§ 3.59 p.m.
§ THE MINISTER WITHOUT PORTFOLIO (LORD DRUMALBYN)
My Lords, I shall with permission repeat the Statement which is being made by the Secretary of State for Trade and Industry in another place on shipbuilding on the Upper Clyde. This is the Statement:
" The group which I invited to advise me about Upper Clyde Shipbuilders has reported. Their report is now available in the Vote Office.
" Their principle findings are that Upper Clyde Shipbuilders Limited, as organised in 1967, was doomed from the start as a result of the faulty concept of structure within which it was organised; the burden of eventual loss with which it was saddled; and the inadequate management with which it was provided. The Group therefore conclude ' that any continuation of Upper Clyde Shipbuilders in its present form would be wholly unjustified '. The Group also state that the present order book is dangerously thin for U.C.S. in its present size, particularly in view of the low level of orders coming into the industry.
639 " Nevertheless if the order book is concentrated at the Govan and Lint-house sites; if ship production is standardised; if the management is radically reformed; and if much more productive and realistic working agreements can be negotiated with the men who would be employed there—on these conditions, the Group think it should be possible to form a new company which would retain a viable shipbuilding capability on the Upper Clyde with prospects of some eventual expansion.
" The Government accept these conclusions. But the Group's conditions are fundamental and the enterprise can go forward only if they are met. In particular I must emphasise the need, if this venture is to succeed, for first-class management and for satisfactory undertakings by the unions in relation to working practices and wage rates.
" If these conditions are met the Government believe that private capital should be forthcoming, particularly from Scottish sources, and the Government would be ready to provide some of the initial capital.
" If the new venture can be established on the basis I have described, some 2,500 men will have the prospect of continued employment there. Another thousand men, and probably more, should be able to find work with other shipbuilders on the Clyde. Some too may be retained in work by other interests acquiring U.C.S. facilities from the Liquidator. For the rest, a considerable number are likely to be needed for the completion of ships already building. Thus only about 400 men in all will become immediately redundant, although others will do so at intervals during the months to come, as ships are completed. The Government will of course do everything possible to assist those who lose their jobs.
" If the Court grants the company's application for a winding up order, the liquidation of Upper Clyde Shipbuilders Limited will proceed.
" While we are seeking to establish whether the conditions for a viable shipbuilding enterprise can be created, on the lines recommended by the expert 640 Group, I will have their continuing advice. I am grateful to them for the work they have already done.
" To ensure meanwhile that the Liquidator has the necessary working capital, the Government propose to allow him to retain for a limited period the monies advanced under existing arrangements with the provisional Liquidator. If during this period further sums are needed, then, provided there has been satisfactory progress in fulfilling the conditions I have outlined, funds will be made available from the consolidated fund and estimates will be presented to the House in due course. If Government money were to be provided for a continuing operation legislation would have to be introduced."
§ LORD HOY
My Lords, we are grateful to the noble Lord for repeating the Statement made in another place, but I think he will agree, as a Scot, that this is a particularly black day for Scottish industry. Is the noble Lord aware that male unemployment in that part of Scotland is already running at 10 per cent.? And, of course, we have just had the announcement that Plessey will close next month, so adding to this number.
I should like to ask the noble Lord one or two questions. When the expert committee say that it might be possible to concentrate at Govan and Linthouse, does this mean the complete closing down of Scotstoun and Clydebank? Secondly, with regard to the number of men involved, is it not a fact that the figure of 400 is a little misleading? Will it not mean that at least 5,000 to 6,000 men's jobs will be lost, even when the operation is completed? Further, has the noble Lord made any estimate of the number outside the yard whose jobs will be lost as a consequence of this action? Is not the total likely to be somewhere in the region of 15,000 to 18,000? I should also like to ask just how much this is going to cost public funds. What will be the losses entailed? Indeed, has any estimate been made of what will be the cost to Government funds in regard to redundancy payments on top of all this?
Finally, the fifth paragraph of the Statement says:If these conditions are met the Government believe that private capital should be forthcoming, particularly from Scottish sources, and 641 the Government would be ready to provide some of the initial capital.Can the noble Lord tell us just what sums are involved in doing this job? How much are the Government prepared to pay, and how much do they expect to raise from private Scottish sources?
§ LORD TANLAW
My Lords, we on these Benches would like to reserve our comments on this matter until we have had an opportunity of reading the special report. But on first reflection we should like to ask one major question. The Statement implies that if the new company is formed it will be formed on the site of the Upper Clyde. I should like to ask the noble Lord whether he would consider the possibility of using a lower Clyde site near the proposed Hunterston Steelworks. I should also like to ask whether, if this is not to be the case, and the proposed new company is to be sited on the existing Upper Clyde sites, this casts any doubt at all on the proposed new steelworks?
§ LORD DRUMALBYN
My Lords, I agree that this is a black day for Scottish industry; no one can dispute that. The noble Lord asked whether this involves the complete closure of Scotstoun and Clydebank. The intention is that the ships at present being built there should he completed, and that the remainder of the work should be transferred to Govan. It will then be for the Liquidator to dispose of the Scotstoun and Clydebank yards. I should say that, so far as I am aware, no inquiries have been received in regard to the Scotstoun and Clydebank yards. The noble Lord suggested that the mention of 400 workers becoming redundant is misleading. I do not think it is. What I said was that only about 400 men in all will become immediately redundant. Naturally, there will be a run-down, and the Liquidator will have to decide how to dispose of the workers then. I did say, however, that it is estimated that Scott Lithgow could provide jobs for up to 1,000 men at the end of the year.
The noble Lord then went on to ask about employment outside the yards. That is a difficult thing to estimate. One has seen some rather, I think, exaggerated estimates in the Press about this. I am afraid that I cannot give the noble Lord an estimate about it. If there is a continuing 642 activity at Govan, and if the activity at Scott Lithgow increases, then quite a number of those who are providing work outside the yards will continue to do so. But, of course, those who provide the supplies for ships do not do so only for the Clyde; many supply them for elsewhere, as well. The noble Lord asked what losses have been entailed by the Government. Something over £20 million of Government money has been put in, and that I am afraid is the level of the loss. Much of this must have gone, as some of it will rank with other creditors. So far as the redundancy payments are concerned, I can give the noble Lord details if he wants them, but probably he does not.
§ LORD HOY
My Lords, no. But I wonder whether the noble Lord can help us in this way. Obviously, if we are going to pay off some thousands of men, some estimate must have been made of what it will cost in unemployment benefits, and some estimate must also have been made of the cost in redundancy payments, because at the end of the day we shall be losing some thousands of jobs in the industry.
§ LORD DRUMALBYN
My Lords, this is primarily a matter for the Liquidator. It is for him to decide what is the size of the forces to be retained, the payments in` lieu of notice, or payments with notice, and redundancy payments. Finally, the noble Lord asked what sums are involved. It is difficult to give precise estimates, but to acquire the assets from the Liquidator, to provide working capital and to improve facilities might cost something like £10 million. The Government hope that this money might he found from private sources, but they accept that some degree of Government involvement may be necessary.
The noble Lord, Lord Tanlaw, asked whether consideration had been given to moving to a lower Clyde site. Consideration has not been given to this point because of the nature of the present operation, which is an operation of liquidation. The recommendation made by the experts is that the activities should be concentrated at Govan. If it is possible on the conditions they have indicated, that is where what remains of Upper Clyde Shipbuilders should continue to operate. So far as the possibility of 643 steel development is concerned, this has not entered into the picture. My Lords, I hope I have answered the questions satisfactorily.
THE EARL OF SELKIRK
My Lords, is my noble friend aware whether there have been any inquiries about Govan? He has said that there were no inquiries about Scotstoun and Clydebank. Secondly, may I ask the noble Lord whether he is aware of the importance of taking some action quickly? Many of the men in the yards are highly skilled. If they leave the area the problem of finding employment in any form of development where the percentage of the less skilled is higher will become increasingly more difficult.
§ LORD DRUMALBYN
My Lords, I am obliged to my noble friend. There have not as yet, again so far as I know, been any inquiries about Govan, but this is the first announcement that has been made of the recommendation. Regarding my noble friend's second point, I fully agree with him. The Government are very alive to this point and so of course is the Liquidator. He wants to do the best he can.
§ LORD BERNSTEIN
My Lords, I assume that the Government got out some figures before coming to this decision. I assume they have estimated what it would cost the nation if they did not continue to support the shipyards, what the benefits would be and what the alternatives were. Is it not possible to have this information? Leaving out the tragedy of the unemployment involved and all the related problems, there must be some basis on which the decision was made. Is it asking too much of the Government that they should share that information with the nation, and with this House in particular?
§ LORD ORR-EWING
My Lords, before my noble friend answers that point, would he bear in mind that this has been a very costly and somewhat naïve experiment, which was pushed on to the previous Government by Mr. Wedgwood Benn at enormous cost to the taxpayer? Whereas I perfectly concede, as would everyone in this House, that it is a tragedy for those who are there and have been led astray, it is a little unfair 644 to demand extra millions of pounds for this particular shipyard when other shipyards have introduced better working arrangements with their trade unions, have introduced better management and also standardised ships. All these things have been done in other yards without massive support from the taxpayers of this country. Surely there must be a limit to the manner in which we prop up this particular shipyard.
§ LORD BERNSTEIN
My Lords, if I may say so, I was not asking anyone to put up more money. I was asking on what information the Government have based their present decisions.
§ LORD DRUMALBYN
My Lords, the answer to the noble Lord, Lord Bernstein, is that the Government appointed a committee of experts. After I have sat down, he will be able to get a copy of their report from the Printed Paper Office and when he has read that I am quite certain he will agree that the Government's decision in this matter was right.
§ LORD SHACKLETON
My Lords, can the noble Lord not understand even now the questions which my noble friends were asking? Is he aware that there is something called the Central Capability Unit, or Public Expenditure Analysis Unit, which is supposed to be able to make estimates of social costs? Is he further aware that we had no idea, when the Government were facing their decision, whether they had estimated the amount of money they will now have to pay out by way of unemployment benefit and redundancy payments?—because the Government are going to advance money to support this. Can the noble Lord give some indication as to what the total cost will be as a result of closing down these shipyards? I will not pursue further the tragedy involved but we would like to ask whether in fact the Government have done these sums, because only the Government can do them: this Committee would not be in a position to do them.
§ LORD DRUMALBYN
My Lords, the point is surely that here is an enterprise which was set up, admittedly, in a hurry. The amount in losses that they were faced with at the time was seriously underestimated. It has been shown that 645 at least two of the shipyards are totally non-viable. The experts' report has made quite clear (to read the words again) that…any continuation of Upper Clyde Shipbuilders in its present form would be wholly unjustified.If the noble Lord reads the report he will see that the experts were conscious of the social considerations.
§ LORD DRUMALBYN
I am now dealing with the social considerations and will come to the social costs later. No estimate has been made on the social costs for the reasons I have given, that it is impossible at this stage to say how many men will be employed and how many will have to seek employment elsewhere. It must be remembered that as this is a special development area assistance is available. But the major point here is that, on the basis of this report, the Government have come to the conclusion that it would be quite unjustifiable to continue putting money into an enterprise of this kind which shows no sign whatsoever of being viable. Governments are prepared to give assistance of one kind or another, especially in development areas, on condition that the enterprise looks as though it might become viable in the long run and not otherwise.
§ LORD HOY
My Lords, I do not want to prolong this discussion unduly, but I am sure that your Lordships' House will realise how important this is to Scotland and its economy. I find it difficult to understand how the Government came to this decision without having costed it. The noble Lord has just said that the Government found themselves unable to cost it, and yet, in spite of not knowing what the cost is to be, they have reached this particular decision. Might I also ask whether it is correct, arising out of the remarks just made by the noble Lord, Lord Orr-Ewing, that in this particular yard there was a substantial cut in the labour force, but at the same time the output went up by 87 per cent.? Surely this was a contribution by the workmen along with their employers to help to bring about the viability of the yards?
§ LORD BERNSTEIN
My Lords, I have just been given a copy of the report 646 of the Advisory Group on Shipbuilding in the Upper Clyde. It does not give any of the information I requested. I should like, with permission, to ask again for the information. I have not suggested that the Government should advance any further money, but I should like to have the information on which they have based the decision to implement this report and what it will cost the nation, directly or indirectly, to do so.
§ LORD DRUMALBYN
My Lords, it is absolutely impossible to give an estimate of this kind. One does not know how many of these workers will be employed either in the continuing enterprise or elsewhere in shipbuilding, or elsewhere in industry that may he developed on the Clyde. There is no means of costing this. All that can be said at the present time is that here is an enterprise which has shown that it is not viable. As much as possible of it, given the conditions and if the conditions are fulfilled, will be maintained. But this is all that can be justified. For the rest, the Government have said that they will do their utmost to find employment for those who are displaced.