HL Deb 08 March 1979 vol 399 cc334-40

5.12 p.m.

The MINISTER of STATE, NORTHERN IRELAND OFFICE (Lord Melchett) rose to move, That the draft Order, laid before the House on 7th February, be approved. The noble Lord said: My Lords, this draft order deals with two very important companies in public ownership in Northern Ireland—Short Brothers and Harland and Wolff. Its purpose is to establish a sound framework for the relationship between the two companies and the Northern Ireland Department of Commerce, which holds all the shares in Harland and a majority of the shares in Short Brothers. The draft order in fact sets out the arrangements which already exist or have been developing since control of the companies passed to the Department of Commerce. The Department already gives financial help to both companies under other powers, of course; and the Department is also kept fully informed of their performance and is consulted about major policy issues. The new order will not change any of that, but it will provide a firm statutory base for Department/company relations, and make clearer what is expected to each side. It will also result in Parliament receiving more regular information and being better placed to comment on the affairs of both companies than in the past, because under this order funds for the companies will be sought through the normal supply procedures, but separately from other funds for industrial use in Northern Ireland.

There is an immediate need for new legislation because on 31st March 1979 the powers of the Department of Commerce to give financial help to Harland and Wolff expire. As noble Lords know, the shipbuilding industry throughout Europe, and indeed the world, is having to rely on Government help to bring it through the current slump in demand, and this is true of Harland as well. We have therefore taken this opportunity to draw up new legislation which brings together and regulates all important aspects of the Department's relations with both companies. This more permanent framework should increase the confidence that customers have in the companies.

Looking at the current position at Harland, employment has fallen by about 1,500 over the past two years and seems certain to fall still further, despite the help which will be available under this order to enable the shipyard to obtain new work. The company is diversifying its production as much as it can, to safeguard the jobs of as many of its employees as possible, but there are limits to the number of new uses to which shipbuilding facilities can be put. The next few years are going to be difficult ones for shipbuilding in Europe, and Harland is no exception; but the financial provisions of this order should give Northern Ireland's shipbuilding industry a fair chance of survival. The Government's detailed proposals for assistance to Harland and Wolff over the next two years are currently under discussion with the EEC Commission, and I regret to say that the discussions arc not proving easy. I am therefore not yet in a position to make any definitive statement about our proposals. The negotiations are continuing, and we shall, of course, try to ensure that the company can adapt to current conditions, and that its capacity to respond to future improvement in the market is maintained.

The past five years have not been easy ones for Short Brothers, either. It has made losses in each year since 1974, partly because it has been incurring a heavy outlay on the development of new products. on the development of new products. However, these products (notably the SD3-30 commuter aircraft) are beginning to sell well, and the company's longer-term position looks hopeful, provided it can deliver the goods on time and remain competitive in price. However, in the short term it will need further finance to re-equip, to meet operating losses and to continue with essential development work. The company has drawn up a five-year corporate plan, which shows that a return to profitability is expected in 1981, and the Government have agreed this plan as a basis for future funding of the company and for monitoring the company's performance. The plan sets demanding targets for the company, but they are achievable, and if the company can meet them its future should be secure.

Substantial sums of public money will be needed by these two companies over the next few years, and the Department of Commerce will monitor this expenditure very carefully. Close monitoring is already carried out, but it is given formal legislative status in the draft order. The order also empowers the Department to give directions to each company, and these directions will be binding upon wholly-owned subsidiaries where appropriate. This is not, of course, a power which the Department would expect to exercise very frequently, if ever; but it is one that, in view of its probable scale of financial commitment to the companies, the Government believe the Department must have available. The power will certainly not be used to interfere in the day-to-day management of the companies.

As I have said, the draft order does not make any fundamental change in the Government's approach to the two companies concerned. The powers of assistance are more or less the same as those already available under the general industrial development legislation in Northern Ireland. The provisions in the order covering information, review of performance and consultation with the Aerospace and Shipbuilding Corporations in Great Britain are all formalising existing practice, rather than new proposals. As I have said, my Lords, these two companies are of vital importance to Northern Ireland's economy. I am sure that this more permanent framework for their relations with the Government, set out in this order, will lead to greater confidence in the future of the companies, and will be widely welcomed in Northern Ireland. My Lords, I beg to move.

Moved, That the draft Order, laid before the House on 7th February, be approved.—(Lord Melchett.)

5.18 p.m.

Lord BELSTEAD

My Lords, I am grateful to the noble Lord for giving details of this order, which, of course, refers to the two most important heavy industrial companies in Northern Ireland. The noble Lord referred specifically, among other things, to Article 6 of the order, which enables the Department of Commerce to give directions to either Harland and Wolff or Short Brothers, or their subsidiaries, in relation to matters which appear to the Department to affect the public interest. I accept what the noble Lord has said, of course—that the intention of the Government is that these directions would not be concerned with the day-to-day running of either of the companies—but, none the less, there appears to be no requirement in Article 6 for the directions which the Department may give to be made public. Under the Aircraft and Shipbuilding Industries Act 1977, the Secretary of State for Industry is required to lay an order, subject to Affirmative Resolution, before both Houses whenever he wishes to prescribe any activities to be undertaken either by the British Aerospace Corporation or by British Shipbuilders, and I should like to ask the noble Lord the reason why there is not a similar provision in this order.

I should also like to take the opportunity which this order presents to ask about future employment prospects at Harland and Wolff. There is a phased reduction in the workforce at the shipyard taking place at the present time, I understand, and I should like to check with the noble Lord as to what is the target. The recent document from the Department of Finance in Northern Ireland—the document was called Economic and Social Progress in Northern Ireland—refers to opportunities to diversify production at Harland and Wolff. I very much hope that these opportunities will become realities. I believe I am right in saying that last year an agreement was made between Harland and Wolff and a German firm of marine engine builders which saved about 400 jobs in Belfast. I should like to know whether there is any immediate prospect of any projects of similar importance. Having asked those questions, I accept the general case which the noble Lord has made, that this order is necessary for support for these two vital companies. On those grounds, I certainly support the passage of the order.

5.20 p.m.

Viscount BROOKEBOROUGH

My Lords, I should like to ask the Minister a question concerning fair trading in Europe. I understand that under EEC rules all shipbuilders in Europe are supposed to offer exactly the same terms for loans and interest on loans in order to get business for building ships. I saw in the Financial Times that there was a very strong rumour that the Germans were in fact giving an extra year's credit. I wonder what the Government have done in order to investigate that. I feel very much that we British play the rules of the EEC absolutely straight and on the whole do not examine other countries' misdemeanours with the same vigour with which other countries seem to examine ours. I should like to feel that Harland and Wolff were on all fours with firms in any other countries. I am sorry to ask this question now but I did not realise that we were going to discuss it at this point.

Lord MELCHETT

My Lords, I am grateful to noble Lords for giving a welcome to this order. The noble Lord, Lord Belstead, asked a question about publishing the powers of direction. I should like to have the opportunity to consider that. But one thing which will interest the noble Lord and which I did not mention in my opening remarks is that the position of Harland and Wolff is different from the relationship between a Minister and a nationalised industry. This is a public company where the Department is the sole shareholder in the case of Harland and Wolff and a majority shareholder in the case of Short Brothers. The Government's power of direction does not rest solely on statutory provision but also is available in their capacity as the majority or sole shareholder of the company. There is no exact parallel to be drawn between relations between the Department of Commerce and Harland and Wolff and the relationship between the Department of Industry and the Secretary of State for Industry and British Aerospace or British Shipbuilders. But I will look at the point that the noble Lord has raised and I will write him about it.

The noble Lord also asked a question about the position so far as employment prospects were concerned. The prospects at Shorts are reasonably good. The figure over the past five years has gone up by about 1,000 to something like 6,200 and it is expected to increase by a further 300 by 1982. The position at Harland and Wolff is not anything like as good as that. But Harland and Wolff, at least in the short term, I think it is fair to say, are in a relatively good position—that is relative not to any other shipyard being in a good position in Western Europe or the world, for this is a very depressed shipbuilding industry—in that Harland and Wolff's present order book, for example, has eight ships on it worth £161 million. They are one bulk carrier, two oil product tankers, two LPG gas carriers and three passenger car ferries. The position in the longer run is no more or less healthy than that of many other shipyards in the world, except that Harland and Wolff is building on a reasonable short-term basis.

The noble Lord asked also about the engine works and the tie-up with the German engineering firm, MAN. At present the engine works position is not very encouraging. It is short of work. The works at the moment have orders for three main engines providing work only up to the end of 1979 and for reducing the number of workers as the current year proceeds. The company is hopeful that a recently agreed association with MAN will result in a useful flow of work in the engine works as the manufacturer of medium-speed engines designed by MAN. These have the advantage of being suited to both land and marine use. The number of medium-speed engines on order is up to target for the first year's trading, and this is reasonably encouraging. I think that the real answer to the noble Lord's question is that it is early days yet but that the prospects, so far as we can see at present, for the tie-up with MAN look reasonably encouraging.

The noble Viscount, Lord Brooke-borough, asked about the eye that we keep on various incentives offered by other European countries and elsewhere in the world, and, in particular, about an incentive offered by the West Germans at the moment. I do not have detailed information about that. It may be that by the time we come on to the next order I shall be able to give the noble Viscount more information; but, if not, I will write to him. I can assure him that we do keep a careful and close eye on the range of industrial incentives available in Northern Ireland and in this direction do everything we can—and we have a good deal of discretion. Our success during the last calendar year in attracting new industries to Northern Ireland shows how flexible we are prepared to be. We might not be able to do exactly the same thing but it is often possible to achieve the same results by different means. Last year we had several notable examples of our success in that direction.

On Question, Motion agreed to.