§ 2.57 p.m.
§ THE MINISTER OF STATE, DEPARTMENT OF HEALTH AND SOCIAL SECURITY (LORD ABERDARE)
My Lords, I beg to move that this Bill be now read a second time. This is a short and simple Bill which does nothing more than raise from £400 million to £700 million the statutory ceiling on the power of the Secretary of State for Trade and Industry to give guarantees under Section 7 of the Shipbuilding Industry Act 1967. These guarantees facilitate the financing of orders for ships placed by United Kingdom owners in United Kingdom yards and the purpose of the scheme is to prevent United Kingdom orders from going abroad solely to obtail easier credit terms. The Bill is a direct descendant of the Shipbuilding Industry Act 1969 which raised the statutory ceiling from the £200 million in the original scheme to £400 million, and indeed for reasons of legal simplicity repeals the 1969 Act. It is at least satisfactory that heavy ordering of new ships for the United Kingdom fleet has made necessary these successive increases in the limit.
In presenting this Bill, I think it is right to pay tribute to the work of the Ship Mortgage Finance Company. Through their advisory committee they advise the Department for Trade and Industry on the security requirements for 506 the guaranteed loan, and act as agent in the negotiations on the security and legal documentation with the shipowner. Their expertise is well known, as is that of their Chairman, the noble Lord, Lord Sherfield. But, though the Bill is simple in itself, I have no doubt that your Lordships will wish the debate to range rather wider than the pure terms of the Bill over some of the problems of the ship-building industry, particularly in view of the Statement made yesterday in another place by my right honourable friend the Secretary of State for Trade and Industry.
I should like to deal first, if I may, with the position in general and at the end make specific reference to the position of the Upper Clyde Shipbuilders. We are now approaching the end of the "Geddes" period. Six years ago Sir Reay Geddes and his Committee took a frank and objective look at British shipbuilding. They found that an industry which had been a front runner and boasted of a distinguished history of achievement, had allowed itself to be outdistanced by its foreign competitors. It still retained, however, the advantages of a highly qualified work force and a wealth of practical experience.
The Committee took the view that the decline could be reversed and growth resumed if the industry put in hand a major reorganisation, which was to be assisted by public funds. But they were quite clear that the reorganisation would have to be completed over a specific period and that at the end of this period the industry would need to stand on its own feet again and compete as an equal with the world at large. The once-and/or-all character of the Government assistance offered was written into the legislation and a limit was set to the life of the Shipbuilding Industry Board up to the end of 1970, unless extended by a maximum of a further year. There was no provision for Government assistance thereafter.
During this period of reorganisation the industry has received a large proportion of public assistance in relation to its size; indeed, more than the Geddes Committee recommended. The Shipbuilding Industry Board has been in existence for nearly five years and has paid or promised over £18 million in grants under Section 3 of the Act, £3 million in equity subscription, 507 and has agreed to advance over £17 million in loans upon conditions more favourable than normal commercial terms. Over £2 million in grants have been paid in relief of interest. In addition the then Ministry of Technology granted additional support to the tune of £8½ million.
Apart from this capital assistance, Shipbuilders' Relief, a rebate of indirect taxation, amounted to £16 million in the same period. These are very substantial sums for an industry which in 1968 accounted for about 1 per cent. of the output of manufacturing industry and which has also been receiving the important but indirect help of the Home Credit Scheme. During the same period demand for ships has been buoyant. World order books in 1969 were 40.4 million gross tons. To-day, they are double at over 80 million gross tons. The British ship- building industry as a whole has not fully grasped this opportunity. Progress has been made, but somewhat slowly. Though there have been success stories, parts of the industry have failed to increase their productivity and have failed to make profits.
By extending the life of the Shipbuilding Industry Board to the end of this year, the Government have recognised the real difficulties of the industry and have lengthened its convalescent period. The Geddes programme envisaged that the period of injection of capital into the industry should have come to an end last year. But there will be no further extension of the Board's life, and by the end of this year the Board and the powers of support by loans and grants will have run their full course. Before I leave the subject of the Shipbuilding Industry Board, may I make a special reference to Sir William Swallow, his colleagues on the Board, and to Mr. Barker, the director? Their task has certainly not been easy, and I am sure it would be right to give our thanks for their work.
We intend to continue Shipbuilders' Relief, which is now running at over £4 million per annum. We have relaxed the rules about the import content of ships qualifying for credit guarantees in order not to hinder the use of imported steel where supplies on competitive terms cannot be obtained from the domestic market. So far we have not received an application to import foreign steel, but 508 the concession has introduced an atmosphere of competition. It is only right that if our shipbuilders have to live in a competitive international market, they should be able to buy plate at the sharpest prices.
The Government also fully appreciate the importance to the industry of assured credit facilities. The present power to give guarantees expires at the end of this year with the Shipbuilding Industry Board and different arrangements will be needed. The Government recognise that by one means or another they will have to play their part in ensuring that finance continues to be available, and an assurance has been given that a further Statement on credit facilities will be made before the Summer Recess. I cannot to-day anticipate that Statement. But the limit in the present Bill before us will be sufficient to enable the industry to receive credit guarantees on at least all home orders on which building will start before mid-1973. The Shipbuilding Industry Board has been making recommendations subject to the passage of this Bill, but there is still credit available for guarantees for any orders due to start before mid-1973. This interim measure will thus be of substantial assistance to the industry in maintaining its present order book. But apart from these measures, we do not consider that there is any justification on economic grounds for special aid beyond the assistance available to all industries operating or investing in Development Areas.
With regard to Upper Clyde Shipbuilders, there is little that I can add to the Statement made in another place yesterday by my right honourable friend the Secretary of State for Trade and Industry, but perhaps I can recall the history of this ill-fated venture to your Lordships. U.C.S. was formed in February, 1968, by the merger of four shipbuilding yards on the Upper Clyde and the acquisition of a 51 per cent. interest in a fifth. On their formation, U.C.S. received a loan of £3½ million from the S.I.B. and over the period July, 1968, to May, 1969, they received further loans of £1.2 million for capital equipment. Despite this assistance, they ran into serious financial difficulties early in 1969, and between February and August of that year received grants from the 509 S.I.B. totalling £5½ million and an equity purchase of £3 million. They were once again in financial difficulties at the end of 1969, and in February 1970 the previous Government made them a direct loan of £7 million. Including Government investment and a loan to Fairfields, one of the companies which formed U.C.S., the total public money made available to the group is over £20 million.
In October last year further doubts arose about the viability of U.C.S. until it was agreed last February that Yarrow (Shipbuilders) Limited, in which U.C.S. held a 51 per cent. share and which mainly builds warships for the Royal Navy and overseas Governments, should be acquired by Yarrow & Company Limited and become independent of U.C.S. U.C.S. also strengthened their financial position with the help of shipowners who agreed to an increase in the prices they were paying for their ships. It was further proposed to work out a capital reconstruction, and the Government agreed to a substantial writing-down of loans and equity. U.C.S. did not at that time seek further loans and public funds, and it was made quite clear to them that no new public funds would be provided. At that time U.C.S. were confident of their future viability, and it was not until last Wednesday that my right honourable friend was informed by the Chairman that unless sums could he made immediately available they would petition for the appointment of a provisional liquidator.
My Lords, as announced yesterday, the Government have reluctantly come to the conclusion that further injections of public money into the company as it now stands would serve nobody's interest. I should like, in particular, to make it clear that the problem is not just a shortage of working capital, as has been implied in many Press reports. It is also the fact that the company are quite unable to forecast when the present excess of liabilities over assets might be reversed. We fully recognise, however, how important it is to preserve as much employment as possible in these yards, and to try at least to complete the building of those ships on which work is currently in progress.
My right honourable friend is consulting a provisional liquidator with a view 510 to bringing about the reconstruction of whatever groupings may prove to be most expedient, and he proposes to set up a small group of experts to advise him on the most appropriate action to achieve such a reconstruction. The failure of U.C.S. is a tragic disaster, and when our plans are further advanced it may well be that your Lordships will wish to return to the subject. In the meantime, I hope that your Lordships will give a Second Reading to this Bill, which is one essential prop for the future of the British shipbuilding industry in providing a very significant increase in the ceiling of credit guarantees. I beg to move.
§ Moved, That the Bill be now read 2a. —(Lord Aberdare.)
§ 3.12 p.m.
§ LORD GREENWOOD OF ROSSENDALE
My Lords, like, I suspect, the noble Lord, Lord Aberdare, I turn to the question of shipbuilding with an almost completely fresh mind—almost a tabula rasa. We do not of course oppose the Bill, which will give at any rate some small help to the shipbuilding industry. In at least one respect I will follow the noble Lord: as there is a more detailed debate on Upper Clyde Shipbuilders taking place to-day in another place, I propose to devote most of my time to the Bill itself. But none of us can talk about shipbuilding in the context of the Government's decision on the Upper Clyde Shipbuilders, and in the light of the latest returns from, for example, Swan Hunter, without being deeply disturbed at the industry's plight and its prolonged and profound difficulties.
When this Bill was in another place, it was remarkably roughly handled by both the Conservative and the Labour Parties, partly, at least, because it seemed to presage almost total Government disengagement from the shipbuilding industry, and its abandonment to market forces. I think that many of your Lordships will agree that recent events have shown how right those criticisms were. It is surprising how slow the present Government have been in announcing their policy for this extremely important industry. On February 18 the Secretary of State said that the Second Reading of this Bill in another place would provide an opportunity for a major statement on the industry, but when the Second Reading took 511 place on April 22 Sir John Eden, the Minister for Industry, could only say:I hope to be able to make a fuller statement about the arrangements for shipbuilding credit before the Summer Recess."—[OFFICIAL REPORT, Commons; 22/4/71; col. 1391.]It was hard to believe that yesterday's rather sad and melancholy Statement was the pabulum for which the hungry sheep were looking, and I was relieved to hear from the noble Lord a few minutes ago that there is still a Statement to be awaited, and that we shall have it before the Summer Recess. I fully realise how long policies on these important matters take to evolve. Indeed, the members of the present Government used to revel in criticising the Labour Government for leaving industry in a state of uncertainty; but now we probably have greater uncertainty in industry than at any time since 1945. It is an uncertainty which is even more damaging to industry because it is linked with the feeling that the Government will adopt the most reactionary and crudest laissez-faire policy towards industries which really need public support.
Over the years both shipbuilding and shipping have, in my view, been neglected. Even the most casual study of the Financial Times or the Investors' Chronicle will show the difficulties that those two industries are facing, and the problems which lie ahead for both of them. My own feeling is that the Government would have been wise to use the very limited Parliamentary time that is available to discussing the future of the shipbuilding industry rather than wasting it on the Industrial Relations Bill, because the livelihood of many thousands of workers and whole communities depends on the prosperity and stability of shipbuilding and shipping.
It is difficult, I think, to resist the conclusion that some blame rests on the shipowners. The Japanese, for example, buy virtually all their ships from Japanese shipbuilders, and 4 out of 5 new German ships come from their own shipbuilding yards. I do not know what the figure for the United Kingdom is, but I think the reverse of the coin is interesting: in the United Kingdom 80 per cent. of our output is going to British owners. In the circumstances, the speedy decline in our exports is understandable, but sad. In 1966, two-thirds of the 512 industry's orders came from abroad; in 1967, it was one-third; in 1968, it was less than one-fifth: and we have steadily sunk from the position of being the world's greatest shipbuilder. Japan has now more than half the world market, and it seems quite clear that within the near future that 50 per cent. will go up to around 60 per cent. They, of course, are getting substantial Government help, as well as the support of patriotic Japanese shipbuilders. Just as Japan is making progress, so Italy, Germany and France are all giving solid encouragement to their shipbuilders. It seems as if we are in danger of reaching a position in which only British shipbuilders will be left to face the cold winds of competition almost unaided.
Sitting back and taking a reasonably detached view of an industry with which I have had no governmental, constituency or personal links, it seemed to me that the Geddes Report, to which the noble Lord referred, indicated that a new phase in the industry's history had been reached. The Geddes Report was commissioned by the Labour Government, and the policy that the Labour Government adopted was based on it. It seemed that it would end the twenty years of neglect the industry had suffered. But now we are going back to the pre-Geddes era with all the uncertainty, all the reluctance to invest and all the resistance to productivity agreements that characterised it. There is no doubt in my mind that Her Majesty's Government should support the shipbuilding industry and should undertake a continuing commitment to do so. That, I think, is what the Shipbuilding Industry Board was saying in its last Annual Report. May I join with the noble Lord in paying tribute to Sir William Swallow and his colleagues and staff, and thanking them for what they have done for the industry. But in the last Report the Shipbuilding Industry Board said:Large sectors of the industry will continue to require access to capital which they will not be able, in the near future at any rate, to generate in sufficient amounts for themselves.I am sure that the Board was right in that conclusion.
Finally, a word on the Upper Clyde Shipbuilders—I shall be almost as brief as the noble Lord who preceded me. I believe that the Upper Clyde Shipbuilders was a great experiment. In its inception 513 it showed our capacity for improvisation at its best, and with £90 million worth of work on its books, and with greatly improved productivity, it is difficult to believe that most of the undertaking's problems were now not within reach of solution. The Government have now winged it and may well have killed it. In the light of our experiences in recent months I shall be surprised if it is the last of the great undertakings to fall victim to the Government's uncouth and unsophisticated economic policy.
That is what I think the City Editor of the Daily Telegraph is saying to-day in rather a different way. It is under the heading, "Mr. Heath Cuts off his Nose…" and it begins with these words:Mr. Heath is taking a great, if calculated risk. In rejecting the plea from Upper Clyde Shipbuilders for further Government assistance, he may be putting U.C.S. out of business, raising the level of unemployment in Scotland, demonstrating that he is a man of his word and denying sanctuary to lame ducks. But that is not all. He is putting the fear of loss into every creditor of every doubtful company in this country…and squeezing what few drops of commercial confidence may be left in boardrooms throughout industry.Unless there is a dramatic change in the direction of economic policy soon—by the autumn at the latest—the chances of acute and painful recession arc real.That at least gives us food for thought, and it is a warning I believe the Government would be foolish to neglect. As the noble Lord has said, we shall have an opportunity of returning to the position of the shipbuilding industry before we rise for the Recess. I have no doubt that over the next few months there will be many opportunities for debating a deteriorating economic situation. But the Bill before us this afternoon gives us some promise that at least some firms may benefit, and we shall do nothing to hinder its passage through your Lordships' House.
§ 3.23 p.m.
§ BARONESS LEE OF ASHERIDGE
My Lords, I am wondering whether your Lordships' House realises the great service that Her Majesty's Government are rendering in this matter. I believe that they are helping us to rid ourselves of the myth that private industry, because it is private, is efficient. There is no one on this side of the House who would want to make an attack on all private industry. I see my noble friend, Lord 514 Sainsbury, on one side of me, and we have distinguished employers of labour on this side of the House who have had no labour troubles and who are running industries of which we approve. What I hope we shall not be mealy-mouthed about on this side of the House is that this industry has failed largely through bad management, and if there is bad management at the top there is demoralisation right through. There are a great many fine people in this industry, and I believe that if, as an outcome of this difficult situation, we go right through and say that shipbuilding should be part of the public sector, we shall get the enthusiastic support of people at all levels of this industry. I want to suggest to your Lordships that if we go dickering around on this matter we shall not obtain the top management we want. we shall not win the co-operation of all the workers in the industry and we shall stagger on from one makeshift position to another. I hope that if we cannot convert this Government to the proposition that there are some sectors of industry, including this one, that belong to the public sector, it will not be long before we get rid of this Government and get a sensible solution.
§ LORD SHINWELL: My Lords—
THE LORD PRIVY SEAL (EARL JELLICOE)
My Lords, I wonder whether I may just come in for a moment, not in the substance of the debate at all, but I think we went a little wrong in our order. I thought that the noble Baroness rose just to ask a question or to make an interjection; I had not realised that she was going to make a substantive speech. I think it was my noble friend Lord Barnby who was due to follow the noble Lord, Lord Greenwood, and thereafter the noble Lord, Lord Shinwell.
§ 3.26 p.m.
§ LORD BARNBY
My Lords, this House has no power in regard to this, a Money Bill, but that does not remove our obligation for vigilance relating to anything employing large commitments of Government funds which in this case we will remit. The noble Lord in his persuasive manner has emphasised the need for a massive further extension of the original amounts in the 1969 Bill. There was also reference in my noble 515 friend's speech to Upper Clyde Shipbuilders. I think my noble friend will have received some comfort from the moderate way in which the Opposition spokesman approached the matter, saying that there would not be opposition to the Bill. He said this in moderate language in comparison with what might well be used. I must, as I am the succeeding speaker, refer to the speech of the noble Baroness. I am afraid I could not quite hear the noble Baroness's rather emotional speech, so I hope she will forgive me if I do not comment on it.
Since the noble Lord who spoke for the Opposition gave a quotation, I will take upon myself the liberty of also making a quotation from a leading newspaper. This morning there were big headlines on the Engineering Union's conference, and I quote:The rejection of all productivity deals which might lead to redundancies and raise unemployment was unanimously approved at the annual conference of the l½million Amalgamated Union of Engineering Workers at Torquay yesterday.
§ A NOBLE LORD: Shame!
§ LORD BARNBY
I propose to return to that later. May I refer to the doubts that I have always felt since the original Bill was introduced in 1969. To what extent are we right in selecting this one industry for such massive support as it has had over the years? I know that emotionalism and political expediency are two considerable factors in guiding both sides, and it was the late Government who were mainly concerned with raising the large amounts of these guarantees. Once a Government embarks on a policy of spoon-feeding industries, there is always a danger of inefficiency creeping in. I have doubts as to whether it is right that one industry should be singled out to receive such assistance. But as to inefficiency, I suggest that the evolution of the shipbuilding industry has been the result of inefficiency on the employers' side and a poor labour approach on the workers' side.
At this stage I will refer to the speech of the Minister of State in April in introducing this Bill into another place. He referred particularly to U.C.S. and made the statement that he was assured that U.C.S. were doing well and that there 516 was no intention of asking for any further special assistance. Nevertheless, it is in relation to that situation that, within so short a time, it has been disclosed that a crisis has arisen. It looks as though there is good reason that market operations should apply. Why should inefficiency make further demands on Government assistance? I quite support my noble friend who has said there is no intention on the part of the Government to give further assistance.
When a firm gets into difficulties, I would agree with the contention from the opposite side that the equity owners must surrender everything. In this case it has been said that a massive subscription has been made by the Board to U.C.S. Therefore, there is a close connection between the Bill and U.C.S. The Government are an equity owner of a substantial amount in that concern. But, if a crisis has arisen through inefficiency of management, why should there be the suggestion that Government support must be given? I read carefully the speech of the Minister of State to which I have just referred, and I listened with incredulity to the word picture that was painted in another place yesterday when the Statement was made by the Secretary of State for Trade and Industry. Surely the situation in the U.C.S. has undoubtedly been brought about by inefficiency. Surely common sense would not suggest that in the present period of rapid inflation, which has recently been stated to have averaged 4.9 per cent. per annum for the last five years, any board of management would take long-term contracts without an escalation clause. Why, many other industries would be in a similarly disastrous state if they took such unnecessary risks. I suppose that, so far as suppliers are concerned, credit insurance would have been widely used; so a loss in that way must fall upon the average users of credit insurance, and therefore premiums will put up the cost to industry in general. So it is not a case of this one industry being carried.
If I may return to the noble Lord, Lord Greenwood of Rossendale, who spoke for the Opposition, he regretted the suggestion of a return to the abandonment of market forces, and then added that the Government would have been better advised recently to drop the Industrial Relations Bill. But if anybody takes 517 the trouble (as many will have done) to read the speech of the Minister in another place in introducing this Bill there, he will know of the alarming increase in the amount of time lost by strikes. Yesterday in another place there was a reference to the increase of productivity, and figures were quoted. What a frightful admission of "loafing on the job" before, if in three years efficiency could be raised on the scale suggested! It is a terrifying indictment that labour will "loaf on the job" like that. That is why I gave the frightening quotation earlier in my speech. Can it be due to anything other than inefficiency that the tonnage of ship construction in this country has fallen to 6 per cent. from 15 per cent. ten years ago and 43 per cent. twenty years ago? It is due to this absurd situation of multiplicity of unions and demarcation of jobs. One reads continually of troubles in the shipyards and about the delay of ship deliveries. Subsidy policy raises the expected costs to the Exchequer. My Lords, I am afraid I have trespassed on your Lordships' indulgence for too long. I would conclude by expressing my support for the noble Lord in recommending to the House the Second Reading of this Bill.
§ 3.37 p.m.
§ LORD SHINWELL
My Lords, it is possible to disprove the case of the noble Lord, Lord Barnby, almost in a sentence, but for the purposes of clarification perhaps I may have the consent of your Lordships to indulge in two or three sentences. What is the noble Lord's argument? It is that here is an industry to be singled out for preferential treatment. Recently we have been singling out another industry for preferential treatment. I do not seek to revive the issue again; I mention it merely as an illustration and refer to the subject of Rolls-Royce. It may be argued, particularly by noble Lords on the Government Benches, that the case of Rolls-Royce was in the sphere of Defence. But what about shipbuilding? If it had not been for the variety and efficiency, and in particular the mobility, of British shipping in both the First World War and in the last war, perhaps we should not have succeeded in the long run—and it was a long run—in achieving victory.
Shipbuilding. and its allied industry shipping, are both as important in the sphere of defence as even the revival and 518 continuation of the Rolls-Royce engine. The subject of Defence may not appeal to some of my noble friends on this side of the House, but surely in the sphere of Defence we can obtain the support of noble Lords opposite. That is my first contribution to this very important subject.
My Lords, my noble friend Lord Greenwood began by informing your Lordships that he came to this subject with a fresh mind. I cannot claim that advantage. It is sometimes desirable to approach a subject without having any previous knowledge of it, but I was—for what it may be worth—for many years the chairman of the Labour Party Shipbuilding and Shipping Committee and I gained some knowledge of the subject. Moreover—again, for what it may be worth—it has a bearing on the U.C.S. Fifty-odd years ago I was the member of the Glasgow Town Council representing the Fairfield Ward where the U.C.S. now exist. So I do not come to the subject with a fresh mind; I know something of the history of this business.
It may seem to be purely coincidental that this Bill is introduced in your Lordships' House almost simultaneously with the decision by Her Majesty's Government not to provide any further financial aid to U.C.S. In other words, "Let them go hang"; and if that language is regarded as exaggerated let me direct attention to the history of this subject. I revived my knowledge of the history of the subject by reading the Guardian this morning. That is one of the "quality" papers—a paper of repute and a paper that apparently knew something about the activities of the Conservative Party in relation to the future of Upper Clyde Shipbuilders. Yesterday, in the course of a debate in another place, the Minister responsible, Mr. Davies, asserted and emphasised and re-emphasised, that it was only the other day that Mr. Hepper, the General Manager of U.C.S., informed the Government that in a few days' time there would not be sufficient funds available even to pay the wages of the work people. A sudden announcement of a dramatic character, as if there was no history behind this affair. The Guardian "blew the gaff" this morning because it announced that in 1969 Mr. Ridley, a member of the Conservative Party and now a member of the Government, had 519 consulted with other members of the Conservative Party with the deliberate object of destroying the U.C.S. and, moreover, if it had to be sold off. to sell it to another shipbuilding firm—I use the language used by Mr. Ridley then and repeated in the Guardian this morning"— for a mere pittance ". What was the reason?
Let us consider briefly the history of U.C.S., at one time the Fairfield Shipyard, then associated with John Brown's and associated with Yarrow, the Naval shipbuilding firm, and then with Connell's and with two other of the smaller shipbuilding yards of the Clyde, in a consortium. Difficulties presented themselves, financial and otherwise, and so it was decided to form an organisation. This was the period —the dramatic period—that worried members of the Conservative Party. It was a consortium consisting of trade unions, the employers and the Government. It was a new form of consortium; a very dangerous form of consortium almost a socialist form of consortium, so when it was formed it was decided by Mr. Ridley and others, according to the report in the Guardian this morning (if I am challenged I am prepared to read the whole of it, but that might be going a little too far for your Lordships' patience) to sell off U.C.S. as rapidly as possible "for only a pittance." That did not mean that those who were ready to buy would not find some measure of profitability later on. Of course, if you sell off a concern of this kind for an "old song" then there is always the possibility that a revival may ensue and the industry may become more profitable. I leave it there, but I hope that your Lordships, particularly on the other side of the House, will read the Guardian in order to ascertain actually what is the history behind U.C.S.
Mr. Davies indulged in a bit of pretence yesterday. He said that he had heard about the trouble only the other day. He was the head of the C.I.B. He is an economic expert, has all the expertise available to him; yet was not aware of what was happening in 1969 and what views were expressed by members of the Conservative Party at that time.
Let us deal with the substance of this matter. My noble friend Lord Greenwood 520 of Rossendale touched upon the subject, but I will go a little further. There is not a single shipbuilding firm in the whole of the European Continent whether in Germany, Italy or any other country—I am prepared to challenge contradiction—that could survive for five minutes without subsidies: 15 per cent., 16 per cent., running up to 20 per cent. What about Japan? "Ah!" we are told, "Look at Japan. How favourably the Japanese shipbuilding industry is placed, obtaining orders from all over the world, even from United Kingdom shipowners!" More's the pity! We are dealing with facts. But why is the Japanese shipbuilding industry in a favourable competitive position? Because of its fiscal policy. There are varying forms of subsidies. I learned about subsidies, both to shipbuilding and to shipping, many years ago when the Matson Line—and I will spell that, M-A-T-S-O-N Line. I do not want to be misreported: not that it matters very much; I am not likely to gain any publicity for this debate because it is not pornography that we are discussing. The Matson Line of the United States of America was heavily subsidised, and indeed it has been discovered over the years that it is impossible to build ships at a profit in the United States of America without heavy subsidisation. That is the position.
This is not a malady peculiar to the British shipbuilding industry; it is worldwide. I emphasise— if it is necessary to indulge in emphasis—that, apart from certain exceptions, and I will deal with one or two in a moment, shipbuilding throughout the world had for many years to be heavily subsidised in order to survive. Who began it? Apart from the United States, many years ago, and West Germany and Norway and Sweden, who began it? I should like to criticise the Conservative Government, but in fact it was the Conservative Government who began the credit guarantees scheme. It was Mr. Marples who, as Minister of Transport, came to the other place with a proposal to provide credits to shipbuilding in this country.
I am sorry that my noble friend Lord Diamond is not present, because he engaged, as I did, in a number of hectic debates on the subject when we had to provide guarantees—not a mere four or five million pounds, but running up even to £20 million—either in the form of 521 loans or actual grants to the Cunard Company to maintain that company. And I say this in the presence, I think (I am not quite sure whether I am right in this), of at least three noble Lords who are directors of that important shipping company. But, if they are not directors now, they used to be. I am not blaming them for that at all; that might make the company more efficient than it used to be and make it less necessary for it to ask for substantial guarantees from the Government. But the "Queen Elizabeth 2" would never have been built had it not been for credit guarantees. And, by the way, long ago, also when there was a Conservative Government, the first "Queen" was built as a result of guarantees provided by the Conservative Government. If there is a rot, they started it. What are they complaining about?
But they had to do it. They were right. They were under pressure. I contributed to the pressure in a limited degree. They were under pressure from Members in the other place, from Members in your Lordships' House who were intensely, and rightly, interested in the future of shipbuilding and its allied industry shipping; and they were also under pressure from a variety of interests ancillary to the shipbuilding industry—engineering and the like. Of course it was the right thing to do. That is the reply to the noble Lord, Lord Barnby. I can sometimes call him "my noble friend", because, strangely enough, we have been associated—in my case not financially; about him I am not so sure—when he wanted some assistance for a particular firm in my old constituency. I readily responded, and I did not even ask whether it was efficient or otherwise. Obviously, if it had been efficient he would not have asked for my assistance. He did not think about that when he began his contribution this afternoon; it is just as well to remind him. That is the position.
About U.C.S. at the present time, what is the cause of the trouble? Let us leave aside all the political prejudices, even my own prejudices. all bias, all partisanship; and let us deal with the facts. What is the real trouble about shipbuilding? It is not inefficient; it is not lacking in higher productivity. Nor is it the fault of the workpeople. Of course, they do occasion 522 ally "go off the deep end"; there is trouble in the shipyards as well as in other industries. Many of the keenest workers in the United Kingdom are those shipwrights and boilermakers, and all the others associated with the building of our ships. Our ships are of the highest quality, whatever anybody may say to the contrary. What was the trouble with U.C.S.? The noble Lord, Lord Barnby, said they ought to have known, when they entered into contracts, whether they were going to be viable and profitable or not. How can one tell? Why did not they possess an assurance of future viability and profitability? I will tell your Lordships why. It was simply because when, in a period of intense competition, a firm is seeking orders against the Germans, the Italians, the Japs and all the rest of them, and somebody suggests, "Do not enter into any contracts of a fixed character. Insist on the escape clause, an escalation clause, because prices may go up, there may be inflation", the answer is, "We want the orders." This is competition.
§ LORD BARNBY
My Lords, would the noble Lord give way for one moment? In regard to what he said may I quote from Section 7(3)(b) of the original Act of 1967. It says that these advances should be made on the assurance… that the carrying out of the order in question… will contribute to that increased efficiency and Will secure that use is made of resources…The point, surely, is how can you anticipate, when an advance is made, that there will be a satisfactory deployment of resources for profitable reasons; and, if these difficulties arise, not blaming the employers but the unreasonableness of labour demands, then the conditions of the Act cannot be fulfilled.
§ LORD SHINWELL
My Lords, if the argument now deployed by the noble Lord, Lord Barnby, is to put the blame on the workers because they are asking for increased wages, it is such a familiar argument and it is one so readily objected to that it is hardly worth pursuing the point. Obviously, these firms—surely this is a reasonable point of view—engaged in this industry, facing intense competition from foreign shipbuilders, could not afford to ask for conditions; no strings were attached. It was impossible. They were fixed contracts, and even if there 523 had been escalation conditions from time to time it would be impossible to give any assurance about whether building a ship would be profitable and the firm remain viable.
But now we are faced with this simple position. A firm says, "We must have £5 to £6 million to meet creditors and pay wages". The Government say, "No". I am going to put a point of view that may surprise even my noble friends. I regret as much as anybody on this side, and indeed the other side of the House —I am sure I represent the opinion of all your Lordships when I say this—that there should be unemployment or redundancy. Nobody could want that; nobody with a spark of humanity, any generosity of spirit, being concerned with the future of our country, wants more unemployment, more redundancy. But from my political point of view, from my objective —I would not say the objective of every Member of my Party, but my objective—of a system of society where the State directs, even if it does not own, everything, directs the policy, taking into consideration all the facts and possibilities, a system not necessarily egalitarian but a system where there is co-ordination and co-operation, the decision of the Government not to provide the money but to appoint a liquidator who will inquire into all the circumstances, and meanwhile the Government will continue to pay the wages, suits me very well; it is a very fine system. And should there be any further trouble in industry I hope that the Government will continue to pay the wages, even if it means that I will have to pay more tax. If that is the system they want, let them have it. That system means a kind of Socialism. Is that what the Government want? What do they want? This industry being battered and shattered, and no longer of any value to this country? Is that what they want? No. All right, they propose voluntary liquidation, but at the end of the day, even if U.C.S. goes out of existence, we shall still have to find credit guarantees and subsidies of one form or another in order that our shipbuilding industry should survive.
I promised that I would refer to some shipbuilding firms which are exceptional. Take Yarrow, the naval shipbuilders. 524 They were part of the consortium and then they decided to leave. Why are they profitable? They are not too profitable and sometimes they have met with difficulties, but they are more profitable than U.C.S. Why? The answer is naval shipbuilding: no competition from abroad from the Japanese, the Norwegians, or the Germans. They need not worry about fixed contracts. They can always settle it with the Admiralty, the Ministry of Defence, or the Treasury, if there are difficulties. They have always got the Navy League behind them. I accept that defence is paramount, even if some of my colleagues do not, because I believe in defence in the present state of the world. Therefore, there is no trouble over naval shipbuilding. No wonder they said that they were leaving. It is far better to operate in isolated fashion than to be associated with other firms, however efficient, who are nevertheless far from viable. But these are exceptional cases.
I say to the Government: beware; this is not a matter of U.C.S. alone; this is a matter of the whole of our shipbuilding future. Take Swan Hunter and Richardson, one of the most efficient shipbuilding firms—and I challenge contradiction—not only in the United Kingdom but throughout the whole of the shipbuilding world. No one could be more efficient. More credit to them. But look at the position. They lost £6 million last year, and £3 million before that. Why? Lack of efficiency? No. It simply happens to be the temper, the mood, of the shipbuilding industry in face of intense competition.
Yes, we must pass this Bill. My noble friend Lord Greenwood of Rossendale was right; we are bound to support this Bill. Perhaps there is not sufficient credit being provided. It is now proposed at £700 million, and we may have to make it £1.000 million, but the shipbuilding industry must be maintained at all costs. I support the Bill for that reason. But I remind noble Lords on the other side that credit guarantees, financial assistance and subsidies to shipbuilding and to shipping, began not with a Labour Government but with a Tory Government.
§ LORD BALFOUR OF INCHRYE
My Lords. I intervene for a moment, and only because of a remark which the noble Lord, Lord Greenwood of Rossendale, made during his speech. As the noble Lord, Lord Aberdare, and the noble Lord, Lord Greenwood, both said, we are going to come back to this subject in greater detail on a later occasion, but I think we cannot let this decision— I think a courageous and difficult decision, and a right decision, which Her Majesty's Government have made on the Upper Clyde Shipbuilders— pass entirely without considering the remark of the noble Lord, Lord Greenwood, when he said that the Prime Minister was refusing further assistance to Upper Clyde Shipbuilders. I believe it will be seen that in the long run the Minister, the Prime Minister, and the Cabinet are not refusing help but giving great help to the industry and to the men employed in that industry. In a competitive world you cannot finally isolate any industry from the harsh realities of world competition. You may assist it; you may subsidise it in certain circumstances; but you cannot isolate it from the cold and hard wind of international competition. When facing competition you must expect to have maximum efficiency in your management. Mr, Wedgwood Benn talked of nationalisation. It seems to me that in the mind of Mr, Wedgwood Benn nationalisation is a password for continuous subsidisation of losses of an enterprise which its best friend could not say has proven efficient management.
The employment of men is of vital human interest to every noble Lord on every side of the House, but I ask the noble Lord. Lord Greenwood, and other noble Lords this question: is not the employment of shipwrights, of men working on the construction of ships, more secure as regards tenure, more likely to give individual reward to those men, if they are occupied in working in a viable concern where dead wood has been cut away and where efficient management has been introduced? Surely it is in the interests of the men themselves that this thorough reorganisation should be carried forward. Therefore I contradict the noble Lord, Lord Greenwood, when he says that Mr. Heath and his Government have not given assistance. I believe that they are giving the correct assistance in the 526 long run in the interests of the men in employment.
§ 4.8 p.m.
§ LORD MACPHERSON OF DRUMOCHTER
My Lords, I rise to support this Bill and should like to put two very short points which have already been made, particularly by the noble Lord, Lord Shinwell. First, like everybody here this afternoon, I am deeply concerned about the unemployment position so far as concerns the Clyde Shipbuilding works. It is tragic to have thousands of skilled men being put out of work and the degrading and unhappy position that this is going to cause. But I understand that the Government are not really refusing to help in the particular case which seems to be the topic this afternoon—U.C.S.—but what they are saying is that they will examine the company in order to see how this matter can be resolved on a fair basis.
The other point I wanted to make is that we all know that Japan and other competing countries subsidise their shipbuilding industry. Is it possible, when we look into the position of U.C.S. and the whole shipping industry, to examine the ways and means by which these subsidies are given? I am a great believer in private enterprise and competition. I think this is right, and the right way of running our industry, but we cannot expect a company to compete with other countries who are subsidising that particular industry. To me, that is not fair competition. I hope that when we explore the industry in more depth we shall see whether there are ways and means by which we can assist our industry, so that they can compete fairly with foreign yards.
Regarding the particular company which is suffering to-day, U.C.S., I am sure the Government have borne in mind that in our national defence, apart front the humanitarian reasons, it is necessary to maintain a strong shipbuilding industry on the Clyde. I hope that when we discuss this subject next time suggestions will he put forward, not only for getting our industry on an efficient basis but for ways and means by which we can put it in a position to compete fairly with Japan and all the other shipbuilding countries.
§ LORD ORR-EWING
My Lords, I did not intend to intervene, but I should like to take up one or two points made by the noble Lords. Lord Shinwell and Lord Greenwood of Rossendale. I agree with the noble Lord, Lord Shinwell, that the potential of our shipbuilding industry is important for defence, but the naval shipbuilding capacity of U.C.S. was hived off in the Yarrow enterprise and they have been less involved, or involved to practically no extent, in defence in more recent years. The case is very different in scale from Rolls-Royce which was supplying not only the Royal Air Force, but 70 other international air forces, and that was an obligation which simply had to be met if we were to keep our word. So that this is totally different in scale and, so far as I know, U.C.S. is not supplying the navies of 70 other nations.
Secondly, the noble Lord, Lord Greenwood of Rossendale, seemed to suggest that this malaise of British industry has come about since June 18 last year. That is not the case; I think it has come about after six years of Socialism. I take the view that, with the increasing taxation of company profits—which was supported not by the great body of the Labour Government, but by the Left-Wing of the Labour Government—with the increase in corporation tax from a forecast 37½ per cent. to an eventual 45 per cent., with the increased burden on the distribution of dividends, the levying of S.E.T. and with the reduction of profit margins, making it impossible for all industries to invest in the future as they would wish, we are now reaping the whirlwind which was sown in those years in which the locusts ate, the profits diminished and investment went so sadly down. It was called by the Left-Wing—and openly so—backdoor nationalisation. But it is wrong to put the responsibility on the present Government; this is a process which has gone on for a long time. The noble Baroness prefers to see flat out and obvious nationalisation but, on the whole, I do not think the country would support her view.
§ LORD ORR-EWING
They never have supported that view up to now. When 528 ever the point has been put to them in elections, they have shied away from it in a very robust manner. What is worrying is the manner in which this group was selected for this experiment. I was in the other place when it was discussed, and it was called a great experiment. I agree that to some extent it succeeded in the early years, but it is very unfair to some of the other great shipbuilding undertakings that this group should have priority and preferential treatment, while Cammell Laird, Swan Hunter and others who are making a great contribution to shipbuilding for both home and export should not be so greatly helped. U.C.S. has already been given £20 million in grants and loans, and once you are on that slope when are you going to say, "Stop"? I heard Mr. Wedgwood Benn, poor chap! who seems to be associated with bankruptcies—first, Rolls-Royce, which he did so much to bring about by encouraging them to take on the RB. 211, and now U.C.S.—say this in another place in December, 1969:… there is not sufficient priority to justify the investment of further public funds in this enterprise in the face of the many competing demands on national resources."—[OFFICIAL REPORT, Commons, 2/12/69; col. 1305.]There it was, hard and fast: "This is the end." I am surprised to see that he does not have a conscience, and that he turned a somersault in another place yesterday and said: "Everything is changed. What I said then does not apply now. It is totally different to-day." What is totally different is that this is not his responsibility; it is someone else's responsibility.
I intervene only to point out that there is another side to this question. But I give this Bill my support, because I think it right that we should advance these sums to the shipbuilding industry. However, we must not think that skilled men are being put out of work. This is giving them an opportunity to reform on a more efficient basis a very essential and live shipbuilding industry on the Upper Clyde, just as Rolls-Royce has been reformed and will be better for it. I believe that, if some of the more enlightened approach by the trade unions since the tragedy that befell Rolls-Royce in February spreads to the trade unions on the Clyde, then in the long run U.C.S. will be better for what is a short-term tragedy. I give support to this Bill.
§ 4.15 p.m.
§ LORD DRUMALBYN
My Lords, this debate has taken place very much in the shadow of the announcement that was made yesterday by my right honourable friend the Secretary of State for Trade and Industry on the U.C.S. application for a liquidator. Everyone has treated this subject with great sympathy and great moderation. it is something which must affect all those who have experience of Scottish affairs. In this connection I should like to say to the noble Lord, Lord Macpherson of Drumochter, how much I welcomed his intervention in the debate, in view of the very distinguished contribution that his father made as Regional Port Controller in Scotland during the war. He indeed grew up to understand the problems of the Clyde, and it is inconceivable that there should not be a shipbuilding industry on the Clyde.
I do not want to-day to go into any detail on the problems of U.C.S., and in that I think I am following most of what has been said. But I would endorse what my noble friend Lord Orr-Ewing has said: that the way in which this matter is being dealt with could lead—. and we all hope that it will—to the rebirth of something which is going to be really viable on the Upper Clyde. If that is the outcome, then I am sure that none of us will complain, but in the meantime there is obviously going to be a period of great anxiety. I should like to say just this to your Lordships. I feel that we should all like it to be recognised that the anxieties of the Clyde are very widely shared. We should also make it plain that it is our belief, as witness the debate in the House to-day, that this is a matter which, as the noble Lord, Lord Shinwell, said, though admittedly with slightly different emphasis, can be solved only by co-operation and co-ordination. Any tendency towards what might be a quite natural violent reaction to the circumstances at the present time could only harm the future of the Clyde itself. So, for practical reasons, I hope very much that, with the same moderation that has been shown in the House to-day, it will be possible to work out some means for reviving shipbuilding on the Upper Clyde and, in the interim, to work out some method of continuing activities there, and certainly for finishing off the jobs that have been started.
§ LORD HOY
My Lords, when we are talking about co-operation, should we not put on record that during the past twelve months in this shipyard, by the cooperation for which the noble Lord is asking, the labour force has been cut by 25 per cent.; and at the same time output and use of steel has gone up by 87 per cent.?
§ LORD DRUMALBYN
Yes, my Lords. I am glad that the noble Lord has put that on record. What I am pleading for at the present time is a continuance of this co-operation in the difficult circumstances that have arisen. This is not the time to attribute blame to one person, or to one group of people or another: it is a time to concentrate on a satisfactory outcome to the present difficulties.
My Lords, if I may turn from that subject to the Bill that we are debating to-day. I think that we must always start from the proposition that we are, after all, a great trading nation, dependent on the carriage of goods abroad. We have traditionally been a great shipping nation, and we still have a very great stake in the shipping industry. It is of course in our interest in this country that our goods should be carried, brought to us and exported, as efficiently and as economically as possible; and it is for that purpose that the shipowners in this country want to be competitive with shipowners abroad. After all, this is essentially a free trading industry; and while it is quite true that countries have been subsidising their shipbuilding enterprises, there has been, as noble Lords will probably be aware, an ad hoc Working Party of the O.E.C.D. on shipbuilding which includes all the major shipbuilding countries in Western Europe as well as Japan, and the purpose of that Working Party is to seek the progressive reduction and elimination of factors which distort competition, such as Government aids and subsidies.
As was quoted in another place on the Second Reading debate. France, for example, has greatly reduced the subsidy she was giving to shipbuilding. I think she has cut it by three-quarters. Japan has also removed her import duty on ships of over 10,000 tons, and is looking at the credit system that she has with a view to removing the restriction on 531 Japanese ships alone. It is of course true that all major shipbuilding countries support their shipbuilding industry to some degree with a wide variety of aid, the most significant of which are direct construction subsidies and favourable credit schemes. It is a fact that these are gradually being reduced, and it is equally a fact that, despite these subsidies, there are failures in the countries that provide subsidies among those firms that they subsidise. We are certainly not alone in that. But, of course, the purpose of the Geddes objective was not to provide a permanent subsidy to shipbuilding in this country; in fact, the Report expressly disclaimed that as an objective. It was to promote the ability of the United Kingdom shipbuilding industry to compete in world markets.
My Lords, it is perhaps worth mentioning that at the time the Bill was being debated in another place, on March 9, 1967, Mr. Wedgwood Benn then said, while indicating that in his view the job of implementing the Geddes Report was urgent, that the industry must not look forward to aid on a continuing basis. That, of course, does not mean that there should be a withdrawal of the guarantees, the extension of which is provided for in the Bill. Indeed, one might question how far guarantees can really be described as a subsidy. It is a fact that there have been no calls on the guarantors, the Government, because there has as yet been no default so far as the repayments of credits are concerned; and unless, of course, there are such repayments, there is no real subsidy. This is a guarantee of bank lending, which is of course of the very greatest importance. It was because of the difficulty of British shipbuilders in obtaining bank loans that this form of assistance was introduced in the first place, and I think we all agree that this was timely and has in fact enabled a considerable increase of building to take place in this country.
As my noble friend made clear, we have in the course of the last two or three years been in something of a shipbuilding boom, and this, of course, has benefited our order books, which stand pretty high at the present time. It has also 532 meant that contracts which were taken at fixed prices have led to losses, because in a period of inflation such as we are experiencing at the present time the ships which are at present being produced are those that were ordered three, four or five years ago. These are problems that have to be solved. It certainly has reduced liquidity at the present time, and one would not deny for an instant that this is partly responsible for the plight of U.C.S. But, my Lords, the purpose of the Bill is limited to raising the level of the guarantees to £700 million, which it is reckoned is sufficient to cover the shipbuilding starts up to the middle of 1973. Noble Lords will be well aware that what goes on to the order book now may not actually be started for one, two or three years, but the raising of the level to £700 million is estimated to enable credit worthy projects to receive the benefits of the guarantees up to starts in the middle of 1973.
My Lords, I hope those are the points that noble Lords wanted me to deal with. As I said, I do not intend to follow in detail what has been said on U.C.S. I would merely express the confidence that the Government feel in the shipbuilding industry. We believe that, aided by these guarantees, aided also by the very considerable improvements that are being made in productivity at the present time, and aided further by the developments that took place under the 1967 Act in consequence of the Geddes Report, the industry will be able to hold its own in world markets and we look to the future for, at any rate, some recovery. I do not think that we could expect to recover anything like the proportion of world shipbuilding that we used to have, but we look to our shipbuilding industry for some recovery of the proportion of ships that are being ordered at the present time in relation to world demand.
I should like to conclude with one observation. It is not the case that a ship cannot be built without subsidy. We have, if I may mention one firm, an outstanding example of that in Austin Pickersgill of Wearside which has had no benefit at all under the Geddes Act and yet is producing profitably and doing very well.
§ On Question, Bill read 2a: Committee negatived.