§ 3.48 p.m.
§ Lord Cockfield
My Lords, I will, with permission, repeat in the form of a Statement the reply being made in another place by my honourable friend the Minister of State for Industry to a Private Notice Question. The reply is as follows:
"As the House knows, discussions have taken place with a number of companies interested in taking over Scott Lithgow. The Government have been concerned throughout to minimise any further cost to taxpayers who have already put a huge amount of cash into Scott Lithgow.
"My right honourable friend the Secretary of State for Trade and Industry today gave his formal consent to the sale of Scott Lithgow to Trafalgar House.
"Under the new ownership Scott Lithgow will now complete the Britoil contract as well as the other work in the yard, and seek new work.
"The costs of this deal for British Shipbuilders are broadly the same as those which would have arisen if the Britoil contract had been lost and the yard run down and closed. However, there are wider benefits arising from the maintenance of jobs at Scott Lithgow.
"Instead of the severe blow to Greenock of closure of the yard, this deal holds out a prospect of a substantial operation continuing and, I hope, expanding. It also means the acquisition of a valuable facility by an experienced United Kingdom offshore operator, which has vast financial, managerial and technical resources and the retention of hard-won and valuable experience in the forefront of offshore technology.
"I am sure that the House will join me in welcoming this transfer of Scott Lithgow to the private sector, which offers a real hope for the people of Greenock and for the future of shipbuilding on the Lower Clyde".
My Lords, that concludes the reply.
Lord Bruce of Donington
My Lords, we on this 0side of the House thank the noble Lord for repeating the reply to the Private Notice Question. Of course, a number of questions arise. The first matter in which the House would be interested is the purchase consideration which is being paid by Trafalgar House in respect of the acquisition of this asset and the relationship between that sum and the Government's own valuation of the yard itself, not only on a net asset basis but also on a future earnings basis. I gather that the Britoil contract will now go ahead. Am I correct in inferring from that that any question of action by Britoil against Scott Lithgow now lapses?
In view of these developments, will the noble Lord agree that the somewhat unfortunate imputations against the workforce of Scott Lithgow may now be withdrawn? Will the noble Lord agree that one of the reasons there was dissatisfaction by Britoil with the progress of its particular contract was precisely because the management layout of the job which was presented to the workers did not in fact prove practicable, that there were substantial defects in production planning, and that in any event the performance of the contract itself was largely prejudiced by repeated changes in design and by repeated changes in specification, which had nothing to do with the workforce at all but which, as the noble Lord probably knows, interfered with production and certainly increased costs as these progressed? Will the noble Lord agree that, when perhaps the full facts of the take-over and its conditions are known, it may be necessary to make further inquiries into this matter?
§ Lord Mackie of Benshie
My Lords, we should very much like to welcome the reply to the Private Notice Question asked in the other place. It is very gratifying and will be so to the local authority which has done so much to promote the continuance of employment in the area. Quite apart from the financial questions asked by the noble Lord, Lord Bruce of Donington, a number of other questions arise.
Is Trafalgar House taking over the yard on its own, or is it in association with other people who have technical expertise in this matter, as has been noised about? Can the noble Lord the Minister tell us how much has been written off? Can he also say what has been done about the very valuable real estate? In other words, has frontage of the river been retained or has it been sold to Trafalgar House? These questions are important to the future of Greenock and to the people on Clydeside for, if at any future time the yard does fold, the real estate would remain extremely valuable. Can the Minister tell us what size of workforce is envisaged under the new regime?
§ Lord Cockfield
My Lords, I am grateful to both the noble Lord, Lord Bruce of Donington, and the noble Lord, Lord Mackie of Benshie, for their welcome to the development which has occurred. The important thing is that this industry has been saved, and we hope that it will have a good future. Perhaps I may deal, first, with the last point raised by the noble Lord, Lord Mackie, because it is an important one. The whole of the existing workforce of Scott Lithgow of 2,900 will be taken over by Trafalgar House. Of course, the future will depend upon the success of the company under Trafalgar House's ownership and direction in 246 securing new orders. But for the moment at any rate the whole of the existing workforce is being taken over.
To take the first point raised by the noble Lord, Lord Bruce of Donington, the total cost to British Shipbuilders of writing off all the existing liabilities, meeting certain contingent liabilities, and so on, is the sum of £88 million. However, we estimate that approximately £17 million of that will be recouped over the next three years, and that includes a refund by Trafalgar House of £12 million, which is an injection of working capital being made by British Shipbuilders at present.
However, the simple truth of the matter is that the yard was bankrupt, and the cost to British Shipbuilders, and therefore the Government, is no greater than the cost which would have been involved in closing down the yard. But the important thing is that this transaction both saves the yard and offers the possibility of saving the jobs of 2,900 people.
On the second point raised by the noble Lord, Lord Bruce of Donington, the Britoil contract will now go ahead. Agreement has been reached between Trafalgar House and Britoil on this. It is part of the agreement that the litigation should be dropped. Therefore, that has been satisfactorily settled.
The noble Lord, Lord Bruce of Donington, also referred to what he described as the "unfortunate imputations against the workforce". In fact, as everybody knows, a very great many industrial problems have been experienced in that yard. There have been repeated strikes and go slows. At the time that I made the last Statement to your Lordships there was a threat of a national strike designed to maintain restrictive practices. I could give details of all these industrial troubles. I have made it clear from the very beginning that there have been deficiencies on the part of the management as well, and that there have been problems with the design of the rig, which was something entirely new. I have never sought to attribute the whole of the blame to the workforce. But, equally, they must take their full share of the blame.
On the other point raised by the noble Lord, Lord Mackie of Benshie, Trafalgar House will be supported by Howard Doris Ltd., which has great expertise in this field. It will also have access to the expertise of GVA, which is another company with wide experience. The exact terms of the agreements between Trafalgar House and the other two companies have not yet been settled, but the expertise is there and would be available. Perhaps I might write to the noble Lord on the matter of the land.
§ Lord Ross of Marnock
My Lords, is the Minister aware that this must give very considerable relief as well as satisfaction to all those interested in the industrial and social wellbeing of the Greenock-Renfrewshire area? The outlook of about a month ago was pretty bleak and dim, when the Government were forcing a deadline which was unrealistic. Indeed, I see this transaction very much as a triumph for the pressures and concerns of the whole community of that area and for the trade unions and the workers in the area, that at last it is recognised that, properly led, they can do a job. When we hear workforces in Scotland described by a Secretary of State as inferior to peasants straight from the paddyfields of Korea, we 247 can understand the concern that there was in the West of Scotland about this. I am indeed grateful, and thank the Minister for what efforts he made in reaching this very much more satisfactory conclusion than we dared hope for six weeks ago.
§ Lord Cockfield
My Lords, the noble Lord, Lord Ross of Marnock, strikes entirely the right note when he refers to a feeling of relief and satisfaction. This has been a happy outcome of what at one time might have been a real tragedy, and it is something for which we all ought to be grateful.
If the noble Lord, Lord Ross of Marnock, would forgive my making this one small point: the Government did not themselves set a deadline. The problem arose out of a notice served by Britoil terminating the contract.