British Shipbuilders Bill

HC Deb 17 November 1982 vol 32 cc282-363

Order for Second Reading read.

3.42 pm

The Minister of State, Department of Industry (Mr. Norman Lamont)

I beg to move, That the Bill be now read a Second time.

The purpose of the Bill is to make it possible to introduce private investment into subsidiaries of British Shipbuilders. It is also intended to make it easier for the board of British Shipbuilders to take decisions that are in the best commercial interests of the corporation.

The House well knows the Government's policy towards the public sector and their desire, wherever possible, to encourage privatisation. British Shipbuilders should be no exception, but existing legislation prevents even a modest element of privatisation. The Bill, by removing the impediments, is the first step in that direction.

Hon. Members will be aware that under the Aircraft and Shipbuilding Industries Act 1977 British Shipbuilders was given a statutory duty to build and repair ships and slow-speed diesel engines. The 1977 Act imposed a series of conditions under which the corporation had to carry out that duty. The Act is a straitjacket for the corporation. It prevents it from entering into joint ventures with the private sector, and it makes it difficult for the corporation to get out of particular activities. In the Government's view, this is far too restrictive for a corporation whose five main divisions—merchant shipbuilding, warship building, engineering, offshore work and ship repair—are so different and diverse. Indeed, the statutory duties that are imposed by the legislation do not even apply to all its activities. Therefore, there is a case for rationalising on these grounds alone. We want to give commercial freedom to the corporation, in line with our conviction that private enterprise has a major role to play.

Mr. Bob Cryer (Keighley)

rose—

Mr. Lamont

I shall give way later.

The powers proposed in the Bill will be familiar to the House, because they are closely modelled on the Iron and Steel Act 1981, which clarified the British Steel Corporation's power to enter into joint ventures. As a result of the 1981 Act, a number of joint ventures between the BSC and the private sector have come into existence. However, although they are closely modelled on that Bill, it may help if I briefly describe the Bill's main provisions.

Clause 1 repeals section 2 of the 1977 Act, which imposes statutory duties on British Shipbuilders to promote the production and repair of ships and certain marine engines. It replaces those statutory duties with powers. Therefore, British Shipbuilders will be free to choose whether to engage in activities that it is at present obliged, by statute, to undertake.

Section 2 of the 1977 Act imposes several subsidiary duties on the corporation. The requirement to carry out those subsidiary duties is also repealed by clause 1.

We are taking this opportunity to clarify British Shipbuilders' position on national defence requirements. The Ministry of Defence is British Shipbuilders most important single customer and British Shipbuilders will, of course, continue to pay full regard to its requirements. Under the Bill, the defence implications of British Shipbuilders' activities and other matters relating to the national interest will be the Secretary of State's responsibility. That seems to be a logical approach. National defence is first and foremost the responsibility of Government.

The statutory duty for British Shipbuilders to promote industrial democracy is also repealed. The form that employee involvement takes will, of course, remain the responsibility of the BS board. Following the amendment to the Companies Act 1967 introduced last month into the Employment Act, the corporation's subsidiaries will report each year on the progress made.

Clause 1(3) gives BS permissive powers to undertake the activities previously covered by duties. It also makes it clear that BS may promote the carrying out of these activities by others, whether or not those others are wholly owned subsidiaries. That provision will allow British Shipbuilders to undertake joint ventures with the private sector.

Dr. John Cunningham (Whitehaven)

The Minister said that one reason for the Bill was to remove inflexible controls over the management of BS, including such things as the duty to have regard to national defence and industrial democracy. How many requests has he received from the corporation to make those changes? What changes has BS asked him to make?

Mr. Lamont

I shall come shortly to the corporation's attitude. The Government believe that the corporation should determine its areas of business solely on commercial grounds and that defence requirements should be judged by the Government.

Clause 2 introduces important new powers for the Secretary of State. He will be able to direct BS to dispose of assets and parts of its undertaking and to limit or cease activities. These powers will be subject to a negative resolution in either House.

The power to direct BS to limit or cease any activity will, among other things, help to prevent unfair competition. As hon. Members on both sides of the House know, there has been deep concern among the private sector ship repairers about unfair competition from BS almost since the corporation's inception. Private sector engine builders have for a long time complained about unfair competition from British Shipbuilders.

It seems to us that in dealing with any future problems of unfair competition the Government's position will be stronger with these powers of direction. We shall, of course, consult the board and the trade unions and we hope that we shall be able to act in agreement with BS, both on unfair competition and disposals. However, reluctance by nationalised industries' boards to surrender part of their empires is not unknown.

Mr. Kenneth Lewis (Rutland and Stamford)

How will the Bill deal with the unfair competition that British Shipbuilders faces from overseas companies building subsidised ships?

Mr. Lamont

We constantly address ourselves to that question, and I am sure that my hon. Friend knows that the intervention fund gives direct assistance with almost every order that BS gains. That instrument of subsidy has been designed specifically to help our industry compete with firms in the Far East and elsewhere. I shall say more about that aspect later.

Dr. David Clark (South Shields)

Will the Minister confirm that he is under great pressure from private ship repair yards which want no further competition? What would be the Government's attitude to a workers' co-operative that wanted to buy a defunct BS yard? Would the Government allow a workers' co-op to negotiate with BS to take over a yard and to compete against the private interests that are putting so much pressure on the Minister?

Mr. Lamont

Of course we would take a favourable view of that. We would have no objection to people employed in a BS repair yard negotiating with British Shipbuilders to buy the yard and to establish it as an independent unit in fair competition with the private sector and BS. That is a good idea and a favourable development. I assure the hon. Gentleman that if he puts such a proposition to me I will ensure that it is favourably considered by BS.

Clause 2 of the Bill contains important safeguards to prevent British shipbuilders from making changes in its organisation that would be incompatible with the introduction of private capital. They will also prevent activities that are important for our defence interests from coming under foreign control. In addition, by providing powers to direct the setting up of employees' share schemes, the Bill will allow us to honour our commitment to give employees the opportunity to buy shares.

Following the precedent of the Iron and Steel Act 1981, clause 2 imposes a duty on British Shipbuilders to organise itself so that its activities are carried out in the most efficient manner.

Mr. Mike Thomas (Newcastle upon Tyne, East)

Will the Minister of State confirm that the Bill empowers the Government and the Secretary of State to direct that part or all of a subsidiary formed under the new arrangements could be sold to the private sector? Would not those in the private sector be unlikely to buy such a subsidiary or take a stake in it unless the guaranteed profits of warship building were available?

Mr. Lamont

The hon. Gentleman's comments about the powers in the Bill are broadly right. I shall deal specifically with warship builders.

We believe that the changes are desirable, because at present BS can be prevented by existing legislation from acting in its own best interests. It is plainly absurd that it could be prevented from forming joint companies with the private sector even if it wished to do so. I particularly address that point to the representatives of the SDP who have said that they support partnership between the public and the private sectors and new ways of financing the public sector. Existing legislation is an obstacle to that. The Bill removes those obstacles, and if the SDP were consistent it would support the change.

Surely the idea of joint companies between the public and private sectors is sensible. If the SDP votes against such a modest proposal, it will show that its reactions are as Pavlovian and as knee jerk as those that it attributes to other parties. It will show that the SDP's view is neither pragmatic nor principled but simply calculated to be different from the views of others. Views about ownership may differ, but that does not mean that the boundary between the public and private sectors should be fixed by legislation for all time. That is the way to the museum economy.

I can understand Labour or SDP Members opposing steps that might be taken under the powers of direction in the Bill, but that would mean opposing those steps when they are taken. To vote against enabling legislation is to be dogmatic, which seems an immoderate stance for those who call themselves the moderates of the centre.

It must be in the interests of an industry if it can get away from the clutches of the Treasury, from having its investment decisions reviewed by Ministers and questioned in the House and from its hard-pressed management having to put in time before Select Committees. All those requirements are the inevitable and proper obligations placed on State industry. They are proper when the Government are the bankers and the owners, but that is no way to run a business and I am sure that all the managers of nationalised industries agree with that.

Separate businesses within BS will do better if they are freed from the legal straitjacket. Joint ventures will allow them to draw on the managerial and financial resources of the private sector. White Papers on nationalised industries, cash limits, financial targets and efficiency audits are no substitute for commercial freedom. British Shipbuilders' most powerful competitors all have commercial freedom, and only commercial success will halt the loss of employment in BS.

It is absurd to pin hopes of preserving employment on an ever-growing combination of public ownership and subsidies. The taxpayer has financed over £540 million of losses in BS, but that has not solved the problems. Some hon. Members, including my hon. Friend the Member for Rutland and Stamford (Mr. Lewis), draw attention to unfair competition and subsidies elsewhere, but the one thing that cannot be subsidised is delivery dates, and that is where our competitors have sometimes had the edge recently.

Those are the reasons why we want to see an injection of private resources into British Shipbuilders' activities. However, I stress that the Bill does no more than enable that to happen. Some of the corporation's most important activities will remain in public ownership for the foreseeable future. Merchant shipbuilding is unprofitable and in present conditions would obviously not be attractive to a private investor. The Government will have to continue to support merchant shipbuilding for the foreseeable future.

Mr. Derek Foster (Bishop Auckland)

How can the Minister talk about commercial freedom while the EEC is putting pressure on all its members to phase out State aid at a time when the Japanese have developed a powerful cartel? Is not that the commercial freedom of the madhouse? We are the only people in favour of commercial freedom and we are in the most vulnerable position of any shipbuilding nation. Others are garnering their strength. How is that commercial freedom?

Mr. Lamont

I disagree with the hon. Member. The European Community regulates State aid within Europe and there is no reason to believe that Britain's support to its industry is less than that of other European countries. As to the Japanese, the hon. Gentleman used the phrase "forming a cartel", but all the evidence shows that the Japanese Government's support for its industry is less than ours. We should be deceiving ourselves if we believed that the secret of Japanese competitiveness was simply Government support. Japanese shipbuilders have many advantages and they are much more competitive than many European organisations.

The hon. Member for Newcastle and Tyne, East (Mr. Thomas) mentioned warship building. Warship building is profitable and is one area of the corporation's activities that could attract private sector investment. However, I should emphasise one point. The Bill will prevent defence interests, such as warship yards, from falling into unfriendly hands. Nevertheless, the view of Opposition Members and of the right hon. Member for Stockton (Mr. Rodgers) is that, because the Ministry of Defence has been British Shipbuilders' main customer, it should remain in public ownership. That misses the point. We must return to a position where the Ministry of Defence is not its main customer. Before nationalisation, exports accounted for 50 per cent. of its business.

As the chairman of British Shipbuilders said, many jobs depend on regaining lost markets overseas. I was extremely surprised when the right hon. Member for Stockton supported the public ownership argument the other day. I know what Labour Members believe, but it is surprising that the SDP should believe that, for example, if the National Health Service is the major customer of the pharmaceutical industry, that industry should be nationalised. There is no reason why a company that is a main supplier to the Government should not be in private hands. What is important in this case is the ability of the warship builders to compete as successfully in world markets as they used to do.

Mr. William Rodgers (Stockton)

The argument is simple. The shipbuilding industry is nationalised and the Ministry of Defence is the largest customer of its shipbuilding section. The shipbuilding section is often successful in obtaining foreign orders. If that is so, how will a privately owned warship building sector be more able to attract the orders that it does not attract at present?

Mr. Lamont

The right hon. Gentleman's facts are not up to date. The industry has not attracted export orders and has achieved nothing like the success that it had before nationalisation.

Mr. Mike Thomas

That was 10 years ago.

Mr. Lamont

Whether one talks about shipbuilding, aircraft or any industry that supplies the Government, there is no reason why it should be publicly owned.

A second reason for the Bill is that it is anomalous that, even if British Shipbuilders decided that it wished to get out of one activity, it could not do so. If, for example, the corporation decided that it did not wish to remain in ship repair—and I think that there are strong reasons why it should not—its statutory duties could prevent it from following its commercial instincts.

The board of British Shipbuilders has, of course, been consulted on our intention to change the framework within which it operates. The board is in favour of privatisation and the injection of private capital into the industry, but it is opposed to fragmentation of the corporation. It believes that the piecemeal disposal of mainstream activities could damage future viability. I should emphasise to the House that the Government would exercise the powers in the Bill only after taking into account the views of the board and the effects on the rest of the industry. We intend to build on the industry's strengths. Warship building is the only part of British Shipbuilders to make substantial profits since nationalisation. It would be wrong if those companies were starved of investment because of losses in the rest of the corporation. In the past, capital expenditure has suffered because of the demands for extra cash to meet unexpected trading deficits. Privatisation could open new sources of finance and help with investment.

Mr. Robert C. Brown (Newcastle upon Tyne, West)

Warship building guarantees profits because it is underwritten and the contract price is fixed at the beginning of the job. Does the Minister believe seriously that if British warship building is privatised we can sustain a merchant shipbuilding industry in Britain?

Mr. Lamont

We should not maintain warship building in public ownership in order to maintain our merchant shipbuilding capacity. The two should stand separately. The hon. Member for Newcastle upon Tyne, West (Mr. Brown) said why he believes that warship yards make profits, but we must deal with more than domestic sales. We wish to see the same export sales that existed before nationalisation.

A shipbuilding industry need not be totally publicly owned to survive. Among British Shipbuilders' competitors, the French industry is a mix of public and private ownership and the German industry is mostly private. I need hardly remind the House that the most successful shipbuilders, in the Far East, are privately owned.

However, Sweden began to move shipbuilding into public ownership in 1975, since when more than one out of every two jobs in its merchant shipbuilding industry has disappeared. In British Shipbuilders, more than one quarter of jobs have disappeared since nationalisation. Time and again experience has shown, in this and in other industries, that nationalisation cannot protect jobs.

The Bill is another example of the Government's determination to strengthen the industry. Since we came to office, we have provided the crorporation with more than £600 million. Cash requirements have been halved, and capital expenditure, which when we came to office was running below the needs of the corporation, has been increased. We approved the substantial project for the modernisation of Vickers. Throughout a long and difficult period, the Government have supported the industry and they will continue to support the merchant shipbuilders.

Labour Members talk about investment, but they should know that investment by itself is not enough. What matters is not the quantity of investment but its quality and the use to which it is put. A problem of the industry is that the massive investment in the 1970s did not produce a significant increase in productivity, which has not yet passed the level reached before nationalisation. There have been achievements, especially under the present chairman, Mr. Atkinson. In previous debates I paid tribute to him, to his management teams and to his work force for their effort, but we still have a long way to go to catch our competitors. The Bill will be an additional spur to even greater efforts.

The House should know that we are examining British Shipbuilders' new corporate plan. I told the House in April that it would be wrong to place great reliance on the forecast in the previous corporate plan of a continuing improvement in real prices. Unfortunately, our doubts on that have been more than justified and British Shipbuilders and the shipping industry once again face a severe recession.

We cannot isolate British Shipbuilders from those severe conditions. They will mean that the corporation will not be able to achieve its loss target for this year, which is £10 million after intervention fund assistance. We shall have to consider British Shipbuilders' new corporate plan and financial support for British Shipbuilders in the context of the massive overcapacity that exists world-wide. We must recognise—this relates to the intervention by my hon. Friend the Member for Rutland and Stamford—the dangers of being drawn into a subsidy race. It would be against the interests of British shipbuilding to add to existing overcapacity. The Government do not intend to go down the road taken by the previous Labour Government who authorised the disastrous Polish shipbuilding deal. When we have completed consideration of the corporate plan, I shall report to the House.

The industry faces difficult market conditions. I know from my visits to the yards the great efforts being made to win orders. Those difficult conditions are no reason for failing to give the industry the chance to attract private capital and entrepreneurial and managerial skills. That should be a challenge and an opportunity, and not something to be feared, as apparently the Opposition do.

We are taking powers in the Bill to enable the Secretary of State to direct the board on disposals and to limit or cease activities where that is in the industry's best interests. The other day a right hon. Gentleman referred to the matter as being only a question of theology. I dispute the word "only". But it is not a matter of theology. There is nothing theological about helping the shipbuilding industry to improve its ability to compete and survive. It is only by harnessing public and private resources that the battle for orders and jobs will be won.

I commend the Bill to the House.

4.11 pm

Mr. Stanley Orme (Salford, West)

The Bill is not relevant to the problems facing the shipbuilding industry. If the Minister is to divide warship building from the building of the merchant fleet, that will mean the end of merchant shipbuilding in the United Kingdom. We shall be giving up, after all the sacrifices made by both the people in the industry and British taxpayers, if we take the soft option of giving warship building to the private sector. It will make a profit and that profit will be at the expense of British taxpayers.

In effect, the Bill contains only two clauses. It does nothing to further the industry. Many of my right hon and hon. Friends have great experience of the industry in the areas they represent and will be able to speak with real authority. There is no evidence that the board of British Shipbuilders wants privatisation. Of course it says "Yes" when the Government hold a pistol to its head. If one looks at the submissions made to the Select Committee on Industry and Trade, British Shipbuilders does not advocate privatisation. It advocated the improvement of the shipbuilding industry by different forms of investment. It did not say that the answer to the problem was privatisation. The industry was taken into public ownership and saved in 1977 because of the failure of the private sector. We would have had no shipbuilding industry if we had not taken it into public ownership and supported it with Government finance and reorganisation. A substantial price has been paid by those who work in the industry, quite apart from the investment made by the British taxpayer.

Mr. Michael Grylls (Surrey, North-West)

The point about the separation of merchant shipbuilding from warship building is that at the moment merchant shipbuilding is unfortunately in trouble. We hope that it will improve. The warship building yards are still doing well. If they are left together there is a danger that the warship building yards will be in trouble because they will be starved of investment. There will be then two industries in trouble and not one.

Mr. Orme

Those are not the facts that have been put to me by the people in the industry. Since public ownership about 20,700 jobs have been lost from the shipbuilding industry, leaving about 65,000 people directly involved. With the transfer of a number of yards from merchant to offshore and naval building, merchant shipbuilding and engineering are now carried out in 15 yards compared with 27 in 1977, in 28 berths compared with 66 in 1977, in two marine engine building companies compared with five in 1977. Those reductions were carried out without any major industrial relations confrontation. The recent dispute at the Robb Caledon yard has been the only serious industrial dispute within British Shipbuilders. I know that my hon. Friend the Member for Dundee, West (Mr. Ross) will confirm that.

There has been a considerable improvement in performance. A loss of £110 million in 1979–80 was reduced to £20 million in 1981–82 in a severely depressed market. That is the background against which British Shipbuilders is having to work.

The Bill relates to the powers and duties of British Shipbuilders. It is not, as the Minister said, a strictly privatisation measure similar to the British Aerospace Act 1980. It allows the Secretary of State to direct the corporation to transfer assets into a specially formed subsidiary company or companies and to sell those companies if the Secretary of State so directs. It is an enabling Act that gives wide powers to the Secretary of State. Some of my hon. Friends are well aware of the arguments about enabling Acts. For instance, within the Labour movement we have the Militant Tendency. My word, the Government can show it a thing or two. The Government are taking powers without further parliamentary control. In my opinion, that is against the principle of parliamentary democracy. The Government are playing fast and loose with the House of Commons.

Mr. Mike Thomas

If we are not careful, the shipbuilding industry will become like the steel industry, which was brought into public ownership for good reasons at the outset and then turned into a political football and kicked backwards and forwards by the Labour and Conservative Governments until it was almost destroyed.

Mr. Orme

We do not want to kick it about. We want it to remain within the public sector because we believe that that is the correct place for it. The hon. Gentleman voted for the measure at the time and I am encouraged to know that he will vote against the Government this evening. He is consistent on this issue.

Can the board refuse to comply with the directions of the Secretary of State if in its opinion such directions are against the interests of British Shipbuilders? Could there be confrontation? The question arises from the Bill. The division between the board's powers and the Government's wishes has not been clearly defined. The Minister mentioned in detail the changes, which will give the Secretary of State wide powers.

I understand tht some claims for compensation from the 1977 nationalisation that went before the European Commission of Human Rights are still outstanding. Can the Minister tell us the up-to-date position and say how that situation relates to the changes? The Government cry crocodile tears, but we should have an answer.

Mr. Norman Lamont

What is the purpose of the right hon. Gentleman's question about compensation before the European Court? Does he believe that the nationalisation terms were unfair?

Mr. Orme

We just want to know the Government's attitude. They have been in office three years and have done nothing about it.

Mr. Don Dixon (Jarrow)

When British Shipbuilders was nationalised in 1977 the three warship yards received about £25 million compensation based on 1974 figures. They claimed £75 million. The Tories said that they would rectify the position when they came to power.

Mr. Orme

My hon. Friend has great experience in the matter and I thank him for what he says.

The hon. Member for Surrey, North-West (Mr. Grylls) mentioned the breaking up of the yards and the division between merchant shipbuilding and warship building. That would be the death knell of British shipbuilding as we know it. If the yards are split, will the Government give preference to private yards? Will they favour those in which private money has been invested? The buyers will tell the Government that they have bought the yards and want the invesment, whether in warships or whatever.

What is the Government's policy on warship orders? The Minister talked about the lack of overseas orders. Prior to nationalisation, for virtually a decade, there were no overseas sales. In the 1950s we built about 40 per cent. of the world market.

Mr. Douglas Jay (Battersea, North)

Fifty per cent.

Mr. Orme

Now it is down to 4 per cent. During the decline, when Japan, Korea and other European countries went into merchant and warship building, our industry was in private hands and no investment was made. Our share of the market virtually disappeared.

The Minister might at least have paid tribute to the work of British Shipbuilders during the Falklands dispute—to the turnround of ships and the skill called upon in the interests of the nation. We would have been in a sorry state had we had no basic shipbuilding capacity and had had to rely on foreign imports.

How will defence orders be decided on? They come 100 per cent. from the public sector.

Mr. Mike Thomas

Guaranteed profits.

Mr. Orme

At present the orders come from the public sector and go to the public sector. If part of British Shipbuilders goes to the private sector, it will be the public sector versus the private sector.

Mr. Robert C. Brown

I made the same point to the Minister. The only guaranteed profitable part of British Shipbuilders is naval shipbuilding. The Minister and the hon. Member for Surrey, North-West (Mr. Grylls), who is secretary of the Tory industry group and who has an interest in pharmaceuticals, both mentioned the pharmaceutical industry. They said that, to follow our argument, because the NHS is the biggest customer of the industry the industry should be nationalised. If NHS custom was withdrawn, what chance would the industry have of surviving? That is the exact analogy with naval shipbuilding being hived off from British Shipbuilders.

Mr. Orme

That underlines my point. The Ministry of Defence is a publicly owned body. Its orders should go to the public sector.

Warship building is profitable and has helped to reduce British Shipbuilders' deficit. The Minister dismissed the argument that one sector should help another. All shipbuilding countries are having difficulties. It is outrageous that the warship building sector should be sold off so that the private sector can make profits out of the public sector.

Mr. Norman Lamont

What is the difference between warship builders and any other defence contractors? The right hon. Gentleman seems to believe that defence contractors have guaranteed profits. Does he believe that Racal, Marconi, GEC, Plessey and all the other defence contractors should be publicly owned?

Mr. Orme

We are talking about 100 per cent. direct involvement. One argument for nationalising the airframe and aircraft industry was that it involved 90 per cent. public money. My hon. Friends may later wish to take up the Minister's argument.

The difficulties facing the shipbuilding industry include the severe workload gap for 1983–84, the poor market and the fact that the future of warship ordering is unclear. We do not know what proposals there will be in the Defence Review. The outlook for merchant shipping is even more serious. Because of the oil glut, demand for offshore development has declined considerably.

British Shipbuilders told the Select Committee that the UK needs a proper maritime policy for both merchant and naval fleets—and fishing too for that matter. Once the capability in shipbuilding and ship repair has been disposed of, it will not be recoverable. BS want the ships lost in the Falklands dispute to be replaced in addition to normal fleet replacement. Shipbuilding, like shipping, is a national strategic asset—and should be treated as such by government. It is perfectly reasonable to be able to ask that there should be government support. 'If you want to have a navy you have to have one every day, not just sometimes.' That is what the chairman of British Shipbuilders said in evidence to the Select Committee. There is no reference there to privatisation or denationalisation. He was asking for an overall plan. It was an all-party Select Committee. It recommended that iii. the Government should set up a high-level interdepartmental working group to consider the full implications of a maritime policy for the UK embracing both shipbuilding and shipping; iv. the Government should press the European Community to co-ordinate its policies for shipbuilding and shipping both internally within the Community and in its relations with countries outside the Community; v. the Government should remind all public authorities of the desirability of buying British materials and components and also ships built in British yards; The Minister referred to the Polish order. Without it, merchant shipping development would have been in great jeopardy. If, in the face of great Government opposition, we had not reordered the "Atlantic Conveyor", many shipyards in the Northern region would have been in jeopardy. The P & 0 liner order going to Finland was a national disgrace. Those are some of the facts. Against that background, we must consider what British Shipbuilders has pressed the Government to do. I shall again quote from the evidence that the deputy chairman of British Shipbuilders gave to the Select Committee: BS's Deputy Chairman stressed that the last few years had been traumatic for the industry and for the workforce, largely located in areas of already high unemployment. It seems clear that for the most part there had been an extraordinary level of realism and degree of co-operation between management and workforce. While there have been difficulties recently we found the approach of witnesses from the Confederation of Shipbuilding and Engineering Unions and from the Shipbuilding and Allied Industries Management Association most constructive. In other words, people involved in the industry want it to survive and have been co-ordinating and co-operating to that end.

There is great skill in the industry. There are great spin-offs into other industries such as steel, components, engine building and fitting out. That is why the Opposition maintain that we should buy British. That is why the Bill is irrelevant to the problems that face the nation.

Britain faces the threat of Korea. That country keeps its tenders 5 per cent. below the lowest tender in the United Kingdom because the industry there receives massive Government support. That makes nonsense of any claim that British Shipbuilders should compete in the free market. The Government should recognise that point.

Mr. Dixon

I do not know whether my right hon. Friend has read this months edition of Shipbuilding News but in it the chairman of British Shipbuilders, when referring to international competition, said that there is no future in boxing by Queensberry rules if your opponents are engaged in all in wrestling. That is what we are talking about with regard to international competition.

Mr. Orme

Once again my hon. Friend has underlined the Bill's uselessness and the damage that it will do. We have no hesitation in opposing it. The Minister has not made out a case for it. It is a short Bill. It chiefly consists of two clauses. They will cause havoc in the industry and will not help in any way. Not only will the Opposition vote against it, but if the Government are foolish enough to enact it before the next general election we shall reverse the proposals when we return to office. Repealing the Bill will be part of our campaign to create and recreate an industrial base—of which shipbuilding is a vital part—that we can build upon to produce full employment and get the manufacturing sector moving again. The Bill aims directly at the manufacturing sector. It will make us dependent on foreign imports rather than on British-built ships. It is irrelevant and I ask the House to oppose it.

4.35 pm

Mr. Neville Trotter (Tynemouth)

There have been many debates on the shipbuilding industry since I was elected in 1974, and all of them have taken place against a background of depression and uncertainty about its future. I am afraid that will continue to be so for many years for reasons beyond our shores. We are talking about an industry that, perhaps more than any other, faces international competition. Nothing is more international than the shipping industry and the shipyards that supply it.

Before discussing the future I shoud like to pay tribute to the past and especially the immediate past. It is right that we should pay tribute to the work force for the way in which it responded to the sudden calls as a result of the Falklands campaign. I shall confine my examples to Tyneside. HMS "Illustrious", a complicated carrier and one of the finest ships in the Navy, was made ready for service three months early. That required 19 weeks' work to be completed in eight weeks. That remarkable achievement deserves to be praised and recorded.

Mr. Robert Hughes (Aberdeen, North)

I do not wish in any way to detract from the splendid work that was performed by shipyards during the Falklands campaign, but perhaps the hon. Gentleman will also pay tribute to the work forces in other shipyards who have done so much to keep the industry going during these difficult years.

Mr. Trotter

I should like to pay tribute to many who work in the shipyards, but one cannot give blanket coverage as there have been some unfortunate occurrences where the same dedication has not been apparent. Those who have been unwise enough to follow that path are those who are most likely to suffer in future.

One cannot divorce the discussion of shipbuilding in Britain or elsewhere from the shipowning scene, the circumstances of which are grim. The world recession led to a fall in the volume of world trade at the same time as the very large scale development of shipbuilding in Japan and the developing countries of the Far East led to a flood of ships pouring on to the seas of the world.

The Japanese went in for shipbuilding in a very big way 10 years ago—and these new yards started producing a great volume of ships just at the time that the world recession began because of the increase in oil prices.

The first ships to be affected were tankers. The Japanese thought that they would collar the world tanker market. They constructed tanker building yards all over the island. Practically every coastal town of any size had such a yard with the latest equipment and a hard working oriental work force. They produced so many tankers that now about half of the world tanker fleet is surplus. Many are tied up in Norwegian fjords or the bays of Brunei. Moreover, many are steaming at half speed not only to save fuel but so as not to arrive too soon with oil supplies to the market. It is incredible that half the world's tanker tonnage is now surplus and ships that are only a few years old are being scrapped.

When the market for tankers collapsed, the oriental yards turned to bulk carrier construction and diligently produced a large number of such vessels to carry grain and minerals. Now the same thing is happening again. Work cannot be found for this flood of ships, and the number of vessels laid up is frighteningly high. About 1,000 ships throughout the world are laid up. In 1980, 10 million tonnes of shipping were laid up. Last year, the figure was 27 million tonnes. It is now 76 million tonnes.

Changes have occurred in world trade. Oil now comes from the North Sea. In rough terms, according to what I am told by friends in the shipping industry, for every million tonnes of oil produced in the North Sea, one fewer large crude carrier is needed. At the moment, oil production amounts to about 90 million tonnes a year, and the need for perhaps 90 large tankers has thus been removed from the world merchant fleet.

I have referred to over-capacity in the bulk trade. Some figures I was given recently showed that the income obtained from the charter of a standard-sized bulk carrier able to go through the Panama canal was $2,850 a day. The cost of paying the crew amounted to over $3,000 a day. The income was therefore insufficient to meet the crew costs, let alone other running costs which amounted to over $2,000. This allowed nothing for depreciation of the cost of the ship or interest on the loan taken out to buy the ship and nothing towards investment in a new ship. With such losses from operating there is now hardly any demand for merchant ships of most types. Many types can hardly be given away. With owners selling to reduce their losses, an almost new second-hand ship can be bought for a fraction of the price of a new one. Against that background, who will order a new ship?

I pay tribute to the management of British Shipbuilders, which has done well in the past year in gloomy and difficult marketing conditions. The chairman has already been mentioned. There are many who could be praised. I single out Mr. John Parker, the deputy chief executive. I know of no one in the shipbuilding industry who has worked harder in recent years. He has slaved away, travelling from one end of the world to the other to obtain orders. We have done relatively well in a very bad situation.

No hon. Member can fail to agree that there is a defence implication for our Merchant Navy and our merchant ship building capacity. The size of the Merchant Navy has fallen from 1,600 ships of 50 million tonnes in 1975 to fewer than 1,000 ships and about half that tonnage. There must be some level below which it will not be possible to react to a crisis such as the Falklands campaign. There is a national need to maintain both the Merchant Navy and a shipbuilding capacity to enable us to continue to operate ships in future.

I was pleased to hear the Minister make the important statement—probably the most important in the debate—that the merchant ship building yards would not only remain in public ownership but would continue to receive public support. No one can say that the Government have not helped the industry. This aid amounts to about £600 million since 1979, expressed in pounds of historical value. If translated into pounds of current value, the figure is £700 million. A vast sum has gone into the industry.

I cannot understand the argument that the introduction of private capital is harmful to the warship building industry. Last year's accounts show that the warship building division made a profit of£32 million and the merchant ship building division a loss of £l36 million. What happened was that the profits made by the warship builders were siphoned off to keep the merchant ship builders going. That cannot lead to the capital investment and improved productivity that is needed in the warship building yards. The managements of the warship building yards say that they have not been receiving adequate investment for that reason. I see such investment coming from outside the industry. I see nothing wrong in it.

The future size of the warship building industry must depend mainly upon the ordering rate for the Royal Navy. I make no secret of the fact that I should like to see more warships built. A larger warship building industry is possible only if we obtain our share of foreign export orders. All over Western Europe complex naval ships are being built and sold.

In considering the future of the industry I say now as I have said before that two factors that must be borne in mind are the fierce competition from merchant builders in Korea and other Eastern countries and the need for deeper inquiry into the reasons why we are no longer obtaining orders from foreign countries for major warships. It is 10 or 12 years since this country obtained a major warship export order.

Mr. Mike Thomas

The hon. Gentleman and I share a common interest in Swan Hunter. I accept his general argument about the warship yards and warship building. Does he accept that if all the pressure were to give warship orders to yards that had been privatised in order to maintain their profitability and private investment, the naval orders that have enabled Swan Hunter to remain viable for the past five years would no longer be available?

Mr. Trotter

The hon. Gentleman refers to Swan Hunter. It is a matter dear to both our hearts. I thought that at one stage the Ministry of Defence had stated that each of the mixed builders—Swan Hunter is the main such builder, part warship and part merchant—would in future issue figures separately for their two divisions. I understood that undertaking to have been given in reply to the Select Committee, but I note that there is no division in the current set of accounts so we do not know how the results are split between naval and merchant work.

I do not see the threat envisaged by the hon. Gentleman. I do not believe that Swan Hunter will be an export yard except for large ships, such as carriers. If the Australians decided to order a carrier in this country, I would expect the order to go to Swan Hunter. For a long time export orders for frigates and destroyers have been handled at Vosper Thornycroft and Yarrow.

Mr. Thomas

The type 24 frigate can be built in a number of places. If the pressure were to put orders for those frigates into yards that had been privatised in order to maintain agreements about the profitability of those yards, would not jobs in Swan Hunter in my constituency and at Wallsend be placed under severe threat? My firm judgment is that this threat would arise. The hon. Gentleman does not seem to have answered the point.

Mr. Trotter

If there were a political decision to send the orders to one town and not the other, it would, of course, mean jobs going to one place and not to the other. I do not believe that what the hon. Gentleman suggests will happen. I think he meant to refer to the type 23 frigate. The type 24 was designed but got no further than the drawing board, so the point about details does not matter. The issue is whether British warship orders will in future be given to Swan Hunter. I am convinced that they will be from all my knowledge of the Navy and its plans for the future, and I have no doubt at all that there will be substantial naval work for the Tyne.

Mr. Robert C. Brown

The hon. Gentleman, the hon. Member for Newcastle upon Tyne, East (Mr. Thomas) and myself have a deep interest in Swan Hunter. However, the hon. Member for Tynemouth (Mr. Trotter) is not following the point. If the naval shipbuilding capacity of this country is privatised, there is no way that privatised naval shipbuilding yards will give their guaranteed profits to Swan Hunter. Therefore, the future of Swan Hunter must be in grave jeopardy if naval shipbuilding is privatised.

Mr. Trotter

The hon. Gentlemen are going rather far in supposition. Is the hon. Member for Newcastle upon Tyne, East (Mr. Thomas) suggesting that warship yards are to be sold? If that is what he is suggesting—

Mr. Brown

The Minister suggested it.

Mr. Trotter

My understanding is that private capital will be invested in the warship yards.

Mr. Donald Dewar (Glasgow, Garscadden)

Ask the Minister.

Mr. Trotter

I have no doubt that the point will be cleared up in the wind-up speech, as it always is.

Mr. Brown

Why does the Minister not reply?

Mr. Trotter

The main class of ship to be built for the Royal Navy at Swan Hunter in the years ahead is being designed at Swan Hunter now. It is being designed not at Yarrow or Vosper Thornycroft, but on the Tyne. This is a phoney and spurious argument. There is a class of large ships of the Royal Navy, as Opposition Members should know, upon which design work is being carried out at Swan Hunter now. The question of design is being rethought in the light of the Falklands experience.

Sir David Price (Eastleigh)

I am concerned with Vosper Thornycroft. Will my hon. Friend forgive me for pointing out that most of the design teams for the type 42, the type 22 and, we hope, the type 23, which will come eventually, are either at Yarrow or Vosper Thorny croft. They carry the overheads of maintaining the design teams, irrespective of the order book. The real argument is not one of public or private ownership, but where the teams are being maintained, and that is in those two yards. My hon. Friend is right in saying that if we go back to very large vessels Swan Hunter would play a part. However, as I understand it, Swan Hunter is not in the design at the moment. The main design for frigate replacement is done at Vosper Thornycroft and Yarrow.

Mr. Trotter

As it always has been.

Mr. T. W. Urwin (Houghton-le-Spring)

On a point of order, Mr. Deputy Speaker. As the hon. Member for Tynemouth (Mr. Trotter) clearly, and perhaps genuinely, misunderstands the import of a particular part of the Bill. should not the Minister enlighten his hon. Friend?

Mr. Deputy Speaker (Mr. Paul Dean)

I am sorry. but I cannot help the right hon. Gentleman. It is a matter for the Minister whether he intervenes.

Mr. Trotter

My mind goes back to the largest class of frigate built since the war—the successful Leander class. Such frigates were built in yards all over the country. It is 20 years since the design came out. I do not remember which yard was the lead yard in designing them, but I do know that the 10 or 12 yards that built them were privately owned, yet the design was used by all. The argument is a spurious one.

Mr. Dewar

rose—

Mr. Trotter

No, I shall not give way. We have discussed the matter sufficiently.

The third repeated question in any discussion on the industry is that of the financing of orders in the merchant shipbuilding yards. The problem of obtaining orders is not just one of the cost or the delivery time, but very much the length of time over which one can pay for the ship. International agreements among the shipbuilding countries are definite and open as to the interest rate and the period of payment. However, one constantly hears of clandestine methods of evading those agreements being used in the shipbuilding countries. Shipowners tell me that the period of repayment and the interest rate are in many cases as important to them as the price. It can be the main factor in deciding the country where the order is placed. We need to look very closely at how we can help the shipbuilding industry in this respect.

Mr. Derek Kimber is a leading figure in the industry who has worked extremely hard on the export side with great success. With his knowledge gained from talking to shipbuilders all over the world, he believes there is a need for flexible repayment terms so that the shipowner can have the balance of his loan carried forward and the main part of the repayment effected when trade turns up, as it must do. The equilibrium will be between critical supply and demand and the upturn in orders should come again in the next four or five years. Freight rates can vary enormously by a factor of three within a period of 18 months. When they have gone up again, owners will be better able to meet the cost of servicing and repaying a loan. This is something that the Minister might take on board as a means of financing ships.

Whoever owns the industry and however we discuss its organisation, it will have a difficult future. The degree of success, the size of the industry and the prospects for future employment will depend, first, on continued Government support for the merchant ship building side, which I was delighted to hear the Minister pledge tonight, and, secondly, on the skills and the productivity of those who work in the industry. We cannot get away from the fact that, as in every other industry, the future is in the hands of those people rather than in the hands of the House.

4.57 pm

Mr. Frederick Willey (Sunderland, North)

I am glad to follow the hon. Member for Tynemouth (Mr. Trotter), as we both represent parts of the North-East. He will no doubt agree with me that in form the Bill is objectionable and unsatisfactory. In substance, depending on how it is treated, it can be either a triviality that is alien to present circumstances, or a serious threat to the industry. From what the Minister has said, it seems more likely to be the latter.

The Minister's Back Benchers, however, seem to be less than enthusiastic about the Bill and the hon. Member for Tynemouth was more obscure than enthusiastic. During the Debate on the Address, the hon. Member for Southampton, Test (Mr. Hill) spoke about the Bill. He appeared to take the view that it is frivolous, and said that privatisation was a very long shot and that we cannot privatise British Shipbuilders simply by selling off the warship yards, and then expecting a fairy godmother to take up the merchant ship building yards.

There have been virtually no export orders for naval work for a long time. We are thus concerned with contracts for the Ministry of Defence, which are worked out between BS and the Ministry of Defence. If, because of the orders that may arise out of the Falklands war, these warship yards are made privately profitable, that would be no less than obscene.

Nearly all the merchant shipbuilding yards are in the North-East. There is only Govan outside. Sunderland Shipbuilders would not expect a fairy godmother. Court Line, which made considerable investment before nationalisation, went bust. Austin and Pickersgill would not expect a fairy godmother. The accounts of British Shipbuilders show the money that it needs for support.

Indeed, merchant ship building has no immediate future unless, as the Minister conceded, there is public support comparable to that received by the shipbuilding industries in other countries. The Minister referred to delivery dates. I must tell him that he is out of date. Delivery dates are now an embarrassment—ships are being delayed because their owners do not want delivery. The industry is unattractive to private investment and, if the Government begin privatisation, the yards will be written off. It will be claimed that investment will not give an adequate return.

It is agreed that British Shipbuilders has a good record. It has an efficient and effective management. John Parker was previously with Austin and Pickersgill. He, with many others, has made a substantial contribution to British Shipbuilders. Labour relations have been transformed. But in spite of that, there have been heavy and continuing losses in manpower. This is continuous. Since April 500 jobs have been lost in the yards on the Wear, and consequently almost twice as many outside the yards. My hon. Friend the Member for Jarrow (Mr. Dixon) will no doubt point out that the Tyne has suffered a catastrophic collapse in ship repair work.

Merchant ship building must have a certain capacity in order to exist. Its present capacity is the minimum for Britain. The industry is under threat. There has been a dearth of orders, with order books down £100 million compared with 12 months ago. The British fleet is declining at an alarming rate—more than one-quarter of the fleet has disappeared during the past 18 months and the position is rapidly deteriorating. Only recently we were accustomed to talk about things being all right after the early 1980s. Now we talk about the mid-1980s. We must give more support and assistance to British shipbuilding.

I have been unique in always taking the view that it is more important to concentrate on shipping than shipbuilding, even though I represent a shipbuilding constituency. We must look to Japan to see how it developed shipbuilding and then shipping. Years ago, as a young man, I wrote a plan for shipbuilding. I said that there would be between 40,000 and 80,000 redundancies. I was regarded by many of my colleagues as ridiculous in anticipating substantial redundancies. I was right. Indeed, my figures were a gross underestimation of what eventually happened. I saw the beginning of world competition. I argued then that we would have to provide reserve capacity, which demanded from the Government a new location of industry policy. We needed to provide alternative comparable work in shipbuilding areas. I remember the feat performed by Sunderland when war broke out and the yards were manned by people who had been unemployed for many years. If we are concerned with the national interest, we must provide for such eventualities. We should have altered our approach.

I emphasise again the importance of shipping. I have always said that the nationalisation of shipbuilding would do nothing to stabilise the demand for ships. To concentrate on shipbuilding alone was unwise—the top priority should have been shipping. I recommended aids and controls and a reorganisation commission and we have made a great deal of progress since then. There has been the Geddes report and also that of Booz-Allen, which was far too much neglected.

However, I also recommended that there should be a fact-finding committee, drawn from both sides of the two industries, supported by people with industrial and public experience. That would have created an awareness of our national responsibility for the two historic industries—shipbuilding and shipping. I envisaged that from such a committee we would obtain a maritime policy.

It is significant that when the Select Committee met British Shipbuilders and listened to Mr. Atkinson, it recommended that there should be an interdepartmental working group to formulate maritime policies. In reply, all that the Government do is talk about the free market and the introduction of the Bill. I am trying to be non-controversial. We should study how, for instance, Japan has organised shipbuilding and shipping. It is a great pity that the recommendation was not accepted by the Government. I am trying to convince the Government to accept something that will give those concerned on both sides of both industries an opportunity to formulate maritime policy.

During recent months Japan has gained three-quarters of the world's shipbuilding orders. North Korea is offering ships at ridiculous prices. We cannot tolerate this. I agree with Mr. Atkinson's views about Europe, and we must deal with Europe. It is nonsense to talk about free trade in such circumstances, or about Britain's interests. We have no particular interest in the development of shipbuilding and shipping in Japan and the Far East.

I am told that scrap and build has not been discussed in the EEC for three years and that there was considerable scepticism when it was discussed. I am concerned not with that, but with it being discussed again. The shipping fleet is in a far worse condition than it was three years ago. There has been a considerable amount of breaking up in the merchant fleet. We have heard about what has happened to the British fleet. We need to investigate scrap and build again. It might be an attractive proposition.

It is agreed that the merchant fleet had an important part to play in the Falklands battles. If that is so, we should now be thinking about a sensible investment policy for the British merchant fleet. We should also be thinking about a strategic shipping reserve. It might be an official part of the Royal Fleet Auxiliary. That would mean ships being equipped with defence features. We should consider the conversion and part use of the present fleet for that purpose or, alternatively, the construction of ships with those features. They would be built in British yards. There is nothing to stop us from doing that. We could work out with British shipowners suitable assistance terms.

I have no wish to be critical about the machinery of credit and aid to which reference has already been made. We recently negotiated cover for two ships from Ethiopia, which were desperately needed in Sunderland. I have a great respect for the Department of Trade and the Export Credits Guarantee Department, but something more can be done. I have been told repeatedly by Mr. Kimber that we need to improve and expedite the present procedures, but we also need flexible financial packages and special terms when buyers are from less-developed countries. The Minister should not look surprised because it can be done and it is done. It is done by the Japanese, the Germans and, not surprisingly, the French.

We have taken advantage of aid. Sunderland yards benefited through orders from India a long time ago. More can be done and more must be done. We must sit down and think out some form of inducement for British owners to place orders in British yards. We shall not get anywhere by discussing privatisation, which can only distract and upset those working in the yards. We want the capacity to build a Navy and the merchant shipping that is required, and to sustain them.

Mr. Urwin

I am grateful to my right hon. Friend for giving way. I am deeply interested in his point about the negotiations for the building of two ships for Ethiopia by Sunderland Shipbuilders. He will recall, as I do, the problems with which Sunderland Shipbuilders was confronted because of what appeared to be an unnecessarily long hold-up by the Department of Trade in releasing the resources available through ECGD.

Is there not a lesson to be learnt there? British Shipbuilders at Sunderland was at its last gasp to maintain employment, largely, presumably, as a result of the unnecessary delays in releasing the capital resources to which it was entitled through ECGD. Does my right hon. Friend agree that there is a lesson to be learnt about coordination between those two Departments?

Mr. Willey

I agree with my right hon. Friend I have great respect for ECGD. It has done a good job and has responded in the past to appeals made by British shipbuilding. Nevertheless I agree with my hon. Friend that we must learn from these experiences and learn quickly.

We need a national interest in British shipbuilding. I use those words not in the cynical way in which they appear in the Bill but in a real sense. British shipbuilding and British shipping are two historic industries on which we greatly depend, particularly if we should ever be involved in war, as we found in the Falklands. We must stand by these industries. They are making a great effort to recover in difficult circumstances. They want our confidence and they do not want to be distracted by the matters contained in the Bill.

5.15 pm

Sir David Price (Eastleigh)

I agree very much with the important point made time and again by the right hon. Member for Sunderland, North (Mr. Willey), but there is no point examining shipbuilding unless we also examine the state of shipping. Unless there are orders for ships, there is no reason to have a shipbuliding industry. The right hon. Gentleman also confessed to having been consistently right in his pronouncements on British shipping and shipping policy in general. I say to him "Welcome aboard", but he will not find himself popular because, as he knows, the most unpopular thing that a politician can ever do is to be consistently right. We heard from the right hon. Member for Salford, West (Mr. Orme) and from my hon. Friend the Minister of State what one might call characteristic speeches in which they were both consistent with their previous form. I, too, wish to be consistent. In shipping matters I always declare a personal and a constituency interest.

It is clear from the background to the Bill that the House wishes to discuss, first, the state of British shipbuilding and, secondly, the state of British shipping—being, we hope, the major source of orders for our industry. There is general agreement that world shipbuilding, into which we fit, is in a poor state at the moment. In that context, I hope that the House realises how poor is the state of European shipbuilding. Although shipbuilding as a whole in the world is down, in some parts of the world it has its tail up, particularly in Korea and Taiwan.

The percentage share of the world order book is interesting. I have before me the figures to June 1982. They show that the general total, although down, is not as significantly down as one would think from the depressed state of the European industry. The order books of the three major Far Eastern countries—Japan, Taiwan and Korea—accounted for more than 50 per cent. of the identifiable world order book. Compared with 10 years ago, the Japanese share was down but the Korean and Taiwanese shares were up substantially. Ten years ago Korea and Taiwan contributed virtually nothing to world shipbuilding capacity.

An examination of the three leading European shipbuliding countries—Britain, Sweden and Germany—shows that as of June 1982 the current orders in the yards of those three countries was only 7.9 per cent. That is a pretty desperate state. That is the consideration that should be engaging the House.

British Shipbuilders, to which tributes have already been paid, has been holding on but, as we know from examining its annual report, it is not bullish for the future. The section of the annual report headed "Business Outlook" states: Market prospects for 1982/83 do not look encouraging, with few signs of sustained recovery in the world economy and a severe recession in the shipping market. It is worth the House recognising that, when shipping is depressed, one cannot expect shipowners—whether Government of private—to place orders for many new ships unless it can be shown that the order for a new ship and the investment in it will reduce operating costs.

Ten years ago one could make such a case because ships were faster. There has been a big increase in bunkering costs and the advantage of speed has been reduced by the heavy increase in the percentage of the total running costs taken by bunkering. There has been a decline in the number of ships flying the British flag and the flags of some other European countries, but the ships have not disappeared from the world shipping scene. They appear under other flags, trading in the same waters and seeking the same businesses, but with lower operating costs.

My hon. Friend the Member for Tynemouth (Mr. Trotter) gave figures showing the reduction in our merchant marine. In the six years between the end of 1975 and the end of 1981 our merchant marine diminished from nearly 50 million tonnes deadweight to nearly 29 million tonnes deadweight. The figure continues to fall. Some of these ships were foreign-owned but were registered in the British register. In this sense the Red Ensign was a flag of convenience. Even discounting that, the reduction in British registered ships is alarming.

This is not the occasion to rehearse the various arguments advanced by the British shipping industry as to how this downward trend could be reversed. To do that I should have to go into taxation and many other matters. However, the arguments must be recognised. We shall not find the solution to the problems of British shipbuiling, whether publicly or privately owned, until we cope with the problems of British shipping. To that extent, the right hon. Member for Sunderland, North was right, as was British Shipbuilders and the Select Committee. We must consider the problem as a whole, not in bits and pieces.

It follows that the House must take a view about the minimum size and the mix of the British merchant marine. The recent experiences of the British merchant marine in support of the Royal Navy in the South Atlantic brought that point vividly to our attention.

The second and obvious function of British shipbuilding is building for the Royal Navy. I stick to the old view that unless one builds ships for one's own Navy there is little chance of selling naval ships abroad. Uniquely, Vosper Thornycroft designed ships and sold abroad before it built for the Royal Navy. That was years ago and should be regarded as normal. The selling of naval ships does not involve a straight commercial contract. It requires Government support in different capacities.

I am not in a critical mood tonight, but I could be a little critical of Ministry of Defence support in the past for the sale of naval vessels and equipment. The Dutch are extremely successful in that respect. When they have not succeeded in selling a whole ship they have sold parts of ships and the equipment because their naval ships have flown their commercial flag throughout the world. The problems of selling abroad cannot be tackled in compartments. They must be seen as a whole.

We must get a move on with orders for the naval yards. The hon. Member for Southampton, Itchen (Mr. Mitchell) and I were happy to be present at the launching of HMS "Gloucester" but what new order will go into its berth? We need the normal ordering from the Royal Navy that one would expect to come up each year as well as replacement orders for the Falklands casualities.

Hon. Members rightly fly the flag for Swan Hunter and other North-East yards, but Yarrow and Vosper Thornycroft are specialist naval yards. They carry higher overheads on their naval design teams that have to be sustained year in and year out. If we were to lose those teams we could never expect to get designs of the quality produced by those two yards ever again. That must be borne in mind in discussing the comparative costs of different yards.

Mr. Dewar

I do not wish to sidetrack the hon. Gentleman, but he may be able to help me. The hon. Gentleman listened with care to the hon. Member for Tynemouth (Mr. Trotter) when he gave his impressions of the Bill and its likely consequences. Some of my hon. Friends believe that there is a possibility that major naval yards will be sold. The hon. Member for Tynemouth pooh-poohed that and said that it was not in the Government's mind. What is the hon. Gentleman's view?

Sir David Price

I shall come to that. I wish to make my speech in logical sequence. I was talking about the need for orders from the merchant navy and the urgent need for orders from the Royal Navy. The House is agreed about that. There is a link between the two. There must be more support for the merchant navy in its defence role. I could detain the House by listing the features that should be built into the various classes of merchant ship to make them more suitable to support the Royal Navy, whether in a combat role as with "Canberra" or in a supply role, as with many of the ships in the South Atlantic task force. The House will agree about that.

There is an urgency. If one leaves the matter too long the expertise will disappear. There is always a danger among the admirals, admirable though they are, of making the best the enemy of the better. As a result, they argue so long about design that costs escalate enormously and the Treasury turns them down. If they would settle for something a little less than one best—and now—they might get it.

We must consider the Bill in the context of what really matters for the future of British Shipbuilders. With respect to the Minister of State, I do not think that the Bill gets down to the fundamentals. However, it is helpful in two important respects. The Bill is only an enabling measure. It provides the opportunity to introduce private finance into British Shipbuilders. I do not believe that there will be sell-offs. I see a partnership. I can imagine how the partnership would work on a specialist order. For instance, building ferries for a ferry operator, equipment for oil rigs and ships for foreign Governments might be financed in joint ventures. It would make sense to set up a joint company to build a particular ship and to inject capital into the company. That would be helpful.

I envisage opportunities to increase sources of finance for British Shipbuilders. In the present state of British shipping and shipbuilding, I cannot envisage people queuing up to buy British Shipbuilders as a whole. Anybody who thinks that that will happen lives in an unrealistic world. However, if one can find additional sources of finance for any nationalised industry one reduces the industry's dependence on the Treasury. We all have great respect for the Treasury, but as an industrial and commercial man I prefer other taskmasters.

Mr. R. C. Mitchell (Southampton, Itchen)

The hon. Gentleman has not answered the specific question put to him by the hon. Member for Glasgow, Garscadden (Mr. Dewar). The Minister appears to be in favour of selling off warship building yards. Is the hon. Gentleman is favour of that?

Sir David Price

The Bill is only an enabling measure. What the hon. Gentleman suggests is possible, but I am not aware of any such proposition at the moment and I should be surprised if there were. Perhaps the Secretary of State would like to sell, but I should like to know who the buyers would be, given the state of the market.

Mr. Robert C. Brown

The hon. Gentleman is not naive, but clearly it is the Minister's intention, and that of the Government, to sell off the whole package of naval shipbuilding. Does the hon. Gentleman honestly believe, bearing in mind that the profits from naval shipbuilding have virtually offset the losses in merchant shipbuilding of British Shipbuilders, that any private interest will take a shipyard part of which builds warships and part of which builds merchant ships?

Sir David Price

With respect to the hon. Member, I am not prepared to get involved in a speculative argument, because I have not put forward the proposition. Certainly I defend propositions that I put forward. However, I am prepared to entertain the proposition of mixed financing, because I see great advantages in that. Opposition Members should direct their question to my hon. Friend the Minister of State. It is his Bill, not mine. I was merely saying that I do not regard the Bill in quite the satanic terms that Labour Members do. Equally, I do not view it with quite the same enthusiasm as does my hon. Friend the Minister of State. I am decently agnostic in these matters.

5.31 pm

Mr. Don Dixon (Jarrow)

The Bill is totally irrelevant to the problems of the shipbuilding industry. As my right hon. Friend the Member for Salford, West (Mr Orme) rightly said, it is the death knell of merchant shipping in this country. The social consequences of that will be borne by many of my hon. Friends who represent constituencies with high unemployment where employment depends greatly on shipbuilding.

In view of the consequences of the Bill and the devastating effects that it will have, it is an insult to the House that the Secretary of State for Industry did not present it to the House today. Moreover, the Minister of State gave no reason for that. The Bill carries out the Government's basic philosophy: if it's in the black, flog it back; if it's in the red, leave it dead. That is the Government's attitude to our nationalised industries. Anyone who knows anything about the shipbuilding industry knows that if it is to remain viable it has to remain one unit, and that selling off part of it will destroy the whole of this great British industry.

My right hon. Friend the Member for Salford, West talked about the three naval warship yards, Vospers, Yarrow and Vickers, which protested against the compensation that they received when they were nationalised in 1977. I believe that they went to the European Court. The Conservative Opposition at the time said that when they came to power they would rectify the matter. It was suggested, in I believe an early-day motion, to the right hon. Member for Leeds, North-East (Sir K. Joseph) that compensation should be more realistic. This Bill, in which the yards are to be given back to the owners, is a rectification of the compensation that they did not get when nationalisation took place.

The Government cannot break up British Shipbuilders without destroying one of our most skilled possessions. Under State ownership, British Shipbuilders is in better shape than it has been for years, in spite of what one or two Conservative Members say. Compared with world shipbuilding, it has greatly improved its position. Losses have been reduced from £110 million two years ago to only £19 million this year—at a time when world shipbuilding is in the doldrums. That is a tribute to nationalisation and to the Labour Government who nationalised and thereby saved our shipbuilding industry. It is also a tribute to the co-operation, hard work and self-sacrifice of the trade unionists and those who work in British Shipbuilders. Two years ago, shipbuilding workers were third in the wages table; today they are down to nineteenth. The unions accepted the loss of many jobs in an effort to make the industry efficient. Does anyone believe that if the industry is sold the co-operation, hard work and self-sacrifice of the unions will still be available? To sell off the naval warship yards will cause great social problems. It will simply hand over money that has been collected from taxpayers to finance naval contracts which will benefit a minority of shareholders who will buy the yards. Moreover, there will be confrontation with the same unions which have co-operated with the Government since the industry was nationalised. I am talking not just about manual unions, but about staff and management unions. Alec Ferry, the general secretary of the Confederation of Shipbuilding and Engineering Unions, representing 1½ million workers, said at the boilermakers' conference this year: The confederation has already warned the Government we will oppose any such moves for which there is no logical justification. We in the unions have proved we do not want confrontation. But if we are faced with unnecessary problems created by blind political dogma, we can only react accordingly … We have not worked our guts out and faced all that aggro since 1976 in what was then a bankrupt industry, only to see it return to the same people who created all that problem in the first place. We have not sacrificed 22,000 jobs of members and accepted a cut in the standard of living for the remaining 65,000 for the purpose of creating the possibility of commercial viability, for it to be taken advantage of by private investors". The selling off of the naval warship yards will have devastating effects, in spite of what the hon. Member for Tynemouth (Mr. Trotter) said about mixed shipyards at Swan Hunter on the river Tyne. My hon. Friends the Members for Newcastle upon Tyne, West (Mr. Brown) and Wallsend (Mr. Garrett) know the consequences that the lack of naval work at Swan Hunter would have on the river Tyne. Incidentally, Swan Hunter has the highest productivity in naval work in this country.

The Minister talked about late finishing dates. I do not know whether he read the Falklands war honours list. Ron Watson, a director of Swan Hunter, was awarded an OBE on behalf of the work force of 2,000 whose efforts produced HMS "Illustrious" three months ahead of schedule. The Minister talked of late finishing dates, although many of the men who worked at Swan Hunter, who had been sacked 12 months earlier and were brought back during the Falklands campaign to get HMS "Illustrious" finished, were working 12-hour shifts. That is the reward that they got.

Mr. W. E. Garrett (Wallsend)

Will my hon. Friend stress the fact that they were craftsmen who had been out of work for more than 12 months, and that if such craftsmen are left unemployed much longer there will be no craftsmen left to do future emergency work?

Mr. Dixon

I entirely agree with my hon. Friend. If the Falklands crisis had occurred in two years' time, the result might have been very different. We are talking not just about a few jobs lost in shipbuilding but about whole communities which rely on shipbuilding for their social and economic health.

Shipbuilding and the connected industries have formed an important base in the North-East for many years. I shall give one or two examples. A survey was carried out in the constituency of my hon. Friend the Member for Wallsend, and 62 per cent. of the work force employed there lived either in Wallsend or in adjacent towns.

As my right hon. Friend the Member for Sunderland, North (Mr. Willey) said, a survey was taken of the work force at Austin and Pickersgill's Southwick yard. It revealed that 37 per cent. of the work force lived within one mile of the yard, and that only 1.5 per cent. lived more than five miles from it. These figures give us some idea of what would happen if the yard were to close. It is a highly skilled labour force and, as my hon. Friend the Member for Wallsend says, if its members are out of work for a long time we shall not be able to recruit them again.

In the North-East nearly 8 per cent. of employment in manufacturing industry is in shipbuilding, ship repairing or marine engineering. In the rest of the United Kingdom such activity provides only 2.5 per cent. of employment. In certain areas in the North-East it is more concentrated. For example, on the Wear 20 per cent. of employment depends on shipbuilding, ship repairing and marine engineering. On the Tyne it is 17 per cent.

There exists within the North-East an integrated shipbuilding and ship repairing industry that is supplied mainly by services within the region. The work that is done within a shipyard amounts to only 40 per cent. of the cost of a ship. This means that the services of contractors and the cost of materials amount to 60 per cent. of the cost. My right hon. Friend the Member for Sunderland, North talked about the consequences of the Bill and said that one in every so many members of the shipbuilding industry's work force would be put out of work. The Bill will also have consequences for those outside the industry. It could mean that two men in every so many members of the ancillary industries will be put out of work.

Within the region which I represent in part there are many organisations connected with shipbuilding and ship repairing. Newcastle university has the largest and the foremost naval architecture department of all universities in Britain. The South Shields technical college has an internationally known marine college. The British Ship Research Association has its headquarters in Wallsend. British Shipbuilders has its headquarters in Newcastle. British Ship Repairers has its headquarters in South Shields. If the Government destroy the shipbuilding industry, there will be serious consequences in the North-East, including the Tyne and the Wear.

In October the Tyne and Wear county council published a paper in which it listed the firms that announced redundancies between June and August. The following major job losses were reported in the press: Tyne Ship Repairers, South Shields, 1,000; Comings, Sunderland, 440; William Press, South Shields, 330; H. K. Porter Ltd., Newburn, 86; Lack-Johnson, Washington, 70; Caterpillar Tractors, Birtley, 60; Crompton Parkinson, South Shields, 60; and Ronson, North Shields, 50. The list is almost endless. The purpose of the Bill is to sell off the naval warship yards, and if it is enacted it will destroy the British shipbuilding industry. That will put another 200,000 in the Northern region on the dole, workers who rely on shipbuilding, ship repairing and marine engineering.

It is nonsense to talk about saving public expenditure when it costs £5,000 a year to put a shipbuilding worker on the dole. Jarrow is known as the town that was murdered in the 1930s. It already has one of the highest rates of unemployment in Britain. The last ship repairing yard in my constituency, Mercantile Dry Dock, is being closed this year. The last pit in my consituency, Bolden colliery, is being closed this year. The last steel plant in my constituenccy is under threat. The South Tyneside metropolitan district council, which embraces the constitueny of my hon. Friend the Member for South Shields (Dr. Clark), recently commissioned a survey. It revealed pockets of over 50 per cent. male unemployment.

The Mercantile Dry Dock, Bolden colliery and other work places worked throughout the Second World War despite Hitler's bombs, but they cannot continue under the policies introduced by the Government. Their policies are having more effect on my constituency than the German bombers.

The result of the survey that was undertaken by the North-East Centre for Community Studies in part of the South Tyneside district showed that 22 per cent. of heads of households were unemployed. It showed also that 53 per cent. of the respondents to the survey relied on help towards rent, rates and mortgage repayments, that 28 per cent. had difficulty in paying their rent, that 37 per cent. had difficulty in paying heating bills and that 14 per cent. could not pay heating bills. Other studies that have been carried out on Tyneside have drawn links between longterm unemployment and health problems, suicide, marriage break-downs, heavy demand on social services and a variety of other social consequences.

During her famous speech in Swansea the Prime Minister said that the unemployed should be mobile. No doubt she was referring to the young and active. When those who are young and active leave the areas to which I have referred they do not take with them the community centres, hospitals, old people's homes or parks. These facilities remain and the older population has to pay for them.

It is criminal to talk about putting British Shipbuilders back into the hands of private owners. The industry would have been finished if it had not been nationalised in 1977. Private ownership virtually bankrupted the industry. The Minister talked about massive investment in the 1970s. I do no know the source of his facts, but a survey that was undertaken in the early 1970s showed that the assets of the British shipbuilding industry amounted to £825 for every worker. In West Germany the assets were valued at £1,000, in Italy at £1,200, in Sweden at £1,800 and in Japan at £2,800.

A survey that was undertaken later in the 1970s showed that in the British shipbuilding industry an extra £80 had been invested per man whereas West Germany had invested a further £162 per worker, Japan had invested an additional £409 per worker and Sweden had invested an extra £554 per worker. In September 1981 Lloyd's List reported that the seven largest shipbuilding yards in Japan had earmarked £626 million for investment in plant and equipment.

It was lack of investment in British shipbuilding that put it in the state in which the Labour Government found it in 1977. There was a lack of investment on the part of the private entrepreneurs about which we hear so much. The Geddes report of 1966 made a similar statement. The Booz-Allen report also referred to lack of investment in the industry. The case for nationalisation was proved by that report.

The industry requires a national policy. The Government should take the advice of the Select Committee on Industry and Trade, which suggests the setting up of a high level interdepartmental working party to consider the full implications of maritime policy for the United Kingdom, which embraces shipbuilding and shipping generally. We cannot isolate shipbuilding from shipping. Instead of introducing a Bill that will destroy shipbuilding the Government should have produced a measure that embraced the suggestions that have been made on numerous occasions by my right hon. and hon. Friends, including an effective scrap and build scheme. We have talked about such a scheme for years and we know that it is being blocked by certain European countries.

We should provide more attractive credit terms for prospective buyers and ensure that British shipping companies build in this country. There is not a shipbuilding company in Japan that builds outside Japan. It is about time that we adopted a similar national policy for supplying British shipowners. We should bring forward defence programme orders and, for example, orders that stem from North Sea oil production programmes. We should ask harbour authorities and other such bodies to bring forward their vessel replacement programmes. We should press the EEC to increase the amount available from the intervention fund.

Many of my hon. Friends wish to speak in the debate. Many of them already have far too high a level of unemployment in their constituencies and cannot accept any more. We in the Northern region have been quiet for far too long and have accepted unemployment far to easily. Unemployed people over the age of 45 who live in the North-East are finished. They have no chance of getting another job. Furthermore, there are young people leaving school who have no chance of a job.

I finish by repeating what I said in my maiden speech. It is about time that the Government took heed of some of the warnings that Labour Members have given them. The young people of today are not so steeped in democracy that they will accept the solutions of the 1930s for the problems of the 1980s. The sooner Ministers get that in their heads the better.

5.50 pm

Mr. Michael Grylls (Surrey, North-West)

I have listened carefully to the speech of the hon. Member for Jarrow (Mr. Dixon). Nobody would dispute the sincerity and importance of his general remarks about unemployment in the North-East. However, in other respects he is a little off beam. If one compares British Shipbuilders over the past three years under this Government with the previous two years of the Labour Government, it will be seen that the Government have given it twice as much money by way of National Loans Fund money, public dividend capital money or grants under sections 7 and 8 of the Industry Act. That is on the record.

That being the fact, for the hon. Gentleman to deduce that the Government are doing their best to destroy the shipbuilding industry is nothing short of ridiculous. He must know that that is not true. He is not doing his region any good by pretending that under this Government the shipbuilding industry is under threat.

The hon. Gentleman rightly said at the beginning of his speech that over the past three years British Shipbuilders' position has improved. Losses have been reduced and productivity improved. Delivery dates are better than they were. To say that the Government are damaging the industry when they are providing such massive support is Alice in Wonderland language. He is not doing any good to his constituents or anybody else in the shipbuilding industry.

Mr. W. E. Garrett

The hon. Gentleman seems to have misconstrued what my hon. Friend the Member for Jarrow (Mr. Dixon) was trying to say. He was not critical of the grants and allowances that have been made by the Government. He was anticipating what will happen when the proposed legislation is passed. The hon. Gentleman has accepted that it is Government investment which has allowed the industry to reduce its deficit, improve its efficiency and meet the challenges that have existed up to now.

Mr. Grylls

That is correct. The Bill will allow the introduction of private capital into British Shipbuilders.

In the debate so far my hon. Friends the Members for Eastleigh (Sir D. Price) and Tynemouth (Mr. Trotter) have spoken with one objective in view—the good of British shipbuilding as an industry. Their knowledge has allowed them to speak sincerely on that. Throughout the debate there has been a degree of unanimity. We are all concerned with the good of British shipbuilding in general.

I apologise if I misunderstood the hon. Member for Jarrow, but I got the impression that he was trying to cast doubts on the Government's sincerity in wishing to see a healthy shipbuilding industry.

The debate is not about the generality of British shipbuilding. There is almost a bipartisan policy on that. The Government have increased grants to British Shipbuilders and have made various statements about continuing financial support. The debate is about whether there is any room for private capital for the good of any part of the British shipbuilding industry.

Mr. Dick Douglas (Dunfermline)

If, as the hon. Gentleman says, the crux of the matter is the introduction of private capital into British Shipbuilders, why is it necessary to take powers in the Bill which impair and undermine the industry's structure? That is what is at stake. That is the division between us. If people wished to invest private capital, it would not be necessary to take such powers. Those Conservative Members who support the Bill must explain why the Government are doing it in this way.

Mr. Grylls

The hon. Gentleman is right regarding what the Bill is about but he is probably wrong on the legal point. He may remember that I have been one of those who have pressed the Government to come forward with measures to allow the investment of private capital for the good of the warship building industry. That has not happened. One reason for that is that the powers were not there under the old Act. The Minister will correct me if I am wrong, but he did not have watertight legal powers to direct British Shipbuilders to allow the introduction of private capital. Therefore, the Bill is directed to that purpose. It is a clarification which allows the introduction of private capital. The central argument is whether private capital is good or bad. We should be clear about that.

Mr. Dewar

The Bill does clarify the position and makes it possible to introduce private capital. However, there is a fear among Labour Members that the machinery created by the Bill will also allow the sale of substantial assets, such as individual yards, or parts of the warship division. As an expert in the Conservative Party on the industry does the hon. Gentleman think, first, that that would be undesirable, and, secondly, that that is not the intention of the Bill?

Mr. Grylls

To talk of selling a company or an asset is not the right way to look at the matter. The real issue is whether to bring in private capital. British Aerospace has greatly prospered since it was able to go to the City and raise private capital. If one wants to be emotive about it one can say that it has been flogged off. It is better to say that it has had an opportunity to attract private capital.

An article in The Engineer last week quotes John Lyons, the general secretary of the Engineering Managers' Association, as saying: It is clear the Government is acting on grounds of political dogma or, if not that, to cut a dash with its more ideological followers. We must refute that view. The Government are not acting on grounds of political dogma. The important point is not so much ownership, although the Conservative Party prefers private ownership because it is more efficient generally—as the record shows—but what is for the good of the industry; what will make it most efficient. Ownership is not an end in itself. If all nationalised industries were efficient and returned good dividends to the taxpayer and the Treasury, there might be less pressure to privatise them. It is only because they are such a drain on the Exchequer that people, rightly, want to privatise them and to enable them to gain capital on the market.

Another important factor, which is linked to the question of efficiency, is investment. I shall demonstrate why some of the warship building yards have been starved of investment since nationalisation. That is very damaging. As I said, I think to the right hon. Member for Salford, West (Mr. Orme)—who is unfortunately not in the Chamber now—one side of the industry is still in trouble, although things are improving, while the other side—the warship yards—is making a profit. If the two sides remain married together there is a danger that they will both fall. If there is not enough investment in the warship yards, they will not be modernised and will be unable to attract overseas orders or properly service orders from the Ministry of Defence.

The critical factor is investment. Those who work in the warship building yards would be wise to take a leaf out of British Aerospace's book, or indeed out of the book of any of the companies that have been privatised and that need heavy investment. They would be wise to ask what has happened to those companies since their return to the private sector. They should ask whether those companies have done any better and whether they have attracted capital for investment and modernisation and thereby secured jobs. Whatever the percentage of equity—whether it is 49–51 or 50–50—if the warship yards are allowed to attract money from the private sector jobs will become more secure. Clearly the money will not come from BS.

Dr. John Cunningham

The hon. Gentleman must produce a better argument in support of his belief that privatisation will attract private capital. He has mentioned British Aerospace twice. If what he says is true, why is British Aerospace knocking on the Department of Industry's door saying that unless it has Government support and taxpayers' money it will not have any chance of taking part in the A320 airbus project or of going ahead with the P110, which is now called the agile combat aircraft? How does the hon. Gentleman explain that?

Mr. Grylls

It is perfectly explicable. As the hon. Gentleman well knows, prior to nationalisation in 1977 the privately owned aircraft firms relied for part of their investment capital on "launching aid" from the Government. That has always been the case. We are saying the same thing now. The greater part of investment comes from the private sector. The hon. Member for Whitehaven (Dr. Cunningham) should not turn away when I am telling him the answer. I do not wish to be impertinent, but it is the answer. The company is asking for a little topping up, but most of its investment has come, and will come, from the private sector.

Opposition Members ask how Britian can exist without a warship building industry. We all agree about its importance, but they suggest that the industry could not exist without nationalisation. However, Nelson won the Battle of Trafalgar without relying on the nationalised warship industry. Beatty and Jellicoe won the Battle of Jutland and the Battle of the Atlantic was also won without a nationalised warship industry. Indeed, I imagine that most of the warships—if not all—that went to the Falkland Islands were produced by the privately owned warship building industry. Therefore, that case cannot be made.

The argument is not so much about ownership but about investment. How best can we get investment in our warship yards? We at least agree about the desperate need to return the merchant yards to profit, and to make them successful so that they can win and deliver orders all over the world. We should all agree that the same applies to the warship yards. We are arguing only about the best way of achieving that. Since nationalisation, the warship yards have been starved of investment. I shall not weary the House with figures, but I should like to give one set of figures for a yard mentioned by my hon. Friend the Member for Eastleigh. I refer to Vosper Thornycroft UK, the nationalised warship yard in Southampton and Portsmouth. In the five years since nationalisation Vosper Thornycroft UK has paid from its profits £48 million in dividends. In the three years prior to nationalisation it paid only £700,000 in dividends. Therefore, the money has been siphoned out of Vosper Thornycroft UK. The same applies to Yarrow and Vickers, the other two main yards. The money has gone into propping up the merchant shipbuilding yards. That is a bad policy because it ends up with two problem children instead of one.

The important point is that the merchant shipbuilding yards are almost in profit. In a year's time they may almost be running profitably and they will not need that support. Therefore, we should allow the warship yards to stand on their own and to plough their profits into investment and modernisation so that they can attract orders from all over the world. The Government must make up their mind about how they intend to attract private capital if the Bill is enacted.

I am sure that the Minister realises that the former owners of the three main warship yards—Yarrow's, Vickers and Vosper Thornycroft—did not receive proper compensation for their assets when the yards were nationalised in 1977. They can hardly be expected to buy them back in 1982. If I buy a house worth £50,000 from the hon. Member for Whitehaven for £5,000 and then offer to sell it back to him for £50,000, he will ask for the original £50,000 before perhaps offering to buy it back. That is the analogy. Therefore, the Government have a problem if they want the former owners to buy back the yards. Alternatively, a joint corporation could be made of the warship yards and shares could be traded on the market and offered to the public. That would be a satisfactory way of ensuring a good warship building industry.

Mr. Dewar

I am genuinely confused. I understood the hon. Gentleman to say that the sale was not a starter and that we were looking at joint ventures and possibly an injection of capital. He is now talking about the former owners buying back the yards. That is very different and much more sinister. What is the hon. Gentleman's position?

Mr. Grylls

I am saying exactly the same thing. Who will put private capital into the warship yards? In theory, the former owners could do so, but they do not have the money because they have not been properly compensated. Is the hon. Gentleman with me?

Mr. Dewar

Yes.

Mr. Grylls

That is the problem. The former owners can speak for themselves, but I doubt whether they would buy back the yards. Private capital is more likely to be obtained by floating off part of British Shipbuilders into a separate Companies Act company on the Stock Exchange. BS could maintain 49 per cent. of the shares, or whatever percentage is thought proper, and the public could subscribe for the rest of the shares. In that way private capital could be attracted and the yards would prosper.

So far, the Government have not elaborated on how private capital is to be obtained. Nevertheless, I congratulate them on the principle of the Bill. If we want Britain to maintain an international warship building capability, we must ensure that the industry is modernised. The only way to do that is by allowing the introduction of private capital. Both sides of the House should agree about that.

I hope that the Bill is enacted and I shall certainly support it in the Lobby tonight.

6.9 pm

Mr. W. E. Garrett (Wallsend)

Many tributes have been paid to the management and workers of British Shipbuilders, but they are sick to death of tributes and are more concerned about their jobs. At the weekend, I met full-time union officials and employees in my constituency and I found that the mood of despondency and gloom had deepened to a level that I have not known for many years.

The management is puzzled and punch drunk and the work force is demoralised. Since nationalisation management-worker relations have improved considerably. Many of us remember the years of bitter conflict between men and management under private enterprise. Strikes went on for months because of private management's attitude, its failure to understand the needs and aspirations of the work force and its inability to motivate the workers into feeling that they were part of an industry which mattered.

None of us should forget the major role that private enterprise played in the demise of the British shipbuilding industry. It is on the record and it is a piece of social and industrial history which should be a lesson to us all.

It is a mystery to the work force, though not to me, why the Government should upset the existing arrangements under which, in spite of world difficulties, the industry was striving to get back on to an even keel. The position will worsen if the Bill goes through.

We have had a sombre debate so far and it has been part of a pattern of debates about the industry over many years, even since nationalisation. I wish that people would leave the industry alone so that it can get on with the task of meeting the nation's defence needs in peace and war and preparing itself for the time when the commercial markets improve. The British people will face a challenge if they are given encouragement. We should be securing the base of our industry so that it can meet the challenge of fair competition.

The present unfair competition cannot be allowed to continue. It may stick in the gullets of some hardline Conservative Members, not many of whom are present, but there must be a change in the Government's thinking. If we do not get the necessary changes, including import controls on shipbuilding, the British public will force the changes on the Government.

I cannot understand why we are so insistent that we must build warships for export. We should build sufficient ships and equipment for the defence of our country, but I have the uneasy feeling that when we sell ships to other countries we are selling our know-how.

When we sell ships to countries that are friendly at the time of the sale we may be storing up trouble, because those countries could become unfriendly in future. Argentina is a classic example. If the Argentine navy had not been so incompetent and unable to manage ships as well as our Navy managed them, some of our ships might have been sunk by the superior fire power of ships that we had sold to Argentina.

I strongly disagree with the Minister of State's claim that it is not illogical for the private sector to be involved in defence work. He mentioned a number of private companies that had defence contracts, but every hon. Member has received letters from such companies asking for Government intervention so that a defence contract can be made profitable. There should be more State intervention in companies to which defence contracts are awarded. Plessey, Ferranti and Marconi have all been in trouble from time to time and all have been bailed out by defence contracts which, by their nature, involve public expenditure. I want more State intervention in such cases, but the Government advance a contrary view.

I have to confess to an enormous error of judgment. If my constituents were assembled here, I would apologise to them for having said that the privatisation of shipbuilding would be low on the Government's agenda for the rest of this Parliament. I was wrong; the Government have put it high on their agenda. There are many more urgent matters for the House to debate and decide. I wish that the Bill had not been introduced in this Parliament. More rational thought should have been given to the matter.

6.17 pm

Mr. Michael Marshall (Arundel)

I am glad to follow the hon. Member for Wallsend (Mr. Garrett). He and my hon. Friend the Member for Eastleigh (Sir D. Price) raised the important question of the market with which we are concerned. The hon. Gentleman mentioned defence work, which is relevant to our discussion, as was the comment of my hon. Friend about Vosper Thornycroft and merchant ship building.

I welcome the Bill and recognise that it is an enabling measure. It may give the Opposition sport to speculate how the Bill will be carried through, but we do not know what the Government will bring forward. Opposition Members are at liberty to say what they would not like to see happen, and they have been doing that in spades, and I shall outline what I should like to see happen.

The remarks of the hon. Member for Wallsend about defence were important. The Falklands conflict raised one-off issues and we shall have to think carefully about the future role of the Royal Navy and the degree to which it is relevant, practical and feasible to think in terms of retaining a capability for that sort of activity. We shall also have to think about the lessons that were learnt about the conduct of warfare. Many feel that the age of the submarine is being enhanced by those lessons. The practical approach to missile carriers is important and would necessitate entirely new designs and perhaps different yards. It would be dangerous merely to take a traditional view of the lessons to be learnt from the Falklands conflict. If we do not recognise that, we shall be misled.

I disagree with the opinion of the hon. Member for Wallsend that we are unwise to seek foreign sales. Our long tradition of selling abroad has underpinned Vosper Thornycroft, for which some of my constituents work.

The hon. Gentleman does not make sense when he argues that a country should not hand over weapons that may be used to its disadvantage. I see it the other way round. We were better prepared because we had know-how about the equipment used by the Argentine navy and other forces. Our foreign sales policy meant that we also had control over Argentine spares.

If we are concerned about our entire defence industry—several Labour Members have actively supported the industry, despite the internal debate in their party—we must be committed internationally. That international outlook towards sales is a lesson that can be learnt from the Falklands conflict and from an examination of the Bill.

The right hon. Member for Salford, West (Mr. Orme) provided one of the best straight-faced comedy routines that I have ever seen when he asked about the Government's intentions to satisfy customers who were dissatisfied because of the Labour Government's 1977 legislation. Speaking from experience, I can say that the compensation paid was narrowly drawn and created a feeling of unfairness. It was extremely difficult to pay such compensation in a practical way. Had the right hon. Gentleman's arguments been employed at that time by his party, the position today would be more simple.

I pay tribute to the Government for carrying out the legislation that was passed in the House. It is almost inconceivable that many former shipbuilding company owners will wish to invest in that part of the industry.

The Bill is enabling legislation that reflects the Government's interest in and enthusiasm for privatisation, the principles of which are being made increasingly clear. I support the extension of those principles. The 50–50 mix that was applied to British Aerospace and to Cable and Wireless for the provision of private capital makes good sense. I am disappointed that the SDP is unwilling to consider the provision of private capital on a case-by-case basis. We should consider the obvious advantages of the 50–50 approach. It is a genuine attempt to depoliticise the necessary funding and to distance ourselves from the suggestion that the industry would be used as a political football.

I regret that the hon. Member for Newcastle upon Tyne, East gave us his reflex reaction in saying that his party would return to public ownership anything that might be taken over in that way. The 50–50 scheme would enable the State to retain a substantial stake in the company. It is entirely proper for the House and the Government to examine the way in which public responsibility is exercised by companies that have a public shareholding. It represents a distinction between the classical nationalised industry and the private industry. The Government have evolved the format, which deserves serious consideration.

Mr. Mike Thomas

The hon. Member for Arundel (Mr. Marshall) and I served for a considerable period on the Select Committee on Nationalised Industries. We agree about several matters, such as the 50–50 scheme. However, he is not speaking for his Front Bench. When I outlined my fears to the Minister, not about the 50–50 scheme but about the sell-off of profitable parts, the Minister refused to say that that was not in his mind. I should be happy if the Minister told us that he agreed with the hon. Member for Arundel, but I suspect that he does not. It would be the triumph of hope over experience.

Mr. Marshall

The hon. Gentleman is taking upon himself much wider responsibility than my hon. Friend the Minister, who did not suggest that. We were told that there was an opportunity to attract private capital. Just as in other privatisation measures, I expect the 50–50 pattern to follow. The hon. Gentleman falls into the trap of his former links when he talks about a sell-off.

Mr. Mike Thomas

That is what the Minister meant. Why did he not say it?

Mr. Marshall

The hon. Gentleman uses emotive words, but it will not be a total sale and the House will have plenty of time to consider the matter. Private capital is needed in some areas. The main attraction of privatisation is the opportunity for employee shareholding, as British Aerospace, Cable and Wireless and the National Freight Corporation have shown. The increasing commitment to an industry becomes self-evident when one visits the shop floor at British Aerospace.

Some of my hon. Friends mentioned the fact that warship builders have invested the fruits of their efforts in other parts of British Shipbuilders. That is not a fair or businesslike way to run a corporation. We must return to the fundamentals by which British Shipbuilders was created. The five divisions—shipbuilding, ship repair, warships, merchant ships and slow diesel ships—were the usual hotch-potch of companies created without obvious logic. It has created some anomalies, one of which can be found in the ship repair industry that falls into both the public and the private sectors. Private ship repair companies face unfair competition from the British Shipbuilders repair companies, which need not fear the financial discipline of bankruptcy and which have been able to survive within a large corporation.

The equity argument demands that wherever there is an opportunity to remove State control it should be grasped. Ship repair is an obvious area. Warship building is a problem because the profits from those companies flow into British Shipbuilders' coffers and their structure means that they have been locked into British Shipbuilders. The most important part of the Bill gives us the opportunity to consider ways in which the companies can be disentangled and private capital drawn in.

I welcome the recent success of Vosper Thornycroft and British Aerospace in obtaining the contract for the modernisation of part of the Chinese navy, because I, too, am worried about Vosper Thornycroft, and that is the best news that we have had for some time. It points the way towards a more effective international marketing drive, but only if private capital is injected. We must get away from the Westminster and Whitehall mix that is inevitable in major nationalised corporations. The greater freedom of movement at British Aerospace helped to secure that contract. Such initiatives could be accelerated and developed in the way that I described.

My hon. Friend the Member for Eastleigh (Sir D. Price) emphasised many times the importance of Vosper Thornycroft's design team. That design team has for many years been regarded as the front runner for the British shipbuilding industry in going for overseas contracts. However, it is regarded as an overhead within a much larger corporation which over recent years has taken substantial amounts of its earnings for disbursement throughout that corporation. Now that Vosper Thornycroft is being squeezed and its order book is being reduced, the maintenance of its design team is regarded as an overhead charge. I believe that the design team still has opportunities to obtain overseas sales not only for itself but for other British warship builders.

I urge early moves on the 50–50 approach towards warship builders and to some extent the ship repair industry. It would allow movement away from the highly complex intermix of merchant shipping support and the way in which the Treasury views the amounts of money that go to British Shipbuilders. The industry is having to change and move into areas of high technology. and it needs to be able to make those changes rapidly.

I understand some of the Opposition's arguments about enabling measures. I am sure that all parliamentarians will put forward their arguments on that matter. When internationally competitive manufacturing industries have been nationalised special problems have been created for United Kingdom industry. The difficulty is that the Government, Civil Service and parliamentary interface with industry has locked management and the work force into a position where they find it difficult to compete in the world. That is the case with major parts of British Shipbuilders.

I join in the tributes that have been paid about the progress that has been made. However, it cannot be argued that nationalisation was a job-saving exercise. I do not take any pleasure in saying that. Large numbers of redundancies and rationalisation were part of the difficult task that had to be faced. I pay tribute also to the efforts of those people who enabled the task force to be despatched to the Falklands within four days. It did not involve just British Shipbuilders; it involved the whole merchant marine. It included all the necessary adaptations and the speeding up of the delivery of HMS "Illustrious". It is unfortunate, but it takes a national emergency to bring British skills to the boil.

British Shipbuilders still faces major problems. The right hon. Member for Salford, West (Mr. Orme) said that it was a disgrace that P&0 had bought from Finland. He should have reminded the House that the problem was that British Shipbuilders could offer only a three-year delivery whereas the Finns won the order with a two-year delivery. We have to overcome that sort of problem. Hon. Members who know British Shipbuilders know that there is a great deal that needs to be done to improve productivity.

One must recognise that this discussion about merchant shipbuilding must be related to the way in which world shipping markets and shipping industries have changed dramatically. We face new and powerful competitors. There is a great deal of force in the argument of those who say that we should look closer at the way in which we view competition and the way in which other countries subsidise their industries. The Government have shown themselves willing to help in every way possible within Europe and our traditional markets. However, the subsidy war is not one that we can win. The balance of world shipbuilding power has changed dramatically, and it does not help to hope for the return of the halcyon days when we dominated the world.

I believe that there is a case for maintaining warship building for identifiable domestic needs and for the sale of warships around the world as we have done in the past and can do again. I believe that we should maintain the British merchant shipbuilding industry. My hon. Friend the Member for Eastleigh was right, and I take the same view, when he said that it might be better to consider whether the money would be better spent in encouraging British shipowners to buy British. Opposition Members who have criticised the Government about the "Atlantic Conveyor" should recognise that Cunard was encouraged to agree terms for the purchase of its replacement. I believe that that was the sort of action that my hon. Friend the Member for Eastleigh had in mind.

I do not believe that there will be opportunities for early or hasty action under the Bill when one recognises the present state of world shipping, the shipping market and British Shipbuilders' order book. I believe that those issues and the issues on the future of British Telecom, the next 50–50 public-private measures, and employee shareholdings will be considered when we have the general election. If those issues are argued electorally, I have every confidence in the outcome.

6.36 pm

Mr. R. C. Mitchell (Southampton, Itchen)

I should thank the Minister for spending five minutes attacking the Social Democrats. I am flattered. The more he spoke, the more he convinced me that I am right to recommend to my right hon. and hon. Friends that they should vote against the Bill. It is a bad Bill as drafted. The first argument against it is a constitutional one. It is an example of a new breed of Bills, similar to the Iron and Steel Bill 1981, known as enabling Bills. They give the Minister and therefore the Executive much greater powers vis-a-vis Parliament. The Bill gives the Minister the power to do virtually anything with little parliamentary accountability—the negative, not the affirmative, procedure. He can do virtually anything without coming back to the House, except perhaps for a one and a half hour debate after 10 o'clock.

It is not, as the Minister tried to make out, a Bill to enable British Shipbuilders to do various things that it cannot do now. I should have had some Sympathy with that. It is a Bill to enable the Minister to instruct British Shipbuilders to do certain things. I suspect that this Bill and the Iron and Steel Bill 1981 grew out of an argument between the Minister and Sir Denis Rooke of the British Gas Corporation when he challenged the Minister's right to give directions.

Mr. Mike Thomas

He is a maniac.

Mr. Mitchell

One of the textbooks that I was forced to read when I was a student was written in 1929 by Lord Hewart, the Lord Chief Justice. It was called "The New Despotism"—I am sure that hon. Members have read it—and it attacked the tendency to move towards delegated legislation. It argued that parliamentary power was being reduced and that ministerial executive power was being increased. I do not know what the noble Lord would say if he were alive today to rewrite his book. More and more enabling legislation is being introduced to give Ministers unlimited powers.

The right hon. Member for Salford, West (Mr. Orme) was right to say that the proposal smacks of the Militant Tendency. I believe that there must have been a mole in the Cabinet. It would be interesting to work out who he is.

I remember the boring resolution moved at meeting after meeting when I was in the Labour Party that the meeting called upon the next Labour Government immediately to pass an enabling Act to take into public ownership any of the 250 monopolies that it wished. This measure is confined to one industry, but it enables the Minister to privatise and to instruct British Shipbuilders to privatise in any way that he thinks fit, whether or not it agrees.

Mr. Frank Field (Birkenhead)

The hon. Gentleman has twice said that the Bill gives the Minister power to instruct British Shipbuilders and the Minister has twice indicated dissent. Will he invite the Minister clearly to state whether the Bill will give him power to instruct British Shipbuilders to take actions with which it may not agree?

Mr. Mitchell

I hope that one of the Ministers will deal with the point.

Mr. Norman Lamont

I spent time referring to the SDP because in a previous debate SDP Members said that they were in favour of co-operation between the public and private sectors. I hoped that they would see the Bill for what it is. It is difficult to have that co-operation unless we alter the statutory position, which is what the Bill does.

If the hon. Gentleman fears that we shall act in a doctrinaire way that is opposed by British Shipbuilders, it is open to the House, through the negative procedure, to challenge us. When he casts his vote he must consider whether he is totally against the introduction of private capital even when it is agreed by British Shipbuilders. He has every safeguard when it is not agreed.

Mr. Mitchell

The Minister still has not answered the question.

I agree with 50–50 experiments and with private capital being brought in if British Shipbuilders wants it. If the Bill were drafted to give British Shipbuilders the ability only to opt for that, I should urge my hon. Friends to vote for it, but it goes much wider. It gives the Minister power to direct British Shipbuilders, for example, to sell an individual yard. I do not trust the Minister not to do that. I believe that is the intention in the Government's mind. That is why we shall vote against the Bill. I wish that the Government would drop the fictional phrase "in the national interest". It merely means what the Minister thinks at that moment.

The Bill is a prelude to privatisation, so we should consider the state of the industry when it was in private hands. If one had to pick an industry that was the greatest failure under private enterprise, it would be shipbuilding. In the late 1940s only Britain, the United States and Sweden were building ships. Our industry was doing well and making substantial profits, but the money was not reinvested in the industry. The profits were distributed, and a lot of money was made. Our industry was therefore not in a position to meet the competition from Germany and Japan with their modern shipyards.

Soon after I was elected to the House I went with a shipbuilding group led by Lord Shinwell to visit a number of shipyards. We closely examined shipyards on the Clyde, the Tyne and elsewhere. We looked at the structure of the boards, particularly the old family ones. Probably grandfather was a great shipbuilder, but the grandson knew little about the business. On the board was uncle Bill, auntie Nellie and cousin Willie.

I wish that the Fairfield experiment had been allowed to continue instead of being amalgamated in the wretched business of bigger is better. It was a treat to visit Fairfield. I was met at the door by six people in white coats; three management and three shop stewards. There was no way to tell which was which. Each knew as much about the industry as the other.

I also visited John Brown, the great yard that built the "Queens". As we left the management office after a cup of coffee to visit the shipyard, our hosts picked up their bowler hats. We were told that they needed them in case nuts and bolts fell on them, or they banged their heads on a plank when climbing a ladder, and so on. The real reason was to mark the distinction between management and labour.

Such examples of bad management led to bad labour relations, but there were also faults on the union side. We probably still have too many unions in the industry. A Hamburg shipyard manager once told me that he had to deal with only one union, whereas we have about 16. There were also too many demarcation disputes. We all remember the one in Cammell Laird about the porthole. It went on for several months.

Mr. Field

What year was that?

Mr. Mitchell

In the 1960s, I believe.

Under private enterprise the industry had bad management and bad industrial relations. Consequently, our proportion of the world shipbuilding trade fell dramatically—from nearly 50 per cent. to about 4 per cent. at the time of nationalisation.

Since British Shipbuilders was set up there has been a 70 per cent. drop in the number of days lost through industrial disputes and increased efficiency and cooperation with the trade unions. That has been achieved with little help and perhaps even hindrance from the present Government. Our shipyards are still not as efficient as they should be and there is a long way to go.

My main criticism of British shipbuilding is that there has been an over-centralisation of management. I gave that same warning when the Aircraft and Shipbuilding Industries Act 1977 was going through the House. I agree with the hon. Member for Surrey, North-West (Mr. Grylls) that there is a case for letting individual yards have more power and influence. It would be wrong if we took the profits of warship building yards—they are the profitable ones—away to invest them somewhere else. It would be wrong to starve them of their profits and to invest them exclusively in other parts of the shipbuilding industry. We must strike a balance.

The country needs a maritime strategy. There is no sign that the Government have accepted that need. We must get shipbuilders, shipowners, trade unions and the three relevant Departments—Trade, Industry and Defence—and the Royal Navy together and sort out Britain's future maritime policy.

There has been a dramatic drop in shipping tonnage under the British flag in the past few years. I asked the Minister about the matter this week. Since 1 January 1980, 3½ million tonnes of British shipping has left the British flag either to be sold or to go to foreign flags of convenience. What is more, that figure does not include BP's selling of 18 tankers. If we go on like that, Britain will not have a merchant navy. If that is some, there will be no Falklands operations of any description. We must examine those problems together.

It is absurd that in the past, under Governments of both major parties, shipowners have been given incentives to have their ships built abroad. They have sometimes gained financially by doing that. Whenever possible, British ships should be built in British yards. It should not be necessary to have the sort of argument that there was about the replacement for the "Atlantic Conveyor". We should not have to involve the Prime Minister to ensure that a British ship is built in a British yard. There should be co-operation between the two industries and the Government to ensure that it is more favourable to build British ships in British yards.

It is interesting to read the Select Committee report and the comments of British Shipbuilders on warship building. The Industry and Trade Committee report states: None of the evidence we received was so trenchantly expressed as that of BS in protesting that HMG should 'suddenly withdraw orders, cancel orders, keep limiting us with financial constraints, do not tell us what orders we are going to get and do not help us to sell our ships overseas'. We are not surprised that this should be the 'subject of very strong protestation from British Shipbuilders to both MoD and the Navy'. We strongly sympathise with Mr. Atkinson's cri de coeur 'you cannot turn a tap on and off in warship building because of the very great national skills involved'. The hon. Member for Eastleigh (Sir D. Price) said that.

The Government must make up their mind about the warship building pogramme. I mean not just the warship building programme to replace what was lost in the Falklands, but the programme that would have existed if the Falklands campaign had never taken place. Unless some shipyards, including Vosper Thornycroft in my constituency, receive orders soon, they will be in trouble.

I thought that the Minister showed ignorance of the shipbuilding industry when he seemed to imply that a warship building yard could exist purely on export orders. That may have been so once, but it is no longer true. The first question a shipbuilder is asked when he tries to sell his ships to a foreign navy is "How many of those ships are the British Navy buying?" That happens repeatedly. The two go together. One cannot expect a warship building yard to exist solely on export orders. I am worried about the attitude of the two major parties to public ownership. Using public industry as a political football was one description. That is damaging to the economy.

I was sad to hear the right hon. Member for Salford, West make the conventional assertion that if a Labour Government are returned they will immediately reverse the Bill's provisions. It is impossible to say at this stage when that will be. It may be next year, in 10 years time, or may be never.

Mr. Mike Thomas

It will probably be never.

Mr. Mitchell

That is the problem. The Labour Party's policy seems to be "If it moves, nationalise it"; the Conservative Party's policy seems to be "If it makes a profit, privatise it." Neither policy will create one job or do anything to improve our economy. Nor will the Bill. Indeed, it may damage the economy by creating even more uncertainty.

Mr. Norman Lamont

The Bill provides for a mixture of public and private finance in British Shipbuilders. I should have thought that the hon. Gentleman would support that.

Mr. Mitchell

I shall come to that point later.

The Government's attitude to the public sector is odd. Gas prices are an example. The Minister instructs the gas corporation to increase prices against its will and then the Prime Minister makes a speech complaining about the high prices charged by nationalised industries. The Government sell off profitable parts of publicly owned industries, and then complain that what is left makes a loss. They constantly—the Minister did it today—ask publicly owned industries to act commercially, and the Treasury interferes and makes it impossible for them to do SO.

Private and public industries can work together and co-operate. I have no objection to the joint ventures that have been mentioned today. Nor have I any objection to British Shipbuilders receiving an injection of private capital if the industry wants it. It would be possible to draw up a Bill to enable that alone to happen. However, I strongly object to selling off the profitable parts of British Shipbuilders and leaving the rest. I strongly object to selling off the warship building yards. As many hon. Members have said, if the profitable parts of British Shipbuilders are sold off, no civil shipbuilding industry will be left. That cannot be in the national interest. It cannot even be the Minister's interpretation of the national interest.

For those reasons, I ask my right hon. and hon. Friends to vote against the Second Reading of the Bill.

6.59 pm

Mr. Michael Colvin (Bristol, North-West)

It is a pleasure to follow the hon. Member for Southampton, Itchen (Mr. Mitchell). If it had been possible for me to accompany the hon. Gentleman to Fairfields, I would have drawn precisely the same conclusion about those who were wearing bowler hats. There is no doubt that many of the problems of our shipbuilding industry stem from poor industrial relations. The feeling of "them and us" has been overcome successfully by Japan, which has for many years been one of our main shipbuilding competitors.

I am also pleased that the hon. Gentleman should conclude that bigger is not necessarily better. This could certainly be applied to British Shipbuilders, which has become far too over-centralised. The right hon. Member for Salford, West (Mr. Orme) remarked that the top brass of British Shipbuilders, on the recent visit to the Select Committee on Trade and Industry, had not suggested that denationalisation would be a good idea. That is hardly surprising. The number of its top executives within the £20,000 to £40,000 salary bracket had doubled since 1980–81, from 31 to 64. They have a vested interest in staying in the public sector.

I welcome the Bill. Its enactment will enable the Government to fulfil yet another Conservative manifesto pledge to sell back to private ownership the recently-nationalised aerospace and shipbuilding concerns, giving their employees the opportunity to purchase shares. I am pleased that British Aerospace has been denationalised so successfully. Many of my constituents are now shareholders. I hope that the manifesto undertaking to enable workers to take a stake in their company will be honoured when methods for denationalising part or the whole of British Shipbuilders are examined.

The Bill comes late in the life of this Parliament. My right hon. Friend the Member for Leeds, North-East (Sir K. Joseph), who was then Secretary of State for Industry, said about denationalisation soon after the general election that in the light of the particular problems of the industry and the consequent difficulty of predicting its future size … this is not the right time."—[Official Report, 23 July 1979; Vol. 971, c. 30.] That was back in July 1979. The time may still not be ripe for actual privatisation. I agree with my hon. Friend the Member for Arundel (Mr. Marshall), who expressed doubts about the timing. However, there is no need to delay the measure to enable British Shipbuilders to be privatised as and when its performance and the market permit.

Although adverse world conditions and the peculiar problems of the British shipbuilding industry applied before nationalisation, there is no doubt that the Labour Party's ill-conceived nationalisation plans and the long period of indecision that ensued had a damaging effect upon the industry's competitiveness. When the Conservative Government were elected, there was little that they could do about British Shipbuilders except to buy it breathing space to get its house in order. I believe that that breathing space is now coming to an end.

For years, our shipbuilding industry has been struggling against the tide. Two trends have been working against the industry. First, there has been a dramatic collapse of world demand for shipping and shipbuilding, with over 70 million tonnes now laid up, mostly bulk carriers. Secondly, there has been a decline in European and especially British competitiveness. The figures tell their own story. In 1955 the EEC built 70 per cent. of the world's ships. In 1976 it produced only 22 per cent. In 1950, 42 per cent. of the world's new ships were built in British yards. In 1978, the British share of world order books was 4½ per cent., and it is now less than 3 per cent.

One of the main reasons for the decline in our competitiveness has been poor productivity. At a time when output per person employed in British manufacturing industry as a whole was rising, the productivity of British shipbuilding was falling, especially during the 1974–77 period of the Labour Government when great uncertainty was caused by the threat of nationalisation hanging over the industry. The Labour Government were obsessed with the idea of extending State ownership, hooked, as the Labour Party still is, on clause four of the party constitution—the State ownership clause that the late Hugh Gaitskell fought so hard to repeal. It now hangs round the neck of the Labour Party like an albatross and is a constant reminder to all Labour voters that the party is out of touch not only with the country but also with most of its rank and file supporters.

Mr. John Garrett (Norwich, South)

We shall see.

Mr. Colvin

The hon. Member for Norwich, South (Mr. Garrett) laughs, but opinion surveys, especially recent ones, show that the British people reject the idea of nationalisation. Even during the heady days of the debate on the nationalisation of the shipbuilding industry, when it was thought by some that their jobs would be made more secure, many workers voted against the nationalisation of their firms. During that debate, Labour Ministers were at pains to point out that there was nothing they could do to guarantee jobs in the shipbuilding industry or anywhere else. For once, they were right. British Shipbuilders has not simply lost money; it has also lost jobs.

In July 1977, upon nationalisation, British Shipbuilders employed 87,000 people. By September 1979, the figure was down to 79,000. By March this year, it had declined to 66,000. Over 20,000 workers have left the industry at a cost in redundancy money of £55 million. It may be inevitable. But it proves once and for all that nationalisation has nothing to do with saving jobs. What rationalisation may do is to make the jobs of those left in the industry more secure. That will happen only if the industry and the firms within it survive.

I was interested to hear the comments of the right hon. Member for Sunderland, North (Mr. Willey) about the Booz-Allen report and the Geddes report. It is some time since I read those documents. I do not recall finding anything in either of them that recommended nationalisation as a solution for the shipbuilding and ship repairing industry problems. They recommended rationalisation. That is very different.

Our shipbuilding industry had to operate in the 1974–77 period in the dreadful economic climate that the Labour Government created. This was one reason for the Labour Party's nationalisation policy—sheer economic incompetence. The other was political dogma. Its rationale for nationalisation appears to be to create the economic and political climate in which no one has the confidence to invest and then to step in, ostensibly to protect jobs, with nationalisation as a cure for a disease that the party's policy itself has created. Sooner or later, the day of reckoning has to come. The price for so-called job protection has to be paid. That price can sometimes be the total collapse of the enterprise.

At this very difficult time, we nearly face not the collapse of British Shipbuilders—because it is secure in the knowledge that the taxpayer stays behind it—but the collapse of the free enterprise firms, particularly the ship repairers in the industry, with which British Shipbuilders competes unfairly.

Since nationalisation, British Shipbuilders has lost £322 million. That has meant that British Shipbuilders has been under-quoting to obtain orders, cushioned as it is from bankruptcy by the £700 million it has received from the Exchequer.

Much has been said about unfair competition from overseas because other countries offer more favourable subsidies to their shipbuilding industries than those of the United Kingdom. We owe a great debt of gratitude to the Industry and Trade Select Committee report on British Shipbuilders in the 1982–83 Session. It included a table showing that the United Kingdom is in the middle of the range for Government and other subsidies.

When one takes the direct production aid to shipbuilding and adds to it home credit schemes and grants to shipowners, the combined subsidy for the United Kingdom is about 37 per cent. That compares not unfavourably with Denmark, which has a subsidy of 34 per cent., West Germany with 32½ per cent. and the Netherlands with 38 per cent.

It is notable that the two countries that have been successful in shipbuilding hitherto are Japan, with a subsidy of 5 per cent. and, though with a much smaller industry, Norway with a subsidy of only 9 per cent. These figures do not take into account Government financing of the shipbuilding industries which occurs in a number of countries, the £346 million that British Shipbuilders received of public dividend capital that is unremunerated, or the payment of £55 million redundancy money available for the shipbuilding redundancy payments scheme.

One cannot blame unfair competition from overseas, particularly unfair competition from Japan where subsidies hardly exist, for the problems of the British shipbuilding industry. One must look elsewhere for the reasons for the problems. They arise much more from our low productivity, bad industrial relations, too many unions—which leads to demarcation disputes—and bad delivery dates. That is one of the main reasons why shipowners are reluctant to place orders in British yards.

It is not only the Labour Party that is to blame for the dogmatic nationalisation of our shipbuilding industry. Had it not been for the Lib-Lab pact of 1977, the hard-fought Aircraft and Shipbuilding Industries Act would never have received Royal Assent. I trust that today Liberal Members, who have been conspicuously absent from the debate, will join the Conservatives in the Aye Lobby for the vote, thereby helping to undo some of the damage that they have done to the industry.

Mr. R. C. Mitchell

What does the hon. Gentleman think the strength of the shipbuilding industry would have been today had it not been for nationalisation in 1977?

Mr. Colvin

That is the type of hypothetical question that it is extremely difficult for anyone to answer. However, had the industry not been nationalised in 1977, it would still have suffered the problems inflicted by the Labour Government's economic policies in the last two years of their period in office. Once the Conservatives were returned to power in 1979, a new economic climate began. That in no way would have stopped the shake-out of surplus labour in the industry, or the improved productivity.

Until recently, five men have been doing four men's work in British industry, overall. If we wish to regain international competitiveness—that is what we are talking about—we must face up to the fact that the fifth man will have to go. Had that happened in Britain, with a labour force of 22½ million, the unemployment figure in this country would be 4½ million, not 3½ million. That seems to show that there has been considerable regeneration with new jobs in industry. The shake-out is cruel, hard and tough, but it is inevitable. If one tries to avoid it, one is living in a fool's paradise.

Clause 1 will remove the legal straitjacket that prevents British Shipbuilders from organising its own affairs in the light of its own commercial judgment. At the moment, it cannot form joint companies with the private sector, set up saleable subsidiaries or sell shares to the public. Those are three possible ways of beginning the privatising of the shipbuilding industry. The Bill will enable British Shipbuilders to do any of those things.

While giving BS that additional freedom, the Bill will leave the responsibility for national defence implications with the Government, which is where they should be. Clause 1 imposes on the Secretary of State a requirement that before giving a general direction to British Shipbuilders he must be satisfied that it will "further the national interest." The national interest and national defence implications of the Bill are important.

A report in the Financial Times yesterday said that, as long as ship owners are losing money, there will be no hope for shipyards. That is true. Unfortunately, the number of ships in our merchant fleet has been falling fast. In the past seven years, the number of ships flying the "red duster" has fallen from 1,614 to 943. Every week, there are three fewer British ships. We used to have the world's biggest fleet. Now we have been overtaken by Liberia, Greece, Japan, Norway and Panama. As an island trading nation, we need a merchant fleet for both economic and defence reasons.

In the recent events in the South Atlantic 54 of our merchant ships were involved in the task force that recaptured the Falklands. Eleven of those ships were supplied by British Petroleum, and yet only the other day this company, which is half owned by the British Government, decided to get rid of 16 of its ships, over one third of its fleet.

Mr. Keith Best (Anglesey)

My hon. Friend talks about the need for a merchant fleet for defence purposes and he has rightly drawn attention to the way in which the merchant marine, particularly the Royal Fleet Auxiliaries, came to the assistance of the Royal Navy in the South Atlantic. Will he also acknowledge that in the future, with a diminishing amount of money available for defence purposes, we are more likely to see the use of merchant ships with clip-on armaments and other fittings that could be turned into effective war machines in the case of a conflict? That is an additional reason for the survival of our merchant fleet.

Mr. Colvin

My hon. Friend has echoed the thoughts of a number of other hon. Members who have spoken today. I went to Southampton to see both the "Canberra" and the "QE2" on their return. I have no doubt that they could have been into action a little quicker if their original design had incorporated those features that would have enabled them to be converted quickly—for example, the strengthening of decks so that helicopters could land on them. With the development of modern technology, we could containerise many of the weapons used on the ships. In my constituency, where part of the Sea Wolf missile is manufactured, there are plans to containerise the whole of the Sea Wolf system. If the Government had reached a decision more quickly, and had we put that missile—

Mr. Deputy Speaker (Mr. Bernard Weatherill)

Order. The hon. Gentleman's remarks are interesting, but they do not have much relevance to the Bill.

Mr. Colvin

I stand corrected, Mr. Deputy Speaker. I was drawn to a favourite hobby horse.

Our merchant ships should have the ability to be converted to military use at short notice. Admiral Sir John Fieldhouse would agree with that. As commander of the Falklands task force, he said about the British merchant fleet: "I cannot say too often or too clearly how important has been the Merchant Navy's contribution to our efforts. Without the ships taken up from trade—"

Mr. Deputy Speaker

Order. I am sorry to interrupt the hon. Gentleman again, but he must try to relate his remarks, important though they are, to the Bill.

Mr. Colvin

I stand corrected once more. With respect, I must point out that if we do not have a healthy merchant navy, we will not have a healthy shipbuilding industry. Without a successful shipbuilding industry and a successful merchant navy, our defences will be sorely weakened. We must accept that in this, the Maritime Heritage Year, the British merchant fleet—our fourth arm of defence—has nearly sunk to rock bottom.

At the present rate of loss, our already weakened merchant navy will be non-existent by 1988. Where will that leave us if we have to face another General Galtieri? As the Prime Minister said, the country owes a great debt to the merchant navy. I trust that when the White Paper on the military lessons to be learnt from the Falklands campaign is published it will reinforce the argument for stringent strengthening of our merchant fleet, without which there would have been no campaign.

The Government have already done much to help improve the political and economic climate in which British shipbuilders operate. We now have lower inflation, lower interest rates and a lower national insurance surcharge. Managers are encouraged to manage and employees are more realistic in their demands. The Bill, which will enable British shipbuilders to operate as the market demands, and therefore to take the best advantage of the market, is, happily, another nail in the coffin of nationalisation. Nationalisation has not served this country or this industry well.

My right hon. Friend the Secretary of State for Education and Science once said that when the State owns, no one owns, and when no one owns, no one cares. We are then in trouble, because if no one cares, no one works. No one works anywhere as hard as they would in a free enterprise company—[Interruption.] That is one fact of life that Opposition Members must face. Our shipbuilding and ship repairing companies, when freed from the shackles of nationalisation and the unfair competition that arises from State handouts to the nationalised sector, will begin to regain lost custom. To think otherwise is negative. To put one's trust in nationalisation is defeatist—worse, it is unrealistic at a time when the British people, even if not Opposition Members, are beginning to demonstrate how realistic Britain must be to survive. We must survive, and we will. With this Bill, our shipbuilding and ship repairing industries will survive.

With those thoughts in mind, I give the Bill my wholehearted support.

7.24 pm

Mr. Frank Field (Birkenhead)

I hope that the House will forgive me if I bring the debate back to the Bill and follow the contributions of some of my hon. Friends who told the House of the atmosphere in the shipyards. When I visit Cammell Laird there are humour and wit written on people's lips, but in their eyes there is despair and fear. They ask me what more must they do to enable our shipyards to survive.

When the shop stewards and the men read the debate, they will no doubt pick on the point agreed by hon. Members on both sides of the House, that if the shipbuilding industry is to prosper it needs to increase productivity. Their question—and I direct it to the Minister—is: how can they improve productivity if the orders—not only the orders from the private sector, but the orders that they expected to receive long ago from the public sector—are running out? It is a sad reflection that we are debating the Bill now, and not reinforcing the achievements of the shipbuilding industry during the past few years.

The most interesting point in the Minister's opening speech was not what he said, but how he said it. The House is used to the Minister giving an effective performance in presenting his brief. But the longer he spoke—especially when he tried to explain the clauses and their effects—the more uneasy he became. I was reminded of one of the passages from Zeffirelli's film "A Man for All Seasons". Perhaps the title is appropriate. In the film Rich gives testimony against Moore, and Moore approaches Rich and picks up his seal of office and asks Rich what it is. Rich proudly replies that it means that he is Chancellor of Wales. Moore replies "To lose one's soul for the world, Rich, but for Wales?" The Minister's seal of office is intact, but just as Rich's statement led to the death of Moore, so, in the most important part of the Minister's speech, we saw a glimpse that the Bill is about the demise of merchant shipbuilding.

If one tried to measure the most irrelevant Bill that could be brought before the House to support the shipbuilding industry, it would be hard to produce anything other than the Bill before us.

Unlike some hon. Members, I shall be brief. The Bill is brief. When the Minister replies, I want him to answer four questions so that we all fully understand what the Bill is about before we complete Second Reading.

First, is the measure about selling yards or selling shares in some of the yards? The hon. Member for Tynemouth (Mr. Trotter), who always brings a considerable knowledge and distinction to our debates, thinks that the Bill is about selling shares in some of the yards. If so, I hope that the Minister will explain why clause 2 gives powers to discontinue or restrict any of its activities or to dispose of any of its property … to secure the discontinuance or restriction of any of the activities of a wholly owned subsidiary of British Shipbuilders". Why are those words in the Bill if it is about selling shares rather than selling complete yards? Please let us know before 10 o'clock what the measure is about. Is it about introducing private capital by way of floating shares or is it about trying to sell off the profitable parts?

My second questions stems from the first. If it is about selling off parts of our assets, not just introducing private capital, will the Minister, when he replies, tell us more about what his powers will be? The hon. Member for Southampton, Itchen (Mr. Mitchell) invited the Minister to clear up this point earlier. The Minister intervened, but did not answer the point.

I am not a shorthand writer, but I noted that the Minister, in his opening comments, used the key phrase: The Bill will allow British Shipbuilders to take decisions which are in the best interests of the industry. We want to know not only whether the Bill is about selling yards or introducing shares but whether British Shipbuilders will make that decision, or whether it can be overruled by the Minister. That is the second question to which I should like an answer.

My third question follows the same theme. How will this measure help the industry's performance? We have not had an answer so far from the Government. Given the present state of the world market for shipbuilding orders, what is the special chemistry which will come from introducing private capital into some of our shipyards? What is the mechanism by which the profit motive will somehow secure orders which have not been secured so far and which, as part of the Government's defence of their policy on British Shipbuilders, hon. Members have said are not there? If the orders are not there, how will the introduction of private capital have this magic effect on the order books?

My fourth question has been posed by Opposition Members, although I dare say it has been in the minds of Conservative Members. How will selling off, if selling off it is, be in the national interest? How can it possibly be in the national interest—if we interpret the Minister correctly—if such a policy leads not only to the demise of part but to the final collapse of our ability to produce merchant ships?

Those are my four questions on this short Bill.

Mr. Norman Lamont

Perhaps I can assist the hon. Gentleman. There is no mystery about what the Bill does. The hon. Gentleman can read. It is crystal clear. We are taking powers to enable private capital to be introduced, and there is also a power of direction relating to disposals. Both are in the Bill. I assure the hon. Gentleman that I would not have devoted time to talking about introducing private capital into subsidiaries if I did not think that was desirable and a solution to which we are attracted. Both are there. I assure the hon. Gentleman that no decisions have been taken on these matters.

Mr. Field

I am grateful to the Minister for that intervention and answer. The argument is developing as the debate goes on, as indeed it should.

I conclude by describing the type of Bill that I should have liked to see introduced instead of the three-clause Bill before the House today.

The first clause of that alternative Bill would have registered our thanks to the industry for the success that it has achieved over the past few years—a success which is due both to the management and to the men. I thought the Minister's comments on the industry's performance were less than generous, given the background against which the industry has been performing. I wish to underline the success of the management and the men in bringing about the changes that we have seen.

We have heard much about the investment of taxpayers' money—our money—in the industry, but it is also important to record the input of the work force into the industry over the past few years. We have heard about the loss of almost 21,000 jobs, which has been the real sacrifice of many of our constituents. There has been a form of wage restraint in the industry over the past few years, which many of us would not have thought possible, and, as the chairman of the shop stewards at Cammell Laird brilliantly describes, there has been a recognition that some protective practices in the industry have slipped into restrictive practices, Those restrictive practices need to be abolished. Clause 1 of an alternative Bill would have thanked the industry for those achievements.

The second clause of such a Bill would have provided the Government with powers—whatever the European Community thought or wished to do—to introduce a scrap and build policy. Should we have such a measure from the Government, I doubt whether it would be long before our European competitors started to introduce similar measures.

The third clause of the alternative measure would have laid down a timetable by which we could expect the placing of public orders. If one examines the answers that hon. Members receive from Ministers at the Departments of Defence and Industry on the placing of public orders in the shipyards, one finds that they are answered carefully. Usually the questions ask "How many orders have been placed since the general election of 1979?" The answers usually give the number of public orders in the shipyards at present, but do not distinguish between those which were placed before and after the general election. When we have pressed Ministers on the matter in the past, we have been told that the reason for such a large number of orders from the Labour Government was that an election year was approaching. Perhaps one of the good things for the shipbuilding industry is that we are again approaching an election year.

7.36 pm

Mr. Peter Lloyd (Fareham)

I am pleased to follow the hon. Member for Birkenhead (Mr. Field). He has been admirably brief and unless I am carried away I, too, shall try to be reasonably brief. The hon. Gentleman directed a number of questions at the Minister. I was interested in the replies, which were implicit in the speech with which he opened the debate.

The hon. Gentleman referred to the progress that had been made in British Shipbuilders since nationalisation. I would agree that progress has been made and that credit should go to those responsible. Nevertheless, I welcome the Bill. I welcome it as part of a line of measures which return, where appropriate, assets to the private sector which are presently in the public sector. Such measures have predictably sparked off hostility on the Opposition Benches.

The tenor of Opposition speeches has been either that the Bill is irrelevant or that it will do immense harm. We have also heard the suggestion that there is an element of dogma in it. Here I disagree with my hon. Friend the Member for Surrey, North-West (Mr. Grylls). I believe that what the Minister said, and the Bill he has introduced, does go with his ideological grain, if by ideology Labour Members mean that there is a presumption on the Conservative Benches, which the Minister reflects, that businesses are likely to be better run and provide more stable employment if they operate within the disciplines of the market and look to their shareholders for cash and that if they do not—they know this—retribution will quickly follow from the market.

In this sense Opposition speeches also had their ideological flavour. We do not need to be ashamed of the fact that this is a matter of principle and a matter of deep difference in approach between the two parties. It is better that it should be highlighted in the debate than that we should pretend that it does not exist. The Opposition are determined to believe—in my view, against all the available evidence—that industries are much more likely to flourish if they are in public ownership and much more likely to wither and die if they are not. The public, I am happy to say, do not agree with them.

The right hon. Member for Salford, West (Mr. Orme) said that the suggestion or threat of privatisation or private capital was a poor reward and a poor recompense for the splendid response of the shipbuilding industry to the demands of the Falklands campaign. That is not how private capital is regarded by the warship builders in my constituency. The right hon. Member for Sunderland, North (Mr. Willey) said that the Bill will distract and upset all British Shipbuilders' employees. I cannot speak for them all, but in my constituency I believe that the Bill will concentrate minds and encourage warship building employees.

The right hon. Member for Salford, West said that if the Labour Party returned to power it would repeal the Bill. He did not say under what arrangements it would be repealed. Different suggestions or threats have been made to those who might consider buying shares or putting their money into any part of British Shipbuilders. One suggestion is that there should be no compensation. "Labour's Programme 1982" suggests that investors should get back precisely what they put in—no more and no less—and I presume with no allowance for inflation. At the last Labour Party conference it was suggested that there should be compensation only where there is proven need.

I hope that the hon. Member for Whitehaven (Dr. Cunningham) will explain the Labour Party's policy. If it involves proven need, what does "proven need" mean? Will that need be proven only if pension fund or trade union money has been invested, or will it be according to the type of investor or the size of the investment?

I believe that the Labour Party's threats will not put potential investors off. They will judge whether the Labour Party is likely to return to power. The threats are further evidence of the Labour Party's hostility to private participation and its appeal to the electorate will be reduced as a result.

I was interested in what the hon. Member for Southampton, Itchen (Mr. Mitchell) said. Some of his conclusions are drawn from the experience of the warship builder to which I refer. I saw the force of what he said when he argued that the Bill was an enabling measure, making privatisation and reorganisation possible. He said that there may not be sufficient time or opportunity to debate the possibilities when the Government have finished their consideration.

The Minister has explained that no decisions have been taken. When the decisions are made, some could be important and far reaching. The House should have the opportunity to examine them carefully. If private money is to be injected into warship builders, whether in minority or majority shareholdings, Swan Hunter will represent a problem. We should like to debate in detail how the Government intend to overcome that problem. I hope that the Under-Secretary will give some reassurance.

Mr. R. C. Mitchell

I agree with much of what the hon. Gentleman says. Is he saying, as I did, that one and a half hours late at night is not sufficient to debate the fundamental issues that may arise from the Bill?

Mr. Lloyd

For a minor change, one and a half hours late at night is sufficient. For a major change it is insufficient. The Minister of State nods his head so I believe him to be of the same opinion. We can, therefore, be satisfied about that.

Mr. Field

The crucial point is who decides what is major and what is minor. I am reminded of the tale of Mr. and Mrs. Sydney Webb. They said that their marriage was successful because one answered all the questions that were important and the other decided which questions were important. The Government will decide whether the change should be regarded as important. Once they have made that decision it is difficult for the House to overthrow it and have a proper debate.

Mr. Lloyd

I am interested in what the hon. Gentleman says. It remains a mystery to me how business and the time allotted to it is decided. I understand magic consultation takes place behind the Chair. To both sides of the House, it is apparent which measures are important. If the Government decide to make a large change that they are pleased with, they will not want to pretend that it is small and unimportant. I am less worried than the hon. Member for Birkenhead that it will be difficult to distinguish between the important and the unimportant. Perhaps I am naive but I have sufficient faith in the normal processes to be assured that the Opposition would not allow the Government an easy ride if they under-estimated the importance of a change.

I agree with much of what the hon. Member for Itchen said, but I wish to press him with some questions. I assume that the hon. Gentleman was speaking for his party and the Liberal Party. My impression is that they are opposed to privatisation or denationalisation, if not root and branch, at least by and large. I thought that he said that they would take up private cash in this case, but not change the ownership or control.

My impression is that the SDP and Liberals would leave what is nationalised in public hands and what is still in the private sector in private hands. Does that mean that they think that the divide between public and private is exactly where it should be and that there is no need to change? If that is their view, I do not agree. The general public would not agree.

Perhaps the hon. Member for Itchen is saying that there is no difference between public and private, give or take an employee's representative council and profit-sharing. If he says that, he misses a fundamental point which creates the dispute between most of my hon. Friends and the official Opposition. The Opposition have different views, but they understand the large implications and differences about where ownership lies. Perhaps the hon. Member believes that there is not much difference.

Mr. R. C. Mitchell

My party's belief is that ownership is stressed too much by both main parties. Problems in industry remain the same whether they are in public or private hands. The case for privatisation or for nationalisation should be considered on its merits and not according to dogma.

Mr. Lloyd

I understand what the hon. Member for Itchen is saying, and in my view he is wrong. Ownership does not make any difference to the problems that one is facing at any time, but it affects the way in which the industry, company, firm or shareholder reacts to those problems. I support the Bill because I believe that the healthiest way is to have ownership well diluted within the community. A firm should look to its customers and shareholders for its livelihood, not to the Government. Although, as I say, I understand the hon. Gentleman's view, it is a superficial one. It is not the position that one would expect of a party that was planning to break the mould; rather, it is the position of one that plans to keep it intact.

The Minister rightly says that this Bill does not seek to denationalise anything. What worries me is that it does not say what will be done. That is why we shall need to debate the matter. It is an enabling Bill that opens up options. British Shipbuilders is already made up of divisions, and it is therefore possible to consider each sector on its merits.

There is an overwhelming case for Ship Repairers to be returned to the market. That sector makes losses each year. Therefore, it is an expense to the public purse. More important, it is a source of unfair competition to repairers in the private sector. It will mean, in the end, that jobs in the public sector are safe at the expense of jobs in the private sector. If jobs have to go—it will be accepted on all sides that jobs have had to go, and it is an open question how many more will have to go—they should go in those parts which are the least efficient and the most costly to maintain. For that reason, I hope that the Government will look carefully at the position of Ship Repairers and act accordingly.

I doubt very much whether the time is ripe for the same approach to be taken to the merchant shipyards. That sector has successfully undergone reorganisation and rationalisation, which would have had to take place if it had not come to the public sector. That is done more slowly and more expensively through the process of nationalisation, or more quickly and less expensively under, for example, Sir Kenneth Cork. One way or another, rationalisation had to take place. Although it is more comfortable when such things are done slowly, one could argue that it would have been better if it had been done before we were in the depths of the present recession. So the answer to the question that was posed earlier "What would have happened if there had been no nationalisation?" is that there would have been a sharp rationalisation, which I hope will be the result, reached over a much longer time, of the nationalisation method. The rationalisation now taking place in the merchant ship building is making progress now, but it has not reached the point at which it could reattract sufficient capital and private funds to help either British Shipbuilders or to relieve the burden on the taxpayer. Thus, it still needs support from the Exchequer and the Government.

I hope to get the Minister's agreement, even if it is only in the form of a nod, to the proposition that the support which has been notable under the Government so far should continue, where necessary. I hope he will agree that the possibility that private funds may be introduced into the warship builders, or the privatisation of the Ship Repairers, will not affect the support that merchant ship builders enjoy. The support that they enjoy should be based on their prospects.

Mr. Dewar

If we assume that the two divisions, merchant and naval, stand on their own—I think that that was the Minister's phrase—clearly the support needed by the merchant side, unless it is drastically cut back, will be much increased because it does not have the surplus from the naval section.

Mr. Lloyd

I agree that the support needed will be increased—by how much remains to be seen. If British Shipbuilders remains a major shareholder in the warship builders, it will have that proportion of the profits. We do not know whether it will have a majority or minority shareholding, or none. If it has a shareholding, which I imagine is likely, it will have those resources. It is much more healthy—certainly for warship builders and, I believe, for the way in which industries are funded—for public support, if it is needed by the merchant shipbuilders, to be straight from the Exchequer, and not siphoned off from the warship builders, leaving them under-capitalised.

Mr. R. C. Mitchell

Does the Minister agree?

Mr. Lloyd

I am sure that he does.

For that reason, the time is overdue for private capital in the warship builders. Warship building is a discrete activity within British Shipbuilders. We have mentioned the problem of Swan Hunter, and there are others. There is no difficulty in separating the warship builders from the rest of British Shipbuilders, and as the warship builders are profitable I am sure that there will be no lack of interest from investors.

I am convinced that in the case of Vosper Thornycroft, the warship builders, which I share with the hon. Member for Itchen, there will be solid support at all levels for the introduction of private capital and a return to the private sector, if that is sensibly and carefully thought through, as I am sure will happen if we have a thorough debate on the matter.

During my first months in Parliament I received delegations comprising employees from Vosper Thornycroft. They were worried that it appeared that their expectations of being taken out of British Shipbuilders by the Conservative Government would not be fulfilled. A succession of Thornycroft employees, both past and present, tell me that since nationalisation there has been a growth of bureaucracy, red tape and frustration. They know that the capital resources that they could use profitably are not available because they are siphoned elsewhere. That is to be expected. When one joins a profitable group of shipbuilders, as the warship builders are, to the loss-making merchant shipbuilders, the overall problem of management is the loss-making side. So it uses profits, not necessarily for the further development of the profitable elements, but to try to staunch the problems on the other side. Nationalisation and being part of British Shipbuilders have brought no benefit to the warship builders.

Export performance has nose-dived since nationalisation. Certainly there has been no new frigate order. It would be wrong to put that down entirely to nationalisation, because of the state of the world market. However, nationalisation has provided no help or improvement in that respect. Where warship builders need to look to Government they can do so effectively and usefully, whether they are in public ownership or not.

The Government could most usefully ensure that their orders for naval ships through the Ministry of Defence are placed regularly and not with irregularity, and intermittently, so that it is impossible to plan. I am not arguing that the Government should necessarily place orders for more ships than they can afford, nor that they should be different ships from those that the Navy requires just to meet the possibility of exports, though I hope that they will bear those two factors very much in mind. The Government should behave not like a general manager but as a sensible customer who wants to get the best from his suppliers. During public ownership—no doubt this was the position before nationalisation—there has been less coordination than there might be between defence sales, the Foreign Office and the ECGD to clinch orders that are available from abroad. There has been also the lack of an all-embracing, broad financial package when it has been needed.

There are many other suggestions to be made and many of them were in the report of the Select Committee on Industry and Trade. Some of the suggestions are more useful and practical than others and I shall not pursue them now. I suspect that more progress might be made if warship builders are in the private sector. They will be freer to make their own arrangements, raise their own finance and lobby directly on their own behalf, which they find it difficult to do now.

There is still outstanding the matter of compensation for the previous owners, which dates from the 1977 Act. The Government, in their previous existence as the Opposition, agreed that the terms offered by the Labour Government were virtually daylight robbery. I do not think that the then Conservative Opposition promised that they would rectify those terms when they took office but I am open to correction. They certainly left the impression that they would turn every stone and make every endeavour to rectify the terms of the Labour Government.

The compensation paid to Vosper Thornycroft, the shipbuilding company which I know best, was less than the cash that was in the bank on vesting day. The Government have been saying during their three years in office that the damage cannot be undone because the shares of the parent company have changed hands on the terms of the 1977 Act and that to introduce new terms would be unjust to those who have sold. I do not share that view. The shares changed hands in the knowledge that compensation was disputed. The buyers and sellers were both able to make a judgment about the eventual outcome along with all the other judgments that traders in shares have to make on these imponderable matters.

I realise that the Government can say nothing definite on the issue at this moment. The matter is now before the European Court of Human Rights. I know that Ministers do not like crossing bridges before they come to them. However, I hope that they, and the Department generally, are bending their minds to the manner in which they will deal with the matter. I hope that they are coming to decisions on how they will deal with the privatisation if the judgment goes against them and they need to have as a result second thoughts about the decision that they made earlier in the lifetime of this Parliament. I do not believe that it would be right, even if it were possible, for the former owners to be offered shares in, for example, the warship building companies at a cheap rate, or at no rate at all, to make up the difference between what they had and what they should have had. I suspect that that would not be possible without a change in legislation. We need a proper and above-board resolution of the problem. If that means cash for the former owners, so be it. If shares are to be sold in the majority or minority shareholding, they should be sold at the proper market price at the time of sale.

I welcome this enabling measure if it is to be used sensibly to return to the private sector the parts of the industry that are able to prosper. If that happens, I believe that a great service will have been done to the economy generally and to the parts of British Shipbuilders that are involved. In the longer run, which I think will be a considerable time, I hope that it will be possible for the merchant shipbuilders to be returned to the market in the same way. If that can be achieved, the merchant shipbuilders will have been restored to profitability. There is no more certain or sounder basis for the stability of the jobs within that sector than that.

8.5 pm

Mr. Donald Dewar (Glasgow, Garscadden)

When I became a by-election candidate in my present constituency in 1978 there was a common assumption that by-election candidates would be photographed against the background of the cranes, covered berths and sheddings of the Clydeside shipyards. That was appropriate because shipbuilding was the great traditional industry on the upper Clyde.

There have been considerable changes, but shipbuilding is still an enormously important industry in my constituency and to those who live in the surrounding area. Within the boundaries of my constituency is the Yarrow yard, which has been referred to frequently during the debate. It employs about 5,500 in an area which has been devastated by the recession. There are few signs of the much-vaunted economic recovery about which Scottish Office Ministers tend to talk. I am glad that the Under-Secretary of State for Scotland, the hon. Member for Edinburgh, North (Mr. Fletcher), is to reply to the debate. The health and future of the Yarrow yard is, by any standards, of prime importance to the west of Glasgow.

It is easy to talk about the traditional importance of shipbuilding. The fact that it has been paramount in the industrial structure of the area that I represent does not mean that it has any right to survive as such and that there is not a case for continuing change. However, I pay tribute to what has happened in the industry in difficult times against the background of world recession and slump over the past year or two years.

My right hon. Friend the Member for Salford, West (Mr. Orme), who opened the debate on behalf of the Opposition, drew attention to some simple statistics. He referred to the losses of British Shipbuilders after crediting the intervention fund payments. We have seen them come down from £110 million to £40 million to £20 million. It was hoped that they would fall to about £10 million. However, that will not be so for reasons which are well understood by those who take an interest in the industry. However, the figures show a solid achievement over a period.

I think that everyone who has participated in the debate has read the report of the Select Committee on Industry and Trade. Evidence was given to the Select Committee by the unions and management of British Shipbuilders as well as by Ministers.

It is accepted that there has been an enormous improvement in productivity. Reference has been made to improvements of 15 per cent. and 16 per cent. a year. These improvements have been achieved against the background of massive, wounding and traumatic redundancies. There has been a loss of about 25,000 jobs since 1977. None the less, the industry has survived. That may seem a modest claim, but it is remarkable when we consider the difficulties that it has faced.

Skills have been preserved. Many in the industry thought that it was beginning to move towards a rational and settled structure within which they could continue the fight for it. However, it would perhaps be an exaggeration to say that the industry was moving towards a secure place in the market, because of the uncertainties.

The Government have introduced a wretched measure that will breed insecurity. I am sure that many in the industry will be disappointed that an extra hazard will have to be met by the industry. My right hon. Friend the Member for Salford, West claimed that that was irrelevant to the industry's problems and in one sense I agree. However, that might be too optimistic an assumption. If the Minister takes one of the many ill-defined options that this sweeping enabling legislation allows, the consequences for the industry could be very far-reaching.

This is a peculiar debate, because no hon. Members really know what they are talking about. I say that in a simplistic sense. I am not talking about the lack of information or sophistication in the debate. We have not known what we have been talking about because the Minister has, on the whole, sat sphinx-like throughout and, when pressed, has merely said that there is a whole range of options and that no decisions have been taken. He has said that in future the naval yards may be sold off. If so, they may be hived off entirely into the private sector, or perhaps a minority or a majority shareholding will be retained. Nothing is clear at all, other than that we are putting into the hands of Ministers, whose attitude to the industry is fundamentally unsound, power which it is unwise for the House to grant them, given the difficulties facing the industry.

The hon. Member for Tynemouth (Mr. Trotter) came forward with the optimistic and too charitable assumption that there will be only a minor adjustment in an attempt to introduce a little extra private capital into certain sections of BS—nothing more dangerous than that. Who could object to a few joint venture projects? That would be fair enough if he were the Minister, but he is not.

We know that the Government are ideologically committed. I am not being abusive. They are proud of it. The Prime Minister is constantly proclaiming her ideological commitment. When the Minister opened the debate, he used an interesting phrase. He said that the Bill was more than just theology. Some hon. Members might think that in Conservative hands that theology might turn into bigotry with considerable dangers for the industry.

If British Shipbuilders is plundered—if those parts that are making money are ripped out—it is not just a nice political argument as to whether it is theoretically desirable. It is not even an argument about what happens to the parts that are taken away. We must be concerned about what happens to what is left behind. The impact upon the rump of British industry, which, because of market conditions and recession in world shipping, cannot reasonably be expected to be profitable could be little short of catastrophic.

It is common ground that the obvious candidates for privatisation—if that is what the Government ultimately do, and that is certainly one of their options—are the naval yards which, in the latest report on British Shipbuilders, showed profits of —39 million on a turnover of about —430 million. Why should such parts be sold off? Why should there be the threat of instability which is bred by the possibility of their being hived off? What is the point of it? What price will the rest of industry and the taxpayers have to pay?

I should be glad to retreat, truncate and alter my remarks if the Under-Secretary of State for Scotland would stand up now and say that, as far as he is concerned, there is no question of a straight sale of any parts of the naval division. If that were the position, we could have a different, interesting and important debate. However, that is a door that he will not shut. He knows that we must take account of that possibility when we come to our conclusions on the value of the measure before us.

I shall consider briefly the arguments in terms of Yarrow (Shipbuilders) Ltd. and the Clyde where I live. The arguments against the sale of a yard such as Yarrow (Shipbuilders) Ltd. are strong and persuasive. It is a prosperous yard, which is entirely dependent on public sector orders—for example, the type 22, the new generation of type 23 and the Hunter class mine hunters. All those are British naval orders, and there is no reasonable prospect of significant export orders in the pipeline.

Like others of my hon. Friends, I am puzzled that the Minister should talk about returning to the days when the order book was 50 per cent. full of work for foreign navies or owners. There is no prospect of that. It is not constructive to suggest that the sales forces of, for example, Yarrow (Shipbuilders) Ltd., Vosper Shiprepairers Ltd. or Vickers Shipbuilding Group Ltd. are lacking in skill, tenacity, enthusiasm and verve for their work, and that, if only they were privatised, they would suddenly be galvanised into action and the sheiks of the Gulf States and the naval Ministers of South America would be queueing up and saying "Thank goodness Yarrow (Shipbuilders) Ltd., Vosper Shiprepairers Ltd. or the Vickers Shipbuilding Group Ltd. has been privatised. Now we shall come and sign the contracts." That is nonsense.

The market is tough. Skilled people have struggled with it, and will continue to do so. There is no sudden escape hatch. There is no magic in a transfer into the private sector, as some hon. Members seem to think.

Yarrow (Shipbuilders) Ltd. makes money because of the MoD contracts. It is an efficient yard not only because of its work force, but because of investments. Walking round Yarrow (Shipbuilders) Ltd. and looking at the glass reinforced plastic complex, the new covered berths, and listening to the plans for the proposed new module hall, one realises that it represents literally tens of millions of pounds of public investment. It would be difficult to price. It would be difficult to sell at a fair figure on the private market, even if it were believed that an arm's length transaction was in the public interest.

Such a yard is an inappropriate candidate—I use the word as neutrally as possible—for the hiving off of the kind that some Conservative Members seem to envisage. That is the positive argument against the sale.

The negative argument concerns the effect upon the rest of British Shipbuilders. The Minister, said that naval and merchant ship building should stand separately. Another Conservative Member said that naval yards should be on their own. What sense does that make at the end of the day? We all know that the industry has problems. We know that if the industry is run as an integrated whole, keeping within its framework those parts of the industry that can make money, the management will have the manoeuvrability, interchangeability and financial flexibility which any large firm in the private sector would use and appreciate.

Why should the industry be stripped of those advantages in order to put the naval division on its own? Why should we, as it has been described, float it off into the private sector? Why should we talk about the old owners taking it back? I do not object on moral grounds—although I might do. I merely say that it will put the management into a straitjacket which, at the end of the day, is not in the taxpayers' interests. That is a good point that I made to the hon. Member for Fareham (Mr. Lloyd) earlier.

If the £38 million profit in 1981–82 is moved out of British Shipbuilders' budget, and if the Minister is genuine—let us give him credit for that—when he says that he will support the merchant ship building side, it merely means that more money will have to be found from the taxpayers' budget to make up for the gap that is created in British Shipbuilders' finances. That is in no one's interests. Research and development, sales expertise and management structure will suffer as a result of that exercise.

There is no case for such action. On the Clyde, the case is graphically illustrated. Only 25,500 people work in the merchant yards of British Shipbuilders, but many other jobs are dependent upon them. Specific areas of Britain would be seriously affected by the loss of such jobs.

We all know that there are problems in the lower Clyde. Anyone who has looked at the British Shipbuilders report will know that Scott Lithgow Ltd. has problems. What would happen to Greenock and Port Glasgow, if Scott Lithgow Ltd. were to go to the wall? No doubt the hon. Member for Edinburgh, North would be on the sidelines wringing his hands. However, the disaster would be real and sharp. Last year, Scott Lithgow Ltd. lost £14.9 million, Govan Shipbuilders Ltd. lost £6.2 million and Yarrow contributed £8½ million.

Will the men in Govan or Scott Lithgow have a feeling of security if they see Yarrow sold off? From my contacts I know that interchangeability—even in terms of labour and skills in the yards on the Clyde—has proved to be an important element in keeping down the temperature. Understandably, that temperature has often risen as men looked at the problems facing them and at the numbers of their colleagues being asked to go down the road.

To rip Yarrow out of that pattern on the Clyde, which is one of our great traditional shipbuilding areas, would be stupid and maladroit in the extreme. It will sap confidence at every level in the industry. Some Conservative Members believe that privatisation is a popular theme and that the Bill can be justified not on its merits, but because it is part of a continuing policy embracing Britoil, British Airways, and so on. This time it is the turn of BS. Indeed, that theme has been hinted at in our debates.

The Under-Secretary of State for Scotland, the hon. Member for Edinburgh, North, comes from the lower Clyde, although he now lives in a very different part of Scotland. If he returns to his roots and talks to those who know the industry, he will discover that privatisation is not popular. It engenders great bitterness and sometimes a feeling of despair and betrayal. The shipbuilding industry on the Clyde, in the North-East and in every other part of the country has experienced recession and rationalisation of the most unpleasant and wounding variety. To give it this final dose of insecurity—that is what it is, because of the Government's failure to clarify their intentions—is to betray those who have done much to save themselves and who have no reason to feel any gratitude for the way in which they are now being treated.

This is a case of playing politics with jobs in areas in which jobs are precious and are becoming increasingly scarce. I hope that the Under-Secretary of State for Scotland will at least do something to redeem his reputation by making it clear that there is no question of selling off Yarrow or any other important unit in the Scottish shipbuilding industry. If such parts of the industry were sold off, the hon. Gentleman would never be forgiven. The people of Scotland would have another deep wound to carry against the devastation wrought by the Government throughout the length and breadth of our area.

8.23 pm

Mr. Albert McQuarrie (Aberdeenshire, East)

I listened with great interest to the speech of the hon. Member for Glasgow, Garscadden (Mr. Dewar). Fortunately, I come from the Greenock area, which is much nearer to many of the shipyards that the hon. Gentleman mentioned, which are referred to in the Bill. He spoke of companies such as Scotts of Greenock, Lithgow of Port Glasgow, Hamilton Brothers of Port Glasgow, the Greenock Dockyard Company, Lamonts of Greenock, Govan Shipbuilders, John G. Kincaid and Company, Hall Russell of Aberdeen, Yarrow Shipbuilders, Fairfields of Glasgow and Fergusons of Port Glasgow, but they are all shipyards that have, in my lifetime, been in private and successful ownership. They were nationalised by the Labour Government in their programme of nationalisation.

The Bill is committed to promoting the private ownership of shipbuilding. It will remove the present statutory obstacles to the introduction of private capital and will provide enabling powers for the Secretary of State for Industry to direct BS to dispose of particular assets of those subsidiaries. It will be recalled that BS was established under the Aircraft and Shipbuilding Industries Act 1977—now known as the 1977 Act—on 1 July 1977. It was formed from 27 companies in shipbuilding, ship repairing and marine engineering.

It must not be forgotten that shipbuilding in Europe suffered a continuous decline in the 1950s and 1960s. In the United Kingdom, employment in the industry fell from 130,000 employees in 1955 to 69,000 employees in 1973. From 1974, the threat of nationalisation by the Labour Government hung over the industry. In addition, the industry had to operate from 1974 to 1977 in the dreadful economic climate created in that industry by the Labour Government. World demand continued to decline and, not surprisingly, the industry faced serious financial problems. Since nationalisation, the industry has received more than £700 million in subsidies. Had it remained in the private sector, assistance would have been needed, but the industry would have faced up to the need for rationalisation much sooner and, as a result, the cost to the Exchequer might well have been much less.

Under the 1977 Act, the corporation's borrowing limit was £500 million. In November 1981 that amount was increased to £600 million. Under the Shipbuilding Act 1982, the overall limit was increased to £700 million, with the Secretary of State being given additional powers to extend the sum to £800 million. That is an astronomic figure to spend on subsidising losses in that industry.

Clause 1 lays down the functions of BS. Under the 1977 Act, BS has a legal duty to promote the efficient and economic design, development, production, sale, repair and maintenance of ships and slow speed diesel marine engines, and research into matters relating thereto. Other legal duties are also imposed by the Act. For example, BS is required to carry out its activities with full regard to the requirements of national defence and the need to benefit from the knowledge and experience of its work force and to promote industrial democracy.

Such legal requirements would obviously be inconsistent with operation as a private sector company. Thus the first step in privatisation is to remove them. The Bill therefore seeks to repeal these sections of the 1977 Act, while ensuring that BS retains the legal capacity to carry on its existing activities and other activities approved by the Secretary of State. Removal of the legal straitjacket will enable BS to organise its affairs in the light of its own commercial judgment. Responsibility for the implications for national defence is put where it properly belongs, on the Government.

Mr. John Garrett

Who wrote the hon. Gentleman's speech? Did the Under-Secretary of State for Scotland write it?

Mr. McQuarrie

I wrote it.

Under the 1977 Act the Secretary of State was required to have regard to several specific factors before giving a general direction to BS. They were: the need to co-ordinate the operations of BS with those of the British Shipping industry; the Shipbuilding policies of any international organisations to which the United Kingdom belonged; BS's ability to compete in world markets on equal terms with overseas competitors; and the implications for regional employment. The Bill seeks to replace them with the requirement that before giving a general direction to BS the Secretary of State must be satisfied that it will further the national interest. The above factors will obviously be embraced by that requirement, and other factors might be involved.

Clause 2 empowers the Secretary of State to direct British Shipbuilders, by order, to discontinue or restrict any of its activities or those of its wholly owned subsidiaries and to dispose of all or any of its properties, rights or liabilities or those of its wholly owned subsidiaries if that is in the national interest. It is envisaged that the power will be used to deal with unfair competition with the private sector and to direct the sale of some or all of the shares in British Shipbuilders' subsidiaries.

The Secretary of State will also be empowered, when directing disposals, to direct BS to form a company to which the property can be transferred. He will be able to prohibit such a company from straying outside the activities specified in his direction.

Mr. Dewar

The hon. Gentleman is obviously taking a considerable interest in the Bill. Will he say something about the machinery to which he is referring? What use does he expect to be made of the hiving-off possibilities, particularly in Scotland?

Mr. McQuarrie

The Secretary of State will take whatever decisions are in the best interests of the industry.

The Secretary of State will be able to maintain control over the nature and use of the assets of the company. It would initially be a wholly owned BS subsidiary and the restrictions to which I referred would end if it ceased to be wholly owned.

Those provisions would enable activities to be concentrated in separate, wholly owned subsidiaries to ensure transparency. That might be necessary in its own right or as a prelude to disposal. The Bill would also enable the Secretary of State to direct that an employees' share scheme be established to allow the employees to benefit from a disposal.

When the Secretary of State directs or consents to a disposal, he will be able to require British Shipbuilders to amend its articles of association to include restrictions on matters such as the size of foreign shareholdings and the nationality of directors. That should be a concern of Scottish Members, particularly the SNP Members.

The Secretary of State will also be empowered to require the creation of special rights preference shares to be held by him or his nominee. The consent of those shareholders would be needed for any change in the relevant articles.

Mr. Dewar

I recognise that the hon. Gentleman trusts the Secretary of State and says that anything that the right hon. Gentleman does is right, but he must have a personal view which he will urge on the Secretary of State. What part of British Shipbuilders does the hon. Gentleman favour hiving off into the private sector?

Mr. McQuarrie

I favour the hiving off, to use the expression favoured by the hon. Gentleman, of those parts of British Shipbuilders that could be put into private ownership and make a profit but which, at present, are costing the taxpayers hundreds of millions of pounds in productivity losses. I wish to see them put into private enterprise, with employee shareholdings, so that there is a working in partnership—something which we have not had in Scotland for many years. I remember the days of my youth when we had productivity, profit and a happy work force in places such as Scotts. The men went home every Friday evening with a respectable and satisfactory wage packet. They have not had such wage packets while they have been a part of British Shipbuilders, because the corporation has made losses. Under private management Scotts was a profit-making venture.

Hall Russell is another example. The Government have given the firm the opportunity, and the firm has produced profits. That is the sort of company that we want to hive off. Yarrow was a profit-making concern. Why do we not hive it off and let it live on its own? Why should unprofitable sections of the industry depend on bread from Yarrow to feed them? Let them create their own productivity and profitability. Yarrow was well known for making profits. I am glad to see that the manager of the company has gone back to the family name of Yarrow.

My hon. Friend the Member for Fareham (Mr. Lloyd), who has left the Chamber for the moment, mentioned the 1977 compensation terms. In Opposition, the Conservative Party was against the terms of compensation for the owners of firms nationalised under the 1977 Act. My right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) reaffirmed the view that the terms were grossly unfair. Total compensation paid for the 25 private companies vested in British Shipbuilders was £725 million. Many of the companies have settled but, as my hon. Friend the Under-Secretary of State for Scotland has said, nine separate applications are before the European Commission of Human Rights. The Government believe that, however unjust the original arrangements were, it would be unjust to amend the terms now because people have sold their shares under the terms of the 1977 Act.

On BBC Radio 4 on 27 April 1982, my hon. Friend the Minister of State for Industry said: We believe that jobs are going to be best preserved and orders most easily won under private ownership". Privatisation brings many benefits. Companies are removed from the artificial guarantees provided by the State, where there are few commercial disciplines and no need to persuade investors to invest in the business. Managers who must lead the work force and who know most about the business are freed from Treasury control and can raise money in fair competition with other borrowers. Greater efficency within companies is produced when investment projects compete for capital. Employees can identify more closely with their companies by taking a stake in them. Thanks to the Government, about 90,000 employees have already taken such a stake.

Mr. Gordon Wilson (Dundee, East)

Redundancy men.

Mr. McQuarrie

Redundancy men have not taken a stake in their companies. If the hon. Member for Dundee, East (Mr. Wilson) would pay attention to what is happening in Scotland, he would notice that the National Freight Corporation has been taken over by its management and employees and is now being run as a profitable concern. The reason was not redundancy but privatisation of that corporation. As a member of the Scottish National Party, the hon. Gentleman should welcome the benefit that that privatisation has brought to the Scottish people. By no stretch of the imagination are they redundant.

When it is linked with liberalisation, consumers benefit from the effect of competition on efficiency and prices. Individuals can buy shares and smaller investors especially are often given preferential access as they were in Britoil, as my right hon. Friend the Secretary of State for Energy mentioned in his statement to the House the other day.

The real rate of return on the £90 billion employed in the nationalised industries in 1980 was minus 1 per cent., and that poor performance was not untypical of recent years. The burden on the nation must be reduced. Therefore, progress must be made on privatisation and liberalisation. The Government have made substantial progress in reversing the Socialist ratchet. For the first time since the Second World War, the size of the publicly owned sector of industry is being significantly reduced. Labours's Programme 1982" states: We have to demonstrate the practical benefits of common ownership, showing how public enterprises can be a spearhead for innovation and new investment, making clear the benefits to both workers and consumers, and exploring the best forms of organisation and different forms of common ownership". At least the Labour Party can understand that the practical benefits of common ownership are not apparent, although 30 years have passed since the Labour Party's nationalisation programme got under way.

The programme also promises A radical improvement in the services which these industries provide to the people who own them". At least the present shortcomings are appreciated. However, the Labour Party plans to renationalise the businesses that the Government have returned to the private sector, to undo everything that has been achieved in liberalising the State monopolies and to extend nationalisation to each important sector of industry.

The terms of renationalisation have been disputed within the Labour Party. The right hon. Member for Bristol, South-East (Mr. Benn) told the House: Both at the TUC Congress and the Labour Party conference last year … we … called for the reacquisition of public assets without compensation."—[Official Report, 10 November 1981; Vol. 12, c. 499.] However, hon. Members on the Right of the Labour Party appear to have succeeded in moderating that statement. "Labour's Programme 1982" states that shareholders should be repaid precisely the amounts which were paid for the assets at the time they were denationalised. A different form of words emerged from the previous Labour Party conference, where the motion passed said that compensation would be paid only "on proven need." That ensures that the recipients will not gain from their investment.

The right hon. Member for Manchester, Ardwick (Mr. Kaufman) was quoted in the Financial Times of 20 October 1982 as saying: We will make sure that those who have bought into British Shipbuilding will make no gain from their act of piracy. He promised that the Labour Party would renationalise without delay any part of the British shipbuilding industry that is privatised by the Government.

That is the Labour Party's answer to privatisation. The Government are determined to privatise such industries as they believe will benefit the nation. This enabling Bill, far from forcing people out of work, will create employment because it will create incentive within companies. Those companies can no longer obtain finance from the Government but must obtain it by increased productivity and profitability. In the past, privatisation has proved satisfactory and the companies that survive the recession will prove it in the years ahead. The Government have taken steps to ensure that we have less nationalisation and more privatisation.

8.42 pm

Mr. Ernie Ross (Dundee, West)

I shall not be tempted to follow the rather remarkable speech of the hon. Member for Aberdeenshire, East (Mr. McQuarrie). I shall leave that to the Hansard reporters.

Hon. Members who are involved in the shipbuilding industry, either because they have shipbuilding companies in their constituencies or because they are Members sponsored by a union that is heavily involved in the industry, have seen the Government's failure to understand an industry. Apart from their obsession with privatising all areas of the public sector, the Government have been marked by their failure in three and a half years to bring forward a plan for the shipbuilding industry. This Bill does not attempt to resolve the problems facing the industry and does not recognise the efforts that have been made by the management and workers to improve British Shipbuilders.

Even the Minister must accept that, since nationalisation in 1977, little short of a miracle has been worked during a deep recession. in 1977, five merchant ship building companies were in such a perilous state that they could not have operated commercially. Other problems included interference by the European Community, high inflation and an overvalued pound as against the currencies of our major competitors. However, since the Government took office, they have been determined not to allow the industry to plan in the way that it did under the Labour Government. The warship yards, which have been consistently profitable, have relied almost entirely in recent years on Ministry of Defence contracts.

Although British Shipbuilders submitted its corporate plan in May last year, the Government gave no early warning of what they intended to do. The chairman, Mr. Robert Atkinson, said that a mid-term goal was required to overcome some of the short-term difficulties that were faced. While the corporation was waiting for a reply from the Government, the Ministry of Defence review took place and the bombshell exploded. There were to be cuts in the Royal Navy budget, no further orders for type 42 frigates, a reduction in the number of destroyers and frigates committed to NATO and fewer type 23 frigates to replace type 22 frigates.

The suddenness of that decision, which was taken without consultation, put many thousands of jobs at risk, and they still are. That is one example of the Government's failure to adopt a co-ordinated approach towards shipbuilding. After listening to some of today's comments, it seems that we shall have to rely on the Argentines to ensure that we have a viable industry There is nothing in the Bill to suggest that there is an alternative.

The proposals in the Bill are a slap in the face for British Shipbuilders' management and work force. Many of my hon. Friends are aware of the sacrifices that have been made in the industry. Over 20,000 jobs have disappeared and many yards have closed. Both sides of industry agree, and I am sure the Minister will when he replies, that there has been a determination by management and the work force to improve industrial relations through the shipyard negotiating committee and to get rid of any practices that threaten the industry. It was agreed at the yard in my city that the arrangements for the transfer of labour and removal of restrictive practices were the best in the industry and yet the yard closed.

The Bill kicks out the need for the industry to retain industrial democracy, which we encouraged and which permitted 20,000 jobs to be lost and yards to be closed without threatening the industry. As an hon. Member sponsored by the AUEW-TASS, which represents naval architects, engineers and designers in British shipbuilding, following nationalisation I supported the building up of specialised teams. There has been no commitment by the Minister to keep those specialised teams, and if they are lost as a result of privatisation the industry will go down the drain. The Government's intentions are criminal. Instead of recognising British Shipbuilders as a nationally important strategic industry and examining how the industry, which has achieved so much with so little help, can be stimulated and encouraged, the Government have decided to reward it by hiving it off to their political friends. They are selling another of Great Britain's assets.

The Bill is not needed. It does not make industrial or economic logic. It asks hon. Members to accept something that none of us would accept unless we were regarded as missing some of the vital faculties in our upper regions. No one believes that there will be private investment in the merchant yards, and the naval yards of Yarrow, Vickers and Vosper Thornycroft will be sold. If we are to retain a merchant shipbuilding industry, it will need massive Government support.

The Bill sets out to fulfil one Tory election pledge. I challenge the Minister to tell us how privatisation will help the industry. Neither the workers nor the management support the Bill. The designers and other members of the specialised team who belong to my union have a different concept of the industry from the Conservatives. In a pamphlet about the future of British shipbuilding published two years ago, Robert Atkinson, the chairman of British Shipbuilders, states that we need a co-ordinated approach to maritime affairs. A senior Cabinet Minister should be appointed to the task with staff seconded from Departments that have major maritime interests, including the Ministry of Defence, the Departments of Trade, Industry and Transport and the Home Office. British shipbuilding would be central to such a strategy. The Minister has not suggested that the Bill will produce that co-ordinated approach.

We also argue for a scrap and build programme to correct the imbalance between demand and supply. Even with the relatively low programme targets suggested by the international maritime industries, it would help to even out the trough in new building. We have not had a single cheep from the Minister about that. The Government are bankrupt of ideas for British shipbuilding.

Mr. Bill Walker (Perth and East Perthshire)

Rubbish.

Mr. Ross

All that we hear them repeat is the dogma that dictates the squandering of national assets paid for by the taxpayer and the hard work and sacrifice of the workers in the industry. They believe that by ending nationalisation they will improve the industry's efficiency and viability and our future as a maritime nation. The Minister can produce no evidence to suggest that this or any other measure that the Government have brought forward will improve the situation.

We shall oppose the Bill tonight and in Committee. The workers and the management in the industry will also oppose it. I am sure that my hon. Friend the Member for Whitehaven (Dr. Cunningham) will tell the Government that when we come to power shipbuilding is one industry that we shall quickly and properly take back into public ownership.

8.52 pm

Mr. Bill Walker (Perth and East Perthshire)

The hon. Member for Dundee, West (Mr. Ross) would not expect me to agree with much of what he said, but I felt that he made a thoughtful speech and I found parts of it interesting. I congratulate the hon. Gentleman on working hard for jobs in Dundee. I hope that he remembers that when the Robb Caledon yard closed we were both delighted that a private company took over the yard and provided jobs. We are both interested in jobs; it does not matter whether they come from the public or private sector. We differ about where the best road for the future lies. I do not doubt the hon. Gentleman's integrity in striving to retain jobs and obtain new jobs for Dundee. I hope that he does not doubt mine in working to get jobs for Tayside.

We should not forget the example of Robb Caledon. British Shipbuilders saw no future for the yard but a private company took it over. My hon. Friend the Minister of State helped to tie the deal together. I recall speaking to the Minister late at night and activities that helped to close the deal going on throughout the night. It looked at one stage as though it would go foul.

Mr. Ernie Ross

The hon. Gentleman fails to understand that the yard was capable of building ships on the edge of technology. Everyone accepted that. That was despite the utter lack of investment by the previous owners. It had a reserve of skills and provided between 40 and 50 apprenticeships for young people that now no longer exist. Those skills were transferred to a completely new industry—Kestrel Marine—and were not available to help British Shipbuilders, which needed them to build up its operations.

Mr. Walker

That was an interesting intervention. We can all go through life saying "This could have been and that could have been if …" We are dealing with just one event. There is no question that at that time British Shipbuilders decided that there was no future for shipbuilding on the Tay. We had to find an alternative.

The comments of the hon. Member for Dundee, West about scrap and build are well worth pursuing. In the present Parliament's lifetime or in the next one, there will be opportunities to pursue that matter positively and constructively.

The Conservative Party differs from the hon. Gentleman and the Opposition in that we are looking for new ways to deal with the problem. We do not believe that things must be done in a given way simply because that is how they have been done in the past. We are trying to find ways of stimulating additional business, improving productivity and increasing job prospects.

The Government came to office on a pledge to promote private ownership. I have never apologised for holding that view. I favour private ownership both in industry and in householding. The Bill will do much to improve the circumstances surrounding British shipyards. We must welcome that. We cannot insist that, just because something is publicly owned, there and for ever it will remain. That is nonsense. Equally, I accept that, just because a concern is owned privately today, it need not always be so. To think otherwise is the attitude of the dodo.

Hon. Members must face up to the fact that even British shipowners are not ordering sufficient new ships or exploration rigs for the North Sea to maintain the present number of jobs in the industry. Since nationalisation, more than £700 million of taxpayers' money has been invested in the industry. I do not doubt that, if yards had remained in the private sector, some public money would have been required because of present world conditions. There is no way in which Britain could have avoided the problem of the recession on its own. However, I doubt whether we should have had to inject so much money. Indeed, I suspect that considerably less would have been required. But would the changes in management, working practices and rationalisation have taken place earlier if shipbuilding firms had been privately owned? I believe that they would because the impetus to do so would have existed. I do not hesitate—I never have—to say that I favour private as opposed to public ownership.

Mr. Robert C. Brown

rose—

Mr. Walker

I hope that the hon. Gentleman will forgive me if I do not give way. There is not much time left before the winding-up speeches.

We cannot return to the circumstances that obtained in the shipyards before the last war. No one wants that. Management practices left much to be desired. Nor can we allow the shipyards to develop into a public sector monster that, year after year, consumes increasing amounts of public money. What we need is a new dawn where the workpeople can have a stake in the company for which they work. There must be more incentives to encourage individuals to do better and to work together. Workpeople must be able to relate more clearly with their company. I see greater competition taking place between different yards in the same sector of the industry. This can only help us in world markets. The more competitive we become, the better we shall fare in world markets.

Like my hon. Friend the Member for Fareham (Mr. Lloyd), I was disappointed that the Government were unable to find a means of compensating previous owners who were robbed under the nationalisation Act. I have in mind especially Yarrow's, a fine shipyard which was worth much more than the amount paid for it. The private owners did not receive adequate compensation upon nationalisation. No hon. Member can be proud of such a situation. It does not seem to me to be justice. In the same way that we wish to give justice to individuals, we should give justice to owners, whoever they are, when the State moves in.

9.1 pm

Mr. Andy McMahon (Glasgow, Govan)

I thank you, Mr. Deputy Speaker, for calling me. It would have been a tragedy if, in a debate on shipbuilding, the voice of Govan had not been heard. The Bill is a recipe for tragedy and for disaster. Some hon. Members who have spoken in this debate do not know what it is like to be in a double bottom or a gunnell staging. They are concerned about only one matter—pacifying and placating their friends, the rip-off merchants in the Stock Exchange, and trying to curry favour for the general election.

In 1972 the right hon. Member for Sidcup (Mr. Heath) attempted to close the Govan yard under the pretext that it was a lame duck. That lame duck got off its back and became a fighting eagle. It brought about the nationalisation of the shipbuilding industry not only on the Clyde but throughout the United Kingdom. As a result, workers gained better training and re-tooling in shipyards which for years, under private ownership, had been falling apart because of the medieval tools in use. Any attempt to interfere with the structure of British Shipbuilders, as suggested in the Bill, will be fought by the workers on the Clyde. I bring the message "Hands off the British shipyards"

9.3 pm

Dr. John Cunningham (Whitehaven)

I declare an interest. I am sponsored by the General and Municipal Workers Union, one of the major unions in the shipbuilding industry.

We have been discussing a Bill about privatisation. We have heard what amounts to two different arguments from the Government side. On the one hand, Conservative Members, such as the hon. Member for Arundel (Mr. Marshall), have assured the House that there is nothing in the Bill that should worry us or the workers in the shipyards. On the other hand, other Conservative Members have described the Bill as a full-blooded Conservative commitment to the selling-off of the naval yards. In the middle, the Minister says that the Government are taking powers but making no decisions about how, when or where the powers may be used.

No one on the Government side has given any assurances about the future viability or the long term prospects for the merchant ship building yards. Those yards play a massive part in employment on Tyneside, Wearside, Teesside and the lower Clyde. If those yards were to close, tens of thousands of people would be put on the dole overnight. They would be people working not only in the shipbuilding industry, which is an assembling industry, but in engineering companies in the private sector, which depend so much on the future of British shipbuilding for their orders and for the employment that it provides.

As has been said by a number of my hon. Friends, privatisation offers no solution to the problem facing the British shipbuilding industry.

Mr. Colvin

rose—

Dr. Cunningham

No, I shall not give way—certainly not at this stage in my speech.

Privatisation will do nothing to arrest the decline in world orders for ships or to safeguard the major gains that have been made in productivity, wage bargaining and union co-operation that has played such a vital part in the steady improvements that have taken place since vesting day in British Shipbuilders.

Mr. McQuarrie

What about the losses?

Dr. Cunningham

As the debate developed, it became clear to my hon. Friends that an ideological smokescreen was being thrown up by Government supporters to hide the proposal to decimate the British shipbuilding industry by this measure. "Privatisation" is a word for an ugly process. The Government are really concerned with national asset stripping when they talk about privatisation. We have seen this in other industries—British Aerospace and Britoil—and we are to see it in British Telecom. At every stage we see massive public assets with investment going back for decades being offered for sale for no purpose other than to satisfy the ideology of the Conservative Party. There is no shred of any proposed new strategies, initiatives or developments for those industries that are to be privatised. It is dogma for dogma's sake.

Mr. Colvin

rose—

Dr. Cunningham

I have told the hon. Gentleman that I am not giving way. I shall certainly not give way to hon. Members who have made long and boring speeches about the Falklands war in the middle of a debate about shipbuilding. The introduction of the Bill at this time, in the midst of the worst recession the industry has faced in living memory, will inevitably cause massive uncertainty, regardless of the soothing assurances of Ministers and Tory Back Benchers. It presents a real prospect of unemployment to many shipyard workers. It proposes privatisation at some unspecified future date. This will prolong doubt and uncertainty about what will happen to shipyards throughout the United Kingdom. It will cause loss of confidence not only among shipyard workers but among customers of British shipbuilders at home and abroad. Who is likely to consider placing orders with yards whose future is in doubt and clouded by the type of uncertainty introduced by a measure of this kind? It is demotivating for those who work in the industry—the managers, the workers and the board.

It is noticeable that when I asked the Minister of State earlier whether anyone in the industry had asked for the measures in the Bill to be introduced, he failed to answer. He knows that no one in British Shipbuilders has asked for these proposals. From the board down, had anyone had the opportunity honestly and openly to speak in public, I am sure that the overwhelming majority would have said "No".

Apart from the Government and a few of their Right-wing supporters, no one has asked for the Bill—certainly not the Select Committee that recently considered the shipbuilding industry, nor the informed and technical press that writes about British shipbuilding. Some people have said that it is the worst possible time to introduce such a measure. The arguments for introducing the Bill at this time are few. They have been weakly argued tonight. They are thin, and the debate has done nothing to convince us that it is other than a threat to the present configuration and capacity of British Shipbuilders.

There has been some argument whether the proposal will simply mean the introduction of equity capital into parts of the corporation. What is the purpose of such a proposal? It will not change the demand for ships. It will not bring new orders to British Shipbuilders. If that is the measure of what the Government intend, do they think that there will be a rush of private capital in that direction? Of course not, and no one believes there will be.

The recession has meant that world output of ships has fallen from 33.9 million gross registered tonnes in 1976 to almost exactly half that total, 16.9 million gross registered tonnes, last year. Against that fall in shipbuilding, there have been increases in capacity in the Far East, Korea and elsewhere. Even now the Japanese and others are complaining about the world position. In common with other Japanese shipbuilders, Mitsui is being hit by shrinking demand for new buildings as most shipping markets continue to be depressed. The position in the Far East yards exactly mirrors what is happening in Britain. Against that background, we are told that there is likely to be a demand for private capital to invest in shipyards. Frankly, we do not believe that.

Nor is it true to say that market forces will help. Those hon. Members who have spent time considering shipbuilding both in Britain and internationally know that there are hardly any market forces at work. Japanese shipbuilding industry officials are claiming that the Koreans are quoting prices 30 per cent. lower than their prices. We are told that the Japanese are efficient, successful and highly productive. That gives the lie to the argument that if only we could have privatisation or private capital the prospects for British shipbuilding would be massively improved. That is not borne out by events.

Arguments rage across Europe about the levels of support and subsidy for the industry. It is clear from evidence given to the Select Committee that, unless we continue to support our industry, there will no industry at all. That is the reality of the problem.

Mr. Mike Thomas

The hon. Gentleman knows that he carries me some considerable way with him in his arguments. However, he is coming rather close to losing me. Why is equity participation such a bad thing? I agree that it may be difficult to achieve, but it is not bad. Why does he need to go into circumlocution? Will he explain why such equity capital or privatisation will involve renationalisation without compensation should there be another Labour Government?

Dr. Cunningham

The hon. Member for Newcastle upon Tyne, East (Mr. Thomas) says that I am in danger of losing him. We believed that we had already lost him, and we were happy about that.

Mr. Thomas

Answer the question.

Dr. Cunningham

I wish to quote from British Shipbuilders report and accounts for 1981–82.

Mr. Thomas

rose—

Dr. Cunningham

The report states: Britain as an island nation is, and always has been, a strong maritime nation needing seapower, and by necessity this must continue to be the case. Shipbuilding plays a vital part in our nation's prosperity and in its protection. We have a capability that needs to be sustained and recognised as a national asset because a shipbuilding capability is not something that can be used intermittently; to be available when required. Those are the words of the chairman of the corporation—a man from the private sector who was appointed by this Administration and who, I believe, is opposed to the proposals.

In addition to this cataclysmic decline in orders, the laying up of vessels is gathering momentum. The hon. Member for Tynemouth (Mr. Trotter) rightly said that more than 1,000 merchant vessels are now laid up around the world. That total is increasing, literally day by day.

Against such a background, how can Conservative Members believe that some change of ownership will revolutionise the prospects for the industry? The more we examine their arguments, the more we see that there is nothing behind them other than the desire, for the sake of dogma, to sell off these public assets.

The tremendous uncertainty over naval orders following the Defence Review and the decision to run down the Navy's conventional surface ships has also damaged the prospects for shipbuilding. That matter is purely and simply in the hands of the Government. Those decisions will not be affected by a change of ownership. Only one naval order has been confirmed this year.

In 1981 more than £400 million of business was available to British Shipbuilders. In the context of privatisation, it may be that the Government are deliberately holding back naval orders. It is widely reported that they have orders up their sleeve for naval vessels worth £500 million. It would be an outrage if they were to load those orders into yards simply to make them attractive for privatisation. It is no wonder—

Mr. Norman Lamont

The attitude of British Shipbuilders and of its chairman is exactly as I stated it earlier. The chairman is in favour of the introduction of private capital into British Shipbuilders. If that is his view, is the hon. Gentleman still against it?

Dr. Cunningham

Yes, I am, but I am not altogether convinced that the Minister, who is a member of the Government who are holding a pistol against the head of British Shipbuilders at the moment, is being altogether candid with the House.

No wonder there is anger in British shipyards at present. No wonder there is frustration and disbelief about this measure being introduced at what, by common consent, must be the worst possible time—and, incidentally, the worst possible time for those people who may be invited to put their money into the industry.

Sir Frederick Burden

Why make the change?

Dr. Cunningham

Why make the change at all? Is the taking of duties away from British Shipbuilders and the granting of more powers of direction to the Government and Whitehall the new industrial management we are to see from the Government? Is the new attitude to be that Whitehall and Ministers know best? Are we to experience the second guessing of corporate strategies and plans so carefully worked out by professional managers in the industry?

Whatever Conservative Members may think, the Bill will give the Secretary of State power to overrule decisions and processes at the whim of a Government Committee or the Cabinet. No advantages or improvements in the industry's prospects will result from taking such a power. Some hon. Members argue that the Bill will improve prospects. At best, they deceive themselves; at worst, they attempt to mislead workers in the industry.

Several hon. Members have talked about the need for competition in shipbuilding. Will there be any competition to build naval warships? Will we invite foreign yards to tender against Yarrow, or will Yarrow automatically get the orders? Will we invite foreign yards to tender for Trident nuclear submarines, or will Vickers get the orders? There will be no competition. The naval yards will be guaranteed orders paid for by the taxpayer. Any advantage from building ships for the Navy with taxpayers' money should accrue to the taxpayer and the nation, not to private enterprise.

That is our view, so we do not hesitate to respond to the Minister of State and say "Yes, we are against privatisation, particularly of the naval yards." Public money will guarantee the work. Competition will play almost no part in the placing of orders and contracts.

When Conservative Members talk about productivity, do they mean that it will be possible to improve productivity if orders are placed here and there? If a run of frigates is to be built, surely the yards will quote a price only on the basis of there being a run of orders. If so, will that not enable them to undercut the mixed yards which would be left if privatisation takes place? It is clear to everybody on Tyneside, to the Confederation of Shipbuilding and Engineering Unions and to British Shipbuilders that Swan Hunter will never be able to survive the major mixed yard. Swan Hunter has the only yard capable of building large vessels such as "Illustrious" and "Ark Royal". Such yards cannot survive the privatisation of naval yards. They cannot survive with the range of skills and labour force involved in the outfitting trades that they provide today. That will be damaging because Swan Hunter has our major large shipbuilding yard as well.

We are in no doubt about the real threat posed by the proposal to Swan Hunter in particular and to Austin and Pickersgill, Sunderland Shipbuilders and yards at Birkenhead, on the Tees and on the lower Clyde.

In defence of the Bill it is argued that more investment will follow privatisation. No one has said from where they expect the investment to come. The hon. Member for Surrey, North-West (Mr. Grylls) said that British Aerospace is still knocking on the Department of Industry's door for money for the A320 and the agile combat aircraft. Far from solving the problem of investment, British Aerospace has come back to the Governments door. The chairman, appointed by this Government, in his annual report says that without the support and assistance that other airframe manufacturers receive from their Governments, British Aerospace cannot continue. That is the reality of privatisation in British Aerospace. Privatisation offers not the slightest guarantee that more investment will be forthcoming.

There has been much argument about support for British Shipbuilders by this Government, and how much greater that support has been than under the Labour Government. So it should be. This Government have been in charge of the corporation for much longer. What has not been increased, and what has damaged the prospects of British Shipbuilders, has been the intervention fund. That fund was £85 million a year under the Labour Administration and it could be used for 30 per cent. of the cost of a vessel. Last year, it was down to £45 million—about 18 per cent. of the cost of a vessel. So, in terms of using Government support to win orders and business and safeguard jobs, it is not true to say that support from the intervention fund has increased. It has been progressively reduced by this Government at a time, as my hon. Friend the Member for Jarrow (Mr. Dixon) rightly said, when others are playing the game and supporting their industries according to an entirely different set of rules.

Many of my hon. Friends have compared what has happened in the five years since the creation of the corporation with the industry's previous record. Conservative Members argue that under private ownership there would be a magical return to better and more effective work, more investment, new techniques, new equipment, and so on. That argument beggars belief. The record of the private management of the shipbuilding industry could not be worse. If we were to look for the most signal failure of any management of any industry in the country, we would look first to the shipbuilding industry. We see its failure to invest. Instead of being dominant in the world, we see a massive and consistent decline in its market share, a failure to train, a failure to introduce new skills, new technologies and new ideas, and a failure for more than a decade to win an export order for a naval vessel worth the name. That is the record of private management of the shipbuilding industry before nationalisation. No one who looks at that record could be confident about private enterprise improving the present state of the British shipbuilding industry.

We come back to our conclusion that ideology, not any thought for a new initiative or strategy, has dominated the introduction of the Bill. The Minister, in opening, said almost nothing about the future prospects for British Shipbuilders. I hope that his hon. Friend, in winding up, will have more to say on that subject. The industry, which has been in public ownership for only five years, has made major advances in industrial relations and wage bargaining.

The Confederation of Shipbuilding and Engineering Unions played a key role in the reorganisation of the industry and its separation into the various divisions of naval and merchant ship building. I do not understand hon. Gentlemen who have argued that separation of the functions of the corporation will improve the position. The functions are already separate. There are at present five separate divisions of British Shipbuilders. As my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) and others said, if those divisions are forced apart into different ownership, some will survive—the naval building division, certainly—and others, just as certainly, will go to the wall.

Division, selling off and privatisation offer no prospect of a co-ordinated and planned approach to the future of British shipbuilding. These moves are likely to break up and destroy the commitment of the unions to the industry and end, once and for all, any attempt rationally to discuss its problems.

The Government's proposals will cause dismay. They will be met with disbelief in areas of already far too high unemployment. If enacted, they will place in jeopardy major shipbuilding capacity in the North, in Scotland, and on Merseyside. Outside the yards, where two or three jobs exist for every job inside the yards, great anxiety will result. It is not so long ago that the British Marine Equipment Manufacturing Council, which is entirely in private hands, said to the Government that it, too, was opposed to moves to privatise British Shipbuilders.

There is widespread opposition to what is proposed and widespread concern about the effect of dismemberment of the corporation. The proposed break-up of the corporation is a political, industrial and economic obscenity. It is based on dogma. It is understandable that it has already caused massive concern among those engaged in the industry at all levels, and it may well lead to industrial unrest. It has caused potential customers to reconsider their positions. As my right hon. Friend the Member for Salford, West said, the proposal to sell profitable yards is the death knell of merchant shipping in Britain. The introduction of the Bill is the signal to send British Shipbuilders to the breaker's yard. We shall oppose it at every stage.

9.32 pm

The Under-Secretary of State for Scotland (Mr. Alexander Fletcher)

The hon. Member for Whitehaven (Dr. Cunningham) spoilt what was a perfectly respectable speech in the last few moments, with his doom-laden prophecies of what will happen in the industry if any private capital is introduced, that being the Bill's modest purpose. I do not believe that there will be the industrial unrest that he prophesied because of sensible decisions taken by the board of British Shipbuilders in conjunction with my right hon. Friend the Secretary of State. Nor do I believe that customers will scurry away from an industry that, with a contribution from the private sector, will have an opportunity to make itself more efficient in future.

The hon. Member for Whitehaven talked gloomily about the future of merchant yards, a matter of importance to many right hon. and hon. Members on both sides of the House. My hon. Friend the Minister of State, Department of Industry said at the beginning of the debate that the merchant yards would continue to be supported. He said that they would have to be supported and that support would continue for them as they are likely to remain in public ownership for some time to come.

Privatisation, the word that the hon. Gentleman used, will not improve the market place. I agree that it will not. It will not bring more orders to British Shipbuilders but it will improve the industry's ability to obtain a greater share of world markets. The market itself will not expand as a result, but privatisation will improve the industry's ability to obtain more orders, and that means more secure jobs.

Mr. Robert C. Brown

How?

Mr. Fletcher

I shall be happy to elaborate on that later. I think that the reasons are obvious and have already been mentioned in the debate. I shall explain why I believe that British Shipbuilders will benefit from the injection of private capital. Contrary to what the hon. Gentleman said, British Shipbuilders will welcome the introduction of private capital. It, like others, can see great benefit in that. As I have already said, the benefits are obvious. Not only will it make more funds available for investment—important as that is—but it will also help to increase confidence at all levels in the industry. Individuals and institutions will show their confidence by making funds and private capital available to the industry.

Whatever may happen in Japan or Korea, our responsibility to improve British Shipbuilders' commercial performance is not lessened in any way. We fully appreciate the difficulties that British Shipbuilders and other European yards face in competition with the Far East. Even the Japanese are now complaining about the effect of the Koreans on their shipbuilding. However difficult international problems might be, we must do everything in our power to improve the competitiveness of British industry.

It has been suggested that we are holding back naval orders from the Ministry of Defence so that there can be a flurry of orders on the introduction of any sort of private capital into the industry. In 1981–82 £400 million-worth of defence orders were placed with British Shipbuilders. This year, the Government are placing naval orders worth more than £500 million in real terms over and above those placed by the Labour Government in 1978–79. That is a significant contribution by the Ministry of Defence to British naval shipbuilders.

The hon. Member for Glasgow, Govan (Mr. McMahon) entertained us to a spirited speech. In saying that, I am not diminishing in any way the sincerity of his remarks. However, the House may not be aware that the hon. Gentleman represents both the public and the private sector of the shipbuilding industry in his constituency. All I shall say about that is that he defends both in his dealings with the Scottish Office, and why should he not? He will know better than most that those of his constituents who are employed in private sector ship repair are competitive and anxious to ensure that orders are secured by their own efforts in their yards.

The right hon. Member for Salford, West (Mr. Orme) said, in opening the debate for the Opposition, that the separation of warship building from merchant ship building means the end of merchant ship building. I have already repeated my hon. Friend the Minister's remarks that, on the contrary, the Government accept a continuing obligation to support the merchant yards. What would end would be a cross-subsidy from the warship yards to the merchant ship building yards. That could only strengthen the warship yards. It would strengthen both their investment and their ability to export, simply because the profits of warship building would not be drained off to support merchant ship building. That would be of great significance to the warship yards.

Mr. Robert C. Brown

In view of what the Minister has just said, and bearing in mind my fears and those of my constituents that under the Bill naval shipbuilding will be directly sold off, leaving merchant ship building to stand on its own feet, will he give those of my constituents who depend on Swan Hunter Shipbuilders Ltd. for their livelihood a guarantee as to their future?

Mr. Fletcher

It is impossible to give any British workers a guarantee about the future, particularly if they work in an industry that competes world-wide. In addition, the hon. Gentleman's point is hypothetical. He assumes that the warship yards will be sold off. However, the Bill's purpose is to enable private capital to be introduced into British Shipbuilders. It has been said several times that the form that that will take has not, in any way, been decided. It will depend on the circumstances at the time. Surely the hon. Gentleman will accept—whether or not he agrees with any of the Government's actions—that any decisions that we make will be made in the best interests of the shipbuilding industry and of the country as a whole.

Mr. Dewar

I listened carefully to the Minister's remarks. The whole tenor of them was that profits made in the naval yards will not be available to help the rest of British Shipbuilders. Two results follow: first, BS's merchant ship building division will be left in considerable trouble; second, the taxpayer will have to foot the bill. Neither of those is an attractive option.

Mr. Fletcher

If that were so, and the warship yards were operating privately and independently, the board of the warship yards or yard could make its own decisions about how to dispose of its profits. It would strenghten the warship yards' ability to compete and to provide a better service to the Ministry of Defence. We have said several times today that the Government will continue to support merchant ship building in the United Kingdom. It would be a responsibility no longer of the successful warship builders but rightly of Government

Mr. Bill Walker

Has my hon. Friend noticed that, although the Labour Party intends to fight the Bill, there are only 20 Labour Members present?

Mr. Fletcher

My hon. Friend is absolutely right. Far be it for me to suggest that the Labour Party is losing its heart to fight such proposals.

Many defence orders are already met by the private sector. I refer, for example, to aircraft, aircraft equipment, tanks, missiles and communications equipment. A whole host of private sector companies give a first-class service to our Armed Forces in providing defence equipment.

Dr. John Cunningham

Yes, but they are not one-product companies like the naval yards.

Mr. Fletcher

Perhaps BS should diversify. The enabling legislation before us will, for the first time, enable it to do just that. I may have misled the right hon. Member for Salford, West and the hon. Member for Whitehaven when I spoke of the figure of more than £500 million in real terms. That was on naval expenditure. However, I shall write to the right hon. and hon. Gentlemen if that figure proves to be incorrect. My hon. Friend the Member for F'areham (Mr. Lloyd) rightly pointed out that, contrary to what Labour Members say—and I also have some experience of this—not all the workers in BS oppose the introduction of private capital. My hon. Friend speaks with great experience and authority and it would do Opposition Members good to pay some attention to the wishes of their constituents instead of to the cliques and groups who seem to dominate their constituency associations.

Mr. Mike Thomas

rose—

Mr. Fletcher

In a few moments I shall turn my attention to the Social Democratic Party.

The right hon. Member for Salford, West said that to save the merchant ship building side of BS it was important to become involved in the Polish contract. BS estimates that the total cost to the taxpayer of that Polish contract amounts to more than £72 million. I do not know how that can be described as being helpful to Britain's economic problems. The deal was a disaster, not only to the British taxpayer, but to the British shipping industry, because we built subsidised ships in our yards to compete with British ships sailing the oceans of the world. The right hon. Member for Salford, West should not boast about that deal.

Mr. Orme

How much would it have cost the British taxpayer if we had not taken those orders and British Shipbuilders had folded? What would have been the cost to the nation? Those orders helped to keep British Shipbuilders afloat and we believe that the money was well spent.

Mr. Fletcher

Those orders did not help British Shipbuilders compete in the real world and they used taxpayers' funds which would have been better used in investment. It would have been better to invest £72 million in improving the facilities of British Shipbuilders than to give a present of £72 million to the Polish Government, which was what the Labour Government did.

I am a little surprised that the hon. Member for Dundee, West (Mr. Ross) should oppose the Bill, because he has personal experience of how the introduction of private capital can save jobs in a nationalised industry. The nationalised organisation decided to run down and close Robb Caledon and a private sector company, Kestrel Marine, came into the yard, is competing for work in the North Sea and employs more people in the yard than were employed there by British Shipbuilders.

My hon. Friend the Member for Tynemouth (Mr. Trotter) made the important point that the Bill does not withdraw public support from the industry, particularly merchant shipbuilders, for the simple reason that ownership of the industry does not decide the level of Government support or subsidy that may be required from time to time. Equally, no industry can be protected from the delivery performance of its competitors and in the international marketplace delivery and cost are paramount, whatever the Labour Party may say about a Labour Government's ability to support the industry.

I agree with the right hon. Member for Sunderland, North (Mr. Willey) that the industry is under threat, but the threat is from overseas competition. The question facing the industry and the Government is what sort of organisation would enable the industry to meet that competition more effectively. That is the central question that should be occupying the minds of hon. Members.

If we can agree on anything it is surely that the answer to improved efficiency and competition is not continued nationalisation. We believe that the Bill will provide the commercial flexibility that our shipbuilding industry needs to survive the threat to which the right hon. Member for Sunderland, North referred.

My hon. Friend the Member for Eastleigh (Sir D. Price) mentioned a maritime policy. The Bill deals with the introduction of private capital and a more commercial attitude into the industry. The Government already have a maritime policy designed to promote the interests of the shipbuilding and the shipping industries, but we oppose any change in that policy that would increase aid to shipbuilding at the expense of the shipping industry. The Government's view on a maritime policy was set out fully in our response to the Select Committee on Industry and Trade earlier this year.

My hon. Friend the Member for Surrey, North-West (Mr. Grylls) was right to emphasise the enabling powers in the Bill, which permit British Shipbuilders to participate in joint ventures with the private sector, to dispose of assets to the private sector and generally to act in a fully commercial manner. Speed and flexibility of response to market conditions are not exactly the hallmark of our nationalised industries. That feeling is bad enough when those industries are monopoly suppliers to the domestic market but internationally it is essential that they should be able to compete with the best shipbuilders in the world.

My hon. Friend the Member for Arundel (Mr. Marshall) mentioned productivity. Since nationalisation, British Shipbuilders and the unions have made great efforts to improve productivity. Incentive schemes have been introduced to almost all British shipbuilding companies. Recently the board set up a new department for performance improvement and productivity and it appointed consultants to advise on the introduction of advanced production planning techniques. As a result of all those efforts, British Shipbuilders and the work force have substantially raised their productivity performance since 1979. Despite the improvement, productivity levels have still to pass pre-nationalisation levels.

The hon. Member for Southampton, Itchen (Mr. Mitchell) spoke on behalf of the SDP and perhaps the Liberal Party, although we are not sure. He understood that the Bill alters the statutory position of British Shipbuilders. The Bill enables an effective public-private partnership to be operated in shipbuilding. Tonight's vote provides the SDP with an opportunity to support its policies, yet the party of the centre—the party of consensus—is running away from the opportunity. I am reminded of a quotation from Marshal Foch in 1916 that typifies the SDP's attitude to the Bill: My centre is giving way, my right is in retreat, situation excellent, We shall not vote," says the SDP. The hon. Member for Birkenhead (Mr. Field) and his colleagues who are opposed to private capital going into British Shipbuilders should talk to shop stewards in platform, ship repair and shipbuilding yards. The shop stewards and workers to whom I speak in the yards know that they must compete in order to survive and they are doing so, but they are far from pleased when public sector nationalised companies in competition with them offer prices that they believe are lower than the market price. The workers tell me "We put our jobs at stake in competing here. If the public sector should win the contract because it offers a lower price, we must meet the loss incurred in losing the contract out of the taxes that we pay from our wages." It is not a minority of the yard workers that takes that view.

The hon. Member for Glasgow, Garscadden (Mr. Dewar), my hon. Friend the Member for Aberdeenshire, East (Mr. McQuarrie) and my hon. Friend the Member for Perth and East Perthshire (Mr. Walker) spoke about some of the Scottish yards. I am surprised that the hon. Member for Garscadden should be so afraid of private sector capital in the successful warship building yard in his constituency. He wonders why private capital should be necessary. Surely he remembers that when the yard was a private sector company, it was not just a one-customer company dependent on the Ministry of Defence for its orders as it is now. It could attract orders from other parts of the world. If private capital is reintroduced, there is no reason why it should not do that again.

Mr. Dewar

Will the hon. Gentleman give way?

Mr. Fletcher

I do not have time. [HON. MEMBERS: "Give way".] I wish to move on to Govan Shipbuilders—

Mr. Dewar

rose—

Mr. Deputy Speaker (Mr. Ernest Armstrong)

It is obvious that the Minister is not giving way, so the hon. Gentleman must resume his seat.

Mr. Fletcher

During the past few years, Govan Shipbuilders has considerably improved its performance, but it still has a long way to go before a private sector offer for the yard is made, either as a capital contribution or anything else.

The hon. Member for Garscadden referred to the annual meeting of British Shipbuilders, at which the chairman said that, to survive, Scott Lithgow must drastically improve its productivity performance. The sooner that that happens the happier we shall be in the Scottish Office and elsewhere about jobs being maintained on the lower Clyde.

Another successful yard is a former nationalised company that is now in private hands. At UIE on Clydebank the work force is performing extremely well. If the hon. Member for Garscadden were to speak to some of those workers, it would ease his difficulties. In smaller Scottish yards, such as Hall Russell, there has been welcome private sector participation in both structure and operation. In the past such yards were successful in the private sector.

My hon. Friend the Member for Perth and East Perthshire made it clear that the Bill is about the introduction of private capital into British Shipbuilders. It does not concern many of the matters debated by hon. Members today. The introduction of private capital is of great importance to the future, not only of British Shipbuilders but to its management and workers, who will feel more secure in obtaining new orders and improving competitiveness.

With the support of the Government, British Shipbuilders has been radically restructured and its performance has improved in the face of difficult market conditions. The time has come to strengthen the industry further by removing the financial and bureaucratic constraints that have hampered the performance of parts of the industry.

The 1977 Act, which has underpinned British Shipbuilders' performance, is a legal straitjacket. The Bill, by amending the 1977 Act, will provide a more flexible framework within which the corporation can operate. Hon. Members will know that the Government came to office with a manifesto commitment to encourage the introduction of private capital into State-owned industries. That is what we are doing because it is expected of us. The Bill will enable us to take the first steps to achieve that in the shipbuilding industry.

We cannot afford to wait until the entire corporation is profitable before we introduce private capital. The industry is suffering from the world recession. Competition is fierce and becoming fiercer, but jobs will not be saved by clinging to the dogma of public ownership. The industry must be competitive and must draw on every resource available in Britain, including capital and expertise from the private sector. It must attract private sector managers, technicians and researchers who will wish to contribute to a thriving and successful organisation. All that will drive people away is the threat of nationalisation that was repeated today by the hon. Member for Garscadden and his hon. Friends. The industry needs to he competitive and draw on all available resources if it is to win the orders that it needs to survive the threat that it faces and provide more secure jobs.

For those reasons, the Government commend the Bill with enthusiasm. We believe that it is in the best interests of the British shipbuilding industry.

Question put, That the Bill be now read a Second time:

The House divided: Ayes 287, Noes 231.

Division No. 11]	[10 pm
AYES
Adley, Robert	Boyson, Dr Rhodes
Aitken, Jonathan	Braine, Sir Bernard
Alexander, Richard	Bright, Graham
Alison, Rt Hon Michael	Brinton, Tim
Amery, Rt Hon Julian	Brittan, Rt. Hon. Leon
Ancram, Michael	Brooke, Hon Peter
Arnold, Tom	Brotherton, Michael
Aspinwall, Jack	Brown, Michael(Brigg Sc'n)
Atkins, Rt Hon H.(S'thorne)	Browne, John (Winchester)
Atkins, Robert(Preston N)	Bruce-Gardyne, John
Atkinson, David (B'm'th,E)	Bryan, Sir Paul
Baker, Kenneth(St.M'bone)	Buchanan-Smith, Rt. Hon. A.
Baker, Nicholas (N Dorset)	Buck, Antony
Beaumont-Dark, Anthony	Budgen, Nick
Bendall, Vivian	Bulmer, Esmond
Benyon, Thomas (A'don)	Burden, Sir Frederick
Best, Keith	Butcher, John
Biffen, Rt Hon John	Carlisle, John (Luton West)
Biggs-Davison, Sir John	Carlisle, Kenneth (Lincoln)
Blackburn, John	Carlisle, Rt Hon M. (R'c'n )
Blaker, Peter	Chalker, Mrs. Lynda
Body, Richard	Channon, Rt. Hon. Paul
Bonsor, Sir Nicholas	Chapman, Sydney
Boscawen, Hon Robert	Churchill, W. S.
Bowden, Andrew	Clark, Hon A. (Plym'th, S'n)

Clark, Sir W. (Croydon S)	Hunt, David (Wirral)
Clarke, Kenneth (Rushcliffe)	Hunt, John (Ravensbourne)
Clegg, Sir Walter	Irving, Charles (Cheltenham)
Colvin, Michael	Jessel, Toby
Cope, John	Johnson Smith, Sir Geoffrey
Cormack, Patrick	Jopling, Rt Hon Michael
Corrie, John	Joseph, Rt Hon Sir Keith
Costain, Sir Albert	Kitson, Sir Timothy
Critchley, Julian	Knox, David
Crouch, David	Lamont, Norman
Dickens, Geoffrey	Lang, Ian
Dorrell, Stephen	Langford-Holt, Sir John
Douglas-Hamilton, Lord J.	Latham, Michael
Dover, Denshore	Lawrence, Ivan
du Cann, Rt Hon Edward	Lawson, Rt Hon Nigel
Dunn, Robert (Dartford)	Lee, John
Durant, Tony	Le Marchant, Spencer
Dykes, Hugh	Lennox-Boyd, Hon Mark
Eden, Rt Hon Sir John	Lewis, Kenneth (Rutland)
Eggar, Tim	Lloyd, Ian (Havant & W'loo)
Elliott, Sir William	Lloyd, Peter (Fareham)
Eyre, Reginald	Loveridge, John
Fairbairn, Nicholas	Luce, Richard
Faith, Mrs Sheila	Lyell, Nicholas
Farr, John	Macfarlane, Neil
Fell, Sir Anthony	MacGregor, John
Fenner, Mrs Peggy	MacKay, John (Argyll)
Finsberg, Geoffrey	Macmillan, Rt Hon M.
Fisher, Sir Nigel	McNair-Wilson, M. (N'bury)
Fletcher, A. (Ed'nb'gh N)	McNair-Wilson, P. (New F'st)
Fletcher-Cooke, Sir Charles	McQuarrie, Albert
Fookes, Miss Janet	Madel, David
Forman, Nigel	Major, John
Fowler, Rt Hon Norman	Marland, Paul
Fox, Marcus	Marlow, Antony
Fraser, Rt Hon Sir Hugh	Marshall, Michael (Arundel)
Fraser, Peter (South Angus)	Mates, Michael
Fry, Peter	Mawby, Ray
Gardiner, George (Reigate)	Mawhinney, Dr Brian
Gardner, Edward (S Fylde)	Mayhew, Patrick
Garel-Jones, Tristan	Mellor, David
Gilmour, Rt Hon Sir Ian	Meyer, Sir Anthony
Glyn, Dr Alan	Miller, Hal (B'grove)
Goodhart, Sir Philip	Mills, Iain (Meriden)
Goodhew, Sir Victor	Mills, Sir Peter (West Devon)
Goodlad, Alastair	Miscampbell, Norman
Gorst, John	Mitchell, David (Basingstoke)
Gow, Ian	Moate, Roger
Gower, Sir Raymond	Monro, Sir Hector
Grant, Anthony (Harrow C)	Montgomery, Fergus
Gray, Hamish	Moore, John
Greenway, Harry	Morgan, Geraint
Grieve, Percy	Morris, M. (N'hampton S)
Griffiths, E.(B'y St. Edm'ds)	Morrison, Hon C. (Devizes)
Griffiths, Peter Portsm'th N)	Morrison, Hon P. (Chester)
Grist, Ian	Murphy, Christopher
Grylls, Michael	Myles, David
Gummer, John Selwyn	Neale, Gerrard
Hamilton, Hon A.	Needham, Richard
Hamilton, Michael (Salisbury)	Nelson, Anthony
Hampson, Dr Keith	Neubert, Michael
Hannam, John	Newton, Tony
Haselhurst, Alan	Nott, Rt Hon John
Hastings, Stephen	Onslow, Cranley
Havers, Rt Hon Sir Michael	Oppenheim, Rt Hon Mrs S.
Hawksley, Warren	Osborn, John
Hayhoe, Barney	Page, John (Harrow, West)
Heath, Rt Hon Edward	Page, Richard (SW Herts)
Heddle, John	Parkinson, Rt Hon Cecil
Henderson, Barry	Parris, Matthew
Heseltine, Rt Hon Michael	Patten, Christopher (Bath)
Hicks, Robert	Patten, John (Oxford)
Higgins, Rt Hon Terence L.	Pattie, Geoffrey
Hogg, Hon Douglas (Gr'th'm)	Pawsey, James
Holland, Philip (Carlton)	Percival, Sir Ian
Hooson, Tom	Peyton, Rt Hon John
Hordern, Peter	Pink, R. Bonner
Howe, Rt Hon Sir Geoffrey	Pollock, Alexander
Howell, Rt Hon D. (G'ldf'd)	Prentice, Rt Hon Reg
Howell, Ralph (N Norfolk)	Price, Sir David (Eastleigh)

Proctor, K. Harvey	Taylor, Teddy (S'end E)
Pym, Rt Hon Francis	Tebbit, Rt Hon Norman
Raison, Rt Hon Timothy	Temple-Morris, Peter
Rathbone, Tim	Thatcher, Rt Hon Mrs M.
Rees-Davies, W. R.	Thomas, Rt Hon Peter
Rhodes James, Robert	Thompson, Donald
Rhys Williams, Sir Brandon	Thorne, Neil (Ilford South)
Ridley, Hon Nicholas	Thornton, Malcolm
Rifkind, Malcolm	Townend, John (Bridlington)
Rippon, Rt Hon Geoffrey	Townsend, Cyril D, (B'heath)
Roberts, M. (Cardiff NW)	Trippier, David
Roberts, Wyn (Conway)	Trotter, Neville
Rossi, Hugh	van Straubenzee, Sir W.
Rost, Peter	Vaughan, Dr Gerard
Royle, Sir Anthony	Waddington, David
Rumbold, Mrs A. C. R.	Wakeham, John
Sainsbury, Hon Timothy	Waldegrave, Hon William
St. John-Stevas, Rt Hon N.	Walker, Rt Hon P.(W'cester)
Shaw, Giles (Pudsey)	Walker, B. (Perth)
Shaw, Sir Michael (Scarb)	Walker-Smith, Rt Hon Sir D.
Shelton, William (Streatham)	Waller, Gary
Shepherd, Colin (Hereford)	Walters, Dennis
Shepherd, Richard	Ward, John
Silvester, Fred	Warren, Kenneth
Sims, Roger	Watson, John
Skeet, T. H. H.	Wells, Bowen
Smith, Dudley	Wells, John (Maidstone)
Smith, Tim (Beaconsfield)	Wheeler, John
Speller, Tony	Whitney, Raymond
Spence, John	Wiggin, Jerry
Spicer, Michael (S Worcs)	Wilkinson, John
Squire, Robin	Williams, D.(Montgomery)
Stainton, Keith	Winterton, Nicholas
Stanbrook, Ivor	Wolfson, Mark
Stanley, John	Young, Sir George (Acton)
Stewart, A.(E Renfrewshire)	Younger, Rt Hon George
Stewart, Ian (Hitchin)
Stokes, John	Tellers for the Ayes:
Stradling Thomas, J.	Mr. Anthony Berry and
Tapsell, Peter	Mr. Carol Mather.

NOES
Abse, Leo	Cunningham, Dr J. (W'h'n)
Adams, Allen	Dalyell, Tam
Allaun, Frank	Davidson, Arthur
Anderson, Donald	Davies, Rt Hon Denzil (L'lli)
Archer, Rt Hon Peter	Davis, Clinton (Hackney C)
Ashton, Joe	Davis, Terry (B'ham, Stechf'd)
Atkinson, N.(H'gey,)	Deakins, Eric
Barnett, Rt Hon Joel (H'wd)	Dean, Joseph (Leeds West)
Beith, A. J.	Dewar, Donald
Bennett, Andrew(St'kp't N)	Dixon, Donald
Booth, Rt Hon Albert	Dobson, Frank
Bottomley, Rt Hon A.(M'b'ro)	Dormand, Jack
Bray, Dr Jeremy	Douglas, Dick
Brocklebank-Fowler, C.	Dubs, Alfred
Brown, R. C. (N'castle W)	Duffy, A. E. P.
Brown, Ronald W. (H'ckn'y S)	Dunnett, Jack
Brown, Ron (E'burgh, Leith)	Dunwoody, Hon Mrs G.
Buchan, Norman	Eadie, Alex
Callaghan, Rt Hon J.	Eastham, Ken
Callaghan, Jim (Midd't'n & P)	Edwards, R. (W'hampt'n S E)
Campbell, Ian	Ellis, R. (NE D'bysh're)
Campbell-Savours, Dale	Ellis, Tom (Wrexham)
Canavan, Dennis	Ennals, Rt Hon David
Carmichael, Neil	Evans, Ioan (Aberdare)
Carter-Jones, Lewis	Evans, John (Newton)
Cartwright, John	Ewing, Harry
Clark, Dr David (S Shields)	Faulds, Andrew
Clarke, Thomas(C'b'dge,	Field, Frank
A'rie)	Fitch, Alan
Cocks, Rt Hon M. (B'stol S)	Flannery, Martin
Cohen, Stanley	Foot, Rt Hon Michael
Concannon, Rt Hon J. D.	Forrester, John
Conlan, Bernard	Foulkes, George
Cook, Robin F.	Fraser, J. (Lamb'th, N'w'd)
Craigen, J. M. (G'gow, M'hill)	Freeson, Rt Hon Reginald
Cryer, Bob	Freud, Clement
Cunliffe, Lawrence	Garrett, John (Norwich S)
Cunningham, G. (Islington S)	Garrett, W. E. (Wallsend)

George, Bruce	O'Neill, Martin
Gilbert, Rt Hon Dr John	Orme, Rt Hon Stanley
Golding, John	Owen, Rt Hon Dr David
Graham, Ted	Palmer, Arthur
Grant, John (Islington C)	Park, George
Hamilton, James (Bothwell)	Parker, John
Hamilton, W. W. (C'tral Fife)	Parry, Robert
Hardy, Peter	Pendry, Tom
Harman, Harriet (Peckham)	Penhaligon, David
Harrison, Rt Hon Walter	Powell, Raymond (Ogmore)
Hart, Rt Hon Dame Judith	Price, C. (Lewisham W)
Hattersley, Rt Hon Roy	Race, Reg
Haynes, Frank	Radice, Giles
Healey, Rt Hon Denis	Rees, Rt Hon M (Leeds S)
Heffer, Eric S.	Richardson, Jo
Hogg, N. (E Dunb't'nshire)	Roberts, Albert (Normanton)
Holland, S. (L'b'th, Vauxh'll)	Roberts, Allan (Bootle)
Home Robertson, John	Roberts, Ernest (Hackney N)
Homewood, William	Roberts, Gwilym (Cannock)
Hooley, Frank	Robertson, George
Horam, John	Robinson, G. (Coventry NW)
Howell, Rt Hon D.	Rodgers, Rt Hon William
Howells, Geraint	Rooker, J. W.
Hoyle, Douglas	Roper, John
Huckfield, Les	Ross, Ernest (Dundee West)
Hughes, Mark (Durham)	Ross, Stephen (Isle of Wight)
Hughes, Robert (Aberdeen N)	Rowlands, Ted
Hughes, Roy (Newport)	Ryman, John
Janner, Hon Greville	Sever, John
Jay, Rt Hon Douglas	Sheerman, Barry
John, Brynmor	Sheldon, Rt Hon R.
Johnson, James (Hull West)	Shore, Rt Hon Peter
Johnson, Walter (Derby S)	Short, Mrs Renée
Johnston, Russell (Inverness)	Silkin, Rt Hon J. (Deptford)
Jones, Rt Hon Alec (Rh'dda)	Silkin, Rt Hon S. C. (Dulwich)
Jones, Barry (East Flint)	Silverman, Julius
Jones, Dan (Burnley)	Skinner, Dennis
Kaufman, Rt Hon Gerald	Snape, Peter
Kerr, Russell	Soley, Clive
Kilroy-Silk, Robert	Spearing, Nigel
Kinnock, Neil	Speller, John Francis (B'ham)
Lambie, David	Spriggs, Leslie
Lamond, James	Stallard, A. W.
Leadbitter, Ted	Stewart, Rt Hon D. (W Isles)
Leighton, Ronald	Stoddart, David
Lestor, Miss Joan	Stott, Roger
Lewis, Ron (Carlisle)	Straw, Jack
Litherland, Robert	Summerskill, Hon Dr Shirley
Lofthouse, Geoffrey	Taylor, Mrs Ann (Bolton W)
Lyon, Alexander (York)	Thomas, Dafydd (Merioneth)
Lyons, Edward (Bradf'd W)	Thomas, Mike (Newcastle E)
McDonald, Dr Oonagh	Thomas, Dr R.(Carmarthen)
McGuire, Michael (Ince)	Thorne, Stan (Preston South)
McKelvey, William	Tilley, John
Maclennan, Robert	Tinn, James
McMahon, Andrew	Torney, Tom
McNamara, Kevin	Urwin, Rt Hon Tom
McTaggart, Robert	Varley, Rt Hon Eric G.
McWilliam, John	Wainwright, E.(Dearne V)
Marshall, D(G'gow S'ton)	Walker, Rt Hon H.(D'caster)
Marshall, Dr Edmund (Goole)	Wardell, Gareth
Marshall, Jim (Leicester S)	Watkins, David
Mason, Rt Hon Roy	Weetch, Ken
Maxton, John	Welsh, Michael
Maynard, Miss Joan	White, Frank R.
Meacher, Michael	White, J. (G'gow Pollok)
Miller, Dr M. S. (E Kilbride)	Whitehead, Phillip
Mitchell, Austin (Grimsby)	Whitlock, William
Mitchell, R. C. (Soton Itchen)	Willey, Rt Hon Frederick
Morris, Rt Hon A. (W'shawe)	Williams, Rt Hon A.(S'sea W)
Morris, Rt Hon C. (O'shaw)	Williams, Rt Hon Mrs
Morris, Rt Hon J. (Aberavon)	(Crosby)
Morton, George	Wilson, Gordon (Dundee E)
Moyle, Rt Hon Roland	Wilson, Rt Hon Sir H.(H'ton)
Mulley, Rt Hon Frederick	Wilson, William (C'try SE)
Newens, Stanley	Winnick, David
Oakes, Rt Hon Gordon	Woodall, Alec
Ogden, Eric	Wright, Sheila

Young, David (Bolton E)	Mr. Hugh McCartney and
	Mr. Allen McKay.
Tellers for the Noes:

Question accordingly agreed to.

Bill read a Second time.

Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).