We need your support to keep TheyWorkForYou running and make sure people across the UK can continue to hold their elected representatives to account.

Donate to our crowdfunder

Orders of the Day — European Community (Shipbuilding)

Part of the debate – in the House of Commons at 12:00 am on 4th July 1975.

Alert me about debates like this

Photo of Gerald Kaufman Gerald Kaufman Parliamentary Under-Secretary (Department of Industry) 12:00 am, 4th July 1975

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.

Article 5 deals with emergency aids to companies in difficulty, which would have to be notified to the Commission in accordance with the EEC Treaty.

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.