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Harland And Wolff

Volume 889: debated on Wednesday 26 March 1975

The text on this page has been created from Hansard archive content, it may contain typographical errors.

With your permission, Mr. Deputy Speaker, and with that of the House, I wish to make a statement about Harland and Wolff, the Belfast shipyard. This is not the first time it has been necessary to make a statement on this subject. The right hon. Member for Cambridgeshire (Mr. Pym) told the House on 21st December 1973 about proposals to provide financial support. In a further statement on 22nd July 1974 I announced that, as a rescue operation, the Government had decided to extend the shareholding in Harland and Wolff Limited already held by the Northern Ireland Department of Commerce, with a view to providing the additional finance required by the company to make good its heavy trading losses, and to bring about the changes which the Government believed to be necessary. Following that statement, the Government put a project team into the yard to undertake a review of the company's affairs.

That review has now been completed. The company's annual accounts for 1973 published in November 1974 showed a £38 million provision for estimated prospective losses on contracts entered into prior to 31st December 1973. In the light of the review it appears that the provision for prospective losses needs to be increased by over £22 million, that is, to about £60 million.

These are very heavy losses. However, a modernisation programme costing £35 million, mainly financed by Government, and making this yard one of the best-equipped in Europe for the construction of large tankers, bulk carriers and similar ships, is nearing completion. The company is the largest single industrial employer in Northern Ireland, with a long tradition of technical excellence in shipbuilding. It still has a substantial order book. The Government have accordingly decided that they have no alternative but to give the company a chance for survival.

Everybody in the company must realise that the only hope for the future lies in such efficient use of their own skills and of their excellent technical facilities that, as the present order book is worked off, the company can quote acceptable prices in worldwide competition with reasonable expectation of making a profit. We cannot contemplate a fresh succession of loss-making orders. With the world market for large ships in its present doldrums, the going will be tough and the outcome uncertain.

The Government's intention last July was initially to take a substantial majority in an expanded equity, leaving existing shares in the hands of their present owners. However, the issued share capital has been eroded by the enormous losses and large sums of new money will have to be put in. So we have concluded that the only satisfactory way in which the company can be financially reconstructed is for the Government to become the sole share- holder. Legislation for the compulsory acquisition of all the issued shares, ordinary and preference, which are now in private hands will be introduced in due course. Like all Northern Ireland legislation in the interim period, it will take the form of an Order in Council, under the Northern Ireland Act, 1974. Terms of compensation will be announced which will take account of the realities of the situation and the particular circumstances of the company.

These matters will take a few months to accomplish and meanwhile the undertaking needs to be kept in funds. To this end an interim Order in Council will be introduced immediately to enable the appropriate payments to be made by the Northern Ireland Department of Commerce. We have invited the company to make the necessary adjustments of its borrowing powers.

The Government have made clear to the board that the company may not conclude new contracts to build ships without the approval of the Secretary of State, which normally would not be given unless they satisfy him that all direct costs and overheads can be covered in the building years beyond 1978. It has also been made clear that they may develop, but not without the Secretary of State's approval implement, plans to use the resources of the yard in other ways. The future of the yard is now in the hands of those who work there. No Government could go on supporting the yard indefinitely. Unless it can obtain orders which can be completed without loss, a halt must be called.

I am convinced that if the company is to survive this can only be through the determination and effort of everyone in Harland and Wolff. Increased productivity is vital, and I mean vital, but productivity deals alone are not enough. A new approach to industrial democracy is required. This is why we need to advance towards genuine worker participation in the decision-making processes at all levels in the yard. We have now sent to unions and management within the yard the promised discussion paper on worker participation and it is the spirit of this that we want to see influencing the attitudes of everyone in the yard. This paper is not a blueprint—there is so such blueprint available to fit any given situation—nor does it cover every possibility. The inten- tion is to indicate possibilities which can be discussed freely and tailored to suit the particular circumstances of the yard and its employees. We are entering upon an exciting experiment, with all the problems that this will entail. There will be difficulties, but if these can be overcome it may enable the yard to survive.

A new managing director is required. Now that the decision has been taken on the future of the yard the post will he advertised publicly as quickly as possible. Anyone already working in the yard will, of course, be free to apply.

In the future the yard will in a real sense be owned by Northern Ireland. Those working in the yard will no longer be working for private shareholders, or for themselves alone, but for Northern Ireland. It is their responsibility to ensure that, in the interests of Northern Ireland, the yard will survive.

Is the right hon. Gentleman aware that, in view of the great seriousness of his statement and what he describes as "an exciting experiment", we shall press for a debate on Harland and Wolff in the context of Northern Ireland as a whole? On the question of industrial democracy, would he confirm that the Government will acquire 100 per cent. ownership? Will the managing director he has mentioned he responsible direct to the Secretary of State or to a national board? What will be the basis of compensation and, as the losses are to be met from the Northern Ireland budget, how will this affect development and social services in Northern Ireland as a whole?

I thank the hon. Gentleman for his questions. The question of worker participation and "an exciting experiment" caused some hilarity in the House. I hope it does not cause hilarity in Northern Ireland because we are talking about the survival of a major industry employing 10.600 workers, crucial to the economy of Northern Ireland. If this company were to go into liquidation, the cost to the Government would be substantial; therefore, it is in everyone's interest to make this experiment work, and I am hopeful that that can be achieved.

I will certainly mention the question of a debate to my right hon. Friend the Leader of the House. My right hon. Friend might consider either having a debate upstairs in the Northern Ireland Standing Committee which he is seeking to form or pressing for one on the Floor of the House, but I will discuss that with my right hon. Friend.

The advertisement for a managing director will be coming out in a day or two. I have announced it publicly today. We want somebody who can play a leadership rôle within this yard. I can assure the House that the conditions will not be similar to the previous conditions and terms which were offered. We want to see somebody appointed and, whilst we have not ruled out anybody in the yard, the post will be publicly advertised and people will be free to apply. There is no reason why the consultation about which I have been talking could not start at the level of this appointment.

The basis of compensation will have to be worked out. I am not in a position to give the hon. Gentleman details and I do not think it would be advisable to do so in the House, but I can perhaps let him know at a later date exactly what that position is.

As for the losses and the decision of my right hon. Friend the Secretary of State to levy some of the costs for this yard against expenditure in Northern Ireland, certainly some of the cost will have to be taken into account by future Government expenditure—not the whole of the cost, but the Government have said on a number of occasions that there is a Northern Ireland responsibility here and that nobody in Northern Ireland can avoid it.

The Minister will be aware that the size of the projected losses will cause shock and alarm not only within the industry but throughout Northern Ireland. I should like to assure him, however, that there will be general appreciation of the Government's willingness to give the yard another chance. However, the important part of the statement, to my mind, is the sentence,

"Unless it can obtain orders which can be completed without a loss, a halt must be called."
Of course that is a right and proper attitude. Can the Government indicate why the yard is in this position of making continuing losses? Have they been able to identify the root cause of the yard's problems?

I thank the right hon. Gentleman for the first part of his question. He quoted to the House the crucial sentence within the statement. It is absolutely crucial, and I would underline it: no Government could go on in this position. The reason we have taken these decisions is that we believe that there are possibilities and that the workers in Harland and Wolff will respond to the challenge. It is a challenge.

The right hon. Gentleman asked why we are in this difficulty. There are all sorts of problems from the past, such as problems of industrial relations, problems of fixed pricing, problems of the world shipping market. These are real problems. It may be of interest to the House —hon. Members interested in this subject will already know—that there is not a shipyard in the world at the moment which is not receiving some Government support, whether it be in Japan, West Germany, Sweden or Britain. But the fact is that we cannot go on in this way. We have to try to get the output, the steel throughput and the pricing acceptable, so that the company can compete in world markets. The facilities are there, the money has been spent. Physically, on the ground, everyone can see the facilities, fed by a skilled labour force. Therefore there is no reason why this cannot be got off the ground. These are the bases of the problems facing us at the moment.

Will my right hon. Friend accept that all political parties and political representatives in Northern Ireland will be grateful that the Government have once again given this opportunity to Harland and Wolff to survive? In view of what he intimated in his statement, could he say whether there is still a market for large tankers and bulk carriers, bearing in mind that there is now the possibility of offshore oil? Can he say that in contemplating any orders which are forthcoming in the interim period the Government will have a say—not may have a say, but will have a say—in whether such orders are accepted or rejected? Can he further indicate to the House that in the compulsory acquisition of shares the Government will not be taking any steps which would make it appear that they were giving golden handshakes to people who have been running such an inefficient company in the past?

Next—this is, perhaps, most important will the Minister be responsible to the House as to the person to be appointed managing director?

Finally, will the Minister accept my congratulations on the excellent discussion paper which has been published today? In the contacts he had with the trade unions and others involved in the preparation of the Discussion Paper on Industrial Democracy, did he have discussions on the possibility of achieving an integrated work force at Harland and Wolff and ensuring that a man's religion will be no bar to his getting employment at that establishment?

I thank my hon. Friend for his kind remarks. I have already explained that there is a world recession. The order hook is full until 1978. It is beyond then, when new orders are negotiated, that the crunch situation arises. My hon. Friend's guess is probably as good as anybody else's about the oil situation and about whether large tankers will be needed. I am not a pessimist. Things tend to ebb and flow. One minute it looks as if there will be no more orders. Then orders come in. We shall have to wait and see. Any new orders will have to be fulfilled in accordance with the criterion I have set out in my statement.

The Government will be directly involved in the question of the appointment of the managing director. At present the company is answerable to the Department of Commerce and, through the Department of Commerce, to the Secretary of State and myself, who are answerable to the House. We would be answerable in future in the same way.

As for my hon. Friend's question about golden handshakes, the acquisition will be on the normal basis of share value. The price of the shares does not give the Government cause for any concern

I have had continuing discussions with the trade unions. Nobody more than the Government wants to see a more balanced work force. One of the ways in which we are tackling this question is through the apprentice training scheme. There is now a Government training centre in West Belfast. We hope to build a special training centre outside Harland and Wolff for apprenticeships in Harland and Wolff. I have been given assurances by the representatives of the trade unions that they will co-operate with the Government in this regard.

Several Hon. Members rose

Order. Long questions and long answers make matters difficult. There is a great deal of business to follow.

Is the right hon. Gentleman aware that I shared his indignation earlier at the comments of some hon. Members, particularly Labour Members, who show a strange ambivalence when we arc dealing with workers in Belfast compared with workers in Great Britain?

The right hon. Gentleman has not given us any details of the findings of his project team. Has the project team come to any conclusions with regard to manning at Harland and Wolff, not only at the craft level but also in the service and administrative sectors? What action does the right hon. Gentleman intend to take to strengthen the management team apart from the sackings which he undertook a few months ago?

Will the right hon. Gentleman accept my thanks for and congratulations on his Discussion Paper on Industrial Democracy? Is he aware that all sensible people in Northern Ireland realise that industry can go forward only on a partnership basis? I particularly welcome the fact that the discussion paper contains no dogmatic assertions but puts forward points for discussion, which I think will be valuable.

It was unfair of the hon. Gentleman to criticise hon. Members on this side of the House. His criticism was not justified. I assure him that my hon. Friends expressed great concern about the situation in Northern Ireland. The Government have received support from this side of the House in difficult times on this issue, and we appreciate it.

We have given the main basis of the report of the project team, which is that it has made a forecast of the losses, which are substantial. Proposals have come forward about manning. These will be discussed with the appropriate trade unions. Adjustments will have to be made.

Is my right hon. Friend aware that, because of the enthusiasm with which his statement was received by the United Ulster Unionist Members, we look forward to their voting with the Government on the Third Reading of the Industry Bill?

We warmly welcome the statement about industrial democracy and hope that there is to be a ripe future for the yard, but the statement on losses is somewhat disconcerting. Does the £60 million go only to the end of 1974, or is that a projected loss until 1978? If it is not a projected loss until 1978, what is the amount of the loss between 1974 and 1978? When talking about projects after 1978, are we talking about each project having to be on a break-even basis? Finally, what are the other resources of the yard which might be used in different ways?

I thank my hon. Friend for his warm welcome of my statement. I take note of what he said about the attitude of some hon. Members opposite on other subjects. I welcome the support I am receiving from Northern Ireland Members on both sides of the House in this matter.

The losses are projected losses to 1978. I have emphasised that the break-even point will be the critical issue when new orders are taken.

Is the Minister of State aware that this is not the first time that we have asked for a debate on an important Northern Ireland matter and have been referred to the Northern Ireland Committee, which has not been set up? Will his right hon. Friend the Secretary of State talk seriously to the Leader of the House about this?

Meanwhile, may I ask the right hon. Gentleman to say a little more about the future structure of the company? Will the managing director when appointed be responsible simply to the Secretary of State or to a board which will be collectively responsible to the Secretary of State? What will be the structure?

This will be a joint stock, limited liability company with a 100 per cent. Government shareholding. So there will be a board. I do not know what form management will take. The discussion paper says that there will be an opportunity for people to devise methods. Obviously proposals will be made to the Government, which we shall examine sympathetically, for putting the concept of worker participation into operation.

There is some misunderstanding on the question of a debate. There is a difficulty about time. The Government have said that there could be a debate upstairs in Committee. The Leader of the House made a statement previously to the effect that a Northern Ireland Committee will be formed where these matters can be debated. If the Opposition wish to press for this matter to be debated, or if they want to take one of their Supply Days or even half a day, that will be entirely for them. The Government would welcome a debate. My full statement goes some way towards informing the House of the true position.

Even by the standards of other shipyards, are not these escalations in loss staggering? When can we have some report on why there has been this escalation from £38 million to £60 million? Is it entirely a matter of fixed pricing? Will my right hon. Friend enlarge on the phrase

"the necessary adjustments of its borrowing powers"?
May I repeat the question asked by my hon. Friend the Member for Kingston upon Hull, Central (Mr. McNamara) and not answered as to what are the resources of the yard in other ways and how they are to be used?

Finally, how do these actions square with the views we heard so eloquently expressed for many years by the right hon. Member for Down, South (Mr. Powell)?

On the last point, my hon. Friend must address his question to the lion. Member for Down, South (Mr. Powell). As to the size of these losses, when the Government in July examined the position under the previous management and under the Government subventions, the project team had to find out exactly what was the reality of tIle position. Frankly, when we are dealing with a company of this size, with forward orders, and when it takes three years to build a ship, all kinds of problems arise. It has taken several months for the project team to arrive at these figures and at the forecast it now makes.

I tell my hon. Friend, as I have told the House, that there is no simple answer to this problem or to the question why the shipyard is in this position. There are a number of answers. We are now trying to wipe the slate clean and to say that there is a chance for survival and that given ownership money, worker participation and forward thinking, the Government believe that we can support a positive approach. I was asked about other uses for the yard. My hon. Friend is thinking of other products for which it can be used. This is very difficult in a shipyard of this size, designed to build 300,000 ton tankers. But there is, for instance, an engine shop employing over 2,000 workers which at present is doing an excellent job and is breaking even. There are problems. It is not an easy matter of just switching from one product to another. Fundamentally, this is a shipyard and has to be a success as such.

Several Hon. Members rose

On a point of order, Mr. Deputy Speaker. May I draw your attention to the fact that, although the statement which the Minister has made obviously has very serious implications for the taxpayer in Great Britain as a whole, not a single hon. Member from the back benches of the main Opposition Party succeeded in catching your eye?

Order. The hon. Gentleman is not entitled to cast reflections on the choice of the Chair.