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Towards the end of the sorry saga, the patient's constituency Member of Parliament is increasingly asked why he does not just let the poor old thing die in peace. Few seem to understand his outrage at such a question.

To end the medical metaphor, if, in medical terms, this crazed and macabre farce finally leads to the murderous outcome that I have described, eventually all those responsible will go to trial. Some might get away with more than others, but they will all be barred from medical parctice for life--they will be struck off. Eventually, the political equivalent will catch up with those responsible for the wanton and unnecessary destruction of jobs in Sunderland and 600 years of proud shipbuilding history.

Even tonight it is not too late. There is a new Secretary of State and a new Minister dealing with shipbuilding. They should take a deep breath and think again. If they must continue their obsession with the European Commission's interpretation and their interpretation of the rules, they should go back to the European Commission and say, "It is nonsense that a directive which, rightly or wrongly, was designed to reduce subsidy in European shipbuilding is now being used to eliminate the one yard that is going to have a go at shipbuilding without subsidy--a contradiction in terms."

They should say, "We are renotifying you that we have accepted one of these bidders. We are going ahead and we are prepared to negotiate the consequences, but we are not prepared to have the absurd situation in which one of the best shipyards in the world, with a willing and skilled work force looking for jobs, and with ships waiting to be built when the world is booming with orders, is allowed finally to close." The Government really must think again.

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10.36 pm

Mr. Chris Mullin (Sunderland, South) : My hon. Friend the Member for Sunderland, North (Mr. Clay) has made an impressive, detailed and damning case. I hope that the Minister will address the serious charges that he made. I look forward to the day when the Select Committee gets its teeth into this matter, because it will not go away. The Minister has been in his present office only a few days, but the matter will be in his in-tray and those of his masters for some time yet.

I regret that the recent reshuffle means that the Ministers who presided over the closure of NESL and the disastrous events of the past 12 months are not here to account for their stewardship. All that we can hope for tonight--it is no criticism of the Minister--is a mechanical recital of a brief and as much bluster and synthetic indignation as the Minister can muster--having seen the Minister on previous occasions in his Home Office days, we know that that is quite a lot.

One of the problems in engaging in a rational dialogue on the fate of our shipbuilding industry is the frequency with which those responsible for the shipbuilding industry change. My hon. Friend the Member for Sunderland, North will have a better idea than I of the exact count, but there have been more Ministers responsible for shipbuilding than coups in Bolivia.

Many people in Sunderland feel betrayed by what has happened in the past 12 months or so. My hon. Friend has documented what has happened. My role tonight is merely to underline some of the points that he made and to draw attention to one or two other aspects. One of the consistent themes in what has happened to our shipyards in Sunderland is the constant moving of the goalposts. When privatising industries, it is customary to fatten them up first to make them attractive to potential investors. It is unusual for an enterprise to be put on the market when its fortunes are lowest and when it is liable to be least attractive to potential investors. Yet that was the moment when the Department of Trade and Industry chose to privatise NESL. Just at the moment--it seemed to be disastrous at the time--when the Danish ferries order fell through, the Department saw the opportunity to close NESL once and for all.

It reckoned without a number of factors. First of all, it saw no orders. People in Sunderland are not daft ; they are quite realistic--if there are no ships to be built, there cannot be shipyards. However, as my hon. Friend the Member for Sunderland, North said, there was a potential Cuban order worth £110 million. The Department of Trade and Industry declined to take that order seriously, I was present, along with my hon. Friend and others, at a meeting at the DTI when the then Secretary of State--which is two Secretaries of State ago--the right hon. and learned Member for Rushcliffe (Mr. Clarke), admitted that he had not taken the Cuban order seriously, although he now did. That was one rare piece of frankness in this sorry saga. In about June of last year--some time before my hon. Friend had raised the matter--the Cuban order was at last being taken seriously.

A new problem then arose--there were no buyers for the yard. We had a yard and an order, but we did not have any buyers. Many of us took the view, which was shared by Lloyd's List, that the decent thing to do would be to go

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for the order, and any other orders that were available, and worry about finding a buyer afterwards. However, that was not what happened.

In December last year, we were told by the newest Minister responsible, the right hon. Member for Braintree (Mr. Newton), that there were no suitable buyers, so the yard would have to close. The right hon. Gentleman was, however, decent enough to say that he would do his best to keep the assets intact, in the hope that some use could be made of them in the near future. What I suspect he did not expect was that not one but two potential buyers would shortly emerge. As my hon.Friend the Member for Sunderland, North has said, it was a situation that the Department failed entirely to predict and, even when it was staring it in the face, it took some time to wake up to it.

My hon. Friend the Member for Sunderland, North quoted the letter to him of 8 February, in which we were told that, while there would be a problem, because of the closure in December, with anyone wishing to undertake subsidised shipbuilding--God knows there is no shipyard in the western world, even now, that does not enjoy some degree of subsidy--

Mr. Jeremy Corbyn (Islington, North) : Anywhere in the whole world.

Mr. Mullin : Yes, anywhere in the whole world, as my hon. Friend said.

We were told, however, that there would be no problem should buyers come forward who were prepared to buy the yard without subsidy. My hon. Friend the Member for Sunderland, North, quoted the precise passage from a letter, which I think bears quoting again. I hope that the Minister will deal with it, because no one from the Government has dealt with it so far. It said :

"Should anyone wish to purchase some or all of the Sunderland facilities for shipbuilding without any form of assistance, that would entail only the negotiation with British Shipbuilders of acceptable terms for acquiring the facilities in question." We cannot have it clearer than that.

According to the document deposited in the Library, on 17 April the first of the two potential buyers, the Anglo-Greek interest, told the Ministry that it would require no subsidy. So from 17 April, the DTI had one buyer, who was not after any subsidy. By 3 May it had two--the Olendorf company had also come forward as a buyer and it, too, did not require a subsidy. There was no greater evidence of the shipyard's viability, because those were commercial interests--they were not charities. They were not doing it for their love for North East Shipbuilders or necessarily the people of Sunderland. They would be the first to admit that they were doing it for commercial interests.

Therefore, by 17 April and 3 May, those hard-headed commercial interests thought that it was possible to build unsubsidised ships in North East Shipbuilders. Such had been the strengthening of the market and the rise in shipbuilding prices around the world, that it was rightly predicted by my hon. Friend the Member for Sunderland, North, and others with an interest in these matters, that unsubsidised shipbuilding would be possible.

At that time, the goalposts were moved again. There was talk of a threat to the enterprise zone that the Minister had announced in December and of the new owners inheriting British Shipbuilders' debts of £90 million. It is

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hard to believe that those threats were serious, because no one purchasing a new enterprise for between £7 million or £9 million would contemplate taking on debts of £90 million. They would have said, a long time before that, "We are not interested, good night." The potential purchasers did not say that, the goalposts were moved again and everything was done to discourage them, no doubt in the hope that they would go away. However, they persisted, which was a tribute to the strength of the market and to the changes that had occurred in it over the previous six or 12 months.

We were told, finally, that the European Commission would not accept the deal. We were further told that the Minister was not aware of that possibility until he visited Sir Leon Brittan on 27 June, but I do not accept that. A copy of Sir Leon's letter dated 12 July has now been placed in the Library. Presumably, it is the most authoritative statement of the Commission's view, although, as my hon. Friend the Member for Sunderland, North said, he is only one Commissioner and if there were a vote there is a possibility that he would be out-voted.

Although Sir Leon's letter is not very helpful, it does not mention an outright objection to the sale of the yards, nor does it say that the enterprise zone would have to go. It merely talks of a "reappraisal", and not of cutting off aid altogether but of reducing it.

There is good reason to believe that the use of the Commission as an alibi was exaggerated and that if there had been the political will there would have been no difficulty in finding a way to reopen the yards as commercial enterprises.

If Ministers set out to sink what remained of our merchant shipbuilding capacity, they could not have done better. Who needs foreign competition when we have the Department of Trade and Industry?

The Department of Trade and Industry grossly under-estimated the revival of the market. A cynical interpretation of the letter dated 8 February, which was mentioned by my hon. Friend the Member for Sunderland, North, would be that it never dawned on Ministers when they undertook to keep assets intact until 30 June that there would be any takers. If that interpretation is correct, it suggests that they were woefully misinformed and ill-advised.

The Department of Trade and Industry and all concerned grossly under- estimated the strength of feeling in Sunderland. The industry did not begin 30 or 40 years ago ; it has deep roots in the culture of Sunderland. For 600 years, ships had been built on the Wear, and people not much older than me can recall when one could not walk in the main streets of Sunderland without hearing the sound of hammers on rivets coming from the shipyards that lined its banks. Generations of people in Sunderland owe their livelihoods to the shipyards. They are deeply proud of the yards, and for good reason. There was a time, within the living memory of most people, when the yards accounted for more than half the world's merchant shipping output.

Not least of the Department's mistakes was to under-estimate the strength of feeling in Sunderland. The whole town has been united in our campaign to save the yards. All political parties on the borough council have lent their voices to this, as has the chamber of commerce, and the local newspaper, which gives donations to the

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Conservative party, has been unstinting in its support. Above all, the work force has united under shop stewards who command greater respect than any I have come across. I pay tribute to all those who have played a part in the magnificent campaign, which is far from over, to save our shipyards.

For some time, the Department has been perpetrating a cruel hoax not only on the people of Sunderland and the workers in the shipyards but on the commercial interests that seek to buy them. It pretended to solicit bids, when in reality it discouraged bids. I can conclude from his letter of 8 February only that the Minister was unaware of the sixth directive and did not become aware of it until the end of June when he visited Sir Leon Brittan. I do not want to be too hard on the previous Minister of Trade and Industry. All of us acknowledge that he is on the merciful wing of his party and inherited decisions made by others. I recognise his genuine concern for the fate of Sunderland. Perhaps that was what led him to preside over the present mess.

The circumstances of North-East Shipbuilders Limited has implications for the country. As an island nation, we depend on shipping, yet we lack the capacity to build our merchant ships. Once we had the biggest fleet in the world, but now our erstwhile shipping capacity is under foreign flags and crewed from the poorest nations. It has implications for the defence of our country. Only the other day, the Select Committee on Defence drew attention to the shortage of merchant shipping available in time of war.

Above all, it has implications for all those interested in the malign effect of the EC on the British economy. It may come as news to many that the EC cannot merely veto subsidies, but can veto a commercial arrangement that requires no subsidy. This saga illustrates our enormous loss of sovereignty to the EC over the past few years. Many wonder whether Germany or France would tolerate such interference and suspect that, if the market revived soon to allow a German yard to reopen, we would hear no more about the sixth directive.

Mr. Clay : Is my hon. Friend aware that Sir Robert Atkinson wrote to me and said that the French act first and argue afterwards? Does he agree that that is interesting, coming from somebody with direct experience as a former chairman of British Shipbuilders?

Mr. Mullin : We could learn a great deal from the French and Germans. At the end of the day, our problem is not in Europe but in a lack of political will in Whitehall and Westminster.

There is one other aspect of EC policy I should like to draw to the Minister's attention. Renaval is the programme of aid that the EC operates for various regions that have been badly hit by closures of merchant shipbuilding yards. I understand that no application for such aid has been made on behalf of Sunderland, although the Government have applied for aid for Plymouth, Strathclyde and, unbelievably, Gibraltar, which are much less hard hit than Sunderland.

Last week, I and others had a meeting with the Commissioner responsible for regional development, who confirmed that no application had been made and expressed surprise at that. He was confident that if one were made, it would be favourably considered. On 10 July, the leader of Sunderland borough council, Councillor Charles Slater, wrote to the then Chancellor saying :

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"I would be furious if my officers had neglected such obvious issues as those now confronting you in any negotiations undertaken on the Council's behalf."

He was referring to Renaval. The letter continued :

"I assume that you are equally displeased with your officials and that they have been instructed to resolve matters as quickly as possible, and to Sunderland's advantage."

I checked yesterday with the office of the leader of the borough council and, as of yesterday, he had not received a reply to that letter. I hope the Minister will tonight assure the House that an application is under way.

Mr. Clay : The Government have been telling us for months that nobody wants to risk the aid that is going to Sunderland for remedial measures by reopening the shipyards. In other words, Sunderland needs the aid so much that we should be prepared to keep the shipyards closed, rather than risk losing the aid package. At the same time, it seems that the Government are refusing to apply for another aid package, the Renaval aid, which would do just as well as the aid being given for closing the shipyards. That shows the hypocrisy of it all.

Mr. Mullin : I agree with my hon. Friend. The Government cannot have it both ways. Given that there has been a massive loss of jobs in Sunderland, it is clear that, if part of the shipbuilding industry there were to be revived, it would not be incompatible to obtain Renaval aid for areas which are not revived. It is time that those responsible got their skates on.

My hon. Friend the Member for Sunderland, North began by saying that we in Sunderland have one of the most modern yards in Europe and that millions of pounds of taxpayers' money had been invested in it. We have a skilled work force, there is a rising world market and the sixth directive--the alibi given for the closure of the yard--is due to be renegotiated in 18 months' time, no doubt taking into account changes in the world market. There is, in addition, a strong possibility--as my hon. Friend discovered on his recent trip to Strasbourg--that the EC is prepared to reconsider the issue. It would be an act of gross vandalism to destroy those yards now. We want an assurance from the Minister that while any possibility remains--and it seems that a large one remains--of a future for those yards building ships, which is what they were built for, they will be kept intact. At least until the European Parliament has had an opportunity to see if it stands by the claims that have been made for its position on this matter. We in Sunderland do not want to see those yards destroyed if there is any hope of them being retained, and we believe there are considerable grounds for hope in view of the dramatic revival in the world market. We seek an assurance from the Minister to that effect.

A friend of mine who has worked in the yards in Sunderland all his working life told me recently that he had been offered a job in a shipyard in north Germany. He said, "Shipbuilding in Sunderland is not dead. Sunderland workers will still be building ships, but they will be building them in German yards." I cannot think of a sadder epitaph for the Government's policy or for merchant shipbuilding in this country than that they have turned the proud shipyard workers of Sunderland into a race of guest workers in the yards of our competitors. That is a sad state of affairs.

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10.58 pm

Mr. Doug Henderson (Newcastle upon Tyne, North) : I congratulate my hon. Friend the Member for Sunderland, North (Mr. Clay) on initiating this debate, on his excellent contribution and on the role that he has played, in company with my hon. Friend the Member for Sunderland, South (Mr. Mullin), in campaigning to retain shipbuilding in the north-east and to retain a merchant shipbuilding capacity in Sunderland. If my hon. Friend the Member for Sunderland, North has shown nothing else today he has shown that when he eventually retires after a long period of service in the House he would make an excellent ombudsman for the National Health Service. No doubt a future Labour Government will bear that in mind.

I congratulate the hon. Member for Grantham (Mr. Hogg) on his appointment as Minister of State. I hope that he is given a little more leeway by his boss than was given to his predecessor. The fact that he represents a particular town in the midlands may give him the influence that some of his hon. Friends enjoy. He will probably say that it does not, because he has not exactly been bequeathed the most enviable of tasks by his predecessors at the Department of Trade and Industry.

As for the relationship between the Government and the European Commission on trade and industry matters, I am not sure whether we can expect to see the pattern that was established in the past recurring in the future. We have been told this week that there will be no change of policy. I am not sure whether that was the Prime Minister or Bernard Ingham speaking. I am sure that we all look forward to hearing the Cabinet's view of the relationship between the interests of this country and the way in which those interests are dealt with in Europe. The history of the DTI and of British Shipbuilders' involvement in this whole business is one of complacent incompetence.

My hon. Friends have raised several questions and in the short time available to me I shall summarise three or four of their main questions. First, why were the terms of any sale not clarified by the Department after it announced that offers could be considered on 17 January? I have a little experience of negotiations and it has always struck me that the first thing to do when entering a negotiation is to examine the ground rules, consider how they might change and decide what options might be available later. From the evidence that we have heard in the debate about this whole saga, it does not seem as though anything of that nature was undertaken by the Department. Indeed, in the letter sent by the previous Chancellor of the Duchy of Lancaster to my hon. Friend the Member for Sunderland, North on 23 January this year, there was absolutely no acknowledgement or identification of the problems that could arise in the future. Secondly, after the Commission said that intervention fund money would not be available in response to the issues raised by the Department in April after a bid was received on, I believe, 6 April, why did the Department not then seek to clarify whether any other conditions would apply? We are told that the Department was told that the rules of the game had changed and that intervention fund money would be available, but surely it is a basic tenet of negotiating that one should then seek to clarify whether any other matters would be laid down as the conditions in which aid might apply.

Thirdly, after the previous Chancellor of the Duchy of Lancaster was told by Sir Leon Brittan on 27 June about

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the problems which existed in relation to any bid, did any further negotiations take place with the Commission between that date and 13 July, when a further statement was made to the House? If negotiations took place, what was their nature and what conditions were suggested by the Government in response to the talks on 27 June?

I do not want to elaborate too much, but the fourth question that must be answered is why British Shipbuilders did not seek to give the Government advice on the difficulties of interpretation which might arise in regard to the sixth directive. British Shipbuilders has someone permanently based in Brussels who is supposed to keep the industry briefed on a day-to-day basis about the things that happen there. British Shipbuilders must surely have been aware of some of the difficulties which might lie ahead--or if not, why not? Only two interpretations are possible at this late date. Either the Government welcomed the Commission's veto or they have been given the runaround for the past year and have accepted in a docile fashion an edict by officials in Brussels which would never have been acceptable to the Italians, the Germans or the French. Can anyone imagine an Italian or German shipyard, which had been closed but was given the possibility of reopening, being treated in this manner? Can anyone imagine the German, French or Italian Government giving in to the Commission as the British Government seem to have given in on this issue? Can anyone imagine the Germans or French not clearing the ground early so that they knew the conditions which might apply and could therefore give the issues the widest consideration? The Minister has a difficult task today. He inherits a grave situation. I ask him to forget the past, to start again, to look to the future and, even at this late stage, to reopen negotiations with Brussels to seek a new package. If he does not do that, he will face another question--what happens to the yards?

If there is no attempt to reopen negotiations, and no satisfactory conclusions to such negotiations, the only conclusion that I and the people of Sunderland can draw is that their yards, their inheritance, their history, their traditions, their skills and their expertise are being thrown to rust and decay in the cold north-east winter winds. I assure the Minister that although I represent a Newcastle constituency, I occasionally visit Roker park. The winds there bite the football ground and they bite the shipyards that are left to decay. Surely it would be better to reopen negotiations and, while they are going on, keep the yards intact in the hope that, with the widely acknowledged upturn in world shipping, there will some day be another option for the people of Sunderland which will allow shipbuilding to take place.

I have this evening asked the Chairman of the Public Accounts Committee to examine the circumstances in which the Government failed to take the opportunity to dispose of a public asset in a way that would have given hope to a great industrial town and raised public funds. I have also written to the Chairman of the Select Committee on Trade and Industry asking whether he can examine the implications of the closure of North East Shipbuilders Limited for the maintenace of a merchant shipbuilding industry in Britain. That Committee has twice discussed shipbuilding and NESL. Twice it has received submissions

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from Ministers and twice, I believe, it has not been told the whole truth. I hope that the Minister will join me and willingly make himself available, with his civil servants, so that the Select Committee can get to the bottom of the matter.

Rather than damning reports from those Committees, which I think very likely, I should much prefer the Minister to re-establish a proper and effective working relationship with his old friend, Sir Leon Brittan, with whom he had a close relationship, and to reopen negotiations in Brussels on this sorry affair.

11.8 pm

The Minister of State, Department of Trade and Industry (Mr. Douglas Hogg) : The future of Sunderland, particularly of North EastShipbuilders, is serious and important.

I am grateful to the hon. Members for Sunderland, North (Mr. Clay) and for Sunderland, South (Mr. Mullin) for raising this matter, as it gives me an opportunity to explore some of the relevant considerations. I am also grateful to the hon. Member for Newcastle upon Tyne, North (Mr. Henderson) for his kind welcome. This is the first time that we have had the great pleasure of debating one against the other.

This is my first venture in the House as Minister with responsibility for industry and enterprise, and I am glad that it should coincide with a debate on the future of industry and enterprise in a town with strong manufacturing traditions and traditions which are deeply rooted in engineering.

I hope that the hon. Member for Sunderland, North will forgive me if I say that I do not accept his criticisms of my right hon. Friend the former Chancellor of the Duchy of Lancaster. No one was more anxious than he to bring prosperity to Sunderland, and his commitment to that task was well known. On his behalf, I am grateful to the hon. Member for Sunderland, South for being good enough to pay tribute to him.

At the end of last year, my right hon. Friend had to focus on the future of the shipbuilding yards. His predecessor, the present Secretary of State for Health, had promised that if there was no successful bid for NESL a suitable package of measures would be introduced to allow the town a new future. Bids had been invited by the end of September, and I know that-- having examined the advice from British Shipbuilders on those bids--my right hon. Friend was impressed by the advantages of retaining shipbuilding, if that were possible. A number of factors had to be taken into account, and my right hon. Friend took them into account. Sunderland, as I have said, had a strong tradition in the industry, and there was much inherent skill in the town. However, my right hon. Friend had to be conscious that only bids that were capable of providing a viable future for the industry should be seriously considered. He had also to be conscious-- as indeed he was--that, even had such a viable bid been made, there would in all probability have been a substantial fall in employment.

My right hon. Friend also had to consider the positive advantages of creating enterprise zones. He was very conscious of what had been achieved at Consett, Corby, Scunthorpe and elsewhere. That argument was fortified by points made by, for example, my hon. Friends the

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Members for Pembroke (Mr. Bennett) and for Langbaurgh (Mr. Holt) on the occasion of his statement on 13 July.

I think that the House will acknowledge that my right hon. Friend took immense trouble to find a shipbuilding solution for NESL, and that it was only with the greatest regret and after examining all the relevant factors that he announced, on 7 December, the decision to close the yards. He announced that decision in conjunction with a range of positive measures designed to ameliorate the position that he knew would ensue. Prominent among those measures was the creation of an enterprise zone of some 150 acres for Sunderland.

My right hon. Friend announced a variety of other measures : for example, £10.5 million was to be provided through British Shipbuilders, of which £5 million was designed specifically to help the work force with, for instance, retraining and job replacement, while another £5 million was intended to promote enterprise within the borough of Sunderland. Another element in the package was the provision of advanced factories worth some £7 million through the agency of the English Industrial Estates Corporation.

Both Sunderland Members will acknowledge that the position has improved, contrary to their fears when the closure decision was announced. I understand that, although about 2,000 men were made redundant as a consequence of that decision, 1,100 or so have now found some form of permanent employment. Opposition Members shake their heads. I can only act on advice and no doubt the matter will be further examined. I have given my understanding of the present position.

I should now like to speak about developments between last December and today. The hon. Members for Sunderland, North and for Sunderland, South have understandably focused on these matters. I cannot give a complete account of what occurred, but shall touch on only one or two matters that seem of special interest. In that respect the two hon. Members who represent Sunderland adopted a similar approach. In a debate on 14 December 1988, my right hon. Friend the Chancellor of the Duchy made it clear to the House that it was possible in principle to renotify the Commission with proposals about shipbuilding at NESL.

My right hon. Friend made it crystal clear that he was not willing to put at risk the remedial arrangement that he had already announced for Sunderland, nor was he prepared to put at risk the disposal of the smaller British Shipbuilders facilities. The European Commission decided on 21 December not to raise objection to a package notification for British Shipbuilders which included details of the terms of disposal of some of its smaller facilities together with the corporation's forecasts for 1988 and 1989, proposals for the closure of North East Shipbuilders and the £10.5 million element in the remedial package that I have outlined.

On 22 December the Government notified their intention to introduce the enterprise zone in Sunderland. On 17 January, at a meeting in Sunderland with the "Save our Shipyards" campaign, at which I suspect one or other or both hon. Members for Sunderland were present, the former Chancellor of the Duchy made it clear that he was prepared for the NESL yards to remain in being at least until 30 June to allow for any new interest that could use the existing investment to make proposals to British Shipbuilders.

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Against the experience of the previous autumn, shipbuilding proposals seemed unlikely. More likely were proposals for repair and conversion.

The next significant event was that the Commission formally cleared the enterprise zone for Sunderland. I understand that that occurred on 2 March.

Mr. Mullin : In his rundown the Minister seems to have passed 8 February, the date of the letter to which my hon. Friend the Member for Sunderland, North and I referred. Perhaps the Minister will come to that in a moment, but there must be some explanation of the remarkable statement in that letter.

Mr. Hogg : The hon. Member for Sunderland, South seems to have forgotten the explanation that has been given. He will recall that precisely that question was put to my right hon. Friend the Chancellor of the Duchy during his statement on 13 July. If the hon. Gentleman cares to look at column 1151 of Hansard of that date he will see my right hon. Friend's reply. I could not do better than repeat that answer, but as it is already in the Official Report I do not propose to trouble the House further about it.

A first offer was received on 6 April and this was later amended on 17 April to exclude the requirement for intervention fund support. This followed a meeting between Department of Trade and Industry officials and Commission officials about the difficulties likely to be encountered in any renotification of shipbuilding proposals for NESL.

Both the shipbuilding interests which sustained their bids were advised that an offer requiring intervention fund assistance or the equivalent was bound to result in the Commission consulting other member states in a "procedure". They were also warned of potentially serious difficulties even if funding was not required, but prospects could be improved only if bids were without such assistance and there was some lasting reduction in capacity in the yards.

On 3 May, British Shipbuilders received a second serious offer from a shipbuilding interest, which was also confirmed as being without intervention fund support. Both these bids required further clarification and proof. In addition, two non-shipbuilding bids were confirmed on 26 May and 6 June respectively. In these circumstances, and recognising that the Commission could be expected to give a clear opinion only on the basis of a full appreciation of the plans of the two shipbuilding interests, the Government thought it right to take stock of the position as a whole, and to define the framework within which decisions could be taken.

The House will also recall that my right hon. Friend gave a written answer on 7 June this year setting out how the Government intended to proceed. He said that he had asked British Shipbuilders to give advice about each of the bids by 30 June and that the Government would take decisions in the light of a number of factors. Among these, the position under the sixth directive was only one. Meanwhile, preparations for the enterprise zone and other remedial measures in Sunderland were put on ice.

Following final clarification meetings between British Shipbuilders and the bidders, which gave him a full picture of what was likely to be proposed, my right hon. Friend visited the responsible Commissioner in Brussels on 27 June. The responsible Commissioner was Sir Leon Brittan, whom I had the privilege to serve as parliamentary private

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secretary. He made it plain that if shipbuilding were to be continued at NESL the Commission would feel it necessary to open a procedure under article 93(2) because, in his view, the commitment implied by the Commission's acceptance of the notification of the closure of the yards was a commitment to keep them physically closed for at least five years, and that that commitment would have been called into question. Accordingly, the Commission would need to reopen the package notified last December.

Moreover, aids accepted as restructuring would have to be redefined and any excess repaid. In practice, that would mean an increase in British Shipbuilders' market borrowing, a sum of £90 million the previous December, because otherwise the corporation would have been in breach of the sixth directive.

Secondly, the Commissioner made it plain that in any circumstances he would be bound to recommend a procedure, which would take some six months. Thirdly, the Commissioner also made it plain that, since he regarded the Commission's clearance of the enteprise zone as dependent upon the closure of NESL, the Commission's continued approval of the zone could not be assumed.

Mr. Clay : We understand why the Minister is reading from the statement in the Library. However, he has reached the crux of the matter. We have just heard the two crucial points. What the Minister has read out about the problems of British Shipbuilders' commercial borrowing, he has read out as being the Commission view. According to that, by definition, it would not have been possible to sell off the yards. In other words, the bidders were wasting their time if the Government accepted the Commission's view, because no one could buy the yards.

The second crucial consideration for the Government is the enterprise zone, because they do not want to risk that. Is it not extraordinary that another Commissioner is querying Sir Leon Brittan's judgment, and querying whether the competition Commissioner can link the two matters? Despite that query, the British Government have accepted Sir Leon Brittan's judgment and caved in.

Mr. Hogg : As the hon. Member for Sunderland, North has already made plain, in this regard Sir Leon is the lead Commissioner. We have to form a view as to what is the likely effect of the advice that the lead Commissioner is bound to give to his colleagues. Having regard to the advice that he set out in his letter of 13 July, it is inevitable that if the lead Commissioner gave the advice there set out, it would have the consequences there itemised. Even if that is not a certain consequence, on any view of the matter it is a highly probable one. That assessment has to be judged against the other benefits that will flow to Sunderland from the establishment of the enterprise zone.

The other issue raised by the hon. Member for Sunderland, North touches on the effect of the borrowing. It is clear that a substantial debt transferred to an acquiring bidder creates a problem for that bidder. I suspect that it would put the problem too high to say that the transaction thereby became impossible. Clearly, however, such a debt would increase the problem. Were the Government to renotify the shipbuilding proposals for the yard, the future of the Sunderland measures could be

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called into question. In any event--perhaps the hon. Gentleman would care to reflect upon this--progress would be delayed for at least six months.

Mr. Andrew Rowe (Mid-Kent) : I realise that conditions vary in different parts of the country, but it may be of some consolation to the hon. Members for Sunderland, North (Mr. Clay) and for Sunderland, South (Mr. Mullins) if I recall the fact that after the Chatham dockyard closed, with cataclysmic results for the morale of those living in Chatham, two enterprise zones were declared. Chatham now has remarkably low unemployment and a thriving economy with a large number of businesses. I hope that that may be of some consolation to the hon. Gentlemen.

Mr. Hogg : That echoes the point that I have made already. My hon. Friend's experience coincides with experience at Consett, Corby and Scunthorpe, where the establishment of enterprise zones has led to a substantial increase in prosperity and employment. I hope that the hon. Members for Sunderland, North and for Sunderland, South will take that message back to their constituents.

When considering the future of Sunderland, the Government must take account of the relatively certain promise of the enterprise zone and the other measures that were announced in December 1988. The current estimate is that at least 3,000 to 4,000 jobs would result from those initiatives. That is one relatively certain proposition on which we must reflect. We must also consider the shipbuilding proposals, which as a result of the attitude adopted by the European Commission are likely to involve delay for at least six months. They would call into question the enterprise zone, and they are likely to result in financial obligations that would make the transaction extremely unattractive.

Mr. Clay : The Minister has still not responded to the central question. If what he has said is true and that is the Government's judgment, that must have been true in January. The enterprise zone would have been in danger then. Against that background, why did the Government allow people to waste their time and money bidding for the shipyards? If the Commission has changed its mind and hardened its attitude, why do not the Government say to it, "We are sorry but you should have told us this before ; we have bidders now, so we shall get on with it."?

Mr. Hogg : I understand that intervention to be a reference to the acquisition by the acquiring bidder of the capital debt.

Mr. Clay : And the difficulty of the enterprise zone.

Mr. Hogg : Indeed. Officials had estimated that any redefinition of cost by the Commission within the rules of the directive would be capable of being covered by British Shipbuilders' expected net income over the years to come, provided that there was no intervention fund support and that the Pallion yard remained closed. In other words, they did not accept in their assumptions that there would inevitably be an odd capital obligation of the sort set out in the Commissioner's letter of 13 July. Officials considered the problem of the co-existence of the enterprise zone with some renewed shipbuilding activity, but felt that action of the kind ultimately taken was proper. The criticism of those officials by the hon. Members for Sunderland, North and for Sunderland, South is not warranted.

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The Government concluded that in all the circumstances, the enterprise zone and the other measures described were in Sunderland's best long-term interests. My right hon. Friend accordingly invited British Shipbuilders, in consultation with the Tyne and Wear development corporation, to undertake further work with the existing bidders in examining the use of the yard's assets for purposes other than shipbuilding, with a view to making final recommendations in due course.

The establishment of the enterprise zone and all the other elements of the package of measures to promote enterprise and new jobs in Sunderland will press ahead with all possible vigour. My right hon. Friend the Member for Braintree (Mr. Newton), the former Chancellor of the Duchy, devoted considerable energy and personal commitment to finding the best way forward for Sunderland. After careful examination of all the facts, he concluded that the enterprise zone solution was the best. From all the material that I have examined, I see no reason to differ from that view. Advantage must be taken of the measures that the Government have made available.

Sunderland's shipbuilding traditions have been strong, but as well as bringing periods of prosperity, they brought periods of great uncertainty. The means are now available to the Tyne area, through the enterprise zone and other measures, to grow in terms of prosperity and employment. I hope and believe that the energy, skill and determination of the people whom the two hon. Gentlemen represent in their respective constituencies will achieve that highly desirable result.

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