Shipbuilding (Tyne and Wear)

Part of the debate – in the House of Commons at 11:44 am on 31 March 1983.

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Photo of Mr John Butcher Mr John Butcher , Coventry South West 11:44, 31 March 1983

I should be delighted to deal with that question. I appreciate the concern that many hon. Members have about the method and the support that is given through my hon. Friends in the Department of Trade. They give considerable assistance, particularly in regard to orders that we hope to obtain from Third world countries and the developing countries. I shall deal with the right hon. Gentleman's point and hope to be in touch with him as soon as possible.

As I was saying, the Labour party has made great play of the support that it would give to shipbuilding should it be returned to office. It says that it would increase investment in the industry, but what is its record? When the Labour party left office, capital investment in British Shipbuilders was at a very low level—little more than care and maintenance and finishing off capital projects that were started before the yards were vested in the public corporation.

In contrast, in 1981–82, under the Conservative Government, capital investment doubled. In the current year—the year that is about to end—it has again increased significantly. For 1983–84 we have approved a higher external financing limit which accommodates capital expenditure of £90 million. That is a fourfold increase on the levels of four years ago. That level of expenditure compares favourably with the frequently quoted level of expenditure undertaken in. Japan. Japan is believed to be undertaking investment of £600 million, but the Japanese industry is, of course, significantly larger than ours.

Those involved in the industry must bear in mind, during the current pay negotiations, that finance for capital and for wages come from the same pot. The more restrained the wage demands, the more the industry can invest in its future.

The Labour party says that it will encourage the public sector to expand and diversify and give it freedom to raise funds on the capital markets. The reality is that it is doing its best to damage the corporation's ability to respond flexibly to the market, and to draw on all possible resources, by opposing the measures in the current British Shipbuilders Bill. The Bill will enable British Shipbuilders to draw on the resources of the private sector and to enter into joint ventures, but the Labour party is threatening to break up any joint ventures and to renationalise. I do not believe that the Labour party's record allows it to lecture the Government in the strident terms that have been deployed, not only in this debate, but in previous debates.

In the current thin shipbuilding market, and with acute competition for scarce orders, there has inevitably been criticism that British aid does not match what is offered by our foreign competitors. It is often asserted that foreign competition—particularly from Japan and Korea—is unfair. While in some countries—for example, Belgium and Denmark—shipbuilding credit schemes are more favourable than ours, their credit, unlike ours, is open to their ship owners whether they build at home or abroad. They do not, as we do, give production subsidies as well. In relation to the combined value of credit and production subsidies in the major shipbuilding countries, the United Kingdom is in about the middle of the league.

The Governments of Korea and Japan help their industries, as do the Governments of the United Kingdom and other shipbuilding countries. Efforts are continuing in the OECD working party on shipbuilding to bring about concerted reductions in subsidies worldwide. Japan and Korea have substantial advantages in productivity. BS has estimated that Japanese productivity is between two and two-and-a-half times greater than ours in the United Kingdom. I know that the corporation is making strenuous efforts to bridge that gap, but, at a time when costs and prices are being cut to the bone, that factor must have a big effect.

I congratulate BS and the work force on the very positive attitude they are taking and on the great strides they are now making in productivity. I particularly commend to the House the investment programme that BS is making in computer-aided design and manufacture. We endorse and support it, because it is one of the major factors that will help BS to compete in delivery and lead times, which are important factors. We have to be concerned not only with price but with being able to respond flexibly to new orders. We believe that investment in that area will bring significant benefits to BS.

We recognise that support for the industry, however large, cannot insulate it from the market place, and that hardship has arisen in the north-east region. For that reason we have provided substantial financial assistance to the north-east. As a West Midlander, it is with somewhat mixed feelings that I say that under this Government the north-east has received over £1·7 billion of aid. That figure does not include assistance to British Shipbuilders and the British Steel Corporation; it does not include Manpower Services Commission expenditure and a large range of other forms of Government expenditure. The whole of the Tyne and Wear area is a special development area, where the highest level of regional assistance is available.

The future of the north-east region must lie in widening the industrial base and getting it away from an overdependence on traditional industries. We are not obsessed with the new industries. We want to use the new technologies and to see their application in the established and existing industries, to help them to become more competitive.

I am glad that new growth industries are already well established, with, for example, over 120 firms employing 12,000 people in electronics. We shall also help here by continuing to encourage, through the support for the innovation programme, the development and application of new technology.

The Government share the very deep concern of the people of Tyne and Wear about the plight of the shipbuilding industry. We have supported the industry massively already, and will continue to do so. We have recognised the uncertainty facing the industry and have increased British Shipbuilders' external financing limit for 1983–84 to £160 million from this year's £122 million.

The Government have said—as have the Minister of State and the Secretary of State—that merchant shipping in the United Kingdom will continue to need support for the foreseeable future. The Government are not sitting back. We have not been dispassionate or coldhearted in the manner in which we have reviewed the needs of the shipbuilding industry.

The hon. Member for Jarrow said that he was most concerned about people on the scrapheap. So are the Government. It is unfortunate that there is not time today to discuss other aspects of the issue. It is necessary to look at the schemes by which people can be retrained—and retrained again, if need be. We can restore some flexibility to the job markets in the north-east and utilise the skills available in the north-east.