Orders of the Day — Shipbuilding (Redundancy Payments) Bill

Part of the debate – in the House of Commons at 12:00 am on 16th January 1978.

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Photo of Gerald Kaufman Gerald Kaufman Minister of State (Department of Industry) 12:00 am, 16th January 1978

I beg to move, That the Bill be now read a Second time.

The House will remember that when announcing the introduction of the Shipbuilding Intervention Fund on 24th February last year, I said that my right hon. Friend would be bringing forward proposals to Parliament for redundancy schemes to assist British Shipbuilders and Harland and Wolff to alleviate the human problems caused by any contraction of the industry.

The Bill now before the House provides the means through which my right hon. Friend proposes to accomplish that objective. The House will have noticed that the Bill is a simple enabling measure. Fundamentally, it does nothing more than empower my right hon. Friend to make schemes to provide financial assistance to employees of British Shipbuilders or Harland and Wolff, or their subsidiaries, who lose their jobs, or who are transferred to less well-paid employment, either because a yard is closed, or because its activities, or the numbers employed there, are reduced.

Everyone knows the extent of the collapse of the world shipbuilding market, which has resulted almost entirely from the massive world tanker surplus, but also from unjustifiable expansion of shipbuilding capacity—again almost wholly for tankers—in Japan and other countries. The effect of the oil crisis has been to reduce worldwide demand for new merchant ships to about 13 million gross registered tons annually, and virtually to eliminate demand for new tankers altogether. World output in the past, by contrast, has averaged about 34 million gross registered tons and theoretical capacity is even greater. Although a straight comparison of these two figures exaggerates the extent of the crisis—because of the relatively low Labour content in tankers—it still reflects an excess world capacity in employment terms of about 40 per cent. Everyone is agreed that the level of demand is unlikely to begin to increase significantly until the early 1980s, and then only relatively slowly.

It has been said before, and I take this opportunity of saying it again, that the United Kingdom has made no contribution to this tragic situation. Employment in shipbuilding in this country has been declining steadily for very many years. In 1972, we and our European partners warned the world, and the Japanese in particular, that serious overcapacity was being threatened because of the rapid and unjustified expansion of shipbuilding facilities in Japan and elsewhere. So, even without the oil crisis, there would have been over-capacity today, although perhaps not as serious as it now is.

Having made no contribution to excess capacity and having tried to persuade others to act sensibly, we do not see why the very small percentage share of the world market that we have had in recent years should be further reduced. That is what threatened us in 1975 and 1976. That is why, as the House knows. we introduced the Intervention Fund last year and why similar assistance is available to Harland and Wolff, to help it meet the fierce and often unfair price competition which arises out of the desperate struggle to capture as many as possible of the few orders available.

The fund has been used very successfully by British shipbuilders. Last year, with its help, they won orders amounting to over 540,000 gross registered tons, worth nearly £400 million. Given the higher labour content of these orders as compared with previous production, which included many tankers, this is a substantial achievement, although still falling short of a full year's work. If we take into account the total orders won by Harland and Wolff and the private sector—again with Government assistance in most cases—the total for the country as a whole is over 730,000 compensated gross registered tons. It is a performance which, in relative terms, is not likely to be bettered by any of our major competitors, including Japan, which managed to secure only about 45 per cent. of a year's full output last year.

This performance is not merely a tribute to the Intervention Fund. It is also a tribute to aggressive and centralised marketing b British Shipbuilders and by the board of Harland and Wolff, which has been made possible by nationalisation. I am also happy to pay tribute to the patriotism of many British ship owners, who had placed a very large proportion of their orders in United Kingdom yards up to the end of last September. I do not yet have the figures for the whole of 1977, but I am less happy to note that an excellent nine months' record is likely to have been blemished when the figures for the final quarter are published. I hope very much that British ship owners will De able to restore that record this year. It is as much in their interests as in anyone else's that there should be a sound and viable United Kingdom shipbuilding industry, as I know most of them recognise.

But, despite the relative success in winning new orders last year, the figures I have given—especially about the performance of Japan—illustrate just how impossible it is, even given the lowest prices, to secure enough orders to continue full output. As I said when introducing the Intervention Fund, shipbuilding industries all over the world are facing the inevitability of contraction, and this country cannot isolate itself from that trend. In 1978, competition is likely to be even more fierce than it was in 1977. Many countries now have subsidy schemes, and it is not impossible that there could be even fewer orders to share out this year. It is also likely that many yards in many countries will run out of work and that countries everwhere will be feeling the same social pressures which threaten this country and which it is the purpose of this Bill to alleviate.

I want to make plain that neither the Bill nor the schemes that we shall put forward will propose any "target" reduction in capacity for British Shipbuilders, on Harland and Wolff. It is for British Shipbuilders, in consultation with the trade unions, to decide the shipbuilding industry's operational and corporate strategy, and it will be some time before British Shipbuilders can complete a corporate plan. We have, therefore, tried to provide for the maximum flexibility for any special redundancy scheme in order to meet every kind of option.

We envisage, for example, that, given the uncertain future for shipbuilding in the light of world market conditions, there may be some workers—perhaps those nearing retirement—who would prefer to leave now, at a time of their own choosing, if given a suitable cash inducement to do so. There may be others who would like to take up employment in another industry in another part of the country and who need the help to move their households which a special redundancy payment would provide. If a need arises to reduce the numbers employed in a particular company, the intention is to call for volunteers in the first instance. The scheme will not, therefore, be limited simply to payment in the event of closure.

The next important point I wish to make is that the Bill envisages that the schemes will operate only for a limited time—two years in the first instance, which may start from 1st July last year, that is, vesting day for British Shipbuilders, and which may be extended to four years by an order by my right hon. Friend, subject to affirmative resolution of both Houses. There is a very good reason for this limitation. We are seeking to deal with a special situation which has arisen as a result of a sudden, once-for-all structural change in the balance of supply and demand for ocean-going merchant ships, with a world industry—not just a United Kingdom industry—which has gone from wild boom to unprecedented slump. That slump has been slow to be felt because of the huge order books built up during the boom, but its effects are now beginning to be acutely felt in every merchant shipyard here and elsewhere, and they will press down harder as 1978 goes by.

Against this background it is our expectation that the large disparity between supply and demand which now exists could disappear within the time scale envisaged. Shipyards throughout the world which have no ships, or fewer ships, to build will cut back. The purpose of the Bill is to alleviate the social effects of that part of this worldwide process which this country is unable to avoid. It is not to put shipyard workers in a privileged position in the ups and downs that are part of ordinary industrial life.

The scheme will be implemented by means of orders laid before Parliament and subject to affirmative resolutions of both houses. Parliament will accordingly have adequate control over the terms of the scheme. The other reason for proceeding in this way is that the schemes will inevitably be very detailed indeed, especially if we are to ensure that they operate fairly between different individuals.

In the first instance, payments will be made by British Shipbuilders and Harland and Wolff directly to the workers who benefit, and the Government will reimburse the two undertakings both their expenses in operating the schemes and the payments made under them. At my request, a basic scheme has been worked out in consultation between British Shipbuilders, Harland and Wolff and the Confederation of Shipbuilding and Engineering Unions. It is now being studied by the Government. Only the broad structure has so far been proposed and a great deal of work still needs to be done on the detailed provisions. When consideration within the Government has been completed, I shall need to have further consultations with British Shipbuilders and the CSEU to arrive at a scheme that I can recommend to the House.

Until these consultations have been completed, I obviously cannot say very much about the proposals. What I can say, however, is that they envisage a combination of a lump sum payment based on age and length of service plus an income support payment based on length of service only and payable during the subsequent period of unemployment for up to two years. However, as I have indicated, the full details of the schemes will be laid before the House as soon as agreement is complete and draft orders can be prepared.

As to the cost of the schemes, everything will obviously depend on how many men qualify for benefit during their currency and, as I have already said, we do not intend to fix any target for across-the-board contraction. For any arbitrary figure for the number of beneficiaries there are still many variables which can affect the total cost. In general, for example, payments will tend to increase with age and length of service. If the take-up is predominantly among the higher age groups, as might happen in a general slimming-down process, the average payment and the total cost will be higher than would be the case if take-up were to be spread across the full age range, as in the event of a closure.

Once the full details of the schemes are prepared, it will be possible to offer some illustrative examples based on age and length of service data, as has been done for past schemes in the Explanatory and Financial Memorandum to the bill. In another debate in the House last month the hon. Member for St. Ives (Mr. Nott) suggested on behalf of the Opposition that higher levels of payment than those mentioned in the memorandum would be justified. I share that view. Indeed, I would expect the cost of the scheme which I bring forward to the House to be higher than the illustrative example for previous schemes given in the Explanatory and Financial Memorandum.

This is a measure which everyone can agree is needed to meet the consequences of a unique world problem faced by the shipbuilding industry and to mitigate its effects on workers in this country. I therefore hope that it will be accorded a speedy passage, both in this House and in another place.

I commend the Bill to the House.