SHIPBUILDING (LOANS TO SHIPOWNERS) (Hansard, 29 May 1963)

§ 82. Dame IRENE WARD
To ask the Minister of Transport whether he will now make a statement on proposals to help shipping and shipbuilding.

§ 84. Mr. P. WILLIAMS
To ask the Minister of Transport whether, in view of the current threat to employment in the shipbuilding industry, he will now make a statement about the Government's proposals on this matter.

§ The Minister of Transport (Mr. Ernest Marples)
With permission, I should like to answer Questions Nos. 82 and 84.
The Government have been regarding the extent of unemployment in the shipbuilding industry with increasing concern, particularly since it is mainly concentrated in development districts. The world's shipbuilding capacity is now far too large for normal demand. There will have to be some contraction, from which our shipbuilders cannot expect to escape altogether.
But the immediate situation is worse, because in recent years ships have been built faster than world seaborne trade has grown. So our shipbuilders have been faced with a trough in demand which has brought their order books very low. Although recovery must come, there are few signs of it yet.
Therefore, the Government have been anxiously considering whether there are any special steps which they might take to help. Shipbuilders have been hit by the low rate of ordering by British ship-owners, and this feature has been particularly in our minds. We considered a scrap-and-build scheme. But no matter how it was administered, this would really be a subsidy for the shipbuilding industry, and subsidy is a course to avoid if at all possible.
1327 Moreover, the British mechant fleet is one of the most modern in the world; and British ships are already being scrapped at a satisfactory rate. For these and other reasons, we think that a scrap-and-build scheme would not be appropriate.
The Government have decided, instead, to make funds available for a strictly limited period at Government lending rates for financing new orders for British shipyards.
The loans will be made to shipowners, and the terms of the loans will be decided on the advice of an Advisory Committee which I am setting up under the chairmanship of Lord Piercy. Lord Piercy is the Chairman of the Ship Mortgage Finance Company, and he has agreed that the experienced staff of this company may be put at the disposal of the Committee in the handling and investigation of applications.
The Government are prepared to make £30 million available for financing new orders. We shall consider raising this limit if experience shows that it would be right to do so. But the scheme will not, in any case, continue beyond 31st May, 1964. We contemplate that individual loans might be for periods of up to a maximum of 10 years. The lending rate based on Government credit for loans of from five to 10 years repayable by instalments is at present 5 per cent.
The Government will be prepared to make loans available in suitable cases for up to 80 per cent. of the cost of a ship. But the terms of each loan will be decided on merits, including, of course, the creditworthiness of the applicant. The scheme will apply to orders from British shipowners. Special facilities are already available for export credits.
I hope that this scheme will make a real contribution to the problems of British shipyards at this difficult time.

§ Dame Irene Ward
While thanking my right hon. Friend very much for having thought out these practical steps which. I think, he needs no assurance will be very welcome indeed, may I ask my right hon. Friend whether this new scheme has been thought out in consultation with British shipbuilders and owners? In view of what he said about the increase of merchant fleets throughout the world and the general problem of 1328 shipping, has he anything to say about the problems which will arise from this, in view of the fact that it is not only shipbuilding which is the problem but the operation of the merchant fleet throughout the world to full capacity and in really competitive terms with other countries which subsidise both their shipbuilding and shipping interests?

§ Mr. Marples
I am grateful for my hon. Friend's support of this scheme.
As for the scheme being worked out in consultation with British shipbuilders and owners, the answer is "No", because we felt that the House should know the scheme first. We shall, of course, be consulting them straight away, but from negotiations which go on normally between my Department and the shipowners and shipbuilders we have a fairly good idea of what they have in mind.
As far as the general position is concerned, this is a worldwide problem, because the capacity of the world's shipbuilding far exceeds the rate of demand for world shipping, and it is aggravated by the subsidies given by certain countries. Of the leading shipbuilding countries, France, Italy and the United States are the principal ones which give shipbuilding subsidies. The first two will be eliminated in due course under the Common Market negotiations.

§ Mr. P. Williams
Will my right hon. Friend accept my congratulations on getting back from the opening of the motorway in time to make this statement? Will he help the House to put the whole matter in the right perspective? When we compare British shipbuilding costs with those of foreign nations we must take into account the fact that foreign nations subsidise their building to a very large extent, and, therefore, there is a great deal of uninformed and unfortunate criticism in this country of the British shipbuilding industry?
Will he also accept that most of us, on this side, at any rate, would also support him in rejecting subsidy? Can he tell the House what sorts of types of ships he expects to be disposed of and replaced in the work of Lord Piercy's Committee? Can he tell us whether he envisages British shipowners getting the same credit facilities as are given to foreign owners at present? Finally, if the scheme envisages legislation, how soon shall we get it?

§ Mr. Marples
In answer to my hon. Friend's last question, legislation will be needed, but I am advised that the scheme can be started now. There are precedents for that, so the scheme will start straight away. It will apply to ships of 100 tons and over, but will exclude fishing vessels because they are covered by the White Fish Authority and the Herring Industry Board, which administers schemes for fishing.
As far as subsidies are concerned, I think that our principal competitors, such as Japan and Sweden, do not have subsidies, but it is clear that they have been quoting prices which are under actual costs and are unrealistic. Therefore, to that extent, of course, they will be making losses. Japan is extremely concerned at the present trend in prices.

§ Mr. Willey
Is the right hon. Gentleman aware that, as far as it goes, this scheme is welcome? We welcome any step which will improve the position of British shipowners putting orders into British yards. But does he realise that this does not seem to match present requirements? British shipyards are facing a few—if we take an optimistic view—very crucial years, and if they are to get through those years much more than this will have to be done? We want to encourage new types of ships and reorganisation of construction.
I noticed that the right hon. Gentleman referred to contraction, but he said nothing, about alternative work. We do not want contraction at the further expense of shipyard employees. I think that he has to take a much wider view of the industry and much more constructive action if the industry is to get through the next immediate and very difficult years.

§ Mr. Marples
There was one supplementary question which my hon. Friend the Member for Sunderland, South (Mr. P. Williams) asked, which I did not answer, about credit facilities. I think that this will mean that the British owners will have credit facilities better than or at least as good as the facilities given to foreigners who wish to buy in this country.
In reply to the first part of the supplementary question by the hon. Member for Sunderland, North (Mr. Willey), I think that it is much too early to say that this scheme will not provide the 1330 relief which is wanted. It is difficult to estimate quite what relief it will give. All I can say is that British shipbuilders have continually complained that British shipowners do not have the necessary credit terms to encourage or induce them to order ships. This will provide that inducement, and if it does bring orders to our shipbuilding yards it will be welcomed in some of the development districts.

§ Mr. Shinwell
Was the right hon. Gentleman serious when, in reply to one of his hon. Friends on the other side of the House, he said that so far he has had no consultations with either shipbuilders or shipowners on the proposed scheme because he wanted to make an announcement to the House? Was it not possible, before making the announcement, to have some preliminary discussions with those primarily concerned? How does he know what type of ships are required? How does he know what credit facilities are required?
Is the right hon. Gentleman not aware, on the basis of his own statement, that the supply of ships is far in excess of the demand and that the only way of dealing with this problem, apart from extended credit facilities, is that followed in other shipbuilding countries, for example, in Japan'? Recently, in connection with the building of a tanker for a large firm in this country, it was said that nothing but a scrap and build policy would be of any avail.
Is he also aware that the Court Line recently sold seven ships to a foreign country instead of scrapping those ships, and that they are to he in competition with this country? When will he face the inescapable fact that unless we dispose of a great many of our obsolete ships, some of them 15 and 20 years old, and of a speed which makes them no longer of competitive value against the ships of many maritime nations, we shall not solve this problem?

§ Mr. Marples
Scrap and build is really a direct subsidy. The shipbuilders did not want that. They wanted owners to be given an inducement to order more. We have now given that. The credit we are now giving covers all types of ships. It is not just one type, and it does not depend on whether it is an advanced type or whether it is a dry cargo vessel or a tanker.
1331 The credit is given on the best terms the Government can possibly give to any institution in this country, at the lowest rates of interest at which anybody can borrow. Therefore, it ought to be a great inducement to shipowners to order British ships. While I know that this is a world problem, this is specifically intended to help our shipbuilders in development districts. I think that it will do so.

§ Mr. P. Browne
Is my right hon. Friend aware that the biggest employer in one part of my constituency—the 1332 Appledore shipyard—closed down overnight recently, and that we have had difficulty in getting it going again? Does he further agree that one of the reasons why these smaller firms are hanging on by their eyebrows is the contraction in the coastal fleet? Will he not pay more attention to this important part of our transport system?

§ Mr. Marples
I cannot agree with my hon. Friend. What has happened is that, in view of the scarcity of orders in the world, the bigger yards are now going in for the smaller ships, which they did not do before.