HL Deb 21 July 1987 vol 488 cc1271-6

3.5 p.m.

Brought from the Commons, and read a first time.

Then, Standing Order No. 44 having been dispensed with (pursuant to Resolution of 16th July):

Lord Beaverbrook

My Lords, I beg to move that the Bill be now read a second time.

The Bill is short and technical. It concerns British Shipbuilders borrowing limits which is a statutory ceiling on the corporation's borrowing placed by the Aircraft and Shipbuilding Act 1977. The borrowing in question covers the funds that British Shipbuilders may acquire from the Government in the form of public dividend capital and also loans from the commercial market.

The limit on the corporation's borrowing stands at £1,400 million as a result of the British Shipbuilders Borrowing Powers (Increase of Limit) Order, which was debated in another place in December last year. This limit will be breached imminently—in fact, by the end of this month. The Bill that is before your Lordships' House proposes an increase in the borrowing limit to £1,550 million and makes provision for further increases to £1,800 million subject to affirmative resolution in another place.

I should make it clear that the borrowing limit does not apply to the intervention fund paid in support of individual orders; neither does the Bill actually vote any money to the corporation. It simply provides British Shipbuilders with the power to receive money. The provision of funds in the form of public dividend capital is a matter for Parliament to decide through the normal procedures for voting money.

In recent years the world shipbuilding market has remained severely depressed. The major European shipbuilders and the Japanese have had to restructure, and even the Koreans are now feeling the pinch. Orders placed last year totalled 9 million tonnes throughout the world, which is only half of what could have been built if all yards had been working to capacity.

Against that gloomy picture British Shipbuilders has had to exert itself to the utmost to win orders. I am glad to be able to say that all the yards have work, and with the China order for container ships at Govan and the Danish ferries at North-East Shipbuilders the large yards have work until 1989. Considerable government help was required in the present market to secure those orders, so let it not be said that this Government have no interest in supporting the industry.

The corporation's approach is to strive continually to improve efficiency which ranges from securing better components at cheaper prices through the whole spectrum of organising the workforce's tasks and providing them with the most advanced manufacturing systems. The Government have done all that they can to support British Shipbuilders—with public dividend capital to meet the needs of the business, intervention fund support to help win orders and the diplomatic support necessary for challenging new markets such as China. Whatever help we may give, the survival of British Shipbuilders depends in the main on itself, its own efforts to win orders and to build ships to time and to cost. However, for the immediate future the corporation must have an increase in its borrowing limit by the end of the month in order to continue to trade. I commend this Bill to your Lordships and I beg to move.

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

3.8 p.m.

Lord Williams of Elvel

My Lords, the House will be grateful to the noble Lord, Lord Beaverbrook, for introducing the Second Reading of this Bill, which we on this side of the House support. I shall not detain your Lordships for very long but there are one or two points that I feel I ought to make because this Bill gives us what is more or less an annual opportunity briefly to review the state of the British shipbuilding industry.

I should like to ask the noble Lord to deal with a technical point when he comes to reply for the Government. Clause 2(2) of the Bill says, "This Act extends to Northern Ireland". Does that affect in any way the relationship between British Shipbuilders and Harland and Wolff? There have been some difficulties between the two manufacturers and indeed some chasing of orders which may be allocated to the one or to the other, and I should be grateful if the noble Lord could spend a little time developing that relationship for us.

As the noble Lord has pointed out, the general state of shipbuilding in Britain is not particularly happy. We are now coming up to the tenth anniversary of the creation of British Shipbuilders. Britain used to have 25 per cent. of world orders; it now has 2 per cent. of world orders. Half of the yards in Europe that have closed in the past 10 years are in the United Kingdom. The 70 yards and facilities that British Shipbuilders inherited have declined to seven; the workforce of 80,000 that it inherited has become a workforce of somewhat less than 6,000. Other European Community countries suffered job losses of approximately 30 per cent. to 50 per cent.; the United Kingdom has suffered job losses of somewhere around 300 per cent.

I refer the noble Lord and your Lordships to a remark that was made by a Minister formerly responsible for shipbuilding who is now the Financial Secretary to the Treasury in another place when two years ago he said words to the effect that British Shipbuilders employed fewer than 12,000 people in merchant shipbuilding and engine building and that if it declined much further it would simply disappear—the road would run out. Since then the workforce has more or less halved.

We accept what the noble Lord said about international competition and that the Government and British Shipbuilders have an exceedingly difficult task in obtaining their share of world orders at the present time, which is a particularly difficult period since, as I understand it, South Korea is still expanding capacity and the Japanese have announced that as long as there is an ocean to sail on they will build ships to sail on it.

What can he done? First of all, there is the question of competition between various members of the European Community. I understand that that is now governed by the sixth directive. I should like to ask the noble Lord how he regards the position of the Brittany Ferries order, which was diverted from Govan shipbuilders to a French shipbuilder, through intervention from the French Government. This is perhaps the first real test of the sixth directive and I should he grateful if the noble Lord would tell us whether the Government wish to pursue this to the furthest point that they possibly can.

The second question that I have of the noble Lord is this. How far is it possible in the Government's view to persuade British shipowners, who are less willing to buy ships at home than shipowners of other nationalities, to do more for British yards? So far as I am aware, the Japanese since 1947 have built 100 per cent. of their merchant fleet in Japan. In our case I understand the figure to be 50 per cent. Even with the rise of South Korea, Japanese shipowners seem to be determined, for various reasons which no doubt are explicable, to build in Japan. Is it not possible to consider, since your Lordships debated the parlous state of the merchant marine only the other day, some sort of scrap and build programme such as we had in the 1930s under the British Shipping (Assistance) Act, which was of very great help to yards at that time?

My last question concerns a particular region of the United Kingdom which of course is Scotland. Scotland has developed with government encouragement a new capability for servicing the oil industry in the North Seas. It appears now that UIE, and possibly other Scottish yards, are under severe constraint and are possibly threatened with closure. I do not have to point out to your Lordships, or indeed to the noble Lord, that were that to happen it would have a severe impact on the Scottish economy. If oil prices recover, and if there is more exploration activity in the North Sea, then it would seem only sensible that the Scottish effort in this direction should be supported and not allowed to fail. If it does fail, the inexorable decline forecast by the former shipbuilding Minister that I quoted a minute ago would undoubtedly take place and would have dire effects on the Scottish economy.

I do not wish to detain your Lordships longer. The noble Lord has been kind enough to explain the purpose of the Bill. We support it and we wish it well. I hope that the noble Lord will take my remarks in the friendly and constructive spirit in which they are meant, because we wish the Bill to go forward.

3.12 p.m.

Lord Lloyd of Kilgerran

My Lords, I first apologise for not having my name on the speakers' list, but I assure your Lordships that I shall be brief in the observations I make. Like the noble Lord, Lord Williams of Elvel, we are also grateful to the Minister for his clear explanation of this Bill, which we support. In view of the lucid and practical approach of the noble Lord, Lord Williams of Elvel, I do not wish to press the matter any further. But I should like to mention one aspect which it appears to me the Minister considers to be of some importance in regard to the shipbuilding industry generally. As I understood him, he mentioned the importance of spare parts.

I should therefore like to ask the Minister —if he is not able to answer me now, perhaps he will do so later—whether he knows that there is a Bill threatened to come before the House where the position of spare parts for equipment which is used for shipbuilding purposes may be the subject of rather draconian legislation in regard to designs. Where there is no patent protection or design protection of spare parts, they should be capable of being manufactured by any firm. I understand that there may be a large loss of jobs if the Government go on with their proposals for new design rights in the intellectual property Bill and the innovation Bill, which I understand are coming before the House after the Recess.

Lord Harmar-Nicholls

My Lords, may I ask my noble friend how the £1,800 million maximum borrowing here compares with the equivalent situation in Japan? Also is he in a position to say what the interest on the borrowing is likely to be here compared with Japan?

3.15 p.m.

Lord Beaverbrook

My Lords, I am grateful to noble Lords who have spoken in our short debate on this Bill. As the noble Lord, Lord Williams, said, the corporation has considerable difficulties but there can be no expectation of a blank cheque. British Shipbuilders has a new chairman of only two months' standing. He is reviewing the industry and looking at how all its problems can be tackled. He has promised a corporate plan in the autumn which Ministers will be considering very carefully indeed.

The noble Lord, Lord Williams, asked me how this Bill extends to Northern Ireland. The Bill provides scope for British Shipbuilders to borrow and there are entirely separate arrangements for the financing of Harland and Wolff. The fact that this Bill extends to Northern Ireland is thus largely a technicality. Harland and Wolff is not affected in any way by the Bill. Also we would try to ensure that there was fair competition between British Shipbuilders and Harland and Wolff on any particular order.

With regard to the noble Lord's question about the fairness of the Brittany Ferries' order, we cannot prevent the French, and nor can the Commission, from keeping the order in France. In this case the French are in a uniquely strong position to determine where the order is to be built. I should point out that the Commission is now looking at this matter. It is looking not only at the aid package offered by the French but also at the aid package which we had offered for the building of the ship in the United Kingdom.

The noble Lord also mentioned ship scrapping. Ships are already being scrapped at a rate much higher than new orders are being placed. Last year alone 31 million gross tonnes of ships were scrapped and only 9 million tonnes were ordered. There is clearly no sense in subsidising a process that is already taking place on a major scale.

With regard to the industry and Scotland, as I have already said, of course the Government are doing everything they can to help the industry and the areas in which it is concentrated. There are considerable assisted areas in the North of England and in Scotland, and the Government want to see the yards do the very best they can in the circumstances of the world economic situation in shipbuilding. Perhaps I may write to the noble Lord, Lord Lloyd of Kilgerran, on the point that he made. I have not had notice of that question and perhaps I can come back to him on the subject.

Lord Lloyd of Kilgerran

My Lords, I am very much obliged to the noble Lord.

Lord Beaverbrook

My Lords, my noble friend Lord Harmar-Nicholls asked me the position as regards borrowing by the Japanese industry. I do not have any figures on that. If I can find out any, I shall again write to him. Meanwhile, I commend the Bill to the House.

Lord Mackie of Benshie

My Lords, before the noble Lord sits down, in addition to what the noble Lord, Lord Harmar-Nicholls, asked, could he find out whether assistance in Japan and in Korea is by borrowing or by grant?

Lord Beaverbrook

Yes, my Lords, I shall look into the matter and write to the noble Lord. Perhaps he would like to have a copy of the letter.

Lord Williams of Elvel

My Lords, before the noble Lord sits down, perhaps I may ask him again on Brittany Ferries whether the Government are prepared to pursue this matter according to the terms of the sixth directive, under which, as I understand it, there is no aid to European shipyards without the Commission's approval.

Lord Beaverbrook

My Lords, I understand on this particular order, as a result of the investigations, that no one can now provide state aid to secure it without the Commission's approval. So, yes, we shall do everything we can to pursue the order for this country but it has now attracted the interest of the Commission, which is looking into it.

On Question, Bill read a second time; Committee negatived.

Then, Standing Order No. 44 having been suspended (pursuant to Resolution of 16th July), Bill read a third time, and passed.

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