HL Deb 21 April 1983 vol 441 cc660-9

4.36 p.m.

Debate on the amendment moved on Third Reading, resumed.

The Parliamentary Under-Secretary of State, Department of Health and Social Security (Lord Trefgarne)

My Lords, it may be for your Lordships' convenience if I now return to the amendment moved by the noble Lord, Lord Bruce of Donington. I am sure that your Lordships will appreciate that, much as some might hope, it is just not possible to legislate against market forces, and though at first sight the amendment might seek to do that, I acknowledge that the noble Lord, Lord Bruce, did not say that in his opening remarks. As it appears, the amendment does no more than ask the Secretary of State to use what influence he has in a way which, in his judgment, promotes certain objectives.

These objectives are ones with which I am sure we would all agree. We might have different means of trying to achieve them, but I doubt whether anyone in the House would not subscribe to the wish to see United Kingdom shipbuilders in a stronger market position, to see United Kingdom and foreign owners encouraged to place their orders in this country, and to see United Kingdom shipbuilders protected against unreasonable competition; though what in this context constitutes "unreasonable" is, I suggest, open to debate.

Because the Government broadly share the underlying spirit of the objectives, we have taken, and shall continue to take, action designed to help British Shipbuilders and the other United Kingdom shipbuilders and repairers. Perhaps I may refer to some of the steps that we are taking. Our support for British Shipbuilders now amounts to over £600 million in the form of public dividend capital fund, the intervention fund, the shipbuilding redundancy payments scheme, and other aid. In 1981–82 alone, for example, we provided over £47 million-worth of price support through the intervention fund. We fully recognise that the industry faces a continuing period of acute difficulty, not least the kind of difficulties to which the noble Lord, Lord Bruce, referred, and which were referred to recently by my honourable friend in the other place. We accept that this must mean a continuing measure of support for merchant shipbuilding for the foreseeable future.

United Kingdom aids to shipbuilding are set within a European framework. The problems of Far Eastern competition and a distorted world market have hit all European shipbuilding industries. The level of assistance over the past year has been determined by a balance between the need to overcome distortion in the market and that of avoiding a subsidy race which would be in no-one's interest. A subsidy race would be very costly, self-defeating and leave the United Kingdom industry no better off than before. We have to offer aid within an international framework if we are to avoid escalation. We shall be discussing proposals for further assistance to the shipbuilding industry with the Commission and our Community partners.

The Government provide support for the shipbuilding industry in a number of different ways: the intervention fund, as I have said, credit, shipbuilders' relief, et cetera. Noble Lords, especially the noble Lord. Lord Bruce, have suggested changes which would permit additional support to be given. I am not referring to what he said today but to what the House has heard on other occasions. Some changes are not practical. A scrap and build scheme is often mentioned as a possibility. In debate on the Bill my honourable friend the Minister of State explained at length why this would not help. In the end, it would benefit mainly the scrapyards; and at a time when most owners are heavily tonnaged and want to scrap ships without buying new ones, it is unlikely to be widely taken up and provide much help to the shipbuilding industry.

Improved credit is another suggestion heard from time to time. The Government are willing to consider proposals for improvements to the home credit scheme; but the scope for flexibility is limited by international commitments to ensure that the terms of the scheme comply with those permitted under the OECD understanding on export credit for ships. I know that other contries offer more advantageous credit terms than we do. Belgium and Denmark are examples. But they do not also give production subsidies. If both elements of support are considered together, the United Kingdom is about halfway up the league in terms of assistance.

The United Kingdom shipping industry is also criticised for placing a much smaller proportion of its orders in home yards than fleets in other countries. This was a matter to which the noble Lord, Lord Bruce, referred. On average, about 40 per cent. of the United Kingdom fleet orders go to United Kingdom yards compared with over 80 or 90 per cent. in some other countries. But the United Kingdom fleet is very much bigger than others in Europe, apart of course from Greece—they have no shipbuilding industry to speak of—and is an important employer, with over 70,000 seagoing employees, as well as being an important export earner. It operates in a fiercely competitive international market. Its competitive freedom is vitally important.

United Kingdom shipowners have to be able to buy where they can get the best deal. If United Kingdom yards offer the best terms, they will certainly win the business. We cannot hope to tackle the problems of the United Kingdom shipbuilding industry by damaging the commercial freedom and efficiency of United Kingdom shipping. Other Governments provide assistance but the amendment does not stipulate what action should be taken. For that reason, it is an unnecessary and, in my view, an inappropriate addition to the Bill.

Having said that, I was pleased to see in the amendment a reference in paragraph (a) to United Kingdom shipbuilders rather than simply to British Shipbuilders, the public corporation. There are some small private sector shipbuilders and private ship repairers. We have made no secret of our hope that the size of the private sector will increase. We have however repeatedly made it clear that the powers to direct British Shipbuilders to dispose of its property would be used only after consultation and for reasons related to the industry's interests—to build on the strengths of the industry. But our concern is that the whole of the industry, whether the public or private sector, should improve its competitive position and regain its markets. Whether it could improve its position to move from a 2 per cent. share of the world market for merchant ships to a predominant position, as envisaged by the amendment, is I believe a matter beyond even the industry's boldest dreams.

Paragraph (c) of the amendment seeks protection against unreasonable competition. The whole framework of European Community and OECD policies is designed to avoid unfair competition through regulation of subsidies—both production subsidies to the builder and subsidised credit to the buyer. The difficult question however is when is competition unreasonable or unfair? Comparative advantage through lower costs does not make competition unfair. But if there is evidence of hidden subsidy leading to depressed export prices we shall certainly pursue it with the countries concerned—as indeed I think would the Government of any country or any Government of this country.

This amendment, if accepted, would I fear not achieve anything. It would express generalised objectives without specifying how they are to be achieved. It makes it clear that it would be for the Secretary of State's judgment whether his actions were designed to achieve the objectives. The amendment would change nothing and would be an unnecessary addition to the statute. I hope that the noble Lord will not press it.

4.45 p.m.

Viscount Massereene and Ferrard

My Lords, I have some sympathy with Lord Bruce's comments. My noble friend on the Front Bench asked: what is unfair competition? I consider that unfair competition arises where a country like Korea or other countries in the Far East pay wages that are about a quarter, or even less, of what we pay here. Many of the countries that compete with us in shipbuilding have what really amounts to forced labour. Some are dictatorships. I consider these factors as unfair competition. I agree that we in Europe have to stand on our own feet. However, when one considers the depressed wages in other countries, I believe that we should subsidise the British shipbuilding industry.

Lord Trefgarne

My Lords, we do.

Viscount Massereene and Ferrard

Yes, we do. But one has to remember that the shipbuilding industry used to be what I would call the heart of England. At one time we built half the tonnage of the world. Now, I understand, we build only 2 or 2½ per cent. That is an utter tragedy. We still have the skills. We are probably the most skilful shipbuilders in the world. I agree with my noble friend on the Front Bench that we cannot restrict shipowners as to where they have their ships built. They must have their ships built where they can obtain the cheapest quote. I was once interested in a small way as a shipowner. They contribute a great deal to the invisible exports of this country. We cannot restrict them.

There is, however, a need to try and combat the position under which some countries use forced labour. I should like to go back for a moment into the past. Several of your Lordships, including my noble friend on the Front Bench, will be too young to recall the flax trade. It was a great trade in the North of Ireland, and also in the Netherlands. However, owing to forced labour in other countries, especially Russia, the trade was completely destroyed in this country and in the Netherlands. By using forced labour, Russia was able to undercut every other producer of flax. Having done so, Russia had a complete monoply of flax and "upped" the price.

I do not wish to stray off the point, but forced labour in dictatorships poses a great danger. I do not know what the answer is; but of all the industries in Britain, the shipbuilding industry should, I believe, have the greatest help. I am on the whole opposed to heavy subsidies, but here is an exception.

Lord Lloyd of Kilgerran

My Lords, like the noble Lord the Minister I first read this amendment with a great deal of sympathy for the general theme behind the three subsections. I then reminded myself that my noble friend Lord Simon had spoken very strongly against this Bill on Second Reading. But I also reminded myself that it was the constitutional duty of this House as a revising Chamber to try to be helpful. Therefore, basically it seemed to me that it would be helpful to include a new clause headed: General duties of Secretary of State at this stage of the Bill. When we read those words particularly in the context of Clause 2, new Sections 4A and 4B, there is a strong case to be made out for saying that it would be helpful in the circumstances of this British Shipbuilders Bill to have some general duties of the Secretary of State set out in this way.

As far as subsections (a) and (b) are concerned, I would go a long way with the noble Lord, Lord Bruce of Donington, as regards the basic theme behind those two subsections. However, subsection (c) causes me considerable trouble. The noble Lord, Lord Bruce, emphasised this subsection as being a very important aspect of the amendment. I believe that the Minister, the noble Lord, Lord Trefgarne, also appreciates the problem which is facing British shipbuilding operations in the light of what is loosely known as "unfair competition". If subsection (c) had dealt with competition in the context of Articles 85 and 86 of the Treaty of Rome I would have supported it. But when it deals with, unreasonable competition"— whatever that may mean— from foreign shipbuilders and ship repairers generally, then I ask myself: what is intended by the noble Lord, Lord Bruce of Donington, to prevent such so-called "unfair competition"? Does he mean that import restrictions would be imposed or that there might be some kind of levies? That of course would be a situation which we on these Benches would be very much against. Therefore, it is with considerable regret that I must say that I could not support the amendment if the noble Lord, Lord Bruce, proposes to divide the House.

Lord Roberthall

My Lords, I rise only to support what the noble Lord the Minister and the noble Lord, Lord Lloyd of Kilgerran, have already said. Subsection (c) includes the word "unreasonable", which is a word about which enormous differences of opinion are held according to whether you are suffering from import competition or you want to export. Ever since the end of the war the problem of competition in international trade has exercised the world and that is particularly so in the period of a recession. But throughout that period GATT, and now the Community, have built up a complex structure to deal with this problem. It would be most unfortunate if we made any move suggesting that we wanted to weaken those institutions.

Lord Trefgarne

My Lords, if I have your Lordships' permission to speak again, I should like to make one additional point. There is really very little between the noble Lord, Lord Bruce, and I on the spirit of the amendment that he has put before your Lordships' House. The problem is that the world shipbuilding industry, of which the British shipbuilding industry is but a part, is facing the worst recession in its fortunes for half a century or more. That is why the situation is so difficult in the world shipbuilding industry, and of course the British shipbuilding industry is not immune to those difficulties.

Several noble Lords have pointed to the difficulty of defining the unfair competition which the noble Lord, Lord Bruce, has in mind, and I too share the misgivings on that point. But I hope that the noble Lord, Lord Bruce, will agree that to put these sort of exhortations, which is really what they are, into the Bill, would not now be appropriate.

Lord Bruce of Donington

My Lords, I am most grateful to the noble Viscount, Lord Massereene and Ferrard, for the support he offered to what I believe to be the whole core of this matter—that is to say, whether our domestic industries, of which the shipbuilding industry is only one, but a very important one that goes right to the vitals of the nation, should be exposed without any demur to competition that emanates not from free democracies within which free trade unions operate, not within Europe, I would hasten to assure the noble Lord, Lord Kilgerran, but from countries with military régimes where trade unions are the pliant servants of Government, as in Poland before Lech Walesa; and whether we are prepared to sit back and allow this to continue. We all know that, since the abolition of exchange control in the United Kingdom, considerable sums of money have left the City of London for South Korea precisely to invest in shipyards there, where these low costs, these fractional wage costs and these very subnormal conditions of work apply. We know, too, that money has gone there from the United States and from West Germany. Sure enough, they are new industries which are well equipped, but they have been equipped very largely through British finance. In order to get a return on British finance in places like South Korea we are now in a situation where labour—I venture to put it in parenthesis, sweated labour—in such countries is now going to be permitted to strike at the vitals of our own industry here. That is the plain and simple issue and that is the way in which I am sure the country will understand it.

I am very grateful for the sympathy that has emanated from the noble Lord. He expressed himself most agreeably in favour of the broad trend of the amendment. The irony of it is that in the middle of the debate on this matter there was a Statement from another place on the CAP—a CAP which is about the most protectionist instrument of the lot for the whole of British farming. So we are applying one standard to our industries that are battling for our existence but we are prepared to pay out thousands of millions of pounds in deliberately protective measures in support of British farmers. This is not a time to debate agriculture, but the contrast is very stark and very ironic.

I did not mention the question of scrap and build. That was mentioned by the noble Lord opposite presumably in amplification of the concluding statement of his right honourable friend in another place. But since the noble Lord touched upon the matter, may I say that scrap and build was very much on my mind when this amendment was put down.

It is the duty of the British Government to take a very hard look at the position of the shipping industry when large numbers of floating coffins are abroad the high seas at present, sustained only by the fact that insurance companies will still continue to insure, at exorbitant rates, ships that are not really seaworthy. The noble Lord may ask how that affects the Government. The answer is very simple, and it was brought out very clearly at the conference on shipping over which I presided in Paris in 1978. If the Government themselves (not the Department of Industry, but the Department of Trade) really enforce standards of inspection on British ships—and I mean really enforce them—then that would result in a number of ships which are at the moment sailing the seas not being allowed to be there, and it would in fact necessitate their replacement.

Lord Trefgarne

My Lords, I feel that I must intervene again, and I hope that I still have your Lordships' permission to do so. Is the noble Lord saying that there are ships on the British register now sailing which are unseaworthy?

Lord Bruce of Donington

My Lords, no. I am saying that there are ships owned by British shipowners which are scrupulous enough to fly under flags of convenience but which are still owned by British shipowners, who avoid the regulations. As the noble Lord knows perfectly well, this has been brought out. For example, he knows that 25 per cent. of the tankers in the ownership of British shipowners are registered under flags of convenience and do not fly under the British flag. Therefore, something that Her Majesty's Government could do would be to enforce standards. They may enforce them as regards ships under the British flag; but they could also take a far more active part in international conventions that seek to enforce these standards internationally.

In any event, the Government ought to take a more positive attitude towards the whole of the British shipbuilding industry. I suggest that the incorporation of this clause, which merely incorporates general duties—but sufficient duties for any Secretary of State to be mindful of them in the discharge of the functions of his office—ought to be included in the Bill, if only as a marker as to the real responsibilities of the Secretary of State in relation to the shipbuilding industry. I am sorry, but in view of the Government's refusal to accept the amendment, I must press this matter to a Division.

On Question, Whether the said amendment shall be agreed to?

Their Lordships divided: Contents, 43; Not-Contents, 124.

Balogh, L. Molloy, L.
Birk, B. Nicol, B.
Bishopston, L. [Teller.] Oram, L.
Briginshaw, L. Peart, L.
Brockway, L. Phillips, B.
Bruce of Donington, L. Ponsonby of Shulbrede, L. [Teller.]
Cledwyn of Penrhos, L.
Collison, L. Prys-Davies, L.
Cooper of Stockton Heath, L. Rea, L.
Denington, B. Sefton of Garston, L.
Ewart-Biggs, B. Segal, L.
Fisher of Rednal, B. Shackleton, L.
Gaitskell, B. Shinwell, L.
Gallacher, L. Soper, L.
Gregson, L. Stewart of Alvechurch, B.
Hatch of Lusby, L. Stewart of Fulham, L.
Jacques, L. Stone, L.
Jeger, B. Strabolgi, L.
Jenkins of Putney, L. Underhill, L.
John-Mackie, L. Wallace of Coslany, L.
Leatherland, L. Willis, L.
Longford, E. Wootton of Abinger, B.
Airedale, L. Chelwood, L.
Alexander of Tunis, E. Clitheroe, L.
Ampthill, L. Coleraine, L.
Amulree, L. Colyton, L.
Auckland, L. Cork and Orrery, E.
Aylestone, L. Cottesloe, L.
Banks, L. Cox, B.
Beaumont of Whitley, L. Craigavon, V.
Belhaven of Stenton, L. Cullen of Ashbourne, L.
Bellwin, L. Daventry, V.
Belstead, L. Davidson, V.
Blake, L. De Freyne, L.
Boardman, L. De La Warr, E.
Caccia, L. Denham, L. [Teller.]
Caithness, E. Derwent, L.
Campbell of Alloway, L. Diamond, L.
Carnegy of Lour, B. Ellenborough, L.
Cathcart, E. Elliot of Harwood, B.
Elton, L. Murton of Lindisfarne, L.
Faithfull, B. Newall, L.
Ferrers, E. Northchurch, B.
Fortescue, E. Nugent of Guildford, L.
Fraser of Kilmorack, L. Orkney, E.
Gainford, L. Orr-Ewing, L.
Gardner of Parkes, B. Penrhyn, L.
Garner, L. Platt of Writtle, B.
George-Brown, L. Porritt, L.
Gladwyn, L. Rankeillour, L.
Glanusk, L. Renton, L.
Glenarthur, L. Roberthall, L.
Glenkinglas, L. Rochester, L.
Gridley, L, Romney, E.
Hailsham of Saint Marylebone, L. Sainsbury, L.
St. Aldwyn, E.
Hanworth, V. Saint Brides, L.
Harris of High Cross, L. St. Davids, V.
Harvington, L. Sandford, L.
Hives, L. Sempill, Ly.
Hornsby-Smith, B. Skelmersdale, L.
Hunt of Fawley, L. Somers, L.
Hylton-Foster, B. Southborough, L.
Ilchester, E. Spens, L.
Kennet, L. Stamp, L.
Killearn, L. Strathcarron, L.
Kilmarnock, L. Strathcona and Mount Royal, L.
Kinloss, Ly.
Kitchener, E. Swansea, L.
Lane-Fox, B. Swinfen, L.
Lauderdale, E. Swinton, E. [Teller.]
Lawrence, L. Taylor of Hadfield, L.
Lloyd of Kilgerran, L. Terrington, L.
Long, V. Thomas of Swynnerton, L.
Lucas of Chilworth, L. Thorneycroft, L.
Mackay of Clashfern, L. Tordoff, L.
Macleod of Borve, B. Trefgarne, L.
Malmesbury, E. Trenchard, V.
Mancroft, L. Vaux of Harrowden, L.
Margadale, L. Vickers, B.
Marley, L. Vivian, L.
Masham of Ilton, B. Wakefield of Kendal, L.
Mottistone, L. Wigoder, L.
Mowbray and Stourton, L. Wilson of Langside, L.
Moyola, L. Young, B.

Resolved in the negative, and amendment disagreed to accordingly.

5.10 p.m.

Lord Trefgarne

My Lords, I now rise to move that this Bill do now pass. The Bill will give commercial freedom to British Shipbuilders. It will enable them to draw on the resources of the private sector and to open up new sources of finance. But it will also give the Government reserve powers to deal with unfair competition and to determine the borderline between public and private sectors of the industry. These powers are, as you Lordships will recall, subject to negative resolution of either House.

In our debates noble Lords opposite have perhaps not fully acknowledged the support that the Government have given to the industry and which I referred to again when we were considering the amendment just now. Our first actions on coming into office were to ensure the continuation of the Intervention Fund and of the Shipbuilding Redundancy Payment Scheme. Both these schemes were on the point of collapsing. More recently we have significantly increased the value of the redundancy benefits available. The taxpayer has also been called upon to assist the industry by providing well over £600 million since 1979.

The Labour Party, by contrast, has emphasised the support that it would give to shipbuilding, should it be returned to office. It has said that it would increase investment in the industry. But when it left office, capital investment in British Shipbuilders was at a very low level—a level which provided for little more than essential maintenance. In contrast, under the present Administration, capital investment has increased and new large capital projects have been started. We have approved an increased external financing limit for 1983–84 which accommodates capital expenditure of £90 million; that is, a fourfold increase on the levels of four years ago. That is a level of expenditure which compares favourably with the frequently quoted levels of investment undertaken in Japan.

We are of course fully aware of the current severe difficulties facing the industry. These problems are afflicting the industry worldwide whether it is publicly or privately owned, and the Government are sympathetically considering the request for assistance which the chairman of British Shipbuilders has put to us. This Bill is designed to help the industry. It will improve British Shipbuilders' ability to compete and survive. I therefore beg to move that this Bill do now pass.

Moved, That the Bill do now pass.—(Lord Trefgarne.)

Lord Bruce of Donington

My Lords, when I listened to the noble Lord's record of what had been done for British Shipbuilders under the present Administration, I suddenly realised that we were getting away from the Bill and must be getting near election time. However, he did say in the course of his remarks that the Bill gave the Government power to protect the British industry from unfair competition. Since the noble Lord, right from the beginning of the passage of the Bill through this House from the Second Reading onwards, has explicitly stated that it is impossible for the Government to protect British Shipbuilders against unfair competition, it is very interesting to see whereabouts in the Bill that power has been taken. In fact, the only power that would enable the Government to do it was comprised in sub-paragraph (c) of the amendment which the Government have just rejected.

I do not intend to waste your Lordships' time any further in the consideration of this Bill. It is a bad, squalid little Bill. It serves no useful purpose whatsoever, except to give the Government powers to flog off the profitable portions of the warship section, which operates on the cost-plus basis. This is the sole purpose of the Bill.

I ought to warn the noble Lord that on the return of a Labour Administration we shall undoubtedly repeal this Bill. Moreover, we shall make inquiries to exhume some of the rather queer transactions that have been referred to by me in the course of the Committee stage. I hope that none will be protected from that exhumation which will take place.

This is a completely unnecessary Bill, but there is nothing we can do within the conventions of the House to stop it going through. It would be an abuse of the conventions of this House, as we see them, to object to a Motion that the Bill do now pass. I suppose, my Lords, that the best thing we can do with it is to let it pass, because it will soon pass out of human consciousness anyway.

Lord Rochester

My Lords, may I say just a few words about the Bill at this stage? For reasons that I shall not rehearse now, my noble friend Lord Simon on behalf of my noble friends opposed the Bill in principle at Second Reading, as your Lordships know. We sought to introduce one or two amendments, for one of which I was responsible, and the noble Lord, Lord Trefgarne, will not be surprised to be reminded that I regret very much that the Government did not feel able to accept the amendment concerned with the subject of employee involvement.

I should however like to take this opportunity on behalf of my noble friends to thank the noble Lord, Lord Trefgarne, for the way in which he has piloted the Bill through this House. Their general attitude to it must be the same as that to which expression has just been given by the noble Lord, Lord Bruce. I think we should leave it at that.

Lord Trefgarne

My Lords, I am greatly obliged to your Lordships. I beg to move.

On Question, Bill passed.