House of Commons Hansard Debates for 9 Jul 1992

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signatures--the 10th highest ever number of signatures to such a motion, I believe. The motion set out, more briefly than I have done tonight, the basis of what I have been saying, and concluded that the House

"calls on Her Majesty's Government to take immediate and positive action to first ensure that the British fleet is strengthened by appropriate stimulation of investment in modern tonnage and second encourage the recruitment, training and employment of British seafarers."

That motion flowed directly from a report by the Government's joint working party with the industry. It has given added strength and urgency to all that we have heard this evening.

I am concerned that the Government are playing a game of financial pass-the -parcel between the Ministry of Defence, the Department of Transport and the Treasury--and, to a lesser extent, the Foreign and Commonwealth Office and the Department of Trade and Industry. Not so very long ago, the red duster ruled the world. It could so so again today, because of the inherent strength of the industry. The modest concessions on cabotage recently won by my right hon. Friend the Secretary of State for Transport are welcome, but they are not an adequate response to the challenge that the industry faces. If the British merchant navy is to make the contribution that it can and should make to the defence of this country, something must be done. The industry has suggested capital allowances and national insurance and taxation reliefs for seafarers. One of those measures was before the House yesterday, but sadly it was not moved.

I understand that the Government do not like those proposals, but if they do not like them, let them suggest some proposals of their own. Something must be done, and soon, if the consequences that have been spelt out tonight are not to take place all too early. 9.23 pm

Mr. Andrew Robathan (Blaby) : I congratulate my hon. Friend the Member for Worcester (Mr. Luff) on his passionate plea for the merchant marine, and also my hon. Friend the Member for Sevenoakes (Mr. Wolfson). I cannot, I fear, back up their detailed exposition of facts and figures, but I shall consider the subject in a historical perspective. We all know that those who ignore the lessons of history are destined to repeat the mistakes of the past.

Most if not all of us in the House were brought up on tales of brave sailors of the past--Hawkins, Raleigh and Drake. If we look back beyond the Gulf war and the Falklands, right back to the armada, we see that it was our sailors and our ships that protected our shores. In Napoleonic times, the battles of the Nile and of Trafalgar developed our naval strength in the protection of our own shores. Many members of another place if not of this House will remember how crucial was the battle of Jutland in the first world war.

Dr. John Reid (Motherwell, North) : As was the battle of the Falklands.

Mr. Robathan : That is so. You, Mr. Deputy Speaker, will remember Dunkirk, when our merchant ships, small ships, and amateur sailors came to this country's defence. They saved the British Expeditionary Force, played a crucial part in raising morale, and ensured a successful outcome to the second world war. So, too, did the Atlantic convoys. I could mention many other examples.

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Many people viewed the Suez crisis with some misgivings, but our Royal Navy and merchant ships lent their support in that episode, too. We heard from other hon. Members about the Falklands and the Gulf war. Less than two years ago, we relied on our merchant shipping and merchant sailors to support our operations overseas.

Times change. It may be argued that we no longer need such defence support. Who can predict the future and know what it will hold? Whose crystal ball could have predicted the anarchy in Yugoslavia given that, when Tito died, a marvellous future seemed to await the Balkans?

It will not have escaped the notice of the House--including those right hon. and hon. Members who usually sit on the Benches opposite, which are now empty--that we are an island. However many tunnels are built, we will always rely on shipping. As we withdraw from overseas territories such as Hong Kong, it is more important than ever to have home-based ability and experience in reserve. In future, we will not be able to call on our friends and dependencies overseas. At army staff college I was taught about something called STUFT. As right hon. and hon. Members can imagine, that prompted many puns. It actually stands for shipping taken up from trade. The importance of STUFT was the great lesson of the Falklands. Shipping taken up from trade is no longer available because the British merchant marine has declined so much.

Positive action is required. I ask my hon. Friend the Minister to examine the issue closely. Financial incentives are needed to keep British shipping alive and vibrant. I will not dwell on the consequences for trade--and we will always be a trading nation--gross national product, and the employment of mariners if they cannot be provided.

My hon. Friend the Member for Worcester said that the House was promised a statement last year on the grave defence implications of the rundown in merchant shipping. That statement must be made. If we have no merchant fleet, we will weaken our defence. We will have no mariners, experience, tradition or shipping to call on. We cannot sit back and let the merchant fleet perish by default. I ask my hon. Friend the Minister to produce a happy solution.

9.28 pm

Mr. David Shaw (Dover) : My hon. Friend the Member for Sevenoaks (Mr. Wolfson) did well to continue a Kent tradition, in securing a debate on shipping. Over the past 12 months, I have initiated two debates on the subject--as right hon. and hon. Members might expect from a Member of Parliament with considerable constituency interests in shipping, in terms of both jobs and a thriving ferry industry. In my Adjournment debate earlier this year, I secured from my hon. Friend the Minister for Aviation and Shipping a promise to monitor carefully the subsidies and support given by other countries to their shipping. I was therefore disturbed to hear my hon. Friend the Member for Sevenoaks say that other countries are still increasing their support and subsidies, whereas we are not competitive in that regard.

As my hon. Friend the Member for Worcester (Mr. Luff) said, I initiated a debate last year, to which a Treasury Minister replied. I was promised that the defence review would consider whether support should be provided under the Defence budget as approved by the

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Treasury and how some assistance might be appropriate in that area. I hope that my hon. Friend the Minister will be able to deal with that specific issue later. The excellent speeches made by my new hon. Friends the Members for Worcester and for Blaby (Mr. Robathan) raised a number of issues which suggest that our shipping industry is not thriving as it should be and that we shall have to monitor it most carefully. The Government must take an active role in that respect. The merchant fleet is terribly important to this country. Attention has been drawn to its military and civilian importance. The ferry industry in my constituency provides many thousands of jobs and I hope that it will continue to do that for many years to come. Many of the seamen who live in my constituency do not just work in the local ferry industry : they work on our deep sea ships and travel to ports around the country to engage in our shipping industry.

The decline in our merchant fleet has not simply occurred under this Government. It is important for the House to recognise that the decline started when Labour was in power in the mid-1970s. The British shipping industry was not helped by the subsidies made available by the then Labour Government to Polish ships. Nor was it helped by the support given by the Labour Government to the United Nations Conference on Trade and Development code which encouraged the developing countries to develop subsidised fleets of their own. That competition in the international shipping markets was severely subsidised and it caused considerable damage to our fleet. The changes that the Government have made to capital

allowances--ironically made by the predecessor of my hon. Friend the Member for Blaby--have gone too far. They have encouraged disinvestment in shipping to which my hon. Friend the Member for Sevenoaks referred earlier. Many ships are now transferring to foreign flags.

When my hon. Friend the Member for Sevenoaks referred to tax havens, I was reminded of my debate on that subject yesterday. I am concerned that there is a considerable transfer of assets away from the United Kingdom to tax havens in other countries which make it more favourable for ships to be held as assets registered in those countries. That is ludicrous. If, as I am sure my hon. Friend the Minister will claim when he replies, those ships would be available to the Royal Navy if they were required in times of war, they should be available as ships registered in the United Kingdom.

We should ensure that our tax regime is sufficiently favourable so that the tax havens do not receive the business. Why should lawyers and accountants in those countries form companies and earn the fees ? The money should be brought back to this country, be that in respect of the advisory services for lawyers and accountants or through ship ownership.

It is in the interests of the Ministry of Defence to persuade the Treasury that the capital allowances regime is enouraging disinvestment, not investment. My hon. Friend the Minister represeents a constituency which has shipping interests and I know that he will endeavour, perhaps with a little difficulty, to reconcile his sympathies with his responsibilities. However, I am sure that we can rely on him for a forthright speech which will endeavour to point out that he will take forward the battle in Whitehall in the interests of shipping and in the interests of his constituents. I hope that, in due course, he will try to

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tackle within Whitehall the issue of re- flagging to tax havens, as it must be stopped. I hope also that he will take a robust line in negotiations with the Treasury and point out that the money should not come out of the budget of the Ministry of Defence. It is an adjustment to capital allowances that has gone too far.

The capital allowances regime is unfavourable. There have been international reports, and I have previously referred to the report of the Federal Reserve Bank of New York into international allowances on assets. I hope that my hon. Friend the Minister will go into battle on capital allowances and tax matters. My hon. Friend is an expert on financial matters, having had a financially oriented career, among other skilful careers. I hope also that he will seek changes to the capital allowances regime which will allow our shipping industry to develop further and allow us to be comfortable and to sleep easy in our beds at night knowing that our defence is properly integrated not only in terms of military shipping, nuclear deterrence, or having many skilled people in our Army, as we saw in the Gulf war, but in terms of a properly managed defence capability that is backed up by a competent, able and well-invested merchant marine. 9.35 pm

The Minister of State for Defence Procurement (Mr. Jonathan Aitken) : The House has been privileged to hear four excellent speeches amounting to a useful and interesting debate. I particularly congratulate my hon. Friend the Member for Sevenoaks (Mr. Wolfson) on the way in which he presented his case. He is a worthy champion of the red ensign, and he asked a number of questions to which I shall return. I was glad that he recognised the changing defence strategy of this country and our emphasis on mobile and flexible ground forces. He is right to ask whether we have the sea-lift required to move those forces in certain situations and whether we have defined the shipping required for such operations. I shall return to those questions, but I can tell him now that the answer is in the affirmative.

I also congratulate my hon. Friend the Member for Worcester (Mr. Luff) as a new, fluent and articulate voice on the subject of British shipping. I noticed in his presentation a slight difference of emphasis from that of my hon. Friend the Member for Sevenoaks, who, at one point, seemed almost to make our flesh creep by his descriptions of the terminal decline of British shipping, whereas my hon. Friend the Member for Worcester perked us up no end by his strong words about how British shipping is still the best in the world and the ballast to all our activities.

My hon. Friend the Member for Blaby (Mr. Robathan), who brings to such debates his own distinguished military experience, was right to go back to the lessons of history. It certainly struck a chord with me when he rolled off his tongue great names such as Hawkins and Drake. Only yesterday, I was in Plymouth standing at the site where Drake had been when, just 304 years and 16 days ago, he launched the armada. It is impossible to be in such surroundings without wondering whether the lessons of history will teach us that we have to learn again from the lessons of the past and that one day again we will be launching major seafaring operations. The probability is

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not high, but Defence Ministers have to plan for improbabilities. I was glad that my hon. Friend reminded us of the importance of not forgetting the lessons of history.

My hon. Friend the Member for Dover (Mr. Shaw) has long been a persistent and passionate crusader for Britain's seafarers and British shipping. In the previous election campaign, he was something of a heart of oak, politically. The local paper predicated that he would lose the seat of Dover with a swing of 23 per cent. to Labour, but the good arguments that he has put forward in the House on behalf of his constituents' interests won him the day and he came back. We are very glad to see him.

Dr. Reid : I am grateful to the Minister for giving way, as he knows that I am somewhat restricted by protocol because I shall speak in the European fighter aircraft debate. As he has paid such compliments to the erudite and informative speeches that have been made, and as he knows that, even in 1989, the Defence Select Committee was speaking of six successive years of decline in the merchant marine, he will know that the defence statistics that have just been revealed show evidence of the claim of a further 42 per cent. reduction in the number of United Kingdom-registered general cargo vessels between 1984 and now. Even more alarming, there has been a 40 per cent. reduction in the number of officers and ratings since the Falklands conflict in 1982.

Therefore, will the Minister respond to the erudite speeches made tonight by going to the heart of the problem and what Conservative Members called at one stage a breach of trust--strong words indeed from the Minister's own side? The Government said in the White Paper that they were conducting

"a detailed review of the defence requirements for British merchant ships and seamen in times of crisis."

While we welcome that, what does the Minister mean by "in times of crisis"? In what strategic context is he considering the requirements? Is he contemplating changes in the legislation? Which organisations is he consulting as part of the review? In order that we do not have a further breach of trust next year, will he say when the review which has been announced again this year of the merchant marine will be completed?

Mr. Aitken : I am glad to respond to the hon. Member for Motherwell, North (Dr. Reid). I shall do so quickly and cover the detail later. First, the review is complete and I shall announce it tonight, although it will not necessarily gladden his heart. It was an interdepartmental Government review, but we took into account the representations that have been made by a range of organisations, including at various stages the Chamber of Shipping, the National Union of Marine, Aviation and Shipping Transport Officers and other such organisations. We also studied the Grove report.

I do not accept that there has been any breach of trust in the matter of the regrettable decline in the British merchant fleet. I shall turn to the specific statistics which are at the heart of the hon. Gentleman's case and that of my hon. Friend the Member for Sevenoaks in a moment. As my hon. Friend said, the subject is not new. My hon. Friend the Member for Dover reminded us that I, too, as a maritime Member represent a channel port. We have debated the decline in Britain's merchant fleet for all the time that I have been in Parliament.

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Of course, the decline in our merchant fleet is a matter for general regret. To give some hard facts, the number of United Kingdom registered trading vessels of 500 gross registered tonnes-- that is, of a size likely to be important in any defence calculation--has fallen from 1,614 in 1975 to 321 at the end of 1991. However, in the past few years the decline has slowed and in the four years since 1988 it has been at the rate of some 12 or 13 ships a year.

My hon. Friend the Member for Sevenoaks somewhat over-emphasised the nature of the decline when he said that the British merchant fleet would soon cease to exist if the rate of decline of the past four years continued. The cessation of existence of the merchant fleet is certainly a long way away.

The reasons for the decline are many and various. They include the changes in the pattern of international trade and the commercial pressures on British shipowners to sell vessels or transfer them to foreign registers. I take the sensible point made by my hon. Friend the Member for Dover about the need to crack down on tax havens which may encourage such transfers. Then there was the decision of the last Labour Government to begin phasing out capital allowances for ships. That perhaps started the process of decline.

The reasons are many and the solutions are also many. The Chamber of Shipping, in which my hon. Friend the Member for Worcester properly declared an interest, has been vociferous in suggesting solutions, as has the former chairman Lord Sterling, who has made many representations to my right hon. Friend the Chancellor of the Exchequer and others.

The ingenious fiscal concessions that have been suggested are not within my responsibility. I hope that my hon. Friends will understand if I do not refer to them at any length other than to say that I will bring them to the attention of my right hon. Friend the Chancellor of the Exchequer and others.

My hon. Friend the Member for Sevenoaks concen-trated on the defence dimension of the issue, as I wish to do.

Mr. Wolfson : I am grateful to my hon. Friend for giving way. On tax measures, I compared the position in the United Kingdom with those abroad and mentioned our lack of progress in achieving a level playing field. I hope that my hon. Friend will return to that subject, as he promised.

Mr. Aitken : I heard what my hon. Friend said, and I undertake to bring his remarks to the attention of the Chancellor of the Exchequer. A Defence Minister cannot respond satisfactorily to such subjects as the level playing field on tax concessions. During the debate on the Finance Bill last night there was an opportunity to raise those matters, although sadly the amendment concerned was not moved. Debates such as those on the Finance Bill, when a Treasury Minister is responding, are the proper occasion for those subjects to be ventilated and questions answered, but I shall ensure that my hon. Friend's argument is considered by the Treasury.

Mr. David Shaw : May I support my hon. Friend the Member for Sevenoaks (Mr. Wolfson) on that issue, and declare an interest in what I am about to say, as a chartered accountant. The Treasury is well staffed with accountants and other supporting staff who are used to figure work. If the Ministry of Defence is taking that

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argument and need on board, it might be appropriate for it to sort out the accounting arguments with its accountants, ready for the battle that needs to be fought in Whitehall.

Mr. Aitken : As my hon. Friend is an accountant, he knows more about battles between accountants than I do, but I am sure that they will, as usual, occupy the attention of the Treasury. The defence of the realm transcends accountancy. The question whether we have to spend public money, or in any way change our policy, because of the defence requirement is to be decided not through mere financial calculations, but through the deeper defence calculations.

Dr. Reid : Before the Minister gets into a labyrinth of tortuous arguments about accountancy, and without any sour grapes, as it is not often that a Minister gives me a straight answer to a question, he said that the review has been completed and that he is about to announce it. Does he think it appropriate that a review of the merchant marine, presumably undertaken with a view to reversing some of the disastrous trends of the past few years, should be suddenly announced at this time of night, at the tail end of a Session?

Mr. Aitken : I repeat that I do not think that the review is likely to gladden the hon. Gentleman's heart. Nevertheless, we shall announce our conclusions at the earliest possible opportunity. It has literally just been completed. No one can be accused of trying to smuggle something under the carpet if a Minister responds to a debate and answers the questions that have been asked. There will be plenty of other opportunities to ask questions, including at Question Time, but I can assure the hon. Gentleman that we are not engaged on some nocturnal concealment exercise--far from it --and I shall face up to the announcement of the review, although it may be found disappointing.

Mr. Bryan Davies (Oldham, Central and Royton) : Is the Minister confirming that the review will be the subject of a statement to the House in the near future, or simply that it will be made public at some stage?

Mr. Aitken : Towards the end of my speech I shall announce the results of the review. As I said earlier, the frissons of excitement that seem to be building up may not be entirely justified when the announcement is made.

I was about to turn to the historical theme, the necessity for preparedness, touched on by my hon. Friend the Member for Blaby. In recent history, there has rarely been a time when the strategic uncertainties of a changing world, and the changing threats that come with it, have posed such difficult challenges and questions to defence planners and Ministers.

It remains a near certainty that in times of tension or war the United Kingdom will need a significant number of merchant ships. The hon. Member for Motherwell, North tried to bowl me what he thought was a clever question about the definition of a time of crisis. I can only say that a time of crisis is when the House of Commons has the kind of debates and exchanges that took place at the time of the Falklands or the Gulf war, which suggest that we are in an hour of national crisis. Parliamentary indicators are as good a signpost of crisis as any.

It is a virtual certainty that in such times the United Kingdom will need a significant number of merchant ships

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for European and out-of-area reinforcement. The merchant ships will also be required to support naval operations. It is possible that with lower force numbers, longer warning times, larger aircraft and newer methods of transportation, such as the channel tunnel of which my hon. Friend the Member for Sevenoaks was once such an ardent enthusiast, we may have a more flexible task when providing such reinforcement and support. Nevertheless, the importance of merchant shipping for Britain's defences in an emergency remains pivotal. There is little doubt, therefore, that the theme of this debate is correct : a healthy British merchant shipping industry may have to provide a vital lifeline and supply line to British forces in an hour of peril.

In an ideal world we should like to have a large pool of British-flagged, British-crewed vessels to choose from in time of war or crisis. Unfortunately, we do not live in an ideal world when it comes to the health of the British merchant fleet. We share the concern of my hon. Friend the Member for Sevenoaks at the decline in the number of British-registered vessels--I have already said that it is down to 321 vessels of 500 tonnes or above. However, we do not believe that the situation is so critical that we could not manage to carry out the type of crisis resupply and reinforcement task that faced us at the time of the recent Gulf war or at the time of the Falklands invasion--tight and more difficult though that task might be.

May I remind the House of what happened at the time of the Falklands crisis and of Operation Granby for the Gulf? In Operation Granby 109 foreign- flagged vessels and five United Kingdom vessels were engaged in the reinforcement and movement of men and equipment to the Gulf. On the return phase, 81 foreign vessels and three United Kingdom-flagged vessels were chartered. The cost of the operation was about £140 million.

We had no difficulty in obtaining all the British forces shipping requirements on the open market. Virtually all the movement of men was done by air, but the equipment was largely moved at sea. Although some might say that it was disappointing that the United Kingdom-registered vessels represented a comparatively small percentage of the operation, that was a voluntary decision on the part of the British shipping industry. Lord Sterling wrote to The Times during Operation Granby to say that the British shipping industry was then extremely busy with existing contracts and did not necessarily wish to bid for the contracts that were on offer to the shipping industries of the world. We were able to undertake Operation Granby successfully.

At the time of the Falklands crisis 52 merchant ships were used, the majority of them British. Half of them were requisitioned, half chartered.

Dr. Reid : I am sory to intervene again, but I did not realise that such a substantial response would be made tonight.

Does the Minister realise that what he has said about Operation Granby is at total odds with the Select Committee on Defence analysis, on which it spent a great deal of time? It concluded that there was "an almost total absence of UK shipping from the lists of ships providing the sealift for Granby The significance of the degree of dependence displayed must be addressed by MOD in its analysis of the lessons of Granby."

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Is the Minister saying that the Select Committee was totally wrong and that its analysis has been either ignored or rejected after investigation under the MOD review? Can he confirm that MOD police are now investigating allegations of fraud during the chartering operation for Granby? I am not asking for details, but can he confirm that an investigation of fraud during the chartering contracts process is under way?

Mr. Aitken : The answer to the hon. Gentleman's last point is that I can confirm that the Ministry of Defence police fraud squad is conducting investigations into the chartering of some shipping for the Ministry of Defence during the Gulf crisis. It is not our practice to comment on Ministry of Defence police investigations while they are under way, and the hon. Gentleman will appreciate that.

The answer to the hon. Gentleman's first point is that the Select Committee was factually correct, and in my factual analysis I confirmed that. There is a difference of opinion between the Government and the Select Committee in that we believe that Granby was a successful operation, that it offered charters to British shipping and that while those offers were perhaps not taken up as widely as we would have hoped, our job was to make sure that Operation Granby was a success. From the point of view of shipping, it was a success. We believe it indicated that a British defence movement on that scale is entitled to go and can successfully go out on to the open market to fulfil Britain's defence needs.

Mr. Luff : I am sure that the Minister is not suggesting that the shipping industry in some sense turned its back on Operation Granby. Will he join me in congratulating the British shipping industry on the efficiency with which it is run, which meant that it did not have ships available at the drop of a hat? Will he learn the lesson from that and accept that if we could encourage the industry to grow, more ships would be available for such an operation?

Mr. Aitken : My hon. Friend makes a sound point. The British shipping industry was at that time enjoying a high level of success and efficiency and, reasonably enough, did not want to disturb its existing charter arrangements. The wider interests of British shipping to which he referred earlier are well taken.

The Falklands operation is the kernel of the argument because it was a British-only operation and the question is whether we could do it again if we were called on to do so. That is extremely unlikely, particularly as we have built a new runway in the Falklands and installed there a formidable garrison.

Without being complacent, the answer is that we could. Fifty or so similar ships could still be requisitioned or chartered from the United Kingdom shipping register or from the British dependent territories shipping register. Although it would be tight in some categories, the answer, without being complacent, is that we could do it again.

Mr. Robathan : I seem to remember that during the Falklands operation the Indian Government objected to some of its nationals on British ships being sent to the Falklands.

Mr. Aitken : My hon. Friend is correct, and I shall come to the subject of seafarers, which is different, though important, in relation to the subject of ships, with which I have been dealing so far.

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Even though there are fewer British flag vessels from which to choose, it can be claimed, without complacency, that we should be able to mount operations similar to Granby or the Falklands. There are good grounds for believing that by a combination of chartering foreign vessels on the open market and chartering or, in some cases, requisitioning them, British ships could meet the expected requirements of a crisis or wartime situation, even in the worst and surely unlikely scenario that we were acting alone, without allies or friends.

Mr. Wolfson : Is it not a fact that a key difference between the Falklands operation and the Gulf was the need to requisition ships, as opposed to being able to charter on the open market? In addition, there was danger to shipping--as was seen in what happened in terms of sinkings--in relation to civilian ships. The need to requisition must be a high focus for the Ministry of Defence.

Mr. Aitken : My hon. Friend is right. There are circumstances of greater danger than Operation Granby. There were dangers--which have been somewhat minimised in this debate--to shipping at the time of Operation Granby and we must, and do, focus on the possibility of requisitioning British ships, not only from the United Kingdom register, as we are entitled to do, but from the United Kingdom dependent territories register. The figure given earlier of only 166 ships being suitable was not correct when one takes into account, for example, the ships on the Bermuda register. There are many BP tankers and other vessels on that. We have carefully considered the requisitioning possibilities.

I said that I would mention the review that we have been conducting internally--as promised--between Government Departments on the defence requirement for merchant ships in times of crisis. It follows from the argument that I have been advancing that the review concluded that there was no need for special measures for the British shipping industry now. However, there may be a need to do something more about crewing to ensure an adequate supply of British seafarers, and that aspect will be the subject of further study. I shall tell the House something of our thinking and past practices on that feature. Given the importance of merchant shipping, the Government have introduced a number of measures to help the industry and ensure the availability of vessels and crews for national needs. Those include financial assistance for the training of recruits under the Government's assistance for training scheme--the GAFT scheme-- which commenced in 1988. Before the introduction of that scheme, the annual recruitment of cadets had fallen to a low of 162. By the end of the 1988-89 period, the figure had risen to 289, and it reached 521 at the end of 1990. Government assistance has also been made available for the travel expenses of deep-sea crews for the repatriation of seafarers, and there has been a relaxation of foreign earnings deduction rules to allow British seafarers to spend more time in the United Kingdom. In addition, a Merchant Navy Reserve was established in May 1989 to provide a pool of British seafarers who could be called upon in times of national emergency to man merchant vessels. That reserve establishment was a direct

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consequence of some of the problems that arose in the Falklands war, to which my hon. Friend the Member for Blaby referred.

The purpose of the establishment is to cover two perceived shortfalls in manpower. First, it replaces foreign nationals serving in United Kingdom flagships when, in time of crisis or war, they are deemed to be a security risk, or when they express a desire to leave the ship or are ordered to leave by their Government. I think that that is what happened in the Indian shipping case to which my hon. Friend referred. Its second purpose is to man British-owned but foreign-flagged vessels returning to the United Kingdom flag in time of tension or war as a result of emergency legislation. In that case, it may be necessary to provide full crews.

Recruiting for the Merchant Navy Reserve got off to a slow start, but a campaign in major British ports at the beginning of 1992 increased the numbers in the reserve to more than 650. The Department of Transport, which administers the scheme, hopes to build up the reserve's strength to more than 1,000 by 1993, and is aiming for a final establishment of about 2,000.

The Government also provide war risks insurance to indemnify shipowners against loss ; and there are agreements with open registry states. In that connection, we have already signed agreements with Liberia, Bahamas, and Vanuatu, where there are approximately 100 British-controlled ships registered. That would mean that in times of crisis it would be possible to gain access to those vessels with the consent of the countries of registration. Furthermore, in the unlikely event of a full-scale war involving the North Atlantic Treaty Organisation, we would have access to the shipping resources of our NATO allies.

The Government also participated in a joint working party with the British shipping industry. The recommendations of the working party included the introduction of more flexibility into the rules governing the nationality of officers on British ships. The main justification for those rules is one of defence, and we have made major concessions at the request of the industry. The Department of Transport has recently issued a consultative document recommending that the existing nationality conditions for United

Kingdom-registered merchant vessels, covering the ship's master, first officer and chief engineer, be relaxed to require that only either the master or the first officer be British. In the case of those vessels of strategic importance, the master would still be British.

I hope that the House will accept from the range of measures and practices that I have outlined that some progress has been made on the availability of British seafarers in time of war for ships that have to go to an area of danger.

I realise that the announcement of the review that I have made will not be greeted with cheering and will not gladden the hearts of my hon. Friends who have so properly and ably raised matters of concern tonight. I hope that they will accept that the argument about the defence dimension in Britain's merchant shipping is really about defence priorities and defence spending priorities. There are competing requirements for defence funds, and our review of the defence requirements for merchant shipping in times of crisis shows that at this juncture we cannot allocate defence funds in support of the British shipping industry. I am sorry to be the bearer of those bad

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tidings, but I hope that it is some reassurance to know that we have taken careful measures to ensure an adequate supply of British seafarers in times of crisis.

There is a vital role for merchant shipping in an emergency and we continue to keep a close watch on the state of the industry and the trends to ensure that our plans are capable of being met. We carefully review shipping requirements and our latest review shows that there is no need at the moment for any special measure. I assure the House that we continue to give the defence needs of merchant shipping a high priority, and I hope that after this useful debate there is still no doubt about our commitment to making sure that this need will continue to be met.

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Student Hardship

10.5 pm

Mr. Bryan Davies (Oldham, Central and Royton) : I am grateful for this opportunity to debate student hardship, which causes a great deal of concern not only to me but to many of my hon. Friends. Representations from students show the difficult circumstances in which they now find themselves, and those difficulties are the direct result of a series of disastrous Government decisions in recent years on student finance.

I am glad to see an Education Minister in his place. It is a long time since we had an opportunity to debate this issue. When it was last debated in November, the Government, by some strange quirk, decided to field a Social Security Minister who spent a great deal of time denying her Department's responsibility for student problems. I am glad that the winding-up speech will be delivered by a Minister who accepts responsibility for the welfare of students. However, some contributions should also be made by the Department of Social Security.

Over the past few years, the Government have followed the principle that gave birth to one of our more famous supermarkets--"stack 'em high and sell 'em cheap". The principle followed by the Government in higher education-- if principle is not too dignified a term--is pack 'em in and slash their cost. The deliberate impoverishment of students has been part of Government policy in the welcome move towards increasing the number of people in higher education. However, no policy should make life increasingly difficult for those who participate in higher education, and Government policies have had extremely deleterious consequences.

What other group of people has been told that basic income should be frozen at 1990 levels? The grant component of higher education support for students is frozen at precisely that point. What other group of people would be told, "We know that this may prove to be inadequate, but we have a battle against inflation"? Britain still has higher inflation than many other countries in western Europe, and over the past three years there has certainly been a decline in the purchasing power of the student's pound. What other group of people would be told to take out loans and become dependent on finance that would have to be paid back with interest in the future? Such policies are implemented by a Government who bleat about the dependency culture even though they are deliberately inculcating exactly that dependency among a large section of our young people. It is detrimental for students to be placed in such an invidious position. The Minister has written on several occasions--certainly once in response to hon. Members who raised the issue with him

previously--that he believes that it is important that students are gaining greater independence and economic awareness. He believes that that is happening. Greater independence looks like a sick joke when students are being plunged into debt. I do not doubt that they are gaining greater economic awareness. Many are being taught some fairly harsh economic lessons by the Government : they are being taught about poverty, dependence on loans and how helpful it would be if one had a relatively prosperous father or mother.

I have not the slightest doubt that when Tory Members of Parliament send their offspring into higher education, in many cases after having spent thousands of pounds on

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secondary education in public schools, thereby increasing their children's chances of going into higher education, they bail out their offspring when they say that the level of parental contribution, assessed against the grant, is too low to live on. It is clear from all quarters that the support is inadequate.

Whereas it may be possible for members of the Conservative party, Tory Members of Parliament and some sections of the community to bail out their children and ensure that students get through this period without total impoverishment, that option is not open to large numbers of my constituents who have no spare resources to supplement the inadequate student grant.

Mr. Graham Riddick (Colne Valley) : Which countries in the western world do not have a loan system to help towards the maintenance of students?

Mr. Davies : I think that the hon. Gentleman will recognise that we managed to run a higher education system for a very long time on the basis of respect for students and the provision of the resources necessary to give them adequate grants. I do not remember the Conservative party telling the nation that it would set out gratuitously and deliberately to make life more difficult for students seeking to enter higher education.

Mr. Riddick : Will the hon. Gentleman please answer my question?

Mr. Davies : The question is not apposite. Many features of our higher education system compare very favourably with those of other countries. For example, our success rate at graduate level is the envy of many countries, and there is a correlation between support for students and success rates. If the hon. Gentleman is suggesting that it would be more appropriate for us to adopt other countries' systems of financial support for students, he may also find that he is embracing the notion that more of our students should fail their courses, in line with other countries. That is not a particularly progressive or constructive way to view young people's education. The Minister must face the problem that not only is the student grant inadequate, leading to dependence on loans, but all other means of supplementing student finances are effectively blocked. The Government have made it abundantly clear that there is to be no form of benefit support for students. That is a substantial loss. A study carried out by the students union of the university of Manchester has demonstrated that, for the average student in Manchester, housing costs have increased from between 45 and 50 per cent. of his income up to 71 per cent. That is a considerable slice of a student's income. It is a fact that students can no longer apply for housing benefit. The result--I am sure that the Government did not wish this upon the students--is that students are so impoverished that their standard of living is below the level of unemployed young people between the ages of 18 and 24. We are asking the young unemployed, who have an extremely difficult time, to exist on about £60 a week if they have access to housing benefit, but student support is only just over £50 a week.

I wonder whether Conservative Members have considered the privations that students face. I know that some people will say, "Students have always been poor. Our own generation at university was scarcely well-off, but it survived". The majority of students of my generation

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survived because we were able to obtain vacation jobs. We could not make our grants last throughout a full year unless we were able to have some earning powers during at least the long vacation.

Mr. Peter Thurnham (Bolton, North-East) : What was wrong with that ?

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