§ 3.58 p.m.
§ The Minister of Aviation (Mr. Julian Amery)I beg to move,
That this House takes note of the Report from the Select Committee on Nationalised Industries, on the British Overseas Airways Corporation.The White Paper which I submitted to the House in November outlined the causes of the deficit from which B.O.A.C. had suffered and gave the background to the reconstruction which I then proposed. I think that there will be general agreement that the new Board has already shown no lack of vigour in the plans it has put forward.The Select Committee has given a very lucid account of the past years of B.O.A.C. and I would like, at the outset, to pay tribute to the work of the Committee. Broadly speaking, its Report confirms the views expressed in the White Paper, although there are certain points where the two documents are at variance. There are the issue of detailed financial control of B.O.A.C. and some points with regard to engineering and maintenance. I do not think that any final judgment will be possible until Sir Giles Guthrie's plan has not only been finally determined, but carried out. Meanwhile, I prefer to stand by the views I expressed in the White Paper.
The importance of the Select Committee's Report is the very trenchant discussion contained in it of two issues: first, the responsibilities of the Government and the Corporation in relation to one another; and, secondly, the relation- 492 ship that should exist between the Corporation and the aircraft industry.
The story of the VC10 illustrates these problems and throws a great deal of light on them. This is important to the whole future of the Corporation and is very much in our minds at the moment, after the Government decisions which I announced on Monday. I will have a good deal to say about the VC10 before I sit down, but, first, I will deal with some of the general considerations affecting the Government's relations with the Corporation.
The Select Committee was impressed by the uncertainty which it judged to prevail in the Corporation as to what its rôle and duties were, how far it was intended to operate as a commercial undertaking and how far it was a flag carrier and a body which had responsibilities to the aircraft industry.
It is true that there was no directive laid down for previous chairmen such as I have laid down for Sir Giles Guthrie. This was because, frankly, none was thought to be necessary. In his report in 1952 Sir Miles Thomas, commenting on the year 1951–52, made it clear that he regarded the Corporation as "essentially a commercial undertaking". Lord Douglas, in the long and brilliant years in which he guided B.E.A., plainly took the same view. Sir Gerad d'Erlanger's correspondence with Lord Watkinson stresses on many occasions the importance of not prejudicing B.O.A.C.'s commercial position in a highly competitive industry.
When asked—in, I think November, 1957—to take delivery of Britannias, which he regarded as not coming up to the standard required by the Corporation, he insisted on receiving written instructions from the Minister of Aviation of the day for doing so. All this suggests that he at least had the clear view that he was intended to operate the Corporation as a commercial undertaking—and when asked to depart from that standard he wished to have the facts recorded. The same thing happened in the case of Kuwait Airways, a matter which has often been raised in the House.
In 1961, a White Paper was published on the financial and economic obligations of the nationalised industries. This, too.
493 laid down the Government's view that they should be run by their managements on commercial lines. Certainly, in my experience and talks with Sir Matthew Slattery, I was never aware that he took any other view of the matter than this. Any Minister of Aviation must discuss his problems in the round with the leaders of the aircraft industry and the heads of the airlines. He does so because he needs their co-operation in many ways. I have done it myself and I am having a conference tomorrow with both.
Industrialists—the leaders of industry—are, of course, limited in the cooperation that they can give by their responsibilities to their shareholders. I accept at once that the head of a nationalised industry is, perhaps, more likely to find it easier to accept responsibility for decisions which he judges to be right in the national interest, even if they are not so directly connected with the interests of his Corporation. And here there is obviously the possibility that responsibilities may become blurred. It was because of this that I issued my directive to Sir Giles Guthrie when he assumed responsibility on 1st January. The Select Committee, as I understand its Report, endorsed this directive and the policy behind it. But I have noted, from some of the remarks made in this House, in another place, and in the Press, that the full sense of the policy has not always been fully understood. I will, therefore, comment on this issue.
§ Mr. John Diamond (Gloucester)Before the right hon. Gentleman leaves that point, will he make it absolutely clear whether what he has just said is completely right, namely, that this was a matter of voluntary policy on his part—or was he submitting to a request or demand by Sir Giles Guthrie, which would represent a very different attitude indeed?
§ Mr. AmeryI have not dealt with that point yet. I said that I gave a general directive to Sir Giles Guthrie, when he assumed office, laying down the lines on which I thought he should operate. I did not give the directive at his request, but in view of the uncertainty which there appeared to be in people's minds about the rôle of the Corporation. It appeared better to make it clear once and for all.
494 It will be recalled that in the debate in December hon. Members expressed uncertainty about the rôle of the Corporation. The Report of the Select Committee finds that there was some uncertainty. In view of this possible uncertainty I thought it prudent to write the letter which I did. It was not done at anybody's request, but because I thought it wise, in the prevailing uncertainty, to make the position quite clear
I want to explain the exact meaning of the directive, because, although the Select Committee showed a clear understanding of it, I am not sure that it has always been clearly understood. It has been suggested, for example, that there is a contradiction between my having asked Sir Giles Guthrie to operate the Corporation as a commercial undertaking and the Government then deciding not to accept his proposal on the cancellation of VC10s the other day.
The essence of the directive is that the Government have asked the Chairman of the Corporation and his fellow members of the Board—the members of the Corporation—to run B.O.A.C. as a commercial undertaking, with the aim of securing a return on its capital. The Corporation is owned by the public and the Government have a responsibility to see that due regard is paid to the public interest in the broadest sense. The important point is that there should be a clear distinction and division of responsibility between the Chairman and the Government. The Chairman's duty is to run the Corporation as a commercial undertaking and to make proposals to that end. The Government's duty is to make sure that the public interest, in the widest sense, is taken into account and it is for the Government to take responsibility if they decide to request the Corporation, for reasons of national policy, to take action which is at variance with the Corporation's commercial judgment.
What we want to avoid—and, perhaps, have not always sufficiently avoided in the past—is either that the Government should interfere in the commercial policy of the Corporation or that the Chairman of the Board of B.O.A.C. should try to determine where the national interest lies. A natural consequence of an attempt to define this sphere of responsibility is that where the Government asks the Corporation to do something different from that recommended on commercial grounds, the 495 Government's request should be recorded and, in appropriate cases, the Government should indemnify the Corporation for the consequences of carrying out those Government requests.
Slightly more difficult is the question of how all this should be presented in the accounts and elsewhere. Plainly, there will be cases where the aim of the Government's purposes would be defeated by premature publicity, but this is something which must be determined according to the circumstances of each case. I will try to apply this general theory.
§ Mr. Austen Albu (Edmonton)In view of the remarks which the right hon. Gentleman is now making, why is it that neither he nor his predecessor accepted the recommendation of the 1959 Select Committee, particularly since the same terms were asked for on that occasion?
§ Mr. AmeryI was saying that plainly the Government's advice or request must be recorded and that, where appropriate, there should be some indemnification of the Corporation. I also said that the question of publicity must depend on the circumstances of the case.
Perhaps I may be allowed to try to apply this rather general statement to the more particular aspect. Let us take, first, the route structure. Plainly, it is the Corporation's duty to determine what route structure is either profitable or potentially profitable. On the other hand, it is conceivable that the Government might wish to ask the Corporation to operate a particular route in the general interest of the promotion of British trade or of Commonwealth relations. If so, perhaps they should pay for the service. It is even possible that the Government might wish to cut out a route. If hon. Members opposite were, by any mischance, returned to power, they might wish, for ideological reasons, to stop B.E.A. running to Spain. If so, on the basis of what I have said, they would be expected to pay for doing so.
496 Then, take the question of the size of a fleet. The size of an air fleet must be a product of the route pattern, and not the other way round. I say that because I think that there is some evidence that hitherto B.O.A.C. has under-utilised its aircraft—if I may use that rather disagreeable verb.
More difficult is the question of the composition of a fleet, and I should like to say a word or two on that In my directive to Sir Giles Guthrie on 1st January, I wrote:
The choice of aircraft is a matter for the Corporation's judgment. It has been the aim of the Corporations to buy their aircraft as far as possible from British sources and I trust that this policy will continue. There may, of course, sometimes be occasions (as when Boeing 707s were purchased in 1956) where the choice of foreign aircraft is unavoidable.In the Government's view, the national interest calls for the maintenance of a strong aircraft industry, and it would plainly be contrary to this national interest if our national airlines were regularly to fly foreign aircraft when suitable British aircraft were available.To this extent, my directive is a limitation on B.O.A.C.'s freedom in that respect, but I think that it also carries with it certain clear advantages. The smaller airlines of the world will, naturally, find it to their advantage to buy the best aircraft they can at the cheapest price off the shelf when they need them. A great airline like B.O.A.C. will find, I think, that over the years its interest is best served by being first in the field with a new aircraft built by its own national industry. We saw the fruits of this in the years before the tragic Comet accident. We have seen it with the Viscount. Air France has seen it with the Caravelle.
Of course, this element in the letter I wrote to Sir Giles Guthrie posed a serious problem both for B.O.A.C. and B.E.A. If they are to be first in the field with new aircraft they will be saddled with substantial introductory and proving costs. They may have to place a substantial initial order, because British industry is not likely to embark on a new development unless the initial order is substantial. Instead of buying extra aircraft as the need arises, they may find themselves having to order more than they would wish in advance, and find themselves in a less flexible position than 497 they would wish as the ups and downs of air traffic confront them.
The industry, too, faces a problem here. The Coporations are its main market, and the requirements of the Corporations are not always what the export market wants. This is a problem I face regularly with our weapon systems; it applies to the commercial side as well. Under the 1960 policy as laid down by my right hon. Friend the present Secretary of State for Commonwealth Relations, the Government help the industry with the launching costs of transport aircraft. Successive Select Committees since 1959 have also urged that we should help airlines with introductory and proving costs, and I think that there is much to be said for this.
Turning, now, to the VC10—
§ Mr. William Shepherd (Cheadle)Is my right hon. Friend convinced that the policy of building national aircraft to the requirement of a national airline is really practicable in 1964? Have we not to look to some form of international cooperation in construction to get away from this difficulty?
§ Mr. AmeryI intend to deal with that point later, so perhaps my hon. Friend will not mind waiting till then.
Let me turn, now, to the VC10. In 1956, it became plain that B.O.A.C. would need to fly jet aircraft on the Atlantic route if it was to maintain its competitive position at all. It had miscalculated, and it was not alone in this, on both the Britannia and the V1000. It asked the Government for authority to buy 17 Boeing 707s for the Atlantic route. Lord Watkinson, then the Minister responsible, agreed that the Corporation should have 15 of these aircraft, and it was later allowed to buy another three. I have no doubt at all that Lord Watkinson's decision was right—there was no suitable British aircraft available at the time—but he also told the Corporation that if it needed any further long-range jets it must look to British industry for them.
The Corporation then entered into negotiations with the different firms—and there were many more in those days in the industry—but only Vickers was prepared to develop a long-range jet aircraft on a private venture basis. The VC10 was accordingly designed to 498 B.O.A.C.'s specification. It is fair to say that B.O.A.C. was very impressed at this time by the need for short takeoff and landing performance. It had, as it thought, covered its Atlantic requirement by a buy of Boeings, and it was thinking of its southern and eastern routes. It believed that, with the runway conditions of those days, the Boeing 707 would not be suitable for these. It therefore asked Vickers to design an aircraft of relatively short take-off and landing capability.
As we know, this proved, in the event, to be to some extent a miscalculation; runways all over the world were lengthened, to some extent with United States Government aid. However, the VC10 still has an advantage in that there are airports like Nairobi, Kuala Lumpur and Colombo where it can land and the Boeing 707 cannot. Nevertheless, the requirement to do this has involved some increase in weight, and some marginal increase in running costs. It is only fair to Vickers to say that if the aircraft is in some respects marginally more expensive to operate, that is partly due to the specification to which B.O.A.C. asked Vickers to design it.
Were the Government right to tell B.O.A.C. that beyond 15 Boeings it must turn to the British industry? I have no doubt that the answer must be "Yes". On balance of payments grounds alone, £100 million was then—and still is today—a very large sum. Moreover, Vickers' decision to develop this aircraft on its own initiative deserved encouragement and support.
I come now to the question of the numbers of aircraft ordered. Some of the evidence given to the Select Committee suggests that the Government put pressure on B.O.A.C. to buy more aircraft than it needed. Quite frankly, I can find no evidence of this; indeed, the evidence I have found rather points the other way. In 1960, my right hon. Friend the present Commonwealth Secretary was engaged on the rationalisation of the aircraft industry—merging it into groups—and the VC10 order was crucial to the formation of the British Aircraft Corporation. Nevertheless, when, in that year, the Corporation asked my right hon. Friend for permission to buy 10 more VC10s, he questioned the need, 499 and did not agree to it until he had been reassured by the Corporation that it was commercially appropriate. He made it clear in writing that, while the new order in his view would be helpful to the industry, he was not asking B.O.A.C. to place it.
A year later, when B.O.A.C. sought to increase its capacity still further, the Government actually made it cut back the extent of its order and incur cancellation charges on three aircraft because the Government were not prepared to raise the financial ceiling. I have no doubt that Vickers insisted upon a substantial order, and I have no doubt either—and the Select Committee bears me out—that B.O.A.C. in those days was very optimistic about the prospects. Sir Matthew Slattery told the Committee that B.O.A.C. foresaw the need for 30 to 35 aircraft on Eastern and Southern routes alone.
Evidence has been given to the Committee which suggests that the Corporation was forced to choose between buying too many aircraft or none at all. I can find no evidence that this dilemma was ever put to the Ministry. If it existed at all it surely must have been the first duty of the chairman of the Corporation to go to the Minister of Aviation of the day and explain the problem and ask for help in the underwriting of aircraft for which he could not see the need at that stage. There is no record or evidence of anything of the kind. It is my belief that no serious doubts about the number of aircraft ordered were entertained by the Corporation and there was no strong preference in the Corporation's mind for Boeing 707s against the VC10s until long after the relevant decisions had been taken.
§ Mr. John Cronin (Loughborough)This is a serious matter which we ought to clear up. Is not it the case beyond doubt, as shown in the Select Committee's evidence, that Sir Matthew Slatterly and Sir Basil Smallpeice, both reputable people, said that extra VC10s were ordered under pressure from the Government? Is the right hon. Gentleman saying that those statements were untrue?
§ Mr. AmeryI have been saying what I thought the truth was. I have found no evidence whatsoever of Government pressure in this matter, and I have indicated to the House evidence which seems to me to prove conclusively that my right hon. Friend the Minister of Aviation of the day, the present Secretary of State for Commonwealth Relations, declined to approve the buying of an extra 10 in 1960 until he had been assured that there was a commercial need for them. He said in writing that whilst this would no doubt be helpful to the industry he was not asking for it, and a year later the Government cut back the proposal by B.O.A.C. for increased capacity and made it cancel three aircraft against the Corporation's wishes.
§ Mr. Eric Lubbock (Orpington)Would the right hon. Gentleman remind the House that the Chairman about whom he was speaking was not Sir Matthew Slattery? Sir Matthew wrote to his predecessor before he took office imploring him not to place the order for these additional aircraft.
§ Mr. AmeryI have been talking about matters in 1960 which concerned Sir Gerard d'Erlanger's time. I am sure that matters in 1961 come into Sir Matthew Slattery's period. In the spring of 1963, in his advice to me, Sir Matthew proposed to cancel—
§ Mr. Roy Jenkins (Birmingham, Stechford)Before the right hon. Gentleman moves on to 1963, may I ask whether it was not the case in November, 1959, that the board of B.O.A.C. considered the desirability or not of taking up 10 of this option of 20 and decided that it should enter into no commitment until the last possible date, August, 1962, and within two months of this happening, as a result, so it was said in evidence, of a combination of pressure not in writing but direct pressure from the Minister in association with the project for forming B.A.C., and the fact that Vickers said that unless an additional order was made it could not make the original 35, the B.O.A.C. Board completely turned round?
§ Mr. AmeryNo, Sir. This is what I am dissenting from. I have seen today—and I have been looking through the files—records of a meeting where the Minister 501 of Aviation of the day asked the Chairman of B.O.A.C., Sir Gerard d'Erlanger point blank—I cannot carry the exact words in my head, but the implication was—"Are you convinced that there is a commercial need for these? Are you sure that you can use these extra aircraft?". He was assured that they would be used and would be commercially desirable. Equally, there is a letter from the then Minister saying in effect, "Whilst this order would be helpful to the industry I want to make it clear that I am not asking you to place it." I should have thought that this was conclusive evidence.
§ Mr. George Wigg (Dudley)On a point of order. As the right hon. Gentleman has quoted a document and letters—
§ Sir Harry Legge-Bourke (Isle of Ely)Not quoted.
§ Sir H. Legge-BourkeNot quoted.
§ Mr. Deputy-Speaker (Sir William Anstruther-Gray)Order. I am paying attention and I want to hear the hon. Member for Dudley (Mr. Wigg).
§ Mr. WiggAs the right hon. Gentleman has quoted documents and papers, will you order that those shall be laid on the Table?
§ Mr. Deputy-SpeakerMy impression was that the right hon. Gentleman was giving a summary of documents and papers and not quoting verbatim.
§ Mr. AmeryI think I said that I could not quote the words and that I was giving the sense of them.
In the spring of 1963, Sir Matthew Slattery proposed to me that the Corporation should cancel 13 Super VC10s. I was very reluctant to agree to this proposal and, on my initiative, a meeting was held between B.O.A.C, the British Aircraft Corporation and the Ministry of Aviation. I think that we had two meetings. As a result, B.O.A.C. asked B.A.C. to suspend work on the last 10 VC10s without prejudice to the contractual position. In subsequent months the views of B.O.A.C. about the number of aircraft which it would need varied 502 more than once and I was very glad that I had avoided the cancellation at that stage.
On 1st January, 1964, Sir Giles Guthrie took over the chairmanship and I asked him to prepare a plan. He began with a routes plan, and I am sure that the Select Committee's Report is right in commending his decision to look first of all at the routes. He proposed to maintain substantially all the B.O.A.C. routes, except for some possible changes on the South American side and possible plans to extend the route pattern over the Soviet Union and across the Pacific. He planned also to maintain most of the frequencies previously flown.
But Sir Giles Guthrie is convinced that this can be done with 23 fewer aircraft than B.O.A.C. had planned for 1967, and he believes that this can be achieved by higher utilisation of aircraft. He supplied me with convincing evidence of serious under-utilisation in the past, and I see no reason to challenge his judgment.
If Sir Giles is proved right, then serious miscalculations were made in the past. I am not inclined to be too critical of this—aircraft corporations are still in the early stage of their evolution—but I want to make it clear that the decision of B.O.A.C. on the VC10s was the Corporation's decision. It was taken on commercial grounds and I can find no evidence that the Government were responsible for it.
After his study of the routes. Sir Giles Guthrie turned to the composition of the fleet. He proposed to cancel 30 Super VC10s, to keep 20 Boeing 707s which he already had and to buy first of all six and later another eight new Boeing 707s. The main reason was that the 20 Boeing 707s which he had in service were already largely depreciated in the B.O.A.C. account and they were therefore considerably more profitable to operate than new Super VC10s would have been.
Given his desire to keep the 20 Boeing 707s, he went on to advise that the logical next step would be to buy new Boeing 707s as and when he needed them. I think that certain other considerations were in his mind at the same time. B.O.A.C. had built up a considerable expertise in the operation of Boeings. Many of the Corporation's pool partners operated them, so that spares could be 503 interchanged to some extent, and it is easier, in the sense of quicker, to obtain new Boeings than it might be at some undisclosed date to get VC10s. All these are valid commercial considerations which I do not dispute. There is no question whatever of the VC10 being in any way technically inferior to the Boeing 707. Indeed, in many ways it is superior. It has a higher speed and a lower landing speed, which is a vital factor in safety. Its take-off and landing is shorter. Its cabin quietness is remarkable, as anyone who has flown in it will testify The standard VC10s are already winning golden opinions from passengers and pilots.
In its early period of operation with B.O.A.C. the average utilisation time of the standard VC10 has been, so I am advised, about 8 hours a day, which is very high for an aircraft in its introductory period. It is interesting to note that during its introductory period of service with B.O.A.C, the VC10 has lost only about half the time through maintenance trouble that was lost by the Boeing 707, and this despite the fact that the Boeing, when B.O.A.C. first took it on, had already been proved in service with Pan American.
Let me also tell the House of a tribute from a distinguished visitor from the Middle East where, after all, the magic carpet was first conceived. He told me that he had prolonged his visit to London so as to be able to fly back in a VC10.
The aircraft, in fact, has very great possibilities of development with regard to both its carrying capacity and its range. It is true that the Super VC10s are substantially more expensive than the Boeings now in service with B.O.A.C. The Boeing, with spares, originally cost £2¾ million to buy, and the Super VC10 cost something like £3½ million. But the new Boeings would cost, including Import Duty, about the same as the Super VC10, so that the economic penalty is not an important factor in this respect.
In our view, it is not right to ask the Corporation to sell off its old Boeings which are profitable and are bringing in profits at this time. But Sir Giles Guthrie's plan involved buying new Boeings and the Government felt that they could not agree that B.O.A.C. should cancel the Super VC10s in order 504 to buy new Boeings. B.O.A.C. might have gained some advantages from having a more uniform fleet, and possibly some marginal saving in running costs. But there would have been a very serious industrial consequence, and a serious and perhaps mortal blow would have been struck at the prospects of what we regard as a very fine aircraft. Our claim is that the VC10 is a wholly suitable aircraft and that, in accordance with the directive which I gave to Sir Giles Guthrie, we think it right that where suitable aircraft are available, and particularly where an order has already been placed, the Corporation should maintain that order.
§ Mr. John Rankin (Glasgow, Govan)Before the right hon. Gentleman leaves the characteristics of the VC10—and I am making no criticism; I believe in the machine—may I remind him that there has been some criticism of fuel costs? Would the right hon. Gentleman say a word about that?
§ Mr. AmeryYes. As I explained earlier, B.O.A.C.'s request for a relatively short take-off and landing performance has put up the weight of the aircraft and this, I think, involves marginally increased fuel costs. I have been surprised, in the analysis that I have had made of these things, to find how marginal these are; but there is a penalty there.
§ Mr. WiggBefore the right hon. Gentleman leaves the question of cost, would he be good enough to give the number of aircraft on which his assessment of the cost is based? Obviously, if 10 aircraft are subsequently cancelled, the cost will be very much higher than the figure that he has quoted. Surely, in all honesty, he ought not to come here and quote a selling figure when the spread-over is over a much higher number than he knows will ultimately be ordered.
§ Mr. AmeryI am sure the hon. Gentleman will give us credit for having examined all the permutations. Naturally, I have been considering the most extreme cases of operating either a wholly Boeing or a wholly VC10 fleet, which is the fairest comparison. I have also had regard to the consequences of a mixed fleet. My statement is based on the more extreme position if we have all Boeings or all VC10s. It is the 505 fairest possible basis on which comparison could be made when thinking in terms of fleets of either 39 or 47 aircraft.
§ Mr. R. J. Maxwell-Hyslop (Tiverton)Is it not a fact that as well as specifying the take-off performance, B.O.A.C. specified that it must be in conjunction with non-stop operations between Singapore and Karachi and between Nairobi and London? Whereas it could have achieved full take-off performance by leaving off some fuel, this was not open to Vickers because of the long range specified in association with the short take-off?
§ Dr. Jeremy Bray (Middlesbrough, West)Why is the right hon. Gentleman glad to hear it?
§ Mr. AmeryI am sure that my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) has a great and intimate acquaintance with the aircraft industry, and there may be some points which should be in my mind and are not. Therefore, I am very glad to be corrected and to be given extra and advantageous advice in support of the thesis that I am making
Sir Giles Guthrie appreciates the force of the considerations that I have outlined. We have asked him to take 17 Super VC10s and he has agreed to do so. Seventeen is, in fact, two more than his plans require on paper, and it may be that at the time of their introduction into service he would have to sell off two Boeing 707s, but this is all some time ahead. The Corporation in the short-term need seven Super VC10s and will introduce and prove them. Precisely when they introduce the balance of 10 is a matter for them. Their present plans certainly involve some readjustment of the earlier dates of entry into service, and B.O.A.C. and B.A.C. with the help of my Department will consult to see how best to deal with any of the aircraft in the interval between production and entry into service.
The Royal Air Force will take three Super VC10s in addition to 11 standard VC10s and these three will be to some extent modified to meet military require- 506 ments. All 20 Super VC10s now under construction will thus go forward according to plan.
§ Mr. Frederick Mulley (Sheffield, Park)Would the right hon. Gentleman say a little more about the R.A.F. requirements? Little has been said about this. Only a short time ago the right hon. Gentleman the Secretary of State for Defence said that not only did he think that there was adequate provision for Transport Command, but that it was very expensive and he could not contemplate any further expense of this sort. How is it that in the last three weeks the whole situation has changed and the Government are recommending a further three?
§ Mr. AmeryI see the force of the hon. Gentleman's intervention. He will not be surprised to know that the Royal Air Force has already included provision in its forward costing for another three aircraft which it has for some time regarded as necessary.
I turn now to the last 10 Super VC10s on order. Work on these has been suspended for over a year, but the contract stands. I mean by this that if there were ultimately to be cancellations there would have to be payment of cancellation charges. I should like to pay tribute to Vickers and B.A.C. for the forbearance with which they have accommodated B.O.A.C. on this point and on being able to hold the work in suspense. I am advised that this is not likely to lead to any redundancy problems. Airline forecasts change very rapidly and the Government hope that these last 10 will not need to be cancelled. How long they can be kept in suspense is a matter for B.O.A.C. and B.A.C. to work out together. I am advised that technically it might be possible to keep work in suspense for a year or so without interruption to the production line, but there may be other factors to be considered, and this is a matter for the two Corporations, B.A.C. and B.O.A.C, to discuss together.
§ Sir Arthur Vere Harvey (Macclesfield)Will my right hon. Friend tell the House in rather more detail about the deliveries of the first 17 which the Corporation has agreed to take? It seems that five will be delivered next 507 year, two in 1966, and the remaining ten in 1968 and 1969. How can any company possibly have a continuous production line with deliveries phased like that? It does not begin to add up. Can we be given more information, if not now, then in the winding-up speech?
§ Mr. AmeryI have tried to say something about this. The Corporation will take seven in the short term, whether all next year, or most next year and some the year after is a matter for the Corporation, and precisely when it introduces the balance is again a matter for the Corporation. Obviously, the Corporation's present plans involve some readjustment of the earlier dates for entry into service, though not necessarily in the production programme.
B.O.A.C, B.A.C. and my Department will consult to see how best to deal with any aircraft in the interval between their production and their entry into service. We do not have any firm plans on this yet, but I have no doubt that ways and means can be found either of holding or of using the aircraft in the interval between the time they are produced and the time when the Corporation is ready to introduce them into service. The length of suspension is a matter for B.O.A.C. and B.A.C. to discuss together, although technically it can be a year or more.
In our view, it would be a very great mistake to cancel these aircraft unless and until it became quite clear that they were surplus to requirements and likely to remain so. This will not be clear until some time to come. It is our hope that with their present specification, or with some future development, they may still fly in the B.O.A.C. fleet.
§ Mr. R. T. Paget (Northampton)The three aircraft which are suddenly being given to the R.A.F. are, of course, required by the R.A.F. as transporters for the Army. Can the right hon. Gentleman say whether the Army has been consulted about whether these aircraft are in the least suitable for Army requirements, particularly the carrying of heavy equipment?
§ Mr. AmeryUnder our Administration the Service Departments have always 508 consulted closely, and now that they are under one roof they consult even more closely.
After my statement on Monday, I was asked the cost of all this. My right hon. Friend the Chancellor of the Exchequer will direct his remarks to that aspect when he winds up the debate this evening. But I can say at this stage that the 1962 Act earmarked the necessary funds for the full buy of VC10s, so that the postponement of work on the last ten can have the effect only of postponing expenditure. When we have Sir Giles Guthrie's plan, we shall bring forward proposals for the capital reconstruction of the Corporation and this, as I have assured Sir Giles, will have regard to any excess capital or running costs of operating VC10s instead of Boeing 707s.
§ Mr. LubbockDoes not the delay in the delivery of the last VC10s mean that the Corporation will have to make some progress payments to B.A.C?
§ Mr. AmeryB.O.A.C. and B.A.C. are in touch with each other about all this. The other night I brought together Sir Charles Dunphie, Sir George Edwards and Sir Giles Guthrie. They discussed the general character of the plan and agreed to carry on talks about its implementation. I thought that I had made that clear in my statement on Monday.
The essence of the problem which the Report of the Select Committee brings out is that the British aircraft industry must regard British airlines, whether nationalised or independent, as their main and initial market, but the British airlines by themselves are not big enough to place the large contracts which would allow long production runs on the American scale with their associated economy. There is, therefore, a certain commercial advantage to British airlines in buying the cheapest aircraft off the shelf where they can get them. This certainly involves less rigidity in planning and greater flexibility, but we would be very wrong to ignore the danger of encouraging any such policy.
At present, British industry faces a major competitive offensive from across the Atlantic, notably in shipping, aircraft, airlines, weapon systems, computers, nuclear reactors and in many other respects. Unless we take steps to meet this challenge, we could find ourselves 509 literally driven out of all these sectors of advanced technology.
How then should we solve the problem? One possible course would be to specialise and to concentrate on the development of aircraft of a particular type. But this would mean contracting out of another important sector. This, perhaps, is the policy of retreat. The alternative is to join forces with our friends in Europe, pooling our resources and enlarging the market. This is what we have done with the Concord. Here we have divided the investment and doubled the home market. With the E.L.D.O. launcher, five or six of us have joined together. I am inclined to think that this may well be the pattern of the future. As it happens, I am holding a conference tomorrow of the heads of the aircraft industry and of the airlines. One of our first tasks will be to consider these things. In all this we will weigh very carefully the advice of the House this afternoon.
§ 4.46 p.m.
§ Mr. Frederick Lee (Newton)I beg to move, at the end of the Question to add:
but regrets that the policies of Her Majesty's Government have contributed largely to the difficulties now confronting the British Overseas Airways Corporation and the British aircraft industry".The right hon. Gentleman did not speak very long to the Motion. Indeed, he did not closely examine the contents of the Report itself; and I am not sure that I blame him for doing that. He concentrated, perhaps inevitably, on his statement and what has flowed from it and merely touched on one or two of the issues raised in the Report as he went along.I have always regretted that during the last year or two we have never had a proper opportunity constructively to consider the aircraft industry and the Airways Corporations, largely because the right hon. Gentleman will insist on getting himself into all sorts of trouble, so that every time we have a debate it has to be about either a scandal or a tragedy.
I agree with him that, quite apart from the issues of the VC10, the British aircraft industry is facing serious trouble. He mentioned the problems of the huge power of the United States. He does not help us much by going to the United 510 States for our defence at a time when the British aircraft industry could very well do with orders for weapons of the type which he proposes to get from the United States.
I do not dissociate myself from the right hon. Gentleman's concluding remarks when he says that we are confronted with vital problems—the narrowness of our market, the effect of ordering by the Corporations and the needs ' of the aircraft companies for big home orders and the specifications of the Corporations which may well make aircraft unattractive to overseas buyers.
It is one of the remarkable things of this present controversy that the Boeing, which figures so largely in our deliberations, was not made with any B.O.A.C. contract in mind, whereas the VC10, which was made to the Corporation's specifications, does not now appear to be quite so attractive to B.O.A.C. as it did. On the other hand, the Viscount, which was once turned down by B.E.A., became our greatest success in the export market.
I wonder whether we can expect a little more co-operation between the Government, the airlines, and the aircraft manufacturers, to ensure that the airlines do not ask for unreasonable specifications which count us out of world markets. The point that I tried to make about the Boeing itself, as distinct from the VC10, at any rate gives us the assurance that planes are being made which are not necessarily to the specification laid down by the Corporations, but which are then great successes, and I mention the Viscount in the opposite respect.
The outstanding feature brought to light in the Report is the complete muddle between the Government and the two arms of the aircraft and aviation industries. I think that it is essential to our success to bring about a greater degree of partnership between all three. This must be done if we are to overcome the problems which face us all.
As we go through the mass of evidence of events from the time of the failure of the first Comet and relate it to the issues covered in this Report and the decisions taken by the Government since its publication, it becomes clear that it is impossible for the House to deal with all this in a single debate. As we saw the full extent of the tragedy of B.O.A.C. unfold 511 —some of us were watching the position and hoping that that this tragedy would not occur, but fearing that it would—we felt that the Minister was becoming more and more desperate in his attempts to prove that Ministers, past and present, were and are in every way blameless for it.
It was that attitude which led the right hon. Gentleman, in his White Paper on the B.O.A.C., to make grave accusations of weakness in financial control against those in charge of the airline at the time when the White Paper was written. The Report makes nonsense of the claims of ministerial purity and gross incompetence by the then management. Indeed, on reading through the Report, as I have done a dozen times, one realises that the one man who can accept it wholeheartedly is Sir Matthew Slattery. We are asked to take note of the Report. Why did not the Minister ask us to accept it?
The right hon. Gentleman paid a tribute, as I do, to the zeal and manner in which those hon. Members who formed the Committee carried out their investigations. I think that they did a great national service in bringing to the notice of the public issues which are peculiar to our aircraft and aviation industries. These issues are now common knowledge among people, but this could not possibly have happened if our colleagues on this Committee had not done their work in such an exemplary manner. I congratulate them on their work.
The Report deals minutely and sympathetically with the problems which confront both management and the Government in attempting to strike a balance between the interests of the aircraft manufacturing industry and the B.O.A.C, and the Committee's findings are valuable to all those who wish to see healthy, prosperous, industries in both those sections.
Looking at the issues of the day which now face us, I believe that this problem of our exports, to which the Minister referred, may well determine the size of our industry and whether it can sustain itself against the bitter competition which it is now facing. With the exception of the BAC111, I know of no other project which has big export possibilities. This aircraft was produced, not to the specification of the Corpora- 512 tions, but with export possibilities very much in mind.
I hope that from now on, instead of relying too heavily on the home market, narrow as it is, the aircraft industry will reach out more for overseas markets, and that wherever possible the Government will do everything in their power to assist them. To ensure that that is done, we cannot leave this trinity in its present state. We must ensure that there is a much closer relationship between them.
Dealing with the Report itself, I turn to the point made in it about the Minister's refusal to let the Select Committee see a copy of the Corbett Report. The House may remember than when the Minister announced the setting up of the Corbett Inquiry we did not object to the inquiry as such, but we argued that there was a relationship between the problems of the B.O.A.C. and of the aircraft industry which necessitated an inquiry into both organisations. In view of the situation revealed in the Minister's statement the other day, I think that it would have been a good thing if we had begun from that angle.
The Report shows that the Select Committee was hampered by not being able to see the whole of the Corbett Report. The Committee asked to see it on a confidential basis, and we know that documents or statements produced or made on such terms are not included in the published reports of our Committees. At a later date the Committee learned that certain sections of the Report—in my opinion, quite rightly—had been made available to the heads of Departments within the B.O.A.C. The Committee therefore asked that those sections should be made available to its members, but again the request was refused, on the ground that that would constitute a breach of the undertaking given to Mr. Corbett and others. I submit that it is a serious matter when the work of Parliament is hampered in this way, and I should like to feel that if the House were not in its death throes we would pursue this matter further.
The Report points out that the Committee has power to send for persons, papers, and records, but this is meaningless unless it has the power to demand from Ministers papers which are essential to its deliberations. I exclude, of 513 course, documents and evidence related to matters of security and defence. I submit that to refuse to produce documents in this type of case is an insult to the members of the Committee, quite apart from the fact that it prevents the House from reaping the full benefit of the Committee's work.
Mr. Corbett was engaged in his professional capacity. He did his job in that capacity, just as hundreds of others do in the service of the Government. If he did not wish to undertake the task unless given the assurance that his Report would be kept secret, the Minister should have asked someone else to conduct the inquiry. Surely Mr. Corbett does not have a monopoly in his profession? I have never been certain that Mr. Corbett asked for this secrecy to be maintained, and I therefore ask the straight question: did Mr. Corbett stipulate secrecy, or did the Minister impose this condition, and if so, why?
§ Mr. DiamondMy hon. Friend can take it from me that there is no chartered accountant who would not regard it as an insult to his professional capacity and integrity if it were suggested that his report would be one thing if made public, and another thing if kept secret.
§ Mr. LeeMy hon. Friend is an accountant, and I am glad to hear him say that.
The matter is all the more serious because recently we had the case of Mr. Ferranti who refused to produce certain accounts which were important to the work of another Select Committee. He was then persuaded to show those accounts to the Lang Committee, whose findings we still await. Can the Minister say whether he has received those findings, and whether we are likely to be told them during the course of the next few days? That Committee has no standing whatever in this House. Certainly it has no comparison with a Select Committee appointed by the House. It is very difficult to understand why Mr. Ferranti could be persuaded to reveal these accounts to a committee which has no standing here while nobody could persuade him to reveal them to the Select Committee. It would seem to me that while most of us are agreed that there is a need 514 for more committees of the House with wider powers than the existing ones, the Minister seems to be doing his best to emasculate and frustrate the work of those that we have.
I agree that a summary of certain criticisms in the Corbett Report were afterwards shown to the Committee without the context in which they were made. The Report observes that from what it was shown the Committee was not satisfied that some of the criticisms were justified. It may well be that the Minister felt a little apprehensive on that point himself, more particularly as he based his own criticisms in the White Paper on the Corbett Report.
In Chapter IX of the Committee's Report, we see that it deals exclusively with financial control. It examines the methods used by B.O.A.C. and compares them with the suggestions of the consultant as to the methods by which it carried out its investigations. The Committee first looked at the day-to-day financial administration. I do not want to go through the details, which hon. Members will have read. The Committee in its conclusions to this section of Chapter IX, paragraph 248, says:
Subject to these reservations "—that is the provision of a running balance sheet—the replies made by witnesses from B.O.A.C. to the comments made by the consultants on the administrative efficiency of the Financial Controller's department seem genuinely convincing to Your Committee. They are fortified in this view by the opinion of the Ministry's witnesses".Later, it says:In general however, the Ministry's criticism was of the Corporation's general financial direction; they agreed that no specific instances of a failure in B.O.A.C's organisation for controlling finance had been given by the consultants.So much for day-to-day administration.In its conclusions on control of capital expenditure and general financial control by the Board, the Committee made clear that it considers the Minister's criticism of B.O.A.C's annual forecast had been too harsh, but the criticism of financial weakness in control of associated companies related chiefly to the periods 1956 to 1960 and by 1963–64 the B.O.A.C. was making a surplus on the operations of the associated companies.
515 The Committee goes on to say that in the engineering and maintenance departments, the B.O.A.C.
had undoubtedly made substantial progress in reducing their costs which were now much closer to the costs of other long-haul airlines".and other savings are being made.The conclusions reached in paragraphs 266–7 are so vital to the judgment which the House has to form of the accusations made by the Minister in his White Paper that I should like to quote them from the Report. It says in paragraph 266:
In all these fields, in fact, explanations have been given for B.O.A.C's performance which are different from and independent of the criticism made both by Mr. Corbett and the Ministry of weakness in financial directions. Moreover, on the evidence set out in this chapter, Your Committee conclude that, subject to the few exceptions which have been mentioned, the internal efficiency of B.O.A.C's financial administration has stood up to the criticism made of it.In paragraph 267, we read the same thing:The Ministry concede that there have been improvements in the financial direction of the Corporation. They recognise signs of better financial direction in more conservative estimates of revenue and a stronger drive for economies; and they note that this effort is being made in the associated and subsidiary companies as well as in the Corporation. ' All the advice I have had', said the Permanent Secretary (in January, 1964) 'is that the Corporation during the last year has improved in the sphere of finance'.It rounds off with the paragraph:Your Committee note, however, that these qualifications were not made by the Minister in the White Paper of B.O.A.C's financial problems.
§ Mr. AmeryI want to make two brief points. I have no doubt at all from my own experience and relations with the Corporation that the appointment of Mr. Charles Hardie, a very distinguished accountant, to the Board has already had a very beneficial effect on the financial control of the Corporation. Where engineering and maintenance is concerned, the hon. Gentleman will note that the Select Committee makes an interesting recommendation about the appointment of more senior technical directors.
§ Mr. AlbuOf course, the appointment of Mr. Hardie took place after the matters to which this Report refers.
§ Mr. LeeMr. Hardie had not begun to officiate at the time when the White 516 Paper took its recommendations from the Corbett Report. Therefore, Mr. Hardie's appointment did not improve the financial standing of B.O.A.C. This had happened before Mr. Hardie began to officiate.
§ Mr. LeeThat does not answer the point I am making. The point I am making is from the Committee's Report. The Permanent Secretary himself pointed out the improvement that had been made in the past twelve months, that is, the twelve months prior to the Report being written, and it comments that this did not appear in the Minister's statement in the White Paper. I was going to go on to compare the statements made in the Report with those in the White Paper.
§ Sir John Eden (Bournemouth, West)Would the hon. Gentleman read the top sentence in paragraph 268? He read out the whole of paragraphs 266 and 267, but paragraph 268 says:
Your Committee believe, however, that in one crucial respect financial direction has been defective: the Corporation have not in the past been giving their undivided attention to their strict commercial and financial advantage
§ Mr. LeeI think this is important, and I do not dissent from it in the least. This point now comes to the failure of a directive by the Government as to what is the true purpose of the Corporation's work. It is a wider issue than either the hon. Gentleman or I have yet mentioned. It is in the White Paper, and I am contrasting like with like. Paragraph 33 states:
The report on financial control finds weakness in this aspect of the Corporation's administration. It concludes that financial control has not been accorded sufficient importance within the Corporation.The paragraph headed "Management" states:The crucial factor will be the success of B.O.A.C.'s management, in correcting existing weaknesses in organisation and in forecasting accurately its future share of air traffic of the long haul routes".It goes on to talk about the associated companies and states that£15.3 million were lost in investments in associated and subsidiary companies.517 It goes on:There is a need for stronger management.The point I am making is that on the issues criticised by the Minister in his White Paper that weaknesses in financial direction and control by the management functioning when the White Paper was produced were unjustified and the criticism of unsatisfactory control of the associated subsidiaries was applicable only to the period 1956 to 1960. That is a summary of the conclusions reached by the Committee.The Report informed us that in 1962 and again in 1963 Sir Matthew Slattery produced proposals which would have enabled him to go even further with B.O.A.C.'s recovery but was refused permission, first, because Mr. Corbett was already inquiring into B.O.A.C.'s affairs, and, secondly, because the Minister was preparing his White Paper. I submit to the House that it is a little rough to be accused afterwards by the same Minister of weakness in control, and I believe that I should be justified in asking the Minister whether he now intends to withdraw the charge and clear the names of those whose professional capacity was brought into question by him. [Interruption.]
Surely, if a Report of this type, gone into thoroughly by hon. Members of this House, comes to the conclusion that the Minister mistakenly took the recommendations of the Corbett Report, which he refused to disclose, and based criticisms in a White Paper on them, and finally finished by firing the management of B.O.A.C, and afterwards the Committee proved he was wrong—why should not he withdraw what he said?
I can give further instances. The Minister's weakness for unfairly criticising B.O.A.C. was evidence in his statement about depreciation made in the House during the Second Reading of the Air Corporations Bill on 6th November, 1962, when he said:
What I cannot accept so easily is that the depreciation in the value of the Corporation's aircraft fleet has only been fully revealed this year. This is not a situation which has come up upon us in the night. It has been building up for two or three years past; and in any business efficient management must call for a clear understanding and a clear presentation of the balance sheet."—[OFFICIAL REPORT. 6th November, 1962; Vol. 666, c. 814.]518 Again, hon. Members will have read Chapter V of the Report. The Committee discloses the most fantastic muddle imaginable between the Ministry of Aviation, the Treasury and B.O.A.C. over the question of depreciation, including the refusal of the then Minister to permit B.O.A.C. to write down the value of its DC7C fleet by £6½ million. There was a minute of the discussion between the Minister and B.O.A.C. about this at a meeting on 30th July, 1959—which was held in the context of a larger sum of £23 million depreciation—which minute the Minister refused to show to the Committee. Indeed, it is only on the odd occasions that the Minister shows it anything.I wonder why he refused to show the Committee that. This was a vital issue. The Minister met the B.O.A.C. people and discussed the question of depreciation. But depreciation was one of the points that he criticised. In those circumstances, why cannot the Committee be told what transpired at the meeting between the Minister and B.O.A.C. on that occasion? It was following that meeting that a complete stalemate ensued, and the Committee made it clear that all three were partly at fault in not pursuing the matter. No matter how we apportion the blame between the Treasury, the Ministry of Aviation and B.O.A.C, one thing that cannot be right is for the Minister who knew this had been going on for years to imply in this House that he knew nothing whatever about that situation, which had been utterly chaotic for many years.
I now turn to the Minister's statement of 20th July. Since he made it I have read it again and again, in the hope—as one who ardently desires to see a healthy and prosperous aircraft industry and an equally strong and successful B.O.A.C.—that I could support the contents as a workable compromise. In fact, I believe that it condemns both to the worst of all possible worlds.
From my own industrial experience I know a little about factory layout, the need for continuous runs and a balanced forward programme, including the components made by other contractors and the need for these to be in harmony during the currency of the contract. I would have thought that delivery dates 519 and costing depended heavily on these matters. But under the conditions of the Minister's statement it is physically impossible for Vickers and other contractors to function on such lines. They neither know the numbers which are to be produced nor the delivery dates that they are expected to honour.
When Sir Giles Guthrie took over at B.O.A.C. he was instructed to run it as a purely commercial proposition, while the Minister continued to enforce policies which made it impossible for Sir Giles to run it in that way. Indeed, the Chairman was instructed to reconcile the irreconcilable. With the possible exception, for special reasons, of El Al and Air Lingus, I doubt whether there is a long-haul airline in the world which is now running as a completely commercial proposition without some form of aid from outside its ordinary competitive business.
The Committee informed us that the long-haul business throughout the world has never been able to make more than 1 per cent. on its capital after depreciation. We know that a fall of 1 per cent. in the load factor of B.O.A.C. means about £1½ million. Yet B.O.A.C, with a £80 million deficit, upon which it pays about £4 million a year in interest charges, was suddenly instructed to act as a commercial proposition.
§ Sir William Robson Brown (Esher)The hon. Member has now reached the question of the VC10—
§ Mr. LeeI have not reached the VC10.
I am trying to show some of the matters which are essential if B.O.A.C. is to be able to function in the way that the Minister has asked. On the matter of interest charges, the Minister who gave that instruction did so while refusing to permit B.O.A.C. to tender for scheduled trooping—one of the ways in which the American Government assist the long-haul airlines of the United States. In answer to a Question raised, the Report shows that Pan American carry the equivalent of five divisions across the Atlantic every year in maintaining the American forces in Europe, which puts several points on its load factor. Also, Air France has 520 received £17 million in the last three years; Lufthansa has received £19 million in the same period, and the Scandinavian Air Services in 1961 received £14½ million of new working capital. How can we merely instruct B.O.A.C. or any other commercial organisation to run as a profit-making venture while doing nothing to remove those factors which make that impossible?
In 1962–63—and this is something which is again within the right hon. Gentleman's purview—independent airlines earned £3–7 million from scheduled trooping to points in B.O.A.C.'s area of operations. Dealing with the charter work that B.O.A.C. could do, Sir Matthew Slattery in giving evidence said that it picked up £8 million worth of business in one year. That figure includes trooping, and I do not know how much was in respect of trooping. While we penalise B.O.A.C. as against all its competitors throughout the world and still insist on huge interest charges on dead money, we surely cannot say that B.O.A.C. should compete with people who are receiving either open or hidden subsidies from their Government, and still ask B.O.A.C. to function as a completely commercial proposition.
§ Mr. Paul Williams (Sunderland, South)The question of trooping is a serious and important one. Does the hon. Gentleman suggest that those independent companies which have received trooping contracts are either getting subsidies or are making large and wild profits? If he is, he does not know the difference between the base and the apex of aviation. Secondly, does he agree that if trooping contracts were open to the Corporations in the way that he is suggesting it would be a perfectly reasonable proposition to open to the independent airlines the ability to run scheduled services with an unlimited frequency on the basis that the Corporations do.
§ Mr. LeeI do not know about the apex or the base, but if the hon. Member knew a little more about the 1960 Act he would know that the independents were allowed to ask for licences on scheduled routes. Secondly, if the independents are not making big profits on trooping, why does the Minister refuse to throw these contracts open, not as a 521 monopoly for B.O.A.C.—I do not suggest that—but for competition between B.O.A.C. and the independents?
The Report showed that independents earned £3.7 million from trooping in B.O.A.C. areas. No matter what political line we take on this matter, it is surely not unfair to say that if B.O.A.C. is to be asked to run as an entirely commercial proposition we should give it the facility enjoyed by all its competitors, of being able to tender for trooping contracts along with the independents.
§ Sir A. V. HarveyIf I understand the hon. Member's argument, he is putting forward suggestions to improve the profitability of B.O.A.C. But B.E.A. has been in exactly the same position and has managed to turn in a good profit.
§ Mr. LeeSo they may. The hon. Member has been long enough in the aviation industry not to confuse the functions of the long haul industry with B.E.A. People who know only the apex and base would know the answer to that one.
In pursuance of the directive, Sir Giles Guthrie deemed it necessary to cancel the order for 30 Super VC10s. From this the very first commercial implementation of his own directive, the Minister turned tail and fled. I have said that I consider the timing of the directive to have been absurd. I have said that I do not believe that we can turn any business info a commercial proposition merely by throwing out an instruction to it to be commercial. First, it is necessary to take the elementary steps in order to enable a business to be so, after which one would be entitled to expect results.
In his statement the Minister said that Sir Giles Guthrie
has agreed that B.O.A.C. will take 17 of the 30 Super VC10s. This means that he will take seven to meet his estimated requirements to 1967 and subsequently a further 10."—[OFFICIAL REPORT, 20th July, 1964; Vol. 699, c. 41.]I do not think the Minister went any further today in informing us when these 10 will be taken. The hon. Member for Macclesfield (Sir A. V. Harvey) asked about that. We require to know what period is covered by the word "subsequently". Can we have quite hard dates by which these 10 are to be made and delivered? Otherwise we may well be left in doubt whether these 10, as well as 522 the 10 already left in suspense, will ever be produced.I know from my contact with the workers at Weybridge that they are very apprehensive on this point. I am told that design staffs are employed only on modifications and that people have been told that after March there may well be redundancies. Therefore, it is of great importance to the people at Weybridge and other parts of the B.A.C. organisation—because it may well mean a reallocation of work—that we should be given a pretty straight answer.
I do not know how far one can look ahead, but one reads that the new editions of the Boeing will be far more economic than the ones which exist now; whether they are called the Boeing 800 or 520 is immaterial. I wonder whether we should be looking ahead to a Super-Super VC10 and thinking in terms of a capacity of 200 and that sort of thing rather than confining ourselves merely to the present edition. That, of course, is entirely technical, and I do not pretend to know the answers. But if, as we all wish, we are to see a VC10 comparable economically with the new Boeings, I suggest that we had better look ahead, and to what the Boeing people are doing, if we are to hope to match them no matter when the new Boeings come into existence.
Let me sum up this point by looking at the facts of the position which the Minister has created. First, the right hon. Gentleman issued his directive, and for the first time the B.O.A.C. Board knew without any doubt what were its terms of reference. I suggest that the timing of the directive was wrong, but there it is. Sir Giles Guthrie responded that the Super VC10 order was "uncommercial" and to obey the directive he must cancel it. If that happened the effect on the aircraft industry would be quite catastrophic. At Weybridge we had other programmes in operation—the TSR2, the BAC111 and the Concord. If anything happened at Weybridge those programmes would also be in grave jeopardy, but that is the business of the Minister and not the Corporation.
In his directive the Minister used the words, "in the national interest". Given the dilemma in which he has placed us how does one act? I said last Monday 523 that we on this side have no responsibility for the position which has been created. I suggested that the Government should make themselves responsible for financing the order. We are often asked what are our remedies for problems created by this Government—heaven knows, finding answers for the misdeeds of this accident-prone Government taxes even our resources—and I should have thought that the suggestion I made was probably the only logical way out of the impasse in which we now find ourselves—
§ Mr. P. WilliamsThat is stupid.
§ Mr. Charles Loughlin (Gloucestershire, West)He produces the problems. He cannot produce answers.
§ Mr. LeeI said and the Report pointed out that during 1956–60 some issues within the B.O.A.C. were not functioning as well as they should. The Report points to the great number of changes in the Chairmen and Deputy-Chairmen and the Board of Management. A constant feature has been that the majority of the Board at any one time has been part-time members. As the Minister elected the members of the Board I take it that this was and still is Government policy. We are told that part-time membership has at the best meant little more than a meeting once a month. During the period 1956–60 we had the utterly absurd situation of a part-time Chairman with a full-time Deputy-Chairman and a Board the large majority of whose members were once-a-month members.
In Annexe A of the Minutes of Evidence we read:
One result of this arrangement which was accentuated by the appointment of my predecessor on a half-time basis, has been that the formulation of policy has been left almost entirely to top management.… The Board has tended to approve policy proposals after a somewhat cursory scrutiny of Board Papers together with some questioning of senior members of management who are normally in attendance at Board Meetings.This was the situation during the whole of the period in which the first decision on the VC10s was made and indeed when the 1960 decision to order 10 more was 524 taken. It is utterly absurd to suggest, with a board of that composition that we can ask for highly technical decisions such as the ordering of aeroplanes of this type.I put it seriously to the House that the plain fact was that there was no real board in existence in B.O.A.C. at all during that period. We know from the Minutes of Evidence that Sir Gerard d'Erlanger, the part-time Chairman, believed that the main purpose of the Corporation was to support the aircraft industry and develop its world routes irrespective of profitability. I believe that the Report of the Minutes of Evidence shows that between 1956 and 1960 a great airline was reduced to sheer chaos by a combination of Ministerial interference in areas of B.O.A.C. work not within their statutory powers, and an almost non-existent Board led by a part-time Chairman who misunderstood his functions. The preservation of the aircraft industry is of the utmost importance in the national interest. But surely this is the job of the Minister and it is utterly wrong that B.O.A.C. should be used for such a purpose.
On Monday I indicated that we on this side of the House did not accept that B.O.A.C. freely ordered too many aircraft. In other words, I was saying that Ministerial pressure had in fact been exercised. The Estimates Committee in 1959, examining the relationship between the Minister and the Corporations, voiced concern about the ability of the Minister to exercise far wider de facto powers over the Corporations than his statutory powers gave him. In the second part of the Report of the Estimates Committee, 1963–64, we see the matter taken further. The Committee went over the familiar ground, which the right hon. Gentleman has covered today, about the 15 Boeings. In paragraph 98 the Committee goes on:
Evidence submitted by B.O.A.C. to the Sub-Committee—but not reported—makes it clear that the Corporation was under the impression that permission would only be given on the understanding that the Corporation would commit themselves to the purchase of British aircraft subsequently… This was the understanding of the Board, who agreed to the commitment, and the Minister in his statement to the House on 24th October, 1956, said that ' this purchase is regarded both by the Government and B.O.A.C. as an exceptional measure to bridge the gap until a new British type is produced.' The Board, at a 525 meeting on 27th September, 1956, agreed to accept what they regarded as a definite condition of the Minister's permission to buy the Boeings and to begin an examination of the likely contenders for the new order.Throughout the Report the Committee goes on to argue from that point. Paragraph 102 is illuminating:The situation now confronting the Corporation was succinctly summed up by the Chairman in evidence before the Subcommittee.'I think I can give you the best picture by referring you to a remark which is always attributed to the late Mr. Henry Ford who said "If you want one of my motor cars, you can have it in any colour you like—as long as it is black…". So [in 1957] we now come to the stage where "you can have any colour as long as it is black". You have got to have a British aircraft, and there is only one possible British aircraft, and that is the Vickers'.I do not want to go on quoting and I am sorry to do so in order to prove the case which I am making.
§ Mr. Maxwell-HyslopThere may have been only one aircraft, but does not the hon. Gentleman agree that the aircraft was substantially built not to meet a specification determined by Vickers in advance but to meet a specification by B.O.A.C. itself?
§ Mr. LeeI am not arguing about the specification but whether or not B.O.A.C. had any choice as between having a specific aeroplane made for it and having none at all.
The Minister goes on insisting that there has been no Ministerial pressure. First, they say, "You can have 15 Boeings for the Atlantic run. The condition of that is that you then order British aircraft." The only firm which could possibly cater was Vickers and, therefore, the only plane which the Corporation could have was the VC10. As long as the Minister wants to argue that that was a free choice given to B.O.A.C. then I must quote from the Reports of the Committee that it was nothing of the kind. Perhaps I could give the hon. Member paragraph 105 where, first of all, it is mentioned that the same thing happened with B.E.A. and that the B.E.A. Board threatened to resign unless it got the Trident. Lord Douglas had a way with him in these matters and therefore B.E.A. got the Trident. In paragraph 105 we read:
In both these cases Ministers, intervened in spite of the fact that no Government invest 526 ment was at that time contemplated in either project. Despite the recent increases in the maximum borrowing powers of the Corporations, the Minister will still possess a strong, although non-statutory power over the Corporation's purchase of new aircraft.These are not my words. In both these cases Ministers intervened, that is in the ordering policy of the two Corporations. How often the Minister can go on repeating that it is untrue that Ministers have intervened in the face of reports of this type, I do not know.
§ Mr. Maxwell-HyslopThe hon. Gentleman introduced the subject of the DH121. Both these aeroplanes were not originally crystallised entities which the Boards had to buy. In the case of the DH121 the specification was altered most of the way through its development. It was scaled down 30 per cent. In the case that we are talking about, surely the hon. Gentleman must realise that the VC10 is not an unalterable entity forced on the airline but an extremely elastic entity which crystallised in the form determined by B.O.A.C. That is the whole point.
§ Mr. LeeI am not arguing whether it was altered a hundred times. The hon. Gentleman really will not face the issue that there was no alternative to the VC10 among any possible British aircraft at all. This was the condition imposed by the Government. I have also quoted to the hon. Gentleman and to the rest of his colleagues the opinion of the Estimates Committee, that on two occasions, in the ordering of aeroplanes, Ministers had intervened.
§ Sir W. Robson BrownI want to know what we are going to say to the men at Weybridge. That is what I am waiting to hear the hon. Member say.
§ Mr. LeeI say to the men at Weybridge that we would not cancel a single one and I invite the hon. Gentleman to come into the Division Lobby tonight and support us.
I do not want to go on quoting but I suppose that it is essential in order to make the case. In the Minutes of Evidence in the Report which is now under discussion we see time after time from questions asked that there is not the slightest shadow of doubt that influence was brought to bear by Ministers on a number of occasions in order to ensure