§ 3.10 p.m.
§ The MINISTER of STATE, DEPARTMENT of INDUSTRY (Viscount Trenchard)
My Lords, I beg to move that this Bill be now read a second time. This very short Bill, one of the shortest on record, covers two important shipbuilding items. It provides for an increase in British Shipbuilders' statutory borrowing powers, and it widens the scope of the home credit scheme to include con- 582 versions of ships and mobile offshore platforms by United Kingdom owners in United Kingdom yards. Neither provision adds to the aid for the industry announced by the Government on 23rd July and the policy in relation to shipbuilding and British Shipbuilders remains as outlined at that time, and it is to provide a clear and fair framework for British Shipbuilders to perform a very difficult task in difficult conditions and gradually to move to return that industry to profitability.
This is, as I said, a small Bill, but it is useful none the less and I will go through the details and explain what part the provisions play in the Government's plans to help British Shipbuilders. With certain exceptions specified by the Aircraft and Shipbuilding Act, the borrowing limit covers the amount which the corporation and its wholly-owned subsidiaries may borrow and any public dividend capital that may be voted to it. When British Shipbuilders became a fully fledged corporation in July 1977 its borrowing limit was set at £200 million with provision for the Secretary of State to increase it by order to £300 million. An order to this effect was made in July this year. Even then, it was already evident from British Shipbuilders' financial position that the £300 million limit would need to be increased again within a matter of months, and this is still so. Hence the first clause of the Bill. The proposal is to increase the limit to £500 million with powers for it to be raised by an affirmative order in the other place up to a maximum of £600 million. In present circumstances no one can be sure how long the new limits will suffice, but we may certainly hope they will last longer than those they replace.
British Shipbuilders was set up during a recession in the shipping market of unprecedented severity which has resulted in severe losses for British Shipbuilders. Shipbuilding industries all over the world have also made large losses. This year's cash limit of £250 million and loss limits of £100 million, after crediting Intervention Fund assistance, reflects the severity of the industry's difficulties and illustrates the need for the contraction plans of the corporation. Next year we expect improved results; we have set a loss limit of £90 million before crediting intervention fund assistance. It may be helpful if I were to refer back to the 583 figure I gave, that this year our loss limit has been £100 million after crediting intervention fund. The amount credited up to October was £35 million, so it is clear that the loss this year on a comparable basis to the £90 million I have just quoted for next year's plan will be in excess of £135 million. That represents a sizeable reduction on the rate of loss and the external financing limit has been set at £120 million.
These figures show that both the Government and British Shipbuilders are determined to reduce the corporation's losses and put it on the road towards viability. We have stated our policy of making public money available over the next two years while it adjusts its capacity and improves productivity. Raising the present borrowing limit as proposed in the Bill will allow the Government to finance British Shipbuilders in accordance with the policy which we announced on 23rd July. I repeat that it does not add any further assistance to that already outlined in that policy.
The second clause is intended to improve British yards' ability to compete with foreign repair yards which already enjoy similar credit facilities. The home credit scheme established by Section 10 of the Industry Act 1972 enables the Secretary of State to guarantee loans raised to finance the construction or completion of ships and mobile offshore installations in the United Kingdom for United Kingdom owners. It does not however at present cover finance for the conversion or alteration of ships or mobile installations by United Kingdom owners. The present proposal will fill that gap.
The guarantees will be limited to the finance for the work of alteration and will not cover finance for the purchase of the ship or installation to be altered. The minimum size of ship which is laid down in the EEC Fourth Directive will be 5,000 gross registered tonnes, although we shall be able to go down to 1,000 gross registered tonnes to match officially supported credit terms in instances outside the EEC where there is evidence that ships of that size are being supported. To qualify under the scheme, the conversion has to involve radical alteration to the hull, the cargo plan or the propulsion system. 584 Similar eligibility rules will apply to mobile offshore installations.
Guarantees will normally be up to 80 per cent. of the contract value over a period of five years from delivery. The interest rate in the home credit scheme is currently 7½, per cent. Although these are the normal terms, the possibility of extending credit to 8½ years is the maximum allowed under the EEC and OECD agreements and it is not excluded that for very large contracts of special importance we may feel it desirable to go to the limit. The conversions involved—for example, enlarging and re-engining ships to achieve improved fuel economy—can afford worthwhile opportunities not only for ship repairers but also for shipbuilders, engine builders and other related industries.
The House will recall that when we took office we found that the intervention fund had been allowed to lapse—it had lapsed in March of this year—and that British Shipbuilders had only qualified approval for their corporate plan, and that was over three months after sending it in. The previous Administration recognised that contraction was inevitable, but they could only bring themselves to consider these matters on a step-by-step basis. Our measures have given the corporation a framework of support and a basis for planning over two years.
Since then we have successfully negotiated the proposed new intervention fund of £120 million, which we announced in July, and this is now available to subsidise orders within limitsagreed with our partners in the EEC. We have also agreed wider limits on credit with our partners in OECD, and we have pursued the possibility of a worthwhile Community scrap-andbuild scheme. It has been disappointing to my right hounorable friend that the Council of Ministers were unable to reach a decision on this at their recent meeting, though I understand that further consideration is to be given to the proposals. For their part British Shipbuilders reached agreement at Blackpool with the Confederation of Shipbuilding and Engineering Unions on their strategy to reduce the industry to a little over 400,000 tons of capacity a year. We all recognise—and we congratulate the parties to the agreement—that this was not an easy agreement to reach.
585 There are some signs of a rally in the market now, but they have to be viewed in the context that orders for the industry over the past five years have been below the level required to sustain British Shipbuilders' preferred strategy, including the tonnage that I have just mentioned. In our view therefore British Shipbuilders will still find it difficult to sustain their strategy. Moreover, although prices in some areas have firmed up a little, in general they remain much too low.
British Shipbuilders, with the active co-operation of the unions, are making strenuous efforts to improve productivity. Joint monitoring committees have been set up, self-financing productivity schemes have been devised, and the corporation is running a very active publicity campaign in all its yards. As many noble Lords will know, it is never harder to improve industrial productivity than when orders are scarce and, consequently, when men are apprehensive. Yet nothing is more calculated to undermine future employment in the industry than levels of productivity below those achieved elsewhere.
British Shipbuilders still have a long way to go. They recognise the challenge they face, and will continue to face, from their overseas competitiors—both from the old-established industries and from those growing up in the newly-industrialised countries of Asia and South America. The Government have provided the industry with certainty in the framework of support that they can expect. The help which this Bill makes available is part of that framework.
Before concluding my introduction of the Second Reading of the Bill I think I should mention that up until October the tonnage for which orders have been firmly placed is 280,000, against the annual figure for the preferred plan (which I have spoken of) of a little over 400,000 tons. So the size of the task which is still before British Shipbuilders, despite an improvement in the order position, particularly in October, is clearly very formidable indeed. Nevertheless, on the basis of the points that I have outlined I commend the Bill to the House. My Lords, I beg to move.
§ Moved, That the Bill be now read 2a (Viscount Trenchard.)586
§ 3.24 p.m.
§ Viscount SIMON
My Lords, it falls to me to thank the noble Viscount for explaining so clearly to us this small, but important, Bill. I think that any one of your Lordships who has been following the fortunes—or perhaps I should say the misfortunes—of our shipping industry through recent years would not be surprised that the Government have had to put some more money into the industry. The noble Viscount made the point that the Bill does not add to the aid offered by the Government. I did not completely follow his point; it does not add to the aid that the Government said they were going to give, but it does in fact add to the aid that would be available without the Bill. It is certainly no surprise that this is necessary, but whether it will be enough to carry through British Shipbuilders for two years remains to be seen. I am no financial expert, and clearly we in your Lordships' House cannot examine that matter in detail without having a great deal more information. I will accept it from the Government that they hope that it will do so, and no doubt they have chosen the figure accordingly.
I should like to touch for a moment on Clause 2. I think that this is a great improvement, and I believe that with the aid of this clause there should be very useful work for the shipyards. Your Lordships may remember that when we discussed pollution a great point was made that this would be a good time, while there is shortage of employment for tankers to go ahead with the modifications to tankers which will eventually be required under international agreements—the segregation of ballast tanks, and so on; and one would hope that there will be orders of that kind coming into the shipyards as a result of this clause enabling them to be supported by the Government.
As the noble Viscount said, this is a very short and concise Bill, but I think it is the normal custom in your Lordships' House to look at matters a little more widely than the wording of a Bill, and I was rather hoping that the noble Viscount would be able to say more about the future and how it appears to the Government. I quite recognise that British Shipbuilders are continuously updating their corporate plan, and there may be no exact moment 587 when the noble Viscount can tell us what it is; but at any rate he has assured us—and I am very glad to know this—that there is a forward plan and that that forward plan is being developed as we go along.
As the noble Viscount reminded us, there is a target at present of a little over 400,000 tons a year production, and the great problem is: how are we to achieve this? In common with all industries, the answer here is that the industry has to produce what the customer wants, at the right price, and in time. In recent years late delivery has certainly been one of the worst failings of our shipbuilding industry, and it must always be remembered that in this industry, as in most industries, time costs money; the longer it takes to build a ship, the heavier the burden of overheads that have to fall on that particular ship. So the management and the unions are faced with a real challenge today, as I think the noble Viscount outlined. It appears to me that one of the advantages of nationalisation should be the ability to compare the best performers in our shipyards with those that are not so good, to learn the lessons from that, and so encourage the adoption of best methods as widely as possible.
There is another advantage arising from nationalisation—for I do not deny that there may be advantages, though I believe that in most cases the disadvantages outweigh them—in that a single ownership with Government backing is better placed than would be a number of independent shipbuilders to negotiate agreements with other countries. I wonder whether the noble Viscount, when he winds up the debate, can tell us how we are getting on either with international agreements on the reduction in shipbuilding capacity, or with the scrap-and-build scheme which has been discussed in the European Economic Community—which, if it came to fruition, and provided the scheme is well devised, would I think undoubtedly help the shipbuilding industry without in fact damaging the shipping industry.
In conclusion, my Lords, perhaps I may turn to the vast human problems to which contraction of the industry inevitably gives rise. I sometimes wonder whether our present arrangements for dealing with the problems of unemployment can cope adequately with a major industry facing massive redundancies located mainly in a 588 few small areas. Rather the same position arises in the case of the steel industry. In fact, we might ask ourselves whether our present arrangements can cope adequately with the problems of unemployment on the scale we see around the country today; but perhaps that is a matter which we should not pursue this afternoon but leave for the debate which is being initiated tomorrow.
In this industry we have fairly substantial redundancy payments, but all that these do is help to bridge a gap; they do not close it. They are temporary palliatives; and the task before the industry—because I think it is a task for the industry rather than for the country—is to redeploy the redundant labour. This, I suggest, should be a major concern of the management and of the unions. It is not good enough for the management to say, "We are paying these men the redundancy payments which have been authorised by Parliament, and they are of no further concern to us". Many of these men have been in the industry for a long time, and I feel that the employer has a responsibility to go beyond that and to try in any way he can to help the redeployment of labour.
I should like to see established in the shipyards special units to give help to those who are made redundant—help as individuals. They should not he treated as a number of people who fall into some machine out of which they may or may not secure what they want, but as individuals with individual problems; and I cannot help feeling that it would be a help to them if those familiar with their own problems were there to advise them. I may very well hear the noble Viscount say, "Who is going to pay for this?". The conception I had in my mind was that these special units should be manned by people in the industry who would otherwise become redundant—people at both management level and at shop floor level, helped, of course, by the trade unions.
My Lords, such an arrangement certainly would not be 100 per cent. effective, but would it not help those who wanted to seek new employment to have their individual problems looked at and discussed by people they know already, people in their own business, rather than for them to have to go merely as numbers into an employment office register? This is not a suggestion that need apply solely 589 to the shipbuilding industry, I suppose; but in the situation in which that industry finds itself today, with the very large redundancies in view, I suggest that something of that kind would be a real contribution towards a solution of the problem.
§ 3.34 p.m.
Lord CAMPBELL of CROY
My Lords, I am grateful to my noble friend Lord Trenchard, the Minister of State, for introducing this Bill so clearly. It seems to me to be very urgent. It seems as though it is needed by Christmas, and I hope the House will give it a quick passage. Clause I certainly appears to be needed before Christmas, because British Shipbuilders are likely to exceed the previous limit of £300 million by January. Since the debates on this Bill were held in another place there has been a report in the Press—it appeared at the end of last week—that an estimate had been made of the losses in the current year, and that these were working out at about £4.5 million more than the target loss which had been set by the previous Government. I wonder whether when my noble friend replies he will make any comment on this, and on its effect on the financial part of the Bill, other than that it must make the Bill even more urgent.
I congratulate the Government on obtaining agreement with the EEC on a further intervention fund. I understand that this is to extend for at least two years; and I include in this the separate agreement for Harland and Wolff in Northern Ireland. The United Kingdom shipbuilding industry should now have a clearer picture of where it stands for at least two years. It has been pointed out that the percentage of subsidy under the new arrangements will be somewhat less than that which was available under the previous arrangements, but I understand—and perhaps my noble friend will be able to confirm or correct this—that only about one-fifth of the £85 million which we knew was previously available was in fact taken up and spent. My noble friend mentioned the agreement within OECD on credit terms to be guaranteed by the Government. Provided that all the member nations stick to the rules, this is to be welcomed, too, but I would point out that fierce competition in 590 extending credit virtually amounts to the same as increasing subsidy, and as has been proved by experience in the past, this is not to the advantage of this country.
I also welcome the other function of this Bill, in Clause 2. Hitherto, United Kingdom yards have not been able to benefit from the guarantee by the Government, in our case the Export Credit Guarantee Department, with specially favourable terms, for the construction and conversion of vessels where they are owned by United Kingdom owners. The scheme applied to foreign vessels in United Kingdom yards. We were therefore at a disadvantage compared with our EEC competitors. It is right to provide the redress for this in the present Bill, which in my opinion has been overdue. The Bill should therefore provide a breathing space for the British industry, and reduce uncertainty. We are in the middle of a world recession, and there is great over-capacity internationally in this industry. But, as my noble friend mentioned, it is expected that there will be an upturn in about three or four years' time. People are even saying there is a small sign of it now.
My Lords, it has been one of my tasks in recent years to follow the fortunes of the shipbuilding industry. I believe we should remember those long periods when we in this country led the world in shipbuilding. Our industry has set the highest standards, and has enjoyed a very special reputation for skills and workmanship. There was the period when the noble Lord, Lord Shinwell, was on Clydeside, in the years at the beginning of this century—and I am glad that he is to follow me in this debate. We certainly led the world at that time.
I was reminded of this, and of an earlier period, the day before yesterday, because on Sunday I made a visit to Bristol—a city which I know very little and have visited only about three times. I went there to see the progress which has been made on the restoration of the steamship Great Britain ", because I was on the committee which, 127 years after she was built by I. K. Brunel, brought her back from the Falkland islands to the dock in which she was built, where she now lies. I am glad to say that progress is going very well. Let us remember, my Lords, that the "Great Britain" was the largest ship in the world when she was launched in the 591 1840s; she was the first screw-driven ocean-going vessel; she was the first vessel with the principle of bulkheads—and I could go on listing the other things on which she was first. She also survived everything. She would not have survived a scrap-and-build programme, of course, but after about 30 years in passenger service, like the Cunard "Queens" of recent times, she turned to freight and finally she was beached and used as a hulk. She has survived 127 years. She is a monument to invention, vigour and enterprise, and I believe that we need those attributes again today.
Some reduction in our shipbuilding capacity is inevitable; it is necessary. The future success of our shipbuilders will depend on productivity and the ability to deliver on time. It is good news that the restructuring programme has been agreed between British Shipbuilders and the unions. I have not seen details of this; I do not know how much has been published of the actual proposals. It may be that they are still confidential. But perhaps my noble friend can give us more news today. But contraction of the shipbuilding industry is especially difficult to arrange. Closures and redundancies on any large scale cannot take place painlessly. There is so much work in the shipbuilding areas which is connected with the industry, for example, the smaller firms supplying components almost entirely to the shipbuilding industry and the ancillary industries which are based in the same areas. Alternative work for those who have to be laid off is not easy to find in those areas.
In the summer of 1978, we had before your Lordships' House the redundancy payments schemes for British Shipbuilders. We gave attention to those schemes and they passed through this House with our blessing. I ask my noble friend: Is it proposed that the redundancies should be carried out entirely by what is called natural wastage—voluntary retirement and absence of recruitment? Are they to be on that basis, or are there also to be compulsory retirements? We saw what looked to be favourable schemes for sums of money to be given to those who were to retire; but I know that the unions were very keen—understandably, for reasons that I have given—that the redundancies, if possible, should be on a voluntary basis. 592 I hope that your Lordships will recognise that I, myself, am one who understands the acute problems that there must be in shipbuilding areas if the workforce has to be drastically reduced. The main difficulties are with merchant shipbuilding and I presume that one of the matters to which British Shipbuilders have been turning their attention (necessarily with the assistance of the Government) is how much of the workforce can be moved to the naval shipbuilding programme. I have seen reports that some thousands are being so moved. Provided that the prospects for naval orders, both from the United Kingdom and from countries abroad, are good, that seems to be another way in which the reduction of the merchant shipbuilding workforce can be carried out effectively.
I would ask one question, which is a topical one, about what are known as protection vessels. I regard these as including not only the naval fishery protection vessels but the general protection vessels now that the concept of a 200-mile economic zone as well as a 200-mile fishery limit is one that has the acceptance of most of the world. There was a report in the Press yesterday that there is competition between a design called the "Osprey", of which one has been already commissioned and is in use in Denmark, and the British Shipbuilders' larger vessel designed for the same duties. I believe that we will need vessels of this kind. There have been fishery protection vessels besides those belonging to the Navy. A small fleet belonged to the Secretary of State for Scotland for years and carried out certain duties. There will be a need for more such vessels, I believe, because of the very much wider extent of waters which we will have to patrol for various reasons, including our offshore oil installations.
I now come to the scrap-and-build scheme which was referred to briefly. The EEC Commission's proposals were, I understand, considered by the Council of Ministers two weeks ago on 20th November. It appears that nothing was decided and, although what happens in those meetings is confidential, the impression was given that the scheme was too vague and that the Ministers sent it away asking for more specific proposals. I would support a scheme for scrap-andbuild—and I am glad that the Minister 593 of State for Industry in another place made it clear that he supported such a scheme—provided that it is not draconian and that it takes account of the fact that there could be a rather greater upturn in demand for ships in the mid-1980s than that now expected, as the extent of cycles in the past have shown.
I would urge everyone in the shipbuilding industry to espouse productivity. This is exceedingly difficult at a time like the present; but I urge them to shun the temptation to extend time over orders and spread the work, although it is natural to want to do this when there is a world shortage of orders. But it is very shortsighted and will damage the industry in the long run. The United Kingdom shipping industry is one of the largest, although it is getting smaller. Naturally, it has requirements for specialised vessels and it needs to be firm on delivery dates; but I am glad to say that the shipping industry, the ship owners of the United Kingdom, have been ordering a substantial proportion of their requirements from United Kingdom yards. It is in their interests to do so; it is in their interests that there should be a modern, competitive shipbuilding industry in the United Kingdom to be able to continue the supply. It is also, I believe, in the interests of everyone in this country.
My Lords, where shipbuilding is concerned, we, as a country, should still be in the forefront in design, invention and, above all, application without delay. So I give this Bill a blessing and hope that it will go through your Lordships' House with no delay.
§ 3.47 p.m.
§ Lord SHINWELL
My Lords, one would require to be an incurable optimist to believe that this Bill will save the British shipbuilding industry in the next two years, or even for a longer period, from disaster. When he began his speech the Minister informed us that this was a simple Bill. Undoubtedly, it is simple, excessively simple; but the subject is far from simple. It is complicated and replete with potential queries about whether the financial proposals are capable of bolstering up the industry for even a limited period. I do not regard the subject as in any way simple; it is highly complex. Moreover, it is closely associated with our 594 economic situation. Many questions should be asked.
If I am in any way dissatisfied with the Minister's opening speech, it is not because he has not stated the facts contained in the Bill. That did not take much time, in any case. It is because what we should be discussing, debating and investigating, is why the shipbuilding industry of the United Kingdom has declined so rapidly in the last 25 or 30 years. There must be a cause: why do we not discuss it? Are we afraid to discuss it? Will it offend any section of the shipbuilding industry if we venture to ask questions associated with the decline to which I have just referred? So far as I am concerned I have no inhibitions—none whatever—about this or any other matter. If there are problems, let us not run away from them. They are not solved in that way. By no means am I suggesting that problems can be solved by debating them. It depends on attitude. It depends on whether we have the courage to face the facts and whether we refrain from indulging in optimism about what might happen in the future.
I certainly am not very much concerned about the future; I am concerned about the present, and it is to that aspect that I venture to address myself. To begin with, I ask noble Lords to note that we are setting a target of 400,000 tons of British shipbuilding. There is not much difference between the total volume of our shipbuilding set by the target from the kind of tanker the Japanese could produce running to almost 300,000 tons. That is an illustration, a contrast. What are we aiming at? I am far from saying that there is nothing worthwhile in the Bill; Clause 2 is very much worthwhile, except that I am bound to say it is belated. How often under previous Governments has this matter been debated? How often have I personally, when I was chairman of the Labour Party's shipbuilding and shipping committee, raised this issue of why, when we provide credit to foreigners who wish to employ Britishers producing ships for them, we fail to provide British shipowners with similar credits. That has been raised over and over again.
A member of our Front Bench (he is not present and I shall not mention his name) who was responsible during a debate in another place when we were 595 discussing precisely this aspect of the problem refused on behalf of the Government of the day—I am sorry to say it was a Labour Government—to provide British shipbuilders with credits similar to those provided for foreigners. I never could understand the reason why they declined. Moreover, it must be taken into account that, as a matter of principle, there is nothing particularly obscene in a Government providing credits, financial grants or assistance of any kind in order to maintain the existence of an industry.
For many long years foreign countries have subsidised shipbuilding with sums far in excess of anything that we have ever attempted to provide or, it would seem, even thought of providing. All Governments have been to blame. I am bound to say—let the truth be told!—that it was a Conservative Government that provided the largest subsidy ever for a ship built in this country. I remember the late Ernest Marples, as Minister of Transport, who was responsible for shipbuilding, urging the Members of another place to agree to a credit of £3 million in order to build a Cunarder. There was a great deal of opposition; I am not so sure I was not one of those who opposed it at the time. I think it was because I thought that the Cunard Line had sufficient financial resources to undertake the task without Government assistance. That is only one illustration. The Japanese have subsidised their ships; the Germans have subsidised their ships; the Americans have always subsidised their ships—there would be no American shipbuilding without subsidies. They are still doing it.
I note that it has been suggested that the EEC have been giving this matter consideration. A scheme was placed before them which would apparently provide for a kind of consortium which would decide not to build too many ships, whether to rely on the capacity of a particular country, and would consider requirements, and so on. We are going to get very little out of the EEC in this respect. We can set it aside; the scheme put before them is dead; it was dead before it started. They are not going to come to our aid on shipbuilding—apparently, they are not going to come to our aid on other matters, but that is another story. We can come to that on some other occasion. 596 I am conscious as I speak that this is not a subject that requires oratory, imagery, flowery speeches—and certainly not optimism. I noted what the noble Lord, Lord Campbell of Croy, said. He was inclined to be optimistic. He has been associated with this subject for a long time and I know that his heart is in it. He wants to see the British shipbuilding industry revived; I know that. However, with all the oratory of which he is capable and all the good wishes, it will not succeed.
The other day I happened to read the Daily Telegraph—I am sorry to give them a gratuitous advertisement; they never gave me one. I took note of what was said about British shipbuilding; and surely nobody would refute what the Daily Telegraph says, even if I myself occasionally have some objections. An article was headed: "Jobs warning by British Shipbuilders." The chief executive of the British Shipbuilders had said:We must get our costs down and deliver dead on time. No excuses. Guarantees to customers must be kept ".He said that the alternative could be the loss of practically every job in merchant shipbuilding. He was supported by the managing director of finance, Mr. Hares. The article went on to say, in the context of the financial proposals to which the Minister had referred, that next year the losses must be held to £90 million inclusive of the subsidy fund. That is the target: to hold down the losses. It is not to make gains: gains are not in this matter at all—just losses. Mr. Hares is quoted as saying:This will be very difficult to achieve. We are in serious danger of not being able to live within the limits set by Government ".Obviously there is not enough money. There will be losses and then a further decline. The chief executive went on to say this:The Government has given us two years to save this industry. Unless we can demonstrate real progress we will all sink together. My job will go, your job will go ".—I presume he meant the jobs of the shipyard workers—Every merchant ship we build makes a loss. Warships are paid for by the taxpayer ".He went on to say that an investigation into "fundamental things which damage our efficiency" had been made—I would ask your Lordships to give particular 597 attention to this—and had shown that costs could be cut rapidly. Unions had to help management make working practices more flexible. Absenteeism and poor time-keeping had to be reduced.
I hope to be forgiven for my preface. This is what I wanted to come to. This is fundamental, and I ask the question: why did the Minister not refer to this? Are we afraid to talk about it? Who is responsible? What is responsible for this decline?—a general decline throughout the whole world. There is one example I might touch upon—namely, the practice of British shipowners (and I am not indulging in any criticism but simply stating the facts) when a ship is 14, 15, 16 or 20 years old, of not scrapping a ship. They no longer modernise; it is hardly seaworthy but they sell it to the Greeks, sell it to the foreigners, who then carry on for many long years afterwards in competition with us. That is going on all the time. If we had scrapped many of these ships, instead of selling them to foreigners at low prices so that they could engage in competition with us, perhaps paying wages much lower than we give our people, it might have helped, even if we did not build more ships.
I come to the fundamental point: who is responsible? According to what I have just read, we have absenteeism. Who is responsible? Is it the workers? If they are responsible let us have the truth. Do not let us be afraid of it. I would say that to my old colleagues, some of them connected with the trade union movement: let us not be afraid of it. If the trade unions are responsible let us state the facts; let us investigate. If the workers are responsible for absenteeism, let us know all about it. Let us not have mere assertions of this kind, which may be quite justified. Let us have the facts.
Bad timekeeping is also mentioned. Who is responsible for that? Nothing is said about bad management. I do not say a word because I do not know anything about it, but it is just possible—I will put it no higher than that—that the management is not as efficient as it might be. Let us investigate. That is what we ought to be debating. It is not merely a question of dealing with losses likely to be sustained which will he covered by the 598 Government in due course. What has that got to do with the subject? We must find out what is the cause of the trouble and when we have diagnosed the complaint and have had a thorough investigation then let us try to find a solution either by co-operation or by some other means. Perhaps it may mean more finance, more imposition on the taxpayer or whatever it may he; but let us get the facts right. Let us find out who is to blame.
Who is to blame? The Minister said nothing about that—nothing at all. He never mentioned it, as though it did not matter. But we understand that it matters and in fact even the Telegraph understands that it matters. Those responsible for running and administering the industry believe that it does matter. They themselves do not suggest a remedy but a remedy has to be found, and I venture to say—and, with this I close—that it is no use having debates of this kind, roaming all over the place, unless we get down to the facts which are associated with our problems, and seek to resolve them. That is essential, and I should like to have an answer from the Minister. Is it the intention of the Government to try to inquire and find out the cause or are they so fully informed that no further investigation is necessary? So are we to see the decline go still further?
It is not only a question of jobs: as the noble Lord, Lord Campbell of Croy, rightly said—and he could easily have emphasised this with justice—it is a matter of prestige. We were a great maritime nation. The noble Lord, Lord Campbell of Croy, referred to what happened at the beginning of the century. I remember so well at that time that every Clyde shipyard was up the eyes in work and often refused to accept further offers from foreigners. They refused to consider tenders and so on. It was in that area in the North-East: Sunderland, Newcastle-on-Tyne and the Wear and all round there. That has all gone. It is slipping, slipping away from us all the time: no prestige, no jobs, no industry. And all we can provide is an assurance that if there are losses they will be met. "If there are losses! "—we know in our hearts there are going to be losses and that what we are proposing to provide in order to cover the losses is a mere bagatelle and will not solve the problem.
§ 4.7 p.m.
My Lords, I am very glad to be able to take part in this Second Reading debate and to thank my noble friend Lord Trenchard for the explicit way in which he introduced the Second Reading of the Bill. As he said, it is a very short Bill and has a very limited application, but it is none the less an extremely important Bill as a link and as a rung in the ladder to get our shipbuilding industry back to viability. I was most interested in what the noble Lord, Lord Shinwell, had to say. In some respects I hope to follow some of his thoughts. Your Lordships will remember that we had a very full debate on shipping in June of this year. We saw the situation of the industry as a dismal and rather aifficult picture, and of course that has its implications on shipbuilding; but I do not think we need to cover much of the ground that came out in the June debate, because that can be read.
There are a few further points to make, and perhaps one or two points from the debate which I should like to re-emphasise, this evening; and I hope not to be very long. At some time world trade will recover, but it seems to me very important to make the point that it would be idle to pretend either that we in the United Kingdom or our fellow shipbuilders in Europe or elsewhere will ever get back to anything like the picture of shipping and shipbuilding that we were accustomed to in the past.
In saying that, I am not being critical of anyone. If I have any reservation about that remark, it would be merely this: that the situation being what it is and having developed as it has—and I want to say a little more about the development of the present situation—I regret that something was not done very much sooner about the way that Europe is now getting down to this difficult problem. I should have thought, with the information which was available a few years ago, that more could have been done to foresee the difficult situation that we have got into now. Be that as it may, we did not foresee it. Therefore steps are actively being taken. We cannot always make the right kind of forecasts, so we have to look at the situation as it is now.
600 The noble Lord, Lord Shinwell, asked the very important question: Why have we got into the situation that we are in now? I am going to suggest to your Lordships one or two reasons. They may be self-evident but I think that they need to be repeated if we are to obtain a clear picture of what is behind the Bill. The first and obvious factor which has upset the whole of the shipbuilding world, among other worlds, is the oil and energy situation, with its many facets.
In passing, I want to make this point. The noble Lord, Lord Shinwell, referred to the figure of 430,000 gross registered tonnes as the aim of British Shipbuilders today. He made the valid point that it is not very far off a single VLCC that Japan, may have been able to build. I would merely mention to your Lordships that it is not very much more than some of the very large VLCCs which we were building when I was chairman of Harland and Wolff. Then we were building 330,000-tonne tankers. I make that point because, owing to the oil situation, it is very unlikely that we shall want anything like so big a fleet. We have North Sea oil, and there are all sorts of other reasons why the need for these very large crude carriers is so much smaller and may or may not ever return.
§ Viscount SIMON
My Lords, I wonder whether the noble Viscount would give way. Are we not getting a little confused over the tonnages which we are speaking about? These large tankers are 300,000 tonne deadweight carriers. The target of 430,000 is the gross registered tonnage, which would be quite different.
My Lords, the noble Viscount is quite right. There is not all that much difference, but it gives the measure of the problem. So much for oil.
The next point I want to make relates to the development of the very fast oceangoing container ships. One of those ships replaces today seven, eight, nine or even, in some cases, 10 of the traditional cargo liners. Then there is the virtual disappearance of ocean-going passenger ships in favour of aircraft and the changing types and demands for naval vessels to be built in our shipyards.
Then there is a point which your Lord-ships may think is a little far-fetched, 601 although I do not think that it is; namely, the development by the Russians of their very large freight-carrying Trans-Siberian Railway which will do a great deal to obviate the use of ships between, say, this country and Japan—to say nothing of the developing countries and their determination, which one can very well understand, to have their own shipping and often their own shipbuilding yards. So there exist a large number of facts which are nobody's fault, but those facts are there.
The noble Lord, Lord Shinwell, asked further: Is it the fault of the workers, or is it the fault of management? I would hesitate to answer that question. However, I should like to say that with a declining amount of trade it is very easy to see that morale in the yards is extremely difficult to maintain. This may have an effect. It may affect the enthusiasm either of workers or of management. These are a few considerations which seem to me to answer the question: Why have we reached this stage? I am sure that there are many other reasons which noble Lords can call to mind. However, it leaves us with a picture of considerable over-capacity, a picture which it is difficult to obtain a clear definition of and therefore a picture upon which it is difficult to base any long-term policy for shipbuilding. Having said that, there are certain factors which I regard as definite and to which we can cling.
At some stage there will clearly be a resurgence of world trade. At that stage, and maybe before, the number of laid-up ships—good, modern ships—will be largely absorbed. That will not, of course, help with the building of new ships. The present fleets will in due course call for replacement as they get older and become outdated, though it is important to mention—and I shall refer to this again in another context before I sit down—that the average age of the United Kingdom merchant fleet is only seven to eight years. It is a very modern fleet.
This has certain important repercussions. We in the United Kingdom, I take it for granted, will continue to need a thriving shipbuilding industry, albeit smaller than in the past. As my noble friend Lord Campbell of Croy has said, we are still among the leading shipbuilding nations in 602 Western Europe. We can still build as good ships as anybody else so long as—and I think that this is very important—we do not in all these difficult situations allow our skills to be lost to us and go elsewhere.
It is not merely a question of structural change which has to be considered—streamlining to reduce overheads. Nor is it a question of investment to modernise methods. Both of these are very important, but there are other equally important factors to be considered in relation to what has to be done. For instance, manning levels will have to be gone into very carefully. There will be other factors, too, all directed to greater productivity and lower cost. Obviously this must be a major task, but it is an essential task if we are to continue to exist in the world league as we have done in the past. However, I want to emphasise that it will take time.
When my noble friend introduced the Bill he referred to a step-by-step approach, and I agree entirely with him. It is significant to recall that the noble Lord, Lord Shinwell, went back into history. Perhaps I may follow him. It is significant to recall that when Sir Reay Geddes and his committee reported on shipbuilding in 1966—that was Command Paper 2937 of 1966—he referred to average United Kingdom output of over 1 million gross tons a year for the five years 1960–65, and in fact for many years somewhere between 1.1 and 1.2 million gross tons a year has been our level of activity in our shipyards. The level of capacity that the United Kingdom industry is aiming at today is somewhere in excess of 500,000. That includes the 430,000 which relates only to British Shipbuilders. We must take that figure and look at it against our existing order book, and we shall find that our existing order book is a very long way away from even that low capacity at which we are aiming.
That raises two points in my mind. The first is that those figures, from 1 million to about half a million and then right away below that in our order books, are some measure of the difficulty experienced by the United Kingdom industry in competing in the world. The second point is a rather different one. I feel that that low figure is one which we should not be pressed by Europe to try to go below. 603 As I have tried to explain, we have already contracted considerably and, after all, if we take Japan, they have increased in the same period by about 35 per cent. There is no doubt in my mind that British shipbuilders, Harland and Wolff and other small private yards, are working hard to improve our competitive ability and I was glad that my noble friend Lord Trenchard was able to give some hope that their efforts to improve productivity are being successful, but it will be a long and continuing struggle. As others have said, there will be some human dislocation, some painful adjustments to be made, and for that reason alone it is essential that we should go on step by step. It is the time factor that makes the provisions of this Bill so important, together with the two year intervention fund arrangements which, as we have heard, were announced early in July.
I mentioned that I imagine, as I think has been said, that the performance in the yards will be very closely watched and monitored. I hope it will continue to show a steadily improving performance. But whether it does or not, or to the extent it does, it will be bound to determine what further measure of support Her Majesty's Government can reasonably then consider. Much will rest in the hands of industry itself, both management and trade unions; but on this, when reading the report of the debate in another place on the Second Reading of this Bill, I was pleased to see that when there was some suggestion that at the end of the two years there will be a deadline the Minister of State was at pains to kill any such idea, and I hope that when my noble friend replies he may be able to endorse that point. The two years does not give a deadline but is merely one step.
On the other hand one must regretfully agree with the Minister of State in the same debate—and I say "regretfully" because I have close and friendly associations with the great shipyard in Belfast, Harland and Wolffe, and one admires so much what all our shipyards are attempting to do. In passing perhaps I may say a rather more pleasant word. Only this morning that yard was able to launch a very important ship for British Rail and I am sure that it gave everyone working in the yard a boost; a ship launch is a great event in a shipyard. But I use the word "regretfully" because I agreed with the 604 Minister of State when he made a general point, and perhaps I may just quote from Hansard of another place. He said:We firmly believe that if one industry does not in the long run earn a real return on capital employed, support for it will represent a misallocation of resources at the expense of the rest of the economy and employment in other industries ".That was a very important point but he went on to say that he was certain that both management and the unions were well aware that the future lay in their hands. I certainly hope, and indeed expect, that the more sinister implications of that statement will, so far as shipbuilding is concerned, never need to come into being.
Mention has been made of the extent to which British shipowners place orders with British shipbuilders. They are sometimes criticised for not giving enough support. My impression, however, is that British shipowners have a sense of loyalty to our own yards. They would like to do what they can, and in some cases it is often to their own practical advantage—ease of supervision during building, for instance —but we must remember that shipowners operate in a world market where competition is intense and they must clearly buy in the most competitive and, perhaps above all, the most reliable market.
In this connection, I have been studying a few rather interesting figures. At the 30th September—just two months ago—the order book for United Kingdom registration of new ships consisted as follows: 650,000 deadweight tonnes, which amounted to 39 ships, were to be built in the United Kingdom; 850,000 deadweight tonnes, that is 38 ships, were to be built abroad. That gives a balance in favour of shipyards overseas, but if we look at what has happened during the last two months we see that some six new ships for United Kingdom registration of 400,000 deadweight tonnes have been attracted to United Kingdom yards with —and this is the important point—the help of the invervention fund. While it is apparently true that during that period no overseas orders have yet come in, it seems to me to be an encouraging straw in the wind and it encourages me to feel strongly that the policy that Her Majesty's Government are pursuing as regards borrowing powers and so on is the right one.
With regard to Clause 2, I agree with other noble Lords that it puts right a very 605 curious anomaly and I do not think there is anything more I want to say about that. Obviously, when it comes to major conversions in our shipyards, our shipowners should have just the same facilities as regards credit as overseas shipowners.
Before I sit down, I had not intended to say very much about scrap-and-build schemes, but as both my noble friends and other noble Lords have said something about this I feel I must say a word. Superficially, of course, it has great attractions. We in this country are not without some experience of such a scheme. There was a scheme in the 1930s following the great depression when British shipowners had an enormous number of old tramps. They were slow, they were out of date, they could not compete with the new types of ships from overseas, and there was a scrap-and-build scheme. But the circumstances today are quite different. Again in the report to which referred, Sir Reay Geddes's report, he refers to scrap-and-build schemes, and he issues a caution as to the problem of bringing one into being which is fair to all concerned. Today, as I have already mentioned, our fleet is extremely modern, seven to eight years old, and I think before agreeing to any scheme we should be very careful—and I know the Secretary of State is aware of this because I read something he said in another place—to make certain that, whatever the scheme, which will cost money, those who stand to benefit the most should pay most. With a fairly modern fleet it could be that we should benefit least but still be expected to pay most. I think we want to be extremely careful in agreeing to any such scheme. Having said that, I welcome this Bill, and, like my noble friend, hope it will get a very rapid passage.
§ 4.32 p.m.
Lord BRUCE of DONINGTON
My Lords, it may be for the convenience of the House if I respond, somewhat briefly, to the introduction of the Bill by the noble Viscount, Lord Trenchard. It is much easier for me to be short because so very many valuable contributions to the debate have been made, by the noble Viscount, Lord Simon, the noble Lord, Lord Campbell of Croy, my noble friend Lord Shinwell, and the noble Viscount, Lord Rochdale, and it would be presumptuous 606 of me, and a waste of time, to repeat to the House many of the informed observations that they have made. We on this side of the House will be happy to facilitate the passage of this Bill with all possible speed. It may be truly termed, as indeed it was termed in the other place in the course of the Second Reading debate on 1st November, a non-controversial Bill, and of course we support it.
That does not mean, however, that we do not require to be informed on certain aspects of the Bill, and it does not mean that we would not like to be reassured on one or two of the matters that have been raised here, notably by the noble Lord, Lord Campbell of Croy, concerning the adequacy of the provision of the Bill, and other points that have been raised so forcefully by my noble friend Lord Shin-well. He referred to the same article in the Daily Telegraph as I believe the noble Lord, Lord Campbell of Croy, had in mind when he referred to the possible inadequacy of the provision. I will not weary the House by reading the same portions of it to which my noble friend Lord Shinwell, referred but it is reported in the Daily Telegraph for Saturday, 1st December:A British shipbuilder said yesterday that it is overspending and is likely to run out of cash even though the Government recently raised its borrowing limit from £300 million to £500 million with provision for it to go to £600 million. Mr. Michael Casey, chief executive, said that the average cost of building a ship in Britain was 30 per cent. more than the price charged to the customer ".This reveals what has been known for a long time, particularly by those expert noble Lords who have spoken this afternoon, not merely a temporary position of the British shipbuilding industry which can be corrected within a finite period of time, but a chronic situation, in regard to which this Bill makes some contribution.
I share the hope voiced by the noble Viscount, Lord Rochdale, that in two years' time the Government will not then hang a threat over the head of the British shipbuilding industry, as might conceivably be implied by a reading of the observations which were then made, and which have already been quoted. We have to face the fact that in this modern age certain industries in the older established manufacturing countries of the world are bound to go into a decline, for 607 a number of reasons that have been touched on by noble Lords. The free play of the forces of competition, to which I hope I may refer without offence to noble Lords opposite, which has so long been the basic tenet of the philosophy of the party opposite, means that this is bound to happen.
May I give the House, with your Lordships' permission, just one example. Over the past 10 years there has been a massive export of capital from the United States, from the United Kingdom, from Germany, into the construction of shipyards in Korea and in Brazil, where the labour costs, as indeed was pointed out by the Economist some 18 months ago, are about one-eighth of the labour costs in Europe. Quite clearly, those new shipyards, heavily financed, are bound to produce, bound to be able to produce, craft for the seas of the world at a price with which the older manufacturing countries such as ourselves cannot compete.
There is a question of principle to be resolved here. Are we to leave the whole industry to the free play of forces of competition, which are stacked against us from the beginning, or are we to endeavour to do what, if I may say so, Her Majesty's Government appear to be doing at the moment, although it appears to be half a U-turn, to be able to attack the whole problem rationally? And the fact of the matter is that in many of these industries indefinite governmental support will be required. We seem to have a horror in the United Kingdom about subsidising industries as though in doing so we are committing some mortal sin.
I turn to another topic altogether, but one which is closely aligned with this one. If, for example, because of its losses British Rail is subsidised to the tune of £250 million or £500 million, there is immediately an indignant outcry as though the whole sense of commercial morality, probity and so on has suddenly been violated and we ought to feel terrible about it. Yet, in Germany the railways are subsidised at the rate of £4,500 million a year, and the Germans are quite proud of it. Indeed, they run a very efficient railway system.
608 I am well aware that those arguments should not and must not leave either the management or those who work in the industries with any sense of complacency; they must not feel that precisely because there is the social obligation of the Government to keep the industries in proper running order, they can take advantage of that. However, if we we want to encourage those of our citizens who are engaged in the shipbuilding industry to behave with some degree of social morality, it is up to all of us, and the Government in particular, to create a social climate within which that degree of social responsibility can be felt and carried out by the people involved. It is no use on the one hand advocating the policies of the jungle with the weakest to the wall and the devil take the hindmost, and then asking the others to behave with a degree of social responsibility. Therefore, I and my noble friends on this side of the House would envisage the necessity for the continuation of this type of support over a period of years rather than for the limited period envisaged in the Bill.
The Government's stated objective has been to adjust capacity and to restore profitability. I think that that last point had better be held in abeyance for the time being because, due to the factors to which I have already referred, it will not be possible within the modern context to restore profitability to this industry, using any of the normal commercial standards which are used to define normal profitability. That is not on, and we should fool ourselves if we thought that it were possible.
As regards the adjustment to capacity, I sometimes think that we tend to regard the capacity of the industry as being the over-riding factor. We tend to take the view that, apart from the appearance of an upturn to which some noble Lords have referred with a degree of optimism, nothing can be done, or we assume that nothing can be done, to increase demand for the building of ships. That is not so. It may be extremely difficult in the broadest sense to regard—in a world in which the population is increasing at a logarithmic rate—with pessimism the eternal decline of international trade. That simply would not happen because if it were to occur within the modern context 609 it would not be possible for the Western world to control the wrath of the developing and poorer countries. It simply will not happen.
But, leaving that consideration aside, it is not generally realised that nearly 30 per cent. of ships at present on the high seas are already obsolete; that if, in fact, those ships were replaced or it were necessary for them to be replaced, the effective demand for shipping, not only in British shipyards but in European yards and other yards throughout the word, would be considerably increased. I would respectfully suggest to Her Majesty's Government that they might give some consideration to that very important aspect of the matter because, as the noble Lord, Lord Shinwell, knows through his long experience, the scandal of sub-standard ships on the seas of the world, largely sailing under flags of convenience, is one of the major evils of all sea traffic at present.
As regards that matter I am happy to say that the United Kingdom has a very good record indeed. Of the seven main conventions that have been agreed over the past 10 years, the United Kingdom has not only ratified the seven, but has enacted in its laws the means of maintaining those conventions and giving them the full application of law. I refer in particular to the Safety of Life at Sea Conventions and the other associated conventions. Our EEC partners, who very often refer to us as the awkward ones of Europe, have not been so good in ratifying those conventions, or indeed in enforcing them by passing the laws through their own Parliaments. France, for example, still has four to ratify and Eire has practically the whole seven—I believe that is is now six out of the seven. The same record goes throughout Europe, with Germany coming a close second to our own record.
The efforts of Her Majesty's Government in Europe to ensure that throughout the EEC the Safety of Life at Sea Conventions and the other appropriate regulations are applied, would immediately mean, if properly enforced, a demand for shipping to replace those ships that, under those laws, would no longer be admitted to any port in Europe. That would increase effective demand. Also, the practices of some insurances companies 610 in this respect encourage the retention on the seas of the world—with consequent risk to life, limb, cargo and so on—of ships that ought never to be on the seas at all. They do it because of the extra premium risk they are prepared to take and the owners are prepared to pay in order to sail on the sea ships that ought really to be in the scrapyards. Therefore, one hopes that among the other things that Her Majesty's Government may be considering, they will give their attention to that matter. If, for example, the ships on the seas of the world were required to pass the equivalent of the MOT test which we have for cars, there would probably be an increase in demand of roughly 10 per cent. for new ships in the world. That is not a factor that ought to be left out of account.
There is little for me to say on the contents of the Bill itself. I have touched only on those matters that have been suggested by my noble friend Lord Shinwell and by the contributions that have been made by other noble Lords. The Bill is a simple one. We welcome the improvements contained within it, particularly the extension of the intervention subsidy to conversions as well as to construction.
I am a little bothered about one remaining point which was touched upon not only by the noble Lord, Lord Campbell of Croy, but by the noble Viscount, Lord Rochdale. I refer to the question of guarantees. The guarantee of ship construction—as indeed is the guarantee of ordinary construction projects throughout the world—is, I regret to say, one of the biggest rackets in the world. It is all very well for us to say that we will give the same or equivalent insurance, export credit guarantees and all the rest of it as other countries. In my experience Government departments—particularly the Department of Trade and Industry—are very naïve in this respect. I have one or two instances in mind, with which I shall not weary the House, but in one particular case I wrote to them saying that an insurance was required for some 15 years at X per cent., because, of course, the United States was providing exactly that facility. I received a prompt denial—that it was not the practice of the United States in any way to back anything which was out of the OECD norm. They can think again upon that, because whatever the various Government departments say in some 611 countries as to their practice for insurance, what eventuates in practice is a totally different matter.
Therefore, I hope—and I am sure that noble Lords who have had experience of this will agree with me—that the Government will try to be even more vigilant than they are disposed to be at the moment on questions of infringement of agreed rates of export credit guarantees and similar associated guarantees. If merely the word of other Governments is accepted, I do not think that that will be satisfactory. Experience has shown that the words of some overseas Governments cannot be accepted in this regard. We wish this Bill a fair wind and congratulate the noble Viscount, Lord Trenchard, on the very clear, modest and non-controversial way in which he has introduced it. I hope that we may be able to help its passage further.
§ 4.52 p.m.
§ Viscount TRENCHARD
My Lords, first I should like to thank all noble Lords who have made valuable contributions to this debate. All the points that they have made will be very carefully studied. As I become a little less green, I am gradually learning that one cannot deal with all the points raised in a debate without being too long. I should like to thank the noble Lord, Lord Bruce of Donington, for supporting the Bill on behalf of the party opposite. Indeed, all speakers have wished the Bill the speediest possible passage. My noble friend Lord Campbell of Croy mentioned the urgency of the matter, so I am indeed grateful for the assurance that the Bill will be speeded on its way.
I do not have the time to include in my remarks the points made today on the shipping industry. Noble Lords may care to look back to the debate we had on the shipping industry earlier this year. I think they will find in that debate, for instance, that the Government's attitude was stated on the need for other countries to raise standards of shipping. However, although the connection between shipping and shipbuilding is present and obvious, at this juncture there simply is not time to go into all the points that have been mentioned in passing on shipping.
The noble Viscount, Lord Simon, and my noble friend Lord Campbell of Croy 612 raised the very important human problem. First, if the plan for 400,000 tonnes and a bit more is achieved, the work force changes that are necessary to reach efficiency at that level of throughput involve, in very round figures, a reduction of probably just under 10,000 people, which leaves a force at the end of those redundancies of 20,000. The agreement which British Shipbuilders have made with their unions has been on the basis that those redundancies can be accommodated by a combination of naval construction and filling vacancies there, a fairly small contribution from other public sector orders, which have been mentioned by various speakers, and by voluntary, and not compulsory, redundancy. That is the belief of the management, and the union and management have accepted the plan on that basis. They plan to make those reductions over a two-year period.
My Lords, I should like to ask the noble Viscount one question. Am I to understand that the target figure of 420,000 tonnes, or whatever it is, is exclusive of Government orders?
§ Viscount TRENCHARD
My Lords, having read the figures many times, perhaps I could confirm that to the noble Viscount after the debate. At the moment I am of the belief that this does not include the construction of naval vessels. If I am wrong, I may have an opportunity to correct it, but I see that my adviser in the Box is nodding, so that may speed up the process.
We discussed the redundancy payments when we put through the provision for the financial side of redundancy. However, I entirely agree with noble Lords that redundancy and the payment of it is one thing, but the individual attention that those, in this case, volunteering for redundancy will receive is another. I can assure noble Lords, without being lengthy, that British Shipbuilders put a good deal of time into this and pay it much attention. I propose to send those noble Lords who raised this point a short note on the measures that are being taken. These dovetail with the efforts of the Manpower Services Commission and with our regional policy. and with the care and attention that new employers—and they are still too small in number—in these areas are giving to retraining and making welcome shipbuilders in totally different industries.
613 My noble friend Lord Campbell of Croy referred to the article which was published in the Daily Telegraph, which I confess I have not read, but nearly all of which has been read to me in the debate. Surprisingly enough, I do not seem able to get hold of a copy on my side of the House. Two facts from the article were mentioned. First, there was the suggestion that there was a £4.5 million greater loss than the target figures for this year. Secondly, some points were raised by the noble Lord, Lord Bruce of Donington, to which I shall return later.
Lord CAMPBELL of CROY
My Lords, perhaps my noble friend will give way because I may be able to help him here.
Lord CAMPBELL of CROY
My Lords, my reference was to an article published in the Business News of The Times of 30th November.
§ Viscount TRENCHARD
My Lords, I am sorry, I must read the Press much more. The point at issue is that British Shipbuilders have recently assured my honourable friend and colleague the Minister of State, Mr. Butler, that they are on course to stay within their cash and loss limits for 1979–80. The next point raised by my noble friend Lord Campbell was whether it was true that the previous spend before we got the intervention fund going again was only one-fifth of £85 million. Indeed, the sum that was spent was £15 million. To that extent we have already got the intervention fund support for this industry really under control, negotiated, and going at a faster and a slightly higher level than was the case before we came to power.
The scrap-and-build scheme has been raised and welcomed by several of us, but I took note with great interest of the point that the noble Viscount, Lord Rochdale, mentioned in relation to the possible dangers of particular kinds of scrap-and-build schemes, bearing in mind that we have a much newer and more modern fleet than many other countries. That is an important point, coming as it does from someone of his great experience, and I shall pass it on to my right honourable friend.
614 May I come to the contribution made by the noble Lord, Lord Shinwell. Let me say straight away that I did not say that the subject was simple. Indeed, I said that British Shipbuilders faced a very difficult task. I hope that we have the courage to face the facts, as he says, but may I deal very quickly with some of the points that he raised. He asked why successive Governments had not given credit to British shipowners similar to that given to foreign shipowners rather than shipbuilders. There are a number of credit and guarantee schemes, as well as the direct subsidy, which we give to British shipbuilders. The British shipping industry is in a different position to the industries of other countries, in that it has been established on a worldwide basis for a very long while. As a result, it has placed its orders over a wider field of shipyards at home and abroad for a considerable number of years. It needs careful thought, as regards credit to shipowners whether a country in the economic condition that we are experiencing should spend any large proportion of its money in that direction, bearing in mind that quite a proportion of it is almost certain, on past trends, to end up working to the benefit of foreign yards.
In the time available, what I have to say is that, taking into account the losses which we are supporting, the intervention fund, the various credits and guarantees (of which some small extensions are the subject of this Bill), and being as vigilant, if I may say so to the noble Lord, Lord Bruce of Donington, as we can, I believe—and I believe that our British shipbuilding industry now believes—that they have a fair position. It is not an easy position, but a fair and a clear position in which they can try to put right the decline that has been going on for too long.
The quotations that the noble Lord, Lord Shinwell, gave from Mr. Casey, the chief executive of British Shipbuilders seem to me to be exactly in line with our statements. He spoke of serious dangers and of difficulties, as I understood it. But there is no doubt that both British Shipbuilders' management and British Shipbuilders' employees are set on the target which is in front of them. They have reached a very creditable agreement. I believe that the diagnosis which the noble Lord, Lord Shinwell, called for has largely been made. I believe that there are limits 615 to the degree that it is helpful to go into culpability, or to go into post-mortems. They are inclined not to bring the patient back to life. I believe that we now have a growing degree of realism on the part of both management and employees—of all working in shipbuilding—that we must get our industry competitive, and that the major part of that work needs to be done internally.
The noble Viscount, Lord Rochdale, contributed very helpfully to this debate in raising a whole succession of technical reasons as to why the world shipping fleet will in future not be of the same kind, and will probably be of a smaller tonnage. I am grateful to him for that contribution. Both he and the noble Lord, Lord Bruce, raised the question of time: was the two years a deadline? As my right honourable friend in the other place so clearly said, no, it is not a deadline. A two-year programme in very uncertain circumstances is better than a one-year programme. It is an effort to try to give British Shipbuilding a clear framework in which to continue their improvement, which is planned, and the figures of that improvement I gave in my opening statement.
We shall have to review the situation at the end of that two-year period, and we shall have to see what progress has been made. But we do not accept what the noble Lord, Lord Bruce, said, that the losses of British Shipbuilders cannot, in this world as he describes it and in the sense in which he raised it, be extinguished. We have not said that aid will be extinguished. There are substantial moves for the regressivity—it is a terrible word, but that is the word that is being used—of aid on an international basis. This is why we accepted a reduced limit on the intervention fund from 30 per cent. to 25 per cent. We are being vigilant about the progress of that regression in other countries. But we have never said that in two years, or even any other number of years, aid, credit or guarantees will be eliminated. What we ask for is that on a fair trading opportunity basis which takes account of those things, losses of the company are extinguished after receiving aids, credits, guarantees, et cetera. This must happen because there 616 cannot be an indefinite bill for an industry over and above the provision of a fair trading opportunity. As my right honourable friend in the other place said, that can only weaken other sectors of the economy by denying them resources.
In conclusion, I want to strike a note of optimism. If you look at the figures of both world shipping tonnage and of shipbuilding, what you see is what I term an over-shoot. You see that the amount of shipping on the seas of the world has not really declined but the very fast rate of growth that was going on until a decade ago has slowed to a very small amount. What has clearly happened is that the world's shipbuilding industries have totally over-shot demand. This has of course, as my noble friend Lord Rochdale mentioned, been contributed to by new countries coming into shipbuilding for the first time. I do not take the view that the noble Lord, Lord Bruce of Donington, took in relation to it being a matter for criticism that British capital among other capital from many other countries may have gone—I do not have the figures—into helping to construct a shipbuilding capacity in new countries. This will happen and I would much rather we took a share in helping those countries and being able to develop good trading relations with them.
The situation therefore is that we have lost a share of the market, mainly but not entirely because of new countries coming into the game, and because world shipbuilding over-shot demand. The overshoot will rectify itself. Then one sees that this year, and even in very recent months, high wage cost countries have been gaining tonnage. We have started to gain a bit of tonnage ourselves and Germany and Japan are gaining tonnage at the moment at a faster rate than us. I believe that, with the investment that has gone into our yards in recent times and with the will of all working in the industry to become competitive, we can take our share of the increased market which, as Lord Rochdale said, will turn upwards in the mid-eighties.
§ On Question, Bill read 2a, and committed to a Committee of the Whole House.