§ 2.53 p.m.
§ LORD TEYNHAM rose to call attention to the depletion of the capital resources available for the progressive re-equipment of the Merchant Fleet, due to the inability of British ship owners to set aside adequate reserves to meet the cost of replacement; and to move for Papers. The noble Lord said: My Lords, in opening this debate to-day I think I should declare that I am a director of ship-owning companies, and therefore I am materially interested in their welfare. It is almost exactly three years ago that I had the temerity to address your Lordships on the conditions in the shipping industry, and from the point of view of the national economy I think the most illuminating and important factor since that date is the steady increase of foreign exchange which is earned by our merchant shipping. If we go back to 1947 the shipping industry's contribution in foreign exchange was in the region of £60 million, and in 1948 no less than £100 million. Then last year, 1952, the industry's foreign exchange earnings reached the magnificent figure of something like £225 million. Of course, this is not the whole of the picture. The figures that I have given apply only to dry cargo ships. There are, also, of course, the earnings of tankers. Moreover, the figures do not take into account freights earned by British ships carrying to this country imports which would be carried in foreign shipping if no British ships were available. Therefore we are saving exchange in that direction.
§ This condition of affairs all sounds very healthy and happy until we look a little closer behind the scenes, at the backbone of the industry. Do we find ship owners placing orders for new ships at the present time? Do we find the shipbuilding yards happy and contented 1120 about the future? Far from it. I would say that the reason is not far to seek. In the year 1951, the orders placed for new ships amounted to over 2¾ million tons gross; in 1952, the orders were down to barely one million tons, and in 1953, so far, they are probably well below half a million tons gross. It is true that we have a few weeks to go yet, but I am afraid that we shall not get many orders for ships on these stocks.
§ I will try briefly to give your Lordships an example of the difficulties facing a shipowner at the present time. Take a ship that cost £100,000 before the war, and is due for replacement. At to-day's figures, this ship would cost something like £400,000. The owner of that ship will, no doubt, have been prudent, and will have written off the £100,000 out of his profits by depreciation, which of course is free from tax; but he is still short of £300,000, which he must find out of taxed profits. That is the point. All this means that, to close the gap, he must find not only £300,000 but double that amount—that is, £600,000. These figures, which I have endeavoured to make clear, mean that to replace a ship costing £100,000 a shipowner must set aside £700,000 out of the earnings of that ship during her lifetime, which is almost an impossible proposition in the industry at the present time. It is impossible of fulfilment because the Treasuryinsist that the annual depreciation on a ship must be measured in the pounds of the year in which she was built, while receipts and running costs must of course be measured in the current year's pounds. On the one hand, shipbuilding costs are at a very high level, and shipyards are, in fact, through no fault of their own, pricing themselves out of the market and forcing some owners to look abroad for new tonnage. On the other hand, we have what I might call the heavy hand of the Treasury, unwilling or perhaps unable to make any tax allowance for British shipping.
§ It may be said that the shipping industry is in no different position from other industries, and that the cost of all types of plant and machinery has increased during the past few years. But I would say to your Lordships there is a very great difference indeed. In the first place, the increase in the price level of ships is much larger than in most other 1121 industries. Moreover, a ship cannot be replaced by degrees: naturally, when the time arrives for a ship to be scrapped, the whole asset has to be replaced in one operation. If I may give a simile, it is rather as if a hotel, with all its public rooms, bedrooms, lifts and kitchen equipment, were completely destroyed and replaced from the foundations upwards. Most other industries can keep their plant up to date by a continuous system of replacing individual items, but that is quite impossible with shipping. It is perhaps true to say that the shipping industry is the only one which requires such huge sums to maintain its capital equipment and, at the same time, is subject to such rapid obsolescence. I do seriously plead with the Chancellor of the Exchequer, to see whether he can in some way lighten the burden of taxation on the shipping industry as a whole, because, to put it bluntly, we shall soon be faced with the gradual deterioration of our merchant fleet, through lack of replacements; and what is very serious, it may cause unemployment in the shipyards.
§ It is no doubt true that shipbuilding costs are far too high, and the sooner it is realised, on the shop floor and elsewhere, that the demand for higher wages is strangling the industry, the better it will be for everyone. It will also be very wrong if the officers and men who man the ships of our merchant fleet have their livelihood taken away from them by irresponsible elements in the engineering industry. I am sure that all your Lordships will hope that sounder and wiser counsels will prevail. It has been argued in some quarters that shipbuilders are earning large profits. That argument is being used to support claims for yet higher wages. The fact is that the majority of shipbuilders are using any profits that they are able to earn in modernising their plant and machinery, and there is no justification whatever at the present time for higher wages which, if granted, would cripple the industry because orders for new tonnage will quickly pass to competitors in other countries.
§ Three years ago, competition from Germany and Japan was only just beginning to be felt; but now, German tonnage has increased eight-fold, to over 1,250,000 tons gross. In the same period, Japanese tonnage has increased two and a half 1122 times to over 3 million tons gross. The shipyards of these two countries are getting into full swing again, and we must now be ready to meet their competition, not only afloat but also in the shipyards. I hope the noble Earl who is going to reply for Her Majesty's Government will not use the argument that no relief for the shipping industry can be expected until the Royal Commission on Taxation have made their Report. I am sure that Her Majesty's Government are aware of the repeated warnings that have been given by the leaders in this great industry, but I cannot help feeling that there is a tendency to think that perhaps the matter is not really so urgent; that it can well await the Royal Commission's Report; or, better still, that if nothing is done the problem will solve itself.
§ I cannot emphasise too strongly that the problem is a very urgent one indeed, and that immediate steps should be taken to give some relief to the shipping industry, certainly not later than the next financial year. It was during the debate on this year's Finance Bill that the Economic Secretary to the Treasury set out a number of reasons why the Government should give more favourable treatment for mining works than for other plants. Amongst the reasons given were the importance of mining to the national economy, the extent of foreign competition and the highly speculative nature of the business. I cannot help saying that all these justifications could be applied equally well to shipping. I see no reason why shipping should not have an equally valid claim for special treatment—in fact, I would say for very special treatment indeed, in view of the large and impressive earnings in foreign exchange. I suggest that an arrangement should be made whereby certain untaxed reserves could be placed to a special fleet replacement account, such funds to be used solely for capital expenditure on ships. It would be possible to have Government control over those funds. This arrangement would be of great value to all sections of the industry, and of particular value to partnerships among the smaller companies, whose profits are not only subject to income tax but are also subject to surtax.
§ I do not want to extend this debate into questions of defence, but in passing I should like to point out the strategic importance of the smaller ships, of coastal 1123 shipping, in war time. As your Lordships know, it was the little ships which proved invaluable in the last war and may well prove so again, for perhaps a rather different reason. Our main ports may be quickly put out of action for considerable periods of time by atomic weapons, and it may become necessary to tranship from ocean-going vessels into smaller coastal craft so that our numerous small harbours may be used. I would point out to your Lordships that unless shipowners, many of whom are small concerns, are able to replace their craft with new vessels at the proper time, our security may be seriously jeopardised.
§ Her Majesty's Treasury may well find it less costly to give some relief on the lines I have indicated, rather than find themselves confronted with the necessity of building fleet auxiliaries for purposes of defence. I maintain that the shipping industry spends, devotes and confers a greater proportion of its profits to replacing its assets than any other industry, and, for the reasons I have endeavoured to make clear, should, in fact, receive very special treatment. There is no protected home market for shipping, no monopoly and no subsidy, and I need hardly add that the industry seeks none. But it really cannot sustain its tremendous effort unless it is given a reasonable chance of maintaining its plant, like any other industry, at a level of efficiency which will enable it to compete in the world's markets.
§ 3.6 p.m.
§ LORD WILMOT OF SELMESTON
My Lords, I am sure your Lordships will agree that Lord Teynham has made a most eloquent case for consideration of this very important claim. Ships, in common with other industrial plant, are being run down and wasted away by the effects of the high taxation of industrial earnings, and I hope that the noble Earl who is going to reply for the Government will realise that the case so ably put by Lord Teynham applies very largely to the whole range of industrial equipment. I think the time has come when the Treasury must seriously consider whether initially a large depreciation allowance should not be made on the basis of replacement costs. The fact is that in the pursuit of export sales in order to assist the nation to balance its overseas accounts, not only shipowners—though they may 1124 be, and I think are, in a special case—but every kind of industrial concern is giving away with every pound's worth of goods a small part of its accumulated capital; capital which it will find, eventually, it is unable to replace. The effect of this over the years is steadily rendering obsolescent the capital equipment upon which Great Britain depends for its future livelihood. And the major criminal in this assassination of our past frugality is the Treasury. It is impossible, under the present system of taxation, for many industrial enterprises, whatever they do, to replace the wastage of their capital equipment which has taken place in the pursuit of export sales, for the benefit of foreign consumers incidentally but primarily for the benefit of the national balance of payments.
The shipping case, as Lord Teynham has so ably pointed out, is a very special one, because in this industry the whole plant has to be replaced at one time. The men who serve in our ships, upon which the life of this nation depends, have to live in that plant. In that sense it is different again from any other industry. A ship is the home and place of livelihood and recreation of the crew. If the living conditions of the men who serve are to keep pace with modern conditions generally, ships must be replaced. Therefore, I agree that there is a very special case for the consideration of shipping. But there is a real need over the whole field of industrial plant. It seems to me to be much more important for the Treasury to concentrate its attention, if there is the possibility of any tax amelioration, upon giving incentives for the ploughing back of industrial profits into the replacement of plant, rather than upon a reduction of the general rates of taxation. The former decidedly comes first.
In the case of shipping, however, there are one or two safeguards which ought to be borne in mind. In the past things have happened which ought not to happen again. Ships which ought to have been scrapped have been sold off to foreign buyers, who have then come into the market at cut rates with those very ships to drive our own ships out of the market. If concessions of any kind are to be given for the scrapping and replacement of obsolete ships, then those ships should be scrapped in fact and not sold to foreign owners to compete with and drive 1125 our own ships off the seas. That seems to me to be extremely important. We must bear in mind that, like other industries, the shipping industry has periods of boom and periods of adversity, and some arrangements should be made to see that in times of high profits some part of these profits is set aside to form a reserve from which the industry can draw to replace ships when there is need but not the means to replace them. We should not countenance the lavish distribution of profits in good times and in bad times the falling back on the taxpayer to do what the nation needs to be done.
I hope the noble Earl will consider this matter, not only in the case of ships, but also in the case of industrial plant as a whole, because it seems to me that the Government have been very foolish recently in encouraging the belief that because we have for some years had a Conservative Government all our industrial financial troubles are coming to an end. They are by no means coming to an end. The problem of the balance of payments is still a very real one. It is looming ahead as a menacing one. And the sort of talk, for instance, that came from Government spokesmen in the television debate, when they gladly embarked on a policy which approved the spending of hundreds of millions of pounds upon the advertisement of consumer goods for the home market, is not the way to get restraint in wage claims, but is the sure way to rising costs which makes the replacement of our ships so difficult. The Government have many problems ahead. They will not solve them without the co-operation of the whole nation, including the wage-earners; and to encourage the belief that the outlook is rosy and that prosperous times have returned when it is not true will bring retribution in the form of rising prices. I should like to congratulate the noble Lord, Lord Teynham, on the brevity and eloquence of the case which he put, and to say, with the few remarks which I have made, that we generally support him.
§ 3.14 p.m.
§ LORD SALTER
My Lords, there are two questions before the House to-day: one is that which is defined clearly in the Motion, namely, the danger that arises from the depreciation of reserves to a point at which ship replacement may be impossible or on too small a scale; and 1126 the second is the question, not contained in the Motion itself but touched upon in the two speeches to which we have listened, of what should be done about it. I should like to offer a few observations on both those questions. As regards the first, I agree with the noble Lord, Lord Wilmot of Selmeston, that the case made by the noble Lord, Lord Teynham, is so strong that I do not imagine any of your Lordships would question it or wish to differ from it. As I understand it, there are three reasons why we should do our utmost to avert the danger, which, as Lord Teynham demonstrated, is a very real one, that when present orders are worked off there will be inadequate replacement in British yards of British ships for British ownership. These reasons are, first, that the shipping industry is of vital importance to our economy and in particular to our balance of payments, both in respect of their large foreign exchange earnings, of which particulars were given by the noble Lord, Lord Teynham, and also, what must not be forgotten, the large saving in the expenditure of foreign exchange which comes from the conveyance of British imports in British ships rather than in foreign ships.
The second reason is to avoid the disaster of unemployment and distress, not only in the shipping industry, but still more in the shipbuilding industry. I say, "still more" because a disaster in the shipping industry is naturally and necessarily not only transferred to the shipbuilding industry, but multiplied in its scale and range and effect. No one who remembers, as I am sure all noble Lords do remember, the state of our shipbuilding yards in the inter-war years and the depression of that period, will need any further emphasis upon that aspect of the problem. The third reason is that we may be in the best possible position if another war should come upon us. On this subject I should like to make a few remarks, particularly as it so happens that in each of the two great wars of this century I was at a central point in the Shipping Control and was as well able to observe as anybody in this country what was the character of the dangers presented to us by a shortage of merchant ships and the destruction of our ships by submarines.
I might give many instances of the character of that danger, which in both wars threatened to impair, and perhaps to 1127 impair fatally, our war effort, but I will take one example only. Your Lordships may have noticed a speech made by the chairman of the Cunard Company some time ago in which he stated what it would cost to replace the "Queens" and what relation that bore to the amount that was allowed as depreciation and was therefore free of taxation. When I read that account, I reflected upon the original building of the "Queens," which was well in my recollection. It was a very doubtful thing then whether the "Queens" would ever be built. I do not believe that they would have been built, but for the vision and indomitable will of Sir Percy Bates, a director and later chairman of the Cunard-White Star Company. A little thing would have made a difference in the decision whether to build or not.
With that in mind, I reflected upon what the "Queens" meant in this last war. I do not believe there was anything in the whole sphere of our war effort which gave such value per unit of money, manpower and material as the "Queens." They carried troops all over the world. In particular, during the preparations for the invasion of France, each of the two ships was able to carry a whole division across the Atlantic inside a week. I think it is a reasonable question to ask whether, if those two ships had not assisted, it would have been possible to collect the number of troops in this country to allow D-Day to be planned for June, 1944. I think it is also a reasonable question, in view of the installations for the latest missiles for bombing and destruction found in North France when the invasion did take place, whether, if the invasion had not taken place in June, 1944, London and many other great cities in this country would not have been little more than rubble. I mention that as one illustration of the enormous importance of seeing that, should there he another war, we are adequately supplied both with ships and shipbuilding facilities. What is needed is that the shipbuilding capacity of this country should not be impaired, as it was impaired when we started this last war by the effects of the previous shipbuilding depression; and also that an adequate proportion of the output of British shipping yards should come into British ownership and under the British Register. The first question defined in the Motion will command universal assent.
1128 I now come to the much more difficult question, on which I do not propose to speak except tentatively and with some hesitation. Both the noble Lord, Lord Teynham, and the noble Lord, Lord Wilmot of Selmeston, suggested a change in the present replacement allowances. I fully realise the case for calculating replacement on a different basis. It may be that so special a case can be made for shipping that it can be dealt with without prejudice to similar claims; but at once I was struck with the fact that the noble Lord, Lord Wilmot of Selmeston, said that, although there might be a special case for shipping, it was not a unique case, and that certainly many of the arguments could be applied, in lesser or greater degree, to other industries, too. It is well that we should have in mind that when this question is considered, either by the Royal Commission or by the Government, they must necessarily put to themselves the question: Is the case of shipping so different from that of other industries that we can make the change for the one and not for the other?
In some respects, as the noble Lord, Lord Teynham, said, it is undoubtedly different. It is true that, whereas other industries producing, let us say, for export, are not completely dependent upon export markets where the Government give, and can give, no assistance, but have some part of their business in manufacturing for the home market, too, that is not so in the case of shipping. It is also true, as the noble Lord, Lord Teynham, said, that the ships in the shipping industry are different, in their relation to the industry and in the way in which they have to be replaced, from the plant in other industries, which can, perhaps, be replaced from time to time. That is perfectly true, and I believe most people would consider that there is a special case, in the sense that arguments of that kind have greater force for shipping than for almost any other industry. But it is a matter of important difference of degree rather than of kind. The other question that any Government must ask is whether the difference is sufficient to do for shipping what cannot be done for other industries; and if the answer is "No," whether the finances of the State can bear the cost of the wider extension of the same principle. I do not propose, while the Royal Commission is sitting on 1129 this extraordinarily difficult question, which has many wide implications, to offer a personal opinion as to what is the appropriate answer to that question; but it may be that the Treasury can find some method of assisting in regard to this particular problem which will not run them into the full implications of a general change of the whole basis of replacement.
I should like to add one further comment to illustrate the complexity of the question. Both for the Government and for the Royal Commission now sitting, this problem is one that is at the heart of the whole of the tax structure, in a period in which costs have been going up as rapidly as they have in recent years. I do not think it has been adequately realised that a tax structure which defines the limits of different taxpaying classes and different concessions in terms of a pound which thereupon ceases to have more than a fraction of its previous purchasing value, is bound to run into every kind of anomaly and injustice and evil result. I should like to illustrate my point. What is true here is true of the whole income tax structure. You have certain limits defined in pounds sterling, let us say, for specially low rates of taxation for people at the lower end of the income tax scale; and you have, similarly, a surtax limit at £2,000 defining the point at which people pay more than the normal income tax rate. Suppose, to simplify the question, that, while everything else remains substantially the same, the pound just halves in purchasing value, so that the average income is twice what it was before and the average cost of everything we buy is also twice what it was before. One effect of that is that the surtax limit becomes, in terms of the earlier pound, a limit of £1,000 and not £2,000. So it is with the concession at the other end of the scale.
I mention that, because when the Government or the Royal Commission are considering the particular question of replacement basis, which arises from exactly the same fact, they are bound to have in mind the inevitable effect on the whole tax structure at a time of quickly rising prices. I mention that only to illustrate that, while I am completely convinced by the importance, and indeed by the urgency, of the case put before us by the noble Lord, Lord Teynham, and while I sincerely trust that some means may be 1130 found of relieving the situation to some extent, even before the Royal Commission have reported, I personally do not feel able, in view of these complexities, to suggest a particular scheme to your Lordships at this moment. But as to the importance of the case and the urgent need of solving it, sufficiently, at any rate, to avert the worse dangers to which attention has been called, I do not think any of your Lordships can have any doubt whatever.
§ 3.28 p.m.
§ VISCOUNT RUNCIMAN OF DOXFORD
My Lords, listening to the noble Lords who have already spoken on the Motion so ably moved by the noble Lord, Lord Teynham, I have had something of the comfortable feeling of a man going in to hat fairly low in the order of batting who has seen so many runs scored by those who have gone down to the pitch before him that it does not much matter whether he himself makes a "blob." If, therefore, I venture to address your Lordships, as one who has spent the greater part of his fife in trying to manage ships—which in itself is as comprehensive a declaration of my interests in this Motion as I can offer—it is not in an attempt to reinforce on general grounds what has already been said, but to try to give your Lordships some notion of the size and nature of the problem as it strikes those in the shipping industry whose duty is to solve it and indeed, whose livelihood, together with the livelihood of a great many other people, depends on their solving it successfully.
I apologise for troubling your Lordships with one or two figures. They will be as simple as I can make them, and on that account probably fairly inaccurate; but they will serve their purpose if they act as pointers. The British ocean-going merchant fleet at the moment is slightly smaller than it was before the war. The dry cargo portion of the fleet is about 10 per cent. smaller than it was before the war, but the tanker portion is rather larger than before the war. There has been a movement away from dry cargo ships towards tankers, which is in itself natural as this country ceases to be an exporter of coal and becomes increasingly an importer of oil, and indeed, as the movement of oil about the world increases in volume, as it has done quite substantially.
1131 How far, from a defence point of view, or even from the point of view of the economics of this country, that particular tendency is wholly desirable, is perhaps another question. It is relevant when we consider the difficulty or otherwise of keeping the British merchant fleet, tanker or dry cargo, up to date. The tanker portion of the fleet is to some extent a special case. The tankers are, after all, primarily what one might call the delivery wagons of the major oil companies. Their function is not very different, except in size and distance, from those large vehicles which from time to time make us wish that our roads were rather wider. It can be taken as fairly certain that the oil companies will see to it that their own products reach the consumers. It seems to me, therefore, that the finance of tanker building—and something like three-quarters of the British tanker fleet at the moment is owned, directly or indirectly, by the oil companies—is a matter which the oil companies themselves will no doubt solve, and which the people of this country will pay for in the form of an increased price, if that should be found necessary, for the oil they consume.
I should like to ask your Lordships to consider more particularly the case of the dry cargo portion of the British Mercantile Marine. That is, of course, a large collection of extremely different sorts of ships. If there is one thing which characterises the ship industry of this country perhaps more than any other country it is the extremely high degree of specialisation which one finds and which goes, I think rightly, with a large number of ownerships. In many ways, the problem would be simpler if it were merely a question of renewing two or three large individual fleets. You could then tackle it on the broadest lines and it is conceivable that the problem would be much easier to solve because of the nature of the spread which would then exist. But in fact the British Mercantile Marine consists of a large number of different ownerships, some of them, as the noble Lord, Lord Teynham, suggested, very small in themselves.
It is through the direct application of its knowledge and experience to the solution of particular problems, particular trades and the carriage of particular kinds 1132 of goods—all that large number of specialisations—that the British Mercantile Marine possesses a great part of the competitive strength which it still holds in the seas of the world.
It would be possible—in fact, it would be fairly easy—to make out quite a good statistical case for saying that the industry has not much to worry about. It is possible to point to the relatively low average age of British ships. On a rough calculation—perhaps I should say an informed guess, rather than an estimate—I think that in the next ten to twelve years something like one-half of the British merchant fleet will disappear, by reason of old age or obsolescence, and will have to be renewed. If that were the whole of the problem it would not be a serious one. The average life of a ship is normally reckoned as somewhere between twenty and twenty-five years, and if all the industry had to do was to replace half its fleet in twelve years, it should, on the face of it, be in a comparatively happy position.
The difficulty arises from the fact that the age spread, if I may so call it, of the British Mercantile Marine is irregular. Of the ships at present in service in the fleet—he ocean-going ships—in June this year, something like one-third were built in the years 1940 to 1946 inclusive. That is the reason why the average age appears low, but it is also a reason for supposing that the problem of replacing will be more difficult than it would have been if the flow of new tonnage had been more regular. Those ships were built during the war—and let us be grateful that they were built by our own yards, by the American yards and by the Canadian yards. But they were built for a general purpose; that is to say, of carrying as much cargo under war-time conditions as could be carried in bulk, and regardless of any unnecessary refinements. They were, in fact, as far from a specialised transport vehicle as you could well get. They were, moreover, built to specifications and, indeed, to scantlings which were not designed for a long life. Most of them, unfortunately, were known to be going to have a short life from the moment they were launched, and there is good reason to suppose that they are neither as suitable nor likely to live as long as would a normal cargo ship built 1133 in time of peace by a particular owner to meet the requirements of his particular trade. So that, although the ships look young, they may be ageing rapidly. Although they look numerous, their value as a whole is much less than the corresponding amount of tonnage could contribute under normal conditions.
It may be argued: Well, if you are still going to have so high a proportion of relatively young ships in the fleet, there is no need to bother about replacing them just yet. Let it stand over a little, and perhaps shipbuilding prices will go down; perhaps things will be a little easier, and perhaps, after all, we shall not have to adopt these drastic measures. It would be very agreeable to think that that might be so, but I am afraid that the tendency is the other way. The noble Lord, Lord Teynham, quoted some figures of shipbuilding orders. I think the figures which he quoted were those of the total orders in the shipyards. If you take the orders of British tonnage in British yards at the present time, not only are the figures smaller, but the diminution of orders is both more marked and more rapid. It is approximately true to say that in the first nine months of this year the new orders placed with British yards by British dry cargo owners amounted to something like one-tenth of the orders placed in the whole year 1951—about 1,200,000 tons in 1951, and about 124,000 tons in the first nine months of 1953. That provides some measure of the difficulty which has already begun to show itself to the British owner.
The British owner cannot sit back and say, "I will not order any more ships until my war-built ships are on their last legs." There are two or three reasons why he cannot do that, and they will no doubt occur to your Lordships. The first is that, even if he were anxious to teach the shipyards a lesson by leaving them bare of orders for a considerable period of time, it would be an exceedingly short-sighted policy which would result in misery, unhappiness and economic loss which nobody could contemplate with equanimity. Moreover, not only are his 1946 ships getting older, but they are becoming less suitable for the special goods of his trade. If he is to keep pace with his foreign competitor, who is clearly going to build specialised ships, he must 1134 match him up. He may have to have recourse to selling his elderly ships abroad in order to pay for better ones bought at home. I should like to discuss that point in a little more detail in a few minutes.
It has already been made quite clear by noble Lords who have spoken what is the nature of the problem in terms of the increase in prices. I should like to say the same thing again in rather different words, by a simple sum. If we have to replace, roughly speaking, half our present fleet in ten years, it will cost more than four times as much as in prewar days. That, roughly, is the order of the problem. A ship to-day costs about four times what an equivalent ship would have cost before the war. It is true that the type of ship being built to-day is better equipped, possibly faster, and without doubt has better accommodation for her crew, than was the ship built before the war. But it may be argued that refinements of this sort are not things which should be paid for except out of additional earnings during the lifetime of the ship; they are not things which you can take care of within a wear-and-tear allowance. This Motion speaks of the "progressive re-equipment of the Merchant Fleet." If that re-equipment is not progressive it will fail in its purpose, for if we do not re-equip progressively, other people certainly will. To replace half your fleet at four times its original cost is a prodigious undertaking under any conditions.
Traditional ways in which the British Mercantile Marine did refresh itself and replace its tonnage have been two. First, by saving, by ploughing back into the business more profits than were distributed to the shareholders; and, secondly, by selling ships abroad when they were found to be no longer economical to operate or when exceptionally good prices could be obtained for them in order to place orders for new ships. On the matter of saving, noble Lords who have already spoken have explained the situation in much better words than I could use. I should like to speak for a few moments on the second point, and it is here that the specialised nature of the merchant fleet is of importance. A liner company, in order to maintain the scheduled services which it operates, and which it cannot 1135 let go without affecting good will and connection with customers—which may be extremely serious—is obliged, whether it will or no, to keep its fleet at approximately the same strength, unless trade falls off to such an extent that the number of sailings has to be reduced. If trade should increase, the liner company may charter a tramp ship to supplement its own fleet. But, by and large, they have to face the problem of replacement and consider what to do as the ships wear out
If he is clever at judging the market, the tramp owner will sell a ship at the time when it is no longer any good to him, at as near the top of the market as he can. He will be certain to find someone less intelligent prepared to buy. I hope that it is not an undue exhibition of national pride to say that, more often than not, the individual in these circumstances is foreign. A ship sold in that manner is unlikely to go into the market in such a way as to undercut the man who has sold in order to replace it by a more efficient ship.
§ LORD WILMOT OF SELMESTON
Would it not go into the market as undercutting not only the standards of living, of the seamen but also the ships of other British shipowners in different lines of business?
§ VISCOUNT RUNCIMAN OF DOXFORD
That is a difficult question to answer. I do not think British shipowners are quite such fools that they would deliberately make sticks to beat their own backs with, and I think one must assume that there is some general experience in the contrary sense. The argument, I think, would probably be that, broadly, things like conditions and wages are nowadays becoming more standardised throughout the world than they used to be, and that, in the main, foreign owners are paying much the same sort of wages as our own people are. In any case there is a continuous move in that direction. I do not suggest for a moment that that movement is complete, but there is a fair measure of it.
§ LORD WINSTER
That is not the case with ships flying the Panamanian and Liberian flags, which undoubtedly are undercutting wages and undercutting maintenance.
§ VISCOUNT RUNCIMAN OF DOXFORD
I am grateful to the noble Lord for the correction. I think he will be prepared to agree that that applies to some, though not all, of the tonnage under those two flags.
§ VISCOUNT RUNCIMAN OF DOXFORD
I do not wish to over-emphasise the point. If wages and conditions are anywhere near the same, it is, as one would expect, open to the newer ship to conduct her operations at a much lower cost on any other ground except that of depreciation and the renewal of an article which was more costly in the first place.
The noble Lord also touched on the sale of ships for scrap, and this is a point which I should like to mention. It is nothing like so important for, obviously, if you sell a ship when times and trade are good, you will get more money than if you sell for breaking up. Nevertheless, this is a source of additional funds for the replacement of British tonnage; and it is at the present time considerably restricted, as your Lordships know, in order to keep the price of scrap low in this country. I know from personal knowledge of an individual case, which I mentioned this morning to the noble Earl who is to reply, of two old passenger ships, where it would have been possible—and may still be, if the order is not invoked against them—for the owners to sell them to Japan for scrap and, after paying the cost of getting them there, still show £100,000 more per ship than would be the case if the vessels had to be sold for scrap in this country. A hundred thousand pounds is not to be "sneezed at," even on what was originally a very expensive ship, and it would be even more expensive to replace.
Desirable as it no doubt is to keep down the price of scrap in this country, it seems a little hard that, in effect, the British shipowner should be subsidising British steelmakers, or some of the steelmakers, to that extent. I am glad to say publicly that I know this order, which, theoretically and in practice, makes it possible for Her Majesty's Government virtually to prohibit the sale of ships abroad, for trading or scrap, has been applied in a most understanding and generous manner. In practice, in my 1137 own experience, it has not been unreasonably invoked. But opportunities for selling ships, for scrap or for any other purposes, are fleeting; they must be taken quickly. In practice it is not at all the same thing to be told by your Government, "If there are any special reason for defence, or if it were not that we wanted scrap badly at home, we would probably allow you to sell your ship to foreigners; and if you really think you want to, come and tell us what you propose to do and we will tell you whether you may or not." However kindly that is done, it is in practice a restriction on the owner on the best opportunities of disposing of his assets, and one which may make all the difference between getting a price which is worth while and a price which is not. That is a small point, perhaps, but we are up against a problem so vast, and involving so many pounds, that we cannot afford to neglect even so many pence.
I should wish to say one thing more. It is a palpable truism that the shipping which the world needs depends on the trade which the world can provide. It may well be that, if we are about to face a prodigious shrinkage of world trade, we can look on while our own Merchant Marine shrinks in consequence. I doubt whether any of your Lordships would wish for that solution, and I hope that none of us feels obliged to expect it. If that is not to happen, if there is to continue to be a sizeable, and possibly an increasing, amount of sea-borne trade throughout the world, there will be, sooner or later, a gap in the tonnage needed to carry it. That gap has been filled by British ships in the past. If we do not fill it in the future, and begin filling it very soon, somebody else will; and if it is filled by someone else we shall not be able to fill it twice over.
§ 3.51 p.m.
§ LORD WINSTER
My Lords, I am sure your Lordships dislike figures and statistics as much as I do, but I must be allowed to quote one or two figures as a background to what I propose to say. I think the essential thing to remember is that it is dry cargo tonnage which carries our food, which carries our raw materials and which takes away our exports. While world dry cargo tonnage has increased by over 1 million gross tons, our dry cargo tonnage has fallen by very nearly 450,000 tons. In 1939 we owned 3½ million gross tons 1138 of tramp shipping. To-day that figure has fallen to under 2½ million tons—that is to say, there is a diminution of over 1 million tons in our tramp shipping and there are no signs whatever of that decline being arrested. Again, in 1900 this country owned about 50 per cent. of world tonnage. To-day it owns just over 20 per cent. of world tonnage—that is to say, a drop from one-half to one-fifth—and the fall would be even more striking if we were to omit tanker tonnage and if dry cargo tonnage alone were considered. Again, in pre-wardays, in 1939, only 9 per cent. of British ships on the register were over twenty-five years old. To-day, over 15 per cent. of dry cargo tonnage exceeds that age. Moreover, most of the present dry cargo tonnage is, as has been pointed out, of wartime construction and, therefore, cannot be expected to have the long life which pre-war similar tonnage enjoyed.
§ LORD SALTER
May I ask the noble Lord to clarify one point in his interesting statistics? He gave a figure of diminution in tramp tonnage. Is not that diminution to some extent the result of a transfer of ships of essentially the same character, dry cargo carriers, from the tramp category to the liner category? If so, it does to some extent modify the position as he has put it.
§ LORD WINSTER
I listened to the noble Lord's speech with great interest; he is a great expert in these matters. I do not think it alters the fact that it is dry cargo tonnage which is of prime importance to the life of this country.
§ LORD SALTER
I was only asking about; the distinction which the noble Lord made between tramp tonnage and dry cargo tonnage. After all, you may have dry cargo ships, carrying goods, in a greater proportion as liners than as tramps, in which case the figures of the reduction in tramp tonnage as such would be of rather different significance.
§ LORD WINSTER
There may be a modification in that respect, but the point I have brought out on dry tonnage is as I have stated it. It may be said, as against the figures I have quoted, that our merchant fleet has made a good recovery since the war because, after the war, it was seriously depleted; but large sums were then available to owners as compensation for losses. It is true that 1139 the tonnage may be back to pre-war figures or thereabouts, but dry cargo tonnage is down by 1¼ million tons, and over the last three years the dry cargo tonnage has been delivered to owners at a rate below what is required to maintain that fleet at the present size; and it is also insufficient to make good the tonnage deficiency below the pre-war level. Even if ships are kept in service over twenty-five years, it must be remembered that, after a life of twenty-five years, upkeep and maintenance is very heavy indeed, while performance becomes low. It is exactly the same as with acar. After a certain number of years running of a car, oil consumption becomes high, frequent repairs are necessary and upkeep becomes very high indeed. Precisely the same thing is true of an old ship.
What are the causes of the troubles about which we have been hearing this afternoon?—and I think the points have been moderately put, too. The causes are many and various. There is the high cost of construction and the slow rate of construction, which combine to give very uncertain dates of delivery. There is also taxation and assessment, and there can be no doubt whatsoever that the greatest handicap of the shipping industry to-day is financial. For instance, the depreciation allowances on old ships, depreciation allowances out of which the cost of new ships must be largely met, are based on the original cost of the ship. The old ship must have been very much cheaper to build than her replacement; and a new ship cannot be built at a cost, say, of £50 a ton out of the depreciation allowance for a pre-war ship built possibly at a cost of £10 a ton. Taxes take more than two-thirds of the new ship's nominal net profits. The total cost of ships represents a very much higher proportion of the revenue in the shipping industry than does the cost of plant and equipment in most other industries. The replacement of old ships is a much heavier factor for the shipping industry to consider than is the replacement of worn-out plant and machinery in other industries. Also, though I think it is not generally realised, the shipping industry suffered greater losses during the war than those of any other industry.
Let us look at this question of orders, which has been referred to this afternoon. 1140 Figures I have seen show that in the year 1951 730 ships were ordered, totalling very nearly 4 million tons. In the year ending September, 1953, there were orders for only 166 ships, totalling about half a million tons. If those figures mean anything, they mean that our shipbuilding industry is declining. This is an industry which employs no fewer than 1,000,000 workers. Prices are high, there are inadequate steel supplies and delayed delivery; and for these reasons, unfortunately, orders are going abroad. In 1953, too, although the orders are for some half a million tons, it is anticipated that only some 200,000 tons of that attenuated figure will be dry-cargo ships, and the rate will be below replacement rate.
What has the Chancellor of the Exchequer to say about this state of affairs? On November 6 he said that shipbuilders had no reason for pessimism because they had on their books orders to occupy them for four years. Of those orders the greater proportion is either for tankers or orders for other countries—in fact, the orders for other countries account for about one-third of the new construction. But, in any case, the statement is a fallacious statement. What matters is the position at the end of those four years which the Chancellor of the Exchequer quoted. If plenty of orders do not come in meanwhile—and at present there is no sign of their doing so—what is going to be the position? What you want is not, as the Chancellor seemed to think by his remarks, merely to work off your orders, but to get a new order for every ship that you launch. That is the thing that matters. What is the position about these orders, and the chance of their coming in in the near future? I looked at the last report of john I. Thorneycroft and Company. That report indicates, that on the shipbuilding side that firm is not receiving orders sufficient to replace the existing orders as they are completed. Again, it must be noted that shipbuilders are now very chary of entering into fixed price contracts, although they are being pressed to do so. Two great shipbuilding firms, John Brown and Company and the Fairfield Shipbuilding Company, have both recently lost very heavily indeed upon fixed price contracts.
That is the shipbuilding side; there is also the owners' side of the matter which has to be considered. Take the United 1141 Steamship Company. I have been looking also at their recent report. That company have ships on order. None of them will be completed at the contracted date, while costs are rising all the time. That company know neither when they will get the ships they have on order, nor what they will cost when they do get them. Like other owners, they cannot get a fixed price contract, and consequently all additional costs are passed on to them. This, of course, depletes their financial resources until they really are not in a position to give another order. I noticed also the remark of the chairman of one of our most important tramp-owning companies which at the present moment owns twenty-five ships. He says that if taxation, construction costs and freights remain as now, by 1970 his fleet will be reduced to eight or nine ships. That fleet is wearing out from the bottom, as I fear is the case in many other instances, too. When the figures for the year are completed, 1953 will show a rise in foreign construction and a fall in British construction, compared with the construction in 1952. Moreover, these high taxation and construction costs have led to cancellations of orders—not merely are not enough new orders forthcoming, but old orders are being cancelled. Prominent shipowners have emphasised the impossibility of financing new construction at present prices, which are three to four times pre-war prices; and, in view of the high percentage, perhaps some 60 per cent. of the nominal net profits are taken by tax.
I am glad that the noble Earl, Lord Selkirk, is going to reply, because we know from experience how carefully he masters the subjects on which he is called upon to reply, and how much he endeavours to meet the points put to him. I have only one question to put to him. I should like to ask whether the Government disbelieve what the shipowners say on this subject. If they do not disbelieve them, why do they not do something to meet what the shipowners say? And if the Government do disbelieve them, surely they are taking a very great responsibility on themselves to contradict the words of men who have served their country so very well in the past. Therefore, I put to the noble Earl the question, do the Government disbelieve what these shipowners say on this particular subject? In regard to the high percentage of taxation 1142 let me quote only one point. For the year ended June, 1952, the United British Steamship Company made profits amounting to £742,613. Out of those profits, taxation took £450,000—surely a striking instance of the truth of what shipowners are saying upon that particular subject.
I turn now to the all-important question of new tonnage. The fundamental principle is that new tonnage ought to be provided out of earnings. The modernisation of the Merchant Navy ought not to depend upon external finance, and the cost of new capital for this purpose would be a very heavy additional burden on the industry—already, as I believe (I can only speak for myself) too heavy a burden. The present incidence of taxation really forbids the replacement of worn-out ships out of earnings. I think successive Governments have been very unimaginative on this point. The result is a decline in dry cargo tonnage especially, and the advancingage of the tonnage that remains. The fact is that the tools of the shipping industry are not being kept up to date, because the shipowners are really not in a position to do that. Far from being able to replace ships out of their earnings, let us look at what has happened to the Orient Company. They had to realise some of their holdings in order to part meet the builders' instalments on the "Orsova" which they are building at the present moment. That ship is to be completed in 1954, and she is going to cost £5½ million. A ship of exactly the same type, the "Orcades," which was completed in 1949, cost £3½ million, a difference of £2 million in the five years that have elapsed.
Now, if I am not wearying your Lordships, let us look more particularly at the case of the "Orcades." During her life that ship, built at a cost of £3½ million, has got to earn a surplus of £7½ million over her running costs in order to produce the £3½ million allowed as untaxed depreciation, and she has also to earn £4 million more, of which taxation will take about half, before the £5½ million which we see is necessary to replace her has been put by, and before she shows any surplus as her contribution towards the company's dividends. In face of those facts, the chairman of the Orient Company has said:If we do not secure the necessary surpluses for replacement, unless we can borrow new 1143 capital, we shall be faced with the alternative of reducing the carrying capacity of our fleet. The risk we as a nation are running is of the State eventually being short of tools, such as ships.May I ask the noble Earl whether the Government wish to see the Orient Line reducing its carrying capacity? Do the Government wish to see the nation becoming "short of tools such as ships"?
Now a word or two about the age of the fleet—a most important factor in the matters which we are considering. Due to war losses, to the standard tonnage built during the war, and to the growth of the tanker fleet, we have an ageing merchant fleet, much of which is rapidly becoming obsolescent. Mr. Boyd-Carpenter in another place has referred to this matter. Speaking of the age of the fleet he said (OFFICIAL REPORT(Coms.) Vol. 508, col. 2017):the percentage of those under 10 years of age—that is to say, comparatively new ships—is very nearly twice what it was in 1939; and, therefore, there is a clear indication that a remarkable job of replacement has been done.As in the case of the remarks of the Chancellor of the Exchequer, which I have quoted, that, again, is a fallacious statement. In 1952, much of the war-built standard tonnage was being operated, all of which was under ten years of age. That is true—we agree upon that point. But the economically useful life of such tonnage will be very much less than normal, owing to its being of war-time construction. So Mr. Boyd-Carpenter's comparison between 1939 and 1952 on this point of the age of the fleet is really highly misleading. A considerable portion of our 1953 tonnage is represented by tankers. Eighteen per cent. of these tankers are over twenty years old. In 1939, the comparative figure was only 15 per cent. And, apart from the question of age, this great increase in tanker tonnage, has really un-balanced the merchant fleet. Calculations show that by 1957, 34 per cent. of the merchant fleet will be tanker tonnage. That I consider very unhealthy indeed, in view of this country's dependence upon dry cargo tonnage. Such are some of the difficulties and adversities with which British shipowners have to compete at the present time.
The facts about our very rapidly ageing fleet have to be considered in 1144 the light of the severe competition which our merchant fleet has to meet at the present time. Look at France. The French National Assembly gave a pledge after the Second World War to reconstitute the French merchant fleet. That work is nearly completed. The total cost of it has been £310 million. But the French Minister of Marine has just pointed out that the requirements continue. The French fleet still comprises obsolescent ships and second-hand ships acquired after the war, and he has asked the National Assembly for £92 million from public credits in order that this work of replacing and modernising the French merchant fleet may continue. And to enable French shipowners to order ships he has told the Assembly that they must be enabled to borrow £210 million over a period of fifteen to twenty years, paying not the normal rate of 7½ per cent. to 8 per cent. but at most 2½ per cent. to 3½ per cent. And he asked the National Assembly for that because he says that otherwise they cannot do it. So much for French competition. French shipowners are also going to get repayment of 11 per cent, to 15 per cent. on the export sale price; that is to say, a subsidy on exports such as other industries enjoy in France.
What about German competition? German shipping is growing rapidly. It is interesting to note that Hamburg has recently completed the world's largest tanker. She now has 1,500,000 gross tons afloat, and she has over 1,000,000 gross tons building. That is to say, over 9 per cent. of the world's total tonnage is under construction in 167 ships in Western German yards alone. I notice that one yard, at least, is working three shifts. In 1952 Germany launched over 500,000 tons of shipping. In 1951 she had launched only 318,000 tons; that is to say, in one year she had put her launching up by over 200,000 tons. What about Japan? Those of us who visit London docks now see Japanese ships of the most modern type coming in to those docks in increasing numbers. In 1948 Japan had 1,000,000 gross tons of shipping. In 1952 she had nearly 3,000,000 tons and substantial numbers of ships on order. In 1951 she launched just over 400,000 tons of new shipping, and in 1952 she launched over 600,000 tons. In one year she had put her launchings up by over 174,000 tons. It is expected that in 1145 1955 her fleet will be 4,000,000 gross tons. That tonnage will fill her domestic needs and drive her to export ships in order to keep her yards going, and we can be sure that she will export at almost any price in order, after filling her domestic needs, to keep those shipbuilding yards in being and in running order. The Japanese fleet rose in 1952 by 605,000 gross tons to very nearly 3,000,000 tons of shipping. So much for Germany and Japan. I wonder whether your Lordships have seen a cartoon which I saw recently. It showed Japanese and German shipbuilders rubbing their hands and sayingBritain used to rule the waves; now she prefers to work to ruleThere is a good deal in that.
The question of balance of payments has been raised this afternoon. Shipping has, in the past, been a main contributor to our balance of payments. The latest returns which I have seen showed contributions amounting to over £70 million in six months. If the shipping industry is to go on doing this, making this heavy contribution to the balance of payments, then the Government must make it possible for obsolete and obsolescent ships to be replaced by modern ships. I do not think that that can be done if taxation of the shipping industries continues at its present levels. I must make one point at this time because I do not want to be misunderstood upon this matter. If tax relief is in the shape of tax rebates, then I would say that those rebates must be frozen until new ships are ordered or delivered. That would have to be an essential point. I do not want to stress it too much, but, looking at the question of foreign exchange, I understand that shipping accounts for one-tenth of the gross earnings of foreign exchange. I notice that Mr. Gurney Braithwaite, before he resigned his position, estimated that dry cargo ships alone earned £225 million foreign exchange. In view of these figures, I think it is clear that by their present policy the Government are killing a goose which lays several fine golden eggs, golden eggs which the Treasury will sorely miss if the present state of affairs is to continue.
Although stress has been laid to-day upon owners, and I think very rightly, because they are in the forefront of the battle, I wish to point out that the effects 1146 of high taxation and high shipbuilding costs are felt not only by owners but by the shipping industry generally. It affects Merchant Navy officers and seamen, who number some 150,000, because a reduction in the size of the Merchant Navy, or inability to meet competition, spells laid-up ships and unemployment for these officers and men. We also have to consider the fact that the building of a ship is not an affair of the shipbuilding yard alone. There are all the other industries which manufacture the equipment which goes into a ship—the instruments, the furnishings and the fittings, which I need not enumerate. All these are affected by any decline in the shipbuilding industry.
With all modesty, I claim that what have said establishes that with the present taxation rates and shipbuilding costs the Merchant Navy cannot in future be maintained at its present size. If the Government spokesman is able to contradict that with facts, not assertions, nobody will be more glad than I to hear them. Germany, Japan and Italy are all re-entering international seaborne trade in a big way. They are doing so with modern and efficient ships, built with Government help. We are trying to compete with them with ageing ships, many of them not nearly so efficient as those of our competitors, many of them built here but to-day operating under foreign flags. No other industry has to face such heavy capital outlay in order to replace its worn-out units as does the shipping industry. If shipping is to hold its own, it must have the ships to face up to the competition, of which I have given factual instances. After all, our shipowners do not ask for Government aid. I have seen no demand on the part of the shipowners for Government subsidies or Government aid. All they ask is to be allowed to spend more of their earnings on building ships, and so giving employment to the shipbuilding yards and all those concerned with the equipment of ships, and to the officers and men who have to man them. In other words, they are asking to be allowed to spend more out of their earnings in the payment of wages. Roughly, that is what it comes to.
To-day, over 60 per cent. of the ships entering British ports are flying foreign flags. Do the Government want to see that situation continue? Do they wish 1147 this country to become charterers of foreign ships? That is the tendency at the present moment. When the "Empress of Canada" was burnt out at Liverpool in that dreadful disaster, it would have cost £8 million to replace her. The company did not feel able to replace her at that cost, and bought a twenty-nine-year-old French ship, some knots slower than the "Empress" had been, by way of replacement. I hope the Government will ponder that fact.
It makes no sense whatever for successive Governments to treat this matter as they do. The trouble is that there is not sufficient public interest in this matter, and therefore there is insufficient pressure of public opinion on the Government. People just do not understand what is involved in this question, and so things get shelved. The nearest we came to defeat in two world wars was when we were losing merchant ships faster than we were replacing them. Now, in peace, more ships are going off the United Kingdom register than are coming on to it. More than ever we have got to earn our living, and we can earn a lot of it with ships. But we must have plenty of the best ships to do it. The management of our shipping industry is all right—I do not think any country can run ships so well as this country. The officers and men are the best we could wish for in the way of crews. My last word is simply this; that although perhaps it is imperfectly realised, the maintenance of its Merchant Fleet is of far greater importance to the nation than are the claims of the Inland Revenue.
§ 4.27 p.m.
My Lords, I am certain your Lordships must be grateful to the noble Lord, Lord Teynham, for having introduced this Motion in your Lordships' House. We have had most interesting and informative speeches from experts in every branch of the shipping industry. The only experience that I can claim is that in my childhood days and a little later, possibly a little too late, I used to run a fleet of mechanical clockwork ships on the duck pond at home. I assure your Lordships that I know every problem involved in a ship breaking down out of reach, quite impossible to bring back home, come storm and 1148 tempest. I believe that a retriever dog comes in useful at times, but it will not work for every type of ship. I also know the waste of time that is caused when such an unforeseen emergency happens and also the exasperation of loss of gumboots, dirty clothes and the excuses that have to be made for being late for lunch on return.
I once had a very fine ship, a model of a tramp steamer, made of wood and built in Germany, three and a half feet long, bought from Mr. Hamley's shop in 1935 at a cost of about £7. But it had this defect: it had a very poor clockwork engine, which is the trouble with all mechanical toys made in Germany. My brother and I decided to fit it with a steam engine, as we had a surplus one. Unfortunately, our mechanical efforts were not quite what they should be in good union practice, and that ship never saw service as a steamer. But it is still in existence to-day, on the stocks. If I took it to the Round Pond on Sunday afternoon, the chagrin I should feel would be exactly the same as that which the noble Lords, Lord Runciman and Lord Teynham, will feel apparently in four years' time, when, as the excellent brief he produced alleges, there possibly will be only one ship left in British yards, unless something can be done about placing orders now. Judging from the Round Pond, where I have been to spend a few moments of idleness, the competition there is very great indeed.
Apart from this experience (shall I say?) of ship-running and shipbuilding, I should tell your Lordships that such ideas as I wish to put forward this afternoon are not contained in the noble Lords' briefs, but are entirely my own opinions, based partly on facts put forward by friends I know in the shipbuilding industry. It seems clear that taxation is the first and foremost thing in the minds of the noble Lords, Lord Teynham and Lord Runciman, and, in fact, in the minds of all managers of shipping concerns. But there are a few more facts which have been omitted even from the speeches of such experts as have spoken this afternoon. I am told that a ship which will carry 10,000 tons of dry cargo (possibly the same as the ship called the "Neptune," which I own) will cost between three and four times as much as pre-war. We have had those figures mentioned 1149 already this afternoon, but they cannot be over-emphasised in this debate. Another vitally important point to every shipowner is the number of four-yearly surveys which have to be carried out in the course of the life of a ship. After twelve years it may easily cost £10,000 to carry out one of those surveys, which have to be done under the regulations laid down. That does not include damage by accidents, storm damage, or other unforeseen things that can happen at sea. Therefore, by the time a ship is of an age of twenty to twenty-five years, some £50,000 to £60,000 will, by law, have had to be spent upon her in the course of her lifetime.
A ship will depreciate, whether she is used or not—if you tie her up, barnacles will still grow on her bottom plates—and machinery has to be replaced all the time and kept in working order. Whereas in a factory you can cover up the machinery to preserve it, and you can even sell your machinery and change the whole factory over to some different industry, that is not so with a ship. But what is even more important is that a ship built for a specific purpose cannot be used for any other purpose, or can be used only most uneconomically for another purpose, should the particular trade for which she has been built fall into the doldrums. A shipowner who is carrying timber must make a sufficient profit out of the timber trade while it is flourishing in order to be able to convert his ship to carrying coal, motor cars, or something like that, should the timber trade fall on hard times. We have, already been told that a ship which cost £250,000 before the war has got to earn £750,000. Surely, when the shipowners and the directors of great shipping lines tell us that ship owning companies cannot possibly earn this amount of money with taxation at its present level, we must take note of what they say.
There are some further points which I feel the Chancellor of the Exchequer and his advisers should hear in mind if they find it is possible to make a concession to the shipping industry. The British standards, not only of constructing ships but of their management, are far higher than those of any other country in the world, not only in regard to the quality of the building and materials, but also in regard to the safety margins on which 1150 they are run. Then there are the conditions for the crew, which in the modern British ship are as good as, if not better than, in any other ships in the world. Foreign competitors have not such qualms about ideals of safety, comfort and pay for ships' crews; furthermore, many of the Governments who are supposed to enforce the Lloyd's Register regulations can, no doubt, at times be somewhat more lax than Her Majesty's Government are with the regulations as applied to ships registered in this country. All those points, together with the others which have been mentioned in your Lordships' House to-day, must add up to a special problem for the shipping industry. Is it not possible for the Chancellor of the Exchequer and his advisers to give special consideration to the shipping industry? Are the evils of such a case greater, or are they less, than the evils of other industries? Are there to be no ships being built in British yards at the end of the period of four years?—or rather, to go back to the brief, there might be one ship being built in British yards.
We have dealt with the question of tax, but little seems to have been said—and this is somewhat surprising, with so many experts present who have such a great knowledge of the industry—with regard to the efficiency of running a ship and what happens to that ship when she is actually in port, loading or unloading her cargo. When I asked a friend about this question, he told me straight away that it was not tax relief he wanted and it was not a Government grant: he said the most important item in the shipping industry is the quicker turn-round of ships in docks. Ships in docks, as we have heard, cost money all the time. The delaying of any ship is obviously reducing the margin of profit which the shipowner is making. The only way in which a shipowner can earn profits, so as to place an order for a new ship, is by means of his present ships—it is only too easy to see that at any time in a newspaper. But do the boiler men in the Red Funnel tugboats in Southampton Water know that? I know a little about an oil-fired boiler—I have one—and, compared to a coal boiler, one man can obviously do the work of two. Can a tug-owning company, faced with the costs that they have to-day, go on paying two 1151 men to do the work of one? Even if they can afford it, I am certain that the second man has a very pleasant, enjoyable and, I expect, remunerative job. But it is wasting time.
A Cunard ship, I think the "Queen Mary," is likely to be delayed at the moment. If that costs the Cunard Company £10,000, £20,000 or £30,000, whatever it may be, that is so much less money to be spent in future on a replacement ship in Newcastle-upon-Tyne. Do the boilermakers think that the tugmen's union, or these particular tug, boiler men, know that this time is being wasted, and that the boilermakers' jobs are possibly being jeopardised? That would seem to be the line to take with these particular troubles. Surely, the higher the cost of running your shipping and turning it round in the docks, the less money you have, and the later it will be spent in the shipyards on replacements.
I did not know about it, but a friend sent me a copy of a Report of a Committee which in 1948 discussed the turn-round of shipping. The Committee made a great many highly technical recommendations. I do not know whether any noble Lords present were on that Committee, but their Report went into great detail about the working of docks and harbours. Running through the summary of advice, on page 20 it speaks of night-shift working in Bristol Docks, of hours of working, and of a local committee to consider night-shift working. Again, on page 23, it speaks of night-shift working in the Hartlepool Docks and a local joint committee to consider it. How much have these committees been able to do in order to get the dock men to work at nights? I know that at Avon mouth the docks are not worked at night, and a five-day week is the normal rule. That puts hundreds of thousands of pounds on to the cost of turning round a ship. That is the particular point which was made by this friend of mine to me. If only these ships could be turned round more quickly and got back to sea with a new cargo, there would be little fear among the big shipyards that they would not get their replacement orders in good time.
I regret to say that I have been speaking as if I were blaming the dockers whom we want to work nights, 1152 but surely there must be something a little wrong with the shipowners or with the dock managements. Your Lordships know the cost of keeping a ship idle overnight, and it is worth while paying a body of men, irrespective of what their present actual wages may be, to get that job done. I should have thought that there was a level of payment which would persuade a man to go to work at night. From my own experience on a farm it does not seem to make much difference to the man. He seems quite happy to work day or night, and to chop and change his hours of work. We put him on full overtime, as if he were working on Sunday, and he is perfectly pleased to work at night. Why cannot this problem be solved in the same way in the harbour industry?
Again, there is the question of mechanisation. We read in the newspapers about these new loaders and that men refuse to use them. Have these new loaders been shown to the men properly? Has anybody been produced who would use them? I wonder how many managers of these corporations have gone down into the docks and actually put one of these machines into operation. Have they actually threatened that if one man does not work the machine he will be out, and that they will find another man who will? Have they been out to find a man who will? If this brought about a nation-wide strike—which I think is doubtful—surely Her Majesty's Government would be able to take powers to deal with it. It is quite certain, and all shipowners will agree, that it is vital and imperative to speed the turn-round of ships in our ports. If those ships can be turned round more quickly, then the shipyards need not fear for orders for replacements in the future. The red light is shining now. It is a fact that ships are being turned away from this country to go to the Continent. Costs of ship repairing on the Continent are one-third less than those in British yards. Furthermore, the time taken—the guaranteed time—is not even half that which is unguaranteed and conditional in our own British yards. That is how shipyards will put themselves out of a job. There was the case of a ship which came in for a four-year repair and re-fit. One English firm tendered the lowest British price. The manager of this particular firm said that the contract was lost to the Continent by many 1153 thousands of pounds. If enough ships go to the Continent—and I have seen something of the working of German shipyards, and also those in France and in Holland—then the outlook is black for the British ship repairing trade.
Where is the blame? Surely it is on the work and the will to get that work quickly and well done. If the noble Earl who is to reply to this Motion could give any assurance to the industry, first that it might be possible to consider a special case for shipping, that would be a great help to the industry. There are many experts—unfortunately, they are lacking in your Lordships' House to-night who have absolutely first-hand knowledge and experience of all these matters in the docks. If they could evolve some method for getting more and better quality work done to speed the turn-round of the ships, and if noble Lords opposite could put pressure on the trade unions—the boilermakers especially—in the ship-repairing industry to turn round these ships and get them out of the yards, then surely the shipbuilding and ship owning industry would have a lot less to fear over the course of the next four years than it has at present.
§ 4.48 p.m.
My Lords, there can be no doubt whatever of the urgent importance of this point which my noble friend Lord Teynham has raised for discussion this afternoon. Yet, as I see it, the underlying difficulty the shipping industry is up against is a difficulty which besets not only the shipping industry but, to a greater or less extent, every other form of industrial activity in this country to-day. It is, as I see it, just this: it is the overriding difficulty of being able to replace worn-out assets, whether it be ton for ton, in the case of shipping, machine for machine, in the case of other industries, or something else, when the greater portion of the cost of replacements has to be met out of earnings that have already borne tax at to-day's penal levels. That is the problem, and it is significant that not one of your Lordships who have spoken this afternoon has not mentioned that point in one form or another. I should almost feel apologetic for raising it again, but it is no new complaint. It is a complaint which has been made in your Lordships' House over and over again; it has been made in another place; 1154 it has been made on platforms up and down the country; it has been made in the Press. Yet, so far, nothing has been done about it. To my mind that is an excuse that one can justifiably put up for raising it again.
It was put with great force and authority before the Millard Tucker Committee. It was put more recently before the Royal Commission; and there it is. It may be that my noble friend, when he comes to reply, will argue, as the noble Lord, Lord Teynham, hoped he would not, that now is not the time, when the Royal Commission is still sitting, to raise this point again; that we ought to wait to see what the Royal Commission reports. One must admit that there is force in that argument. I believe that, in the case of shipping, there would be force in that argument if only one could put one-self back in time by three or four years. But so far as shipping is concerned, I have listened to noble Lords who have spoken this afternoon and there can be no doubt that it is a matter of urgency to-day. The argument that we ought to wait for the Royal Commission's Report may, perhaps, be a reasonable one in the case of other industries. After all, in other industries the rate of replacement can for a while be adjusted in keeping with such available liquid resources as there may be at any one time.
Take the simple case of a factory which may have, say, three rooms that need to be re-equipped. There it is possible to re-equip one room at a time, instead of all three at once. That is a matter of practical expediency which may be possible, though not always desirable. But one thing that that does admit is that there is going on all the time the erosion of capital assets, wasting away the real substance of the firm concerned, When, however, you come to shipping, that sort of compromise, as I see it, cannot possibly be a practical solution. You cannot replace one-quarter or one-third of a ship at a time. You can, it is true, replace a big ship with a little ship; but that would not be desirable. It is "Nothing" until you can do "All"; and with the strictly limited life of a ship, there can be no question whatever that our shipping companies must be finding themselves in a considerable dilemma—indeed, I fail to see, as things are, that the shipping industry can do other than contract. That is actually what the figures show. The 1155 noble Lord, Lord Winster, quoted some interesting figures. I think he pointed out that not only was the merchant shipping fleet growing smaller in relation to world shipping but that it was growing smaller in fact. He quoted a figure of 450,000 tons less in 1952. It is obviously a matter of great seriousness to all concerned. Lord Teynham has argued that in the light of that situation, with our shipyards failing to receive the steady flow of orders enabling them to plan their production in an efficient way, with the exceptional post-war demand for shipping that has been largely met, and with the intense competition that now exists in the world shipping industry, some special arrangement should be made in the case of our shipping industry.
Some of your Lordships may have seen in the Financial Times of November 26 last a reference to that intense competition in the shipping industry. It was a small case, but indicative of what we are up against. It was the case of four 1,500-ton coastal ships required by Chile. There were no fewer than seventy-five different tenders for those ships. That in itself in an indication of the intensity of the competition that we are now having to face. So, when we realise that with British shipping being by far the largest customer of our shipbuilding industry—and, indeed, the very basis on which that industry can start to build its own export trade—it seems to me there is some case for special consideration. I say that with some hesitation because, as one who has no direct interests in shipping, who has many connections with other industries, and who realises that this question of depreciation allowance is a vital one for all industry, I hesitate to recommend something special for the shipping industry. Yet I believe there may be some grounds for special consideration; indeed, I am more than ever convinced on this, having listened to noble Lords carefully on this point. Why?
The noble Lord, Lord Salter gave us a vivid account of the importance of shipping as part of our defence measures. In peace, the industry is a major contributor to our earnings of foreign exchange. I believe that it would be true to say that as a single industry it is probably the biggest of all in earning 1156 foreign exchange. It is an essential link, also, in our whole system of export trade. There is another point, which I think was just touched on, and it is this. The shipping industry employs the products of what one might almost say is a complete cross-section of industry as a whole; and any decline in the shipping or shipbuilding industries of the country might have implications and ramifications throughout the whole of industrial Britain.
It may be asked, when an appeal is made for some special tax concessions: Is there anything else that could be done to avoid such a course? No doubt there are other ways that could contribute. The noble Earl, Lord Bathurst, has referred at some length to the question of turn-round. I am not competent to discuss such a complex and difficult matter. There is the cost of production of ships at home, and no doubt that matter is very important: it is constantly before all sections of the industry. But however successful one might be along that line, it can but have a long-term effect; its effect cannot be felt immediately. In any case that aspect certainly goes far beyond the scope of a debate of this kind. It may be asked, ought we not to be content with what can be obtained from the initial allowances? Undoubtedly those are of value, though I should have thought of greater value to those who are trying to enlarge and build up a fleet than to those concerned with replacements. But, in any event, they can really be regarded only as a loan. To my mind, the one action that Her Majesty's Government could take which would have a very early effect on this vexed problem would be in some way to relate depreciation allowances to to-day's cost of renewal. Whilst I can readily understand that my noble friend Lord Selkirk, when he comes to reply, may be unable to give us any categorical assurance one way or the other now. I would ask him to use his most persuasive powers—and, if he will allow me to say so, I know of nobody who, if he is convinced of a cause, has more persuasive powers—to persuade his colleagues in Her Majesty's Government that now, not some months or years ahead, is the time for something to be done.
§ LORD KIRKWOOD
My Lords, in rising to address your Lordships' House, I make no apology. What has brought me to my feet this evening, without any preparation, is some words that fell from the noble Lord, Lord Teynham. I may have heard them wrongly, and he will correct me if I have. I took him to say that the engineers—and I am an engineer, born and bred—have no right at the moment to be demanding an increase in their wages. That is what he said, or words to that effect. The noble Lord, in cold blood, says that to me, representing the engineers. I have in my hand this Order Paper which contains the essence of what we are discussing here to-day:To call attention to the depletion of the capital resources available for the progressive re-equipment of the Merchant Fleet due to the inability of British shipowners to set aside adequate reserves to meet the cost of replacement; and to move for Papers.The noble Lord says to me, quite calmly, that the engineers have no right to ask for an increase; and yet he can come here, well fed and well clad, representing all that he does, and ask for assistance from the Government. That is what has brought me to my feet.
The engineers have every right to ask for an increase. I am not saying that noble Lords have no rights; but they have no right to say that the engineers have no right to demand an increase—because there is no finer body of men in the world than the shipbuilders of Britain of to-day. They have given you, you shipowners, the finest ships that ever sailed the Seven Seas. They have given them in my day. And yet, when the shipbuilders go and ask for an increase, those with whom you are identified say to them, bluntly; "No; no increase. Awa' wi ye!" The result is that all the engineers of Britain are outraged at the treatment that has been meted out to them, at not being treated as fellow countrymen, as men upon whom this country has had to depend right down the pages of history. During the last war, the engineers gave of their best. They increased production beyond all manner of means and ideas. You talk about working overtime, the night shift system: in my own country, Scotland, we surrendered even the Sabbath Day. It was always instilled in us: "Keep it holy. Six days shalt thou labour, and 1158 do all thy work: But the seventh day is a day of rest." They even gave up the Sabbath Day, gave up their all, and now, when they come before the employers, including the Runcimans, what do they get? A blunt "No." That is not the way to treat your fellow countrymen.
§ VISCOUNT RUNCIMAN OF DOXFORD
I have to interrupt the noble Lord, but I am not a shipbuilder and I am not involved in this dispute, one way or the other.
§ LORD KIRKWOOD
I know that perfectly well. I knew your father very well—but that is by the way. The fact remains that it is the conditions that have forced the engineers to ask for an increase. I know what it is to be a working engineer, rearing and educating a family. I know what it is that surges in the engineer's breast; I know what surges in the heart of the engineer's wife: it is the desire to try to make her family better than she was. Many of them have done so. What has happened here in the process of time? The standard of life has been raised, not only in our country but practically all over the world. Now you, as shipowners, are feeling it, because the shipbuilders have to charge more for the building of the ships, as they have to pay the workers more than they did formerly. Just think of it: when I finished my time on the Clyde, fifty-eight years ago, I was a highly skilled engineer, and what was our weekly wage? How much do you think it was, "O, ye of little faith"?—6¾d. an hour. That is what your forefathers paid the highest skilled engineers in the world—6¾d. an hour. And when we got the employers on the Clyde (and that embraced Britain) to recognise a standard rate, it was 7d. an hour—and we thought we were doing well.
What were the prevailing conditions at that time? We were building the first of the modern battleships in what is now designated John Brown's shipyard, but was then J. & G. Thomson; we were building the first of the modern battleships for Russia, and at the same time, building the same type for Japan. Because of the development that has taken place, because there is now more coming-and-going and more reasoning applied than there was in the days that I have just described, the employers are to-day prepared to permit us to discuss 1159 terms. That has been going on for the last fifty years, to my knowledge—I have been a member of my trade union for over sixty years. As a result of all that, the standard of life has been raised. At that time, the foreman (not the manager at all) could sack you on the spot, without even giving you your pay. Now that is all abolished. The scene has changed. I want to get this point across in this House—the scene has changed. The mentality of the men has changed just as well as that of the employers. But the employers must not get away with the idea again that they are superior to the workers, because they are not. Therefore, owing to that general rise and the better education of the workers, of which they have taken every advantage, they would think it ill became me to sit here calmly listening to shipowners stating the shipowners' case while at the same time those same individuals have turned a deaf ear to the workers. You want replacements of ships. The workers want replacements—their replacements are their children. The women of to-day demand more from their men. The men are prepared to give it. They work to-day under all manner of conditions, for all manner of hours. Formerly in shipbuilding, particularly on the Clyde, I tried to get payment by results, time and time again. Now it is the order of the day. The workers have given and will continue to give, but they expect the employers to treat them differently, and I expect it of them.
When I made my maiden speech here in this House of Lords, I predicted that the day was past when a body of men such as the employers in the shipbuilding and engineering industry would just turn a deaf ear and tell the negotiators who went to see them about getting an increase of their wages that there was no hope, and force the engineers to take such a drastic step as to stop work. Everyone knows that to stop work is a serious matter. But the individual who pays the awful price for a stoppage of work is the wife of the engineer, who has a family dependent upon what he can bring in—and it is down to its barest. So I do not know whether your Lordships would consider me in order or out of order if I were to make a plea here on behalf of the working shipbuilders of Britain, who are the finest shipbuilders in the world.
1160 You come and ask for a gratuity, or some amelioration of the tax imposition which is placed upon you. I am not saying that I am against you, because I want work for the shipbuilders. I know the difficulties. I know what the management of John Brown have told me, time and time again. I know all about prices going up three times. I know all of that, so I am not against you. But what concerns me is the very idea that circumstances are such that even you, the shipowners, who may have tens of thousands of pounds personally, are badly affected. In my maiden speech here I pointed out that the ruling classes in this country got the best of it; they are not in poverty, and neither are the shipowners. But there are shipbuilders who are always on the verge, always faced with what the merest breath of adversity may, in a moment, spell.
Now your Lordships can rest assured that so long as I am here, that is how I shall look on everything that is raised here. I analyse from this point of view of: how is this going to affect the worker? I am not ashamed to own that I am a worker, born and bred. And I want you to know that if you will exercise the power you have for the common weal—not just pay lip service to it but render it to the common weal—then I shall have no fear for what is going to happen in the future to Britain. I am opposed to the individuals who go about moaning about conditions which they say are going to pull us down as a nation. Great men right through the pages of British history have bemoaned the fate which they have thought to be impending for the nation. Even the great Duke of Wellington said he rejoiced that he was passing out before Britain came to disaster. They have been doing that all along. But I am perfectly sure that if this House were to use its influence and power as it could—and many whom I have talked to in this House in their quieter moments are anxious that it should take place—we need have no dread of the future. A noble Lord who sits on the Liberal Benches speaking the other night on television used a Scottish phraseWhere self the wavering balance shakes,its rarely right adjusted.I want the House of Lords to have some idea other than that simply of self. I 1161 want you really to be British in the interests of Britain. And now is the day and now is the hour for putting that spirit into operation. I want, if I may to finish on this note. As one who knows the workers, and who lives with the workers, I say to you that if you men play the game by the workers, the workers will play the game by Britain and by you.
§ 5.23 p.m.
§ LORD BURDEN
My Lords, I should not have ventured to say a few words in this debate but for the remarks of the noble Earl, Lord Bathurst, who made some appeal to those of us who have experience in the industrial movement. Much as we enjoyed his speech, I am not going to follow my noble friend Lord Kirkwood in his most interesting reminiscences, except to say this. I was brought up in the heart of dockland, and the first attempt I made to speak to an audience was in the school in which Cardinal Manning announced the end of the dock strike. I have talked with old dockers who were present on that occasion. They told me that the tears ran down their cheeks as he spoke. He appeared to be inspired, they said, as though angels of heaven were helping him. I have seen the dockers lift themselves up by their own efforts from slavery—and I use that word advisedly. I have seen the dockers in the early days, before that time, standing in rows and a foreman going along the row saying, "You and you and you," thus choosing men for two or three hours of work. And the selection depended largely on the relationship of the men concerned with the foreman. When in 1929–30, for a brief period, I was a member of the West Ham Board of Guardians, tough relieving officers told me that in South West Ham dockers were so treated by the appointed Guardians that when they were taken on for two hours of work they collapsed. They had not sufficient strength, owing to lack of food, to enable them to carry on; they had, in fact, no food in them. So when the noble Earl, Lord Bathurst, makes his appeal he should remember, too, that these people and their sons have very long memories. But I will not continue in that strain.
If I understood the noble Earl correctly, he said that he had seen works going on in repair yards in Germany, and that the cost of carrying out a contract 1162 there was somewhere about one-third less than the cost in our yards.
I said that in the particular case I mentioned the lowest tender from Germany was one-third lower than the lowest from our yards.
I think that it would be a profound mistake, and probably a misrepresentation of the noble Earl, to attribute that solely to wages or working conditions. That is the point which I wish to make. I could show the noble Earl a pile of letters from—to use a horrible term—stockists of steel plates. In one letter a fairly large firm of ship repairers are asking for steel plate for urgent ship repair work, and it is shown that the orders could not be fulfilled. In addition, as I am sure the noble Earl knows, anything from £2 to £3 a ton is added to the cost of steel plates passing through the hands of the middlemen. It is the lack of a steady flow of material, plus the increased cost of steel plates, passing as they do through the hands of middlemen, which substantially adds to the cost of production and repair work in some of our best yards. It is only because I thought it might be taken that the sole reason for the increase of the tender mentioned by the noble Earl lay in the cost of labour and materials, that I have ventured to put this point before your Lordships.
My Lords, I certainly did not mean to give the impression that wages were the only cause of this difference of one-third in the tenders from the English and the Continental yards. The noble Lord opposite has mentioned the middleman. I suppose exactly the same sort of situation obtains in Germany. I saw a German friend the other day with an enormous Mercedes-Benz motor car. He had everything he wanted. I suppose the same situation obtains there.
§ 5.30 p.m.
§ THE PAYMASTER GENERAL (THE EARL OF SELKIRK)
My Lords, one of the advantages of this House is that we do not rigidly keep to rules of procedure. Perhaps I may draw the House back to the subject of the debate, which, basically, is financial and which, if I may say so, would be more properly dealt with in another place. That does not mean for 1163 one moment that the Government do not welcome any statement by noble Lords who are well versed on this question and who speak with great authority. But what I must make clear is that noble Lords cannot expect from me to-night any statement of new policy.
Although the noble Lord, Lord Teynham, gave an excellent and short statement of the case, I think these debates are always rather gloomy. I do not know why they should be so gloomy because they deal with a subject of which we are certainly proud. If I may use a simile recently used by Mr. Churchill, from the time when Drake sailed in the "Golden Hind" to the time when the "Gothic" left Southampton, we have been dependent on our sea-going trade. It is not only a question of our pride in our ships and men. We have also a deep affection for all those who engage in the sea-faring trade, whether in the Merchant Fleet or in the Navy, and that is likely to continue very much in the same way in future. Our ability to pay our own way depends very much on the quality of our ships and of the men who man them. It is fair to say that they are the backbone of our trade in peace time, and the sustenance of our very life in war. This is particularly important when we are living in an island with probably a higher standard of life than any other country in the world, outside the North American Continent. The only way we are doing this is by our foreign earnings, and in these the shipping industry plays a very important part.
I do not think that the noble Lord, Lord Wilmot of Selmeston, can accuse anyone speaking for the Government of complacency. Certainly I do not think that what we have achieved in the last two years is the end of the problem. We claim that things are a little better than they were two years ago, but I think most speakers for the Government have emphasised the urgency of the present position if we are to maintain, let alone improve, the situation we are in. In spite of what the noble Viscount, Lord Runciman, has said, I think it is fair to say that our shipping tonnage to-day is as high as before the war, or even higher. I think the difference is a matter of whether you register certain ships owned in Canada or not; but in point of fact 1164 there is not a great deal of difference between the level of shipping to-day and that before the war. This is the more remarkable when we consider that two-thirds of our ships were lost during the war. To-day, we still command the largest active commercial fleet in the world. It is true that it does not form so high a percentage of the world fleet as in 1913, when we had 42 per cent. of commercial ships, or as in the pre-war period, when we had 26 per cent. of the world commercial fleet; but it is higher than it was in 1945, when we held only 19 per cent. Unlike some countries, we do not subsidise our Merchant Fleet at all.
It is only natural that our Merchant Fleet to-day is more modern than it was in the past, but I think it is proper to emphasise that, whereas in 1939 32 per cent. of the Fleet was less than ten years old, now 59 per cent. is less than ten years old. The noble Lords, Lord Runciman and Lord Winster, quite rightly, emphasised the fact that a great many of these ships were built during the war, and that perhaps they are not so readily adaptable as modern ships; that perhaps they were built rather more hurriedly, and that it may be that their lives will be short. I accept that. But the question of their replacement is not immediate, and we must accept that, too. Their replacement will not, in any case, fall due for the next five years, so it is not an absolutely immediate question. I should mention that the average speed of our Merchant Fleet has increased: 37 per cent. of the ships travel at 14½ knots, as opposed to 22 per cent. before the war. So I must take the position that our Fleet is not in a bad condition.
The noble Lord, Lord Teynham, did not so much emphasise the position as it is to-day as the position as it might be in the future. I should like to glance through the different types of vessels that we have. I know that there is some disagreement about the particular categories, but I do not think there is much disagreement with the general trend. The tonnage of passenger liners is down some 25 per cent., but this coincides with a fall in the world tonnage of passenger liners, and we have as large a share as we had before the war. Moreover—and this is the curious thing—to-day, with a smaller fleet, we are carrying more passengers 1165 than we did before the war. I am told that that particularly applies in the case of passenger vessels sailing from the United Kingdom outwards. In a way, this is the more remarkable, because we have also played our part in air expansion. I should like to stress that we are not favouring air transport as against sea transport, because to a great extent air transport is capturing new markets, and if we did not help air transport to some extent it would not be passenger shipping which would get the benefit but foreign air lines.
There has been an increase in the tonnage of dry cargo liners, although here again there may be some discrepancy in the figures. Whilst we are up 7 per cent., compared with pre-war, ships may be in operation rather longer than is normal because there has been a period of high demand for tonnage. However, the order book shows that liner owners are continuing to place orders, and any fall in replacement has been arrested this year. I thought that noble Lords somewhat underestimated the place of tankers and spoke as if they did not much matter. But our tanker fleet is 50 per cent. larger than pre-war; and it has been increasing, and seems likely to continue to increase, at a rate which the world oil traffic demands.
There is a question of the dry cargo tramp fleet, which has undoubtedly fallen since pre-war, and has fallen quite sharply between 1950 and 1952. Here again there may be statistical discrepancies, according to whether or not Canadian-owned tramps are added. But there is no doubt about the decline, and we welcome any opinion (although I am not sure whether we have had any clear opinion) on why that decline has taken place. I think them are more reasons than simply the financial one. There are shipowners who have invested their money elsewhere, notably in tramp tankers, which I believe are increasing in number. I am told that some shipowners have sold their ships at, I believe, high prices to foreigners—as the noble Viscount, Lord Runciman suggested—in order to get money for replacements. Some have gone in for more specialised ventures—indeed, I believe that more cargoes are being carried by cargo liners than by tramps. What I suggest is that there has possibly been over a longer period some decline in tramping as an 1166 instrument of merchant shipping. We find that in 1909 something of the order of two-thirds of the British Merchant Fleet were tramps whereas this position has progressively declined until now the proportion is something of the order of one-fifth. However, I suggest that we should not read too much into these figures as to why owners do or do not order tramps—it probably has a great deal to do with their view of what freight rates will be in future.
Perhaps I may for a moment refer to world figures, which throw some light on the matter. I should like to quote United Nations figures in regard to some of these facts. First of all, the total tonnage of cargo carried by sea has increased between 1937 and 1950 by about 10 per cent. This is more than accounted for by the tanker cargo, which has gone up by about 150 per cent. Dry cargo, however, has fallen 20 per cent. on world figures. That shows that our present concentration on tankers is generally in line with the trend of world cargoes. If I may turn to the British figures, they show that British imports have gone up between 1938 and 1952 from 55 million to 77 million tons. That increase, however, is again entirely due to tanker cargoes. The imports of dry cargo, on the other hand, have declined from 52 million to 47 million tons. These figures include reductions in grain, timber, and animal feeding-stuffs, but there are increases in iron ore. The weight of exports from the United Kingdom has decreased from 50 million to 33 million tons, but this has been caused by the reduction in coal and coke exports, whilst other dry cargoes have increased from 11 million to 15 million tons, and petroleum from one million to 5 million tons. The point I am making is the need to adapt our fleets from time to time as requirements of world trade change.
I should now like to turn to the question of shipbuilding. I think it is fair to say that shipbuilding yards have been continuously at work since the end of the war. I suggest that up to now any limitation in building has been almost entirely due to materials, rather than to finance. Moreover, at present I am given to understand that, for large ships, delivery is unlikely to be made until 1956, and for very large ships probably a good deal later than that. What I think has caused concern is the decline in orders 1167 placed for ships in recent times, and figures have been quoted. But I think it is fair to say that, if we go back a little further, we find that in 1949 the number of ships ordered was even smaller than those ordered this year. In other words, the high orders in 1951, which have been quoted, do to some extent average out over the whole period. Prices of ships have risen, and the length of time which it takes to obtain delivery must undoubtedly have an effect on the willingness of people to place orders at the present time. I feel that it is difficult to be quite sure of the reasons why anyone puts in orders for ships.
A good deal of emphasis has been laid on the question of the depreciation allowance, and I should like to say a few words about that. This system of what really amounts, I suppose, to calculating profit, goes back a long time—rather over a century—and first received statutory authority somewhere in, I believe, 1878. It has gradually been matured and qualified since then, and in 1907 it was laid down that the total amount of depreciation allowance must not exceed the actual cost. There have been alterations from time to time since that date. The point I should like to make is that there has not been any serious complaint about the operation of depreciation allowances until the end of the Second World War. We were then faced with a situation which in some cases seemed to be entirely new. There had been periods of sharp rises in prices before, but most of them had been short-lived. To-day, we have had steadily rising prices since 1945—in fact, probably rather earlier. The question was whether something entirely new should be initiated. As the noble Lord, Lord Salter, said, this goes to the heart of the subject. What the noble Lord, Lord Kirkwood, said has emphasised the extreme difficulty of keeping a balance in what is a very difficult matter, which is the task of the Government.
It has been rather suggested that this matter has been run over rough-shod. It has, however, been fully considered in the Tucker Report, which went into the subject exhaustively. I do not propose to deal with it in detail, but I should like to mention two small points which incline me to the view that this was not 1168 the best way to do it. For instance, the Tucker Committee asked: Why should you give preferential treatment to traders, as compared with other classes of taxpayers, such as those who invest in Government securities at fixed interest rates? Then they said: Why should you favour the established and stationary business at the expense of a new expanding one; because funds set aside for setting up a business of expansion will be outside the scope of the relief? What I want to emphasise is that these points have been carefully considered by that Committee, and they will be considered again now. There is then the point: if we do something about this, do we change the basis of all industry? I think the noble Lord, Lord Wilmot, seemed to indicate that he would be glad to see the basis of all industry changed; and I am not certain that the noble Lord, Lord Rochdale, also would not be glad to see that. I emphasise that only to show that this may be a fundamental operation, and it presents some basic difficulties at the present moment. It is being considered by the Royal Commission now sitting under the noble and learned Lord, Lord Radcliffe, and I understand that the General Council of British Shipping have given their evidence. There is nothing to stop the Commission from making an Interim Report should they consider it sufficiently urgent.
I should now like to mention one or two points referred to by the noble Viscount, Lord Runciman. He raised the question of the restriction of sales. The position there is quite simple, in this sense: we cannot at present completely release or give up the power of restricting sales. We have a duty towards the United Nations and to our Allies. We cannot allow to happen, what might otherwise happen—thatis, that ships should go to potential enemies. The other point, which I confess is more difficult, is the question of scrap. Quite frankly, we have not got scrap. We may bring our steel industries to a standstill, and one of the first to suffer from that will be the shipbuilders and, in turn, the shipowners. I am sure that the noble Viscount's remarks will be carefully considered. These are the sorts of considerations which the Government have to bear in mind. I thank him for what 1169 he said about this particular regulation being applied with understanding, because it is unusual for the word "understanding" to be applied to any Government Department. I should like to say that the average sales between 1927 and 1937 appear to have been about the same as the sales last year.
I think I have answered most of the questions which have been raised, but I should like to add this. Frankly, as we see it at the present time, the shipyards are full, and if it appears that at the present, at any rate, there are limitations, they have up till now been material rather than financial. Moreover, on the information which the Government have, it seems that the industry as a whole has sufficient reserves to finance its immediate programme. This does not, of course, rule out the fact that individual companies may be in a less satisfactory condition, nor does it mean that the industry has all the financial resources for replacement which it considers desirable. The facts available to the Government do not suggest that the immediate problem is one which justifies any radical alteration while the Royal Commission is sitting. No one, however, in face of the statements of responsible leaders in this important industry, can possibly regard this situation with complacency.
The Government have the greatest sympathy with the shipping industry and its anxieties about its ability to set aside adequate reserves for future replacement and to meet both lower earnings and more extensive competition. If we are to hold our own ground—and it is important that we should do so—it is fundamental, first, that we should have an expansion of world trade, and, secondly, that British shipping should have a fair field. Quite apart from the important question of capital resources, the Government will continue to do all in its power to maintain international trade at the highest level and to remove barriers upon the employment of our shipping on an equal footing with that of our competitors in international trade.
§ 5.53 p.m.
My Lords, I should like to congratulate the noble Lord, Lord Wilmot of Selmeston, on his excellent speech, and also thank him for 1170 supporting me in this debate. The difficulties of replacing worn-out assets apply to all industries, but I hope I made it clear that in shipping quite a different state of affairs is to be found. I was delighted to hear from the President of the National Union of Manufacturers, Lord Rochdale, that even he thought there was a special case for shipping. I was also delighted to hear the contribution from the noble Lord, Lord Kirkwood. I am afraid it is the first time that I have heard him speak, as I missed his maiden speech. I should like to tell him that I, too, have been an engineer and have served in the stokehold of a battleship, and I know something of the yards in the Glasgow area about which he spoke. I am sure the noble Lord would not like the engineers to destroy their livelihood by demanding wages which the industry could not pay. If that once happened we should find that the business would go to our competitors abroad. I am sure he would not like that to happen, and I am certain that we are together in that respect.
I must say that I was rather dissatisfied with the reply of Her Majesty's Government. Of course, figures can be made to show anything, and it is always difficult to know whether one set of figures is on a comparable basis with others. I cannot accept all the statements made by the noble Earl until I have had time to look at the figures a little more closely. I should like to make one point. The noble Earl said that the figures of new tonnage in 1949 were even lower than they are now. I think the reason for that was that the shipowners were hoping to see a halt in the rising prices and a return to the standard practice of quoting a fixed price, which they had been unable to obtain for various reasons. I certainly do not wish to press this Motion, but I hope that the Report of the Royal Commission will not be too long delayed, and that it will not be too late to save the shipyards from unemployment and our merchant shipping from any deterioration. I beg leave to withdraw the Motion.
§ Motion for Papers, by leave, withdrawn.
§ House adjourned at five minutes before six o'clock