Orders of the Day — Shipbuilding (Great Britain)

– in the House of Commons at 10:30 pm on 26th July 1982.

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Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames 10:30 pm, 26th July 1982

I beg to move, That the draft Shipbuilding (Redundancy Payments Scheme) (Great Britain) (Amendment) Order 1982, which was laid before this House on 5th July, be approved.

Photo of Mr Enoch Powell Mr Enoch Powell , South Down

On a point of order, Mr. Deputy Speaker. I wonder whether it would be for the convenience of the House if you would be prepared to take this and the next order together. They involve the same principle, and from the point of view of Northern Ireland we should be happy to have them debated together.

Photo of Mr Donald Dixon Mr Donald Dixon , Jarrow

Further to that point of order, Mr. Deputy Speaker. The shipbuilding industry is under threat in many areas and many hon. Members wish to speak on this order. I therefore suggest that the orders be taken separately, so that hon. Members have the full time in which to put constituency cases.

Photo of Mr Ernest Armstrong Mr Ernest Armstrong , North West Durham

Unless there is unanimous agreement that the orders be taken together, they must be taken separately.

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames

The purpose of the order is twofold: first, to prolong the shipbuilding redundancy payment scheme to 30 June 1985, the maximum period permissible under the statute; and, secondly, to improve the benefits under the scheme.

As to the prolongation of the scheme, I should first assure the House that this should not be taken as an ill omen for the industry or any cause for alarm. As I told the House in April, British Shipbuilders has made striking progress in financial terms from the depth of the shipbuilding recession. Losses have declined from £110 million in 1979–80 to the very creditable result last year of £19· million loss. Order books now stand at around 540,000 compensated gross registered tons compared with a low of 400,000 tons this time last year. British Shipbuilders has increased its market share to 2·5 per cent. of world new orders, which is the best result of any year since vesting day. These results were obtained in what the chairman has described as "generally difficult trading conditions" and undoubtedly much of the credit must lie in the painful steps which the corporation has had to take to make itself more efficient. The Government have fully supported the corporation in that, to the extent of nearly £600 million since we came to office.

British Shipbuilders' recent report also discloses problems ahead. On merchant shipbuilding, the chairman states that the world industry is beginning to feel the effects of a deepening recession in the shipping market. He comments that the current offshore boom which started in 1980 is coming to an end and that ship repair has suffered very poor trading conditions. As the House knows, on 15 July British Shipbuilders announced major restructuring plans designed to restore the ship repair division to viability. As the chairman stated, the immediate market prospects overall for the corporation for 1982–83 do not look encouraging.

Not all the news is bad. British Shipbuilders clearly stands to benefit from the consideration being given to the ship replacement orders following the Falklands operation, and the current naval construction programme is being pressed ahead as rapidly as possible. British Shipbuilders and the private sector ship repair companies are benefiting from the refurbishment of merchant ships as they return from the task force. I know that the House is interested in one particular order, and before I sit down I shall say a word about that.

In this context, the House will also be interested to know that we have decided to relax the rules on credit for conversions. When we extended the scope of the home credit scheme to conversions in 1979, the normal credit period was limited to five years. In view of the increasing importance of conversion work to the ship repair industry, we have now agreed that for a period of 12 months credit of eight-and-a-half years should be available under the home credit scheme as a matter of routine for all conversions with a contract price of over £1 million. I know that this will be welcome to the industry.

The House will be interested and pleased to know that the European Commission has recently given approval to a further tranche from the intervention fund of £20 million both for British Shipbuilders and the private sector until the expiry of the fifth directive at the end of December. The future of the intervention fund after December will need to be considered against the background of discussions in the early autumn on what Will follow the fifth directive.

Against the background of British Shipbuilders forecasting more difficult conditions ahead, it would clearly be prudent to prolong the shipbuilding redundancy payments scheme, but we must all hope, as the chairman has said, that British Shipbuilders can take these conditions in its stride and press forward with its plans.

I turn now to the case for improving the scheme. The scheme was first introduced in 1978 with retrospective effect to British Shipbuilders' vesting day. Since then, while the framework of the scheme has remained unaltered, the benefits available for those over 40 have retained their value in real terms through annual adjustments in the ceiling for reckonable earnings in line with the general redundancy payments scheme. The maximum level of those earnings has gone up from £100 in 1978 to £135 now.

On the other hand, the lump sum of £300, which is all that is paid to the under-40s under the scheme, has lost considerably in real value, and to restore its 1978 purchasing power about £500 would now be needed. This has tended to overlook the hardship of redundancy for younger men, and the main thrust of the order is to remedy that situation and to give a better deal to the under-40s.

We have also received representations that the terms of the scheme are unfair to middle management, because of the effect of the £135 a week maximum. However, the scheme has proved to be very cost-effective. At a cost of about £55 million to date, about 20,000 employees have been persuaded to accept redundancy with relatively little industrial disruption. Although there are other costs associated with closure, this compares with an annual saving in British Shipbuilders' manpower costs of more than £150 million. None the less, the effectiveness of the scheme on the present terms has clearly been diminishing.

The effect of article 2(3) is to revise the provision for the payment of lump sum benefits so that the sum for the under-40s is related to age and service in place of the current flat lump sum of £300, which is paid to all people under 40. From now on it will be related to both age and service—as with those above 40.

For a person of 25 with five years' service and earning £100 a week, the benefits will be £1,000. A person of 39 with 20 years' service earning £100 will receive £4,000 plus an age amount of £450, making £4,450 in all. The minimum entitlement is £500, which is received by all those over 19 with more than a year's service.

The proposals will also give some improvement in benefit to the over-40s. This is done partly through a modest improvement in the lump sum through the new age table set out in schedule 1, but chiefly through the new multiplier in schedule 2, which links the length of service element with the previous earnings to determine the larger part of the lump sum and the whole of the sum that is available for income support. It is right that only the over-40s should be eligible for support payments, as they have greater difficulty finding new work.

The third major improvement is the new definition of previous earnings which entitles scheme beneficiaries to have their benefits based on one and a half times the maximum under the Employment Protection (Consolidation) Act—that is, up to £202·50 a week at present. This has been a subject of considerable concern to management and representations have been received from SAIMA among others. The new definition appears in article 2(1)(b). We hope that it will help middle management. I know that this is a matter of concern to the hon. Member for Bristol, North-East (Mr. Palmer).

One effect of the changes is that the maximum entitlement under the scheme will go up from £11,550 to £17,200. This is very much a theoretical maximum. It would apply only to someone with 20 years' service who earned over £200 a week. The increase on the previous earnings maximum is the chief factor. A man of 50 with 25 years' service earning £130 a week would have received £10,335 in all under the scheme if he remains unemployed. This is now increased to £10,900.

I apologise for bombarding the House with these figures. It is, however, important, if hon. Members are to judge the scheme, that they should see the sort of lump sum payments and income support payments that will be available under the scheme. I shall place in the Library a table that will set out some examples of the changes although there are many combinations that one can take. British Shipbuilders will be publishing an updated version of its booklet giving advice and explanation on the working of the scheme.

To date, scheme beneficiaries—this is the best statistic to give the House an overall impression—have been receiving, according to British Shipbuilders, about £3,700 on average. British Shipbuilders calculates that this will go up to an average of about £5,000. The proposals have been discussed extensively with British Shipbuilders' unions and management and are broadly acceptable to both.

Another alteration in article 2(4) increases the minimum weekly income support payment from £10 to £20 a week. This means that those who are receiving only modest payments will receive them twice as quickly. This goes some way to deal with the problem raised by the hon. Member for Glasgow, Central (Mr. McTaggart) from time to time—the interaction of these payments and supplementary benefit. For people on very low incomes, this will go some way to modify the problem to which the hon. Gentleman has drawn our attention.

One of the technical amendments being made is to ensure that all work on the construction of mobile offshore installations is in future brought within the scope of the scheme. This is achieved by articles 2(1)(c) and 2(1)(e). Now that these activities are an essential and important part of British Shipbuilders' work, it is important that the rights enjoyed by men engaged in them are the same as those working in more traditional fields of British Shipbuilders. This is a technical amendment, and such employees, if they become redundant, are for the most part already covered under the scheme.

I emphasise that the timing of the change should cause no particular concern. It should not be inferred that a substantial number of such redundancies are imminent. It is merely that, as currently drafted, the scheme does not apply to offshore work before vesting day, of which there was very little, nor to employment in this work by those who have joined British Shipbuilders since vesting day. Fairness dictates that those engaged on offshore work should share with those elsewhere in the corporation equal rights to benefit under the scheme.

I turn to another technical amendment. British Shipbuilders has made a frequent practice of making payments of 12 or 13 weeks' pay "in lieu of notice" to its employees who have accepted redundancy. Views have been expressed that such a payment may in some circumstances rank as a company scheme within the meaning of article 11 of the redundancy payments scheme. If that is the case, the payments made to the employee under the so-called company scheme would be deductible from those paid under the redundancy scheme proper. It is desirable that British Shipbuilders should have the discretion to make those payments in lieu of notice without the risk that, in some cases, the payments might be held to be deductible.

We have taken the opportunity in article 2(6) of the draft order to clarify the position by ensuring that such payments up to a maximum of 13 weeks are not to be regarded as company schemes, so there is no risk that they might be held to be deductible. That will afford British Shipbuilders some discretion and flexibility to use payments in lieu of notice as an added inducement to their employees to accept redundancy.

The growth in the practice of making payments in lieu of notice has had a unwelcome side effect and we are taking advantage of the opportunity in the order to rectify it. Before the making of Statutory Instrument 1981 No. 315 in March last year, one requirement for receipt of the weekly support payments under the scheme was that former British Shipbuilders' employees should, if unemployed, be registered for employment. But the 1981 order altered that and provided that, to become eligible for benefit under the scheme, an employee also had to be eligible for unemployment benefit or, if he was ineligible, it had to be the case that he would have been eligible but for falling within one of seven listed categories, for example, that he was sick or had become self-employed in the meantime.

When my right hon. Friend the Secretary of State for Employment gave the reasons for that change in Committee in February last year, he said that the amendment was so designed that the new link with unemployment benefit did not disentitle anyone who would otherwise be entitled to receive benefits under the scheme. Assurances to the same effect were given in other places. We have since discovered that we had not allowed for a complex position, which is when pay in lieu of notice was granted by British Shipbuilders to the employees who accepted redundancy and the period in respect of which pay was given was longer than the period to that employee under the Employment Protection (Consolidation) Act 1978. The period for lieu of notice payments exceeded the statutory notice period and, for that excess period, a person could not receive benefits under the scheme. Therefore, we are taking action under the Appropriation Act to protect those who are currently receiving benefit under the scheme and who are at risk of being affected by the position. They are receiving the scheme benefits in full.

To put the matter right for the future and to ensure that the assurances given by my right hon. Friend are scrupulously honoured in their entirety, the Government are widening the definition of "unemployed person" so that it includes as an eighth proviso the receipt of pay in lieu of notice for the day in question. That is done in article 2(1)(d) of the draft order. I apologise for the complexity of the explanation, but it is a difficult and important matter.

Naturally, I hope that little use will be made of the scheme and I have emphasised many times that it should not be interpreted as ushering in an era of great difficulty for British Shipbuilders. I hope that that company can take in its stride the less encouraging outlook that has developed in the market. The Government will certainly give it all the help that they can.

I am sure that the House would expect me to say something about the Cunard requirement for a container ship—the so-called replacement for the "Atlantic Conveyor". We are not expecting an announcement until the end of this week. As Lord Matthews said, the gap between British Shipbuilders and its competitors is very large, but we are continuing to explore ways of bridging that gap. We are anxious to find a way.

I commend the order to the House. In the Government's view, it is clearly right, given the less encouraging market and the resultant uncertainties, to prolong and enhance the scheme.

Photo of Dr Jack Cunningham Dr Jack Cunningham Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Industry) 10:49 pm, 26th July 1982

A debate on this order relating to improvements in redundancy payment provisions in British Shipbuilders is both timely and apposite. I congratulate the Minister of State on the careful way in which he explained the amendments. My hon. Friends and I appreciate his proposal to place tables in the Library so that we may consult them. I do not agree that this measure is not an ill omen, but it is perhaps symptomatic of the times in which we live and the difficulties now facing British Shipbuilders.

Unemployment is already more than 3 million, and is high in those areas where British Shipbuilders has its main operations—the Clyde, the Tyne, The Wear, Teesside, Merseyside and—these days, under this Administration—on the South Coast and in the South-West. There is no doubt in the minds of thousands of men and their shop stewards and full-time officers in the industry that they face a crisis of impending redundancy. It is only a matter of days, and well within the memory of the House, since an announcement was made affecting possibly 1,500 shipyard workers on the Tyne, in South Shields and Jarrow. If those redundancies are confirmed, it will be a catastrophe for South Shields. The Minister of State should be in no doubt about that. So, to say that this debate should not be taken as a portent of trouble to come is the understatement of the week. Disaster is already facing the 1,500 shipyard workers and their families.

I agree with the Minister of State—and, for that matter, the managemer.t of British Shipbuilders—that there is likely to be a further decline in demand for ships because of the recession. Orders for new vessels have decreased, compared with the last year. All our information leads us to conclude that that situation is likely to obtain for a number of years—forecasts say until perhaps the mid-1980s.

Photo of Mr Harry Cowans Mr Harry Cowans , Newcastle upon Tyne Central

I thank my hon. Friend for giving way. He says that there seems to be a decline in orders for new ships, but there is one outstanding type of ship for which there is no decline. If the Government were to take some action, they could fulful the Minister's hope that this document would be used very little. If he put his money where his mouth is straightaway, we could deal with the shortage of other ships later.

Photo of Dr Jack Cunningham Dr Jack Cunningham Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Industry)

I agree, and I shall come to that matter in a moment.

The House recently debated the hiatus in naval orders, which, again, is the result of this Government's policies. That shortfall in expected work for British Shipbuilders had a major impact on the Clyde, the Tyne and the Mersey. Redundancies are likely to result. Again, the Minister of State was less than candid about the likely impact of Government policies on jobs for shipyard workers.

It may sound reassuring and comforting to people outside who listen to or read this debate and see the sums that the Minister mentioned, but the effect of redundancy payments has gone well beyond their original intentions. The number of jobs disappearing as a result of men being offered large sums to leave industries, with little thought of the long term, when they are young and middle-aged men, is a grave cause for concern.

I and many of my hon. Friends know, representing industrial areas as we do, the problems that are now being faced by people who, within the past few years, have taken significant sums of money to leave industry only to find that the money does not last for ever. Those large, attractive, sums soon run out when the bills come in. The long-term social consequences for them, their families, the communities and the country as a whole should be considered seriously. However, that is a subject for another debate that we cannot go into detail on tonight.

Workers in British Shipbuilders have steadily and consistently over recent years been improving their productivity and performance since vesting day in 1977. As is demonstrated by the report published a few days ago on the accounts for 1981–82, the corporation has stayed within the cash limits set down by the Government. Wage negotiations have again been moderate, and excellent team work throughout the corporation has again helped to increase productivity. All that has taken place against a background of reduced financial support from the Government.

The Minister mentioned the intervention fund. Of course, that is welcome, but I would remind him that in 1977 the fund was originally established at £65 million and later increased to £85 million with a much greater percentage of support for any one particular order than exists at present. In real terms the amount of support that the Government are now giving through the intervention fund, taking inflation into account, is nothing like the amount of support that British Shipbuilders were being given at that time.

I disagree with the Minister, as I am sure do my hon. Friends, that the prospect is anything like as rosy as he tended to suggest for workers in the shipyards. The future for many of them is grim and threatening. I mentioned the Tyne redundancies, announced last week. Recently several of my hon. Friends and I met representatives of workers from the Tyne yards as a whole. They left us in no doubt that, come the autumn of this year, without further significant orders, many hundreds, if not thousands, more jobs are likely to be put at risk.

That is rather strange to those workers who, a few months ago, saw the P and 0 order for a major cruise ship go abroad and, more recently, a Furness Withy line order go abroad. Now they contemplate the prospect of the replacement for the "Atlantic Conveyor" going abroad, on this occasion probably to the Far East.

The Government's policies and attitudes do not appear strong enough to the workers. Such work as the early delivery of the "Ark Royal", HMS "Illustrious", HMS "York" and HMS "Liverpool", from the Clyde down to the South Coast, has been praised over and over again by the Royal Navy, newspapers, management and the Prime Minister herself.

I shall read out some of the comments that appeared on the work done on merchant vessels and conversions for the task force. Round the Clock Working as race is on to finish warship orders … Yards respond to the Falkland crisis. And again, 'Busting their guts' for the Falklands—HMS 'Liverpool' is completed well ahead of schedule. Such comments have come from all sides on the efforts made by the shipyard workers.

The men have also been delivering merchant vessels early. However, early delivery brings them face to face, not with more orders or Government support, but with the dole queue. That is the result of improving productivity and of responding to pleas from the Navy and Government Ministers to get those vessels down the slipway. No one can complain about the perfomances of British Shipbuildiers and its management and men.

Photo of Dr Jack Cunningham Dr Jack Cunningham Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Industry)

No one can complain because in many cases not only has productivity improved—despite what the hon. Gentleman says—in leaps and bounds but British Shipbuilders' tenders are the lowest in Europe. As the Minster recently confirmed in a letter to me, British Shipbuilders has a statutory duty to have regard to the requirements of national defence in maintaining a shipbuilding capability. How is it to be able to maintain that capability if hundreds of millions of pounds of orders in the past three years, and under the Government's policies, are to continue to go abroad?

British Shipbuilders is told that it must be competitive, but it is competitive with any firm in Europe. Indeed, 60 per cent. of its present merchant order book is for export.

When we talk about competition, we are discussing not competition with Europe or even with the United States of America but about competition with one part of the world, the Far East and Japan and Korea. British Shipbuilders does not consider that that competition is based on market forces or, indeed, that it is fair. We have some sympathy with that point of view, and we are not alone.

The Institute of Shipping, based in Bremen, says the same thing. A recent article in Lloyd's List states: South Korea 'poses a threat to the world's yards'. The threat is posed not only to British Shipbuilders but to world shipyards. It is common knowledge that these days, the Koreans take the Japanese price and then promise to deliver for 5 per cent. less, regardless of other costs. Many people—not only those in British Shipbuilders—will argue that many of those tenders will barely pay for the cost of materials and labour. Therefore, when talking about competition, we should be talking about competing on an equal basis, with equal levels of support, equal financial arrangements and equal costs for borrowing and the funding of orders. We shall then discuss something that matches like with like.

Photo of Mr Dale Campbell-Savours Mr Dale Campbell-Savours , Workington

Is it not significant that under article 92 of the Treaty of Rome, the payment of State aids and subsidies to companies and industries within the EEC is prevented, although we are willing to buy from countries that pay those subsidies? Is there not a contradiction?

Photo of Dr Jack Cunningham Dr Jack Cunningham Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Industry)

The general view is that the Government are trying to play the game by one set of rules and other Governments are playing an entirely different game.

Photo of Dr Jack Cunningham Dr Jack Cunningham Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Industry)

I shall not give way as I wish to make a brief speech and I have already given way twice.

Are not the workers in our shipyards worth something in return for the efforts that they have made both recently, and in the past few years? Do not those people and their families—the men who were lionised in the press during the Falklands crisis—have a future? Should they continue to make a contribution to our trade and defence effectiveness? We are a major maritime nation. Do we need a shipbuilding industry? The answer to those questions from the Opposition, and the Labour Party in particular, is an unequivocal "Yes". There is no such clear commitment from the Government, who cannot make up their minds whether we should maintain a major shipbuilding capability.

In the first quarter of the year more than 60 per cent. of all OECD orders went to the Far East. The General Council of British Shipping has drawn attention to that problem, as have others in other countries. The position will continue without more aggressive Government support. British Shipbuilders, the Confederation of Shipbuilding and Engineering Unions and the National Union of Seamen call upon the Government to have a maritime strategy, and we subscribe to that approach. How can we stand aside from this serious and deteriorating background? How were the Swedish Government able to intervene a few days ago to ensure that three container ships in the same consortium as Cunard are to be built in Swedish yards? Is there any doubt that the French vessel will be built in a French shipyard? If those vessels were for an American line they would be built in an American shipyard.

Taxpayers are making a significant contribution to enable Cunard to replace the "Atlantic Conveyor", and it seems incredible to most people that it will not be, and cannot be, built in a British shipyard. I shall return to the subject of the "Atlantic Conveyor" shortly. The Government have even created difficulties for British Shipbuilders over the sale of HMS "Invincible". If they had not reneged on their agreement with Australia there is a strong possibility that they would have ordered another vessel from British Shipbuilders. I say to the Government and the Navy "The Tyne workers can build another 'Invincible,' but the Navy cannot build another Swan Hunter." If Swan Hunter's yard and facilities are allowed to go they will almost certainly never be replaced.

Against a background of orders lost to the Far East and British shipping lines going abroad for their ships, how can the Minister say that redundancy is not likely to grow and threaten shipyard workers? If Cunard eventually places an order in the Far East, the country—this issue cuts right across party boundaries—will greet the decision with derision. How will British Shipbuilders survive as maritime shipbuilders against that background? Mixed yards like Swan Hunter are dependent upon both naval and merchant shipping orders for research and development, design, material ordering, and union co-operation. "Why co-operate when all that the future offers is to work oneself out of a job?" is what shipyard workers are asking. They feel that Lord Matthews and the Government do not give a damn about their future. The prize for working for Great Britain and the task force is a place in the dole queue. Praise in the Daily Express and other newspapers is empty rhetoric when workers are faced with that prospect. Patriotism does not pay the bills for these workers and praise does not fill the slipways. Only orders for ships do those things. The shipyard workers want actions and not words.

The Minister of State says that there is a ray of hope. We welcome that. We think that there is no reason why the Government should not be saying categorically after weeks of argument, vacillation and delay, that the order will be coming to Britain. Cunard will get at least £10 million worth of taxpayers' money and people of all shades of opinion believe that that money and the money for the order should be spent and invested in Britain. Cunard and the Government should work harder to bridge the gap. They owe that to our shipyard workers.

Among other things Lord Matthews is the proprietor of the Daily Express. Underneath the title of the newspaper the following appears: "The Voice of Britain". Bearing in mind all that has gone before, if this order goes abroad shipyard workers will conclude that the voice of Britain as expressed by Lord Matthews is a voice that speaks with a forked tongue.

Photo of Mr Arthur Palmer Mr Arthur Palmer , Bristol North East 11:12 pm, 26th July 1982

I shall not speak for long at this declining time of night. Bristol is not a shipbuilding port, although it once was. The "Great Britain" was built at Bristol, but that was rather a long time ago.

I wish to raise the rather narrower issue of redundancy payments and the position of middle management employees, who are much affected by the level of the payments because of the upper limit of the scale. I must declare an interest because the Shipbuilding and Allied Industries Management Association is part. of the Engineers' and Managers' Association, which is my union. My general secretary has corresponded with the Secretary of State on this issue and I have personally corresponded with the Secretary of State.

The situation that arises in shipbuilding redundancy payment schemes is one that could apply elsewhere, but it is especially significant in this debate. There is a real discrepancy these days between the upper limit of earnings counting for redundancy payments and the upper limits which count for national insurance purposes. In 1965 the upper earnings limit for national insurance purposes was £18 and for redundancy payment purposes it was £40. By 1982 the national insurance contributions upper limit became £220, and for redundancy payments it was £135. There has been a complete reversal in 17 years. There have been certain charges in State pension arrangements which have had an effect on the percentage rates charged to employers and employees, but the operation of the national insurance fund has remained basically unaltered for a long time.

In contrast, the amount of earnings upon which national insurance contributions are levied has increased at a far faster rate than the earnings limit that counts for redundancy payments. It is appalling to see the discrepancy between the two scales. I am the first to admit that the process occurred under successive Governments—notably in 1972, 1973, 1976 and 1977—but there has been a much greater rate of change since 1979. Therefore, since 1979, the upper earnings national insurance limit has increased by 63 per cent., but the limit on pay for redundancy purposes has increased by barely half that, at 32 per cent.

Successive Governments have increased percentage contribution rates for national insurance when unemployment has risen. The original intention of the Redundancy Payments Act 1965 was to compensate those who became unemployed. The effect of Government policy has been insidious. In 1965 the maximum level of earnings for redundancy pay was 223 per cent. of average male earnings, but by 1981 it had declined to 93 per cent. In short, the system discriminates particularly against the somewhat higher paid employee, which was never the original intention.

From the correspondence that I have seen, the minsterial answer is this. I hope that the Minister of State will deal with it. It is that we can now depend more and more upon extra-statutory redundancy payments. That is an unsatisfactory state of affairs because there is nothing positive about that. It depends upon trade union strength and the situation in a particular industry. Non-statutory redundancy is uneven and uncertain. It also discriminates against the public sector.

The Shipbuilding (Redundancy Payments Scheme) (Great Britain) (Amendment) Order enables me to draw attention to a bad trend that does not always get the attention that it deserves. I confess that there have been some improvements in that scheme, due to strong trade union representations, in which my union played its part, particularly on the length of service, age limits and so on, but the fault of the difference between national insurance limits and the upper level of redundancy payments remains.

Photo of Dr David Clark Dr David Clark Shadow Minister (Business, Innovation and Skills), Shadow Spokesperson (Education) 11:17 pm, 26th July 1982

I have participated in several of these debates over the years. The report the following day in the Daily Express and other such newspapers states: "Golden Handshakes for Shipyard Workers." The Minister smiles. He has seen such reports. I re-emphasise the point that he made. We are not talking about vast sums of money. As the Minister said, from 1980–81 the average was £3,700—not a great deal when a career and a job are being sacrificed.

One survey conducted in 1979 showed that only 4 per cent. of the people made redundant at that time were eligible for £5,000 and that well over half of those made redundant would get less than £1,000. Since then the figures have risen, but the amount is small compared with the sacrifice that the men and the communities are making.

I make this point strongly. We are talking not only about jobs here and now, filled by individuals, but about the future for many communities, the seed corn and the young people who come into the industry. When people sell their jobs in this way, they are often selling the future of their community and their district.

The Minister said that support payments would not be paid to the under-40s. He used the word "naturally" or "understandably". It is not natural or understandable. In the areas of major shipbuilding there is massive long-term unemployment. In Tyne and Wear alone over 80,000 men are seeking jobs. One-third of them have been out of work for more than 12 months. It matters little whether one is 30 or 50. If one is out of work and a shipyard worker on the Tyne, one will be unemployed for many years. I hope that the Minister will look at that matter for future occasions.

The Minister said that he thought and hoped that little use would be made of the scheme. I wish that I could share his confidence. His phrase "little use" will sound to my constituents like a classic cliché. The Minister knows that 10 days ago the Government's financial constraint on British Shipbuilders resulted in the town that I represent being decimated. British Shipbuilders announced that there would be about 1,500 redundancies in the ship repairing industry. All the repair yards in South Shields, which have been building ships since Roman times, are to be closed. The planners estimate that for every job in the yard there are three jobs outside. That illustrates the effect on towns such as mine.

Already the area has 29 per cent. male unemployment. I do not exaggerate. If the redundancy scheme goes through, we shall be talking of about 40 per cent. male unemployment. Yet the Minister says that he hopes that little use will be made of the scheme. I hope so, too. My hope and his hope will be realised only when he is prepared to take action.

The Government are about to pay £10 million to Cunard. What is the total extra cost of labour of the scheme? Is it more than £10 million or less than £10 million? When I consider that sum, I think about the building yards on the north side of the town. I note the lack of orders. I realise that the Government are contemplating allowing a firm to build a vessel overseas. I fail to comprehend that.

I wonder why the Minister has not been frank with the House. Perhaps he does not know. Before I came to the House tonight I heard the news. The Secretary of State for Defence has decided to give £3 million to Cunard if it builds a ship in the United Kingdom. Why did the Minister not tell us that? Was he not told? If he was not told, he should find out what is happening.

It should not be a question of the Government trying to bribe Cunard to build that ship in the United Kingdom. Does Cunard not realise that men died on the ship that it is to replace? Is there no patriotism? I have been reading newspapers from the First World War, when there was a great debate about conscription. One of the arguments was "When there is conscription of labour, why should there not be conscription of capital?" The near traitorous action by the Cunard directors, who are prepared to put profits before their country, gains no support among the ordinary people of our country.

I demand that the Minister takes action to retain jobs for shipyard workers. We have needed shipyard workers in the past—and, by God, we have needed them in the last two or three months—and we shall need them in the future. We want some action.

Photo of Mr Ian Wrigglesworth Mr Ian Wrigglesworth , Teesside Thornaby 11:24 pm, 26th July 1982

I do not disagree with many of the remarks from the Opposition side of the House, but I should like to add some words in support of the orders and on the background against which they are presented.

The House should agree to the orders. The schemes should be extended and the basis of lump sum payments should be changed. The limit on the previous earnings rule should be increased. That is all acceptable, fair and equitable, but the House should pass the orders with a heavy heart. I wish that they were not necessary.

A sad state of affairs confronts us in the shipbuilding industry. Other hon. Members have mentioned the unemployment levels in their constituencies. I tell the hon. Member for South Shields (Dr. Clark) that we already have male unemployment rates of over 40 per cent. in some parts of Middlesbrough, and I am sure that that is also the case in his area.

We have lost 100 ship repair jobs at Smith's dock and 900 further redundancies were declared by the British Steel Corporation this week. A threat also hangs over the ICI petrochemical complex on Teesside. I sometimes think that those in other areas do not appreciate the scale of the disaster that is hitting people's lives in the North-East.

The prospects are extremely grim. The Government must take a share of the blame not only for the domestic situation, which we tend to concentrate on in the House, but for some of the international situation, which affects shipbuilding much more than some other industries.

When the right hon. Member for Cardiff, South-East (Mr. Callaghan) was Prime Minister he did much to try to get the strong economies in the world to reflate, to push the weaker economies into reflation and to increase demand in the world economy. The present Prime Minister and her Government have led the world in their monetarist, deflationary policies. Reagonomics and Thatcherite policies have become the norm throughout the Western world, and the result is the depression that faces the West.

The Government have as much responsibility to try to ensure that demand is increased in the world economy as they have to ensure an increase of demand in the domestic economy. Because of the present state of the British industry, the enhanced scheme will have to be used by British Shipbuilders. When the 1,500 redundancies on the Tyne and the Tees were announced, British Shipbuilders blamed the "appalling market conditions" and those words were taken up by the BSC in announcing its 900 redundancies on Teesside a few days ago.

No matter what the Government do to get inflation and interest rates down, to improve the other economic indicators and to make companies competitive—I am all in favour of that—it will all have been achieved for nothing if the demand is not there. People will still be going on the dole and will not have the jobs that they had in previous years and the jobs that they deserve.

Redundancy schemes will fuel inflation by increasing the public sector borrowing requirement and by pouring money into the pockets of non-productive people. The money will be spent not on productive investment, but on compensating people for losing their jobs. That is not the productive way to use public expenditure. It should come as no surprise that we are in the present state of affairs. The Government should realise, as has been made clear, that they are in truly exceptional circumstances with this industry—more so than with other industries in the world.

The hon. Member for Whitehaven (Dr. Cunningham) referred to the competition that we face from South Korea. I recently looked at some comments that were made earlier this year by the chairman of Lloyd's Register of Shipping, especially those relating to the development of the South Korean shipyards. He described it in the most forceful terms. He said that the development of South Korean yards was a most disturbing factor and that, inevitably, the work that comes from yards that are struggling for orders in other parts of the world is still substantial and that those shipyards would be a threat to British yards. They were the views not of Opposition Members but of the chairman of Lloyd's Register of Shipping, warning about what is happening.

That represents extra capacity on a world market that is already over subscribed. Everyone knows that. Therefore, how can we be surprised by the prices that are being quoted for the "Atlantic Conveyor"? We are told that the Korean yards quoted Cunard $58 million for the replacement, Japan $65 million, British Shipbuilders $80 million and others quoted up to $115 million. British Shipbuilders was by no means the most expensive, which is the impression that some people have tried to put around. But what an enormous gap. When compared with $115 million, can anyone believe that $58 million is a real market price? It is not. As has been pointed out, that price would not even pay for the materials, never mind the overheads and the manpower to build the ship.

I should like to know what the Government are doing to find out, so far as is possible through the available channels, how the discrepancy is arising. Is it the case that such a low quotation can be made by another yard on truly competitive terms, or is it, as we know from the passing of other industries, an example of a Government and a sector of industry pursuing a world-wide strategy to ensure that they capture the markets of the world? Are they intent upon undercutting the competition of other yards around the world, thereby forcing them out of business, and taking over those markets in the long term? In other words, are they pursuing the loss-leader approach over a long period of time to undermine our position?

The Minister shakes his head in disagreement. If that is not so, let us have the facts and understand whether it is exchange rates or other factors that affect prices that enable the Korean yards to quote prices that are so much lower than those of other shipyards in Europe, especially that quoted by British Shipbuilders.

The Government have a duty to the taxpayer, British Shipbuilders and its workers to discover why that discrepancy occurs. There would be much greater understanding and acceptance of the circumstances if it were discovered that the quotations were being made on truly competitive lines. I do not believe that for one moment but they might be a little more acceptable if that could be proved.

Photo of Mr Robert Cant Mr Robert Cant , Stoke-on-Trent Central

The ITV news broadcast mentioned by my hon. Friend the Member for South Shields (Dr. Clark) said in effect that Lord Matthews had got his sums wrong and that the price differential was not £15 million. Whitehall sources had said that it was only £6 million and that the Government were prepared to give £3 million towards that, so the loss would be only £3 million.

Photo of Mr Ian Wrigglesworth Mr Ian Wrigglesworth , Teesside Thornaby

As I was in the Chamber, I did not hear the 10 o'clock news, but I hope that what the hon. Gentleman says is true. Lord Matthews getting his sums wrong does not create great confidence in Cunard, but if it leads to the "Atlantic Conveyor" order going to a British yard we should find some consolation in that. Lord Matthews, Cunard and the Government have a duty to stop at nothing to ensure that that order comes to the North-East. The work is urgently required. The quality of the work done there and the effort that has been made have already been described. They are a testimony to the capability of those yards to carry out that work, and there is no justification for the order not going to them.

I hope that the Minister will take on board the message that the House has given him loud and clear today. In terms of both the "Atlantic Conveyor" and the general demand within the economy, the Government have a major responsibility to take action. Pouring money into redundancy schemes is not a way to create wealth or get people back to work but a waste of resources.

Concern has been expressed about the scale of the payments and the possibility of misuse. To me, however, it is not the level of payments that is wrong but the fact that alternative employment is not available. It is the way in which the economy is being run that is wrong, not the level of redundancy payments. My father left the steel industry with a pittance after working in it for 40 years. Such a tendency should not be perpetuated. If people have worked for 20 years or 25 years in an industry, they are entitled to a reasonable golden handshake of the kind to which only management has been entitled in the past. That is eminently justified and that is why the order should be approved. The fault lies in the way in which the economy is being run so that those people are condemned to the scrap-heap, in many cases for the rest of their lives if they are nearing retirmement age, and certainly for a great deal longer than should be the case.

Therefore, in supporting the order today, I hope that the Minister will take on board the points that have been made and will press his colleagues in the Government to introduce a package of measures in the not-too-distant future—if it is too late to do this before the Summer Recess, then certainly in the autumn—to try to get the British economy going again and to increase demand so that major industries such as shipbuilding get the orders that they should. The Government must also take action abroad to ensure that the international economy gets a boost, which can happen only if the kind of policies that the Government have been pursuing are ended not only here but throughout the world.

Photo of Frank Field Frank Field , Birkenhead 11:38 pm, 26th July 1982

In one sense I was grateful to the Minister today, because the longer he spoke the greater was the image of my grandmother rekindled within me. To the many choices and chances in her life she used to respond that half a loaf was better than no loaf at all. The longer the Minister spoke, the more that image came back to me.

When I visit the Cammell Laird shipyard, the message from the men is not that they are not grateful for improvements in redundancy payments, because of course they are, but their demand is for more work and they ask questions that I cannot answer. As the Minister hopes to respond briefly to the debate, I hope that he will have time to answer those questions. They ask how Parliament can find the time and the taxpayers' money to give them redundancy payments. More importantly, they want to know how Parliament can vote their money to pay unemployment and supplementary benefit but cannot find the money to keep them in work. They pose important questions about our national accounting. The money is available for redundancy payments and to keep men and women idle, but it cannot be found to support the shipbuilding industry to the extent that many hon. Members wish.

I was pleased with the new note struck by the Minister when he commented on British Shipbuilders' annual report. He commented on the striking progress. Indeed, he could have done a better job than British Shipbuilders, because the main table in the annual report setting out the cost to the Exchequer is presented in "funny" money. It does not take account of inflation.

If inflation is taken into account, and if one's starting point is the year in which the Government were elected, one finds British Shipbuilders' losses reduced 13-fold since 1979, cash requirements reduced three-fold and the subsidies going to the industry via the intervention fund have been more than halved.

The Minister was right to talk about striking progress, but what are the Government doing? They have come forward with redundancy payments but have not offered much other positive assistance to help the industry.

Part of the problem facing shipbuilding is that it is one of our old, staple industries. The conventional wisdom about those industries is that they are dying and the sooner we get rid of them the better. Yet a new industry is arising within shipbuilding. For example, the Cammell Laird yard in my own constituency has diversified considerably over the past few years. It is no longer concerned merely with shipbuilding but is massively concerned with offshore work. The skills that have been developed to meet those requirements are considerable. That is why Labour Members have pleaded with the Government to abandon their view of shipbuilding as an old, staple industry that must quietly be done away with. Instead, they should recognise that industry's success.

A number of forces in Merseyside have argued against those of us who have gone into the yard and told the men "The only hope of having a long-term future is to improve your productivity". Such forces have a vested interest in the yard not succeeding. However, Cammell Laird recently produced HMS "Liverpool" in four years instead of five.

People are now asking "Was it worth while making that effort and putting so many men that much nearer the dole queues?" All the Members of Parliament for the area have argued that it was worth while, but that will be proved only if there is another order.

The Government should look at British Gas and its placement of orders for Morecambe gas. It is making every possible effort to ensure that those orders go to British firms. Why do not the Government follow the policy outlined by the Secretary of State for Education and Science, when he was Secretary of State for Industry, who believed that the Government have a duty to use public sector orders to increase our efficiency? The Government have a major success on their hands. When will they find the time to debate, instead of redundancy payments, positive ways to encourage that success?

Photo of Mr Donald Dixon Mr Donald Dixon , Jarrow 11:45 pm, 26th July 1982

On every occasion on which the House has discussed the shipbuilding industry since the Government were elected the purpose has been to curtail the borrowing limits, to impose new cash limits or to extend the redundancy payments scheme. It is sad that hon. Members should welcome redundancy payments, when we know that these mean more jobs lost. However, those thrown on the scrap-heap have the right to be cushioned financially. The order bribes people into idleness.

Hon. Members are not discussing a few jobs. We are talking about the devastation, socially and economically, of whole communities that depend on the shipbuilding and ship repairing industries. My hon. Friend and Member for South Shields (Dr. Clark) remarked upon what would be the effect of 1,400 redundancies in South Tyneside. It seems ironic, in the aftermath of the Falklands war, that the spirits of the shipbuilding community should be so low. I think of those who worked so hard in the ship repair yards of the River Tyne to get HMS "Fearless" ready and the the "Illustrious" finished ahead of time and who are now threatened with redundancy. If the "Atlantic Conveyor" is built outside this country, it will mean that the Government are imposing unemployment.

Many people would regard the building of that ship in a yard outside this country as an act of betrayal by Cunard and Lord Matthews. It is no good Lord Matthews talking about patriotism during the Falklands war if his deeds show what patriotism means to him after the war. I saw the flags outside the homes of shipyard workers in my constituency at the weekend welcoming home their sons from the Falklands. Those sons, awarded medals for fighting the Falklands war, will be showing them to their parents who are standing in the dole queue.

We are not competing against Japanese, Korean, German, French, Swedish or Italian shipyards. We are competing against terms offered by Governments outside this country. It is a political game, and the sooner that the Government recognise that the better. It is no argument for the Government to say that they are curbing public expenditure, when the cost of benefit payments and losses of taxation and national insurance are taken into account.

The 14,000 workers paid off in the ship repairing industry will cost £7 million in benefits and loss of insurance and taxation.

The replacement of the "Atlantic Conveyor" will mean 25,000 tonnes of steel being produced by steel workers in this country at a time of crisis in that industry. Materials will account for 60 per cent. of the price of the replacement. Every year, British Shipbuilders places orders amounting to £550 million for materials and equipment. Ninety-four per cent. of purchases are made from United Kingdom companies. The major part of a ship's price is not controlled by British Shipbuilders. Even if the men in the industry agreed to work for no money, we could not compete with the Koreans.

The British shipbuilding industry and its workers have shown that they are willing to co-operate and that they wish to have a viable industry. Last year only 1 per cent. of working hours were lost through disputes. Since nationalisation in 1977, more than 100 bargaining units have been reduced to one. The workers have accepted the redundancies. Thirty-six shipping berths have closed. Employment on merchant ships has dropped from 38,000 to 18,000. The British shipyard workers now wish the Government to prove that they also wish to have a shipbuilding industry, which is vital to an island economy.

Photo of Mr Harry Cowans Mr Harry Cowans , Newcastle upon Tyne Central 11:50 pm, 26th July 1982

I shall be very brief, because I understand that the Minister may wish to tell us all the good news when he replies. I hope that he has some good news.

We must realise that the original Shipbuilding (Redundancy Payments) Act 1978 provided a cushion effect for men who were changing jobs. The Minister made great play of the fact, when he introduced the document, that it would be seldom used. I hope that in his reply he will tell us on what he based that assumption. I, as my hon. Friends, have met shipyard builders and repairers on the Tyne and the Wear. They have informed me—I suspect that they are much better informed than the Minister—that in the shipbuilding industry there will be no work after September and that in the ship repair industry here is no work now and nothing for the foreseeable future. On that basis alone, how can the Minister tell the House that he hopes that the scheme will be little used?

The tragedy is that we are not now talking about cushioning people when they change jobs. We are talking about closing down, on the Tyne and Wear and industry that will never be reopened. Although I appreciate that the trade unions are in favour of the scheme, I tell the workers to divide the redundancy payment lump sums by their wages and they will discover that they are selling out for peanuts.

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames 11:53 pm, 26th July 1982

I am in a dilemma because the last time that I talked to the House about taking the powers to enable us to introduce improvements in the scheme I was accused of being alarmist. The accusation was made that the fact that I was bringing the powers must mean that more redundancies were in the pipeline. Many interpretations were put on the fact that I had appeared at the Dispatch Box and was taking the powers. All that I wished to do tonight in my introductory remarks was to emphasise that the timing of the order was not related to a plan that had been put to me by British Shipbuilders. I wished to calm unnecessary fears.

At the same time, I emphasised—I have no intention of misleading the House—that the market outlook for shipbuilding is not good. I quoted what the chairman of British Shipbuilders said about that. The climate is difficult. I simply expressed my hope that we need not make too much use of the scheme. We all share that hope, but we know that the outlook for the industry is difficult.

Naturally, there have been comments about a replacement for the "Atlantic Conveyor". There is not much that I can add to what I have already said. I said that the Government were exploring ways of bridging the gap. The question of a possible Ministry of Defence involvement was raised. I confirm that the Ministry of Defence is involved in discussions with Cunard, along with the Departments of Trade and Industry, on a replacement for the "Atlantic Conveyor". Its usefulness in the Falkland Islands has led the MoD to take an interest in its replacement, but it is too early to comment on the results of the discussions.

The hon. Member for 'Whitehaven (Dr. Cunningham) mentioned the reductions in the intervention fund. There has been a reduction, and it was deliberate Government policy. The same has happened throughout Europe. It is a European policy to cut back shipbuilding aids, because subsidies are having a counter-productive effect. They are increasing capacity and driving down the price of ships, and that is not in the interests of the industry. That is why Europe feels that it should cut back subsidies so as to be in a better position to meet competition from the Far East.

The hon. Member made a forceful speech, in which he struck new heights of oratory that we had not expected in this debate on a statutory instrument. However, at one point it was not attached to terra firma at all, and that was when he talked about subsidies and the fact that there is not a free market in shipbuilding. He asked why we were playing according to the rules when everyone else was cheating. He ignores the fact that this Government have given considerable subsidies to British Shipbuilders. It is a travesty to suggest that we are alone in the world—would that it were true—in cutting back subsidies. We have given considerable amounts. In public dividend capital, intervention fund assistance and other assistance we have given nearly £600 million of subsidies to British Shipbuilders since we came to office.

The problems arising from Korea and Japan cannot simply be dismissed as ones of subsidies. I recently visited Korea and the Hyundai shipyard and saw the advantages there of modern equipment, lower wages and very high productivity. People work there on Saturdays and Sundays. They have tremendous advantages. It is not simply a question of subsidies. That is not the answer. We must strive to become competitive and improve our productivity.

The hon. Member for Whitehaven mentioned maritime policy. He would like British owners to place more orders in British yards. Of course, we should like that, but we must have regard to British shipping, which is an important economic interest. He accused British shipowners of putting profits before jobs, but he was Nearly in the position of putting shipbuilding jobs before shipping jobs, which are also important to this country.

The hon. Member for Thornaby (Mr. Wrigglesworth) came back to the usual argument—it is all a lack of demand in the economy, as though somehow shipping is not a world-wide market. Whatever else our Chancellor of the Exchequer does, he does not determine the demand for ships in the world. I should have thought that the hon. Gentleman must know that.

However, he had his answer to that too—that it is the Prime Minister and the Chancellor of the Exchequer who have inflicted their economic policies on the rest of the world. He endows the Government with great powers of persuasion. I venture to suggest that it is not so much the powers of persuasion, but the facts and obvious rightness of those policies that has led other countries to adopt them.

I stick to the view that I expressed at the beginning of the debate. Of course, we want to see British shipbuilding prosper. Of course, we do not want to see increasing redundancies. However, we have felt it right to present the order to the House. It makes substantial improvements in the terms for those who are in the unfortunate position of losing their jobs. Those improvements in that scheme have been and will be widely welcomed in the industry. I commend the order to the House.

Question put and agreed to,

Resolved,That the draft Shipbuilding (Redundancy Payments Scheme) (Great Britain) (Amendment) Order 1982, which was laid before this House on 5th July, be approved.