HL Deb 11 February 1971 vol 315 cc268-72

4.28 p.m.

LORD DRUMALBYN

My Lords, I should like, with the leave of the House, to repeat a Statement made by my right honourable friend the Secretary of State for Trade and Industry in another place. The Statement is as follows:

"Yarrow (Shipbuilders) Limited is a subsidiary of Upper Clyde Shipbuilders Limited—(U.C.S.)—in that the latter holds 51 per cent. of the former's share capital. It has long been the intention of the parties concerned to bring about the separation of Yarrow (Shipbuilders) from U.C.S. and arrangements now made enable this to be done. The 51 per cent. shareholding in Yarrow (Shipbuilders) owned by U.C.S. is now being acquired by Yarrow & Company Limited which thus becomes the 100 per cent. shareholder. In this way Yarrow (Shipbuilders) becomes independent of U.C.S.

"Yarrow (Shipbuilders) is predominantly a naval yard with a long tradition of building excellent warships for the Royal Navy and overseas Governments. Both Yarrow (Shipbuilders) and U.C.S. have encountered difficulties in recent years and both face problems of serious cash deficiency. In view of the importance of Yarrow (Shipbuilders) for the present orders and future programme of the Royal Navy, it has been decided that the Ministry of Defence should make a loan to Yarrow (Shipbuilders) (on terms to be agreed) towards meeting the company's requirements for working capital. These are at present estimated at a maximum of about £4½ million during the next three years. This facility should enable Yarrow (Shipbuilders) to maintain its programme and to regain profitability.

"U.C.S. is strengthening its own financial position further with the help of shipowners for whom it is building, and it is confident of its ability to achieve a viable future. It is proposing a capital reconstruction to reflect the realities of its balance sheet. Precise details remain to be worked out, but the intention is that the Government for their part would agree to a substantial writing down of equity and a writing down and conversion of fixed interest public loans into a smaller equity holding. The aim would be to maintain a total public holding of some 48 per cent. of the U.C.S. voting equity but with an increased dividend entitlement after the capital reconstruction. No new public funds are to be provided to U.C.S.

"A supplementary estimate will be submitted to the House in due course."

My Lords, that concludes the Statement.

LORD HUGHES

My Lords, I should like to start by congratulating the Government on the realism which permeates the whole of this Statement and by asking the Minister to convey to his right honourable friend the Secretary of State my appreciation of the fact that he has not felt himself bound by some of his previous statements when faced with the fact that the needs of the shipbuilding industry require this continued intervention of public funds. It has been my lot on more than one occasion to congratulate Ministers on carrying forward the policies of the previous Government (the noble Baroness, Lady Tweedsmuir, has been the recipient of these thanks on more than one occasion), so it is no unusual experience for me to express my thanks to the Government for recognising the real needs of the situation and not being bound by any Party dogma.

I have only two questions to ask. Do the Government expect that these measures will maintain or, better still in the present position of Scottish unemployment, expand the employment opportunities in shipbuilding on Clydeside? Secondly, as Parliament will be unable to form a balanced judgment without the details of the capital restructuring and other financial information, will the Government issue a White Paper on this matter at the earliest opportunity?

THE EARL OF LAUDERDALE

My Lords, I should like to ask my noble friend whether the Government's decision about U.C.S. has been taken in the light of the balance sheet and trading accounts up to August, 1970, or whether they are still acting on accounts for an earlier period?

LORD DRUMALBYN

My Lords, may I first thank the noble Lord, Lord Hughes, for his reception of this Statement? I think we are all very glad indeed that these steps are being taken in view of the obvious disquiet and misgiving that existed on the Clyde. What we hope—and we cannot say that it is more than a hope—is that these actions will result in two viable and prosperous companies that will expand employment on the Clyde.

I was asked also whether the Government will issue a White Paper when precise details are available. I will convey that suggestion to my right honourable friend. I am not certain whether it would be entirely appropriate. I think that Parliament ought to be informed in some way or another, but I cannot commit my right honourable friend at the present time as to how that should be done.

The answer to the question put by my noble friend Lord Lauderdale is, No; but the Secretary of State has had access to the cash flow statements of both companies and has had the fullest information from them as to the present state of their business.

LORD SHINWELL

My Lords, may I ask the noble Lord whether this decision has been reached by the Government after consultation with the Shipbuilding Industry Board? I am of course familiar with the shipbuilding industry; and also the Clyde situation. Is the noble Lord aware that both the U.C.S. and the Yarrow shipbuilding firm have encountered non-profitability for several years: in other words, that they are both "lame ducks"? Does not the decision of the Government make nonsense of the "lame duck" theory?

LORD DRUMALBYN

My Lords, with regard to the noble Lord's second question, I should have thought quite the contrary. What the actions of the Government are intended to do, and what we hope very much they will do, is to make these two companies—which I quite agree have not so far proved themselves, as was hoped when U.C.S. was set up in 1968—viable and prosperous. This is the reason for the steps that are at present being taken. As to the consultation with the Shipbuilding Industry Board, my right honourable friend is in constant touch with them.

LORD HUGHES

My Lords, is the Minister not accepting the fact that there are circumstances when public intervention in the affairs of industry can result in "lame ducks" being cured? Is he not in fact saying that there is a real prospect that this particular duck will be able to waddle along satisfactorily on both feet? While I appreciate that the Minister is not necessarily in a position to accept the suggestion that a White Paper should be issued, do I understand him to say that he accepts that some form of public statement will be made which will put Parliament in full possession of the facts?

LORD DRUMALBYN

My Lords, I think that Parliament has a right to be told the facts, but I think the noble Lord will realise that, so far as U.C.S. are concerned, it is primarily a matter for them to make clear what their position will be. However, as I said, I will convey what the noble Lord has said to my right honourable friend. As to his opening remarks, I hope that these ducks will not only waddle, but fly.

LORD STRATHCLYDE

My Lords, I wonder if my noble friend can say whether, prior to being incorporated in Upper Clyde Shipbuilders, the firm of Yarrow Limited had ever been in trouble financially during the whole of its long history?

LORD DRUMALBYN

My Lords, my memory is not all that long, but not to my knowledge. This has not been a very happy marriage.