HL Deb 11 February 1964 vol 255 cc501-27

4.2 p.m.

Order of the Day for the Second Reading read.


My Lords, we all regret that my noble friend Lord Chesham cannot be here to take charge of this Bill, but I am glad to say that he is making good progress and expects to be back here by the week after next. At the end of last May my noble friend Lord Chesham read to your Lordships the statement of the Minister of Transport about the shipbuilding credit scheme, whose provisions are retrospectively covered by this short and simple Bill. My noble friend mentioned in the statement that at that time, on May 29, the Government contemplated an upper limit of £30 million as the total quantity of loans which were to be advanced to ship owners under the scheme, but he added [OFFICIAL REPORT, Vol. 260, col. 886]: We shall consider raising this limit if experience shows that it would be right to do so. Experience did show that it would be right to do so. Applications were more numerous than had been expected, and in July the Minister announced that the upper limit of loans under the scheme was to be raised to £60 million.

At the same time, the Minister disclosed that one particular separate application, from the Cunard Company for the building of the proposed new 58,000 tons "Queen", with the aid of a Government grant, had been rejected by the Government because the proposed terms put before them were not, in the Government's view, satisfactory. So that no loan for the Cunarder was included in this new limit of £60 million. But three months later, in October, a revised proposal for Government financial assistance by way of loan to the new "Queen" was agreed to. It was agreed that a loan of £17½ million should be advanced under this shipbuilding credit scheme by the Government to the Cunard Company.

The Ministry of Transport, therefore, decided to raise the limit from £60 million to £75 million, which is the figure mentioned in this Bill. The whole of this £75 million has already been committed, but none of it has actually been advanced, because under the scheme no loan is actually paid out until after the ship in respect of which it is made has not only been launched, but delivered to the owners who have ordered it; and although between two-thirds and three-quarters of the tonnage which will be financed under this shipbuilding credit scheme is already under construction, it is most unlikely that any of the ships will, in fact, be delivered to their owners until after this Bill has become law. So the granting of the loans will not take place until some time after the Bill is passed, although all the effective decisions were taken some time ago.

At the time when the original scheme was announced by my noble friend in this House, in May of last year, the shipbuilding industry had been suffering from a growing depression for several years. There has been in recent years a great increase in capacity of all the shipyards of the world, and the same amount of ships can be built with far less labour. If, therefore, there is a falling off in world demand for shipping, the effects are much more severely felt. In Great Britain, whereas in 1958 our orders were enough to last for another two years, by 1963 outstanding orders were down to considerably under 2 million tons, and the amount of time which they were likely to last was only about six months. It was obvious that, whether temporary or not, there had been a severe falling-off in demand.

In order to deal with this drop in demand the Government had, of course, considered for some time whether there was any advantageous action which a Government could take. The most obvious method of State assistance to shipbuilding would be a subsidy. The four principal shipbuilding countries in the world are the United Kingdom, Japan, Germany and Sweden: Germany, Sweden and Japan are our three largest competitors. After that, in the next class, so to speak, are France, Italy, Norway, Holland and the United States. Of the three largest competitors, none subsidise their shipbuilding but France and Italy both do so quite openly; and the United States, although they do not subsidise ships built for foreign owners, do subsidise their domestic shipping.

As long as any of our competitors practise subsidisation of shipbuilding, it must remain open to us, if we think it advantageous, to retaliate by doing the same. But in present circumstances the Government have always taken the view, and the shipbuilding industry have taken the same view, that, on balance, it would not be in our interests to do so: partly because it would encourage those who do not at present subsidise their shipping to do so, which would be considerably to our disadvantage, and also because it would prejudice the efforts which we are always making to persuade those countries who do subsidise that they ought either to reduce or to abolish their subsidies because we believe that they are a bad thing for world trade as a whole.

Another method of possible Government assistance which is often suggested, and which on one occasion before the war was applied here, is what is called the "scrap and build" policy. One objection to that is, again, that it would depend upon a substantial subsidy. Another objection at the present time is that the age of the British merchant fleet is not old enough to make any extensive policy of scrapping really economical. What the Government decided to do last year was to help the industry over this trough in demand for shipping by offering these loans at what are called Government rates of interest—that is to say, interest rates at which the Government themselves can borrow, which are less than those at which a private shipping company could raise the money.

This Bill, to which we are now asking your Lordships to give a Second Reading, is a short Bill which ex post facto authorises and covers what has been done under this loan scheme. The Bill gives power to lend money for any vessel which is more than 100 tons, except fishing vessels, because these are already in a position to receive assistance from either the White Fish Industry Board or the Herring Fishing Board. It limits the amount which was already allocated before the Bill was printed to £75 million, at such rate as the Treasury may direct. Subsection (1) of Clause 1 enables the Minister and the Treasury to appoint an advisory committee, which was appointed as soon as the credit scheme was announced last May, for the purpose of advising the Government which applicants for a loan under this scheme are creditworthy, and also whether they are likely to build the ship as quickly as possible, which is one of the purposes for which the scheme was introduced. What the Government wanted to do was to try to induce shipowners, by offering these loans at a favourable rate of interest, to execute orders which they were thinking of doing anyhow within the next year or two, a little sooner in order to tide over this trough in demand.

The whole of the money has now been allocated, and the shipping tonnage which will now be built and financed by money advanced under the scheme is about 900,000 gross tons. Of that total, bulk carriers account for 540,000 tons, tankers for 150,000 tons and cargo liners 120,000 tons. The new Cunarder, the new "Queen", will be a little over 58,000 tons, and the rest are made up by tugs, dredgers, coasters and other smaller craft.

As my noble friend Lord Chesham pointed out in the original statement, one reason which had prompted the Government to introduce this scheme was that so many of our shipbuilding industries—practically all of them—are in the development areas. The Government have not made any attempt at all, neither have they asked the advisory committee to make any attempts, to allocate the loans to applicants in any particular proportion between the development areas. Indeed, you could not do that, because the loans are given to the owners who are ordering the ships. After the agreement has been made with the owner, it is then left to him to decide in which shipyard or in what part of the country he will place his order after receiving competitive tenders.

Your Lordships may be interested to know how the distribution does work out in practice. It is more or less in proportion to the productive capacity of the different areas. Scotland gets 288,000 tons, the North of England 424,000 tons, Northern Ireland 94,000 tons; and there are still another 90,000 tons which have not yet been allocated—that is to say, application for loans has been accepted and guaranteed to the owners, but the owners have not yet decided in which yard they will place their order.

At the time when my noble friend Lord Chesham told your Lordships of the shipbuilding credit scheme, employment on construction of merchant ships had gone down from about 75,000 in 1958–59 to about 53,000, not entirely because of the falling-off in orders, but partly because of an increase in productivity. But it was going down, and the trough in orders seemed to be reaching a depth that was alarming. At the present time, the situation is very different. We estimate that by the spring of this year employment in the shipyards will be up to about 70,000, that 1½ million tons will be under construction and that the orders book will be very nearly 2½ million tons—I think the actual figure is 2.4 million tons—on shipping. Of course, that improvement has not by any means been all due, or even, I should say, to a major extent due, to the shipbuilding credit scheme. Indeed, if it were, it would not be at all in keeping with the purpose of the scheme, which was only to give a temporary stimulus to help the shipping industry to tide over this bad period.

Of the 1½ million tons of shipping which we think will be under construction by the end of March, between 600,000 and 700,000 tons only will be tonnage financed by the shipbuilding credit scheme. Presumably a good deal of that would have been under construction whether the scheme had been introduced or not. The improvement in the situation is basically due, not to the advantage of this favourable Government credit under the scheme, but to improved demand, to better freights which now prevail and, to some extent, to the improving efficiency—not so fast as one would like, but it is improving—of British yards; and noncredit orders in the last six months which are not financed by Government money have been coming in very much more rapidly than they were before.

Our purpose, first, in bringing in the scheme, and now in confirming it after the event by this Bill, was simply to tide shipowners over their difficult trough in demand so that they would have more time to prepare themselves for the very keen competition which they will have to face and which will persist for as far ahead as can be foreseen. If our shipbuilding industry, as I am quite confident it can do, is going to hold its own in the modern world, both management and labour will have to get rid of restrictive practices; they will have to promote more competition among their subcontractors, and they will have to reorganise and re-shape their yards for the purpose of placing them upon a more competitive basis. In our view, only the industry can decide how to do that: it is not a matter which the Government can decide for them. But we believe that the measures which are authorised in this Bill, and which have, in effect, already been taken, will be a valuable and considerable help in giving the industry more time in which to do these necessary things for the benefit of its own future. I beg to move.

Moved, That the Bill be now read 2a.—(The Earl of Dundee.)

4.21 p.m.


My Lords, I am very anxious to speak on this Bill but I have a rather bad, heavy cold. I may give your Lordships a little trouble in listening, but I will do my best. In the first place, may I say to the noble Earl that we welcome this Bill in principle, as we did the last one on export credits. The fact is that the Government have been over-late in dealing with the matter. It was pointed out in another place that nearly two years ago we were still pressing in Parliament for help to be given in the shipbuilding industry, and so far as I am concerned the present state of the shipbuilding industry—which I agree with the noble Earl has been stimulated in the last twelve months by the Government scheme—is not in the state in which it ought to be.

We had a tremendous task facing the nation after the First War, and by 1921 unemployment in the same areas in which it began to develop two years ago, was, indeed, terrific. Grave steps were taken. It was felt that there would be no future for the shipbuilding industry unless drastic steps were taken to close yards, and the late Sir James Lithgow was chosen to be the chairman of a company called National Shipbuilding Securities to go into the case for closing certain yards. He became, I think, rather a victim of trade union attack, although he was merely the chairman selected from within the shipbuilding industry to do this job, which he did not like doing. I went into it with some interest and detail later as I got to know him better.

The situation after the last war was dealt with in a very different manner from that adopted in the years 1918 to 1923. We had been so warned by the experience after the First War that the Coalition Government of the War Cabinet began to plan in 1944–45 for the arrangements to be made afterwards. A terrific task awaited the industry. It had been subjected to bombing and damage out of all proportion to any damage it suffered in the First War. It was able from time to time to bring in modern replacements for plant which had been destroyed; but above all, with the wisdom of men like Lord Leathers, and his advice as Minister of Transport, and Sir Amos Mann, it set up a joint advisory committee to see how the work outstanding in great volume could be tackled, and how the resources of the country could best be used to lead into a steady prosperity of the industry. I am bound to say, looking back, that there have been few periods in the history of British shipbuilding in which any such joint arrangement made has been so successful.

Up to the moment when Labour left office in 1951, we had easily been the leading contributor, in tonnage, to the shipbuilding programme of the world—a very valuable business for us. But then, almost within a year or two of the arrival of the Conservative Government, began the general trend to what I call the wasted years in regard to the industry. The signs of decay in the industry were apparent to anybody years ago, and yet so little has been done by the Government in these wasted years to put it back again upon a firm footing.

I welcome, of course, this credit scheme, which has been brought in, because it has given a spell and a time for some things to be done of major reconstruction. My honourable friend who spoke for the Opposition in the other place on the Second Reading of the Bill, paid, I noticed, a great tribute to that quite young man, Sir William Lithgow, for what he is attempting to do from the shipbuilding side; and I am glad to join in the praise given to him by my colleague.

But I am bound to say that, as I look at the industry to-day, there are certain very great handicaps. There is not enough progressive outlook in this industry being sharpened by the outlook in the rest of the shipbuilding world. The noble Earl said something about the increase in general capacity for shipbuilding, on which, of course, he is absolutely right. Shipbuilding capacity has been increasing, but how do we hold on to our proper share in this great mercantile nation of ours? By simply standing still, or by attuning our control of the industry to the needs of the times? Let us look at the facts of the situation and take the reference made by the noble Earl to who were the leading shipbuilders after the war—he mentioned West Germany, Sweden and Japan; and quite rightly so. Then he brought in a list of those who were on a different basis—Italy and France. But, of course, Sweden, Norway and Denmark, have made great advances in their modernising of their shipbuilding equipment and, therefore, expanding their output into the world market for shipbuilding. But we have dropped steadily behind.

In 1962, I think, we were 350,000 tons less in output than we had been the previous year, and the noble Earl has quite rightly acknowledged that the prospects at that time were, indeed, very dim; and so they were. I have not seen the final output figure yet; I do not know whether the noble Earl has had the figure for 1963. From what he has said to-night, we hope it will have been affected to some extent by the date of finishing certain of the tonnage covered by this Bill. It may have improved on last year's output, but certainly there is nothing like the output we ought to have from this country.

What stands in the way of our getting going properly? In the first place I think there should be a Government who take a real interest in the prosperity of such industries. When a Government like the one we have now rely upon private enterprise to do everything, and only come in at the last moment as an insurance, as if they were dealing with a fire concern, we cannot hope, in this modern world of ours, to see this industry keep pace as it goes along. I do not think this Government have been anything like as active as they should have been in looking after the state of industry and seeing that it is modernised and kept up to date.

How do I pick out the points in regard to that? I was very interested when I was, politically at any rate, in charge of the building and repair of all naval and merchant shipping for five years during the war, and I know a bit about it from practical experience. I visited practically the whole of the shipyards in this country. I found they were nothing like well equipped, and they were being constantly interfered with by bombing, but their output was stupendous. One of the reasons for that—let me be quite fair in allocating responsi- bilities—was that in war time we seemed to get away from the restrictive practices in the industry which seem to arise in peace time and which are so much more absent from the industry in other countries. And these restrictive practices are not only by the workers. I do not like them when they are done by workers, but they are done on the other side of the industry as well, very often. Restrictive practices cannot really operate to the benefit of a great industry like this or contribute properly to the general prosperity of the country.

I remember going up to the Wear and taking great interest in a firm—I do not suppose one ought to advertise names of firms, and I will not—which had brought up to date one of the finest marine diesel engines to be found. They did an export trade, but they were also very valuable to this country in time of war, and the work they turned out was really magnificent. What is the situation in diesel engines to-day? Will anybody get up and say we are leading the world, as we did then, in the production of diesel marine engines? I do not think so. I should like to hear from the noble Earl whether he contends that. Is Sweden ahead of us? Is the Swiss engineer ahead of us? Is the Dane ahead of us? This is something which requires consideration. I get my information nowadays only by glancing at the shipping papers now and again when I have time. But it is the Government's job, especially within the Ministry of Transport, to keep pace all the time with these things, and that is not being done.

Let us have a look at costs. One of the great handicaps in shipbuilding, according to the shipbuilders' case to me, was always the excessive comparative cost to the British builder of steel plates. What has happened about steel plates in this country? We had national ownership of the iron and steel industry for not much more than eighteen months. But the complaint of the shipbuilding industry is that the cost of steel plates to-day, in spite of the greatest subsidies to a part of the reconstituted capitalist steel industry, like the £50 million at best borrowing rates to Colville's and the like, is not competitive with the price at which they are being bought by our foreign shipbuiling competitors. What is the explanation of that? It would be jolly interesting to me to know.

I am going to leave my noble friend to deal with all the extraordinary circumstances which seem to us to arise in the different stages of the Cunard business. I must say that as we look to the general future of the industry we must have something much better than the attention at present given by the Government to the industry. I noticed, for example, that the Minister of Transport, in his speech on the original submission of the Bill in the other place, did not make any reference to future possible changes in the propulsion of merchant ships. My honourable friend who was then in charge of the debate for the Labour Party referred in some detail to the extraordinary experiments that were taking place in the world—it is now nearly a month ago that he made this statement—in the development of nuclear marine propulsion. And I dare say many noble Lords here to-day will already have seen a copy of the Economist of last week and read an extraordinary article with regard to this particular matter.

And yet, so far as I can find in the report in Hansard of the Commons debate, after all this detailed case had been made by my honourable friend in the other place, not a single word was said in reply to the case put for the urgent need for the production of an experimental ship as a matter of research and development vitally required for the maintenance on a modern basis of our competitive power in the world as a shipbuilding country.

My honourable friend in the other place pointed out that to his knowledge there were experiments very far advanced in both the United States and Russia. He pointed out, too, that there were very far advanced experiments being built up in West Germany and in Japan. As a matter of fact, the Economist this week claims that unless the Government act at once on the basis of scientific research they may be continuously behind. They state two things: it would take four years, at least, for us to produce for final trials and use an experimental nuclear-propelled marine ship, at a cost of between £5 million and £6½ million. That is the cost I put on it. Some people say £5 million; some people say more. And the Economist points out that the present experimental ship which is being produced in West Germany will be ready for full trials in 1967, whereas we could not possibly, even from now, have one ready before 1968. Take the case of Japan. Japan is well advanced with its inquiries into the production of such an experimental ship, and it is greatly helped by something they have devised in connection with their shipyards, that we have not done half enough about in this country. What they have done is to use their shipbuilding yards in the production of other engineering work as well as the construction of ships. That has been exceedingly valuable to them in carrying their overheads in relation to these other new matters, and they are engaged in, and developing rapidly, their experiments in the use of nuclear propulsion.

There are all kinds of problems yet to be settled. It is not easy to produce a nuclear-powered marine engine which is of the right weight to fit into a merchant ship. It is a big problem. A good deal of the absence of the use of special ballast in an ordinary merchant ship of the present type means that great tonnages of oil or other fuels have to be carried; while to have a nuclear and yet more powerful marine engine means that a comparatively light weight is needed. There you have a problem to face, with regard to how to get the proper stability and balance in a merchant ship.

Why are we not engaged in the same experiments? We are told in another place—this is now confirmed in the article in the Economist this week—that not only are Russia, the United States, Germany and Japan well ahead with these experiments, with 1967 fixed for performance by West Germany, but now Denmark, Sweden, Italy, France and, I believe, two other countries are engaged upon this same research and development. Here the Government have come to book on this to-day. We welcome their Bill, but they are late in the actual credit, and they have not deigned even to give an answer to the debate and the case put forward by my honourable friends in another place in regard to the need for having experimental and scientific development of this sort to keep us in line. The other thing that they have failed to tell us is what they have done constructively to see that our ship- building yards are sufficiently modern in their equipment and outlook.

Frankly, I am disappointed in the speech of the noble Earl, whom we all greatly like. I thought that he would have studied the debate in another place; and, although the Vice-Admiral there seemed to get a good heckling while making his replies, I should have thought that we might have been told to-day what is the real answer to the case that I am putting and which has already been put by my colleagues in another place on January 15. We ought to have had the answer given us to-day to bring that debate up to date. Therefore, I conclude—and I apologise for having taken so long—by saying that I welcome the Bill as it is. It certainly is not the final answer. You have got to do some more about it in the interim period, while you get the shipbuilding industry properly back on its feet. Meanwhile, we welcome the Bill, and we pray that the Government will get on with the job that they ought to be doing.

4.45 p.m.


My Lords, I rise to address your Lordships' House for the first time with some trepidation. I am strengthened, however, first by the knowledge of your traditional tolerance; secondly, because I am going to speak on a Bill which is not a Party issue; and, thirdly, because if I am informed correctly, it is almost impossible to transgress the Rules in debate. This Bill is a retrospective measure; we are giving authority for expenditure which has already been incurred. While being unusual, this, of course, has its great advantages over some Bills which are produced by any Government. We are able to test and see whether it has been beneficial and has succeeded in its aims. I think we have to agree that here this is the fact. This has been a most successful measure. I am not going to take extreme cases, but if we take the labour force, in June 1963 it was 53,000 and it has now built up to 60,000. That is a considerable achievement. This has given employment to people largely in the distressed areas. So far as tonnage is concerned, the tonnage under construction has risen from 1.8 million to 2.4 million dead weight tonnage.

The situation before credit facilities were available to British owners was not, in my submission, primarily due to the inefficiency of out-of-date shipyards, or to the intransigent and archaic labour relations which exist in British shipbuilding yards. I do not believe that to be true. Apart from extensive rationalisation, British shipyards have spent a sum of no less than £150 million on modernisation. We must give credit for that. Mention has been made of strikes, demarcation and restrictive practices. I am not going to deal with those subjects, because it is hardly the debate in which to do so, but I must point out that there are far fewer disputes in British shipyards—an old basic industry—than there are in the British car industry, which is relatively new. I get a little tired of the denigrating of this great industry, and I only hope that the people who do it will study the facts.

I do not propose to accept the contention that it is essential for this industry to be contracted. I think it still has a great future, and that we are apt to forget that for every 1,000 work-People employed in British shipyards, at least 1,400 are employed by sub-contractors in providing the necessary equipment for the vessels. So, in regard to the total manpower actually employed, one has almost to double the number employed in the shipyards. I thought that Ministers in another place were far too facile in talking in terms of drastic closure or retrenchment. The state of the industry and the difficulties that it has gone through are due entirely to the subsidies given by foreign Powers to shipbuilders and owners. The noble Earl gave many illustrations. Take Spain. Few people regard Spain as a shipbuilding country, but Spain gives heavy subsidies against British builders for British and Norwegian owners of shipping. In France, there is a 25 per cent. subsidy, yet French shipyards make a loss. Sweden, which had no disorganisation at all due to the war, has made available a special sum of £27 million in the form of credit to counteract Japanese competition.

Of course, Japan is the most ominous of the competitors. The Japanese Government have set the industry a deadweight target of 1½ million tons for export alone. The average wage rate in Japanese shipyards is £40 a month. At present they can quote at 22½ per cent. lower than world prices. This is not the end of the story. Continental shipbuilders are constructing shipyards in Eire, Mexico and Greece, not only in competition with their own shipping companies but of course with British shipyards too. The Governments also provide subsidies. Therefore, it is essential that we should have a measure like this to give credit to British shipowners. It has certainly got the industry over a rather difficult period.

I have certain criticisms of this measure, and there are certain points on which I should like to have an answer. The first question I ask is why this scheme should be brought in at the end of May, 1964. That seems to me discriminatory against British shipowners, because foreign owners can order ships from British shipyards and get the benefit of the credit facilities. I fail to see why British shipowners should be placed at a disadvantage, and I should like an answer on this point.

I come now to the question of the Cunarder—a very controversial question, I regret to say, in a maiden speech, but it has been referred to by the noble Earl. I do not know whether I should call it the Q.3 or the Q.4, but for the purposes of this debate I shall call it the Q.4. Why was it found necessary to include the £17.8 million, the cost of the new Cunarder, in this sum of £75 million? This was not the original idea of the Government at all. If so, why was legislation produced in the other place? This is an afterthought. What is the real reason behind it? We have got to have a new Cunarder because British prestige is at stake, and this ought to have been taken as a separate item of expenditure. Let us look at it from the point of view of giving employment in shipyards—if we are to listen to some people, this "shot in the arm" to this derelict industry. The cost of the new Cunarder, £17.8 million, could have built five bulk carriers or five super tankers—work which could have been spread over the many yards in Britain. Instead of that, the Cunarder, whoever gets the contract for it (and I do not want to name them), is bound to be built in one large yard. I consider that this is a narrow, mean and not very far-sighted policy.

The noble Earl mentioned in general terms how this money has been distributed. But I should like to ask him to give us an assurance that one British shipowner has not had a 25 per cent. allocation of this global sum. It is a very difficult and tricky business for the Minister of Transport or the Treasury, whoever allocates the money, to do the job fairly. Therefore, we ought to have a little more explanation as to how it is being distributed.

I now come to the question of steel, which was mentioned by my noble friend Lord Alexander of Hillsborough. It is axiomatic to say that steel is the prime raw material of British shipbuilding. Some of us want to know what is taking place in the steel industry. It is said that a reduction of £7 to £8 per ton on steel on a 60,000-ton tanker will reduce the tender price by something like £100,000. Therefore, this is a considerable item indeed. What we find happening is that British steel manufacturers are selling at lower prices to our competitors abroad. I fail to see why we should sell more cheaply to our competitors abroad rather than provide cheap steel plate for the British shipbuilding industry. But that is not the whole story. The Iron and Steel Community will not sell steel to British shipyards at lower than world prices, so it appears that this matter must be looked into. The Parliamentary Secretary in the other place stated that this whole matter was to go before the Restrictive Practices Court. It would be interesting to hear from the noble Earl just why he thinks that is necessary. There is no doubt that British shipbuilders have been placed at a great disadvantage in having to pay such high prices for steel.

I was amazed by the categorical statement by the Minister in the other place that this was to be a once-and-for-all stimulus to British shipbuilders. This point was mentioned by my noble Leader, and I should like to develop it. The £75 million credit provides capital for British shipowners to place orders for British ships to be built in British yards. The fundamental difficulty which affects the basic industries of this country at the present time is the shortage of fluid capital. To take a homely example, if one were fortunate enough to be left £100,000 and went to one's stockbroker to ask for advice as to where it should be invested, would he mention one basic British industry in which to place that £100,000? The answer is, No. It would be invested in the distributive industries, in speculative building, and probably a few thousand in heavy chemicals. The dilemma with which any Government, whether it be Labour or Tory, is going to be faced is that the basic industries of this country must have capital. They cannot get it all from ploughing back profits, for profit margins are very tight at the moment. There are going to be more and more measures of this sort, in regard to not only the shipbuilding industry but many other basic industries.

There is another argument in support of this point. Whereas large firms could face up to a slump of six or eight years in the bad periods of the 'thirties, today they would be in bankruptcy if they had to face up to a slump of two years. This is going to mean careful consideration on the part of the economists of the Treasury and of both political Parties in relation to the financing of British industry, particularly the basic industries. I am not now going to deal with the question of the nuclear ship, except to endorse what my noble friend Lord Alexander of Hillsborough said—that the sooner we have one the better. It is monstrous that a great maritime nation such as Great Britain should lag behind in this matter, and we should like to have an explanation from the Minister. We might have an indication that a measure is to be brought forward providing the capital for a nuclear ship. If I might digress, I would throw out the suggestion that it would be a good idea to have a nuclear reactor placed in an Admiralty Fleet auxiliary, with the Fleet auxiliary manned in the usual manner.

I do not want to detain the House too long, but I should like to say that I have thought for a long time that the Ministry of Transport is one of those Departments which are far too big. How one man can keep control of roads, railways, docks, waterways, power stations—he has some power stations—and London passenger transport, and look after shipping and shipbuilding, I just do not know. The Department will have to be split up. The argument that was advanced in the other place, that this cannot be done without giving every Minister a seat in the Cabinet, seemed to me—if I may say so, in a maiden speech—rather childish. My Lords, I welcome this Bill. Something is better than nothing. The British are a great nation. They can build ships and sail them; and long may they continue to do so.

5.1 p.m.


My Lords, it is a very agreeable privilege for me to be able to congratulate the noble Lord upon his most successful maiden speech in this House. He and I were colleagues for a number of years in another place, and it is a great pleasure to me to resume acquaintance with him here. He was a Minister—he was Assistant Postmaster General—and later, after the fall of the Socialist Government, continued his most useful and public-spirited activities on the Estimates Committee, serving as chairman of one of the subcommittees of that extremely important probing Committee. When he referred to this Bill as dealing with the expenditure of money which had already been spent without statutory authorisation, I thought that his old instincts as a guardian of the public purse were going to make him criticise it. However, on the contrary, he said that this had the advantage that we knew that the money had been well spent before the statutory authorisation was required for it. I cannot think that that sentiment would have been one that he would have expressed when he was a member of the Estimates Committee. As a member of the A.E.U., he is a most welcome recruit to the much valued and respected body of trade unionists in your Lordships' House. I am sure your Lordships all agree with me when I say that we hope frequently to hear from him, and we are confident that he will speak with the same detailed knowledge and wide grasp that he has shown in his maiden speech this afternoon.

My complaint against this Bill is that it is only a palliative, and not conditional on any improvement in the causes of the decline of the shipbuilding industry. It has been in decline for a long time, largely through its own fault. In 1946 more than half—53 per cent.—of the world tonnage launched was launched in this country. By 1961 the proportion had fallen to 15 per cent.—that is, a decline in 15 years from 53 per cent. to 15 per cent. In 1962, despite the fact that the tonnage under construction in the world increased that year by 2½ million tons, Britain's share had fallen again, this time to 13 per cent. Between 1957 and 1963 it had lost one-third of its labour force, and we, who at one time were the greatest exporters of ships to the world, are now importing on average 300,000 tons annually from foreign yards.

My Lords, why has this industry declined? There is no secret about that: its costs are too high; ships take too long to construct, and strikes frequently make delivery dates quite uncertain. Usually when the Government ask Parliament to give some special assistance to a selected and favoured industry, Parliament is given an assurance that something is going to be done to put matters right, to make certain that if this special assistance is given the industry will be able, after the lapse of a period of time, to stand on its own feet. There is no such guarantee on this occasion. Indeed, the Minister speaking in another place refused to accept any proper responsibility for seeing that this assistance is conditional upon an improvement in the industry. He said, speaking on 15th January [OFFICIAL REPORT, Commons, Vol. 687 (No. 31) cols. 239–240]: I come next to the labour situation. This is a subject with which employers and unions have been wrestling for over two years in a working party under a Ministry of Labour chairman. My Lords, that was a reference to the working party set up in December, 1961, when my noble friend who is now Lord Blakenham was Minister of Labour. There has been no report, and the Minister went on to say: I make no secret of the fact that progress has been disappointing and distressingly slow. I hope that with the recent settlement on pay and hours it will be possible for both sides to get somewhere. I am sure that it is as much in the interests of the men themselves as of the management that this should happen. Indeed, it must happen if this industry is to be healthy and vigorous in the years to come. A little later he went on to say: But all this is for the industry itself to tackle. It is not for the Government to tell the industry how to run its business. Much the same words fell from my noble friend the Minister of State at the Foreign Office this afternoon. But is it not justifiable, when special assistance is being given, to ask that something should be done about it? We have, I think rightly, the Government seeking to bring to an end resale price maintenance as it is against the national advantage, and I would say that when they are lending £75 million largely in order to assist this industry, the Government are entitled to ask of the industry that it should set its house in order.

My Lords, the cause of the depression, as the noble Lord, Lord Hobson, has said is foreign competition. In tankers and bulk carriers Sweden is undercutting us by 10 per cent. and Japan by 20 per cent. Surely this is no time for an increase in wages or for the phased introduction of the 40-hour week. Her Majesty's Government have reported the settlement of December 16 to the National Incomes Commission, and have presented this large volume of evidence showing what the effect of the settlement is likely to be. In a leading article, called "Danger Signals" published on December 18, The Times has also drawn attention to the very serious consequences that may result from this settlement.

The Government say, on the authority of the National Economic Development Council, that with a 4 per cent. increase in production it is possible to increase money incomes by from 3 to 3½ per cent. without inflation. I suppose this industry would claim that this settlement is just within the so-called "guiding light". It is estimated that the effect of the increased wages in this settlement, and the reduction of hours from 42 to 40 per week, in two stages, will ultimately increase hourly wages by the equivalent of 9.6 per cent. As this is spread over three years, I suppose it is argued that this is only 3.2 per cent. But, my Lords, that, of course, is conditional upon there being no further wage demands during those three years: it is conditional upon there not being a successful attempt to raise wages by local settlements above the national level; and there is, of course, as The Times has said, every reason to expect that there will be a further wage demand next year, and another the year after. Not only does this settlement not contain any undertaking that during the period of the reduction in hours there shall not be a further demand for an increase in wages, but nothing is said about demarcation disputes, and nothing about restrictive practices.

My Lords, this permitted increase of 3 to 3½ per cent. is a general average over the economy as a whole, and an average implies that some increases may be more but that others must be less. In the case of an industry which is facing competition from abroad, with its own prices, as I have indicated, too high—10 per cent., too high, in the case of Sweden, and 20 per cent. in the case of Japan—clearly this is not an industry where it is safe or desirable for there to be an increase in wages of this kind. The effect of the promise of the phased introduction of the 40-hour week has already caused the closely allied engineering industry to demand the introduction of a 40-hour week; and, as The Times has said, if it were once admitted in the engineering industry as a whole it would be quite impossible to prevent it from spreading through the economy as a whole. While there may well be some progressive, vigorous and efficient industries where the additional cost of the 40-hour week could be absorbed, it is manifest that that cannot be the case at the present time in the shipbuilding industry unless there is to be such a change in outlook and improvement in relations as will enable restrictive practices to be brought to an end.

All these points were clearly foreseen by the Government, and have been set out in the memorandum which they have presented to "Nicky"; and when this is so clearly seen by the Government, is it really enough for them to lecture and to present memoranda upon the subject? If £75 million is being made available as a special effort to assist the shipbuilding industry, surely this is a case where the Government could insist upon something being done. This Bill does nothing to ensure the necessary reorganisation of the industry and the improvement in its labour relations. For example, there are no proposals to bring about keener competition, as I think the noble Lord, Lord Hobson, said, among sub-contractors in order to make certain that prices are genuinely competitive; and no proposals, such as I should have liked to see, for buying steel in the cheapest market. If there is this complaint against British prices being higher than foreign prices, is there any reason why British shipbuilders should not seek to buy, as their competitors are doing, from foreign steel producers? My Lords, the Prime Minister has said that the objective of this Government is to try to ensure the modernisation of this country as a whole. Clearly this Bill, which is giving a temporary, unconditional assistance to the shipbuilding industry, is doing nothing to bring about the modernisation of the British shipbuilding industry.

5.16 p.m.


My Lords, I should first like to add my congratulations, and those of the House as a whole, to the noble Lord, Lord Hobson, on a most successful and enjoyable maiden speech. I liked the whole of it, if I may say so, and I particularly liked the carefree gaiety with which the noble Lord announced that he had been told that there were no Rules of Order in your Lordships' House, and that it did not really matter what he said. Our Rules of Order are sometimes, perhaps, made up as we go along, and with regard to what is said in another place I never trust myself to give authoritative pronouncements on these matters, but I think we are supposed not to refer to what has been said in another place during the same Session unless we have some reason for quoting the exact words of some Minister in another place. I greatly enjoyed the noble Lord's references to the debate in another place on January 15, which was also referred to by the noble Earl the Leader of the Opposition. I enjoyed, and the House enjoyed, what the noble Lord, Lord Hobson, said about it, but I do not think that, if I pursued the matter, your Lordships would enjoy my remarks quite so much as you did his. I shall therefore try myself to keep in order about that.

I was also gratified by the patriotic tone which imbued most of what the noble Lord, Lord Hobson, said. It is true that we are in many respects holding our own, and doing much better than countries like France or Spain, in spite of certain advantages which they give to their shipbuilding; and I was glad that he mentioned the £150 million which has been spent on modernisation, to very good effect. In my remarks I said something about the need for ending restrictive practices and for adapting yards on more competitive bases, but I was glad to hear this figure, of the actual amount which has been spent on modernisation, mentioned by the noble Lord.

The noble Lord said that, although speaking for the first time, he would like to say a few things which could be regarded as controversial. I do not think he was unduly controversial, but I ought to reply to the specific points to which he did ask me to reply, about allocation, about the new Cunarder and about the permanence of the scheme. Of course, one can never give a very definite reply on a question like permanence, because no Government and no Parliament can ever bind its successor, and we must always he free to act in the national interest according to the circumstances of the time. I think that one reason why we never contemplated making this shipbuilding credit scheme anything more than temporary was that we wanted to give the industry a breathing space during which it could give more attention to its own long-term plans which it has got to make for itself in the long run. If we had prolonged this particular scheme, I think it might have reduced the incentive to compete for exports, because this scheme is only for home ships or orders by home owners.

It is for the industry to adapt itself to the needs of the present. It may certainly be that in the long term there will be a reduction in the number employed. Some yards may have to go out of business; but the point is that this scheme has removed the industry's need to preoccupy itself with immediate survival. It has enabled it to give more attention to long-term planning. But we have all the considerations which the noble Lord mentioned, about indirect assistance which other countries give to their shipbuilding, very much in mind.

Then the noble Lord asked about allocation. I cannot, of course, disclose the firms to whom loans have been committed under this scheme; but the whole point of setting up the advisory committee under Lord Piercy (for whose services the Government are grateful), provided for at the beginning of Clause 1, was to take the immediate responsibility out of the purview of the Minister of Transport and to appoint a specialist committee of people in a position to examine every claim on its merits. We did not propose that there should be any kind of distribution allocation by trying to divide up the money lent between different owners or areas, but simply that every application for a loan should be examined strictly on its own merits including the credit-worthiness of the applicant. There are some applications which have not been proceeded with; but the numbers finally refused are, I understand, very few.


My Lords, could the noble Earl say whether the loans are to be secured? If so, how?


Yes, my Lords, they are secured. The loans, as the House knows, are up to 80 per cent. of the value of the ship, and the security is the ship itself.


Not a debenture?


No, my Lords; the security for payment is the ship on which the loan has been spent.

The noble Lord, Lord Hobson, asked about the new Cunarder, and he went into some recent history. I should just like to remind your Lordships that the Government were prepared to carry out, and offered to carry out, their obligations under the 1961 Act which enabled this large sum of money to be spent on what would have been the Q3. It was not the Government who retracted from that undertaking; it was the Cunard company who decided after the offer had been made, after they were first willing to accept it, that, after all, it was not going to be worth their while. It was they, not we, who withdrew.

I have already mentioned the next application in July which we did not accept. But I thought the noble Lord sounded as if he were under the impression that this £17.6 million which we were advancing had been money which might otherwise have been lent to a number of other, perhaps more needy, shipowners or builders. That is not so. The amount was increased in July to £60 million, and at that time the Cunard application for a loan was turned down. Later on, the Cunard application was revised on the new terms which were no longer unacceptable to the Government and which should enable the loan to be made. An entirely new amount was authorised, and the maximum raised to £75 million which would not otherwise have happened. It was not at the expense of anybody else. It was done in order to enable this new loan to be given for what the noble Lord correctly described, I think, as the Q4. The Q3 will never really exist.

I should like to thank the noble Earl the Leader of the Opposition for gallantly contributing his part in this debate, in spite of the very severe physical disability which he suffered, and which all of us are only too apt to suffer St this time of the year. I hope very much that he will soon be completely well again. I was glad to hear what the noble Earl said about research. I cannot reply at very great length, and I do not think he would want me to do so; but I would mention that the Ministry of Transport are extremely conscious of the potential advantages which there may be in the nuclear propulsion of ships; and various systems are being examined. The Minister does realise the need for urgency; but it is essential, whatever type of reactor is adopted, that it should be one which offers the prospect of being at least as economical as a conventional type of engine. It is not yet clear beyond doubt what type, if any, could be so developed; but we are urgently studying this matter.

There is not much I can say about diesel engines, because it is the case, as the noble Earl said, that builders have fallen behind in the production of diesels. The need to meet the difficult international competitive conditions does apply to all sections of the industry—engineers as well as shipyards. A great many have spent a great deal on modernisation; and it is the object of the scheme to provide time. The Department of Scientific and Industrial Research has just announced a considerably increased grant to the British Ship Research Association for the next five years; and I should like to mention to the noble Earl, also, that provided the shipbuilding industry raises a minimum grant-earning income of £600,000 a year, the new terms will provide grant-aid of 50 per cent. of industrial income up to £1 million. In addition, there will be a grant of £1 for every £1 contributed by shipowners, subject to a maximum grant of £200,000 a year. That could represent the biggest grant yet made to any industrial research association.

I always listen with a great deal of interest to the noble Earl's comparison between conditions immediately after the war and conditions now, because there were so many theatres of administration in which the noble Earl played a distinctive part both during and after the war; and this was one of them. I would say—and I think probably most noble Lords would agree—that the most essential difference between post-war conditions and present conditions is this: after the war a great deal of the world's shipping had been sunk; very little new replacements had come along; and there was an enormous demand for shipping all over the world. It was too easy; almost everybody was crying out for ships, and however expensive and uncompetitive your production of a ship was, for a very long time you were fairly well assured of a market. Now it is the other way round. If we want to meet—and as a great shipbuilding nation we must do so—keen and permanent competition, we have got to think very much more of efficiency, and not nearly so much simply of bulk production.

I know that it is a matter of opinion, but our view is that State control cannot do very much to improve the efficiency of the shipyards. There are other circumstances, as in the emergency of war or in immediate post-war conditions, when a larger measure of Government control is right and justified; but we do not feel that in the present circumstances Government interference or Government management or Government control can be much help to the shipyards in their paramount need, which is to reduce costs and increase competitiveness. I was glad to hear the noble Earl pay tribute to those who have helped in making our modern shipyards more competitive, particularly to one shipowner, whose constituency I used to represent in another place.

My noble friend Lord Molson kindly gave me notice that he intended to raise his point about wages, which I think, on the face of it, is a good point. It may have a particular application to the shipbuilding and engineering industries, but I do not think that we could have made any conditions of the kind he suggests in this shipbuilding credit scheme. The whole point is that we thought it would be a good thing if we gave a quick stimulus to the industry, and the need in the middle of last year was urgent. If we had tried to impose conditions, such as that a loan would be given only if there were no increase of wages that the Government thought excessive, it would have been doubtful whether any shipowner would have been prepared to take advantage of the scheme. The buyer needs to know where he stands. He does not actually get the loan until after the ship is delivered and the owner, through the Ministry of Transport, has entered a commitment to place a contract for a new ship, with the reasonable assurance that the commitment will be honoured when the ship is delivered to him. It would be very difficult if he were to be told that he would get the loan only if certain things, such as an absence of wage increases, had or had not happened by then, because individually he might have very little control over any wage agreement which is concluded.

The pay settlement which has recently been reached in shipbuilding has been referred by the Government, as my noble friend mentioned, together with the settlement in engineering, which was reached about the same time, to the National Incomes Commission for examination, and I think that it would be best for us to see what they have to say about it before venturing further comment, because I think it is likely to prove a little more complicated than it may appear to be at first sight, and we do not want to anticipate any opinion that they give. I am sorry not to be able to give a more satisfactory reply to my noble friend, because I think that, in principle, the point is a very good one. But I do not think that we could have done anything to meet it, either in this Bill or in the previous action which we took about the credit scheme, which this Bill somewhat posthumously legalises.

On Question, Bill read 2a: Committee negatived.