HC Deb 22 July 1974 vol 877 cc1060-71
The Minister of State, Northern Ireland Office (Mr. Stanley Orme)

With your permission, Mr. Speaker, and with that of tile House, I wish to make a statement on Harland and Wolff, on behalf of my right hon. Friend the Secretary of State, who is at this moment in Northern Ireland, where he will be speaking to representatives of the firm's management and labour.

The firm is facing increasingly serious financial difficulties. The right hon. Member for Cambridgeshire (Mr. Pym) informed the House on 21st December 1973, before the completion of detailed discussions with Harland and Wolff, about proposals to provide further financial support to the company. My right hon. Friend investigated the matter in March 1974.

Subsequent discussions revealed the company's continuing inability to meet its production targets and the inadequacy of the previous proposals for providing it with further assistance. Revised figures were received on 5th July this year. The financial consequences of these are quite clear. If the company is to continue trading, further Government financial support is required urgently. The amount involved, which cannot yet be calculated precisely, is likely to be very substantially in excess of that considered necessary last December. The proposal then was that £10 million of debt owed to the Government should be replaced by the issue to the Government of shares, and that the Government should provide guarantee facilities for up to £10 million as needed up to the end of 1976.

Harland and Wolff occupies a unique place in the Northern Ireland economy. It is the largest single manufacturing employer, providing between 5 per cent. and 6 per cent. of all jobs in the manufacturing sector. Since 1966 the company has received financial assistance totalling £68 million from both the United Kingdom and the former Northern Ireland Governments, by way of standard and special grants, loan and equity participation.

It is against the special Northern Ireland background that the Government's proposals for dealing with the present situation should be viewed. The Northern Ireland Department of Commerce already holds 47.6 per cent. of the company's equity. With a view to providing additional finance and in order to bring about the changes which the Government believe to be necessary, we have decided to extend that holding.

This will be achieved, subject to the approval of the shareholders, by the acquisition of additional shares in the company to give the Government a substantial majority in an expanded equity; this will be effected under Section 7 of the Industry Act 1972. It is not envisaged that this will involve acquisition of shares from existing private shareholders.

The Industrial Development Advisory Board has been informed of the general situation. Because of the urgency of the matter, we are adopting this relatively simple course, but the possibility of proceeding to full public ownership in Northern Ireland at a later date is not precluded. Meanwhile, we shall have a large enough stake to ensure control. Initially, the additional equity will need to be held by Her Majesty's Government, but it is clearly most desirable that in the longer term the responsibility for this Northern Ireland registered company, which is such a prominent feature of the Ulster economy, should rest completely in Northern Ireland. The detailed arrangements are being worked out in consultation with the company and its advisers, and I would hope to report further to the House in due course.

The Government intend that there shall be a comprehensive review of Harland's management structure and resources, a full examination of the order book, a temporary moratorium on any new shipbuilding orders, strenuous action to reduce overheads and the implementation of realistic manpower policies and training arrangements capable of securing any necessary increase in the labour force in a manner compatible with the manpower needs of the rest of industry in Northern Ireland and with the untapped resources of the Northern Ireland labour market. For example, it will be important to increase greatly the volume of apprentice training in order to ensure a succession of skill in the yard and spread the opportunity for the acquisition of skill more widely within the community.

To achieve these changes and improvements we need to advance towards genuine worker participation in all the decision-making processes of the company. I have already talked at length to management and unions, and it is my intention, in consultation with the management, the shop stewards in the yard, the Northern Ireland trade unions and the TUC, to consider full participation in management by representatives of all employed in the firm. I shall begin the detailed discussions tomorrow in meetings with the 200 or more shop stewards in the yard and with a similar number of men from the middle management of the company, I am convinced that if we can achieve this participation in management, along with a return to full free collective bargaining, we shall be laying a solid foundation for the introduction of whatever measures are needed to obtain the increases in productivity which are essential to the company's survival. Comprehensive machinery will be instituted to monitor progress in implementing all these developments.

I emphasise to the House that this is a rescue operation. The consequences for Belfast and Northern Ireland of allowing the yard to close, as it would have to do if the Government did not intervene, would be disastrous. Nevertheless, this must not be regarded by those working for the company as an open-ended Government subvention. This is being done for the sake of Northern Ireland, and the only way it can be done is by finding, to the extent necessary, compensating offsetting savings in public expenditure from within the Province. These will be achieved without departing from parity in the cash social services and without detriment to the Government's social and economic objectives for the areas of especially severe unemployment.

While earlier expectations in regard to the performance of Harland and Wolff have not been fulfilled, the modernisation and re-equipment programme has proceeded apace and the shipyard is now one of the best equipped in Europe. It remains to harness the skill, pride and latent enthusiasm of all those employed in the firm to achieve the immense potential of the undertaking.

Mr. Heseltine

The House fully understands the presence of the Secretary of State in Northern Ireland. My right hon. Friend the Member for Chesham and Amersham (Mr. Gilmour) asks me to apologise to the House for his absence in Northern Ireland.

We understand that in the special circumstances of Northern Ireland the Secretary of State had to seek political solutions, and it is against that background that what the right hon. Gentleman had to say must be judged. As the Government have been so deeply involved during the past few years, why is it impossible for the right hon. Gentleman to give more detailed figures of the sums of money that are to be committed? Secondly, does it not show a lack of commercial foresight to impose a total moratorium on all future orders for the yard, regardless of the conditions and terms upon which those orders might be offered by potential customers? Thirdly, the right hon. Gentleman referred to certain economies that will take place in Northern Ireland to compensate for this additional expenditure. Would it not be appropriate for him to spell out now the areas in which the Government are seeking to make those economies?

Mr. Orme

I thank the hon. Gentleman for what he said and for not seeing fit to compliment the Government on using the Conservative Government's Industry Act. We have found the Act extremely useful in the difficult circumstances that face us.

The hon. Gentleman asked about the sums of money involved. As I said, the full calculations of the amount of money involved are not yet available. We had a remit from the company as late as 5th July. We inherited this situation, and the previous Government must have been aware of the difficulties the yard was in at that time. The previous Government promised a subvention of about £10 million in December if that should be necessary. Unfortunately, it is necessary. Without damaging the prospects of the company by giving figures that might not be absolutely accurate, I can say that the sums of money involved are far in excess of those I have given to the House. That is how serious the situation is.

There is a full order book. I could give details if the hon. Gentleman wants me to do so, or I could put the details in the record. There are orders for about 19 ships amounting to about 2½million tons. That is sufficient if there is an increase in the steel throughput, which is the crucial factor. In 1972 the steel throughput was running at about 90,000 tons a year, and it is now running at 60,000 tons per year. One can see the problems that face the unions, management and the people of Northern Ireland. Having talked to the unions and management, I am convinced that that throughput can be dramatically increased, and I know that the workpeople are prepared to co-operate in securing that increase.

The moratorium on the shipbuilding does not apply to the engine works, which, as the hon. Gentleman probably knows, sells engines separately, apart from making them for the yard. The engine works has orders from the United States, Japan and South America. It has a good order book and a good record of meeting commitments. We want to bring the yard up to the standard that exists within the engine shops.

The hon. Gentleman asked where the economies will be made. The Government felt that the expenditure might appear to people in Northern Ireland as an open-ended commitment and that Northern Ireland should take some responsibility for this. Therefore, there have to be cuts in certain Government expenditure in Northern Ireland to cover it. These matters are now being discussed. The cuts will not be made in the social services or in areas of high unemployment, but fuller details will be given when they have been worked out.

Mr. Craig

No one will dispute the need to mount a rescue operation. On behalf of all Northern Ireland Members I congratulate the Government on their willingness to do so. We regret that there is not sufficient information to enable us to pass judgment on the need to economise. We accept what the Minister says and we thank him for his readiness to help.

Mr. Orme

I thank the right hon. Gentleman for what he said. The Government are not hiding the figures. The seriousness of the situation is apparent to all. It will be possible later to give full figures, and people will then be able to judge the economies that will be needed in Northern Ireland. The figure I have given is not a false figure.

Mr. McNamara

I congratulate my right hon. Friend on his use of the Industry Act 1972 in mounting this operation. Government supporters welcome the full extent of his statement, in terms not only of the discussions he is having with all the people employed in the firm but of worker participation in the running of the industry and also of the opening of employment prospects in the industry to people to whom it has been denied in the past.

Does this decision mean that there will be a change in the nature of the craft at present being built by Harland and Wolff? Does it also mean that we shall have from the Minister itemised accounts of where cuts have been made to meet the increased expenditure on Harland and Wolff? Finally, will the Minister give us an assurance that he will throughout go hand in hand with the trade unions of Northern Ireland?

Mr. Orme

I thank my hon. Friend for his remarks. There will be no need to change the nature of the craft being built. There is pressure away from large tankers towards much smaller medium-sized tankers because of the oil situation. That has already been anticipated at Harland and Wolff, which has a large number of smaller tankers on order.

I welcome what my hon. Friend said about training. I had nothing but cooperation from the trade unions when I discussed this matter with them. At present there are facilities for training about 500 apprentices. The yard has potential to train 1,500, and that will and mean drawing people from a wider area than East Belfast. I believe that the work force is prepared to accept this. By training such a large number of people we shall help other industry in Northern Ireland as well as Harland and Wolff.

My hon. Friend asked about details of the cuts that will be made in Northern Ireland. Details of those will be published, and the matter is being discussed at the moment. We have no precise details and I should not like to hazard a guess because the Ministers who are responsible for Departments in Northern Ireland have to do that job. They have to face a difficult financial situation. It is not a sleight of hand, it is a real saving, but it will be effective only as long as Harland and Wolff remains in the red. Immediately it pulls out not only will the economies stop but the profitability will go to Northern Ireland, and that will be welcomed by the people of Northern Ireland. As for the trade unions, as I said, I intend to go hand in hand with the trade union movement, and that process starts tomorrow.

Captain Orr

Am I right in thinking that largely the money for the rescue operation will come from central funds but that a proportion will come from what would normally be the Northern Ireland budget? Alternatively, is the whole of the money to come from the Northern Ireland budget? The situation is a little obscure and it is difficult to understand to what extent Northern Ireland will benefit until there is some precision on the figures.

Mr. Orme

I should have thought that the hon. and gallant Gentleman would have welcomed the fact that the yard will continue to exist. The alternative is for it to go into liquidation. That is unthinkable in present circumstances. I welcome what the hon. and gallant Gentleman said about that.

A large measure of the cost—not the total cost—must be offset against Northern Ireland's current and future expenditure. The idea behind this is to make sure that the people of Northern Ireland will know exactly what is involved.

Mr. Delargy

I remember once saying in this House that the only question one was allowed to ask on Northern Ireland was about the position in Harland and Wolff. We are back where we started. When my right hon. Friend is carrying out the rescue operation and having consultations with management, shop stewards and others, will he look into the disgraceful discrimination in employment practised in Harland and Wolff for more than 50 years?

Mr. Orme

My hon. Friend will see from the statement that the Government believe that the right way to tackle the question is in the form of genuine apprentice training which will involve people from both communities. At the moment there are not the skilled trained people in the community about which my hon. Friend is concerned. I believe that the unions are realistic in this matter and I do not believe there will be any difficulty. The matter will have to be discussed with the company, and this is part of the Government's statement.

Mr. Beith

Does the Minister agree that the rescue operation is a considerable act of faith in the Ulster workers and calls for some indication from the Ulster workers that they are prepared to put their weight behind stable government in the Province and not throw away that prospect, or future prospects, for their own yard? We welcome the commitment of worker participation in the decision-making processes, but will he spell out to the Ulster workers that this House requires genuine participation by the Government of Northern Ireland in all sections of the community and that baby and bath water are very much linked together?

Mr. Orme

I thank the hon. Gentleman for his comments. I am sure that the workers in Northern Ireland, and not least those at Harland and Wolff, will recognise from the way in which the Government have introduced the proposals that there is no idea of harking back to recent disputes. We want this shipbuilding yard to survive. It is one of the best equipped yards in Europe and its work force is among the most skilled and capable in the world. If the workers participate as we hope they will, there will be political advantages to be gained as well as economic advantages.

Mr. John Davies

Bearing in mind that the Industry Act 1972 was specifically devised to assist areas in industrial decline, surely there should be no surprise that it is used in such a case as Harland and Wolff. However, how does it come about that, the Act having been devised to use the advice of the Industrial Development Advisory Board, we are now told in the statement that it has only been informed? An essential factor of the Act was consultation, not information. May I have an explanation?

Mr. Orme

Yes. We have had so little time—[HON. MEMBERS: Rubbish."] If the Government had not acted today, the firm could not have opened today. The right hon. Gentleman gave the impression that we had months in which to take action. It took us until 5th July to obtain the latest realistic figures. We have kept strictly to the terms of the Industry Act and we have had no complaint from the Industrial Development Advisory Board.

Mr. Heseltine

If the Government had the latest figures on 5th July, what has happened between then and now to preclude their alerting the advisory board to the situation?

Mr. Orme

In that period the Government had to adopt their policies and consider what action they would take. There were other factors.

Mr. Heseltine

It is disgraceful.

Mr. Orme

It is not. The Conservative Party should not start nit-picking. The situation at Harland and Wolff fits every part of Section 7 of the Industry Act. The Government acted in good faith and in the interests of the company.

Mr. Dalyell

Could the House be told why the December forecasts seem to have gone so significantly wrong? Was this due to the fact that they were ludicrously optimistic in the first place, since what has happened seems extraordinary?

Mr. Orme

I would hate to make party political points on the statement. One of the problems was the steel throughput, together with a conflict on wages, counter-inflation policy, phase 3, and the fact that the boilermakers were unable to negotiate, which led to a blockage in the steel throughput. We are hoping to clear that situation. It is not sufficient just to take action on wages. Unfortunately, the situation has grown far more serious.

Mr. Ian Lloyd

The Government have given the House a most astonishing and alarming statement. Despite the investment of £66 million in the yard, the throughput of steel has dropped from 90,000 to 60,000 tons. Since the figure of capital investment is comparable to the investment in its most competitive yard, Kockums in Sweden, is there not a far more serious conclusion which the Government should draw from the incident—namely, that there is a distinct and possibly disastrous stranglehold on productivity being exercised by those responsible for output at Harland and Wolff? Is it not time that the country, and Harland and Wolff in particular, examined this question, because to pour in millions after millions into what was an obsolete yard and what is now a modern yard which still does not work seems questionable? What is the country to conclude?

Mr. Orme

Before the hon. Gentleman makes such remarks he should look at the yard.

Mr. Lloyd

I have done so.

Mr. Orme

He should talk to the work-people and see what is the potential of that yard. Undoubtedly, because of bad industrial relations in the past there has been a failure of communications and many other difficulties. But the important problem is the steel throughput. We are now resorting to control over the company to expand the industrial potential. I hope that the TUC's proposals for a two-tier board, involving full participation of elected representatives to run the company, will make it the pride of Europe.

Mr. Tom King

Is the Minister aware that his answer about the Industrial Development Advisory Board will not wash? Everybody knows the substantial sums of Government money involved in Harland and Wolff, and the Northern Ireland Office has a particular interest in that company. If this is an indication of how the Government monitor the situation and seek informed advice on their investment, this gives little encouragement to further actions of this kind. Is this not in direct contradiction to the statement made by the Minister of State, Department of Industry that, although there was no time to consult the advisory board on the Court Line, in any future cases the board would be consulted? But within a very short period of time we find that undertaking not being honoured.

Mr. Orme

I do not know what the hon. Gentleman is hoping to rescue from this operation. Is he saying that we should not have used the Industry Act?

Mr. Tom King

No: that you should use it correctly.

Mr. Orme

We have used the Act and we have informed the board and have had no complaint from that body. We are not obliged by law to consult but it has been informed in the proper manner. We have needed to move with speed, as was the case over the Court Line. I do not accept the hon. Gentleman's argument.

Mr. Selby

On the question of the transfer of work from Govan to Belfast, I understand that was done to increase productivity. Obviously, that move has not been successful, so who is at fault? Obviously, the management is incapable of running the concern whether at Govan or in Belfast. Surely the Government should take it all over because nobody else seems capable of running it.

Mr. Orme

The reason why the Government did not take over the yard completely was that legislation would have been needed and time was not available. I said in the statement that the Government would have a large holding in the company, and it does not preclude a 100 per cent. holding. We shall have enough of a holding to create the type of management which will be satisfactory and which will meet my hon. Friend's point.

Mr. Heseltine

May I press the Minister on the question of the Industrial Development Advisory Board. It has been said that the Government were right to become involved in Harland and Wolff. That is not the point at issue. What is important is that the advisory board should feel that it has a valuable job to do. If the hon. Gentleman reads the Act he will see that the Government are compelled to consult, and if the advisory board disagrees, the fact must be published that it did disagree. It is difficult for the House to understand why consultation did not take place. Since it is the second time in two weeks that this has happened, the Minister will antagonise people who give their time to helping the industry.

Mr. Orme

I have the Act here, and I have looked at Section 9. One does not have to consult. One is in order in asking the advisory board to advise. That is what it is there for. The board is there not to dictate to the Government but to give advice. The Government sent this information to the board and received no objection to what was proposed. I wonder why on earth the Opposition are raising this matter.

Several Hon. Members

rose—

Mr. Deputy Speaker (Mr. George Thomas)

Order. There is a lot of business before the House and we must get on.