HC Deb 25 March 1971 vol 814 cc1054-66

12.48 a.m.

Mr. Dick Douglas (Clackmannan and East Stirlingshire)

I will try to be concise and I hope that if I hurry through my speech I shall not be thought disrespectful. The House has had a difficult, arduous week and I do not want to detain hon. Members unduly.

One thing I had better make clear, in view of the commonness of the name "Douglas" on Clydeside, is that I am in no way a relative of the present managing director of Upper Clyde Shipbuilders. I must make that point for obvious reasons.

The point I want to draw to the attention of the House is Civil Estimate Class IV, Vote 15, subhead G.1. relating to the Shipbuilding Industry Board. The Board was set up under the 1967 Act to make grants in connection with reorganisation of resources.

This Vote in the past has enabled certain regroupings and restructuring to be undertaken in the shipbuilding regions, particularly on Clydeside. One of the mergers which has resulted from the activities of the Shipbuilding Industry Board is the creation of Upper Clyde Shipbuilders. That group has undergone a great deal of financial and structural difficulty and happily we are now seeing some indication that many of the difficulties are being overcome. I should like to be optimistic about the group's future, but I am afraid that my own commercial judgment and knowledge of the shipbuilding industry would not lead me to such a conclusion at this time. The yard under its new direction has met with considerable success in obtaining new orders and in assessing the market.

The Shipbuilding Industry Board has tried to carry into operation the recommendations of the Geddes Committee which argued the case for a restructuring of the industry. On page 90 of its report in regard to the Clyde the Committee said: There is, however, a division between the upper and lower reaches which in terms of tradition and travelling time may be significant. Rationalisation would thus provide for more than two groups The argument in relation to the reorganisation of resources is that one should have not more than two groups and Geddes argued on those lines. I feel that the Shipbuilding Industry Board should look at the future prospects of industry in the Clyde and that we should be moving towards one group for the Clyde.

One point in the Geddes Report that is likely to be made much less difficult is the argument about travelling time. In the past we have managed to plough considerable resources into road works, and particularly tunnels and bridges. The new Erskine bridge affords the opportunity to increase the mobility of labour between the north and south banks of the river. We should be using the resources of the Shipbuilding Industry Board to try to get these two groups on the upper and lower reaches to anticipate future trends.

One proposal which might be expected is the abolition of the Shipbuilding Industry Board. It was not expected that the Board would continue ad infinitum but that it would have a limited life. Personally, I feel that it would be extremely premature to end the activities of the Board when the industry has not resolved its difficulties. I would argue strongly against abolition of the Board when I consider that it still has a job to do. If this matter is left to the Government whose attitude is to look at reorganisation on the basis only of commercial judgment, then any reorganisation in terms of better communications, and so on, will not take place without further pain and suffering.

The second issue refers specifically to a Defence Estimate. Therefore, I recognise the Minister's difficulty in responding fully and wholly to the points I wish to raise under this heading.

In a statement to the House on 11th February the Secretary of State for Trade and Industry said: 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".—[OFFICIAL REPORT, 11th February, 1971; Vol. 811, c. 809.] In the Estimates, Yarrow (Shipbuilders) is shown to be building several frigates for the Royal Navy. Therefore, it is arguable that the Government, in looking at the structure of U.C.S., had to consider the liquidity position and what would happen, if they did not plough resources into the group as a whole, to resources which were necessary for the nation's defence. I should not want to enter into discussion with the Minister on that score.

What concerns me is the in-and-out position of Yarrow (Shipbuilders). This company was brought into the group as the S-yard—the specialised yard—in the Geddes scheme of regroupings. We are now to take out the S-yard, for good reasons, in terms of the future of Yarrow & Co. Ltd., the overall holding company, by means of a loan to Yarrow (Shipbuilders)—a loan for which there is no public accountability and which is to be given on terms yet to be agreed by the Ministry of Defence. This loan will enable Yarrow, as it were, by the back door, to buy its way out of the 51 per cent. holding which U.C.S. has in its organisation. The company, as it were, extracts itself by this method and we, therefore, plough some liquidity' into U.C.S. The Government may want to do this, but there were other organisations which they could have used for this purpose. I do not think that this is a desirable way to go about strengthening the liquid position of U.C.S.

We have to consider British shipbuilding as a whole. While the world market has increased five times in the past 20 years, British output has remained virtually static in a growing market. If we are to have a viable industry, the viability of shipbuilding on the Clyde as a whole has to be considered. In this respect we are thinking, directly or indirectly, of the employment of over 40,000 people on Clydeside. If we consider the reverberations of any difficulties in the shipbuilding industry then we must realise that 40,000 people would be affected in Scotland.

I have argued, looking to the future, for the creation of one group on Clyde-side. I realise that the Government would not want to anticipate any policy decision in relation to that matter. But if we annihilate the Shipbuilding Industry Board we deny ourselves the opportunity, by persuasion, of bringing the groups on Clydeside together to discuss such aspects as joint ordering of materials, joint consultations with suppliers, and so on.

While the Shipbuilding Industry Board has been reasonably successful in obtaining the restructuring of groups in shipbuilding, it has done nothing whatsoever in the important sphere of restructuring the marine engineering industry, particularly in the heavy diesel and turbine engine sector. The Geddes Committee argued that we needed to consider restructuring this section of the industry, and nothing has been done.

It is a tragedy of British engineering that we have not been able, apart from the Doxford "J" type, to design a successful commercial heavy diesel engine. There is still a need for some organisation to persuade the various concerns in marine engineering, particularly the heavy side, to create viable units. So I am arguing for the continuation of the board, because I believe that it has a function to perform. I should not like to put any length on its life—I realise that these organisations cannot always be kept in existence—but to end it prematurely would be disastrous for the shipbuilding industry and for the people of the Clyde in particular.

The reason that I raise this matter when I do not have a Clydeside constituency is that my constituents are directly affected by the future of shipbuilding. A considerable number are employed in the industries which cater for the auxiliary machinery for ships and their engines. So it is important to them and to the castings industry, which represent, that shipbuilding on Clyde-side should continue to be viable.

I ask the Minister to consider my points and to give some indication that these Votes will not necessarily be the last Votes for the Shipbuilding Industry Board, and that we shall be discussing these Estimates for many years to come.

1.3 a.m.

Mr. Anthony Wedgwood Benn (Bristol, South-East)

First, I congratulate my hon. Friend the Member for East Stirlingshire (Mr. Douglas) on having raised two very important points. Second, I invite the Minister to clear up some uncertainty created by the speech of the Secretary of State for Trade and Industry at the Press Gallery lunch, which has been the occasion of a Motion on the Order Paper. This was a public, not a private occasion.

Speaking about the policy of the Government, in one paragraph in particular the right hon. Gentleman said: In saying this, I underline, by contrast, that we do not believe by Prices and Incomes Boards to control the wages they pay or the prices they charge; by Industrial Reorganisation Corporations to impel them to marriages they do not contemplate, providing them with dowries they do not justify; by Shipbuilding Industry Boards to induce them to undertake projects whose success they are not organised to attain; by Industrial Expansion Acts to stimulate them to expansions not within the capacity of the resources they can organically command; and so on through the whole gamut of policies and institutions designed to confuse the judgment of business men within their own field of comprehensions by considerations wholly outside it. That paragraph, which I am pleased to place on the record of the House, equates the Shipping Industry Board with three other institutions which the Government have already abolished—the Prices and Incomes Board, the I.R.C. and the Industrial Expansion Act—and dismisses these as part of a "gamut" of policies devised to "confuse the judgment of business men".

I have two points on that. First, that statement about a public board, the Shipbuilding Industry Board, which is of concern to all the shipbuilding constituencies, should have been made not at the Press Gallery lunch but in the House. Second, will the Minister tonight explain what the policy of the Government is with regard to the board?

I will just set it in its historical context. The S.I.B. was set up in response to the recommendations of the Geddes Committee, and initially it was intended that it should run until the autumn of 1970, with a possible extension of one year.

If my memory serves me right, I extended it by one year, taking it to the end of the current year. Or perhaps I announced that extension and the present Government put it into operation. Either way, the board is due to end its statutory life at the end of this year.

It was argued—I argued it myself—that because there was a strong case for the industry feeling that the work of the S.I.B. was limited in time, the industry should take advantage of the board while it lasted. However, that is totally different from announcing its demise as part of a new and different ideology of an incoming Government and totally different from dismissing its work as one of those institutions devised to confuse the judgment of business men. Although shipbuilding has made a significant advance, it still has formidable problems of organisation and management to overcome. Anybody representing shipbuilding and hearing that remark —about its being devised to confuse—would be bound to be anxious. This anxiety has been reflected by hon. Members on both sides of the House, including the hon. Member for Tynemouth (Dame Irene Ward).

I hope, therefore, that in replying the Minister will either explain the Government's policy more clearly or say when we may expect a statement from his right hon. Friend on the subject.

1.7 a.m.

The Under-Secretary of State for Trade and Industry (Mr. Nicholas Ridley)

I am happy to try to answer some of the questions that have been asked about a matter which is extremely important not only for Clydeside but for the country as a whole. The Government have been giving the closest study and attention to the subject, and, on a personal note, it occupies a large proportion of my time.

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. In any event, the right hon. Member for Bristol, South-East (Mr. Benn) will agree that this is not the time to make major pronouncements of policy; that is, when there are so few hon. Members present and when the large number of hon. Members who are interested in this whole subject are not in their places. I will, therefore, confine my remarks to dealing with, though not being able to answer many of, the questions that have been asked.

As the right hon. Member for Bristol, South-East rightly said, the Shipbuilding Industry Board's life comes to an end at the end of this year. It was prolonged for a further year, by Order laid by the present Government and not by him. We were to have debated that, but unfortunately the Order was not reached because of the intense interest of hon. Gentlemen opposite in the Fire Precautions Bill, which was a pity because I had hoped to make some remarks about the board on that occasion.

It comes to an end at the end of this year by Act of Parliament, and, therefore, unless an Act is brought forward extending its life, it will automatically end. What arrangements will be made to take its place must be left for my right hon. Friend's speech.

On the occasion cited by the right hon. Gentleman, my right hon. Friend was referring to the functions of the S.I.B. concerning groupings, which brings me to the speech of the hon. Member for East Stirlingshire (Mr. Douglas).

The question of compulsory groupings was never one which made us feel very easy. Perhaps I use the wrong word. The groupings which were in the mind of the board, or, before that, in the mind of the Geddes Committee, may have seemed to make good sense, but they were not welcomed by the participants. This is one part of the work of the Shipbuilding Industry Board which we have never considered entirely desirable.

With hindsight, one can point to some evidence to support that view. It is surprising that several of the most successful shipyards in this country have not been amalgamated with any other or have, perhaps, made a voluntary merger with another shipyard, without much help or coaxing by anyone, whereas some of the big groups which have been put together under pressure from the board are not showing up at all happily at the present time. I do not want to make too much of that, but it cannot be said that the evidence of the restructuring of the shipbuilding industry leaves one with great confidence, as it would have done if all the restructured groups had been highly successful and those left out were not.

We do not, therefore, believe that the rôle is in any case one which is helpful to the industry. My right hon. Friend was quite right to use those words—"designed to confuse the judgment of management"—which the right hon. Gentleman quoted, because it can well be that a group scheme has the effect of joining the weak on to the strong and bringing down both as a result, which is not in the interest of either the weak or the strong.

We shall not, therefore, seek to prolong that function of the board, nor introduce any provisions to do it ourselves. Nor, I think, will the right hon. Gentleman find that there will be loans or grants available for the purpose specifically of assisting mergers and take overs in the shipbuilding industry.

I come now to the Clyde, the hon. Gentleman's interest. On behalf of the Government, I would not express any view on whether there should be not more than two groups, whether there should be more or fewer, or just one group. It seems to me not to be within my knowledge on within anyone else's knowledge save that of the people actually concerned in running shipyards on the Clyde.

Mr. Douglas

After a very searching inquiry, at that point of time the Geddes Committee concluded that there should not be more than two groups. This point is not made in a vacuum. I have said that we have moved on from there, and the infrastructure on Clydeside has altered. I am looking not for a distinct prophecy but for a certain indication from the Minister of how the Government view the future.

Mr. Ridley

No, the evidence runs strongly against the hon. Gentleman. The Yarrow shipyard was put into the Upper Clyde group, very much against the will of the Yarrow board. It stayed there for three or four years, and the results were not at all satisfactory. When the proposition was made that Yarrow should leave the Upper Clyde group, there were few left who contested the decision that that should happen. Indeed, the right hon. Gentleman himself set in motion the events which led to Yarrow's withdrawal, which was hastened forward by this Government—although we ran into some difficulties, to which I shall refer. But the principle that Yarrow should leave was accepted in most quarters, though not, I believe, in all, because the actual working of the merger proved not to be successful.

Equally, I think that the Lower Clyde group is not in the mood to join with the Upper Clyde group. Who am I to say that it is wrong? I certainly do not believe that one can appoint a committee which says that this, that and the other firm should or should not merge, and that that is such a wise view that it must be implemented against the view of the parties.

As regards the Clyde shipbuilding industry, it would be a brave man who could say how many companies there should be, and whether existing companies should or should not amalgamate. The fact that communications have improved between the Upper Clyde and the Lower Clyde groups due to the building of the bridge is very welcome, and this I am sure will help the employment of labour and the flexibility of employment between the two main shipbuilding areas on the river. If in due course it appears to the managements of the companies there that they should get together, either directly in a merger or in a looser association, I would not wish to stand in their way. But I do not intend to put any pressure upon them either way.

This question of joining the weak to the strong is very relevant. When we think that Upper Clyde has had £20.2 million of public money and Lower Clyde has had a very much smaller sum in loans, which it will eventually have to pay back in the main, we can see that if the two had been joined together at the beginning the sum which might have had to be advanced over the years of the right hon. Gentleman's stewardship might have been very much greater even than the £20.2 million. The argument that joining a weak company to a strong company results in a strong company just because of the economies of scale and the power of size may be very wrong, and it is one that I reject.

The future of the board is, therefore. that it will end, and that it is available for its loans and grants which it still possesses to shipyards for the next nine months up to the end of this year. In due course my right hon. Friend will spell out the policy that we shall have towards the industry as a whole. I have gone so far as to say that I would be surprised if it contained any provisions for pressure or forcing amalgamations of any sort. Indeed, my experience of trying to help the tangled difficulties which have beset Clyde shipbuilding ever since I have had any responsibility for it makes me feel that this must be right.

I will say a word or two about Yarrow Shipbuilders, because the hon. Gentleman specifically referred to it. First, the loan which the Ministry of Defence made to Yarrow was in no sense to help the separation of Yarrow from Upper Clyde, nor in any sense to help Upper Clyde Shipbuilders. The truth of the matter was that Yarrow ran into grave financial difficulties, or perhaps I should say that Yarrow faced grave financial difficulties in the future, and it would probably have been unable to continue trading unless it had been assured of credit to tide it over that difficult year or two ahead, when its cash flow became critical to its being able to continue to trade.

In those circumstances it was agreed by my noble Friend the Secretary of State for Defence that, as a client, he would extend a loan to Yarrow, because he believed that it was important from the point of view of national defence not only that we got the ships now building at Yarrow but also that the capability of the yard to build naval ships in the future should be retained in this country. It was a very similar development to the action of the shipowners who had ships building at Upper Clyde Shipbuilders, who increased the prices of their ships voluntarily to save Upper Clyde from similar difficulties. It had a similar cash flow problem. The two operations can be taken as very similar, in that the clients of both yards found it in their interests to help the yards out of their financial troubles when they were faced with liquidity problems.

In fact, I do not think that any money has been drawn yet by Yarrow, nor do I think that it is likely to be drawn all at once. It may not be drawn—any of it —for several months more, until the cash flow problem actually hits the yard. Therefore, it does not appear in the present Estimates, and it will be on the Defence Department Estimate in the financial year following this if any money is drawn by Yarrow. The terms for this loan are not yet fully agreed. It is for a maximum of £41 million, although we hope very much that the full amount will never be drawn. The terms of repayment have not been settled, nor has any money be drawn. It is more in the nature of a stand-by credit should it be needed by Yarrow.

No public money was given to Yarrow by my Department, nor was any public money given to Upper Clyde Shipbuilders on this occasion. It is not our intention to give any in future. As my right hon. Friend said the other day at Question Time, it will be for both yards and their management and those who work in them to ensure that they are viable. It is not enough to say, "These yards are in difficulty financially. Therefor, there must be grants or money from the Government in order to make sure they survive." There is a duty on those who work in them to make sure that they survive, and we want it to be made extremely clear that the situation is critical—it is perhaps true to say that it is fairly critical in all three of the main Clyde yards—and that a great degree of effort and co-operation will be needed from all those who work in them to make sure they have a strong and viable future.

It is depressing that Barclay Curle has been on strike and that two U.C.S. ships have been locked up in the dry dock there and have not been available to the owners who otherwise would have been able to take delivery of them. It is depressing that the Lower Clyde boilermakers are still on strike, having rejected a 12.9 per cent. increase in pay, and that ships are being delayed there and are not getting further towards completion.

Events of that sort do not help the reputation of the Clyde yards and make it not more but rather less certain that they will be viable.

Mr. Douglas

I share the hon. Gentleman's concern about the productivity problem which results from stoppages, but I think he will agree that it must be seen against the overall picture of regional problems and regional policy. The Government have created considerable uncertainty and unrest. I would deprecate anything done either by workers or by management to undermine the long-term viability, but the Government have a responsibility to create good industrial relations, and they have manifestly not discharged that responsibility.

Mr. Ridley

But regional policy does not excuse non-commercial behaviour by men or management which leads to further collapse and unemployment. We are not in the business of saying that just because an enterprise fails to be commercial but is in a region it is assured a future. The biggest contribution which can be made to regional policy is that concerns which find themselves in these difficult areas, where the Government have greatest sympathy about bringing in new employment, should make as big a contribution to regional policy as the Government or anyone else by ensuring that there is a high reputation and satisfactory record of productivity and profit-making in these concerns, because then they can expand and make a big contribution to future employment in the region.

Mr. Benn

If the Government do not wish to intervene in industry, why has the hon. Gentleman picked three shipbuilding companies, said that their position is critical—which is bound to affect confidence, and that the position is likely to get worse—and underlined the fact that, because of current difficulties with industrial relations, and so on, no help will be made available? Does he regard it as his job, while doing nothing, to go round expressing the Government's view about the viability of firms whose survival has a great rôle to play in maintaining employment? Is not this a unprecedented act? Can the hon. Gentleman recall any occasion when a Minister has commented on the viability of a private company which he has no intention of helping?

Mr. Ridley

The right hon. Gentleman knows perfectly well that the Upper Clyde Yard and Yarrow have had discussions with the Government and have had to get more money from their clients to put them back on a viable basis. That is what I was referring to. The Lower Clyde Yard has issued a circular to all those who work for it. explaining its financial situation. I have seen it. It is to be seen by anyone who wishes to look at it. The company is making an appeal for the end of the strike because it is essential for its future that there should be a resumption of work. That is common knowledge. I have done nothing to damage that position I have merely made it clear that we believe that these firms have to work out their own future. For this I wish them all good luck and complete success, because their market is fine, their order books are long and their opportunities very great. I believe that there is no reason why the Clyde should not be employing twice as many people in shipbuilding at some future date. I hope it will. I am certain that, with the sort of attitude which the hon. Gentleman has brought to the debate and the determination of all concerned, the shipbuilding industry on the Clyde can have a very prosperous future.