HC Deb 19 May 1971 vol 817 cc1411-22

Not amended (in the Standing Committee), considered.

Motion made, and Question proposed, That the Bill be now read the Third time.

Mr. Bruce Millan (Glasgow, Craig-ton)

The Opposition welcomed this Bill so far as it went. We have not changed our mind about that. However, even at this late stage, it would not be right to allow the Bill to go without expressing briefly some of our reservations about the way in which the Government have handled this whole matter.

The Government are removing the various elements of assistance to the shipbuilding industry provided under the Shipbuilding Act, 1967. We debated this matter on Second Reading and it would not be appropriate to debate it again, but neither on Second Reading nor in Committee have we had from the Government any expression of commitment to the continued prosperity of the shipbuilding industry, or any real view as to the place that the British shipbuilding should hold in the world. That is our basic criticism of the Government and their handling of their relationships with the shipbuilding industry. Nowhere is there a sense that the Government are anxious to see the shipbuilding industry succeed and to play their part in so doing.

In regard to the credit limits in the Bill, it is agreed by virtually everybody outside, by the industry itself, and by all the commentators on the Bill that the limits laid down are completely inadequate. Indeed, it may be seen that that they are already inadequate to meet the demands placed upon them and that they will become increasingly inadequate as the months pass. They are meant to take the industry up to the stage at which fabrication of new ships would start by mid-1973. That is a misleading way to put the situation if it is interpreted as giving the industry two further years of credit, because orders are going in now for work going well beyond the middle of 1973 and the limits are inadequate.

We have been promised that the further guaranteed credits for the industry beyond the limits laid down in the Bill will be dealt with by some new method to be announced to the House before the Summer Recess. The Secretary of State for Trade and Industry referred to this matter in a speech in Glasgow last week, but I am afraid that the speech was not in terms which make any clearer exactly what the Government have in mind. What the right hon. Gentleman said was: The Government recognise that by one means or another they will have to play their part in ensuring that finance continues to come forward to meet the apparently insatiable demands of the market. In so far as that represents a commitment to go beyond the £700 million, it is welcome, but it does not give us any guidance at all as to the form which the new credit assistance to the industry will take.

Nothing that has happened since 22nd April, when the Bill received a Second Reading, is likely to give increased confidence to the building industry. unemployment figures published since then have presented a very much worse position than we had before, and shipyards are largely situated in areas of high unemployment. The economy is stagnating. Trade is in danger of declining. Then we had the announcement in today's newspapers of the intention of four of our major shipping companies not to carry on with orders for container ships for the New Zealand trade in the changed circumstances, and obviously the Common Market negotiations are one of the factors involved here. As the shipping companies have said, there may be special circumstances in this case, but it is another example of a blow to the shipbuilding industry in a period when there is already considerable uncertainty because of the Government's lack of policy. It underlines once again the increasing urgency of getting some clear statement of policy from the Government.

I hope that the references to the promise of a statement before the Summer Recess will not be taken as meaning that we shall have a statement on the last day. I hope very much that we shall very soon be told the Government's proposals for extending credit for the shipbuilding industry.

The one matter which is of considerable relevance and which is new not only since Second Reading but since the Committee stage is the announcement by the Bank of England last week of new credit arrangements—

Mr. Speaker

Order. This is a Third Reading debate. I have no doubt that the hon. Gentleman is confining himself very closely to what is contained in the Bill. Whether this announcement is contained in the Bill, I am not certain.

Mr. Millan

It is very relevant to what is contained in the Bill. I should explain that the guarantees in the Bill are guarantees by the Government of advances by the joint stock and clearing banks. The Bank of England's announcement has considerable implications not just for future credit arrangements but for the credit arrangements contained in the Bill. It is to those that I direct myself specifically. I should not feel confident to discuss the announcement, apart from its relevance to the Bill.

When the previous Government announced the increase in limits to £600 million, which was to form the basis of the Labour Government's Bill, the Paymaster-General made it clear that the banks had been extremely co-operative in making these credit arrangements available and that they had co-operated on the favourable rate of interest, then 5½ per cent., which was to be available to the shipbuilding industry.

At the time of the Second Reading and Committee Stages, the Under-Secretary made a number of obscure references to there being no purpose in the Government saying that they would guarantee large sums of money unless the banks were willing to make them available. At the time, those references were obscure. They became clearer last week when the Bank of England made its statement. I want to ask the hon. Gentleman, first, whether those references referred to the new arrangements for Bank credit which were proposed last week.

It seems that, whatever else the new arrangements will do, they will not make credit easier to obtain for the purposes of the Bill. I suspect that the new arrangements may make credit more difficult to obtain.

I notice that the Financial Times, in its editorial on the Bank of England document, made the specific point that the document needs clarification in its relation to special credit arrangements such as the shipbuilding credit arrangements with which we are dealing. It would help the House if the Minister would tell us something about that.

As I read the statement and understand its implications, having read the commentaries on it, there is a likelihood that the general rates of interest charged by the banks for credit generally are likely to be higher under the new arrangements than at present. The argument is that this will be a price worth paying by industry for the improved flexibility of the credit arrangements under the new proposals. If credit generally is likely to be more expensive, this raises sharply the question of the interest rates which are likely to be made available to the shipbuilding industry on the sums which the Government are guaranteeing under the Bill when the new proposals come into operation.

The hon. Gentleman was asked, both on Second Reading and in Committee, whether he could make any precise announcement about the actual interest rates or whether he could at least tell us that the Government's intention was that the interest rates which would be available under the Bill would be fully competitive with those available to our competitors. I repeat that question tonight, particularly in the context of the new arrangements which I understand are likely to make credit more expensive than it is. If the hon. Gentleman is unable to tell us what the interest rates will be, we shall want a pledge that the Government are committed to saying that the interest rates available in Britain are competitive with those available to competitors of our shipbuilding industry.

We agree that the Bill should be passed quickly. It is a pity that it did not come before the House at an earlier stage in the Session. However, we repeat our dissatisfaction with the way in which the matter has been handled by the Government and ask, even at this late stage, for further clarification on the matters which I have mentioned.

10.28 p.m.

Mr. Arthur Blenkinsop (South Shields)

I promise to be even briefer than I was in the main debate tonight. This is the only opportunity which we shall have, before the Bill leaves this House, to ask the Minister for any further information he may have following the statement which he made in Committee.

Those of us representing constituencies with shipbuilding interests are naturally disturbed lest there should be the slightest danger that orders which may become available cannot be accepted because of credit difficulties.

We had a useful statement from the Minister in Committee. As my hon. Friend rightly said, we had the repeated promise that a statement would be made before the Summer Recess. We do not see the need for such a long delay before a new statement is made. As a fortnight has elapsed since the Committee stage, is the Minister able to tell us anything further about the nature of the new provisions to which we may look forward? In any case, may we have a reassurance that there is no danger of loss of orders merely by reason of lack of credit facilities?

10.30 p.m.

Mr. Dick Douglas (Clackmannan and East Stirlingshirc)

I rise to follow the points which my hon. Friend the Member for Glasgow, Craigton (Mr. Millan) made in relation to the provision of the line of credit which is to be extended through the joint stock banks to the shipping companies and eventually to the yards.

In Committee on the Bill I raised this important issue of the discussions taking place between the Minister and the joint stock banks, when I asked the Minister: What discussions are taking place between the Ministry and the joint stock banks to remove some of the banks' fears about so many of their loans and advances being at fixed rates over a relatively long period of time?"—[OFFICIAL REPORT, Standing Committee E, 6th May, 1971; c. 26.] I recognised when raising that topic that that might encroach upon the Government's general discussions with the Bank of England and the joint stock banks on monetary policy.

My hon. Friend has indicated that there has been a statement. I know that it is difficult to bring this matter entirely within the bounds of order, but there has been a statement which has a distinct relationship to the granting of this £700 million worth of credit to the industry. There has been a statement on policy in relation to competition and credit control which directly affects the nature and function of this credit. The points I want to put directly to the Minister are related to those which my hon. Friend made.

Will this make it easier for the companies concerned to obtain credit? During some of the discussions on the Bill there has been an implication that the Bill is unnecessary to the question of being able to raise £700 million. If this is so, will the Government be considering another statement of policy, which all the industry wishes to hear, and the sooner the better, and long before the Summer Recess? Will this mean that in future we shall not need legislation to increase this limit, that there will not need to be legislation to follow this? Will the banks be able to increase the quantity of credit flowing to the industry without necessarily increasing the price of credit which the industry has to pay?

These are important considerations which must be in the industry's mind at present, because the Government, through the Bank of England, are making substantial alterations in the asset structure of the joint stock banks. It may be that the Government will be very generous. It may be that this type of credit is to compete. The whole onus of the Government's policy is to increase competition between the joint stock banks. If the banks show competition in granting this form of credit, will the Government look favourably on other responsibilities which will be placed on the banks in future?

My last point relates to the eventual nature of the industry. What do the Government intend to do, under the terms of this Bill, and in terms of the future structure of the industry, to get the ship-owning companies and the shipbuilding companies closer together? We have seen today an instance which might have serious implications for the future of a particular yard. I do not want to raise any difficulties, but the shipbuilding industry and the shipping companies are carrying out policies which are not in direct opposition but which might damage each other. In granting and underpinning these credit facilities, the Government have a responsibility to ensure that future sums of credit are forthcoming, that there is a greater integration in marketing and policy between shipping companies and shipbuilders. I hope that the Government will not detract from that responsibility when they eventually make their statement on future policy.

10.36 p.m.

Mr. Ronald King Murray (Edinburgh, Leith)

My constituency contains a shipbuilder, Robb Caledon of Leith, with a high reputation as builders of vessels of limited size and repairers of vessels. They have done well in export markets by catering for specialised lines of shipbuilding. The company suffers from the unique disadvantage in this country that only the shipbuilders of Leith are not in a development area. This means that they have problems, and I have been very impressed by the way in which Robb Caledon have faced up to this disadvantage.

The Bill offers very little hope to a company like Robb Caledon facing an international competitive market in specialised shipbuilding. The difficulty is credit. People want to purchase specialised ships but want to know whether credit will be available. The £700 million provided by the Bill is not nearly enough. When one thinks of the additional methods mentioned by my hon. Friend the Member for Glasgow, Craigton (Mr. Millan), it is clear that this figure falls far short of the needs of the shipbuilding industry.

10.37 p.m.

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

I am grateful to hon. Members opposite who have spoken and to the Labour Party generally for the way in which they have facilitated the passage of this Bill. This is in the interests of shipbuilding, because the Bill is urgently needed so that the credits which may be advanced and guaranteed under it can be paid. It is right that the Government should pay tribute to an Opposition for facilitating a Bill in this way. Otherwise it would be difficult to draw money which is becoming urgently needed. No money has been advanced under the Bill before it has left the House, so those who feared on constitutional grounds need fear no longer.

I have little to add to what has been said before about the provision of credit for the industry. There was a feeling among those who spoke that the limits were inadequate. I confirm that, for long-term purposes, we do not pretend that the limits are adequate to finance the credits which will be called for in the middle of this decade and beyond.

Reference was made to the cancellation of the orders for Swan Hunter's which we read about in the newspapers today. As I read them, the shipping companies did not allege that this was something to do with the Common Market. The papers made it clear that this was a decision taken on commercial grounds. Although that is a matter for the companies, that is what I read in the papers. The amount of credit which those orders have occupied will become available to other orders for the industry as a whole. The cancellation in itself, although a sad thing, in some respects increases the amount of credit which will be available for new orders.

I would be wrong to be drawn further than to say that the £700 million, plus the repayments which may be made during the current year, which we estimate to be £25 million, still seem to us to be adequate for the immediate purposes of the industry, until such time as my right hon. Friend can make a further statement about the future.

The hon. Member for East Stirlingshire (Mr. Douglas) seemed to think that the announcement by the Bank of England recently about new arrangements being made for credit through the banking system had some bearing on this problem. This is not so. The consultative document is not even a policy decision. It is a consultative document which the Bank issued. It deals with the availability of credit for those sectors of the economy which do not depend on fixed-rate credit from the banks.

Mr. Douglas

I accept that. However, would the hon. Gentleman agree that some aspects of the consultative document have become not only policy but are now in action?

Mr. Ridley

I am sure that the hon. Gentleman would not expect me to answer for the Treasury in a matter such as this. I am merely making the point that the consultative document is about the provision of credit to that sector of the economy which is not drawing fixed-rate finance from the joint stock banks.

It is not unfair for me to say that it was necessary for this study to be brought to a conclusion before the Government could complete their study of the availability of fixed-rate finance for the shipbuilding industry. To that extent the hon. Gentleman is right; the document was a precursor of the second study which is taking place. I cannot say more to supplement what I have said at earlier stages or to what my right hon. Friend said at Yarrow's last week, when he made the statement which the hon. Gentleman quoted. The problem is being urgently studied and as soon as possible, and certainly before the Summer Recess, any doubt will be cleared up by a statement from my right hon. Friend on the future of credit policy.

The hon. Gentleman will accept, for this reason, that it is impossible for me to quote the rate of interest at which credit will be available, whether it will be competitive with that of our competitors, or, indeed, to give any details at all about the new credit facility. As I said on Second Reading and in Committee, the terms on which new credit may be available simply cannot be stated now.

However, it is clear that work which is to take place in shipyards in the next few years is entirely covered by the amount of credit available, and we are tonight talking about the terms on which new orders may be taken after 1973 or even 1974; and this remaining doubt the Government hope to clear up as soon as possible.

I assure the hon. Member for South Shields (Mr. Blenkinsop) that there is no shortage of orders on which work can start in any shipyard, and I assure the hon. and learned Member for Edinburgh, Leith (Mr. Ronald King Murray) that credit is at the moment not an impediment to providing employment in any shipyard in this country. There is still a certain amount of credit available for guarantees for any orders which may be booked for immediate construction in any of our yards.

I am sorry to have to tell the House that I have nothing to add to what has been said previously, except to reaffirm that the Government intend to clear up the matter at the earliest possible opportunity, and certainly before the Summer Recess.

The hon. Member for East Stirlingshire made an interesting comment when he said that he was not satisfied that the relationship between shipbuilding and ship-owning companies was right. But that is not a matter for the Government. How the industry does its business and organises its contracts between the ship-owners and shipbuilders is a matter for the industry. I hope that the hon. Gentleman will pursue his thoughts in the matter in talks with the various industries concerned. I do not entirely agree with what he said.

The industry as a whole has to find ways of earning its living in future in relation to the competition from other shipping and shipbuilding companies throughout the world. Of course we want the industry to succeed.

Mr. Douglas

I do not wish to labour this matter, but on Clydeside right now there is an instance of a shipbuilding company and a ship-owning company at loggerheads, which seems quite unnecessary, and the attitude of the ship-owning company is possibly placing in jeopardy unnecessarily the future of our yard. This is because the ship-owning companies and shipbuilding companies have been at arm's length, which necessarily militates against the future of both sections of our industry.

Mr. Ridley

The hon. Gentleman will not expect me to discuss a matter now before the courts. The normal commercial interests of the two companies of which he speaks are matters on which it would be quite wrong for me to comment.

Both ship-owners and shipbuilders have to find a way of earning their living in the competitive situation in the world. Both sides of the industry are entitled to pursue their legal and commercial remedies to problems as best they can. Of course we want the shipbuilding industry to succeed. But it is not the Government's philosophy to lay down a "norm" for the size that the industry should be and to say, "Whatever happens, we believe that the industry should build so many million tons in 1975, and the size of the order books should be so great." That is not what we are saying. We say that given the opportunities in the world market, and given the relative tax and subsidy advantages, and the credit advantages which the Bill provides, regarding the relative world position of our industry, the opportunities exist and are very great. But the Government do not plan the size of the industry.

If I were rashly to give a figure—which I shall not—for the size that I hope the industry would achieve, I think that that target would be greatly exceeded by events. It does not depend on the Government or the House but on the efforts of both sides of the industry, on management and men, on sub-trades and sub-contractors. They have the ball at their feet, and I hope that they will make the greatest success of it.

Mr. Ronald King Murray

I take the point that the Minister has just made, but I wonder whether he would deal with the other aspect of credit facilities given to the shipbuilding industry by the Government. Would he not agree that it is vital that these facilities should be available at an early stage when offers are made? This is a factor in which the Government could play a big part.

Mr. Ridley

Perhaps the hon. Gentleman has not followed our discussions on this matter. There are adequate credit facilities guaranteed by the Government to provide the money for all ships likely to be built before the middle of 1973, and the Bill ensures that. The area of uncertainty which remains is whether a ship-owner who places an order for a ship for delivery after that time will be able to draw credit at that time. So we are talking about the order book for more than two years ahead and not about the immediate future.

The Government have made it clear that they will make a further announcement on this subject within the next two months—before the end of this Session. If there is an area of uncertainty it will not last long, nor will it preclude ship-owners from ordering ships, because they may certainly take it into their own hands whether they believe that the credit which will or will not be available is satisfactory; nor do they necessarily need credit to place orders. Indeed, large numbers of export orders can be won which can secure export credit. It is not correct to say that there is a hiatus between absolute guaranteed credit and having no chance of obtaining orders. I accept that there is a gradation of risk, but we hope to take steps in this regard.

Mr. Ronald King Murray

The point I want to press and which I want the Minister to consider is whether he is satisfied with the speed with which credit facilities are given.

Mr. Ridley

There have been complaints about this in the past. It is one of the matters I have examined. The Ship Mortgage Finance Corporation, which vets applications for home credit, is extremely efficient and quick. The same can be said of the Export Credit Guarantee Department, which vets credit applications for foreign orders. It is obviously one of the questions we shall have to examine, to ensure that the machinery is as perfect as it can be if and when we produce a new scheme of credit in the future. This is an administrative detail which the hon. and learned Gentleman can rely upon us to get as good as possible. Though there were criticisms several years ago about the speed with which credit was made available, there have been no criticisms in recent years.

I believe that the Bill will be a major contribution to the finances of the shipbuilding industry. I am glad that it is welcomed on both sides of the House. I say again that it is only an interim Measure until the Government can announce their further plans and thoughts about the future of this policy. I hope that the House will give the Bill a Third Reading now, so that we can make the money available which I hope will be to the benefit of the constituencies of hon. Members who have taken part in the debates on the Bill and of all those who build ships—that ancient, useful and important industry which operates in all parts of Britain.

Question put and agreed to.

Bill accordingly read the Third time and passed.