Orders of the Day — Shipbuilding Industry Bill

Part of the debate – in the House of Commons at 12:00 am on 22nd April 1971.

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Photo of Mr Edmund Dell Mr Edmund Dell , Birkenhead 12:00 am, 22nd April 1971

I shall deal with the Geddes policy and remind the hon. Gentleman of the successes achieved under it. But, having allowed the industry to deteriorate for 20 years in face of international competition, it was not reasonable, especially if internationally subsidies were to continue, to expect that the industry could be rescued from its predicament in four years.

The Geddes Report was based on the presumption, explicitly stated in the Report, that it would be possible to withdraw support at the end of 1971, although I think it was optimistic in that, but on the assumption that something was done internationally about subsidies. Nothing, or virtually nothing, has been done internationally about them. The competitive position, in its reality, remains as it was when the Geddes Committee reported.

The Government have contented themselves with blaming management and workers, as the Minister for Industry did today. Because the industry cannot compete in these circumstances, or cannot regain its share of the market, we say that it must be management and workers who are to blame, whereas, although a great deal more could be done by management and workers, in this competitive situation what is needed is Government help.

We shall not get anywhere by attempting to flagellate management and workers for the fate which the shipbuilding industry has suffered through the operation of market forces. Criticism of management and workers is self-fulfilling. We leave an industry to face this type of international competition, and it fails to meet it. There is not adequate investment and there are inadequate increases in productivity. Management is not recruited as it should be, and the fear of redundancy makes workers less cooperative with proposals for increased productivity. Though one result of the Geddes Report was that there was a great improvement in the willingness of trade unions in the industry to co-operate in schemes for increasing productivity.

Associated throughout with the shipbuilding industry, which was abandoned to market forces and which elsewhere in the world is assisted, was the shipping industry—again an industry with a world lead, again left to market forces and again left relatively to decline until investment grants were introduced when, oddly enough, the industry began to regain something of its relative position in the world. The Government have withdrawn investment grants. The Rochdale Report recommended their withdrawal but said that equivalent assistance should be given. It has not been given. Assistance to the shipping industry has been considerably reduced. The consequence is serious for the shipping industry, as leaders of it have pointed out. It is also serious for the shipbuilding industry because necessarily it will have an effect on orders placed by British shipowners in British yards.

The shipping industry has throughout its history operated a policy of placing orders where economically it could best place them. A very large proportion of its orders has been placed abroad, which is understandable from its point of view. No other national shipping industry with a major shipbuilding industry in its own country has followed that policy. Whether the reason is that they were not permitted to follow such a policy is an interesting subject of speculation. If the British shipping industry had been prepared to give the shipbuilding industry the guarantees of future orders which were given in, for example, Japan, where 100 per cent. of Japanese shipping orders go to the Japanese shipbuilding industry, or in Germany, where 80 per cent. of orders go to the German shipbuilding industry, it would have been interesting to speculate whether we would have today a shipbuilding industry better capable of satisfying the requirements of British shipping. This has been one of the factors which have led to the relative decline of the British shipbuilding industry.

Hon. Members opposite try to emulate the principles of Adam Smith. But even Adam Smith would not have allowed this to happen. He, being a good Scotsman, believed that the power of the State should be used to support British shipping. He was not nearly so much in favour of disengagement as hon. Members opposite.

In this way, these two growth industries were allowed to decline in face of international competition. Then, in 1965, the Geddes Committee was appointed. The Geddes Committee and the policy which followed its Report enabled the industry to survive, provided the industry with valuable additional resources which are today enabling it to get important orders which it would not otherwise have been able to get, has enabled it to increase its orders to the highest figure for many years and enabled it last year to achieve the highest volume of completions it has achieved for many years.

The Secretary of State—and he has explained his absence today to me—is fond of saying, and the Minister for Industry repeated today, that money provided under the Geddes policy has gone down the drain. One result of the Geddes policy was the recent Shell tanker order which would not have been placed in this country without that policy. The value of orders like that to our balance of payments far exceeds the amount of money spent as a result of the Geddes Report, and the policy will bring further orders to the yards which will be of value to Northern Ireland and to our balance of payments.

But, following the Geddes Report, the industry has not succeeded in dealing with its problems in two respects; and, in the face of international competition, it could not have done. First, it has not made itself profitable, and, secondly, the level of investment, other than the investment supported by Geddes, has continued low. We know about the low level of investment because we have the investment grant figures, which show that during the years since the Geddes Report privately financed investment has been very low. It will now probably be lower because of the withdrawal of investment grants. Incidentally, one of the advantages of the investment grant system is that we know facts like that, whereas under the Government's tax allowance system we shall not have these figures.

We need today not another Geddes Committee but a decision by the Government on what share of a growing world market the United Kingdom industry should aim at, which the Government must achieve by means of large-scale investment assistance. On the other hand, if we should get out of this industry, as the Government apparently believe, then the Government should say so. The statement of the Minister for Industry today merely confirms the indications that that is what the Government intend. He indicated that there will be no continuing support for the industry other than possibly further credit guarantees. We already knew of the demise of the Shipbuilding Industry Board. We know about the abandonment of investment grants, which, in an industry like this which is unprofitable, means that there will be no investment incentives at all. There is the end of the regional employment premium. In these circumstances I do not understand how the Government can expect the industry to be able to compete in world markets.

I attribute no value to the exordium which the Minister has given us today that if only the industry would pull up its socks it could compete against the subsidised competition it faces abroad. This is not an industry which we can leave to market forces, we have lost far too many years, competition is loaded against us, the industry is still too weak, and if inflation continues at the present rate, even the escalation clauses will not save its profitability.

The hon. Gentleman said that we must have regard to what is happening abroad. Let us look at world competition in the industry. Japan has 50 per cent. of the world market. Their shipbuilding industry is more efficient, which, given the investment that has taken place in that industry over the last twenty years, is hardly surprising. In addition, Japan has an undervalued currency, The Times, in a review of the Japanese shipbuilding industry a few weeks ago, said that the threat of yen revaluation haunts the industry, and I can understand that. An undervalued currency is a subsidy from the great mass of the population to its exporting sector.

Japan is putting in eight new yards, which will raise its capacity from about 10 million gross tons now to 15 million gross tons by 1975. This is being done with the assistance of central and provincial governments. What estimates have the Government made of forward demand for shipbuilding in the world? According to estimates made by the British shipbuilding industry, these eight additional yards will be capable of raising Japan's 50 per cent. share of world shipbuilding to more like 60 per cent. Is that confirmed by the Government, or do they have different figures? It looks from these figures as though Japan is not even content with the record so far achieved but is going for an even larger share of the market.

Let us look at the European position. There are overt subsidies in France and Italy. All over Europe there are yards maintained with Government help, despite financial crisis. Götaverken has had a financial crisis but has not gone out of existence. Burmeister and Wain has had a financial crisis but has not gone out of existence. Both are getting assistance from their Governments. Only the British shipbuilding industry is to be abandoned. There is also the other factor which I have mentioned of the greater loyalty of national shipping companies to their own shipbuilding yards.

Given the history of the industry, given the nature of the international competition, given the freedom of British ship owners to order abroad, and given the abolition of investment grants and the regional employment premium, how can one reasonably hope that adequate investment from private sources will sustain a viable shipbuilding industry in this country? The only possible source of adequate investment is the State. I know that the Government's position is, as the Minister for Industry said, that they will not feed inflation by subsidies and grants. They apparently believe that the only effect of the implementation of the Geddes Report was to feed wage inflation in British shipbuilding yards. This is an extraordinary point of view for a Government which have decided to fight wage inflation through the public sector. The sector that can in the last resort rely on support from the Government is the sector which the Government have chosen to fight wage inflation.

One of the new arguments for taking over the commanding heights of the economy—and the Government might consider this—is to help them fight wage inflation. But apparently in the shipbuilding industry assistance merely creates wage inflation. To give companies some guarantee of a future existence creates wage inflation. It depends on the method of providing Government aid. In the history of the shipbuilding industry there have been too many Government rescue actions. When people are rescued from time to time they come to expect the next rescue. There has been too little consistent determination by the Government through aid to maintain a viable shipbuilding industry. Had that been the policy before Geddes as well as during Geddes we would have seen investment, higher productivity and a competitive shipbuilding industry, and rescues would not have been needed.

So there is this vital question for the Government, and the Government have decided to abandon the British shipbuilding industry to market forces, and have taken this decision at a time of mounting unemployment generally and in the development areas. They have told us today that if there is a danger of collapse in particular shipbuilding companies because of the unprofitability of orders which they have taken on in the last few years, they will take no action, despite the current levels of unemployment in development areas. The Minister for Industry has made an amazing statement today against the background of the most recent unemployment figures and their trend.

I believe that this policy is wrong. The Government should support the shipbuilding industry and undertake a continuing commitment to such support. The question is whether, where companies are so dependent on Government support and there is a prospect of that support being required long term, there is any point in continuing the forms of private ownership. If Government support is given, the reality must be strong Government control to ensure that we achieve the objects of the support—higher productivity, adequate management, greater competitiveness. There is, therefore, a strong argument for bringing the form into line with what must be the reality by means of public ownership. The Government have decided, as the Minister for Industry has told us today—