BRITISH SHIPBUILDERS: LIMIT ON BORROWING ETC.

HC Deb 14 November 1979 vol 973 cc1408-49

Question proposed, That the clause stand part of the Bill.

7.18 pm

Dr. John Cunningham (Whitehaven)

I begin by declaring an interest. I am a sponsored member of the General and Municipal Workers Union, which represents a large number of men who work in the shipbuilding industry. It is important to put that on record.

I intended to welcome what the Minister had to say. However, as he did not say anything, I may move on quickly.

I give a general welcome to the intention of clause 1. It is an important provision. However, the Opposition have a number of questions about what is intended in raising the limits imposed by section 11 of the Aircraft and Shipbuilding Industries Act 1977 in relation to the finances of British Shipbuilders. We welcome the recognition of the need to do that and the Government's apparent commitment, on this occasion at least, to use public money. We wish that that commitment could be more widespread. The Opposition would have taken similar action if we had been in power. In that sense, we are satisfied with the provisions of Clause 1.

It is in the national interest to have an effective industrial capability in merchant shipbuilding, defence shipbuilding, marine engines and our oil industry requirements. However, the financial provisions relate to the two-year time scale that the Government set for the industry.

Are the new limits sufficient? Is the provision large enough in view of the situation obtaining in the shipbuilding industry? Perhaps, subsidiary to those questions, I may put a few more detailed points to the Minister. The strategy of British Shipbuilders is to maintain a capacity of about 400,000 to 450,000 tons in merchant shipbuilding. The orders situation leads us to conclude that that may well be difficult. The Minister of State made that point before. We understand it. The berth programme of British Shipbuilders is serious. There is a need for much more vigorous Government action on orders. If action is forthcoming, as we urge, will the limits set in the Bill be sufficient to enable British Shipbuilders to fulfil extra orders?

I recall the action taken by the previous Administration on the Polish deal. That deal was much decried, at the time, by right hon. and hon. Gentlemen now in Government. However, not only was it useful to British Shipbuilders but it met with the approbation of the Public Accounts Committee.

The berth programme prompts us to ask whether the financial provisions are sufficient because the situations on the Clyde, the Tyne, the Wear, the Tees and Merseyside are urgent. The second question of detail arises because of the lowering of support for the industry as a result of the reduced intervention fund. The Government have made much of their role in this matter, but the intervention fund is now a failure. In no way does it match up to the real value of previous provisions, nor does it match up to what British Shipbuilders demanded. The level of support has gone down to 25 per cent. The attitude of British Shipbuilders was that the previous rate of 30 per cent. should be abolished and that there should be no support element. This lower level, however, will have an effect on the financing of the industry.

Much has been said of the need for a scrap-and-build programme. We have not seen any progress in the provision of such a programme by the Government. We regret that. It is an important matter. If a scrap-and-build programme were agreed—as we urge that it should be soon—it would expose the need for additional finance for British Shipbuilders. I refer the Minister to the document adopted by the Confederation of Shipbuilding and Engineering Unions. The confederation recently discussed the general situation and in particular it argued in favour of the building of a much higher proportion of the United Kingdom tonnage in British yards.

It also argued for an early agreement on, and implementation of, a scrap-and-build policy, advance public sector orders and further defence orders. We understand that defence expenditure is to be increased, and perhaps the Minister will take on board the fact that some of that money should go to shipbuilding. The document also discusses the enforcement of the issue of segregated ballast tanks, the accelerated diversification of products and the installation of inert gas systems where necessary. These are proposals which could bring much-needed work to the yards but they require extra financial provision.

Are the Government really fighting for orders for the yards? We have not seen much evidence of great conviction in that respect. We would welcome more vigorous action because that would have an impact on the ability of the industry to finance itself within the provisions set out in clause 1 of the Bill.

Apart from the arguments which relate specifically to British Shipbuilders, there is also the question of the effect of inflation on the financial provisions. Inflation is rising rapidly and likely to go on rising and we understand that there is the likelihood of an increase in minimum lending rate which would affect the industry in many ways. Wages will have to be taken into account. It is against this inflationary background that we question the limits of the provisions. Capital investment proposals for the high technology and engineering sectors of British Shipbuilders prompt us to ask whether the limits set out in the clause are sufficient to meet the urgent and expanding needs of the industry.

The Minister of State was in doubt about these limits when he introduced the Bill on Second Reading on 1 November. He said that he hoped that there would be sufficient provision. I do not know what the Minister's hon. Friends would think if he had to come back to the House on a subsequent occasion to ask for increased provision. If he did, we would not hesitate to support him, though we think it is better to get the matter clarified now.

On industrial and employment grounds as well as on the grounds of national interest, British Shipbuilders should not be placed in difficulties. Because of the Minister's attitude to private capital in the industry, yet another question arises under the heading of financial provision. He referred to this matter also on 1 November. What effect would changes in the industry have on the provisions? The Government should be more forthcoming about this when asking the Committee to agree to the Bill.

I understand that British Shipbuilders in its corporate plan states that the worldwide industry is experiencing the worst crisis in memory. British Shipbuilders are not the only ones in difficulties, though the plan describes the crisis as a matter of survival for the industry. We want the industry to survive and we want a greater level of support through the intervention fund. The fund is now smaller. We want to see more capital expenditure in yards throughout the United Kingdom. Offshore activities are also a key factor in planning and should be given national priority. That could lead to a significant increase in the provision of jobs, particularly in. Scotland, where they are badly needed.

There is a measure of agreement between management and unions about financial needs and about the need for aggressive action by the Government on public orders, defence measures and the intervention fund. Do the Government intend to change gear on these matters since they seem to be losing momentum? Against the background of the world shipbuilding recession, what does the Minister expect British Shipbuilders' trading loss to be in the next couple of years? That is a relevant question.

These issues are vital and urgent. We expect a detailed response from the Minister. My hon. Friends also have many questions about their constituencies.

7.30 pm

Mr. W. E. Garrett (Wallsend)

I am pleased with the progress of the Bill. I have followed closely the interests of the shipbuilding and ancillary industries and I cannot add much that is new to the argument. I had the pleasure, or misfortune, to sit through the long Committee stage of the Bill introduced by the previous Government. It is difficult to begin a new argument when one agrees basically with the general principle. One can always argue for a more generous injection from public funds, but at present the money proposed is probably right in relation to the possible needs of the industry in the next three to four years.

I am sure that the Minister will persuade the executive board of British Shipbuilders to indicate how much of the money will be used for further research. That is important. We must keep in a healthy state the research establishment at Wallsend in my constituency. We must also ensure the well-being of the research establishment at Teddington, where a different type of work is done. Research must be maintained and the results must be incorporated in future since that could give us an advantage when we compete for orders in three or four years' time.

There is a slightly more optimistic mood on the Tyne following recent orders. They are welcome and we are also pleased about the orders obtained for the Birkenhead and Govan yards. I am sure that hon. Members who represent those constituencies will have more to say about that.

Naval contracts in the North-East have been completed on time and to the satisfaction of the contractor—the Admiralty. Perhaps the Admiralty will use its influence and encourage other contractors to use the North-East yards.

This is a difficult time for the shipbuilding and repair industries. Morale is low. Perhaps we shall be telling a different story this time next year. There may be some improvement. The longer that ships are at sea, the quicker their life expectancy diminishes. Inevitably, British ships will have to be replaced. If they are not, insurance premiums will increase and that will add to the operating costs. World shipowners will be looking for yards which can rebuild their fleets. The money provided in the Bill, if it is used wisely, will secure those future orders.

Hon. Members who represent shipbuilding constituencies have not been too critical of the Conservative Party. We could have rubbed our hands with glee at the possibility of the Minister having to do a partial about-turn on his party's philosophy. We have resisted that because the broad principle is generally accepted by both parties and by both the present and previous Governments. I hope that the Bill progresses merrily and speedily tonight and that it is placed on the statute hook as quickly as possible.

Mr. Don Dixon (Jarrow)

I apologise for being absent at the close of the debate on 1 November. If I had known in advance that I would be absent, I would have mentioned it. I received an urgent telephone message about the serious illness of a close relative. I had to depart immediately for home. I was well up the M1 when the Under-Secretary of State for Scotland, the hon. Member for Edinburgh, North (Mr. Fletcher), was making sarcastic remarks about my absence. I accept that he made those remarks in ignorance.

Clause 1 does not go far enough. My constituency relies a great deal on shipbuilding, ship repairing and marine engineering. The town in which I was born and which I now represent was built on a tradition of steelmaking, shipbuilding and ship repairing. In the 1930s we went through the traumatic experience which Shotton and Corby are now facing.

In his more enlightened remarks on Second Reading the Minister said: The main brunt of the contraction in recent years has been met in Merseyside and the North-East of England. Since mid-1977 over half of the 8,000 jobs lost in British Shipbuilders were lost in the North-East alone."—[Offical Report, 1 November 1979; Vol. 972, c. 1577.] We all accept that. The male unemployment rate in my constituency is 16 per cent. The North-East relies on heavy engineering, shipbuilding and ship repairing. Any contraction in those industries adds to the already unacceptably high rate of unemployment.

A lack of recruitment in the industry amounts to the same as redundancies, because if wasted jobs are not replaced school leavers are not offered apprenticeships.

The shipbuilding industry is an important cornerstone of the industrial community. For economic, social and strategic reasons the industry should not be allowed to contract. The Tyne and Wear county council, to which I pay tribute, has done much to help the shipbuilding industry in the North-East. It held a conference, with other local authorities, in April this year to provide a national platform for discussion, among all the major sectors of the industry within the EEC, of the worldwide problems that face the shipbuilding and ship repairing industries. The conference carried the following resolution unanimously: This conference affirms its belief that a vigorous national shipping and shipbuilding industry is essential to this country. The aim must be to ensure that the industry survives the current world recession and remains effective in the face of increasing competition so as to take advantage of the recovery expected in the 80s. To this end this conference calls on all sectors of the industry to unite their efforts in a new spirit of partnership, to build on the skills and expertise within the industry and, with the full participation of Government, together with our partners in the EEC, to find ways of increasing its overall strength. At the same conference the hon. Member for Wirral (Mr. Hunt), who was the chairman of the Conservative group on shipping and shipbuilding, said: There must be no doubt as to the necessity to maintain a merchant shipbuilding capacity, as it cannot be left to others to supply the ships which carry Britain's and industrial Europe's seaborne trade. We would all agree with that. If the Prime Minister's nightmare ever comes true and we have those hairy Russians positioned across the Channel, it is as important to have merchant shipping to carry the supplies as it is to have warships.

Despite the present deteriorating position of the industry—much of it beyond its control, caused mainly by subsidies and import controls in other countries—Britain is still the fourth largest shipbuilding nation in the world. It has always suffered from periodic demands, feasts and famines. The Geddes report in 1966 recognised that the private owners' failure to invest and adapt was one of the underlying causes of the industry not meeting the demand of the changing pattern of competition. Investment by private owners in British shipbuilding was pathetic. A survey carried out in the early 1970s showed that for every man employed in the industry the assets were £825. In West Germany the figure was over £1,000, in Italy it was £1,200, in Sweden it was £1,800 and in Japan it was £2,800.

The following years did not help the British worker and his need for proper tools. After that survey the investment for every man in the industry was £80 In West Germany it was £162, in Japan it was £409 and in Sweden it was £554 It is small wonder that the efficiency of the United Kingdom shipbuilding industry was well below that of our competitors I referred in the debate on 1 November to platers' helpers pushing shell plates about in the shipyards on wooden barrows. Those were the sort of tools given to workers to compete with the rest of the world. Because of their greed for profit and their lack of investment, the private owners have much to answer for with regard to the state of the industry today. If it had not been for nationalisation, it is doubtful whether we would be discussing the industry tonight.

Massive over-capacity in the industry internationally has given rise to intense competition for orders. Savage price cutting to levels well below the cost of production has resulted in bankruptcies among shipbuilders in many countries. That led to widespread financial intervention by Governments in the form of various subsidies, either as direct or indirect price support or in the form of soft credit packages to developing countries.

In the financial pages of The Guardian on 4 July a report stated: Unofficially there is concern on the British front that competitors are playing dirty tricks. British shipbuilders will point to a ferry order they lost to a West German yard offering below cost prices. … The yard then went bust but they continued the work, sustained by the German Government—a device well within EEC rules". The past 10 years have seen the cost of building ships double while the value of the ships has reduced by one-third.

I deal now with the conditions that prevailed in the shipbuilding industry not so many years ago. The chairman of British Shipbuilders has said: We are breaking down old-fashioned and deep-rooted attitudes and substituting informed, active and hard headed involvement with participation". Let us consider those old-fashioned and deep-rooted attitudes and understand how they came about. I speak from experience when I say that the British shipyard management was the most reactionary in British industry. I have heard debates in the House of Commons in which remarks by Conservative Members were purely academic. I doubt whether many of them have been nearer to a shipyard job and the conditions that workers face than lying in a deck chair on a liner cruising round the Mediterranean.

7.45 pm

Markets in the shipyards were abolished a few years prior to nationalisation. It was a tradition that started in the cattle markets. Early in the morning, when it could be snowing, raining or hailing, we went to the gaffer's office and stood there for an hour or so until the gaffer came out—the rain was coming out of our laceholes—and said to some of us "You can start today, the rest of you go home". It is not so long since those conditions prevailed. I am sure that my hon. Friend the Member for Newton (Mr. Evans) will remember those days.

I was a shop steward in a shipyard where men working with welders were holding lugs about an inch and a half from the flame of the welding rod. The sparks went down our sleeves and we finished up with septic sores on our hands, yet the management would not provide us with gloves. They said "Why not look round the dock bottom and find some welders' old gloves?" I had to go to a central conference in York in my efforts to get these gloves. They cost 1s. 6d., or 7½p.

When speaking of profitability. Conservative hon. Members should remember that when the snow comes this winter the workers will probably have to walk from the gates for a mile through the snow, climb up the gangway, shift the snow and chip the ice from their job before they can start work. That should be taken into consideration. Conditions in the shipyards are deplorable. There have been improvements since nationalisation, but I am speaking of a time not so many years ago. Shipwrights received the princely sum of 7s. 6d. for greasing the slipways the day before a ship was launched. We were up to our ankles in mud and slush on the after end of the ship putting grease on the slipways. Gloves were supplied for that job. The management set that payment without consultation and said that it was trying to cut costs. At the same time it stripped the joiners' shop of machinery in order to have a champagne party for the visitors and management after the launch of the ship. Those are the sort of conditions that prevailed in the shipbuilding industry.

Few manual workers received pensions. Those who managed to live long enough to retire usually left with little or nothing, and often without a word of thanks. It was left to the workers to have a whip round to give them something when they retired.

My hon. Friends have raised many questions but the Minister is reticent in answering. Matters raised by my hon. Friends show where we stand. The Under-Secretary of State for Scotland said in the debate on 1 November: Let me make it clear at the outset that we wish to see a viable and competitive shipbuilding industry in the United Kingdom. Along with other shipbuilding nations we recognise that with the present state of the market such an objective cannot be achieved without a measure of Government support".—[Official Report, 1 November 1979; Vol. 972, c. 1568.] Nobody would dispute that statement. The support has been given, but with a time limit that hangs over the shipyard workers' necks. This concerns many of my hon. Friends. We do not argue with that, but we emphasise that in a world where countries are giving subsidies to the shipbuilding industry, and while other countries have import controls, our industry requires a guarantee that it will be supported against unfair competition. No one is saying that shipyard workers have a divine right to work. However, Britain lives by exports and it will always need to build ships. We need a shipbuilding industry to build merchant ships.

I know that ship repairing is not featured in clause 1 but I shall refer to it briefly. We are now hearing a great deal about scrap-and-build. If and when it comes about, it will help the marine engineering industry but it will not help a great deal of the ship repairing industry. The more ships we scrap, the fewer repairs will be required on older ships.

There was a report in the Financial Times yesterday that suggested that, because of a shortage of scrapyards in Europe, many orders may have to go to the Far East. I hope that when the Minister has discussions on scrap-and-build he will keep in mind my comments about the ship repairing industry and the scrapping of ships if ever we see the scheme implemented.

Mr. Keith Wickenden (Dorking)

First, I declare an interest in shipbuilding. I do so especially as the hon. Member for Jarrow (Mr. Dixon)—but for the hon. Gentleman's speech I should not have contributed to the debate—reierred to a ferry shipbuilding order that went to Germany because it was oversubsidised. That story has been put around for a long time and I am happy to record the true facts. If any hon. Member is interested, I am in a position to support my case with documentary evidence.

I am chairman of a company called European Ferries Ltd., one of the larger cross-Channel ferry companies. In May 1978 I said in my annual report to my shareholders that later in the year we would be placing a shipbuilding order that might be one of the largest orders placed by any British shipowner in 1978. I said that my board and I hoped that it would be possible to place the order in a British yard.

We invited 26 yards to tender, treating the 20 British shipbuilders as one yard, and 11 did so, including British Shipbuilders. The lowest tenders came from Japan and Hong Kong. They were ruled out by my technical director on technical grounds. The next lowest tenders came from Denmark and Germany, and were extremely close at about £48 million for the three ships. Of the 11 tenders, British Shipbuilders was eleventh in price at £62 million. We may have been able to live with that, but the most disappointing part of the tender was that whereas we had required two of the ships to be delivered by 30 June 1980—the German yard could deliver one by 31 December 1979 and one by 31 March 1980—British Shipbuilders could not deliver the first until 30 June 1980, and only then, incredible as it may sound, by subcontracting to a Dutch yard.

Mr. W. E. Garrett

Will the hon Gentleman tell the House whether the Germans delivered the first vessel on time?

Mr. Wickenden

The first vessel is due for delivery on 31 December 1979. I am assured that it will be delivered on that date. It will certainly be launched on that date.

I am not seeking to blame British Shipbuilders. It may sound as though I am, but I want to be fair to it. The ships that my company ordered are specialised. Over the years British shipbuilding capacity has concentrated on much larger ships, such as tankers and bulk carriers. These are ships that contain a great deal of steelwork. Hon. Members who know a great deal more than I do about shipbuilding will know that the fitting-out skills that are required in a ship of the passenger liner type are different from those required in a bulk carrier or tanker. Sadly, our skills in that respect have been allowed to decline. I suspect that that is one of the reasons why the German yard was able to deliver so much faster.

I wish to put the record straight. It has been said widely—I do not know from which source—that there was a massive Government subsidy. I do not believe that to be so. It is my understanding that the reason for the difference in price was that the German yard was able to deliver in half the time, which would, of course, have a bearing on the cost of production.

It has been said that the German yard went bankrupt immediately afterwards. That, too, is not true. The confusion arose because, as a condition of the contract, my company had insisted, for obvious reasons, on sterling finance. That would not be a risk that any commercial shipyard would be able to take, even if it were large enough to do so. Therefore, the commercial risk was taken by the Bremen state government, who had to pass the necessary legislation to enable them to take the risk. That is how the myth of the yard's having gone bankrupt came about. It did not go bankrupt. It is in a surprisingly thriving state.

Mr. Dixon

What I said was written in the financial section of The Guardian of 4 July.

Mr. Wiekenden

Yes. I am not suggesting that the hon. Gentleman is saying anything that he does not believe to be true. However, I am happy to put the record right. The Guardian was wrong. It was delivery dates that caused my company to place an order, sadly, outside the United Kingdom. Difficulties about delivery dates are at the root of the troubles of the shipbuilding industry and most of our industry generally.

Mr. John Evans (Newton)

The hon. Gentleman had a vested interest as he was chairman of the company placing the order. Did he investigate whether there was a subsidy coming from the German Government to allow him to have his ship at £48 million as opposed to the price that British Shipbuilders was quoting?

Mr. Wickenden

It was £48 million against £62 million. One can only ask questions. Obviously one cannot go into the depths of what is taking place behind the scenes in Germany. I am assured by those who know the German political and legislative scene more than I do that if there had been a subsidy it would have been necessary for a state law to be passed by the Bremen state government, as there was for the sterling interest factor. I am assured by the chairman of the yard concerned, for what it is worth, that there was no such subsidy.

Mr. Evans

He would give that assurance, would not he?

Mr. Wickenden

I am not so sure. The financial quotation from British Shipbuilders was well outside OECD terms. We, too, do not always strictly abide by the rules.

Delivery dates are the crux of the matter in industry generally. If, on both sides of industry, we can improve our methods and techniques so that we regard a delivery date as inviolate, we shall start to win back contracts that are now going elsewhere.

Mr. D. N. Campbell-Savours (Workington)

Is the hon. Gentleman aware that the German Government subsidise the German steel industry by means of a coking subsidy, which is an indirect subsidy to all the industries that use steel? As ships are produced in steel, it is clear that there is a subsidy. If we were to investigate other areas we would probably find that the Germans were effectively subsidising all parts of their industry that have a direct bearing on production of shipping.

Mr. Wickenden

In many respects that is a fair comment. I am delighted to say that the steel for the order that I am talking about was supplied by the British Steel Corporation. The hon. Gentleman has made a valid comment, but it does not apply to the order placed by my company. It is fair to say that throughout the world there are hidden subsidies, as there are in Britain.

Mr. Campbell-Savours

When the hon. Gentleman, as chairman of his company, was informed by British Shipbuilders that it could not provide the ships by a certain date, did he seek to find out why? Did he seek to examine the reasons why it had made that decision? Did he not protest and stress the need for production to take place within the British economy? If he did so, what was the response?

Mr. Wickenden

Yes, my company made inquiries. My technical director, who deals with these matters almost excusively, had lengthy meetings with British Shipbuilders. My company wanted the order to go to a British yard if possible. Mr. Michael Casey, the chief executive of British Shipbuilders, advanced a reason to which I have already referred—namely, that the British shipbuilding industry has lost or allowed its fitting-out skills for the passenger liner type of ship to drift away. This is a type of ship that requires a great deal of fitting out. We have not built a significant passenger line-style ship for many years. Skills, I am sad to say, have drifted away.

8 pm

Another reason given was that British Shipbuilders was not proposing to build three ships in one yard. That was a dreadful mistake. It meant that a learning curve would be required in respect of each of the ships at each of three different yards. It also meant the second and third ships would probably not have been very satisfactory. When one builds a new type of ship with new technology—these were ships containing a considerable amount of new technology—in a series, the first is likely to be a bad ship, rather as the first car in a production line is more likely to have bugs in the system than is a later one. This order was for a series of three ships, possibly extending to seven later.

Although that was another reason, apparently, for delay in delivery, the primary reason was that skills had dirfted away. That is not a situation for which British Shipbuilders can be blamed. It has been in control of the situation for only a relatively short time.

Mr. Donald Dewar (Glasgow, Garscadden)

The speech of the hon. Member for Dorking (Mr. Wickenden) goes to the heart of the problems that afflict the shipbuilding industry. It is depressing for management, the work force and the nation if a company—I accept that it was acting in good will— wished to place an order in Britain but was unable to do so. Germany is a high wage economy, a country comparable to ours in many ways. If the case set out by the hon. Member for Dorking shows what is happening, the situation is extremely depressing and distressing. I hope that Ministers and British Shipbuilders will try very hard to discover what went wrong. I should be fascinated to see the carcase of this failure dissected in an attempt to discover why we were so badly undercut. I have some sympathy wih the view that there must be some hidden subsidy. The German steel industry is an obvious competitor for such a subsidy. But the price differentials mentioned by the hon. Member for Dorking are startling and give no cause for comfort.

In clause 1, we are happily voting, or allowing, the borrowing requirements of British Shipbuilders to be increased. None of us objects to that in principle. In practice, there is no point in having wide borrowing requirements if the finance is not put to good use and we are incapable of attracting work. Without the work, the size of the borrowing requirement will not matter. At the end of the day, it will be money down the sink, if it is ever drawn. We will have a catastrophic situation in our industry. I do not object in principle to clause 1. What worries me is the practice. Hon. Members on these Benches would like to see more intervention and public support for the industry. The industry faces apalling difficulties although there are some signs, despite the case study to which the hon. Member for Dorking referred, that productivity has improved. There has been retooling to create modern yards and there are signs, according to the City pages, that freight rates and tanker rates, particularly the smaller end of the range, have recovered. There has already been a substantial drop in the amount of mothball tonnage. One hopes that more orders will soon be coming along for which British Shipbuilders can compete. Given that situation, we are happy that British Shipbuilders should have the finance to compete for those orders. It is not a case of saying, although we would like more, that we do not wish to accept the half loaf that the Government are offering. That would be a short-sighted policy.

In principle, we will give a fair wind to clause 1. It is easy to say that the borrowing requirement should be shoved up from £300 million to £600 million. That can be done. But if there is no sign of support from the Government of the kind that British Shipbuilders needs to get through this difficult period, all the efforts of this legislature and this Bill when enacted will have been in vain. The Government are telling British Shipbuilders that it has to be self-sufficient in two years. By putting this tight corset, if I may use a fashionable word, around British Shipbuilders, we are causing a great deal of dislocation and dismay in the shipbuilding industry. It seems that we are forcing British Shipbuilders to take actions which are so severe that they will be almost counter-productive in terms of the health of the industry and its long-term future at which the Government and the country should be aiming.

The hon. Member for Dorking said that Mr. Michael Casey had said that one of the reasons was that the industry had largely lost its skills. If the shipbuilding industry is further run down, chasing extremely tight and draconian financial targets, we may destroy not only those skills a lack of which led to the loss of this specialist order but our skills right across the range of merchant shipbuilding. That would be an absolute catastrophe.

Many hon. Members made the point in the debate on 1 November that it is not the British shipbuilding industry that has contributed to the vast over-capacity that the industry now faces. If we were to contract from our present point in the same proportion as the Japanese, or some of the mushrooming industries, might have to contract, we would be left with a base industry so small, having opted out of the skills that we need, that we would not be able to benefit from a recovery in the industry. That is one of the basic problems.

I am a Clydeside Member. I represent a constituency with big and substantial shipbuilding industries. It is not a traditional shipbuilding constituency in the sense that it is all a memory. It is a shipbuilding constituency at the moment. My constituents are heavily involved in and dependent upon the shipbuilding industry. I have no doubt that they would want me to give a blessing to clause 1 and to a raising of the borrowing requirement. They would also want me to say that there is a crisis of morale in the shipbuilding industry, certainly on Clydeside, that is now reaching worrying proportions.

I do not wish to be alarmist. I want, however, to lay down my marker. We are reaching a point where the whole credibility of the corporate plan is being called in question on Clydeside in a very fundamental way. We have the two yards, Govan itself and Scotstoun Marine, which are in a state almost of dislocation. About 1,300 to 1,400 people who work in the steel trades in Govan are standing around doing nothing. One factor that will clearly destroy skill and productivity, and devastate morale, is people standing around doing nothing with no certainty that any work will come forward. That tragic situation is occurring in the Govan yard.

At the other end of Govan Shipbuilders, about 1,100 to 1,200 men at Scotstoun Marine know that the yard is going on to a care and maintenance basis. The men have no idea what is to happen to them or to the yard once it is on a care and maintenance basis. This situation is perhaps due to the hurried way in which decisions have been taken and the tight limits that the Government are imposing despite the borrowing requirement contained in clause 1. It is understood that the yard will go to Yarrow's, an extremely efficient and flourishing naval shipbuilders in my constituency. It is not clear what Yarrow's will be able to do with it or whether it will ever have a potential use for it. In the short term, I understand, Yarrow's is not likely to have a use for it. The men are being invited to volunteer for redundancy. But, given the devastating situation in the employment market, very few are volunteering at this stage. The men understand that there are to be no compulsory redundancies. A hopeless impasse has therefore arisen in which no one knows what the future holds.

On 1 November I said that there was a particular and substantial worry in Govan shipbuilders about future ordering. I raised that as forcibly as I could. I received a reply from the Under-Secretary of State for Scotland, the hon. Member for Edinburgh, North (Mr. Fletcher), who stood in during that shipbuilding debate. He agreed that it was perfectly true that there would be two orders for 26,000 tonnes deadweight Cardiff class carriers coming to the Govan shipyards. He accepted that this had been included in the package when the corporate plan was unveiled, and that a letter of intent had been signed. He added that the letter of intent had not yet become a firm order. He said: It is not unusual for a considerable period to elapse between a letter of intent and a contract". He went on to say: A letter can take six months or more before it becomes a firm order".—[Official Report, 1 November 1979; Vol. 972, c. 1575.] That is not unusual in the industry, and it certainly applies in this case. I do not want to be critical of the Under-Secretary of State for Scotland, who is not in his place. I notice that he has just emerged through a trapdoor. In no way do I wish to be critical, but my colleagues on Clydeside, and the representatives of the work force, took his words as being a little casual and perhaps dismissive. I accept that that may be a false impression, because I have no doubt that the hon. Gentleman is alarmed and worried about the situation.

I met the local confederation the very next day. It is very worried about morale in the yards and about keeping control in the yards when there is absolutely no hard prospect of work coming in to take up the slack. It will not be news to the hon. Gentleman to learn that there will be a meeting of the shipbuilding negotiating committee of the confederation on Monday of next week. Immediately afterwards, it hopes to meet top British Shipbuilders executives to discuss the Govan situation.

I accept that British Shipbuilders would very much like to deliver these orders, but if we find that those orders are not delivered, and unless we can get some clear commitment from the Government about work in the yards, it will be very difficult indeed to continue in the sort of limbo in which the men of skill are now placed.

I appeal to the Government to show some indication that they will take a less non-interventionist approach to the problems of Govan and many other yards in the country. As I have said before, there is a danger that they will be seen to be doing a Pontius Pilate act and washing their hands on the sidelines. However, when a man's job and traditional skills are at risk in a yard where he has worked all his life, there is very little comfort in having a Government who say "We cannot intervene. We must leave it to British Shipbuilders, which has been told that it has got to take the kind of measures that will eliminate all financial debit within a two-year period."

We all welcome the higher borrowing requirement. But let me yet again appeal to the Minister to do something to reassure an industry that is now facing an extremely serious situation and cannot be left hanging as it is at present I recognise that it may be impossible to say anything now. Perhaps it is unreasonable to expect that, but I hope that my warning about the consequences of further inaction and no news coming forward for the men on Clydeside will be taken very much to heart and that Ministers will try to act in the near future, given a situation that is becoming intolerable. Because it is intolerable, action with regard to sanctions may be taken by the men which would be in no one's interest, but they may be driven to such action by the total lack of news and encouragement from the Government.

It would be a tragedy if we were to end up in that situation in default. Once we reached that situation, it might be very difficult indeed to undo the damage. I therefore appeal to Ministers to look seriously at the effect of their policies, and at their strict financial approach to the affairs of British Shipbuilders, given the tragedy in human and economic terms in areas such as mine.

Dr. David Clark (South Shields)

I hope that the Minister will agree that the tenor of the debate has been moderate and positive. That is the way in which Labour Members have tried to approach the Bill. We recognise that the Government have undertaken a difficult task. We take them at their word when they say that they want a viable and competitive shipbuilding industry.

In essence, we are now talking about the borrowing requirement of the shipbuilding industry. We should like reassurance from the Minister on a number of points before deciding whether we shall divide the Committee. I hope that the Minister will be able to reassure us on these points, which stem from the question whether the amount of the borrowing requirement will be enough.

8.15 pm

In one way the hon. Member for Dorking (Mr. Wickenden) and my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) said more or less the same thing. The hon. Member for Dorking said that British workmen have lost their skill in building this type of ship. My hon. Friend the Member for Garscadden talked about morale. I am sure that all hon. Members would agree that they aye one arm the same thing. They are one and the same reflection of a phenomenon, because we are talking about particular areas of the country that have a number of physical things in common, such as rivers and seas.

They have another thing in common. They suffer from incredibly high unemployment. My hon. Friend the Member for Jarrow (Mr. Dixon) said that male unemployment in his constituency was 16 per cent. My constituency is immediately next door, and it has an even higher rate of unemployment. I make that point because we are talking about areas of incredibly high unemployment. Therefore, in a situation in which men are worried about their futures, and when they see uncertainty, their morale and everything associated with it is bound to suffer.

The hon. Member for Dorking was honest and frank when he said that we cannot blame British Shipbuilders. We inherited this problem from the past. But it is no use looking to the past, we must build for the future. In doing so we must recognise the difficulties. We must appreciate that the two-year time scale about which the Government are talking should not be a deadline. I hope that it is not a sort of guillotine that is hovering above British Shipbuilders. If it is seen in that way, it will affect the morale and skill of the work force even more.

Having said that, it is worth while paying tribute to a certain number of workers in British Shipbuilders. I think especially of the Tyne Ship Repair Group, where, as the Minister knows, the men gave a commitment not to strike. They kept to that. They deserve every credit for doing so, and I am glad to see the Minister concur.

In talking about the borrowing requirement, we should also think about the future of British Shipbuilders in the immediate years. That future is inevitably entangled with the policy, or non-policy, within the Common Market. That brings me back to the scrap-and-build policy. As the Minister knows, I raised this matter on 1 November and I received an answer from him yesterday. I should still like a little more commitment.

The Minister says that he is committed to the scrap-and-build policy. I should like to know whether there is any money behind it. It is easy to say "We think that this is a good idea", but may we have an assurance that, if an agreement is reached within the EEC, money will come forward from the Government to support the scheme? If the EEC scheme does not come forward, will the Minister seek power from the EEC to bring in our own scrap-and-build programme? I understand that the document to be presented to the Council of Ministers contains a number of policies—first, those funded by individual Governments; secondly, those funded by the Community; and, thirdly, a kind of partnership. I understand that the Commission has a preference for one of those options in particular but that it is for individual Governments, quite rightly, to use their sovereign right to decide which one they should follow. Will the Minister tell us, one way or another, whether there will be money to help the scrap-and-build programme of British Shipbuilders? It would be most helpful if he could give us that undertaking.

The Minister of State, Department of Industry (Mr. Adam Butler)

I have probably expressed more support for the scrap-and-build scheme than any other Minister from the member States. Surely it goes without saying that if in principle I support a scheme that involves finance, I must be supporting the input of funds. The hon. Gentleman is correct. We hope that this measure will come before the Council of Ministers next week—and, of course, I shall be in there fighting.

Dr. Clark

I am reassured by that statement, and I publicly acknowledge the enthusiasm of the Minister. But the Opposition have a right to be sceptical, because they know that this Government are very keen to cut back money supply. I hope that the Minister will fight very hard within the EEC for the scheme to be brought forward.

When we are dealing with the borrowing requirements of British Shipbuilders, as we are under this clause, as my hon. Friend the Member for Glasgow, Garscadden said, it is no use having the money unless we can do something with it. I come back to the point on which we keep probing the Government and on which we are still not satisfied—public service orders. It is known that the previous Government carried out a survey of the public service to see whether there were any potential orders. I do not know what the outcome was, but I understand that there were certain discussions about hydrographic vessels. What has happened about those? Are we to get any orders from this area?

What about British Shipbuilders using its money, possibly under the borrowing requirements, to build ships not necessarily "on spec" but for lease? I have specifically in mind liaison between, for example, the British Steel Corporation and British Shipbuilders. As the Minister knows, the factor that brought this to my mind was that when British Steel, a nationalised body owned by the people, wanted to lease a ship it leased a Scandinavian-built one from Ladbroke's, a private organisation.

Could there not be more co-ordination and advance liaison about the requirements of various publicly owned industries with British Shipbuilders to try to bring things together?

On the question of finance, I draw the attention of the Minister to a problem that I face at present and on which I should like his help. What amount of money may British Shipbuilders borrow? On 1st November, I mentioned that Peter Johnston, a firm in my constituency, had gone into liquidation, with the loss of about 300 jobs. The company had been primarily involved in fitting out ships.

Though it is bad enough for men to lose their jobs, the real problem is that 37 apprentices also lost their jobs. I am sure that the Minister and the House will agree, as they did on 1 November, that we must de everything in our power to try to retain the skill of our people. Nowhere is that more true, and nowhere is there a greater danger of disillusionment, than among young people.

I ask the Minister to intervene with the shipbuilding industry training board. An approach was made to it yesterday by a group of people in the constituency, including North of England engineering employers, the various unions, the employment services and the South Shields marine and technical college. It would be a great help if the Minister could advise us on that matter.

Will the Minister make any further comments about the amount of subsidies available to the shipbuilding industry, even within the EEC? I know that Ministers of all Governments say "We play by the rules. As far as we can judge, the other side also plays by the rules." Unfortunately, some of us are beginning to doubt that. I was very impressed by the paper produced by John Parker, in which he listed the aids given to their shipbuilding industries by our European competitors. Has the Minister any more thoughts on the terms and conditions, and is he satisfied that those in Britain are adequate?

I remind the Minister of a point that I made previously. 1 am glad to hear that he will go to the Council of Ministers meetings to fight for the British shipbuilding industry, but recently one of his Cabinet colleagues, when asked what the Common Market had achieved, said that it had stopped France going Communist. What he really meant was that the Common Market had saved the traditional industry of France, which is agriculture. That is more important than sheep—I hope that that is not too emotive—cows and turnips. In France, agriculture is an economic sub-culture which has kept many people on the land and has brought prosperity to many areas that would have been severely depressed

I suggest that my analogy is not far wrong, because the shipbuilding industry not only builds ships but provides many related jobs. For every job in the shipbuilding yards there are three or four outside. There is a sub-economy in shipbuilding areas that is vital to maintain the employment level.

When the Minister begins to barter and bargain at the Council of Ministers I hope that he will not concede the point that there will be an equal slimming down of all industries within the EEC. It must be borne in mind that, just as agriculture is important to France, the shipbuilding industry is a traditional part of our culture. We cannot concede to the EEC that it must be cut down to the same level as in smaller nations.

Mr. John Evans

I am proud to take part in this debate with my hon. Friend the Member for Jarrow (Mr. Dixon). Like him, I was born and bred in that town. I do not believe that either of us, when we were respectively union chairman and secretary at one of the major Tyneside shipyards in the 1960s, thought we would see the day when we would be discussing the problems of the shipbuilding industry in the House of Commons. However, time flies and it is interesting to note that we are both shipyard workers who left school at 14 and spent most of our working lives in the industry.

My hon. Friend gave a graphic description of the problems and conditions which shipbuilding workers have endured for so long. Part of the problem is that those who work and suffer—in many cases seeing fellow workers die—in the industry have long and bitter memories. There are deep-seated problems in the industry.

We welcome the Bill, for what it is worth. However, one of the problems facing the Government is the question of credibility—whether the workers in the industry or even the public feel that there is a true, meaningful commitment by the present Government to the British shipbuilding, ship repairing and marine engineering industries. The three industries are linked.

Although ships are not now built in my constituency, one of the largest factories there, the GEC Vulcan works at Newton-le-Willows, is a very large supplier of small diesel engines to the British shipping industry. That industry, like shipbuilding, is flat on its back at present. Considerable numbers of my constituents are facing redundancy because of lack of orders flowing from the shipping industry.

8.30 pm

I am not at all surprised that the Conservative Benches are empty, apart from the Government Front Bench. There is always very little interest on the part of Conservative Members in the problems of this industry. I am particularly sad that the hon. Member for Dorking (Mr. Wickenden) has left the Chamber. He made some very important points which deserve some answers. I think that we all recognise that the hon. Member was not attacking British Shipbuilders—indeed, he spoke in sad terms—but in cold print it will read as an attack upon British Shipbuilders. He referred particularly to three issues which concerned him, as the chairman of a major shipping company, in placing his orders in foreign yards and not British yards—price, delivery dates and lack of skills.

On the price issue, we should need a great deal of evidence and knowledge of what went on at the time of the order before we could pass judgment. From my experience in the House of Commons and my experience of three years in the European Parliament, I suspect that a very large subsidy was paid by the German authorities for the building of those ships. That may be disputed. We would need to see the evidence.

What concerns me was the hon. Member's concentration upon delivery dates. In this respect I feel that he may know a great deal about shipping but little about shipbuilding. One of the things we would all need to know on the question of the delivery date is whether British Shipbuilders had a berth available on which to put the ship. After all, one could hardly take a skeleton of a ship off a berth to put one of the hon. Member's ships on it. We would need to know a great deal more about the position before simply putting it on the record that British Shipbuilders was late in delivering, like every other British industry. We would need to know what would have been the starting date of the ship, and the completion time. That evidence was not given to us.

The other point which is of fundamental importance in the debate on this clause, which is concerned with the future of British shipbuilding, is the loss of skills. I refute the hon. Gentleman's argument that we are losing skills in the building of liners. I think that all hon. Members who have any knowledge of shipbuilding know that no one is ordering liners any more. Most people now travel in aeroplanes. Only a few liners are involved in cruising.

Dr. John Cunningham

To be fair to the hon. Member for Dorking (Mr. Wickenden), I think that he almost made the matter clear, although perhaps to get it on record, as my hon. Friend rightly says, it is important to make it plain that the hon. Member was referring to orders placed in 1978, and he said that British Shipbuilders at that time did not have the skills. If that is so, as British Shipbuilders took over only in 1977, it must be made abundantly clear that the loss of skills, if it occurred, occurred under private enterprise and not under public ownership.

Mr. Evans

My hon. Friend has anticipated one of the points I wanted to make. One of the serious problems that will face what is left of the industry of the future will be the lack of skills which will be brought about by a lack of apprentices being taken into the industry. Nevertheless, I reject the argument that British Shipbuilders is losing any skills whatever. Today British Shipbuilders workers are building some of the most sophisticated warships which have ever sailed the seas.

The hon. Member for Dorking referred to fitting out. Although he may not have realised it, there is obviously a difference in fitting out a bulk carrier or a tanker as opposed to a liner or a cross-Channel ferry. Nevertheless, in fitting out those ships certain skills are involved which apply to all ships. It is important for that to be put on the record, because I should not like people reading the report of the debate in Hansard to think that we on the Labour Benches were prepared to listen silently to even a well-meant attack on British Shipbuilders on the two issues of delivery dates and skills. In this industry we have all the skills necessary. If the industry received substantial backing from the Government in financial terms and planning terms, we could assure the world that we could build anything that the world requires.

Given the lack of capital investment in private industry, which was referred to by my hon. Friend the Member for Jarrow, British Shipbuilders has a proud record on delivery dates. In the four years following the setting up of the Swan Hunter consortium on Tyneside, every single delivery date was met.

On 1 November, the Minister said that he hoped that hon. Members would not press him on borrowing requirement limits, but we are entitled to know what commitment over what period the Government have in mind for the industry. Yesterday there was an article in the Financial Times on the scrap-and-build policy, and my hon. Friend the Member for South Shields (Dr. Clark) covered much of that aspect. The Financial Times has a proud record of leaks from Government Departments which invariably turn out to be correct—and I am not talking of just this Government. The article says: The UK Government believes the scheme would be worthwhile if it was introduced quickly, before the expected upturn begins, and if it was organised on a national basis. We are fascinated to know when the Government believe that that upturn will occur. I can see nothing on the horizon to indicate any upturn in world trade.

Most of the industry's problems result from the cataclysmic downturn in world trade over the past few years. If there was an upsurge and ships were in demand, I suspect that we should not be discussing the Bill. We are discussing the future of British shipbuilding in the context of a recession that is probably the worst since the 1930s.

I hope that the Government recognise the absolute necessity of retaining the British shipbuilding industry. We want not merely a shell but an industry that can cater for Britain's future requirements. Although we are members of the EEC—and some of us do not welcome that—we are an island and a trading nation. When world trade improves, we shall doubtless again supply ships to the world if we have a shipbuilding industry left.

I hope that the Government will give a clear undertaking to support the British shipbuilding industry during the few difficult years. Other countries are subsidising their industries, and ours should not be left to stand on its own feet to face competition that is patently unfair and in many cases discriminatory. The Government must have a long-term commitment to the industry.

It is not merely the shipbuilding industry on Tyneside, Clydeside, Merseyside or elsewhere that is affected. Other industries in other parts of the country are closely tied to shipbuilding. The shipbuilding and ship repairing industries are synonymous. They employ large numbers of people and their decline would also have an impact on other industries throughout the country. The shipyard provides only 30 per cent. of the components of a ship and 70 per cent. comes from other industries which are therefore dependent on a prosperous shipbuilding industry. They need the base of those orders to ensure that they produce the goods for domestic needs and for export. It is important to recognise that we are not discussing shipbuilding purely in terms of Tyneside, Clydeside or any of the other great yards. This industry is not only a major strategic industry but it is also one that has an impact throughout the country.

Mr. Dixon

Does my hon. Friend also agree that one of the biggest customers of British Steel, which is now in such a perilous position, is British Shipbuilders?

Mr. Evans

That is obviously an important point. One of the great problems facing the steel industry is the downturn in orders, particularly in the shipbuilding industry, as a vast amount of steel is used in the production of a ship. This endorses the point that I have been trying to make about not looking at shipbuilding in isolation. It is a major and key strategic industry and its prosperity has repercussions far beyond its areas.

I hope that the Minister will cover these points when he replies to the debate. I hope that the Government will recognise that the industry is looking for a long-term commitment from them. The industry has heard enough about lame ducks being slaughtered and profitability being the essence. The Government and the British people must recognise that this industry cannot be profitable in the short term. A major upturn in world trade is needed before there can be any hope of profitability.

Mr. Frank Field (Birkenhead)

I wish to support the Bill, particularly clause 1. My hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) put his finger on an important point when he spoke about the atmosphere and morale in the yards. The atmosphere and morale in Cammell Laird is much the same as that in other yards. It is very much affected by statements from the Government Front Bench. I am sure that Cammell Laird people will carefully comb the pages of Hansard tomorrow to see whether the Government are prepared to be more forthcoming than they have been in the past.

I visited Cammell Laird very soon after the Minister of State paid his summer visit to the yard. I was struck by the fact that both management and men were united in their comments about the qualities of the Minister. They felt that it was a welcome change to have someone who was prepared to listen, but they both went on to say that they wished he would begin to give them answers to some of their questions. I cannot help but recall those comments when I think that this is the third or fourth time that we have tried to probe the Government's thinking on the substance of the initial policy statement by the Minister of State on the shipbuilding industry.

Like many other Members on this side of the Committee, I realise that Cammell Laird faces particular problems brought about by the decline of the shipbuilding industry in this country. The announcement earlier this week about the Government's plans for Shotton have important implications for Merseyside as a whole and Birkenhead in particular. Some of my constituents work at Shot-ton, and the Birkenhead dock is primarily dependent on bringing ore into Shotton. If Shotton is closed, the Birkenhead dock might also be closed and many people put out of work.

Birkenhead has two main industries—the port industries and shipbuilding. I hope that when the Minister replies he will say something about the whole series of policies that have been put forward by my hon. Friend the Member for Whitehaven (Dr. Cunningham) on a number of occasions. I hope that this time we will have a reaction from the Government Front Bench.

8.45 pm

In particular, I hope that the Minister will comment on two areas which are crucial to the North-West. In correspondence and in the House I have asked the Minister of State what he meant when he said that the Government would try to bring forward public sector orders. I had been a Member for only a few weeks when I realised that one's questions were answered only if the Minister had good news to give. I hope that I am present in the House when the Minister announces the bringing forward of public sector orders, because he will deservedly make the most of it when he has accomplished that task. Let us hope that soon he has good news.

Like many of my hon. Friends, I fought an election campaign against opponents who said that if a Conservative Government were elected the defence budget would be increased, as it has been, and that such an increase would bring orders to shipyards such as Cammell Laird. I look forward to the time—I hope it is soon, because of the effect on morale in yards on the Clyde and in the North-West—when Ministers can announce the bringing forward of defence orders.

My third point is one about which I have asked the Minister for details before. For once, I do not expect an answer. I hope that those who work in British shipbuilding will shortly see a change in Government policy. I am sure that the Minister and other right hon. and hon. Members saw the report in yesterday's edition of The Times by Peter Hill on the possible loss of an order worth about £200 million from the Hong Kong-based World-Wide (Shipping) Group. Peter Hill went on to say that Ministers had been made aware of what is now, I suppose, a new phrase which we shall hear frequently in the House, the "attractive soft credits" being offered by our competitors to win orders which might otherwise go to this country.

The report reaffirmed that the present Government, perhaps like the previous Government, are abiding by the spirit and the letter of the OECD guidelines on competition in this field. Peter Hill emphasised that executives at British Shipbuilders had made it clear to the Government that it was not that we were competing unequally with groups or nations outside the EEC, but that we were now not competing on equal terms with our EEC partners.

I hope that the Committee will bear with me if I bring up to date the contribution that John Parker of British Ship builders continually makes to our debates. In that report in yesterday's edition of The Times he was reported as saying: 'The United Kingdom has adhered to the OECD understanding on export credit for ships, but in situations where other countries have not, and do not, it is crucial that British Shipbuilders should have the opportunity to match such terms. I hope that when the Minister winds up the debate he will for once have good news for those who work in British shipyards and for those of us who represent them. I hope that he will be able to answer some of our questions on the meaning in practice of the key policy statement which he made some months ago. I do not expect him to comment on whether the Government will change their mind about putting British Shipbuilders on equal terms with our competitors, both within the EEC and outside, when competing for orders. I hope that he will be supported by hon. Members on both sides of the Committee on any quiet directives he gave to British Shipbuilders to go out and win orders on terms equal to those countries which are snatching orders from us now.

The Minister may be surprised that I do not end, as I usually end my contributions to shipbuilding debates, with a whole string of questions. I hope that Government policies will soon be finalised and that the hon. Gentleman will be able to announce the effects of the increased defence budget on our shipyards and the bringing forward of public sector orders.

Every hon. Member who has spoken has said how disappointing it is to have an allocation of funds with which the clause deals but of which Government policy at present is making so little use.

Mr. Ron Brown (Edinburgh, Leith)

The contributions to the debate have confirmed one thing—that shipbuilding is the Aunt Sally of the United Kingdom economy. We know the reason. Basically, the industry has suffered at the hands of private owners. In the good times, they said that they did not need to invest, and when the bad times came they said that they could not afford to invest.

That could be said of many other aspects of the British economy, but it is particularly true of shipbuilding. It is bad in my constituency, where we have Robb Caledon, the other half of the famous operation on the East Coast of Scotland. The part of that operation in Leith will remain, but we must look at that shipyard. It is called the Victoria shipyard, and is well named, because it is ancient. The yard finds it hard to compete in world markets, because it is not efficient. It is extremely backward, using equipment that should belong to a museum.

The same story could be told of other parts of the country. The world economic crisis has worsened the position, as we all recognise, but it has been helped along by Government policies, which are intensifying the recession and crisis. In that situation, fewer vessels, not more, are needed. When we are fighting for contracts, we find that there is the old 1930-style strategy of a trade war, which leads to arguments for further closures. That is the problem now.

I believe that the recently announced closures are only the first round. I must be realistic. I tell my constituents "Your yard has been saved for the time being, but be on the defensive." They are on the defensive, and rightly so.

The men are willing to co-operate with management. The former owners have gone, but unfortunately there are still the old ideas in management, and those ideas will not be moved. There may be various reasons. Perhaps the present Government have something to do with it. I believe that massive investment should come from the State, and I welcome the Government's measures. They are important for investment, but they are simply a drop in the ocean compared with the magnitude of the problem. Many hon. Members have spoken of the investment in other countries.

We must look to the future. We must examine the problems of British shipbuilding and wherever possible eradicate them. It would be wrong for anyone in Government or elsewhere to pussyfoot around with the jobs and the future of many families, whether in Scotland or in England. The problems are the same.

It is interesting that the hon. Member for Dundee, East (Mr. Wilson), a representative of the Scottish National Party, has disappeared from the Chamber. I should have thought that he would at least stay to make a contribution on behalf of his constituency.

What can we do about the problem? We can argue the case for shipping lines in this country investing in our yards. It is up to the Government to put on the pressure. We should insist that the lines buy British ships. Many ships need replacing. Possibilities exist with the scrap-and-build programme but pressure must be put on the Government. Any measures we can take are limited, but we must not say that the British shipbuilding industry will go to the wall and disappear. Shipbuilding workers are leaving the industry because they feel that it is doomed. It is ironic that some shipyards are looking for skilled workers. The CBI has said that it is difficult to get skilled workers for industry, including the engineering industry. Not enough apprentices are being trained.

The Government's attitude seems to be in favour of investing overseas. Perhaps industrialists have no faith in this country. No doubt, big business will go for the fast buck and speculate. That will not assist the country or the principle of nationalisation. We all accept that nationalisation is an important step forward. Even Conservatives support it to an extent. Of course, it is not perfect, and when it operates in a capitalist economy it does not operate on behalf of working-class people.

Talking in Socialist terms, we require the "commanding heights" of the economy—as pointed out by Nye Bevan—to run industry and help shipbuilding. I hope that the next Labour Government will give resources to the industry to modernise the yards. We must commit ourselves to that proposal and state it to the industry and its trade unionists. In that way we shall win their confidence. The electorate at large has little confidence in the Government's administration but at least we can state our commitment.

Mr. Ernie Ross (Dundee, West)

I welcome the opportunity to speak in the debate. On 1 November the Under-Secretary of State for Scotland did not clear up several matters. I should like to raise those today. I associate myself with the remarks made by my hon. Friend the Member for Edinburgh, Leith (Mr. Brown) when he regretted the absence of the hon. Member for Dundee, East (Mr. Wilson). I find it strange that at this vital Committee stage on the Shipbuilding Bill the hon. Member for Dundee, East, who is an honest and sincere man, should not find it necessary to be in the Chamber. We find ourselves in this position because of the actions of the hon. Member for Dundee, East and his colleagues. On 3 May some of his electorate were rewarded for their support by joining the unemployment register. It is sad that he is not here tonight, because I am sure that he would have made a valuable contribution.

I hope that the Minister has seen a copy of that new newspaper, the Dundee Standard. It contains a full page of photographs outlining some of the problems faced by the workers in the yard. I served my apprenticeship there 19 or 20 years ago. The pictures were familiar to me but it was unacceptable that, 20 years later, the platers who bring the plates from the yard to the ship are using the same broken-down, dilapidated barrow that was in use when I was an apprentice. That is the answer to the hon. Member for Surrey, North-West (Mr. Grylls) who tried, on Second Reading, to make play of the supposed losses incurred by Robb Caledon. The hon. Member for Dundee, East and I answered the hon. Gentleman on that point.

9 pm

Discussions are taking place in the joint working group on the Dundee yard and other yards, including Leith, where the situation is slightly worse than that at Robb Caledon. The majority of yards could do with more subsidy. The problem is that the sums contained in the Bill are not as large as we would like.

On Second Reading, the Under-Secretary of State for Scotland did not satisfy my hon. Friends and myself in relation to the two-year period. I quoted from the Cambridge economic forecast which states clearly that there will be a fall of 9 per cent. in shipbuilding demand this year and a further 7 per cent. fall in 1980–81. Labour Members have a right to press the Government to ensure that workers in the yards are convinced that there is not an exact time limit within the two-year period.

Despite the Government statements, reported in the Financial Times on Monday, it would be helpful to those in the industry if we could know which scheme the Government intend to pursue for the scrap-and-build programme. It would be relevant for the Minister to answer that point tonight.

In Dundee a joint working party has been set up between British Shipbuilders, the shipbuilding negotiating committee, shop stewards and the local community. It may not be appropriate for the Government to make a statement on discussions that are taking place, but I am confident that the group's report will make nonsense of the comments of the hon. Member for Surrey, North-West on Second Reading.

I have knowledge of the agreements in the Dundee yard and I am confident that the working party will confirm that the agreements made between the finishing trades, the general workers and the boilermakers are such that if they had been used properly by the management, some of the problems facing Robb Caledon would not exist. It is important to note that British Shipbuilders has made significant changes in its top personnel in that yard. I hope that those points are taken into account in any deliberations that take place.

I am also confident that the working party will acknowledge that many of the competitive yards in British Shipbuilders do not have the agreements that exist in Robb Caledon and that the lesson is that those yards could be even more competitive if they had such agreements. I hope that in these discussions there will be consideration of the idea that has been floated of having a synchro lift installed in the Dundee yard. The workers in the yard and I, and anyone with any knowledge of shipbuilding, fail to understand where the local district council got the idea that somehow if the synchro lift was introduced 2,000 jobs would be created in ship repairing. It stretches one's imagination to work out where one could employ 2,000 people in ship repairing anywhere in this country. That number of additional jobs is just not on.

If the study group concludes that Robb Caledon should have a synchro lift, I hope that there will be no problem with the funding. Some of the sums of money that have been mentioned are quite considerable. There has been talk of £6 million, and I hope that the Government will not prevent British Shipbuilders from getting the necessary funds to ensure that the project goes ahead if it is found to be viable.

The primary aim of the workers in the Robb Caledon yard is to retain shipbuilding there. The comments of the Under-Secretary on Second Reading demonstrated the need to retain shipbuilding at the Dundee yard. He suggested that one of the features that could be used under the Blackpool agreement was inter-yard transfers. I am sure that he realises that to apply that scheme to Dundee would mean moving workers and their families 60 miles to the next nearest yard. As my hon. Friend the Member for Leith said, that is not the most modern and up-to-date of yards. I doubt whether it could absorb workers from other yards, and anyway the problem of moving workers and their families from Dundee would make transfers unacceptable.

I hope that the Minister's reference to a sensible plan for recruitment is not meant to infer that apprentices will not be taken on. If we are to have a viable industry in the 1980s and beyond, we must continue to recruit apprentices, both in manual trades and for the design staff. If we do not train young people in the design skills, we shall never be able to compete with foreign yards. In particular, I should like to see the skills in the Robb Caledon design office retained. I hope that the Minister will indicate tonight that there is no intention of downgrading or eliminating the yard's design capability.

The workers in Dundee hope that the Government will be prepared to review the borrowing limits favourably and seriously if the upturn in demand is as certain as the Cambridge economic review has suggested. We hope that this is only the first stage of a commitment that in the 1980s and 1990s we shall have a viable shipbuilding industry.

The Under-Secretary of State for Industry (Mr. Michael Marshall)

The debate has ranged very widely. I make no complaint about that. However, it presents me with some difficulties, as to answer all the questions raised would take me well beyond the rules of order as they apply to a narrowly drawn clause.

We are discussing the doubling of the borrowing powers of British Shipbuilders. The hon. Member for Whitehaven (Dr. Cunningham) summarised the key questions relating to that aspect, and there was a helpful and constructive debate. I recognise the sincerity and deep interest shown by hon. Members on both sides of the Committee. The Government want to respond. Although, in the ambit of this debate, it is difficult to consider all the matters raised, we take on board many of the points made.

Perhaps the hon. Members for Edinburgh, Leith (Mr. Brown) and Dundee, West (Mr. Ross) were attempting to hot things up towards the end of this part of our debate. I remind there that we must consider another clause and the Third Reading, and I hope that we may return to some of the broader issues later.

The way in which the debate ranged reinforced many points that were raised on Second Reading. I shall try to pull together into five main areas the points raised by hon. Members on both sides. The debate highlighted the fact that the borrowing powers must be seen within a broader context. Frankly, I wish that we could answer some of the key questions that were raised. The question that dominates the minds of all Members of Parliament is this: to what extent can we predict the upturn in this market?

I was heartened to hear the hon. Member for Wallsend (Mr. Garrett) say that things were looking more optimistic in his part of the world. However, this is a difficult problem, whatever the mechanism we seek to balance the borrowing powers, including the intervention fund, and on whatever basis we seek to help this great industry. The trade unions have shown that by their acceptance of the proposals put to them by British Shipbuilders. We recognise that this will be a difficult, uphill task over many years.

Within the five broad areas, I refer first to the intervention fund. The detail was spelt out pretty well on Second Reading. We now have a two-year agreement, which will help us to move ahead with rather more certainty. Part of the importance of the intervention fund and its retention brings me back to a question raised by a number of hon. Members, including the hon. Member for Newton (Mr. Evans). It is natural for us all to distrust other areas and the subsidising of their industries.

This industry, almost more than any other, is one in respect of which our membership of the Community has been of great value. In setting the limits for the intervention fund—indeed, in looking at policies on scrap-and-build and many other questions—we have an opportunity to test and evaluate the sincerity and determination of other countries to play by the rules. The Government would want to move quickly, upon any evidence of unfair competition from hon. Members on either side. I urge all hon. Members, with their experience and constituency contacts, to help us if they feel that there is such evidence. The intervention fund is a key in that sense.

I now refer to the scrap-and-build scheme. My hon. Friend the Minister of State is grateful for the expressions of good will and support as he goes to discuss the matter with the Council of Ministers on 20 November. The House will understand why, in this delicate negotiating position, this is neither the time nor the place to declare the Government's hand in detail. We are looking for a cost-effective scheme. My hon. Friend has been well to the fore and, many would admit, pre-eminent in urging this cause. I know that he appreciates, as do all Government supporters, the way in which the Opposition gave help and support in that endeavour.

Looking at the wider context within which clause 1 has been viewed tonight, all hon. Members recognise that a credit race to replace the intervention fund race, or any other part of the shipbuilding war, will not help anybody. That is why there is common agreement that we should maintain the OECD limits on credit.

9.15 pm

Productivity, the fifth key element, has played a large part in the debate. Many of us were grateful to my hon. Friend the Member for Dorking (Mr. Wickenden), who was not able to stay for the whole of the debate and who was particularly anxious to hear the speech by the hon. Member for Jarrow (Mr. Dixon). My hon. Friend always gives a courteous and careful hearing to anyone who is an expert in his field and it was helpful to hear the views of someone who has to make purchasing decisions.

The key question on productivity is how we assess whether our industry is moving towards greater productivity. The trade unions have shown some recognition that all is not well. The hon. Member for Newton gave us some helpful advice about the technical assessment that would be necessary to establish fairly what is a late delivery. He also discussed the problem of start-up time. I think, however, that he would be the first to recognise that with a thin order book one might expect to find berths more easily than at other times.

Mr. John Evans

It does not necessarily follow that an empty berth, which might be suitable for building a VLCC, woud be ideal for building a cross-Channel ferry. It is not just a question of empty berths. The important point to recognise is that the available berth should be suitable for the ship required.

Mr. Marshall

The point is well made. However, I think that the hon. Gentleman will accept that, at a time when there is greater spare capacity, necessary adaptation and change is more feasible than at other times. The point about market opportunity that has been made in the debate is one that many in British Shipbuilders will no doubt take on board.

The delivery differential in the contract for the Esso support vessel which went to Finland—when so many competing firms were quoting a two-year delivery date against our three years—demonstrates that productivity is not an idle concept. Many hon. Members, with their experience of the industry, appreciate that this is a key issue and that it is part of the basis on which the trade unions and management of British Shipbuilders are striving to make the industry competitive in probably the most internationally competitive manufacturing game in the world.

The hon. Member for Wallsend was a little more optimistic, and I hope that that optimism reflects market trends. We must not get too excited at the prospect of a few more orders this year than last year for British Shipbuilders, because orders are still well below capacity. When talking to ship owners I find a remarkable degree of unanimity among them about the age of their fleets. They tend to say that their vessels are modern. The passenger liner industry, in which Clydeside made its name famous all over the world, is declining. More people are flying and so the liner market becomes increasingly limited. The hon. Member for Jarrow, with his trade union experience, was perhaps led astray when he referred to my hon. Friend the Under-Secretary of State for Scotland as being sarcastic. I am sure that if he re-reads column 1576 of the Official Report he will find that my hon. Friend was welcoming his contribution.

My hon. Friend made a valid point about scrap-and-build and the way in which that may be extended to ship repairing. The Government will consider it.

The contribution of my hon. Friend the Member for Dorking was followed by a speech by the hon. Member for Glasgow, Garscadden (Mr. Dewar). There was a degree of common ground. The industry is declining and there is a fear that the skills will slip away. There is evidence that some of the most able workers are leaving the industry.

Hon. Members have sought assurances that the Government are doing all that they can to deal with their anxieties. The Government understand the problems. Nobody would wish to stand at the Dispatch Box and say that we are doing anything but pursuing with the utmost vigour the opportunities to help this great industry. That applies to public purchasing and wherever there are opportunities to assist.

It is difficult to make off-the-cuff pronouncements in the midst of the negotiations within the Community and when we are reviewing the number of issues, including hydrographic vessels.

The hon. Member for Whitehaven described accurately the basis upon which the clause provides for the borrowing powers to be doubled in two tranches. The first tranche involves £500 million, with provision for a further increase, subject to the approval of the House. The borrowing powers cover the aggregate amounts that British Shipbuilders and its wholly owned subsidiaries can borrow, other than by way of interest and loans exempted under section 11(9) of the Aircraft and Shipbuilding Industries Act and public dividend capital received by British Shipbuilders.

The hon. Member for Whitehaven asked whether I could assure him that that was enough. When he asked the question, the hon. Member knew that it was unanswerable. The state of the market and the degree of international agreement must be considered. The hon. Member will recognise that borrowing powers and the revenue account are separate. Profitability can affect the degree to which borrowing powers are necessary.

Let us examine what has happened in recent months. British Shipbuilders has so far drawn £135 million from the Exchequer, against a ceiling of £300 million, plus £33 million by way of foreign borrowing in connection with the Polish deal. It also has a temporary borrowing facility of up to £30 million.

British Shipbuilders estimates that its limit will be exceeded by early 1980. This borrowing limit was set by the previous Government to cover a five-year period but it will probably be taken up in about three years.

Mr. Ian Lloyd (Havant and Waterloo)

Do the figures that my hon. Friend has just given take account of the expenditure of £170 million in excess of the expenditure agreed for the Polish deal?

Mr. Marshall

I cannot give an answer, but I shall be happy to inquire about it. We are speaking of basic global sums to which British Shipbuilders had recourse.

The trend in borrowing reflects the adverse trading conditions facing the industry. It is important to stress that the increase in the borrowing limit in no way means support for British Shipbuilders additional to that which was outlined in my right hon. Friend's July statement, which set loss and cash limits for this year and a loss limit for next year.

Some of the borrowings that have gone in the past to capital investment reflect a continuing trend. The figures are interesting. In 1977 and 1978 capital expenditure, less grants, totalled £17 million. Last year the figure was £23 million. Expenditure this financial year is running at about the same level.

On capital expenditure, it seems that the order of magnitude is running at a steady level. A large part of that expenditure has been used for modernisation schemes, some of which were started prior to nationalisation. It may be of interest to the hon. Member for Birkenhead (Mr. Field) and other hon. Members to know that half of that expenditure has been spent on the naval yards. I recognise the hon. Gentleman's interest in the naval yards because Cammell Laird has been moving into that area.

The remainder of the borrowing is accounted for by losses that, after tax and interest, amounted to £93 million to 31 March 1978 and £64 million in 1978–79. In view of the uncertainty of the future size and shape of the industry and the problem of assessing market demand, I have tried to show that it is not possible to say how long the money will last.

It was explained on Second Reading that we have asked British Shipbuilders to make substantial progress towards viability. I hope that the new limits will be longer than the five years estimated for the previous limits. In general, the Government feel that this is the right measure and that clause 1 reflects a basic undertaking given to British Shipbuilders at a difficult time. It recognises the degree of agreement reached with trade unions on the present contingency planning. In that sense, and in that spirit, I commend the clause to the Committee.

Question put and agreed to.

Clause 1 ordered to stand part of the Bill.