SHIPBUILDING INDUSTRY

HC Deb 29 July 1976 vol 916 cc949-78

Mr Peter Viggers (Gosport)

I beg to move Amendment No. 239, in page 75, leave out lines 15 to 17.

Mr. Deputy Speaker

With this we may take the following amendments:

No. 240, in page 76, leave out lines 26 to 29 and insert '15,000 gross tons'.

No. 241, in page 77, line 38, leave out 'except in the case of a warship'.

No. 242, in page 77, line 43, leave out from 'registered)' to end of line 2 on page 78.

Mr. Viggers

The effect of these amendments will be to delete from the Bill the names of three warship manufacturers, Vickers Shipbuilding Group Limited, Vosper Thornycroft Limited and Yarrow (Shipbuilders) Limited.

Whatever the case for the nationalisation of some parts of the aircraft or shipbuilding industry, the warship manufacturing industry has special factors. Vickers, at Barrow-in-Furness employs 13,000 people. Yarrow operates on the Clyde, and Vosper Thornycroft employs 7,000 people at Woolston, near Southampton, and at Cosham, near Portsmouth.

Warship manufacture is highly specialised. The basic cost of the vessel in substantially final form is normally only half or two-thirds of the total cost, which includes the weapon packs.

The warship manufacturers engage in design and construction and work with the customers in producing highly specialised vessels. The three yards that I have named are designated by the Royal Navy as "lead yards" for design and construction. This means that they not only design the ships but are instructed and authorised to carry out the construction of first-of-line vessels. This is extremely important, as close technical co-operation is needed during the period of construction. It is normal for the customer, be it the Royal Navy or the overseas customer, to place a team with the manufacturer during the period of construction, and the design evolves in that period. Often expensive changes take place in design during the period of construction. Immediate and important decisions, involving large amounts of money, are frequently needed to be taken at short notice by the warship manufacturer during the period of manufacture. Anything that damages the close local control of the warship manufacturers will be damaging for the industry.

Manufacturers of warships have an exceptionally successful export record. Vosper Thorneycroft alone has exported 60 different orders to 29 different countries totalling about £300 million in value since 1960. It attributes that achievement to expert and flexible management, working with a skilful and willing work force, and to a strong team of designers of wide experience who rapidly and convincingly produce the designs of the ships that their customers require. In other words, it is a team effort. It tends to be a happy industry. It is hard working and has a good labour relations record.

Thornycroft has won a record number of Queen's awards to industry. Its turnover since 1966 has risen from £6½ million to £57 million a year. Its profit has risen from £400,000 to about £4 million this year. About 70 per cent. of its products are exported. However, the Government propose to pay only £4 million in compensation when they nationalise that company.

The important point about warship manufacture is the range of customers especially overseas customers. The Vosper Thornycroft record is impressive It provided four cruisers for Brazil, a corvette to Ghana, three fast patrol boats to Kenya, 24 fast patrol boats to Malaysia and two destroyers to Iran. The geographical spread of customers is mirrored by the political backgrounds of the régimes to which they are being exported.

I address my remarks especially to those who feel that a delicate conscience should govern the decision whether a building should take place. There are large numbers of countries to which orders are exported, the régimes in control of which may well not be approved. With the Government now seeking to bring increasing trade union involvement into management, I must ask the people working for the companies, through the Minister, whether they feel that their livelihood and the work they do should be under the possibly prejudicial hand of people who will seek to use political pressure to stop an order being fulfilled.

There is another point of importance. The Minister of State will be well aware of this. There are currently being built in different yards in this country warships that are intended for customers who may be mutually antipathetic. I shall not name names; it would be inappropriate and harmful for me to do so; but there are orders in hand in different companies whose destinations are countries the régimes of which might not agree, and where the ships might be used against those manufactured by another company.

Again, I must ask the people working for these companies, through the Minister, whether they feel that it would be damaging for the industry to be nationalised so that there was only one company where it would be difficult for manufacture to take place for different countries unless all the countries which were customers were happy with each other. The Minister will take on board that point. He knows that orders would have been lost if the industry had been nationalised.

The effect of central control on the direction of orders would be disastrous in this industry. Vickers and Yarrow both operate in areas where unemployment is higher than in the Portsmouth and Southampton area. The temptation that a Government would find politically impossible to resist would be for the diversion of orders from an area of comparatively low unemployment to an area of higher unemployment. Indeed, that has happened. Already the Government have placed orders with Swan Hunter, despite the clearly stated policy of concentrating ship manufacture on the three main designated yards.

Mr. John Evans (Newton)

Does the hon. Gentleman not recognise that since before the turn of the century the Tyne shipbuilders have turned out some of the finest warships that have ever been built for this and many other countries? Does he recognise the insult that he pays to the shipbuilding workers of the Tyne when he suggests that they do not have the capability or the skills to build warships of the highest class, from frigates to battleships, if necessary?

Mr. Viggers

I did not say the words that were attributed to me by the hon. Gentleman. Nor was I seeking to deprecate the activities of Swan Hunter, which I am sure is a first-class yard. Since the Booz-Allen report it has been clearly stated Government policy that warship manufacture will be concentrated on three main warship manufacturers. On that basis, those three manufacturers have built up their productive capacity. The Press report in which the announcement was made of the Swan Hunter orders made it clear that the Minister announced the Swan. Hunter orders after receiving a delegation of six Labour Members of Parliament. The Government will beyond peradventure be subject to intense political pressure to divert orders from the three main designated manufacturers to other areas where they would like the orders and the work.

Let each firm stand alone in terms of orders and let it compete fairly. Above all, for the sake of export orders, let not the industry be nationalised with the possible risk of diversion of orders from highly successful companies to those which have not been so successful in winning orders. The manner in which nationalisation control will be exercised also causes us alarm. I cite the example of the British Steel Corporation and its failure to take decisions on Shotton and Port Talbot. This is a record of dither and delay, which is clearly attributable to the nationalised industries.

Decisions are taken for the wrong motives. There is clear evidence of favouritism in yielding to special pressure, whether in Scotland, Wales, or even in Kingston upon Hull, when hon. Members sought to bring pressure so that orders were placed there. There is a clear need for a Government who act on behalf of all the people.

A special point is involved in warship manufacture. The Admiralty has a proud and jealous record of its own developments of projects. There is a catch phrase used in industry—"not invented here". If a project is invented by the Admiralty it is more likely to obtain ready backing. If the design is thought up somewhere else, it is uphill work to develop the project.

6.30 p.m.

Many of the brightest and most innovative ideas in warship manufacture were "not invented here" from the Admiralty's point of view and the ideas win through only because of the persistence and enthusiasm of the individuals and firms that develop them. This takes not only enthusiasm but money from the firms, and if the dead hand of nationalisation should fall on the industry, "not invented here" will become an article of faith.

Nationalisation will not allow small firms to fritter away their resources on individual projects. There will be a central planning agency and "not invented here" will become the spirit in which it will work. Anyone running a nationalised industry will be obliged to impose a planning policy to cut out a large amount of development by smaller firms.

Mr. Kaufman

The hon. Gentleman has not listened to a word that has been said about decentralisation. If he had taken the trouble to read our amendment, which the House approved, he would know that all the speculations in which he has indulged are utterly without foundation—but, then, the hon. Gentleman has not been here before this amendment.

Mr. Viggers

The Minister's last point is not true. He feels that the amendment will settle the matter, but I throw back at him the record of the British Steel Corporation and the deplorable statement by the Secretary of State for Industry on the failure to reach a decision on Port Talbot. Forget amendments: the Government must stand on their record, and it is pretty deplorable.

The awkward squad who want to develop new ideas and push through proposals which do not fit in with the Admiralty thinking will get in the way in a nationalised industry and may find it more attractive to work elsewhere rather than in an octopus spawned by the Government.

The financial record of warship manufacturers is outsanding. Vosper Thorneycroft has a magnificent record not only of profitability but of investment. Shareholders' funds increased from £12.9 million to £19.6 million last year, of which £4.9 million was accounted for by the revaluation of fixed assets, but a substantial amount resulted from the reinvestment of profits, which has been company policy for some years.

Warship manufacturers do not want or need nationalisation. One is forced to the conclusion that the Government are nationalising the warship manufacturers to balance and pay for the nationalisation of the other shipyards that need Government help. Nationalisation will reduce local control and flexibility. There is no reason for it, and it will do nothing to improve profits or investment.

Overseas customers like dealing with individual firms. They like our manufacturers, and this leads to orders, which lead to jobs. I am surprised that the hon. Members for Portsmouth, North (Mr. Judd) and Southampton, Test (Mr. Gould) who have Vosper Thornycroft workers in their constituencies, are not here. No doubt they are engaged in important work elsewhere.

The nationalisation of warship manufacturers will cause a loss of jobs to the nation. For the manufacturers in general and Vosper Thornycroft in particular, it will lead to a diversion of profitable enterprise and employment to other less successful yards.

Mr. W. E. Garrett (Wallsend)

I agree with the hon. Member for Gosport (Mr. Viggers) about the products of the Vosper Thornycroft group. It makes a wide range of fighting ships which are sold all over the world, and has a record of construction and design that is second to none.

However, I feel that the hon. Member was being too pessimistic about the role of the warship building industry under the new corporation. None of the places that he mentioned has naval design teams as large as those in the North-East, particularly in the Swan Hunter group. That team had to work hard, on a competitive basis, to secure the recent orders for the group on the Tyne.

I confess that I was one of the hon. Members who lobbied the Minister responsible for defence procurement in an attempt to obtain the contracts. We were successful not because of political favour or lobbying but because it was known that the design team in the group was there at the right time and the right price, and that the yard could start work immediately on these highly sophisticated ships.

Countries all over the world have a high regard for the construction of British naval vessels. I do not think that nationalisation will diminish their enthusiasm for placing orders here. Most would even go to a totalitarian country if it provided the right ships at the right price. These countries will continue to come here whether the yards that we are discussing are included in or excluded from the State corporation.

I also wish that the hon. Members for Southampton were here, but I can assure the people in Vosper Thornycroft, in the Southampton area, and those in Yarrow, on the Clyde, that there will be plenty of work in naval construction, not merely for our own Navy but for others, and that even under a State corporation there will be a high level of competition. There will be an improvement in the capability of obtaining orders, because there will be much more research into the design of vessels. This research is already operating in some spheres. There is no need for gloom or worry. The naval side of the industry has a bright outlook.

My hon. Friend the Member for Newton (Mr. Evans) is more expert than I on shipbuilding and he will confirm that the workers, management and designers in the new corporation will be good enough to get out and win orders.

Miss Harvie Anderson (Renfrewshire, East)

I support the amendment, and shall wish to emphasise some of the remarks of my hon. Friend the Member for Gosport (Mr. Viggers).

I should like to say first to the hon. Member for Wallsend (Mr. Garrett) that other shipbuilders can of course build warships, but the three yards with which we are concerned in the amendment do not construct any merchant ships. They are specialist warship builders. They are in a different category from other yards, and nationalisation is likely to damage the essential service that they give to our national defence effort and to exports.

Warship building is a very specialised type of shipbuilding, requiring large design teams and quality control and sales organisations quite beyond those needed in the less specialised sector. It is a special part of the industry, and there are good reasons why it should not be nationalised.

The first reason is especially important at present. About 60 per cent. of all orders for naval vessels placed by foreign governments come to Great Britain. This important contribution to our balance of trade surely cannot be overlooked by the Government.

It is questionable whether foreign Governments would be as willing to place orders with British State-owned yards as they are with British companies. We have to remember that the commercial basis of and the secrecy built into contracts is a factor of which foreign Governments must take account. It is obviously essential to incorporate foreign equipment in warship design where overseas governments place orders. This must be a matter of the greatest possible secrecy to the Governments concerned. They must have complete confidence in that secrecy being maintained by the firms with which they place contracts. They need not necessarily wish our own Government to be aware of the full detail.

My second point is to draw attention to the progressive and continuing improvement in the volume and profitability of export sales. We have to remember that warship building was isolated or drawn away from the rest of British shipbuilding at the time of the Booz-Allen Report. It seems to me likely that there will be an increasing need to rely on exports than there was in the past.

Let me try to make that more plain. In the recent Defence Review, it seemed to some of us that the resources available for warship building or for maintaining employment in warship building yards were not to be very high and that there would be considerable concern about whether sufficient resources were available to maintain our own defences on what was believed to be the necessary level. If that is true, Government supporters cannot have it both ways. If they believe it right, in expenditure cuts, to reduce the amount of money spent on defence, they cannot then expect full employment in our warship building yards.

That brings me back to my first point, which is that the 60 per cent. of export orders that we now complete in our British yards will have to be increased still further. Therefore, consideration for foreign Governments placing orders here is perhaps higher than it has ever been since the 1920s. I hope that hon. Members who take a different view from me on defence will remember that.

I come, then, to my third point. In supplying the Royal Navy, the Government would be trading with themselves. I recall using the same argument in relation to former efforts at nationalisation.

I have never thought it a very good idea to have no competition between the person placing the order and the person making the goods. It will be said that as there are such massive grants it does not really matter, but I do not accept that. I think that there is room for considerable competitive spirit between orderer and builder. In trading with themselves, the Government are likely to damage the economic sense of the business, as there is not the same imperative need to arrive at realistic contracts.

Perhaps I can divert for a moment and illustrate what I mean by discussing briefly the position between the present Government and Govan Shipbuilders. It is well known, from exchanges in this House in recent weeks, that contracts have been taken on at a wholly uneconomic rate from a foreign Government in order to sustain employment. It may be that that has merit in cases where the situation is as bad as it would have been in Govan Shipbuilders had we not obtained these foreign orders from Kuwait, but the three yards with which we are dealing in this amendment are not in that position; they are in precisely the reverse position. They are earning for the country valuable contracts and they are carrying them out profitably, to the benefit of the country.

6.45 p.m.

In nationalisation, damage will undoubtedly prove to be caused, amongst other factors, by the removal of control from the man on the spot who is in the yard to the distant policy-making body. On this amendment you would not allow me, Mr. Deputy Speaker, to rehearse any of the arguments already put forward about distribution, to which the Minister of State referred. But, as my hon. Friend the Member for Gosport said earlier, we have very little faith in the breakdown of huge corporations. The Minister of State will have achieved a miracle which even he might be modestly hesitant to recommend at this stage if he thinks that, through the shipbuilding corporation, he will achieve the breakdown of bureaucracy which we have not seen so far in nationalised industries.

There will also be a slowing down of technological advance. This is a very important factor. Throughout our long debates on this Bill, questions have been asked about the way in which such matters would be handled, and whether each yard would continue to do its own research and development. But we are not really assured, because the Minister of State simply does not know. In this respect, he is in the happy position of being able to shrug his shoulders and point out that there is a corporation building up. My point is that it will probably build up much too large and be a much more substantial body than we want to see.

It is clear that the Government want to retain the profitable part of our industry—as profitable as it is now. I have heard Government supporters express the view that they wish to nationalise industries that are profitable because to date they have been able only to nationalise industries which, broadly speaking, are unprofitable. I have pointed out before that our shipbuilders—especially our warship builders and, in this case, Yarrows—have already had the experience of being taken into the amalgam that dragged them down from profitability. They have now regained a remarkable degree of profitability, and in no way will I support their inclusion in the nationalisation provisions. The three warship builders that we are considering have had quite sufficient changes in recent years. A further change at this stage would be very damaging. Once again they would be amalgamated with merchant shipbuilders which, throughout the country and throughout the Western world, are having a very difficult time.

I shall not go further into the question of the profitability of our warship builders, but, as I have said, there are considerable national assets in their success, in terms of advantage to our balance of payments. My hon. Friend the Member for Gosport spoke of the investment made by Vosper Thornycroft. We have also to consider the investment made by Yarrows. Government supporters tend to concentrate their interest on the grants which have been made to the yard. However, apart from those grants and apart from the naval construction orders, the firm of Yarrows has invested many millions of pounds and now has an extremely up-to-date yard. That is no doubt due in part to Government grants, but part is due to the investment of considerable moneys from the firm's own resources. It cannot be charged with earning profits on money paid over to it in grant form.

I have said before, as I said 10 years ago in this House, when the first amalgamation was suggested after the Geddes Report, that we simply cannot strengthen the weak by weakening the strong. We have this tiny element of strength within the British shipbuilding industry. All I am asking the House to do is to support these amendments, so that the strong shall retain their strength and be the national asset that I believe them to be.

Mr. John Evans

I shall not detain the House long on those amendments because, frankly, I am amazed by them. I should very much like to know whether the hon. Member for Tynemouth (Mr. Trotter) is supporting these amendments or wishes us to oppose them. To be honest, I am a little doubtful whether I should go into the Lobby with the Tory Party and support it on these amendments.

We have not actually faced the consequences of what would happen if the Government were to accept this amendment or were defeated on a vote on it; because the hon. Lady and others opposite have spoken of political pressure being used to persuade the Government of the day to transfer naval orders from Yarrow, Vickers and Vosper's to areas like Tyne and Humberside. If these firms were not taken into public ownership or were left out of public ownership, the political pressure on a Labour Government would be absolutely intolerable because the whole northern and Scottish groups of MPs would be pressing them constantly to ensure that Royal Navy orders were placed in publicly-owned yards. Rather than saving the yards by taking them out of public ownership, I suggest we are threatening them very much by suggesting that they should not be taken out of public ownership.

In considering the question of orders for the Royal Navy I recall serving a part of my apprenticeship in a warship, the "Albion", and I know a little about warship construction. I well recall that that ship was in Swan Hunter's so long, because of constant changes in design. that some apprentices—fitters, boilermakers, painters and electricians—served their entire five-year apprenticeship on it. It was said that when the ship finally left the Swan Hunter yard the band played "Will ye no come back again?". Those who have some knowledge of warship construction will know that it is the fattest, healthiest, most profitable form of shipbuilding order one can get; because, frankly, tender prices for warship construction are meaningless. As has been said here, design changes almost weekly, sometimes even daily, so that the tender price is quite meaningless, and there is is always a fat profit to be made on warships.

It is not surprising that companies like Vosper's, Vickers and Yarrow went over almost exclusively to warship building, which is very profitable. They have been able to invest some of their profits in modernising their yards, but we cannot lose sight of the fact that those profits came largely from the taxpayer, because in the main it is the taxpayers who are placing the orders. I recognise that these firms have export orders, but I am making the point that the backbone of the yards and their prosperity have come from orders from the Royal Navy, and not only warships in the accepted sense but fleet oilers and other Ministry of Defence vessels, orders for which have been placed with these yards.

People on the Tyne—and I now represent a Mersey constituency—could not understand why we did not get a fairer crack of the whip on Ministry of Defence orders for warships. In the unlikely event of this amendment succeeding, that will be greatly welcomed by some shipbuilders in other yards because I say here in this House that undoubtedly we shall use maximum political pressure on the Government to transfer orders for these yards, if they are not publicly owned, into publicly-owned industry. Warship orders have always been political. It has always been the case that orders have been given or ships sent for repair to places where unemployment is heavy. That has happened constantly since particular areas were stricken with heavy unemployment.

I recall one vessel, a fleet oiler named "Iona" which was in and out of the Tyne so much that it was generally recognised it did not need a pilot or tugs and could manoeuvre itself alongside the jetty. Every time unemployment started to rise the Government of the day, whether Labour or Conservative, would send warships, fleet oilers or Ministry of Defence ships to the Tyne for repair during periods of heavy unemployment.

An hon. Gentleman opposite talked on and on about nationalisation and centralised control, and made a strong point about the decentralisation proposals involved in the Bill. These will be successful because the shipyard workers themselves will ensure that they are, but orders for the Admiralty are completely centrally controlled, because they come from Bath. Many times shipyard workers have to wait days or weeks for designs, drawings or confirmation of changes to come from Bath. To use a classic phrase, they are waiting for "the man from Bath". Therefore, when we talk of local control we are not talking of the warship building industry, because that is centrally controlled and in the main is operated from Bath. I submit to the House that it is not in the best interests of the industry to suggest that these firms should be taken out.

Finally, on the export field, it is understandable that we have built a very strong, worthwhile business building warships for the Royal Navy so that in this field the yards have acquired expertise which they can use in obtaining orders from foreign Governments. I see no danger whatsoever that any of these orders will be transferred from these yards. That is simply trying to throw a scare into my hon Friends from Southampton, who will not be influenced by it. There is no danger whatever to these yards. I expect a fairer spread of orders, but I submit that those yards which have built up expertise in this field will continue to use that expertise. I expect a fairer spread of orders throughout the British shipbuilding industry, and I mean orders for all types of ships throughout the United Kingdom; because if we are to save our industry, undoubtedly we need a national plan. This Bill will give us that, and I am sure that the prosperity of yards like Vosper's, Vickers and Yarrow will continue even more under a nationalised setup than under a private enterprise set-up.

7.0 p.m.

Mr. Neville Trotter (Tynemouth)

As my hon. Friend the Member for Gosport (Mr. Viggers) has pointed out, we are talking here of a success story. These three are among the most successful private enterprise firms in Britain. They have given the Royal Navy a magnificent fleet and they are the leaders in exports of naval vessels in the whole world. If one looks through the Fleet lists of the world one finds that throughout the whole range, from the Argentine to Zanzibar, practically all the countries in the free world build their navies or other vessels in these three yards. It is a remarkable story of good design, good ships, and, obviously, competitive prices. It is a story that has resulted in profits for these companies, and very substantial advantage in balance of payments terms for the whole of Britain.

One must start opposition to the nationalisation of these three companies, therefore, by asking what possible further advantage can come from changing an existing success story. I can see no reason whatsoever to suppose that any good can come from these three firms passing into public ownership; and all the probabilities are that this will be a story of disaster. As for the effect of nationalisation on the Royal Navy, when the Russian destroyer "Obraztsovy" called at Portsmouth it was noted that an air conditioner of Japanese make was installed in the wardroom. I do not know whether we shall ever reach the stage when the Royal Navy will have to depend on Japan for part of its equipment.

Certainly I would have thought that the effect of nationalisation on the Royal Navy's three principal specialist suppliers could only be disastrous. As my hon. Friend, the Member for Gosport pointed out, it is essential that these three companies should retain efficient independent design teams.

One only has to look at the difference between the Type 21 and Type 22 frigates. The Type 21 frigate was designed by Vosper and Yarrow. It was built on time at a fraction of the cost of the Type 22 frigate, designed by the Navy Department's team at Bath. This is just one example of private enterprise producing an excellent ship on time, and far more cheaply.

Then there is the question of cost benefit to the public. I see no way in which public ownership of yards can bring any advantage. We shall see two public bodies arguing with each other—the Royal Navy versus British Shipbuilders. In that sort of argument only an optimistic person could believe that public funds would figure very much. There would not be the keenness of discussion and negotiation there has been in the past when the question of the survival of these three yards as private enterprises was at stake. The taxpayer will find himself paying more for ships for the Royal Navy.

I do not think that hon. Members fully understand the effect of the rundown of the Navy as is being planned and executed by the present Government. On 26th April I asked the Minister of State for Defence for an estimate of the number of people engaged in the construction of warships for the Royal Navy. His answer was that there were about 20,000. On 8th April I asked for an estimate of the number of jobs which would be lost as a result of the reduction in equipment orders, particularly in the Royal Navy. He replied: The Defence Review reductions in the Royal Navy's shipbuilding programme will mean that about 11,000 direct job opportunities in the shipbuilding industry will be lost over the next 10 years."—[Official Report, 8th April 1976; Vol. 909, c. 285.] The first answer referred to 20,000 on warship building, so there is a staggering reduction ahead of warship builders as a result of the defence cuts. And that is before the last cuts, a week ago.

These three firms face very serious problems indeed for the future as a result of the Government's decision to cut defence expenditure, in the Navy particularly. Therefore, they will rely more than ever on miantaining export successes. If they are not successful in the export field there will be most serious problems, and a very substantial loss of jobs. With 11,000 jobs already at stake, we shall need to export more warships than ever before to maintain job numbers. The Minister of State seems to think that State ownership will help to increase exports. Some of his hon. Friends share that view. They must be supreme optimists of all time if they believe that. The ordinary man in the street would not agree with them for one moment.

Mr. Kaufman

Is the hon. Member aware that, under State ownership, British Leyland is the biggest exporter this country has?

Mr. Trotter

But it was the biggest to begin with, and the situation has not changed yet. British Leyland has not been going on very long under State ownership.

I am not suggesting that there will be any change in 12 months or so, but over five or six years, there could be a very substantial change in the export orders of the three firms I have mentioned. I cannot see confidence being retained by foreign Governments.

In the past we have seen the extraordinary antics of Government supporters over the countries we should supply with ships. A survey ship was built for South Africa by one of these firms. Would the Government allow that to be sold when the firm is nationalised?

Mr. E. Fernyhough (Jarrow)

Is the hon. Member aware that in the 1950s and early 1960s we could have had many orders for ships from the Eastern bloc but under the Battle Act we were not allowed to supply them? So the fact that we do not agree with the Governments of some countries and do not supply them with ships does not make much difference.

Mr. Trotter

Is the right hon. Member referring to sales to the Warsaw Pact countries? I hope that Labour Members are not actually suggesting that we should build ships for the Russian navy. I do not think they would want them, because they have large resources of their own.

Mr. Fernyhough

They were two tankers built in Hebburn yard in my constituency in 1950. These two oil tankers were not allowed to be delivered to Poland, although Poland had paid for them. The Americans stopped us from selling the tankers to Poland, even though Polish seamen had come to take delivery.

Mr. Trotter

They must have been Navy tankers.

Mr. Fernyhough

They were oil tankers.

Mr. Trotter

Certainly there have been sales of merchant ships to the Soviet Union in recent times. I do not think any hon. Members would suggest that we should sell warships to the Soviet Union. They have enough of their own. They are just starting to produce aircraft carriers when we are getting ready to dispose of "Ark Royal".

Foreign Governments will begin to look around to find a more stable situation in which to place their warship orders. They will want a situation without political interference and control of the shipyards.

There is the question of the supply of spares. In maintaining the modernity of a ship after it is built it is much more advantageous to return for refits to the country in which that ship was originally built.

Then there is a question of bureaucracy in State ownership. The image of State-Britain abroad is one of a very inefficient outfit. This is the pattern one finds as one travels around the world, and to apply it to the manufacture of warships will lead to our being out on the deal.

Another question is that of muddle. For example, what shall we see on the Clyde? Shall we see Govan and Yarrow reorganised as they were? I suspect that, if they are locked together in that way, Yarrow will no longer be with us. People working in Yarrow would not want to be brought back in a forced marriage with their colleagues in Govan up the road.

There is also the question of names. The federation wishes to see all the names put in the dustbin. Apparently it wishes to be referred to as British Shipyards—Tyne, British Shipyards—Solent, or British Shipyards—Clyde, depending on the area of the country. That would be the height of folly, because Vosper, Vickers and Yarrow are world-famous names, particularly for warships. To scrap them would be the height of folly.

The Government believe in industrial democracy and the Secretary of State for Energy says he believes that no executive action should be taken in a State-owned organisation without the agreement of the work force. So if the trade union leaders in the shipyards say that a name should be scrapped, even if that would be the height of folly, perhaps under the industrial democracy envisaged by the Government the trade union leaders will get their way. We have no idea of the Government's views on that sort of issue. All that is still entirely in the air. If we scrap the names of Vickers, Yarrow and Vosper we shall be throwing away assets of immense value to this country.

We have no idea of the organisation which is to be established under the new corporations. We do not know where the headquarters will be located, although the Government have had months in which to discuss that. We do not know whether there will be a specialist warship division, but it is only realistic to assume that, if a number of high-powered and expensive Chiefs are appointed at head office, they will want a considerable number of Indians beneath them to control.

Whatever the Government may say at the moment, I believe that we shall see a very large headquarters organisation with certain gentlemen specialising in the control of warship building. There is the suggestion that, for the sake of peace in the provinces, there will be a geographical layer of administration, and that there will be the amalgamation of yards under individual management. All this is uncertain. After two and a half years in office, the Government have said nothing on these points.

There is the possibility of work being directed. The Govan yard, for example, after some years of nationalisation, could get no orders without taking them at a massive loss which the Minister of State is, perhaps, unwilling or unable to quantify. It may be that in future orders will be diverted from Yarrow's up the river, to keep Govan going. Cammell Laird was one of the firms building Type 42 destroyers along with Swan Hunter and Vickers. Recently, two more Type 42 destroyers were put out for tender. Cammell Laird put in for one, and possibly two, because without them the company would be coming to the end of its naval work, but the orders went to Swan Hunter and Vosper Thornycroft. Perhaps the Navy was told that the orders should go to those companies; but it is unlikely, in view of the unemployment on Merseyside, for there to be a ministerial decision deliberately to divert work away from the Mersey. Perhaps Cammell Laird lost the order because it could not match the price or delivery of its competitors.

What will be the future position? The head of British Shipbuilders is the present head of Cammell Laird, a gentleman of strong views who wishes to see the headquarters of the corporation placed in that backwater of British shipbuilding on the Mersey. Perhaps he will have similar views about where the work should go in future. What evidence does the work force at Vosper's, Yarrow, or even Vickers have that in future orders will not be diverted to Cammell Laird just because the chief executive of the corporation thinks it is a good idea.

We have had no argument show that nationalisation will be of any advantage to these firms. The country cannot afford to nationalise these industries and those who work in them can ill afford it, either. There would be a saving of public funds if they were omitted from the nationalisation proposals. I am sure that the IMF would rejoice, and the Chancellor would find his problems that much reduced if the money were saved. These firms mus export to survive, and they are much more likely to do so if they remain in the efficient hands that have brought them to their present successful position.

7.15 p.m.

Mr. William Small (Glasgow, Garscadden)

I hope that the Government will resist the amendment. It is an exercise in necrophilia—intercourse with the dead—and that will happen after the vote. I want to see the warship builders in the corral. My favourite television programme concerns a place called Shiloh, and that means "corral of peace". I want peace in industry.

I know Yarrow very well and I can understand the loss of face felt by Sir Eric Yarrow under the nationalisation criteria. Throughout my time in this House I have been the big ear for Yarrow, lobbying Ministers. This place is one big pressure group, but where do the pressure groups come from after nationalisation? Tony Griffin will be the organising manager. Scott Lithgow builds submarines and warships on the Clyde, and Ross Belch is on record as saying that he will help to make the nationalised industry work.

The reality of life is that the big nationalised group must be the recipient of defence orders. Yarrow has a tremendous record. If one goes to its yard, one might as well go to the United Nations. It builds for the world. I do not see anything to stop that yard, or any other, from building for the world after nationalisation. There will be only a change of name.

Perhaps it would be as well if I used less Greek than usual. Let me refer only to Pandora and, with her, Pyrrha and Deucalion, the brother and sister who threw their mother's bones over their shoulders. And so in the sense that these shipyards want to throw their bones out and remain outside the bigger group, they are making a big mistake.

Mr. Nicholas Fairbairn (Kinross and West Perthshire)

We have heard about Yarrow. I hope that hon. Members will not consider that I am being partial if I refer only to Scottish yards.

On one side of the Clyde there is Yarrow and on the other is Govan Shipbuilders. At one time Yarrow was part of Govan and the organisation made a loss. Yarrow managed to get out, and since then, in the last four years or so, it has made a gross profit of £16 million with a net profit of £10 million. It has reinvested £8 million of that amount. It has increased its work force from 3,500 to 5,000. In other words, it has created a real and viable improvement. One of the prides of the world is to be able to say "That ship was built at Yarrow's". I do not believe that that record, that capacity and that skill will be sustained after nationalisation.

To confirm me in that belief I had only to listen to the words of the hon. Member for Newton (Mr. Evans), who said that, after nationalisation, the Members of Parliament representing the Clyde and the Tyne would no longer need to fight one another for the orders; he said they would not need to badger the Government or the Ministry of Defence because there would be a fair spread of orders.

Let us examine that philosophy. The Minister of State was responsible for steering through that crapulous Bill which claims as its ideal to make British industry more efficient and to remove over-manning. Let us consider the concept whereby we shall be fair to the yards of the Tyne and the Clyde. We shall say "One order for you, and one for you". Orders will be artificially created and granted, regardless of the capacity of the yard to win, sustain and execute them. We shall introduce an element of inefficiency and bureaucracy. Who is to take this great decision?

When the work forces on the Clyde who have taken pride in the success of their companies see work being sacrificed to some other yard called British Shipbuilders (Tyne) will they not come to their Members of Parliament and say "What about our jobs?" Will the Government say, as I. fear is the lesson of nationalisation, "However many orders you have or however many orders you have not, whatever profits you make or whatever losses you make, there is a philosophy of nationalisation which permits us, your big brother and your kind father, to guarantee your job and to guarantee from the bottomless sack of international money the funds required to sustain the enterprise however much it may fail."

I have heard no argument to tell me that, when the yards are nationalised, they will be more efficient, more profitable and better employed, or that employment will increase. I have heard arguments that employment will be guaranteed, and that, regardless of the creative capacity of the yard, orders will be spread amongst the yards, but I have heard no word to suggest that the yards will be more efficiently or more imaginatively run.

The yards will be run by bureaucracy. The instant decisions that have to be taken daily at Yarrow will take months. A decision will first have to be taken about which piece of bureaucracy shall decide. The country has a disease, easy to contract and difficult to cure, and that is the justification for bureaucracy. As soon as there is one tier, there is justification for a lower tier and another below that. That is what will happen.

I regret that the great and proud quality that made Yarrow will be lost. We threw away the markets of Southern Africa. They were proud to say that their ships had been made in Yarrow. Now they are made in France. I cannot believe that there are many foreign countries which will order boats, sail them and say that they are proud that they were made in British Shipbuilders (Clyde). The Bill is destructive of a great craft in Scotland, and I regret that tonight we shall purblind see the fate of British shipbuilding.

Mr. Kaufman

The Opposition are telling us that it is inappropriate and unsuitable for warships to be manufactured under the chairmanship of Admiral Sir Anthony Griffin, Controller of the Navy since 1971; educated at the Royal Naval College, Dartmouth; joined Royal Navy 1934; went to sea as a midshipman in 1939; war service in the East Indies, Mediterranean, Atlantic, North Russia and Far East; specialised in nagivation, 1944; Staff College, 1952; Imperial Defence College, 1963; Commander HMS "Ark Royal" 1964–65; Assistant Chief of Naval Staff (Warfare) 1966–68; Flag Officer, Second-in-Command, Far East Fleet, 1968–69; Flag Officer, Plymouth, Commander, Central Sub Area Eastern Atlantic, and Commander Plymouth, Sub Area Channel, 1969–71; Commander 1951; Captain 1956; Rear-Admiral 1966; Vice-Admiral 1968; Admiral 1971. That has nothing to do with the manufacture of warships.

Mr. Fairbairn

rose—

Mr. Kaufman

No, I shall not give way. The hon. and learned Gentleman has tilted at his windmill. He has talked even more irredeemable rubbish than usual. I see that the hon. Member for Hampstead (Mr. Finsberg)—speaking for the shipyard workers of Hampstead—has come to reinforce the rubbish spoken by the hon. and learned Member for Kinross and West Perthshire (Mr. Fairbairn).

We are told by Opposition Members that this man, with this flimsy and irrelevant record, is inadequate to have anything to do with the building of warships. We are also told that it is inappropriate to have a publicly-owned warship building industry because the customers will not like it. Who are these customers? Are they private mariners? Are they enthusiasts who go around collecting warships as a hobby? No, they are Governments. The only people I know who buy warships are Governments, and they are publicly owned. It is an interesting concept of public ownership that the armed forces of foreign Governments will be repelled by the idea of buying warships manufactured by the publicly-owned British Shipbuilders under Admiral Griffin.

Mr. Viggers

rose—

Mr. Kaufman

No, I shall not give way. Had it not been for the speech of the hon. and learned Member for Kinross and West Perthshire, the hon. Member for Gosport (Mr. Viggers) would have talked the greatest rubbish in the debate. I see that the hon. Member for Blaby (Mr. Lawson)—speaking for the shipyard workers of Blaby—has come in. I do not know whether his mask is slipping.

The hon. and learned Member for Kinross and West Perthshire, the hon. Member for Gosport—who has taken no interest in the Bill until tonight—and the hon. Member for Tynemouth (Mr. Trotter)—who has taken a great and informed interest in the Bill—have all disregarded the statements made over and over again by the Organising Committee and in the House by Ministers that it is almost certain that the component companies of British Shipbuilders will retain their present names. All the fanciful romancing about British Shipbuilders (Tyne) and British Shipbuilders (Clyde) served to fill up the speeches of hon. Gentlemen who have taken no interest in the Bill until its final stages, but it is completely inaccurate.

Opposition Members appear to subscribe to the theory that only loss-making companies shall be taken into public ownership. That is what the Conservatives did when they were in power. They nationalised Rolls-Royce when it went bankrupt. They nationalised Govan Shipyards—which is held up to us as such a paragon of failure. They did it. They were the people who had four years of nationalising loss-makers, and they believe that a Socialist Government should nationalise only loss-makers.

The Government do not accept that proposition. We do not believe it is right that losses should be nationalised and profits "profitised". Nor do we accept a shipbuilding industry that is privately profitable on the basis of public funding.

It would be extremely illogical if, in taking the shipbuilding industry into public ownership, we were to exclude precisely those companies that are most dependent on the Government for their survival. Yet that is what the amendment seeks to do.

Hon. Members have placed great stress on the warship building sector. The Government believe that as a nation we must have an overall plan for our national shipbuilding resources. Arguments advanced of the importance of warship building are arguments for including this sector in the future public sector.

7.30 p.m.

The significance of warship building to the industry is clear. In a booklet commissioned by two of the warship builders named in the Bill—namely, Vosper Thornycroft Limited and Yarrow (Shipbuilders) Ltd, entitled "The Special Case For The Naval Shipbuilders"—it is claimed that in five years the two companies have secured export orders worth £273 million. The three warship builders give employment to 20,000 men. Those are all good reasons for vesting the companies in British Shipbuilders and not for excluding them.

Great play has been made of the fact that a considerable part of the profits of these companies comes from export orders, but it is not trumpeted so loudly that those orders are obtained only because the warship builders are major Ministry of Defence contractors. It is on that that their standing as naval builders depends. The fact that their products are acceptable to the Royal Navy means that they are acceptable to other nations' navies. In addition—this confutes what many Opposition Members have been claiming—they obtain a great deal of assistance from the Ministry of Defence in winning orders. That is the purpose of MOD Defence Sales. Construction grants provided under the Industry Act 1972, enacted by the Conservative Government, were paid on export warship contracts but not on Ministry of Defence orders. That is a point that the hon. Member for Gloucestershire, South (Mr. Cope) got completely wrong in Committee.

The right hon. Member for Renfrew-shire, East (Miss Harvie Anderson), who has explained why she cannot be here, and the hon. and learned Member for Kinross and West Perthshire dealt in great detail with Yarrows. Anyone would think that the company was the epitome of sturdy, independent private enterprise. In fact, the company was rescued from insolvency by a Ministry of Defence loan of £4½ million in 1971. Sir Eric Yarrow's letter to shareholders on 12th March 1971 indicated that the loss for the 10 months ending 30th June 1970 would be about £3 million.

The right hon. Member for Knutsford (Mr. Davies), when he was Secretary of State for Trade and Industry, announced to Parliament on 10th February 1971 that it was the Government's decision that the Ministry of Defence would make a loan to Yarrow (Shipbuilders) Limited towards meeting its requirements for working capital. The right hon. Gentleman said: Both Yarrow (Shipbuilders) and UCS have encountered difficulties in recent years and both face problems of serious cash deficiency."—[Official Report, 10th February 1971, Vol. 811, c. 809.] If it had not been for Government aid, the company's shares would now be completely worthless. Without public money Yarrows would not be in a position to receive any compensation.

Opposition Members have talked about the profitability of Yarrows, but let us look at what lies behind the profits. Pre-tax profits include over £4 million in Government grants, including £2.8 million in construction grants and £1.2 million in regional employment premium. To get a clearer view of the picture, we need to look at the six years from 1970 to 1975. The 1970 results showed post- and pre-tax losses of £2.72 million. Cumulative pre-tax profits for the six years were £13.93 million. Post-tax profits were £7.59 million. Government grants in this period amounted to £4.36 million.

Mr. Nigel Lawson (Blaby)

Tell us about taxation.

Mr. Kaufman

The hon. Gentleman is gibbering on so much that he does not listen to what is said.

When the right hon. Member for Renfrewshire, East spoke in Committee in February 1971 about Yarrows profits she conveniently excluded 1970 from her calculations. In that year certain provisions for future losses were set up—provisions that contributed £1.45 million to profitability in the five subsequent years as those provisions were written back. It is also a fact that net interest received, after deducting interest paid, contributed £1.8 million of profits during the years in question. This is a perfectly proper credit to profits; it is not an operating profit.

The case put up by the Opposition is bogus. The case for the nationalisation of the warship companies is unanswerable, and I hope that the House will support the Government in that proposition.

Mr. Tom King

As we draw towards the end of these long sessions on the Bill, we get to know the Minister of State better and better. One of the Kaufman laws that we now recognise is that the weaker the case, the greater the abuse and the more supercilious the approach.

The hon. Gentleman, speaking as he does with great authority for the shipyard workers of Manchester, Ardwick —that is the way in which he referred to several of my hon. Friends—was unwise to refer to Admiral Griffin. He brought him into the debate; no one else did. The admiral is someone with distinguished naval service, but unfortunately—the Minister of State raised the matter—he has never built a ship in his life. He is now to be Chairman of British Shipbuilders.

I am bound to say that there have been criticisms by a Select Committee of certain of the ways in which warships were ordered by the procurement department. I thought that the Minister of State made a singularly prolonged non-point when he read out the distinguished war service of someone whom the Opposition have not criticised. However, in all that record of service there is no experience of shipbuilding.

The whole point of the debate on the warship builders—I hope that this is the concern of all hon. Members—is whether those who work in the industry are likely to be better or worse off when nationalisation takes place. I shall explain why we believe that the future of the yards, the prosperity of the people who work in them, the prosperity of the regions where they are located and, therefore, the national interest would be better served if they remained independent.

The hon. Member for Wallsend (Mr. Garrett) said he could promise that there would be plenty of orders both for specialist warship builders and for other yards in the United Kingdom. I do not know what special access to the placing of shipyard orders the hon. Gentleman has. I do not know how he is able to override the projections that I think are accepted by the Government of a worldwide slump in shipbuilding and a 100 per cent. excess of capacity over demand. At present there is twice as much capacity as projected demanded over the coming years. In those circumstances, a promise of ample orders is obviously unrealistic.

The hon. Member for Newton (Mr. Evans)—I notice that neither the hon. Member for Wallsend nor the hon. Member for Newton has been in the Chamber to hear the Minister or myself—said that there would be a fairer spread of orders. The hon. Member for Southampton, Itchen (Mr. Mitchell) wisely absented himself from the debate at that stage. What do his hon. Friends mean? A fairer spread of orders in terms of someone who works for Swan Hunter can only mean fewer orders elsewhere. Surely the logic of that is inevitable.

When we hear where the real threats to employment lie, we must be struck by the figures quoted by my hon. Friend the Member for Tynemouth (Mr. Trotter). He quoted figures from an official parliamentary answer. According to that answer, there are now 20,000 people engaged in warship building. The likely job losses forecast by the Government in their own answer amount to 11,000 over the next 10 years as a result of the defence cuts. If we look to find where the damage to these industries is likely to come from, we find that the real responsibility lies with the defence cuts which have been announced. If that is true, the only hope for the yards lies with an even greater export achievement.

The main burden of our case is that export orders are likely to be damaged by a nationalised corporation. The Minister of State thought that he had made a telling point when he said "How can people object to buying from a Government when most of those who buy warships are Governments?" That might sound a quite good point until one thinks about it. It is the experience of all who work in the industry—I do not think that the Minister of State has had that privilege any more than I have, but I refer to my experience and intelligence —that Governments prefer not to deal directly Government to Government in these matters, some of which are confidential.

Mr. Ron Thomas

rose—

Mr. King

No, I shall not give way as we are against the guillotine.

Moreover, it is possible at any time for Governments—

It being twenty minutes to Eight o'clock, Mr. DEPUTY SPEAKER proceeded, pursuant to Orders [20th] and the Resolution [27th July], to put forthwith the Question already proposed from the Chair.

Question put, That the amendment be made:—

The House divided: Ayes 303, noes 313.

[For Division List No. 299 see col. 1037]

Question accordingly negatived.

Amendment proposed: No. 258, in page 75, leave out lines 19 to 26.—[Mr. Tom King.]

Question put, That the amendment be made:

The House divided: Ayes 304, Noes 310.

[For Division List No. 300 see col. 1047]

Question accordingly negatived.

Amendment proposed: No. 247, in page 75, leave out line 20.—[Mr. Tom King.]

Question put, That the amendment be made:—

The House divided: Ayes 305, Noes 311.

[For Division List No. 301 see col. 1047] Question accordingly negatived.

Amendment proposed: No. 259, in page 75, leave out lines 28 to 30.—[Mr. Torn King.]

Question put, That the amendment be made:—

The House divided: Ayes 305, Noes 310.

[For Division List No. 302 see col. 1051]

Question accordingly negatived.

Amendment proposed: No. 219, in page 77, line 4, at end insert: 'and (d) on 21st November 1975 the number of persons employed by that company in any city or town engaged exclusively in the business of repairing, refitting, converting or maintaining ships exceeded 300, provided that the company is not a member of the same group of companies as a shipbuilding company falling within the description in paragraph 2 above '—[Mr. Gwynfor Evans.]

Question put, That the amendment be made:—

The House divided: Ayes 304. Noes 311.

[For Division List No. 303 see col. 1057]

Question accordingly negatived.

Mr. Deputy Speaker (Sir Myer Galpern)

I now propose to put the Question on all amendments moved by a Member of the Government down to Schedule 7, Amendments Nos. 197 to 208. With the agreement of the House, I propose to put one Question on all of them.