HC Deb 11 February 1971 vol 811 cc808-13
The Secretary of State for Trade and Industry and President of the Board of Trade (Mr. John Davies)

With permission, Mr. Speaker, I should like to make a statement about shipbuilding on the Clyde.

Yarrow (Shipbuilders) Ltd. is a subsidiary of Upper Clyde Shipbuilders Ltd. —U.C.S.—in that the latter holds 51 per cent. of the former's share capital. It has long been the intention of the parties concerned to bring about the separation of Yarrow (Shipbuilders) from U.C.S. and arrangements now made enable this to be done. The 51 per cent. shareholding in Yarrow (Shipbuilders) owned by U.C.S. is now being acquired by Yarrow & Company Limited, which thus becomes the 100 per cent. shareholder. In this way Yarrow (Shipbuilders) becomes independent of U.C.S.

Yarrow (Shipbuilders) is predominantly a naval yard with a long tradition of building excellent warships for the Royal Navy and overseas governments. Both Yarrow (Shipbuilders) and U.C.S. have encountered difficulties in recent years and both face problems of serious cash deficiency. In view of the importance of Yarrow (Shipbuilders) for the present orders and future programme of the Royal Navy, it has been decided that the Ministry of Defence should make a loan to Yarrow (Shipbuilders), on terms to be agreed, towards meeting the company's requirements for working capital. These are at present estimated at a maximum of about £4½ million during the next three years. This facility should enable Yarrow (Shipbuilders) to maintain its programme and to regain profitability.

U.C.S. is strengthening its own financial position further with the help of shipowners for whom it is building, and it is confident of its ability to achieve a viable future. It is proposing a capital reconstruction to reflect the realities of its balance sheet. Precise details remain to be worked out, but the intention is that the Government for their part would agree to a substantial writing down of equity and a writing down and conversion of fixed interest public loans into a smaller equity holding. The aim would be to maintain a total public holding of some 48 per cent. of the U.C.S. voting equity but with an increased dividend entitlement after the capital reconstruction. No new public funds are to be provided to U.C.S.

A Supplementary Estimate will be submitted to the House in due course.

Mr. Bean

May I, on behalf of my right hon. and hon. Friends and myself, warmly welcome the statement the Secretary of State has made, which indicates that the Government are prepared to make substantial sums of public money available for shipbuilding and retain a 48 per cent. public shareholding, which confirms the policy of the previous Government; and the fact that no money is to be given to U.C.S. is a confirmation that U.C.S. is now viable?

We shall, as the Secretary of State will understand, want to debate this matter and the state of the shipbuilding industry generally, because, with the best will in the world, there is now no relationship whatsoever between what the right hon. Gentleman says and the industrial policy followed by the Government in these matters, as will be evident not only from this statement but from the Government's proposals to nationalise Rolls-Royce. The right hon. Gentleman is presiding over the total shambles of an industrial policy.

Mr. Davies

It is difficult to detect a question in the right hon. Gentleman's statement, but, giving him the benefit of the doubt, to the degree that this action is concerned with trying to assure the defence capability of this country, I certainly hope that it does meet the wishes of both sides of the House. This is the purpose we are undertaking.

Mr. Boyd-Carpenter

In view of past experience with such loans, what security is being obtained for the loan to Yarrow (Shipbuilders)?

Mr. Davies

As I said in my statement, the terms and conditions of this loan have not yet been worked out and these will have to be seen at the time when they are worked out.

Mr. Rankin

On behalf of Govan and Govan Shipbuilding Yard, I welcome the statement. Not only will it help Yarrow, it will also help the Govan yard. May I suggest to the Minister that he continue the policy a little further, because we also have another component in U.C.S. which could do with a little aid. Would he have a look across the water again, where he will see that a little financial help to Clydebank, by separating the engineering side from the shipbuilding side, which is weak and needs aid, would still further assist U.C.S?

Mr. Davies

U.C.S. has not asked me for cash support. Therefore, the hon. Gentleman's suggestion that there should be further cash support would not be correct. In looking at their future, U.C.S. will undoubtedly be examining the means by which the optimum viability would be maintained. This would entail scrutiny of the questions which the hon. Gentleman has raised.

Mr. Ramsden

What is the statutory or other authority for this loan? Is it under the Shipbuilding Industry Act or what? Second, what will be the future position of other such firms who may wish to tender for construction orders to the Ministry of Defence if one of their number is in receipt of a loan from that Ministry?

Mr. Davies

The second question must be raised with the Minister of State for Defence, because procurement problems of the Royal Navy are squarely in his hands. The last part of my statement said that we would be putting a Supple. mentary Estimate to the House in due course.

Mr. Ross

Does the Government share the view of U.C.S. directors, who are confident that they will achieve viability? The Minister stated that at present they estimate that Yarrows will require £4½ million over the next three years as working capital. If it is agreed, will the Government provide it, and will the right hon. Gentleman arrange for a ceremonial burning of his "lame duck" speech?

Mr. Davies

On the last point, no, I do not think so. The very experience that we are going through intensifies and underlines the problems I raised. On the question of the likelihood that U.C.S. will prove viable in the future, this is the view of the Board. I have no view on the subject at all. If I were to have a view about the viability of every company in this country I should indeed be perplexed. On the total sum made available, this is subject to further negotiation, but it is unlikely greatly to differ from the figure I mentioned.

Mr. Tom Boardman

To avoid any misunderstanding in the future, will my right hon. Friend give an assurance that it is not the Government's intention to under-write future commitments of these yards either to suppliers or to customers?

Mr. Davies

The Government's policy on shipbuilding generally will be debated in the House on a later occasion. The Government's clear purpose, as I have repeatedly said, is not to bail out concerns which cannot see their way through to viability. That is a policy to which I absolutely adhere. In both these cases the concerns maintain that viability is open to them and will be achieved.

Mr. Benn

Surely the right hon. Gentleman cannot escape responsibility altogether. As Secretary of State, he is a 48 per cent. shareholder of Upper Clyde Shipbuilders. He said that the Board believe that there is a viable future, and he has approved a reconstruction on that basis. Surely the truth is that Upper Clyde Shipbuilders was not a lame duck. If it is, it is a lame duck proposing to lay a golden egg.

Mr. Davies

That is a most extraordinary statement. I have not yet approved a reconstruction operation. I have said that reconstruction is likely to take place but is subject to finalisation. When it comes to responsibility, I am almost bereft of speech by the right hon. Gentleman. Twenty million pounds have been put into this concern and to a very large degree have been lost. They were put in by the party opposite without due regard for the real viability of this concern.

Mr. Speaker

Order. We cannot debate this matter now.

Dame Irene Ward

On a point of order. May I ask your indulgence, Mr. Speaker? None of my hon. Friends who have been called are shipbuilders. With great respect, it is rather hard on the Tyne and other rivers if we cannot have anything said about all the money that goes to Scotland, when nothing comes to us.

Mr. Speaker

I am very sorry. I will certainly bear in mind what the hon. Lady has said when we come to the debate on shipbuilding.

Dame Irene Ward

No, I want it now.

Mr. Speaker

The Prime Minister——

Dame Irene Ward

On a point of order. How can I register——

Mr. Harold Wilson

On the same point of order. If the hon. Lady——

Dame Irene Ward

Sit down. How can I register my opposition to the treatment of the Tyne? I want to say something about the Tyne now.

Mr. Harold Wilson

Further to that point of order, and waiving our rights, surely if the hon. Lady wants it now, should not she have it? [Laughter.]

Mr. Speaker

It is a very bad precedent, but I will call the hon. Lady.

Dame Irene Ward

Thank you very much, Mr. Speaker.

Hon. Members

No. Thank Harold.

Dame Irene Ward

I have not very much to thank Harold for.

Mrs. Renée Short

Silly old woman.

Dame Irene Ward

You be quiet. I am grateful to the House for showing a measure of justice. As the Clyde has done very well out of public funds, I want to know what my Government intend to do about Tyneside? May we have a special debate on the position of the Tyne, if Scotland is to have everything?

Mr. Davies

The question of a special debate on a specific part of the country is not for me but for my right hon. Friend the Leader of the House.

Dame Irene Ward

Then, let me have the Leader of the House.

Mr. Davies

As I mentioned, we shall have an opportunity later for a debate on shipbuilding.

Mr. Barnett

On a point of order. Are we now to take it that every time an hon. Member makes a sufficient idiot of himself he will be called?

Mr. Speaker

In the very special circumstances, and in view of the intervention of the Leader of the Opposition, I called the hon. Lady. I said that it was a bad precedent, and I promise that I will not follow it.

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  1. BUSINESS OF THE HOUSE 60 words