SHIPBUILDING INDUSTRY BILL

HC Deb 23 January 1969 vol 776 cc675-774

Order for Second Reading read.

4.1 p.m.

The Minister of Technology (Mr. Anthony Wedgwood Benn)

I beg to move, That the Bill be now read a Second time.

This is a short Bill—only one page—but one of great importance to our shipbuilding industry and to a lesser extent to the shipping industry and the industries which supply shipyards with marine equipment and materials. Its effect, broadly speaking, is to raise from £200 million to £400 million the statutory ceiling on the guarantees I can give to facilitate the financing of orders for ships placed by British owners with British shipbuilders.

It was Section 7 of the Shipbuilding Industry Act, 1967 which enabled me to give these guarantees. As I explained to the House at the time, the Government had two objectives in introducing that provision which went somewhat beyond the Geddes Report's recommendations on which the rest of the Act was based.

In the first place, its aim was to prevent British shipowners being forced to place their orders for ships abroad solely to obtain better credit terms. At that time British owners were not, of course, eligible for British export credit facilities. If they were to get similar terms they could do so only by ordering from a yard in another country where similar credit facilities were available.

Moreover, our shipbuilding industry enjoys no natural protection, and the nature of shipping operations makes it virtually impracticable, while the intense international competition in shipping makes it undesirable, to impose a tariff on the purchase of ships abroad.

So, in the absence of a home credit scheme matching those to which British shipowners had access when ordering abroad, the British shipbuilder was fighting an almost inevitably losing battle for the custom of the British owner who had no commercial alternative in many cases but to buy abroad.

The way in which Section 7 of the 1967 Act operated was that it enabled the Minister to guarantee a loan towards the cost of a ship ordered by a British owner from a British yard. The clearing banks, Scottish as well as those in England and Wales, agreed to provide money under such a guarantee on similar terms to those applied under E.C.G.D. financial guarantees. The shipowner pays fees to cover the legal and administrative costs of the scheme and no cost falls on the Exchequer unless there is a default by the shipowner and the security proves insufficient to cover the loan.

The determination of the security requirements in each case is, therefore, important, and on these matters I am assisted by an Advisory Committee set up by the Ship Mortgage Finance Company Limited, which acts as the Minister's agents in negotiations with the shipowner. I am very glad to be able to say that the banks have agreed to continue these arrangements should Parliament pass this Bill and that the Ship Mortgage Finance Company has also agreed to continue to act as the Minister's agents.

Some hon. Members may wonder why, having provided the £200 million limit in the 1967 Act, which as a whole was intended to cover the reorganisation period in the industry up to 1970, the Government now seek to double the ceiling. There is a simple answer. Guarantees, involving a liability of £86 million, have been issued and other guarantees which will bring the outstanding liability up to £200 million are either under negotiation or approved in principle or in the hands of solicitors for the necessary legal documentation. Indeed, without in any way presuming to anticipate the passing of this legislation I can tell the House—this is why the Bill is urgent—that further cases are under discussion with shipowners of the order of £87 million in total.

It may be asked—a perfectly fair question—why this demand for guarantees was not foreseen. I must admit that we did fail to forecast this development and I will try to give the reasons. There have been a number of minor factors which it was difficult to foresee at the time. The first was quite a lot of pent-up business which needed covering when the Act was passed in June, 1967. Another minor factor—I do not want to make too much of this—was the development of new types of drilling rigs for use in the North Sea which took the form of ships.

But there were two major factors. One was the continuance of the high level, indeed the: increase, of world demand for merchant tonnage. I shall give the figures. We discussed this two years ago when we were all rather anxious—indeed, the hon. Member for Eastleigh (Mr. David Price) and I were warning the industry not to expect the rise in world orders to continue. In 1966, world new orders came to 18 million tons; in 1967, to nearly 22 million; in 1968, to about 25.5 million. Even more important has been the increase in British orders particularly since devaluation. When the 1967 Act was passed we all knew that: in 1966, British shipbuilding had booked orders for only 0.38 million gross tons, 2.1 per cent. of world merchant ship orders. In 1967, the figures were 1.04 million tons and 4.7 per cent. In 1968, new orders amounted to 2.56 million gross tons, representing 10 per cent. of new world orders.

This pressure of demand has meant that our yards have been taking orders for delivery further ahead than seemed possible in the winter of 1966–67. This applied to both export and home orders. Net home orders, which amounted to just over 250,000 tons in 1966, reached nearly 1 million tans in 1967 and 1½ million in 1968. This was a substantial increase in home orders. This is not only good news for those who will build the ships. It is equally good for the balance of payments, because this is import-saving business for British industry. This without doubt justifies our decision to have the guarantee system in 1967. Although I must come in a white sheet to the House and confess that the forecast I made has proved to be a pessimistic one, it is the sort of white sheet that I am happy to wear and which many Ministers would enjoy wearing.

Earlier, I referred to there being two objectives of Section 7 whose effective operation is prolonged by the Bill. The second was to reinforce the remaining provisions of the 1967 Act which established a Shipbuilding Industry Board to assist the reorganisation of the industry with grants and loans. We not only saw it as a way to meet our Parliamentary objective, but of giving the British shipbuilder a chance of competing fairly and also helping reorganisation of the industry.

The Act required that before the Minister gave a guarantee in support of a particular order the Board should recommend this taking into account what the shipbuilder was doing about the reorganisation of the yard's resources and the contribution which the order in question would make to their fuller employment. This was to that extent a selective scheme. I said at the time, when we discussed this in Committee, that we had to recognise that this put great power into the hands of the Board and I argued that it would use them widely and sensibly. Looking back, rather less than two years later, events have proved this to be right.

On the one hand, the existence of these powers of recommendation by the Board as a sanction of last resort, as it were, has helped to encourage action on the detailed reorganisation requirements. When a shipbuilder seeks the Board's recommendation for a particular case, he is required to complete quite a lengthy questionnaire covering changes in his organisation, investment plans, expected profitability, industrial relations, consultation, and so on. This is not just a piece of bureaucracy. Nor is it intended as such. Nor is it having that effect. But it provides the Board with a regular check on the progress of reorganisation and the shipyard managements with a check list on progress and points to the things which need attention.

Since we never intended the guarantee scheme to be a featherbedding for the industry, and since we have never believed at any stage that mergers by themselves would guarantee the efficiency of this or any other industry, the fact that the guarantees have been handled selectively gives an opportunity for the Board to see how the national objectives are being met.

Mr. John Rankin (Glasgow, Govan)

Will my right hon. Friend tell us whether, when the Board gave an interest-free loan of £7.5 million to Clydebank, it followed the course that he has outlined?

Mr. Benn

I am dealing at this point with the work of the Board as a whole. I shall come to that case, which is relevant to the Bill. I am talking now only about guarantees for home orders which are being covered in this way.

Sir Ian Orr-Ewing (Hendon, North)

The Board has the responsibility to report to the right hon. Gentleman and he is responsible for reporting the findings to the Comptroller and Auditor General and for laying copies before the House. Is he able to make the information available to the House? It is difficult to get the information from the Library. I wonder whether these reports have been made.

Mr. Benn

It is always pleasant when an hon. Member intervenes to put a point which anticipates something one will say later in one's speech, because it means that one is meeting the need of the House. This is the first report of the Board and, naturally, I shall say something about it.

I come now to the powers of the Board to recommend. There has been only one case in which the Board has refused a recommendation and in that case the Board subsequently decided to make a recommendation after consultation with the shipbuilders. In consideration of the Bill, I have obviously taken account of the views of the Board that its power to withhold the recommendation for a guarantee will continue to serve a useful purpose in its continuing efforts to promote the competitiveness of the industry in world markets, which is the basic objective the Act assigns to it.

It may be appropriate against that background to refer to the progress made along the lines of the Geddes proposals. I shall here make reference to the Clyde reorganisation. The first steps required of the industry were in 1967, obviously to obtain sufficient orders and to bring about groupings. The difficulty was that if we did not have groupings we could not get orders, and if we did not have orders there was not the confidence to get groupings going.

The immediate problem of short order books was not wholly within the control of the industry and even less of the Board, although, of course, the availability of credits and, subsequently, devaluation have both proved key factors and the position now is incomparably better than when the 1967 Act was being debated. As to grouping, there are now groups within the meaning of the Act in the North-East, on the Upper Clyde and the Lower Clyde, in East Scotland and on the Wear and, although formed before the Act came into force, others on the Wear and the South Coast.

Of course, they are not all according to the Geddes Report model. One, led by Swan Hunter and based on the Tyne, is clearly beginning to measure up to the Geddes target—indeed, exceeds it in some respects—and the Upper Clyde is also larger in terms of size of labour force. Other groups vary in size down to small two-yard groups.

At Belfast, the great Harland and Wolff shipbuilding organisation has undoubtedly been given a new sense of direction by the construction of a new building dock which can produce giant tankers of up to 1 million deadweight tons—all in one piece without the necessity of having to make separate parts and weld them together later.

As to big marine engine production, there have been few obvious structural changes, largely because engine building is often carried on in works which are largely engaged on other marine and non-marine work. The main recommendation of the Geddes Report on this section was the concentration of production, and considerable progress has been made on that. Big marine turbine production for merchant ships is henceforward likely to take place in only two works, which also cover industrial and power industry turbine requirements. The bulk of current production of big slow-speed diesels is in four plants—two in the North-East, one on the Clyde and one at Belfast.

Although we must expect certain further structural changes, the emphasis at this stage of the operation will inevitably be on acceleration of the reorganisation of resources—in the words of the 1967 Act—whether in grouped or single yard enterprises. We have always recognised that size and grouping is not of itself enough, but is only a means to the kind of reorganisation, investment and yard specialisation which would make the industry competitive. Indeed, in some cases, efforts to plan reorganisation and invest in the improvement of the smaller concerns may itself lead to the realisation that it would be more economic if conducted within a larger framework.

The Board is accordingly now taking a new initiative with the industry to provide help in this field not limited to the provision of grants and loans. This is a new and very interesting development. It has formed a committee of shipbuilding finance directors who are examining accounting methods, for, as anyone who has been even remotely involved in the industry's financial problems will know, adequate costing and cost control can be vital for the survival of the industry—indeed, of most other industries.

That is one aspect of the Board's work. I turn now to marketing. The Shipbuilders and Repairers' National Association has, with the Board's support, set up a central market research unit for the industry to provide the background research and intelligence which will obviously be more important to back up the sales efforts of individual concerns. The Board has also arranged for a consultant to study the marketing problems of the industry so that he can recommend improvements in the organisation of marketing.

The Board is also considering the need for other initiatives in such areas, for example, as industrial relations, which used to be the subject of major comment in the old pre-Geddes days, and training, research and development, and it is working with the Department of Employment and Productivity and with the Shipbuilding Industry Training Board. The object in each case will be to see how far it can help forward action in the firms to apply the best practices to the special circumstances of the industry.

Of course, all this is ancillary to the Board's exercise of its main statutory powers to provide grants and loans under Sections 3 and 4. Here I come to the Board's Report and accounts for the last financial year, which will very shortly be available to the House. On the latest information available to me, the Board has promised or has made grants totalling nearly £6 million and loans totalling over £14 million and, of course, further applications are coming up for consideration. All this is relevant to the credit guarantees with which the Bill deals, since this is the background against which the Board will be making its recommendations in respect of guarantees.

Mr. Arthur Blenkinsop (South Shields)

Can my right hon. Friend explain why there has been so much delay in the presentation of the Report which, according to the Library, was laid officially in July, but, in fact, only in dummy? Why do we still not have the information?

Mr. Benn

Since this was the first Report of the Board and a precedent, the Comptroller and Auditor General became involved and it therefore had to go through this procedure. As far as the Board and my Department are concerned, there has been no undue delay, but I fully understand the anxiety of the House to see this Report, and it will be available shortly.

Sir Ian Orr-Ewing

Section 8(5) of the Act says: The Minister shall not later than the end of November in any year send the statement of accounts of the Board for the financial year last ended to the Comptroller and Auditor General who shall examine, certify and report on the statement of accounts and lay copies of it together with his report before each House of Parliament. The Report was made correctly by the Board to the Minister in July, four months after the end of the previous financial year, but there is also the case of the November Report, of which we have also heard nothing, although we are now half-way through January.

Mr. Benn

This is a stage in the operation which carries it beyond my responsibility, but I am advised that the Board made its Report within the time specified. For that reason, and the reason which I gave in answer to a question a moment ago, the House ordered that it be printed and presented together with the Report of the Comptroller and Auditor General in view of the fact that it was the first report of its kind. I say this subject to further examination, but I do not believe that any delay which may have occurred was attributable to the Board or to failure to fulfil its statutory requirements.

Mr. John H. Osborn (Sheffield, Hallam)

I hope to develop the point later, but would it not have been much more helpful if we could have had Second Reading of the Bill after publication of the Report instead of shortly before it?

Mr. Benn

I agree. It would have been more convenient, candidly, had we been able to consider them together. The plain truth was that as the guarantees were being exhausted and there was urgent need to seek Parliamentary authority, and in view of my own reluctance, which I must confess, to proceed in anticipation of statutory authority, a practice which I very much deplore, I thought it proper to bring the Bill forward at the earliest possible moment. It is unfortunate that my need to bring it forward early, coupled with the desire of the House to look in detail at the first Report of the Board, has meant that we are debating them, in a sense, without the background which the House would like to have. I am sorry that it should have been like this, because it would obviously have been better if we could have avoided it.

Before I leave the industry and its progress with reorganisation, I think I should say something about the QE2, which is by far the biggest and most important project upon which the industry is engaged. The QE2 was not financed under a Section 7 guarantee, but by a loan to Cunard which was originally to be made under the Shipbuilding Credit Act, 1964, but is now being made by the President of the Board of Trade under a special provision of the Industrial Expansion Act.

This ship was the subject of ordinary commercial contracts between the ship-owner, shipbuilder and suppliers. The Government did not intervene in or control in any way its design, construction or equipment any more than they would in the case of any other ship, whether or not the contracts were effected under Section 7. It is true that the National Physical Laboratory provided tank test facilities and similar services and that the Board of Trade applied the usual regulations, but that was the limit of direct involvement in the ship.

The House would not, however, want me, for those legalistic reasons, to regard the ship as being just another ship, because it is not just another ship. It is a very fine ship, as the Government technical experts who have had the opportunity of seeing it will confirm.

I have obviously discussed, because I am sure that the House would want me to do this, and I would myself, the recent misfortunes with both the Chairman of Cunard and Upper Clyde Shipbuilders Limited. I have also consulted Sir William Swallow, who has been looking into the possible effects of this on the shipbuilding industry. Having a distinguished industrialist able to look at this complicated problem from the point of view of independence has been of great value to me.

The present position on both the completion of the accommodation and the engine failures has been widely reported in the Press and I do not have anything to add to what has been reported. Certainly, no one would wish to avoid criticism by saying, as could be said, that it is quite common, here or abroad, for a ship to be late, for its accommodation not to be completed or anything of that kind. Similarly, it would be wrong to say that ships with even less complex turbines than the QE2 have run into trouble with them. There obviously have been failures in this case. Having said that, however, I do not believe that a public inquiry or an attempt to pin the responsibility or blame on a particular individual would be of value at this time. I was asked a Question about this in the House and I gave that as my view.

Some of the comment has, candidly, been rather extreme. This is not a national disaster. It is a very damaging blow to our national pride, but it is only a temporary one. The indications are that in due course this ship will be a very great source of pride to those who built it and to the country as a whole. I for my part have little doubt that the lessons which can be learned from this have been brought home.

The main aim now is to get the trouble right as quickly as possible so that the ship can go into service and start earning money for its owners and for the country. I think that a post mortem would hinder this rather than help.

I am much encouraged in the talks I have had to find that this general approach commands wide assent among those actually engaged in the very difficult job, on the one hand, of competing the technical work and, on the other, of trying to get the ship into service as quickly as possible.

Mr. E. Shinwell (Easington)

I put a Question on the Order Paper to which my right hon. Friend has replied by Written Answer. My purpose in asking for an inquiry was in no sense an attempt to denigrate either the Cunard Line or the firm responsible for building the ship, but an attempt to clarify the position precisely because of ill-founded and exaggerated reports in the Press. That was my purpose. Perhaps it might be possible to develop the theme at a later stage.

Mr. Rankin

I, too, had a Question on the Order Paper today. I am grateful to hear the statement which my right hon. Friend has just made, because it fully justifies everything I know in connection with the QE2. I hope that I may have a chance of speaking in the debate.

Mr. Benn

I appreciate what my right hon. Friend and my hon. Friend have said. I well understood the reasons why they tabled their Questions. I hope that they did not read into my reply any rebuke to them. Some of the comments which have been made were, however, as my right hon. and hon. Friends know, of a very extreme character. In addition to such technical and other difficulties as we have to contend with, there is no point in taking on extra burdens which arise from comment of that kind.

Mr. Austen Albu (Edmonton)

Can my right hon. Friend say whether, when the previous Government made the original arrangement for the guarantee to Cunard for the ship to be built by John Brown, there was any condition about the improvement of the management of the John Brown shipyard in the way which is now being done with loans or grants made by the present Government?

Mr. Benn

I do not think that it would be right to comment on the previous arrangements. Special arrangements were made for the "Queen Elizabeth 2", special arrangements for credit schemes. The unique quality of the Geddes Report, and what has followed, is that we linked the money to the reorganisation of management and resources, and since this was broadly accepted in the House we can all take credit for the fact that we have approached the industry in this way. That there have been failings—some of them may be evident today and others may appear in future—confirms me in my judgment that we were right to look at it in this way.

Captain Walter Elliot (Carshalton)

Can the Minister give an assurance that in due course we will know what went wrong and who, if anyone, was responsible?

Mr. Benn

If the hon. Gentleman is asking me whether, in the event, we shall know more about what happened, I suppose that the answer is, "Yes". If he is saying to me will an inquiry be set up later to look into this, my answer would be, I think, "No." I have little doubt that there will be many versions and stories circulating about what went wrong, and I hope that everyone who writes about it will keep a sense of proportion.

Taking the industry as a whole, British shipbuilding, while not yet fully reorganised, has much better prospects than when the Shipbuilding Industry Act was passed in 1967. To have carried out this restructuring to the present point and to have booked 10 per cent. of the very high level of new world orders last year are no mean achievements; and I want to pay tribute to those in the industry who have made them possible.

On the other hand, United Kingdom completions last year still amounted to only 6.2 per cent. of the world output in tonnage terms. The years 1969–70 will be a testing time during which our shipbuilders must make reorganisation more fully effective at yard level and secure a higher output. This will, in turn, increase their hunger for orders. At the end of last year our order books stood at 7.3 per cent. of the world order book for merchant tonnage. I would not wish now, any more than in the past, and certainly not after my experience as a prophet, to forecast the flow of world shipping orders. One view is that the present high level of orders is likely to fall off. It is also possible that technical and economic changes in shipping could maintain the demand at a high level.

Clearly, higher and more efficient output in British yards, and their resulting need for new orders are vital factors, whichever way world markets go. The Bill is designed to enable the industry to make the necessary effort to increase output, to continue to seek new business, including home orders, knowing that the credit terms available to British purchasers who order ships from home yards will enable them to compete on level terms over credit. Now that the Bill is launched, I hope that the House will soon fit it out with stautory authority and send it out to do its work.

4.30 p.m.

Mr. David Price (Eastleigh)

This is a very simple Bill. It is a consequence of the success of the arrangements made under Section 7 of the Shipbuilding Industry Act 1967, and the object is not the least bit difficult to understand. It is simply to increase the amount of preferential credit made available to British shipowners who place orders for new ships in British yards, from the sum of £200 million to £400 million, for which the public purse, and this is the important point, accepts liability as guarantor of repayments.

It should be made absolutely clear, if anyone doubts this, that the £400 million credit is not to be found from the public purse, but from the private banking system. All that the Bill requires of the public purse is that it be the guarantor of the repayment of £400 million, in precisely the same manner as it was the guarantor of the original £200 million under Section 7 of the principal Act. The experience of the operation of the provisions of Section 7 encourages us to take the view that the risks of liability to the public purse involved in giving the Bill a Second Reading are slight.

It was evident at the time of the Second Reading of the original Bill, 22 months ago, that if the shipbuilding industry was then to achieve anything approaching the Geddes target of 2¼ million tons a year output consistently then a ceiling of £200 million was too low a figure for the credit scheme.

The House will appreciate that in any credit scheme of this nature a peak figure is reached at the end of the early years before repayments flow in. This peak figure is inevitably higher than the average figure of outstanding credits at which the scheme will settle down after it has been running successfully for a number of years. I would remind the House that loans under this scheme are repayable by equal half-yearly instalments, normally over a maximum period of eight years. The full figures on how the scheme is working are not available to me, but I would hazard a guess that the peak would be reached somewhere round the year 1971–72. I would be grateful if the Parliamentary Secretary could confirm that.

We have to make provision for a higher figure of outstanding credit at the peak moment than will be the average figure during the currency of the scheme. The House will recall that at the time of the Second Reading of the original Bill I expressed my doubts as to the accuracy of the figure of £200 million, if the scheme were to prove successful. I accept entirely the right hon. Gentleman's comments about this. Possibly I had more confidence in the success of the scheme than he did.

I want to turn very briefly to the basic principle underlying the Bill. A credit scheme of this nature redresses the balance of disadvantage, which has hitherto made it more expensive for a British shipowner to place an order in a British yard than in a foreign yard. It gives him no preference, but restores the balance of disadvantage. Unless hon. and right hon. Gentlemen opposite have changed their views, we agreed, last time we discussed these matters, that preferential credit for one industry is in principle wrong. Nevertheless, we were faced then, and we are faced again today, with preferential credit from all the competing shipbuilding countries of the world, which leaves us with only three alternatives.

Either we run a similar system of preferential credit, or we accept, for this reason alone, that the order books of British shipbuilding are bound to decline, or, thirdly, we place a protective tariff on the purchase of foreign-built ships by British owners. We rapidly rejected the third alternative, for the reasons stated in the Geddes Report. I would like to quote one sentence from that Report which says: The concept of a home marke is difficult to apply at all because ships sold to home owners may spend their life competing for international trade, seldom or never touching a home port. Let us remember throughout the debate—and there may be criticisms from hon. Members who do not know the industry, and think that it is being cosseted and protected—that British shipbuilding competes for orders in the world without any protective tariff at all, and that in this it differs from most manufacturing industries.

As to the second alternative, this House has already accepted the Geddes proposition that shipbuilding is an activity in which Britain should succeed. The whole of the Geddes Report, and subsequent measures, have been directed to the proposition of assisting the industry to become more competitive. It would be quite wrong to abandon that proposition now. Therefore, we are left with the first alternative, and that is the reason for the Bill.

There is no doubt in my mind, as there was no doubt in the mind of Geddes, that one of the determining factors in the placing of an order for a new ship with a particular shipbuilder are the credit terms which could be offered to the shipowner. Many will say that at present it is the determining factor, more important even than price and delivery date. It is not for me to say whether it is the most important. Let us say that it is a very important factor.

We must give a moment's thought to the question of the long-term effect of these sorts of preferential credit schemes. Most international conferences that have discussed them have agreed that in global terms they are economic nonsense. Have the Government made any progress in persuading other countries to abandon these schemes? Let me make it clear that I should be the last person to press our Government to abandon our own credit schemes until other nations agree to abandon theirs. I do not want to see Britain being the only nation playing to some Queensberry rules under G.A.T.T. If other nations play to other rules, we must play to their rules to survive. As an old back row forward, I have learned to play just as dirty as my opponents, neither less nor more. I have no doubt at all that for straight pragmatic, reasons it is right that we should have these arrangements, although in economic and international principle I do not like them.

One further point about the source of credit. The credit comes from the private banking system, that is to say, from the gnomes of Lombard Street and their shareholders and depositors. They are being asked to double the quantum of credit which they make available to British shipowners on terms of up to eight years at fixed rates which are well below current commercial rates. In the light of the continuing credit restrictions, and the oppressive effect which that squeeze has upon normal commercial relations between banker and client, it is evidence of the banks' high sense of national duty, as determined by the Government of the day incidentally, and not by them, that they have agreed to double the quantum of credit.

During the Report stage of the principal Bill, in May, 1967, the Chief Secretary, whom I am glad to see with us today, said: I should like to say that the Government are grateful to the banks for agreeing to co-operate in these arrangements. The banks regard their primary lending functions as being to meet the normal requirements of industry and commerce for short-term finance and do not want their capacity to discharge that function to be inhibited by too great a volume of longer-term commitments."—[OFFICIAL REPORT, 11th May, 1967; Vol. 746, c. 1792.] That statement is even truer today when the quantum which they are asked to provide is doubled.

When the previous Government first asked the banks to agree to offer fixed lending rates for export—and it is to the export rate that the shipping credit rates are linked—Bank Rate was not as high as it has been under the present Government. The object then was to iron out the peaks and troughs of the going credit rate rather than to give a substantial preference. But today a fixed rate of 5½ per cent. is well below the mean average of the going rate under the present Government. The consequence is that the preferencial element in the scheme has grown and is carried by the banks to the extent that the fixed interest rate is below the mean average of the going rate.

I turn to the expectation of life of these arrangements. Section 7 of the principal Act ties these arrangements to the life of the Shipbuilding Industry Board, because under subsection (3) of that Section No guarantee shall be given … except on the recommendation of the Board …". Yet Section 9 of the same Act determines that the Board shall cease to exist at the end of 1970. There is power by Order to extend it by one year, but not beyond 1971. This means that there is an absolute maximum of three years, and yet we are asked to approve a scheme today, with credit available up to eight years, which is expected to have a longer life than three years. Yet the screening authority, which is the link in the chain of events by which credit is given, has a maximum life of three years.

What do the Government think will then happen? We discussed the life of the Board and the arrangements to be made during the Committee stage of the principal Act. Some of us put forward proposals which the Government rejected because they said, not entirely unfairly, that the main purpose of the S.I.B. was to bring about reorganisation of the shipbuilding industry, which was then urgent. But surely in what we are discussing today we are thinking beyond reorganisation. We cannot go on reorganising for ever. We hope that reorganisation will soon be over. However, I do not believe that the reasons for which we are doubling the figure of the credit scheme will cease to exist after 1970 or 1971.

Do the Government propose to say that when the S.I.B. is wound up they will introduce amending legislation which will free the credit scheme from S.I.B. approval? There are alternative methods of doing it. During Second Reading of the principal Act, I suggested a possible alternative, which was some standard form of contract with penalty clauses relating to delivery and performance. The right hon. Member for Easington (Mr. Shinwell) interrupted me at that point and showed some interest. I wonder whether the Government have something like that in mind? They should have brought forward proposals to deal with the continuance of the credit scheme after the ending of the S.I.B.

There is a final technical point on the Bill and the arrangements for the credit scheme. Under Section 7(3) of the principal Act, approval is linked to reorganisation. What is the position of yards which, for various reasons, are not involved in reorganisation? Some of those reasons can be completely respectable and agreed by the S.I.B. I suggest two: first, the smaller specialist yard which is still very competitive within the narrower field in which it operates; and, secondly, those yards which are geographically isolated.

There is nothing in the Bill, and there was nothing in what the Minister said, about how they will be treated, but a narrow reading of the principal Act could suggest that owners who place orders in their yards would not be eligible for this credit. I am sure that that is not the Government's intention, but there is doubt about the matter. I hope that it may be cleared up.

I follow the Minister in widening the compass of our consideration by saying a word or two about the state of the British shipbuilding, because it is the beneficiary of this Bill, although the credit goes to the shipowners. There are three questions which right hon. and hon. Members will wish to ask. First, what is the current state of British shipbuilding? Secondly, what progress has been made since March 1967, when we gave a Second Reading to the Shipbuilding Industry Bill? Thirdly, what are the future prospects for the industry?

The Minister gave us good news about the current state of the industry. What he said was a very welcome improvement. Undoubtedly, the industry has been helped by devaluation and by the prolonged closure of the Suez Canal. Nevertheless, it deserves our congratulations for the progress which it has made in the last two years. I should add my hope that all the orders have been secured at prices which will return a profit, and not a loss, because the House will appreciate that it is relatively easy to secure orders upon which no profit is made.

Obviously, we want orders for British shipbuilding which return a profit when they are completed. This means, among other things, that costs, must not rise unduly during the currency of an order. Holding down costs is one of the biggest problems facing British shipbulding now that it has successfully improved its order book position.

The Minister told us something about the progress made in reorganisation. He will realise that the fact that we have not yet had the first report of the Shipbuilding Industry Board means that many of us are not as well informed as we hope we shall be when we receive it. I regret that we have not had it before us earlier, but I accept that it is in the hands of the Comptroller and Auditor General and that the document is, therefore, entirely outside the Minister's or the S.I.B.'s control.

On the question of grouping, I wonder whether the Parliamentary Secretary could tell us the state of play on Wearside? What is the exact position of yards lying outside the main shipbuilding areas? Do I gather that it is accepted that Harland and Wolff, with its new building dock in prospect, Will remain on its own and be regarded by the S.I.B. as potentially viable? What is the position of Cammel Laird on Merseyside, and of Vickers at Barrow? What about the small yards in other parts of the country? I mention Vosper-Thorneycroft, which is in my own area.

I ask the Government two questions of a general nature on reorganisation. Do the Government and the S.I.B. still adhere to the main Geddes recommendation that the main strength of the industry should be reorganised into four big and compact shipbuilding groups? I suspect from what the Minister said that the answer is "No". Secondly, do they still agree with the Geddes recommendation on specialisation between yards based on the three categories: the S-yards, making sophisticated ships; the M-yards, making multi-deck mixed cargo ships; and the B-vards making bulk carriers and carriers?

There have been further trends in world shipbuilding since we last debated these matters towards the construction of large bulk carriers in large shipbuilding docks. I spoke at some length on this matter when we were discussing Clause 9 of the Industrial Expansion Bill in Standing Committee last March, so I will not repeat my analysis today. But this is a new factor which was not sufficiently in the mind of the Geddes Committee or in our minds when we last considered the industry's problems.

This double trend to even larger bulk carriers and the increased use of large building docks must influence the prospects and more particularly the future balance of the industry. I would have thought that that would be an important factor in determing the type of ships which the individual groups will be able to make, and I should very much like the Parliamentary Secretary to deal with those points.

Two other matters have a direct bearing on the industry's prospects. The first is industrial relations. This has been a continuing problem in the industry and when we discussed the matter two years age, it featured prominently in several speeches. On the evidence available to me, I think that considerable progress has been made and we all welcome the statement by the president of the Shipbuilding Industry Association, Sir John Hunter, that labour relations are also improving and that we have completed a national three-year agreement on wages and holidays, as well as a number of local and district agreements which should go a long way towards increasing productivity and efficiency", Nevertheless, the House will agree that in some yards we have a long way to go before we can be satisfied with the state of industrial relations.

Mr. Rankin

When the hon. Gentleman speaks of the need for good industrial relations, is he comprehending full consultation between men and management on all shipbuilding projects within the various yards?

Mr. Price

The hon. Gentleman knows me well enough, and I have spoken enough on these matters, to know that there is nothing between us in principle. He obviously has in mind the details of some particular arrangement in some particular yard and I am not competent to talk about individual yards which are outside my personal experience. But we can all agree on the general principle.

We will also all agree that continued demarcation disputes in certain yards have been a matter of deep concern to all of us. If only we could transplant the best practice from the best yards into all our yards, we would make a substantial contribution to the competitiveness of the industry.

Some concern has been voiced by one or two of the leaders of the industry about the nature of some productivity agreements. Productivity agreements are very much the height of fashion at present, but they achieve nothing except higher costs if the resultant productivity is not in fact achieved. I do not wish to develop this point further. I state it merely as a factor relevant to the industry's future competitiveness.

Another important matter is steel prices. As the Geddes Report told us, steel prices account for about 20 per cent. of merchant ship costs and must therefore be a key factor in the construction of any ship. In steel, the most important is the basic price of heavy plate. The House will recall that the Geddes Report asked for the eventual achievement of a 10 per cent. reduction at constant prices in the steel cost of British-built ships and added that it was not expecting the steel makers to subsidise that.

I will not develop the arguments of the Geddes Report, which will be familiar to many hon. Members. However, we are finding that quite the reverse is likely to happen and the new proposal for an increase in steel prices will have the overall effect of increasing the cost of steel for shipbuilding by about 20 per cent. As the Geddes Report recommended a 10 per cent. reduction, that means an overall increase of 30 per cent. since the Geddes Committee reported.

I hope that this is a matter which the Government and the industry will take up with the Steel Corporation independently of the inquiry into steel prices which is to be made by the Prices and Incomes Board. I cannot help feeling that the immediate reaction of the Government to many of these matters is to turn the whole thing over to Mr. Aubrey Jones, who is in danger of becoming the habitual long-stop for all the fast balls bowled at the Government.

I want, finally, to refer to the problems of the QE2 which the Minister mentioned and to which no doubt others will wish to refer. The facts of the delay in completing the QE2 and the reasons presented in the Press have not made happy reading. The reasons given in the Press may or may not be true and the presentations may or may not have been fair. I am not in a position to know the full facts and I therefore resist the temptation to make an outsider's analysis of the causes of the delay, but of the fact of delay and of the fact of technical difficulties there can be no argument.

Therefore, suffice it to say that public concern about the delays is perfectly legitimate. Although I share some of the Minister's views about exaggeration and about too dramatic language, I think that he went too far the other way in his recent speech to the Institute of Patentees and Inventors when he called public comments on the delays an example of latent hostility towards invention and, indeed, technology generally. I think that he will now agree that he went too far.

Having said that, I entirely agree with him that it would be absolutely counterproductive for the House to enter into a witch-hunt today about who may or may not have been to blame for the delays in completing the QE2 and the technical difficulties over the turbines. At this moment, the clear priority is for the QE2 to be completed successfully and speedily, and nothing should be said or done which would divert those concerned from fulfilling that purpose. I therefore agree with the Minister's Written Answer to his right hon. Friend the Member for Easington yesterday. However, I hope that the Minister and those concerned will keep the House and the public informed of progress when that is appropriate. It is worth remembering that the British public has an investment of up to £24 million in this project. Quite apart from reasons of national prestige, there are hard cash reasons for wanting to see this project a success.

We all hope that the difficulties will soon be overcome and that the QE2 will quickly take her place, as from a design board point of view she should, as the pride of the ocean, successful and profitable. Should the technical difficulties persist for any long period—and we do not yet know their full nature—no doubt the House would wish to return to the question whether a technical inquiry would be helpful. This is a matter for the future, however, and therefore, with that qualification, I suggest that we do not pursue the issue today, tempting though that might be, and that we leave those concerned to get on with the job unimpeded by public inquiries.

I end on a much happier note. We hear much about the alleged delays of the completion of ships in British shipyards, but the QE2 is the exception rather than the rule. I ask anyone who doubts that to read the extremely helpful article in The Times on Monday, which quotes the success of British yards in meeting their delivery dates. I hope that the industry will build on this good record to produce the competitiveness which we all want and which the Bill will assist.

4.58 p.m.

Mr. E. Shinwell (Easington)

It is a fair guess that the Bill will meet with the unanimous approval of the House. As my right hon. Friend remarked, it is a short but nevertheless important Bill. I am sorry that the importance of the topic has not attracted a larger audience. On Monday, it will be quite different; a large number of hon. Members will be present to discuss cannabis; but I do not want to raise that topic this afternoon. My only comment is that perhaps we have the higher quality, and there I leave it.

The hon. Member for Eastleigh (Mr. David Pries), in many of his observations, if I may use a cliché, took the words right out of my mouth. I am grateful to him that he did not allow his customary political opinions to obtrude. There was nothing of a partisan nature in his remarks, nor can there be any vital political issue concerning the prospects of the shipbuilding industry of the United Kingdom.

A great many questions need to be asked in addition to those put by the hon. Gentleman. In the matter of steel prices the hon. Gentleman was correct in what he said. If we are to assist in improving the position of the British shipbuilding industry, we must do whatever is within our power to increase its competitiveness and not make it more difficult for the industry even to survive. To fortify what I have just said, may I quote from a recent speech by Sir John Hunter, who knows a great deal about this subject. He said: Unless British shipbuilders can obtain steel, which forms so large a proportion of the cost of a ship, at prices comparable to those paid by their international competitors, the industry has no prospect of a prosperous future and little chance of ultimate survival. Sir John went on to make a suggestion which I was surprised to hear from this source, and I am not sure that his views will be acceptable to hon. Members opposite. He is reported as saying that: If the British steel industry could not make steel available at competitive prices in its nationalised form, it would have to be subsidised. This is unusual, but as it happens I agree with Sir John Hunter, particularly in the context of the remarks made by the hon. Gentleman, who asked what is to happen in 1971. We may provide credit facilities, initiate schemes of reorganisation, seek to promote rationalisation of the industry and endeavour to cure the evil of adverse industrial relations, but, when the peak hour has been reached, what is to follow?

The hon. Gentleman referred to the competitive position of the shipbuilding industries in other countries, which adopt the technique of subsidies, sometimes concealed. This has been customary for many years in shipbuilding and in the shipping industry. It is questionable whether the shipping industry in many maritime countries could have survived without subsidies. It is quite different in this country. Shipping managed to survive, although many firms went into liquidation, without the need of subsidies, at any rate until the last few years, when Government assistance became essential and Governments rightly intervened.

I agree with the hon. Gentleman that one cannot adopt Queensberry rules in a matter concerning the survival of one of the most important of our industries, which employs craftsmen, labourers, about 70,000 men in shipyards, and probably 30,000 men who are employed by contractors, sub-contractors, and so on, with all those engaged on the ancillary trades associated with the industry, including shipping and the docks. I hazard a guess that the Bill affects not only those directly concerned in the shipbuilding industry, but, at the least, 300,000 or 400,000 workers. It is a very important matter.

If we are concerned about the survival of this industry we must be prepared to adopt, either through Government intervention or in some other form, methods, however unusual, to enable the industry not only to survive, but to prosper. I say this particularly in view of the facts and figures presented by my right hon. Friend on the comparable position of the shipbuilding industry throughout the world.

My right hon. Friend, quite rightly, took great pride in the fact that there had been considerable improvement in the prospects of the industry in recent years, and that the British shipbuilding industry has reached about 7 per cent. of worldwide shipbuilding. That figure, 7 per cent. is almost at the bottom of the league. Last week I obtained some figures and I gather that the Japanese shipbuilding industry has reached 40 per cent. of the world's shipbuilding production.

What are the reasons for this: industrial relations, delays in delivery and the like? The fact is that over the years we have been neglecting the industry. Governments have been reluctant to intervene when intervention was essential. I do not impute blame to the shipbuilders or the shipowners; they were themselves reluctant to ask for Government aid. They were individualists, independent, wanting to stand on their own legs and resenting anything in the nature of Government intervention which had become essential.

It must be accepted, despite what was said by the hon. Gentleman about the financial arrangements provided by the banks, that without Government intervention the industry would not have reached even the 7 per cent. position. It was not entirely the concern of this Government. The previous Conservative Government initiated the credit scheme, for which we were grateful. Many times my hon. Friends and I have argued from the other side of the House in favour of Government intervention, and this led eventually to the credit facilities.

I want to devote some of my time to the QE2. I do so because of exaggerated statements appearing in the Press, even in the quality Press. Let me deal, first, with the matter of delays. There has been a great song and dance about the delay in completing the ship. There has been quite a lot of fury and intense criticism about the turbine difficulties. One would imagine that delays never take place in the shipyards of Japan, the Scandinavian countries, West Germany, France and Italy, and that only in this country there are delays in delivery. I want to refute the allegations which have appeared in some newspapers recently about the interminable delays which are holding up the industry and threatening our prospects. There is nothing like facts to refute an allegation. I shall provide some of the facts.

I hope that the House will not complain if I weary hon. Members with some information which may not be at their disposal. It may be that many of my hon. Friends have the information, but that it did not occur to them to bring it with them today. They may have thought that I had not got it, and that they have it ready for their speeches later on. Anyhow, here it is.

Let me take Japan first. We hear a lot of talk about Japan having the most efficient shipbuilding industry in the world. As a result, far too many British shipowners are ordering ships in Japan. I would rather they ordered ships in this country, but there it is. We are told that when a shipowner orders a tanker of 200,000, 300,000, or 150,000 tons, or a liner of 25,000 tons, no sooner said than done, the ship appears. It is built, just like that. It is said that Japanese workers get their coats off and roll up their sleeves, there is no trouble about management or about industrial relations: if a ship is ordered, it appears on time. Look at the poor British shipbuilding industry, they say, where quite the opposite happens.

Let us get the facts straight. In 1968, for example, the first Japan-built freedom ship, a tramp steamer of about 15,000 tons, was at least six weeks late. The problem was a leaking stern tube, and there were machinery troubles. Another yard was late with two cargo ships for the British-owned Blue Funnel Line in 1966. The massive 200,000 ton tanker "Tokyo Maru" was delayed for several months in 1966. The most recent instance involved the two 200,000-ton tankers being built for Shell by a Japanese shipyard. During construction, delays occurred because of the need to strengthen the hull structure. One was scheduled for delivery in November, 1968, and has still not arrived. The other, scheduled for delivery in August, 1969, also looks like being late.

There is any amount of material in this document, by no means involving only Japanese yards. In 1965, an Italian yard had troubles with a 45,000 gross ton passenger liner. She developed severe vibration on her trials. That is familiar language. On her maiden voyage, she was delayed.

The Norwegian cargo liner, "A. P Muller", built at the Bergen yard, was information which may not be at their causing a delay of several months.

The cargo liner "Italia", due for delivery in October, 1964, was eventually delivered three years later. As a result, the yard went into liquidation.

On the maiden voyage of the 200,000-ton Shell tanker "Marinnla", built in Denmark, the boilers burnt out and she was delayed for two months. There are similar instances of delays occurring in West German yards.

Miss J. M. Quennell (Petersfield)

I have not interrupted the right hon. Gentleman to congratulate him on his Japanese accent. Would he tell us the source of the document from which he is quoting? He failed to do so.

Mr. Shinwell

I can assure the hon Lady that it was not prepared by the Labour Party. It has not the research facilities available. It was prepared by shipbuilders and shipowners in combination. There is no doubt about the source of it. I would not dare to present facts of this kind to the House without knowing about the integrity of those supplying the information.

Why should not the House have this information, in view of the exaggerated, unfounded and sometimes malicious statements that have been made about the QE2? Nevertheless, what happened was regrettable, but there is no reason why we should allow the Press or anyone else to denigrate the British shipbuilding industry. I do not say that its record is beyond reproach; I do not think that any shipbuilding industry in the world has a spotless record in relation to deliveries. Furthermore, delays in delivery are not confined to the shipbuilding industry. Electric power stations and nuclear reactors are delayed. The Post Office today reported delays in the provision of telephonic communications. Delays are inevitable in any industry. They should be prevented or modified if possible, but delays will occur.

People frequently ask why they occur. There are allegations about adverse industrial relations, and there have been criticisms of the workers at John Brown's. I have some association with Glasgow and the shipbuilding industry. I lived in the shipbuilding area for many years, and I represented it on the town council and the trades council. The Clyde shipyard workers are among the finest craftsmen in the world. They absent themselves occasionally, but so do others. Executives absent themselves. Even Members of Parliament absent themselves. Ministers absent themselves, and so do Leaders of the Opposition. They may engage in all sorts of ancillary activities. I will not take it further than that, but why blame the shipyard workers?

There is talk about pilfering, and I know something about this. In my somewhat chequered career, I was at one time national organiser for a seamen's organisation, and for services rendered to seamen, I was made an honorary life member of the Seamen's union.

I can recall seeing one of the Anchor Line, Allen Line or White Star Line ships about to leave port. Always someone was seen coming down the gangway at the last minute carrying a large parcel or bag. I have seen an Anchor liner in port and observed a couple of fellows who had nothing to do with the ship go on board and shortly afterwards come down the gangway carrying a wardrobe

What about pilfering in the stores? There is pilfering everywhere. There may have been a bit of pilfering, on the QE2 but I doubt whether any of the craftsmen were involved. In the shipbuilding industry, contractors, subcontractors and sub-sub-contractors are concerned. As soon as the keel is laid, all sorts of other workers come in who are not directly employed by the shipbuilders. There will always be a few black sheep among them. They see something which attracts them, and off they go with it.

However, as a result, according to one reputable newspaper the QE2 is described as a white elephant. We could do with a few more white elephants of that kind. I would rather have white elephants of the QE2 type than the TSR2, or even some suggestions about space travel. I would rather spend the money that some hon. Members would like to spend on space travel in building up the British shipbuilding industry. But perhaps that is becoming slightly irrelevant to the subject under discussion.

I applaud what my right hon. Friend is doing, except about marine engineering. I have a document full of information about marine engineering. I have done a lot of research during my short absence from the House. This document should be examined. The Geddes Report suggested promoting something in the nature of rationalisation. I think that my right hon. Friend described it as concentration. Too little is being done about developing marine engineering through research. The marine engineering industry has been grossly neglected. At one time, more than 60,000 men were employed in marine engineering. No more than 40,000 are employed now.

Many of the so-called marine engineering shops undertake operations which have nothing to do with shipbuilding. This should be corrected. I should like my right hon. Friend and his Department of Technology, with his good will, ability and drive, to be even more dynamic to ensure that the marine engineering industry is developed to a point when we shall avoid trouble about turbines and such matters.

No doubt, the Bill will be accepted. However, we must consider the future. What will happen in 1970 and 1971 after the S.I.B. has gone, if it is to go out of existence? We must concern ourselves with that matter. This is not a partisan or political issue. It is a topic which deserves consideration in the highest possible measure from every hon. Member in the House.

The future of the British shipbuilding industry is a matter of national concern. There may be some minor criticism about the non-submission of the S.I.B. Report and matters of that kind, but these are trivialities compared with the essential issue of how we are to ensure that the British shipbuilding industry not only survives, but prospers, and I believe the nation wants it to prosper.

5.23 p.m.

Dame Irene Ward (Tynemouth)

I am delighted to follow the right hon. Member for Easington (Mr. Shinwell) because, although we have had many political differences in the past. I think that we have tried to fight a joint battle in support of the shipbuilding and shipping industries on the North-East Coast. I am very glad for the opportunity of supporting this important new Bill.

I also offer my congratulations to my hon. Friend the Member for Eastleigh (Mr. David Price) on his excellent speech on the Bill, the problems arising from the shipbuilding industry, and his constructive thoughts about the future.

I sat on the Committee dealing with the last shipbuilding Bill. The situation concerning shipbuilding has altered out of all recognition. Although I would not, as a Sassenach, dare to make observations on the shipbuilding industry on the Clyde, I am delighted to say that remarkable strides have been made in reorganisation on the Tyne and on the Wear. What has encouraged everybody living in those areas is that most of the orders that have been received lately have been achieved in the face of the most fierce competition. The work that has been done by Sir John Hunter, leading the industrialists on the Tyne, and also the achievements of the Wear, deserves full credit.

I do not wish to say very much, but I wish to be associated with the support given for the Bill and I should like one matter to be embodied in HANSARD. During the course of our discussions in the House among Members on both sides, very little attention seems to be given to the part that shipbuilding and shipping really plays in strengthening our balance of payments. Some of my colleagues—and they are entitled to their views as I am entitled to mine—seem to think that if the shipbuilding industry or the shipping industry cannot stand on its own feet it is better to concern ourselves with the growth of ordinary manufacturing and other types of industry. Very few Members stand up for the national advantage to be gained from a flourishing shipbuilding and shipping industry. It is important that this aspect of the contribution that the Bill will make should not be overlooked.

It is not for me to get involved in the type of speeches which have been made up and down the country by, for instance, the right hon. Member for Wolverhampton, South-West (Mr. Powell). He certainly has very little interest in the areas such as those from which the right hon. Member for Easington and I come. It is a good thing to nip in the bud the kind of speeches that sometimes emanate from the right hon. Member for Wolverhampton, South-West.

Shipping makes a valuable contribution to invisible exports. Concerning the balance of payments, I think that a great deal of success may be achieved in invisible exports. We must maintain our shipbuilding industry in areas like the North-East Coast, Clydeside, Merseyside and Harland and Wolff's. I link this with the problems that arise from mine closures. Some people seem to think that we should be able to build ships whether or not we have the facilities—rivers, coasts, or whatever it may be. Very little; attention is paid to the fact that if shipbuilding was allowed to decline, for instance, on Tyneside and Wear-side—and it looked as though it was declining—the North-East Coast could not sustain a livelihood at all.

We knew the difficulty that both the main parties have had to contend with in trying to adjust the balances in the development areas to make up for the loss which they have suffered through the closure of mines and the reduction in shipbuilding and shipping orders. If we consider the whole of the national economy, and not only that part of it which concerns shipbuilding and shipping, we see that it is tremendously important to maintain those areas in which shipbuildirg and shipping have thrived in the past and which are experiencing great difficulties today.

The decline in naval shipbuilding has meant that an additional difficulty has had to be faced by the industry. In the old days we used to say that we were able to maintain our competitive function in shipbuilding because there were always naval orders to sustain us. Unfortunately—at least in respect of the Tyne—the amount of naval shipbuilding is very small as compared with the position in the past, so that an ever greater responsibility rests upon those who have to maintain our great shipbuilding and ship-repairing yards.

The House should give great credit to the shipbuilding industry and to both the Conservative Government and the present Socialist Government for the steps that they have taken to try to stabilise employment in the shipbuilding areas. I am very glad to have the opportunity of paying them credit. It has been a long haul and a very difficult one, and we are still not quite certain about the future.

To say that I am slightly critical is putting it mildly—that is not my way of conducting my life—but I am extremely unhappy to hear hon. Members on both sides of the House talk as if it were quite easy to extend some of our industries without thinking of those industries which are now experiencing great difficulty in competitive tendering to maintain their employment position. I am unhappy to hear hon. Members arguing that it is not important to ensure that we have a thriving shipbuilding and shipping industry.

In the interests of our balance of payments and the national economy it is very important to maintain our old industrial contributions. Every time I hear that the Tyne has won additional orders in the face of fierce competition I feel proud of my part of the country and the work that is put in both by capital and labour—to use the old phraseology.

I hope that hon. Members will realise that in our present position we cannot afford to neglect our shipbuilding, shipping or marine engineering. I am in some difficulty in touching on the subject of marine engineering, because very little information seems to be available to enable hon. Members to assess the position. In Committee on the Bill in respect of which we last raised the question of the development of marine engineering, it was difficult to make any headway. A man I know very well, who represented some marine engineers in the Confederation of Shipbuilding Employers, expressed to me the anxieties of the marine engine builders about the future of marine engineering.

I should be grateful if the Parliamentary Secretary would give us more information than seems to be available at present on the development of marine engineering. This subject is very important to our rivers as well as to the shipbuilding and shipping industries. I should regret it if any hon. Member puts a case against the Bill on the ground that a prosperous shipbuilding industry is not vital to our national economy.

I should like to have set out in some detail what the Government have done to keep the Furness Yard in operation. It is very disturbing to industrial relations if, for months and months, anxieties are expressed at the possibility of yards such as Furness closing down, even though they may have been developed into modern productive yards through the employment of a great deal of capital. For months we were told that there was no possibility of saving the Furness Yard; it was not able to obtain orders, and would have to be closed down. When representations were made to the Government they always said that nothing could be done.

In terms of the relationship between employers, craftsmen, and the ordinary men in the industry, it is most unsettling for those who have to make their lives in the industry to have all this going on. The general worker in the shipbuilding industry does not know much about Parliamentary procedure. He does not know that on many occasions we have to go on and on and on pressing a case before success is achieved. It does not help men to settle down to do the jobs they are called upon to do if they fear that their livelihoods are going to be taken from them.

I remember conditions on the Tyne in 1931 and 1932. I shall never forget the time when, in 1932, I went on the Commissioner's launch from Newcastle to the mouth of the Tyne. There was only one sound to be heard on that journey—the sound of a dredger at work. That, in a different way, expresses the kind of situation which led to the Jarrow march. That angle of industrial life on Tyneside has never left my memory.

The workers in the Furness Yard were told that the yard must close because nobody would do anything to save it. Then, suddenly, after many months, to everybody's great satisfaction the Government took some action. It is not clear to me, however, what the Government have done, although I am very grateful for whatever action they have taken. In what direction and sphere were they able to help this yard? Was it done through bank credits? Was it done by way of a grant to the yard? How did it fit in? Was the decision taken by the Shipbuilding Industry Board? I do not know, and we on the North-East Coast should like to know, because we are very apprehensive about the future, both because of the difficulties arising from mine closures and the problems which we must go on meeting over world shipbuilding tenders.

I am not particularly worried that the Board will exist only until 1970 and then have its life extended for another year if Parliament thinks fit, because Parliament can always act. But when men are considering whether to make their life in the industry and are uncertain of the future, there is unrest and anxiety, which is not satisfactory for the region. When International Formica established its factory on the West Chirton Trading Estate in my division, the personnel manager told me, when they were recruiting labour, that an enormous number of skilled shipyard workers were applying for jobs because they felt that they were likely to have much more security in future employment than was offered by shipbuilding. This is not good, either for the men themselves or for stability in the region.

Everything which needed to be said about the Bill was said by my hon. Friend the Member for Eastleigh, but I should like to add my congratulations. The House is very conscious of the part that the shipbuilding industry has played for Great Britain in the world. We are very glad that it has been possible to make this arrangement with the banks to ensure a reasonable future.

But what is also tremendously important is the question of steel prices. It would have been more helpful in this important debate if the Minister concerned with that matter—I am not sure who he is, because things shoot around under this Government so much and one is never sure of Ministers or Departments—could have been here to tell us about the future over steel prices. The right hon. Member for Easington said that Sir John Hunter had said that steel would have to be subsidised if steel prices had to rise, but that will not help the economy. The point which I wish to stress is that we will get our economy right only if we get the balance right between all our industries. One cannot safeguard the future of shipbuilding satisfactorily unless one can ensure that steel prices will continue to allow that industry to be competitive in tendering.

It would not help the national economy if steel prices had to be subsidised. I hope that most hon. Members would agree on this. When this difficulty arises, and when Sir John Hunter, who is very keen on the future of the industry, flies a kite—everyone seems to be flying kites and it takes 10 years to win backing—unless he can give some immediate indication about what difficulty would arise if steel prices rose, he must use whatever weapon is available. He cannot argue about what the Steel Board will do.

Exactly the same difficulty arises over the National Coal Board. For the future of our economy, we must get a proper balance between all our major industries. Taxation and other problems enter more into manufacturing, but in relation to our great heavy industries of the past, present and, I hope, future, the balance must be got right. They all depend on one another. It is disquieting to hear about the possibility of a rise in steel prices, although in the last few years we have made this tremendous progress. Are all those trides to be impeded because of another Department and another nationalised industry crashing into what we want to do for the future and the safeguarding of shipbuilding and shipping?

Part of the difficulty of Parliamentary life is that not all Ministers are present at the same time. We cannot ask the Treasury for its view over steel. The Minister has to carry the whole burden on this issue, which he did very well, but it is not very satisfactory for the industry or the economy. Perhaps the Minister could let us know today about the likelihood of steel prices rising. It is no good our being too happy or satisfied if there is to be a blow shortly from a nationalised industry. I am delighted to have been able to say how glad I am that the shipbuilding industry has prospered so well. Long may it last.

5.47 p.m.

Mr. Frederick Willey (Sunderland, North)

I am delighted to follow the hon. Lady the Member for Tynemouth (Dame Irene Ward), because she has fought consistently for the shipbuilding industry, particularly in the North-East. Shipbuilding debates tend to be non-partisan. In the past, we used to be united against the Government and the hon. Lady had the courage on occasion to vote with me against her own Government. Now the pattern has changed and we are united in congratulating the Government.

I hope that my hon. Friend the Member for Sunderland, South (Mr. Bagier) will agree with me particularly when I say that my right hon. Friend is the most popular Minister that we have had. We recognise the importance of what he has done. I concede that the change in the fortunes of the industry has partly been dependent on Suez and devaluation, but substantially it has depended upon the Shipbuilding Industry Act and the speedy implementation of the Geddes Report. The important thing which this has brought is a greater sense of confidence within the industry that this is a prosperity which they will be able to maintain. I pay tribute also to the Shipbuilding Industry Board and Sir William Swallow in particular, and, most important of all, to the industry itself.

I am not going to talk about the QE2. I mention it only to call attention again to the fact that this industry provides too much "knocking copy". It is too often the whipping boy and I am glad that the hon. Member for Eastleigh (Mr. David Price) called attention to the article in The Times recently about delivery dates. This accords very well with what my right hon. Friend said about delivery dates in some foreign yards.

Consider what happened on the Wear in 1968. Doxfords delivered seven ships during the year, six of which were delivered within one or two days of delivery date while the seventh was three months ahead of schedule. Pickersgill's delivered five ships, four of which were between four and eight weeks ahead of delivery date. One was three weeks late because a lorry bringing machinery was involved in a road accident. At Bartram's four ships were delivered during the year and all were well ahead of schedule. On average, they were six-and-a-half weeks ahead of delivery date.

Why cannot we have this sort of information as news? Why must we always be so gloomy and despondent? Why cannot we say that we have done a cracking good job on the Wear in the last 12 months? Why cannot we publicise the fact that if one wants a ship built on time, the order should be placed on the Wear?

Mr. Blenkinsop

On Tyne.

Mr. Willey

I said "on time", but I would not be upset if orders were given to the Tyne as well.

While the outlook is good and we have a satisfactory order book—with work guaranteed for at least a couple of years ahead—I agree that we must look at the position not only absolutely but relatively. We must recognise that the Japanese order book is six times as long as ours, that Sweden and West Germany have lengthened their order books more than we have and that France is on our heels.

If one studies the shipbuilding league, one sees that Japan has put up another record performance and is way out ahead, that West Germany is second with the best total they have had since 1958 and that, without knowing the final figures, we may have been pipped at the post for third place by Sweden.

It is important to consider these matters because Geddes was looking for a recovery on our part by gaining a share of the world market of 12½ per cent., giving us an output of 2¼ million gross tons. We have recovered to between 6 per cent. and 7 per cent., which means that we have a long way to go before reaching the target set by Geddes. Until we achieve it, we cannot feel secure or say that we have arrived at a satisfactory position in world shipbuilding.

As hon. Members have said, credit plays a large part in all this. On the export side we can reasonably say that the position is satisfactory. It is when we consider the percentage of orders placed by British shipowners in British yards that we become disturbed. Only a few years ago, at the time of Geddes, 100 per cent. of Japanese home orders went to Japanese yards despite the length of that country's order book; 97 per cent. of all French orders went to French yards; 95 per cent. of all Italian orders went to Italian yards; 80 per cent. of all West German orders went to West German yards; and 70 per cent. of all Swedish orders went to Swedish yards. At that time only 27 per cent. of all British orders went to British yards.

Since then we have recovered, and I suppose that we have got back to the point when about 40 per cent. of British orders are going to British yards. This means, of course, that today there are 1¾ million tons under construction in foreign yards for British shipowners. This is extremely important to British shipbuilding. Indeed it must be the most important factor in our minds.

Until a few years ago the position was very different. I recall first raising the alarm in the House, pointing out that for the first time British shipowners were placing orders abroad. As the debate on this subject has continued, the fact has emerged that the major cause of this has been the disparity in credit terms between what can be obtained in foreign yards and what can be obtained at home. Imagine the advantage to British shipbuilding if the 1¾ million tons of British orders now being built abroad were transferred to British yards. It was to redress this balance of disadvantage that Section 7 was introduced. Most people recognise that it was one of the most important provisions to be included in the Act.

I have been laudatory in paying tribute to the Minister. I assure my right hon. Friend that he need not appear in a white sheet because Geddes only recommended a figure of £30 million, with a limit of £10 million in any period of 12 months. It was against that advice that the Government properly provided a guarantee not for £30 million but for £200 million and this will be doubled in view of our experience of the past year.

While reference has been made to the terms of Section 7 and the fact that it was said that difficulty might arise from it, I would not press strongly for it to be amended. I was actively concerned in the only case where there has been real difficulty but everyone was satisfied. The Minister said that he anticipated that the S.I.B. would act wisely and sensibly. Certainly in this case it did. When one introduces a provision like Section 7 one must have some sanction behind it. At the end of the day it can be reasonably said that the result has not been unsatisfactory.

Having said that, I must admit that I have received complaints about delays in the Department and I am told that difficulty has arisen on occasion because of this. I appreciate that the Department will experience difficulty with the Treasury. Nevertheless, I trust that the Department will reconsider this whole matter and ensure that decisions are made as expeditiously as possible because delays can be extremely prejudicial to the shipbuilder.

It is because there is no prospect of a liberalisation of trade in ships, that we must ensure that our industry is not prejudiced. There is no alternative but to extend the amount of the guarantee. However, at present there may be a limit on the period and this should be reconsidered. But if we are to extend the amount, it is proper to do what the Government have done on this occasion, which is to double it so that the industry may feel a sense of security and feel fully justified in looking to the future—a future bound to be more difficult than the immediate past—with real confidence.

There is undoubtedly a great sense of security in the industry. We on the Wear have had vastly improving labour relations. The case about labour relations has always been exaggerated. Ours on the Wear have never been very bad, and now because we see greater security ahead we intend to make labour relations more attractive. The trouble in some cases is that the industry is contracting in its labour demands. We are providing security, but for a smaller labour force. It is all the more important, therefore, to bear in mind the target set by Geddes.

There is a tendency for any industry to work within its limits of security, when it has security. This industry, on the other hand, must go out, be expansionist and see that it meets the target by clawing back a modest amount of the world market in shipbuilding, but this will be in the face of intense competition. My right hon. Friend the Member for Easington mentioned that the Japanese have 40 per cent. of the world market. At one time after the war we had 50 per cent. of it, but now we have to fight back.

I share the two serious doubts which have been mentioned. First, there is some uncertainty about marine engineering. I think that my right hon. Friend the Minister was a little too optimistic about the progress which is being made. Secondly, I share the anxiety which has been expressed about steel prices. Traditionally British shipbuilding has enjoyed, and has depended upon, an advantage in steel prices. It was only under the last Tory Government that the advantage was lost. What constitutes 20 per cent. of the price of a ship is now being threatened by the price increases.

I know that a submission has been made to the National Board for Prices and Incomes, but this is not a matter which can be left to the Board. This matter cuts right across the question of the aid we give to the industry. It is an industry in which the nation has a great interest. This matter should be the subject of a very different sort of inquiry from that which will be conducted by the Prices and Incomes Board. It is of vital importance to the industry. We must ensure that we do not prejudice the steps we have taken to help the industry by allowing steel prices to run against it.

I hope that the Government will give us further and more encouraging information about marine engineering. I hope that they will resolutely face the very difficult question of steel prices. I welcome the Bill, because it is another chapter in a story of successful Government co-operation with an industry which has always been understandably reluctant to accept aid. It is now accepting aid. It is using it to reorganise and strengthen itself whilst retaining its independence and competing in world markets.

6.2 p.m.

Mr. Stanley R. McMaster (Belfast, East)

It gives me particular pleasure to be able to comment on some of the points made by the right hon. Member for Sunderland, North (Mr. Willey). The right hon. Gentleman was obviously anxious to pay tribute to the Wear and the Tyne. I shall devote most of my comments to my own experience from Belfast relating to Harland and Wolff, which also, I am proud to report, has a good record for early delivery of vessels. It was the early delivery last year of two ships—the "Thara" and the "Skanfast"—which helped the company to win the mammoth order from Aristotle Onassis for three very large tankers worth £25 million to the United Kingdom.

I welcome the Bill. Its predecessor brought great help to our shipyards. The right hon. Member for Easington (Mr. Shinwell), myself, and many other hon. Members who have pressed for years in the House for assistance to the industry and who debated the matter, both in the House and in Committee, will remember how in 1967 we attempted to convince the Minister of Technology that the assistance being given under that Measure was a little on the mean side. The Government now agree that we were right.

Not only was it a little on the mean side. It also seemed to come too late. The position of Britain as a major shipbuilding nation had declined rapidly after the last war from that of being the world's main shipbuilder to being well down in the league table in 1967. The Minister was right to point out that we have now stepped up our production again, but, as the right hon. Member for Sunderland, North, said, we are still a long way down the league table. The total volume of orders placed throughout the world has risen rapidly in that time. Orders placed in world shipbuilding yards increased from 5,251,000 tons in 1954 to 14,307,000 in 1966. The United Kingdom's share fell from 1,400,000 tons out of 5,251,000 tons in 1954 to a minimum in 1963 of 923,000 tons and to 1,084,000 tons in 1966 out of the increased world total of over 14 million tons.

I was sorry that the Minister did not deal at greater length with some of the recommendations of the Geddes Committee; for, after all, these two Shipbuilding Industry Bills are designed to implement the Committee's recommendations. The Committee was set up to inquire into the shipbuilding industry and it made a number of proposals relating to the organisation of yards, the improvement of labour relations, and other ways in which Britain's position could be improved. As a result of the operation of the 1967 Act, we have somewhat recovered our previous position, but there is still much leeway to be made up. I should have liked some detailed attention to have been paid from the Front Bench to the progress which has been made by the Government in implementing the Geddes proposals. The Report was presented to Parliament in March, 1966. Now, nearly three years after that, we should have been able to say that we are well on the way to implementing most of the proposals.

My hon. Friend the Member for Eastleigh (Mr. David Price) referred to the pressure for mergers in the industry. What progress is being made with mergers? What is the Government's policy with respect to yards such as that of Harland and Wolff? Do the Government intend in any way to penalise yards which cannot conveniently fit into a preconceived pattern of merged groups? What attention have the Government paid to the criticisms made of some merger proposals? We all know the difficulties of some of the yards in the Upper Clyde. Is it wise that several yards which are losing substantial sums should be merged with profitable and efficient yards? Is that for the good of the industry as a whole? If it is, can the Government justify these proposals? Is it wise that a yard which is geographically isolated, such as that of Harland and Wolff, should be forced, if it is to obtain benefits under the Bill and have moneys made available to shipowners under it, to merge with a yard from which it is geographically widely separated, when such a merger would pose enormous management problems? Is this for the greater efficiency of our industry?

What are the Government doing about the proposed increase in the price of steel, an increase which could add about 20 per cent. to the price of steel for our shipyards and largely offset the benefits to be obtained from the measures already taken by the Government? Our yards are a major customer of the British steel industry. Is it right that they should be penalised in this way? The whole purpose of the Bill is to enable our yards to compete in an international market. In that market, should not our shipyards be free to buy steel from any source, the cheapest possible source, so that they may compete with the Japanese, the Germans and the Swedes, who are all ahead of us in the world shipbuilding league table? If, on the other hand, they are compelled to buy steel from the British steel industry, should it not be sold to them at the world steel price rather than at an increased price which could largely offset the benefits of the Bill?

Will the Minister deal at some length with the Government's plans for 1971 and thereafter, that is, assuming that the Shipbuilding Industry Board extends its life for one year until 1971, as provided in the original Act? Obviously, the work of the Board is not yet completed.

I have mentioned some of the factors calling for improvement in our shipyards. There is little in our shipyards, or in British industry as a whole, which could not do with a good deal of improvement. I am referring here not just to labour relations but to the whole gamut of management—more venturesome management, better management ideas, better trained management. There is as much fault here in our shipbuilding industry as in labour relations and trade union practice.

We have heard a good deal about trade union amalgamations. I am delighted that many of the 50 unions which operated in each yard and used to fight one another over demarcations, leading to unfortunate strikes and loss of orders, have now been amalgamated. But has this brought an end to internecine war within the trade union movement? Some of the crafts are still fighting one with another although they are amalgamated within larger unions. What are the Government doing in an effort to stop this stupid quarrelling which can do nothing but harm to our industry?

What do the Government themselves intend to do to play their part in assisting the industry? The Minister of Technology admitted that it deserves the special attention of the Government. Are they now satisfied, or do they intend still to exercise their powers and seek further to improve our competitive position until Britain again becomes one of the leading shipbuilding nations of the world?

I need not repeat the reasons why the Government should intervene. The shipbuilding industry is an international industry. The Geddes Committee went at length into the methods used by the Swedes, the Germans and the Japanese to assist their yards. Unless we are to opt out completely and buy subsidised ships built in other countries on long-term loans at subsidised and uneconomic rates of interest, unless we are to disband our own industry and try to redeploy the men elsewhere, we must be prepared to match the subsidies given abroad.

What efforts have the Government made to have this rather silly and self-defeating policy of subsidy brought to an end? What negotiations have they had with other Governments to return to a more sensible footing and to drop the idea of subsidy? So long as the Government do not tackle the problem in foreign relations, or so long as they are unsuccessful in their efforts, they must be prepared to match what is done elsewhere. Otherwise, we shall face an insuperable problem in disbanding our own industry, not only in retraining and redeploying the men—which I believe to be impossible, knowing the numbers employed—but in losing all the capital investment which we have built up and all the skill and know-how of our shipyards.

This country must carry on while other countries subsidise, and we must match those subsidies with similar assistance to our own yards. We are a maritime nation depending upon our shipping and our shipbuilding industries. If we do not support our building industry, our shipping industry will have to buy ships from abroad, thus adding a tremendous burden to the balance of payments. In summary, those are the reasons for continuing support beyond 1971. I pay a special tribute to Sir William Swallow and the Shipbuilding Industry Board for the work which they have done already. It is almost an insult to them to suggest that they can shortly—and it is shortly—be disbanded.

I say a word in praise, also, of the chairman of Harland and Wolff, Sir John Mallabar, as he now is. Sir John was invited to take up this position two or three years ago, taking over the yard when its future was very much in doubt, when the whole British shipbuilding industry was in a trough of depression and there were serious doubts as to whether it could survive. He has done tremendous work in Northern Ireland.

The orders for the yard fell to nothing between 1966 and 1967. Just one big order came in in September, 1967, for the Esso tanker, taking over an order which had previously been placed by a Norwegian oil company and which had later been cancelled. That was the only relief until the beginning of January, 1968. Then Harland and Wolff was able to announce the contract with Wimpey for constructing the large new building dock in Belfast. This was a concept which had been strongly advocated by Dr. Denis Rebbeck, the managing director of the company, for many years, and it was companion to the large dry dock already planned by Harland and Wolff. This dock will take ships larger than any in the world; it will be the largest building dock there is.

Following the announcement of the building dock, showing confidence in the viability of Harland and Wolff, orders for new ships started to come in again. Harland and Wolff has, I think, reached a turning point. However, I am sure that the Minister will be pleased to know that Sir John Mallabar exercised great discretion in dealing with these inquiries. He was not prepared to accept orders at a loss although, as I have said, very few orders had been won by the yard and the order book was down to the bottom at that time. There were enough inquiries, I am told, completely to fill the modernised Musgrave yard, but it was not till May, 1968, that he accepted his first orders, first for two ships and four engines, and then, later the same month, for a 55,000-ton bulk carrier for the Bowring Steamship Company. This meant that in May about £7 million worth of work—a total of three ships and five engines—was taken by Harland and Wolff, which it had the prospect of completing at a profit. Three more engines were later ordered by Swan Hunter and three by Cammell Laird. The yard in Belfast now has sufficient orders for engines. Previous speakers have referred to engine building in this country.

Last October three giant tankers worth £25 million were ordered from Harland and Wolff, and only last week another £1,800,000 contract was placed in the engine works for three more super, large-bore Biermeister and Wein, eight-cylinder diesel engines. This is a very valuable contract for Harland and Wolff. The engines are particularly big, and none like them are being built in this country. They are not being built for use in Belfast but have been ordered by Swan Hunter and Tyne Shipbuilders for installation in bulk carriers ordered by the Seabridge Shipping Company of London.

Those figures show that our shipbuilding industry is well worth the support the Government are giving it. It is proving that it can earn the kind of money the country so badly needs to support its balance of payments. But this is only a start. Though the position at Harland and Wolff looks a great deal better than it did two years ago, and though it may soon be possible, if present progress continues, for our shipyards to raise money on the ordinary equity market, which I am sure the Government would welcome, the Government's job is not yet finished. In the Geddes Report there is an exhaustive list of items which need to be attended to. I hope that the Minister will deal with some of these, and in particular say what the future is for the Shipbuilding Industry Board.

Mr. Speaker

Order. I remind the House that many shipbuilding areas are involved in the debate. Reasonably brief speeches will help me to call hon. Members from them all if possible.

6.24 p.m.

Mr. John Rankin (Glasgow, Govan)

I should like to identify myself completely with the view expressed on both sides of the House that the shipbuilding industry cannot be expected to compete for world orders if the selling price of its ships is to be in any way controlled by another industry in this country. I hope that the Minister and all those associated with him will give this matter their closest attention.

I want to deal particularly with the two yards in my constituency. Last Thursday, I met the men in Govan and the shipbuilders and other workers at Linthouse, who form part and parcel of the wider complex called Upper Clyde Shipbuilders. There we have five yards, on opposite sides of the River Clyde, seeking to work successfully together in the building of ships.

I discussed with the shop stewards the problems that particularly affect our area, not forgetting the wider problems. Naturally, one of the subjects was the "Queen Elizabeth 2", which they did not regard as a problem at all. At least, in their estimation, if it was a problem it had been magnified out of all proportion, and they felt that to some extent that had been done deliberately by certain influences in the British Press.

A week later I find myself dealing with a Measure which makes £400 million available for the development of the shipbuilding industry in Great Britain and Northern Ireland. I have often tried to give a helping hand to that industry on the other side of the Irish Sea, in which many members of my trade union are usefully employed. We are providing this money to sustain and promote a policy of developing this great industry along co-operative lines, because the outdated methods of unnecessary competition led to redundancy and waste. Under the new dispensation we hope to secure constancy of employment and a still bigger share of world markets.

I understand that my right hon. Friend the Minister of Technology and my hon. Friend will visit Upper Clyde-side very soon. They cannot go there too soon; as what I shall say later may emphasise. When I was last there I asked my friends in the unions whether things in Clydeside were working towards those ends of co-operation that we all want to see in industry today. Their answer then was undoubtedly, "Yes". That, of course, gave me great heart.

Last Thursday, I posed to them the question which I had put before the Summer Recess. Were they still working in that way? They were very doubtful and so am I. These topics were the main material, the central core, of the long talks we had a week ago and which took up most of Thursday. Their firm belief is that more than money is required in this industry. New confidence is needed among the men. Closer consultation between men and management is urgently needed now because the men in Linthouse shipyard, as it was, are now not sure of their future and, of course, this projects my mind back to the atmosphere that was created when the Fairfield yard had almost to close and a new management under Sir Iain Stewart was brought in to take control.

That new management was based on the idea of working together, of taking the men with the management at all times; of telling the men in public meetings and through committees created for the purpose, through the shop stewards and by every other available means, what the management was intending to do, what were its plans and what was their future.

This system now seems to be on the wane and the men are worried. When I asked them the questions that a Member of Parliament asks his people, they had no answers to give. They are being told that joint consultation is still in operation, but the topics they are allowed to discuss are not the topics which were discussed under the previous management, which had been rejected. It is only the little twiddly bits of things that happen in the yard that are discussed—and these are intelligent, educated men. This sort of situation is forming the root of trouble which could be of a most serious kind.

The QE2 was discussed, but they regarded it very lightly. They said that it was no problem. They thought the position had been exaggerated out of all sense and proportion in the Press. They had worked on the ship and every one of them believed that it will be a vessel of which Britain and the Clyde will be proud. In their estimation, where does the trouble lie? Everyone said that it was known by the men building the ship that she should not be launched on the date proposed. Some of them said that, had it been 1st April, it would have been wiser.

But the liner was rushed out of the yard for a purpose. Cunard was anxious to make £2 million too quickly and so pressed Clydebank and its management to get the ship out as quickly as possible. It may be a criticism—I intend none—but Clydebank tried to co-operate and paid the penalty. Cunard did not get its £2 million and Clydebank has suffered the ignominy. That view is not the view only of some but of all the men with whom I was speaking and who were working on the ship and knew her state and what was likely to happen if the demands of Cunard were acceded to.

The shop stewards are very anxious to know what is to happen at Linthouse. Of course, we have an idea that Linthouse will not continue as a shipbuilding area. The five shipbuilding yards are to become three and Linthouse will not continue. But, at the end of June, when we had a debate. I was assured that, to retain a significant labour force at Lint-house, there would be a design scheme and also an extension or an intensification of the engineering side. These things may still be in the programme, but none of the men affected see them coming into being and, as a consequence, when I went to "Old Govan"—to Fairfield's of former days—last Thursday, I found that 4,700 men were engaged in the yard.

When I was there in June, the number working was 2,700. Thus 2,000 more people are employed in a yard with no more ships on the stocks. That creates a terrible situation because sometimes there are four men on one job. There has been an increase of 2,000 workers, but no increase in the number of tools or in the tooling facilities. One man may say to another, "Give me a shot of the tool. You have had it all morning."

That is not the way to create confidence, to create the assurance that the men want for the future. And there is no consultation. They are not being told why this is being done. I realise we cannot have people leaving a yard and going out into the street. But if they are to be sent to another yard to ensure full wages during this period, when things are changing, then it should not be solely at the expense of the men at the other yard. They are alarmed and the men coming in are also worried.

I hope that my hon. Friend, when he goes to Govan and the Upper Clyde, will restore to these men in the Govan and Linthouse section some of the confidence they used to have in the future of shipbuilding on Clydeside. I fully realise that creating three yards out of five is not child's play, but if that is to be the end, it must be achieved along with full employment. It can easily be attained by sacking men, but the problem is to create a new shipbuilding future on Clyde-side without creating unemployment. We must seek to return to the old way of consultation between men and management. It is essential in industry today that there should be this consultation.

This is especially so in shipyards. Shipyards themselves are fairly widely dispersed, which is one reason why there is pilfering. But if there is pilfering in any yard in Britain, there is only one source responsible and that is the management. I agree that shipbuilding lends itself to pilfering, but it can be stopped by the management if management wins cooperation from the men. There used to be pilfering in Fairfield's, because just across the road from the entrance to the yard there were several little agencies all ready to take what the men brought to them. But that pilfering was stamped out by good management, which sought the men's co-operation and got the workers on its side.

The men in the yards must be fully aware of management's intentions. The blame for failure, if failure ensues, rests completely with management. When cooperation has been tried, it has been justified by results and shown to be profitable. It has succeeded because the management has carried the men with them. Industrial relations are still the problem facing us and I hope that when my right hon. and hon. Friend goes to Clydeside, they will emphasise the importance of this relationship in securing success on the Upper Clyde.

6.43 p.m.

Mr. Edward M. Taylor (Glasgow, Cathcart)

Whenever we have a debate on shipbuilding we are always exhorted to speak as briefly as possible. We all try to do so, although that is difficult as this is a subject in which we have constituency or other special interest. However, like other hon. Members, I shall try to be brief.

Every hon. Member who has so far spoken has rightly stressed the importance of shipbuilding to Britain. About 70,000 people are directly employed by the industry and about 250,000 British families depend directly or indirectly on shipbuilding for their livelihood, which stresses the significance of the industry. As has been said, employment in the industry is concentrated in the development districts, on the Clyde and the Tyne, and in Northern Ireland, where jobs especially for men, are even more significant than they are elsewhere.

It has been the practice in this as in other debates to talk about the old days and the new. The old days before the Shipbuilding Industry Act were not happy. There may have been too much of a tendency to blame that on the practices and managements of the old days without paying proper regard to the industry's desperate economic plight at that time. In 1963, before my right hon. Friend the Member for Wallasey (Mr. Marples) introduced the shipbuilding credit scheme, shipbuilding was virtually unprotected against unfair foreign competition and was about the only industry in Britain which was entirely unprotected by tariffs or quotas or similar measures. Other countries, such as France, the United States, Italy and Japan, were all paying their industries heavy subsidies and offering preferential credits. The industry reached an intolerable credit position when British owners found that loans of more than 50 per cent. were difficult to obtain, even at a rate of interest at 8 per cent., whereas in Japan 100 per cent. credit was available at about 5 per cent. The situation for the industry would have become impossible without the credit scheme.

We all appreciate that the best thing for shipbuilding in Britain and elsewhere would be the end of subsidies and of this kind of preferential credit. This would end the subsidy and credit war, leaving the best yards in the world to get orders in their own right and by their own efficiency. However, so long as we have a situation in which other countries protect their internal markets and have subsidies and loans for their shipbuilding industries, it would be intolerable for our own industry to go down because of preferential rates offered elsewhere.

Hon. Members have been referring to the prosperity of shipbuilding. The Minister rightly said that orders of more than 2½ million tons in 1968 were splendid and were well-nigh a record for recent years. While this is true, it must be remembered that the action taken since the Shipbuilding Industry Act does not guarantee the success of British yards. They have created a situation in which it is possible for unions and managements to create the conditions in which shipbuilding can survive, but already there are warning signs, and I hope that the Parliamentary Secretary will say something about them.

The first: is rising costs. In shipbuilding, only about 25 per cent. of the cost is directly under the control of the yard. It has already been said that the cost of steel represents about 20 per cent. of total cost. Sub-contracting and other costs account for about 75 per cent. and any escalation of these costs would be very serious.

The hon. Member for Glasgow, Govan (Mr. Rankin) spoke about the Clydeside problems, and I think that he will agree that one of the most significant arises because of our place on the river. Unlike the yards in Belfast and elsewhere, we shall never be able to think of building giant tankers of 200,000 or 300,000 tons. What worries me as a Clydeside Member is the indication that the steel price increases will not be all-round increases, straight percentage increases which will apply universally, but increases giving preference to standard sizes of plate and to the kinds of steel which are more readily used in giant vessels, in the giant ore carriers and giant tankers.

On Clydeside, we shall have to concentrate on more sophisticated vessels, and the pricing proposals will have a particularly adverse effect on yards building smaller or more sophisticated ships. I hope that the Parliamentary Secretary will say something about this, for any such change will be dangerous for Clydeside.

When I worked in the shipyards, before coming to this House, the level of wages varied enormously between the most highly skilled and the unskilled. Some were in an extremely strong bargaining position, such as the welders. More recently, there has been a substantial escalation in wages. While, in April, 1964, the average shipyard wage in Britain was £17 l1s. 3d., by June, 1968, it had reached £23 8s. 4d., a substantial increase.

Mr. Rankin

The hon. Gentleman will know that we now have productivity agreements on Clydeside whereby wages will generally rise according to productivity, rising from £19 a week to £39, which is getting nearer to what they should be.

Mr. Taylor

I agree that productivity agreements are in the process of agreement on Clydeside. I was surprised to hear what was said about consultation, because when I was in shipbuilding we spent a great deal of time on consultation—it was my job at the time—and I thought that if we spent a little less time consulting, and a little more time building ships, many of our problems would disappear. The hon. Member for Govan will have read the U.C.S. Joint Consultation Scheme and will appreciate that on Upper Clydeside there is a formula and structure which will allow for the most highly developed form of consultation.

The hon. Member for Govan said that wages were getting nearer what they should be. Serious concern has been expressed about wage increases. Indeed, some have said that they are going sky high. Are they being matched by increases in productivity? Are the productivity advances which have been made fully justifying the advances which are taking place in wages? Hon. Members will have read the interesting remarks of Sir John Hunter about the problems which arise when payments are made before increased productivity is agreed. These sort of problems create a serious condition in shipyards and in industry generally. This is bound to happen if there are increased wages without other benefits accruing.

Will the Shipbuilding Industry Board be making reports about the progress that is being made for the better utilisation of labour? The example given by the hon. Member for Govan was unfortunate in this connection. He will admit that progress has been made and that problems do arise as a result of, for example, overmanning and demarcation lines, not just between unions, but between various sections of a union.

It would be a mistake if the impression went out from the House today that this £200 million of credit and all the splendid assistance given by legislation has created a marvellously prosperous situation in the shipbuilding industry. Certainly, all of this has created an opportunity for the shipyards to strive ahead, but we would be fooling ourselves if we gave the impression that everything is well and that the future is universally rosy.

It would be wrong to underestimate the magnitude of the task of those who took over the management of Upper Clyde Shipbuilders. They took over five yards and, by general public report, three, and possibly a fourth, were losing money at the time of take-over. Various reasons could be given for the losses, but I will not go into them now. This take-over was a terrific challenge and in the interim period a remarkable number of new orders has been obtained. I understand that about £1 million worth of orders have been obtained each week since February, 1968, when the new owners took over.

This has been a remarkable achievement, but it is desperately important, for the viability of this organisation and for mergers of this type generally, that we be given an indication that they can be profitable. Everybody I have met recently on Clydeside—including Mr. Hepper and his colleagues, union officials and men—is anxious to succeed, and I hope that that will happen. However, co-operation is needed from all sides and, perhaps more important, I trust that the Government will provide assistance to complete the job. Much reorganisation and retooling must be done.

Will the present assistance by way of loans for reorganisation be sufficient for this re-equipping task, so that the yards may reach an adequate state of modernisation to face the future with confidence? It would be tragic to have spent so much money on Clydeside only to find that not sufficient cash was available to complete this once-for-all reorganisation. Many people on Clydeside are worried about this and I trust that we will be given a satisfactory assurance by the Government. This is a once-for-all exercise and adequate capital should be made available to carry out the reorganisation.

I do not intend to speak at length about the QE2, which has been a bit of a tragedy for Clydeside, because a wonderful ship like this, which obviously attracts enormous publicity, could otherwise have been one of the most glorious pieces of publicity for the area. Unfortunately, it has received a great deal of adverse publicity.

As hon. Members have pointed out, there has been much unfair criticism. I agree that mistakes have been made, but much of the criticism has been uninformed and unfair. We are told that trouble was experienced with the QE2's turbines. We have had many examples of this type of trouble arising elsewhere. The 23,000-ton passenger liner "Hamburg" had to return to its yard and have its trials delayed for some weeks because of turbine trouble. These troubles are not unique, although they are regrettable.

As for remarks that have been made about the unfinished state of the QE2, it should be remembered that on a three-year contract many problems will arise. I am upset by the sort of remarks that have been made about the shipbuilding workers of the Clyde. Some of the reports that have appeared are to be deplored. In building an average ship many factors arise. Among the workers are those employed in the steel industry the finishing trades, and so on. But a passenger liner is unique because of the luxury equipment that it contains.

This means that many ancillary workers—sub-contractors and those involved in other trades—must be employed to finish the job. In other words, one's traditional shipbuilding workers are not the only people employed on building a passenger liner, and this creates enormous problems of discipline and security.

I deplore the scurrilous things that have been unfairly said—and particularly those attributed to Clydeside workers—on the basis of the misdemeanours of a handful of men whose activities we all deplore. Hon. Members who represent Clydeside constituencies are proud of the achievements of the Clyde and of the ships that we have built there over the years. It is interesting to note that a foreigner, the managing director of a Norwegian shipowning company, recently said, when ordering two further ships from Clydeside, that his company always had confidence in Lithgow's to keep to the contract. In other words, contracts have been kept, despite difficult circumstances. We on the Clyde have had many successes and are proud of the past. I hope that this debate will bring a sense of balance to what has been an unjustified smear on the generality of Clydeside workers.

May we have a general indication—remembering the number of splendid orders which we have and the new prosperity which they have created—of the real prosperity of the industry? This problem is affecting industry generally throughout Britain. In other words, while we cannot hope dramatically to overturn world events in shipbuilding overnight, it would be helpful if the Government would tell us whether the problems associated with profitability are being overcome.

On the question of productivity, may we be given a summary of the real progress that has been made? Labour problems frequently bring industrial and financial problems. One yard on the East Coast of Scotland was almost paralysed for several weeks because its boiler-makers were out on strike. When they returned, its electricians went on strike. These are obviously big problems, although perhaps isolated, and they must be overcome. It is strange that in many areas where agreements have been signed to do away with restrictive practices and unofficial strikes there are still such problems.

Looking to the future it will be desperately difficult for Clydeside, for all parts of the shipbuilding industry, if, at the end of 1970 or 1971, the Shipbuilding Industry Board is wound up and the credits disappear. Will we not be in danger of plunging back into the terrible situation of a few years ago? Certainly, the yards will have been improved, reorganisations will have taken place; there may have been an improvement in productivity.

But no matter how efficient our yards become, no matter how much goodwill is created, if, in 1971, British yards are competing, on the basis of credit costing them 8 or 9 per cent. and perhaps only getting 50 per cent. of it, against companies in other countries where credit is made available at 5 per cent., or 4 per cent., this will be a credit barrier which it will be impossible for the industry to overcome, no matter how efficient it is.

We do not expect the Government to spell out their plans for the future, but they should make it clear that they are aware of what a tragedy this could be if all this splendid hard work and progress was lost. I imagine that this will not happen, and for that reason I support the Bill.

7.0 p.m.

Mr. Arthur Blenkinsop (South Shields)

I applaud very much the fact that every speaker has welcomed Government intervention, as displayed in the Bill. I cannot go along with one of my right hon. Friends who suggested that this was a non-political Bill and a non-political debate. It is highly political. It is not contentious, but highly political, because it is dealing with a highly political issue. What is the proper way in which a Government can intervene in an industry? I am delighted that there should have been unanimous agreement that this is an effective way to do so.

It encourages me very much because of the possibilities opened up elsewhere. I join with the hon. Lady the Member for Tynemouth (Dame Irene Ward) when she courageously and vigorously said that there must be no nonsense, no talk of Government not intervening in areas like ours, in development areas. There must be no cutting back or interfering with Government intervention which is available. None of us who live on Tyne-side and in the North-East generally can be but delighted that this Bill has proved as effective as it undoubtedly has—I quite take the point made by the hon. Member for Glasgow, Cathcart (Mr. Edward M. Taylor)—in providing the conditions in which the changes can be made.

I do not exaggerate and contend that we have solved all the problems. We have not. Many of them are right on our backs at the moment. However, we can face these problems with far more assurance than we could a year ago. This Measure, giving further financial backing for the guarantee scheme, enables us to go ahead with much greater confidence. Many of us on the Tyne, and the same applies elsewhere, were very pleased at the way in which orders have been secured, transforming the situation in a big way. I am delighted to say that on the Tyne, as on the Wear and in other areas, we are also transforming the delivery record. It is true that delivery date reputations of many of our yards are very good. Long may it be so.

I am very anxious to get more information from the Board. We had some interesting indications from my right hon. Friend the Minister about the work of the Board, almost tantalisingly interesting, but we did not have the Board's Report before us. This is important, because we want to know something about the way in which it is operating. We were told that it has set up very interesting and important special groups, following up particular problems. As I understand, there are groups working specifically on the problem of industrial relations, training, research and development, and, I imagine, other subjects, too. We would all like to know more about how this is being done. If the full Report could not have been made available, it would have been helpful if the Government could have laid a White Paper, an informative document.

Most of us are concerned to see that the advances made in greater efficiency in the yards—and this applies to management as well as to unions—are fully carried out. I am not completely happy as to whether information is really getting right down to every man in the yard. I know that efforts are being made to do this, for the agreements reached on the Clyde as well as on the Tyne, but the new and dramatic efforts being made by management and unions to break through have not fully satisfied me that we have done enough. It is patently obvious that there are many in the unions still not fully aware of the implications of the agreements being reached.

I am glad that my right hon. Friend the First Secretary of State has approved the new agreement for shipyard workers on the Tyne. It opens up further possibilities of advance for the men there. I am still anxious that we should place every emphasis that we can upon the importance of this being understood at all levels in the yards. Unless we do, the good records that we have achieved may not be fully maintained.

I very much welcome the fact that the President of the Boilermakers' Society, which has its head office on Tyneside, recently suggested joint discussions with the management over the relationship of shop-repair work to shipbuilding, and the ways in which there might be better planning, with a better chance of obtaining orders. This has to do with the union as well as the management side. I agree with many who have argued that it is hard completely to separate problems of shipbuilding from ship repair. It could be a disaster at the moment when the prospects are so encouraging.

On the Tyne, there are many men out of work, particularly in my constituency. This is in the repair yards, and to some extent in shipbuilding. I hope that it will be possible, either for the Board, or the Council to be set up at the same time, embracing repair as well as building, to give further special consideration to the future of ship repair in an area that desperately needs support and reorganisation just as much as the shipbuilding yards.

I join with others in expressing anxiety about steel prices. Again, this is a question of Government intervention. I am all for Government intervention, it is others who complain. I am no believer in normal market forces operating. I want to see the Government upsetting those market forces when they do not operate in ways which I believe are socially right. I make no apology for being anxious about this matter.

We should like to hear more about marine engine developments. We have been deeply concerned about this on the Tyne. We have suffered severely in cutbacks in employment in this field. We are glad that progress is being made and that greater clarity is being obtained about the future of marine engines and how concentration should take place. I should be pleased to hear more about this question. If the S.I.B.'s Report will not provide us with this information, perhaps my hon. Friend could consider some other way in which it might be given to us, possibly by means of a White Paper.

We very much welcome the steps forward which have been taken, but we are deeply anxious that the opportunity which is provided should be fully utilised.

7.21 p.m.

Mr. Peter Hordern (Horsham)

I hope to abide by your request, Mr. Speaker, but I fear that I shall be somewhat controversial. My rôle today is that of a skeleton at a very enjoyable feast. Every hon. Member who has spoken has given the Bill a warm welcome, twice the welcome which the 1967 Bill received. That is right because twice the amount of money is being provided.

The Minister said that he stood before the House in a white sheet. If I have not seen a penitent before a bowl of cream before, I shall know one when I see one next time. The right hon. Gentleman said that the shipbuilding prospects of this country were a great deal better than when the Bill of two years ago was introduced and that 10 per cent. of all new orders were being booked by British yards. This is a magnificent record. It leads me to ask only one question: given the striking success of the British shipbuilding industry, is this Bill needed?

There will always be a voracious appetite for Government assistance in industry. The more it receives, the more it becomes dependent upon it. In my opinion, all Government assistance acts in the same way as heroin. It is just as dangerous, and the withdrawal symptoms are every bit as severe. If Government assistance is to be provided, therefore, it should be provided for a specific short-term reason which has clearly defined national benefits. It should be in the nature of a shot in the arm to carry out radical changes. Its purpose should not be to strengthen the position of an already rapidly expanding industry.

I am therefore led to ask whether in our present economic situation it is necessary to introduce the Bill. I cannot think that the economic situation justifies it. I know that the Government's case is that there is no requirement from the Treasury unless the shipowner defaults on his payment. That is a very remote contingency, given the generous terms of the loan. But I am concerned, not with the question of liability to the Treasury, but the bad economic effect on the level of the money supply.

Last November, it was announced that fixed rate lending under the special schemes for export and shipbuilding finance would henceforth be excluded from the calculation of credit ceilings. That means that any lending by the banks will be over and above the level permitted under the credit squeeze and cannot lead to anything but an increase in the money supply and, therefore, to inflation. We were told by the Minister today that £200 million has already been committed by the banks under the scheme and that it is likely that another £87 million will soon be required. This is a not insubstantial sum. When one remembers that the total money supply rose by £519 million in the second quarter of 1968 and by only £100 million in the whole of the third quarter, it is a significant figure.

I therefore object to the Bill because of the bad economic effect which it will have on the money supply.

Mr. Shinwell

The hon. Gentleman is advancing a very interesting point, but would he tell us specifically the bad economic effect? If the shipbuilders did not have the benefit of Government guarantees, would not they have to go to the banks for the purpose of buying equipment, paying wages, and so on, as they have always done, and would not the economic effect be the same?

Mr. Hordern

The economic effect would not be quite the same, because the banks are providing this money over and above the ceiling limit which they are allowed to provide under the arrangements of last November. This sum of money, to be increased to £400 million, is over and above the amount which the banks are allowed to lend. That is the inflationary aspect.

With a Bill of this kind, it would be wrong to labour its economic consequences, but I wish to ask one or two questions about the industry itself. Is it the case that it is now short of orders? From all we have heard today, I do not believe that that can be claimed. It seems that at the beginning of last November the order intake stood at 1¾ million gross tons compared with over one million tons at the beginning of 1967. I understand that there are another 1¼ million gross tons in immediate prospect and that shipowners are readily placing contracts.

Are prices uncompetitive? This is another point which has not been brought out today. It is a question, not only of credit, but of the price at which the shipbuilder can deliver his ship. We have the advantage over every other major shipbuilding country of cheaper prices because of devaluation. The Minister said during the Second Reading debate on the last Bill No guarantee can be given unless the Shipbuilding Industry Board advises me that … the order is suitable and necessary for the particular yard's progress."—[OFFICIAL REPORT, 9th March, 1967; Vol. 742, c. 1782.] I wonder whether that criterion can be applied with the industry in its present position, let alone the Geddes criteria, and particularly the third, that without such credit facilities the order book of the group will be insufficient to provide the optimum flow of work during the transitional period". It is clear that the Government have not accepted the Geddes Report in its entirety, for there is not even the pretence of fulfilling that requirement. What is more, the Geddes Report suggested that the loan facilities given by the banks should be limited to £30 million, not £400 million.

It is not a convincing argument to claim that because Japan has increased its production so rapidly our production represents only 6 per cent. of world production and that we must continue to give special protection. The simple fact is that British yards are busy and do not require further assistance at this time. Nor is it the case that every major shipbuilding country even operates a revolving credit scheme. The Swedes do not operate such a scheme. Their companies have to borrow on their home market and in the foreign capital markets of the world.

The more assistance we provide while the yards are busy, the less likely they are to carry out the necessary measures so well described in the Geddes Report. There are no incentives to carry out mergers and the inefficient yards will survive.

Mr. Blenkinsop

I understand from an article in the Economist that credit guarantees are given in Sweden and that there are other special facilities of a character similar to those available in this country.

Mr. Hordern

I cannot find the reference I used, and I apologise to the right hon. Gentleman. I have a reference that the Swedes do not operate a credit revolving system. I do not know whether or not the Economist is right, but my information is different.

It is possible to make a convincing case for Government assistance to every industry. The Government ought to be taking the lead in the international dismantling of subsidies. The Minister, who believes in unilateral disarmament, should be the first to appreciate this. The O.E.C.D. was supposed to be looking at a scheme of international disarmament for these subsidies as early as last May, and I hope that in winding up the debate the Parliamentary Secretary will tell us about the progress and the results, if any, of the conference.

Every industry would like assistance from the Government, and most of them make a good case for it. I am convinced that the shipbuilding industry has a better case than almost any other industry, but some time, somewhere, the music must stop and the piper must pack away his flute, and this is the time to do so.

7.21 p.m.

Mr. Albert Booth (Barrow-in-Furness)

As I wish to speak on the same points as the hon. Member for Horsham (Mr. Hordern), it is a pleasure for me to follow him, although I have reached a completely different conclusion. I do not wish to be discourteous to him, but I wonder whether he has read the 1967 Act, which clearly states the conditions which attach to loans and the tests which the Shipbuilding Industry Board must apply before making grants. Among the conditions is the effect which such a loan would have on the reorganisation of the shipyard building the new ship, and the increase of efficiency of that yard's resources. While applauding the original Act and the degree to which the Bill supplements it, I wish to argue that there are certain other factors which should be taken into consideration before granting loans, not alternatives but additional factors.

The factor which I have most in mind is the regional discrepancy in merchant shipbuilding tonnage which has come about in recent years. In the year ending December, 1967, 34 per cent. of the merchant shipbuilding tonnage completed was built in Scotland; 6 per cent. in Northern Ireland; 57 per cent. in the North-East—Tyne-Tees and Wear—and 1 per cent. in the North-West, other districts producing the balance of 2 per cent. In the year ending December, 1968, there was a change in the position, as could be expected from the developments which have taken place under the Act. These changes are changes which should lead us to consider whether or not, in making grants under the Act generally, and in granting loans, regard should be had to what is happening regionally in the shipbuilding industry. In the year ending December, 1968, only 21 per cent. of the merchant shipbuilding tonnage was completed in Scotland; 23 per cent. in Northern Ireland—a tremendous increase which I welcome because of the unemployment there; had there been such an increase in the North-West, I would be highly delighted—53 per cent. in the North-East; 1 per cent. in the North-West—1 per cent. being the rounded off figure, the actual figure was less than this; and 2 per cent. in other districts.

Mr. Shinwell

Does that include naval building?

Mr. Booth

This does not include naval shipbuilding. This is merchant shipbuilding tonnage, and this has a considerable bearing on my argument.

In previous discussion on legislation for this industry we have taken into account that among the changes needed within the shipbuilding industry in order to increase our merchant tonnage was a transformation of facilities from naval to merchant shipbuilding, and the possibility of getting within certain of our shipyards the capacity to build merchant as well as naval ships. It is no exaggeration to say that merchant shipbuilding production in Barrow-in-Furness, one of the biggest shipbuilding yards, virtually came to a halt because of the naval order for the Polaris submarine. The position in Cammell Laird's yards in the North-West reflects a serious dip in merchant shipbuilding production because of naval orders. This is a factor which should be taken into account in applying grants and loans.

If we are to intervene deliberately, as intervene we should—the industry cannot be left to market forces—we must intervene intelligently in order to reorganise it. If we are about to do this, we must have regard to all these factors, our regional policy, the relationship between naval and merchant production and other factors which are already included within the 1967 Act. I therefore ask my right hon. Friend in his dealings arising from the Bill with the Shipbuilding Industry Board to urge upon them consideration of regional factors.

I share with many hon. Members concern about our marine engineering industry. It is as much a beneficiary of the Bill as the shipbuilding industry. I will concentrate my remarks on one aspect of the industry, namely, turbine production. The remarks of my right hon. Friend in opening the debate should lead us to outright alarm at the position of marine turbine builders. He sees the future of marine turbine production as lying in those firms which have had a tradition of producing land turbines. If this is so, the outlook for those companies which were specifically marine turbine builders is very bleak.

The Minister has an obligation to tell us how many marine engineering firms which concentrated their production facilities on marine turbines he envisages will close down, and what will happen to the labour force and production facilities of these firms. In the light of the turbine trouble on the QE2, it is also relevant to ask the Minister where he intends that marine steam turbine research should take place, in view of the closing of Pametrada, and the restricted attention of the British Shipbuilding Research Association to this subject.

Although I welcome the improved order book position, I feel that, in the light of our production figures, we are becoming joyful far too early. Although the order book position has increased by two and a half times, we do not yet have production figures for the year 1968 and I would be surprised if the actual tonnage produced in 1968 exceeded 1 million tons, and 1 million tons produced in a year when world order books rose to 25 million tons is not a figure we can be pleased about in a country which once produced half the world's ships. We have to set our sights very much higher, We should be thinking not in terms of 10 per cent. of the world order book but of nearer 20 or 25 per cent. as being a practicable figure at which to aim to give us a viable national shipbuilding industry.

Section 6 of the 1967 Act makes provision for the acquisition of shares by the Shipbuilding Industry Board. I hope that we shall be told how many shares in the shipbuilding industry have been acquired. It seems to me that the people of this country have provided a considerable amount of money for the reconstruction of the industry, and that gives them a right to an interest in it. This provision in the 1967 Act was a good one, and the Minister owes us an account of the extent to which it has been used.

I join with other hon. Members in welcoming the Bill. I hope that, by the time that these facilities have been exhausted, we shall see a bigger and more viable industry.

7.30 p.m.

Mr. John H. Osborn (Sheffield, Hallam)

I am one of the few hon. Members present who have no shipbuilding concern in my constituency. However, I speak as one who has to look at priorities in terms of Government expenditure.

I intend to confine my remarks to three subjects. The first is to ask whether we should be voting this £200 million guarantee. Secondly, I shall deal with QE2. Thirdly, I shall discuss the problems of reorganisation, touching on the work of the Shipbuilding Industry Board, and its effect on the various shipbuilding establishments.

At the outset, I want to welcome the present position as being a good deal healthier than it was two years ago. I welcome the progress which has been made, but I accept the facts put forward by my hon. Friend the Member for Horsham (Mr. Hordern), that banks are lending money at advantageous rates and that there are priorities to be looked at not only in terms of direct Government expenditure but of the loans and expenditures incurred by the banks. If the shipbuilding industry is treated well, there is the possibility that, at a time like this, others will suffer at its expense. The Government hold the public purse and, therefore, we must know what they are doing.

I do not want to discuss such matters as the price of steel, but a dialogue has been going on between the steel manufacturers and the shipbuilding industry for many years. If the solution is to subsidise steel to the shipbuilding industry, the funds involved will be taken away from other activities in the country and given to that industry.

I turn to my first point, and I ask, at the outset, if we should be voting this £200 million at all at this time. My hon. Friend the Member for Horsham is the only speaker so far to put forward the other point of view. There is a balance which was expressed very well in a leading article in the Financial Times of 5th December last—

The Joint Parliamentary Secretary to the Ministry of Technology (Mr. Gerry Fowler)

Will the hon. Gentleman accept from me that we are not voting £200 million? We are giving my right hon. Friend the right to guarantee loans of that amount.

Mr. Osborn

I thank the hon. Gentleman for that correction. Of course, he is right. We are dealing with a proposal to give the Minister power to guarantee loans. I apologise for trying to be too brief in describing this. He already has the right to guarantee loans, and it is proposed that he should extend this.

The joint loan has had a degree of success and has brought orders to our shipyards. Not to continue it at this time obviously would be to limit a scheme which has been started. On the other hand, there have been various advantages to the shipbuilding industry. Devaluation has made our prices more competitive. Low order books have given the industry the advantage of being able to quote favourable delivery dates. What is essential now is that those delivery dates are implemented. The yards have benefited recently from the upsurge in shipping orders.

Those of us who are concerned with the Government's purse are anxious that the present position does not lead to complacency in management or to undue pressures from the trade unions on behalf of the workpeople in the industry because, if they were given in to, the shipbuilding work force would be the first to suffer. The orders would not roll in later on. Whatever else happens, we must satisfy ourselves that there is no complacency.

Dealing with whether we should vote this money, the question which comes to one's mind is: what is our commitment? Under the Industrial Expansion Act, there is a specific commitment to Cunard. Under the Shipbuilding Industry Act, 1967, there are facilities to loan money and buy shares, which involve expenditure. Credits to shipbuilders as such are nothing new. They were started by the previous Government, and, of course, there was the 1964 Act. But it is reasonable to ask how great is our commitment, bearing in mind the subsidies and assistance given to our overseas competitors.

We had a discussion earlier about Sweden. One of my hon. Friends referred to an article in The Times on 6th November, where it was pointed out: In its report for 1967 the Swedish Shipbuilders' Association pointed out that there were a number of facilities granted to foreign yards which were not available to them. It stressed the advantages the British got from the £200 million revolving credit. Before speaking now, I wanted to know the extent to which we had committed ourselves, and I intervened earlier to ask the Minister whether he had complied with Section 8(3) of the 1967 Act, which provides that the Minister shall lay a copy of each report to him under the foregoing provisions of the Section before each House of Parliament together with such comment as he may think fit to make. I intervened to say that it would be more helpful for someone concerned with the national purse to know where we have got. I believe that the Minister should have taken steps to have this Report published and available before asking for this extra guarantee.

We were given a hint from him that credits under the Act are now £6 million and loans £4 million. There was an indication from Lord Beswick in another place yesterday that they have agreed to lend £5½ million to Upper Clyde Shipbuilders. But this is all piecemeal information coming to us when we are attempting to judge whether or not to grant this extra guarantee at the present time.

In my view, we have been asked to write a blank cheque for the shipbuilding industry. Perhaps as an act of confidence in the Shipbuilding Industry Board and in the industry itself, the Minister is asking the bankers, metaphorically and actually, to endorse his judgment. But any outside agency in private enterprise would have to put forward a better case than is presented to us today.

That underlines the dilemma of the Government, of the House and of the country. Should we go on paying out for Government intervention and assistance, bearing in mind that the money is no longer in the "kitty" to the extent that it was a year or two ago? The House should bear in mind that the banks, independently of the Government, have an obligation to restrict their loans, especially after November. Public expenditure has to be watched very carefully.

With those observations, I want to touch on the incidents involving the QE2—

Mr. McMaster

I have been endeavouring to follow what my hon. Friend says. He refers to a blank cheque for the shipbuilding companies. Can he enlarge a little on it? The £200 million is being provided by the banks. The Government are merely guaranteeing it, as my hon. Friend knows. How does that affect other industries? I cannot follow his argument.

Mr. Osborn

There is a limited fund to be loaned to industries and others involved in those activities. If there is a restriction on bank loans generally, generosity in one direction means limitation in others. I think that my hon. Friend will follow that. I accept that it is a blank cheque in terms of a guarantee only. It is right that I should be reminded of this again.

I should now like to make a few quick observations on the QE2. The point I make is that it has had far too much publicity in our own Press. The right hon. Member for Easington (Mr. Shinwell) and my hon. Friend the Member for Glasgow, Cathcart (Mr. Edward M. Taylor) have mentioned other cases. I have a cutting from The Times of 17th January pointing out that the 23,500-ton "Hamburg" has had difficulties in its trials. This is a small cutting from one of our own newspapers. It is a pity that the misfortunes of the QE2 have hit the headlines of the world. But I welcome the decision of the Minister concerning pressure for an inquiry from Members of Parliament and the support given by my hon. Friend the Member for Eastleigh (Mr. David Price) that there should not be a public inquiry at this time.

A feature of the Government is that we have commissions, reports, inquiries and witch-hunts of all descriptions. I reiterate that witch-hunts at this particular time—and I picked this word beforehand—and hunting for scapegoats is no help to the British shipbuilding industry and will not help those on the Clyde who have a very difficult task.

But the dilemma is still there, because public guarantees and public funds are involved. Many members of the public will ultimately hope for an adequate explanation. I regret that Government intervention promotes one to ask for inquiries at times of difficulty.

My third point concerns the shipyards. It is about 35 years since I first visited John Brown's shipyard. That is a name closely associated with Sheffield, so I have had an interest not only in the Clyde but in other shipyards. I had the privilege, with my hon. Friend the Member for Cathcart, of making a few inquiries as an outsider on the progress of the Upper Clyde shipyards this week, in Glasgow. The reorganisation and managerial difficulties have been immense. Any team of Members of Parliament, whether they are aware of shipbuilding problems or are concerned with public expenditure, must welcome the strides that have been taken, not only on the Upper Clyde, but in other shipyards.

Neutral Members of Parliament would want to assist those who are embarking on expensive reorganisation. I am the first to accept that if nothing was done on the Upper Clyde or in the other shipyards, the orders would not be coming in now. Any visitor will be given an account of the reorganisation, the employment charter, the productivity bargains, the problems of profitability and reconciling different costing systems when five shipyards come together. They are familiar problems of amalgamation and reorganisation. These problems face many industries today. The positive side of reorganisation on the Upper Clyde I am satisfied, is going ahead, but I also recognise that there are difficulties.

There is a new management and a new team. I fear that any inquiry at this time would distract the management and the new team from the task of making a viable and competitive shipyard on the Upper Clyde. For that reason, I welcome the decision taken by both Front Benches.

But there are problems. The hon. Member for Barrow-in-Furness (Mr. Booth) talked about the steam turbine, the gas turbine and the engine industry. This was dealt with briefly in the Geddes Report, at pages 66 and 67. Pametrada, as a combination, is no longer with us. Articles in the technical Press remind us that this is one of the largest engines of its type and the facilities for testing it are limited. I believe that the Shipbuilding Industry Board and the shipbuilding industry has to rationalise its engine activities as it has had to rationalise the yards. However, I accept that this takes time.

The building of the QE2 presented a changing industry with a new set of problems. During the course of my engineering activities I have experienced many occasions when the best prepared plans have had teething troubles and difficulties. I wish those on the Upper Clyde every success and a prosperous future. The country will welcome a solution to a difficult engineering problem that has faced the manufacturers and users of the QE2.

I come back to a point that I have already made: that this involves Government guarantees and Government money, and that the country must be satisfied that not only is it being well spent but that it continues to be well spent.

7.45 p.m.

Mr. William Small (Glasgow, Scotstoun)

Two hon. Members have given a tepid welcome to the Bill. I will not go into the situation in detail in terms of the economic manner of approach. I want to develop my argument in terms of the brand image of the nation as a whole. We are technically competent to hold our own in a very competitive world with Japan, Sweden and West Germany.

This is the Shipbuilding Industry Bill. The word "industry" has a very high content. The shipbuilding industry is not what is was. I served my time, and I speak as a fully qualified engineer—non-degree. I was brought up in an engineering environment all my life. However, when I look around and see the change in technology—and I will come to turbine technology later—I have some qualifications.

My approach is to take the Cunard-Brown relationship on the Clyde. The names are synonymous. They are not impersonal. They are household names, as was the P. & O. and the Castle Line. The young men of my time had a pride in their craft and considered themselves the best engineers. We need this element of self-satisfaction in our craft and the knowledge that we are out for perfection.

I ask: where were we in the days of steam? Then I take a look at the decisions that Cunard and other boards have had to make. Ten to fifteen years ago the liner traffic was the glamour traffic for shipbuilding. Japan would not have built the QE2. It will give five standard off-the-peg customer jobs. A sophisticated executive ship, to be the pride of the seas, will not be made in a Japanese yard. Standardisation has got a grip there on a commercial and competitive basis.

Cunard made a decision to come out of passenger traffic, so out go the "Corinthia", the "Sylvania" and others, and in come the "Franconia" and the "Carmania".

We then move on to Cunard's symbolic decision. According to Cunard's chairman, it is considering only 12 to 15 per cent. of its interest in passenger lines. The rest consists of its internationally-orientated cargo service. That is Sir Basil Smallpeice's view of Cunard today. Today's requirements are not the same as those of the past. That must be remembered. We have discovered North Sea gas. The new technology in shipping is bound up with container traffic. We must be able to compete with other nations in terms of our know-how in this respect.

I can illustrate my point by saying that in its time the Britannia aircraft represented the peak of British engineering technology. It was a very successful aircraft, but it was quickly followed by the turbo-jet and then the pure jet. The hon. Member for Sheffield, Hallam (Mr. J. H. Osborn) was too much concerned with economic gain and not enough with the brand image of the nation as a whole. The content of his speech was very narrow. A former Minister of Civil Aviation once described himself to me as a kind of Public Assistance Board for the aircraft industry, with the task of seeing that it was competitive. I am asking for no less in shipping—to maintain our leadership in turbine technology.

It was a political decision by the Government to set up the Geddes Committee, so that we did not have individual commercial judgment with various board rooms competing with each other. We must now ask ourselves whether it has been worth while. I am proud of the Upper Clyde Shipbuilders Ltd. Five companies have come together. There is co-determination to make the venture a success. We cannot shift workers, houses, schools and hospitals from the riverside. There is no other geographical location for shipbuilding.

During the period from 1959 to 1963 no fewer than 5,000 skilled workers left the Clyde. The problem that we face now is the resuscitation of confidence in the industry on the part of its workers. That confidence must be established. We hear a lot about participation in decision-taking. Fairfield's was a first-class experiment. It was a social revolution but it did not produce enough economically to justify it. Its inheritor—the Upper Clyde Shipbuilders Ltd.—has adopted almost 60 per cent. of the Fairfield principles.

The result of the adoption of these principles is £1 million a week in new orders. The hon. Member for Glasgow, Cathcart (Mr. Edward M. Taylor) will not disagree with me. Since 28th February, when it started, the value of the order book has grown to £57 million, with a potential of £30 million more if confidence is still there. Success has been achieved because the management carefully worked out the problems facing the company. It had an internal debate on wages to be paid with a smaller order book, and then with a larger order book, and it struck a balance between the two.

The Upper Clyde wage bill is such that there has been a 10 per cent. increase in wages right across the board—an increase of £1,600,000. This is the result of co-determination. This is the result of improving delivery dates and the restoration of confidence among the workers. The secret is mobility. The workers accept the principle of mobility within each yard. The Clyde is like a big building contractor. Because of its size it can go for a mix, just as a big building company can go for multi-storey flats, tenements and bungalows. Because five yards are concerned, the Upper Clyde can go for a mix in the market place. This makes a difference. I am sure that the hon. Member for Cathcart is aware that every word I am saying is true.

The manager of this company is the only one in the whole of Europe who has given a guarantee against redundancy to his employees. No other manager has taken such a calculated risk—if we can call it that. Co-determination is the "in" word on the Clyde. That shows the credibility of the political decision taken by the Government and supported by the industry. What I have said illustrates why things are healthy on the Clyde. I say this especially because it has had a bashing about the QE2.

The QE2 is a better ship than were the first two Queens. They could not go through the Panama Canal but the QE2 is designed to have a shallow draught. The upper cabin structure is made of aluminium. The ship has a speed of 700 miles in 24 hours. It can call at more passenger ports as a tourist vessel than any other ship. I say this having been in the "Michaelangelo" and the "Raphael".

In the old days Bell invented the telephone—by accident—and Marconi invented wireless. Today we have turbine technology. The success of I.C.I. has come about because it has 2,000 Ph.D.s to advise it and it has a plan right through to the year 2000. It has planned for all the possible trends and changes in the chemical industry. That is the nature of the animal at which the shipbuilding industry will have to look. The leaders of the industry will have to face the fact that the reorientation that is taking place in the industry concerns international container transportation. The Cunard company is alive to this.

I challenge any engineer or scientist—degreed or otherwise—to give a written guarantee that there will be no turbine failures. He will not do it. He will say, "I will give you up to a 5 per cent. margin." He is just as hopeful as all of us, but it is always a 5 per cent. margin. Car engines or turbo-jets, every engine ever made has a critical point.

I used to work in a test bed. I will not describe myself as what I am, but I know something about the instability of metal fatigue factors, molybdenum, vanadium, chromium and nobium, and there is a steel man over there. I know about manganese and the lot, internal expansion and clearances and all the rest of it, but that would be too technical and I do not want to develop any wizardry or to have a private telephone line to Heaven on the answers to this.

I did not support a public inquiry, but there should be a technical appraisal within the industry between Cunard and the U.C.S. group and let it go at that. I do not often take up time, but only speak on something that I know about. What is happening in terms of North Sea gas and reallocation of these areas is not necessarily a trend towards liner traffic. In view of these developments, many jobs will be required and men with a different knowledge, up to the latest skills, will be needed. I could have done many things. I can still bend a plastic pipe with hot air and get a good bend, but I could not weld ultrasonically metal to earthenware. But it is being done today. All these advances will lead to a requirement for some young men in future to do this job.

One of the problems with the QE2 was the introduction of so much aluminium and the need for the skills for harnessing and locating this metal and keeping it steady. In the Financial Times of 15th January, 1969—right up to date—speaking of whether this nation is slipping in the market place, and referring especially to John Brown Engineering (Gas Turbines), Arthur Sandles says that the industrial gas turbine market is basically healthier internationally, and that two United States companies have been looking for a partner. Great mergers are happening in this country internally in the shipbuilding industry, and now, the Americans, with all their technical progres, are looking for a partner. And they come to John Brown Engineering on the Clyde. So they are not mugs in America if they want a working relationship with John Brown's on the future of gas turbines. The company has signed a seven-year licence which gives them entry to the American market. There is nothing to be ashamed about in that, in this modern world.

John Brown's Clydebank yard, which is within the U.C.S. division, has successfully constructed four drilling rigs, establishing itself as the United Kingdom leader in this field. Upper Clyde Shipbuilders have secured an order for a drilling ship for the Clydebank yard, and John Brown's is negotiating another order. Drilling ships are a new development, combining the features of jacking up the drilling rig with those of a conventional ship. This is a new design study and appreciation will be required, because there have been failures at sea of drilling rigs with loss of life.

This shows what is happening in the passenger liner traffic. It is expected that there will be early delivery of a bulk carrier to the Glasgow owners, Harrison. I do not want to make a totally constituency speech, but the Provost of Clydebank, who has more than a nodding acquaintance with the Minister of Technology, is concerned about the pending closure of Babcock and Wilcox. I have also seen what is happening in the Burntisland shipyard. Men who have devoted their lives to an engineering environment are not ready yet to give up the ghost in their techniques and skills and their wish to apply themselves to a new challenge.

I hope that the Minister, by coming to Scotland or otherwise, can give credence to the idea that he is taking a deep interest in what concerns those who make their living in this industry. He might consider the Burntisland position and advance hope in Scotland, where we have had a lift by what has been done by the Government in terms of shipbuilding and otherwise.

8.7 p.m.

Mr. W. E. Garrett (Wallsend)

This is the third shipbuilding debate in which I have taken part recently and I have found this one of an exceptionally high standard. It is amazing how many hon. Members have a deep knowledge of this important industry.

I, too, would pay tribute to the speech of the hon. Member for Glasgow, Cathcart (Mr. Edward M. Taylor), which was excellent not only as it affects Clyde-side but the industry generally. I wish that I could say the same for the hon. Member for Horsham (Mr. Hordern), who more or less advocated economic anarchy. I should have liked to ask him, had he been here, whether he would advocate the withdrawal of agricultural subsidies in his constituency. I doubt whether he could have given a satisfactory answer.

There have also been two good speeches from the Front Benches, particularly from the Minister, who made a positive contribution. But he must also answer the pertinent questions which he has been asked.

Many references have been made to Sir John Hunter, chairman of Tyne Shipbuilders, in my constituency. I known that hon. Members have taken very good advice, and have made their protestations about the proposed increase in the price of steel. As Sir John rightly says, this can influence the whole economic structure of this industry. But no one has referred particularly to a speech which Sir John made—he makes many, since he launches many ships and uses the occasions as bases for his utterances—last week about the trade unions, which was ill-advised and did no good for relations in an industry which has been so troubled with industrial problems for many years.

Since there is a much better climate of opinion now, he would be well advised to allow the personnel people in this industry and the local union officials to sort out their local problems. Had there been better collaboration between men and management in the Barrow yard of Vickers, the unfortunate demarcation dispute which has gone on for so long would have been resolved by now. Members of Parliament and people in the industry, both management and employees, should handle these issues very delicately. Unless we can, we shall revive some of the bitterness which has affected the industry. I would advise Sir John Hunter, again, to choose his words carefully in dealing with this sector of the industry.

Are the medium and small shipbuilding establishments fully utilising these credit facilities? Hon. Members will remember the unfortunate occurrence in your constituency, Mr. Deputy Speaker, when the Burntisland Yard in Kirkcaldy, announced that it would close. The closure of yards of this kind are a major economic disaster because they represent the main, perhaps the only, sources of employment. Is it true that since the credit facilities became available little attempt has been made by management, and, I fear, by the Minister, to ascertain whether the medium and small yards are being helped to become more economic?

We hear a lot these days about the QE2, super tankers and huge bulk carriers. Nevertheless, the medium and small yards are important because the sort of vessels which they build form a substantial proportion of the orders that are placed. I am not satisfied that we have improved the techniques of production in this sector of the industry nearly as much as we should.

Are plans to be announced by any of the large companies forming consortia for improvements in ship-repair facilities? I fear that we are lagging behind in, for example, the provision of dry docking facilities. When we talk about producing 240,000-ton vessels we must not lose sight of the fact that dry docks must be provided for them. Capital must be found to build these docks to ensure that the work needed to be done on these ships can be done in this country.

The Republic of Eire has recognised this fact and is building not only an oil off-loading terminal point at, for example, Bantry Bay, but is considering building large dry docking facilities. Oddly enough, there is such a large dry dock in Portugal, which has been operating for about a year. If we had thought ahead we could now be obtaining orders to clean and repair these large ships. I trust, therefore, that cash will be made available through these credit facilities for this purpose. Are any of the firms involved in consortia on Tyneside, Clyde-side and Northern Ireland thinking in this direction and, if so, will credit be extended to them?

The shipbuilding industry has a good future. I do not share the gloom that some hon. Members have expressed and I do not agree with those who say that there will be a gloomy prospect after 1971. There is no doubt that a vast amount of reorganisation is taking place, that the management of the industry has changed its outlook and is doing much rethinking and that the industry is quietly building up its confidence and getting the right type of new management. The fact that it has a good future should help to improve the economy of the nation.

8.13 p.m.

Mr. Gordon A. T. Bagier (Sunderland, South)

This has been a wide-ranging debate in which the QE2 has been mentioned together with the activities of various shipbuilding groups. There must be the impression that everything is all right in this industry. I was disturbed by the speeches of some hon. Gentlemen opposite, who suggested that because we were pleased with the progress of the industry and the length of its order books, everything in the garden was rosy. Do they really believe that there is no need for the Government to extend these credit facilities? If they do, they are adopting a dangerous course.

While I welcome the state of the industry's order books, I cannot lose sight of the factors which have caused these orders to be placed with us. I believe that, at least in part, this trend has had nothing to do with the reorganisation of the industry. One of the main factors has been devaluation. Another has been the regional employment premium. This is particularly so in the development districts with shipbuilding yards because they have introduced a price range which has helped to make them competitive internationally.

We must not forget the effects of past short order books. We cannot be absolutely certain, for example, that we are not getting these orders because we can deliver earlier than most of our competitors. We must examine this aspect carefully before getting too excited about the industry and suggesting that it is out of the wood. For this reason, hon. Gentlemen opposite who have spoken in the terms to which I referred have not studied the Bill and what it is intended to do; for while it is designed to provide extra credit up to a ceiling of £400 million, it does not remove the obligation on shipyards which apply for credit to take further advantage of reorganisation schemes and other factors which can help them become more competitive.

We need not look back far to realise that the industry was in a very bad way indeed only a few years ago. In 1963, it produced only 1.52 million gross registered tons. In 1964, the figure dropped to 0.36 million; and while, in 1965, it went up to 1.77 million, it slumped again in 1966 to 0.48 million gross registered tons. With the intervention of devaluation and other factors—not forgetting the short order books at the time—our order books began to lengthen.

If we do not remain competitive I shudder to think what will happen if there is no longer a growth in world demand for shipbuilding and the industry becomes internationally highly competitive. Bearing these things in mind, I trust that hon. Members will not even start to think that the industry is out of the wood or that it does not need assistance from the Government.

We should not forget to give credit to the S.I.B. We recall what former Administrations did, and particularly the £70 million which was handed to the industry in credit to help it over the desperate period in which it found itself only a few years ago. At that time there was no obligation on it to reorganise. The Labour Government have not only made provision for money to be granted to the industry, but are ensuring, by the Bill, that on this occasion it will not merely be helped to get over its present difficulties but will be helped to become viable. We must not lose sight of the consequences of recessions in this industry.

Not all shipyards easily accepted the requirement to regroup. On Wearside, we had a long and protracted struggle. There were many reasons for this, which I will not go into now, and I would like to know from the Minister just what is the present position on Wearside.

We must not forget to give credit to the trade unions in the industry, for they have co-operated well. There have, of course, been isolated problems, but there has been, and is, a great move in the right direction on the part of our colleagues in the unions, along with management, and there is a genuine desire to make the industry viable. It is accepted that the world does not owe this industry a living and that it must remain competitive if it is to stay alive.

I pay tribute to my right hon. Friend for enabling the Furness establishment to be retained. At one time it was said that it did not have any chance at all of surviving, the grouping on the Tyne gave confidence in the viability of Furness, with the result that the establishment was taken under the group's umbrella, and we were thereby able to save many much-needed jobs in the North-East.

Those of us who represent constituencies in which the industry is sited are interested not only in the solution of the short-term problems, but in reorganising the industry in such a way that it will not be necessary to ask for help every 18 months or so. We want the industry to be in such a position that, whatever the state of demand for ships is in five, 10, 15 or 20 years' time, it will be viable and capable of meeting competition from wherever it comes.

8.20 p.m.

Mr. Simon Wingfield Digby (Dorset, West)

It is about two years since the House debated shipbuilding. Hon. Members have welcomed the opportunity of doing so today. Many hon. Members have special constituency interests. Many more of us have a great affection for the industry, even a sentimental one. Shipbuilding ended in West Dorset with the arrival of iron ships, because our rivers were too small to launch them into. The River Brit is not a large river.

The debate has been well-informed, though some points have been made several times. The debate has, perhaps, been rather narrow, but a great deal of well-informed opinion has been expressed and there has been an extraordinary degree of unanimity. The conclusions reached on both sides have approximately accorded with what the Minister said in his interesting introductory speech.

The Bill doubles the ceiling of guaranteed loans for home owners at a rather artificial rate of 5½ per cent. There was a time when the industry had strong connections with certain overseas owners, some of which unfortunately have lapsed a little. Our home owners are extremely important. I was told yesterday in a Written Answer that the whole of the £200 million provided under Section 7 of the 1967 Act is about to be used up. True, the order book is much larger than it was. Those who remember the overfull order books of the 1950s, as I do from my time at the Admiralty, would not say that we have reached the stage where the order book has become an embarrassment. It is absolutely right that this extra money should be voted.

The hon. Member for Sunderland, South (Mr. Bagier) rightly said that one reason why there has been this great acceleration in orders has been the attraction of the short order book and earlier deliveries. We might be premature in reaching too many conclusions about this sudden flush of orders.

The home market is important. Many hon. Members would like to see British-owned ships British-built as well. United Kingdom tonnage is still an important factor in world trade. On the latest figures available to me, the United Kingdom registered merchant fleet amounts to no less than 21.9 million tons. We have been overtaken by Liberia, which now has over 25 million tons, and Norway's tonnage is approaching ours, but they are still very important customers for our shipbuilding industry. The Russians have increased their fleet to no less than 12 million tons, a subject more for comment in a defence debate than in this one.

It is heartening to know that in 1968 orders were 2½ times those for 1967. I was particularly heartened by what the Minister said about the dramatic increase in the proportion of world orders which we are obtaining: that was the best news that has come out of this debate. Although the orders are good, launches and completions are still rather disappointing, but they can be explained. It is heartening, too, that the number of cancellations, which at one time was considerable, has declined.

Therefore, tonight we can have cautious optimism about the industry's future. I say "cautious", because Japan's achievements are remarkable. Japan is mostly turning out fairly simple ships like tankers which do not have a tremendous amount of work in them. One Mitsubishi yard alone—Nagasaki—is turning out no less than 800,000 tons a year. With the output from the Yokohama yard and from the Kobi one and, I believe, from another yard that Mitsubishi has, the total output by Mitsubishi is very great. It must make us wonder about the advantages of vertical integration as opposed to horizontal.

This is no time to limit the amount of loan help to the industry. My hon. Friend the Member for Tynemouth (Dame Irene Ward) was right to point out the tremendous balance of payments advantages that there are. She was also right to point to the handicap under which the industry has suffered in recent years due to the greatly reduced amount of naval orders, with so few ships of any size being built for the Royal Navy.

It is a pity that the report of the Shipbuilding Industry Board could not have been ready. I accept that this is not a matter for the Minister. In Committee on the 1967 Bill we stressed the importance of the House having early information. It is a long, long time from July to January. I am sure the Minister will take any action he can to speed up the report.

In the absence of the report, it is difficult to judge the type of work the Board has been doing. It is obviously doing a good job, though we detect certain signs of rigidity in its work. I was delighted to hear about the studies it is undertaking into market research and accounting. The Board comes to an end in 1970, although it could be extended for a year. What happens after 1970 or 1971? Although the Parliamentary Secretary obviously cannot anticipate what his opinion will be if he is still in the Government then, I should like him to tell us what is in the Government's mind.

The Bill amends Section 7 of the original Act. At the time of the passing of the Act we had doubts about the conditions to be attached to any help in the form of loans. There were accounts that loans were being withheld in the case of the Wear, although I understand that in the end the yards concerned got the loans they required. We are all very pleased to hear about the orders that Doxford has won in the last few days. The Written Answer I received yesterday stated that no orders have been lost through the Board having refused to grant approval for loans. Although it is desirable that the Shipbuilding Industry Board should be able to exercise a certain influence in regard to amalgamations there could be nothing worse than that it should try to use the big stick too much. There are certain areas of difficulty. My hon. Friend the Member for Belfast, East (Mr. McMaster) mentioned Harland & Wolff. The Lower Clyde is another difficult area. It would be a mistake to be too rigid in our approach to amalgamations simply because of something which Geddes said or did not say.

There has been a heartening increase in the amount of guaranteed loans outstanding. At first sight, perhaps, it is a little surprising that the banks should be willing to lend this money. I take it that the Government have no doubt that the extra £200 million will be sufficient. I suppose that, in about four years, as all loans are taken out for eight years, the maximum figure outstanding will be reached. At one time, I detected some reluctance on the part of the banks to find the money. Perhaps the Parliamentary Secretary could tell us why they now appear to be willing to lend it at a rate of interest much below that of the market.

The principal case for continuing these loans depends on a number of factors, not all of which have been brought out in the debate. The first is the soaring cost of new ships to owners, coupled with the low return which, unfortunately, shipping is bringing at present, making it difficult for owners to provide fully for these greatly increased costs of replacements. Then there is the all-important need which has been stressed a good deal today, to match our competitors abroad. For a long time, the industry was able to stand on its own feet despite all the subsidies abroad of one kind and another, but foreign subsidies had an impact which it could hardly be expected to bear. It is an industry fully exposed to world competition. This must never be forgotten—a point very well brought out by my hon. Friend the Member for Glasgow, Cathcart (Mr. Edward M. Taylor). It should be our objective to have British-built ships for the British flag. This is an aim which will appeal not only to hon. Members particularly interested in shipbuilding but to others as well.

There is a case against continuing an artificial rate of interest. That case was made by my hon. Friend the Member for Horsham (Mr. Hordern), and there are others who think like him. They do not approve of an artificial rate, of two different rates of interest, and they also regard it as inflationary that the money should be found in that way. In the present state of the order book, if the advantageous rate for home owners were cut off, a lot of the slack, I am sure, would be taken up by more orders from abroad, but I have always taken the view that, in the long run, it pays us hand over fist to build our own ships.

Special considerations apply to the shipbuilding industry. The world reputation which has been built up by British-built ships is a great asset; it has taken 100 years and more to establish it, and it is still something which is understood all over the world. There may be those in the Board of Trade and elsewhere who say that the shipbuilding industry's conversion factor is not as good as that of some other industries, but the new industries will take a long time to build up the sort of reputation which has been achieved by great shipbuilding areas like the Clyde and the North-East for British shipping, a reputation which has been, is and will be for a long time respected throughout the world.

There is another special factor in the very concentration of the industry on certain rivers, where it plays such an important part in the national economy. In my view, that factor alone justifies special treatment for the industry.

Inevitably today, the question of the QE2 has been in our minds and there have been many references to it. I still believe that she is a magnificent ship. She is a prestige ship, but she is a commercial venture as well, a valid commercial venture. But it is particularly unfortunate when there is criticism of something of a prestige ship. I am very sorry that some of the things that have been said and written about this setback—for setback it is—have been a little exaggerated. She is not a typical ship in any sense. It is wrong to attach to the industry as a whole any blame there may have been.

There have been two subjects of criticism—the general delay and the turbines. The delay has not really been all that great, and it is not altogether surprising, because she is a unique ship, technically very advanced. In particular, there is the factor of the enormous use of aluminium in the superstructure, amounting, I think, to 1,200 tons, which presented all kinds of problems. As far as I know they have been successfully overcome. At the other end of the scale, there is the question of the internal decoration. Those of us who saw those designs at the Design Centre will have felt that it was a tremendous fillip to other industries from which advantage can be derived.

There was a rush to get the ship ready in time. Many temporary workers had to be taken on, and there was the worry of lack of following orders. But anyone who was fortunate enough to attend the launch will have no doubt of the pride that the Clyde and Scotland took in the ship and their desire to do the best for her. If a few people have let the side down, that should not be over-emphasised.

The very fine achievements in other yards have rightly been pointed out. There was an article in The Times of 20th January, and the right hon. Member for Sunderland, North (Mr. Willey) spoke about the record of Bartram and Doxford for ships delivered on time or before Therefore, it would be wrong to place too much emphasis on the late delivery of a very special ship of this kind, the last of a generation.

What really worries all of us is the question of the machinery. When we think that steam turbines were invented and given to the world by Sir Charles Parsons, whose name remains in Pametrada, it is unfortunate that this should have happened. But we must remember that a German ship, the "Hamburg", has been delayed for three weeks in launching because of turbine trouble, and the Central Electricity Generating Board has had a great deal of trouble with its turbines. There is the question whether, since the closing of Pametrada, it was possible to test the turbines in the way they could have been tested while Pametrada was still going strong. I hope that the Parliamentary Secretary can say something about that. Turbine trouble occurs quite frequently, though I can understand that it is particularly disquieting for the public that it should have happened in the case of the QE2. We all share the hope that the trouble will be rectified fairly soon. If it went on too long it would cause a good deal of public disquiet.

There has even been some questioning of the whole concept of the QE2, but I have not much doubt about this. The smaller QE2—smaller than the Q4 would have been—seems to me a perfectly valid commercial concept, viewed both as a transport and as a cruise ship. Even with its unfortunate start, I believe that this magnificent ship can still achieve tremendous success and do a great deal for British prestige abroad, and I still feel that the loan made by Parliament for her was fully justified.

When one looks at her from the point of view of shipbuilding, she is the last of an era and not a prototype for a new age. If the machinery trouble had been due to nuclear reactors, it might be more easily understood. The Chandos Committee mentioned the possibility that when the time came the best thing to do might be to try out nuclear machinery. But in the event that was obviously premature.

I must say something about steel prices. The right hon. Member for Easington (Mr. Shinwell), in a typically interesting speech, mentioned them, as did the hon. Member for Wallsend (Mr. Garrett). Steel prices are perhaps the biggest hurdle facing the industry. The Geddes Committee made no bones of the fact that this was one of the most important cornerstones of its Report. The Report has been more or less implemented with the single exception of steel. The increases in the prices of steel of the kind suggested now would, I am advised, mean an increase of 2 per cent. on all ships, and, when one comes to the "extras", the increase is very great indeed and out of all proportion.

It may be asked why shipbuilders should not order foreign steel at a cheaper price, as our competitors can do. But if more than 20 per cent. of the components of a ship are ordered abroad, I understand that the loan is reduced. There is thus a strong disincentive to our shipbuilders to order steel abroad. And why should they buy it abroad? Why should we not be able to go on producing British steel at a price suitable for our shipbuilders?

I wonder what is the object of the idea that Lloyd's specifications do not matter all that much. Is it the object of the steel authorities to try to secure bulk orders and standard plates? I feel that a certain amount of bureaucracy crept in here, and I hope that the right hon. Gentleman will tackle the Minister of Power about this very important matter. Now the steel industry is nationalised, I see no reason why the special needs of shipbuilding, which are very much in the national interest, should not be regarded and why this section of the Geddes Report should not be implemented. As the hon. Member for Sunderland, South said, we are not out of the wood, and I think that this is one of the most important ways in which we are not out of the wood. So I beg the right hon. Gentleman to take these negotiations about steel prices very seriously.

This House should not send out to the shipbuilding industry today a message of criticism and doubt just because of one ship. We should send it a message of encouragement because it has got through lot of its difficulties and it faces many more difficulties ahead in many areas. Despite this, it is on the right road. I have no hesitation in inviting my right hon. and hon. Friends to vote for the Bill, for these extra guaranteed loans, because I believe them to be thoroughly justified in the circumstances and because I believe that we have to compete with the shipbuilding industries in the rest of the world on level terms.

A few years ago, I visited South Amercia, and along the Pacific coast I saw a ship which had been built on the Clyde far back in the last century, nearly a hundred years ago. There she was, for special reasons of war something of a national monument. I believe that British ships have a reputation that will long survive in the four corners of the world.

8.45 p.m.

The Joint Parliamentary Secretary to the Ministry of Technology (Mr. Gerry Fowler)

I was sorry to hear of the sad demise of the shipbuilding industry in the constituency of the hon. Member for Dorset, West (Mr. Wingfield Digby). If only it had survived until the lifetime of the present Government, we might have hoped that it would have grouped with my similarly dead coracle-building industry at Ironbridge on Severn, when we would have had a new rival to the Clyde and the North-East.

May I say how glad I am to see you, Mr. Deputy Speaker, in the House for this debate? There are dark shadows across the shipbuilding industry even now. One of them is the sad news, which struck in the latter part of the last year about the Burntisland shipyard. We in the Ministry of Technology have spared no effort to find, if we can, a commercial solution to this problem to keep this yards in shipbuilding, and the hon. Member for Kirkcaldy Burghs (Mr. Gourlay) has made as strenuous an effort to save this yard, as could be expected of any constituency Member, and all credit is due to him for that, and I hope that his efforts and ours will be rewarded with success.

I can only repeat my right hon. Friend's apology for the absence of the Report of the Shipbuilding Industry Board. It has been with the Comptroller and Auditor General for some time, but I understand that as it deals with a new type of expenditure, it has taken him some time to finalise his Report. It is a pity that hon. Members have not had the Report before today's debate, but there was little we could do about it.

This has been a wide-ranging debate, as are all debates on shipbuilding. We always discuss not simply general questions, but also the regional and local interests of each hon. and right hon. Gentleman affected, and that makes it very difficult to reply, because one is always asked a plethora of questions not only about national matters, but about the fortunes or prospective fortunes of particular areas. I hope that hon. Members who feel that I have neglected some local issues will not hold it against me, but I do not want to detain the House too long.

The Bill has two purposes. The first is to extend the limit of outstanding liabilities under guarantee for a further £200 million to £400 million. The second is to amend the original Section 7 of the Act so that the amount available for guarantees is limited not only by reference to the actual total of guarantees in force at any given time, but by any amount paid by the Minister of Technology on guarantees so far as they have not been recovered by him.

This was an omission from the original Act which neither side of the House spotted at the time. I am glad to be able to tell the House that we have "come clean" and that we are showing the utmost honesty and saying that we do not want to be able to sneak even one extra guarantee by means of this loophole.

I have been asked a variety of questions, not least by the hon. Member for Eastleigh (Mr. David Price), about the guarantee scheme. The hon. Member asked me when the scheme would reach its peak and he suggested that there would be a specific peak and that the amount under guarantee would then fall away. I do not think that that is right. A revolving fund of guarantees does not rise and then fall away, unless there is some extraneous factor which leads the amount under guarantee to fall away, such as a decline in orders placed in British yards. Rather it rises to a plateau and should remain on the plateau if we continue to gain our due share of world orders.

Mr. David Price

We can argue about this later, but I think that the hon. Gentleman will find that it peaks and then goes down to a plateau. If he plots it, I think that he will find on the speed at which the first £200 million has been taken up in relation to an eight-year term that while it settles down to a plateau, it still peaks to begin with.

Mr. Fowler

At all events, while we can argue about this afterwards we are agreed that it will settle down at a plateau. I would not dissent from the hon. Member's view that it should happen soon after 1970. I cannot really be more precise than that. I would expect that repayments will begin to be made on loans which have been guaranteed in this way by the end of 1969. The initial sums repaid will not be very large.

The hon. Gentleman also suggested, and other hon. Members have alluded to this, that preferential credit schemes are ultimately undesirable—that they are desirable in this country not least because they are prevalent internationally. He asked what we were doing about this. As he will know there has been an O.E.C.D. shipbuilding working party considering the subsidies and other forms of assistance given to shipbuilding industries throughout the world, in a wide variety of ways. I will not detail these now, but would like to say to the hon. Member for Horsham (Mr. Hordern) that he need not doubt that these practices exist. This is the principal justification for operating such a guarantee scheme ourselves.

We have to be sure that our ship-owning and shipbuilding industries enjoy the same advantages as other industries in other countries. The schemes are different in every country. The way help is given differs, but that does not mean that the result is not much the same across the board. Our aim remains to work for an international agreement to contain and reduce Government assistance to shipbuilding, which has become so permanent a feature in so many countries. Those countries were operating such schemes long before we gave any substantial assistance to our own industry. There probably is not a single shipbuilding country in which some form of special assistance is not given.

With regard to the terms for export credits, which lie behind the level of the interest rate for the home order credit guarantee scheme, the Government are discussing the possibility of an agreement with the other members of O.E.C.D. The House will be glad to know that progress is being made and that there will be further full discussions with the industry before any final decisions are taken.

Let me now turn to another question raised by the hon. Member, and repeatedly by other hon. Members. It was pointed out that Section 7(3) of the 1967 Act ties the grant of guarantees to the life of the Shipbuilding Industry Board. It was asked what would happen when the Board no longer existed, because the first life of the Board is limited by the Act to the end of 1970, and its resurrection cannot be for more than another year, at least by the terms of the Act.

Hon. Members pointed out that after the death of the Board we could no longer give guarantees on the basis of reorganisation, as is done by Section 7(3). The hon. Member for Belfast, East (Mr. McMaster) suggested that the answer to this might be to extend the life of the Board. I do not want to commit myself tonight to any particular solution. All I can do is to assure the House that we are well aware of the problem, and say that unless we can reach international agreement with sufficient scope to ensure that our industry can compete with rival industries, without any form of special assistance, then our present thinking is that we shall have to ensure that there is some credit assistance of this kind, though not necessarily of precisely the same kind. I cannot in any way anticipate the details of what may be a future Bill.

Perhaps I should explain why, in that event, the Bill extends the amount which my right hon. Friend can guarantee by precisely £200 million and not a greater sum. I draw the attention of the House to the provisions of the Section of the original Act which require the Board, before it can recommend a guarantee, to satisfy itself that the ship on order will use resources which would otherwise shortly be unused. It is clear from the provisions of that Section that one cannot attempt to see too far into the future in making further provisions at this stage while maintaining the ultimate sanction which that Section provides for the Board.

That sanction has been useful. If hon. Members say that the Board has threatened to use it only once and then, in the end, gave the guarantee, I recall to them the theory of the deterrent. It is commonly said that a deterrent has failed if it is used. That is the justification for that provision of the 1967 Act. We may have to reconsider the position as a whole at a later date, but it would be unwise now to anticipate precisely what might happen at that time.

Another point raised by the hon. Member for Eastleigh on Section 7(3) concerned guarantees for ships built in smaller specialist or isolated yards which cannot reorganise. I suspect that he is confusing the phrase used in Section 7 of the 1967 Act, namely, reorganisation of resources, with the crude term which we frequently use in referring to the activities of the Shipbuilding Industry Board, namely, grouping.

The hon. Member for Belfast, East asked whether non-merged yards would be penalised. That is not what the Act provides. It does not provide that the S.I.B. must consider whether a yard has grouped or intends to group. It must consider whether the yard has reorganised its resources, or intends or has plans to do so. That is quite different from grouping. There cannot be a yard in this country which, even within the life of the S.I.B., has not reorganised its resources, whether physical or human, to some degree. The hon. Gentleman can rest assured that this will not be an obstacle in the way of giving guarantees in respect of orders placed with isolated yards.

I turn to the question of the order book of the industry and its production in the past year. It is clear that this lies at the root of the timing of the Bill. We have had to introduce the Bill now because the industry has received so many orders during the past year. There is a variety of reasons for that. Devaluation has been a great boost, albeit not necessarily a boost which will last for ever, to the British industry. The effect of grouping has certainly made some yards much more competitive by virtue of the strength which they derive from their fellows in the group.

Greater efforts have been made by the industry to achieve delivery dates which are on time or before time. Many hon. Members have referred to that phenomenon. I will say no more about it save to please the hon. Member for Belfast, East by quoting that newsworthy man, Mr. Aristotle Onassis, who, when asked why he had at last placed orders in Belfast, said, "Because Harland and Wolff has shown that British yards can meet delivery dates as well as produce the best quality ships".

Mr. Onassis has never had any doubt on the later point, but he has now been shown that they can meet delivery dates, too. Every group in the country has shown improvement. Most of them have a first-class record over the past year concerning delivery dates. This, too, has been an important factor. The credit guarantee scheme has, perhaps, been the most important factor of all.

At all events, the situation is that when one compares the state of the order book today with what it was 18 months ago, one discovers that our share of ships on order on a worldwide basis has gone up from 6 per cent. to approaching 8 per cent. That is a quite steep rise in 18 months. At the same time, the Japanese share has gone down from 46 per cent. to just under 37 per cent. We are, therefore, making progress and it is something of which we can be proud.

Progress did not stop at 31st December. Hon. Members who have read their newspapers recently will have read the accounts of orders announced this month. I make it in the region of 1¼ million dead-weight—not gross—tons of shipping already ordered this year from British yards. I make, too, the value of those orders to be considerably in excess of £60 million. This is very good going. The boom in ordering from British yards has not yet come to an end.

Orders are one thing, however, and the production of the industry, best measured by its launches, is another. Many hon. Members have suggested that we were not as well up in the world league production, measured by launchings, as we might be, and that is probably true. Nevertheless, the figures are a little misleading because of the type of ship which we build in this country.

The hon. Member for Dorset, West rightly drew attention to the fact that the Japanese build a much higher proportion of relatively simple ships, whereas we build a much higher proportion than they do of relatively complex ships. As the hon. Member will know, to take account of this a system of compensated tonnage has been devised which irons out the crudities of measurement in gross registered tonnage.

Looking at the 1967 figures, for example, one finds that the Japanese proportion went down from 47½ per cent. to 42 per cent. of tonnage launched. The Swedish and German proportions also went down. We find on this basis that the United Kingdom was at that point of time in 1967 running second in the world league, at 8.5 per cent., whereas Sweden and Germany were 7.2 and 7 per cent., respectively. On a crude tonnage basis, the Swedes at least were ahead of the United Kingdom. It should be remembered, therefore, that the crude figures are misleading and that because we build sophisticated ships, we are under-represented in the crude figures of gross registered tonnage launched.

This is a magnificent improvement, but it would be unwise tonight to suggest that the picture is wholly one of sunshine. There are many tasks still before us, especially—I was glad that the hon. Member for Glasgow, Cathcart (Mr. Edward M. Taylor) drew attention to this—the need to increase throughput Productivity agreements are essential, but equally essential is to ensure that the productivity provided for in those agreements becomes reality. Productivity is not simply a matter of productivity agreements. It is also a matter of management methods and of the reorganisation of physical resources.

Many factors go to make increased throughput. I would like to see industry eating up its much improved order book much more rapidly than would have been the case had it merely maintained the throughput of two years ago. If it succeeds in eating through its present order book more rapidly than past history would lead us to expect, then we must now be looking for more orders. With the order books in their present state one might be inclined on past history to say that we can begin to slacken off a bit; as most yards are pretty well provided for until the end of 1970 or well into 1971, why should we bother to look too far ahead; after all, costs might rise and it is singularly unwise to take orders too far ahead.

If we can do the essential thing of increasing throughput, then we should be looking now for more orders, and this has a substantial bearing on why the Bill is needed now. I hope that we can increase the share of world orders that we have taken, not simply this year, last year or the year before, but that we can continue to increase it year by year for several years to come. We shall be able to do this only if we can get faster throughput in the yards.

There are many other problems, some of which have been mentioned. Many of them I do not want to say much about; if I were to do so it would delay the House too long. I want to say a word about marine engineering, which was raised by so many hon. Members. I will not say too much about it, as it is very marginal to the Bill.

My right hon. Friend the Member for Easington (Mr. Shinwell) suggested that the industry is contracting rapidly. The hon. Lady the Member for Tynemouth (Dame Irene Ward) suggested that we were left in rather a fog because there was so little information of what was happening in the industry. I have a little sympathy with both points. Perhaps I can deal with the latter point by giving some information now and with the former point by saying that figures can be very misleading.

What is the marine engineering industry? Is it merely the production of marine engines, is it the production of all other engineering products connected with shipbuilding, or, if it is neither of these, is it something in between? Whatever the definition may be, how is the number of people employed in the industry precisely determined? Many of them may be employed on engine building at one stage in their career and on other forms of marine engineering when the order book of a particular engine builder has gone down. Some engine builders even taken in jobbing engineering work. It is difficult to give a precise figure, but I doubt whether there are more than 5,000 at any one time employed in the manufacture of slow-speed marine diesels, but it would be hard to prove that assertion.

What has happened in the marine engineering industry is that we have been having concentration. We have been getting Geddes by stealth. This is where I have some sympathy with the hon. Lady the Member for Tynemouth; it is by stealth; there has not been much publicity. The two works in which marine turbines for ships are concentrated are A.E.I., with orders for several of their own design, and John Brown Engineering, which has licences for popular designs of foreign origin. Vickers, of Barrow, also build turbines for certain naval vessels.

There are now four works in which three quarters of the production of slow-speed diesels is concentrated; George Clark and N.E.M., Doxford, Kincaid and Harland and Wolff. Although other marine engineering works have also taken a few orders, it is with these four that the bulk of the orders is concentrated. It is on these four that I would expect the industry to recreate itself in the years to come. The Geddes Report recommended concentration of production whether or not that involved grouping. On the basis of this commercial development after a period when all the works were short of orders, reorganisation of resources is necessary and is now proceeding quite well. The industry still has a long way to go, and its progress will be attended with much less publicity than the reorganisation of the shipbuilding industry itself. But it is moving rapidly in the right direction.

Mr. Shinwell

Has the Department entered into consultations with the Shipbuilding and Engineering Federation, the trade union, on this subject of marine engineering? Has it seen a copy of the report issued by the union, and, if so, can my hon. Friend say what was the reaction of the Department?

Mr. Fowler

When I saw my right hon. Friend waving his report I suspected that it was the report circulated to the Shipbuilding Council by the unions. We have seen it and taken it into account in our deliberations and consultations with the S.I.B. on the subject.

Turning to the QE2, which is the other major topic that has been raised, patently it has been in the forefront of the minds of many right hon. and hon. Members who have spoken in the debate. My right hon. Friend and I have kept in close touch with progress since the difficulties in the QE2 began to appear and, indeed, long before then. Our contact has been not only with the chairmen of the two companies, but with the chairman of the S.I.B. It has been most valuable and helpful to have the advice of a prominent industrialist on problems of this kind.

All sorts of charges, justified and unjustified, wild and less wild, have been made about the QE2. I shall not go into many of them and certainly I shall not talk at length about pilfering. I think that that is essentially a matter for the mangement and the police. If there has been pilfering, it is disgraceful and deplorable. However, I think that we have developed a talent for starting hares and pursuing the "poor wee timorous beasties" over hill and dale in our righteous indignation. This hare is a nasty and unpleasant brute, but it is silly and unfair to pin much of the blame for the troubles on it. I do not think that pilfering has affected the issue substantially one way or the other, and it should not bulk large in any judgment about the QE2. There have been faults of men and management, but the most significant fault remains that of the turbines.

So as not to give my own judgment, all that I can do is to quote the judgment of a learned periodical. I read the other day: It is only fair to say that this kind of thing can happen to any new turbine design. Turbine design is a very difficult business, as the QE2 affair has illustrated. That seems to be the fairest judgment. In large measure, it was bad luck.

Nor are such technical difficulties unique to Britain, as so many hon. Members have pointed out. Many hon. Members will have read the article in the Sunday Times by the London correspondent of the New York Times. To quote one sentence of it, he says: There were bound to be risks in building so technologically advanced a ship, and faults are hardly unprecedented in complex modern liners. He gives some examples, and concludes: What seems unjustified is any national sense that Britain is worse than any other country and must therefore suffer. That is a very reasonable judgment.

The hysterical treatment accorded to the difficulties of the QE2 by some reflects less credit on the nation than these difficulties themselves do. This is not an attack on the Press, even that part of the Press which dealt in sensational headlines like "Ship of Shame". The Press is but part of the nation, and it reflects what is becoming a British malaise. I mean by that the inability to resist the temptation to denigrate ourselves, and the wish to parade ourselves before the world in sackcloth and ashes and to scrutinise ourselves in public every day lest a new blemish on the body politic should have escaped our attention.

We seem to have lost the capacity to treat our foibles with the wry humour that many of them deserve. Above all, we forget that we are, each and every one of us, part of the marketing team for British goods. Foreigners do not ignore our criticisms of ourselves.

In the case of the QE2, over-anxiety that its commissioning and maiden voyage should be days of glory for British technology contributed in no small measure to making them the flop that they were. An excessive zeal to succeed concealed for too long from those responsible for the ship that the target dates could not sensibly be met, and the difficulties which should have appeared on private trials were revealed in the glare of publicity which was meant to attend the ship's triumphant entry into service. I suspect that over-anxiety was at the root of it.

When all is said and done, the QE2 is a magnificent ship. Its technology is advanced, and it is a showplace for what British industry can achieve. Some say that it is not particularly complex because people have been building passenger liners for a long time. But let me give some examples. It is claimed to be the first ship in the world with automatically lubricated rudder bearings. It probably has the most sophisticated computer system ever installed in a merchant ship, the first to combine technical, operational and commercial functions at sea. Its radar equipment, supplied by G.E.C./ A.E.I., includes the most modern automatic plotting techniques. It is probably one of the biggest break-throughs in marine radar techniques, because it is no longer necessary to hand plot the past track of other ships.

To take a final and interesting example, many hon. Members may not know that there are three Weir Westgarth flash evaporators in the main engine room, each producing 400 tons of fresh water from the sea per day, and all done automatically. That is an advance in marine technology that springs from the collaboration of Weir with the A.E.A., a collaboration which has ensured that last year Wier secured every single desalination order placed throughout the world. We should be proud that we have incorporated these things in a new liner. It is a magnificent ship. I believe that it sets new standards in ocean comfort, enjoyment and elegance. The task now is to get this new Queen of the seas into service with maximum speed and minimum fuss.

I pass now to the Upper Clyde Shipbuilders, since it has had so much bad publicity in connection with this ship, and most of it undeserved. I was sorry that my hon. Friend the Member for Glasgow, Govan (Mr. Rankin) stressed so much the worries of members of the work force of Upper Clyde Shipbuilders. He suggested that U.C.S. must reorganise on the basis of full employment. This is exactly what U.C.S. has been doing. This was the secret of the initial acceptance by the work force of Upper Clyde Shipbuilders of reorganisation.

Never before has a shipbuilder of any size and substance in this country given a guarantee of employment to all its work force with over nine months' service. It was only able to do this by the early drive for orders. That early drive necessarily deferred some of the other essential reorganisation. It could not do several things at once. A great task still lies before U.C.S. But I have every confidence that if the management of U.C.S. approach these problems in the way that it has approached others in the first nine months, it will make an enormous success of the project.

Mr. Rankin rose—

Mr. Fowler

I ought to press on.

I have been asked about a whole variety of other areas, in particular whether any further grouping is in mind. It is impossible to answer that question sensibly tonight, for the simple reason that the need to group may become apparent only to the management of a certain area when it faces some heavy new investment or some crisis in its fortunes. Certainly, further groupings may take place; certainly, they may take place on the Wear or in that area that we call the Irish Sea. But I would be silly if, tonight, I sought to forecast what those groupings might be. The experience of my right hon. Friend and myself indicates that it is rare, in keenly competitive business, for companies to be sure for long that their present organisation and size are ideal. I am not going to seek to look more than 18 months ahead. I merely say that I do not regard the present organisation of the industry as sacrosanct and necessarily static for ever.

I have been asked repeatedly to say something about steel prices. Almost every hon. Member who has spoken has asked me to do so. I can be brief. The matter has been referred to the Prices and Incomes Board and I do not wish to anticipate its judgment in any way. I make only one point. The Government have not shirked their responsibilities by referring this matter to the Board. A new situation exists in terms of the price of steel for ships. Not only can the industry, through the S.R.N.A., make representations, but the S.I.B., as an independent body, not part of the industry but with considerable expertise about it, can also make representations to the Board. In this way I hope that the Board will be able to come to a reasoned judgment with the best expert advice.

I would not wish to predict the future market for ships, whether on a world basis or at home. It is a very hazardous business. It may be that the new types of ship—the large tankers and the container ships—will have a shorter life than those to which we have become accustomed, with a rather more slowly developing industry, over the past century. It may be that the future world market will remain buoyant. On the other hand, it may not. We do not know.

I hope, however, that whatever the size of the future world market, the United Kingdom will continue to get at least 10 per cent. of it or, better still, an increasing share every year. I hope that with greater throughput we can eat up that increased share. The industry today is healthier than it has been for a long time past. It is recovering its rightful place in the world, and the Bill is essential to enable it to maintain that place.

I am proud to be a member of a Government who have done more for this industry—an industry which is vital to the economy in terms of its exports and import-saving as well as to the men employed in it—than any of their predecessors. They have done so with the good will of hon Members, on both sides of the House—and I pay tribute to all those hon. Members—although there have been one or two dissentient voices tonight.

I therefore commend the Bill to the House in the hope that it will enable us to continue the good work that we have been doing.

Question put and agreed to.

Bill accordingly read a Second time.

Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).