doubt your predecessors in the Chair have told you that some latitude has been granted to previous speakers during this debate. Perhaps I might draw a comparison of the treatment of a shipping company in this country in regard to taxation and one with ships registered in a Pan-Hon-Lib country. Between 1949 and 1958 a British company owning on an average throughout that period 12 vessels, each of about 10,000 deadweight, might have made a profit of about £8,850,000.

I know of such a company. If such had been the case that concern would have paid in Income Tax and Profits Tax alone no less than £3,380,000. I think it must be appreciated that if its ships had sailed under a flag of convenience it would have had nearly £3½ million additional funds available for adding modern ships to its family of ageing sisters.

The grave and growing and now urgent problem presented by the competition of tax free ships is quite distinct from the difficulties which faced the shipping of the world as a result of the current severe depression in freight rates. I think that it was the Minister of Transport who tried to give us comfort by remarking that it would appear that the Pan-Lib-Hon-Co ships are suffering most from the present depression of freight rates. I think that to some extent that is true, but the reason is a very different one from the one which he suggested.

The reason is that the managers of Pan-Lib-Hon-Co ships have, on the whole, refrained from taking long-term contracts, long-term charters, which they could quite well have done if they had wanted to; but in their tax free position they were happy to seize the chance of quick and high returns. Now that the bad times have come it is their policy rather than their ships which may, and, perhaps, some of us hope will, land them in trouble.

In point of fact, the threat to British shipping presented by Pan-Lib-Hon-Co tonnage would disappear completely should the time ever arrive when no efficient shipping company in the world was able to make any profit. We cannot get much comfort out of that, for no doubt good times will return, and, as a consequence, the danger will grow again. Moreover, if bad times continue I am in wholehearted agreement with the warning which has been voiced in two speeches from the other side of the Committee, namely, that these ships, or the owners of these ships, may be tempted to slash salaries and wages and to allow worsening conditions afloat.

This they could do since they are not bound by any international convention. They are free from Government control and are not answerable, so far as I know, to a powerful trade union or even any trade union at all. They can inaugurate worsening conditions without restraint and without notice. So what is the answer to these problems which have been posed to the Committee by every speaker this afternoon?

I venture to assert that neither the Minister of Transport nor the right hon. and learned Member for Newport, nor any other right hon. or hon. Member of the Committee, nor for that matter any member of the shipping industry, can give a satisfactory answer to that question, one which is at present both politically possible and economically sound. Certainly, the Government have not been able to answer that question today. To the uninitiated the answer seems obvious. They say, "Let us have an international agreement. Let us have an international scheme which will penalise in some way the tax-free tonnage of the world." We just cannot get it.

I believe that it is not the slightest good any Member of the Committee, even if he were tempted to do so, pretending that we can get international co-operation of that sort. I hope I am quoting the Minister correctly when I suggest that he said that he was all in favour of international co-operation if he could get it and could find a way of implementing it when he had got it. That does not take us very far.

The International Chamber of Shipping, the Conference on the Law of the Sea at Geneva this year, O.E.E.C. and many of the Governments of other traditionally maritime nations, the Council of British Shipping—all these and many more national and international bodies have searched in vain for even the basis of a plan. We can get no comfort at all out of Articles 5 and 6 of the Geneva Convention. How are we to enforce it? I would not be in the least surprised if every maritime nation voted in favour of that proposal. I am not surprised that Greece and America abstained from voting, but even when we have got that far no one in the world knows how we are to enforce proposals of that sort.

We must face the fact that up to the moment failure to find anything in the way of an international scheme, let alone agreement on the scheme, has been a complete failure and among the many discouraging rebuffs one factor, even standing by itself, rules out anything in the way of international agreement. Forty per cent. of the ships flying flags of convenience are American owned, and I believe that the bulk of the money of the ships which are ostensibly registered with Pan-Lib-Hon-Co by Greek owners comes from Wall Street.

Mr. Rankin

Can the hon. and gallant Member say whether any are British owned?

Sir L. Ropner

There is no Pan-Lib-Hon-Co British owned ship.

Mr. Rankin

None at all?

Sir L. Ropner

No, none at all.

Mr. Rankin

Can the hon. and gallant Member go a little further and say that no British owners are interested in these ships?

Sir L. Ropner

No, I do not think that I can do that, not because I believe that it would be the case but because I simply do not know.

I will shortly give one reason why I believe it is correct to say that there is no British owner who has registered his ship in a Pan-Lib-Hon-Co country. I said just now that 40 per cent. of the tax-free shipping in the world is American owned. America, far from co-operating in any effort to prevent the merchant navies of the traditional maritime countries of the world being swept from the sea, and which already heavily subsidises her liners, now actually encourages her tramps and tankers to make use of flags of convenience.

I now come to the point: why do not British owners register in Pan-Lib-Hon-Co countries? There are two answers. One is that I do not know an owner who wants it; the other is that no one would be allowed to even if he did want it. In point of fact, very great difficulties and considerable obstacles are put in the way of United Kingdom shipping companies which wish to register ships in low tax Commonwealth countries. I have thought—at one time I was sure—that it might be a solution to the problem presented by tax-free ships for British owners to be allowed to register their fleets in Commonwealth countries.

I have reminded the Committee that in good times and fair times Pan-Lib-Hon-Co ships acquire an enviable trading advantage by virtue of their tax-free status. I should be out of order, in Committee of Supply, if I suggested the obvious counter to the threat to British shipping which arises from this source. I would say only that I am fully conscious of the size of the pill which may have to be swallowed quite soon by the Chancellor of the Exchequer if this country is to maintain a Merchant Navy which will continue to rank in size and efficiency at even the greatly reduced proportion of world tonnage to which it has already sunk.

I am not in a position to assert it, and it may be said that, in any case, my opinion is biased, but I certainly believe that both strategically and economically the case for the preservation of our Merchant Navy is complete and is overwhelmingly convincing.

6.51 p.m.

Mr. Cyril Bence (Dunbartonshire, East)

There is no doubt that every hon. Member who has spoken this afternoon has spent a great deal of time on, and feels deep concern about, the problems facing the British shipping industry.

It is unfortunate that not more hon. Members are present to appreciate the grave difficulties with which the industry is faced—difficulties which arise not from any ineffectiveness of the British Mercantile Marine or the British shipbuilding industry but from the fact that there are individual owners and Governments in the world who, in this great international transport system, will not play the game according to the recognised commercial rules which have been accepted for many years. Shipping is an international transport system, and unless the nations and the owners who ply their ships round the world agree on some principles of general practice and commercial conduct, many of them will go to the wall.

We have been told on all sides that none of the ideas for solving the problem which have been mooted in various quarters will work because we cannot get international co-operation. The hon. and gallant Member for Barkston Ash (Sir L. Ropner) also said that there is no hope of getting an international agreement on the problem of registering ships under flags of convenience. I have read a good deal about it and I have been to several meetings connected with it, and I subscribe to that view.

Since it appears that the most powerful maritime nation in the world, the United States, will do nothing to influence its owners and will pass no legislation for-bidding its owners to register ships under Pan-Lib-Hon-Co flags, I do not see how it is possible for any international agreement to be reached. Tackling the problem along that line will lead nowhere. The problem will continue, British shipping will be faced with these difficulties and perhaps British shipping will decline, particularly in certain categories, over the next twenty years. That can never be allowed to happen.

It has been said, and I agree, that it has been a tradition of all countries which have a seaboard also to have a fleet. I think that Alfred the Great started it. Indeed, it may well have been started long before his time in Ninevah or the Mediterranean, but I think it was Alfred the Great who first conceived the idea in Northern Europe of a great fleet. Throughout the Middle Ages in England, throughout the Tudor period and the reign of Charles II, and even up to the nineteenth century, the ships in the British yards were built by and under the supervision of the State. It was the British Navy and Government building which led to the building of almost all the merchantmen that sailed the seas in the sixteenth, seventeenth, eighteenth and nineteenth centuries. It was only later that shipping became a purely private enterprise matter. Earlier it was a great State activity.

Now, in the twentieth century, when we have built up this huge system of international shipping with the United States, France and Germany on the basis of a private transport system, the new nations who want to build their mercantile fleets are doing it by the same techniques as we were using 300 or 400 years ago.

Perhaps I may give an example. The American merchant marine wants two new passenger liners for the Atlantic and two for the Pacific. The information about this has been published in the Press. America is building four such liners, two for the North Atlantic and two for the Pacific. They are being built at Government initiation at a cost of £26¾ million each. Tenders have been put out offering these ships on extended terms at a total cost to American mercantile owners of £16½ million each, which means that they are being subsidised by the State. This is the kind of thing which was done in Tudor England.

What shall we do about it? Shall we still try to survive in international transport over the oceans of the world by sticking to the nineteenth century idea of financing and building ships by trying to get the owners to depreciate their existing vessels in order to get enough money to build new vessels at what may be a much higher cost, not merely because of inflation but because of the competition in forms of transport? This competition necessitates replacing one ship which has a certain economic earning capacity by a ship with a higher capacity.

Exactly the same situation arises when we replace a machine in industry. The machine which replaces it is much more expensive and we hope that it will be more efficient. The shipowner has to follow the same procedure. Like the builder of ships, he is continually being driven by the competition of air transport and of the ships of the world to seek higher efficiency, and the initial capital cost of higher efficiency is always very high. This is one of the difficulties which meets every industry, not only the shipping industry.

My interest in this problem arises from the fact that we have John Brown & Co. Ltd., the ship builders, on Clydebank. On the stocks at the moment I think there are seven tankers, from 18,000 to 30,000 tons each, one cargo vessel, a small frigate, but no passenger liner. The American, German, French and Japanese Governments are initiating the construction of ships. When they initiate this, these Governments ensure that they get the maximum efficiency out of a yard in which ships are being built. They do this by ensuring that the keels laid down on the slipways of those yards are for ships which will employ a balanced labour force in the yard.

This is very important. It is a great cost advantage if one builds a cargo vessel in a shipyard where all the remaining ships are tankers. Riveters, welders and electricians are needed, but not joiners, carpenters or furnishing tradesmen. There is an unbalanced labour force, which means a hold-up here and there. Every shipyard manager likes to have a balanced order in his yard. The French, German, Japanese and American Governments see to it that that is done, but it is not done here, though it was done at one time.

Of course, the argument can be made, and I accept it, that orders for cargo vessels are falling off. Everybody wants tankers. The oil companies and the big charter companies want tankers. Here again, of course, we come to the point that any solution for increasing the number of cargo vessels to enable our shipyard managers to balance their labour force depends upon expanding world trade. It is no good building ships if there is no cargo to carry and no trade. Therefore, it is the duty of any Government concerned with this vital activity to maintain the tempo of international trade. That is the root of the problem, as was said by my right hon. Friend the Member for Easington (Mr. Shinwell).

I want to be as brief as possible, and I am eliminating many things I had in mind to say because I know that other hon. Members want to speak. I will come at once to the main conclusion I want to put to the Committee. I believe that any attempt to reach international agreement in all the different ways which have been suggested will fail. It has been tried for so long. I was very pleased to hear what my right hon. Friend said about this. What we must do in this country is to set up an organisation—my right hon. Friend called it a Ministry of Shipping—to co-ordinate shipbuilding and merchant shipping.

We can no longer afford, in the absence of international agreement, to see our industry disintegrate. There is little or no co-ordination. A Ministry of Shipping might be the right way to go about it. We might even do what was done in Tudor times, and is done now by the Germans, Japanese and Americans. They are all doing it now. Ghana will be doing it before long. The Soviet Union, of course, and China, are doing the same thing. We may well come to the stage, whatever resistance may be offered from the other side, where the State will build the ships and they will be managed and run as they were run 400 years ago in this country.

That may well be the only way Britain will be able to hold her own in seafaring. However the Americans, Germans, Japanese or French may put it, that is what they are doing. They are doing it under a cloak, but, nevertheless, that is what they are doing. The terms on which those four American vessels to which I referred are to be hired to American shipping companies will be terms on which no British shipowner could possibly have a ship built in any shipyard in the world.

It is no use the British shipowners or ship builders telling the British shipyard workers that, in order to defeat this form of competition, they must work harder. That is all nonsense. It is not that the workers of other nations work harder than our boys, but that the owner in America, for instance, can have his ship more cheaply because the American Government are using financial techniques to see that he shall have a ship more cheaply than can any owner in the United Kingdom or in the sterling area. I agree with my hon. Friend the Member for Keighley (Mr. C. R. Hobson). American finance houses are fighting a battle against sterling. They have been doing it since 1947, and they still are. This may well be one of the instruments.

My right hon. Friend the Member for Easington said that we should talk straight to the Americans and tell them what they are doing. Does any body here believe that there is any American financier or big businessman doing these things who does not know what he is doing? I was in industry between the wars and met many employers in a big way of business, but I never met one who did not know what he was doing or the consequences of his action. Every American industrialist and businessman or head of an oil company which is pursuing certain activities today knows what he is doing and knows the consequences of it.

If we cannot alter things by international action, we shall have to use the same techniques in financing our own merchant fleet in order to compete and hold our own. It may well be that the taxpayers generally will have to make some contribution towards it. I would rather that be done than that we should see the nation go under to devices and techniques employed by a country which calls itself a country of free enterprise and free competition, but which, to win and establish its own position, uses methods which, in public, it renounces.

7.6 p.m.

Mr. Paul Williams (Sunderland, South)

Until today, I did not know that there were so many Members of the House who took the same view as I do of American financial policies. I had always understood, certainly in the months towards the end of last year, that interdependence was the great slogan and that everyone accepted that interdependence meant that was a sharing of policy and approach with America. It has been a great revelation to me today to know that there are so many people at last willing to criticise American financial policy—

Mr. Bence

At last?

Mr. Williams

—in the way that I and some of my hon. Friends have criticised it for a number of years. However, I do not at this moment want to go off at a tangent about American financial policies, against which I have spoken repeatedly for some time. I want to talk about the success story of British shipping, both operating and building.

There is a particular danger today, when there has been this very heavy slump in freight rates and when there is an absence of new orders from both home owners and foreign owners, of crying "Woe" too much. There is a great danger of building up a feeling that the British marine fleet is in decline and that there is no future for young people in it. This is just not true, and, if we can do anything in this debate to paint the true picture, that there is a pleasant and remunerative future for people who still think of going to sea in ships, we shall do something well worth while.

As has been said, whether in the change from wood to steel or from sail to steam, and now to nuclear power, Britain has led in matters nautical through the centuries. Whether the parallel be with the Tudor era, the earlier Elizabethan age or this latter-day Elizabethan era, we have led in nautical research and developments, in building and in operation. It must be our purpose to maintain our fleet, although, unfortunately, as my hon. and gallant Friend the Member for Barkston Ash (Sir L. Ropner) said, there has been this tragic decline in our percentage of total world tonnage. Obviously, the paramount reason has been two world wars, but, surely, our success over the centuries has been based on far-sighted, capable and wise management, upon sound workmanship and upon the loyal patriots of this country.

Mr. Bence

And Government support.

Mr. Williams

Moreover, it has been based on our not being placed at a disadvantage vis-à-vis our competitors abroad.

We have heard a great deal about the damage done to our mercantile marine in two world wars, and we have heard a great deal about flags of convenience. The right hon. Member for Easington (Mr. Shinwell) spoke about flag discrimination, a most unfortunate practice which has grown up after the end of the Second World War, largely at American instigation. These, surely, are the present causes of our discontent and unhappiness about the situation of our merchant marine. These are the things which, together with high taxation here at home, raise the problems of unfair competition and avoidable handicaps. I believe that we should in this debate impress upon the Government and the leaders of thought throughout the nation the consequences of things that have been said both within and without the House. We have heard so often of the vital rôle of British shipping, but to go on paying wordy votes of thanks is not enough when in the end this is a matter of hard pounds, shillings and pence.

Shipping is vital to our national economy. Whether the figure which is disputed is £300 million a year, £190 million or £180 million, or even £115 million, the point is still taken that the difference between solvency and bankruptcy may well be made by the success of this vital industry. After all, it is not merely ship operation which is the vital matter; it is the ability of this nation to build the best ships that the world wants and to make them available for foreign owners.

We heard my right hon. Friend the Member for Monmouth (Mr. P. Thorneycroft) in the Budget speech last year speak, then as Chancellor of the Exchequer, of the special position of British shipping. That was not an unimportant remark from a Chancellor of the Exchequer—a deliberate reference to the special position. It makes one believe that the Government are convinced of the special position of British shipping. But to go on saying it is not enough. Surely further action is needed. One can obviously welcome the further action announced by my right hon. Friend the Minister of Transport and Civil Aviation today in relation to the Capital Issues Committee. Some of us think that it would be better to disband this Committee, but if it is to continue in existence the advance announced today is worthwhile.

If these statements of Government policy over the years add up to anything it is this. A solution must be found for the problem of flags of convenience. I am not sure that the Government have made a sufficiently positive approach. We have heard this afternoon of representations made, I believe the Minister said, by the Chamber of Shipping. This is all right as far as it goes, but is it sufficiently positive? Is it not the responsibility of the Minister of Transport to establish a body—I refrain from suggesting a committee because committees sometimes go off into the backwoods and forget about the problems; if it is a Royal Commission nobody takes any notice—made up of representatives of the building side, the operating side, the Admiralty, the Foreign Office, the Treasury and the Ministry of Transport itself to go behind locked doors, perhaps, sit down and produce an answer within three months or, at the very least, in time for the next Budget.

We are obviously prohibited in this debate from referring to detailed matters of taxation. But in saying what I have said, I think the Committee will see that I, personally, believe that the only solution is one of taxation. I do not follow the argument about subsidies, because it seems to me that to take the money in taxation and to give it back in subsidies is wasteful in the process.

Surely, in relation to Pan-Hon-Lib countries there are only two possible practical solutions, or perhaps an amalgamation of the two. Either the Pan-Hon-Lib countries must impose conditions similar to those of the genuine established maritime Powers or we must alter our conditions in order to be more approximate to theirs. With the background of taxation in mind, the gist of what I am trying to say should be obvious. If they cannot raise taxation to our level— obviously that is not a practical proposition—we have to do something to make a special position available for our own shipping industry. I think that this is a matter which rests fairly and squarely upon the Government.

I now turn to the question of shipbuilding. Here, again, one can reasonably claim a success story, and if in the next few moments I talk about the River Wear I hope the hon. Member for Sunderland, North (Mr. Willey) will forgive me for trespassing on the geographical territory of his division. But, as he knows, it is of considerable interest to me and to the people who live in my division. We can claim a success story for this country since the war, although it is perhaps temporarily blurred by the depressed freight rates and the absence of new orders.

I think that the answer which I received from the Civil Lord a few weeks ago helps to give a balanced picture of what is the true situation today. A few weeks ago he told me that our present order book stands at 6.2 million tons, which, at the 1957 rate of completions, would take four and a half years to work off. I am not suggesting that it will take four and half years and that no speed-up can be achieved, but from the employment side of things this will help to remove some of the alarms and fears which some people have about employment in the shipbuilding industry. Perhaps it will not remove them altogether, but it will certainly prevent an exaggerated picture being painted.

Some people say how unfortunate is our order book, for only 20 per cent. of the orders are for export. I should have thought that that was just the reverse of the truth and that that is the strength of our order book, that these are orders upon which we can rely because they are placed by home companies which we know to be responsible people and less liable to cancellation.

Again, since the war, especially in recent years, there has been far too much praise of the success of the re-equipment of the German and Japanese yards and other yards on the Continent and in Scandinavia.

Commander Maitland

Does not my hon. Friend agree that if we build our own ships in this country we get a double advantage, and surely that ought to be strongly pressed?

Mr. Williams

I could not agree more with my hon. and gallant Friend that there is a double saving and double advantage to our national economy.

Too often in recent years one has heard people praising the ability of the German worker and the supremely efficient way in which German and Japanese yards have been laid out. This may have been the advantage of losing the war, of being bombed and being destroyed, getting American finance for rebuilding, having the best techniques and having the land cleared free of charge at the expense of a few bombs. Too often we have failed to sing the praises of British shipbuilders and the industry generally, achievements which have been carved out of the banks of our rivers and often the slum areas of our towns. These are real achievements which have been achieved in spite of the burden of high taxation under which they have all suffered and other burdens, such as the shortage of steel about which we have heard and know so much in this House. I propose to have no reticence about the achievements of the River Wear in this matter.

Dame Irene Ward (Tynemouth)

And the Tyne.

Mr. Williams

My hon. Friend may have a chance to support the river which once I loved later. One has only to think of the advance and achievements on the Wear since the war. Ships have been built developing from 12,000 tons up to 17,000 tons. One yard has a vessel taking shape on its stocks today which will be of 34,000 tons. Plans exist for the building of ships of 40,000 tons and later up to 65,000 tons. These are no mean achievements. It is worth while quoting a few words of the chairman of the company where these developments have taken place. He said, in June this year: Shipbuilders realise that they must compete for further orders on an international basis under conditions of the fiercest competition. It is because we realise this and because we have faith in the continued co-operation of our workers that we are going ahead with our large new berth. This is part of the great development that is taking place in British shipbuilding. This is the success story which has for too long been hidden and not seen by the general public at large.

Another example on the River Wear is of a 10,000-ton vessel which took only 11 weeks from keel-laying to launching. Another firm on the same river plans to double its intake of steel next year as the result of a vast reorganisation and reconstruction programme. At the same time, everyone is actively interested in the development of nuclear power. These are some of the positive things that are going on in the British shipbuilding industry.

In spite of all this, however—I say this with no acrimony or ill feeling—there is, I believe, an Achilles heel to this industry. I refer to the many outdated restrictive practices and the rivalries which exist between certain unions. It may be that my remarks would have been more palatable had they been made by someone from the other side of the House, but it would be unfortunate if a debate such as this were to pass by without some remarks being made about the demarcation disputes which exist in this industry.

It serves the industry no good if people pretend that they do not exist. It serves the members of the unions ill to pretend that disputes do not take place and it serves the long-term employment position less well still if we try to camouflage the reality of the situation.

I have recently seen a letter written by a Norwegian saying that the British shipbuilding industry could see off all foreign competition most easily if it were not for the restrictive practices and the demarcation disputes which exist. This may be true. It is, of course, possible to paint an exaggerated picture either way. It may be possible to pretend that these things do not exist or to exaggerate their importance. In matters of repair, however, the feeling that there may be demarcation disputes during the repair of a ship may well sway an owner from having the repair done in a United Kingdom yard and placing his order with a Continental yard.

Mr. D. Jones

Does the hon. Member suggest that there are no disputes in Continental yards? Does he not remember that last summer the German metal workers' union was on strike for three months?

Mr. Williams

I am grateful to the hon. Member for his intervention. I want, however, to come to the gist of what I am saying concerning demarcation disputes.

I wish to quote some remarks made by people of note. I do not put them in any order of precedence. I quote first some remarks made by Major-General Dunphie, chairman and managing director of Vickers-Armstrong, in July last year. The first few words have a ring which is, perhaps, just as true now as twelve months ago. He said: During the last few weeks we have been told that we are in grave economic danger as a nation"— those are the sort of words we hear from time to time— we have also been told that we are having great prosperity. I am convinced that the danger can only be averted, that the prosperity can only be achieved, if we produce more—that means, if as shipbuilders, we build faster. This can only be done as a combined operation by both parties in the industries. Management must provide newer and better equipment and methods—and this we are doing and shall do; labour must use them to the full. I purposely referred to both 'parties' and not both 'sides' of the industry. I think of 'sides' as the participants in a contest which one wins and the other loses. Industry is a contest in which both win or both are well and truly lost. There is the key to what can be done in industrial relations if we can help to create this feeling of co-operation.

I believe that the disputes which largely take place in the shipbuilding industry are not always disputes "against the bosses." They are disputes between the unions. This is where the people who stand most to gain from success are doing most to cut each other's throat. That is why I take great heart from some words used by Mr. George Barratt, the general secretary of the Confederation of Shipbuilding and Engineering Unions, earlier this month. He said: I would like to see this Confederation of ours become a big amalgamated union. The officials of the present unions could form themselves into an executive covering various trade groups handling their individual problems, and you could have an overall executive to cover general problems.

Mr. Hobson

Concerning restrictive practices, of which I have had a lot of experience—indeed, I took part in disputes many years ago—does the hon. Member not consider it wise to make the distinction that disputes rarely arise from restrictive practices in repairs, but that in the case of new construction the new techniques should be discussed beforehand between employer and employee?

Mr. Williams

That is why I drew attention to the remarks of Major-General Dunphie, who referred not to the "sides" in industry but to the "parties". If one could get this consultation, as in many shipyards it already exists, in places where, unfortunately, there may be a bad tradition, if we could get the tradition that the hon. Member for Sunderland, North and I know exists in many of the yards of the North-East, the industry in general would not be blackened with the misfortune of one or two limited instances.

I have entered this note, which may be one of dispute between the two sides of the House, and even among Members on each side of the House, in the hope that by spotlighting the fact that these demarcation disputes and troubles exist and that there is a way out if the two sides of the industry co-operate, I shall be able in some small way to contribute to the success of British shipbuilding. Thus far, since the war, success. I believe that it can continue if we have a flexibility of approach combined with soundness of judgment and there is vigour and ambition at the top.

7.28 p.m.

Mr. Frederick Willey (Sunderland, North)

I share the concern for the shipping and shipbuilding industries which my temporary neighbour in Sunderland, the hon. Member for Sunderland, South (Mr. P. Williams) has expressed tonight.

Mr. P. Williams

Why; where is the hon. Gentleman going?

Mr. Willey

Concerning the question of demarcation, the hon. Member must know—we all should know—that discussions are at present taking place. This is a delicate matter and it is best to leave the discussions where they are.

I intend to speak about shipbuilding, but it is impossible to do so without also speaking about shipping. I have said many times in this Chamber that freight rates are a barometer as much for ship- building as for shipping. In general, I feel that far too much has been said about Pan-Lib-Hon-Co.

I supported and welcomed the increase in the investment allowances. I support every step that is taken to establish a genuine link. I feel, however, that we have concentrated too much on this issue. However, if the present situation in shipping remains much longer, we are likely to face a more real threat from discrimination and subsidisation. What we are concerned with is our position in relation to world shipping. I am surprised that nobody has mentioned the British Iron and Steel Corporation's ore fleet and the development which has been taking place over the past few years.

What we have to consider is the changing shape of world trade and world shipping. What we are anxious to do is to form an accurate forward picture of the position of British shipping and also, equally important, the relationship of world shipping to world trade. These are the matters which are disturbing the shipbuilding industry.

I welcome and readily acknowledge the initiative taken by the Government in the international sphere. Of all the steps we can take, this is one of the first importance. I think we can congratulate ourselves on the successes we have attained this year, and I was surprised that the right hon. Gentleman was not more forthcoming in speaking of the creation of the Inter-Governmental Maritime Consultative Organisation. We may as well be quite frank about it. I know that this has not been helped by the Chamber of Shipping. I thought at one time that the right hon. Gentleman was speaking by leave and licence of the Chamber of Shipping.

Here, we have to recognise the creation of this organisation, which will be the first United Nations Agency to have its headquarters in London. After ten years, this organisation is being created and can have a very important part to play in world shipping. We realise its limitations and the fact that its membership is limited, but now that we have got twenty-one signatures and ratifications, some of the countries which have dragged their feet in the past may come in. We know that this body's powers are limited and that it has a limited competence only, but we must recognise that it is in this sphere that we must promote effective action, because we have a primary interest in it.

I think we should expect and must ensure that I.M.C.O. is as successful in shipping as I.C.A.O. is in civil aviation. We must pursue this matter still further. Whatever success or lack of success we have in international co-operation, there is no excuse for us in Britain, because of the great importance of these industries to us, not taking some initiative ourselves.

It seems to me that one of the melancholy conclusions which one reaches from this debate so far is that no constructive proposals have been made with regard to British shipping. I can only say, as representing, with the hon. Gentleman opposite, a shipbuilding constituency, that we are therefore all the more vulnerable. Shipbuilding does no more than reflect the prosperity of shipping, and at the present time I would say that shipbuilding has an apprehensive prosperity.

I want to deal briefly with two matters which reflect that apprehensive prosperity. We are apprehensive, for one reason, and I think we should recognise and not disguise it, that our production figures have not been good enough. I pay my tribute to management and men in the shipbuilding industry, but, whether we regard these figures absolutely or relatively, they are not good enough. If we regard them absolutely, we must be disturbed by the fact that production has fallen, and has only begun to pick up in the last quarter. Relatively, the proportion of shipbuilding of British yards has fallen dramatically over the past few years.

I know the difficulties of making comparisons and the necessity for making allowances for the types of ships constructed, but we have to recognise that here—and I would not join anyone in advocating an extension of our shipbuilding capacity—we have a capacity for producing possibly 2 million tons, at any rate 1¾ million tons, and only once during the past four years have we passed the 1½ million tons mark. This is a matter which must prejudice the industry, and it is one which we must face.

One of the factors has been steel. We discussed this in March last year, and the Civil Lord, who has the endearing quality of being an optimist, was unduly optimistic then. Every reply from the Government Front Bench is unduly optimistic, and he was unduly optimistic and persuaded us that there were no difficulties there. Yet any review of the industry last year reveals steel shortages as one of the cardinal reasons for the fall in production last year. I do not think it is good enough. I do not want to mislead the Civil Lord, and I agree that the position regarding steel deliveries at this moment is better than it has been for years, but I do not want the Government to rely upon present circumstances.

Are they saying that the present slack in industry will continue? I think that is what they are saying. It is because there is some slack among other competing industries that steel is now going into the yards. We do not want that position to continue, and I mention it because I do not want the Government to relax any pressure on the iron and steel industry to meet its production targets. The industry is saying that it cannot meet these targets, but we want pressure from the Government to ensure that the steel will be there. I would still say, although the position is much better than it was, and I know that the Civil Lord thinks that I am doctrinaire about it, that there is room for improvement, and I hope that before the end of the debate he will be able to give us a progress report.

I should like to mention another point, in view of the contribution from the hon. Member for Sunderland, South. One of the factors which has affected production in the shipyards is the shortage of labour. There is a shortage in some of the skilled trades. I hope the hon. Gentleman will see what has been done recently by the trade unions in Sunderland about riveters, because it would be unfair to create the impression that the unions are difficult over demarcation questions. We have difficulties about the shortage in particular skilled trades, and especially the black trades. This again is a matter which affects the overall production of the industry.

The other matter to which I want to refer concerns cancellations, together with the dearth of orders. We can have some consolation, if little solace, just as we can when we consider the position of shipping. We can say that our shipyards have been less badly hit than many of the other shipyards in the world, but I would ask the Civil Lord how serious the present cancellations are. I have no desire to exaggerate them, but we are told that at present many of these cancellations are no more than the cancellation of very speculative orders, cancellations of options which will not now be taken up, and that they were tentative rather than firm orders.

If this is so, I hope we shall have a more realistic statement about the order books. If we get cancellations and we are given an explanation such as this, it makes the order books themselves look a little unreal. I hope that the Civil Lord will be able to say whether the cancellations have been mainly of this category, but I hope he will also impress upon the industry, particularly as it has been prejudiced by this long order book, that it should try to reduce its order book to realistic proportions.

I have said before that I readily concede that in some respects a reduction of the order book would be a very good thing. It would be a very good thing if we could safely rest on the premise that pressure of orders on the yards is likely to return, because if, after a while, the recession passes by and orders come back, we should not like the British yards to be prejudiced regarding new orders by an unduly long order book.

Another conclusion which it seems possible to arrive at here, when we have yards with long order books and orders are being cancelled, is that when they are cancelled, the shipping line cancelling them is saying that it is prepared to lose its place in a very long queue and to take a risk about getting back in that queue. If that is so, it seams to me that we ought to look at these cancellations very seriously indeed. It would seem to me that opinion is hardening that the present conditions will obtain for much longer than has hitherto been believed. Although we must be as realistic as we can when we consider cancellations, we must also realise that there are in these cancellations signs that judgments are being taken that the recession will last much longer than we had believed.

Two years ago I wrote my proposals about the future of the industry. I have looked back to them, and I make no apology for them. I would emphasise two of the assumptions that I made, which caused some challenge at the time. First, I assumed that the industry would probably face difficulties beyond its own control. I still believe that. Secondly, I assumed that there would inevitably be some contraction in demand for new shipping from British yards. I still believe that. Those assumptions are still valid, and what we have to do in the light of our present experience is to decide how proximate the conditions will be. That is the real importance of this debate. I have no reason to change my opinion, and that is why I said that I oppose any proposal to expand the capacity of British shipyards. I want security and continuity of employment in them. I have no reason to change my belief that the capacity of the British yards will eventually be reduced, and that we shall not be able to sustain the capacity at its present rate.

Mr. William Shepherd (Cheadle)

What is being done to improve the conditions in respect of demarcation? Apart from the subsidy in the form of the low cost of steel plate, it is clear that we should not carry on some of the ridiculous practices which we have done in the past ten years.

Mr. Willey

I have dealt with that matter. I said that it was being discussed by responsible people who will seek to obtain the best solution to a very difficult problem.

I was saying that my assumption that there will be a contraction in this great industry is confirmed in the light of our present experience. This places serious responsibilities on the Government. I will mention two of them. It emphasises the need for the provision of alternative work in the shipbuilding areas. We have had no sign of this from the Government. This is absolutely necessary. It must not be provided haphazardly; it must be work similar to that which is carried out in the yards.

The second point—this, also, ought to be tackled now—is that within the yards themselves there ought to be provision for alternative work. This is a factor which affects present capital development in the yards. We ought not to be content with calling attention to the need for alternative employments in the neighbourhood of the yards; there must be new developments in the yards themselves and we should be considering the possibility of the use of the premises for alternative work. This is very important when large sums are being spent and there is a rapid development of prefabrication in the yards, for the development of prefabrication, if we are rational about this, will lend itself to use for other purposes.

I should like to re-emphasise the two conclusions to which I was driven when I wrote my proposals two years ago. I think that the hon. Member for Yeovil (Mr. Peyton) will be with me in this. We cannot expect too much from the present Government—I did not expect too much from them then, and I do not now—but we must expect a recognition of this problem. Here I think the hon. Member for Sunderland, South is with me. I appeal again for the setting up of a fact-finding committee. I know the reply that I shall get from the Civil Lord about the advisory committee which was set up in 1946, but we need more than that.

Mr. P. Williams

I take it that the hon. Member is referring to the Shipbuilding Advisory Committee. I gather that he wants something more than that, and so do I.

Mr. Willey

I am glad that we are agreed that we ought to have something more than that.

There are further reasons why we need such an approach. One is that we must recognise the possibility of public support for the industry, and if we have to recognise that possibility, it is very important that all the facts should be established. There are many problems on which we want broad advice to guide us about the industry and to guide the industry itself.

We have talked about the intensification of competition in shipbuilding. We are living in a period of revolutionary change in methods of construction, and I think these might be examined by such a body. One important factor is standardisation of design. I know very well that it is the pride of the British yards that they will produce anything to order, but we are concerned with shipping and shipbuilding and I think we have a lot to learn from some of the other shipping lines about standardisation of design.

We have talked about capital investment. I pay tribute to the fact that the industry has put in £50 million over the past ten years and is at present putting in a further £70 million. But we are considering new circumstances in the world of shipbuilding. We have even to consider—this is a very difficult question for all of us—the construction of new yards. One of the difficulties this country faces is the siting of our present yards. The hon. Member for Sunderland, South will realise the very considerable ingenuity which has been shown by Sunderland shipbuilders in extending the yards but he will also recognise how limited they are because of the character of the river. Unfortunately, that applies to almost every shipyard in Britain.

We have also had some reference to reduction in costs. I am obliged to the hon. Member for Cheadle (Mr. Shepherd) for his intervention, for he has reminded me of this. We can out-compete the Japanese. Although the Japanese have far lower labour costs, our steel costs are sufficiently less to mean that if we take into account both labour and steel we have the advantage. However, Sweden can on occasion out-compete us, and she is at a disadvantage in respect of both labour costs and steel costs. The only reason why Sweden can do that is that she has a high productivity based on good management. I recognise that we have good, enterprising management in the British yards, but I still believe that we have something to learn from countries like Sweden and Holland.

We have a good record on research, but the demands now being made are far greater than they have ever been. We were recently discussing in the House the difficulties of the aircraft industry. Circumstances have driven the firms in the aircraft industry to group themselves for the purpose of meeting the heavy research and development costs which are entailed. We must realise that similar problems are besetting the shipbuilding industry.

I should like to conclude upon that matter, because it is probably the most important issue before the industry at the moment. The whole future of shipbuilding could be altered overnight if we had a revolution in the form of propulsion. It is very difficult to forecast anything about shipping and shipbuilding, but what one can forecast is that if there were a new form of propulsion which was commercially satisfactory, it would transform the position of both industries.

Some years ago we looked to the gas turbine, but now we are looking to nuclear propulsion. This is a type of research which is enormously expensive. I recognise what has been done by the team at Harwell and by the special committee of the Admiralty, but we have also to consider not only what is happening in the United States, but also what is happening in the Soviet Union. We have to consider what the Soviet icebreaker "Lenin" is doing.

The moral to be drawn from this, and it is critically important to the future of the shipbuilding industry, is that we must recognise—and this is the burden of what I have said—that both shipping and shipbuilding are vitally necessary industries for Britain. We have a national responsibility. The proposal which I have made to the Government—and I am very glad that it is supported by hon. Gentlemen opposite—is that at any rate we should have the essential factors in the argument and the information before us so that we can then decide what to do.

7.52 p.m.

Commander J. W. Maitland (Horncastle)

The hon. Member for Sunderland, North (Mr. Willey) ended his speech by saying that shipping and shipbuilding were vital industries for the United Kingdom. I absolutely and entirely agree. No one who has taken part in the debate has yet said anything to the contrary. I cannot recall a debate in which there has been such complete unanimity, and I hope that that unanimity will be continued when the Civil Lord replies to the debate.

It has been a rather difficult debate, because under our rules of order we are not able to discuss suggestions for reducing taxation, and, as the hon. Member for Sunderland, North said, that has resulted in not many helpful suggestions having been made. That is part of our difficult procedure and is understandable.

I wish to impress upon the Government the fact that if it is believed that these two industries are vital to the country, then something must be done to help them. We can have a Mercantile Marine if we help it now, but if we do not we will find that Great Britain has a Mercantile Marine which is gradually dwindling. I cannot think of any two industries which are more vital to our economy.

If there is any doubt about that, let us consider what is happening in America. There has been much criticism of America today, but the American Government have been using every device—with some of which I entirely disagree—to foster and build up the American shipping industry—by subsidy, by flag discrimination and by the tactical use of flags of convenience. The United States of America has shown the world that she at least believes in the vital economic importance to her of the shipping industry. That is a lesson which this country should learn and do something about.

There has been much justifiable criticism of America during the debate, but I cannot allow it to pass without reminding the Committee that in answer to a Question which I put last week I was informed that the American Government have made it possible for us to use the nuclear propulsion mechanism of the American submarine. That will be of enormous help to this country in speeding up nuclear development for marine propulsion. It will enable us to get a nuclear-powered submarine to sea very much more quickly than would otherwise have been possible. We shall inevitably learn a tremendous amount of the "know-how" of construction, and so on, and will thus be able to speed up the development of, and improve, the device which we ourselves will eventually produce.

One of the principal reasons for the importance of shipping and shipbuilding is strategic security. I do not mean by that our need for a great many ships in the event of war to save us from submarines. This is, of course, important, but I am one of those who believe that so long as we remain as strong as we are, and do not flinch, the dangers of physical warfare are rapidly fading away and that the principal danger is the economic threat from Russia.

Mr. Bence

From America.

Commander Maitland

From Russia. That will develop enormously in the next few months and years, and I can think of no weapon for our protection more important than having a healthy Mercantile Marine.

Another thing which has not been mentioned, and which may seem sentimental, since it cannot be measured in exact monetary terms, is the great value of having the British and the British Commonwealth flags busily going about their business in the great ports of the world. I have seen something of that and it is something about which I do know, and I can assure hon. Members that it is of the utmost importance that the flags of Great Britain and the Commonwealth should not fade from the scene. For that to happen would do our prestige far greater harm than can easily be realised.

One of the reasons for our agreement in this debate is that at the back of our minds is the memory of the 1920s and 1930s, when ships were laid up in all our ports and when we saw the shipyards fading away to nothing.

Mr. Rankin

Rationalisation.

Commander Maitland

That was the beginning, and it is as well to remember that it is in shipping and in world trade that terrible slumps first make their appearance. That is why we have to take great care when we see these signs which are now being observed.

My right hon. Friend the Minister of Transport rightly said that we are coming through better than others. That is certainly the case with the shipbuilding industry, where the great majority of cancellations have been in other countries—probably in Japan, although it is very difficult to get exact figures. It is fairly clear that we have done better than the rest of the world, and the same is probably true of the shipping industry.

One of the best and quickest ways of getting rich—it has never happened to me, but it happens to some people—is to consolidate when one is in a good position. When the market is low and one is in a good position, that is the time to buy in. If we have succeeded as well as the Minister has said, now is the time to go ahead and strengthen the position of our shipping industry. Then, in the tough years ahead, we shall have something which will be a great support to our economy.

8.0 p.m.

Mr. Edward Evans (Lowestoft)

I am well aware that the debate must concern itself with the widest implications of shipping and shipbuilding; that there is concern about the international aspects of the problem—with the flags of convenience, finance and all that goes with our great maritime history—and that the question of our maritime supremacy must rank very high in our concern. I had it in mind to traverse some of that territory, but it has been explored so thoroughly already that I shall leave that aspect of the matter.

Together with shipping in the mercantile sense, we must concern ourselves with the related problem of shipbuilding. Although interest must inevitably centre on the largest areas of shipbuilding, I want to remind the Committee that it is not only the firms on the Clyde, the Tyne, the Wear and in Belfast which view the present situation with anxiety; quite a number of other ports, perhaps not se well known, look to the future with a considerable degree of anxiety and apprehension. I and those in my port of Lowestoft do not share the Minister's optimism in this regard. Although he spoke of the order books being full for four or five years, I can assure him that at Lowestoft we look beyond 1959 with a great deal of worry.

I therefore make no apology if I do some special pleading in respect of the particular problems which assail Lowestoft. It is the constituencies which make up the nation, and we must obtain the views of people in all parts of the country. I would disabuse the minds of hon. Members of any misconception they may entertain about the economic position of this port. It is a delightful seaside resort, but it is also a fishing port. Indeed, in the near and middle water fisheries it is in the front rank, maintaining the most modern fleet of vessels and catching prime fish. It plays a great part in the East Anglian herring season.

Since the war there has been a dramatic change in the industrial development of the town, which has done a great deal to counter the economic unbalance which formerly depended on two seasonal industries—the holiday industry and the autumn herring fishing. We have always had a reasonably stable trawling industry. Lowestoft has for a long time been engaged in shipbuilding, chiefly of fishing craft—first of the old wooden drifters of sail and steam, and then steel vessels in the same range.

The port contains two main shipbuilding yards, with a number of engineering factories doing subcontracting and repairs. Before the war one of those yards employed about 200 men. It was engaged in building and repairing relatively small craft of about 90 or 100 feet. During the war the yard was taken over by the Admiralty, and the number of men employed rose to 500. Eighty-seven vessels were built—minesweepers, steel coasters, landing craft and other types. In 1946 the Admiralty work ceased, but the yard was kept busy reconverting fishing vessels from war service to fishing. The labour force fell to 250, until in 1950 the Admiralty gave orders for coastal minesweepers and seaward defence boats, and brought the number back to about 500. I am glad that the Civil Lord is here, because I want to stress what an important part the Admiralty can play in the economic life of the town.

There then came a small boom, with the introduction of fishing grants, the subsidy scheme for new vessels and the conversion from steam to oil. That was a valuable incentive to the fishing and shipbuilding industries. Since then, however, the town has felt a gradual recession. Our order books are incomplete after 1959. We are now faced with the Icelandic trouble, which has put an inevitable brake upon new construction and development. There has been a very serious falling off in orders, and in a short time there will be hardly any.

The other yard, in its present form, is a post-war development, and has been expanded to deal with a very valuable contract secured from the Russian Government for 20 modern trawlers. Large sums have been invested in constructing large engineering shops, runways, dry docks, clearing channels and other necessary work in order to meet this huge commitment. The Russian order is now practically ended; it will be completed in August this year, and the recession in the last few months has left this modern and capable shipyard with a bleak future.

Large sums of money have been invested in it and many men have been attracted to the town, chiefly from Scotland, the Tyne and other similar areas. It can proceed with a great deal of work. It can do building and repairing, and it could develop the type of vessel in which we on the East Coast have specialised for so long. We feel that we have depended in the past on Admiralty orders, and we ask now only for a fair deal; we ask not to be ignored. If the Admiralty makes up its mind about its programme and gives us what we regard as our fair share, it can make a tremendous contribution to the town's economy.

This is probably the only constituency speech that has been made tonight, but unless I put forward these points there is no one else here to do it. I have been subjected to a great deal of pressure, which I have not resisted in any way. If the Admiralty is not forthcoming in this matter Lowestoft is faced with the bleak prospect of a falling demand, rising unemployment and a return to an economy which is too dependent upon seasonal fluctuations.

The Minister has been subjected to this pressure before, but I wish to press him again with regard to the harbour bridge, and I hope that he will listen to what I say, because he and I have already had words about it. The channel on which the harbour bridge stands forms the only access to the sea from the magnificent yard that I have been describing. Hitherto, the narrow range of the channel, which admits vessels of no more than 57 ft. beam, has inhibited this firm from tendering for larger vessels. It is circumscribed by this narrow exit to the sea. What it wants is an 80 ft. stretch of water, which could take much bigger vessels. Lowestoft could then build tankers of up to 16,000 ft. and dry cargo vessels of 8,000 or 9,000 tons.

Mr. Ede (South Shields)

My hon. Friend means 16,000 tons.

Mr. Evans

I mean 16,000 tons. The firm could build tankers of 16,000 tons, and dry cargo vessels of 8,000 or 9,000 tons. The facilities are there and I am sure that the prospects at Lowestoft would be better than at other places because, as the Minister said, most other yards are full up for five years and the yard at Lowestoft is not. We could do the work. We should like the Minister, in conjunction with the Railway Commission and the Eastern Area Board, to examine the possibility of carrying out my suggestion. It is a considerable project, as is realised in Lowestoft, but, were it carried out, I am sure that in the near future it would provide rewarding returns.

I urge the Government not to turn their back on this small port. We are aware of the demands and pressures put upon the Minister by a number of Members of Parliament who have constituency interests. But I ask the Government to treat the small ports with sympathy and understanding and to provide real help for them. I am pleading especially with the Civil Lord because if the Admiralty returned to the practice of providing the kind of private work which it formerly provided for Lowestoft, that would do a great deal to secure the economy of the town.

8.10 p.m.

Mr. Douglas Marshall (Bodmin)

I hope the hon. Member for Lowestoft (Mr. Edward Evans) will forgive me if I do not follow his remarks in detail. I have a great deal of sympathy with what he has said. The hon. Member and I have fought through the years on behalf of the fishing industry and I hope that the Minister will take due notice of the situation at Lowestoft.

After sitting here for just over four hours, listening to the debate, I feel that the whole subject has been covered. But there are, perhaps, one or two points which have not been mentioned.

The right hon. and learned Member for Newport (Sir F. Soskice) said that the purpose of a debate on shipping and shipbuilding, from the point of view of the Opposition, was to enable them to probe the question and to try to get some answers from the Government. The right hon. and learned Gentleman did not suggest how certain of these problems, of which we are all aware, might be solved. It is probable that the right hon. and learned Gentleman had no reason to believe that the Government would reply with any suggestions which would be immediately practicable. I certainly had no reason to believe that. But I do not think that sufficient notice has been taken of what has been said by the Minister about the financing of the shipping industry.

Mention has been made of the remarks that he directed to the C.I.C. One hon. Member said he hoped the C.I.C. would not remain for very long in any case, but I think that the Minister went further. One of the difficulties which has beset the shipping industry is that it is variable in its earnings and in its loss capacity. Consequently, in financing anything to do with the industry it may well be necessary from time to time for money to come in faster than the rate recognised for some other long-term purposes and the financing of this industry may prove much more to be a banking operation than a question of long-dated financing.

I think that my right hon. Friend said that in future the shipping industry would be given the opportunity to find the money it required in its own way without having regard to any form of direction from the Government. I hope that I am right. If so, I think that my right hon. Friend has done a great deal for the industry in making that statement.

I wish to spend a few moments discussing the question of shipbuilding before referring again to the shipping industry. The tone of one or two of the speeches made today has caused anxiety. On the whole, the majority of speakers gave the impression that all is well. It is true that we have had statements from the Civil Lord that there is work available for four and a half years. It is true also that there is anxiety because no new orders are coming in but only 5 per cent. cancellations have taken place, but I think that we have a lot to worry about.

If we contemplate the position of Japan we realise that her building costs are probably 15 per cent. lower than ours over all; that her financial operations are on quite a different plane from ours and call for only 20 per cent. deposit and finance over six or seven years at a reasonable rate of interest of 6 or 7 per cent. Roughly speaking—I am not referring to ships laid up, or anything of that kind—the world shipping capacity at sea at present is about 100 million tons and the capacity to rebuild of the world's shipyards is sufficient to replace those ships in twelve and a half years.

That is a worrying thought. I do not want to give any cause for anxiety regarding our ability to build ships. I am sure that our management, men and our skill and technical "know-how" is up to the task. But it is better to recognise that it is a task which will not prove an easy one. I am certain that as the years develop it is a task which may become even more difficult.

I was glad that one hon. Member mentioned certain restrictive practices. I do not want to develop this point, but I am certain that the one thing which is more important than anything else is that our shipyards and our country should by every means possible retain a reputation for value and quality. I feel sure that all hon. Members will agree on this point. Figures have been quoted showing the changing position of the United Kingdom shipping industry during the last few years and how, although the total tonnage of its fleet has gone up, compared with the figure for world tonnage expressed in percentages, the United Kingdom figure has declined steeply. Although I do not think that figures were actually mentioned, all hon. Members recognise that for the flags of convenience ships they have gone up. They have gone up 9,000 times in nine years. That is rather a telling figure and one which can be remembered easily. The total tonnage of ships flying flags of convenience have gone up 9,000 times in nine years.

Let us look fairly at this matter. We have been discussing two separate things at the same time. We have discussed the recession and ships which are laid up, and also the difficult position of the repair yards, about which little has been said and about which I hope the Minister will not be forgetful. At the same time, we have been discussing the question of flags of convenience. If the recession went on, flags of convenience would not matter one way or the other. Their only advantage is that ships flying them are more or less exempt from taxation.

The matter begins really to worry us when things are getting a hit better and when we start normal competition on the high seas. If this is allowed to go on in the way it appears to be developing, the situation must arise when United Kingdom fleets become smaller and flags of convenience ships more numerous. This is a very serious matter. Hon. Members, without exception, recognise that the Mercantile Marine and our shipbuilding industry are vital to the country and to the men in them, whom I may call some of our best people. Those who had anything to do with them during the war will know that that is true.

What are we to do about it? The right hon. and learned Member for Newport posed the problem. The Government have not answered and the right hon. and learned Gentleman did not expect them to do so. At present, it is more than likely that if we asked the chambers of shipping and the mercantile fleets in Europe they would not know the answer to the problem. One has to face the fact that about 40 per cent. of the flags of convenience belong to the United States and that the United States transferred her ships to flags of convenience. The remaining 50 per cent. or so are Greek, but the money has come from the United States so we are back again where we started.

Furthermore, there are two other factors governing the matter. We may be moving into a loss position in shipping in which the United States of America may agree to these ships being transferred easily back to United States flags and away from the flags of convenience. There are many different arrangements by which the United States has a 50–50 share of cargoes and all the rest of it. Let us not forget that this is a very dangerous matter to be complacent about. It does not apply only to the ships attached to United States of America. Other people look around and realise that this is quite a nice practice. Therefore, we get arrangements between Iran, Kuwait and Saudi Arabia, resulting in their oil being carried in their own national bottoms. It is a matter of the gravest danger.

Her Majesty's Government have done everything they can to put this matter to the United States of America at the very highest level. We all have admiration for the United States, especially those who were privileged to fight side by side with them during the war. We also know that it is much more difficult to get agreements at a little lower level than at a little higher level. This problem has to be pressed at the top and to be worked downwards. We have to measure up to this situation.

I am, therefore, proposing to make three suggestions, purely as cockshies, if the Minister cannot make any suggestion nor can the right hon. and learned Gentleman who posed the problem. Hon. Members have said quite rightly that the Government have not offered any form of solution. There are three methods which might be adopted. The first is rather difficult for me to mention because I might be ruled out of order for going into detail on taxation. When we talk about flags of convenience, the only reason why they existed during a time of profit was that they give freedom from taxation. It is difficult to make a suggestion without a monetary basis, where that basis is purely about monetary difficulties.

The point I would put to my right hon. Friend is to remember the investment allowances. We are dealing with a flexible industry, so we should make the investment allowances flexible. They must flow backwards as well as forwards so that they can be taken advantage of by a flexible industry which at different times makes different sizes of profit and loss.

The second suggestion is that if we find that there is no method of overcoming this problem without indulging in the principle of discrimination, which no one acquainted with shipping wants, we must ease the Bermudian way. We must make it possible to wear a flag which measures up to the flag of convenience and so settle this matter once and for all and still remain under the Red Duster.

The third suggestion I make is to impose a tax upon every ship coming into every United Kingdom port and for arrangements whereby our European friends in the Free Trade Area and the Common Market also impose a tax upon every ship, without discrimination.

The Temporary Chairman (Mr. W. S. Duthie)

Order. The hon. Member must refrain from any suggestion of taxation.

Mr. Marshall

Certainly, Mr. Duthie. I will not mention it. A port due must be imposed upon every ship by Europe and ourselves and it would be allowed as a full allowance against the taxation payable. Thus there would be no discrimination. If any particular company bears no taxation there will be no question of discrimination but, an the other hand, no rebate in tax, and the method would, at the same time, measure up to the flags of convenience.

I have rather trespassed on the rules of order, and I apologise. One thing which is quite sure is that the whole Committee has been very attentive in this debate, which has not been of a party controversial nature. The whole Committee is absolutely satisfied that the Mercantile Marine and the shipbuilding industry are vital to the United Kingdom. The Committee is fully aware of the difficulties confronting them. Hon. Members realise that this is a problem which gnaws at the very vitals of the industry and that a clear solution has not yet been found. Let us trust we shall find one, because British shipping and shipbuilding and British prosperity are one and the same thing.

8.30 p.m.

Mr. A. Blenkinsop (Newcastle-upon-Tyne, East)

Almost every hon. Member who has taken part in the debate, including the hon. Member for Bodmin (Mr. D. Marshall), has made various proposals and suggestions, no doubt very rightly, about how various forms of assistance can be given to the shipping and shipbuilding industries to meet the special difficulties they face. If we are to discriminate in favour of the shipping and shipbuilding industries, as we may very well need to do, it is of the highest importance that there should be the fullest sense of public responsibility in the industries. It may prove to be absolutely essential that we should provide for that public responsibility if in one way or another, by means of subsidy or forms of special taxation, public funds are used.

It seems absolutely vital that that point should be borne carefully in mind. Everyone who lives in a shipbuilding area or represents shipbuilding workers, as I and many of my hon. Friends and others who have spoken do, should make it clear that they admire the efforts of many of the shipbuilding companies to make good use of the funds at their disposal. As the hon. Member for Sunderland, South (Mr. P. Williams) said, both on the Wear, and certainly on the Tyne, enormouse capital funds have been made available for modernisation and reconstruction of the industry.

That brings its problems. As one who represents an area with some of the largest yards in the world, some of the biggest dry docks very close by and the biggest, if not the only, research unit, also very near, I should point out that there have been admirable efforts by many shipbuilding firms to make good use of the reserves they have accumulated, and very large reserves those have been. While recognising that and paying tribute to the firms for the way in which they have carried out and are continuing to carry out a very high expenditure on modernisation and development, we must also bear in mind that it is a matter of real concern to those working in the industry and living in the area that there shall be a continuance of full public responsibility.

Certainly, we would look with some anxiety on any suggestion that the reserves at the disposal of those firms should be transferred in any way into private hands, either by a shoe manufacturer taking over firms by financial deals through the Stock Exchange, or any other way. It is not wholly their own money which they are putting into this business; it is the money of the whole area, indeed of the whole country, which is being used in this way at the moment.

I have found the tenor of the debate rather unreal. One of the vital issues we should have been considering should undoubtedly have been what action is being taken to ensure that there is work for the ships we build in our yards today. That issue was touched on by the Minister in his speech, which otherwise I found rather tepid. The Minister touched on the problem of what action is to be taken to try to encourage development of world trade upon which the whole future of our shipping and shipbuilding industries depends. That is what matters.

What I cannot understand is how we can hope for the steady advance and development of our industry if there is ever danger of restrictive practices by Governments, our own and others, which may endanger the prospect of the development of world trade. I hope that this matter will be discussed at the forthcoming Commonwealth Economic Conference, because it is a matter of supreme importance.

Take, for example, the question of India. Will there be any way of ensuring, and do the Government intend to insist, that India should carry on her five-year plan, involving enormous imports of goods from this and many other countries, which have to be carried in ships? That is the kind of practical problem that we are facing. If the Government, together with the Governments of other countries, are unwilling to plan some way of helping to maintain and develop the plans of countries like India and other under-developed areas of the world and if no effort is made to help shore up that development and assist it, the whole basis of trade upon which our shipping prospects depend will be lost.

The longer-term prospect for shipbuilding should, I think, be good if we can envisage a reasonable advance of standards of living in the underdeveloped parts of the world, because that will ensure the advance of trade between countries and make it possible for our ships as well as other people's ships—for other countries have a right to their shipbuilding development, too—to be fully used.

I am concerned because I do not see any sign of any real energy or action from the Government devoted to this end. I do not see the kind of really vigorous effort being made to stimulate and encourage the development of those backward countries upon whose development so much in our own country depends.

I was a little surprised by a casual remark which the Minister threw out. I am sure that it was a mistake, and I give him the opportunity to correct it now. He said, when talking about the present Government's own economic policies, that they had not affected the position of shipping recession—that the Government had not "made a major contribution to shipping recession". I am quite sure that he did not mean that. He used a most unhappy phrase. I believe that in fact he did use those words, and it is quite extraordinary to us that the Government were rather proud, apparently, that they had not made a major contribution to the shipping recession. What we are asking for is some assistance for the development of shipping, not for a minor contribution towards depression.

Mr. Watkinson

As the hon. Gentleman has raised this question, I had better point out that the remark is taken out of its context. I was answering a point made by the right hon. and learned Member for Newport (Sir F. Soskice) that our economic policy had not been one of expansion, and I was saying quite clearly that the economic policy of the Government—and the hon. Gentleman can read my words in HANSARD—had had no adverse effect on the shipping industry; indeed, the very reverse.

Mr. Blenkinsop

I am glad to hear the Minister say that he did not mean what he said previously; I am somewhat relieved by that.

One major question which has been referred to only casually in the debate is research, which is a question of supreme importance to the future development of the shipbuilding industry. It is again a matter of some pride to the Tyne that it is on the Tyne that the new development has taken place of linking one of our biggest shipbuilding firms with one of the big nuclear plant consortia to try to ensure the most rapid development of nuclear power for ship propulsion. That carries in it the seed of the same exciting possibility of development as we saw, also on the Tyne, many years ago when the steam turbine was brought into use.

Mr. P. Williams

Without wishing to detract from what the hon. Member has said, I am sure that he is aware that everybody in shipbuilding is actively interested in what is going on at Harwell.

Mr. Blenkinsop

I agree. I was saying only that it is rightly a matter of pride to all of us that this work is going forward. I think we have the right to ask the Government what assistance they are prepared to give, or can give, in ensuring the most rapid development possible of the project. The costs involved must be enormous. Some people have said that other countries have gone well ahead in some of the applications of the new nuclear propulsion to shipping. That may or may not be true, but certainly this is a key issue for the future of our shipbuilding and shipping industries, and I therefore hope that the Government will be able to make an announcement about it.

We should pay a tribute to the trade unions for the work which they are doing to try to meet in their own way some of the problems of discrimination against British ships. We should compliment them on the work which they are doing through their international headquarters to try to make sure, for example, that the British shipbuilding industry is not defeated by undercutting due to low wages abroad. Often we hear pleas from hon. Members opposite for reductions in wages or reconsideration of wages in this country because of competition from low-wage countries abroad. I would much rather see what the British trade unions are helping to bring about; I think we should try to see whether we can encourage the raising of wages in other countries. It is to the credit of our trade union movement that it has been able to play a part in assisting other countries, including Germany and even Japan, to a considerable movement forward in wage conditions, not only to their satisfaction but also to our satisfaction in knowing that we should not be subject to the same kind of unfair price competition.

The hon. Member for Sunderland, South raised the very important question of trade union practices, and my hon. Friend the Member for Sunderland, North (Mr. Willey) made the perfectly fair reply that this matter was being considered and that already in some yards much progress had been made. The hon. Member's quotation shows that this matter is very much in the minds of trade unionists. This is a matter which has been brought all the more to the fore over the last few years by the revolutionary developments in the industry, and not all the difficulties are by any means on one side.

I strongly support the suggestion made by my hon. Friend and others that there should be a meeting between both sides of industry and the Government, and I hope that before long it will be a Government of the Labour Party rather than of the Conservative Party. I very much hope that there will be such a meeting to discuss some of these problems as well as problems of the full use of the new capacity in the yards and the new techniques.

I hope that the Government's assistance will be forthcoming in offering reasonable security to the men employed in the yards. That is the point which is still at the back of the minds of hon. Members who represent areas of this kind. I am sure that it would have a real prospect of success, provided that the Government in office at the time were willing to play their part in helping to bring the parties together and offering conditions in which there could be a hope of real success and advance.

I do not think that we need leave the debate unduly depressed. The prospects are reasonably good for the future, provided that we take full advantage of the opportunities available and provided that the Government are willing to play their part in helping to ensure the development of world trade, upon which the future really depends.

8.45 p.m.

Mr. William Shepherd (Cheadle)

I am very glad that the hon. Member for Newcastle-upon-Tyne, East (Mr. Blenkinsop) finished his speech on a note of mild optimism. I feel that during the debate today we have had a little too much pessimism, which is, perhaps, inevitable in special pleading.

As I see the situation, it is by no means as poor as many hon. Members on both sides of the Committee have suggested. It is certainly not bad in shipbuilding. I am very glad that my hon. Friend the Member for Sunderland, South (Mr. P. Williams) told the Committee of the magnificent achievements of the British shipbuilding industry since the war. There have been too many people decrying and minimising what we have done in many branches of industry, and it is about time that somebody took the contrary view. I am very glad that my hon. Friend did it. Nevertheless, good though the performance in shipbuilding has been, it really could have been very much better.

In the shipbuilding industry we are not getting anything like the maximum utilisation of plant and machinery. It is a very curious quirk of fate that we should not have been able to indulge in some of the nonsense which has been indulged in by that industry on the labour and production side had it not been for the fact that our shipbuilders had an enormous subsidy through the cost of their steel for construction purposes.

Had we not had that big subsidy, both men and management in the shipbuilding industry would, a long time ago, have had to get down to the real problem of doing away with demarcations and similar out-of-date practices. It is a very great misfortune that they have not done it before. Steel prices in Great Britain are beginning to match world prices, and this is an indication to us that we must get on with the job in the shipbuilding industry of putting right those things which reduce output from our yards and make our ships—I will not say non-competitive, because they are still competitive—less competitive than they would otherwise be.

I said that I did not believe that the industry was in such a bad state. I say this as an outsider, because I am about the only Member taking part in the debate who is not connected with the sea.

Mr. George Thomas (Cardiff, West)

The hon. Gentleman is one of the few who do not come from the North-East Coast.

Mr. Shepherd

That may perhaps be so. Indeed, I have a great respect for those who go to sea. I cannot set foot on a ship without feeling sick, and I admire all those who can go to sea with no such fear. I share the admiration of the whole Committee and the country for the men who make the ships and for those who sail them. It is extraordinary that the sea seems to attract an essentially good type of man. I do not know why it is, but it is so in this country and in almost every other. I should not like to see this great industry of shipbuilding and the Mercantile Marine damaged through any lack of action on the part of Her Majesty's Government.

I do not share the extreme pessimism sometimes expressed. We are now in a steep trough in regard to freights, and we are meeting a great number of difficulties, but we really must appreciate that these things have followed a period of unparalleled prosperity when rates were amazingly high. One cannot expect the unreal situation of enormous freights to go on indefinitely. Neither can one expect to employ for all time liberty ships which in the ordinary way would have ended their life many years ago. I think that when we have got rid of the totally unworkable tonnage in this industry, then the forward prospects of the industry will not be as bleak as they appear to be today. Indeed, had it not been for the Korean war and the coal situation in Europe and, to some extent, the grain harvest, the situation which we have known of inflated rates and unreal conditions would have evaporated a long time ago.

We are not now facing a severe depression but a return to conditions that more approach the norm that we should expect. It is in the light of that attitude that we ought to judge our problems. I know that there are very real problems facing the industry, but I do not think that we are in too bad a position to deal with them.

Many hon. Members have spoken about the competition that we face from countries flying flags of convenience. I admit that this is a real problem. But we have to realise that our competitors in the main are not flying flags of convenience. Eighty per cent. of our competitors are facing taxation conditions as bad as ours, some of them worse than ours and some of them better than ours.

Therefore, we ought to get a little sense of proportion about the problem of flags of convenience. One sees from the figures of laid up tonnage that it is not always a good thing to sail under a flag of convenience. Indeed, I understand that some American shipowners are seeking permission to transfer from flags of convenience back to the American flag so that they can share in the available shipping that is offered to those who have a privileged position under the American flag. I do not think it is true to say that the flag of convenience is necessarily the greatest evil.

I agree with hon. Members opposite and on this side that discrimination in the long run is likely to be a greater danger to our shipping. I wonder whether the shipping world can carry on for an indefinite period on what is a rather hazardous basis. After all, shipping is one of the most hazardous businesses in the world. One goes on building ships which cost enormous sums of money, but there is no co-ordination between world requirements for shipping and the numbers of ships built. One relies upon one's judgment and the people of this country do that extraordinarily well. But if we are to aim at stability in this industry, will it be possible for all time to go on without a method of international co-ordination?

I know that international co-ordination does not come easily and that our ship- owners are independently-minded men. I have no doubt that there have been many times when they themselves have rejected any suggestion that more order might be put in this industry. But I do not think it is, on the whole, wise over a long period in the future to allow the industry to continue on the basis of having no international co-ordination and making no attempt in the broadest terms to match the new building capacity with the real means of trade and the movement of goods and passengers. It is not, therefore, a question so much of trying to get tax reliefs as of getting more order and stability into the industry.

I know that in this debate we cannot talk about taxation reliefs in detail. I do not, however, favour the principle of giving tax reliefs to specific industries. The' idea of giving tax reliefs to particular individuals or industries does great violence to the whole concept of equity. Much as I dislike subsidies, if we had to take such action as would result in money being paid to this industry I would much prefer to see a direct subsidy than the method of a tax relief, which is grossly unfair to other industries which have to bear the full rate of tax.

I hope, however, that it will not be necessary to give any form of relief of this kind or a subsidy. We should aim at getting rid of the difficulties which face our mercantile marine. I am fully satisfied that in fair competition we can more than hold our own with the other nations in this business.

I agree with what has been said about the position of the United States of America. Some of my hon. Friends and some hon. Members opposite have, however, been unrealistic in their attitude towards the United States. It is no good our saying to the United States, in the most polite terms, "Please get out of the tramp business", which is precisely what hon. Members on both sides have been saying today. It should occur to us that the United States has a strategic interest in maintaining a tramp fleet, as we have. If we are to go along with the United States—and I am in favour of this—we must do it with a sense of realism.

What can we say to the United States if we go along with them? It is clear that discrimination by the United States is harmful to our trading interests and that America is largely responsible for the growth of the ships under flags of convenience. The United States has led the idea of discrimination with her 50–50 business and has largely fortified financially the flags of convenience ships.

As hon. Members know, America subsidises heavily the building of liners and their operation. I wonder whether we could say to the United States, "If you will agree to stop discrimination and cause your shipowners not to use the flags of convenience, if you prevent them, as we prevent our shipowners, from using flags of convenience, we would be agreeable to your subsidising your tramp shipping in a manner similar to that in which you subsidise your liners." The United States makes some effort to ascertain our operation costs with our liner traffic and then gives a subsidy to its own operators largely to balance that out. I would think that that proposition might have some little chance of success.

Mr. Willey

Does the hon. Member know that there is now a possibility that the United States may be making representations to us complaining of restrictive practices in the Conference arrangements about liner traffic.

Mr. Shepherd

That might provide us with an opportunity of raising this issue.

I am quite convinced that the path for us to pursue is not to look to the Government to subsidise the industry and not to look to taxation relief, but to say to ourselves that under fair conditions we can meet and beat the world. What we have to do is to try to get a realistic approach to the United States, because the United States is the key to all this business. We must not expect the United States to put itself out of the tramp business. We have to find some arrangement with the United States which will enable it to continue in the business, but we know that because of high wages and the high cost of construction, unless the United States Government give some sort of subsidy to ship operators, they could not be in the business.

Therefore, I hope that we shall not have too pessimistic an overhang in this industry. When one is pressing the Government to do something, even though one is not quite sure what it must be, one is inclined to lay it on rather thick and heavy, and there are real problems to face. I look upon the industry as one of great vitality and energy. British shipowners and seamen are the best in the world, and I am convinced that if we can get an equitable arrangement with the Americans, the British Mercantile Marine will continue to hold the proud place it now has in the world.

Mr. Rankin

On a point of order. May I draw your attention, Sir Gordon, to the fact that not one hon. Member from Glasgow has been called tonight, and only one Member from the whole of Clydeside, the greatest shipbuilding area in the world?

The Deputy-Chairman (Sir Gordon Touche)

One Member has been called from the Clyde. I am sorry that more Members have not been called.

Mr. G. Thomas

Further to that point of order. May I also submit to you, Sir Gordon, that, while I realise that it is too late now, the people of Wales have a very special interest in merchant shipping and shipbuilding? It is most unfortunate that we should have had such an unbalanced debate and that not a single back bencher from the Principality has been called.

The Deputy-Chairman

I am equally sorry that a Member from Wales has not been called.

9.1 p.m.

Mr. David Jones (The Hartlepools)

I feel that I ought, first, to crave the indulgence of the Committee in making a speech from this unaccustomed position on the Opposition Front Bench. To my hon. Friends the Members for Govan (Mr. Rankin) and Cardiff, West (Mr. G. Thomas), who have complained, may I say that some months ago the North-Eastern Development Council published a document entitled "The Land of the Three Rivers". My hon. Friends will not be able to complain that in this debate the voice of the "Land of the Three Rivers" has not been heard.

This debate has ranged widely, but it has mainly concentrated on shipping and shipbuilding. It is true that, as a consequence of the state of the shipping industry throughout the world, there is an effect upon the shipbuilding industry. I was interested yesterday, in looking at the annual summary of Lloyd's Register of Shipping for 1957, to find that during last year 260 merchant ships were launched in the United Kingdom, amounting to 1,413,000 tons, which was 30,314 tons more than in 1956, but 60,000 tons less than in 1955.

If we look at world tonnage and the United Kingdom proportion of that tonnage—and a number of speeches this afternoon, including that of the Minister, indicated that the recession in world trade has affected the world position even worse than that of the United Kingdom—it is interesting to note that Lloyd's Register of Shipping shows that, in 1952, 29.6 of the world's total launchings were from British shipyards, that in 1953 the figure was 25.9, that there was a slight increase in 1954 to 26.8, another slight increase in 1955 to 27.7, but that the figure fell in 1956 to 20.7 and was down again in 1957 to 16.6, showing that the proportion originating in British yards had dropped by 13 per cent. between 1952 and 1957.

If we look especially at the North-East—and I referred a moment ago to the "Land of the Three Rivers"—we find that normally, in connection with shipbuilding and the shipping industry, the "Land of the Three Rivers" is regarded as one area for that purpose. We also find that during 1957 there was a drop of slightly more than 15,000 tons in the launchings from these three yards. It is true that on the Tyne there was an increase of about 3,800 tons. The Wear came out almost equivalent in the second year. However, the Tees, which I regard as the most important of the three rivers, dropped by 18,999 tons, and that seems to me to call for some important consideration by the Government.

There was a debate on the Adjournment on 19th February, 1954, initiated by my hon. Friend the Member for Sunderland, North (Mr. Willey), who called attention to the shipbuilding position in the North-Eastern area. The then Civil Lord, the hon. Member for Dorset, West (Mr. Wingfield Digby), said, referring to my hon. Friend: The hon. Gentleman has run true to form and once again has been pessimistic and tended rather to cry 'Wolf'."—[OFFICIAL REPORT, 10th February, 1954; Vol. 523, c. 2385.] On 9th March, 1954, replying to a debate on the Navy Estimates, the hon. Gentleman said: Undoubtedly the main problem of the industry is no longer so much that of steel as of future orders. The hon. Gentleman was, therefore, saying in 1954 that the problem of steel had been solved and that it was now a problem of orders. I see the hon. Member for Sunderland, South (Mr. P. Williams) shaking his head. All I am saying is that the representative of the Government replying to the debate indicated that in the Government's view, in 1954, the problem of steel had been solved. The then Civil Lord said: I think that has been generally reflected during the debate which we have had this evening, and it has been the central problem which the Admiralty has been watching for the last six months or more. Until early 1956, work is there, and the position is satisfactory for the larger yards, although smaller yards will need orders before that. We have naturally to ask ourselves whether orders will come along after that to make good the deficiency."—[OFFICIAL REPORT, 9th March. 1954; Vol 524, c. 2055.] We now know that, however much they were looking for those orders, the orders have not arrived.

In its 1957 summary, Lloyd's Register of Shipping refers to a total production—no returns were available from Russia and China—of 1,690 ships with a total tonnage of slightly over 7 million, an increase over 1956 of 1,800,000 tons, of which the United Kingdom got about 31,000 tons. The summary contains a list showing the production of completed ships during 1957 in 13 countries. Japan topped the list with nearly 2½ million tons of shipping and Germany was next with 1,231,000 tons. All but three of the 13 countries increased their tonnage by more than the United Kingdom in 1957.

No one wishes to decry the magnificent record of the shipbuilding and shipping industries in the United Kingdom, certainly since the war, but the House of Commons, the country and the industry are entitled to know what the prospects are not in the near future, but two or three years ahead. It may be that they have sufficient orders in hand at present to keep the yards reasonably busy for four years, but a shipbuilding yard cannot be efficient unless it can attract to its labour personnel some of the brighter lads leaving the secondary and modern schools.

The industry must recruit annually a substantial number of intelligent youths to man the industry. What parent with any responsibility would advise his son to enter the shipbuilding industry if there is no indication that beyond three and a half to four years there is likely to be a reasonable assumption of employment in the industry for lads leaving our modern and secondary schools, lads who, in four or five years, would be qualified technicians?

In Lloyds List for 23rd April it is said: In view of the low level to which freight rates have fallen, the absence of any sign of early improvement, and the mounting tonnage of laid-up shipping, it was expected that the intake of new orders would virtually cease, and that there would be a number of cancellations. That shows that the people in the industry are apprehensive about the future.

I have a further quotation, this from a reprint of the Financial Times, in which it is said: Although the U.K. industry— that is, the shipbuilding industry— is not complacent about the present dearth of new orders and the possibilities of further cancellations, it feels it is in a much better position than some of its competitors, particularly Japan. The order book is worth at present-day prices about £900 million"— but the industry is concerned about what is to happen in four or five years' time— Many yards in Japan have little more than 18 months' work in hand. If that is the case, and world competition becomes keener because of quicker and firmer delivery dates, it is possible that Japan will continue to increase her share of world shipbuilding. We should not be complacent about that.

This is the position which the Government should carefully examine in a special kind of way. It is no good succeeding Civil Lords of the Admiralty saying that everything in the garden is all right and that we have three or four years' orders and that there have been only a few cancellations and that we can, therefore, continue in the way we are going.

The hon. Member for Cheadle (Mr. Shepherd) had something to say about British shipyards. I do not claim to be an authority, but there seems to be a conflict of view among the people who claim to be authorities on the shipbuilding industry. We are told by some—and we had it from the hon. Member for Sunderland, South—that a good deal of money has been put into the industry since the end of the war. I believe that to be true.

Mr. Andrew Shonfield, the economic editor of the Observer, has recently written a booklet, issued in the Penguin series and entitled, "British Economic Policy Since the War." On page 42, he says: The striking thing about the British shipping industry that emerges, when one comes to look beyond the blanket excuse of steel shortage which has covered its activities ever since the war, is the stubborn refusal to invest in the creation of more productive capacity. Things may now be changing, but in most years during the 1950s the amount of money spent on plant and equipment can have been barely sufficient to cover normal wear and tear and obsolescence in the shipyards. During the four crucial years from 1951 to 1954, when first the German yards and later the Japanese were going ahead with large-scale re-equipment. British shipbuilding firms spent £4 million annually on their fixed assets. For an industry, which was producing an average of £120 million a year at this time and employing over 200,000 workers, this is a figure which is so low that it would sugegst to the outside observer that someone was trying to get out of the business, and in the meantime was determined to spend as little as possible on it. I do not altogether subscribe to that view, but people are entitled to know the facts. That is a further justification for the argument that the Government should take special steps to ascertain how the efficiency of the industry can be improved and how it can re-equip itself.

I agree with the hon. Member for Sunderland, South that we ought to write the success story of the industry, but we must face facts fairly and squarely as keen observers in the industry see them. If there are two points of view the truth can be resolved finally only if the Government will undertake an examination of the facts and see what can be done to make the industry more attractive for people in the future.

The hon. Member for Cheadle spoke about restrictive practices in the industry. A good deal of nonsense is talked about this. I have read that trade unions have restricted the work of their members in the welding of sea-going vessels. I have made inquiries on the point, and I understand that the union concerned has placed a limit to the amount of welding that a craftsman can do in an hour, because of the vital importance, to the crew manning a ship, of the reliable welding of those plates when that ship is tossed in a rough sea.

The Committee should remember that these weldings—certainly on the hull of the ships—are subjected to some of the most severe strains that can be experienced, and if there is reason to believe that the welding of British ships has been faulty seamen will be less ready to go to sea in them. It is, therefore, important that this matter should be left in the hands of the people responsible for it, who know most about it.

Criticisms have been made, not necessarily in this debate, that the number of hours worked by workers in British shipyards are substantially less than those worked by people in other countries. The Ministry of Labour Gazette for March, 1958, states that the hours worked in the last pay week in October, 1957, in British shipyards, on shipbuilding and repairing, all persons, averaged 48.3 per week.

On page 103 of the same publication it is stated that shipbuilding workers in Germany, all workers, worked an average of 45.3 hours a week. On page 102, for France, they will find that for shipbuilding, machinery, automobile, cycle and aircraft workers the average number of hours worked during the same period was 48.2 per week. I understand that Japanese shipyard workers work 42 hours a week, but that that is over six days. This is a clear indication that the nonsense talked about the efficiency of this industry being affected by the shorter working hours in the United Kingdom is not true.

When we talk of the success story of this industry we must bear in mind what is said by the people concerned with the industry. I have here a page taken from the Economist for 31st May of this year, giving an account of the annual meeting of Cammell Laird and Company Limited at which the chairman stated: It is not surprising, therefore, that while our shipbuilding company has an order book which includes a wide variety and size of vessel and will provide a steady flow of work for our yards for some time to come new orders became scarce during the year and still remain so. Turning to the report of the meeting of Messrs. Harland and Wolff, Ltd., we find that the Chairman, in his address to the shareholders, said: Whilst I am glad to say that our present order book provides a varied and well balanced programme of work for some time to come, I must sound a note of warning. Against a background of a diminishing number of inquiries for new tonnage, and increasingly competitive conditions … I do not think that we can afford to ignore warnings of that kind, made by people connected with the industry, and, therefore, I should like to ask the Civil Lord what plans the Government have in mind for dealing with this situation.

It may be that there is a reasonable amount of work for 1961 and 1962, but ought we not now to be examining carefully what we should do at the end of 1961 or the beginning of 1962? Has there been enough modernisation? Should more capital be put into this industry? Is there still modernisation work that we can do? The industry and the country are entitled to know the Government's plans. We should not be fobbed off with an explanation that, as all is well for the next four years, we need do nothing about it—unless, of course, the intention is that because this Administration will not be in office at that time, they need not bother.

I wish to say a word about Pan-Lib-Hon-Co. It is true that the tramp shipping rates have dropped. If we take 1952 as 100, in April, 1950, they were 62.7 for voyage freighters and in March, 1958, 51.8 for time charters. The Prime Minister made a speech at the annual dinner of the Shipping Federation, from which I should like to quote. He said: No industry is more important than the shipping industry to the maintenance of the economic strength of this country and its influence in the modern world. I think that everybody will agree with that, but we are entitled to know what the Government propose to do about the Pan-Lib-Hon-Co fleet of roughly 15 million tons.

I think it was the hon. Member for Bodmin (Mr. D. Marshall) who complained that suggestions had not been offered from this side of the Committee. If he can get his right hon. Friend the Prime Minister to place at our disposal all the commercial and diplomatic evidence that the Government collect from the embassies of the world we will reach a conclusion in a reasonably short time. We cannot be expected to have the information which is available to the Government at any moment of time from every capital city and most of the other big towns of the world.

I will make another suggestion. Mr. John Foster Dulles made a statement on 6th June to the Foreign Relations Committee of the United States Senate. Dealing with N.A.T.O., he said: N.A.T.O., a defensive organisation, is now much more than merely a military alliance. It is becoming a true community of free nations. Within this community, to a degree unprecedented in history, countries are carrying out a policy of close co-operation in peacetime without abandoning their independence. This development is one of the most significant and promising events of our time. If N.A.T.O. has these intentions at present, and if the reason for the United States Government keeping a benevolent eye on, if not actually encouraging, United States shipowners to transfer their ships to the countries of the flags of convenience is, as one American writer said the other day, for the purpose of "creating a fifth arm in the event of trouble in the world", ought not the American Government to be told in no uncertain terms by their partners in N.A.T.O. that in doing that they are breaking the lifeline of those other European countries if that trouble should arise?

However dependent the United States might be on its merchant shipping in a war, this little island will be far more dependent. We should, therefore, use the powers that are available to us in N.A.T.O. to make it quite clear to the American Government that this is not the kind of co-operation that Mr. John Foster Dulles talked about when he addressed the American Foreign Relations Committee. I should be astonished if the Prime Minister did not seek an opportunity last week, when he was in the United States, to make this point clear to the President. If he did not, will the Government now undertake to raise the matter before the next meeting of the N.A.T.O. Council?

Will the Government also say to the United States of America that, in our view, it will be going beyond the normal freedom of the seas if the United States Government permits its merchant ships to be registered in countries the total population of which is less than 7 million, and where any of the regulations cannot be applied, even if it gives lip-service to international regulations for regulating ships on the high seas?

When a Government accept a convention, or a recommendation of an international conference, one has a reasonable expectation that that Government will be able to carry out the recommendation if any of their nationals should violate it. The United States has the power, authority and responsibility to regulate its merchant fleet if it is registered in the United States of America. If the Tanker Times for April is to be believed, the reason why United States shipowners, with the connivance of the American Government and of the American banking houses, allow their merchant ships to be registered in the Pan-Lib-Hon-Co countries is that it will give them an advantage over British shipping in competition for cargoes.

It is no use the Minister contenting himself by pointing out to us that there is a greater proportion of Pan-Lib-Hon-Co ships than of our ships laid up. Probably the reason is that in an effort to get rich quick they have been engaged for the whole time in spot charters, while the British tramp owner has been mainly accepting time charters. The spot charters are no longer available and the Pan-Lib-Hon-Co countries have got to the difficulties quicker than we have got to them.

Whether it is a depression or recession in America I am not prepared to say. I read in a newspaper the other day that the ex-President of the United States, Mr. Harry S. Truman, when asked to define the difference between a recession and a depression, said, "If your friend and neighbour loses his job that is a recession; if you lose your job it is a depression." If the chairmen of some of the British shipping companies are to be believed, this depression, or recession, is likely to affect British shipping for at least a year or two more. By that time a number of the time charters on which British tramp ships are working will have run out and there may be no renewal.

Is the information given to me right, that nearly 40 per cent. of the oil which arrived at the Fawley Refinery in 1957 was carried in Pan-Lib-Hon-Co ships? I also ask: are there any ships under flags of convenience laid up in our rivers and estuaries? If so, why do we permit them to stay there? If those ships are competing unfairly with us in the rest of the world, they ought at least to go back to the countries of registration when they are laid up.

9.33 p.m.

The Civil Lord of the Admiralty (Mr. T. G. D. Galbraith)

On the whole, this has been an interesting debate. It is the first debate we have had on shipbuilding for more than three years, although shipping was discussed in another place rather more recently. Unlike the right hon. Member for Easington (Mr. Shinwell), I think there is a distinction between shipbuilding and ship operating. Shipbuilding is essentially a manufacturing industry, while shipping is really a service. They have little more in common than, for example, the road transport industry has with the motor manufacturing industry.

As a result of this duality, the debate today has inevitably been somewhat ragged. Some hon. Members have been concerned mainly with the difficulties of the shipping industry and especially with the problem of flags of convenience, while others have commented on the present and future position of the shipbuilding and ship-repairing industries with special reference to employment prospects in them. Nevertheless, in spite of the duality, I think the debate has been well worth while.

The three industries, shipping, shipbuilding and ship repairing, are of great value to the country, and the Government welcome the interest shown in all quarters of the Committee in their future welfare.

The problem which worries most ordinary people is the large number of ships at present laid up in various parts of the country because there are no cargoes to fill them. The right hon. and learned Gentleman the Member for Newport (Sir F. Soskice) seemed to suggest that it was the economic policy of this Government that was to blame for this, but, of course, as he mentioned in the later part of his speech, Britain is not the only country suffering from idle shipping, and the proportion of British ships laid up is about the same as the British share of world tonnage.

Sir F. Soskice indicated dissent.

Mr. Galbraith

If the right hon. and learned Gentleman did not say that, I apologise. That was what I understood him to say. Although it does not bring much consolation to those who are affected, we must recognise that this is a world problem and not a purely national one which it is in the power of any Government, whatever their politics, to solve by their own actions.

If the laying up of ships is, as we hope, a temporary problem, the problem posed by flags of convenience and flags of discrimination is not one which time will necessarily solve by itself. As my right hon. Friend said this afternoon, in opening the debate for the Government, the Government share the concern of the shipowners in this matter. We are well aware of the industry's special difficulties. Indeed, that was recognised in last year's Budget and in the further concession announced this afternoon by my right hon. Friend.

It would, I think, probably be difficult to go much further along that line, although my right hon. Friend will certainly bear in mind all the suggestions which have been made this evening. In his opening remarks, I think that he covered many of the points which have been made since then, so I want, for the remainder of my speech, to turn to the shipbuilding industry because here the picture is rather different from what it is in the shipping industry.

Mr. G. Thomas

Will the hon. Gentleman, in the course of dealing with the shipbuilding industry, make reference to the state of that industry in the Principality of Wales?

Mr. Galbraith

I shall be dealing with the shipbuilding industry in general. No doubt my remarks will have reference to the conditions in the Principality, as well as in other parts of the United Kingdom.

The shipbuilding industry may not be booming but it certainly is not depressed just now. In fact, the order books in the United Kingdom, taken overall, are, if anything, a little too large. Orders include over 6 million gross tons of shipping, which, at the present rate of output, of about 1½ million tons a year, would last for approximately four years. Of course, as hon. Members realise, the sum is not quite as simple as all that. On the one hand, I hope that no one in the industry will take the present rate of production as being in any way the maximum; and, on the other hand, in general, it is the big yards which are better off than the smaller ones. A very long order book is not necessarily a healthy one. If shipowners are unable to place orders with yards with the prospect of reasonably quick delivery and reasonably firm prices, they will be tempted to go elsewhere, and from that point of view the shorter the order book the better.

On the other hand, it takes up to about two years to get every thing ready for building a ship from the moment an order is placed, and so on the average we should not want the order books to be shorter than two years. But, of course, the size of the order book is not the only thing that counts. What is just as important as the size is the sort of items which are contained in the order book. The strongest card in the British industry is that our order books cover a rather wider variety of ships than do those of most of our competitors. Tanker tonnage, for example, accounts for only about half of our order books and the other half is composed of vessels of a more complicated type, especially liners, the design and building of which give work to a host of industries which are not directly connected with shipbuilding.

In addition to these merchant ships there has been a large programme of naval building, not only for the Admiralty but also for foreign Governments. This work requires the highest technical skill and craftsmanship and gives to the British order book a balance which is the industry's best guarantee of insurance against bad times. It also gives it a value which is out of all proportion to the size of the order book.

Much has been said about growing competition from foreign yards, especially from Germany and Japan, and the fact that we have lost our old lead. In this matter it is perhaps wiser to pay more attention to economic common sense than to feelings of national prestige. Of course, it is agreeable to lead in anything, but in an era of full employment it is much wiser to keep a balance between one industry and another than to put all our eggs in one basket.

It is perfectly true, as has been pointed out in several speeches this evening, that in 1957 we launched, approximately, 1.4 million tons against 2.4 million tons from Japan and that this represents a declining proportion of the world's shipbuilding output. Although the proportion of launchings from British yards was down, the tonnage was up, and, after all, that is what is important. In fact, ever since the war the output from British yards has been extraordinarily steady, with a slight tendency to increase all the time.

Mr. D. Jones

When the hon. Member says that the output was up in 1957, with what is he comparing it? With 1956? How does it compare with 1955?

Mr. Galbraith

The industry has been very steady. If the hon. Member goes back to the war he will see that there has been a very steady, slow increase all the time. One year may have been slightly down on the previous year, but if he plots the graph he will see that it is rising all the time.

Another aspect which is very important is that ships built in Japan are preponderantly tankers and small vessels for which, as far as my information goes, the price is around £100 per gross ton. Our shipyards, on the other hand, produce ships of all sorts, and many of these are of a much more sophisticated construction than the tanker. As a result of this, the value of British output last year was not far below the value of Japanese launchings, in spite of the wide difference in the size of the tonnage launched. This is a feature of our order books and of our launchings which is often forgotten yet it goes to the very root of our shipbuilding industry. It is a quality industry and its earnings are high relative to its output.

The hon. Member for Sunderland, North (Mr. Willey) spoke about output and wondered whether it was as high as it ought to be. He made a reference to steel. It is perfectly true that until recently uncertain supplies of steel plate and heavy sections have been the chief problem, but the supply is improving and in none of the yards which I have visited in the last year has this matter been raised with me. I have taken particular care to ask in as roundabout a way as I could in order to find out whether the people who were entertaining me were merely being polite, and not once did they say that shortage of steel was what was holding them back. Over the last three years the average supply of steel received in the shipbuilding and marine engineering industry has increased by 3,600 tons a week.

As for the future, about which the hon. Gentleman asked me, the additional needs of the shipbuilders and engineers have been calculated and phased into the development of the iron and steel industry. I quite admit that, until that development is completed and the new mills come into production, the position, although it has improved, will remain tight.

Another difficulty affecting output, which was referred to by my hon. Friend the Member for Sunderland, South (Mr. P. Williams), has been restrictive practices and disputes over demarcation. Several hon. Members referred to this matter. The Committee will, no doubt, remember that following last year's strike in the industry there was an agreement between the two sides that a series of joint conferences should be held to discuss the problems. I understand that meetings have since been held, but these do not seem to have led the two sides to much agreement as to how progress might be made. As has frequently been said by Government spokesmen in the past, the problems of restrictive labour practices can be satisfactorily dealt with only by each of the two sides in the industry concerned acting jointly in the light of the industry's own need and circumstances. I will just say in passing that there is encouraging evidence of the willingness of parties in a large part of the rest of industry to give serious joint consideration to matters of this kind.

It is rather disturbing that joint discussion in the shipbuilding industry should, apparently, be encountering such persistent difficulty. The Government certainly hope that the two sides will make further efforts and will yet find it possible to achieve a greater measure of co-operation and progress.

Mr. C. R. Hobson

Since the hon. Gentleman is speaking on behalf of his Department and the Government, does not he think that it ought to be made perfectly clear that the dispute last year was over wages? It was a dispute over wages, which coincided with a dispute in the general engineering industry. It was as a result of the previous strike at Cammell Laird over the boring of the holes by the respective trades, a dispute which was finally settled by T.U.C. arbiters in conjunction with the employers' representatives, that this joint machinery was set up. It did not arise from the strike in the industry as such.

Mr. Galbraith

I do not think that it is any good going over the past now. The point I want to make is that people in other industries, apparently, get together and discuss these things rather better than they do in the shipbuilding industry, and we hope that the improvement which has taken place in other industries will take place in the shipbuilding industry, too.

Mr. Shepherd

Will my hon. Friend do what he can to impress upon both sides the importance of achieving some progress? One does not want to exaggerate the effects of these practices, but it is perfectly true that a great deal more output could be had from existing yards if we could deal with the problem.

Mr. Galbraith

I do not feel that I can say anything more on that subject, except that it would be possible to increase production in British shipyards from 1.5 million to 1.75 million tons a year as the steel becomes available, without any increase in the labour force.

One or two hon. Members have spoken about modernisation. There was, until recently, a limitation of output because the yards were laid out in a very old-fashioned manner. In recent years, the yards have been transformed out of recognition, as the hon. Member for Keighley (Mr. C. R. Hobson) remarked. Over £60 million has already been spent on modernisation, and plans for another £60 million are in hand. The most notable feature of the modernisation is that it has been carried out without disrupting the capacity of the yards concerned. Unlike Germany or Japan, which were able to start from scratch—I dare say that that explains the points which the hon. Gentleman the Member for The Hartlepools (Mr. D. Jones) read to us—British shipbuilders have modernised their yards and have kept going at the same time.

During last year I visited forty yards. I have been enormously impressed by the energetic modernisation being undertaken at them all. I admit that this was a complete surprise to me. Before coming to the Admiralty, although I am a Clydesider, I had always heard that the industry was rather a backward one. I have seen with my own eyes that nothing could be further from the truth. This is a go-ahead industry. The hon. Member for The Hartlepools is able to see in his own constituency the kind of thing I mean. I would counsel him to use his own eyes rather than the remarks of the gentleman from whose book he was reading.

Mr. D. Jones

I was asking for somebody to inquire, because obviously neither the Civil Lord, nor I, nor most of the hon. Members who have spoken in the debate, are qualified to reach firm conclusions.

Mr. Galbraith

Of course, I accept that; but the evidence of my own eyes after visiting forty yards in different parts of the country leads me to the conclusion that a great deal of modernisation is going on.

A particular aspect of this modernisation which struck me was the reduction in the number of building berths. At first sight it might appear anomalous—and I know that sometimes it causes misunderstanding among the workers—but, with prefabrication in large units, space is at a premium and the alteration of a berth into storage space often makes it possible to halve the building time on the actual berth. At one yard in particular which I visited in the North-East these modernisations have recently achieved the outstanding success of building a 15,000 ton ship from keel to launching in nine weeks.

The industry is clearly virile and go-ahead. It has shown faith in its own future by the enormous sums that it has spent on modernisation, and it now has the equipment and layout which will enable it to be highly competitive.

Looking to the future, some concern has been caused by the recent cancellation of orders, but I do not believe that this is as serious as it may appear at first sight. After all, in the last twelve months only thirty-five ships, totalling about one-third of a million tons, have been cancelled, and this represents less than 5 per cent. of our present orders. One hon. Member wanted to know whether these were firm orders. The answer is that these were cancellations of firm orders.

There is nothing unusual about fluctuations of this sort. In 1954 orders fell off in the same way as today after a period of intensive ordering. Furthermore, as my hon. and gallant Friend the Member for Horncastle (Commander Maitland) said, some other countries are much worse off and have been much worse hit by cancellations than we have been. I think that these quite modest cancellations were probably highlighted by the recent so-called cancellation of a Cunarder at John Brown's.

Mr. Bence

It was postponed.

Mr. Galbraith

As the hon. Member for Dunbartonshire, East (Mr. Bence) says, what happened was that the order was only postponed. Other work took its place and not one man lost his job. This should show to the hon. Member for Dunbartonshire, East, that private industry is just as capable of phasing its work as an industry run by the State.

Mr. Bence

I am surprised at what the Civil Lord says. Although I mentioned that it may well be that the British Government, in defence of their vital interests, may have to do the same as the United States, I was not suggesting that the Government should step in because our people were inefficient. What I said was that the Government might have to step in to save Britain from the unfair competition thrust against it by the American Government stepping in in her own shipping industry.

Mr. Galbraith

I must have got it the wrong way round. I thought that the hon. Member was suggesting that private industry could not phase its orders as efficiently as the State.

Another fact which has been mentioned as proof of the weakness of the shipbuilding industry is that the world's merchant ships amount to about 100 million tons, while world output is running at about 8 million tons. This point was made by my hon. Friend the Member for Bodmin (Mr. D. Marshall). I call this formula the Runciman formula, because I think it was Lord Runciman who first propounded it. If what my hon. Friend said is true, it means that ships could be replaced every twelve years or so, whereas, as hon. Members know, the life of a ship is about twenty years.

It would seem, therefore, that there is an excess capacity of shipbuilding. This calculation, however, fails to take account of the fact that demand is at the moment at a particularly low level and that everything points to an increase in the future, not only from world trade, such as the increasing demand for oil, but also because a large amount of tonnage is almost at the end of its useful life and will soon have to be replaced.

Nevertheless, it would be idle to deny that competition is likely to be keen for some time to come. The shipbuilding industry is aware of this and so are the Government. It is for this reason that so much effort is being put into the development of nuclear marine propulsion of a type that will be economic, so that, as the hon. Member for Sunderland, North said, this country might have the advantage of being first in the field in this new development.

In the military and strategic sphere, the Americans are ahead of us and the Russians have already launched an icebreaker; but commercially we lead on land and we hope that technical development now being undertaken will pave the way for a marine propulsion unit that will be economic. I assure the hon. Member for Newcastle-upon-Tyne, East (Mr. Blenkinsop), that we are pressing ahead with this as fast as we can. It is too early yet to be definite, but the Committee may like to know that developments have reached the stage at which the shipowners and the shipbuilders are working together with the Atomic Energy Authority at Risley so that the technical possibilities of nuclear power can be married at the earliest possible stage to the practical requirements of shipping and the manufacturing know-how of the shipbuilder.

Furthermore, so that shipbuilding and shipowning firms may be kept fully in the picture, representatives attend a study group which meets every quarter. In this way, we in the Government hope that the industry will be in a position to go ahead quickly once the technical problems involved in the development of an advanced gas-cooled reactor are overcome.

The hon. Member for Keighley also referred to ship repairing. It is true that compared with the prosperity and the strong position of shipbuilding, ship repairers have been hit much more heavily. The extent of unemployment varies in different parts of the country from as little as 1 per cent. in Barrow to 13 per cent. on Merseyside.

There are, however, one or two points which mitigate the position. In the first place, while ship repairing is the first industry to suffer from a fall in freight rates, it is also the first to profit when the rates go up. Secondly, ship repairing is nearly always done in a shipbuilding area. As long as there is plenty of work in the shipbuilding yards, there is a chance for suitable labour from the ship repairers to find alternative employment there.

What has perhaps aggravated the repair position has been the reduction in naval work, which has also affected places like Lowestoft, as was mentioned by the hon. Member for Lowestoft (Mr. Edward Evans). Everywhere I go, I am asked whether the Admiralty can make more repair work available to private firms. The right hon. and learned Member for Newport asked me the same question privately. Sometimes the larger firms want a frigate and the smaller firms, perhaps, an inshore minesweeper.

I recognise the tremendous help that would be given if more Admiralty work were available, but as a result of the shrinkage in the size of the Navy the Admiralty has had to strike a balance between closing down some of its own dockyards—for example, Hong Kong. Sheerness and Portland—and reducing the amount of naval work put out to contract.

I hope I have shown that, although we do not underestimate the difficulties, there is no need for undue anxiety about British shipbuilding. It is a thriving, efficient and forward-looking industry. Most firms have full order books and costs are no higher than those from other Western European countries. In these circumstances, I believe that the industry can look after itself at least for the time being.

It being Ten o'clock, The CHAIRMAN left the Chair to report Progress and ask leave to sit again.

Committee report Progress to sit again Tomorrow.