Orders of the Day — Aircraft and Shipbuilding Industries Bill

Part of the debate – in the House of Commons at 12:00 am on 2nd December 1975.

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Photo of Mr Gordon Wilson Mr Gordon Wilson , Dundee East 12:00 am, 2nd December 1975

My hon. Friends and I put down an amendment which sought to point out some of the dangers which might be inherent in the Bill relating to centralisation and the effect that it could have on the ability to take industrial decisions in Scotland. Regrettably, that amendment has not been called. However, I hope in the course of my remarks to refer to the policy being followed by the Government, particularly their proposals for devolution and the lack of industrial policy related to it.

First, I should like to refer to the Bill. Apart from its merits and demerits, the Bill has caused harm by being a year late. I do not necessarily mean that its effects would be good, but that uncertainty has been caused in the shipbuilding industry in particular. For instance, in my constituency a large prefabrication shed in the local shipyard has not been commenced partly because of the com-the nationalisation issue underlying it. pensation problem and partly because of Therefore, there has been a withdrawal of investment finance at a time when many yards and workers in those yards would have been pleased to see it. This view has been expressed by hon. Members on both sides of the House.

However, the shipbuilding industry has to operate in a world-wide climate which is not an easy one. When we examine the scale of assistance and aid which is given to this industry in many other countries, we become aware of the com-petition—I might use the term "unfair competition"—which the shipbuilding industry in the United Kingdom and Scotland, for which I speak specifically, has to suffer.

For instance, the Japanese shipbuilding industry and merchant fleet have been built up since the war by means of generous credit provided by the Development Bank of Japan. Nearly 100 per cent. of the shipping that has been required by Japanese companies has come from Japanese yards. In many instances, until 1971, credit was not given unless the Japanese companies ordered from Japanese shipbuilders. Therefore, that did not give much opportunity, even assuming that our shipbuilders were competitive, for us to compete in that market.

In markets elsewhere in the world, special credits are given for large proportions of the price, preferential rates of interest are charged, and cargo preference is given in certain countries to those who buy ships built in those countries' yards. I need not go as far as Korea or Brazil, which were mentioned earlier, to give an example. In France, where there is high cost-inflation insurance, it is intended to double the size of the mercantile marine by 1980 with the help of equipment grants and interest subsidies. Already 50 per cent. of the ships have been bought through French shipbuilding companies, although there is no formal restriction in market. In Germany the situation is that 96 per cent. of German shipping has been purchased from German yards. That may be a mark of the effectiveness of the industry there, but funding is given by the German Government to make it possible and attractive for German shipowners to buy from yards in Germany.

I turn to the list of aid which is marked out for the United Kingdom. There is a rebate of indirect taxes calculated at 2 per cent. of a ship's price, but there has been no direct support of any other kind—apart from the credit arrangements under the terms agreed by the OECD—since termination of construction grants. A cost escalation insurance scheme, which has been introduced, has not yet been used. That scheme has been criticised today as being inadequate.

Therefore, when we criticise the shipbuilding industry it is worthy of note that much of the competition that the industry faces is of a severe nature and that the industry has not been given the aids which other Governments abroad supply. Even if the industry has to be nationalised, a policy still has to be drawn up for shipbuilding which will allow the nationalised industry certain tools with which to compete against foreign suppliers. If that does not happen, the industry will be in exactly the same trading position as it is at present irrespective of whether it is partially or wholly publicly controlled.

At present most of the yards in Scotland are well endowed with orders for the next year and possibly two years. However, the worry of Scottish shipbuilders is that the present order crisis could have an effect in the period from 1976 to 1978. Reference has already been made to the world shipping position. The serious situation is due partly to the oil crisis and partly to the recession which is taking place world-wide.

I shall mention four basic statistics which will affect the market and which put the problems of the industry into perspective. First, after a rise of between 7 per cent. and 8 per cent. over several years, the volume of world trade has fallen by about 10 per cent. this year and is not expected to rise more than marginally in the coming 12 months. Secondly, according to an estimate by British Petroleum, oil traffic is unlikely to grow by more than 2 per cent. a year between now and 1980. Thirdly, world trade generally is not expected to expand at a much faster rate—it will probably expand at about 5 per cent. a year at the most, from 1976—77. Lastly, the volume of traffic will not reach the 1974 level again until 1977, and by that time the carrying capacity of the world's merchant fleet will have increased by over one-third—from 450 million tons in 1974 to 600 million tons.

Whatever method we use to improve the shipbuilding industry, the ordering situation world-wide is not encouraging. Most of the yards in Scotland are in a reasonable position at present, but they are worried about the future. I understand that Scott-Lithgow Limited has about £100 million worth of orders for shipbuilding and another £90 million worth of orders for oil-related products. Approximately the same figures apply to Yarrow Shipbuilders Limited.

Govan Shipbuilders Limited is also worried about the situation. And here it should be stated that although Govan Shipbuilders is losing money, its performance record is better than the experts gave it credit for right at the start, but it was interesting to read a comment by the managing director, Mr. Archie Gilchrist, who focused attention on some of the problems that his company is suffering. He also said that two crucial factors affected it. One was internal and related to productivity, and the other related to orders. Both are equally important.

The chairman of the company, Professor Kenneth Alexander, said early in November that the Government must take action within two months to avert the orders crisis affecting Britain's shipbuilders. He said that two options were open to the Government in this connection. The first option was to subsidise British shipowners to buy British and the second was to finance the construction of ships "on spec" so that they would be available to meet demand when the next upturn in world trade occurred.

Regardless of the machinery by which the whole of the shipbuilding industry comes under public ownership, many of the problems relating to orders will still be present. It is in this respect that the Government have not advanced a policy, and delay in tackling the issue over the past 18 months has caused trouble.

Hall Russell and Company Limited has a reasonably good order book, and the Dundee yard, Robb Caledon Shipbuilders Limited, is presently in a reasonably happy position. However, a shortfall in orders could soon develop in the Leith yard.

One of the first questions we have to ask is whether nationalisation in itself will be an adequate way of maintaining jobs which are already in danger and provide for the expansion of the industry. It is clear that nationalisation by itself does not necessarily guarantee full employment. Anyone who knows anything about the redundancy situation in the British Steel Corporation over the last 18 months or who is in receipt of letters from the railway unions will be aware of the cuts that are being made on the railways, which will lead to redundancies, and will be aware that nationalisation does not guarantee employment.

Secondly, good managers do not grow on trees. Probably one of the best assurances for the shipbuilding industry is the obtaining or continuation of good management. Again, nationalisation by itself will not necessarily supply good management. It is more likely to produce greater administration. This was the experience which hit the Scottish area of British Steel.

It is interesting to note that the yards which exist in Scotland have a very wide range of product. The largest employer, Scott-Lithgow, apart from its capability for super-tankers, has orders for bulk carriers, dredgers, oil supply vessels, tugs and trawlers. That is the range. Other yards also specialise. Govan Shipbuilders produces a range of general product carriers. However, one of the best hopes for the Scottish shipbuilding industry may be specialised and high technology ships. If that is so, one wonders whether any centralised buying agency which we may find under a nationalised structure would necessarily help the provision of those specialised ships.

I have great reservations about whether the Robb Caledon Yard—which, I admit, is not perfect—could or would survive in a nationalised structure. I am sure that one of the first projects of a nationalised body looking at the industry would be to rationalise. Here is a yard which produces small and specialised ships. It may be that it would not fit into a pattern or concentration on the larger producers rather than on the smaller specialist yards far from the centre of the industry. This is one of the points I tend to make to workers who tackle me on this score.

What we have to do first is to produce a policy which will provide reasonable inducements and financial incentives not only to our own shipbuilders but also to the home shipping industries, on the lines of those deployed by other countries. The second point could be consideration of a scrap-and-build provision, and the third—which I am putting forward only tentatively—might be that given by Mr. Gilchrist when he indicated the prospect of "spec" building to tide over the hump of two or three years.

"Spec" building is very controversial. There would probably have to be the assurance of some form of market for that to go ahead. Nevertheless, in the next two, three or four years there will be a gap in orders. It is this gap that the Government may have to consider filling if they want shipbuilding to survive as a major industry.

The Minister has raised the subject of Scottish Aviation. I have been to the Scottish Aviation factory and spoken with the management and the action committee. I know the efforts which other hon. Members, including the hon. Member for Central Ayrshire (Mr. Lambie), have put into trying to keep jobs going in this factory. However, it remains the fact that at present, regardless of nationalisation, there is a risk of many hundreds of jobs being lost. Even if the Bill becomes law, the prospect is that there could be a reduction in employment within that factory unless work is obtained for it.

Scottish Aviation produces small aircraft. It is different in many ways from the larger aircraft groups which are being nationalised. It was a very chilling experience for me today to hear the Secretary of State mention that the aviation industry would be sustaining a reduction in the work force. Again the word "rationalisation", of which we have heard so much in Scotland and which has generally meant a loss of employment, could be implemented in this instance to cut out a factory on the northern periphery because it did not fit into the major pattern of the aerospace industry.

Lastly, I suggest that there are other alternative ways for the Government to intervene in financing and in planning, the shipbuilding and aerospace industries. The Government now have the Scottish Development Agency. The National Enterprise Board in England will allow for participation in equity stock and will allow planning agreements. The Government have all the tools to hand, and yet they have chosen this blunt instrument of nationalisation, which is so bound up with State monopoly, and huge bureaucracies.

It is on this matter that my hon. Friends and I feel great misgivings in regard to the Government's plans. This sort of organisation will lump the Scottish element, which is composed of different factors and types, into one unit. It will take away a certain proportion of decision-making power from Scotland, and it will not necessarily be replaced by anything else. It will take away the right of the smaller companies to find their own markets and operate within them.