THE MERCANTILE MARINE

HL Deb 20 March 1958 vol 208 cc322-34

3.8 p.m.

LORD WINSTER rose to call attention to matters concerning the Mercantile Marine; and to move for Papers. The noble Lord said: My Lords, I rise to move the Motion standing in my name on the Order Paper. At the outset of my remarks I should like to say how very deeply I regretted to read of the death of Lord Rotherwick. His was a name to conjure with in the shipping world, while his advice and personality will, I know, be very deeply missed.

The text of my remarks to-day is taken from some words spoken by the Prime Minister at the Chamber of Shipping Dinner on October 7 last year, when he said: No industry is more important than the shipping industry to the maintenance of the economic strength of this country and its influence in the world. I think those words link on to some words once used by Emerson, who said: The most advanced nations are always those who navigate most. I think the Prime Minister and Emerson are agreed that Britain will flourish only for so long as her shipping enables her to do so. Those two sayings form the background to the remarks which I shall make this afternoon.

Our shipping industry was built up in exceptionally favourable times. We had the first run of the steam engine, and in those days we had vast amounts of coal to carry out and grain to bring back. To-day, the industry is passing through very difficult times; but it still boasts of vast experience, of our traditional know-how, of prime seamen and unsurpassed engineers. All those factors combine to offer safe and punctual sea transport, and to offer it at economic rates. The Prime Minister said that our Merchant Navy is enormously impressive, and he spoke of it as consisting of nearly 19 million tons. That figure requires analysis, because it includes fishing vessels, tugs, harbours, estuarial and river craft: the trading fleet is about 16½ million tons.

Many countries at present are expanding their merchant fleets because they enjoy advantages which are denied to our shipowners. For instance, there is the question of subsidies. The United States undertook to pay about 40 per cent. of the £1,000 million programme laid down in 1955. The American Government also insures about 90 per cent. of privately financed mortgage, and grants operating subsidies to enable the American lines to compete with their foreign rivals. Those operating subsidies may amount to as much as £60 million a year. A 10,000-ton freighter, for instance, may receive a subsidy of £500 daily towards her operating expenses. I know that the French Line has just laid down the magnificent new 56.000-ton liner "France". There again, the French Government will grant a very heavy subsidy towards the building of that ship.

So far as this country is concerned, some people talk to me as if the doubling of the investment allowance had put our shipowners into perfectly happy positions; as if they had nothing to complain about now. That investment allowance is, however, only a small help to owners of small fleets, and it still leaves the owners of ships running under flags of convenience with the great advantage that they enjoy at present. The trouble is that the depreciation allowed for taxation purposes is not proportionate to current replacement rates; and that fact, coupled with inflation, makes it difficult, if not impossible, for shipowners to replace ships out of earnings. Shipowners do not build ships for the fun of building them, or because they look nice when they are built: they build, or do not build, according to whether they see their way to securing the necessary funds. They do not build in anticipation of such subsidies as I have quoted, but only if they estimate that the ships will earn profits. Replacement costs are very heavy indeed. A Cunard passenger ship, built for £1 million in 1939, will to-day cost £5 million. A dry cargo liner, which in 1939 cost, say, £247,000, to-day will probably cost £1,200,000. Because of these heavy costs, replacements have to be delayed and obsolete ships kept in service. The fact is that new construction to-day is an act of faith.

Doubling the investment allowance still leaves about two-fifths of the cost of replacement to be found out of profits which have already paid tax. I speak of replacements but, of course, to replace is not enough: we need to expand to meet competition, and to expand into new fields. Freights are a sad story to-day. The industry has, of course, had some good years, but the lean years have now come with a vengeance! On January 1 this year, 80 ships, aggregating nearly 400,000 tons, were laid up, and laid up for other than repair. The sad thing about it was that they included ships which had been laid up immediately after completing their trials. Freight rates have fallen catastrophically. From about 105s. a ton for coal to the U.S.A. they have dropped to 52s. a ton. For tankers, the drops have been even more severe. But while freight rates fall, running costs do not. It is all very well to lay up a ship, but to tie up a 10,000-ton cargo vessel will probably cost something like £85 a day. One reason for the state of affairs that I have described is that there is to-day far too much tonnage in existence for too little cargo. It must be remembered that to-day we have 40 million more tons at sea than before the war. The new ships of large tonnage are much more efficient in their arrangements, so that fewer ships can lift more cargo. The demand for cargo space for bulk cargoes has been falling, and in a recent month as many orders for cargo were cancelled as in the whole of last year. That, I think gives your Lordships some picture of the fall of freights at this moment.

I think it is agreed that Britain can thrive only on a high volume of international trade. We import about £76 per head of the population, and export about £65, leaving £11 to be made up by invisible exports. To these invisible exports the shipping industry is a great contributor. I see that the shipping services to-day are valued at no less than £250 million; and that sum alone pays for all our imports of tea, coffee, chocolate and spices.

In shipbuilding, costs continue to rise. In 1956 building costs were five times what they were in 1937. In 1957, Japan led the world in new construction with nearly 21 million gross tons—1 million gross tons more than Great Britain built in the same year. Japan has trebled her output in the course of three years. In the last quarter of 1957 she started 90 new ships, with a tonnage of over 700,000 gross tons, while Britain started only 74 new ships, with a gross tonnage of 436,000. That is a small illustration of how Japan has gone ahead. Japan's position seems almost unassailable, but at least we have retained our competitive status with other nations, and we are retaining the leadership in new contracts. The present order book is now about 1,000 million tons, but these huge figures must not obscure the need for greater efficiency. On the Clyde, there is a good spirit: they believe that we can regain our old position, in spite of the fact that 1957 was their poorest year for many years.

But there are things in our favour. Much new machinery and equipment has been put into the yards; more steel will probably become available in the future; there is the increased investment allowance and there are signs of a more cooperative spirit in the industry. Indeed, my Lords, there should be a good spirit in the industry, because full employment in shipbuilding is assured for something like five years ahead. I feel that these factors ought to enable the industry to increase its capacity by about 1¾ million tons a year and, very important, to improve delivery dates and the giving of fixed prices. Demarcation strikes are of course a bugbear. I hope they will not make their appearance again in 1958, and that the new machinery of which I have spoken will be operated to something like its maximum efficiency.

There are two questions I should like to ask in connection with shipbuilding. The Liverpool shipowners have set up a committee to inquire whether shipowners have adequate facilities for shipbuilding and purchase. My first question is, does bank finance offer the required flexibility to shipowners wishing to build? The other question is this. I was told last year that in three of the trades concerning shipbuilding 4,000 more skilled men were required. That seems to me a very high figure, and it set me wondering whether something is at fault with the apprenticeship system as its exists to-day.

The great feature of shipbuilding in recent years has been the building of tankers, and in 1957 the record of very nearly 5 million tons of new tankers was established. Tanker construction really dominates the shipbuilding scene to-day. Suez touched off the building of huge tankers, but it will require a 70,000 or 80,000-ton tanker going round the Cape to equal a 40,000-ton tanker going through Suez. I am not at all convinced that these mammoth tankers will prove economic, and we may find that something like a 30,000-ton tanker will be the best. The largest tanker afloat to-day is one of 85,515 tons deadweight, and the company owning that enormous tanker has ordered three of no less than 103,500 tons deadweight, and ordered them from a Japanese yard. Niarchos and Onassis, who are known as the golden Greeks, each have tankers of over 105,000 tons on order in America. It seems to me that these big tankers represent a lot of eggs in one basket, and because they are so big that does not mean that they are immune from break-clown or from mishap.

May I touch for one moment on the question of the appearance of the ships which we are building at the present moment? In the Navy we had a saying, "If she looks right, she is right", and, upon my word, as regards naval ships I must say that that very often indeed proved to be correct. Foreigners judge a British ship by her appearance as compared with foreign competitors, perhaps lying in the same port. But the modern British freighter is often a very odd-looking ship. She has what I would call an irregular ensemble; she looks to me like a schoolgirl whose teeth are being bridged or got into shape. Often these ships have a heavy exterior design which, to my eye, wants tidying up. In motor ships the funnel is frequently clear of the bridge, which gives a ship a very disjointed look. And with regard to the funnels of some new lines, I can say nothing else than that they are completely freakish in appearance. I hope we shall get away from these short, squat funnels, and combine the funnel with the mast, which I am sure would give the ship a much more attractive appearance. Some of the names given to our ships are also very freakish indeed. There was an American businessman, who I imagine was not extremely literate though a good businessman, who decided to go into the shipping industry, and he bought a ship called "Ajax". He prospered and he bought three more; and he called them "B-jax", "C-jax" and "D-jax". That is, I think, typical of some of the freakish names we see to-day.

If I may, with great respect to some who are present to-day, I should like to say a word about shipowners. I think they are a sturdy, independent race of men. Twice in fifty-eight years they have had to replace losses largely caused by Admiralty neglect, and since the last war I imagine they have spent something like £700 million on building 7½ million tons to make good their shortage. I do not wish to be invidious, but in view of a recent announcement I think it is fair to say that the P. & O. Steam Ship Company has shown great courage and enterprise. Perhaps I may take this opportunity of congratulating the noble Viscount, Lord Simon, on his recent appointment as Chairman of the Port of London Authority. London is still the greatest port in the world, and I feel convinced that in that position he will render great service to our economy. At a difficult time for shipping the P. & O. Company's commitments for new tonnage have risen from £39 million to £89 million—£45 million for completions and £44 million for tonnage ordered but not yet laid down. Since the war that company has built 1.300,000 gross tons at a cost of £150 million. I notice, too, that the Company is not laying up ships at the present time but extending its interest. The Company entered the tanker business two years ago and since then has put on order eighteen tankers. I think all those things show great boldness and also great faith in Britain's future.

With regard to replacements there is another point which I think is overlooked. It is said that a ship costing £200,000 in 1937 would cost £1 million to reproduce to-day. That means reproducing the ship of 1937. But, of course, there have been great developments in shipbuilding since 1937, and to replace the £200,000 ship to-day would probably cost not £1 million but more like £1,600,000. I believe that is a point which is frequently overlooked.

I want to come now to what I believe to be the most important matter on which I wish to touch to-day—the question of what are known as flags of convenience". This is a most menacing problem and one which is still unresolved. My noble friend Lord Henderson kindly called my attention this morning to the fact that the Nordic Foreign Ministers, whose meeting is reported in The Times to-day, have been discussing the question of flags of convenience; but I notice that although they discussed and deplored these registrations they have not put for-ward any proposals for a solution of the problem. The "co" has dropped out of the very awkward word "Panlibhonco" and it has become "Panlibhon"; but I can only say that the abbreviated name smells just as unpleasant as the name in its original form. It represents the most disturbing maritime phenomenon of the post-war years. I do not know whether there exists a Liberian who knows the stem of a ship from the stern—I understand that they mostly live in the bush; yet Liberia has become the fourth greatest maritime country in the world; and those mammoth tankers of which I have spoken are operating under the Liberian flag.

I believe that the figures I am about to give are important. Since 1950 "Panlibhon" tonnage has grown from 4 million to 14½, million, and is still growing. Greece, which is a genuine maritime country, has only 301 ships operating under the Greek flag but 497 operating under flags of convenience. In fact, the Greeks operate 53 per cent. of the flags of convenience tonnage, the United States of America operating some 40 per cent. Of course these countries—Panama, Liberia and Honduras—impose very indulgent conditions for registration. No qualifications of any kind are demanded. The seat of management of the ships need not be in the country of registration. Then in the matters of surveying, load line, and crew conditions, our requirements are very strict; but such conditions do not exist in regard to registrations in these three countries of which I have spoken.

Taxation in those countries is negligible—in all three it is 9d. per ton per year, and owners who register with them have the assurance that that will continue for twenty years to come. For a 5,000-ton cargo liner the registration fee is £2,000. What that means is shown by the fact that it is equal to the cost of one transit through the Suez Canal. Moreover, there is no tax on earnings. Our shipping cannot survive against this tax-free-competition. If taxation and inflation continue on the present scale in Britain our fleets will be submerged. Sea transport will fall, lock, stock and barrel, into the hands of flag of convenience countries. Already 10 per cent. of the world's tonnage is under such flags, and such owners can afford to build when ours cannot.

Sometimes people speak to me as if this tonnage under flags of convenience were comparable with the kind of secondhand motor car that one sees for sale outside garages on the Great West Road. It is not second-hand tonnage at all. The greater part of it is new and efficient tonnage. Some 35 per cent. of the tonnage under these flags is under five years old. Our comparative figure is 22 per cent., so we must not imagine that this is second-hand tonnage. Our shipowners simply cannot afford to build on a scale to meet such competition and cannot therefore share fully in the world expansion of fleets. Liberian tonnage increased by 1.6 million in one year. Ours took eight years to increase 1.5 per cent. I feel that that is a very significant figure. To-day, public utility companies are chartering these flag of convenience ships, and crude oil is being carried in them to the European refineries. The Liverpool Steamship Owners' Association see the final ruin of our merchant fleet if something cannot be or is not done. They say: The British mercantile marine cannot hope indefinitely to survive against competition from ships of flag of convenience fleets.

This is an immensely difficult problem, but of one thing I am sure: it is most essential, in endeavouring to meet it, that all the countries affected should act together, It would be a very bad thing if, in desperation, individual countries began to take unilateral action in the matter. There are certain very unpleasant facts which must be faced. We have to remember that in London great numbers of ship-brokers, ship chandlers and insurance men live, for the greater part, on flag of convenience owners. They would suffer a very heavy reduction of living if they had to live on British owners alone. Then there are those who do bunkering for these ships, repair yards, shipbuilders and so on. Flags of convenience have become "big business"; and, so far as I can see, so long as the "Panlibhon" countries connive at this state of affairs, flags of convenience are likely to stay.

Most important of all, we have to face realistically the fact that Washington gives full support to and encourages these ships. Fifty per cent. of the ships flying these flags of convenience are U.S.A.-owned or controlled. The Americans are out to save operating costs and. my word! they do it. A Liberty ship or T.2. tanker costs twice as much to operate under the American flag as it would cost under a flag of convenience. During this shipping recession, to operate under flags of convenience is about the only way to make money.

This really serious menace to our mercantile marine has grown up under successive British Governments of both Parties, but it would be interesting to know whether the present Government have any suggestions to make in the matter. An allied handicap to our shipping is flag discrimination, which is governmental action which restricts the freedom of traders to choose the ships in which their cargoes may be carried; and that, of course, impedes the free flow of international trade. I believe it is a two-edged weapon, because if Britain cannot sell her shipping services on a competitive basis she must buy less abroad; and flag discrimination must raise prices and increase the cost of imports and exports; and because of increased transportation costs we shall get export costs which are higher than those of imports. The evil is on the increase. It diverts trade from normal economic channels into channels decided by nationalism. It hinders international trade. Unfortunately, here again, America is giving a lead in this matter—a lead which I am sorry to see is being followed by some South American Republics.

My Lords, the last matter I wish to touch upon I shall deal with as briefly as I can, for I am afraid I am detaining your Lordships for much too long. However, it is a vast subject. I should not like to sit down without saying something about nuclear developments in the mercantile marine. There is a great deal of research in progress. Britain and America have safety organisations working with their atomic energy organisations; the Admiralty have a safety committee working on problems of nuclear behaviour with shipowners and shipbuilders, and they are studying also problems of nuclear behaviour in ports and coastal waters. So far as I know, exchange with America of nuclear ship information is confined to information about warships. I recognise that naval reactors could possibly be used in much the same form for merchant ships. But I am quite satisfied that duplication in this matter of nuclear research still exists between America and our country. We have no permanent working group in Washington. I saw the other day a speech by the Minister of Supply in which he spoke guardedly, but clearly what he said indicated his disappointment. He said that the Americans are tending to hug secrets to themselves—in other words, the Americans are not living up to the principles advocated by their President.

The other point I particularly wish to make about nuclear developments is that I think we are wise to go slowly in this matter—not too slowly, not to lag. Our object should not be to (what I will call) "do a Sputnik", but to build a nuclear-powered merchant ship which could be run safely and profitably. It is true that America speaks of building a nuclear-powered cargo ship in 1960, a ship of 21,000 tons, but that is certainly not going to be economic. We have decided in principle (those blessed words which are so frequently used by Government spokesmen) to build a prototype reactor for a merchant ship by 1964, and I think that if we do that we shall be doing well. "Safety" and "Profitability" should be the watchwords—safety, certainly, because, unlike nuclear-powered houses, liners may carry 2,000 passengers, and ports are situated in very populous areas. A fire in a port like Southampton might put the whole port out of action; and there is the risk of collision or fire. If eventually all merchant ships become nuclear-powered, the rate of sinking will continue as at present. The fact that a ship is powered in one way and not in another will not make any difference to the average number of sinkings, which in 1956 numbered about 163 ships. What do you do about fission products in a sunken ship? That is quite a problem to consider.

In conclusion, may I say of the personnel, of the crews and seamen in our merchant fleet, that on the whole I think they are pretty good. The shipowners meet the demands put forward to them on behalf of the officers, of which I can speak to some extent, and of the seamen, of which I know from hearsay. I think they meet those requests not in a spirit of being driven into a corner and having to yield to something, but in a genuine spirit of wanting to have contented officers and men in their ships. Perhaps at the moment one of the main demands on the part of the officers and personnel refers to air conditioning in Persian Gulf tankers. That is a problem which will have to tackled one of these days, and perhaps the question of leave and reliefs for officers and men employed in the Persian Gulf tankers will have to be looked at again.

We hear a lot about the drift from the sea. Well, as to a spirit of adventure, there are plenty of candidates for cadetships and apprenticeships, but one finds that early enthusiasm wanes. Running a ship is a very arduous business, not an affair of glamour by any means, and perhaps officers and men are busiest when in port. There is separation from the family and there is only a distant prospect of command; and so, as I say, the glamour tends to get worn off and the spirit of adventure dies, and one finds there is a fairly steady drift from the sea. The big lines are to-day, I believe, short of junior officers; and shortage of engineer officers has been a problem for a very long time.

What of the future? I do not trust the scientists a yard, or what they may do, but as far as we can see (we cannot always take long views at the moment) Britain will be surrounded for a long time yet by exactly the same amount of salt water as she has been surrounded by in the past, so we shall continue to need ships and crews. But there will be technological developments leading to changes in basic design, which has remained virtually unchanged for about a century. I do not know about automation as applied to ships and shipbuilding. It is only ten years since an aircraft took off, crossed the Atlantic and landed under remote control, but, for the present, manpower has a certain advantage over the machine: it is more flexible, it is more reliable, and it has the great advantage that man can be produced by virtually unskilled labour!

As for the spirit which animates the mercantile marine, I should like just to quote this extract from Lloyd's List, from the master of the "Sea Isle": Drifting slowly South East. Weather good. Pumps out. All pipes blocked. No water for food or drink. Drinking beer until tug arrives. So long as that spirit animates our men we shall not go far wrong. It reminds rue of a notice seen in a shipping office which had the heading, "They were all wrong", and underneath was a long list of quotations of lamentations by eminent men about the future of this country. At the bottom it said, "We came through all right and we shall do so again." It is in that spirit, this firm belief that we shall overcome the obstacles of which I have spoken and shall once again come through our difficulties, that I have spoken this afternoon. I beg to move for Papers.

3.49 p.m.

LORD FRASER OF NORTH CAPE

My Lords, before the noble Lord sits down after his admirable speech, I should like to ask him what he meant when he said that a lot of merchant ships were sunk, due to the Admiralty. We have in the Royal Navy the greatest admiration for the Mercantile Marine, and we did our best to protect them. I know that the noble Lord was at the Admiralty for a short time during the war. It may be that that was the period to which he was referring.

LORD WINSTER

My Lords, I did not regard my duties so highly. What I was referring to was what I think is now history: that at the outbreak of both wars of this century the escort ships and arrangements for convoy were not what they should have been, with the result that a great number of merchant ships were lost and a great number of lives of officers and men also were lost. It was to that fact that I referred and, as I say, it is a fact which is now history and not a matter of opinion.

LORD FRASER OF NORTH CAPE

My Lords, may I say that I entirely disagree with the noble Lord? That was a Government responsibility before the war and an Admiralty responsibility during the war.