§ Order for Second Reading read.
§ 4.13 p.m.
§ The Minister for Industry (Sir John Eden)
I beg to move, That the Bill be now read a Second time.
This is a short and simple Bill, the effect of which is to raise from £400 million to £700 million the statutory ceiling on the power to give guarantees under Section 7 of the Shipbuilding Industry Act, 1967, to facilitate the financing of orders for ships placed by British owners with British shipbuilders. It does nothing more. For reasons which I shall explain later in my speech, it does not prolong the life of the Shipbuilding Industry Board which under the 1967 Act must finish at the end of this year.
The Bill follows an established path. When the home credit scheme was first introduced under the 1967 Shipbuilding Industry Act, the provision for credit guarantees was set at a relatively modest ceiling of £200 million. At that time the average order book seemed to be on the decline and international competition in shipbuilding was extremely severe. Overseas purchasers of British ships has access to credit at concessionary rates through E.C.G.D. British shipowners, however, could obtain cheap credit only by buying their ships abroad. The home credit scheme, by extending credit guarantee facilities to cover purchases of ships in Britain by home owners, was intended to prevent such orders from going abroad solely to obtain easier credit terms.
Following the 1967 Act, it was found that far from declining as had been initially anticipated by the then Minister of Technology, the number of orders for ships to be built at British yards increased substantially. It became necessary by means of the 1969 Shipbuilding Industry Act to raise the statutory ceiling on shipbuilding credit to £400 million. Last year yet a further step was taken when the previous Government introduced legislation to increase the limit to £600 million. This Bill was lost on the dissolution of Parliament. So we have seen 1382 what was at the outset a comparatively modest scheme grow into one which involves very substantial sums of money. This money is made available by the banks—not by the Exchequer—but there is of course a contingent liability on the Exchequer.
The House will, I know, wish to consider the need for this further Bill against the background of events and policies since the Geddes Committee reported in 1966 and in the context of the Government's shipbuilding policy as a whole. The debate provides the first occasion to tell the House about some of the conclusions we have reached following on from the review in which we have been engaged.
The basis for the policy followed by the last Administration is to be found in the recommendations of the Geddes Committee. Geddes proposed that the industry should be given a once-and-for-all opportunity to strengthen its competitive position in world markets through the provision of Government assistance. The industry was to make "a new start" and there was to he no open-ended commitment, no featherbedding—that was particularly emphasised by the right hon. Gentleman. The once-and-for-all character of the assistance was written into the legislation by setting a time limit to the life of the Shipbuilding Industry Board. There was no provision for Government assistance thereafter.
The House will recall that the Geddes Report recommended that the Shipbuilding Industry Board should be empowered to make loans of up to £32.5 million and grants up to £5 million. In the event the assistance given was substantially in excess of these sums. The provision for grants to the industry through the S.I.B. was increased to £20 million and in addition substantial sums of money were provided outside the 1967 Shipbuilding Industry Act—£7 million for Upper Clyde and £1½million for the Cammel Laird shipyard.
The total level of assistance already provided under the Act is £18 million in grants and £19 million in loans and the Shipbuilding Industry Board has further applications under consideration. Assistance has also been given to the industry through the rebate of indirect taxation at present worth 2 per cent. of the contract price of a ship. This is known as 1383 the Shipbuilders' Relief and originated as an extension of the export rebate scheme to home sales of ships. It was retained for the shipbuilding industry alone following withdrawal of the export rebate scheme from manufacturing industry in 1968.
These measures together with the home credit scheme gave substantial support to the industry over a period of some five years.
Since 1967 international developments have been very favourable to the industry. We have seen a massive and continuing boom in shipbuilding. World order books in 1967 were 40.4 million gross tons. Today they are nearly 80 million gross tons. Prices of ships have responded to the world boom though costs have also risen substantially. A 250,000 deadweight-ton tanker in 1967 was priced at about £6-£7 million. The same tanker ordered today would cost about twice that figure. Lengthening order books have enabled shipbuilders gradually to secure more favourable terms and many have now negotiated contracts with escalation clauses.
This then is the background to the review of the industry that we set in hand on taking office. We found that in recent years, in spite of favourable world market conditions and of Government grants and loans approaching £50 million, most merchant shipbuilders have made substantial losses. Performance, of course, has not been universally bad, and I do not mean to imply that it has been. There have been some notable successes. But taking the industry as a whole, although orders have been plentiful, the merchant ship order book is today worth about £737 million, production here has been virtually static. World output has been steadily increasing. In 1967 United Kingdom completions were 1.2 million gross tons; last year the figure was 1.3 million gross tons. The decline in our share of world output has not been arrested. United Kingdom shipyards now account for only 6.5 per cent. of world tonnage, compared with 15 per cent. in 1960, and 43 per cent. in 1950.
I am sorry to have to say to the House that even though the urgent need for improvement was underlined over and over again in the Geddes Report, and despite the warnings given by the right 1384 hon. Gentleman the then Minister of Technology, a good part of the industry's indifferent performance must be attributed to poor labour relations. The strike record of the shipbuilding, ship-repairing and marine engineering industries has been far worse than the average for other industries. Provisional estimates for last year indicate that 1,975 days per 1,000 employees were lost in shipbuilding, ship-repair and marine engineering through strikes compared with an average of 468 days for other industries. It is sterile in these circumstances to attempt to apportion blame. Both management and unions are responsible for what has been happening. They are taking too long to shake off old attitudes and they are wasting the opportunities they have been given to put their own house in order. It is their joint failure in this vital area, combined of course with the inflationary policies of recent years, that has proved so damaging to our shipbuilding industry and left it still saddled with problems which could—and should—have been solved years ago.
Since it is usual for at least two years if not more to elapse between an order and the delivery of a ship, this is an industry which is particularly vulnerable to the effects of rising costs. And it has been hard hit: the scale and direction of past Government assistance has encouraged unreasonable wage demands and exacerbated inflationary trends. From October, 1967, to October, 1970, in a period when output has been stagnant and the financial position of most shipbuilding companies has failed to improve, weekly earnings in the shipbuilding and ship-repairing industries taken together have increased faster than the average for all manufacturing industries and faster than in engineering alone. In October, 1967, average earnings in shipbuilding and ship-repair were 61 pence more than those in engineering industries and 11 pence more than the manufacturing industry average. By October, 1970, these differentials had increased to 149 pence and 70 pence respectively.
The inescapable fact is that a good part of the capital assistance to the industry has done little to strengthen longer term prospects. Some of the assistance was undoubtedly directed at maintaining employment in the short term, but insufficient account was taken of the prospect 1385 of ultimate profitability and security of employment. In fact, the only major facilities represented by almost £50 million of capital assistance are the building dock and associated steel facilities at Harland and Wolff, the new facilities under construction at Scott Lithgow, and a small dock project at Appledore.
The previous policies have not transformed the industry to the extent that had been hoped. We do not intend to follow them. All hon. Members would agree that there is no doubt that what this industry needs is a period of stability in labour relations and relief from inflationary pressures. Here the Government can certainly help. In the longer term I am sure that the most effective way is to encourage self-reliance in management, to reward efficiency, and by supporting international efforts to help bring about the progressive elimination of practices that distort competition.
Immediately, however, we recognise that a further breathing space is needed to complete the processes of readjustment in which the industry has been engaged. We have therefore extended the life of the S.I.B. to the end of this year, the latest possible date under the Act. This gives the industry a final opportunity to apply for what remains of loan assistance under the Act either for investment or for working capital, and enables the Board to complete outstanding business. It was never the intention that the Board should become a permanent feature of the landscape, and I repeat: we do not intend to extend its life and its powers to give grants and loans beyond the end of this year.
An essential feature of the legislation which set up the S.I.B. was always that it was transitory—it was created to provide temporary assistance for the once-and-for-all re-organisation of the industry. And in relation to the size of the industry —in 1968 it accounted for about 1 per cent. of manufacturing industry—it must be said that it has received quite a disproportionate share of temporary assistance from public funds. Against this background, we do not see a case for singling out the shipbuilding industry as the continued recipient of a special payout from the taxpayer which can only weaken morale and lessen the incentives on management and employees alike to learn to operate competitively in the world market.
1386 However, it would be unjust, as well as likely to lead to economic distortion, for shipbuilding to operate under significantly disadvantageous conditions compared with other manufacturing industry. Since it lacks the tariff protection enjoyed by other manufacturing industry, we have concluded that it is right to continue shipbuilder's relief which is equivalent to 2 per cent. of the contract price of a ship; the industry will continue to receive import duty drawback, and, as I announced to the House just before Easter, we are relaxing the rules about the import content of ships qualifying for credit guarantees in order not to hinder the use of imported steel where supplies on competitive terms cannot be obtained from the domestic market.
Apart from the indirect help of the home credit scheme, to which I shall return in a minute, we do not consider that there is any justification on economic grounds for further special assistance to the shipbuilding industry as such—that is apart from assistance available to all industries operating or investing in development areas.
In line with the policy of giving the industry an opportunity to readjust, we have accepted the proposals of the Northern Ireland Government for the future of Harland and Wolff. There is no doubt that this shipyard, which has some of the finest physical facilities in the world for building large tankers, has the genuine potential for coming out of its present, difficulties on a secure long term basis. The Northern Ireland Government will ensure that the company will be provided with funds to make it financially viable. Once these have been provided, the Northern Ireland Government have made it clear that there can be no question of further support if the company again gets into financial difficulties. I too wish to make it clear that the company will not he able to look for further support to the United Kingdom Government.
§ Mr. Edmund Dell (Birkenhead)
Before the hon. Gentleman leaves Harland and Wolff, he will be aware that the Northern Ireland Government at Stormont yesterday introduced an industrial development Bill which makes it possible for the Northern Ireland Government to take an equity holding in private industry. Is the hon. Gentleman aware of whether it is the intention of the Northern Ireland Government to take an equity holding in 1387 Harland and Wolff representing the level of the assistance they propose to give?
§ Sir J. Eden
I am not aware of their intentions and what may be the exact motives lying behind that Measure.
The House is aware of the Government's decisions as regards Yarrow (Shipbuilders) where we have taken action to safeguard the present orders and future programme of the Royal Navy. The separation from U.C.S. of Yarrow(S) will enable U.C.S. to concentrate on merchant shipbuilding and the intended capital reconstruction will enable the company to reflect the realities of their financial position. U.C.S. are confident of their future and I would emphasise that they have not asked for any new assistance from public funds.
I mentioned the home credit scheme and said I would be returning to it. At the beginning of this year guarantees given or offered subject to the passage of legislation had brought the potential limit of liability to £600 million. This was sufficient to provide credit on full order books for the industry until mid-1972. The proposed increase to £700 million, together with forecast repayments of £25 million expected this year, should enable the industry to receive credit guarantees on all home orders on which fabrication will start by mid-1973.
Some shipowners who have been offered guarantees subject to legislation now need to draw on guaranteed credit to meet their obligations under their contracts with the shipbuilders. If the House gives a Second Reading to this Bill I propose to enable these shipowners to draw on guaranteed credit by anticipating enactment of the Bill and giving guarantees in excess of the present statutory limit of £400 million. Guarantees given in advance of enactment will, of course, be counted against the proposed limit of £700 million.
§ Mr. Anthony Wedgwood Benn (Bristol, South-East)
The hon. Gentleman is adopting the old practice of jumping ahead of parliamentary support. Is this not a nonsense? Of course he will get parliamentary approval to make these guarantees available, but they would have been available under the Act which he is repealing.
§ Sir J. Eden
Because I am aware of this point I have given extra special emphasis to it in my remarks. Indeed, I paused at that point in my speech to give the right hon. Gentleman time to intervene.
The answer to his substantive point is that I realise this is an unusual procedure. I thought it absolutely right to say this openly to the House. If the House does not agree with this course it will not be proceeded with. If the right hon. Gentleman is intervening to say that it is wrong for us to do it this way and that it should not happen, I assure him that I have taken note of his view.
§ Mr. Benn
The hon. Gentleman is talking as if this were a debating point. It is not unusual, but illegal, to anticipate parliamentary approval. What I say in a supplementary intervention does not make it legal. I appreciate that he was underlining this point and I am grateful to him for that, but he has just repealed an Act which would have rendered legal the provision of these guarantees. He then comes before us with a smiling face, knowing that he has the good will of the House, to say that he proposes to do something which he has just made illegal by the repeal of another Act. This is an absurdity. Naturally the House wants to see the industry receiving these guarantees. The Industrial Expansion Act not being applicable until the expiry of the Shipbuilding Industry Act, there is a short overlap, but beyond that my point is wholly substantial.
§ Sir J. Eden
It is not wholly relevant to the Industrial Expansion Act, and the right hon. Gentleman will be aware of what I said at the outset. These are bank advances and, as the right hon. Gentleman knows from what has already taken place, there are good grounds for a certain degree of optimism here. I have taken note of his remarks, and if he wishes me to understand that he does not think this is the way to proceed in this case in view of the circumstances—
§ Mr. Dick Douglas (Clackmannan and East Stirlingshire)
Before the Minister continues, as he is representing the Government at the Dispatch Box, may I ask him to be frank and indicate how much of the gap between the £400 million and £700 million has already been pre-empted 1389 in terms of credit guarantees by the financial institutions?
§ Sir J. Eden
I cannot give those figures. The decisions rest primarily with the Shipbuilding Industry Board first of all.
§ Mr. Frederick Willey (Sunderland, North)
This is an important matter and we must not overlook the responsibilities of the Comptroller and Auditor-General. What is the exact position? Either the Minister has the authority to do this or this legislation is a waste of time. Either way, he cannot say that because of apathy or this matter not having been dealt with he is taking this step, or that shipbuilding orders will be held up without this authority. It seems impossible for the House of Commons on a Second Reading debate to give the Minister authority to act in the way he is seeking authority to act.
§ Sir J. Eden
I would accept the right hon. Gentleman's strictures if I had attempted to conceal something from the House, but I have certainly not attempted to do that. I recognise some of the points that have been made about this being a somewhat novel way of proceeding. It is with a desire to help the industry that this step is being taken, but I will return to the issue later in the debate if that will be of help.
The proposed new limit of £700 million will help the industry to maintain its present order book, but it will not be sufficient to meet all applications this year for guaranteed credit. The Shipbuilding Industry Board in determining which applications to recommend will, therefore, have regard to the date of commencement of fabrication work in the yard.
The Government are considering what should happen when the S.I.B. ceases to exist at the end of the year. We are taking into account the prospects for the shipbuilding industry and also the fact that, if the scheme is to continue, some change in the institutional and statutory arrangements would, in any case, be needed after 1971.
§ Mr. Simon Wingfield Digby (Dorset, West)
My hon. Friend said that up to the end of 1973 there will be sufficient credit. He must know as well as I do that many of the big yards are trying to get orders for 1974. Is he really saying 1390 to home owners that they might as well look abroad—is he trying to divert them abroad—because there will not be credit guarantees at home?
§ Sir J. Eden
I was about to say that we are considering what should he the position when the S.I.B. ceases to exist.
§ Mr. Dell rose—
§ Sir J. Eden
The British shipbuilding industry does not exist in a vacuum. It is part of the world shipbuilding industry and the form of any Government support in the future must have regard to what is happening abroad, as well as to the effect of prospective changes in this country in investment incentives and company taxation.
I am not, therefore, in a position to give any categoric assurance today about the terms on which finance for shipbuilding may be available in future.
§ Mr. Dell
We want to be absolutely clear about this extremely important and worrying statement which the Minister has made. As the hon. Member for Dorset, West (Mr. Wingfield Digby) pointed out, British shipowners are wishing to place orders now, and that would take the figure beyond £700 million. The Minister has himself said that the present decision involves rationing by the S.I.B. Are the Government really leaving the British shipowner and shipbuilder without any guarantee as to the future in respect of credit?
§ Sir J. Eden
I was saying that we are now having to look to the future beyond the time when the existing vehicle comes to an end.
§ Dame Irene Ward (Tynemouth)
If my hon. Friend is just beginning—we are not quite sure about this—to look to the future, may we know when he started looking to it and how long he thinks it will be before he catches up with the future?
§ Sir J. Eden
Perhaps hon. Members will give me the opportunity of repeating the remarks I made before this last set of interventions, because it was particularly important and may go a long way to answering the questions which are now being put to me.
I said that we had to look to the future and have regard to what was happening 1391 abroad as well as to the effect of prospective changes in this country in investment incentives and company taxation. I went on to say that I was not in a position to give any categoric assurance about the terms on which finance for shipbuilding might be available in future.
The Government recognise the importance for the industry of assured credit facilities. I hope to be able to make a fuller statement about the arrangements for shipbuilding credit before the Summer Recess.
§ Mr. Arthur Blenkinsop (South Shields)
Surely the country and the shipbuilding industry were told that a major statement would be made on this occasion. They have made clear their interest in the future and the financial position of the industry. Is the hon. Gentleman now saying that after all the months of waiting for this Bill he cannot say anything more definite than what he has just said?
§ Sir J. Eden
The hon. Gentleman is underestimating the significance of what I have said. Perhaps when he has studied my statement he will moderate his references to it and take comfort from it.
Capital grants and loans will continue until the end of the year and will cease with the dissolution of the Shipbuilding Industry Board. Shipbuilders relief and import duty relief will be carried on. The credit rules on steel imports have been relaxed. The credit ceiling is being raised by the Bill, and a further statement on future credit facilities will be made before long.
Taken together, these measures add up to realistic support for the industry which should give it every opportunity to improve its efficiency and to prosper. Despite inflation, it is possible for an efficient shipbuilder with good labour relations to flourish—as witness the case of Austin & Pickersgill, which has not received one penny in capital assistance from the Shipbuilding Industry Board. The industry as a whole has healthy order books. The extension of the home credit scheme to £700 million shows the potential demand for ships for United Kingdom registration. There are also profitable export orders to be obtained 1392 and, indeed, the industry could well do more in this direction.
But the fortunes of any particular company must depend on its own efforts, skill and judgment. No level of Government support can guarantee success. The industry, however, now has the opportunity to regain its independence and add further honour to its long and distinguished past. I ask the House to approve the Bill.
§ 4.43 p.m.
§ Mr. Edmund Dell (Birkenhead)
The hon. Gentleman has just announced the Government's virtually total disengagement from the shipbuilding industry. Unlike the Governments in virtually every other shipbuilding country, the British Government have decided to disengage from this industry, which is vitally important to our balance of payments, vitally important to our own shipping industry and vitally important to the British engineering industry. They are abandoning the industry entirely to market forces. That is what their policy amounts to. That is what it is in all essentials.
The hon. Gentleman said that perhaps we would find more comfort in his statement when we had an opportunity to study it. I must protest against the delay in making even this statement to the House. The Bill was introduced on 12th February. On 18th February the Under-Secretary of State said in Committee on the Industry Bill that the Second Reading of this Bill would be taken as an opportunity for a major statement of policy on the shipbuilding industry. We have been waiting two months since then. It even appears now that on the subject of credit guarantees we shall have to wait until the summer Recess.
Even so far we have waited two months. Yet I remember the preaching we used to have from hon. Members opposite about the dangers of leaving industry uncertain. For two months the shipbuilding and shipping industries have been left uncertain by the Government as to what their intentions are—and for no reason at all. Everything which the hon. Gentleman has said today could have been said two months ago. If the Second Reading of this Bill could not have been fitted in before, then the hon. Gentleman's statement could have been made separately to the House. But for 1393 two months the Government have been prepared to leave these two vital industries in uncertainty as to what they intended, and today we find that even now they have not fully worked out their policy.
§ Mr. Blenkinsop
In addition, we have had no kind of statement on the repair side of the industry, although we understood that we were going to get that as well.
§ Mr. Dell
I agree. I was coming to that point. Only yesterday the Under-Secretary of State said, in answer to a Question, that if only we would wait until today we would have a statement on ship repairing. I do not know whether it is his intention to make that statement in his reply tonight, but if so it means that we shall not be able to debate it. That would be an extraordinary situation. We were assured that ship repairing was also under consideration by the Department, that we were to hear the Government's intentions about it and that, apparently, we would be able to debate them. But we shall not be able to debate them if the statement on ship repairing is to be made at the end of the debate instead of, as would be proper, at the beginning. The attitude of the Government is extraordinary and deserves the condemnation of the House.
In relation to credit guarantees, for two months, apparently, the Government have been saying to themselves, but not to the House, "Give us the Second Reading of this Bill and then we will go through the processes of raising the limit of credit guarantees to £700 million." During these two months, the Government could have had their Bill. They could have enabled themselves to do what they propose to do, legally instead of illegally, taking advantage of the consideration of the House towards the industry. But their programme has been taken up with far less important and far more damaging Measures in the interval. For two months legislation which could have been got through, and which is vital to enable these guarantees to be given, has been held up. Now the shipbuilding and shipping industries are left uncertain as to the future intentions of the Government towards them.
§ Dame Irene Ward
Before the right hon. Member for Birkenhead (Mr. Dell) 1394 proceeds with his speech, I would like to know from my hon. Friend whether the shipbuilders, ship repairers and ship owners have been told all this information and what their views are.
§ Mr. Dell
There are so many leaks from the Government, however, that it is quite possible that they have been told before the House has been told. But the hon. Gentleman has made his speech and has provided them with all the information that they are going to get from the Government for the next few months. The hon. Lady must rest on her disappointment and take the matter up with the Government in the vigorous way for which she is well known.
The Government have decided, in effect, to revert to the pre-Geddes policy of allowing market forces to dominate the future of the industry. The industry will therefore be placed in a position entirely different from that of virtually every other shipbuilding industry in the world. What has happened to the industry since the war has lessons for industrial policy in this country generally. It shows the effects of the policy to which the Government are now reverting. After the war ours was the leading shipbuilding industry in the world. It was a growth industry, with a mounting demand for ships all over the world. Yet it was abandoned to the operation of market forces. It was abandoned to competition mounted from Japan with other than market forces operating there. The Government in this country were prepared to allow this growth industry, in which we had a world lead, to lose its competitive position year by year, even though, quite obviously, it could not, faced by the international competition it had to deal with, maintain its competitive position alone.
That was the situation up to the Geddes Report. The industry was left to market forces, to which we are now to revert. The result was a catastrophe for the industry from which only the Geddes Report and the Geddes policy, implemented by the last Government, rescued it.
§ The Under-Secretary of State for Trade and Industry (Mr Nicholas Ridley)
What the right hon. Gentleman says does not square with the facts. The industry's share of the market, indeed its production, continued to decline even under the Geddes policy.
§ Mr. Dell
I shall deal with the Geddes policy and remind the hon. Gentleman of the successes achieved under it. But, having allowed the industry to deteriorate for 20 years in face of international competition, it was not reasonable, especially if internationally subsidies were to continue, to expect that the industry could be rescued from its predicament in four years.
The Geddes Report was based on the presumption, explicitly stated in the Report, that it would be possible to withdraw support at the end of 1971, although I think it was optimistic in that, but on the assumption that something was done internationally about subsidies. Nothing, or virtually nothing, has been done internationally about them. The competitive position, in its reality, remains as it was when the Geddes Committee reported.
The Government have contented themselves with blaming management and workers, as the Minister for Industry did today. Because the industry cannot compete in these circumstances, or cannot regain its share of the market, we say that it must be management and workers who are to blame, whereas, although a great deal more could be done by management and workers, in this competitive situation what is needed is Government help.
We shall not get anywhere by attempting to flagellate management and workers for the fate which the shipbuilding industry has suffered through the operation of market forces. Criticism of management and workers is self-fulfilling. We leave an industry to face this type of international competition, and it fails to meet it. There is not adequate investment and there are inadequate increases in productivity. Management is not recruited as it should be, and the fear of redundancy makes workers less cooperative with proposals for increased productivity. Though one result of the Geddes Report was that there was a great improvement in the willingness of trade unions in the industry to co-operate in schemes for increasing productivity.
1396 Associated throughout with the shipbuilding industry, which was abandoned to market forces and which elsewhere in the world is assisted, was the shipping industry—again an industry with a world lead, again left to market forces and again left relatively to decline until investment grants were introduced when, oddly enough, the industry began to regain something of its relative position in the world. The Government have withdrawn investment grants. The Rochdale Report recommended their withdrawal but said that equivalent assistance should be given. It has not been given. Assistance to the shipping industry has been considerably reduced. The consequence is serious for the shipping industry, as leaders of it have pointed out. It is also serious for the shipbuilding industry because necessarily it will have an effect on orders placed by British shipowners in British yards.
The shipping industry has throughout its history operated a policy of placing orders where economically it could best place them. A very large proportion of its orders has been placed abroad, which is understandable from its point of view. No other national shipping industry with a major shipbuilding industry in its own country has followed that policy. Whether the reason is that they were not permitted to follow such a policy is an interesting subject of speculation. If the British shipping industry had been prepared to give the shipbuilding industry the guarantees of future orders which were given in, for example, Japan, where 100 per cent. of Japanese shipping orders go to the Japanese shipbuilding industry, or in Germany, where 80 per cent. of orders go to the German shipbuilding industry, it would have been interesting to speculate whether we would have today a shipbuilding industry better capable of satisfying the requirements of British shipping. This has been one of the factors which have led to the relative decline of the British shipbuilding industry.
Hon. Members opposite try to emulate the principles of Adam Smith. But even Adam Smith would not have allowed this to happen. He, being a good Scotsman, believed that the power of the State should be used to support British shipping. He was not nearly so much in favour of disengagement as hon. Members opposite.
1397 In this way, these two growth industries were allowed to decline in face of international competition. Then, in 1965, the Geddes Committee was appointed. The Geddes Committee and the policy which followed its Report enabled the industry to survive, provided the industry with valuable additional resources which are today enabling it to get important orders which it would not otherwise have been able to get, has enabled it to increase its orders to the highest figure for many years and enabled it last year to achieve the highest volume of completions it has achieved for many years.
The Secretary of State—and he has explained his absence today to me—is fond of saying, and the Minister for Industry repeated today, that money provided under the Geddes policy has gone down the drain. One result of the Geddes policy was the recent Shell tanker order which would not have been placed in this country without that policy. The value of orders like that to our balance of payments far exceeds the amount of money spent as a result of the Geddes Report, and the policy will bring further orders to the yards which will be of value to Northern Ireland and to our balance of payments.
But, following the Geddes Report, the industry has not succeeded in dealing with its problems in two respects; and, in the face of international competition, it could not have done. First, it has not made itself profitable, and, secondly, the level of investment, other than the investment supported by Geddes, has continued low. We know about the low level of investment because we have the investment grant figures, which show that during the years since the Geddes Report privately financed investment has been very low. It will now probably be lower because of the withdrawal of investment grants. Incidentally, one of the advantages of the investment grant system is that we know facts like that, whereas under the Government's tax allowance system we shall not have these figures.
We need today not another Geddes Committee but a decision by the Government on what share of a growing world market the United Kingdom industry should aim at, which the Government must achieve by means of large-scale investment assistance. On the other hand, if we should get out of this industry, as 1398 the Government apparently believe, then the Government should say so. The statement of the Minister for Industry today merely confirms the indications that that is what the Government intend. He indicated that there will be no continuing support for the industry other than possibly further credit guarantees. We already knew of the demise of the Shipbuilding Industry Board. We know about the abandonment of investment grants, which, in an industry like this which is unprofitable, means that there will be no investment incentives at all. There is the end of the regional employment premium. In these circumstances I do not understand how the Government can expect the industry to be able to compete in world markets.
I attribute no value to the exordium which the Minister has given us today that if only the industry would pull up its socks it could compete against the subsidised competition it faces abroad. This is not an industry which we can leave to market forces, we have lost far too many years, competition is loaded against us, the industry is still too weak, and if inflation continues at the present rate, even the escalation clauses will not save its profitability.
The hon. Gentleman said that we must have regard to what is happening abroad. Let us look at world competition in the industry. Japan has 50 per cent. of the world market. Their shipbuilding industry is more efficient, which, given the investment that has taken place in that industry over the last twenty years, is hardly surprising. In addition, Japan has an undervalued currency, The Times, in a review of the Japanese shipbuilding industry a few weeks ago, said that the threat of yen revaluation haunts the industry, and I can understand that. An undervalued currency is a subsidy from the great mass of the population to its exporting sector.
Japan is putting in eight new yards, which will raise its capacity from about 10 million gross tons now to 15 million gross tons by 1975. This is being done with the assistance of central and provincial governments. What estimates have the Government made of forward demand for shipbuilding in the world? According to estimates made by the British shipbuilding industry, these eight additional yards will be capable of raising Japan's 50 per cent. share of world 1399 shipbuilding to more like 60 per cent. Is that confirmed by the Government, or do they have different figures? It looks from these figures as though Japan is not even content with the record so far achieved but is going for an even larger share of the market.
Let us look at the European position. There are overt subsidies in France and Italy. All over Europe there are yards maintained with Government help, despite financial crisis. Götaverken has had a financial crisis but has not gone out of existence. Burmeister and Wain has had a financial crisis but has not gone out of existence. Both are getting assistance from their Governments. Only the British shipbuilding industry is to be abandoned. There is also the other factor which I have mentioned of the greater loyalty of national shipping companies to their own shipbuilding yards.
Given the history of the industry, given the nature of the international competition, given the freedom of British ship owners to order abroad, and given the abolition of investment grants and the regional employment premium, how can one reasonably hope that adequate investment from private sources will sustain a viable shipbuilding industry in this country? The only possible source of adequate investment is the State. I know that the Government's position is, as the Minister for Industry said, that they will not feed inflation by subsidies and grants. They apparently believe that the only effect of the implementation of the Geddes Report was to feed wage inflation in British shipbuilding yards. This is an extraordinary point of view for a Government which have decided to fight wage inflation through the public sector. The sector that can in the last resort rely on support from the Government is the sector which the Government have chosen to fight wage inflation.
One of the new arguments for taking over the commanding heights of the economy—and the Government might consider this—is to help them fight wage inflation. But apparently in the shipbuilding industry assistance merely creates wage inflation. To give companies some guarantee of a future existence creates wage inflation. It depends on the method of providing Government aid. In the history of the shipbuilding industry there 1400 have been too many Government rescue actions. When people are rescued from time to time they come to expect the next rescue. There has been too little consistent determination by the Government through aid to maintain a viable shipbuilding industry. Had that been the policy before Geddes as well as during Geddes we would have seen investment, higher productivity and a competitive shipbuilding industry, and rescues would not have been needed.
So there is this vital question for the Government, and the Government have decided to abandon the British shipbuilding industry to market forces, and have taken this decision at a time of mounting unemployment generally and in the development areas. They have told us today that if there is a danger of collapse in particular shipbuilding companies because of the unprofitability of orders which they have taken on in the last few years, they will take no action, despite the current levels of unemployment in development areas. The Minister for Industry has made an amazing statement today against the background of the most recent unemployment figures and their trend.
I believe that this policy is wrong. The Government should support the shipbuilding industry and undertake a continuing commitment to such support. The question is whether, where companies are so dependent on Government support and there is a prospect of that support being required long term, there is any point in continuing the forms of private ownership. If Government support is given, the reality must be strong Government control to ensure that we achieve the objects of the support—higher productivity, adequate management, greater competitiveness. There is, therefore, a strong argument for bringing the form into line with what must be the reality by means of public ownership. The Government have decided, as the Minister for Industry has told us today—
§ Sir J. Eden
Is the right hon. Gentleman saying that it is the policy of the Opposition that the shipbuilding industry of this country should be nationalised?
§ Mr. Dell
I am giving an expression of my view that if finance for particular shipbuilding companies to make them competitive has to come from the Government, there is a strong argument that 1401 such companies should be taken into public ownership, and for the form to be brought into line with the reality which is strong Government control of shipbuilding companies that require Government support.
§ Sir J. Eden
Is the right hon. Gentleman giving it as his personal view that the industry should be nationalised, or is he speaking officially on behalf of the Opposition from the Dispatch Box and saying that the British shipbuilding industry should be nationalised?
§ Mr. Dell
The hon. Gentleman is not in a position to argue, following the Government action on Rolls-Royce, that there are not situations in which on merit public ownership is required. I referred in a previous intervention to the Northern Ireland Government introducing the Industrial Development Bill which permits the Northern Ireland Government to take equity shares in private companies. There too, apparently, it is increasingly realised that public ownership is necessary to establish certain industries on a competitive basis. I believe that where an industry or a company is so dependent on Government support as is much of the shipbuilding industry, it should be publicly owned. The Government, on the contrary, have decided to abandon the industry, a decision which takes no regard of the employment consequences. They are prepared to allow the industry to die.
We shall give a Second Reading to the Bill because it will enable certain further orders to be placed with the industry, and it is important that those orders should be placed, but we regard the statement of policy which has been made today as utterly calamitous for the industry and we utterly reject it.
§ 5.10 p.m.
§ Mr. Simon Wingfield Digby (Dorset, West)
The right hon. Member for Birkenhead (Mr. Dell) had some responsibility for this industry when he was a member of the Labour Government, and, therefore, we listened with interest to what he said. Indeed, he said a number of things with which I would agree, but I would not go the whole way with him in many of his remarks. The fact that he attributed the revival of the shipbuilding industry to investment grants was far too broad. There have been wide- 1402 spread abuses of investment grants, and, though they have probably helped the shipping industry more than others, I am sure that it was right to do away with them.
§ Mr. Wingfield Digby
Abuse is always possible but I believe that investment grants particularly lend themselves to abuse.
I did not agree with what the right hon. Gentleman said about the Geddes Report. When one looks at the implementation of its recommendations over the years, it can be seen that results have been most disappointing. One of the most disappointing things is the way in which money which was to have been available under Geddes in the way of grants and loans has been spent. It would be a brave man who would not say that the Upper Clyde had had too much of the money and that if that money had been spent in other areas it would not have been done very much more for the industry.
I was amazed to hear the right hon. Gentleman say that public ownership would solve the problems of the industry. If a large amount of money is spent on an industry there must be a degree of public control, but the record of public ownership has not been one which I would wish to see followed in the shipbuilding industry.
Although the Bill deals with a somewhat narrow point of Government guarantee for credit facilities, it also raises wide issues about the future of shipbuilding and its profitability. An article in the Economist Weekly on 27th March entitled "Should Europe Build Ships" pointed to the difficulties of ourselves and our competitors. The difficulties of the British shipbuilding industry can be regarded as typical of the problems of other industries, though perhaps in a more acute form. Lack of profitability, price inflation, fixed price contracts, labour relations and high wage claims are problems which are to be found in many industries other than shipbuilding, but since shipbuilding is an assembly industry which takes orders 1403 covering a long period ahead it has been particularly hard hit by these factors.
I should like to stress that demand for shipping is very buoyant indeed. World demand for shipping has increased, and is increasing. Secondly, our shipbuilding competitors, despite the subsidies which they receive, also have their difficulties. Therefore, we should not get too depressed about the difficulties of our own shipbuilding industry, although they may seem a little more acute than those faced by some of our competitors.
The Bill concerns home owners' orders; it has nothing to do with orders from overseas, which can be financed in other ways. It is, therefore, relevant to notice the degree to which the shipbuilding industry of Britain has become dependent on home owners. According to the latest figures for 1970, only 20 per cent. of compensated tonnage orders were foreign, and in regard to gross registered tonnage the figure was 18 per cent.
§ Dame Irene Ward
Perhaps my hon. Friend would add that Swan Hunter on the Tyne has received a terrific fillip because it has just obtained an order to build a Norwegian liner, and this has helped us in our plans for the future.
§ Mr. Wingfield Digby
That is very good news indeed, but the fact remains that home owners were responsible for 80 per cent. of the orders in 1970. If we look at the total order book the picture is very much the same: 22 per cent. of compensated tons only ordered from abroad, and in regard to gross registered tonnage the figure is 25 per cent. Therefore, we must see how far future orders will continue to come from our home owners.
The trend which has led to foreign owners ordering away from Great Britain began some time ago. I remember that many years ago when I had some responsibility for the shipbuilding industry the tradition among Norwegian owners and others was to order in this country. Unhappily, that tradition has declined. As recently as 1966 65.7 per cent. of orders came from abroad; in 1967 it had fallen to 33 per cent. and by 1968 to 18.3 per cent. Therefore, our shipbuilding industry is largely dependent on home owners.
1404 We have already heard from the Minister, in a somewhat disappointing statement so far as I was concerned, that the sum of £700 million will not be sufficient to meet all the orders which home owners might be willing to place in 1974 and after. This is bound to make those owners take their orders overseas where there are greater incentives open to them, such as better credit terms, than we are able to offer in this country. The ceiling in the original Bill, which was dropped a year ago because of the General Election, was £600 million. The figure is now £700 million but, according to my calculations, that is only six months' worth of orders and, therefore, is less generous than the original Bill.
A good deal of uncertainty has been created because shipbuilders have been unwilling to order components and steel until they were sure about the credit position. They have been uncertain about the final cost and delivery dates, and this has made it more difficult for them to plan future voyages and the profitability of ships.
Another factor which has altered since the original Bill is that Bank Rate has now been cut to 6 per cent. while at the same time the rate of interest allowed to banks has gone up from 5½ per cent. to 7 per cent. Therefore, the terms have increased enormously in favour of the banks. I do not understand why the banks are reluctant to advance this money when they can get 1 per cent. above Bank Rate for it. It could be argued that there is no great advantage in the Government guarantee since the owners can go to the market and get the favourable terms of reduced Bank Rate. That may be so, but I cannot understand the reluctance of bankers to lend their money on terms of this kind, all the more so at a time when we read that export credit guarantees have increased so much. According to my figures, they were up 17 per cent. in the last quarter of last year. I should have thought that this cause was just as worthy in terms of foreign exchange as guarantees for export credits.
I now come to my comments on the Geddes Report. Ever since I was first associated with the industry, I have believed it to be one of the greatest complexity. It was probably impossible for any outside committee to come into the 1405 industry and make the correct recommendations. Looking back, we can all see that our doubts about the main recommendations were more than justified. My hon. Friend the Under-Secretary of State has more than once drawn attention to the emphasis on shotgun weddings. The right hon. Member for Bristol, South-East (Mr. Benn) is the patron saint of shotgun weddings. He always seemed to want them. But they have not worked out at all easily, especially on the Upper Clyde, and if some of the other proposals between Northern Ireland and the North-West had been implemented, the position would have been even worse. This is one of the reasons why too much of the Geddes money was spent in the wrong place.
§ Mr. Douglas
Will not the hon. Gentleman concede that paragraph 276 of the Geddes Report says:During the past ten years the industry has spent over £60 million on land, buildings and new plant and machinery. It appears to us, however, that little if any attempt has been made before investing new capital to estimate the return in terms of increased profit or reduced costs…"?That was the industry under private enterprise.
§ Mr. Wingfield Digby
I do not see what that has to do with shotgun weddings. Some of the amalgamations could have been encouraged and would have been good. But there is no doubt that the action of the last Government in forcing them on people has done, and will continue to do, a great deal of harm. The mere fact that they did it with the best intentions does not exculpate them or put them in the position of saying that Geddes was wonderful in every respect.
§ Mr. Albert Booth (Barrow-in-Furness)
The hon. Gentleman is a fair man. He referred to my right hon. Friend the Member for Bristol, South-East (Mr. Benn) as the patron saint of shotgun weddings. Surely he will agree that in the case of the shipbuilding industry my right hon. Friend implemented a measure which had been agreed within the industry. He was not responsible for foisting the Geddes policy on the industry. The industry had agreed to it.
§ Mr. Wingfield Digby
The hon. Gentleman will remember that Geddes 1406 made definite recommendations, one of which would have meant that shipbuilding in his own constituency would be joined to that in Northern Ireland. I do not know whether he thinks that that would have been a good plan. I think his constituency would have suffered.
Then the Geddes Report dealt with machinery and components. Here again, its recommendations have not worked out very well. I find it difficult to attribute blame, though I feel that the Shipbuilding Industry Board has proved to be a disappointment. Certainly I expected more from it than has been achieved.
Although the difficulty about industrial relations was recognised by Geddes, undoubtedly that has also done a lot of harm. In support of that assertion, I use not my own words but those of the article in The Economist:…repeated rescue operations have given shipyard workers the impression that the taxpayer will probably pay for whatever unreasonable wage demands they make.I think that that comment is justified, and the right hon. Member for Birkenhead came very near to agreeing with it.
Another point that right hon. and hon. Members opposite must remember when they claim credit for Geddes is that they ignored the most important of all the Committee's recommendations, which was that shipbuilding should once again have a cheaper rate of steel, as it did in the old days. I have said this many times before in this House, and I say it again. I am happy to congratulate the Government on holding down the price of steel, and my hon. Friend is to be congratulated for altering the position about getting cheaper steel from abroad. Steel is a very important part of every ship, and it is sad that this important provision of the Geddes Report was ignored for so long.
What are the prospects today, after Geddes? World demand is great. In our yards we have great skill, and we have certain skills of management. I have always believed in our doing the tasks at which we excel. Great Britain is good at shipbuilding, whatever the temporary difficulties. For that reason, certain help is justified. The provision of this guaranteee does not cost the Government a penny. Even the Bill says that it will not cost any money. I do 1407 not see why the bankers should not put up the extra money to turn the Government's proposal into a full revolving credit.
In a highly competitive world it is difficult to find an industry which does not have difficulties. The shipbuilding industry is a concentrated one, and unemployment has severe social consequences. I believe that there is a place for the British shipbuilding industry in the world today, although our share of world markets has been reduced so seriously. In the few cases where we have the kind of equipment which can be compared with that of the Japanese—for example, at Harland and Wolff—I hope we shall be able again to show the world, but it can be done only with the co-operation of all sections of the industry, including the workers.
I hope that my hon. Friend will lose no time in considering the home owners, making up 80 per cent. of our market, who contemplate ordering ships for 1974. As a result of what has been said today, I fear that they will be inclined to look abroad more than ever. Our shipping industry has pulled up. It has shown itself more enterprising than it was after the war. It is going in for bulk carriers and container ships in advance of the world. It is a very competitive industry. At 2 or 3 per cent., its return on capital is very small. It must be able to order in the cheapest place. I am sure that most owners would prefer to order at home. and I still believe that it can be made possible for them to do so. For those reasons, I hope that my hon. Friend will complete his further look at the industry as rapidly as possible.
§ 5.28 p.m.
§ Mr. Frederick Willey (Sunderland, North)
I begin by declaring an interest. My constituency probably contains the greatest concentration of shipyards in the country.
It is pointless for the Minister to talk about shipbuilding representing only 1 per cent. of British industry. Shipbuilding is concentrated in three or four districts, and in those districts, obviously, it is of great local importance. Incidentally, my constituency contains the best and most successful yards in Britain in terms of management and men, though 1408 they have not the resources of other yards. The Minister mentioned Austins, and he will be delighted to know that the company is celebrating the centenary of the SD14.
I mention these local factors because there are two that I want to emphasise. The Minister said that Austins has received no aid. In fact, the Sunderland shipbuilders are very independent. They are reluctant to take aid. Compared with other shipbuilding districts in Britain, they have had practically no aid.
I also think that it is unfortunate that the operations of the S.I.B. have been too subject to political pressures. If we looked at the industry coolly and rationally, probably more aid would have been concentrated on areas like Sunderland where the yards have been so successful. Indeed, we have helped other yards. The best thing that was done about U.C.S. was to get Stan Douglas from Austin Pickersgills. I mention this to draw the Government's attention to the warning given by the S.I.B. in its last report, when it said thatlarge sectors of the industry will continue to require access to capital which they will not be able, in the near future at any rate, to generate in sufficient amounts for themselves.The S.I.B. said that this was a real risk and warned us that this year, the period we are just in, the S.I.B. will find itself unable to deal with some of the applications made to it.
I have mentioned Sunderland's background because I think it may require aid. I want an assurance from the Government that any such request will be looked at rationally and realistically and that Sunderland's claim, if it should be made, will be considered against the background of the aid which has been given to competing shipbuilding districts, because Sunderland is facing competition not only subsidised from abroad but in this country, too. The Sunderland yards are not prepared to be out-subsidised by the other British yards which have been so heavily financed.
The second local factor which I emphasise is that, like most shipbuilding districts, Sunderland is in a development area. I have acknowledged in previous debates that Sunderland is now a special development area. At the moment it has male unemployed at 9. per cent., but it has had male unemployment bumping 1409 10 per cent. for three years. Shipbuilding has to be considered in this context.
It is no use the Government telling me that Rolls-Royce will be considered in the interests only of Rolls-Royce. As Rolls-Royce has been nationalised we must pay attention to the fact that the Rolls-Royce factory in Sunderland is vital to maintain even the present rate of employment.
The Minister referred to labour relations. I should like to emphasise one particular consideration. For many years shipbuilding has been a contracting industry. Our Sunderland yards have been making 300 to 350 workers redundant every year. A lot of nonsense is talked about the shipyards. There has been heavy rationalisation in the yards, and this has taken place in areas of heavy unemployment. In these circumstances, labour relations are frightfully difficult. We had a disastrous strike at Doxfords for 13½ weeks last year. That is why I have mentioned the difficulties which we may be facing.
The Minister must appreciate that asking men to accept the rationalisation of their industry within the context of heavy unemployment is a real difficulty. Other factors affect the matter. Sunderland has redundancy among miners, too, but one should think of the terms which they get on redundancy. I mention this because these matters have to be considered as part of regional policy.
The tragedy about shipbuilding is the need—which we have had for years—for an expansionist attitude in the industry. Consider the present position. We have an order book to discharge facing serious cost escalation. Think of the incentive that there ought to be to speed production, if only to mitigate prospective losses. It is not altogether a good thing to have accumulated this order book. It carries liabilities.
I have previously made clear my position on steel prices. The steel price is 20 per cent, of the cost of a ship. We should be doing all that we can to hold down price increases as we have done previously, but it should be done in the context of a prices and incomes policy. We should mitigate prices in the nationalised industries. We should do what our competitors would do in the present situation; we should see that the British shipyards, to encourage them to speed 1410 production, by one device or another receive steel more cheaply than at present.
I should like to pay tribute—I am surprised that no one has done so—to Sir William Swallow. Sunderland has been fortunate. It has not troubled the S.I.B. greatly. However, the industry recognises that Sir William Swallow has done a very good job. But the job was only a holding operation. The melancholy fact is that in broad terms Geddes has been only a partial success. It has been a partial failure. We are reaching the dates set down by Geddes but we have no prospect of reaching the target of 2¼ million gross tons or 12½ per cent. of world output. As has been pointed out, the output is just over half that and there are no signs of it rising. I am not suggesting that the solution is easy or that it is stereotyped, but we must consider the British shipbuilding industry in the context of world shipbuilding.
My right hon. Friend the Member for Birkenhead (Mr. Dell) mentioned Japan. When I last spoke in a debate on the shipbuilding industry a couple of years ago I pointed out that Japan was then producing six times the shipping that we were producing. The amount is now nine times higher. Two years ago I gave the world output figures. I said that we should probably be pipped for third place by Sweden. We are now a poor fourth, and Sweden is well above us. But France and Spain are on our tail. Spain has made a spectacular increase. These countries are not going in for shipbuilding to carry losses. There must be some attraction in building ships.
Our export figures have been mentioned. They are the worst for five years. But what is appalling and disastrous—this is the crux of the debate—is that, despite the aid which the Bill will give, British orders from abroad worsen from year to year. It is fantastic, compared with 20 years ago, that last year new British shipping built abroad was far greater than the total output of British yards. This is not a matter of nationalisation. That is irrelevant but we must recognise that other countries have, and pursue, a national policy for their national industries of shipping and shipbuilding.
Japan's yards have, in our terms, a fantastic order book which has put them 1411 in an entirely different league. Yet, despite that, 100 per cent. of Japan's home orders go into Japanese yards. This does not happen by accident.
The Japanese merchant fleet has multiplied five times in the last 10 years. In 1969 it overtook the British fleet, and now it is 1 million tons larger. All that has been built in Japanese yards. The Japanese have an entirely different national attitude to their national industries. It has nothing to do with nationalisation. It is a matter of national will and determination.
That attitude is to be found not only in Japan but in other shipbuilding countries. I have mentioned France. France did not have a Geddes Report. People there recently looked at their industry, and there has been a thorough reorganisation of the basic principles of shipbuilding in France. The result is that since the beginning of 1970 France has topped the list of countries building specialised shipping. She builds more oil tankers than we do. She has an order book as big as we have, but the important thing is that in France they have looked rationally at the market, decided what they could take, and have got on with it. All this has not been done by accident. It has been the result of a concerted national effort, and it is this attitude that we have to recognise. We must adopt a similar approach, and what I am saying about shipping and shipbuilding applies to other industries, too.
Geddes—and it should not have been put any higher—was a salvage operation. It is no good saying to the shipbuilding industry, "We have given you a launching pad, off you go". We must see what other shipbuilding countries have done, learn from them, and then show equal skill, sense and determination here.
I intend to be brief. Nothing has been said about marine engineering. Every year I read with melancholy the S.I.B. report that no progress has been made and that the position is thoroughly unsatisfactory. Our marine engineering industry should look at other countries to see what is happening. No mention has been made of ship repairing, which is facing major difficulties.
What we want is a national will and spirit to settle the problem. I am dif- 1412 fering from my right hon. Friend about nationalisation, because this is not a simple matter. This must be a joint operation. At the moment we are considering the banks providing cheap credit, with Government guarantees, discriminating in favour of an industry. This is an industry upon which my constituents depend to a great extent, and I support this, but the problem is complex. I am not saying that if shipbuilding and shipping are considered, we must not consider other industries, too. What I am saying is that however great the difficulties, we must face them.
It will not be easy to evolve a pattern for dealing with difficulties in this industry. If one considers the history of Japanese shipbuilding, one realises how complex it can be—at one time it was supported by a levy on sugar. Let us show the kind of determination that has been shown by the Japanese, not only in shipbuilding but in shipping. They have now shown such a determination to go ahead in shipping that Liberia had better watch out.
I am disappointed at the Government's attitude. I do not think that they can abnegate their responsibilities. Shipbuilding and shipping are international industries. We must learn from what has been done in other countries, and do the same kind of thing here. If we do not, then not only these industries but the whole country will slide into trouble. Probably it has slid too far already. What we need above all else is a national will. The Government cannot leave somebody else to deal with the industry; they must give a lead and see that people pull together. For years I have argued that this ought to be an expansionist industry. What we want to see in the industry again is spirit and determination to deal with the problems which face it.
§ 5.45 p.m.
§ Mr. Stanley R. McMaster (Belfast, East)
I denounce, straight away, the air of depression which was so apparent in the speech of the right hon. Member for Birkenhead (Mr. Dell). I welcome the Bill. As the right hon. Member for Sunderland, North (Mr. Willey) said, the shipbuilding industry has a great future. I, too, have a large shipbuilding yard in my constituency. During the last 10 1413 to 12 years this yard has been modernised, and it now has a large building dock, one of the largest in the world, and certainly the largest in Europe. New fabrication sheds are nearing completion, and when they are in operation they will place this country in the forefront of world shipbuilding.
The right hon. Member for Birkenhead does no service to the industry when he calls for the nationalisation of the shipyards. One has only to consider what has happened in other industries that have been nationalised. For example, the steel industry, to which the right hon. Gentleman referred, has had seven different political bosses during the last five years. What good does it do an industry to bring it under public control and change its management with every change of Government?
§ Mr. Dell
The hon. Gentleman is a Northern Ireland Member who frequently talks about the situation at Harland and Wolff. In fact, he has been described as the hon. Member for Harland and Wolff. Perhaps he will comment on the Industrial Development Bill introduced yesterday. Does he know whether the Northern Ireland Government intend to take a shareholding in Harland and Wolff, a company to which they are giving financial assistance, and to which they are likely to continue to give such help?
§ Mr. McMaster
The right hon. Gentleman has anticipated my speech. If he will forgive me, I shall deal with that issue in due course.
I welcome the Bill, and I am glad that the limits are being increased. This is the second increase in the limits provided for in the 1967 Act. These are reforms which I and the stalwart few who always attend these debates have advocated for many years. The whole purpose of the Bill is to place the British shipbuilding industry on a par with shipbuilding industries throughout the world. Considerable sums of money are tied up when a ship is being built in German, Swedish or Japanese yards. Five years may elapse from the placing of an order to the delivery of the finished vessel. The building of the ship often has to be financed at gruelling interest rates. For many years interest rates abroad have 1414 been lower than in this country. Bridging the gap and providing a guarantee has not cost the Government one penny. They have been at risk, but they have not lost anything through having to provide these guarantees since the provisions for them were introduced in 1967.
Therefore, with the expenditure of the taxpayers' money, the Government can give a guarantee which has enabled the shipowner, British or foreign, to order vessels in this country at very competitive interest rates. I would remind the House that one or two per cent. on the interest rate can account for many hundreds of thousands of pounds in the final cost of the vessel.
I agree that perhaps the limit of £700 million may not be adequate. I am glad that the Minister did not close the door on this point. I would urge him to reconsider it, as it costs the Government nothing—although our money is at risk —and I do not see why they should not provide a guarantee subject to ordinary commercial considerations. After all, the banks can be relied on to vet the purchasing shipping line carefully. They would bear the loss in the first instance.
I suggest that a limit of about £1,000 million is more realistic. I said this when we discussed the original Bill, and I said it when the limit was raised to £400 million in 1969. By the same token, I believe that the £700 million is inadequate. The Minister almost said as much.
I hope that the Minister will pay particular attention to what is happening abroad. Our main competitors, of course, are other European yards. We know that some of them, particularly France and Italy, are subsidised. British Rail placed an order just over a year ago with the Italians, who receive a 15 per cent. subsidy. In France the industry receives between 15 and 17 per cent. subsidy, which can be further increased by another one or two per cent. if the yard is in a development area. I do not go along with the Minister. I feel that it would be better if there were no subsidy provided for any yard, but as this is an international business, we have at least to match the foreign subsidies.
I might then be asked: what of the Japanese? But they do protect their industry, since any Japanese ship owner who orders his ships abroad has to pay 1415 import duty. As Japan has been able, on the strength of her own home market, to build up a strong shipbuilding industry, surely, if we cannot persuade our other main competitors to drop this policy, we should consider matching it and protecting our own shipyards. I accept completely what the right hon. Member for Sunderland, North said: shipyards are vital to this country.
I welcome the Shell tanker order, which is valuable not only directly to the shipyard in my constituency but also to our balance of payments. It saves vital earnings abroad. Also, since these tankers will carry crude oil all over the world, this country will be assisted in that way too in the long run. So for trading reasons, it is essential, not just important, that our shipyards should be made as competitive and viable as possible.
Also, we are a maritime nation. Our defences are completely dependent on the seas. Certain economists have advocated that since our foreign competitors are prepared to subsidise their yards, since capital and labour are scarce, we should buy the ships which they are offering at low prices, allow the shipyards to decay and redeploy the men into other industries. [Interruption.] I am referring to articles in the Economist and other journals.
§ Mr. Douglas
Would the hon. Gentleman not concede that his Front Bench have a peculiar addiction to the views of the Economist? The policy announcements for the steel industry and their practice in that industry were announced in the Economist months ago.
§ Mr. McMaster
I welcome the Government's action over the steel industry, and I am tempted to follow the hon. Gentleman into that argument. But if he considers the Minister's speech carefully, he will see that what I have said is correct. In other words, this is not the policy of Her Majesty's Government. I would strongly refute any such policy, for both trading and defence reasons.
When an industry like shipbuilding is making large bulk purchases of steel, there is a good case for the quotation of a special price. I very much welcome the Government's action in halving the increase suggested by the industry from 14 per cent. to 7 per cent. Steel is a large 1416 factor in the price of a ship—more than 20 per cent.—so this is a matter of great concern to British shipbuilders.
However, I wonder whether this is the complete answer to the problems of British shipbuilding. It would do the shipbuilding industry no good if it paid such a low price for its steel that the steel industry suffered. The reason for the difficulties which our shipyards have got into, particularly over the last decade or two, is the rapid rise in its prices, which is directly related to increased labour costs and increased prices in the country as a whole. Where escalation clauses were added to contracts—many contracts had none—they proved totally inadequate because costs have risen so sharply.
I would like the Minister to consider carefully whether we should not now have a prices and incomes policy. If the escalation in current trends continues in the shipbuilding industry, under which wages costs have risen more rapidly than in other parts of the engineering industry, our shipbuilding industry will be badly damaged.
In the present circumstances, we cannot control our shipbuilding prices, and it is unreasonable to expect that we can. Therefore, although I have not advocated this in the past, I feel that now, considering the particular problems of our shipbuilding industry, the time has come for the Government to lay down some norm or, perhaps, even go further and impose a statutory policy on the country restricting the increase of prices and incomes, perhaps even for a long period. I feel that it is the Government's duty to take a lead in this way, and I ask them, in the light of this debate, to reconsider the whole question.
Now, a word about Harland and Wolff, During the Easter Recess I took the opportunity to go round the yard and see for myself the progress being made in building facilities there. There are five modern slips, added 10 or 12 years ago, in the Musgrave Yard, which are still in operation, but much more impressive is the new large building dock capable of taking tankers of up to 1 million tons, which looks as far ahead as one can see.
At the moment, the dock is being used to build a tanker of 250,000 tons, and, as we know, it recently received orders 1417 for more such vessels from Shell. There are orders on the books from both Shell and Esso, and also from Onassis.
The productivity of this modernised yard will help Britain to recover her position in the world as a major shipbuilder. Once the steel fabrication sheds are finished and brought fully into operation—by June of this year, I hope—the metal will flow through from one side of the yard, through the shot blasting, cutting and other parts of the fabrication sheds, where large sections will be prefabricated under cover in a way never possible before. Very large sections can be prefabricated, and, as I saw for myself, there is giant cranage available so that the plates may be welded together in the building dock.
All this means that the facilities can be used on two, or even on three shifts, I hope, if there is pressure, as there is a great deal of capital tied up. This is something revolutionary in British shipbuilding, but it is vital if we are to bring down our costs so as to compete with Europe and Japan. One would not expect fabrication in the building dock to go on round the clock, because of the weather conditions which we so often experience in this country, but this would not be necessary. So long as large portions can be assembled under cover in the fabrication shed, it should be possible for the company to reduce its costs considerably.
For these reasons, I am far more optimistic now about the future of shipbuilding in this country. We have great skills available. We have a skilled work force. The trade unions have made clear that they are prepared to meet the management on flexibility of labour in a way which we have not known for many years. The co-operation of the trade unions and the better management which, I hope, will be available will put this country back among the leading shipbuilders of the world.
I hope that we can be told a little in the winding-up speech about the Governmenes plans for the management of Harland and Wolff. This is a matter of some concern in Belfast, particularly after the recent uncertainty about the future of the yard and the possible plan to sell a large part of the interest in the yard to an overseas interest. I was very pleased 1418 that, in the end, control of the yard remained in this country.
I come now to the point made about nationalisation by the right hon. Member for Birkenhead. I do not regard nationalisation as the answer for our shipyards. If Government money has to go into our shipbuilding industry so that it may meet subsidised competition from abroad, it is right and proper that the Government should protect their interest by taking an equity holding in the yard and having representatives on the board; but that is totally different from Government management and control.
The trouble with nationalisation is that we have frequent changes of Minister and changes of Government policy, and nationalised yards become subject to terrific political pressure. This cannot help any industry, whether shipbuilding, steel, coal or transport. It is far better that that industry should be given some stability, security and continuity for the future. Nationalisation would not secure this for our shipyards. That is why I reject the suggestion that either Harland and Wolff or British shipbuilding generally should be nationalised.
§ Mr. Dell
I did not suggest that the nationalisation of particular shipbuilding companies was the answer to the problem. I suggested that it might be part of the answer. But will the hon. Gentleman answer this? He believes that equity holdings should be taken by the Government in firms to which Government money is given. Will he tell us what proportion of the equity of Harland and Wolff would now be in public ownership if the capital provided by the Government to that yard were represented as a share of the total capital of the yard?
§ Mr. McMaster
I think that my hon. Friend the Minister would be in a better position to answer that than I am at this moment. I am aware that the entire shipyard of Harland and Wolff is grossly under-capitalised, but I should not like to go into that in great detail now. For one thing, part of the money advanced by the Shipbuilding Industry Board to Harland and Wolff may be advanced by way of loan. Before giving a realistic and sensible answer, one would have to determine what proportion of Government money would best be made available on loan, which could reasonably be expected to be 1419 repaid in the future, and what proportion should be put in permanently by way of equity. There are many arguments as to the pros and cons of each method. What is advanced by way of loan has to be serviced, and interest rates are high, which puts a large charge on the company. On the other hand, the company retains a much greater degree of independence. If a company is under-capitalised, it is possible for people to go into the stock market and, by spending comparatively little money, particularly if the company is not doing well, gain control. All these are matters which would have to be considered. I should not like to give a firm answer to the right hon. Gentleman.
I return to my original point. While welcoming the Bill, I should like the Government to look again at the total limit available and see whether it would be more sensible to increase it. As a nation, we ought to adopt a far more confident frame of mind. Whether the money made available to Harland and Wolff or to other yards is public or private money will depend very much on confidence: in the one case, the confidence of the individual investor, debentureholder and shareholder, and, in the other case, the confidence of the British public in allowing public money to be spent in this way.
The British shipbuilding industry merits our confidence. As a result of the Geddes Report and the efforts of the last two Governments, Labour and Conservative, our shipbuilding industry has been modernised. I imagine that the reason why there are so few hon. Members attending the debate today is that people are, perhaps, more optimistic about the future of our yards. There certainly does not seem to be great concern evident in the House that the industry needs further help, for if there were there would be more hon. Members present.
Therefore, I totally reject the depressed air which hung over the House during the opening speeches, and particularly that of the right hon. Member for Birkenhead. With a revision of the total amount of guarantee, which is not costing the Government a penny, we can look forward to a brighter future for our shipyards.
§ 6.10 p.m.
§ Mr. E. Fernyhough (Jarrow)
I apologise to the Under-Secretary of State because I may not be able to hear his reply as I hope to take part in another forum at 8 o'clock. It was a commitment made long before I knew that there would be this debate, a debate in which I am glad to take part.
I am intrigued by the contradictions of the speech of the hon. Member for Harland and Wolff. He has no belief in nationalisation, but praises the Minister who, if the steel industry had not been nationalised, would not have had the power to intervene in the commercial judgment of the Steel Corporation and make it keep the price of steel down. Our steel prices are still competitive. The shipbuilding industry has already made it clear that it does not believe that there will be any advantage to be gained by being able to import foreign steel, because it does not believe that it will be able to get better prices and quality than it can get here.
If I felt as hon. Members opposite do and lived in a town where there was a naval dockyard, I should be very unhappy and uncertain, because there is something publicly-owned that is part and parcel of the shipbuilding and ship-repairing industry. I presume that Conservative hon. Members will go to Gosport and Portsmouth and various other places like that and tell the people there that the yards are inefficient and must be put in the hands of private enterprise, that the State which runs them is incapable and is running them in an inefficient and costly and wasteful way. We know that that will not happen.
The main theme of the Minister's speech was that most of our problems in the shipbuilding industry are apparently due to wage cost inflation. I do not understand what is happening. The Government are publishing broadsheets telling the people that we must get into the Common Market. Articles are published in the papers saying that the wage rates of British workers are £5 to £7 a week lower than in the Common Market. If our wage rates are inflationary now, what will they be like when we get Common Market wages? What will the effect be if our lads say, "If Common Market wages are £5 to £7 above ours, 1421 it is time we made up some leeway and caught up. It is time we levelled out this unfairness."? That would place us in an even more uncompetitive position. It is all right to say that the Common Market workers are more productive and so on. One of the major factors that very few hon. Members will realise, in regard to the shipbuilding industry or any other of our major industries, is that this country has carried a defence burden far greater than all its competitors. It is that, more than anything else, which has placed us at a competitive disadvantage in industry in general.
What disappointed me most about the Minister's speech was that he made no reference to ship repairing. The Under-Secretary of State said yesterday in reply to a Question by the hon. Member for Tynemouth (Dame Irene Ward):A report prepared by the Ship Building and Ship Repairing Council on the ship-repair industry as a whole was considered by my right hon. Friend before deciding, last August, that further Government assistance for the Palmers ship-repair yard would not be justifiable. The Council released its Report to the Press last September.Before the decision was made to close Palmers the Government had studied the report, which makes it perfectly clear that the North-East had the lowest cost in ship-repairing of any of the ship-repair yards in this country. If the costs in the North-East were the lowest of any of the yards, how did it come about that the most up-to-date ship-repair yard in the North-East was closed down? Why were not the Government prepared to give a much longer look at that problem and at the social problem which is created?
The Under-Secretary also said yesterday:The Minister for Industry or myself, if we catch your eye tomorrow, Mr. Speaker, will hope to say something about policy for the ship-repairing industry."—[OFFICIAL REPORT, 21st April, 1971; Vol. 815, c. 1178–9.]The Minister did not say a word about it, and therefore we are in the dark. It may be that the Under-Secretary will give us a little more hopeful news about the ship repairing industry than we have had about the shipbuilding industry. The Bill, with its limitations, and the other announcements made today, will bring no great joy to the hearts of directors, managements and workers in the shipbuilding industry.
§ Mr. Blenkinsop
Does my right hon. Friend agree that it is very unsatisfactory for us not to have had that statement at the beginning of the debate?
§ Mr. Fernyhough
It will be decidedly unfair to everyone taking part in the debate if a statement is made in the winding up speech on which no one will be able to make any comment, no matter how acceptable or unacceptable the statement might be.
The one part of the speech of the hon. Member for Belfast, East (Mr. McMaster) with which I agreed was that in which he referred to the British shipbuilding industry being as important a part of our defence as any ballistic missile or any other weapon. No nation such as we are, the biggest importers in the world, dependent upon ships more than any other single nation, could ever afford to allow its shipbuilding industry to disappear, whatever the causes. The Government would have to do a Rolls-Royce if things went too badly wrong. Of course they would then recognise that the ships which bring in our food and raw materials are as important as the aircraft engines which we have been discussing in the House recently. I do not believe that the future of the industry is quite so hopeless. It is possible to encourage better relations which can lead to improved productivity and greater competitiveness. A Government which wants that kind of thing ought not to have done what this Government have done.
There is a dispute on the Tyne at present. I wonder what the Secretary of State for Employment's conciliation officers are doing to bring about a settlement. We know that this is a Government of no interference; they do not believe in getting mixed up with such things. They cannot run away from their responsibilities for 56 million people in this country and they cannot run away from their responsibility for what is happening in industry. It is the duty of the Minister to attempt to use his good offices to bring about a settlement in the dispute.
If we accept the philosophy which was behind the Minister for Industry's speech we can see that this is a Government which believe in standing aside. What they have to realise is that there are countless thousands of people who believe that they are not interfering enough. We 1423 cannot have an unemployment problem such as exists in my constituency and surrounding constituencies, of enormous magnitude, with all the worries apprehensions and fears which accompany such a problem, and expect the people affected not to think that it is the duty of the Government to intervene.
Naturally they want the Government to intervene because they believe the Government's policies are largely responsible for their fears and apprehensions. The Under-Secretary could bring a little brightness to what has been a dull and sombre picture by saying something which will encourage those in the ship-repairing industry and give them a little more hope for the future than they received when I brought a delegation from Vickers, Hebburn to meet him last year.
§ 6.23 p.m.
§ Dame Irene Ward (Tynemouth)
I am a little apprehensive about taking part in the debate because I have so little expert knowledge to contribute. However, for many years I have taken a great pride in the shipbuilding and repairing industry in my part of the world and I would not like a shipbuilding Bill which contains certain helpful features to be passed on to the Statute Book without expressing my appreciation of it and some of the anxieties about the future of the industry. After listening to the Minister for Industry, I felt that my limited knowledge of the industry was not sufficient to enable me to cope with the statement made my him.
We have had to wait a long time to hear that speech. In my own small way I have been instrumental in pressing my Government to get on with this Bill and I feel in an unfortunate position. In parliamentary life one learns to pick up information and to exercise judgment as to who to believe and who not to believe. I had understood that it was very embarrassing to the Department responsible for the Bill that we have had to wait so long for its introduction. I had emphasised to the Leader of the House on many occasions that we ought to have the Bill.
To my consternation, when the Minister for Industry got up he did not seem to be ready to make the statements which I thought he was ready to make because 1424 he was so anxious to get the Bill on the Statute Book. I am in an unfortunate position because I do not know who is speaking the truth. Perhaps the Under-Secretary can say whether the Government are in a position to state their case fully, and I hope it will be better than that which has been stated this afternoon. When are we to know? How far have representations from the shipbuilding, ship repairing and other shipping interests been taken into consideration here?
I do not want to get into a political conflict today, but I must say that the views of the right hon. Member for Birkenhead (Mr. Dell) did not accord with mine. It was refreshing to hear the right hon. Member for Sunderland, North (Mr. Willey) rightly paying tribute to the shipbuilders on his river. We have always known of the first-class shipbuilding industry in Sunderland. There have been a lot of small, competent family firms there. According to what the right hon. Gentleman said, they were not demanding money from the Government and certainly not demanding nationalisation.
I agree with the right hon. Member for Jarrow (Mr. Fernyhough) that we have not had the promised statement on ship repairing. I shall not argue with the right hon. Gentleman about who has the best ship-repairing yard in the North of England, but in my constituency there is a first-class repairing yard. I am naturally anxious to hear about it.
It is not always the Whips or, indeed, Ministers who encourage one to press the Leader of the House to find time for a Bill. It is quite pleasant when it comes up. I was naturally expecting that we should have the pledge redeemed and that we should hear something about ship repairing. Nothing seems to have happened and nothing seems to have been said. It was very difficult to fathom exactly what the Department of Trade and Industry was intending to do, what its ideas were, or whether it was having difficulties with the Treasury. By the time I had listened to my right hon. Friend, I had no idea exactly where we were on this very important issue. I hope that later we shall have a great deal more reliable, consistent and helpful statements made so that the shipowners and those who build ships on our rivers, 1425 on the Tyne and in other parts of the North-East, will be assured of their future.
It is well worth while to remember that our shipping industry has contributed a great deal to our invisible exports. As the industry is part and parcel of the active side of our economic survival, we should give it all the help that we can. The letter sent from the Department of Trade and Industry to the Chamber of Shipping on the business of perhaps helping a little in the transfer from investment grants to investment allowances was rather mean. We could have been a little more helpful and generous to an industry which has contributed so much to our invisible exports. I am not pleased by that letter.
Another difficulty with which I am faced at present with regard to shipbuilding is what we can do to help. It was interesting to hear my hon. Friend the Member for Belfast, East (Mr. McMaster) —the hon. Member for Harland and Wolff, as he is described. He ought to be very pleased, proud, hopeful and appreciative, as I am sure will be his constituents. I have always thought that the Upper Clyde received a great deal more attention from the previous Government than did Tyneside or, perhaps, Belfast. Political pressures from sections of the community play their part in Parliament, as we well know. I was not all that pleased because sufficient help had not been given to marine engineering. I have often raised that question in the House, but unsuccessfully. Also, ship repairing on the Tyne, which is very important to owners who sail from that river, has not had a fair share of help.
Hon. Members on both sides of the House have been pretty restrained in the debate. But we are faced with a very difficult situation on the Tyne with regard to the fitters' strike. I have not seen the latest figures, but it is a terrifying situation for everyone on Tyneside, whether they are engaged on shipbuilding or not. One cannot continue to run private or nationalised industries without profitability. That is quite clear. When I speak to friends who are not particularly interested in shipbuilding on the Tyne, they always say, "You are all right up there now, because you have full order books." Up to a point, that is true. But a major shipbuilder in our country, Swan Hunter, is not building at a profit. In the end, without profit there will be no money 1426 to tax to maintain the general instruments of government. This is a serious situation. Although full order books provide employment, that will be no good if those who work in the shipbuilding industry know that, in the long run, a time of reckoning is coming.
I sympathise with the right hon. Member for Jarrow when he talks about loss of jobs and so on. Unemployment is a frightful situation for any person to face. But the people who are carrying out this strike in a certain section on the Tyne are running the risk that Swan Hunter will close some of its yards. This would have an escalating effect on unemployment on the Tyne and would deprive first-class shipbuilders, first-class workers, their wives, the shopkeepers, ratepayers and everyone else. Many additional unemployed would be added to the already regrettable number.
Obviously there has been controversy about the Government's decision on the steel industry, a decision which I warmly applaud. The reason for giving shipbuilders the release to import foreign steel was the continuing losses in the nationalised steel industry and its continuing demands for increased prices.
The other day I listened to the head civil servant in research. What he said about the possible future of all our industries in relation to competition from. Japan ought to be noted by every man and woman who has any responsibility for government. To my knowledge, what was related to the many men and women who were present was a very frightening statement of fact. I hope that we are now to be told when the anxieties of the shipbuilding, ship repairing and shipping industries will be alleviated.
Many of the Minister's remarks made me anxious. For example, he did not comment on a point which the right hon. Member for Bristol, South-East (Mr. Benn) raised. This may not seem terribly important to some, but it is important to me. Apparently the Secretary of State for Trade and Industry told the Opposition why he could not be present for this debate. That was polite of him, but I would have liked to have been told too. I have a shrewd suspicion that because of pressure from hon. Gentlemen opposite, this debate is taking place today, with the result that my right hon. Friend, because of an appointment from which 1427 he could not escape, is not able to attend. That is my guess. He graciously informed the Opposition of that. He might have told his hon. Friends as well.
§ Sir J. Eden
I apologise to my hon. Friend for not having mentioned this before. Her guess is absolutely correct.
§ Dame Irene Ward
Psychology is important, particularly in Parliament. Having been here for many long years, I want the Government to know that I want to be put in the picture as well.
I am still not sure whether this Measure will achieve anything. Although I listened carefully to the remarks of the Minister for Industry, I do not know what section of the industry will benefit or how, when, why and if it will benefit. We must do everything possible to keep our first-class shipbuilding industry in operation, and competitively and profitably in operation.
I must sound a political note which I am sure will not be acceptable to hon. Gentlemen opposite. I would like to see built here the frigates which South Africa wants. One of our great mistakes of the past was the loss of naval shipbuilding. We once had a first-class naval shipbuilding industry, but we now seem to build very few naval ships. I do not know if any have been going to Belfast or the Clyde, but certainly they have not been coming to the Tyne. We would like to see some built on our river, for a number of reasons, and especially because it would help to reduce unemployment.
I am today neither congratulating nor hammering the Government. I dislike finding myself in the position of having heard a Minister's speech, not understanding what he said. Whatever he said, he said it charmingly, but charm does not tell one anything. I want to know some absolutely reliable facts. All the charm in the world—it is fun to be charmed and we have some extremely charming Ministers—will not provide the wherewithal for life. In other words, one cannot live on charm.
I want to know how, if at all, the Bill will help our shipbuilding and ship-repairing industry. I hope that the Under-Secretary will answer this question and all the others I have asked in a way that will give us the facts and also, perhaps, get a good reaction. It is the 1428 job of the Opposition to criticise and when we were in opposition we criticised hon. Gentlemen opposite. Indeed, I often enjoyed doing it. I find it difficult to criticise the Government because I am such a loyal supporter of theirs, but what we had today from the Minister was not good enough.
Our great shipbuilding industry has done much for Britain. Our shipowners have earned great invisible exports. Long may they go on doing so. I want to know what a Conservative Government intend to do to ensure their survival economically, competitively and profitably.
I trust that the Under-Secretary will comment on the strike on the Tyne and will point out to the men precisely what they are doing. I believe that if industry can earn substantial profits—I refer to any industry, but in this context I am concerned with shipbuilding—they should be distributed in an equitable fashion so that everybody benefits.
However, it is not a good idea—indeed, I oppose it root and branch—for one section of the shipbuilding industry to run the risk of doing lots of valuable men out of jobs and thereby increasing unemployment on our river, for that would be the result of such action. Nor do I think it right that our shipping interests, which are so valuable to the nation, should be threatened. I trust that the Under-Secretary will, when replying to the debate, bear in mind the many questions that need answering, and answering satisfactorily.
§ 6.46 p.m.
§ Mr. Arthur Blenkinsop (South Shields)
I assure the hon. Lady the Member for Tynemouth (Dame Irene Ward) that she is not alone in expressing dissatisfaction with the speech of the Minister for Industry. Indeed, it would be hard to find an hon. Member on either side who had any greater understanding than she had of that speech. She can console herself with the thought that her anxieties are shared in all parts of the House.
We have every reason to be dissatisfied because, as she said, we have been pressing for this debate. The Bill was published some time ago and we were given to understand that this would be made the occasion for an important statement of Government policy on the future 1429 of the shipbuilding and ship repairing industry. This has not happened. Far from a full statement of the views of the Government about these two important sections of industry, we have even had an uncertain account of the provisions of the Bill and all that goes with it.
One would have thought that the Minister would at least have been able to give an account of a two-Clause Bill, with all the background information to it. One might equally have expected to have been told whether the existing credits were adequate for the orders which the industry has already taken. When questioned about the existing credit facilities, and whether the maximum figure had been reached, leaving aside the future, the Minister did not give a clear reply.
Neither did we receive an assurance about whether the provision made by the Bill will be adequate to meet the orders for which tenders are now being offered. The industry wants to know whether it should seek business ahead. We are in a fantastic situation because while the industry is saying that the figure should not be £700 million but between £800 million and £1,000 million, the Minister did not try to explain the position.
All he did was to say that there were doubts about the future, that the matter was being examined. His phrase was that the Government were "looking to the future". I do not know whether we can take much comfort from that. Presumably, they have been looking to the future for the last six months or more. The fact that they have not been able to come up with an answer, even though the debate has been repeatedly postponed, does not greatly encourage us to expect much more from the Minister who replies. That is one matter on which we think it right to express our dissatisfaction, and this unsatisfactory way in which the Government have brought forward the Bill ought to be pursued vigorously.
As my hon. Friend the Member for Jarrow (Mr. Fernyhough) said, we are dissatisfied not only with the way in which this modest Bill has been introduced, but because we have not had a statement setting the Bill in the wider perspective as we were promised. This wonderful Administration of expert businessmen and the rest is not showing up particularly brilliantly, and certainly 1430 the businessmen concerned with this industry will be even more uncertain about their future after the debate. We know that they are already expressing their uncertainty clearly and vigorously.
We are dealing with industries which affect thousands of people. It may not employ a large proportion of the total employed population, but in my constituency it employs a very large proportion of the total employed. The industry has been contracting in any case as part of the reorganisation which we all foresaw as being inevitable with the changes in the industry, but that makes it all the more difficult for the unions to implement and accept changes of a kind which all agree to be desirable.
The unions have accepted great changes in procedures in order to make for more flexibility. They have accepted great changes in pay structures. I agree that they have fought for and secured important improvements in pay and earnings, but they have also accepted a great many changes in all the enormous range of rates of pay customary in the industry. Although there have been great improvements, there is no doubt that they have been implemented only with great difficulty. That has imposed an immense strain on the trade unions and it must be understood that that process has been going on while changes have occurred in this industry that only a few years ago might have seemed not very likely, if not impossible. That is one element of the situation which ought not to be forgotten.
My right hon. Friend the Member for Sunderland, North (Mr. Willey) called attention to the success story of Sunderland. I have an equal claim for my constituency where all the launchings of a major shipyard last year were well ahead of the order date. Those are facts. There are many disappointing facts which we have to face, but for heaven's sake let us not decry the positive work which is also being achieved. When people have successes, it is not particularly encouraging to them to get the kind of blanket condemnation which is all too often made. I claim that the successes we have had over that period have been due to the Labour Government's efforts to ensure that the recommendations of the Geddes Report were implemented, for because of that it has been possible to 1431 make some important changes. There are thus successes to be set against the disappointments.
On the other hand, it is suggested by the ship owners that the ship repair industry, which has been fairly profitable recently, is placed in the North-East. We welcome that recommendation, but it is a fact which ought not to be dodged that the ship repair industry still continues many out-dated practices, and we all know it. We have to ensure that the modernisation which must come occurs in that industry too. But we will not get the advantages we want unless there is more understanding by management of what discussion with workers really means.
Unfortunately, it is still true that the management of far too many ship repair yards do not have real discussions with the men of a kind which any of us would recognise by that term. It is a tragedy that there is still so much of the atmosphere of casual labour about the industry, in spite of many improvements. If we are to get the advantages available to us and to develop the ship repair industry fully, this is one of the most urgent matters to put right.
That is why we want some clear initiative by the Government to bring the two sides of industry together openly to discuss the future of the shipbuilding indusstry and the ship repair industry, not a discussion only by a few people at the top, but an attempt to open the whole of the industrial background to discussion by a wide range of representatives of the men, as well as of the management, so that these problems may be brought into the open. Until we can do that, we have little hope of getting the atmosphere of expansion which is needed.
I am not so doubtful as my hon. Friends about looking at the possibility of some form of greater public intervention in the industry. It is a vital industry for the country. My anxiety was aroused because the Minister seemed to be casting the industry out, to be standing aside, willing to see the industry disappear. If it disappeared, that would be the end of employment for 156,000 men and women all over Britain. It would mean in the northern area some 34,000 to 35,000 more men out of work. In my 1432 constituency alone it would mean another 5,000 men out of work in addition to the nearly 14 per cent. who are already out of work.
Surely this is a situation which no Government can accept in the kind of casual way which seemed to be conveyed in the Minister's speech. I therefore call upon the Government to make a clear statement of their attitude to the whole industry, both shipbuilding and ship repairing, and to offer some hope of a new initiative to set against the great anxieties and fears which most of us have drawn from the hon. Gentleman's speech.
§ 7.0 p.m.
§ Mr. W. E. Garrett (Wallsend)
Several hon. Members have called this a fairly dull, listless and somewhat sombre debate. This is because the Minister spoke with not much delight and enthusiasm for his task. I hope that when the Under-Secretary of State replies we shall get more enthusiasm and some distinct replies to the many questions raised on both sides of the House.
Like the hon. Lady the Member for Tynemouth (Dame Irene Ward), I could not understand the important part of the Minister's speech dealing with credits. I hope that the Under-Secretary of State will give a clearer explanation; otherwise, I am afraid, there will be misapprehensions which could result in extreme gloom and dismay in the North-East and other parts of the country. I hope that the hon. Gentlemen will consult and try to put it in simpler terms for ordinary hon. Members like myself.
Basically, the attitude of the Government towards this industry is one of indifference. I cannot understand that really, because there is an impression that the industry is being heavily subsidised. It is not. We are talking about credits, and these are paid out at interest. The term "revolving credit" means that we have a kitty of Government credits out of which the Government make money. The situation is different in certain parts of the Upper Clyde area, where some subsidies have been granted. But these are infinitesimal compared with the vast sums of money handed out for Concorde—£400 million at least—or in agricultural subsidies. When considering the financial state of the shipbuilding 1433 industry, we should relate it to the amount of money spent on other industries.
We in this House also seem to have a masochistic delight in putting certain industries before the public eye. We debate the shipbuilding industry and coal mining, bat we rarely debate the chemical, electronic or civil engineering industries and others which should possibly be given an airing on occasion. This is the fourth or fifth debate we have had on this subject over the last four to five years. What we are saying in many cases is a reiteration of a familiar theme.
Again, the myth that self-destruction seems to pervade the industry should be destroyed. The industry is not desperately sick. It is not going as well as some people would like, but still in some regions it is prosperous, and it is going through a period of reorganisation. If I had to criticise the Geddes Report it would be on the time limit. I believe that the time limit it set for the period of reorganisation was too short. I would like to have seen it extended. That is why I am so disappointed that the Shipbuilding Industry Board's term will expire in December. I ask the Minister even at this stage to think about that again. The Board still has a useful job to do. If its term were extended for another three to four years, it could be a most useful tool for the reorganisation of the industry.
Much has been said about labour relations in the industry, and one could get the impression that there is complete anarchy. There was. It had a bad labour relations record. But it is not as bad as it used to be. The hon. Gentleman referred to the bad state of labour relations, but, taking the record over the last decade, there has been a decided improvement, in spite of some unfortunate disputes, particularly on the Upper Clyde and the one which is taking place on Tyneside at the moment.
Here I must declare my interest, because I am a member of the Amalgamated Engineering Union, whose members are in dispute with the Swan Hunter Group. This is basically an old-fashioned dispute. The management gave a rise to the boilermakers and the engineers think that they are entitled to a similar rise on a question of parity. I appeal to 1434 the management once again to make some approach to the trade union so that negotiations can begin and the five-week-old strike ended as quickly as possible.
The marine engineering side was at one time a very important facet and adjunct of the industry, but it is not so important now. As the Geddes Report said, our influence on that side has declined. Nevertheless, it still has a part to play, and I would like to have heard something more positive from the Minister and some guidance as to what is to happen to some of the shipbuilding research councils, particularly the one at Wallsend. We are possibly the top nation in shipbuilding design. We have given a lead in shipbuilding techniques. But there again we have let them go to other countries, I regret to say. The Japanese, in particular, have taken advantage of much of the techniques we acquired through research over the years.
Both the Minister for Industry and the Under-Secretary of State were born in and have connections with the North-East. They know full well that the men in the shipbuilding industry are basically hard working and have a great belief in their industry. I hope the Government will continue to rethink their attitude to the industry and, above all, give it much more hope than they have done up to now. If we get that, the debate will have served some useful purpose because it will give men and management and the unions the incentive and desire to make this industry once again one of the premier industries of Britain.
§ 7.9 p.m.
§ Mr. Dick Douglas (Clackmannan and East Stirlingshire)
The Minister for Industry endeavoured, albeit unsuccessfully, to put the shipbuilding industry into the context of the capital goods industries as a whole. If I have any direct quarrel with the Government in relation to their industrial strategy—if I can dignify it with such a term—it is that they are attacking directly the capital goods industry. The shipbuilding industry is a major capital goods industry, but it also, as my hon. Friends have pointed out, has a number of facets that relate, in terms of employment, production and import saving, to other industries as well. The supply of auxiliary materials to ships is of vital importance. Yet the Government 1435 have sought, in their policy of withdrawing from industry as a whole, to attack and undermine confidence in the capital goods industries. One of the unpleasant features of the rise in unemployment is that whereas before the assets in question could be classified as wasting assets, the Government are attacking an asset which is not a wasting asset and which therefore has distinct possibilities of regeneration.
However, that does not, in the short term, excuse the high level of unemployment which is directly attributable to Government policy. If the Government can claim any credit, it is that they have removed the seasonal variation. In future, one winter will be integrated with the next. The Government have eliminated the seasonal variation, and in future we shall have a continually upward trend.
The Minister indicated some of the Government's solutions to the problems facing the industry in general and the shipbuilding industry in particular. He said that many of the industry's problems could be cured if we could eliminate, in some magical way, cost-push inflation. I do not dispute that occasionally inflationary bargains are made which will not be justified in terms of long-run productivity; that is a question of judgment and balance for management and men. But I do dispute that the Government can, by exhortation, achieve an incomes policy.
I refer to the speech of the Chancellor of the Exchequer last night. It is in this context that we consider industrial relations in the shipbuilding industry and other industries. The hope which the right hon. Gentleman holds out is this:Our interim aim is to achieve a substantial de-escalation of pay settlements accompanied by a levelling off in the rate of unemployment Later, when pay settlements have returned to more sensible levels, it should be safe to allow output to grow at a rate sufficient to reduce the level of unemployment".The right hon. Gentleman is saying to the unemployed, "Before there is any prospect of reducing unemployment, the level of wage bargains must be de-escalated". No framework is suggested in which that can be done. This is the prospect for men in industry. With this psychological approach, is it any wonder that industrial relations are bad? 1436 The Government are saying to men in industry, "You must resolve your differences by magic. We shall stand back and let you battle it out. But we shall create a climate in terms of the level of demand which is conducive of insecurity".
We may be wrong about the psychology of the working man. Having worked in a shipyard, I can speak personally about this matter. Rightly or wrongly, the working man does not fear inflation—perhaps he should. He fears unemployment. Unless the Government give a guarantee that the level of unemployment will be significantly reduced in the coming winter, they will be in for a bad time in terms of industrial relations. It does not please me to say that, but that will be the result of their policies.
§ Mr. McMaster
Is the hon. Gentleman asking the Government to say to people employed in making stage coaches, "We guarantee that you will always be employed in making stage coaches"? Can a Government give such a guarantee? Is it not in the nature of things that men have to accept change in a changing world?
§ Mr. Douglas
I agree that men must accept change. But it is the Government's responsibility to create an economic climate in which change is acceptable, and the present Government are manifestly not doing that. That intervention comes ill from an hon. Member who has advocated an incomes policy. The Government have denied responsibility for any type of incomes policy other than a policy of exhortation. If an incomes policy or de-escalation could be achieved by mere words, the Government should be successful, because they have devoted more words to that than to almost any other topic.
On 25th March, the Under-Secretary of State for Trade and Industry said:I am in some difficulty in that my right hon. Friend will be making a major statement on shipbuilding policy on the Second Reading of the Shipbuilding Industry Bill, and I do not wish to anticipate him on that occasion."—[OFFICIAL REPORT, 25th March, 1971; Vol. 814, c. 1060.]If the Minister's speech today was a major statement of policy, it will not give any cheer to the shipping companies or to the shipbuilding industry, because all that the hon. Gentleman said was known on 25th March and when the Bill was 1437 published. There has been no supplementary statement about the Government's policy. We have an interim Measure which says, in -effect, "The Shipbuilding Industry Board will be wound up at the end of 1971". I agree with my hon. Friend the Member for Wallsend (Mr. Garrett) that the time scale in connection with the Board leaves much to be desired, because the deep-rooted problems of the industry are so great—perhaps a lot greater than the Geddes Committee thought—that the work of the Board should continue.
I turn to that part of the Shipbuilding Industry Act, 1967, which deals with the guarantees, Section 7(3), which reads:No guarantee shall be given under this section except on the recommendation of the Board, and the Board shall not make such a recommendation unless it appears to the Board"—and then it gives several pointers. Subsection (3)(b) states that the Board shall not make a recommendation unlessthe carrying out of the order in question in that shipyard is consistent with, or will contribute to, that increased efficiency and will secure that use is made of resources which are then or will shortly be available and are otherwise unlikely to be used".Therefore, the Board has a specific responsibility to ensure that increased efficiency will result.
When the Board is wound up at the end of 1971 and its administrative powers devolve to the Minister, how will the Minister act, directly or indirectly, in connection with the yards to ensure increased efficiency? Will he, because of his non-interventionist view, leave the matter to the operations of the yards? I do not believe that £700 million is sufficient because claims up to that figure have, I think, already been made. It is the Government's responsibility to consider what is to happen to the industry.
The change from investment grants to tax-based incentives has not necessarily benefited the industry.
Taking a tanker costing £5 million, will the Government quantify the difference in terms of the life of that asset related to free depreciation and the investment grant procedure and the pre-1966 position? There is no point in the Minister taking refuge in the Rochdale view of investment grants. Rochdale was asking for a pre-1966 position with investment allowances where sometimes 1438 140 per cent. of the asset could be written off. We have the position where only 100 per cent. of the asset can be written off over the life of the asset. The Government have a responsibility to give their views on the future of this industry, particularly after 1974 when regional employment premiums will end.
Is it the Government's intention to alter the differential betwen manufacturing industry and other industries in development areas? This is extremely important from the point of view of shipbuilding orders now being taken. The Minister said that we should receive, some time in the future, a further statement of policy, but will his further statement require legislation? His Department has dismantled the structure set up under the Industrial Expansion Act, and has abolished the Industrial Reorganisation Corporation. These instruments could have been held in reserve at no great cost to facilitate some of the residual powers of the Shipbuilding Industry Board.
I turn to steel prices. It would be ill-received on this side of the House if a yard such as Harland and Wolff, or any other yard in receipt of governmental or public subvention, chose to use indirectly public money to import massive quantities of steel from abroad, when the British steel industry is under such severe attack by the Government. I share the view of the hon. Member for Belfast, East (Mr. McMaster) on steel prices. The Japanese industry which has grown so massively in the past 20 years to 10,000 million tons, has done so because of the competitive prices of Japanese steel. This has again been a purposeful element of the Japanese Governmental policy of creating massive integrated steel works. It would ill serve our future prospects if, by allowing higher steel imports, we indirectly subsidised Japanese and other producers to the long-term detriment of the British steel and shipbuilding industries.
The Government must look at their industrial policy overall. If we are to save the British shipbuilding industry we must take measures to save the British steel industry. If we are to have cheaper ships along the lines Geddes suggested, it is vital that the British Steel Corporation should have Government backing for massive investment in the industry. It will 1439 not do to say that the shipbuilding industry can import in the short run cheaper steel from abroad.
On analysing the figures, I am perturbed about the decline in the proportion of the British flag fleet to total world shipping. Over 20 years the British proportion of the world flag fleet has halved, whereas the Japanese proportion has doubled. I am concerned about this proportionate diminution in the number of ships under direct British control. From discussions with constituents who are concerned in supplying British and other shipbuilding industries with auxiliary equipment, I understand that it is much easier for them, for language and other reasons, to obtain orders for a ship under the British flag built in a British yard.
I believe that there is a future for the British shipbuilding industry, but that future can only be made secure if the Government are behind the industry's efforts to solve the problems. I depart from the view of my right hon. Friend the Member for Birkenhead (Mr. Dell) and I ask the Minister who is to reply not to do so on the direct issue of whether the industry should be publicly owned. That is not the question now. Changing the name on the door will not solve the industry's problems. Unless the industry is given a clear guarantee of governmental support and assistance during the next five or ten years, the morale of the men and management will be impaired. This industry has suffered more than any other industry in the past from dynastic entrepreneurship. We have to create dynamic entrepreneurship, and that is the responsibility partly of the industry and partly of the Government. The Government should not sit back and adopt a non-interventionist attitude but should take direct responsibility.
§ 7.27 p.m.
§ Mr. William Small (Glasgow, Scotstoun)
I listened with dismay to the speech of the Minister. I have worked in the shipbuilding industry man and boy and I shall deal only with the broad aspects of it. In the old days when we were asking the Minister of Transport—who was then the right hon. Member for Wallasey (Mr. Marples)—for support for the shipbuilding industry, I used to say that there would be demarcation 1440 disputes and empty berths. At that time there were empty berths because of the lack of a labour force, the lack of ships and of orders. If a census were to be taken, it would show that the Labour Government gave more support to the shipbuilding industry and made it more stable.
In my generation parents used to say that every boy should have a trade, and I speak as an engineer. However, we all know that rivers cannot be moved to suit anybody, not even engineers. We are naturally a shipbuilding nation and I am an interventionist. Sixty years ago the United States and the Soviet Union were merely economic backyards. The economic blocs of today in building up maritime strength are taking the trading routes from Britain. We all know that in the airways the Government are hiving off profitable routes to private enterprise, but now our sea routes are being stolen from us and abroad we have the image of a backward nation in this respect.
I speak as an engineer who worked in industry for many years. I know that there is dismay among workers in the shipbuilding industry when considering the matter of their security and whether they will be able to look forward to a lifetime of work in the industry and will ever be able to draw a pension.
The recommendations of the Geddes Committee were welcomed by the trade unions. It was a demonstration of what could be done by Government intervention, and it paid off. The shipbuilding industry did not need an Industrial Relations Bill to control its relationships. There were teething troubles in the industry, but the style of change which flowed from Geddes was welcomed. What came out of the Geddes Report was transferability of job functions so that there were no demarcation disputes, which had always been a crime condemned by everybody. This was why we were not getting orders.
In looking at the situation on the Clyde, we must ask ourselves whether that area benefited from the activities of the Labour Government. I personally acclaim the efforts of my hon. and right hon. Friends when in Government for bringing stability to the Clyde and a greater sense of security than had ever been the case 1441 before. The Government must now consider whether Government intervention should continue.
To come on to the rôle of the Shipbuilding Industry Board, it must be said that the Board put public money into the Clyde in the form of grants and loans and that that money was necessary. Fairfields fell out of the picture before Geddes reported, and I hope that the present Government will take some action over that yard, since it is one of the most important yards on the Clyde.
We must consider the style of what is taking place under the Industrial Expansion Act and consider the situation which will arise because of the abolition of regional employment premiums. The names of the shipbuilders on the Clyde are, to me, household words, as are the names of the various employers within the shipbuilding industry. The employers certainly felt that the 37s. 6d. per head per employee in employment premium helped as a balancing factor in terms of employment ratio and enabled a situation to obtain in which there was not rivalry in the pricing policy of various engineering companies. This helped the industry and stabilised the labour force. Therefore, the regional employment policy had a considerable effect in the shipbuilding areas.
The Secretary of State for Trade and Industry is due to come up to the Yarrow Yard on 14th May to open one of the covered-in building berths. This will be one of the biggest of its kind in the world—three ships can be built under cover. For the benefit of all those dilletantes who may not know these facts because they have never dirtied their hands, I would inform them that a shipyard worker often has to work in fog and in frost, day and night, in the open. Therefore, a figure of absenteeism of 16 per cent. during the winter must be seen in the context of the sort of conditions in which such a tradesman must work. The development of these covered building berths means that the assembly and prefabricated units will be covered in and will be directly accessible to the workers and a man's productivity is likely to go up by 30 per cent. This development took place with Government support and I hope that this initiative will be continued. I understand that there are some employers who regard that sort of ex- 1442 penditure as unjustified. In fact, it is more than justified, and I am sure that this will be shown by the results.
I think that it is wrong to put a credit ceiling of £700 million into legislation when one bears in mind the length of time it takes to build a ship, and indeed to build up an order book. The one-off job is no use in these modern days. We now have to go for four and five jobs at a time and we must aim at standardisation. This is what is happening in the Upper Clyde Shipbuilding Group which specialises in building four or five ships at a time.
We all know that there has been an extension of the principle of container ships. I will not go into details because we all know that the Under-Secretary of State who is now on the Front Bench is an intelligent and knowledgeable young man who has lived in the modern world. He will know the large increase in container ships and many developments are taking place in this respect which will mean that the shipping lanes will be turned into a vast trunk road.
The fact remains that I am somewhat disappointed with the Government's policy and with the provisions of the Bill. I would restyle the well-known work by Ivor Novello "Careless Rupture" and would apply it to the Secretary of State, who does not know where he is going.
§ 7.38 p.m.
Mr. Bruce Milian (Glasgow, Craigton)
Unfortunately, this debate has not been very satisfactory because of the inadequacy of the information that we had from the Minister in opening it. I shall come back a little later to what he said—or perhaps to what he did not say.
I wish to begin by taking the House back to the Geddes Report and its recommendations. The report made the important point, which many people at that time had not sufficiently appreciated, that there was an expanding demand on a worldwide basis for shipping and shipbuilding. The United Kingdom industry in face that expanding world demand had not itself been expanding sufficiently, or indeed at all. This was the important and basic message of Geddes—namely, that this country should share in that increased demand for shipbuilding.
1443 Geddes said that the industry in this country would not be able to share in that expansion unless it was radically reorganised. The Geddes recommendations were intended to achieve the reorganisation of the industry partly by the efforts of the industry itself, both management and men, which would involve a considerable amount of Government assistance and the establishment of the Shipbuilding Industry Board to oversee the reorganisation which that Committee felt was required.
The Labour Government accepted the basic premises, arguments and recommendations of the Geddes Report, and they were implemented in the 1967 Act. The various schemes for giving grants to the industry, loans for reorganisation, additional working capital, and the home credit scheme whose extension we are considering today, all come from the 1967 Act.
The point which I want to make more than any other about the Geddes Report and about the 1967 Act, leaving aside for the moment all the very important details of the Act, was that when the Labour Government passed the 1967 Act they took on a commitment to the prosperity of the industry. We accepted the Geddes statement that the industry had a future, and that it had a bright future if it could reorganise itself on the lines that Geddes recommended. We expressed our confidence in the industry, and it was part of the general confidence that we expressed at the time and attempted always to express in the six years of Labour Government in British industry as a whole being able to solve the problems with which it was confronted.
What has happened to the Geddes recommendations in the light of the support that the Labour Government gave in the 1967 Act? It is a mixed picture. Obviously, all the hopes held out at the time of the Geddes Report and the passing of the Act about reorganising the industry and putting it on a sound economic basis for future expansion have not been achieved within the time limit that Geddes laid down, which, with slight alterations, was accepted by the Labour Government of the day. But there is an impressive record of achievement, and a good deal of the policy of reorganisation has been implemented over the last few years.
1444 At this point, it would be remiss of us not to pay tribute to the Shipbuilding Industry Board. Sir William Swallow and his colleagues have shown tremendous enthusiasm and courage in very difficult circumstances. They have achieved a considerable amount in the period of the Board's existence. But we have not solved all the problems of the shipbuilding industry. It is still true that our share of world orders is far too low. It is also true, unfortunately, as my right hon. Friend the Member for Sunderland, North (Mr. Willey) said, that the share accruing to the British shipbuilding industry has been reducing rather than increasing over the last few years.
Some of the figures are alarming, when one sees what Britain has been able to achieve compared not just with Japan, where the figures are quite remarkable, but with Sweden, West Germany, even France, and Spain as well. Taking a 10-year period, in terms of ships launched using gross tonnage figures, which I appreciate are not necessarily the best figures to use, the figures show that the 1970 launchings from British shipyards at 1.2 million gross tons were very little different from the 1960 figures. In fact, they were slightly down. They were, admittedly, an increase over the 1968 and 1969 figures, but they were still very much at the 1960 level. In the case of Japan, the gross tonnage has moved from 1.7 million in 1960 to no less than 10.5 million in 1970. In the case of Sweden the tonnage has gone from 700,000 in 1960 to 1.7 million in 1970. West Germany also shows a very substantial increase. So does France. The Spanish figures are now beginning to represent another alarming picture on the scene from the point of view of competition to British industry.
In the time that we have had since the Shipbuilding Industry Board was established and the 1967 Act was passed, obviously we have not brought up our share of the world total in the way that we might have expected and hoped. Similarly, our productivity is not as good as that of some of our major rivals, though one hesitates always to make generalisations about these matters because different yards have different records of productivity and some are very much better than others. Our labour relations have improved considerably. 1445 That is certainly true on the Clyde. But there is a long way to go there as well. Our cost figures have not been sufficiently under control compared with those of some of our international competitors. In the last year or two, partly because of contracts taken on at very small margins which have then been eroded by subsequent cost increases, our industry has been running at a very low level of profitability and, in some cases, with considerable losses.
The situation is by no means a completely satisfactory one. As my right hon. Friend the Member for Birkenhead (Mr. Dell) said, it may be that one of the difficulties that we have been facing is that the Shipbuilding Industry Board has not had enough powers to implement and push through the reorganisation as quickly as it should have been done. The implication of that is that what is required here is not less Government intervention and Government control in the industry but more direct Government intervention and a great deal more Government control when very large sums of public money are being put into the industry.
Above all these considerations, the important one to fix firmly in our minds about what has happened over the last two or three years and what the record of the Shipbuilding Industry Board has been is simply that if it had not been for the 1967 Act and the activities of the Board, the British shipbuilding industry would have been completely obliterated by 1971. There is no one in Clydeside who would argue that in Upper Clyde we would have any shipbuilding industry if it had not been for the 1967 Act and the action taken since then. That is the really important consideration that one should have in mind when looking at the admitted disappointments that we have had in some areas of actvity over the last few years. We have this achievement to our credit, and it is a very important one. We have maintained a British shipbuilding industry in circumstances where, without these efforts, it would not have been possible to maintain it at all.
One of my criticism of the Minister's speech is that he made too few of his remarks in the context of what is happening in the world as a whole and in terms of the worldwide demand for shipping and shipbuilding. The state of the world's order books is better than ever 1446 before. Orders are very buoyant, and there is a tremendous amount of work available in different parts of the world. Many of our competitors continue to increase their share of the amount of orders available.
Another important feature of the present situation is that we should not be too depressed by some of the difficulties on cost and profitability that we have in the British shipbuilding industry. Similar problems face our competitors. Even the Japanese are not completely excluded from them. The Swedes and Germans are facing similar difficulties of contracts taken on in a period of inflation on what were virtually fixed prices which subsequently turn out to be unprofitable. The problems that we face are not unique from the British point of view or intrinsic only to the British situation. The same problems are faced by our competitors, and, while directly that situation does not help us, indirectly it gives us some cause for optimism.
We are finding that our competitors, as well as ourselves, are having to insist on contracts with appropriate cost-escalation clauses, because without them they are unable to run at a satisfactory level of profitability. The more contracts which are taken on with cost-escalation clauses, and provided that our industry—this is an important proviso—is able to reduce its delivery periods to match what some of our competitors are able to achieve, the more we can be satisfied that the long-term future, from the profitability point of view, is a good deal brighter than now.
With an increasing world demand and better prospects of profitability, it seems that the question facing this Government, which would have faced any Government, is whether, having already invested large sums in the industry, they should continue that investment and get the advantages which can come from it, or abandon the industry altogether.
It is important to look at the attitude of other countries in this respect. In many cases they face problems similar to our own. They have at times reluctantly been pushed into providing subsidy and support over the last few years. However, I know of no major competitors of ours in shipbuilding who have taken the attitude that they should abandon their industry. The opposite has happened. They 1447 have all, by Government action and policy, reasserted that they have every intention of seeing that their industry survives and will expand.
What we expected, and were entitled to have, from the Government today was a similar expression of confidence and determination in the continuance and prosperity of our shipbuilding industry. It is a particularly bitter disappointment that we heard nothing from the Minister expressing that determination and confidence. There seems to be a particular lack of self-confidence in the Government generally about British industry. Some of the talk about lame ducks and allowing industry to stand on its own feet, and so on, is simply a mask for a complete lack of self-confidence and policy towards industry. The Government are frightened of some of the problems with which they have to deal, and they take refuge in these general philosophies and principles which do not bear serious examination either as principles or in practical application.
I should like to have heard today the kind of approach outlined by my right hon. Friend the Member for Birkenhead in his opening speech: first, a statement on the Government's determination to support the industry, and, secondly, an assessment of what they think its place will be in a worldwide context and the kind of achievements which would be open to it, given the necessary support and determination within itself. Such forecasts were made at the time of the Geddes Report. We are entitled to know how the Government see the place of British industry in that worldwide context and what they intend to do to support the industry in order to achieve the objectives which they have in mind for it.
What have the Government done which bears upon the prosperity of the industry? First, we have had the changeover from investment grants to allowances. This is not an appropriate time to deal with the change in investment grants policy dealing with industry as a whole. However, it is generally accepted in industry now that the changes announced by the Government in October were at the very least mistimed. There may be a certain body of opinion within 1448 industry that, on the merits, some of these changes ought to be made; but, at the very least, I find that industry takes the view that the changes were mistimed.
Many parts of the country, including the regions, which have particular support from the investment grant system, go very much further, as I do, and suggest that the changes themselves, apart from their timing, are essentially wrong in principle. Certainly they are mistimed, because they have been made at a time of low profitability within industry as a whole. The change from investment grants to allowances for taxation purposes is likely to be unattractive to large sectors of industry, particularly those running at low levels of profitability and those attempting to expand their activities in the development areas.
We know that the shipping industry has protested vigorously about the changes made by the Government in the grants and allowances available to it. There is no doubt—Rochdale admitted it, though it subsequently went on to advocate certain changes—that a good deal of the increase in orders over the last few years was directly attributable to the change which the Labour Government introduced in the investment grant arrangements. The Chamber of Shipping certainly takes the view that the changes which have now been announced by the Government are detrimental to the shipping industry and will lead to a falling off in orders which, as has been pointed out on a number of occasions today, will have a serious effect on our shipbuilding industry because so many of the orders which we have had over the last few years have been by British shipowners.
There are also the transitional arrangements for the shipping industry and the particular problems which it has had because of the terms on which the Government announced the change from 27th October, 1970. I understand that there have been some discussions with the Government on the problems arising from that change. I hope the Minister will be able to give us some information about the present position.
Another thing which the Government have done positively, or, rather, negatively, is to announce today what one assumed from the terms of the Bill, that 1449 the Shipbuilding Industry Board will go at the end of 1971. I agree that the 1967 Act visualised that the Shipbuilding Industry Board, in terms of the various financial incentives which it would give to the industry, would have a limited life. This was in line with the Geddes recommendation that what was required was a reorganisation operation to be done quickly and with vigour by the industry itself, not something which would take a long time. Geddes recommended that the sooner the reorganisation was done the better. But it did not necessarily follow that when the reorganisation had been done the Government would disengage from the industry altogether, contract out, and say: "The job has now been done. The Board has fulfilled its purpose. It will now be wound up, and nothing will take its place."
We had an extraordinary statement from the Minister to the effect that the Board would be wound up at the end of 1971. However, he was not able to tell us what would take its place. He had no idea about the administration of the credit scheme which had been done by the Board or what was to be done, even administratively, when the Board was wound up at the end of the year. More important than the administrative arrangements, the Minister was unable to tell us anything about Government policy towards the kind of things which the Board had been doing so successfully over the last few years.
The job will not be finished at the end of 1971—we might have hoped that it would be finished, but it will not—and the Minister gave no indication of what was to take the place of the Board at the end of this year. Again, we are promised some kind of statement about it before the Summer Recess.
§ Mr. McMaster
I am following the hon. Gentleman's remarks very closely, and I am obliged to him for giving way. A few minutes ago he charged the Government with lack of confidence in the industry. What could be a greater token of lack of confidence than suggesting that the Board should be carried on in perpetuity or, as his right hon. Friend suggested, that our shipbuilding industry can survive only if it is nationalised?
I think that not for the first time the hon. Gentleman has mis- 1450 understood the point that I am making. There is nothing more damaging to the confidence of the industry—I should be willing to wait and see the reaction of the industry to the Minister's speech today in order to see who is right—than the uncertainty which will be continued by the kind of speech made today by the Minister. The obvious inability of the Government, after 10 months in office, to make up their mind about the industry will be the most damaging thing of all to arise from today's debate.
The increase to £700 million in grants and guarantees is a disappointment, not only because of the amount itself but because of the unwillingness and inability of the Minister to give any indication whether this is the end of the road for guarantees or whether there will be something more in the future when the sum of £700 million is exhausted.
The Minister said that the limit laid down in the Bill would take us up to ships for which the fabrication would be starting by the mid-point in 1973, but, as the hon. Member for Dorset, West (Mr. Wingfield Digby), and others, said, this is completely unsatisfactory to deal with the present position, because many of the orders which ought to be placed now relate to periods beyond the mid-point in 1973. The Chamber of Shipping has been making this point repeatedly over the last two months, and we have had an admission from the Minister today that the Shipbuilding Industry Board has been turning down applications, apparently for no reason other than that funds, even at the £700 million level, are completely exhausted. The Bill, therefore, provides no real extension to the guarantee scheme.
I think that it was the hon. Member for Dorset, West who said that the Bill as it stands, even without looking further into the future, was a good deal less generous than the Labour Government's Bill of a year ago because the amount of money which ought to have been made additionally available is more than the difference between the £600 million proposed by the Labour Government and the £700 million in the Bill.
I agree with those who have said that unless we get further assurances, and very quickly, from the Government about what is going to happen, orders will be placed abroad. This is particularly so where 1451 there is a full order book and shipowners are, naturally, concerned to get their place in the queue established as quickly as they can and cannot wait any longer for government decisions about credit terms. The delay in establishing a policy is particularly disastrous because orders lost now are unlikely to be regained, even if the Government make a further and more optimistic statement in a few months' time.
My right hon. Friend the Member for Sunderland, North said that there had been a delay of up to two months, but the delay has been considerably more than that. We have been waiting for a statement of policy on the shipbuilding industry ever since the Government were elected to office last June. They have now been in office for 10 months. We have been expecting, and have been entitled to, a statement from the Government long before now, and the excuse that we are given now about the lack of parliamentary time is ludicrous.
The Government have found the time to introduce legislation to denationalise State pubs. They have found the time to bring in the ridiculous Education (Scotland) Bill. I detail only those pieces of legislation which I particularly abhor, but we have been presented with all sorts of legislation which could easily have been put back to enable this Measure to be brought forward if the Government were really anxious to end the uncertainty in the industry.
There has been uncertainty in the industry for all that time, and promises were made that the uncertainty would be ended when the Bill was debated. To get the kind of negative and uninformative speech that we had from the Minister this afternoon is merely to add insult to injury. Nothing has been said about marine engineering. Nothing has been said about the ship repair industry, even though we were promised that a statement would be made about it today.
We had the extraordinary spectacle of the Minister saying that because of the Government's dilatoriness he intended to act illegally and anticipate the passing of the Bill by giving guarantees which he had no legislative authority to give. I say this for the Minister, that he had the grace to look shamefaced when he 1452 made that statement, but that is all that one can say on his behalf.
There is, too, the extraordinary situation of U.C.S. On 11th February the Secretary of State for Scotland made an announcement about capital reconstruction at U.C.S. One assumes that the arrangements for that were made before the statement was made in the House, but two months have elapsed since then and we have had no more information, and when the Secretary of State is questioned about it he says that details have not been worked out. It is an extraordinary situation, and seems to be typical of the complete lack of decision in the Department about the industry.
We have not been told whether, when the new statement is made, further legislation will be required to implement what is said. This point was made by my hon. Friend the Member for East Stirlingshire (Mr. Douglas). Will further legislation be required? Is this all that we are to have in the way of legislation, or will something else be produced before the Summer Recess, or perhaps after it? Once again a cloud of uncertainty hangs over the whole issue.
What is particularly damaging is that this uncertainty will continue in an industry which is situated almost exclusively in areas of high unemployment. I represent an area of Glasgow where there is a high rate of unemployment. The situation in that part of Glasgow, and in the West of Scotland and elsewhere, during the last few months has been marked by an uncertainty and a lack of confidence the like of which I have not known for 10 years. This state of affairs is attributable, first, to uncertainty about the Government's regional policies and, secondly, to the inadequacy of the Chancellor's statement in October, and the inadequacy of statements made by the Government since then.
We may argue about the merits of various policies, but it is a fact that there is a greater lack of confidence now than at any time during the last 10 years. With unemployment figures as excessively and disgracefully high in the areas to which I have referred, it is particularly abhorrent that we are to have added to it uncertainty about the shipbuilding industry. The uncertainty could easily have been removed if the Government had made up their mind about what 1453 policy they would pursue, and had been able to announce it this evening.
If we cannot be given details of Government policy—and, obviously, they have not worked it out, or they would not have been so discreet about it, or, alternatively, as the hon. Member for Tynemouth (Dame Irene Ward) said, they have not been able to get Treasury approval for it—I hope the Minister will at least express confidence in the industry and a determination to see that it prospers and achieves a higher rate of production than it is achieving now. If we get such a statement, something might be saved from the debate on the Bill.
Obviously, we have to support this Measure, because it does something useful, but we do so with feelings of bitter disappointment at the Government's having been unable to tell us what they have in mind for the future of this industry.
§ 8.10 p.m.
§ The Under-Secretary of State for Trade and Industry (Mr. Nicholas Ridley)
I should like to answer straight away the point of the reference of my hon. Friend the Member for Belfast, East (Mr. McMaster) about Harland and Wolff. The question of the management or capital reconstruction are matters for the Government in Northern Ireland, and I cannot help my hon. Friend with the answers he seeks, although I understand their importance.
The second matter to which I should like to turn straight away is ship repair. I said at Question Time yesterday that either I or my hon. Friend would say something about this industry today. I apologise if it is inconvenient to hon. Gentlemen that it was decided to put this in the wind-up, but if any hon. Gentlemen wish further elucidation as I speak we still have a little time and I will try to answer their questions.
As the House knows, the Shipbuilders and Repairers Council produced a report in August, 1970, which showed, sadly, that the industry had been shrinking for 10 years and to some extent put the blame on the changing world trade routes, which did not bring ships to our shores for repair so readily, and on the failure of our industry to hold its share of the traffic. The report was made public and I should like to mention five recommen- 1454 dations which it made and report on what the Government consider should be done about them.
The first recommendation was that the industry should take steps to strengthen itself, that there should be much closer discussions between unions and management, and that there was scope for beneficial mergers, arranged by management, not Government. They commissioned at the same time a report from the Economic Intelligence Unit on the marketing difficulties of the industry and came back clearly with the answer that it was performance, the speed and reliability of carrying out repair contracts, which was the difficulty with the industry, and not the price at which it could tender.
In a second recommendation, the report asked that the Government should exceed the two per cent. shipbuilders' relief to the industry, but since it appears that it was not cost which was the industry's problem, and since no economic case was made for this concession, the Government have not see fit to accede to it.
The right hon. Member for Bristol, South-East (Mr. Benn), on Second Reading of the Shipbuilding Industry Bill in 1967, said:… there is no intention that any of the finance made available under the Bill shall be devoted to ship repairing."—[OFFICIAL REPORT, 9th March, 1967; Vol. 742, c. 1887.]We still do not believe that there is a case for that now.
Third, the report asked that we should find ways to persuade ship owners to repair their ships in this country rather than abroad, a sort of arm-twisting suggestion which I believe would be unacceptable both to opinion in this House and indeed to the interests of ship owners themselves, who must be allowed the freedom to decide where it is right and proper to repair their ships.
§ Mr. Blenkinsop
Is the hon. Gentleman not aware that nearly every other country ensures that an extremely high proportion—in some cases 100 per cent.—of their ship repairs are done in their own country? Is this suggestion so unreasonable? Should it be dismissed quite so casually as the hon. Gentleman has done?
§ Mr. Ridley
But hon. Gentlemen have also spoken a lot about the importance of a big and successful shipping industry. A 1455 large number of British registered ships never call at British ports. We are perhaps foremost in cross trades. Therefore, it would be a tremendous step for Government to take to try in some way to bring those ships home for repair when they may be ploughing several thousand miles from our shores. The reactions of the shipping industry to this suggestion are strongly against it.
§ Mr. Willey
What is the position about the Japanese mercantile fleet, which is larger than our own?
§ Mr. Ridley
Without notice. I cannot be exact about the rules about repairing in that country. I can only say that the Government believe that a measure of this sort would not be in the interests of the Merchant Marine or of the British repairing industry in the long run.
§ Mr. Douglas
On this point, have the Government made representations to the shipping companies to see why it is, even when the ships come fairly regularly to British ports, that they are not brought here for repairs and refits? As the report said, this is a problem of marketing. Do the Government intend to have some discussions with the shipping companies, or are they just going to wash their hands of it?
§ Mr. Ridley
I will come to that in a moment.
The next recommendation dealt with the rating and taxation of dry docks. There are cases before the courts on both these matters, and it is impossible to comment on them until they have been decided. But the Government are keeping a keen eye on this, because clearly this is an important matter.
The last matter was the question of fall back pay. The up-and-down nature of employment in the ship-repair industry has costly results for the industry, and the redundancy pay and contracts of employment legislation has in the past made difficulties for this industry. The House would not like to exempt the ship-repairing industry from the standard behaviour in these matters towards the work force, and we are not considering anything of the sort. But if the industry can find ways which would help to solve this problem, either with the unions or by some acceptable relaxation of regulation, 1456 we should be only too pleased to try to help them. But we do not accept the industry's case that special Government funds should be made available to cover these payments because it is an exceptional industry and incurs them more often than others.
The right hon. Member for Jarrow (Mr. Fernyhough), who courteously explained why he could not stay, and other hon. Gentlemen have felt some apprehension about this industry. I know that, in the industry, it is sometimes thought that it is unfortunate because it has not received the same degree of aid as shipbuilding. But the Economic Intelligence Unit did not believe that cost was the industry's problem and talks with shipowners, perhaps at second hand from myself, have led me to understand that there is a feeling among shipowners that it is this question which is paramount in their minds, as to where to place repair contracts.
But what is encouraging is that the outlook does seem to be improving in a number of firms. Indeed, some ship repair firms are doing well. It appears that we now have a competitive edge in this industry, and if the speed and reliability of the work can be improved, the industry should have a considerable future without any subvention from Government.
I turn now to the steel price question, which was the subject of considerable debate. It is general knowledge that the original request from the British Steel Corporation was for a 22.2 per cent. increase in shipbuilding plate, but that has now been brought down to about 10 per cent., which I believe will be of great benefit to the shipbuilding industry in future.
On top of that, the Government have waived the credit admissibility rules so that it will be possible on occasion to import steel to manufacture ships which are subject to credit arrangements. The point of this is that it will introduce a thoroughly competitive atmosphere and shipbuilders will be able to buy their steel on the most competitive terms available. If we have to live in the highly competitive atmosphere of shipbuilding, it is clearly right that the cost of plate should be equally highly competitive. It is not only a question of cost; all sorts 1457 of other factors come into it, the terms of delivery, quality, and so on.
Now, the question of extending credit to urgent cases if the Bill receives a Second Reading tonight. We have waited, for reasons of courtesy to the House, and have not extended credit up to the £700 million limit because it is wrong to anticipate legislation in that way. On the other hand, there is nothing illegal in so doing, and right hon. and hon. Members who have used the word "illegal" are quite wrong. It is a matter of courtesy to the House. If the House were to agree to the principle of the Bill by giving it a Second Reading, I see no reason why, as these guarantees are urgently needed, my right hon. Friend should not now issue them.
That would not be to anticipate legislation in any sense to the same extent as the right hon. Member for Bristol, South-East did when he appointed the members of the Shipbuilding Industry Board six months in advance of the Second Reading of the Bill which brought the Board into existence. I do not think that we should greatly complain about that, especially as money was not involved on a large scale. But I must ask hon. Members whether they want us to use this credit now, because it is urgently needed by shipowners and is having an effect on the liquidity of some shipbuilders who need credit instalments for their cash flow purposes.
§ Mr. Willey
I am concerned about this. It has been strongly argued in the debate that we may have to go beyond £700 million. Do I understand from what the Minister has said that he will be able to do that and that he need not come to the House with legislation?
§ Mr. Ridley
There is no legal impediment to anticipating the passage of the Bill. The only reason that the Government have not done it so far, before Second Reading, stems from the obvious question of courtesy to the House.
§ Mr. Willey
I am putting it to the Minister that he may find that he ought to exceed the £700 million after the Bill has become law. I gather from what he said that he is able to do that. This is very important, because if the industry is in troube all he need do is make a statement that the guarantees can be given.
§ Mr. Ridley
May I put that right? It would be wrong and totally illegal for the Government to extend guarantees beyond the £700 million limit covered by the Bill. Nor would it help very much if the banks were not prepared to provide the money, for it is not just a question of the Government's willingness to provide guarantees; there is also the question of whether the money would be forthcoming.
§ Mr. McMaster
Hon. Members on both sides strongly questioned whether £700 million would be adequate, particularly in view of what was said in the opening Government speech. Will my hon. Friend consider whether an Amendment could be introduced to increase the £700 million, since it appears to hon. Members on both sides that the proposed limit is totally inadequate, and it would not cost the Government any money anyway?
§ Mr. Ridley
I am coming to that, if my hon. Friend will have patience. I have quite a bit to say about the future. The Bill takes us to a limit of £700 million, which, with the £25 million repayments which are expected, will be enough to produce credit for all home orders where work starts by the middle of 1973. There is no question whatever but that anyone who wants to draw credit from the hank, provided that he has the necessary guarantee and documentation, will be able to do so, as far as we can judge, right up to the middle of 1973. The total amount of credit so far drawn is, I think, £258 million.
§ Mr. Ridley
I shall be grateful if hon. Gentlemen will allow me to complete what I have to say. I think that they will find their questions answered and that they will be reassured.
I shall stick for the moment to the question of drawing credit, and I shall then come to the question of provision for the future. We have, as I say, ample credit which can be drawn for any order up to the middle of 1973. Within the totals, there is a certain amount available for any ship which might be required to 1459 be delivered early, because a berth was found for early delivery, and this will apply in the case of small ships. I feel that the House will agree that it is right to use the available credit under the £700 million limit for those ships which may be built and in respect of which, therefore, money may need to be drawn.
As my hon. Friend the Member for Dorset, West (Mr. Wingfield Digby) said, it is the banks which finance these credits, and the demand for credit of this type creates problems for the banks. Fixed-rate lending is tending to pre-empt an increasing proportion of the banks' resources, as the right hon. Member for Sunderland, North said. That is the reason for the ceiling in the Bill. It is not purely a decision which can be attributed to the Government. It is clearly right and proper, therefore, that beyond the ceiling of £700 million the Government will have to do something else for the future, and, as the hon. Member for East Stirlingshire (Mr. Douglas) said, there will have to be new arrangements for underwriting the guarantees after this stage is complete.
On the question of home credit after the £700 million, I hope that I can convince the House that the cries of alarm from hon. Members opposite are not justified. We cannot tell the House today the terms on which finance for shipbuilding will be available. The Government fully recognise the importance for the industry of assured credit facilities and we hope to make a statement on the future arrangements before the Summer Adjournment. I appreciate that the hon. Gentleman would like me to be even more forthcoming, and I should like to be. But I remind the House that the money comes from the banking system, although backed by a Government guarantee, and I ask right hon. and hon. Members to accept that it might be more helpful to the objective which they seek, and which we all share, not to press me to anticipate further what facilities will be available.
§ Mr. Dell
The Minister is evidently indicating that in future a different technique may be used for home orders from that which was used in the past. He evidently cannot say what that technique will be. However, can he give an assurance that it is the Government's intention to provide British shipowners ordering 1460 ships in British shipyards with terms which are competitive with those that would be available if they placed those orders abroad?
§ Mr. Ridley
I think that I answered that question entirely when I said that I cannot tell the House today the terms on which finance for shipbuilding will be available in future. But I should have thought that any shipowner who reads what I have said today will feel that it is not so difficult for him to consider which of the alternatives before him he would like to choose if he wishes to order a ship.
§ Dame Irene Ward
Why cannot my hon. Friend say why he cannot tell us. If he just told us why we could perhaps take it in.
§ Mr. Ridley
The reason why I cannot go further than that is that the matter has not been decided. I have said that I cannot yet tell the House the terms on which credit will be provided in future. But, as I have also said, it is perfectly clear that there is enough credit to last until 1973. So I do not see why the House is so terribly keen to know how the terms will be arranged, in the period long before that.
§ Mr. Dell
The Under-Secretary seems to imagine that on the basis of his statement British shipowners will be able to make decisions, but his statement is that he cannot tell them the terms on which the future guarantees, by whatever method, will be available. Surely, the implication is that British shipowners will take the terms they know they can get abroad rather than wait for uncertain terms which the Government may or may not announce in the future.
§ Mr. Ridley
The right hon. Gentleman is doing a great disservice to the shipbuilding industry by trying to confuse and twist what I have been saying, which is perfectly clear. Never have shipowners been able to know the terms on which fixed rate credit would be available in the future. The interest rate went up in the middle of last year, but they were not told that five years before. The exact rate of interest on which credit might be available, or the terms of any sort, have never been announced five years ahead. I implore the right hon. Gentleman not to try to make out something which was 1461 intended to be clear and helpful to be the reverse.
§ Mr. McMaster
Listening to my hon. Friend carefully, I am in some doubt. He said that he would increase the £700 million guarantee because the banks may not be able to lend the money. There is no guarantee that they will lend the money, is there? All that my hon. Friend has to do is to increase the guarantee, and whether the banks have the money and are willing to lend it is nothing to do with the Government. Therefore, is there an undertaking that moneys will be made available by the banks up to the limit of the Government's guarantee?
§ Mr. Ridley
My hon. Friend should know full well that it is the money the shipowners want, not the guarantee. The guarantee is by no means the hardest part of the operation. The problem which must be faced up to is providing these very large sums of money at a fixed rate against a background of liquidity.
I should like to make one further point about credit before moving to the industry as a whole. The shipbuilding industry has an ample stretch of orders ahead. The order books are very long and very fat. So there is no question but that there will be a complete continuation of work, and there is no suggestion that this will affect the shipbuilding industry.
§ Mr. Douglas
The hon. Gentleman has had a number of interruptions, and I apologise for interrupting him again. He has given certain figures which I understand represent a ceiling of credit guarantee of £700 million. That is what the Bill is about. He said that about £240 million has been drawn. Can the hon Gentleman tell us how much of this cash has already been pre-empted? How much have the banks given in terms of credit on the assumption that this Bill will be passed? Has he any figures on that?
§ Mr. Ridley
It is difficult to give an accurate figure because there is a large block of orders under consideration. If they were all to be granted then it would bring us quite near to the limit. If, on the other hand, they are not all granted, and there are uncertainties of sufficient importance for it to be misleading to try 1462 to quantify an answer, then there would be much more leeway.
I believe that I have made the position entirely clear and I hope that it is clear to my hon. Friend the Member for Tynemouth (Dame Irene Ward). I hope that it is clear, even though it may not be entirely acceptable to some hon. Gentlemen opposite.
My hon. Friend was taken to task a little for not saying enough about the international aspects of shipbuilding. It has been said that the domestic industry will be at a disadvantage compared with shipbuilders elsewhere because of the extent of overseas government support. This is an area in which comparisons are fraught with difficulty. Moreover, the importance of subsidies can be exaggerated. Differences in the costs of material, labour, productivity and finance are factors of great importance, difficult to quantify. Our experience over the past five years demonstrates that substantial financial assistance does not necessarily ensure success.
The right hon. Member for Birkenhead (Mr. Dell) suggested that nothing had been done about international subsidies. It should not be overlooked that some countries have already reduced the rate of assistance or protection to their industry. France and Italy have been reducing their building subsidies. Only five years ago the French building subsidies were about 20 per cent. of the cost of a vessel. Now they have been reduced to 5 per cent. Japan has removed her tariff on the import of vessels over 10,000 tons and intends to widen her home credit scheme, currently restricted to domestic orders in domestic yards, to cover orders placed by Japanese shipowners abroad. This is a great opportunity for our industry to attract Japanese orders.
There is also the agreement on levelling up credit rates which was made last year. All this shows the progress being made in ironing out international subsidies. While the effect of subsidies can be exaggerated, I would not dismiss them as unimportant. Their existence is damaging to fair competition. They can also represent a waste of resources and while there are real difficulties in the way of rapid progress towards an elimination of Government aid the current programme of O.E.C.D. is encouraging.
1463 All the main shipbuilding countries are co-operating to find a basis for reducing assistance in a fair and equitable manner. This is necessarily a complex task but I believe that the work now in train will in due course result in a further agreement to complement the understanding on export credit for ships. For our part we intend to give full support to these discussions to ensure that they reach fruition.
Some hon. Members appear to think that we should continue indefinitely a system of subsidies for the United Kingdom shipbuilding industry. To do so would clearly undermine the international discussions to which I have referred and this would damage the longer-term interests of the industry in turn.
As has been pointed out, the whole Geddes concept was a once-for-all injection of funds for the industry to get itself on its feet. The life of the Shipbuilding Industry Board could not be extended beyond the end of this year even under the Act passed by the party opposite. It would have required new legislation. I will quote from what the right hon. Member for Bristol, South-East said when he introduced the Bill. He will agree that he shared this view strongly at that time.
He said:If I had to summarise the Geddes Report in three sentences, I should do it like this. First, the competitive success of the British shipbuilding industry depends on the industry itself, the managements and workers in it. Secondly, the Government should help, but all public expenditure should be directed to and conditional upon the reorganisation of the industry. Thirdly, the job is urgent: the industry must not look forward to aid on a continuing basis. This is a job that has now to begin."—[OFFICIAL REPORT, 9th March, 1967; Vol. 742, c. 1778.]
§ Mr. Benn
Before the hon. Gentleman concludes the reference to what I said, he will recall that that speech was made, I think, in 1967 on the recommendation of Lord Geddes himself, which we accepted. But nothing in that speech precluded the possibility that at the end of the period we would see where we were and take necessary measures, and nothing in that speech indicated what we have heard today: the dismantling of the whole policy towards the shipbuilding industry, no help whatever for ship re- 1464 pairing, and the credit scheme to be brought to an end, with no indication of what is to happen thereafter.
§ Mr. Ridley
The right hon. Gentleman knows that his last sentence was wrong and mischievous. As I remember, the credit scheme introduced by the previous Government had a limit of £600 million with no prolongation of the Shipbuilding Industry Board or any other different policy from what I have been talking about.
But, whatever may be the case, this phase has come to an end. The industry has had this chance. I do not think it is wrong to go over the effects of giving the industry this chance, and I should like to do that. But at this stage I join with hon. Gentlemen in paying a very real and warm tribute to Sir William Swallow and his Board, and to Mr. Barker, the director. The only reason why my hon. Friend did not do this earlier was that he did not know whether it was right to pay a warm tribute nine months before the end of the life of the Board, but since other hon. Gentlemen have decided to do so, I am sure that it would be right that we should add our grateful thanks for the hard and intelligent work that its members have done for the industry.
The right hon. Gentleman, and other hon. Gentleman, thought that the Board should continue longer. He seemed to say that there should be no rescue operations—there we agree with him—but that there should be a sustained period of aid for the industry. I wondered, en route, how long he thought that this sustained aid would need to continue. For the last four years, the industry has had nearly £50 million of State capital, and the home credit scheme has now taken £258 million of advances, and, in addition, £15.7 million has been spent on shipbuilders' relief. This adds up to £65 million of capital and £258 million of loans from the banks.
This industry represents 1 per cent. of our manufacturing capacity. Production is still lower than the 1954 post-war peak of 1.5 million gross registered tons. In 1970 it was 1.3 million only. Our world market share between 1954 and the present time has fallen from 27 per cent. to 6.5 per cent.
§ Mr. Ridley
I do not have them with me, nor are they in my head. If the right hon. Gentleman would like to look them up, I will give way to him so that he can give them.
Productivity does not appear to have risen. Our productivity is lower than that of our rivals, although I agree with the hon. Member for Glasgow, Craigton (Mr. Millan), who said that it is very difficult to quantify. In the three years from 1967 to 1970, wages in the industry have risen by 34.6 per cent., which is more than the average for all wages and the average for the engineering industry. This has been the cause of the fixed price contract losses which have brought the industry into difficulties and affected its liquidity.
The hon. Member for East Stirlingshire seemed to think that the Government was making an attack upon all capital-intensive industry. But what is doing that is wage inflation at this rate, because often it is two or three years, or even more, between the need to tender for a ship and having to pay the final wages Bill for work on it.
During this period the number of days lost per 1,000 employees through industrial disputes went up from 750 in 1960 to 1,975 in 1970, a staggering record, the figures being almost trebled.
A number of comments have been made about the strike on the Tyne. I do not wish in any sense to intervene or comment on it, except to say that this continued record of strikes not only damages the reputation of the industry but greatly adds to its costs, and costs must be got down if the industry is to be competitive.
I can sum up the Government's policy so that my hon. Friend the Member for Tynemouth is in no doubt about it. My hon. Friend the Minister for Industry made this policy quite clear, but it may be helpful if I go over it. Since coming to office, the Government have given an extra 1½ years' breathing space, until the end of 1971, for the existing weapons to remain in existence—the S.I.B., grants and loans, credit and so on—and loans will still be applied by the S.I.B. if companies wish to claim them.
We have decided to give three more years of R.E.P. until the date when it is 1466 due to come to an end. We have decided to continue with the credit scheme, and I have spoken of the difficulties of this, particularly for the future. We have decided to continue the 2 per cent. shipbuilders' relief. We have also decided to provide a competitive situation for the provision of plate for shipbuilding.
On the other hand, we have decided to end the S.I.B. at the end of this year and to provide no further grants or loans apart from those already undertaken by the S.I.B., and, of course, apart from the assistance which is available to all industries operating in the development areas.
The right hon. Member for Sunderland, North was right—I greatly admired his speech—when he said that national will and determination was required. He seemed at the end of his remarks to say that it should be will and determination on the part of the Government. I believe that it must be will and determination exercised by everybody concerned with the industry.
The conditions are there, the market is buoyant and order books are long. The Government are providing far greater help for this than for many other industries. I see no reason whatever why this industry should not go ahead and succeed, provided it has the national will and determination for which the right hon. Member for Sunderland, North called.
Nothing would be more disastrous than to follow the advice of the right hon. Member for Birkenhead and nationalise this industry, so plunging it into the uncertainties of nationalisation. Sufficient has been said about the harm caused by uncertainty. In view of the history of the steel industry, I would have thought that nobody would advocate that treatment for shipbuilding considering what happens once an industry becomes the shuttlecock of politics.
Further to the remarks of the hon. Member for East Stirlingshire, I see no reason to believe that changing the name of the owner on the gate would solve the problems of this industry.
§ Mr. Dell
Would the hon. Gentleman indicate to the House whether there were any political motives behind the assistance to Harland and Wolff? Would he indicate to the House whether there were 1467 any political motives behind the assistance to Yarrow? Would he indicate to the House whether there were any political motives behind the capital reconstruction of U.C.S.?
§ Mr. Ridley
Would the right hon. Gentleman indicate to the House whether there were any political motives behind his suggestion that the Government should nationalise the shipbuilding industry?
§ Mr. Ridley
The right hon. Gentleman knows full well that there are all sorts of considerations in a Government's mind. What I want to know from the Labour Party is whether hon. Members opposite intend this to be their policy in future. If they do, the nation will know and pudge. I believe that the Government's policy is quite clear and that it gives great opportunities to the industry, and I therefore hope that the House will give the Bill a Second Reading.
§ Mr. McMaster
I must admit that I am very disappointed. In reply to questions from both sides of the House, my hon. Friend said earlier that he could not increase the £700 million because of the lack of availability of money from the bank. But he knows as well as I do that this money is advanced by the banks, on the Government's guarantee, for the purchase of ships built in this country. The money is to be spent in this way and one way or another it will find its way back to the banks where, subject to the liquidity ratio, it can be re-lent, so that the banks do not have to find a penny and can get their 7 per cent., less what they have to pay on deposits. Why do we have to stick to £700 million? Could it not be increased to £1,000 million? The money goes round, and my hon. Friend knows it.
§ Mr. Ridley
My hon. Friend seems to have found a form of financial perpetual motion. I do not believe that such a thing exists, and I hope he will ask the banks and discuss the matter with the Committee of the Clearing Banks. I am not prepared to discuss the willingness of other people to lend 1468 their money. It is entirely a matter for them to explain to him.
§ 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).