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On Second Reading, the Minister made the point that the Bill will provide a breathing space for the shipbuilding industry. I would very briefly refer to this point. If the purpose of the Bill is to provide this breathing space, I would re-emphasise that there is a responsibility on the right hon. Gentleman's Department to promote energetically action in the industry. I felt that when we were discussing the Bill, he too easily took the view that this was a matter that could be left to the industry.
I am delighted to see that our debate has had an immediate response. The Minister for Science has announced that the aid to the B.S.R.A. has been increased. That is a welcome improvement. But I would emphasise that if we compare British shipbuilding with the shipbuilding in other countries, the Government have to take a view similar to that taken in other countries and be prepared to give a lead in seeing that the sort of measures we discussed on Second Reading are taken during this breathing space.
The other point to which we wished to return on this Clause was the sum of £75 million. I would emphasise—I am sure that the Parliamentary Secretary will be with me in emphasising this—that this is not a subsidy to the industry. What the Government are doing, at very little expense to the taxpayer, is providing good credit facilities to this amount. I emphasise this because it affects the sum that I have in mind. It is not a question of making a subsidy to the industry, but affording the industry the benefit of Government credit.
The right hon. Gentleman is certain that £75 million is the right sort of sum. I have conceded, and will concede again, that it is important to get the sum right. If the sum is not right, we may very well get a position in which orders are held back because it is believed that the Government are wrong and will have to revise their opinions. That would be unfortunate for the industry in its present position.
It is conceded on both sides that this is merely a breathing space. If the breathing space is to afford a proper opportunity to the industry, we do not want any withholding of orders because mistakenly the industry feels that the Government are likely to revise their view. I feel that the Government have not got the figure right for two reasons.
I can put it simply in the case of my own constituency. Unfortunately, this week, 300 men have been paid off at Short's yard on the Wear. I do not expect the Parliamentary Secretary to be able to say that the purpose of the Bill is to provide security of employment for all men in the shipyards. It is to give aid to the shipyards to help them over their present difficulties. I quote this case as an example, because we have to realise that when we talk about these orders which have been attracted by these facilities being unevenly spread this very much affects the shipbuilding capacity which the right hon. Gentleman has in mind.
This is why I think that my hon. Friends were quite right in asking for more particulars and information about the way in which the £75 million was spread. If this is sufficiently unevenly spread, it could mean the taking of a very gloomy view indeed in the shipbuilding industry. I call attention to my own constituency, because it is well known that the Wear yards have done very well indeed out of the Government's scheme. Nevertheless, it so happens that at the time we are discussing this Bill one of our own family yards is in very great difficulties and will not, it appears, receive benefit from the scheme. I think that we should know something more about the way in which this is unevenly spread. That is the first factor which disturbs me when considering this Clause.
The other factor is this. It is one which I mentioned on Second Reading. We should have some better view of what the Government's estimate is of the likely capacity of British shipbuilding. This is very important, because we have just received the latest Lloyd's returns and they show that for the second time since the war we have fallen into third place. We were behind Japan, but now we are behind West Germany, which has had a bad year. We have fallen below 1 million tons. It is against that background that the Government have provided their aid, and although they are providing welcome aid they are providing it at a low level, and I do not think that we can lightly accept what they have done.
The amount of aid to be provided is welcome, but it may very well conceal the fact that it is being provided for a limited capacity, if we consider British ship building as a whole. When the right hon. Gentleman talks about the future outlook, we must remember that this is temporary aid and that the Government are accepting an appreciable fall in the level of British shipbuilding.
I hope that before we agree to the Clause the Parliamentary Secretary will be able to assure us somewhat on those two misgivings.
I, too, am worried about the factors mentioned by my hon. Friend the Member for Sunderland, North (Mr. Willey). I am worried about this being temporary aid. This is a piece of temporary legislation to help the shipbuilding industry, which has been passing through a difficult period, and I have no doubt that if we get a recurrence of the situation which has existed in the industry for the last four years we shall have another piece of legislation similar to this, to provide more temporary aid.
I believe that in view of the high capital cost of ship construction, the difficulties of trading throughout the world, and the barriers that are being put up everywhere due to all sorts of practices by various foreign Governments, the time has come for this island, which depends so much on the carrying trade, and on heavy import and export business, to review the present set-up, and for the Government to become a partner in shipbuilding and to become, albeit to a limited extent, the financiers of shipbuilding.
During the Second Reading debate I made it clear that even on this temporary basis I am glad the Government are acting as the financiers behind British shipbuilding, because there is no doubt that the ordinary commercial channels of financing cannot provide money for our shipbuilding industry in competition with the Government financing which takes place among our competitors abroad.
From time to time hon. Members on both sides of the House suggest that we should retaliate against foreign shipbuilders, or against the practices adopted by Governments abroad, but it is very difficult for a country like ours to indulge in retaliatory practices. We are a trading nation, and if we start retaliating we may do ourselves more damage than we do to our competitors. I think it right that we should make public what we are doing to sustain our shipbuilding industry at what we think is the proper level.
Clause 1(b) refers to
the alteration of such a ship, whether the alteration is designed to convert it into a different kind of ship or not.
The Clause says that money may be provided
for the purpose…of the equipment of the resulting ship.
I am concerned about that, and I am glad that my hon. Friend the Member for Stoke-on-Trent, South (Mr. Ellis Smith) is in the Chamber, because I know that he, too, is deeply concerned about the problem which I now propose to discuss.
The Scottish pottery industry is centred at Barrhead and Renfrew. Though it supplies all sorts of china and porcelain equipment. Stoke, is of course, the great pottery centre of the country. This industry may well be required to equip passenger liners with various items. I hope that those who contract to supply porcelain and pottery to be used in such ships will benefit by the provisions of the Bill, and that it will not be possible for a shipbuilder to build the hull and engine of a ship on the Clyde—whichis, naturally the area which should receive the first priority—with the help of a loan at a low rate of interest—which is in a sense a hidden subsidy, but I have no objection to that because if we know where they are being given they are not hidden subsidies—
From time to time we are told that if an arrangement is made whereby loans are given at a lower rate of interest than that paid on ordinary commercial borrowings, that is, in effect, a hidden subsidy. I do not accept that view, but that is what we have been told time and again by right hon. and hon. Gentlemen opposite when we have asked for money at a low rate of interest for social purposes.
I was about to ask whether it would be possible for a shipbuilder who contracted to fit out a vessel to subcontract to a foreign contractor to supply the pottery and porcelain equipment required for the ship. It seems to me that those who take advantage of this credit provided by the State to build a ship in a British shipyard should ensure that everything that goes into the ship is manufactured in Britain. The Parliamentary Secretary may say that certain specialised equipment which goes into a ship cannot be obtained in this country, and has to be obtained from abroad.
There is then the problem that propulsion machinery is sometimes manufactured in this country under licence, and the licence fee has to be paid to an inventor, or to the person who has the patent rights, in another country. I think that that situation arises in respect of the Sultzer diesel engine. Will the Clause as it stands inhibit a shipbuilder from going to sources outside the United Kingdom, not for the ship itself, but for the hardware that is required for it?
A few years ago I was told that if a big passenger liner was built on the Clyde, 38 per cent. of it would be constructed in the Midlands and notin the shipyard at all. If 38 per cent. of a ship is built elsewhere than in the shipyard, by someone other than the builder who has the contract for the ship, as subsection (b) refers only to the alteration of a ship, it seems possible that a builder will be able to obtain his equipment from other than a British engineering works or pottery. It would be unfair if, having received a loan under the Bill to build a large passenger liner, a builder could equip that ship with a few thousand pounds worth of pottery bought in Holland, or in Czechoslovakia, or in Germany.
I should have thought that the Bill would apply not only to the ships which are built or repaired in Britain, but also to everything that goes into them. I should have thought that all these things would have to emanate from British sources. I hope that I shall receive a satisfactory assurance on this point. Perhaps the Parliamentary Secretary will be able to put it on record that everything that goes into ships which are built under these terms, and upon Government credit, will be manufactured and provided from British sources.
I hope not to detain the Committee for too long, because the subject of the Adjournment debate is of great importance to me. That is a testimony to my sincerity in rising on this occasion.
Since the Second Reading debate and the debate on the Money Resolution most of us have had time to go back to our constituencies and to consult our many friends among employers and workers in the industry. I find that none of them is very happy about the Bill, despite what was said by the Minister and his able Parliamentary Secretary during the earlier proceedings.
The Money Resolution has been drawn so tightly that we have been virtually prevented from making any Amendments. The major concern of many managers and men is not that the Bill is a bad Bill, but that its effect has almost expired. During the long series of arguments on the Money Resolution—and in my opinion the Financial Secretary did not do very well on that occasion; we had to pull the figures out of him, as though we were dentists, pulling teeth from a reluctant patient's mouth, one by one; the extractions took place punctuated by long arguments, until we finally got a figure—we were told that the loans under Clause 1 amounted to £75 million. But £73·8 million has been committed, and £17·6 million of that has been allocated to the construction of the Q4—the new Cunarder.
I should like to know what will happen if, like the unfortunate Q3 the Q4 does not materialise. Can we take it that the £17·6 million will be made available for fresh applications, or outstanding applications which have fallen foul of the bar on all loansapplied for after 31st May, 1964? There is some concern about this, because many shipbuilders have not done as well out of the Bill as they hoped. The money has not been spread evenly throughout the industry, although my constituency—and I believe that this is true of all the Clyde—has done reasonably well from the distribution of orders. That reminds me of a point which I should raise with the Parliamentary Secretary.
The hon. and gallant Gentleman mentioned that there has been a reasonably fair distribution of orders. Can he tell us the respective shares of the orders falling under the credit scheme which were attributable to each of the major shipbuilding rivers of the United Kingdom? It would be interesting to know the figures. The Secretary of State for Scotland told us that the Scottish share represented about one-third. I do not know whether that is Scotland's capacity. I thought that it was two-fifths, but I do not wish to be niggling about the fractional difference between two-fifths and two-sixths, although it represents a significant sum of money when considered as a proportion of £75 million. I should like to know what will happen if there are no successful tenders or if the company concerned decided not to build the Q4.
Will the Parliamentary Secretary tell me whether it will be possible for the successors to this Government to repeat the procedure which was followed in respect of the Bill? The present Minister—who may not be a Minister very much longer—hassaid that this is a once-for-all gesture. I should like to know, however, whether the same procedure will remain open for a new Minister in a new Government. Would it be possible for him to make an announcement in Parliament in May, to the effect that he intends to operate a credit scheme; then to ask for applications to that credit scheme; then to collect the money before Parliamentary sanction is given, and then to close the scheme within twelve months of his original announcement? That would be a delightful exercise for the next Labour Government to perform, if the shipbuilding industry is to face the difficulties which we expect to arise after the spring of 1965 unless freight rates continue to rise, as I hope they will.
I am concerned at the fact that we have not widened the Clause or the Bill so as to give the Government and their successors adequate room for manoeuvre, and to give the shipbuilding industry what is only its right in these difficult times of international competition.
The hon. Member for Sunderland, North (Mr. Willey) told us that he thought that it was the duty of the Government to take energetic steps to promote efficiency in the shipbuilding industry. I do not altogether dispute that, so long as active interference in the affairs of the industry is not included in the meaning of the word "promote". We try to work in partnership with the industry, and we do our best to assist it in any way we can, by advice, and so forth.
The hon. Member went on to express doubt—as other hon. Members have—whether £75 million was the correct figure. I shall return to that point later. In that context he quoted the laying off of men from a certain shipyard. I must point out that we shall not necessarily promote the efficiency of the shipbuilding industry as a whole if we embark upon the enterprise of trying to protect and prolong the life of individual yards. I have said this several times before. It may be rather a hard thing to say, but the fact remains, as my right hon. Friend pointed out at length in the Second Reading debate, that one of the dangers of a scheme of this nature—a danger which has been openly referred to in the Press by some leaders in the industry—was that it might unduly prolong the life of yards which otherwise would have closed.
In the main, that has not occurred. With negligible exceptions, orders have been placed in yards that we feel satisfied are good yards, which are likely to survive and continue to make a contribution to the health and efficiency of the industry.
The hon. Member also asked about the likely capacity of the industry. I should be out of order if I attempted to deal with that question in detail, but I want to refer to one point that the hon. Member made arising out of the question which is relevant to this loans scheme. He referred to the recent figures of completions and said that they showed that this country had fallen back to third place. So it may have done; but we should not fix our eyes on completions. They are in the past. What we should be watching are the orders, and it is largely owing to the way in which the scheme has been working, and in which the money has been distributed—as the hon. Member will find if he studies the order books all over the world for 1963—that this country comes out, relatively, very much better than it did in the three previous years.
The hon. Member for Dunbartonshire, East (Mr. Bence) was worried about the temporary nature of the scheme, and he asked whether it could be made permanent. That could not be done under the Bill. But surely he is not suggesting that it should be made permanent. It would be difficult and invidious to single out one industry and to say that a perpetual loans scheme of the kind set up by this Bill should be applied. However, I should be out of order if I attempted to enlarge upon that point. He asked whether these loans—
But we have the Railway Finance Corporation and the Agricultural Finance Corporation. There are arrangements regarding the aircraft industry and the cotton industry.
Surely we do not want to have shipbuilding and shipping join the queue of industries which the taxpayer has to support for ever and ever.
The hon. Gentleman asked whether these loans could be applied to ships in which the shipbuilders or owners required that components, or some of the components, should be ordered outside Britain. The answer is "Yes". We did not think it practicable to insist that all the small components should necessarily come from this country.
It is not practicable as I am sure the hon. Gentleman—who knows a good deal about the industry—will appreciate. In the component business there is, if I may use the term, a tremendous amount of "cross-fertilisation". A large number of the components put in the ships, the orders for which we have lost—and which may have gone to Sweden—are ordered in this country and vice versa. Particular shipowners have got into the habit of having certain types of components in their ships and if we tried to dictate what components had to come from Britain, what would happen would be that some orders would not be placed here.
As I explained on Second Reading, loans will not be attracted for the main engines unless they are made in Britain. We do not insist on the engines being ordered in Britain. But we say that if they are not, and as this represents such a big percentage of the total value of a ship, we shall not apply the loans. I understand that three ships have been ordered for which the engines are coming from abroad.
The hon. Member for Greenock (Dr. Dickson Mabon) suggested that people in the industry were disappointed that the figure in this Clause is not larger. They would not be human if they were not disappointed. That is to be expected and I do not take it amiss.
The hon. Gentleman asked—it is relevant to this Clause—what would happen if the Q4 is not built. Theoretically, of course, if the building of the Q4 were called off before the date in the Clause arrives, further loans could be made. But the position is not quite the same as with the Q3 because approximately £250,000 has been paid in fees by the Cunard Company and so it would think twice before abandoning the project at this stage. There is quite a lot of money at stake.
But the answer to the hon. Gentleman's hypothetical question, so far as I can give it, is that I do not think we should make any attempt to offer loans for the ordinary commercial ships for a reason which I shall explain when I answer the main question put by the hon. Member for Sunderland, North about how we arrived at the figure of £75 million.
The hon. Member for Greenock asked whether the procedure remains open and the answer is that it does not under this Bill. He asked whether it could be repeated. It could be repeated if any subsequent Minister, or Parliament, decided to do so, and obtained the necessary support. The hon. Gentleman was not correct when he said that there was no parliamentary sanction for what has been done. If he reads the special "Shipbuilding Loans" subhead in the Supplementary Estimates of the Ministry of Transport for the current financial year, he will find that it contains a footnote clearly setting forth the intention. Perhaps I should say that the Vote authorised the administrative expenditure to enable the scheme to be started and the footnote made clear that this was intended to enable my right hon. Friend to make these loans. I would remind the hon. Gentleman that Parliament passed that Estimate.
In the footnote there was no indication of the size of the credit to be given. When Parliament voted the Estimate hon. Members were not aware that it meant voting £30 million, as was first announced by the Minister, and later £60 million and finally £75 million. It is a rather strange reflection to make on the control of Parliament over Government spending.
But as was said during the Second Reading debate, it would have been open to any hon. Member—including the hon. Member for Greenock—to have put down a Motion asking us to stop offering the loans.
I wish now to come to the main question, whether £75 million is the right sum to have written into this Clause. My reply, in one word, is, "Yes". We are satisfied that it is the right figure. Let us consider how and what orders have been generated, first in terms of money. At the moment, the loans offered amount to £74,720,000 which is very close to £75 million. A tribute should be paid not only to the advisory committee which advised us on the soundness of the loans we are making, but also to the officials who operated this scheme with such skill that they almost exactly arrived at the total sum of money—with a little modest "queue", in case one or two dropped out.
The loans which have been offered under the Clause have gone for types of ships which I think are of some significance from the point of view of the rightness or wrongness of the scheme. There are 24 bulk carriers of a total gross tonnage of 496,000; eight tankers, which add up to 155,000; 14 cargo liners, 128,000; and 14,500 tons of small vessels. There is also the Q4 of 58,500 tons and a number of small vessels, lighters and miscellaneous which add up to 7,000 tons.
I was asked about distribution to areas of the country and it is as follows. In the North in which I include the North-East and the North-West, there are 382,000 gross tons of orders which have been placed under the scheme. In Scotland, the figure is 288,000 and in Nothern Ireland 94,000. There remain 95,000 tons some of which have been allocated to other areas, but most have not yet been allocated.
The way the work will progress is again relevant to the Tightness or wrongness of the figure of £75 million. Up to the end of December, 1963, work under these loans had actually started on nearly 400,000 gross tons. Two ships, totalling 23,000 tons, have been launched and work on a further 250,000 gross tons will start during the first quarter of this year, of which 70,000 tons will start this month. Apart from the Q4, the remaining 140,000 tons will be started in the second quarter of this year and we reckon that 200,000 gross tons will be completed in the current year and 550,000 gross tons will be completed in 1965, leaving 26,000 tons to be finished in 1966. We expect that the Q4 will be started at about the turn of this year and that she will be completed in 1967.
The hon. Gentleman asked how we arrived at this figure and I will tell him. Originally, we estimated that about £60 million of loan money would be required for ordinary commercial orders to do what we wanted to do, which was to restore the level of orders to the average to give the industry a breathing space. As it turned out we were not far wrong. If we exclude the Q4, the amount of the loans totals just under £60 million. The total order book last year was just over 1½ million tons—which is a little over, but not very much over, what the Committee which considered this matter in 1961 estimated as a proper and normal rate at which the industry might expect to work.
My right hon. Friend, when we first announced the loan scheme, referred to £30 million. I shall be frank with the Committee. We did that because we had very conflicting advice on how the scheme would pan out. Eminent people thought that practically none of these loans would be taken up. We thought it would be unwise to start with a great flourish of trumpets and to say that £60 million would be available and then find that nothing was subscribed. When my right hon. Friend made his announcement he left the House in no doubt that if there were a demand for more, more would be available and the figure was later raised to £60 million.
Then came the, in some ways rather unexpected, request by the Cunard Company for a loan under this scheme. Before that it had put forward proposals which we thought quite unacceptable. The company had second thoughts when the scheme was published and came to the conclusion that it would be prepared to complete the Q4 under the terms of the scheme. The necessary processes were gone through and a loan was offered and accepted. We thought it right to raise the figure to £75 million so as to restore the amount for normal commercial ordering. That is why this is in the scheme although it is outside the special object for which the scheme was started. It was included in the scheme as a convenient way of saving the necessity to come to the House with yet another North Atlantic Shipping Bill.
That is how we arrived at the figure of £75 million, which we believe is about right. Of course, we do not pretend that these loans and this scheme will solve the industry's long-term problem, but they will help and we believe they will give the industry time in which it can solve that problem for itself.
I wish to ask the hon. and gallant Gentleman a question, because I do not understand the logic. He said that the Minister was right in saying that the industry would have to shrink to its right size and shape. I take it that that means it must be smaller than 1½ million tons for which the £75 million has been provided.
On Second Reading, I asked the hon. and gallant Gentleman to tell us what the Government had in mind in regard to the National Economic Development Council and the industry and he then referred to the 1½ million tons. How can the industry "shrink" from 1½ million tons to 1½ million tons as being the right size and shape when this money is provided? I am not splitting hairs. This question is most important for those employed in the yards; they do not want to go out of business.
If I may be allowed to be slightly out of order for a couple of seconds, I said that when my right hon. Friend referred to the capacity of the industry having to shrink, he was speaking of the theoretical capacity. We estimate that to be much nearer 2 million tons a year than 1½ million tons.
I thank the Parliamentary Secretary for the information that he has given. It is of considerable help. I also appreciate his difficulties in going further. I do not quarrel about this, but we would like to have a further breakdown to express the problem in terms of utilisation of current capacity.
When the right hon. Gentleman the Minister and the Parliamentary Secretary, rightly, talk about contraction, they should not be surprised if they are then pressed to say what contraction they have in mind. In shipbuilding debate after shipbuilding debate we have discussed flexibility. Flexibility depends very much on security and security depends on a long-term view of the industry. I emphasise again that other countries have a much greater sense of security in their shipbuilding industries than we have in this country. I hope that the Parliamentary Secretary will bear that in mind.
I make a general comment on what the hon. and gallant Gentleman said about the £75 million. I hope that I have made clear from the start that I do not quarrel with the Minister having first said £30 million, then £60 million and then £75 million, but, obviously, when he changed the amount he changed the estimate. When he made the statement about £30 million that was probably right according to the advice he had, but, because this has happened and he has reached the final figure we naturally have some anxiety and want to know if he is right now.
There are two factors I call to his attention. The Minister said—and one would not quarrel with this—that last year it worked out very fortunately. There was an exceptional number of foreign orders which came in in the first six months and affected the position over the full 12 months. I want to know whether we can expect that position to arise again because that would affect the forward view very much. Was it exceptional that those orders Dame in, or were there reasons for thinking that that would be the pattern for the coming year?
The second factor, which is equally important—I confess that I should have pointed it out on Second Reading—is that we are too much apt to refer to this as a year's orders. The purpose of the scheme was to attract forward orders and to bring them within this year's orders. So we have to look at this matter over a period. I am sure that the Parliamentary Secretary would say that we are rather more optimistic than we would have been because the freight position seems to be rather more encouraging. I am not questioning the necessity to reach a final figure, but there is still a little longer time and the Bill has yet to go to another place.
I should like further discussions to take place and the Parliamentary Secretary to consult his advisers to make absolutely sure about this point. We cannot speak with the knowledge and advice which the Parliamentary Secretary has, but we know that the industry has expressed some anxiety. The Parliamentary Secretary will not be surprised about that. It is legitimate that we should pay attention to that. The industry has felt that it has been cut off rather sharply. I do not quarrel about the fact that the money has been spent, but that makes it appear as though the Minister has afforded himself very little slack. I beg the hon. and gallant Gentleman to assure us that even with this very limited opportunity he will take advantage of the fact that there is still time and discuss the matter further to see whether there is a case for extending it.
The hon. and gallant Gentleman might have been rather too optimistic and we may have been both optimistic and pessimistic about freight rates, but they have moved very quickly. They have moved quickly in the last two months and we should like to see them move quickly. I should like the hon. and gallant Gentleman to consider this question before the Bill becomes law and to give his judgment on it.
Naturally, we watch this question with great interest and anxiety, but I see no reason to suppose that the loans to be given under the Bill will in any way reduce the capacity or the chance of the industry to receive foreign orders—rather the reverse in so far as they will keep the yards occupied and tend to reduce their overheads.
I repeat—and this is highly relevant to what we are doing—it is wrong to pretend that our industry is uncompetitive over the whole range of ships. It is highly competitive. What we are doing by the Bill is to carry a stage further what we have already done by offering in advance to make loans available. That will not reduce the chances of the industry getting a good volume of foreign orders, and I hope that it will do so.