British Shipbuilders Bill

HL Deb 07 March 1983 vol 440 cc6-21

2.50 p.m.

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

My Lords, I beg to move that this Bill be now read a second time. The Bill has been described elsewhere as a modest measure. It has two distinct elements intended to put British Shipbuilders into a similar statutory framework to the British Steel Corporation. The first element lifts the constraints imposed by the Aircraft and Shipbuilding Industries Act of 1977 which laid down a series of conditions under which British Shipbuilders had to carry out its activities. This legal straitjacket has to be removed to give British Shipbuilders the freedom to take decisions which are in the best commercial interests of the corporation—the kind of freedom its most successful competitors enjoy. The second element empowers the Secretary of State to direct British Shipbuilders to dispose of assets and to limit or cease activities.

The first element of the Bill is dealt with in Clause 1, which repeals Section 2 of the 1977 Act. This imposed statutory duties on BS to promote the production and repair of ships and certain marine engines. Clause 1 replaces those statutory duties with powers. It also makes it clear that these powers may be exercised through other than wholly-owned subsidiaries. That is, it opens up the possibility of joint ventures at present prevented by the 1977 Act and also enables assets to be completely returned to the private sector where practicable.

The repeal of Section 2 of the 1977 Act also removes from BS a number of its subsidiary duties. The most significant of these is the duty to have full regard to the requirements of national defence—a curious requirement not now placed on any other defence contractor. Of course, they have to work within the framework of the Government's defence policy: but while the Ministry of Defence is an enormously important customer of BS and the corporation will obviously continue to pay close regard to MOD's requirements, national defence is a matter for the Government.

Another of British Shipbuilders' present statutory duties, to promote industrial democracy, is also repealed. In the debate in 1977, the noble Lord, Lord Melchett, speaking for the then Government said, industrial democracy must develop from the people involved". It should not, he said, follow a rigid formulation laid down by Government. The very phrase "strong and organic", he admitted, had no precise meaning. My Lords, I agree now as I did then. We feel that industrial democracy goes hand in hand with good management. It does not take a statutory provision to ensure good practice, as many examples in the private sector amply demonstrate. We are confident that the management of BS will continue to work to develop good relations, a job the corporation have done so well since vesting day. Repealing this duty does not indicate any weakening in the Government's desire to see good industrial relations.

The second element of the Bill is introduced in Clause 2. This provides important new powers for the Secretary of State. He will be able to direct BS to dispose of assets and parts of its undertaking, and to limit or cease activities. Before using these proposed powers, the Secretary of State will need to consult British Shipbuilders and to be satisfied that the giving of the direction was in the national interest. And use of the power will be subject to a negative resolution in either House. We feel that the decision on where to draw the line between the public and private sectors of an industry cannot be left to one part of that industry. Nationalised industry boards are sometimes reluctant to surrender parts of their empire. Naturally we hope that we shall be able to agree with the board on disposals and will not be obliged to use these new powers.

The powers to restrict an activity are there to strengthen the Government position when dealing with unfair competition. Noble Lords will be aware of the anxieties expressed by the private sector ship repairers and engine builders about unfair competition from BS. The Government would be ready to use these powers if BS were to engage in unfair competition with established shipping interests. No decision has been taken on how or when the powers to direct BS to make a disposal or limit its activities will be used. And I should emphasise that the Government would exercise the powers in the Bill only after taking into account the view of the board and the effects on the rest of the industry.

Clause 2 of the Bill contains important safeguards to prevent BS from making changes in its organisation that would be incompatible with the introduction of private capital. It also provides safeguards in the event of the disposal of a BS subsidiary, whether or not that disposal results from a direction. It enables us to prevent activities that are important for our defence interests from coming under foreign control and it provides powers to direct the setting up of employees' share schemes. It also amends the 1977 Act so that BS would not be underwriting the financial liabilities of companies after they ceased to be wholly owned, while preserving the rights of those who have contracted with the companies before the Bill becomes law.

Warship building is the only part of BS to have made substantial profits since vesting day. It cannot be right if the investment and future viability of the warship building companies should suffer because of the loss-making activities of the rest of the corporation. There is a good case for returning warship building to the private sector so as to open new sources of finance and to help with investment. Some of the corporation's most important activities, however, are unlikely to benefit from such finance. Merchant shipbuilding is unprofitable and in present conditions would not be attractive to a private investor. The Government will have to continue to support merchant shipbuilding for the foreseeable future. Indeed, we have recently announced a further tranche of Intervention Fund subsidy of £20 million to run to July this year. We shall shortly be discussing with the European Commission further Intervention Fund assistance when the present tranche expires.

The provisions of this Bill should be seen in the context of the industry as a whole. The chairman, Sir Robert Atkinson, has achieved a great deal for this industry over the past three years. It has gone through a painful period of restructuring and reorganisation. This has been achieved with little disruption, and all concerned in the industry deserve recognition for this. But the Government have played their part too. Substantial support has been given to BS. Under this Government well over £600 million has been provided. BS's capital expenditure has increased. Indeed, in 1981–82 it doubled. This year it will increase significantly again; and it is expected to rise further to £90 million in 1983–84. But even more needs to be done. Investment alone is not enough. The massive investment in the 1970s did not achieve the hoped for increase in productivity which, though it has improved, has not yet reached pre-nationalisation levels.

The Government recognise the difficult and uncertain situation which the corporation is facing. The markets for merchant shipbuilding, ship repair and off-shore work remain very depressed. As the half-year results showed, BS's losses will significantly increase this year. Only warship building has been consistently profitable. Since this Bill was introduced BS has received £585 million of orders for new naval ships, partly to replace our Falklands losses. Another frigate is to be ordered this year. But the prospects in other markets remain very uncertain. After considering British Shipbuilders' Corporate Plan, we have accordingly decided to increase the corporation's external financing limit from this year's £122 million to £160 million in 1983–84.

Shipbuilding has a difficult time ahead. Management and workforce will have to work closely together to gain orders. The Government will continue to support BS's efforts and the Bill will give BS the freedom to draw upon every resource. It is absurd that it should be prevented from attracting private capital and entrepreneurial skills. It is clear that it should be given more freedom to organise itself according to its own commercial judgment. My Lords, in the light of that, I commend the Bill to your Lordships.

Moved, That the Bill be now read a second time.—(Lord Trefgarne.)

3.3 p.m.

Lord Bruce of Donington

My Lords, the House will be grateful to the noble Lord for having introduced the Second Reading of the Bill in this place. As he says, it follows true to form. There are no more legal complexities in it than there were in the previous set of privatisation Bills. Therefore, no useful purpose would be served in arguing out the somewhat tortuous legal detail into which we had to go when other industries were privatised.

Of course, this Bill is entirely irrelevant to the needs of the country at this time. It does not add anything to the country's productive capacity. It does not result, and is not intended to result, in the alleviation of any industrial, unemployment or social problem anywhere. One wonders indeed why it has been introduced at all, except of course to follow out the usual party line of the party opposite to provide for further privatisation. I can imagine Ministers of State these days like Red Indians dancing around the wigwam of the Prime Minister and showing her the scalps of the various nationalised industries that they have strung around their belts. I have no doubt that she is vastly entertained thereby and that her full approval showers upon those who have achieved the trophies they have gained. It serves no useful purpose at all.

The noble Lord has said that the Bill takes away duties and substitutes powers. Is it entirely wrong that a public corporation should owe a duty to the country at large? What is so reprehensible about the duties that were spelt out in the original Act of 1977? The noble Lord says that he wants to release public corporations from the duties in order that the shackles imposed upon them by those duties are removed. We all know perfectly well what will happen. The chief of British Shipbuilders, whoever he may be after, I observe, the anticipated retirement of Sir Robert Atkinson, which is hinted at in today's Financial Times, will obviously become the creature of the Minister, pliant to his every wish.

The noble Lord said at one point that the Bill would permit the injection of private capital. I do not know how private capital will be attracted into any other section of the businesses at present conducted by British Shipbuilders outside perhaps the warship side, to which I shall return. The noble Lord, on the one hand, advertises the almost untenable position of the merchant shipbuilding and various other sections belonging to British Shipbuilders and, with the next breath, he says that of course they must be free to attract private capital. I very much doubt whether private capital will be brought into those sections. After the Government, if they are re-elected, privatise the warship section, for quite obvious reasons, private capital will go into the warship section. There are good reasons for that, to which I shall return presently.

I am afraid that we have to discuss this Bill today within the context of the whole situation of British shipbuilding. As the noble Lord will realise if he has read The Times today, a campaign is starting today in the North-East of the country aimed at drawing the attention of the public at large, and indeed of the Government, to the incredible plight into which the northern part of the country has been plunged in recent years, I should add, largely due to the monetarist policies of the party opposite, although I shall not argue the point in detail now. The campaign is being organised by the Tyne and Wear County Council. This is what is said. I should like noble Lords to listen to this. There is no point in discussing Bills within the atmosphere of an academy. Bills are concerned ultimately with people. Let us see what the leader of the Tyne and Wear County Council has to say about the situation up in the North.

He says: We have suffered heavy losses in all our major traditional industries over the past few years and now have more than 100,000 adults and 16,000 teenagers on the dole. We are not prepared to see the lifeblood of this country slowly disappear. We intend to use every weapon available to ensure that we retain our shipyards". He goes on to say: The entire community of Tyne and Wear workers, traders, business people, shops, pubs and clubs, all depend on the shipyard workers for their livelihood and any further decline would amount to a disaster for the entire population of Tyne and Wear". That is only the expression of one person, but I think that it will be echoed by every noble Lord whose associations in various parts of the country are sufficiently extensive for him to arrive at a perception of the misery that at present exists, largely through unemployment and certainly through poverty, in very considerable areas of this country, including the shipbuilding areas.

How did this situation come about? In 1950, British shipyards were responsible for the construction of about 50 per cent. of the world tonnage required by shipowners of various nations. By the time that British Shipbuilders was formed at the time of nationalisation, that 50 per cent. share of the world market had declined to 4½ per cent. It is necessary for us to consider how that has happened. Initially, of course, the loss was stimulated by the growth of competition for British shipyards from other countries, including those in Europe, belonging to what we shall loosely call for the moment the Western world. British shipyards increasingly encountered competition from other European countries and our share of the market progressively dropped. Some reasons have been given for that. They were given in another place during the debate that took place on 17th November and they were not challenged.

In the early 1970s a survey showed that the British shipping industry had £825 per worker employed invested in it; in West Germany the figure was £1,000 per employee; in Italy £1,200; in Sweden £1,800; and in Japan £2,800. The growing competition among what are sometimes called our trading partners in the West, was very largely achieved on the basis of massive investment by these countries at a far greater rate than investment was forthcoming in this country. The study continued by saying that later in the 1970s there was a spurt. British industry added an extra £80 per employee; West Germany a further £162; Japan an additional £409; and Sweden an extra £554 per worker. There can be no doubt, and I do not think that it was seriously contested in another place, that the growing uncompetitiveness of the shipbuilding industry in the United Kingdom during the years following 1950 up to the time of its nationalisation when we had 4½ per cent. of the market, was owing quite considerably to a gross disparity in the capital resources made available to shipbuilding in the United Kingdom as compared with the other Western nations and Japan.

However, after that a new phase began which affected the European shipping industry as a whole, including the British shipbuilding industry, and that was the rise in shipbuilding activity in what are termed, in the various GATT negotiations that have taken place, the "newly industrialised countries"—that is, Taiwan, Korea and Brazil. Therefore the share of the European market as a whole in the 1970s onwards fell very considerably, and fell at the hands of these newly industrialised countries to which I shall return, because—as I shall show—their basic wage rates are much lower than those obtaining in the United Kingdom.

That was the situation that was inherited when British Shipbuilders came into operation in 1977. Aside from the warship section—to which the noble Lord has already referred and to which I shall return—unless British Shipbuilders had been formed and unless the merchant shipping and other facilities had been powerfully aided by Government and reorganised in the way in which they have been since, there would be no shipbuilding industry at all, outside the warship section, in the United Kingdom today. The noble Lord occasionally refers to these matters in ideological terms, and I am bound to reply. Private enterprise in the shipbuilding industry up to the time of the 1977 Act reduced that industry to a shambles from which it has to be rescued, and any suggestion to the contrary can, I think, be dispelled if noble Lords would care to peruse some of the proceedings that have taken place in another place.

The noble Lord's very favourable observations make it unnecessary for me to refer to the accounts of British Shipbuilders which I have with me, save to assure your Lordships that the contents of the accounts for the year ended 31st March 1982 fully bear out in detail the eulogies, which I am quite sure the noble Lord meant sincerely, that flowed from the noble Lord's mouth. All that really is in doubt is the Government's intentions. They have been made reasonably clear. They are, of course, to privatise the profitable sections—the warship section—and to allow what I will refer to loosely for the moment as "a rump" to continue. The other pretence is that these provisions, by virtue of which the Secretary of State is given considerable control over the corporation, will be exercised benevolently in the interests of the industry as a whole. In another place the term used was: to release them from the constrictions under which they now operate.

The noble Lord in his speech said that it was the Government's intention to make quite sure that British Shipbuilders, or what remained of it, did not unfairly compete with the private sector. He did not say quite how he was going to do that, but he did give an indication. Just how do the Government propose to deal with competitiveness? We have no need to speculate any further about that because we have had a recent example.

The noble Lord will be aware that on 7th February the Government announced that the contract for the building of a cable ship ordered by the CEGB was to go, not to British Shipbuilders, but to South Korea. Your Lordships will recall that this raised some interest not only in another place but also in this House. Some very grave doubts were expressed as to the manner in which this extraordinary event was achieved. Your Lordships will recall that it was pointed out as being a slight incongruity, to put it at its mildest, that the Government on the one hand should be advocating that British firms should buy British and yet on the other hand, when it came to the ordering of this particular ship, should do nothing to prevent the order being placed by a British company with a Korean shipbuilding company. Mind you, the reasons given were very cogent. Apparently the quotation was alleged to be some 50 per cent. higher and the Prime Minister made much of the point when she referred to this matter at one of her conferences.

Your Lordships will recall that at the time when the statement was made in this country I put the Government on notice, and at the conclusion of the proceedings on the statement on 7th February, at columns 1014 and 1015 of the Official Report, I said: Will the noble Earl also please take note that we shall probably return to this question in greater detail at a later stage? It is to the accomplishment of this public duty that I now turn. Your Lordships will recall that in 1978 conversations took place between the then Labour Government and the French Government and between the CEGB and its corresponding organisation in France, Electricité de France, concerning the completion of a 2,000 megawatt link between France and the United Kingdom. The advantages of this were discussed at the time and I shall not adumbrate them now. It appears that the British share of the project would cost in the region of £250 million and, indeed, that figure has recently been confirmed. That comprised not merely the laying of the cable itself but also the provision of the cable ship, which was the means by which the cable was to be laid.

In July 1982, at the request of the CEGB, British Shipbuilders received the specifications of this from their specialist consultants and notified them that completion was required in the spring of 1984 and that tenders were for submission, at any rate to three quite prominent firms of contractors, for the total operation, one of which was a Canadian firm and two of which were British.

British Shipbuilders in conjunction with its chosen subsidiary—in this case Sunderland Shipbuilders Limited—prepared the tenders and in due course these were sent off, were received by the contractors concerned and were communicated to the CEGB. There was a second round of tenders at a later stage in which British Shipbuilders also participated, quoting only of course for the completion of the cable-laying ship. The price quoted was about £13 million—that is, after taking into account a 10 per cent. contribution from the Intervention Fund, which is under the control of British Shipbuilders.

It is important that your Lordships should bear the following points in mind, and over the last month I have been at pains to investigate this matter in detail so that your Lordships may be aware of what transpired. The first thing is that the response from the two British contractors conveyed to British Shipbuilders during the period from October-November 1982 was that the contractors were very interested. Secondly, in fact, early in January British Shipbuilders were advised that in view of the fall in the value of the pound the price had become highly competitive.

The third point to bear in mind was that at no time was British Shipbuilders advised by anybody—either the DOI or the CEGB—that the price was too high. The fourth point, which your Lordships should bear in mind and which your Lordships may find slightly unusual, is that British Shipbuilders was never invited to tender again. The fifth point to bear in mind is that at no time did the international transport concern—that is, the firm that ultimately secured the contract—make any request to British Shipbuilders to tender. This is rather an important point because the CEGB had previously been operating and had invited its contractors to operate under the condition that, if at all possible, British Shipbuilding yards were to be used for the purpose of the construction of the ship. I say that at no time did the firm, ITM, to which I shall return, invite British Shipbuilders to take part.

The sixth point which I should like your Lordships to bear in mind is that at intervals following the submission of the tender, and in the words of British Shipbuilders: As the situation developed, we registered with CEGB our strong interest in this proposed contract and we have kept the DOI and the Offshore Supplies Office in the picture regarding progress". As your Lordships will be aware, the Offshore Supplies Office is an organisation which continues to propound, very successfully and energetically, the objective of buying British.

We now pass to the earlier part of 1983, and in the last week of January British Shipbuilders learned for the first time that ITM had been awarded the cable-laying contract. They had made inquiries—naturally, because they had heard nothing—of the Department of Industry, and they were informed on 27th January that the decision to use a Korean yard was "irrevocable". Indeed on 7th February, Mr. John Moore, the Under-Secretary of State for the Department of Energy, said in another place: the CEGB has advised me that a formal contract now exists with ITM". On 14th February the contract was, in fact, signed. It is understood that the CEGB is putting 10 per cent. of the sum "up front" and I am quite sure that this will be very useful to International Transport Management.

In the meantime, on 14th January Sir Robert Atkinson, who, your Lordships will be aware, is the distinguished chairman of British Shipbuilders, wrote to Sir Walter Marshall, who, as your Lordships will know, was appointed the chairman of the CEGB in July 1982, asking for an interview in order to discuss the cable ship project. No response to this leader of one nationalised industry was received directly from Sir Walter. On 27th January Sir Robert Atkinson, to whom this afternoon the noble Lord has paid such just tributes, received a reply from a Mr. D. R. Lomer, who is a board member of the CEGB: replying on the chairman's behalf due to his heavy commitments". Your Lordships may feel that this seems to be rather an extraordinary state of affairs between the leaders of two nationalised industries, except that one, of course, knows the history of Sir Walter Marshall and one, of course, knows the purpose of his appointment.

I now crave your Lordships' indulgence to draw your attention to the firm, International Transport Management, to which this contract has ultimately been awarded, and which apparently has entered into a contract with the Korean yard. The head office of this company is a converted private house at 20 Southfield Road, Middlesbrough, which is pleasantly furnished but is not capable of housing more than about 25 staff. I make no point of that. Smallness is often beautiful and there is no reason to suppose that its efficiency, its entrepreneurial skills, or even technical skills are in any way deficient because of the smallness of its staff. But it is good that your Lordships should form some mental picture of the type of organisation that is involved. It has a London office at 7–8 Market Place, London, W.1.

Your Lordships may possibly be interested to learn that the accounts of this company have also been researched. As at the date of inspection of the file on 14th February last, the last accounts filed by the company were those relating to the year ended 31st March 1980. That is 31st March 1980, and we are now in March 1983. They were dated 27th November 1980 and filed on 19th February 1982, some one year and one month after the prescribed time laid down in the Companies Act 1976. No accounts for the year ended 31st March 1981 have yet been filed, even though they were due to be filed on 31st January 1982. These are one year and half a month late. The accounts for the year to 31st March 1982 ought to have been on file by 31st January 1983. They were at the time of research already half a month late.

The reason that I am going into this detail is so that your Lordships may be aware of the background of what subsequently happened, because the Government's statement refers to International Transport Management. ITM is the trading name of ITM (Offshore) Limited, which is the company to which I have referred. Incidentally, the Accounts of ITM (Offshore) Limited to 31st March 1980 showed net current liabilities—that is, current liabilities less assets—of £38,990, and total assets of £462,720. The net profits made for 1980, your Lordships will be glad to hear, amounted to £163,217, as distinct from £6,415 in 1979. So up to 1980, which is all we knew on 14th February, that was the position.

Doubtless your Lordships will bear in mind that it may well be that the fortunes of this company have progressed at the same successful rate that they obviously did in 1980, and they may well be much more substantial than is revealed on the accounts for 1980. Your Lordships may therefore feel that perhaps this company has been modest in not allowing the public to see its accounts for the two following years, because, of course, your Lordships would then be able to know whether the company's structure, as such, could sustain the large contract that has apparently been awarded it by the CEGB.

It is perhaps of interest to note that on the file at Companies House there is another company, ITM (UK) Limited, which has no accounts and which was struck off on 7th December 1982. ITM (Overseas) Limited was registered on 7th August 1980, and ITM Consultancy Limited was registered on 7th August 1980. In neither of these cases were any accounts available, and there is nothing improper in this in any way because the companies may not have commenced trading, although by statute they are really required to file their annual returns. Public bodies that deal with organisations of this type very properly want to be informed as to their background, and very properly want to be put into a position where they can assess the relative technical or other abilities of the directors to carry out these mammoth tasks, and indeed whether the finances are likely to be available for the job to be done. I have no evidence of any inability on the part of ITM (Offshore) Limited to perform the task. I do not know, and I would not cast any aspersions on them whatsoever. It is up to your Lordships to decide just what happened, and whether what happened was in accordance with the usual traditions in the way that British public undertakings are normally supposed to place their contracts and to conduct their affairs.

Now why did ITM (Offshore) Limited obtain the contract? The Government's answer to this is that they simply were able to quote a price that was completely so far below any quotation received from British shipyards that any such quotation was immediately out of court, even though—as your Lordships are probably aware and may I reiterate it once again—at no time did ITM ask British Shipbuilders to quote on any specification whatsoever for this contract.

Now it is said that the price was low. If so, why was it low? We can find out immediately because the Korean shipyard construction was part of a package deal, and in the course of its performance, so far as the Korean side was concerned, they were paying, or would be paying, wage rates at about 23 per cent. of the amount payable in Europe. I have the ILO Bulletin of Labour Statistics for April to June 1982, and I find that the average wage rate per hour in Korea was 70p, and the average throughout Europe as a whole was 312p. It means that in European terms, translated into British terms, we could of course have had the contract if we had been prepared to pay our workers, and if our workers had accepted, £28 per week for a 40-hour week; or, alternatively, if our workers had been prepared to work for that rate of wage for the 73 hours a week that the Korean workers are required to work in instances of this kind which would have brought them in £51 a week. This is presumably what Her Majesty's Government think is fair competition.

But of course there is another reason also. It appears, so I understand, that the cable ship will belong to ITM when the charter with the CEGB is finished, and ITM have had an undertaking from the Korean authorities that they will charter it in Korean waters at the end of the contract through CEGB. So what really has happened is that the Korean authorities have placed themselves squarely behind the Korean shipbuilding company, Hyundai, I think the name is, one of the largest companies in South Korea. They have put themselves squarely behind this company and have been able to quote prices that are quite uncompetitive by any European standard at all and which, in fact, constitute the most blatant form of dumping that can be imagined at this time. This example will be of ill-assistance to the noble Lord, Lord Cockfield, when he comes to, as one hopes he will, try to institute anti-dumping measures in the EEC. The reply will inevitably be that the British Government themselves connived at this blatant dumping which has taken place.

What are the consequences for British shipbuilding of the course of action that is being taken? First of all, it is a blow to British Shipbuilders' prestige. It is no good having a Buy British campaign, urging shipowners to buy British ships, unless you are prepared to take all reasonable and prudent steps to ensure that your companies have fair competition. It is a blow also to the financial situation of Sunderland Shipbuilders and its workforce. And it is a blow to other British industries; steel, for example, because about £3½ million-worth of steel would have been bought from British Steel. It affects engines, cable laying equipment, electronics, controls, fittings and so on.

Was the Prime Minister told all about this? Did she know exactly what had happened when this decision was made? In the absence of any satisfactory indication—and there have been plenty of opportunities since these events took place—I submit that the Department of Industry and the CEGB between them knew about this from November onwards and in fact connived at what happened. I accuse the Government of not caring at all whether British Shipbuilders benefit from it. All they are really concerned about are the profitable parts.

The noble Lord himself made the point that the warships side of the business is making a profit. That is the case for a very good reason; the warships side is the side of British Shipbuilders which works for the defence departments on a cost-plus basis, and any company that cannot make a profit when working on that basis must be very bad indeed. No wonder the Bill empowers the Government to dispose of these assets.

Your Lordships may decide to give the Bill a Second Reading. There is nothing we on this side of the House can do to stop that. But it is a squalid little Bill which we shall repeal at the earliest possible opportunity.

3.43 p.m.

Viscount Simon

My Lords, when the Aircraft and Shipbuilding Industry Act was going through your Lordships' House a little over six years ago, we on these Benches opposed it. We did so not because we had an ideological objection to nationalisation but because we believed that in a mixed economy—which we are—there should be a proper balance between the resources in the public and private sectors, and we felt at that time that there was already too high a proportion in the public sector. That being so, we objected to the nationalisation of the shipbuilding industry.

I hope the Government do not think that because we objected then, we are delighted with the idea that they want to regain it for private enterprise—or those parts of it, as the noble Lord, Lord Bruce, said, which are profitable—because we on these Benches take the strong view that the constant seesawing in industrial policy is most damaging for the country. When, every time a decision is made, it is altered within a few years because another party attains power—and Lord Bruce indicated that this will be altered when his party gets into power—that is very damaging to British industry. Indeed, it is one of the factors which has led to the decline of British industry. From that point of view, therefore, we are opposed to the Bill. We think it a mistake, after so short a time, to want to alter things again.

Besides that, there is the question of the present desperate position of the shipbuilding industry as a whole, which the noble Lord, Lord Bruce, expressed so well. Is it not possible that, in a position like this, where very difficult decisions have to be taken and where it may be necessary still further to restrict production or close yards, it is better to have the whole of the industry in one hand? Would it not be in a better position, in one hand, to negotiate with shipbuilding industries abroad? Would it not also be in a better position, if the worst comes to the worst and it is necessary, as I hope it will not be, to reduce still further our shipbuilding capacity here, to decide where that production should take place? With a number of independent companies the difficulty of reaching agreement is very much greater.

While I am not an economist (unlike the noble Lord, Lord Bruce), I should think that if there were many small undertakings competing in a very flat market, that would be extremely bad for keeping any sort of market at all, because the different people would be falling over each other to cut rates. That could result in an absolute disaster, and the shipbuilding industry in the long term is far too important for this country for us to risk anything of that kind.

The noble Lord, Lord Trefgarne, was very clear in indicating how the Secretary of State proposes to use the extraordinary powers which he seems to be given in the Bill. The unfortunate British Shipbuilders may have been released from a straitjacket, but what they have got into now I do not know. It could be leg irons, cross irons or almost anything. The Secretary of State can tell them to do something they do not want to do or he can stop them from doing something they want to do. There is little indication in the Bill—and there was not much in Lord Trefgarne's speech—of how the Secretary of State visualises carrying out his powers.

The Minister said he would want to use them as little as possible, but I know what Secretaries of State are like; once they have powers, they generally find they want to use them. Indeed, it would be extraordinary if, having introduced a Bill of this sort in a busy Session when everybody is trying to get some other Bill through, the Government did not intend to use the powers once they have them. In any event, the powers are in the all-too-familiar pattern we have got used to; in the name of freeing everybody to do what he likes, the Secretary of State takes more and more power to interfere with what is done. It is similar to the discussion we had about local government not long ago. The Government are always saying, "Let us make the people free", and then they control them more, not by an Act of Parliament—the people controlled would then at least know the limits of their activities—but by the actions of a Secretary of State who does not tell them what he intends to do.

The noble Lord, Lord Trefgarne, indicated fairly clearly, for example, that the Secretary of State has in mind trying to find private capital for the warship builders. Certainly he would have great difficulty trying to find money for any other part of shipbuilding. What does he intend to do? At present, the warship builders make some profit, and that helps British Shipbuilders as a whole. If they are deprived of that profit, what will happen to the rest of the shipbuilding industry? Does the Secretary of State believe it should be supported financially through all the difficult years that may still be coming? Or does he really think that when he has—successfully, in his view—got rid of the warship building side the rest can be left to go to the wall, with all that would mean to the shipbuilding areas of the country and the people who work in them? It seems that there are strong grounds for not doing anything at the present time, but instead letting British Shipbuilders go on doing the best that it can, and certainly not taking away from it about the only profitable operation that it has in its business.

To turn to the Bill itself, I must say that I found it extraordinarily difficult to follow, though I was helped by what the noble Lord, Lord Trefgarne, said in his introduction speech, and I suppose that we shall learn a little more as we go along. I really do not understand why it is thought necessary to remove all the duties of British Shipbuilders. It is not necessary to remove all its duties to release it from the straitjacket, and I should like to know whether British Shipbuilders itself has expressed the view that its duties inhibit it in its activities. I should have thought that the duty of doing the best that it can and so on was very wise.

With regard to the particular question to which the noble Lord referred, relating to industrial democracy, I must say that personally I have always disliked the phrase. I like to think of it as worker participation; but, whatever one calls it, the fact remains that British Shipbuilders has been very successful. I accept that it could well have been successful without legislation; but have the Government considered the psychological effect of removing the statutory requirement? It seems to me that, if there is the requirement—and it may have nothing to do with improvement in industrial relations in the shipyards—to remove it would be very damaging. Surely it does not do any harm to leave it, and I wonder whether when we reach the Committee stage the Government may consider doing something about that.

So much has been said by the noble Lord, Lord Bruce of Donington, that I can make my speech shorter than I had intended. The noble Lord, Lord Trefgarne, said that somebody had called the Bill "modest". I do not know who did that, and no matter who it was, I should not myself have used that word. I should have called it irrelevant, as I think the noble Lord, Lord Bruce, did—irrelevant at a time when the industry is in a really desperate position. It will not bring to Britain a single new order for a ship. I suggest that what is needed—and urgently needed—is for Ministers to find the time not to prepare Bills of this kind, but to get together with British Shipbuilders, the shipping industry (I mean of course both sides, including all the unions), and perhaps potential investors in British Shipbuilders, if there are any. They should sit around a table and try to work out a strategy for both the immediate term and the long term for the British shipbuilding and shipping industries, which are indissolubly linked together and which are absolutely vital to the future of this country.

3.54 p.m.

Lord Trefgarne

My Lords, we have heard two interesting speeches this afternoon. I accept that, if I caught him right, the noble Viscount, Lord Simon, does not find himself wholly in accord perhaps with the timing of the Bill rather than the content. The noble Lord, Lord Bruce of Donington, spent the greater part of his very long speech dwelling on one particular matter which, as I think he would agree, does not specifically arise from the Bill that we are considering this afternoon. But I do not complain about that, because he was certainly entitled to raise the point, and I listened very carefully to what he had to say.

The noble Lord, Lord Bruce, described the Bill as irrelevant, and that word fell from the lips of the noble Viscount as well. The noble Lord said that the Bill had nothing to do with unemployment, it would have no effect upon investment and so on. I do not think that the noble Lord, Lord Bruce, is right in that. I believe that this is a very relevant Bill. It comes at a time when, admittedly, the shipbuilding industry, in particular the merchant shipbuilding industry, is in some difficulty, but of course the British merchant shipbuilding industry is not alone in that. The shipbuilding industry is also in difficulties certainly throughout Europe, and in many other parts of the world. Indeed that is no doubt one of the reasons why some of the prices that we hear about coming from the tendering offices of shipbuilding companies in the Far East are so low. They, too, are short of work, and that is why they seek to attract such business as there is at low prices.

As for making more possible investment more readily available to British Shipbuilders, I believe that that is a consequence which will flow from the measure that is before your Lordships this afternoon. Apart from the statutory bar, one of the other difficulties that investors would face if the bar alone were removed, would be the straitjacket in which British Shipbuilders finds itself, for example, because of the duties imposed upon it. They are indeed duties; they have to be followed to the very end. For example, one of the duties is that British Shipbuilders may not permit mainstream activities to be carried on by partly-owned subsidiaries, and that is a very serious constraint upon the activities of British Shipbuilders.

Both noble Lords referred to warship building. As I said in my opening remarks, it is the case that warship building has been one of the more profitable activities—in fact the only profitable activity, I think I am right in saying—within British Shipbuilders, certainly since nationalisation. That is largely due to the fact that it has had the benefit of orders from the Ministry of Defence, not least the orders that flowed quite recently following the Falklands conflict. But I believe that there is considerable scope for new investment, new initiative, and maybe for new ownership in the warship builders as well, because, despite their comparative success with regard to the British naval requirements, their success in world warship markets has been less marked. For example, it is unhappily the case that they have not received a major order for a warship in I think a period of at least nine years. That is a very long time. That has been during a period when the world market for warships has been rather more buoyant than the market for merchant ships.

So I believe that the provisions of the Bill before your Lordships will enable new investment, new initiative, and new entrepreneurial skills to be injected into the warship building side of British Shipbuilders, as well as in due course into the merchant shipbuilding side of the business. Of course I accept that at the moment the time is not appropriate for any significant change in that direction so far as merchant shipbuilding is concerned, but I hope and believe that the time will come. Indeed I am quite certain that this measure will enable that to happen to a considerable extent so far as merchant shipbuilding is concerned when the market improves.

As I have said, the noble Lord, Lord Bruce, described in great detail some events as he understood them with regard to a recent matter concerning the Central Electricity Generating Board. I hope that he will forgive me if I do not follow the line of his speech, save, if your Lordships will agree, to dissociate myself completely from the remarks that he made about Sir Walter Marshall, the chairman of the Central Electricity Generating Board. I do not think that that is a matter which specifically arises from the Bill. If the noble Lord thinks that arising from that matter there are any particular points to which I ought to reply, I shall certainly do so, privately by correspondence, if he will so allow me.

As I have said, the Bill will remove the straitjacket from British Shipbuilders. Indeed, with the support of the present Government British Shipbuilders has been radically restructured and its performance has improved in the face of quite difficult market conditions. The time has now come to strengthen the industry further by removing what I think the noble Lord, Lord Bruce, referred to as the financial and bureaucratic shackles which have been hampering the performance of parts of the industry.

By amending the 1977 Act, this Bill will provide a more flexible framework within which British Shipbuilders can operate. This Government came into office with a clear mandate to encourage the introduction of private capital into state-owned industries. British Aerospace, which was nationalised with shipbuilding in 1977, has already been successfully returned to the private sector. This Bill will enable us to take the first steps to bring this about in the shipbuilding industry. We cannot afford to wait until the whole of British Shipbuilders is profitable before we do this. The industry is in recession worldwide. Competition is fierce and getting fiercer, jobs will not be saved by clinging to the dogma of public ownership. The industry needs to be competitive. It needs to be able to draw on every resource, if it is to win the battle for orders.

On Question, Bill read a second time, and committed to a Committee of the Whole House.