THE SHIPPING INDUSTRY

HL Deb 03 April 1968 vol 290 cc1228-38

2.50 p.m.

LORD GEDDES rose to call attention to the shipping industry; and to move for Papers. The noble Lord said: My Lords, in drawing your Lordships' attention to the shipping industry I must first declare an interest, both as a director of a shipping company and as this year's President of the Chamber of Shipping of the United Kingdom. It is now just over eight years since this subject was last debated in this House. This in itself is an indication of the extent to which, in peace time, shipping is a forgotten industry, or at least one which is taken too much for granted, except of course during a strike of seamen or dockers, when the industry's services become all too conspicuous by their absence. Whenever on such occasions shipping is mentioned in public, words like "vital" and "lifeline" are freely and sincerely used. But it is not mentioned nearly enough in ordinary times, or in the right quarters.

There is a further justification for inviting your Lordships to consider this subject once more after so long a time, and that is the fact that a Committee of Inquiry are now examining the industry, under the expert chairmanship of the noble Viscount, Lord Rochdale, whom I am glad to see here in his place to-day. Perhaps I should make it clear that this time I shall confine myself to shipping, as distinct from shipbuilding. It is true that, in a sense, these are sister industries; but they are quite separate, and shipbuilding has problems of its own which have been widely publicised. Similarly, I shall not refer to another industry with problems of its own—the fishing industry. This has always been regarded as distinct from the merchant fleet, and is indeed quite different in terms of operation, ownership and the legislation which applies to it.

My Lords, eight years ago the outlook for British shipping, as many speakers then said, and as indeed I said myself, was black. The picture which I have to paint to-day is not one of unmitigated gloom, but rather of change: of great changes that have already taken place, and of more to come. At the time of the last debate world seaborne trade amounted to 970 million metric tons. By 1965 this figure had increased to 1,600 million tons, and it is still rising. But a large part of this increase has been in the quantity of oil being shipped, which is now substantially greater than all other cargoes put together. This has had a profound effect on the structure of the world's merchant fleets, including our own. The world merchant fleet has risen over the same period from about 104 million to about 167 million tons gross. The fact that it has not increased at quite the same rate as world trade is partly because the newer ships tend to be faster, and partly because of the reduction in the number of ships laid up as a result of lack of employment. In January, 1960, there were 6¼ million tons laid up, including nearly 1 million tons of British shipping; in January of this year the world figure was down to 750,000 tons, including only nine quite small British ships, totalling 60,000 tons. But the most dramatic increase in ships' tonnage has been in tankers. The world's oil carrying capacity has risen during this period by well over half, and the ships themselves are bigger. At the time of the last debate, only 10 of the tankers on order had a deadweight tonnage of more that 100,000 tons—the first of many of the "Torrey Canyon" size. Now throughout the world there are already in service 30 vessels half as large again; and there are at least 170 of these under construction or on order, mostly in the 200,000 ton class, and including some of over 300,000 tons. In sheer size tankers have now taken the place of the passenger liner, and in far greater numbers.

Where does the British merchant fleet stand in all this? It has increased, but at nothing like the same rate as the world fleet, and it now stands at 20½ million tons gross. Its share of world tonnage, however, has fallen over these eight years from 19 per cent. to just over 12 per cent. This is a very different picture even from 1939, when we could claim 28 per cent. of the world's tonnage. We have in the past year lost our place at the head of the league table to Liberia; and although Liberia—in this context only, and with all respect—is a paper tiger, for ships under her flag are mostly owned either by American or Greek interests, we are no longer very far ahead of Norway and Japan, both of whose fleets have increased dramatically in the past few years.

There are many reasons for this relative decline, but the main one has been the switch from coal to oil as a source of energy. In 1913 we exported 77 million tons of coal, mostly in our own ships, well over twice the weight of our total exports last year, though of course only a fraction of their value. By 1938 the figure was down to half of this, and by 1967 it had dropped to less than 2 million tons. By contrast, our imports of oil and oil products have risen in weight by over eight times since 1938 to the present figure of well over 90 million tons. In these 30 years we have changed from being exporters of one form of energy to being importers of another, and on even a vaster scale. So it is not surprising that the pattern of our shipping operations, and the nature of the ships themselves, should have changed. It is significant, too, that the countries whose fleets have increased at a faster rate than ours are for the most part untrammelled by the demands and precedents of other industries.

Nevertheless, our shipping industry continues to play an unobtrusive but vital part in our economy as, in almost every sense, an invisible exporter It is sometimes difficult to grasp what those words mean, and perhaps an example might help. Last week, a 20,000 ton British flag ship of my own company brought a cargo of oil into London. She last sailed from a British port in December, 1962. During these 5¼ years she steamed over 390,000 miles or, to put it another way, she carried roughly 8 million ton-miles of cargo, and always in the so-called cross trades far away from home. She has been truly an invisible exporter during the whole of that time.

The net contribution of United Kingdom shipping to the balance of payments is about £140 million a year, or a quarter of the whole of our invisible earnings. But this is not the whole story. British ships help to carry our own exports and imports, and if there were no British ships the net cost to our balance of payments would be of the order of £300 million a year. The industry achieves this result on a dangerously narrow margin of profitability, though this is characteristic of shipping throughout the world. According to the Economist, the overall return on capital employed by United Kingdom shipping companies in 1967 was a mere 0.9 per cent.; and a report on European liner operations not long ago suggested that an increase of 20 per cent. in freight tariffs would be needed to ensure a reasonable return.

There are, of course, times when at least some types of shipping enjoy a boom, but the lean periods in between tend to be protracted. In spite of this, our fleet has been transformed, and for the better, in the past few years. In the last debate, the noble Viscount, Lord Runciman of Doxford, concluded by saying: If we have not in the years to come to the same extent the biggest mercantile marine in the world, at least let us try … to have the best."—[OFFICIAL REPORT, 3/2/60; col. 925.] The first part of that is already true. We have not yet quite succeeded with the second—for example, our ships are on average slightly older than those of Norway and Japan—but we are well on the way towards it.

The most obvious change has been to fewer but larger ships—from just over 3,000 to slightly under 2,200, but with an average tonnage of just under half as much again. Conventionally, our fleet is divided into three main classes of ship—liners, tramps and tankers—and each of these, in turn, into ocean-going, which is much the larger part, and coastal. Liners are those ships which ply on fixed routes to fixed schedules, like buses, and the great majority of them are concerned wholly or mainly with cargo, including refrigerated cargo. Because of the withdrawal of so many passenger liners, as a result mainly of competition from the air, the tonnage of ocean-going liners as a whole has decreased, and now represents about 42½ per cent. of the whole oceangoing fleet, compared with 52½, per cent. eight years ago. This trend will be accelerated by the emergence of container ships, a specialised form of liner of which I shall have more to say later.

The next group, the tramps, are rather like hire-cars, in that they can be chartered either for a single trip or for a period, though the latter is becoming more usual. Their tonnage has increased a little in these eight years, and now represents 20 per cent. of the ocean-going fleet, but they include an increasing proportion of the large new ships known as bulk carriers, which are used for such commodities as iron ore. The third group, the tankers, are owned mainly by the oil companies for the transport of their own raw material or products. Their numbers have fallen by about a third, but their average tonnage has doubled, and their proportion of the ocean-going fleet has risen from 30 per cent. to 37 per cent. The contrast will be still more marked in two or three years' time. At the beginning of 1960 there were only four United Kingdom owned and registered tankers with a carrying capacity of more than 40,000 tons; but of the 200,000-tonners that I have mentioned as being on order to-day, 25 at least will form part of the United Kingdom fleet of to-morrow. So much for the oceangoing vessels.

The coastal and short-sea fleet, on the other hand, has declined both in number of ships and in total tonnage, as a result largely of the continued falling away of the seaborne coal trade. Although there is the same trend towards larger vessels, this is limited by the capacity of the ports and the terminals to which they trade. These broad divisions tend to conceal the emergence of highly sophisticated types of new ship, such as roll-on, roll-off ships in the short sea trades, methane carriers and bulk chemical carriers, oil-rig service craft, and so on. These are all evidence of increasing specialisation, and they bring me back to the most revolutionary of the specialised vessels of to-morrow: the big container ships which will soon begin to take over the role of the conventional cargo liner in the deep-sea trades. The revolution here is not so much in the idea of pre-packing cargo in enormous boxes of uniform size, instead of stowing it in the holds of a ship item by item or bale by bale; it is in the concept of through-transport from inland depot to inland depot, with the minimum of handling and delay at the ports and with a single operator responsible for the entire movement.

Britain is often accused of having bright ideas but failing to exploit them. Here the reverse is the case: we cannot claim to have invented containers, but we have seized the opportunity they offer and are developing the idea further and on a larger scale than anyone else. Next year, in addition to existing short-sea container services and to transatlantic services operated by British and foreign shipowners in collaboration, nine specially-built ships will come into operation on the Australian run, doing the work of fifty or more conventional cargo liners. It may not be long before the principle is applied to other routes where the volume of cargo justifies the very heavy capital investment.

I propose to touch only very briefly on the all-important human aspect of these changes. Bigger ships, with sophisticated equipment, mean, ton for ton, smaller crews. Since the last debate, the number of United Kingdom-domiciled seafarers has fallen from about 140,000 to about 110,000, and it must continue to fall as the industry becomes more and more capital-intensive. At the same time, the modern officer or rating is becoming increasingly professional and versatile. Higher standards of entry are being set, and more and more emphasis is being placed on training at all levels. The recent introduction of degrees is one example, and the opening last year of the magnificent National Sea Training School at Gravesend is another. One extremely interesting development is the gradual and planned breaking down of the traditional divisions between deck and engine room, and even between them and the catering department. The master of a ship and his officers are coming to be regarded as managers, and increasing use is being made of work study and other management techniques.

These developments bring new responsibilities. One of them is safety, and perhaps I may touch briefly on tanker safety, since I have been particularly concerned with it. In so doing, I can hardly avoid mentioning the ill-fated "Torrey Canyon". This was an incident of the most unlikely kind, and the result of sheer ineptitude. But it happened, and it has been followed recently by two further incidents with similar results on the other side of the Atlantic. As I have pointed out, the world has come to rely for its energy mainly on crude oil, and in doing so it has exposed itself more and more to a new kind of hazard, the extent of which we have realised only gradually. A great deal of work needs to be done, and is being done, to minimise this hazard. But cool judgment is required where restrictive measures are concerned. It would be wrong for example, to be panicked into restricting the size of tankers. Collisions are a greater risk than strandings, and fewer and bigger ships, provided that they meet the highest standards of manning, actually reduce the chances of collision. Above all, in an international industry like shipping such measures must be concerted internationally. Not only is it pointless and dangerous to have ships of different nations obeying different rules, but it is also merely quixotic and economically suicidal to impose on one's own ships restrictions from which those of other flags are exempt.

Possible measures arising out of the "Torrey Canyon" episode, such as recommended sea lanes, are being thoroughly worked out by the Inter-Governmental Maritime Consultative Organisation. This United Nations organ could easily have become a forum for mere sectional theorising, but in this case it has shown itself to be a well-balanced and powerful instrument with considerable potential for the future. I only hope that IMCO's work will not be undermined by hasty unilateral action by the United States as a result of the recent incidents, and, more generally, that it will resist the temptation of reaching out too far into fields of responsibility which are the province of established institutions, such as the classification societies in the field of ship design.

It is somewhat ironical that Britain should have been the first sufferer from a discharge of crude oil on the "Torrey Canyon" scale, for we have taken the lead in promoting international agreement to limit the far more common cause of oil pollution, the discharge of wastes after tank washing, and a British tanker company has developed a system, which is now widely adopted, which eliminates practically any discharge at sea at all. We have also our own tanker safety code for the avoidance of fire and explosion, which is now being adapted for international application, and is to be followed by a similar code for the carriage of bulk chemicals. Only last September tanker owners from all over the world met in Brighton to exchange information on the causes of casualties. And, although this is my special field, there are similar developments in other trades. It may well be that the time is not far off when it will be necessary to reach international agreement on at least the minimum qualifications for those who are entrusted with the command of ships which may enter the harbours of any nation in the world.

In a commercial sense, shipping the world over is peculiarly vulnerable to factors outside its own control. Some of these are quite unpredictable, like gluts and famines: others result from the actions of Governments, including our own. One example has been the closure of the Suez Canal for the second time in a dozen years, with 15 ships, including four valuable British liners, bottled up inside it for the past ten months. The disturbance to the pattern of trade has been profound during this period, and the cost has been heavy to shipowners and consumers alike. One thing is certain: if and when the Canal reopens to shipping of all nations, as of course we all hope it will, it will never resume its old importance. Before last year's hostilities just three-quarters of the Canal's revenue was from tankers carrying crude oil from the Persian Gulf to Europe and returning in ballast. The largest vessel which could traverse it fully loaded was about 70,000 tons dead weight; but the Canal authorities had laid plans for straightening and deepening it to take a 200,000-tonner by about 1975. But at last year's level of Canal dues it would already have been more economical to take a loaded 200,000-tonner, a number of which were by then on order, round the Cape. Now, with the uncertainty about the future of the Canal, many more vessels of this class have been ordered, with the result that by the early 1970s there will be sufficient of them in service to carry all the oil that used to go through the Canal. The flow of oil through the Canal to North-West Europe may well be reduced to a trickle; and it is by no means certain that the big tankers will want to use it even if, and when, several years later, it is deep enough to take them. If meanwhile the Canal dues are increased, to compensate either for this loss of revenue or for the cost of deepening, they may become prohibitive even for a large proportion of dry cargo ships, including the new container ships. It will be a sad thing for everyone if the Canal, which has been of such profound service to trade and humanity for a century, should fall into disuse; but it could happen.

Then there is the deliberate action by foreign Governments in restraint of trade. Much was said during the last debate about flag discrimination and cargo preference—devices by which certain nations reserve a proportion of their trade for their own vessels. These practices, often associated with subsidies, are kept within bounds only by endless negotiations on the part of British and European ship-owners and their Governments. Again, some nations encourage the use of flags of convenience, which enable their nationals to enjoy tax concessions and other benefits which they could not and would not enjoy under their own flag. Finally, there is increasing interference, most strikingly by the United States' Federal Maritime Commission, in the pricing mechanism; and arbitrary criteria are being opposed to the free play of market forces.

A new factor since the last debate is the emergence of the United Nations Conference on Trade and Development, which has an active Committee on Shipping. The underlying purpose of this organisation, to help the developing countries to help themselves, is unexceptionable; but where shipping is concerned it tends to takes the form of encouraging the growth of national fleets, in part at least for reasons of prestige and with insufficient regard to commercial realities. This could lead to uneconomical services driving out the established ones and leaving the country concerned with a liability rather than an asset, in spite of cargo preference. There are several cases where improvement of port facilities would reduce or stabilise the cost of the existing services and be a much better investment in the long run.

Our vulnerability is equally marked where the actions of our own Government are concerned. The effects of devaluation, for example, are by no means clear, but a very high proportion of the disbursements of British shipowners is in non-devalued countries; and many owners face substantial additions to the cost of ships they are having built abroad. So far as taxation is concerned, the industry has enjoyed the benefits of free depreciation. At the same time, however, there was the change in the basis of company taxation, which has largely nullified those benefits. In a very different field, ship-owners are gravely concerned at the im- pending withdrawal of the Navy from East of Suez, believing that all kinds of lawlessness may develop without the often unseen presence of the "policemen on the beat".

In the last debate the noble Earl, Lord Jellicoe, referred to "an increasing need for a real and fruitful partnership between industry and Government". A partnership of a kind has existed between the shipping industry and the Government for much longer than with most other industries. It has always been friendly, but at the present time it is not, I believe, as fruitful as it could be. Although the Government usually appreciate the special problems which we have as an international industry, they are not always successful in taking up the cudgels for us against other Governments whose approach is more restrictive.

In other spheres, particularly where the Ministry of Transport is involved, our relations are less harmonious. In recent months the Minister has taken two major steps without apparent regard for their effects on shipping. The first is the proposed nationalisation of the ports. This, we believe, is a purely doctrinaire decision, and one taken at the worst possible time. The second is the Transport Bill, which could affect shipowners in two ways. First, it would restrict our customers in their choice of inland transport, and this is of special importance with the through-transport of containers. Secondly, the massive support accorded to the railways cannot fail to have an adverse effect on coastal shipping. According to the White Paper, The Transport of Freight, the Government recognises the contribution which coastal shipping can make to the national transport system and accepts the principle that competition between coastal shipping and the railways must be fair. But the effect of the Transport Bill is to nullify the safeguard, such as it is, provided by Section 53 of the 1962 Act; and it is difficult to see how competition can be fair when one competitor is given orders, and resources, to secure traffic regardless of specific comparative economics.

My Lords, I hope that I have painted a picture of an industry which is at once vital, virile and vulnerable. Vital, in the sense that our balance of payments would be in a far more parlous state without it; virile, in that it is responding promptly and positively to changing pressures and demands; and vulnerable, in that it is subject to a greater array of unpredictable external factors than any comparable industry. My plea is that Governments of this country, of whatever political colour, will, by paying special regard to the industry's special problems, help to add yet another "v", for viable. My Lords, I beg to move for Papers