With your permission, Mr. Speaker, and that of the House, I would like to announce the arrangements made for the replacement of the "Queen Mary".The size, speed, accommodation and physical characteristics of the new ship will be as recommended by the Committee under the Chairmanship of Lord Chandos. All appropriate shipyards in the country will be invited to tender. The Committee advised that the capital cost should not exceed £30 million, and the Government agree. Up to £30 million the Government and Cunards contribute in the proportion of 3 to 2. This compares with the Chandos Committee's suggestion of a fixed contribution by the company of £12 million and, therefore, gives an added incentive to the company to keep down the cost. If the final cost is greater the excess will be met by Cunards. The ship will be owned by a separate wholly-owned subsidiary company of Cunard. Provisions will ensure the ship and company remain under British control. The Chandos Committee proposed that the Government's 25-year loan should carry 4½ per cent. interest. The Government agree that in the special circumstances of the North Atlantic passenger trade some assistance is necessary to run an express service against subsidised competition. But the Government have decided that financial assistance should not take the form of an artificially low rate of interest, but should be an outright grant, which Parliament itself would authorise. Therefore, interest on the loan will be at the rate for 25-year loans which is being charged by the Public Works Loan Board when the agreement is signed. The additional cost which this higher rate of interest places on Cunard will be offset by an outright Government grant. At the present interest rate of 6¼ per cent. and assuming a total cost of £30 million, the grant would amount to some 3¼ million and the loan to £14¾ million. Also, interest will be charged from the actual dates that moneys are advanced and not from the date the ship enters into service, as proposed by the Chandos Committee. Interest accrued during construction will be added to the principal of the Goverment's loan and will be repayable on the same terms. The only other significant change from the Chandos Committee's recommendation is that there will be no reduction in interest charges payable to the Government whatever the rate of yield on Cunard's investment in the ship. But the rate of yield above which profits must be used to accelerate redemption of the Government's loan is raised from 7 per cent. to 7½ per cent. The security for the Government's loan will be as recommended by the Chandos Committee. A formal agreement between the Cunard Company and the Government will be prepared as quickly as possible and will then be made available to Parliament. Legislation will be introduced.
We note that the Government have now turned down the idea of a specially favourable rate of interest and substituted a flat subsidy. There seems to be no beating about the bush that the Government are giving a flat, outright subsidy in this case. In these circumstances, since there is to be this most unusual subsidy from the taxpayer and the Government are putting up so much risk capital, does not the right hon. Gentleman agree that there is the strongest possible case for the Government having a share of the equity or, at the very least, a convertible debenture?Secondly, in view of the amount of Government money involved and the need to get the maximum possible protection for that money on behalf of the taxpayer, does not he agree that there is equally a case for the Government having the right to nominate directors of the subsidiary company which is being created for this venture?
With regard to the first part of the question, I think that the House would prefer an open subsidy which it can recognise to a hidden subsidy by a reduced rate of interest. An open subsidy enables people to calculate the subsidy, which is what we would like, and Parliament can control it and object to it if it wishes.Secondly, the Government are not really putting up a great deal of risk capital. The Committee went into this most carefully. According to the estimates of the travel for the next ten years, it will work out that the taxpayer by the end of the ten years will be very well safeguarded and the Cunard Company takes practically all the risks. In these circumstances, the third part of the question is answered—it would be inappropriate for the Government to enter into equity ventures of this sort.
Quite apart from the amount of capital and the amount of risk on the effort—and the Chandos Committee can be wrong—the Minister has come down here with this almost unprecedented proposal for a flat, outright subsidy. Surely, in those circumstances, the Minister should follow the precedent set, for example, in the case of D.A.T.A.C. loans, where Government directors were appointed. Would he tell the House of any precedent for the Government taking such a risk of this kind and giving an outright grant without taking a very specific interest both in the equity and in the direction of the company? Does he not realise that, for example, the Government nominate directors for the British Petroleum Company, where, of course, 50 per cent. of the capital is held?
The right hon. Gentleman has not got it correctly. The Cunard Company is, in effect, providing the first £12 million of the equity money and the Government, in effect, produce the remaining £18 million, but it is secured. The Cunard Company is taking the risk, not the Government.
Is my right hon. Friend aware that at any rate a few of us feel that if the Government are to spend any money at all on such projects it could have been better spent on supersonic flight? Will he tell us whether there is to be an opportunity to debate the matter?
The question of a debate will be for my right hon. Friend the Leader of the House to consider, but, of course, legislation will be wanted and the House can then express its views. Although there obviously will be a great increase in air travel there will still be a large number of people who would prefer to go by ship, at least one way, and if this subsidy is not given it will mean that this country stops its shipping across the North Atlantic routes and will lose a very great number of dollars both from the money earned from Americans and as a result of the foreign currency for which inhabitants of this country will ask in order to go on other ships.
What drastic changes have occurred in the capitalistic system to render it impossible for this money to be raised on the open market? Is not this an indication of lack of confidence in the economic climate on the part of investors, and is it not, perhaps, the result of successive years of high Tory taxation?
It is because every other service of ships across the Atlantic is subsidised by other countries.
Is the Minister of Transport aware that the Italian and French Governments—and, I believe, the German Government—are sponsoring the building of large passenger liners not only for crossing the North Atlantic but to serve the Pacific routes as well? Therefore, is it not essential, not merely in the interests of British shipbuilding but in the interests of Britain generally, that, as an earner of foreign exchange, we maintain fine passenger services across the oceans of the world? I am confident—as, I think, everyone in the business is—that for very many years a sea journey in modern British passenger liners will, if one has the time and the leisure, prove far more exciting and interesting than a jet flight.
As long as it is a paying proposition and our shipbuilding industry gets benefit from it and we get some prestige benefit and foreign exchange, I think it is a good investment.
As this is a long-term project and as the rate of change in motive power is taking place rapidly, would not my right hon. Friend consider laying down that this new ship should be nuclear-powered, as the economic argument that at present excludes the use of nuclear power does not arise in view of the large element of public money involved?
Nuclear propulsion is not yet adequately developed and, frankly, we are not prepared to wait for the replacement of this ship.
The right hon. Gentleman stated that firms at ports throughout the country would be allowed to tender. When allocating this project, does he intend to take social problems into account? And will he ask his right hon. and hon. Friends now to stop the humbug about payment of subsidies without a means test? Can he say whether the Cunard Company gave an undertaking that it had tried to raise the money on the market and had not been able to do so before he and the Government came to the conclusion that the company must have the money?
With regard to the last part of the hon. Gentleman's supplementary question, it is quite clear that nowadays a private firm cannot find private risk capital to compete with foreign Government subsidised interventions. That is the nub of the problem. If the House thinks that firms can find such risk capital, I am afraid that we shall not have an Atlantic service. As to the other part of the hon. Gentleman's supplementary question, tenders will be issued and considered on their technical merits.
Order. We cannot debate this matter now without a Question before the House.