§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Peel.]
§ 10.6 p m.
§ Mr. Paul Williams (Sunderland, South)
Yesterday we debated the subjects of employment and unemployment. In all the four major speeches during the course of this debate there was no more than a passing reference to the problems of British shipbuilding. This I believe to have been a disgrace and a slur upon the House. It shows how casually this island race and this maritime nation treats both the shipping and the shipbuilding industries.
We can have little doubt that British shipping—and I start with shipping rather than shipbuilding—is of paramount and continuing importance to us as an island race. To quote figures may be tedious, but it is not unhelpful. In 1961, the earnings of British shipping topped £560 million, and the positive net contribution of British shipping to our balance of payments position and to our invisible exports was about £50 million. These are not small figures. To repeat a phrase "they ain't hay". They make a positive contribution to our standard of living and level of employment, for without these positive earnings the British economy would be sailing pretty close to the rocks of economic disaster.
There are two problems facing British shipping today. One is the problem of flag discrimination, and at a moment of high freight rates and the absence of profits this is perhaps the lesser of the two evils, although it is a rock submerged by the high tide of depression. The other problem is the surplus world tonnage, which results in depresed freight rates, these depressed freight rates themselves causing tonnage to be laid up. If, perchance, there is a recovery in freights, this brings back into operation the laid-up tonnage, Which, in due course, is a sanction against real recovery. These are the twin problems presently facing the British shipping industry—and, indeed, the world shipping industry.
No one can doubt that there is a vital necessity for a large British shipbuilding industry. It is a vital part of our economy, not only in terms of our balance 1226 of payments but because every ship built has itself an export element in its contribution to our economy. It is either a direct export, in the sense that it is an order by an overseas owner, or an export in the sense that it is a British ship which will continue to earn repeatedly over the years. This fact is seldom acknowledged by Government and seldom recognised by those outside these twin industries.
Today the British fleet totals about 20 million tons. If this fleet were to be replaced at a rate of 1 million tons a year it would be—to put it mildly,in the present depressed state of orders—a highly satisfactory position for British shipbuilding yards. But this is not happening, and we must ask ourselves why and try to find a remedy for this difficult situation. In a few moments I hope to do that.
Before I come to my propositions I want to refer to another factor in the situation. The capacity of the British yards today is 1½ million tons a year plus. This we must take as the irreduceable minimum and the target at which we must aim.
If on the basis of 20 million total tonnage we should be able to look for 1 million tons replacement orders it means that the balance must be made up by export orders. How competitive is British industry today? It is no use talking about exports if the industry is not competitive. Over recent years many attacks have been launched on the sin p-building industry. Management has been attacked as fustian, fuddy-duddy and out of date. The labour force has been attacked as being antediluvian and feudal. None of these accusations can be justified today. Minor criticisms can be and must be made. There are still inefficient managements and some firms which are not re-equipping at the rate at which they should. There are many labour practices which are more akin to the atmosphere and attitude of the 1930s, although I can understand the hesitation of some people in that respect, and many people adopt practices which are irrelevant and damaging to the industry.
Having said all that, I must add that I believe that the British yards are competitive with foreign yards and, but for the subsidy element provided for foreign 1227 shipyards by their Governments, the British yards would be in a position to scoop the pool of all the orders on the basic costs of production alone. It is also necessary to recognise that the shipbuilding industry, as such, is an assembly industry and responsible for approximately one-third of the cost of any ship which is produced; so that, comparatively speaking, it has only a small price margin in which to manoeuvre.
Yesterday the hon. Member for Southwark (Mr. Gunter) spoke at some length, and quite rightly, about labour relations and the atmosphere inside industry. Although I have said that this is an industry which is more effective than most people suspect, I believe that there is yet much to be done in the way of improving labour relations; and if the recent Bill introduced by the Government can help, so much the better. What is needed is for management and unions to strike a bargain, the one to give security and the other to exchange flexibility. This is a politician's phrase and remains to be worked out on the factory floor and in the shipyards. But it is good for politicians to say these things in the hope that labour, management and unions will follow that idea.
Today we may be in no doubt at all that because of world demand for ships; because of the surplus tonnage which exists and because of the world shipbuilding capacity there is and there is likely to be into the foreseeable future an over supply, so that we are in a situation of grave danger. To put it in most measured terms, we face the possibility that whether British shipyards are economic or not there is a danger that half of them will need to be closed. That is not because of inefficiency but because of the world situation. I say this with care and deliberation, because I do not want to say or to do anything to harm the chances of British industry getting orders. But one must make clear to the Government that unless some action is taken there is the danger that half the British yards will face the need to close down within the next twelve months.
I come now to the recommendations which I wish to make to the Government. The first is a negative recommendation. I do not believe that we should delay decisions on policy pending any inter- 1228 national settlement or further discussion. I do not believe that we can afford to wait. I consider that the country is looking for crisp and decisive government. Unless it gets that it will be dissatisfied, and rightly so. To wait on an international discussion might be like waiting for the flood and it may be that we should be engulfed by the problems that would descend upon us.
Secondly I recommend that there should be a speeding up of the naval shipbuilding programme. I think particularly in terms of the need to place orders for depot ships and for fleet auxiliaries. The programme should be expanded and accelerated. I will give a few simple figures. The placing of an order for one frigate equals work for 300 or 400 men for three-and-a-quarter years directly. Indirectly, for every man employed in the shipyards there are three working outside on sub-contract and supply work.
If we could provide in the building of one frigate jobs for 300 or 400 men for three-and-a-quarter years plus the ratio of three men working outside for each one in the yards, in terms of an auxiliary service replacement programme, this would involve the provision of jobs for 4,000 or 5,000 men in the same ratio for men on sub-contract work for every man working in the yard. If the Government were in a position to place orders for three frigates and nine or ten auxiliaries, that would provide direct employment for a very considerable number of people which could be paid for by a 1 per cent. switch in defence expenditure.
My next point is on scrapping. At present 2.4 million tons of British shipping is more than twenty years' old. If we regard the more economic life of a ship as about twenty years, what is wrong with trying to find some fiscal incentive to scrapping this tonnage, not selling it abroad for use further to depress the rates but taking it out of service altogether? To put it another way, 2.75 million tons of dry cargo tonnage was built before or during the last war. That is a similar amount of tonnage which also could be taken out of operation. If that were to happen it would mean that the Government would have to find some way of bridging the gap between trading and scrap values because 1229 there would be no advantage at all in this tonnage being "scrapped"—I put the words in inverted commas—if it is to be sold abroad further to depress freight rates. It must be scrapped and taken out of operation altogether.
My next point is about those new young nations which, in the face of economic reason, wish to have their own merchant fleets. This is a disadvantage to British shipbuilding, but it could put this country on the inside track of getting orders for the tonnage which those now young nations wish to have. They want merchant navies because that is a status symbol of independence. If they wish to have them, let us provide them with the ships. We could do it in one of two ways, either by merchant banks coming in and being more positive in financing these operations, or in terms of what I have called "tied aid ".
I welcomed the remarks of the Chancellor of the Exchequer yesterday when he said that he would make available £10 million for what I loosely call "tied aid". What is the point of providing loans if those loans are to be used to buy German, American or other products? I understand the political difficulties, but let us if possible provide loans conditional on nations taking up the slack in our economy. To coin a phrase, this could be exporting our unemployment. If it provided what other nations want and provided employment for us, if it ran counter to G.A.T.T., I am afraid that G.A.T.T. must go. This is much more important than hocus-pocus international agreements.
What I found disappointing in the speech of the Chancellor was that there was no constructive suggestion about how this would help British shipbuilding. I have one further point to make—and I hope to make time for the hon. Member for Sunderland, North (Mr. Willey) to have a few words.
I will admit that in the past I have dragged my feet on the question of a nuclear merchant ship; I have wanted to wait until we had a commercial venture. Now I want to get my feet wet. It is time that we learned lessons on how to operate a nuclear merchant ship. The Atomic Energy Authority has spent £500 million on the provision of nuclear power stations. For one-tenth of that sum we could make some progress on 1230 getting a nuclear merchant ship. Why not? Can the Government tell us? There are one or two alternatives, and they are so close in terms of the space needed in a ship that there is no reason at all why we should not now start placing an order for this ship to be constructed.
British shipbuilding is vital to Britain's survival, both economically and militarily. No Government can afford idly to stand by while this industry declines. Those who work in the yard, and those who stand at the employment exchanges, demand thought from the Government, and they demand action, as well.
§ 10.22 p.m.
Mr. Frederick Wiley (Sunderland, North)
I shall be extremely brief, because the Parliamentary Secretary has been kind enough to indicate the amount of time which he would like to reply to the debate.
I wholeheartedly support almost everything which was said by the hon. Member for Sunderland, South (Mr. P. Williams), and I congratulate him on taking this opportunity to raise what are for us and for the country very grave issues. These two industries are vital to Britain, as the Parliamentary Secretary of all people realises. I recognise that the shipping position is extremely difficult; it depends very largely on international action. But, like the hon. Member for Sunderland, South, I feel that we cannot delay the action. We should like to see evidence of some dynamic action, and I support what he said about the new nations. I think that we should earnestly try to reach agreement with them about shipping. We have been far too sectional and limited in our approach towards these countries. We ought to be willing to make concessions and to establish mutual responsibility for trade between our countries.
There are many things which ought to be considered about shipbuilding. My hon. Friend the Member for West Lothian (Mr. Dalyell) would have spoken about school ships. I think that we ought to consider every possible way in which we might help the shipbuilding industry. The hon. Member for Sunderland, South referred to nuclear propulsion, and I should like to add something to what he 1231 said. I think that we are losing heavily in the race for nuclear propelled vessels.
I have probably spoken for too long already, but, in conclusion, I should like to see some sense of a building programme—and I accept what the hon. Gentleman said. I would not stigmatise the British shipping industry. We have very good shipping. I do not think that we should emphasise the volume of shipping over 20 years of age, for our fleet is a very good fleet. But in the present situation we need, above everything else, a building programme. When we talk about subsidies by other countries, this is in part an expression of the fact that other countries have established for themselves building programmes, and I hope that the Parliamentary Secretary will in particular deal with this problem of trying to get a building programme which might be a forward programme for four or five years.
§ 10.23 p.m.
The Parliamentary Secretary to the Ministry of Transport (Vice-Admiral John Hughes Hallett)
My hon. Friend the Member for Sunderland, South (Mr. P. Williams) has done well to raise this matter before the House adjourns for the Recess, and I have no quarrel at all to find with the spirit in which the hon. Member for Sunderland, North (Mr. Willey) echoed some of his remarks. The truth is that British shipbuilders today are facing a crisis graver than anything since the 1930's. There are thousands of men who have devoted their lives to the industry and who face a very anxious Christmas, with dark prospects for 1963. Since shipbuilding is essentially an assembly industry, of course the effect of bad times tends to spread beyond the shipyards, and that is why we are so deeply concerned at the present position.
My hon. Friend rightly devoted part of his speech to the difficulties through which shipping is passing. Unfortunately, the slump in shipping is mainly caused by a world-wide surplus of ships. Profit margins of most shipowners today are below the level needed to cover depreciation, and that is why so many of them are not replacing old tonnage at the present moment. But, as the House knows, the world's shipowners are urgently trying to reach an international 1232 agreement for the stabilisation of freight rates.
My hon. Friend suggested that the Government should encourage the scrapping of old ships. We have considered this. But we doubt whether a subsidised scrapping scheme—I am not referring to a scrap-build scheme, but to a scrapping scheme—would be beneficial if it was confined to this country. On the other hand, an international scheme, in which several maritime nations took part, might be a different matter. We are quite ready to explore this possibility, but the first step must be for the shipowners to reach agreement among themselves for some form of laying up scheme.
My hon. Friend suggested a number of other ways in which the Government might help our shipyards, but before I come to them I should like to examine the present state of the industry and I want to be perfectly frank. There are two problems—a long-term and a short-term one. In the long term, unlike my hon. Friend, we think that some reduction in the present capacity is inevitable. By how much is a matter of opinion.
§ Vice-Admiral Hughes Hallett
In Britain. By how much is a matter of opinion. I should not like to express an opinion on that. We are often urged to collaborate with the industry in producing what is called a planned scheme for rationalisation. I ask hon. Members to consider the difficulties. We have no power to force a shipyard to close if it wishes to stay open. Neither have we any power to compel a shipyard to stay in business if it wishes to close. Even if we had such powers, they would be extremely difficult to apply.
Most unfortunately the outlook for the industry in the short term is more critical. When I replied to the debate on 15th February of this year I warned the House to expect some further decline. I said this:… if we assume that orders can be got in 1962 and 1963 at the same rate as in 1961, then we estimate that the total tonnage under construction will fall to perhaps less than 1 million tons in two years time. That, it is true, represents only 60 per cent. of present capacity …"—[OFFICIAL REPORT, 15th February, 1962; Vol. 653, c. 1644]1233 At the time it rather looked as if the orders were going to continue at the 1961 level. In the event there has been a sharp falling off, and orders so far booked this year are running at approximately 200,000 tons below the 1961 figures. If there is no recovery during the next year or year and a half, our shipyards will be down to less than one-half of their present capacity before 1964 is out.
So far as we can tell, British orders are no longer going abroad to any great extent. We know of a total of 35,000 tons of genuine British orders placed abroad this year, compared with a total of about 125,000 tons of foreign orders secured by the United Kingdom. This is prima facie evidence that our shipyards are once again competitive. Certainly my right hon. Friend and I have been impressed by the determined way in which they are now fighting for orders.
I want to say here a word of caution, because in their desire to keep their men at work many yards are accepting contracts at a loss. The prices being tendered have ceased to give a reliable indication of the true cost. They are rather a measure now of the depth of the purse of many of the shipyards concerned. We understand, for example, that the decision to close the well-known yard of Simons-Lobnitz was not precipitated by lack of work but rather by the scale of the losses that had to be accepted in order to obtain what work there was.
The distress of those who face redundancy is understandable. Yet before they blame their employers or the Government I hope they will search their own conscience. Can the men and their unions honestly claim to have done their utmost to work new machines to best advantage, or to secure the greatest efficiency and flexibility of labour? That is the crucial question. Whatever the immediate future may hold, whatever artificial—and I stress "artificial" steps might be taken to help the industry through its present problems, its future will never be secure unless the productivity in British yards equals that of the best foreign yards.
Meanwhile, the urgent problem is how to tide the industry over the next two years, in the hope that by then the outlook for shipping will have brightened 1234 and have led to a revival of normal replacement orders.
My hon. Friend had a number of suggestions. The Government are naturally examining how far it would be desirable to advance the naval programme. I can add little to the reply of my hon. Friend the Civil Lord to a Question put to him on 5th December. In his reply he pointed out the fact that there was not a great deal of scope for acceleration. None the less, the contribution which the naval orders make to the industry is a very real one. We accept that and the same is true of other types of Government contracts. The decision of my right hon. Friend the Secretary of State for Scotland, which was announced yesterday, to order three new vehicle ferries from Messrs. Hall Russell of Aberdeen will provide work for at least a year for 1,000 men.
Turing to the question of tied aid, my hon. Friend mentioned what my right hon. Friend the Chancellor of the Exchequer said yesterday about the use of aid to developing countries in a way which will at the same time help our own industries. Certainly, where appropriate, this can apply to ships. Indeed, about £1½ million of our recent aid to Pakistan is to be spent on ships. It must be spent here, although the ships can be new or second-hand. But we must be cautious. The last thing we should wish to do is to tempt developing countries to order ships they would not otherwise build or to provide shipping services which can be provided more cheaply by existing British lines.
Then there is the possibility of a programme of nuclear ships. I yield to none in my eagerness to move forward in this field. Yet even on the most optimistic forecast, I cannot see nuclear ships making much impact on the shipbuilding position as a whole for several years. Parliament has been patient and trusting in this matter and I can assure the House that we are making good progress and expect to carry the matter much further next year. We are confident that we are now working on the right technical lines.
We are left with the conclusion that only by stimulating shipowners to replace old tonnage at once could massive support be brought to the shipyards as a whole. Of course, this is why both 1235 sides of the shipbuilding industry have pressed us to start a scrap-build scheme. There are a number of ways in which such schemes can be operated. Since some of them would require legislation, I cannot describe them now. But whether they are done by Statute or by administrative action, they have one feature in common; ship owners are paid a subsidy if they order new tonnage in exchange for scrapping.
Naturally the Government are examining this matter with care. It would be wrong for us not to do so. My right hon. Friend the Minister of Transport is also discussing it with the ship owners, as he undertook to do, because in the past they have been rather opposed to scrap-build. However, in saying all this I do not want the House to think that we accept the arguments or are in favour of a scheme. Apart from the cost, there is the risk of producing an artificial, short-lived boom which could do great harm to the industry. For example, the 1939 scheme resulted in orders for three-quarters of a million tons being placed within a few weeks of its announcement. I do not think that anything on that scale would be healthy today. However, I repeat that we are examining what might be done as a matter of urgency and we shall, of course, keep Parliament informed.
Let me end where I began. The vast bulk of everything which Britain buys or sells has to come by sea. This is why shipping is, and will remain, vital to our economy and our independence. British shipping in turn relies on a healthy shipbuilding industry and no body of men is more conscious of this than the British ship owners themselves.
Between them these two industries represent an immense investment, not only in terms of money but also in terms of expert management and skilled 1236 labour. I can assure the House that the Government will not stand idly by while this investment runs to ruin.
§ 10.35 p.m.
§ Mr. Tam Dalyell (West Lothian)
The hon. Member for Sunderland, South (Mr. P. Williams) had a number of good ideas but, frankly, it is pitiable that he should have come to the House of Commons to ask for frigates to be built in order to give employment. Just as people in the 1930s asked for battleships to be built to create employment, so the hon. Member tonight made the same sort of proposition. Instead of asking for frigates, I beg the hon. Member to think in terms of ships for social purposes; perhaps school ships.
If the hon. Member changed his plea and appealed for 10,000 to 15,000 ton school ships, I am sure that he would get a great deal of support, for he would be carrying out an idea which was pioneered by the British India Steam Navigation Company in that firm's school ships "Dunera" and "Devonia". There is considerable scope for this idea; the carrying of, perhaps, 800 pupils for, say, 14 days or longer to Bergen, Oslo, Copenhagen and Amsterdam, or South to Corunna, Lisbon and Gibraltar. Alternatively, they could be taken by train to some of the places they have only read about in their text books; Marseilles or Venice and then to Itea for Delphi, Iraklion for Knossos, or even Athens herself. This sort of thing would be of such advantage—
§ The Question having been proposed after Ten o'clock and the debate having continued for half an hour, Mr. DEPUTY-SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
§ Adjourned at twenty-four minutes to Eleven o'clock.