Orders of the Day — Shipbuilding (Northern Ireland)

Part of the debate – in the House of Commons at 11:53 pm on 26th July 1982.

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Photo of Hon. Adam Butler Hon. Adam Butler , Bosworth 11:53 pm, 26th July 1982

I beg to move, That the draft Shipbuilding (Redundancy Payments Scheme) (Northern Ireland) (Amendment) Order 1982, which was laid before this House on 2nd July, be approved. There are separate but identical Northern Ireland and Great Britain shipbuilding redundancy payments schemes. Both were made under the Shipbuilding (Redundancy Payments) Act 1978. Our objective is to facilitate the orderly reconstruction of the United Kingdom's nationalised shipbuilding industry by providing financial assistance for employees who in that process are made redundant or are transferred to less well paid employment in the industry.

The benefits available under the schemes are the same for workers leaving both British Shipbuilders and Harland and Wolff. We have just debated an order dealing with the position in Great Britain. The order before us now proposes amendments to the Northern Ireland scheme which will preserve the position in Northern Ireland on a par with that in Great Britain. Although my hon. Friend the Minister of State, Department of Industry, dealt at some length with the scheme for Great Britain, as some hon. Members may not have been present to hear his speech, it would be proper for me to summarise the main points of the order.

The main effects of the amendments will be to extend the scheme for two years to 30 June 1985 and to make all redundant employees who come within the scheme, notwithstanding their being under 40, eligible for lump sum payments with a minimum of £500. The over-40s already receive periodic payments as well as a lump sum and that reflects the greater difficulty that individuals in this age group have in finding other work.

The benefits for the over-40s are also being upgraded, essentially by amending the tabulations used for calculating the entitlements of individuals under the scheme. In addition to this, the maximum weekly earnings limit for the purposes of the scheme is to be 150 per cent. of the maximum under the employment protection legislation. That figure would currently amount to £202·50 per week and the change will mainly affect those in the higher wage and salary brackets, particularly staff employees.

Together with various technical amendments, the changes that I have outlined will ensure that Northern Ireland shipbuilding workers who become redundant will continue to be treated no less favourably than their Great Britain counterparts.

In considering Harland and Wolff's immediate prospects, the Government have decided that it would be prudent to make provision for enhanced redundancy terms for workers leaving the company in the medium term. That Harland and Wolff is facing a difficult future is well-known, and I cannot hold out any prospect of immediate or easy solutions.

In the preceding debate much reference was made to the condition of the shipbuilding industry world-wide. The industry has been affected by acute depression, with little respite for several years. Prospects for the medium term remain gloomy. Demand for new oil tanker or dry bulk tonnage is not expected to improve significantly until 1985 at best. Freight rates are currently at a very low ebb and the glut of oil tankers is well-known and is underlined by the large number of tankers laid up throughout the world.

Moreover, Harland and Wolff operates at an end of the market—in large, relatively unsophisticated ships—which is particularly exposed to Far East competition. A recent study by the Association of West European Shipbuilders of the Korean threat to our yards showed that it was precisely in large bulk carriers that the Korean yards had the greatest cost advantages over Western producers. At the same time, several shipyards, notably in the Far East, are planning to expand their existing capacity. The market is therefore most definitely not in Harland and Wolff's favour, and so the company must clearly take very determined steps towards greater competitiveness if it is to weather the present and forthcoming difficulties.

The Government are fully aware of the company's present position and prospects. We recently agreed a package of aid for Harland and Wolff under which more than £47 million from public funds will be provided to the company in the current financial year. That comes on top of about £270 million of assistance in all forms which has been provided to Harland and Wolff since 1966, and the total is now equivalent to over £600 million at today's prices. One has to ask whether such a sizeable sum of money could not have been better spent, in part or in whole, in support of other Northern Ireland enterprises, or put to reducing the overall burden of taxation.

Part of that £47 million of assistance takes the form of subsidies paid from the Harland and Wolff intervention fund. The fund is available to Harland and Wolff alone of Northern Ireland companies and is designed to enable it to match competition for orders by subsidising its costs. I am pleased, again, to tell the House tonight that the European Commission has very recently approved proposals which the United Kingdom Government put to it for continuation of intervention fund subsidies for Harland and Wolff until the end of this year at least. The Commission has agreed that, because of the special circumstances of Harland and Wolff in particular and of Northern Ireland generally, we may continue to grant subsidies to Harland and Wolff at present levels—that is, up to 18 per cent. of the contract price of each ship—whereas other British yards may receive aid up to the lower figure of 15 per cent. This concession will apply only to large ships—Harland and Wolff's speciality—because, as I have just said, they are the subject of the strongest competition from the Far East. The Commission has also agreed that the amount of money which may be used to subsidise new orders will remain at £10 million for commitment on an annual basis, whereas the amount available to other yards has been reduced. The level and amount of subsidy will have to be reviewed towards the end of this year, but I am hopeful that the subsidy will be renewed.

The Government—and, I might add, the European Commission—have therefore recognised the particular problems of Harland and Wolff and of Northern Ireland in general by providing a higher level of aid than is available for other shipyards in the United Kingdom. This aid should, we hope, give Harland and Wolff an edge over competitors in securing work in the near future. This and previous Governments have done an enormous amount to help Harland and Wolff to survive. That cannot be challenged.

But I cannot emphasise too strongly that the company's future, its salvation, lies not with the Government but in the hands of the company—management and work force—itself. The Government cannot instruct owners to order ships from Belfast; only competitive prices, a reputation for prompt delivery and high-quality ships can do that. We cannot provide the company with a base-load of naval orders, because warship construction is not compatible with Harland and Wolff's facilities and skills. We have been advised by independent business men of the highest standing that Harland and Wolff's prospect of any major diversification, switching emphasis to non-marine engineering products, is virtually a non-starter. I repeat that Harland and Wolff's salvation is in the company's hands: if it cannot produce the ships that owners want promptly, and at the right price, no one in the company can count on a secure future of stable employment at Queen's Island.

There is plenty of room for cost-cutting and improvements in delivery. The company's costs are far higher than they should be, and all too frequently it delivers ships late. That also contributes to major losses, which have to be added to the losses arising from the maintenance of production capacity far in excess of demand. All that makes it the more difficult for the yard to win a satisfactory level of new orders, despite the high levels of Government subsidy that are available.

The company must, therefore, strive towards two targets: first, it must lower its costs; and secondly, it must improve its delivery performance. The company has sought consultants' advice, 'which is now being considered by the board, about how it can cut its overhead costs and bring its facilities more into line with demand. That is critical if employment in a more efficient company is to be secured, and I assure the House that cost-saving measures will have the Government's full support. Savings must be made if the company is to survive. The company—work force and management—has a simple but very stark choice—cut costs or go under.

No Ministers and no one who has the first idea of the position that Harland and Wolff holds in Northern Ireland want to see the yard close, but it can close itself through being uncompetitive, through not cutting its costs sufficiently and by not winning orders.

The company must also strive also towards the second objective, which is improved performance. With substantial Government help Harland and Wolff is now working on two large oil tankers and a 170,000-tonne bulk carrier. Those ships are perfectly geared to the yard's facilities. I am sure that many potential buyers will be watching to see whether Harland and Wolff can perform to specification and date, just as the taxpayer will be looking for performance to cost as well. It is not the Government but all employees at Queen's Island who are being put to the test.

It will readily be appreciated that all this cannot be achieved without cost in terms of redundancies. Job losses there will be, there must be, if employment is to be secured for the majority. The choice is as stark as that for the whole company, management and work force: between a smaller, more efficient company and one which has effectively chosen to close itself.

The Government have, then, had to take those factors into account in deciding to recommend to the House an extension and enhancement of the Northern Ireland shipbuilding redundancy payments scheme.

I see no alternative to redundancies. They are essential in the battle for survival. They represent individual sacrifice and hardship. It is up to those who remain to make the sacrifice worth while. The order will help to alleviate the hardship of the individuals who lose their jobs, and I therefore commend it to the House.