British Shipbuilders (Borrowing Powers) Bill

HC Deb 01 November 1983 vol 47 cc750-824

Order for Second Reading read.

4.4 pm

Mr. Don Dixon (Jarrow)

On a point of order, Mr. Speaker. Because of the critical condition of the shipbuilding industry and the probability that next week there will be a strike over the men who are locking themselves in the yards, is it not an insult to the House that the Secretary of State for Trade and Industry is not here in person to present the Bill, which is totally irrelevant to the problems of the shipbuilding industry? If we cannot have the Secretary of State to present the Bill, can we not at least have the organ grinder present to listen to the comments that my right hon. and hon. Friends will make about British Shipbuilders?

Mr. Speaker

I cannot help the hon. Gentleman, because I am not responsible for who speaks from the Government Front Bench.

4.5 pm

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

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

Before I begin, may I welcome the right hon. Member for Bethnal Green and Stepney (Mr. Shore) to our industrial debates. The right hon. Gentleman always speaks with authority and passion and we very much look forward to his contributions to our debates. May I also welcome the hon. Member for Glasgow, Garscadden (Mr. Dewar) and say that we look forward equally to his contribution to the debate today.

I wish, of course, to explain the purpose of the Bill and I should also, in view of the serious position faced by British shipbuilding, like to make some comments about the market. Those comments will, I think, be of interest to the House — comments about individual yards and contracts and also about the steps that we propose to take within the European Community.

The purpose of the Bill is to increase the limits on British Shipbuilders' access to external finance. The Bill is permissive in the sense that it gives legislative cover for the future provision of finance. The limit on British Shipbuilders' external finance was set in the Aircraft and Shipbuilding Industries Act 1977 at £200 million. This limit has been increased by two successive borrowing Acts and by statutory order with the approval of the House to the present limit of £800 million.

When I sought the approval of the House to increase the previous limit of £700 million to £800 million by statutory instrument in July of this year, I told the House that this exhausted the provision under current legislation and that we planned to introduce new legislation this Session. The purpose of the Bill is therefore, as anticipated, to make provision for the limit to be raised, and to be raised substantially. I cannot agree with the hon. Member for Jarrow (Mr. Dixon) that it is irrelevant to the needs of British Shipbuilders.

The new limit will be £1 billion, and the Bill also makes provision for the limit to be raised to a maximum of £1.2 billion by successive steps of up to £100 million with the approval of the House. The Bill will permit an increase of up to 50 per cent. in British Shipbuilders' so-called borrowing limit. I say "so-called borrowing limit" because the last time I introduced an order under legislation one Opposition Member stood up and asked, "What are the Government doing? All they are doing is enabling British Shipbuilders to borrow more money at usurious rates of interest."

The term "borrowing powers" is something of a misnomer, because the Bill deals with external finance — grants from the Government. That is what the legislation is about and the money provided by the legislation is provided almost in the form of public dividend capital. A small amount of Government finance —a very small amount—is also being made available in the form of national loans fund money to finance one particular project, about which I shall tell the House in more detail.

British Shipbuilders also has the power to borrow from commercial sources, but again that is a small part of the total finance that is the subject of the Bill.

Other finance provided to British Shipbuilders is in the form of the intervention fund. It does not always seem to be appreciated in the House that the intervention fund is the device by which the Government make available a subsidy on practically every order that British Shipbuilders wins—a subsidy of 15 to 17 per cent. This legislation does not include Government expenditure for shipbuilding redundancy payment schemes.

An increase in British Shipbuilders' access to external finance is necessary because the corporation is approaching the limit of the external finance that has been authorised. Cumulative finance authorised by Parliament stands at £681 million. The provision that we are now discussing will be necessary to cover British Shipbuilders' current and planned external financing.

Successive increases in the external finance made available by the Government to British Shipbuilders reflect two things: first, the continued support that the Government have given to the industry; and, secondly, the losses that the industry has made. Taking into account not only the financial provision covered by the Bill but the other sources of finance that I have mentioned, the industry has received about £840 million since we came to office in 1979. The vast majority of that £840 million has gone into merchant shipbuilding. It is an enormous sum of money by any standards, and an enormous sum of money for a group of yards that have employed, on average, 27,000 men over the past five years.

That £840 million is not the whole story on Government support. Since 1979 we have placed substantial naval orders—33 warships valued at £1.9 billion have been ordered since we came to office, the vast majority of which have been at British Shipbuilders' yards. In the past year alone, six surface ships and one submarine valued at £835 million have been ordered from British Shipbuilders' yards. In addition, there has also been a continuing flow of public sector orders into British Shipbuilders. There are currently six vessels being built at British Shipbuilders' yards, valued at around £80 million, which have been ordered by present or former public sector bodies.

A considerable amount of Government support has also gone to fund capital investment. British Shipbuilders' investment has doubled since we came to office in 1979. Again, by any standard that is an impressive record. No private sector company making losses of over £100 million would be willing or able to invest £90 million, the pinned total British Shipbuilders' investment for this year. We are doing that to try to ensure that British Shipbuilders' facilities are brought up to the standard that is needed if the corporation is ever to have any chance of being internationally competitive.

Mr. Dick Douglas (Dunfermline, West)

The Minister is enunciating, particularly on the defence side, what a prudent Government would do. Is it not a fact that the Government praised our maritime resources at the time of the Falklands and that if we had not had good foresight we should never have been able to mount the Falklands campaign? The tragedy is that the Government are eroding our capacity, in merchant and naval terms, to continue to be a major maritime power. Will the hon. Gentleman make it plain that we intend being in merchant as well as defence shipbuilding for all time?

Mr. Lamont

I clearly separated defence spending from aid to merchant shipbuilding and explained that a huge proportion of the £840 million had gone to merchant shipbuilding. That is a large amount of support for an industry of that size. There are many industries in this country of a comparable size that do not receive any support from the taxpayer. All that finance adds to the pressure on taxation and interest rates. I answer the hon. Gentleman's question by saying that we intend to support merchant shipbuilding. We have always made that clear.

Mr. Harry Cowans (Tyne Bridge)

rose—

Mr. Lamont

I hope that the hon. Gentleman will permit me to continue for a while without interruption. I have a lot to say to the House.

An important part of British Shipbuilders' current capital programme is the modernisation of the facilities at the Vickers yard at Barrow. I announced our approval of this project to the House on 17 November last year. I am now able to give further details of the project and the means by which it will be funded.

The main part of the project is a covered construction hall to be built on land reclaimed from one of the docks in the Barrow docks. The hall will be served by a shiplift for moving submarines from the hall into the water. The complex will enable the construction and outfitting of up to four submarines, either conventional or nuclear, to take place simultaneously under one roof and on a level site. It is an important point that the facility will be suitable not just for nuclear submarines but for other submarines and surface ships.

The project will take about five years to complete and will cost about £230 million. The cost will he met through a mix of public dividend capital and loans from the national loans fund. The funding will be in the proportion of two-thirds public dividend capital to one-third loan. The Secretary of State for Defence will also be making a loan of £25 million on the same terms as the NLF towards the cost of the project.

The finance will be advanced to British Shipbuilders, which will pass it on, on the same terms, to Vickers. In the same way, Vickers will be responsible for servicing the loan through BS. Vickers will also remunerate the public dividend capital element of the funding. The rate at which the PDC will be remunerated will be decided by the Secretary of State, with the consent of the Treasury, taking into account Vickers profits arising on contracts and the improvements in productivity arising from the project itself. The remuneration of the PDC may be retained by BS, in which case it will be taken into account when setting the corporation's external finance limit each year. This will be by far the largest project undertaken by BS since nationalisation and represents a massive financial commitment by the Government.

Mr. Peter Shore (Bethnal Green and Stepney)

It certainly is a major capital project, but will the Minister relate it more clearly to the measure that we are discussing? How does the increase in expenditure which is involved in this project relate to the Government's authorisation for increased borrowing capacity, which is the subject of today's deliberations and which covers, initially, about £200 million?

Mr. Lamont

I explained that injections of public dividend capital into British Shipbuilders are part of what is called the borrowing limit. The public dividend capital put in will count towards that, so it is part of it.

Far too much of the finance that has been made available to British Shipbuilders has been drained away from much-needed capital investment into the continued underpinning of British Shipbuilders' poor performance. BS has performed poorly for a number of years; it has made losses every year since its inception. It is not surprising therefore that employment in the industry has, regrettably, contracted by about 25 per cent. since nationalisation.

After a short period when trading losses seemed to be reducing, they rose again in 1982–83 to the appalling total of £117 million. It is important to appreciate that those losses were not the consequence of the deterioration in the market; they largely reflected losses on contracts which were taken some years previously. It is public knowledge that British Shipbuilders managed to lose £94 million on only four contracts at Scott Lithgow and Swan Hunter.

Those total losses conceal a wide variation in the performance of individual parts of British Shipbuilders. it is public knowledge that on merchant shipbuilding the corporation lost about £85 million, and that on offshore work it lost £77 million. The only part of the corporation that has been consistently profitable has been the warship side, which recorded a profit of £55 million in 1982–83.

Mr. Cowans

It is ironic—perhaps the Minister will comment on this—that he should claim so much for the naval side of British Shipbuilders when that is the very side which the Government are seeking to get rid of. If their privatisation policy is successful, what will happen to the rest of British Shipbuilders? Perhaps the hon. Gentleman will also tell us—more important than us, the people working in the industry—how it is possible to increase efficiency in empty yards. If the Government had used their muscle on Cunard we should have had a better shipgbuilding industry and there might then have been an argument in relation to efficiency. These questions must be answered, because they are vital to the industry.

Mr. Lamont

I shall comment on Cunard and shiprepairing. The hon. Gentleman said that I claimed much. I simply stated the facts of the merchant shipbuilding losses and the warship building profits. I made no comment about how easy—

Mr. Cowans

Answer my questions.

Mr. Lamont

As the hon. Member for Dunfermline, West (Mr. Douglas) implied, it may be inevitable that profits are made there, but there are things that we must do and therefore can afford. There are other parts of the industry that are having great difficulty in being internationally competitive, and they are posing enormous problems and burdens for the taxpayer.

Mr. Kenneth Carlisle (Lincoln)

My hon. Friend referred to the large losses being incurred by the merchant shipbuilding side. Do those losses include the intervention fund element, which is substantial for each ship built?

Mr. Lamont

The figures that I gave are after intervention fund.

The record of performance in some of the merchant offshore and ship repair yards has been appalling and we must face that. Productivity at some of the merchant yards has not returned to the level that it was at before nationalisation, despite the amounts of investment. [Interruption.] If the hon. Member for Dunfermline, West wishes to intervene to make a comment, let him do so.

Mr. Douglas

The purpose of my intervention—and I declare an interest in shipbuilding—is to ask how the Government, or even British Shipbuilders, hope to get orders, merchant or otherwise, into yards if we perpetually cry stinking fish. Will the hon. Gentleman say clearly that Britain intends remaining in shipbuilding? We have gone down from one million gross registered tonnes capacity to 400,000 and the intention is to go down to about 200,000. For a major maritime nation, that is ridiculous. Will the hon. Gentleman concede that at least?

Mr. Lamont

We have supported merchant shipbuilding massively. We have a regime of support, both through credit and through the intervention fund, which is comparable with that of most of our competitor countries. We have said that we want to retain a capacity in merchant shipbuilding. I have said that again and again from the Dispatch Box. I am sensitive to the point made by the hon. Member for Dunfermline, West about too much criticism and calls of stinking fish, but there must come a point when we face the facts of our poor performance. For too long, especially from the Opposition Benches, people have not been prepared to face the truth about the performance of our merchant shipbuilding. It has not been a case of inadequate support by the Government. Rather, our performance has not matched that of our competitors.

Mr. Dixon

rose—

Mr. Lamont

I have given way four or five times and I wish to get on.

Mr. Dixon

rose—

Mr. Speaker

Order. I think I heard the Minister say that he would not give way again.

Mr. Dixon

Will the Minister give way on that matter?

Mr. Lamont

No, I will not.

Mr. Dixon

rose—

Mr. Speaker

Order. I am very sorry, but the hon. Gentleman knows the rules. The Minister is adamant.

Mr. Dixon

Will the Minister give way?

Mr. Lamont

I have given way four or five times. I have to say a number of things which the House will wish to hear and it would be for the convenience of the House if I made progress.

The new chairman of British Shipbuilders, Mr. Day, has acknowledged the need to make a massive and sustained improvement in competitiveness. This is at the heart of the strategy that he is developing for the industry. Improvements must be achieved, and why should they not be? There can be no argument about the need for the merchant shipbuilding division of British Shipbuilders to improve its competitiveness. I take extremely seriously the point made by the hon. Member for Dunfermline, West. There are dangers in criticising what has happened and in putting off the customers of British Shipbuilders, but the customers are not stupid or ignorant. They read the newspapers and know the facts. They have read in the newspapers about the Atlantic Conveyor order which, in response to pressure from the House, the Government bent over backwards to help secure for this country by putting in substantial aid. Already that order is running late and is over budget.

The customers of British Shipbuilders have read about Sunderland Shipbuilders losing the floating port order to Harland and Wolff because of strikes. They have read about the major refit of the Canberra for P and O, which was lost because of the inability of Vosper Shiprepairers to guarantee a completion date owing to the threat of industrial action. Customers know those facts. The tragedy is that the facts damage the ability of the good parts of British Shipbuilders, such as Govan which has a better record in meeting the needs of the customer.

British Shipbuilders' repair yards have recently lost some well-publicised refit orders because of the inability to meet the requirements of shipping companies. Every time this happens there is a row in the House. Yet we do not have an emergency debate every time a United Kingdom engineering firm loses an order to an overseas competitor or when British consumers decide to buy more foreign than British cars. The situation for ship repair and shipbuilding is no different from that in a host of other industries where this country has to compete to win orders. The motor industry has shown what can be done. It has massively increased productivity. In the last year it has won back part of the domestic market.

Ship owners in this country would like to place more orders in the United Kingdom but they have not been able to get their requirements met on the delivery and availability of ships. Ship repair and shipbuilding have not adjusted in the same way as the motor industry, for example, to the needs of the international market place.

It has been made clear by Mr. Day that he does not regard ship repair as a mainstream business for British Shipbuilders. In spite of that, British Shipbuilders has shown its willingness to seek ways of securing ship repair jobs by its recent offer to dispose of Tyne Shiprepair to a management buy-out. This offer was made with the full support and encouragement of the Government. I very much hope that the Tyne Shiprepair work force will carefully consider the deal that is on offer, as British Shipbuilders has made it clear that the alternative may be that jobs will be lost. The choice may be between buying out or bowing out.

Some hon. Members have argued in previous debates that the Government should secure orders for the shipbuilding industry by somehow forcing United Kingdom ship owners to buy British. To them I would say, first, that the United Kingdom shipping industry employs about 60,000 people, compared with 17,000 in merchant shipbuilding; secondly, that the shipbuilding industry faces enormous difficulties; and, thirdly, that shipping has to be competitive and must have its ships available when it needs them. It would be wrong to follow policies that would damage shipping and put at risk jobs in a vain and futile attempt to solve the problems of shipbuilding.

More powerfully, how exactly do Opposition Members imagine that such coercion would work? If they think about it, they will realise that the usual prescription of import controls—the siege economy—is not practicable in this industry. It is not like physically preventing car or steel imports to force the United Kingdom consumer to buy British. British ship owners are perfectly free to register their ships under foreign flags if they so wish. Flagging out is the ultimate sanction of the shipping industry to maintain its freedom to buy in the most competitive market.

On the offshore side, the picture is also extremely gloomy. Hon. Members will be aware that Britoil, as it is entitled to do under its contract, has served a notice on Scott Lithgow requiring it to demonstrate within 30 days that it can deliver within 300 days, that is, April 1984, after the contract delivery date. If Scott Lithgow fails to give a satisfactory demonstration, the owner has the right to cancel the contract and demand an immediate refund of the progress payments so far made to the yard, which would be about £40 million.

Although the construction of the rig is seriously delayed and the service of the delay notice reflects the concern of the owners, it is premature to speculate on Scott Lithgow's response. The service of the notice does not mean that the contract has been cancelled. Still less does it mean that the yard is to be closed. There is a variety of possible outcomes depending on the facts and the commercial decisions of the parties. I can assure the House that I am keeping in close touch with developments, but the matter lies primarily with Britoil and Scott Lithgow.

Dr. Norman A. Godman (Greenock and Port Glasgow)

Will the Minister give way?

Mr. Lamont

If the hon. Gentleman really thinks that wise, I shall do so.

Dr. Godman

I am pleased to hear the assurance the Minister has given. The work force at Scott Lithgow readily recognises the critical nature of the negotiations between the customer, Britoil, and Scott Lithgow. May I point out to the Minister that there have been difficulties with the client? The project is some 22 months into construction, yet Scott Lithgow cannot agree with the client the finalised drawings that would allow the project to proceed unimpeded. For my part, having spent many hours of the summer recess at Scott Lithgow, I am confident that the management, staff and work force at the yard can deliver a first class product to Britoil.

Mr. Lamont

I am sure that British Shipbuilclers and Britoil—it is a matter for them—will take heed of what the hon. Gentleman has said. I have no doubt that his remarks will be taken up by others and that they will be taken into consideration. It must be a matter of negotiation between the two parties.

I have talked about the competitiveness of British Shipbuilders, but BS's own suppliers are an important influence on its competitiveness. The House will be aware that Mr. Day has gone on record as saying that BS is looking to its suppliers to sharpen their pencils in an effort to meet international prices, and he was right to do so. I have emphasised that we are not prepared to hamper the shipping industry to solve the problem of British Shipbuilders. Equally, we are not prepared to handicap British Shipbuilders to help inefficient engineering firms.

The Government are only too aware of the extremely depressed state of the merchant shipbuilding market. British Shipbuilders, like other western European shipbuilders, is facing an extremely severe recession. Even the Japanese have been feeling the pinch. In 1982 BS recorded the lowest tonnage of orders that it had ever taken. The order book in 1983 will be even lower. World new orders were the lowest in 1982 since 1978, and the first half of 1983 is little different. Accordingly, as I told the House on 28 July, we are prepared to take exceptional action to help the United Kingdom industry over this difficult period.

First, we applied to the Commission for the approval of an interim extension of the intervention fund. The application was granted and we are now applying for yet a further extension.

Secondly, we have made clear to the Commission our view that the rules governing aid to shipbuilding are not realistic in the present market. There is a need for our industry and for that in Europe to restructure, but if we cannot provide more finance we shall face the total collapse of our industry immediately and not a planned restructure. If that happens, many of our yards will get literally no orders. For that reason we have proposed that we should increase the intensity of the intervention fund. I refer to the percentage by which we subsidise virtually every merchant shipping order. We have proposed that we increase that from its present level of no more than 15 per cent. We have argued that in consequence we must increase the amount of money available through the intervention fund. Both these measures will have to go hand in hand with a proper plan for restructuring.

As I have told the House previously, we are prepared, while pressing our case with the Commission, to consider all specific requests for assistance needed to obtain new orders on a case-by-case basis within the broad framework of the international rules.

As the House knows, the key problem is that the Community—especially the Commission—is committed to the principle of "degressivity" in shipbuilding aids. That is a year-by-year reduction in the level of subsidy. This is a long-standing policy which was followed by the Labour Government when they negotiated the fourth shipbuilding directive in 1978.

We have indicated to the Commission our view of the changed circumstances and we are pressing our case strongly. There are signs that other European countries are facing similar problems and may share our view, but I cannot hold out hope of a quick or easy agreement. We shall neither deserve nor receive sympathy within the Community unless we can demonstrate that the United Kingdom is putting its own house in order. I have said that our approach to the Commission is for a temporary easement. Our long-term aim—it must be the same for European shipbuilding generally — must remain the reduction of subsidy to shipbuilding. It cannot be in Europe's interest to have a pensioner industry in perpetuity. Europe's industry needs to restructure.

As the House knows, BS is currently facing the threat of further industrial action in opposition to its survival plan of a continued wage freeze and substantial restructuring. I am conscious of the dangers of commenting or appearing to intervene on a sensitive industrial relations issue. However, there comes a time when so much has happened that to say nothing seems to show a lack of realism.

I find the attitude that has been adopted both regrettable and extraordinary. Over the years the industry has received massive support from the Government. That support amounts to £840 million. Its very existence depends on a constant flow of cash from the Government. Last year it lost £117 million and it is likely that it will lose a similar amount this year. Everyone in the industry knows that it is facing an order book crisis. The Government are not failing to support the industry, for the truth is that there are not enough orders to be obtained and that a number of yards are about to run out of work. The Government are prepared to take exceptional action to help obtain essential new orders.

In the face of this manifest crisis, the unions response has been to press for a substantial wage increase, to oppose any compulsory redundancies and to back up their demands with the threat of industrial action. A strike or any form of industrial action can damage only the workers themselves, for they will throw away much-needed work. The mere threat of action has turned the Canberra away from its usual refit, and with that and other work will go the jobs of the union's members.

Industrial action at this critical stage would be both tragic and foolish. It would be a disaster for employers. I do not appeal to altruism or patriotism. I appeal to the self-interest of those who work in the industry. A strike would mean the spectacle of men in the most depressed parts of the country throwing away their livelihoods. I hope that Labour Members will use their influence to try to avert this tragedy.

The previous chairman of BS, Sir Robert Atkinson, once described the Scott Lithgow work force as a group of deaf men. I am sure that the 55,000 who work for BS are not deaf. I am sure that they do not want to see the end of British shipbuilding, which would indeed be a tragedy.

It gives me no pleasure to speak as bluntly and bleakly as I have about the industry. However, I think that there comes a time when one has to say these things. I do not believe that the Government can be accused of failing to support the industry. We have done so and we have indicated our intention to continue to do so. We can do that only if all who work in the industry are prepared to back the efforts of the Government and the management and to work together. With that proviso, and in that spirit, I commend the Bill to the House.

4.38 pm

Mr. Peter Shore (Bethnal Green and Stepney)

I thank the Minister of State for his welcome on this occasion. We are having a timely debate in view of the gravity of the situation that faces the shipbuilding industry. I share the view of those who regret the absence of the Secretary of State. I say that not because I feel that the Minister lacks competence, but because the seriousness of the difficulties facing the industry would have been better marked if the Secretary of State had been present to introduce the Bill.

The Bill and the debate are concerned with the future of an industry which is a major employer directly and whose fortunes involve many other jobs in supplying and supporting firms. The industry has a major relevance to the livelihoods of communities, especially along the Tyne, Wear and Clyde rivers. I share the view of some of my right hon. and hon. Friends that the industry has strong connections with national interests and security.

For much of the past decade, the shipbuilding industry has lived with recessions and crises. It faces an intensification of its problems. New orders have been reduced to a trickle and total tonnage under construction and on order has shrunk alarmingly. Last year, British Shipbuilders recorded a loss of over £112 million. Today's news—I am grateful for the Minister's remarks—that Britoil is considering cancelling its £86 million order of a drilling rig with Scott Lithgow will have served to heighten the general sense of crisis and to deepen the mood of pessimism that undoubtedly exists in the industry. We are reminded of these events on the eve of the important talks that British Shipbuilders and the Confederation of Shipbuilding and Engineering Unions are scheduled to hold tomorrow.

The main focus of the debate is the future of British shipbuilding. The essential questions are whether it has a future and, if so, the types of ships and productive capacity that we are seeking to achieve and maintain. What is the Government's commitment to British shipbuilding? What role are the Government prepared to play? The previous Labour Government took over the shipbuilding industry and brought it into public ownership when it was already on the point of collapse. We intended to make a new start, to enlist the full support of the trade unions and their members and management in the revival of the industry, to draw up and adhere to a viable corporate plan, to provide the finance needed for reinvestment and reorganistion and to see the industry through the inevitable initial financial losses.

No one who has studied the industry during the past seven years, including four years of Conservative Government when industrial relations were not happy, can doubt that the unions have played their part in helping to revive the industry. The past four years have seen massive changes in work practices. Many of the old demarcation barriers have been swept away, and there is much greater flexibility in the deployment of the work force. Taking account of the industry's financial problems, the past four years have been a period of prolonged moderation in pay, culminating in a pay freeze that has lasted for 18 months. Shipbuilding workers have seen their position in the wages league drop from fourth to twentieth and the work force, including marine engineering, contract from 87,000 to 62,000. They have seen yard closures and a reduction in capacity from 1 million tonnes per annum to 400,000 to 500,000 tonnes. No one can say that the men have not co-operated or that they have not sought positively to assist in their industry's revival.

The Minister's remarks today will not have helped the mood of the work force. Of course, a balance must be struck between speaking plainly about the industry's problems and damaging the industry by listing and rehearsing the defects that undoubtedly exist in all industries, including shipbuilding. It would not be a bad idea if we heard from Ministers and, perhaps, the industry some record of the industry's achievements. I should like to know how many ships have been delivered on time and how many were delivered before their delivery dates. Such information would provide greater encouragement to the industry and help to improve its reputation.

Despite the men's persistent and protracted efforts, the further deterioration in the industry's fortunes last year —and it is continuing this year—and the management's proposals for dealing with it have led to hopelessness and anger among the work force. This was evidenced when the union negotiators reported to their yards last week on the 12 October negotiations with British Shipbuilders and the men gave their leaders virtually a free hand to take the necessary action to improve management's position. The Government know the issues: the absence of a pay offer for yet another year, apart from a 26-week so-called bonus when inflation will rise to probably 6 per cent. this year; compulsory, as opposed to voluntary, redundancy; and a further reduction in the industry's capacity.

The Labour party wishes ardently for a successful outcome in the interests of the men, the industry and the nation. Mood and morale in the industry are critical. There is not just continuing decline and rapidly dwindling order books, but anxiety about the Government's policy on the industry's future—indeed, survival.

We are aware that a worldwide overcapacity in shipping emerged first in 1974, with the sharp reduction in oil trade and the accompanying slow-down in world trade growth generally. The substantial recovery during the late 1970s was virtually halted by the combined effects of the redoubling of oil prices in 1979 and the introduction of deflationary and monetarist policies in the main countries of the West. Consequently, world trade—this is the key to shipping—grew in 1980 by 2.3 per cent.; in 1981 it was minus 0.7 per cent.; and in 1982 it was minus 2.3 per cent. In 1983 world trade is expected to grow by 1 per cent. That must be seen against a background of world trade which previously grew steadily by between 5 and 10 per cent. per annum. That has intensified the underlying problems.

On any medium or long-term basis, shipbuilding has been, and will be, a growth industry. I remind the House of somewhat happier and more buoyant days when world shipping tonnage more than doubled between 1964 and 1974 from 153 million tonnes to 311 million tonnes. Since then, world tonnage has continued to grow. It is now about 425 million tonnes, including an overhang of about 80 million tonnes of idle laid-up capacity.

Now that the American economy is moving strongly into expansion, we see the first small signs of improvement. I read the verbatim record of the conference between British Shipbuilders and the confederation, which was held on Wednesday 12 October. The new chairman of British Shipbuilders, Mr. Graham Day, said: I think we are already seeing some signs that the shipping market has bottomed out. For example, as at the end of last month for two months in a row the number of vessels laid up worldwide has reduced. Scrapping rates have continued to be at reasonably high levels. On some trades, we are starting to see freight rates firming. If that trend should continue then it is consistent with progressive market recovery for shipbuilders from the middle of next year. The Japanese, who have some considerable authority in making estimates, estimate a build up to a world market level of about 25 million gross registered tonnes by 1990.

In a further statement, Mr. Day acknowledges that the precise mix of demand is uncertain but that recovery, if it takes place, will be due to scrapping, to obsolescence, to hopefully recovery of world trade: and recovery, for example, in the United States of the major bulk commodities of grain and iron ore, in coal and oil, to start to move in increased quantities and, consequently, the things which they help to manufacture. While the prospects as the decade proceeds appear to be rather more hopeful, there is an almost universal view that the next 12 months at least will see no improvement in orders. That is the immediate problem. Shipbuilding has always been cyclical, which is why wise policy has to address itself not simply to today and tomorrow but to the medium term prospect.

Such a policy must have at least four components: first, emergency financial assistance to prevent an unacceptable contraction in United Kingdom shipyard capacity; secondly, a policy to improve the competitiveness of British shipbuilding—and the Minister is right to stress that. The first and foremost factor in competitiveness is the modernisation of the shipyards. Of course, there has been investment in the use of computers in shipbuilding, which puts us in the lead in that area. In the midst of a deep recession, we have greater investment in shipbuilding than we have had for some years. That is due entirely to the fact that it is a publicly owned industry. Where else in manufacturing industry is there investment during the middle of a recession?

What is the future investment programme for British shipbuilding? How does it compare with the programmes of our principal world competitors? How much of the moneys provided by the Bill is earmarked for investment? These are important questions, but, despite my attempt to persuade the Minister to clarify his remarks about the financing of the £230 million project in Barrow, it is not clear how this additional expenditure is to be financed, unless it is through the Bill.

If £230 million is to be financed out of the Bill—the first order allows for an increased tranche of £200 million and a further two of no more than £100 million each— there is not a great deal left for other things, unless we are talking about entirely different time scales. If so, when does the Minister expect to return with another Bill? If £230 million over a four to five-year period is already preempted, when will he return with another Bill, or is this to be the last? We shall see.

Mr. Norman Lamont

The £230 million Vickers investment programme is for a five-year period. We shall see how long the headroom established in the Bill will last, but it will probably be a shorter time scale.

Mr. Shore

I am grateful to the Minister. I am not sure what the profile of the build up of expenditure in Vickers is, but we could find this measure being exhausted relatively soon.

The second factor in efficiency is that of management. I gain the impression at times when listening to Ministers that they think efficiency is almost entirely dependent upon how trade unions and men behave and perform. I have never had the slightest doubt that that is important. The effort that people put into their work makes all the difference, but the organisation, the flow and design of work are management jobs. Some of the major problems in this area have been due to the lack of proper work planning and the frustration, anger, loss and waste that follow. I do not make the opposite error and say that I believe that all British managers do not do their job. That is not so. We have known since the days of the Geddes report—going back some 20 years—that shipbuilding has lacked the input of new methods and management and so on, while—covering those years I mentioned earlier —world shipping was, and probably still is, one of the great growth industries, of which the British share shrank and continued to shrink. We must be clear about that equality of responsibility and, in addition, Government responsibility.

Sir David Price (Eastleigh)

Will the right hon. Gentleman, in fairness, recognise that a ship has a great deal of bought-in content which can be up to 60 per cent. and that, therefore, his strictures apply equally to the suppliers? It has been suggested to me that if the suppliers increased their efficiency—as the right hon. Gentleman seeks—we would be more competitive. That includes everyone from the steel to the compass maker.

Mr. Shore

The hon. Gentleman has made a valid point. That is undoubtedly the case, and one has only to think of the importance of steel. I take the hon. Gentleman's point.

There is a third element of competitiveness which it is appropriate for me to raise, because I used to wear a different hat. It is the fact that our international competitiveness generally has declined by at least 15 per cent. since the Government took office in 1979.

I have not seen separate figures for the international competitiveness of our shipbuilding, but it would be interesting to know how much it has suffered from exchange rate changes and differential inflation during the past four years. No one can say that it is not a major factor. If the loss of competitiveness of British shipbuilding is an average of 15 per cent., it equals the limit of the 15 per cent. intervention fund money that we are apparently allowed under EC law to provide. It is as though the intervention fund had been wiped out for British shipbuilding, because of the loss of international competitiveness that we have sustained.

Lastly, there is pay. That brings us to the Government's major strategy, about which I worry—their attempt to restore competitiveness not by increased investment but by cuts in real income. That policy has not arrested the massive decline in Britain's manufacturing industries during the past four years, which is a tragedy that is recognised on both sides of the House. It is a dead-end policy which will not work.

My third item is the Government's inaction in assisting with orders for British shipyards. The British Merchant Navy is still one of the largest fleets in the world, but we are surely almost unique in the extent to which we place orders for new ships in foreign rather than British yards. In the debate on 19 April 1983, my right hon. Friend the Member for Salford, East (Mr. Orme) cited the fact that during the past five years 56 per cent. of domestic orders had gone overseas. He compared that with West Germany which built 82 per cent. of its ships, Italy 98 per cent., and Japan 100 per cent. Last year even the CEGB was allowed to order a cable-laying vessel from Korea.

As we all know, lack of support for the British shipbuilding industry extends to ship repairing. Far too many of the ships that were mobilised for the Falklands campaign returned home to be refitted not here but in foreign yards. In my view, the behaviour of Cunard, or rather Trafalgar House, has been disgraceful. I should like to know what continuing consultation the Government have with British shipowners to ensure that more orders and a steady flow of orders go to British yards.

I understand that there must be competitiveness in British shipyards, but bringing together the major customer with the major supplier is at least one of the minor planning techniques that even this Government think is still respectable. Let customers and suppliers talk together, interface, as they say, find out what the problems are and see what improvements can be made. I do not know why that has not happened with the shipbuilding and shipping industry in Britain in this period of grave difficulty.

I refer the Minister to the report on British Shipbuilders by the Select Committee on Industry and Trade in the 1981–82 Session. It made a recommendation in paragraph 43 that 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. That would not be a bad idea.

Mr. Derek Conway (Shrewsbury and Atcham)

Bearing in mind that no Labour Members from north-east England are present in the Chamber for this important debate and the right hon. Gentleman's comments about Government support, does he recall the £10 million given from the intervention fund to assist in the Swan Hunter order for the replacement of the Atlantic Conveyor, which meant valuable jobs for north-east England? It is a great pity that Labour Members from that area are not present to hear the right hon. Gentleman recognise the Government's support for that venture.

Mr. Shore

I understand about that order, but the hon. Gentleman should not make such remarks, which he knows are unfair. My hon. Friends have been here, and they will be back. They will be here until the end of the debate, and many will take part in it. Let the hon. Gentleman leave that alone. It is too serious a matter to be dealt with by trying to make points about who is momentarily present in and who is momentarily absent from the Chamber.

There is a great contrast between the two island industrial nations of Britain and Japan. We both have massive merchant fleets. In spite of major reductions, in 1982 the British fleet was still over 22 million tonnes. In 1982, Japan had a fleet of 41 million tonnes. Last year Japan completed over 8 million tonnes of new merchant ships, and the United Kingdom had 435,000 tonnes. It is absurd that we are unable to relate the replacement needs of our merchant fleet to our shipbuilding industry.

National policy ensures that, with naval construction, the Government place orders in British naval yards. In short, the Government rightly believe that our national security as an island nation requires us to sustain naval shipbuilding capacity, but our security also rests upon our merchant fleet. It is dangerous and wrong to allow a situation to develop in which we can no longer rely on our shipyards to maintain the necessary minimum of our merchant fleet.

What we need is a real commitment by the Government that the industry has a future and that they intend to sustain it. There is no such commitment today. On the contrary, it is Government policy to preside over the break up and privatisation of British shipbuilding and to withdraw entirely from ship repairing. In the debate on 18 July the Minister of State said: It is the view of the Government and of the corporation that the company should not remain in ship repairing in the long term. The remarks that the Minister made today about his conversations with the new chairman endorsed his previous statement. I am not sure whether Mr. Day was the chairman then or whether the Minister talked to him earlier, but the Minister endorsed what he told the House in the previous debate.

It helps to explain why so little was done to assist the ship repairing industry with the refitting work following the Falklands campaign.

Mr. Richard Needham (Wiltshire, North)

Is it not right that the previous Labour Government appointed Mr. Day as chairman-designate of British Shipbuilders?

Mr. Shore

I was interested not in Mr. Day's judgment but in the Minister of State's judgment. He made his judgment and statement before Mr. Day was appointed as chairman. I am recalling that to the House as it is a relevant matter for it to consider. Another quotation is more relevant. The Minister told the House in the same debate on 18 July: We have never made any secret of our view that BS's warship building is a prime candidate for privatisation". The Minister of State distinguished between warship building and merchant shipbuilding in the quotation that I gave. He must know that to hive off warship building from merchant shipbuilding in the present circumstances would lead to a major contraction, if not elimination, of our merchant shipbuilding capacity. Last year, according to British Shipbuilders' accounts, warship building made a profit of just on £32 million. Merchant shipbuilding chalked up a trading loss of nearly £56 million and the offshore division a loss of about £78 million. As the Minister said, in what I thought were rather brutal words: If merchant shipbuilding can only survive on the back of warship building, there is very little future for it. I do not agree. While warship building, supported by public purchasing policy, provides a reasonable guarantee of both demand and profitability and therefore supplies a welcome element of stability in an industry that is inevitably subject to major fluctuations, it is not true that over time merchant shipbuilding and offshore building are doomed to continued loss making. Until this last black year, the efforts of those involved in the industry — I include the unions, management and the men — substantially improved the trading accounts. The Minister quoted similar figures. Trading losses were cut to £41 million in 1981 and £20 million in 1982. As the Minister knows, this year virtually all the trading loss of £110 million was accounted for by two expensive items, The first was the loss on the oil rig at Scott Lithgow, a contract that was taken four years ago. That did not reflect the recent improvements in shipyard efficiency. Secondly, at Swan Hunter a structural fault followed a design failure during the construction of a tanker for British Petroleum. It is remarkable that, apart from those two special items, the rest of British shipbuilding was in virtual balance this year.

In the debate on 18 July the Minister of State told the House that British Shipbuilders had submitted a corporate plan, setting out its own views. There were discussions. He said: It is important that our response should be in the context of an over-view of the business. Far too often in the past, we have rushed into short-term measures. We need to take a strategic look at the situation. We have a responsibility to the people inside and outside BS whose jobs depend on BS and to the taxpayer who has already put so much into this industry."—[Official Report, 18 July 1983; Vol 46, c. 132–134.] We want a strategic look and a corporate plan. That is essential. It should be based upon a clear commitment to maintain a viable shipbuilding industry in Britain capable of meeting not only our naval requirements but the demands of our Merchant Navy and the North sea. Unless we have that commitment, I do not believe that there will be an improvement in the morale of those who work in the industry—which is probably the most important factor affecting it at present—and I fear that the moneys for which the House will vote today will be in a lost cause.

5.10 pm

Sir David Price (Eastleigh)

I welcome the intervention of the right hon. Member for Bethnal Green and Stepney (Mr. Shore). We have had several debates in the past 18 months on the fortunes of British Shipbuilders and the shipbuilding industry. Much of what hon. Members may say is in danger of being repetitive and I was pleased to hear the right hon. Gentleman as a new voice. We have witnessed a continuing and unhappy saga in the shipbuilding industry.

The right hon. Gentleman said that he hoped that more talks would take place between British shipbuilding companies and British Shipbuilders. I have been assured on many occasions by the General Council of British Shipping that such discussions do take place. The difficulty is that when they start talking they discover that there is a considerable gap between the prices which British Shipbuilders can offer and those encountered by the British shipping companies around the world.

Another problem concerns the type of craft that British Shipbuilders is prepared to build. I remember our late colleague Mr. Keith Wickenden saying in the House on several occasions that the ferry side of the business must be one of the growth areas for British shipbuilding. Until recently British Shipbuilders, which is our principal shipbuilding concern, was not really interested in giving quotes for such work, but I believe that that position has now changed for the better.

This is yet another debate on the declining fortunes of the British shipbuilding industry. Having heard the views of my hon. Friend the Minister and of the right hon. Gentleman, we must not consider the gloomy position to be purely British. We must recognise that the plight of our shipbuilding industry is shared by those of all the other European shipbuilding countries, so we are not unique in this matter. There may be reasons, common to us all, which we should examine.

To be parochial for a moment, South Hampshire has an involvement in the fortunes of Vosper Thornycroft, which is a firm of warship builders. Since the parliamentary boundary changes to which the right hon. Gentleman referred, the Woolston yard of British Shipbuilders has been in my constituency, but I have always had an interest in that yard. The Vosper Thornycroft yard did well before nationalisation and is still holding its own. About 80 per cent. of that yard's profits come from exports, but unless a naval shipbuilding yard receives orders from its own navy— in our case the Royal Navy—it cannot be a credible exporter of naval vessels. The House must recognise that the major naval powers buy virtually all their ships from their own yards. The market for warships is in the second and third tier countries which cannot sustain their own shipbuilding industries. Such countries are sensitive to the authenticity given to a ship which they may consider purchasing by the exporting country's own navy.

Currently tenders have been put out for two type 22 frigates. I should be abusing the House if I made a commercial for Vosper Thornycroft, but I have total confidence in the objectivity of the Ministry of Defence which I am sure will in no way have its ears bent by a delegation from Merseyside suggesting that Cammell Laird should get the orders. I trust that the tenders will be dealt with on a competitive basis and that social factors will not be a deciding matter. An unemployed platelayer is an unemployed platelayer, in whichever constituency he lives.

The warship division of British Shipbuilders has been steadily in profit, but the merchant shipping side has been losing money. It is fair to say that naval shipbuilders have been getting orders, although not as many or as steadily as they would wish. I have always said in debates on this subject that orders are what matters. The unions, the management and the House must make efforts to assist British Shipbuilders to get more orders. That is really the guts of the matter.

The merchant shipbuilding industry in Europe is exposed to the cold winds of world competition and recession. If anything, the industry is in a worse state now than when we last debated this matter on 19 April. During that debate I said: More orders are urgently needed".—[Official Report, 19 April 1983; Vol. 41, c. 231.] Britain is not in a unique position, because the prospects for the European industry are gloomy. World shipyards have been hit by the recession as their customers, the shipowners and the shipping companies face a glut in capacity brought about by a slump in world trade. In March, 91 million tonnes of shipping were lying idle in the world compared with 55 million tonnes nine months earlier. In such circumstances shipping companies do not regard the purchase of new ships as their top priority. Their top priority is to survive. Competition from yards in the Far East is intense. In March, British Shipbuilders had an estimated £2,700 million worth of work on its order books. That included £1,900 million for warships. Orders for merchant shipping amounted to about £535 million.

Unless shipbuilders get continuity in orders, disruptions occur in the deployment of their labour forces. It is no good having plenty of fitting-out work when the platelayers have nothing to do. The way to keep costs down is to have a continuity of orders. If shipbuilders have orders that peak, costs will rise compared with shipyards having an even work load. The Ministry of Defence seem now to appreciate that fact when placing naval orders. The yards that were below capacity suffer even more when orders are not forthcoming and the House must realise that fact.

There is a constant outcry from British and European shipyards about unfair competition from the Orient. I make no apology for raising this again. I have been accused by my hon. Friend the Minister of State of using emotive words such as "unfair competition", so perhaps it is better to refer to "different rules of competition."

Sir Robert Atkinson made the following validictory remark in the annual report of British Shipbuilders: At this time the merchant vessel cost price gap is about 35 per cent. (ie cost of EEC build compared with Far Eastern selling prices) and this gap must be closed if survival is to be ensured, although Far Eastern selling prices are admitted to be 15/20 per cent. below their costs. When I intervened earlier I said that on some merchant ships the bought-in costs could be up to 60 per cent. That leaves less margin for a yard to reduce its costs.

I know that the Minister has been solicitous in looking at comparative figures. He assures us that the Government are doing as much from our intervention fund as any other European country. I accept that. Nevertheless, the differential remains. I wonder whether that is purely an exception in shipbuilding or whether it is a more fundamental difference between the far eastern countries' approach to industry and manufacture and that of western Europe.

I wish to draw the attention of the House to part of the famous speech by Sir John Hoskyns to the Institute of Directors about how our affairs are managed. This part has not appeared in the press. It is not about the narrow base upon which Cabinets are chosen and their relative amateurism, but about how we in the West will face the competition from the new industrialised countries of the far east.

Sir John said: I believe that we are seeing a field test of two quite different political economies: on one hand, the West—and particularly Western Europe — with heavy welfare spending, elaborate employment laws, increasingly rigid labour markets and deeply entrenched interest groups; on the other, the liberal economies of the NICs, with public spending at around 25 to 30 per cent. of GDP, low taxes, basic welfare provision in cases of real need only, unprivileged trade unions, quite dirigiste policies on education and the support of sunrise industries. Today, technology can transfer almost overnight from the West to these countries with their lower labour and tax costs. It is no good our grumbling about technological sweatshops or comforting ourselves with the thought that these countries do not have democracy on the Westminster model. They have rapidly rising living standards and low unemployment. Democracy costs money, and they will soon have more of it than we do. The world is a socio-economic laboratory, and we had better learn from the experiments being conducted in it. That is pretty hard stuff, but it is relevant to the debate.

In all those circumstances, what can we reasonably expect the Government to do? First, as mentioned by the right hon. Member for Bethnal Green and Stepney, there is the defence contribution of the Merchant Navy. I have spoken about that before and will not develop that theme. I simply observe that after the Falklands campaign— which at its peak involved more Merchant Navy ships than Royal Navy ships—we were told that there would be a review. However, that was some 15 or 16 months ago and we still do not know what is being proposed. If something is not done soon the Royal Navy will find itself looking to the Merchant Navy for ships, but the ships will not be there. I hope that the Minister will tell us what is happening.

Secondly, the General Council of British Shipbuilding 18 months ago called for a 40 per cent. investment allowance for a three-year period. Supported by British Shipbuilders, it again called for that during Budget time last year. We could not debate the issue in the House because it was not selected for discussion during the Finance Bill. However, it is a realistic and positive proposal over a relatively short time.

Thirdly, there is a recognition that there ate no unsubsidised offers for ships around the world. The idea that there is free trade is an illusion. If a shipping company is known to be thinking of placing an order, offers are put to it from shipbuilders of different countries. From my experience I know that the yards in the far east will compete against the going rate and put in a figure below any other offer. The fact that they will make a loss is irrelevant to them. That is the reality of life.

Fourthly, there is the effort to improve the cash flow and capitalisation of British Shipbuilders, which is the purpose of the Bill. I welcome that. I am in no doubt that without a greater number and more steady flow of orders the future of British shipbuilding, especially merchant shipbuilding, is bleak.

5.25 pm

Mr. Bruce Millan (Glasgow, Govan)

It is always a pleasure to follow the hon. Member for Eastleigh (Sir D. Price), who speaks with great authority and knowledge in our shipbuilding debates. He has a commitment to the industry which I wish was shared more widely by his colleagues. I shall not debate with him the merits of his yard for building frigates. My hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) may have something to say, as he represents Yarrow Shipbuilders on the Clyde. I agree with virtually everything else that the hon. Gentleman said and I hope that the Minister will answer his points.

I wish to speak principally about the Govan shipyard in my constituency and about Scott Lithgow. However, before doing so I wish to comment on the general position. There is a critical industrial relations problem in the industry and a meeting is to he held tomorrow between the management and the shipbuilding negotiating committee. All those with an interest in the prosperity of the industry will hope that that meeting is successful and that industrial action will be avoided.

I hope and expect the trade unions to approach the meeting with a tremendous sense of responsibility and an awareness of the critical position of the industry. Equally, I hope that the management will approach the meeting with an understanding of the depth of feeling among ordinary shipyard workers about the issues involved, and especially about pay. There has been no increase in pay for 18 months and overtime in many yards has all but disappeared. Men are on basic levels of pay which are not nearly as attractive as past earnings, which included a good deal of overtime. Both sides need to approach tomorrow's meeting with a responsible attitude. If no settlement is reached, I hope that negotiations will continue. A strike cannot be welcomed by anyone because it will damage the industry. I hope that that will be avoided.

The Minister's speech was a curious mixture. Most of it was extremely negative and not calculated to raise morale in the industry. The industry has suffered. and is still suffering grievously, arid morale is at a low level. However, the Minister made one or two hopeful remarks, one of which was about the intervention fund. That fund is not working satisfactorily, partly because there are not sufficient orders available so that the sums of money made available by the Government have not fully been taken up, and partly because the levels of assistance are no longer realistic in the competitive atmosphere being faced by British Shipbuilders. I understood the Minister to say that we are arguing in Brussels that the present level of 15 per cent. plus 2 per cent. is too low and should be increased. If the percentage is to be increased, I hope that that will be done with the maximum of flexibility. I doubt whether it makes sense to say that it should be not 15 per cent. but 20 per cent. because that would not do much good.

I understand that British Shipbuilders would like it if there were an overall financial limit for each of the shipbuilding industries of the Common Market, but that within that overall financial limit it should be possible to gear a certain percentage help in any particular case to obtain the order against competition from other parts of the world. I hope that it is such an approach which the Minister is impressing on our Common Market partners.

It will be depressing if the Minister says that he does not see a quick solution to the problem, for discussions at Brussels take place at a snail's pace and do not meet the urgency of the problems. Unless we can get agreement quickly, I hope that the Government will take unilateral action. There is no point in waiting for another year while negotiations take place and the industry disappears. We need something better than we have at the moment, and we need it quickly, and the Brussels procedures do not provide the urgency that we need.

The Minister has in the past referred to the shipyard at Govan, in my constituency, and acknowledged, as does the BS management, that it is an excellent yard with an excellent reputation. It has been delivering on time, and sometimes before time, it has an excellent industrial relations background and it has done much in recent years to reduce substantial losses to manageable levels, and with a reasonable order book the yard could be viable and economic.

As to the quality of its work, delivery dates and so on, it is a yard well regarded not only here but by foreign shipowners. However, like other yards it is running out of orders. By the spring of next year, unless there are some other orders, it will run out of work, and that will be tragic. There have already been redundancies which have gone smoothly, with no industrial relations hassle, and there are further redundancies to come, but soon the yard cannot be economic, given the overheads that it has to carry, such as facilities, unless it gets more work.

I am anxious that the yard should get some work and in this connection I introduce the subject of the Central Electricity Generating Board order for the three coal carriers that it wants. I understand that the CEGB is likely to place an order in January of next year, but I hope that it will place the order earlier.

I spoke about this matter to the Minister at a meeting that we had on 27 July and I shall not be misinterpreting what he said when I say that his view was then, and I hope still is, that the order should go to the United Kingdom. Therefore, I was astonished a few days later when I saw a report in the press that the CEGB was asking for international tenders. This is a nationalised industry, and, given the background on the cable-laying ship that went to Korea, it is astonishing that the CEGB is asking for international tenders as well as tenders from British Shipbuilders and Harland and Wolff.

I have been in correspondence with the Minister about this. He said that he could not intervene with the CEGB and that it was up to the corporation to make a commercial decision. That is not good enough. This is an important order which, if it came to Govan, would provide 15 months' work and the ship could be built there with great skill at a price that would be competitive in European terms, although Govan, like other yards, is not able to meet the highly subsidised, artificial prices of Korea mentioned by the hon. Member for Eastleigh.

It would be outrageous if the CEGB placed the order for the three coal-carrying ships outside the United Kingdom. If the order goes to Harland and Wolff, which is as interested as Govan, I shall be extremely disappointed —I put it no higher than that—but at least the order will be within the United Kingdom. This order is important for Govan, and it has the ability to do the job at a competitive price. I could contain my disappointment if the order went to Harland and Wolff, but if it went overseas to Korea or to any other country every hon. Member would feel a sense of outrage. The Government must see that the CEGB places the order in the United Kingdom. Given the state of the industry it would be ludicrous—it would make us the laughing stock of other shipbuilding nations—if such an order by a nationalised industry went abroad.

No doubt my hon. Friend the Member for Greenock and Port Glasgow (Dr. Godman), in whose constituency Scott Lithgow is, will say something about the yard if he catches your eye, Mr. Deputy Speaker. I pay tribute to him for the tremendous amount of work that he has done for Scott Lithgow since he was elected in June. If there has been an improvement in the recognition of the seriousness of the problems and a willingness to co-operate to get out of the difficulties in the past few months, a good deal of the credit must go to my hon. Friend. I am happy to pay that tribute to him, and I hope that he will be able to describe the circumstances in detail, with the intimate knowledge that I do not have.

Today's news about the Britoil letter is serious, but not unexpected. We have known for some time that the letter was to come before the end of October, and we know that there has been difficulty with that contract. Last year Scott Lithgow had a loss of £66 million, which is serious. There is not much use for recriminations, or for discussions on how the problems arose. There must have been faults on many sides and all the problems cannot be attributed to the work force. There must have been management failures —that is inevitable—but it does not excuse the work force. Everyone involved has a share of the responsibility, but it is futile to go back over the history of it, unless we are talking about learning lessons for the future. We do not want to lay the blame for the problem on one side or the other, because that will not help.

It is not impossible to resolve the crisis in Scott Lithgow and what the Minister said this afternoon is helpful in this context. As I understand it, the letter that Britoil sent British Shipbuilders was inevitable, given the terms of the contract, if Britoil was to protect its interests. It looks as though Britoil's contract plus the 300 days will not be met by Scott Lithgow, to put it at its lowest, and Britoil had to send a letter as a precautionary measure.

However, it is misleading—and I was glad that the Minister confirmed this—to talk of the cancellation of the contract. As I understand it, Britoil said that its preference would be to renegotiate the contract because it wants the rig and does not believe that it will get it either on the due date or on the due date plus 300 days, but at some time in spring 1986. However, Britoil is still saying, as it did in today's newspapers, that it wants the rig and not the cancellation. On the other hand, British Shipbuilders has rather given the impression that it is not interested in or not able to stand the burden of renegotiation and therefore has been thinking of cancellation.

One of the difficulties is that even without taking into account the details of the contract—which sounds fairly extraordinary —without knowing how much has been spent by Scott Lithgow, how much has been paid by Britoil, how much of the work has been done, how much it will cost to complete the contract, and so on, and without knowing how much has already been written off the British Shipbuilding accounts retrospectively, back to 31 March 1983, it is difficult to make a final judgment on what would be the best financial course for British Shipbuilders.

Even so, until today I found it impossible to believe that it could benefit British Shipbuilders to cancel rather than renegotiate the contract. I thought that it must be better for British Shipbuilders, provided that it can get an understanding in the yard about the new contract date and so on, to renegotiate instead of cancel. It seems to me that that view was confirmed by the Minister today, when he gave precise information of which I had been unaware. He said that in the event of cancellation the £40 million paid by Britoil up to the present time would be refundable to Britoil.

British Shipbuilders would not have received a penny for all the work that it had done and would be landed with a great steel hulk, which presumably it would be difficult to sell for anything like the amount of money that had been spent on it. It must surely make sense for British Shipbuilders to renegotiate the contract. Britoil wants to renegotiate. It wants the rig. So it would be to the advantage of Britoil for that to happen, and it would be equally to the advantage of British Shipbuilders for the contract to be renegotiated and the rig completed.

There must, therefore, be a basis for an agreement between Britoil and British Shipbuilders. In the absence of an agreement, cancellation would be a devastating blow to the area. No doubt my hon. Friend will describe the consequences in an area which not only suffers from high unemployment but has had an appalling unemployment record over many years. We must avoid cancellation and get a renegotiation of the contract.

I was heartened when the Minister said that the Government were keeping in close touch with the situation, and so they should. After all, the losses of British Shipbuilders — as the Minister never tires of pointing out, and quite legitimately—are borne by the Government and the taxpayer. Equally, we have a considerable interest in Britoil, despite its element of privatisation. I therefore thought that the Government would be actively involved in the negotiations, particularly if there were any question of cancellation of the contract. Of course, I shall be perfectly happy if the two sides come together without any direct intervention by the Government, but if there is any danger of cancellation, with the disastrous consequences that that would have for Scott Lithgow and that part of the Clyde, I hope that the Government will intervene and see that the contract is renegotiated and not cancelled.

I believe that a new spirit is developing in Scott Lithgow. Indeed, it is needed. Clearly, if there is a renegotiation it will be in the interests of everyone in the yard, both management and men, to see that the renegotiated date is met. That is indispensable if the yard is to have a long-term future. The yard deserves that chance, and I hope that the Government will see that it gets it. In the long-term future, bearing in mind the state of the offshore industry, there is no reason why Scott Lithgow, with its technical expertise — no one has ever complained about a contract that has been completed at Scott Lithgow—could not fit well into the offshore side of the industry. I am sure that the yard has a long-term future if it can be helped through this crisis.

What is true of Scott Lithgow is true of the industry as a whole. We have an immediate crisis, but I believe that the industry can survive it if there is sufficient commitment by the management and men, and also by the Government. I only wish that I were more confident that that commitment existed, despite my acknowledgement of the fact that the Minister showed signs today, at least in respect of Scott Lithgow and the intervention fund, that the Government not only realise the problems of the industry but are willing to go some way to help to solve the problems. If that is the Government's view, I can only tell the Minister that the men in the industry do not understand that at the moment, and time is short if the industry is to survive.

5.45 pm

Mr. Kenneth Carlisle (Lincoln)

I find this a sad debate, and I am sure that the whole house shares the worry of the right hon. Member for Glasgow, Govan (Mr. Millan) about the future of the industry. I am sure that we all wish the Govan yard well.

This debate and the Bill mark one more stage in the decline of what was one of our greatest industries. The facts are bleak, as many hon. Members have said. It is a sobering thought that after 1945 we had over 40 per cent. of the world markets in ships. Today that share is down to 3 per cent. Moreover, we must remember that the decline affects not only shipbuilding yards but the steel mills which supply the steel for the ships, and also the components. In my constituency of Lincoln we had a fine business which supplied engines for ships. That business has ceased to exist because of the decline in shipbuilding. All hon. Members regret the decline in shipbuilding. All hon. Members regret the decline in shipbuilding and what it means for the communities which depend on those yards and which for so many years have been connected with them.

However, the House has a wider duty. Today we are being asked to approve a huge increase in taxpayers' support for British Shipbuilders. We cannot let that pass without asking why it has proved necessary and whether we are right to vote for so much extra money. We must also ask ourselves what can be done to stem the haemorrhage of taxpayers' money in the future. I was disappointed by my hon. Friend the Minister when he said that he expects to come back to the House in a short time for even more funds for British Shipbuilders. We have to face the fact that the industry has declined. We must also face the fact of the fierce worldwide competition for new orders. There is not only a slump in shipping and hence in shipbuilding, but there has been a dramatic increase in the capacity of newer countries, such as South Korea, to produce ships. So shipbuilding is facing a crisis world wide.

In this debate it is right to accept what the Government have already done to help. Shipbuilders in this country receive more Government assistance than our competitors in other countries receive. The Opposition are loth to recognise that. The intervention fund is pouring large sums of money into the industry. We all know, and perhaps we all welcomed, the £10 million that went to Swan Hunter so that it could quote competitively for the Atlantic Conveyor. One quarter of the price of the Atlantic Conveyor is coming from the taxpayer. So we must recognise that British Shipbuilders does not go without support from the taxpayer.

Unfortunately, however, there has been truly disappointing progress towards the industry becoming competitive. Of course, it has developed certain skills. I accept what the right hon. Member for Bethnal Green and Stepney (Mr. Shore) said about specific skills, in the use of computers and in ship design, where we are in the lead. By and large, however, productivity has been disappointing, and it is far below what is required if we are to compete.

In addition, there has been a devastating failure to deliver on time. Scott Lithgow has been quoted, but it must be emphasised because it is such a tragic example. The order for the Britoil oil rig is now about 500 days behind schedule and that is from a yard which is claiming to be fighting for its survival. If that is so, that order should be up to time.

What lessons can the Government learn from the sad events, the fierce competition and this debate? We must ask ourselves how we can do better in future. One fundamental lesson that has spanned the tragedy of shipbuilders in the past five years is that nationalisation has proved no solution to the industry. In shipbuilding and elsewhere nationalisation has shown that it impedes the ability of an industry to adapt and modernise. Old methods are kept alive purely in the belief that in the end the taxpayer will prop up the business. Therefore, changes are much slower than is required by the difficult conditions of the day.

The hon. Member for Govan mentioned another factor —the impost of overheads on the Govan yards. How much are the overheads the result of the structure of the nationalised industry? If it were a smaller yard, those overheads would be much less. Because of the inefficiencies of nationalisation, the financial demands on the taxpayer have been far higher. Since nationalisation the taxpayer has already provided £840 million and in the foreseeable future we shall probably vote for at least another £400 million of taxpayers' money.

In 1977, 27 companies were put into one business. If that had not happened, each of those businesses would have sought its own way through the recession. Of course, there would have been some failures, but there would also have been successes. Because nationalisation enabled the industry to go back to the taxpayer, the enterprise of so many of those smaller businesses was stifled. I challenge any Labour Member to say that that is not so.

Nor can one claim that nationalisation has produced better industrial relations. From what I hear, the morale of the work force is low. They find it difficult to relate to the organisation in which they work. Certainly employment has not been protected by nationalisation. The number of people employed is one quarter less than it was in 1977. In the long term, nationalisation is much worse.

If nationalisation is bad for industrial relations, for employment prospects and for competition, what on earth do we gain from it? How do Britain and the employee benefit? The gains are negligible. Finance is drained off instead of being kept by the taxpayer in the form of lower taxes, earmarked for the support of growth industries or to encourage new processes and manufacturing techniques to make older businesses more competitive. That is always necessary, and I am glad that the Government have recently recognised that it is important to modernise old industries.

The great subsidies to nationalised industries have only gone to prop up some jobs in the short term. Because of the drain on resources, the subsidies have destroyed many unnoticed jobs elsewhere. One of the great challenges facing the Department of Trade and Industry in this Parliament is to know how to direct its large resources in a far more creative way. As I said, there is scope in the nationalised industries to save a great deal of money. I hope that the Department will also take care in its regional policy. I do not want to see an extension of assisted areas. I hope that in the near future it will face up to its responsibilities. For example, to extend assisted areas to the west midlands will do nothing to help the position at all. It could well cast a blight on my area of the east midlands.

The Labour party says that it has a solution to the problems of the shipbuilding industry. In its manifesto it claimed that BS would remain a wholly nationalised concern but that in addition it would erect a state owned shipping organisation as the main customer for BS. As a result BS would have been given greater protection and larger subsidies. We must ask how that would help the taxpayer and what real help it would give BS to face up to world competition and, in reality, to become more competitive and adaptable to market conditions.

Nationalisation has had its chance and has failed. The Government have no alternative but to push ahead with denationalisation. For that purpose the British Shipbuilders Act was passed earlier this year. If denationalisation goes through, the work force will have far more opportunity to use those excellent skills which still exist in our yards. I am glad that the Government have announced their intention to denationalise the ship repair yards. We can look forward to the same for the warship yards. Those are profitable and the new orders for the type 23 frigate are an enormous boost to confidence. If the warship yards are denationalised, they will be able to export much more effectively. They will not necessarily be tied to the complex warships which have been suitable for our Navy. They will have a greater incentive to market their products than they have had up to now.

The Government should encourage buy-outs. The move at Redheads on the Tyne is welcome. I hope that it will succeed, and that the Government will encourage and promote buy-outs as far as possible. Not only will that denationalise the business but it will give the work force a much more direct involvement in what they are about and in the success of the yard. In the previous Parliament we were all encouraged by the success and confidence of the National Freight Corporation.

Not all parts of BS can be denationalised. I doubt whether any hon. Member expects buyers for the merchant shipbuilding side. We must keep some shipbuilding capacity for strategic reasons: all hon. Members recognise that. Indeed, it is enshrined in the 1983 Act. However, if there is no sale we must ask how much more we can expect the taxpayer to put up. We must be prepared to pare down those yards to what is necessary for strategic reasons.

All hon. Members will agree that Britain wants a shipbuilding industry which can compete world wide and adapt quickly to new methods. We want one that can supply safe and satisfying employment to its work force and which can meet our strategic needs. We need one which does not have to come back to Parliament every other year or so to ask for additional funds. I do not want in this Parliament to have a debate such as this again where we have to vote yet more taxpayers' money to BS. We cannot be certain about the future. The world situation in shipbuilding is difficult. However, nationalisation has signally failed. The Government came into office with a clear programme to denationalise industries where it would help in their success. This is one industry where that principle applies. We look to the Government to meet that challenge in the year ahead.

6 pm

Mr. Frank Field (Birkenhead)

I am always pleased to speak after the hon. Member for Lincoln (Mr. Carlisle).

Mr. Ernie Ross (Dundee, West)

Why?

Mr. Field

Had my hon. Friend waited a moment, I would have explained that, although usually I agree with the hon. Member, I cannot recall any occasion on which I disagreed with him more strongly.

The hon. Gentleman rightly raised the question of competitiveness in British industry. However, had he listened to his hon. Friend the Member for Eastleigh (Sir D. Price) he would have heard about the difficulties of notching up competitiveness in an era when orders are fast disappearing. One of the paradoxes facing those of us who represent yards is that, although there is a considerable increase in competitiveness on individual orders, the overall position is not as impressive as it should be because yards are trying to keep their labour forces together in the hope of winning further orders.

Secondly, the hon. Gentleman stressed again the issue of late deliveries. His criticism may be fair in the case of some yards, but as a picture of the whole of British shipbuilders it is very slanted. I am proud to represent a yard that is delivering not just on time but before time. One of the difficulties faced by the Ministry of Defence in its budgeting for the Treasury 18 months ago was caused by the fact that Cammell Laird and a number of other yards were delivering so early on warship orders that the Ministry of Defence had difficulty in finding funds to pay for the orders. There are problems with late deliveries, but to stigmatise all yards on the ground of late deliveries is to give a partial view of what is happening in British shipbuilders.

Thirdly, the hon. Gentleman claimed that nationalisation had made the introduction of new practices more difficult. In one of the Cammell Laird lobbies, when hon. Members of all parties, management and men, bosses and unions, came to London to present the case for the yard, our chairman of shop stewards presented the problem of restrictive practices. He said that it is true that in many yards practices that were protective sometimes become restrictive, but that it is doubly difficult to break those restrictive practices when by breaking them one may be putting not only oneself but one's mates "on their bikes". In this debate, as in other debates on the industry, we are trying to establish not only whether the Government plan to bale out British Shipbuilders for the time being but whether there is a basis for the long-term viability of the industry. The hon. Gentleman and the hon. Member for Eastleigh both touched on that point.

I am not among those hon. Members who claim that the Government are not providing money for British shipbuilders. The problem is not that the Minister has not won £840 million for the industry since 1979, but that we have often been given the money in packages which made it difficult for British Shipbuilders to plan for the long-term.

To some extent, the Minister spoilt the picture of his success in battling with the Treasury —I hope that I shall not weaken his role by saying this—by adding into the equation the £1.9 billion of naval orders, as though the Government would not normally place naval orders. We need naval orders because we have a navy. It is fortunate that there are naval orders, and it is fortunate that they go to British yards, but it is a little strong to present the £1.9 billion as part of the Government's contribution to survival of British Shipbuilders.

Before I express my support for the Bill—and even the hon. Member for Lincoln supported it in the end—I should like to refer to the problems of my own yard. Reading through the report of our last debate, which went some way through the night of 18 July, I was struck by the number of hon. Members who talked about anger in the yards. I have to report tonight that the mood is one not just of anger but of anger mixed with near despair.

Most of us represent shipbuilding constituencies in areas which are already heavily affected by unemployment. Let us consider the number of people in my constituency who have been conscripted into the Government's unemployment army since 1979 to help the Government fight the war against inflation. Since 1979 there have been not 5,000 job losses, not 10,000 or 15,000, but more than 20,000. The House will not be surprised to hear that large tracts of the constituency have already been laid bare industrially. It is as though industrial locusts had descended on the area and devoured the industries.

The shipbuilding industry is something that remains. That industry is not important only for the almost 4,000 jobs that it now provides. It is not important only because, as the hon. Member for Lincoln pointed out, shipbuilding orders mean jobs to suppliers outside — and there are many other jobs in the surrounding region of Merseyside that depend upon the survival of Cammell Laird. The importance of the industry lies, above all, in the fact that it is the umbilical cord linking us to an industrial future. Ask any tradesman or any skilled worker in Merseyside where he was trained and one will almost always get the answer "Cammell Laird". If we lose the yard, we shall lose the possibility of benefiting from any industrial regeneration that the Government are able to bring about, if their economic policies are successful.

The mood is one of anger and despair. This measure is important not just in terms of the immediate survival of those whom we represent, but as our toehold on an industrial future.

How well does the Bill—which we all support —match the needs of the industry? I am thinking not just of the immediate needs but of the need to make sure that we have some shipbuilding industry in the future. There could be no better starting point for this debate than to consider what the Minister told us on 18 July when we were extending the borrowing requirements of British Shipbuilders. He said: It is quite clear that the corporation's present difficulties are not a passing phase … Long-term problems need long-term solutions. The Minister did not leave the matter there. He went on: We are not in the business of providing short-term breathing space for BS. We must now consider the long-term future of the business."—[Official Report, 18 July 1983; Vol. 46, c. 133.] I agree with those remarks, but the Minister has not tonight answered the questions he raised in July. Hon. and right hon. Members on both sides have already identified the questions that we need to answer if we are to establish whether there is a viable plan to support the long-term future of British shipbuilding. The hon. Member for Eastleigh, in a pertinent speech, gently reminded the Government of the importance of placing defence contracts regularly so that work can be spread properly throughout the yards. He also mentioned the importance of the link between our merchant ship capacity and any future defence capacity that we may have following the success of the Falklands operation. What do the Government have to say about that? The future of British shipbuilding cannot be unrelated to the success or otherwise of the wider aspects of Government economic policy.

I very much welcome my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) to his new position on the Opposition Front Bench. He vividly stressed how ineffective the intervention fund had been. When the intervention fund is matched against the fall in British competitiveness since 1979, it shows that the fund has only been allowing us to mark time. It has not given us a cutting edge in winning orders. Therefore, I hope that the Minister will let us know how generous the intervention fund will be in future, and to what extent it will override the fall in British competitiveness that has taken place in the past four years.

The hon. Member for Eastleigh asked how we were to stop the now rapid decline in the percentage of British shippers that build in British yards. He put forward an idea that has been mooted before in the House, involving the offering of tax concessions to British shippers that build in British yards. Are the Department and the Treasury likely to support that idea, especially as the Government will soon be thinking about the Budget?

If we wish to ensure that we have a merchant shipbuilding capacity in future, is it sensible at this stage in the industry's life even to think about, let alone pursue, the policy of privatisation? Before the Summer Recess I questioned the Minister on that point. I do not doubt that the Government have a mandate for it. They have made their intentions clear. However, I think that British taxpayers would get a better deal if the profits of the warship yards in the foreseeable future were put back into the industry instead of into private pockets.

The debate has rightly been gloomy, but I wish to end on a slightly more optimistic note. We have a new chairman at British Shipbuilders. Like my right hon. Friend the Member for Bethnal Green and Stepney, I hope that the negotiations that both sides will enter into shortly will be successful. Having met the chairman, I am much more confident about the future of the industry than I was.

6.13 pm

Mr. Malcolm Thornton (Crosby)

I congratulate the hon. Member for Birkenhead (Mr. Field) on the way in which he has put the case, particularly with regard to Cammell Laird. Those who represent Merseyside constituencies will endorse his remarks. The hon. Gentleman and his colleagues from the Wirral have been responsible for putting a cohesive and coherent case to the Government to try to preserve Cammell Laird's order book.

I should point out to my hon. Friend the Member for Eastleigh (Sir D. Price) that an unemployed platelayer may be an unemployed platelayer, but Cammell Laird bases its desire for a warship order not on the fact that it is situated in an area of high unemployment but on its proven track record in being able to deliver warships well ahead of time. We were certainly not given as much credit, or, indeed, local newspaper publicity, as we should have had at the time.

I support the remarks made about the need for the training facilities offered to Merseyside by Cammell Laird. One of Merseyside's great problems is that it has a large pool of unskilled labour. The more that Merseyside loses manufacturing industries, the greater the problem will become. If we lose a substantial number of jobs at Cammell Laird and the yard has a less than certain future, it is clear that there will not be the training facilities to provide the skilled labour force that will be needed on Merseyside when the economy begins to improve.

Many hon. Members have referred to the tone of the debate. It is all too depressingly familiar. The dilemma is pertinent to us as an island race, because we need ships, shipbuilding and ship repair facilities. As has been said, we need to match our merchant fleet requirements to our defence and national security. Nevertheless, we live in the real world of costs and competitiveness in the shipbuilding industry. I accept that there has been a decline in demand. As the right hon. Member for Bethnal Green and Stepney (Mr. Shore) rightly pointed out, it is due to various factors, including the fact that the recession has combined with a tremendous overcapacity in shipping. As we have heard, 91 million tonnes of shipping are laid up at present.

There is another factor that was not mentioned by the right hon. Member for Bethnal Green and Stepney when he referred to the heady days when we built ships. In those days all our yards had full order books. However, the fact is that the pattern and size of ships have changed. The jobs that ships are being asked to do have changed. There are fewer, but bigger ships. Oil was once carried by many small ships, but it is now caried by a few large ships and fed into pipelines that do the job that many coastal tankers used to do. Those are all contributory factors to the resulting overcapacity.

There is an estimated 40 per cent. overcapacity in the shipyards of the world. The picture is bleak and does not offer any great prospect of major orders for our shipyards, or for those in the rest of the world. We have already heard that countries such as Japan and Korea, which have enjoyed the lion's share of the shipbuilding market for a long time, are now suffering from overcapacity and the worldwide recession.

We now have a further injection of money while yet another corporate plan is prepared. For many years we seem to have seen one corporate plan after another that has tried to cope with the changing situation. None of them has worked. Although I am sure that we all wish Mr. Graham Day well in the tremendous task facing him, I have some reservations about what the new corporate plan will mean.

I should like to explain why I have fears about corporate plans. There is obviously a need for rationalisation, as there is overcapacity in our yards. It is important to recognise that yards must be able to build to customers' requirements. My hon. Friend the Member for Eastleigh referred to Keith Wickenden's statement in which he said that he was in the market for a ferry, but that at the time British Shipbuilders was saying that it was not interested or did not have the facilities to provide the ferry. We have heard today about Scott Lithgow. It is not for me to comment about Scott Lithgow, because I do not know the details of that yard, but I know that one of the decisions of the corporate plan, which was to move away from traditional shipbuilding and into offshore work, has meant a period of change for the yard, but that has failed to produce the goods.

A team of experts is required in a shipyard to produce the ships. Those experts do not grow on trees and they do not come together overnight. It takes a long time for individual shipyards to garner together men of ability in the different areas of high technology and skills that are required for designing ships. Once that team is broken up and destroyed, it is difficult, if not impossible, to replace. That has happened in shipyards not only in this country, but in western Europe and in other parts of the world.

When a yard is forced to look in other directions, when it is moving from merchant shipping and traditional ships to platforms, it has a great deal to learn not only at design but at the work force level. The article that I read today in The Scotsman was not a million miles away from the truth when it pointed to this as one of the factors in the Scott Lithgow case. It may be that the lateness of this contract is due to a combination of other factors. It may be that there is poor productivity, bad management decisions and that some of the decisions of Britoil have caused further delay, but the delay at Scott Lithgow is symptomatic of the problems that a yard faces when it is forced by circumstances and by corporate plans to change the pattern of its operations.

The expertise that is being lost in the shipbuilding industry is at the core of the argument. Experts will not stay in an industry if they cannot see work coming forward for them to do. They will not stay in the shipyards; they will move elsewhere. Some will even emigrate. They are not being replaced. They are unlikely to be replaced, given the present demand in the shipping industry. That salutary point should be taken on board. If, as we hope, there is an upturn in the world economy, we shall need more ships, because we are an island nation and goods must be shipped in and out of the country. We shall need new ships and the facilities not only to build but to service them. It ill behoves us to see a further brain drain from our shipyards, which will mean an even bleaker future for the industry.

The Bill is about Government aid for the shipbuilding industry. As the hon. Member for Birkenhead said, it will provide money for the shipbuilding industry. The hon. Gentleman did not dispute the fact that the Government have given a great deal of money to the shipbuilding industry over the past four years. However, I believe that the aid should be given in specific ways, bearing in mind the importance of shipping to this island and of ensuring that our shipyards have a future by keeping our expertise in them.

We must give direct aid to the shipyards to enable them to modernise. As has already been said, one of the problems that we have faced for a long time has been the lack of modernisation in our shipyards. There has been not only poor management at some levels and bad industrial practices at others, but a requirement for management and the work force to work with outdated equipment while foreign competitors have been modernising at a tremendous rate and making it extraordinarily difficult for us to compete, even if all other things were equal.

Unfair competition has disturbed many of us. For example, British Shipbuilders has said that the total package quoted by the Finns was equal to the cost of the steel alone in British Shipbuilders' quotation for the same contract. Even allowing for some less than happy practices in some yards and all the problems that beset our industry, I cannot believe that that is comparing like with like. The Government must ensure that, when we compete for orders with foreign yards, competition is fair. I do not suggest that British yards should be given unending sums of taxpayers' money merely to enable them to exist. They must compete in the world market, but it must be fair competition. Like must be compared with like. Where there are signs of unfair competition, the Government must draw attention to it at every stage and seek to eliminate it.

The hon. Member for Birkenhead mentioned tax incentives and my hon. Friend the Member for Eastleigh spoke about investment allowances. When one considers the total strategy of an island requiring these facilities, it is nonsense not to encourage British ship owners to have their ships built in British yards. Rather than giving direct subsidies, I would use the tax system to assist them. The investment allowance for which the General Council of British Shipping has been asking for years, coupled with a look at other tax incentives, may be one way to encourage British owners to have ships built in British yards.

A slightly more peripheral point relates to the total approach to selling abroad. We have heard of the importance of our warship sales abroad. In the past it has sometimes been extremely difficult to get the Navy to release some of its high technology ships to foreign Governments, particularly when, as one hon. Gentleman said, some are second or third tier Governments in shipbuilding terms.

Other countries use their naval ships as bases when making diplomatic visits. They use them as a total selling package. I should like to see some of our ships being used in that way to encourage foreign Governments to buy.

We cannot expect those Governments to be persuaded to buy our warships if they cannot have quite the same vessels as we use for our Navy. In recent years there has been a move in warship design towards a more acceptable basic package — one which is more readily saleable abroad—and I hope that will help the overall position.

How can the industry help itself? I agree that raking over the embers of past failures is not helpful, though we must learn from them, including the problems at Scott Lithgow. I have been connected with meetings that hon. Members on both sides have had in the last four years with the General Council of British Shipping. Time and again British ship owners have been forced abroad because of the uncompetitive prices of British yards. During this breathing space — is it a breathing space and an opportunity for reconsideration, a time when the new corporate plan will mean something?—which is being given to the shipbuilding industry by the Government, the industry—management and work force—must examine carefully what is happening in the yards.

I agree with the right hon. Member for Glasgow, Govan (Mr. Millan) that many restrictive practices have been lifted. But many remain and there are still major problems with the trade unions in the shipping industry and they are adding to the lack of competitiveness in the yards. If there is the will from Government, management and workers to make a go of a yard, all the problems must be closely examined.

The Japanese and Koreans have been able to out-gun us in shipbuilding, although something of a myth has developed over the building of ships abroad, particularly in Korea. Certainly they are cheap and they are delivered on time, but—and there is a "but"—the quality of those ships in terms of long-term durability does not match the quality of ships built in British yards. It may seem sensible —it may even be desirable—to reduce the initial capital cost of a ship for a company, but a far better product is obtainable from British yards. We must ensure that we can supply that product at a lower, certainly more competitive, cost.

We have heard about the need for a total strategy. Within that strategy we must look at the whole range of shipping operations in Britain—not just shipbuilding and ship repairing, but the industry as a whole. As I said in opening, as an island nation we depend on ships to bring foreign goods in and to take our goods out. We ignore that basic fact at our peril.

The Minister appealed for all sectors of the industry to recognise that, unless things in shipbuilding are put right, we will lose the industry. If that were to happen, we should have a greater dependence on other countries and would not be able to provide the type of back-up facility that we provided in the recent south Atlantic conflict. It is vital, therefore, that the Minister's plea is heeded. My plea is that the breathing space that this additional injection of money will provide should be used to preserve and guarantee not only jobs but a major part of the British shipping industry.

6.36 pm

Mr. Ernie Ross (Dundee, West)

Many of my hon. Friends will wish to be associated with the comments, made from experience, of the hon. Member for Crosby (Mr. Thornton). Many helpful comments are being made in the debate by Conservative Members, and my hon. Friends and I are bound to support them because we have before us a Bill which will ease for a short time the serious problems facing British Shipbuilders. We shall no doubt find our paths diverging when the Government continue, following this measure, to pursue for ideological reasons their plans to ruin the industry by privatising parts of it and threatening the very existence of the industry by selling off warship yards. No matter how many well-intentioned contributions are made in this debate, they will mean little if the hon. Member for Crosby, who previously worked in the industry, and his hon. Friends on a later occasion join the Minister in the Lobby as the industry is being destroyed.

I shall not delay the House with a long speech because unfortunately I no longer represent a shipbuilding constituency. In my area a rig construction yard has replaced what was the extremely good shipbuilding facility based on Robb Caledon of Dundee. What we have left is a technical group which is making a contribution to the successful designs which British Shipbuilders is able to sell. In that sense I speak in the debate with some sorrow.

My trade union represents the technical and administrative staffs and specialist design teams in the industry. I speak in support of my hon. Friends who, in addition to speaking today, will wish to address the House when the Government are less confident than they are on this occasion. It may then be necessary to point out that the small amount of money which the Government are giving to British Shipbuilders may have come too late for some yards and be insufficient for the majority.

After the Minister has replied to the debate, I am sure that there will still be missing a clear picture of the Government's strategy for the industry. As my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) pointed out, we want the Government's strategy, not Graham Day's strategy. What is their strategy, and when will the details be unfolded? Is it contained in the points that were put at Newcastle by Graham Day when he met the shipbuilding negotiating committee of the confederation, or is it simply in the Minister's statement to the House on 28 July when he said: we are prepared to give consideration to specific requests for assistance on a case-by-case basis within international rules". —[Official Report, 28 July 1983; Vol. 46, c. 1355.] As hon. Members on both sides of the House have demonstrated and will continue to demonstrate, those international rules apply only to British shipbuilders.

In an industry that has shed 26,000 workers with very little difficulty, except for those who have unfortunately had to accept redundancy, the work force is to be encouraged by the House to place its future in the hands either of Mr. Day or the Minister at a time when every other shipbuilding nation is doing all in its power to protect its industry, confident and determined that there will be a future for shipbuilding. What do we offer the work force tonight? We offer massive changes in working practices on the basis of a bonus of £3.50 per week, the closure of at least three yards, the sale of Tyne Shiprepairers, the continuation of an 18-months wage freeze, and, worst of all, a further 2,600 redundancies, many compulsory.

That is set against the background of an industry that used to have a capacity of over 1 million tonnes, now reduced to about 400,000 tonnes. Our capacity is so small that even if some of our yards were closed it would not affect the world-wide overcapacity. The reduction in capacity can be viewed by those in the industry only as part of a deliberate policy by the Government. The hon. Member for Corby (Mr. Powell) was right when he said that we are losing skilled men. Once a balanced work force is broken up it cannot be put together again. We are not training the apprentices who will be needed in the future. Many of the older shipyard workers who have skills have emigrated. The workers are convinced that the Government are determined to break up the industry and to hive off to their friends the profitable sectors.

At the same time as workers are being asked to accept compulsory redundancies and a wage freeze, many orders that could provide work are being held up. There are in the pipeline 14 contracts worth £50 million, orders tailor-made for the three yards, Robb, Cleland and Goole, which are under threat. Although 1,500 workers are facing redundancy, British Shipbuilders still claims that there is a lack of orders and that work will run out in a few weeks' time.

It appears to those in the industry that the acceptance of orders is being delayed deliberately so that the plan put forward by Mr. Day can be accepted before those contracts are concluded. The Government have a responsibility to ensure that the contracts are concluded so that the workers will know that they have a future. The Minister must answer the question put by my right hon. Friend the Member for Glasgow, Govan (Mr. Millan) about why there is a delay in concluding contracts for the coastal survey vessel, the salvage ships and the seven tractor tugs.

The Minister attacked the work force for lack of realism. He claimed that the industry has had massive financial support, yet there are continuing losses. We have been told that there are no new orders, although we know that there are orders in the pipeline which he will not bring forward. Referring to the response from the work force, he claimed that there is a threat of industrial action, opposition to restructuring and massive wage demands. He said that if only to appeal to their self-interest my hon. Friends and I should demand that the claims they are making—justifiable claims—should be toned down.

Let us examine one area, the privatisation of ship repair. If hon. Members have a copy of the report of proceedings of the conference that took place on Wednesday 12 October, in Blackpool, in paragraphs 111 and 112 on page 20 they will see to whom the ship repairing yard is being sold — some of the existing directors. Some 665,000 workers who can be moved anywhere within an industry are to lose one part because the management says that it can manage the ship repairing yards better outside the British shipbuilding sector. The workers have a right to demand why that is so. Why can the same managers manage better outside an integrated industry the same ship repairing yards? In paragraph 112 Mr. Hares, a British Shipbuilders director, said in regard to the proposals: whilst difficult, they offer a chance of survival. … under private ownership the constraints which we have upon us … on pricing policy will disappear and, in addition, the BS management charges which we apply right across the Corporation would … no longer apply". If that is the reason why those ship repairing yards are not profitable, why does the Minister not remove the restrictions and allow them to remain inside British Shipbuilders?

The Minister attacked what he suggested were greedy workers. The workers have had their wage levels held since April 1982. The offer of a £3.50 per week bonus guaranteed for 26 weeks equals a general increase in wages of about 1 per cent. Skilled workers in shipbuilding are now twentieth in the wages league; in 1979 they were fourth. There used to be 162 bargaining units; now they are down to two. Against that background, 62 per cent. of the work force in some yards have to get state benefits to supplement low wages. These workers are making a reasonable demand after an 18-months wage freeze. No sensible or fair-minded person would accept that the demand for a wage increase of 5 or 6 per cent. would threaten the industry.

There is a problem in shipbuilding world wide but the plan put by British Shipbuilders to the unions in Newcastle on 12 October is not a plan for survival; it is more like one for suicide. It does not answer the real and serious problems. The future of this vital industry seems to come low down in the Government's list of priorities. It is far behind their ideological approach to all nationalised industries, their political expediency, their fanatical support for the privatisation of nationalised industries, and their attacks on organised trade unions.

Many suggestions have been made by my right hon. and Friends during the debate about what the industry needs. There must be a commitment by British ship owners to build their ships in British yards. Within the European Community orders by British ship owners in their own country's yards have declined dramatically. On the other hand, there has been a dramatic increase in "home" orders in Belgium, France, Denmark and West Germany.

We need a national plan for an integrated industry which recognises that Britain is a trading nation—just— and a manufacturing nation— just. As an island nation we need a merchant fleet that is owned and built by Britain in Britain. We also need a committed work force.

Part of the Government's strategy is a demand that British Shipbuilders breaks even financially. The method that they use is to cut, cut and cut again. The Government are determined to privatise the warship yards, thereby ensuring that BS is left with merchant ship yards that could almost disappear because of financial strain. To set against the Government's approach is the resolution of the workers who attended the delegate conference last week to which I have already referred. The resolution reads: This Conference reaffirms its total commitment to the well-being of the British Shipbuilding, Shiprepairing and Marine Engineering industry … Conference urges the SNC to enter into further talks with British Shipbuilders to make every effort to find a solution to the present impasse". If the Minister uses language of that sort when he replies, it is possible that the discussions that are due to take place tomorrow will get off on a good footing and that there will be a result that we shall all welcome. That result will be achieved only if the workers in the industry believe after tonight's debate that their concern is shared by the Government and that they are determined to help them through an extremely difficult period.

6.52 pm

Mr. Richard Needham (Wiltshire, North)

The hon. Member for Dundee, West (Mr. Ross) made an extraordinary speech. He seemed to be saying that the Government have been cutting, cutting and cutting again in the shipbuilding industry when, in fact, they are proposing to increase the borrowing limits, which under the Aircraft and Shipbuilding Industries Act 1977 have increased from £200 million to £800 million and now to £1,200 million. If the hon. Gentleman thinks that that is not support of a munificent and magnificent type, I do not know what he expects. No one could conceivably complain of the backing that the Government have given to the shipbuilding industry.

It could be said that the Bill is the granddaughter, or even the great granddaughter, of the Aircraft and Shipbuilding Industries Act 1977. I am not certain whether it could also be said that it was born on the right side of the blanket. To a great extent, the troubles of the industry stem from the 1977 Act. On Third Reading, the right hon. Member for Manchester, Gorton (Mr. Kaufman) said: The hon. Member for Newbury asked me whether the Government would guarantee jobs in the industry if the Bill was passed. The answer is 'No'. I have said, not just in the House but on visits to shipyards, aircraft factories and ship repair yards, that this Government will not guarantee one job in any of these industries. I wonder whether the hon. Member for Dundee, West would agree with that. The right hon. Gentleman explained: The Bill cannot do that. What it does is to provide a framework within which it will be possible to maintain the maximum level of employment. Without the Bill, shipyards will fall down like dominoes and so will ship repair yards, while the aircraft industry will be in very great trouble indeed." —[Official Report, 7 December 1976; Vol. 922, c. 314.] The truth was the exact opposite. The previous Labour Government demonstrated their obstinacy and narrow-mindedness in forcing through the measure that ultimately became the 1977 Act. That took three and a half years and in that time the opportunities for the British shipbuilding industry disappeared. I shall quote from Mr. Brian Hogwood's "Government and Shipbuilding" which was published in November 1978. I do not think that Mr. Hogwood is a known member of the Conservative research department. He wrote: Whatever the merits or demerits of the nationalisation Bill or of the particular arguments advanced in justification of the amendments which delayed its passage … there is little doubt that delay in the passage of the Bill … increased the uncertainty surrounding the shipbuilding industry and delayed the process of its adjustment to the post-1974 conditions. The delays also resulted in difficulties in the formation of British Shipbuilders itself. There were a number of resignations from the organising committee of British Shipbuilders. The first to resign was Mr. Graham Day, who stated on resigning at the beginning of December 1976 that 'The delay in the Bill becoming law has seen the industry drift adversely in a way that options, which I previously thought in the middle of the year would be open, are no longer available."' It seems that Mr. Day was clear at that time that the obstinacy of the Labour Administration had closed alternatives that would have been open to him and his team had the Bill been enacted earlier.

Mr. Hogwood continues: This was followed at the end of January 1977 by the announcement of the resignations of Peter Mills, responsible for corporate strategy, Tony Peers, responsible for industrial relations, and Pat Griffiths, responsible for finance. By the beginning of 1977 there was no one in British Shipbuilders who was capable of getting the new organisation off the ground. Only the chairman and deputy chairman remained on the original organising committee.

By the end of 1978, Mr. Hogwood reports: it had become clear that grossly inadequate provision had been made for losses on orders inherited on vesting day. It is also clear from Mr. Hogwood that most of the time of the new management of British Shipbuilders was taken up at the start in deciding where the new headquarters were to be. Contrary to the advice of British Shipbuilders, the Government had determined that the headquarters were to be built in a shipbuilding area.

There could not conceivably have been a less auspicious start. Some of the time of the management was spent chasing orders, but that was only when it was not trying to decide where the headquarters would be. It was spending its time in those ways instead of working through a corporate plan, which should have been in preparation for three and a half years during the time when the Bill was being considered.

By the end of 1978, before the Conservative Government came into power and before the second oil shock, Mr. Hogwood says that the order position in British Shipbuilders was catastrophic — a word that has been used on numerous occasions today by the right hon. Member for Bethnal Green and Stepney (Mr. Shore). In the first nine months of 1978 orders totalling 77,000 tonnes had been received compared with orders for 36 ships totalling 372,000 tonnes in 1977. From July to September 1978, British Shipbuilders had taken no merchant shipbuilding orders. After September the position improved slightly, though confirmation of some orders awaited the approval of subsidies by the European Commission.

The shipbuilding industry's problems stem not from the great granddaughter of the Bill but from the intransigence of Labour Members, who determined that they would put off vesting day and discussion of the Bill with a view to getting the Bill on the statute book. They were also determined to insist that ship repairers be included in the Bill. As a result, they lost the entire management structure which they had set up, which offered the best chances for British Shipbuilders and which consisted of some of the finest managers in shipbuilding anywhere in the world. It was lost because of the intransigence of Labour Members.

What happened to the ship repairing subsidiary which was supposedly so vital to the Bill? At Falmouth, 1,300 workers were employed in ship repairing when it was taken over in 1976. By March 1979 the Labour Government, together with British Shipbuilders, were putting forward proposals for the closure of the Falmouth works. Most of the other ship repairers were in equal difficulties. This happened before the Conservative Government took office in 1979 and before the effects of the recession were felt. The problems of British Shipbuilders cannot be laid at the Government's door. Since then, we have needed continual ad hoc arrangements to assist the industry'.

I was interested to hear the right hon. Member for Bethnal Green and Stepney and other hon. Members ask why British merchant ship owners do not build their ships here. Why was Japan able to assure its ship owners that they could purchase their ships in Japan? The reason for the British action might be that the Labour Government decided to provide such massive subsidies for the Polish order that Polish ship owners were able to subsidise the shipping rates which attacked our merchant fleet. This meant that they did not have the money to place orders in this country. Do Opposition Members believe that if Japanese ship owners found that they could buy ships cheaper in Britain or elsewhere they would continue to use Japanese shipyards? That argument is ridiculous. I do not accept the argument that the British merchant owners are not being as sensible or patriotic as they might be. If the British merchant marine is to survive, there is no alternative other than to ensure that the owners buy their ships where they can at the best possible price.

The Opposition complain about that, but what would be the position if they were in power? Does anyone suggest that a Labour Government would spend the same amount on the naval shipbuilding programme that we suggest? [HON. MEMBERS: "Yes."] I doubt that. It is nonsense to suggest that they could fulfil their election proposals.

Mr. Harry Cowans (Leyton)

rose—

Mr. Needham

I shall not give way. Other hon. Members wish to speak.

The Opposition could not afford the thousands of billions of pounds that they were proposing for pension and other arrangements and at the same time maintain a naval shipbuilding programme.

The failure of the strategy that should have been put into effect at Scott Lithgow by British Shipbuilders eight years ago, if the Labour Government had given it the chance, is not the fault of the workers or management. When a strategy does not work, for some of the reasons that I have given, and world circumstances change—for example, tankers are no longer ordered — we need a change in the marketing of products and the use of shipyards.

Does anyone suggest that the Scott Lithgow yard was specifically designed for manufacturing oil rigs? It was designed to produce vertical tankers. Does it have an assembly hall of sufficient height for the metal building that is required for an oil rig? Does it have satisfactory arrangements for transporting parts of the rig three miles down to where assembly takes place? Was it reasonable to suggest that Scott Lithgow should take on the design of such a complicated rig with American consultants in charge? The problems occurred because of a lack of orders, a failure of strategy and a desire to try to find business and work for shipyards which were not necessarily suited to manufacturing oil rigs. It is not right to blame the work force for that. We cannot lay the blame for the failure of this strategy at the Government's door. The fault is not that of the Government, who put hundreds of millions of pounds into the industry, but that of the Opposition, as they know in their hearts.

With the return of Mr. Day, and now that we have managed to put together a plan, British shipbuilding has a much better chance of succeeding than if matters had been left to the Opposition.

7.4 pm

Dr. David Clark (South Shields)

The debate on shipbuilding is unusual in that when we have such debates there are usually many speakers from the Opposition and only the hon. Member for Tynemouth (Mr. Trotter) from the Government side, but I see that he is not here today. I am grateful that there are Conservative Members here, and I hope that they will continue to attend shipbuilding debates and learn from some of the points made by various hon. Members. It is plain that, although some Conservative Members know a great deal, others have been drafted in to speak. Some of those who have been drafted in have disappeared.

The hon. Member for Wiltshire, North (Mr. Needham) ought not to have made his gibe about Government naval orders. If he examines the order books he will find that it is not the Opposition but the Government who have been found wanting. The hon. Gentleman may remember that the former Under-Secretary of State for the Royal Navy the hon. Member for Ashford (Mr. Speed) resigned from the Front Bench because of the way in which the Government were decimating the Royal Navy. If the Falklands Islands incident had occurred 12 months later than it did we would not have had sufficient surface ships to undertake the attack. I hope that we shall hear no more along the lines advanced by the hon. Gentleman.

The Minister, when opening the debate, rightly made great play of British Shipbuilders' losses, and there is no doubt about that. However, it is worth reminding the House again that British Shipbuilders were not unusual and that yards in every country in Europe have suffered massive losses. I do not believe that the Minister will deny that. It would be helpful if he reminded the House of that problem.

The key question is not about the losses, but whether we need a shipbuilding or ship repairing capacity. I believe that we have one answer to this strategic question. Sometimes, hon. Members do not understand that.

The hon. Member for Wiltshire, North represents an area in which there are many farms and much agriculture. I do not know whether there are many shipyards there. I am one of those who believe that it is right—

Mr. Needham

The hon. Member has made a cheap comment. My constituency has 2 per cent. of its workers involved in agriculture and a much greater number in engineering.

Dr. Clark

I was making the point that the hon. Gentleman's constituency has many farms and a great deal of agriculture. He will probably agree that it is proper, for strategic reasons, for this country to subsidise agriculture. I believe that the Minister said that since 1977 we have have spent £840 million on shipbuilding. That is a lot of money that has to be set aside. We give an annual subsidy to farmers of £1,250 million. Not being a farmer, of course, I cannot grasp such a sum. It averages a fantastic £10,000-plus subsidy per farmer each year. Plainly, not all farmers receive that subsidy, but we use averages when talking about shipyard redundancies and the subsidy that shipyard workers receive. It is equally valid therefore to point out the huge subsidies that farmers receive. I am not saying that it is wrong. I am trying to put the £840 million into perspective.

There has been talk of the unrest and unhappiness in the industry. I regret that the Minister was not a little more positive when he introduced the Bill, which we are happy to support. He has, perhaps correctly, criticised the workers on occasions, but there is another side to the coin, as we have heard tonight. Early deliveries are made by various yards, yet I have never heard a Conservative Minister praise the workers, which is a great pity. They always knock British workers. The British yards are suffering difficulties, as are the European yards. We know that sit-ins have just ended in some of the German yards. There are strikes in the German yards, but we never hear about them. No one ever mentions them because the press and the establishment in Great Britain are too busy knocking our people.

During the Falkland crisis patriotic workers worked night and day to launch a carrier on time and workers converted merchant ships so that they could take part in the task force.

Mr. Cohen

Those workers are now on the scrap heap.

Dr. Clark

As my hon. Friend says, those workers are now on the scrap heap. When we talk about costs and losses, I concede that we are talking about overall costs to the Exchequer, but most of the shipbuilding areas are suffering from horrific unemployment. Many Conservative Members would be surprised at the unemployment levels in areas such as the Wear, the Tyne, the Clyde, the Mersey and so on. Almost 30 per cent. of the men on south Tyneside, represented by my hon. Friend the Member for Jarrow (Mr. Dixon) and myself, are out of work. The cost of keeping the average person out of work is £6,000 a year. The net cost to the Exchequer of British Shipbuilders is nothing like the amount that the Government try to pretend.

The hon. Member for Wiltshire, North argued plausibly that the trouble with the shipbuilding and repairing industry—he has done a certain amount of research— was the fact that the mistake was made in the time taken to establish the ship repairing group. His argument does not hold water because the Tyne Ship Repairing Group was nationalised, or taken into public ownership, long before the 1977 Bill. It was taken into public ownership because Court Line, the capitalist organisation that owned it, went bust and the National Enterprise Board had to rescue the yard and provide jobs and services on the Tyne. The blame could not be laid at the door of the nationalisation Bill.

That was one of the points made by the hon. Member for Lincoln (Mr. Carlisle). I am sorry that he is not here. I enjoyed the hon. Gentleman's comments, although I disagreed with him. He said that no one wanted nationalisation. He should ask the men in my yard whether they want to stay nationalised. They are the people who have stayed and fought. They have not accepted voluntary redundancy. They did not accept the gold. They stayed because they believed in their skill and industry.

There are two reasons why those men bitterly resent the fact that they are to be privatised. They have been in private hands before and seen their firm close. Therefore, they are suspicious. They do not want to be burnt twice. They are resentful also because they, like me, thought that an honourable deal had been done about 18 months ago when British Shipbuilders announced that it would close all the ship repairers on the Tyne. The deal was that Brigham Cowan Ltd. and Redheads in my constituency would close, that the Mercantile Dry Dock Company Ltd. in the constituency of my hon. Friend the Member for Jarrow would close and that the Middle Docks and Engineering Company Ltd. would stay open. The men accepted that deal and spurned the lure of gold. They now find that under Government pressure they are being forced out of a job because the Government want to sell yards to their friends.

It is no wonder that the men feel resentful and betrayed. They have experienced private industry. It failed. They took part in an honourable deal, on which the Government reneged. Therefore, it is not difficult to understand their bitterness.

I want to put one or two specific points to the Minister to try to be helpful because we must get ourselves out of these difficulties, and it would be helpful if he would concede them. First, redundancy is plainly one of the problems. These men know that if they opt for private industry and that firm goes bust — they have no confidence in private industry managers, because they have tried it before—they will receive no redundancy payments. These are the men who have resisted the temptation in the past. Is there any way in which those who transfer to private companies can benefit from the scheme into which they paid for years under the state system?

Secondly, we all appreciate, as is clear from the comments that I made about North Wiltshire—I make this point genuinely—that shipbuilding takes place in specific areas, as does steel making and coal mining, for good geographical reasons. That is accepted by the EC and special facilities have been made available to areas where steel works have closed and special aid assistance has been given to redundant coal mining areas. Cannot the same facility be obtained from the EC for the former shipbuilding and ship repairing industries where the problems are equally great? We accept that the world is changing and that our traditional industries will not always supply jobs for the future. We want a chance to compete in that future. We need technological and capital investment and that would be one way of achieving it.

7.17 pm

Mr. Jonathan Sayeed (Bristol, East)

I am rather surprised that the hon. Member for South Shields (Dr. Clark) should suggest that my hon. Friend the Member for Wiltshire, North (Mr. Needham) should not talk about shipping. If we followed that rule, half the Opposition Members would not be able to talk about Kampuchea, North Vietnam or many other places. We can, of course, talk about areas even though we do not represent them.

The hon. Gentleman was right to say, as we have all said, that the shipping and shipbuilding industries are in a desperate state. I therefore support the increase in borrowing powers, but we must not ignore the fact that it is only a short-term palliative. It will not cure the long-term ills.

In 1977, 27 shipbuilding, ship repairing and marine engineering companies were forced into nationalisation, since when they have been bedevilled by strikes, crushed by low productivity, hit by outdated working practices and denied orders because of unfair competition. Few would deny that much of the blame lies with past management that failed to modernise, to build covered yards and to harness the undoubted skills and pride of the shipyard workers. Furthermore, the same management failed to initiate production line techniques, as the Japanese did, for the efficient production of the carriers of our life's blood. It should also be recognised that the same managers faced Herculean obstacles. They faced the most antiquated set of work practices, the most massively counterproductive demarcation and ever-declining profit levels. All those factors greatly contributed to our current desperate state. Nationalisation meant that those very practices frequently continued in the shipbuilding industry. It was partly protected by nationalisation from the reality of decline and the necessity for rationalisation.

So much for the past. What about the future? We cannot continue along the same old path. We must have new thinking and the will to implement it. Therefore, I suggest that my hon. Friend the Minister of State should consider a few points. The first is rationalisation. We must concentrate our resources on yards that have the position, the work force, the facilities and the management that will enable them to have a long-term future. I accept that that means that there will be a set of hard decisions. It will be hard for the yards that are not chosen. But if we are to have an industry at all, we must face reality. That means making hard decisions. Once those yards are going concerns, they must be returned to private hands. It is a hard fact of life that if one is likely to lose one's shirt because one loses a contract, one's mind is wonderfully concentrated on producing the right ships at the right price and at the right time.

The borrowing powers, which we all support, are only a short-term measure. For the medium and long-term we need more radical ideas. I should like to suggest some. The first relates to competition. We must ensure that trade is not only free, but fair. Our market share of merchant ship building has declined from 40 per cent. in 1926 to 20 per cent. in 1956 and to 3 per cent. now, despite the £800 million that has been pumped into British Shipbuilders since 1977.

What about our competitors? The Japanese market is nigh on closed to us, yet it has an almost free hand to continue its destruction of our manufacturing base. I am sick and tired of our pussyfooting attitude. Let us take unilateral action. By so doing, let us assist the EC to get off the fence. Let us tell the Japanese in unmistakable terms that while we are happy for them to come here— we shall assist them to relocate here to supply European markets — we are no longer prepared to countenance one-sided trade that contributes to our self-destruction.

We should also put those points forcibly to the South Koreans. They produce ships at 65 per cent. of the cost of ours. Despite their claims to the contrary, they do it largely by indirect subsidies, tax holidays, cheap credit and cheaper steel. They produce their ships at even less than our material costs. Could not my hon. Friend the Minister put pressure on the EC to discourage that unfair competition? For instance, could not the EC refuse port facilities to specific ships that are dumped on the world market, which has 60 million tonnes laid up? At the same time my hon. Friend might care to look at the French and German cabotage rules, Scandinavian port rules and the Panamanian canal rules, all of which militate against the British flag. We cannot isolate shipping and shipbuilding from ship repairing, marine services or the closure of nautical colleges. We cannot fail to recognise that they all contribute to the decline of the British merchant fleet.

Naturally we must not be negative. We must not only try to protect our position, but search for ways in which to redress the balance. I offer my hon. Friend one suggestion. In the Falklands campaign, merchantmen played an integral and essential part in a modern naval conflict. Therefore, is it not possible to give subsidies or tax incentives, possibly from the Navy Vote or elsewhere, for merchant vessels to be built in British yards, to be manned by British crews and to carry the British flag? Those vessels should be constructed so that they can be simply adapted into auxiliary naval vessels in a way that does not detract from their civil use.

Such vessels could be container ships with helicopter platforms, containerised command and control modules and sea-to-air defence modules. They could be crude oil carriers supplying fuel to the Fleet and operating jump jets.

They could be bulk carriers or general purpose merchantmen acting in time of war as dry good Royal Fleet Auxiliaries, and operating one or two Harriers or Sea King or Wessex helicopters to give close support. Those ships should have British crews, who should be encouraged to be members of the Royal Naval Reserve. The terms of the building subsidy should be couched in such a way that British owners, by accepting that subsidy, have to make those vessels available in time of conflict and, on infrequent occasions, for short-term manoeuvres.

As other hon. Members are anxious to speak, I shall not develop that theme or go on to others. I support this short-term measure provided that we recognise that that is all it is and that we must rationalise, denationalise and bend our minds to discovering and implementing every method that supports and enhances a maritime Britain.

7.28 pm

Dr. Norman A. Godman (Greenock and Port Glasgow)

As I represent a community that is heavily dependent on shipbuilding and maritime engineering, I welcome any financial or other form of assistance to the industry. I am new to the House, but I have fairly lengthy experience of the shipbuilding industry. I was by trade a shipwright.

There have been some even-tempered and intelligent contributions to the debate. Hon. Members who made the most noise must be elsewhere. That is no bad thing.

The hon. Member for Eastleigh (Sir D. Price) outlined the economic importance of the shipbuilding industry to other industries. There is no doubt that its economic importance extends far beyond the maritime communities in which our shipyards are situated. British Shipbuilders, and other shipyards are major customers of several industries which are frequently situated away from our principal waterways. British Steel is a major supplier to British Shipbuilders and other yards and marine engineering plants in Britain. Each month thousands of tonnes of heavy plate leave steel plants at Ravenscraig and elsewhere to enter our shipyards.

In the financial year 1982–83 British Shipbuilders purchased £610 million worth of materials and services in pursuit of its business. It is reasonable to assume that about 90 per cent. of such purchases were from United Kingdom companies. During the previous financial year, British Shipbuilders spent £24 million on energy and water, £14 million on rates and £7 million on plant hire. In addition, many other suppliers, including those engaged in microelectronics and the computer systems industry, will benefit from work carried out in British shipyards. Offshore structures and maritime vessels are major users of new technology in navigational aids, cargo handling, stability maintenance, dynamic positioning and so on.

The assistance given to British Shipbuilders should be compared and contrasted with that received by British Leyland and the British Steel Corporation in the past few years. The Minister referred to the losses incurred by British Shipbuilders in the past year. If we compare and contrast the investments made in the three organisations and the losses suffered by them a clearer picture emerges of the financial assistance given to British Shipbuilders. Losses incurred by British Leyland from 1977 to the end of 1982 were about £1,266 million. Losses incurred by the British Steel Corporation between 1977 and 1983 were £4,929 million and losses incurred by British Shipbuilders were £485 million. Those massive losses must be deeply regretted, but they give us a clearer perspective of the assistance given to those industries.

If it is important, as I believe it is, to maintain, when necessary, assistance to the British motor car industry, and if it is vital to assist, when necessary, the British steel industry, I believe that it is equally important for an island nation to give assistance to its shipbuilding industry in what can only be described, if we examine the figures which have been paraded before the House today, as extraordinarily difficult economic circumstances. Conservative Members have put forward one or two versions of the history of British shipbuilding. I believe that the British shipbuilding industry is still suffering from the legacy of short-term management techniques and a weak capital structure.

During the past five or six decades management throughout the industry was deeply reluctant to invest in new technology or expansion. Capacity stability or even reduction was the order of the day, as I know from my experience in the shipyards. Little or no attention was given to the analysis and development of project management. Regrettably, Britain is still adrift in the technique of project management and in market orientation. There has been a wilful refusal in the past few years to engage in a systematic analysis of market development. According to Professor Anthony Slaven, the consequence of such ultra cautious management has been a neglect of new markets and a lethargy in adopting new methods and vessels at a time when success demanded bold capital investment. The persistence with traditional management responses led inevitably to the eclipse of the industry by its major rivals. Despite such crippling historical factors, however, British Shipbuilders and many of the small yards in mainland Britain have, by and large, caught up with their European competitors, although not with the Japanese and South Koreans.

I believe that British shipyards still require Government assistance in many ways. First, the small British yards would benefit from a change in the EC shipbuilding intervention fund which at present does not apply to the construction of vessels of less than 150 gross registered tonnes. The lower limit of 150 tonnes has remained unchanged since 1972 even though the circumstances of the industry have changed substantially. The fifth directive on shipbuilding will remain in force until 31 December 1984. I should like to see the limit reduced to 75 or at least to 100 gross registered tonnes.

Recently a small Scottish yard, operating in an area of high unemployment in the west of Scotland, tendered for a ferry of 120 gross tonnes required by the Shetland Islands Council. Although the naval architects, a famous firm based on the east coast of Scotland, said that the Scottish yard's quotation was priced competitively, gave the best delivery date and was the most professionally prepared, the order was given to a Norwegian yard which received, in relation to the cost of the tender, a massive subsidy from the Norwegian Government of £124,000.

Although some assistance was offered to the Scottish yard, in no way did it approach the massive subsidy which the Norwegian yard received. The Scottish Office provided a subsidy to the council of approximately 75 per cent. I regret the loss of the order because, among other things, about 50 United Kingdon suppliers would have benefited from that order.

I await with interest what the Minister has to say on the directive. I believe that the Government should make every effort to change the terms of the directive. The cut-off point for funding should be 75 gross registered tonnes. The EC intervention fund should be made more flexible than it is at present.

The Government can also assist the shipbuilding industry at this critical time, despite the objections raised by Conservative Members, by ensuring that nationalised industries, state Departments and public corporations involved in the maritime industries place their orders for vessels and equipment with British yards. I know that many people in the shipbuilding and marine engineering industries are deeply concerned about the CEGB order, to which my right hon. Friend the Member for Glasgow, Govan (Mr. Millan) referred. I understand that the CEGB has said that orders may be placed with foreign yards. That reveals an odd and disturbing attitude. Consumers cannot go to South Korea or Japan for cheap electricity. I declare an interest as I want the orders to go to Govan. If they do, and if low speed diesel engines are specified, John G. Kincaid of Greenock could build the engines.

I wish to make a few observations about Scott Lithgow and the offshore engineering industry. The United Kingdom was a relative latecomer to the offshore engineering industry. For some years there was little involvement in the design, construction and operational aspects of the industry. Although the United Kingdom has a part to play now, it remains a minor part. That sparse involvement is in stark contrast with Norway and France, both of which have a major stake in the offshore engineering industry.

During the past 20 years that industry has grown in northern Europe and there is now an annual investment of £4,000 million. That will continue for some time. It is an important area for involvement by British maritime organisations. It is widely believed that as the offshore fields become smaller and more marginal, and the profit margins less wide and less certain, more and more oil companies will switch to floating production systems. Scott Lithgow and Cammell Laird have the capability to build the most technologically advanced offshore structures. But if the yards are to be competitive on the international market, they will require Government support and financial assistance.

The Minister referred to the latest developments in the contract negotiations between Britoil and Scott Lithgow. I was pleased to hear his fairly positive remarks about the critical position on the lower Clyde. Scott Lithgow is the major employer in that area. It is also a major purchaser of goods and services from other industrial organisations. For example, in 1982–83 it spent £67 million in direct purchases, of which 56 per cent. was spent on goods obtained from within the Strathclyde region and spread among 112 suppliers. About 20 per cent. of the £67 million was spent in the Inverclyde district. Scott Lithgow is of major importance both as an employer and as a customer, not only in Strathclyde but in Scotland and the remainder of mainland Britain.

If the yard were to close—I do not believe that it will — the economic and social effects on the local community would be disastrous. I am sure that the hon. Member for Banff and Buchan (Mr. McQuarrie), who knows the area, will acknowledge that. Unemployment in the Clyde area stands at more than 20 per cent. If the yard closed the figure would exceed 40 per cent., and might reach 45 per cent. There is no need for the community to suffer the dreadful blow of such a closure. The contract can be delivered on time. Scott Lithgow has the skills, experience and knowledge to produce a first class rig for Britoil. If there is an overspill, that should be accepted by both sides and the contract renegotiated.

There have been problems in project management and other areas. The October edition of Shipbuilding News said about Scott Lithgow and a BP rig: A remarkable technological operation involving the mating of the upper and lower sections of a giant rig in the middle of the Clyde estuary has been accomplished by Scott Lithgow days ahead of schedule. Scott Lithgow, who pioneered the process of building tankers in two halves and joining them together in the water, have now accomplished a similar feat with an oil rig for BP‥‥It is believed to have been done only once before in America, but the operation at Scott Lithgow involved the load out of the deck unit including the superstructure and drilling derrick onto three transporter barges which was the largest of its kind ever undertaken in the world. Scott Lithgow have now set themselves a target date of delivery by December 22, which, if this can be achieved, will help to restore some of the credibility lost over the past two or three years… Once again Scott Lithgow have demonstrated that in technical achievement they are in the forefront of new developments. Since I became a Member of Parliament, I have spent many hours in the shipyards. There is no doubt that a change in industrial relations attitudes has taken place. There is an acceptance of the need for change, as I told Mr. Day yesterday. The management revival plan produced in Scott Lithgow has elicited a response from the shop stewards committee and the work force that is both positive and responsible.

I hope that this week's negotiations at national level will be settled amicably and realistically, especially in the light of what is happening on the lower Clyde.

7.48 pm

Mr. David Heathcoat-Amory (Wells)

It is never a pleasant task for the House to discuss the business of a declining industry. It is not with relish that I do so, but from a desire to help and to try to illuminate some the principles involved. Any economy — certainly any dynamic economy — contains industries that are contracting and others that are expanding. That does not mean that we should discard those that are contracting.

During the debate we have heard references to the strategic value of the shipbuilding and ship repairing industries, but other issues are involved. No unit in any economy exists on its own. The demise of any industry has a knock-on effect throughout the economy. If the Government have a role, it is to assist the difficult process of change and not to ignore it. The trouble with so much of post-war Britain is that Governments have persistently intervened to retard that industrial change rather than to promote it. This has postponed the day of reckoning in a number of cases, but has never, as far as I know, cancelled it.

So it was with the British shipbuilding industry. It was a cruel delusion for any Government to pretend that they could achieve for British shipbuilding what British Shipbuilders could not achieve for themselves. The 1977 nationalisation was an act of folly because it persuaded people that the crucial factor in the future of British shipbuilding was the involvement of the Government rather than the involvement of the customer.

There are now two more powerful trends which have come together, neither of which comes under Government control. The first of these is the reality of world competition, about which we have already heard. To suppose that Britain can regain her overwhelming maritime pre-eminence is an exercise in nostalgia. We are a maritime nation, not by right, but by effort. During the 19th century we carried a high proportion of the world's manufactured goods. That was an artificial trend, based on the sale of low value added heavy industrial products to a captive market. We have seen the promotion of a number of other industrial countries, Japan, and South Korea among them. However, below them is another tier of emerging industrial countries which are anxious to build ships to carry their own goods. In my experience, foreign competition, be it from Japan, South Korea or other emerging countries, is not based on unfair subsidies.

We are at least as generous in this country to our shipbuilders and our ship repairing companies as those other countries, although I ask my hon. Friend the Minister of State to keep industrial support by other countries under review. Such a review should cover the informal as well as the formal assistance given by other countries to their industries. I am afraid that the ability of other shipyards to build cheap ships is founded on certain industrial realities. Cheap steel and better working practices unhindered by past industrial attitudes are foremost among them. To cry foul at the achievement of foreign shipyards is not worthy. Nor will the relative disadvantages, such as they exist, of our shipyards, be altered by anything that I have heard from the Opposition Benches tonight.

The other trend is the volume of idle shipping in the world. It is estimated that there are now about 91 million tonnes of shipping lying idle in foreign ports. This means that any upturn in world trade is likely to be carried in those ships. The proper reaction to such facts is not how we can alter them, but how we can intelligently react to them. We must increase our own efficiency, and I am not persuaded that that process is helped by state ownership. Nor have the Opposition made a convincing case for continuing state control or ownership, beyond an apparent belief that such ownership gives access to a bottomless pit of public money.

The Government have a part to play in easing the process of contraction and change, not least for the employees and ex-employees affected. Special attention must be given to retraining the men released. The problems of job mobility out of affected areas must also be examined, and this requires a more co-ordinated approach to the problems of industrial change than has yet been undertaken by any Government.

I welcome the Bill as a mark of responsible management of this difficult industry. It remains now for its management and employees to make good use of the considerable sums of public money to secure for the industry a future, without the need for too many debates such as this one.

7.55 pm

Mr. Don Dixon (Jarrow)

I thank you for calling me in this important debate, Mr. Deputy Speaker, because tomorrow there is to be an official meeting between the shipbuilding negotiating committee and British Shipbuilders, and next week there could be a national strike or an occupation of the shipyards.

I have sat here almost all day. I notice that the hon. Member for Shrewsbury and Atcham (Mr. Conway) is not present, but I understand that he said that there were no northern Members of Parliament here for a shipbuilding debate. We were at the important annual meeting of the northern group, so we were not here between 5 and 6 o'clock. I had better put that on the record in case the local press accuses northern Members of not taking an interest in the shipbuilding industry.

Mr. Cowans

Perhaps my hon. Friend will draw the attention of the House to the fact that the hon. Member for Shrewsbury and Atcham (Mr. Conway) slipped in for two minutes and slipped out again, and that he is not here when all the members of the northern group are not only here but contributing to the debate.

Mr. Dixon

The hon. Member for Shrewsbury and Atcham used to be a county councillor in our area—he is now one in his own region—so I do not need to be told anything about him.

I shall talk about the Minister who introduced the Bill on Second Reading. I do not know whether this is unparliamentary language, but I have never heard such arrogance, insolence or ignorance from a Minister of State, Department of Trade and Industry equal to that of the present Minister. The hon. Gentleman said that men in warship yards working on Admiralty ships are more productive than when working on merchant ships. Does the Minister really think that when a shipwright or a plater or any shipyard worker works on an Admiralty ship he runs up and down the decks, yet when he goes on a Merchant Navy ship he walks up and down them? That is not a particularly intelligent view for a Minister who speaks for the Government on the shipbuilding industry.

Labour Members accept the Bill, but it is irrelevant to the problems facing the British shipbuilding industry today. The industry faces a greater crisis today than any that it has ever faced, even during the 1930s. As I pointed out, next week could be crunch week for the British shipbuilding industry. When the former chairman of British Shipbuilders met the shipbuilding negotiating committee to present his document on the state of the industry last December, the latter said: Every time we require to meet our lay representatives it appears w are not only the purveyors but in actual fact the creators of bad news. As an S.N.C. we know that this is not the case but we would be foolish not to recognise the frustration and disillusionment which faces our members at present. That frustration and disillusionment are now on such a scale that the workers in the industry are voting eight to one and nine to one to take industrial action against the package put forward by Mr. Graham Day of the British Shipbuilders board. The frustration and disillusionment have built up over a number of years, because men have seen thousands of their workmates thrown on the scrap-heap. They have co-operated with management over work practices, only to see more men sacked. The frustration and disillusionment have built up while they have agreed to cut down the wage bargaining units from 168 to the present two, which stops the leap-frogging that we used to have. Frustration and disillusionment have built up to the point where men are saying, "Enough is enough."

The shipbuilding industry is heading for the biggest confrontation that it has ever known. I know these men. I live among them. Indeed, if I were still working in the shipyards and I had been at one of those meetings last week when they were deciding what action to take, I should have voted with those lads to take the action that they have now determined to take.

I am often accused of being emotional about the shipbuilding industry. I make no apology for that. I have worked in the industry all my life. I started when I was 14. I need no lessons from Conservative Members about industrial relations or conditions in the shipyards. I experienced the conditions in the shipyards when they were under private management. They were a jungle, and they were nationalised because private management failed the shipbuilding industry. Indeed, the first survival plan of British Shipbuilders was in 1977 when the Labour Government nationalised the industry. No one should forget that.

I have vivid memories of the 1930s. I remember an organisation called Shipbuilding Security Ltd.—merchant bankers, ship owners and shipbuilders who combined to rationalise the shipyards because of overcapacity and world recession. Those vultures came to Jarrow—the town where I was born—in 1935. They bought the old Jarrow Palmers yard, and then closed it. That was why the Jarrow march took place in 1936. That is why Ellen Wilkinson wrote the book about the town that was murdered.

When the Minister spoke about the shipbuilding industry, he did not once mention the social consequences of closing shipyards. He did not mention the fact that shipbuilding communities are like mining communities: they depend economically and socially on the shipbuilding industry. The Minister has no feeling whatsoever for those communities.

My grandfather and father were thrown out of work in 1935, when Shipbuilding Security Ltd. bought the old Palmers yard. My grandfather never worked again. My father got work only in 1939 when the country decided that it required ships to fight the second world war. Otherwise, like my grandfather, he would never have worked again. Shipbuilding workers today think of the shipbuilding board as being the same as Shipbuilding Security Ltd. of the 1930s, and that it will close yards.

Shipbuilding workers are told repeatedly that they have to be competitive. We heard that again today from the Minister. No shipyard workers in the world work harder than British shipyard workers. There may be yards that have better equipment. In Britain, the yards were starved of investment when they were in private hands. I know that, and the men in the shipbuilding industry know that. In 1962, we had the Paton report. In 1966, we had the Geddes report. In 1972, we had the Booz Allen report. All of those reports talked about the lack of investment in British shipyards. That is why we are not competitive today.

A survey in the 1970s showed that for every British shipbuilding worker there were assets of £825. In Germany, the amount was more than £1,000. In Italy, it was more than £1,200. In Sweden, it was over £1,800. In Japan, it was over £2,800. I accept what the Minister says about the £840 million that has been invested since nationalisation, but we should compare that with the fact that last year Japan invested £620 million in only seven shipyards and that Korea has been investing £400 million a year in shipyards.

I agreed with little of what the previous chairman of British Shipbuilders, Sir Robert Atkinson, said, but I wholeheartedly agree with what he wrote in the 1981–82 report on the state of British shipbuilding. He said: Britain is an island nation 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 shipbuilding is not something that can be used intermittently, only available when required. To be effective it needs continuous use, it needs constant improvement and continuous investment in men and materials, for once that capability is allowed to disperse it will not be recoverable. Shipbuilding like shipping is a national strategic industry and needs a declared national maritime policy. Britain remains one of the few major maritime nations in the world where the national requirements of shipping and shipbuilding are not linked. That statement was made by a former member of the shipbuilding industry, and I wholly agree with it. I am sure that some Conservative Members agree with it, and I have no doubt that most of my colleagues on the Labour Benches believe it.

Already the requirements of fortress Falklands are not being met solely by United Kingdom ships. Foreign ships are being chartered and sent to the south Atlantic. Over the past seven years, the British fleet has nearly halved in size. The number of United Kingdom-owned and registered ships has fallen from 1,614 to fewer than 900. In 1982 alone, 100 ships were lost. United Kingdom-owned and registered tonnage has fallen by almost a third since the beginning of 1981. Not only is our fleet being depleted, but so is our capacity to build and maintain that fleet.

I want to spend one or two moments talking about the effects of the shipbuilding recession in the north-east, where shipbuilding, ship repairing and marine engineering have formed an important part of our industrial base. We in the northern region have been top of the unemployment league for many years now. Our unemployment percentage has been higher than that of any other region, with the exception of Northern Ireland. The northern region accounts for 20 per cent. of total employment in the shipbuilding industry in the United Kingdom. Within the northern region, there is a completely integrated shipbuilding, ship repairing and marine engineering industry, almost wholly supplied and serviced from within the region. That situation is not repeated anywhere else in the country.

We have many organisations that are connected with the industry. The University of Newcastle, in the constituency of my hon. Friend the Member for Newcastle upon Tyne, Central (Mr. Merchant), has the largest and foremost naval architecture department in the country. It has close links with the industry, and it has a marine industries centre. Sunderland polytechnic — in the constituency of my hon. Friend the Member for Sunderland, North (Mr. Clay) — has a department of naval architecture. South Shields marine and technical college is internationally known. With those institutions, the north-east has the greatest concentration in the country of technical education facilities directly connected with the shipbuilding industry.

In our region, shipbuilding is not just a job; it is a way of life. That is because of the close relationship that exists between the working and living environments. When one closes a shipyard, one closes a town. The hon. Member for Edinburgh, Central (Mr. Fletcher), the Under-Secretary of State, may find that amusing. He would not find it amusing if he were to come to my constituency.

Let me give an example. A survey carried out at Swan Hunter showed that in Wallsend 62 per cent. of the work force lived in that town or in adjacent towns. In Sunderland, a survey showed that at Austin and Pickersgill 37 per cent. of the work force lived within one mile of the yard and only 15 per cent. lived more than five miles away. That is why the recession in shipbuilding has such an effect on whole communities.

We want a Minister to come here not with these small Bills giving additional borrowing powers to British Shipbuilders, but with the recommendation of the Select Committee on Industry and Trade, which produced a report some time ago. The first recommendation of that report was that a national maritime policy, co-ordinated by a senior Cabinet Minister, should be formulated in consultation with the trade unions, British Shipbuilders and the shipping industry. That is the positive policy that we want from the Minister, not Bills that allow additional borrowing powers. Not one of the 9,000 men who are now under threat of redundancy will be saved by the Bill. Since nationalisation, 25,000 have been sacked.

We also want the Minister to suggest that British ship owners, Government Departments and nationalised industries should buy British. My hon. Friend the Member for Greenock and Port Glasgow (Dr. Godman) mentioned that last year BS spent £680 million—94 per cent. of it in United Kingdom-based companies. What has happened to the scrap and build scheme? We hear so much about it, yet it disappears after each debate.

It is nonsense for the Minister to come here and talk about saving public money by sacking shipbuilding workers when it costs £6,000 to put each one on the dole. Is it not better for a shipbuilding worker to do something useful for the country rather than to stand about drawing unemployment benefit?

When the Minister talks about competition, he is not talking about fair competition. Korea, Japan and some European countries have been mentioned. Their shipbuilding industries receive either direct or indirect subsidies. Japan has not built a ship outside Japan since 1950. Japan could build ships cheaper in Korea, but not one Japanese ship owner has gone to Korea. The Japanese are building ships in their own shipyards. Continental ship owners have shown others how to place orders in their own industry. That is what we should be doing and what the Minister should be encouraging. I do not oppose the Bill, but it does nothing for the British shipbuilding industry or for the areas represented by Labour Members.

8.11 pm

Mr. Tom Sackville (Bolton, West)

I do not blame the hon. Member for Jarrow (Mr. Dixon) for becoming emotional. What is happening in the shipbuilding industry is tragic and his area is one of the most tragically affected. However, he and other hon. Members have failed to address themselves to some of the fundamental commercial realities that have led to the decline of the industry.

In the past 10 years there has been a deep recession in world trade. That has been caused partly by the first oil shock, followed by the second oil shock in the late 1970s, which had the direct effect of reducing the amount of bulk oil carried round the world. That has had a strong knock-on effect on world trade generally. Many countries' economies have shrunk during this period. For example, some countries in the middle east have used oil revenues to create import substitution industries so that a minor boom in shipping during the mid-1970s has already begun to tail off there.

Foreign competition has been vicious. Many of the countries which have recently started shipbuilding have access to cheap supplies of steel. It has already been pointed out—it is true of the far east as well as Finland —that some bids are equal to only the cost of the steel in Britain. The same applies to labour costs. That is the case not only in Japan and Korea, but in counties such as Brazil and Indonesia which are coming into the shipbuilding market because there is a trend towards carrying one's trade in national flag ships.

Government investment has been considerable in some countries. Korea is a good example of a country where there was a national plan to invest in what were perceived to be the growth industries. The equipment used by such shipyards has been much superior to that used in many British shipyards for similar vessels, with a consequent difference in the price quoted.

The British shipbuilding industry has been beset by a general lack of competitiveness. I do not blame the work force or management, but for various reasons, which we all know, the atmosphere within the British shipbuilding industry has not encouraged competitiveness in a world in which it is possible to stay in business only by being competitive.

My hon. Friend the Member for Wiltshire, North (Mr. Needham) referred to some of the chaos that resulted from the legislation of 1977 and the nationalisation of major parts of the British shipbuilding industry. He mentioned specific cases of managment leaving and of a lack of policy in the early stages. History does not suggest that Britain's nationalised industries compete effectively in the world. Much as Labour Members may not like to hear it, privatisation will be one of the saviours of part of the British shipbuilding industry.

Mr. Eddie Loyden (Liverpool, Garston)

rose—

Mr. Sackville

No, I shall not give way.

The decline in the shipbuilding industry goes on. There is vast overcapacity in the industry. It has been estimated to be about 40 per cent. of the market as a whole. It has been said that Japan had 58 per cent. fewer orders at the end of 1982 than in 1981. If Japan has had that sort of decline in its shipbuilding orders, there is little hope of our being able to maintain the capacity that we have had in the past. All that is depressing and we can only come to the conclusion that we shall have to scale down.

We should ensure that the money invested in BS— about £840 million since nationalisation and the figure is growing—is not a case of good money following bad. Are we sure that the money needed to maintain jobs in the shipbuilding industry will not starve what may be the industries of the future of the investment that they should have? To cite just one example, only a small part of the money invested in BS since nationalisation is required for a major aerospace project—the A320 airbus. It would be a great tragedy if that project, which will maintain many jobs in a growth industry, were denied the necessary finance, and our part in that project cancelled, because of money spent on other industries. Again, to put it into perspective, an even smaller fraction of the money to be spent on shipbuilding could be used to assist a project with a good future, again in aerospace, in the Manchester division of British Aerospace—the advanced turbo-prop aircraft. That project, which has a huge export market potential over the next 20 years, could be helped for a fraction of the money that has been invested in what may, to a great extent, be yesterday's industry.

It has been said that if the Labour party were to take office it would decrease expenditure on naval orders. The Labour party manifesto says that a Labour Government would reduce defence expenditure to the level of that of our European partners. One does not need a calculator to work out, on the basis of the percentage of our GNP devoted to defence expenditure compared to that of our European friends, that that would mean a drop of between 25 and 30 per cent. in defence expenditure, which would have a very significent effect on naval orders and orders for all other military equipment.

A small but important part of the shipbuilding industry consists of those yards that build fishing vessels. The fishing vessel industry has been declining recently for two reasons. It has been hit both by the decline in the turnover of the fishing industry in this country and by the drift towards ordering foreign vessels, subsidised no doubt by their own Governments.

In the past few years there has been a growing trend for large foreign-owned vessels to "Hoover up" off coasts what we had thought of as our fish. Many of our foreign friends have been breaking all the rules of the fishing industry. There is a strong suspicion — it cannot be proved—that foreign Governments are subsidising petrol for fishing vessels. There is a strong suspicion also that some countries are catching herring during a herring ban and calling them pilchards. There is a further suspicion that foreign countries are landing fish with no regard to quotas.

I was in Fleetwood two weeks ago. I was amazed to find that none of the Fleetwood fishing vessels had put to sea for two and a half weeks, because of rough weather. None of the fishing vessels at Fleetwood today is large enough to cope with storms such as we endured at that time. Meanwhile, vessels twice as large were out in the Irish Sea—French and Danish vessels—catching fish to be landed in foreign ports, subjected to no inspection and, very likely, exported to Britain and sold in Fleetwood.

Mr. Deputy Speaker (Mr. Paul Dean)

Order. I am finding it difficult to relate the hon. Gentleman's remarks to the Bill.

Mr. Sackville

The connection is that orders for new fishing vessels have declined seriously over the past few years because the fishing industry has declined, for the reasons that I have mentioned. Other countries are investing large sums in the restructuring or renewal of their fishing fleets, and in 1982—to give an example—the Sea Fish Industry Authority put about £3 million into the restructuring of our fishing fleet.

Mr. Deputy Speaker

Order. I am sorry to interrupt the hon. Gentleman again, but he is going very wide of the Bill. He must relate his remarks to the Bill.

Mr. Sackville

I conclude by saying that it is of paramount importance that the Minister should take note of the urgent need to restructure our fishing fleet.

8.25 pm

Mr. Bob Clay (Sunderland, North)

Hon. Members have given broadly two interpretations of the Government's policy and intentions towards shipbuilding. Hon. Members, including some Conservative Members, have hinted that the Government are misguided, and do not understand what they are doing, the depth of the crisis in the industry, the technical problems involved or the nature and extent of the competition. However, the view that I share is that the Government know precisely what they are doing, and have embarked on a course that involves the privatisation of naval yards and that will involve the closure or disposal of ship repairing. It is increasingly clear that the Government will use the limited amount of money that they are making available simply to reduce the industry so that there are possibly only four or five merchant shipbuilding locations left. When demand picks up, the industry that is left can then conveniently be handed over to the Government's friends in private enterprise. Indeed, Mr. Graham Day has been installed for that very purpose. That is the clear and calculated intention of the Government.

Therefore, all the remarks that we have heard about the action that may commence after tomorrow are blatantly and disgustingly hypocritical. If that is not so, how can the whole chapter of incidents that has been described by hon. Members on both sides of the House be explained? I refer to the failure to bid for orders or to secure them, and to the way in which work is often almost given away. The disgraceful case of Jebsen's Drilling plc came to light only recently. That firm asked British Shipbuilders if it could take rigs into the Tyne for repair work. It was initially told that it could not do so, although that was blatantly untrue.

I take great and bitter exception to the attack made on the workers at Sunderland Shipbuilders in my constituency. How better could one organise and ensure an industrial dispute than by conceding to 38 people in a yard of thousands what amounts to a substantial wage increase at a time when people have been bleating about the state of the industry and when workers have suffered a wage freeze? If British Shipbuilders' management had set out to cause a complete stoppage in that yard, it could not have made a better job of it. In Sunderland, questions are being asked about that. People ask whether it could be anything to do with the fact that there are penalty clauses that apply if deliveries are late but which do not apply if the delay results from industrial action. I point no finger, but simply repeat the questions that are being asked in my community. If the Minister is innocent and unaware of those questions, he should get to the bottom of the matter instead of attacking the workers involved.

Apart from the lost orders, there is a broad area in which British Shipbuilders has not attempted to compete. Should not British Shipbuilders have been looking for new areas of work? A shipbuilding and turbine producing firm in France, Alston-Atlantique, preassembled a whole hydro-electric power station for the Ohio river in the United States. It was floated on manufactured barges to the United States. Why does not British Shipbuilders try to get into that sort of market if there is a lack of demand for the more conventional type of work? Why have we not made any serious attempt to move into the new generation of coal-powered, steam-driven ships? Three ships have been built in Korea, two in Japan, two in Italy, and one in the United States, and two conversions have been carried out in Spain. However, nothing has been done in Britain and there has been no serious attempt to do anything.

If things are so bad, why have we not moved into that area of work? Why have we not seriously considered using the skills, the space and the design staff in our yards in order to build substantial wind, wave, or barrage power systems? We should be addressing ourselves to all the alternative forms of energy. Why has there been no serious attempt to utilise our skills and work force in that way? The Government's clear intention is to run down the industry and then privatise it.

Conservative Members often talk about productivity, but the most productive and efficient shipyard in Europe, Austin and Pickersgill, is in my constituency. In 1976, 1977 and 1978 it had the highest productivity in Europe and produced the most tonnes per man hour. Nothing has changed since nationalisation. Indeed, there is less demarcation. There is complete interchangeability between the boiler making trades. By agreement, there is flexibility between the boiler making and outfitting trades. All the things that management as well as Conservative Members have described as the key to success have been done.

The Prime Minister went to the yard twice—although not recently — to launch ships. She told the workers what a good job they had done, and said that if only all the other yards were like it things would be better. She said that the yard was a shining example to the rest of Britain and Europe. That is the sort of yard that Conservative Members say that we should move towards. It already exists. It has the capacity to build 20 SD14s per year. It will launch five this year, but only three next year, if it is lucky. One of the managers put the point succinctly when he said that people do not run a washing machine to clean one dirty handerchief per week.

The yard has all the practices, investment and equipment to produce ships as productively as any other yard. Its productivity was comparable to that of Japan three or four years ago. The problem is that it does not have the ships to enable it to produce productively. It is as simple as that. Competition from Korea is crucial to the argument. We know that the Korean Government set out to do what they are now successfully doing. If things continue as they are, Korean shipbuilders will eventually undermine the Japanese industry.

However, it has not been sufficiently stressed that few workers in the industry in Korea last beyond the age of 40. They work 10-hour and 12-hour shifts, six or seven days a week and they do so on pitiful wages. If a worker is half asleep at the end of the shift because of his working conditions, he may lose a hand or arm, or, indeed, his life, in an accident. There is a lack of any meaningful health and safety regulations. At the slightest sign of unrest the yards are virtually under martial law. If a worker is mained in that way, he loses his job and does not receive any compensation or reward. We are told by Conservative Members how people should compete against such workers. There is no way that British shipyard workers should or will compete with those conditions. Conservative Members should reconcile themselves to that fact.

Several hon. Members have referred to the meeting that is to take place tomorrow. I resent the predictable attitude of Conservative Members that the workers are all to blame. I resent the implication that they are like lemmings. Conservative Members ask how they can behave in that way when the industry is in such a state. It is because the industry is in such a state that they are behaving like that. They have had moral lectures from Conservative Members for far too long.

The wage crisis in the industry has led to a lack of confidence in the future and a lack of morale. That leads people to accept redundancy because they see no future in shipbuilding. The wage crisis has been caused in three ways—low increases until there were no increases at all; no increases for eighteen months; and now virtually no overtime at all. Sustained and regular overtime suited the management. Far more attention should be paid to that point. That was the way that the industry operated when there were orders. In the yards to which I have already referred, a survey carried out by the shop stewards shows that, in 20 weeks of last year compared with 20 weeks of this year, apart from the fact that there was a wage freeze, earnings have fallen by £27.50 a week which is a wage cut of 20 per cent. That is what shipyard workers now face because of the loss of overtime. As has already been pointed out, the workers have fallen from fourth to twentieth in the wages league. In a secret ballot in Sunderland yards, workers came out 8:1 and 9:1 for industrial action if necessary.

Conservative Members have talked about facing commercial reality, but I should like to tell the Minister about a different reality. My constituents come to me and set out their entire family budget and explain that they will have to take redundancy if it is on offer. They do not smoke, they do not drink, they have sold the car, they walk to and from work, they never take out their wives, they have stopped buying their children presents but they are still three months behind with the mortgage, they cannot get a council house and the only way to solve the problem is to sell their jobs to pay off the mortgage. What a deplorable and disgraceful state of affairs.

That is the reality that Conservative Members should face. That is why people who have been moderate and have taken it for so long have had enough. The wages in the industry are such that many people say seriously and after reflection that, if something is not done about wages, there is no point in the industry surviving.

There is despair and crisis in the industry. Tomorrow will be decisive. I agree with my hon. Friend the Member for Jarrow (Mr. Dixon) who said that if he were a shipyard worker he would be supporting the proposed action. I hope, as all of us hope, that sense will prevail and that there will be a generous concession tomorrow to stop this dispute, but if there is not Opposition Members will entirely understand and will support the action being taken.

There will be few times when I quote my local newspaper with approval. The Sunderland Echo, a Conservative newspaper that supported the Government at the general election and supports the Government on most issues, concluded its editorial last night as follows: If the Government are not prepared to give more aid to this vital industry so that a modest rise may be made in basic pay, we might as well close the shipyard gate now. That was a Conservative editorial in a Conservative newspaper and it reflects what the entire community in Sunderland and other shipbuilding communities are saying.

Mr. Norman Lamont

Read the Bill.

Mr. Clay

The Opposition have obviously failed to persuade the Government of reality. If British Shipbuilders does not face that reality tomorrow, the shipyard workers will set about the task of persuading it of that reality.

8.38 pm

Mr. Michael Fallon (Darlington)

No Government who introduce a Bill revoking an order made in July under an Act of last year, itself repealing an order of 1981 made under an Act of 1979, itself superseding an order made in their first few weeks in power could possibly be accused of neglecting the shipbuilding industry in the way that the hon. Member for Sunderland, North (Mr. Clay) suggested. No Minister who raised the public finance limit to £300 million in 1979, raised it again to £500 million in the same year, to £600 million in 1981, to £700 million last year, to £800 million just three months ago, and who now proposes in this Bill to raise it to £1 billion and to extend it yet again to £1.2 billion could possibly be accused of meanness or lack of support for the British shipbuilding industry. Rather, the taxpayer might with some justification accuse British Shipbuilders, having exhausted its book of blank cheques, of treating Parliament as its auto bank.

Huge sums are involved here. The public finance now made available to British Shipbuilders exceeds our entire overseas aid programme this year. The ease with which these sums are being handed over will be much envied by other sectors of British industry, which have had an equally tough recession in the last three or four years, not least in the north-east.

We are constantly lectured by Opposition Members about merchant shipbuilding being important. It is important as an industry and it is important to the northeast, but it is not that important. For example, it is not generally put about that the nuclear power industry in the north-east now employs more people in the construction, installation, maintenance and operation of nuclear power stations than does merchant shipbuilding in the north-east. It is all very well for Labour Members to remind us that whole towns may be put out of work and that particular shipyards may be bankrupted, but they should also point out that the sums now to be expended on British Shipbuilders could be bankrupting other industries and businesses.

The public finance being consumed now by British Shipbuilders is almost equal to the special corporation tax paid by this country's 200,000 small businesses; more than one million small business men are working day and night simply to fund British Shipbuilders. If the corporation continues to lose money faster than Parliament can provide it, we are entitled to ask some questions not simply about productivity and performance, about which we have heard much, but about some of the matters to which the Minister of State referred today and in his two statements in July, such as the losses on contracts already undertaken. I should have thought that some of those losses were matters, if not for the Public Accounts Committee, for the Select Committee on Trade and Industry when that is reconstituted.

Mr. Ernie Ross

When did the hon. Gentleman last work?

Mr. Fallon

I have some knowledge of the industry. I was intimately concerned with the last two nationalisation measures and my brother was employed in the Robb Caledon yard in Scotland, to which the hon. Member for Dundee, West (Mr. Ross) referred.

While we shall have to approve the Second Reading tonight—if with some reluctance—it seems only right that we should demand more information from the Government. Without testing the Minister's patience, perhaps he will write to me about certain points that I wish to raise.

Two years ago it was said that total losses since vesting day—which will be much remembered by those who studied the original nationalisation measures — were £341 million. I wonder what the figure is now. I think that it must be approaching £1 billion.

Would it be possible to produce for Parliament the operating results of each of the different yards of British Shipbuilders? Such information is not contained in either of the two annual reports of British Shipbuilders that I have studied, and they give no indication of the productivity and performance of the yards. Indeed, it is a constant smokescreen in that the nationalised industries' operating results—the operating costs as well as the profit and loss that each unit makes—are never revealed in their annual reports. Instead, they are concealed in breakdowns by divisions, regions and so on.

We had a problem with the National Coal Board in getting similar information for each colliery. It was not until the Monopolies and Mergers Commission cut through the fog earlier this year and produced operating results for each of the mines that we learnt for the first time that, of the 22 collieries in the north-east, only three were profitable, while the other 19 made an operating loss in the year to 31 March 1982 of £226 million. The north-east would be more prosperous without a coal industry.

The Minister should give us a little more information about the corporate plan now being discussed with the industry. The hon. Member for Dundee, West made a good point when he asked for more information on the plan to be made available to Parliament. I have not seen the corporate plan, and it is difficult to get hold of it.

What we really need to know from the Minister is what end is in sight to the continuous drain on public funds. It is interesting to analyse what the Minister and his predecessors have said to Parliament on the subject. On 23 July 1979, the Minister said: We are prepared to put public funds, for a two-year period, behind the industry's own efforts to achieve viability." — [Official Report, 23 July 1979; Vol. 971, c. 43.] Two days later the Minister said: There is of course a need to strike a balance between the needs of the industry and what the taxpayer is prepared to pay. We cannot provide support without limit."—[Official Report, 25 July 1979: Vol. 971, c. 803.] On 17 November 1981, the Minister said: the Government … consider that aid to shipbuilding should be temporary and diminishing." — [Official Report, 17 November 1981; Vol. 13, c. 170.] On 28 July this year, the Minister reminded the House: We cannot afford to go on subsidising shipbuilding with these losses‥‥we cannot afford to have losses on this scale indefinitely." — [Official Report, 28 July 1983; Vol. 46, c. 1356–58.] I hope that the Minister, when he winds up, will reassure us on that point, as there seems to be a suggestion that he will be coming before the House again almost immediately asking for a further extension under the powers to be granted to him under the Bill.

Obviously we accept that since the House met in the summer the position has worsened considerably. Indeed, there seems to be very little hope for shipbuilding in the world market. The only good news since the House last debated shipbuilding comes from the north-east and the successful purchase by the Redheads consortium of its former yard from British Shipbuilders. A small group of men, only 80, have taken their future in their own hands and, with great courage and not much support from Labour Members in that area, have successfully reopened their own yard. I thank the Minister for his response to early-day motion 146 tabled by myself and my hon. Friend the Member for Wiltshire, North (Mr. Needham). I thank him, too, for the personal interest that he has taken in the success of the Redheads buy-out. Now that the yard has reopened, I hope that hon. Members on both sides of the House will join with me in sending good wishes to Jack Richardson and those 80 ship repair workers who are facing a difficult and competitive market.

It has been said that British Shipbuilders has agreed a similar option for Tyne Shiprepair, although regrettably the men employed in that yard continue to oppose it. I regret that the hon. Member for South Shields (Dr. Clark) is no longer in the Chamber because I do not think that he was entirely accurate when he implied that those men stand to lose their jobs by any transformation in the ownership of Tyne Shiprepair. That is not the case. The two directors who are buying out the yard have offered employment to 850 of the workers.

Nor is the reopening of Redhead's yard in any way a threat to the continued survival of Tyne Shiprepair were it to be privatised. The two yards do different types of work on different sizes of ship. There has already been close co-operation between the Redheads consortium and the rest of the private sector, such as Tyne Dock Engineering. I hope that the men of Middle Dock will think again before they reject the proposition that has been put to them and face almost inevitable redundancy. There is a way out and it has been put forward and agreed by British Shipbuilders.

I hope that we shall hear soon from the Government of British Shipbuilders' plans to dispose of its remaining interests in the ship repairing sector as quickly as possible. I understand that Vosper Shiprepairers Ltd. has work that goes well into next year, but plans for its disposal should be put in hand now. That process should not be tied up in concert with the privatisation of the warship builders.

Falmouth Shiprepair Ltd. is a well positioned and profitable yard that could survive perfectly well in the private sector. In view of the Minister's assertion in July that it is not in the long-term interests of British Shipbuilders to be engaged in ship repairing, I hope that plans will be put in hand as soon as possible for the disposal of Vosper and Falmouth.

It is inevitable that reluctantly we shall have to give the Bill a Second Reading, but the real bill will continue to be picked up by the taxpayer. I do not think it right that we should merely assent to a large additional sum of public money being expended without at least asking some of the questions that I have tried to pose.

8.52 pm

Mr. Nicholas Brown (Newcastle upon Tyne, East)

I welcome the Bill and I would welcome also—in this instance I find that unusually I am agreeing with the hon. Member for Darlington (Mr. Fallon)—a sight of British Shipbuilders' corporate plan or, pending that, a clear statement from the Government of the extent, yard by yard, of the Government's long-term, or even medium-term, commitment to the industry.

In common with most hon. Members, I was at my constituency while they were at theirs at the weekend. I represent a shipbuilding constituency and I spent part of the weekend talking to my constituents who work in the yards. I can confirm everything that my hon. Friends the Members for Jarrow (Mr. Dixon) and for Sunderland, North (Mr. Clay) have said about the views and attitudes of those who work in the yards. They know that an industrial dispute is looming. I am pessimistic about the chances of getting through the next few days without a major industrial dispute. I hope that we do not have a dispute and, of course, no one wants a dispute. However, the mood is very much for a dispute. There is no wish on the part of the shipyard workers to take on anyone. The mood is different from that for there is a feeling of desperation.

That is true of the workers and the communities around them. Everyone is saying "Enough is enough and we must now take action without even calculating the chances of winning or losing." The people say "We must take a stand because we cannot find out what is going on and our confidence in the management has been reduced rather than enhanced. We feel that the few jobs that remain are much at risk."

Wages are also a factor. Real earnings for shipyard workers have steadily declined over the past few years. Constituents have told me that after a full working week they can still claim family income supplement, a rent rebate or a rate rebate. We are not talking about working in pleasant, comfortable surroundings such as those in which we work. We are talking about pretty heavy manual work in surroundings that are often unpleasant and downright dangerous. I am sorry that the hon. Member for Shrewsbury and Atcham (Mr. Conway) is no longer present. I understand that he intervened earlier to point out that the northern group of Labour Members was not present in the Chamber. In fact, the members of that group had gone to their annual meeting. The hon. Gentleman used to be the leader of the small Conservative group of the Tyne and Wear county council. He sought to represent a Newcastle constituency in Parliament. He has demonstrated his commitment to that region by leaving it and going to Shrewsbury.

We hear comments from those who have left the industry, who have taken or are contemplating taking their redundancies, to the effect that the jobs are no longer worth having. That is said consistently. This breeds not an atmosphere of enthusiasm but one of quiet desperation.

We are told that we should look for alternative employment. No shipbuilding community has within its travel-to-work area a major alternative employer ready to take on large numbers of displaced shipyard workers. That affects people's attitudes. Other shipbuilding nations have taken a positive decision to protect their domestic industries. Shipbuilding has no free market; all the markets have intervention. Shipbuilding is very much a buyer's market and, as always in those conditions, is governed by price. Nations making their own ships have to decide the market share they wish to retain and how much they will put in to carry their domestic industries through the recession. I should like a clear-cut commitment from the Government on that point. Obviously, if we have an enslaved industrial work force and a police state like South Korea, we have a competitive advantage. However, we do not have that here.

Mr. Donald Dewar (Glasgow, Garscadden)

Yet.

Mr. Brown

We make a terrible mistake if we say that the industry's problems can be solved by productivity. The competitive gap cannot be made up by productivity. In this debate, productivity is a blue herring.

The only way we can increase productivity with declining output is through job loss. Demarcation issues are not at the core of this debate—although, inevitably, they will be at the heart of press comment on the debate. At the end of the debate is the Government's commitment to the industry. The key issues are our economy's industrial base, the relationship between British shipbuilding and foreign exchange earnings and the related issue of import penetration. Those were subjects to which we should have turned our attention when the British motorcycle industry collapsed, largely because of excessive profit taking and low investment. The industry was replaced not by a new, efficient and highly profitable competitive British motorcycle industry but by Japanese imports. If we continue to allow our manufacturing base to be eroded in this way, our economy will not have the spread of primary and secondary industries necessary to sustain the rest of our economy. The logical consequence, which does not seem to have occurred to everyone, is that, if the manufacturing base goes, the private sector service industries will decline in international importance. That might take some time, but it is inevitable. We cannot afford to let that happen.

The Labour party's case is that money invested in sustaining shipbuilding is invested in the nation's industrial base. That is investment in the future of the shipyards and in everyone who has income related to the economic function of the shipyards.

The Japanese and the Koreans see that, with all the money that they have invested in their shipbuilding capacity, they cannot afford to lose this battle. They recognise that there is a recession, and they are determined to plough in more money so that when the recession ends they are still in industry. It may mean their taking risks and putting money into building ships for which there is no immediate market, but they are prepared to do that to preserve their shipbuilding capacity. They hope that the workings of demand will push our shipbuilding capacity under. We cannot afford to let that happen. The Danes, for example, are determined that that will not happen to them. They subsidise to the same extent as the far east to ensure that it does not occur.

On the Tyne and Wear—I am sure it is the same elsewhere—the rumours of closure are rife. It is said that the private sector wheeler dealers in and out of the industry are seeking to obtain small and highly profitable sections at the expense of the whole industry. That is a depressing background against which people have to contemplate their future. We are entitled to ask what is happening at Tyne Ship Repairing Limited and why. If it is or could be made profitable, why is the state not investing in it? Why does it have to be handed over? Will British Shipbuilders' new corporate plan make a direct reference to encouraging non-union management of the industry? I should like to know whether that rumour is true.

Another fear felt in my area is that there is work for Clelands Shipbuilding Company Limited. There is also a widely held suspicion that any national industrial dispute will be used as an excuse to close the yard and put the work into a privatised Appledore, Ferguson, Ailsa or Hall Russell.

The Government have a duty to restore morale in the industry by stating their policy on such matters and a duty to preserve the country's industrial base and not to plunder it at the expense of the rest of us and to the benefit of a few. In the short-term, the industry looks to the Government. In the long-term, the country will look to the shipbuilding industry.

9 pm

Mr. Albert McQuarrie (Banff and Buchan)

The Bill seeks to increase the amount of finance provided to British Shipbuilders from the £800 million authorised in July this year initially to £1,000 million and eventually to £1,200 million. The original sum under the Aircraft and Shipbuilding Industries Act 1977 was £200 million. This is an astronomic increase and is a direct result of British Shipbuilders' continuing difficulties and the deterioration of its market. The outlook is gloomy because the world's shipyards have been hit badly by the recession and their customers are facing a glut in capacity because of the drop in world trade.

Sir Robert Atkinson, the former chairman of British Shipbuilders, warned before his retirement that the corporation was fighting for its life. At the end of 1982 world forward orders for shipbuilding had decreased by 35 per cent. from the end of 1981. British Shipbuilders' work force has been reduced from 87,500 at nationalisation in 1977 to under 60,000. In addition, 3,968 jobs were lost during July, August and September of this year and a further 2,000 jobs will go by the end of the year. A further 1,150 jobs are at risk at Cleveland, Henry Robb and Goole if the firms do not receive immediate orders.

Labour policy does not help matters, because in its recent manifesto it said that it intended to ensure that British Shipbuilders remained wholly nationalised and to create a state-owned shipping organisation to act as its customer. I am at a loss to know where it would have found business for the ships once it had built them if there was no demand for them.

Labour proposes to apply its usual remedy of state-controlled subsidy and protection, with the sole aim of preserving jobs without any thought of the cost. Shipping and shipbuilding are sources of international competition. Attempts by this country to opt out of that would be harmful to international trade and the jobs that depend upon it. Labour said nothing about the fundamental problems that make our yards uncompetitive or how it would tackle such problems.

I shall deal with shipbuilding in Scotland, and in particular in the west of Scotland, with which I am connected. My hon. Friend the Minister and myself are natives of Greenock where the Scott Lithgow shipyard is located and our fathers and my brother worked in that shipyard. Scott's of Greenock, Kincaid's, Hastie's, Ferguson's, Lamont's, Rankin and Blackmore and George Brown are but a few of the firms that used to employ most of the male labour force in Greenock. Unfortunately, most of them have disappeared for the simple reason that strikes and lack of productivity have driven them to the wall. We are now left with Scott Lithgow, which is a conglomeration of some of those firms, but which is facing the kiss of death because its labour force refuses to accept that, unless there are radical changes in the working methods, closure is inevitable.

Dr. Godman

Will the hon. Gentleman give way?

Mr. McQuarrie

I shall not give way, but I pay tribute to the hon. Gentleman for his tremendous efforts in endeavouring to prevent the closure of the yard. He has done a tremendous amount of work in Greenock to try to save the yard.

Having been born in Greenock, where the yard is located, I am deeply disturbed by the fact that the labour force will not accept the realities of life. In 1983 the yard registered a loss of £65.98 million. The loss had increased from £14.9 million in 1982—a staggering increase of £51.08 million. It accounts for over half the loss by the whole of British Shipbuilders. The reasons for such poor performance are varied, but they have been there for many years. I remember the strikes from my youth. The yard suffered from poor productivity—[Interruption.] There is nothing to laugh at. That is the reason why the yard is in its present state.

Dr. Godman

Private enterprise is the reason.

Mr. McQuarrie

It is not.

Dr. Godman

rose—

Mr. McQuarrie

I shall not give way.

The yard suffered from poor productivity and reluctance of the employees to adapt to modern trends. Sir Robert Atkinson, in his last report before retiring, stated that Scott Lithgow had the lowest productivity in the whole of British Shipbuilders. The yard was also guilty of unreliable delivery. It has constantly been burdened with heavy financial penalties for late delivery. The North sea oil support vessel Iolair, though it was a great engineering achievement—it was mentioned by the hon. Member for Greenock and Port Glasgow (Dr. Godman) — and demonstrated the skill of the labour force in the yard was a year late. There is no point in being skilful if the vessel is delivered a year late. The 109,000 tonne BP tanker, British Spirit, was 14 months late. In all, the three contracts which the yard received from BP cost £73 million in losses and provisions against deficits this year.

It is also extremely interesting to record that in presenting his 1982–83 report Sir Robert Atkinson said that the losses registered by Scott Lithgow amounted to £12,500 per employee at the yard. That is double the figure mentioned by the hon. Member for South Shields (Dr. Clark). He said that each unemployed worker cost the Government £6,000. Sir Robert Atkinson outlined the problems at the yard when he said in The Scotsman of 1 April: Scott Lithgow has to put its house in order and the sooner it does the better it will be for Clydeside. It is no good saying you want more orders unless you can deliver on time. Other factors at the yard are worth commenting on and are indicative of the reason why British Shipbuilders is in such a desperate state. There have been poor industrial relations, both on the shop floor and at management level.

Work practices, particularly job demarcation, have been poor. In addition, since nationalisation in 1977, 424,000 working days have been lost in the Scottish shipbuilding and marine engineering sector. It is obvious from that that the future of that great shipyard is at risk.

On 28 July Sir Robert Atkinson gave some indication of a survival plan for the yard. He said that without acceptance of such a plan the company had no future. He estimated that cuts of 2,138 had to be made in the labour force of 5,245 by March 1984. The unions had agreed to 709 redundancies to be completed by the middle of this month, which it is hoped will be carried out on a voluntary basis. That decision has merely postponed the main bone of contention on the remaining redundancies.

Sir Robert also recommended that the area of the Clydeside yards should be reduced thereby saving a considerable sum of money, as the long waterfront layout of the yards at Scott Lithgow imposed heavy overheads. It was imperative to have more flexible work practices, an end to job demarcation and realistic wage bargaining procedures.

Dr. Godman

What about the shop stewards?

Mr. McQuarrie

If those targets are achieved, British Shipbuilders may consider some new capital investment in the yard. Mr. Alan Blair, leader of the Liberal party on Inverclyde district council, said on 17 October: The union leaders have responsibility, not just to get a survival plan in exactly the same terms they would like—they have a wider and more important responsibility for the future of our whole community. I am sure that the hon. Member for Greenock and Port Glasgow accepts that we need a responsible approach not only by the labour force but by management. A joint effort must be made if the yard is to be saved. As a native of Greenock, I could not agree more with the hon. Gentleman on that.

The attitude of the work force remains crucial to Scott Lithgow's survival if it is to gain any benefit from the Bill. I hope that the hon. Member for Greenock and Port Glasgow is succeeding in his efforts. Tragically, the two sides do not seem to appreciate the seriousness of their position and the fact that the future of the yard is in their hands. The work force has refused an extra £3.50 to work a three-shift day to meet the delivery dates for British Petroleum's Sea Explorer rig. The contract contains a £19,000 a day penalty clause for late delivery, but the work force is refusing to accept a method which would overcome any problem which may arise. That is in sharp contrast with the privately owned Cambleton shipyard, where the work force has offered to work recognised holidays to gain orders.

That is the sad history of one yard since it was nationalized—

Dr. Godman

What about Ferguson's?

Mr. McQuarrie

The Government are doing their best in introducing the Bill, which will increase the borrowing powers of British Shipbuilders, but there must be an end to using taxpayers' money to bolster up yards where the work force could not care less. If there is not to be a complete shutdown of yards such as Scott Lithgow, the labour force must give a fair day's work for a fair day's pay. Only then will British Shipbuilders succeed and yards such as Scott Lithgow have a good future, as I sincerely hope they will.

I welcome the opportunity afforded by the Bill to inject further money into British Shipbuilders in an endeavour to save yards such as Scott Lithgow.

9.13 pm

Mr. Ron Brown (Edinburgh, Leith)

Many views have been expressed in the debate. We all agree that the British shipbuilding industry is in serious difficulties, but that was not always so. In 1950, British shipbuilding yards held about 40 per cent. of the world market. Today their share is under 4 per cent. The history of British shipbuilding reflects Britain's decline as an industrial power. The main cause of that decline was not the workers but the lack of investment. When times were good and profits were high, the owners repeatedly took the money and ran. That is reality.

We once had the slogan "British is best", but time has proved that the Germans, Japanese and South Koreans can also produce the goods. I am not knocking British workers —they are the best, especially the shipyard workers. They proved that in the Falklands war. The Government needed their support to conduct the war. Although I did not support that venture, the shipyard workers gave their all. Unfortunately, they did so without recognition from the Government.

Some Conservative Members will say that nationalisation was the reason for the decline of shipbuilding. Tory Members constantly repeat that garbage. But the TUC recently said: It is not an exaggeration to say that without nationalisation there would not be, apart from the profitable warship yards, a viable shipbuilding industry in the UK today. Of course, Tory Members will not accept that.

Unfortunately, since state ownership there have been areas of neglect—for example, compensation. Instead of paying the previous owners compensation, they should have been jailed. The shipyard workers have paid the price for that. Since 1977 there have been many closures, including nine shipyards, 30 building berths, three engine building facilities and three ship repair yards.

Whatever may be said about shipyard workers, they have co-operated. About 21,000 of them have lost their jobs, with the work force being reduced from 87,000 to 66,000. Many areas in the north-east, north-west and Scotland have been hard hit by Government policies, even though they are areas of high unemployment.

British Shipbuilders has had the co-operation of the unions, but the management are not Socialists and do not appreciate Socialist arguments. They are doing a job for capitalism and big business. They have repeatedly seen nationalised industries milked for the benefit of big business. Anyone who condemns nationalised industries, especially British Shipbuilders, ignores the facts.

I accept that state aid has been involved, but virtually every shipbuilding nation provides some form of aid. Shipyards cannot operate without backing from the state. But we all know that any support in Britain has come from a Labour Government. It has certainly not come from a Tory Government. When the yards were nationalised in 1977, an intervention fund was set up to provide a subsidy of up to 30 per cent. of the cost of a ship. That was very important to the industry. Gradually that has been whittled away and has now been reduced to about 18 per cent.

Taking inflation into account, that figure is well below its former value and that creates many problems for the industry.

The Tory Government and the EC have deliberately undermined the industry. The fellow who made that clear was the former chairman, Sir Robert Atkinson, who said: European shipbuilding cannot compete with the false prices and financial packages being quoted by the Koreans and Japanese. Unless the EEC acts vigorously without delay, European shipbuilding will become extinct. We have to persuade the Government to do that. The management have seen the problem and realised the position. The former chairman in particular has put it on the line. Many individuals will say that they are against subsidies, but that is hypocritical because the EC and the Tories support subsidies, such as those going to their farming friends who control the broad acres. It is hypocritical to argue against subsidies for the shipbuilding industry.

We know that the Tory party wants privatisation and asset stripping, but they make the industry less viable. That is what the right hon. and hon. Tory Members want and that has been their argument all the time. However, they claim to be patriots and to believe in this country, just like their shipowning friends who placed their orders abroad. They are trying to live up to Adam Smith's observation that the capitalist is a citizen of the world. Our breed of capitalists is worse than the capitalists elsewhere. The Germans, the Japanese and the French all place orders within their own country, thus helping their own workers. Our lot are obviously more reactionary.

Trade is important to Britain, as we have often heard. Some 60 per cent. of imports come in, not in British, but in foreign ships and 60 per cent. of our exports leave in foreign ships. That means that investment has gone down repeatedly. In 1972, shipbuilding represented 9.8 per cent. of the United Kingdom investment in total, but in 1981 it was only 1 per cent. One can see how things have developed. One reason out of many is that of flags of convenience, which have not been mentioned much tonight. It has been reckoned that 1,000 of the owners using flags of convenience are British owners. They are justifying substandard ships, cheap labour and the most horrific conditions going. Many older Members who may have been in the Merchant Navy may remember the coffin ships in the 1920s and 1930s. We are getting them again, but in a new form, flying the flags of convenience. The disgrace is that many of them come under British ownership.

It does not have to be like that. When right hon. and hon. Members argue for scrap and build, they should remember that it is not something new—it is going on in Japan where there are various subsidies to help owners scrap old ships and build new ones. The subsidies can be as high as 60 or 80 per cent. Thus the idea is not new or revolutionary, and if the Japanese can do it so can we.

British Shipbuilders needs support, not abuse, remembering that many communities are affected. I think especially of my community of Leith where I have no doubt that the shipyard of Henry Robb is on the hit list. Graham Day will not admit that there is a hit list, but there is one. Leith may be small when compared to many yards, but it is important. It is important in history: it built the biggest flag ship of its day in 1511, the Great Michael. In 1832 the Sirius, the first wooden paddle steamer, was built in Leith. In 1881, Leith paved the way with the building of steamships. During the first and second world wars, record production was maintained in both the yards that then existed.

The story of Leith is, of course, the story of many other places. The workers can produce the ships, given the chance, but are they given the chance by this Government? In my opinion, they are not, and the reports say that they are not. Of course, Ministry of Defence work has been in the pipeline for some time. Right hon. and hon. Members have repeatedly argued that that work should be brought forward to help the yards, particularly the smaller yards, but a cynical game is being played. By delaying, the Government are helping the new hatchet man, Mr. Day, to close certain yards. We know what is happening. If Mr. Day has any concern for the industry, he will resist. He does not have to be a Dr. Beeching. He can resist, he can get the industry moving, and do certain things to help the industry.

Whatever happens tomorrow or later this week, Leith will fight. It has to fight to exist. If there is any argument about co-operation, I have no doubt that the work force in Henry Robb will say "Yes, we shall co-operate to save the yard", but they will not co-operate to close it. They will not act as coolies or serfs. That is the message that we have heard repeatedly today.

We must remember one thing. The industry may be regarded as a lame duck, but it is certainly not a dead duck. That is the difference. Labour Members will fight alongside the workers in the industry to maintain the shipbuilding industry, because it is vital to this country.

9.27 pm

Mr. Donald Dewar (Glasgow, Garscadden)

Occasionally in debates in the House there is a slight air of unreality, and that has broken out occasionally this evening. A number of new faces, if I may put it that way, have joined us in this shipbuilding debate, and there is nowt wrong with that, although I got a passing impression that it had more to do with Whip power than with a form of new enthusiasm for the problems that we face.

There has been a good deal of talk about rationalisation and denationalisation. It has all had a familiar ring. The hon. Members for Wiltshire, North (Mr. Needham) and Wells (Mr. Heathcoat-Amory) theorised about the industry in a somewhat detached way. From the hon. Member for Darlington (Mr. Fallon) we had some strange and curious facts. I am genuinely sorry that he, for example, should say what he did. It tells us a lot about the new generation of Tories — we hope not the rising generation of Tories, but certainly the arriviste Tories— who say that they wish to see the Bill passed with some reluctance.

I do not think that we should pass the Bill with some reluctance at all. We should pass it because it is an essential first step, although it is, of course, not enough to deal with the problems that the industry is now facing. There is one insistent and urgent aspect that unites almost everyone connected with the industry in the House, and it is the anxiety about the industry's future and what will happen over the next year or two. That anxiety unites almost everyone. Men, management and unions are all concerned about the future of shipbuilding. No one underestimates the difficulties that we face, whether on the Tyne, the Wear or the Clyde.

None of us underestimates the importance of what will happen during the next few days. It would be wrong for us to try to pre-empt the discussion. That would be counter-productive and dangerous. These matters must be settled at the negotiating table. We do not want to have to give outside advice, but to express the hope that there will be genuine negotiations which will make progress during the next few days and avoid the head-on confrontation and widespread industrial action which no one who is interested in the industry wants.

The Minister knows, because it has been put repeatedly by my hon. Friends, that there are enormous problems for the work force and that there is, in particular, a crisis of morale. We know that for a number of years now the work force has been taking wage settlements well below the rate of inflation. In the past 18 months there has been a complete freeze and in real terms that is a substantial cut. In 1979 21,000 jobs were lost in the industry. At the same time we have seen real efforts in, for example, the rationalisation of bargaining units, the rationalisation of demarcation, and so on. Considerable progress has been made.

It is wrong for the Minister— I say this not in a carping sense or to score a point—to say that he finds the men's attitude as they approach this round of bargaining "regrettable and extraordinary". I think that that was his phrase. It is understandable and Labour Members at least have no difficulty in understanding the apprehensions and anxieties of the people at Henry Robb, Goole, Barclay Curie, and the many other yards, which are almost certainly facing an uncertain future. Of course, we want a settlement, but we want a settlement that will be reached by both sides talking constructively which will remove some of the gloom that hangs over the industry.

The House should treat the specific problem of Scott Lithgow with a little delicacy and caution. There have been many headlines, particularly in the Scottish press, which have engendered an atmosphere of crisis on the issue. We are told that we now see Scott Lithgow pushed to the brink of catastrophe. The danger is that the publicity will harden attitudes and yet public stances do not always represent the whole story. Again, I express the hope that I imagine everyone shares that there will be genuine negotiation between BS and Britoil and that it will be possible to renegotiate the contract to give the Scott Lithgow yards some sort of secure future.

I echo the point made by my right hon. Friend the Member for Glasgow, Govan (Mr. Milian) when he talked of the one part of the Minister's speech which I found peculiarly helpful. The Minister made it clear, even in the negative sense—

Mr. Sayeed

Peculiarly?

Mr. Dewar

Peculiar in the context of the rest of his speech.

For all that, I welcome it wholeheartedly. The right hon. Gentleman made the simple point, in the negative sense, despite what might be gathered from a superficial glance at some headlines, that the order has not been cancelled and that the yard has not been scheduled for closure. We hope that that will never happen. Both sides must be committed to negotiate. We know that Britoil wants the rig and that BS would, because of what the Minister said today, be faced with substantial cancellation costs. Surely, as my right hon. Friend the Member for Govan said, there is the basis for renegotiation and for reaching some settlement which will secure the future of 4,400 workers in an area of high unemployment.

In the rhetoric of politics we go in for a great deal of overkill. However, if something catastrophic happened to Scott Lithgow it would have awesome consequences for the economy of the area. It would be a hammer blow. I hope that Ministers will work hard in the background to create the conditions that will lead to a settlement, although I am not suggesting that they can dictate to partners in negotiation on a commercial contract. I hope that the Secretary of State for Scotland is making it clear to his colleagues that sweeping redundancies on the scale rumoured in the press would be fundamentally and completely unacceptable given the present state of the Scottish economy.

Labour Members are sure that the industry needs confidence in itself so that it will be in a position to take advantage of a recovery in the market when that recovery comes. The problem is not one of Britain's capacity. We are now down to 3 per cent. of the world's shipbuilding capacity. I do not believe, therefore, that our problem is the simple one of overcapacity.

Secondly, I welcome the Minister's remarks about the intervention fund. Clearly, because of the rules that British Shipbuilders was observing and the system that was in operation, it was to some extent being underused. Of course there must be a financial ceiling, but we should look at applications case to case and at least use the money available so as to attract work. Merely finding that what we can offer is unacceptable on every occasion and being left with resources that are unused would be a considerable advantage. I hope that the Minister will encourage his colleagues to be very tough with Europe. Unless there is progress in the near future we should take steps unilaterally to overcome the problem and use our opportunities to the best advantage.

I do not want to dwell too heavily on the matter of ordering ships in British yards. The Minister must be aware of the strong feelings in the House on that matter, and I hope that he will bear them in mind. It has been pointed out from the Back Benches that there is the opportunity of an order for three colliers from the Central Electricity Generating Board. I am sure that even Conservative Members would agree that it would be a tragedy if those orders did not come to the United Kingdom. No doubt we all have our own preference about which yard could deal with the order most efficiently and effectively, but we are united upon the fact that the order should come here. If there is a sinister meaning behind the fact that the order has been put out on international tender, I hope that it has been made forcibly clear to the CEGB through the usual channels that anything other than a British yard would be totally unacceptable to the Government, the Opposition, the industry and everyone else.

The plans for privatisation have built uncertainty and unease about the future into the industry. My hon. Friend the Member for South Shields (Dr. Clark) spoke eloquently and with feeling about the ship repair side of the industry in his area. I have a particular constituency prejudice on this matter, because my constituency contains Yarrow. I suspect that Yarrow will be a particularly attractive offering in the great sale, if it takes place. My point of view is not simply a Labour point of view; it is much more broadly based. I know that Oppositions are often suspected of opposing for the sake of opposing, but I believe that there is a widespread feeling in the industry that to rip the naval shipyards out of British Shipbuilders, leaving behind what must be financially a very much weakened rump, will not help anyone. To take £31 million out of a balance sheet for the past year which is alarming —I accept that—will merely destroy morale and create certain real practical difficulties and disadvantages. In the Clyde, for example, there has been a certain amount of flexibility and interchangeability of labour and expertise. I should like to see integration, not fragmentation, in an industry which is already facing far too many problems.

I cannot see the advantages of privatisation for the industry and those who work in it. I have tried hard. For instance, I have corresponded earnestly with the Scottish Office on the subject, presuming that the Secretary of State and his colleagues would be consulted on the matter and would have a view on it. The hon. Member for Eastwood (Mr. Stewart), who is the Under-Secretary of State in charge—loosely speaking—of Scottish industrial matters wrote to me on 17 August and tried to explain why, for Yarrow, and presumably for other yards, privatisation would be an advantage. He said, first, that it would expose the yard fully to market forces. In the context of what is happening in the industry, that is claptrap. The hon. Member should have been ashamed when he read that piece of nonsense, and should have rejected the draft submitted to him. He then said that privatisation would remove the yard from the straitjacket of its connection with British Shipbuilders. I do not believe that that is a straitjacket, or that the hon. Gentleman had a coherent argument. His letter boils down to the remarkable contention that if a yard remained in British Shipbuilders, it would be starved of the investment that it needed to be efficient. It is implied that efficiency and investment could be obtained only by moving to the private sector. I do not accept that for a moment. However, if that is the Government's position, the way in which they are running, and dealing with British Shipbuilders has very sinister undertones. I was corresponding with the Minister about a module hall. The Minister said that it would add significantly to the efficiency of production. The hon. Gentleman then went on rather triumphantly to imply that the module hall could be obtained only by privatisation, because there was no way that it could be obtained from British Shipbuilders or the Government. If that is the Minister's position, and if that is the way that the Government approach the industry's problems, it is not surprising that we face such anxious times.

We should be trying to increase co-operation and to create a consensus in the industry. We should not be trying to destroy it by taking out the most "profitable" parts. I use inverted commas, because that profitability is based, of course, on public sector orders and on a tendering system that perhaps provides a more comfortable economic position than those in the merchant shipbuilding yards could ever hope to experience.

I entirely accept that there are no easy answers and that the next couple of years will be very tough for the industry. However, I understand that it is the considered view of British Shipbuilders that the trough—to use a rather ugly term—is bottoming out and that the worst will soon be over. It is thought that a slow improvement may begin in the middle of next year. I hope that that view is not too optimistic. However, people with great knowledge of the industry certainly think that. We must ensure that the industry has the confidence to allow it to come through these difficult times, so that it is in a position to benefit when the upturn comes.

I hope that the Minister is really much more flexible and encouraging than some of the fundamental zealots on his Back Benches allow him to appear to be in public. We have heard a series of depressing speeches which have demonstrated a total lack of sympathy for the problems that the industry faces. One is left with the impression —I do not have any pleasure in saying so—that a good number of people who possibly do not depend on shipbuilding would be happy to see the industry written off, and would be prepared to see at least the merchant side of the industry almost fade away. If that is so, they are making a great mistake. The very arguments that would write off British Shipbuilders in their narrow accountancy books would write off large sections of British engineering and British industry. We cannot and should not contemplate that, and we cannot and should not afford that. We need a little courage and imagination from the Government and some support for an industry that has worked hard in the past few years for its survival, despite specific local difficulties. The industry deserves that support.

9.42 pm

The Under-Secretary of State for Trade and Industry (Mr. Alexander Fletcher)

I congratulate the hon. Member for Glasgow, Garscadden (Mr. Dewar) on his elevation to the Opposition Front Bench. Given some of the remarks of Opposition Members, especially those of the hon. Member for Sunderland, North (Mr. Clay), it may be helpful if I remind the House of the reason for the Bill.

The story of British Shipbuilders since 1977 is not unconnected with its increased borrowing powers. as my hon. Friend the Member for Darlington (Mr. Fallon) pointed out. The original Act set an external borrowing limit of £200 million. This Bill, just six years later, will, if approved, raise the limit to £1,200 million. That is not all. Other finance,.such as that from the intervention fund and the shipbuilding redundancy payments scheme, is not covered by this legislation. Taking that into account, British Shipbuilders has received, as my hon. Friend the Minister pointed out, no less than £840 million since the Conservative party came to office in 1979. In no way could that be considered neglect of the British shipbuilding industry.

As a result, investment in British shipbuilding has doubled since 1979. Of course British Shipbuilders now needs further finance for its continuing trading activities, for further capital expenditure and for further restructuring. This is a massive commitment by the Government which reflects the extremely difficult position in the market that British Shipbuilders is having to face.

The right hon. Member for. Bethnal Green and Stepney (Mr. Shore) talked about improved performance over the past four years. He mentioned in particular improved flexibility and moderation in pay. What matters of course is that our competitors' performance is also improving and has improved remarkably over the same period. That still leaves us a considerable way behind shipyards in other countries. That is happening not only in the shipbuilding industry but in all our industries. Other countries' industries are not standing still waiting for us to catch up.

Against that background the management and unions will meet tomorrow. The future of the industry, as the right hon. Gentleman acknowledged, is very much in their hands.

My hon. Friend the Member for Eastleigh (Sir D. Price) mentioned three points; the growing amount of tonnage laid up, the growing number of countries now building their own ships, and the growing importance of naval orders, which the Government fully recognise. In the past year alone, naval orders to British Shipbuilders amounted to £835 million. Since May 1979, orders for 33 warships with a value of £1.9 billion have been placed by the Government.

My hon. Friend also mentioned the importance of suppliers and sub-contractors who carry out up to two thirds of the total contract in some cases. The difficulty facing our shipbuilding industry is that it is in the front line of competition and sub-contractors and suppliers, although dependent on our shipyards for their orders, are sometimes the tail that can wag the dog and lose the order if they too are not keenly competitive in the quotations they give to British Shipbuilders.

My hon. Friend also asked about a review of the use of merchant ships in times of war. My right hon. Friends the Secretaries of State for Transport and for Defence are examining the arrangements for deploying merchant shipping in that event. We are fully aware of the need to maintain proper facilities to service our fleet, both naval and merchant, in the event of another war.

The hon. Member for South Shields (Dr. Clark) said that an impediment to the Tyne Shiprepair buy-out was the loss of redundancy payments. In fact, the terms of the buy-out include an ex gratia payment to each employee who transfers. Although not the full amount, it is a considerable sum. It is not possible, however, to extend the redundancy scheme to the private sector, as the hon. Gentleman will be aware.

The hon. Gentleman also asked whether EC special aid for shipbuilding areas could be made available. Some areas are already covered by Community aid to alleviate the effects of high unemployment in shipbuilding areas.

The right hon. Member for Glasgow, Govan (Mr. Milian), speaking from an unusual position but with all his customary strength, endorsed the call for realism and responsibility from both sides at tomorrow's meeting. He recognised that any prolonged dispute — indeed any dispute at all—would be critically damaging for the industry. The hon. Gentleman mentioned the much improved performance at Govan with which I happily agree and the prospects of the CEGB order. We hope that that order will come to the United Kingdom and that the British Shipbuilders' yards will submit keen tenders for it. The Government will be ready to consider how assistance can best be deployed within our international obligations.

My hon. Friend the Minister of State, Department of Trade and Industry covered the Scott Lithgow matter as much as we should in a debate of this nature. He is keeping in close touch with the position. I remind the right hon. Member for Govan, the hon. Member for Greenock and Port Glasgow (Dr. Godman) and the hon. Member for Jarrow (Mr. Dixon) of a point made by my hon. Friend the Member for Banff and Buchan (Mr. McQuarrie)—that I am not without family or emotional connections with Scott Lithgow. My father spent his entire working life in the companies that now constitute those yards. I also fully appreciate the apprehension with which shipyard families throughout the country look towards the outcome of the important meetings that will take place tomorrow.

My hon. Friend the Member for Lincoln (Mr. Carlisle) questioned the need for more taxpayers' support for British Shipbuilders. Much of this money is for restructuring and capital expenditure, including the naval work to which my hon. Friend referred, and to ensure that efficient units remain, for we cannot abolish our shipbuilding industry for what I hope are obvious reasons.

But my hon. Friend is correct to blame nationalisation for many of the industry's difficulties today because it spoilt the motivation and drive of the industry and it has not materially improved efficiency or industrial relations, or indeed safeguarded employment, which were the objectives that the Labour Party commended to the House when the nationalisation measure was presented. That is why privatisation is such a key part of our strategy for British Shipbuilders.

My hon. Friends the Members for Wells (Mr. Heathcoat-Amory), for Bristol, East (Mr. Sayeed) and for Crosby (Mr. Thornton) mentioned, among other things, the need for fair competition between countries. What is fair competition and what is a fair and competitive offer for a shipbuilding contract? Government subsidies should be clear and open and capable of comparison one with the other, but it is difficult to know in any contract what sort of subsidy is involved. The only solution is for all Governments to withdraw and let shipyards compete on a free and fair basis internationally. Until that happens we shall have constant difficulties in matters of this kind.

The hon. Member for Dundee, West (Mr. Ross) spoke with sorrow of the closure of the Robb Caledon yard in Dundee. That former yard, which was closed by British Shipbuilders in 1981 with the loss of almost 1,000 jobs, was taken over by a private sector company, Kestrel Marine, which moved from shipbuilding into offshore work, where there is a market. Most of the jobs that were lost in 1981 are now available to the people of Dundee in this new and diversified operation. If anything justifies the restructuring of the industry and the need to move away from clinging to shipyards that have no prospect of gaining orders, it is the example of that yard in Dundee.

My hon. Friend the Member for Wiltshire, North (Mr. Needham) was correct to point out that the problems of British Shipbuilders cannot be laid at the door of this Government. The hon. Member for Greenock and Port Glasgow pleaded for more Government support for the corporation. I find it hard to understand how people who have listened to this debate, have read the Bill and have taken into account the funding that has been and is being made available by this Government can feel that there is any reason to accuse us of neglect.

If one considers what the Government have done and are doing in support of British Shipbuilders, one sees that we have introduced this Bill to increase the corporation's access to external finance and have provided British Shipbuilders with £840 million since 1979. It is important in the present crisis to remember that we have arranged for an interim extension of intervention fund support, have applied for a further extension and have made it clear to British Shipbuilders that, while the negotiations take place—I agree with Labour Members who complain that the negotiations can take a long time in Brussels—and contracts which come forward will be looked at on a case-by-case basis while we endeavour in Brussels to reach agreement on further facilities from the intervention fund.

We are providing some £200 million to fund the modernisation of the facilities at Vickers, again pointing to improvements and looking to the future and the sort of work that can be done. This is not just work for the Trident programme. These modern facilities will be capable of building conventional submarines and surface vessels. I repeat that we have placed nearly £1,900 million worth of naval orders in British Shipbuilders' yards since we came into office in 1979.

These are the actions of a Government who are realistically supporting British Shipbuilders. The Opposition have made their points in the debate. They should be as much aware as anyone else that a Labour Government could not or would not have done more since 1979 for the industry. I have heard agonies about closures and losses which one can understand to a certain extent. I have heard complaints and demands—from only one or two hon. Members, I am happy to say—that the workers should almost rise up in arms at tomorrow's meeting. I am glad that most Opposition Members recognise the seriousness of the situation. I have heard nothing from the Opposition to add to the list I have read out as to what additionally the Government should have done or should be doing at this difficult time.

We have presented a case which the House understands and accepts. We have given hon. Members every opportunity to present their ideas or anything further that they wish to commend to the Government. Their absence suggests firmly that we will have the support not just of my right hon. and hon. Friends but of the Opposition.

Question put and agreed to.

Bill accordingly read a Second time.

Bill committed to a Committee of the whole House. —[Mr. David Hunt.]

Further proceedings stood postponed, pursuant to order this day.