HC Deb 28 April 1986 vol 96 cc681-712

Order for Second Reading read.

4.40 pm
The Minister of State, Department of Trade and Industry (Mr. Peter Morrison)

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

If I make a rather shorter speech than usual, it is to give right hon. and hon. Members in all parts of the House, particularly the Opposition, the opportunity to make their speeches, as the hon. Member for Liverpool, Walton (Mr. Heffer) pointed out. Furthermore, as I have already explained to the Opposition Front Bench spokesmen, I have a back problem, which means that standing for any length of time is somewhat complicated.

I apologise on behalf of my right hon. Friend the Secretary of State for Trade and Industry for his absence. He would very much have liked to be here. However, as the Opposition know, he arranged a considerable time ago to be in the United States this week to talk about trade relations. My right hon. Friend will be following closely the Hansard report of the debate, as he considers shipbuilding to be one of his prime areas of responsibility.

The Bill is technical, but in no sense do I believe it to be unimportant. Our shipbuilding industry has a very long history. Thanks to Mr. Graham Day and his successor, Mr. Hares, who takes over later in the week, there have been enormous strides towards efficiency. The work force of British Shipbuilders has played an important part in that process and it believes that those strides towards efficiency are necessary.

The corporation's current borrowing powers are up to a maximum of £1,200 million. The House will recall that that limit was set in the British Shipbuilders (Borrowing Powers) Act 1983. It is likely that that limit will be reached at some stage during the summer, although I cannot say precisely when. That is the reason for the Bill. Its purpose is to increase to £1,300 million, and, at a later stage, to £1,400 million, subject to the affirmative resolution procedure, the amount that British Shipbuilders may receive by way of Government support. It is not related to public dividend capital, which is dealt with through the normal Estimates procedures; nor does the borrowing limit apply to grants paid under the intervention fund. Therefore, it is both a technical and an important Bill. Its introduction demonstrates the Government's continued commitment to British Shipbuilders.

Since 1979, £1,449 million has been paid by direct aid to British Shipbuilders. That is made up of just over £1 billion by way of equity and loan, £235 million by way of intervention fund and £177 million by way of the redundancy payments scheme. By any stretch of the imagination, there is nothing mean about that. Indeed, some of my right hon. and hon. Friends may consider that it is over-generous. However, I believe that the Government have struck precisely the right balance.

As the House appreciates, support alone cannot guarantee a future for the shipbuilding industry. I suspect that there is no right hon. or hon. Member who does not realise that shipbuilding is a highly competitive, worldwide market and that at the best of times it is a market in which it is difficult to compete. I think that all right hon. and hon. Members will agree that today conditions are even worse than one dared to think that they would be as little as a year or so ago.

Why is this a complicated and difficult market in which to compete? It goes back to the first oil crisis of 1973. Since then capacity has far outstripped demand and restructuring has taken place. In western Europe there has been a reduction in capacity of about 50 per cent. In Japan, capacity has been reduced by 35 per cent. However, while that restructuring was taking place, China and Korea entered the market. Despite that, the market had ticked over until recently. In part that was due to what I describe as both visible and invisible subsidies, as a result of which there was a modicum of new orders. Recently, however, a dramatic change has taken place in the shipyards both of the far east and of Europe.

In Japan, for example, when Sanko—which has been, not perhaps completely single-handedly but to a major extent, responsible for orders for the Japanese shipbuilding industry—went out of business, Japanese yards had to lay off 10,000 workers, and there are calls for a further 20,000 job losses. In Korea there were no new orders in August and September of last year. Domestic orders have picked up in Korea since then, but it has shelved its plans for further expansion. There have been a few orders in Europe, but, even so, it seems that Sweden is reconciled to the closure of its nationalised industry, and Holland is cutting back on subsidies.

Despite the current depressed state of the market, the Government believe that British Shipbuilders must continue to concentrate on certain areas: cost effectiveness, competitiveness and having the right support at the right time. As all right hon. and hon. Members who take a close interest in this matter will appreciate, that is the main thrust of its corporate plan for 1985. After what I would describe as the successful completion of the sale of the warship yards, all these activities are concentrated in the merchant shipbuilding sector.

To maximise cost effectiveness, British Shipbuilders is doing certain things. It is concentrating on certain products, such as ferries, offshore supply vessels and diving supply vessels. Judging by its present work load, it is fair to say that that policy has been successful. It is securing better components at better prices. Thanks to its phase 5 pay and productivity agreement, it is adopting new building methods. That is a step in the right direction. It is also making appropriate capital investment. Since 1979, capital investment in the shipyards has been just under £330 million. It is investing in capital projects relating to CAD-CAM installations and, at a completely different end of the scale, upon the most up-to-date welding gear.

The corporation's order book is as follows. I am happy to say that there are ships to be finished in all of its yards. Govan has an order for a P and O ferry, which will take some time still to finish. Smith's Dock has three of the four Cuban ships still under construction, and Austin and Pickersgill has two advanced bulk carriers still under construction. Last Friday saw the naming by my right hon. Friend the Prime Minister of the Stena Seawell at Sunderland. Sunderland has a second diving support vessel on the stocks, as well as a very large crane barge for ITM. Ferguson-Ailsa has a number of small ships under construction, and Appledore has two dredgers on order. However, when this work runs out, British Shipbuilders will face a major problem.

Against a target in 1985–86 of 200,000 gross tonnes of new orders, British Shipbuilders secured only 23,000 tonnes. I do not believe that that was because of lack of support. It was simply because there were remarkably few orders to be won, especially towards the end of last year. The latest figures I have for the world market last year show an order book at the end of 1985 of just over 25 million gross tonnes. That is the lowest level for three years. More significantly, it is very nearly the lowest level since 1979.

To put the decline of the industry into context, it is worth while to remember that the peak order book in recent times, that of March 1974, stood at no fewer than 133 million gross tonnes. That is more than five times the level of orders that we now have.

Building ships more efficiently is the key to delivering them on time and to the owners' satisfaction. I have already referred to the fact that my right hon. Friend the Prime Minister named the Stena Seawell last Friday. The delivery of that highly complex vessel on time and in perfect condition speaks volumes for the dedication and effectiveness of the Sunderland management and work force. It is the best kind of advertisement that the industry could have, and it is worth more than any amount of Government support. I am sure that all right hon. and hon. Members will join in applauding that success.

Against this background of the corporation's own drive towards cost effectiveness lies the support that we are continuing to provide. In this financial year we have made provision for an external financing limit of £73 million for British Shipbuilders, covering payment of public dividend capital to meet the needs of the corporation and intervention support for individual orders.

But as important as the value of support is the effectiveness of the manner in which it is provided. Not included in the British Shipbuilders' figures is the home credit scheme, which matches the financial terms that the United Kingdom owner ordering merchant ships could obtain if he was going overseas. But, as the House will appreciate, the key production aid is intervention fund support to bridge the price gap between United Kingdom costs and foreign prices. The present rate is 20.5 per cent. of contract price, although the Commission, which approves aid regimes within the present fifth directive on shipbuilding, will allow some flexibility on a case-by-case basis.

We are also ready to consider other means of support case-by-case, as the need arises, although always within the international rules which have to be observed as a framework if any sense of order in this market is to be preserved. I have already mentioned the present Community regime. As the House knows, we are now embroiled in the discussions in Brussels over the content of the Community regime to follow the fifth directive; the new measure which will govern the provision of aid to shipbuilding in the Community from the beginning of 1987.

We have already had a valuable session of the Council of Industry Ministers, which was attended by my hon. Friend the Under-Secretary of State. He made clear both our belief that aid for the industry will remain essential for some time to come, and that we are determined that such regulations as are introduced should cover all aids, however given. As I have explained to the House, the United Kingdom aid regime is straightforward and transparent. It has to be said that those of some of our partners are much less so. In consequence, we have asked the Commission to ensure that it gets all shipbuilding aids in the Community on to the table and to make its recommendations for the next regime in the light of what is revealed by these inquiries. I am happy to report that the Commission is hard at work along those lines.

Mr. Frank Field (Birkenhead)

The Minister mentioned putting everything on the table, so is it possible to put on the table too the £37 million subsidy given to Harland and Wolff? Is the hon. Gentleman aware that when Northern Ireland's accounts were approved in the House, the Minister responsible gave us an assurance that none of that money would be used to win orders that could go to English or Scottish yards? When we ask questions, it is said that we cannot be told where that money goes because of commercial confidentiality. Is that not a topic that could well be considered by the National Audit Office?

Mr. Morrison

I know that the hon. Gentleman follows such matters closely and carefully, but I assure him that the Government looked carefully to ensure that the tenders from Harland and Wolff and from Swan Hunter were on a like-by-like basis. It would have been quite wrong and politically careless not to do that. But the hon. Gentleman will appreciate that the process took some time. There was the possibility of earlier decisions, but further checks were taken into account. I understand the disappointment felt about Swan Hunter, but no doubt the hon. Gentleman heard the statement last Thursday by my right hon. Friend the Secretary of State for Defence. Those matters were taken carefully and closely into account.

Mr. Frank Field

I was not specifically thinking of the order that was announced last week. No hon. Member can discover where that £37 million goes. As it is spent but we cannot find out on which orders it is spent, is that not a topic for the National Audit Office?

Mr. Morrison

I should be happy to look further at that point if the hon. Gentleman so wishes. However, I would not like to give any undertaking from the Dispatch Box. The hon. Gentleman will appreciate that Harland and Wolff does not fall within my ministerial responsibilities, but I am happy to look into the important point that he has raised.

As I said at the beginning of my speech, the Bill is very important. All those Opposition Members present and, indeed, those of my right hon. and hon. Friends who are present, have close connections with the shipbuilding industry. Their constituencies may be involved with that industry to the exclusion of all others, and I appreciate that this topic is important to them. I shall listen carefully to what they all have to say and will, with the leave of the House, reply to the debate.

I commend the Bill to the House. It represents a further strong indication of the support that the Government have already given British Shipbuilders over the years. That support has been very significant.

4.54 pm
Mr. John Smith (Monklands, East)

As usual, the Opposition will not oppose a Bill that gives British Shipbuilders extra borrowing powers. But this is the occasion for a very timely debate on the shipbuilding industry. It is clear to all who know about the industry that the merchant shipping side is approaching as serious a crisis as it has ever faced.

During the past few years the industry has shrunk, particularly in terms of manpower. Since 1979, we have lost 48,000 jobs in shipbuilding and ship repair. But even more important, a crisis is now imminent. The Minister read out the orders that are now with British merchant shipyards. But he failed to add that all of them are near completion. He did not mention any prospective orders. As far as I know, it is highly speculative whether any orders are in prospect. We face the awful truth that, as the year progresses, the time approaches when some of those yards will have no orders. If orders are not obtained very quickly, there will be a difficult gap to bridge if orders are subsequently obtained. I am sure that the Minister realises that a lot of preparatory work needs to be done before a ship is properly under construction.

Some commentators, including, I believe, the retiring chairman of British Shipbuilders, have said that the years between 1986 and 1990 would be the crisis years for shipbuilding. It is believed that it is possible to contemplate some rise in orders after then, because of the shipping industry's need for replacement orders. Whether or not that is true, the crunch has already arrived for British merchant shipbuilding. Capacity simply cannot be reduced further. If it is, it will fall below the minimum size necessary to retain a proper shipbuilding industry. There must be a minimum size to justify the design capability, the research and development effort and the substantial work force and management who are committed to the industry. If the industry contracts further, we shall cease to have an industry.

In 1986, shipbuilding in this country faces survival or extinction. Of course, the consequences of extinction are dramatic not just for the industry but for those areas of the country that are deeply dependent on it for their prosperity and employment. I need mention only Tyneside, Teesside, Wearside and Clyde, although there are more shipbuilding areas than that. However, those regions are particularly dependent on the industry, and it is unthinkable that ships should not be made on those principal rivers.

Other trades are dependent on the shipbuilding industry, ranging from those involved in the steel industry to those that produce fairly minor pieces of equipment. It has been calculated that there are at least three jobs outwith the shipbuilding and ship repair industries for every one job within them. Therefore, the consequences go much wider than just the shipbuilding areas, and affect many other parts of our manufacturing industry.

The tragedy for the industry is that a Conservative Government are in power at this time of crisis. It is now clear that the decision to privatise the naval shipyards was one of the most stupid decisions in the history of Government relationships with British shipbuilding. Just when the industry is at its most vulnerable, its most profitable part has been handed over to the private sector, leaving British Shipbuilders exposed.

The former chairman of British Shipbuilders, Sir Robert Atkinson, told us when privatisation was being considered that, if it took place, we would cease to have an integrated industry, and the Government would be taking away the very capability which had helped it to survive and which would enable it to survive again through the difficult years ahead.

The industry would have had sufficient problems without privatisation, but with privatisation and its stunning financial effect on British shipbuilders the industry has been forced into an unnecessary crisis. A handicap has been imposed upon it just when there is a world slump in orders and a catastrophic decline in the United Kingdom merchant fleet. The problem for us is not a fall in orders but a relative fall in the British share of the market. Only about 2 per cent. of the world's shipbuilding orders come to Britain. Taking all that into account, the privatisation of the naval shipyards must rank as one of the most stupid acts of Government for many years.

We say that the industry must survive. The Government's clear responsibility is to ensure that it does. The crisis is one of depth as well as of timing. Speed is necessary if there is to be a chance of survival. It is clear from recent days and months that the Government do not understand that the timing of orders is of tremendous importance to both naval and merchant shipbuilding. If the timing is wrong, unnecessary damage will be caused.

I shall suggest a number of measures which, in addition to those which are under way, the Government should undertake to help the industry survive the crisis. First, there must be a proper Government procurement policy. Orders are available from the public sector. They should be organised and brought forward so that they are in time for the British shipbuilding industry. I hope that never again will orders go abroad such as that from Pacific Nuclear Carriers for an important nuclear carrier ship. For a British public sector organisation to give an order to another country is intolerable. The Government should have stopped that. I hope that if that occurs again it will be stopped.

The Minister should co-ordinate and bring forward as many public sector orders as can be found. I hope that he will not say that it cannot be done, because it was done under a Labour Government. Indeed, my right hon. Friend the Member for Glasgow, Govan (Mr. Milian) was responsible on a number of occasions for intervening positively—for example, on British National Oil Corporation orders. The Government should make an internal effort to co-ordinate and organise orders as soon as possible. That would provide an important breathing space for our merchant yards.

One initiative should be pursued vigorously by the Department of Trade and Industry. It affects in particular the Sunderland and Govan yards. I refer to the proposal by British Shipbuilders for the fleet support king 20/20 vessel. That has been developed extensively within British Shipbuilders and involves a new type of fleet auxiliary vessel. It has possibilities for foreign navies, but it is crucial that orders come from the Royal Navy to give it credibility on the foreign market. I do not suggest that it is a substitute for the auxiliary oiler replenishment vessels, but it is complementary to them. It represents a new opportunity for the British merchant yards by supplying naval orders, particularly abroad.

Mr. Bob Clay (Sunderland, North)

And it is cheaper.

Mr. Smith

I have corresponded with the Secretary of State for Trade and Industry, who has passed the buck to the Ministry of Defence. Certainly my right hon. Friend the Member for Govan and my hon. Friend the Member for Sunderland, North (Mr. Clay) will be pursuing this matter with the Ministry of Defence and the Department of Trade and Industry. I hope that the Department of Trade and Industry will not shuffle off responsibility, but will fight for this important new initiative for British Shipbuilders.

Mr. Clay

My hon. Friend was kind enough to show me a letter from the Secretary of State for Trade and Industry about the FSK. Does he share my view that it appears that the Secretary of State does not even know the Ministry of Defence's position? He just says that it is a good project and that he hopes that the MOD will order it. He does not seem to be aware that several weeks ago his colleague in the Ministry of Defence said that the MOD did not intend to order it.

Mr. Smith

It is clear that the Secretary of State for Trade and Industry is not aware of the Ministry of Defence argument that the ship would have to be armed. The Department of Trade and Industry and the Ministry of Defence should sort the matter out, and decide what is required and what would be suitable for British Shipbuilders to build. I hope that they will bear in mind the enormous importance of putting in an order in view of the enormous export potential involved.

The Government must increase their support in various ways. I think in particular of the shipbuilding intervention fund. The Minister of State said that the Government are pursuing the matter within the EEC, but previously targets have been set but not achieved. I hope that that will not happen again.

When we enter negotiations to safeguard our national interest we are not helped by free market speeches inside and outside the four walls of the Community. If the Government continually argue a free market policy they have little credibility when they come to argue in favour of an interventionist policy in terms of our national interest within the EEC. It would be helpful if the Government abandoned their free market postures because it is crucial that we gain as much advantage as possible from the shipbuilding intervention fund.

In addition, I hope that the Government will examine the possibility of further United Kingdom support packages for the industry. Other Governments provide such packages and this Government should. I draw attention to one example. The report on European maritime transport policy published recently by the other place recommends that the British Government should re-examine the limit on loans. Currently an eight-year limit on loans applies to shipowners who buy vessels from British shipyards. That conforms with OECD guideline. It is well known and documented that other Community Governments give additional support. The report argues that there should be a 12-year loan capability. The Government cannot say that it is impossible to allow such a loan capability because other Governments with the same obligations allow it. That possibility must be examined urgently.

I hope that the Government will further examine the extension of credit packages. My hon. Friend the Member for Sunderland, North will, no doubt, tell us about his interview with the Prime Minister a few days ago in his constituency. If the Prime Minister is claiming that credit packages in Britain are as good as in other parts of the world, or that they can be made available, we want clarification as soon as possible. The Government should be putting their whole effort into finding ways of keeping the industry in existence.

There can be few occasions when the future of an entire industry becomes at stake over a short period. From time to time particular parts of a certain industry get into difficulty. They can be helped when they need to be helped, but I cannot think of a recent example of the whole of an industry facing a crisis of existence in a period of only a few months. The months of crisis are here now and the future of the industry will be decided in the next few months. That is why it is crucial that urgent action be taken by a Government determined on one policy objective—the survival of the industry. Without that the industry will face extinction with consequences which are too frightening to contemplate for the country's manufacturing potential, for certain areas and for a series of ancillary trades.

I am sorry to say that the Government's approach reveals that they do not understand the task or the seriousness of their responsibility. The Opposition have that awareness and we shall campaign with ceaseless vigour to ensure that the British shipbuilding industry survives for the future.

5.9 pm

Mr. Patrick Nicholls (Teignbridge)

We know that the purpose of the Bill is to increase from £1,200 million to £1,300 million the corporation's borrowing limit. We know that because my hon. Friend the Minister has told us so. I suppose that we could also discover the purpose by reading the Bill, but clause 1(1) runs to about 14 lines and contains a plethora of brackets. It is a feat to read that clause to oneself—out loud or in silence—and so ensure that the inflections, the brackets and finite verbs fall in the right place; but finally the subsection yields up its secrets. I think, in the end, I would have been able to find the answer without my hon. Friend telling me. I suspect that a bracket is missing from that subsection, but for the life of me I could not suggest where it should go. This is a drafting point—and perhaps as a lawyer it appeals to me—but that subsection is in a league of its own.

It has already been said—and it will no doubt be repeated—that this is a long-standing problem In fairness, the right hon. and learned Member for Monklands, East (Mr. Smith) did not suggest that it was anything but a long-standing problem. Some of the correspondence which I have received concerning the fate of the British merchant fleet suggests that it is an immediate problem. Correspondents argue that, because it is so immediate, it is the responsibility of the Government. From the right hon. and learned Gentleman's speech I detected a recognition of the fact that the problem goes back a great deal further and that it cannot be attributed to the Government. I certainly would not argue that, because it is not the responsibility of this Government, it is necessarily the responsibility of the previous Labour Government.

The lack of orders represents the problem of present overcapacity. Two years ago, the worldwide excess in shipping capacity reached 120 million DWT which represented an excess capacity of 30 per cent. in oil tankers, 22 per cent. in combined vessels, 20 per cent. in liners and 7 per cent. in container ships. That represented—no pun intended—the high-water mark. That situation has been partly ameliorated by the scrapping of capacity, but there is still an overcapacity of between 40 and 50 per cent. I agree with the right hon. and learned Gentleman that the solution to overcapacity will not emerge until the 1990s.

The problem facing the shipbuilding industry was recognised as long ago as 1975 by Mr. Eric Varley, the then Secretary of State for Industry, when he said:

The prospects for shipyards throughout the world are bleaker than perhaps at any time during the past 20 years. The demand for new merchant ships, especially oil tankers, has slumped to almost nothing. Existing orders are currently being cancelled."—[Official Report, 2 December 1975; Vol. 901, c. 1460.] In 1978, the right hon. Member for Manchester, Gorton (Mr. Kaufman), in his capacity as Minister of State, Department of Industry, when introducing the shipbuilding redundancy payments scheme, said:

shipbuilding industries all over the world are facing the inevitability of contraction and this country cannot isolate itself from that trend."—[Official Report, 16 January 1978; Vol. 942, c. 175.] The Government and the previous Labour Government faced the consequences of a contraction of world trade. What can be done about that? My hon. Friend the Minister said what the Government will do to meet that threat. There must be two broad approaches in Government policy. One must try to stem the losses and the other maximise the potential. The Government committed themselves to returning to the private sector the warship building yards in an attempt to stem some of the losses. Since 1979 the Government have invested £1,449 million. One may argue whether that is too much or too little.

Some of the correspondence I have received has stressed that this country is worse off than other countries. Some argue that, therefore, the contraction in the merchant shipping industry is faced only by this country. If our performance was substantially worse than that of our competitors, it would be an accusation with which the Government would have to cope. However, when one studies the comparative state of affairs in the competitors' yards, it places our own position in perspective.

In 1984–85, British Shipbuilders won 1.7 per cent. of new orders compared with 1.8 per cent. in 1980–81. Japan's performance is often used to criticise ours, but its share of the world market fell from 54 per cent. in 1983–84 to 38 per cent. in 1984–85. Exports from Japanese shipyards have slumped to their lowest level since 1978, and there is no improvement in sight. The shipbuilding division of the large Hitachi Zozen combine was reported to be working at barely 60 per cent. of capacity at its six yards in March 1984. This month, the major Japanese shipbuilders reached an agreement to cut capacity by 20 per cent. during the next two years.

In 1975, Swedish yards employed 28,000 people, but by 1983 the figure was less than 8,000. The Kockums yard underwent severe restructuring, and in 1982 it turned consistent loss-making into a small profit.

Norway has only two ships of any real size on its order books and its yards gained little significant work during the year.

In West Germany, the new orders received in 1983 dropped from 4.4 per cent. to 2.4 per cent. In March 1984, the Financial Times reported that HDW had been forced to close its merchant shipbuilding yard in Hamburg and A G Weser, part of the Krupp group, had closed its large yard in Bremen, with the loss of 2,000 jobs.

France, however, after years of declining orders, has achieved success, but only with a massive injection of state aid. I am not trying to be contentious, but I think that most people would agree that the famous Polish shipping contract of the 1970s was not especially helpful. It was an example of getting business, provided that one was prepared to pay for it. France might have begun to go down a path which we have already been down.

The Government, through subsidies, have ploughed almost £1.5 billion into the shipbuilding industry. One may argue whether that is the right figure. I do not believe that the Minister would claim to be able to justify that figure to the nearest pound, but it is clear that an industry is not benefited simply by pouring money into it in the face of logic, the facts and world trends. It is no use pouring in money in an undisciplined way simply because one wants to protect the industry. If such a method saved industry, any Government would use it, but it does not. The Government are in the unenviable position of having to use a Solomon's touch. They must pluck out of thin air a sum which recognises what ought to be done and where the British industry stands in the world pattern.

Every week, I have to talk to my constituents about so-called cuts and the money that the Government have ploughed into a range of public services and undertakings—there is a substantial port in my area—but I have to tell them that there is a limit to how much can be ploughed in. Bearing in mind the world pattern and how we are faring, the money that the Government have put in is about right, although even my hon. Friend would not justify it to the last pound.

The Government's policy and financial input can be commended. The Bill is consistent with those elements. I understand that there will probably not be a Division. If we were pressed to a Division, I should have no trouble in supporting the Bill.

5.21 pm
Mr. Bruce Millan (Glasgow, Govan)

I was not sure what the hon. Member for Teignbridge (Mr. Nicholls) was arguing except, perhaps, for the closure of the British merchant shipbuilding industry. As for Government expenditure and subsidy, I did not hear any of the hon. Gentleman's colleagues recommending earlier the closure of agriculture, which legitimately receives large sums of public money.

I am glad that we have the opportunity to discuss merchant shipbuilding, as much public attention has legitimately been given to the problems of naval shipyards and the auxiliary oiler replenishment vessel recently. As my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) said, the present crisis in British merchant shipbuilding could be terminal. We now have a rump of what the industry used to be. British Shipbuilders employs only about 10,000 people in merchant shipbuilding and, unless firm orders are obtained soon, about 4,000 of them will be made redundant by the end of the year and the rest will go during 1987. That is the extent of the crisis.

The Minister mentioned the 23,000 tonnes of orders that have been obtained in the past financial year. That should be compared to the 200,000 tonnes target. It is insignificant in terms of keeping the industry going. The lack of orders at my Govan yard is critical. Of course there is a world problem. Nobody is disputing that or suggesting that we can isolate ourselves, but some hon. Members tend to speak as though no orders are being placed. That is not so—l3 million tonnes of shipping was ordered in 1985, of which we got 20,000 tonnes.

In 1984, rather more than 15 million tonnes was ordered and in 1983 19 million tonnes was ordered. The reduction is significant, but a substantial tonnage was available in 1985. Not all of it was available for tender by British Shipbuilders, however, for a variety of reasons, including the fact that many countries protect their industries. That makes competitive bidding by British Shipbuilders or other Western companies impossible.

The rundown of the Japanese and South Korean industries has been mentioned, but Japan still has an order book of 9.7 million tonnes as compared with Britain's 350,000, all of which is under construction and will run out in the next year or 18 months. South Korea has 4.7 million tonnes of orders. European industries might be more analogous to ours, but West Germany, Finland, Denmark, Italy and France all have fuller order books than us.

Describing the problem does not solve it, but it shows that we should not give up and believe that our industry must go into liquidation. There are orders about, but we have not got anything like enough of them. If the industry is to survive, we must exert more pressure than have any previous Government to ensure that such public sector ordering as there is is placed with British yards.

It is scandalous that any public sector organisation should place an order abroad. There was a danger a few years ago of a Central Electricity Generating Board order for three colliers going abroad. Only political pressure brought it back to the United Kingdom. It was placed with Govan Shipbuilders, which delivered all on time. Indeed, at least one collier was delivered ahead of the delivery date.

I noted what the Minister said about the intervention fund. It always seems absurd to go through the rigmarole of setting a limit to the fund and then not using the money because no orders come along. It would be much cheaper to provide some intervention fund assistance to obtain an order than to pay for a yard's rundown or for redundancy payments because orders are not obtained, to say nothing of the human, industrial and economic considerations.

Mr. Peter Morrison

Perhaps I can help the right hon. Gentleman. I said earlier that there is some flexibility in the intervention fund. British Shipbuilders has not approached us about flexibility for an order, but we are prepared to examine each case as it comes.

Mr. Milian

That is extremely helpful. Perhaps the Minister can also be helpful concerning credit terms. Like my right hon. and learned Friend the Member for Monklands, East, I noted what the Prime Minister said at a meeting in Newcastle last Friday.

I would like the Minister to say that the Government will guarantee that no orders will be lost by British Shipbuilders simply because of inadequate credit terms, and that if they can compete with international competitors in terms of price—with intervention fund assistance where necessary—delivery dates and technical specifications, they will not lose orders because of inadequate credit terms. If such a statement could be made, it would be very helpful in the context of this debate and in the context of the Govan yard, which is interested in the attempts that British Shipbuilders is making to obtain container ship orders from China and to obtain further ferry orders to add to the one that it is completing now.

I am not privy to those negotiations, nor am I presuming to say that the Government are or are not being helpful. I am making no criticism of or, for that matter, conferring praise on the Government. I should like the Minister to say that he recognises the importance of the orders, not only for the Govan yard but for merchant shipbuilding as a whole. He should give an assurance that British shipyards will not lose out on these and other orders because of a lack of adequate credit terms.

I mention the FSK 20/20 fleet support ship against the background of Govan shipyard. Its last order is the P and O ferry, which is due for launch in the autumn and for delivery in March 1987. After that, there in nothing on the order book. It is a tribute not only to the management but to the men at the yard that they have pledged themselves to meet the delivery dates although they are working themselves out of a job. I am sure that those pledges will be fulfilled. We desperately need another order, and although the FSK would not come within a time scale that would solve the immediate problem, it would be a considerable help to Govan shipbuilders and others.

Partly for reasons of time, and partly because of the merits of the matter, I do not wish to discuss the decision made last week between Harland and Wolff and Swan Hunter. Nor do I wish to suggest that the FSK is a straight substitute for the AOR as a fleet support vessel. It is not. One order has been given for the AOR, and the second will go to Swan Hunter if proper terms can be negotiated. I am looking beyond that. It is not clear to me, nor has it been made clear in the defence White Paper or in anything that the Secretary of State for Defence has said, why subsequent orders for fleet support vessels should have the many weapons and other defence equipment that are included in the AOR. I do not understand the defence justification, apart from anything else, for the Ministry's line. The figure quoted in newspapers for the AOR is £130 million. The FSK, which would do the job more than adequately without the weapons system involved, is being quoted by British Shipbuilders at £65 million to £75 million, which is almost half the price of the AOR.

I do not wish to compete, certainly not with my hon. Friends who are interested in the AOR, but there is a case for the FSK and I object to the fact that that case is not being properly considered by the Ministry of Defence. I hope that the Department of Trade and Industry will ensure that the case is properly considered by the Ministry of Defence. Unless it is, the chances of obtaining orders from foreign navies will be considerably reduced. This is an opportunity for the Government directly to underwrite the British merchant shipbuilding industry. I hope that they will take that opportunity and press the Ministry of Defence, as some Labour Members have already done, to consider positively the FSK 20/20. If they cannot give an undertaking to order the ship within the next year or two, will they at least express a genuine interest in it and ensure that it is considered as an alternative for the replacement of the Royal Naval Auxiliary fleet, which is aging and must be replaced in any case?

5.34 pm
Mr. Anthony Nelson (Chichester)

The right hon. Member for Glasgow, Govan (Mr. Milian) spoke with considerable experience and a strong constituency interest which is respected by hon. Members on both sides of the House. He has spoken previously about the need for support for the shipbuilding industry as part of a wider industrial strategy that he propounds, and he has always spoken with moderation and persuasion. At least some of his remarks will be taken on board by my hon. Friends at the Department of Trade and Industry. I could not agree with every aspect, but on finance, on which I hope to say a word in a moment, I share many of his sentiments.

Whether we represent shipbuilding constituencies or not, we all have a national interest in the survival and prosperity of this most important industry. During the past decade or more, there has been a welcome bipartisan approach towards investment in the shipbuilding industry, reflected largely by the significant investment of public dividend capital and in debt finance by successive Governments in what is now called British Shipbuilders and in the many companies that comprised that nationalised concern.

About £1 billion of public dividend capital has been invested by the Government, forming part of the £1.5 billion of total capital support, yet sadly this was during a period when British Shipbuilders lost an accumulated sum of about £650 million. It appears that the provision of capital, whether to write off losses or through "soft" state funding by public dividend capital, has not been sufficient to halt the decline of this great industry or to fit it to take advantage of future opportunities. I wish to suggest modestly one or two ways in which we should help the industry to alleviate some of its problems.

Despite the despondent tone of much of the debate so far, there is reason to believe, nationally and internationally, that the shipbuilding industry can perhaps look forward to rather better times. None of us has an interest in trying to talk down the prospects of the industry or talk down the prospects for the market, unless there are demonstrable and immediately viable means of dissuading people. There are better prospects for world shipbuilding—first, because of the fall in the price of oil, which will be a circular trend. Although it may not maintain its low price, it will probably trade at lower real prices than it has historically.

This will have two major advantages. First, it should increase the traffic of oil internationally, and oil comprises a significant part of maritime trade; secondly, oil as a constituent cost of transport will be significantly reduced. When we recall that a major reason for the decline in shipping internationally and, therefore, to a large extent, in shipbuilding, was the rapid and large increase in the price of oil, it is not unreasonable to expect that a converse movement might engender some revival.

Secondly, there are better prospects because the fall in interest costs nationally and internationally should create not only a more viable world economy in which transport, including ships, may be ordered, but greater economic activity in those countries and lower costs of financing which will make new orders more viable. I believe—although it is more speculation than prophesy—that the price of commodities internationally, which is exceedingly low, will increase. I do not know whether it will move up rapidly, but the demand for international commodities of all sorts—minerals and foodstuffs—will rise. These form a significant part of the cargo markets and might be expected to bring about a revival in "world scale" charter rates and, after a revival in the charter of older shipping, a revival in demand for new cargo and general vessels.

As many hon. Members have said, there has been a fall in Europe in capacity for shipbuilding and there has also been a fall in Japan and elsewhere. This fall in capacity, combined with the much more streamlined and technologically efficient shipyards that are currently competing against each other, will provide a firmer basis on which to attract new orders. When one looks at some of the major customers for ships and sees the extent to which new build forms a large proportion of their fleets, one can say with a little confidence that there are better prospects for the future.

One of the largest shipping companies in the world is the Worldwide Shipping Company which is registered in Hong Kong. The majority of its shipping fleet is less than five years old. The fleet owned by that company is bigger than the whole of the British merchant shipping fleet. If one takes that into account and assesses the extent to which such companies will look to international shipbuilders to replace their fleets, it is clear that there will be a demand for new build. Our aim must be to go out with renewed vigour and perhaps more imagination, with Government and industry working hand in hand more closely than hitherto to try to get a share of that cake.

With great modesty, I should like to suggest five ways in which we might move forward. I hope they will commend themselves to my hon. Friend and to hon. Members. The first and I am sure the single most important factor that will assist the revival, continuity and survival of the industry is ship finance. That is the key. Whatever we may say about labour practices, quality, dates of delivery, heritage and so on—important as they all are—when one comes down to it, it is the cost and the extent to which purchasers, including Governments, are accountable to others for the purchases they make that are important. Customers should be able to undertake purchases at the lowest competitive levels of finance.

The lower interest rates currently prevailing provide a welcome opportunity. On previous occasions I have argued for them to be lowered even more and for the Government, as far as they can, to influence the rates in this direction. That is the single most important factor that will create a more competitive opportunity for British Shipbuilders. We should look more pragmatically and imaginatively at the way in which British Shipbuilders tenders for orders. It should consider the extent to which it is allowed, within the rules of the game, to front-end load the interest costs within the price of a ship as opposed to the extent to which it costs the ship quite separately from the interest. In Britain, tendering is done honourably and correctly, but some other countries are far more inclined to offer an exceedingly low rate of interest, whereas the real interest cost is to a large extent absorbed within the capital price that is tendered for the ship.

The home purchase scheme and preferential interest rates through ship mortgage finance have been helpful, as has the aid and trade provision, in providing low-cost ship finance. Although it is on the fringes of this matter, we should look imaginatively at barter deals. Such deals, especially given the movement of oil in recent years, provide a tripartite opportunity—as do all barter deals between countries—to British Shipbuilders to get orders at viable prices, but the liability against a fall in the value of the commodities bartered is shared by others.

It is essential that we have competitive and more stable rates of exchange that will enable us to tender internationally. As a small part of such a policy we should be members of the European monetary system. We should be able to tender in foreign currencies with a guarantee by the Britsh Government that any variation from the exchange rate basis on which a tender is made will be met by Government. I should like my hon. Friend to explore ways in which this can be done within GATT and other rules.

Public sector orders, about which something has been said, should be far more related in future than they have been in the past to the export potential of the ships. The warship sector is a prime example. Under successive Governments, the types of ship ordered by the Royal Navy have not been suitable for export markets. In the merchant sector, the success some years ago of the SD14 as an off-the-shelf ship is an example of the way in which we should be buying ships in the public sector that have export potential.

Although my hon. Friend said that British Shipbuilders is specialising much more than it has done in the past, there are dangers in specialising in the offshore oil industry; those dangers arise because of the reasons I enunciated earlier. Although British Shipbuilders should concentrate in a specialised sector of the market, in future it should also emphasise its capability in other technological sectors not involving energy or offshore exploration.

The marketing policy of British Shipbuilders should be much more imaginative than it has been in the past. I should like to quote one example, and here I declare an interest. One of the companies that I advise is seeking to assist a middle eastern country in the development of its fisheries industry. To that end I contacted Ferguson-Ailsa to obtain information about its capability in that field. The company sent a brochure about the ships it builds. I had no further communication from the company about the inquiry, but I have been bombarded for months by Nordic interests which have this very day sent a delegation to the countries concerned to explore the opportunities. The Nordic export project fund is state and industry-financed in Scandinavia and is out to get business not only for its shipbuilding industry but for its engineering and manufacturing industries. It acts as a vanguard for many export companies.

The Department of Trade and Industry and British Shipbuilders should renew their efforts to follow up inquiries for projects abroad and inquiries about ways in which they can work with others in turnkey projects to assist in the provision of vessels. In these and in other ways, but most of all in the provision of preferential finance, much can be done to ensure that British Shipbuilders takes better advantage of any future upturn than it has done in the past. To the extent that the Bill provides it with the wherewithal, I welcome this primary legislation and the terms in which my hon. Friend moved the Second Reading.

5.49 pm
Mr. Michael Meadowcroft (Leeds, West)

Like the hon. Member for Chichester (Mr. Nelson), I do not represent a shipbuilding constituency but I share his belief that the progress and development of shipbuilding is important to the whole of Britain. I listened with interest to his rather optimistic views about the potential for shipbuilding, but in his speech I failed to detect a sense of the urgency of the matter. Unless there is some sign that his optimism is to be quickly justified, there will not be the capacity to pick up the orders when they are available.

Like other hon. Members, I have no wish to oppose the increased capital finance that the Bill will make available. I should like to encourage a greater ability to invest in other spheres of service and industry where it is within the Government's power to do so. It seems a shame that we look at minor details and minor areas rather than at the whole area of Government spending. Set against the background of decisions in shipbuilding, which at best puzzle and at worst embitter those involved, it is important to appreciate the problems of people who are struggling to survive in the industry.

The borrowing powers for British Shipbuilders need to be increased in the context of fair treatment rather than in the context of backing up the myth that there is free and open competition in the industry. If warship operations are rather more profitable than merchant shipbuilding, it is important to realise that it is essentially orders from Governments that provide that extra profit, and there is no point in trying to represent that as fair and free private competition. It would have been far more acceptable to me and my hon. Friends if at the same time as introducing the Bill to increase the borrowing powers of British Shipbuilders the Minister had been able to announce an earlier start date for the next AOR vessel and a definite offer to Swan Hunter. Even more acceptable would have been an announcement that an order for a type 23 frigate was to be placed with Swan Hunter.

Mr. Nicholas Brown (Newcastle upon Tyne, East)

The hon. Gentleman has referred to the AOR vessel, which, strictly speaking, goes outside the bounds of the Bill. However, will he explain what Liberal party policy is on the issue?

Mr. Meadowcroft

It was made clear last week by the Liberal spokesman that the order for the next AOR vessel should be placed on Tyneside, and that the order should be accelerated.

I do not know whether this is associated with lack of capital, but it appears that British Shipbuilders has got rid of its computing capacity by passing it over to Hoskins, which has declared redundancies. Some of those who have been made redundant will not have the rights that would have accrued to them if they had stayed with British Shipbuilders. This might be a small matter, but it is important to those who are involved. The capacity to maintain cash flow should be examined.

I hope that the Minister will dispel the fear that increased capital capacity is being made available so that certain sections of the shipbuilding industry can be fattened up for privatisation. Against the backround of fairly general acceptance of what the Bill seeks to do, I hope that the Minister will give the House an assurance that investment is not taking place with a view to selling off sectors of the industry in future.

5.53 pm
Mr. Michael Fallon (Darlington)

The presence in the Chamber of five Members from the north-east bears witness to the importance of shipbuilding for Tyneside, Teesside and Wearside. There is no better illustration of the Government's industrial policy than the Bill. It is modest in size but it will be huge in cost. The Bill is a good example of the Government's pragmatism and of the dogmatic empiricism which seems to envelop the Department of Trade and Industry these days.

Ministerial support is to be extended again and Exchequer subsidy is to be increased. When the Bill is fully implemented, the borrowing limit of British Shipbuilders will have been raised five times in four years during this Parliament. The 1979 and 1981 measures raised the borrowing limit five times in the four years between 1979 and 1983. The Government started with a borrowing limit of about £200 million and we are now approaching a borrowing limit of £1,400 million. As my hon. Friend the Minister has said, progress has been made. British Shipbuilders has been streamlined and its management continues to be improved to stem the huge financial losses that BS suffered in the late 1970s and early 1980s and belatedly to improve productivity and working practices, which require improvement throughout the industry.

Since the last major debate on a Bill of this sort, which took place in November 1984, and in which I was fortunate enough to participate, streamlining has taken place. Warship and other yards have gone, including Brooke Marine, Yarrow, Vosper Thornycroft, Hall Russell, Vickers and Swan Hunter. I believe that British Shipbuilders is in better shape now than it was. Parts of it have been released to the private sector and the losses involved in running the corporation have been reduced. It is to the credit of the Government that that has been achieved against a grim and deteriorating international background. It is to the credit also of the retiring chairman of British Shipbuilders, Graham Day. We should put on record the debt that the industry and the Government owe to Graham Day for the work that he has done.

I hope that my hon. Friend the Minister will agree that we are a long way from the heady days of 1979 when his predecessor's predecessor was quoted as saying: We are prepared to put public funds, for a two-year period, behind the industry's own efforts to achieve viability."—[Official Report, 23 July 1979; Vol. 971, c. 43.] We are even a long way from July 1983, when my hon. Friend's predecessor told the House:

We cannot afford to go on subsidising shipbuilding with these losses."—[Official Report, 28 July; Vol. 46, c. 1356.] When my hon. Friend replies, I hope that the will give us a clearer glimpse of the medium and longer-term prospects than he was able to do in his necessarily short speech on moving the Second Reading. The taxpayer at least would like to know whether the end of these losses is in sight.

It would be wrong not to say something about last week's announcement about the AOR order, which is relevant to the Bill. My hon. Friend the Minister will know that the Government's decision, sensible as it appeared in London, was disappointing to those on Tyneside. However, there are lessons that Tyneside can learn from the decision. It must recognise that it must be preferable when it comes to price and design. If the tender from Harland and Wolff was as competitive as it was made out to be, a couple of questions at least deserve to be answered. Is warship procurement based on the old principle of Buggins' turn? Will the various Departments that are involved in procurement policy genuinely evaluate on a competitive basis the bids that they receive?

Secondly, what is the implication for a yard such as Harland and Wolff and the other yards that are covered by the Bill that still receive public funds? I asked last week whether, if the bid was as competitive as it was made out to be, my hon. Friend the Minister had any plans to privatise Harland and Wolff. I did not get an answer to that question, nor did I receive an answer to a question which I put before Easter, in which I observed that the subsidy for industry and employment in Northern Ireland is about 404 per cent. higher per head than that for England. I think that we deserve answers to these questions.

The Government can be accused of many things, and my hon. Friend the Minister may or may not have been right in his forecasts and his description of the state of the industry. He may well be open to criticism from Opposition Members about the pace and evenness of the privatisation programme. In this debate, however, he cannot be accused of a failure to support British Shipbuilders. A total of £1.5 billion has been committed since 1979. That is a massive investment by the long-suffering taxpayer. It is no fault of the Government that it is not yet clear exactly how much of a return we are likely to see on it.

5.58 pm
Mr. Ted Garrett (Wallsend)

It is my misfortune in life always to speak in debates on the problems of industry. I look forward to the day when I can speak about industrial and commercial problems with a success story behind us. During the years that I have represented my constituency I have had to talk about decline in the coal, machine tool, steel, fishing and civil engineering industries.

I am by nature an optimist but I am only now starting to recover from the bitter disappointment of Swan Hunter not obtaining the AOR contract, which was awarded to Harland and Wolff. Despite all the words that have been uttered and all the words that have been put into print, the people of Tyneside still feel a sense of bitter resentment. They are still unconvinced that the decision was not political because they have not had any figures to convince them otherwise that the order was gained by Harland and Wolff on a purely commercial basis. I should like the Minister for Trade to give us the figures to show the true realisation of the price difference. I doubt whether the independent accountants had the time to go into the subsidy question or to produce the accurate figures that are alleged to have been the decisive factor.

My memory of shipbuilding goes back many years. Even when I was a young man in the union, I was dealing with shipbuilding matters. In the Aircraft and Shipbuilding Industries Act 1977, some of us from the trade union side rather naively thought that we were doing Harland and Wolff a favour by wanting to incorporate it under the British shipbuilding flag. We were politely told by the then Government that Harland and Wolff would be better left out of the Act because it would receive higher grants and allowances. Later on, in some quiet manner, Harland and Wolff came under the Act, and so could receive subsidies.

Harland and Wolff has two forms of subsidy. I deny any bias when I say that the managing director of Harland and Wolff, whom I consider to be an astute man, a good shipbuilder and a man respected in British Shipbuilders, has put a deal together in which he has blended both the subsidies to get the correct figure. He will deny this, but underneath it all there remains the argument, given to me by senior management and independent people not employed in the shipbuilding industry, that it was physically impossible for the alleged £5 million difference to be on a strict commercial basis.

I congratulate my hon. Friends and Conservative Members on the way in which they have fought for Swan Hunter. It was a long and bitter campaign. Oddly enough, I also wish to congratulate the Department of Trade and Industry. It was a slow starter in seeing the nature of the problem, but when it had grasped it, it fought for its corner, although it could not win. The odds were against it in Cabinet, in Cabinet Committees and in ministerial committees. It was against the Minister of Defence, the Secretary of State for Scotland and, some would say, the Prime Minister. I have my doubts about that. I think that on this occasion she was in a minority. That is purely my instinct. I am not privy to her inner thoughts, and I doubt whether I ever shall be. However, to be fair, she listened carefully and intently to my hon. Friend the Member for Newcastle upon Tyne, East (Mr. Brown) and me. I am fully convinced that she did not understand the full nature of the problem until that meeting, but she carried out some rethinking of policy after it.

We cannot carry on being bitter and negative about what has happened. As has already been said, we must do something even at this black moment for British Shipbuilders. I do not believe that the industry will disappear. I do not think that that is the Government's will. However, I wish that some more initiative and imagination were shown. I am not blaming only the Government—past Governments have been responsible for the lack of the imagination that this country, as a maritime nation, should be adopting. We let passenger liner business go out at the time when the signs were that passenger liner business was increasing. It is now a booming business, but we are out of the industry. We should have a more strategic plan for our defence programme. It cannot go on in stops and starts and booms and slumps. If we have a truly national defence programme, orders should balance out better.

I still believe in the British shipbuilding industry and I believe that we can remain a maritime nation, but the imagination must come from a variety of sources. It must come from confidence in the industry and in the shipowners, and, above all, from the confidence of this place. It is here in the House of Commons that such confidence should start, and it must start now.

6.5 pm

Mr. Bob Clay (Sunderland, North)

One of the extraordinary things about this debate is that a similar debate may not be held next year, as many hon. Members have already said. We are facing the possibility of the end of merchant shipbuilding in this country by the end of this year or early next year. The Minister was remarkably complacent about that. I bitterly resent one or two, but not all, of the Conservative speeches about the Government pouring money into British shipbuilding. Let me put the record straight, using the same calculations as those used by the Minister about aggregating public money upwards since 1979. He talked about £1,449 million going to British shipbuilding. However, Ministry of Agriculture subsidies for the farming industry are at £5,538 million. Until the Government take account of that, we should not hear anything about over-generosity towards shipbuilding. The Government have to decide whether they want a British shipbuilding industry.

The Government have orders within their gift. Ii was amazing to hear the Prime Minister explain to me and to trade union colleagues on Friday morning that the irradiated fuel vessel order had gone to Japan because much of the trade that will be carried by the vessel is Japanese—in my view, that is Japan dumping its waste on this country, but nevertheless orders are orders. It seems extraordinary that the Japanese Government can not only oblige its shipowners to buy Japanese but can oblige British shipowners to buy Japanese if they want to trade with Japan. If the Government took a lesson out of the Japanese book, we should not be discussing these problems tonight.

My right hon. Friend the Member for Glasgow, Govan (Mr. Milian) has already spoken about the FSK20/20. There was a surprising lack of understanding, which is now on the record, between the Department of Trade and Industry and the Ministry of Defence. It is clear that British Shipbuilders and the Admiralty had some misunderstanding about the vessel. It is incredible that British Shipbuilders was allowed to spend £250,000 on research and development and that people from the Admiralty went in and out talking about fine detail, only for the Government to say that they did not want the ship.

It is extraordinary how the Department of Trade and Industry does not seem to have impressed on the Ministry of Defence the significant effect on export orders and other factors that the development of this ship could have. The new corporate plan for British Shipbuilders saw the FSK as something central, and it will now have to be rewritten. It is tragic that the Department of Trade and Industry did not explain long ago to the Ministry of Defence the significance of the ship.

The Government should now do something about soft credit. Neither I nor my colleagues who were with me on Friday morning have any doubt that the Prime Minister said that the Government had looked at this and would take a different attitude. I have no doubt that she said specifically that, with the exception of Japan, from now on, orders would not be lost to this country because of inadequate credit arrangements. The words "soft loans" and other such terms were used.

It is no good the Government saying that that is not a change of policy. One can point to specific orders from Ethiopia, Yugoslavia and other countries which have been lost by British Shipbuilders during the past couple of years simply because of the credit package. The intervention fund is important, but we know that even if the total base price is lower, if another country offers better credit facilities, such as a moratorium on payments, lower interest rates, or longer repayment periods, Third world countries in particular will place their orders with it. We have lost orders because of that.

If the Government would do what the Prime Minister clearly undertook to do on Friday morning, with the exception of Japan, which is to be prepared to offer credit packages to undercut all competition, it would be possible to place orders in British yards. It should also be possible to force British shipowners to place orders with British yards. We hear a great deal of talk about the world recession, but if all the orders placed by British shipowners last year had been placed in British shipyards, they would have more than filled the capacity of British yards, despite the world recession.

I should like the Minister when he replies to answer my question about intervention fund money. In an intervention in the speech of my right hon. Friend the Member for Glasgow, Govan (Mr. Millan), he said that so far British Shipbuilders has not asked for any special arrangements. I have heard that before, and if it is the case, what is he doing about it? It seems incredible that we have been losing orders because of finance, yet he says that British Shipbuilders has never asked the Government to apply special arrangements. We should not have been praising Graham Day tonight, but damning the man for the butcher that he was. If he or his successor are so incompetent that they have never knocked on the door of special arrangements at the Department of Trade and Industry, it is they who should have been sacked long ago, instead of the thousands in the industry who have been dismissed. Why have they not considered the special arrangements that the Government offer?

I know that people are worried about many areas, but I make no apology for spelling out to the Government the wider context. British Shipbuilders provides 3,100 jobs in my constituency in Sunderland. No one disputes that every job in the industry supports three outside it. Twelve thousand jobs in the area are already at stake. Male unemployment is already running at 45 per cent., 50 per cent. and 55 per cent. in large areas around the river. The loss of those jobs, even on the Government's calculations, which are a fiddle, would cost the Government £72 million a year. That is the cost to the Government in Sunderland alone by the closure of Sunderland Shipbuilders and Austin and Pickersgill. That does not include the human cost of misery and despair, and the decay of the town.

Little time remains, and orders must be placed in both yards within the next few weeks. When the Prime Minister named the Stena Seawell on Friday, she praised the management and the work force. She said that the whole of Britain could be proud of the achievement in Sunderland, and what a marvellous yard it was. In the past she said the same about the Austin and Pickersgill yard. We shall remember those words, and expect that if she takes time to come to the north-east and praise the yards, her next step will be to find orders for them so that they will not close by the end of this year.

6.14 pm
Mr. Don Dixon (Jarrow)

I remind my hon. Friend the Member for Sunderland, North (Mr. Clay) that the Prime Minister has on a number of occasions praised the National Health Service, yet we all know what she has done to it. The explanatory and financial memorandum states: The Bill will have no effect on public service manpower. That is because there is little public sector manpower left in the shipbuilding industry. When the shipbuilding industry was nationalised in 1977, there were almost 83,000 employees, but this year there are fewer than 10,000. Therefore, I understand why that was stated.

The Minister said that British Shipbuilders had received £235 million in intervention funding and £177 million for redundancies. I assume that most of the other money that it has received has been invested in the warship building yards, which have been sold to the private sector.

I am sorry that the hon. Member for Darlington (Mr. Fallon) has left the Chamber. In a previous debate he referred to Redheads shipyard, which is in the constituency of my hon. Friend the Member for South Shields (Dr. Clark). He stated: Redheads in particular is more than simply a commercial success. I hope that all hon. Members would wish it to be a commercial success in a hostile ship repair environment. It is also a shining example to the rest of the industry, not simply the repair industry, of the much more flexible approach that is required in working practices, entrepreneurship and by going out across the continent of Europe to market one's product."—[Official Report, 27 November 1984; Vol. 68, c. 862.] Redheads ship repairers, in which many workers invested their redundancy pay, is now bankrupt. Those workers have lost both their redundancy pay and their jobs. That shows the effect of privatisation.

Dr. David Clark (South Shields)

The House will recollect that on many occasions I was attacked across the Chamber for advising those workers not to put their hard-earned money into that foolhardy venture. My hon. Friend will recollect that those men were encouraged actively to do that by the Conservative party, the hon. Member for Darlington (Mr. Fallon), and, indeed, the then Minister of State, Department of Trade and Industry the hon. Member for Kingston-upon-Thames (Mr. Lamont), who opened the yard. Does my hon. Friend agree that, as the matter is still sub judice, there should be a committee of inquiry into the events surrounding the establishment and collapse of that company?

Mr. Dixon

I certainly agree with my hon. Friend. Many of those men are particularly worried by the lack of information they received about the company going bankrupt.

We shall not oppose the Bill. It has often been said that nobody wants to shoot a one-legged Father Christmas. At least this debate gives us an opportunity to discuss the many major problems facing the British shipbuilding industry today, and the men who have invested their lives in it. The Government should present a more positive approach in these days of crisis for the industry.

The relationship between British shipowners and the industry is vital in terms of the need for home orders. British shipyards have been largely dependent on home owners in the post-war period. Unfortunately, the number of orders placed by British owners in British yards has declined considerably since the early 1960s. Between 1962 and 1966 an average of 67 per cent. of tonnage was home produced. Between 1967 and 1971 that figure collapsed to 32 per cent., and between 1972 and 1976 a mere 28 per cent. of British tonnage was built in British yards. Indeed, the Booz-Allen report, which was published in 1973, found few established links between British owners and British builders. That is in stark contrast to Japan where there is a close link between owners, builders, banks and the Government. Not one domestic order has been placed outside Japan since 1947. Everyone knows that Korea builds cheaper ships than Japan, yet Japanese shipowners always build their ships in domestic yards. It is a pity that British shipowners do not follow the same policy.

The General Council of British Shipping has made some proposals to the Secretary of State regarding the Budget debate. One suggestion is that there should be roll-over relief for balancing charges. That would enable funds from the disposal of a ship to be set off against the cost of a replacement vessel which would encourage shipowners to build more ships, hopefully, in British yards. When the Minister meets his European colleagues, I hope that he will discuss the scrap and build scheme. European community countries have debated that since 1977, but nothing has happened. To create orders to keep a viable shipbuilding industry in Britain, it is imperative to have a scrap and build scheme, even if it is conducted unilaterally.

The state of the industry report, which was published in February this year by British Shipbuilders, was a doom and gloom report. It pointed out that the target for 1985–86 was 203,000 compensated gross tonnage, but, by the end of January British Shipbuilders had secured only 18,000 CGT, which was less than 9 per cent. of the target, and expected to achieve 70,000 CGT. However, as the Minister has pointed out, it did not achieve that tonnage.

My right hon. and hon. Friends have referred to other parts of the British shipbuilding industry. That makes dismal reading, but I do not want to go into it because of the time constraints. Last delivery dates are as follows: Austin and Pickersgill, November 1986; Govan, March 1987; Smith's Dock, December 1986; Sunderland Shipbuilders, February 1987; Appledore, March 1987; Ferguson-Ailsa in Port Glasgow, May 1986; Ferguson-Ailsa in Troon, September 1986; and Clark Kincaid, October 1987. The comments of my hon. Friend the Member for Sunderland, North are true. Unless the Government take immediate steps to help the industry, there will be no shipbuilding debate this time next year, because there will be no shipbuilding industry.

The trade unions have made enormous sacrificies in tackling the shipbuilding industry's problems. Thousands of jobs have been axed and the remaining workers have faced periods of great insecurity. Bitterness and disillusionment shroud the industry. Most of the yards to which we are referring and which are shedding labour are in areas of high unemployment.

I should like to refer to Swan Hunter, although I appreciate that the Bill has nothing to do with naval works. My hon. Friend the Member for Wallsend (Mr. Garrett) has mentioned that yard, and I have no doubt that my hon. Friend the Member for Newcastle upon Tyne, East (Mr. Brown) will do the same, if he catches your eye, Mr. Speaker. Therefore, I do not want to dwell too long on it. The argument on placing the AOR orders—the Harland and Wolff design has been accepted—shows how resources can be wasted if the shipbuilding industry is split up. Swan Hunter's design team of 420 which is designing the AORs and Harland and Wolff's design team which is working for the Ministry of Defence are working against each other. That is what happens when the industry is split up. Swan Hunter has a first-class team, but unfortunately, because of the wastage of resources, it will have to go.

I have a letter from the Ministry of Defence referring to orders for the third, fourth and fifth of the type 23. An article this morning in the Financial Times refers to a cut in the defence budget of £3 billion over the next three years. The article states: However, a prime target for cuts will be the Navy's shipbuilding programme, which seems certain to fall short of the Government's stated target of three new warship orders a year. This will mean delays to the new Type 23 frigate, as well as, possibly, to the building of conventionally powered submarines. Swan Hunter has not only lost the order for the AORs but stands little chance of getting the order for the type 23 frigate if the Government carry out their cuts in the defence programme.

The men at Swan Hunter were led up the garden path. Every worker received a copy of the document issued by the management when it was considering a buy-out. It states:

This morning a meeting took place at which the team negotiating for the purchase of the company met trade union representatives from all groups of employees, including fulltime officials, for the purpose of announcing their intentions for the company. To set aside your concerns and worries about future prospects and job security, we can confirm the following statement was made:— All existing employees will be kept on. No sooner had the management buy-out taken place than it was talking about a crisis and possibly closing if the orders were not received. People in the shipbuilding industry have faced that problem for a considerable time. Since 1979 when the Conservative party was elected to government, there has been insecurity, redundancies and closure of yards. Unless the Government do something about that, Britain will be the only maritime nation that does not have a shipbuilding or ship repairing capability to service our fleets. I hope that the Minister, when he stops talking to the Government Whip, will take some notice of the shipbuilding industry and the suggestions of my right hon. and hon. Friends. Much more could be said about the industry, but I shall conclude to allow my hon. Friends time to speak.

Several Hon. Members


Mr. Speaker

Order. I remind hon. Members that the first of the Front-Bench speakers will seek to rise at 6.40 pm. I hope that the Minister and the spokesman for the Opposition will have time to speak in that time.

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

I shall take your words on board, Mr. Speaker.

It is always of considerable regret when British maritime interests place orders for vessels in south-east Asia. I recall the Scottish shipping line, the Berm Line, placing an order with Daewoo of South Korea for a bulk carrier and a semi-submersible rig. About 18 months ago, Trinity House ordered a lighthouse from south-east Asia. Such orders reflect what the annual report of Lloyd's Register of Shipping called the "unassailable" position occupied by south-east Asian shipbuilding nations.

I support the comments of my right hon. Friend the Member for Glasgow, Govan (Mr. Milian) on the intervention fund. The fund must be used flexibly and imaginatively. I was pleased to hear the Minister's intervention. We need a domestic scrap-and-build programme. I have argued in the House and elsewhere that if we want a motto it should be, "Build British and sail British."

Because we now have a single company, North-Eastern Shipbuilders, in north-east England, I wonder whether the board of British Shipbuilders has similar plans for its yards, and Clark Kincaid on Clydeside.

The debate takes place against the depressing backcloth of decline in the European shipbuilding industry. This dreich state is seen at its depressing worst on Clydeside. My constituency has been badly damaged by scandalously high unemployment, with 26 per cent. male unemployment and more than 1,000 people out of work. The Government must act to halt the continuing decline in shipbuilding and in marine engineering.

I shall refer to constituency interests. I urge the House to ignore the remarks of the hon. Member for Chichester (Mr. Nelson) about Ferguson-Ailsa, a yard in my constituency. That yard has a first-class approach to marketing its skills and services. I resent ill-founded criticism of that yard, which is struggling mightily. Clark Kincaid, which is in my constituency and that of my hon. Friend the Member for Wallsend (Mr. Garrett), is the last marine engine builder of any size on the Clyde and the Tyne. Not long ago the company was praised by Cunard for the quality and delivery date of the engine built for the Atlantic Conveyor, which was to replace the vessel of that name sunk in the Falklands war. Clark Kincaid is building two small medium-speed land engines for the Cayman Islands and two marine engines—a Sulzer and a BW engine. It is crucial to maintain that marine engineering capacity.

The Minister mentioned Ferguson-Ailsa of Port Glasgow and Troon. He said that the yards were building several small vessels. I shall be slightly more accurate than that. At Port Glasgow the yard is completing the second of two anchor-handling vessels for the Canadian Arctic oil industry. The yard at Troon is shortly to finish the second of two offshore supply vessels for Seaforth Maritime. In addition, a research vessel for the Ministry of Agriculture, Fisheries and Food is being constructed. Those two yards—Port Glasgow and Troon—are under the FergusonAilsa title. They have some 700 employees. They are first-class specialist yards which are desperately short of orders. Clark Kincaid is a first-class outfit. It has excellent industrial relations and a high quality of work. I confidently expect Ferguson-Ailsa to win the order for a new fisheries protection vessel, which is to be placed soon by the Department of Agriculture and Fisheries for Scotland. That is in line with what was said by my right hon. Friend the Member for Glasgow, Govan (Mr. Milian). It is essential that the state, public utilities and public corporations place their orders with our yards. Once the fisheries protection vessel is launched, it will patrol the Scottish fishing grounds on behalf of the Department of Agriculture and Fisheries for Scotland.

In its recent report on fisheries protection the Select Committee on Scottish Affairs urged the Scottish Office to place the order with a Scottish yard. That yard should and must be Ferguson-Ailsa. It has designed the vessel, it built the previous vessel for the fisheries protection service and should build this one.

I shall make my final quick points as I am conscious that my hon. Friend the Member for Newcastle upon Tyne, East (Mr. Brown) wishes to speak.

This is an important issue in Scotland at the moment. Within the next 12 weeks Caledonian-MacBrayne will announce the placing of an order for a 1,000-passenger car ferry. It is to be used for the Hebridean islands service. I would like to say to Mr. Colin Patterson, the chief executive, and the board members of the Scottish Transport Group that that order must be placed with a Scottish yard. Again I say, declaring a constituency interest, that that yard should be Ferguson-Ailsa. It has built vessels before for Caledonian-MacBrayne and it should be given this order.

It is essential, of course, that Ferguson-Ailsa submits a sensible and competitive tender and I have no doubt that it will do so. However, Mr. Patterson and his colleagues must remember that they are employed to provide a service for their Scottish customers— the people who travel among the islands and between the mainland and the islands. Those passengers and the overwhelming majority of Scots want the vessel to be built in a Scottish yard.

My final comment concerns Scott Lithgow, formerly owned by British Shipbuilders and now owned by Trafalgar House. It, too, is a yard which is grievously short of work. It now has a first-class industrial relations record with an excellent quality of work.

I am given to understand that the shipping company, ACL, plans, in the near future, to extend five of its vessels. Naturally, I sincerely hope that that work is carried out in the United Kingdom. I do not want to see the work go to West Germany where the QE2 is heading for its refit and re-engining. If the work for ACL is to be done in the United Kingdom, why not at Scott Lithgow? Trafalgar House has a major stake in ACL-25 per cent. of the equity I believe. On the basis of demanding work for British and Scottish yards, I urge Sir Nigel Broackes and his colleagues to recommend to ACL that the work be undertaken by Scott Lithgow. It is essential that British maritime interests place their orders with British yards. They are two sides of the same coin.

6.34 pm
Mr. Nicholas Brown (Newcastle upon Tyne, East)

I thank my hon. Friend the Member for Greenock and Port Glasgow (Dr. Godman) for curtailing his speech so that I can make a short contribution.

I endorse the remarks made by my right hon. and learned Friend the Member for Monklands, East (Mr. Smith). He said that the privatisation of the warship building yards was lunacy, because the profits from that could have made a contribution to the very matters we are discussing today. However, the Government would not get very fat on the £5 million that they apparently got for Swan Hunter when it was privatised. If the terms and conditions and full extent of the deal were so fair to the managers and owners of Swan Hunter, I ask the Minister whether his Department would be prepared to buy it back if the owners wished to sell it to them. Will he address that point in his reply?

The moneys referred to in the Bill cover the question of redundancy payments. The yards which have been privatised out of British Shipbuilders are no longer covered by the redundancy payments scheme. It was felt, of course, that they would not need redundancy payments because there was work for them to get. That is not turning out to be the case for Swan Hunter. The workers face the possibility of being made redundant on terms substantially less favourable than for those who accepted voluntary redundancy a year and two years ago. The responsibility is the Government's, not that of the private owners of the yard. Is the Minister willing to make any sort of financial contribution towards the relief of that set of circumstances that the Government have done so much to bring about?

Both Cammell Laird and Swan Hunter are mixed yards. They have been forced to become warship yards and have been promised work as well. Swan Hunter, at least, still has an eye towards trying to obtain some merchant orders. In his introduction the Minister referred to intervention funding and to looking at individual work on a case-by-case basis. If Swan Hunter is to survive at all, I understand that there is an outside possibility of it still obtaining merchant work. Can we come to see the Minister and have its case discussed on a case-by-case basis? It is not taking work from any other shipyard; it is tendering for it because of its specialist nature. Is the Minister's door open to Swan Hunter, or will merchant orders be subsidised on a case-by-case basis for those yards that the Minister has designated as merchant yards and yards, such as Swan Hunter, which used to do merchant work, will be out of it altogether?

My hon. Friend the Member for Birkenhead (Mr. Field) referred to the special subsidy arrangements at Harland and Wolff, as did the hon. Member for Darlington (Mr. Fallon). They made the point that there are substantially more yards than work. Is it true that the subsidy arrangements mean that Harland and Wolff will always have a competitive edge and that it will always be there when mainland British merchant yards are struggling without the same financial support? How will the Minister allay that fear? How will he demonstrate to those who represent not only warship yards, such as those I represent, but those who represent merchant yards that somehow Harland and Wolff will not always have a competitive edge because it always has more subsidy than is provided for mainland Britain? That is certainly a real fear on Tyneside, and the Minister should allay it not just by assurances but by being able to demonstrate that there is no such subsidy.

Tyneside is not trying to take work from other communities. We just want to be treated fairly. We do not want the work that our community should have taken and put elsewhere. We feel that the AOR was taken for political reasons and placed in Belfast. The type 22 frigate went to Cammell Laird; it should have come to us. There was a £9 million cost for the British taxpayer. There was a promise of the type 23 frigate to make up for that, and that is now two years overdue.

If the Government are serious about seeing Swan Hunter and shipbuilding survive on the Tyne, the Minister, who has direct responsibility because he sold the yard into the private sector, should discuss with his right hon. Friend the Secretary of State for Defence when those promised orders will be committed and how the assurances that the Government have given to the people of Tyneside will be upheld. The suspicion on Tyneside is that those promises will not be upheld.

6.39 pm
Mr. Gordon Brown (Dunfermline, East)

While, technically, the debate has been about the extension of British Shipbuilders' borrowing powers, it has also been, rightly and properly, about the contraction of the industry, the risk to jobs, the threat to established skills, and the fears and needs of the shipbuilding communities up and down the country. It has been about the problems of Sunderland, which were mentioned by my hon. Friend the Member for Sunderland, North (Mr. Clay). It has one of the highest unemployment rates in the country. The industry faces closure if no new orders are found before the end of the year. The skills of the workers were praised by the Prime Minister on Friday but now they face the prospect of closure and of a rundown of the industry if the Government do nothing. The debate has also been about the problems of Govan and Greenock, where no new orders are yet available and where, additionally, jobs will be lost, and unemployment in an area of high unemployment will rise.

The debate has also been about the problems of the north-east. I congratulate my hon. Friends the Members for Newcastle upon Tyne, East (Mr. Brown), for Jarrow (Mr. Dixon) and for Wallsend (Mr. Garrett) on the campaign that they have mounted for orders for Swan Hunter. It seems remarkable that, when a yard is denationalised, orders and jobs dematerialise almost overnight. The Minister should tell us what his Department will do to persuade the Ministry of Defence to speed up the promised orders for type 23 and the second AOR so that jobs can be saved and retained at Swan Hunter in the north-east.

When we have already suffered a halving of the capacity of the shipbuilding industry over the past seven years, when, as my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) said, 48,000 jobs have been lost throughout the shipbuilding and ship repairing industry, when we have only 2 per cent. of world orders for merchant shipbuilding at the moment, and when the retiring chairman of British Shipbuilders, who was praised by Conservative Members, has said clearly that the industry is facing a bare-knuckle fight for survival, and fears that the merchant shipbuilding industry could go exactly the same way as the motor cycle industry, the question is not the generalities raised by Conservative Members in their lengthy speeches, but what the Government are doing. The question is what they will do through their public purchasing powers, activities to secure proper intervention fund support, and the development of packages that can beat the rest of the world by ensuring the maintenance and continuation of our merchant fleet. What will the Government do to prevent a catastrophic rundown in the merchant shipping industry over the next year, and to prevent a decline that could lead to the disappearance of the industry as a whole?

Both sides of the House share a concern about the decline of the merchant shipping industry. It was 1,200 strong in 1979 and is only 600 strong today. The General Council of British Shipping fears that the figure could fall to 400 and then to 200 by 1995. When last week the Committee in another place called for urgent measures from the Government to secure orders for British yards and to ensure that the British merchant fleet could maintain and expand its capacity to deal not only with industrial but with defence needs, the question that the Minister must answer during the debate is: why has he not done more? What more will he do to persuade British shipowners to buy British, to repair British and, indeed, to sail British, in the interests of the industry?

There are three things that the Minister can do. The first is to use the Government's public purchasing powers to the benefit of shipbuilding communities. Surely it is in the Department's interest and, indeed, in other Department's interests, when faced with the prospect of ever-rising unemployment at great cost to the Government, to speed up the orders that have been mentioned by Opposition Members. Those orders are desperately needed by the various Departments, but, because of cash shortages, particularly in the Ministry of Defence, they are not being placed.

My right hon. Friend the Member for Glasgow, Govan (Mr. Millan) and my hon. Friend the Member for Sunderland, North mentioned the FSK 20/20. The Minister should clarify the position. The Ministry of Defence encouraged British Shipbuilders to design that; British Shipbuilders could build and export it. It is not a substitute but it is a complement to the AOR. The Minister should tell us what pressure he will bring to bear on the Ministry of Defence to ensure that those orders, which could help Sunderland and Govan retain jobs, are placed as soon as possible.

Secondly—the Minister raised this point—there should be effective pressure to secure proper support from the intervention fund. When the Under-Secretary spoke in a debate last year, he said that he was fighting for Britain in Europe. Over the next few months his proposal for 35 per cent. subvention became only just over 20 per cent. subvention under the intervention fund. This year's negotiations have started with the Commissioner for competition, who says that he wants an effective and significant reduction in the overall level of aid. The Under-Secretary, who appears to be leading the negotiations on behalf of the Government, is quoted as saying that he wants an end to the nonsense of worldwide subsidies. While not offering Britain as a sacrificial lamb, he has also said that Europe could take the lead in the process of ending the "buying" business for orders.

We should like the Minister to give us an assurance that he and his colleagues will fight for decent intervention fund support, that he will not be swept aside by the Commissioner for competition, that he will not yield to other countries that want a cut in intervention fund support, and that he agrees with us that we cannot afford the luxury of misplaced ideologies about free market forces—other countries are doing their best to protect their industries, while we seem to be mouthing monetarist orthodoxies in Europe.

Thirdly, the Government can take to heart what the Prime Minister seemed to be saying on Friday, which Downing street seemed to withdraw—that we need better packages to enable us to persuade people to buy British and build in British yards. The Prime Minister appeared to say that at the moment we could offer packages that were better than in any other country except Japan. That is contradicted by the evidence that the Department of Trade and Industry gave to the Committee in another place, when the officials appeared to be saying that other countries were able to beat us hands down, especially France and Germany, which could offer better and longer repayment periods and better credit packages for building ships.

The Under-Secretary appeared to say that other countries in Europe were offering hidden subsidies while our subsidies were all transparent and above board. If a study has not been done and if proposals have not been brought forward to improve the credit and loan packages on offer, the Minister could help by giving us an assurance that he will examine the packages and ways in which to improve them, take up the point that was made by my right hon. Friend the Member for Govan and guarantee to us that no order will be lost because the credit terms that are on offer in this country are detrimental compared with those offered by other countries.

We are talking about the survival or extinction of the merchant shipbuilding industry. We are talking not about an industry that is old-fashioned, but about an industry that has moved into high technology. This afternoon the Minister acknowledged the widespread gains in productivity that have been achieved—what he called the enormous strides forward. He also acknowledged the improvement in industrial relations. However, the Government need to match the commitment that has been made by the work forces throughout the country. What we need from the Government is a commitment to use their public purchasing powers to secure orders, to fight in Europe for an expansion of intervention fund support, to develop the packages that can be offered to secure the orders that Britain needs, and to ensure that British shipowners will buy British, sail British and repair British for the future of the industry.

What we need are not the complacent words that the Minister appeared to use at the beginning of the debate, but an assurance that dynamic initiatives will be taken to secure the future of the yards, to secure orders, to save the jobs and to safeguard the future of an industry that is vital not only for our industrial and trading needs but for the defence of this country.

6.49 pm
Mr. Peter Morrison

In the short time that is available, I shall attempt to respond to what has been a very serious debate and pick up as many of the points as I possibly can.

If at the beginning of the debate I gave the hon. Member for Dunfermline, East (Mr. Brown) the impression that I was complacent, I assure him that that was not so. His right hon. and learned Friend the Member for Monklands, East (Mr. Smith) described the severity of the position, and I agree that it is very serious. I would not go so far as to use the words of the hon. Member for Dunfermline, East and say that it was a case of survival or extinction, but I am more than aware of the serious problems faced by the merchant shipbuilding industry in Britain.

I do not wish to detain the House with the debate about privatisation and whether that was a good or bad decision. The right hon. and learned Member for Monklands, East would expect me to defend the decision to privatise, and I do that with conviction. I believe that the employees in the Vickers consortium, 80 per cent. of whom took up the shares, would agree that privatisation was the most sensible way forward.

I should like to reiterate what I said at the beginning of the debate about the Government's commitment to the industry. If we had not been committed to the industry, we would not—at a time of scarce resources—have invested £1,440 million in the industry since we came to power in 1979. The Government have made a major commitment in that sense.

One of the main themes running through the debate, which was raised by the right hon. and learned Member for Monklands, East and by the hon. Member for Dunfermline, East, has been public sector purchasing policy. I agree that any responsible Government should have regard to that. I am sure, however, that the right hon. and learned Member for Monklands, East would accept that significant orders have been placed with the shipbuilding industry by the Ministry of Defence.

The right hon. and learned Gentleman also raised the point about the British Nuclear Fuels Ltd. ship. He will be aware that the first four ships ordered by that consortium came from this country. The right hon. and learned Gentleman's point referred to the fifth ship, and the tender from the Japanese was substantially below the tender from British Shipbuilders. It is also fair to say, as the right hon. and learned Gentleman realises, that the company is not British dominated. It is Japanese-French as well as British.

The right hon. and learned Gentleman also raised a specific point about the FSK 20/20, as did many of his hon. Friends. I believe that is a good ship, and of course it is important for the future. It has export potential. I understand all those points. However, the Opposition will appreciate that the Secretary of State for Defence must look carefully at his precise needs. He cannot, off the top of his head, create orders in a way that the Opposition would like.

The right hon. and learned Member for Monklands, East raised the matter of the increase in intervention fund support. As I said when I intervened in the speech of the right hon. Member for Glasgow, Govan (Mr. Milian), we can consider support through the intervention fund on a case by case basis and there can be some flexibility.

The hon. Member for Sunderland, North (Mr. Clay) made the point with some vigour that it was surprising that British Shipbuilders had not come to the Government for support. That may be surprising, but so far as I know that has not happened because there has been no increase in the use of flexibility relating to the intervention fund. That is not a reason for no orders coming forward. I understand the passion with which the hon. Member for Sunderland, North puts his case, but, in all honesty, the position is not quite as he would like it to be.

Another of the themes running through the debate, which was raised by the right hon. Member for Govan among others, was the provision of credit. I appreciate that the competition in connection with the allocation of credit can become unfair or even more fair, and we must consider that position. There is the possibility of softer credit in certain circumstances using the aid and trade provision. I confirm that we are ready to consider the use of that provision in appropriate cases, and I can specifically confirm that, in the case referred to by the right hon. Member for Govan and his right hon. and learned Friend the Member for Monklands, East, we are ready to use it. We must judge each case on its merits.

I believe that a misunderstanding arose from the interpretation of the meeting between the hon. Member for Sunderland, North and shop stewards and my right hon. Friend the Prime Minister. I was not present at that meeting, but I have heard reports that it was very constructive on both sides. I am sure that the shop stewards appreciate that the Government and the Prime Minister are doing everything within their power to help British Shipbuilders and will therefore help with the jobs that are available.

Mr. Clay

In fairness to the shop stewards and to myself, the Minister should not mislead the House by implying that we thought that the Prime Minister was doing everything in her power. As the Minister has allowed me to intervene, may I say that my recollection of the meeting and that of the shop stewards is clear. The Prime Minister was not simply talking about one situation. She said that from now on no country, other than Japan, can undercut this country on credit in connection with orders.

Mr. Morrison

As I have said, I was not at the meeting but I did receive reports. I have related to the hon. Gentleman the present position for credits under the aid and trade provisions.

My hon. Friend the Member for Teignbridge (Mr. Nicholls) referred to the right hon. Member for Manchester, Gorton (Mr. Kaufman) and to a former Secretary of State, Mr. Eric Varley, and what they said about the industry in the 1970s. They had to deal at that stage, as did the then Government, with a very difficult situation. As the hon. Member for Wallsend (Mr. Garrett) said, the problems with the industry should he dealt with on a broad rather than a party political front. I believe that that has been the tone of the debate so far, and I agree that that is the approach that we should take.

Mr. Gordon Brown

Before the Minister leaves the point about credit packages, whatever the Prime Minister said, will he give us an undertaking that no other country will be able to undercut us on credit terms and that he will ensure that British Shipbuilders can offer the best credit terms?

Mr. Morrison

The hon. Gentleman is asking the impossible.

Mr. Gordon Brown

No, I am not.

Mr. Morrison

With due respect, the hon. Gentleman is asking the impossible. How am Ito know precisely what other countries may be offering by way of credit? The right hon. and learned Member for Monklands, East, who has been a senior Secretary of State, knows perfectly well that it is not always possible to know about credit terms as negotiations are commercially confidential. It would be impossible for me to give such an undertaking to the hon. Member for Dunfermline, East or to the right hon. and learned Member for Monklands, East without misleading them and the House.

My hon. Friend the Member for Teignbridge referred to the previous Labour Administration who said how difficult it was for people to manage the shipbuilding industry in western Europe and throughout the world because of the contraction of the industry. Of course, shipbuilding is extremely important to certain parts of the country, to the north-east and parts of Scotland in particular. I therefore understand why the Opposition make the point with conviction that the Government should force British shipowners to buy British ships. I cannot acquiesce to that request. It is fair to say that in recent years two thirds of British ships bought by British shipowners have come from British shipyards. Obviously, we shall do what we can to sell to Britain's shipowners the ideas of British Shipbuilders.

I commend the Bill to the House. I am sure that it is a further step in helping British Shipbuilders in the direction that it should be going.

Question put and agreed to.

Bill accordingly read a Second time.

Bill committed to a Committee of the whole House.—[Mr. Archie Hamilton.]

Committee tomorrow.