§ 5.20 p.m.
§ Lord DONALDSON of KINGSBRIDGE rose to move, That the Draft Shipbuilding Industry (Northern Ireland) Order 1975, laid before the House on 21st April, be approved. The noble Lord said: My Lords, this Order, which the House is now asked to approve, has been laid under the provisions of the Northern Ireland Act 1974. Noble Lords will see that it provides for further Government finance for the Belfast shipbuilding firm of Harland and Wolff, which the Company needs if it is to con- 46 tinue trading and providing employment—at present running at just over 10,000 jobs. The background to this measure was set out in a Statement made last month in another place by my right honourable friend the Minister of State for Northern Ireland in which he indicated the grave situation facing the shipyard.
§ Noble Lords will recall that a recent review of the company's affairs, carried out by a project team appointed in 1974 by the Secretary of State, revealed the need for a massive increase in the provision for estimated prospective losses on the present order book. Against this, a major programme for modernising the shipyard's facilities, costing in the region of £35 million and largely financed from public funds, is nearing completion. The company is the largest single industrial employer in Northern Ireland, and has a full order book. The Government have therefore decided that Harland and Wolff must be given a further chance of survival.
§ In order to facilitate the financial reconstruction of the company and other changes which the Government believe to be necessary, it is our intention to lay before this House and another place proposals for taking the company into full public ownership. We hope to lay in the near future the necessary Order-in-Council for transferring to Government the shares presently in private hands. In the meantime, as I have indicated, Harland and Wolff needs funds to continue trading. The draft Order now before us, which we envisage will soon be subsumed into the second Order to which I have just referred, is essentially an interim measure to provide for this finance.
§ Because we cannot yet be sure how the interim situation will develop it is necessary, pending completion of the necessarily complex arrangements for the company's longer-term future, for us to be able to respond quickly and effectively to whatever may turn out to be the company's exact short-term needs. It is for this reason that the present interim Order has been widely drawn as regards powers, duration and financial limits; although I must make it clear that many of the powers in this interim Order are not in fact intended to be exercised until the Government own the company. Noble Lords will note that the Order authorises 47 the Department of Commerce for Northern Ireland, with the approval of the Department of Finance, to provide financial assistance to Harland and Wolff by various means, up to a limit of £40 million. The limit of £40 million may be raised by the Department by Order, with the consent of the Department of Finance, on not more than two occasions and by an amount not exceeding £5 million each time.
§ This is a very substantial sum of money, coming as it will on top of previous Government assistance to the company. It is clearly important, therefore, that this assistance should be used to restore the company, if at all possible, to commercial viability. My right honourable friend in another place will be maintaining a very close oversight of the operation of Harland and Wolff and will be paying particular attention to the establishment of appropriate procedures for monitoring the company's affairs and for safeguarding the proper use of the funds to be provided.
§ The Order itself is concerned with the provision of additional funds to Harland and Wolff, but there are other related issues including the appointment of a new Managing Director. This post has been advertised, but we do not intend to allow ourselves to be rushed into making a decision. The important thing is to get the right man, even if this means waiting longer than we might otherwise wish. Equally important is that all who work in the yard, at every level, should be fully identified with making a success of the company. It is in pursuit of this objective that the Government have published a discussion paper on worker participation in the shipyard (which we discussed at Question Time this afternoon) and have called for concrete proposals for the introduction of industrial democracy in the company. Important as these different aspects are, they are not the main consideration. The overriding consideration must be whether shipbuilding in Northern Ireland has an economic future.
§ The proposed further financial assistance under this Order will provide Harland and Wolff with a much-needed breathing space and enable the shipyard to continue in operation in the short term. But it will not, and cannot, in itself secure survival in the long term. Moreover, it 48 must be made clear that there is not a bottomless pit of public money available to keep the yard in existence regardless of performance. These funds can be made available only so long as there is some reason to believe that the company can achieve a viable future and that genuine efforts are being made by all who work at Harland and Wolff to secure this objective. It is on the effort and resolve of everyone in the company that its future now depends. Clearly no one could guarantee success or expect it to be guaranteed, but if this Order is approved we shall be giving management and workers an opportunity to show what they can do. My Lords, I beg to move.
§ Moved, That the Draft Shipbuilding Industry (Northern Ireland) Order 1975, laid before the House on 21st April, be approved.—(Lord Donaldson of Kingsbridge.)
§ 5.27 p.m.
§ Lord BELSTEAD
My Lords, as the noble Lord has explained, this Order provides for further Government finance for Harland and Wolff and this is to be done, as Article 3 of the Order states,to provide, maintain or safeguard employment in Northern Ireland.As the noble Lord said, on 26th March the Northern Ireland Department of Commerce published a Discussion Paper. Industrial Democracy, and it stated:The Government have stated that they cannot go on pouring money into Harland and Wolff indefinitely ".I agree with the noble Lord, Lord Donaldson, that this is undoubtedly a fact—a fact underlined by the present economic state of the United Kingdom.
This Order, therefore, marks a serious step for Northern Ireland, and the noble Lord's closing words underlined that fact. It is also a serious matter for the Government which is, after all, through the Northern Ireland Department of Commerce, to acquire Harland and Wolff share capital, to take on the enormous prospective losses of Harland and Wolff's existing contracts, and to shoulder the responsibility of ensuring that in future Harland and Wolff will be run at a profit. Even though this historic yard, extensively modernised, has, as the noble Lord told the House, a full order book, these responsibilities will require a willingness to face facts in the running of industry 49 and employment which I have not discerned in Government policy in Great Britain hitherto. But the immediate responsibilities under this Order will be Northern Ireland ones. I hope that a sense of realism and determination may imbue the Department of Commerce in Northern Ireland—and, of course, at the moment this is a responsibility through the Northern Ireland Office—and that this will see Harland and Wolff through to a better future.
May I ask the noble Lord three questions. First, would it be premature to ask him what is the basis of compensation so far as the value of Harland and Wolff shares to be acquired is concerned? In any event, what is the percentage of shares which remain to be acquired in the company? Secondly, what effect will this expenditure have on the rest of the Northern Ireland Budget for the near future? In the discussion paper, I think the Secretary of State said that he would shortly be publishing a White Paper on Public Expenditure in Northern Ireland for the years up to 1978–79. Are the Government yet ready to say what effect the Harland and Wolff decision will have on other Northern Ireland public expenditure?
The discussion paper of 26th March was mainly concerned with outlining ways in which there could be worker participation at the yard. In that paper this was said:The vital question is, who makes the decisions and do the workers themselves want the responsibility of making the yard a success?It may be that some very difficult decisions will have to be taken concerning productivity and manning, although so far as manning is concerned it is obviously the hope of everybody that the future of Harland and Wolff will be a future of expansion. My third question, therefore, is this: have the unions yet agreed that they wish to be involved in decisions of this kind, decisions which are going to be essential for the future of the yard and ultimately for the prospects of employment within the yard? Of itself, this Order solves nothing; but with realism and goodwill the future of Harland and Wolff, which is so essential to the economy of Northern Ireland, may be assured.
§ 5.31 p.m.
§ Lord DONALDSON of KINGSBRIDGE
My Lords, I am grateful for the speech of the noble Lord in which he has accepted this rather difficult Order. As he has said, it is a very serious matter. It would be absurd to pretend that it is not. I can answer his three questions fairly quickly and simply. I need hardly tell your Lordships that the answer to his first question, namely, whether it is premature to ask for the basis of compensation, is Yes, it is premature. This matter will have to be settled in the next Order which will complete the take-over of the firm. It is a fairly complicated procedure and it cannot happen at once; therefore it would be quite wrong of me to make any suggestions. The Secretary of State spoke at one stage about the value of shares, which does not necessarily mean the price of shares. This will have to be worked out. I am afraid, therefore, that the answer to the first question of the noble Lord is that it would be premature to ask for the basis of compensation, and I do not propose to attempt to give it.
The noble Lord also asked about the percentage of capital which is already held by the Government. The answer is that at present the Department of Commerce owns 47.6 per cent. of the issued ordinary stock. In itself, this represents 33 per cent. of the total authorised capital. In other words, a proportion of the stock is not issued. Of the remainder of the total, some 58 per cent. is in private hands, either as ordinary stock or as preference stock, and some 9 per cent. of the ordinary shares remains unissued. I think this is a reasonably accurate answer. In broad terms, at present the Department of Commerce owns 47 per cent. of the issued ordinary stock; 53 per cent. remains to be acquired.
The effect on the Northern Ireland economy of pumping this money into Harland and Wolff will unquestionably be direct, but not necessarily total. There is no doubt that every time this kind of transfer is made the general plans for expenditure in Northern Ireland have to be cut. I do not say that they are always cut by the total percentage; there are possibilities of help from this side of the water. Basically, however, any extra 51 expenditure on one project must be met by savings elsewhere.
The noble Lord asked whether the unions have agreed to participate in essential plans for the future of the yard. The answer to his question is that there can be no future plans unless they have the approval and support of the employees, and that is what the company is working on now. Since the Government announced last July their intention of providing financial support, wage negotiations have been focused on productivity targets, and a manpower resources plan is being produced. Therefore the answer is not a straight "Yes" to the question asked by the noble Lord. In fact, I may say to him that I am perfectly certain that we shall obtain union co-operation in keeping the company going and giving it another opportunity to pull itself round.
§ Baroness HORNSBY-SMITH
My Lords, could the noble Lord tell us how much money, under successive Governments, has already been poured into this company? It is a matter of concern to me that we are told that Harland and Wolff have a full order book. If they have a full order book and still are not making their way, it is a matter of deep concern that again we should be pouring public money into this company. Could the noble Lord say to what extent any effort has been made to find out whether there is overmanning? It is asking a great deal of today's very hard-pressed taxpayers that they should continue to pour money into a company which, according to the statement of the noble Lord, has a full order book and should, presumably, be building its ships at an economic and reasonable price.
§ Lord DONALDSON of KINGSBRIDGE
My Lords, if I may speak again by leave of the House, I will answer the question of the noble Baroness regarding quantities. In one way and another, by 31st March, 1975, a figure of just under £60 million of special assistance had been put into the company. In addition, this company, like all other companies, has received a certain amount of standard assistance, and there was another £22 million of that kind of assistance. The second question of the noble Baroness related 52 to the order book. It is not one that I can answer in detail. Roughly speaking, the position is that we appointed a project team to examine the matter. One of the results was that four orders were cancelled, because it was found to be cheaper not to fulfil those orders than to fulfil them. The kind of trouble that the company has run into is the kind of trouble which many companies have experienced—that they accepted fixed price orders and inflation has gone against them. Also, productivity failed to rise as had been planned, and there were a number of difficulties. We are not saying that necessarily the company is going to succeed: nobody can guarantee that. We are saying that this injection of money is, in our opinion, worth while and that the reward of success will be very great indeed. I think that is about as far as I can take the question which has been asked by the noble Baroness.
§ On Question, Motion agreed to.