§ Motion made, and Question proposed, that this House do now adjourn.—[Mr. Arbuthnot.]
10.47 pm§ Mrs. Margaret Ewing (Moray)I would have preferred not to have to raise this matter on the Floor of the House, for obvious reasons, but I welcome the opportunity to discuss with Ministers the future of the fabrication yards in the highlands of Scotland.
This is an issue of great concern to all who represent the area, and I am grateful to the Minister for being here. I understand that he flew back from Berlin to respond to this debate. He has agreed that the hon. Members for Inverness, Nairn and Lochaber (Sir R. Johnston) and for Ross, Cromarty and Skye (Mr. Kennedy) should share the debate with me. Although we represent different parties, we have a common concern about this matter. We greatly appreciate the Minister's being here.
The purpose of the debate is to argue the case for the retention of the fabrication yards in the highlands. This is a key manufacturing industry which is of great significance to the local economy, and it has a massive impact on other aspects of the economy—not only in the Highland local authority area but in the Grampian region in which my constituency lies and where many of the workers at Ardersier live.
Recently Ardersier announced 1,300 redundancies, to take place by Christmas. Another 1,200 jobs could be in jeopardy by next April. The hon. Member for Ross, Cromarty and Skye will speak about Nigg, which lies within his constituency. I can assure the Minister that both yards are looking positively towards the future and that they will be second to none in their efforts to win orders to retain their facility in the area. I congratulate both the management and the work force at the yards on the substantial efforts that they make year in and year out to bring orders to the area.
It is easy to say that the fabrication yards are part of a cyclical economy and that it is bust or boom. I do not accept that that is necessarily the position. There is a strong argument for having a much more planned approach to winning and allocating orders to ensure that they are distributed evenly among the yards.
It is easy also to say that the oil boom is over and never again will substantial orders come to our yards. There is still huge potential in the North sea, as there is off the west coast of Scotland and in other areas throughout the world. There is an opportunity that must be seized and not lost, as it was in the past.
We are keen to ensure that the highly skilled work force in the area, with its excellent reputation for high standards and quality of work—there is good management and good industrial relations—is retained as a key manufacturing base in the highlands of Scotland. Without the fabrication yards in the north of Scotland, there is a distinct danger of a service-only economy. It is essential that we retain a manufacturing base in the area.
I shall put three key points to the Minister. First, when the Minister visited Aberdeen recently he spoke about the establishment of a working party to examine the potential of the United Kingdom continental shelf. We welcome the opportunity that that will bring. I ask him to spell out more clearly what the working party will do. It is fundamental that it should consult those who are involved 257 in exploration, development, supply and fabrication. Local representatives of the managements and unions should be able to express their points of view, and so should the local authorities. Highland regional council, Grampian regional council and local district councils have made it clear that they have their own ideas, attitudes and propositions. I hope that the Minister will adopt a positive attitude to the representations that have already been made.
Secondly, the House has agreed that there should be an overall review of energy policy as a result of what has happened in the coal industry. Members have rightly emphasised the importance of the industry, and we do not dispute that. However, if there is to be an overall review of energy policy and strategy, surely there must be an opportunity for the committee that is now working on the issue to consider the implications of energy policy for suppliers and producers. Is it possible for the Minister to enable evidence to be taken by the committee that will bear on the fabrication yards? The effect on our communities of the loss of the yards would be as significant as the loss of jobs in the mining communities. That must be taken on board.
Thirdly, when we talk about the need for assistance to be given to industry, people think in terms of subsidies. It is thought that the Government should provide money. There are many areas in which the Government could consider assisting industry without necessarily spending money. I ask the Minister to consider tax inducements for exploration and development and to ensure that there are policies to enable marginal fields to be brought on stream a little earlier than the date anticipated by the Government. They should not all come on stream at the same time because we want a steady flow of orders and stability.
Will the Minister also take on board the need for forward planning on a long-term basis? A clear argument is emerging from our yard—that we should never have been put in this position in the first place. If the Government had listened to the arguments several years ago—indeed, decades ago—about the need to ensure stability in the planning process, we should not have been in this boom or bust situation.
I hope, too, that the Government will look into the question of the need for expertise in sub-sea engineering. That is where the future of many of these yards will lie. If the Government could ensure that expertise is provided to the yards for sub-sea engineering, they would be guaranteed a better future than the bleak one that they now face.
There are many other important aspects of this subject, but as this is a short debate I shall give way to other hon. Members who wish to speak. Nevertheless, I hope that the Minister for Energy and the Under-Secretary of State for Scotland, the hon. Member for Edinburgh, West (Lord James Douglas-Hamilton), who has responsibility for the highlands and who I am glad to see on the Treasury Bench, will afford to the three of us an opportunity to discuss with them in greater detail other ideas that we have about helping the local economy.
§ Sir Russell Johnston (Inverness, Nairn and Lochaber)First, I thank the hon. Member for Moray (Mrs. Ewing) for allowing me the opportunity to take part in the debate. 258 My particular interest is the McDermott yard which is in my constituency, though many of the workers in that yard live in the hon. Lady's constituency. Although we are members of different parties, in my opinion the hon. Lady has always adopted a concerned, constructive and sensible approach to these problems. I cannot think of any time when we have been in dispute about them. I also thank the Minister, as the hon. Lady did. It is one of the coincidences of life that while I was sitting beside the German ambassador tonight he observed that he had travelled in the same aeroplane as the Minister on the way back from Berlin.
I intend to make six points. First, the Minister is looking at the cost-cutting exercise which he told us about at our meeting with him. He has the co-operation of the trade unions and of management. It is worth repeating what the hon. Lady said—that industrial relations at the McDermott yard are a model for everyone to follow. A genuine cost-cutting exercise implies, however, a more ordered and planned approach, as things run down, than obtained in the heady days. It takes about £500,000 to make a bid. If this were dealt with in a planned way, as the regions have tried to do, the costs could be reduced.
Secondly, we want to know how the inquiry that the Minister is engaged in will fit into the general energy inquiry which arose out of the proposed closure of coal mines.
Thirdly, the direct question has to be asked: whether and by how much the Government want to sustain the oil supply industry in Scotland and what they intend to do about it. We know that there is over-capacity—that only 25 to 30 per cent. of capacity is being used. How do we deal with that? During the coal industry debate, reference was made to what is happening in Germany. Reductions are also being made in Germany, but they are being made over a 15-year period. The hon. Lady referred to possible developments on the west coast. By the time they come on stream, we may have no means left of servicing them.
Fourthly, there is the immediate question whether work can be brought forward. We are told that there are between 150,000 and 200,000 tonnes of work until 1995. What are the opportunities?
Fifthly, the oil rig fabrication workers operate in conditions of intense difficulty and danger. They are easily comparable with those to be found in coal mines. In many respects, they are more dangerous. Coal miners benefit from European Community regulations. I do not complain about that. However, there are no central redundancy arrangements for oil rig fabrication workers. I should be glad if that could be looked into.
Sixthly—I address this particularly to the Scottish Office Minister—whatever happens, there will be cuts. The Government must acknowledge that cuts will place huge pressure on local government services and training agencies such as Highland Enterprise, which will require more finance. We have already had 1,200 redundancies announced but we face the possibility of twice as many. That is an enormous number. In the highland economy, it is huge and it will require a swift, considerable and committed response. I hope that that is what we shall hear from the Minister tonight.
§ 11 pm
§ Mr. Charles Kennedy (Ross, Cromarty and Skye)Like my hon. Friend the Member for Inverness, Nairn and Lochaber (Sir R. Johnston), I am exceedingly grateful to the hon. Member for Moray (Mrs. Ewing) for the opportunity to contribute to the debate, though only briefly so as to allow the ministerial response to be as full as possible.
Like my hon. Friend the Member for Inverness, Nairn and Lochaber and the hon. Member for Moray, I welcome the fact that we have present not only the oil Minister, if I may so describe him, but the Minister with responsibilities for the highlands. The seriousness of the situation—not only the immediate redundancies announced at Ardersier, but the long-term implications for the industry and their impact on the highland economy —is such that, to quote the phrase that the Minister with responsibilities for the highlands used in a meeting with us this summer, although we are not seeking excessively paternalistic reflexes, we need help.
I endorse the points that have been made, but I stress to the Minister that in the past 25 years the highlands have seen the siting of the Corpach pulp mill, the Invergordon aluminium smelter and the Dounreay nuclear reactor, all of which, in their various ways, were at the forefront of technology. Two are now gone and one is in severe decline. In many senses, the oil yards represent the last anchor of the economy in terms of major infrastructural investment employing thousands of people. I plead with the Minister to make every constructive effort in his own Department and particularly with the Treasury to ensure that this significant industry and vital part of our economy, social fabric and well-being is secured for the future.
§ 11.2 pm
§ The Minister for Energy (Mr. Tim Eggar)I appreciate the chance to have this debate in the House. Some of the debates in which I have been involved in the past six months as Minister for Energy have been conducted in a rational way, with sensible analysis of the various issues that we face; other debates have not gone exactly that way.
The issue has rightly received a lot of attention, and I have been impressed by the way in which everyone involved—unions, management, oil companies, the hon. Member for Moray (Mrs. Ewing) and other Opposition Members—has been prepared to consider the options and to explore the various possibilities in a joint and co-operative way.
We know that we face a considerable problem in the fabrication industry throughout the United Kingdom. One of the dreadful ironies is that although the important Dunbar order, which was awarded to the Fife yard recently, brought much pleasure to people there, it obviously has serious implications in Ardersier.
It is worth reminding ourselves that over the past couple of years the United Kingdom construction yards have enjoyed very full order books. Some people would say, with the benefit of hindsight, that the order books were almost over-full because they were leading to genuine capacity problems, to training problems and to cost control problems. Looking forward, we are moving from a high peak historically to a prospect of a relatively low volume of orders. Unlike on previous occasions, when we 260 have been able to see a pick-up a number of years ahead, present predictions are of fairly flat demand for three or four years.
Everyone in the industry recognises that likelihood. The task that everyone is trying to address is how we overcome a structural change in the marketplace. The structural change is perhaps all the more serious for the heavy fabrication yards because the nature of the orders in the United Kingdom continental shelf in the years ahead is changing. As the North sea is becoming a more mature oil province, and as a result of technological changes brought on largely by cost pressures, there is a consensus in the industry that we are moving away from the large-scale developments, with the large jackets to which the highland yards especially were designed to respond, to smaller platforms and jackets, and an increasing preoccupation with sub-sea completions—the more high-tech end of the fabrication industry. With that development comes a different mix of skills. The size of the yards can be considerably smaller. That, again, has implications for the cost base of the highland yards.
As hon. Members know, I have been up to the Highland Fabricators yard and I have had many meetings, both formal and informal, with unions and with management. There is a feeling out there that somehow the major threat comes from overseas contractors. In fact—one must congratulate the United Kingdom fabrication industry as a whole—although the threat has always been there, in practice the United Kingdom yards have been more than able to hold their own. It is significant that virtually all the orders for the Dunbar project have so far gone to United Kingdom yards, with the deck contracts to UIE at Clydebank and the jacket contract to RGC.
There is a feeling, to which the hon. Member for Moray referred, that somehow we should design a policy that is all about evening out the flow of work. It is extremely complex even to conceptualise such an evening out. What one would try to do would be to dictate to individual companies which have to make investment decisions the precise timing of when those investment decisions should be taken. Unless one dictates the timing, one cannot, by definition, even out the flow.
One of the interesting factors that we face now—a great opportunity for British yards—is that the Norwegians, who are sometimes held up to us, despite the fact that they have a far smaller sector, as people who have evened up the flow of orders, face a severe capacity problem in their yards because their order book is building up very fast. Many people believe that it is building up so fast that it is ahead of the Norwegian yards' capacity to produce the necessary jackets and concrete platforms. That, in turn, provides an opportunity for our United Kingdom yards to go in there competitively. I agree with the hon. Member for Moray that our yards are now properly competitive. They were not always, but they are now. Work force and management alike are determined to get out there and get the orders that are available, and the AMEC yard has recently won an important order from Norway. Before that order, many had believed that there were no Norwegian orders to be had, but that has proved wrong. Unfortunately, that order has not helped the yards in the highlands, but it shows that there is more work out there to be got, and that it is not necessary to consider only UKCS opportunities.
The hon. Members for Moray and for Inverness, Nairn and Lochaber (Sir R. Johnson) were kind enough to draw 261 attention to the widespread support for my announcement in Aberdeen, which I discussed when the hon. Member for Inverness, Nairn and Lochaber came to see me. I am keen that that important initiative should result in practical suggestions from the working group as to ways in which we can reduce operating, construction and capital costs in the UKCS.
For reasons that I fully understand, the hon. Member for Moray wanted to make the group rather larger than we currently intend. We have suggested that it should he chaired by John d'Ancona of the Offshore Supplies Office and should consist of a small group of representatives of the oil companies or customers—about three—and a similar number from the oil supply industry, as well as a representative of the Scottish TUC. I have deliberately kept the group small because I want it to be a working group. We have given it a very tight timetable. We have asked it to report back and have emphasised the need to produce practical recommendations by the end of February. Although I would certainly encourage the various different local organisations and others to make suggestions, I am reluctant to extend the membership of the group, because to do so would slow down its work, which will in any case be undertaken within a tight timetable.
The hon. Member for Moray will be aware that I made some other announcements in Aberdeen, which were intended to try to make it easier for oil companies to come forward with developments. In the past, the arrangements were rather bureaucratic, and companies were required to jump unnecessary hurdles, some of which we are now trying to remove. In particular, I emphasised the need to get some of the very small fields up and running rather more quickly than had previously been the case. The easing of bureaucracy combined with a determination to try to identify cost reduction methods should have the effect of bringing forward a number of marginal fields.
I do not want to put an unfair positive gloss on the situation by pretending to the House that numerous large jacket orders will suddenly be produced. That is not the nature of the new North sea. What it will do, however, is to produce a large number of additional man-hours of work. Given the inevitable changes in orders, one of the challenges for the traditionally large highlands yards is to find ways to reduce their overheads and thus become more responsive to the more technologically complex orders which are available but which may not keep them so busy for so long a period. Both unions and management are aware of that challenge.
My hon. Friend the Under-Secretary of State for Scotland has been listening carefully to the points that have been made. Concern has been expressed in the highlands about such matters as assisted area status. Hon. Members will be aware that we are currently conducting a review of the map and have that in mind. Although it was not mentioned today, I know that the question whether 262 there is a chance of the highlands being upgraded—if that is the right word—to EC Objective I status is of concern to many people. My information is that at the moment the criteria are not met. However, that does not necessarily mean that the new draft regulations published by the Commission might not change the situation.
§ Mrs. EwingI did not raise assisted area status because I recognise that that is not within the Minister's remit. However, as he has mentioned it, are the Government going to support Objective I status for the highlands?
§ Mr. EggarAs the hon. Lady rightly realises, that is not my direct responsibility. However, I understand that under the current criteria the region is not eligible, although those criteria may be revised as part of the EC future financing and structural funds review. I assure the hon. Lady that United Kingdom Ministers will take the case of the highlands and islands fully into account once negotiations on the future of the fund begin in earnest. I hope that that is helpful. However, if the hon. Member for Inverness, Nairn and Lochaber wants to pursue that issue, he is best advised to pursue it with the Parliamentary Under-Secretary of State for Scotland, my hon. Friend the Member for Edinburgh, West (Lord James Douglas-Hamilton), because I must admit that I am not fully familiar with all the detailed arguments.
The hon. Member for Moray referred to the taxation regime and ways in which it might help to bring forward developments which would not otherwise occur. That technique was used in 1986–;87, but the situation is now rather different. The total Government take from the North sea is very limited—about £1 billion. Most of that money comes from well-established producing fields. The amount of flexibility that the Government have to reduce taxes and thus bring forward marginal fields is almost insignificant because of the relatively low level of tax currently paid by North sea fields.
However, I am obviously interested in particular proposals and cases put to me by oil companies. In particular, I would always be concerned about a project which would make sense pre-tax and which would therefore go ahead pre-tax, but which does not make sense post-tax. For example, we were able to find a way to ensure that the Columba development proceeded.
I am acutely conscious that I have not covered all the points that have been raised. The hon. Member for Moray raised three points and the hon. Member for Inverness, Nairn and Lochaber raised six. I will read the Official Report and try to respond to those points in writing. If the hon. Member for Moray would like meetings, I can tell her that I always have an open door. I want to explore ways to help as much as she does.
§ Question put and agreed to.
§ Adjourned accordingly at seventeen minutes past Eleven o'clock.