New Clause. — (Provision for Special Capital Allowances on Certain Ex- Penditure Incurred in Connection with Shipbuilding, Ship Repairing and the Provision of Port Facilities.)

Orders of the Day — Finance Bill – in the House of Commons at 12:00 am on 2nd July 1957.

Alert me about debates like this

Where a person carrying on the business of shipbuilding or ship repairing or a business which includes the provision of port facilities incurs capital expenditure after the fifth day of April, nineteen hundred and fifty-seven, on the provision of either additional facilities for the construction and repair of ships or in connection with the provision of additional port facilities for docking, handling, loading and unloading of ships (other than expenditure in connection with warehouses or storage facilities) and that expenditure ranks for capital allowances under sections two hundred and sixty-five and two hundred and sixty-six of the Income Tax Act, 1952, as amended, such person shall be entitled to claim under this section an initial allowance at the rate of one-fifth of such expenditure in lieu of the allowance granted under section two hundred and sixty-five, and an annual allowance of one-twentieth of such expenditure in lieu of the allowance granted under section two hundred and sixty-six. Subject to this alteration in the rates of allowance, the whole of Part X, Chapter [...] of the Income Tax Act, 1952, shall apply as if the allowances granted under the section were allowances given under sections two hundred and sixty-five and two hundred and sixty-six.—[Mr. H. Fraser.]

Brought up, and read the First Time.

4.45 p.m.

Photo of Mr Hugh Fraser Mr Hugh Fraser , Stafford and Stone

I beg to move, That the Clause be read a Second time.

The object of this Clause is to reduce the burden of taxation which falls on shipyards and docks and other harbour installations. At present, it takes about forty-five years to write off such an asset and by this Clause we propose to make it possible for a company to write it off in seventeen years by means of a double initial allowance of 10 per cent. and a rate of annual depreciation of 5 per cent.

This does not in any contravene the statement of the Chancellor that he is unable to face any further investment allowances this year, but I believe it a matter of supreme urgency for this country to consider the shipbuilding problems which face us in relation to three factors.

First, there is the tax position of other countries. Secondly, our own strategic position which was shown up over Suez and, thirdly, the enormous growth in size of shipping and the necessity to rebuild so many of our yards.

This Clause deals with all these matters, but I wish to pay special attention to the question of the large ship. I know that the shipping industry attaches importance to a balanced programme of shipbuilding, but we are living in the age of the large ship. If we consider available statistics regarding what is necessary to be moved in the world in the shape of raw materials, it is clear that the size of units is increasing. For example, the size of the world movement of fuel ore, and the movement of oil, between 1955 and 1965 is calculated to increase from 295 million tons to 480 million tons.

On the question of movement of ore, we know that, in view of the enormous increase in steel consumption, more countries have to go outside their own territory and build large ore carriers to bring back the ore to their steel and iron works. Already, the ore movements are mounting at almost the same rate as those of oil. We are faced with an increase of about 8 per cent, in this respect. It is estimated by O.E.E.C. that between now and 1960 there will be an increase in the figures for world-wide steel production from 283 million tons to 381 million tons per year. It follows inevitably that we are moving into the era of the large ore and fuel carrier.

I have not touched on the question of the movement of solid fuel or of other ores, like aluminium and other chemical and near chemical products, from remote parts of the world. It is futile for the Treasury to adopt the attitude which has been evident in the past, and say that what is wanted in this country is more little ships selling at £300 or £400 a ton rather than the big units selling at £90 a ton. That is almost as foolish as saying to the electronics industry that what we want is masses of valves, because more manpower is employed in their production, and fewer of the beastly new transistors.

It is not only the Treasury which is responsible for the trouble, but also some of the shipbuilders and the shipbuilding unions. There seems to be a schizophrenic attitude in these matters. First, they are like the old Bourbons saying, "What is good enough for father is good enough for me" and then they take a Micawberish attitude and say, "Something will turn up." In my opinion, unless some action is taken, something will not turn up. Already, we are being forced towards greater and greater size of unit. Of the £7 million worth of shipping on order in this country 52 per cent. is for tankers and 7 per cent. for carriers. I believe tha it was the intention of the Government, expressed in the foreign affairs debate after Suez, to assist the shipping and oil carrying industries by the appointment of an admiral to co-ordinate these parts of the Ministry of Power which have not already been co-ordinated, and by doubling the investment allowance. But this Clause remedies the large omission on the part of the Government, who have not touched the shipbuilding and docking industry direct.

The Clause is an attempt to put the British shipbuilding and docking industries on a basis of taxation equal to that of our competitors overseas. This is an intensely competitive international trade. I is no good the Government saying that by stimulating home demand for British ships they have made all well in the shipbuilding industry. The number of orders placed with British shipyards since April for large tankers of more than 40,000 tons has nearly doubled, but the Government should not delude themselves. These orders are spread over nearly seven years, during which period a temporary recession might well occur in the tanker-building programme.

These orders are partially due to the fact that all the other tanker dockyards throughout the world, from Bremerhaven to Yokohama, are now filled. It is little credit to this country that we were not the first but the last of the shipbuilding countries to go in for the construction of these larger ships. It is not unfair to say that we are the "tail-end Charlie" of the tanker boom. Even today, with this sudden ordering of ships by the British Petroleum Company we are still producing fewer large tankers than West Germany and Japan. Our delivery dates are far behind the dates of those countries. We must make certain that we are competitive upon an international basis.

One of the main factors in the cost of production is taxation. In international competition, costs matter, and in an overtaxed world taxation is a prime factor in basic costs. For the purposes of this argument we have to consider mainly two items of plant, the berths on which ships are created and the docks in which they can be overhauled. Today, there are only seven berths and slipways in this country which are capable of launching a 65,000-ton vessel. More are contemplated, but until greater allowance is given it will be extremely difficult to carry out the necessary organisation to bring them into line with the integrated berth-steel works situation which one sees in countries like the United States, at the Bethlehem steel works, at the Ludwig yards, in Japan, and at the three yards in West Germany, where steel works and shipyards are integrated. Unless further assistance is given in this country it will be extremely difficult to do this.

Both employers and workers in this industry must face the fact that during the coming years there will be a new technique of ship construction. Unless capital and labour adapt themselves to that fact we shall have disastrous results over a large range of shipyards in this country.

How are our shipbuilders to be encouraged in this matter? At present, shipyards, slipways, docks, etc., are treated not as plant, as they should be, but as ordinary industrial buildings. The quickest and smartest way for the Government to get round this difficulty is for them to tell Somerset House that in future docks, dry docks, graving docks and slipways should be treated as industrial plant and depreciated at their proper and normal rate. No action would be needed by the House of Commons, but a purely administrative action by the Chancellor of the Exchequer, which he would be able to perform.

Let us compare the rate of taxation and the rate of write-off in other countries with our own. In this country, shipyards, docks, etc., take forty-five years to write off. In the United States, where there is now a gigantic building programme for large tankers, it takes on the average twenty years to write off these larger items of equipment. In France, the Government make special arrangements with the industry or with a portion of it, and the maximum write-off period for docks and dry docks is seventeen years.

In West Germany, special arrangements are creeping in. Many shipyards are already integrated with steel works and have advantages which ours do not possess. In Italy, the Tramboni laws recently passed mean that finance is offered to companies which are building tankers either for the home trade or overseas. In Sweden, there is a twenty-year write-off for dry docks; in Japan, thirty years; Norway, twenty years; and Holland, eighteen to twenty years.

In Denmark, by an act passed by the Danish Parliament in May, 1957, an agreement has been come to with the large Danish shipping industrialists to make an extension of Danish steelworks free of any charge and to build two 100,000-ton graving docks, again with all the necessary assistance and a flat rate, 100 per cent. depreciation allowance for one year.

It is worth pointing out that this Danish project will entail the movement of 1 million cubic metres of earth. It will be done tax free. In this country to move earth is excavation, and only 25 per cent. of the cost of a slipway can be counted as the cost of excavation. Therefore, if we attempted to carry out integration of steel works and dockyards this aspect of the matter would have to be further considered.

The question of docks and dry docks is equally important, because of the obvious need to dock the growing number of large ships of the world. There ought to be in this country docks capable of receiving them where these large ships can be repaired. The number of dry docks capable of taking 65,000-ton tankers in this country is lamentably small. The same taxation arguments apply to docks as to slipways.

Hon. Members will recall that the Suez crisis forced us to study this aspect of docking. The problem is not only with the length of the ships, but with their beam. In a 65,000-ton tanker the beam is well over 100 feet. Most of our docks can do nothing at all for these large tankers. We have not a single dock to take the 100,000-ton tanker. It may be that this tanker is too large, but even for the 65,000-ton tanker there is a great shortage indeed of docking facilities. Some of my hon. Friends who are expert in this matter of docking will be dealing with the question later. The docks which can accommodate the 65,000-ton tanker are limited to either two or three.

We are faced with a serious situation and the Government must recognise the fact. This is not merely an economic question, but a general political question. I am concerned about our ability to produce large ships both for our Commonwealth and ourselves. Shipbuilding companies have shown great enterprise in what they have already done. However, it is quite clear that if the revolution in the British shipbuilding industry is to be undertaken, there must be Government assistance by way of tax relief, instead of fine words and fine speeches which butter very few parsnips.

5.0 p.m.

I put it to the Government that to regard a dock or a slipway as an industrial building instead of as plant is wholly out of date. We have seen now, during the last ten years, the size of ships has increased, how docks and slipways have had to be altered and how, on the new scales, it is essential that these assets should be written off in a short period. I put two propositions to the Government. First, they should adopt the simplest course, which is to give instructions to Somerset House that slipways and docks should be treated as plant. That is the best way. The other is to adopt this new Clause, which gives a chance for the writing down of assets in seventeen years.

In 1945, it was made possible for our farmers to write down their assets in ten years. I believe that our present economic, political and strategic problems demand this proposed action, which is far milder than that which the Government took in 1945.

Photo of Mr Peter Rawlinson Mr Peter Rawlinson , Epsom

I beg to second the Motion, so eloquently moved by my hon. Friend the Member for Stafford and Stone (Mr. H. Fraser). In doing so, I must first declare a personal interest, in that my family have, for over 200 years, been connected with shipbuilding and ship repairing on the Merseyside. The company is now exclusively engaged, not in shipbuilding but in ship repairing.

From the day in 1740, when my ancestor—called the "father of Liverpool shipbuilding"—started to repair and build ships, it is obvious to everyone that ship repairing and shipbuilding have played an essential, a vital part in the safety and prosperity of the nation. One would have thought that to be so obvious that it would not need to be said, but, as my hon. Friend has said, it does not appear to be appreciated, when it comes to action, that our independence, our existence, turns on the prosperity of this industry.

The First and Second World Wars were very nearly lost because of our shortage of merchant shipping, and the essential and strategic importance of the industry must be clear. Nowadays, the industry has not only strategic but vital economic importance to the nation. A former Civil Lord of the Admiralty has said that the ship-repairing industry was worth some £70 million to the country, and it makes a very large contribution to our balance of payments. The foreign currency earnings of British ships have been estimated at £250 million.

But, the industry is facing revolutionary changes in the very near future, as a result of this new development of the large tanker. Perhaps I may use an illustration. About a year ago there was talk of the general purpose oil tanker or ore carrier as being of some 18,000 tons dead weight. Looking ahead, it was thought that that type of oil tanker might be of 28,000, 32,000—possibly 45,000 tons. Now, in 1957, there are even greater developments and greater and larger ships. The size of the general purpose oil tanker has increased from 18,000 dead weight to between 45,000 and 48,000 tons dead weight.

The company with which I am concerned was planning to extend its dock facilities, which used to be limited to taking 18,000-ton tankers. The first plan—and this has all happened over a period of a very few months—was to make extensions so as to be able to take vessels of 32,000 tons. That was altered to 38,000, and finally to 46,000 tons. The plans were altering all the time in order to match the modern trend of the development of the vast ship. As my hon. Friend has said, it is not only that the length has increased, but that these tankers are be-coming much more beamy. It is no use our having a vast tanker fleet unless we have the means of keeping the ships at sea by having the facilities for repairing and maintaining them. We must have those facilities—maybe not immediately—to match the ships now being built. Even a new ship needs voyage repairs and damage repairs, and those repairs can be extensive.

It was a considerable surprise to many people when, at the end of 1956, when a ship called the "Evgenia Niarchos" was launched at Barrow, it was stated that no privately-owned dry dock could take this 757 ft. by 97 ft. ship. The tanker fleet is no use without dock facilities. My hon. Friend talked about foreign competition. Everywhere on the seaboard facing this island there are growing up these vast facilities, and great docks are being prepared ready to take these new ships. They are being prepared at Copenhagen, at Stavanger, at Schiedam in Holland.

In New York a very large dock will be ready for service in 1959, and at Malta there is a reported scheme for two docks, one 676 ft. and the other 740 ft. long. Those two docks are under the control, not of a British company but of a Danish and Norwegian group of companies. There is to be a new floating dock at Marseilles, and it is reported that in Greece an agreement has been reached for dry docks to take ships of up to 50,000 tons dead weight. The urgency is surely indicated by all this foreign activity.

The industry was very grateful for the recent relief given by the Chancellor of the Exchequer, by which expenditure on cutting and tunneling—including dredging—qualified for capital allowances. But a dock is not just a hole in the ground, and surely some distinction can be made between a dock and the other "industrial building or structure" defined by Section 271 of the Income Tax Act, 1952. A dock, with its altar from which all the services run—the pipes, compressed air pipes, pumps, cranes, etc.—can be used for no other purpose. Therefore, if it is an industrial building or structure, it is an industrial building or structure for a specific purpose. That is why, as my hon. Friend pointed out with vigour, the industry has always sought to be allowed to treat a dry dock as a piece of plant for a specific purpose and thereby to qualify for plant allowances. If we are not to get that special allowance, the industry asks most vehemently that it should get the reliefs suggested in the new Clause.

I listened with great respect, as I always do, to the words of my right hon. Friend the Prime Minister when he spoke in the debate on 15th May last. In talking about this matter, he referred to Her Majesty's Government's "real sense of urgency", and said that he would seek … the close co-operation not only of a large number of Government Departments, but of private companies."—[OFFICIAL REPORT, 15th May, 1957; Vol. 570, c. 436.] He announced then the appointment of Sir Matthew Slattery as special adviser on transport. Sir Matthew will certainly appreciate the need for repairing facilities. My right hon. Friend spoke about the 5 million dead weight tons of tankers under construction in the United Kingdom shipyards, and of the increase in a very short time in the number of larger tankers.

If there is to be a real sense of urgency, let us hope that it will be reflected now in the attitude of the Treasury. It is on Treasury reactions, whether or not there is a sense of urgency, that the matter will be judged. I say with respect that the words uttered from the Dispatch Box are either mere sound and thunder or that they mean something. If they mean something, then we hope today to have a suitable reply from the Minister. In these circumstances, I commend the Clause to the Committee.

Photo of Mr Cyril Bence Mr Cyril Bence , Dunbartonshire East

I do not propose to deal with the whole question of ship repairing, docking facilities, the capital equipment necessary for the shipbuilding industry, and so on, but to confine my remarks to the shipbuilders' yard. The shipbuilding industry is in a very peculiar position compared with almost every construction industry in the country other than building construction. In most other metal-fashioning industries capacity of production can be increased by increased capital resources without changing functionally the outward semblance of those industries. In the motor car industry or in any metal-fashioning industry by the introduction of very small machines, transfer machines and automation, the output of the unit of capital employed in the confines of a given space can be increased, but I doubt whether that can happen in the shipbuilding industry.

In my constituency we have the famous yard of John Brown's. I was shocked to hear the hon. Member for Stafford and Stone (Mr. H. Fraser) refer to our shipbuilders as the "tail-end Charlies." John Brown's launched two of the largest ships ever launched in the world—the "Queen Elizabeth" and the "Queen Mary." John Brown's can still launch a 60,000 or a 100,000 ton tanker if required. I believe I am right in saying that there are only three ports in Europe that can take a 60,000 ton tanker loaded. They are Rotterdam, Antwerp and Southampton. Nowhere else could a tanker of over 30,000 tons be unloaded. There is the big oil depôt at Carslade in Scotland. The oil is pumped from there to Grangemouth.

It is no use talking about 60,000 ton tankers because we have nowhere to unload them. There is not sufficient water for them to get in or out. We are not the "tail-end Charlies." John Brown's can put a 100,000 ton ship on the stocks if a British dock can take the ship.

With regard to the dry dock, I have always supported the plea for a graving dock at Greenock on the Clyde. Only a few weeks ago, John Brown's launched a passenger ship. It had to go into dry dock before it did its trials. I think it was the "Slovenia". She was launched at John Brown's, fitted out in the basin and then went down to the dry dock in Liverpool and came back to the Clyde for her trials. Such an arrangement is an awful waste of time and adds greatly to the cost of the ship.

John Brown's shipyard is squeezed in on the river by commercial buildings. There is no room for it to expand. The only way that John Brown's, Fairfields or Stevenson's could expand on the Clyde would be by acquiring very expensive commercial property around their yards. Many industries in the country are in a position to expand the area of their operations not necessarily by acquiring expensive commercial properties. Industries in which I personally have been employed have been able to expand their factories by, say, one or one and a half acres at low cost. But the shipyards of Great Britain are bounded by expensive commercial properties.

5.15 p.m.

Hamburg has been quoted. All the property in Hamburg was knocked down by the British and American Air Forces. The land was clear of the old property and new property was able to be put up at far less cost than could be done by John Brown's on Clydebank. Long ago I said that John Brown's eight or nine berths should extend across the main road, but that could be done only at terrific cost. John Brown's must do that if it wants to increase its output. In the general engineering industry output can be greatly increased by new techniques within a given space. The hon. Gentleman opposite is connected with a famous light engineering industry and he knows that what I am saying is correct. Even in the steel industry, output can be stepped up within a given area by the employment of technical processes and transfer machines, but that cannot be done in a shipyard. In the shipbuilding industry prefabricated sections are made as far as sixty miles away from the shipyard because the shipyards have not the room in which to construct them. They have to be transported to the shipyards.

Whenever we on this side of the Committee ask for certain things to be done for certain specific sections of the community we are told that it is discrimination, there must be a Bank Rate of 6 per cent. for everyone whether one wants to go round the world in eighty days or to build a shipyard. However, hon. Members opposite always find ways of getting favours done for particular industries. The hon. Member for Stafford and Stone has suggested that certain things should be done for the shipbuilding industry. But I would point out that if we start giving favours to the shipbuilding industry because of its difficulties it will not be long before the steel industry will ask for special discrimination and will put up a good case to that end.

I was recently in Germany and was surprised to learn that their grievance was that because of British Government discrimination in the nationalisation of the steel industry the shipbuilders of Britain were getting subsidised steel and that steel makers were getting subsidised coal from nationalised industries. They said that that was unfair competition. If the hon. Member for Stafford and Stone is now going to ask for more concessions for British shipbuilders I am afraid that the shipbuilders of Japan and Germany will say that the British industry is being further subsidised. The British shipbuilding industry is certainly competing with Germany. It is highly competitive and in many respects it can beat the German industry.

Photo of Mr Hugh Fraser Mr Hugh Fraser , Stafford and Stone

Expand the industry then.

Photo of Mr Cyril Bence Mr Cyril Bence , Dunbartonshire East

We recognise that, but I think it is unfair for anyone in this House to say that the British shipbuilding is falling down. It is standing up and beating foreign competition. The hon. Gentleman opposite quoted the United States. They are at the bottom of the league in shipbuilding. We can beat the Americans in building ships, and the Germans and the Japanese, too. If one goes to those countries, they will tell one that. The only people who seem to think we are losing the battle are people in this country.

I was told—I will not mention the name of the fellow or of the company with which he is connected—that one of the biggest bugbears in the industry are the shareholders. They are only concerned about dividends, notwithstanding the fact that the men running the industry tell them that as much money as possible ought to be retained in order to expand the yards. This struggle has always gone on and is still going on, not only in the shipbuilding industry but in other industries as well.

I remember that when the Labour Government were in power people in industry blamed the Government for their difficulties. Over the last few years, some shipbuilders have been blaming the steel industry because they cannot get the necessary steel plate. When we tell the steel industry this they blame the shipbuilders and say that they do not know their business, but neither blames the Government. When the Labour Government were in power they blamed the Labour Government, but now they blame each other.

The hon. Member for Stafford and Stone spoke about integrating the steel industry with shipbuilding as is happening in Germany and under the Coal and Steel Community in Europe. We on this side of the Committee are all for that. I think the hon. Member is right; there should be greater integration. Running those industries as watertight, private enterprise, profit-making institutions, does not fit in with the modern world. There has to be greater capital planning and, unless something like this is done, it may not be possible to have greater expansion on the Tyne, the Mersey and the Clyde because of the high cost of capital and the need for elbow room. The City of Birmingham, or the City of Glasgow may be able to close a factory and rebuild it twenty miles outside the city boundaries, but that cannot be done with a shipyard. A shipyard is limited to the proximity of water, the depth of water, and room to launch a ship. Shipyards cannot be moved around in the same way as factories can be moved.

It is imperative that the Government should do something to recognise the special difficulties of the industrial activity of building ships in the modern world. I think there is a special case for shipbuilding yards and I hope the Government will consider trying to find some way of helping the shipbuilding industry to expand its capital.

Photo of Mr Paul Williams Mr Paul Williams , Sunderland South

I hope I shall be forgiven by the Committee for returning to the Clause under discussion. I also hope that, if my remarks are rather staccato and short, that will be convenient to the Committee after the plethora of detail we have had.

I declare a two-fold interest in this matter. First, my interest is that the British Merchant Marine and British shipbuilding industry should be maintained as the supreme and prime industry whose paramount interest must be recognised. Surely it is vital that we should do whatever possible to see that our shipbuilding and ship-repairing industry can continue to provide facilities for building new ships and repairing old ones in the way which has been provided in the past. My second interest is connected with my constituency of Sunderland, South. Eighty per cent. of the male population of Sunderland has employment in the shipbuilding and allied trades. Therefore, my second interest is security of living conditions for the people in that town.

My hon. Friend the Member for Stafford and Stone (Mr. H. Fraser), who submitted this new Clause, drew attention to the theme which was speeded up at the time of the events of last autumn. He pointed out how the theme had been developing from 1938 onwards, especially since 1945 and more especially since about 1950—the theme of a demand for larger ships and more specialised vessels. That theme was given an added impetus at the time of the events in the Middle East last year. I believe the Government fully deserve the tributes paid to them earlier in debates on the Finance Bill for the actions they took in relation to ship ownership, but, as my hon. Friend said earlier in discussion of this Clause, that is only half the problem.

If we are to learn the lesson of last autumn, if we are to learn the lesson of the trend of shipping development over the last decade, it is not enough merely to give financial incentives or to remove financial burden from ship ownership.

We must also deal with the other half of the problem by removing some of the burden on those who provide the ships, those who provide repair facilities, and those who provide the port and handling facilities as well. It seems to me that this Clause is deliberately aimed at facing the second half of this problem. The first half of it has already been recognised and perhaps remedied by the action of the Government in the Budget. I should have thought it obvious to anyone in any quarter of the Committee that the very burden of taxation which bears upon British shipbuilders, British ship repairers and providers of port facilities in the United Kingdom was such as to make it difficult to provide new yards, new slipways capable of meeting the needs of the 65,000 ton vessel, the 80,000 ton, the 90,000 ton and the 100,000 ton vessel.

The yards of Germany and Japan were destroyed during the war. As the hon. Member for Dunbartonshire, East (Mr. Bence) said, they started rebuilding from scratch, very often with dollar aid, deliberately designed to help create and re-create old industries. War damage gave a great advantage to those two defeated nations. In addition, since then they have secured substantial preferential treatment by their various Finance Ministers. This Committee should demand that the Government should realise that the problem of British shipping is not one they have dealt with by dealing with the question of ship ownership, but that there is the second part of the problem whereby the Treasury, by reducing tax burden, may enable owners to meet the demands of the moment and enable repairers so to redesign their docks that once again in the second half of the century, as in the first half, we may scoop the pool.

Photo of Mr John Peyton Mr John Peyton , Yeovil

I wish to thank my hon. Friend the Member for Stafford and Stone (Mr. H. Fraser) for bringing this matter by means of this new Clause to the attention of the Government. I very much hope that my right hon. Friend the Economic Secretary will treat this problem as one of real urgency. For many years now it has been neglected.

I wish to give one example of what I think this could mean. I do not think anyone will challenge the fact that failure to act will mean increasing the cost of power and particularly of steel Would the right hon. Gentleman give the most careful consideration to what is happening now? Over recent years there has been a large increase in our imports of iron ore. It is almost certain that that increase will continue. If a large proportion of those imports came from Canada I think it not unlikely that there would be a freight saving of about £1 a ton in iron ore. That would be a saving of vital importance to the steel industry.

I do not want to prolong my remarks, but I wish to say to my right hon. Friend that unless the Government treat this problem with the urgency it demands and apply their mind to it now they will bear a heavy responsibility in future for an ever-increasing burden of costs in two most vital industries.

5.30 p.m.

Photo of Mr Nigel Birch Mr Nigel Birch , Flintshire West

My hon. Friend the Member for Stafford and Stone (Mr. H. Fraser) made an extremely well-briefed and eloquent speech. A great part of this debate has, naturally, been devoted to the question of tankers. We must, however, be a little bit careful about talking only of tankers, because we also need liners and dry cargo ships, both of which have a higher conversion factor. The labour force in many yards would be unbalanced if that factor were not kept in mind.

My hon. Friend wanted the Treasury to do two things. The first was to accept his new Clause and the other, by administrative action, to class industrial buildings as plant. I am advised that the administrative action advocated by my hon. Friend is not possible without legislation.

The general question is, of course, one of vital importance, as my right hon. Friend the Prime Minister recognised both in his speech and by the appointment of Sir Matthew Slattery to look after, in particular, the problem of the transport of oil from the Middle East. We have given deep and careful consideration to some form of tax assistance for shipbuilding, both before the Budget and when my hon. Friend's new Clause was put down, but I am sorry to say that we have not decided in favour of it. I will give the reasons.

When my right hon. Friend the Chancellor of the Exchequer announced in the Budget that he was doubling the investment allowance for ship owning, he went out of his way to say that that was a unique step for a unique industry, because that industry was inevitably open to the full blast of competition, and competition from ships sailing under flags of convenience. But the effect of doubling that investment allowance is indirectly to stimulate the shipbuilding industry and it gives to it the strongest possible commercial motives for expansion. This industry not only has these strong commercial motives for expansion, but it is not, as our industries go, particularly short of capital.

What is happening? I believe that the present developments are encouraging. The projected capital expenditure over the next five years is between two and three times greater than it has been over the past ten years. A big leap forward is going on in this industry. We have been collecting the data with some care and there is no doubt that very naturally, after the war, the industry to a certain extent remembered old unhappy far-off things and was cautious; it thought, for example, that another slump might arise. It now has the bit between its teeth and is expanding as fast as it is reasonable to expect it to do. A good number of these investment plans involve the provision of facilities for building large tankers.

There has also been talk about the question of docking facilities of various sorts and whether they would be adequate. Clearly, there is a time lag. These larger docks are not immediately necessary. We are advised, however, that on the present firm plans and on other plans now in prospect, docking facilities should not be a limiting factor.

I turn now to the details of the Clause. There is considerable technical difficulty in carrying out its proposal. I do not want to bear too much on this, because that would be irritating, but in a proposal of this nature it is extraordinarily difficult to know where to draw the line. In some yards, cranes, electrical apparatus and so on, might be actually built by the waterside in the shops of the shipbuilding company. In other cases, they would be manufactured by other companies a long way from the docking facilities. The question of where exactly to draw the line is not at all easy.

Therefore, while I agree with my hon. Friends that this is a problem of vital importance, we believe that it is being tackled by the industry in the right way and we do not believe that discriminatory tax relief, which in principle is undesirable, is necessary at the present time or would materially contribute to the development and expansion of the industry which we all wish to see.

Photo of Mr Roy Jenkins Mr Roy Jenkins , Birmingham Stechford

I am glad to see the Economic Secretary back on duty. As he knows, I am a great admirer of his speeches on almost every subject except overseas trade corporations, on which he had far too much good sense to be able to make convincing speeches. I am glad that that has not led to any demotion for the right hon. Gentleman or any removal from the Dispatch Box.

I certainly agree with most of the points that the right hon. Gentleman made to the Committee this afternoon. I thought that both the hon. Member for Stafford and Stone (Mr. H. Fraser) and the hon. Member for Epsom (Mr. Rawlinson) made powerful even if slightly contradictory appeals to the Committee. They advanced on the Clause in a kind of pincer movement, the hon. Member for Stafford and Stone beginning with a damning indictment of the shipbuilding industry and the hon. Member for Epsom following up with a glowing tribute to the industry and all its works. In both cases, however, the two hon. Members were led to the conclusion that the essential cure for the industry—or reward, if "cure" is not the right word—was a discriminatory tax concession.

That came out particularly clearly in the remarks of the hon. Member for Epsom, who said that there was great need in the industry for a sense of urgency and then went on quite automatically to equate the need for a sense of urgency in the industry with the need for a discriminatory tax concession.

Photo of Mr Peter Rawlinson Mr Peter Rawlinson , Epsom

I said that the sense of urgency was because the fleets were being built and we must keep the required docks in readiness and, therefore, there should be encouragement for docks as well as for building.

Photo of Mr Roy Jenkins Mr Roy Jenkins , Birmingham Stechford

Quite so. I do not think that any of us on this side—and my hon. Friend the Member for Dunbartonshire, East (Mr. Bence) helped to bring this out in his intervention—would in any way underestimate the problems of the industry or its importance and the Government and the country solving them; but we cannot accept the view—and I do not think that the hon. Member on reflection would wish us to accept it—that merely to pose the fact that the industry has problems and merely to say that it is vital to the future of the country is in itself to argue the case for a discriminatory tax concession. We must be extremely careful about where we give these discriminatory tax concessions.

I was particularly in agreement with the Economic Secretary in his concluding sentences on that aspect. One has to argue a rather finer case than that of merely saying that this is an industry in which great changes are coming about and that we should be adapted to them, in order to show that the case for a tax concession exists.

I have no doubt that the figures which, with great wealth of knowledge, even if recently acquired, as he assured us, the hon. Member for Stafford and Stone put before the Committee of the likely increased demand for docking facilities over the next few years constitute in themselves an enormous incentive to the industry to go ahead without tax concessions and to carry out these vitally necessary extensions and improvements.

It is a double-edged weapon to bring forward these figures as being in themselves proof of the fact that the industry needs special treatment, because it has not done badly. It has a 40 per cent. investment allowance for shipping, which undoubtedly seeps through and helps the shipbuilding and ship-repairing industry. To a quite considerable extent, the industry is clearly in a prosperous state. It clearly has a prosperous future lying ahead of it, in so far as one can say that of any industry. In all these circumstances, while we do not in any way underestimate the importance to our economy of this industry, we agree with the Economic Secretary in thinking that no case for a discriminatory concession has been made out.

Photo of Mr Hugh Fraser Mr Hugh Fraser , Stafford and Stone

I am distressed by the speech of the hon. Member for Stechford (Mr. Roy Jenkins), who seems to be utterly unsympathetic to the problem of international rates of taxation, which he, as an economist, must realise, are vital in final cost. I have given a number of various levels of taxation and comparisons to show the taxation improvements needed for the simple reason of keeping our ship yards in competition with those in Japan, America and Germany and other competing countries abroad.

I am equally distressed by my right hon. Friend's statement that the proposed concession would be a question of discrimination. As my hon. Friends have tried to show with great expertise, and I with my few random remarks, it is quite clear that slipways and docks should be regarded by the Treasury as merely plant, in the same way as in recent years we have had concessions on boiler rooms being plant and other concessions which have been wrung out of our showdowns with the Treasury, which is extraordinarily unco-operative in these matters.

I propose to ask leave to withdraw this new Clause because I am afraid that if I were to take it to a Division the Opposition would vote with me. Therefore, I beg to ask leave to withdraw the Motion in the hope that the Government will look at these matters more realistically and that next year they will be able to put forward some proper means to help this industry.

Photo of Sir Norman Hulbert Sir Norman Hulbert , Stockport North

Is it your pleasure that the Motion be withdrawn?

Hon. Members:

No.

Question, That the Clause he read a Second time, put and negatived.