North East Shipbuilders Ltd.

HC Deb 13 July 1989 vol 156 cc1144-53

4.2 pm

The Chancellor of the Duchy of Lancaster and Minister of Trade and Industry (Mr. Antony Newton)

With permission, Mr. Speaker, I wish to make a statement about the disposal of North East Shipbuilders Ltd., whose closure I announced last December, in combination with proposals for an enterprise zone and other measures to promote alternative employment in Sunderland.

As I told the House in a written answer on 7 June, in the intervening period there emerged a number of expressions of interest in bidding for some or all of the three yards for various purposes, including ship repair, shipbuilding and general engineering. We had therefore decided to ask British Shipbuilders to evaluate the proposals and to offer advice that would then be taken into account along with wider considerations. Pending a decision, elements of the remedial package not already implemented, including designation of the enterprise zone, were to be held in abeyance. In the light of British Shipbuilders' advice, we have now reviewed the position as a whole. Of the many factors involved, there are three in particular to which I should refer.

First, of course, I must refer to the bids themselves, of which there are four. Two are from shipbuilding interests. While they vary in respect of the anticipated use of the yards, especially in the short term, both envisage initial employment of about 200, rising to around 1,000 at some later date. Of the non-shipbuilding bids, one is concerned only with the Pallion yard; it envisages employing about 250 people initially—rising to 600 at a later date—on work connected with desalination projects, floating harbours and offshore oil equipment. The other envisages employment of 400 initially, rising to some 1,650 in three years, to manufacture a waste disposal system which has been demonstrated, but not yet exploited, in Canada.

The advice I have received from British Shipbuilders is balanced. In the case of what it regards as the better of the two shipbuilding bids, it notes the continued risk to secure long-term employment from the market and from levels of productivity achievable in the yard. Of what it regards as the better of the two non-shipbuilding bids, it says that it could represent the basis for a new and substantial manufacturing activity, but a number of important aspects require further elucidation before clear advice can be given on the prospects of secure employment.

The second factor, which I give particular weight, is the importance attached in Sunderland to the enterprise zone. When I visited the town again at the end of last month, following my statement of 7 June, I was given confirmation of the exceptionally high level of interest which the proposed zone had attracted, including that of many potential inward industrial investors. As a result, it was confidently expected to produce well over 3,000 jobs over the next five years, with perhaps another 1,000 to come from other elements in the remedial package. Everyone to whom I spoke emphasised their wish to press ahead with realising this opportunity and the need to remove any doubt or delay.

Thirdly, we have had to take account of the position under the sixth directive on state-aid to shipbuilding—[HON. MEMBERS: "Why?"]—under which a variety of measures connected with British Shipbuilders, including the sale of certain assets, the anticipated closure of NESL and some aspects of the remedial package for Sunderland were notified to, and accepted by, the Commission at the turn of last year.

We have always made it clear in the House, and to the parties interested in purchasing the yards for shipbuilding, that the Commission would necessarily be interested in any material change in these arrangements, inevitably leading to uncertainty about the outcome. This uncertainty could only finally be resolved by a formal renotification, leading to a decision by the Commission as a whole. However, the soundings we have taken with the Commission suggest that they would be likely to insist on a procedure lasting some four to six months. The probable outcome would be for any prospective purchaser of NESL to have to shoulder a significant additional burden arising from past British Shipbuilders losses.

Mr. Teddy Taylor (Southend, East)

Why? Under what law?

Mr. Newton

Moreover, it has been made clear that the Sunderland enterprise zone, which also required Commission consent, could be called into question.

Having carefully weighed all these considerations, our view is that the essential choice is clear: either the shipbuilding bids, which offer at best an uncertain prospect of fewer jobs than before in an industry which has always been subject to considerable insecurity or the vigorous and whole-hearted pursuit of the enterprise zone as planned, including the Southwick yard.

We have concluded that the latter course is the best in the long-term interests of Sunderland. Accordingly, I am asking British Shipbuilders, in consultation with the Tyne and Wear development corporation, to undertake further work with the existing bidders on the use of the assets for purposes other than shipbuilding with a view to making final recommendations about the future of the assets in due course. The establishment of the enterprise zone, and all other elements in the package of measures to promote enterprise and new jobs in Sunderland, will be pressed ahead with all possible vigour.

Mr. Bryan Gould (Dagenham)

Is this not a shameful statement, about which the Chancellor of the Duchy of Lancaster ought to feel duly ashamed? Does it not amount to the pronouncement of the death sentence on a major British industry? Has he not made it clear that the sentence has already been carried out—execution by ministerial incompetence? The death of British shipbuilding lies at his door, and should be on his conscience.

How is it, after commercially viable bids, acceptable to the vendors, for Europe's most advanced shipyards in Europe's leading maritime nation, by two European shipbuilders who need no subsidy, who want to build ships to take advantage of the upturn in world shipping, who will provide employment for hundreds and eventually, perhaps thousands of shipyard workers in an area of high unemployment, and who want to rebuild a strategic British industry, that the Chancellor can come to the House and say that those bids cannot proceed, and that the last remaining British merchant shipbuilding capacity must be extinguished? Is this not a nightmare in which reason and commercial logic have been stood on their heads?

Mr. Teddy Taylor

I agree.

Mr. Gould

Does it not fly in the face of his earlier assurances that bids that required no subsidy would meet no difficulties?

Does the right hon. Gentleman agree that, in a letter dated 8 February which he wrote to my hon. Friend the Member for Sunderland, North (Mr. Clay), he said: Should any one wish to purchase some or all of the Sunderland facilities for shipbuilding without any form of assistance, that would entail only the negotiation with British Shipbuilders of acceptable terms for acquiring the facilities in question."? Why do the British Government no longer have the power to allow those bids to proceed? Is it not a totally irrational response to the undoubted efforts of a world upturn in shipping, of which the commercially viable bids for the yards are further convincing evidence? Is not his representation of British Shipbuilders' attitude to the bids and his implication of a link between the decision he announced and the aid package to Sunderland simply an attempt to mask the fact that he totally failed to comprehend the situation and discovered only two days ago—too late, it seems—that the European Commission, having sanctioned his closure of the yards, was determined that they should not be reopened?

When the right hon. Gentleman has had written details of at least one offer since early April, why did it take him so long to discover what the Commission's attitude would be? Why did he wait until the end of June before raising these matters with the Commission? Even now, will he tell the Commission that he and his Government are not prepared to sit back and allow Britain, of all countries, to be reduced to a situation where it no longer has any major merchant shipbuilding capacity, when other European countries such as Italy and Spain retain such a capacity? Will he give an assurance that he will not break up the assets until the negotiations to which he refers have been concluded?

Finally, does the right hon. Gentleman accept that British merchant shipbuilding has been denied, by his statement, the life-saving help that is on offer and has accordingly been left to die of the wounds which he has needlessly inflicted?

Mr. Newton

May I make two factual points in response to the hon. Member for Dagenham (Mr. Gould)? There remains quite significant merchant shipbuilding capacity in Britain.

Mr. Chris Mullin (Sunderland, South)

Where?

Mr. Newton

Well, including Harland and Wolff in Northern Ireland and a number of yards on the British mainland, including Swan Hunter, often in yards which carry out a great deal of military shipbuilding. The notion that there is some death sentence, as the hon. Member for Dagenham put it, on merchant shipbuilding in Britain, is extremely far-fetched. In conjunction with almost all European countries, Britain has suffered a large decline in merchant shipbuilding capacity over a decade or 20 years, leading to difficulties in recent years.

Let me turn to some of the other points that the hon. Gentleman raised about our dealings with the Commission. At every stage, we have sought to give the House, bidders and hon. Members the best possible assessment that we could of the position in relation to the directive as events have moved on. I have no doubt that the hon. Member for Sunderland, North (Mr. Clay) will wish to advert to that point.

The letter that I wrote on 8 February, as the hon. Member for Dagenham said, refers to subsidised shipbuilding, and is quite clear about what the difficulties would be in respect of subsidised shipbuilding. The point at issue now is precisely how the question of subsidy will be interpreted by the Commission, and its likely response as proposals have been refined and hardened over the past few months.

Let me make one last point in response to the hon. Member for Dagenham. Immediately after the first bid was received on 6 April, the bid in which the hon. Member for Sunderland, North is particularly interested, an approach was made by officials to the Commission for indications of what the position would be.

On 11 April, it was immediately made clear to the bidders that any question of a bid involving intervention fund continuing subsidy would be likely to cause great difficulty, to put it mildly, and even without that there could be considerable difficulties. Within a week or so, the bidders came back with a bid which demonstrated that they would seek to manage without intervention fund, but in which many other details were lacking, and which took the Government some time to probe to make some assessment of whether it was a bid that we could sensibly put forward as a concrete proposal. At the same time, or a little later, in May, we received another shipbuilding bid, which also needed careful assessment.

Around the turn of May and in early June, we received definite bids for non-shipbuilding purposes. It seemed to me right, and it still seems to me right, to have undertaken a proper evaluation of all those bids alongside each other, rather than take an endlessly moving series of hypothetical questions to the Commission.

The first requirement was that the British Government should decide what was the sensible way forward. I emphasise that what we have done is weigh what we regard as the very uncertain prospects of creating sufficient secure employment with the shipbuilding bids against the advantages of pressing ahead full steam with the enterprise zone, with the possibility of a non-shipbuilding bid that may well in the end—I accept that further work on it is needed—prove to be a more attractive prospect for the use of the yards in providing secure employment in Sunderland.

Mr. Bob Clay (Sunderland, North)

Is it not the simple truth, for all that the Minister is trying to get around it in the most disingenuous manner, that he made it clear, not only in the letter to me but in other letters and statements, that subsidy meant intervention fund money and that all these difficulties about which we are now being told would follow if bidders asked for intervention fund money? They were told not to ask for it. They forwent intervention fund money. At a late stage, months later, the Minister suddenly discovered when he went to speak to the Commissioner, Sir Leon Brittan, that all these difficulties existed, which the Commissioner claimed he should have known about from the start, from the time that he made the statements in the House last December.

Because of this complete incompetence, muddle and surrender to Brussels, without even making a formal notification of these proposals, and at a time when the market for ships is rising steeply, as the Minister knows, and when free enterprise operators—whom one would think the Government would welcome and bless—want to order ships immediately, have other orders to place and require no subsidy or state assistance, those people are having the door slammed in their faces. The people of Sunderland, especially the shipyard workers who have been made redundant and their families, have been treated in the most disgraceful way. I hope that the Minister at least feels, in his heart of hearts, that this is the most shameful day of his political life.

Mr. Newton

I do not, of course, accept much of what the hon. Gentleman has said—

Mr. Clay

Well, the Minister should.

Mr. Newton

Of course, however, I understand the strength of the hon. Gentleman's feelings. I hope that he will at least accept that I have never sought to be, nor, in my view, have I been, disingenuous in the points that I have made to the House. I ask the hon. Gentleman to accept, in what is undoubtedly a difficult balance of judgment, taking account of a variety of factors, that we have sought to come to the conclusion that offers those self-same people of Sunderland, about whom I share the hon. Gentleman's concern, the best prospect for new industries, expanding industries and jobs that will last in the long term.

Mr. Michael Brown (Brigg and Cleethorpes)

Does my right hon. Friend recall that some years ago a similar decision had to be taken by the Government with regard to the Brigg and Scunthorpe constituency where there was a steel problem? Was not the greatest decision for the benefit of my constituents in both Brigg and Scunthorpe then and Brigg and Cleethorpes now, the decision to ensure that an enterprise zone would be created? I advise my right hon. Friend to invite Labour Members to go to Scunthorpe, Glanford and Brigg to see the massive increase in investment, job diversification and employment that has resulted from the decision to create an enterprise zone in my constituency.

Mr. Newton

It certainly is the case that the experience of enterprise zones in transforming the prospects of areas that have lived with industries experiencing great structural decline has been very striking and encouraging indeed. One of the things that has contributed to the decision that I have announced today in respect of Sunderland, is that, by all accounts, the interest shown in the enterprise zone in Sunderland has been exceptional, even by the standards of earlier enterprise zones.

Mr. Chris Mullin (Sunderland, South)

Does the Minister accept that many people in Sunderland will feel betrayed by today's decision? For months his Department has perpetrated a cruel hoax not only on the people of Sunderland but on the enterprises that were bidding for the yards. The Department told us that unsubsidised ship offers would be seriously considered. Not one but two have emerged. We now learn that, because of a decision that was taken, probably at the end of December, they cannot now be considered.

People in Sunderland simply will not understand what is happening. The Minister seems only recently to have become aware of an understanding that his own Department reached some months ago. Why was the fiasco allowed to continue for so long if people in the Minister's Department knew that shipbuilding would never be allowed to resurface?

Will the Minister place in the Library of the House of Commons all communications with Brussels relating to this matter so that hon. Members can see it for themselves? Is it possible that the Minister was the only person in his Department who was not aware of the understanding that was reached as long ago as last December? We in Sunderland worked out a long time ago that such an understanding had obviously been reached. Will the Minister apologise to the people of Sunderland for the cruel hoax that has been perpetrated on them for so long?

Mr. Newton

There has been no question of a cruel hoax. The bids that have come forward have been evaluated and assessed in the context of what I have repeatedly emphasised at every stage since I took on these responsibilities a year ago—that the primary factor was what was likely to be best in the long-term interests of the people and the area of Sunderland. Having evaluated and assessed those bids against the alternatives, both the non-shipbuilding bids and the enterprise zone, we have come to the conclusion that I have outlined this afternoon. I feel no need to make an apology for that. I naturally regret, as I regretted last December, that at that stage it had not proved possible to find a way forward. What I do not regret is having to put to the House this afternoon a decision that I believe is in the best interests of the jobs and the future of industry in Sunderland.

Sir Giles Shaw (Pudsey)

I am sure that my right hon. Friend will allow me to comment that, at best, this is a fairly lamentable episode—lamentable not wholly for the unjustified accusations that were flung at my right hon. Friend but for the way in which the shipbuilding directive, the intervention fund and the role of subsidy are now being interpreted. I am sure that my right hon. Friend will understand that my view is that we cannot have a regime that allows an industry to contract and yet is somehow incapable of expansion when the need for expansion occurs. Would it not be a reasonable outcome of this episode for my right hon. Friend to seek to renegotiate, or perhaps introduce another element into, the directive to allow a more orderly course for possible expansion should there be a need, as there is in many cyclical industries, which the private sector has detected, to fulfil a genuine demand?

Mr. Newton

I do not think that it necessarily follows from what I have said that the current directive, which will last until the end of 1990, is incapable of responding to a change in circumstances. We are considering the conditions in which such a change might take place against the background of what had been agreed earlier. There might be two views on the detail of that argunent, but that is a slightly different point. I can certainly undertake to my hon. Friend—he asked in a reasonable way—that we shall take account of all experience of operation of the current sixth directive when negotiating some successor directive, as will no doubt occur at some time in the next 18 months.

Mr. Jim Cousins (Newcastle upon Tyne, Central)

Does the Minister accept that the patient and dogged people of the north will share a sense of dismay at his statement, which means that industries that could have survived and, indeed, prospered are not to be allowed to do so? Does he also accept that what rubs salt in the wound is his reference to Swan Hunter when it, as part of another deal, was also prevented from ever having access to the intervention fund and had to struggle in the merchant shipbuilding market on its own?

Will the Minister tell the House with direct candour which will stick? Will a deal based on shipbuilding and ship conversion be acceptable, or is that, too, part of a cover-up, which leads us from the bluster of Bruges to the sale of our shipyards?

Mr. Newton

The hon. Gentleman may have made a slip of the tongue when referring to shipbuilding and ship conversion. He may have meant ship repairing and ship conversion.

I cannot be optimistic at this stage about that possibility without an opportunity to consider in more detail its possible relationship with the wider situation in the directive that I described. For example, were there to be a proposal for ship repairing at North Sands, which is one of the possibilities that I understand has been floated, I would certainly be prepared to consider it, provided that I can be satisfied that it will not risk the adverse consequences to which I referred in my statement or conflict with the vigorous pursuit of the enterprise zone and the creation of alternative employment in Sunderland.

Mr. Neville Trotter (Tynemouth)

My right hon. Friend is known to have taken a great personal interest in trying to deal with the serious problems caused by the collapse of the yard in Sunderland. He must be aware of the strength of feeling about what has happened—that the almost miraculous prospect of the shipbuilding yard reopening has not come about.

Is the Minister aware that the relationship with Brussels is seen as a key factor in this? Does he agree that the long-term future of Sunderland lies with the enterprise zone and transformation to industries with a secure future? Are there not two odd facts about the bids that have been received from shipbuilders? Why were they not put forward while the yard was still open? Why did they wait until the yard closed, knowing that, in doing so, they would no longer get intervention fund money? Does that not put doubt into people's minds about whether there would have been a long-term significant future if the bids had gone ahead earlier?

Mr. Newton

I certainly accept what my hon. Friend said about how much better it would have been had either of the bids been put forward at a different time, when they could have been considered in a different context. As to how secure they would be, I said in my statement and probably also in some of my answers to supplementary questions that considerable doubt remains about the long-term security of the jobs that would be created if either of these bids were to proceed. That is one of the things that we have borne in mind when judging what my hon. Friend rightly says is the alternative, which is the pursuit of the creation of jobs in new and different industries, particularly through the enterprise zone, but also in other ways.

Ms. Joyce Quin (Gateshead, East)

The Minister referred to the importance that the people of Sunderland attach to the enterprise zone. He did not refer to, but is he aware of the great importance that is attached in the town of Sunderland to keeping the shipyards open? That is the real feeling of the people of Sunderland.

Furthermore, instead of simply giving way to the European Commission, does the Minister consider that, in view of the reduction in capacity in British shipbuilding, and the fact that there are European bidders for the Sunderland yards, he should have made a strong case out to the Commission and been prepared to fight, if necessary, to keep the yards open?

Mr. Newton

There is no question of having given way to the Commission. We have to take account of a directive which, as part of the Community's policy to secure a level playing field on state aid to industry generally, is to be seen in the interests of this country.

As I said in my statement, I had to judge whether arguing these matters through was in the interests of what was, at best, an uncertain prospect for jobs in an industry which has been notoriously subject to cyclical swings, and over which there was therefore some doubt about the long-term security of jobs, to decide whether that was the right thing to do.

On balance, taking all the considerations together, I came to the conclusion that it was not, and that it was right to proceed full speed ahead with the alternatives including, most notably, the enterprise zone.

Mr. Richard Holt (Langbaurgh)

As someone who was brought up in Sunderland, I appreciate that there will be strong feelings there today about the Government's decision, but as someone who represents a Teesside constituency, I must advise the House that a few years ago we were in the same position, but that today Teesside is booming and going ahead. Only today I received a press release from the international chemical company MTM, stating that it is investigating and evaluating a £50 million investment in Teesside, bringing with it 1,000 jobs. That is the way forward for the ex-shipbuilding areas.

Mr. Newton

I am grateful to my hon. Friend, who has made an important point about experience in another part of the north-east which I have also visited frequently. While, for obvious reasons, it is not possible for me at present to refer to some of the specific interests that have emerged in relation to the enterprise zone in Sunderland, I am confident that the experience that my hon. Friend reports from Teesside will be repeated in Sunderland and that that will be profoundly to the long-term benefit of the people of that area.

Mr. Nicholas Brown (Newcastle upon Tyne, East)

My hon. Friend the Member for Sunderland, South (Mr. Mullin) invited the Minister to place the correspondence between himself and the EEC on intervention funding in the Library so that we could all have a look at it. Is his reluctance to do so because that correspondence would reveal a shoddy deal to sell out for all time any prospect of intervention funding for shipbuilding in the northern region so that he could gain the consent of the EEC bureaucracy for the quite different and far more advantageous arrangements that the Government have put in hand in Northern Ireland and for Harland and Wolff?

Mr. Newton

No, as far as we are aware, no link is being made between the Commission's consideration of the proposals on Harland and Wolff and those agreed at the turn of last year for British Shipbuilders. Harland and Wolff is not part of British Shipbuilders, it is a separate entity. Therefore, I do not think that what the hon. Gentleman has suggested will stand up.

Several Hon. Members

rose—

Mr. Speaker

Order. I am sorry to have to say again that we have great pressure on time today. I appreciate hon. Members' interest and hope that I have called all those who have a direct interest. I shall allow two more questions from each side, and I am sorry that that will not include every hon. Member who wishes to ask a question.

Mr. Teddy Taylor (Southend, East)

While only time will tell whether the Sunderland people will do better out of making ships, hula-hoops, beefburgers or anything else, does the Minister acknowledge that there is a massive constitutional problem because a clear statement on which shipbuilders and others acted stated that, without intervention aid, the matter could be considered only by British Shipbuilders, but we now find that the Commission has redefined "aid" and insisted that any proposal must involve historic losses? Would it not be infinitely better for a Conservative Government in a free-market economy to leave such decision to the market and not to non-elected bureaucrats in Brussels? What powers were they using when they said that historic losses should be taken into account?

Mr. Newton

First, if my hon. Friend's initial point refers to the same letter that has been adverted to at various times during the past half hour, I remind him that it referred to subsidy in general rather than to intervention fund in particular. I have already referred to that on several occasions.

Secondly, I do not see anything unconstitutional in this country—in this case it happens to be within the framework of the Community, but it could equally well be within some international framework—signing an agreed set of rules that are designed to create a level playing field about state aid, for shipbuilding in this case, but which apply to state aids for other purposes as well—

Mr. Bob Cryer (Bradford, South)

They do not want state aids.

Mr. Newton

—including the motor car industry. The Commission is operating within the agreed terms of the sixth directive, to which this country was party.

Mr. Doug Hoyle (Warrington, North)

Will the Minister stop waffling to the House? If he is saying that he did not know last December, does he recall that he appeared before the Select Committee on Trade and Industry on matters relating to North East Shipbuilders only in late June? Why did he not tell the Committee then that non-subsidised shipbuilding would not be allowed and that if it was allowed, the EEC would then reconsider all the subsidies paid to British shipbuilding? Why does he take such a weak, craven and pusillanimous attitude to the EEC? Will he go back to Brussels and speak for Britain and for British shipbuilding?

Mr. Newton

At every stage, I have given those who have asked me about these matters my best assessment on the information available to me at the time.

With regard to the second half of the hon. Gentleman's question, I can tell him that I have made it absolutely clear that the Government have made a judgment on the basis of a very wide range of factors. At the end of the day, the key issue for us—I would hope, too, for the House—is how we can best promote the largest number of long-term secure jobs in Sunderland. I believe that what I have announced today will achieve that.

Mr. Nicholas Bennett (Pembroke)

Is my right hon. Friend aware that there is considerable sympathy with and admiration for his difficult decisions? Can the people of Sunderland not take courage from what has happened to us in Wales, where structural unemployment has led to a considerable decline in the coal and steel industries, but where industry has diversified and many new jobs have been created? Can my right hon. Friend not draw comfort from the success of the Milford Haven enterprise zone in my constituency? In the town of Pembroke Dock, where there was very high unemployment in the past two and a half years we have seen 50 per cent. reduction in unemployment as a direct consequence of having an enterprise zone in the area.

Mr. Newton

I am grateful to my hon. Friend also for his example of the success of measures similar to those that we intend to press ahead in Sunderland. I have no doubt that it was knowledge of those experiences that led to the experience that I recounted, of being pressed very hard in Sunderland to ensure that nothing was done to impede the implementation and success of that enterprise zone.

Mr. Charles Kennedy (Ross, Cromarty and Skye)

Will the Minister be a little more forthcoming about his reference to the Commission? It became clear from his statement that the Sunderland enterprise zone, which required Commission consent, could be called into question. Is he saying that in all the to-ing and fro-ing with the Commission, it has said that, if the Department of Trade and Industry pursued the bids, it would pull the plug on the enterprise zone?

Mr. Newton

To be precise, when I saw Commissioner Brit tan in Brussels, as part of our process of evaluating the bids and deciding what to do, it was made clear that the Commission could not rule out reopening the question of the enterprise zone, which it said it saw as related to the Sunderland package.