HC Deb 23 July 1973 vol 860 cc1157-64

The following Questions stood upon the Order Paper:


To ask the Secretary of State for Trade and Industry if he will now make a statement of Government policy in respect of support for British shipbuilding, in the light of the Booz-Allen Report.


To ask the Secretary of State for Trade and Industry if he will make a statement on shipbuilding and ship repairing arising out of the discussions which have been proceeding on the Booz-Allen Report.

The Minister for Industrial Development (Mr. Christopher Chataway)

With permission, Mr. Speaker, I will now answer Questions 31 and 36.

From the consultations I have had it is clear that there is agreement among both unions and employers with the general thesis of the Booz-Allen Report that if the major firms are to survive increasing competition their weaknesses must be remedied, although the report's calculations about the decline in employment in the industry are not accepted by either side. All those consulted accept—as do the Government—the importance of shipbuilding in certain areas of high unemployment.

With the recent upturn in orders, the situation of the British shipbuilding industry, at least in the short term, has dramatically improved since the report was prepared, and there is no doubt that the industry has a unique opportunity in the years immediately ahead to re-equip and modernise. It is also in a better position than Booz-Allen envisaged to finance such modernisation schemes.

I have concluded, therefore, that the next step should be to consider under Part II of the Industry Act investment proposals for individual projects in the assisted areas, and to do so on the same basis, with one important exception, as investment proposals from other industries. Thus, although there may, as with other industries, be some cases for exceptional consideration on employment grounds, our approach will be to treat shipbuilding applications within the same guidelines and the same financial limits as are employed for all other manufacturing industry in the assisted areas.

This, of course, involves a critical appraisal of a company's management, market and product range, labour relations and practices, and general prospects of viability. It means also that the company must agree to provide full information to enable us to monitor its performance.

The normal rules for selective capital assistance are so framed as to encourage the creation of additional employment in assisted areas. As Booz-Allen makes clear, however, a big increase in output per man is a vital necessity in shipbuilding. I propose, therefore, that we should make one exception for shipbuilding to the general guidelines. We shall be prepared to give the same favourable loan terms to modernisation schemes in the assisted areas which do not increase employment as we normally give only to those which do provide more jobs. I hope shortly to be able to make an announcement under these arrangements about the first modernisation scheme which I am considering. This concerns the yards at Sunderland, which are owned by a subsidiary of Court Line.

My right hon. Friend the Minister of State for Defence has accepted the BoozAllen view that the Ministry of Defence should concentrate its orders for warships on the three specialist builders. The mixed naval and merchant shipbuilders will, however, continue to be able to tender for Royal Fleet anxilliaries and other Ministry of Defence vessels. Any application for financial assistance for the modernisation of the mixed or the specialist warship building yards in the assisted areas will be considered by my Department under the arrangements I have already outlined. I shall keep the House informed of the progress achieved.

Mr. McMaster

I welcome my right hon. Friend's report and his rejection of the excessive pessimism in the BoozAllen Report. Will he, nevertheless, because of the importance of employment in the areas concerned and the importance of heavy capital industry and the continuing prosperity of the shipyards, expedite his final decisions on the report? Has the rationalisation which was recommended by Geddes been completed? Is there further scope for rationalisation in view of the intense competition from Japan, in particular, whose yards were built up under a protective tariff?

Mr. Chataway

A considerable rationalisation has been carried out since the Geddes Report. I would not rule out the possibility of further moves in that direction. I agree with my hon. Friend that we must always take into account the fact that 90 per cent. of the shipbuilding is situated in the development areas.

It will be important to arrive at as early decisions as we can in relation to some of the modernisation schemes, as clearly there is at present a particularly favourable situation for securing orders overseas. None the less, the House should not underrate the size of the task of looking in detail at a number of major projects, and it may well be a year before decisions have been reached in all the major cases.

Mr. Dell

Can the Minister now say in what form he intends to put capital into Cammell Laird? Can he confirm that he does not expect any decline in employment in that shipbuilding yard?

Mr. Chataway

There have been very difficult negotiations about the form in which the support should be put into Cammell Laird and the nature of the capital reconstruction. These difficult negotiations derive from some very complicated provisions which were arrived at in 1969 and 1970. I hope that we shall be in a position finally to clear that up before too long.

It is certainly not the company's view that there should be any significant number of redundancies.

Dame Irene Ward

I thank my right hon. Friend very warmly indeed for all the trouble that he has taken to consider the Booz-Allen Report and all its implications. Since I am technically in no position to comment today on what he said, when the House comes back after the recess, if there are any points or comments about his statement that have been made by the shipbuilders and the shipping and ship repairing people, either for the assisted areas or about shipbuilding in general, will he then use his good offices to let us have a debate on the whole of the policy that he announced, in view of the fact that various parts of the country must have different attitudes-[Horn. MEMBERS: "Too long".] I know that hon. Members opposite are not interested in what the Minister said. May I know that I shall be able perhaps to have a debate when the House reassembles? I thank my right hon Friend very much for all that he has done.

Mr. Chataway

I know that my right hon. Friend the Leader of the House, who is present, has taken note of what my hon. Friend said about the desirability of a debate. I much appreciate what she said and I recognise that she is right in regarding my statement as perhaps one about procedure. I shall, by the most suitable means, try to keep the House informed as we make further progress.

Mr. Robert C. Brown

Will the Minister resist the temptation to ignore Swan Hunter just because at present it has a good, long order book? It is now that it needs some money to modernise to face the rigours of the future, particularly in relation to the former Vickers dry dock, which his right hon. Friend murdered in the name of the lame duck policy immediately after the last election.

Mr. Chataway

I agree that it is very important that the industry should not think that, just because order books are now long, the problem has been solved. That perhaps has been an attitude too frequently adopted in the past. The hon. Gentleman might reflect that he would help the process of speedy modernisation if he persuaded some of his right hon. and hon. Friends who are responsible for policy formulation in the Labour Party to drop their nationalisation proposals.

Mr. S. James A. Hill

How will the shipyards outside the assisted areas, such as Vosper, Thorneycroft in Southampton, which is building warships in competition with yards which are getting the full benefits of any aid that the Government may provide, benefit from my right hon. Friend's statement today?

Mr. Chataway

The shipyards outside the assisted areas, of course, get the benefit of construction grants and shipbuilders' relief. I am referring particularly to merchant shipbuilders outside the assisted areas. But it would not be right to give to yards outside the assisted areas the kind of assistance that is specifically reserved for industry within the assisted areas and which is given for employment reasons.

Dr. Dickson Mabon

Does the Minister realise that many members of the all-party shipbuilding group in the House who came to see him did not accept the reference to a decline in employment in shipbuilding? Would the Minister assure us that, in considering the applications that are being put forward to him-for example, by, in my constituency, the Scott Lithgow group-he will not use as a rather dull and pessimistic criterion the approach that he does not want to increase employment in shipbuilding? Will he confirm that, in the second stage of his consideration, he will process these applications as speedily as possible, and certainly this year?

Mr. Chataway

I shall certainly ensure that we process these applications as speedily as is consistent with giving them a thorough scrutiny. Naturally, I want to see as many people as possible employed in viable shipbuilding firms, but we must take account of the recommendations of the Booz-Allen Report in relation to the need for much higher productivity in shipbuilding.

Mr. Edward Taylor

My right hon. Friend referred to the upsurge in shipbuilding orders in our yards. Has he made any assessment whether, over the next two or three years, these orders will prove generally profitable? Could he also say whether he has made any assessment of the progress being made by Govan Shipbuilders, which appears on the face of it to be very encouraging?

Mr. Chataway

I think that considerable progress has been made by Govan Shipbuilders and it would be right to say that, over all, shipbuilders are considerably more optimistic than they have been at many times in the past about the likely profitability of the orders that they have been able to win over the last six months.

Mr. Willey

On behalf of the all-party delegation which met the Minister, may I thank him for making this statement before the recess, as he promised? Would he make a statement also on the progress made in the discussions on the European aspect of aid to shipbuilding? May I be assured that he will get a very early decision now in the case of the Doxford yards? Also, what is the position of Austin Pickersgill?

Mr. Chataway

I am aware that the European Commission has begun to consider the possibility of a Community shipbuilding policy. We are ready to join in discussions on such a policy and to review our own plans in the light of any agreement which might emerge. But it is not clear at present what form such a policy would take, and it would not be right to delay these decisions to await the outcome of discussions which may take a long time.

Mr. Ian Lloyd

Does my right hon. Friend realise that some of us find his statement a little disturbing? What guarantee can he give that large sums of the nation's capital will not continue to be poured into yards which in the long term have absolutely no hope of competing with yards abroad? Can he give us any indication whether, on the more positive side, some of the nation's capital will be made available for new greenfield sites which have some hope of competing?

Mr. Chataway

The purpose of commissioning the Booz-Allen Report was that the difficulties, the weaknesses and the strengths of the British shipbuilding industry could be laid out for the industry itself and this House to see. We now have to look at individual proposals for modernisation on the basis of the considerable information that is contained in the report. I agree with my hon. Friend that it would not be right, and that it would do no one a favour, to put Government money into projects with no prospect of viability. It is for that reason that we should be right, I believe, to proceed as I have suggested, by treating proposals for modernisation in shipbuilding on broadly the same basis as we treat proposals for new investment in any other industry, and treating them within the same guidelines—with the one exception that I mentioned.

Mr. Benn

Could the Minister tell the House how much cash, in terms of millions of pounds, the Government have set aside through the Treasury for this support? Second, is he aware that this industry has received £171 million of public money over the last five years and that that, more than anything, explains why the TUC and the Labour Party favour public ownership? Third, is the European Economic Commission required to approve his plans and does he have agreement from the Commission for them? Finally, could he be a little clearer about the redundancies which might be involved, since employment in the industry has declined from 215,000 in 1948 to 73,000 in 1971, and Booz-Allen's lowest estimate involves a further fall to 25,000 or 27,000, which would be quite unacceptable in view, as the Minister knows, of the rapidly growing world market for ships?

Mr. Chataway

On the European Commission, my proposals are consistent with the Treaty of Rome and with the directive on aids to shipbuilding adopted by the Community in July, 1972. Therefore, individual permissions are not required on these matters. As for the final cost and the final employment figure involved in reshaping the British industry, clearly one cannot at this moment make estimates, because they depend upon the vigour-[HON. MEMBERS: "Why not?"] They depend upon the vigour with which the industry responds to the Booz-Allen Report and the proposals that are put to us for modernisation of individual yards.

As for the right hon. Gentleman's observations about nationalisation, 1 found at least one thing strongly to commend in the proposals that he put forward the other day. That was the exemption of the Marathon Shipbuilding Company from his nationalisation proposals, on the ground, I gather, that it has injected capital and expertise into an area. I only hope that that concern for an American company may in time extend to one or two British companies.