Clause 4.—(LOANS.) (Hansard, 11 May 1967)

§ Mr. Speaker
The House will know that I have had posted up a list of the Amendments which I have selected for consideration. I suggest that with Amendment No. 1, we should also discuss No. 2, in page 3, line 14, at end insert: (iii) the construction and layout of a new shipbuilding yard or the construction of new building docks in an existing shipyard.

§ The Parliamentary Secretary to the Ministry of Technology (Mr. Edmund Dell)
I beg to move Amendment No. 1, in page 3, line 10, at the end to insert 'structures, works'.
Hon. Members who were on the Committee will remember that, in Clause 4 (2,a) and (b), we defined the circumstances in which loans might be given in the case of grouping schemes and non-groups. In considering the debates on these matters in Committee and observing Amendment No. 2 in the names of Members of the Opposition, we considered that it would be right to extend the circumstances in which loans might be made in the case of non-groups. We would achieve this by Amendment No. 1.
I should make it clear, however, that we have in mind merely minor structures and works. We are thinking, for example, of the provision of a new crane, which might involve laying a new track, which would be a structure or a work, and we are also thinking that structural work may be necessary, for example, to modernise an existing quay or fitting-out yard.
If the Amendment is carried, the object of Amendment No. 2 would be achieved in law and it would be possible for loans to be made in the circumstances described. I should make it clear that it is not likely that the power would be used in that way. I do not want to comment any further on that without hearing the Opposition's argument for Amendment No. 2, but I suggest that, as their 1786 case is met in law, they might not want to press the Government on their intentions. If they do, it might be better if they move the Amendment.

§ Mr. Simon Wingfield Digby (Dorset, West)
In the circumstances, I beg to move Amendment No. 2, in page 3, line 14——

§ Mr. Speaker
Order. The House can take only one Amendment at once. The hon. Gentleman may, however, speak about his Amendment.

§ Mr. Wingfield Digby
I do not think that it is necessary, in any case, for me to move my Amendment, Mr. Speaker. I am grateful for what the Parliamentary Secretary has said. It is clear that it went some towards meeting our point, although I am not sure that he has the same circumstances in mind.
We have in mind—I think that this is the feeling in the industry, too—that, whereas, in Japan, about 60 per cent. of the tonnage is built in building dry docks, that is not the case here. Indeed, they hardly exist. This is because our shipyards were laid out in the past. The most modern of all, the Furness Yard, was constructed only at the end of the First World War, and hon. Members may have noticed that its financial results have not been particularly good. It might be necessary for us to move forward to some of the new conceptions, and it would be a pity if the loan money were not available for that.
Hon. Members may have noticed that a recent report of Charles Clore, Seers Holdings, said that no less than £6½ million was provided in the accounts for losses in the Furness Yard, of which no less than £3½ million was for contracts which had not been begun on 31st December last. That is the measure of the problem.
We must note that our foreign competitors have not only laid out completely new yards—partly, it is true, because of war bombing—but also that they have gone in for building docks, which are very useful for the construction of the giant tankers and very large ore carriers to which we are becoming accustomed.
Although it may be difficult, in any of the mergers envisaged under the Bill, for such total reconstruction to take place, in 1787 the case of a merger of two or three yards, it might be necessary to have fairly complete reconstruction of one or two and to include this new form of building docks, which is in many ways superior to a slipway.
I hope, therefore, that the Parliamentary Secretary can go a little further and tell us that this would be covered by his Amendment, as we thought, at first sight, that it was.

§ Dame Irene Ward (Tynemouth)
I support my hon. Friend the Member for Dorset, West (Mr. Wingfield Digby). The Parliamentary Secretary did not give a wide enough definition. His example of what would be included under his Amendment was restricted. I wonder whether he could respond to my hon. Friend's case, to take the discussion into a much wider aspect of the problem. I hope that the Government's Amendment is not restricted to the extent that it appears to be. The hon. Gentleman's explanation covered only a small part of what we have in mind. I hope that he will go much further, as his point was not particularly expensive.

§ Mr. Stanley R. McMaster (Belfast, East)
I support my hon. Friend the Member for Dorset, West (Mr. Wingfield Digby). I hope that the Minister will deal with this point, which was covered at length in the Geddes Report.
It was admitted in Standing Committee that the building of ships here is largely out of date, compared with that of our principal competitors in Sweden and Japan. Slipway building is not as efficient as the building in new docks. Many of our yards, including Harland and Wolff, in my constituency, want such a dock. There are no such docks at Harland and Wolff and the managing director and the chairman have both said recently the addition of such a building dock would greatly increase the yard's competitiveness. As this is the biggest yard in the country, some attention should be paid to the view expressed by Dr. Denis Rebbeck and Mr. J. Mallabar.
I therefore hope that the Minister will say that "structures, works" is a wide enough phrase to cover this point.

§ Mr. Dell
As I said, in law the words "structures, works" probably cover 1788 what hon. Gentlemen opposite have in mind. I thought it right to make it clear that it was not at present the intention of the Government to spend on such projects as hon. Gentlemen opposite have in mind the large sums of money which would be involved. If this were done, a major part of the loan provision under the Clause might go in such projects.
The building of a big building dock could cost £15 million. It might be less, but it would be a substantial sum and we think it inadvisable and inconsistent with the recommendations of the Geddes Report that money should be spent in this way. The House will remember that paragraph 558 of that Report recommended that loans for all capital projects for ungrouped yards should not exceed £2 million. I specifically mention "ungrouped yards" because the effect of the Opposition Amendment would merely be to extend the possibility of making loans in respect of ungrouped yards. But the provision is already drafted in such wide terms that, in law, their intention is covered.
However, the main object in providing these loans, in the view of the Government, in pursuance of the Geddes recommendations, is to assist in the restructuring of the industry. It is for this purpose that we expect the money to be used, rather than for the building of large building docks of the type recommended in the Opposition Amendment.
I also draw attention to the fact that the Geddes Committee considered the sort of propositions hon. Gentlemen opposite have in mind. It considered whether it would be advisable to build such docks and it was very cautious indeed in its response to this idea. The Committee looked at the likely profitability of the sort of ships that would be built in such docks and at the likely market for those ships and it came to the conclusion that the market was not likely to justify the expenditure.

§ Mr. Wingfield Digby
Is the hon. Gentleman aware that even since Geddes looked into this matter there has been a tremendous development in the building of large tankers? Is he aware that even during the last 18 months, since the Committee examined the matter, the position has considerably altered?

§ Mr. Dell
I agree that there have been many changes, of which that is one. Nevertheless, the question whether this part of the market is likely to be profitable—and produce a return on the sort of capital that would be likely to be expended on such a dock of this kind—is open. Geddes did not say that this should not be done, but that the matter would have to be looked at carefully before it was done and that a real assessment of the position would have to be made first of all.
One can build quite a small, sophisticated ship and its value and likely profit can be greater than for one of these large tankers. There is here a question of commercial judgment and our view is that a judgment cannot be made yet about whether or not this would be the right course. Even if one disagrees with Geddes on this matter, the fact remains that under the Clause we have £32½ million of loan money, only part of which will go to non-groups. The Opposition is proposing what might be very large expenditures indeed, amounting to such a proportion of that £32½ million that the real purpose of the loan money—the restructuring of the industry—would not be achieved.

§ Mr. Wingfield Digby
Does that mean that the Government and the Shipbuilding Industry Board will try to deflect firms which want to do this with the money they raise themselves?

§ Mr. Dell
By no means. If a firm makes its own commercial judgment as to the profitability of this sort of expenditure, that is up to that firm. We are envisaging circumstances in which it would be advisable for the loan money from the Government to be used under Clause 4, and I have been explaining the intentions of the Government.
If one considers what the law will be if the Government Amendment is accepted, then in all probability the intention of hon. Gentlemen opposite will be covered. In the light of this explanation, I hope that hon. Gentlemen opposite will not press their Amendment.

§ Mr. McMaster
Before the hon. Gentleman sits down, would he make the position absolutely clear? He said that it was the intention of the Government that, 1790 because of the amount of money available, it would not be adequate for such a building dock. Is it the intention of the Government to issue a direction to the Board that it should not use this money for this purpose? After all, building docks are extremely useful and——

§ Mr. Speaker
Order. An intervention after the Minister has sat down must be an intervention and not a second speech.

§ Mr. McMaster
Would the Parliamentary Secretary make it clear that the Government do not intend to issue such an instruction to the Board?

§ Mr. Dell
It would not be necessary in this respect for such a direction to be issued because, under subsection (5), any loan requires the approval of the Minister. The Minister would, therefore, have the final say in respect of such a proposal made by the Board and, in this case, I think that the Minister would have to be very powerfully persuaded.

§ Mr. Dell
I beg to move Amendment No. 3, in page 3, line 22, to leave out from 'that' to 'and' in line 25 and to insert: 'the person carrying on that undertaking—

(i) is putting into effect a reorganisation of the resources used by him for the purpose of carrying on that undertaking; or

(ii) has since the date of the commencement of this Act put into effect such a reorganisation as aforesaid (including a reorganisation begun but not completed before that date)'.

§ Mr. Speaker
I think that it would be convenient to take Amendments Nos. 8 and 9, at the same time.

§ Mr. Dell
That would be convenient, Mr. Speaker.
In our usual, helpful way, these three Amendments show that the Government have taken account of the sense of the discussion in Committee, when concern was expressed as to the width of the circumstances under which loans under Clause 4, or guarantees under Clause 7, might be given, in respect of the date on which a reorganisation scheme might have been commenced.
Some hon. Members were concerned that schemes of reorganisation might be ruled out if the effective date was the date of the passage of the Measure. 1791 We explained in Committee that this was not likely to happen, that reorganisation was a continuing business and that continuing reorganisation schemes would benefit, even if they had begun before the coming into operation of the Bill. To place the matter beyond doubt, and so that hon. Members and noble Lords in another place might be persuaded of this fact, we have tabled these Amendments, the effective words in Amendment No. 3 being: … (including a reorganisation begun but not completed before that date)". The same arguments apply in respect of Amendments Nos. 8 and 9.

§ Mr. David Price (Eastleigh)
We are grateful to the Parliamentary Secretary for tabling this Amendment and I hope that the House will accept it. I realise the difficulties every Government have with this sort of Bill in drawing the line for a starting point—there are always hard luck cases going further back in time. The Government Amendment goes some way to meeting some of the anxieties of the industry without, I hope—seeing on the Treasury Bench the Chief Secretary—giving an open-ended commitment for the taxpayer as regards the past.