HC Deb 20 October 1989 vol 158 cc268-9W
Mr. Clay

To ask the Secretary of State for Trade and Industry (1) if he will provide an estimate of the commercial cost to British Shipbuilders of the closure of North East Shipbuilders, separately identifying(a) redundancy payments, (b) closure bonus payments, (c) care and maintenance of the facilities since vessel construction ceased, (d) all costs incurred by British Shipbuilders in dealing with prospective purchasers of the facilities and (e) any other costs;

(2) if he will provide an estimate of the cost to Her Majesty's Government of the closure of North East Shipbuilders Ltd., excluding commercial costs to British Shipbuilders.

Mr. Douglas Hogg

The accounts for North East Shipbuilders Ltd. for 1987–88 were prepared on a closure basis following the decision announced by the then Chancellor of the Duchy of Lancaster on 7 December 1988. Signed on 31 January 1989, provision for estimated extraordinary losses of £53.7 million was made on account of closure. The provision included £28.5 million for redundancy payments and £5 million for closure bonus payments. These closure costs could only have been avoided had disposal retaining the whole of the work force proved possible based on bids received in 1988.

Offset by forecast receipts from the disposal of assets, the greater part of the £19.8 million for other costs reflected in the provision related to unrecovered labour and overheads. These were estimated by convention from 1 April 1988, the beginning of the following financial year. A considerable proportion of these costs had been incurred by December 1988, were irrespective of the decisions taken then, and could not have been avoided for some time thereafter even if sale negotiations had commenced at that time. Moreover, had a decision to open negotiations for shipbuilding been taken in July 1989, costs up to the early part of next year would not have been avoided on account of the Commission's expected procedure. British Shipbuilders regard more detailed information on other costs as commercially confidential.

In addition to costs at NESL, disposal talks both before the end of 1988 and in 1989 have involved senior corporation staff for a proportion of their time. Their salaries and related overheads would, however, have been incurred whatever decisions were taken in December 1988 and in July 1989. Fees for financial advice to British Shipbuilders on NESL are additional but are commercially confidential.

All costs incurred by British Shipbuilders net of trading income are funded by Her Majesty's Government.