British Shipping Industry

Part of the debate – in the House of Commons at 4:01 pm on 17th December 1984.

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Photo of Mr Michael Colvin Mr Michael Colvin , Romsey and Waterside 4:01 pm, 17th December 1984

I beg to move, That this House recognises that the shipping industry is not only of great importance to the United Kingdom's trade and commerce, but also to the United Kingdom's defence needs and North Atlantic Treaty Organisation commitment; notes with concern the decline of the British merchant fleet in terms of tonnage and share of world markets; and asks Her Majesty's Government to state its policies for helping the industry to improve its international competitive position. Both the constituencies that I have had the honour to represent have strong maritime connections, and that is one reason for choosing the state of our Merchant Navy as the subject for my private Member's motion. The other is that since the Conservative Government took power in 1979 there has been no opportunity, in either Government or Opposition time, for a general debate on an industry which is crucial to this country's economic prosperity and its strategic defence.

It is true that we have had Adjournment debates about the Merchant Navy, and I pay tribute to the hon. Member for Kingston upon Hull, East (Mr. Prescott), who had an Adjournment debate on this subject in March 1983. I am sure that the House will also applaud my right hon. Friend the Member for Taunton (Mr. du Cann) for initiating his Adjournment debate on the Merchant Navy in October 1982, for the general way in which he has spoken up on behalf of the merchant shipping industry and for the way in which he drew attention to the state of our merchant fleet during the recent debate on the Royal Navy. The House will also salute my right hon. Friend the Member for Taunton for taking over the chairmanship of the all-party merchant shipping group, which has just come into being, and not a moment too soon.

I am afraid that apart from those debates and occasional "quickies" on small matters of shipping legislation, the Finance Bills have offered the best opportunities to say things about shipping. Perhaps that underlines the importance of fiscal policy for this vital industry. It is a pity that all the Treasury Ministers who were here a moment ago, and to whom many of our remarks this afternoon will be directed, are not here to listen to this debate.

The debate is necessary because the British merchant fleet, in spite of being one of the world's most modern and efficient, is declining at the rate of about two ships per week, which could nearly extinguish it by the end of the decade. Cruise ships and ferries may be doing all right, but by the year 2000 we may have a fleet which consists only of cruise ships and ferries, and that would not be good enough for our trading position. As recently as 1966 our fleet was the largest in the world, representing 12.5 per cent. of world tonnage.

When I first went to Bristol as a candidate in 1975, our merchant fleet was still at an all-time, but somewhat exceptional, peak. However, our position in the international league table was then already beginning to slip because our overseas rivals, often with massive state aid, were outgrowing us and adding to the excessive world tonnage. For the last decade the gap between available tonnage and cargoes has been steadily widening. Symbolic of the mounting shipping surplus is the fact that two of the earliest ships which I saw use the new Royal Portbury dock in Bristol, which were recently launched OCL container ships, were laid up because there was no demand.

As I look out from the Waterside part of my constituency across the Solent, I see the horizon blanked off by the huge hulk of the Burma Endeavour standing idle in Southampton, not on account of the industrial dispute in the docks, although there is plenty of that, with dockers determined to scuttle the port of Southampton, their jobs and the jobs of many of my constituents who are working in the dock-related services, but because there is no economic demand for its 500,000 tonnes oil-carrying capacity. It is cheaper for BP to pay £1 million a year in wages, maintenance and mooring fees to keep her idle in dock.

Therefore, I hope that today I can, first, convince the House that Britain needs the Merchant Navy. Secondly, I shall explain why our share in world shipping is down to 3 per cent. and still falling fast. Thirdly, I shall try to suggest what we should be doing to halt and perhaps reverse this dangerous downward trend.

Why do we need a Merchant Navy? In answer to that question I shall quote from a pamphlet entitled "British Shipping—the Right Course", of which I am the joint author with Mr. Jonathan Marks, a shipbroker, a good Tory and one day, I hope, a Member of Parliament. In the introduction to the pamphlet we said: Britain's economic prosperity depends on our success in international trade. It generates a third of our national income and employs a corresponding part of our workforce.As a major exporting and importing nation, it is essential for us to have free access to world markets to sell our goods and services.It is equally vital to be able to purchase raw materials and finished products abroad.We need the freedom to invest overseas and to attract foreign capital into Britain.No other leading industrialised country has so clear a stake in open trading markets.The prosperity of our country rests upon this foundation. Our shipping industry is of critical importance in sustaining Britain's competitive performance in these world markets. The comparative advantages which a British-owned and registered fleet once enjoyed have made it one of the largest national flags and made a major contribution to our overseas earnings. Even now, an industry which employs more than 45,000 officers, ratings and cadets on about 800 vessels, which earns about £3.5 billion per annum and which in total contributes a surplus of £1 billion to the balance of payments each year is clearly vital to our economy. Threats to its prosperity constitute a danger to our long-term interests.

Our shipping industry is now in a state of crisis. The advantages which we once enjoyed in supplying shipping services have long since ebbed away and our fleet has shrunk accordingly. The world recession has compounded our problems. It has cut British shipping traffic with disproportionate severity. It has been argued that if our fleet continued to decline at the present rate it would be impossible to mount another Falklands expedition and could cast doubt on our ability to fulfil our NATO commitments.

While this has been happening, we have seen the growth of unfair competition. We have seen Governments in developing countries build up their fleets. We have seen moves by our overseas competitors towards protectionism and even more state subsidies. We have seen the massive growth of the Comecon fleet, which, as well as being part of the Soviet Union's naval might, is in a position to wage economic war on this country. Nor should we forget that it is our maritime tradition that helps to make the City of London what it is. Sink our merchant fleet and untold damage will be done to the maritime service industries such as insurance and the Baltic Exchange, ship forwarders and travel agents which today provide worldwide services to shipowners everywhere. They are very important, too.

There are many reasons why we need a merchant fleet, and it is important and appropriate to mention at this stage three independent organisations which think likewise—the Nautical Institute, the Greenwich Forum and the British Maritime League—and pay tribute to the work that they have done and are doing to broaden and to deepen the debate on merchant shipping.

It is not surprising that voices have been raised within and without the shipping industry calling for drastic action to prevent a further decline of our fleet. One purpose of this debate is to ask the Government what they are doing to bring forward maritime policies which will halt and reverse that downward trend.

Before looking for remedies, it is important to examine the reasons for the decline. There has been no shortage of analyses, but diagnosing the ill is very much easier than prescribing a cure.

The British Maritime League has completed the most recent in-depth study in response to a request from my hon. Friend the Parliamentary Under-Secretary of State. The league rightly concludes that the main underlying cause of our fleet's decline is the impractibility of trading fairly in a market which is no longer governed by economics alone. Our competitors will do anything to survive when far too many ships are chasing far too little cargo. I know that it is a clichè, but it is the old case of Britain playing cricket while the rest of the world perform karate.

More specifically, the causes of the decline of our fleet can be either international, over which we have no direct control, or national, over which Britain — the Government or the shipowners or the unions — have some significant influence. The causes also apply either generally to the whole of the British merchant fleet or to particular sections of it.

Internationally, the world recession has reduced the demand for seaborne trade, and the debts of many developing countries and also the Comecon countries have put a high priority on acquiring foreign exchange. Our trade with Europe has grown at the expense of long-haul trade. Shipping requirements have been grossly overestimated by Governments, shipowners and banks. There were, for example, too many tankers in the early 1970s before the oil crisis, and too many bulk carriers in the late 1970s. The growth in protectionism is both national and international and includes national subsidies, direct and indirect, national flag discrimination or preference, national Government interference in conferences, multilateral and bilateral financial aid to developing countries for shipping projects and, of course, the UNCTAD 40–40–20 liner code for freight. More efficient ships have been introduced. There has been a growth in competition from flags of convenience, with lower taxation, minimal regulation, lower crew costs and, in some cases, less costly safety standards.

Another international cause for the decline of our cargo liner fleet is the development of the Trans-Siberian railway, which is now taking an increasing share—nearly 30 per cent. —of the trade between Europe and the far east.

Further threats to our liners are, first, the growth of the massive Taiwanese Evergreen and United States lines' fleets, which will be operating round-the-world container services outside the conferences; secondly, the increased practice of cargo reservation by countries such as Latin America, India and Sri Lanka; and, thirdly, reserved cabotage exercised in various forms by France, West Germany, Greece, Spain, Italy, all the Comecon countries, the United States, Canada, Australia, Japan, Finland, India — at least we can beat the Indians at cricket, even if we cannot beat them at shipping —Panama and most countries in south America and southeast Asia. The list is a very impressive one —[Interruption.] I am glad to see the hon. Member for Kingston upon Hull, East here now. I was paying credit to him earlier in my remarks.

To sum up, it is a very inhospitable and unfair market in which British shipowners have to compete, and we cannot afford to have any self-imposed handicaps. I know that it is dangerous to generalise, but it is nevertheless true to say that shipowners, both British and foreign, choose to fly the Red Duster because of the fiscal policies and tax regimes of successive Governments, and they have registered elsewhere—or "flagged out" as it is called—because of excessive operating costs, particularly crew costs. Until recently there were extreme cases where British crews were twice as expensive as Chinese crews, not only because of wage levels, but because of the related welfare payments — the so-called social wage which owners have to meet. British ships also tended to be overmanned, and it is greatly to the credit of the seamen's unions that at least on new ships our manning levels are now comparable internationally.

I cannot be as complimentary about the Government. Until recently our fiscal policies and tax regimes were an incentive to "flag in". Now it is quite the reverse. In his 1984 Budget my right hon. Friend the Chancellor of the Exchequer did his best to torpedo what was left of the British-registered fleet. Apart from adding to crew costs by removing overseas tax relief, he ended the 100 per cent. first-year allowance coupled with free depreciation. Admittedly, thanks to some tough talking during the passage of the Finance Bill, the Government recognised that shipping was a special case and introduced instead free depreciation on a 25 per cent. writing-down allowance, but this is thought by shipowners to be totally inadequate when compared with what other western European Governments are doing to increase their financial support for their shipping. The Red Duster is now being put at a competitive disavantage against nearly every other fleet.

With due respect to my hon. Friend the Parliamentary Under-Secretary of State, I think that there is a very good case to have the debate answered by a Treasury Minister. Indeed, I should like to see my right hon. Friend the Chancellor of the Exchequer at the Dispatch Box. I do not suppose that he would be able to say very much, because we have to accept that between now and Budget day he is in purdah, but I hope that he will read the debate and take action on what is said during it.