§ 4.5 p.m.
§ LORD CHESHAMMy Lords, I think that it will now be convenient for me to make a statement similar to that being made by my right honourable friend the Minister of Transport in another place about the Government's proposals for assisting the shipbuilding industry.
The Government have been regarding the extent of unemployment in the shipbuilding industry with increasing concern, particularly since it is mainly concentrated in development districts. The world's shipbuilding capacity is now far too large for normal demand. There will have to be some contraction, from which our shipbuilders cannot expect to escape altogether. But the immediate situation is worse, because in recent years ships have been built faster than world seaborne trade has grown. So our shipbuilders have been faced with a trough in demand which has brought their order books very low. Although recovery must come, there are few signs of it yet.
Therefore, the Government have been anxiously considering whether there are any special steps which they might take to help. Shipbuilders have been hit by the low rate of ordering by British ship-owners, and this feature has been particularly in our minds. We considered a scrap-and-build scheme. But no matter how it was administered, this would really be a subsidy for the shipbuilding industry, and subsidy is a course to avoid if at all possible. Moreover, the British merchant fleet is one of the most modern in the world; and British ships are already being scrapped at a satisfactory rate. For these and other reasons, we think a scrap-and-build scheme would not be appropriate. The Government have decided instead to make funds available for a strictly limited period, at Government lending rates, for financing new orders for British shipyards. The loans will be made to ship-owners, and the terms of the loans will be decided on the advice of an Advisory Committee which my right honourable friend is setting up, under the chairmanship of Lord Piercy. Lord Piercy is the chairman of the Ship Mortgage Finance Company, and he has agreed that the experienced staff of this company may be put at the disposal of 886 the Committee in the handling and investigation of applications.
The Government are prepared to make £30 million available for financing new orders. We shall consider raising this limit if experience shows that it would be right to do so. But the scheme will not in any case continue beyond May 31, 1964, We contemplate that individual loans might be for periods of up to a maximum of ten years. The lending rate, based on Government credit for loans of from five to ten years, repayable by instalments, is at present 5 per cent. The Government will be prepared to make loans available in suitable cases for up to 80 per cent. of the cost of a ship. But the terms of each loan will be decided on merits, including, of course, the creditworthiness of the applicant.
The scheme will apply to orders from British shipowners. Special facilities are already available for export credits. I hope this scheme will make a real contribution to the problems of British shipyards at this difficult time.
§ EARL ALEXANDER OF HILLSBOROUGHMy Lords, we are obliged to the noble Lord, Lord Chesham, for giving us that statement. It is a very important one and perhaps the noble Viscount the Leader of the House will not mind if we say a few words about it. We welcome any attempt which is made to provide employment in special areas like this, because it has a cumulative effect. But I am not altogether sure that one can accept this scheme as it stands, willy-nilly. To start with, the period during which loans can be made is limited to less than eleven months. That seems an extraordinarily short period in which all the various kinds of people concerned in shipbuilding, beginning with the ship-owners, can decide on what type of ship they want, or are allowed to build, and make their applications. It seems to me to be wholly inadequate—unless the Government are making this particular decision in relation to the date of the Election. Is that it?
Then I do not understand the restriction on the time for which this money, given as a maximum sum, is to be available to applicants. I think that this requires some explanation. I am quite satisfied, of course, with the arrangements which are being made with regard to the proper vetting of applicants for Government 887 credits up to 80 per cent., which will be in the hands of the noble Lord, Lord Piercy, and his very experienced group. But we know nothing about the type of ship that would be most likely to be wanted. No mention is made of that. Is there any limit? Does it go from a small motor launch up to a cargo liner—or anything bigger? Why are we not told something about that? If any special legislation is to be introduced at a later date, perhaps we could have a longer debate about it.
The question of unemployment in the shipyard areas is by no means confined to shipbuilding: it is also connected with ship repair. I am sure the noble Viscount the Leader of the House will agree with me that, if Japan is going to give very large credits on a ship-repairing job of up to £2½ million, it will be necessary to look at ship repairs with just as much concern. Then we have to consider the history in this matter. I know, for example, what a terrible task the Admiralty had during the war because we had not the required ship-repairing yards. Sometimes there were over 3 million tons of shipping awaiting repair. Many of these facilities were closed down by the National Ships Security Company (or whatever it was called) under the late Sir James Liscott, and they were liquidated. We want to know what the Government are doing all the way round. The noble Leader will perhaps suggest when we can debate this matter more fully, and how exactly the authorisation of the announcement made to-day is to be dealt with. Will it require legislation? Will it require a financial Order? If so, then perhaps we may have a debate. Certainly there is a good deal of "meat" to be attacked in this business.
§ LORD BALFOUR OF INCHRYEMy Lords, may I ask the noble Lord to make one point clearer? I have particularly in mind the smaller shipyards on the East coast. Will this scheme apply to the small shipyards who build what I call the standard types of ships? If so, must the aid be in respect of firm orders? If those yards have the courage, the initiative and the finance to build what I call for stock—I am thinking particularly of shipping trawlers and the like—will they be able to qualify for 888 the aid to build for stock, as against firm orders?
§ VISCOUNT HAILSHAMMy Lords, we are getting rather a backlog of questions to answer. I do not want to stop further questions, after I have answered those that have been asked, but perhaps I might deal at once with the questions put by the noble Earl the Leader of the Opposition, and leave my noble friend to handle other questions, with which he is more competent to deal. Of course, this would normally be a proper subject for debate. I understand that legislation will be required; I am not exactly sure why, but I am advised that it is so. This means that there would in the ordinary course be a debate. I should think that is the right answer to the noble Earl's request for a debate.
I think the noble Earl is mistaken, if he will forgive me for saying so, about the question of the period for which the loan is available. To begin with I must say that it was perhaps less than right that he should make the gibe about the Election date. That was perhaps unfortunate in the circumstances.
§ EARL ALEXANDER OF HILLSBOROUGHThe date suggested it.
§ VISCOUNT HAILSHAMI think the noble Earl must appreciate that a responsible Government is just as keen as he or his friends may be to help an industry in need, and it is quite unworthy to suggest that any electoral motive has entered into it. Indeed, if it had, I must say that it would be fairly easy for a Government in power to make a splash with a "scrap-and-build" scheme, which we have expressly, and I think rightly, rejected. The fact of the matter is that we think—and we may be right; I suggest that we are—that what is really needed is the bringing forward of orders now. The shipbuilding industry is in need of help now. Probably the scheme will yield a limited amount of new orders at any time, and the effect of making the loan available only for a limited period will be, I hope, to ensure that those orders will come forth soon, rather than at some undetermined date in the future when it may happen to suit the shipowners to place them. This may not be right, but I think it is the kind of argument that was passing through my right honourable friend's head, and 889 he was probably wise to do it in that way.
I agree with the noble Earl as regards the matter of the ship repairing industry, which is allied, but still distinguishable. It is doing a great deal better than the shipbuilding industry at the moment, and it has, in effect, a much greater security, because British owners are not as likely to put their ships in foreign yards for repair as they may be to take advantage of a cheaper price for an article in the first instance. At all events, it must not be thought that this scheme would be suitable for a ship-repairing scheme. It is appropriate for the placing of new orders in the particular nature of the mechanism employed. I think those were the points raised by the noble Earl. I am glad he regards this as an important statement. So do we. I am sure he shares with us the desire and belief that it will prove of benefit to those for whose benefit it is intended.
§ EARL ALEXANDER OF HILLSBOROUGHMy Lords, may I say that there was no gibe intended. I only asked the reason for the short period: could it be because of the Election that they felt they could not commit other Governments. That was the reason for it. I must say that £30 million is going to want some spreading in the course of eleven months from the word "Go"; and if you want legislation first, I do not know how you a re going to do it.
§ VISCOUNT HAILSHAMMy Lords, I may say to the noble Earl that I accept what he says. It struck me at the time as intended to be what I said, but I accept from him that he had no such intention. We have not merely allotted in the statement £30 million, but have said that it would be extended if need be.
§ LORD LUCAS OF CHILWORTHMy Lords, the statement is of first-class importance and I am certain that the Government, having made up their mind that the combined shipping industry, owning and building, is in need of financial help, are right to have started with the shipowning industry and not the shipbuilding industry, because, as the noble Lord, Lord Chesham, said in his statement, the plight of the shipbuilding industry is due to a shortage of orders from the shipowning industry. But there is a good deal to be said for the points the noble Earl the Leader of the Opposition 890 has made. This subject wants very careful consideration, because one has to take into account the question of which lines it is going to be in the national interest to help. As the noble Viscount the Leader of the House knows, one of the greatest obstacles to the development of our shipbuilding is the fact that the demand all over the world for British shipping has fallen, and is falling, through flag discrimination and subsidisation to an appalling extent. Unless we can do something, and do it quickly, for some of our old-established shipping lines, the British flag will not be flown in some parts of the world. That, I think, would be a serious matter. It is no good thinking that there will not have to be discrimination, because it is no good giving this money to overcrowded lines. You have to give it to companies that are flying the flag and plying their trade under the great obstacles of flag discrimination and subsidisation. I hope that the Government will bear this in mind when they prepare legislation.
LORD HAWKEMy Lords, as one who has constantly urged the Government to do something about this problem, I am pleased to hear what my noble friend has announced, though I am not quite sure that I should not have preferred a "scrap-and-build" plan, because I am rather dubious about the placing of new orders by shipowners when they cannot earn depreciation on their existing tonnage. What I should like him to look into is the question of naval tonnage, because he said that the British Mercantile Marine is well up to date. But are we certain that if we get involved in some trouble within the next year we have the landing craft, et cetera, to deal with the matter, other than the landing craft that are rusting from the last war? I believe it would be far more profitable to employ this money in building auxiliary naval vessels than to offer this particular carrot to shipowners.
§ LORD SILKINMy Lords, the noble and learned Viscount, in answering my noble friend, said that the problem of ship repair was not so grave as that of shipbuilding, and that may well be so, but it is, nevertheless, quite a serious problem. I do not expect a reply straight away, but I would ask for consideration to be given to the question of assisting, in appropriate cases, all ship repair as well 891 as the acquisition of ships. I imagine that as legislation is involved we shall have a full opportunity of discussing these matters at greater length, but I hope that ship repairing will not be ruled out where a proper case can be made out for assistance.
LORD REAMy Lords, I apologise for not being in my place earlier, but I have read the noble Lord's statement. I should like to support the noble Lord, Lord Balfour of Inchrye, and others, who have pointed out that the pinch is with the building yards, the repairing yards—
§ VISCOUNT HAILSHAMThe building yards.
LORD REA—the building yards, which, of course, are often repairing yards as well. I ask this only for information. Have the Government considered giving this subsidy to the people who are suffering—that is, the yards—rather than the shipowners, so that they may quote lower prices, rather than that the money should be given to the shipowners to pay higher prices?
§ LORD OGMOREMy Lords, may I ask the noble Lord whether he is aware that the special facilities that he refers to as available for export credits are not adequate, and that British shipbuilders are under heavy competition, and sometimes unfair competition, from foreign shipbuilders? There is more reason to give facilities for export trade rather than for internal trade. Secondly, may I ask the noble Lord whether any similar facilities will be available for our aircraft manufacturers who are having a very difficult time at the moment?
§ LORD CHESHAMMy Lords, it seems to me that we have an incipient debate on our hands. I will at once answer my noble friend Lord Balfour of Inchrye, who really has the leading question on this matter, before it gets lost among any others. He enquired about the position of small ships being built in small shipyards in places, for instance, like the East Coast. He mentioned trawlers. Of course, this loan would not be available for the building of fishing vessels, which are looked after by different means, and therefore they are not affected by it. But it is intended that this scheme should apply to other forms of smaller vessels of 100 gross tons upwards.
§ EARL ALEXANDER OF HILLSBOROUGHOne hundred gross tons?
§ LORD CHESHAMYes.
§ LORD BALFOUR OF INCHRYEAgainst firm orders?
§ LORD CHESHAMAgainst firm orders. It is not intended that these loans should be available for what, in the best sense of the word, might be described as speculative building.
§ LORD BALFOUR OF INCHRYEStock building.
§ LORD CHESHAMIt is intended to be against firm orders by the shipowners who want the ships.
§ EARL ALEXANDER OF HILLSBOROUGHI wondered whether this is to be entirely for sea-going ships or whether they are to be river barges or something of that kind, of 100 tons.
§ LORD CHESHAMI do not think there is any means of differentiation in that matter.
§ EARL ALEXANDER OF HILLSBOROUGHOh, well!
§ LORD CHESHAMThe noble Earl says, "Oh well!", but this is a measure which is intended, though applied through shipowners, to assist shipbuilders, who presumably will find it of assistance to build any vessel that comes within the scope of the size.
I do not want to enter into a discussion on a number of the useful points put forward by the noble Lord, Lord Lucas of Chilworth, which obviously have to be taken into consideration in our thinking, as indeed they have been very much in our thinking for some time. I would say merely this. Even with the aid of the loan, of the credit facilities, which are proposed, a shipowner has still to see his way to running his ship competitively in the world before he will order. In that sense, it is almost self-regulating, in that presumably no sensible shipowner, even with easy credit facilities, will order ships which he cannot run competitively on overcrowded routes.
§ LORD LUCAS OF CHILWORTHBut interest rates do enter into the cost of running a ship.
§ LORD CHESHAMYes, my Lords, that is so, but I do not think that a likely consequence of this scheme is an overcrowding of already over-populated routes.
The noble Lord, Lord Hawke, raised a point which is rather outside the consideration of the statement, and I can say no more except to remind him that this really has nothing to do with it. The naval programme has been accelerated in order to form another means of some assistance to the shipbuilders. The noble Lord, Lord Rea, seemed to see this as some kind of gift to shipowners, which it is not in any sense. It is a possibility of obtaining an advantageous loan in order to encourage shipowners to produce orders which will also help the shipyards. That is the nature of the matter, and it is not intended to lead the shipowner into any sort of difficulty of overcrowding stock in the way I thought the noble Lord meant.
The noble Lord, Lord Silkin, mentioned repairing yards, which is really another consideration. I think there is general agreement that the pinch comes on the building yards, although in some cases they may be repairing yards as well. There is, of course, the existing, fairly generous, depreciation provisions already available to shipowners if they have the ships to repair, and I do not think his point is analogous to the same kind of consideration we have before us in the statement.