HC Deb 31 March 1983 vol 40 cc475-87

11.6 am

Mr. Don Dixon (Jarrow)

I am pleased to be able to speak today on the serious situation of the shipbuilding industry in this country and throughout the world. I am perturbed, however, that the Secretary of State for Industry, in view of the numerous debates on the shipbuilding industry and the introduction of the British Shipbuilding Bill, has not had the courtesy to come and hear about the fears of shipbuilding communities throughout the country. I refer to shipbuilding communities because I was born and have spent all my life in such a community and I worked in shipbuilding until I became a Member of Parliament, so I am well aware of the anxiety felt by those communities.

First, I pay tribute to Tyne and Wear county council and especially to its leader, councillor Michael Campbell, for its current campaign to save the shipyard in its area. That is a credit to the locally elected representatives, who, unlike the Government, are not sitting back and watching the death of one of our oldest and most important basic industries.

I have been accused on previous occasions of being emotive about the shipbuilding industry. I make no apology for that. I started work in the industry when I left school at the age of 14 and I have worked in no other industry. I have vivid childhood memories of my father and grandfather being thrown out of work when the Palmer shipyard was closed by Shipbuilding Security Ltd. in 1934. My grandfather never worked again and my father did not work again until war was declared. In the 1930s, thousands of good men were thrown on to the scrap heap as surplus to requirements, redundant and no longer required to do a useful job for society.

A few years later, when war was declared in 1939, they were all taken back into the yards because of the sudden importance of ships to us as an island nation. Not only were they taken back into the yards but if they did not work overtime they were put in front of a tribunal and fined for not working weekends and evenings. That is the extent of the importance of shipbuilding workers during the war. People who a few years previously had been no use to society were suddenly important.

The same story was told just 12 months ago during the Falklands dispute when men in Tyne and Wear who had been paid off in the previous 12 months to two years and had never had any other employment were fetched back into the shipyards and asked to work around the clock to get the task force ready.

Tyne and Wear is the centre of the British shipbuilding industry. It contains the largest concentration of public and private shipbuilding activity in the country. The importance of the area to the industry was recognised in 1979 when British Shipbuilders chose to have its headquarters in Benton house in Newcastle. Lloyd's Register also has an office in Newcastle. The boilermakers society, one of the biggest unions in the shipbuilding industry, has always had its headquarters in Newcastle. That proves the importance of Tyne and Wear to the shipbuilding industries.

Facilities in Tyne and Wear cover a range of activities, including merchant shipbuilding, warship building, ship repairing and marine and related engineering. There is an integrated shipbuilding, ship repairing and engineering industry that is almost wholly supplied and serviced within the area. Those conditions are not to be found anywhere else in the country.

Many organisations are connected with the industry. Newcastle university, for example, has the largest and foremost architectural department in the country, which has close connections with that industry. It also has a marine industries centre that was set up in 1970. Sunderland polytechnic has a department of naval architecture and South Shields marine and technical college is internationally known for its training of seafarers. Within those institutions the county has the greatest concentration of technical and educational facilities that are directly connected with the shipbuilding industry.

British Shipbuilders' operations in the county consist of three major shipbuilding companies. The first is Swan Hunter on the Tyne. I am pleased that my hon. Friend the Member for Newton (Mr. Evans) is here because we have both worked in many of the yards that now belong to Swan Hunter. The second is Austin and Pickersgill and the third is Sunderland Shipbuilders, both of which are on the river Wear. There is also Clelands which is a small shipbuilding yard on the river Tyne and Tyne Shiprepair which is one of the major ship repairing companies in the country. There are many engineering companies such as Clarke Hawthorne, British Shipbuilders Engineering and Technical and Wallsend Slipway.

The Tyne and Wear area made a major contribution to the overall production of British Shipbuilders in 1981–82. It accounted for 60 per cent. of employment and turnover in the merchant shipbuilding division, 70 per cent. of employment and turnover in the ship repairing division and 56 per cent. of employment and 59 per cent. of turnover in the engineering division. At the moment, the shipbuilding industry employs nearly 20,000 people in Tyne and Wear out of a total of 95,000 manufacturing jobs. Therefore, the shipbuilding industry represents 20 per cent. of all manufacturing jobs in the county. Any further reduction in the industry will have serious consequences for the local community, where almost 100,000 people are out of work.

The following firms have recently announced redundancies in the county. Tyne Shiprepair of south Tyneside has announced 1,200 job losses, Sunderland Forge has announced 440 job losses, Willam Press of North Shields has announced 330 job losses, H. K. Porter Ltd. of Newburn has announced 86 job losses, Lack—Johnson of Washington has announced 70 job losses, Caterpillar Tractors of Birtley has announced 60 job losses, Crompton Parkinson of South Shields has announced 60 job losses and Ronson of North Shields has announced 50 job losses. I could go on ad nauseam about the number of jobs that the county is losing in manufacturing industries. We should bear in mind the fact that those job losses are adding to the 100,000 people who are already unemployed arid the fact that a threat hangs over the 20,000 people who are directly employed in the shipbuilding industry and the other 80,000 people who are indirectly employed by it as suppliers of materials.

Jarrow, where my hon. Friend the Member for Newton lived for so long, was known in the 1930s as the town that was murdered. We already have one of the highest rates of unemployment in the country. The last ship repairing yard, Mercantile Dry Dock, has closed down. The last shipbuilding yard, Palmer's, is under threat as a result of the present shipbuilding policy. The last pit in my constituency, Boldon colliery, has been closed. The last steel plant in my constituency is under threat of closure. In the South Tyneside metropolitan district, which comprises the South Shields and Jarrow constituencies, there are pockets of almost 50 per cent. unemployment.

A survey on part of the district conducted by the northeast centre for community studies shows that, in the area studied, 22 per cent. of all heads of household were unemployed. Moreover, 53 per cent. of respondents to the survey rely on help towards rent, rates and mortgage repayments and 28 per cent. have difficulty in paying the rent. The report also found that 37 per cent. of respondents had difficulty in paying heating bills and that 40 per cent. had been unable to pay bills. That is the type of area that we are dealing with when we talk of reducing Britain's shipbuilding capacity. We are referring to areas such as Jarrow, Wallsend, Sunderland, South Shields and parts of Scotland and Merseyside, which already have far too much unemployment and which any more tailoring of the shipbuilding industry would hit increasingly hard.

The principal employer in the shipbuilding industry in Tyne and Wear is Swan Hunter which employs 9,000 men. Austin and Pickersgill employs 2,850, Sunderland Shipbuilders employs 3,300, Clelands employs 500, Sunderland Forge employs 525, Clarke Hawthorne employs 1,150, British Shipbuilders Engineering and Technical employs 325, Smith Shiprepair employs 200, Tyne Shiprepair employs 1,200—that number is to be cut drastically—Wallsend Slipway employs 225, British Shipbuilders employs 100 people at the Benton house headquarters and Tyne Dock Engineering employs 75.

It is clear, therefore, that almost 20,000 people in Tyne and Wear are employed directly by British Shipbuilders or by the shipbuilding and ship repairing industry. That is only direct employment. Even more significant are the jobs that are generated by large purchases of goods and services from local suppliers. It has been estimated that for every job in British shipyards there are three indirect jobs in sub-contracted and servicing industries. If we include those indirect jobs, the significance of shipbuilding to local employment is clear.

There have recently been considerable job losses in the shipbuilding industry in Tyne and Wear. They have been a significant factor in the ever increasing rate of unemployment in the county. The current unemployment rates in Tyne and Wear, as at January 1983, are as follows. In Gateshead, 13,217 men are unemployed, in Newcastle, 18,432 men are unemployed, in North Tyneside, 10,592 men are unemployed, in South Tyneside, 11,134 men are unemployed and in Sunderland, 19,730 men are unemployed. That gives a total of 73,105 men who are unemployed. I am not being sexist. I speak only of male unemployment because that is the relevant figure when we are discussing the shipbuilding and ship repairing industry. Indeed, 22.4 per cent. of men in Tyne and Wear are unemployed. That is one of the highest rates in the country.

Since vesting day in 1977, British Shipbuilders has cut almost 8,000 jobs in the county, the most recent being the 1,200 jobs that were lost at Tyne Shiprepair. A further 1,600 redundancies are being sought—at Swan Hunter, 960; Sunderland Shipbuilders, 415; Austin and Pickersgill, 200; Clelands, 30; and Wallsend Slipway 11. Those redundances have already been announced and have nothing to do with the questions that my right hon. Friend the Leader of the Opposition put to the Leader of the House earlier today when he asked for the Secretary of State to make a statement on the proposed 9,000 to 17,000 redundances that are being talked about in the industry.

Those proposals come extremely hard to the work force, which in recent times has increased productivity by greater flexibility and improved techniques. It seems likely that the redundancies sought by British Shipbuilders will be achieved not only by voluntary redundancies but by compulsory redundancy procedures, which will contravene the Blackpool agreement that was signed on the reconstruction of the industry in 1979 by the management and the shipbuilding unions. There appears to be no guarantee that the latest proposals represent a final cut in manpower. Further redundancies may be sought in the light of the adverse market conditions.

While there is a tendency to regard individual proposals for job reductions in isolation, it must be recognised that the continuation of the current slimming-down process will do untold damage to the long-term capabilities of the Tyne and Wear yards. International shipping experts predict that there will be an increased demand for new ships in the next few years and it is important for local and national economies that resources should be there so that we can compete and secure orders when the upturn comes.

The spending power of the 20,000 shipbuilding workers and their families in Tyne and Wear is considerable and any significant loss in employment over the years will have a devastating effect on businesses. Since the campaign "Save our shipyards" began in Tyne and Wear I have had letters from shopkeepers, tailors and various organisations that are worried about the effect that further unemployment will have on their businesses. It will also have a tremendous effect on employment in the riverside communities. A recent survey of the Tyneside shipbuilding areas showed that shipbuilding accounted for 44 per cent. of male unemployment in Wallsend; 18 per cent. in South Shields; 16 per cent. in Jarrow and Hebburn; and 12 per cent. in North Shields. I am talking not about commuters who travel to the area with pin-stripe trousers, brollies and bowler hats but about people who live within sight of the shipyard gate. Two surveys that were carried out recently showed that in the Wallsend yard 62 per cent. of the work force either lived in Wallsend or the towns adjacent. At the Austin and Pickersgill, Southwick yard 37 per cent. of the work force lived within one mile of the yard and only 1.5 per cent. lived more than five miles away. So we are talking about the closing down of shipyards affecting closely knit communities that are like pit villages and mining communities.

The work force in the shipbuilding industry to a large extent consists of highly skilled men whose skills are specific and of limited value outside their industry. That means that workers who contribute so much to shipbuilding, once made redundant, prove difficult to redeploy. A special survey of redundancies at Swan Hunter in 1979 showed that 83 per cent. of those made redundant have not found employment after a year. The results were far worse than for similar redundancies at the same time in other industries. There are currently 5,000 former shipyard workers in the Tyne and Wear area who are out of work with no hope at all of getting a job.

In the past, shipbuilding has been a valuable source of apprenticeships for local youth and further contract in the industry are a serious threat to them. With the current high level of youth unemployment in the area we can ill afford to lose such apprenticeships.

Much has been achieved by the shipbuilding and repair industries over recent years at great cost to the work force. We must not now throw all that away because of the world recession. Since nationalisation the shipyards have experienced a major restructuring at the cost of over 25,000 jobs. The work force made great sacrifices to produce slimmer, more efficient and competitive British shipyards. Much has been achieved in industrial relations and productivity. There were 182 wage bargaining unions at the time of nationalisation and they have been slimmed down to one for the manual workers and one for the staff workers. Since nationalisation, when the men realised that at last they had something to contribute to the industry, pay rises below the rate of inflation have been accepted. Indeed, shipbuilding workers have dropped from third in the wages league to 19th, and this year they have been told by British Shipbuilders that there will be no increase at all.

I accept that £600 million has been invested in the shipbuilding industry since nationalisation. The Minister will probably say that that is a tremendous amount. However, one must compare that with the fact that last year Japan invested £626 million in its seven shipyards and Korea is investing £400 million a year. The British shipbuilding industry must compete against such yards with a high capital investment. Failure to support our yards at this time will be to waste the good will, investment and co-operation of the trade unions since nationalisation.

Britain is a major trading nation and as such depends heavily on its merchant fleet, which carries 44 per cent. of its seaborne trade. Therefore, maintenance of the fleet is essential not only for strategic reasons but for our balance of payments. In 1981 merchandise exports were valued at £51 billion and imports at £48 billion. As well as carrying the United Kingdom trade our shipping industry makes a valuable contribution to invisible earnings by exporting its services. In 1981 an invisible earnings credit of £3.9 million was generated by our merchant fleet but that has been on the decline for a considerable time. In the past seven years the merchant fleet has fallen from 1,614 ships to under 900 ships. For an island nation that is an alarming prospect.

I was present at the Adjournment debate that was initiated by my hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott) yesterday. I was disgusted at the arrogant attitude of the Under-Secretary of State for Trade. If our trade and merchant fleet are in the hands of such people, God help us in the future.

When we talk about investment and competition between the Korean, Japanese and other shipyards we must remember that British Shipbuilders never had much investment when it was in private hands. British Shipbuilders was nationalised because it was failing in private hands. A survey that was carried out in the 1970s showed that for every British shipbuilding worker the assets were £825 compared with over £1,000 in Germany; £1,200 in Italy; £1,800 in Sweden and £2,800 in Japan. That is the sort of competition that the British shipyard workers are up against. Many Governments are supporting not only their shipbuilding industry but their shipping industry. Lloyd's List of Wednesday 16 February says that New Zealand is set to toughen up its shipping laws and that it has hinted that it would help the nation's shipowners in international trade by extending export incentives that are currently available to other industries.

Nowhere does that Lloyd's List article state that the Government intend to introduce ship credit guarantees. At a time of world recession, other nations are at least trying to prop up their shipping and shipbuilding industries. The Government say that we must have open and fair competition. That was ably summed up by Sir Robert Atkinson, the chairman of British Shipbuilders, when he said that we fight to the Marquess of Queensberry rules when everyone else is involved in all-in wrestling. It is nonsense for the Government to say that there can be no protection for our shipping and shipbuilding industries because we are competing in an open market.

Even in Europe our shipping is unfairly penalised. France, Italy, Spain and Sweden give better credit facilities and more attractive packages to shipowners. I do, however, have some complaints about British shipowners. It is about time that they showed some patriotism and placed orders in this country. In answer to a question in the European Parliament, it was discovered that Belgium orders 94.6 per cent. of ships in its own shipyards; France, 91.8 per cent.; Italy, 99.4 per cent.; but the United Kingdom, only 47 per cent. British shipowners have the worst record for ordering ships in home yards, and they purchased only 40 per cent. in United Kingdom yards in 1981.

United Kingdom orders that were not placed with home yards did not go to the European Community but went mainly to the Far East. One of the largest cruise liners ever to be built, worth £90 million, was ordered in Finland. When my right hon. Friend the Member for Salford, West (Mr. Orme) asked the Prime Minister why that liner could not be built in Harland and Wolff or Swan Hunter, he was told that there would be insufficient finishing trades to build the liner on the river Tyne. I have never heard such nonsense in my life, considering that 5,000 unemployed British shipyard workers are kicking their heels on street corners.

I do not want to say too much about the Atlantic Conveyor, which was sunk in the Falklands. Lord Matthews of Cunard, through his newspapers, told the British people during the Falklands conflict that they should be patriotic, but as soon as he received his £10 million insurance settlement he decided that the new ship would be built in South Korea. It is about time that British shipowners were a bit more patriotic, bought British and gave jobs to people who helped them so much in years of need.

The chairman of British Shipbuilders, Sir Robert Atkinson, complained bitterly to the Secretary of State for Industry about the CEGB order for a cable-laying ship going to South Korea. That is another example of a nationalised industry ordering ships outside this country. That is an absolute disgrace in view of the capacity available here. British Shipbuilders has one of the best records on ordering and buying British. In 1981, out of £550 million that it spent, 94 per cent. of the orders went to British and British-based industries. British Steel was one of the major recipients of those orders.

I was annoyed when on Tuesday 15 February The Times published an article by Barrie Clement entitled "BSC is bypassing own ships". It said: Foreign ships are being chartered by the British Steel Corporation while three of four of its own British-crewed vessels are laid up. Of the foreign vessels on charter, two are Norwegian, one of which sails under the Panamanian flag; another is French; two are registered in Hong Kong and one is German-owned but registered in Liberia. That is how other nationalised industries behave, when British Shipbuilders is trying its best to buy British.

Mr. John Evans (Newton)

Does my hon. Friend agree that that catalogue casts considerable doubt on the Prime Minister's campaign to buy British? If even our nationalised industries ignore the Prime Minister's request to buy British, does not that suggest that her campaign is merely a facade?

Mr. Dixon

I entirely agree with my hon. Friend, and nothing made a bigger mockery of that than the Atlantic Conveyor order. However, all the arguments from the Opposition and the trade unions, as well as public pressure, persuaded Lord Matthews and the Government to change their minds and prevented that order going to South Korea.

I have spent a long time discussing the implications of further unemployment and redundancies in the shipbuilding, ship repairing and related industries in Tyne and Wear, and especially in my constituency of Jarrow. I appreciate that we are in a world recession. I also appreciate that many shipowners must run their ships on freight rates that barely cover fuel and crew costs. However, this is only a short-term problem, and we require some short-term assistance for both the shipbuilding and shipping industries.

My hon. Friend the Member for Newton said that the Prime Minister had asked people to buy British, and I remarked that the British Steel Corporation was chartering foreign ships when its own ships were laid up. Had the former chairman of the BSC, who has now moved to the mining industry at an enormous fee, been employed in America, he would not have been able to do that under the Jones Act 1920. He would have been unable to carry out the practice that he initiated in the BSC of chartering foreign ships.

Tyne and Wear is asking for the reintroduction of a 40 per cent. investment allowance for the purchase of new ships from British yards and for major refurbishment of British shipping. The General Council of British Shipping has also called for financial support to allow British Shipbuilders and the ship repair industry to compete on equal terms with foreign competitors.

No one can tell me that the South Koreans, in spite of their low wages and long working hours, can tender such low prices. It means that if British shipbuilding workers accepted no wages at all, they would still be unable to compete with South Korean prices. No one can tell me that the South Korean Government are not supporting their industry.

The same thing will happen to shipping as happened to the motor cycle industry. We shall have no shipbuilding capacity at all and shall have to rely completely on foreign companies to provide our ships.

Yesterday, Tyne and Wear county council met the Secretary of State for Industry. At the beginning of my speech I complained that the Secretary of State for Industry had not once stood at the Dispatch Box in the past few months to talk about British shipbuilding, despite the major build-up that we had not so long ago and the recession. He met Tyne and Wear county council yesterday because of the Darlington by-election. He spoke in support of the Tory candidate at Darlington, and Tyne and Wear county councillors went to the meeting and told him that he should meet a deputation because of the situation. The right hon. Gentleman did not have the guts to refuse at the public meeting. Had it not been for that, the county council would not have met the Secretary of State and would probably have met the Under-Secretary of State or the Minister responsible in Committee for the British Shipbuilders Bill.

We also need a scrap-and-build scheme. We have talked about it for years. In 1977 the EC and Commissioner Davignon talked about it. In 1979 there was a report, yet people are still only talking about it. It is about time that Britain decided unilaterally to have a scrap-and-build scheme so that we can support our fleet and our shipbuilding industry. The Minister talks about article 5 of the fifth directive on shipbuilding. Article 4 says: Rescue aid intended to maintain a shipbuilding, ship conversion or ship-repair undertaking, pending a definitive solution of the problems confronting the undertakings concerned in order to deal with acute social problems and the regional effect which may arise, may be considered compatible with the Common Market under this directive. It is no good the Minister saying that we cannot aid our shipbuilding industry in isolation. Article 4 gives the Government the power to do that and it is about time that they did something.

The Tyne and Wear deputation put several proposals to the Secretary of State yesterday. There is considerable potential in the production of smaller specialist vessels. The types of vessel considered suitable are fishing and fishery protection vessels, and geological and hydrographical ships and tugs. They are medium to high technology vessels, which require considerable expertise in areas in which the United Kingdom is among the world leaders. If the Government gave some help, there could be a major export boom. It has also been suggested that in the short term, if the Government felt inclined to help areas such as Tyne and Wear, they could declare both sides of the river Tyne and the river Wear enterprise zones—although I have my reservations about them—which would free British Shipbuilders from paying rates and would not impose any burden on the already hard-pressed local authorities.

I may have spoken for too long, but in the letter that I received last night from Mr. Speaker's office I was told that I could speak until noon. However, in conclusion, I say that the Government must help areas such as Tyne and Wear, where unemployment is already far too high. Those areas rely on shipbuilding as a major manufacturing 'industry. Indeed, 95,000 people work in manufacturing industry and, of those, 20,000 are employed in shipbuilding. Therefore, 20 per cent. of those employed in manufacturing are employed in shipbuilding. The industry offers predominantly male employment. If the Government do not take action, they will be responsible for the industrial economic and social rape of our area.

11.44 am
The Under-Secretary of State for Industry (Mr. John Butcher)

I fully understand the motivation and feelings of the hon. Member for Jarrow (Mr. Dixon). He has put up a pugnacious defence of his constituents' interests, of the shipbuilding industry and, in particular, of Tyne and Wear. I visited that area about two weeks ago, not for by-election purposes, but purely on Department of Industry business. I am glad that the hon. Member has raised this issue. I welcome the opportunity to make it clear to the House that the Government are keenly aware of the deep concern in the Tyne and Wear area about the prospects for the shipbuilding industry.

My right hon. Friend the Secretary of State for Industry met representatives of the Tyne and Wear county council—and of local unions—on 29 March to discuss this whole issue. They emphasised the point that the area is heavily dependent on shipbuilding and shiprepairing. Fifteen per cent. of the local working population are directly employed in these industries. Local supplier industries depend on them, too. The area has already suffered substantial job losses in shipbuilding and shiprepairing. The round of redundancies announced by British Shipbuilders in January fell heavily on the area and added to already very high levels of unemployment.

Shipbuilding, like any other industry, cannot be isolated from the effects of deep recession in its markets—and markets for most of British Shipbuilders' products are, as the chairman, Sir Robert Atkinson, has been stressing for some time, quite appalling. The shiprepair market has been grim for several years. The merchant shipbuilding market has never really recovered from the slump in orders which started in 1973. At the bottom of the last recession in 1978 new world orders were equivalent only to about a quarter of then available capacity. The market improved substantially in 1979 and 1980, but from a very low base.

The boom in bulk carriers orders in late 1980 and early 1981 brought many orders to Tyne and Wear yards. But the boom burst and with the slump in world trade the world shipbuilding market faltered in 1981 and slumped again last year. The level of new orders was equivalent to around half present world capacity. Scrapping rates have more than doubled since 1980. The amount of tonnage in lay-up has increased seven to tenfold and freight rates have gone through the floor. With the overhang of so much spare shipping capacity it is likely that the market for new ships will be very difficult for some time to come, even though world trade is expected to pick up again shortly.

Against that background, it is not surprising that Tyne and Wear should have been hit hard over the past five or six years. The area has two of British Shipbuilders' main merchant yards to which the hon. Gentleman referred—Austin and Pickersgill and Sunderland Shipbuilders—a small merchant yard, Clelands, the mixed yard, Swan Hunter, and a marine engine building works. There has not been the work available to support an industry of the size that British Shipbuilders took over in 1977. Restructuring was inevitable. If BS cannot win enough orders to maintain order books, it has to be for the corporation's commercial judgment to adjust capacity to meet demand.

Although the overall picture for shipbuilding in the area has been bleak, there have been some recent successes. Only last week Austin and Pickersgill announced that it had won an order for two cargo-carrying liners from Ethiopia. Just before Christmas Swan Hunter received orders for two frigates Worth £250 million as part of the package of Falklands replacement ships. I join the hon. Member for Jarrow in commending the excellent work that the local ship repairers and workers put in during those very difficult days at the time of and immediately after the Falklands crisis.

In Sunderland, British Shipbuilders has also won a contract to supply engines for the new Birmingham power station. In current market conditions British Shipbuilders' new merchant orders have been won against acute foreign competition and with considerable support from the Government. Opposition Members are curiously silent about the support that the Government have given to the industry. Our first actions on coming into office were to ensure the continuation of the intervention fund and of the shipbuilding redundancy payments scheme. Both those schemes were on the point of lapsing. More recently, we have significantly increased the value of the redundancy payments available.

Mr. Frederick Willey (Sunderland, North)

We very much appreciate the aid that was given by the Government—whom we met some months ago—for the Ethiopian orders. However, can the hon. Gentleman say whether any progress has been made on the Mexican orders, which are crucial to Sunderland shipbuilders?

Mr. Butcher

I should be delighted to deal with that question. I appreciate the concern that many hon. Members have about the method and the support that is given through my hon. Friends in the Department of Trade. They give considerable assistance, particularly in regard to orders that we hope to obtain from Third world countries and the developing countries. I shall deal with the right hon. Gentleman's point and hope to be in touch with him as soon as possible.

As I was saying, the Labour party has made great play of the support that it would give to shipbuilding should it be returned to office. It says that it would increase investment in the industry, but what is its record? When the Labour party left office, capital investment in British Shipbuilders was at a very low level—little more than care and maintenance and finishing off capital projects that were started before the yards were vested in the public corporation.

In contrast, in 1981–82, under the Conservative Government, capital investment doubled. In the current year—the year that is about to end—it has again increased significantly. For 1983–84 we have approved a higher external financing limit which accommodates capital expenditure of £90 million. That is a fourfold increase on the levels of four years ago. That level of expenditure compares favourably with the frequently quoted level of expenditure undertaken in. Japan. Japan is believed to be undertaking investment of £600 million, but the Japanese industry is, of course, significantly larger than ours.

Those involved in the industry must bear in mind, during the current pay negotiations, that finance for capital and for wages come from the same pot. The more restrained the wage demands, the more the industry can invest in its future.

The Labour party says that it will encourage the public sector to expand and diversify and give it freedom to raise funds on the capital markets. The reality is that it is doing its best to damage the corporation's ability to respond flexibly to the market, and to draw on all possible resources, by opposing the measures in the current British Shipbuilders Bill. The Bill will enable British Shipbuilders to draw on the resources of the private sector and to enter into joint ventures, but the Labour party is threatening to break up any joint ventures and to renationalise. I do not believe that the Labour party's record allows it to lecture the Government in the strident terms that have been deployed, not only in this debate, but in previous debates.

In the current thin shipbuilding market, and with acute competition for scarce orders, there has inevitably been criticism that British aid does not match what is offered by our foreign competitors. It is often asserted that foreign competition—particularly from Japan and Korea—is unfair. While in some countries—for example, Belgium and Denmark—shipbuilding credit schemes are more favourable than ours, their credit, unlike ours, is open to their ship owners whether they build at home or abroad. They do not, as we do, give production subsidies as well. In relation to the combined value of credit and production subsidies in the major shipbuilding countries, the United Kingdom is in about the middle of the league.

The Governments of Korea and Japan help their industries, as do the Governments of the United Kingdom and other shipbuilding countries. Efforts are continuing in the OECD working party on shipbuilding to bring about concerted reductions in subsidies worldwide. Japan and Korea have substantial advantages in productivity. BS has estimated that Japanese productivity is between two and two-and-a-half times greater than ours in the United Kingdom. I know that the corporation is making strenuous efforts to bridge that gap, but, at a time when costs and prices are being cut to the bone, that factor must have a big effect.

I congratulate BS and the work force on the very positive attitude they are taking and on the great strides they are now making in productivity. I particularly commend to the House the investment programme that BS is making in computer-aided design and manufacture. We endorse and support it, because it is one of the major factors that will help BS to compete in delivery and lead times, which are important factors. We have to be concerned not only with price but with being able to respond flexibly to new orders. We believe that investment in that area will bring significant benefits to BS.

We recognise that support for the industry, however large, cannot insulate it from the market place, and that hardship has arisen in the north-east region. For that reason we have provided substantial financial assistance to the north-east. As a West Midlander, it is with somewhat mixed feelings that I say that under this Government the north-east has received over £1.7 billion of aid. That figure does not include assistance to British Shipbuilders and the British Steel Corporation; it does not include Manpower Services Commission expenditure and a large range of other forms of Government expenditure. The whole of the Tyne and Wear area is a special development area, where the highest level of regional assistance is available.

The future of the north-east region must lie in widening the industrial base and getting it away from an overdependence on traditional industries. We are not obsessed with the new industries. We want to use the new technologies and to see their application in the established and existing industries, to help them to become more competitive.

I am glad that new growth industries are already well established, with, for example, over 120 firms employing 12,000 people in electronics. We shall also help here by continuing to encourage, through the support for the innovation programme, the development and application of new technology.

The Government share the very deep concern of the people of Tyne and Wear about the plight of the shipbuilding industry. We have supported the industry massively already, and will continue to do so. We have recognised the uncertainty facing the industry and have increased British Shipbuilders' external financing limit for 1983–84 to £160 million from this year's £122 million.

The Government have said—as have the Minister of State and the Secretary of State—that merchant shipping in the United Kingdom will continue to need support for the foreseeable future. The Government are not sitting back. We have not been dispassionate or coldhearted in the manner in which we have reviewed the needs of the shipbuilding industry.

The hon. Member for Jarrow said that he was most concerned about people on the scrapheap. So are the Government. It is unfortunate that there is not time today to discuss other aspects of the issue. It is necessary to look at the schemes by which people can be retrained—and retrained again, if need be. We can restore some flexibility to the job markets in the north-east and utilise the skills available in the north-east.

Mr. Dixon

The Minister talks about retraining people from the shipbuilding industry, but we live in an island in a world in which seven-eighths of the surface is covered by water. We rely on 98 per cent. of our trade—by weight—being carried by ships. What is the point of retraining shipyard workers? We require a shipbuilding industry, just as we require a shipping industry. There is no point in retraining shipbuilding workers so that they can produce plastic knobs. We shall require ships in the future, and shipbuilders to build and maintain them. We should be retaining them, not retraining them.

Mr. Butcher

The hon. Gentleman's point is well taken. I thought that I had shown that the Government regard the continuing retention of shipbuilding capacity as a priority. We want it to be competitive and balanced. We want it to be able to build warships and merchant ships, and to re-equip and refurbish them. All those elements of the shipbuilding industry are required. My hon. Friend the Minister of State and my right hon. Friend in the Department of Industry, as I mentioned earlier, have made very strong statements in this regard, and I hope that it is not a point at issue.

We appreciate that we shall need the capability to which the hon. Gentleman referred. We cannot opt out. I hope that he will accept that there has to be retraining even within the shipbuilding industry, and that there has to be flexibility in the labour market. We are looking for flexibility and for more dynamism in the job market. We cannot always do what our grandfathers did. I fully appreciate the loyalty that exists within families and the pride in the fact that skills continue to go from father to son, but that cannot always happen. Although we all hold the industry—and indeed the community in the northeast—in the very greatest affection, the people there must also look to the developments of the future, as I am sure they are already trying to do.

For the reasons that I have given, I say that the Government are not sitting back. We have a realistic and flexible approach. The shipbuilding industry has benefited from a number of the measures that we have brought into being. We hope to see a successful shipbuilding industry. We hope that Sir Robert Atkinson will do his very best to ensure that we have a productive and competitive shipbuilding industry.