HL Deb 27 June 1967 vol 284 cc92-113

3.16 p.m.

Order of the Day for the Third Reading read.

THE MINISTER WITHOUT PORTFOLIO (LORD SHACKLETON)

My Lords, I beg to move that this Bill be now read a third time. Before we turn to the Amendments, on a procedural point I would draw your Lordships' attention to the fact that the Procedure Committee in 1961 took the view that it would be undesirable that an Amendment which had been fully debated and decided upon on the previous stages of a Bill should be moved again on Third Reading. Three of these Amendments in fact appeared and were debated on the Committee stage. But, thanks to the co-operation of the noble Lord, Lord Drumalbyn, we have contrived to dispense with the Report stage because of the importance of passing this Bill into law; and I am sure that the statement of the Procedure Committee, that it is considered undesirable, still provides us with the flexibility to do what we like in this House, which is one of our greatest advantages.

Moved, That the Bill be now read 3a.—(Lord Shackleton.)

On Question, Bill read 3a.

Clause 4:

Loans

4.—(1) Subject to the provisions of this section, the Board may make a loan to any person to enable him to acquire shares in a company carrying on a shipbuilding undertaking or a main engine manufacturing undertaking if the shares are to be acquired in connection with a grouping scheme.

(5) Any loan under this section shall require the approval of the Minister.

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: My Lords, as the noble Lord, Lord Shackleton, said, this is an Amendment which was moved on the Committee stage. The purpose of the Amendment is quite simple. It is simply to provide that, where the Minister exercises the power conferred on him by Clause 4(5) to disapprove a loan, he should state the reason to the Board, and that the Board should pass the reason on to the applicant. I certainly do not think it is at all necessary to argue this matter again. I have put the Amendment down again because the noble Lord said, in column 1325 of the OFFICIAL REPORT: …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 undertaking in regard to this matter. I think the point here was that both sides were in agreement that in the ordinary way it would be desirable for the reasons to be given; and the noble Lord was, I think, looking to see how far he could meet our point while safeguarding the public interest. I beg to move.

Amendment moved— Page 3, line 38, at end insert the said words.—(Lord Drumalbyn.)

LORD SHACKLETON

My Lords, I agree very much with the arguments of the noble Lord, and I certainly undertook to consider the question to see how far I could strengthen the assurance, even if I could not meet his full requirements. If I recall rightly, on a previous occasion the Minister said that if possible he would give it. I now have a very much stronger assurance, although it does not go the whole way. My right honourable friend has agreed that I can assure your Lordships that it is the intention to give the reasons for withholding approval, and that those reasons would be withheld only when it would be contrary to the public interest or to commercial confidence to do so. So I think we have altered the emphasis. Instead of his giving it if possible, his intention is to do so unless there are reasons for not doing so. I find it difficult to foresee the particular circumstances in which it would be refused, but, after all, this is in a sense experimental, and indeed almost temporary legislation to cover a period of years. I hope that this further, rather stronger, assurance will satisfy the noble Lord.

LORD DRUMALBYN

My Lords, I am grateful to the noble Lord for what he has said, thus giving a stronger assurance. In the ordinary way, I think he would agree that it would have been desirable to have incorporated the gist of what he has said in the Bill itself, and of course I could have drafted an Amendment which would have safeguarded the public interest. It has been done on other occasions, but the noble Lord appealed to us not to pass Amendments which were not absolutely necessary, in order that the shipbuilding industry could get the advantages of the Bill as soon as possible. For that reason, I thank the noble Lord for the assurance that he has given, which I accept with gratitude, and I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 8 [Reports and accounts]:

3.22 p.m.

LORD DRUMALBYN

My Lords, this is also an Amendment which was moved at the Committee stage, and it is quite a simple point. The clause says that the Board's report on its functions during the year should include a statement of any grants or loans made by the Board during that year, specifying in each case the grantee or borrower and the amount of the grant or loan. The Amendment seeks to add the words: and the rate of interest at which and the period for which the loan is made. It seems to me this would be useful information for the purposes of Parliamentary control and information. Here again the noble Lord was good enough to indicate that he was sympathetic towards the Amendment, and I hope that he will again be able to give an assurance on this point. 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

My Lords, as with the following Amendment, I am asking the House—and the noble Lord has accepted this—to say that in view of the urgency we should not include what he wishes actually in the Statute. May I make very clear that I do not regard this as being a desirable practice for most legislation, but this is an emergency, almost a "crash" procedure. The Board will exist only for about four years, and therefore the need to enshrine it permanently in the Statute is a little less pressing; although again I do not regard that as being entirely desirable legislative practice. However, I can give the definite assurance that my right honourable friend has agreed that the information for which the noble Lord has asked, as to rates of interest and periods of loan made by the Board, will be included in their annual report.

LORD DRUMALBYN

My Lords, I thank the noble Lord for his assurance, and I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 9 [Dissolution of Board]:

LORD DRUMALBYN

My Lords, this, again, is a matter which we discussed on Committee stage, when the noble Lord again expressed sympathy. The point here is that when the Board comes to the end of its existence it will have to make a final report. Clause 9(3) says: On the dissolution of the Board its property, and any rights or liabilities to which it is entitled or subject in consequence of its exercise of functions, shall vest in the Minister. It seems only sensible that Parliament should know what property, what rights and what liabilities are passing from the Board to the Minister. This was one of the purposes of the Amendment on the Order Paper. The other purpose was to ensure that there should be a final report. It is for these two purposes that I move this Amendment. I beg to move.

Amendment moved— ( ) Not later than four months after the Board has ceased to operate, it shall make a general report to the Minister on the exercise of its functions since its appointment, and shall include in the report a statement of the property and each of the rights and liabilities vesting in the Minister by virtue of subsection (3) above."—(Lord Drumalbyn.)

LORD SHACKLETON

My Lords, I explained to your Lordships that I did not think there was a need for any special report, but I fully agreed with the noble Lord that what he was asking for was reasonable; and arguments which had been adduced—that the information on the rights and liabilities was always available if people looked back through the earlier reports—I did not find entirely satisfactory, because obviously convenience in presentation is of great importance.

Here, again, my right honourable friend has approached the Shipbuilding Industry Board, and although I do not wish to get tied up in the Bill I think that in the absence of legislative procedure it must be a matter for the Board to agree upon, rather than for my right honourable friend to give it a direction. Therefore since the previous stage I am able to give a definite assurance that their final report will cover the matters to which the noble Lord has referred, in that it will include a general report on the exercise of the Board's functions since its establishment and a statement of the property rights and liabilities which will be vested in the Minister on the dissolution of the Board. I am sorry to keep on repeating this, but here again the reason for not incorporating this in the Bill is one that I should not regard as satisfactory with legislation for a permanent statutory body.

LORD DRUMALBYN

My Lords, I am grateful to the noble Lord for the assurance he has been able to give on behalf of the Board and the Government. Also, I am grateful to him for stressing that this is not the usual pattern of behaviour that we should adopt in your Lordships' House and that it is because of the special needs of the shipbuilding industry at this time. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 12:

Interpretation

12.—

"main engine manufacturing undertaking" means an undertaking (whether or not carried on in conjunction with an undertaking of any other description) for the manufacture in the United Kingdom of engines for the propulsion of ships of not less than one hundred tons gross tonnage;

3.27 p.m.

THE MARQUESS OF ABERDEEN AND TEMAIR moved to add to the definition of "main engine manufacturing undertaking": or of refrigerating equipment for ships defined in Lloyds Register of Shipping under the heading Refrigerated Cargo Installation'.

The noble Lord said: My Lords, perhaps I am a little fortunate in that the Amendment that appears in my name is a new one and so I have not to make any excuse. On the other hand the subject about which I wish to speak was certainly discussed during the Second Reading debate. What I said on that occasion was that refrigeration is something which is very important to all of us to-day, and that there was a strong case for certain classes of ships to be included in the benefits which are promised to the shipbuilding industry under this Bill. The noble Lord, Lord Shackleton, was kind enough to say that he followed the force of my argument although he had not been able to consider the suggestion, and that it was true (and I will say more about this in a moment) that refrigeration is an important ancillary of every ship. He was good enough to say that if there was any further explanation he would be happy to give it on the Third Reading of the Bill. I therefore take advantage of those words to put forward this Amendment.

Refrigeration has advanced greatly in recent years and is used in many ways apart from the ordinary refrigerator that everybody—or nearly everybody—has in his kitchen, and air conditioning and so forth. I am not sure whether it is generally known that there is a large refrigerating plant in the basement of this building, and some of us feel the result of it perhaps more than we want.

I wish to refer to the Explanatory Memorandum at the beginning of the Bill. It says: The object of the Bill is to set up a statutory body to be called the Shipbuilding Industry Board with the function of promoting the ability of the shipbuilding industry in the United Kingdom to compete in world markets, to enable the Board to give financial assistance for this purpose to shipbuilding and main engine manufacturing firms… The question is, how does the refrigerating equipment of a ship come into that object? In all passenger ships and most cargo ships it is an ancillary, not only for kitchen equipment but for air conditioning and so forth. On Second Reading I referred to a type of ship of which the refrigerating plant is not an ancillary; it is something for which the ship was built, and Lloyd's Register of Shipping has a separate section which refers to refrigerated cargo installations. These ships are separately inspected, and by that means Lloyd's cover the great majority of the refrigerated cargo ships in the world. There is also the Bureau Veritas and so on, but Lloyd's really control by their certificates. There are probably about 1,400 ships in the world with that special certificate.

They are mentioned in the Geddes Report. In paragraph 83 the proportion of refrigerated ships under that classification is given as 3 per cent. I think, as a matter of fact, it is probably rather less. Paragraph 90 says: The world fleet of refrigerated ships has grown in recent years and this expansion is likely to continue. Here is something in which we have to compete with foreign builders, who are quoting very low prices. The ship I have in mind, as defined by Lloyd's Register, has certainly propelling machinery, but equally it has a refrigerating plant which is really part of the mechanical equipment of the ship, without any thought of ancillaries.

In most ships, in my experience, the refrigerating compressors and machinery are in some cases right alongside the propelling machinery and in other cases in a separate compartment, and the same engineering staff look after the whole lot, particularly in watches; those normally in charge of the propelling machinery will also during their watch be in charge of the refrigerating plant for which the ship was built; in fact it was built round it. The noble Lord, Lord Drumalbyn, wondered whether there was a marine refrigerating engine. In the early days there was, but to-day matters have gone ahead and the refrigerating plant is of a nature which can be used for any purpose. In the case of the ships to which I have referred it is applied to keeping the cargoes of those ships and bringing them to their destination, mostly for food, sometimes for other purposes, in good condition.

There is a further point. It is the feeling that the references in the Bill and in the purposes of the Bill which I have already read out to main engines relate to something almost definitely defined as propelling machinery. It would be not a very great alteration, and certainly it would be valuable to our industry, if it were made plain that this very important refrigerating plant is included in main plant. A great many of the main engines are not built in the shipyards—I think there are very few which are—but I can say that at the shipyards where there is a considerable shipbuilding industry there are attached to the yards what are almost branch works of the refrigerating manufacturers. Their men are constantly in the yards, because it is not merely a question of putting in a compressor or something which is driven by oil, or whatever it may be; the whole of the ship is equipped with the necessary apparatus to fulfil its task. That means that there are always in the shipyards a number of men working on that particular aspect of the ships, especially those ships which are defined as a separate class of ship and are inspected by Lloyd's and have to be passed by them, after strict inspection, for the task they have to perform. With those few thoughts, I beg to move the Amendment in my name.

Amendment moved— Page 9, line 39, at end insert the said words.—(The Marquess of Aberdeen and Temair.)

3.38 p.m.

LORD SHACKLETON

My Lords, the noble Marquess has made a most cogent case, and I should like to thank him personally for acquainting me in advance with the particular arguments he was going to use. If a case is made by him (with, I think, an unequalled experience of this industry; for I do not believe that anyone in your Lordships' House knows as much about this subject as the noble Marquess does) one is bound to listen with very great care indeed, and I have taken quite a lot of trouble, first to understand the purpose of the noble Marquess's case and to assess it, and also to provide a reply which I hope will explain why it is impossible to meet what he wishes but, at the same time, goes some slight way in one part to meet him.

Your Lordships will recall that on the last occasion the noble Lord, Lord Somers, also referred to steering engines, and frankly this further example indicates the difficulty we are in and why it would be impossible under this Bill to seek to do what the noble Marquess wants. As he knows, the shipbuilding industry is to a very considerable extent an assembly industry. It puts together the products of a very large number of industries, ranging from heavy engineering to electronics, furniture, plastics and so on. The Geddes Report emphasises the importance of bought-in equipment in the economics of shipbuilding and also suggested (I am sure the noble Marquess has seen this), in Chapter 12, ways in which suppliers of equipment could themselves assist the shipbuilding industry to become competitive. Equally, it pointed out the benefits that a competitive shipbuilding industry would bring to the suppliers of ships equipment. This Bill is intended to promote the competitiveness of the shipbuilding industry as such; and although much will flow out in benefit to others, assistance is confined, except in one respect, to that industry. The one respect is that of main propulsion engines.

The reasons why this particular kind of equipment was brought within the scope of the Bill are, first, that the main engine is the largest single piece of equipment which the shipbuilder has to buy, and, secondly, that traditionally main engine building has been regarded as part of the shipbuilding industry, and is at present carried out largely by shipbuilding firms or by firms associated with shipbuilding firms. So I take the point of the noble Marquess that there may be other firms who are closely associated, geographically or otherwise, with engine building firms. To extend the provisions of the Bill to cover assistance to all other industries which supply equipment of one kind or another would mean extending it over a wide area. Refrigeration equipment and auxiliary engines, again, for working the steering gear, are not, in fact, made in the shipbuilding industry—at least, not for the most part—but by firms outside that industry, in many cases in conjunction with the manufacture of similar equipment for use in industry generally in the country.

As the noble Marquess knows the definition is precise in this matter; it appears in the definition clause. The main engine is well understood in the industry to mean the large engine, most commonly a slow-speed diesel, but sometimes a steam turbine or medium-speed diesel, which drives the propeller shaft and provides the propulsion for the ship. The definition in the Bill ties the term to "propulsion machinery". The noble Marquess said that we in this House depend on, or are perhaps handicapped by, our refrigeration equipment. But no one would suggest that the refrigerator is part of the propulsion machinery of the House of Lords. The noble Marquess himself is part of that machinery.

I must emphasise that this Bill is drawn specifically in relation to the shipbuilding industry. I hope I have shown to your Lordships that it would mean going far outside the purposes of the Bill and of the Geddes Report if we were to accept this Amendment. I think there are other reasons technically why we cannot meet this within the Bill. But there is one thing that I can say in encouragement: the guarantees given under Clause 7, which are guarantees in relation to the actual shipbuilding, will cover not only the cost of the hull of the ship but all the cost of any equipment, whether it is refrigeration equipment or other kinds of equipment, included in the ship while it is being built. While, therefore, refrigeration equipment will not rank for benefits under Clause 4, or indeed in relation to grants under Clause 2 or Clause 4, or for loans, it will benefit under this particular provision.

Perhaps I may make a further point which I hope will be of interest to the noble Marquess. It is possible that in certain cases shipowners seeking guarantees may wish for foreign equipment to be incorporated in the ship. It is not the intention that the loan obtained by the purchaser under guarantee shall be used for the purchase of imported materials, components and equipment; and a procedure will be set up, similar to that operated on export orders by the Export Credits Guarantee Department and the Board of Trade, to ensure that the interests of competitive supplying industries in this country will not be harmed by the provision of a Government guarantee in respect of a contract. Under this procedure, account will be taken, in determining the amount of the guaranteed loan in each case, of the availability, or otherwise, on competitive terms of equivalent products from British sources.

I hope that I have been able to convince the noble Marquess that to extend the provisions of the whole of this Bill and of particular grants and Government loans to refrigeration equipment would introduce great difficulties. In a sense, it is arguable that by bringing in main engines we have already created a difficulty, and at every point beyond that we create wider ones. Nevertheless, I hope that I have been able to convince him now, though I have not been able to do so before, that this Bill will be a help, and that the help under the guarantees will be available to the British refrigeration industry.

THE MARQUESS OF ABERDEEN AND TEMAIR

My Lords, if the noble Lord will allow me to say so, I did, perhaps, miss out one point on this subject. The ships carrying this special nomenclature of refrigerated cargo vessels account for only about 3 per cent. of the vessels in question. In fact, the 3 per cent. figure is given in paragraph (8) of the Geddes Report, but it is rather less than that.

LORD SHACKLETON

My Lords, it is of course a question of demarcation, something which has bedevilled the shipbuilding industry in other ways. There again, one can say the same thing about passenger ships. Four per cent. of ships are passenger ships. I hope that I have made clear the reasons why we cannot accept this Amendment, and our conviction that the Bill will none the less be of help.

THE MARQUESS OF ABERDEEN AND TEMAIR

My Lords, I certainly shall not divide the House, and I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

LORD DRUMALBYN

My Lords, before we part with this Bill perhaps I may be allowed to say one or two words—

LORD SHACKLETON

My Lords, may I interrupt the noble Lord? Perhaps it would be convenient if we said our final words on the Motion, That this Bill do now pass. I beg to move that the Bill do now pass, and will reserve my final remarks until other noble Lords have spoken.

Moved, That the Bill do now pass.— (Lord Shackleton.)

3.49 p.m.

LORD DRUMALBYN

My Lords, the purpose of this Bill is one that is supported by both sides of the House. Primarily, it is to set up a Shipbuilding Industry Board which is to operate for three and a half years, or at most four and a half years, in the hope that, as a result of the assistance that the Board can give towards the regrouping of shipbuilding firms and of marine engineering firms, and the additional assistance, by way of guarantees, which the Bill enables the Board to give, the shipbuilding industry in the United Kingdom will be enabled to make itself competitive and to regain a proportion of the business which it has lost.

There are four points that I should like to make. They are all points of detail which we have already covered, but not, I think, covered completely. One of the ways in which assistance can be given is by loans for the re-training of workers. Under Clause 4 it is possible to give such loans on condition that the re-training is done for employment by the shipbuilding undertaking and for the purpose of that shipbuilding undertaking. I suggested at an earlier stage that it may well be convenient for one group, say one of the two groups on the Clyde, or one of the two groups in the North-East, to do the re-training for the other group, or indeed for other independent companies as well. The point we were discussing was whether it would be possible for the group which did not do the actual training to get a loan. It seems to me that it would be possible for the Board to give a loan to the group whose workers are being re-trained irrespective of where they are being re-trained. I should like to have this assurance from the Government. I feel that as the clause is drafted it is possible for such a loan to be given, provided that the workers are to be employed by the person to whom the loan is given, and the re-training is for the purpose of that shipbuilding undertaking.

My second point deals with the question of the remission of interest on loans. Under Clause 5 such remission must be interest in respect of any period before the end of the 1970s. As I pointed out at an earlier stage, it may well be that the loan is only given in 1970, in which case the scope for remission of interest will be very small indeed. I do not know whether the noble Lord is able to give any further explanation on this point, but it seems to be a small blemish on the Bill.

My third point is one on which the two sides of the House are not agreed, that is, that Clause 6 allows the Board to take shares in the company as the counterpart of the money that it advances. There is no reason in principle why this should not be done, but there are very good practical reasons why it should not be done. I do not want to repeat the arguments which I put forward at the earlier stage. I would only say that I hope the Board will have regard to the practical disadvantages with regard to its own standing in the eyes of the industry if it takes shares in one of the groups and not in another. It will be considered to have more of an interest in the group in which it holds shares than it has in the others. I feel that this will be the case even though the total amount of money, whether by grant or loan or shares taken in the company, is the same as between the two groups. It will still be thought that the Board has a greater interest in the group in which it has taken shares.

The fourth and last point that I wish to raise relates to guarantees. The argument I put forward at an earlier stage was that it was unfortunate that there should be discrimination between different firms or different groups in this country as to whether there can be a guarantee or not. The Bill makes it clear that they are entitled to guarantees if they are undertaking reorganisation of the resources used by the firm. "Resources" is defined in the interpretation clause as follows: 'resources', in relation to any undertaking, means the buildings, plant, equipment and manpower used for the purposes of the undertaking". It is sufficient, under the Bill, if they are making satisfactory progress in the preparation of plans as well as putting them into effect. I pointed out that there are difficulties involved in this, because it may well be that an order may come along before much progress has been made in the preparation of the plans. I suggested that it was desirable that, so long as any indication of the intention to make some degree of reorganisation was apparent, such guarantees should be available, otherwise one would have a most unfortunate discrimination between different firms. One might even put a firm or a group in the position of losing an order which would have enabled it to carry on and reorganise.

Finally, while this Bill deals with reorganisation and re-grouping, surely the principal issue here is the will within the industry itself to be competitive. This is fundamental to the whole exercise, and unless all those in the industry are well aware of the absolute necessity for so arranging their relations with one another in the industry as to enable competitive quotations and a sound profit to be made, then all the money that may be advanced by way of grants, loans, and all the rest of it, will have been wasted. Therefore, in supporting this Bill, I am sure I speak for all your Lordships when I say that all the Bill can do is to put the ball at the feet of the shipbuilding industry in the hope that it will shoot a goal. The goal is to make the industry competitive in the world so that it can prosper and make progress, not only in the near future but over a long period of years.

3.58 p.m.

LORD MOLSON

My Lords, I should like to take up the note of the last few sentences of my noble friend Lord Drumalbyn. Unfortunately, I was not able to attend the Second Reading of the Bill, and therefore was not able to raise a matter which seems to me to be of very great importance. I refer to the question of whether there is going to be an abandonment of the restrictive practices and the bad relations between employers and employed, which are the chief reasons that this industry has declined in the way it has. The decline is not only wholly lamentable, but sensational. In 1946, 53 per cent. of all the tonnage in the world that was launched, was launched in this country. Fifteen years later, by 1961, it had fallen to 15 per cent. If I rightly understand some figures I have been given, by 1967 it had fallen to about 8 per cent.

I criticised the Shipbuilding Credit Bill introduced by the Conservative Government in 1964 on the ground that it made no provision whatsoever for this problem of demarcation disputes and restrictive practices being tackled. The noble Lord, Lord Beswick, in introducing this Bill said that the 1964 credit scheme was intended to provide a breathing space which our shipbuilders would be able to use to strengthen their competitive power. By the end of 1964 it was already clear that these hopes were unlikely to be fulfilled. That in large measure was due to the fact that this financial assistance had been given unconditionally, and nothing in fact was done to alter the restrictive practices and old-fashioned methods which were insisted upon by the trade unions. The experience which the Government have had in the case of the Fairfield shipbuilding yard, what has happened in the case of liner trains, what is happening at the present time in London at the Stratford base—all these illustrate how useless it is to provide the means for modernising an industry if there is not, in the words of my noble friend Lord Drumalbyn, a willingness to use them.

If I construe this Bill aright, it is possible for the Shipbuilding Industry Board to take some steps along these lines. The grants under Clause 3 are conditional upon putting into effect a reorganisation of the resources used by him"— that is, the recipient of the grant— 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 … make grants to that person. When one turns to page 9 one finds that the definition of "resources" includes manpower. Therefore I think it would be possible under this Bill for the Board, and therefore for the Government, whose consent is required under subsection (2) of Clause 3, to pay a grant. I should like to ask the noble Lord whether he can give any indication that the Government are prepared to use this Bill, when it becomes an Act, for the purpose of achieving some progress in that way.

My own Party indicated—it was said by Mr. Marples in another place, and it was largely repeated by a noble friend of mine in this House—that it was for the industry to manage its own affairs. I do not think that that is entirely the doctrine of the present Government; and certainly when public money is being made available to give assistance to an industry it is entirely proper that that assistance should not be given unconditionally. Certainly, it is proper to insist upon such conditions as will ensure that the money is well spent and is useful for the purpose of bringing about an improvement in the prosperity of that industry. I shall be glad to know from the Government whether they are of the opinion that this Bill enables them to take steps of that kind, and for an assurance that it is, as I hope, their intention to do so.

4.3 p.m.

LORD SHACKLETON

My Lords, on the final stages of this Bill I should like, first of all, to express again my gratitude to noble Lords for the speed with which we have dealt with this important subject, on which there were a number of real issues of significance to discuss. Thanks to the rapidity of the House of Lords we have, in fact, completed our business rather sooner than my right honourable friend even thought possible, and in the process, even though we have not altered the Bill itself, I think we have made provision to ensure certain necessary improvements in its administration. I hope that the Bill will shortly receive the Royal Assent. Before I make my final valedictory remarks, I should like to deal with some of the points which have been made.

The noble Lord, Lord Drumalbyn, raised again the difficult question which really touches on the criteria for deciding whether a guarantee should be given. He asked for an assurance that so long as a shipbuilder had signified (I hope I have this correct) his intention of going ahead with plans for reorganisation, and had indicated that he was doing something in that direction, a guarantee on the ship which he was to build would not be refused. In a sense this was a rather different approach from that of the noble Lord, Lord Molson, in relation to one particular and very important aspect of shipbuilding efficiency. I am afraid that it is not possible to give the noble Lord, Lord Drumalbyn, such an assurance.

In the first place, the application of the criteria is very much a matter of judgment which rests with the Shipbuilding Industry Board. We have set up the Board; we have given it a job, and we have given it certain absolute criteria, concerning the need to achieve a competitive shipbuilding industry, under which to operate. And the Board will have to test its decisions against its interpretation of those basic principles. It is not enough for a firm merely to say that they are going to reorganise, and possibly to make some minor moves in that direction. The Shipbuilding Industry Board should be satisfied that there is a real and urgent intention to get on with reorganisation; that the reorganisation is of a kind which will increase the efficiency of the firm; that the order concerned will help, and not hinder, in the necessary reorganisation—for example, in the specialisation of yards—and that it is genuinely needed by the firm concerned. It is certainly not the purpose under Clause 7, which deals with guarantees, to enable shipyards to get orders merely to survive for a little longer, or to build up large order books as accretion for the firm. The Shipbuilding Credit Act 1964 had this effect. The purpose of the scheme is to reinforce the incentive to reorganisation on which the survival of the industry ultimately depends, and we expect the Shipbuilding Industry Board to apply those criteria pretty strictly before making its recommendations to the Minister.

It was suggested during the Committee stage that by including criteria of this kind the Government were departing from the recommendations of the Geddes Committee. I do not think the noble Lord used that argument to-day, and in fact that is not so. It is true that the scope of the guarantee scheme included in the Bill is a good deal wider than the limited credit scheme proposed by the Geddes Committee. But in paragraph 556 of their Report the Committee recommended that credit should be given only in cases where the orders concerned would reinforce the incentive to grouping and reorganisation, and the criteria now included in the Bill are very much in the spirit of the criteria recommended by the Committee.

May I now turn to the very important point raised by the noble Lord, Lord Molson, which is of course fundamental to the success of this industry? It is because of the failure of previous, more limited, efforts that the Geddes Committee made their strong recommendations and the Government are carrying them out. In Chapter 21 of their Report the Geddes Committee regarded the improvement of industrial relations in the industry as of paramount importance to the success of the reorganisation planned for the industry. The Government fully accept this view and agreed with the spirit of the Amendments put down in the House of Commons, which would have made the giving of guarantees under Clause 7 conditional on the conclusion of formal agreements with the workpeople in the yards concerned to promote higher productivity, to remove obstacles to increased efficiency, and to ensure continuing consultation between management and work people.

As someone who has been for the past ten years, until I became a Minister in the present Government, concerned very largely with industrial relations in the personnel management field, I know what a vital subject this is. But to include a statutory requirement for the conclusion of formal agreements could be unnecessarily rigid. In the last resort, an industry gets the industrial relations which the management has deserved. This may not always be fair, but this is where the responsibility must lie in the first instance. I think it is better to give the Shipbuilding Industry Board discretion to take this aspect of reorganisation into account with all the others, and not to set up—and the noble Lord did not advocate it—some rigid statutory requirement.

My right honourable friend said that the purpose and the spirit of the arguments now put forward by the noble Lord, Lord Molson, would be very much in the mind of the Shipbuilding Industry Board as it approached its task. If there were no response on this matter of relations between management and workers it would clearly be a factor—and I want to stress this again—in disinclining the Board to take the view that the proposed reorganisation was likely to be effective. More positively, the Board will be looking for and seeking to encourage in every way possible the considerations which were mentioned in another place, and which have been mentioned again now by the noble Lord.

Since then, my right honourable friend has received from the Chairman of the Shipbuilding Industry Board the following information on the action which the Board proposes to take on this subject. The Board is arranging to ask shipbuilders who apply for their recommendations under Clause 7 to say what arrangements or agreements have been or are being made to promote higher productivity, to remove obstacles, to increase efficiency and to ensure continuing consultations between management and workpeople. The Board also proposes to keep this consideration well in mind, not only in the context of Clause 7 of the Bill but also as one of the most important elements in the implementation of the Geddes Report and in the administration of the other provisions of the Bill.

It will therefore be seen—and I hope this will go some way to satisfy the noble Lord—that in deciding whether or not to recommend financial assistance for any shipbuilding firm the Shipbuilding Industry Board will have very much in mind the removal of obstacles to increased efficiency. So I hope that the noble Lord will have got from the Labour Government what he in fact failed to get from his own Government on an earlier occasion. I think no one should underestimate the importance of this. Of course, as has been made clear, this Bill is producing incentives, but these must work in order to enable people to benefit from them.

The noble Lord, Lord Drumalbyn, said something about the retraining of workers, and here again I think I can satisfy him to a small extent. He asked whether loans could be made available to a shipbuilding firm for retraining workers of another firm, and he also referred to the meaning of the word "workers". He did not raise the latter point to-day, however, so perhaps we can leave it for further argument by lawyers. But on the first point, it is true that a shipbuilding firm will not be able to qualify for a loan in respect of its activities in retraining the workers of another shipbuilding firm. On the other hand, a firm which, as a result of its reorganisation, wishes to have some of its workers retrained, will not be debarred from seeking a loan for this purpose solely because the training will be done not on its own premises but elsewhere; for example, in a training centre—perhaps one already existing under the Industrial Training Act, but with the special purposes of this Bill in mind—run by another shipbuilding firm, or possibly an institution.

In such circumstances, the firm with the training centre would presumably (as, again, it might do under the Industrial Training Act passed by the previous Government) make a charge for providing those facilities, and the firm whose employees were being retrained could seek a loan to cover that expense. I hope the noble Lord will agree that perhaps this is the appropriate method in all the circumstances. It would be inappropriate, and rather difficult, for a firm to take on a loan in order to provide facilities which would benefit another shipbuilding firm. Indeed, it might be very reluctant to do so. The obligations relating to that loan—the payment of interest, and so on—should clearly rest on the firm which is to benefit. There is also one further point. Any training centre which a shipbuilding firm runs is unlikely to be devoted solely to retraining workers in new skills. It is more likely to be a general training centre, and retraining will be only a part of its activities—and this, of course, raises the wider question of the Industrial Training Act.

My Lords, I hope that I have been able to satisfy the noble Lord, as I fear that I still shall not be able to satisfy him on his suspicions about the powers of the Board to act in a less than impartial way in regard to those firms in which investments have been made. We discussed this matter very fully, and the noble Lord clearly did not want to go into it again. I can only repeat my assurances that, while I believe that the argument in favour of this proposal is unanswerable, and is perfectly fair and just, I should not have regarded it as a major part of the Bill; and I certainly have no anxieties that partiality will be shown. The fact that the noble Lord himself is suspicious indicates, of course, the danger that other people in the industry will be suspicious, but I can only repeat my assurances and my confidence in the Shipbuilding Industry Board.

My Lords, with the passing of the Bill the way will be open, in a very few days indeed, for the establishment on a statutory basis of the Shipbuilding Industry Board and for the provision of finance to the industry. As the noble Lord said (and the noble Lord, Lord Molson, also gave figures), the industry is passing through a very difficult and very dangerous period, and much of the earlier optimism aroused when the Geddes Report was first published has evaporated—and this is understandable. The orders which have been coming in have been very low; and the financial position and profitability of many of the firms are dangerously difficult. But this Bill provides the legislative powers to enable the programme outlined in the Geddes Report to be carried out. In certain respects—for instance, in the matter of loans—it goes very much further in giving large-scale first aid.

The need is urgent, and we cannot stress this urgency too much. Already the industry has taken a number of important steps; and the Shipbuilding Industry Board, as your Lordships know, is already, even in its pre-statutory form, taking a very active part. There have been the studies on new groupings on the Wear and the Upper Clyde; and there has been the proposal for the merger of the four shipbuilding firms on the Tyne. But, of course, grouping is not an end in itself. There is the need for reorganisation in men and equipment; but it is essential—and I am quite certain that everybody who has studied the industry, especially the Shipbuilding Industry Board, regards this as a necessity—that, if reorganisation is to be successful, there should be grouping. The Government therefore welcome the recent moves.

Here again, in my final words I should like to emphasise the importance of what the noble Lord, Lord Molson, has said. Indeed, this was in the notes of my speech even before I knew that the noble Lord was going to raise this matter. There is this vital need to improve the climate of industrial relations; and I may say that, despite some much-publicised disputes in the industry, there seems good reason to believe that there has been some improvement in the climate. The effects of the series of local productivity agreements early last year are working through, and procedure agreements dealing with the difficult problem of demarcation have been reached with the unions in the industry.

The Geddes Report has provided an outline for action; but of course the need is urgent. The urgency with which your Lordships have dealt with this Bill will, I hope, be communicated to those doubters in the industry who still do not appreciate that a vital national interest and their own livelihoods are at stake. Therefore, on behalf of your Lordships I should like to extend good wishes to the shipbuilding industry with, if I may say so, a firm instruction now to "get on with it." I am certain that your Lordships would also wish to send good wishes to the members of the Shipbuilding Industry Board, Sir William Swallow, Mr. Tony Hepper and Mr. Gormley, who have taken on a task of the greatest importance which I know is already making greater demands than they anticipated. I am grateful to your Lordships that this Bill is now being passed into law. I beg to move.

On Question, Bill passed.