SHIPBUILDING INDUSTRY BILL (Hansard, 20 June 1967)

HL Deb 20 June 1967 vol 283 cc1317-58 1317

§ 5.10 p.m.

§ Order of the Day for the House to be put into Committee read.

§ Moved, That the House do now resolve itself into Committee.—(Lord Shackleton.)

§ On Question, Motion agreed to.

§ House in Committee accordingly.

§ [The BARONESS WOOTTON OF ABINGER in the Chair.]

§ Clauses 1 and 2 agreed to.

§ Clause 3:

§ Grants to assist reorganisation of resources

§ 3.—(1) If it appears to the Board that a person carrying on—

(a) a shipbuilding undertaking in relation to which, a grouping scheme has taken effect at any time after 24th March 1966; or
(b) a main engine manufacturing undertaking,

is putting, or has put, into effect a reorganisation of the resources used by him for the purpose of carrying on that undertaking and that the reorganisation is likely to lead, or has led, to increased efficiency in the use of those resources for that purpose, the Board may, subject to the provisions of this section, make grants to that person—

§ LORD DRUMALBYN moved, in subsection (1), after "purpose", to insert: and that there are good prospects of the undertaking ultimately being able to be carried on successfully without further assistance of a kind provided under this Act".

1318

§ The noble Lord said: The noble Lord, Lord Shackleton, will recognise where this Amendment is drawn from—it comes from the Distribution of Industry Act. In that Act it was thought fit not to give financial asistance to firms unless they showed a prospect of being able ultimately to carry on successfully without further assistance. In this case, it would seem sensible to make it a condition of giving a grant or loan of public money that it should appear to the Shipbuilding Industry Board not only that a reorganisation is taking place, or has taken place, which is likely to lead to increased efficiency, but also that the efficiency will be increased sufficiently to ensure that in the long run the group will be able to carry on without State assistance. Forming groups is not in itself a guarantee of competitiveness, or even of survival, and since public money is involved this would seem to be a quite desirable Amendment. I beg to move.

§ Amendment moved— Page 2, line 27, after ("purpose") insert the said words.—(Lord Drumalbyn.)

§ THE MINISTER WITHOUT PORTFOLIO (LORD SHACKLETON)
I am sure that any Amendment coming from the noble Lord, Lord Drumalbyn, has a respectable ancestry, and I acknowledge this one. The purpose of the Amendment is, of course, an entirely laudable one, that it would be no use if the result of carrying out this policy were not to lead to increased efficiency, and indeed to the continued viability of the firm, without continuing Government assistance. I should like to assure the noble Lord—and I hope that he will accept this for the reasons that I will give—that what he seeks to achieve is already provided for in the Bill. Under Clause 3(1) in order to qualify for a grant a shipbuilding group or an engine building firm has to be putting into effect or has put into effect a reorganisation of their resources which is likely to lead or has led to increased efficiency in their use. It is the intention that assistance given under this Bill should result in shipbuilding and engine building firms which will be able to stand on their own feet in three to four years' time.
Under Clause 1—the noble Lord might like to look at subsections (1) and (3) of that clause—the Shipbuilding Industry Board is required to exercise its 1319 powers, which includes powers for making grants and loans For the purpose of promoting the ability of the shipbuilding industry…to compete in world markets… A shipbuilding or engine building firm which is not likely to be able to stand on its own feet in the timescale we envisage will clearly not promote the competitive ability of the industry, and it would be no good wasting scarce money and resources upon it. It is for the firm to convince the Shipbuilding Industry Board not merely that it would like loans, grants or guarantees, or that with such assistance it would become somewhat more efficient than at present, but that with this support it would be able to get back on its own feet in three to four years' time. Unless the firm is able to do so, the Board could not, consistent with their duty under Clause 1, give the assistance which is requested.
While, therefore, there is no difference between the noble Lord and myself on this matter, I can assure him that his point is already catered for in the Bill—not, I admit, in such precise terms as he suggests, but I am sure that he would be the first to agree that we ought not to put into a Bill words which are not really necessary. Having gone into this very thoroughly with my advisers, I am satisfied that the purposes of the noble Lord are met.

§ LORD DRUMALBYN
I am grateful to the noble Lord. I agree that our intentions are exactly the same on this issue. Perhaps when we began to discuss this matter I ought to have said that it would be convenient to discuss Amendment No. 3 at the same time. This Amendment deals with grants and Amendment No. 3 with loans. I would merely make the point that, so far as loans are concerned, Clause 4(4) says: Any number of loans may be made…to the same person. This perhaps makes it a little more difficult to see what will be required ultimately, but in view of what the noble Lord has said I think your Lordships may rest assured that this will be the object of the Shipbuilding Industry Board, and I beg leave to withdraw the Amendment.

§ Amendment, by leave, withdrawn.

§ Clause 3 agreed to.

1320

§ Clause 4:

§ Loans

§ 4.—

§ (2) Subject to the provisions of this section, the Board may make to any person carrying on a shipbuilding undertaking—

§ (b) whether or not such a scheme has taken effect in relation to that undertaking, a loan for—

(i) the provision or improvement of buildings, structures, works, plant or equipment used or to be used by him for the purpose of carrying on that undertaking;
(ii) the re-training of workers for employment by him for that purpose.

§ (3) Subject to the provisions of this section, the Board may make to any person carrying on a main engine manufacturing undertaking a loan for the purposes of that undertaking generally or for such purposes of that undertaking as the Board thinks fit—

(a) if a grouping scheme has taken effect in relation to that undertaking at any time after 24th March, 1966; or

§ (4) Any number of loans may be made under this section to the same person.

§ 5.16 p.m.

§ LORD DRUMALBYN moved, in subsection (2)(b)(ii), to leave out from "employment" to the end of the subparagraph, and to insert "in the shipbuilding industry". The noble Lord said: The effect of this Amendment would be that loans could be given for the retraining of workers not only as is stated in the Bill, for employment by the undertaking for the purpose of the undertaking, but also the re-training of workers for employment in the shipbuilding industry. Your Lordships will be aware that the hope is that there will be two groups formed on the Clyde and two in the North-East of England. There may, of course, be other companies which will get together, and there may also be companies which will remain individual companies.

§ The re-training of workers will be necessary in many cases, and it may well be convenient for the re-training to be done by one group of companies, or by one company, on behalf of other companies. In that case, the appropriate company to get the loan would be the company doing the re-training. Under this Bill it would not be possible for a company whose workers were being retrained by another company or a group 1321 of companies to get a loan for that purpose at all. It seemed to me that as drafted the clause is a little too restrictive, and the purpose of the Amendment is to make it a little wider. May I ask the noble Lord whether the word "workers" is entirely clear? It is not defined in the interpretation clause. In the notice in The Times today about the Confederation of Shipbuilding Unions, the word "workers" is given a much wider significance than is, I think, often given, and I should be grateful if the noble Lord would tell me exactly what is the significance of the words in the context of the Bill. I beg to move.

§ Amendment moved— Page 3, line 14, leave out from ("employment") to end of line 15 and insert ("in the shipbuilding industry.").—(Lord Drumalbyn.)

§ LORD SHACKLETON
I was interested in the noble Lord's arguments, one of which I must admit I had not fully appreciated. I should like to give the case as I see it, but it may well be that I should like to take further advice. Basically, this clause and the particular subsection enables the Shipbuilding Industry Board to make loans to shipbuilding firms, whether grouped or not, for the retraining of workers to be employed in the firm concerned in its shipbuilding industry. The present Amendment will have the effect of enabling the S.I.B. to provide loans to shipbuilding firms for retraining workers in the industry at large whether or not they are employed by that firm and whether or not the new skills which they will acquire are required by that firm in carrying on its business.
Paragraph 551(c) of the Geddes Report, on which this provision is based, recommends the provision of loans to groups to provide funds for retraining of workers for the purpose and benefit of grouping if the cost thereof could not be covered by existing arrangements under the Industrial Training Act. Paragraph 588 also recommends the provision of funds to non-grouped firms for the purpose of retraining. In recommending that finance might be provided for retraining purposes, it is clear that the Committee did not envisage that loans should be made available for general retraining schemes in the industry—for example, as a result of technological change to retrain workers in new techniques or crafts. Their recommendation covered only that retraining 1322 which is made necesssary by an internal reorganisation of resources whether in a grouped or a non-grouped firm. In order therefore that the benefits of such retraining should be secured to the firm to which the loan is being made it is clearly necessary that the retrained worker should be employed by the firm for the purpose of carrying on its business.
The noble Lord made two points which I should like to look at further. He is concerned that loans may not be available for workers who need to be retrained in a firm which would not be entitled to grants. I do not think that he is correct in this, but knowing the thoroughness with which he studies legislation I hesitate to say that I am sure he is not correct. The retraining of workers in the shipbuilding industry to meet developments in the industry generally is covered by the Industrial Training Act 1964. The limited funds available under this Bill are intended to assist the reorganisation of the industry and should not be used for matters covered by other legislation.
I think this goes some way to meet the noble Lord's point. I agree that there may be difficult areas of judgment, and that technological change may occasionally be associated with reorganisation but as the Bill stands we believe that it is wide enough to give the necessary discretion to the Shipbuilding Industry Board without exposing them to requests for help which really ought to come under the Industrial Training Act. I am not sure that the noble Lord did not have a hand in passing the Industrial Training Act into law, and I should like to say to him that that is an Act which is obviously bearing good fruit. I will certainly consider this again, and also look at his point on the definition of "workers". I assume that the word is defined in other Acts. I must confess that for the life of me I cannot recall what it is. If I may deal with this point, if necessary, at a later stage, I shall be glad to do so.

§ LORD DRUMALBYN
I am grateful to the noble Lord. Perhaps I read the words rather more restrictively than they are intended to be read. I am still not absolutely certain that the loans would be available for the retraining of workers where the retraining was being done on behalf of another shipbuilding firm. I am glad that the noble Lord has said 1323 that he will look at this, and I do not propose to pursue it further now. I beg leave to withdraw the Amendment.

§ Amendment, by leave, withdrawn.

§ LORD DRUMALBYN moved to add to subsection (5): which, however, shall not be withheld without assigning a reason, which the Board shall forthwith communicate to the applicant. The noble Lord said: The point of this Amendment is that it is clearly desirable that the applicant for a loan should know why a loan negotiated between him and the Board is refused by the Minister, otherwise he does not know what to do to rephase the loan in order to make it acceptable. I assume that in the ordinary way loans will be negotiated between the Board and the applicant, and that the result will be passed on for the approval of the Minister.

§ Under the Distribution of Industry Act the President of the Board of Trade can approve proposals for financial aid to an applicant in whole or in part, but cannot give aid in excess of such proposals or where no such proposals are made. Here the only power the Minister has is to approve or refuse a loan. If an application is refused after it has been agreed between the Board and the applicant, without any reason being given, the applicant is bound to feel unfairly treated and aggrieved. It is difficult to see what course is open to him in such a case other than to approach his Member of Parliament and have the case taken to the Ombudsman. It would save a lot of trouble for the Department if a reason were given for a refusal of a loan.

§ It was stated on behalf of the Government in another place that in most cases the Minister would give a reason, but that it was possible to conceive of circumstances in which it would be embarrassing to do so. No indication was given of the sort of circumstances the Government had in mind. If it is possible to conceive of them, then the Government should be able to say what are the circumstances they conceive. Otherwise the conception is somewhat imaginary and, one may say, rather barren. There is no harm at all in the Government saying that they have refused a loan because they did not think that even with a loan the company would be viable in the long run, even if the Board thought so. Nor is 1324 there any reason why the Government should not refuse a loan in terms that they did not consider the status or stability of a company was sufficient to warrant a loan. I think it is right to be as frank as possible, and I think that the Government would be wise to accept this Amendment. I beg to move.

§ Amendment moved— Page 3, line 38, at end insert ("which, however, shall not be withheld without assigning a reason, which the Board shall forthwith communicate to the applicant.").—(Lord Drumalbyn.)

§ LORD SHACKLETON
I hope that the noble Lord will not think that, because I express sympathy with his purpose but am not so helpful in my reaction, this sympathy is merely designed to calm his fears. In any case, I know that it is difficult to deceive the noble Lord by false assurances. I do not think there is any disagreement between us. The Minister hopes that he will seldom, if ever, need to withhold his approval where the Shipbuilding Industry Board wishes to make a loan under this clause. If he does withhold approval it will be in the normal exercise of his administrative discretion under the Bill. It may not be for one or more specific reasons, but on the balancing of considerations. It is argued that some of the considerations may be confidential for the time being; for example, in respect of information which might affect other firms or, indeed, other industries, or in respect of new legislation which might be under consideration. It might, therefore, be undesirable for the Minister to be under a statutory duty to give his reasons for withholding approval.
I know that it is all too easy for the Executive to protect itself in this way, but there is a further sanction, of which the noble Lord is well aware, if I understand this correctly, in the Parliamentary Commissioner Bill. It will be possible in such circumstances to ask the Parliamentary Commissioner to investigate, and for him to establish whether the discretion had been properly used. It is my understanding—but I should like this to be subject to correction—that in certain circumstances the refusal to give this permission could itself amount to maladministration. It is early days in the administration of the Parliamentary Commissioner, but it 1325 is in this sort of area that he could be effective. As the noble Lord said, the Minister has given an undertaking that he will normally grant this. There is the further sanction, in that Clause 8(2)(b)(iii) requires the Board in its Annual Report to state cases where the Minister has withheld this approval for grants and loans. We think that this goes some way to meeting the point of view of the Opposition.
I am still rather sympathetic towards the noble Lord, because I remember some of the discussions on the Steel Bill, where the Government were able to be more forthcoming. But this is rather an unusual, and experimental Bill. It is possible to conceive of circumstances where it might be difficult, and I have given some examples, although it is a question for judgment whether the examples I have given are wholly convincing. But I will give an undertaking that I shall talk further to my right honourable friend on this, and if for some reason it is not possible to amend the Bill in the way the noble Lord wishes, I will see whether it is possible to give an even stronger understanding in regard to this matter. As we know, the Minister is open to Parliamentary check, as well as that of the Parliamentary Commissioner. I think it is a finely balanced argument. I will certainly undertake to consider this again, although I do not wish to mislead the noble Lord into thinking that I can make a promise.

§ LORD DRUMALBYN
I am obliged to the noble Lord for his undertaking to give further consideration to the matter. When he is doing so, will he take into account the fact that the reference in Clause 8(2)(b)(iii), as I understand it, is not a great deal of help to somebody who has had an application refused. It may be quite a long time—a year or more—after the refusal, and I should have thought that the purpose of putting this in was rather to give a more general idea of the policy the Minister is adopting towards applications and the number of refusals that are being made than to deal with any particular refusal. Having said that, I beg leave to withdraw the Amendment.

§ Amendment, by leave, withdrawn.

§ Clause 4 agreed to.

§ Clause 5 [Relief for interest on loans]:

1326

§ 5.33 p.m.

§ LORD DRUMALBYN moved, in subsection (1), to leave out "being interest in respect of any period before the end of 1970." The noble Lord said: The point of this Amendment is quite simple. As the clause is drafted, the Board is able to remit only the interest payment on a loan during any period before the end of 1970. Apart from the fact that the life of the Board may continue longer than that—it may go until 1971—it may well be that a loan would be negotiated, say, in 1970 itself, or in 1969. It does not seem altogether reasonable that if a man negotiates a loan in 1967 or 1968 he can get a remittance of interest in the early part of the loan, but not if he happens to negotiate the loan in 1969 or 1970—certainly in 1970. It seems reasonable that the words, being interest in respect of any period before the end of 1970", should be omitted. I beg to move.

§ Amendment moved— Page 4, leave out line 6.—(Lord Drumalbyn.)

§ LORD SHACKLETON
On this matter, unlike the previous Amendments, I am, I fear, in disagreement with the noble Lord. I understand the purpose behind his Amendment, but I hope I can convince him that this would be a step which could be counter-productive in regard to the purposes that we both have in mind. Under Clause 5(1) the Board's power to give relief of interest applies only to interest accruing up to the end of 1970, and, as the noble Lord said, there is no provision for this period to be extended, even if the Shipbuilding Industry Board's life is extended. The effect of accepting this Amendment would be to enable the Board to give grants in relief of interest throughout its life, including any period up to the end of 1971 for which that life is extended. The Geddes Report, in paragraph 551(a), recommended that the Shipbuilding Industry Board should be empowered not to charge interest on loans in the first three years; that is to say, in respect of interest due not later than the end of 1970. The present Amendment could result in loans being eligible for remission of interest for a period of four years or more and is. therefore, contrary to the recommendation of the Geddes Committee.
1327 The remission of interest, as I am sure the noble Lord will agree, is a valuable additional assistance to the industry and therefore an incentive, and the sooner a company qualifies for and receives a loan, the longer the period over which it will be eligible for relief of interest. This provision is intended as a further incentive to get on with reorganisation as quickly as possible. By extending the period during which grants could be made in remission of interest, the Amendment would to this extent reduce the incentive and blunt the sense of urgency which it is vital to maintain in the industry.
The noble Lord may say that this is not significant, and it is more important to be able to give this extra incentive afterwards. But I am sure he will agree with me that the shipbuilding industry is facing serious and urgent problems. The level of orders taken by the industry last year and during the first four months of the present year, both from home and overseas owners, was very low. Many of the firms in the industry suffer serious financial problems. It is therefore vitally important that the industry should take the necessary steps—by the grouping of firms, reorganisation of resources without delay, and so on—to become competitive.
The power of the Shipbuilding Industry Board to provide the loans is the incentive to grouping and reorganisation; the power to provide grant in remit of interest is a valuable additional assistance to the industry. And again I stress the importance of getting on with it quickly. The sooner it qualifies and receives a loan, the longer the period over which it will be eligible for interest. To be effective, such a bonus scheme must be open for a limited time only. The Geddes Report recommended a period of three years, and this has been followed in the Bill. The Amendment could mean that the time for which the scheme is open was extended to four years or more, and this would reduce the incentive and blunt the sense of urgency which in present circumstances it is so vital to maintain in the industry. Although the noble Lord knows I am not anxious to pressure him on this matter, it is so vital that almost every day counts in this matter. So I am afraid that I must disagree with him. This would not serve a valuable purpose and could even be a disincentive.
1328 It is, of course, arguable what period it should be. We could pick on a number. It certainly was the considered view of Geddes that it should be three years, and I see no reason to alter that; although I can see reasons against it. I stress that the firms who are considering this now have to move quickly, and anything which suggests something to the contrary would. I think. be damaging. So, reluctantly, I must disagree with the noble Lord.

LORD HAWKE
I rather wonder whether the noble Lord and the Government are not trying to ride two horses on this particular issue. He has mentioned the deterrent, the sense of urgency and using this as a deterrent to encourage people take their loans quickly. But, normally speaking, loans of this sort sometimes have an escape clause on interest, on the ground that the loan has not borne fruition for a certain number of years. I should have thought that was a much more reasonable way of looking at these loans, and that the proper course would be to use a time inducement by saying that there would be no loans available after a certain period: but always say that the Government in any case can remit the interest for the first three years while the loan is beginning to bear fruit.

§ LORD SHACKLETON
I did not use the word "deterrent"; I used the word "incentive"—

LORD HAWKE
Incentive, yes.

§ LORD SHACKLETON
—though what I am concerned with here is the deterrent effect—anything which suggests that it is not urgent, when almost every day counts. I agree that there is force in the noble Lord's arguments in general terms, but we are dealing with an unusual situation. This "package" has been carefully thought out. It has been discussed, and indeed I have myself argued the case, as I always do. I always try to argue the case for the opposition before I come along to argue the case against the oppossition. And I am convinced that the stand we have taken on this is right.
There are, of course, other provisions in the Bill with regard to funding in certain matters, and we shall come on 1329 to these in relation to possible investment in the company. But I think that in this particular context I am satisfied, although one could argue as to which year would be the right one. The noble Lord might even argue that it would be better to have no limit, but I see no particular virtue in adding the extra year. It is not the case that we have just "thought of a figure" and are sticking to it. This is the one that has been recommended, and I am satisfied that it is the right one.

§ LORD DRUMALBYN
I wonder whether the noble Lord would take this into consideration. There are, of course, under Clause 4, two separate aspects of loans. First of all, there is the loan for acquiring shares. On that, I can see that one can deal with the financial aspects fairly quickly. It may well be that the grouping first arranged will not prove to be the best one. There may be within the next two or three years adaptations of the grouping, and this may call for further financial assistance. So it may well happen that by, say, 1970, in three years' time, some further acquisitions or expansions, amalgamations, mergers and the like, will have to be considered.
The second aspect is that there are the physical consequences of the regrouping, and these may take a good deal of planning. There is the question of building structures and works, and so on, and also the point that I have already mentioned, that under Clause 4(4) the Bill envisages that any number of loans may be made to the same person. It may well be that a series of loans will be initiated over the same period. That being so, however great the incentive required in order to encourage people to get on with the work, it must be envisaged that there will be a succession of loans throughout the period. It does not seem to me entirely sensible that it is only the loans in the early part of the period that will be entitled to remission of interest. I do not propose to press this matter further now, but I should be grateful if the noble Lord will look at it again. In the meantime, I beg leave to withdraw the Amendment.

§ Amendment, by leave, withdrawn.

§ Clause 5 agreed to.

1330

§ Clause 6:

§ Assistance by acquisition of share

§ 6.—

§ (3) The Board shall not dispose of any shares acquired by it by virtue of this section except with the approval of the Minister.

§ 5.47 p.m.

§ LORD DRUMALBYN moved to add to subsection (3): if the sale of the shares would realise a sum less than that subscribed by the Board for them. The noble Lord said: I beg to move Amendment No. 6. The point of this Amendment is simply this. Obviously, if there were going to be a loss to the Treasury there would be a good deal to be said for requiring a Board which is to be given the latitude we understand this Board is to be given to apply to the Exchequer before disposing of the shares. But I should have thought that neither the Exchequer nor the taxpayer would have objected in any way to the shares being disposed of at a profit. Therefore, if a profit were available on the shares it would seem unreasonable to deny the Board the discretion in this matter of disposing of the shares at a profit. The point is a simple one. It does not seem to me that there is any reason why the Board should not reduce its holding if it is advantageous to do so. I beg to move.

§ Amendment moved— Page 4, line 27, at end insert the said words.—(Lord Drumalbyn.)

§ LORD SHACKLETON
In this case the Government have thought it desirable to provide under this clause that the Shipbuilding Industry Board should have the power to acquire shares in shipbuilding firms. Of course, one of the reasons is that if the firm concerned becomes profitable the public should be able to participate in the profits which accrue, and if a firm becomes, or looks like becoming, so profitable that the value of its shares in the market rise above their issue price, it is right that the Government should have the option of retaining those shares so as to secure for the public purse a share of the profits which the public investment has helped to make possible.
If we give the Shipbuilding Industry Board freedom to dispose of shares and relieve it of the obligation to secure the 1331 Minister's approval for disposing of such profitable shareholdings, it will deprive the Government of this option. One may argue on this that it is unlikely that the Shipbuilding Industry Board would not behave responsibly in this matter, and it certainly would be argued that it would not go for a quick profit merely to make the final report look good. But, unlike other bodies which are concerned regularly with investment, this is essentially a short-term Board. It is an unusual situation, and I think that the Minister must, in the end, be responsible. After all, he is going to take over the holdings after the Shipbuilding Industry Board is disbanded and I do not really see any virtue in putting this responsibility on to the Board.
Indeed, although the Board's advice can be vital in this matter I think this is a power which should ultimately rest with the Minister concerned. I can see there are dangers of adding more and more responsibility on to Ministers, and if this were a continuing Board it might be a different situation. I would not wish to argue that in the case of the Industrial Reorganisation Corporation, they have these powers, but this is a rather unusual case and therefore I think it is better to leave the responsibility with the Minister who, in any case, will have to continue that responsibility after the Board is wound up.

§ LORD DRUMALBYN
I do not attach a great deal of importance to this Amendment and in any case one would recognise that the Board would be likely to be in close contact with the Minister. I do not think I need press this Amendment and therefore I beg leave to withdraw it.

§ Amendment, by leave, withdrawn.

§ On Question, Whether Clause 6 shall stand part of the Bill?

§ 5.52 p.m.

§ LORD DRUMALBYN
As the noble Lord is well aware, this is a matter on which we cannot see eye to eye on our side of the Committee with the Government's point of view, but the particular reason why I have put down an Amendment to leave out Clause 6 is that on the Second Reading the noble Lord, Lord Beswick, expressed sympathy with my view that it would be wrong for the Board or the Government to make it a 1332 condition of giving financial assistance that part or all of the money should be advanced against an issue of shares, or that the loan should be convertible into shares at the option of the Board or, after 1970, at the option of the Minister. I hope, therefore, that the noble Lord is now able to tell me that the Government share the noble Lord's sympathy and that neither the Board nor the Minister will insist on having shares in the equity as a condition of giving financial aid.
It is Government policy that the Geddes recommendations that companies should reorganise themselves into groups should be implemented. It would be quite wrong if that policy were to be frustrated in any instance by insistence on the part of the Board or of the Minister that the applicant should concede shares in the company as a condition of getting the money, even if that was acceptable to the recipient of the money. It seems to me it would be equally wrong to bring the full force of Government pressure to bear on a group or a company to make them issue shares against their better judgment. I personally have no objection in principle to the taking up of shares in a company by the Board or the Government, provided it is done with the full consent of the company given in accordance with the Companies Act: but it must be a matter for agreement between the parties and must not be something imposed by one party upon the other.
I would repeat what I said on Second Reading: that at the same time there are obvious practical difficulties. If the Board or the Government have an interest in the equity of one group and not of others, or have a greater such interest in one group than in others, it would be idle for the Government to delude themselves into thinking that actions would not be influenced by that interest. I think we are all entitled to assume that Ministers or Government-appointed Boards and civil servants are human and that they do not act differently from any other group of managers who have particular interests to safeguard. To claim that they do is either self-delusion or hypocrisy. Even if ministers and civil servants sprouted wings and, by virtue of belonging to the British Government, became de-humanised, as it were, the remainder of Her Majesty's subjects could 1333 scarcely be expected to believe in such transformation; and it seems to me wholly undesirable that the Board or the Minister should be thought to be prejudiced in these matters by reason of an interest in the equity in favour of one group and against the rest. I hope the Government will think again about this matter, but the main point I want to establish is that, whatever may be thought of the merits or demerits of this clause, it will not be used oppressively; that is to say, it will not be used in the way of denying a group or company the financial benefits of the Bill unless a share of the equity is conceded in return.

§ LORD SHACKLETON
Let me give the best assurance I can that this clause will not be used oppressively. It is always impossible to guarantee everything in life, but it is certainly not the intention of the Government that it should be used oppressively, and it is not the intention of the Shipbuilding Industry Board. I should like to give rather a full reply to the noble Lord because I think it is important, although I cannot meet him on this matter—and I do not think he expects me to—so far as leaving out the clause is concerned. On the other hand, it is important that there should not be anxiety or misunderstanding about the intentions behind it.
First of all, let me say that I do not think we ought to attach overmuch importance to this particular clause. It seems to me perfectly proper that the Government, like any other provider of capital, should be enabled to invest in the particular company, and we have seen developments along these lines in other forms of public company. The framework was made—I cannot remember whether it was by this Government or the previous Government. I think the previous Government were interested in the idea of taking equity in one of the airline companies. Clause 4 empowers the Shipbuilding Industry Board to provide shipbuilding and engine firms with capital in the form of loans and in certain circumstances for the purposes described. This enables the capital under Clause 4 to be made available in forms other than a simple loan. First, the Shipbuilding Industry Board is enabled to make a loan on terms which provide for the debt to be discharged by its taking up new shares 1334 issued by the borrowing company, and, secondly, the Shipbuilding Industry Board is enabled, instead of making a loan, to take up new shares in the first place.
It is intended that the loans made under Clause 4 should be at the Government credit rate. Clause 5 enables the Shipbuilding Industry Board to make grants in relief of any interest payable up to the end of 1970, and this clause may result in capital being made available on very much more favourable terms than are obtainable commercially. The Shipbuilding Industry Board may then be in the position of an investor putting money into a new or reconstructed business without expectation that the investment will pay off immediately. But whereas the investor would expect to benefit later as the business became profitable, the return to the Exchequer under the Clause 4 loan will continue to be limited to the Government credit rate at the time the loan was made. In those circumstances the Government considered that the Shipbuilding Industry Board should have the additional options provided by this clause and thus have normal commercial freedom to negotiate with the undertaking seeking capital about the form in which this capital should be provided.
The noble Lord was worried that this procedure might be used too oppressively, and might in certain circumstances be used to deny a loan that would otherwise be desirable. The only reason, I should have thought, for resistance by a company in such circumstances would be the anticipation of a much higher rate of profit than the interest which otherwise they would pay. I really do not see why, in these matters between a willing lender and a willing borrower, this should not be the subject of ordinary negotiation. The first advantage of this proposal is that the Shipbuilding Industry Board could, in suitable circumstances, ensure that the public purse, from which the capital was provided, could participate in the profits which might accrue later to the borrower as his efficiency and profitability increased. Otherwise the return to the Exchequer, which initially provided the money at specially favourable terms, and possibly also with grants in relief of interest, would be limited for the period of the loan to the Government credit 1335 rate at the time the loan was made. If, as is hoped, the profitability of the enterprise rises above this interest rate, the benefit would go to the private investor, and the public would be precluded from participating in the profitability which its provision of capital had made possible. For the life of me, I cannot see any reason, other than the fears expressed by the noble Lord, why there should not be this provision and why the public should not benefit from their own investment. They, after all, are providing this help, and we all agree that this help is necessary. I do not think the noble Lord seriously disagrees that the Government and the taxpayer should benefit in this way.
This clause would enable the Shipbuilding Industry Board in effect not to expect any return for a period extending beyond the end of 1970. This could be done in certain circumstances, but this could be a mixed blessing. Clearly borrowers with little confidence in their own long-term profitability could see it as a way to secure what amounted to loan capital at little or no interest, and the Government would not expect the power to be exercised in such a case. This is not intended to prop up companies which cannot stand on their own feet. It is doubtful whether a company anxious to have capital on those terms for this reason would be a suitable recipient even for a loan. While the Shipbuilding Industry Board may be as sure as they can be that a particular undertaking has excellent prospects of becoming profitable, it may be uncertain as to the precise timing, or the Shipbuilding Industry Board may in the case of a second stage reorganisation, starting possibly in 1968, reach the view that the company could not be expected to pay interest on the capital quite as soon as the end of 1970. In that event the provision of capital under this clause might not be just a safe option for the borrower but an arrangement which has eventual financial advantage both to the undertaking and the Exchequer.
Thirdly, the Shipbuilding Industry Board might consider it should take a more direct interest than is normally taken by a provider of loan money in the steps taken to develop the management of a particular enterprise. It is true that the Shipbuilding Industry Board has other powers, such as that of giving 1336 or refusing grants under Clauses 3 and 5, and recommending guarantees under Clause 7, but these are essentially in the nature of vetoes exercised from the outside, and the Shipbuilding Industry Board may feel it could contribute more as a participant in the undertaking's equity. Indeed, there are signs, as I know, that this is already happening in order to forward some of the progress that is necessary.
This clause, therefore, provides the shipbuilding industry with certain options to meet a changing situation, and it is subject to two limitations. The cost of any shares acquired will be taken into account for the purposes of the ceiling on loans under Clause 4, so that loans and share acquisitions together cannot exceed £32½ million. further, the Minister must approve the acquisition or disposal of shares just as he must the provision of loans under Clause 4, and since the cost of any shares acquired will he met from voting money under Clause 10(2)(a) and subsection (7), there will be the usual Parliamentary control.
The noble Lord suggested—and this was also suggested in another place—that the Shipbuilding Industry Board should not be provided with this option since their competitors would be bound to suspect that the Shipbuilding Industry Board would be more favourably inclined to a firm in which it had an interest, whether or not the suspicion was justified. The option is between an equity share or a loan, possibly for as long as 15 years. In either case the Board will have a powerful interest in the firm concerned. The fact that somebody has loan capital in a firm does not alter the fact that the Board is greatly concerned with the firm's progress, and it is doubtful, therefore, whether the interest would be greater if there were equity participation instead of a loan.
I would never accuse the noble Lord of unworthy suspicion, but I really think this is not a very meaningful suspicion, and it would certainly not be the intention of the Shipbuilding Industry Board to behave in a way in which they showed particular favouritism, or were more inclined to make a loan because of the return upon it. They will have to judge this within the terms of the Act, and it seems to me proper to provide that the public should get the benefit, if benefit there should be, and that it should not be 1337 transferred to the private investor. I would say this is a very happy and balanced arrangement. I apologise to the noble Lord for the length of the reply.

§ 6.8 p.m.

§ LORD DRUMALBYN
I do not think the noble Lord need apologise at all. I think he has given a much better justification of this particular clause than has been given before. Indeed I go so far as to say it was because of the way in which the Government approached this clause in another place that I put down this particular Amendment, because it was said, not once but several times, that this would be at the choice of the Board, in consultation with the Minister, and not—and this was the point—at the choice of the person who was going to receive the money. The noble Lord, in his justification of it, has made it fairly clear (and this of course may be so) that it may be to the advantage of both parties. What I am saying is, accepting that we have to have this clause, are we assured that it will be used only where it is patently to the advantage of both parties, and not just to the advantage of the Government; in other words, can we be assured that the Government will not deny financial assistance unless it is taken in a certain way. I think the noble Lord has answered that question in the affirmative, unless I am mistaken. I hope he has.

§ LORD SHACKLETON
I am sorry if my eloquence has had an even wider effect than I intended. Here is a group wanting certain support and they get it on certain terms which will be judged best for the industry. But clearly it is arguable that if people think they are on to a good thing, and loans they are going to make will bring in a good return in a few years' time, it may be that they would prefer to have it at loan capital at less than commercial rates.
It seems to me that the public interest must be respected in this matter. It is not a question of harrassment or using a stick; it is a question of arriving at a satisfactory agreement and a satisfactory negotiation. But I should not like to suggest that a firm will be entitled to loans regardless of what the prospects may be.
I hope that I have given a rational explanation. I am sure that this will be conducted in a sensible and negotiating 1338 way. I am sure that the Shipbuilding Industry Board will be reasonable. Equally, the companies concerned must realise that it is right that they should not get something for nothing. If there is some equity profit and there is perhaps convertible loan stock, or whatever it may be, I do not think they will necessarily want to take the equity. I do not know what form it will take, but we will say that it will take the form of convertible loan stocks. To my mind, it would be desirable that in this case the lender should not be more handicapped than any other big institutional lender. This is a considerable, if I may use the term, bailing out of private enterprise, and it seems to me that private enterprise should reasonably pay what they would pay to others, bearing in mind already the favourable terms of the Government.

§ LORD DRUMALBYN
I do not think I can reasonably dissent from what the noble Lord has said, except perhaps in one particular to which he almost returned in his second reply. At an earlier stage he said that the only reason for resistance to the suggestion that shares should be taken up by the Board would be the anticipation of much higher profits for the existing shareholders than if the assistance were given by way of loan. I do not believe that that is so. I think that there are other reasons, reasons of control and management, which would lead people, companies or groups to be not altogether favourably disposed towards the acquisition of shares by the Shipbuilding Industry Board or the Government. I think that one has to take that into account.
But I agree that a balance must be reached, and I hope that the ventilation of this matter in Committee to-day will to some extent enable the industry to be reassured that they are not going to be forced against what seems to be their will and their interest and, in some cases they may think, common sense, to issue shares in return for assistance, instead of taking it by way of loan, where taking it by way of loan would seem to be just as beneficial to the Government and to the taxpayer. In other words, I hope there will be no doctrinaire approach on either side in this matter.

§ Clause 6 agreed to.

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§ Clause 7:

§ Guarantees in connection with shipbuilding Guarantees by Minister

§ 7.—(1) Subject to the provisions of this section, the Minister may, with the consent of the Treasury, guarantee the payment by any person who is an individual resident in, or a company incorporated under the law of any part of, the United Kingdom, any of the Channel Islands or the Isle of Man of any sum payable by that person in respect of principal or interest under arrangements (whether by way of loan or otherwise) entered into by that person for the purpose of financing—

(a) the construction to the order of that person in a shipyard situated in the United Kingdom of a ship of not less than one hundred tons gross tonnage; and

§ (3) No guarantee shall be given under this section except on the recommendation of the Board, and the Board shall not make such a recommendation unless it appears to the Board—

(a) that the person carrying on the shipbuilding undertaking comprising the shipyard in question—
1. (i) has since the date of the commencement of this Act put into effect a reorganisation of the resources used by him for the purpose of carrying on that undertaking (including a reorganisation begun but not completed before that date); or
2. (ii) is making satisfactory progress in the preparation of plans for, or in putting into effect, such a reorganisation as aforesaid,
being a reorganisation which has led, or is likely to lead, to increased efficiency in the use of those resources for that purpose; and
(b) that the carrying out of the order in question in that shipyard is consistent with, or will contribute to, that increased efficiency and will secure that use is made of resources which are then or will shortly be available and are otherwise unlikely to be used.

§ 6.15 p.m.

§ LORD DRUMALBYN moved, in subsection (1)(a), after "construction" to insert "conversion, adaptation or substantial modification". The noble Lord said: This is an important Amendment, and it has the backing of both shipbuilders and shipowners. After "the construction" this Amendment would add the words, "conversion, adaptation or substantial modification". The paragraph would then read: The construction, conversion, adaptation, or substantial modification to the order of that person in a shipyard situated in the United Kingdom of a ship of not less than one hundred tons gross tonnage.

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§ Here we are dealing with the giving by the Minister of guarantees under Clause 7. I am told that unless this Amendment is made, in the course of the next year or two British shipowners will have to dispose of some ships to foreign buyers, if they can find any, or alternatively have the work done abroad. I quite accept that ship repairing has to be excluded from the Bill. But conversion and adaptation to a new kind of use seems to be markedly different from repairing or normal overhaul: the major conversion of, say, a passenger ship to a one-class ship, or major conversion of a freighter to make it suitable for containers or the process of what I believe is called "jumboisation". If it is a fact that British shipbuilders could be covered under the Export Credit Guarantees for such work of foreign shipowners, why on earth should they not be covered by this clause for British shipowners? But even if they cannot be so covered, there seems to be a strong case for keeping fitting out yards occupied with conversion work, especially where reorganisation is in process, if there is no other work to do in the lifetime of the Shipbuilding Industry Board or at any particular interval, rather than let the work or the ships go abroad into foreign ownership. It seems to me that there is a strong case here for widening the clause and allowing guarantees to be given, not just for construction, but also for major conversions, for adaptations or substantial modifications. I hope that the noble Lord will be able to see his way to conceding this Amendment. I beg to move.

§ Amendment moved— Page 4, line 37, after ("construction") insert ("conversion, adaptation or substantial modification").—(Lord Drumalbyn.)

§ LORD SHACKLETON
The noble Lord has helped me, and I shall not attempt to explain his Amendment because he has explained it quite clearly. Even the way in which he used that unfortunate word "jumboisation" gives one confidence. Of course, the cost of such a process certainly could be more than the cost of building a ship. It could go up to £1 million or £2 million. There is a border line between shipbuilding and ship-repairing and it is difficult to delimit. I have already mentioned one border line in relation to this process 1341 to which the noble Lord has referred. There is another, that ship repairing can be carried out not only in a repairing yard which is part of a shipbuilding concern, but actually in a yard normally used for shipbuilding. Indeed, in the case of a major ship repair or conversion job, the shipbuilding yard may be the more appropriate.
This Amendment seeks to extend the clause, which is concerned with shipbuilding orders; that is, orders relating to the construction and fitting out of a ship. There are problems, some of which are awkward; one of which, of course, is this problem of definition. Conversion, adaptation and modification are not exact terms. Quite small jobs on quite small ships can include an element of conversion or modification, and the only practical way of drawing a distinction would almost certainly be to provide for a minimum contract price, to make the conversion or modification job with a contract price exceeding £500,000 eligible. That is an example.
A more important problem is that, although there is evidence that ship orders by British owners are going abroad because of the interest disparity which the clause is designed to overcome, I am sure there is no such body of evidence that ship conversion jobs are going abroad for this reason. I am very willing to consider any further evidence on this, but if it is argued, despite the absence of any body of evidence, that the extension of this provision to conversion or substantial modification jobs would have an effect on the placing of the orders, then the major difficulty becomes clear. Even large conversion or modification jobs can be carried on in ship repair yards which are not part of shipbuilding groups. If, in order to qualify, the orders had to be placed either in a shipbuilding yard or in a yard belonging to a shipbuilding undertaking, then it would be most unfair discrimination against ship repair undertakings which are not in a shipbuilding group, because it would tend to divert business from one concern to another and, in effect, to draw what is ordinarily regarded as ship repair work from specialist ship repair concerns to shipbuilding concerns.
To sum up, even if the problem of definition could be overcome, and if there were evidence that disparity in credit 1342 terms was having the same effect on ship repair as it has on shipbuilding, the Government do not think they could extend this clause to cover ship conversion without extending it, and possibly the Bill as a whole, to cover assistance to the ship repairing industry. Therefore, reluctantly—although one always tries to do everything that is possible—I must say that I think this inevitably goes beyond the purpose of the Bill, and it certainly goes beyond the financial Resolution, which clearly I cannot discuss. I therefore hope that the noble Lord will not press his Amendment. It has, as he knows, been very carefully considered by the Government, and there have been discussions. I should not like to say that this is just a "good try", as I see the force behind it; but I do not think that it is strong enough to amend and widen the Bill in the way he suggests.

§ LORD MITCHISON
Before "jumboisation" is put into the Bill, could we be told if it means to prevent a ship from being a white elephant or to make it one?

§ LORD DRUMALBYN
I do not know whether the noble Lord's noble friend would like to answer that question; do not think I should venture to do so.
The noble Lord has left one very small chink open to me to see if I can get information which would satisfy him, although I think we all recognise the difficulties of definition involved. Before we part with this particular point, I wonder if I could ask him one other question. Clause 7(1)(a) deals with the construction of a ship, a complete ship. I believe it is sometimes the case that a shipyard will construct a whole section of a ship—the middle section or something of that kind—and I should have thought that considering this is clearly a shipbuilding job, it should be possible to get the assistance envisaged for that kind of operation, even if assistance for adaptation and conversion were not available. I wonder whether the noble Lord would help us a little further on this. I imagine that, whatever may be said about the financial Resolution, it would probably be possible to bring that within the financial Resolution. If not, I have no doubt that it will be possible to make the necessary Amendment, if the other place should think fit. I do not know 1343 whether the noble Lord opposite is going to add to this discussion, because he knows a great deal about these matters. But, unless he wishes to do so, at this stage I ask leave to withdraw the Amendment.

§ Amendment, by leave, withdrawn.

§ 6.26 p.m.

§ LORD DRUMALBYN moved, in subsection (3), to leave out from first "Board", to the end of the subsection. The noble Lord said: The effect of this Amendment is to leave out all the various conditions which have to be observed before a guarantee can be recommended by the Board. I would concede at once that there are obvious arguments in spelling out for the Board the conditions on which it should give or withhold guarantees. My objection is not to the spelling out of the conditions, but as to the conditions which are spelt out. It seems to be unfair for the Bill or the Board to discriminate between British shipbuilders in a way in which E.C.G.D. does not discriminate.

§ If a foreign shipowner places an order for a ship, the guarantee does not depend on whether the order is placed with the shipbuilder who is at present reorganising or with one who is not. It is very odd that it should do so if the order is placed by a British shipowner. The clause has departed a long way from the Geddes recommendations, and it appears that the Bill was held up for a considerable time to enable the clause to be worked out. Naturally, the clause is supported by those shipbuilders who intend to reorganise, but surely, if there is to be discrimination, the guarantee should depend on the efficiency of the shipbuilder and his ability to make a profit at competitive prices, and not whether he has to reorganise to do so.

§ One could really take this argument very much wider and say that in the shipbuilding industry one is dealing with an entirely international industry, and ask whether those who build ships in this country should not receive credits on the same basis as is available to shipowners if they go abroad for the same order. The point is that shipowners should not be driven abroad to order from foreign shipbuilders if they can get the ship built in this country on the same terms, apart from the credit terms. Yet in certain 1344 cases this is happening and shipowners are being driven to order abroad merely because of the credit facilities given and guarantees attached. I should have thought this was the right way to have tackled the matter rather than try to attach it as an additional incentive to encourage people to reorganise. Whether they do so or not, it seems to be only fair and reasonable that shipowners should not be deterred from ordering in any particular British shipyard because the same terms which they can get if they order a ship abroad are not available to that particular British shipyard. I beg to move.

§ Amendment moved— Page 5, line 2, leave out from first ("Board") to end of line 21.—(Lord Drumalbyn.)

§ LORD SHACKLETON
As the noble Lord has pointed out, subsection (3) of Clause 7 provides that the Minister shall not give a guarantee except on the recommendation and in accordance with the criteria, and the criteria is spelt out clearly, and it seems to me to be desirable. In recommending guarantees, the S.I.B., in the exercise of any of its powers, must consider whether the action it recommends would promote the ability of the shipbuilding industry to compete. The noble Lord seeks to delete the detailed criteria. He argues that they are in some degree contrary to the Geddes Report and could be used with unfair discrimination against shipbuilding firms which did not need reorganising. It is the contention—and I know no one connected with the Shipbuilding Industry Board who would say otherwise—that there is no shipbuilding firm in the country which does not need reorganisation. Of course, the situation has changed very considerably since the Geddes Report was published. In certain respects the change works in support of the noble Lord's argument; namely, the rather desperate situation and the tremendous decline in orders which have led to the Government's producing so very much bigger a scheme for £200 million.
But there is, of course, a difference from loans obtained under the Export Credits Guarantee Department, which the noble Lord realises are guaranteed by the Department, though they are provided from commercial sources. This money comes from the Exchequer. Again, while Geddes did not specifically recommend 1345 that loans might not be made in accordance with these criteria, he considered that preference should be given to reorganisation. The urgency of the situation and the certainty of those concerned that reorganisation and regrouping virtually everywhere are going to be necessary, have made the Government face this squarely and insist on applying these criteria.

§ LORD DRUMALBYN
May I intervene for one moment? Is the noble Lord right in saying that the money which is to be guaranteed comes from the Exchequer? Are we not confusing two sets of loans here? Because the loans that are to be guaranteed in this case are the loans to be made by banks to the shipowners in periodic payments.

§ LORD SHACKLETON
Yes. I beg the noble Lord's pardon. I know that if ever I go wrong the noble Lord can always be relied on to put me right in the nicest possible way. I would withdraw from that argument.
Let me look more closely at my brief on this. The arrangements under this clause are temporary, and the guarantees can be given only on the recommendation of the S.I.B., which will be dissolved at the end of 1970, or possibly in 1971. The real difference—and this, I fear, is where I went wrong—apart from the technicality that the loans come from commercial sources rather than from the Exchequer, is that the Geddes Report envisaged a modest ceiling. I must apologise to the noble Lord for getting that wrong. But, even so, this does not significantly alter my argument, that the whole purpose of this Bill is to stimulate reorganisation, and it is the view of the Government that these criteria are necessary and need to be specifically stated.
At one stage I considered whether these criteria were necessary, and whether Clause 1 covered the point. But after discussion it is quite clear that these are the criteria which we want to apply, and we want to apply them specifically. Whereas there could be a certain argument on justice in this matter, I do not believe that any real issue of this kind arises. The reorganisation will be necessary and will come about, and it will be of a kind that it is vital we should proceed to as quickly as possible.

1346

§ LORD DRUMALBYN
I am obliged to the noble Lord, but when he looks very closely at the conditions he will see that they are very tight. The person must have: since the date of the commencement of this Act put into effect a reorganisation". It is not just that he has to be contemplating it; he must have already put it into effect. It may well be that in the meantime, before the reorganisation has been put into effect—

§ LORD SHACKLETON
I do not think the noble Lord is quite correct. The paragraph goes on or … is making satisfactory progress in the preparation of plans". Perhaps on this occasion I have been able to correct the noble Lord.

§ LORD DRUMALBYN
I am obliged to the noble Lord. As he said, the paragraph says: is making satisfactory progress in the preparation of plans for, or in putting into effect, such a reorganisation as aforesaid". But it may be a very difficult matter to judge how far a shipbuilder has got in his plans. I should like an assurance from the noble Lord that, so long as a shipbuilder has signified his intention of going ahead with plans and has indicated that he is doing something in that direction, a guarantee on a ship which he is to build will not be refused in a case of that kind. It is very important that this should not be regarded in too tight a manner; otherwise we may find that orders which could have kept a firm going will go elsewhere, and the firm may go out of business altogether before it has even been able to lay the basis of the plans. I hope that the noble Lord will give us an assurance that this provision will be interpreted in the widest possible manner.

§ LORD SHACKLETON
I am not sure that the argument which the noble Lord has advanced does not weaken his case. If the firm is in danger of going out of business, the reorganisation or making of plans is all the more necessary. If it is in danger of going out of business, and has not even started planning for the future, it may not be a suitable recipient of this help. But here again I must stress that this is part of the package and, as I understand the position, there is a great deal of 1347 activity towards reorganisation. So far as I know, of the requests put forward for guarantees (of course, the requests cannot yet be accepted because the Bill has not been passed), the Shipbuilding Industry Board expects to agree every one; and there are other ships under consideration.
I can see the anxiety of the noble Lord, but I must stand on the principle. However, I should be very willing to go into this a little further, and perhaps give a little more information on it at a later stage of the Bill. Certainly I can make no promise, nor give any undertaking of the kind for which he has asked; nor do I think it would he proper to do so. But I may be able to make him a little happier, which may also relieve other people's fears. But we must stand firm on the principle.

§ LORD DRUMALBYN
I am grateful to the noble Lord. I take the view that if a firm is going to remain in business it must get orders, and that that has an even greater priority than reorganising. There is no point in reorganising unless the firm has orders in hand and has something to get on with. But in view of what the noble Lord has said, I beg leave to withdraw the Amendment.

§ Amendment, by leave, withdrawn.

§ Clause 7 agreed to.

§ Clause 8 [Reports and accounts]:

§ 6.40 p.m.

§ LORD DRUMALBYN
This is a minor, probing Amendment put down to discover whether the statement of "grants" in the annual report is to include remission of interest on loans, which under Clause 5 is to be treated as grant. I beg to move.

§ Amendment moved— Page 6, line 4, at end insert ("including any such grant as is referred to in subsection (2) of section 5 of this Act,".—(Lord Drumalbyn.)

§ LORD SHACKLETON
I realised that this was a probing Amendment. As I understand it, all the grants provided in the Bill are covered, and there is therefore no need to itemise this particular kind of grant. So I think the noble Lord has achieved his purpose.

1348

§ LORD DRUMALBYN
I am much obliged. I beg leave to withdraw the Amendment.

§ Amendment, by leave, withdrawn.

§ LORD DRUMALBYN
The reason for putting this Amendment down is because it seemed to me that a mere statement of loans made is not very informative unless one also knows what is the rate of interest at which, and the period for which, each loan is made. I recognise that the terms of the loan may be complicated. Nevertheless, the information asked for in the Amendment should help Parliament and the Press without misleading them in any way. I beg to move.

§ Amendment moved— Page 6, line 4, at end insert ("and the rate of interest at which and the period for which the loan is made.").—(Lord Drumalbyn.)

§ LORD SHACKLETON
I entirely agree with the noble Lord. He is asking something that is reasonable, and I do not think there can be any objection to it. I would have been inclined to accept this in principle and to suggest that another Amendment should be put down at Report stage. I am willing to consider this with the noble Lord, Lord Drumalbyn, and any other noble Lord who is interested, certainly before Third Reading, when I think we should also be able to amend it. If I gave the noble Lord an absolute assurance that the Government would—I hesitate to use the word "instruct", because I am not sure without checking it how far they can give a precise direction on this—but would certainly procure that in some way the Shipbuilding Industry Board include this information in their annual report, I wonder whether that will satisfy him. In other circumstances I should have preferred, as would the noble Lord, to put this in the Bill, and certainly if the Shipbuilding Industry Board were going on for a long while then I think it should be framed in legislation. But I hope that, having given the assurance that it will be put in, this will meet the noble Lord's wishes. He might wish to consider that aspect of it further; but certainly I agree with him that this is a worth while objective.

§ LORD DRUMALBYN
Naturally, one always likes to have things of this kind put in a Bill if it is at all possible, but 1349 we are in the difficulty, which I completely recognise, that the industry is very anxious that the Bill should go through as quickly as possible, and one does not want to hold it up in any way at all. I am not quite certain how long it takes for another place to make an Amendment, and if on inquiry the noble Lord were to find that this could be dealt with quite expeditiously, then I should have thought that it was an Amendment worth making. It certainly would not be debated, and would he readily approved in another place if it were made. At any rate, I am grateful to the noble Lord. We can discuss this. I beg leave to withdraw this Amendment.

§ Amendment, by leave, withdrawn.

§ Clause 8 agreed to.

§ Clause 9:

§ Dissolution of Board

§ 9.—(1) Subject to any order under subsection (2) of this section, the Board shall cease to exist at the end of 1970.

§ (2) The Minister may at any time before the end of 1970 by order direct that the Board shall not be dissolved until such later date, not being a date after the end of 1971, as may be specified in the order.

§ LORD DRUMALBYN moved, in subsection (1), to leave out "exist" and to insert "operate". The noble Lord said: Perhaps it may be convenient to take Amendments Nos. 11, 12, 13 and 14 together. I am afraid that what the noble Lord said on the last Amendment does not encourage me to think that he will accept this series of Amendments.

§ LORD SHACKLETON
The noble Lord does not mean No. 14, but Nos. 11, 12 and 13.

§ LORD DRUMALBYN
Not No. 14? Would the noble Lord like to deal with that separately?

§ LORD SHACKLETON
It is a separate point, I should have thought. If I may deal with it in that way, I can perhaps be more helpful on it.

§ LORD DRUMALBYN
The purpose of these Amendments is to secure that after the Board has ceased to operate and before it finally ceases to exist it will make a final report. It seems decidedly odd that a body should issue its final report after it has ceased to exist, and subsection (4), 1350 which provides for the Minister to make an order laying down, so to speak, its obsequies, does not help very much. I shall deal with the other point when I come to it.

§ LORD SHACKLETON
I am sorry. Perhaps I should not seek to guide the noble Lord. Perhaps it would be as well to mop up No. 14, too.

§ LORD DRUMALBYN
I think it would be convenient to discuss them all, because they were conceived as coming together. It seems to me desirable that Parliament should know exactly what are the assets, rights and liabilities which the Board hands over to the Minister. I strongly suspect that my Amendment No. 14 is defective, but I hope that the noble Lord will approve of at any rate the way, if not the actual words, in which the four Amendments seek to deal with the demise of the Board and what might be described as its last testament, which customarily comes before, rather than after, death. I beg to move.

§ Amendment moved— Page 6, line 32, leave out ("exist") and insert ("operate").—(Lord Drumalbyn.)

§ LORD SHACKLETON
Perhaps I may deal with the first three Amendments and then make some comments on Amendment No. 14, too. These Amendments accept the principle that the Board's operations should cease on those dates, but leaves the date of the actual dissolution of the Board indefinite; and the Amendments obviously have the purpose of providing a period after the Board has ceased to operate during which it will be able to prepare its final report and put its affairs in order. I submit that these first three Amendments are not really necessary. The Government recognise that such a period may be necessary, but have provided for this, first, by making provision for the extension of the life of the Board (and in considering such an extension the need of a period for tidying up the Board's affairs will be taken into account) and by providing in subsection (4) of Clause 9 power for the Minister to modify the provisions of Clause 8. For example, as regards the periods covered by the final report of the Board, which have been precisely laid down, power is given to the Minister to modify that, and this is to meet the situation at the time.
1351 These provisions enable the Minister to ensure that the affairs of the Board will be put properly in order before its dissolution. They also provide flexibility in dealing with administrative matters which cannot be foreseen at present and which may arise on the Board's dissolution. At the same time, they ensure that there will be no doubt as to the date on which this statutory body will cease to exist. I think it should be possible to secure that the last few weeks of the Board's life is a running down period in which it is largely tidying up its affairs, and it should be able to prepare its final report and accounts during this period in such a way that they cover the time right up to immediately before the Board's dissolution. The final report and accounts could then be rendered formally, immediately before dissolution. In any event, if, when the time came, there was any difficulty about this, Clause 9(4) is wide enough to enable provision to be made whereby the final report and accounts could be rendered on its behalf after its dissolution by the final members of the Board. There is also a technical difficulty on the word "operate".
May I now turn briefly to the last Amendment, Amendment No. 14? It is arguable that there is really no need to require the Board to report on the exercise of its functions or to repeat information already published about the rights and liabilities to be vested in the Minister. I must say that the Government are sympathetic to what the noble Lord seeks to achieve. In other circumstances, I should have suggested putting down an Amendment, perhaps at a later stage; and this can be done. But while I agree that this sort of information ought to be in the Statutes, we are not legislating for all time; we are legislating for a period of three or four years. It may be that in 1970 or 1971 there will be a situation which will call for further legislation. This we do not know; but it would be wrong to ask Parliament to consider that at the moment. There may be further matters which will have to be dealt with. I am not suggesting that there should be a successor body. This is intended to be a major rescue and reorganisation operation.
I think, therefore, we have enough flexibility. But I will give an under 1352 taking to the noble Lord, by Amendment or othewise, that we will ensure that the final report will contain the sort of thing he wants—both the functions and any recommendations that may be made. Certainly we shall see that the final report gives a general review and, in particular, an up-to-date statement of the rights and liabilities vested in the Minister. I will give a clear undertaking that this will be provided for, and we can consider whether in the circumstances there is any need actually to put down an Amendment.

§ LORD DRUMALBYN
I am much obliged to the noble Lord for what he has said. I beg leave to withdraw the Amendment.

§ Amendment, by leave, withdrawn.

§ Clause 9 agreed to.

§ Clause 10 [Financial provisions]:

§ LORD DRUMALBYN moved, in subsection (7), to leave out "(a)". The noble Lord said: This is the last of the Amendments we have to deal with. Before I move it, I should say to the noble Lord that we very much appreciate the work he has put into this particular Bill amid all his other responsibilities and cares at the present time. I know he has had to take this Bill on rather at the last moment.

§ This particular Amendment looks very small. The subsection as at present drafted says in effect, as I understand it, that where the Board (or, after 1970, the Minister) exercises an option under a loan agreement to take up shares under Clause 6(1)(a), the Minister must repay the loan into the Exchequer out of moneys voted by Parliament—that is, out of the annual Vote. The annual Vote can, of course, provide for this contingency in advance. The Minister will then hold the shares he has taken up out of the loan agreement. What I do not understand is why shares should be paid for out of the annual Vote in a case where they are taken up under a loan agreement some time after it was made, but should not be paid for in the same way if they are taken up against an advance at the time when it was made.

§ If there is to be this distinction between the way in which shares and loans are 1353 financed in the case of options exercised, why should there not be the same distinction when the original advance is made partly by making a loan and partly by subscribing for shares—or, for that matter, entirely by way of subscribing for shares in one case and entirely by way of loan in the other case? The point is that a loan should be repaid, whereas the money paid for the shares will not normally be repaid. Even if the shares are sold it is unlikely that the amount received will be exactly the amount paid for them. To a considerable extent this is really a bookkeeping matter; but it is also a matter of accountability to Parliament. I should be grateful if the noble Lord could explain why there is this distinction. I beg to move.

§ Amendment moved— Page 8, line 5, leave out ("(a)").—(Lord Drumalbyn.)

§ LORD SHACKLETON
I was about to say that this is a most unintelligible Amendment. It is one which I had to take the greatest care in understanding. I agree with the noble Lord that what it deals with may not be a major point, but certainly it is interesting and significant. I hope the answer I give will satisfy him, as I doubt whether I shall be able to give him another. Subsection (7) of Clause 10 preserves the distinction that is made in Clause 10(1) and Clause 10(2) of the Bill—and this follows the usual practice—between the financing of loans by the Board and the financing of all other expenditure by the Board. The loans are to be financed directly out of the Consolidated Fund, as the noble Lord knows, and all other expenditure, including the purchase of shares, is to he financed out of Votes. The power to make loans dischargeable by the issue of shares calls for a special provision to maintain this distinction in any case where a loan is in fact discharged by the issue of shares. The necessary provision is contained in Clause 10(7) which ensures that the Consolidated Fund is reimbursed from Vote money for any loan money originally taken direct from the Consolidated Fund under the terms of Clause 10(1) which, instead of being repaid under the terms of the loan agreement, is discharged by the issue of shares. Perhaps that is clear. Possibly, if I had put in a 1354 full stop it might have been easier to understand.
The power of the Shipbuilding industry Board to enter into loan agreements containing provisions of this nature derives from paragraph (a) of Clause 6(1). The power given under paragraph (b) of that subsection is a power to acquire shares directly and not through convertible loan agreements. When shares are acquired directly, the purchase will in any event be financed out of Votes, since the cost will be "an expense" of the Board and therefore covered by Clause 10(2)(a). The reference to paragraph (a) of Clause 6(1) is therefore precise and exact. The deletion of this reference in subsection (7) of Clause 10 would really add nothing to the clause. I hope that answers the noble Lord. I could give him a fuller explanation. I should like to thank him for his help. I would say that this has been a pleasant change from South Arabia—but not without its complications.

§ LORD DRUMALBYN
I am much obliged to the noble Lord. I found his explanation entirely clear, but I am afraid it prompts me to ask a question that I asked on Second Reading. What is the amount of the Vote for the purchase of shares during the current year? I wonder whether the noble Lord is able to give me that information.

§ LORD SHACKLETON
That is a very fair point; but I am afraid I do not have the answer. Perhaps I may give the noble Lord the answer on Third Reading. I remember that he asked that question. I do not know how far it is possible to provide in anticipation of legislation; but, of course, it is always possible to proceed by Supplementary Vote.

§ LORD DRUMALBYN
I am much obliged to the noble Lord. I beg leave to withdraw my Amendment.

§ Amendment, by leave, withdrawn.

§ Clauses 10 and 11 agreed to.

§ Clause 12 [Interpretation]:

§ 7.0 p.m.

§ On Question, Whether Clause 12 shall stand part of the Bill?

THE MARQUESS OF ABERDEEN AND TEMAIR
I have no exact wording for an Amendment which I should like to 1355 move, but if I am not out of order, I should like to refer to a particular point. Clause 12, the interpretation clause, refers in line 34 to the "main engine manufacturing undertaking and obviously accessories not essential for the vessel are excluded from grant. There is, I claim, one class of machinery which cannot be looked upon as an accessory and without which a ship would be useless; that is to say, the refrigeration machinery. There are certain classes of vessels which cannot go to sea without this machinery.
Without refrigeration they are quite useless. When I first started work (I hope that the noble Lord, Lord Shackleton, will agree when I say that I was a worker; and my mates and I felt that we were workers) we were making fishing vessels of less than 100 tons and at that time the vessels did not have refrigeration plant; they had to use ice in the cargoes. To-day no fishing vessel can take to sea without refrigeration.
I do not wish to extend the argument fully, but the other vessels to which I wish to refer (they are mentioned in the Geddes Report) are classed as refrigerated vessels. In paragraph 90 of that Report there is an explanation of the importance of refrigerating plant which is in increasing demand. It is true that the demand is not so great as it was at one time. I may say that the firm with which I was engaged produced refrigerating machinery for refrigerated vessels and supplied 50 per cent. of the entire world output. We are a long way from that to-day, but in fact such vessels are built to take the plant and cannot be used without it. The vessels are used for the importation to this country of meat and many other items. A third class of ship in which refrigeration is used is the passenger vessel, which to-day, of course, is always fitted with refrigerating machinery. I would ask the Minister to consider whether it is right to exclude that very important plant, which is essential for a ship, from any form of financial help. I cannot put it in the form of an Amendment, but I hope that the suggestion may be accepted and considered by the Minister.

§ LORD SHACKLETON
I certainly recognise the noble Marquess as a 1356 worker. He is the oldest apprentice in this House, and probably in his long and interesting life has known more about shipbuilding, and indeed industry, than any Member of your Lordships' House. So one is bound to respect what he says. I fully accept the force of the argument advanced by the noble Marquess, although I have not had an opportunity to consider his suggestion. The fact is that there is a large amount of ancillary equipment for ships, including, I am afraid, refrigeration equipment, which is not covered by this Bill. The noble Marquess may say that this is a mistake, but the Bill relates basically to the organisation of the shipbuilding Industry. The refrigeration industry is not part of that industry, and were we to act on the suggestion of the noble Marquess we should be going far beyond the purposes of this Bill.
I will consider what the noble Marquess has said, and if there is any further explanation that I can give to him I shall be happy to do so on Third Reading. But, so far as I can tell not only is this point not covered, but I do not see how it could come within the terms of the Bill or of the Financial Resolution. I suppose that this type of equipment would be bought-in, and the provisions of the Bill are not directed to that particular aspect of shipbuilding. The particular aspects to which the Bill is directed are described in the Long Title. So, reluctantly, because I should like to be of help to the noble Marquess, I can offer little hope, beyond an undertaking to comment further at a later stage.

THE MARQUESS OF ABERDEEN AND TEMAIR
If I may, I would remind the noble Lord, Lord Shackleton, that the matter is mentioned in the Geddes Report.

§ LORD DRUMALBYN
The noble Lord, Lord Shackleton, has said that the matter is not covered specifically, but there is no doubt that it is broadly covered by the words in Clause 1(1): For the purpose of promoting the ability of the shipbuilding industry in the United Kingdom to compete in world markets … In the Long Title there is a reference to "marine engine manufacturing undertakings". I do not know whether a marine refrigeration engine is a specific and separable kind of engine, but if so I should have thought this could be 1357 brought within the ambit of the Bill quite simply. The great difficulty that I pointed out on Second Reading is that the margin by which the cost of British ships has to be brought down is quite considerable—it is of the order of 15 per cent.—to make the industry competitive. Any way in which costs can be brought down, by the organisation of plant or by any assistance which can be given, to make British shipbuilding as a whole more competitive would certainly be very much in line with the objects that we are pursuing by this Bill, and I do not think this suggestion should be rejected out of hand. I think that the noble Marquess has conferred a benefit by drawing attention to this point.

§ LORD SHACKLETON
It is, of course, an interesting point, but I should be very surprised if we could alter the definition, which I think is what the noble Lord, Lord Drumalbyn, wants to do in relation to main engine manufacturing. The fact that there is a definition does not mean that it can be altered to mean something which is not implicit in the name itself. The noble Lord, Lord Drumalbyn, who supported the noble Marquess, has been able to put a point now which he would not be able to put on Third Reading, because we should no longer be able to add to the Bill. But your Lordships are usually pretty tolerant, and I will try to give an answer. I must say, although I make no complaint, that this is rather a "swift one" to be bowled in the last stage of the Bill, and if I have not batted as well as I should, I think that the noble Marquess must bear some of the responsibility. However, I will certainly think further about it and tell the noble Marquess the answer.

§ LORD SOMERS
I note that there is a reference in the clause to engines for propulsion. Are steering engines therefore excluded?

§ LORD SHACKLETON
I think that I should have to go back to the noble Lord. Lord Drumalbyn, to help us, but as I understand it, they are not necessarily a "main engine". For all I know, such engines are manufactured by a main engine manufacturing undertaking, but I am going so far outside my brief that I really think I had better say no more.

§ Clause 12 agreed to.

1358

§ Remaining clause and Schedule agreed to.

§ House resumed: Bill reported without amendment.

§ LORD SHACKLETON
My Lords, we are all agreed on the urgency of this Bill, and if there are any further matters with which we wish to deal by Amendment, perhaps they can be dealt with on Third Reading. I beg to move that this Report be now received.

§ Moved, That the Report be now received.—(Lord Shackleton.)

§ LORD DRUMALBYN
My Lords, I am agreeable to the course proposed by the noble Lord. I feel certain that any further matters that have to be dealt with can be dealt with on Third Reading.

§ On Question, Motion agreed to, and Report received accordingly.