§ The Paymaster-General (Mr. Harold Lever)
With permission, Mr. Speaker, I should like to make a statement on the Shipbuilding Credit Scheme.
The Shipbuilding Industry Acts enable the Minister to issue guarantees in respect of loans made by banks towards the purchase of ships by British ship-owners from United Kingdom yards. The limit on the liability under these guarantees is at present £400 million.
Because of the continuing high level of orders for ships placed by British firms, and the success of British shipbuilders in competing for these orders, the statutory limit on the amount which can be guaranteed will shortly be reached. Unless the limit on guarantees is raised further guarantees cannot be given and British shipbuilders will find themselves at a strong disadvantage in tendering for home orders against the export credit arrangements of foreign competitors.
It is, therefore, proposed at an early date to introduce legislation to increase the statutory limit on the ability to give guarantees by a further £200 million. I shall also undertake, in consultation with the Chief Secretary, a review of the continuing need for credit for home shipbuilding orders, and the arrangements by which it is made available.
I am glad to be able to tell the House that the London clearing and Scottish banks have agreed to accept additional commitments within this new limit, while the longer-term review is carried forward. In the interests of British shipbuilding, and the balance of payments, additional guarantees within the proposed new limit will need to be promised, subject to the passing of the legislation.
§ Mr. David Price
This statement is not a surprise to the House. I think that many of us anticipated it. The underlying reasons by which it is made necessary—the success of British shipbuilding —are entirely welcome to all of us.
I should like to ask a few short questions on the statement.
First, is this further £200 million of loan by British banks for home orders to British yards outwith the Government's ceiling on bank advances?
Secondly, are we to assume that this further £200 million, on top of the £400 million already available, will be on the same terms as were offered for the first £200 million in 1967? If so, given prevailing credit rates, has the right hon. Gentleman made any calculation, at least notionally, of what it will cost the banks?
Thirdly, the right hon. Gentleman mentioned the review, and I should like to ask two questions on that.
First, will the Government, in their review, examine the methods by which they determine which industries should or should not receive privilege loan facilities? I am sure that hon. Members representing agricultural interests will want to know why this is extended further to shipbuilders, but not to farmers. I say this quite objectively. Will the review cover the methods by which the Government determine who are privileged and who are not?
Secondly, I detected in the right hon. Gentleman's tone of voice that, after the review, he saw a ceiling limit to how far the scheme would work. In other words, is the £600 million the final answer, or, if British shipbuilding continues to boom, do we go on?
Will the right hon. Gentleman give short answers, because we recognise that long answers require debate.
§ Mr. Lever
I hope that I can remember all the questions.
The £200 million, like its predecessor £400 million, is outwith the bank ceiling.
The rate of interest will be the same as now—5½ per cent. I cannot guess what this will cost the banks. The banks have taken up a creditable position in that they are prepared to help the shipbuilding industry with this cheap credit on Government guarantee, but they have 513 shown themselves able and willing to do similar things to help other industries.
I cannot undertake specifically to consider a system which might deal in a similar way with agriculture or any other industry. It is not within my province. Bat the hon. Gentleman can rest assured that arty wisdom gleaned in the course of the review will be employed impartially over the whole sphere of Government activity.
As for what the banks lose on it, I hope that nobody will mind if I adapt what I said in Committee on the Finance Bill. I think that, even after the very laudable public-spirited help here, our joint stock bankers will remain among the less spectacular examples of malnutrition in this country.
Is my right hon. Friend aware that his statement will be greatly appreciated and welcomed by the shipbuilding industry? At the same time, will he persevere in trying to reach international agreement about all this, because it seems that there is now a risk of over-production in world shipbuilding and shipping? Although we should like to preserve the parity of British shipbuilding with other countries, which is what his statement means, at the same time we should like to get a more realistic element introduced into all this.
§ Mr. Lever
I am always ready to advance international co-operation on economic and monetary matters. I cannot undertake that there is a proximate prospect of our getting agreement internationally to ensure that whatever else happens we do not fall back in our share of shipbuilding or any other industry. What we can and do try to achieve is to stop uncensored competition in, as it were, cheap money being available in unlimited quantities within this or any other activity, however laudable. I do not share my right hon. Friend's rather pessimisic and anxious view of the prospect; of the shipbuilding industry.
§ Mr. Wingfield Digby
As the Government have got their sums wrong twice before, may I ask the right hon. Gentleman whether he is sure that £600 million is sufficient to establish the revolving scheme?
§ Mr. Lever
The hon. Gentleman must not assume that anybody got any 514 sums wrong. At the time that the £400 million was provided it was desired that we should see how the industry progressed with this assistance in relation to financing its ships. When we had some experience and the £400 million was about to be used up, we thought that the scheme should be extended by £200 million. For this reason, this legislation is being brought before the House.
Will the right hon. Gentleman explain exactly how the Government came to the conclusion that this industry, above all others, qualified for £200 million at 5½ per cent.? What comparison have the Government made of the effect on the balance of payments of, say, injecting £200 million at 5½ per cent. into agriculture?
§ Mr. Lever
Calculations are going on all the time as to where the Government might usefully intervene. Some of their interventions earn more applause than others. This intervention seems to have been welcomed not only by the recipients—because nobody shoots Santa Claus—but also by many other people who have studied the impact upon the revival of the British shipbuilding industry.
I do not think that this is an occasion when I could usefully survey the whole sphere of potential Government intervention and weigh one against the other. But I can assure the hon. Gentleman that we make these comparisons.
§ Mr. Rankin
I join in the welcome which has been given to my right hon. Friend's proposal to devote more money to shipbuilding. Is my right hon. Friend aware that I do so with particular enthusiasm because I was on Clydeside last week and I found that there was a money shortage due to the fact that the money which we had been promised in this House four weeks ago by the Minister had not arrived? May I rest assured that the money which has been promised is on its way?
§ Mr. Lever
My hon. Friend reveals a delicious Bohemian aspect of his character in finding himself in unusual places where they have these unusual experiences. I assure him that what has been promised has, according to the custom of the House, been promised on the assumption and hope that the House will sanction the appropriate Bill.
515 As one right hon. Gentleman opposite has said, albeit out of order, this is not Government money. This is a Government guarantee of money provided by the banks—
§ Dame Irene Ward
May I ask the right hon. Gentleman whether he has read the Report of yesterday's debate on the Industrial Development (Ships) Bill, during which nobody on either side of the House really spoke in support of the Government? Yesterday, when we had the argument about the Treasury, there was present a different Minister; no relation at all to the right hon. Gentleman. May I now be told which Member of the Treasury team will be responsible for this matter? I also want to know whether I should address Questions to the right hon. Gentleman, to the Parliamentary Secretary, or to the Minister of Technology. The whole situation is very confused.
§ Mr. Lever
If I take the hon. Lady's word as being accurate, my hon. Friend the Parliamentary Secretary apparently received no support from either side of the House. That is not an unusual experience of Governments in this sort of debate, but the hon. Lady is aware that these are two totally different subjects.
§ Mr. Lever
Yesterday, the House discussed investment grants. The issue today is a question of loans to ship owners who want to build ships in British yards. The hon. Lady need have no fears. If she addresses Questions to my Department, or to me, she will find that I shall be happy to see that she receives an answer. If the hon. Lady is interested, she might like to know that I read the pearls which were uttered during yesterday's debate, because I am very concerned with the subject.
Mr. Edward M. Taylor
As preferential credits were introduced and continued because other shipbuilding countries were doing the same, can the right hon. Gentleman say whether any progress has been made in the discussions which have been going on in O.E.C.D. for about six or seven years on removing the competitive subsidising of credit?
Can the right hon. Gentleman also say whether the Shipbuilding Industry Board, which has to supervise the issuing of these credits, will have its life continued after it is due to expire next year under the Shipbuilding Industry Act?
§ Mr. Lever
I agree with the hon. Gentleman that it is desirable that there should be international agreement in restricting these special rates for exports for shipbuilding, or anything else, insofar as international competition is the season for our country seeking to match the efforts of other countries. Progress has been make in many fields of this kind, but it is inclined to be rather slow.
These credits cannot be granted except while the Shipbuilding Industry Board is in existence, and on its recommendation. The board can have its life renewed. It is due to expire at the end of 1970, but I am reviewing the whole situation. I cannot give any further information at the moment.
§ Sir K. Joseph
Is not the Santa Claus in this case the banks and their shareholders, who include pension funds and trade unionists? Is the implication of the Minister's statement that banks have undertaken only to continue this credit and to extend it pending completion of the review, and that they have given notice that they will end it afterwards? Will the right hon. Gentleman try to initiate a new initiative along the lines suggested by my hon. Friend the Member for Glasgow, Cathcart (Mr. Edward M. Taylor) at O.E.C.D. to reduce the international credit race for shipbuilding?
§ Mr. Lever
I shall look into the last point to see where we are up to. There is continuing progress, and it is largely under the instigation of the Treasury, because in most cases the Treasury provides the money, and nobody else.
The right hon. Gentleman should realise that when the banks agree to do 517 this they have regard to the overall advantage to their business, as I am sure they should as prudent directors. I welcome the public spirit which also informs their decision. I do not think that the right hon. Gentleman is putting it fairly in saying that they are making a sacrifice of their shareholders' interests. I am sure that he would not want that to be thought of these experienced bankers who take a broad and public-spirited view and feel that there is no necessary disharmony between public interest and the ultimate interests of their shareholders.