HC Deb 20 February 1990 vol 167 cc779-85 3.30 pm
Ms. Joyce Quin (Gateshead, East) (by private notice)

To ask the Secretary of State for Trade and Industry if he will make a statement on the decision by the European Commission on shipbuilding and ship repair on the Wear.

The Minister for Industry (Mr. Douglas Hogg)

I saw Sir Leon Brittan on 2 February to discuss the proposed sale of certain sites of North East Shipbuilders Ltd. Sir Leon Brittan made it plain that he would not accept any proposal predicated upon a return to shipbuilding even after the expiry of the five-year period.

I saw the Anglo-Greek consortium yesterday and told it of the Commission's views. I said that limited facilities to undertake a ship repair and refurbishment operation at the NESL North Sands site would be allowed. It is considering the offer. The enterprise zone at Southwick will be designated as soon as possible. It is likely that the Tyne and Wear development corporation will now proceed with its plans to redevelop the St. Peter's Riverside development site.

Ms. Quin

Will the Minister accept that the latest pronouncements of the European Commission in the person of the Government's own appointee, Sir Leon Brittan, are such as to make future shipbuilding on the Wear, even after the five-year period, virtually impossible? Does the Minister's statement mean that the Southwick yard, which is one of the most modern in Europe, will be bulldozed and that it cannot be used for future shipbuilding activities? Will the Minister comment on the secrecy surrounding the agreement with the European Commission in December 1988? Did the Minister understand the agreement that was entered into by the Government at that time? Will he make the details public to us, because they have never been fully revealed?

The Minister's failure to understand has meant that would-be purchasers of North-East Shipbuilders Ltd., or parties which wanted to place orders in those yards, had their hopes raised during last year and then dashed, as it appeared that the European Commission would not allow those activities to take place. The Minister has made play of the enterprise zone. Does he accept that an enterprise zone would have been possible for Sunderland, based on unemployment levels and previous shipbuilding job losses in the town, but that the people of Sunderland, while seeing advantage in an enterprise zone, do not want one in return for the closure of their shipyards and their shipbuilding facilities?

Hon. Members will no doubt raise their constituency interests in supplementary questions, but will the Minister accept that there are important national implications in the decision of the European Commission? At a time when Japan is taking the lion's share of the boom in shipbuilding orders, when German yards are organising joint ventures with their counterparts in East Germany and when Britain has had more job losses in shipbuilding than any other European country, could not the Government have stood up for British shipbuilding and the Sunderland yard more than they have done?

In this connection, will the Minister comment on the editorial in today's Lloyd's List that it is simply unacceptable to have a rump of a shipbuilding industry which is utilised only when the Japanese and South Korean order books are full? Are not the Government guilty of failing to recognise the value of the shipbuilding industry and the role that it can play in our industrial future?

Mr. Hogg

The hon. Lady asked a variety of questions, and I shall seek to respond to them. On the allegation of secrecy, there has been no secrecy in this matter. She will recall that the whole matter was considered at considerable length by the Select Committee on Trade and Industry. I had the pleasure of appearing before that Committee and explaining events.

On unemployment in the Sunderland area, the hon. Lady will be pleased to know that, although in December 1988 unemployment was about 26,154, or 15 per cent., I am glad to say that in the 12 months until December 1989, it fell by three percentage points to stand at 12 per cent.

I confirm that it is unlikely that shipbuilding will return to Sunderland. The hon. Lady should bear in mind the fact that the development plans of the consortium developed over a period. I make no criticism of that; I simply state that that is what happened. The plans started off as ship repair and refurbishment plans. Then they embraced an element of shipbuilding. Then shipbuilding became the core of the plans. As recently as January of this year, the plans suggested that all the work should be done at Southwick. It was a constantly developing programme.

The plain truth is that shipbuilding is a cyclical industry. I am afraid that shipbuilding in Sunderland has consumed vast quantities of public money. In no sense would the Government be justified in continuing to subsidise the activity in the way that they previously had.

The hon. Lady should be more bullish about the future of Sunderland. She should bear in mind the fact that we put in place an extensive remedial package which included £45 million worth of remedial measures—in particular, the enterprise zone. I hope that that will create between 3,000 and 4,000 jobs in the town. I believe that the future of Sunderland is extremely good. It has been greatly improved by being based on a diversified, strong local economy, which is what we are achieving.

Mr. Teddy Taylor (Southend, East)

Although the Labour party has no grounds for complaint because of its now near-obsession with commitment to the EEC and the development of broader powers there, will my hon. Friend the Minister seriously consider that there is a serious democratic problem when a non-elected civil servant in Brussels can instruct the British Government and Parliament, irrespective of their wishes, that shipbuilding without special aids cannot continue in a part of this country?

In view of this devastating blow for shipbuilding and democracy in Britain, will the Government begin to wake up to the enormous threat of destruction of our democracy of transferring power from elected Parliaments to the non-elected bureaucracies? What is the point of rejoicing at what is happening in eastern Europe at people's escape from a centralised bureacracy, when that is what we are creating in western Europe?

Mr. Hogg

I am afraid, much though I respect my hon. Friend, that I do not accept his analysis. In December 1988, we notified the Commission of the closure of the yards. We put forward a series of remedial proposals, which were accepted on the basis of the closure of the shipbuilding capacity in Sunderland. If we wish to renotify any further scheme, we must go to the Commission with the full plans. The Commission has unfettered discretion on whether to approve those plans. That is what has happened, and it is consistent with the practice that has been approved in this place.

Mr. Bob Clay (Sunderland, North)

Does not the Minister accept that, when he says that the Anglo-Greek proposal changed several times, he ignores the fact that the consortium changed them as it tried to keep up with the goal posts that the European Commission and the Department of Trade and Industry kept moving? They began by defining closure as shipbuilding without subsidy changed it to no shipbuilding for five years and now have a scorched earth policy, saying that we cannot retain the assets that would allow for a resumption of shipbuilding after five years.

Is it not the case that even the modest ship repair proposal that is to be allowed will have to have every acre of land and every piece of equipment that is purchased scrutinised in Brussels just to make sure that it may not be used for shipbuilding in the future? Given that British Shipbuilders, the Tyne and Wear development corporation, Sunderland council, the local Members of Parliament, and the Members of the European assembly, all welcomed the Greek proposal for Southwick—I believe that the Minister himself gave it some support—what is the hidden agenda that leads the British Government, in the most subservient way, to give in to every arbitrary and legally dubious whim on which Sir Leon Brittan decides? Can the Minister honestly tell the House that, if the right hon. Member for Braintree (Mr. Newton) had understood what the notorious December 1988 package really meant, he would ever have agreed to it?

Mr. Hogg

I make no criticism of the Greek consortium. The hon. Gentleman knows that it changed its plans. That is not a result——

Mr. Clay

Because of you.

Mr. Hogg

That is not a result of the Department of Trade and Industry changing the goal posts; it was because we pressed the consortium hard on the viability of its proposals—and on whether its plans offered the prospects of good quality and permanent jobs. It was against that pressing that the consortium identified in its plans that the main element would be a return to shipbuilding.

There are mixed views even within Sunderland on this matter. There is a powerful case for saying that it is not in Sunderland's interests to return to shipbuilding, and that Sunderland's economic future would be very much better served by the broadly based and diversified economy that the remedial measures that we have put in place will bring about.

Mr. William Hague (Richmond, Yorks)

Will my hon. Friend accept support for his position from his hon. Friends, simply because he has no real alternative? Will he take every opportunity to emphasise the positive aspects of what is happening in the area in question? To save further mix-ups of the type that might have happened over the last couple of years, will my hon. Friend also undertake to clarify with the European Commission just how long the conditions that it has set up are meant to be in force?

Mr. Hogg

I am grateful to my hon. Friend. The European Commission's policy, effectively, is that, during the period when one is required to give notification of a proposal, it will not accept a proposal that is predicated on a return to shipbuilding. I repeat that such a scheme or proposal will not be acceptable to the Commission. I entirely agree with my hon. Friend that one needs to be positive about this. The diversified, broadly based economy that our measure will bring to Sunderland is very much in the interests of that town and will free it from independence upon a cyclical industry, which is not in the long-term interests of Sunderland.

Mr. Nicholas Brown (Newcastle upon Tyne, East)

If the private sector wishes to preserve Sunderland for shipbuilding, why is the state, in the person of the Minister, intervening to prevent it? I thought that the Conservative party believed in letting the private sector take a lead in these matters. How does the Minister defend depriving the whole of the north-east of England of intervention funding for its shipbuilding industry, and yet continuing to fund such support for Harland and Wolff in Belfast?

Mr. Hogg

Two separate points are raised in that question, and I shall address them both, if I may. First, in so far as the proposals are predicated on a return to shipbuilding, the Commissioner has made it wholly plain to me that such a proposal would not be acceptable to the Commission.

The hon. Gentleman's second point dealt with private sector against private sector. However, he has omitted to realise that we have a viable private sector alternative for both Southwick and North Sands. For Southwick, we have the enterprise zone and for North Sands, we have the TWDC's St. Peter's Riverside development.

Mr. Nicholas Brown

indicated dissent.

Mr. Hogg

The hon. Gentleman may shake his head, but I can tell him now, and I do tell him now through you, Mr. Speaker, that, from the point of view of Sunderland's future, the TWDC prefers its development for North Sands to that of the Greeks.

Mr. Tim Devlin (Stockton, South)

Is it not the case that, in the past 10 years, the north-east has suffered an extremely painful transition from old, declining industries to new, sunrise industries and that employment opportunities have improved dramatically in the past two years? Given that there are plans on the drawing board for a major redevelopment of the centre of Sutherland, it would not be right to take such rearguard action, which presents a nostalgic view of the north-east as a traditional shipbuilding area—which is no longer the case. We should turn our backs on the past and press forward with the future.

Mr. Hogg

I am grateful to my hon. Friend, who has a deep knowledge of the problems of the area. In the past 12 months, unemployment has fallen by three percentage points, which is a dramatic improvement.

My hon. Friend makes a valuable point by suggesting that there are real dangers in being too dependent upon a cyclical industry such as shipbuilding. It is better by far for the economy of the town to be broadly based and diverse. That will be the effect of the St. Peter's Riverside development and of the enterprise zone.

Mr. Chris Mullin (Sunderland, South)

Is the Minister aware that he is talking nonsense when he says that opinion in Sunderland is divided on this issue? Every conceiveable strand of opinion—of the borough council, Members of Parliament, the local Tory newspaper and the chamber of commerce—is satisfied that a return to shipbuilding is in the best interests of Sunderland. Is it not a fact that Sunderland and his Department have been well and truly stitched up by the EEC?

The hon. Gentleman will be aware that Sunderland has one of the most modern shipyards in western Europe, but we are about to sit and watch it being demolished—that is akin to a scorched earth policy. It will be a crime if the shipyard at Southwick is allowed to be demolished. We should at least keep it mothballed for four or five years, so that the opportunity to build ships again in Sunderland can be taken up when it comes, after his Government have been swept away.

Mr. Hogg

Let us analyse the hon. Gentleman's remarks by considering the last point that he made. The hon. Gentleman suggested that the Southwick site should be mothballed for five years—in other words, no productive use should be made of 40 acres for about five years. That cannot be—[Interruption.] That cannot be in the interests of Sunderland, especially when one bears in mind the fact that there will be an enterprise zone on that site, which will create many jobs. We expect that 800 jobs will be created on the part of the enterprise zone now covered by the Southwick site.

So opinion in Sunderland is divided, but there is also a division between what people say in public and what they say in private. There is a strong opinion in the town that recognises the dangers of being dependent upon a cyclical industry, and which sees the advantages of the enterprise zone at Southwick and of the TWDC's development at North Sands. There is a great deal of support for them and, on reflection, I hope that the hon. Gentleman will join that support.

Mr. Phillip Oppenheim (Amber Valley)

Is it not true that shipbuilding is still a labour-intensive industry? That is why, in relatively advanced economies such as Japan, shipbuilding, with the exception of the recent cyclical upsurge, has had a reduced importance in its economy. It is a complete mirage to offer people false hope that an industry such as shipbuilding is an industry of the future, especially bearing in mind the appalling history of awful management and poor labour relations in that industry and the huge subsidy that must be paid for each ship built in Europe.

Mr. Hogg

My hon. Friend is entirely right. I am afraid that the track record of shipbuilding in Sunderland over recent years was simply not good. It consumed large sums of public money and required great subsidies. He is right to draw attention to the financial perils associated with returning to shipbuilding in Sunderland. It may be relevant for the House to know that the financial advice that we received on the Greek consortium's plans was that they were fraught with considerable risks of failure.

Several Hon. Members


Mr. Speaker

Order. This is an Opposition day and statements should be confined to shipbuilding and ship repair on the Wear.

Mr. Alan Williams (Swansea, West)

Is not the announcement of an enterprise zone a ministerial admission that the Government are in despair at what remains of regional policy? Is not the Minister aware of the evidence that his Department gave to the National Audit Office, that it will cost £30,000 per job to create a job in an enterprise zone and that, for that reason, the Government had virtually abandoned enterprise zones? Is he not also aware that those jobs that were created came largely from elsewhere in the locality, and that those that were new were generally in retailing or wholesaling, and were part-time and low-paid?

Mr. Hogg

I can only suggest that the right hon. Gentleman should reflect on these matters before he asks such a question. If he had the time to visit, for example, Scunthorpe or Corby, to mention just two places, he would see the blatant absurdity of the question that he has just asked. Enterprise zones are an extremely effective way of getting assistance to those areas that need it most. The zone will be an important part of the regeneration of Sunderland. A little more homework would improve the hon. Gentleman's question.

Mr. Neville Trotter (Tynemouth)

There has been reference to the cyclical nature of this industry, but is not a continuing factor the domination of the world market for merchant shipbuilding by far eastern yards, which continue to offer ships at prices that are millions of pounds less than are quoted in Europe? Is it not unrealistic to expect that to change? Will not Sunderland's future be better with high-tech industries that will be attracted by the enterprise package? Will my hon. Friend confirm that the package is already proving successful in attracting industries with a future that is bright and that it will reflect future pride and glory on the town of Sunderland, in the way that shipbuilding has in the past?

Mr. Hogg

I can indeed give my hon. Friend the assurances that he seeks. He has been a powerful advocate of the interests of his part of the country. He is entirely right to say that we have seen some important industries coming into the north-east. He is most certainly right to draw attention to the capacity that exists for shipbuilding in the far east, where many shipyards have been mothballed. I question very much whether shipbuilding will be the highly profitable industry that some Opposition Members suggest.

Mr. Roland Boyes (Houghton and Washington)

Is the Minister aware that I attended a conference recently in America where the discussion was based on getting goods, men and equipment across the Atlantic in case there was a war in Europe? The conclusion of the conference was that there was a marked shortage of merchant shipping to carry out those tasks. Therefore, how is it that, when there is a shipyard in Sunderland with the best equipment and skilled men for building ships, the Government intend to go abroad to increase Britain's merchant shipping? Is not that ridiculous?

Mr. Hogg

As the hon. Gentleman will recall, we tried to find a bidder for the NESL yard for many months before the decision was snade in December 1988 to close it. I am afraid that, for many years, shipbuilding in Sunderland was making enormous losses and had to be subsidised by public money to a huge extent. It is not right, and is not a proper use of public assets, to continue with that policy, and we shall not do so.

Mr. Matthew Taylor (Truro)

The Minister has sought to blame Leon Brittan for the decision, but has also sought to argue in the House that it was the right decision. Will he clarify whether, in talking to Leon Brittan, he urged the case for the consortium to be allowed to go ahead on behalf of local jobs or simply accepted Leon Brittan's decision—or even welcomed it?

Mr. Hogg

I have not tried to blame anybody; I have explained the situation. The Commissioner made it clear in discussion—I urged the contrary point of view—that he would not allow shipbuilding to return to Sunderland in the circumstances being proposed by the Greek consortium. That is the explanation that I have given the House. When we came to contrast the Greek proposals for Southwick and for North Sands with the alternatives, it was far from clear that, on its merits, the Greek proposal should be preferred. For example, the Greek proposal for the North Sands Riverside development involved taking up to 20 acres of land that would otherwise form part of the TWDC's development. Another factor was that the TWDC development will provide about 850 jobs, which would not have been compatible with the Greek scheme.

Mr. Nigel Spearing (Newham, South)

Will the Minister confirm that, when the Government decided to install remedial measures in the Sunderland area, they had to go to the EEC for permission for such regional aid and did Her Majesty's Government give the undertaking that the shipyard would be closed? If so, under what regulation did the EEC issue such an edict, when was it debated by the House and what view was taken of it in the House?

Mr. Hogg

On the latter detailed questions, I shall have to write to the hon. Gentleman, as he would expect. With regard to the main part of this question, the position in broad terms—I say "broad terms" because it was the subject of extensive evidence before the Select Committee on Trade and Industry—is that we had to notify the EEC of the £45 million package of closure aid that we were giving in Sunderland, and that was approved on the basis of the irreversible closure of shipbuilding in Sunderland. If the hon. Gentleman is asking whether we gave a written undertaking to that effect, I think that the answer is no.