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Shipbuilders' Relief

The Economic Secretary to the Treasury (John Healey): I am today confirming the abolition, in full and with immediate effect, of shipbuilders' relief.

Council Regulation (EC) No. 1540/98 which established new rules on aid to shipbuilding requires the phasing out of state operating aid within the community. The regulation specifically refers to commercial vessels and fishing vessels for export from the community and stipulates that state operating aid be abolished with effect from 31 December 2000. HM Customs and Excise will continue to honour claims for contracts signed on or before 31 December 2000, in respect of such vessels.

Shipbuilders' relief has additionally been payable in respect of warships and other fishing vessels. However, the purpose of EC Regulation 1540/98 was to bring an end to state operating aid in the Community and in order to comply with the spirit of the EC regulation and with state aid law, these other categories of vessel must also lose their eligibility, and will do so from today. Customs will therefore honour claims for contracts signed on or before 12 January 2004 in respect of such categories of vessel not explicitly included in the text of EC regulation 1540/98.

The Government believes that the best way to support a strong shipbuilding industry in the United Kingdom is not through providing such old-style operating subsidies but by promoting international competition and through support for enterprise, research and development, science and innovation and tackling skills needs.

The DTI has provided a £3 million grant to the Link Shipbuilding Research Project being led by the Shipbuilders' and Shiprepairers' Association. Launched in June 2001, this is a five-year project with total funding

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of £6 million, which combines academic studies with master classes tailored to the needs of individual yards. The scheme is making good progress, and the yards involved have attributed recent improvements in business activity and productivity to the master classes.

To support skills development across the UK economy, the Government is setting up new councils to identify and help deliver the skills that employers need. The Science, Engineering and Manufacturing Technologies (SEMTA) Sector Skills Council, which covers the shipbuilding industry, has already been established. SEMTA is preparing a sector skills

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agreement which will identify the skill needs, priorities and scope for collective action by the employers it represents.

To further support skills and workforce development in shipbuilding staff, the Government is prepared to invest up to an additional £500,000 to support SEMTA on the implementation of its sector skills agreement, where it applies to shipbuilding. This additional funding will be conditional on the SEMTA sector skills agreement being approved by Government, and founded on the clear commitment to collaborative action from shipbuilding employers as well as unions and other stakeholders.