HL Deb 03 February 1960 vol 220 cc872-85

3.4 p.m.

LORD TEYNHAM rose to call attention to the state of the shipping industry; and to move for Papers. The noble Lord said: My Lords, in moving this Motion, I should first of all like to declare an interest in the shipping industry, and then I should like to draw your Lordships' attention to the serious position in which the shipping industry finds itself to-day. In the past we have always known cycles in this industry, both good and bad, and in course of time the good has always succeeded the bad, but at the present time so many factors are operating against recovery that I feel that there is a great need for a new shipping policy. I need hardly add that the shipbuilding and ship-repairing industry is largely dependent on shipping policy generally, and that we should, of course, consider the whole together.

The outlook for shipping and shipbuilding is indeed black, in spite of the fact that trade is booming and exports at a high level. In the past, prosperity in shipping has gone hand in hand with trade, but that is certainly not the case to-day. What are the factors which are operating against our mercantile marine? They are many and varied, and some of them are such that they cannot be dealt with by the industry themselves. If we are to have a new shipping policy, I suggest that Her Majesty's Government must be a party to it. British shipping cannot alone combat flag discrimination; it cannot combat the arbitrary action of foreign Governments, and it may even become necessary to consider acts of retaliation rather than let the industry become permanently weakened. Whatever happens, we cannot and we must not be left behind in our maritime race, and if other countries cannot be persuaded to cease flag discrimination and the provision of heavy subsidies, we may well be driven to do the same.

It is, of course, a platitude to say that shipping is a vital industry to us, but with some countries who own ships this is not by any means the case but is largely a question of national prestige, and the industry is subsidised accordingly. I maintain that we in this country on the basis of fair competition can provide the most economic shipping service in the world, but we cannot combat foreign Government interference in shipping which is so prevalent at the present time. I repeat that we must have Government co-operation for a new shipping policy which must be realistic and able to produce results. An efficient industry should and can cope successfully with ordinary commercial competition, but I would say that it becomes a different matter when commercial factors are disturbed by political interference which is so prevalent at the present time.

Perhaps I may be allowed to remind your Lordships of two flagrant and unconcealed cases of flag discrimination which have recently arisen. The Brazilian Government, despite no fewer than six formal protests about it, has recently issued a decree to ensure that 70 per cent. of Brazilian imports are carried in Brazilian flag ships. Again, the Guatemalan Government has decided to waive the 100 per cent. customs surcharge levied on imports into Guatemala, provided they are shipped in vessels of the national flag. There is no doubt that this type of cargo preference discrimination has by far the most damaging effect on international shipping. It applies not only to Brazil and Guatemala, but also to the Argentine, India, Chile and, of course, the United States.

It will be clear to your Lordships that the problems which face the shipping industry to-day are largely due to the fact that it cannot now trade on level terms with its competitors, owing to foreign Government interference. I think it is true to say that one of the root causes of difficulties in the shipping industry is the problem of finance related to taxation. The fact is that since the war it has been possible for foreign shipowners to borrow in the New York market most of the money for the purchase of new ships, and the finance houses who handle these matters know full well that they will get their money back quickly because taxation is so light and many of the vessels trade under flags of convenience.

On the other hand, the British owner, under heavy taxation, has to look on and watch the foreign owner forge ahead and expand his fleet with modern ships. I cannot help feeling that the shipping industry is heading for a first-class crisis when the tonnage at present building has been completed. It is, of course, true that one of the answers is to speed up a policy of scrapping old ships. This is an excellent plan, provided the owner can replace his old ships with new ones, but some relief in taxation must be given to provide for it. I hope Her Majesty's Government will encourage the scrapping of old ships. If they are sold for trading they will almost certainly get into the hands of foreign operators who will compete against us and maintain the surplus world tonnage which exists to-day.

I believe a"scrap and build" policy was worked out some time ago but it was not proceeded with, but that is no reason why we should not try again. It is a fact that although we still lead the world as a maritime nation, our percentage in the world fleet ownership is dwindling year by year, and it is now down to 17 per cent. It is well worth remembering that 60 years ago it was as high as 50 per cent. Cannot we get Government co-operation among the nations of the world to induce owners to scrap all ships which are 20 years old and over? This would make a very marked difference in the shipping climate and we might begin to see a permanent improvement in the industry. Although many wartime ships are still in service most of those laid up, I expect, will not come back again.

I do not think it is generally realised what a curious, and one might almost say chaotic, state the shipping industry has got into. For example, difficulties to the dry cargo vessels have been greatly increased by the intrusion of oil tankers into the grain trade. Large new tankers are being employed to move grain cargoes, a duty for which they were never intended. I believe some 75 per cent. of the grain shipped out of United States ports to the Continent and India in the past twelve months was carried by tankers. In fact, since last August over one million tons of grain has been fixed in tankers.

There is one other point. I would draw your Lordships' attention to the fact that it has sometimes happened that Government Departments like the Board of Trade, the Treasury and the Commonwealth Relations Office, have acted, I would say quite unwittingly, in a manner which has not been in the best interests of shipping. I hope Her Majesty's Government will bear these factors in mind. I wonder whether it is generally realised that at the present time no less than 6¼ million tons of world shipping are laid up. I am certain that this problem can be tackled only at international level. Cannot Her Majesty's Government take steps to renew the recent American talks on flags of convenience, discrimination and subsidies? I still feel that something could be done in that direction. I understand that the Minister of Transport during his recent visit to the United States to study road conditions did in fact have a conversation on shipping matters, and I wonder whether the noble Lord who is to reply for Her Majesty's Government can indicate to us what results, if any, were arrived at from those discussions. I believe an International Conference on safety of life at sea is to be held in this country in May. Could not this Conference be extended to cover international shipping practices which are harmful to this country and other nations of the world?

It is interesting to note the reasons which lie behind the policy of the United States in shipping. They claim that they must subsidise not only the building of ships but also their operations under their own flag because of high labour and operating costs. Again, it is for this reason that they support the registration of ships in almost tax-free countries. And last, but not least, a preference is given for the carriage of certain cargoes by United States ships.

It is certainly not a very happy picture for international shipping, and until something is done to alleviate these difficulties little improvement, I feel, can be expected. As I said before, we may have to consider protecting our own interests in the best way we can. We certainly cannot just let matters take their course; the problem is far too serious, and I hope that Her Majesty's Government will be able to indicate the policy they propose to pursue.

As regards taxation, might not a scheme be worked out which would permit shipowners to put aside a portion of their profits solely for the purpose of fleet replacement? The sum perhaps could be on loan to Her Majesty's Government and if not used for rebuilding it could be released after deduction of tax. It is high time that there should be some entirely new re-thinking by the Treasury about the shipping industry, and time is running out. I suggest it is well to remember that the amount of foreign exchange earned for this country by United Kingdom shipping in 1952 amounted to £221 million and for 1958 it was down to £135 million. I would again repeat that there has been a steady and continuing fall in the relative share of United Kingdom shipping in world tonnage, and the writing on the wall is for everyone to see. There is no doubt that the industry is facing a deadly menace under present conditions, and I earnestly ask Her Majesty's Government to do all they can to promote a new shipping policy by all the means in their power. I beg to move for Papers.

3.17 p.m.

LORD WINSTER

My Lords, I should like warmly to congratulate the noble Lord, Lord Teynham, on bringing forward this Motion, which deals with one of the most serious questions facing the Government at the present moment. I hope that when the Government do look at what confronts the shipping industry, they will first of all consider the competion which that industry has to face today, and will then consider the contribution which the shipping industry has made to our invisible exports in times gone by. And I hope the Government will ask themselves whether they can afford to neglect the shipping industry, with the possible serious loss of those invisible exports. It is quite clear that, if things go on as they are at present, with our shipping industry having to face the competition which at present confronts it, there will be a serious loss of those invisible exports which we cannot afford.

The prospect before the shipping industry at the moment is very unsatisfactory. The industry is confronted with a serious slump, and there is a very dangerous growth in flags of convenience (which are now called in America flags of necessity) and a great growth in what I think is even more dangerous than the flag of convenience; that is, the flag of discrimination. Also, of course, there is the question of subsidised shipping, subsidies for building ships and subsidies for operating ships. The expectations for the immediate future are certainly not bright, so that the introduction of this Motion to-day is very timely.

At the beginning of January this year there was a slight improvement in the situation: there were 127 ships laid up, with a tonnage of 784,000 tons, as against 135 ships at the beginning of December—just a slight improvement, but nothing very great. Of the ships laid up, 59 were dry cargo ships and 66 tankers. Together they represented 5 per cent. of Britain's merchant fleet. So that 5 per cent. of our fleet is laid up to-day. That is against a world average of 7 per cent. laid up, so we are just a little ahead of the world, though it is nothing to congratulate ourselves about. Even liner companies have had to take ships out of service, and the profits of many companies have slumped. For instance, the Cunard Company paid no dividend in 1959. The last report of Furness Withy showed that a profit of just under £4 million, £3,976,000, had come down to £2,157,000. Reardon Smith, another big company, in the first quarter of 1958 showed that their profit was down from £3 million-odd to £1,133,000.

Those are very significant and serious figures. The serious thing about them is that, even if world trade greatly improves, not all the laid-up tonnage will even again find employment; some of it will most certainly have to be scrapped. Although 751,000 tons of our Merchant Navy is of pre-1934 construction, it is a fact that five tankers built in 1958 and 1959, and two dry cargo ships, are to-day standing idle—new ships are standing idle while so much of the old tonnage is laid up and cannot find employment. World trade decreased by 3 per cent. in 1958, but world tonnage increased by 7 per cent. That is a serious thing—more new tonnage is coming to hand although world trade is decreasing. There are too many ships for the trade offering; that is the trouble which confronts us to-day. The Financial Times put it clearly and well in an article which read: The mounting total of tonnage has far outpaced any expansion one can expect in the near future in world trade. With new ships coming from the shipyards in large numbers and owners reluctant to scrap even elderly ships, this state is bound to continue unless shipowners can reach some agreement on a plan of control. Freights have been rising, it is true, but they are still 17 per cent. below what they were in 1952, and the reports issued by the shipowners' organisations indicate little or no anticipation of an early improvement.

Another side of this business of the slump is that the strength of the Merchant Navy fell in March, 1959, to 141,891 officers and men. That is the lowest figure ever shown since these figures were first issued. The strength of the Merchant Navy has been falling for nineteen consecutive months, a reduction of over 11,000 officers. I am told that parents now say that they do not want their boys to go to sea. While you have"never had it so good" ashore, the Government will find difficulty in getting 140,000 men prepared to give up better homes, cars and television. The British Merchant Navy is the largest in the world, and yet only 1 in 275 of the population go to sea—a remarkably low figure. Ships have got larger and faster, but the proportion of the population which goes to sea tends to decrease.

Shipowners do all they can to improve amenities afloat and to keep the wages they pay in step with shore wages, although they have also to keep in step with foreign competitors who are paying lower wages. Amenities afloat now are very good. There are single rooms for nearly all the crew, recreation spaces, air-conditioning, cinemas, swimming pools, libraries and television while in harbour. But life at sea must always be very different from life ashore, and its appeal to the population must inevitably be limited. What life at sea means is separation from wife and family. It is true that many, if not all, the tanker companies allow their masters' and chief engineers' wives to go to sea. But wives do not want to live at sea. It is not a life which appeals to the wife, certainly after the first trip or two. For one thing, it is not a life in which to bring up children. Leave, too, is a great problem. To-day, shipowners give good leave, but it has to be given at certain times. It may be that a man spends nine months at sea and three months at home. The three months at home are far too much—the average sailor wants to be back at sea again long before the three months are up. Of course, engineers find no difficulty whatever to-day in getting shore jobs. There is a great difficulty about seagoing engineers at the moment.

The prospects for tankers are rather brighter, although there are to-day far too many ships for the trade currently available. During 1959 new tankers for delivery totalled 8 million tons. During 1957 oil consumption increased by 9 per cent., but tanker carrying capacity increased by 14 per cent. So there were far more new tankers coming into service than the increased oil consumption required. It is the same thing again—too many ships are competing for too little trade. Trade may improve: indeed, it is improving in some directions. But it will not improve to such an extent as to mean employment for all existing ships and the new ships which are coming in steadily from the shipbuilding yards. In 1958 7 million tons were laid up while 9 million tons were launched, and in 1959 there were 10 million tons under construction. That is the position under the slump. The owners of old ships are in for a bad time. It is unprofitable to operate them, yet scrap prices have slumped from £10 to £12 a ton to as little as £5 to £5 10s. a ton.

The British shipping industry has always shown itself able to meet fair competition, but it is now facing competition which is unfair, uneconomic and uncommercial. Many countries to-day want a merchant navy for prestige, and for no other reason. For it has become an affair of prestige. Many such fleets which exist to-day could not possibly exist on an economic or commercial basis. These prestige fleets lead to building in excess of world trade requirements. World tonnage went up by 6,900,000 tons in 1959, and tanker tonnage went up by 4,300,000 in 1958; and there was not the trade to justify those developments. Pushed to extreme these practices could reach a point where normal operations become impossible. They are the negation of efforts to expand international trade, foster international friendship and improve standards of living.

To-day there are 15 million tons of flags of convenience shipping. During the past five years flag discrimination has been developed and practised by 40 of the 64 countries with which we were trading in 1957, so that those markets are lost to us. The discrimination takes various forms. Its main form is that a Government stipulates that goods must be carried in national bottoms, regardless of what that may cost. Subsidies may be given to cover building and operating costs. In the next ten years 250 ships are to be built for American owners. Their cost, which will be 2½ billion dollars, will be subsidised to the extent of no less than one-half; that is to say, £400 million. That amount will be found by the Government towards the cost of building those ships. In 1957 16 American companies operating 300 ships received £50 million in operating subsidies. Germany has given shipowners interest-free loans. France is to pay 25 per cent. of the cost of the new liner"France", and Greece, Italy and Japan give special tax bonuses to shipping.

My Lords, how can our shipping industry be expected to compete in view of those difficulties? Surely it must be obvious to Her Majesty's Government that an altogether unfair handicap is being placed upon our shipping industry and that something should be done to help them. An attempt was made (if it can be called an attempt) at the Washington Conference last year. I remember that Conference very well, because—I will not say there was pressure, but at any rate it was suggested to me that I should postpone the Motion about the Merchant Navy which I had on the Order Paper in view of this wonderful Washington Conference which, apparently, was going to solve many of our problems. It appeared that it was desirable to wait and see what happened. I can tell your Lordships what happened—nothing. The Conference was a complete and absolute washout.

I believe that British shipowners are fairly reasonable people and what they were after at Washington was proposals for establishing machinery for examining the matters in dispute, so that world trade might be economically covered by international shipping. The organs of the American Press, from the very start of the Conference, represented it as, in the words of one newspaper: an out-and-out attack aimed at destroying the American Merchant Marine. The fact, of course, was very different: it was an attempt to prevent the American Merchant Marine from destroying some other merchant navies. It was also called: A broadside assault on the very foundation of our maritime policy as it exists today. The truth is that subsidies are considered absolutely essential to enable America to compete with lower-cost foreign vessels, which are cheaper to build and to operate. It is true that last January President Eisenhower called for a reappraisal of maritime policies. Up to the time of the Conference, however, little had been heard from the State Department of any result from the President's call. Since the Conference I have not heard of anything more, and I think we may say that, so far, the President's call has yielded no result at all. Yet the American Press says—and I quote again: We do not want to hurt our allies' shipping, neither do we wish to hamstring our own fleet. The two aims, however, are largely, if not entirely, incompatible. It is impossible to do both things. It is impossible to avoid hurting their allies' shipping and not hamstring their own fleet.

The fact is that on an even footing the American mercantile marine cannot compete with ours. In case I seem to have spoken rather harshly about the Washington Conference, let us have a look at the communiqué issued by the countries which took part—Britain, Belgium, Denmark, France, Federal Germany, Italy, Holland, Norway, Sweden and the U.S.A. The communiqué said: Very difficult and technical problems … require further study, so arrangements will be made to set up continuing informal machinery for this task. May I ask the noble Lord, Lord Chesham, who is to reply, whether these"arrangements" have so far taken any shape whatsoever? I should also like to ask why there has to be"informal machinery". I do not see any need for it to be informal; but the main point is: has that informal machinery taken any shape whatsoever? The right honourable gentleman the then Minister of Transport, Mr. Watkinson, said at a Press conference: I am satisfied that we have made some useful progress at Washington. Again, may I ask the noble Lord what the progress was? If some progress was made, surely by now it should have been possible to say at once what the progress was. All we were told in the communiqué was that the full and frank exchange of views had been helpful towards establishing a closer harmony between their shipping policies. Our old friends"full and frank" appear in every communiqué now, whatever it is about. They are words which have become quite meaningless. The communiqué continued: The representatives reaffirmed the general objective of their Governments to promote so far as practicable freedom of opportunity for all nations to compete in world trade and thus provide the most efficient service in the interest of the general economy of the free world. Why cannot we be told what they did at this Conference to promote all these admirable objectives? It was also said: The representatives welcomed assurances by the United States that its subsidies are so administered as not to give subsidised operators an advantage over foreign competitors. That, I think, is the gem in the communiqué. After all, if the subsidies are administered so as not to give any advantage, why on earth are they given? What is the point of giving them? I notice that the Conference lasted only four out of the scheduled five days, yet it was said: It was not possible to examine all the complex problems. They were agreed there was need for further exploration. They agreed to recommend informal arrangements to facilitate consideration of these problems. My Lords, what has happened since the Washington Conference? What has been done to facilitate further consideration of these problems? It is fair to say, and I have no hesitation in saying, that nothing substantial was achieved at Washington. Mr. Watkinson may have been satisfied that useful progress was made, but who else was satisfied, and is the shipping industry of this country, to say nothing about other countries, as satisfied as was Mr. Watkinson that useful progress was made? The Conference seems to me to have agreed to the American national-flag policy and nothing was settled on subsidies and flags of convenience. Actually the communiqué accepted the American statement that subsidies are not given to effect an advantage over competitors.

The noble Lord, Lord Teynham, mentioned that Mr. Marples, when he was recently in America, had had some conversations with the State Department arising out of the Washington Conference, and asked whether the noble Lord, Lord Chesham, could tell us what was the result of those conversations. Lord Teynham need not wait for the noble Lord, Lord Chesham, to tell him. Exactly and precisely nothing whatever came out of those conversations between Mr. Morse (I believe it is) and Mr. Marples. The U.S.A. have refused the European proposal for a committee at ambassadorial level to investigate, to examine, shipping practices. They say it is putting the question too high altogether to push it up to ambassadorial level; that that would be making it far too important a matter. I do not think that our shipping industry regards Ambassadors as too important people to discuss the evils which are afflicting their industry at the present moment. As regards flags of convenience, that question has been very fully discussed in previous debates. I will only mention that last March a friend of mine saw at the Cape a 63,000-ton tanker and two 83,000-ton tankers able to load oil or minerals. They were built in a Japanese yard, leased to an American firm, and flying the Liberian flag. That is what is going on at the present moment.

My Lords, I should like to end by saying a word or two about shipbuilding. There are so many urgent matters that require discussion about the Merchant Navy at the present moment that it would take far too long to deal with all of them and I do not want to detain your Lordships unduly. But certainly one of these days we shall have to discuss replacements for the"Queens", which is a most important matter. However, on shipbuilding, I hope there may not be a building slump when the current order book is completed, but the outlook is very unfavourable. The Financial Times has cited orders lost to our shipbuilding industry because British shipyards quoted prices 10 per cent. to 40 per cent. higher than Continental prices, showing that Britain is being out-paced by her competitors while British shipbuilding output has remained static now for many years. In spite of new techniques which have been coming along, production has been well below capacity. For some time our prices have been higher than those of our competitors, and delivery times very much slower. Competition in shipbuilding is keen, and orders go to the most attractive quotations for quality, price, credit terms, delivery dates and so on.

British shipyards have only few orders coming in for big ships. Output is being maintained, in fact, by working off a backlog of orders. I see that the President of the Shipbuilding Conference has said that the present order book of 4 million tons could include ships which may be cancelled if trade depression continues. The President called on the shipbuilding industry and its suppliers to examine production methods with a view to reducing costs and so enabling us to meet competition. The outlook for 1960 is very unfavourable for the shipbuilding industry for want of new orders; some yards may stop working. Believe me, good times are not just around the corner.

The present situation is due to the fact that between 1948 and 1958, in ten years, world shipyard output quadrupled from 2,300,000 to 9,300,000 tons. The expansion was overdone, wildly overdone, and contraction, of course, has followed. The history of our shipbuilding industry gives us a good place in the race, but not so good that it cannot be squandered by managements and men who refuse to put their house in order. All that has been built up could be lost in that way. My Lords, I hope that I have not wearied you by quoting figures, but it is really necessary to quote them to bring the seriousness of the present situation before you.

I see that the noble Lord, Lord Chesham, who I was delighted to see had been visiting the shipyards of the North-East Coast, congratulated those concerned on the fact of their having quite a number of new orders. But they were not really a very large number of orders. Anything is welcome, but two or three swallows do not make a summer, and something very drastic indeed is required to put shipbuilding and the shipping industry on its feet. A director of the Blythswood Shipping Company has suggested Government aid to eliminate out-of-date tonnage, a"scrap and build" scheme, or exemption from taxation if profits are reinvested in new ships. Something of that sort is what is wanted. Although £4½ million worth of orders for North-East Coast builders is welcome, it does not amount to a revival, for several yards already have empty berths. My Lords, I hope that the Government will not resent-I am sure they will not—the facts I have tried to bring before them, because the present state of our shipbuilding industry is most serious and depressing for those who know the history of our shipbuilding and shipping industry, and how much the economy of this country has been built up through shipping. It is very depressing indeed to see so many ships laid up, freights not remunerative, and men leaving the sea. It is a very sad story, and I hope that the noble Lord will impress these facts, as I am sure he will, upon his right honourable friend, and will ask for these matters to be seriously considered and something done to restore our Mercantile Marine to the proud position it has occupied for so many long years in the past.