HC Deb 26 February 1985 vol 74 cc294-306 12.38 am
The Parliamentary Under-Secretary of State for Trade and Industry (Mr. John Butcher)

I beg to move, That the draft British Shipbuilders Borrowing Powers (Increase of Limit) Order 1985, which was laid before this House on 13th February, be approved. The draft order before us tonight concerns the borrowing limit placed upon British Shipbuilders. This is the statutory ceiling on the funds that British Shipbuilders may acquire from the Government or elsewhere — specifically public dividend capital, loans from the National Loans Fund and borrowings from the market. It does not apply to payments under the intervention fund or the shipbuilding redundancy payments scheme — [Interruption.]

Mr. Deputy Speaker (Sir Paul Dean)

Order, perhaps the Minister will wait a moment, so that we can hear him. Will hon. Members please leave the Chamber quietly?

Mr. Butcher

The limit currently stands at £1,100 million, having been raised by order last June from £1,000 million. We now propose that it be raised again, under the terms of the British Shipbuilders Borrowing Powers Act 1983, by £100 million to £1,200 million.

Let me stress that this is a purely permissive measure, raising the ceiling on the amounts that British Shipbuilders may borrow. It is not in itself a commitment to expenditure. Whether and what funds will be provided will be a separate matter for Parliament, dealt with through the normal Estimates procedure.

The reason for bringing forward this order is straightforward. When we introduced the last order in June 1984, we told the House that British Shipbuilders' Borrowing stood at £869 million and that we had allowed, through the external financing limit, for a further £217 million of external finance in 1984–85. The majority of that finance has been provided through public dividend capital and through the National Loans Fund and other loans associated with the modernisation of Vickers at Barrow-in-Furness. By the end of March 1985, we therefore expect total borrowing to amount to about £.1,080 million.

For the financial year 1985–86, the House knows that we have set an external financing limit of £36 million, after taking account of expected proceeds from the sale of British Shipbuilders' warship yards. As part of this will be intervention fund, which does not count against the borrowing limit, it might be thought that British Shipbuilders could pass through 1985–86 still within the £1,100 million limit, but there are two areas of risk.

The first is one of timing. If most of the sales of warship yards take place later in the year, British Shipbuilders' borrowings will continue to rise in the early part of the year, possibly over the limit. Secondly, as the House knows, the completion accounts relating to the sale of Scott Lithgow have yet to be finalised. It is possible that when they are, British Shipbuilders will need to meet further costs arising from the sale.

This order, if approved by the House, will fully exhaust the provision for raising the limit under the 1983 Act. As long as British Shipbuilders remains unprofitable, its borrowings, albeit offset in the short-term by sale proceeds, will continue to rise. At this stage I cannot tell the House when or what further legislation may be necessary in due course. We shall review the position in the autumn, in the light of the progress of the corporation, the level of sales proceeds from the warship yards, the levels of intervention fund support approved by the Commission and the level of general support that we are able to commit within the constraints of public expenditure. We shall then introduce a Bill if appropriate.

We have had no shortage of debates in the House on one aspect or another of shipbuilding. Since Christmas the House has had two wide-ranging debates in the context of the Shipbuilding Bill to extend the shipbuilding redundancy payments scheme, currently being considered in another place. I shall therefore confine myself tonight to a short review of what the corporation has achieved since we laid the last order of this sort in June 1984, and to a few words about the prospects that we see for the rest of 1985. I am sure that that will remain the pre-occupation of hon. Members, as ever with debates on ship building.

In June 1984 the corporation was just recovering from the traumatic experience of the failure of Scott Lithgow and its subsequent rescue from oblivion through the sale to Trafalgar House. Our policy to dispose of the corporation's shiprepair interests was already in hand and Tyne Shiprepairs, Readheads and Grangemouth had rejoined the private sector. Considerable restructuring was in hand throughout the corporation, with 13,000 jobs lost in the first six months of 1984, and three small yards, Goole, Henry Robb and Clelands sadly forced to close through lack of work. Since then we have seen further radical developments both of our policy towards the industry and within the corporation itself.

First, my right hon. Friend the Secretary of State announced in July 1984 our intention to return all warship interests and their remaining shiprepair and minor engineering interests to the private sector. British Shipbuilders has since issued sale documents for Brooke Marine, Hall Russell and Yarrow and has received bids for all three yards. The House will appreciate that I cannot give more detailed information about the identities of the bidders, or the prices, for this could prejudice the sale negotiations. British Shipbuilders is also pressing on with the preparation of sale documents for the other four yards. I understand that it will probably be ready to issue these within the next two months.

The two remaining BS shiprepair companies — Falmouth and Vosper Shiprepair—are also currently on the market. British Shipbuilders have been negotiating with several potential purchasers but have not yet been able to reach unconditional agreement on terms which the corporation regards as satisfactory.

At the same time, my right hon. Friend the Secretary of State announced that we had received the corporation's corporate plan and that we fully endorsed it primary aim of concentrating resources on a stable, cost-effective mainstream merchant shipbuilding business. The corporation has since then devoted great effort to achieving that aim. I have already described how far it is down the road of disposing of the non-merchant parts of the business. In addition, it has been pursuing its plan objective of restructuring the organisation on a basis designed to regionalise and make much efficient use of resources. The restructuring of its engine building operations from five to two main sites and the creation of a single engine building company, Clark Kincaid Ltd, provides a very clear example. This has led, sadly and inevitably, to job losses. Since June 1984 the corporation has announced 1,285 redundancies on the merchant and engine building side of the operation. British Shipbuilders has a continuing need to make itself more competitive and to win more work.

Equally there have been job losses on the warship side, principally at Swan Hunter, Vospers and Cammell Laird. This is despite the recent placing of the orders for type 22 frigates at Swan Hunter and at Cammell Laird and the announcement that Swan Hunter will, subject to agreement on price and delivery, get the order for the next type 23 frigate.

But again I have to say that these losses, sad though they are, are the price of past failures, in this case the inability to obtain a single major warship export order in the last 10 years or to compete effectively in the market for merchant ships.

Hon. Members will be aware that since the House last debated these topics in the debate on the redundancy payments scheme a significant amount of good news has emanated from British Shipbuilders. An order has been placed at Smith's dock for four ships, ultimately destined for use by Cuba. I welcome this considerable success for one of British Shipbuilders' most productive yards At Austin and Pickersgill, where the order position was desperate indeed, management and unions reached very rapid agreement on new working practices and arrangements which have enabled British Shipbuilders to proceed with an order for two ships for another foreign owner. My right hon. Friend the Minister of Agriculture, Fisheries and Food has just placed an order for an advanced research vessel at Ailsa whose sister yard, Ferguson's on the Clyde has already this year obtained other valuable orders.

Most recently Govan has of course secured a £38 million order from North Sea Ferries for a major ferry of the latest design. This is a particularly welcome development, both for the work it provides for one of British Shipbuilders' most efficient yards and for the opportunity it provides for British Shipbuilders to re-enter the market for high value passenger vessels. And the string of orders has meant good news for British Shipbuilders' reorganised engine building operation, Clark Kincaid, which now has a valuable base load of six slow speed engine orders. Looking a little ahead, it is already well-known that Govan is in the running for a further major order from a Turkish owner and that Sunderland is looking at a number of prospects, including the joing development with ITM of a heavy-lift crane barge.

As a result of this progress and the considerable efforts being made by British Shipbuilders under its chairman, Mr. Graham Day, it now seems likely that it will get very close to or reach its stated order target for 1984–85 of 200,000 compensated gross registered tonnes.

Against this backdrop of a fight-back by the industry, the Government too have been fighting in Brussels to secure approval of higher rates of intervention fund. We were unable to reach a satisfactory agreement with the outgoing Commission and have now renewed our efforts to persuade the new Commission of the justice and logic of our case. We have already pressed our case with the new competition commissioner, Mr. Sutherland, and we intend to press it further when my hon. Friend sees him next week. Despite the orders I have announced, it is vital to the very survival of merchant shipbuilding in the United Kingdom in the next few years that we should get early agreement to a temporary increase in intervention fund rates to enable our industry to compete with the unrealistic prices still being quoted in the far east. I am now genuinely optimistic that the end of our long battle is in sight and that a satisfactory new aid regime will soon be in place. Meanwhile, we have of course been operating interim arrangements within the European rules. The raft of recent new orders is testament enough to the effectiveness of these arrangements.

We have had a long night and I know that some hon. Members want to contribute to the debate, but I cannot let pass the opportunity to pay the highest compliment to Graham Day. He has not received the best and most optimistic comment from some Opposition Members. I have every confidence that the corporation, under its most radical and innovative chairman yet, will provide the plan for the future and implement it. I urge the House to approve the order.

12.50 am
Mr. Geoffrey Robinson (Coventry, North-West)

Like the Under-Secretary of State, I and my hon. Friends are aware of the long preceding debate. None of us would wish to delay the House unduly and we shall not oppose the order. However, the Under-Secretary's statement was surprisingly detailed and some questions arise. I imagine that he will have the answers readily to hand.

The hon. Gentleman will be aware that there is some doubt and dispute between those with a continuing interest in where the £1 billion for BS has gone. It would be helpful to have a breakdown of what has gone into working capital, trading losses and fixed investment to secure the future of the yards. If the fixed investment could be split between military and civil business we would have some idea of what future to envisage for those yards that will remain with BS after the Government have finished hawking off what are the only presently attractive parts of the industry. I do not expect all that information now, but perhaps the hon. Gentleman will write to me on those points.

As the pattern of sales emerges over the next few months, it would be helpful to see who has got what of the public share that has gone into the companies. It would be reassuring to see something being put back into what will remain in the public sector.

I presume that the 200,000 compensated gross registered tonnes are for those yards that will remain in the public sector, or does that apply to what is still within BS? I imagine that the target is for those yards that will remain. If not, what will be the forward coverage for those yards that will not be sold off? We know that the Government made adequate provision. They have written off all the debts and pushed out what military orders they can. We welcome that. As the Minister said, it has not prevented severe redundancies at Cammell Laird, Vosper Thornycroft and Swan Hunter in the military sector. But we welcome those orders. We are not grumbling. Indeed, we have been pushing the Government to give them. However, we should also be keen to have the order level related to not just the military business, about which we have been well informed recently, but also to the forward order cover of those yards that will not be flogged off by the Government.

We cannot, as we have often made clear previously, share the hon. Gentleman's rosy view of the future. We have said before that the Opposition have no grounds for imagining that there will be a solid base for a continuing civil commercial sector — the cost-effective constant mainstream civil business. Some progress has been made on a small scale in some yards and we welcome that, but without continuing Government support, of a kind that we have had no evidence of, for what will remain in the public sector, we fear that we shall see the industry disintegrate completely.

It may be that the negotiations are still at such a delicate stage that the hon. Gentleman cannot be more clear about the state of the Commission's negotiations but some information would help all hon. Members. The hon. Gentleman will be aware that the Minister of State was pushed on that point previously and he said that he could not be expected to state precisely what level of funding he was pushing for or what percentage that would represent by way of grant or support to the industry.

If the Minister could give us some idea of how far the negotiations have proceeded — he was a little bullish in his remarks on this—and fill in the details a little, such as the size of funding, the percentage grant and the subvention that might be permissible within the EEC regime, that would be helpful and might justify what he called the fruits of the long battle that are now in sight.

We welcome the extension of the powers but we oppose the flogging off of the yards. Is the Minister standing by the statement that if the military yards do not find buyers — of which Yarrow is already on the market and the others about to be so—those yards will be closed? We need a clear answer on that tonight. We believe that they should stay in the public sector. We are opposed to them being flogged off, but even more are we opposed to them being closed if buyers are not found.

We want to know where the money has gone between the military and civil businesses and between the various categories of investment. We want to know the forward order load for the civil yards that remain within British Shipbuilders after the haphazard auction has reached its lamentable end. We want to know precisely where the 200,000 CGRT has been found. If the Minister can fill us in on the negotiations with the Commission, that would be helpful.

12.57 am
Mr. Malcolm Bruce (Gordon)

As the hon. Member for Coventry, North-West (Mr. Robinson) said, this order extends the borrowing powers of British Shipbuilders and no one would wish to oppose that.

Some questions arise to which I hope the Minister will reply. Given one or two of the matters upon which he touched, one wonders to what extent the requirement for additional borrowing is related to the Government's policy of privatisation. It appears that there may be continuing investment in yards that are to be sold, which will require to be funded. More specifically, there will be the follow-on consequences of the Scott Lithgow deal.

As some hon. Members may recall, I was critical of the deal when it was struck — not because I objected in principle to the yard moving from British Shipbuilders to the private sector, but because of the terms in which it was taking place, namely, that the price paid was extremely low and the guarantees remaining on the public purse appeared to be open-ended and rather high. I hope that when the Minister replies he will say what commitment will have to be met by the public sector on the Scott Lithgow yard. Some of us think that it might be a substantial sum.

I shall confine myself to the Scottish yards. The bids that have apparently come in for Yarrow and Hall Russell are clearly different from what was envisaged. The joint management buyer fell through. While I appreciate that the Minister is not in a position to disclose the details, can he reiterate a previous assurance that the Hall Russell yard will be sold as a shipyard? He knows the strength of feeling in the city about that. It would be welcome if the Minister could say tonight, first, whether any offer he has on the table is likely to prove acceptable and, secondly, if it is that he will ensure that as far as the Government can reasonably guarantee the shipyard will continue to be a shipyard and will not be sold for any other purpose. It has, in private and public ownership, been a successful and profitable yard and it is the wish of the local community that it should continue to be so.

I do not want to labour the point, but it is worth reiterating that people who do not know the local economy in Aberdeen tend to think we are happy with the fact the we have oil. We are, and it has given us a level of unemployment which other areas might envy, although 10 years ago any other part of the country would have regarded 7.5 per cent. unemployment as a disaster.

Nevertheless, the traditional industries in Aberdeen are being squeezed out by the oil industry. If this shipyard went as a yard, that would be seen as a psychological and practical blow to traditional industries in the locality, industries which the community is anxious to sustain, especially as the yard has been efficient, successful, flexible and profitable. It would be most regrettable if the net effect of privatisation was to prevent that from continuing.

We welcome the fact that some additional orders have gone to British Shipbuilders. To the extent that the Government can make any positive statements to the effect that they feel — we can differ if we consider that they are not right—that British Shipbuilders is coming out of the doldrums, if that turn out to be true, it will be welcomed. Many of us requires much more to happen before we shall be convinced that progess is really taking place.

Some questions remain unanswered about the increase. For example, is it simply and extension of what has been going on? Is it real money going into the shipbuilding industry to strengthen it, or is it transitional money which will benefit private owners who take over some of the yards? We have seen to much from the Government of public money going in to prop up assets which have subsequently been sold off at a low price to benefit, one can crudely say, friends of the Government, people who do not give a proportionate return to the taxpayer.

One is still left with a feeling of concern lest some of the deals which are still outstanding and which British Shipbuilders will have to pick up may prove expensive. That is part of the reason, one suspects, why the Government are having to increase the limit.

Those who wish to see British Shipbuilders restructured, to see the industry successful and to see the Government pursuing a proper shipping and order placement policy welcome any move that is likely to make for improvements in that direction. I hope that the Minister realises that simply presenting an order — which, of course, we shall not oppose—does not mean that we are convinced that the Government's policy is on the right track.

Despite the general and blatant political points that I have made, I hope that my questions about Scott Lithgow and Hall Russell will be answered and that assurances will be given. That will be welcomed by many people outside the House, who will be concerned if the Minister is unable to give those assurances tonight.

1.3 am

Mr. Nicholas Brown (Newcastle upon Tyne, East)

I shall not delay the House unduly at this late hour. However, this instrument provides an opportunity for hon. Members with constituency interests in the shipbuilding industry to make representations to the Government. In particular, it is an opportunity for those of us who wish to see the industry preserved to question the Government on their overall approach and on recent developments in the industry. I shall not go over old ground. There are some new points about which I wish to probe the Minister.

In the past the Opposition have not opposed orders designed to raise the limit on British Shipbuilders' borrowing powers, and we shall not oppose this one. However, with privatisation looming for the greater part of what is left of the industry—the warship yards—we have a duty to seek from the Government details of what the extra money is required for and how they intend to recoup the taxpayers' money that is being spent or the warship yards that are due for privatisation.

Prior to nationalisation, a major cause of the difficulties in the industry was lack of investment because the private sector preferred to take its profit rather than reinvest. It would be ironic if the end result of nationalisation was that public funds had been used to make up for the failure of the private sector to invest, only to have the recapitalised industry handed back to the private sector on advantageous terms.

Everything depends upon the actual terms of privatisation. I understand why the Minister has to be reticent on the specific details at the moment, but the Government have a duty to safeguard public investment in the shipbuilding industry and to make sure that the nation gets a proper return on its investment.

I was disappointed that the Minister did not refer specifically to the increase in borrowing limits. The order does not deal with the difficulty that shipyard workers who will be made redundant after December 1986 will face These will be the workers who have stood by the industry and have not taken the opportunity to sell their jobs. They will be forced out of the industry by closure, without full severance payments if that closure comes after the end of 1986.

It would be wrong for the Government to leave matters as they stand, because a section of the shipbuilding community will be treated unfairly. The injustice will be made worse because workers deprived of accumulated entitlements will have no means of preventing their redundancy. Indeed, these will be the workers who are now sticking by a low-paid industry and doing everything possible to save their jobs. I do not think that the House would want to treat shipyard workers in such a shoddy way.

If there are further redundancies after 1986 as a result of a downturn in naval orders by the Ministry of Defence, I think that it would be the will of the House—certainly it would be the will of my right hon. and hon. Friends — that arrangements should be made to ensure that shipbuilding workers in that unfortunate position received their redundancy entitlement not just under the state scheme but also under the British Shipbuilders' scheme. It would be unfair if they were left without that sort of protection. The Minister should address himself to that eventuality and give an assurance that in those special circumstances the Government will be willing to act. That would be helpful.

Will the Minister also address himself to the status of warship yards that have work but are not privatised by March 1986? This is of considerable concern to the industry. I mentioned in the last debate that the Minister of State had said that the warship yards were to be sold or closed. Is that still the Government's approach, or are they saying that these yards will be alienated from public ownership on a subsidised basis, or will they be kept in the public sector in a disadvantaged way until the work runs out, or are the Government still considering — as was mooted last summer by the Secretary of State — the launch of a private limited company to accommodate yards for which there has been no other private bid by the time the privatisation date that they have set approaches?

Yards such as Cammell Laird and Swan Hunter have a substantial tradition of doing merchant work. Swan Hunter in particular has built up a record of producing specialised merchant vessels, and it is still in that market. If it is asked to go over to warship building as its only function, it will lose a source of work for its men and a source of revenue for the privatised company. Does the Minister see any future for Swan Hunter in merchant work, especially for specialised vessels, where European yards can still be competitive? I have in mind the launch of the cable laying vessel, which has only recently left the Tyne. That is the sort of work that Swan Hunter will want to compete for, and it should have the opportunity to do so.

If the Government adopt the method of subsidising merchant shipbuilding for which I think they will opt, which will mean giving a cash subsidy to British Shipbuilders and saying, in effect, "This is your subsidy for merchant shipbuilding", it will be for BS to decide how that money will be spent across its merchant yards. Mixed yards such as Swans, which are supposed to be treated like warship yards, would be cut off from effective subsidy for merchant orders. As we have said repeatedly in these debates, there is no free market in merchant shipbuilding. Every merchant shipbuilding economy needs state support. It is the position of yards such as Swans that I wish to probe.

If the Government intend to adopt a different approach in subsidising British merchant shipbuilding — for example, one that takes into account the social consequences of unemployment, the work force that is employed or the pragmatic order-to-order subsidy rather than a fixed sum—it will be helpful if the Minister will say so now, so that the position is clear for all those who have responsibility for future planning in the industry.

Swan Hunter has been promised a type 23 frigate order. I ask the Minister to give an assurance that it will not be as long delayed as the orders for type 22s. The Type 23 order will be crucial for the employment programme at Swans. If the yard does not receive the order in time, there are bound to be further redundancies on Tyneside. I shall not rehearse all the arguments about why the region should not have to bear the present burden of unemployment. I am sure that the Minister is aware that it is a region of very high unemployment and that it does not want to carry the additional burden of further shipbuilding redundancies.

The Minister has whetted my appetite and that of my hon. Friends by talking about the new aid regime to meet competition from the far east. It is something that is giving him new hope. It seems that it will deal at last with import penetration and I understand why the Minister cannot reveal to much at this stage. If what he has outlined comes to pass, it will be welcome. I only hope that it will not come too late for the industry and that it will provide an effective barrier to unfair overseas competition, especially from the far east. I hope also that it will prevent the annihilation of our merchant shipbuilding markets as a result of dramatic import penetration. I wish the Minister well in his endeavours if he is genuinely taking that path.

1.13 am
Mr. Butcher

First, I thank the hon. Member for Coventry, North-West (Mr. Robinson) for his endorsement of the objectives behind this measure. I understand that there is unanimity in the House that we should proceed in the way that has been outlined. I can assure him that as all the recent shipbuilding orders are covered, in the main, by the intervention fund, they have taken that subsidy forward automatically into next year's build programme. We would not have next year's build programme if there had not been the intervention fund support which Mr. Graham Day has used so imaginatively in scouring the world for orders.

I shall restate briefly what we are about tonight. The order raises the borrowing limit of British Shipbuilders by £100 million to £1,200 million. It gives BS the authority to borrow from the Government or elsewhere up to that limit. In practice, the funding involved is primarily public dividend capital plus certain Government loans associated with the modernisation of Vickers and temporary borrowing from either the national loans fund or the market. It does not apply to payments under the intervention fund. The proceeds from the sale of the warship yards will be allowed for, but we are looking still at net EFL, even allowing for the proceeds of sale. Obviously, I shall not disclose the exact figure tonight, as it could prejudice what we are looking at, but it will be about £36 million.

We are introducing the order now because, by the end of March, British Shipbuilders will be approaching its current limit of £1,100 million. As I have explained, we expect receipts from the sale of warship yards in 1985–86 to hold net borrowing in that year to the March 1985 level. But the timing of the receipts will be critical, and that will be another factor in relation to Scott Lithgow. Clearly, it is essential that we make provision now for borrowing which may arise in the early part of the year if sales receipts do not, as is likely, match expenditure on a month-by-month basis. Moreover, we still await the settlement of the completion of accounts relating to the sale of Scott Lithgow. It is clearly prudent to make provision for any costs which may arise.

In my opening remarks, I told the House of both the radical restructuring which British Shipbuilders has undergone since we last introduced a borrowing limit order, and the recent new order success that this has brought. After virtually a year without new orders, during which we have had a number of sombre and depressing debates, it gives the House pleasure to be able to participate in a debate on the first successes of the revamped British Shipbuilders.

As ever, many questions have been asked. In the financial year 1984–85, British Shipbuilders expects to spend more than £100 million on capital expenditure, of which £51 million is for the modernisation of Vickers. The balance will go to the other yards. The hon. Member for Coventry, North-West asked about future work projections. In 1985–86, British Shipbuilders plans to spend about £130 million, of which £60 million will be on the modernisation of Vickers. In both years, capital expenditure on merchant shipbuilding will be running at about £20 million.

The hon. Gentleman also asked for a breakdown of the £1.23-ish billion which we are now contemplating. I have answered that question in great detail in past debates, and I therefore accept the hon. Gentleman's invitation to let him have the updated detail in writing.

At the time Scott Lithgow was sold in March 1984, the financial reconstruction of the company, which comprised part of the deal, was done on the basis of provisional and unaudited accounts. This was documented in British Shipbuilders' annual accounts for 1983–84 and fully explained in evidence to the Select Committee on Trade and Industry in July 1984 by both British Shipbuilders and its auditors.

Finalising the completion accounts has proved a complex business. The auditors of British Shipbuilders and of Trafalgar House are still deeply involved in negotiations. I understand that the principal item at issue is the provision made in March 1984 for the costs of completing the BP rig. Under the terms of the deal, British Shipbuilders retained responsibility for this rig. In the event it took far longer to complete than originally estimated. British Shipbuilders and Trafalgar House are therefore negotiating over who should bear the extra completion costs involved, and over a number of other issues relating to the accounts.

I must stress, however, that any costs which may arise from the BP rig will not bear upon the original decision to sell the yard. It was always clear that the BP rig was so far advanced that it only made sense to complete it—and the costs would thus have arisen whether the yard was retained in British Shipbuilders, closed or sold.

The hon. Member for Gordon (Mr. Bruce) displayed a laudable concern for yards outside his constituency and referred to the implications for Scott Lithgow. Having spent some time last week in that yard, I detect a new atmosphere there. The workers are committed. My only regret, from having walked around a couple of the car parks, is that it appeared that about 35 per cent. of the cars parked there were of foreign manufacture. Although we had a rather whimsical exchange with the shop stewards on that particular morning, they could perhaps have pressed me to a deal if they eliminated that form of purchasing to allow for a totally British purchasing policy on behalf of British ship owners. That was a deal I could not deliver, but it was an interesting exchange.

On the question of Swan Hunter and merchant work, there is nothing now, of course, to prevent Swan Hunter's from seeking merchant work while it is in the corporation. What happens afterwards will depend on the new owners. As the chairman of British Shipbuilders has pointed out, Swan Hunter lost a lot of money on the Atlantic Conveyor in spite of the subsidy that the ship received. I noted very carefully what the hon. Gentleman said about the type 23 frigate; and I will, of course, communicate his concern to my right hon. Friend the Secretary of State for Defence so that the invitation to that yard to be up to scratch to justify the placing of that order in those circumstances is complied with.

The hon. Member for Coventry, North-West asked a question about the 200,000 compensated consolidated gross registered tonnes applying only to yards not to be privatised. The 200,000 compensated gross registered tonnes target is for merchant orders. None of the yards to be privatised has a merchant workload at present, nor do any have any immediate prospects of merchant work. I hope that the hon. Gentleman finds some reassurance in that.

We were then asked to clarify our position with regard to negotiations with the Commission. I am afraid that I have to avoid the invitation of the hon. Gentleman to be more specific. He has been in business himself and he knows that one does not go into a negotiating position declaring one's bottom line to those with whom one is negotiating. However, I can say, if he wishes me to use a different adjective, that we are looking for a substantial increase in the current rate of intervention fund, not least because, as hon. Gentlemen have noted, we are concerned to see that we match the far east competition.

On the breakdown of the subsidy from the Government, I did undertake to write to the hon. Gentleman and to give an update on what is now probably going to be in excess of the £1,200 million support figure. British Shipbuilders' workload next year, as I said earlier, will consist almost entirely of the orders they have got this year under IF support.

On the question raised on privatisation, we hope and believe that we shall be able to sell all the warship yards. We have not even anticipated that it will not prove possible to do so. We have not, therefore, considered what would happen to the yards if they were not sold.

I have not forgotten the hon. Gentleman's question about Hall Russell. It is our hope and wish, as we have said before, that it will be sold as a shipbuilder, but that depends on the bidders that come in for that particular order. We have given the strongest hint possible that we too would regret the lapsing of that sort of capability on that site.

Mr. Nicholas Brown

I would like to press the point I raised about the position of shipyard workers in warship yards who are made redundant after the expiry of the British Shipbuilders redundancy scheme at the end of 1986 through no fault of their own but because, for example, to give the most obvious reason, of a further downturn in the ordering requirements of the Ministry of Defence and there not being enough work to fill all the yards. If those workers who have stuck by the industry were to be made compulsorily redundant through no fault of their own, under present circumstances they would be disadvantaged. I should be grateful if the hon. Gentleman could at least give an assurance that the Government, in those specific circumstances, would look sympathetically at the position of the men and the possibility of compensating them for the substantial loss, amounting in some cases to 50 per cent. or even 60 per cent., of their redundancy entitlement.

Mr. Butcher

The hon. Gentleman may recall that we had a long debate on this in the past. I think we made it very clear that after the expiry of the shipbuilding redundancy scheme, as debated and approved in the House recently, it would be up to the successor privatised yard, if it was privatised by then, to have a follow-on scheme. The hon. Gentleman will have noticed that in similar circumstances in the past, when yards have passed from the public to the private sector, there has been a compensatory element of payment to the workers who have passed into the private sector. Negotiations have taken place, and some have been more generous than others. Thus the "rights" to the levels of redundancy payment enjoyed in British Shipbuilders are taken account of, but are no longer pertinent once the company has gone into the private sector.

I should like to send the hon. Gentleman details of four such deals done in the past. He may care to take his lead from them. He may rest assured that there is not a chasm, in terms of support, into which people fall. A number of compromises have been available.

I commend the order to the House.

1.26 am
Mr. Geoffrey Robinson

With the leave of the House, I shall reply to the debate.

I thank the Minister for the further information. It will not come as any surprise to him that it is disconcerting to see so little capital investment going into the civilian side. That only confirms our worst forebodings.

We welcome the fact that the Minister said that the compensatory gross registered tonnage was indeed for those yards. However, one year forward is not a great deal of forward order coverage, given that the Government have plunged the industry into a further period of great uncertainty.

The Minister then let slip a figure of £36 million. Is that figure for the proceeds that he expects from the immediate sales of the warship yards that are put on the market? Did he say that the proceeds from the sales would be credited to BS, and would thus benefit BS in addition to the increase in the borrowing facility that he is making available? If that is the case, we shall not press him as far as the Commission is concerned. However, we shall look very carefully at whatever deal he eventually comes to the House with, and we shall want to be assured that it is as substantial as he claims.

With great respect to the Minister, the Secretary of State and to the officials, it is about time that they gave some thought to the situation that they are putting themselves in of utter distress sales. It is not good enough to say that they have not thought about what they will do if they cannot flog off those yards. Will they give them away, pay people to take them, or close them? If Ministers cannot answer that question tonight, it is time that they had a clear-cut policy saying that those yards that are completing their orders will be left within BS, and that their managements will fall within its area of competence, and that they will be allowed to complete them.

We should like the Minister to come back to the House on those points. We cannot welcome the Government's policy towards the industry, and oppose that policy in every conceivable respect. But we welcome the order in that it enables the industry to continue, albeit in an unsatisfactory state and towards an uncertain future. In the circumstances, there is nothing that we can do but accept the order and to hope that the industry will have a better future than the Government seem to envisage. We shall follow the industry's progress, and the progress of the sales over the next months with great trepidation, and I fear that we shall be debating these issues before long as the Government's auction proceeds. But for the moment we shall let the order go through without a Division.

Question put and agreed to.

Resolved, That the draft British Shipbuilders Borrowing Powers (Increase of Limit) Order 1985, which was laid before this House on 13th February, be approved.