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Mr. Roland Boyes (Houghton and Washington) : The Minister will recall that, during last week's statement, I asked two basic questions. First, I asked how many jobs had been created to replace jobs lost in the mining industry. Secondly, I asked the Minister to investigate the magnitude of youth unemployment in the borough. I have obtained the most up -to-date figures, which may be of
Column 923interest to the Minister. There are 6,035 youngsters who are either unemployed or on a job scheme that has a finite time limit. I asked what vacancies had been notifed to the careers office by employers. The Minister may be interested to know that in Sunderland there are five vacancies, in Houghton there are none and in Washington there are six vacancies. In other words, there are 11 job vacancies for more than 6,000 youngsters without proper jobs.
Mr. Newton : I intended to say something in a moment about the number of jobs being created in Sunderland, and I shall. I shall study further the figures that the hon. Gentleman has just brought into the debate. However, I must make the point that it is well known that the job vacancies notified to jobcentres--I assume that the hon. Gentleman meant jobcentres--represent a substantial understatement of the jobs available in an area. A considerable amount of evidence is available to that effect.
The other half of the £10 million will be used to help new businesses to start up or existing businesses to expand. Obviously, we shall be prepared to look at any type of business that can make a real contribution to the welfare of Sunderland. These measures, which are substantial in themselves--as I said last week, they have a total value over a period of about £45 million--are, of course additional. That point does not seem to have been fully appreciated by Sunderland borough council in some of the comments that it made last week. They are additional to the help that is already available to Sunderland and will build on what is already being achieved there. They are over and above the support--estimated to be something more than £120 million--that the Government are spending this year in Tyne and Wear in general, including Sunderland in particular.
Unemployment has fallen in the area by more than 7,000 in the past two years, and some 1,000 new jobs have been created in Sunderland in the past year, thanks to the combined work of the city action team, the Tyne and Wear development corporation, the Northern Development Company and the local authorities. Sunderland continues to be helped directly by regional assistance made available to the north-east by the Department of Trade and Industry, which has created or safeguarded 135,000 jobs in the past decade.
What is particularly striking and encouraging for the future is the success of Sunderland and the north-east generally in attracting investment. It is expected that more than 3,500 new jobs will be created there in the next two to three years by Nissan, Ikeda Bussan, which makes components for Nissan, NEK Cables of Norway and Goldstar Electronics of South Korea. That is a measure of what has already been achieved in the north-east and, not least, in Sunderland, and on which we believe that the measures that were announced last week will build still further.
I said last week that the House would share my regret that it had not proved possible to find a way forward for NESL and that, at least, was clear. The House will also share my view that there is a way forward for Sunderland, which will give it the new opportunities that all of us want to see. It is those new opportunities that we are now determined to achieve.
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Mr. Bryan Gould (Dagenham) : I beg to move, to leave out from "That" to the end of the Question and to add instead thereof : "That this House condemns the decision to close North East Shipbuilders Ltd. and the loss of jobs and damage to the Sunderland economy which the closure will mean ; deplores the obsession with dogma which puts privatisation above the securing of orders ; and regrets the unnecessary and untimely demise of British merchant shipbuilding."
I propose to waste little time on the Government motion or on the Minister's speech. I hope that the Minister will not take it amiss that he will not find it embarrassing if I say that I felt that his heart was not in it. I believe that he came to his new
responsibilities and discovered that he was the prisoner of a policy bequeathed him by his predecessor and which was then foisted on him by the Secretary of State. He has tried hard to escape the trap in which he found himself, but it is unfortunate for all concerned that, in the end, he has not been able to spring that trap.
The right hon. Gentleman has approached his task today--and his task last week as well--with an appropriately heavy heart because he understands that what he has to announce means the destruction of jobs, the destruction of a major British industry and the destruction of hopes for the future of our industrial economy. It is a wanton act of destruction and an outrageous act of industrial vandalism. Like all acts of vandalism, it is all the more sickening because it is so unnecessary.
The parrot cry for so long in respect of the British shipbuilding industry has been that there are no orders to sustain it. The Minister was very fair in acknowledging that that is precisely the problem that the whole of the world shipbuilding industry has faced over a long period. There is not a shipbuilding industry in the world that has survived without subsidy, and substantial subsidy at that. I can simply counsel the Minister and regret that he and his predecessor have so often grossly and unfairly overstated the degree of subsidy on which our own shipbuilding industry has relied. The absence of orders is not the central point today.
There can be no ground for closing down what remains of British merchant shipbuilding with the excuse that there are no orders. The reason for the closure lies in the Government's obsession with dogma and their insistence on putting privatisation before commercial sense and industrial logic. I use the words "obsession with dogma" advisedly because it takes an obsessive and doctrinaire Government to be ready to kill an industry rather than allow it to survive and prosper in the public sector. It is almost as though the shipbuilding industry is being judged on its past, rather than on its present or its future. It is almost as though this industry is being punished for the subsidy that it has received in the past, rather than being rewarded for its efforts and encouraged to take the opportunities that now open up for it.
It is true that the collapse of the Danish ferry order created an immediate and difficult problem, but even there, there is a mystery and a sense that the crisis was not wholly unwelcome to a Government who had already decided to wield the executioner's axe. The contract with Johansen subsists. Every effort to negotiate further possible buyers for those Danish ferries has met with the objection from Johansen that he still has a contract to buy them. No real effort has been made either to keep Johansen to his
Column 925contract or to declare him to be in default. Consequently, he and the Government, through their paralysis, have allowed the situation to frustrate genuine expressions of interest from about 80 potential buyers. They may not all be serious or to be taken seriously, but there are real expressions of interest in buying the ferries and none of them have been pursued.
We therefore cannot avoid the conclusion that it was convenient for the Government to discover that the collapse, or apparent collapse, of the Danish ferries order had come about at about the time when they had decided to close those yards.
An equally great--perhaps even greater--mystery surrounds the Cuban order. The Minister will accept that the Cuban order for 10 general purpose merchant ships is worth about £110 million. The seriousness of the Cuban interest can hardly be denied, but the Minister's predecessor denied it when my hon. Friend the Member for Sunderland, North (Mr. Clay) and I went to see him earlier this year and when he gave evidence to the Select Committee. The Cubans are serious, and have been serious all along, and the Minister cannot say that the order could not have been secured at a reasonable price, as no negotiations ever took place. The Cubans have merely suggested an opening target price. They have never been permitted to get to the negotiating table to start to negotiate specifications and price. Even now, at this late stage, the Cubans continue to signal the seriousness of their interest. The No. 2 man at ASIMEX is to visit London in the next few days, and I understand that he is prepared to negotiate a deal under which he would lease one of the yards and take on short-term contract labour for the duration of the build. That would save 900 jobs, and it would keep the yard alive until we could decide whether there was an upturn in world shipping demand. If the offer is to be taken up, however, quick action is required. I am glad to hear that the Minister is to wind up the debate ; perhaps he may even wish to intervene in my speech to answer this question. The Cubans are prepared to defer placing the order elsewhere for at least another month. Is the Minister prepared to enter proper negotiations with the Cubans, and to put up a proper negotiating partner? So far, the Cubans have been unable to negotiate with British Shipbuilders, and a successor has not been put in place with which to take up negotiations.
The matter is urgent because, if the closure of the yards is finally and irreversibly notified to the EEC Commission, intervention fund assistance will be lost for ever. Has that notification yet been made, is it irreversible and is it in any sense a condition of EEC approval of the other disposals of which the Minister spoke? What we need to know--the information that is desperately needed on Wearside--is whether the door has finally been closed, or whether even now it remains open. If it has finally been closed, this debate is a charade: it has come too late and it is a debate that the Government have offered when they have already cut the throat of British merchant shipbuilding.
It appears that the Minister does not propose to intervene, but I hope that he will comment in winding up.
Mr. Newton indicated assent .
Mr. Gould : The Minister made some play of the fact that in his view optimistic assessments had been made of the upturn in world shipping. Let me draw attention to some surveys and forecasts that suggest otherwise. A recent survey of world shipping is much more optimistic. It talks of demand rising to 30 million tonnes in the mid-1990s. There are unmistakable signs in the world shipping market--in the price of second-hand ships, in freight and charter charges and in other market indicators--that clearly show that the world upturn has at last arrived. That is why the Cubans are trying to get in early with substantial orders : they know that there will soon be pressure on capacity. That is why it is so ludicrous that the Sunderland yards are to be closed at this moment of all moments. All independent observers would accept that, on the basis of substantial investment, the Sunderland yards have become the best equipped yards in Europe and the European yards best placed to take advantage of the coming upturn. Huge efforts have been made by the work force, to which I am sure the Minister would wish to pay tribute. The taxpayer has put in huge investment and, as a consequence, the yards are at the leading edge of new technology. Even the Japanese have visited Sunderland to see how it is done. No one can walk away from those yards without a heavy heart at the thought that that impressive capacity is to be lost to our industrial economy. To turn our back on orders and close down the yards is a vote of no confidence in all that has been achieved so far--and, paradoxically, in the very management whom the Government recently installed.
No sensible business man would walk away from a market when it was just about to turn up, or write off huge investment made or skills developed just when all those efforts were on the point of paying off. No sensible Government would abandon their indigenous merchant shipbuilding capacity just when it is becoming clear that the prizes will go to the Governments who have had the courage, commitment and foresight to stick with their shipbuilding industries. What has been the point of making the effort and of keeping faith with the industry if the Government lose their nerve or prefer political to industrial objectives just when it is all likely to pay off at last and when better times are coming? The truth is that we do not have a serious business man or a sensible Government in charge. We have in charge a salesman who sees no value in anything that cannot be sold and who would close down a vital industry rather than have it remain in public ownership.
There is a value in what is being lost. It is a value that is very great to the people whose jobs and communities are affected and to the economy of Britain. Lord Young may not have obtained the price that he wanted, but there is a price to be paid.
Mr. Dennis Skinner (Bolsover) : Is my hon. Friend surprised at the way in which the Secretary of State is acting, given that he is only a jumped-up property developer who is not interested in the backbone of British industry? The Government do not care tuppence about subsidies ; they operate a double standard. Farmers, for example, are subsidised out of the taxpayers' pocket to the tune of £13 a week for every family in Britain to ensure that their industry ticks over. The same Government wrote off £4 billion of Rover's debt so that they could hand the
Column 927company over to British Aerospace--the company to whose chairman the right hon. Member for Chingford (Mr. Tebbitt) acts as an adviser.
Mr. Gould : My hon. Friend is on a strong point. He confirms my contention that the values of the asset stripper underlie this sorry story. If no one can be found to offer the required price for the assets, they are simply thrown away. The price that Lord Young had put on the assets could not be obtained, but there is a price to be paid. It will be paid by 2,000 people whose jobs will be lost as a direct result and by a further 3,000 whose jobs will be lost as an indirect consequence. It will be paid by the Sunderland economy. The package that the Minister has announced is no more than a pathetic sop and a salve for a guilty conscience. The price will be paid in the destruction of a 600-year-old tradition and of the pride and identity of the shipbuilding community. It will be paid in the loss of a future for an industry that will matter greatly to our economy and our industrial base. In the end, this country will no longer be a maritime nation. It cannot now build for its own merchant fleet or to preserve, protect and develop its own trade and strategic requirements.
We are a smaller and weaker economy and country as a consequence, blind to our past and, apparently, to the future and its needs. We are the victim of a Government who see no value in our industrial economy, who care nothing and know nothing about our industrial base, who--as they say--know the price of everything but the value of nothing. The consequence is that the British merchant shipbuilding industry is the last and, in many ways, the most lamented in the long list of this Government's victims.
Mr. Neville Trotter (Tynemouth) : This sad day has been long in coming, but it has been envisaged in our debates for some time. My right hon. Friend the Minister has given a lucid explanation of the international scene and background. Last night I read the Booze Allen report, one of the earliest documents on shipbuilding that I have seen. It came out in 1972, and what it had to say was prophetic. Let me briefly quote its conclusions :
"Despite the growing world demand for shipbuilding the UK will be faced with rapidly increasing competition in the next ten years, as world-wide over-capacity becomes more severe Government support alone cannot ensure a long term market for the industry, nor is technology likely to offer any particular advantage in the UK." That is exactly what has come to pass. It is little comfort to us that the same has happened in all other western European countries, as my right hon. Friend pointed out.
In 1975 I visited the Swedish shipbuilding industry, which was a new creation. Modern yards had been built from scratch in green field sites. Every one of them has now closed. At that time the Swedes were second only to the Japanese in shipbuilding. I was surprised that a small country like Sweden could have achieved such a position, but it had. The whole industry came and went within about 10 years. The reason has basically been competition from the Far East--cheap labour competition, especially from Korea--which came about at the same time as a tremendous fall in world demand for ships. In 1974 over 200 million tonnes were on order ; now the figure is down
Column 928to 33 million tonnes. Last year, only 16 million tonnes were built. That in itself is almost a halving of the amount built the year before.
My right hon. Friend referred to the vast sum of public money that has gone into the industry in this country. I compute it as about £1 million for every working day that British Shipbuilders has been in existence. If I have a criticism, it relates to whether that taxpayers' money has been spent to best advantage. It does not seem to me to have achieved much. I understand the arguments that supported it at the time, but I cannot help wondering whether we might have obtained better value by using it in different ways. One way in which we might have used it would have been to help our Merchant Navy more. If we had put more funds into supporting our shipowners, we might now have had a more assured order book for the future. I think that Govan comes best out of the recent dramatic events. It has an assured future by having a shipowner as its owner, which makes a good deal of sense. I had lunch today with a foreign shipowner who owns a yard in his country. He believes, as I do, that that is probably the key to success for western shipbuilding--that there should be a natural market from the yard owner's own fleet. Of course, he can also sell ships to others if circumstances permit.
Mr. Ted Garrett (Wallsend) : There is a slight contradiction in the hon. Gentleman's argument. Only this afternoon I heard that more redundancies are to be announced tomorrow at Swan Hunter, whose work force in Tyneside is shared between his constituency and mine. That contradicts the argument that private owners know best what is best for their business.
Mr. Trotter : Swan Hunter lost out on the last frigate order because, as the hon. Gentleman knows, it was considerably undercut by the other frigate builder. I am happy to tell the hon. Gentleman that, when I last talked to Swan Hunter's management, they said that they now thought that they had got their sums wrong and believed that they could have put in a lower bid in the light of what they know now. I am hopeful that, in the next round of frigate orders, Swan Hunter will be successful. Everyone agrees that it is a very technically competent yard. I am sure that the hon. Member for Wallsend (Mr. Garrett) thinks so as well, and hopes, as I do, to see more frigate orders going there in future--which, of course, would lead to more employment in the yard.
When will there be an upturn in the merchant shipbuilding scene? I do not expect one until the second half of the 1990s. The Drewry shipping consultants, in a recent in-depth study, forecast a further decline in western Europe as the industry concentrates in the far east. Sadly, I also believe that that will happen. I do not think that the House fully appreciates the scale of competition from the Far East with which we are faced. The Japanese export some 16 ships every month ; we are not able to export 16 in a year, and nor are the other western European countries. The Japanese and Koreans together have over 300 ships on order, a total of 22 million tonnes. My right hon. Friend read out figures for the fall in the labour force in the main traditional shipbuilding countries, but I think that he will find that the Koreans have added some 100,000 men to their labour force at a time when the rest of the world has seen labour forces contract.
Column 929The various hourly wage rates are quoted in dollars, because that is the currency of international shipping. In the United Kingdom the rate is approximately $9 an hour. In Korea it is approximately $3 an hour. The Koreans also work about twice as many hours a week as western Europeans are expected to work, and of course they do not have the overheads of modern western industral society. In general, Korean yards have the advantage of paying only about a fifth of the labour costs paid by our yards in Sunderland or other Western European countries.
Recent figures show that the cost of building a bulk carrier in a typical European yard would be $21 million, and that the far east price was $12 million. In other words, the prices being fixed by our low-cost competitors in the far east are being fixed at a figure a great deal lower than the cost of building the ship in this country--in some cases, lower than the cost of the parts that go into building it. The 28 per cent. intervention fund has proved wholly inadequate to meet the competition, and the result has been losses that, in Sunderland, have been running at a rate of £1 million a week. That is due to the world price being fixed by yards in the far east whose workers are paid a fifth of the wages that we pay. These are the facts of life for this country and for Holland, Germany, France, Sweden and the other former shipbuilding countries of Europe. Korea has trebled its capacity while the western European industries have been declining. Now Korea and Japan produce four times as many ships as the whole of Europe put together.
We have been forced in desperation to take dubious contracts, with inevitably huge subsidies and heavy losses on top of that. We have been faced with customers who have no money and want 15 years to pay, or go bust like ITM in Sunderland or renege on the contract as the Danes did.
My right hon. Friend the Minister of Trade and Industry shares my deep concern over the decision that has had to be taken for Sunderland. I congratulate him on the package that he has put together to seek to create new jobs for the future in Sunderland. The total sum has been decried and derided as inadequate, but it works out at £20,000 for every man working in the yard. In addition, a significant sum of redundancy pay is being paid into the community. If it is anything like that paid out in previous cutbacks in the shipbuilding industry, it will be about £10,000 to £11,000 per man. In total there is a massive sum going into the community in Sunderland.
We must all seek to put that money to the best possible use to ensure jobs for future generations in the town. It is no good looking back to the past with pride--however much we are entitled to do so. We must look up the river to Nissan and the industries of the future. As my right hon. Friend said, there has been a significant fall in the number of unemployed in Sunderland. Unemployment is a desperate problem in that town ; nobody could say otherwise. However, there has been an encouraging fall of 7,000 in the past two years and 4,000 in the past year. The number of jobs in shipbuilding in Sunderland has already fallen from 7,500 a few years ago, to 2,200 today. That fall of about 5,000 jobs has been dealt with by the creation of new jobs at Nissan and elsewhere. That is what we must continue to do in the three
Column 930or four years ahead, by means of the various schemes introduced by my right hon. Friend. It is wrong to decry the nature of those schemes or their magnitude.
Yesterday, the Northern Development Company said that the mood was favourable for new jobs and businesses in the north-east. It saw the new enterprise zone in Sunderland as an attractive feature to new businesses coming to set up in the north-east from abroad or from other regions of Britain. We have not yet heard any details about the enterprise agency proposed by my right hon. Friend. I await those details with great interest because that agency will have a very important part to play for future generations in terms of jobs and the creation of a new spirit in the town.
Tyne and Wear chamber of commerce is particularly strong and will be prepared to accept the challenge. One of the features of the past few months has been the tremendous co-operation between all sides in Sunderland in seeking to save the yards. In the years immediately ahead, we must show the same co-operation in seeking to replace them with future employment in modern industries. The proposed schemes will work towards that end. There is a great deal of Government money going into them and there must be co- ordination of the efforts of all those in the region, whether it be the urban development corporation which concentrates on redeveloping the river banks, the Northern Development Company which attracts industry to the region, or English Industrial Estates which is the Government's industrial promotional agency for property and is creating new factories in Sunderland. All those must work together to provide a future for Sunderland based on secure jobs for the long-term future and not what have come to be give-away ships, for there cannot be a sound future for Sunderland based on continuing to build give-away ships.
Mr. Bob Clay (Sunderland, North) : The decision announced last Wednesday has been widely described as industrial vandalism. Those words are not rhetoric ; they are accurate and specific. Vandalism is about wanton destruction, and there is no doubt that this destruction is planned, calculated and deliberate. Vandalism is also about unnecessary destruction and I hope to prove that this destruction, if it goes ahead, is wholly unnecessary.
I concur with my hon. Friend the Member for Dagenham (Mr. Gould) that the Chancellor of the Duchy of Lancaster wanted to find a solution. That is shown by the number of postponements of the closure decision. I thank him for that. However, as I have said before, tragically he inherited a course of events set by his predecessor, the right hon. and learned Member for Rushcliffe (Mr. Clarke). In order to avert that course of events, he had to reverse some aspects of Government policy or overcome difficulties within his Department and British Shipbuilders. However, if he really wishes to retain a viable shipbuilding industry on Wearside, there is a chance for him to do so.
On Monday I attended the launch of the last ferry from Southwick. It was a moving occasion ; many people felt empty and unable to comprehend the fact that that beautiful ship, built in that magnificent facility, would probably be the last. In Sunderland, the reality that hundreds of years of tradition are coming to an end is still sinking in.
Column 931If the workers in the yards and the people of the town felt that we were facing a lack of orders, they could learn to live with the bitterness. If they felt that they had been working in an out -of-date facility which needed massive investment in plant and machinery that could not be provided and that it could not keep up with other yards in the world, it would be easier to bear. If they felt that they were operating in a declining market and that there was no future for the industry, it would have been bitter and difficult to take, but they might have been able to swallow it. However, the opposite is true ; that is why people are so angry.
I pay tribute to the managing director of North East Shipbuilders, together with the rest of its management, work force and shop stewards, who have had to live through months of torture. I pay tribute to all the parties on the council, who were all opposed to what the Government were doing. I pay tribute to the people of the town who have been united in their wish to save the yards. It is worth referring to the compliment that the Prime Minister paid to the quality of the work and the management and work force in the yards less than three years ago when she named the Stena Seawell. She paid a glowing tribute at that time and said :
"We have the skills, the enterprise, the inspiration to do it ... I hope we'll be able to do a repeat performance by virtue of the tremendous advertisement we can blazon across the world". She referred to it being a modern ship and mentioned the latest technology. All that has been put on record many times.
It is interesting to refer to a speech made in the House at the time by the right hon. Member for City of Chester (Mr. Morrison), who was then the Minister of State :
"Building ships more efficiently is the key to delivering them on time and to the owners' satisfaction. I have already referred to the fact that my right hon. Friend the Prime Minister named the Stena Seawell last Friday. The delivery of that highly complex vessel on time and in perfect condition speaks volumes for the dedication and effectiveness of the Sunderland management and work force. It is the best kind of advertisement that the industry could have, and it is worth more than any amount of Government support. I am sure that all right hon. and hon. Members will join in applauding that success."--[ Official Report, 28 April 1986 ; Vol. 96, c. 683.]
It is remarkable that Ministers were praising the yards at that time and that they are now announcing closures.
As my hon. Friend the Member for Dagenham said, it is all happening because the Government put the dogma of privatisation before commercial necessity. The tragedy is that, unlike any other privatisation, whatever the ideological merits of the argument, the privatisation was stumbled into almost by accident. The right hon. and learned Member for Rushcliffe intended that the yard should close because it had no orders. Then an extremely embarrassing thing happened. There was a possible order from Cuba and that is where the trouble started.
The right hon. and learned Gentleman pretended that he had never had an intervention fund application, even though, as he told the Select Committee, the chairman of British Shipbuilders had written a letter in the normal manner setting out the deal and asking for intervention funds. However, the Minister's predecessor persisted in effectively misleading the House by saying that he had never received such an application. Eventually it became
Column 932clear that a form should have been filled in but that he had told the chairman not to fill it in, but to write a letter instead. By then it was clear that there was this order, so the intervention fund application was made. The line then changed. The intervention fund could not be used unless the yard was privatised. The point that was made at the time, and that is still made, is how on earth can we expect to find a buyer for the yard when the yard's forthcoming order book has not been finalised? If the Government had been serious about privatising NESL instead of closing it, they would have encouraged British Shipbuilders by helping it to obtain the Cuban order. Then the Government would have talked about privatisation. By doing it the other way round, the Government sounded NESL's death knell. The Danish ferries have already been mentioned. I believe that the DTI did not want to solve that problem. It is a peculiar coincidence that this week, within days of the announcement of the closure of the yeard, Mr. Johansen, who originally defaulted on the 24 ferries contract, is about to sign a contract for six ferries from British Shipbuilders, in addition to the two ferries that he has already ordered.
If Mr. Johansen is buying six ferries from British Shipbuilders to settle the deal and get it out of the way, why did he not buy six ferries from British Shipbuilders six months ago? I am becoming increasingly suspicious about it. I remember that the right hon. and learned Member for Rushcliffe announced almost gleefully in this place that there were problems about the Danish ferries contract. Then I found out that in March, six weeks before any public announcement, the Prime Minister had told a Conservative councillor in Sunderland that there was a problem about the contract. Why on earth had the Prime Minister been briefed about that long before anyone in Sunderland knew about it, other than this Conservative councillor? I think that it smells.
As for subsequent events, I hope that the Minister will not deny that the Export Credits Guarantee Department, not British Shipbuilders, could have stopped that contract with Mr. Johansen. He defaulted to the ECGD and the Department could have cross-defaulted the whole contract. If it had done that, either Mr. Johansen would have had to pay up and Sunderland would have continued to build the ferries for him, or he would have been out of it and somebody else could have come in.
We know that some of the inquiries have not been serious, but I understand that there have been sufficient serious inquiries about the ferries since British Shipbuilders cancelled the contract with Mr. Johansen. Nevertheless, every time somebody seriously proposes to buy any ferries, British Shipbuilders is scared off because Mr. Johansen threatens litigation again. The ECGD and the Department of Trade and Industry should have dealt with that. Sunderland would probably still be building ferries instead of facing the problems that it faces now. The Minister's predecessor was quite happy to allow the persecution of British Shipbuilders by that evil man from Denmark to continue so that it would provide an excuse for closing the yard.
Despite the default on the ferries, there was the Cuban order. That was not an obscure order from a small island on the other side of the world with a different political system. In shipping terms, Cuba is a massive nation. It has one of the world's biggest fleets. Its fleet is expanding, and
Column 93323 ships of the existing fleet were built on the north-east coast of England. Why was Cuba so keen to place the order in Sunderland? It has a greater respect for the technical qualities and abilities of that yard than our Government. The Cubans made it clear throughout that they liked the ships and that they wanted more of them. They have bent over backwards to place the order in the north-east. It must be unprecedented for another country that is trying to place such a large export order in the United Kingdom to be so abused, to have so much misinformation and misrepresentation put around about their intentions and effectively to be spat upon by our Government. There was misinformation about the price that Cuba was prepared to pay. It said that it wanted to negotiate the price. Cuba sent a letter of intent, which it said would be transferred to other bidders. In that letter Cuba said it would negotiate at about £10.9 million per ship. I have heard civil servants and those in high positions in British Shipbuilders say that they would not pay even £2 million less per ship.
When I organised the bids for those yards, I recall informing the chairman of British Shipbuilders that the Cubans were prepared to make a stage payment of 20 per cent. when the contract had been signed. It would have been one of the most generous stage payments ever made. It would have provided the yard with a huge cash flow advantage, with 20 per cent. of the contract up front. I was told, "I just don't believe that. They would not do it. Why should they?" However, on the same day as I was told that, the Cubans' financial adviser at Lloyds bank informed a senior civil servant in the DTI that that was what his customers were prepared to do.
It is quite scandalous that the Minister should say that these bids and the Cuban order have been seriously assessed when so much misinformation went unchal-lenged. Cuba wanted 10 ships and 10,000 containers. That is £15 million to £20 million-worth of work on top of the ships. Cuba was interested in training Cuban shipyard workers so that they could then return to Cuba and work in the industry in Havana. Cuba thought that it might be possible to send an occasional repair job for Cuba to the River Wear. It offered to set up a joint marketing company with the yard to sell the yard's products in Africa, the far east, Latin America and other places where they have influence. It also offered a five-year co-operation deal with the yard on marketing and other projects, but we are told that all that is not serious.
I return to the point that was made earlier. Having described the loss of British Shipbuilders and the state that the industry was in, the Minister said :
"Against that background, it was clear to my predecessor tand to me that a solid future for the yards depended on finding new owners who could run them in a viable way."--[ Official Report, 7 December 1988 ; Vol. 143, c. 318.]
If that is their view of how British Shipbuilders has run the industry, it is a little odd that it has been left entirely to British Shipbuilders to judge who would be an appropriate buyer. As for the bids that were made, in the case of each of the four early bidders there were complaints about their treatment. Regardless of the merits of their bids, all the bidders said that the goalposts were moved, that new conditions were laid down after they had been told what
Column 934the conditions would be, and that when those conditions were met even more conditions were found about which they had not been told in the first place.
Now that we have run out of time, I must ask the Minister a crucial question. Why was there a relaxed seven-week delay in the summer during the bid process? The bidders were asked to bid by 15 August, but they were then told that their bids need not be placed until 30 September. I have heard it said that the bidders wanted more time, but the four who eventually submitted bids have all told me that they were prepared to bid by 15 August. I know that two of them complained in writing about the deadline having been put back.
Somebody has been guilty of the most appalling incompetence. The entire privatisation process that the Government wanted to pursue was held up for seven weeks. We could have been seven weeks further on. We should then have been seven weeks less away from the end of the year and there would still have been a chance to produce a satisfactory result.
Included among the early bidders was the owner of the West German shipping company, the Egon Oldendorff line. The hon. Member for Tynemouth (Mr. Trotter) referred to the importance of shipowners being involved in the ownership of yards. He was prepared to bring to the consortium an order for six 33,000 tonne bulk carriers. He was on the point of placing that order in Korea. The contract was within days of being signed. He sent a letter, of which I know the DTI is aware, in which he said that he would withdraw that order from the Inchon yard in Korea and place it in Sunderland at a higher price. Perhaps the price was still not good enough, but when big German shipowners make offers such as that it is criminal that bids should be rejected out of hand and that a yard should have to close. It is interesting that that shipowner said to me later that, if he were to become involved in any other consortium or in any other form of ownership bidding for NESL, he would do so on condition that if his name were mentioned, even in confidence, to either the DTI or British Shipbuilders he would pull out of it. The House will have to make its own judgment about why shipowners and others appear to be so paranoid about their names being mentioned to the DTI and British Shipbuilders. That, though, is how they feel. That is what I have been told. Privatisation is made rather difficult when the people who can be involved and provide takeover backing are nervous about how their names are used. I shall later relate my own experience of that.
When the Chancellor told the House that he would allow a little more time for bids to be put in, I decided, but not out of any commercial interest, to try to put something together. I thought, "No one else is doing it," I knew that the Cubans were interested, but I decided to put in a bid myself. I sent a letter to the chairman of British Shipbuilders which was copied to Lazards and the DTI. In it was the name of Mr. John Hall as a potential substantial investor. The letter clearly said, "In Confidence" but within 24 hours the public relations consultant of British Shipbuilders had leaked his name to at least six journalists to my knowledge. That has been one of the common problems experienced during the privatisation process. When I asked for some financial information from an NESL director, he understandably said that I had to sign a letter of confidentiality and that I would have to get such a letter from British Shipbuilders' headquarters. I
Column 935telephoned BS headquarters and was told, "No, no, no. You get it from Lazards." I telephoned Lazards and was told, "No, no, no. You should get it from British Shipbuilders, but we will send you one anyway to save time." That demonstrates that nobody knew what they were doing or what the rules were right from the start.
On 28 November, I received two letters. One was from Mr. Reg Arnell, board member for finance of British Shipbuilders, refusing for the second time to tell me what the alternative use valuation of NESL was and that he did not see any good reason why a bidder should want to have that information. The other was from David Coates, head of the shipbuilding division of the DTI, saying, among other things, that I ought to understand that BS's recent alternative use valuation for NESL was £9 million to £10 million and that, if I did not bid near that price, the Commission might regard the difference as an operating subsidy and count it against intervention fund on future contracts. Therefore, while BS told me, "We will not tell you-- you do not need to know," the DTI was telling me, "You had better know because you will be in trouble if you do not." Brilliant! When I complained to the chairman of British Shipbuilders about being treated in that way, I was told that he had told me the information personally six months previously, so why was I complaining? I thought it extraordinary that information apparently given in confidence to me as a Member of Parliament might be used later for commercial purposes. As a result of being abused in that way, I do not feel particularly bound by any confidences made subsequently.
On the Friday after the bid was submitted, I received a letter, again from Mr. David Coates, head of the shipbuilding division in the DTI, saying that a key part of my proposal was not acceptable to the European Commission. He had written to me on 21 November saying that it was acceptable. I am quite sure that he said that in good faith. He got it wrong, which is fair enough. However, when I was told two days after I had put in a submission that a key piece of information, which came from the DTI, was wrong, it might have given me a bit more time to sort it out. I was told that a key part of the proposal was not acceptable at 4 pm on Friday afternoon. The following Wednesday, the Minister was in the House announcing a closure.
On the same Friday, I was told by Mr. Lister, the chairman of British Shipbuilders, that the proposal was good, but not good enough. He told me that Lazards had already done an assessment of the financial side of the bid. It was clear to me from what he said that some things had been added up twice. Repeated requests for meetings were made by the consortium but, as was not the case with previous bidders, those requests were refused. Even meetings with the consortium's accountants, financial advisers or solicitors were refused.
The consortium's accountants telephoned Lazards and asked whether it had done the assessment. Lazards said yes. The accountants said, "We would like to talk to you, as we think that there may be some misunderstandings," but Lazards replied, "It is too late. We have already told British Shipbuilders what our conclusions are." That is an absolutely incredible way in which to conduct matters. I do not know how the Minister can say that the issue received serious consideration. We asked for meetings in our original proposal and in our revised proposal, and telephone calls asking for meetings were made.
Column 936Finally, on the Tuesday before the Minister came to the House to announce the closure, I spent the morning accompanied by my hon. Friend the Member for Gateshead, East (Ms. Quin). When we talked to Mr. Coates from the DTI about certain aspects of the proposal, he said, "Do you really want to meet British Shipbuilders?" "Of course I do," I said. He arranged it. He told me to be at Knightsbridge at 3.30 pm that afternoon. We finally got a meeting. A careful assessment of the proposal was supposed to have been made. The meeting was at three hours' notice, so it was impossible to bring in any advisers or other members of the consortium. And the Minister says that this has been a serious process.
We were hounded at the meeting about the consortium not having enough financial backing. We were told when the meeting started that Tom Burlison, the regional secretary of the General, Municipal, Boilermakers and Allied Trades Union, had telephoned Mr. Lister before the meeting. Mr. Lister's account of the conversation was that Tom Burlison had telephoned and said that GMBATU might stump up a bit more money. Mr. Lister said that his response was, "Can you write out a cheque for £10 million here and now?"--a pretty facetious question. The response was apparently no.
John Edmonds, the general secretary of the union, was present when Mr. Burlison made the telephone call and confirmed his account of it, which is that Mr. Burlison said, "Give me three weeks and I shall raise the money." We were hounded for three hours about financial backing, when Mr. Lister had just been told that somebody was prepared to raise £10 million in three weeks.
Is the yard really to close because of those three weeks? There was another extraordinary incident at that fatal meeting on Tuesday afternoon. When we were being pressed on equity, it was pointed out that the potential investment by managers at the yard had not been counted. I found it extraordinary that that was the first time that they knew that any managers wanted equity in the yard. In the proposal which we submitted was a letter from Brian Tennant, the production director of NESL, saying quite clearly that managers were being asked to contribute equity. If Mr. Lister and Lazards were unaware of that, they could not even have read the proposal. That is how serious the consideration was.
The meeting got even funnier. When I said, "You know it now. Here is the letter which was in the proposal. The management will offer some equity"-- some senior managers support the consortium ; it is effectively a management buy-out as well as a work force buy-out--I was told, "That does not make any difference because managers are not allowed to use any of their redundancy money in British Shipbuilders disposals. That is a British Shipbuilders rule." I do not know whether it is a good rule or a bad one, but it is a pity that bidders were not told that in the first place. It is a bit odd that something that goes on in all other management buy-outs turned out not to be allowed here the day before it was announced that the yard is to close.
The whole thing has been an absolute scandal. It is a scandal in the wider sense that 2,000 jobs have been murdered and British merchant shipbuilding has effectively come to an end. It is also a scandal that the process should have been dealt with in such a way. The Minister must say more about the role of the European Commission. We have heard that, if BS makes the work
Column 937force redundant and a new owner re-employs some workers, the redundancies--or some of them--will count as operating aid and against contract aid.
The yard has no work at the moment. That is the Government's responsibility because they delayed the Cuban order. People are being laid off as a result. We are told, however, that lay-off pay counts as operating aid and will be counted against intervention fund and in future. The steel and equipment for the nine ferries have no more than scrap value, but we are told that, if BS allowed a purchaser to take that material and equipment, its full original cost would count against intervention fund. We are told that British Shipbuilders' losses count against a future owner. I suspect that behind the Minister's words, "Haven't I done well? We have done five successfully ; it is a pity about NESL," is a reason for British Shipbuilders to wash its face for the other five--Clark Kincaid, Ferguson, Troon, Appledore and MDC. They are closing NESL so that they can have an easy time with the Commission on the other disposals. Whatever the Minister says, I shall never believe anything different.
At the end of the day, whether or not all the rulings or advice from the Commission are true, no formal proposal was ever put to the Commission before the proposal to close the yard. We are entitled to know the cause of death. Doctors have to put reasons on death certificates ; they cannot say, "It might have been a bit of cancer, but he did have bronchitis and he broke his leg two years ago". Was it the European Commission? Did the rules of the sixth directive make it impossible for a new owner to take over? Was it the fact that the yard had no orders? That has been clearly shown to be untrue. Was it the privatisation process itself? Was it Mr. Johansen? Was it all those reasons, or did the Government welcome all those excuses to propose closure because ideologically they no longer wanted to support shipbuilding?
The final tragedy is this. I shall not spend much time on it, but when I look at the £45 million rescue package I ask myself the following question. If a big industry had just closed on the River Wear and an intelligent consultant was brought in to suggest what could be done to restore jobs in the area, he would say, "It is a riverside site. Let us find something appropriate for it. Let us find something which can produce exports because we have a big balance of payments problem. Let us find a growing market, albeit a weak market in recent years, but one that is on the upturn." When they considered all those points, they would probably say, "Let us start shipbuilding on the River Wear. There is a market, it is a riverside site, and there is an order available to start it."
If it were an empty site, the capital investment in machinery and equipment would be too much. It would certainly be too much for the Government. But that is not the case ; the stuff is already there. The Government plan to pull it down. People might say that it might take time to get a skilled work force together to specialise in such activities. The work force exists, but it is being sacked. If shipbuilding were not there already, there would be a unique opportunity to start it, but the Government will not do that. Instead, they will close it down, and that is why people feel so outraged. If we had to swallow
Column 938privatisation, at least it could have been done fairly, not with the idiocy, incompetence and corruption of the way in which it was carried out.
Hoping to end on a more positive note, may I say that, even at this stage, the Cubans, who apparently were not serious and who suffered so much abuse and misrepresentation, are so anxious for their ships to be built in those yards that they have said that they will not place the order anywhere else for another month. They are still hoping that a solution can be found.
The proposal is that at least we could save Southwick, a yard built specifically for volume production of the ships that the Cubans want. At least we could give it two or three years' breathing space. The Cubans could lease the yard from BS, a residuary body, the DTI, the Urban Development Corporation or whomever ended up owning it. Let the Cubans lease the facilities. Let them take whatever intervention fund is available next year after various bits and pieces have been knocked off by the redundancies, British Shipbuilders' operating losses and so on. Let them take whatever intervention fund is available. Let them have the credit terms which were always available and which other member states allow.
The only contribution that the Government have to make is to give decent credit terms to people who the Government have acknowledged always pay on the nail and never default. Let them take the yard and find a shipbuilder-- a distinguished shipbuilder is available elsewhere--to manage the contract for them, and let them employ local workers in Sunderland to build that contract. Let them do it at their own risk, so that, if they get only nine ships instead of 10 ships for their money, that is their risk. There is no financial risk to the British Government.
The Government need only say yes and agree credit. It would provide a breathing space and allow us not to have to finalise the debate about whether there are further orders and whether there is an upturn in the market. In the two or three years that the contract is being built, we shall find out. It would keep a foot in the door. What possible reason can the Government have for refusing that proposition if the Cubans are prepared to agree to it? It suits everyone. There is no problem about transfer of ownership ; the Cubans would lease it. There is no question of losses for the Government ; it would be done at the Cubans' own risk. If the Minister says, "Yes, we shall give it a try," and immediately withdraws the notification of the closure of Southwick to the Commission--there is to be a meeting in seven days' time and the Commission will need a change of notification well before that meeting--I shall believe that he genuinely wanted to save something and finally had the opportunity to do so.
That proposition meets every objection that the Government have raised to every previous proposal. It meets all the objectives, it retains shipbuilding at no loss to the Government, it saves at least a few hundred jobs for people who wish to remain working in shipbuilding, and it gives us a breathing space to decide what to do in the long term. If the Minister says no to that, he will confirm the notion that, whatever his own feelings, the Government started something several months ago that they would not allow anyone to change--even one of their Cabinet Ministers.
Column 9395.26 pm
Miss Emma Nicholson (Torridge and Devon, West) : I speak as a Member with shipbuilding responsibilities--Appledore is in my constituency--and family and political links in the north-east. My father was a Member of Parliament for Morpeth and I fought Blyth, as it was then, before the hon. Member for Blyth Valley (Mr. Campbell) took his seat. Further, I was a management consultant with 10 years' hands-on experience in heavy and light industry.
I was intrigued by the lengthy speech of the hon. Member for Sunderland, North (Mr. Clay) pinning his case to the two words, "economic vandalism". He used those words with intensity ; he said he meant them and that they were the purpose of his speech. If he really meant them, perhaps he will allow me to examine those two words. If the phrase means anything at all and is not just two words plucked out of the Oxford dictionary, it must mean the wanton destruction of something that is financially healthy. As a former management consultant, I must say that that means to me a company with full order books, an expanding work force and a bright future, with buyers clamouring for appointments and with the managing director and chairman with their sleeves rolled up, working exceptionally hard and being desperate for time, with the telephone constantly ringing. Alas, the truth is very different from the way in which the hon. Member for Sunderland, North described recent months for NESL. It would appear that it has been dependent on Members of Parliament to make its business appointments. That cannot be right. In chasing the Cuban rainbow, the hon. Gentleman overlooked the fact that Cuba is a Communist republic where key workers send their children to fee-paying private schools. That is bad news in his terms.