Orders of the Day — Shipbuilding Industry

– in the House of Commons at 2:21 am on 7 February 1983.

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Photo of Mr Donald Dixon Mr Donald Dixon , Jarrow 2:21, 7 February 1983

I am pleased to have the opportunity to debate the importance of the British shipbuilding industry, which is experiencing one of its most difficult periods since the 1930s. In spite of that, according to the chairman's statement in the 1981–82 annual report, British Shipbuilders kept within the £25 million target that was set by the Government and the trading loss was only £19·79 million.

It is vital that we have a Merchant Navy and the shipbuilding capacity to build and maintain it. The Merchant Navy is the main carrier of our national trade—98 per cent. by weight of our trade comes and goes by sea. The post-war growth in foreign fleets and shipbuilding is not the result of a failure by British shipbuilders, but of a combination of factors such as nationalism, changing patterns of world trade and, above all, financial taxation and other direct and indirect support that is given by foreign Governments to their home shipping and shipbuilding industries.

The world recession in trade has resulted in the shipping industry facing a worldwide crisis. Freight rates are now at their lowest level—a level at which shipowners find it impossible to operate profitably. Huge losses are being incurred by ships that operate in virtually all trades.

It was recently reported in Lloyd's List that some owners are chartering vessels at rates that just cover fuel and crewing costs, and do not take account of depreciation or return on capital. These problems have spawned a shipbuilding trade war, especially between western Europe and the Far East. Korean shipyards are now quoting prices that would only cover the cost of materials in European shipyards.

It has been said that even if British shipyard workers worked for no pay, we could not compete with some of the prices that are quoted by the Koreans. It is impossible to believe that the Korean and Japanese Governments are not protecting their shipbuilding industries to the hilt. Now is probably the worst time for the Government to introduce legislation—I refer to the British Shipbuilders Bill—which, rather than supporting British Shipbuilders, will result in greater insecurity and confusion. The proposed legislation bears no relevance to the industrial needs of the British shipbuilding industry. I am of the confirmed opinion that that legislation is pursuing purely political objectives, which could destroy the achievements of the five years since the British shipbuilding industry was nationalised. It may halt a number of major initiatives aimed at further improving the industry's efficiency and productivity.

Since vesting day, nine shipyards, three engine building facilities and three ship repair yards have closed, 25,000 jobs have been cut and a further three ship repair yards are being closed with a loss of 1,400 jobs in south Tyneside, the area that I represent. Just last week we were told that another 1,800 jobs would have to go, many in the north-east. People talk about the massive redundancy payments that the shipbuilding workers are alleged to receive. The average redundancy payment is less than £3,800.

Until now, all that has been with the co-operation of the trade unions. The dramatic decline in numbers of jobs, together with increased flexibility and mobility, resulted in an increase of 15 per cent. in productivity by 1981. At the time of nationalisation there were 168 bargaining units in the industry. Different groups of workers competed against one another, with leapfrogging claims and demarcation disputes. Productivity suffered, costs rose and any innovation was regarded with widespread suspicion. One of the first major achievements of British Shipbuilders was to reduce the 168 bargaining units to two—one for the manual workers and one for the staff in the supervisory division. All pay and other conditions at national level are negotiated once a year. Leapfrogging and demarcation are now a legacy of the past. Each national wage settlement has been struck at well below the rate of inflation, with the result that shipyard workers have dropped from third in the wages league to 19th.

All that has been made possible because of the industrial democracy that was introduced when the yards were nationalised. The men are conscious of their responsibilities to the industry, which now communicates effectively. They are aware of the problems besetting the industry. There is a feeling of working for a total industry that is competing internationally rather than one company competing with another on the other side of the country or even on the other side of the river. That good will and co-operation will be lost if there is any fragmentation of the industry and industrial democracy is stopped as a result of the British Shipbuilders Bill. There will be confrontation with the unions at the worst possible time for the industry.

Robert Atkinson, the chairman of British Shipbuilders, in the 1981–82 report, said: Britain as an island nation is, and always has been a strong maritime nation needing seapower, and by necessity this must continue to be the case. Shipbuilding plays a vital part in our nation's prosperity and in its protection. We have a capability that needs to be sustained and recognised as a national asset because a shipbuilding capability is not something that can be used intermittently, to be available when required. To be effective it needs continuous use, it needs constant improvement and continuous investment in men and materials. Once that capability is allowed to disperse it will not be recoverable. Shipbuilding like shipping is a national strategic industry and needs a declared national maritime policy. Britain remains one of the few major maritime nations in the world where the national requirements of shipping and shipbuilding are not linked. Before nationalisation British Shipbuilders was subject to a number of reports—the Patten report in 1962, the Geddes report in 1966 and the Booz-Allen report in 1972. Investment in British shipbuilding then did not compare favourably with that in many European shipyards. A survey was carried out at the time of the Geddes report in 1966 which showed that there were assets of £825 for every many employed in the industry in this country, in West Germany it was over £1,000, in Italy £1,200, in Sweden £1, 800 and in Japan £2,800. There was little investment in British shipbuilding compared with our overseas competitors.

If we are not careful we shall have no one to build ships in the future. In 1979 more than 20,000 apprentices and trainee technicians were taken in to shipbuilding. In 1981 there were 10,000. Who will build ships in the future if we do not train apprentices and technicians?

I want to talk a little about the effects of the recession in the north-east where shipbuilding, repairing, and marine engineering have formed an important part of our industrial base. We have been top of the unemployment league for many years. I do not like talking about percentages when talking about unemployment because we are discussing human beings—breadwinners and wage earners. An individual is 100 per cent. unemployed whether he is one of 15 per cent. or 20 per cent.

The northern region accounts for 20 per cent. of the United Kingdom's shipbuilding industry, and we were able to take advantage of the shipbuilding boom of 1973 because of our skills. In that year 51 per cent. of United Kingdom tonnage was launched from yards in the north-east. Nearly 8 per cent. of employment is in shipbuilding and connected industries compared with 2·5 per cent. nationally.

The concentration is higher in certain parts of the region. On Wearside 20 per cent. of the work force is employed in shipbuilding, ship repairing and engineering. On Tyneside the figure is 16 per cent. We have a completely integrated shipbuilding, ship repairing and marine engineering industry, which is not duplicated anywhere else in the United Kingdom.

Many organisations are connected with the industry. The university of Newcastle has the country's largest and foremost naval architecture department, which has closelinks with the industry. It also has a marine industry centre. Sunderland polytechnic has a department of naval architecture. South Shields marine and technical college is internationally known. The north-east has the greatest concentration of facilities for technical education directly connected with shipbuilding.

Shipbuilding is not just a job; it is a way of life because of the close relationship between the working and living environment. For example, a survey carried out at Swan Hunters at Wallsend showed that 62 per cent. of its work force lived in Wallsend or the adjacent towns. In Sunderland the survey showed that 37 per cent. of Austin Pickersgill's work force lived within one mile of the yard and only 15 per cent. lived more than five miles away. That is how important shipbuilding is to communities. The whole social and economic life of communities in our area depends upon shipbuilding. That is why the recession in shipbuilding has such an effect on those communities.

I want from the Minister, first, a national maritime policy co-ordinated by a senior Cabinet Minister, to be formulated in consultation with trade unions, British Shipbuilders and the shipping industry. That was suggested by the Select Committee, which interviewed trade union representatives, British Shipbuilders' representatives, and the Minister who will reply to tonight's debate. Recommendation (iii) of paragraph 43 states: The Government should set up a high-level interdepartmental working group to consider the full implications of a maritime policy for the UK embracing both shipbuilding and shipping. Robert Atkinson, the chairman of British Shipbuilders, said in an article in the shipbuilding magazine in November 1982: I am convinced that there is only one way in which this can be achieved. There must be a single national body overseeing the interests of all the maritime industries and interests involved including defence. What we need is a Minister of maritime affairs or a Minister of the sea, as exists in France; a man of senior position within Government, who can evaluate the problems facing us all, and with the power to implement decisions. Mr. Atkinson said that after the publication of the Select Committee report.

Secondly, British shipowners, Government Departments and nationalised industries should be told to buy British. Not long ago, P and O ordered one of the largest cruise liners ever to be built, at a cost of £90 million, but the order went to Finland. We had arguments about the replacement of the Atlantic Conveyor after it was sunk in the Falklands dispute, and last week we had discussions about the CEGB cable boat, which is to be built in Korea. An article in the Sunderland Echo on Wednesday 2 February stated: A £10-million contract which could have saved shipbuilding jobs on the Wear is believed to be going to Korea. Sunderland Shipbuilders, which had put in a bid … to carry out work for the Central Electricity Generating Board, had been 99 per cent. certain of winning the contract. The barge, for delivery in March next year, would have filled the gap at the Deptford yard which would have seen them over an extremely lean period this year, and saved many jobs. Today there was anger at the yard that the contract may go to the Far East, and Mr. Fred Willey, M.P. for Sunderland North, is taking up the matter.The cable-laying is being sub-contracted out by the CEGB and Sunderland Shipbuilders were told that their tender was the lowest in Europe and even matched Far East tenders. 'When the yard heard the order was to go to Korea everyone was extremely angry', said a Sunderland Shipbuilders spokesman. One can understand why everyone was extremely angry, because in Sunderland we have one of the highest unemployment rates in the country. This order would have saved many jobs.

Paragraph 43(v) of the Select Committee report states: The Government should remind all public authorities of the desirability of buying British materials and components and also ships built in British yards. British Shipbuilders does so. Last year, British Shipbuilders placed orders of £550 million with United Kingdom-based companies.

The British Steel Corporation is a major recipient of such orders. In 1980, the British Steel Corporation supplied 189,200 tonnes of heavy plate to the shipbuilding industry; in 1981, 138,000 tonnes; in 1982, on current orders, 164,000 tonnes with estimates for 1983 of 202,000 tonnes. That represents 95 per cent. of the heavy plate requirements of British Shipbuilders and the orders were placed with the British steel industry. British Shipbuilders pursues a "buy British" policy. One would hope that other nationalised industries would reciprocate, and build and buy ships from the British shipbuilding industry.

My third suggestion is the introduction of a scrap and build scheme with credit terms for British shipowners to order ships in British yards. On page 30 of the Select Committee report it is pointed out that some years ago, under a previous Government, Britain grantee aid for shipowning of about £450 million of taxpayers' money, of which about £133 million was spent in Britain. The rest went for orders overseas to build up the asset strength of our competitors in Japan. There should be credit facilities for British shipowners to build their ships in Britain.

A Member of the European Parliament recently asked to what extent EC shipowners placed ship orders in European shipyards. The United Kingdom placed orders in Community shipyards to the extent of 13·3 per cent.—the highest percentage of ships built in other yards. The United Kingdom built only 47 per cent. of its ships in British yards, while Germany placed orders for 79 per cent. of its shipping in German yards; Belgium 94·6 per cent.; Denmark 84 per cent.; France 91 per cent. Britain was bottom of the league.

My fourth suggestion to help British Shipbuilders, certainly in the short term, is to create enterprise zones on both sides of the River Tyne and on both sides of the River Wear. That would assist British Shipbuilders and the local authorities. In West Germany, according to the evidence given by Robert Atkinson to the Select Committee, local authorities can help German shipbuilders. In Britain, they cannot. If the Government were to make enterprise zones on both sides of the Rivers Tyne and Wear, it would help the shipbuilding industry and the local authorities.

My final suggestion is the withdrawal of the British Shipbuilding Bill, which is at present in Committee. If the Bill is enacted, it will cause confrontation with the trade unions at the worst possible time for the British shipbuilding industry.

I say that with all due defence to the Minister.

A shipbuilding conference was held in Blackpool on Monday 24th March 1980—there has been another meeting since then—at which the following resoulution was passed: this Conference of Manual Employee Tradesmen, and General Workers, Office Staff, Technical Staff, Supervisory and Management Staff of British Shipbuilders accepts absolutely, the need for the most harmonious and close working of all parties within the Industry in order to steer the Industry through the present-continuing difficult World Marketing situation, and of course to provide the maximum employment for our members.We reaffirm that such relationships can only be maintained on the basis of the Industry retaining its present nationalised Form, under Public Ownership.We therefore reject totally any attempt by the Government to introduce any element whatsoever of de-nationalisation, whether it be Hiving-Off or Sale of Shares.In the event of any such proposals being brought forward by the Government, we call upon the Shipyard Negotiating Committee to arrange an immediate reconvening of this Delegate Conference to consider positive action to oppose any denationalisation or hiving-off proposals.This Conference also confirms that with our co-operation to date, on the re-structuring of the Industry, the introduction of centralised bargaining, the acceptance of flexibility and changes in working practices and the acceptance of self-financing Productivity Schemes have all been forthcoming on the basis of progressing the successful future of the Nationalised Shipbuilding Industry. Any necessary re-assessment of our position arising from any Government proposals to commence `dismantling' in whatever form would require us to consider our future attitude to the items listed in Paragraph Four. I genuinely believe that the Minister has the industry at heart. I suggest that if the British Shipbuilders Bill goes on to the statute book we shall have confrontation at a time when the shipbuilding and shipping industries can least afford it. I hope that the Minister will respond positively to the issues that I have raised.

Photo of Mr Harry Cowans Mr Harry Cowans , Newcastle upon Tyne Central 2:48, 7 February 1983

I think that my hon. Friend the Member for Jarrow (Mr. Dixon) is the one Member of this place who has worked in the industry. I am pleased to have the opportunity to take up his remarks briefly and to raise two or three additional issues.

It seems nonsensical that we place orders for ships with countries such as Korea and Taiwan. If we continue to do so, there will be no British shipbuilding industry. If that happens—it may very well happen—where will the ships be built? If the present policy is implemented and we destroy the shipbuilding industry, ships will not be built in Britain. I ask the Minister seriously to consider whether that is what he wants.

As my hon. Friend the Member for Jarrow has said, there has been co-operation right across the board by the trade union movement on the Tyne and Wear. Contrary to what the Conservative Government say, we on the Tyne have a remarkable record of building ships.

I fear that we are in danger of destroying an industry on the Tyne, and of putting nothing in its place. We may find that having destroyed shipbuilding, despite the co-operation of the trade union movement and the management, there will be nothing left on the Tyne. Where will the Minister then go for the ships that the Tyne supplied when Britain faced its greatest crisis of recent years? We turned out the ships to the Falklands, but if the industry is destroyed, heaven forbid that that crisis ever comes again.

The Minister should think hard, because if the industry is destroyed and Britain is in trouble again, where will he turn to for the ships and the co-operation that he got on the Tyne? He should think hard before destroying the industry, as he is in grave danger of doing.

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames 2:51, 7 February 1983

I pay tribute to the hon. Member for Jarrow (Mr. Dixon), who is assiduous in supporting the shipbuilding industry and speaking out for it in the House. Having been with him for some weeks in Committee on the Shipbuilding Bill, I know of his expertise and knowledge of the industry and his hard work on its behalf.

The hon. Member's speech was full of realism, and he did not deny the problems that shipbuilding and shipping face worldwide. He referred to the pressure, for example, on freight rates. The whole of western European shipbuilding is under enormous pressure. Despite a substantial reduction in production, here, in western Europe and in Japan, there is still far too much shipbuilding capacity chasing far too few orders. That is a problem from which we cannot isolate British Shipbuilders.

I cannot hide from the House the fact that the industry faces tremendous problems and will be under pressure for some time to come. While the Government accept—and I have gone out of my way to emphasise this in Committee—that merchant shipbuilding will need support for the foreseeable future, the success of the industry in withstanding the pressures of the market must depend primarily on the competitiveness that we need.

The industry has made progress, as both the hon. Member for Jarrow, and the hon. Member for Newcastle upon Tyne, Central (Mr. Cowans) have said. It has made progress under Sir Robert Atkinson, as he now is, but a considerable amount remains to be done. The future of our shipbuilding industry lies to a noticeable extent in the hands of the industry. Management and work force must work together.

I agree with both hon. Members who have spoken that there has been a good record in the recent past of co-operation and moderation in wage claims. That is the way in which we can develop the efficiency and competitiveness that we need. We have, as the hon. Member for Jarrow knows, continued with the intervention fund, which we use to enhance the competitiveness of our merchant shipbuilders. The purpose of the fund is to put us on a more equal footing vis-a-vis competition from the Far East.

Up to January of this year, support under the scheme approved for British Shipbuilders amounted to £248 million. The fifth directive on shipbuilding aids has been renewed and we expect that the Commission will very soon approve the continuation of the intervention fund up to mid July. We shall shortly be in touch with the Commission on shipbuilding support after July.

Of equal importance is our support for the restructuring of the industry. If we are ever to be competitive with the Far East, we must make efficient use of labour and capital. That process of essential adaptation is supported by the shipbuilding redundancy payments scheme. To date there have been some 22,000 beneficiaries, and the total amount paid out in benefits is approxmately £62 million.

Both the hon. Member for Jarrow and the hon. Member for Newcastle upon Tyne, Central naturally referred to the recent publicity given to the Central Electricity Generating Board barge. Of course, the Government would much have preferred that order to go to British Shipbuilders. As my hon. Friend the Under-Secretary of State for Energy emphasised this afternoon, the barge was not being purchased or owned by the CEGB. It was using an intermediary. He also emphasised that when the tenders were received by the various intermediaries there was such a big difference in price that the board—because it was anxious and would have preferred the order to be placed in Britain—asked that tenders should be resubmitted. Unfortunately, there were still huge differences in the tenders and tender prices. I am afraid that the British Shipbuilders bid was a long way out, and the extent to which it was out was such that it could not have been bridged by the intervention fund or by Government intervention.

Both hon. Members asked about public sector purchasing policy. We have such a public. It says, not that we must always buy British in the public sector, but that public sector authorities should be aware of and take into account the industrial consequences of their decisions. We accept that British firms and British nationalised industries should be given the opportunity to compete. In this instance, British Shipbuilders was given the opportunity to compete and the CEGB requirement went to tender twice.

The CEGB's requirement was for the hire of a vessel for 12 to 18 months to bury cables between England and France. The tenders, therefore, did not reflect just the purchase price of the vessels. The hirers would be the operators of the barge, and in quoting prices that had to be allowed for in the expected utilisation of the vessel over its commercial life. Therefore, it is not possible to say that International Transport Management won the charter simply because it intended to buy the ship in Korea. However, I stress that we would have preferred the order to go to Britain.

As the hon. Member for Jarrow said, British Shipbuilders has achieved much in its five years of existence. A disparate group of more than 40 companies has been pulled into a divisional structure and central financial control has been greatly strengthened. As has been said, until this year the corporation has been able to stay within a reducing external financing limit. The point was made that the corporation faces a renewed recession in world merchant shipbuilding, marine engineering, ship repair and in offshore activity.

In Committee, the hon. Member for Jarrow and I have discussed productivity. As I have said before, productivity has not been all that was hoped for. Productivity, which I admit is difficult to measure in the shipbuilding industry, slumped during the recession, when yards had gaps in their work load, but it improved as order books strengthened. However, in a period of recession it must be doubtful whether British Shipbuilders can sustain the improvement achieved during the past two years. Despite improvements, productivity levels still have to surpass those of the pre-nationalisation days.

I shall say a little about the financial performance of British Shipbuilders. In 1979–80 losses amounted to £110 million. In the two subsequent years they fell to £41 million, then to £20 million, but the improvement has proved temporary. At the half year, British Shipbuilders announced losses of £28 million, which, as the hon. Gentleman said the other day in Committee, is already substantially over the loss target of £10 million that we had set for the whole year.

These overall figures disguise an even more worrying underlying picture. Warship building is the profitable part, while merchant shipbuilding is making substantial losses. The Falklands replacement orders announced before Christmas are good news for the corporation, providing additional work for Yarrow, Swan Hunter and Vosper Thornycroft. A further frigate order will be placed next year, but the corporation still needs to stick to its long-term aim of improving its warship export sales. That will be extremely difficult, because the corporation has not had a major warship export order for the last 10 years.

The offshore market also faces great difficulties. Cammell Laird recently won the British Gas Morecambe bay order, but it will soon need another to follow on. Losses in the offshore division last year amounted to £21 million.

The hon. Gentleman is well aware of the problems on ship repair. Many of the Tyne ship repair yards that have been closed are either in his constituency or near it. Losses in ship repair last year came to £7 million and action was needed to stem the considerable losses at Tyne ship repairers. All this has meant continuing and substantial Government support—£600 million since we came to office.

The hon. Gentleman said something about European shipbuilding policy. Within Europe we have sought to maintain a framework of aid for shipbuilding which would allow the European industry to adapt to the changes in the world market and prevent a pointless subsidy race with our European competitors. The EC countries have recognised that in the present market conditions aids are necessary, but that we should reduce them progressively and together.

The level of United Kingdom aids is sometimes criticised, as the hon. Gentleman has done, but taking direct aid and credit together, we believe that the United Kingdom assistance compares well with what is available in other countries. In some countries—for example, Belgium and Denmark—shipbuilding credit schemes are more favourable than ours, but their credit, unlike ours, is in principle open to their shipowners, whether they build at home or abroad, and I emphasise that they do not, as we do, give production subsidies as well. If one assesses the combined value of credit and production subsidies in the major shipbuilding countries, the United Kingdom in terms of support comes about the middle of the league. That is before one takes account of the financing of losses, the injection of public dividend capital into British Shipbuilders, which is a substantial additional support available to BS and which is not available to many of the European shipbuilders, many of which are privately owned and do not receive support of this nature.

The introduction of a scrap and build scheme has been suggested several times as a way of helping the industry. We do not believe that a scrap and build scheme would be more cost-effective than existing measures of support. We are opposed to adding such a scheme to existing subsidies, as this would run counter to our policy and to the European policy of reducing state aids. The question of a scrap and build policy was at one time explored but commanded little support within the EC. It is also doubtful whether such a scheme would be effective in current market conditions, when many ship owners are thinking of scrapping or selling to get rid of tonnage and do not want new ships.

There has been reference to a maritime policy and the work of the Select Committee on Trade and Industry. The Government have a maritime policy designed to promote the interests of shipbuilding and shipping. We are opposed to any change in that policy that would have the effect of increasing aid to shipbuilding at the expense of the shipping industry. We have to look at the two together. They are closely related. One can easily damage the other. We set out our views on a so-called maritime policy in our response to the Select Committee report which was published earlier this year.

A proposal canvassed by the chairman of British Shipbuilders is the appointment of a Minister for the sea. I hesitate to cross swords with the chairman of British Shipbuilders, but I wonder whether that is not really a rather gimmicky approach. It is a good phrase. What does it mean? We consider that the existing administrative arrangements operate well. The Secretary of State for Trade has the primary responsibility for co-ordinating policy on maritime matters, but other Ministers take the lead in areas closely connected with their own Departments. It has been emphasised time and again that there is close co-ordination between the Department of Industry and the Department of Trade on these issues.

There has been reference to the Booz-Allen report, the Patton report and the Geddes report, which have commented on the inefficiency of British shipbuilding under private ownership. I am well aware of the criticism contained in the reports. None of them suggested that nationalisation would be an answer to the problem. The thrust of the reports means that remedies could be found without a change of ownership.

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

Both my hon. Friend the Member for Jarrow (Mr. Dixon) and I have stated that the primary worry is the decimation of the shipbuilding industry in this country. Can the Minister name one Japanese ship that was built outside a Japanese yard? While the Japanese have a policy of building at home, we build overseas. The day will come when we shall have no shipbuilding industry and the Japanese will hold us to ransom.

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

I cannot name a Japanese ship that has been built in a British yard. Japanese ship owners choose to build in Japanese yards. The yards are highly efficient. Rates of interest are very low. Japan is a low-inflation country. Those are the factors that influence Japanese ship owners.

I spend much of my time trying to persuade and appealing to British ship owners to place orders in British yards. It is precisely because part of my concern is the health of British shipping that at the end of the day I am not prepared to compel British ship owners to place orders in British shipyards against their will. The hon. Gentleman knows as well as I do that British ship owners do not always want to place orders in British yards. That may be regrettable, but it is unfortunately true.

Photo of Mr Donald Dixon Mr Donald Dixon , Jarrow

The Minister said that the Patton report, the Geddes report and the Booz-Allen report did not suggest nationalisation of the shipbuilding industry. I accept that the Patton report and the Geddes report did not. The Geddes report suggested that there should be rationalisation and that a shipbuilding industry board should be set up to finance that. However, the Booz-Allen report, which was virtually a plan for nationalisation, criticised the British shipbuilding industry. The nationalisation plans which were accepted by the 1974 Labour Government were virtually based on the Booz-Allen report.

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

None of the three reports recognised or even implied that nationalisation was the answer. The Geddes committee was specifically asked to consider the industry's structure. Indeed, the very fact that it did not recommend nationalisation could be taken to imply that it felt that remedies could be found which were separate from the ownership of the industry.

Photo of Mr Donald Dixon Mr Donald Dixon , Jarrow

What about the Booz-Allen report?

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

The hon. Gentleman is not right to imply that the Booz-Allen report in any way suggested that nationalisation was the answer, but perhaps that is an argument that we can continue in Committee.

The hon. Gentleman also touched on the impact—it is natural that he should—of the recession on shipbuilding and the tremendous job losses in his constituency. I understand and sympathise with the concern that he feels. After visiting his constituency last week and talking to some of the people who had been made redundant at Readheads, I well understand the anxiety and despair that is felt there because of the failure of new industries to come into the area fast enough to take up the job losses in shipbuilding. I cannot give an easy answer to the question. All I can say is that the Government are giving to his and other constituencies in the area all the aid that they possibly can.

As the hon. Gentleman is well aware, his constituency has special development area status. The northern region—not just his constituency—has more assisted area status than any other region in England. Over £36 million in regional development grants has been paid to companies in south Tyne since May 1979 and in the same period, under section 7 of the Industry Act 1972, selective assistance has been offered in 45 cases, involving over £10 million. Regional development grants paid in the northern region in 1981–82 totalled £143 million, which is higher than for any other region in England. Indeed, it accounts for 23 per cent. of the total regional development grants paid out.

The hon. Gentleman asked for an enterprise zone in his constituency and on both sides of the Tyne. There are two enterprise zones near his constituency. He may feel that they are not a direct benefit to his constituents, but we had to bear in mind the proximity of other enterprise zones when making decisions about new ones.

I assure the hon. Member for Jarrow that we in no way underestimate the tremendous social strains and problems created by the level of unemployment in his constituency. I am always pressing for productivity improvements and the need to be competitive, but I well understand the human implications involved.

The hon. Gentleman talked about the British Shipbuilders Bill. He made an appeal that we should withdraw it, as he thought that it was damaging. He will not be surprised to hear that I cannot agree to that. The purpose of the legislation is to develop the industry's strengths without the taxpayer having to pick up all of the bill.

I have said again and again that the merchant shipbuilding sector is unlikely to attract private investment. I emphasise that it will continue to be supported by the Government for the foreseeable future.

Warship building is a separate question. That may attract interest. Those companies should not be starved of capital investment because of the losses of the rest of the corporation.

The hon. Gentleman implied that privatisation of part of British Shipbuilders might lead to a break-up of the national agreement with the unions. The Bill is an enabling measure. Its passage will not lead to an immediate and total privatisation of British Shipbuilders activities. I see no reason why, following any disposal of those parts of the shipbuilding industry remaining in public ownership, British Shipbuilders should not continue to negotiate in a unified fashion if that is judged to be in the interests of the industry.

Finally, I strongly agree with what the hon. Gentleman said about the great technological expertise in the higher educational institutions in his region. He referred to Newcastle university and Sunderland polytechnic. I agree that it is extremely important that the shipbuilding industry and those institutions should have the closest possible links. We hear a lot of talk about the new technology being applied to new industries. What is important is that the new technology should be applied to the traditional industries. That is the way in which we can compete with everyone.

The hon. Gentleman asked me the unanswerable question of how the Koreans manage to quote the prices that they do. How can we compete with the Koreans? Even if we worked for nothing, we still would not be competitive. One way is to harness modern technology to shipbuilding. I endorse everything that the hon. Gentleman said about establishing the closest possible links between the local universities and polytechnics and British Shipbuilders. There is a remarkable reservoir of technical knowledge there. I know that and the Koreans know that. They have even employed some. That emphasises the world-leading technology in those institutions.

I am convinced that the combination of our policies of support for the industry and the new horizons being opened up by the British Shipbuilders Bill are right for the industry. Much has been done, but much remains to be done. There needs to be a continuing assault on costs and productivity. British Shipbuilders will have a hard task maintaining the pace of improvement of recent years in a deteriorating world market.

I hope that hon. Members will take home the message that the Government are providing support and help to the industry and will continue to do so. The Government cannot solve all the problems. We cannot conjure up orders out of thin air. The industry must attack its own costs and boost its own productivity. Increased efficiency is the only route to increased competitiveness. Competitiveness is the essential ingredient in the industry's future. A partnership between the Government and the industry is essential for competitiveness.