Before I call upon the Under-Secretary of State for Industry to move the motion in the name of the Prime Minister and his right hon. Friends, it is my duty to inform the House that Mr. Speaker has not selected the amendment in the name of the right hon. Member for Battersea, North (Mr. Jay) and his hon. Friends.
On a point of order, Mr. Deputy Speaker. You have just informed the House, Mr. Deputy Speaker, that the amendment in the names of my hon. Friends and myself has not been called. Is it not rather unfortunate from the point of view of the control of these activities by the House, a matter which has been emphasised today, that we should not have the opportunity, if necessary, of taking a vote on the amendment as well as on the motion?
Further to that point of order, Mr. Deputy Speaker. Will you draw the attention of Mr. Speaker to paragraph 27 of the report of the Select Committee on Procedure on European Legislation, where it specifically states:
I beg to move,
That this House takes note of Commission Document R/1362/75.
I trust that I shall be able to move this motion to the satisfaction of my hon. Friends. I hope that they will find that they are able to take note of it and that they will find that they would not have wished to move their amendment.
I might add that my right hon. Friend the Chief Secretary to the Treasury has just had cause to bifurcate upon inaccurate Press reports. I repeat to the House what I said earlier on the points of order—namely, that the Press report in yesterday's issue of The Times relating to the motion was not accurate. That being so, the motion and this debate are both necessary.
I have not had the benefit of seeing the report in The Scotsman, which could only be superior to the report in The Times. If the report in The Scotsman chimes in with that in The Times but in a lengthier version, I fear that it will be as inaccurate as that which has appeared in The Times.
As hon. Members will be aware, the Scrutiny Committee has recommended that the EEC Directive on Aids to Shipbuilding should he debated on the Floor of the House. Those hon. Members who are familiar with the Commission's earlier proposals a year or so ago and with the points we raised at the time will, I am sure, agree that the text we have before us today meets most of our objections. But as the House will know, the Government are deeply concerned about the serious over capacity situation, the declining orders in the international market for ships and the implications for the future of shipbuilding in this country. I, therefore, welcome this opportunity to hear hon. Members' views and to explain why we are recommending that the directive should be adopted.
I am not sure whether this matter should be raised as a point of order, but we are discussing a "take not" matter, not whether the Government should urge us to support it. That was exactly why I raised my point of order a little earlier.
I accept what my hon. Friend said. Her Majesty's Government are not recommending in the motion that the directive should be adopted by the House. The situation is that, having heard the views of the House, we shall go forward to recommend that the directive be adopted by the Council of Ministers when it meets in a few days' time. The situation is that this House now has an opportunity to debate this directive before it is finally considered and is adopted by the Council of Ministers in a few days' time.
On a point of order, Mr. Deputy Speaker. I should like to have your guidance. The Minister has underlined the fact that we are involved in a take-note motion, but he began his speech by saying that the Government approve the instrument. On former occasions when the Government have approved of an instrument and want the House to vote upon it, they have tabled a motion to approve and it is open to hon. Members to disagree. I hope that you will seek to protect hon. Members in this matter. In this case it would have been appropriate to table an appropriate motion.
Further to the point of order, Mr. Deputy Speaker. I apologise for taking up time in this short debate, but an extremely important point has been reached. We are not dealing with the simple point whether the amendment should be taken but with the whole character of the proposition put before the House and whether the situation has been changed by the Minister's statement. The Minister began his speech by saying that he was seeking to show why we should approve of the directive, and he went further and said that it would act as guidance for British Ministers in Brussels.
I believe that the proper course, in procedural terms, would be for Mr. Speaker to be consulted, or for the Minister to decide that he should withdraw the order, at least until Monday, so that he may consider whether he wishes the House to debate and decide the issue, with the idea that the approval of this House will give guidance to the Minister in Brussels.
This is an important matter. It was inevitable that we would have to deal with this relationship at some point following the decision to enter the EEC, and these matters cannot be solved by minor ad hoc points of order. The Minister could withdraw the order and and enable hon. Members to examine it under proper conditions and then either approve or disapprove.
Further to that point of order. If my recollection is correct, this is the first time that the House has debated or is likely to come to a decision on a specific motion since the referendum. During the referendum campaign it was constantly stressed that both Ministers and the House would have control and have their say on what was said in the Council of Ministers. From the exchanges that have taken place between the right hon. Member for Knutsford (Mr. Davies), my right hon. Friend the Member for Battersea, North (Mr. Jay) and my hon. Friend the member for Renfrewshire, West (Mr. Buchan), it is obvious that the position is not at all clear. Therefore, Mr. Deputy Speaker, I ask you to reconsider the earlier decision and to support my right hon. and hon. Friends in their submissions. Unless the matter is cleared up, the power of the House in respect of instructing Ministers at the Council of Ministers will be unclear, and that will be contrary to the pledges that were given by the Government prior to the referendum.
Further to that point of order. I do not share the view of my hon. Friend the Member for Newham, South (Mr. Spearing) that we should disapprove of this motion. I hope that we shall simply take note. The Under-Secretary implied that if there were any qualifications within the directive—and I should certainly like to mention one—he would be willing to pass this on so that the matter could be raised at the Council of Ministers and thus influence the finality of the directive.
I am fully cognisant of and greatly sympathetic with the views of my hon. Friends and the right hon. Member for Knutsford (Mr. Davies). We should be extremely careful in the way in which we handle this business. Having taken the view that I held up to the referendum, it would be inappropriate and slightly hypocritical of me if I were now to take a contrary view. I assure all hon. Members that, by coming before the House on a take-note motion, I do not assume that if that motion is accepted it thereby involves the approval of the House. If I were to do so, then indeed not only would I be in some contempt of the House—which I certainly would not seek to be—but I should not be behaving consistently with the views that I have held on these matters for a considerable time.
I in no way resent the points of order that have been raised. Indeed, far from resenting them, I think that right hon. and hon. Members have been absolutely right to make their points at this time so that we can all be perfectly sure of the basis upon which the debate is being conducted. I should like the House to understand that it is not the intention of Her Majesty's Government, and certainly not my intention, that we should take more out of the debate than a take-note motion would justify. I hope that all hon. Members will accept that assurance and allow me to proceed to explain the directive, because some hon. Members have expressed concern about it.
I shall now explain the purpose and scope of the directive. It may be asked—it is certainly a question that I should have asked as probingly as I could—why do we need a directive on shipbuilding at all? From our point of view, and I am sure that of other member States, the best argument for a directive is its permissive nature. It does not restrict our powers. It legalises aids which are being given and which might otherwise be prohibited. Article 92 of the EEC Treaty prohibits State aids which may distort competition, other than those listed in paragraphs 2 or 3. The exceptions listed in sub-paragraphs 3(a) to 3(c) include aids to promote the development of special areas and of certain economic activities, such as aids given under Section 7 of the Industry Act in the United Kingdom.
The Shipbuilding Directive is made under Article 92(3)(d) which allows the Council to add other categories to those already listed. Its effect is to widen the list of exceptions to the general prohibition of State aids contained in Article 92, but it does not preclude us from proposing to the Commission additional aids if the need arises.
In the absence of a directive, all aids to shipbuilding will have to be justified under the Treaty of Rome. For instance, we would need to seek approval for our Home Credit Guarantee Scheme. This does not mean that any directive will do and, throughout our negotiations in Brussels, we have endeavoured to explain our point of view and to ensure that our shipbuilding industry could continue to get the support it needs to safeguard its position among shipbuilding nations. The market for ships is an international one and the directive is not particularly concerned with competition in intra-Community trade in ships, which is not very significant. Its aim is to place all EEC shipbuilders on an equal footing to compete in the world market.
This directive, like its predecessor, takes account of international agreements to regulate aids made under the OECD, to which all EEC member States have subscribed. They have been working effectively since their introduction in the late 1960s and all the signatories have expressed their strong wish to uphold them against the background of deteriorating order books and intensifying competition.
There is a long history of support given by Governments to their shipbuilding industries, culminating in a subsidy race in the 1960s when Governments tried to outbid each other in order to maintain or increase their share of the market. In 1969, OECD shipbuilding countries signed the Understanding on Export Credit for Ships, which was a major and successful step towards orderly marketing and fair competition on equal credit terms. In 1972, the same nations undertook to remove progressively all obstacles to normal competitive conditions in the world market for ships under an OECD agreement known as the General Arrangement.
This provides, among other things, that direct subsidies to shipbuilding should be eliminated by 1975 and that no new aids specific to shipbuilding should be introduced. The General Arrangement has worked well and discussions are proceeding on what further steps could be taken, bearing in mind the problem of over-capacity. Naturally, all Governments, including Japan, which now has a 50 per cent. share of world output, are deeply concerned about the difficulties ahead and particularly the dangers inherent in fierce competition.
Neither we nor the other EEC countries want to breach our obligations unilaterally by increasing our aids to shipbuilding. That is not the way to deal with the problem. Together, we shall discuss with Japan and other major shipbuilding countries in the OECD what measures can be taken in the common interest.
It is against this background that we must examine the purpose of the directive. It deals essentially with four subjects—direct building subsidies, Government assisted credit, investment aids and rescue of companies in difficulties.
I shall be coming to the question of Japan before I conclude. If I do not, perhaps my hon. Friend will remind me.
Article 2 of the directive provides that direct subsidies for the building of ships may continue until the end of 1975 when, with certain exceptions, they must come to an end. I think it is with this provision that the amendment proposed by my right hon. Friend the Member for Battersea, North (Mr. Jay) and others is concerned.
Although the amendment has not been selected for discussion, it is right that I should speak on the points it raises. It refers to the elimination of direct building subsidies to the United Kingdom shipbuilding industry by the end of 1975. However, these subsidies have already been eliminated. Subsidies were given to the industry under the name of construction grants in the three years from 1972 to 1974 by virtue of Section 11 of the Industry Act 1972. There was no provision in that Act for the subsidies to be continued beyond the end of 1974 and we have not considered it appropriate or necessary to undertake the legislation which would have been required if construction grants were to go on. They have, therefore, come to an end. There is no direct building subsidy in respect of work done in shipyards after the end of 1974. So the directive does not affect our position one way or the other.
I accept that. That is one of the consequences of being a member of the Community. From a practical point of view, however, which must be adopted in these circumstances, since we do not intend to have this kind of subsidy we are not inconvenienced by not being allowed to have it. I cannot go further than that, and I hope that my hon. Friend will take my point.
Some observers seem to take it for granted that our shipbuilding competitors outside the EEC give direct subsidies to their shipbuilding industries. In fact, generally speaking, this is not the case. There are very few countries that subsidise shipbuilding directly. I may mention the United States and Canada, which provide large subsidies to offset their high labour costs, but these countries scarcely compete in the international market and they are far down the scale of international shipbuilding. The United States is well down the "top 12" and Canada is not even in it. Indeed, in the United States subsidies are available only for ships to be registered under the American flag.
So far as I am aware, there is no other major shipbuilding country which gives a significant subsidy. Certainly there are no direct subsidies in Japan which produces half of the world's ships, or in Sweden, which is our next largest competitor. I do not think it can be said, therefore, that in this respect the directive will have any adverse effect on the competitive position of the United Kingdom shipbuilding industry.
I must emphasise, however, that the Government provide substantial assistance to our industry by other means. Most of the industry is in assisted areas and is eligible for the full range of regional aids. I will come to that in a moment but I should like to note, at this point, that the directive does not affect our power to give this regional assistance.
More specifically, I should like to deal now with the matters covered by Article 3 of the directive, that is to say, credits for home and export sales. Credits for export sales are provided by ECGD. Credit for sales to United Kingdom shipowners are provided by the Department of Industry through the Home Credit Scheme for Shipbuilding.
The credit terms are governed by the OECD Understanding on Export Credits for Ships—which we apply to home sales also—and, like our main competitors, we have voluntarily subscribed to this Understanding. The directive makes it clear that such credits may continue. This is of very valuable assistance to the United Kingdom shipbuilding industry because our arrangements are such that any shipowner, provided his credit is good, can be assured of getting finance from a bank to cover 70 per cent. of the cost of a new ship from a United Kingdom shipyard.
The Government have arrangements with the banks, which have been described in the House, whereby the banks are refinanced when their lending exceeds a certain limit. Consequently, there is no need for them to limit the amount of credit they provide for ships. Although we comply fully with the terms of the OECD Understanding, I may say that in this respect our arrangements are probably better, from the shipbuilders' point of view, than arrangements in many other countries where the finance may be much more difficult to obtain. There is a considerable cost to public funds in providing this assistance to the industry and it must not be ignored in comparing our own measures with those available abroad.
I should also mention at this point, perhaps, the scheme of cost escalation insurance which we have just introduced. This applies to ships built for foreign owners, as it does to other exports of capital goods, and I hope that it will be of further assistance to the shipbuilding industry. Some hon. Members may wonder why it is not mentioned in the directive whereas the French scheme of cost escalation insurance is referred to in paragraph (b) of Article 2.2. The reason is that our scheme is not specific to shipbuilding whereas the French scheme is—that is to say, the French scheme for ships is somewhat different from their scheme for capital goods in general. Therefore, their scheme needs specific mention in the directive and ours does not. Taking all this together, I think I can say that the directive will not require us to change our policies in a way that would be disadvantageous to our industry in relation to competition from outside the EEC.
Article 4 provides for the regular supply of information on decisions to grant aids to investment in shipyards. The Commission's earlier proposals, which we opposed, provided for aids to new investments to be notified to the Commission in advance, so that it might decide whether they were compatible with the shipbuilding policy. In the new version, these aids would be notified post facto and the information collected by the Commission discussed with member States in order to arrive at joint guidelines for Community shipbuilding. We have every intention in this difficult period of co-operating with the Commission and with our partners on this question.
Before I conclude there is one point I would like to make about the scope of the directive, relating to regional assistance. I know that many hon. Members are concerned about the difficulties our shipbuilding industry will be facing in the next few years as a result of the deteriorating market situation. I know that they are also concerned that we should retain our ability to safeguard our expertise and the jobs of those who have invested their life's work in shipbuilding.
But we should not forget that our shipyards are concentrated in assisted areas and will continue to benefit from the regional aids available to all industries in these areas. These aids are not specific to shipbuilding. They are general, and as such fall outside the directive. We have established quite clearly that a directive about shipbuilding cannot preclude Governments from granting aids to enterprises for regional development purposes. Our aid policy in this respect would not, therefore, be affected. We have nevertheless undertaken to provide such information as we can to the Commission about assistance to investment in shipyards, because we feel that this is important for the development of a Community shipbuilding policy.
But when the bulk of our shipbuilding industry comes under public ownership—the Government have made clear their intentions in this respect—neither the Treaty of Rome nor this directive will hinder us in any way from investing in our shipbuilding industry, from increasing its efficiency and, therefore, its competitiveness. One of the first tasks of the organising committee, when it is set up, will be to consider future investment. While we would expect it to take fully into account the international market situation and demand forecasts, there is nothing in the directive which would prevent it or the public corporation which will manage the industry from taking any decisions they think fit.
Clearly the directive will not solve the problems of our shipbuilding industry. It will not dissipate the effects of overcapacity and lack of orders. It is not its function to do so. The purpose of the directive is to legalise and regulate aids and to provide a basis for discussions with member States on a possible Community shipbuilding policy. It is the Government's opinion that these modest objectives strike the right note at this juncture.
Except for some minor details, agreement has now been reached with our partners in Brussels on the text of the directive.
I ask the House to take note of the Commission's proposals and to allow the Government satisfactorily to conclude their negotiations in Brussels so that the directive may be adopted at the earliest possible time.
I thank the Leader of the House for including this item for debate today, but I express my deep concern, which is widely felt, at the absence of sufficient active interest in the substance of the debate.
The debate is undoubtedly welcome, because the House has, probably for the first time, an opportunity to make its views known to the Government and the Community before decisions are taken by the Council of Ministers. As we heard in the preceding debate, the House invariably deals with what are virtually death certificates rather than birth certificates. This is an opportunity for the House to be in at the beginning of what may well be an extremely valuable contribution to the well-being of a major industry of this country and of the Community.
Before I comment on the contents of the Commission's paper, it might be of assistance to right hon. and hon. Members who may be more familiar with procedures in this House than with those which operate in the Community if, as a Member of the European Parliament, I were to paint the picture which operates in the European Parliament in relation to this proposal.
I stress that the role of the Commission is not to make decisions which are binding but to make proposals for directives which, after having received approval by the Council of Ministers, only then become binding. Coupled with that obligation is the requirement to engage in the most comprehensive consultation which I, in my short service at the European Parliament, have ever seen. The consultation is with Governments, industrial organisations, trade unions and any parties which might be affected by the proposals in so far as those parties are willing to present their views.
The next stage, which is related to the stage of consultation, is to prepare draft proposals. It is appropriate that we are debating a draft proposal, not a proposal which at this stage need necessarily be seen as a binding obligation.
The hon. Gentleman has referred to widespread discussion. Can he say whether, for instance, the trade unions in Belfast shipyards have given their wholehearted support to this draft directive?
I do not know whether the trade unions in Northern Ireland are directly linked with the trade union representation in the Community. If they are not, I venture to suggest that the fault does not lie in Brussels with the Commission but that it lies mainly with the trade unions in either a part of this country or the trade union movement in this country prior to our total commitment to the Community.
After the draft has been prepared, the next stage is for it to be submitted by the Commission to the European Parliament. When it is formally presented, that Parliament decides to submit the proposals for detailed scrutiny to the appropriate committees.
This proposal has been before the Economic Affairs and Monetary Policy Committee and the Social Affairs Committee. It has received the most detailed, exhaustive and questioning discussion by the Commissioners responsible for social affairs and shipbuilding. This process lasts for seven months. Only then is the Commission's proposal brought back to the European Parliament in plenary session for a full and comprehensive debate in the presence of the Commissioners responsible for all aspects of the policy and—this is extremely important—in the presence of the representatives of the Council of Ministers which ultimately has to take the final decision.
In other words, the process of consultation, discussion and exchange of views is exhaustive. It is one which this House would be well advised to consider, carefully to examine and perhaps adopt. Only after the Parliament has made its views known do they go back, together with any modification, to the Council of Ministers, which decides whether to accept or reject those proposals. Even after a rejection by the Council, parliamentarians of all countries are never backward in coming forward to make sure that pressure is put upon the Commission as a collegiate body and the Council of Ministers through the President of the Council who attends the sittings of the Parliament.
I come now to the Commission papers which are before us. The first proposal was published in December 1973. At that time shipbuilding order books stood at a record level. Indeed, they were over-full. At that time inflation was running at what we regarded as a record all-time high of between 6 per cent. and 10 per cent. The Arab-Israeli conflict had ended only three months earlier, leaving us with economic and energy crises.
Today we are in a different position. Order books are collapsing internationally. We hear daily of the cancellation of orders for tankers. Fortunately for this country some shipbuilding yards have been engaged in oil rig and ancillary service construction work. Inflation is still serious in Europe but in Britain it is calamitous. The world economy is hovering at a dangerously low level. In Britain we are witnessing the frightening consequences of our various methods of helping our shipyards to deal with their many and varied problems. Only yesterday we read of two yards which were running out of cash. This has happened in many sectors containing the older-established industries.
Commissioner Spinelli is responsible for industrial policy. During a debate in the European Parliament he spelt out this interpretation of the objectives he sees underlying the proposal we are debating. He said:
the aims of a Community shipbuilding policy are competitivity and balance. In this sector, competitivity means being capable of holding one's own in the face of strong international competition without public assistance, which has been granted by almost all the Member States for some decades. Balance requires developing the shipyards in such a way that investment grows in step with demand so that crises of overproduction do not occur.
That was how Commissioner Spinelli saw this proposal.
The Commission is anxious to receive advice on structural changes as well, and I place on record that we, the members of the European Conservative Group, joined with the Socialist Group in the European Parliament in pressing upon the Commission what we felt was a crying need for a directive on structure, but this was strongly resisted by Mr. Spinelli. He felt, I think rightly, that it was difficult enough for the Governments of the nine member States to reach agreement on the area of aids and that to try to find common acceptance of a policy on the restructuring of a major industry was extremely difficult—we had to concur with this—and posed insuperable problems. It was on those grounds that both the Socialist Group and the Conservative Group in the European Parliament withdrew their insistence on the need for a directive on structure.
The House, however, will note that there are several Community instruments available to help facilitate change—and change there must be if the economy of any country or the industry of any country is to prosper.
It is appropriate in this context to mention the European Investment Bank, the Community Social Fund, the Community Regional Fund and the Community Research Fund, which are beginning increasingly to play a crucial role in selectively stimulating change in the field of technology as well as structure. But I am sure that the House will not underestimate the difference in bargaining power of the Community in international negotiations as compared with the bargaining power of any one State. Whereas much of the work concerning aids has been conducted on an international plane through the medium of the OECD, I hope that the Government will, with the Community, press for a continued emphasis upon the need for wider negotiation in dealing with the problems of the shipbuilding industry, not only in regard to aids, which have made considerable progress in the last 10 years, but in the structural sense as well.
I should like to put some questions to the Minister, to which I hope he will be able to reply when he winds up the debate. First, will the Government assure the House, now that they are committed to active and, I hope, highly constructive participation in the workings of the Community, that they will make time in the parliamentary timetable for the views of this House, as opposed to the views of the Government, to be voiced at the formative stage of Commission drafting? I assure the Minister that the Commission is a highly receptive audience of our views at all times. Apart from this, Members on both sides of the House would be the better able to participate in the intensive work to which we are looking forward in our involvement in the now completed European Parliament.
Secondly, do not the Government agree that the solution to the problems of major industries like shipbuilding is best found on a Community basis rather than by each member State trying to go it alone?
Thirdly, will not the Government agree that where all sectors of industries are in receipt of aids, no one is in receipt of aids—in other words, that what is important is selectivity and extreme care in administering aids, in whatever form. In my judgment, the only criterion which can possibly be accepted, is competitive capability. This can best be achieved by a policy of high capital investment in machinery and a similarly high investment in skilled manpower and advanced technology. Only an industry which has a combination of those things—a highly intensive concentration of machinery, a very advanced technology and highly skilled manpower—can have any future. That applies to any industry, and especially to shipbuilding.
When does the Minister expect this proposed directive to come into effect? As existing measures lapsed, I believe, on 30th June, what is the legal position in this interregnum?
The House will no doubt have been made aware of the views of the shipbuilding industry. It has generally expressed its satisfaction with the directive in its current version, but it has expressed concern, to which the Minister has referred, about the need for consideration of the 2 per cent. shipbuilders' relief. Will the Minister indicate his recognition of the importance of this and say what particular measures the Government have in mind to deal with the murderous, cut-throat competition in international shipbuilding and selling which is rapidly developing?
Lastly, will the Minister assure the House that the Community will resist any move to dismantle aids to any shipbuilding industry in the Community unilaterally? We feel that this is a process which is desirable and towards which we must work but that to do so now unilaterally in the world of international trade could be highly prejudicial and would be thoroughly unacceptable to the British shipbuilding industry.
I want to start by commenting on the reasons for our amendment, which I regret has not been selected, and stressing that my anxiety on that score has not been relieved by the Minister's later remarks, although I understand his anxiety to try to set our minds at rest on this matter.
However, as I understand it, he ended by saying that the importance of this debate arises from the fact that, among other things, in a few days' time our representatives in Brussels will require to know the mood and the attitude of this House. I do not take this to refer to peripheral points but as a reference to the directive as a whole. Nothing in the Minister's speech suggested anything to the contrary. It was a general speech in approval of the document, and not a speech in explanation of it.
I take entirely the point made by the right hon. Member for Knutsford (Mr. Davies), who has done more than any other individual in the House to try to secure the right kind of scrutiny and that the right kind of decisions are made thereafter in this Chamber. On this very first occasion we are in grave danger of creating the precedent whereby, whatever we may think of this particular directive, a decision in this House on a take-note basis may be interpreted as a declaration of approval. The rejection of that view does not alter the situation. It is not enough for the Minister now to say that it will not be taken in this way. The whole tenor of his speech and the way in which the Government have approached the matter suggest that this is how it will be interpreted. I know the Minister's anxiety now to reassure us, but his whole approach is the reason for our anxiety, and not his later remarks. That is the problem.
The second matter is the point we raised on points of order earlier today. I shall read reports in The Times and The Scotsman. The version in The Scotsman is longer, and is highly specific. Yesterday The Scotsman said:
Originally the commission had hoped that member governments would agree to reduce their shipbuilding aids to certain maximum levels over a set period. At the same time they demanded prior approval of any new state aids to shipyards"—
not just notification—
but under pressure from Britain and other EEC members the commission climbed down from an interventionist approach to the more flexible set of rules which the Nine have now approved.
What rules have been appoved? Has the directive been approved? What position do we now face? That is an extremely circumstantial statement in The Scotsman.
It is important that I intervene at this point as we are being asked a "Have you stopped beating your wife" question. My hon. Friend asks what has been approved. I cannot tell him, as nothing has been approved. It is important to emphasise that the report in The Times, presumably echoed at greater length in The Scotsman, is wholly inaccurate.
I have seen many leaks, distortions and inaccurate stories, but I have seen very few reports which contained as many circumstantial points as this one. However, I take the Minister's point, although I shall look for corroboration in the future.
The Scotsman says:
The new rules, which are contained in the so-called Third Directive on the co-ordination of the Nine's aids to their shipyards, make clear that member governments will continue to be free to nationalise shipyards. At the insistence of the Italians, a paragraph has been added to the commission's text clarifying this point.—Times Foreign Service.
Is the Old Thunderer completely wrong? It is not usual to make statements such as at the insistence of the Italians.
I understand the difficulties of the Minister if his case is that no such discussion took place and that no decision was arrived at. However, this is not the kind of story which is usually dreamed up by correspondents. Newspaper reporters usually dream up stories which are more sensational and violent than that.
I now come to the directive and the Minister's speech. It is not good enough to say that there is no intention of making such subsidies and that we need not be inconvenienced by not having them. The whole point of economic management is the ability to react to events. It is not good enough to say "As we are not yet in the situation where we may require measures, nothing is wrong, and we have disbarred them for the future".
We seek the freedom to take the decisions required in the situation in which industry finds itself. A distinguished shipbuilder said that he approved of harmonising as long as it did not prevent Britain from taking those measures which the industry required to face its competitors. This is the kind of problem with which we were immediately faced when we entered the Common Market.
Why is this a serious matter for us? The United Kingdom depends more on shipbuilding than any other country in the Community, with the exception of Germany, which is slightly ahead of us. The point remains that although the German industry is bigger than ours, shipbuilding is of greater relevance to British wellbeing than it is to that of Germany, first because of its size in comparison with our gross national product and secondly because of the regional importance of shipbuilding to Britain. Therefore, the United Kingdom is in a more crucial position in relation to obtaining the right decisions than any of the other EEC countries.
The shipbuilder recognises that the real problem is not internal EEC competition but external competition, particularly from Japan. That is why I am alarmed when the Minister says that as we do not intend to have such subsidies we are not inconvenienced by not having them. That shipbuilder claims, rightly or wrongly, that we are virtually in a world dumping situation in relation to Japan and one or two other countries.
The Japanese shipbuilding industry now has half the world capacity. More important, the Japanese quote prices that are about 60 per cent. or 70 per cent. of the price that British shipbuilders require to quote. I do not believe that that is due merely to Japanese efficiency. Indeed, if the wage element were removed we still could not compete at that level. The reason is that various measures are used by the Japanese. Insurance is available against foreign exchange losses, the shipbuilding industry in Japan is linked closely with the steel industry, all ships built in Japanese yards until recently received Government aid. Japan hardly ever ordered abroad and it entered almost into a single form of competition by closing one entry for its overseas competitors. It is not surprising that the Japanese have cornered such a large section of the world market, 50 per cent., which has an enormous impact on the world situation.
Japanese capacity alone is equivalent, if not more than equivalent—most people would say 50 per cent. is more than equivalent—to the likely world demand for ships over the next decade. The problem we face is that our major competitor not only has half the world capacity but that that capacity is roughly 50 per cent. above a reasonable estimate of world demand over the next 10 years. That is why we seek to free our hands if necessary for the kind of support that our industry needs.
We accept that we are now in the Common Market. Our task is to continue to pursue our objectives. I opposed entry because I believed that we should be inhibited from taking certain measures which were necessary for our country. Now that we are in the Common Market it will be less easy to take these measures, but we must pursue our objectives and try to achieve what successive Labour Party conferences felt was necessary for our country. Although my colleagues and I acquiesce in our entry to the EEC that is not to say that we are quiescent. We may be acquiescent to entry, but we are not quiescent to any failure to safeguard British interests now that we have entered. In many ways it is now even more necessary to criticise.
Formerly, we criticised the failure to safeguard our interests and tried to build a platform on which we hoped to express our reasons for refusing entry. Now, criticism has an added importance, because it is necessary to develop our position within the Common Market. Criticism, therefore, is even more vital, and I think that the right hon. Member for Knutsford will agree with that. I think that he will be shoulder to shoulder with us, both on the specific points we are making and on the methods that should be adopted. That is why it is important that we should decide either to approve or disapprove and not merely take note, of the motion.
What does the British shipbuilding industry face? I mentioned competition, but the real problem is failure to invest in this industry, as indeed in other British industries. We needed an Industry Act and a National Enterprise Board because of the failure of British capitalism to invest in British capitalism. Therefore, we require public investment. Investment in Germany in shipyards per head of the population is about double the investment in British shipyards. In Japan, five times as much investment per head goes into shipyards than goes into British shipyards. In Sweden the proportion is about seven times as much.
We have considered this matter, and in our judgment the kind of investment that is necessary to bring us into line with our world competitors can only be large-scale capital injection. Injection on that scale can come from only the nation. That is why we have indulged in the nationalisation of the industry. We cannot inject the kind of money that is required without ensuring that the public have control.
Over-capacity is largely a result of capital investment to produce enormous numbers of very large crude carriers for which there is no demand. Fortunately, our industry has not gone down that path.
Whatever the hon. Gentleman's analysis of the situation, that is no argument for not having the best possible form of investment for our industry. The kind of investment that we need is that which will produce efficiency within our yards. It is not a question of investment leading only to enlargement. There is a big difference between the two forms of investment. I understand the point that the hon. Gentleman is making, but I am talking in terms of efficiency, which is a different matter.
In this case we are in danger of falling foul of the directive. In Page 2 of the directive Commissioner Spinelli says:
It also wishes to stress that the information on decisions to grant aid for shipbuilding referred to in Article 2 and the information on investment aid mentioned in Article 4 will be examined periodically by the Commission in collaboration with experts from the Member States so that joint guidelines for the sector in question can be drawn up.
Article 4 relates to investment. If there is a need for large-scale investment we have to notify that investment programme in advance to the EEC. Members of the EEC can decide whether they wish
to draw up common guidelines. It there are common guidelines they will, by their very definition, relate to the other Eight. Therefore, our decision to go ahead with nationalisation is immediately put into question. The two matters are linked in that way.
Hence the reason for anxiety about the directive and our reason for saying that we decline to approve or take note of the directive till we get certain matters clarified. We want clarification of the things that we see as necessary for the future survival of the British shipbuilding industry. Secondly, the guidelines that our Minister takes to Brussels should be those approved by the House and not those merely taken note of by the House.
I believe that we should welcome this directive. It establishes ground rules for the European shipbuilding industry. I believe that it will act to the benefit of the British industry. It is a considerable improvement on the original draft and I believe that it now meets the main objections put forward by the British industry. I see it as being a modest start to what is required to tackle the enormous problems which have already been outlined this afternoon.
The future of the industry is, of course, of particular concern to us in the North-East. The hon. Member for Wallsend (Mr. Garrett), who unfortunately cannot be present because of a long-standing constituency engagement, has particularly asked me to express his concern about the future of the industry. I am sure that we both welcome the assurance of the Minister that regional aid will not be affected as a result of the directive.
The Booz-Allen Report, based on the assumption of a reasonable expansion in world demand for shipping, came to the conclusion that by 1975 there would be a surplus of building capicity of 100 per cent. over demand. In fact, we have seen a world recession and the collapse of the tanker market, and that assumption is accurate and the over-capacity must now be well over double and perhaps three times the level of demand.
I suggest that there is need for a more positive European policy for shipbuilding. The directive should be seen as only the first step towards the emergence in the near future of definite decisions as to the direction to be taken for the future of the industry in Europe. It is not just a question of protecting the industry but rather of ensuring its survival against unfair competition coming from elsewhere. We in Europe must band together and face the challenge from Japan and the emerging countries. Time is not on our side. We have reasonable order books up to 1976, but after then the situation is gloomy indeed.
Industry in Great Britain suffers not only from world conditions but from the uncertainty caused by the threat of nationalisation hanging over the industry. I am sure that all hon. Members on this side of the House feel it unfortunate that the Government's main concern for the industry at present is aimed at changing its ownership. That attitude is at best irrelevant and in practice most damaging. I urge the Government to face the hard facts in the industry as a result of world-wide over-production. The President of the Shipbuilding and Repairers National Association said only recently that time was not on our side. That is most definitely true.
I ask the Minister for an assurance that the Government will not rest on this directive but will go back to Brussels and fight hard for a further more positive directive in the near future. That directive should set out European policy and should lead to our nations working to-together to face the challenge that is before us all—in the short term to ensure the survival of the industry, and in the long term to secure the efficient expansion which we all seek.
I hope that my hon. Friends will not oppose the take-note motion. The directive is important. A number of excellent points have been made in this debate and I hope that the questions put by the hon. Member for Cheadle (Mr. Normanton) will be answered by the Minister.
We are all concerned about the 2 per cent. shipbuilders' relief arising from the Finance Act 1966. The major matter is that the present directive is a better document than that which was published in draft in Ocotber 1973 largely because of the British Government's insistence that support for the British shipbuilding industry must be realistic and seen as a whole. The shipbuilding unions have not been over-active so far as I am aware in making clear their attitude on these directives. If this directive were turned down, our Briitsh ship owners' credit scheme would be in danger. I know that my hon. Friends would not wish that to be the case at the present critical time. They really must not oppose the directive.
I do not accept the argument advanced by my hon. Friend the Member for Renfrewshire, West (Mr. Buchan) that there is any nationalisation bogy in the directive—that is to say, that the directive is against any form of public ownership. It is not. Any reference to the Italians is a reference not to the "nationalisation" of their industry but to "rationalisation". That, if anything, is a misprint which perhaps the Scotsman and The Times have misjudged in their assessment. I do not think that the directive has anything to do with public ownership or with inhibiting its application to the shipbuilding industry. However, this third directive presupposes the existence of a fourth directive. It is by no means the last word and cannot be.
The third directive in its preamble describes a situation which although true last year is not true now. I hope that it will be a springboard for a fourth directive which in turn will be based on the proposition that we are no longer discussing the essence of competition in the Common Market but must recognise that the Common Market is one economic unit competing in the world.
My hon. Friend the Member for Renfrewshire, West referred to the active and well-organised effort by Japan to remain the shipbuilding nation of the world. References have been made to agreements with the OECD but I doubt whether they are fully respected. Certainly Japan has made the most extraordinary progress since the end of the Second World War. Despite all their difficulties, the Japanese are still managing to maintain the pre-eminence of their position in world shipbuilding.
My hon. Friend has said, as so often before Ministers with responsibility for the shipbuilding industry have done, that there are no direct subsidies to shipbuilding in Japan. If that is the position, they have developed one of the best indirect ways of going about it that any country has devised.
In the Financial Times of 1st July 1975, an article by Peter Duminy from Tokyo stated:
The Japanese Ministry of Transport wants $950 million to be earmarked to fund the shipbuilding industry's deferred payments next year, an increase of $620 million compared with funds expected to be available from the Export-Import Bank in 74–75.
I am in favour of competition, but not of unfair competition or of our having all the rules and trying to stick to them with others doing the cheating. That is quite wrong. Even if the Japanese were the best shipbuilders in the world, and the Europeans the worst—which is not true—it would be strategic nonsense for the Common Market to cease building ships and to rely on other nations to build ships for Community trade. After all, the Common Market generates the largest sector of world trade. I cannot remember the precise figure but it represents far more than the United States or the Soviet Union. It would be madness for us not to build our ships. I repeat that I do not accept that we Europeans are the worst shipbuilders.
Unfortunately, the British disease of knocking each other and of constantly parading all our defects and never mentioning all our successes affects shipbuilding more than any other industry. We have half a dozen, or maybe more, first-class shipbuilding yards in the private sector in this country. We have other good yards in the public sector which could also be enterprising and successful. It is high time that we began to build up on what we can do in Great Britain.
My plea is that when the Minister goes to discuss this matter and the future of later directives they should concentrate on what Europe should do for its own shipbuilding yards about its strategy for aid, grants and development, whether direct through shipbuilding or indirect through the regional fund, the research unit or anything else. They should be directed to the proposition that Europe must have a shipbuilding industry and be a large shipping power.
I should like to refer to a speech made by Commissioner Spinelli, not the one quoted by the hon. Member for Cheadle, but the one mentioned in the Financial Times on 30th June 1975, at the beginning of this week in Brussels. Commissioner Spinelli laid out his three propositions for a new industrial policy. He said that the new industrial policy would recognise
that in major industrial sectors that are vulnerable to over-capacity new investment plans should be notified in advance to Brussels, in the same way that investments in the coal and steel industries have to be notified under the European Coal and Steel Community.
He specifically mentioned those sectors in which he was interested—namely shipbuilding, artificial fibres and glass.
I am not an authority on the latter two, but I do know about the shipbuilding industry. It is high time that within the Common Market we had a new shipbuilding policy looked at through European eyes. I have no doubt that with this directive and a directive to follow of that complexion, we could have a most successful shipbuilding industry, not only in the other eight fellow member countries of Europe but in countries outside the Community. Great Britain must try to get back the preeminence that it once had in this great industry.
This matter is important because, as has been pointed out, it is the first debate that we have had on the directive since we entered the Common Market after the referendum. Secondly, it is important because, as the hon. Member for Cheadle (Mr. Normanton) pointed out, the shipbuilding industry is in a catastrophic state. I believe that money is needed to help, perhaps even save, the Govan shipyard. Will the directive prevent money from being granted for that purpose? I should like an absolute assurance on that point.
About 6,000 people are employed in the Belfast shipyard, and I would hate to think that their future is to be dealt with in the manner described by the hon.
Member for Cheadle (Mr. Normanton). I fear that the article in the Economist of 21st June indicates what the Common Market has in mind for the Belfast shipyard and others in the United Kingdom. The article concluded:
In the early autumn, after completing a hard look at French and German State aids, the competition office plans to start an investigation into British State aids. In the renegotiations, Britain's regional employment premium, loathed in Brussels as a continuing subsidy of industry's production costs, was allowed to go on until 1977. But the Commission is unlikely to agree to another stay of execution…The most frequently cited example is Harland and Wolff, the Belfast shipyard. Its trading loss last year was £15 million on a turnover of £40 million, but Government handouts are keeping it afloat.
The Belfast shipyard received a total of £13 million in loans in 1974 an d1975 and £6 million in grants between 1973 and 1975. Can the Minister assure us that if the Belfast shipyard needs money, it will be forthcoming?
The United Kingdom depends on its shipbuilding industry more than does any other Common Market country and we ought to be very concerned about unfair competition from nations outside the EEC including, for example, Japan. I wonder how Italy will fare? Together with France and the Irish Republic, it will get benefits only until 1977.
I understand that, overseas, the shipbuilders' relief is not regarded as a subsidy because it is a rebate of indirect taxes. But shipbuilders all over the world are allowed some rebate on indirect taxes to help them. Shipbuilders in the United Kingdom are not treated more fairly than those in other countries. In Japan, they get all sorts of aid. Is the 2 per cent. relief likely to be reduced? Does that percentage correspond in value to the burden of these taxes?
I am concerned about this directive. Money has been going to the Blefast shipyard to help pay off fixed-price contracts.
Although it is right that much money should have been put into the shipyard, it has been at the expense of other services in Northern Ireland. The Minister has said that the directive will not prevent aid to development areas. I hope he can give us an assurance that the Belfast shipyard will not suffer and that not a single job will be put in jeopardy.
I shall be very brief. It is something of a feat to come within just a whisker of going into the Lobby with the right hon. Member for Battersea, North (Mr. Jay) and the hon. Members for Renfrewshire, West (Mr. Buchan) and Newham, South, (Mr. Spearing). I am grateful for Mr. Speaker's foresight in not accepting the amendment and therefore not putting me in that embarrassing position.
I have a strong objection to the acceptance of the directive as it stands. I object equally to the attitude of mind of the Government as expressed by the Under-Secretary. He said that this was just a take-note motion but that the Government had approved it, and I noted that he said that they had virtually reached agreement with their partners as to the content of the instrument. If that is so, I wonder what on earth is the good of their coming to the House to debate it.
I therefore strongly object to this form of debate and to the way in which the directive has been put to us this afternoon. The instrument itself worries me in this respect: I believe that it reveals a dangerous degree of complacency on the part both of the Community and of the Government. A great deal has already been said this afternoon about the extreme gravity of the situation that faces the industry. It is not just a question of competitiveness. It is a question of survival which now faces the industry. To try, therefore, to get us to accept an instrument which I believe has only one real advantage for us, in that it allows us to maintain certain other facilities to the yards, is unreasonable. We all know that the clock is stopped, that arrangements are found to hold over situations in the Community so that things which are beneficial are not arbitrarily destroyed. It is not necessary to go through all this paraphernalia in order to do so.
The directive portrays an atmosphere in the shipbuilding industry which is totally at variance with reality. It is all very well for the Government to say that they are not precluded from putting proposals for further aids to the Community and that they would do so. How does the Under-Secretary reconcile that with a preamble which says,
Whereas the continued application of aids to operations has a conservatory effect which
was justifiable in the past but which is not of a nature to improve significantly or in the long term the competitiveness of the Community shipbuilding industry; whereas, however, such aids must be eliminated gradually so that the shipyards may adapt to the new conditions; whereas aids to shipbuilding should not however adversely affect trading conditions to an extent contrary to the common interest…
How can he maintain that he can go to the Community and ask for something new having put his name to a document like that?
In view of the problems that this industry will face over the next few years, in view of the immense importance for the Community to face up to the need of ensuring the survival of the shipbuilding industry, which despite these cycles has a great future to fulfil, and on which point I wholly agree with the hon. Member for Greenock and Port Glasgow (Dr. Mabon), this directive is valueless. It is quite unnecessary for preserving the rights and provisions which we already possess and it give a character to the attitude of mind to the industry which is singularly at variance with the realities of the case.
I apologise for having to cut the debate short, but I think the House would take it amiss if I failed to reply to the points which have been raised.
I say to my right hon. and hon. Friends that I fully accept the critical tone in which they have spoken during the debate. I would not wish otherwise than that we should have a debate of this kind on an EEC directive. My hon. Friend the Member for Renfrewshire, West (Mr. Buchan), absolutely fairly, said that following the referendum those who were opposed to remaining in the Community acquiesced and accepted acquiescence, but there did not follow quiescence, and that is right. I trust that debates on EEC directives, whatever their basis, will continue to be debates in which hon. Members do not pull their punches. But I cannot say the same for the contribution of the right hon. Member for Knutsford (Mr. Davies). It is all very well for him to deliver speeches of asperity of that nature when we are involved in a situation of which he was one of the principal architects.
For my hon. Friends who seek to be the guardians of this House, partly because of the attitudes they adopted before the referendum, is one thing. For a former Minister for Europe to complain of the way in which we now proceed is another. While I fully accept the criticisms of my hon. Friends, I cannot accept the criticism of the right hon. Gentleman.
The hon. Member for Cheadle (Mr. Normanton) put a number of questions and took up the complaints, which were also put with a great deal of validity by other hon. Members, about the form in which the motion had come before the House and the question of which motions should come before us when we are considering matters of this kind. He asked how we could involve the House at a formative stage. I agree with him that that is an exceptionally serious point. The present arrangements for parliamentary scrutiny for EEC proposals allow for the views of the House to be taken into account at the negotiating stage, but I think that the House would not be satisfied if that situation were to continue simply as it is.
Therefore, it is important that the House should note the statement made by my right hon. Friend the Prime Minister after the referendum that it would be expected that we should develop the scrutiny arrangements to make them more effective. He added:
I trust that there will be an early debate on the recent Report of the Procedure Committee on European secondary legislation."—[Official Report, 9th June 1975; Vol. 893, c. 36–37.]
That report was referred to by my hon. Friend the Member for Newham, South (Mr. Spearing) in his point of order at the beginning of the debate. What he said will add extra emphasis to what my right hon. Friend said last month.
The hon. Member for Cheadle also asked that in trying to find solutions to the problems, whether of shipbuilding or of other industries, we should always proceed on a Community basis. He contended that it was best to try to solve them on such a basis. My reply is that it depends on the problems. It is true that now that the people of Britain have voted for us to remain in the Common Market, and that it is an established fact that we are and shall continue to be
members of the Community, we should make the best of the machinery of the Community that is available to us and the partnership into which we have bee slotted, and which the British people e
For example, it is strongly held on the Labour benches—the hon. Member for Tynemouth (Mr. Trotter) might disagree—that there can be no satisfactory future for the British ship-building industry outside public ownership. We believe that the nationalisation measure that we shall be introducing early in the next Session is an extremely important part of the solution of the problems of the shipbuilding industry. That is not a Community policy. It is a United Kingdom policy which is fully compatible with Community membership, as we have established.
The hon. Gentleman also asked when the directive, if approved, would come into effect. It is to be considered by the Council of Ministers on 10th July, and, if adopted, it is expected to come into effect immediately.
The hon. Member for Cheadle also asked what takes place during the interregnum. The Commission has said that during the interregnum, which is in any case a short period, it would not raise any difficulties. To my hon. Friend the Member for Renfrewshire, West I would reply that notification of investment applies only to projects of over 5 million units of account receiving State aid, and investment by the Government as an owner is not affected.
My hon. Friend the Member for Greenock and Port Glasgow (Dr. Mabon) asked during my opening remarks and during his own speech what the position was about Japan. Japan is bound by the OECD General Arrangement and the Understanding on Export Credits for Ships.
The hon. Member for Down, North (Mr. Kilfedder) was understandably concerned about two matters. The first was the position of Harland and Wolff in Northern Ireland. The Government have announced their intention to bring Harland and Wolff into full public ownership. This is allowed under the Treaty of Rome and there is nothing in the draft directive to prevent investment by Governments in publicly-owned companies. The Commission is aware of the Government's plans and has made no objection. I say to the hon. Member for Down, North that the best way in which he can safeguard Harland and Wolff and the jobs in that company—he asked that not a single job be lost in that company—is by coming into the Lobby with the Government when we have the Second Reading debate on the shipbuilding nationalisation Bill early next Session. I trust that we shall see him with us in the Lobby to safeguard jobs in Northern Ireland. I know that he does not have these odd ideological views. He is something of a populist. Therefore, I am sure that he will vote with us in favour of nationalisation.
The situation, as I attempted to explain in my opening remarks, is that our aids to shipbuilding under the Industry Act are not specifically shipbuilding aids—they are regional aids. As they are regional aids, they are not ruled out by this directive. We are able to continue with regional aids for shipbuilding as regional aids rather than as shipbuilding aids—
On a point of order, Mr. Deputy Speaker. I started the debate on a point of order, so may I complete it on a point of order? What has happened? We have had a discussion. The Minister has talked it out. Does this mean that the motion lapses and that we have not taken note? Could the position be defined for us?
Order. I am referring to the point of order raised by the right hon. Member for Battersea, North (Mr. Jay). At the commencement of public business a Notice of Motion was put to the House and agreed to. That is the operative motion upon which the present motion has now lapsed at the end of one and a half hours.
Further to that point of order, Mr. Deputy Speaker. Is not this the truth of the matter? Notwithstanding the fact that these documents have been out-distanced by other events taking place within the Common Market, the Council of Ministers and the Commission, the Government, albeit with lack of support from the Conservative Party, only a few weeks after the referendum, have been unable, at a quarter to five on a Friday, to muster sufficient votes in the House of Commons to take note of this document. This is an indictment of the fact that all those hon. Members who are so keen on Common Market ideas have not been able to present themselves in this Chamber to give the Government sufficient support.
The fact is that, had a vote been taken, the Government know, as do the Opposition who dragged us into Europe, that those of us who are opposed to the Common Market would have carried the day. That is why this motion has been talked out by the Minister.