Estimates Day – in the House of Commons at 10:01 pm on 21st July 1988.

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Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry) 10:01 pm, 21st July 1988

I beg to move, That the draft British Shipbuilders Borrowing Powers (Increase of Limit) Order 1988, which was laid before this House on 13th May, be approved. The order concerns British Shipbuilders' borrowing limit. This is the statutory ceiling on the funds which the corporation may acquire in the form of public dividend capital from the Government, and loans from the commercial market. The order merely gives British Shipbuilders the power to receive the money. It will always be for the House to decide what actually should be made available through the estimates procedure.

The limit presently stands at £1,550 million, as a result of the British Shipbuilders (Borrowing Powers) Act which received the Royal Assent in July last year. The terms of the 1987 Act enable the borrowing limit to be raised by amounts not exceeding £150 million at a time to £1,800 million, subject to affirmative resolution of this House. I now propose that the borrowing limit be so raised by £150 million to £1,700 million.

I have stated very clearly on a number of occasions in recent weeks that British Shipbuilders has continued to consume alarming sums of money relative to its size. The total now stands at almost £1·8 billion since 1979, while employment is now only 6,261 people. No hon. Member should be surprised to see that the borrowing limit needs to be raised yet again—for the fourth time, I might say, in the last two years. The increase last July amounted to £20,000 per employee. This year's increase amounts to a further £24,000.

Of the £150 million provided by the British Shipbuilders (Borrowing Powers) Act 1987, around £100 million has been spent so far. British Shipbuilders forecast, that it will need the rest over the summer and early autumn so that, without the approval of this order tonight, there would be a risk to the corporation's ability to continue trading before the next Session of this House. This is the fourth time in the last two years that the House has had to vote extra money to save the business from closing down.

Since the 1987 Act received the Royal Assent, borrowing has been needed for three main reasons. Contract losses have continued to mount. For instance, the first of two ferries for Caledonian MacBrayne built by the Ferguson yard was discovered to be seriously overweight. This is likely to cost the taxpayer around £4 million more than expected on a ship priced at £7 million. None of the corporation's orders has been carried out without contract losses. Secondly, under-recovered overheads have been running at a high rate because of the chronic shortage of orders and work at the yards. Thirdly, the dispute with the customer for the Danish ferries at North East Shipbuilders has meant that no instalment income has been received for many months. British Shipbuilders has had to meet all the building costs itself, although the programme of work has continued. I will touch on that again later.

These and other costs have all required cash, including borrowing from the market and public dividend capital. For the same reasons the corporation will not be able to operate its business within this year's external finance limit of £80 million. The House has been invited to vote a further £74 million as a summer supplementary estimate for British Shipbuilders. The external finance limit will be revised formally once we are clear about disposal possibilities for the remaining facilities and the share of any further costs that the taxpayer will need to cover this financial year.

That history of losses provides the background to my policy for the corporation. We are not selling parts of the business because of some ideological hang-up. We are selling them for sensible commercial reasons. We believe that the parts of shipbuilding that are capable of survival in this country will be managed more efficiently in the private sector, and must face up to market conditions.

I now turn to the programme of disposals that I announced on 18 April when the letter of intent from Kvaerner for its proposed purchase of Govan was received. On 27 June I was delighted to announce the terms that had been agreed with Kvaerner. These have now been notified to the European Commission. I trust that the Commission will accept the terms at its meeting next week, so that the sale can be completed in early August as planned.

Kvaerner offers Govan a future. As British Shipbuilders had not succeeded in attracting other orders beyond the two ships for China agreed early last year, it is plain that the only alternative facing the yard was closure. I look forward to welcoming Kvaerner to these shores. Quite apart from the other business that it intends to bring, there is the prospect of at least one major merchant shipbuilder continuing in Great Britain. As I have said before, my aim now is to discover to what extent it might be possible to return all of British Shipbuilders' yards to private hands. The corporation is nearing the end of its life as a nationalised industry, and there is no realistic prospect of its ever achieving commercial viability in its present form.

It is of course important to stress that we are looking for serious purchasers with sensible business plans and substantial financial backing. We shall sell the parts of the business to substantial interests with a prospect of developing the business for the reasonably foreseeable future. We owe it to the work force and the taxpayer to negotiate on that basis. We are not prepared to facilitate asset-stripping, or to inject large sums of public money into flimsy or speculative ventures. I have to tell the House plainly that I cannot guarantee that we will find credible purchasers or affordable orders and work for every part of the business. My aim is to return every part of the business to the private sector on a basis that is fair to the purchaser, the taxpayer and the work force wherever possible.

British Shipbuilders now expects bids for Appledore from at least two groups interested in continuing merchant shipbuilding at the yard. British Shipbuilders will shortly set a bid date, which I expect to be in early August. As for the other yards, our main objective is to retain merchant shipbuilding as the principal business if that can be achieved on reasonable terms acceptable to ourselves and the European Commission.

Interest has also been expressed in Clark Kincaid and the Ferguson yard at Port Glasgow. I expect British Shipbuilders to set bid dates for those facilities in the near future. There remains considerable interest—I stress the word "considerable"—in Marine Design Consultants at Sunderland and Dundee. I expect bids for MDC will be invited a little later in the programme. In all these cases there will, of course, be delay between the receipt of bids and any request for consent for disposal to allow for negotiations with the parties.

There are, as I have told the House before, a number of parties interested in acquiring all or part of the British Shipbuilders facilities at Sunderland. However, I have to say that they are taking their time in bringing serious propositions to John Lister, the chairman of British Shipbuilders, as the basis for bids. There are naturally important points that need to be discussed in advance of bids on such matters as compliance with the European Community sixth directive and the various qualities that British Shipbuilders would expect to see in an attractive bid.

I am aware that two bidders in particular have made a great deal of their interest in acquiring the business in the press, especially the local press in the north-east. It can only be in the interest of the people of Sunderland if the people who say that they have plans for the yards now come to the table with solid propositions and evidence of financial hacking. For that reason, we have to set a definite target for bids to be received for North East Shipbuilders Ltd. in Sunderland. John Lister has agreed to set a final date soon for bids for NESL which will certainly not be later than the end of September.

I am particularly conscious of the uncertainties facing the work force at North East Shipbuilders. I am only too aware of the concern that that is causing to the work force and its families in Sunderland, which is a particularly troubled town at the moment. The House will recall that, apart from its appalling record on losses in recent years, the immediate problem at NESL began with the difficulties that I announced on 18 April between British Shipbuilders and its Danish customer. That dispute still drags on. Meanwhile, British Shipbuilders has cancelled a considerable number of contracts with Mr. Johansen and how has a number of excellent ferries completed in the River Wear and ready to sell. It is making considerable efforts in that direction, but ships take time to sell in today's markets. Meanwhile, inevitable layoffs have already begun at the yard, as was always expected from the moment that the order began if further orders were not attracted into the yard alongside the Danish ferries.

There is also a great deal of interest in the possible order for a series of general cargo ships from Mambisa, the Cuban deep sea shipping company. British Shipbuilders has put in an application for intervention fund support in connection with that order. After careful consideration, I have decided that I cannot offer such support to British Shipbuilders.

As I have said before, my reasons for that are not political or ideological. They are practical and commercial. I am simply not satisfied that British Shipbuilders could build those ships to cost or could do so within the terms of the sixth directive by which we are willingly bound. I have seen no persuasive argument to the contrary, and I have seen a good deal of evidence that supports my view. For instance, the last four ships for Cuba overran their intervention fund support, which was already a considerable cost to the taxpayer, by between 12 and 17 per cent. of cost. If we look back over the history of British Shipbuilders, we see that intervention fund support over the years has cost the taxpayer £250 million. Trading losses on top of that intervention fund support total about £1 billion. Most of us could find more attractive ways of spending £1 billion of public money on one public service or another.

However, I am prepared to consider intervention fund support for the Cuban and other orders from any who may successfully negotiate the purchase of a yard in Sunderland. Such a purchaser would have to accept the risk of contract losses over and above intervention fund support. Any new purchaser or manager would strive to avoid such trading losses. My Department has established that the Cuban company Mambisa has the authority to purchase these ships and to negotiate price and credit terms. One of my officials has been to Cuba to discuss that very matter.

It remains now to be seen whether any of those interested in the yards could negotiate satisfactory terms and they certainly face fierce competition. However, Mambisa has confirmed to my official that it is prepared to allow plenty of time for negotiations to take place.

All this confirms what I told the Select Committee on 28 June. The Cuban order is now a serious opportunity and there never was a June deadline for any contract. However, it is important—so that there is no misapprehension—for people in the north-east to understand that the order is not, and never was, a forgone conclusion. The Cuban order simply is not in the bag or readily available for anybody.

Mambisa is pleased with the ships that it has bought in the past and is happy to order again, but only on competitive terms that are attractive to it, which is, of course, the basis on which any prospective customer would proceed. If the order was won by any British bidder, work would be unlikely to start on the Cuban ships for some months. It could not start this year. The Cuban order, even if it is won, is not, of course, big enough to provide sufficient work to occupy both yards in Sunderland and all their work force. The Cuban ships are not the only ships that prospective purchasers are talking about with British Shipbuilders and my Department.

The situation is extremely difficult and it is important for me to play fair with the people of Sunderland. It would be quite wrong for me to disguise from the House or from the people of Sunderland the fact that there is a very large question mark over the future of the Sunderland yards. We must face up to the fact that there is no clear or certain expectation that any order for any ships can be found for those yards—under any credible ownership of the yards—at acceptable cost.

I have said before that I am not convinced that merchant shipbuilding offers the best future for the town, if it can be sustained only by huge subsidies for occasional orders. The whole business runs the risk of continuing on a hand-to-mouth basis, which is no certain future for the work force and their families. Substantial lay-offs, if not redundancies, are inevitable over the next few months. If no satisfactory bid is forthcoming, I shall in due course announce a package of measures for the town that will be designed to create new opportunities and which will underline all the efforts already being made to secure its economic future. I very much hope that that will not prove necessary, but it is the Government's duty to the people of Sunderland to help them to attract new enterprise and jobs should the need arise.

The order before the House tonight is essentially a technical matter, which is designed to allow British Shipbuilders to continue trading within its statutory trading limit. It is the occasion for a shipbuilding debate in which hon. Members who represent shipbuilding constituencies and other hon. Members who have legitimate interests in shipbuilding may give their views.

British Shipbuilders now has its programme of disposals well in hand. There are inevitable uncertainties. Some facilities may close. However, I hope that in place of a corporation which still makes appalling losses we shall shortly see a merchant shipbuilding industry which is strengthened by these disposals and has a promising future into the 1990s and beyond. I shall make every effort to ensure that we improve the prospects for profitable industrial activity and for secure employment which will last in all the shipbuilding towns.

Photo of Mr Bryan Gould Mr Bryan Gould , Dagenham 10:18 pm, 21st July 1988

I had intended to begin my short speech by saying that the Opposition welcomed the order and the fact that at least the borrowing limit is to be raised, which is a sign that the Government do not intend to pull the plug on British Shipbuilders at the moment. However, in the light of the speech that the Chancellor of the Duchy of Lancaster has just made, that welcome would be quite inappropriate. We have just heard nothing less than the sounding of the death knell of British merchant shipbuilding and, in particular, the death knell for shipbuilding on the Wear. The Chancellor's announcement that he is not prepared to provide intervention fund support in the present circumstances is nothing less than a knife in the back for the workers in Sunderland.

This debate traditionally provides the opportunity for asking questions about the future of the British shipbuilding industry. We have had precious little information from the Chancellor tonight, except for that staggering announcement of his refusal to support the British merchant shipbuilding industry.

We are within a week or so of the House rising for the summer recess. Events of great importance are likely to take place during that recess, and I ask the right hon. and learned Gentleman to ensure that I and the hon. Members whose constituencies are involved and who have an interest in shipbuilding are kept informed and allowed to question the Chancellor and his Department about each stage of the operation. We need to be able to continue to make the case for British merchant shipbuilding over that period, as it has certainly not been made by Conservative Members.

I was going to express a welcome for this order, but I was not going to welcome the reasons for extending the borrowing limit. They lie in the uncertainty, delay and confusion that have arisen because of the Government's attitude to the decisions they have to take. Because the future, particularly in Sunderland, is so unclear and, in the light of the Chancellor's speech, so gloomy, costs are rising, workers are being laid off and losses are sure to mount. Because of all that, British Shipbuilders continues to need the increase in borrowing limits for which the order provides.

The Chancellor had the opportunity this evening to provide the House and the industry with information on which the industry could base some sort of future and make better plans to reduce the inevitable haemorrhage of costs that will occur over the next few months. Instead, I fear that the industry will be left with no incentive except to bear the losses as they happen and to look forward to a future without hope.

The right hon. and learned Gentleman mentioned the future for Govan. It has a future of a sort in the hands of Kvaerner, and subject to the permission of the Commission it has a future with the intervention fund subsidy that is available. But it is reasonable to ask why it was necessary to give the yard away if the subsidy approved by the intervention fund is to be continued. That is an instance of the ideology that the Chancellor denies is at work.

We also heard some cryptic remarks about the future of Appledore Ferguson and Clark Kincaid. We were told that British Shipbuilders was setting bid dates. It should be put firmly on the record that British Shipbuilders is not taking the initiative in this respect. To the extent that John Lister and others are setting bid dates, they are doing so under the direction of the Chancellor of the Duchy of Lancaster.

The most pressing question arises not in respect of Govan, Appledore Ferguson or Clark Kincaid but—it was clear from the Chancellor's speech—in respect of North East Shipbuilders Ltd. Layoffs are already taking place and by Christmas no more than 200 men will be left on the site. By early in the new year the yard will have no more work and will close unless orders are secured. It is essential to the future of British merchant shipbuilding that the yard's future should be secured. It is surely common ground among all who care for the future of the industry—that must include the Chancellor—that the future of the yard depends on securing orders, not on the form of ownership.

Orders are the lifeline for NESL. The overwhelming priority for any Government, Minister or person concerned with the future of the yard must be to secure orders to keep it and the industry alive. The Government have their priorities wrong; they deny their commitment to ideology, but say that ownership must be established first, and only then can orders be examined. It is that order of priorities that threatens the survival of the industry.

The yard desperately needs orders. An order—subject, I agree, to the factors that the Chancellor mentioned—is available. One crucial precondition to the securing of that order is that intervention fund support should be made available. The Chancellor had an opportunity tonight to make it clear that, if British Shipbuilders, NESL, could reach agreement on price and could raise the necessary financial support—I will come to that in a moment—the difficulty that might arise in the absence of intervention support might be removed, the yard would be encouraged and helped to secure the order, and only then would the Government insist, if they wished, on sorting out ownership.

It is the Government who have reversed that order of priorities and insisted for reasons of no validity—reasons which rest entirely on their own dogma—that the order should take second place to ownership.

It is not as though the Chancellor's arguments bear any real examination. First, the doctrine peddled by the Chancellor speak very little for his confidence in the new management that he appointed only a year or so ago. I believe that he should have come to the House tonight to express some confidence in the new management, which has recognised the problems facing British Shipbuilders, especially the yard in Sunderland, which has taken great steps, with the co-operation of the work force, to get matters right. The Chancellor has expressed a substantial, if not fatal, vote of no confidence in both management and work force.

Secondly, the Chancellor bases his argument on the need to ensure—as he puts it—that contract losses, if they arise, will be borne not by the taxpayer, but by a new private owner. Even on the Chancellor's terms, that argument does not stand up. I do not believe that the case for the inevitability of contract losses has been made. If the Chancellor is simply making that assumption, it amounts to a tremendous vote of no confidence in the yard and its management.

I shall assume for the moment that the Chancellor was right in saying that, if the Cuban order were obtained and intervention fund support provided, there would still be contract losses, but there is no escape by selling to a private owner. No private owner worth his negotiating salt would sit at the opposite end of the table and ignore that factor when deciding what price to pay or, far more likely, what sum to demand to take the yard away. The taxpayer will pick up the bill for contract losses, irrespective of whether the yard remains in public ownership. Ownership is irrelevant to contract losses; as it is irrelevant to securing the orders and to the survival of the yard. It is the Government's dogma alone that makes ownership relevant at all.

There are real questions to be asked and answered. Unfortunately, in a remarkably uninformative speech, the Chancellor has provided little information on any of those real questions. On the Danish ferry contract, we have had no indication from the Chancellor of what the legal position was, how the negotiations were proceeding, what the Export Credits Guarantee Department's attitude was, what would happen if Johansen finally defaulted, and what that would mean for the work programme on the remaining ferries? We have no information on that, which is extremely disappointing.

What about the Cuban order? As I have said, that is the one remaining realistic prospect for keeping the yard open. The Cuban order was denied as a possibility for months by the Chancellor. It was only when the yard and its management insisted that it was a real possibility that the Chancellor deigned to take it seriously.

There was also a question about the application for intervention fund support. British Shipbuilders wrote expressing considerable interest in the order, referring to the price it thought that it would bid and the amount of intervention fund it would need. However, the Chancellor's Department told British Shipbuilders that help would he very unlikely. When it raised again and in public the need for intervention fund support, it was rebuffed with the excuse that no application had been made. That kind of double dealing epitomises the lack of support and interest that the Government have shown in securing the Cuban order.

However, at least a senior civil servant has now been to Cuba and presumably has entered into serious negotiations. We hope that he has come back from Havana with some serious propositions. Again, we heard very little information about that from the Chancellor tonight.

Will the Chancellor confirm that he believes that the Cuban order is a real possibility? Will he also confirm that British Shipbuilders—subject, I agree, to foreign competition—can bid successfully for the order? Will he further agree that with intervention fund support and a level of financial support in a package—which we, above all, must be able to organise in the City of London in the form of a package that will at least match that available from other supplying countries such as Spain—the Cuban order would be available and would save the yard? That is what we had hoped to hear this evening from the Chancellor. Instead we heard the sound of the slamming of the door.

If the Government insist on their ideological obsessions and on selling the yard before they consider support for the order, there are still real questions which the Chancellor has not deigned to answer. How many bidders have we had? How many are serious? How many of them would keep the yard going as an entity? How many intend to split up the yard, retaining only such bits as design capacity? What are the deadlines? Is there a serious prospect of the Copson bid or order materialising? If it materialises, what are the plans to bridge the gap that would inevitably arise? All those are real and practical questions, the answers to which will determine the fate of thousands of jobs and of this vital yard and part of the British merchant shipbuilding industry.

We have had no answers from the Chancellor to those important questions. I am left with welcoming the order. However, I suspect that the increase in borrowing powers is itself a poisoned chalice and that this is not an act of generosity, but something that will be hung around the neck of British Shipbuilder; in future as further evidence of how unsustainable it was. Time and again we hear the figures trotted out about how much public money is being devoted to the industry. The Chancellor has conceded in earlier comments that large proportions of that money have gone to warship yards that have since been privatised and to restructuring and causes other than trading losses. I hope that these further sums will not be added into that quite unfair and misleading total.

As the Chancellor is aware, I recently visited Sunderland and the two yards on the Wear. I was impressed, as any visitor would be, by the evidence of the taxpayers' investment and by the immense facilities available to the yards. I was also impressed by the keenness and realism of the management and the tremendous efforts made by the work force, which has suffered grievously in terms of job losses in recent years. I formed a very high opinion of the efforts made in those yards to sustain a future that is so important to British industry.

I am sorry to hear tonight that the Chancellor does not share that enthusiasm. No one discounts the difficulties involved, but I had hoped that the Chancellor would reaffirm his commitment to British merchant shipbuilding and NESL. Sadly, we did not hear that reaffirmation tonight.

Photo of Mr Neville Trotter Mr Neville Trotter , Tynemouth 10:34 pm, 21st July 1988

The size of the borrowings revealed to the House by my right hon. and learned Friend the Chancellor is perhaps not a shock—the seriousness of the position has been rehearsed on many occasions over a long time—but it shows that we are indeed in a crisis and cannot just accept a continuation of the previous scene. I agree with my right hon. and learned Friend that action is needed.

My right hon. and learned Friend will understand the concern in the north-east about the fate of Sunderland Shipbuilders. He is, I know, aware that this is regarded as a regional problem not just of concern to all parties on Wearside but in the wider area.

Enormous efforts have successfully been made to modernise the local industry and provide alternative employment prospects on Wearside. My right hon. and learned Friend cannot, however, be ignorant of the serious unemployment problem in Sunderland. We must do all we can to seek to ensure a future for the town's shipyards.

There are signs of a changing world scene for shipping. It would not be right to say that the sun is rising and that there are rosy prospects, but ship demand is growing. There are signs that the era of cut-throat competition, which depressed prices and led to dramatic borrowing to cover British Shipbuilders' losses over many years or more, is easing. Prices are rising, and our main competitors in the far east are experiencing problems. The Japanese are suffering from the high yen. When I visited Japan earlier this year with a Select Committee, I was interested to note the difficulties that the Japanese are experiencing with all their exports because of the strength of the yen. For the first time, Korea is experiencing industrial relations problems. Demands are being acceded to for very large wage rises. These eastern competitors will not have the easy time that they had in the past.

The shipbuilding recession is an international problem and the House has rehearsed the problems many times over the 13 years of the recession. On many occasions, I have drawn attention to the need for international action. At last, there are signs of that happening. Discussions are now under way between the Japanese and the EEC to seek to establish some stability in the shipbuilding market.

I have referred to the concern on Wearside and in the north-east, but the reduction in capacity has a far wider knock-on effect on the engineering industry. The House is aware that I have been involved with the marine equipment industry for a long time. Twice as many jobs are involved in the manufacture of parts of ships as in assembly in the shipyards. Those jobs are nationwide, not only on Wearside.

Inevitably, there is much uncertainty on Wearside about the future of Sunderland Shipbuilders. However much we should like him to, I understand why my right hon. and learned Friend cannot reveal details of any discussions with potential purchasers of the yard or discussions with the Cubans or other potential purchasers of ships. Will he, however, undertake that any information about potential orders from Cuba or other shipowners will be made available to a potential purchaser of the yard so that the potential purchaser will know the state of any negotiations?

Will my right hon. and learned Friend consider the possibility of the two sites in Sunderland being converted into private ownership separately? I remind him that at one time they were two separate businesses before British Shipbuilders came into being. Will he give way on the end of September deadline if serious negotiations are in progress at the time? If by then there is a serious possibility of either site—or both sites—in Sunderland being transferred to a purchaser, will he undertake to extend the deadline?

One must accept that one cannot go on building ships at 45 or 50 per cent. losses. It is a measure of the Government's support for the industry that they are prepared to continue the intervention fund at 28 per cent. A 28 per cent. subsidy on future merchant orders will be available to any purchaser of the Sunderland yard and my right hon. and learned Friend should spell out that fact. I ask him to understand the wide concern in the north-east about the future of the industry, and I hope that he can give the House some assurances on my specific points.

Photo of Mr Robert Clay Mr Robert Clay , Sunderland North 10:40 pm, 21st July 1988

I endorse the remarks of my hon. Friend the Member for Dagenham (Mr. Gould) about the Minister's speech. It was even more dreary, pessimistic and disappointing than I expected it to be. Some of his remarks were positively damaging to any prospect of the privatisation of NESL on which he is so bent. Any potential purchaser who took much notice of his speech would immediately be put off.

The Minister has created an absolutely hopeless mess for the future of NESL, because of his ideological obsession with privatisation first and, perhaps, orders later. That point can be illustrated in a pragmatic way. On many occasions, the Minister himself has acknowledged that the Cuban order is a serious possibility. He acknowledged that point tonight, despite saying that he was not prepared to give intervention fund assistance for it at the moment. That statement is to be welcomed, compared with his remarks earlier in the year that the order did not exist at all.

Having acknowledged it as a serious possibility, the Minister must surely accept that any immediate purchaser of NESL—a purchaser on whom he is insisting—will have to clinch the Cuban order, unless there are so many orders around the world at the moment that each potential purchaser can come along with different prospects. If that is the case, the scenario is different from the one that has continually been painted in debates over the past few years, when we were told that there were no orders in the world.

The Minister acknowledges that the Cuban order is essential. Some other things can be exciting in the longer term, but they will not happen unless the gap, or some of it, is filled by the Mambisa order in the near future.

I do not understand how the Minister has the audacity to talk about potential purchasers taking their time. Only a few weeks ago, he announced his determination to privatise NESL. Some people—one or two—have been seriously working night and day, putting other matters aside, to try to put together a package that will save the yard. If one is trying to put together a bid, I can hardly believe that it is helpful not even to know what the bid deadline is or what is happening with the Cuban order. It is a chicken and egg situation. How does one put together a business plan for NESL when one does not know what is happening with the Cuban order? How does one hope to secure the Cuban order when the Cubans do not even know with what ownership they are placing the order?

It is ridiculous for the Minister to say that people are taking their time. Some of the people who are not taking their time, other than the one or two serious potential bidders, are the growing number of sharks, charlatans and comedians who are coming on to the scene and, looking at the pickings. That is ridiculous when we are talking about 12 to 15 potential purchasers. It is so ridiculous that, I suppose, I could walk out of the Chamber and announce that I am to put in a bid for NESL, and my name would go on the list. Anyone can walk in off the street, ring up the Department of Trade and Industry, and another joker will be put on the list as a potential bidder. That is the ridiculous situation that has been created.

Men have been laid off and will be laid off in their hundreds in the next few weeks—that affects their families—but they do not even know the names of the potential bidders—the "blue tornado" and the rest of the jokers. The men do not even know whether this measure will provide them with some future security. The Chancellor of the Duchy of Lancaster has created that situation by his insistence on privatisation before anything else can happen.

Let us look at the outcome. From a pragmatic point of view, the position is ludicrous. There are only one or two serious prospects. As an example I shall take Mr. Zacchi and his consortium, which seems serious about wanting to secure the Mambisa order. We can also take as an example Mr. Copson and his bucket boats, which is a more long-term proposition. How does it help fitting together those different propositions and working out whether things can be built and outfitted in Pallion, Southwick or North Sands and how the facilities could fit together in a way that would maximise them when those people are, in effect, having to bid against each other and against a deadline that they do not even know?

Apart from the Minister's blank refusal, which I suppose was not that unexpected, there was the appalling announcement that in no way will there be intervention fund aid without privatisation. The other appalling development was his announcement that the bid deadline might not be until the end of September. As he knows, there will be hundreds more redundancies by them. If the Minister allows the damaging uncertainty to continue until that time—when there are people who, if he would only clarify the position, could start talking seriously about bids in the next few days—the position becomes even more damaging than we thought.

In conclusion, the Minister has created a mess and it is his responsibility to get out of the mess. There is a way out of it. If one puts ideology aside, the common-sense way to proceed is to say, "We have one or two potentially serious possibilities—the Cuban order, Mr. Copson and one or two others—and the job with which we should now get on is clinching the Cuban order, doing the work on Mr. Copson's proposition and talking about the one or two other potential orders. Let's leave NESL as it is at the moment to get on with that job."

When those orders have been clinched when we know whether Mr. Copson can build his bucket boats and whether he can get a licence and overcome some of the other hurdles facing him, and when the NESL's existing management who, at the top level, from the chairman down to the managing director, are one of the best managements in British Shipbuilders for a long time and who are supremely qualified to work out the practicalities of building those ships and arranging cycles and time scales to save the greatest number of jobs—when all that has been done, if the Minister must, we can then debate the privatisation of what has been achieved. That is the logical way to proceed.

If the Minister does not do that, this debate may mark the final announcement of a malicious and unnecessary sabotage of the largest remaining part of the British merchant shipbuilding industry.

Photo of Charles Wardle Charles Wardle , Bexhill and Battle 10:48 pm, 21st July 1988

I am grateful for the opportunity to make a brief contribution to the debate, because the decline of shipbuilding in this country has a significance which should not elude British industry as a whole and which is worth emphasising.

I am not suggesting that there is any great significance in the motion to increase the statutory limit up to which British Shipbuilders can raise additional public dividend capital or raise commercial loans. My right hon. and learned Friend the Chancellor of the Duchy of Lancaster has explained his object in that regard and what he has told the House that British Shipbuilders requires is analagous to a private company seeking to increase its authorised but unissued share capital or to raise the borrowing powers in its memoranda and articles of association.

What matters in any enterprise is the reason for which that additional finance is contemplated. The sound reason is to fund expansion beyond the scope of any current earnings and cash flow. The less happy reason which applies in the case of British Shipbuilders is to enable a company to accommodate the effect of cumulative losses, to cover the cost of cuts which managers euphemistically describe as "rationalisation" and to cover the cost of redundancies without breaching statutory limits.

Not surprisingly for British Shipbuilders, this evening's order comes after a decade of huge losses. The industry has struggled with the massive problems of over-capacity throughout the world, cut-throat competition, spectacular changes in marine technology and production methods in the shipyards. As such things had an effect, it must be said that British shipbuilding labour has all too often shown itself to be poignantly ignorant of the vital need to be flexible on matters such as demarcation and of the need for greater productivity.

Photo of Charles Wardle Charles Wardle , Bexhill and Battle

I am not saying that there has been no progress, but there has not been enough. There is no question but that our labour has priced itself way beyond the competition offered by far eastern shipbuilders.

The sad story of Britain's shipbuilding decline from 80 per cent. of the world market to one third of the virtual captive market that existed during the rebuilding boom of the late 1940s and early 1950s and down to our present minute and paltry share of the market is a well-documented case study of industrial decline, upon which I shall not dwell.

The last chapter of that case study was the ill-judged nationalisation that scraped through in 1977. In the past decade, that has resulted in the massive drain of £2 billion of taxpayers' money. The purpose of that support has been to preserve the jobs of a few workers and—rightly perhaps —to sustain the shipbuilding communities. It might have been kinder if, long ago, the attention of such communities had been turned to other products, fresh markets, new enterprise and a renewed sense of determination.

No amount of taxpayers' money, grants or subsidies will turn the industrial clock back. It is sad that Opposition Members cannot accept that and cannot accept its significance for Britain's industry. No amount of subsidy will halt the inevitable progress of change. [Interruption.]Opposition Members may shout as much as they like, but it will not. The harsh fact of life that must be faced is that competition is here to stay. There are cheaper and more flexible sources of labour, and sophisticated technology and cheaper raw materials at the disposal of shipbuilders in Japan and—more worrying for our industry—in South Korea.

British Shipbuilders undertakes a production task whereby two thirds of the product cost is bought in and one third is open to management and employee control. That is not a basis on which our yards can compete with the far east.

The problems are not unique to shipbuilding; industrial change is taking place everywhere. In the early 1980s, countless firms in the black country faced a similar acute problem of over-capacity in world markets. Those companies had priced themselves out of the market as a result of wage-driven inflation.

Photo of Charles Wardle Charles Wardle , Bexhill and Battle

The hon. Member for Dagenham (Mr. Gould) may express surprise, but I worked in that part of the world and saw examples of the good times and the bad. I saw the problems and I have witnessed the resurgence. There is a lesson to be learned by the shipbuilding industry. The sooner Opposition Members grasp the import of that lesson and encourage the shipbuilding communities to understand it, the sooner prosperity will return to those yards.

Photo of Mr Bryan Gould Mr Bryan Gould , Dagenham

I have borne the hon. Gentleman's outrageous lecture with equanimity for some time, but will he estimate a guess as to the importance and relevance of the 60 per cent. increase in the real exchange rate, brought about by an excessively tight monetary policy perpetrated by his Government, to the problems experienced by British industry in the period he mentioned, and especially industry in the black country?

Photo of Charles Wardle Charles Wardle , Bexhill and Battle

It was undoubtedly a factor, along with the increase in oil prices in the 1970s. I recommend that the hon. Gentleman looks at the comments of his colleagues and the level of unemployment that they were predicting in the late 1970s before this Government came to power.

Wherever industrial change has been accepted as a challenge, and wherever the hankering after yesterday's markets has stopped, industrial and commercial resurgence has already begun, with new technologies and new opportunities to exploit. I hope that the British shipbuilding industry will grasp that vital lesson.

We have heard all about the resourceful and wholly commendable initiatives taken by the Government to provide subsidies for the possible Danish and Cuban orders and latterly to find suitable buyers. We have heard about Govan and Kvaerner and the initiatives taken towards Appledore and Ferguson, but, so far as the Wear and North-East Shipbuilders are concerned, the harsh reality of market competition must be faced. There will always be pockets of specialist shipbuilding enterprise in this country, but, on the Wear, we should not perpetuate a long-gone past, but create a new and prosperous future.

Mr. Bruce Milian:

The speech to which we have just listened has been a complete waste of time in this short debate which is taking place at a disgracefully late hour about an important industry. I shall cut my remarks short and just make one or two comments about Govan shipyard.

The way in which Sunderland has been treated is outrageous. The Minister's speech, far from being helpful to the prospect of privatisation and the prospect of obtaining the orders that Sunderland desperately needs, has been extremely unhelpful and damaging. Sunderland has been treated in an utterly disgraceful way.

The deal concerning Govan has gone through, subject to the European Commission's approval. Although I have expressed my views on privatisation on a number of occasions, I have to accept that the privatisation of Govan will now go ahead. It is not an unmixed blessing, even with the orders that are coming to Govan, because 500 redundancies will accompany them. So far as making the yard profitable is concerned, it helps if one obtains the yard for nothing, all the assets, plant and machinery are written down to nil in the 1986–87 British Shipbuilders' accounts and if all the losses and any prospective losses on the orders in the yards at the time are borne by British Shipbuilders and, ultimately, by the taxpayer. Kvaerner is getting an extremely favourable deal at Govan, but I wish the company well at the yard because the interests of my constituents who work there are bound up with the success of the yard.

I want to ask about intervention fund support in the long term. It was announced in a written answer on 27 June that the two gas-carrying ships which are definitely to be ordered at Govan are to have intervention fund support and the two other possible orders will also be eligible. The sixth directive was meant to last for five years and we are only 18 months into it. The Government have already reneged on the directive, as they are not making support available to British Shipbuilders so long as the company remains publicly owned.

I hope that the Minister will tell us about the longer-term prospects of the sixth directive, both in Govan and elsewhere. It was intended to last for five years and there has already been a considerable resiling on that by the Government. Those hon. Members who still have shipbuilding interests are entitled to ask the Minister to tell us something this evening about the longer-term future of the sixth directive and intervention fund support. I should like to say much more, but I know that hon. Friends with constituency interests are anxious to be called.

11 pm

Photo of Miss Emma Nicholson Miss Emma Nicholson , Torridge and West Devon

The shipyard in my constituency is important to its economy. If the shipyard in Appledore were to be closed, or turned into a marina or a block of luxury flats, there is no way in which 520 jobs could be found for 520 very skilled people. I feel confident that privatisation will not lead to the closing of the yard.

I am puzzled by the unpleasant tone of some of the Opposition speeches. I appreciate that my shipyard, if I may use that familiar phrase, is different. At least half the men on the shop floor welcome privatisation. There is an exceptionally good relationship between management and men. The management, the men and I have had no difficulty in discovering who will be putting forward the bids. Would-be bidders have approached me and have asked to meet me. John Lister, the chairman of British Shipbuilders, has fobbed me off over making a closer link, sooner than he wishes, between the prospective purchasers and the men on the shop floor.

The Minister welcomed a large delegation from the yard to his office only last week. It was an immensely helpful and successful meeting. Of course he was unable to tell the men everything that they wanted to know. Commercial constraints mean, quite properly, that until bids are on the table, commercially sensitive information cannot be released. Everything cannot be put on the table during union and management negotiations when a prospective purchaser is being tempted to buy.

The yard has a good order book and a good future. There are no worries about far eastern labour, because nobody else makes such splendid little ships—dredgers—as Appledore Ferguson. The yard has made tremendous advances in the use of modern technology, with beautiful computer-aided design. It has already led to great advantages.

The fears and concerns that have been expressed more inelegantly than Opposition Members may realise will not be justified in the long run. Privatisation will lead to more jobs and to the expansion that the dead, cold hand of the state could never achieve.

Photo of Chris Mullin Chris Mullin , Sunderland South 11:02 pm, 21st July 1988

You will forgive me, Mr. Deputy Speaker, if I err slightly on the inelegant side, too, but I must outline the consequences of the shattering blow that this state of affairs represents for my constituents and those of my hon. Friend the Member for Sunderland, North (Mr. Clay). Sunderland was built on shipbuilding. Well within the memory of many of the people who live and work there today, Sunderland was once the largest shipbuilding town in the world. Male unemployment now stands well in excess of 20 per cent. In some areas there are whole streets where hardly anyone has a job. A generation of children is growing up who may never have any work, except that provided by a Government scheme. If the Minister and hon. Members detect just a little anger on this side of the House, I have given him the reason for it.

I must knock on the head a couple of falsehoods that were lobbed in by the hon. Member for Bexhill and Battle (Mr. Wardle). He referred to workers pricing themselves out of jobs. The workers in the Wearside shipyards take home on average £110 a week. Their gross pay is between £145 and £160, depending on their grade. It is outrageous for the hon. Gentleman to talk in those terms. They are merely an illustration of his ignorance.

The hon. Member spoke about the need for flexibility and claimed that there had been demarcation problems, although I was interested to note that the Minister did not make such an allegation. Indeed, anybody with a knowledge of the industry would avoid making such an allegation because the workers in Sunderland have been extremely flexible. As one of them put it the other day, they have seen more changes than the traffic lights in Fawcett street. They have bent over backwards to make their industry viable. There is no sacrifice that they have not been prepared to make.

It has not been pointed out clearly enough just how much what has occurred has been in direct contradiction to the advice of the management of British Shipbuilders. Mr. Lister, the widely respected chairman, who was appointed just over a year ago by the Government, has left nobody in any doubt about his view of the situation. When he appeared before the Select Committee on Trade and Industry on 14 June, he was asked by my hon. Friend the Did you think when you were appointed last year to be chairman that you were going to be presiding over the fragmentation of your corporation within the year?A: I would not have joined if I had thought that for a moment. I thought that my job was to turn it round and make it viable. After six months I believed I could see a way to do that, or I would never have come.Q: So, as an experienced businessman, you can see that, in keeping the corporation together in its present form, whether publicly owned or not, it would have a future?A: Yes. Later, Mr. Lister said in answer to a question from the hon. Member for Waveney (Mr. Porter): In my view, if you took one yard out of British Shipbuilders it would not be able to exist in the form that it is … we would not be able to sustain the research and technical effort at the level that is necessary.Q: Have you advanced that view to the Department of Trade and Industry?A: Yes, I have.Q: With what response?A: I think they accepted it.Q: Did they indicate what they were going to do about it? A: Their response was to suggest that we would sell Govan to Kvaerner.Q: I do not see the logical connection between the view you have expressed and the sale of the yard.A: Neither do I. What is occurring is happening in the teeth of the interests of the work force, without regard to the social consequences and in defiance of the view of the management appointed by the Government. If there is some bitterness in Sunderland, it is due to a feeling—the Minister used the phrase "ideological hang-up" and perhaps that best describes it—that this is privatisation at all costs.

I join my hon. Friend the Member for Sunderland, North in saying that we should do our best to obtain the Cuban order and then discuss the form of ownership. The workers in Sunderland are practical people. Unlike some Members here, they dwell firmly in the real world. They have done their best to preserve their industry and the generations of skills that have been accumulated. As I say, let us get the order and then argue about the method of ownership.

Photo of Dr Norman Godman Dr Norman Godman , Greenock and Port Glasgow 11:08 pm, 21st July 1988

The hon. Member for Devon, West and Torridge (Miss Nicholson) kindly referred to the joint interest that we have in Appledore Ferguson. I understand that she is to visit the Newark yard in Port Glasgow in my constituency at the beginning of August. Hugh Hagen, the convener of the shop stewards' committee, informed me this evening that he is looking forward to her visit.

Photo of Dr Norman Godman Dr Norman Godman , Greenock and Port Glasgow

I do not have time to give way. This is too serious a matter for many hundreds of families in my constituency.

My hon. Friends and I must be brutally realistic over this matter. We must ignore the Minister's professions of ideological innocence. The Government are getting rid of what is left of British Shipbuilders. That is accepted by the shop stewards and employees at Clark Kincaid and at the Newark yard of Appledore Ferguson. It is now received wisdom. The Minister spoke of serious purchasers with sensible business plans, and I should like to speak about both facilities. Clark Kincaid is the only marine engine builder left on the Clyde. It is now building an excellent work force, entirely unlike that described by the hon. Member for Bexhill and Battle (Mr. Wardle)—a speech characterised in some respects by its insensitivity and stupidity. If our workers are paid so highly, why has Kvaerner come to Glasgow?

Clark Kincaid is building two engines for Chinese ships which are under construction at Govan. As I have told the Minister before, the Chinese superintendent engineers are delighted with the quality of the workmanship of the first engine, which has been test-run for scores of hours. Clark Kincaid would, I believe, become a much more attractive prospect to serious purchasers if Kvaerner would give us some indication that it would purchase the engines for the liquid petroleum gas carriers from the lower Clyde. I for one do not believe that the intervention fund money should be used to purchase equipment that is to go into a ship from outwith the European Community. Statistics from the Department of Trade and Industry prove that more than 90 engines for ships built in European Community shipyards—I see that the hon. Member for Tynemouth (Mr. Trotter) agrees with me—have come from engine builders outwith the EEC. In my view, that was not and is not the purpose of the intervention fund principle.

As I have said to Kvaerner, it could display plainly its commitment to the west of Scotland by placing orders with Clark Kincaid, which in my naturally biased view is among the best engine builders in Western Europe. When a replacement was built in the north-east for the Atlantic Conveyor, which was sunk in the Falkland conflict, the engine was built by Clark Kincaid. Cunard's technical director sent a letter saying that he had not encountered that quality of workmanship before. When the Atlantic Conveyor was extended at Scott Lithgow in my constituency, the superintendent engineer at Cunard told me, "This engine is a superb product of which the whole of Scotland can be proud."

If Kvaerner places those engine orders with Clark Kincaid, it will make it a much more attractive prospect to a would-be buyer. I hope that considerable sympathy will be shown to the management buy-out proposals. Those involved know the lower Clyde and are trusted and respected by the committee of shop stewards, who, led by councillor Robert Jackson, are demanding—rightly, in my opinion—that they be allowed to talk to the would-be purchasers. Is British Shipbuilders denying that facility to these highly experienced, mature and wise shop stewards? If so, it is a disgrace. They are a credit to the members they represent, and they will negotiate sensibly and realistically with a serious would-be purchaser.

Ferguson's—the hon. Member for Torridge and Devon, West will have to forgive me; to me it will always be Ferguson's of Port Glasgow—has been mentioned in that august journal the Greenock Telegraph, known to my Scottish colleagues and of course the hon. Member for Eastwood (Mr. Stewart). Last night's editorial stated: Appledore Ferguson is our one remaining shipyard. Whatever happens, they must not be sold down the river. British Shipbuilders must make sure that they find a buyer who can give reasonable guarantees about the future of this excellent little yard. That is precisely what it is—an "excellent little yard". Despite what the Minister said about the recent error on the Caledonian MacBrayne ferry, that remains the fact. The error was the responsibility of the designer, as he knows. It had nothing to do with the work force, which is entirely blameless in that regard. The designers who committed the error have parted company with British Shipbuilders.

Appledore Ferguson is a first-class little yard. The shop stewards and the convener, Hugh Hagen, should be given the facility to speak to would-be purchasers. I believe that Ailsa Perth of Troon is a serious would-be purchaser with sensible business plans. I wish to hear from the Minister that the board of British Shipbuilders will give every facility to Hughie Hagen and his colleagues to meet would-be purchasers, whether they are from Ailsa Perth or elsewhere. That is what I am seeking for my constituents who work at Clark Kincaid and Ferguson.

As everyone here knows, when a company is acquired, the work force is acquired with it. That is a fact to which the hon. Member for Torridge and Devon, West alluded. Incidentally, I hope to visit the shipyard in her constituency at the beginning of September, with her agreement. It would be difficult to refuse to do so, given that I accepted her visit to my constituency.

I wish to ensure that the shop stewards at Clark Kincaid and Ferguson—they are fine, decent, honourable men, whom it is a privilege to represent—are not barred from talking to would-be purchasers. After all, they will be purchased along with the material facilities in the yards. I want to see both yards continue, although it looks as if that will be under private ownership. I want the best deal possible for my constituents at Clark Kincaid and Ferguson in Port Glasgow.

Photo of Austin Mitchell Austin Mitchell Shadow Spokesperson (Trade and Industry) 11:18 pm, 21st July 1988

We have had the opportunity to hear a little industrial rubbish from the hon. Member for Bexhill and Battle (Mr. Wardle), who does not speak much in the Chamber. Having listened to him, I can understand why that is. We have heard "I'm all right, Joe" from the hon. Member for Torridge and Devon, West (Miss Nicholson). The Minister gave us a homily on borrowing powers, which amounted to the ability of British Shipbuilders to borrow its own death grant.

This is the death knell of British Shipbuilders. The Minister comes to bury it and I come to praise it. It has done a superb job in concentrating the industry, in keeping it going and ensuring that it can survive to inherit the turnaround in shipbuilding that will come in the 1990s, in which we need to be an active player. Thanks to the Minister's policies, we shall not be. Having done all that, British Shipbuilders is being sabotaged by the Minister. He is normally the genial face of industrial incompetence, but tonight he was the shamed face of industrial murder. It is no wonder that he had such a miserable and unhappy expression throughout the debate, bearing in mind the news that he brought. He was telling us about industrial murder.

A hole was knocked in British Shipbuilders by taking out the defence yards, so that they made no contribution to the whole. The idea that obsessed the Minister earlier in the year was the giveaway of Govan, which was 40 per cent. of BS's capacity. I shall not repeat my Victor Kyam joke that the giveaway is such an obsession that when it comes to Harland and Wolff, which is not part of British Shipbuilders, the Government are not bothering to check whether Mr. Tikkoo, who is presumably a Hindu, is a Protestant Hindu or a Catholic Hindu, before he is given the yard.

We are seeing the dismantling of British Shipbuilders. The Minister has told us that what is not sold will be scrapped, closed, sunk, made redundant or ended. That was his message. It was also the message that he gave to the Select Committee on Trade and Industry. He said: I rather think there won't be any yards in the ownership of British Shipbuilders in 12 months' time. Can there be a more incompetent way of dealing even with the dismantling of British Shipbuilders? Is not that an invitation to every shark and to every crook—to all those strange creatures which swarm in these waters—to come in and take the pickings? Is not that treating British Shipbuilders like a rummage yard to be picked over? Is not the Minister saying to anyone who wants, "Come in. There are bargains here. There are profits for the asking"? Is he not saying to anyone who might place orders with British Shipbuilders, "Hold on to your orders. You'll get better terms and a better deal. You'll even get the yard"? Is not that incompetence?

What swindler in the City would announce that the company was to go within a year whatever happened and then, as the right hon. and learned Gentleman has done tonight, start knocking the goods and saying that they are not up to the job—that the vessels that the yards produce are not adequate for the purposes for which they are intended? What kind of industrial performance is that? What confidence does it show in British shipbuilding and in the industrial future of Britain?

The Minister compounds his asinine attitude to the sale of a national asset with dogma, particularly on the question of NESL. He has told us that the Government will not consider giving help—the kind of help that every other Government would give their shipbuilders. The Government will not consider helping NESL to win the Cuban contract. The Cubans want those ships, which are of a good basic Austin and Pickersgill design. All other Governments will provide help and say, "We shall build up a package and help with the financing." The Chancellor of the Duchy, on the other hand, has told us that the Government will not do that unless the yard is sold first, they will not do it if the yard remains publicly owned.

Effectively, that is the death knell of the shipyard. The lay-offs have already begun: by the end of August there will he about 370 lay-offs; by September, 600 to 700 lay-offs; by Christmas, there will be only a couple of hundred people left, and by February next year the yard will run out of work. The Minister has said that that yard must now twist in the wind while the agony of finding a buyer who can take on the Cuban contract continues. He should have been saying, "We will provide the help to get that contract for British Shipbuilders to keep the yard going and to keep the jobs in being." All that he has promised tonight is a little industrial mortician operation when the yard is closed. I am surprised that he did not promise the area a garden festival, as garden festivals have been passed round British industrial areas like wreaths under this Government.

It is a bitterly frustrating job being in Opposition and having to watch such industrial incompetence and sabotage going on. We are having to watch mistakes being made and the Government ruining a great British industry. We cannot stop it happening. The Government have the votes. We cannot argue against it, because sheer prejudice from the top—from No. 10 Downing street—is forcing this treatment on a British industry. What we can do is to pin the blame for the sabotage of the industry right where it belongs—on the Government, on the Minister and on his Department—the Department of Trade and Industry reduction and industrial sabotage. They are responsible for sounding the death knell for North East Shipbuilders Ltd. and for British Shipbuilders.

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry) 11:23 pm, 21st July 1988

The hon. Member for Great Grimsby (Mr. Mitchell) has a racy turn of phrase which usually enlivens our debates, but I think that his flair for light entertainment is a little ill-placed in this extremely serious and important debate about the future of British shipbuilding. The hon. Gentleman added to the attacks on my hon. Friend the Member for Bexhill and Battle (Mr. Wardle), the one hon. Member to whom I do not need to reply.

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

I agree with 90 per cent. of what my hon. Friend said. Unlike the hon. Member for Great Grimsby, unlike me, and unlike any other hon. Member who has spoken in the debate, my hon. Friend the Member for Bexhill and Battle has considerable experience of running a business in difficult trading conditions—and successfully. He spoke a great deal of business common sense in the face of a lot of completely hopeless wishful thinking and irresponsible financial suggestions from the Opposition.

Unfortunately, it is important that we make things clear to the people who are so worried in the shipbuilding towns. Several times I was accused of not being sufficiently informative. I was only too informative. I was probably looking serious and grave because I was setting the facts before the House, as everyone should know them. As my hon. Friends the Members for Tynemouth (Mr. Trotter) and for Torridge and Devon, West (Miss Nicholson) acknowledged, I had to hold back commercially confidential information. I will not give details of people who might be customers or purchasers and who do not want details about them to be disclosed. That would sabotage the outcome that hon. Members have said they want. I put forward the position as clearly and fairly as I could to the House. The only sensible way of proceeding is that which I set out.

I begin with the one yard that has a secure future—Govan—as a result of the policy that we have followed. The Opposition attacked the arrangements for Govan, on the absurd basis that we have somehow given away that asset to a Norwegian company. Of course, we have had to cover the cost of the losses on finishing the Chinese orders. Of course, we had to cover the cost of redundancies which were not the responsibility of Kvaerner, and we have made arrangements that I believe satisfy the Commission rules. They are prudent; they do not write off debt; they are fair arrangements that give that company a future. We have also complied with the sixth directive, to which I shall return.

The right hon. Member for Glasgow, Govan (Mr. Millan) made it sound as though the sixth directive forces Governments to give up to a certain level of aid. That is wrong: it does not. Other European countries do not give aid, but there is a limit if they do. We readily accept that to ensure fair trading within the sixth directive, with which we have complied.

For the future, we have made it clear to Kvaerner that, within the rules that appertain at the time, intervention fund support would be available for orders by Kvaerner. If the four ships are ordered, Govan has a work load well into the 1990s. The alternative was closure. Our policy has been successful in Govan, so it was absurd to attack what has happened there—

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

I shall not give way to the right hon. Gentleman, as he is the least troubled Member in the Chamber, since Govan is safe into the 1990s, subject only to the approval of the European Commission, which I hope we shall get tomorrow.

Opposition Members will not face up to the background of what has happened to the other yards. I explained that background and set out the purpose of the policy. Opposition Members keep accusing me of being obsessed with privatisation, but this policy is not, in its origins, about privatising the yard. It is the Opposition who are obsessed with privatisation. Because an element of people bidding for particular yards has entered the scene, they are so obsessed by their preference for retaining what has proved to be an especially disastrous nationalisation of the yards that they insist on turning all their speeches around privatisation and saying that that is the root of the problem. It is not.

The hon. Member for Dagenham (Mr. Gould) said that the reason for the cuts and lay-offs in the work force is the Government's activities. It is not: it is because there are no orders. The Danish work in Sunderland is now running down. Lay-offs were bound to come at this time. It is because there is nothing to build that lay-offs are taking place. If a Cuban order, an order for a bucket ship or any other order were obtained now, work could not begin until next year. Lay-offs are inevitable and it is misleading people to suggest that the present situation arose because of the Government and could have been avoided.

We did not start with the problem of ownership. We began by looking at British Shipbuilders' application for the intervention fund support for the Cuban order. That is the background to the order tonight. This is the fourth time in two years that we have had to come to the House for more money. Last year it was £20,000 per employee; it is £24,000 per employee this time—and we shall all approve that in a few minutes' time. The history has been one of making losses over and above intervention fund support on every order.

But the hon. Member for Dagenham, supported by his Friends, says, "Never mind. Let's just get the Cuban order"—the implication being, "at any price." The business is highly competitive: the Cubans are not bound to order with us. But the Opposition say that we should carry the cost overruns at the taxpayers' expense and then sort out ownership. That cannot be done. Such an approach would not only be in breach of the sixth directive and disallowed by the Commission, but would be disallowed quite sensibly, because it is utterly irresponsible trading of the sort that the Opposition indulged in with the Polish ship order when they were last in government.

The Opposition cannot claim that they envisage a serious future for the corporation. They simply say, "Let us get the order at any cost. Let us carry on as we are now." The Government examined the matter and have said, quite sensibly, that there can be no future in going along that path.

Photo of Mr Bryan Gould Mr Bryan Gould , Dagenham

The Chancellor can resolve the dispute by giving a simple answer to this question: will he provide intervention fund support for the Cuban order, irrespective of ownership?

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

We shall not give intervention fund support to British Shipbuilders, because its history is that it cannot comply with the sixth directive and it cannot stop making cost overruns on top.

The Cuban order has only become serious during the past few weeks, because Mambisa has only just received authority to place the order. We shall allow the Cubans to negotiate with any serious bidders and they will be notified of any bidders that we recommend. We shall give any serious bidders information about the order.

In answer to my hon. Friend the Member for Tynemouth (Mr. Trotter), we shall look at separate purchasers for the separate yards, if they come up. Mr. Copson—who needs a licence for his bucket ships—must apply for the licence. Mr. Zacchi, who has gone public, must put propositions to us. There are other purchasers who want to build other ships, but they have not gone public. We are negotiating with them. If other people think that they can buy these yards and take orders at intervention fund support levels within the sixth directive, the Government will consider them.

We shall also look at Appledore——

It being one and half hours after the commencement of proceedings on the motion, MR. DEPUTY SPEAKER put the Question, pursuant to Standing Order No. 14 (Exempted Business).

Question agreed to.

Resolved,That the draft British Shipbuilders Borrowing Powers (Increase of Limit) Order 1988, which was laid before this House on 13 May, be approved.