HC Deb 16 July 1987 vol 119 cc1342-50

Considered in Committee; reported, without amendment. Order for Third Reading read.

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

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

As the House will appreciate, we debated the Bill at some length a week ago. I think that it would be inappropriate and unnecessary for me to speak at length now. With the permission of the House and of yourself, Mr. Deputy Speaker, I hope that at the end of the debate I shall be able to answer any comments or contributions that hon. Members may make.

7.29 pm
Mr. Bruce Milian (Glasgow, Govan)

I wish to raise one matter that follows on from the contribution which I made to the debate on Second Reading. I had hoped—I think that the Government did as well—that the Brittany Ferries order would come to Govan Shipbuilders. I do not wish to rehearse all that I said on Second Reading, but I wish to emphasise my wish that the Government pursue the matter with the greatest vigour. The Government took the issue to the European Commission on the basis that an unfair subsidy had been granted by the French Government to enable this important order to go to a French yard. On the basis of free and fair competition, it had been the intention of the prospective owner of the vessel, Brittany Ferries, to place an order with Govan Shipbuilders.

There has been a development since Second Reading, so I am intervening to ask for clarification from the Minister. The Commissioner responsible for these matters, Mr. Sutherland, yesterday announced that he had found both the French and British Governments in breach of the sixth directive on the maximum permissible amount of aid. There has been some rather misleading comment about this. It suggests that there was a deliberate intention on the part of British Shipbuilders and Govan Shipbuilders to put in a subsidised tender that was in breach of the directive so recently agreed within the Community, and operative only from the beginning of this year.

The reality is rather different. The tender submitted by Govan Shipbuilders was within the directive's maximum limit, and what has placed it above these limits is the later intervention by the French Government. They offered an additional subsidy of 10 per cent. to the operator of the vessel and the ship owner, Brittany Ferries. It is the addition of the two subsidies that has brought the British tender outside the limits laid down in the directive.

The French tender is an entirely different proposition, because this is a matter between the French ship owner, the French operator and the French Government. The French Government, having intervened in this matter—in my opinion quite improperly—have not only brought the French tender outside the limits, but have coincidentally brought the British tender outside the limits. They made, I suspect, a completely false promise that, no matter where the order went, the 10 per cent. subsidy would be payable. I do not believe that if Brittany Ferries had persisted in putting the order into Govan the 10 per cent. subsidy would have been paid. I would have been astonished if that had happened.

The French Government have behaved deviously and cunningly in this matter, and have put us in the dock alongside them. I hope that the Minister will clear up the matter, because some newspaper reports today have suggested that we have been as much at fault as the French. I do not often defend the British Government, but in this case we are the injured party, not the culprit. I hope that the Minister will take this opportunity to clarify the situation. I think that my understanding of this matter is correct, but it is important that this should be put on the record at this convenient opportunity.

I hope that the Minister will also take on board the point I made on Second Reading, and which I now repeat, that I hope that we will pursue this issue with the utmost vigour. It is my hope that we can start again the whole business of the placing of the order. However, being realistic, I am not hopeful that that can be achieved. The order has been placed with a French yard—I deplore that—but if there is any way to save the order for Govan I hope that the Government will attempt to do it. At the least, the position should be clarified. We should have an undertaking that the Government will continue to pursue this through the Commission in every possible way open to them.

7.33 pm
Mr. Ted Garrett (Wallsend)

Because of the pressure of time I was unable to catch your eye, Mr. Deputy Speaker, on Second Reading. As I have said many times, I welcome any amount of public intervention in shipbuilding borrowing facilities. Therefore, I have no shame in saying that I support the Government in their decision to increase British Shipbuilders' borrowing powers.

This is the first time that I have had to speak about Swan Hunter, which is in my constituency, when it will have no opportunity to benefit from such an order, because it has been privatised. However, that is not to say that the people in the north-east of England, particularly those connected with the long tradition of shipbuilding in the region, are not interested in what is happening in British Shipbuilders. Nor would it be true to say that they are not interested in the future of British Shipbuilders. I am pleased in one respect. The Government are still determined to keep this industry alive, in spite of world competition and in spite of the fact that they have faced the criticism of not being interested in this industry.

I notice that my hon. Friend the Member for Gateshead, East (Ms. Quin) is waiting to catch your eye, Mr. Deputy Speaker. I gather that my hon. Friend is still a Member of the European Parliament. As such, she has played an active part in directing attention to what the European Commission is doing to help in the crisis facing the European shipbuilding industry. I am sure that she will have something to say about that.

The people on Tyneside, especially those employed at Swan Hunter, are fully aware that now that the company is privatised they have to face the harsh realities of private and allegedly free competition, but in the big wide world they cannot hope to compete with other nations, particularly those in the far east. I should like the Minister to study the report on the shipbuilding industry produced by the Commission. I ask him to think seriously about how the Government can help in the implementation of the second of the three recommendations, that which concerns the social impact in the less-favoured areas of the EEC where shipbuilding takes place.

I know that successive Governments have made some social contribution to the economic consequences of the decline in the coal industry. However, as far as I am aware, there has been no political decision in the United Kingdom Parliament about the social consequences of the decline of the shipbuilding industry. It would be helpful if the Minister had some influence on, and consultations with, his colleagues to see whether the Commissioner responsible for shipbuilding policies in the EEC can bear in mind that the north-east should be considered a less-favoured area within the Community and therefore have some priority in efforts to meet the crisis in shipbuilding.

7.38 pm
Ms. Joyce Quin (Gateshead, East)

The Opposition do not oppose the increase in the borrowing powers of British Shipbuilders. However, traditionally Third Reading debates are used to voice some wider concerns about the shipbuilding industry, and I should like to add my voice to some of those concerns.

I agree with many of those who spoke in the debate last week that a great deal needs to be done to ensure the survival of the shipbuilding industry. As my hon. Friend the Member for Wallsend (Mr. Garrett) said, my main interest in the industry arises from my experience as the representative of Tyne and Wear in the European Parliament. In the past, the area had within its boundaries one third of Britain's shipworkers, and even today it accounts for about one third of the very reduced shipbuilding activities in Britain. I have been struck by two things during our debates in the European Assembly. First—this point was made last week—the British decline in shipbuilding has been more dramatic than the reduction in almost any other European shipbuilding industry. The figures certainly bear that out. Secondly, during the past 10 years, there has been a dramatic collective decline in European shipbuilding compared with the expansion in some areas of the far east. We must act to make sure that shipbuilding has a future in Britain and that our capacity will allow us to respond to the range of designs of ships that will be needed in the future. Some of those ships will be very sophisticated vessels.

The British and the EEC approaches to the industry have been too negative. Our response to the world market seems to have been that, since the market has been contracting, we had better contract twice as fast. Japan and Korea have said, "The market is declining, but we want a larger share of it." The emphasis in EEC policy has been very negative. It simply tries to reduce subsidies to the industry across the board. That was certainly the case in the EEC fifth directive on aids to shipbuilding. The sixth directive which replaced it is better in some respects, and I welcome the improvements, especially the fact that all aids are now included so that the more transparent British aids can be seen more clearly against the hidden aids that have been given in other countries.

However, it remains true that almost the only shipbuilding policy in the EEC is one of controlling subsidies and trying to even out competition among European countries. That does not deal with the main problem, which is the survival of European shipbuilding in the face of increasingly intense competition from the far east. European shipbuilding policy has not been successful in that sense.

I and some of my colleagues have argued repeatedly for a more positive and comprehensive strategy towards shipbuilding, including measures to stimulate demand in British and European shipyards and measures to scrap some of the older tonnage, which my hon. Friend the Member for Sunderland, North (Mr. Clay) mentioned last week. We must also spend more European money on research and development in shipbuilding. We need a European commitment to a level of capacity below which we will not go and which we will defend strongly in international negotiations, especially with Japan and Korea.

My hon. Friend the Member for Wallsend mentioned the social and regional aspects of shipbuilding. Here again, British and EEC attitudes and approaches have been very dilatory. Perhaps the Minister remembers that, seven or eight years ago, there were proposals in the EEC to provide money for shipbuilding areas from the so-called non-quota section of the European regional development fund. That small programme took more than two years to negotiate, and when it was finally agreed it provided only 17 million ecu, which was about £10 million, for the whole of the United Kingdom shipbuilding industry over five years. That was totally inadequate, given the serious problems of many of our shipbuilding areas.

The European Commission and the member Governments have still not agreed a new programme on the regional and social consequences of the crisis in the shipbuilding industry. The Commission's proposals are more than a year overdue, and they are still not being properly discussed. We have been told that, because of the financial crisis in the EEC, there will not be enough money in the budget for some time to implement such proposals. That is selling our shipbuilding areas very short.

The Government and the EEC have treated the industry with insufficient priority. Britain's case has not been argued sufficiently in the EEC, and the European Community as a whole has not argued strongly enough for shipbuilding in its international trade negotiations. Can the Minister tell us when shipbuilding was last on the agenda in international trade negotiations with Japan and Korea? When will it be on the agenda in the future? I understand that it has been discussed far less often than the other areas about which we express concern when considering our trade balance with the far east—motor cars, video tape recorders or the range of consumer electronic goods. Shipbuilding is an important aspect of the unfavourable trade balance between Britain and the far east and it should be considered with more urgency than has been the case until now.

Looking around the Chamber, one would think that shipbuilding was not a great priority for the majority of hon. Members. But many hon. Members have within their constituencies industries which supply goods and essential parts for shipbuilding. The health or sickness of the industry cannot be seen in isolation. It has serious ramifications for many constituencies in Britain. The industry uses the products of the new technologies. They include CAI)CAM facilities, which are important to the survival of shipbuilding and to the survival of our new technology industries and the important new technological sector.

I plead with the Government to do all that they can to ensure the survival of shipbuilding for the long term, not just the short term, and to act in such a way as to give our shipbuilding areas and our shipyard workers real hope for the future.

7.48 pm
Mr. Gordon Brown (Dunfermline, East)

; This has been a short debate, but we have heard wide-ranging and extensive contributions about the problems of shipbuilding. Our willingness to allow the Bill to go through quickly has nothing to do with complacency about the crisis in shipbuilding, but is a measure of our concern about the crisis affecting shipbuilding and our determination that measures should be taken as quickly as possible to allow the existing yards to flourish and maintain a merchant shipbuilding capacity.

I congratulate my hon. Friend the Member for Gateshead, East (Ms. Quin) on her speech. Her eloquence and expertise will be of tremendous benefit in future shipbuilding debates, and I hope that the Minister will answer her main point. If there are problems with the European budget, social fund aid for shipbuilding areas should not be a victim of the disputes that are taking place in Europe. I am grateful to my hon. Friend the Member for Wallsend (Mr. Garrett) for mentioning the problems of Swan Hunter. My hon. Friend the Member for Newcastle upon Tyne, East (Mr. Brown) did the same last week. Although warship orders are not the Minister's direct responsibility, I hope that he will bear in mind the problems of that yard.

My right hon. Friend the Member for Glasgow, Govan (Mr. Milian) mentioned a problem which we read about in the newspapers this week and which arose in last week's debate. Those of us who have followed the amazing saga of the Brittany Ferries order during the past few months will find it extraordinary that the victims in the matter—Govan Shipbuilders and British Shipbuilders generally—have been found guilty by the Commission. I hope that the Minister will carefully consider what appears to be at best sharp practices by the French, and at worst a dangerous deception that caused Govan to lose the order. I hope that he will assure us tonight that, not only he will keep watch on what is happening in the Commission. but that he will press the Commission to a swift conclusion on this matter. This is the first case that has arisen since the new directive. There is no point in having an intervention fund and debating the future of that fund if we are unable to draw on it for major orders that we are capable of winning.

Last week much was said about the British Shipbuilders' order book. I am grateful to the Minister for writing to other hon. Members and myself giving us specific answers to the problems facing North-East Shipbuilders and Govan Shipbuilders as well as some of the other yards outside British Shipbuilders. I trust that the enthusiasm that the Minister has already brought to his job as Minister with responsibility for shipbuilding, evident in the debate of last week and from his written answers of the past few days, will be matched by the enthusiasm of his Department and British Shipbuilders, backed up by his Department, to win the orders necessary to sustain the industry.

My hon. Friends the Members for Gateshead, East and for Wallsend mentioned the draft European Commission report—it was mentioned in the press on 30 June— about the state of the shipbuildng industry in Europe and the world. I know the Minister agrees with me that it makes extremely gloomy reading. It suggests that even after a third cut in production capacity—it is estimated that it is likely to happen over the next two years—the yards in Europe will still run at 70 per cent. capacity for the rest of the 1980s and 80 per cent. capacity in the early 1990s. The report suggests that entire production centres will be shut down. It goes on to suggest that 30,000 jobs will be at risk in the European Commission countries. It paints an extremely gloomy picture.

Mr. Garrett

My hon. Friend is quite correct in saying that 30,000 jobs in the industry will be at risk, but the knock-on effect could run to 100,000 jobs. The Commission has concerned itself directly with the industry, but has failed to take account of the wider impact of the closure of production centres.

Mr. Brown

I am grateful to my hon. Friend for drawing attention to that. Throughout our debates on shipbuilding we should be concerned that, in the northeast and Scotland in particular, for every production worker affected by cuts and closures there are at least two or three others directly dependent on that production worker. When we discuss the number of jobs that have been lost in the past few years and the numbers still at risk, we are also talking about the effects on entire communities.

We have suffered more than most of our European competitors. On 7 July the Minister was good enough to give me figures concerning the losses among shipbuilders and they confirm my belief. During comparable periods since 1979 Belgium has lost 2,000 jobs; France 8,000 jobs; Germany 5,000 jobs; Italy 7,000 jobs; and the Netherlands 4,000 jobs. Up to 1986, according to the Minister's figures, the United Kingdom has lost 18,000 jobs. However, according to my figures, based on a more up-to-date calculation, we have lost at least 25,000 jobs. Therefore, not only did we suffer more than our competitors in the past, but we are suffering more now.

If we consider the current state of order books for the first two months of this year, as they appeared in Lloyd's List a few days ago, it is clear that, given the drastic problems throughout the world, Italy managed to achieve more orders in the first few months of this year than in previous months. West Germany managed to achieve more orders and South Korea has been able to move to the top of the shipbuilders' league. Taiwan has done extremely well, but, despite all the efforts of British Shipbuilders—management and work force—the number of orders that we have won is down on previous months. It is despite the orders won at Govan. Indeed, last week, my right hon. Friend the Member for Govan paid tribute to Mr. Eric Mackie for his efforts that enabled us to win the Chinese order. It is despite the work of North-East Shipbuilders to win Danish orders. Despite all those efforts, our share of the world market has not gone up.

In the previous debate the Minister spoke of the generosity of the Government towards British Shipbuilders. However, he must bear in mind that, not only have our European competitors done more over a longer period, and still do, to support their industries, but privatisation, by selling profitable yards dependent on public sector orders into the private sector, has done enormous damage and harm. That view is confirmed by two former chairmen of British Shipbuilders who talked about acts of political dogma that put the future of the corporation at risk.

The Government are still not doing enough to secure orders to guarantee the future of the yards. High wages are not the problem—we pay our workers less than most of our major competitors in Europe. The problem does not lie in the lack of advances in productivity because between 1979 and 1985 there was a 30 per cent. advance in the productivity of British workers. Indeed, since then there have been major improvements because flexibility agreements have been reached. British Shipbuilders is not technologically backward. A great deal of effort has gone into investing in the most modern computer techniques. The industry may be old, but it is no longer old-fashioned. The yards are not inefficient. A few weeks ago, with the completion of the North sea order at Govan, the chairman of P and 0 was so satisfied with the work that he has invited the work force to join one of the sailings of the vessel. Industrial relations are not a problem because the new chairman has expressed his satisfaction with the industrial relations record and has complimented the work force on it.

The fact is that, given the difficulties of world demand, not enough is being done to safeguard the industry. The Minister should reconsider what he appeared about to investigate last week—he then rejected it—the establishment of a task force to scour the world for available orders.

The Minister, as one of his first acts as Minister with responsibility for shipbuilding, should conduct a trawl of the various Departments to advance public sector orders. He should take the necessary action to persuade British shipowners to buy British. Large orders have been lost overseas in the opening months of this year.

I share the faith of the work force of British Shipbuilders in the future of shipbuilding in this country. The Government must now show their faith in that future by investing and protecting the industry and by securing orders. They must support the loyal, efficient, dedicated work force who have made every sacrifice to ensure that the industry is able to win world orders. I hope that the Minister will back up the efforts of the management and the work force.

7.58 pm
Mr. Atkins

A number of today's points were dealt with at some length last week. I appreciate the fact that the hon. Members for Gateshead, East (Ms. Quin) and for Wallsend (Mr. Garrett) were not able to be here then and therefore made their points tonight, but if they take the trouble to refer to last week's debate, which they may have done already, they will see that a number of their points were covered then.

The right hon. Member for Glasgow, Govan (Mr. Millan) referred to Brittany Ferries. I should like to take this opportunity to put the current position on the record. I think he recognises—there is not much difference of opinion—that we have tried to deal with the matter.

As I anticipated in last week's debate, the European Commission has now decided to open an article 93 procedure against the French and against ourselves in respect of aid offered for the Brittany Ferries order. There are two reasons for this. First, when British Shipbuilders tendered to Brittany Ferries, the French authorities were robustly maintaining that aid that they grant for ships flagged in France was not state aid for shipbuilding of the kind to be covered by the new sixth directive. It is evident that, as a result of its investigations, the Commission has satisfied itself both that this is aid that it regards as subject to the limits in the new directive and that the aid would apply to a ship purchased from Govan. As further evidence of the pressure applied to Brittany Ferries, I have to say that Brittany Ferries told British Shipbuilders that the French authorities had let it be known that in their case this aid might not be available. It appears that the French authorities, not perhaps for the first time, have now changed their tune in responding to the Commission

The second reason is that the Commission has confirmed, as a result of its investigations, that the Dutch authorities have offered a lower level of aid than either ourselves or the French and, according to Commission practice, this in itself gives rise to an article 93 procedure in a case where one Community member asks for an investigation under the new directive. We did so, of course, because of the way in which the French have behaved.

As to what happens next, under Commission rules both the French authorities and ourselves will have a set period in which to respond to formal letters from the Commission. We have nothing to fear in this. We indicated to the Commission in advance of its decision that we had no interest in being in breach of the directive and would adjust our offer of aid once it confirmed that French flagging aid was, indeed, to be counted under the sixth directive and the French authorities had confirmed that it would be available for a Govan ship. We shall decide how far we should adjust our aid once the Commission details its reasons for opening the procedure against us.

Whereas I applaud the action that the Commission is taking in ensuring that the aid applied to this order is fair and fully in accord with the new directive, it would be wrong of me to suggest—I suspect that the right hon. Member for Govan recognises this—that I thought there was any significant chance in the order coming to Govan. As I explained last week, the French are in a uniquely strong position to ensure that this order remains in France even if, for instance, Brittany Ferries ends up paying a far higher price than it would had it ordered abroad.

I shall he pleased to let the House know the result of the Commission's procedures in due course. I emphasise again what I said last week. We shall do everything in our power to ensure that the case that needs to be put to the Commission and fought by the Commission on our behalf is made with all the strength that we can muster. I am grateful to the right hon. Member for Govan for raising the matter and giving me the opportunity to put the current position on the record. I hope that he will find it helpful.

The hon. Member for Wallsend speaks with weight and authority on the matters that concern him, and I listened to him with interest, as always. He referred to social consequences, and his hon. Friend the Member for Gateshead, East, who is a Member of the European Assembly, will know of that authority's activities. I shall ensure that the hon. Gentleman's points are considered. He will know that Tyne and Wear is recognised by the Commission as a shipbuilding closure area. None the less, his points are well taken and I shall ensure that those involved listen to them.

The hon. Member for Gateshead, East made some thoughtful points and spoke with authority on the problems facing her constituency. As I said, a number of those points were raised last week. I hope she feels that they were dealt with in some detail then, but I recognise that the hon. Lady wanted to get them on the record now. I am glad that she agrees with the Government that the sixth directive is an improvement. There is always room for improvement, but this is at least a better directive than the fifth.

The hon. Lady suggested that the shipbuilding issues to which she referred were not the subject of as much discussion as they should be. I must disagree and point out that shipbuilding issues generally are constantly raised within the OECD. My ministerial predecessors raised points on behalf of the British shipbuilding industry and I hope that I, too, shall be in a position to do so.

The hon. Member for Dunfermline, East (Mr. Brown), in what was perhaps his vale as a Front-Bench spokesman on the shipbuilding industry, as he moves to higher and more important things in the context of the Treasury—[Interruption.] Well, "different" things; perhaps I should put it like that. The hon. Gentleman brought us back to the arguments that he advanced last week about the task force. I do not wish to bore the House, but I tried to deal with those matters at some length last week. I can do so again, but I think that I would only be emphasising what has already been said.

The hon. Gentleman will know that many of the problems faced by the shipbuilding industry are the result of changes in customers' ordering specifications and the problems associated with maintaining financial viability and with going into liquidation. Although there have been many improvements, as the chairman of British Shipbuilders and the hon. Gentleman have said, there have been problems with poor performance and delivery. I agree that the work force and management of British Shipbuilders are doing a lot to put matters right.

The hon. Member for Dunfermline, East was a little uncharacteristically churlish about the Government's efforts. We have tried to do a great deal by devoting resources and interest to, and giving support for, export orders, which the hon. Gentleman mentioned in terms of the Chinese order. I cannot accept the charge that we have not done enough. However, I should like to end on a reasonably friendly note on a subject on which there are not many differences.

We believe that the Bill will be passed on the nod, because we recognise its necessity and importance. I hope that the hon. Member for Dunfermline, East, as he rnoves to different duties, will not forget that the Government have played, and will continue to play, a part in looking to the interests of those involved in the British shipbuilding industry. I pledge that I shall do all that I can to assist the industry to maintain its position and, where there are difficulties, to work hard to try to solve them. I urge the House to give the Bill its Third Reading.

Question put and agreed to.

Bill accordingly read the Third time, and passed.

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