HC Deb 20 October 1971 vol 823 cc724-36
The Secretary of State for Trade and Industry and President of the Board of Trade (Mr. John Davies)

With permission, I should like to make a further statement on shipbuilding on the Upper Clyde.

Govan Shipbuilders Limited—the company set up with private capital to bring into effect the Government's wish to see a viable merchant shipbuilding industry on the Upper Clyde—has been faced with difficult problems to surmount before it can commence its task.

A condition of its receiving Government support was that it should enter into satisfactory agreements with its workers or their representatives concerning working practices and wage rates. But until very recently there was unwillingness on the side of the workers to enter into meaningful discussions with the company to this end.

On the other hand the liquidator was running out of work at Govan and Lint-house, with a threat of heavy redundancy because the shipowners were unwilling, without far-reaching guarantees, to confirm their orders. Moreover, the liquidator was becoming very short of funds.

In these circumstances I have had recent discussions with Mr. Dan McGarvey of the Confederation of Shipbuilding and Engineering Unions and subsequently my hon. Friend the Minister for Industry has had talks with the shipowners primarily concerned.

The results of these meetings are:

Mr. McGarvey, with the full agreement of the shop stewards, and I have jointly signed a statement—the text of which I am circulating in the OFFICIAL REPORT—undertaking that there would immediately be meaningful discussions with Govan Shipbuilders Limited on the understanding that the Government would give the requisite guarantees to the shipowners to enable work to be maintained. We have further jointly agreed to work together to encourage a purchaser for the Clydebank yard to come forward, and also to consider whether it would be in the economic interest of Govan Shipbuilders Limited to include Scotstoun within the project.

The Minister for Industry is negotiating with the shipowners concerned the terms of guarantees they need to enable them to confirm their orders. The financial commitments already agreed are substantial and I am publishing full details of them in the OFFICIAL REPORT. A further statement will be made when the remaining negotiations are completed. Estimates will be presented to the House in due course. To these will be added the considerable further public funds needed for investment in Govan Shipbuilders Limited in addition to its private funds so long as the company can put before me a fully appraised proposal for a concern capable of attaining long-term viability, including, of course, evidence of satisfactory agreements reached with the unions.

It is already abundantly evident that the ship orders being worked on by the liquidator are likely to realise a heavy loss, as will the new work needed to maintain employment at Govan and Lint-house. Financial guarantees will be required from the Government to enable him to do this and will be included in the further statement to be made. This refutes the assertions that U.C.S. was on the verge of turning the corner into profitability. Moreover, the likely scale of the funds involved in putting a part of U.C.S. on the road to ultimate prosperity reveals very clearly how unreal was the claim that the whole concern could have been saved by the injection of some £6 million. That might have tided the situation over for a few months but was entirely inadequate to set it on the road to viability even if ship orders to sustain all four yards had been at all in view, which they were not.

The following action is now to take place.

I will complete negotiations with the shipowners for the guarantees they need. The unions will enter into meaningful discussions with Govan Shipbuilders Limited.

The study of the Govan-Linthouse project which I had already commissioned will be extended to look at the alternative of the inclusion of Scotstoun.

I am ready to advance up to £1½ million to the liquidator over and above the £4 million already advanced, of which £2.7 million is repayable.

I express the profound hope that all those having the future of shipbuilding on the Upper Clyde at heart will work together to make a success of these endeavours.

Mr. Benn

Will the right hon. Gentleman confirm that after refusing £5 million to £6 million sought by U.C.S. in June he has now been forced to give the liquidator a loan of £5½ million? Will he also confirm that he has abandoned the "Wise Men's Report" based on a two-yard solution, as he is now considering the inclusion of Scotstoun and is promising to make substantial sums available to Clydebank? Will he confirm the assertion of Mr. Douglas, the Deputy Chairman of Govan Shipbuilders, that £30 million will be required from public funds as a result of the Government's policy? Would not it be more honest to admit that he has been forced into a total retreat by the determined action of the men in U.C.S., the men whom he wholly forgot in the summer and who are now part way to securing their main objective?

Mr. Davies

It is very clear that the right hon. Gentleman's observations were written before he listened to my statement, because in practically every respect the statement dealt specifically with the points he raised. The loan to the liquidator, as the right hon. Gentleman must have just heard me say, is in considerable part reimbursable in any case. [Interruption.] Indeed, they would not only not be reimbursable but would, as I said, only be sufficient to tide it over for a few months pending the next input, and that is undoubted. The right hon. Gentleman asked about the abandonment, as he called it, of the "Wise Men's Report". I made it very clear that Govan Shipbuilders Limited is studying a two-yard project. It has been agreed that it shall in addition study an alternative to see whether the inclusion of Scotstoun could make the project more economic. That in no way indicates any abandonment of the position the Government took up before.

As for Clydebank, to which the right hon. Gentleman said additional money had been promised, the Government have never said anything else but that they would hold eligible for finance under the Local Employment Acts any purchaser of Clydebank coming forward with a viable proposition. The Government still await that. This is in no way a change from the position the Government have consistently taken up.

The right hon. Gentleman spoke of the cost to Government funds, and mentioned Mr. Douglas's figure. I have no idea, and will not venture one until such time as I have the advantage of a practical project put forward by Govan Shipbuilders Limited and supported by the consultants' work which I have commissioned.

Mr. Benn

The right hon. Gentleman has missed the point of my question, which is that part of the money given to the liquidator would have been repayable, as would have been the funds made avail- able to U.C.S. in response to its request in the summer.

Second, the right hon. Gentleman has not given the House any account of the enormous sums of public money which the Deputy Chairman of the company he has set up has publicly said could amount to £30 million, and without that money neither Govan Shipbuilders Limited nor any other solution there could be viable. Will he now give the House the estimate he makes of the total cost of the Government commitment to maintain the policy he has said is totally unchanged since the summer?

Mr. Davies

Unlike the right hon. Gentleman, I am not inclined to throw forward assessments of estimates without the opportunity to have them studied properly. That tendency has landed us in a good deal of trouble.

The truth is that as far as the advances to the liquidator are concerned it is not that they are susceptible to repayment. There is a reimbursement coming on that, beyond all doubt.

There is no doubt, in the light of subsequent evidence, that any payment made to the company at its moment of absolute crisis would have been simply lost money, but it would have been only a small part of the lost money to follow it.

Mr. Edward Taylor

The news that my right hon. Friend intends to confirm the current contracts of the previous company and the recent announcement of the extension of the naval shipbuilding programme will be greatly welcomed on Clydeside, because more jobs will be secured than had appeared to be the case a few weeks ago. When will my right hon. Friend be in a position to let us know whether the Scotstoun yard can be added to the consortium? Can Govan Shipbuilders Limited now go out looking for more work?

Mr. Davies

I hope very shortly to be able to give confirmation of existing orders. The naval orders do not directly help the yards in question because they are not destined for the production of naval ships, and have not been so used, although clearly those orders will be very welcome on Clydeside. The question of the inclusion or otherwise of Scotstoun in the Govan Shipbuilders project will arise only when I have in hand the guidance of the company itself, coupled with the report of the consultants. I hope very much to have that in hand before the end of the year.

Mr. Grimond

Assuming that things go as well as the Secretary of State hopes and that shipbuilding continues at Govan-Linthouse and Scotstoun, can he give the House any estimate of the redundancies which will even then result, and can he tell us, bearing in mind the frighteningly high unemployment rate on the Clyde, what other employment the Government can offer to these men?

Mr. Davies

The figures are that at the end of July when the company really went into liquidation firmly the numbers employed were 8,387 people and there are now almost exactly 1,000 less than that. The prospect for future employment, I suggest, has to be seen in a range which, at the low end, starts at the 2,500 figure put forward by the group of experts, but it has been, I think, confidently hoped that the figure might be materially improved, and improved not only by adding the numbers employed in the new project as a result, perhaps, of the inclusion of Scotstoun and perhaps of double-shift working, or, better still, at the Govan-Linthouse yard, but additionally by other employment being offered to the workers at U.C.S. and either on the Lower Clyde or at Yarrow's. Yarrow's must hope that they will be in part beneficiaries of the additional defence orders which will help to this end. The figures are not easy to conjecture, but look as though they may be considerably less in terms of redundancies than those which have been mentioned.

Mr. Burden

I wonder whether my right hon. Friend's attention has been drawn to an observation by the right hon. Gentleman the Member for Bristol, South-East (Mr. Benn) on 2nd August this year when he stated the policy of the last Government and that he had written to Upper Clyde Shipbuilders and told them that labour practices should be altered and that there should be a slimming of the labour force by some thousands of men. His recent passionate outbursts on behalf of workers on the Clyde appear to some of us just a teeny-weeny bit phoney.

Mr. Davies

My hon. Friend cites one of many interesting observations which the right hon. Gentleman gave vent to in times gone by, but, clearly, they are not those which are present in his mind at the moment.

Mr. Small

I will study in depth later the statement which the right hon. Gentleman has made, but may I ask him this? In terms of dealing with the yards now known as lame duck industries, could there be separate guarantees as for B.S.A. by the involvement of the E.C.G.D. as a long-term banker—as for the rest of the operations of B.S.A.?

Mr. Davies

No. The situation is that with ships, as the hon. Gentleman probably knows, the arrangement for providing credit guarantees is different from though analogous to that of the E.C.G.D. This will be deployed in relation both to orders based on home delivery and export delivery on the Upper Clyde.

Mr. Brewis

Has my right hon. Friend had any recent approaches from outside interests to take over the Clydebank yard?

Mr. Davies

Approaches have been made—primarily to the liquidator, because he has the task of disposing of the Clydebank yard. It is his responsibility, though, of course, I and my Department have been much engaged in discussions with people who might be interested. There is at the present moment to the best of my knowledge, only one current practical interest in the purchase of the Clydebank yard for shipbuilding. This is one of a number which he is evaluating of alternative possibilities here and on the Continent, and is unlikely to reach a definite conclusion within the course of the next month or two.

Mr. Rankin

I should like to draw the right hon. Gentleman a little father along the road on which he is now progressing, and in what has been achieved so far. May I ask him to realise that this trouble started in 1964, and that the men concerned have been the sufferers and that we want to try to prevent them from being so any longer? Would he, therefore, take the step of suggesting to those concerned—and using his influence to ensure this—that two members of the trade unions with which he has been dealing should be appointed to the new board? The men may not have money to invest, but their lives, and the lives of their children and wives, are invested, and that is a greater investment than any amount of money. Would he give them that chance to be on the board to talk about the problems of the men—not only in the yards but in their homes, which are just as important, particularly to anyone who knows Govan? I urge him to take up this point.

Mr. Davies

I am, of course, sympathetic to what the hon. Gentleman says, and I know that the Chairman and management of Govan Shipbuilders Limited are, too; but the hon. Gentleman will realise that this is their task. They are a private company and it is their task to decide on who will be on the board. Certainly, however, as I have said, I am fully sympathetic to what he has said.

Mr. Bruce-Gardyne

Can my right hon. Friend tell us whether his statement this afternoon means that the Government will be giving completion guarantees in respect of orders for ships at Govan-Linthouse, and, if so, what assurances have the Government already received about labour practices in the yard? Secondly, in respect of the query by the right hon. Gentleman the Member for Orkney and Shetland (Mr. Grimond), is it a fact that from upwards of 1,000 vacancies are current at Scott-Lithgow and others at Yarrow's?

Mr. Davies

On that point there is no doubt that there is a substantial number of vacancies available at Scott-Lithgow's, and there might be at Yarrow's, but that is not at this moment certain. On the question of completion guarantees, as my hon. Friend will see from the paper I am circulating in the OFFICIAL REPORT, there is an undertaking from the unions in relation to this general agreement to ensure that the ships now given guarantees or to be given guarantees will be built with due despatch and efficiency. I forget the precise words, but they are of this kind. I think it is a meaningful guarantee given by the unions.

Mr. Douglas

Would the right hon. Gentleman confirm that what he is in process of achieving is the painful restructuring of the industry on the Upper Clyde? Secondly, would he confirm or deny that the taking on board of the Irish Shipping Company orders—four bulk carriers at £13 million—will result in substantial losses being taken on board by the new company? How does he presume to compensate the company for these orders?

Mr. Davies

I can but agree with the hon. Member that what is taking place is a painful restructuring, but it is also a belated one, if I may say so. The losses which Govan Shipbuilders might incur as a result of taking on the Irish Shipping Company orders are, of course, a very real problem and will figure as part of the whole financial project which Govan Shipbuilders will have to put before the Government when it puts its proposals up. The hon. Gentleman's remark, of course, underlines the fact that these, as other ships in the order book, were loss makers and are loss makers. Therefore, that more than ever emphasises the fact that U.C.S. was a loss maker—now and in the future.

Mr. Wingfield Digby

Can my right hon. Friend assure me that the more promising prospects on the Lower Clyde are not being overlooked in the circumstances of available skilled labour, and whether everything necessary is being done to help the company to develop, including the provision of the necessary houses?

Mr. Davies

The position on the Lower Clyde is also very much under discussion with my Department and the interests of the shipbuilding industry there are very much in our minds. I think I can assure my hon. Friend that everything within the reasonable range of my Department's activities will be made available.

Mr. Buchan

Is the right hon. Gentleman not aware that in the Lower Clyde, which I happen to represent, we have an unemployment rate of between 10 and 11 per cent.? The right hon. Gentleman mentioned the 1,000 jobs on the Upper Clyde, but we cannot get these skilled men. On what basis does the right hon. Gentleman assert that the figures now show that the company would not be viable, when every single independent piece of evidence from Professor Alexander, Ken Douglas and the Shipbuilding Industry Board, which reported to him in May, all asserted that it would be viable? Will the right hon. Gentleman let us see the evidence on which he is basing this curious assumption?

Mr. Davies

I realise that there is a serious state of unemployment on the Lower Clyde, too, but the truth is that there are vacancies in the Lower Clyde shipyards for skilled professions, and the hon. Gentleman knows that this is so.

On the question of losses, or the turning into profitability, to which so much reference has been made, I recall to the hon. Gentleman's mind that Mr. Kelly, who proposed to take over the Clydebank yard at one stage, gave up because he foresaw £5 million losses. I also recall to his mind that the liquidator has made it clear that on the ships currently being built there will be substantial losses. Govan Shipbuilders Limited in respect of the ships which are currently under discussion in relation to guarantees are facing substantial losses. I find it difficult to reconcile these facts with the general statements which are made by others.

Mr. Ross

Am I right in thinking that in the agreement signed by the men and the unions the men have not withdrawn from the position that their principal aim is the continuation of shipbuilding at the four yards?

Secondly, am I right in assuming that the figures the right hon. Gentleman has given today, which, with the guarantees in respect of the five ships being built, greatly exceed anything that has hitherto been mentioned, relate only to the present and immediately past position, and that the right hon. Gentleman has not yet said what special launching aid will be required for Govan-Linthouse? Will he make it absolutely clear that Govan-Linthouse is not yet off the ground, and that it will require a considerable sum of money from the right hon. Gentleman once it is off the ground?

Lastly, I press on him, as I have done before, that he must make an effort to get a solution to the Clydebank problem. He cannot leave this town and the people there in these desperate straits. The unemployment figures in Glasgow are much less than the figures in this area. Does the right hon. Gentleman realise that the aid which he offers to any incoming shipbuilder to the area under the Local Employment Acts will not begin to meet the problem?

Mr. Davies

On the last point, I do not quite understand what the right hon. Gentleman means. The aid to incoming industry under the Local Employment Acts is, on the contrary, exceedingly substantial, providing the conditions are right to accord it.

Of course I recognise, as was said in the joint statement, that the principal aim of the unions is to seek means to preserve employment in all four yards in the U.C.S. This is in the statement which will be circulated with the OFFICIAL REPORT. Furthermore, I have said very clearly, and repeat, that I will do all I can to encourage a purchaser to come forward for Clydebank. I assure the right hon. Gentleman that he does not need to press me on the matter, the matter has been completely stated.

On the question of Govan-Linthouse not yet being off the ground, I agree with him. It is for this reason that I hope there will be the concerted effort needed to get it off the ground. This is what I have been looking forward to.

The right hon. Gentleman mentioned launching aid. It is true that none of the figures I have quoted as yet have covered any specific aid to ensure that the Govan-Linthouse project in fact emerges as a viable operation.

Following is the information:


  1. 1. The representatives of the Confederation of Shipbuilding and Engineering Unions made the following points:
    1. (a) The principal objective was to seek means of preserving employment in all four yards of the U.C.S.
    2. (b) In relation to the orders immediately needed at Govan to facilitate the establishment of Govan Shipbuilders Limited, the C.S.E.U. were prepared to give assurances as to the contribution of the work force to the timely and efficient delivery of the ships, providing the Government was prepared to give the requisite guarantees to the ship owners in question, and providing the liquidator was prepared to set in hand work on those orders.
    3. (c) As soon as the arrangements envisaged in (b) above had been made they were prepared immediately to enter meaningful negotiations regarding working practices, 735 wage rates etc., with Govan Shipbuilders Limited. These negotiations would cover the operation of the Govan and Linthouse yards and would be extended to cover Scotstoun as well, providing the feasibility study showed the inclusion of the last-named yard to be in the economic interest of the whole project.
  2. 2. Mr. Davies agreed in view of the undertakings given by the representatives of the C.S.E.U. to seek urgently to finalise negotiations with the ship owners in question with a view to reaching agreement upon the guarantees required to secure the confirmation of the orders above referred to. He welcomed Mr. McGarvey's assurance that in these circumstances talks would quickly begin to secure the establishment of Govan Shipbuilders Limited.
  3. 3. It was furthermore accepted that the Government and the C.S.E.U. would make every effort to encourage a purchaser for Clydebank Yard and that such purchaser would be eligible for substantial financial assistance under the Local Employment Acts. The C.S.E.U. considered that this would create a proper climate for the meaningful discussions with Govan Shipbuilders Limited.



Details of Financial Commitments and Liabilities Undertaken in Relation to Upper Clyde Shipbuilders since 14th June, 1971:


1. Payments made to the liquidator total £4 million of which approximately £2.7 million is recoverable. It has been agreed that up to a further £1½ million will be made available as additional working capital.


2. In respect of four ships now being built with the aid of a bank loan guaranteed by the Department under Section 7 of the Shipbuilding Industry Act, 1971, an undertaking has been given that if the ships are not delivered by certain dates, the Department will relinquish its right to recover from the shipowners any payments it may be called upon to make under the guarantee.

3. A guarantee similar to those under Section 7 of the Shipbuilding Industry Act 1967 has been given to another ship-owner in respect of one ship. A guarantee offered in February 1971 had not been completed at the time of liquidation and, since the Act precludes a guarantee if the ship-builder is in liquidation, an extra-statutory guarantee was necessary. The maximum potential liability which is estimated at £2.49 million will count against the present limit of £700 million for guarantees under Section 7 of the Act.


4. Expenditure and commitments have also been incurred on consultancy and advisory services totalling less than £100,000.