§ 9.48 p.m.
§ Mr. William Hamilton (Fife, West)
The legal luminaries have had their say, and I hope that we shall be a lot briefer in this debate.
Last weekend a storm in a teacup broke out in our newspapers, especially the Scottish newspapers, about British Railways' decision to place a contract for the building of a car ferry ship with an Italian firm of shipbuilders. We had some instant politics from the expected quarters, especially the hon. Member for Glasgow, Cathcart (Mr. Edward M. Taylor). Incidentally, we were all very sorry to learn of his sudden illness last Monday evening, and very much hope 1850 that he will be with us when we return after the Summer Recess. I can sometimes make an effort to enjoy his clowning, and I would have dearly loved to hear his contribution to this debate.
The hon. Member's snap judgment on this matter was to deplore the fact that a State-aided industry could be allowed to give orders to foreign firms. The question he implied was, if it did it, how could others be persuaded to be patriotic? That seemed to be the gist of his criticism of British Railways. The inference was that, in all circumstances, irrespective of costs, delivery date or any other commercial consideration, nationalised industries must not be allowed to place contracts with foreign firms.
I wonder whether those who propound the principle would expect private industry to adopt it. Of course they would not. My view is that we cannot possibly shackle nationalised industries—nor, indeed, any other kind of industry—in that way. Nationalised boards and public corporations are given statutory rights to exercise their commercial judgment in the day-to-day management of their affairs. Quite often, that is the answer given in this House when we question decisions made by them and I suspect that the same answer will be given tonight. We have all accepted that principle in this House and it could not possibly be otherwise. To shackle British Railways or any other nationalised industry in this way and, at the same time condemn them if they do not show profits is to want to keep one's cake and eat it.
One or two things need to be said about this tender. According to Mr. Gordon Stewart, of British Transport Ship Management (Scotland) Ltd., which manages the profitable Stranraer shipping services, tenders for the order were invited from both U.K. and continental firms. At the end of the day, the Italian firm won the contract because it was able to offer both a lower price and an earlier delivery date than any British yard.
According to Press reports—I do not know whether they are true—the Italian yard's delivery date was two months better than that of any other tender and this apparently was a decisive, if not the decisive, factor in awarding the contract. I have seen it reported, also, that the contract, in addition to the earlier 1851 delivery date, was £250,000 lower than that of the next lowest tender. If that is so, it represents a considerable fraction of the £2.5 million total capital cost of the ships.
The argument has been used that the tender should not have been accepted because Italian shipbuilders are subsidised by up to 15 per cent. of the cost of a ship. I do not know whether this is true. As The Times Business Supplement pointed out yesterday, that argument involves the right of anyone, whether a private person or a public organisation, to buy in the most economical way.
It is also worth pointing out that our own shipbuilding industry is far from standing on its own feet, unaided by Government subventions of one kind or another. Despite these benefits and the competitive edge given by devaluation, British shipowners still buy half their tonnage from foreign yards. This may be due to the fact, as pointed out in The Times—that, thanks largely to Government assistance in rationalising and modernising the British shipbuilding industry, British yards have today such full order books that they cannot offer delivery dates as early as they might otherwise have been able to do.
I think that it is true that only one shipyard in Scotland tendered, I think one in Dundee. Certainly, Upper Clyde Shipbuilders did not tender, although invited to do so, and nor did the Scott-Lithgow Group, on the Lower Clyde, again according to reports, because demands were too heavy to enable them to meet the delivery date required by British Railways. To that extent it is a healthy sign that British yards have the largest order books that they have had for many years and, therefore, cannot offer as early delivery dates as some foreign yards.
But this is a highly competitive business and we have been losing ground. Other countries have long order books and they can meet the delivery dates more competitively than other yards. Japan, West Germany, Sweden and others are beating us in this respect.
I have no time in this debate, and nor am I competent, to apportion blame for this uncertainty within the industry as between management and the trade unions. I conclude by saying that it is 1852 important to keep the problem in perspective. I have not come here to criticise British Railways, and it is as well to keep this matter in proportion.
This ship is to cost £2½ million. According to a Written Answer in HANSARD this morning, British Railways have purchased 72 ships since nationalisation of which only four have been bought from foreign yards. Putting it another way, the £2½ million is in the context of shipbuilding orders of about £700 million, and so it is a minute fraction of the total.
Because international competition in this industry is so fierce, it is not surprising that some United Kingdom orders go overseas, and vice versa. International trade is very much a two-way traffic and we must not be afraid of international competition. We must equip ourselves to meet the challenges arising from it, and that applies not least to the shipbuilding industry. I hope that that is one of the lessons, and probably the most important lesson, to be learned from this exercise.
§ 9.59 p.m.
§ Sir Arthur Vere Harvey (Macclesfield)
I do not disagree with the hon. Member for Fife, West (Mr. William Hamilton). In the main, I thought that he was right. However, one or two things have to be put into perspective. If Britain is to go into the Common Market, we have to get used to this sort of thing, except that it should be a two-way traffic.
It was during Mr. Harold Macmillan's time as Prime Minister that it was laid down that the nationalised industries should operate like any other concern. It does not always happen. They have many advantages over an ordinary publicly-owned company, for they have easier access to funds and in times like these when there is a squeeze, although they are affected, it is not as hard on them as on others. A short time ago B.O.A.C. had losses of more than £100 million written off and the figure for B.E.A. was more than £80 million. It is a curious way to run a company—after 15 or 18 years to write off £100 million and start again. We should all like to be able to run a business like that.
British Rail was quite right. It wanted delivery to fit in with a season and it was offered a big price advantage. But it is a reflection on the British yards. I do not want to criticise what they have 1853 done, because in the last century we built probably the best ships in the world. I remember travelling on an Italian shipping company's 20,000-ton liner from Hong Kong just before the war and learning that it had been built on the Clyde. The Italians were buying British liners then, but they have come a long way since.
It is a reflection not just on the trade unions—although only a short time ago there were 21 different unions in the yards—but also on management. Both are to be criticised. I do not want to be drawn into another matter, but I am sorry that the Government did not proceed with their legislation a short time ago—
§ Sir A. V. Harvey
I said that I did not want to be drawn away, and I thought that you were probably watching me, Mr. Speaker.
The order books are full, but many of these orders are not profitable. The shipyards rushed to get them rather than have empty yards, but frequently through bad planning and indifferent management, the work is unprofitable. That is not a good thing when yards in Scandinavia, Germany and Japan are getting profitable orders. Once the yards have become computerised and have got their sub-contracting right, once the industry has been rationalised, I am sure that British yards will be able to compete with any in the world.
A Greek shipowner who had ordered a British cargo ship said recently, "I had to pay more for it, but when I got my ship it did not have to go back shortly after for rectifications." From Continental yards ships often have to go back again after a short time for rectifications, which is very inconvenient for the shipping company.
British Railways on this occasion were right. One can say many things about them in other spheres, but I wish them well. I hope that they will get the ship on time and that we will shortly be supplying Italian companies with British ships.
§ 10.3 p.m.
§ Mr. William Hannan (Glasgow, Maryhill)
In view of the speeches of my hon. Friend the Member for Fife, West (Mr. 1854 William Hamilton) and of the hon. Member for Macclesfield (Sir A. V. Harvey), I can also be brief. When this news broke last weekend there was understandable concern among those who would have expected that ships for Stranraer and Larne would be built either on the Clyde or in Belfast. Naturally, one gets protestations in letters and telegrams.
Like my hon. Friend the Member for Hamilton—
§ Mr. Hannan
I certainly withdraw that reflection.
Of course I agree with my hon. Friend the Member for Fife, West that the responsible Minister should have the opportunity of clarifying the situation. No Press statement was available to me at that time. Government loans and grants are already available to the shipyards. I agree that our criticism must be directed towards that quarter. I do not agree that, irrespective of price and/or delivery dates, all contracts should go automatically to British shipyards.
I would be prepared to support a decision that a contract should go to an area affected by high unemployment if there is a small margin in the tenders, because in that event social considerations are involved. Given that British Railways are subsidised, in an event such as that which I have described they would be helping to subsidise a development area.
Are Italian shipyards subsidised to the extent of 10 per cent. or 15 per cent., as the Press has reported? It is true that the margin was £250,000?
§ Mr. John Brewis (Galloway)
Is not what the hon. Gentleman is saying a point which should be taken up with Scottish shipyards? Practically none of the shipyards in Scotland tendered.
§ Mr. Hannan
I want to leave that to the Minister. Various statements have been made about the number of tenders which were made. It has been said that one Scottish shipyard tendered, but The Scotsman of the 18th said that no Scottish shipyard had tendered. Why did not more English and Scottish shipyards tender? Not all of them have full order books. Mr. Heffer spent the whole of his first year with U.C.S. scouring around for orders, so I can understand that that concern has a full order book.
1855 Norman Sloan, Director of the Shipbuilders and Repairers National Association, has said:We are vary disappointed a nationalised body should go abroad, particularly to a country where the shipbuilding industry is heavily subsidised such as Italy.The quotation from the hon. Member for Glasgow, Cathcart (Mr. Edward M. Taylor) has been made. Both statements direct criticism at a nationalised body—or the State—for placing these orders abroad. We are directing our fire at the wrong target. It is not the body placing the orders which we should criticise, but the shipbuilding industry which is compelling this because it is not able to produce either at the price or by the date required. The industry is nationalised to the extent that it receives £50 million from the Shipbuilding Industry Board. It is wrong to sneer or level criticism at British Railways or other nationalised bodies for placing orders abroad. It is disappointing that British shipyards are unable or unwilling to tender.
Some of the revelations made by the Minister of Technology to recent committees about the lack of proper accountability and of efficiency in some shipyards prompt me to ask: what urgent steps are being taken to end this miserable state of affairs?
There are considerations in relation to E.F.T.A. and others of our European partners which I will not now develop.
In many directions private industry as well as nationalised industry, such as B.E.A. and B.O.A.C., is lapping up subsidies, grants and loans and holding out the begging bowls for more. So let us get a sense of balance in this matter.
British Railways have been receiving some assistance. Under the 1968 Act, social grants were provided for lines which had not been paying their way but for which there was a social necessity. Capital has been written down to save interest charges.
There is a dividing line here. I speak not only for myself but, I think, for quite a number of hon. Members in saying that we find increasing difficulty in getting Questions past the Table. Ministers have difficulty. If I may say so, I think that 1856 some of our officials of the House are finding increasing difficulty in finding that dividing line between the responsibility of Ministers in this field—the responsibility, for example, of the Minister of Transport as against that of the Minister of Technology. Even tonight, when the reply to this debate is to be given by my hon. Friend the Joint Parliamentary Secretary to the Ministry of Transport, a colleague of mine from Glasgow, one would have thought that this might more properly have been the job of the Ministry of Technology.
I end by drawing attention to a very good letter which appeared in the Glasgow Herald only last week. It called attention to this problem but in another sector. It was written by a man who belongs to a different political party to myself and who is a well-known figure in the Clyde—Mr. Finlay Hart. He draws attention to the fact thatIn February of this year the Athel Line ordered four specialised tankers from Sweden. The Lyle Shipping Company in the same month ordered a bulk carrier from Norway. Half of the 24 new ships on order for P. and O. are to be built in foreign yards. The Scottish company, H. Hogarth and Sons, Ltd., ordered a 22,000-ton bulk carrier from Norway, also in February.In May it was reported that France will build a 10,000-ton ferry worth £4.5 million for a British company.And so it goes on.
I think that much of the criticism concerning British Railways, when seen in perspective and in retrospect, is of less importance than it appears. Nevertheless, these criticisms have been made and I shall be pleased to hear answers to some of the queries which I have put to my hon. Friend.
§ 10.13 p.m.
§ Mr. Stanley R. McMaster (Belfast, East)
I should like, first, to join the hon. Member for Fife. West (Mr. William Hamilton) in very much regretting the absence of my hon. Friend the Member for Glasgow, Cathcart (Mr. Edward M. Taylor) from the debate tonight. I hope that he will soon return to the House and be fit and well again.
I have been astonished to hear the hon. Member for Fife, West and the hon. Member for Glasgow, Maryhill (Mr. Hannan), knowing the state of unemployment in Scotland, speaking as they have done. I have gone into this matter in some detail and I am sure that they will 1857 listen and forgive me if I correct them a little on some of the points they have made.
The background to this debate is surprising. The Government set up the Geddes inquiry into the state of our shipbuilding industry in 1965 and it reported the following year. As a result, the Shipbuilding Industry Board was set up and was finally incorporated in June, 1967. The board was set up on the recommendation of the Geddes inquiry to help our shipbuilding industry and, according to its first report, it is costing the taxpayer £80,000 per annum.
It is, perhaps, a matter of regret that we have only one report yet published by the Shipbuilding Industry Board, that is, the report for its first year, which was up to 31st March, 1968. The report was published in July, 1968—or, rather, ordered by the House of Commons to be printed then; but it was not available to Members or to the public until some months after that. It is a great pity that the second report is not available, because in a debate like this it would have been extremely useful.
However, it appears from Answers to Questions in the House that £9.3 million have been expended in grants by the Government to help our shipbuilding industry, and in addition to that, over £14 million have been made available to our shipyards by way of loans. In other words, over £25 million up to date have been made available to our shipyards in order to assist them.
The hon. Member for Maryhill referred to the help which British Railways are getting from the Government, and he called it small help. The "small help" which British Railways receive from the Government comes to about £150 million per annum—£150 million. Their working deficit is between £80 million and £90 million and has been so for many years past. I have a copy of the accounts to hand, but will simply summarise them to shorten my remarks.
On the working deficit of between £80 million and £90 million accrued interest charges require £150 million per annum, to keep our railways solvent, and also, under the Transport Acts of 1968 and 1962, to which the hon. Member referred, £487 million in 1962 and a further £1,262 million were written off British Railways' accumulated deficit, a total of £1,750 1858 million. This is a very considerable sum of money, particularly when one looks at British Railways' accounts and finds that the total value of their assets is only £1,512 million.
Order. I hope that the hon. Member will link what he is saying to the fact that British Railways have ordered an Italian ship.
§ Mr. McMaster
You have anticipated me, Mr. Speaker, because the next point I was coming to was the efficiency of British Railways, because one may justifiably question the efficiency of a company which is running such colossal deficits.
As to this order, British Railways issued their invitation to tender in March of this year after considerable dilly dallying. They had been leasing a Norwegian ship. They must have known for some time that they would require another ship for this route. When they issued their Press release on Friday of last week they said that one of the reasons they did not order from a British shipyard was the delay in delivery.
They invited tenders in March, 1969. In May, tenders were supplied by three British shipyards. The shipyard in my own constituency, Harland and Wolff's, was one of those shipyards. The order, however, was not placed for a further three months, not until July when the announcement was made.
§ Mr. McMaster
I do know the names of the other two, but I was given them in confidence, and, therefore, I prefer not to disclose them at this stage, but I think that the hon. Member, who knows the ropes of the British shipbuilding industry, could easily discover them. One was in Scotland, the other on the Tyne.
The three shipyards, and particularly that in my own constituency, felt extremely aggrieved when they saw the British Railways' Press handout complaining that the order had been placed in Italy because quicker delivery was available there.
I would ask the Minister whether he would endeavour to find out whether British Railways did receive tenders and 1859 whether, after three months, having decided they could not on those terms order this boat, they went back to any of the three yards to ask if it could expedite delivery. My information is that they did not. The boat is to be delivered and to be in service in the late spring of 1971. I am told that, if the order had been placed in Belfast, the boat could have been delivered by the summer of 1971. So the difference is only a matter of three months, and three months has already been wasted by British Railways in making up their mind whether or not to order the ship.
§ Mr. James Hamilton (Bothwell)
Will the hon. Gentleman tell the House the difference between the tenders put in by Harland and Wolff and the company which received the order?
§ Mr. McMaster
The hon. Gentleman probably knows that it is extremely difficult to get the precise information which one requires on orders for ships. The shipbuilders are perhaps a little at fault. If they want to attack, they should provide precise information to the public. I believe that the lowest tender was less than £200,000 more.
My next point is on credit terms, which might be vital. Hon. Members will remember how we fought in the House with the Board of Trade for the credit terms which are extended to overseas shipowners who place orders in Britain to be extended to British owners. The Minister gave way and introduced the home credit terms agreement, under which the special terms, 5½ per cent., would be extended to British shipowners, but these terms do not apply to British Railways.
Why do they not apply to British Railways? If British Railways order a ship in Britain must they borrow at the market rate of 9 or 10 per cent.? What rates are being offered in Italy, and what credit terms? Why can British shipyards not match the credit terms offered abroad when building a ship for British Railways, in the same way as they can in building a ship for any other British shipowner?
Another just cause of grievance suffered by British yards is that there is a 4 or 5 per cent. differential in credit. This is vital, because the cost of the ship is only £2½ million, and the difference in price 1860 between the Italian contract and the British tender is not more than 4 or 5 per cent.
I wish to refer to a point which has already been raised, the practice of the Italians of subsiding their shipbuilding industry. Many hon. Members besides myself have frequently asked the Board of Trade about this. I am sorry that neither the Minister of Technology nor the President of the Board of Trade is present, because this is a vital matter involving many millions of pounds of the taxpayers' money.
The United States has carried out a survey and published a document, which is headed "Maritime subsidies, 1969". It has been prepared by the United States Department of Commerce, and contains the following interesting paragraph:Construction subsidy or aidTo offset the difference between Italian construction costs and those in foreign shipyards, subsidy of about 15 per cent. of the cost of a vessel is paid directly to the shipyard for the construction of merchant ships (including those built for foreign registry) based on the type and cost of the ship to be built.If my arithmetic is correct, a contract for £2½ million with a subsidy of 15 per cent. works out at £350,000—considerably more than the difference in price between the British and the Italian tender.
This is the Italian subsidy. Although the British shipbuilding industry has received a good deal of help from the Shipbuilding Industry Board we offer no similar subsidy to our shipyards.
§ Mr. McMaster
These figures relating to subsidy are borne out by other sources, namely, in the O.E.C.D. and E.E.C. bulletins. I ask the Government to look carefully at this matter of the subsidies offered by foreign yards
I should like to refer, lastly, to the price of steel, which is a matter that is greatly tied up with this contract. The hon. Member for Fife, West said that he felt that British Railways should be free to buy ships abroad if they were quoted a better price. Why, then, should our shipyards not be free to buy steel abroad 1861 if they can buy it more cheaply? What is sauce for the goose is sauce for the gander.
About 2,000 tons of steel are involved. This will be a loss to the British steel industry since the Italians are unlikely to buy their steel from Britain. particularly as there is a considerable difference between the price of steel one can buy on the Continent and the price of steel in this country. The basic price of steel here, following the recent rise in steel prices, is £48 10s. a ton. When one adds to that the extras in regard to quantity, and so on, the average works out at around £53 a ton.
This is to be compared with the lower continental prices. I have done some research and I have found that in Germany the basic price quoted is £43 a ton as against £48 10s. here. But when Germany quotes a basic price it is entirely different from the British basic price. It is a basic price after deductions are made for quantity and similar matters. With British steel, those extras are added on to the basic price. British shipbuilding companies now find that they are paying £53 per ton, whereas the Germans are paying £43 a ton, a difference of £10 a ton.
The British shipbuilding industry is not allowed to buy its steel abroad. it 1862 is an Alice in Wonderland situation when our shipbuilding industry is hampered in this way and at the same time has to face competition from subsidised competitors which buy their steel at a lower price.
The Minister of State, in this House on 21st May, said that he would not see the British shipbuilding industry sold down the river. The Government, of course, own British Railways, they own the British Steel Corporation, and have a substantial interest in the British shipbuilding industry. Compare the situation of the Government to that of a large industrialist who buys a manufacturing subsidiary and then, instead of ordering the goods he needs in that manufacturing subsidiary, orders them outside, leaving his own subsidiary to lose money and capacity. This is a ridiculous position.
Our shipyards have lost a substantial order in this contract and our steel industry has also lost a substantial order. Furthermore, both industries have suffered a loss of prestige. Perhaps more serious in our current economic state is the fact that our balance of payments will lose about £2½ million in 1971. For these reasons I ask the Government to look at this order very carefully, since it is a vital one for this country. It certainly should not go to Italy.
§ 10.30 p.m.
§ Mr. Donald Dewar (Aberdeen, South)
I cannot entirely agree with the hon. Member for Belfast, East (Mr. McMaster) over the importance in financial terms, of this order. In many ways it is not a matter deserving a great deal of the time of the House if it is looked at in isolation. Obviously, in the context of order books in the British shipbuilding industry £2,500,000 is a very small matter. It is right to raise the issues if only because of the widespread Press and public controversy when this contract was placed, certainly in my part of Scotland. We saw a large number of conflicting emotions expressed—incompatible reactions in many cases—and a whole plethora of what I can only describe as alibis being trotted out by the various interests in shipbuilding.
What we are trying to do is to get my hon. Friend to comment on the general practice of British Railways and upon the kind of questions which this raises about the world of shipbuilding and its relations with the Government. The idea was put about, and it was very widely implied that in some way the industry had been let down by the British Railways Board, by a nationalised industry, and therefore, at one remove, by the Government. The Press, on 18th July, was studded with such words as "shocking", "astonishing" "astounding". This is extremely unfair. I accept the general point put forward by one or two hon. Friends and one hon. Member opposite, that if we are to talk in this emotive language it would be fairer to say that the British Railways Board were let down by the shipbuilding industry, and not vice versa.
It is self-evident that we have to allow the nationalised industries to run themselves, within defined limits and with certain exceptions, as efficiently as possible and according to the best available commercial practice. It is hopeless if their judgment is to be constantly inhibited and if the inevitable financial difficulties of British Railways are to be compounded by deliberate Government policy. I was surprised to discover that in Scotland a number of prominent Tories seem to have taken the opposite point of view.
1864 My hon. Friend the Member for Fife, West (Mr. William Hamilton) has already referred to the hon. Member for Glasgow, Cathcart (Mr. Edward M. Taylor). In passing, I would say that I too, was extremely sorry to read about his sudden illness. I know that he would have particularly enjoyed being here. If I may say so, without being misunderstood, we miss his particular brand of personal populism. On this issue, however, he spoke for a great number of people in Scotland when he suggested that this contract should not have been allowed to go abroad. His sentiments were echoed by the Scottish T.U.C. General Secretary, Mr. Jack, who said:This is most disconcerting, a nationalised industry placing an order overseas. I can hardly believe it has been done without there being a nod of approval somewhere, and that nod should not have been given.My view is that there may he cases when we have to distort the play of the free market, but these are rare. I seem to be defending basic Tory principles at this point. A large proportion of the House would agree, though I have doubts that in the aircraft industry, for example, there are circumstances when buying British is necessary. These are very special cases. By and large, I would like to think that there is near enough agreement in supporting the general principle that the British Railways Board was forced, perhaps sadly, to take the tender which most suited its particular needs, and which was the one most financially attractive.
Clearly, if we depart from this we will constantly be trying to raise ourselves by our boot straps. If we are to invite the world to go in for a "beggar my neighbour" round we will be one of the first countries to suffer when world trade is cut back. We, above all, cannot afford to show a lead in anything which will look like restrictive practices or general protectionism. We are constantly looking, successfully in some cases, unsuccessfully in others, for foreign orders. It would not be in our interests to try to force our people to confine their purchasing to Britain.
The tragedy is that the British Railways Board was left with no alternative but to go to these Venice shipbuilders. It is all very well to say that of the 72 1865 ships that the Board has ordered since 1948, 68 were from British yards. The interesting point is that the four exceptions were all recent orders. What must be worrying is whether in this specialised sphere at least there is an unwillingness to tender by British shipbuilders and that, when they do, they are not competitively priced.
I recognise that there has been much reference to the Italian shipbuilding industry in, for example, the statement made by Mr. Norman Sloan, the director of the Shipbuilders and Repairers' Association. But I do not think that many hon. Members can claim any specialist knowledge of the Italian shipbuilding industry. I am personally surprised to hear how heavily it is claimed that it is subsidised. To my knowledge, the Italian shipbuilding industry has never been a great force in world markets. Italy is not a great shipbuilding nation. Also, Venice is a northern Italian centre and it would not benefit from the marked attempts to encourage industrial development in southern Italy
The hon. Member for Galloway (Mr. Brewis) asked: it is not up to the shipbuilders to bring forward a case? He is quite right. If they think that there is heavy unfair competition from Italian yards, it is up to them to produce a good documented case which explains how it is worked and in what way it is unfair—whether it is the equivalent of dumping. If they do, I am sure that they will get a hearing from the Minister. It may be impossible or not practicable to do anything about it, but at least they will be able to negotiate a defined problem on all fours. It is no good prating on in general terms, as Mr. Sloan does, about "at least 10 per cent. and possibly 15 per cent." without coming and laying it on the table and saying, "Here is the situation and here is our exact complaint."
If we are honest in talking about subsidisation, we should remember that a large part of the shipbuilding industry in Britain falls in development areas, and an interesting argument could arise about the extent to which we subsidise our shipbuilders. I do not want to go into this in great depth, but there are investment allowances, regional employment premium, and S.E.T., which means 37s. 6d. for every male worker, and of course, 1866 they are all male workers in the shipyards.
The hon. Member for Belfast, East referred to the excellent credit facilities which are generally available. Considering the advantage that the shipbuilding industry ought to have got from devaluation, the really depressing and alarming thing is not the loss of this one small order, but the secret fear that in some way this is typical of the complete failure of the shipbuilding industry to cash in on the great incentives and encouragement which have been offered by successive Governments.
I find the explanations which have been offered anything but satisfactory. Why were there only three tenders? It is fair to say that many of our shipbuilders have full order books. I wish that I could say that they were profitable. In many cases they are not. In terms of employment and keeping the industry going, if not viable, at least that is some encouragement. But we are in a situation where promises of delivery have become a nightmare of good intentions unfulfilled in too many cases
Hon. Members, perhaps not representing shipbuilding constituencies, are nevertheless still heavily involved in the argument about this problem, because the House is constantly asked, through the Shipbuilding Industry Board and the money supplied to it, and so on, to allocate further subsidy and further support for an industry, which, I suspect, is not responding as it should.
I do not want to labour the point at length. In Scotland, it is a sensitive sphere for obvious reasons. Upper Clyde Shipbuilders is in the process of swallowing up about £18 million of public funds. I strongly support the Government's action in coming to its rescue and preserving it.
The really alarming point about it is that this group of well-known yards, famous names in Scottish industry, familiar in every household, firms which represent, or should represent all that is fine, or supposed to be fine in Scottish industry, or everything that the Scots themselves think their yards should represent, has been shown up in so many ways to be utterly unsatisfactory, and, to put it at its plainest, quite blatantly inefficient.
1867 I do not know how many hon. Members have followed this, but perhaps I might give two examples of what I mean. I refer to the evidence given by my right hon. Friend the Minister of Technology to the Select Committee on Scottish Affairs when talking about the U.C.S., and its legacy of disastrously uneconomic contracts. He said at page 257:I think the reason for that broadly was that there were no proper figures kept by the constituent companies at all. This has been one of the great nightmares of shipbuilding. The U.C.S. management, a highly professional management, very largely brought in from outside"—my right hon. Friend means from outside the industry—took over constituent companies which had kept no proper records at all and were not able to anticipate what the cost of discharging contracts would be. Many of the inherited losses that have come to light derive from the fact that the constituent companies did not know what price was the right price to quote for a shipThat is only one group, only one case study, but it raises interesting—
§ Mr. Rankin
On a point of order, Mr. Speaker. I do not want to distract my right hon. Friend, or to direct him along lines other than those he is following, but he is now on a topic which, in my view, does not come within the province of the Minister of Transport, and I wonder whether we can expect an answer to what he is saying from a Minister who has no responsibility for this topic.
Order. I am grateful to the hon. Member for guiding me about what is in order. When the hon. Member who has the Floor gets out of order, I shall call him to order, but I have no power to insist on the Minister answering a particular part of his argument.
§ Mr. Dewar
I think that the point I am making is self-evident. This one important part of the industry which has been under the microscope recently has, to put it kindly, been found wanting. I do not know to what extent this is the general picture, but given our rather disappointing place in the race for this order, one begins to wonder what is happening in other areas of the industry which have not been in such spectacular trouble in the last months.
The hon. Member for Belfast, East was right in saying that we do not like to 1868 see orders going abroad. One of the main justifications of the support for the industry is import substitution, and it is a pity to see all our hopes jeopardised, but the point that we have to decide, and which the Goverment at the end of the day have to decide, is whether the British Railways Board could not buy British because the industry is facing unfair competition from abroad, or whether it is because, in some way, the industry is still suffering from what my right hen. Friend the Minister of Technology described asinadequate management and bad industrial relations, poor capital equipment, and inadequate marketingI suspect that there may be a great deal of the second still about, and the trouble is that the Shipbuilding Industry Board has neither the technical resources nor the remit to oversee the day-to-day management and operations of the firms and units in the industry it financially helps.
We in this House are in the unfortunate situation of being asked to authorise the supply of public money on a continuing basis without really having the machinery to make sure that we get results for the sums that we are spending. This is a most embarrassing and awkward position. I only hope that the little matter—and I think that it in itself it is a little matter—of the placing of the order for the Stranraer-Larne ferry will persuade the Government to look again at the kind of cost-effectiveness of the aid that we are giving to this industry. I want to spend heavily on having a viable shipbuilding industry, but I want to be sure that within the foreseeable future it will be viable. I only hope that we will get something like the assurance that we want in the months ahead.
§ 10.45 p.m.
§ Mr. John Brewis (Galloway)
I find myself in the rather unusual position of agreeing to a large extent with the hon. Member for Aberdeen, South (Mr. Dewar), not least in his good wishes for the recovery of my hon. Friend the Member for Glasgow, Cathcart (Mr. Edward M. Taylor), and also very much in agreement with what was said by the hon. Member for Fife, West (Mr. William Hamilton).
I do not wish to enter into a general discussion on the position of the shipbuilding industry, but rather to put before 1869 the House one or two factors showing why we need this boat for the Larne-Stranraer crossing quickly. I think that everyone in Stranraer would like the boat to be built in a Scottish shipyard, and, if not in a Scottish yard, by Harland and Wolff, because this crossing is in a sense an international one. Half belongs to Scotland, half to Northern Ireland, and most of those using it come from England. When British Railways are able to place a new order for £250,000 less, as a nationalised industry, they are entitled to get that benefit of the deal, especially as so few British firms tendered.
This crossing is very profitable and the trade is booming. It carries about half a million passengers a year. My hon. Friend the Member for Belfast, East (Mr. McMaster) suggested that a delay of two months would not make much difference, but the Italian shipyard can deliver the boat in the spring and if it is available in the spring and summer it can provide about one-third more capacity on this busy crossing.
That makes a tremendous difference. Not only will it mean more employment for people in Northern Ireland and in Scotland—which is a chief consideration, because we have a very high rate of unemployment on both sides of the channel—but it will replace the Swedish boat at present on the crossing. The Swedish boat which is on charter is comparatively small. It does not carry nearly so many cars as will be carried by the new boat and it is chartered at just under £1,000 a day payable in Swedish kroner.
Having this boat two or three months earlier, in time for the holiday season, and replacing the Swedish boat, represents good business for British Railways. I support the decision.
§ 10.48 p.m.
§ Mr. Hugh D. Brown (Glasgow, Provan)
The two points I wish to make have not been covered in detail. This is a rather unusual debate. It would be difficult for a stranger listening to it to decide on which side, concerning party, hon. Members spoke. This has disturbed me and I have been trying to discover the reason.
We are indebted to my hon. Friend the Member for Fife, West (Mr. William Hamilton) for initiating the debate, for 1870 this is a matter worth discussing. I find it odd that the hon. Member for Belfast, East (Mr. McMaster), although he has excellent research facilities concerning Harland and Wolff and Short Bros., should merely use the occasion virtually for an attack on any kind of publicly-owned body without any recognition of the substantial amount of Government money going not only to Harland and Wolff, but to Northern Ireland as a whole. One must be fair.
I am sorry that the hon. Member for Glasgow, Cathcart (Mr. Edward M. Taylor) is not present. All of us, although we detest his politics, have a genuine liking for him. I am all the more sorry that he is not present—I say this to the hon. Lady the Member for Finchley (Mrs. Thatcher)—because he speaks with some authority on behalf of the Conservative Party in Scotland on shipbuilding matters. It would have been interesting if an hon. Member opposite could say that he either was or was not speaking officially for the party.
§ Mrs. Margaret Thatcher (Finchley)
My view on the matter is rather different from that which my hon. Friend took. I take the view that British Railways are fully entitled to purchase their ships at the lowest price and the earliest delivery dates. I am grateful to the hon. Member for giving me the opportunity to make that clear.
§ Mr. Brown
I do not know whether the Scottish people will be told what is official Opposition policy., and if the hon. Member for Cathcart reads it I hope that it will not retard his recovery.
It is true that a delivery date in the spring is important, but why have British Railways taken so long to place the order? Why was the ship not ordered sooner? There may be a good answer, and the hon. Member for Galloway (Mr. Brewis) may know it, but I do not know it—and I should like to know it. This is an emotional subject. Why are we hiring this Swedish ship? Why are we involved in this loss of foreign currency? What about the credit facilities?
All hon. Members apparently argue—although I have some reservations on the subject—that publicly-owned bodies and nationalised industries should be completely free to use their commercial judgment. But do they suffer any disadvantages in credit facilities compared with 1871 others who wish to buy ships? There is no point in the hon. Member for Belfast, East telling us about the losses of British Railways if he then argues that they are not even to have equality of treatment in the buying of ships.
Leaving aside the problems of British Railways, the question surely is: why cannot the customer get what he wants from a British yard? What about other companies which are buying abroad? What is their excuse? British Railways have some excuse, because they are under pressure from ill-informed and malicious critics in the Opposition who are always breathing down their necks and who offer no recognition of the uneconomic services which the railways have to provide.
There are a few such services in Galloway and Northern Ireland. I do not think that there is a service in Scotland which pays its way. That is why we resent the ill-informed, prejudiced views of the hon. Member for Cathcart when he makes his public statements. It is high time that the Conservative Party either disciplined him, or makes it clear that he speaks for no one but himself.
§ Sir A. V. Harvey
The hon. Member regretted the illness of my hon. Friend the Member for Glasgow, Cathcart (Mr. Edward M. Taylor). Now he is attacking him in his absence. He is being a little unfair. Why does he not get on with the debate?
Order. Despite the love-hate relationship, the hon. Member should get back to the subject.
When an hon. Member intervenes, and is so insulting to me, Mr. Speaker, I am entitled to defend myself. The hon. Member for Cathcart knows me well enough to realise that if he has any complaint to make, I will withdraw anything which offends him, but I will leave him to decide that.
I am coming to the hon. Member for Macclesfield (Sir A. V. Harvey). He talks about the Conservatives now being in favour of the commercial judgment of nationalised industries. [An HON. MEMBER: "We always were."] A sig- 1872 nificant reason why British shipbuilding is in a mess is precisely the attitude of the hon. Member for Macclesfield and his kind. In shipbuilding on the Clyde there have been plenty of well-bred bowler hats, but not enough brains beneath them. This has been a family tradition. Where have the subsidies been in the past? There is surely some significance in the fact that Upper Clyde Shipbuilders, a private concern, is in a bit of a mess because in the past Clyde shipbuilders have been feather-bedded as a private enterprise concern by tax-payers money. It is no coincidence that the Public Accounts Committee drew attention to the fact that Denny's, for example, always seemed to get all British Railways' contracts. It is now bankrupt. It did not object to taking taxpayers' money; it was a lucrative contract.
It is significant that Fairfield's used to get all the Caledonian Steam Packet orders. It was good, profitable public money. This was in the good old days, when hon. Members opposite were in complete control of everything. It is more than just a coincidence that the John Brown shipyard received all the Cunard orders, or that Yarrow's received all the defence contracts—all with public money. They have been so used to taking it from the taxpayer that they are quite inefficient.
I will not be tempted into the aircraft industry, but I suspect that there is a wee bit of that—
§ Mr. Brown
There is no fun if one does not have a little temptation sometimes, Mr. Speaker.
I think that I have made the two points I started out to make—the delay in ordering and the credit facilities. I suppose that we are all nationalists at heart here. Probably everyone who comes from Glasgow and the West of Scotland has nostalgic memories of sailing up and down the Clyde. My father worked all his life in Harland and Wolff, and I know a little about the firm. Some of the most reactionary employers in the world were the Clyde shipbuilders. Therefore, I say with some feeling that I regret that the 500,000 passengers sailing backwards and forwards from Stranraer to Larne, one of the nicest sails 1873 that one can have in summer when it is calm, should have to look at a plaque saying that the ship was built in Italy. This is not just being narrowly patriotic. While we all want commercial judgments for publicly-owned bodies, I always hope to see them being tempered by some kind of social responsibility, unlike private enterprise in the past.
Therefore, I hope that my hon. Friend the Minister will be able to give us assurances that the policy of commercial judgment tempered by social responsibility has been applied in this case.
§ 10.59 p.m.
§ Mr. Geoffrey Wilson (Truro)
I shall be very brief. I support the commercial judgment of British Railways in this matter. My hon. Friend the Member for Belfast, East (Mr. McMaster) questioned their judgment and made some allegations about the Italians subsidising their shipping. Those are matters that I will not go into. Perhaps the Minister can comment on them.
I want to comment on some of the speeches from the Government benches about what they suppose to be policies of the Conservative Party. They have no warrant for the sort of things they have said, particularly the hon. Member for Fife, West (Mr. William Hamilton). The Conservative Party view about nationalisation has always been perfectly clear, especially about British Railways.
I think that I have taken part in every debate in the House concerning British Railways since 1950. Our view has always been clear. We do not like nationalisation. We do not want to extend it. Where possible we wish to diminish it, but where it exists we want it to be efficient. We do not want it to be at a disadvantage compared with private industry, but we do not expect it to have any advantage compared with private enterprise by being nationalised.
That was clear from the beginning and it was this side which criticised the Labour Party when it was in power in Government, in 1947, for the ambiguous words it put into the Transport Act, 1947, words which put the British Transport Commission in rather a doubtful position as to exactly what its duties were. When it came to 1962 we revised that and made it clear. The 1962 Act says, in Section 3, that 1874It shall be the duty of the Railways Board in the exercise of their powers under this Act to provide railway services in Great Britain and, in connection with the provision of railway services, to provide such other services and facilities as appear to the Board to be expedient.…Section 5 gives the railways power to provide shipping.
In debate in the Committee it was made clear what was to happen under that Act. The right hon. Gentleman the Member for Vauxhall (Mr. Strauss) moved an Amendment. I spoke second in the debate and said:'This Bill is a break with the past and it is, I hope, an intentional variation of the Act of 1947 as amended by the Act of 1953. The Act of 1953 altered the Act of 1947 quite substantially…"—[OFFICIAL REPORT, Standing Committee E, 1st February, 1962, c. 387.]My hon. Friend the Member for Henley (Mr. Hay) confirmed that I was right when he said:…what we are trying to do is to provide a completely new duty for the Railways Board, in the light of that situation in the past"—[OFFICIAL REPORT, Standing Committee E. 1st February, 1962, c. 415.]He went on to say that we were removing the common carrier obligation and the control of fares and charges outside London.
Order. The House knows the hon. Member's wealth of knowledge on the subject, but he must come to the topic which we are discussing.
§ Mr. Wilson
The point I was making was that previous speeches in this debate have indicated that the Opposition were seeking some limitation on the commercial freedom of the Railways Board to carry out its purposes. I was pointing out that as long ago as 1962 the Opposition, then the Government, gave British Railways the power to do exactly what they have done, and that in buying an Italian ship they are acting under powers given in the 1962 Transport Act.
I will not pursue this, but I will take a sentence from the next column, column 416 of the Standing Committee report, in which my hon. Friend the Member for Henley said that we had deliberately omitted any reference to the individual needs of industry and that we did not wish to complicate the task of the Railways Board. That is exactly why the 1962 Act amended the 1947 and 1953 Acts. We wanted the board to act in a 1875 commercial manner and that is what it has been doing now.
I will only add that in the annual Report and Accounts of British Railways for 1968 it was also made clear what would be the consequences of acting otherwise. On page 7 there is a reference to a statement by the Joint Parliamentary Secretary, when he said:in principle, their objectives are now at last virtually identical with that of a private industry, except that they will be expected to perform certain social services, but only if they are paid for doing so.If any hon. Member wants to insist on British Railways buying a ship at a tender other than the lowest, which would be contrary to ordinary commercial judgment, British Railways would be entitled to ask the Government to pay the difference. So it would not be British Railways which would be subsidising British shipyards, but the taxpayer through an indirect subsidy. I do not think that that can be required by any hon. Member. For these reasons, assuming that the Parliamentary Secretary will answer the allegations about subsidies, I think that British Railways acted perfectly correctly in using its commercial judgment and buying a ship from the Italians a few months earlier than it could have got it from anyone else.
§ 11.6 p.m.
§ Mr. John Rankin (Glasgow, Govan)
I am fortified by the fact that you, Mr. Speaker, have allowed the line my hon. Friend the Member for Aberdeen, South (Mr. Dewar) took when he dealt with Fairfield's, because I want to pursue this aspect, which is pertinent not only to what happened two years back, but is also closely allied to the situation which we find ourselves in today in the shipbuilding industry. My hon. Friend stated definitely that the Fairfield yard had failed in its purpose as a shipbuilding yard and to some extent, if not altogether, had made a mess of things and had rather mismanaged its share of the industry.
Just two years ago, when Fairfield's was still in operation as a unit, it entered into world competition for the building of a fleet of container ships. Not a single yard in England tendered as an individual unit, but a number of them formed a consortium to tender. Fairfield's got one of the ships and the others went to West Germany. The English yards, despite the 1876 fact that they had joined together, were able to match Fairfield's offer.
That was a great achievement for Fairfield's, but before it could consummate it it had ceased to be Fairfield's and had become part of Upper Clyde Shipbuilders. Then the scene changed. If I were to go much further it might be thought that I was becoming critical of U.C.S. and that would be unfair, because we all unite in doing our best to see that it succeeds.
Order. The hon. Gentleman will link what he is saying with the decision of British Railways to buy an Italian ship.
§ Mr. Rankin
That was the point of order I raised when you disagreed with me, Mr. Speaker. However, I accept your Ruling and I shall try to align what I am saying with what I hope to say.
Into the Fairfield mind came the idea that if we were to be successful, particularly in an industry like shipbuilding, management and men had to work together and that the men had to know what management was thinking and that there must be communication between both. That can be done only through a chief executive officer. I brought him to the House, so that hon. Members could hear for themselves what was being done to make Fairfield's operable and successful. For two solid hours hon. Members listened entranced to the scheme he unrolled for making this shipbuilding yard a success. But the scheme was thwarted.
I still say that our present difficulties can be resolved only by following the plan which was suggested two years ago. It is obvious that the struggle to maintain our place in the shipping and shipbuilding world is becoming greater than ever. We have many competitors who have newer techniques of production and who, as a result, are making life hard for the home-based ship owner and shipbuilder.
This is borne out by the run-down of the whole system in Britain in past years, particularly on Clydeside. When a ship is built abroad and it is felt that it could have been built in this country, the protests are loud and long. It is our business to examine the merit in these protests.
Clearly, British Railways must be allowed to exercise their own judgment, but Parliament cannot easily do its duty 1877 of inquiring into the matter without appearing to challenge that right. Ministers keep records to guide them when they deal with matters of high policy. I quote an example which I found in column 394 of HANSARD for 5th March, this year. It shows that during 1968 British shipowners placed orders overseas for 2.8 million tons of shipping worth £205 million; but that foreign orders for U.K. registered vessels were 4.6 million tons, representing £338 million, a balance in our favour of £133 million. Obviously, if the balance of £133 million lay against us, the Government would have been more interested.
We must consider other figures to get the proper picture of these purchases at home and abroad. We must consider aircraft engines, internal combustion engines, tractors and steam engines. The value of these exports was £385.4 million—
Order. We are not discussing exports in general. We are discussing the award of a British Railways' shipbuilding contract to an Italian firm. We must not widen the debate too far.
§ Mr. Rankin
But for our discussion to make any sense, we must understand this order, in £ s. d., against the whole background. If the claim is accepted that a ship should be built at home, should the repairers be similarly treated? The answer nowadays is generally, "No," and that the repairs should be done at the first port of call. Any other policy would severely hurt one part of the Commonwealth in particular, namely, Hong Kong. It is the first port of call for ships coming westward across the Pacific. After the battering of that phase of their journey, repairs are usually essential and Hong Kong can do them at Tai-Poo Airport—
Order. I must call the hon. Gentleman to order. We are on Second Reading of the Consolidated Fund Bill, it is true, but we are discussing a particular subject on which his hon. Friend the Member for Fife, West (Mr. William Hamilton) has initiated a debate.
§ Mr. Rankin
With all respect, Mr. Speaker, and whether we like it or not, this business involves the exchange of money for imports or exports—
Order. This is percetly true, but we cannot discuss money in this debate, or imports or exports, except in so far as they are concerned with the subject which we are discussing.
§ Mr. Rankin
I am sorry, Mr. Speaker. Ship repairing seems to be out of order, then, but shipbuilding, which is equally important and is related to ship repair, is in order—
Order. Perhaps I can help the hon. Gentleman. This debate is about a shipbuilding contract, and that is why a discussion of this shipbuilding contract is in order.
§ Mr. Rankin
Then I shall leave that matter, Mr. Speaker.
But if wisdom now dictates that ship repairs should be carried out where that is commercially convenient, in the long run, this is the most profitable as well as the safest way. We do not dictate in these matters, but allow discretion to the ship repairer and to the shipowner. We must allow a similar kind of discretion to British Railways when they buy a ship.
§ 11.19 p.m.
§ Mr. Cyril Bence (Dunbartonshire, East)
I do not subscribe to the view that any commercial organisation, whether State or private enterprise, should do other than buy, say, ships on terms that provide the best service for its customers.
Shipbuilding is of such importance to Glasgow and to Belfast that it forms the industrial base of those areas. A failure in shipbuilding in Belfast or on the Clyde has a demoralising effect on all the commercial interests in those areas. We should use all our foresight and give all the assistance we can to enable the Clyde shipbuilding industry to restore itself.
I do not criticise the decision of British Railways to buy a ship abroad. We are a trading nation. I would like all tariff barriers and quotas to be removed. I am basically a free trader. The more we can exchange goods across the frontiers the better for all of us. Regarding the world as one, the more that is produced wherever it is produced the better it is for all humanists. I am not a nationalist of any kind.
1879 However, millions of pounds of the taxpayers' money is being used to improve the techniques of shipbuilding on the Clyde. Conditions are being imposed. It is suggested that shipbuilding resources on the Clyde are in excess of what is necessary and might have to be curtailed. This is unfortunate, because it is possible that world trade and, therefore, the demand for ships, will expand.
I have no objection to writing down the capital of nationalised industries. Private industry has been writing capital down for hundreds of years. In the 1930s many well-known companies wrote down their £ shares to 2s. 6d., or 5s., and thousands of shareholders lost a good deal of money. A number of people in South Wales committed suicide. Thousands of small men in South Wales were ruined when Baldwin's, whose £ shares had been written down to 5s. but which stood at 1s. 3d. in the market, went into liquidation. The writing down of capital is part of our industrial system: companies write off their costs by writing down their capital. Some of British Railways' capital has been written down, but in this case it is the taxpayers' money. With a private industry, it is the shareholders' money. However, they are all citizens of Britain. It is not novel. I do not think that the system would work unless it was done occasionally.
When public money is poured into two related industries, it behoves those industries to get together. British Railways must project its future demands. For some years it has been hiring a Swedish ship at £1,000 a day. They must have known some time ago that the ship would have to be replaced. Normally, in ordinary business circles, a projection would be made three years ahead of a new ship being required for the run. The order was not placed on the Clyde because the delivery date was a couple of months short. I agree with my hon. Friend the Member for Glasgow, Provan (Mr. Hugh D. Brown) that where two public institutions are involved, one could have consulted the other months earlier. British Railways should have consulted the shipbuilding industry two or three years ago when they took the Swedish ship on charter.
Surely, at that time they projected the need for a new ship in 1969 or 1970. 1880 Why did they not get together with the shipbuilders? A big customer like British Railways, who have bought 75 ships since 1945, should be in contact with the shipbuilding industry, particularly on the Clyde. In the climate of the situation on the Clyde, it would be the right and proper thing to engage in consultation long before tenders were requested. They should have expressed their needs and ascertained the supply potential. My hon. Friend the Member for Fife, West (Mr. William Hamilton) is right to raise this matter, and my hon. Friend the Member for Provan and I would like answers to these questions.
Has there been, and is there, regular consultation between British Railways and whoever supplies its main products, such as the locomotive builders? A commercial firm projects its needs three or four years ahead and consults all kinds of manufacturers to find what is in the market and who are the potential suppliers. This continuing, evolving and developing process is followed by every big manufacturing industry. Have British Railways done that? Surely they did it with English Electric, for diesel engines and with coach builders and manufacturers of steel rails and all sorts of equipment. Had there been general liaison between the shipping side of British Railways and the shipbuilding industry, I am sure that a specification could have been evolved and arrangements made.
I do not believe that the price of steel is all that important a factor. I am not so sure whether, delivered at the shipyards, continental steel would in the long run be cheaper than British steel. I doubt it very much. Certain qualtities of steel might be different in price, but over the general range the British steel industry can stand alongside the continental industry for steel delivered at the ports. Possibly there was a lack of liaison and consultation between two great institutions. If consultations had taken place earlier and had specifications been discussed, very much like Cunard did with John Brown's, this order may well not have gone to an Italian yard.
In saying that, however. I do not want anyone to get the impression that I am in favour of featherbedding any industry to buy in the dearest market simply because it suits a local political purpose. All other things being equal, including 1881 the delivery date and the quality of the ship, I am generally in favour of the principle that all our institutions should buy the best product they can to give the best service to their customers at the lowest possible price.
§ 11.30 p.m.
§ The Joint Parliamentary Secretary to the Ministry of Transport (Mr. Neil Carmichael)
I think that we should all be grateful for the opportunity which my hon. Friend the Member for Fife, West (Mr. William Hamilton) has given us this evening to discuss this subject. To some extent, perhaps, some of us have been surprised at the great interest it has aroused, particularly as it has been raised on the Consolidated Fund Bill, at a time when many of us are waiting for other subjects—as I am myself, for debate 20—to come along, and wondering whether they, including that debate, will be reached.
Before trying to answer some of the questions which have been raised, perhaps I may be allowed to add my own condolences to the hon. Member for Glasgow, Cathcart (Mr. Edward M. Taylor). We have said many things about him this evening, but all of us hope he does recover soon. If I know him, he will probably be reading HANSARD tomorrow to see just where we all went wrong.
As I said, I am grateful to my hon. Friend, and, indeed, I am to all hon. Members for the contributions which they have made to this subject. They will. perhaps, excuse me if I do not try to deal too specifically with each of the points made, for, although I am not suggesting there was repetition, the subject is a rather narrow one, and although different hon. Members approached it from different points of view, basically the answer can be narrowed down slightly if I give what, as I see it, from the Ministry's point of view, is the position of the British Railways Board, which is, after all, basically what we are discussing.
The background to this discussion is that the board has a scheme to develop the Stranraer to Larne and the Fishguard to Rosslare shipping services, and the scheme necessitates a new vessel for the Stranraer to Larne service and the modification of and transfer to the Fishguard station of one of the vessels at present serving the Stranraer-Larne route, and certain works at Fishguard. The total 1882 gross cost of the proposal was finally estimated at £2.79 million gross.
It is worth noting that this scheme will give the Stranraer-Larne route two of the most modern vessels in the board's fleet, and a first-class service linking Scotland with Northern Ireland. I am sure that this will please the hon. Member for Galloway (Mr. Brewis). I have used the service frequently. It is an excellent service, and I hope that more people from the South will start coming up to use this service, particularly with the new ship.
The consent of the Minister of Transport was sought, and it was given, since this entire project is clearly desirable. However, approval was given only to the project. It is not the practice for the Minister, nor was there any power, to specify where the orders for the ships, or whatever else might be needed for this project, should be placed.
Having decided on, and having had approval given to the scheme, the Railways Board then proceeded to seek tenders for the construction of the new ship which would be required. In accordance with its normal practice the Board sought tenders from a number of yards in this country and from yards abroad. Only four firm tenders were received—from the Italian yard, from Harland and Wolff, in Belfast, from Swan Hunter, and from Robb Caledon, in Dundee. The Italian tender was better on price and on delivery, and accordingly the Railways Board placed the order there.
This is a point we must stress. We are not discussing just price or just delivery: we are discussing the combination of the two. The case is very formidable if the two are combined. Hon. Members will realise that it would be quite wrong of me to give the comparable delivery dates or any confidential commercial information enclosed in a tender from a yard, and all I can say is that the combination of the two factors, delivery date and price, made it quite clear that the Italian offer was better.
§ Mr. McMaster
While not seeking to get confidential information on price, may I ask, could the hon. Gentleman tell us when approval of the project was given? Surely that is something he could tell the House? When was approval of this project given by the Ministry of Transport?
§ Mr. Carmichael
I would need notice of the question, when the actual approval of the capital expenditure by the board was given. It was a rather complicated scheme. It was not just a straightforward matter. That perhaps, to some extent, answers my hon. Friend the Member for Glasgow, Provan (Mr. Hugh B. Brown).
It was not just a straightforward job of replacing a ship. It was juggling with ships, looking at the services and the possibilities of return on the services with all the various permutations. It was a complicated matter. But as to the actual date on which final approval was given, perhaps I could write to the hon. Gentleman and let him know.
Had the board placed the order elsewhere than Italy, it which have imposed on itself an unnecessary and uncompensated hardship. The board has a primary duty to run its affairs in as efficient and economic a manner as possible. Under the circumstances, given this primary duty, it had no option but to accept the Italian offer.
It should be noted that the Railways Board has by no means a monopoly of shipping services, and since it is in competition with the private sector, which itself is not debarred from placing orders abroad, the board would not consider it right to handicap itself unnecessarily.
A number of other points could be made. The delivery date is particularly important, because it was very necessary to catch as much as possible of the summer season for 1971. I do not know the actual figures, but I am sure that a high proportion of the 500,000 passengers travel in the summer. Therefore, even a matter of months is vital if ships can be put on routes earlier in the summer rather than later.
The Railway Board's shipping operations are themselves earners of foreign exchange through its operations on the Continent. They are also an important link in the efficient movement of exports abroad, particularly to the Continent. It is expected that a considerable number of items for this ship will be of British manufacture, although at this stage neither I nor, I suppose, anyone else knows exactly what will be of British manufacture.
The Government's position from the point of view of railway policy is that what the Railways Board did was cor- 1884 rect. The board has at last been given a realistic financial remit which should enable them to climb out of the situation of massive deficit in which the railways, generally speaking, have found themselves in the past 15 years or so.
The Government's policy for the nationalised industries is clearly that if the industries are required to act against their own interest, some form of compensation will be arranged. This point was made by the hon. Member for Truro (Mr. Geoffrey Wilson), who has been involved in railway debates in this House for much longer than I have and is much more of an authority in his association with the railways.
This policy was set out in the White Paper "Nationalised Industries: a Report on Economic and Financial Objectives" (Command 3437); and it was restated in the Government's reply to the Select Committee on the Nationalised Industries (Command 4027).
In present circumstances there are no powers to prevent the Railways Board from placing orders in Italy, and there are no powers to compensate them should they agree to place orders in a United Kingdom yard. Thus, the Railways Board, which the Government have appointed, has in its considered commercial judgment decided that the Italian tender was best from the point of view of the board. The Government would not wish to disagree with the considered judgment of the board on a purely managerial matter, particularly if it were to lead to the Board doing something against its own interests.
Most hon. Members have realised the impossibility of a narrow "By British" outlook. Like other nationalised transport undertakings, the board is under no special obligation to buy British. Under various international agreements, it is obliged not to show discrimination against foreign suppliers, as in the case of E.F.T.A. The question of whether or not the practice should change in such a way that nationalised authorities should discriminate has been considered, but this country has more to lose than to gain from such a change of policy.
The U.K. shipbuilding industry's current order book stands at about £700 million, of which about £170 million-worth is for overseas registration. Therefore, it is by no means wholly a one-way trade. As a trading nation, this 1885 country depends on exports, and our exports are someone else's imports. Any policy of restriction, especially in the face of the international agreements to which this country is a signatory, could only invite retaliation. My hon. Friend the Member for Aberdeen, South (Mr. Dewar) dealt with this point most effectively.
Throughout the debate there has been a suggestion that perhaps my right hon. Friend should give a general direction to the board not to accept the Italian offer. It would not be appropriate for my right hon. Friend to have used this power in the specific instance of this ship, since this is not really a general use of the power, and, therefore, is not covered by Statute. Moreover, it is perhaps doubtful whether giving such a direction would be desirable in the national interest, as the Statute clearly demands.
§ Mr. McMaster
Did the Government inquire into the fairness of the competition the Italian yard was offering? Was it subsidised, or was it not?
§ Mr. Carmichael
I feel that, here again, my hon. Friend the Member for Aberdeen, South has dealt with the question most effectively.
It is true that the Italian Government pay a construction subsidy, which I believe to be about 13 per cent. for this type of ship. But it is extremely difficult to unravel what subsidies are paid at one place as compared with another. It would be very difficult in this country, with all the help given to industry generally in different parts of the country, to establish exactly what subsidy was given on a particular vessel.
It is a feature of the world shipbuilding industry that it is aided by Governments. There is probably no nation that does not subsidise its shipbuilding industry in some way. Incidentally, I understand that the report of the Shipbuilding Industry Beard up to March this year will be available in the autumn. Under the Shipbuilding Industry Act, 1967. we are making available to our shipbuilding industry financial assistance for its reorganisation, although that assistance is different in kind from a direct subsidy.
The Government hope that international agreement will be reached in O.E.C.D. on the progressive reduction and elimination of all artificial aids to 1886 shipbuilding. They have welcomed the recent recommendations of the O.E.C.D. Council that further work should be done on this problem. I am sure that that will give great pleasure to my hon. Friend the Member for Dunbartonshire, East (Mr. Bence), who advocated free trade.
The Railways Board, in its commercial judgment, has decided that in terms of price and delivery, as a competitive section of a highly competitive industry, it would do best to purchase the ship from the Italian yard. It would have been wrong of the Government to disagree with this.
The Upper Clyde yard was not able to tender and the chairman of the yard in the constituency of the hon. Member for Belfast, East (Mr. McMaster) was quoted as saying that the Railways Board would have to take its place at the end of the queue. The Board has been extremely fair. It asked for tenders from many yards throughout the world and accepted that from the Italian yard which was the most suitable in terms of delivery and price. This debate has shown that most hon. Members agree that the board should be exercising its commercial judgment in this way.