§ 4.22 p.m.
§ The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Lucas of Chilworth)
My Lords, I beg to move that this Bill be now read a second time.
This is a short and simple Bill. It has only two purposes: first, to extend the life of the Shipbuilding Redundancy Payments Schemes by 18 months; and formally to write off certain irrecoverable loans made by the Shipbuilding Industry Board to Upper Clyde Shipbuilders in the period from 1968 to 1972.
The Shipbuilding Redundancy Payments Scheme for Great Britain and Northern Ireland was introduced in 1978 by the then Labour Government. It was backdated to July 1977, to the day on which British Shipbuilders was formed. The scheme was intended to alleviate the human problems caused by the contraction of the industry and was to run for an initial period of two years. The contraction of United Kingdom shipbuilding—and, in particular, its need to achieve competitive manning levels—has unfortunately continued far beyond the original life of the scheme and successive extensions of the scheme have lengthened its life to eight years. The scheme is therefore due to expire on 30th June this year.
The scheme provides for benefits in the form of a lump sum, to all made redundant and, for those over 40, additional weekly support payments for up to two years following redundancy. These payments are over 691 and above those payable under employment legislation. Since 1977 about 36,000 former employees of British Shipbuilders have received scheme benefits at a total cost of more than £130 million. Currently some 7,000 people are in receipt of the weekly payments. I do not think that there can be any doubt that the scheme has made a significant contribution over the years to the alleviation of the inevitable personal problems of redundancy and has helped considerably to smooth the path of contraction of the industry itself. Further, it has proved a very valuable tool indeed in the management of the shipbuilding industry.
But the merchant shipbuilding industry continues to face a very difficult market. In many respects we find ourselves back where we were in 1977, albeit with a smaller but still vulnerable industry, facing massive world recession in shipbuilding. Having said that, it is good to note that British Shipbuilders has recently achieved some successes. Two weeks ago it announced an order for four ships, ultimately for use by Cuba, to be built at Smith's Dock, Middlesbrough. This success is particularly welcome for one of British Shipbuilders' most efficient yards. At Austin and Pickersgill, where the order position was desperate indeed, in the last few weeks management and unions have very quickly reached a new agreement on working practices and arrangements. This has enabled the company to proceed with an order for two ships for another foreign owner. The Ministry of Agriculture, Fisheries and Food has placed an important order for an advanced research vessel at Ailsa, the sister yard of which, Ferguson's, on the Clyde, has already this year obtained other valuable orders. And only two days ago British Shipbuilders announced that Govan had obtained a £38 million order for a major ferry for North Sea Ferries. There are also other orders under negotiation, which we see as very encouraging.
As a result of this progress and the considerable efforts being made by British Shipbuilders under its chairman, Mr. Graham Day, it now seems likely that it will reach its stated order target for 1984–5 of 200,000 compensated gross tonnes.
But enthusiasm for these achievements must not blind us to the underlying problems which remain. British Shipbuilders' recent orders, like those which have gone over the past few months to Harland and Wolff in Belfast, continue to require substantial subsidies—within the European Community's rules. British Shipbuilders has a good way to go in regaining competitiveness and becoming a truly viable merchant shipbuilder. Part of that process will involve boosting productivity, increasing the utilisation of facilities and creating regional services serving a number of yards on a much more economic basis. This will inevitably mean further restructuring and. I fear, further job losses.
Although British Shipbuilders is now engaged in turning the industry round, and in the privatisation of the warshipbuilding yards, the Government do not, of course, want to add to its burdens by requiring it simultaneously to negotiate a successor to the statutory Redundancy Payments Scheme. The Government have therefore decided that it would be right to extend the scheme beyond June this year. I 692 should immediately stress that this decision does not indicate any lack of faith in the industry or that there are any firm plans to close further yards. Any redundancies that occur later this year or in 1986 will be brought about by the state of the market, or by continuing inefficient uncompetitiveness. These are factors which are outside the control of the Government. Your Lordships will also recall that British Shipbuilders has been asked to dispose of its warshipbuilding yards by 31st March next year. Together with the disposal of the engineering and ship repairing interests currently in train, this means that by the end of 1986 the state will own less than one-third of the United Kingdom shipbuilding industry. Even without further redundancies, British Shipbuilders and Harland and Wolff will by then employ only 17,000 people, compared with over 90,000 when the scheme was first launched in 1978.
British Shipbuilders' management intend that the remaining merchant sector should by then have recovered from the present position and will be well on its way to a competitive position. It should also by that time have found some reasonable level of stability. There will then really be no justification at all for maintaining a statutory shipbuilding redundancy payments scheme for an industry where two-thirds of the workforce are employed in the private sector and therefore would be outside the scheme.
The Government have therefore decided that this should be the last extension of the statutory scheme. Of course, at the same time the Government do not believe that entitlement to redundancy payments should cease with the ending of this scheme. We are therefore asking the managements of both British Shipbuilders and Harland and Wolff, in consultation with their unions, to establish successor schemes by the early autumn of 1986.
It is too soon to say exactly what these new schemes will look like. They will be the product of a free negotiation between the management and the unions. They may decide to alter the way in which total benefits are divided as between lump sums and weekly payments. I do not know. I am really in no position this afternoon to give a binding commitment that the successor scheme will be as generous as, more generous or less generous than, the present scheme; but I do emphasise that it is not the Government's intention to require British Shipbuilders to reduce the level of redundancy benefit.
The Government have also made it clear that they will fund the non-statutory redundancy payments through public dividend capital. There is therefore no reason to assume that these new arrangements will mean that those who will lose their jobs after 1986 will in general be worse off than under the SRPS now in force. That is the reason for Clause 1: to extend the existing scheme against the background I have set out.
The Bill also presents a suitable opportunity to write off loans made in the period between 1968 and 1972 by the Shipbuilding Industry Board to Upper Clyde Shipbuilders, a company now in liqidation. Parliamentary approval is needed for this and to reduce the assets of the National Loan Fund accordingly. Warning of this was given in Accounts relating to issues from the National Loans Fund, which 693 was published on the 12th December 1983 and presented to Parliament. This is really a book-keeping transaction and is dealt with in Clause 2 of the Bill.
I emphasise that the main purpose of the Bill is further to extend the scheme, which is valued by both the management and the workforce of the shipbuilding industry. We must hope that it does not prove necessary to make extensive use of the scheme; but surely no one can object to the continuation of this measure of support to those workers who are made redundant in a highly competitive industry such as the shipbuilding industry. With those remarks, I commend the Bill to the House.
§ Moved, That the Bill be now read a second time—(Lord Lucas of Chilworth.)
§ 4.34 p.m.
Lord Bruce of Donington
My Lords, the House will be grateful to the noble Lord for having moved this seemingly innocuous little Bill which, on the face of it, goes to extend benefits already incorporated in the Shipbuilding (Redundancy Payments) Act 1978, as outlined in Schedule 2 of Statutory Instrument No. 916 of 1981 and as amended further by Statutory Instrument No. 1290 of 1982, with corresponding statutory instruments in Northern Ireland.
The Government were kind enough to pay high tribute to the workings of this scheme which, as the noble Lord has already indicated, has greatly helped to ease the passage of the reconstruction of the shipbuilding industry which has been occasioned by forces mainly outside the control of the industry itself. At the same time, the noble Lord has informed the House that the scheme is to come to an end in December 1986. In fact, that is automatically done by the repeal of Section 2(4) of the original Act of 1978—after which we are given to understand that a new scheme, which is to be negotiated between British Shipbuilders and the trade unions, will come into operation.
The noble Lord has indicated that it is his devout hope that the scheme, as negotiated between British Shipbuilders and the trade unions, will be no less favourable than the one already in existence. This brings us therefore to the question of why, then, has it become necessary to give notice of the termination of the scheme? If its continuance provides no greater drain upon public money than is involved in the scheme to be negotiated between the British Shipbuilders and the trade unions for a greater benefit, then why abolish it?
Quite clearly, the Government do anticipate making some saving. Moreover, we note that it is not to apply to those parts of the shipbuilding industry which are due for privatisation. The reason for that, as given by the Secretary of State in another place, is that to continue the existing scheme under the Shipbuilding (Redundancy Payments) Act 1978 and the subsequent statutory instruments would be expensive, bureaucratic and wrong in principle.
I find this a little odd. A scheme that has been in operation for a number of years, introduced by the Labour Administration in 1978, extended and approved in very glowing terms by the existing Government ever since and further extended today in so far as the public sector is concerned, is a most 694 desirable thing. In fact, the Government, by inference, take credit for it and I am bound to tell the noble Lord, in so far as the noble Lord's bounty (or that of the Chancellor of the Exchequer) is to be extended for a further 18 months, his claim to benevolence is well justified. Why, then, should a scheme which is regarded in such benevolent terms in the public sector suddenly be regarded, if it is continued into the private sector, as expensive, unacceptable and, above all, wrong in principle?
It is when we consider these matters that this little Bill which is so innocuous becomes quite clear. It is a pre-privatisation Bill. Indeed, some hint of it is given in the text of the Bill by the writing off of some £2 million, to which the noble Lord has already referred. The real purpose of this Bill is quite simply to induce as much further redundancy before December 1986 as is possible in all the sectors, whether or not they are to be privatised, in order that when privatisation takes place on terms those taking over the warship yards will not be encumbered by what they regard as unnecessary staffs. It is therefore an invitation to further redundancy and there can be no doubt about it. The main purpose of it is to clear the decks for those private firms that will take over the warship section so that, by then, the further slimming down could have taken place.
Let us for a moment consider the scope of the negotiations that are to take place between British Shipbuilders and the trade unions. I am not suggesting that these negotiations will take place in any other way than with the utmost good faith, but they have to take place within the financial constrants under which British Shipbuilders are operating at the time. We know perfectly well that the warship yards are to be privatised.
There might be some slight, wry musing about this, because it seems odd to us that, in spite of all the virtues claimed for private enterprise ownership—initiative, drive, ability to take risks, courage, endurance and all the rest of them—they themselves never have to face the challenge of reconstructing an industry that is not doing well. Everything has to be dressed up beforehand, debts have to written off and prospective redundancy liabilities have to be got rid of. Then, and then only, under conditions of security, these courageous entrepreneurs are invited to come in and cash in on the proceeds. That is remarkable.
It is more remarkable in the case of the warship section because, as the noble Lord knows perfectly well, that section has contracts which run on a cost-plus basis and it is almost impossible for anybody to make a loss on them anyway. So they are presented with almost cast iron profitability, as history has shown, to those who take them over. Of course, all these measures will have to go through your Lordships' House and another place. However, on the assumption that they all go through successfully and there is no uncovenanted intellectual conversion by your Lordships to the arguments which I shall produce at the time, British Shipbuilders will be some £33 million short of profitability which they would otherwise have been able to apply against the losses which I fear they are still going to make, for reasons which I shall presently describe.
695 So when it comes to the scope of the scheme, Mr. Day will not be able to negotiate from a position where he anticipates relief of his financial position to the annual tune of some £33 million from the warship yards. He will be £33 million short. When it comes to assessing the viability of British Shipbuilders, this is a significant sum that he has to take into account. Indeed, he could say to the trade union side in good faith, "I am sorry chaps. Eighteen months or so ago we were £33 million better off than we are now. Now we are a bit constrained and we really cannot afford to carry on a redundancy scheme which is anything like as favourable as before."
Moreover, the ways of Her Majesty's Government are by now well-known to this House. If Her Majesty's Government want a particular authority to take a line that they want carried out, they have very good means of ensuring that. It will be within the recollection of your Lordships that we have discussed—albeit by question and answer—the whole question of the increase in water rates, which has been imposed by the Government quite arbitrarily insisting upon different levels of profitability than have hitherto been obtained and upon an early repayment to them of sums due. What is to stop Her Majesty's Government, between now and the time when these negotiations take place between British Shipbuilders and the trade unions, from imposing similar constraints that make it quite impossible for British Shipbuilders to achieve any kind of arrangement with the shipbuilding trade unions, in order to achieve a redundancy scheme which is even remotely comparable with the one which they now enjoy under statute?
The answer is of course that the Government want to save money. If the Government say no they do not want to save money, then the answer is very clear. They can allow the existing Act to stand, particularly Section 2(4) permitting further extensions of the scheme. On the other hand, they can say, "Of course, we are going to save a lot of money on this", which will only go to fortify the suspicions of those who are engaged in the industry that, after all that, they are not going to do as well as they did before and it would be better if they got out.
In the course of his opening remarks, the noble Lord made some observation about the future of the British shipbuilding industry. He referred, although I think his confidence was a little muted, to the prospects for the success of what remains as the rump of British Shipbuilders. He knows perfectly well that the policy of open and unrestricted competition, which is the fetish and the passion of this Government, has been one of the factors which has led to the continuing losses of British Shipbuilders. He knows perfectly well that the Government's deliberate exposure of British Shipbuilders to competition from Korea has been one of the principal reasons why there has been such a fall-off in the orders to British Shipbuilders, as well as to other countries. The noble Lord knows perfectly well that the Korean shipyards are financed very largely by capital originating in the United Kingdom, in the United States and in Germany, on which dividends have to be paid. They know perfectly well that South Korea is not a democracy. It is in fact a dictatorship. They know perfectly well that the trade 696 union movement there is comparable in status with the trade union movement in Poland; that the wage rates in Korea are one half of what they are in Western Europe, one half of what they are in Denmark and one half of what they are here.
The noble Lord knows perfectly well that there has been a deliberate exposure—and I do not want to rake over old embers—in fact in one case, in the case of a GEC cable layer, a Government encouraged diversion of a contract to Korea. He knows perfectly well that in this country only 44 per cent. of orders for shipbuilders from British shippers come to the United Kingdom as against 98 per cent. in Italy, 82 per cent. in Germany and 100 per cent. in Japan.
He knows perfectly well that it is only owing to the deliberate dogma of the Government that the fate of British Shipbuilders and of the entire shipbuilding industry has been left to the harsh winds of competition whether they be fair or unfair, whether they come from dictatorships, or from wheresoever they may come. This has been done as a deliberate act of policy in contrast to those of our colleagues in the Western world who deliberately give preference to the products of their own countries.
A day or so ago—it may have been only yesterday—we had some questions and answers on the precarious state of the merchant fleet in this country. I believe that the Question was answered by the noble Lord, Lord Brabazon, who indicated that some inquiry was going to be held into the military implications—or should I say the naval and military implications—of the progressive deterioration in numbers and tonnage of the British merchant fleet. Although I do not wish to hold it as a bogey, on the Government's own assumptions the Soviet Union now leads the world in the ever-increasing number of her merchant ships. I do not expect for one moment that these will have any impact on Her Majesty's Government. They have their dogmas and they must live with them.
I am quite convinced in my own mind about the Government's intentions. I am fortified by the views on this of Sir Robert Atkinson who indicated quite clearly as recently as August of last year that Sir Keith Joseph, who supported the hiving-off of warship building, offered no hope at all for the future of the British shipbuilding industry. Indeed, if noble Lords are familiar with the Observer feature of 12th August 1984, they will note—this has been unchallenged anywhere—that Sir Robert Atkinson in reporting a conversation that he had had with a senior civil servant in the Ministry said,that the policy of the Government was to get rid of shipbuilding altogether".That statement has never been challenged. It is in fact implicit in the Government's actions; it is implicit in their ineptitude; it is implicit in their dogma; that, regardless of the fate of people in the United Kingdom, regardless of the fate or futures of skilled artisans in more than a dozen trades in this country, as long as the dogma goes, as long as the dogma is carried on, it does not matter a hang what happens to British industry as a whole and to the shipbuilding industry in particular.
One can be fanciful as to what the position may be in about 10 years' time on the assumption that the 697 country is prepared to endure a further period of this wretched Administration. However, I can envisage a time when, secure under their nuclear umbrella, thousands of people will be tapping out messages to one another all over the world. We shall have a greater tonnage of computer paper than we have a tonnage of ships under the British flag and constructed in British yards. We shall probably have more stockbrokers than we have ship workers.
Noble Lords opposite are under a complete illusion if they think that they are going to achieve that without very much trouble because implicit in it is a complete disregard of the whole maritime history of this nation and of the whole of its build-up based upon the design, construction and the marketing of things rather than the marketing of information and the shovelling about of pieces of paper. This is a bad and a squalid little Bill which of course will receive your Lordships' assent as usual. Nevertheless it is merely a pre-privatisation Bill and can be condemned purely on that account.
§ Viscount Massereene and Ferrard
My Lords, before the noble Lord sits down, may I point out that I had an interest in shipping once? May I say with due respect that the noble Lord has been speaking a lot of nonsense? I would draw the attention of the noble Lord to the British liner, "Royal Princess", which was built in Helsinki at a cost, I think, of £130 million. No British yard could fulfil the order. The noble Lord knows perfectly well why British yards could not fulfil it. They could not do it because they could not guarantee the delivery date. Why could they not guarantee the delivery date? They could not do so because the unions might have had a strike or a go-slow, and of course under the law as it stands, there is no forcible agreement between shipbuilders and unions that can prevent that.
Lord Bruce of Donington
My Lords, I am most grateful to the noble Viscount for his very courteous intervention. He is of course himself entirely wrong. But this of course is not unusual. Every time there is an interruption in production and delivery date has to be postponed the noble Viscount has almost a Pavlovian reaction—it must be due to restrictive practices; it must be due to difficulties with the work force, and so on. I have a very simple answer to that—a fish rots from the head, not from the tail.