Upper Clyde Shipbuilders

– in the House of Commons at 12:00 am on 14th June 1971.

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Photo of Mr John Davies Mr John Davies , Knutsford 12:00 am, 14th June 1971

Last Wednesday the Chairman of Upper Clyde Shipbuilders came to tell me that his company would not be able to pay wages beyond the end of the present week and expected to be between £4 and £5 million in deficit by the end of August. Accordingly, his board considered that the unions must be told of this situation on the day after he saw me—that was Thursday—and that, on the following day, Friday, they would petition for the appointment of a provisional liquidator. He gave me further details of the company's finances and indicated that an immediate injection of £5 to £6 million alone could save the company, and this substantially in the form of equity or grant.

The Government realised the serious consequences of a collapse in relation to the already high level of unemployment on the Clyde and it was therefore right that the Government should have time to examine the position fully. On the following day, therefore, I requested him to seek his board's agreement to hold their hand even for a few days and gave him an assurance that as far as wages were concerned the Government would ensure their payment for at least a further week. This he undertook to do.

He saw me again yesterday, Sunday, and told me that it now seemed unlikely that funds were available even to pay the current week's wages and unless the injection of funds to which I referred could be guaranteed today, Monday, his board felt it had no alternative but to petition for a provisional liquidator.

The board have told me that they still have hopes of attaining viability in the future, but that they are quite unable to forecast when the present excess of liabilities over assets might be reversed. The Government's judgment is that this company in its present grouping, saddled as it is with debt and dogged by deficit since its inception, having absorbed and lost some £20 million lent and granted to it under arrangements made by the former Government, is unlikely to achieve a state of stability and prosperity without having repeated recourse to Government aid. Only such a state will ensure the confidence in the future that is needed by workpeople, customers and suppliers alike. The Government have decided, therefore, that nobody's interest will be served by making the injection of funds into the company as it now stands.

Hon. Members:

Shame. Resign.

Photo of Mr Andrew Faulds Mr Andrew Faulds , Smethwick

Disgraceful. Bloody disgraceful. You are a disastrous Minister.

Hon. Members:

Order.

Photo of Mr John Davies Mr John Davies , Knutsford

Nobody's interest will be served by making the injection of funds into the company as it now stands. The chairman has been told, and I understand that the U.C.S. board has decided to petition at once for the appointment of a liquidator.

Photo of Mr Jon Rankin Mr Jon Rankin , Glasgow Govan

On a point of order. Owing to the interruptions the last few sentences of the right hon. Gentleman's statement have not been heard here. Would he repeat them?

Photo of Mr John Davies Mr John Davies , Knutsford

The Government have decided, therefore, that nobody's interest will be served by making the injection of funds into the company as it now stands. The chairman has been told, and I understand that the U.C.S. board has decided to petition at once for the appointment of a provisional liquidator.

On the other hand, it is clearly right that, without prejudice to the creditors' interests, the Government should seek to ensure the minimum dislocation of current production and the preservation of as much employment as possible and as many of those assets as can be expected to have a viable and prosperous future. I propose, therefore, to seek the liquidator's co-operation with a view to bringing about a reconstruction in whatever groupings may prove to be most expedient. To this end, I am proposing to consult with him to determine what funds might be necessary to enable him in carrying out his rôle as provisional liquidator to assist me in my objectives.

Meanwhile, in consultation with a small group of expert people whom I propose to nominate, I intend to consider what action may be best devised to achieve the reconstruction I propose.

In the first instance, any moneys required by the Government in connection with the liquidation of Upper Clyde Shipbuilders will be obtained from the Civil Contingencies Fund, but Estimates will be submitted to the House in due course.

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

The Minister has announced to the House a massive and wholly characteristic betrayal—[HON. MEMBERS: "Oh."]—wholly characteristic and massive betrayal—of 7,000 men directly involved and 20,000 others whose employment depends on U.C.S., and, with total disregard for the human factors, is using unemployment in pursuit of this Government's economic policy in an area where there is already 10 per cent. male unemployment, constituting a major tragedy for Scotland. Is the right hon. Gentleman aware—he must be—that since the stern warning which it fell to me to give the company in 1969—since those warnings were given—the labour force has been cut by 3,500 in co-operation with the unions, steel productivity is 87 per cent. up in the last year, and there is a £90 million order book for Upper Clyde, with the prospects of a possible £100 million for its standardised carriers, and that the problem confronting the group is a cash flow problem, for which the Government bear a heavy part of the responsibility by denying payment of the creditors from November to February, without any statement in the House whatsoever? Is the right hon. Gentleman aware that the House will want an immediate debate and is only grateful for one thing—that he did not venture any expression of sympathy? For had he done so it would have been an act of odious hypocrisy.

Hon. Members:

Oh.

Hon. Members:

Resign.

Photo of Mr John Davies Mr John Davies , Knutsford

I really think that the odious hypocrisy comes from the other side. May I read to the House what the right hon. Gentleman himself said in December 1969? He said: After giving the most careful consideration to these proposals, the Government have regretfully concluded that, having regard to the need to contain Government expenditure, there is not sufficient priority to justify the investment of further public funds in this enterprise in the face of the many competing demands on national resources.—[OFFICIAL REPORT, 2nd December, 1969; Vol. 792, c. 1305.] In view of that, I am horrified at what the right hon. Gentleman has just said.

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

Is the right hon. Gentleman not aware that the improvement in productivity, the move towards viability, the reductions in the labour force, and the development of the order book, all came in part because it was necessary for us to make clear to the group that we would not support it unless it moved towards viability, which is now within its grasp?

Secondly, would the right hon. Gentleman now be honest with the House and say why it was that last winter, from November to February, he held back moneys due to the company under the Shipbuilding Industry Act, which largely explains the present cash flow difficulties?

Photo of Mr John Davies Mr John Davies , Knutsford

As for the second question, I am required, in order to discharge my duties under shipbuilding credits, to have regard not only to the validity of the ship owners themselves, but to the likelihood and certainty of the ships being delivered to them. It was in the light of this that I had to reserve for a period of time the credits concerned. However, on the first part of the right hon. Gentleman's question, I have pressed the chairman of this company repeatedly over the last few days, and particularly yesterday, to give me a clear statement as to the time in which he expected to be able to reverse the position of asset versus liability deficit in the future. He was unable to tell me.

Mr. Joha Hall:

Would my right hon. Friend not agree that, from the time of its first organisation, the U.C.S. never had a chance of success unless it was in receipt of continuing Government subsidy?

Photo of Mr Andrew Faulds Mr Andrew Faulds , Smethwick

When did you last visit Glasgow?

Mr. Hall:

Would my right hon. Friend tell the House why it was not until a week ago that the chairman was unable to tell him of the very serious state in which the company found itself? Secondly, was the chairman able to give to my right hon. Friend some estimate of the continuing subsidy that would be required year by year to keep the company in being?

Photo of Mr John Davies Mr John Davies , Knutsford

It is indeed surprising, after having given me assurances at the end of last year and at the beginning of this as to the likelihood of the company failing or getting into liabilities so that I need have no further preoccupations, that he should leave it until within 48 hours of the date on which he was to declare his inability to pay wages to inform me of the situation. As regards further liabilities which the Government might well have in regard to this business, I am bound to say that the existing liabilities are in excess of £9 million and, although an initial injection of the order of £5 to £6 million was requested, I had little confidence that that would be the end of the story.

Photo of Mr Jon Rankin Mr Jon Rankin , Glasgow Govan

The right hon. Gentleman may or may not recollect that before he was in office he used to tell the House that it was in the national self-interest to exercise humanity in these matters. In view of his previous attitude, how can he now come to the House and make this statement, which means that the Government are displaying inhumanity by denying to thousands of people in the Govan division and other parts of Glasgow the right to work? Those men have been working well and have been producing goods which were selling. How can the right hon. Gentleman's previous remarks be explained, in view of the horrible message which he has today sent to the city of Glasgow?

Photo of Mr John Davies Mr John Davies , Knutsford

Since I have spoken of the Government's desire and determination to bring about a reconstruction of this whole operation and to try hard to devise means, in the face of what are not easy legal considerations, to achieve the kind of results the hon. Gentleman mentioned, I feel it unjust that he should now charge me with inhumanity. Indeed I have in mind his very purposes, but I do not believe they will be achieved within the framework of the existing enterprise.

Photo of Hon. Thomas Galbraith Hon. Thomas Galbraith , Glasgow Hillhead

Is my right hon. Friend aware that to all fair-minded people his statement, which must have taken a great deal of courage to make, is a realistic way of dealing with the great industrial and human problem which has existed ever since this unnatural company was set up as a result of Socialist legislation? In their talks with employers, did the unions come forward with any specific proposals?

Photo of Mr John Davies Mr John Davies , Knutsford

Certainly there were talks at the end of last week between the management and the unions with a view to trying to find some arrangement whereby the unions themselves, in one form or another, would recommend a contribution towards the salvation of this concern. It proved impossible for the unions to subscribe to any such arrangement.

Photo of Mr Jo Grimond Mr Jo Grimond , Orkney and Shetland

Could the Secretary of State make clear that this is a crisis of liquidity due to liabilities taken on in the very early days of this rather ill-starred consortium and that it is not due to the likely unprofitability of current orders? Secondly, when he talks about reconstruction, would he also reassure the House that this means that the current orders will be completed and that it is intended to keep shipbuilding going on the Upper Clyde? That surely can be the only meaning of the word "reconstruction".

Photo of Mr John Davies Mr John Davies , Knutsford

On the first point, I must correct the right hon. Gentleman. In fact, it is not just a cash flow problem that is involved. There is a problem of a continuing deficit where the end cannot yet be seen. On the second question, it is with a view to seeing what are the possibilities of continuing shipbuilding on the Clyde, particularly in regard to ships now under construction, that these consultations will now proceed.

Photo of Mr Jock Bruce-Gardyne Mr Jock Bruce-Gardyne , South Angus

Could my right hon. Friend confirm that the right hon. Member for Bristol, South-West (Mr. Benn), when responsible for the shipbuilding industry, told the House that no Government—and his Government in particular—could be responsible for undefined and continuing losses for firms like U.C.S. or any other shipbuilding firm? In these circumstances, how does my right hon. Friend explain the right hon. Gentleman's reaction today except as an attitude of pure, mindless mischievousness?

Photo of Mr John Davies Mr John Davies , Knutsford

In the light of my statement, I found the right hon. Gentleman's remarks incomprehensible, illogical and grossly unfair.

Photo of Mr Hugh McCartney Mr Hugh McCartney , Dunbartonshire East

I realise that the Secretary of State faces serious hazards on this question in view of his "lame duck" speech some time ago. Would he clearly indicate to the House that the Government will work conscientiously to ensure the well-being of the people involved? It is not just a question of 7,500 or 30,000 people; there are something like 120,000 human beings affected by this disaster on Clydeside, including the families of the people affected. Could he indicate, apart from all the devious things he has indicated he will do with regard to reconstruction, what protection he will give to these families?

Photo of Mr John Davies Mr John Davies , Knutsford

There is a grave risk of escalating beyond reason at the moment the problem in regard to unemployment and the impact on suppliers and families. I believe that this was the case in the Press over the weekend. I do not anticipate that the kind of figures which have been mentioned are the figures with which we shall be faced, but it is the Government's firm intention to achieve that that shall not be so.

Photo of Mr John Biffen Mr John Biffen , Oswestry

Is the Secretary of State aware that only economic dinosaurs would wish that the shipbuilding industry should be locked into what the right hon. Member for Orkney and Shetland (Mr. Grimond) called an ill-starred consortuim? Could he say whether, in the Government's objectives about reconstruction, he has in mind the availability of public funds and what limits he will set to such amounts?

Photo of Mr John Davies Mr John Davies , Knutsford

In the immediate future the limit is itself set by the limitations under which the provisional liquidator is bound to operate under Scottish law. Therefore, the duration of time will depend on when the provisional liquidator is in a position to approve. It is during that period that the Government clearly will have to put out funds to try to sustain the position until they can see what solution is possible. Therefore, it is reasonable to suppose that the immediate liability will not be very great. What may subsequently transpire as a result of these discussions I cannot at present foresee; but clearly I will inform the House as soon as I know.

Photo of Mr William Ross Mr William Ross , Kilmarnock

Does the Secretary of State, and particularly the Prime Minister, realise that this is one of the blackest days in the history of Scottish industry? Does he realise that in the area concerned there are already nearly 30,000 men unemployed and that the male unemployment rate is 9·6 per cent.? Is it not strange that the right hon. Gentleman should talk about people seeking to scare the country about escalating figures? Is he aware that many people in Scotland feel that this was a question either of saving the right hon. Gentleman's face or of saving Upper Clyde Shipbuilders? Scotland will not forgive him for what he has done today. What will be the immediate effect of this announcement? Many of us would perhaps have had more sympathy for the right hon. Gentleman if he had said what were his proposals for re-grouping, and if he had said that he had seen experts and the trade unions about this matter. However, he obviously has nothing in mind at all. Will he tell the House exactly what this will mean for the 7,500 people employed in U.C.S. and for the 20,000 others who are employed in the supplying industries? Finally, could he say whether the Secretary of State for Scotland shares his judgment as to his interest in this concern?

Photo of Mr John Davies Mr John Davies , Knutsford

I would have understood it had the right hon. Gentleman's remarks been addressed to those who left the matter until about five days ago to warn me of a sudden and absolute proposal which they had made. To imagine that in that period of time it is possible to create a complete reconstruction programme is to fly in the face of all reasonable knowledge.

Photo of Mr Kenneth Baker Mr Kenneth Baker , St Marylebone

Would the Secretary of State not agree that the appointment of a provisional liquidator will give some breathing space in this crisis, and that the immediate result will not be unemployment of anybody until the liquidator has sorted out the true position—which would appear to be very confused and probably more grave than a cash flow position? Would he also agree that this problem of crisis has been inherited in its entirety from his predecessor, the Minister of Technology?

Photo of Mr John Davies Mr John Davies , Knutsford

That is undoubtedly correct. On the earlier point, the position of a provisional liquidator is one in which he is bound by law to concern himself with the interests of the creditors, and them alone. It is on his co-operation that I must largely rely. I shall seek it, and hope to obtain it.

Photo of Mr William Small Mr William Small , Glasgow Scotstoun

What guarantees will the Secretary of State give for those who are now employed and for how long? Secondly, if in any reconstructed company there is a request for Government aid or largesse, is the Secretary of State prepared to recommend the amount required—whether it be £5, £9 or £10 million?

Photo of Mr John Davies Mr John Davies , Knutsford

I cannot anticipate what may be the result of the work which we shall now undertake. On the question of guarantees of employment, I have at the moment done what seems to be the most urgent thing, which is to guarantee immediate employment, subject to seeing what is the feasible future.

Photo of Mr Stanley McMaster Mr Stanley McMaster , Belfast East

In discussing with the liquidator the future shape of the Upper Clyde shipyards following reconstruction, will my right hon. Friend bear in mind that Britain's principal shipbuilding competitors in Europe—France, Spain and Italy—are subsidised to the extent of 16 per cent. to 17 per cent. and that the Japanese have built up their shipyards behind a heavy protective tariff—a 15 per cent. import duty? Will my right hon. Friend bear in mind not only that fact but the fact that this maritime nation cannot afford any further reduction in its shipbuilding capacity after the reductions which followed the Report of the Geddes Committee?

Photo of Mr John Davies Mr John Davies , Knutsford

I am conscious of the reputed advantage which certain other countries give to their shipbuilding industries. I will take these things into account in seeking to determine the future shape of this concern.

Photo of Mr Harold Wilson Mr Harold Wilson , Huyton

In face of the outrage that has been announced by the right hon. Gentleman—[Interruption.] There is nothing to cheer about on these benches this afternoon. Does the right hon. Gentleman recall that he was the Minister responsible for carrying through the House the legislation to end I.R.C. and other reasonable measures for handling industrial problems? Is he aware that his only substitute for these is the Official Receiver? In view of this, will the right hon. Gentleman recognise that every decision now taken affecting the employment of our people is decided on the basis of ideological obsession by himself and the Prime Minister? Does he realise that what we want is not the Official Receiver but an official psychiatrist?

Will the right hon. Gentleman now consult the right hon. Gentleman the part-time Prime Minister and the Leader of the House and recognise that the House must now have an urgent debate on this question? No doubt there will be hon. Members who will ask Mr. Speaker for an emergency debate under Standing Order No. 9, but does the right hon. Gentleman recognise that there should be a full day's debate this week, and will he give an assurance that there will be immediate talks through the usual channels to arrange a debate on the decision we have had this afternoon?

Photo of Mr William Whitelaw Mr William Whitelaw , Penrith and The Border

Further to what the Leader of the Opposition has said, Mr. Speaker. Of course I am prepared to have immediate discussions through the usual channels to decide how best this matter might be handled in debate in the House.

Photo of Mr Harold Wilson Mr Harold Wilson , Huyton

I thank the right hon. Gentleman for his ready response.