British Shipbuilders (Borrowing Powers) Bill

HC Deb 09 July 1987 vol 119 cc547-81

Order for Second Reading read.

5.12 pm

The Chancellor of the Duchy of Lancaster and Minister of Trade and Industry (Mr. Kenneth Clarke)

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

I begin by congratulating the hon. Member for Dunfermline, East (Mr. Brown) who I understand will be leading for the Opposition. He did not shadow my previous Department but he hounded and persecuted me none the less regularly from the Back Benches. He was so successful in that and other ways that he has been elected to the shadow Cabinet. I am sure that we all agree that that is richly deserved and congratulate the hon. Gentleman on his success.

In a vein which I hope will arouse equally little controversy, I come to the British Shipbuilders (Borrowing Powers) Bill. By tradition, Bills of this kind have become the occasion for a debate on the fortunes of the merchant shipbuilding industry. We all realise that the fortunes of the industry remain in a very difficult state. Once a major employer, the industry on the mainland now has fewer than 8,000 employees, most of whom work for British Shipbuilders. As we all know, and certainly as I know, behind that stark figure of the reduced number of employees lies a history of hardship, difficulty and unemployment for many thousands of people in great industrial centres in this country.

The adjustment in the scale of the industry has not been for lack of support from the Government and the taxpayer. Since 1979, British Shipbuilders alone has received more than £1¾ billion. That is an enormous figure. The root cause of the continued problems for British shipbuilding has been a world market dominated since the first major oil price increase in 1973 by massive excess capacity in shipping and shipbuilding alike. The two industries are linked. The merchant shipping industry—the customer of the shipbuilding industry — has been through a terribly difficult time. Great tonnages are laid up throughout the world. Shipping rates are generally depressed and returns on capital are very low. When the customer is in trouble, the industry which supplies the customer with essential equipment — in this case, the shipbuilding industry—gets into deep trouble as well.

By 1976, when the need to restructure had really hit home in the older shipbuilding countries, about 230,000 people worked in merchant yards in the European Community and 175,000 were employed in Japan. Since then, the European Community work force has fallen to below 100,000 and the Japanese work force to about 90,000. In January this year I visited the great Mitsubishi yard in Nagasaki where the Japanese imperial fleet was built before the war. The yard is short of work and shedding labour rapidly. Some of the managers who showed me around explained that they were unable to win orders and could not compete with the Koreans. The problem of change has gone on throughout the world. As we consider the stark international position, therefore, I hope that we shall not hear too much today from hon. Members pressing the case for their own industries and seeking to attribute the changes of the past 10 years to the Government's policies, our economic line, Thatcherism or anything else. The problem is a world-wide phenomenon with very obvious causes — the excess capacity of shipping and the resulting excess capacity of shipbuilding.

The past 18 months in particular have seen dramatic restructuring of the shipbuilding industry in a number of countries. We certainly have not been alone. France began 1986 with five yards and is now reduced to one. Sweden effectively abandoned merchant shipbuilding altogether and a number of West German shipyards went into liquidation.The Japanese announced a programme to cut capacity by 20 per cent. but look like ending it with capacity cuts and jobs losses nearer 40 per cent. Even the South Korean yards are under pressure.

[Miss Betty Boothroyd took the Chair.]

Hon. Members

Hear, hear!

Mr. Clarke

Madam Deputy Speaker, I had thought that the cheers were for the difficulties in South Korea, which would be understandable in view of the constituency difficulties of many hon. Members present. I am glad to see, however, that they were for your taking the big Chair for the first time. It is a pleasure to welcome you there. You and I will recall taking part in debates chaired by your distinguished predecessor, Betty Harvie Anderson. There has been too long a gap since a woman took the Chair as Deputy Speaker. We are pleased to see you there and we look forward to your presiding over our affairs with great distinction.

As I was saying, even the South Korean shipyards are under pressure. All are looking to reduce their dependence on new merchant building and are diversifying into other engineering activities. Despite the difficulties of all the existing shipyards, however, newcomers such as the Chinese and the Yugoslays are actually building new shipyards and increasing their shipbuilding capacity.

The international situation of more than 10 years, of depression both at home and overseas, will be familiar to those who follow the fortunes of the industry. I have set out the position again today because those of us in the House, including just about every hon. Member now in the Chamber, who are concerned with the prospects for the communities, towns and cities of Britain which were once dependent on shipbuilding for their industrial life, have a duty to face those international facts of life. The present world position is that there is capacity to build 18 million tonnes of new merchant ships each year. Last year, however, new orders totalled only 9 million tonnes, of which the Japanese took 41 per cent., the Koreans 14 per cent. and the European Community 15 per cent. and of which our share was 2 per cent. The latest forecasts from the Association of West European Shipbuilders and the Shipbuilders Association of Japan accept that there is no prospect of an upturn in market demand until 1990 at the earliest. Even if that upturn were to start—many are not certain that it will begin even then—even optimists do not predict a balance between supply and demand until the mid-1990s at the earliest.

That leads me to my first conclusion. When we consider the problems of people in the communities worst affected by the situation in the shipbuilding industry, we shall clearly have to look much wider than shipbuilding itself as we tackle the problems of towns in Scotland and the northeast in particular. The expansion of an enterprise economy on Clydeside, Tyneside and Teesside must be a key objective of all our policies. But if I start going into that, I shall go wider than today's debate on the Bill.

British Shipbuilders is a corporation that has had to adjust. Orders are still, and will remain, hard to win. Inevitably, the profound imbalance of the market has had particularly severe consequences for British Shipbuilders' finances.

The Bill concerns British Shipbuilders' borrowing limit. The Aircraft and Shipbuilding Industries Act 1977 places a statutory ceiling on the funds that British Shipbuilders may acquire in the form of public dividend capital from the Government and loans from the commercial market. The limit on the corporation's borrowing stands at £1.4 billion as a result of the British Shipbuilders Borrowing Powers (Increase of Limit) Order, debated in the House as recently as December last year. The Bill proposes an increase in the borrowing limit to £1.55 billion and makes provision for further increases, subject to affirmative resolution of the House, up to £1.8 billion.

The Bill does not vote money. It simply gives British Shipbuilders the power that it requires to receive moneys. The actual provision of funds in the form of public dividend capital is, of course, a matter for Parliament to decide in due course through the normal Estimates procedures. The borrowing limit has no effect on the other important source of Government support for British Shipbuilders—intervention fund in support of particular orders.

Many hon. Members will recall that it was only this time last year that my hon. Friend the then Minister of State — the hon. Member for City of Chester (Mr. Morrison)—spoke at the Dispatch Box in favour of an increase in the borrowing limit from £1.2 billion to £1.3 billion. As I said, the order agreeing an increase of a further £100 million was made in December last year. In veiw of the frequency of debate, obviously reflecting the frequency of the expansion of financial demands by British Shipbuilders, the House deserves an explanation as to why a further increase is needed now. That increase is urgently needed. The corporation forecasts that it will come close to exceeding its present limit before the summer recess. I hope that no one contemplates delaying the Bill, because that could have a profound consequence for the corporation. An amount of £200 million is a considerable sum for a business of this size to exhaust in little more than a year.

Mr. Frank Field (Birkenhead)

The right hon. and learned Gentleman says that it is right that the House should know what is happening to taxpayers' money. Will he take the argument back a little? I think that, two borrowing requirement Bills ago, we raised the sum from £1 billion to £1.2 billion. The £200 million was largely for Barrow to build a construction hall. Since we voted that money, Barrow and Cammell Laird have been privatised for a considerably lower sum, although all their assets were privatised. What happened to that taxpayers' money? I ask that question because we are so concerned about the growth announced in this Bill.

Mr. Clarke

The privatisation was debated at the time and I believe that the hon. Gentleman was given explanations as to why the price was set as it was. Several privatisations have obviously involved getting the current market value of the assets. Sometimes offsetting expenditure has to be made to discharge losses on work in progress, and so on, so those costs were not counted at Barrow.

The hon. Member for Birkenhead (Mr. Field) is labouring under a fundamental misconception. The fact that one has to pour money into an institution does not make it more valuable. If one is privatising a company, it has a market value based on the prospect of returns to the purchaser. To compare whatever extra borrowing may be required when an industry was nationalised with the price realised on the taxpayer's behalf when the asset is eventually sold is a false analogy. Many loss-making nationalised industries have consumed vast amounts of taxpayers' money. It is only too true that eventually, when the industry has been sold, although the market price may have been obtained, the taxpayer has to wipe off a lot of money expended for past folly.

Mr. Frank Field

I am not trying to trap the right hon. and learned Gentleman. He will have seen from BSEL's returns that it was not a loss-making concern, but a profitable concern, which was to be privatised. I suggest that £200 million of taxpayers' money was not just poured into a bankrupt industry. It was poured into the building of a construction hall at Barrow, which is building Trident. Far from the Government presenting the case as one of taxpayers' money being wasted, should not the right hon. and learned Gentleman be saying, as part of his conversation with the House, that that money should be put to the cost of building Trident? The money has not been lost to taxpayers. It has been a real cost. From the way the accounts are being presented now and the way they have been presented, one could be forgiven for thinking that taxpayers make contributions and the whole contribution is then forgotten. It should he attributed to the right accounts.

Mr. Clarke

If the hon. Gentleman is talking about how the cost of Trident is calculated for the purpose of defence debates, he must make his point to my right hon. Friend the Secretary of State for Defence the next time Trident's cost is regarded as an issue. If he is asking whether the correct market value was placed on Vickers when it was privatised, I must say that I understand that it was correctly valued. We are now dealing with the £200 million incurred over the past year. Although the hon. Gentleman took the opportunity to intervene, I think that it is right for me to explain what on this occasion has caused us to come back with an increase of £200 million on the borrowing limit agreed only 12 months ago. The hon. Gentleman will have to make his point in defence debates if he is trying to add his estimate of the cost of Trident.

Mr. John Smith (Monklands, East)

This is a trade and industry matter.

Mr. Clarke

If the Opposition say that this is an industry matter, the hon. Member for Birkenhead will have to deal with that difficulty when it presents itself. I think that I am being patient in conceding that it has anything to do with the Bill. It does not. I should like to come to this year's £200 million and to why we are considering it again within 12 months.

Of the £200 million, only some £20 million has been absorbed in what one might call the normal costs of the business-capital investment and such essential charges as research and development, marketing and general administration. Last year's restructuring cost some £30 million, a direct result of the shortage of orders. Another £30 million or so was needed in final settlement of the sale of Scott Lithgow to Trafalgar House, principally representing compensation for losses on work in progress which British Shipbuilders agreed as a condition of sale necessary to secure the future of that yard.

Another £40 million of the £200 million has arisen because of the receivership of one of British Shipbuilders' major customers—International Transport Management. ITM had ordered, but barely begun to pay for, a major craneship when the receiver had to be called in. This was no fault of British Shipbuilders, but it reflects the predicament of a customer whose operations had been considerably affected by the recent fall in the price of oil.

Mr. Bruce Millan (Glasgow, Govan)

The right hon. and learned Gentleman mentioned the additional payments in respect of Scott Lithgow. Can he tell us how much in total has been paid out in respect of Scott Lithgow's transfer to the private sector?

Mr. Clarke

I cannot do so on the spur of the moment, but no doubt my hon. Friend the Under-Secretary of State—the hon. Member for South Ribble (Mr. Atkins)—will be able to answer that point if he catches your eye later, Madam Deputy Speaker. Off the cuff, I cannot say how much has so far been paid out.

Mr. Gordon Brown (Dunfermline, East)

How, much of the money has been spent in funding employment instead of funding unemployment? In particular, will the right hon. and learned Gentleman tell us how much is involved in new investment in the shipbuilding industry?

Mr. Clarke

All this is essential for employment. I am describing a huge extension in the borrowing by British Shipbuilders to keep the corporation in existence and to ensure that it can continue to trade and to protect the jobs of the 8,000 employees in the industry. When we are dealing with a problem of surplus capacity, a lack of orders and customers who place orders and then get into financial difficulties, the idea that I should be asked to describe what we are doing to invest in new capacity misses the point. It is part of the tragedy of British Shipbuilders that the position is so bad at the moment that money is being drawn in the kind of provision that I was describing.

I had reached the stage of describing the provision that has to be made when orders are placed by customers who get into financial difficulty. Such is the state of the shipbuilding industry and the problems of shipping companies that builders have had to become involved in their customers' problems and provide sufficient security for finance of new purchases. When it gives guarantees for the finance required to buy the ships that will be built, in the present market British Shipbuilders face a high risk of those guarantees being called in or of becoming involved directly in the financial reconstruction of shipping companies to avoid the full impact of such guarantees being called. Therefore, shipbuilders are required to shoulder part of their customers' risk and to prop up their customers to make sales.

In addition to the ITM illustration that I gave earlier, a further £20 million has been the result of other customer difficulties. A further £30 million represents the cost of labour and overheads that cannot be attributed to contracts over the past year. Because of the nature of their business, eligible merchant shipyards must bear the costs of spare capacity if they do not have profitable work in addition to that taken on a break-even basis with intervention fund help. During the past year, delays in winning orders, notably the delays that took place before we had great success in winning the China order at Govan, have swelled those costs considerably in the case of British Shipbuilders.

However, in addition to all those factors which affect the state of the market, and which are largely beyond the control of British Shipbuilders, the largest single element of the increase—£50 million, or a full quarter of the capacity to borrow that was agreed by this House last year—has been lost on contracts that are in progress in the yards. That is in addition to the subsidies that were required to win the orders in the first place. When a contract has been entered into and a great deal of subsidy given to win it, losses are being made of the order of £50 million in a single year. That figure is a stark reminder of the total cost involved in supporting this industry.

I know of few other industries in which losses on contracts amount to almost half of the turnover before intervention fund support. While Govan and the smaller yards have been far from immune — they have made their contribution to the losses—the greater part of the losses have been made at North-East Shipbuilders' Sunderland yards. That performance must improve against the background of the dire market conditions that I have described.

Undoubtedly, the most unsatisfactory aspect of British Shipbuilders' performance has been those contract losses. I must concede that, even in that case, the fault can be laid only partly at the door of the building yards. In a buyer's market for ships, in which most builders are in desperate straits, suppliers have been able to secure terms that leave the builders exposed to a considerable share of the risks of delayed delivery, unsatisfactory performance, and the costs of rectification. I am glad to say that British Shipbuilders is making great efforts to redress that imbalance. However, it is obvious that British Shipbuilders' performance during the past year has, to say the least, considerable scope for further improvement. I trust that every hon. Member who takes an interest in shipbuilding will join in wishing to see that improvement made. Their constituents must certainly understand how crucial it is to improve the performance of the yards.

The hon. Member for Dunfermline, East trailed his speech a moment ago by suggesting, in describing that great extension of borrowing and explaining where the money has gone, that I did not say enough about what was being done to sustain employment. I reject that just as earlier I rejected strongly the idea that it is nonsense to suggest that the present state of shipbuilding is in any way closely related to the policies of the Government. It is also absolute nonsense to suggest that the Government have not gone to enormous lengths to try to maintain the future of the surviving yards and to keep their employment in existence. We have expended great sums of taxpayers' money to support the corporation's efforts to find work for its yards.

I trust that Ministers agree with those many hon. Members who are present, whose constituents work in the industry, that we are all relieved to know that the corporation has secured work, in a difficult market, which will take all its yards beyond this year and, in the case of the two major yards, well into 1989. The key orders for the 25 Danish ferries at North-East Shipbuilders and for the two, but we hope three, Chinese container ships at Govan were won with the assistance of a great deal of Government subsidy, using taxpayers' money. In the case of the Chinese order, advantage was taken of the soft loan provision that the Government are providing for trade with the Republic of China. We won those orders in the previous 12 months and the Government have put a great deal of taxpayers' money into helping those yards to try to get through their difficulties and to achieve further orders.

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

Is it not a matter for serious regret that the closing date for the tenders for the contracts for the construction of the replacement vessel for the St. Helena service has been put back, this time by three weeks?

Mr. Clarke

As I understand it, the final date for the tenders has been put back because certain British yards that wish to tender require more time because their suppliers require more time to give the necessary details, and the holiday season is upon them. However, I hope that the St. Helena Government will be in a position to consider those tenders and will place an order later in the year. Obviously, we all hope that that date will not be too far away. The St. Helena order is one of the prospects in sight that we hope will give at least some assistance to one of those yards.

Looking ahead, the corporation now has a new chairman, Mr. John Lister. I have had the advantage of meeting him twice in the past few days.

Mr. Nicholas Brown (Newcastle upon Tyne, East)

Before the Minister leaves the subject of intervention funding, it would be right if he told the House about the Government's attitude to intervention funding for merchant work in the privatised warship yards. The Government are encouraging British Shipbuilders to reject merchant work, partly because they have run the industry down to such an extent that it cannot undertake such work, and partly for other and more suspect reasons. Do the Government intend to deprive the privatised yards of such work as well?

Mr. Clarke

I am not sure to what the hon. Gentleman is referring when he says that we are telling British Shipbuilders to reject merchant work. I thought that the position of naval yards was well known, but I realise that it is not acceptable to everybody. The naval yards were privatised on the clear understanding that they would not receive intervention fund support for merchant orders. There are good reasons for that.

The problem that I described in the earlier part of my speech is that we have an excess capacity of shipbuilders for conceivable merchant orders. It does nobody any good, given that we expend large amounts of intervention fund money, to keep the merchant yards in the hunt for those merchant orders that exist. If we suddenly greatly expand potential capacity by giving intervention fund support to the naval yards to go for merchant shipping orders, the result would be that potential capacity would greatly increase but the market would remain the same. That would damage some of the merchant yards to which we have been giving a great deal of intervention fund support in recent years.

I have considered that policy because two hon. Members representing Aberdeen constituencies have already been to see me to press the case on behalf of Hall Russell. However, I can see no ground for changing the policy or for going back on the clear understanding that was made at the time of privatisation that intervention fund support would not be available to naval yards.

Mr. Nicholas Brown

The Minister is being disingenuous. The understanding on privatisation was not as clear-cut as he has said. If the Minister means that work which the Government will not allow British Shipbuilders to do will not be undertaken by privatised yards because the Government will not put intervention funding into those privatised yards after British Shipbuilders has said that it cannot do the work, is he saying that an entire segment of the industry will be lost to our country for good, and that our European or far eastern competitors will have a slice of the market to themselves, or he is saying that the Government will no longer support a section of the industry in this country?

Mr. Clarke

I continue to be mystified by the hon. Gentleman's reference to work that we shall not allow British Shipbuilders to undertake in merchant yards. We make British Shipbuilders work within a contract support limit that it has not yet reached. Obviously, we are interested, but we are constrained by the EEC rule on the amount of intervention fund support that we can offer to British Shipbuilders. I am afraid that I remain mystified by the case that the hon. Gentleman appears to have in mind about an order that British Shipbuilders has been told not to take and that has been driven to the far east because the naval yards cannot take it.

I repeat that it is quite clear, and known to the owners of the privatised naval yards, that intervention support is not available for merchant orders. It is common sense for us to insist on that and it is consistent with the policy that this House has supported for some years of giving intervention fund support to the merchant yards that are still having all the difficulties that I have described. The merchant yards at Govan, and North-East Shipbuilders, would he horrified to discover that we are suddenly opening up intervention fund support to allow a lot of naval yards to try to get into their merchant markets. I am not persuaded of the case for doing that.

I have already met John Lister twice during the past few days, and I know how determined he is to improve the performance of British Shipbuilders and to sustain the efforts of the corporation to create new market opportunities. He has promised a new corporate plan in the early autumn setting out the corporation's view of the way ahead. I await that with impatience and I shall consider it with care. Meanwhile, as a result of the Bill. Mr. Lister will know that we propose that he should have the headroom within which the business can survive and be financed. To give added reassurance to hon. Members with shipbuilding interests, I can tell the House that I have agreed that the British Shipbuilders external finance limit for 1987–88 will be £118 million.

The external finance limit is the limit on cash, either in the form of borrowing or intervention fund support, within which the corporation must try to operate this year. I trust that the House will appreciate that £118 million is a considerable figure. It is a very substantial increase over the existing provision, and I am satisfied that it is a necessary increase. It represents nearly £20,000 for each employee of the corporation over the year. I hope that we shall not continue to hear from the Opposition that the Government are not doing enough to support the industry and the employees of British Shipbuilders. But it must be obvious to everyone of common sense that all the figures that I have mentioned are far too high. The corporation must reduce its costs and continue to improve its performance.

Merchant shipbuilding continues to face unprecedented market difficulty. The Government have always accepted that the industry needs substantial support if it is to have any chance of survival. The new external finance limit signals the limit on cash within which the corporation must try to operate this year. But its continued operation beyond the end of this month depends upon an increase in its limit on borrowing, as provided by the Bill. Its continued survival depends, above all, on its ability to continue to win orders in a crowded market and to improve its performance and justify the huge finance which the Government and taxpayer are putting forward.

I commend the Bill to the House.

5.42 pm

Mr. Gordon Brown (Dunfermline, East)

On behalf of my colleagues and myself, it gives me great pleasure to welcome you, Madam Deputy Speaker, on taking up your duties in the House. It gives us special pleasure, not just because of the personal qualities that you bring to the job, but because you are the first woman Deputy Speaker from the Labour party. We look forward to working under your chairmanship in our debates.

I welcome the Chancellor of the Duchy of Lancaster to his first debate on shipbuilding. I also welcome the Under-Secretary of State for Trade and Industry, the new shipbuilding Minister, who will reply to the debate. During the past four years we have had four Secretaries of State for Trade and Industry, who are responsible for shipbuilding, yet we have had three shipbuilding Ministers during the past nine months. I hope that the new Minister will not take it amiss if I recall that the maiden speech of the previous shipbuilding Minister in December last year turned out to be his valedictory address on the issue. If we had had as many new orders as we have had new shipbuilding Ministers, the industry would have been in a much better position.

As the Chancellor of the Duchy of Lancaster said, this is more than a debate about the technicalities of the Bill; it has become a debate about the general state of shipbuilding. The main point that we wish to make is that Britain used to have 25 per cent. of world orders, but now it has only about 2 per cent. The privatisation of many yards has led to rationalisation and, in some cases, the elimination of shipbuilding in our communities. Half of the yards that have closed in Europe during the past 10 years have closed in Britain, and half of the merchant shipbuilding jobs that have gone have gone in Britain. Therefore, we need more than just a new British Shipbuilders (Borrowing Powers) Bill; we need new measures to protect and to advance shipbuilding, and a new commitment to winning orders for the rest of the 1980s that will bring new hope to our shipbuilding communities.

This summer is the 10th anniversary of the creation of British Shipbuilders. During those years, 70 yards and facilities have become only seven and a work force of 80,000 has become one of fewer than 6,000, and, despite what the Minister says about what is happening elsewhere, Britain more than any other European country or any of our international competitors in the far east has suffered the lion's share of job losses in merchant shipbuilding. Other European Community countries have suffered losses of 30, 40 and 50 per cent., but during the past eight years we have suffered losses of 300 per cent. in our shipbuilding work force. The Minster must answer this question: why does Britain—a merchant shipbuilding and trading nation—with most to gain do least while other countries with least to gain do most to protect their industry?

During the past few months, we have seen the end of engine building at Clark Kincaid at Wallsend and the closure of Smith's Dock. My hon. Friend the Member for Redcar (Miss Mowlam) will wish to catch your eye, Madam Deputy Speaker, to mention her fears about her area. Despite the success of North-East Shipbuilders in winning the order from Denmark and the success of Govan in winning the Chinese orders, those yards will still be running at about 70 per cent. capacity as a result of the redundancies in April this year.

There should be no further cuts in capacity in the industry and no further job losses. The Government should take the necessary action to sustain merchant shipbuilding, not least because about two years ago the former shipbuilding Minister, now the Financial Secretary to the Treasury, said British Shipbuilders now employs less than 12,000 people in merchant shipbuilding and engine building—that if it declines much further it will simply disappear. The road runs out. During those two years, the work force has halved. If the Minister does not take action to protect the industry, Britain will be without a merchant shipbuilding industry worthy of its name.

Will the shipbuilding Minister tell us what is happening about the orders in the several areas in which British Shipbuilders is competing for business? The Cuban order could bring new jobs and opportunities, especially to North-East Shipbuilders. What has happened to the additional Danish orders for which North-East Shipbuilders is looking to sustain jobs in the area? What resources will be made available to pursue Govan's aim to re-enter the cruise ship market? At least four new orders will be placed later this year. Remembering that the QE2 was refitted abroad—something that should not have been allowed to happen—may I ask what action the Minister will take to ensure that when the Cunard orders are up for tender British yards are put in a position where they can win the orders?

What is likely to happen with regard to public sector orders? In an answer that I received this week the Minister said that, apart from the Cal-Mac order and the St. Helena ship, there are only two sets of public sector orders that are likely to be placed in 1987 and 1988. We would be grateful to know the dates when those orders are likely to be placed. I think the Minister has a responsibility to trawl through the Government Departments to look at whether public sector orders in other areas can be advanced to sustain the capacity that is in the industry at the moment.

Will the Minister also refer to the St. Helena supply ship order? He may recall that it was in the debate last May that the decision to order the St. Helena ship, after many years of discussion, was announced. It is now more than a year since that announcement was made. We understand that the order is out to tender, but when will a decision be made that will enable at least one yard to benefit in jobs from that order, which should have been placed some time ago?

What can the Minister do to ensure that British ship owners buy British and that, as we have suggested, a task force is set up within his Department to scour the world for available orders? Will the Minister tell us something about the Government's protest to the European Commission about the Brittany Ferries order? Given that the original complaint was made by the Government to the Commission in January and given the recent statement by the Competition Commissioner that a decision was about to be made and a report issued, has the Minister been notified of the Commission's decision? If so, what action does he expect to come from what is the first case under the sixth directive and what action will he now take to ensure that, just as the French take the action that they feel is necessary, we in Britain will take the action that is necessary to ensure that British ship owners buy British, repair British and fly the British flag?

If the Japanese can say that as long as there is an ocean to sail they will build ships to sail on it, if the French can take the view that they will take what action is necessary to protect their shipbuilding industry, and if the Germans, as they did a few months ago, can make money available from their defence and regional aid budgets to ensure that orders were made available to their own shipyards, Britain, the biggest island trading nation in Europe, a nation that lives or dies according to its sea-going trade—90 per cent. of our imports and 90 per cent. of our exports go by sea — should take the action that is necessary to ensure that existing yards are saved, that there is a full order book for them and that our shipbuilding skills and communities are kept in being and not put in jeopardy. I hope that the Minister will provide the money that is necessary to sustain in this country a vibrant merchant shipbuilding industry.

5.53 pm

Miss Emma Nicholson (Torridge and Devon, West)

It is a great privilege for me to make my maiden speech. As the Member for Torridge and Devon, West I have set myself the welcome task of serving my constituency better than any Member before me. That is a hard task to fulfil — some might say impossible, some might say impertinent — as I follow that much-loved former Member of Parliament, Sir Peter Mills. Peter was a rare Member of Parliament in that he was as much admired and respected in the House as in his constituency. Many hon. Members excel in their constituencies. Many dedicated Members of Parliament work all the hours that they can to look after their constituents, and earn honour and renown locally. Many other Members of Parliament shine brightly in the Westminster firmament. It is unusual to find a Member of Parliament as much admired and respected both in his constituency and in the House. Peter Mills was such a Member.

Peter Mills was an independent thinker. Although he was a loyal supporter of the Government, he did not shrink from disagreeing with the Government when his integrity demanded it. For example, he did not support the dairy inspection charge and, at the risk of incurring the House's displeasure in a future debate, may I say that he did not support the uplifting of the secretarial allowance for Members of Parliament. At the core of his work was his strong Christian faith, which I suggest helped him to overcome his recent illness, coupled with the excellence of the surgery and the nursing care that he received in Devon from the NHS and the strong support of his loyal wife, herself a former nurse. He has now entered a welcome retirement, when he will be farming.

In Peter Mills' footsteps I am proud to represent a truly magnificent constituency, where the beauty of the countryside is excelled only by the outstanding people who live there. We encompass much of Dartmoor, our great national park. Surely the term "an area of outstanding natural beauty" must have been coined by someone while standing on Dartmoor. Preservation and conservation of those areas for visitors and residents to enjoy, and for wildlife to flourish in, is close to my heart. However, visitors bring traffic, and we have heavy transport locally. I welcome with relief the Okehampton bypass which my right hon. Friend the Secretary of State for Transport will open on Thursday next. It will bring income generation, not just to my constituency but to constituencies in Cornwall. For that reason, I will be urgently pressing for the widening of the next stage of the A30 leading to Cornwall, lest we create more vast bottlenecks to thwart our tourists and our local trade.

The impact of road development on the surrounding countryside was much discussed in the House and the other place in the debates on the Okehampton bypass. Farmers care for 70 per cent. of our countryside and, in my constituency, rural prosperity depends on the successful continuance of the small family farm. Spending money in market towns, the relative success of small businesses and large industries, and trade in pubs and restaurants all rest on profits generated by the farmer.

If we want to continue the pattern of country life that we love to see and, as holidaymakers, to visit and to enjoy, we have to help the small farmer in an era of over-production while he diversifies. Aside from tourism development—a crucial leisure industry—we have a famous rural arts community, the Beaford Centre. Last year the centre celebrated its 21st birthday. There, not to cut the cake but to unveil a tapestry woven for the occasion, was my right hon. Friend the Minister for the Arts. Perhaps his great thoughts on the use of Government funding for the arts as the fly trap to attract the spider of much greater private funding started there. The centre has some public funding, but it was begun by private foundation money. Through the very excellence of its work, it attracts the outside finance that it deserves. I strongly support the Minister's new move.

One would expect to find the arts, farming in beautiful countryside, tourism and a high retirement population in the south-west. What one would not expect to find—and the reason I speak in the debate—is shipbuilding. Appledore is no large yard. With 550 employees, it is a small yard both by world standards and when compared with other British Shipbuilders yards. In common with other British Shipbuilders yards, redundancies occurred last May. But—and I spoke with the managing director yesterday—no more redundancies are planned. Of the 95 people made redundant, British Shipbuilders (Enterprise) Ltd. interviewed each one with positive results: 49 have now found employment; 19 have been on or are undertaking special retraining courses; 19 have started their own businesses; and eight are being assessed now for special help. I welcome the funding provided by the Government for British Shipbuilders (Enterprise) Ltd.

Appledore may be small, but it is now stable. As a large employer in a seafaring place, it is a vital part of our community's prosperity. I welcome Appledore's successful move back into the dredger market. Dredgers have been built well and on time, and the order book is full until year end. We must give equal credit to management and the work force, as well as to the Government for their support.

Price is of prime importance in securing orders, particularly with cheaper labour forces overseas. This is where the intervention fund comes in. However, high quality work and perfect timing matter just as much and that is why Appledore has secured orders for three ships over the past two years from just one owner, ARC Marine Ltd. I am confident that Appledore's reputation will place the yard in front when competing for further orders in the coming years.

I am particularly proud that Appledore is developing Questor, the new general purpose research vessel. That should further strengthen the yard when it finds a market. The move by British Shipbuilders into the more complex sectors of the market shows, once again, the technical achievements of our yards. I suggest that that rests upon British Shipbuilders' achievements in the new technology, particularly computer-aided design and computer-aided manufacture.

I will be seeking strongly the restoration of assisted area status that my constituency so badly needs. New software would open the door to far swifter development than we can achieve without European Community funds. In Appledore, as in other British Shipbuilders' yards, we have outstanding hardware and software, designing our ships with line drawings on screen in depth. What happens then? All of that complexity produces a punched paper tape that is carried downstairs by hand and fed into the computer-aided manufacturing mechanism and the cutting begins. That is archaic in computer terms. My industrial background lies in computers. I trained with ICI. The link between screen and cutting should be electronic, not manual.

More funding is needed for software development, funding that could come from Europe. Why allow our shipbuilders to be held back? Assisted area status holds no shame. It is a just recognition that some historic industries—shipbuilding is as old as man—cannot survive by market force alone and justify the taxpayers' suppport. That does not detract from our philosophy, which I most heartily share, that the free market is the fairest mechanism for the regulation of supply and demand and is the only mechanism that endures.

However, intervention is needed where our society wants production to continue against the market force, to boost the old and to come into the era of our sunrise industries. The building of ships and the continuance of the small family firm fall within that pattern. Intervention creates a partnership between the private and the public investor and between private enterprise and the state. The state should be able to take a dwindling role as private enterprise flourishes and grows.

I welcome the continuance of development aid, which Appledore Ferguson Shipbuilding Ltd needs now for two tenders out to the developing countries.

I support most strongly the British Shipbuilders (Borrowing Powers) Bill. It is a crucial measure which will support our yards into the 1990s' upturn of demand.

6.3 pm

Miss Marjorie Mowlam (Redcar)

I begin by congratulating the hon. Member for Devon, West and Torridge (Miss Nicholson) on an excellent maiden speech. She made a convincing case for public spending and I hope that her obvious analytical and intellectual skills are not totally wasted on the Conservative Benches. Madam Deputy Speaker, may I add my congratulations to those of others and say how pleased we are to see you in your new role?

I would like to pay tribute to the previous Member for Redcar, Mr. James Tinn. Jim Tinn is a quiet man, well respected in the House and the constituency for the work that he has put in over 23 years representing the people of Redcar. I wish him well in his retirement. I would like to pay tribute to another Member from Teesside, Ellen Wilkinson. She made her maiden speech over 60 years ago, when she was the only woman on the Opposition Benches. She spoke powerfully about the problems of women in low-paid jobs, about the inequalities in widows' benefits and about the difficulties of the long-term unemployed. We are fortunate now to have 21 Labour women on the Opposition Benches but, sadly, many of the issues that Ellen fought for are still high on the political agenda today. Above all, she was a practical woman who liked to see things done. She liked to get results and I feel that I will have deserved the votes and support of the people in Redcar if I can work with the same energy and commitment as she did.

This debate, the Second Reading of the Local Government Bill earlier in the week and the Gracious Speech have a common theme—the theme of division. There is the division between British shipworkers and those in Korea, the division between the north and south, the division of inequality and even the division between central and local government. However, there is another division which is in some ways greater than those I have mentioned—the division between fantasy and reality. There is the fantasy of the Government who believe that they understand the problems of this country and know the solutions to them and then there is the reality—the day-to-day reality that working people have to live with.

The Government seem impelled by their own fantasy. They do not try to understand the real world. Nowhere are Government fantasies made more clear than in the legislation that they have proposed so far in this Parliament. I have always thought that censorship is a difficult and a complex issue but, having read the obscene fantasies in the Government's legislation, I am beginning to change my mind.

I shall begin with the Minister's fantasy this afternoon. He said that the problems faced by British shipbuilding in the past 10 years had nothing to do with the Government's policies since 1979. He suggested that we should face the facts of the world market. The reality, as the people in my constituency know, is that if there had been intervention funds and if there had been British orders for British firms, the position of Smith's Dock would have been thoroughly different. Last year, 1,300 people were made jobless when Smith's Dock closed. The dock was efficient even by the present Government's standards. It was efficient in that it had a superior computer-aided design and manufacture system. It was efficient in that it had the latest modular construction techniques in addition to the best labour relations in the past 20 years of many of the shipyards in Britain. The saddest thing, as my hon. Friend the Member for Dunfermline, East (M r. Brown) mentioned, is that there was the possibility that multiple cargo ship carriers from Cuba would be placed at the dock, but the closure made that impossible.

The saddest task that I face in my job as the hon. Member for Redcar is dealing with Smith's Dock park. That is the only piece of British Shipbuilders land left in the area. It consists of four football pitches and two cricket pitches that we are desperately fighting to keep in the constituency so that the ex-dockers living in Southbank, Grangetown and Dormanstown have something to do in their leisure time, along with the other 22.5 per cent. of people on Teesside who do not have a job to go to.

The picture of what the closure of Smith's Dock has done is made worse by what has happened to manufacturing investment in the area in the past 10 years. On Teesside, 32,200 jobs have been lost. A total of 9,000 or so of those were in oil and chemicals, 17,900 were in metal, primarily steel, and 6,000 were in shipbuilding. That picture is not complete, because one has to add the jobs that have been lost in the past eight years in construction, which amounts to a further 10,600.

People should sit and think about that. A total of 42,000 jobs in Teesside have been lost in the past 10 years, and that is without going into the detail of the skill base that has been disappearing, the lack of training opportunities for young people and the impact that that has had on the secondary economy, be it shops or small businesses. That is the reality of what has happened in Redcar in the past 10 years.

Mr. Michael Fallon (Darlington)

indicated dissent.

Miss Mowlam

The hon. Member may shake his head, but that is a small indication of his inability to understand the real world. If we are going to reinvest, repair the economy and increase the manufacturing base, we have to work with the public sector, the private sector and local government. That investment must exist in an environment that is both flexible and stable. I am sure that is what we all want and I hope that the next two years will bring that flexibility and stability.

Another Government fantasy concerns local authorities. In the Bill that we discussed on Tuesday, we were offered the fantasy that competitive tendering will in some way increase the efficiency of services in refuse and cleaning. In reality, the people of Redcar who receive or work in those services know that that change will mean more part-time, short-term, temporary sub-contracting. Services will become less efficient in the process.

Another Government fantasy concerns their proposed legislation on industrial relations. The Government have the illusion that, by introducing such legislation, they will increase democracy in the trade union movement and increase choice in industry. The reality, as the people of British Steel and ICI Wilton know — even the Confederation of British Industry acknowledges it—is that that legislation will not increase democracy. That legislation states that people can have a ballot — they can all vote, that is fine — but the Government can ignore the decision they reach. That is disfranchising people and taking away democracy. Yesterday, my hon. Friend the Member for Motherwell, North (Dr. Reid) said that the Scottish people would fight hard to keep Ravenscraig open after August 1988, the deadline that the Prime Minister mentioned at Question Time today. We on Teesside will fight alongside the people of British Steel at Ravenscraig. We certainly will not have one plant played off against another.

If any hon. Members intend to go to the races at Redcar this weekend, the only odds-on bet that they will be able to place is that, whether people work in the public sector or receive those services, the next four years will be horrendous. I hope that the Government realise that fantasies are for private indulgence and not public policy.

6.11 pm

Mr. Michael Fallon (Darlington)

It is a pleasant duty to be able to congratulate the two previous speakers on their maiden speeches. I do so with some sense of depression, because the more we hear speeches of such polish and self-confidence, the more we reflect on our own inadequate efforts some years ago.

My hon. Friend the Member for Torridge and Devon, West (Miss Nicholson) spoke with eloquence and clarity, combining deep local knowledge with the subject of our debate. I believe that my hon. Friend has set herself a formidable task in seeking to follow Sir Peter Mills. However, having heard her today, we are in no doubt that she will succeed in that task.

The hon. Member for Redcar (Miss Mowlam) spoke with equal eloquence, but perhaps with even greater passion and urgency, about the problems of Teesside, and of Smith's Dock in particular. We admire her commitment. In the north-east we need such commitment if we are to promote wider understanding in this House of the deep-rooted problems that we face in the region. The hon. Member for Redcar has also set herself a formidable task in seeking to emulate Ellen Wilkinson. That will be some task, but if the hon. Member speaks on every subject with the same commitment with which she spoke on Smith's Dock, she will he listened to with great respect.

Those of us who have spoken before on similar Bills—I recall Bills of 1983 and 1986—will, of course, have a sense of deja vu. Yet again we are upping the borrowing limit of the corporation and increasing the expendable maximum prescribed under the Aircraft and Shipbuilding Industries Act 1977. Some may believe that we return to this Chamber too often to increase those limits, but I believe that it is right that we should periodically debate the problems of our shipbuilding industry. It is also right that Parliament, conscious of the fact that shipbuilding is one of our great industries, and as protector of the taxpayer, should remind itself of the problems that that industry faces.

The hon. Member for Dunfermline, East (Mr. Brown) referred, as I intended to do, to the fact that this debate falls almost exactly 10 years after vesting day. It marks the 10th anniversary of nationalisation. Therefore, this debate gives us more opportunity than the debates of 1983 and 1986 to look back over the decade since nationalisation to review progress.

That decade of nationalisation must be set against a continually deteriorating international background, an increasingly difficult world market for merchant shipbuilding and the fact that, in each successive year, prices are more and more depressed and orders more scarce and therefore harder to secure. The continuing depression of the world market must be coupled with the absence of any firm evidence that the serious structural over-capacity in Japan and South Korea will be reduced in the foreseeable future or that there will be any true change in the low-cost, high-subsidy regimes practised by those countries. Those regimes underpin that over-capacity. I shall return to that problem later.

Given the international situation, I believe that three points should be emphasised. First, continuing support will be required for British Shipbuilders. I am glad that the hon. Member for Dunfermline, East did not make too much of the extent of financial support provided in the past. I can think of few industries that have enjoyed such support from the Government. The borrowing limit initially set in 1977 was £250 million. Today we are being asked to extend that borrowing limit to £1,800 million. Given that there is now a work force of just over 10,000, it is now running at some £150,000 per man.

Secondly, it seems inevitable that British Shipbuilders must continue down its newly chosen path of specialisation. I hope that, however difficult the corporation's financial position may become, the product development programme will continue to be well funded. I trust that British Shipbuilders will continue to identify the niches in the market place from which added value and a sufficient return on capital can be derived.

Thirdly, there is the continuing problem of overcapacity in the international market. Obviously, as my right hon. and learned Friend illustrated, it is a worldwide problem. It is not something that the Government can tackle alone. However, I believe that we are now beginning to make some progress, at least on a Community basis. The sixth directive is now in place and I believe that the importance of that directive is not simply in establishing uniformity among the state aids that are given to various member states, but also in introducing much stricter guidelines on the transparency of financial relations between member states and their shipbuilding industries.

What I want to know from my right hon. and learned Friend is whether it would be possible for the Government to take the negotiating position that they adopted in Brussels during negotiations on the sixth directive on to a much wider forum, perhaps within the OECD. In that way we might be able to establish some internationally agreed code of transparency that would make it easier to identify the extent of subsidy within the Korean and Japanese regimes.

I will leave that suggestion with my right hon. and learned Friend, but, in the meantime, I am happy to support this Bill.

6.19 pm

Mr. Matthew Taylor (Truro)

I begin my speech by congratulating three people. The hon. Member for Torridge and Devon, West (Miss Nicholson) spoke about her constituency with a calm and ease that deserves our congratulations. Many of the issues that she raised are of concern to me as an hon. Member representing a southwestern constituency, the dualling of the A30 through Cornwall being one example. I hope that we shall be able to work together to achieve that aim.

I congratulate the hon. Member for Redcar (Miss Mowlam). All hon. Members must have been impressed—some were possibly a little embarrassed—that, unlike her, we did not speak entirely without notes. That deserves particular congratulations.

I also congratulate you, Madam Deputy Speaker, on taking the Chair. I hope that you will respect the importance of free debate by Back Benchers and, of course, minority parties and their role in debates.

I do not claim to represent an area in which many workers are employed by British Shipbuilders. However, I represent an area in which the Merchant Navy, shipping and boat building are important. Above all, it is an area in which we can see only too clearly the effects of the decline in shipbuilding. A great number of large boats are moored in Carrick roads in my constituency—a rusting badge of honour for the decline of shipbuilding and the Merchant Navy.

All hon. Members are united in the belief that it is absolutely necessary to continue to support British shipbuilding and to maintain it at its present level. It is clear that we must produce policies and support that will achieve that end. But I am afraid I must say that the Minister seemed to be struggling to justify his position, that he showed precious little verve or imagination to demonstrate that he saw a way of moving forward from the present situation. With the world now facing 40 per cent. over-capacity in its ability to produce ships, and Europe having only 15 per cent. to 18 per cent. of world trade, we are facing a crisis. We must decide whether we wish to continue to support the industry.

Korea and Japan are dominating the market with, frankly, Korea deliberately producing below cost, on the basis of Government subsidies and, at the same time, expanding its capacity — an expansion of capacity of about 240 per cent. over the past 20 years or so. It is possible to argue — I encourage hon. Members to examine the argument—that Korea wants the far east to take control of the world market by effectively buying out its opposition through subsidised production.

John Lister, who is newly appointed to the industry, has asked: How can you compete with a country that trains its army commandos to bite the heads off live venomous snakes? Perhaps that is an exaggeration, but it is true that we have to face up to the reality that British Shipbuilders is not suffering purely from market forces or a shipbuilding depression. It is also suffering from a deliberate and well-thought-out strategy to undermine European shipbuilding to the point at which it is unable to compete effectively and at which, once again, there is an increased demand for British ships and ships throughout the world.

Mr. Lister also asked how one can work productively under a Government that puts a man into office and tells him that his job is to cost them less money and prepare the group for eventual privatisation? Such a Government would not win prizes for motivation in the present circumstance. The truth is that it is not possible to prepare the industry for privatisation while we suffer the current cut-throat competition in world markets and the current challenges to shipbuilding in Europe. We have seen not only three ministerial changes in the past year, but, in the past four years, four chairmen of British Shipbuilders. The changeover in personnel seems to be the one growth area in the industry.

British shipbuilding is a vital industry, but we have seen a gradual depletion of the merchant fleet, with enormous trade and strategic implications and also implications for shipbuilding. It is predicted that, as we approach the 1990s, world orders for British ships will double, yet British Shipbuilders has been cut to a shadow of its former self, while Korean shipbuilding has expanded. That is why it is essential to increase borrowing powers. It is essential to maintain the basis to be able to meet the challenges of the 1990s and not withdraw from an industry that, sooner or later by its very nature, as the hulks rust away, will see a resurgence. The House does not want to face a far eastern monopoly that Europe cannot challenge and meet.

That is why, going beyond the measures that we are debating tonight, it is important that many other measures are taken to help the British shipbuilding industry. It is important for jobs and, as we have heard, for the communities that are involved, but it is also important for the country and its strategic interests.

The Government can and should look further than the limited matters covered by the Bill, towards responding, for example, to inquiries for selected product ranges that are backed by different European countries, so that, once again, the industry can gain the economies of scale that it risks losing at present. There should be more work on standardising equipment ranges in the interests of supporting shipowners and shipbuilders in their desire to compete internationally. There should be more use of the intervention fund to enable the United Kingdom to tender internationally. Therefore, it is essential to have stable exchange rates. To do that, we must join the European monetary system. I urge the Minister to approach the Chancellor of the Exchequer and forcibly argue that case on behalf not only of British Shipbuilders but of the industry in the United Kingdom as a whole.

We need to examine a tax regime that is designed to encourage the construction of new ships. We must look at a scrap and build policy to support the shipbuilding industry and modernise the aging merchant fleet. Strong pressure must come from the European Community and the United Nations to end subsidised competition against our merchant fleet and growing competition from Comecon countries. Above all—it is directly within the influence of Ministers—we must ensure that all ships that are built with public money are built in United Kingdom yards.

On top of the normal cyclical adjustments, we face a deliberate attempt to destroy the European industry. It places an obligation on the House and on the Government to rise to the challenge.

6.27 pm

Mr. Bruce Millan (Glasgow, Govan)

Shipbuilding debates tend to follow the same pattern. I do not intend to go over the whole range of shipbuilding issues. They were covered comprehensively and competently by my hon. Friend the Member for Dunfermline, East (Mr. Brown). On this occasion, there has at least been a little variety in the debate. We have heard two maiden speeches by hon. Ladies. It is a pleasure to add my congratulations to those that have already been expressed to the hon. Member for Torridge and Devon, West (Miss Nicholson), who spoke of her predecessor, Sir Peter Mills, who was well regarded by hon. Members. She spoke extremely competently and confidently about the problems affecting her constituency.

I also congratulate my hon. Friend the Member for Redcar (Miss Mowlam) who spoke extremely well. She mentioned her predecessor, Mr. James Tinn, who was highly regarded by hon. Members. I particularly congratulate my hon. Friend because she made what many maiden speakers do not make—a real debating speech, and she did so with hardly any use of notes. I look forward to hearing her in many shipbuilding debates. Unfortunately, the number of Members with an interest in shipbuilding is declining all the time as more and more yards are closed. That declining number is a reflection of the dreadful experience that the industry has had.

I shall be speaking about my yard, Govan Shipbuilders. I was delighted with the Chinese order. I acknowledged at the time to the Minister's predecessor—and I am glad to acknowledge again — the help given by the Government to obtain that order. The aid and trade provision played an important part in the difficult negotiations. The main tribute for their success must go to the managing director of Govan, Eric Mackie, and various members of Govan who were part of the negotiating team. I am happy to pay tribute to them again. This is a most welcome order.

However, the order does not provide for Govan Shipbuilders a permanently secure future, or anything like it. The number of people employed there is very small. It needs continuity of orders. Most of the people employed there have been laid off. Only in the next two or three months will recruitment begin again. Even so, it will not be possible to run Govan Shipbuilders on an economic basis. Although it is an efficient yard, it cannot be run economically without a sufficient order book to keep the facilities in operation. It desperately needs further orders.

The Brittany Ferries order has been placed with a French yard, following intervention by the French Government. Govan put in the lowest tender—there is no dispute about that. The previous Minister took my view—that Govan Shipbuilders, in free and fair competition, had beaten off the competitors and put in the lowest tender with the best conditions for the obtaining of the order. What is more, there was every sign that Brittany Ferries wanted to place the order with Govan. It made considerable efforts, even when under pressure from the French Government, to put the order with Govan. However, the order went instead to a French yard following intervention by the French Government.

The British Government have taken this matter to the European Commission, rightly alleging that the French Government have breached the sixth directive. This is the first real test of the sixth directive, which was signed only in December last year and came into operation only at the beginning of this year. I had a parliamentary question on that yesterday, but unfortunately it was not reached orally. Instead, I received a written reply today, which says: As a result of our representations, the Commission has informed the French authorities that any aid for the Brittany Ferries order must comply with the new shipbuilding directive and that no aid may he given without the Commission's approval. That is all right as far as it goes, but if the order has been obtained improperly, or even illegally, I should like something to bedone to have the order cancelled, the matter reinstated as it was and the order placed on the basis of genuine free competition. If the directive does not mean that, I am not clear what the point of it is. The great argument for the directive, which the Ministers used at the time when we were not satisfied with the level of aid that could be obtained as the maximum under the directive, was that it had advantages in terms of transparency. We agreed that that was an improvement. This is a real test as to whether the directive can be made to stick.

What is happening? When will we get the report of the Commission? What are the Commission's powers? If the French Government do not co-operate, what will happen? Will they be taken to the European Court?

This order was extremely important for Govan. It had it snatched from under its nose mot unfairly and improperly. I demand that the Government pursue this with the utmost rigour. I hope that we will get an assurance from the Minister when he replies to the debate. I hope that the order can still be retrieved for Govan. No other British shipbuilder was involved in this, so Govan is not squeezing out a British yard.

The St. Helena order will not necessarily come to Govan Shipbuilders. Other shipbuilders are interested, including some in the private sector. However, I believe that Govan Shipbuilders has an excellent chance of getting the order. There has been a great delay in placing the order. It was first announced in May 1986 and I had correspondence with the Minister for Overseas Development on the matter in October 1986. I was told then: The timing of the replacement of the vessel is well advanced and we hope to be in a position to make a decision shortly. I raised the matter in a similar debate in December 1986. The Minister said: The Government have decided what type of ship to recommend to the Government of St. Helena. As soon as that Government's agreement has been received, the ODA will set in motion the competitive tendering arrangements for design and construction of the new vessel in a United Kingdom yard."—[Official Report, 8 December 1986; Vol. 107, c. 142.] A few days later the Minister gave details of the type of ship that the Government had in mind and said that they were setting in motion the competitive tendering arrangements. We are now seven months further on and we still have not had a firm date for when the tender procedure is to be completed and an order placed. It is not good enough for the Chancellor of the Duchy of Lancaster to say that the Government hope to place the order some time this year. The order should have been placed a long time ago, and certainly it should be placed within the next few weeks.

If the Government want to persuade the industry and the House, and particularly Opposition Members, that they care about the shipbuilding industry, here is an order directly in the Government's gift. It is desperately needed by a British shipbuilding yard. I am confident that Govan will put in a competitive tender, so I hope that the order will come to it. It will in any case come to the United Kingdom. It has nothing to do with the world situation, South Korea, Japan or anybody else. It is a public sector order and I hope that we will hear a commitment to place it soon.

Dr. Godman

The closing date for tenders for the St. Helena ferry is 25 August. Should not the period of assessment be reduced from three to two weeks so that the order can be placed as quickly as possible?

Mr. Millan

Once the tenders are made, I hope that there will be no further delay. My hon. Friend knows the story of all the delays so far. I cannot understand the dilatory way in which this matter has been dealt with, particularly as it has been raised so frequently in the House by myself and other right hon. and hon. Members. I hope that we shall get something more specific and definite when the Minister answers the debate.

6.40 pm

Mr. Bob Clay (Sunderland, North)

The key to this debate is the point that has been made in every debate that I can remember—since 1983—which is that, although there may be a recession in world shipbuilding generally, this country has taken by far the greatest share of that recession in Europe, if not in the world. I can remember times when Ministers claimed in debates such as this that the Koreans were intending to cut back. Tonight, even some Conservative Members have recognised that Korea is still expanding capacity. On the last Lloyds register more than 30 per cent. of the tonnage waiting to be commenced around the world—30.2 per cent., in fact—is now held by Korea.

It is worth making the point that those of us who have persistently pointed to Korea and described its ability to undercut countries such as ours in shipbuilding have maintained that that has had to do with the nature of its slave labour economy. Those of us who were denounced for saying that sort of thing about Korea can point to the events of recent weeks there. I received a letter complaining about something that I said on television about Korea. It was from a business man who spends a lot of time in Korea. He said that it was outrageous to describe Korea as a slave labour economy: It is cheap and snide … The Koreans are a very hardworking and loyal race. We have seen how loyal they are to the oppressive and reactionary regime under which they have suffered for so long. I hope that recent events in Korea will lead to a position in which, if we had a sensible Government in this country, we could talk to Korea about more sensible arrangements for the long-term future of world shipbuilding. That would benefit the Korean working-class as well as our own.

The Government must answer a simple question about the future of British shipbuilding. If it is true that there are now 538,000 gross registered tonnes that are more than 20 years old in what is left of the British fleet; if there are another 1,216,000 gross registered tonnes that are 15 to 20 years old; and if there are probably 6 million gross registered tonnes that will need repairing and replacing in the next 10 years, only three things can happen. That tonnage will eventually disappear, or it will be rebuilt abroad, or it will be built in this country. Even if only half of the tonnage of the British merchant fleet that needs replacing in the next few years was built in this country as a result of sensible scrap-and-build policies or other inducements—quite apart from orders such as that for St. Helena, which are in the Government's gift, or orders from developing countries—that would fill what is left of our yards to more than their present capacity. That demonstrates the disgraceful state of affairs that we are in.

Opposition Members warned for long enough that our merchant capacity was sinking to the point at which it would eventually be unable to survive. In some ways we have already reached that stage. There are already hints of the impossibility of certain orders because, if they were secured, we could not build them in British yards, That is how low our capacity has sunk.

It is a pity that the Chancellor of the Duchy of Lancaster has left the Chamber, because he specifically referred to Sunderland in his opening remarks, and to the £50 million losses on contracts over and above subsidy and intervention. He pointed his finger at Sunderland as the main culprit in that respect. Clearly, there have been problems in Sunderland. They have been symptomatic of the attitude of British shipbuilders and of the Government's lack of interest in what is going on. It is quite extraordinary that, on the one hand, the management of British Shipbuilders in Sunderland — North-East Shipbuilders Ltd.—is saying that it is still necessary to make 205 redundancies, resulting in our facing, week by week, the nervous and worrying situation that compulsory redundancies will be declared, with their inevitable consequences; and, on the other hand, the management is saying that it will need an extra 240 workers for the next six to eight weeks, including the holiday period, to come either from the existing employees in Sunderland, who will work during their holidays, or by bringing workers from other British Shipbuilders' subsidiaries, or by subcontracting. So, on the one hand, capacity is being run down with enforced redundancies and, on the other, they are talking about bringing people in from outside as subcontractors. That is a measure of the state of what is left of the industry. How on earth can the Government or the senior management of British Shipbuilders expect to have sensible industrial relations and stability in an industry that is desperately fighting for survival while that kind of insanity is going on?

I ask the Government to make inquiries at British Shipbuilders about a specific matter. Welcome as the ferry orders were in Sunderland—they were a lifeline that saved the yards there—some serious questions must be asked about what happened. The order for 25 ferries was a marvellous contract worth more than £100 million. However, at the time the order was signed we were told that the work was unsophisticated. Now we find that the standards required—57/50—are the highest in world shipbuilding. The management is continually saying that the programme is getting behind, and that the work content is becoming more and more complicated and that is why the unions have been forced to agree to double shift working and many other productivity measures. There is widespread feeling in Sunderland that the contract was negotiated in a way that would lead inevitably to the circumstances that I have described.

Mr. George Parker, the chairman of North-East Shipbuilders Ltd. at the time the contract was negotiated, then left British Shipbuilders in peculiar circumstances which have never been publicly explained by British Shipbuilders. He took a job with P.Z. Trading Company Ltd., which placed the order for 25 ferries with British Shipbuilders. That may be a pure coincidence, but many people in Sunderland are saying that some questions about what is happening must be answered. These events are typical of the type of arrogance, secrecy and hostility that have been displayed to the work force—a feeling that there is a game of chess to be played, rather than getting on with the job.

There has been a feeling of resentment among the work force over the continual tiers of management that they have experienced during the past few years. The turnover of managers in Sunderland in British Shipbuilders exceeds even the number of Government Ministers who have dealt with these debates, or the number of chairmen of British Shipbuilders at national level. How can one expect workers in a shipyard to feel any confidence in the future when they see managers come and go in—sometimes—extremely mysterious circumstances, and when, suddenly, contracts that were welcome turn into nightmares of double shift work and people being told to work in their holidays? Subcontracting often causes the hold-ups of which the Minister complains; work is sent out abroad, is then said to be substandard and has to be sent back abroad, and is then sent to another subcontractor. We have had a long history of that.

There must be an inquiry into the way in which British Shipbuilders has been managed. We can survive if the Government seriously examine the policies for which we have continually argued, and which have been succinctly expressed from the Opposition Front Bench this evening. We need to take advantage of the sensible policies that could be available — scrap-and-build, greater efforts towards obtaining orders from developing countries and coming to more sensible international solutions. We need a more sensible way of running what is left of the British shipbuilding industry.

6.49 pm

Mr. Nicholas Brown (Newcastle upon Tyne, East)

I can remember the considerable pride that was felt on Tyneside when Benton house was opened in my constituency as the national headquarters of the British shipbuilding industry. The north-east of England does not have many headquarters of national industries and it seems as if, since 1979, the Government have been set on closing the one national headquarters that we still have.

In a superb maiden speech, my hon. Friend the Member for Redcar (Miss Mowlam) spoke about the pain and hurt that has been occasioned in her community by the closure of Smith's Dock. Similar stories could be told by hon. Members representing constituencies in Tyneside arid Wearside as well as Teesside. A lot of pain and hardship has been caused in our communities because of what has happened to the shipbuilding industry, and especially because of the Government's privatisation of the warship building yards and their cynical rundown of the merchant shipbuilding industry. That did not happen all at once in one great confrontation, but the Government chipped away a little piece each time. Then they come to the House and in debates just like this say that the industry will now be stabilised, that there is a world crisis but that at least there are some prospects for the future.

In each debate, year after year, Ministers speak less about the prospects and more about the difficulties of the current situation. I intervened during the Chancellor of the Duchy of Lancaster's opening speech to ask about intervention funding. In response he tried to imply that I was seeking intervention funding for warship yards that was justly the due of merchant yards. Nothing could be further from the truth. As my hon. Friend the Member for Redcar said, one working-class community will not try to offset its hurt at the expense of another working-class community in the same position.

If through intervention by the Minister's Department or as a result of the constraints that are put upon it because the merchant sector is now so small British Shipbuilders is refused work in a certain part of the shipbuilding industry, is it the Government's intention to allow the private yards to compete for that work with the same sort of intervention funding support that our European but not our far eastern competitors are allowed?

Mr. Atkins

Give an example.

Mr. Brown

The Minister asks me to give an example. The example that I have in mind is probably commercially confidential and I do not want to give it. The Minister grins, but it is a bit mischievous for his boss to say that he did not know what I was talking about.

I can give an earlier example, of the Santa Rosa. It is an American-owned vessel and it was offered to British Shipbuilders, not for construction or reconstruction but for outfitting. British Shipbuilders declined to undertake that work. It was then offered to Swan Hunter in my constituency but the work could be undertaken only if Swan Hunter had intervention funding. I went to see the Minister's predecessor, solely on the principle of intervention funding. I will not discuss whether the contract was commercially viable. We discussed only the issue of intervention funding after British Shipbuilders had turned down the order. I was given a rebuff and I take what the Chancellor of the Duchy said today as a further rebuff. On behalf of the shipbuilding community in Tyneside, I urge him to reconsider.

Two years ago the Government said that the future of the British shipbuilding industry lay in specialist work. They are now putting a whole range of specialist vessels outside the ability of our industry. That is a cruel, savage and terminal thing to do to the merchant shipbuilding industry, every bit as much as it is cruel, savage and terminal to do it to the warship building industry. The ability to make vessels is a strategic requirement for an island nation. For the Minister to allow a whole sector of that to vanish is grotesquely irresponsible and future generations will not forgive him for it.

My hon. Friends have spoken about the reductions that our European competitors have made, or are supposed to have made. As my hon. Friend the Member for Sunderland, North (Mr. Clay) and our right hon. Friends on the Front Bench have said, the statistics show that Great Britain has made its reductions and that our European competitors have not come with us. We have been playing cricket while others have been fighting with flick knives, and that story can be told about other industrial sectors. It is the duty of the Government to defend our interests, even if the overwhelming majority of electors in the shipbuilding communities show no intention of supporting the Government.

While we are on the European situation, I should like to ask a few questions about the European social fund. That European money is to assist communities in preparing for the hurt and damage that my hon. Friend the Member for Redcar spoke about. Such hurt and damage occurs in shipbuilding communities after the industry has gone. Requests for money from the social fund cannot be made directly by communities, but have to come from the member state through its Government. The feeling in every shipbuilding community in Britain is that the Government are not doing their bit for those communities.

Government spokesmen say that old industries must go and that new ones will come, but where are the new industries on Tyneside? They are not there and they are not on Wearside or Teesside either. The whole of the north of England has been hurt by the loss of jobs in shipbuilding and heavy engineering and has not been assisted directly by the Government through the creation of new jobs. The Government will not even go to Europe to try to obtain funds for the creation of new jobs. Financial assistance from the Minister's Department to the northern region shows a dramatic decline—it has been cut by almost half—since 1979. That is not the sort of thing that should be expected from the Government and they ought to help a region that is in difficulty because of structural changes in its industrial base.

The Government do not have just one state-owned merchant shipbuilding yard; they have two. They have the one that hon. Members have spoken about, and the one that is in Belfast at Harland and Wolff. Many of my hon. Friends who represent merchant shipbuilding constituencies fear that, in a world where yards are fighting hard for orders, Harland and Wolff is on the inside track and is not subject to the same constraints, restrictions or cuts that are visited on our communities in the north-east of England and in the other shipbuilding communities on the mainland. It may be said that Swan Hunter has a particular grudge because of the auxiliary oiler replenishment vessel, and that is correct. The Northern Ireland Office fights hard in Cabinet for Harland and Wolff and the Department of Trade and Industry has a duty to fight hard for mainland merchant shipbuilding communities. So far I see no evidence at all that it intends to do anything of the sort.

6.58 pm

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

I have two British Shipbuilders establishments in my constituency, and for that reason I welcome this Bill.

Before the Minister leaves the Chamber I should like to ask him a question about the Brittany Ferries order. Has the European Commission the power to rescind the decision of the French Government to place this order with a French yard? That is a critical question. If the French can get away with this flagrant breach of EC regulations, what kind of trust can we place in the Community in terms of a fair and reasonable shipping and shipbuilding policy? How can we expect to have a fair and reasonable system of cabotage if the French get away with this kind of behaviour?

I listened closely to the two maiden speeches that have been made. They were good speeches, delivered with remarkable self-assurance and confidence. It is evident that I have many political interests in common with my hon. Friend the Member for Redcar (Miss Mowlam). However, I have a constituency interest in commom with the hon. Member for Torridge and Devon, West (Miss Nicholson) because Appledore Ferguson is situated in both of our constituencies. One is not supposed to criticise maiden speeches, but I was becoming a little concerned about the use of the name Appledore. However, as the hon. Lady said, the company is called Appledore Ferguson. We shall have to work together to defend the interests of the highly skilled people who work for that company.

In my constituency I have two establishments, Appledore Ferguson at the Newark yard, and the marine engine makers formerly known as John G. Kincaid, now known as Clark Kincaid. Between them those firms employ fewer than 900 men and women. Kincaid employs about 500 people and Appledore Ferguson employs 320 people. Both companies are vital to the British shipbuilding industry and to the local community in particular because in the Greenock travel-to-work area, which extends slightly beyond my constituency, more than 10,000 men and women are unemployed. Male unemployment in Greenock and Port Glasgow is in excess of 26 per cent. The overall unemployment rate is about 21 per cent. Those are the Government's figures, not unofficial ones. That is a scandalously high level of unemployment.

The importance of those two establishments is accentuated by the threat of closure that is hanging over Scott Lithgow. To a large extent, that threat has been brought about by the Ministry of Defence's refusal to place an order with the yard that was promised 17 months ago in the wake of the placement of a huge order for conventional submarines with Vickers of Barrow-in-Furness. It is the view of many of my constituents and myself that the Government have acted in bad faith towards Scott Lithgow and my constituents.

On Tuesday I appealed to the Secretary of State for Defence to honour his moral obligation, which he acknowledged, to place those orders with Scott Lithgow. They would provide an essential breathing space and allow Scott Lithgow to look for other orders. I do not expect humility or political principle from this English Government, but that order must be given to Scott Lithgow; otherwise another 1,000 employees will be placed on the dole queue. Another 1,000 families will be pushed down to the poverty line because there will not be a great amount of money for redundancy payments.

Those bleak developments are made darker by the decision of the Clyde port authority to close the Greenock container terminal. That is another example of bad faith being shown to my constituents. The CPA could not run a menage, let alone an ice-cream parlour. Its marketing skills are non-existent. What was needed to protect and promote the interests of the employees of the Greenock container terminal was a superbly orchestrated, worldwide marketing exercise to bring trade to Greenock. The CPA simply was not up to the job. It did not even have the nous to go to London, where there are maritime marketing specialists of a high calibre, to maintain work at the terminal.

Have any discussions taken place between the Minister's Department, Vickers and British Shipbuilders regarding subcontract tenders for the construction of conventional submarines in Barrow? If Vickers wins the orders that it is pursuing overseas, with Government assistance, that yard, together with Cammell Laird in Birkenhead, may not have the resources and the high level of welding skills that are required, and it may have to invite tenders for subcontract work.

I assure the Minister that in my constituency there are the yards and work force to do that work. Facilities in Greenock and Port Glasgow are disgracefully underutilised and there are thousands — this is not hyperbole—of highly skilled shipyard workers who have been unemployed for some time who can do that work. If the negotiations on the subcontract work and the negotiations with foreign Governments such as Saudi Arabia were to be successful—I say this to the Minister, Vickers and British Shipbuilders—submarines could be built on the Clyde at Yarrow and Scott Lithgow. I should like to know whether those discussions have taken place.

With regard to Appledore Ferguson, we have recently had good news from the Secretary of State for Scotland—the strong likelihood of the placement of an order for a Cal-Mac ferry. One is already under construction at Appledore Ferguson. I should like to hear from the Minister that the Government are giving every support to the specialist small vessel yards, such as Appledore Ferguson, and to the one remaining marine engine builder in British Shipbuilders' stable, Clark Kincaid. Both establishments desperately need orders. I appeal to the Government to ensure that any help that they can give goes to British Shipbuilders and those two companies so that they might survive or, better still, prosper in the future.

7.8 pm

Mr. Chris Mullin (Sunderland, South)

I have the privilege of representing part of Sunderland, which 30 years ago was the largest shipbuilding town in the world. At that time the Wear was lined with shipyards which had full order books. Today there is a little over 2,000 people employed there with more redundancies in prospect. Even eight years ago, when the Government were first elected, there were 7,000 men employed in the shipyards on the Wear. For every job that is lost in the yard we lose another two in subsidiary engineering industries, and that is in a town that has 27 per cent. male unemployment, and where a generation of skills are in danger of being thrown on the scrap heap.

It is being suggested tonight — no sensible person would dispute this — that the world recession is the backdrop against which we discuss this subject. That is true, but there are other reasons for the dramatic—some would say catastrophic—decline in British shipbuilding in the last decade or more. First, history records that British shipowners are less willing than our main rivals to buy ships at home. In West Germany, for example, according to the last figures I saw, about 80 per cent. of ships were built in West German yards. In France, the figure was about 90 per cent. and in Italy virtually 100 per cent. But in the United Kingdom it was less than 50 per cent. In Japan, not a single ship ordered by a Japanese company has been built outside Japan since 1947, even though it would have been cheaper for those companies to go across the water to South Korea.

History also records that even public companies have been less than willing to build in British yards. In 1983, the CEGB ordered a cable-laying ship from Korea, and three years ago Trinity House ordered a pilot tender from Korea—ships that could easily have been built in British yards.

Sunderland has an additional problem to which my hon. Friend the Member for Sunderland, North (Mr. Clay) has already referred. There is a bone-headed management in the yards in Sunderland. I do not suggest that that necessarily applies to the management of other shipyards, but in Sunderland the management is more interested in pursuing class war than in shipbuilding. It has exploited the crisis in shipbuilding to inflict further humiliation on a work force that has already made great sacrifices. I give just one example. The management there is simultaneously subcontracting out work, not only to small engineering firms outside the yards but abroad, while calling for redundancies. At present it is in the process of demanding another 200 or 300 redundancies.

Very often the work that has been subcontracted out has been substandard, and many weeks of delay have been endured while those mistakes have been put right. Those mistakes would not have occurred had that work been carried out in Sunderland in the first place.

It has been said that British yards should concentrate on high technology and specialist ships. What then do we make of the decision by Graham Day some time ago to close the engineering and technical services only a year after new facilities for designing a marine engine had been installed? That was a crazy decision. The former chairman of British Shipbuilders, Sir Robert Atkinson, said: It makes my heart bleed. When they start to kill a project like that, they will kill British shipbuilding". How right he appears to have been.

The collapse of British Shipbuilders, if that is what it has been, has been paralleled by another development in shipbuilding—the flagging-out of a large part of the British fleet to Panama, Liberia, Outer Mongolia and goodness knows where else. Half the number of ships requisitioned for the Falklands war now sail under foreign flags. Our imports and exports are now carried on ships registered under flags of convenience, manned by crews recruited in the poorest countries of the world, and entitled to none of the rights that some of us quaintly associate with civilisation. Those ships were built in foreign yards. As other hon. Members have said, as an island nation 95 per cent. of our trade is carried by sea, but very soon we shall have no ships of our own or the means to build them. That cannot make sense.

This is possibly the last chance for the British shipbuilding industry, or what remains of it. Let me commend to the Government several practical steps that they might consider. First, they should produce the combination of incentives, credits and, if necessary, compulsion to persuade British shipowners to buy British. Secondly, they should introduce the programme of scrap and build which the Tory Government of the mid-1930s produced in the British Shipping Assistance Act, which at 1935 prices gave loans of up to £10 million at interest rates of up to 3 per cent. repayable over 12 years on condition that two tons be scrapped for every one built. In Sunderland the result was a fourfold increase in tonnage launched on Wearside in the space of only two years.

We should also take a leaf from the book of the United States—that home of market forces so much admired by many Conservative Members — and look at the provisions of the Jones Act, under which all domestic coastal traffic in the United States is restricted to United States vessels, under which 50 per cent. of all Government cargoes must be carried in United States vessels, under which all military cargoes must travel in United States vessels, under which 50 per cent. of United States grain exports must be carried in United States vessels, and under which 75 per cent. of grain food aid must be carried in United States vessels. What is to stop us taking similar steps?

Ministers should use whatever influence they have with the management of the two yards that remain in Sunderland to ensure that the workers are treated decently, to stop contracting out and to ensure that the work available is given to those who have given their lives to the industry. If we do not take some of these steps, we shall not have a debate such as this in a few years' time, because no shipyards will be left.

In a debate on exactly the same subject not so long ago, the former right hon. Member for Taunton, Sir Edward du Cann, said: During my time in the House I have watched the decline of many manufacturing industries and the extinction of others—motorcycles, television, radio, optical instruments, motor cars and so on. Too many have declined and too many have gone. We choose many fancy words to describe the process—and rationalisation is one. To me, it has been a history of industrial disaster … Future generations will never forgive us if we do not say that this process of attrition in British manufacturing industry has gone far enough. It is time to cry halt."—[Official Report, 21 May 1986; Vol. 898, c. 422] I and I am sure many other hon. Members echo those sentiments in relation to the shipbuilding industry.

7.17 pm

Mr. Tony Worthington (Clydebank and Milgavie)

This has been a debate of much misery, and no hon. Member has brought much cheer to it. I cannot pretend that what I shall say will be any different, because what has happened in my constituency is a reflection of what has happened in the country generally.

Twenty years ago, the QE2 was launched on the Clyde at Clydebank, and we knew at the time that it was the end of the era of sophisticated passenger liners. But we did not realise that it looked like being the end of an era for British shipbuilding. Unless the Government act with a coherent policy, it is difficult to foresee any shipbuilding persisting on the Clyde in 20 years time. Unless some action is taken, Clydebank's last tenuous connection with shipbuilding is likely to disappear shortly with the mothballing of the UIE shipbuilding yard—where the QE2 was built—as there is no work on the horizon.

That is tragic on two counts. First, there can be no area more famous for shipbuilding than the Clyde, and within that area no yard more renowned than that of John Brown, where all the Queen liners were built. As a result, a town that came into existence as a result of shipbuilding looks like losing its raison d'etre.

The second and much greater tragedy is that nowadays we talk not about a dinosaur industry but about a rig-building industry — which, as the hon. Member for Torridge and Devon, West (Miss Nicholson) said earlier, is a sunrise industry. The yard has so adapted its methods and technology as to be universally admired. It is a yard in which last year the Queen launched a rig that is at the forefront of this frontier technology. Unfortunately, on the Monday after the launch, UIE and Bouygyes, the French owners, began laying off the work force, which has resulted in the fact that after the annual holiday in Clydebank only 41 workers will be retained.

Clearly, we are only at the early stages of man exploiting the natural resources under the sea and the ice caps. It will be the developed world, not the emerging countries, that provide the technology and skilled manpower to make that possible. Do we want to be part of that world or not? With the present policy—or lack of policy — Scotland and the United Kingdom as a whole will not be part of that world.

The Government are open to the justified criticism that they have squandered the resources of the North sea on bearing the cost of unemployment. They will now be open to the charge of squandering the technology and skills developed in the exploitation of the North sea by allowing the firms that responded to the challenge to disappear. If we allow UIE and other yards to disappear, we shall be throwing away an infrastructure of interlocking firms and suppliers which it will not be easy to reassemble. In UIE we have a nucleus work force with those essential skills, but it is rapidly being broken up. We also need to maintain research and development connections with places such as Glasgow and Strathclyde universities.

What can and should be done? It is not enough to say that it is all woe. First, the skills of the work force could be nourished if the Ministry of Defence work was used much more constructively—not necessarily in the UIE yard but at neighbouring yards such as Yarrow. If we are supposed to be keeping a 50-warship Navy, why is the Ministry of Defence so remiss in keeping up the schedule so that there is planned work ahead?

Labour Members may bitterly regret the work on Trident. We wish that we had won the election and persuaded the country to renounce those missiles. But if that work is to go ahead, submarine pens will need to be built at Faslane, and Scott Lithgow could be competing. However, the Government do not seem to realise the importance of keeping those skills together.

What is the attitude of the Department of Trade and Industry, the Department of Energy and the Scottish Office, whose representative I am glad to see today, to shipbuilding and rig building. Surely those activities cannot be left to short-term market factors. Strategic decisions need to be taken. My hon. Friends the Members for Dunfermline, East (Mr. Brown), for Sunderland, South (Mr. Mullin) and for Redcar (Miss Mowlam) referred to that. As a maritime nation, we cannot simply allow our merchant fleet to decline into nothing. We must take policy decisions about scrap and build. We cannot allow flags of convenience to rule the waves. We must step in and say, "This is simply not adequate."

What is the stance of the various Government Departments about UIE and oil exploration? How do they envisage the industry developing? Do they want it to have a future? We know that we cannot leave these matters to short-term market forces if we are to be part of the future that the exploitation of the earth's resources will create, but it seems that the Government are doing exactly that.

In all that I have said I have only echoed the report of the Select Committee on Energy, which said that the depressed rate of activity in the North sea would weaken the British offshore supplies industry so much that it would be unable to take advantage of a resurgence in activity if oil prices recover in the next few years.

The problem is not peculiar to the traditional shipbuilding industry. The Government are also remiss about parts of the industry where they have encouraged development. I challenge the Government on their policies on the exploitation of the world's maritime resources. Are they going to formulate a coherent policy so that we can share in the future, or are they going to sit on their backsides?

7.24 pm

The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Robert Atkins)

It is with some trepidation that I rise at the Dispatch Box to wind up this debate as, in the past, my interventions from a sedentary position have amused the House on occasions. I know that I am now a target and that hon. Members may do the same to me.

I congratulate the hon. Member for Dunfermline, East (Mr. Brown) on his success in the shadow Cabinet elections and I congratulate Madam Deputy Speaker who graced us with her presence earlier.

As one whose family have worked as shipwrights in the Royal Naval dockyards in Kent and Devon continuously for more than 100 years, I have more than a passing ministerial interest in the shipbuilding industry. I hope that the remarks made about the number of changes of Ministers will not apply to me — at least in the foreseeable future. It is particularly worth while to hear so many Members speak with real knowledge and experience of the industry.

I hope that the House will join me in paying compliments to the two maiden speakers, who, in this case, were literally maiden speakers, if I can put it that way. The speech of the hon. Member for Redcar (Miss Mowlam) was eloquent and forceful, and we welcome her to the House. I agree with those hon. Members who admired her courage in speaking without notes, because I cannot.

I am particularly grateful to my hon. Friend the Member for Torridge and Devon, West (Miss Nicholson) for participating in the debate. We are delighted that she has done so. She spoke glowingly of her constituency, which is obviously extremely beautiful, and of her predecessor, Sir Peter Mills, who is well known to the House. We wish him a happy retirement. My hon. Friend referred to Appledore Ferguson in her constituency, which plays a vital part in local industry. We welcome and thank her for her contribution.

This debate has highlighted the concern felt by us all about the shipbuilding industry. We have had wide-ranging discussions and heard a number of views, although perhaps our conclusions will be different. I could spend a lot of time answering the points that have been raised, but, with permission, I should like to deal with only one or two and write to hon. Members on the detailed points.

The hon. Member for Dunfermline, East raised some points that can be answered reasonably quickly. He asked about the St. Helena order. I understand that the tender has been issued and bids need to be in to the consultants by 25 August. Therefore, the matter is now advanced although it has been delayed for some time—[Interruption.] We shall encourage it as far as we can.

As hon. Members may be aware, the Cuban order has been put on ice. British Shipbuilders is now negotiating on a new specification, and it seems that the new order is some way off.

A number of hon. Members, led by the right hon. Member for Glasgow, Govan (Mr. Milian), referred to the Brittany Ferries order. That is a complex matter, and many hon. Members may not be aware of the detail of it. It is worth pointing out that Brittany Ferries is a company of complex structure, but that essentially it originates from and is owned by French farmers in Brittany. The yard to which the French hope that the order will go is, practically speaking, owned by the French Government. If one adds to that the fact that the French Industry Minister represents a nearby constituency, it becomes clear that the pressures on Brittany Ferries have been substantial.

I agree that it appears that Govan expected to get the order, but I am led to believe that the Dutch were not out of consideration and that it is likely that the aid that they offered is considerably less than that offered by us. Clearly, therefore, the pressures on us are substantial.

I understand that the European Commission is examining the aid packages offered by all members states which have tendered for the order. We expect the Commission to decide shortly—possibly next week—to open formal procedures under article 93 of the treaty of Rome. Until that process is complete, no aid may be given. We have pressed and continue to press the Commission to act decisively. The Commission has power to prevent aid being paid or to require its repayment, if illegal, but it does not have power to frustrate a contract. We shall pursue the matter as forcefully as we can. The Commissioner concerned is sympathetic to our pressure and I hope that in due course I shall be able to write to hon. Members concerned in considerably more detail. The House should, however, be aware of our great concern about this matter.

The hon. Member for Dunfermline, East referred to foreign orders. He and all those closely involved will know that at present foreign orders are few and far between. If every shipbuilding country sought to keep its own orders in its own yards, as it is understandably suggested that we should, there would be even fewer orders and the whole situation would become worse. On the hon. Gentleman's other questions, perhaps he will allow me to write to him so that we can get the facts clear and right as they develop.

My hon. Friend the Member for Darlington (Mr. Fallon) called for an international investigation into transparent subsidies. The idea makes considerable sense. I will ensure that it is considered and will write to him in due course.

The hon. Member for Greenock and Port Glasgow (Dr. Godman) will appreciate that the matters that he raised are largely for the Ministry of Defence. I have heard him raise those matters before and I have no doubt that the Ministry of Defence will be hearing of them again. The hon. Gentleman will know that Clark Kincaid is building engines for the China ships, and if we get the third order it will provide work until 1989.

With regard to management and organisation, the hon. Members for Sunderland, North (Mr. Clay) and for Sunderland, South (Mr. Mullin) will understand that I have not yet had the opportunity to investigate the details. We expect to receive the corporate plan from Mr. Lister in the autumn. We shall then review the position in detail.

The hon. Member for Clydebank and Milngavie (Mr. Worthington) raised matters which are largely the concern of the Department of Energy and of the Treasury. I am sure that he will continue to make those points where they need to be heard.

As I understand it, the essence of the criticisms directed at the Government are, first, that we lack a co-ordinated policy and, secondly, that we have not done enough. Some Opposition suggestions, such as the idea of a task force, need to be considered. The Opposition have called for a coherent policy toward shipbuilding. We believe that we have such a policy, first, in the co-ordination of a maritime and shipbuilding policy and, secondly, in the timing and volume of public sector orders. The Opposition will be aware that public sector orders are few and it makes little sense to order in advance of need, because, by the nature of budgets, other activities are bound to be displaced. Nevertheless, there are some orders and they undoubtedly help.

Building is now going on of a research ship for the Ministry of Agriculture, Fisheries and Food, a fisheries protection vessel for the Scottish Department of Agriculture and Fisheries and a larger ferry for Caledonian MacBrayne. Orders will be placed this year for another Caledonian MacBrayne ferry, a small ferry for the Shetlands and the St. Helena ship. Two small ferries for the Orkneys will come next year. A task force could do little or nothing to alter the number and timing of those orders.

With regard to aid and financial packages to support our export orders, we have already done quite a lot, particularly in relation to China, to which the right hon. Member for Govan kindly referred as something that we have achieved with some pressure.

I congratulate the hon. Member for Aberdeen, North (Mr. Hughes) on his elevation to an important position on the Opposition Front Bench. With regard to Korea, I had intended to refer to a rather delightful quotation, but the hon. Member for Truro (Mr. Taylor) pinched it. I shall not repeat it, but it sums up the view of many Members.

Another point worth remembering about the idea of a task force is that it is irrelevant to the ordering needs of United Kingdom owners. They have to face difficult world conditions, and if they are not free to choose where to build the ships that suit them best they will be at a considerable disadvantage against competitors, thus putting other British jobs at risk. As it happens, their recent ordering record is quite good. Some 70 per cent. of compensated gross tonnage ordered for registration under the United Kingdom flag in 1986 was placed in United Kingdom yards. If we forced United Kingdom owners to buy here, what do the Opposition imagine would happen if other countries did the same?

Our policies coincide with those of the European Commission, which provides the framework for merchant shipbuilding support. The new sixth directive, to which Members on both sides have referred, is much better than its predecessors. We recognise the problems with the French—from my former incarnation in relation to the aircraft industry, I know only too well how difficult the French can be — but we shall make certain that the Commission ensures that aid is fair. Hon. Members on both sides who have shipbuilding interests and know the issues well must not press me on the ingenuity with which we sometimes interpret the rules, as that would not be in anyone's interests.

British Shipbuilders has experienced great difficulties in recent years and it continues to do so. There are three main reasons for this. First, there have been delays and alterations in specifications for orders received. Secondly, as we have heard in the debate, there have been customer failures. Thirdly, there has been poor performance in a variety of areas. As I have said, there is a new chairman—Mr. John Lister—and we await his presentation of the corporate plan in October or November this year. We shall consider that plan carefully and in due course report to the House.

This has been an interesting debate. I have learnt a great deal today and I shall continue to learn more. In the meantime, the Bill provides financial scope to fund British Shipbuilders for a further period, and I commend it to the House.

Question put and agreed to.

Bill accordingly read a Second time.

Bill committed to a Committee of the whole House.—[Mr. Kenneth Carlisle.]

Committee tomorrow.

c581
1. BRITISH SHIPBUILDERS (BORROWING POWERS) BILL [Money] 126 words