Shipbuilding Bill

HC Deb 09 January 1985 vol 70 cc790-839

Order for Second Reading read.

3.53 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.

This is a short and essentially technical measure. Its purpose is twofold. First, it extends the life of the Great Britain and Northern Ireland shipbuilding redundancy payments scheme by 18 months and, secondly, it formally writes off certain irrecoverable outstanding loans made by the Shipbuilding Industry Board to Upper Clyde Shipbuilders in the period 1968–72.

The shipbuilding redundancy payments scheme was first introduced in 1978, shortly after the nationalization of shipbuilding. In introducing the Bill on Second Reading, the right hon. Member for Manchester, Gorton (Mr. Kaufman) described it primarily as a scheme to alleviate the human problems caused by any contraction of the industry". He went on to acknowledge that shipbuilding industries all over the world are facing the inevitability of contraction and that this country cannot isolate itself from that trend".—[Official Report, 16 January 1978; Vol. 942, c. 173–5.] Those were wise words, of which from time to time we have had cause to remind him. He also emphasised the original limitation of the life of the scheme. At that time it was limited to two years. That was the period that the right hon. Gentleman then thought would take us past the then approaching slump in shipbuilding. In that regard he was perhaps less prophetic.

I recall the occasion well because I was the Opposition spokesman who had the task of welcoming the Bill. I did so, though with a slightly different emphasis. I saw it not just as a measure to alleviate the inevitable misery of redundancy but as a tool to help smooth the path of transition to competitive manning in the industry and to help people thus made redundant to move to the industries of the future. I still hold that view. No one would dispute that the scheme has contributed significantly over the years both to the alleviation of the problems of redundancy in a contracting industry and to progress in relation to the problems of contraction itself. It has proved a valuable tool in the management of change within shipbuilding and has helped in an extremely difficult period.

That is why in 1982 we introduced an order prolonging the life of the scheme until June this year. It was clear then that further contraction was likely. It would have been wrong to have allowed it to have lapsed during such a period of uncertainty, and prolongation seemed the sensible course. As events have shown, with the continued rapid decline in the fortunes of the industry and the consequent reduction in the work force, that was the right decision.

British Shipbuilders has taken advantage of the scheme to a considerable extent. About 35,000 workers in British Shipbuilders have benefited under the scheme at a total cost of £130 million since it began. Today, some 7,000 people are in receipt of the weekly payments. We are now approaching the end of that extension, and the Government have had to decide whether to ask the House to extend the scheme once again. We took the decision to bring forward the measure before the House in the light of the industry's present position.

Merchant shipbuilding continues to face an enormously difficult market. Apart from the upturn of 1979–80, it has, for the whole period of nationalisation, fought an uphill struggle in a deep recession against highly competitive far eastern producers. The inevitable contraction, seen and accepted by the Opposition in 1977, has happened. The merchant shipbuilding sector of British Shipbuilders has halved and is now about 11,000 men, including engine building.

Mr. Eric S. Heffer (Liverpool, Walton)

The hon. Gentlemen refers constantly to the statement by my right hon. Friend the Member for Manchester, Gorton (Mr. Kaufman). Then we had a Labour Government who were working for an upturn in the economy. Since then we have had a Conservative Government who have allowed the shipbuilding and other industries to decline to the extent that there is now a continuing crisis. Is not that the basic reason why we are again facing this problem?

Mr. Lamont

The hon. Gentleman is quite wrong. Shipbuilding deals in an international market, and now, as then, there has been a substantial contraction internationally. As the hon. Gentleman knows, shipbuilding contracted at that time, and the words of the right hon. Member for Gorton which I have quoted showed that he envisaged that there would be some contraction. I do not blame the right hon. Gentleman for not foreseeing that the period of recession in international shipping would last very much longer than the period thought likely to be the case in 1979.

In the past 12 months, alongside the retrenchment, we have also seen within British Shipbuilders some encouraging signs of improving performance. British Shipbuilders is beginning to see marked improvements in throughput per man, even at a time of low work load. That is the period when productivity gains are the hardest to make.

Nineteen eighty-four will be remembered in British Shipbuilders as the year in which common sense prevailed, when a vital agreement on flexible working practices was signed and when the Cammell Laird work force voted with its feet to defy the militants. I hope that 1985 will prove to be the year when the benefits of a positive approach by management and work force show through in vitally needed new orders.

We must be under no illusions. British Shipbuilders still has a long way to go to achieve real stability and a firm future. It would be foolish to ignore the genuine risk that the market will force yet further rationalisation on the corporation. We must all recognise that, even to maintain its market share, it must become more competitive, which in turn means fewer people building the same number of ships.

Meanwhile, the Government intend to push ahead with the policies of privatisation stated by my right hon. Friend the Secretary of State for Trade and Industry in July 1984. We shall seek to return as much as possible of the industry to the private sector. More immediately, we intend to sell the warship yards by March 1986. Taken with the privatisation of ship repair yards and the disposal last year of Scott Lithgow, this means that by the end of 1986 the public sector will account for less than one-third of the United Kingdom's shipbuilding industry and will employ only 17,000 to 18,000 people — 11,000 of them in British Shipbuilders—even if no further redundancies take place either in British Shipbuilders or in Harland and Wolff.

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

Does the measure affect those formerly employed in the yards of British Shipbuilders who are now working for private companies?

Mr. Lamont

It does not affect them, because yards that have been privatised do not benefit from the scheme. A person who is already in receipt of benefits under the scheme will not be affected by the Bill. The hon. Gentleman can rest assured about that.

Mr. Frank Field (Birkenhead)

I wish to take the question a stage further. The Government intend to privatise some yards. What would be the fate of workers in yards which are now publicly owned and which become privately owned who may be made redundant? Would they qualify under the scheme?

Mr. Lamont

I shall obviously outline that in my speech.

The background to our decision about whether to extend the shipbuilding redundancy payments scheme is thus one of the continuing risk of further rationalisation in merchant shipbuilding coupled with a huge reduction in the size of the state sector that will result from the transfer back of certain yards to the private sector.

In our view, it would be wrong in those circumstances to let the scheme lapse now. Since the last prolongation it has served well as a means of alleviating the distress of those made redundant and of enabling the corporation to achieve the inevitable contraction both smoothly and efficiently.

While there remains a need for further rationalisation and a real risk of further contraction of merchant shipbuilding, and while the complex and difficult process of privatising the warship yards is under way, it would be inequitable and inappropriate to remove the scheme. However, we do not propose prolongation because we, British Shipbuilders or Harland and Wolff have plans for further major redundancies in merchant shipbuilding. There are no such plans. But we cannot ignore the risk that further rationalisation will be necessary. It is against that contingency that we are proposing this extension today.

Nor do we expect preparation for privatisation to result in any further retrenchment in the warship yards. The recent job losses at Swan Hunter and Vospers were the result of a failure by those yards to achieve merchant or export orders—an essential complement to the base load of work for the Royal Navy. The impetus to efficiency that will result from the return to the private sector promises in the longer term to generate jobs rather than to lose them. We believe that the scheme should be prolonged, but at the same time we do not believe that it should be prolonged indefinitely.

The scheme applies only to the state sector. Like all statutory schemes, it is inevitably more costly to administer than company-based arrangements.

When the state owned most of the industry and a long period of massive retrenchment lay ahead, statutory redundancy payment schemes made practical sense. By the end of 1986 the state will own less than one third of the United Kingdom industry. Moreover, if it is to survive, the remaining merchant shipbuilding sector will by then have had to fight its way back to a competitive position and to have found a level of reasonable stability. The need and justification for the scheme will thus have passed. We have concluded that it should be extended only this one, last, time to the end of 1986. I cannot tell the House what the cost of the scheme will be, because the cost of extending it will depend on the redundancies that take place. As a guide to what might happen and to indicate the "ball park" area, the cost of the scheme in 1983–84, when there were 7,000 redundancies—that is vastly in excess of what is likely to happen in the much smaller state-owned merchant sector—was £34 million. That covered both some payments for that year's redundancies and some payments to people made redundant in previous years.

Mr. John Smith (Monklands, East)

It is significant that the Minister said that there would be no redundancy provisions after 1986. Presumably there will still be a British Shipbuilders in operation, building merchant ships, whatever happens to the Government's privatisation proposals. Is not the Minister in effect saying that workers who do not accept redundancy from British Shipbuilders before the end of 1986 will not receive redundancy payments? Is he not therefore placing a threat on them to complete redundancy schemes before the end of 1986?

Mr. Lamont

Obviously, I am coming to the right hon. and learned Gentleman's point which the hon. Member for Birkenhead (Mr. Field) also raised. I shall deal with what will happen to the yards that are privatised and with what will happen in the remaining state sector after 1986. If the right hon. and learned Gentleman will let me finish my remarks, I shall address both questions.

The Northern Ireland scheme covering Harland and Wolff has always run parallel to and on the same basis as that for British Shipbuilders. It would, therefore, make sense to maintain it for the same period of 18 months. The Bill does that. There will naturally be anxiety about what will follow the schemes. The management of British Shipbuilders, Harland and Wolff and their work forces must resolve that matter. My right hon. Friend the Secretary of State for Northern Ireland and I propose to ask both organisations, in consultation with their unions, to establish appropriate successor schemes by the early autumn of 1986. It is too early to predict the details of such schemes. They will be negotiated between the management and work force, just as in the private sector. However, at this stage there is no need to worry that the work forces may end up worse off.

I recognise that there has always been anxiety that it is inequitable for the scheme to be available to the public but not to the private sector. Those with the interests of the present private sector in mind may argue either that the scheme should be extended to the whole industry or should be abolished now. I am quite clear that an extension to the private sector would be the wrong solution. A statutory scheme for the entire shipbuilding industry would be expensive, bureaucratic and wrong in principle. Employees of the warship yards will not be able to claim under this scheme after those yards join the private sector. They may be assimilated into an existing scheme, if one is already provided by the new owners, or a new scheme may be established as a result of negotiations between the new owners and the work force at the time of privatisation.

The reverse argument—that the scheme should go now — has been put forcibly by, among others, the Shipbuilders and Ship-repairers' Independent Association. I ask hon. Members who take that view to accept the Government's judgment that the interests of shipbuilding and of its work force are best served by a limited prolongation through the contribution that it will continue to make in the management of any contraction in the state sector.

Mr. Ted Garrett (Wallsend)

I know that the Government's policy is to keep their hands away from manufacturing industry, but will the Minister intervene to encourage the ' unions and management to reach redundancy agreements similar to those that we are talking about now?

Mr. Lamont

I can give no such commitment. I shall ask the management of British Shipbuilders to negotiate a scheme. Equally, for the privatised yards, it will be for the unions and managements to negotiate agreements. It would be wrong for the Government to lay down conditions or to say what the benefits of any scheme should be.

On that basis, I commend this final extension of the scheme to the House as a sensible contribution to our support for the shipbuilding industry.

Clause 2 writes off the outstanding irrecoverable loans made between 1968 and 1972 by the Shipbuilding Industry Board to Upper Clyde Shipbuilders Ltd.—a company now in liquidation — and reduces the assets of the National Loans Fund accordingly. In the "Accounts relating to issues from the National Loan Funds" for 1982–83, published on 12 December 1983 and presented to Parliament, it was stated that parliamentary approval to write off those loans would be sought in the financial year 1983–84. No suitable opportunity arose in that year. This Bill is the first suitable vehicle affording such an opportunity. That is all that I need to say about clause 2.

I commend the Bill to the House.

4.12 pm

Mr. John Smith (Monklands, East)

The Minister presented the Bill as a small technical operation designed simply to extend the redundancy payments scheme for a further 18 months beyond the period already sanctioned by Parliament. However, towards the end of his speech, as he explained the implications of the Bill, it became clear to me and to my right hon. and hon. Friends that something much more important was afoot. The Minister said that the Government had no intention of prolonging the redundancy payments scheme beyond the end of 1986 and that they do not propose to have similar schemes for the yards that are privatised as a result of the Government's privatisation policy.

The Minister would think us naive if we did not immediately ask him some searching questions on the implications of the Government's decision not to continue the scheme beyond 1986 and not to seek similar schemes in the private sector. What will happen to workers, as we near the end of 1986, who fear that they might become redundant in 1987? The Minister says to those workers, "You need not worry. You will be no worse off because I hope that a scheme will have been negotiated between British Shipbuilders and its work force that will give you redundancy protection." If the scheme has to be negotiated, how can the Minister say that the workers will be no worse off? The negotiated scheme could be considerably worse than the present scheme, in which case the workers would be worse off.

The Minister cannot say that the workers will be no worse off unless he gives us a guarantee today that he will insist that any negotiated redundancy payment scheme is no worse than the scheme currently available. He signally failed to do that. I hope that before the end of the debate the Minister or the Parliamentary Under-Secretary of State will make the Government's position clear. For the purposes of our debate at present, it seems clear that the Government will not insist on similar schemes and that the Minister's statement that the workers will be no worse off is meaningless and has no validity.

The second crucial aspect is that workers in the private sector, and workers in enterprises that will be sold over their heads to the private sector, will have worse redundancy protection than will the workers who remain in British Shipbuilders. That is undeniable. That factor will affect the thinking of the workers in the industry as they see their conditions of work worsening materially as a result of the Government's privatisation policy.

Another and perhaps more sinister aspect arises from that. What will be the view of workers who are considering their futures in the period before privatisation? Might they be tempted to say, "It would be wise to apply for redundancy before the yard is privatised so that I can have the rights under the existing scheme. If I do not apply for redundancy before privatisation, I will lose my rights after the yard is privatised." An elderly worker who has spent all his working life in the shipbuilding industry—as is not untypical in most shipyards—will be tempted to apply for redundancy which he might not want and which it might not be in the interests of the company to give him. However, the temptation will be such that he will take redundancy to ensure that he receives as much compensation as is available at present, bearing in mind the possibility that he might get no compensation after privatisation.

Is that not a way of reducing the work force immediately before privatisation, with the bill for redundancy being paid by the taxpayer so that the new private owner takes over a much smaller work force and has no obligation to pay the social costs of the changes in the industry? An extremely devious proposal is being put forward under the apparently innocent and generous terms of the Bill.

I am surprised that the Minister has not interrupted me while I have been making those allegations to say that I am wrong. I suspect that I am right about those facts, and the Minister is silent because my allegations are true. That will cause anxiety throughout the shipbuilding industry for those who will remain in the public sector and even more so for those who will be affected by the Government's privatisation proposals. It is a new twist to the saga of privatisation that was not revealed until the Minister made those remarks towards the end of his speech introducing this apparently innocent Bill. No doubt those features of the proposals will command most of our attention during the debate, and I am sure that my hon. Friends will wish to ask some searching questions.

Mr. Norman Lamont

It is not true to say that this is an entirely new development. When parts of British Shipbuilders were privatized — this is what happened with Tyne Shiprepair Group Ltd. and Scott Lithgow—workers lost their entitlement under the shipbuilding redundancy payments scheme. Compensation for that was the subject of negotiation. The state scheme applies to the state sector. It would be inappropriate for smaller state sector, employing 11,000 people in British Shipbuilders, to have the full panoply of the state scheme. That is simple common sense.

Mr. Smith

The Minister has put none of my fears at rest. I am not sure what happened with the other privatised yards, but my hon. Friends assure me that it was not quite as the Minister described it. Compensation was given to those workers in respect of the loss of their prospective redundancy payments. I do not know whether that is proposed in the case of the privatised yards. Is the Minister saying that at Yarrows, which appears to be the first candidate for privatisation, compensation will he paid to the workers for the loss of prospective redundancy payment rights under the present scheme? If not, why not?

If the Minister rests his case by saying that he is doing nothing different from what happened with the privatisation of the Scott Lithgow yard and compensation was given to those workers, why does he not offer compensation to the workers at Yarrows, who will lose the right to participate in the present scheme? The answer is that he will not do that. Those workers will lose out. The parallel drawn by the Minister is extremely inept. He has chosen a boomerang as a weapon.

Mr. Don Dixon (Jarrow)

Is it not true that the workers in Tyne Shiprepairers were each given £2,100 as a lump sum payment to come out of the shipbuilding redundancy scheme? What the Minister says is not true. It is misleading the House to say that this has happened previously, because the workers in Tyne Shiprepairers were bought out of the redundancy scheme.

Mr. Smith

I am grateful to my hon. Friend, whose deep knowledge of the shipbuilding industry is yet again of great value to the House. That is a very good example of how the Minister was seeking to lay a false trail across our path with his reference to previous privatisation exercises.

As a result of what my hon. Friend said, it is an odd state of affairs that some people were compensated for their loss of rights when they left British Shipbuilders, but that those who stay in British Shipbuilders after 1986 will lose rights in respect of which they will get no compensation. Their reward for staying in the state corporation is that they will lose rights. The Government's approach is thoroughly unsatisfactory and will cause a great deal of fear and worry throughout the shipbuilding communities.

At the end of the day, it worries me most of all that it will be said to workers in yards which are to be privatised that they ought to leave soon so that they will get the benefit of redundancy pay, and that will obviously be of advantage to the incoming privatiser, because he will take over a much smaller work force, with no social obligations. Once again the taxpayer will have to foot the bill for social change, while the very large profits likely to be made in the warship yards will go to private sector employers who will take them over, perhaps at knockdown prices, with almost no social responsibilities.

This is a much more significant Bill as a result of what the Minister said in his closing remarks than appeared on a first reading of it. To the extent that the Minister has revealed the Government's devious intentions, I suppose that we ought to be grateful to him because we are now forewarned about what is to happen.

The reason why we have to discuss redundancies at all is the crisis in the shipbuilding industry. We debated this on 27 November last year, in official Opposition time, when we drew attention to the deepening crisis in the industry. There has been very little improvement since then, and the worry in the industry is growing.

I had the opportunity just before Christmas to take part in a conference of shipbuilding workers in Newcastle, organised by the General, Municipal, Boilermakers and Allied Trades Union, representing nearly all the workers in the shipbuilding industry in Tyne and Wear. I was left in no doubt about the very substantial worries and fears in the industry amongst the work force, many of whom have given most of their lives to that industry. They are acutely aware of the problem which Sir Robert Atkinson mentioned in a speech only a few months ago, which is that the real worry and fear in the shipbuilding industry, particularly on the merchant shipping side, is that one yard will close after another. The more that one listens to the Government's plans, the more it becomes clear that they are unconcerned about whether one yard closes after another.

The fact that the former chairman, Sir Robert Atkinson, speaks in those terms is extremely interesting. He can hardly be accused of being a Labour sympathiser. He has described himself as a great admirer of the Prime Minister, but he said that it broke his heart to see what had been done to the shipbuilding industry in recent years. We know that the crisis has deepened significantly over the last two or three years, and not just as a result of the decline in orders internationally.

The Minister will be acutely aware of perhaps the most significant comment by Sir Robert Atkinson. He said that during his period in charge of British Shipbuilders he was never asked by Ministers about research and development and about the future of the industry. He added: But if I talked about closures or redundancies, their eyes shone. That is the former chairman of British Shipbuilders talking about the Government's attitude to the vitally important shipbuilding industry, and I repeat it because it is worth listening to again: But if I talked about closures or redundancies, their eyes shone. Presumably the Minister of State was one of those whose eyes shone on these occasions.

Sir Robert went on to describe the Government's privatisation policy as "political dogma." He said: The Government wants rid of British Shipbuilders. Given that context of Government policy, it is no surprise that we have had more redundancies recently, and it looks as though there may be more in train. What the Minister said today about the redundancy terms of the Bill makes us worry that, either by inducement or by fear, there will be the acceleration of a large number or redundancies in the yards which are about to be privatised.

I hope that the Government will think carefully about the terms of the Bill. I hope that they will think carefully about the foolish decision not to extend the redundancy scheme beyond 1986. They ought to think carefully about having a fair relationship between those in the privatised sector and those remaining in the public sector so that, as far as can be achieved, justice is done, and on the same basis, to everyone who works in the shipbuilding industry.

Even more important than that, there must be a real effort to try to save the shipbuilding industry. It is not just an ordinary industry to be looked at from the point of view that some industries rise and other industries fall and that we have to accept that almost as we accept the fates. The shipbuilding industry is extremely important to the United Kingdom because of its close connection with the shipping industry, which itself is a crucial industry, for vital reasons of trade and defence.

No maritime nation such as Britain can be without a proper shipping industry. As was made clear in a recent debate, we know the worry and concern in all parts of the House about the decline of our shipping industry, which is running down at the rate of about two ships a week. From having one of the largest merchant shipping fleets in the world, Britain is rapidly slipping down the league table to the point where it will probably be impossible for us again to mount a merchant shipping back-up for a military expedition such as the Falklands.

It is also crucial for a country which depends on trade for so much of its national wealth to have an adequate shipping facility, because for the foreseeable future most of our trade will be carried by sea.

It is therefore crucial to have a shipbuilding industry to back up that shipping industry. I recommend to the Government once again the idea of a national maritime strategy, which has been urged not just from the Opposition Benches but from all parts of the House, whereby the Government decide that there must be a real incentive to maintain a British shipping industry and that in turn there must be real incentives not only for ships to be ordered but for ships to be built in British shipyards.

The Japanese shipbuilding industry was rescued by a large order by the Sanko shipping company of Japan. Despite the fact that a one third price discount is available to Japanese shippers if they buy their ships from Korean yards, not one Japanese shipping company has put an order outwith Japan. I wish that we could say the same about the British shipping industry.

Whatever the attitudes of British shippers, they should be given the maximum incentive, and the disincentives introduced in the 1984 Budget by the Chancellor of the Exchequer are having a bad effect. I hope that in 1985 the Chancellor will rethink his position so that we start having fiscal as well as other policies which will support a national maritime strategy.

I hope, too, that the Government will end this folly of privatisation. We saw another evil aspect of privatisation revealed in the Minister's speech. Let me remind the House about what is proposed. The most profitable section of British Shipbuilders, the part of the industry which is almost the pensioner of the Government because it fulfills only Government orders and operates generally on a cost-plus basis — that jewel in the crown from the profitability point of view—is to be sold off to the private sector, apparently with as few obligations attached to it as possible. The rest of British Shipbuilders has to survive as it may without the help of any cost subsidy from the profitable section. We shall be left with beleaguered merchant shipping yards open to the fierce winds of competition, and they may very well close one after another. We shall be left with a warship building capability dependent on Ministry of Defence orders and a merchant shipbuilding industry which may have almost vanished. In those circumstances, to hand over those assets and to allow the others to wither, or for there to be an obligation for the others to be picked up by the state, is nothing short of ludicrous folly.

The extension of the period of tender seems to have resulted in industrial bloodhounds sniffing around those yards which are to be privatised, looking for some easy pickings. We know from experience that some British companies are adept at seeing what can be got from declining industries at the cheapest possible price. They then start new and profitable businesses out of investment which was made previously by the public sector in businesses which are available to them at knockdown prices. I hope that the Government will take great care to avoid that. I am told that there are already considerable fears among, for example, the work force at Yarrows over the number of bidders that there may be for that yard. Yarrows and Hall Russell appear to be the first in the privatisation stakes.

Finally, let me make a special plea to the Government to deal with the consequences of redundancies in the shipbuilding areas in a more imaginative way than simply by continuing, even for a limited period, the redundancy payments scheme. In many industries the Government are under the illusion that it is sufficient to compensate people for the loss of their individual jobs. They fail to understand that, although the individual may be compensated for his redundancy, the job is lost for ever to the community. It is not enough in the mining industry, the shipbuilding industry, the steel industry or any of our heavy industries where redundancies have occurred to think that the book can be closed from a social point of view when a certain amount of money has been paid to a person who has been made redundant. The community in which that person lives and his descendants will have lost the opportunity of employment.

In part of the constituency of my hon. Friend the Member for Newcastle upon Tyne, East (Mr. Brown), about 49 per cent. of those on the unemployed register are skilled workers. That must be a unique situation in the United Kingdom. We know the loss that that community has suffered. Will the Government consider giving special help to those areas affected by the rundown of the shipbuilding industry? I am sure that the situation that I have described in Newcastle can be found in other areas where there has been a heavy concentration of shipbuilding.

It is folly at this time to devalue the regional policy instruments which were previously available to such areas. Under regional policy changes there has been the abolition of the special development area incentives. When one cuts through all the waffle of the Government's statement, that is the most important change, apart from the cutback in the amount of money committed to regional development.

I hope that in the near future we shall have an opportunity to debate these matters at great length. I merely say now that of all the times to take such steps in areas affected by the rundown of shipbuilding, this seems to be the most stupid. Therefore, I ask the Government to consider providing some special help for those areas. This has been achieved in other industries; for example, by British Steel Corporation industries, and such provisions have been talked about for the coal mining industry. I do not know whether it will be suitable to give such help under the aegis of British Shipbuilders, or whether it should be given by some other Government task force mechanism, but I hope that the Government will give serious consideration to a special regime which can be introduced into those shipbuilding areas which have experienced redundancies so that communities, as well as individuals, receive some assistance. It is not good enough to look at the matter in terms of individuals. We must think of the individuals who have yet to come and others dependent on the industries in the community.

The rundown in some parts of the shipbuilding industry in Britain has been savage and severe. It has been as savage and severe as anything that has been suffered in any other part of the country by any other industry. Other areas and industries have received special help and I can see no good reason why the shipbuilding areas should not do so as well. Instead of bringing the shipbuilding redundancy payments scheme to an end in 1986, I hope that the Government will think more seriously about much more imaginative measures, such as those that I have suggested.

We cannot accept the Minister's speech today with complacency or with a feeling of satisfaction. He has raised many serious fears and he will have to come to the Dispatch Box a few more times before those fears are finally relieved.

4.34 pm

Sir David Price (Eastleigh)

I wish to intervene briefly on a modest and useful little Bill. The right hon. and learned Member for Monklands, East (Mr. Smith) went wide, as he is entitled to do on Second Reading, and I am tempted to follow him further. However, I have spoken in previous debates on shipping and shipbuilding and I shall not, immediately after Christmas in our first debate of the new year, break a rule that I have set myself to be extremely modest in my contributions in the House. I know that one can tax the patience of one's colleagues beyond endurance, so I shall be brief.

My hon. Friend the Minister did not go far enough in his comments on clause 1. What is his timetable for the privatisation of the warship builders? I declare a constituency interest because I have one such yard in my constituency. I have received a clear message, from both the management and the work force—if the yard is to be privatised, for heaven's sake get on with it. I think that both sides of the House will agree that the worst position is to be in a state of limbo, both from the point of view of a yard's customers and the obtaining of orders, and also from the point of view of morale within a yard. Therefore, if our local yard of Vosper Thornycroft is to he sold, as I gather it is, for heaven's sake get on with it and tell us when it is to be sold and on what terms. I know that the Labour party disagrees with the Government's policy, but, given that it is the policy, I think that even the right hon. and learned Member for Monklands, East will agree that there is a great advantage in speed in the despatch of such matters.

I know that the right hon. and learned Gentleman, coming from the part of the country that he does, has an interest in Yarrows, as a lead warship yard. He will agree that the degree to which compensation to redundant workers will be necessary in the warship yards depends on the extent to which the Ministry of Defence places orders. I and the hon. Member for Birkenhead (Mr. Field) have time and again raised in the House the question of the type 22 frigates. That is not even a Treasury matter. The Ministry of Defence does not have to extract money from the Treasury. It has been in all the estimates. But when will orders be placed for the two type 22 frigates for which the hon. Member for Birkenhead and myself are waiting? The delay has gone on for 15 months.

That raises the wider issue. Can we not get out of the Ministry of Defence an agreement that there should be a programme of future naval ordering that is generally known within the industry? It does not mean that it need commit itself on every order to a particular yard because it can be argued that if such a commitment were made years ahead a yard would go soft, and so on. One knows the arguments. But, given the five-year programming of Government investment — we have an annual White Paper on that—I see no reason why there cannot be a five-year programme for naval ordering by the Ministry of Defence.

That does not seem to raise any ideological issues; it just means prudent forward thinking. The House will notice that I forbear to use the word "planning". It may be unacceptable to some of my right hon. Friends. I simply use the words "forward thinking". I see no reason why that cannot be done. All the evidence from such relations as I have with the armed services is that that would be acceptable to the Ministry of Defence at the operating level. That again would assist us on the issue of the labour force within the remaining warship building yards. I offer it as a positive proposition upon which I see no reason why there should be any disagreement in the House.

My hon. Friend the Parliamentary Under-Secretary of State who will reply to the debate is a supplicant in this, because, of course, the Ministry of Defence is the relevant ordering Department. Indeed, I notice that no one from that Department is present. But why cannot the Ministry of Defence have an even naval ordering programme? Some years ago a White Paper—I cannot remember which—agreed with that theory. However, in practice there is no such even ordering. We always hear that great phrase "the lessons of the Falklands". Those lessons were to be written into every new naval order, but in practice they have led to few orders.

The Ministry of Defence is very complex, and perhaps those involved are unable to agree among themselves, but I cannot see why we cannot have a proper annual ordering programme. We should all tell the Ministry that we must have an annual ordering programme that is given at least three years ahead, and preferably five years ahead. I am sorry that the right hon. and learned Member for Monklands, East is no longer in the Chamber, as he suggested that there were easy profits to be made by the warship yards out of the Ministry of Defence. If that is so, that is a problem for the Ministry. But the difficulty of the warship yards is that they have a near-monopoly buyer—the Ministry of Defence.

It is often said that the way out for warship yards is export orders, but most of us with any experience of defence ordering know that it is very difficult to sell defence equipment abroad—whether for navy, air force or army — unless our own forces are buying it. Therefore, unless a naval warship builder obtains an order, particularly a first-of-type order from the Ministry, it will find it very difficult to persuade any foreign buyer, however admirable the proposition may be on paper, to place an order in practice.

The Ministry of Defence may tell a yard, "I am sorry that we are taking so long to make up our minds, but I hope that you will understand our difficulties. You go off and find an export order." But that is not good enough, because the yard will not obtain an export order if it is known that the Ministry is not placing an order. That point must be generally accepted, and relates to clause 1 and the number of redundancies likely on the warship building side.

I have spoken in the House before about the Merchant Navy, and, as the House knows, I am not in entire agreement with the Government. I have some sympathy for what the right hon. and learned Member for Monklands, East said about a more general maritime policy. A maritime policy as such almost sounds too particular, and slightly pompous, to some of us. However, we must look across the board and consider the effect of one decision upon another in different Departments and sectors of the economy. To that extent, I am of course in favour of a maritime policy, but I would not put it quite as grandly as the right hon. and learned Gentleman did. But that is why I sit below rather than above the Gangway.

Dr. Godman

Given what the hon. Gentleman has just said about the need for the enactment of a maritime policy, has not the time come for setting up a Royal Commission to examine the shipbuilding, shipping and maritime service industries?

Sir David Price

I have great sympathy with the motive behind the hon. Gentleman's intervention, but I prefer the House to Royal Commissions. It is an old-fashioned prejudice of mine. I have been here for 30 years and still think that the House is a better instrument than a Royal Commission. But then, I am very old-fashioned in these matters and I do not think that we can duck problems by passing them to Royal Commissions. We should deal with them here in the House. We are perfectly capable of doing so. Incidentally, I am a great supporter of Select Committees. In the last Parliament, I won third place in the ballot for private Member's Bills and tried to implement a proposal of a Select Committee, of which I was not a member, on the flexibility of pensions.

I believe that we should make the House of Commons work. We run ourselves down, but I believe that we are capable of doing much more and of having much more influence on Government than at present. Thus, although I am sympathetic to the hon. Gentleman's question, he should talk about not Royal Commissions but the House.

I may disagree with the right hon. and learned Member for Monklands, East because I believe that the shipbuilding industry is one of our old industries and that it is on the way down. I do not think that it will be eliminated, but the question is at what point it bottoms out and begins to take off again. For those involved, there are three priorities. First, I should like to see earlier retirement. That was the object of a Bill that I tried to promote during the last Session. Unless the state old-age pension is made more flexible, it will be harder for industrial redundancy schemes to accommodate earlier retirement. The basis of the approach to pensions on the part of Governments of both parties has been that retirement income has two elements: the state old-age pension and the occupational pension. Men suffer particularly because they do not receive their old-age pensions until they are 65, whereas women do so at 60. The lack of equality between the sexes is offensive. There is a strong case for earlier retirement in the old heavy industries, but we must get the retirement terms right. Given the conditions in which people used to work and sometimes still do work in the shipbuilding industry, it is only right to draw attention to that point.

Secondly, there is a case for job sharing between older workers. We have not begun to put our minds to that whole new area. But one social reaction to the second industrial revolution must be a degree of job sharing. Thirdly, I always believe in generous redundancy terms. In the long run, that is not only socially right but cheap at the price.

I noticed that the right hon. and learned Member for Monklands, East paid little attention to a point relating to clause 2. In 1967 there was a debate about putting public money into Upper Clyde Shipbuilders. I was then sitting where the right hon. and learned Gentleman now sits, on the Opposition Front Bench, and I remember that the right hon. Member for Chesterfield (Mr. Benn), who was then Minister of Technology, had shipbuilding within his brief. At the time, I criticised the choice of Upper Clyde Shipbuilders, but not the principle. It was not wrong at that time to put public money into British shipbuilding and, indeed, into Scottish shipbuilding, but the choice of the upper rather than the lower Clyde was wrong. We should have gone for the lower Clyde and for building a brand new closed yard, under cover, so that the workers were not exposed to the weather. It could have been built on the lines of the Swedish and Japanese yards, but that did not happen. The lesson to be drawn from the demise of Upper Clyde Shipbuilders is not that in principle it is always wrong to put public money into industry, but that the recipient of that investment should be chosen very carefully and in relation not to industrial history but to one's judgment about future trends in technology and markets.

The right hon. and learned Member for Monklands, East spoke about the desirability of cross-subsidisation between merchant and warship yards. That is a highly questionable proposition. Accountancy as between one yard and another in a large organisation or in any great industrial empire is not that precise. There is also a clear distinction between the two types of yard. It could well prejudice naval ordering and the future of the naval yards if they were to cross-subsidise the merchant yards.

The right hon. and learned Gentleman spoke about the loss of jobs and was concerned not only that those who lost their jobs should be compensated but that the areas in which they lived should be compensated, too. In principle, we can all see the social consequences of the closure of a yard. As the House knows, at one time I was the Minister who had to deal with regional development. In principle, of course, one cared passionately about the strategy, although how far any of us got the tactics right is questionable.

I offer the House this thought. In the old Board of Trade, where I was dealing with these matters, we were running a tight control on industrial development and had incentives to attract industry to favoured areas. It is arguable whether we achieved much. What came out clearly was that investment in transportation and in the public infrastructure was a great deal more important than trying to put pressure on individual firms to go or not to go where we in Government wanted.

My answer to the right hon. and learned Gentleman is that I accept strategically the point he has made but I do not believe that it is most effectively achieved tactically by direct Government intervention in individual firms. To put our money and the public's money into the investment infrastructure is better than to put it into specific projects. I leave that thought with the House.

4.51 pm

Mr. Bruce Millan (Glasgow, Govan)

The hon. Member for Eastleigh (Sir D. Price) always makes an interesting and thoughtful contribution to our shipbuilding debates and his speeches are always made out of genuine concern for the shipbuilding industry, a concern which is not, unfortunately, shared on the Government side of the House. I agree with some things that he said, particularly about the naval ordering programme, but on other matters I disagree with him. As I am a Member representing one of the shipyards on the upper Clyde, the hon. Gentleman would not expect me to agree with what he said about the upper Clyde. I do not wish to debate some of the points he made; rather I should like to deal with the Bill.

As my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) said, redundancy is not a cause for rejoicing even when there are generous redundancy payments. There is a tendency on the part of the Government to consider it a great victory when, as they would say, workers are queueing up for redundancy in a shipyard or a factory. I consider that a defeat not only for the shipyard or the factory and the locality but for the whole of manufacturing industry. Therefore, it is not a sufficient response to the problems of the shipbuilding industry to provide for adequate or even generous redundancy terms.

If there is to be redundancy—unfortunately, we have suffered a good deal of redundancy in the shipbuilding industry in the past year — it is important that the redundancy arrangements should be adequate and, indeed, generous. I do not believe that the statutory scheme for shipbuilding is generous compared with other schemes such as that for the steel industry and that now proposed for coal mining.

It is disturbing that even the statutory scheme for the shipbuilding industry is to be ended on 31 December 1986. There was absolutely no warning of this. The Bill was published only on 3 January during the Christmas recess. When we left for the recess we had no idea of what was in the Bill. The press notice put out with the Bill on 3 January gave us no information about the Bill and did not explain its implications which only became clear in some of the explanations that we had from the Minister of State this afternoon.

Like my hon. Friends, I am opposed to the ending of the scheme in December 1986. The Minister said that we should not worry because he was confident that before that date British Shipbuilders would be able to negotiate at least as favourable terms with the trade unions for the part of the industry that stays under British Shipbuilders; that is my understanding of the Minister's speech. If the terms for the remaining part of British Shipbuilders turn out to be at least as good as the present terms — the trade unions will accept nothing less—there is no purpose in stopping the scheme at the end of 1986 because the cost to British Shipbuilders and, therefore, ultimately to the Government, the owner of British Shipbuilders, will be the same.

If the scheme is to continue in a non-statutory form for the remaining part of British Shipbuilders, there is no purpose in ending the statutory scheme. It would be much more sensible and would not cause the anxiety that undoubtedly the Minister's statement today will cause among the workers in the industry at the decision to end the scheme in December 1986.

An interesting question arises as to what happens to the bits of the industry that will be privatised. What the Minister said about that this afternoon is not accurate, as was pointed out in an intervention about Tyne Shiprepair. At the time of the privatisation of Tyne Shiprepair compensation was offered to the workers for the loss of their redundancy arrangements.

Mr. Norman Lamont

Compensation was negotiated as part of the sole arrangement. Compensation could be negotiated when the warship yards are privatised. Company schemes could be negotiated. Obviously, a state statutory scheme by definition does not extend to the private sector. When Scott Lithgow and Tyne Shiprepair were privatised, the entitlement to the statutory benefit was lost. Compensation was paid, not as a right but as a result of negotiation. I assure the right hon. Gentleman that the position is analogous between the privatisation of warship yards in the future and the privatisations that have happened in the past. There is the possibility of negotiated compensation if there is no scheme.

Mr. Millan

I shall come in a moment to the further privatisation proposals about which I want information that we have not yet had from the Minister or any other source.

First, in regard to Scott Lithgow, my hon. Friend the Member for Greenock and Port Glasgow (Dr. Godman) may want to say more about that as the constituency Member if he is fortunate enough to catch your eye, Mr. Deputy Speaker. In a written answer on 19 December, the Under-Secretary of State for Trade and Industry informed me that when Scott Lithgow was sold to Trafalgar House part of the contingent liability taken on by British Shipbuilders and, therefore, taken on by the Government, because they are the paymaster, was benefits, equivalent to the shipbuilding redundancy payments scheme, to a maximum of 1,600 workers who might be made redundant within a year of the sale." — [Official Report, 19 December 1984; Vol. 70, c. 252.] In other words, the workers in Scott Lithgow were protected. Incidentally, they did not negotiate that. There was no trade union negotiation with Trafalgar House or anyone else. It was part of the deal that there was protection for a maximum of 1,600 workers under the shipbuilding redundancy payments scheme for at least a year after the sale of Scott Lithgow in March 1983. The cost of redundancies at Scott Lithgow will be borne not by the new owners but by British Shipbuilders and, ultimately, by the Government. Redundancies costing £400,000 have already taken place. The new owners have not taken on responsibility for redundancies. The Government, through British Shipbuilders, have maintained that liability.

Trafalgar House did not pay for the yard in full. It was sold for much less than the asset value. We should like to know the details of the financial deal. The cost did not fall on the new owners of the yard. The Government and Trafalgar House negotiated the sale through British Shipbuilders.

Documents which represent offers for sale have already gone out in respect of Yarrow, Hall Russell and other yards which are due for privatisation. The documents have not been made public. Public assets are being sold on the basis of offers for sale which have not been made public. Even hon. Members cannot obtain copies of the offers for sale.

Mr. Norman Lamont

They are available.

Mr. Millan

If so, I should like to obtain copies. I hope that the Minister will send me copies of all the offers for all the yards that are to be privatised. I understand that the documents have not been made available publicly. I understand that interested parties hold the documents on the understanding that they will not disclose their contents to any other party, however genuine, including workers in the yards. Assets are to be sold and the workers are not to be told the contents of the offer for sale documents.

What do the documents say about redundancy obligations under the new ownership? Redundancy obligations will make a difference to the price that a genuine buyer might offer for a yard. Purchasers of the naval yards—we are opposed to the sale of such yards—who want a quiet life must take on an obligation to provide a redundancy payments scheme by agreement with the trade unions. If they do not, they will have a heck of a lot of difficulty with the trade unions.

The Government have always said that, whatever else happens when an industry is privatised, pension arrangements and conditions will not be adversely affected. Unless the new owners continue a similar redundancy scheme workers' conditions will be adversely affected. The new owners, whoever they are, will be foolish not to take on similar obligations.

Such obligations will influence the amount of money that a purchaser is likely to offer for a yard. The Government and the taxpayer will, therefore, foot the bill. For the Government to say that negotiations have nothing to do with them is misleading because the money will come from the public purse.

If privatisation goes ahead, despite our opposition, it must be on terms that are not detrimental to the workers. If the new owners do not accept such obligations workers will want to accept redundancy before privatisation while the present terms are still available. That is not a sensible way to run an industry, whether publicly or privately owned. In too many cases, people have been willing to accept redundancy, leading to the permanent loss of jobs for the community. In areas of high unemployment that is disastrous.

It is better to avoid redundancy. To do that we need more orders, for the merchant yards in particular. Has there been any progress in the negotiations within the European Community on the intervention fund? I refer to the Minister of State's remarks on 27 November 1984 during our last debate on shipbuilding. In column 838 of Hansard the Minister was full of good intentions. I accept that the Government want the scheme to operate more flexibly. At present, the scheme operates on an ad hoc basis, which is unsatisfactory. I hope that the Minister can say that progress has been made with our Common Market colleagues.

The Minister knows Govan Shipbuilders in my constituency because he has visited it. He has acknowledged in the House and elsewhere that it is an excellent yard with a good industrial relations record. The yard has a good productivity level and excellent management/trade union relationships. Co-operation there is positive and the yard's delivery record is excellent.

Even that yard is runninhg out of work. It is working on the three colliers for the CEGB. The contract has proceeded smoothly and the vessels are being completed. By the middle of this year the yard will run out of steel-associated work. In 1986 work will run down completely. Redundancies are inevitable unless additional orders are obtained.

The yard has an active and energetic managing director in Mr. Mackie who has been busy trying to obtain orders for the yard. Among the orders in which he is interested is one for five bulk carriers for a Turkish shipping company. The negotiations have received some publicity, which is not always helpful. The negotiations are well ahead, although I am not sure exactly how far they have progressed. The negotiations are important for Govan's future. The orders would be useful for the engine-building facility in the constituency represented by my hon. Friend the Member for Greenock and Port Glasgow (Dr. Godman).

I do not expect the Minister to go into detail this evening because negotiations are still in progress, but I hope that he will be able to say that he and his Department are fully aware of them and that they stand ready to give every possible assistance to Govan so that it obtains the order. Without it, even that yard with its record will have a troubled time in the next year or so. If that is true of Govan, it is also true of the merchant shipbuilding industry elsewhere in this country. Our general complaint is that the Government have not had the necessary commitment to that industry to enable it to survive in a difficult international situation.

On first reading, the Bill looked perfectly innocent and even desirable because it was extending the redundancy scheme for 18 months. Not untypically, it has turned out to have some disagreeable aspects, which is why, as my right hon. and learned Friend the Member for Monklands, East said, we shall want to explore several matters and obtain assurances and, I hope, amendments to the Bill before it reaches the statute book.

5.11 pm

Mr. Malcolm Bruce (Gordon)

The Minister of State introduced the Bill as a technical measure, but it raises several issues, some of which have been touched on and some of which have not.

In shipbuilding debates, the Minister consistently seems to show a negative attitude towards shipbuilding and shipping. He gives the impression that he regards shipping and shipbuilding as a Victorian hangover that is in decline, and that inevitably we must accept the decline, whether in shipping or shipbuilding. So far we have heard the view of just one Conservative Back Bencher, the hon. Member for Eastleigh (Sir D. Price), but across and outside the House there is a feeling that the Government should say what they regard as the strategic level of shipbuilding and shipping that we should retain in the United Kingdom. If they do not, they will preside over the demise of this major industry. Many people are afraid that that is what is happening. I say this seriously and not in a combative way. In due course the Minister must show a more positive attitude towards the industry than he has on every occasion on which he has addressed the House on this subject.

Presumably the prime reason why, in the short run, we are extending the provision for redundancies is that we are expecting a great many more redundancies. Therefore, it is understandable that there is concern about the Government saying that there is a final date. Is it when they expect the industry to reach the minimum level of employment that will be retained as the strategic core? If the Government tell us that by the end of 1986 they are sure that the industry will have reached its minimum and will be looking for expansion thereafter, and that is the reason why they are not extending the scheme, we might have a little more confidence than we have now.

After all, the United Kingdom is an island nation and a trading nation. Surely it is a requirement that we have British-owned shipping capacity and indigenous shipbuilding capability. It would be ironic if we moved into the 21st century without having a significant stake in these two vital lifelines for this country. Regrettably, under this Government our trade has diminished and our export of manufactured goods is now in net deficit, but presumably we expect to go on trading as an island nation. Even the fact that more of our trade is in ferries does not give us a great deal of encouragement, because most of them are built in foreign yards, and although most of the ferry companies are British, increasingly there is an encroachment of foreign owners in this strategic lifeline.

One area which is not only of constituency interest to me but of strategic importance to the United Kingdom as a whole is the development of North sea oil. It is an offshore industry by definition, and the marine and maritime component of the industry is substantial. Britain's maritime technology should play a much bigger part in the development of the North sea than it does. Let me be more specific. At present we have a record number of drilling rigs operating in the North sea. Virtually all of them are foreign-owned and foreign-built. The exploration rigs and production platforms are serviced by a variety of offshore support and supply vessels, nearly all foreign-built, and a high proportion foreign-owned.

I wonder whether any other maritime nation like ourselves, with such an important growth industry which offers development opportunities of new technology out of our traditional capabilities, would tolerate such a high level of foreign operation in its territorial waters. I am sure that the Japanese would not. We know that the Americans do not. The Norwegians certainly do not. It is time that the Government had a policy which required that more of the ships that we need for United Kingdom purposes were built in United Kingdom yards.

The Government propose to privatise warship yards. I do not wish to repeat what has already been said, but in the last financial year those yards made a profit of £33 million, and any profit that they make is made because they secure orders from the British taxpayer. However, once they have been privatised, any profit that they make will go to the private owners and will not benefit the taxpayer. Therefore, at least £33 million will not be available for the benefit of the remainder of British shipbuilding. I am not suggesting that there will be no benefit, but, by definition, it will be a reduced benefit. Therefore, it is difficult to see how privatisation will help the merchant yards that are left at the core of British Shipbuilders.

When he replies to the debate, the Under-Secretary should tell us what the Government's thinking is on the future of the merchant yards. I hope that it is positive, because many hon. Members fear that there will be no publicly owned shipyards and that the remaining yards will not be transferred to the private sector because the losses will not enable that to happen and the orders will not come, for the reasons that I have given. Therefore, we shall see the loss of valuable and strategically important yards in the British economy.

There is also concern about the implications of the redundancy scheme. We need to extend the scheme now, because the industry is contracting, but there will be a particular need to do so when a finite date is put on the eligibility for redundancy. It does not matter whether that date is when the scheme is due to end because the Government have said so, or whether it ends because the yard is transferred to the private sector, which may or may not have a comparable scheme.

There is an inevitable consequence that the individual working in the yard will say, "I had better take the money and run while I can." Some hon. Members may have noticed an article in The Guardian on Monday, which was entitled: Willing victims baffle unions". Those are the thousands of shipyard workers in Swan Hunter who have applied for redundancy.

Mr. Garrett

The actual figure is 2,000.

Mr. Bruce

I am grateful to the hon. Gentleman. The report states that the company's industrial relations and personnel director, Mr. Denis Shadbolt, concedes that workers may be leaving the company while Swan Hunter remains part of state-owned British Shipbuilders rather than wait for inferior redundancy terms when the yards are privatised later this year. There will be a problem not only for the individual but for the management, which is faced with the problem of who should be made redundant and which workers management cannot afford to lose. The Government must consider, if the yard is being privatised, whether there is a danger that good workers will be lost before privatisation and will not be available to the private owner thereafter. That may weaken the skill and strength of the work force within the yard.

The yard of Hall Russell is of interest to me and to the neighbouring constituency. It is likely to be among the first to be privatised in the present round. As the Minister is aware, I was part of a delegation which saw him some weeks ago. I subsequently had sight of the offer document. I agree with the point made by the right hon. Member for Glasgow, Govan (Mr. Millan). It would be helpful for Members to see what was involved in such a sale. The privatisation presents uncertainties. I am confident that Hall Russell has been a good yard. It has been profitable in public and private ownership, and there is no reason why it should not be successful as a private yard. One wonders, however, whether it benefits from being kicked in and out of the public sector as quickly as it has been.

The document states that the company had the advantage of British Shipbuilders' central services, for which it pays a management fee of £252,000. The prospectus confidently states that the cost of buying those services elsewhere is unlikely to exceed that amount. That may be a statement of faith. We must consider the cost of the management team pulling out of the services that it has developed during the past two years and having to find comparable services elsewhere. It is not just the economic cost; it is the cost in time and energy, which might be better directed towards winning orders and organising the yard's production.

Ultimately, the success of that yard and its ability to remain as a shipbuilding yard, which the Minister knows is the prime interest of the people of Aberdeen, who, in overwhelming numbers, have signed a petition asking that the yard be retained as a shipbuilding yard, will depend upon the Government ensuring that Ministry of Defence orders go to the yard, because they will be the core of its business. That will determine whether the yard is retained as a shipbuilding yard. The Minister has given assurances that he wishes to see that yard retained as a shipbuilding yard. I hope that he will speak to his colleagues in the Ministry of Defence and let them know that he has given those assurances and that they should back him in that objective.

The idea that the yard might be taken over sooner or later by an interested party who might, for example, use it for offshore purposes might seem superficially attractive. It might employ a few more people, and it might be more profitable, but it would reduce the diverisity of employment and industry within the community. The north-east of Scotland has prided itself on remaining relatively problem-free, by economic and industrial diversity. We are not a one-industry area. It would be a disadvantage to us if the oil industry were to expand at the expense of the traditional industries, but it has already happened.

That is not to suggest that we are not grateful for and are not responding enthusiastically to the challenge of the oil industry, but it is why people feel that Hall Russell should be retained as a shipyard. It is also important in the national interest that we retain that strategic capability. Shipbuilding is extremely important for the people of the United Kingdom, both now and in the future.

Mr. Norman Lamont

The hon. Gentleman started his speech by castigating the Government for not identifying a core level of capacity that we could guarantee. He has now been speaking for 10 minutes. When will he tell us what his core level of capacity is? Is it 200,000 or 300,000 compensated gross registered tonnes? How will he guaranteee it?

Mr. Bruce

One would have thought that the Minister could tell the House what the Government's objective is. The hon. Gentleman has the advantage of a Department which should be working on the problem and coming up with the answers. He should be able to deliver the answers. We are going below the strategic level now, and if the decline over which the Minister has presided continues for the next year or two, it will be below the critical level.

I have identified for the Minister's benefit where we should be achieving greater United Kingdom penetration—specialised offshore vessels and ferry services to and from the United Kingdom. I should like the Minister to tell us what he and his Department are proposing to do to ensure that British shipyards obtain a higher proportion of such orders. He cannot just talk in terms—as he is prone to do—of his ideological preference for the free market, because the Japanese, the South Koreans and the Americans operate a selective market. It is not to our advantage for Britain to operate a free market when the rest of the market is not free.

It is time that the Government told us what their bottom line is. At the moment, they are presiding over the dissolution of shipbuilding. It is a demoralised industry. The Government should return to the House with some positive ideas of how they will retain capacity and what that strategic capacity should be. I have identified matters to which the Government should address themselves. I and other Members would be more confident if the Government showed any inclination to do so.

5.25 pm

Mr. Bob Clay (Sunderland, North)

When we came to take part in the debate today, the picture was depressing. Those of us who were thinking about the points we wanted to make if we were lucky enough to catch your eye, Mr. Deputy Speaker, wished that we did not have to talk about redundancy schemes but rather about orders and saving the industry.

I agree with my hon. Friends who have already spoken, who said that the revelation contained in the Minister's speech that there would be no Government scheme after the end of 1986 confirms what we were sure about already. I hope that it confirms for others in the north-east and in shipbuilding communities, who had any doubts, that the Government are planning systematically to close down the rest of the state shipbuilding industry.

The Government are not just privatising warship yards; they are closing or privatising merchant yards. For anyone left in the industry, in Sunderland Shipbuilders or Austin and Pickersgill in my constituency, the message clearly is, "If any of you had any illusions or hopes that the Government were eventually going to do something to produce orders and save those yards, give up and get out now, because there will be no redundancy scheme left worth talking about by the end of next year."

In the light of what the Minister said, it is relevant to talk, as some of my hon. Friends have done, about the general position of the industry. We had a debate not long before Christmas, when various points were made. We received inadequate answers and explanations from the Government. The position has not improved. As the weeks go by it becomes worse. Austin and Pickersgill still has no orders. The Government still have not decided what to do about the export credit for the Ethiopian order, despite pleas from the Opposition Front Bench and by my hon. Friend the Member for Sunderland, South (Mr. Bagier) and myself in the previous debate, and despite all the correspondence. Nothing has been done about that, and nothing has been done about the St. Helena order.

Mr. Parker is off around the world once again saying that he is looking for orders for SD14s. We are always being told that orders are about to materialise for them, but they never do. Redundancies have been announced for 21 January and more redundancies will follow in March. Realistically, unless an order turns up within a limited number of days, there will not just be further redundancies in March, but a closure in March or April. There is nothing left for the yard to do; it is out of work.

The Minister and the Government have for months been castigating hon. Members like myself and my hon. Friend the Member for Newcastle upon Tyne, East (Mr. Brown) for being alarmist and putting around scare stories. It was hypocritical of the Government to point the finger at me and my hon. Friend when they were cynically preparing for the yard to close. They did not need to produce contingency plans relating to the closure of the yard. All they had to do was sit there and not provide any assistance. We know that there is a recession and that the industry faces problems, yet, as has been said time and time again on this side of the House, whenever there is the possibility of an order which British Shipbuilders is trying to obtain in competition with other shipbuilding nations it slips away.

During the last year there has been a list of possible orders for Austin and Pickersgill. Each one has slipped away. The Orlendorf order slipped away for a price gap of £2 million. The Government could have stepped in and done something about it. They could have provided a direct subsidy or an improved financial package. That order for two or three ships, which would have given the yard a breathing space, was allowed to slip away. The Ethiopian order is being allowed to slip away. Every other order is being allowed to slip away. The more that these orders appear, only for other countries to obtain them, the more I am convinced that the problem is not that there are no orders to be gained but that the Government do not have the will to assist British Shipbuilders and individual yards to gain those orders.

Could the Minister comment on the suggestion made to me that the Indonesian Government are planning over the next 10 years to renew their inter-island fleet and that, in the not-too-distant future, the Indonesian Government will begin to negotiate contracts for a total of 280 merchant ships? The Sanko order in Japan, which was referred to earlier by my right hon. and learned Friend the Member for Monklands, East (Mr. Smith), was a staggering example of how Governments can intervene to assist their own industries. I wonder whether it is true — I understand that it is — that the Indonesians intend to bring about this massive renewal. We are talking about hundreds of ships. Does the Minister intend to leave it to the Koreans, the Chinese and perhaps the Japanese to pick up those massive orders, or does he believe that the shipbuilding industry of this country should try to obtain part of that work?

Unless the Government say very soon that they are prepared to act quite differently to assist merchant yards to obtain the available orders, nobody should be in any doubt that the intention of the Government is to bring about the systematic rundown of British Shipbuilders. Its former chairman, Sir Robert Atkinson, has consistently accused the Government of this. It is also the view of nearly everybody who is associated with the shipbuilding industry, apart from those who sit on the Government Front Bench.

The Government need to take action to convince us that this is not their intention. Why does the Minister not come clean and be honest about it? Why does he not put an end to the agonising in the shipbuilding communities and announce that this is the Government's intention? Then we shall know what to do about it.

An even more desperately urgent matter which involves the many people who have already been made redundant and those who face redundancy is British Shipbuilders' engineering and technical services which are situated in my constituency. It is a classic example of the hopelessness, the pessimism and the wilful vandalism of Government policy. The general view of large parts of the international marine engineering industry was that it was a crazy decision to put an end to the development and manufacture of Doxford engines. This decision was categorically denied month in and month out by the Government, British Shipbuilders and everybody else until shortly before the manufacture of Doxford engines came to an end. But at least the facility was there for research and development, there was the capacity for spares and other engineering work and there was the hope that eventually it might be the basis for the rebirth of marine engineering on Wearside, where the Doxford engine at one time dominated the marine engineering industry.

The former chairman had faith in the industry and wanted to do something about it. There was investment in the industry but now British Shipbuilders, for the most absurd logic, it seems to me, has decided to close it. That announcement was made some time ago. During recent months anybody who has any interest in the industry has rallied round and tried to persuade the Government to change their mind. All kinds of people believe that there is a potential for this engineering industry. The "United Kingdom Marine Engineering Audit" — not a Labour party body publication but issued by the Institute of Marine Engineers—states: Although manufacture of engines ceased at Doxford Engines Limited in 1980, their design of opposed piston engines is a strong contender for the ships being ordered today and in the future; work on this has reached a relatively advanced stage at BS(ETS) Limited, a subsidiary of British Shipbuilders, which could be integrated into the project. The project referred to is a major marine engineering project, a total propulsion machinery system.

The engine design would be based on existing expertise and such a project could lead to an upgrading of the marine engineering capability in the UK. . . The participants for such a project should include: shipowners, shipbuilders, classification societies, the Departments of Trade, Industry and Transport, engine and equipment manufacturers, professional institutes, polytechnics and universities. They would all be expected to contribute to the project financially or in kind… A company, with directors drawn from the industry and universities, should control, plan and monitor the project which, ideally, should be located adjacent to a shipbuilding centre and a university. There is no place that better fits that job description than the existing BS(ETS) facility in Sunderland. Any intelligent Government with a commitment to the industry would ask that those proposals ought to be developed and that money ought to be put into them. Indeed, the Government would be putting money into those proposals. Instead, the Government have stood aside and allowed the closure to take place. They have allowed the work force to be bludgeoned bit by bit by British Shipbuilders by threats, by cajoling, by bribes into volunteering for redundancy to the extent that now only 30 or so brave manual workers are determined to try to keep that engine works going, despite the determination of the Government and British Shipbuilders to close it. Lloyd's List, which is not a Socialist publication, carried an article on 3 January which referred to BS(ETS) and concluded: Even now, as Members of Parliament and local authorities concerned with reviving employment on the river Tyne and Wear are fighting to retain or revive Doxford engine prospects, it seems that the engine and its development team will be moved out of Sunderland. The logic of successive British Shipbuilders' heads continues to be difficult to comprehend. Even as the engine was being prematurely buried, Canada and other countries were desperately seeking elusive BS executives in the hopes of placing further engine orders. A number of those responsible for abandoning the engine have now left BS with sadly tarnished reputations". I suspect that the Minister of State, the management and the chairman of British Shipbuilders, who are determined to kill the engineering works, will also end up with tarnished reputations.

Nothing can be done in a few days or a few weeks, but companies have said that they would be interested in taking over the works if BS were not willing to keep it open. Companies are talking about developing the engine, perhaps in conjunction with British Shipbuilders, local authorities are prepared to provide money for research and there is a strong will to keep the works open, partly to develop a new engine, but also to develop the last of the Doxford engines for new types of fuel, involving coal as well as oil. That has enormous export potential for power stations in the United States and one would think that a Government with any interest in maintaining an industrial nation would be interested in such a project.

However, because no company has yet made a concrete offer, the Government and British Shipbuilders are not prepared to allow a stay of execution and to keep the works open. The Minister of State seems to think that it is as easy to sell a works when it is closed as when it is open. He ought to remember that not only physical assets are involved. We must also consider the skills of the workers, the traditions of the works and the teamwork. All that needs to be kept going.

Unless the Government take action in the next few days they will be responsible for the death of a great national asset which could have been the basis of a rebirth of a British domestic engine. That would be shameful and, even at this late stage, I urge the Minister to reconsider the closure.

As has been said, when talking about redundancies we have to accept that no one has the right to sell his job. It is not his job to sell; it is the job of his son or daughter and the job of generations to come.

I beg the Minister of State to think about what will happen in my community if the huge merchant yards are closed. There is massive youth unemployment in Sunderland—it is almost as bad as the rate in areas such as west Belfast. In the east end of Sunderland, unemployment is over 55 per cent.

The Minister should ask himself where young people in Sunderland will get skilled or even unskilled work if the shipyards close. The town is being decimated; there is nothing left. We must be approaching the worst crisis faced by a town the size of Sunderland since the war.

Shipbuilding is the key. If thousands of redundancies take place on the river Wear and the jobs are lost, the unemployment rate will be devastating. Some pockets of Sunderland already have unemployment rates approaching 50 per cent. and there is no hope there for young people. Those pockets will spread widely and the town will become a disaster area.

Mr. Richard Holt (Langbaurgh)

Does the hon. Gentleman agree that one reason why Nissan went to Sunderland was that there was a reservoir of skilled and untrained labour available there? That was an attraction. There is decline, but new industries are going to the area and are attracted by the available labour market.

Mr. Clay

I am grateful to the hon. Gentleman for intervening, because I wished to conclude with a reference to Nissan. Whatever our views about Nissan — the disadvantages, the benefits, the effect on the rest of the British car industry and so on — even if we take an enthusiastic view, we must realise that, given that the first stage of the Nissan development will provide only 400 or 500 jobs, we shall need a Nissan every six days to match the redundancies already announced in the north-east.

Even if phase 2 of the Nissan project goes ahead, and we get 2,000 jobs—though without the sort of spin-off that comes from shipbuilding — we shall need three Nissans to make up for the loss of jobs that directly depend on shipbuilding on the Wear.

Virtually everyone who works in the shipyards on the Wear lives within a mile or two of the river. Many workers live very close to the yards. The workers at Nissan will be drawn from a wide catchment area and some will probably come from as far away as the constituency of the hon. Member for Langbaurgh (Mr. Holt). The hon. Gentleman made a valuable point, because it showed how desperate we are in the north-east. Even phase 2 of Nissan will be only a marginal compensation for the industrial holocaust that Wearside faces. I urge the Minister to consider the consequences of allowing this madness to go ahead.

5.47 pm

Mr. Frank Field (Birkenhead)

I underline the point on which my hon. Friend the Member for Sunderland, North (Mr. Clay) ended. It is difficult for us to convey in the House the feeling in our constituencies about unemployment. Somehow, trying to explain the horror and destruction of unemployment numbs our debates.

My hon. Friend the Member for Sunderland, North did a service to the House, to his constituents and to many others by bringing us back to the desperate situation that many people already face or may have to face unless the Government change their policy towards the shipbuilding industry.

As on previous occasions, I agreed with part of the speech of the hon. Member for Eastleigh (Sir D. Price). I was much attracted by his idea that stability would be given to our industry if the Ministry of Defence could be persuaded to establish a five-year rolling programme of defence orders. I know some of the difficulties involved. For example, the relative price of defence equipment is rising faster than the general level of prices, and that would have to be taken into account, but I sympathise with British Shipbuilders in the difficulties that it has faced over recent years in not knowing what defence orders would be placed in the near future.

I expressed that sympathy with the directors of British Shipbuilders despite the fact that I and other Wirral Membrs are less than happy with the lack of support that British Shipbuilders seems to be giving to Cammell Laird. The scheme proposed by the hon. Member for Eastleigh would be even better if it included a provision for some orders to be earmarked for Cammell Laird. But perhaps I ask too much.

Dr. Godman

In connection with Ministry of Defence orders for the warship yards, is not one of the difficulties the elongated lead time demanded, or argued for, by the Ministry between the building of the first vessel of a new type and the placing of subsequent orders? Would not a reduction in the lead time help the warship yards?

Mr. Field

It certainly would. One of the difficulties with defence ordering at present is that, understandably, the Ministry wants to get as good value for money as possible. That policy can penalise the lead yards in that they incur the initial cost of developing an order, while other yards can bid for subsequent orders at much lower cost. Getting value for money creates real difficulties in terms of stability for the lead yards. That is an important matter, but one that I cannot deal with in this short speech.

My right hon. and learned Friend the Member for Monklands, East (Mr. Smith) asked the Minister whether he could be given information about the terms of sale for our various yards, and the Minister kindly agreed to send him that information. I would be grateful if I, too, could be given details not only of the Cammell Laird sale but of the sale of other yards too.

Although, Mr. Deputy Speaker, you have rightly allowed us, because of the urgency of the matter in our constituencies, to draw the terms of the debate somewhat widely, there is a specific measure under discussion. I was puzzled by a fault of logic in the Minister's presentation of clause 1. He painted a picture of the difficulties of continuing the scheme under the Government's privatisation measures. Not possessing the skill of writing shorthand, I did not write down the Minister's exact words, but his image was one of a growing problem of redundancy, a big scheme and a large bureaucracy. He suggested that those were not conditions that the Government would wish on the industry that they mean to privatise. It is difficult to square that image with the growth that the Government tell us will result from privatisation.

Mr. Norman Lamont

rose—

Mr. Field

I will happily give way in a moment. If the Government are confident that their privatisation measures will be good for the industry and that our share of the world market will increase, there should be less need for a redundancy scheme than there is now and it should be easier to apply a national scheme.

Mr. Lamont

The hon. Gentleman seems to have misunderstood me. He seems to be referring to what I said about the scheme in relation to the state sector. I said that with a very small remaining state sector — 11,000 employees in British Shipbuilders — it would be inappropriate to retain a statutory scheme rather than settling one within the industry. My remarks did not apply to the private sector. The scheme has never applied to the private sector, and if it were to do so it would first have to be amended.

Mr. Field

I accept that as the scheme was designed at a time when the industry was wholly in the public sector, it obviously did not apply to the private sector. However, the Minister's logic is still at fault. There will be far less difficulty in fitting the private companies into a national scheme, by putting a levy on them, if they are successful, than there would be if they were not so successful.

I was troubled by another of the Minister's remarks. We all accept the sad need to extend the scheme. In his defence of doing so the Minister said that the Government were not at fault, because the industry was dependent or the world market. To some extent, we would agree with that. However, if, unlike some other industries, shipbuilding is dependent on the level of world trade, is it not more important to protect the workers in that industry with adequate redundancy schemes than workers in industries that are not open to international competition? If the Minister bases his defence of the extension of the scheme on the existence of a situation that is largely outside Government control, surely the Government have a bigger duty than they would otherwise have to make sure that the workers in that industry are adequately protected?

When referring to Cammell Laird, the Minister said that the moderates had voted with their feet and defied the militants. I consulted the men and women who work for Cammell Laird about what I should say in this debate. They wish me to address three questions to the Minister and to report his replies. First, there is a feeling that the Department of Industry "has it in"—in the words of the employees—for Cammell Laird. In the way that people pick up such information, they have heard that the Department of Trade and Industry takes the view that there is at least one yard too many and that one should close. They have also picked up the idea that the Government feel that it would be difficult to sell Cammell Laird in its present state and that it would be better to run it down, so that there is no work force there, before selling it. Are those the views of the Department? The reason why those ideas have currency in our town is that the work force believes that the Department is blocking the decisions on where the type 22s should go. I hope that the Minister can tell me how the Department views the future of Cammell Laird.

Secondly, if that is how the Department of Trade and Industry intends to fight its corner over the future shape of the industry, the employees would like the Minister to consider that that view is at odds with that taken by other Government Departments which have shown confidence in the area. It is not so long ago that the Lord Chancellor fought his corner in Cabinet and succeeded in persuading his Cabinet colleagues to place the Land Registry in Birkenhead. The effect of that welcome move, which was an attempt to stem the rising tide of unemployment in the Birkenhead area, would be more than wiped out if the Department closed Cammell Laird. Does the Minister understand how other Departments have backed the area? Why do people have those feelings about the attitude of the Department of Trade and Industry to their future?

The third question takes up the point made by my hon. Friend the Member for Sunderland, North about the level of unemployment in the area and what the Government have said about how to beat the apparently ever-rising tide of unemployment. The workers feel that by walking back to work, implementing the flexibility agreement, negotiating with the tug men to achieve the rig out of the dry dock and making sure that the type 42 will be finished before the scheduled date, they are doing all that the Government have asked them to do. They believe that, that being so, if the Government do not give them one of the type 22 orders, it will be the Government who are walking away from the area. The Government will have made the cruel choice that one of the yards that they wish to be closed prior to privatisation is Cammell Laird.

I should be grateful if the Minister could answer those three questions asked by the men and women of Cammell Laird, and allay their anxieties.

5.59 pm

Mr. Nicholas Brown (Newcastle upon Tyne, East)

The key issue in this debate is where the Bill takes the industry. The inescapable conclusion is that it takes us towards contraction, closure and the ruination of shipbuilding communities. All that the Government have done in their consistent approach to the industry strikes another blow at the nation's industrial base. The blow will work its way through other industrial sectors and into the service sector and will further weaken the industrial, commercial and employment base of the British economy. We are today discussing an issue which is wider than the arrangements for reducing British Shipbuilders.

The Government's approach to Britain's industries is completely wrong. The future of service sector industries such as ancillary engineering industries is entwined with those of our great primary industries. Just because banks, insurance companies, lawyers and suppliers to shipyards can take their profit margins and thus call themselves profitable, that does not mean that they will still be able to take their percentage when there are no primary industries for them to take a percentage from. The Government persistently ignore that strategic fact, which overshadows the debate. I have never heard them answer that issue convincingly. They seem to think that, after the industrial sector has been trimmed, the service sector will remain and survive on foreign revenue. That is an absurd belief.

The Minister said that the industry was contracting. Everyone involved in the industry knows what is happening. The argument is not about what is happening but about what we do about it. Instead of protecting the industry in a world crisis, the Minister is introducing a Bill to facilitate its contraction. He has chosen today's debate to tell us, for the first time, that the Government envisage all the warship yards being privatised by March 1986. I am sure that the Minister will correct me if I misheard him. The current ordering requirements of the Ministry of Defence are less than the total capacity of the warship yards, or those yards which are now designated as warship yards. Swan Hunter has a history of warship construction, yet it has not been regarded as a purely warship building yard. It is now to be privatised, on the assumption that its future is overwhelmingly as a warship yard. In other words, there is no future for merchant shipbuilding at Swan Hunter—that is the logic of the Minister's plans. Equally serious is the Government's intention to leave to the private sector the choice about which warship yard stays open. Some yards will be purchased for use as warship yards and others will not.

The Minister must be candid with us about the future of yards which the private sector does not want. I shall willingly give way if the Minister wants to explain the Government's view. He is reluctant to do so. The key fact is that there is only one major customer—the Ministry of Defence— and at the moment there is not enough work to go round. The Government have complete control over that. They are deliberately holding up work, such as the two outstanding type 22 orders, to encourage redundancies and facilitate privatisation with small labour forces. The Minister said that no further redundancies are contemplated but that the scheme is being extended to December 1986 just in case. Just in case? If the two type 22 orders do not go to Swan Hunter soon, there will be a further round of redundancies of between 800 and 1,000 men. However, if the work goes to Swan Hunter, there will be redundancies at the two other yards which are bidding for the same order.

By saying that the redundancy scheme will end by December 1986, the Minister is encouraging people to leave the industry before privatisation. To that end, the industry is deliberately being starved of work. To that end also we are told that the British Shipbuilders redundancy scheme will not be continued into privatisation. There is no respect in that for people's accrued rights in employment and no sympathy for the special nature of shipbuilding communities. In the four shipbuilding local government wards in my constituency, 49 per cent. of the unemployed men are time-served skilled men. Do we hear from the Government about alternative employment initiatives? We do not. Quite the reverse—assistance to the region is to be reduced. The unemployed and the displaced must be offered a future, or the pressures on the social fabric of the community, as shipbuilding Members of Parliament have warned before, will become unbearable. Young people who looked to Swan Hunter for employment and apprenticeships have no future in alternative employment. They did not have such a future last year and the Bill says that they will have none next year.

The Minister gave us his view of circumstances in merchant shipbuilding but, significantly, he did not say what level of merchant shipbuilding capacity the Government are committed to retaining. It is not enough to ask the parliamentary Liberal party for its view—we want the Minister's view. If the era of combined yards such as Swan Hunter is at an end, the Minister should explain what size merchant shipbuilding industry the Government will retain through British Shipbuilders and whether that is being calculated in money terms, tonnage, or the numbers of people employed. They should also tell us whether the issue is to be left to the Government's mythical concept of a free market. In successive debates on this subject, I and other Labour Members have said that there is no free market in world shipbuilding, least of all in world merchant shipbuilding. The Government have a duty to respond to that fact by rescuing and protecting the industry, not by killing it off.

The redundancy scheme is no longer generous. It was originally designed to run by the side of national redundancy payment entitlements and to encourage older workers to leave the industry, almost by taking a form of early retirement. However, they were to leave an industry which it was planned would survive and have a future. The scheme's cash value has not kept pace with inflation and its original purpose has been lost sight of. It is now being used cynically to restructure the industry—the profitable parts being in the private sector and the labour force being dramatically reduced.

At Swan Hunter, British Shipbuilders managers are hoping to become private owners. At the moment, those managers have a duty to British Shipbuilders, which is their employer, and to their shareholders—to us, the British taxpayers. They cannot sneak away from that duty. They are in a difficult position when they say publicly that they want to be part of a private consortium which hopes to take over Swan Hunter's assets. My fear is that, if there is industrial trouble at Swan Hunter, whether about privatisation or any other issue, it will be provoked by the management before privatisation so that the state bears the cost. That would be deeply wrong.

I issue a clear warning to the management of Swan Hunter: if they challenge individual representatives of the work force, such as a convenor, in a dispute about disciplinary matters and try to provoke industrial confrontation, they will find that they are opposed by every trade unionist on Tyneside. They will not be forgiven for putting the local industry through that extra pain.

I am deeply saddened by what the Government are doing and by the fact that there is no recognition of the special problems of shipbuilding areas. Like others, I have warned that the social fabric of our shipbuilding communities cannot take much more of this. The Government must respond or we shall find that the social fabric has torn under the strain.

6.9 pm

Mr. Ted Garrett (Wallsend)

It is not often, Mr. Speaker, that I participate in a debate when you are present. Therefore, rather belatedly on the ninth day of 1985, I wish you every health and happiness and a less troublesome year.

The key to this debate is difficult to discern. Since the general election, my hon. Friend the Member for Jarrow (Mr. Dixon) and I have on at least nine occasions spoken on the Floor of the House about shipping and shipbuilding. As I said just before Christmas, it is difficult to come up with any new ideas.

I refer the Minister to an article in the Daily Telegraph by John Petty, the shipping correspondent, whose advice, knowledge and information are second to none. He says that British and European shipowners have agreed to link up in an attempt to survive against the collapse of markets, bankruptcies and increasing competition. The Minister and his civil servants are now aware of that simple proposition, but we have been aware of it for the last 15 or 20 years and have made such statements time and again.

That article names four companies which are going into bankruptcy or liquidation. A European company called Gazocean, the principal shareholder of which is Gaz de France, is likely to go bust, as is the Kotka Line, which operates a service from Finland to Immingham. Our friends across the Irish channel also have a company which has gone into liquidation.

With the exception of the first, these are not large companies, but they are examples of a continuing decline in shipping, both in the United Kingdom and in Europe. Therefore, I hope that I understand the scale of the problem facing the Government, just as I understood the scale of the problem facing the previous Labour Government. The method of approaching the problem is still open to question and debate, and while privatisation may be a short-term profitable answer, it is not the answer in the long term.

For the 2,000 people in question in my constituency and the constituency of my hon. Friend the Member for Newcastle upon Tyne, East (Mr. Brown), the Government say that there is no answer. Consequently, the number asking for redundancy has exceeded the number expected to be made redundant. I and my Labour colleagues in the northern group of Labour Members were prepared to mount a massive "Save our Shipyards" campaign in conjunction with the local authorities, but the scale of defeatism is such that that campaign cannot be mounted unless the workers have a will to fight and to recognise that there is a future, not merely for themselves, but for the society in which they live. That is the scale of the tragedy. Morale has gone, and consequently the will to win has diminished to the point of no return.

Many of these men thought that they had a working life ahead of them. All of them possess various skills, such as designers and naval architects. Many others have university degrees. They have devoted much thought and time to the skills which even now make our ships the envy of the world—for example, the dual-purpose Atlantic Conveyor. Those men have lost their enthusiasm. They want to leave the industry and, if possible, to start a new career. They will probably join the drift from the northeast and other areas to the already over-populated south, and, given their skills and knowledge, these people should have a better chance of a job in the south than in the regions.

So far, no Labour Member has mentioned clause 2, which relates to money. The average redundancy payment will be just over £5,000. Is it fair, honest or equitable that such a sum should be offered from state funds when miners are being offered £1,000 per year of service? The offer to the miners is reasonable. Equally, is it fair that farmers going out of milk production should receive more generous payments relative to what will be offered to men of equal, and in many cases superior, skills, who have served their country in an equal capacity?

Mr. Dixon

And dockers.

Mr. Garrett

I agree with my hon. Friend. Somehow, we have got ourselves in a position in which we are not offering fair compensation terms to men in the shipbuilding industry.

The Redundancy Payments Act 1965 was introduced by Mr. Ray Gunter, then Minister of Labour. He understood labour problems, and to the memory of his name I should add that he was a first-class Minister of Labour. I well remember the speeches that he made, and he always emphasised that the Redundancy Payments Act was designed merely to tide people over until they got another job. However, it is no longer easy to get another job or to move from one occupation to another, so the financial terms under that Act and the terms that are now being offered are completely inadequate. When this Bill goes to Committee, I hope that Committee members will consider more reasonable terms.

I do not intend to say whether the £1,000 per year of service to miners is adequate or not, but had Lord Gormley still been president of the NUM he would not have been involved in a strike but would have argued from the start that the £1,000 per year of service for redundancy should be used as the basis for negotiation. Something different might have emerged. Regrettably, that has not happened. We cannot even accept as a basis for negotiation the present terms offered to those who must leave the shipbuilding industry. I hope that when my hon. Friend the Member for Jarrow replies he will encourage the Committee, on an all-party basis, to consider more adequate terms of compensation. If I am lucky enough to be a member of the Committee, that will be a main theme in my contributions to it.

6.20 pm

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

First, I echo the sentiments expressed by my right hon. Friend the Member for Glasgow, Govan (Mr. Millan) about the Turkish order for five vessels. If the order materialises for Govan Shipbuilders, as I am sure it will, it will be a marvellous shot in the arm for Clark-Kincaids, the engine builders in my constituency. Kincaids built the engine for the Atlantic Conveyor. The workmanship and delivery times were a delight to the directors of Cunard. Kincaids could, with the assistance of British Shipbuilders, easily take on the task of reengining the QE2. There is much press speculation about that now, and Cunard should give the order to Kincaids.

As both the Minister and my right hon. Friend the Member for Govan mentioned Scott Lithgow and as it is wholly and exclusively in my constituency, I also have a right to mention it. I sincerely and fervently hope that the contingent liability of British Shipbuilders in respect of 1,500 employees of Scott Lithgow being made redundant within a year of the sale will not have to be honoured.

Business is going well at the yard and the Government could help further by placing Ministry of Defence orders with Scott Lithgow. I think principally of follow-up orders for the SKK 2400 conventional patrol submarine. I hasten to add for the benefit of my colleagues that that vessel will not carry nuclear missiles. I am confident that offshore orders will be placed with Scott Lithgow. The directors of Trafalgar House have assured me about local employment, especially selection and training issues, and I believe that they are men of their word. Under its new owners, Scott Lithgow deserves the warm support of all, not merely of those in Scotland.

The provisions in clause 1 should and must be extended beyond December 1986. The Minister's comments will dismay many employees of British Shipbuilders. As my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) said, much more needs to be done for those communities which have suffered from the decline of this once-great industry. Although I warmly welcome the continuing developments in the information technology industry, especially the expansion of IBM and National Semiconductor, we must remember that male unemployment is at a dismally high level—about 23 per cent. Investment is necessary both for the infrastructure of a savaged, wounded region and for the industries there.

The debate takes place at a most gloomy time for the shipbuilding and shipping industries. Almost everywhere we see, if not a continuing and remorseless decline, the dismantling of a great industry.

Mr. Roy Farndon, editor of Lloyd's List, put two questions to a meeting of the Greenwich Forum in 1983. He asked: Can London sell its shipping and ship management and shipping finance skills as the size of the British-owned fleet—let alone the British-registered fleet—continues to decline? … And with the stupefying contraction of British and European merchant shipbuilding and repair, it can be asked whether London's skills in shipbuilding finance, classification and design, can prosper independent of the economic host. The Government are failing in their duty if they stand aside while the contraction continues. Mr. Farndon's questions emphasise the importance of shipbuilding and shipping to the maritime service industries. Sometimes we overlook the importance of shipbuilding and shipping to the marine equipment industries and to many finance houses and merchant banks in the City.

As some hon. Members know, shipbuilding, shipping and ancillary services are of crucial importance to my constituency. Clark-Kincaids is the only merchant engine builder on the Clyde today. It has an important interdependent relationship with the Govan shipyard and other British Shipbuilders yards. It is essential that that marine engine building capacity is maintained, not only for the people directly involved on the lower Clyde but for the entire British shipbuilding industry.

The yard of Ferguson-Ailsa is also in my constituency. It has a fine management-worker relationship and it builds first-class vessels, especially smaller vessels. The yard is fighting hard to gain a foothold in export markets for offshore support vessels. In line with what my right hon. Friend the Member for Govan said about the Turkish order for Govan, I hope that the Minister and his Department are giving every assistance to Ferguson-Ailsa of Port Glasgow and Troon in the important area of offshore supply vessels.

Scott Lithgow is not now owned by British Shipbuilders, but it is rapidly improving its market image in offshore construction and, I hope, soon will again become the best yard for the building of conventional patrol submarines. I should like to see Scott Lithgow and Vickers sharing the building of the SKK 2400 conventional submarine. As the hon. Member for Eastleigh (Sir D. Price) said, there is potentially a marvellous export market for that vessel.

British Shipbuilders can compete with other western European yards. However, European yards cannot hope to compete with yards in Japan or South Korea. There are no easy answers on the international scene. Both those countries now have huge shipbuilding industries. An idea of the size of the Japanese industry can be gained when one discovers that the Sanko order of 111 bulk carriers represents just four months' work for the Japanese industry. Japan is becoming worried about the growth of the South Korean industry.

There is an unbridgeable gap between the prices offered by South Korean yards and those offered by western European yards. James Davis, a director of Kleinwort, Benson Ltd., spoke at a meeting of the Greenwich Forum about a visit that he and other western European industrialists made to South Korea, and about the attitudes of shipbuilding directors there. He said: The best way of describing their attitude is perhaps by describing the extreme answer we got from one of them, Mr. Hong of Daewoo. He said that of course we all came from halftime Europe. That was an opening remark and we asked him what he meant by it. He told us that his men expect to work six-and- a-half days a week, unless there was a big job on, in which case they could not take all that time off … They work intensively. He said, 'the trouble is now it is a time of comparative advantage. It is Korea's turn. You had your turn in Europe. Japan has had its turn. Now it is our turn. The international circumstances are extremely difficult, but they will be worsened by the growth of the Republic of China as a shipbuilding nation and by the continuing growth of Brazilian shipbuilding.

In an age of protectionism, Government intervention and subsidy, it is rubbish to talk about free markets and the freedom of international trade. The Government must defend our maritime industries with the same zeal that they display for the privatisation of public corporations and services. Much more is required than the payment of redundancy cheques to those who are forced out of what the Minister called this contracting industry.

The continuing decline of the merchant shipbuilding industry must be halted. A depressed home market has a dreadful effect not only on the communities within which the shipyards are situated but on industries and communities far removed from our maritime communities.

Mr. T. W. Bewsey, director of the British Marine Equipment Council, said recently: At the present moment the situation on the home market is bad and shows no sign of improving in either the short or the long-term. This is because the depressed state of the world shipping market will continue for several years and as a result the level of orders for new tonnage will continue to be very low … If the UK is to retain a merchant shipbuilding industry in the overall national interest, with particular regard to defence considerations, then the Government must continue to consider seriously what means are necessary for survival; otherwise the industries concerned will disappear, never to be replaced. Given the gloomy economic circumstances of shipbuilding, shipping and maritime services, the time has arrived for a Royal Commission on the British maritime industries. Such a commission could assess the present and future circumstances of our maritime industries perhaps more adequately than could a Select Committee. The idea of a Royal Commission was mooted last year by the editor of Lloyd's List, and I heartily commend the proposition to the House. I say that despite a reprimand that I received from the hon. Member for Eastleigh (Sir D. Price), who reminded me in a conversation outside the Chamber that a former Labour Prime Minister said that setting up a Royal Commission to examine an issue puts back the policy decisions on that issue by four years. I accept the hon. Gentleman's strictures, but although it is essential for the House and its Select Committees to examine the needs of our maritime industries, I believe that we also need a Royal Commission.

The Government must also encourage the development of a buoyant home market. That is especially true of the offshore oil and gas industries. Traditional maritime industries have an important role to play in oil and gas, not only on the United Kingdom continental shelf but elsewhere. There are no easy answers, but no Government should ignore the continuing contraction in shipping and shipbuilding.

6.35 pm

Dr. David Clark (South Shields)

The Bill has a short title and when I first saw it—my right hon. Friend the Member for Glasgow, Govan (Mr. Millan) had the same impression — it seemed to be innocuous and modest. However, as the Minister of State moved the Second Reading today, it became clear that the Bill has many implications. It was almost as though the Minister had opened a can of worms. My right hon. and learned Friend the Member for Monklands, East (Mr. Smith) said that it could be inferred that the Government wished to stop redundancy payments as that would shift the burden of labour before privatisation and thus make the shipyards more attractive financially to their friends. I hope that the Under-Secretary of State will explain that to the House when he replies to the debate.

It was staggering to hear the Minister talk about a contracting industry and then to explain, right, that he could not give the House an overall costing of the scheme because it depended upon the number of people who were made redundant. I understand the logic of that, hut the Government must have some idea of the long-term size of the British shipbuilding capability, both merchant and naval. Can the Minister give us some idea of the manpower requirements that the Government envisage in the immediate and medium-term futures? The Minister must have those figures; or he certainly should have them.

When we talk about redundancies, we are talking about human beings. As so often in shipbuilding debates, we talk about orders and yards and tend to forget that in those yards there are individuals. I endorse what my hon. Friend the Member for Wallsend (Mr. Garrett) said about massive payouts not applying to shipbuilding. My hon. Friend the Member for Newcastle upon Tyne, East (Mr. Brown) said that an average payment of £5,000 was not much compensation for losing one's job.

The problems that we have heard about today from Labour Members—most of those who have spoken in the debate are Labour Members — are similar. The problems of Tyneside are echoed on Wearside, on the Clyde and on Merseyside. There is shameful unemployment in those areas, which are economic blackspots. Redundancies of 2,000 or more have a tremendous effect on communities. When a shiprepair yard in my constituency was privatised, there were massive lay-offs. I now share a travel-to-work area with my hon. Friend the Member for Jarrow (Mr. Dixon), and it gives me no pleasure to say that we experience the highest level of unemployment in England. When we hear of the further redundancies in shipbuilding on the Tyne — because many people from south Tyneside go across the river to Swan Hunter or they work in the Jarrow and Hebburn areas — we wonder how much longer our communities can survive.

I want to press the point made by my right hon. and learned Friend the Member for Monklands, East. Is it not about time that the Government realised that it is not just individuals who are affected, vitally important though they may be? Communities are also affected. Does the Minister appreciate the loss in rateable value to communities such as south Tyneside, north Tyneside, Glasgow and Sunderland resulting from shipbuilding closures? It runs into millions of pounds, and it makes the problems of the local authorities in those shipbuilding redundancy areas even more acute.

I know that there is the EEC scheme, but, just as the Government's shipbuilding redundancy scheme is far less generous than those operating in the mining and steel industries, so the EEC scheme is literally peanuts compared with what is offered to the coal and steel closure areas. When the Government are discussing shipbuilding redundancies, I urge them strongly to pay particular attention to the communities affected.

I realise that the men who work in the shipbuilding industry and who perhaps are contemplating accepting redundancy have made Herculean efforts to increase productivity. We have the Ark Royal being built on the Tyne, and it is months ahead of schedule. We had the Atlantic Conveyor launched recently only a few days after the rescheduled delivery date, and the managing director and the chairman of Cunard paid tribute to the quality of the work.

My hon. Friend the Member for Wallsend touched on a pertinent point when he reminded us that we are discussing a shipbuilding Bill concerned with redundancy at the very time when morale in the shipyards is at its lowest ebb ever. One has only to listen to people talking in the pubs and clubs of Tyneside to understand the extent of the desperation and despondency among them. That is one reason why people are queuing up to take redundancy. It is out of sheer desperation, and it is a tragedy for the country, because those skilled men are vitally needed in our nation. If we lose their skills we shall live to regret it.

We saw only two years ago during the Falklands crisis how men worked night and day to meet the Government's deadlines and managed to help the victory that we sought. But it was a very close run thing, and I doubt whether we could mount the same operation today. Even then we got through only by chartering Scandinavian vessels. At one time the Government were trying to buy a Danish vessel because there were not enough British vessels. That is how desperate the situation is, and that is why as a nation we cannot afford to allow these redundancies to go ahead and the shipbuilding industry to run down.

Does the Minister not appreciate that his proposals for privatisation are the raison d'etre for the demoralisation among members of management teams as well as the work force? The proof of the pudding is in the eating, because we see it in the private yards already. Those who work in the industry see privatisation as casualisation. When they hear talk about the market place, they see it as appearing on a Monday morning and two men being selected out of 50. They see those bad days coining back again, and it is impossible to build a life and a community based on that amount of uncertainty. That is one reason why there is so much demoralisation.

How can we get across to the Minister this point about the market? It is not the market place where labour is hired and fired. How can we get it across to him that there is no such thing as a free market in shipbuilding? Shipbuilding is concerned with strategy and with strategic decisions taken by the Government about the size of the industry. That is why I laid so much stress at the beginning of my remarks on trying to press the Government to say what they saw as the size of our shipbuilding industry. There is no such thing as a free market, and it is about time that the Government recognised that, as an island nation and a maritime power, we need not only British-owned ships to carry goods, but the facilities to build those ships.

I make one final plea. The Government are always exhorting the entrepreneurial nature of British industry. Some of the private yards in the ship repair industry have worked very hard to get jobs. A lot of the work comes from the Soviet Union, especially in the north-east of England where there is easy access from the Baltic and the north Arctic. I understand that currently the Government are negotiating with the Soviet Union with a view to excluding Soviet vessels from the river Tyne. I have had a partial assurance from them that this will not be pursued, but I hope that the Minister will bear it in mind, look into it, and realise how important it is for our shipbuilding industry that we retain that trade with the Soviet Union.

6.45 pm

Mr. Don Dixon (Jarrow)

We have had a number of shipbuilding debates since 1979, as my hon. Friend the Member for Wallsend (Mr. Garrett) reminded us. Unfortunately, they have been about either the curtailment of borrowing powers or the extension of redundancy scheme payments. It is bad when my hon. Friends have to welcome the extension of a redundancy payments scheme. However, those being thrown on the scrap heap have a right to be cushioned financially, albeit not as well cushioned as some others being thrown out of work by the Government.

When we discuss clause 1, we are talking about bribing people into idleness. In the Tyne and Wear area the 2,100 workers being made redundant by Swan Hunter will never work again. It is criminal that the skills of these shipyard workers, learnt over many years, should be thrown away, bearing in mind especially that we are a maritime country. In 1982–83, the number employed by British Shipbuilders fell by 22 per cent. to a low of 48,550.

Unfortunately, I had to leave the debate for a time because the Employment Select Committee was meeting to discuss the closure of 29 skillcentres in areas such as my own, where 2,100 shipyard workers are to be thrown on to the streets. That is why I missed the speeches of the hon. Members for Gordon (Mr. Bruce) and for Eastleigh (Sir D. Price), and that of my right hon. Friend the Member for Glasgow, Govan (Mr. Millan), as well as the end of the remarks of my right hon. and learned Friend the Member for Monklands, East (Mr. Smith).

At the beginning of his remarks my right hon. and learned Friend put his finger on this so-called innocuous Bill about the extension of redundancy payments, because he drew attention to one or two extremely important aspects of it. Those who are to be privatised will lose their redundancy payments under British Shipbuilders' redundancy scheme. The Minister tried to say that this was no different from the position of those who had been privatised before. However, as my right hon. Friend the Member for Govan reminded us, on 1 February last year I asked: If Scott Lithgow is taken over by a private company will the Minister ensure that all the workers receive their full entitlement from the British Shipbuilders redundancy scheme? The Minister replied: I think that that assurance can be given. They will be eligible for the redundancy scheme."—[0fficial Report, 1 February 1984; Vol. 53, c. 352.] The Minister also said that no one previously received anything from the British Shipbuilders redundancy scheme after it had been privatised. In the same debate I made the point that Tyne Shiprepairers, which had been taken over by its directors, had received £4.2 million in a buy-out from the redundancy scheme. How does the Minister square that with his statement to the House tonight? He obviously misled the House tonight when he said that in future companies would not be dealt with any differently from those in the past. That is not true.

Mr. Norman Lamont

As I recall, some people who were made redundant at the time of Scott Lithgow may have qualified for payment under the scheme when the company was part of British Shipbuilders, but when a company enters the private sector the redundancy payments scheme does not apply to it. As the hon. Gentleman said, it is true that in some situations where companies such as Tyne Shiprepairers have been privatised compensation has been paid, but that compensation has been paid not as of right, because there was no statutory right, but as a result of negotiations.

When the warship yards are returned to the private sector, they are in the same position as other companies in the private sector. There may be an opportunity to negotiate compensation; there may be an opportunity for them to join schemes in those companies; there may be an opportunity for new schemes to be negotiated; but there is no statutory right, and there never has been, with this scheme. If it were to apply to the private sector there would have had to be a specific provision in the legislation. [Interruption.] It may or may not be the case that I should have included such a provision, but Labour Members cannot claim to be surprised, because it manifestly is not there, and the position on the scheme is as it has always been.

Mr. Dixon

The Minister says that the companies have no right. The Act implicitly says that when people leave the employment of British Shipbuilders they are entitled to the benefits of a redundancy scheme over and above the national scheme. If a firm is privatised, those people will no longer work for British Shipbuilders, and under that Act they are entitled to their redundancy scheme. That was the reason why Tyne Shiprepairers was bought out. That was the reason why that was negotiated. That was the reason why, when members of Tyne Shiprepairers accepted £2,100 as part of the buy-out from the shipbuilding redundancy scheme, they also had a guarantee of 12 months' employment with the new company. At the time the payment under the British Shipbuilders redundancy scheme worked out at about £10.7 million, compared with £4.2 million under the buy-out.

At that time I asked the Minister what was happening to the other £6.5 million. Had the shipyard not been privatised, the Government would have had to finance British Shipbuilders to pay that money. There are rumours at the moment about pits being privatised. I wonder whether the miners working in those pits will receive redundancy payments under the mineworkers' redundancy scheme which is on the table at the present time. However, as the Minister says, that aspect can be debated in Committee.

My hon. Friend the Member for Sunderland, North (Mr. Clay) talked about the effects of unemployment in parts of Sunderland. He referred to the fact that East End ward has an unemployment rate of 65 per cent. That is possibly true of many areas in Tyne and Wear, and probably in Scotland and Birkenhead. My hon. Friend the Member for Birkenhead (Mr. Field) told the Minister about the level of unemployment in his area. He also asked some specific questions which were reiterated by my hon. Friend the Member for Newcastle upon Tyne. East (Mr. Brown).

My hon. Friend asked what had happened about the orders for the type 22 destroyers which had been promised. They were promised before the summer recess. They were promised again in September, November and December. When my hon. Friend the Member for South Shields (Dr. Clark) and I went to the Ministry of Defence in December, we were told that they would possibly come at the end of January. One is suspicious when such orders are held back at a time when shipbuilders are to be privatised. One wonders whether such orders are deliberately held back because the privatisation scheme is on the board.

My hon. Friend the Member for Newcastle upon Tyne, East also mentioned the possibility of victimisation. I can give the Minister some idea of what happens in the shipbuilding industry in that regard. I was sacked from my job as a shop steward in the shipbuilding industry, and I could not get a job in that industry for a considerable time. Tory Members and Ministers talk about secondary picketing. We have heard a lot about that during the miners' strike. However, the employers do not need to put anyone outside a gate to stop a worker going to work. They pick the phone up and tell the personnel officer not to employ a particular person under any circumstances. That is what happened to me.

My hon. Friend the Member for Greenock and Port Glasgow (Dr. Godman) mentioned the problems and anxieties of Scott Lithgow and Clark-Kincaid. My hon. Friend the Member for South Shields mentioned redundancy pay, the level of manpower and how long we will have redundancies in the shipbuilding industries. He also mentioned another important point. Both he and I have had letters from constituents about the rumour that Russian vessels will be prohibited from using the river Tyne. Our ship repairers have always had several Russian vessels to work on. I hope that the Minister will throw some light on that rumour. We shall certainly take the matter up with the Ministry of Defence, which is possibly where the answer lies.

We have heard during the debate about redundancies and problems in the shipbuiiding industry. If they are international problems, the Government can help out. One can find little good to say about Mr. Graham Day, the chairman of British Shipbuilders, other than that he carries out to the letter his instructions from the Government. In Shipbuildng News in December he said: A number of countries operate domestic preference schemes which secure the dual objectives of sustaining a national fleet and enabling a hard pressed shipbuilding industry to restructure on the back of a workload, albeit reduced. He suggests there that some countries give preference to their shipbuilding industry which Britain does not. That is certainly worth quoting, coming as it does from Mr. Graham Day. It is a pity that he did not take a few more lessons from his predecessor, Sir Robert Atkinson, who used to fight the corner of British Shipbuilders. Unfortunately, Mr. Graham Day is doing what he was instructed to do—to cut the shipbuilding industry down to virtually nothing.

As my hon. Friend the Member for Wallsend said, since 1979 shipbuilding workers have been demoralized because they have had nothing but redundancies. There was the first corporate plan from Sir Robert Atkinson, who talked about a 400,000 tonne throughput. Incidentally, that is the nearest that British Shipbuilders ever came to breaking even. The year that it had a 400,000 tonne throughput was the year that it came within £19 million of breaking even. That is the best year that British Shipbuilders has had. Now Mr. Graham Day talks about a throughput of less than 200,000 tonnes. That is the reason for the present reduction in manpower in the shipbuilding industry.

Most of my hon. Friends who have spoken tonight belong to the Tyne and Wear area. Like me, my hon. Friends the Members for Wallsend, for South Shields and for Newcastle upon Tyne, East are concerned about that area. At the height of the shipbuilding boom 100,000 men were employed in the Tyne and Wear area, but today fewer than 12,000 work there, and that is without the present redundancies. There have been redundancies at Swan Hunter and BS(ETS). Indeed, this morning I was told that Palmers Hebburn of British Shipbuilders is to be put in moth balls. This morning the management told the shop stewards that the yard was going on to care and maintenance. A couple of years ago that yard was employing 2,000 men. That is the scale of the unemployment in that area. Hon. Members should bear in mind that for every man who works as an assembler in the yard, another three men work in supplying the industry.

Our area is being hit in particular because in the northern region male employment has been 25 per cent. dependent on industries such as heavy engineering, coal mining and shipbuilding. That compares with a figure of 8 per cent. for the rest of the country. Thus, with the decline in heavy engineering, the area has been badly hit. In the Jarrow and Hebburn area, male unemployment amounts to 31.3 per cent., without taking into account the present redundancies at Swan Hunter. In south Tyneside as a whole 15,529 people are unemployed, and of them 11,120 are men. That means that 29.5 per cent. of the male population of south Tyneside are out of work. Yet those people have contributed to the local budget.

There has been a reduction in rate income, because if a shipyard closes less money goes to the local authority. Indeed, that point was raised by my hon. Friend the Member for South Shields. The young and active who take the advice of the former Secretary of State for Employment, now Secretary of State for Trade and Industry, and get on their bikes do not take the old people's homes, community centres or local authority facilities with them. Therefore, those facilities have to be provided by the remaining elderly population. That has a tremendous impact on areas such as ours.

The task force has been given various degrees of welcome, but I am told that it is only for partnership authorities. South Tyneside, which I represent, is a programmed authority. We have as many problems as—if not more than—some of the partnership authorities. Therefore, I hope that the Minister will at least consider an extension of the areas so that the task force can take over and include some of the programmed authorities. I also hope that he will get on to the Ministry of Defence and get those type 22 destroyer orders placed as soon as possible.

I have seen a press statement about £100 million of special aid for areas affected by the decline in the steel, shipbuilding and textile industries. Indeed, £10 million was for the shipbuilding industry. I hope that the Minister will make representations to get the amount increased. The amount of money for the Tyne and Wear area was £3.2 million, which is nothing compared to the devastation being wrought on it through the redundancies that we face.

I shall deal now with clause 1 and the redundancy extension. The Minister gave the game away when he said that 35,000 workers had benefited from shipbuilding redundancy payments. The Government seem to feel that a worker benefits from getting the sack and being thrown on the streets, perhaps for the rest of his life. That shows what they think about unemployment. To suggest that 35,000 people have benefited from being made redundant gives us some idea of the Government's thinking on unemployment.

The calculations for redundancy payments have not been mentioned. Both you, Mr. Deputy Speaker, and I sat on the same Committee and you will remember the free riders' charter and clause 1 of the Employment Bill 1982. The Government gave retrospective payments to all those who decided that they would not be members of trade unions in closed shops. The Government gave £2 million retrospectively in order to compensate them. That free riders' charter calculation has now been increased from £145 to £154 per week.

I have little to add to what my right hon. and learned Friend the Member for Monklands, East said on clause 2. The Geddes report set up the Shipbuilding Industry Board and, of course, Upper Clyde Shipbuilders received a loan. I have spoken before about the Geddes, Paton and BoozAllen reports. They were all produced when the shipbuilding industry was in private hands. To judge from what is said by Tory Members and Ministers, one would think that the shipbuilding industry had problems only when it was nationalised. When it was in private hands, the Geddes report led to the setting up of the Shipbuilding Industry Board, and that is why Upper Clyde Shipbuilders had to have that loan. When the shipbuilding industry was in private hands it was in a terrible mess, and that is one reason why the Labour Government nationalised it in 1977.

We shall not vote against the Bill tonight. With some reservations, we welcome the fact that the shipbuilding scheme is to be extended. I hope that some of the problems and anxieties expressed by my right hon. and hon. Friends will be thrashed out in Committee. Indeed, I hope that the Minister will take them into consideration and that when we go through the nuts and bolts of the Bill some amendments will be made. But we are rewriting history when it comes to clause 2. The Government once lent money to Upper Clyde Shipbuilders because private industry had made a mess of it, yet now the Minister will hand the same shipbuilding industry over to the same people who made such a mess of it before.

7.7 pm

The Parliamentary Under-Secretary of State for Trade and Industry (Mr. John Butcher)

Many questions have been asked during this serious and reasoned debate, and it may be convenient if I try to answer as many as I can, particularly those from Opposition Members, who have quite legitimately pursued the interests of the industry and of their constituencies. In addition, my hon. Friend the Member for Eastleigh (Sir D. Price) would like some clarification on the position of the type 22 frigates.

The hon. Member for Jarrow (Mr. Dixon) has a constituency with a very noble history in affairs of industrial relations and in the way that it has reacted to the scourge of unemployment. He should be aware, as he no doubt is, that total aid for the northern region since 1972 stands at more than £1 billion. The aid package, in terms of regional assistance, that is going to those areas where shipbuilding is one of the predominant industries has amounted since 1979 to about £640 million.

I hope that we can deal once and for all with the accusation that the Government are not mindful of the interests of those parts of the country that have been affected by structural unemployment, particularly in the heavy engineering sector and in the shipbuilding industry.

Mr. Nicholas Brown

rose—

Mr. Butcher

I shall deal with the hon. Member's points in detail but I wish first to finish this observation. The interesting suggestion about the application of the task force to the area represented by the hon. Member for Jarrow will be noted carefully. He will appreciate that this idea has been discussed in the press but has yet to have formulation in the full interdepartmental discussions which necessarily have to take place within Whitehall. I shall bring his observations to the attention of the appropriate Ministers in Departments other than the Department of Trade and Industry.

Mr. Nicholas Brown

Will the Minister tell the House where he obtained the figures?

Mr. Butcher

If the hon. Gentleman kept a close eye on Hansard he would have seen a question about how much regional aid had gone to the northern region since 1972. If he checks Hansard, I think that he will find the detailed data in a copy published three or four days before the Christmas recess. I shall send him the appropriate column.

Mr. Brown

What I am asking is where the figures that were quoted in Hansard came from originally — the source of the figures.

Mr. Butcher

The source was the records available to the DTI. It keeps records of section 7 assistance, regional selective assistance. We monitor the amount spent. If the hon. Gentleman wants to find the source of those figures within the Department of Trade and Industry I can only say that this Administration, like Labour Administrations, places explicit and implicit trust in its officials to keep the records accurately. We report faithfully the information to the House when it is requested in a parliamentary question. I cannot see the hon. Gentleman's point.

The hon. Gentleman made three major points which were interesting in that there was a practical philosophical element in each of them. He raised yet again an issue which I thought we had dealt with comprehensively in two previous debates on industrial policy, and not least in the last debate on shipbuilding — the importance of the manufacturing sector and manufacturing industry as opposed to service sector activity. I think it is worth repeating what I said, because I did not hear any disagreement on the last occasion. If we examine manufacturing activity we find that 80 per cent. of output is internationally tradeable. By contrast, some 18 per cent. of service sector activity is internationally tradeable. Although we have to recognise the magnificent contribution that the service sector has made to job creation, with some 280,000 extra jobs being created in the service sector in the last 18 months of the recession, we must recognise also that the wealth creation engine, the core and heart of wealth creation, will always remain within manufacturing. We have to make things which are exportable in international trading circumstances.

Mr. Brown

I agree with all that. Surely the logic of that argument supports my point and not the Minister's.

Mr. Butcher

In that case, I am not sure what the hon. Gentleman's point is. I hope to demonstrate in my response to the detailed debate that we have not been tardy or unhelpful in the assistance given to the manufacturing sector. Certainly we have not been unhelpful to the shipbuilding industry. The House will be all too familiar with the £1 billion support for shipbuilding by this Administration in the previous Parliament and in this one. I resent bitterly the accusation that we have been prejudiced against the manufacturing sector. The hard cash figures as reported to the House disprove that theory.

The hon. Gentleman posed legitimately a question which should exercise the House—is the shipbuilding industry operating in a free international market? On this occasion, as on previous occasions, we have conceded that over the years a market that is decidedly not free has developed in shipbuilding and that there has been an unhelpful and, some would argue, totally unnecessary subsidy race by various shipbuilding nations to get business. Some industries and some nations are more efficient than others; therefore, they may need less recourse to subsidies. But in the main the European Community, through the intervention fund and other proposals, has had to connive in the unfortunate corrosion of the free market in shipbuilding.

As a free market does not exist, we have tried to give our domestic industry the chance to compete in that distorted market. Therefore, the answer to the question whether the world shipbuilding industry is operating in a free market is no. The Government, recognising the reality of the situation, have to give sufficient support to domestic industry to put it back in the race.

The hon. Gentleman obviously queries the source of our information. We can do no more than quote the data compiled accurately by those who work for the Government. He seemed to imply that we were prejudiced or were not helping sufficiently to overcome the special problems of shipbuilding communities. I repeat that £1 billion has gone to one key region and £640 million to other areas in which shipbuilding is a major element in job preservation. I hope that that shows that our spending patterns do not indicate a lack of concern.

In regard to the observations delivered, as ever, in a serious and measured manner by the hon. Member for Wallsend (Mr. Garrett), I should have liked to offer him in this Second Reading debate the sort of assurances that he was seeking on the level of redundancy payments, but I hope that he will agree that these payments, which are not being changed either in character or in manner of compilation, are at least considerably more generous than the basic requirements in other industries. What fascinated me was that I had heard similar remarks eight or nine months ago in Durham in a working men's club in which I had the privilege to spend some time.

There was great concern in that Club and Institute Union club about the very generous payments available to members of the National Union of Mineworkers, should they wish to become redundant. It was claimed that we were creating a two-tier work force. Those payments were genuinely resented by members of the Transport and General Workers Union. They felt that miners were being treated hyper-generously. Shipbuilding employees do not get anything like those payments. Men driving lorries delivering coal to the power stations could not expect anything other than basic redundancy payments. There is strong feeling among workers about this. The Government are being generous enough to shipbuilding workers in regard to redundancy.

Mr. Garrett

The Minister tempts me very much to debate elitism. I shall reserve my remarks for the Committee stage, when I can prove that the elitism at the bottom end of the scale is not as important as the elitism at the top end, where civil servants and other people get excellent redundancy payments.

Mr. Butler

Within whatever elite the hon. Member wishes to call the vanguard of the proletariat—I suppose these days Arthur Scargill sees that as the National Union of Mineworkers — even within the various classes of working people or within what sociologists would call socio-economic groups, an elite has emerged — those who work in the mining industry. It causes resentment among other workers in industries which are more hard-pressed than mining on redundancies. We should hold on to the payments which we propose for shipbuilding employees.

The hon. Member for Birkenhead (Mr. Field) asked a number of interesting questions. The Department does not lack sympathy for Cammell Laird or for Merseyside. The area continues to receive the maximum regional assistance backed by the Department's best efforts. Birkenhead has received £174 million in regional aid since 1979. Ministers do not prefer any one shipyard to another.

Mr. Field

I was not asking for details of the aid going to Birkenhead. If I wanted that information, I would table a question. I was putting to the Minister the feeling in the yard about orders which are to be placed shortly. It appears that the Department is arguing against the interests of Cammell Laird. I wanted a yes or no answer.

Mr. Butcher

No. We want the contracts to be awarded on a fair and objective basis. We want them to go to those yards which are best equipped and which can deliver on time, within the budget. The House should be familiar with those requirements. We have no preference for any shipyard. The future of Cammell Laird, like that of any other yard, depends upon the ability of the work force to deliver the goods on time.

Mr. Field

I understand that to be part of the Government's policy, but the Government have also stressed that one of their aims is to change industrial attitudes. Some people, the Minister included, have said that attitudes have changed at Cammell Laird. Is the Minister now saying that that is of no concern to the Government when they place orders?

Mr. Butcher

Attitudes are changing in all major shipyards. There has been a great improvement. Of course those factors are taken into consideration when we consider placing orders. Is the hon. Member for Birkenhead saying that the change of attitudes in his constituency is greater than anywhere else and that therefore the order should be placed there? Some of his hon. Friends may also assert that admirable proposition. The orders will be placed objectively, on merit, in the yards which the Ministry of Defence believes can best satisfy its contracts.

The hon. Member for Birkenhead and the right hon. Member for Glasgow, Govan (Mr. Millan) asked about distributing sale documents to hon. Members. They asked to see copies of the warship yard documents. Those documents cannot be widely distributed, because they are not full prospectuses. It would be illegal to distribute them to members of the public. However, there is no reason why they should not be seen by hon. Members with constituency interests in warship yard privatisation. We shall write to hon. Members accordingly. One could say that that is tonight's exercise in open government.

The hon. Member for Sunderland, North (Mr. Clay) asked a raft of questions. Before I answer them, I shall deal with Swan Hunter and Vosper Thornycroft. British Shipbuilders' decision on redundancies is the unfortunate reflection of the declining workloads in those yards and the continuing failure to obtain export orders. It is in no way connected with privatisation. British Shipbuilders would have had to declare the redundancies even if the warship yards had not been privatised. The decision makes no assumption about where the orders for the next type 22 frigates will be placed.

The redundancies at both yards will follow a progressive rundown pattern. At Swan Hunter, employment levels will fall by 2,100, to 5,250, by the end of February 1985. At Vosper Thornycroft, employment will be down by 790 to 3,600 by the end of April 1985. British Shipbuilders will, of course, try to achieve as many as possible of the redundancies by voluntary means, including transfers and retraining for other jobs. The hon. Member for Newcastle upon Tyne, East (Mr. Brown) asked about that.

Mr. Brown

rose—

Mr. Butcher

I must press on, so I ask that the hon. Member for Newcastle upon Tyne, East be the last Opposition Member to intervene.

Mr. Nicholas Brown

Can the Minister explain why the Government have delayed placing the orders for the type 22?

Mr. Butcher

If the hon. Gentleman will contain himself for a further three or four minutes, I shall deal with that in my own main remarks instead of in this question and answer session.

The right hon. and learned Member for Monklands, East (Mr. Smith) raised the spectre of a plot to ease people out of the industry in order to fatten the balance sheets of the industry for denationalisation. It is legitimate for Opposition Members to probe and ask questions of the Government. That is their time-honoured role. However, the right hon. and learned Gentleman indulged in scaremongering. By putting a warped interpretation on the details of this innocuous Bill he hoped to raise a spectre. There is no reason at present to believe that British Shipbuilders will need to declare deck-clearing redundancies in the warship yards. Redundancies, including those recently announced at Swan Hunter and Vosper Thornycroft, are caused by the absence of orders.

The right hon. and learned Gentleman also raised fears about the position of those in the warship yards as privatisation approaches. He said that employees would have an option to take redundancy before privatisation and that they would rush to do that. That is nonsense. Employees can take redundancy only when volunteers are called for. Employees cannot take advantage of redundancy if it is not offered.

The right hon. and learned Gentleman asked whether British Shipbuilders' employees would be worse off after 1986. There is no reason to suppose that they will. Employees will negotiate terms with the management and I presume that they will aim to equal or better the present terms. We cannot say tonight what the outcome of negotiations will be. As elsewhere in industry, the outcome will be the result of negotiation. We shall be asking British Shipbuilders and Harland and Wolff to set the negotiations in hand in good time.

Mr. John Smith

Does the Minister accept that employees in British Shipbuilders must be worse off after 1986 because they will not have the guarantee of the scheme which will be stopped in 1986? The Minister has accused me of raising false fears about the future of the shipbuilding industry. Can he guarantee that no redundancies will be declared prior to privatisation in any of the yards which are to be privatised? In the absence of any solid guarantee from the Minister, I shall persist in making the allegation which I was entitled to make.

Mr. Butcher

Does not the right hon. and learned Gentleman agree that, if he were at the Dispatch Box, he could not give that guarantee? He has been in the House and in high office long enough to know that it is impossible to give such a guarantee. No Labour Minister could have done it, and no Conservative Minister can do it. We cannot look into a crystal ball and know now what the order position will be. However, we can say that we shall encourage British Shipbuilders to come to its arrangements by negotiation with the work force for whatever scheme it wishes to see continued after the deadline for this scheme. That is a perfectly reasonable and legitimate proposition to place before the House. No doubt Opposition Members will wish to test it in Committee when we have more detailed debates on this small Bill.

With regard to extending the shipbuilding redundancy payments scheme beyond 1986, I hope that Opposition Members will deploy their arguments later, but tonight I hope that I can assure hon. Members on both sides of the House that there is no plot to produce a flood of redundancies against any time scale and that, as ever, redundancies — those sad decisions — are made predominantly in the light of the position of order books, the health of the site and its objectives for the future.

What about the right hon. and learned Gentleman's point about fairness to the private sector? Frankly, I found it particularly galling. It is strange that he should take that line when it was his Administration who decided in the first place that there would not be provision for the private sector. It has not been a mark of Labour party concern in the past to see the full-blooded health of private sector competitors to publicly owned industries. However, when the scheme ends, there will be full equality between the public sector and the private sector. There is pressure from some of my hon. Friends to bring about that equality at a much earlier date. It will happen, and it will happen because we shall have a rationalised industry on which we can consolidate, hoping that the recession in shipbuilding orders will come to an end.

The right hon. Member for Govan referred to the intervention fund. As the House knows, on 2 November the Industry Council agreed to the extension for a further two years, until the end of 1986, of the fifth directive on aid to shipbuilding. That means that we have overcome a major obstacle to our efforts to secure the Commission's approval to an enhancement of the intervention fund regime. However, we could not reach a satisfactory agreement with the outgoing Commission on our application to increase the level of intervention fund support, so my hon. Friend the Minister of State will soon be knocking on the door of the new Commissioners to re-emphasise our reasonable and sensible proposals.

Two hon. Members referred to the type 22 frigates in a slightly different context. I say again to the House that my right hon. Friend the Secretary of State for Defence is considering the tenders for those vessels and hopes to announce his decisions shortly. We fully recognise the importance of those orders to the three contending yards —Cammell Laird, Swan Hunter and Vosper Thornycroft. We equally recognise the concern in each at the time that it has taken to reach a decision, but it is essential that in reaching it we take fully into account all the factors, including the requirements of the Navy, the cost to the taxpayer, the performance of the yards and their need for work. No doubt the factor mentioned by my hon. Friend the Member for Eastleigh will be uppermost in the minds of all three yards. Of course we welcome the dramatic improvement in the atmosphere and the sense of responsibility in Cammell Laird, but we cannot tell the House tonight the precise date on which that decision will be made, although it will be shortly.

Mr. Nicholas Brown

We must be clear about this matter. Is the Minister telling the House that the decision on where the orders for those two type 22s are placed will not be based solely on commercial considerations?

Mr. Butcher

The decision will be based on the judgment of the Secretary of State for Defence of the ability of the yards to complete those ships on spec, on time and within the contract price. In other words, it will be an objective decision on merit, and on commercial grounds, if the hon. Gentleman wishes to call it that.

At long last, I come to the raft of questions raised by the hon. Member for Sunderland, North. He had the courtesy to write to my hon. Friend the Minister of State requesting that the closure of the BS(ETS) manufacturing facility be postponed for three months while the current investigation into the alternatives to closure is completed. My hon. Friend replied that, while that was primarily a management matter for British Shipbuilders, he had looked into the position. He assured the hon. Gentleman that only those assets that British Shipbuilders needed to keep for its Wallsend site would be removed from BS(ETS), that British Shipbuilders intended to sell the unit as a whole if a buyer could be found, and that closure would not seriously prejudice the chances of a new operation starting up there. The House will agree that British Shipbuilders is going out of its way to be as helpful as possible on the issue and is acting with a judicious blend of commercial and social responsibility.

The hon. Gentleman also referred to the development of the Doxford engine and said that there was a recent suggestion in Lloyd's List that British Shipbuilders is secretly continuing development work on the engine. I am assured by the corporation that that report is wrong. Work on the new engine stopped 18 months ago. It was clear that there was insufficient demand to justify the investment, and British Shipbuilders tried to interest private sector companies in sharing the risk or taking over the work. I regret to inform the House that no one was prepared to do so.

I refer to the general question of the future of BS(ETS). We all naturally regret the closure of the crankshaft and engine-building operation and the redundancies that that has meant, but those were strictly commercial decisions that were forced on British Shipbuilders. The investment in the crankshaft facility was, with hindsight, an error of commercial judgment on the part of management at the time. British Shipbuilders has never achieved, nor is it likely to achieve, the levels of engine throughput that would justify such a facility, and the only sensible thing to do was to close it and, in its view, stop throwing good money after bad. I know that that will seem a harsh observation to the hon. Member for Sunderland, North, but those are the realities as advised to us before the debate.

I am sure that the hon. Gentleman will draw some encouragement from the interest shown by Tyne and Wear county council. Since the decisions were made several parties, including the hon. Gentleman and the county council, have been active in seeking support and funds to enable all or part of BS(ETS) to continue. British Shipbuilders is extending what help it can to the advisers acting for the group in evaluating the possibilities. I hope that something will emerge from that approach, but I also hope that it will be a commercial solution with a long-term future and not an uncommercial rescue operation funded solely by the ratepayers of Tyne and Wear.

Mr. Clay

Does not the Minister accept that if those efforts, which he recognises, are to have any chance of coming to fruition, the work force must still be there? The workers are capable of developing the works in the way that various companies might want to develop them. It is not true that British Shipbuilders is assisting. It has taken a long time to get the Department of Trade and Industry and British Shipbuilders to take any interest in the approaches that have been made. There has been little co-operation, and it does not help potential buyers if the workers who are left are being either threatened or bribed out of the works, and if British Shipbuilders' management seems to have an interest in nothng but closing the works. The picture that the Minister presents of the interest being shown by companies is true, but the picture of co-operation that he is presenting is not.

Mr. Butcher

I shall have to agree to differ on that point. It would appear from the level of activity that is reported to the Department that genuine attempts have been made to resolve the problem, but hard commercial facts have intervened. That particular site apparently cannot obtain the amount of business required for either existing or future management to survive.

Mr. Clay

rose—

Mr. Butcher

I must press on.

I should like to deal with the hon. Gentleman's fifth question, about the Ethiopian order. I gave an undertaking to write to him personally, and I shall discharge it as soon as I can. I can say tonight that British Shipbuilders is proceeding as quickly as possible to put together a financial package acceptable to the customer for an order for two general-purpose cargo vessels from Ethiopia, and if successful it would go to Austin and Pickersgill.

British Shipbuilders is also pursuing a number of other prospects for the yard, but I am bound to say that, in view of Ethiopia's economic position, export credits in respect of that country present certain difficulties. With my Department's support, however, British Shipbuilders has identified arrangements which could offer means of resolving the problems. British Shipbuilders is pursuing that matter urgently.

There are three options for St. Helena—an SD14, a small ship or continued use of the existing ship. I regret to inform the House that, contrary to the views that were put forward in our recent debate on shipbuilding, it is not just a question of another SD14 being ordered or not, or of any particular time scale. There are as yet unresolved options. My right hon. Friend the Minister for Overseas Development is considering these options.

I appreciate the urgent need for orders for Austin and Pickersgill, but of equal importance to St. Helena is a decision which will suit its requirements. Nevertheless, I shall continue to press the urgency of the matter upon my right hon. Friend.

The proposal to extend the shipbuilding redundancy payments scheme embodied in the Bill—

Mr. Millan

I asked about the Turkish order for Govan Shipbuilders. I hope that the Minister can give an assurance that, if necessary, the Government stand ready to achieve that order for Govan Shipbuilders.

Mr. Butcher

The short answer is yes.

The Bill should have the support of both sides of the House. It is, to use my hon. Friend's words, an innocuous Bill. In effect, it continues a policy launched by Opposition Members. I hope, therefore, that the Bill will receive the support of the House.

Question put and agreed to.

Bill accordingly read a Second time, and committed to a Standing Committee pursuant to Standing Order No. 42 (Committal of Bills).