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§ Mr. Mohammad Sarwar (Glasgow, Govan)I am very grateful for this opportunity to debate the important issue of the future of shipbuilidng on the river Clyde. I also thank my colleagues for their support and attendance today, demonstrating the importance of the industry to their constituents and to our country.
Shipbuilding has a proud history on the Clyde. The industry was a dominant force in Scottish manufacturing and a major producer in the world market. Britain's empire and wealth was based on the Clyde yards, as pioneers of innovation and shipbuilders of quality.
As much as one sixth of the world's shipping was launched from Clydeside berths in 1913. Significant competitive pressures since then have led to a decline in the role of Scottish shipbuilding in both the world market and as a force in our economy. From employing around 60,000 in the 1950s, Scotland's shipbuilding work force now employs around 10,000.
Production in Scotland is largely dominated by four yards based on the Clyde: Govan and Yarrow on the upper Clyde; Ferguson's on the lower Clyde at Port Glasgow; and Ailsa Troon on the Ayrshire coast.
Govan is the largest builder of merchant ships in the United Kingdom. The yard has of late specialised in the design and build of large, sophisticated gas and chemical carriers, as well as specialist, one-off vessels for a wide range of uses. Yarrow is the largest shipbuilder in Scotland. The yard has fully covered facilities for building both steel-reinforced and glass-reinforced plastic vessels and has dry dock facilities. It also has an advanced 3-d design capability. The shipyard specialises in the design and build of naval vessels for the Royal Navy and overseas navies.
Of the two smaller shipyards, Ferguson's has developed a market in building small ferries, such as platform supply vessels for the oil industry. Ailsa Troon has only recently re-entered the shipbuilding market, having for some years specialised in marine fabrications, and ship and boat repair work. The hallmark of all four yards is the Clyde-built quality, which sets the Scottish industry apart from its competitors.
My involvement and focus are very much on the Govan shipyard in my constituency. As the local Member of Parliament, I have shared the roller-coaster ride of the past year with the dedicated and skilled work force and their families. My constituents value the former Fairfields yard as the major employer in Govan. Following the announcement last April that the Kvaerner group were seeking to sell or close the yard, the Government worked hard to secure a buyer for Govan. In particular, I must praise the efforts of the task force led by Sir Gavin Laird and by hon. Members for pulling together in support of the Govan workers who reside in constituencies across Scotland.
I must also praise the success of my right hon. Friend, the Secretary of State for Scotland in securing the deal that saw the yard transfer to GEC Marconi, now part of BAe Systems. The Scotland Office, the new Scottish Executive and Members of the House and of the new Scottish Parliament have all shown, by working in 183WH partnership to secure and promote the Govan yard, that Scotland benefits from bringing government closer to the people.
Will the Minister provide reassurance that the Government's sympathetic approach to the shipbuilding industry—which he initiated when in the former Scottish Office—will continue, given its importance to Scotland and the United Kingdom? The shipbuilding regulation adopted by the European Union in 1998 aims to refuse aid on measures to help the industry to improve its competitiveness. The United States delay in ratifying the 1994 Organisation for Economic Co-operation and Development shipping agreement means that yards on the Clyde are vulnerable to uncompetitive pricing practices elsewhere. Regular discussions with Govan shop stewards, led by yard convener Jamie Webster, show that that is a major concern for the Govan yard.
Last year, the European Commission report on world shipbuilding outlined low pricing by yards—especially those in Korea—which sometimes resulted in losses between 14 and 40 per cent. of the calculated building price. After recent difficulties in the far eastern economies, there are genuine concerns that International Monetary Fund-led rescue packages may allow heavily subsidised Korean yards facing bankruptcy to continue to trade at a loss.
I urge the Minister and the Government to continue to investigate whether the conditions and assumptions under which the IMF made the Korean rescue packages are fully respected. It is vital that the Government identify enough evidence of anti-competitive behaviour in Korea so that the World Trade Organisation can take measures to rectify the position. In addition, I urge the Government to continue to help to establish international trade disciplines for a level playing field in world shipbuilding.
The shipbuilding intervention fund will not be available from the end of this year. At present, that operating aid allows British merchant yards to subsidise up to 9 per cent. of the contract value at the time of signing the contract. I fully understand Govan's concern at that decision, but appreciate that such aid has not always helped shipbuilding competitiveness across the European Union.
Last week, the enterprise Minister in the Northern Ireland Executive released £2.7 million in intervention aid for Harland and Wolff in Belfast. As in Scotland, the new devolved Administration has continued the UK Government's active support for the shipbuilding industry. Workers on the Clyde seek Government assurances that any remaining opportunities for such aid this year will not be ignored anywhere in the United Kingdom.
The home shipbuilding credit guarantee scheme currently provides loans to finance the construction, completion or radical alteration of ships and mobile offshore installations. At present, guaranteed loans are available for up to 80 per cent. of contract value for ships and up to 85 per cent. of contract value for mobile offshore installations, such as rigs. Will the Minister outline the perceived extent of its success and whether proposals for altering or improving the scheme are likely?
184WH In Europe, the Council regulation abolishing contract-related aid at the end of this year permits measures to improve the competitiveness of shipbuilding through capacity reductions or productivity increases. On Clydeside, we especially welcome research and development aid and investment aid for innovation. James Watt developed practical steam power on the Clyde, and Govan yard owners Napier, Elder and Kirk pioneered engine innovations that dominated marine engineering for decades. Napier, the father of Clyde shipbuilding, built the first iron ships for the British Navy in Govan. Our proud heritage is matched by a determination to maintain the Clyde's reputation at the cutting edge of the industry in the new millennium.
In Europe, the Industry Council has concentrated on heavy industry, such as shipbuilding and steel, with the emphasis on state aid. With the European Union aid regime moving towards horizontal aid and away from aid for specific sectors, I must impress on my hon. Friend the Minister the need to ensure that the shipbuilding industry is not moved down the agenda and sidelined in future meetings of the Industry Council. My hon. Friend the Minister supported the formation of a shipbuilding forum, comprising representatives of yards, unions, suppliers and customers, to increase British yards' share of EU ship purchases. That partnership approach is widely welcome for Scotland and the United Kingdom. A united industry will always be stronger pursuing common interests, and I praise the commitment of the Labour Government in initiating and continuing that strategy.
On the Clyde, we welcomed the confirmation, by the Minister for Defence Procurement in November, that Yarrow would be the prime contractor for the new type 42 destroyers. An initial contract has been let with BAe Systems to carry out studies on the programme. It is hoped that the BAe Systems partnership of Govan and Yarrow will reap further benefits in future work.
The Defence Procurement Agency's pending decision on roll-on, roll-off vessels is of immediate concern to Govan, as a shipbuilder, and its sister yard, Yarrow, as an outfitter. Govan leads the Sealion consortium bid for six ro-ro ferries, each worth £35 million in a public-private partnership initiative for the Ministry of Defence. Those vessels will have strategic sealift capability to transport equipment for the new joint rapid reaction force. They are not warships, but ro-ros of a commercial build owned by the service provider. The MOD has learned in the past that it cannot rely on commercial shipping to provide ro-ros at short notice or value for money.
On Friday 14 January, the deadline for final ro-ro bids, the Secretary of State for Scotland visited the Govan yard, underlining his recognition of the importance that such a contract could play in the yard's future. The First Minister and the Minister for Enterprise and Lifelong Learning have expressed the Scottish Executive's total support for the bid. Members of Parliament and Members of the Scottish Parliament are united in support of Govan. We all fully appreciate that the Defence Procurement Agency will follow proper procedures in awarding the contract, and that a decision will be made that benefits the taxpayer and the United Kingdom. Nevertheless, I am confident that the Clyde-built quality of Govan will prove most 185WH competitive. Shop stewards at the yard believe that a successful bid would guarantee work for the next five years and could increase the work force by 200. It could allow up to 20 apprentices to be taken on for the first time in three years.
In recent years, HMS Ocean was built in Govan, taking advantage of our commercial build methods and facilities. That amphibious helicopter carrier's primary role is to carry an embarked military force with support. Her secondary roles include afloat training, a limited anti-submarine warfare platform and a base for antiterrorist operations. HMS Ocean is a typically excellent example of the Clyde-built quality of Govan.
The right hon. Member for Kensington and Chelsea (Mr. Portillo), in a previous life as Secretary of State for Defence, awarded two MOD contracts for auxiliary oilers to VSEL at Barrow, despite a strong bid from the then Kvaerner Govan. The second oiler has now been subcontracted to BAe Systems Govan. The first oiler remains at the new sister yard in Barrow, several months overdue at a yard renowned for its submarine work. The MOD has recently improved its use of the smart procurement scheme, which was launched in the strategic defence review. Savings can now be made without sacrificing the quality of work in present and future builds for the MOD by United Kingdom shipbuilders.
Without the ro-ro order, the Govan yard could again face closure next January. The competition for that contract will be strong. Among the shortlist of four bidders, the Dutch company Maersk is keen to use Cammell Laird on Tyneside. That facility was reopened recently by my right hon. Friend the Secretary of State for Trade and Industry, but it is unlikely to be operational for well over a year. Understandably, my right hon. Friend is keen to see the return of shipbuilding to Tyneside whose shipbuilding tradition is second only to that on Clydeside.
I remain confident, however, that the yard in my constituency will meet the challenge of any competition and successfully secure such a vital order. The Govan shipyard has a reputation for high-quality work that is produced on time and to budget. With the active support of the Government on the British and world stage, Clydeside shipyards have a real future. I urge the Minister to reaffirm the Government's continuing support for shipbuilding on the Clyde.
§ Mr. Deputy SpeakerI shall not call the hon. Lady to speak. She has not informed me that she has received the permission of the hon. Member who initiated the debate to do so. She has not notified me of her wish to speak, nor am I sure that she has notified the Minister. Has the hon. Lady followed all those three traditions?
§ Mrs. FyfeNo, I have not. However, in an earlier debate this morning, hon. Members were asked whether they wanted to speak. I did not realise that the rules were being applied so rigidly.
§ Mr. Deputy SpeakerI must explain that the earlier debate was a long Adjournment debate, not a half-hour Adjournment debate for which the rules are different.
12.15 pm
§ The Minister of State, Scotland Office (Mr. Brian Wilson)First, I congratulate my hon. Friend the Member for Glasgow, Govan (Mr. Sarwar) on securing the Adjournment debate. It is a useful vehicle by which to raise an issue that affects his constituency in particular, but also one to bring attention to the wider subject of Clyde shipbuilding. I note with satisfaction the strong turnout of our Labour colleagues to the debate; it is a clear sign of the strength of feeling and interest of those who are committed to Clyde shipbuilding. However, I hope I shall not be considered ungracious. I note also that a Tory Member is present in this Chamber, the hon. Member for Epping Forest (Mrs. Laing). She is very welcome—but no one else is.
My hon. Friend was good enough to recognise that, when I was Minister responsible for education and industry in the Scottish Office, I was able to demonstrate my commitment to Clyde shipbuilding in a practical way. As he rightly said, since 1997 there has been much evidence of the Government's commitment to the shipbuilding industry in general, and Clyde shipbuilding in particular, and to reversing any misguided thoughts about the industry being one that could be left to its own devices or that it was somehow part of an industrial past. It is very much part of our industrial future. The title of the debate "Shipbuilding on the Clyde" is certainly emotive; it carries with it images and memories of great achievements and huge work forces with legendary skills.
As my hon. Friend the Member for Govan said, for some 35 years about 60,000 people were employed building ships on the Clyde. Today, the work force is about one twentieth of that figure. Although the scale is different, the Labour Government strongly believe in Clyde shipbuilding as a modern industry with an important future. I know that Ministers in the Scottish Executive are of a similar disposition. At the instigation of the trade unions, I put in motion the establishment of a Scottish shipbuilding forum that is now chaired by the Scottish Executive. It will provide an on-going and valuable focal point for the sharing of information and the promotion of the interests of the entire industry.
There is nothing old-fashioned about shipbuilding. We have only to go to the yard in my hon. Friend's constituency to understand that fully. Today's industry is high-tech; it needs a strong skills base. Some of the skills may have changed, but modern computer skills are as important as some of the more traditional shipbuilding skills. Modern shipbuilding is also about delivering a quality product on time and to budget. On that basis, I have every confidence that "Clyde-built" can remain a hallmark of quality manufacturing throughout the 21st century.
The Secretary of State for Scotland was closely involved in securing a deal for Govan last year, following the decision by Kvaerner to pull out of shipbuilding. It is worth emphasising that Kvaerner's decision was not solely about Govan, but about shipbuilding as a whole. My right hon. Friend was impressed by the fact, which I know from my own 187WH contact with the yard to be true, that the work force at Govan adapted superbly to change. They are flexible and fully aware of the current climate, which is recognised and welcomed by the new management at Govan—BAe Systems. We all recognise the modern reality that shipbuilding is a fiercely competitive global industry with many players in the market. The world shipbuilding industry is in a critical condition with capacity far exceeding demand for new vessels.
My hon. Friend the Member for Govan mentioned subsidies for shipbuilding in the far east, particularly Korea—a timely reminder of this long-standing problem. I can assure him that the Government share the industry's concern about unfair trade practices by Korea and other low-cost Asian shipbuilders. We are a leading advocate within the European Union and the Organisation for Economic Co-operation and Development of promoting effective international disciplines to deal with unfair trading practices.
At the timely November Industry Council, we achieved a successful conclusion whereby the Council agreed measures to combat Korean unfair trade practices. The Commission and member states have started to implement those measures. At the same time, we urged the industry to play its part in taking those actions forward. It is important that a clear World Trade Organisation anti-subsidy case against Korea was presented to the Commission, which is now working closely with the industry to establish whether there is enough evidence to lodge a complaint. We shall be keeping the pressure up ahead of the next bilateral talks between the Commission and Korea, which are scheduled for February. I can therefore assure my hon. Friend the Member for Govan that the Government recognise and are taking action to address the problems that he properly raised regarding Korea and other low-cost economies.
In my previous incarnation as Minister for Trade, I was firmly convinced that the best way to combat unfair trade practices was to establish international trade disciplines to which all must equally adhere. We have taken a leading role in advocating that both in the EU and the OECD. As my hon. Friend the Member for Govan mentioned, we have been frustrated in our efforts because of the failure of the United States to ratify the 1994 OECD shipbuilding agreement. Nevertheless, we shall continue to pursue those objectives and my hon. Friend can rest assured of the Government's intention to pursue a fair deal and the proverbial level playing field.
The key for shipbuilding, as for other UK industries, is to become even more competitive. The Government formed the shipbuilding forum—on a UK basis as well as a Scottish one—to facilitate that process. It is currently implementing 40 recommendations, including enhanced support for the shipbuilding industry. The Department of Trade and Industry has agreed to allow an element of profit in shipbuilding intervention fund calculations, has extended the role of the shipbuilding intervention fund to conversion contracts and has extended access to several previously excluded yards. The home shipbuilding credit guarantee scheme has been improved by allowing contracts offering pure cover and by allowing US dollar and euro financing. My hon. 188WH Friend the Minister for Trade has expressed his determination to ensure that any outstanding forum recommendations are implemented.
The shipbuilding intervention fund, though helpful, has not delivered the improvements that it promised in the industry's competitiveness. We are monitoring the pressure around Europe to continue the current system of contract aid, such as the shipbuilding intervention fund, but we are not convinced that it is the best way forward. New shipbuilding regulations, which came into force last year, refocus support for the industry on measures that will improve its competitiveness. To that end, we shall pursue the new EU regulations. The net effect should be to give shipbuilding more focused support to guarantee that our shipbuilders are not disadvantaged. The key is to win orders in the globally competitive marketplace, which, as we all know, means delivering ships on time and to the quality that everyone expects from the Clyde and for which it is rightly famed.
For the larger United Kingdom shipbuilders such as Govan, winning orders means, as my hon. Friend said, being especially successful at winning Ministry of Defence contracts. He spoke about the roll-on, roll-off ferry contract, which I understand will be determined by July, and the preferred bidder is likely to be named in the spring. As he recognised, my right hon. Friend the Secretary of State for Scotland visited the Govan yard last Friday to reinforce our political commitment to its future. I am delighted that the unions are at Westminster today, pressing the case with Baroness Symons at the Ministry of Defence, but the roll-on, roll-off ferry contract will be determined in accordance with the clear rules that the Ministry operates for contracts of that size and nature. It is only right that it is so, but I know that the Ministry will carefully consider every aspect of the bids.
The same applies to all the other contracts in the pipeline for the Ministry of Defence, such as coastal survey vessels, alternative landing support logistics, type 45 destroyers and a future aircraft carrier. Clyde yards will figure prominently, and there will be debates here and elsewhere in which their case will be forcefully made.
The hon. Gentleman has concentrated on the yard in his own constituency, as one would expect, but it is important to recognise the success of the yards at Fergusons, Ailsa and Yarrow at winning orders. We will give them our support in the future, as in the past. I emphasise that the Government believe in shipbuilding. We believe that the industry, especially in terms of its Scottish interests, was unnecessarily decimated during the mad-dog days of the 1980s when it was fashionable to write off industries as being sunset when all reality suggested that they should be maintained on strategic economic grounds to help secure our economic future.
I am grateful that the debate has allowed me the opportunity, on behalf of the Scotland Office and the Government, to salute those who work and have worked in shipbuilding on the Clyde. They have built ships in which we as Britons and, in some cases, Scots and Glaswegians, can take pride. They have also championed the rights of workers in a way that has left its mark on industrial relations to this day. I hope that the Government's industrial relations agenda, especially the right to trade union recognition which will soon be 189WH introduced, can to some extent be regarded as a monument to the efforts of previous generations of shipyard workers on the Clyde. They worked for such objectives as well as for retaining their jobs and industry.
I shall reaffirm what I said at the outset. The Government recognise the importance of the Clyde's shipbuilding industry. We have done everything that we can to support it, and we will work closely with my hon. Friend, our friends in the trade union movement and the management of the yards to achieve the best outcome possible.