HL Deb 05 December 1950 vol 169 cc731-66

3.23 p.m.

LORD TEYNHAM rose to call attention to the Shipping Industry; and to move for Papers. The noble Lord said: My Lords, I think it will be agreed on all sides of the House that the shipping industry has worthily maintained its reputation for efficiency, when it is realised that practically all the losses incurred during the war have now been replaced by new tonnage. Unfortunately there is, however, already a dark cloud looming up upon the horizon and day by day getting more dangerous: I refer to the difficulties of replacement of old tonnage. Those difficulties are due to the fact that owing to the penal nature of existing taxation shipowners are unable to build up sufficient depreciation funds. It is not too much to say that this taxation represents in fact an annual capital levy on one of our most important industries —an industry which provides one of our greatest invisible exports, of a value, I believe, of something like £100,000,000.

The cost of replacement of ships is now approximately three times what it was before the war, and depreciation allowed by the Inland Revenue is on only the original cost of the ship. This allowance is quite insufficient to permit the ship-owner to set aside a sum which will cover replacements at present-day costs. In fact, one well-known tramp ship company which at present owns some twenty-five ships has estimated that if taxation remains at its present level and other fac-tors remain approximately the same, by 1965 their fleet will be reduced to twelve ships. That is a very serious matter. I suggest that this calculation must apply more or less to the whole of the British mercantile marine. It is certainly causing grave disquiet in the industry, and I hope also in the mind of His Majesty's Government.

I would remind your Lordships that the shipping industry is in a different category from other industries. A manufacturing concern can renew its plant gradually and the unit of production remains, but a ship is obsolete in twenty or twenty-five years and must, of course, be replaced entirely. It is quite a different proposition from that of a manufacturing industry. I suggest that if our shipping industry is to be capable of trading successfully on the world's trade routes and of maintaining our most important invisible export, it must be capable of replacing its worn-out ships. I wonder how many people realise that there are already now in ser-vice some 2,000,000 tons of obsolete ships which should be replaced as soon as possible. I think it is true to say that at the present time there are some 100 berths in the smaller shipyards on which keels of merchant ships could be laid, but which are at present empty. This is causing unemployment, not only of craftsmen in the industry but of those workers and people in the factories and workshops who provide the fittings for the ships. It is true that the larger shipyards are fully employed in building large tankers for the carriage of oils, molasses and so on, but I can assure your Lordships that the smaller yards are badly in need of work and that very few passenger ships or tramp ships are being built at the present time.

The question is, what relief can be given to the shipping industry to replace its worn-out tonnage? It is true that provision for a certain form of allowance for depreciation known as an initial allowance was introduced in the Income Tax Act of 1945. I would point out, however, that this additional allowance for depreciation really only brings forward the ordinary annual allowance, and the total allowance, therefore, is not increased. As against this initial allowance, the shipping industry suffers from what is known as a balancing charge, which was also introduced, I think, in the Income Tax Act, 1945. This charge places a real burden on the shipping industry and has the effect of revising the total of the depreciation allowances given over the life of a ship. If a ship is sold for more than her written down value, the excess is taxed either in one sum at the current rate or, if the ship is replaced, then over the first twelve years of the life of the new ship.

Of course, it may well be argued that before an owner decides to dispose of a ship he can calculate the consequences of such a sale and what his tax liability will be, but I would point out that the balancing charge applies not only to sales but equally to insurance recoveries on ships which are lost, and it is really a most important point. Replacement costs now run at something like three times the original figure and, of course, the owner is bound to base his insured value on the cost of replacement. It follows, therefore, that where a ship is lost, a large percent-age of the insurance recovery, which should all be invested in a new ship, is bound to be taken in taxation. Surely His Majesty's Government do not intend that taxation should have that effect? I should like to suggest to His Majesty's Government that they should seriously consider putting this situation right by abolishing the miserable balancing charge in respect of ships lost by either marine or war peril.

I should now like to put forward certain suggestions to deal with the main factor of depreciation and replacement of old tonnage. I wish to suggest to His Majesty's Government that the undistributed profits in the industry should be permitted to be retained in order to build new ships, provided that if the money is not so spent the full tax will then become payable. In fact, there should be a formula of "Build or pay." I have little doubt that unless some relief of this nature is quickly given to this great industry, our mercantile fleet will decline in efficiency, a result which will, of course, have a great effect not only on our trade but on our measures of defence. It might be thought by some people that, in view of the somewhat high freights being realised at the present time, the shipping industry should be capable of carrying out the replacement of ships or worn out tonnage from profits. I should like for a few moments to indicate to your Lord-ships what proportion of every pound of gross revenue goes to profit in a shipping business. In the case I have in mind, 8s. 10½d. from £1 of gross revenue is absorbed by wages, salaries, pensions, contributions to superannuation and State insurance; 3s. 10½d. by bunkers, stores, maintenance and other materials; 4s. 5½d. for marine and other insurance, port charges and general disbursements, and 1s. 2d. for normal depreciations. This leaves a net profit of 1s. 7½d. in the pound, of which 10½d. goes in taxation, 2d. in additional depreciation not allowed for in taxation, and 4d. in dividends, leaving 3d. in the pound to be retained in the business.

LORD STRABOLGI

What class of ship is that?

LORD TEYNHAM

That is a coastal ship. With this very slender margin of profit, there is obviously no room for the ever-recurring increases in the cost of wages, salaries and materials which, as your Lordships know, day by day are becoming a greater burden on the industry. What is most important is the re-placement of worn-out tonnage. The shipping industry is also considerably concerned at the unnecessary continuance of certain restrictions against the proper transaction of their business. I would refer to the restriction on the sale of obsolete tonnage to foreign buyers, which was introduced for war-time purposes. This restriction is still in operation, and the owner is allowed to sell to overseas buyers only ships which are fifteen years of age and over. Permission to sell below that age is restricted to owners who are prepared to put the proceeds of the sale into a blocked account from which they can draw only for the purpose of replacement by way of new building or for meeting the cost of modernising existing vessels. I would suggest that, now that the losses sustained during the war have been re-placed, the shipping industry should be allowed to manage its own business, and that this restriction, which certainly is having no beneficial effect on the industry at the present time, should be removed. In fact, it has had an adverse effect on the shipping industry curing the last few years.

I should like now to draw your Lord-ships' attention for a few moments to the competition of German shipping in the short sea trades, which has been giving rise to concern in the industry. It would seem that German shipowners, both as regards operating and as regards building, are in receipt of financial assistance of one kind or another which they can set against their operating losses. In fact, in one short sea trade the German lines are in-creasing their sailings far beyond requirements. One line is advertising two sailings per week, and another one sailing every five days, whereas according to the know-ledge of the competing British lines the cargoes scarcely justify one sailing per week. I suggest that German shipowners are perhaps unwisely dissipating part of their resources to the detriment of British shipping, and in a manner contrary to the spirit of the Washington Agreement. Your Lordships will recall that under the terms of that Agreement, signed by the United States, this country and France, Germany was allowed to build merchant vessels for coastal trade adequate for the requirements of European and German recovery. They have already 60 per cent. of the total tonnage which they had in 1939. I fully realise, and I am sure all your Lordships realise, the necessity for the rehabilitation of Germany and her short sea trade, but I would suggest to His Majesty's Government that there seems to be a case for reviewing the development and activities of German ship-ping in relation to funds which are being made available to that country. I am sure it was never intended that German ships should be put in an advantageous competitive position with British tonnage or, in fact, with ships of any other flag.

There is one other matter with which I should like to deal for a few moments, and that is, the demand from various quarters for additional shipping services in the Caribbean area and Bermuda. There have been many complaints that not only the passenger service but also the cargo capacity is inadequate, and that if this country does not take the initiative the trade will fall into the hand of a foreign flag. There is, of course, a great deal of truth in those complaints. I would remind your Lordships of the report on the West Indian shipping services published in 1948 by the Commonwealth Shipping Committee. That report recommends that a passenger service shall be provided between the United Kingdom and the Eastern Caribbean, the ships to have accommodation for sixty to seventy-five persons and a speed of not less than six-teen to seventeen knots. It was further suggested that that passenger service might be provided in conjunction with provision for the carriage of fruit from that area. In making that recommendation, the Committee drew attention to the high cost of the tonnage required and to the possibility that special measures of assistance in the early stages might be necessary to encourage the shipowners to provide such a service. In fact, an examination of the evidence given to the Committee by shipowners with special know-ledge of the trade shows that to build and operate the suggested service would not be an economic proposition, and Government assistance of some kind or another would undoubtedly be necessary. I would add that trade between this country and the West Indies is not alone in that respect. I hope His Majesty's Government will look into the question at an early moment, before the trade has been wrested from us and is being carried in foreign bottoms.

I have endeavoured to cover various matters which are disturbing the shipping industry. On the one hand, His Majesty's Government urge the industry to keep up a steady flow of orders for the shipyards, at the same time denying the industry the funds to be able to do so. I maintain that it is essential, especially at the present time, to put before the country the position of the shipping industry in the clearest possible terms, and to leave no doubt in the minds of anyone that the Government is seriously disturbed at the prospect of diminishing fleets, of the con-sequent diminishing revenue from in-visible exports, and what is more import-ant at the present time, of a probable contraction and weakening of our life-line of defence. I hope that His Majesty's Government will give the whole matter early and serious consideration. I beg to move for Papers.

3.40 p.m.

LORD STRABOLGI

My Lords, I congratulate the noble Lord, Lord Teynham, first on bringing up a matter of such wide importance, and, secondly, on the very clear presentation of what, I feel, is a very good case. All taxation, of course, is bad, and any taxes that we ourselves have to pay are penal. In this particular case of depreciation, with which the ship-owners are concerned, I think the complaint is justified. The noble Lord is very optimistic if he thinks he will elicit any information from the Government spokesman in your Lordships' House, be-cause I am afraid that the reply will be— and it could not be otherwise—that this would be anticipating the Budget. All I can hope is that, before the Budget is completed and ready for presentation in another place, this matter will be amended.

I should like to support what Lord Teynham has said on that particular point, especially with regard to the amount of depreciation for replacements. I hope that the noble Lord was exaggerating, inadvertently, because he rather surprised me by speaking of the number of idle shipyards that could be building smaller ships on smaller building slips. I under-stand that there is a tremendous boom at the present time in the price of ships all over the world—an astonishing and, in fact, unhealthy boom, which will bring its Nemesis, as most of these booms do. I wonder whether the idleness of building slips for smaller vessels is due to steel shortage, because there is a tremendous boom in steel as well, and a very hard sellers' market. It may be that that is hampering the use of the smaller ship-yards. But if what Lord Teynham has said is not an exaggeration, I hope that the Government will take steps to see that these smaller shipyards are employed. With regard to the noble Lord's remarks about the importance of the mercantile marine, we must all agree with him that its strategic importance cannot be exaggerated. Without a strong mercantile marine we have no chance whatever of surviving in case of war. That is common ground to all of us.

Secondly, of course, shipping is a very important invisible export and a great earner of hard currency, and anything that can be done by any Government to see that the British mercantile marine is prosperous and flourishing should be done. Whatever Party are in power, they have a paramount duty to see that the shipping industry is prosperous and growing. In that respect I join issue with the noble Lord on the very great things that have been done in making good the ravages of the Second World War. He did not quote the actual figures, but if your Lordships will forgive me I will quote them now. For this purpose I take the whole Commonwealth together. In 1939, the British Commonwealth shipping totalled, in round figures, 18,608,000 tons. By the end of 1947 (these are the latest figures I have) the total was a little over that—namely, 18,611,000 tons. That shows that the industry is stable and back to its pre-war tonnage, and as a great many of these ships are, of course, new and faster than those in use before, the situation reflects great credit on the industry.

LORD HAWKE

If I may be forgiven for interrupting the noble Lord, is not the noble Lord confusing what are now virtually two different industries, the tanker and non-tanker fleets? The tanker strength has increased and the other has not.

LORD STRABOLCI

I have with me the figures, broken down. The figures cover the whole of the ocean-going tonnage, leaving out tugs, fishing vessels, small coastal craft and so on. This is the deep sea-going mercantile marine taken as a whole.

The position in the United States is very remarkable. That matter was not referred to by Lord Teynham, but it creates an extraordinary situation. In the United States there has been a fourfold increase since 1939. In that year the United States tonnage, again in round figures, was 8,722,000, and it is now no less than 33,213,000. Those figures are largely accounted for by the tremendous building of Liberty ships and war-time cargo vessels, but there is a fourfold increase. Another point worth noticing is that, whereas the British Common-wealth mercantile marine deep sea-going shipping tonnage is a little above the pre-war strength, the world total has grown by 14,000,000 tons or thereabouts. Before the Second World War the world total was 61,426,000 tons; at the end of 1947 it was 75,291,000 tons. The remarkable thing is that, in spite of this extra 14,000,000 tons of shipping available for the trading nations, and in spite of the fact that there is a great deal of restriction on trade at the present time—as I think, un-necessary and foolish restriction—freights are rising all over the world, and the price of old and new ships is going up. If we carry out anything like the Colombo Conference programme, if we develop the Asiatic areas economically and increase their trade and improve them as markets, and if we get rid of these absurd restrictions on trade with various parts of the world, then the existing shipping will not be enough to carry the trade which will present itself. In such circumstances, I presume that the boom in shipping will go on for some three, four or five years, at least.

When the shipping available has caught up with the needs and demands of freight, however, then, as always happens in the shipbuilding industry, which depends only on one customer, the shipowner, we shall face the inevitable slump. I think it is very much the duty of any Government in office at the present time—I know this matter is very much in the mind of my right honourable friend the Minister of Transport, and I dare say of my noble friend his Parliamentary Secretary—to see that there is a programme thought out ahead to cushion the impact of this slump, and to prevent a repetition of what happened in the 'thirties in this country, when we had a terrible slump, with consequent unemployment and the closing down of the Jarrow shipyard, and all the other horrible things that happened. That ought not to be allowed to happen again. But unless plans are made in advance, I am afraid that, when the present boom in shipbuilding comes to an end, that is just what will happen.

Of course, one remedy put forward is the nationalisation of the shipbuilding, ship-repairing and marine engineering industries. I must confess that in my view there is a very strong case for that action; but there is no case for the nationalisation of the shipping industry. I think my view on that matter is shared by nearly all my colleagues in the Labour Party. It has never been our programme, at any rate in the last decade, to nationalise the shipping industry. It has to be flexible. It has to be of a nature to catch markets, and that sort of thing, and it can be done successfully only by private people who are in the business for private profits. Therefore I think the case for nationalising the shipping industry goes by default. But there is certainly a case for nationalising the shipbuilding, ship-repairing and marine engineering industries, so as to prevent a recurrence of the appalling events which happened in 1930.

I said just now that any Government should do what they can to help the British shipping industry, and that, of course, is the plea of the noble Lord, Lord Teynham. There are two obvious ways in which the industry can be helped to-day, apart from a policy which should aim at breaking down trade barriers, lifting blockades and so on, instead of in-creasing them. One is by tempering the wind to the shorn lamb in the matter of taxation, which we have had very ably explained by Lord Teynham, and on which again I support him; and the other way is by improving the harbour facilities round our coasts. A great deal has been done to our deep-water harbours in recent years by way of improvement, but a great deal remains to be done. The loading facilities in very many of the more important harbours are not completely modern, and many of the other requirements have not yet been supplied. Of course, this is a matter of capital, labour, and materials. Under the Trans-port Act of 1947 the duty of supplying these requirements is laid on the British Transport Commission. I am not criticising that body or complaining. A great deal has been done, but a great deal remains to be done. Improving and, there-fore, cheapening our harbour transport facilities will do a great deal to maintain the prosperity of our shipping industry and will benefit the whole country.

Nothing has been said so far in this debate about the men who man British ships. I must say a word or two about them. Your Lordships, especially those of you who know something about sailors, will not be surprised to hear that they have grievances—grievances about pay, about working hours, about all sorts of administrative matters, about leave and so on. I had intended to lay those grievances briefly before your Lordships, and I had so warned my right honourable friend the Minister of Transport and my noble friend Lord Lucas of Chilworth, who, I believe, will reply to this debate, but my advisers tell me that a meeting of the Joint Maritime Board is to be held in about two days' time, when some of the more important of these grievances are coming up for adjudication. The work of the Joint Maritime Board has been an extraordinary development and it has proved extremely successful. It has brought peace in the industry, and has led, by negotiation, to a great improvement in the lot of British seafarers. When one remembers the kind of people with whom the unions have to negotiate, the British shipowners, of whom it may be said, without any reflection upon them, that they are amongst the hardest bargainers in the world— some people would say they are the hardest-hearted, certainly they are the hardest-headed of business men—I think the working of the Board has been a remarkable example of what can be accomplished by good leadership on both sides and by careful negotiation. Not only has that brought peace to the ship-ping industry, to a very large extent, but it has also vastly improved the conditions of life aboard ship—especially aboard the newer vessels—for our British seamen. As a consequence, we are now attracting a very fine type of young lad to the sea service. That is all to the good.

For the reasons which I have given, I do not propose to go into details of the grievances of seamen, I only ask my noble friend Lord Lucas of Chilworth to note that they do exist and that some of the complaints are very well founded: and I am sure he will agree with me in hoping that the Joint Maritime Board will remedy them. I dare say there will have to be give and take, but I hope that the main claims of the men will be met. One thing which is being asked for is an improvement in wages. I do not think anyone can quarrel with that. Seamen have felt the results of the depreciation of the pound because, naturally, they have to spend a certain amount of their money abroad; perhaps they spend more abroad than most ordinary citizens. Their families have also had to suffer, like everybody else, from the general increase in the cost of living. I believe that their demands are not unreasonable, and I hope that they will be fairly met. I again thank the noble Lord, Lord Teynham, for bringing forward this Motion. It was time that the shipping industry was again brought to the notice of your Lordships. I am certain that Lord Teynham speaks for all of us, and I echo what he has said to the effect that no subject is of more importance to the national well-being, and that the shipping industry requires the constant care and assistance, where it can be given, of any Government holding His Majesty's Commission.

3.54 p.m.

VISCOUNT RUNCIMAN

My Lords, my interest in this subject, which I must declare to your Lordships, is that I am and have been for many years actively engaged in owning and managing ships. I should like to join with Lord Strabolgi in thanking Lord Teynham, both for bringing forward the Motion and for the terms in which he has done so. I think that perhaps one of the most noteworthy features of the shipping situation to-day, not only in this country but in the world, is that in spite of the remarkable replacement of war losses, to which noble Lords have referred, there are not at this moment enough ships to go round. If, as is undoubtedly the case, freight rates are rising, it is because the demand for tonnage exceeds the supply. That is due to a number of factors, and that situation did not, I think, exist even so recently as the summer of this year.

As your Lordships well know, the conflict in Korea has resulted in a great deal of stockpiling of raw materials and the like, most of which have had to be carried over very long distances by sea. One result, at any rate, has been that tonnage which earlier in the year was concentrated on one or two routes has now become extremely widely distributed. When, there-fore, as happened on November 21, His Majesty's Government found it necessary to go into the market to charter tonnage to convey a large quantity of coal—mostly I understand from the Eastern seaboard of the United States—to this country, they went into it at a time when the majority of the world's tonnage (for this is a world question, as much as a British question) was actively engaged in carrying cargoes between places, most of which were very distant from the places at which an immediate concentration of tonnage was required.

It is therefore fairly obvious that if the tonnage required is to be obtained, considerable expense will be involved. You cannot face with equanimity an under-taking like a ballast passage across the North Atlantic in winter, if you are a ship-owner or a seaman. At best it is extremely uncomfortable, and at worst it is positively dangerous. Since cargoes to the United States are already for the most part catered for, it is clear that a great deal of tonnage will have to be induced to go long distances entirely in ballast in order to bring back coal to this country. Not only that, but the time when His Majesty's Government have come into the market has coincided almost precisely with the time when several other European Governments have done the same thing.

There appears at the present time to be something like a coal shortage through-out Western Europe. My information is that between November 21 and to-day, His Majesty's Government have chartered tonnage to carry about 123,000 tons of coal. They have taken nineteen ships, of which, incidentally, only nine were British. Belgium has come into the market at the same time for no less than 176,000 tons of coal. The Italians are in the market to the tune of somewhere in the neighbourhood of 55,000 tons. The Italians, it is suggested, had intended to obtain their coal requirements from Poland, but I understand that although contracts were entered into and shipping was arranged it was found when it came to the point that Polish coal had gone elsewhere. No doubt your Lordships will readily be able to imagine in what direction it has gone.

If His Majesty's Government had happened to go into the market about a fortnight earlier, they would have been able to get their tonnage, or at any rate a proportion of it, before this world demand developed. It is most unfortunate that they should have come forward at just the time when so many other nations were doing the same thing. Shipping, and particularly tramp shipping—which, of course, is concerned with the carrying of cargoes of this sort—works on a world market which is surprisingly free from restrictions and which responds extremely quickly to changes in demand.

At the present moment there is no great supply or source of supply other than the reserve merchant fleet of the United States, which in June of this year—that is to say, before the Korean war developed —amounted to as much as 15,500,000 gross tons, a very formidable reserve. In certain circumstances which we all hope will not come to pass, we should have reason to be extremely thankful for this reserve. We also have to thank the United States for enabling war losses to be made good, for a great deal of this making good was possible only by the enormous output of the United States shipyards. I hope that nobody in this country will ever forget the debt we owe to the United States on this account.

There may be 15,500,000 tons of ship-ping in reserve in the United States, all nicely wrapped up in cellophane, but it is quite a different business to produce these ships on the market for the purpose of relieving a temporary shortage. It would be difficult to man them if they were brought out and came suddenly into the market, whether by the British Government or by anybody else. We cannot expect to find, in a part of the world which has largely been denuded of ton-nage, the ships necessary, and immediately necessary, for this purpose, without paying for the cost of getting them there. It is not altogether fair to suggest, as has been done in some quarters, though certainly not in your Lordships' House this afternoon, that this is a golden opportunity for shipowners, and particularly British shipowners, to "cash in." Taking even a short-term view, the inconvenience of it to the most grasping shipowner very considerably outweighs the advantages. The inconvenience to the world at large must necessarily be very considerable, because if we take tonnage from a market which has by no means too much and apply it to particular purposes, all other countries will have to pay more for the satisfaction of their needs. That is the situation, and clearly there is not very much which can be done about it.

I would support in the strongest possible terms the conclusion arrived at by the noble Lord, Lord Teynham, that if these problems are to be resolved, they can be resolved only by ensuring that the British mercantile marine, so far from declining—and I fear I am able to show that it is declining—should be increasing. Anything which makes it more difficult to replace our tonnage, or which makes the replacement slower, can only be against the short-term, and even the long-term, interests of this country. Reference has already been made to the comparatively venerable age of a large proportion of the British mercantile marine. The noble Lord, Lord Hawke, was right in making a distinction between tankers and other ships. Tankers, if I may so express it, are the "C" licence vessels of the great oil interests of the world. They are not available for anything except their own job. One cannot charter a tanker and fill her up with coal to be brought to this country. That is elementary common sense. It is probably true to say that the oil companies are perfectly capable of looking after their own interests in making sure that they have a sufficient supply of tankers.

If we lake the dry cargo tonnage of this country, nearly one quarter is over twenty years old, which is normally regarded as the effective life span of a ship, and nearly one-seventh is over twenty-five years of age. It is clear, there-fore, that in order to maintain the British fleet at all, let alone to maintain it in a condition of real efficiency, a very large replacement programme will have to be undertaken soon, and will have to continue for some time. This makes me rather doubtful whether we should be apprehensive of the slump in shipbuilding which the noble Lord, Lord Strabolgi, fears. Of course, there are changes in fashion and demand in shipbuilding, and from time to time there well may be yards which do not happen to be equipped to build the particular type of tonnage for which there is a demand. But I think it is unlikely, at any rate for some years to come, that we shall see anything approaching the slump in shipbuilding which we saw from time to time between the wars.

I do not want to go over again the arguments, which have been admirably advanced by the noble Lord, Lord Teynham, about the difficulty of finding money to replace ships at the present time. I would say merely this: since 1946 the cost of building ships has been going up pretty steadily, at the rate of about 1 per cent. per month; it shows no sign whatever of easing off. There is no point in blaming the shipbuilders for that rise. It is a matter largely out-side their own control. When all prices are rising, it would be quite unreasonable to expect shipbuilding prices to stay stationary. Nevertheless, it means that if a shipowner is to put by money to-day to purchase a ship, he will have to put by a great deal more money if he is to have enough to pay for the ship in a couple of years' time, which is about the soonest he will get delivery if he goes to one of the ordinary yards. That seems to me to be a strong reinforcement of the argument made by the noble Lord, Lord Teynham.

But, of course, it is not enough to have ships. As the noble Lord, Lord Strabolgi, said, it is extremely important to be able to use them to the best advantage. Anything which hampers the effective improvement of shipping is a disadvantage at this time, not only to this country, which is likely to be one of the chief sufferers because so much of our trade is with foreign parts, but also to the world at large. Since the war, as there was after the First World War, there has been a considerable increase in the practice of what is known as flag discrimination— that is, treating a vessel of one's own nationality more favourably than vessels of other nationalities. I do not wish to weary your Lordships by recounting the variety and ingenuity of the methods by which this is done. It is not merely a matter of seeing that a ship of one's own nationality gets into a berth first, or even of so arranging matters that she pays lower dock dues. There is the making of trade agreements which provide that cargoes moving between one country and the other shall be carried only in the ships of one or other of them. There is the converting of the foreign exchange controls, necessary for very proper purposes, into an instrument for ensuring that cargoes are diverted to ships of a particular nationality. The same is true of insurance. A number of things of that sort are going on, and until recently they had shown considerable signs of increasing.

One of them, which I mention with some hesitation in your Lordships' House, has been the rule by which half of Marshall Aid cargoes were carried to Europe in American bottoms, even though there was tonnage of the receiving country available and willing to carry them. It has been said, and rightly said, that if one is receiving a. gift, one should not be unduly critical of the manner in which it arrives. But I have been interested to see a recent report to President Truman by his economic adviser which suggests that the Americans them-selves are recognising that if they enforce that rule they are not only giving a concealed subsidy to American shipowners, which may well be considered desirable by some, but they are also making sure that the tonnage available to the world at large—and more particularly to the Atlantic Powers—is less efficiently employed than it otherwise would be.

That is the real argument, and the fundamental argument, against measures of flag discrimination. They are liable to hurt this country perhaps more than many others, for, as your Lordships probably know, one-seventh of the freights earned by British shipping are earned on voyages which do not touch a port of the British Commonwealth at either end. They are probably as pure a kind of invisible export as one could imagine, and they are obviously particularly vulnerable to attack of this character. I do not think there is a great deal that any British Government can do about it, except to make themselves as unpleasant as possible, in whatever ways are open to them, to countries which persist in this, what I may call, extremely anti-social way of acting.

What it comes to in the end, so far as the future of British shipping is concerned, is this. British shipping, and particularly British dry cargo shipping, represents a smaller proportion of world shipping now than it was before the war. There are signs that relatively it may be diminishing even further. It is practically certain that, unless a great many new ships can be built in this country within the next ten years, the size of the British mercantile marine will be very noticeably and drastically reduced. It is equally certain that it is becoming increasingly expensive to build those ships. I think it is only fair to say, however, that if the British shipping companies which earn the freights are permitted to spend money on improving, modernising and enlarging the fleets, and so enabling more freights and more foreign exchange to be earned, the industry will be capable in the future, as it has been in the past, of overcoming that particular difficulty. Given a fair run the British mercantile marine has not found itself unable to carry on on its own in the past, and I see no reason at all to suppose that, given always a fair run, and competition on equal terms, it will not be able to do so in the future.

4.15 p.m.

LORD RENNELL

My Lords, arising out of the speeches which noble Lords have made, there are one or two points that I should like to take up, really by way of emphasis. The first is that of the replacing of tonnage out of depreciation allowances. It is completely impossible to-day for any shipowner to replace obsolete shipping from the depreciation allowances granted. It is comparatively easy to see why that is so. The standard charge for depreciation on ordinary ships is now 6¼ per cent.; that is the allowance which the Revenue make. It was raised from 5 per cent. An allowance of 5 per cent. presupposes for a ship a useful and economic life of twenty years. As a matter of fact, that to-day is optimistic, since experience has shown that ships be-come not only obsolete by becoming worn out but economically obsolete by being no longer suited to the trades in which they are engaged. I think the noble Lord, Lord Runciman, pointed out that there is to-day an increasing tendency to build ships for special purposes and not to have a standard ship which, in theory, is able to serve in any part of the world and do almost anything. The latter is to-day an obsolete type of ship which can no longer really earn its living, and probably cannot earn its depreciation.

But even supposing that a ship can be used for general purposes, where the allowance is of the order of only 5 per cent. (recently increased by one-quarter to 6¼ per cent.) it is to-day manifestly impossible for any shipowner to replace that ship within its reputed life of twenty years. The reason is perfectly clear. Take the simple arithmetical example (I do not pretend to actuarial accuracy or anything like that) of a shipowner who has twenty ships and who has bought them over a period of years. He has so laid out his programme that he requires one ship a year to replace his ships on an average life of twenty years. The cost of ship-building, however, in the twenty years' span of the life of that fleet, has risen by something between four and five times. An ordinary tramp steamer of a standard type which twenty-five years ago cost £100,000 to build to-day could be re-placed only at a cost of something of the order of £500,000. That means that the average allowance made for the replacement of a fleet during the life of the fleet is substantially below the replacement value of any one of the ships. Moreover, if the depreciation provision for those ships was at 5 per cent. in the early part of their lives (as it was before the allowance was raised to 6¼ per cent.) it is fairly clear, from a simple mathematical calculation, that the amount of accumulated depreciation to-day on the older ships in such a fleet would provide only between one-quarter and one-half, but no more, towards the replacement of the ships at modern building costs.

What follows from that is particularly serious. It means that capital investment in shipping is a disappearing asset, and the company that wishes to continue in shipping has all the time to raise new capital to replace its working outlays. That is the real difficulty with which all shipping is faced, and that is why, at the present moment, with the rates of taxation pertaining to ships, there is little incentive to shipowners to increase the size of their fleets, and probably scarcely enough incentive to keep the size of their fleets constant. Experience furthermore has shown that while these considerations apply to ordinary ships they apply even more strongly to tanker shipping. The life of tanker shipping is, effectively and economically, certainly not twenty years, and the large oil companies and people that specialise in tanker shipping to-day are in point of fact tending to write off the value of their tanker tonnage in seven years. Probably the effective life of a tanker is something like ten to twelve years for a tanker taking mixed cargoes; but a conservative estimate is for its depreciation in about seven years. It follows that if the ship lasts beyond the seven years, having benefited from carrying only non-corrosive cargoes or cargoes that do not damage or depreciate it, there is a great deal of money in it, but little money in a new tanker.

While on the subject of tankers I would refer to a point that was made by the noble Lord. Lord Runciman—and I think it was really implied in what Lord Strabolgi said, too—that without the merchant fleet and without tanker tonnage the Royal Navy cannot go to sea and cannot stay at sea. That is quite apart from the consequences that would arise to our-selves in the event of a blockade. Your Lordships will be aware that during the last war we enjoyed the benefit of a substantial amount of foreign tonnage, notably, in the case of tankers, Norwegian tonnage. The Norwegians to-day have built a very large tanker fleet, I believe very much larger (I cannot quote the figures, and they are, I think, not relevant) than they ever had before the war. A great many of those ships are in the ser-vice of the Western Atlantic Powers; they are in American, British and French ser-vice. As a matter of fact, it was a great piece of luck—and it was due to the. loyal and noble attitude taken by the Norwegian shipowners—that at the beginning of the last war we had the pick of the Norwegian ships. It is by no means certain that in similar circumstances in future we should again be able to get hold of them. Without those ships to-day we certainly cannot carry the oil cargoes which this country needs, let alone go to war.

A great many of these tankers, more-over, have been built in this country to Norwegian order. It seems to me a short-sighted policy, from the strategic point of view, that we should have built for foreign owners a large amount of tonnage which we had no guarantee of being able to use to our benefit in a time of emergency. I trust that, in future, whatever steps can be taken will be taken by the Government to ensure that what tanker tonnage is built is built for British use. and remains under our control. I say that without in any way wishing to criticise or disparage the efforts of the Norwegians in this or any other trade. They have been very good friends of ours, and I am sure they will continue to remain so. But there are circumstance; of force majeure in which we might not find them able, however willing they may be, to co-operate with us as they have done in the past. That makes our own position, so far as tanker tonnage is concerned, even more precarious than has already been indicated by noble Lords who have preceded me in this debate.

There are two other points to which I should like to refer, not on the financial or administrative aspect but more from the geographical point of view. One of the most astounding situations in which we find ourselves to-day is that a very large group of British Colonies in the West Indies are served mainly by foreign shipping, because there is no British shipping sold. Whatever the reasons for this may have been in the past—and undoubtedly the difficult economic and financial situation of the West Indies had a great deal to do with it—the fact of the matter is that to-day, if you want to get out to the West Indies as a passenger, and do not desire to fly, or if you want to send cargo out to the West Indies or bring cargo back, the chances are that you will have to use a Dutch, French or an American ship. Quite apart from the sentimental aspect of having British shipping running to British ports and Colonies, that situation is one which redounds to our great disadvantage from more than one point of view. Shipping is one of our great invisible exports. We ought to be able to earn our own freights, to carry our own cargoes from our own Colonies to the United Kingdom and vice versa, and not have to pay, as in the case when we use American ships, hard dollar freights to carry our cargoes from our Colonies.

But there is what I believe to be another and even more serious aspect. Shipping not only earns invisible exports, as they are called, but itself creates in-visible exports, in the form of earnings in insurance, in agency fees, in banking fees and commissions and in exchange. Experience has shown that where a British cargo line calls, there follow all these accessory earning elements, such as insurance, agency fees, and so on, which in the long run are probably nearly as remunerative as the shipping freights themselves. On the other hand, where the freights are carried in foreign bottoms, these other elements tend to go—though I do not say entirely—to foreign markets. Quite obviously, in the case of an American shipping line there is a bias for the agency—probably an American agency of that shipping line—to seek to place the insurance in the American market, and to transact the business arising out of the shipment of those cargoes through American banks. It seems to me, therefore, that so far as the West Indies are concerned—and, after all, they cover these very large and important British territories for which we are trying, not unsuccessfully, to do some-thing, from the point of view of what I think has been called "enlightened self-interest"—we should try to earn as much as we can while helping these Colonies by providing them with shipping and the services that arise therefrom.

The situation in the West Indies in that respect is much more serious to-day than it has been before. One of the great sources of shipping earnings in the tramp world has been charter freights for carrying bauxite from British Guiana for what might be called the international aluminium organisation—the Aluminium Company of America, with its varied related concerns in Norway, Canada, Labrador and so on. I understand that in this bauxite trade approximately fifty ships a year have been chartered, a great many of which are typically British tramp shipping units. If my information is correct, the aluminium group now intends to put a large number of its own ships in this service, which will not only deprive us of these bulk freights but will take the situation into an even more serious sphere. Ships that were carrying bauxite, for instance, from British Guiana to Norway, were for the most part returning empty, or picking up whatever freights they could west-bound from Europe. It is the intention to use these new ships, which are to be built for this bauxite traffic, to cater and compete for such west-bound cargoes, which are already few and far between and are avidly sought by British shipowners. The new element is therefore coming even into the Caribbean, and looks as if it will have a serious effect on what little shipping we have got there.

To some extent the same considerations apply to the Pacific, where to-day, as your Lordships know, there are practically no British line ships trading. I should say (the noble Viscount, Lord Runciman, will correct me if I am wrong) that half a dozen is about the top figure, and it is probably rather less than that. When I say "British line ships," I include British Commonwealth ships, too, because unfortunately the great British ships that used to run from Vancouver across the Pacific to Japan and the Far East are no longer running. It is not possible to get on a British ship from the West coast of America to what we call the Far East, though I suppose to them it is the Far West. Unless he is either lucky or far-sighted, it is practically impossible for a passenger to get from this country to New Zealand on a British line. It seems peculiar, but I believe it is a fact, that when one has dropped as entirely out of a trade as we have out of the West Indies and the Pacific trade, it is not easy to get back without some form of Government assistance.

Lest the noble Lord thinks that he has a point which he can charge up against me, I hasten to say that I have not yet met a British shipowner—although I dare say such people exist—who has the slightest desire to have sufficient contact with His Majesty's Government, either the present or any other Government, as would be involved by receiving a subsidy from them. But it is also probable that there are certain types of shipping which to-day will require a subsidy if they are to get started again. That is notably true, I believe, in the Caribbean inter-island shipping, without which it is not possible in its turn, as I understand it, to run direct cargo or mixed cargo liners from this country. It is not economically possible to have a fast and extensive mixed ship, calling at a sufficient number of ports in the West Indies and getting back here, and the only basis upon which a direct British-West Indies line could be organised, or reorganised, would be to run it on a mixed direct service, with feeder lines on inter-island services. It is probable, as I understand it, that in those inter-island services some Government assistance will be required, for the sake alone of the British Colonies, quite apart from the effect of the present situation on British shipping. As your Lordships know, unless you are prepared to travel either in foreign ships or foreign aircraft, it is practically impossible to move from one British West Indian island to another.

Those points seem to me to suggest that rather wider consideration must be given to British merchant shipping. If I may recapitulate, shipowners should be enabled to replace tonnage by a scaling up of their depreciation allowances under the Inland Revenue provisions. May I say here that the additional initial allowance is of no value whatsoever for that purpose? It may provide finance to build a new ship. The initial allowance applies to ships and machinery, and to any other plant, but it is no remedy to taxation; it is. as it were, only an anticipation of the depreciation allowance. I believe that a review of depreciation allowances on shipping is long overdue. Secondly, some decision on this question of Caribbean shipping in particular, and Pacific shipping in general, is essential. May I here add that, so far as Caribbean shipping is concerned, I understand that the matter has been discussed between various Government Departments and shipowners for three years, without any conclusion having been reached on the subject. I submit that it is time a decision on the subject was reached.

4.33 p.m.

LORD TWEEDSMUIR

My Lords, I shall not take up your Lordships' time for more than a short period. I have just returned from East Africa and have brought with me many vivid memories and, what is almost equally inevitable, an extremely bad cold. I think we are all indebted to my noble friend Lord Teynham for raising this debate, and for his points, which have been put with such clarity and such force that I do not need to labour them all again. I must preface my few remarks by the customary declaration of interest—that I am a director of a shipping company. I was much impressed by the words of the noble Lord, Lord Strabolgi, when he said that without a strong mercantile marine we have no chance of survival in the event of war. That is an unchallengeable truth with which both sides of the House will agree. He went on a little later—and I could not. follow him in this—to say that a case existed for he nationalisation of shipbuilding, ship repairing and engineering.

LORD STRABOLGI

Marine engineering.

LORD TWEEDSMUIR

I am obliged to the noble Lord. I should be more in a position to pass comment on that case had the noble Lord had time to develop it further, but I will not go further with that. In this country we have always depended upon our merchant shipping, and if our merchant shipping were to dwindle in size and importance, so the discharge of our responsibilities in the Empire would be correspondingly preju-diced. To my mind, that will go on being the case to whatever extent the use of air travel is enlarged in the foreseeable future. We have always done a very large part of the world's shipping. We have never had a monopoly, and we are not asking for one now, but we are facing great difficulties. It is for that reason that the burden of the speeches to-day on both sides of the House has been that His Majesty's Government must exert all their authority in the foreign sphere to extend free and fair competition in the international carriage of goods, and, secondly, to allow British shipping to compete on equal terms with the foreigner by removing those handicaps to its recovery from the effects of war.

As my noble friend Lord Teynham said with such eloquence in his opening speech, we should allow sufficient funds to be available to enable the shipowner to rebuild that which has become obsolete or that which is destroyed. The aftermath of war cut a good deal deeper into our shipping than I think most of the public in this country realise. Something like 50 per cent. of our liner tonnage went, together with something like 75 per cent. of our tramp tonnage. Repair, re-placement and rebuilding have now brought us to round about our pre-war figure—but what a difference! Let no one imagine that we have restored the pre-war position by restoring merely an approximation of tonnage figures, because a great many of these vessels were war-time built and they are extremely un-economic in peace. Also, ships built for one purpose are not readily usable for another. Something like a quarter of our liner tonnage is over twenty years old, as my noble friend Lord Runciman said, and so is one-fifth of our tramp tonnage. This means endless and expensive re-fitting, which can mean spending £100,000 on a cargo vessel, or £500,000 on a moderate-sized passenger ship.

This aftermath left a very strange alignment of the mercantile fleets of the world. In the Commonwealth, Canada ended the war with four times the ship-ping she had before. The rest of the Commonwealth as a whole has just about its pre-war tonnage. Great Britain, along with Russia, Finland, Norway, Denmark, Holland, France, Belgium and Spain has rather more than half the world's ship-ping, and those other countries are with-in about 100,000 tons of what they had before war broke out. It is true that Greece is 500,000 tons down, while Sweden is 500,000 tons up, but the advance of tonnage in the United States, as the noble Lord, Lord Strabolgi, said, is considerable. Brazil's fleet is up by one half, Portugal's fleet is double, Argentine's treble, and Panama's quadruple. Also, Germany and Japan are gradually building up their fleets again. My noble friend Lord Teynham said that it was far from his idea to handicap the recovery of these countries, but some review might well be undertaken as to the funds being devoted to this particular phase of Germany's recovery.

Now the climate in which we operate has engaged the attention of some noble Lords who have spoken to-day. Flag discrimination, as my noble friend Lord Runciman said, is on the increase. The trouble with flag discrimination is that it sometimes tempts others to retaliate. He did not give many examples of this deplorable trend, and I will give only one or two. Chile, for instance, insists that cargoes are carried in the ships of the nations who are contracting parties to a bargain, and if such tonnage is not available, those cargoes must be carried in what they call American vessels—a curious projection of the Monroe Doc-trine. The noble Lord, Lord Runciman, said that 50 per cent. of Marshall Aid cargoes from the United States had to go in American bottoms. More than that, 50 per cent. of the United States imports for stockpiling are similarly restricted. The age-old position of the international carriage of goods is being steadily under-mined, and in the climate in which we operate our ships to-day we are up against a great many other things. A great many building subsidies are granted by our foreign competitors, and the losses on nationalised shipping run into very large amounts of subsidies in some of these countries.

Some have other ways of discriminating. It is very hard to get a berth from the port of Beira these days unless your ship is flying the flag of that country. As far as port and harbour dues go, preference is given to their nationals by the Argen-tine, Brazil and Colombia. Thus, the British shipper of 1950 has to compete with the legacy of the destruction of our vessels in two World Wars, the burden of penal taxation at home, and the competition of foreign shipping buttressed by subsidies, tax remissions. State loans, currency restrictions, and open flag discrimination. It is not an even battle.

I will not go at any great length into what has been so ably discussed before, such as the question of allowing to the shipping companies sufficient of their funds free of taxation to rebuild and re-place their fleets. For as long as 10s. in every pound is going in the direction in which it is going now, it is very hard for them to keep up in this race. The noble Lord, Lord Teynham, mentioned the ship-sales ban by which an owner cannot sell old ships, while there is no ban on the sale of new ones. And, of course, in these days, when it is so essential to replenish our merchant fleet, the cost of replacing ships has become very much higher. As the noble Lord, Lord Runciman, said, it advances all the time. My noble friend Lord Rennell has spoken on the important point of tanker tonnage, and the noble Lord, Lord Teynham, has spoken on the short sea trade, and both with great detail and great eloquence about the position in the British West Indies which, so far as British shipping goes, is more or less a void. When I was a little younger I once sailed before the mast for one brief trip. I remember a very didactic old seaman saying to me: "It is not the ships; it is the men in them." As a matter of fact, it is both. The quality of one is no good without the quality of the other. Our seamen are superb, but our shipping position is deteriorating fairly rapidly. I am sure that His Majesty's Government must be well aware of the seriousness of these matters and will be able to see exactly how much more serious they will be if this trend is allowed to continue for another ten years or so. My noble friends have made their points with great care. I will not try to elaborate them further, but I trust the Government will give sympathetic attention to what has been said to-day, and that the noble Lord, Lord Lucas, when he rises to reply, will find himself able to shed some ray of hope on the position.

4.45 p.m.

THE PARLIAMENTARY SECRE-TARY, MINISTRY OF TRANSPORT (LORD LUCAS OF CHILWORTH)

My Lords, when I first saw on the Paper a short time ago the Motion of the noble Lord, Lord Teynham, I congratulated myself that it would fall to my lot to reply to the debate, because I rather pictured myself going hand in hand with the noble Lord down a rose-strewn path with a pæan of praise and congratulation. But I have listened to nothing but unmitigated gloom. The noble Lord, Lord Tweedsmuir, said he hoped that I would shed some light upon this problem. I can assure the noble Lord that, by the time he had finished, the only things I felt like shedding were tears. I suppose that the burden of noble Lords on the opposite side of your Lordships' House has been to get some money out of the Inland Revenue and/or the Chancellor of the Exchequer. When one wants some money, one does not go to see the Chan-cellor of the Exchequer, or one's maiden aunt, dressed in one's finest array with a smile upon one's face. I suppose I must put down to that the fact that with one sole exception—the speech of the noble Viscount, Lord Runciman—we have had unmitigated gloom this afternoon. I hope that by the time I have finished I shall be able to put a different complexion upon the whole scene.

The noble Lord's Motion draws attention to the shipping industry. I intend to draw attention to the shipping industry and the wonderful job of work it has done, because I think sometimes that, since 1945, not only we in your Lord-ships' House but people all over the country have been so preoccupied with building up our industries, building new factories, building up our export trade, building houses and everything else, that we have allowed to go by unnoticed one of the greatest achievements of this country since the war—that is, the achievement of the shipping and ship-building industries. I should have thought that noble Lords opposite might have stressed that achievement a little more than they have done; at any rate that is going to be the keynote of my remarks this afternoon.

I should like to illustrate this wonderful achievement by a few figures—they will not marry up with some of the figures that I have heard this afternoon—showing what really has been done, because figures if they are put in their right perspective can be most eloquent. Before the war, in 1939, we had on the United Kingdom register 3,500 ships—I am not counting the small coasters, those ships of under 500 gross tons. They amounted to 16,900,000 tons of shipping. This was its make-up: 9,600,000 tons of passenger and cargo liners, 3,000,000 tons of tankers, and 4,300,000 tons of tramps. Then came the war, and I am sure that in the minds of all noble Lords there must be ever fresh the wonderful exploits of the Merchant Navy. It is not necessary for me to dwell for very long on how they served this country. I am sure we all remember the vivid and dramatic story of the "Jervis Bay" and some of the Malta convoys. The convoys that were sent to that besieged Island included our best and fastest ships. These ships had to be used be-cause of the diversity of the cargoes we had to send. Think of some of the losses in the convoys that sailed: during one period, fifteen out of forty British ships that left this country were lost, amongst them our best, which were hardly replace-able.

What did it come to when we totted up our losses after the war? On the United Kingdom register alone we had lost 11,250,000 tons of shipping. That was the cost of the war to the Merchant Navy. It left us very depleted. Passenger and cargo liners were reduced from 9,600,000 to 6,600,000 tons, tramps from just over 4,300,000 to 3,900,000, tankers from 3,000,000 to 2,700,000. The total fleet we had then was 13,200,000 tons and our particular loss was in our specialised liner tonnage. So after the war we had to maintain our essential supplies; we had to recover our position in world trade. We had to build our ships all over again. Since 1945, the shipping industry has re-covered, and to-day its total tonnage exceeds our pre-war tonnage of 16,900,000, standing now at 17,000,000 tons. That is the total we have to-day. If that is not a stupendous achievement which reflects the greatest credit upon the shipbuilding industry, employers and workers and the shipowners, I do not know what achievement is.

Not only has our shipping recovered its pre-war position as a world carrier, but it has made an outstanding contribution to our balance of payments position which the noble Viscount, Lord Runciman, mentioned. However, I am not blind to the fact that the post-war building has resulted in a different distribution of types. Our cargo and passenger liners now account for 8,600,000 tons, compared with 9,600,000 tons before the war, but they are more efficient. The post-war ship is faster and carries more passengers, and that tends to offset the decrease in tonnage. We also have less tonnage in medium and small-size tramps of any-thing from 3,000 to 5,000 tons. We have 600,000 tons compared with 1,900,000 tons before the war. On the other hand, the tramp tonnage in the larger sizes has been greatly increased by the war-time standard tonnage built in this country, and by our purchases from America, and at 4,500,000 tons the total tramp tonnage exceeds the pre-war total of 4,300,000. As the noble Viscount, Lord Runciman, pointed out, there is plenty of employment for this tramp tonnage.

Taking our age grouping, which the noble Lord, Lord Teynham, and again the noble Viscount, Lord Runciman, mentioned, the position is not nearly so black as I gathered they wanted to paint it. In September, 1939, about 9,700,000 tons, or about 57 per cent. of our fleet, was represented by ships under fifteen years of age; now we have over 11,500,000 tons, or nearly 70 per cent. under fifteen years of age. That is a very different picture; and new building is steadily being de-livered and is steadily reducing the amount of tonnage in the very old age groups of twenty to twenty-five, or over twenty-five, years. My Lords, in many respects, our mercantile marine is faster now than it was in 1939. In 1939 the speed of 50 per cent. of tramp tonnage over 1,600 tons was below ten knots; the great bulk now is over ten knots. A larger proportion, 10 per cent., has a speed of twelve knots or over, compared with only 3 per cent. before the war. Cargo and passenger liners also show increased speeds. Sixty per cent. of cargo and passenger liner tonnage now exceeds fourteen and a half knots, compared with some 37 per cent. before the war. These are calculations which put a very different complexion on the picture.

Let us take our tanker position. Before the war, the great majority of our tankers had speeds of less than twelve knots: now, 60 per cent. of them exceed twelve knots. I think our tanker fleet illustrates one of our remarkable achievements. I do not agree with the noble Lord, Lord Rennell, if I may use the phrase, in damning with faint praise. British ship-owners have been very quick to seize the great opportunity afforded by the expansion of the oil trade, and a large and increasing proportion of our shipbuilding capacity since the war has been used for tanker construction. Not only have the great oil companies, who together represent perhaps the major tanker owners, been building, but many British independent shipowners have increased their tanker fleets, and some owners whose operations before were confined to the dry cargo trades have now embarked upon the tanker business.

Some noble Lords know very well that as part of the negotiations with the American oil industry designed to reduce our dollar expenditure on oil, one American oil company has now set up a subsidiary company in this country for the building, owning and operating of tankers on the United Kingdom register. As a result of all this, the tanker tonnage on the United Kingdom register is now 3.900,000 tons, compared with 3,000,000 tons before the war. It is still expanding, and may reach a total of 5,000,000 tons by the end of 1953. That is an entirely different picture from what I have described as the unmitigated gloom that has been shed upon the achievements of the shipbuilding industry.

Ships under construction or on order for United Kingdom owners to-day total some 1,800,000 tons, and the total order book to-day is of the nature of 3,400,000 tons. That does not seem to be a bankrupt industry, scraping the bottom of the barrel for the last dregs of cash in order to build new tonnage. At the present time, with our shipyards working at their present level of activity, we have at least sufficient work to last us to 1952, and perhaps well into 1953. If we take the earnings of our merchant fleet in foreign exchange, they were estimated at £60.000,000 in 1947. They rose to £100,000,000 in 1948, and this figure was exceeded in 1949; and the balance of payments figures so far issued for 1950 suggest that those earnings are still going up.

I am not going to claim that all this is due to the Government. The Government have helped to facilitate the recovery by removing restrictions, and without flag discrimination, and—Lord Rennell will be pleased to hear—without subsidies. We have no flag discrimination, and we use every endeavour in every international conference where the subject is appropriate to do away with flag discrimination, and to do away with these unfair conditions. We have released the shipping industry from practically every control. We have allowed it, as tonnage has become more plentiful, to seek its cargoes the world over. I think we have done everything in our power to see that British shipping is freed from those controls. I can assure your Lordships that no Department of His Majesty's Government detest controls more than the Shipping Division of the Ministry of Transport, and I am very glad to have the approval and the approbation of the noble Viscount, Lord Runciman, upon that.

Lord Teynham spoke of restrictions on the sale of ships, and other noble Lords mentioned the same subject. There is, in practice, no restriction on the sale of any ship, so long as it remains upon the United Kingdom register. The only restriction to-day is on the sale abroad of ships not more than fifteen years old. We know very well that building costs are high, and that insurance reserves have been used up. There is still a good deal of obsolescent tonnage to be re-placed, and funds are running short. It was for these reasons that we relaxed the control on the sale of ships, because we knew that this enabled shipowners to get rid of obsolescent tonnage with a view to acquiring better modern ships whilst the market was favourable. And the market has been favourable. It has helped the shipowner to a very consider-able degree, with the result that since we relaxed the restrictions in June last, transfers have been ruining at the rate of about 54,000 gross tons a month, which is roughly the same rate at which ships were sold before the war.

I do not intend to go into any detailed mathematical calculations on the subject of investment, but it may interest your Lordships to know that since 1945 investment in new ships by United Kingdom shipowners has reached the figure of £300,000,000. That is a sizeable sum, and it does not include the large amounts spent on repairs and maintenance. I will come in a minute to the burden of Lord Teynham's remarks regarding taxation. He asked a question about subsidies for German ships. He must have more in-formation about this than I have. If he will be good enough to give me any in-formation which he has, I shall be grateful for it, because the only information I have is that the German Government are providing certain loans, out of funds arising from United States Aid under European Co-operation, to assist owners to buy ships. We have no reason to believe that these loans constitute an operating subsidy or that they are made available at abnormally low rates of interest. Quite frankly, we should be greatly surprised if the Economic Co-operation Administrator were likely to approve the use of E.C.A. counterpart funds in such a way as to give the ship-owners of any country an unfair advantage over the shipowners of other countries. If the noble Lord has any in-formation about this, I am sure that he will offer us his usual co-operation and let us have it.

The noble Lord, Lord Strabolgi, spoke about taxation. All taxation, of course, is said to be too high, and, as he said, that which we have to pay is penal. But matters to which the noble Lord referred are not peculiar to the shipping industry. As he knows, and other noble Lords know, the whole question of taxation of profits is being investigated by the Tucker Committee. Representatives of the ship-ping industry have given evidence, and as their case is before the Tucker Committee it would be improper of me to offer any observations at this stage. I believe that the Report of the Committee will not be long delayed.

The position in the Caribbean has been referred to by the noble Lords, Lord Teynham, Lord Rennell and Lord Tweeds-muir. Lord Teynham was quite right in saying that this matter was considered by the Commonwealth Shipping Committee. That Committee reported to the Secretary of State for the Colonies in October, 1948. Questions arising out of this Report are essentially questions of Colonial policy, rather than of shipping policy, but upon the receipt of the Report His Majesty's Government invited proposals from the shipping industry for a passenger service. Two companies submitted schemes. These were given most careful and sympathetic consideration, but they involved considerable financial sup-port by His Majesty's Government and it was felt that the extent of this was out of proportion to the benefit which might accrue, having regard to the already substantial financial assistance given by His Majesty's Government to West Indian Governments for other purposes, and to the many other and more pressing calls upon the financial resources available for the development of the West Indies. The firms concerned were informed that His Majesty's Government considered that they would not be justified in providing the funds required under their proposals. But, at the same time, the firms were invited to explore further possibilities. No practical plan has, however, yet been evolved. In the meantime, we have, in collaboration with the Colonial Office, done all we can to alleviate matters. So this really is a matter which touches Colonial policy, and I would suggest that if the noble Lord, Lord Teynham, or any other noble Lords who are interested, are desirous of putting any further questions upon this subject, they should address them to the Colonial Office.

The noble Lord, Lord Strabolgi, in one part of his excellent contribution to this shipping debate, mentioned various matters relating to merchant seamen. I take his remarks as giving me an opportunity of paying a tribute to the merchant seamen, and also to the shipowners. I think that the unions connected with the Merchant Navy are among the best led unions in this country, and the Shipping Federation do not fall short of them. They have combined in the work of the Mari-time Board so as to make it a model. The Government are willing and happy to leave in the hands of the Board all the questions which my noble friend raised, secure in the knowledge that the wisdom of both sides will effect amicable agreement.

I think I have answered the main questions asked. I am sorry that noble Lords opposite who are more in touch with the British Merchant Service than I am gave such a gloomy picture. I am sure that the British merchant shipping industry, ashore, in the shipyards and afloat, will never fail in its duty. The happy relationship existing between the shipping industry and the Ministry for which I am responsible in your Lordships' House has assured so much progress in the past that I feel it will ensure the progress of the industry in the future. The next time I travel to the Tyne, the Clyde or Belfast, I think I had better take the noble Lord, Lord Rennell, with me. I am sure that it would be a tonic for him to see these great ships being built, to go down the Clyde and see hardly a vacant berth, to see what I suppose is the greatest shipbuilding yard in the world at Belfast and the other great yards on the Tyne. The picture he would see would not be the sorrowful one which the noble Lord would have us believe is to be seen. I have every confidence in our Merchant Navy. I end as I began, by paying the highest possible tribute to the shipping industry, which in war was our fourth arm of defence and which since the war has done so much to carry our exports abroad. I am certain that in any emergency which may be before us the Merchant Navy will do what they have always done—that is, their job.

5.14 p.m.

LORD TEYNHAM

My Lords, I was delighted to hear from the noble Lord, Lord Lucas of Chilworth, that I had cast him into a fit of gloom, because I hope it will spread to other members of His Majesty's Government and then perhaps the shipping industry may obtain some relief to enable them to replace their worn-out tonnage. I fully support the remarks the noble Lord has made about the wonderful record of the Merchant Navy. He specially mentioned the Malta convoys. I certainly realise what they did, because during that period I was in command of escort vessels with those convoys and with the Russian convoys. The noble Lord confined his remarks largely to shipbuilding and did not refer so much to ship management, which is the real concern of the speakers in the debate this afternoon. The noble Lord has asked me whether I can supply him with further information about unfair German competition, and I shall be pleased to do so. As regards the Caribbean area, I am sorry to hear that His Majesty's Government have turned down two proposals put forward by certain companies, and I hope they will look at that question again. The noble Lord, Lord Strabolgi, referred to the fact that there was a big boom in shipbuilding; but the boom is confined to the larger yards building tankers, and in the smaller yards there is no great boom at all. He also suggested that shipowners should have a programme for building ahead. Shipowners cannot make plans for building in advance if they are not allowed to retain the funds for that purpose.

LORD STRABOLGI

I supposed that they were.

LORD TEYNHAM

The noble Lord also referred to the case for nationalising the shipbuilding and ship repairing industry. He may have a case, and perhaps one day we may hear him expound it, but I cannot help feeling that it is not a very strong one. He also referred to the improving of harbour facilities: I think that is a question which requires a debate on its own, and perhaps at some future date your Lordships may wish to discuss it. In view of what has been said by the noble Lord, Lord Lucas of Chilworth, I do not wish to press this Motion, but I hope His Majesty's Government will give serious consideration to all the points that have been raised by speakers this after-noon, because the shipping industry is very concerned about the position of replacements at the present time. I beg leave to withdraw my Motion.

Motion for Papers, by leave, withdrawn.