HL Deb 23 July 1979 vol 401 cc1658-68

4.27 p.m.

Viscount TRENCHARD

My Lords, with the leave of the House, I should now like to repeat a Statement made in the other place by my right honourable friend the Minister of State. The Statement runs as follows:

" One of the most serious and immediate industrial issues facing the Government on taking office was the state and prospects of merchant shipbuilding. The Government have now completed a review of the situation with British Shipbuilders, and have had wide consultations with unions, private sector interests, the shipping industry and the EEC Commission. I am now in a position to inform the House of the situation, and of the approach the Government propose to adopt. Plans for the Belfast shipyard of Harland and Wolff will be made known separately by my right honourable friend the Secretary of State for Northern Ireland.

" Our consultations have fully confirmed the view of the last Government—and indeed of those working in the industry—that further contraction is inevitable given the extreme severity of the world recession.

" At the end of last year, British Shipbuilders put their plans for dealing with this grave situation to the previous Administration, advising in effect contraction in merchant shipbuilding to an annual rate of some 430,000 tons by March 1981, with a reduction of manpower to around 20,000.

" With the severe difficulties in securing new orders—only 230,000 tons in 1978—British Shipbuilders recognised at that time the magnitude of the task facing them in avoiding contraction below 430,000 tons, and the vital need to increase competitiveness as well as for recovery in the market.

" So far this year recovery has not taken place, and my consultations with British shipowners and others afford few grounds for optimism in that respect. Substantial over-capacity exists worldwide and at present there appears to be no early prospect of recovery. I must warn the House that British Shipbuilders will find it very hard to sustain their target capacity.

" In such circumstances the Government must judge how far and how much they can help.

" One of the Government's early acts on taking office was to seek a renewal of the Intervention Fund which they found had lapsed on March 15th, and a temporary agreement was reached with the EEC Commission. The Government are now making proposals for a fund of £120 million to cover the next two years. In putting these proposals to the Commission I have had to say that the capacity of 430,000 tons is the highest figure that in our view could be retained in 1981.

" In addition to the Intervention Fund, the Government will pursue other measures of support. They are ready to take part in a Community Scrap and Build Scheme providing that it is cost-effective; they are proposing credit for conversions by United Kingdom ship owners, and will support improved credit terms in current OECD discussions; and they will advance public sector orders where practicable.

" The Government will give British Shipbuilders a nil commencing capital debt. We are considering further the most appropriate means of financing the Corporation. In the meantime, British Shipbuilders will continue to be financed on an interim basis from the National Loans Fund.

" The cost to public funds will be substantial and British Shipbuilders is aware of the need for strict financial discipline. For the current financial year British Shipbuilders' cash limit of £250 million and trading loss limit of £100 million, after crediting Intervention Fund assistance, are not being changed. The Corporation is also being set a financial target for 1980–81 of limiting its trading loss, before crediting Intervention Fund assistance, to £90 million. The Corporation must make substantial progress towards providing in the longer term an adequate return on capital employed.

" It is unavoidable that contraction will occur mostly in localities where unemployment is already high. For the most part the shipbuilding industry is located in Special Development Areas and we are concentrating our regional industrial assistance on these areas. To help alleviate hardship to individual workers and their families the Government have extended the Special Redundancy Payments Scheme to the full period authorised by the Shipbuilding Redundancy Payments Act."

My Lords, that concludes the Statement.

4.33 p.m.

Lord MELCHETT

My Lords, once again I should like to thank the noble Viscount for repeating another depressing and gloomy Statement on a major sector of British industry. Once again, as I think has been the case with a number of Statements which the noble Viscount has made, it has, in fact, been possible to find out rather more about the Government's policy and decisions by reading the Financial Times the morning before the Statement is made than by listening to the lack of detail in the Statement when it is made in Parliament.

I wonder whether the noble Viscount can tell us more about the negotiations which have taken place with the EEC and confirm what seems to be the case: that, in return for a vague assurance about speeding up applications which I fear has been said by the EEC on a number of occasions in the past—a vague assurance about something which the EEC ought to be doing anyhow—the British Government have, in fact, agreed that the package of aid for the British shipbuilding industry will be temporary and tapering. Can he also confirm that that package of aid is already less than many other countries—for example, Spain and Finland—are giving to their shipbuilding industries; that those countries have given no assurance to anybody that the aid will either be temporary or tapering; and that we have, in fact, sold out what little hope we have of retaining a shipbuilding capacity in this country through the present slump, in exchange for this vague assurance from the EEC Commission?

Maybe the noble Viscount can tell us, in view of the decision that the Government have taken about how much they can help the British shipbuilding industry through the worldwide slump, whether they really believe that this country will he left—without the full and enthusiastic public support which we believe the industry needs given the worldwide conditions—with a shipbuilding capacity of any sort at all either from the point of view of merchant ships or from the point of view of this country's defence needs upon which I should imagine the noble Viscount and his supporters would place particular emphasis?

The Statement concludes by mentioning of the Redundancy Payments Scheme. As the noble Viscount knows, we on this side welcomed the order to extend that scheme which was brought forward only the other day in your Lordships' House. I hope that he will accept that we had little idea—and he gave us little indication—of the scale of the demands that would be made on this scheme as a result of the Statement that he has made today.

I particularly welcome at last the fact that the Government are admitting in this Statement that there will be job losses as a result of their policies and that those job losses will fall in the areas where unemployment is already highest. The Statement could have added: " and also those areas where the Statements that we have made in the last two weeks will be creating even higher unemployment ".

Once again, I should like to ask the noble Viscount for a little detail and some of the calculations which we all know his Department has made about the extent of those job losses. On previous occasions the noble Viscount has, if I may say so, avoided answering any direct questions of any sort and in particular this one, by simply saying that the Government's general economic policies will lead to an increase in employment and therefore he cannot give us figures for job losses. I hope that the noble Viscount will consider that answer on the basis that if a particular company is closed, it is perfectly possible to say how many jobs will he lost as a result of that closure. It may be that in the country as a whole unemployment is falling and there are more jobs available, but the information about the particular case is still relevant to the particular people involved—in this case those working in the shipbuilding industry—and that information is perfectly easily available and perfectly properly normally available to Parliament. I hope that the noble Viscount will not pursue his previous practice of simply avoiding answering this question, but will give those who are working in the industry a little more detail about the fate that awaits them.

Baroness SEEAR

My Lords, I, too, should like to thank the noble Viscount for repeating the Statement and to deplore, of course, as everybody must, the state of this once great industry. We must also recognise, however, that it is inevitable that this industry should contract and, indeed, a realistic approach to this industry by previous Governments over the past decade might have put us in a position much less severe than the one we are now in. Putting off the evil day does not help very much. However, we wish to retain a shipbuilding industry which has a future. I, too, would like to ask, what estimate has been made of the size of the shipbuilding industry which has a future, which will endure after the serious impact of the present recession? It is to that level—but not beyond that level—that a reduction should be made.

On the question of redundant manpower, I should like to make a point and to ask the noble Viscount for his comments. Within the industry there are a large number of people with a very high level of skill in shipbuilding. However, high levels of skill in shipbuilding are often high levels of skill which, with very little additional training, are transferable to other industries where, as we know throughout the country, there is a great shortage of skilled manpower. I cannot believe that redundant shipbuilders cannot, with very little additional help, be turned into extremely competent skilled persons in other areas, if the training services, the trade unions and employers who are searching up and down the country for skilled labour, are willing to take positive and urgent action to see that this takes place.

4.39 p.m.

Viscount TRENCHARD

My Lords, I should like to start by thanking the noble Baroness, Lady Seear, for her remarks. I believe that there is an element of putting off the evil day which has made a worse situation and not a better one. I believe overall—and this relates to what the noble Lord, Lord Melchett, said—that this very large problem will have to be squeezed from every side, including continued efforts to make our industry that much more efficient. I shall not comment on newspaper articles and forecasts of what Government action will take place. As a newcomer to the political scene, I have watched them over a number of years. The degree of accuracy and skill of the correspondents concerned seems to be fairly high, but I do not think there is any particular difference. I believe that the noble Lord is being quite unfair in criticising us for not being able to produce every detail, when, before a long summer Recess, the Administration wish to put before Parliament the state of their current policies and policy decisions rather than to leave it to speculation.

On the point made by the noble Lord, Lord Melchett, about other countries and subsidy rates, in industry circles there is a belief—indeed, there are suggestions—that other countries, even within the EEC (Spain is shortly to join) are giving more. The department is constantly looking for, asking for and would be anxious to receive real evidence that that is the case. My right honourable friend does not want to encourage—any more than would noble Lords—a subsidy competition within the EEC. Indeed, we believe that one of the aims of the EEC must he to reduce it. We have no evidence that, under the intervention fund arrangements or any other arrangements, countries within the EEC, are subsidising their shipbuilding industries to a greater extent than we have.

I turn to shipbuilding capacity and what will be the final shape of the industry. We very much hope and believe that British Shipbuilders will make every effort to ensure that their preferred option—which is, of course, a 430,000 tonne capacity—comes about. The Statement makes clear that this will be an extremely difficult task, which will require the cooperation of all concerned working on competitive productivity in order to achieve that end. We very much hope that it will be achieved. The preferred plan of British Shipbuilders was known to the last Government and is now widely known. Therefore, it is not fair to say that we have not made available the shape and size of the targets for which British Shipbuilders aim.

In addition to the 430,000 tonne target, that would entail a reduction from the present workforce of approximately 27,000 to 20,000—a reduction of about two-fifths—against a one-third reduction in tonnage. I can give the noble Lord, Lord Melchett, those specific answers. I apologise for the fact that the note which I passed him, when we laid the Shipbuilding (Redundancy Payments Scheme) Order, giving the Scheme's cost to date as being in the £7 million bracket was slightly wrong. Having checked the figure right up to date, it is £8.8 million, with an average of £1,736 per person.

I agree very much with the noble Baroness, Lady Seear, about the transferability of skills. Fortunately, quite a large number of empty factories are located in the main shipbuilding areas, in the Special Development Areas. Therefore, factories are available and the services of Government, including those of the Manpower Services Commission, will do everything they can to encourage other industries to use those factories and to use even smaller-scale facilities which are being provided under one heading or another, in order to try to ensure that what growth industries we have in this country—and this reverts to our central plank of the need to get industrial recovery going on a national scale—will take up the extremely valuable skills and the valuable people made available by this sorry state of affairs.

Baroness SEEAR

My Lords, can the noble Viscount give us a progress report on the transfer of people from this declining industry to new work in those areas, say, in six months' time? Is that an unreasonable question?

Viscount TRENCHARD

My Lords, I do not find it an unreasonable request. I am sure that there will be future occasions which will in any event crop up when I shall, undoubtedly, be asked to make a Statement as to the progress being made in the regions in relation to new industries as against the problems of the old.

Lord GLENKINGLAS

My Lords, will my noble friend agree—I am sure that he will—that those of us who have lived beside the Clyde all our lives share the deep regret of everyone in the House that the shipbuilding industry should have been so seriously in decline? Will he not agree that there are still one or two very high-class shipbuilding yards left in that area? If there are to be redundancies, will he ask his right honourable friends to consider very carefully the provision of that large micro-chip factory which was to be built at Greenock, which is exactly the right area for the regional policy concerned, and will they do their best at least to bring that industry to this part of Scotland?

Viscount TRENCHARD

My Lords, I am grateful to my noble friend and entirely agree with his sentiments. Today I shall not comment on the particular proposition which he suggests might be helpful.

Lord MELCHETT

My Lords, I thank the noble Viscount for giving us the detailed information that he has in following up the Statement. I should like to make two quick points. First, on subsidies, the noble Viscount acknowledged that when I referred to our competitors and the level of subsidies which they give, the countries I mentioned were not in the EEC—in the case of Spain, not yet, in the EEC. But in his answer to my point he concentrated almost exclusively, if not exclusively, on the position within the EEC. In talking about the lack of information or the difficulty of obtaining information—which, of course, I recognise—about the level of subsidies in other countries, would it not have been wiser for the Government to reverse the burden of proof? In other words, to say that until they have positive evidence that other countries—particularly the two I mentioned as examples; namely, Finland and Spain—were not giving much higher subsidies than we already give, it would have been wise not to give so much away to the EEC for so very little in return.

I want to ask the noble Viscount one further question about Harland and Wolff. The Statement says that a further Statement will be made and, of course, Northern Ireland epitomises a region with all the appalling problems which the decline of an industry such as shipbuilding brings. I hope that I did not read into the Statement the suggestion that the Government will try to deal with such a very important matter for Northern Ireland by way of a Written Answer, as I think has been attempted on at least one previous occasion. I hope that the noble Viscount will be able to tell us that a Statement will be made in your Lordships' House, when my noble friend Lord Blease will have an opportunity to ask some questions about Harland and Wolff.

Viscount TRENCHARD

My Lords, I thank the noble Lord for those points. I shall talk to my right honourable friend about the matter of Spain in more detail. If the noble Lord has evidence, which is known to him, as regards Spain, I hope he will make sure that it is in my hands or in those of my right honourable friend. I accept what the noble Lord says about burden of proof in relation to individual countries outside the EEC: that a presumption is something of which we must take real notice. Within the EEC I very much hope that the efforts of the Commission to table what is going on will be the better route towards controlling an otherwise uncontrolled subsidy race. As regards Harland and Wolff, I can confirm my noble friend's suspicion, but not for the reasons he has in mind. However, before the Recess we shall try to make available the largest possible amount of information since we took office on a wide range of very important subjects. A Statement on Harland and Wolff will be found in a Written Answer which is being released in the other place this afternoon.

Baroness WARD of NORTH TYNESIDE

My Lords, may I ask my noble friend a question?—for I represented for very many years a shipbuilding area on the North-East coast.

Viscount TRENCHARD

My Lords, yes.

Baroness WARD of NORTH TYNE-SIDE

My Lords, I thank my noble friend. As he quite rightly said that many small factories are now empty and that they would help in dealing with this matter, could I ask him what special action he is going, to take to help to get work to those particular factories, in view of the fact that we have been trying to do this for many years without much success? If my noble friend has any special way of giving us this information, it would at least be something to encourage the shipbuilders in my part of the world to take action.

Viscount TRENCHARD

My Lords, I thank my noble friend for those questions and points. I think all I can say at this stage is that there is a considerable amount of growth of new industries in the area with which she is so much more familiar than I am. There are plenty of new factories which are occupied, and there are new industries which are growing. The trouble is that they affect very much smaller numbers than the very large industries which are declining. There must, I hope, soon come a point in time, with the continued emphasis of regional policy on developing in these highly impoverished areas, when the growth of new jobs becomes a bigger element than the decline of the old industries. Regrettably, in present conditions, and particularly present shipbuilding conditions, that still seems to be some way off, but we shall leave no stone unturned to try to accelerate it.

Lord DRUMALBYN

My Lords, may I ask my noble friend one question for clarification ? Is it not a fact that the shipbuilding industry throughout the Community is in difficulties? Is it reasonable to assume, from what he has said today, that the announcement and the plans have been worked out in close co-operation with the Commission, that the burden of any curtailment of production is going to be reasonably well shared throughout the Commission and that the burden will not fall unduly upon this country? It is important for us to be assured that this is an announcement which has been made in the closest collaboration with the Commission, and that the Commission is going to co-operate fully in ensuring that the regional interests of this country, as well as the national interests, are carefully safeguarded.

Viscount TRENCHARD

My Lords, I am grateful to my noble friend for raising those points. Yes, shipbuilding is in very severe difficulty—as I think your Lordships know—all over the world, and certainly in the EEC. We are in close negotiation with the EEC to ensure that the measures taken in the various countries are fair. In the past there has been an upper limit on intervention—as I think the noble Lord, Lord Melchett, knows—of approximately 30 per cent. The limit that will be fixed for the future is still being discussed, but I can assure my noble friend that there is every reason to believe that there will be a completely even-handed treatment, and that the EEC thus will be playing a positive role in relation to minimising this great problem and preventing too great a degree of tax-payers' money escalating in all countries.

Lord HARRIS of GREENWICH

My Lords, would not the Minister agree that the exchanges that have taken place this afternoon demonstrate the urgent need to increase the regional funds available to the Community?

Viscount TRENCHARD

My Lords, I think I must leave that as a wider subject for another day. Certainly in relation to regional policy we are in close touch to ensure that we use all the funds available to us from the EEC. The question of larger regional funds and larger contributions to the EEC is, I think, a separate subject which we should not enter into today.