HL Deb 31 July 1980 vol 412 cc1063-71

My Lords, if it is convenient to the House, I will now repeat a Statement made this afternoon by my right honourable friend in the other place on British Shipbuilders' finances. The Statement is as follows.

"With permission, Mr. Speaker, I wish to make a Statement on British Shipbuilders' finances.

"Last July I informed the House of the framework of the Government's support behind British Shipbuilders' efforts to achieve viability within the financial limits set. British Shipbuilders' report and accounts which were being published yesterday and which I have laid before the House, show the position for the last financial year. British Shipbuilders have kept within their external financial limit of £250 million; but have exceeded slightly the trading loss limit of £100 million, after crediting intervention fund assistance. There are, in addition, extraordinary losses of £42 million relating to restructuring.

"For the current financial year, British Shipbuilders have an external financial limit of £120 million. In February, the corporation warned me that British Shipbuilders might need to exceed their external financial limit by some £20 million, but in view of the uncertainties, it was agreed that a further review of the corporation's cash needs should be carried out as soon as the situation had clarified. At the end of May, the corporation advised me that their forecast cash requirement for this year had risen to £187 million.

"Some part of the increase in their cash needs is due to causes outside the direct control of the corporation, such as the steel strike; but, like the private sector, British Shipbuilders have to be able to react to the unexpected. We are not satisfied that sufficient action and economies have yet been taken by British Shipbuilders to reduce the rate of loss in merchant shipbuilding, ship-repair and marine engine building, and generally to curtail expenditure and increase efficiency, and to raise funds through such measures as disposals.

"I have asked the new chairman to examine all possible ways of staying within the limit of £120 million and to report to me on the options for reducing British Shipbuilders' cash requirements for both this year and next. I have also stressed the importance of staying within this year's loss limit. Without corrective action there is a risk that their cash requirements for next year would also remain unacceptably high. The chairman has already reported to me that he sees scope for savings in administration.

"We are unable to consider British Shipbuilders' financial requirements until the chairman has completed this assessment. Should the Government then decide, after consultation with the commission, to advance additional funds, this would involve a winter supplementary estimate, and, if needed before then, would be provided by a repayable advance from the contingencies fund. I shall report to the House again later this year.

"Mr. Speaker, the market for both shipbuilding and shiprepair remains difficult. The number of merchant ship orders placed with British Shipbuilders over recent months has been welcome; nevertheless, as the new chairman warned on the first day of his appointment, those orders are not sufficient to ensure viability. Nearly every order has been taken at the maximum permissible subsidy level. While there has been notable cooperation between management and unions in meeting the difficulties of the past year—and I would like to pay tribute to that co-operation--there is still a very great deal that needs doing, particularly in improving productivity, if the industry is to achieve the levels of competitiveness essential for a secure future."

My Lords, that is the end of the Statement.

4.28 p.m.


My Lords, the House will be grateful to the noble Lord for having repeated the Statement made in another place. I am bound to say that the speed with which this Satement was made after the publication of the accounts is really hardly fair either to the Members of the other place or to the Members of your Lordships' House. The accounts of British Shipbuilders to which this Statement refers became available in the Printed Paper Office only this morning; moreover we on this side of the House were unaware until well after lunch that such a Statement was going to be made. This hardly gives time to be able to study the Minister's Statement against the background of the information that ought to be available for people to pass comment upon it. I myself speak as a chartered accountant. I would not advise on a statement which refers to accounts unless I had adequate opportunity of examining the accounts that the statements referred to. I therefore trust that in the future when the Government feel constrained to make Statements which involve the examination of accounts and other documents, at least courtesy should be shown and regard to the convenience of Members of your Lordships' House—and the same considerations apply in another place—to enable full and adequate study to be made.

Regarding the Statement, one is slightly reassured by the fact that the rather sour nature of its contents is to some extent mitigated by the mention that, should the Government decide that some further aid is necessary, a winter Supplementary Estimate would have to be made. Many of us are a little worried about the Statement: We are not satisfied that sufficient action and economies have yet been taken by BS to reduce … expenditure and increase efficiency, and to raise funds through such measures as disposals". Who is "we"? Who is not satisfied? Is it the noble Viscount's right honourable friend the Minister for Industry who is not satisfied? On what grounds is he not satisfied? I doubt whether there is sufficient in the existing Statement to give any confidence in any judgment that he might reach upon this matter.

The House has only recently spent many days in unscrambling the National Health Service organisation that he perpetrated on the country; and the country as a whole is only now recovering in part from the damage that his decisions did on the whole of British Steel during last year. We therefore venture to query the competence of the Secretary of State to arrive at any judgment.

We note that the noble Viscount appreciates that there has been notable co-operation between management and unions in meeting the difficulties of the past year. That is very good. What has the noble Viscount to say about the increased costs that British Shipbuilders have incurred due to the delay by the Ministry of Defence in putting orders with British Shipbuilders that have been phased for earlier dates? That involved them in very considerable extra labour cost. Is the noble Viscount aware that they, like so many other industries, have suffered very severely from the increase in electricity charges and are likely to do so the more?—an increase that has been dictated by the Government themselves.

There have been difficulties and the Government's suggestion is their usual one. They say that the shipbuilding industry needs to improve productivity. They also emphasise once again the need to increase in competitiveness. Will the noble Viscount give consideration to providing to the House particulars of how much capital has been exported from the United Kingdom both before exchange control and after the abolition of exchange control during this Government's period of office? What movement of capital has taken place to other countries such as Brazil and Korea for investment in competing shipyards by British capital operating at far lower cost? Will the noble Viscount give the House some particulars of that when he finds it convenient? Finally, will he bear in mind and emphasise to the country that if all British shipowners purchased their requirements from British shipyards the turnover of British shipyards would multiply two and a half times?

4.34 p.m.

Viscount SIMON

My Lords, from these Benches I should also like to thank the noble Viscount for repeating this Statement. As the noble Lord, Lord Bruce of Donington, said, it is rather difficult to make intelligent comments on it when one has had so little time to look at the report. None of us can have been surprised at the difficulties which British Shipbuilders have had in keeping within their cash limits. This is one of the great difficulties about the cash limits system. A figure is arranged, I suppose before the beginning of the year, and long before the year ends any figures that may have been forecast are bound to be wrong because of inflation and other matters of that kind, quite apart from the special difficulty that arose over the steel strike.

I do not think that a statement that the corporation is in danger of running beyond its cash limits is one that causes us surprise. I am delighted to know that the matter has been tackled vigorously. We are also in some difficulty in making a comment at this stage when the new chairman has been in office for less than a month. One would probably have a much more useful discussion—and I hope we shall have an opportunity for one—when the Minister makes a Statement later in the year and we can see how things are going.

There are two things in the report (which I have read very briefly) to which I should like to draw attention. One is something to which the noble Lord, Lord Bruce, may have been referring. On page 11 the chairman reports that there were gaps in the programme of some of the yards due to lengthy approval times for contractual negotiations. I am not sure to what that refers; but I hope it does not mean that when British Shipbuilders are negotiating with a purchaser that there is somebody in the Government interfering with those negotiations and saying: "No, you must not do this or that". I hope that is not implied; if so, I should have thought that this was a very bad way to run the industry.

My second comment relates to industrial relations. I was very pleased to read the good report of the improved industrial relations in this previously very difficult industry. All concerned should be congratulated upon that. I have one small technical point on this: the Act required that there should be a report on the industrial relations in the annual report, which I took to mean the annual report of the directors. It is actually made in the chairman's statement. It could be thought—and I hope that the noble Viscount will be able to confirm that I am wrong in my suggestion—that this was the view of the chairman and was not necessarily shared, let us say, by the members of the board who come from the trade unions. I hope that he will be able to put my mind at rest about that.

One other final, tiny point is that towards the end of the Statement the noble Viscount said that the Government would have to decide about additional funds after consultation with the Commission. I was defeated as to who the Commission are, or is it a misprint for "corporation"?

4.39 p.m.


My Lords, I thank the noble Lords for their comments. I understand their difficulty in not being able to comment in depth on the report and accounts when they were published only yesterday. If I, in my comparative ignorance, have the procedures of the House right, I do not think that this would be the occasion for a far and deep-ranging debate on the subject; but we have not done it just to inconvenience noble Lords, for obvious reasons. The Recess is coming, and the accounts were to be published around this time of the year in any event. As the noble Viscount, Lord Simon, said, the Statement makes very clear that there will be a further occasion later in the year which will perhaps, as he suggested, be a better one for a fuller discussion.

The noble Lord, Lord Bruce, picked up the phrase which we have used in this Statement and indeed in the Statement on British Stecl, that we were "not yet satisfied". When one has losses of the size which I shall mention in a moment and when one decides, either at the end of a tour of duty or at any other time, to appoint a new chairman, I think it is natural that one asks him to look at the size of the figures concerned and to look into all the possible headings which we all know exist. That is what we have done and I think we have a duty to do it, particularly as in two years the bill to public funds and the taxpayer will be approximately £370 million in public dividend capital and £60 million under the home credit scheme.

I think, touching on the point raised first by the noble Viscount, Lord Simon, that changed circumstances—and there are changed circumstances in the world economic situation, in the shipbuilding world and in Britain—call for revision of plans, and there is not a business in the country that has not had to re-examine its plans. This would have been inevitable under any policy or in any conditions. As a businessman for most of my life, from time to time I have complained of the need to make budgets which would be certain to be inappropriate for the conditions we found in front of us, particularly as more and more one had to do it on a five-year as well as on an annual basis. But there is no other way to direct a business prudently and, when conditions do seriously change, there is inevitably a need to look at everything again. That has not yet been done in the case of British Shipbuilders.

I do beg the noble Lord, Lord Bruce, perhaps beeause he has now done it so often, to resist the temptation to criticise my right honourable friend the Secretary of State for Industry in a nearly personal way. My right honourable friend has perhaps faced up to these hugely escalating bills in relation to nationalised industries to a greater extent and in a more courageous way than any of his predecessors.

The question of defence orders was raised by the noble Lord hut, in the time available for replying to comments on a Statement, I shall not go into detail except to say that the level of naval orders placed in the last financial year was 22 per cent. higher than in the previous year and the degree of change in ordering in different circumstances was very small.

I have dealt with one of the points raised by the noble Viscount, Lord Simon. On the page 11 point, I am sure we do not mean the form of intervention which he feared. With regard to industrial relations, I am quite sure that the Chairman's statement reflects the view of the whole board, and indeed the view of most other people with knowledge of this industry—in other words, the co-operation has been steadily improving over several years and, in spite of appallingly difficult conditions, it is continuing.

The reference to "the Commission" is actually to the European Commission. As your Lordships will know, both the Fourth Directive and the proposed Fifth Directive bear on the overall amount of aid given to shipbuilding in various different forms, both on a European basis and on a national basis, which have to be brought into account.

I shall not follow the noble Lord, Lord Bruce, into his questions about the outflow of British capital generally, because I think that would be more appropriate for another time. As regards his suggestion, if I understood him correctly, that if all British shipowners bought British ships the volume built in British yards would go up two-and-a-half times, I have not those figures with me at the moment. I have had them on a previous occasion, and if my recollection is correct—if I am wrong I will apologise—on the last occasion when we were debating this topic in your Lordships' House they showed that the majority of British shipping companies' orders are still placed in home yards. However, I may be out of date on that factor. Clearly, it could never be all. In the world shipbuilding scene as it now is, it must be clear that we shall not he the best constructors of every kind of ship that there is; but certainly our endeavours to promote the possible competitiveness of British Shipbuilders are designed to get a higher proportion of British ships built in British yards, and every encouragement will be given in that direction.

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