North East Shipbuilders Ltd. (Hansard, 13 July 1988)

§ 1. Mr. Clay
To ask the Chancellor of the Duchy of Lancaster whether he has recently met the chairman of British Shipbuilders to discuss North East Shipbuilders Ltd.; and if he will make a statement.

§ The Chancellor of the Duchy of Lancaster and Minister of Trade and Industry (Mr. Kenneth Clarke)
I last saw John Lister on Thursday 7 July. North East Shipbuilders was among the subjects that we discussed.

§ Mr. Clay
The Minister will be aware that hundreds of lay-offs are to take place in the next few weeks because of the situation at NESL. Does he agree with Mr. Lister, the chairman, that the immediate hope for the yard is the Cuban order? If so, will he immediately give the intervention fund subsidy and suitable credit arrangements, rather than insist on privatisation first? The Minister's insistence and ideological obsession over privatisation are causing uncertainty and delay and could lose the one order that could save the yard. Will he now agree to the intervention fund and let us clinch the Cuban order? We can talk about privatisation and takeover later.

§ Mr. Clarke
Negotiations are continuing on the Danish contract, but I accept that, because of the unfortunate situation, substantial lay-offs appear to be forthcoming in Sunderland and are likely to take place over the next few weeks.
We do not yet know how much the Cubans would pay for any ships that they bought and we cannot say whether the Cuban order would be likely to occupy all the yards in Sunderland. I made it clear that we would give intervention fund support at an acceptable cost to the taxpayer, but we are not in a position to do that at the moment. It is likely that the proposition will be attractive only if we can find a suitable private sector purchaser.

§ Mr. Charles Wardle
Has not the nationalised shipbuilding industry lost well over £1 billion over the last decade? Is it not also a fact that the industry's decline in this country from controlling over one third of the world market to controlling just a paltry 1.5 per cent. has been due to excessively high wage demands, thus pricing British shipbuilding out of the world market? Is there not also huge over-capacity in the industry?

§ Mr. Clarke
The decline has been due to a combination of features, including the last point made by my hon. Friend. There is a vast excess of shipbuilding capacity throughout the world, compared with any likely demand for ships from purchasers. For a variety of reasons, British Shipbuilders has made heavy losses, well above the intervention fund support that European rules allow us to give it. It would be reckless for contracts to be placed in yards on unacceptable terms to the taxpayer, with the likelihood that the British taxpayer would pay more than the Cuban for the resulting ships.

§ Mr. Beith
Does the Minister realise that the industry has been hugely slimmed down and that what remains of shipbuilding skills on the Wear and the Tyne is of great potential importance to this country? It would be industrial vandalism if the Minister did not safeguard the industry's future either in this case—as he does not appear to be doing sufficiently—or in the case of the Tyne, after the order announced on Monday.

§ Mr. Clarke
Some shipbuilding is doing extremely well. The order won by Yarrow earlier this week was very good news on Clydeside. The shipbuilding industry is slimmed down, as it is in the rest of western Europe and the far east. The yards that will survive are those that have realistic prospects of continuing to find customers at an acceptable cost to the taxpayer. The taxpayer has proved his willingness to put money into British Shipbuilders when there is a worthwhile proposition to pursue.

§ Mr. Gould
Is the Minister aware that if, for reasons of dogma and because the yard is in public ownership, he refuses to provide intervention fund assistance and, as a consequence, the Cuban order is lost and the yard has to close, he will not be forgiven for that act of vandalism? Would it not make sense to secure the order first and then decide the question of ownership, if the Government's obsession with privatisation dictates that that is a real question? May we have an assurance from the Minister that the House will have an opportunity to call him to account for his part in this quite unnecessary drama before the House rises for the summer recess?

§ Mr. Clarke
The Cubans have not yet placed an order and no price has been negotiated with them for those ships. If the Cuban order were obtained, it would not occupy the whole yard at Sunderland. My reservations about the prospects for the Cuban order are based, not on dogma, but on the fact that the last time British Shipbuilders built ships for Cuba it lost between 12 and 17 per cent. on the cost over and above the intervention fund support that we then gave for that order. I know that the Labour Government went in for a notorious Polish ship deal shortly before the 1979 election. The Government have poured money into British Shipbuilders, but we must do so on a common sense basis when we know what the cost is likely to be.