THE SHIPPING INDUSTRY

HL Deb 03 February 1960 vol 220 cc889-946

4.0 p.m.

Debate resumed.

LORD GEDDES

My Lords, may I also start by declaring an interest, in that I, too, am a director of a shipping company. I do not propose to touch on many of the points which have already been mentioned this afternoon, but it is so important that there should be no misunderstanding about the present state of the shipping industry that on this subject I would ask your Lordships' indulgence if, in different words, I again emphasise the gravity of the position. In the recent past, one has seen articles in the Press from which it might be possible to believe that the shipping industry is well on its way towards recovery from the slump of the last couple of years, but the facts are that this is only partially true for parts of the industry.

There has been some revival in the demand for tramp shipping and some improvement in rates, but on January 1 of this year there were laid up for lack of employment in the world over 500 dry cargo ships and over 300 tankers, with a combined gross tonnage considerably in excess of 6 million. Moreover, at that date, in order to avoid lay-up, there were also ships steaming at half-speed and routed, for example, round Africa instead of through Suez. Taken as a whole, the picture can scarcely be described as prosperous and the owner of the tramp, and more particularly the owner of the tanker, has little hope today of a profitable charter and must only decide whether continued trading will be less costly than lay-up.

When, first under the influence of Korea and then of Suez, the volume of ocean traffic continued to rise, in association with a rapid rise in freights, the tonnage ordered from the world's shipyards vastly exceeded what even then might have been foreseen to be, and now clearly is, the maximum required. Apart from the melancholy picture of over 6 million gross tons of shipping swinging idly at its moorings, the turn of the tide is still some time ahead, for the committed output of the world's shipyards can only aggravate that position for the next several years. Not only were too many ships ordered, but under the influence of these orders the shipbuilders of the world expanded their facilities to such an extent that now it is broadly true to say that the world has capacity to build per annum approximately twice the tonnage which seems likely to be required to meet increasing trade and the retirement of obsolete ships.

I do not propose to speak of the problems which are facing the shipbuilding industry, except in so far as those problems bear on the shipping industry itself. In the shipbuilding industry, there can be no escape from the prospect that some capacity must lie idle for a long time—and indeed there are already empty berths in British yards—and the yards which remain active will be those Which can do the best job cheapest and can be relied upon in all circumstances to meet delivery dates. It is true that through traditional loyalty, and to some extent through convenience, some shipowners may continue to place orders in their own countries and with builders not necessarily meeting the criteria to which I have referred, but those orders will be at best the bread, and the butter—let alone the jam—will be missing unless those shipyards are fully competitive with others throughout the world.

In the last war, the shipyards of Great Britain did not suffer the wholesale destruction experienced by their competitors on the Continent and in the Far East, and while at the time this appeared to be fortunate, the fact now is that only with great difficulty and at great expense have they been able to modernise to compete with shipyards totally rebuilt in devastated ports. To that extent already they are at a disadvantage. But a further and more serious disadvantage exists. Historically, the pioneer ultimately suffers because his unit is too small. I refer in this case to the history and present structure of the trade unions. Your Lordships will recollect that in almost every country with which our shipyards must compete there is now the system that there is only one union per shipyard; and if, for example, a boilermaker is asked to do a small electrical job, he is required to do it even though he may not be so skilled at it as the electrician. This has not only the obvious advantage to the shipyard that it avoids such ludicrous disputes as that about the chalk lines, which for many weeks virtually immobilised one of our greatest shipyards, but also the greater advantage that labour can be more efficiently deployed and that the costly delays while waiting for someone else to do part of a job can be eliminated.

While these are problems primarily facing the shipbuilding industry, they have a very direct bearing on the shipping industry, for even after the unwanted ships of 1960 and 1961 have been added to the existing surplus, there will remain the excess building capacity, constantly ready and anxious again to build more ships than the world can possibly employ. In such an economic blizzard I submit that it is the duty of Her Majesty's Government to do everything possible to ensure that the British Merchant Navy bears, at worst, no more than its share of the disaster.

In the fulfilment of this duty, Her Majesty's Government seem likely to be faced with the dilemma of helping the shipbuilding industry without, on the other hand, adding ships to the existing surplus. Clearly, much of the older and less efficient tonnage will need to be scrapped, and this applies at least as much to British ships as it does to our competitors. It may well be that Her Majesty's Government will soon have to consider how to encourage the scrapping of old ships, and in this connection surely the time has come to grant to the ship-breakers unlimited licence to sell their scrap wherever they will for the best price it can fetch, to bring to an end the controls still operative in this industry. And scrapping may need to be linked to some sensible arrangement for the building of the new tonnage which, taking the long-term view, will ultimately be required. Meanwhile, it may be that this is the time, with the increased prosperity of the country, for the Admiralty to increase the expenditure on craft for anti-submarine defence.

And on this subject of scrapping, a further point arises. Both the Admiralty and the Ministry of Transport own merchant ships. Recently, some tankers belonging to the Admiralty, being no longer required, were sold to foreign owners, and reportedly at very low prices. Surely Her Majesty's Government could give a lead in such a case and dispose of such ships for scrap rather than put them into competition with the industry. The case of the tankers is water over the dam, but there is another similar case which is about to arise. An old German passenger ship, the"Potsdam", built almost a quarter of a century ago, was taken over at the end of the war and since that time has been operating as a troopship under the name,"Empire Fowey.". She is now surplus to trooping requirements. To sell her foreign and into competition with the British Merchant Navy might realise a trifling sum in excess of her scrap value. Would Her Majesty's Government not give a lead in this case by withdrawing her permanently from the seas, either into reserve or preferably for scrap?

This brings me to the question of the competitive background of the operations of British shipping. On the credit side, no one has suggested, nor—and I say this without fear of contradiction—can it be suggested that British ships and the men who sail them are inferior to those of any nation in the world. Perhaps it is even because of this truth that there have developed in other countries the now all too familiar three evils, of flag discrimination, of flags of convenience and of wholesale subsidies. Of these there can be little doubt that the most vicious, because it is the most insidious, is the evil of flag discrimination whereby, through the medium of trade treaties and otherwise, traffic is withdrawn from international competition and is restricted, regardless of cost, in whole or in part to ships of the countries concerned. It is to the credit of Her Majesty's Government that steps have been taken to demonstrate, particularly in the United States, the grave dangers of this practice.

It has been suggested that the United States' administration is conducted in such watertight compartments that one branch might be ignorant of the effect of its policy on that pursued by another branch. But, my Lords, that is not a peculiarity of the United States Government; indeed one sees the same thing happening here in London. The praiseworthy enthusiasm to press the export drive seems to be developing a pattern whereby our exports are sold f.o.b. the British the port and our imports purchased c.i.f.; and moreover, there have been cases where the exports have been sold f.o.b. any British port, leaving it to the buyer to nominate the port, and one has seen the absurdity of Scottish manufactures being hauled by our overloaded inland transport system to English ports, rather than shipped direct from Scotland. Far be it from us, my Lords, to suggest that we should engage in flag discrimination, and while I would not suggest that all, or even a fixed proportion, of our exports should be sold c.i.f., I do suggest that Her Majesty's Government should take the greatest care never to agree to a condition that sales should be made f.o.b., or purchases c.i.f. Let it be left free.

With regard to the second evil, of flags of convenience, much has already been said. Her Majesty's Government have seen fit to recognise the unique position of the shipping industry and to grant the investment allowance, which is valuable, so far as it goes; but it does not go far enough to enable the British owner to compete on equal terms with the Liberian. In the case of a new enterprise it is possible for British shipping to obtain the advantage of colonial ownership, but surely it is illogical that this should be granted to a new enterprise yet be withheld from the shipping companies upon whom this country has depended, and will again depend, for its very life. I would ask Her Majesty's Government whether they will not again consider the possibility of allowing existing shipping enterprises the same latitude in colonial ownership as is allowed to new enterprises.

Finally, my Lords, I come to the evil of subsidies. These are likewise insidious, but they are probably the only method whereby a high-cost country can maintain both the shipyards and the shipping which it requires and by which, in most exceptional circumstances, specialised ships can be brought into being. Subsidies can, however, get out of control. In some cases this has already happened, and there are signs of increasing use of subsidies which, in the end, is bound to lead to an increased burden on the taxpayer. There is talk of the use of subsidies to chase this will-of-the-wisp prestige. But what is prestige? The dictionary says that prestige is"influence or reputation derived from past achievements"; and in this context achievement can scarcely be limited to the building of something very big or very fast. Achievement means the doing of something well, taking all factors, including economics, into consideration. It follows that subsidised prestige is almost a contradiction in terms, for it is influence or reputation without regard to economies, and, therefore, without regard to achievement; and I submit that the taxpayer should be asked to subsidise prestige only when there is a real chance of achievement. Here I refer not only to the possible use of public funds to purchase shipping prestige, particularly in the North Atlantic, but also, and much more important, to its purchase in the air.

The prevalence of subsidies, either direct and open, or hidden in the form of excessive payments for the carriage of mail, or of aircraft provided by Governments at nominal cost, or the expenditure of vast and increasing sums on research and development, or the provision and servicing by Governments of increasingly elaborate and expensive airports, makes it well-nigh impossible to arrive at a sound assessment of the economics of air transport; but there can be few who believe that the price of many air transport services bears any relation to the true cost of their provision. To this extent the present system is imposing upon world transport in general an artificial element which is not in the best general interest. Hitherto there have been recognised commercial considerations which have enabled sound business enterprises to decide whether they can secure finance to enable them to build a factory, to dig a mine or construct a railroad. Are these considerations to be different, and is the path of development to be for ever artificially smoothed for air transport? In the hunt for this will-of-the-wisp prestige it is estimated that within the next five years several thousand perfectly good propeller aircraft will be declared redundant and placed on the market at prices far below those to which they could have been written down out of their own true earnings.

My Lords, I suggest that if shipping is to thrive the aircraft industry must be brought to a healthier condition, and this will not be achieved if this will-of-the-wisp continues to be hunted at the expense of the taxpayer. Here I refer particularly to the recent proposal that uneconomic air fares should be even further reduced. I suggest that, before further public funds are channelled into the aircraft industry and the airlines, we should stop and think what we are doing to one of our most important industries.

4.15 p.m.

EARL JELLICOE

My Lords, I must declare two interests. The first is a bread-and-butter one, in that I am a director of a shipping company. The second is one of blood, in that a good deal of salt water flows in my veins from both sides of my family. However, as befits a landlubber, I hope this afternoon to keep pretty close inshore. Wishing to avoid deep water, I should like to make it clear that the views which I am about to express are very personal indeed. The shipping industry is faced with grave and profound problems which have been diagnosed by previous speakers in this debate far more ably than I could diagnose them. The last thing I wish to do is to try to teach my marine grandfathers or their descendants how to suck eggs. Rather, therefore, than try to suggest how the industry should conduct its affairs, I should like to outline certain ways in which I feel the Government could help it to help itself. However, before trotting out my ideas I should like to refer briefly to one particular aspect of the general problem. It concerns our trade with the O.E.E.C. countries, our neighbours in Europe.

Successive Government White Papers on the balance of payments indicate that, while in our trade with all other regions of the world our shipping services produce a substantial credit balance, in our trade with Europe these services are very much in the red. In 1957 the debit was well over £100 million, and although there has been an upswing since then the debit for the first half of 1959 was running at a rate of £50 million annually. Save for that, the already very great reinforcement which British shipping brings to our balance of payments would have been substantially greater. It may be that there is some simple statistical explanation for this curious break in the pattern of the earnings of our shipping industry. If so, I should be glad to receive it. If not, I suggest that it is a matter at which the Government and the industry should look rather closely. I am sure that there is no quick or easy answer to the industry's problems. But much, I believe, turns on the approach which animates those responsible for the industry, whether they be in Government or in the industry itself.

Put simply, I believe that that approach should have two main ingredients. The first should be the recognition that, as with most modern complex industries, there is an increasing need for a real and fruitful partnership between industry and Government. Both (and this is increasingly recognised by all maritime countries) have their part to play, and those parts are becoming increasingly interdependent. Secondly, I believe that all those responsible—and this very much includes Government—should regard the present as a moment of opportunity. Very often the foundations of prosperity are laid through vigour and imagination in times of difficulty. Never was this more true than today, given the pace of technical development and the quick swings in the economic pendulum. Believing this, I should like to suggest certain areas in which Government and the two industries, shipping and shipbuilding, should in partnership pursue forward-looking policies—in fleet modernisation and operation, which entails a thoroughgoing application of modern technology to the industry, and in what I should like to term shipping diplomacy.

First, fleet modernisation. It is vital that the British merchant marine, whatever its size, should be as efficient as possible, in order to weather the present storms and to be in a position to take full advantage of what we hope will be calmer weather ahead. Now I know that youth is only one yardstick of efficiency, and one which in your Lordships' House it would perhaps be unwise unduly to labour. But with ships, if not with Peers, youth has a direct bearing on efficiency, and if one compares the age of our merchant fleet with those of some of its rivals the results are not altogether reassuring. I have looked at the comparative figures for the percentage of the main world fleets under five years old. At the top of the league is Liberia, with nearly 6 million tons of new shipping, representing 49 per cent. of the Liberian fleet. Given the flag, perhaps this is not surprising. But second, with 42 per cent. of new shipping, is our old friend Norway. We are fourteenth on the table, with only sonic 26 per cent. of our tonnage under live years old.

That is not all. First of all, our comparative position is at the moment getting worse rather than better. Secondly—and I know that what I am about to say may be contentious, and perhaps may land me in deeper or hotter water than I had wished to navigate in—I believe that, by and large, ship for ship, year for year, type for type, it is broadly speaking true to say that until very recently the Norwegian fleet, at least, was in quality and design ahead of us. For the premier shipping nation of the world I frankly do not believe that that is good enough. I believe, on the contrary, that it should be our considered objective, and a national objective, to ensure that in age and design our merchant fleet is as young and as good as that of any of the traditional maritime nations. I am certain myself that, given the necessary will and an effective partnership between industry and Government, this can be achieved. Ships now are a little cheaper to build than they have been until quite recently. Nevertheless, of course, it needs courage, and encouragement, to embark on big building programmes at the present time.

I know that many schemes are being canvassed at present to encourage new construction. I should like in that context to endorse what the noble Lord, Lord Geddes, with his great authority, has said about scrapping and scrap prices. I should also like to endorse the reference which he made to the investment allowance. Finally in that context, I should like to make a small suggestion which perhaps concerns the British shipbuilder; rather than the British shipowner. I have visited a number of yards recently, and I have received, I suppose like anybody who visits that highly individualistic industry, a wide variety of replies to my questions as to the sort of aid which the shipbuilding industry might wish the Government, in this time of difficulty, to furnish. But one and all were unanimous in pointing to the challenge presented by the credit facilities which foreign yards are now offering. I gather that 30 per cent. down on delivery, and repayment of the remaining 70 per cent. over, say, seven years, is now fairly common practice abroad; and with their present credit facilities that type of credit competition is difficult, if not impossible, for British yards to meet. I therefore hope that the Government will be prepared to examine with the two industries what can best be done to reinforce the existing credit facilities for new construction.

Modernisation implies not only new ships but also new methods. It means that the fruits of modern technology should be systematically channelled back into the industry as a whole. And, given the pace of modern scientific and technological development, it means that British shipping and shipbuilding must run very fast indeed if they are to outdistance their rivals. There is, I am sure, a growing awareness of all this throughout the industry. But I am inclined to doubt whether that awareness is yet sufficient. For example, on the ship-owning side, I doubt whether there is yet sufficient realisation of the need for a greater extension of scientific management and trade promotion methods. On the shipbuilding side, to take one of a number of possible examples, I doubt whether in this country at present there is a sufficient research and development effort being directed towards the marine diesel engine.

In my view, this whole field is preeminently one for partnership between industry and Government. But I am also inclined to doubt whether in Whitehall there is yet sufficient general realisation of the part which Government could possibly play in this matter. I have at hand the 1958 Annual Report of the United States Federal Maritime Board. In it one reads of the establishment of a joint Industry-Government research development programme, with considerable public funds at its disposal, aimed at placing the American merchant marine—I now quote the words of the Report— In the forefront of world-wide shipping. We know that public funds are made available in this country to assist marine research, but it is all on a modest scale—very modest indeed compared with the support which the aircraft industry has enjoyed in the past, and to which the noble Lord, Lord Geddes, referred. However, given a positive approach there are any number of fields which a broadly based and adequately financed Industry-Government programme could, in my view, cover.

Just as examples, there are already in hand studies in a number of crucial fields of marine research like the relationship between the age and performance of a vessel, the relationship between hull smoothness and its performance, and various anti-fouling techniques—perhaps rather humdrum but vitally important. More funds in this sort of sphere would produce quicker results. A further example is nuclear propulsion. It seems clear, even given the likely fall in the price of uranium, that a nuclear-powered merchant vessel will not be an economic proposition for some time to come. Yet there is a need, in my view, for a real sense of urgency in our research and development in this field if we are not to be left far behind by the Americans and Russians.

I therefore welcome the Government's decision to call for tenders for two propulsion systems and also the establishment of a shipowners' consortium. Nevertheless, I must admit to certain reservations. The"Savannah" will be visiting European ports this year, I gather. We ourselves must get a nuclear-powered merchant vessel or vessels to sea before too long, because it is only with practical seagoing experience that one will get the kinks out. I sincerely hope that there will not be another long delay after tenders are received and before contracts are placed. I also hope that the Government will not adopt a cheeseparing attitude towards the owners' consortium, because it seems clear that with this type of research—fundamental, expensive, and with no promise of early economic return, yet nevertheless vital—the necessary financing should come largely, if not exclusively, from public funds. Finally, I hope that the decision to call for tenders for these two systems means that further Government-supported research and development in this field will not be restricted merely to these two systems. Other less developed systems may ultimately prove better for marine propulsion. I trust, therefore, that research, at least, if not development, will be pushed over a broad front.

My Lords, modern ships are meaningless without modern ports. I believe that by and large our major ports to-day compare unfavourably with those of our Western European trade rivals; that Rotterdam, Hamburg and Antwerp are, broadly speaking, better equipped and more efficient than Liverpool or London. I have some personal experience of Birkenhead, through which a large amount of export tonnage from Merseyside and the Midlands flows. In many ways Birkenhead is still a part of what one might call the China Clipper era, and that in an age of containerised cargo. Cramped and constricted quaysides. A lack of cranes. Gloomy Victorian sheds. And then, as a symbol that after all this is 1960, a vast queue of lorries waiting to unload their cargoes. What this sort of thing spells in terms of ships' turn-round times, of low productivity, of bad labour relations possibly, of higher export costs—in short, of inefficiency—I shudder to think.

Here again, in helping to give our ports and our cargo-handling techniques a real face lift I feel that Government, in partnership with industry, could bring about, if we were all so minded, a really dramatic improvement. May I suggest some possibilities? First, I believe that the time has come for a further high-level review of our port facilities, with particular reference to the best European and American practice. Secondly, I believe that, should such a review disclose a clear need for major improvement schemes beyond the resources of the existing port authorities, the Government should be prepared to give financial backing. There is a precedent there—to which the noble Lord, Lord Geddes, perhaps tossing the penny from the reverse side, referred—and that is the financial support which Government give to airport development. Thirdly, I hope that where the Government have a more direct responsibility, as with the Transport Commission ports, they will set the pace by way of rapid port improvements. Fourthly, I trust that improved rail and, above all, road access to ports, especially in urban areas, will receive priority in our road and rail programmes. Finally, I feel that Government and industry, and indeed labour, could well co-operate in inaugurating pilot schemes for testing improved cargo-handling techniques.

The other area in which the Government could make its partnership with the shipping industry more effective is the diplomatic field, that of intergovernmental consultation. It is an odd paradox that when the general trend in world trading relations is towards more collaboration and less discrimination, with shipping, the most international of trades and on which modern trade is almost exclusively dependent, precisely the reverse is the case. There the jungle of discrimination grows thicker every day. Unfortunately, as we have again heard emphasised, quite rightly, this afternoon, the position is intractable, since it stems in great measure from the understandable desire of the United States to have, against an emergency, a large pool of merchant shipping directly or indirectly under its control. But the solution is made all the more difficult since discrimination is again the natural, if not always economically justifiable, weapon of new countries who want their flags to fly upon the oceans of the world. For them the national shipping line and the national airline are just as much the marks of independence as the anthem or the flag.

The roots of discrimination in shipping therefore go very deep. It is, in my view, vain to suppose that we shall ever entirely eradicate them, and perhaps we are slowly but surely moving towards the logical but absurd result of discrimination where ships will travel one way full and one way empty. In this age of emergent nationalism it is easy to be pessimistic about this process, and the difficulties of getting effective international consultation under way, even with our American friends and allies, has been shown by the barrenness of last year's shipping discussions in Washington, to which the noble Lord, Lord Winster, referred in such harsh terms.

Nevertheless, I am inclined to wonder whether the time may not be ripe for a renewed effort. At a time when there is a growing concern in America over the American balance of payments position, the American taxpayer may be more inclined to question the economic justification for the large subsidies which he provides for the American Merchant Marine. Moreover, if we and the Americans are edging away from the doctrine of broken-backed naval warfare after the initial nuclear exchange, the strategic argument for a large reserve of merchant shipping is that much weaker. Again, as the Americans become more conscious of the dangers of European discrimination against American trade they may be more receptive to European sensitivity to American discrimination against European shipping.

In any event, my Lords, there seems to be a growing realisation on both sides of the Atlantic that the hest way of harmonising European and North American economic policies may lie in some extension of the North Atlantic concept, in the proposition, as Sir Oliver Franks recently put it, that 6 plus 7 equals 15. The O.E.E.C. has had an effective Maritime Consultative Committee, and there now appears a possibility of enlarging O.E.E.C. into an Organisation for Atlantic Economic Co-operation. As a result of American initiative, a high-level official group are now studying the possibilities in Paris. Could it not now be proposed, as a result of British initiative, that a maritime committee should form an integral part of any new international organisation they may hatch up? As I understand it, the function of any new international organisation of this sort would be to harmonise the economic policies of its member States and to co-ordinate the aid policies of the industrialised countries towards the less developed countries.

But are not shipping policies part and parcel of economic policies? And might not this new body prove a useful forum for frank consultation between the industrialised and the less developed countries designed to ensure that aid is used as productively as possible and that, to this end, the most economical and mutually beneficial use is made of available shipping services? I hope that the Government may be prepared to examine the possibility of such an initiative, which would, I am sure, commend itself to our friends in Europe.

My Lords, having spoken for far too long, I believe I could have said what I have to say in two sentences. They are these. This is, I believe, not only a time of present difficulty but also one of potential opportunity for British shipping. In my view, it offers for this unique industry real possibilities, given a really effective partnership between vigorous private and progressive public enterprise, both inspired with at least a dash of what I should like to term the"Jackie Fisher" spirit.

4.40 p.m.

LORD MELCHETT

My Lords, I am sure that the House is most grateful to the noble Lord, Lord Teynham, for putting down this Motion on the British shipping industry this afternoon. Noble Lords seem to have generated an atmosphere of extreme gloom, although I think I detected a little more optimism in the speech of my noble friend Lord Jellicoe. I hope to strike a note of slightly greater encouragement than some noble Lords who have spoken to-day. I think I should declare an interest like other noble Lords, as I am a director of a company which owns and operates tankers and bulk carriers under the British flag; and I have also been concerned in recent years in finding substantial sums of capital for British shipping, particularly for tankers.

There is no doubt that the shipping industry is in a state of decline and that this fact is serious for the nation in view of the important position which the industry has occupied in our national economy up to now; but the more so because of the tremendous scope which there is for the future. The extent and rate of decline can be seen all too clearly in the statistics. To my mind, it does not matter so much that the United States has by now overtaken us as the greatest maritime Power in the world, as that we are almost stagnating while other nations are forging ahead with considerable success. Table 3 of the recently published booklet by P.E.P. on the British shipping industry shows that in the last ten years world tonnage has increased by about 50 per cent., and during this time the defeated nations of the last war, together with a number of the Western European countries that were occupied during the war, such as the Netherlands and Norway, have added greatly to their fleets and to their share of the sea-borne trade; whereas ours has virtually stagnated and we have made almost no progress at all.

I should like to suggest to your Lordships three reasons why we have not been competing successfully with other countries—three reasons which I believe are not normally given sufficient prominence when these matters are discussed. Before doing so, I should like to add that I think that the slack time in the shipping industry at the moment should be seen in its proper perspective—that is, as a levelling off or a pause in what is otherwise an expanding and growing industry in the world. The first reason which I believe has caused us to fall behind some other countries in the last ten years is the failure of British shipping companies fully to appreciate the change in the trend of the pattern of world trade. With the rise of nationalism all over the world there has been an increasing desire to establish local manufacturing industries. This, in turn, has usually led to an increase in the import of raw materials and sources of energy.

The move towards nationalism has also speeded up the demand for higher standards of living, which has also been accompanied in many areas by an increase in the import of food and raw materials and, again, sources of energy, particularly oil. At the same time, the older industrial communities in North America and in Western Europe, in order to sustain their expanding economies, have also increased their import of raw materials and energy. Conversely, the volume of manufactured goods moving over the long trade routes of the world has not expanded to the extent which might have been expected in view of the tremendous expansion in the world economy during the post-war years. As a result, the volume of general dry-cargo traffic has not increased greatly from year to year during the post-war period—in fact, in 1958 it actually fell back a little.

This has resulted in tankers and bulk carriers becoming of predominant importance in the expansion of ocean going fleets. In fact, if you look back over the last twenty years, whereas the tonnage of dry cargo and passenger ships in the world fleets has increased by about 50 per cent., the tonnage of tankers has increased by no less than 300 per cent. The British shipping industry has not really seized the opportunity of getting its fair share of this section of expansion of the world shipping industry, which, after all, was there really for the taking. The second reason why we are not competing successfully is, in my view, that there has been a revolution in the size of ships, and in this matter, too, we are lagging behind more enterprising countries. The reason for the absolute necessity for the increase in the size of ships is that the capital cost per ton decreases as the size of the ship increases, and on the long voyages running costs and fuel consumption are also less with big ships. It should always be borne in mind that the depreciation of the original capital cost far outweighs all other operating costs with ships.

Thirdly, but perhaps of greatest importance, we have failed to provide the necessary finance for new tonnage. Here, some part of the blame, I think, must be attached to Her Majesty's Government, because the investment allowances which reduced the burden of taxation were introduced too late and, in the first instance in 1954, were too little. However, I do not believe that this in any way absolves the shipping companies and the financial institutions from a really singular lack of enterprise in seeking ways of competing with other nations for this growing trade. It was always open to the shipping companies to base operations in Bermuda or in the Bahamas, and thereby to put themselves in a position to compete on absolutely equal terms with the Scandinavian owners who had their own tax concessions, or American and Greek owners who use flags of convenience or, as they prefer to call them, flags of necessity.

There was a period when the Exchange Control regulations in this country made it difficult for British owners to order ships abroad. However, of greater importance either than the question of taxation or the Exchange Control difficulties, and indeed after both these impediments had been removed, was the fact that the United Kingdom financial institutions were most reluctant to advance money on ships unless they were built in United Kingdom yards, although at that time—I am speaking of the period up to the beginning of last year, the post-war period—it was difficult for owners to get ships in British yards at satisfactory prices and with reliable delivery dates. So all these factors combined to make it very difficult for British shipowners to compete successfully with owners abroad who could build in, say, Sweden or Japan, get prompt and reliable delivery dates and enter into charters with major oil companies, when British owners had to deliver the ship or possibly lose the benefit of a seven-year contract; and also foreign owners were able to get the necessary financial backing.

The question of lack of finance in this country, however, went even deeper than that. While the New York banks and life insurance companies were doing magnificent business in lending money secured on mortgage, together with a charter from one of the great international oil or steel companies, and, in some cases, lending as much as 100 per cent. of the cost of new vessels, it was quite impossible, until recently, to place even the highest class of that type of business in London. That was a severe impediment for anyone wishing to finance ships under the British flag.

If anyone doubts the extent to which we have lagged behind in taking our share of this expansion of bulk-carrying in the post-war years, he need only look at the records of some of the great independent fleets built up by the American, Greek and Scandinavian owners, and the very fine record of size, speed of ships and profit to see the extent to which we have missed our opportunities. I mentioned earlier that the whole subject of shipping was of great importance now, not so much became the industry is in difficulties and in a state of decline but because of the tremendous opportunities which lie ahead. I believe the trend of the last ten years is going to continue and that there will be an increase in the demand for large, modern and efficient ships to carry the world's iron ore, oil and other bulk commodities, as well as, of course, passengers and dry cargo.

Ships flying the British flag are just as well placed in present conditions to compete for this trade as the fleets of any other nation. Taxation in the United Kingdom is not too burdensome now with the 40 per cent. investment allowance, and if it is essential there is nothing to stop shipping from being based in other parts of the Commonwealth where tax is lower. In the meantime, financial institutions in the City have at least"got their feet wet" and there is every indication that it may be possible to finance first-class business with less difficulty than in the past, although one must say that the London institutions are still far less sophisticated and less flexible in their terms and attitude than their counterparts on the other side of the Atlantic.

If there is scope for the future, there is also no doubt that competition is going to become more severe. I believe we can compete, but only if the British shipping industry makes an enormous effort to reorientate itself, modernise its methods, as my noble friend Lord Jellicoe has mentioned, and also to modernise some of its basic thinking. Large amounts of fresh capital are going to be required and personally I cannot see them being forthcoming—at any rate in competition with other demands for capital—unless the performance in terms of profits and growth in the next decade is very much better than it has been in the last decade.

Then, again, the next ten years will see greater changes in the transport industry and in shipping than there have been in the last ten years. Nuclear energy will be introduced in shipping propulsion. There will be specialised types of shipping, for example, for carrying methane gas at low temperatures; and new types of cargo-handling will be introduced with roll-on, roll-off techniques, palletisation and other modern developments. In all this, and in other things too, this country should be, and has a right to expect to be, in the lead.

On the passenger side, and in some types of light freight and mail, as my noble friend, Lord Geddes, has mentioned, competition from aircraft is already acute and will become more so as the new generation of jet aircraft come into operation all over the world. If one looks only at the North Atlantic as one section where there is a growing tourist traffic, it strikes one as absolutely staggering that we in this country have not produced more imaginative, prompt and informed proposals for competing for the future sea-passenger traffic, considering the predominance that we have had on the Atlantic in past years; and it is, of course, one place where the air competition is particularly great.

As I see it, the old-established shipping companies and managements must realise that they simply cannot afford not to employ all that is best in modern industrial management technique. Properly trained economists, cost experts and men trained in the disciplines of the sciences must be recruited and given encouragement and the opportunity to use their initiative. In addition, the shipping companies themselves should be flexible in their own structure, in the way they approach new opportunities and new challenges. Many other industries have gone into partnership in other parts of the world, not only in the Commonwealth but in other countries, in order to put up manufacturing plants to serve local demands; and there will be tremendous opportunities in the shipping industry for co-operation abroad with other countries. If we do not seize those opportunities others will certainly do so, and in fact there are already many developments afoot.

I am afraid most of my remarks may have been a little on the critical side and may possibly be resented by those who know more about the shipping industry than I do, but I hope I have not been destructive. I am optimistic and tremendously enthusiastic about the future of the industry. It may be going through a period of decline now, but the difficulties are not unique to shipping or indeed to British shipping. What is needed is careful analysis of where we have failed, and missed opportunities, and a real determination to exploit new markets and new methods and to become efficient and, above all, enterprising.

4.57 p.m.

VISCOUNT MASSEREENE AND FERRARD

My Lords, I should like first to thank my noble friend, Lord Teynham, for bringing up this extremely important Motion. Like many of your Lordships I have to declare an interest in shipping, as I have been for some time a director of a small dry-cargo tramp shipping company with vessels of about 8,000 to 10,000 tons each; and, as your Lordships may well guess, I am not, therefore, in too happy a frame of mind. Your Lordships will have heard what shipowners have been aware of for a very long time—that the world merchant fleet has been growing appreciably faster than the cargoes available for it to carry. We have heard that in 1956 the tonnage of the world merchant fleet was 105 million tons. In the three preceding years it grew by 5 per cent., 7 per cent. and 6 per cent., making in all an increase of 20 million tons. Of course, apart from that, we must also remember that these new ships are far larger and far faster, so the actual effect has been far greater in carrying capacity than these figures suggest.

Unfortunately, world trade has not grown at the same pace. In fact, we have heard that world trade last year dropped by, I believe, 3 per cent. We have had a slight increase in freight rates; but because of people like my noble friend Lord Melchett, with their bulk cargo carriers and tankers, laid up tankers are coming out of mothballs and they are taking the grain trade away from our dry cargo ships. I believe it was the noble Lord, Lord Winster, who said that 75 per cent. of the grain from the U.S.A. last year was carried in tankers. Of course, all shipowners are hoping for a boost in world trade, but I personally cannot foresee world trade ever sustaining the present growth of shipbuilding.

It is evident, as some noble Lords have said, that the rate of scrapping must be increased and the rate of ship-budding will have to slow down. The trouble is how to achieve this. The rate of scrapping has actually increased on its own to 3 million tons from 1 million tons two years ago. I believe it was 3 million tons this year. That alone will not be enough to bridge the gap of imbalance caused by too many ships for too few cargoes. The answer is, surely, as I have just said, a higher rate of scrapping. Shipowners, somewhat naturally, like to sell their old ships at the best price obtainable. They have therefore—as I have done so myself—sold ships for trading which perhaps in the national interest should have been scrapped. It is rather cutting off our nose to spite our face, because it puts these cheap ships into the hands of foreign competitors. Of course, it is all very well for the big shipowners to speak, but if you are a small shipowner you have to sell your ships at the best price obtainable if you want to acquire any capital with which to buy new ships. I ask Her Majesty's Government, to encourage the sale of all ships which are over fifteen years old, I personally would say—I do not know how it would be worked out—to grant some sort of subsidy on scrap from British ships. This subsidy could perhaps be on a sliding scale according to the age of the ship: the younger the ship the greater the subsidy, and of course it would apply only, as I have said, to ships over fifteen years old. But I am quite convinced, as other noble Lords have said, that it is essential for the traditional maritime countries to embark on legislation to prevent their old ships from being sold abroad, except, of course, for scrap purposes.

I should like to say just a few words about a rather hackneyed subject. We have always heard a great deal about flags of convenience, but I think that that subject has been rather skated over in this debate, as I believe the majority of your Lordships quite rightly have thought that to-day flag discrimination is probably a greater danger. I understand that my noble friend Lord Melchett rather blamed British shipowners for not building after the war—perhaps I am wrong—these huge tankers and other cargo carriers that the flags of convenience fleets now have. As far as I remember, the major oil companies after the war gave British shipowners the first opportunity to build these ships. But, my Lords, how could they? Owing to the most crippling taxation and hamstrung by governmental red tape, they simply did not have the capital to build these cargo ships. These big ships require vast sums, which owing to taxation shipping owners in this country have not been able to accumulate.

Nor have the banks been keen on lending money to British shipowners, because owing to taxation they cannot be assured that they will have their money back as soon as if it were to come from flags-of-convenience shipowners. I agree that the increased tax allowances, the 40 per cent. allowance on the cost of building, have been a great help, as have been the other tax-free allowances such as the wear and tear allowances. But, my Lords, here again, it is chiefly the big owners, who have a replacement programme, who reap the benefit most. The small owner, like the company I am connected with, does not have a replacement programme.

I should also like to point out something which appears to have been overlooked, and that is that, in order to benefit from tax allowances, it is necessary that there should be profits. In the last three years quite a few tramp shipping companies that I know have not had any profits at all. As has been pointed out, we cannot compete with the flags-of-convenience owners, with their tonnage, which has been built out of tax-free profits piled up in prosperous years. It has also been pointed out to-day, I think, that the flags-of-convenience fleets have a greater percentage of new tonnage than any other fleets in the world. How can a small company like my company afford to build new ships—a company which, after the war, has been taxed almost out of existence? A ship which before the war could have been built for £200,000 would to-day cost over £1 million. How can we get the capital? Interest rates are high, and the bank rate has just gone up. Bankers know that Governments can be more fickle than a three-year-old filly. There is even no guarantee that tax-free allowances will last. In contrast, Liberia, Honduras, and other such countries have guaranteed not to increase taxes—for over 20 years in the case of Liberia, for 25 years for Costa Rica, and 30 years for Honduras, from the date of registration of a ship.

I would ask Her Majesty's Government to make available to shipowners cheap money to enable them to build new ships. If they can have money on loan at 2 per cent. it would then be possible for us to renew our fleets, and would help shipbuilding into the bargain. Why not? Shipping and shipbuilding, as we have heard, is a unique industry; and, as your Lordships have also heard, it is responsible for a large share of our invisible exports. Three years ago the figure was about £250 million. In fact, shipping can be said to close the debit gap in our balance of payments, without which we could not maintain the exchange value of our currency. I think we have heard the noble Lord, Lord Winster, say that it was down to £138 million last year. My Lords, this is a very serious matter. We now have hire purchase on television and on cars, and we are even going to have it, I am told, on holidays. Surely we can have it on ships, because, if something is not done, we shall soon have redundancy in British yards.

We have heard how other countries subsidise their ships: how America sub sidises almost half her shipping programme; how she insures 90 per cent. of privately-financed mortgage on ships, and how she grants huge operating subsidies. On a 10,000-ton ship it is up to £500 a day. Her Majesty's Government are pouring hundreds of millions of pounds into the mines and railways, and there is no hope of ever getting it back. Why can they not put something into the shipping industry, which pays its way and can make profits? After all, it makes its profits in foreign currency, which pays for so many necessary imports, such as tea, and similar commodities which we cannot do without—at least, I can personally, but some people cannot.

I also ask Her Majesty's Government to look into the question of credits which they grant to members of the Commonwealth. These credits sometimes appear to be utilised for the purpose of starting shipping lines to compete with British shipowners. I am at the moment thinking of India, which I know has acquired ships rapidly with British credits, to the detriment of our shipping services to and from that country. I do not think any British shipowners would object to fair competition, but it seems unwise to grant credits which do nothing but harm to the nation that grants them.

Before I conclude, I should like to say a few words about something that has not been mentioned to-day, and that is the question of the replacement of the two"Queens", the two Cunarders. I fully realise that the Chandos Committee is sitting on this question at the present time. I personally have nothing to do with liner traffic, so perhaps I should apologise for speaking about it at all; but I speak as a British citizen who has travelled on one of these ships, and who has often seen them at sea. I am convinced that these two ships are among the best ambassadors this country has ever had.

We have rather heard prestige decried to-day. I think that the noble Lord, Lord Geddes, was one who rather took that view, though I do not want to take up the cudgels with him on that matter because he has a vast experience in shipping which I have not had. I agree that the economic aspect is most important, but surely on the Atlantic it is also important to uphold our prestige. The United States and France have both subsidised their Atlantic liners, and I feel that it would be foolish for us to lose our prestige on the Atlantic. I should like to see the Government provide whatever subsidy is required for the replacement of these ships, in order to produce ships that will be advertisements for everything that is best in this country, in design, engineering and craftsmanship—ships that would make the liner,"United States", which now holds the Blue Riband, look like a floating prefab. We have always been most liberal with our expenditure on our social services—and quite rightly. But if we neglect the sources of world trade from which our wealth springs, our standard of living must surely decline and these social services become just a mockery.

5.23 p.m.

VISCOUNT SIMON

My Lords, when, periodically, in the last few years we have debated the state of the shipping industry we have repeatedly, almost monotonously, heard some account of the difficulties that face the industry as a result of flag discrimination, and of competition with subsidised and tax-free shipping. On this occasion I think that we have heard rather less of that, because the industry is under the cloud of a great recession and naturally immediate problems of survival in purely commercial terms dominate the scene. But the difficulty that arises from foreign competition in the forms that I have described is still, to my mind, the core of the problem. The noble Lord, Lord Geddes, was at pains to tell us not to think that the present recession was nearing an end, and I am sure that, with his great experience, he is right about that. At the same time, taking a long view—and one must take a long view in considering shipping policy—we must assume that the swing will go the other way, and that in the years to come there will be a better balance between demand for shipping services and the supply.

So I think that to-day we must ask Her Majesty's Government, whatever else they do to alleviate the present position—and we have had some interesting suggestions put forward by speakers this afternoon—to explore the possibility of reaching some agreement with the other Governments concerned. I feel rather sorry that the noble Lord, Lord Winster, was so severe about the Washington Conference. It certainly appears—and the communiqué rather bore this out—that no very striking results were achieved, but it seems to me that this is a specially difficult problem. We must appreciate that other countries do not approach the matter from the same attitude that we do; and if we are to find any way of living with other people, and of liberalising the shipping trade, we have first to understand what other people think about this. And I should have thought that it was immensely valuable to have these talks, even though we did not expect anything to come out of them, certainly not out of the first round.

I know that it has been said that one result of these talks, especially in America, is a better understanding of the problems of the traditional maritime nations of Europe. I hope that it is also true that the traditional maritime nations of Europe understand better the problems of America, because we cannot find a solution to this problem unless the two continents understand each other. It has to be a two way understanding. In discussing the development of shipping service in some of the newly developed countries that have been mentioned by two or three speakers this afternoon it is easy to explain it all in terms of prestige and nationalism. But I think that here again we have to look very carefully. Is there not an economic reason as well? I do not mean entirely the economic reason of achieving what we may call a reasonable balance of payments.

Take India as an example—and used to have a good deal to do with India at one time. India bases her expansionist plans largely on the balance of payments position, and quotes astronomical figures which I strongly suspect represent the total of the gross import freights in all non-Indian ships, and possibly throwing in, for good measure, the total of export freights. When we examine the problem we find that they have grossly over-stated this, because not only do non-Indian ships have substantial disbursements in that country but a great many of the non-Indian ships employ Indian crews, and there are large disbursements in that direction. And this is true not only of India but of nearly all these countries. Whatever the position is, payments are made by foreign ships in local currency; and, equally, the national ship with which it is proposed to replace the non-Indian ship has large disbursements to pay in foreign currency. I venture to think that on purely balance of payments grounds the argument is not a very sound one.

There is another argument which I think we tend to forget and that is the experience of many of these countries during the war. They had been used to relying on the shipping services of the traditional maritime nations. When the war came those services were almost entirely withdrawn. I think that I should be right in saying—the noble Lord, Lord Hurcomb, would know much better than I—that in the early stages it was possible to make some allocation of shipping for providing supplies to countries outside the immediate war area; but as the struggle grew greater it was necessary to mobilise every ship for purposes of the war, and many countries found themselves in grave difficulties. And I cannot help feeling that that was one of the things which led them after the war to take the view that they must have some ships of their own. In a matter of this kind, I feel great sympathy with the noble Lord who is going to reply, and indeed with Her Majesty's Government, because it seems to me that all of us who bring these problems to their notice are really knocking at an open door. They realise, just as we all do in your Lordships' House, how serious these problems are. The difficulty is that, having knocked at the open door and walked in, does anybody know what we ought to do about it? My own feeling is that we must be prepared for very long and patient negotiations, and all we can hope is that during that time alleviatory measures can be taken to enable our industry to carry on.

Some people may think that too much is made of these problems. People outside this House, and perhaps even some of your Lordships, say:"Well, we have heard this story now year after year, yet in spite of the serious recession the British industry appears to be holding its own"—or, if not quite holding its own (that is an exaggeration), that at any rate disaster has not befallen it. It seems to me that this is like a very slow disease which is gradually sapping away the health of the industry. The industry is full of vigour and is fighting back, but, at the same time, unless steps can be taken to stem the course of the disease the time will assuredly come when the crisis will be upon us.

There is one thing that I believe the Government can do, without waiting for any kind of international agreement and. if I may, I should like to bring up again the question about coastal shipping which I mentioned here when we were debating the railways. The noble Earl, Lord Lucan, rather took me to task, and suggested that I was in favour of competition except when the shipowner lost. That was not the point I was trying to make, and I could not have put it very well. When the Transport Acts were passed it was part of the policy of Government—and I think Governments of both complexions were involved—that coastal shipping should be protected from the obvious power of the railways to take away their traffic, because with the enormous amount of business it would always be possible for the railways to pick upon the particular traffic which the coastal shipping was specially fitted to carry, and to give that traffic a cut rate.

I do not want to refer to the particular case I mentioned previously, because I think it is at present under reference to the Transport Tribunal; but there are traffics which coastal shipping is well fitted to carry and which I am quite convinced it will carry most economically in real terms of capital and labour employed. Those are the traffics which I feel it is the policy of the Government and of Parliament they should be be allowed to carry. What I would ask is that Her Majesty's Government should re-state the principle that the freedom given to the railways, which I personally welcome, to run their business on a proper business basis should not be used for the deliberate purpose of injuring the traffic which properly and normally goes to coastal shipping. I believe that if that principle were re-stated it would then be possible, in fact it would be certain, that the representatives of the Transport Commission and of coastal shipowners could sit round a table and discuss machinery. If the present machinery is not working satisfactorily—and that, I gather, is one of the pleas of the Transport Commission—then surely, with good will, the people concerned could sit round a table, and put it right.

I think we are all agreed—and this has been said by several noble Lords this afternoon—that the problems of the shipping industry are not to be solved by Governments alone: there are great responsibilities on the industry, too. As your Lordships know, I am in a minority in not declaring an interest on this occasion, but I had for a long time a close connection with the shipping industry. From my respectful distance now I think I can look at it in a fairly objective way. I have every confidence that the managements and directions of our shipping industry are full of enterprise. There are, of course, in every industry a certain number of people who are content to go along as their forbears did, but I think there is quite as much new thought and new advance going on in the shipping industry as there is in any other industry in this country. I too, like the noble Lord, Lord Melchett, read the report from the P.E.P. I read it with interest, because that organisation has a great reputation for thorough analysis of the problems that are put before it. I thought that in this particular case the report did not perhaps come up quite to their usual high standard, and I felt that some of the statements made, and the arguments drawn from those statements, had possibly been picked up from rather shallow grounds.

The noble Lord, Lord Melchett, referred particularly to the enterprise of the Norwegians, and those of your Lordships who have read the Report will remember that this was also brought out by the P.E.P. It is worth recalling the conditions under which the Norwegians, who undoubtedly showed great enterprise, were able to do this. The noble Lord, Lord Melchett, referred to the problem of finance—of which his knowledge is much greater than mine—but I certainly thought it was the fact that during a large part of the time when the Norwegians were building up their fleet it was not only the attitude of the banks and other finance houses in this country but also the attitude of the Capital Issues Committee which made it extremely difficult for British shipowners to raise money for the purpose of building new ships at the time when money could be raised by Norwegian shipowners to build ships in this country. I think that perhaps the philosophy behind it was that the ship built for a Norwegian was an export. But if so, I suggest that it is quite fallacious, because a ship built for a British owner would, in the ordinary way, in the course of its life earn more foreign exchange, than simply the first price of a ship sold to the Norwegians. Then the Norwegians had access to the New York market, and a great deal of money was lent in New York. So far as I know, during all that period it was not possible for British shipowners to raise money on the New York market.

There is another aspect of Norwegian shipowning which may well have a bearing on this. It is a surprising fact, until you find out about it, that the Norwegian shipping industry is still very largely in the hands of small family businesses. It is still possible in Norway, I understand, for a father who has, say, two or three ships to give a ship to each of his sons as a wedding present, and then they go on, and so on. That type of small business, as we all know, has been completely killed in this country by our system of taxation. I am not criticising this system; but that is the fact. That is the system under which we live, and small businesses of that kind have been driven out, particularly those that wanted a certain amount of capital—and the noble Viscount, Lord Massereene and Ferrard, made that point.

It seems to me that it is much easier to be enterprising with your own money than with the money of a large number of shareholders. A good deal of this enterprise (I will not call it speculative, because that may give it a wrong slant) is certainly taking a chance. It was a quite risky enterprise, and I think the Norwegians would be the first to admit that, but for two fortuitous circumstances, first, the Korean War and then the Suez Canal upset, the risk might not have come out quite so well as it did. Incidentally, while I am mentioning the question of family businesses in Norway, I was rather surprised that the P.E.P. Report implied that part of the trouble in the British shipping industry was due to family businesses. That seemed to me to be a curious observation to make, and I wondered upon what evidence it was based.

There are a number of these family businesses. My experience would show that they are among the most go-ahead of all the businesses in the country, and for quite obvious reasons. First of all, there is the reason I have already mentioned: that people are looking after their own money. The second reason is that it is possible to have young executives; and it is a great thing in business to get the young people taking an interest early. In my experience—and I have met quite a number of people in this category—the young son coming into the business not only is full of keenness, not only (and this is an important point) in a good position in regard to staff relations, which I think are always extraordinarily good in family businesses, but has grown up among people in that business and thus has a background that nobody else can have. So I am surprised at that criticism in the P.E.P. Report, particularly having regard to the experience of Norway, which was quoted in the other sense.

Most of the other points I had thought of bringing forward have already been made by other speakers, and I will conclude by saying that on these three serious problems, which are quite apart from the present recession in industry, in dealing with flag discrimination, flags of convenience and subsidised shipping, I believe that we must ask Her Majesty's Government to exercise infinite patience and all their skill in negotiation. If they will do that, I believe that, in time, we may find a solution to our difficulties.

5.42 p.m.

VISCOUNT RUNCIMAN OF DOXFORD

My Lords, I must join the majority of those noble Lords who have spoken this afternoon and declare my interest in an industry which appears, by common consent of your Lordships today, to be in a pretty bad way. I should be the last to say that it is not going through periods of very great difficulty, but I am reminded of the old adage in the manuals of seamanship, that when finding his ship in a position of great peril the master would do well to call his crew together and remind them that they and others have got out of worse dangers than this before now, and urge them in that way to greater efforts. I do not myself think that the present depression, though different in its way, is perhaps quite as painful as were those which immediately followed the First World War and which characterised the middle years of the 'thirties.

If I may, I would ask your Lordships for a minute or two to take stock of the situation in which British shipping finds itself, with an eye to the next, at any rate, five or ten years ahead, for if there is one thing about shipping as a business it is that it is a continuing business. If you look at it at any one moment of time, and then take your eyes away, you will almost inevitably see it out of perspective. Let us therefore for a moment consider how we stand, compared with the rest of the world, in the three main categories into which shipping falls.

If we start with the tanker and tramp trades, it is not because they are necessarily the most important but because they have the advantage of being rather easier to look at from the way in which they do their business. Normally speaking, a tanker runs full or not at all. The rate at which he may run will vary considerably, and when it gets so low that it is cheaper to lay up, he goes off the market and he is laid up. Therefore the figures give a fairly good picture—I do not say an extremely accurate picture, but accurate enough for general purposes. Tankers comprise in gross tonnage somewhere about one-third of the total fleets of the world. Incidentally, it is perhaps worth saying, since it has been suggested that this country is rather behind-hand in the tanker trade, that the proportion of tankers in the British fleet is just about the same as the proportion of tankers in the world fleet. Of those which are laid up, the British proportion is about 10 per cent., the Norwegian proportion about 14 per cent., the Greek proportion about 30 per cent.; and Liberia and Panama, the flags-of-convenience countries—which are, broadly speaking, if you go back far enough, two-thirds Greek and one-third United States—have something like 20 per cent. of their fleets laid up. Therefore, at any rate in that market, we are in a position which is, if you like to put it that way, rather better than twice as good as the worst.

I do not think that the tanker business is going to have a very easy time in the next two or three years, for reasons which have already been explained to your Lordships this afternoon. Indeed, such calculations as have been made suggest that the surplus of tanker tonnage is going to get worse in the next two or three years, and may reach equilibrium only with the increase in the demand for the carriage of oil somewhere about 1965. I have no suggestion to make to your Lordships, except that they will have to do what is called, if you will pardon the phrase,"sweat it out".

The tramp trade is not altogether dissimilar in the nature of its business from the tanker trade. But here again, of British tramps about 8 per cent. are laid up. It is more difficult to get the figures for foreign countries, because it is less easy to distinguish between the kinds of dry cargo tonnage which they have. Broadly speaking, I think one could say that something like 30 per cent. of the Greek tramp trade was laid up, over 20 per cent. of the Italian tramp trade, and somewhere about 20 per cent. of the tramps flying flags of convenience. There again, British shipping, though not in a good position, is at any rate in not as bad a position as the shipping of quite a number of people who have been mentioned from time to time as being our most formidable competitors. It is, of course, perfectly true that the misfortunes of others are the consolation of a fool, but when all are suffering it is perhaps of some encouragement to feel that we have succeeded in avoiding the worst pangs which beset some of our competitors. I believe that that is the other side of the story of the charges which were levelled against British shipowners during the past few years of being not enterprising enough in increasing their fleets. I think it is likely that some of the people who took too optimistic a view of their prospects may now be wishing that, even with the aid of the New York bankers, they had been a little more restrained.

Another fact which, if one is looking ahead, I think is of some importance, is that nearly three-quarters of the tonnage which is laid up in the world at the moment was built during the latter part of the last war and is, therefore, about fifteen years of age. It is quite true that it has lasted longer than a great many people thought it would when it was first built, but ships will always last longer in good times, when people can afford the money to keep them up, than an old ship would be thought worth while maintaining in bad times. I expect that a great deal of that bulk of tonnage will naturally begin to disappear, and if any of the measures which have been suggested to your Lordships this afternoon can be taken by Her Majesty's Government to increase the rate at which it disappears, so much the better for us all.

So much for those two classes of ship. From the British point of view, the liner trade is, I think, more important than either, and the nearest picture I can get of the position at the present time of the British liner trade as compared with its foreign competitors is that whereas of the total dry-cargo tonnage in the world some 6 per cent. is laid up, of the British dry-cargo shipping only some 4 per cent. is laid up. When one allows that that 6 per cent. contains a very much higher figure in regard to tramps, which I have already mentioned, I think it is a fair deduction that the rate of lay-up among British liners is not as great as it is among a fair number of their competitors. But that, of course, is not the same thing as saying that they are doing nicely, because whereas if a tramp does not get a full freight worth having he lays-up, the liner has to maintain his service and will go on running half empty, or even more than half empty, in order to maintain his obligations to his shippers and keep his place in the berth. His rates are more stable, except where he has to compete with tramp cargo and has to bring them down, but his obligations are more severe. What one finds with regard to the British liner trade is not substantial laying up but substantial lack of cargo for the ships that have to be kept running.

In the minds of many people outside your Lordships' House, and possibly within it, liners seem to mean primarily passenger liners. I should be the last to belittle the importance of the passenger trade, but it is just worth remembering that both money-wise and tonnage-wise, it is very small indeed compared with the cargo trade. Indeed, the figure has been produced that, taking ton-miles as the criterion, passengers represent only 1 per cent. of the whole. That is a somewhat fallacious figure, but if your Lordships will consider the difficulty of carrying a ton of passengers as compared with a ton of iron-ore you will realise that you are not really talking about the same things. But, of course, the passenger trade has always been the place where prestige mainly resided, because it has always, naturally, in the nature of its business, been more before the public mind.

I do not want to say very much about the prestige issues which have been raised by other noble Lords this afternoon, except perhaps this. It is worth remembering that when the late Sir Percy Bates projected and finally built the two"Queens" he did so because, as he said, they were the slowest and smallest ships which would do the job. The operative words in that phrase were"do the job". He did not build them in order to fly the flag but in order to do a job. I think it is worth bearing that phrase in mind to-day and considering whether the job is the same and whether the tools required for doing it are the same. It would not be a good thing for us, or for prestige, or for anything else, if all we did was get rid of two"Queens" and leave in their stead two sacred cows, animals enjoying the highest degree of prestige in their proper countries but of singularly little economic value to anyone.

The bulk of British shipping in tonnage, which amounts to nearly half the ocean-going tonnage as a whole, resides in the British cargo liner trade, and it is just here that the influences of these matters of flag discrimination, competitive subsidies and the like which have engaged so much of your Lordships' attention this afternoon are to be seen at their most harmful. The tramp trade and, so far as I know, the tanker trade are not yet, at any rate, very subject to discrimination. That is largely, I think, because the people who discriminate are either the United States, who keep an eye on their own defences and therefore want a particularly fast type of ship which is not normally engaged in the tramp trade, or the emergent nations at the point of industrial takeover, for whom a merchant trade is a point of economic honour. They, in turn, almost always think of a line running along regular routes, and are probably encouraged so to do by some form of reciprocal trade agreement. It is that sort of agreement, that sort of fleet, which is the real menace to the British cargo liner and therefore to what I think it is fair to say is the real core of the whole British Mercantile Marine.

Is that sort of menace likely to increase or not? I think on the answer to that question, if one gets it right, a great deal of the future of British shipping will depend. I think there is not a very great deal, as the noble Viscount, Lord Simon, pointed out, that Her Majesty's Government can do at any given time to curtail or reduce that menace. It is a matter of long and patient negotiation with the various people concerned, and I do not suppose that in the first instance the negotiations are likely to be at all fruitful, because to some extent in both the American heart and to a much larger extent in the heart of the younger nations this is not primarily an economic but an emotional consideration. It is a matter of national pride, and it is an extremely difficult thing, as all your Lordships will know who have seen anybody in love, to argue a man out of his emotions.

If I may continue this rather dubious metaphor, I think the only thing which is likely to make them less in love with their fleets is to discover that they consist of ships which, though possibly beautiful in appearance, are as economically damaging as a really extravagant wife can be. Once honour is satisfied, then the economic forces have a chance to come into play. My own perhaps slightly wishful thinking is that as the years go on the emotional urge will die and the economic disadvantages will become more apparent. It may be, therefore, that although I agree that this is perhaps the greatest single danger facing not only the British Mercantile Marine but the mercantile marine of all those countries who seek to supply shipping services for the benefit of third parties—the exporters of shipping services, as one might say—I think it is possible, and I would even venture to hope it is probable, that in the years to come it will not get progressively worse than it is to-day.

Finally, what may we hope for, for the British shipping industry in the years to come? We need, of course, ships. But we do not need just ships; we need the right ships, and I was much impressed by what the noble Earl, Lord Jellicoe, had to say about the importance of promoting research to ensure that we get the right ships. For, after all, in a highly competitive trade it is a sad thought that it is no good improving your technique if at the same time everybody else is improving his technique; your relative position remains the same. In a world where all port facilities were enormously increased, where the turn-round of ships in every port of the world was halved, the only result, I am afraid, would be vastly to increase the apparent surplus of shipping. But if we in this country can be the leaders in the future, as we have been in the past, in those developments which make for the more economic running of ships, which make for the design of ships more suited to the trade in which they have to ply, if we can maintain those specialised advantages which really, and increasingly in later years, have been what we rely upon to keep our end up, then I do not think it will be so bad.

I hope that we shall get something out of Her Majesty's Government in the matter of taxation, and I hope it particularly for this reason: it is a commonplace in the shipping trade that of every decade about three good years have probably to pay for about seven bad ones. It has almost always been so, and I am afraid it will be a long time before we get a control over the forces of nature or the minds of men which will materially eliminate these large fluctuations. Why the British shipping industry has been growling away about taxation at a time when outwardly it was quite prosperous was simply that if we cannot get out of our good years enough surplus to see us through our bad years, then we shall be indeed beggars and not contributors to the national economy.

I do not think we shall ever get back to those conditions in the world which gave British shipping its enormous preeminence in the 19th century. I doubt whether we shall even maintain the same percentage of active world shipping, measured in tons, that we have to-day. I do not know that it matters very greatly if we appreciate one thing: that if we have not in the years to come to the same extent the biggest maritime marine in the world, at least let us try—as I think we can try with some prospect of succeeding—to have the best.

6.1 p.m.

LORD SHEPHERD

My Lords, I should like to join with other noble Lords in expressing thanks to the noble Lord, Lord Teynham, for bringing this debate before your Lordships' House at this particular time. As is well known, the Opposition like to have a speaker at the end of the list so that we may have some opportunity of answering any contentious statements made by noble Lords opposite. As I have listened to the debate this afternoon, I heard only one contentious statement, and that was made by the noble Lord, Lord Geddes, on the question of labour relations in our dockyards. I am pleased to say that my noble friend Lord Citrine—somebody who has probably as much experience of labour relations as anybody in this country—is going to say a few words on that important matter.

I had prepared a speech, but I have found that most noble Lords have used all the facts and figures that I had laboriously produced. I should like, in a few moments, just to try to sum up what I think were the main points that were raised. I think I can do it best by reading a small poem that was sent to me yesterday. I have always rather envied noble Lords who are able to quote"off the cuff". I cannot do that because I have not had the opportunity of memorising it; so may read it? Then what can I do for you, all you Big Steamers? Oh, what can I do for your comfort and aid? Relieve you from tax or from flags of convenience? A subsidy render when new keels are laid? Oh, what can we do for you, all you Big Steamers? What can we do so you flourish, not fail? 'Improve British ports and their working to speed us, Atomic power hasten to save us from sale!' The poet says that the last word may be spelled either"sail" or"sale", and he has also tendered apologies to Rudyard Kipling. That little poem, I think, sums up many of the main heads which have been discussed this afternoon.

One new fact, I think, has emerged in this debate. I have always understood, and believed, that the shipping industry took the view that the last thing they could possibly tolerate was Government interference, or even Government assistance. But we heard this afternoon, in what I thought was a remarkable speech by the noble Earl, Lord Jellicoe, a plea for a new partnership—a partnership of Government and industry with the"Fisher" attitude. I should like to pursue with the noble Earl what he meant by"partnership". Did he mean a partnership where the State and industry were supplying jointly the capital for a new and expanding industry; or was it to be a form of partnership where the Government were to be the troubleshooter, to go out on the international front solving the problems of the shipping industry and leaving the operations of the ships to the shipowners? Perhaps we can pursue that point later.

It is quite obvious that the shipping industry has reached a stage when something basically has to be done. I think it falls into two parts. First, something must be done about flags of convenience. I believe that that can be done only by getting the agreement of the main ship-owning countries to prevent the owners of steamers from placing their flags under some foreign flag. There have been some great campaigns on this subject. I think that it was only last year, against much criticism, that the dockers in this country put an embargo on ships under flags of convenience. I do not know what good it did, other than stating their position. But the only solution to this problem will be for Her Majesty's Government—and it will be Her Majesty's Government on whom the effort will fall—to bring the main shipping countries, which are relatively few, around a table to discuss and decide what action is to be taken.

Then we come to the other question, that of discrimination in flags. I should have thought that the effect of American discrimination was becoming less. As I understand it, the discrimination began when the American Government stipulated that 50 per cent. of any cargo carried as aid to European countries, and others, must be carried in American ships. I should have thought that the effect of such an arrangement was declining. The other day I saw some figures to the effect that the amount of cargo aid that is coming into Europe, in particular, has fallen drastically.

I agree with noble Lords opposite that such forms of restriction are bad for trade, but I would warn the House that we must tackle this question carefully because in American eyes we ourselves carry out some form of trade discrimina tion. They point their finger at the system of Commonwealth Preference. Therefore, I think it is a case where we must go to the American Government and say,"This is causing harm not only to us but to the whole of the defence organisation." I believe that the American attitude towards building up their fleet does not depend on its earning capacity, but on the ability to maintain an auxiliary fleet to support their military commitments throughout the world. Therefore, I think that the Government should have these discussions. I hope that they will not take too hardly the words of my noble friend Lord Winster. These discussions will be long-term, and therefore we must look to Her Majesty's Government on those two aspects.

The Government will also, I feel, have to look into the whole question of shipbuilding and ship operation from this country. There is an increasing fear of unemployment in the shipbuilding areas of this country—and there is every reason for that fear. If we look at the figures of construction we see that there is a steady decline each year; and we cannot just look at shipbuilding as an isolated case, because the biggest buyers from British shipbuilding yards are the shipping operators of this country. I think that we build for export in our yards to-day a figure of only about 7 per cent., as compared with the 20 or 30 per cent. of countries like Japan. Therefore the House will see that on those figures alone the prosperity of the operator will have its effect on the prosperity of our shipbuilding yards and, if one goes further afield, on the great engineering centres where the hearts of our ships are built.

I agree wholeheartedly with the noble Earl, Lord Jellicoe. There must be a real partnership in this industry. I do not believe it is within the resources or capabilities of shipowners to deal with the problems that confront this industry. I hope, therefore, that we shall hear from the noble Lord that Her Majesty's Government are going to take immediate steps to bring aid to this industry. And we must stress that, apart from the prosperity of our export trade, we must not forget our defence commitments. We need new and modern ships. We need more ships than in actual fact we need to operate—we may need a reserve—and it is quite unrealistic to believe that shipowners can maintain within their resources a reserve merchant fleet for possible military action. I hope, therefore, that we shall hear this afternoon of a partnership between Her Majesty's Government and the industry.

6.13 p.m.

LORD CITRINE

My Lords, I shall not detain your Lordships very long. I am not a shipowner. I hold no shares in any shipping company or any related activity, and I suppose the nearest I ever came to that desirable consummation was during my chairmanship of the British Electricity Authority, when we had some 52 colliers—coastal steamers—under our control. I listened with a good deal of concern to the opening statement of the noble Lord, Lord Teynham, and the two subsequent speeches of the noble Lords, Lord Winster and Lord Geddes. These speeches were obviously factual and well-reasoned and left no doubt whatever upon my mind that the British shipping industry has a very difficult time lying ahead of it.

I regret that very much. I do so not only on national grounds but on personal grounds, too. My family have been connected with the sea through three generations. My grandfather was a master rigger. My father was mate of an American ship and subsequently an officer of a British ship. He went to sea a the age of eight. Two of my brothers were seamen and I myself, in the early part of my life, worked as an electrician on board ships, both in the shipbuilders' yard and as an employee of certain of the shipping companies in Liverpool. Later, as a trade union official, I was very much concerned with the conditions on board ship. I was responsible for forming the first what we called"seagoing section" of the Electrical Trades Union, which was exclusively for electricians who were employed on board ship.

I should like to pay my tribute to the vast improvement in conditions of life on board ship that have been effected in the intervening years. They are not yet completely satisfactory in every case, but they are infinitely better than anything I saw in my early days. A great deal of the credit for that is due to a man not altogether popular, in his later days, with the trade union movement— the late Havelock Wilson. He, more than anyone else on the side of the trade unions, was responsible for the initiation, in close consultation with the ship owners, of the National Maritime Board, on which, of course, the unions and the ship owners are jointly represented. Anyone who had the slightest knowledge of the intensely bitter relations that had preceded that development must be thankful for the harmonious and co-operative relations that now exist.

We used to sing, in other days, that Britain rules the waves—now, apparently, in limited dimensions; but I believe we all know instinctively how important it is for us, as an island country, to maintain this vital British service. I must confess that when I listened to what I might describe as the courageous speech of the noble Viscount, Lord Runoiman of Doxford (because it was not a popular speech or one completely endorsing all that had been said in this debate, or even what had been said by his colleagues in the shipping world), I felt rather alarmed at his statement, or at least at what I understood him to say: that he did not believe that in all probability we could maintain our proportion of the world's shipping trade. And he added that he did not think it mattered very much in the long run whether we did or not. I think I understood what the noble Lord meant by that, but at the same time I am sure that in every section of the export trade—and this is a vital carrier trade—our effort nationally must be to maintain, and indeed to increase, our proportion, of world trade.

Those who have spoken in the debate have made very clear the handicaps that are now imposed upon British shipping—discrimination, subsidies and flags of convenience. They are all too well known. If we could get fair competition I believe that, with the inventiveness and flexibility of mind of our people, we could well hold our own in that competition. Unfortunately world events are turning against us. What is not recognised, in my opinion, is the fact that every time self-government is conferred upon some State or other the inevitable secondary consequence is that that State seeks to make itself as economically independent of other States as it possibly can. It may do it by tariff walls or something of the kind. This aim at self-sufficiency is, to my mind, a natural outcome of the conferring of self-government upon any country, in greater or lesser measure as the case might be. We must just recognise that.

My noble friend Lord Geddes made some reference to shipbuilding, stressing the importance of delivery dates. But I should like to point out that, vital as those delivery dates are, the shipbuilding industry is not the only one against which the charge is brought of not being able to keep to the delivery dates that have been prescribed either by contract or by agreement. It is a very grave defect, but let us keep in mind that we are living in a period of full employment, when it simply is not possible on occasions to hurry through orders to get them ready for delivery dates, to have the flow of materials coming regularly from the various agencies that make the completed ship, and to have those things coming in at the precise time. That is not possible in a period of intense employment—I would say over-employment—which this country has been going through in the post-war period.

I was interested to hear the noble Lord, Lord Geddes, say that he thought there ought to be one trade union per shipyard. I do not know whether he quite meant that or not, but that would mean a form of trade unionism which is completely repugnant to British trade unionists. It would mean, in effect, something desperately resembling company unions, though I am sure that was not in the noble Lord's mind at all. But what could be done, and what should be done, is that all the unions who are working in the same industry, if they are not capable of amalgamating together—because that process is a lengthy one, as we all know, and as I particularly know, because of my experience at the Trades Union Congress—should work together. And so we place the accent nowadays upon federation and getting the unions working in that way.

I regret to say that this does not completely solve the problem of demarcation, although we never get to know, unless we follow the reports of trade unions, of the number of demarcation disputes that are settled amicably. We never hear of them. We hear of the rows. Men strike against one another, and the employer is standing on the side lines powerless to do very much to help a settlement of the dispute. Why is it that British trade unionists have preserved this attitude? I should like to say this: that while conviction as to the futility of these disputes has already reached the trade union officer, it has not reached the average individual trade unionist. He sees what he deems to be his work being taken by men of another trade; and with the memory of unemployment (it is very hard to get rid of the memories and the suspicion that it may return) he thinks he is being deprived of something. Consequently, more often than not there is a stoppage of work on the initiative of the men themselves about which the union headquarters, even at district level, are completely ignorant.

Once the men are out, it is a devil of a job for a trade union official to run contrary to the clearly expressed views of his members. I know of no trade union official who rejoices in demarcation disputes. They expose our weaknesses. It is the saddest part in the life of any trade union official to find his members striking against members of another trade union on something which in totality means nothing. It might mean work for a particular trade, but it most assuredly does not add to the volume of work at all. I myself worked in a shipyard, as I have already said, for a period. My early impression was that there was an almost complete lack of organisation: time was wasted, and I got into bad relations with my foreman for daring to leave my job on the ship on three successive days to go and look for him so that I could be given another job. I will not mention the name of the yard. I took the opportunity in my days as an official to mention it many times to the managing director of that particular company. There were bad relations in the shipbuilding industry. Remember that.

What we forget is this: we cannot transform men's minds rapidly. As I said once before, the cause of a grievance can disappear but the feeling that it created remains. I believe that much of the trouble this country has gone through in the world from India and other places—Ireland, for example—is due not to anything done in my day and generation but to things done many years before. I remember what my friend the late Jimmy Thomas said when negotiations were taking place with the de Valera Government. I said,"How are you getting on, Jimmy?" He said,"We started at ten this morning and at one o'clock de Valera had got up to Cromwell's time!" I know very well that since my early days shipyard organisation has been vastly improved. I visited British yards and American yards during the war period and was able to make some comparisons. I took a party of Russians round the British yards, several British yards, during the year (I believe) 1943, and I must say this. They were greatly impressed by the speed with which the work was being carried out. In the American yards, let us remember, without perhaps having the acute demarcation disputes that we have, it was shown that during the war period, despite the American claim to build merchant ships in four days (we all heard those stories about means of prefabricating ships and assembling them in the yards), the American man-hours taken were more than double those in the British shipyards. I hope that, when thinking of our trade unions, we shall not overlook these simple facts. It is clear from what has been said that we do need united efforts, and I ask myself how those efforts can be made.

I was for many years a member of the National Production Advisory Council on Industry where the Chancellor of the Exchequer comes and reports on the current situation, and where the Ministers of every appropriate Department, without limitation, appear from time to time when business concerning them is raised. Is this not an appropriate subject to be brought before a body of that kind, where—how shall I put it—the prospects of the British shipping industry could be examined? There, surely, are open to the Government, apart altogether from the question of subsidies and what help they may be able to give, many means by which this position can be examined. If the willingness is there I am perfectly sure the means will be found.

6.39 p.m.

LORD CHESHAM

My Lords, I think that: my principal sympathy this afternoon goes out to the Kipling of the future, of whom the noble Lord, Lord Shepherd, made me think, when he has to re-write the poem of"What can I do for you, all you big diesel-engined oil carriers?" I am glad to be able to tackle what might be called the third round in the series of transport debates, although it seems in some ways a little peculiar that it should not have been initiated by the noble Lord, Lord Lucas of Chilworth. We should be none the less grateful to my noble friend Lord Teynham for putting down this Motion and for moving it so ably, and indeed to all the noble and self-confessed shipowners and seafarers who have taken part in the debate. I am sure my noble friend will understand me when I say that my feelings are mildly tinged with a little regret that the debate should take place at this particular moment of time, though I know that it is no fault of his. The reasons for this will become apparent to your Lordships, I think, as I develop the various points I propose to make.

As a comparative newcomer to the Ministry of Transport, I have been rather struck by the number and variety of subjects affecting the day-to-day business of the shipping industry with which the Department is concerned. It is very closely concerned, for instance, with the safety of ships and of all who sail in them, and I am glad to take this opportunity to express the Government's appreciation of the help they have received from representatives of shipowners, officers and men of the Merchant Navy, and classification societies, in the heavy task of preparing for this year's International Conference on the Safety of Life at Sea, which, in accordance with what now seems to be tradition, will be held in London in May. My noble friend Lord Teynham mentioned that Conference and a possible extension of it, but I think I am right in saying that it would certainly not be practicable or possible to extend the scope of this particular Conference to consider the kind of matters that he had in mind.

Having said that, the first thing I should like to make very clear is that the Government are well aware of the problems and difficulties that the British shipping industry is facing. I am certainly in no mood to underestimate them now and, even if I were, what various noble Lords have said would prohibit me from anything like that. But what could or should be done about them clearly requires a very great deal of thought by shipowners, not only in this country but in the other countries involved, as well as by Governments. The noble Viscount, Lord Simon, said that, and I certainly accept it, as I would accept his exhortation to patience and steady negotiation, which will probably take a long time. But, my Lords, the first need—and it is by no means as easy as it might sound—is to establish the real facts.

As I think is already quite generally known, the General Council of British Shipping have been doing a lot of work in this direction in recent months. The full results of their work will shortly be available to my right honourable friend the Minister of Transport. In fact, yesterday the General Council had a long and very interesting discussion with him on the subject, at which I was present. It is too early for any conclusions to be drawn, but I can assure the House that this material will be studied most urgently and with great care. This seems to me something like the close liaison between the Government and the industry that the noble Earl, Lord Jellicoe, wanted and which was called for also by the noble Lord, Lord Shepherd.

I cannot say more at present on the general issue, but I should like to comment on two particular points which were mentioned by my noble friend Lord Teynham, and also by others. First, there was the question of taxation. Of course, I cannot anticipate the Budget of my right honourable friend the Chancellor of the Exchequer, but I understand that before last year's Budget he gave full consideration to the industry's claim for further taxation relief but decided that he could not bring any proposal forward to meet it. What I can do is to feel certain that, if the leaders of the industry thought, as a result of their present studies, that there were new circumstances, or that they had new proposals to make, then the Chancellor of the Exchequer would be fully prepared to give them consideration.

My second point concerns what has been brought up by a number of speakers—the necessity for large-scale scrapping of old ships, or of the older ships, and also the possibility of working out some"scrap and build" scheme. Naturally, all these matters will be kept very much in mind when considering the report which the General Council of British Shipping is going to make and which I have just mentioned; but I must emphasise what the Chairman of the General Council, Sir Nicholas Cayzer, has said more than once—that is, that scrapping is an international problem; it is no use any one country trying to act by itself. The effect of its efforts on the world market can be only so relatively small. Not only must any effective action in this respect be international in its scope, but it should also, I should have thought, start in the first place at commercial level.

In fact, there are considerable differences of view amongst shipowners about schemes of this kind, and it is hard to conceive that Governments could make a lot of headway in discussing this problem unless there was a prior basis of international agreement between the shipowners. For instance, I think I should be right in saying that, as a result of the experience of the working of the 1935 British Shipping (Assistance) Act and of the Trades Facilities Acts during the previous decade, there is more than one viewpoint, even among British shipowners, about the virtues of"scrap and build". I say this not to be argumentative, but merely to illustrate that the problem is not so easy or straightforward as it might seem. All the same, careful consideration must clearly be given to any scheme which is directed towards improving the competitive position of the British fleet, on which, as has been pointed out, the health of the British shipbuilding and ship-repairing industry so largely depends. But I quite firmly believe that the first step is that the Government should know what efforts have been made among the shipowners of the world to deal with this problem of surplus tonnage.

Before I leave this subject, I think I should say a word about the disposal of ships, and of Government ships in particular. When it comes to the selling of Government ships, the policy in general has been that the Department must have the same regard for the taxpayers' money as the board of a company would be expected to have for the interest of its shareholders. It follows, therefore, that in general it is the Department's duty to obtain the best price that it can. The Government has never bound itself, though, to accept the highest or any particular tender; and it will continue to treat each case on its merits, taking full account of any special circumstances. But I would agree with the noble Lord, Lord Geddes, and with the noble Viscount, Lord Massereene and Ferrard, that the problem of the disposal of the older ships abroad is an important one, and I should have thought was certainly one to be taken seriously into the consideration that I have been talking about.

If we begin to think about breaking down the difficulties in which our shipping industry finds itself in relation to the world position, it seems quite clear that flag discrimination is the most serious one that threatens, and certainly is of considerably greater importance at the present time than that of flags of convenience—I think it would be true to say shat they are not perhaps quite so convenient at the moment as they are in boom times. Furthermore, there is the fact, as has already been mentioned, that, in all, the flags-of-convenience fleets have 17 per cent. of their shipping laid up, as against the 5 per cent. in our own case. But I think it is important to be quite clear what we mean when we are talking about flag discrimination. The noble Viscount, Lord Simon, had something to say about it. Many countries, particularly those which have attained their independence recently, are taking action of various kinds to establish or build up merchant fleets of their own, but that is not necessarily flag discrimination. Commercial competition it may be, and it is true that sometimes we may question whether it is in fact commercial and whether plans of this kind are well conceived, when there is already a large surplus of shipping in the world. Especially we may query them in the case of underdeveloped countries which have so many other calls on their resources. But basically it is not for us to tell other countries how they are to run their own affairs.

What we do mean by flag discrimination is any action taken by Governments, which interferes with the freedom of the shipping of all flags to take part in international trade and with the freedom of the trader to use the shipping services which suit him best. We have heard about many of the ways of doing this. It usually entails either direction of Government cargoes or pressure on private traders to use their national ships. We think that these practices are detrimental not only to our own shipping industry but also to the whole interests of international trade. We have particular cause for concern when discrimination is practised by countries which enjoy financial assistance, either directly from us or from international organisations of which we are subscribing members. The noble Viscount, Lord Massereene and Ferrard, gave an example of this.

I hope that nobody thinks that the Government do nothing to help the industry in opposing flag discrimination. There are several ways in which we can and do help, acting either by ourselves or in consultation with the other maritime countries. We make formal protests. We have made 74 of them in the last ten years, to 31 countries. We have also made many informal representations as well. Within the last year some satisfactory assurances for the future have been obtained from countries which have been offenders in the past, and we have also secured the inclusion of non-discriminatory shipping clauses in several trade agreements and commercial treaties.

These successes cannot be viewed other than against the generally unfortunate background of discrimination which continues to be practised by many countries. As has been repeatedly pointed out, it would be a great help if we could feel that we had greater support from the United States in this matter. Unfortunately, as we have heard, they discriminate themselves and take other measures which are not very helpful to our shipping. The trouble is that this sets an example which is much too readily followed by other countries. It is for that reason that my right honourable friend took the whole matter up again very frankly with senior United States officials in Washington last month, as his predecessor, the present Minister of Defence, did in Washington last summer, together with representatives of eight other nations.

The noble Lord, Lord Winster, who I am sorry is not in his place, raised this most contentious point of the entire debate. I do not know what he expected, but we never expected that progress would be other than extremely slow. It is true that the communiqué at the end of the Washington Conference showed no dramatic result. And it could not have shown a dramatic result. The fact of the matter is—and this is what the noble Lord completely overlooked and left out—that American shipping policy is embodied in laws passed by Congress, some of which go back well before the beginning of the last war. Such a situation certainly cannot be settled by means of a dramatic communiqué at the end of a conference. There was, as Mr. Watkinson said, useful progress. The fact that we and other European countries were able to bring home collectively to the United States Government our concern about questions of shipping policy on which they differ is in itself progress.

It is our intention to follow this up by further talks and to build on the progress that has already been made. I am very glad to have the concurrence of the noble Viscount, Lord Simon, in this direction. We have every expectation that the continuing talks required will shortly be arranged between the United States and the European countries concerned. I cannot say more than this now. We certainly hope that, as a result, we shall succeed in convincing our American friends of the justice of our case and of the danger to the common cause which is inherent in their policy, particularly when we view the matter in the context of the growing recognition of the need for economic co-operation among the Atlantic Powers.

The struggle against flag discrimination is not an easy one, and it is very tempting to consider, as my noble friend Lord Teynham suggested, whether we should not resort to retaliatory measures of one kind or another. We certainly do not rule out the possibility that such measures may prove to be unavoidable. In fact, it is a matter that we are considering at the present time. But before we could decide to adopt any policy of retaliation, even in particular cases, we should need to consider very carefully, in conjunction with the whole industry and with the Governments of other maritime countries thinking as we do, what the wider repercussions of any such change of policy might be.

I should like to turn for a moment to the point to which the noble Lord, Lord Geddes, drew our attention and to which, it seemed to me, he took some exception—that is, the difference between the position of shipping and air transport. Government assistance to air transport takes two main forms—contributions towards the costs of developing new aircraft and towards the costs of airports and ground services. In the case of shipping, we already give, or have under consideration for giving, assistance towards research and development. For instance, in the development of nuclear propulsion for marine purposes, we have made contributions to the Shipbuilding Research Association, to the Admiralty Yarrow Research Establishment and to what is known as"Pametrada", which, for the benefit of noble Lords who do not know this institution, stands for Parsons Marine Engineering and Turbine Research and Development Association. I know that this assistance is less extensive than that given to the air, but allowance has to be made for the needs of the two different forms of transport and for the benefits to be derived from Government assistance. Any case for extending Government assistance in the marine research and development field would no doubt receive most careful consideration. I think I should stress, too, that it is Government policy that airports and ground services should become self-supporting, as soon as possible.

Although I listened with great interest to what the noble Earl, Lord Jellicoe, thought about ports, the fact is that the sea ports and harbours of the world are. in general, already self-supporting, and I do not think the Government would be justified, by subsidy or other means, in artificially reducing port and harbour dues for ships, many of which would be foreign and the great majority of which are probably unaffected by air competition, anyway, by virtue of being concerned mostly with freight.

LORD SHEPHERD

The noble Earl, Lord Jellicoe, also raised the question of the development and improvement of the docks, which I should have thought would be a Government responsibility.

LORD CHESHAM

In view of what I have yet to say, I should rather like to stand on my remark about any case for assistance receiving careful consideration. I should now like to turn for a moment to the coastal shipping industry, a matter which was raised by Lord Simon. During the debate on British Railways on December 17 last I said that the Government shared the anxiety that had been expressed that the coastal shipping industry should be in a sound and healthy condition. I said also that we had very much in mind not only the economy but also the social and defence problems which any decline in the fortunes of coastal shipping would bring. The Government have been, and still are, giving a great deal of thought to the future of coastal shipping, its relation to the other forms of inland transport, the extent and the nature of foreign competition and the future scale of major traffics particularly that of coastwise coal. Talks are, as the noble Viscount, Lord Simon, suggested, taking place almost at once—in fact, I believe I am right in thinking that they start to-morrow—with the Chamber of Shipping, but, quite frankly, I cannot say that the prospects are particularly encouraging. The General Council of Shipping have, rather naturally, included coastal shipping in their survey that I have already mentioned, and I can only repeat that the Government will give the most earnest consideration to the difficulties which undoubtedly beset this section of the industry.

The noble Viscount, Lord Runciman of Doxford, had some interesting things to say, as had more than one other speaker, on the subject of the"Queens." No one will expect me to say anything about that matter, other than to repeat the fact that the Government are firmly of the view that a British passenger service should be maintained on the North Atlantic. Further than that, until we receive the report of the Chandos Committee, I cannot go at the moment. I feel certain that the Committee will read to-day's debate with the greatest interest.

I now turn, as one inevitably must in a debate of this kind, to shipbuilding. My right honourable friend has already said in another place that he is well aware of the difficulties of the shipbuilding and ship-repairing industries and that he intends to study them in detail. He has met the Shipbuilding Conference and the Shipbuilding Advisory Committee, and he will consider carefully any representations that they may make to him. Here again it is a question of determining the true value, as it were, of the problems which face the industries. Decline in shipping activity is, of course, part of the trouble. The volume of ship-repairing work is obviously directly related to the volume of active shipping, as was pointed out by the noble Lord, Lord Shepherd. If this work began to decline in 1956 and 1957, it is, I think, at least reasonable to hope that it will not decline further. At the same time, we cannot expect much improvement until more shipping comes back into use. That again depends on further expansion in world trade and, as I have been explaining, we are well aware of the need to do everything that can be done in that respect.

The decline in shipping, however, is not the only problem, facing shipbuilding. This industry has had, until recently, a protracted period of prosperity, not only in this country but all over the world. Output here has gradually increased from 1.2 million gross registered tons in 1948 to 1.4 million gross registered tons in 1958 and 1959. But, as the noble Lord, Lord Winster, pointed out, world output has increased much more than that, from under 3 million to over 9 million gross tons in about the same period. It has been put in various ways what that increase in capacity represents, but I think the most telling way to put it is that there is now sufficient shipbuilding capacity in the world to replace the whole of the world's merchant fleet regularly every ten or twelve years, and it is obvious that the life of a decently built ship is a great deal more than that.

I do not think I need quote any more figures to show that, even when shipping returns to normal, or something that we can regard as normal, there will still be a great deal too much shipbuilding capacity in the world. Some countries seem to be recognising this fact—at least there are signs that they do. France, I believe, is taking some steps to reduce the number of her yards over the next few years. But we have seen—I hope we shall not see any more—an increasing tendency on the part of many maritime countries to develop their own shipyards, and in some cases no doubt it has been for this reason of prestige.

Another point is that the shipyards of most other traditional maritime countries, certainly on the Continent, were extensively damaged, if not completely destroyed, during the war, and in reconstructing these yards the nations concerned have been able to lay them out on the most modern lines. The result of all this is that the competition becomes even more formidable. But I think I should make it quite clear, because it is sometimes insinuated to the contrary, that no one should suppose that our own shipbuilders have done nothing about modernising or bringing up to date their own yards. Recently I have been twice to the North-East coast, where I saw a fairly representative and wide selection of yards, and I can tell your Lordships that quite a lot has been done up there which impressed me a good deal. I have not the slightest doubt that I should find the same in other shipbuilding areas of the country, though it so happens that that is the only one I have so far been to.

Moreover, this modernisation plan has been carried out in a period when the order books have been full and the building programme going very hard. It is much more difficult to modernise and reconstruct yards at the same time as you are building ships than it is when nothing is going on at all. I should like to take this opportunity of paying a tribute to what has been done, and is still being done, in this direction.

Over all, the conditions I have been talking about have brought a keen element of competition to the industry. I want also to say this. As I went round the yards I found plenty of evidence that our shipbuilders are not throwing up the sponge because they are facing difficult times. On the contrary, they are going out and about wherever they think there may be business to be done. As a result of that, in the last few weeks of last year we saw orders placed, in some cases against very stiff competition, for about 100,000 tons of shipping. I know that orders are never such that you do not want more, but I do not think this picture accords very well with the gloomy one painted by the noble Lord, Lord Winster. I should be deceiving your Lordships, or trying to, if I pretended that I thought that this marked the turn of the tide. Some of these orders were captured at prices which were really too keen for what I might call comfort. But I think it is a real demonstration that the British builders are determined to grapple with the present situation, and in many cases are in a reasonable position to do so in a competitive way—a fact of which I have seen some evidence.

I was interested by the remarks made by the noble Lord, Lord Citrine, and I hope that they, too, will have their effect in aiding the industry in being as competitive as possible. My noble friend Lord Jellicoe compared our merchant ships rather unfavourably in design with those of Norway, and I certainly do not want to start an argument with him about that at the present time. I should like to point out to your Lordships that Norway is a good customer of ours, and always has been. In fact some of the new orders to which I have just referred, which came in at the end of last year, have come from Norway, so evidently it does not look as though the Norwegians would agree with the noble Lord.

I want to go back now to where I started—that the subject of shipping is a highly complex one in itself, and one which links up closely with other forms of transport. It is also true that the problems with which shipping is faced in the world cannot be dealt with in isolation from many much wider problems affecting trade and politics and, indeed, I think, almost every aspect of national policy in its relation with other countries. My noble friend Lord Teynham drew attention to the ways in which activities of other Government Departments may affect our shipping interests. In the Ministry of Transport we are very much alive to that point, and we are in constant touch with those other Departments on matters that may affect us, however indirect that effect may be. I think we are fortunate in this country, compared with some other countries, in the way in which we have developed our administrative arrangements for consultation between Departments, and I can assure your Lordships that the Ministry of Transport are extremely active in getting the shipping implications of particular developments and policies before the other Departments.

We have had a very useful debate which has produced a number of useful suggestions, which again I can assure your Lordships will not be overlooked by Her Majesty's Government in their consideration of the situation. In the course of the debate we have managed to shed some light on a number of the major problems which shipping is now having to face. If it has not been possible for me to say very much about remedies, and about action to put those remedies into effect, it is for the reasons—mostly reasons of timing—that I hope I have made clear to your Lordships.

In considering all these matters, there is one thing which I believe stands out with considerable emphasis. The principles that we have always held, of free and fair competition and non-intervention by Governments, have served our shipping industry well for many years; and we must be careful not to jeopardise our general position for the sake of some particular and perhaps temporary advantage. In the long run, I believe, the shipping industry will be best served by conditions of peace and prosperity which will enable world trade to expand and shipping to operate freely without regard to political factors. Her Majesty's Government will work for the establishment and maintenance of such conditions.

7.7 p.m.

LORD TEYNHAM

My Lords, we have certainly heard many statements and reasons to-day for the unsatisfactory state of the shipping industry, and one of two views have been put forward to indicate that it is perhaps not quite so bad as is sometimes suggested. But we have reached the stage when Her Majesty's Government must give some assistance to the industry to alleviate difficulties in which it finds itself at the present time. I am sure we all appreciate the full answer given by the noble Lord, Lord Chesham, about this industry, and in view of his assurances I should like to ask permission to withdraw my Motion.

Motion for Papers, by leave, withdrawn.