BRITISH OVERSEAS AIRWAYS CORPORATION (SELECT COMMITTEE'S REPORT)

HC Deb 22 July 1964 vol 699 cc491-623

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- 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.

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. Amery

I 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.

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 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. Amery

I am not exactly clear to which recommendation the hon. Gentleman is referring.

Mr. Albu

To the one concerned with the point the right hon. Gentleman has just been discussing.

Mr. Amery

I 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.

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 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. Amery

I 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 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, 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. Amery

I 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. Amery

I 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. Amery

No, 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 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.

Mr. Wigg

As the right hon. Gentleman has quoted a document and letters—

Sir H. Legge-Bourke

Not 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. Wigg

As the right hon. Gentleman has quoted documents and papers, will you order that those shall be laid on the Table?

Mr. Deputy-Speaker

My impression was that the right hon. Gentleman was giving a summary of documents and papers and not quoting verbatim.

Mr. Amery

I 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 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 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 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. Amery

Yes. 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. Wigg

Before 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. Amery

I 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 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?

Mr. Amery

My hon. Friend may be right. I was not aware of that point, but I am glad to hear it

Dr. Jeremy Bray (Middlesbrough, West)

Why is the right hon. Gentleman glad to hear it?

Mr. Amery

I 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- 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. Amery

I 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 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. Amery

I 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. Amery

Under our Administration the Service Departments have always 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. Lubbock

Does 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. Amery

B.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 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 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 —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- 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 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. Diamond

My 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. Lee

My 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 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.

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. Amery

I 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. Albu

Of course, the appointment of Mr. Hardie took place after the matters to which this Report refers.

Mr. Lee

Mr. Hardie had not begun to officiate at the time when the White 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. Amery

Mr. Hardie's appointment has, in my view, already had beneficial effects.

Mr. Lee

That 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. Lee

I 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. 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.] 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 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. Lee

I 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 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. Lee

I 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 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. Harvey

If 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. Lee

So 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 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 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. Williams

That is stupid.

Mr. Lee

It may be stupid, but perhaps the hon. Member will supply the answer to the problem.

Mr. Charles Loughlin (Gloucestershire, West)

He produces the problems. He cannot produce answers.

Mr. Lee

I 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 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 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-Hyslop

There 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. Lee

I 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 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-Hyslop

The 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. Lee

I 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 Brown

I 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. Lee

I 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 that they themselves could pre-determine where the aircraft were bought and what conditions they were bought under. In all this I am not trying to say that the Government are wrong to try to support the British aircraft industry. They certainly are not. I want to support it as well, but it surely is not the job of Ministers to palm off that kind of thing on to any nationalised Corporation. The job is surely that of the Ministers themselves and not of the nationalised Corporations.

I have tried to show that we on this side of the House are conscious of the very great problems which we believe the wrongful policies of the Government have brought to the aircraft industry. It may well be that we shall now have to look at the aircraft industry in a far wider context than in the past. All said and done, it is the industry in which we have the greatest number of scientists and technologists of any industry in Britain. I believe it is possible to use them in a far wider field than in that of orthodox aeroplane work on which they have been engaged in the past. Indeed, if we are to retain an aircraft industry of the proportions which we want to see it may well be that that is the way in which we shall have to look at them in the future—as research exponents and as exponents of those industries nearest to the scientific frontiers, as we call it, rather than to confine them either to the design of aircraft, such as at Shorts and at Weybridge, where they are merely doing work which is not exercising them to the full capacity in design, research and development. This is the kind of thing for which, I think, we can use the industry.

I will finish on the note of the 10 aircraft which are under discussion this afternoon. The Minister quite unfairly has quoted letters which he has not placed on the Table. [HON. MEMBERS: "No."] Hon. Members opposite can split hairs if they wish, but, whether or not the Minister quoted from those letters, he told us of their contents and did not place the letters on the Table. I refer to the 1960 decision to increase the firm order for 10 aircraft.

Is the Minister saying that the Chairman, who had been frantically increasing his route structure in anticipation of the arrival in the mid-1960s of 35 VC10s, decided without pressure, as his last act before retiring, that in the interests of B.O.A.C. he should place a firm order for 10 more VC10s despite the fact that he knew that he had no need to make any decision until more than two years later, in 1962? Does he expect us to believe that Sir Gerard d'Erlanger—who was well aware who his successor would be and the problem which this action would mean for the new Chairman—would, without any pressure, place that order, having said a few months earlier that he had no intention of doing so? If the Minister wants the House and the country to believe that, I can only leave it to their judgment.

It is worth noting that at the same time the Government increased financial returns to the aircraft industry—which maybe necessary, I am not arguing that—to levels more generous than before, and in return for B.O.A.C. help, passed the 1960 Act giving independents the right to operate on the Corporation's routes. In paragraphs 310, 311 and 312 the Committee shows that there is grave responsibility on the part of the Government for what has happened. As to the past working of the B.O.A.C. which led to a deficit of £80 million, the Committee finds that during a number of years past boards have not conducted policies in the best interests of the Corporation. We accept the criticism of those past boards, but the Committee also finds that because of the Government's failure to define such policy objectives the Government must also accept their share of blame for the grave financial consequences which followed and we for our part accept that obligation as well.

5.42 p.m.

Sir Richard Nugent (Guildford)

I thank my right hon. Friend the Minister and the hon. Member for Newton (Mr. Lee) on behalf of the members of my Committee for the kind things they have said about the Report that we have produced. I am sure that all the hon. Members who were on the Committee are glad to think that the Report may have been helpful to the House in considering this very difficult problem.

It is, of course, inevitable that where we are examining events, some of which took place as long as eight years ago, and in an area where there is inevitably political heat, there should be different versions of what happened, but the Report of the Select Committee of experienced hon. Members from all parts of the House may be of help in giving an objective view of what happened. I can assure the House that where we had conflicting evidence—as indeed we did on some matters—we used our collective judgment to reach unanimous conclusions on what was the right version and this is what we put into the Report. I should like to record thanks to the hon. Members who made up the Committee for the generous support which they gave to me.

Our Report did not set out to be a comprehensive review of the affairs of B.O.A.C. We limited our examination to the deficit and aimed to make our Report in time for the debate which we expected would happen, as is happening in the House today, on the future finances of B.O.A.C. and its relationship with the British aircraft industry. This, I believe, is the central issue which is exercising all our minds. If I do not follow the many interesting points raised by the hon. Member for Newton, that is not because I am not interested in them and would not like to follow them but because many hon. Members on both sides of the House wish to take part in the debate and I feel I should confine myself to the central theme.

Our examination was limited to the deficit, its causes and suggestions for its cure. The first major factor contributing to the deficit is recorded in the White Paper. It is that the Corporation has been flying at some time uncompetitive planes. Sir Basil Smallpeice put the cost to the Corporation at £10 million a year on this account. That part of the Corporation's activities in history we did not examine. It is recorded in the White Paper and is well known to everyone. I only say in passing that in recording that the Corporation was flying uncompetitive planes, and in some respects the wrong planes, one must not forget the very heavy blow which it suffered in the Comet disaster and that it had had more than its share of bad luck.

Our Report starts with the second major factor which has contributed to the deficit. That in our judgment flowed from the excessive size of the fleet and the over-optimistic route structure. We found, as the Report records, that all this stemmed from the VC10 order in 1958. I have seen statements by some commentators that this order was caused by Government pressure and by other commentators that the B.O.A.C. had done this independently and in an irresponsible way. I hope that our Report shows that the truth is a great deal more complex.

The story starts in the spring of 1956 when the Corporation was looking for a plane to fly its Eastern and Southern routes. The Boeing specification proposed was not considered at that time to be suitable for those routes. In the autumn of 1956 the Government of the day allowed B.O.A.C. to buy 15 Boeings for the Atlantic route and made a condition that any future purchases should be of British aircraft. At that time this was not a restrictive condition because it was then known that the Corporation was shopping around with the British aircraft manufacturers to find a tailor-made plane for these routes.

During the whole of 1957 discussions went on about the specification of the VC10, the price and so on, and it was not until January, 1958, that the order was finally signed for 35 VC10s with an option for a further 20. By that time the Boeing 707 was suitable for the Eastern and Southern routes and it was known that the Corporation's competitors would be flying it. We tried to understand what was in the minds of the members of the Board at that time when they signed the order for the VC10s. There were two objections. One was an engineering objection. That was overcome after the Board consulted the R.A.E. at Farnborough and the Board decided that the technical specification was satisfactory.

The other and more difficult objection to the order was—as we now see—the excessive number of 35 to which the Corporation was committing itself. The Corporation had started its inquiries with the number of 20 to 25 in mind, but we found in the papers we saw—some of them, unfortunately, we have not been able to publish—that in April, 1957, the Corporation produced a schedule of routes which would require 35 VC10s with a possible option of 27 more. This schedule was shown to Sir George Edwards of Vickers and he told us that to a considerable extent he based the prospect of the order on that.

Sir J. Eden

What year was that?

Sir R. Nugent

It was in April, 1957. We concluded that the Corporation must have felt bound by the condition attached to the Boeing order in the previous autumn that in future it must buy British planes. But we expressed surprise—and I still express surprise—that the Corporation did not at that point go back to the Minister and put to him that a new situation had arisen, that the Boeing was now suitable and was an alternative to fly on these routes, that the minimum number that the Corporation could negotiate was more than it wanted, and possibly seriously more than it wanted, and that it would therefore like to order further Boeings. The Chairman's sense of obligation has been referred to by the hon. Member for Newton, and that came out in evidence. Sir Gerard d'Erlanger undoubtedly felt that he had a specific obligation to fly British.

Sir A. V. Harvey

I understand my right hon. Friend to say that the Boeing could land along the African and Eastern routes. My understanding is that even today the Boeing cannot do this at a number of airfields where the standard VC10 can do so.

Sir R. Nugent

Substantially the Boeing is suitable for the great majority of these routes, and it would have been a suitable alternative. Nevertheless, the evidence which we had was clear—that the Corporation did not go back to the Minister and that it made no complaint about the numbers being higher than it wanted. The Corporation went as far as to write letters to the Minister expressing its satisfaction with the VC10 specification as it was evolving.

We have reached the conclusion, therefore, which we have reported, that it was the primary responsibility of the Corporation that it took this decision to order the VC10 and to order this minimum number of 35. We also record that the Government had some responsibility in this matter because at that time they had failed to make it quite clear that B.O.A.C.'s responsibility was solely a commercial one, in the way in which my right hon. Friend has made it clear to Sir Giles Guthrie in his new terms of reference. I heard what my right hon. Friend said about the extra 10 VC10s in 1960. If my right hon. Friend dissents from the Committee's view that this was due to Ministerial pressure, I can only record that on the evidence which we received we felt that there had been an element of Ministerial pressure and that the Chairman, Sir Gerard d'Erlanger, had been influenced by it. I trust that I am giving no one the impression that we think that we were omniscient. It is much easier to see these things in the light of hindsight than to see them at the time.

Mr. P. Williams

Surely in December, 1961, the contract was further amended to read 12 standard aircraft and 30 super aircraft. Surely this cannot have been within the area of political pressure.

Sir R. Nugent

I have not made the point that it was. I was referring only to the extra 10 aircraft to which Sir Gerard d'Erlanger agreed in 1960. The fact that Sir Matthew Slattery made further alterations to the size and nature of the contract is a completely independent point, and I have no comment to make on it at all.

Had B.O.A.C. gone to the Minister at the point in time in 1958 at which it was signing the order and said that it was against the Corporation's commercial interests and that it would have preferred to have Boeings, it would have precipitated in 1953 the crisis of B.O.A.C. which confronts the House today.

The conclusions which we reached out of all this were that a decision to fly a particular 'plane in the national interest is for the Minister, after assessment of the vital commercial interests of the Corporation, on the one hand, and of the manufacturers on the other, and that if and when the Minister finds it necessary to take such a decision, it is for the Government to underwrite it. It is fair to recall that this has been a principle of this Select Committee over the years in which it has been sitting and making Reports to the House. It is referred to in paragraph 218 of the 1959 Report—mentioned by the hon. Member for Edmonton (Mr. Albu)—where a similar recommendation is recorded.

The fact is that there is no prospect of getting good management and good leadership in the nationalised industries unless there are clear lines of responsibility between the Minister and the Chairmen. The Minister must be responsible for the national interest and the Chairman must be responsible for the commercial interest of the industry concerned. I very much welcome my right hon. Friend's statement on this aspect today.

In this context it is perhaps worth referring for one moment to White Paper No. 1337 of 1961, which introduces the new thought of giving the nationalised industries financial targets over a period of five years related to the return on the capital employed in the industry and to the conditions in the industry. This we feel as a Committee, and I feel very strongly personally, was a very valuable step forward in strengthening the financial discipline of the nationalised industries, on the one hand, and in reducing the scope for Ministerial interference on the other. I think that it will ensure the industries against this kind of unhappy affair from happening in the future.

May I leave our Report for a minute and turn to the Minister's statement about the VC10 and the settlement. Sir Giles Guthrie has announced his wish in regard to the review of the route structure and the size of the fleet, and the consequences which this would have on the VC10 order. He has said that it would be in the commercial interests of the Corporation to take no Super VC10s and to increase his fleet only by an extra six Boeings.

In passing, I would say that this is not surprising. Naturally, it is less costly to increase an existing fleet than to start a new one. I imagine that in taking his decision the Minister has also had the full information about the manufacturers' interests. I warmly welcome the Minister's decision that the Corporation should take up the bulk of the VC10 order, leaving in suspense the 10 aircraft for which there is no demand at present. I observe that when he made the statement two days ago he said that he will make a financial settlement with the Corporation which will take account of the Corporation's deficit of £80 million and at the same time will take account of the financial implications of flying the VC10 instead of the Boeing which the Chairman of B.O.A.C. wished to fly.

I feel that this settlement by my right hon. Friend is exactly on the right lines. He has determined where the national interest lies. He has decided that the Corporation should fly British and that the Government should underwrite the financial consequences. I imagine that this cannot be cleared up finally for another six or 12 months, after the VC10 has been flying long enough to see what is the balance between the strong extra passenger appeal of the VC10, on the one hand, and the higher operating costs on the other. I have been fortunate enough to fly in the VC10, and there is no doubt that it is a very attractive aircraft both for passengers and for pilots. Undoubtedly it has a good prospect of being a successful economic venture and there is a good prospect of a successful outcome. Certainly it has my best wishes.

This, I feel, is the central point of the debate—the relationship between the air Corporations and the air manufacturers. It is clear that the manufacturing industry cannot survive, certainly not with regard to long-distance aircraft, unless the Corporations fly British. But the VC10 incident, which I have briefly recapitulated, shows that the minimum number on which the manufacturers can go into production is more—and in this case was substantially more—than it is in the commercial interests of the Corporation to take. Inevitably foreign sales do not come along until the plane is a patent success. On the other hand, B.O.A.C. cannot alone develop new planes without risking a deficit.

On this point I agree with the hon. Member for Newton—I did not agree with the hon. Gentleman on anything else, but on this I do agree with him—that new airliner development today can be done only as a national project with Government approval and support. I commend my right hon. Friend to the development of the Concord based on the Zuckerman Committee's investigation. This seems to me to be the right approach, where the cost of the enterprise is snared with our friends in France and we have the prospect of doubling the market at the same time. I hope that it is implied in my right hon. Friend's remarks that he is now reviewing the structure of aircraft development with a view to ensuring that our resources in research and production go in for the most promising lines so that we have the best prospect of competing with the giant economies of the United States and Russia. This is an aspect of our national economy where, in the face of this ever-increasing competition, the closest scrutiny is needed of our national resources if we are to get the best out of them and continue to be competitive.

I conclude by hoping that our Report has been a help to the House. I cannot agree with the Amendment. I hope that the House will support the Motion.

6.1 p.m.

Mr. Roy Jenkins (Birmingham, Stechford)

I hope that the Minister will not be away for too long, because in the course of my speech I want to put some points directly to him. I congratulate the right hon. Baronet the Member for Guildford (Sir R. Nugent), whom I am happy to follow, on the Report of the Select Committee of which he was Chairman. In association with other distinguished members of the Select Committee, the right hon. Baronet has produced a remarkable Report which has been of great value to the House and, indeed, to people outside the House in considering this extremely complicated problem.

There are three major issues involved in today's debate. First, where does the responsibility lie for the present mess? Secondly, has the Minister, confronted with this mess, made the right decisions in the recent past? By "the recent past" I mean from the date of the decision to appoint Sir Giles Guthrie up to the statement which he made to the House two days ago. Thirdly, what are the lessons to be learned from this tangled and, on the whole, dismal story, and what is the correct course for the future? I shall say something under each of these three heads.

First, where is the responsibility for the mess? I do not think that anyone in the House can be in any doubt that it is a mess. The Corporation is left with planes which it will take and operate to the best of its ability but which clearly it would rather not have. I cannot believe that the outcome is a satisfactory one for Vickers. I cannot believe that, if in 1956 or 1957 Vickers had foreseen all the events of the past seven or eight years, it would ever have wished to touch the VC10 project. Further, there' is no doubt that, even with the decision announced by the Minister, even with the 17 planes, there is bound to be a compensation element to Vickers for the other 10 if these are not taken up. Therefore, there is undoubtedly a mess.

The Minister today tried, as I understood it, to put the whole of the responsibility for that on to successive Chairmen of the Board of B.O.A.C. I am very doubtful if the Minister convinced anybody but himself. I am not very certain that he convinced even himself. I take the view that some responsibility rests upon B.O.A.C. and upon its successive Chairmen. I think that B.O.A.C. was undoubtedly, particularly in the period before 1960, guilty of fairly consistent over-optimism. I think that B.O.A.C. also showed some weakness, in the sense of being much too ready to succumb to pressure. Before one can succumb to pressure, there must be pressure to succumb to. This was the point in relation to which the Minister was unconvincing. I believe that the pressure came partly from circumstances, partly from Vickers, acting as the agent of those circumstances, but partly from successive Ministers of Aviation.

In the course of the discussion and in the course of the Select Committee's investigations and other investigations certain points have emerged as being fairly independent of dispute. First, in order to buy the 15 Boeings in 1956 the Corporation had to give an undertaking to place a large order for big British jets. As Vickers was in practice the only available manufacturer, Vickers made it clear that it would go ahead only at what looked a reasonable price, with a minimum order for 35, and it probably would not have gone ahead at any price with an order of much less than 30. An order of this size in effect, by the condition attached to the ordering of the Boeings, became mandatory upon B.O.A.C. I do not think that the Corporation had any choice but to enter into such an undertaking at that time, though B.O.A.C. threw away this excuse by producing the totally inflated idea that it might in some circumstances need an extra 27 on top of the 35 and put the option for a further 22.

In a sense one is up against the difficulty of size. One is up against the difficulty in the British aircraft industry of any development project for a big plane going ahead on the basis of a single order from a single customer. Any order is almost bound to be either much too small for the manufacturing company or much too big for B.O.A.C. There is a good chance that it will manage to be both at the same time. One wants, as far as possible, to get away from this basis of an order directly geared to a single customer. I hope very much that the BAC111—

Mr. A. E. Hunter (Feltham)

rose.—

Mr. Jenkins

I am sorry, but there have been so many interruptions that there is a general feeling in the House that we should get on. I would gladly give way to my hon. Friend, as he knows, but I want to take as little time as possible. The BAC111, which is not going forward on this basis, has a better chance of success, and I very much hope that it will be so.

The third point to be borne in mind is that B.O.A.C. at an early stage put forward its clear view that, if it was a question of producing a big jet such as the Super VC10 has become, it would be better for Vickers or any other English company to copy as nearly as it could the Boeing 707 with the engines in pod rather than make a rear-engined plane. That view was rejected both by the Minister of the day, now Lord Watkinson, and by Vickers, on what seemed to me to be the extremely flimsy and foolish ground that it would be degrading for the British aircraft industry and below its status to make a plane as similar as that to an existing American plane. This is an extremely foolish view. It would be much better for our status to make a highly successful plane with the engines in the same position as the Americans have theirs than a less successful plane with the engines in a different position.

I come to the question to which the Minister has already applied himself to some extent of the order for the additional 10 planes in 1960. As I pointed out in an interjection, the Board of B.O.A.C. applied itself to this because Vickers raised with the Board the question of the Super with a larger seating capacity and Vickers' need for a larger order. Undoubtedly, the Board expected that pressure to be followed by pressure from the then Minister, now Secretary of State for Commonwealth Relations, in connection with plans then being proposed for the setting up of the British Aircraft Corporation. However, the Board of B.O.A.C, as I understand it, did an analysis at that stage, in November, 1959, and reached what I have no doubt was the correct commercial decision then, that it did not want to take up any part of the option until the latest possible date, which was August, 1962.

In the next three months, the Board of B.O.A.C. moved from that decision. Why did it move? I have no doubt that it did so under a combination of pressure from the then Minister of Aviation and from Vickers, the manufacturers. The first pressure was not crudely put in writing but there were meetings, and I have no doubt that the impression left on the mind of the Corporation was that, while the Minister was not ordering it to take the additional 10 planes, taking them would greatly facilitate the plans for the reorganisation of the British aircraft industry. That is clear from the evidence given by Sir Matthew Slattery and, more directly on this point, by Sir Basil Smallpeice to the Select Committee.

Sir J. Eden

Was it not open to Sir Basil to ask for a direction?

Mr. Jenkins

There have been many interruptions and I think that it would be for the convenience of the House if I went on.

In addition, Vickers made clear at that stage that it could not undertake to produce the original 35 planes at all unless the additional order was placed. Given the fact that it had been required to order British jets to get the Boeings, the Corporation, if Vickers had not gone ahead with the project, would again have been left in the mid-1960s in the position in which it found itself in the mid-1950s after the original Comet disaster, when it had to scrape planes together in an almost haphazard way in order to stay in business at all. I have no doubt, therefore, that there was considerable pressure at that stage.

In addition to this, Sir Matthew Slattery, the then Chairman of the Corporation, after he had been in office for. I think, eight or nine months, wrote a letter to the Minister, who has now become Secretary of State for Defence, outlining all his doubts about the VC10 in relation to the Boeing—not technical doubts but doubts about economic performance. I think that he went so far as to suggest that, as he saw it, the difference between the economic performance of the two planes was likely to amount to a six point difference on the load factor, a very substantial difference indeed. The Minister of the day, in his continuing capacity in this connection, was given notice as early as the spring of 1961 that that was the view of the Chairman of the Corporation and that he had these considerable doubts at that time.

The present Minister of Aviation, when he came to office just over a year later, inherited the difficulty but also inherited that clear notice from the Chairman of the Corporation that he was extremely worried about the VC10. What did the present Minister do about it? The sad fact is that the right hon. Gentleman, during his first 18 months of office, did practically nothing about relations with the Corporation except to set up the really ridiculous cloak-and-dagger accountancy exercise, the Corbett Committee, the most irrelevant and time-wasting step he could possibly have taken, using this as an excuse for his attitude. To quote the words which the Deputy Secretary of his own Ministry used in evidence to the Select Committee, the right hon. Gentleman put the whole discussion of the long-term policy of B.O.A.C. into purdah for 18 months. In fact, there was a period during which communications were virtually frozen.

Instead of doing this, and freezing the channels of communication, the Minister ought to have applied himself, as soon as he came to office, to improving communications and relations between the Ministry and B.O.A.C. I have no doubt that one of the difficulties in this picture and one of the causes of trouble has been that, ever since the extraordinary muddle about depreciation in 1959—one of the most difficult stories to understand in the whole history of relations between a Government Department and an outside publicly responsible body—there has been a lack of mutual confidence between the Ministry and B.O.A.C.

The right hon. Gentleman ought to have tried to improve the situation instead of, as I think he did, making it far worse by the appointment of the secret Corbett Committee, with its still secret report and its generally morale-lowering effect upon the Corporation.

That is the story, as I see it, to the end of Sir Matthew Slattery's period as Chairman. All four of the Ministers of Aviation who were involved in it bear some responsibility, along with B.O.A.C, for what took place during that period. Quite definitely, there was a good deal of pressure. This culminated in the replacement of Sir Matthew Slattery by Sir Giles Guthrie. Whether or not it was necessary—I have considerable respect for Sir Giles Guthrie, as I have for Sir Matthew Slattery, too—I consider that the way in which this replacement was carried out was, on the whole, very discreditable.

So much for the past. The past is less interesting, but a good deal of responsibility for what lies in the past rests on the right hon. Gentleman and his predecessors.

I come now to the second aspect of the matter with which I wish to deal, that is, the series of decisions by the present Minister of Aviation, starting with the terms of reference which he set Sir Giles Guthrie. It could have been predicted by any Minister of Aviation with the knowledge at his disposal that, if he set Sir Giles Guthrie these terms of reference, he would inevitably get exactly the sort of plan and exactly the sort of report which he has, in fact, received. I do not believe that the report was a surprise to him, or, if it was, he could not have been at all informed on the subject.

There were two aspects to the matter then. One was that B.O.A.C. was over-ordering, but, as the Minister of Aviation—this is clear from evidence to the Select Committee—had been accusing B.O.A.C. of being over-optimistic and thinking more about routes than about profits for several years, the Minister should certainly have had his views about this. Second, there was the fact of Sir Giles Guthrie's preference for new Boeings as opposed to new Super VC10s. This also could have been foreseen from the clear statement contained in Sir Matthew Slattery's letter in the spring of 1961. There was not the slightest excuse for a Minister of any intelligence at all, and with the facts at his disposal, not expecting that, if he set Sir Giles Guthrie these terms of reference, he would receive exactly this son of report.

What on earth was the point of setting Sir Giles Guthrie these terms of reference unless the Minister had decided in his own mind that, when he got the report, he would be prepared to carry it out? If he was not prepared to carry it out, or if he had not decided that he was prepared to subordinate the aircraft industry to B.O.A.C. and to cut them adrift as regards the VC10—I think that it had already become much too late, anyway—the terms of reference asking for a public report from the new Chairman of B.O.A.C. represented a certain recipe for getting the worst of both worlds for both B.O.A.C. and the British aircraft industry, a certain recipe for having to overrule the choice of the new Chairman in the planes which B.O.A.C. wanted to fly, and a certain recipe, by also publishing the report—this would be no fault of the Chairman's—for doing great damage to this plane at one of the most vulnerable points in its history.

This I regard as the major charge against the Minister's present policy. There was no possible point in appointing the new Chairman, with these terms of reference and to produce a report which could have been foreseen, unless the Minister was prepared to carry out the report produced publicly in this way. Also, by the way in which he applied himself to the report and acted upon it, the right hon. Gentleman has acted so as, to some extent, to maximise the damage for both the industry—primarily Vickers—and the Corporation beyond that inherent in the central situation.

From Vickers' point of view, what is the damage in proceeding in this way? First, clearly a great deal of dirty linen has been publicly washed in the last few weeks. B.O.A.C. has been put in the position of publicly decrying some aspects at least of the plane which it has been strongly advertising. Vickers' own public relations machine seems to have been doing its best to overcome this. That Vickers' public relations officer has been in operation with the Press is clear from the statements which appeared one day and then the next. However, I do not blame Vickers for that. There was no other alternative.

The second point is that the order position for Vickers as a result of the Minister's decisions looks better than it is. There is an element of sleight of hand about the announcement of the order position. It appears that only 10 aircraft—the last 10 of 30—are to be put into suspence, but another way of looking at it, and one which is probably more relevant, is that in the next three or four years, which is the period which one has always been considering and the period during which Vickers were prepared to deliver 30 Super VC10s, the company will be asked to deliver only seven to B.O.A.C. and only three to the Royal Air Force Therefore, it is not a case of the last 10 being knocked off in the next four years. As to the B.O.A.C. part of the requirement, the order is being cut to one-third or even one-quarter.

In an intervention during the speech of the Minister, the hon. Member for Macclesfield (Sir A. V. Harvey) made the point powerfully that that would make for difficulties in the production schedule of the industry. There again, the period after 1967–68 is a long way ahead for the aircraft industry. I hope that we will have a reply about this from the Minister or from the Chancellor of the Exchequer if he replies to the debate.

What will be the compensation position about these aircraft? It is not only a matter of how much work has or has not been done on the aircraft which are not being produced. It is also a question that the Vickers price—and, clearly, this is the starting point of the story—was geared to an order of a certain size. If the order is to be smaller, independently of whether work has been done, presumably there must be substantial compensation.

I turn now to the difficulty of the present position from the viewpoint of B.O.A.C. The Corporation is not getting the aircraft that it would most like to have. That is inevitable at this stage, What else, however, has happened? Over the next four years up to 1968, a period that we and the Corporation have been considering in our short-term plans, the Corporation will have to operate a fleet of Super VC10s which starts at nil today and will mount over four years to seven. The average size of this fleet during that period will be three and a half. I cannot imagine anything more difficult or more uneconomic for the Corporation from the point of view of spares and of pilot and fleet deployment than to have to operate a fleet of this derisory size over that period.

The Minister may say that beyond 1968 the fleet will get bigger and that the other 10—not the last 10, but the middle 10—or, at least, some of them, will come into operation. Is there not a danger however, that once the Corporation has come up against the threshold of the supersonic age, it will be put in exactly the same position as the Corporation faced as we came up against the threshold of the jet age? That it will have its most expensive subsonic planes very late in the day just before the supersonic age begins is exactly what happened with the DC7C and the Britannia. The Corporation will, therefore, be up against great difficulties for the reason that these aircraft will be far less written down than those of other competitive airlines when we reach the point when, although nobody can be quite sure when it will happen, there is another break-through in air transport.

The third point about the difficulty for the Corporation is the financial arrangements. The Minister has thrown a shroud of complete secrecy over what he intends to do concerning the financial arrangement with the Corporation. I understood that one of the reasons—it came out in discussions or in evidence—why the Minister's confidence in Sir Matthew Slattery and Sir Basil Smallpeice did not remain as high as it had been was that they did nothing to adjust themselves to the demands of the White Paper to produce a scheme showing how much the Corporation would earn on its capital. They could not, however, have been more reticent than the Minister has been over the past few weeks about how he will deal with the £80 million or what compensation he will give to the Corporation for causing it to fly VC10s when it wants to fly Boeings. Without this, the most vital piece is left out of the jigsaw.

My view is that the £80 million should be written off. There is no point in keeping the £80 million debt, a lot of which arises from mistakes in Government policy, when it incurs interest at the rate of £4 million a year and when it will merely produce a sense of financial hopelessness and demoralisation throughout the Corporation. The Minister's only reason for wishing to postpone action concerning the £80 million can be the hope that another Government will have to deal with it.

As to the compensation for imposing upon the Corporation an aircraft that it would not ideally choose to fly, my view is that the hardest possible calculation should be made of the difference, both in capital cost and in operating cost, and that a once-for-all capital subsidy on the cost of the 'plane should be given at the time of purchase. I would not give an open-ended subsidy to the Corporation; that would defeat the need for financial stringency throughout the Corporation. Equally, however, it would be quite unfair and totally at variance with the directive given to Sir Giles to proceed without compensating the Corporation in these ways.

What is the correct course for the future? To some extent, some of these points have emerged from what I have already said. The first step is to write off the £80 million. Secondly, as to routes and the number of aircraft required to fly them, the report of the new Chairman should be fully accepted. Certainly to interfere in any way with his prerogative for the deployment of aircraft would be grossly to interfere with the functions of management in a way that he would find intolerable.

Thirdly, what sort of aircraft should the Corporation fly? Whilst being, perhaps, a little less optimistic—economically, not technically—about the VC10 than some hon. Members, on both sides, I am inclined to the view that the present arrangement is a hopeless compromise which will not help Vickers or the aircraft industry very much and will leave B.O.A.C. with a tiny and, therefore, uneconomic fleet of aircraft. Accepting, reluctantly, the position into which we have got, it would be better, once the Super VC10 has proved itself in flight to a somewhat greater extent—I would do it reluctantly, but I still think that it would be the better course—to require B.O.A.C. gradually to sell its Boeings, for which I think that a good price could be obtained, and to move towards a larger VC10 fleet, so that by that time the schedule of production at Weybridge could be accelerated somewhat. I think that there would still need to be a few cancellations, but it would be possible in that way to move towards a position by the threshold of the supersonic age of having a fleet of 12 Standard VC10s and approximately 27 Super VC10s. Fourthly, compensation worked out in a hard way and given once and for all would have to be provided for this.

What are the lessons which should be learned from this difficult situation which has been reached? First, I do not think that either the industry or the Corporation should go in for any more projects tied to a single customer. That would be a mistake and would lead to difficulties. Secondly, while I am broadly in favour of enlarging the market and going into partnership with our neighbours, I think that a very hard look should be taken at the Concord project. The costs of that are mounting enormously. It is not certain what the future of supersonic travel is or what the Americans will do. I am not saying that the project should be cancelled, but it should be looked at very carefully because we do not want a repetition of the VC10 story in a few years' time.

The last detailed point seems to me of overwhelming importance. It is continuity of management in B.O.A.C. Almost any single chairman would have done the job better than the four who have been put in one after the other with bewildering rapidity over the last eight years. I suppose that we cannot expect continuity in Ministers of Aviation. I am not sure that I should want it. But, if one cannot get that, this is an additional reason for having some form of substantial continuity at the other end of the scale. Another essential point is that B.O.A.C, almost at all costs, should be given something like the continuity of management in future which B.E.A. has had in the past.

One task of the Minister, or the new Minister, should be to try to restore confidence between his Ministry and the Corporation. It is sadly lacking at present. One of the most important ways to try to do that—and I am sorry that the Minister is not here for this part of what I have to say—is to avoid deviousness and secrecy. There has been far too much secrecy. There was the Swash Report, which was shown to the Chairman of the Corporation only on condition that he did not show it to anybody else. There was the Corbett Report which was not even shown to the Chairman who was in office while the Report was being made. There was secrecy about the change of chairmanship last autumn. As I say, there has been too much secrecy and too much deviousness, and one's back should be turned on this.

Secondly, it is desirable that British Airways Corporations should fly British aircraft as far as possible. B.E.A. has done it successfully, but its problems have been much easier. Things have been much easier for short-haul aircraft operating largely in non-competitive conditions. One would like B.O.A.C. to be able to do this, provided the price for it is not too high. We do not want it done at the expense of B.O.A.C. flying aircraft which it does not really want or at the expense of the aircraft industry producing aircraft purely to B.O.A.C.'s specification which have not a real chance of being sold in the world market.

It is a difficult problem to reconcile these two things. I do not think that it can be done by manufacturing aircraft specifically related to one order from the Corporation. But the Minister, if he is not very careful, will produce the solution, not of saving the Corporation at the expense of the industry or saving the industry at the expense of the Corporation, but of dragging them both down together.

6.33 p.m.

Sir Lionel Heald (Chertsey)

I know that a number of hon. Members wish to speak and, therefore, I propose to confine my remarks to one topic only, namely, the Minister's decision, and to the limited aspect of that decision which concerns the workers and all those engaged in the production of the VC10 at Vickers. I make no apologies for doing this because this is a matter which concerns my constituency. More than 5,000 of my constituents are directly engaged in the production of this very fine aircraft. This is not a political matter in any way. It is a human and industrial question. The people at Vickers have great anxieties.

and I should like to explain briefly what they are and to ask that more consideration should be given to them than, I think, has been the case.

I say at once that I supported the Minister's decision in principle, because the first essential was to overrule the demand that the VC10s should, in effect, be scrapped and that American aircraft should be substituted. That was a disastrous suggestion against which we had to protest in the strongest possible way. In principle, the decision which was made was the right one, namely, that work on the 20 aircraft in production should continue and that those in suspense should remain in suspense—in other words, that no new decision should be made—and, above all, that there should be no question of cancellation. As I say, this was the right decision and I believe that we are almost unanimously in favour of it.

There is, however, very much less certainty, and there is great anxiety, about the way in which the decision is to be implemented. The announcement made by my right hon. Friend the Minister of Aviation on Monday was in these terms, that Sir Giles Guthrie will take seven to meet his estimated requirements up to 1967 and subsequently a further 10. A little later he said: Work will, therefore, continue as planned on 20 of the 30 Super VC10s ordered by B.O.A.C."—[OFFICIAL REPORT, 20th July, 1964; Vol. 699, c. 41.] As it was made, it appeared that that statement would not cause any grave dislocation, inconvenience or difficulty at Vickers. Now it appears that there is considerable doubt about whether it is true to say that work can continue as planned or, at any rate, that the aircraft when finished will be delivered at the time that they would normally be delivered. That is a very serious matter.

I regret very much to find that the uncertainty has led at least one newspaper—the Daily Mail—to make the most alarmist statements on the subject. I know from my constituency that this has caused great disquiet. I should like to read what was said in a leading article which appeared last Tuesday morning after my right hon. Friend's statement: Vickers are unhappy because the decision that B.O.A.C. is to take seven VC10s as arranged, ten someday-never, and cancel ten almost certainly is a death blow to the commercial hopes of this fine aircraft". That was not even an accurate statement of the decision in principle. It was, However, much worse than that. It was, in effect, a statement that this would be a disaster for the VC10. Today, in the same newspaper, there are observations and a caricature which quite clearly suggest that this will be the end of the VC10. That, surely, was a disastrous statement.

I believe it is necessary that further consideration should be given to this matter because—and I wish to use as measured language as possible—those at Vickers who are engaged in this great task are afraid of what may be done if it is left to Sir Giles Guthrie and B.O.A.C. to decide when, how and under what circumstances they will take delivery. That is a matter which should be controlled by the Minister in such a way as would have the approval of the House because it is clear that the view has been taken by hon. Members—the hon. Member for Birmingham, Stechford (Mr. Roy Jenkins), with his great knowledge of these matters, made this clear—that there is, at any rate on the surface, the probability that the whole production system will be thrown out of gear unless Vickers produce the aircraft as planned. So that that is surely a matter which ought to be gone into.

I should also say that I do not wish to enter into all the controversial discussions about what has happened in the past, but I am bound to say that all those engaged in the production of the VC10 have been badly shaken by the way in which this matter has been handled by the Chairman of B.O.A.C. since he came there. On the day he took the chair first there was in The Times a large photograph of Sir Giles Guthrie standing in front of a VC10 and saying, "This is surely a magnificent aircraft". In March when the proving flights were taking place and many of us had the privilege and the most exciting and delightful experience of flying to Khartoum and back in a VC10, there was a full-page advertisement of the VC10 from B.O.A.C. in The Times, and when the first flight took place under B.O.A.C. auspices there was another full-page advertisement which said: This is the VC10. You can now travel in it. It puts B.O.A.C six years ahead of any other airline in the world. It causes grave concern, naturally, when one reads some of the statements that have been made; and, of course, very often the way in which those statements have been reflected by commentators has made the matter much worse, and all over the world people have had their confidence shaken.

I believe that it can be restored. I remember that when I first went to Chertsey we had the Viscount which had actually been cancelled. It was dead for all practical purposes. Well, that great enthusiast and very fine designer, Sir George Edwards, got into contact with Lord Douglas and Peter Masefield and between them they got it going again. We all know what happened. Within two years 78 had been ordered and altogether 500 Viscounts were manufactured and sold, and I personally have never felt more proud than when I was flying from Chicago to Washington in a Viscount with two American businessmen sitting next to me and one said to the other, "Well, you have got to admit this is the finest aircraft you and I have ever been in. "To have that experience in America was a very remarkable thing.

I believe the same thing could happen and should happen, and I think we should see that it does happen, in relation to the VC10, but it certainly cannot happen if the VC10 production line is disturbed, if the company loses its fine craftsmen and if it is quite uncertain as to what its position is going to be in five years' time. So I appeal to my right hon. Friend to look into this matter and to insist upon this being dealt with in such a way that is not going to damage the VC10, still less to bring about the terrible results which have been quite seriously forecast in certain newspapers.

I believe it can be dealt with by various suggestions that have been made. I do not feel that I should delay the House by repeating them. I have no doubt whatever that those who are responsible at Vickers have suggestions to make, and I would ask that they be considered with a completely open mind and that we should not, after what has happened, permit B.O.A.C. to dictate the time at which these VC10s are to be delivered. It is a matter for investigation—a matter for discussion. The suggestion made by the hon. Member for Stechford was one which it seemed to me ought to be con- sidered. I hope that it will be possible to deal with the matter in that way.

6.45 p.m.

Mr. Austen Albu (Edmonton)

The right hon. and learned Member for Chertsey (Sir L. Heald) is right to express the anxiety of his constituents, but he must put the blame where it really rests, and that is very largely with successive Ministers of Aviation and also with previous Ministers of Transport and Ministers of Supply. I must say that the suggestion that the Minister should take responsibility for the rate of delivery seems a useful suggestion, but the right hon. and learned Gentleman made no suggestion about how it was to be paid for. It is really surprising that hon. Members opposite, who tend to consider themselves to be the safeguarders of the taxpayer, seem in these matters to take no interest whatsoever. I think we are indebted to the right hon. Member for Guildford (Sir R. Nugent) for his very fair-minded speech today which explains the reason for the unanimous Report of the Select Committee, which I hope the House has found useful.

In the course of my remarks I shall be rather more critical of the Minister than he was, not because I do not recognise, as my hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins) has clearly recognised, that the Minister faces a very difficult decision but because, in my opinion, he and previous Ministers have refused to admit that the problems have been there and have made no atempt to deal with them. The Minister, in opening, stuck very closely to the record and gave his own view of it, but, as my hon. Friend pointed out, many parts of his speech showed that he realised that what he was saying was by no means the whole story. Nor was it the whole story in the view of the members of the Select Committee.

In discussing an industry like the aircraft industry, and in discussing its production, there is a lot of wishful thinking. A great number of public relations speeches are made—in this House as well as outside—and people are unwilling to face the real facts of the situation. What we in this House cannot do is to decide whether the VC10 is or is not a good aircraft. It is simply not within our competence and we have no responsibility for doing it, but I think that Members of Parliament have a right to point out that a design is not a good design, not a good engineering design, just because it happens to fly well and pilots like it. It is a good engineering design if it is economic. There is an extraordinary amount of public relations talk which implies that because an aircraft is technically good it is therefore commercially good, but an aircraft, like any other piece of capital equipment, is made to make money. If it does not make money, or as much money as a competitive aircraft does, it is not a good piece of capital equipment and no number of letters to the Press, some of them quite extrordinary, or of speeches, or of wishful thinking, can turn something which is not commercially good into something which is commercially successful. But that is the sort of view which one has come to expect of one of the largest spending Departments with hardly any control in the country, the Ministry of Aviation.

We have been discussing two main questions. One is, who was to blame for the VC10 order, for the Corporation ordering an aircraft it does not now consider suitable, and in numbers in excess of its wants. Secondly, we are considering whether the airlines should have any special responsibility in assisting with the development of British civil aircraft.

One thing the Select Committee makes clear is that the full responsibility for the orders, for the quantity and the form in which the orders were made, was by no means clear. B.O.A.C., already confused by the failure of the Comet, undoubtedly under-estimated the speed of the introduction of big jets, the speed at which runways could be lengthened to take those jets and the speed of the growth of newly independent countries wanting to have subsidised airlines of their own. We had no evidence whatever that at that time the responsible people at the Ministries of Supply and Transport thought differently. There is some slight evidence of Vickers thinking at that time that big jets were coming in, but the company did not press the view very hard, and certainly the Government Departments concerned did not think so. In 1957 B.O.A.C. thought it had a requirement for a medium-sized aircraft for shorter runways and also thought, as has been pointed out several times, that the 15 Boeings it was then being allowed to buy for the Atlantic routes were the last foreign aircraft that the Corporation would be allowed to buy.

Attempts have been made to blame B.O.A.C. for not proceeding with a previous aircraft, the Vickers 1000, but that was a military aircraft, and it was turned down by the Royal Air Force, which, like B.O.A.C, bought Britannias. B.O.A.C. could not support the development of that aircraft alone and in any case did not think that it was economic.

When we came to the VC10 requirement, B.O.A.C. was not allowed to have the design that it wanted. It would have preferred an aircraft more like the Boeing which was then being developed, but was forced by the only supplier available in this country to take the rear-engined machine, which, as it turns out, seems likely to be more expensive to operate.

Mr. Maxwell-Hyslop

If the hon. Gentleman is putting this forward as a general principle, could he tell the House why Boeing has adopted it for the 707 and Douglas for the 729?

Mr. Albu

They are a completely different type of aircraft. We are talking of long-haul aircraft. The hon. Gentleman has referred to short-haul aircraft. In any case, I am not an aircraft engineer. I am only giving the history as it came out before the Select Committee.

Because Vickers could not start without a firm order for 35 aircraft, B.O.A.C. allowed itself to be persuaded to take more aircraft than it needed. We formed the impression in the Select Committee that it then went out to find routes on which to fly them and produced a report which showed that it could take a substantial number. But it was clear that it never set out to find those routes until it was obvious to it that it would have to take a large number of aircraft.

If anyone has doubts about the atmosphere in which all these discussions took place, I would remind the House that all these negotiations took place under the chairmanship of Sir Gerard d'Erlanger, who, as my hon. Friend has pointed out, said that the Corporation was there to support the British aircraft industry. I will read the whole of the evidence on this point. Sir Matthew Slattery was told by Sir Gerard d'Erlanger: I am very surprised at the argument that is going on, and very upset about it, because I never believed that it was the Corporation's job to make profits. The Corporation was there to support the British aircraft industry, to develop the routes round the world, and so on. My difficulty was to do that without letting the personnel in the Corporation feel that money did not matter, and that they did not have to be businesslike. It was some time after that that Sir Matthew, trying to get a clear definition, asked the Minister what the real policy of the Corporation should be.

I suggest that this view of the matter was confirmed by the later Government decision in 1959 to bring the control of the airlines under the Ministry of Aviation, the same Department as is responsible for the industry which produces the aircraft. Why, if this were not the view generally held in the Government, was it necessary to remove control of airlines from the Ministry of Transport and put them under the control of this very expensive spending Department, the Ministry of Aviation, which is one of the largest lobbies, perhaps rightly, for the aircraft industry?

I do not think there can be any doubt that the present Secretary of State for Commonwealth Relations in January, 1960, brought pressure on the Corporation to help Vickers out of the financial difficulties that it had got into by developing the aircraft and to help him in bringing about an amalgamation of the industry. The evidence is there that Sir Matthew Slattery tried to stop the extra order being placed, but Sir Gerard d'Erlanger told him that it was too late. He was under very strong pressures because of the Minister's plans for amalgamation of the industry.

It is nonsense to pretend that the Ministries responsible—the Ministry of Aviation and previously the Ministries of Transport and Supply—were not in continuous and close discussions with the Corporation. The Select Committee's reports have brought out how very close the discussions continuously were. There is no doubt in my mind that, as in other nationalised industries, the arms of the Chairman of the Corporation were being continually twisted by successive Ministers, quietly and politely no doubt, but still being twisted, and there is no doubt that at that time the Chairman was under very severe pressure from the Minister.

Then there is the very confused rôle played by the Transport Aircraft Requirements Committee, a body examined both by the 1959 Select Committee and by the Estimates Committee in this Session. The Select Committee in 1959 thought it was a rather more important body than I think the Estimates Committee did this Session, but both of them drew attention to the fact that its terms of reference were very unclear and it did not seem to be very effective, but it must have played some part in all these discussions, which shows that the choice of the aircraft was by no means that only of the Corporation.

B.O.A.C. has never behaved, nor I believe was expected by the Government to behave, as an independent airline in a country without an aircraft industry. Successive Ministers have shown an appalling degree of irresponsibility towards the problem that is created by the existence of a large civil aircraft industry in this country, and they have continually expected the airlines to take decisions in support of the industry which should really have been taken by the Ministers themselves. On this point, no notice was taken of the recommendations of the Select Committee of 1959, which demanded that the responsibilities of the Corporations and the Ministries should be clearly defined.

One of the reasons, as has partly been pointed out already, why the Minister of Aviation was able to exercise a much stronger influence on B.O.A.C. than on B.E.A. was the continual chopping and changing of the Board of B.O.A.C. At the relevant time, when these negotiations were first started and brought to a conclusion, B.O.A.C. was under a part-time chairman and had only two full-time members on the Board. When the Board was strengthened under Sir Matthew Slattery by five full-time members Sir Matthew was sacked. The only continuous member of the Board was the managing director, Sir Basil Smallpeice. I consider that he has been extremely shabbily treated. He was a man with very high ideals of public service, and I believe he was sacrificed because he misunderstood a policy which no Minister ever had the courage to define.

On the question of the nature of the Board, I strongly disagree with the views expressed by Lord Reith, although in his recent letter to The Times there were some matters on which I could agree with him. His view was that there should not be any executive members of the Board. This may be all right for the B.B.C. or advisory bodies, but I know of no large commercial undertaking without a substantial core of full-time executive members within its Board. Unless the Corporation is to be the feeble creature of the Minister, it needs a strong and stable Board with a high proportion of full-time members, some with functional responsibilities.

I turn to the second question which I think we are mainly discussing—should the airlines consider it as part of their duty to assist the aircraft manufacturing industry? I think that the answer is, "Yes, provided that the responsibility for planning the industry is that of the Ministry of Aviation and provided that the Corporations are recompensed for any financial liabilities which they occur in supporting the aircraft industry in matters which are not strictly within their commercial interest." After all, both airlines have played their part pretty gallantly. But I really wonder whether it has entirely paid them. It may have paid our balance of payments, it may have been in the national interest, but has it paid the Corporations? If it has not, this ought to be made quite clear.

The only successful commercial airliner that has been produced and has been put in operation by one of the Corporations is the Viscount, and no successful aircraft has been produced in long-range heavy jets.

I am interested to learn that the Chancellor will wind up; I should have thought that it was about time that he came into the whole picture. Has any Department of the Government or has N.E.D.C. ever made an assessment of the true value of the vast support we give to the aircraft industry?

It is true that its exports are about £100 million a year and that there is some saving on our balance of payments in flying British aircraft—perhaps worth another £20 million. But two-thirds of these exports are in engines and we do not know how much of the balance of £40 million is in civil aircraft. The Board of Trade's figures for the industry include things like missiles and even balloons, but we do not know the value of civil aircraft exports and we are never allowed to know, because, apparently, it is considered to be a matter of security. The figure cannot be very large.

Since 1960, subsidies totalling £49 million have been given to the aircraft industry to support the development of civil aircraft and the figure is probably running now at a level of £20 million to £25 million a year. In addition, enormous sums were spent by the Government on the analysis of the Comet failure and the cost to B.O.A.C. of that failure is now appearing in its account and will have to be paid for by the taxpayer. Then we must add to this the subsidy now to be paid to B.O.A.C. for the higher operating costs of the VC10, for the purchase of aircraft it does not want—and for Vickers for stretching out the deliveries.

My hon. Friend the Member for Stechford referred to the Concord. It is now estimated that this will cost us £140 million—double the original estimate. No one believes that we shall get it for less than at least £200 million each from France and Britain. In a debate on the aircraft industry in July, 1959, I quoted various estimates made at the time, of what it might take to develop a supersonic aircraft. Estimates of the cost then ran from £100 million to £600 million. Mr. Peter Masefield, whose view must be respected, thought that the cost would be about £300 million. I doubt today whether we shall get out at under £400 million to £500 million between us.

There is no hope of recovering a fraction of this development expenditure within the selling price. The only effect of the development of this aircraft will be to increase flying costs and accelerate depreciation of the subsonic jets. Nor do any of the airlines want a supersonic aircraft. Of course, they are placing orders for them because they must do so. In effect, they are taking out insurance policies. On this matter I quote the opinion of Sir Giles Guthrie himself. I asked Sir Giles: If I may, my point is if from a commercial point of view you would have wanted a supersonic aircraft at the time when this one is going to come into operation? Sir Giles replied: No, we would not. On the other hand, you cannot stop progress. That is the general view of airlines throughout the world. Apart from the very great technological and sociological difficulties the aircraft is facing, a warning on this matter was given by the Select Committee in 1959. I know the arguments about developing the Concord. I cannot be accused of being unsympathetic to arguments about technological and scientific advance. Certainly there is a case for really advanced large-scale engineering products to encourage our most advanced engineers and scientists and to give them challenging work to do.

But we have to ask ourselves, in view of the enormously rising expenditure on the development of civil aircraft—and one must include all the subsidies that are to be paid to B.O.A.C, the cost of failures in the past, and so forth—what serious estimate has been made inside the Ministry of Aviation or any other Government Department of the future market for British aircraft. That is not the responsibility of the airlines. It is the responsibility of the Ministry. In my opinion, the question has been quite irresponsibly shirked by successive Ministers and Administrations, during a time when the Government have been pouring money into the industry.

Now I come to the behaviour of the Minister himself. He has shown all the symptoms of a weak man. He has acted against all the canons of good business and good public administration. In spite of the obvious joint responsibility of B.O.A.C. and the Ministry for the present situation, he has refused to accept his share. He has instituted two inquiries into B.O.A.C. and has refused to show the results either to hon. Members or to those who are responsible in the Corporation. These actions are against all the principles of decent management.

The attempt which I understand he made to introduce the Corbett Inquiry into B.O.A.C. secretly, without anyone inside B.O.A.C. knowing that it was going on, was, of course, not only, as my hon. Friend the Member for Birmingham, Stechford said, a cloak and dagger operation but an example of the worst and most unscrupulous type of business management, and from the managerial and administrative point of view utterly despicable.

Such completely unnecessary secrecy is utterly damaging to the morale of an organisation. Anyone who has anything to do with consultants in management knows that one cannot find anything out about an organisation or assist in improving its performance unless one works in co-operation with the executive management of the undertaking. Any attempt by directors or anyone else to put in private spies to find out what is going on inevitably leads to failure.

Now I come to the Minister's attitude to Sir Matthew Slattery. Sir Matthew told him and his predecessors the truth and tried to get the right hon. Gentleman to face reality by issuing clear terms of reference and allowing B.O.A.C. a fresh financial start. Most of the causes of the losses which had occurred were being corrected while Sir Matthew was in office—for instance, those caused by the overseas subsidiaries.

The Minister refused to make it possible for Sir Matthew Slattery to run B.O.A.C. on commercial lines and then sacked him. Then the Minister gave to Sir Matthew's successor exactly what he had refused to Sir Matthew. I am glad to say that sometimes people get the punishment they deserve. The Minister's behaviour has recoiled on his own head. He is shown up to be shifty and incompetent, but, luckily, he will not be here very much longer.

7.7 p.m.

Colonel C. G. Lancaster (South Fylde)

If I do not follow the hon. Member for Edmonton (Mr. Albu), certainly in the latter part of what he said, it is not that I underrate the importance of what he has said. No one who has worked with the hon. Gentleman as long as I have on the Select Committee would at any time do other than give full credit to the knowledge and experience that he brings to bear on the problems that we have to consider from time to time. I want, however, to deal with other matters.

The question of the VC10 has been fully covered, and I want to talk about the work of the Select Committee and how it bears on the sort of problems we are discussing. This is a unique occasion, since it is the first time that we are discussing a Corporation which has had two investigations by the Select Committee.

When we started this rather short inquiry of six months, we had some advantage inasmuch as we could look back to the work we did in 1959 and this was of considerable help. Additionally, we have had the great advantage of being able to have our Report debated within a few months of presenting it to Parliament. The significance of that can best be illustrated by what happened when, about four years ago, we spent a year on an inquiry into the gas industry. Probably the financial implications of that inquiry were as great as, if not greater than, the matter we are discussing today. It took three and a half years before we had an opportunity to discuss that Report in Parliament. We did so on a Friday afternoon and we were given only one hour to debate it. At least we have had an improvement on that today.

We began our inquiry at a very important moment in the history of B.O.A.C. There had been two inquiries—the Swash inquiry and the Corbett inquiry, which had just occurred, and Sir Matthew Slattery and Sir Basil Smallpeice had been dismissed and Sir Giles Guthrie appointed. I say at once that we found a complex and in many ways disturbing situation.

At this stage, I should like to make one or two general observations about the work of the Select Committee. We find that over a period of time we begin to recognise the problems which the great corporations themselves are creating. With the advance of technology, the strains on Departments become greater. Departments have to give advice to Ministers on matters which year by year become more highly technical. Examples will spring to the minds of most hon. Members.

The Ministry of Power at this moment has to take a decision in conjunction with the Atomic Energy Authority as to the type of reactor which ought to be bought. This is a highly technical matter. Whether we are to take the British gas-cooled reactor or the American water-cooled reactor is a very complex question. Departments in no way fitted to give an opinion have to advise Ministers, who in turn have to take decisions which may involve tens and sometimes hundreds of millions of £s.

Further down the line, Parliament, which eventually has to pay the piper, usually has very few opportunities to consider these matters in any detail. All that is open to the average Member is that he can ask a Question which does not infringe the administrative responsibility of the Corporation concerned. Eight or nine months after the year concerned, he can scrutinise the report and accounts of a public corporation and possible debate the issues six months later. From time to time, he might be able to take part in discussions about borrowing powers. If he feels strongly, he can oppose the granting of these borrowing powers against the advice of the Minister concerned and in the last resort not consent to the additional finance.

But meanwhile all sorts of things are going by default. We recently investigated the electricity industry, and in that investigation we found that all sorts of matters which ought to have been known to Parliament were being overlooked. It was only by chance that we undertook that particular investigation at that particular moment. I think that it was Lord Reith who said the other day that the relationship of Parliament to these great corporations would require a great deal of thought. Unless something is done, we shall be helpless in the face of these immense expenditures over which we can have little or no control.

I now come to a contentious aspect of today's discussion, the matter of the Swash and Corbett Reports and the evidence about the amortisation of aircraft which was denied to the Select Committee. K the Select Committee is properly to do its job on behalf of Parliament, it should not be hampered in its work. To say, as the Minister might, that we would draw from these Reports inferences which he himself had not drawn is in some way a reflection on our good sense. We are perfectly capable of drawing sensible and intelligent inferences.

It may be said that much of the Reports themselves was confidential. But in the ordinary course of our work we get many confidential facts and figures put before us and we have to use our discretion about which of them should come out in our Report. I think that it can be shown that we have never exceeded our discretionary powers. Indeed, it is only Parliament itself which can give us the right to see these reports and, if we were not a discreet Committee, Parliament itself could withdraw those powers. Meanwhile, Parliament should give us these powers if we are to bring out reports which provide an opportunity to consider a matter in its full context.

We were shown some part of the Corbett Report. We gave it a mixed reception, mixed not in the sense that our views were divided, but in the sense that we agreed with it about maintenance and engineering costs and so on and disagreed in other respects. These costs had been reported very effectively by Sir Matthew Slattery three years before and we had reported on the subject five years before. What the Corbett Report did in that respect was merely to confirm two previous reports.

We were sceptical about its financial recommendations. It may not be altogether fair to criticise the Corbett Report in this respect, because we were shown only a part of it, but that part was both flimsy and superficial and we thought that it reached a number of conclusions on very slight premises. If the rest of the Report was no better than the part we saw, the Minister got very little value for money.

Beyond that, I do not want to go very far. The matter of the VC10 has been fully covered. I agree with the hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) that my right hon. and learned Friend the Member for Chertsey (Sir L. Heald), and I should like there to be a decision before too long to sell the Boeings and to concentrate on the VC10s. I am not an expert on aircraft, but I have had the opportunity to fly in the VC10 and I must say that it was most impressive. It took off and landed very quickly and it was very smooth, quiet and comfortable. It has the ingredients of a first-class aircraft. It is deplorable that it should have had this adverse publicity, both political and in the Press, and, like every other hon. Member, I wish it well.

I hope that it will not be thought invidious if, as the senior member of the Select Committee, I pay a genuine tribute to the work of my right hon. Friend the Member for Guildford (Sir R. Nugent), who was Chairman of the Select Committee during the time when it produced its last two Reports. He has worked immensely hard himself and has given a first-class lead to those of us who have worked with him. He has been patient, sensible and helpful, and if we have brought out a good Report, a great deal of it is due to his work.

I should like finally to comment on the evidence given to the Select Committee by Sir Matthew Slattery and Sir Basil Smallpeice. It would have been understandable and perhaps natural for some rancour to have shown itself in their evidence. There was none whatsoever. They comported themselves like men, and it was enormously to their credit that they should have done so.

As we all do, I wish the VC10 well. I hope that it will go from success to success and I hope that its success will be followed by an improvement in the standards and results of B.O.A.C. itself.

7.20 p.m.

Mr. Niall MacDermot (Derby, North)

It is a pleasure to follow the hon. and gallant Member for South Fylde (Colonel Lancaster). I agree with every word of his speech. Those who did not have the pleasure of being on the Select Committee have had only a very short time in which to study the fascinating evidence which was published last Monday.

We still do not have the full facts, and we never will. This is partly because it is clear that a number of witnesses engaged in an exercise of self-justification, and partly because of the refusal of the Government to come clean, and in particular their refusal to publish the Corbett Report. I fully agree with all the criticisms which have been expressed on this subject, and it seems to me that in doing this the Government have shown a contempt for this House and for the Select Committee which ought not to be allowed to pass. Nevertheless, enough has been revealed in this evidence for us all to be able to say that we agree with the general conclusions reached by the Select Committee, and with its strictures both on the Corporation and on the Government for the vacillation, muddle, and confusion which has resulted in this mess, as my hon. Friend the Mem- ber for Birmingham, Stechford (Mr. Roy Jenkins) described it. There is no doubt that this mess has bedevilled the Corporation's operations over the last 10 years, and I fear may have done great harm to our aircraft industry. I should perhaps declare a constituency interest in this matter because many of my constituents, like those of my right hon. Friend the Member for Derby, South (Mr. P. Noel-Baker), are engaged in making the Rolls-Royce engines which power the VC10.

Having examined the evidence, in my view the greater share of this blame should fall on the Government, and should be laid at their door and at the door of the series of inept Ministers of Transport who have been dealing with these problems. The present Minister is the last in this sad series, but I do not think that we can even pay him the compliment of saying last but not least.

It appears to me that these Government failures fall broadly into three categories. First, and most important, the failure by the Government to give any adequate policy directions to successive Chairmen, especially on the question of the extent to which the Board should be governed by purely commercial considerations. In reply to Questions after his statement last Monday the Minister said: What I have always sought is that the Chairman of B.O.A.C. should give us his judgment of what is the commercial solution and that he should not seek to determine what the national interest is."—[OFFICIAL REPORT, 20th July, 1964; Vol. 699, c. 48.] That may be admirable advice, but I am unable to find that either he or his predecessors ever told that to any Chairman before his letter of 1st January of this year. Indeed, I think the Minister agrees that no such guidance or direction was ever given, and he seeks to defend that by suggesting that it was unnecessary, and by quoting one or two phrases by various Chairmen saying that they had in mind the importance of commercial interests. The point is whether any one told them that they were to be guided solely by commercial interests, and that they were to put out of their minds what they might think were national interests and not have regard to them, because apparently this is what the Minister is suggesting they should do.

Sir Matthew Slattery's memorandum of August, 1962, to the Minister, which is published with the evidence, says in terms: The Chairman's view is that it will not prove realistic for the Corporation to be purely commercial in its outlook. In my view that is obvious common-sense, and to ask the Corporation to try to put national interests out of its mind and adopt a purely commercial approach is in itself unrealistic. The point is that the Minister was told this in writing in August, 1962. In those circumstances, how can he pretend that there was no need to correct that view on the part of the Corporation?

Sir Matthew's predecessor—and this has been quoted already—told him: … I never believed that it was the Corporation's job to make profits. The Corporation was there to support the British aircraft industry, to develop the routes round the world, and so on. How could the Chairman of the Corporation have got that idea into his head if there had been proper, full, and frank discussions between him and the Minister, and successive Ministers, and they had made it clear to him that he was to be governed in his thoughts solely by commercial considerations?

The second head of criticism against the Government is that they have failed to make up their own minds, let alone give adequate guidance to the Corporation, on the vital questions of national policy involved in the Corporation's affairs. I shall develop this theme later, but to illustrate it I point out that as recently as 1st January, in his letter to the new Chairman, the Minister said: The choice of aircraft is a matter for the Corporation's judgment. He went on to make the qualification which he read to us earlier this afternoon, that the Government hoped that the Corporation would buy British, but asserting that the choice would lie with the Corporation. The events of last Monday show quite clearly that the Minister is not bound by his own directive. I am not suggesting that he should be. All I am saying is that that illustrates a lack of clarity on the part of the Government in making up their own mind as to what their approach should be.

Thirdly, the Government have failed to give the Corporation an effective Board. By constantly changing the Chairman they destroyed continuity, and by having far too many part-time members in the early stages—what Sir Matthew Slattery called the once-a-month members—they ensured that the Board would be incompetent to evolve a properly thought-out policy.

These failures are not merely the result of personal incompetence on the part of successive Ministers of Aviation, but spring from the inability of the party opposite to give consistent and wholehearted support to a nationalised industry, particularly when it is performing a vital, but not inherently profitable, service in the national interest.

The problem here arises from the £80 million deficit over a period of 10 years. This problem sprang from the tragic development of metal fatigue in the airframe of the original Comet. We should get this sum into its proper perspective. As Sir Matthew Slattery said to the Select Committee: The two Corporations "— that is B.O.A.C. and B.E.A.— have created the British civil aircraft industry in this country; but for them there would be no civil aircraft industry, no Rolls-Royce engines selling all over the world, no VC10s, no Comets, no Britannias, no Viscounts, none of that. If you look at the earnings you will find, I think, that if there had been no B.O.A.C. over the past few years our balance of payments would have been £65 million a year worse, because that is the amount which is earned in foreign currency. That is by B.O.A.C. alone.

Apart from the £65 million which B.O.A.C. earns in foreign currency, the aircraft industry has earned enormous sums in exports. The total exports of aircraft and engines over the last 10 years exceed £1,000 million, and of that more than £500 million represent engines and spares. I cannot give the figure of civil aircraft separately, because it is not published separately, for security reasons, but I suppose that it must amount to at least two-thirds of the total.

In the light of that, let us suppose that we had to face the drain of an annual deficit on the part of B.O.A.C. I am not suggesting for a moment that we should. On the contrary, it is my view that, given proper direction, proper management, and proper support, B.O.A.C. once again can become a profit-earning nationalised Corporation like its sister Corporation B.E.A. and like the fuel and power nationalised industries.

But suppose that we did have to face that drain. I suggest to the House that it would not be a national disaster of itself. Indeed, the alternatives, which would be either to wind up B.O.A.C. or else let it abandon the British aircraft industry, would be far greater disasters for us to face. I suppose that is what hon. Members opposite like the hon. Member for Bournemouth, West (Sir J. Eden)—I am sorry that he is no longer in his place—would want us to do. Last Monday, he told the House that he considered that the basis of the present trouble was nationalisation. I suppose that he would prefer a purely commercial approach to that of a national corporation acting in the public interest.

If Sir Giles Guthrie's proposals, which have received such unwelcome publicity recently, are an indication of what would be the free enterprise approach to the problems of B.O.A.C, I suppose the result would be that we would cancel the VC10 orders, pay the penalty and buy American. I think that we have heard this policy enunciated before rather succinctly—"It may be anti-British and derogatory to sterling but it makes sense to me."

Mr. P. Williams

For the sake of accuracy—I suspect the hon. and learned Gentleman may not have told my hon. Friend that he was going to refer to him—when my hon. Friend the Member for Bournemouth, West (Sir J. Eden) referred to this issue he was referring to the aircraft industry and not to the operating industry.

Mr. MacDermot

Perhaps the hon. Member will read the passage which I have here. What he was referring to by that phrase was clearly B.O.A.C. He said: The Labour Party has only one solution for the British aircraft industry, which is nationalisation, which is the basis of the present problem."—[OFFICIAL REPORT, 20th July, 1964; Vol. 699, c. 47]— the "present problem" being the £80 million deficit of B.O.A.C. He was suggesting that was the result of nationalisation.

My constituents who make the Rolls-Royce engines for the VC10s are, I am sure, very thankful that B.O.A.C. is a nationalised corporation, even under the Tory Government, and will not be subjected to these purely commercial considerations.

I should like to develop for a few moments this question of the relationship between the Ministry and B.O.A.C. and the extent to which B.O.A.C. should be governed by commercial considerations. In my view, it would be utterly misleading, and dangerously misleading, to suggest that B.O.A.C, in all circumstances, can and should be governed by purely commercial considerations. Of course we all want the highest efficiency. We want a hard, tight, financial analysis of any proposal put forward and of all the implications that are involved, and the decisions that are taken should be in the light of a hard, tight, financial analysis.

I think it is quite clear from the Report and the evidence that there has been serious failure in this respect in the past. I should have thought that it was desirable that the financial comptroller should be on the Board. It is clear also that where Government policy and national policy require purely financial considerations to be overridden, proper financial compensation should be paid to the Board. But we would be living in cloud-cuckoo-land if we thought that B.O.A.C. could be left to decide on purely commercial considerations matters which are of vital importance to our national economy.

Take, above all, the vital question of whether B.O.A.C. should buy British. On 2nd December last in the Second Reading debate on the Bill then before the House the Minister said: Of course, Ministries are right to use their influence to try to persuade the corporations to buy aircraft which Government policy wishes to see bought, but there is no obligation on them to yield."—[OFFICIAL REPORT, 2nd December, 1963; Vol. 685, c. 905.] I wonder: does the Minister in the light of the events of the last week really believe that? Of course, there is no legal obligation on the Corporation to yield. Indeed, there is no legal power in the Minister to give a direction to the Corporation to buy specific aircraft, but as the Corporation has to come to the Government to borrow capital it cannot in prac- tice buy any aircraft, British or foreign without Government approval. That was recognised as far back as 1959 in the Select Committee's Report. These decisions have to be taken by the Government. That was shown quite clearly in the events of this week.

On 8th July this year the Minister said in the House: No advice or instruction was given to B.O.A.C. with regard to the VC10 order."—[OFFICIAL REPORT, 8th July, 1964; Vol. 698, c. 396.] Again, can the Minister really believe that? Does the Minister deny Sir Matthew Slattery's evidence, which was adopted by Sir Giles Guthrie, that it was a condition of the Government's permission for the Boeing order that any future aircraft we required must be British, or does he deny Sir Basil Smallpeice's evidence that at the time that B.O.A.C. was considering the VC10 order—I quote Question 1200: we had been told quite flatly by the then Minister that if we did not order British aircraft we should not get any, and there was no other aircraft on offer other than the VC10. It was a question of the VC10 or nothing. Again, Sir Matthew Slattery's evidence in Question 1194 about the design of the aircraft when B.O.A.C. specified for a copy of the Boeing 707 But it was ruled on, as far as I know, political grounds, and maybe on Vickers' commercial grounds as well, that Britain would not copy an American aircraft. Consequently, it was forced off "the optimum economic design" and compelled to have a less profitable rear-engined plane.

I am not saying that any of these decisions by the Government was not a right decision. The point I am making is that they are of necessity decisions of the Minister—in this last case supporting the aircraft industry. It was summed up by Sir Matthew Slattery again in Question 1196 in these words: As far as the VC10 is concerned, with which I was intimately concerned, we were not allowed to have the type of design which we would have liked, and so we had to make do with what was produced. The House will hardly need reminding that when Sir Matthew Slattery was about to take over from his predecessor and asked him not to commit himself on the additional VC10s, the answer he got was, "Oh, I am sorry but it is too late. I have been under very strong pressure to do this. It is necessary for the Minister's plans in connection with the formation of the British Aircraft Corporation. "Again, do the Government deny that? I fear that if they do it is a denial that will not carry very much conviction.

I repeat that I am not criticising the Ministers when they interfere in this way with the decisions of the Corporation. I think it is right that they should and it is their responsibility, but I criticise Ministers when they try, as the present Minister does, when things go wrong, to pretend that they do not influence the decisions and run away from their responsibilities both morally and financially.

I am also criticising hon. Members opposite—I am glad to see that the hon. Member for Bournemouth, West is back in his seat—who try in these circumstances to make political capital out of the Government's own failures by saying that the basis of the present trouble is nationalisation. It is this necessity for Government decision that, in my view, makes the Minister's letter of 1st January this year, of which he is so proud, in itself misleading. The Minister says to Sir Giles Guthrie that it is the immediate task to get the break-even point after meeting interest and depreciation and then adds: How this is done is a matter for you. He says that there is established machinery under which the Corporations seek the Ministry's approval for the ordering of new aircraft but the choice of aircraft is a matter for the Corporations' judgment. We are given to understand from the Press that Sir Giles himself had a hand in drafting this letter. He certainly seems to have thought, when giving evidence before the Select Committee, that that sentence meant what it said. In answer to Question No. 1296 he said that he would expect a written directive from the Minister requiring him to take aircraft which were not of his own choice on commercial grounds. Those are brave words. But we have not heard of any written directive having been given to Sir Giles by the Minister over the decision which was taken last Monday. I strongly suspect that no written directive was given.

I have been left with the impression that all this talk of leaving the Cor- poration free to reach these vital decisions on purely commercial grounds was a mere sop to the anti-nationalisation Cerberuses in his own party. The serious aspect of all this is that these manœuvrings and wranglings between the Corporation and the Minister have been carried on in the full glare of publicity in this way. It has done the maximum damage to the British aircraft industry. I wonder what response B.A.C. will get when it tries to sell the VC10 to other airlines. One can imagine the answer, "Why, your own B.O.A.C. would have cancelled them if they could, and would have paid the £200,000 penalty on each aircraft of the first type, and much more on the present type, and then bought Boeings."

On 2nd December last the Minister said, of the VC10: I think that experience will show that this remarkable aircraft, the quietest in which I have ever flown, will prove a very great commercial success in a very short time from now."—[OFFICIAL REPORT, 2nd December, 1963; Vol. 685, c. 905.] I sincerely hope that that prophecy proves correct. It is a prophecy which would have been shared at the time by the highest and most knowledgeable members of the management of Rolls-Royce, which supplies the engines. Those men had— and I hope they still have—great confidence in their ability to sell this aircraft all over the world, and to achieve with it a success similar to that achieved with the Viscount. But it will be almost miraculous if an equal success is achieved after the way in which it has been publicly pilloried in this unending feud between the Minister and the Corporation.

The question is: what should be done for the future? First, I suggest that the Government should make quite clear—and the Minister went a long way towards making it clear today—that the Government's policy for the Corporation is that it should in all circumstances buy British unless it can produce overwhelming proof that the British industry is unable to meet its requirements. I do not think that the Corporation ever had any real doubt about this.

The antics of Sir Giles Guthrie in publicising his unrealistic plan to buy Boeings were merely a manæuvre to strengthen his hand in the battle with the Ministry over the review of the Corporation's capital structure. I use strong language in this respect because the memorandum of the Corporation, published at page 263 of the Minutes, puts forward by way of discussion the possibility of a similar scheme of cutting drastically the number of aircraft and cancelling the VC10 order. Its own comment—and I assume that this is Sir Matthew Slattery's document—is that a drastic remedy of this sort is just not on. Sir Giles Guthrie must have realised it too, and the Minister also.

Secondly, the Government should accept full responsibility for their own decisions where these run counter to the commercial interest of the Corporation, and should foot the bill honestly. I entirely agree with what has been said about the need for the Government, at an early date, to wipe off the £80 million millstone hanging around the Corporation's neck.

Thirdly, Government decisions in these matters should not be kept secret. They must be publised, but the time at which they are publicised is vitally important. If they concern matters such as the recent dispute over the VC10, which are vital to our aircraft industry, publication should be deferred until the time when the decisions will take effect and when it will not damage the selling prospect of the aircraft. I agree with what has been said so forcefully, particularly by my hon. Friend the Member for Stechford, that the present order for VC10s should be honoured in full as soon as possible, and B.O.A.C. restored to a fully British fleet. The important thing is to restore confidence and real, free communication and co-operation between the three elements which can give us a really thriving and prosperous industry, that is to say, B.O.A.C, the manufacturers, and the Ministry. Given this, I think that we can put this sorry 10-year story behind us, learn lessons from it, and produce again an aircraft industry, on a world-wide scale, second to none.

7.46 p.m.

Sir Arthur Vere Harvey (Macclesfield)

The hon. and learned Member for Derby, North (Mr. MacDermot) did what many hon. Members opposite have done this afternoon; he tried to whitewash B.O.A.C. and attack the Government, only to finish by saying that we must have a British fleet. I appreciate that it is getting near election time, but the hon. and learned Member's constituents will not draw much satisfaction from what he had to say. He skated over the £80 millon loss which came about as a result of the Comet disaster. He did not say that at one time there had been 2,000 or 3,000 surplus engineers in B.O.A.C. He did not say that many of its associated companies overseas were losing millions of pounds every day. B.O.A.C. was warned by hon. Members on both sides of the House to get rid of this liability, but only recently has action been taken in this respect.

The hon. Member for Newton (Mr. Lee) suggested that the Government should buy the 30 VC10s. I agree that we should have the 30, but that would be quite the wrong way to go about it, because B.O.A.C. is a self-accounting organisation. Occasional exceptions have been made, but it should operate as far as possible like a business concern.

The hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) said that this is a mess. It certainly is. It is one of the worst messes I have seen in the House for many years. It is a sad mess—that a great British leader industry should have got itself into this position, for a number of reasons. Americans who have travelled in the VC10 recently have said that they cannot possibly understand how we have allowed this situation to come about, in which we are denigrating an aircraft which I am convinced, after 40 years' experience of flying and manufacturing, is a winner. Later I shall say why I think it is a winner.

Over the years B.O.A.C. has never been a happy organisation. There have been far too many changes in the top executives. It has had too many overseas commitments. It has run Bermuda Airways and other airlines all over the world, losing sight of the fact that its main objective was to run a circular route round the world for Great Britain. It has been dabbling with too many different objectives. The engineering staff has been much too large. Relations with the unions have not been as good as they might have been. A few years ago some of the top executives had never gone near the hangars and workshops, and certainly never inside them. If one is running a business today, whether one is a manager or a director one has to be among the men and know how they feel about their problems. B.O.A.C. has ordered practically every type of aircraft since the war, whether American or British—six of this, 12 of that and 18 of the other.

Until recently they did not have what could be termed a project-planning team, a number of backroom men, scientists, dons and others equipped to do research into route values, project requirements and equipment needed for fifteen and twenty years ahead. I am told that Pan American has 300 men doing this work. I doubt whether B.O.A.C. has half-a-dozen, with the consequence that over the years it has been a question of hit or miss. Hon. Members opposite should not think—after nineteen years—that one is resentful of a nationalised industry. We should be the first to give credit for the success of B.E.A. I should like to see B.O.A.C. do the same.

I have said that I welcome the fact that Sir Giles Guthrie has become Chairmen of B.O.A.C. That took a lot of courage. Heaven knows why Sir Giles took on the job. Anyone who takes on the chairmanship of a nationalised industry ought to have his head attended to. He is liable to be "shot at" every Wednesday during Question Time in the House of Commons by Parliamentarians—some of them mischievous—and there are debates on the aircraft industry three or four times a year. He has a Minister and a Parliamentary Secretary helping to run the business. That is a terrible outlook for any man, and I think that the nation ought to be grateful to Sir Giles for taking on the job. I have had the privilege of knowing him for a great many years. Lord Douglas, when he was Chairman of B.E.A., thought highly of Sir Giles, who was on the board of B.E.A. for a number of years. Sir Giles is highly recommended and is of the right age. He has had a great deal of experience, and I am sure we all wish him well. Let us hope that the troubles will be cleared up.

The hon. and learned Member for Derby, North did not refer at all to why B.O.A.C. has too many aircraft. If the hon. and learned Gentleman reads the Corporation's weekly news sheet, he will see that Sir Giles has admitted that 23 too many aircraft were ordered. Pressure may have been brought by the Government to accelerate orders at a time when the marriage was brought about between the airframe manufacturers. But if a chairman of a corporation is put under undue pressure—after all, he is a man of some calibre—he can say, "Hell, I am not going to do this. I am not going to be forced into this situation." One hears of resignations occasionally, even in this House—

Mr. Wigg

Even in the Government.

Sir A. V. Harvey

I will come to my right hon. Friend in a moment. I think that he has battled extremely well against the Treasury to get the result which we have today.

The Opposition cannot lay this problem at the door of the Government. The fact that 23 too many aircraft were ordered is entirely the responsibility of B.O.A.C. It is not the responsibility of the Government. The trouble goes back several years to the VC1000. Six prototypes were ordered for the Air Ministry and it was mainly the responsibility of the Air Force. B.O.A.C. was brought into the technical discussions. In fact, the diameter of the fuselage of that aircraft was altered to suit the requirements of B.O.A.C. I am sure that had B.O.A.C. taken more interest in the project and known a little more about the capabilities of Rolls Royce, and that where the airframe weight increases by the time an aeroplane is built Rolls Royce invariably increase the output of power—had that problem been understood, we might have had the VC1000 on the Atlantic route before the American Boeing That did not happen, and it was a great loss to Britain.

When the Boeing first came into service five years ago I well remember that one landed in Paris minus an engine which had fallen out over French territory. A number of crashes have occurred on take-off owing to the excessive length of take-off. There was one in Paris last year, and there was the DC9 crash at London Airport. They average about one a month. I have met a number of Americans who confessed to being simply petrified at the idea of travelling over 2½ miles of concrete before the aircraft "gets unstuck". This situation should be taken into account when assessing the real efficiency of the VC10.

Make no mistake about it—this is common knowledge in Western Europe—the Americans are out to take over the whole of the Western European aircraft industry; not only the British industry, but the French, the German and the Dutch. They are out to capture the electronics market generally. We must win this fight. The value of the technical knowledge gained in the building of modern aircraft cannot be assessed. Sir George Doughty, who has had great experience in building aircraft, is now producing hydraulic pit props, among other things. We cannot allow ourselves to get out of this business. If it has to have Government support, that support must be forthcoming. I am all for getting the situation cleared up once and for all, and providing Sir Giles Guthrie with the support needed to allow him to get on with the job.

I do not think for a moment that Sir Giles is trying to bring about some smart move by using the threat of the Boeings. I think that there is a hard core among the B.O.A.C. technical staff and management which is pro-American. That feeling goes back to the war years, and exactly the same situation is apparent in the Qantas airline. We cannot altogether blame these people. They have been brought up to appreciate American methods and the provision of a good supply of spares. But this attitude must be broken. I believe that the former technical director of B.O.A.C. is now a Boeing representative in London and that is something which wants watching. I do not blame him for getting the job, it is probably a good job, but the situation is one that should be watched carefully. Quite apart from changes on the Board of B.O.A.C., I think that there should be some changes among the senior executives. Men from the middle ranks should be given positions of responsibility.

When the idea of the VC10 was first mooted it was suggested that it should be a joint aircraft for B.E.A. and B.O.A.C, but B.E.A. decided on the Trident, a smaller aircraft. We do not hear Mr. Milward complaining to the Press about what a dud aircraft he has. He was confronted with problems which he has overcome and he will make profits. Relatively speaking, Mr. Milward had just as big problems with the Trident as B.O.A.C. has experienced in introducing the VC10. When these aircraft were ordered B.O.A.C. knew perfectly well that even if the aircraft came up to the full specifications depreciation charges would have to be met. But now it is said that a large depreciation bill has to be coped with.

I do not begin to under B.O.A.C. reasoning in respect of these normal commercial matters and that is what shakes my confidence. Whatever may be said today I am prepared to believe that in eighteen months or two years' time, based on orders now being placed, B.O.A.C. will be short of aircraft. The Corporation has been wrong so often in the past and has underestimated the growth in traffic, and so on. The VC10 was envisaged as enlarged to become the super VC10 by a 28 ft. stretch of the fuselage. At the request of B.O.A.C. that was shortened to 12 ft. Had B.O.A.C. left the length as it was, and with the new engines and called it a super-super VC10—or something like that—we might have had an aircraft to match the new Boeing.

It was not the Minister who shortened the length of the VC10 fuselage. Hon. Members opposite must get it out of their heads that this is a question of the Government making technical suggestions. The situation is that B.O.A.C. has made so many mistakes that one could almost make a filibustering speech on the subject. We must get the situation cleared up. I consider that the VC10 is a remarkable aircraft. With a specific range margin of 6 per cent. to 7 per cent. of nominal figure it actually got to within 1 per cent. Because of that penalties of £20,000 per aircraft have been paid. The extra performance is in fact over and above specification as laid down by B.O.A.C. There are several thousand pounds of payload extra. The take-off is well below the original figure and all the other figures have been improved on. There is sophisticated refrigeration even when the aircraft is on the ground. Unfortunately I have not been able to fly in one of them. I was asked to go to Lagos in one, but unfortunately on the same day we had the debate on the Ferranti affair. I went down to London Airport, however, to see one go to Nigeria. It went off with a full load of passengers, freight and fuel, flying straight to Lagos. There was no wind whatsoever, but it took off on less than half the runway like a Spitfire. It was a thrilling sight. Runways have been lengthened in many countries and this aircraft has abundance of stretch. The payload will go up. A new Boeing is being brought in.

Mr. Wigg

The hon. Member can put all this to the test. How many Super VC10s does he think we shall sell abroad?

Sir A. V. Harvey

I should have thought after what has happened in this House and in British newspapers in the last fortnight, none. But, looking ahead of the immediate future, when this aircraft has proved itself on its routes and when the Super goes on to the Atlantic route next year, it will do what the "Queen Mary" did. It will collect the traffic because it has so many features which are better than those of the Boeing. I am told—probably the hon. Member for Dudley (Mr. Wigg) knows this—that there is a very firm inquiry by Middle East Airways and that inquiries have been received from the Argentine, possibly Egypt, and other countries. I believe that when it has proved itself other airlines such as S.A.S. and K.L.M. will have to buy the Super VC10, for they will want to carry the traffic.

However well the Concord project is going—no one knows very much about it—it is bound to be late; perhaps four years, because the problems are so great. The Americans may prevent our landing it in America at all if they have not got a supersonic airliner of their own. There should be eight or ten years' run for the VC10.

Mr. Wigg

If the hon. Member holds the view that as memories of the Government's handling of this problem fade the aircraft will sell on merit, why does he not advocate that the Government should take the whole 30, not for B.O.A.C. to take more than they want, but to put them in store, phase them out and sell them?

Sir A. V. Harvey

I am coming to the point about deliveries. I do not think it is the job of the Government to set up trading in aircraft. We have aircraft Corporations. I have no doubt that the hon. Member would go much farther than we are going now if his party were unfortunately successful in coming to power, but I do not expect that. I think the Government should arrange for the Corporation to take the 27, but I wish to ask my right hon. Friend about deliveries.

We must be told more about deliveries because if seven aircraft were delivered in nearly four years I wonder what the Bill will be for the remaining 10 in the latter three years. The building is to take place at Vickers and subsidiary manufacturers and there will be an enormous bill. The more of these aircraft that we can get into service on the Atlantic route and elsewhere the more likely are we to get orders. We cannot stretch the programme out in this way. I tell my right hon. Friend and the Chancellor that I am far from satisfied about the phasing of these deliveries. The remaining 10 are in suspense. I do not quarrel with that, but the existing 17 should be built and delivered as rapidly as possible to B.O.A.C. If the taxpayers are footing the bill, B.O.A.C. must fit in with these views. The Corporation cannot have it both ways.

In reviewing this matter, let the Chancellor of the Exchequer remember that, apart from what the industry hands over to other industries, 300 auxiliary companies are making parts of some sort for the VC10. I suppose that 90 per cent. of them are paying to the Treasury in Income Tax. Enormous sums come back to the Treasury every year in taxation. The men in good jobs are paying tax on this. What the cost to Britain would be of buying American would be catastrophic. To niggle over £15 million to £20 million is very short-sighted.

Mr. Wigg

What about the postmen?

Sir A. V. Harvey

I wish the hon. Member for Dudley would control himself. He goes on for an hour when he speaks. I hope that before this Parliament ends, next week or whenever the House rises, we shall be told—because it is very important that the country and the people in the industry should know where they stand and how their jobs will fare in the months ahead—a little more about deliveries. If that is not possible tonight I hope it will be done before the House adjourns for the Summer Recess.

I have the greatest admiration for Sir George Edwards. The Americans envy us for possessing such a man. He is not only a great designer and technician, but he is a commercial man and a good salesman. He is everything in one. He works himself to death. I do not know why; I have never seen such a worker. Cannot he and Sir Giles, who are both technical people, be compelled to work out a formula of costings and to get on with the job as rapidly as possible to speed up deliveries and get B.O.A.C. redundancies corrected? Where there are redundancies there must be proper compensation. By doing that I think we may have a great aircraft industry because I am convinced that, barring terrible things happening, the VC10 will be a world beater in three or four years' time and with it we can have a great airline.

8.7 p.m.

Mr. John Diamond (Gloucester)

There are some things about which the hon. Member for Macclesfield (Sir A. V. Harvey) and the hon. and gallant Member for South Fylde (Colonel Lancaster) have spoken with which I gladly agree. I gladly agree about the value of the Select Committee's Reports. But for this Select Committee's Report and the previous one of the Ferranti affair, this House would have had no opportunity of considering the Ferranti affair and getting at the real facts or of getting at the real facts with reference to the VC10. The facts are not given by the Government Front Bench, but have to be extracted, and then inadequately and with difficulty, and barriers are put in the way of a Select Committee going into the matter in great detail.

I agree with the hon. Member for Macclesfield that we are in a mess. That is what we are here to examine. I shall not do what he suggested everyone on this side of the House would do—whitewash B.O.A.C. I am much too interested in the success of B.O.A.C. to try to cover up any defects which may exist in it. The only way of avoiding a repetition of this sad, disastrous situation is to make sure that one knows how it has arisen—not for the joy of having an inquest but for the important reason that if one knows why something has arisen one can take steps to avoid it happening again.

I realise that I am the only hon. Member on this side of the House who so far has said that the Select Committee had insufficient evidence to come to the conclusion which it reached. I do not let out the Minister by this. There are so many good reasons for which one could condemn the Minister of Aviation that there is no cause to search for an unnatural and artificial one to add to the score. There does not seem any real evidence from the Report and from what the Minister said this afternoon, and more particularly subsequent actions by B.O.A.C, to suggest that the B.O.A.C. was compelled—I repeat, compelled—against its judgment and perhaps against its wish to take such an excessive number of planes.

This is the main point which we are considering and we still, at 8.10 p.m., have no idea of how this fantastic situation arose. I do not know whether the House realises the extent of the mistake. We are told that the 1967 target for B.O.A.C. planes is 38—and the Corporation has ordered 62, which is 24 in excess of 38, over 60 per cent. more than the Corporation should have ordered according to its present views. If we take into account three which have already been cancelled and for which £200,000 each has been paid in compensation, we get a figure of about 70 per cent.

I find it impossible to believe that a board could take these two decisions. I find it impossible to believe that a reasonable board, on objective grounds, could reach the conclusion that 62 were needed for 1967 and then that the same company, carrying on the same business, largely with the same management, although perhaps with some different people at the top level, could come to the conclusion in 1964 that the figure should be not 62 but 38. One of these two things is not right, and we have not had an explanation. It may be—I do not know—that the current estimate is more at fault. It may be that 38 is a hopeless under-estimatc. It may be that 62 was a hopeless over-estimate.

But I cannot believe that the same board, with the same information available to it, carrying on work in the same field, in which there has been a more or less anticipated rise in traffic and in which it has planned for certain routes and does not propose materially to alter them, could have reached these two decisions. These two statements do not go together, and I invite the Minister to obtain the true information for us. I am thinking of what might be involved if this happened again with supersonic travel. We do not know the figure which may be paid for cancellation in this case. We have been told that it is 30 planes at £1½ million each, which is £45 million, but I have heard a figure of £70 million suggested. All this will be chicken-feed by comparison with the trouble into which we shall run if we do not find out what went wrong and if we repeat the mistake in relation to the Concord or similar aircraft.

I know that the Government Front Bench do not like compliments from me on aviation matters, but I nevertheless say that I am not satisfied that the fault was wholly with the Minister's intervention and that he pressed the Board to take such a decision. What would be the attitude of any managing director who was asked to take such a decision as was made if both these statements are correct—such a decision as to order 60 per cent. more aircraft than he needed, knowing that aircraft are vital to his industry, that they represent 80 per cent. of his capital commitments and that he was sinking his ship by ordering them? Any managing director who knew his job and who was asked to do that, would resign rather than do it.

I am therefore nothing like satisfied that we have heard the truth of this situation. All the explanations and the indications given by the Select Committee are, with the greatest possible deference, not sufficient to satisfy me that both these things are right. There comes a time when one's commonsense revolts, and one has to stick to one's commonsense until one finds out the true facts.

I turn from this to the other main aspect which we are considering—the general commercial attitude with which we wish the Corporation to be run. I fear that, as often happens, a difficulty has arisen and because it has arisen the pendulum has swung completely from one side to the other. Instead of having a Corporation which had no commercial guidance at all, we swing completely the other way and we are to have an airline run in an exclusively commercial manner. This is not my view of a national organisation which is a flag carrier for the country. If we want a plain, commercial organisation, we have the independent airlines. There must be some difference between the independent airlines, being run purely for profit with an entrepreneur risking his capital, and the kind of organisation which we should see in B.E.A. and B.O.A.C. There is a difference.

It is not right to say, as the Minister said, that we can have an exclusively commercial attitude on behalf of B.O.A.C. I do not know what he means by "commercial attitude", and I refer to his letter to Sir Giles Guthrie. I imagine that he means something comparable with the normal situation in private industry in which somebody takes the risk with his money in order to seek a gain in competitive circumstances.

If this is to apply to this organisation, may I remind hon. Members that the method by which we measure the success or failure of a commercial undertaking is well defined but is defined in very narrow limits. Certain items are revenue and certain items are expenditure, and they refer to particular attitudes to a particular business. They take account of their narrow commercial interest, and they do not take account of all sorts of other factors which may be relevant from a national point of view but which, according to habit and custom—it is nothing more—are not considered to be relevant to the carrying on of that business.

Let us see how this attitude is applied, for example, by the Minister to Ferranti. In Ferranti there was no competition. The order was simply placed. There was no risk-taking. The price was agreed after 84 per cent. of the labour costs had been incurred. It was nearly at the end of the job before the price was agreed. This is not taking a risk. I would not go as far as to say that in the Ferranti case there was no private reward. It was a case of two civil servants going along and taking the Treasury bag, and inviting three gentlemen with the name "Ferranti" to dip their hands in up to their elbows and to take everything out of it—which they did. Ferranti is part of the aircraft industry.

Let us see how this applies to the airlines. I do not know who has left his senses, Sir Giles Guthrie or myself. Because it is told to conduct its affairs on a commercial basis, the airline feels entitled to cancel contracts without considering the cost of cancellations one iota. No one has told us what the cost of the cancellations will be. No one has told us that it has even been taken into account. In the present situation we cannot calculate the compensation, for nobody knows how many planes will be taken up. All this is left in midair. And yet somebody tells us that a commercial attitude in running an organisation is interpreted by making a decision without regard to the cost which may be involved—and which may be up to £70 million. The decision is, "I want to cancel all my contracts because I prefer to run another aircraft which is £1 million or £2 million a year cheaper to run ". I am unable to understand all this. The Minister has offered no suggestion of what the compensation may be, nor has Sir Giles Guthrie made the slightest comment on what it might be.

Mr. Lubbock

In a paper submitted to the Corporation by the managing director at the Board meeting on 12th July, 1962, he gave an estimate at that date of £30 million to £40 million for cancelling the whole of the VC10 fleet.

Mr. Diamond

Yes, I understand that—at that date. Since then it has risen. I gave a low estimate of £45 million and a top estimate of £70 million. I may not be absolutely right. Nobody knows for certain. My estimate is sufficient to show the size of the problem. Here a Chairman and a Board are saying, "We can either carry on with VC10s, in which case we pay no compensation, but it may cost a little more to run each aeroplane, a matter of perhaps £1 million a year each. Alternatively, we may cancel the whole lot, running to £70 million. But I, Sir Giles Guthrie, the Chairman and all my Board"—including a chartered accountant who has recently been brought on to the Board, the Minister said this afternoon—"will pay no attention to that. We shall not consider that".

I tell hon. Members opposite that businesses are not run in that way. Decisions are not taken without considering the alternative costs. Of course there are alternative costs in running a Boeing fleet or a VC10 fleet or a mixed fleet. Both must be calculated, and one must decide which will cost more and what the net result is. That is a commercial approach. I do not know if somebody has taken leave of his senses. Because the Minister has written a letter saying, "You must go on a purely commercial approach", the suggestion is now made that the whole of the VC10 order can be cancelled without the cost being taken into account. The cost must be taken into account on somebody's books. If it is not on B.O.A.C.'s books, it is on Vickers' books. It is carried by the nation in one form or other, and that is what really matters.

These are two attitudes merely to show that the Minister is not aware of what a commercial attitude is. He does not know, and he applies it in a ridiculously overstretched sense to one part and does not apply it at all to the other part of the empire over which he rules.

We should take much more than a commercial view. Of course we must first take a commercial view. Of course one must measure what we are doing in an accepted commercial manner. That must be done, but that cannot be the only thing which must be done. We must then take into account many other considerations. It is not right to say that the chairman and the board of a nationalised undertaking should stand firmly and exclusively for a commercial point of view and should all resign if they are asked to do something which is noncommercial. Of course that is not right. They must understand that, although their first responsibility is to have regard to a commercial outcome, their further responsibility is to carry out the will of the Minister, if the Minister as the depository of the national interest tells the board, "What you have suggested is all right on commercial grounds, but commercial grounds are too narrow to be the sole deciding factor for a nationalised undertaking. You must do something different on national grounds, in terms of the national interest".

If a board were wholly married to a commercial approach and were unwilling to bend and be flexible and take a wider approach, there would merely be resignation after resignation after resignation. That is not the way to go about things. Of course the Minister must say, "If you are going to do something which is not commercial, I am prepared to pay you the established cost of doing it'' What I want to see in the accounts of B.O.A.C. is, in addition to all the usual items, an additional one—"To contribution to the national interest, £70 million ", or whatever it is. This item—"contribution to the national interest"—would arise from something which B.O.A.C. is doing, not because it is within the narrow commercial interests of B.O.A.C, but because it is in the established interest of the nation as a whole as laid down by the Minister, who is our safeguard in these matters, who is the representative of the nation in these matters.

Let us see this item in the accounts, and then we shall be able to see what it is. It will be £x million. We will know. Then we can compare it with the other hidden assets we know about—the exports; the lead given to the engineering industry; the employment in various areas, particularly in Northern Ireland, which might not otherwise exist; the improvement in our balance of payments position; the new industry, such as electronics, which has been created. Those items cannot appear in a profit and loss account or in a balance sheet. I am an accountant. I know how narrow the scope of a balance sheet and a profit and loss account is, quite properly. All these other considerations must be taken into account in the House. We must take them into account. Therefore, let there be on the debit side the additional cost which a nationalised undertaking is carrying as a contribution to these undefined but very real assets which we create by having a nationalised undertaking.

There must be one further thing, if a success is to be made of a nationalised industry. This may sound like a speech from a street corner, but it is not. It is the sort of speech I made from street corners in the early 1930s and 1940s. It is something I now know to be true for a fact. There will never be a successful nationalised industry management until there is at the top somebody who believes in running a nationalised industry. I speak as an ex-managing director. It is part of one's daily thinking. Everybody who has had a job like this knows that one's door is continually being pushed open by people coming to ask such questions as, "What do I do about this? What do I do about that?" One is asked questions about small points of daily management to which people want to know the answer. A business does not stand still. It moves every hour.

People asking such questions can have answers only in relation to a general policy which the managing director or chairman, in conjunction with the board, has established and which he has kept forward looking, because it is only by reference to that policy that he can give sensible instructions which tie up with other instructions. It is only in that way that he can communicate. It is only in that way that he can impart enthusiasm from top to bottom.

That is why Lord Robens is making such a success of a nationalised industry. That is why B.E.A. is so successful, because for 15 years a Socialist has been at the top. I do not make any point about his being a Socialist, but there has been somebody in charge who believes in State industry and State enterprise playing its part. It is because he believes in it that his instructions have been passed on all down the line, that this philosophy has been proved in practice, that his enthusiasm has been got over to all employees, and that the profit and loss account at the end of the day shows the result expected from it.

It is because there has been this changing of management, having people none of whom, as far as I am aware, understands or attempts to understand the real purpose of a nationalised industry, that we are in this general mess to which the hon. Member for Macclesfield referred and which we cannot precisely define in any other way. We must have continuity of management, but for heaven's sake let us have continuity of management which is sympathetic to nationalised industries and State enterprise and understands the purpose of it.

Finally, may I in a very few minutes say why I think that the Government are to be wholly criticised on the present situation and on the situation as a whole. I have listened to or taken part in every debate since 1957. The Government have failed the whole time to attempt to understand what a nationalised industry is about. The latest reminder I can give the House is the debate we had recently on nationalisation. I ask hon. Members to recall that debate and remember the heat, the chortling and the points of view which came from hon. Members opposite. I ask my hon. Friends to ask themselves whether there can be any doubt that right hon. and hon. Members opposite who gave vent to those feelings in the free attitude which was shared on both sides in that debate have no fundamental, profound sympathy or understanding for State enterprise. This is the kernel of it. How has it been demonstrated in the aviation world?

From the word "go", there has been hostility towards the two Corporations as the flag carriers. Instead of being proud of having them as our flag carriers and supporting them strongly, the Government have been niggling at them in every possible way. They established a licensing system under which others could compete internally, a ridiculous attitude because there is external competition as hot as can be the whole time, and the board of B.O.A.C. have to spend all their time swotting the little flies which trouble them and are prevented from concentrating on their real job.

The two-tier licensing system has produced a situation in which one one knows where he is. The great achievement of this Government has been to introduce uncertainty in every part of our lives. No one knows, not even the private operator, whether he will be able to get a licence or not, or whether, if he is refused one this year, he will be able to come back next year and get one. This is why we had the Gilbertian situation over Cunard. The Cunard licence was granted by the licensing authority and turned down by the Minister. Cunard did not know where it was, and B.O.A.C. did not know where it was or what might happen in a year. So they got together in the interests of competition. They merged, in the interests of competition, which is supposed to be the whole basis of the licensing system.

This ridiculous situation has its application today. The Minister began by telling us about the route structure and what number of planes would be required for a given route structure. I agree that that is a reasonable way of arriving at the number of planes; one establishes one's routes and draws the conclusion that so many planes are needed to run them. But, if I were managing director, I should not know how to work out the calculations. I should not know whether it was worth while starting now, with the chance of losing money on the routes, in the hope of getting profit later on when traffic expanded. I should be perfectly well aware that, the moment traffic showed signs of expansion, some private airline would have the right to apply to the licensing authority, show that the traffic was expanding, and on that ground come in on my monopoly which I had built up out of my losses.

Mr. Dan Jones (Burnley)

It is being done.

Mr. Diamond

It is being done the whole time, and it is the stupidest irrelevancy for the Minister to say that this has no connection with present problems. Of course it has.

I have stated my criticism of the Government. I add now my criticism of the present Minister, the last and greatest of a line of incompetent Ministers, more incompetent than any who preceded him—and, my goodness, that is saying something. He has reached the almost impossible achievement of keeping every possible problem in the air. He is like a man in the control tower who, when told that there is a plane coming in to land, decides that it is much too difficult to take the necessary steps and keeps it circling round.

Problem after problem is still circling round in the air waiting for—[An HON. MEMBER: "For Godot? "]—no, not for Godot; Godot is not the French for 15th October. Here are some of the problems still waiting and circling round. First, there is the £80 million accumulated loss of B.O.A.C. The arguments were settled long ago. We debated them thoroughly long ago. The loss will be written off. The Minister and the Chancellor know that it will be written off. They both know that, if it were an ordinary public company, the Corporation could go to the court on a commercial application and get this lost capital written off. He wants it to be treated as a commercial organisation. We know that it will be done, but it is not done. It is not done in the interests of the nation, the interests of B.O.A.C. or the interests of Preston—1 do not know which—but, for one reason or another, it is not done. The problem is carefully kept waiting until after the General Election.

The next item is the B.O.A.C. amortisation muddle to which my hon. and learned Friend the Member for Derby, North (Mr. MacDermot) referred. I have no need to go over that ground again, though there is this further connection which my hon. and learned Friend did not mention—he is too much of a gentleman to mention it—that this crisis was reached in the middle of 1959, a few months before the election then. What was wanted, what the accountants and the board wanted, namely, the writing off of proper depreciation and the production of true and honest accounts, was prevented by the Government before the election which followed soon after, just as we are being prevented now from having the £80 million loss dealt with until after the election.

There is the overpayment to Ferranti. What has happened about that? We hear nothing more about it. It is being held in the air, and we do not know whether Ferranti is to stick to its 100 per cent. plus profit or not. What is to happen about the VC10 compensation? We do not know about that.

I realise that the hon. Member for Esher (Sir W. Robson Brown) wants to speak, so I will finish very quickly. Those are several items which are circling round without any opportunity to land, being kept in the air until the time comes when a new Government, of whichever colour it happens to be, will have to deal with them. Therefore, I reach the conclusion that the situation will never be satisfactory until we have a Government who understand what a nationalised industry is about and who try to make it work sympathetically and until we have a Minister who is courageous and prepared to tackle problems and who is not anxious the whole time about what may happen back home at Preston.

8.35 p.m.

Sir William Robson Brown (Esher)

I followed with a great deal of appreciation 99 per cent. of the speech of the hon. Member for Gloucester (Mr. Diamond) until he finished with an observation with which I am never likely to agree. My own intense interest in this debate on a constituency matter is obvious to hon. Members and I have no need to enlarge upon it. I live in the village in which this factory is situated and I see the men who work in it, and sometimes the executive, every day of my life. My interest in (heir welfare and future is intense.

My interest goes beyond that. I have an interest also in the British aircraft industry as a whole. [Interruption.] If the hon. Member will allow me to make my speech, perhaps he will compliment me also. It seems to me that I shall have to lift my voice to its normal pretty powerful volume. All the speeches today, particularly on the VC10, have been most invaluable. The majority of hon. Members have been unanimous in their view.

I should like to say how appreciative I am that my right hon. Friend the Chancellor of the Exchequer has spent so much time in the Chamber during the debate. What he has heard, first about the quality of the VC10 and, secondly, the expressions of confidence in its future, are not idle words. The statements about marginal extra cost of operating are strictly accurate. I could put forward many more arguments of the same kind, but I will deal with only one which I feel is completely and absolutely convincing.

When there is the opportunity of choosing between two aircraft on the same route which cost exactly the same money, it is inevitable that one will choose the aircraft which is safer, more comfortable and more acceptable in every way.

Mr. D. Jones

And it is all the better if it is British.

Sir W. Robson Brown

Let us take not only British passengers but international passengers. As has been said, many Americans pay tribute to British aircraft for the best of reasons.

Let me come to the commercial argument that I wish to put forward. The extra cost is only fractional. All this talk about amortisation, and so on, is unintelligible to me as a man of business. It appears that some accountant has been let loose in B.O.A.C. to say, "Damn this thing somehow", and he seems to use the argument about amortisation as one with which no one can deal.

We have an attractive aeroplane which will bring in additional passengers. The remarkable thing which hon. Members probably know but which the public does not know is that it is not necessary to get 10 or 20 more people in the aeroplane. At a reasonable estimate, five more passengers in the VC10 would turn the scales financially and would justify it. The aircraft has only just come into service. The praise of the passengers has been unprecedented. B.O.A.C. knows all about it. It is not necessary to look at the advertisements. The best advertisement is the man who says that he likes the plane and that it is the best that he has been in. There is no exaggeration about this.

People may say that the pilots are no judges. But they are jolly good judges. I am very much happier when I am with a pilot who is happy with his plane.

There is another aspect that worries me. I said on Monday that I could only express restrained relief at the announcement made by my right hon. Friend the Minister of Aviation. I did not want to appear churlish. I had got a good deal more than at one time I thought we would get, and for that I am intensely grateful. I am not Oliver Twist coming back with his bowl the second time. Before I put my supplementary question, I had made some calculations and I said that I did not know at what rate the aircraft would now be accepted; I did not know what would happen to the economics of B.A.C. I think that in these unfortunate and exceptional circumstances, everybody will get the worst of all possible worlds. I will explain why.

Vickers now have to sit with damp towels around their heads and somehow make the figures fit into a timetable. They will not be able to do it and keep their costs right. Their costs inevitably will increase. Talking through this House to the men in the works at Weybridge in my constituency, I want to tell them that the so-called suspension of the final 10 aircraft is only suspension and cannot be cancellation. It is a firm order which cannot be cancelled without permission and without compensation to the British Aircraft Corporation.

I now address myself to my right hon. Friend the Chancellor of the Exchequer. I should like him to turn his mind to the second worst of all worlds and that is B.O.A.C, which is to operate a number of Boeings. The argument which is used about this is so extraordinary that I now turn it back upon B.O.A.C. The Corporation says that amortisation has gone very well and is now half complete. Is not that a sound reason why we should now change our policy and, in a phased programme, sell the Boeings in the world markets at a good price, show no loss and bring in the VC10s and put them into service instead of into mothballs? The final result for Sir Giles Guthrie and his colleagues would be better than having a bastard organisation with, on the one side, Boeings foisted upon him by his American pressure group, which we all know about, and, on the other side, this small handful of VC10s to try to fill the gap.

There has been far too much pessimism about the future of VC10s with B.O.A.C. The Corporation has got the potential of this aircraft all wrong in what are called the route calculations. I will explain my reason for saying this with argument and not with emotion. I have spent a great deal of the last four or five days seeing as many heads of independent and other airlines as I could in readiness for this debate. They have told me that the one thing they do not understand is the phenomenal increase in trans-Atlantic air travel in particular since the reduction in fares. I could not believe the figures which they gave me.

As the figures were given to me confidentially I cannot give names, but I have looked at them carefully and I can only say that the figures of B.O.A.C. must have been seriously wrong. I believe that with the quality of an aeroplane like the VC10, the Corporation's figures will be proved even more wrong than ever before and that within another two years the Corporation will be wanting every aircraft that it can lay its hands upon. In the meantime, however, we have thrown over this aircraft a cloud that a very great deal of optimistic talking, salesmanship and public relations will be needed to dispel. What worries me is that Sir Giles Guthrie, for what reason I do not know, and probably never will comprehend, made that release to the Press last week, which virtually made an absolutely straight declaration, "I do not want to fly British". That is what he said: "I do not want to fly British. Please, I want to fly Boeings. "Imagine the impact of that on the world. He said he wanted to cancel the other VC10s.

Mr. John Hynd (Sheffield, Attercliffe)

He did not say he did not want to fly British.

Sir W. Robson Brown

Of course, not bluntly, just like that, but that is the way the whole world read it. Let me make my speech in my own way. If I go wrong hon. Members can correct me, but otherwise let me proceed.

He having made that statement, we have to try now, between us, to recover lost ground. I do not want to make a windy speech, but I should like to say to the Minister that I sympathise with him in this because he has had a lot of worries put on his shoulders, matters for which he had not responsibility at all. We have got a world beater. So let us get the closest co-operation now between B.O.A.C. and B.E.A. and the Government. Let my right hon. Friend the Chancellor consider what so many Members, not only this Member, have said, including my hon. Friend—my very gallant and honourable and distinguished Friend—the Member for Macclesfield (Sir A. V. Harvey) who has so much experience in these things. Let my right hon. Friend the Chancellor acknowledge what the House has said, including Members of the Opposition. Perhaps he cannot do it tonight—he could, but he probably will not—but let him say that he will postpone a decision.

I have a measure of sympathy with Sir Giles Guthrie in this problem. I censure him for what he has done, but I acknow- ledge that he has taken on a back-breaking task of reorganisation requiring a superman to accomplish it. I repeat what I have said before, that he has got to battle with the American lobby in B.O.A.C, and he has to deal with the problem of surplus staff throughout the organisation, and I was impressed by his human approach to the problem of redundancy, for he has assured us that he will deal properly, indeed generously, with his men. That is the only sort of satisfaction I have got out of this business.

It has been said before, and I shall not labour it, that he himself has put the most convincing advertisements in the Financial Times about the plane. Now I say to him, "Let us stand behind what you have said. Let us turn over a new leaf. Let us enter on a new phase." Instead of having the worst of all possible worlds, let us get the best of all possible worlds.

It seems to me that the financial experts of B.O.A.C. went up into the upper stratosphere when they started to tear down the performance of the VC10. I do not think that any one of us has had an opportunity really to examine the basis upon which they damned it so severely and cruelly. It has come out of this debate that what we are really discussing is a fractional difference.

It seems to me that I might compliment my right hon. Friend the Minister for anticipating what I wrote down as a note this morning, for he has said that he is going to call a round-table conference with B.O.A.C. and the independent British airlines to see exactly what they can do between them and together. I have sufficient information to believe that something quite convincing and remarkable will come out of this. I believe that we can recover from this situation, and do in this situation rather what we did when the Viscount was first condemned.

Mr. D. Jones

Is the hon. Gentleman telling the House that last Monday's statement is likely to be withdrawn?

Sir W. Robson Brown

I am asking the Government Front Bench to modify it in a number of ways as I have explained and, in particular, to rephase the production of the VC10. The Government should not stop its production but should let it go on, and in the meantime phase out the Boeings. This is what I am asking the Government to reconsider, and I believe that the meeting which has been suggested may well move in that direction.

A most distressing factor would have arisen had the Government acceded to Sir Giles Guthrie's request on a commercial basis. I must say that I very much agreed with my right hon. Friend about this, and I could enlarge considerably on it, because this is my life. This is the assessment on a commercial basis. It seems to me that in respect of a nationalised industry of this kind, a flag-carrying service, we should say, "You must be British unless there is absolutely the most convincing reasons why you should not be, and you must convince us before you take any action. "We cannot give any chairman of any board a blank cheque with regard to policy or finance—certainly not with regard to policy. He must believe and understand that the chairman is not the final authority and that the final authority is the Minister.

I think that at this moment of time, for a while until more VC10s get into the air and more passengers travel and the news gets around, we have had a setback. But I am also worried that this debate and the last couple of weeks of sad recrimination have damaged other British aircraft and their prospects. I do not know what the effect will be on the orders in the United States for the BAC111 and what orders will be lost. The public do not generally understand that the competition in the international field of aircraft is about the fiercest in the world.

The American aircraft industry holds all the aces all the way. It has massive Government orders for military aircraft on which civil designs are based. It has a large internal market. There is also the size of the United States airlines. The orders which they place, by their very size, are four times what we can achieve at any one moment. Also, the postal contracts are a form of subsidy to the American aircraft industry. There is also the very size of the aircraft industry itself, and its production facilities and the quantities that it can bring off the line. These are the things that we are asking Sir George Edwards and his team of men at Weybridge to accept, fight against and beat, and the Government must give them every assistance that they possibly can. I will not repeat what my hon. Friend the Member for Macclesfield said about Sir George. He is a man who is quick of mind, humorous in his approach and human in his attitude, and he is beloved by his men. He has had to carry a cross in the last few weeks the like of which I would never have wanted to bear.

Finally, having mentioned the terrific competition with the United States of America, I would ask whether it is not feasible that we should consider not only European co-operation but international co-operation. Cannot the Governments of the United States, Great Britain and Europe sit at a round table and say how stupid this all is? Let them all agree—

Mr. D. Jones

We should never get agreement from the U.S.A.

Sir W. Robson Brown

I am making the suggestion in all sincerity and will give my conclusion in the event of our not succeeding. First, we should work out reasonable solutions to design problems. Instead of competing with one another we should be united. The design problems would be easier to solve. There would be a better distribution nationwise of the aircraft themselves. In relation to the size of the various companies, the operating costs would be lower. Fares could be reduced. Huge increases would result in air traffic. The whole thing would be an economy by thousands of millions and we would all move in the right direction.

If that is not possible, then we have to say that we must stand behind our own national organisations—behind B.O.A.C. if it stands behind the British aircraft industry. I have the belief, faith and confidence in the factories that produced the Spitfire, which enabled us to win the Battle of Britain. They may, after all, again be required. What a tragic thing if all these techniques and skills were dispersed. A good deal of it would go to America.

8.55 p.m.

Mr. Eric Lubbock (Orpington)

The hon. Member for Esher (Sir W. Robson Brown) has made a fine electioneering speech and his constituents are fortunate that October is coming so soon. He has also prevented me saying a lot of things that I intended to say and asking a lot of pertinent questions of the Government. I wanted to refer in some detail to the proposals made by Sir Matthew Slattery in August, 1962, which the Minister did not even bother to mention today.

Most of the proposals made by Sir Matthew in his memorandum were sound common sense. Some—including the directive that the Minister gave to Sir Giles Guthrie on his appointment-have been implemented. Others, so far as I know, have not been referred to in any detail since the memorandum was submitted to the Minister. I will refer to two examples.

First, Sir Matthew asked for Government action to limit fifth freedom rights. He pointed out that K.L.M., Sabena and S.A.S. carried 7,049, 3,296 and 13,810 passengers respectively from British airports in 1963. This was a total of 24,155, amounting to over 11 per cent. of the total traffic.

Since then the Minister has taken steps to limit the fifth freedom rights of S.A.S. to Prestwick, but what has been done in this respect about K.L.M. and Sabena? We should not wipe out fifth freedom rights altogether because we ourselves benefit from them. The "Bermuda philosophy" to which we have subscribed, is summed up by Stephen Wheatcroft in his book "Air Transport Policy". He says: It is recognised that the economical operations of long-haul carriers necessitated carriers having rights to carry traffic on intermediate sectors, and this so called ' fifth freedom' traffic is allowed to them providing that total capacity operated is reasonably related to the end to end potential of the route. That is not the case with the operations of K.L.M. or Sabena and it is time that the right hon. Gentleman placed restrictions on them as well as on the S.A.S. rights.

Another matter on which B.O.A.C. has asked for direct help from the Minister is in the failure of the I.A.T.A. to enforce its traiff. Sir Matthew Slattery said that malpractices were becoming more widespread and he wanted the Minister to take a much tougher line with the countries whose airlines are known to cheat. If this knowledge is shared between the Ministry and B.O.A.C., what action did the right hon. Gentleman take?

Sir Matthew Slattery was completely vindicated by the Report of the Select Committee and I agree with those hon. Members who say that the Minister should make a personal apology to Sir Matthew for the shabby way in which ho has been treated. The only criticism I would perhaps make of Sir Matthew is that he should have insisted on his proposals being made public when he first submitted them to the Minister in August, 1962.

I want to say something about the cancellations of the VC10 proposed by Sir Giles Guthrie and the fleet requirements he has been left with. I do not understand how it can be that the order placed for 42 VC10s can now be reduced by such a substantial amount. Surely the calculation could not have been so wildly out. I have done my own sums on the basis of traffic carried in 1962–63 when B.O.A.C. produced 931,100 capacity ton miles, of which 487 million ton miles were produced by the Boeing 707. The Corporation had an average of about 18 aircraft in use during that time and with 20 could have produced 541 million capacity ton miles.

Assuming the VC10 to have the same essential output—which is not true because, of course, the standard version is smaller than the Boeing 707—the 29 aircraft which Sir Giles Guthrie has now agreed to take would produce 784 million capacity ton miles, giving the Corporation a total carrying capacity of 1,324,700 capacity ton miles by the time all the aircraft were delivered.

In the last issue of the B.O.A.C. "News Letter", Sir Giles Guthrie says that he is planning on an expansion of 10 per cent. on the passenger side and 20 per cent. on the freight side in the next four years. I have applied that 10 per cent. cumulative rate of interest to the 931 million capacity ton miles produced in 1963. With all these aircraft in use and fully utilised, by 1966–67 total capacity would be 1,324,700 capacity ton miles, assuming the utilisation at the same rate as now, which is nine hours a day for the Boeing 707. Sir Matthew Slattery said in the memorandum of August, 1962, that he did not think that any improvement on that utilisation was possible, because B.A.O.C.s utilisation of aircraft was already a good deal better than that of its competitive airlines.

I promised to sit down by nine o'clock. All I will say in conclusion is that if John Bloom had been Minister of Aviation, he could hardly have got into a bigger muddle than the Minister. Instead of a frank admission of failure, he has smugly tried to justify his actions since he has been in his present office. His speech was an absolute insult to the intelligence of the House and the people of the country as a whole, and he will pay for it in October.

9.2 p.m.

Mr. John Cronin (Loughborough)

I should first like to thank the hon. Member for Orpington (Mr. Lubbock) for truncating his speech on my behalf and for the courteous way in which he did so. Both sides of the House will agree with me if I say once more how much we owe to the Select Committee for this admirable Report, one of the finest reports produced in this Parliament. It has been of the greatest help to us. I want particularly to thank the Chairman, the right hon. Member for Guildford (Sir R. Nugent), for his help in this matter. It is particularly unfortunate that the Minister was so unco-operative with the Select Committee. It is very surprising that he would not allow the Select Committee to see the Corbett Report, particularly as it has been drifting all over Fleet Street for the last few months. This is part of the obscurantism which is clearly now a fashion at the Ministry of Aviation.

The principal topic of debate this evening has been the VC10. Those of us who have flown in it are bound to make a few remarks about it. It really is the most advanced, the most admirable, long-range jet aircraft in existence. It is quiet and comfortable and, on account of its lower approach speed and other advanced systems, it is the safest aircraft in existence. I am sure that it will have a good deal of passenger appeal and that there will be enormous developments of it—that it will be "stretched" as the expression goes and become a bigger and more economic aircraft. It is particularly unfortunate that this very fine product of British engineering should have had this utterly deplorable publicity. The Minister's part in this is equally deplorable. The VC10 has certainly not had a fair trial.

Excellent as this plane is, one cannot escape from the fact that it is unwise to order too many planes for any airline. It is always bad to have too much, even of the best things, and in this case the results could be financially disastrous. Although it has great advantages in passenger appeal, there is no doubt that the VC10 has certain marginal economic difficulties. It may well be that if B.O.A.C. finds itself using VC10s in excess of its requirements it will have to pay a considerable financial penalty.

Sir Giles Guthrie in his well-publicised statement in B.O.A.C. News said on Saturday that seven Super VC10s would cost an extra £15 million in the course of their lives. As we have the Chancellor of the Exchequer here, he can work out that 17 would probably cost an extra £37 million. The financial effects of an excess order of VC10s would be very disagreeable in many ways.

It might have been better in the long run if there had been some modifications in the design of the VC10, because one gets the impression that B.O.A.C. is not completely happy, to say the least, with the design of its VC10 order. It might well have been possible to modify it so that it could compete more effectively with the big American jets. This was the point made by my hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins) in his admirable speech.

The dominant factor in this debate is how the Minister has denied all responsibility on the part of the Government. He has rather suggested that B.O.A.C. has been entirely responsible from start to finish for the VC10 order. This seems to me to be an extraordinary rejection of Government responsibility. Under the Air Corporations Act the Minister has a duty to loan the money to B.O.A.C. to purchase these aircraft, and he in turn has to make a case to the Treasury to obtain the money. The Minister has the right to give general directions to the Board. He appoints and now dismisses the members of the Board. The Ministry admitted in a memorandum which was supplied to the Estimates Committee for its report on transport aircraft this session—this appears at paragraph 12 on page 3 of its Memorandum—that it advises the Corporation as to the future type of aircraft and it has to give its approval for any aircraft orders that are placed. There is no doubt that the Government have a clear responsibility in the matter, and the Minister does not do himself justice by trying to thrust that responsibility entirely on past Chairmen of B.O.A.C.

We know that in April 1957 B.O.A.C. agreed to place an order for 35 VC10s, with an option for 20 more. This could not have been done without the consent of the Minister at that time, because he had to find the money, and he had to give his consent. One wonders why the Minister gave his consent so easily without inquiring into the matter further, because it was common knowledge in those days in aviation circles that this order was rather excessive.

Fligh of 7th June, 1957, said: The order for 35 Vickers VC10s alone represents a very large amount of capacity—equivalent to about three times that of B.O.A.C.'s total fleet in 1956. The VC10 fleet may not be in full service until 1965; but add the traffic potential of the other aircraft on order and it appears that, even assuming a truly prodigious increase in business, the Corporation will have too much equipment on its hands in 1965. That was common knowledge in the aircraft industry at that time, and the then Minister had every kind of expert to advise him. Why did not the Government query that order? Why do they now try to avoid responsibility for it?

Towards the end of 1957 B.O.A.C.'s engineering department expressed doubts about the economic potential of the VC10. The Minister at the time must have known this. There was a conflict between B.O.A.C.'s engineering department and the Royal Aircraft Establishment, and in view of that conflict it was suggested that Vickers should guarantee that the VC10s would have a performance equivalent to that of the American jets, but Vickers declined to give that guarantee. Again I ask: why did the Minister with that warning completely ignore the possibilities that lay ahead?

We know that in 1960 B.O.A.C. ordered a further 10 VC10s in addition to this already large order. We know from the Select Committee's helpful Report that when Sir Matthew Slattery the last Chairman of B.O.A.C. queried the order he was told by the outgoing Chairman, Sir Gerard d'Erlanger that it was too late, that he had been under severe pressure, and that it had been necessary for the Minister's plan for the formation of the British Aircraft Company. We heard also from Sir Matthew Slattery in a Report made by the Estimates Committee on Transport Aircraft exactly the same thing. I should like to emphasise that at the time Sir Matthew Slattery made that statement he was no longer in any way responsible for the affairs of B.O.A.C. and had never had any responsibility for the ordering of the excess of VC10 aircraft. So he was the last man who had any motive at all for distorting the truth in any way.

We heard from Sir Basil Smallpeice, the last managing director of B.O.A.C, that pressure had been put by the Government to make this excess order for VC10s, and we also heard from Sir Basil Smallpeice that the design had been changed on account of political pressure. The Minister has given no answer to this. Here is a direct confrontation of evidence between the Minister and the former Chairman and former managing director of B.O.A.C.—a clear confrontation of completely different versions

Sir A. V. Harvey

Can the hon. Gentleman say who changed the design and what to? It was made to a specification of B.O.A.C, with penalty clauses none of which has been invoked.

Mr. Cronin

I said that Sir Basil Smallpeice said that political pressure had been applied to change the design.

One has to face this basic question before the House: who really was responsible for the ordering of VC10s greatly in excess of the requirements. According to the Minister, it was not the Government. We have the completely opposite version that it was due to Government pressure. Hon. Members will have to think this out for themselves. I must say that in the dealings that we have had with the Minister over the last two years he has not treated us always with competely luminous candour. My own feeling is that this rather scandalous crisis that has arisen has been a direct responsibility of the Government. I think that the Minister is playing a rather shabby part in denying all responsibility.

I want to be fair to the Minister. There is no doubt that when he took over in 1962 he had some very disagreeable problems in front of him. Nevertheless, his actions since then have hardly contributed helpfully towards B.O.A.C's affairs. When the Minister took over in 1962 that was the year when B.O.A.C. had its worst deficit—it suddenly rose to £64 million. There was no time when B.O.A.C. needed more help, leadership and positive guidance from the Minister, and, according to the Report, it had none at all—there was complete and absolute inertia. We know that Sir Matthew Slattery tried to remedy it and pointed out to the Minister the deficiencies in B.O.A.C's Board's composition and its methods of work. He wished to make some improvement, but the Minister, according to the Report, declined to discuss the matter.

Again, Sir Matthew Slattery raised the possibility of reducing the size of the fleet and making some modifications to the order, but again the Minister completely refused to discuss the matter. In fact, the Deputy-Secretary said that the whole matter was put into purdah. Hon. Members will notice that in every attempt that B.O.A.C. made to reorganise in this critical period of its career, it was completely thwarted by the Minister, and he himself was in purdah for 18 months.

B.O.A.C, as some hon. Members have pointed out, had considerable difficulties in that they lost revenue consistently to other airlines picking up passengers in Great Britain and taking them to other countries. E1 A1, Sabena, K.L.M. Air France and S.A.S. deprived B.O.A.C. of about £3 million in revenue each year. This was put to the Minister from the beginning of his taking over office by B.O.A.C. and by numerous of my hon. Friends, but no action was taken until a few months ago. Then action was taken only in respect of S.A.S. about 2 months ago. There has been a loss of millions of pounds revenue simply because the Minister refused to take appropriate action.

Hon. Members have drawn attention to the way in which the Minister has refused to allow B.O.A.C. to do any chartering for troop carrying. This has meant a loss of several millions of pounds each year.

Why has the Minister consistently refused? This is something that I hope the Chancellor will tell us tonight.

The Minister's first positive action was to appoint the Corbett inquiry and, as a consequence, we had the White Paper. But the Corbett inquiry caused a serious deterioration of relations between the Ministry of Aviation and B.O.A.C. The Select Committee said: As a result, B.O.A.C. and the Ministry have sometimes appeared to your Committee as contenders primarily concerned with self-justification, rather than as partners". This is a terrible indictment of the Minister, whose duty it is to co-ordinate aviation. It is in paragraph 283 and while the Minister is looking it up I will move to the White Paper.

The House has never had such a misleading and disingenuous document out before it as the White Paper on The Financial Problems of B.O.A.C. The White Paper refers to the losses made by subsidiary companies of B.O.A.C, but it is only when we read the Select Committee's Report that we learn that in the case of West Indian Airways the subsidiary company was formed at the request of the Ministry; that in the case of Bahamas Airways the Ministry again intervened, and in the case of Middle East Airways the Foreign Office intervened. In all these cases there was direct Government intervention. This has emerged from the Select Committee's Report, but there was nothing about it in the White Paper.

The White Paper referred to the failure of the Corporation to present in its accounts the real value of its aircraft until the 1961–62 accounts. But we know that in March, 1959, B.O.A.C. decided to write down the value of its aircraft to their true figure, and we know that the Minister declined to allow it to do so. It is very difficult to get to the truth of the matter, but on the face of it it looks as though the Minister was suggesting that B.O.A.C. should cook its books.

We shall never get at the absolute clear truth because the whole matter was decided at a meeting between the Minister and the Chairman of B.O.A.C. on 30th July, 1959. They discussed the whole question of the suppression of the true figures. The present Minister has absolutely refused to allow the Select Committee to see the minutes of that meeting. What has he to hide? Why should he have declined to allow the Committee to see the minutes, if something rather shabby was not taking place?

In the White Paper the Minister said: Nevertheless the rate at which B.O.A.C. continued to expand its capacity and frequency was unduly optimistic. But when we read the Select Committee's Report we learn that this expansion was forced upon B.O.A.C. by the excessive number of aircraft it ordered as a result of Government pressure. This was not mentioned in the White Paper. I can give the Minister all the quotations that he wants.

After the publication of the White Paper the Minister came out of purdah and took action. He dismissed practically the whole of B.O.A.C.'s Board. Hon. Members on both sides of the House will probably agree that the Select Committee's Report shows one thing very clearly, namely, that Sir Matthew Slattery and Sir Basil Smallpeice—Chairman and Managing Director—were treated very badly indeed. There is no doubt at all that the recent figures show that the accounts of B.O.A.C. are about £9 million better off as a result of the actions of those gentlemen and they were treated very shabbily.

The Minister had his famous luncheon party at the Stafford Hotel and appointed Sir Giles Guthrie to be Chairman of B.O.A.C. This is the time when the Minister's affairs took a turn very much for the worse. Not only did he appoint Sir Giles Guthrie, but he gave him the directive of 1st January asking him to run B.O.A.C. entirely on a commercial basis. Sir Giles took this quite seriously and, apparently at the Minister's request, published his findings. The principal finding was, of course, that VC10s had been ordered greatly in excess. The Minister, who has adopted an obscurantist attitude with regard to the Corbett Report and other papers helpful to this House in these matters, really went wild and let publicity get completely out of hand so far as the VC10s were concerned. As a result we have had all this dirty linen washed in public, very much to the disadvantage of the British aircraft industry. If the Minister had really taken some steps to co-ordinate matters between his Ministry and B.O.A.C. this very dis agreeable publicity would never have occurred.

Finally, on Monday we had the statement of the Minister's decision on his action to remedy affairs regarding the VC10 order. The first thing which occurs to most of us is that we have heard today nothing about the financial effects. These are of the utmost importance and will cost the country tens of millions. The Minister's friend, Mr. Chapman Pincher, referred to £50 million or £80 million. These are very alarming figures. It is particularly sinister that the Chancellor of the Exchequer is to wind up this debate for the Government. It suggests that the financial effects will be very disagreeable. I should like to know why hon. Members were not informed of the true financial effects at the beginning of the debate so that we could have discussed them. Why are these figures locked as secrets in the capacious bosom of the Chancellor of the Exchequer? Why must we wait for the speech from the Chancellor before we know what are the financial consequences of the excessive VC10 order.

The effects on B.O.A.C. have been of a very serious kind. There is now no longer any pretence of B.O.A.C. operating on a commercial basis. There has been a complete reversal of the Minister's January policy of running the Corporation on a commercial basis. I wish to ask the right hon. Gentleman what are the future relations to be between the Ministry of Aviation and B.O.A.C, bearing in mind that both now have completely different views about what kind of fleet should be employed. There is complete and absolute disagreement. How is the Minister to cope with the situation? He has not shown such tact in the handling of affairs that this promises well now.

Nearly all major policy decisions in respect of airlines centre on aircraft procurement. Here we have a situation in which the aircraft procurement policy of B.O.A.C. is completely at variance with that of the responsible Minister. I suggest that this is a substitution of in-built chaos for co-operation, and that the Minister is completely responsible.

The morale of B.O.A.C. has probably now reached its lowest ebb. It declined when there was that heavy deficit in 1961–62. It declined as a result of the Minister's tactless Corbett inquiry. It probably declined even more substantially when he made his wholesale dismissal of the Board of B.O.A.C. I suggest to the right hon. Gentleman that as a result of the Minister's statement on Monday the morale of B.O.A.C. has now reached bottom. The 22,000 devoted men and women who have served B.O.A.C. and the interests of Britain all over the world do not deserve this shabby treatment.

I ask hon. Members to consider the effects on the aircraft industry. It is hardly necessary to emphasise the severe damage done to the prospects of the Super VC10 in regard to foreign customers. Who will order the VC10 after the Minister has announced that work on the last 10 will remain in suspense and no further work will be done on them? Who will order VC10s after Sir Giles Guthrie's widely publicised report—widely publicised presumably with the consent of the Minister—which indicates that he is prepared to pay about £50 million rather than have the VC10s? There was no need for this to be produced in public. The Minister has dealt blows before to the aircraft industry and he is doing so now.

At this moment he is in negotiation with the United States to re-equip the Fleet Air Arm with Phantom fighter aircraft and with the Italians to re-equip the Army with light helicopters. The Minister is doing his worst for the British aircraft industry. It is not merely a question of the VC10s. B.A.C. will be affected much more widely. We heard today that T.W.A. has decided to reject the excellent BAC111 and to take instead the DC9 a completely inferior plane. This loss of a valuable export order is largely due to the Minister's statement. The fall-out of this unhappy affair will affect not only B.A.C. but the whole British aircraft industry and many subsidiary industries. The country will have to pay a high price for the Minister's irresponsibility.

The way in which the VC10 matter has been handled shows that the Minister is incapable of taking any really effective decision. This is a situation which applies not only to this Minister. None of the Ministers are at present able to take decisions, because they are all looking over their shoulders at the approaching General Election. All the Ministers now are being manipulated by the Conservative electoral machine. They are being manipulated like puppets. The Treasury Bench is now occupied by the zombies of the Conservative Central Office. We have to wait another three months for a change of Government and the return of life and vigour, not only to aviation but to the whole country.

9.29 p.m.

The Chancellor of the Exchequer (Mr. Reginald Maudling)

I thought that the concluding passages of the hon. Member for Loughborough (Mr. Cronin) were getting a little off beam. To suggest that the statement of my right hon. Friend the Minister of Aviation was responsible for the loss of the order of the BAC111, announced in the paper today, was as poor an argument as could possibly have been put forward.

There are several things which the whole House has had in common in the debate. The first is a desire to congratulate the Select Committee on a clear and excellent Report which has provided a basis for a very constructive and considerable debate. The second is that we all agree that B.O.A.C. is a fine airline with a magnificent record of safety. It is a very fine airline by which to travel. We all seek to travel by B.O.A.C. when we can, as do many people in other countries.

Next, we all accept that the VC10 is a fine aircraft, with great passenger appeal and great technical qualities. All these are facts which we accept. At the same time, we must accept the other facts that B.O.A.C. has piled up over recent years a very large deficit which must be dealt with, and that the chairman of B.O.A.C. feels that to operate the VC10 involves a financial penalty, either on capital or current account, of a considerable character, offsetting, in his view, the great technical qualities and the passenger and crew appeal of the aircraft.

This is the situation which we face in the debate. My right hon. Friend who moved the Motion dealt, I thought conclusively, with the argument about the VC10 in particular and why we have taken the decision which he.

announced. I intend, with the leave of the House, to come back a little later to some of these arguments and to deal with points which have been made in the debate.

First, however, I would deal with the Amendment which the Opposition have placed on the Order Paper and which would add to our Motion, 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". No evidence whatever has been produced to support that assertion. I will go through one or two speeches which have been made.

What have been the accusations made against us in the speeches of the hon. Members for Newton (Mr. Lee), Birmingham, Stechford (Mr. Roy Jenkins), Loughborough and others? I have made a note of the arguments put forward. For example, we have been told about the difficulties in respect of depreciation charges. I agree, and I accept on behalf of the Treasury that probably we should have pursued this matter more vigorously, but this is a question of the Government not having pursued B.O.A.C. vigorously enough to make a change from what the Corporation was doing: it cannot be an argument for saying that Government policy was inhibiting what the Corporation wanted to do.

In reply to the hon. Member for Loughborough, the reason why we did not agree to B.O.A.C. writing off a substantial amount in its accounts was that we felt, as the Select Committee felt, that writing off capital of that kind should not be permitted without the authority of Parliament. I should have thought that on this matter the Select Committee vindicated us entirely.

The hon. Member for Newton and others raised the questions of the independent airlines, and of trooping, as if they were a substantial handicap to B.O.A.C. I cannot accept that. I do not think that it is supported by the logic of the Report or the evidence. Indeed, it seems quite clear from reading the Report that whatever rights the independent airlines have to apply to operate in competition on B.O.A.C.'s main trunk routes, they have been very unsuccessful in getting permission to do so—so unsuccessful that I believe that I am right in saying that the Select Committee did not even refer to the competition of the independent airlines in the conclusions at the end of their Report.

I should have thought that the position in trooping is fair, as my hon. Friend the Member for Sunderland, South (Mr. P. Williams) mentioned in his intervention. We believe that the independent air companies can and will make a very valuable contribution to this country's economy. The hon. Member for Gloucester (Mr. Diamond) talked about B.O.A.C. swatting the flies. I do not regard the independent airline operators as flies to be swatted. I regard them as people who should be given a good opportunity. We have explained in debate after debate how we regard the trooping arrangements which we have as part and parcel of the development of independent airlines in the general interests of the economy. It is fair to say that while they are so restricted in competing against B.O.A.C. on its main trunk routes it is not unreasonable that B.O.A.C. should be restricted in competing against them in these trooping contracts.

Mr. Cronin

While the Chancellor of the Exchequer is on the subject of the independents, will he clear up one point? We heard from Sir Giles Guthrie last Saturday that he will cut out completely the South American routes. We heard in the Minister's statement on Monday that he is hoping to sell VC10s to British Eagle Airways to operate the South American routes. Will the right hon. Gentleman throw some light on that?

Mr. Maudling

Quite right. There is a proposal from Sir Giles Guthrie, as I understand it, to cut out these routes. It is at present a proposal. I have heard that some other operators have suggested that they might operate those routes. I should be interested to look at their proposals, because if one could find an independent operator who would run a useful service for this country without costing the taxpayer money I, for one, would be prepared to allow it. These are proposals we must consider.

Another criticism made by hon. Members is the position of the aircraft fleet of B.O.A.C. This is a matter at which the hon. Member for Newton and others have hammered a good deal, arguing that we have pressed B.O.A.C. to take too many aircraft and that we have pressed B.O.A.C. to take the wrong aircraft—in other words, to take British aircraft. I find this argument, apart from being inaccurate, rather inconsistent with the attitude of hon. Members who say that they would not cancel a single aircraft but would keep the whole contract going.

My right hon. Friend the Minister of Aviation dealt very fully in the course of his speech with the argument that we pressed B.O.A.C. to take too many aircraft. It is not true, as I see it on the evidence, that we have pressed B.O.A.C. to buy an excessive number of aircraft. It is certainly true that, on present showing, B.O.A.C has ordered too many aircraft It was a fault of optimism. That is the truth of the matter. It was a fault of over-estimating the growth of air traffic, which the Select Committee said in parts of its Report may not prove in the long run to be quite so unjustified as some people think. There was a short-term setback in the development of air transport, but that short-term setback may not prove to be lasting.

As my right hon. Friend pointed out, the decisions of B.O.A.C. to buy aircraft on this scale were decisions taken by B.O.A.C. in the exercise of its management responsibilities and not under the directions of Ministers. I thought that the hon. Member for Stechford rather helped us in this matter, if I am quoting him rightly, when he talked about B.O.A.C. placing a big order with Vickers because Vickers needed a large order. This is one of the points—the need to have large orders to give an economic basis for production in this country. The hon. Gentleman went on to say afterwards that B.O.A.C. then threw away its excuse by taking an option on a further large number of aircraft. In other words, the hon. Gentleman rather supported our case that B.O.A.C. by its order and by taking that further option made it clear, if excuse is needed, that it was its own management's judgment that this quantity of aircraft would be required.

Mr. Roy Jenkins

I also made it clear that, in my view, it is plain that B.O.A.C. would not in fact have put part of that option into operation without pressure from the Ministry and, to some extent, from Vickers two years later.

Mr. Maudling

I find the attitude of the party opposite to pressure rather odd. "Pressure" is a word which carries a pejorative sense in Parliament sometimes. Is there anything wrong in trying to persuade B.O.A.C. to buy more British aircraft in order to support the production and development of overseas sales? What I am saying is that in fact these decisions were taken on the responsibility of B.O.A.C.; but, if it were true that they were taken under pressure, would that pressure be particularly wrong?

Mr. Roy Jenkins

Pressure may be wrong or may be right, but what is wrong is for pressure to be applied and for the Minister then to devote most of his speeech to denying it.

Mr. Maudling

I said categorically that pressure was not applied. But, if it had been, would it have been such a bad thing? I take the other example of what is regarded as pressure on B.O.A.C, the suggestion that the Corporation was put in the position of having to choose British aircraft "or else". I suppose that, in a sense, that was a form of pressure. [HON. MEMBERS: "Oh."]

Mr. Albu

Even if the taxpayer pays?

Mr. Maudling

The Government made clear at the time of the purchase of the Boeings that they would put a limit on the number of American aircraft they would allow B.O.A.C. to purchase—for very good reasons—and the corollary of that was that if the Corporation wanted to buy any more they would have to be British aircraft. If hon. Members opposite like to describe that as pressure, they can. Surely, it was the right thing to do. Would they have preferred the Corporation to buy American?

Mr. MacDermot

The Chancellor is making an unfair debating point. When I dealt with this very matter, I said in terms that I was not complaining or criticising in any way the intervention by the Government. The only complaint was that they pretended that they did not so do.

Mr. Maudling

I have not referred to the hon. and learned Member because, I much regret to say, I was not here when he made his speech. I was referring to the hon. Member for Newton who made this particular point, which was reinforced somewhat by other hon. Members subsequently.

Mr. Lee

I made the point that, having agreed to 15 Boeings, the Government made the condition that the next order must go to the British aircraft industry. I want the aircraft industry in Britain to be looked after. But this is not the job of B.O.A.C. The job of B.O.A.C. is to look after its own interests. It is for the Government to look after the national interest, not palm off responsibility on to the Corporation.

Mr. Maudling

Precisely what my right hon. Friend said. That is exactly the point of the operation.

Mr. E. G. Willis (Edinburgh, East)

Answer the question.

Mr. Maudling

I answered it fully. The Government made perfectly clear that they would not allow B.O.A.C. foreign exchange to purchase more than a certain number of American aircraft and that, when it had done so, the Corporation would have to turn to British sources for further aircraft. I think that that was absolutely right. Were the Opposition against our doing it at the time?

The argument has been that the deficit of B.O.A.C. arises from Government policy in one way or another. The Report of the Select Committee refers to a number of things, to the fact that, as hon. Members have said, airline business throughout the world is not particularly rewarding and shows little return on capital. It refers, as few speakers today have done, to the growth of airline nationalism in various parts of the world, particularly affecting the operations of B.O.A.C. It refers to amortisation, and I have dealt with that. It refers to the losses incurred on the associated companies, and to engineering and maintenance costs. None of these points made in the Select Committee's Report seems to me to be a matter of Government policy, yet we are told in the Amendment that it is Government policy which is responsible for the losses and difficulties of B.O.A.C.

The main causes ascribed by the Select Committee to the difficulties of the Corporation are that too many aircraft were ordered, of the wrong types, with the result that B.O.A.C. tried to operate too many routes. The argument of the Select Committee is that the trouble arose from a confusion between the Government and B.O.A.C. as to the purposes for which they should be operated.

We must recognise that in this country there is bound to be a genuine conflict of interest between our international airline operators and the aircraft industry. There are bound to be these interests in conflict, and the aim is to reconcile them. The purpose obviously is to have a fine airline which is part of the modern world, internationally competitive, earning foreign exchange and paying its way. This is the thing that we want of the airline.

On the other hand, we also want to see an aircraft industry contributing, as it can and does, very substantially both to out economy and to our exports. But inevitably we must recognise that these things can and do conflict. The situation in aviation is really quite exceptional. It is certainly very different from the situation in sea transport. For example, throughout the world, as we know very well, it is the general practice of Governments to subsidise aviation and aircraft production in a big way, often out of military contracts. Then there is the small home market—a very small home market indeed—in this country compared with that in America or Russia or in the countries of some of our other possible competitors. There is the fact that the sterling area markets which we enjoyed before on a privileged basis no longer afford us the security that they did. There is often the need to establish home sales for an aircraft and to prove an aircraft before we can expect many overseas orders—a particular problem of the aircraft industry.

Then there is the conflict between the need of the aircraft industry to have orders in large numbers to make it economic, and the clear desire of an airline operator to be able to order the aircraft which he wants at the last possible moment, off the shelf, and flexibly for his own requirements. The Select Committee's Report shows very clearly that the desire in this country to give as much support to the aircraft industry as possible by spreading orders forward to give a sound production base is bound to conflict with the normal commercial desire of an airline operator to leave ordering as late as possible and to remain as flexible as possible.

Finally, a matter which has tended to be overlooked is this. There have been the shifting technical developments and the shifting requirements. I remember very well when I was at the Ministry of Supply for a little while how the views of B.O.A.C. changed very rapidly between its support of the turbo-prop aircraft for long-range operations and the decision that it would have to have long-range jets for the trans-Atlantic route. We have seen an example of this in the VC10: in particular, how the comparative advantage of operating from a shortened runway, which carries with it an economic penalty, is less than people expected because of a lengthening of runways throughout the world which people did not foresee.

These are examples of the difficulties in this country of getting a right balance, which we must seek to get, between the interests of the airline operator and the aircraft industry.

Of course, we have to study very carefully where we are going in the aircraft industry in this country. The hon. Member for Edmonton (Mr. Albu) referred to the very large resources going into the aircraft industry. Frankly, as Chancellor of the Exchequer, I cannot disguise my concern sometimes at the way that these sums seem to mount up.

I think, as my right hon. Friend said, that there are two ways of development for this country's aviation industry. What I do not believe we can do is to try to compete with the giant American industry in our own home market across the whole range of types of aircraft. But we can do two things simultaneously. We can produce a range of aircraft—medium-sized aircraft, for example, the range in which we do best—and, by co-operating with other people, as in the Concord project, we can provide the wider market, wider requirement and wider financial and scientific basis which will enable us to compete with the Americans in the largest and most up-to-date aircraft. This is, I believe, the future of the aircraft industry, and this is how we must see it develop.

If I may, I will talk shortly about the VC10 story, both past and present. I believe that the orders were justified at the time that they were made and that they can be quite fully justified. It is fair to say that a certain amount of the criticism is made with a degree of hindsight, as, of course, arises on these occasions. Certainly the VC10, in its original conception, offered qualities which the Boeing 707 could not offer by way of flexibility, for example; and, on the evidence of the letters from the Corporation, it was the aircraft which the Corporation wanted for its eastern and southern routes.

As I have said, what happened in practice was that the position was altered both by the changing airfield position throughout the world and by the speed of development and spread throughout the world of the Boeing. As for the numbers concerned, I am sure that B.O.A.C. was right, bearing in mind that in order to get aircraft at an economic price it must place an adequate number of orders.

It may be that in retrospect the Corporation's estimates of the growth of traffic throughout the world were optimistic; but it was probably wise for the Corporation to err on the side of optimism and it is by no means proved, at least yet, that the long-term growth of aviation will be slower than the enthusiasts believe that it can be.

The trouble with the aviation industry is that these fluctuations in the rate of growth fall particularly heavily on an industry which is so highly capitalised and on an industry in which production schedules have to be fixed so far ahead and where developments which take place in the course of designing and making an aircraft can be so completely disturbing to original plans. Past orders for the VC10 have clearly been vindicated in the debate as being justified at the time on the commercial judgment then taken, although subsequent events have shown, as Sir Giles Guthrie's Report indicates, that the number of aircraft actually ordered by B.O.A.C. is excessive.

The hon. Member for Stechford asked why my right hon. Friend asked Sir Giles Guthrie to make his report when it was known that the answer would be that Sir Giles would not want to have the VC10s. The purpose of the report and the sequence must be as follows. The first thing was to decide what would be the best route and operations pattern for B.O.A.C. The second thing to decide was what would be the aircraft best suited to carry out that pattern of operations. The third aim, with which we must now proceed as soon as possible, was to settle the financial structure of the Corporation which is appropriate to the aircraft which it possesses.

To answer one or two of the points which have been raised, I do not think that it would be possible to settle a new financial structure for the Corporation which was realistic and which gave it an opportunity and incentive to operate on a commercial basis until we had settled the pattern of the Corporation's fleet for the future. Now that we know what the fleet is to be, we can take into account these two factors: first, the accumulated deficit, which must be dealt with in one way or another, and secondly, the penalties which arise for B.O.A.C. from the higher cost of the VC10 as compared with the Boeing 707. Both these factors must clearly be taken into account in arriving at a new and logical capital structure for B.O.A.C. when the route pattern for the future and the aircraft pattern which is appropriate for that route pattern have been settled.

Faced with the fact that too many aircraft had been ordered, the alternatives before us were fairly clear. We could either agree with Sir Giles Guthrie that all the Super VC10s should be cancelled or tell him to get rid of all or most of the Boeings and have a complete Super VC10 fleet, or there could be a mixed fleet in the proportions which the Government have decided are right.

In deciding which alternative to choose, certain factors must clearly be borne in mind. The first is the position of B.O.A.C, the desire of the Corporation to operate economically and commercially, the need for incentive, the position of the new Chairman and the new people running B.O.A.C. and the necessity of giving them all the support possible in the carrying out of their tasks. A second factor is the effect upon the British aircraft industry and its prospects for the future in exports and employment. A third factor to which I, as Chancellor of the Exchequer, must pay attention is the financial factor. We took all these into account in reaching our decision about the number of VC10s that we would wish the Corporation to take.

Mr. Cronin

One follows the points about the importance of the inquiries, but why was Sir Giles Guthrie allowed to conduct the argument with the Ministry of Aviation in the blaze of publicity, which has been so damaging to the prospects of the VC10?

Mr. Maudling

I do not think that the prospects of the VC10 have been damaged as much as all that. I do not think that the future will show that they have been damaged at all. One thing of which I am certain is that today's debate, with what has been said on both sides about the VC10, will be a considerable encouragement to Vickers in their efforts for the future.

The first possibility would be to accept Sir Giles Guthrie's recommendations. We regarded this, although it was quite consistent with the objective that he was rightly given of working on a commercial basis, as being quite unacceptable because of its effects upon the aircraft industry. I gather that the entire House accepts that although Sir Giles Guthrie was right to propose what he did, in accordance with the terms of his directive, for national reasons we clearly could not go along with his proposal.

Another alternative would have been to say, "You must take all the VC10s and get rid of a number of Boeings. "But there are several arguments against this, I think, apart from the very strong argument that it would have been going very much counter to the views of the Board and the Chairman of B.O.A.C, which is a very important consideration. The fact is that we should be disposing of Boeing aircraft long before their full life had been taken up—long before—and inevitably would be disposing of them at a very poor price—because they are a special type of Boeing, with special engines and so on—and there is in particular the question of cost.

The hon. Member for Gloucester asked if this had been costed. I can assure him that it has been costed.

Mr. Diamond

How much?

Mr. Maudling

I am coming to that. The various schemes have been costed at the Treasury, and our calculation is that over the next few years our proposal will be by far the cheapest. To retain the whole VC10 order, including the 10 in suspense, bringing them forward and abandoning the Boeings, which is the other alternative, would cost something like £20 million to £30 million more over the next few years. This, I think, is a very formidable figure indeed. We are facing, as the House is aware, over the next few years a very large total of Government expenditure to which we are committed, and to add this on top of it would, I think, have been a very large item to undertake. [Interruption.] The additional cost of taking either Sir Giles Guthrie's proposal, or the whole of the VC10s, would be in the nature of £20 million to £30 million additional expenditure over the next few years.

Taking account of the sale price of the Boeings, the cost of the VC10s, production expenditure, possible cancellation charges—taking the whole thing into account—the best calculation we could make in the Treasury and the Ministry of Aviation, where we have gone into it very thoroughly and in great detail, is that what we are proposing will save the taxpayer between £20 million and £30 million over the next few years, and that seems to me a pretty formidable consideration to bear in mind.

So we feel that the proposal we have put forward is the best solution for B.O.A.C. and for Vickers and for the British taxpayer. We are not now agreeing to the cancellation of any VC10s. We do not agree to the proposition that the VC10s should be cancelled in order that more Boeings should be bought, although on the commercial judgment of the Chairman of B.O.A.C. this would have been the right thing to do; but we are saying that it would be wrong not to give notice to Vickers that we shall not force B.O.A.C. to take more aircraft than it has need for at the present moment.

Then there will be the complicated question of deliveries of the next 10. We must go into that; and then there is the question of the timing of production and the timing of the absorption into the fleet, and the question of that gap in timing.

This is the solution we put forward. There is a clear conflict here between the interests of a British airline operator and the interests of the aircraft industry. Both those interests should be the concern of the Government and of the House, and we believe that the solution we have put forward is in the best interests of both.

Question put. That those words be there added:—

The House divided. Ayes 202, Noes 268.

Division No. 140.]	AYES	[9.59 p.m.
Ainsley, William	Craddock, George (Bradford, S.)	Fraser, Thomas (Hamilton)
Albu, Austen	Cronin, John	Galpern, Sir Myer
Alldritt, w. H.	Crosland, Anthony	George, LadyMeganLloyd (Crmrthn)
Awbery, Stan (Bristol, Central)	Crossman, R. H. S.	Ginsburg, David
Bacon, Miss Alice	Cullen, Mrs. Alice	Gordon Walker, Rt. Hon. P. C.
Baxter, William (Stirlingshire, W.)	Dalyell, Tam	Gourlay, Harry
Beaney, Alan	Davies, C. Elfed (Rhondda, E.)	Greenwood, Anthony
Bellenger, Rt. Hon. F. J.	Davies, Harold (Leek)	Grey, Charles
Bennett, J. (Glasgow, Bridgeton)	Davies, Ifor (Gower)	Griffiths, Rt. Hon. James (Llaneliy)
Blackburn, F.	Davies, S. O. (Merthyr)	Griffiths, W. (Exchange)
Blyton, William	Deer, George	Grimond, Rt. Hon. J.
Boardman, H.	Delargy, Hugh	Hale, Leslie (Oldham, W.)
Bottomley, Rt. Hon. A. G.	Diamond, John	Hamilton, William (West Fife)
Bowden, Rt. Hn. H. W. (Leics, S. W.)	Doig, Peter	Hannan, William
Bowen, Doderic (Cardigan)	Donnelly, Desmond	Harper, Joseph
Bowles, Frank	Driberg, Tom	Hart, Mrs. Judith
Boyden, James	Duffy, A. E. P. (Colne Valley)	Hayman, F. H.
Braddock, Mrs. E. M.	Edwards, Robert (Bilston)	Herbison, Miss Margaret
Bray, Dr. Jeremy	Evans, Albert	Hill, J. (Midlothian)
Brockway, A. Fenner	Fernyhough, E.	Hilton, A. V.
Broughton, Dr. A. D. D.	Finch, Harold	Holman, Percy
Butler, Herbert (Hackney, C.)	Fitch, Alan	Hooson, H. E.
Butler, Mrs. Joyce (Wood Green)	Fletcher, Eric	Houghton, Douglas
Callaghan, James	Foley, Maurice	Hoy, James H.
Carmichael, Neil	Foot, Dingle (Ipswich)	Hughes, Cledwyn (Anglesey)
Collick, Percy	Foot, Michael (Ebbw Vale)	Hughes, Emrys (S. Ayrshire)
Corbet, Mrs. Freda	Forman, J. C.	Hughes, Hector (Aberdeen, N.)
Hunter, A. E.	Morris, John (Aberavon)	Snow, Julian
Hynd, John (Attercliffe)	Moyle, Arthur	Sorensen, R. W.
Irvine, A. J. (Edge Hill)	Mulley, Frederick	Soskice, Rt. Hon. Sir Srank
Irving, Sydney (Dartford)	Neal, Harold	Spriggs, Leslie
Janner, Sir Barnett	Noel-Baker, Francis (Swindon)	Steele, Thomas
Jay, Rt. Hon. Douglas	Noel-Baker, Rt. Hn. Philip (Derby, S.)	Stewart, Michael (Fulham)
Jeger, George	Oliver, G. H.	Stonehouse, John
Jenkins, Roy (Stechford)	O'Malley, B. K.	Stones, William
Johnson, Carol (Lewisham, S.)	Owen, Will	Strauss, Rt. Hon. G. R. (Vauxhall)
Jones, Dan (Burnley)	Padley, W. E.	Stross, SirBarnett (Stoke-on-Trent, C.)
Jones, J. Idwal (Wrexham)	Paget, R. T.	Swingler, Stephen
Jones, T. W. (Merioneth)	Pannell, Charles (Leeds, W.)	Symonds, J. B.
Kenyon, Clifford	Pargiter, G. A.	Taverne, D.
King, Dr. Horace	Parker, John	Taylor, Bernard (Mansfield)
Lawson, George	Pavitt, Laurence	Thomas, George (Cardiff, W)
Lee, Frederick (Newton)	Pearson, Arthur (Pontypridd)	Thomas, lorwerth (Rhondda, W)
Lee, Miss Jennie (Cannock)	Peart, Frederick	Thompson, Dr. Alan (Dunfermline)
Lewis, Arthur (West Ham, N.)	Pentland, Norman	Thomson, G. M. (Dundee, E.)
Lipton, Marcus	Popplewell, Ernest	Thornton, Ernest
Loughlin, Charles	Prentice, R. E.	Wade, Donald
Lubbock, Eric	Price, J. T. (Westhoughton)	Wainwright, Edwin
Mabon, Dr. J. Dickson	Probert, Arthur	Warbey, William
McBride, N.	Pursey, Cmdr. Harry	Watkins, Tudor
MacColl, James	Randall, Harry	Weitzman, David
MacDermot, Niall	Rankin, John	Wells, William (Walsall, N.)
Mclnnes, James	Redhead, E. C.	White, Mrs. Eirene
McKay, John (Wallsend)	Rhodes, H.	Whitlock, William
Mackenzie, Gregor	Roberts, Goronwy (Caernarvon)	Wigg, George
Mackie, John (Enfield, East)	Robertson, John (Paisley)	Wilkins, W. A.
McLeavy, Frank	Robinson, Kenneth (St. Pancras, N.)	Willey, Frederick
MacPherson, Malcolm	Rodgers, W. T. (Stockton)	Willis, E. G. (Edinburgh, E.)
Mallalieu, E. L. (Briggs)	Rogers, G. H. R. (Kensington, N.)	Wilson, Rt. Hon. Harold (Huyton)
Manuel, Archie	Ross, William	Winterbottom, R. E.
Mapp, Charles	Shinwell, Rt. Hon. E.	Woodburn, Rt. Hon. A.
Mason, Roy	Short, Edward	Woof, Robert
Mayhew, Christopher	Silkin, John	Wyatt, Woodrow
Mendelson, J. J.	Silverman, Julius (Aston)	Yates, Victor (Ladywood)
Millan, Bruce	Skeffington, Arthur
Milne, Edward	Slater, Mrs. Harriet (Stoke, N.)	TELLERS FOR THE AYES:
Mitchison, G. R.	Slater, Joseph (Sedgefield)	Mr. Charles A. Howell and
Monslow, Walter	Small, William	Mr. McCann.
Morris, Charles (Openshaw)	Smith, Ellis (Stoke, S.)
NOES
Agnew, Sir Peter	Carr, Rt. Hon. Robert (Mitcham)	Fraser, Rt. Hn. Hugh (Stafford&Stones
Allason, James	Chataway, Christopher	Fraser, Ian (Plymouth, Sutton)
Amery, Rt. Hon. Julian	Clark, Henry (Antrim, N.)	Freeth, Denzil
Anderson, D. C,	Clark, William (Nottingham, S.)	Calbraith, Hon. T. G. D.
Ashton, Sir Hubert	Clarke, Brig. Terence (Portsmth, W.)	Cammans, Lady
Atkins, Humphrey	Cleaver, Leonard	Gardner, Edward
Awdry, Daniel (Chippenham)	Cooke, Robert	Giles, Rear-Admiral Morgan
Balniel, Lord	Cooper, A. E.	Gilmour, Sir John (East Fife)
Barber, Rt. Hon. Anthony	Cooper-Key, Sir Neill	Clyn, Dr. Alan (Clapham)
Barlow, Sir John	Corfield, F. V.	Godber, Rt. Hon. J. B.
Barter, John	Costain, A. P.	Goodhart, Philip
Batsford, Brian	Coulson, Michael	Gower, Raymond
Bell, Ronald	Courtney, Cdr. Anthony	Green, Alan
Bennett, F. M. (Torquay)	Craddock, Sir Beresford (Spelthorne)	Griffiths, Eldon (Bury St. Edmunds)
Bennett, Dr. Reginald (Gos. & Fhm.)	Crawley, Aidan	Gurden, Harold
Berkeley, Humphry	Critchley, Julian	Hall, John (Wycombe)
Bevins, Rt. Hon. Reginald	Crosthwaite-Eyre, Col. Sir Oliver	Hamilton, Michael (Wellingborough)
Bidgood, John C.	Crowder, F. P.	Harris, Frederic (Croydon, N. W.)
Biffen, John	Cunningham, Sir Knox	Harris, Reader (Heston)
Biggs-Davison, John	Curran, Charles	Harrison, Col. Sir Harwood (Eye)
Bingham, R. M.	Dalkeith, Earl of	Harvey, Sir Arthur Vere (Macclesf'd)
Birch, Rt. Hon. Nigel	Dance, James	Harvey, John (Walthamstow, E.)
Bishop, Sir Patrick	d'Avigdor-Goldsmid, Sir Henry	Harvie Anderson, Miss
Black, Sir Cyril	Deedes, Rt. Hon. W. F.	Hastings, Stephen
Bossom, Hon. Clive	Digby, Simon Wingfield	Hay, John
Bourne-Arton, A,	Donaldson, Cmdr. C. E. M.	Heald, Rt. Hon. Sir Lionel
Box, Donald	Doughty, Charles	Heath, Rt. Hon. Edward
Boyd-Carpenter, Rt. Hon. John	Douglas-Home, Rt. Hon. Sir Alec	Hendry, Forbes
Boyle, Rt. Hon. Sir Edward	Drayson, G. B.	Hill, Mrs. Eveline (Wythenshawe)
Braine, Bernard	Duncan, Sir James	Hirst, Geoffrey
Bromley-Davenport, Lt.-Col. Sir Walter	Eden, Sir John	Hobson, Rt. Hon. Sir John
Brooke, Rt. Hon. Henry	Elliot, Capt. Walter (Carshalton)	Hocking, Philip N.
Brown, Alan (Tottenham)	Elliott, R. W. (Newc'tle-upon-Tyne, N.)	Hogg, Rt. Hon. Quintin
Browne, Percy (Torrington)	Emery, Peter	Holland, Philip
Bryan, Paul	Emmet, Hon. Mrs. Evelyn	Hollingworth, John
Bullard, Denys	Errington, Sir Eric	Hopkins, Alan
Bullus, Wing Commander Eric	Farr, John	Hornsby-Smith, Rt. Hon. Dame P.
Butcher, Sir Herbert	Fell, Anthony	Hughes Hallett, Vice-Admiral John
Campbell, Gordon	Fisher, Nigel	Hughes-Young, Michael
Carr, Compton (Barons Court)	Fletcher-Cooke, Charles	Hulbert, Sir Norman
Hurd, Sir Anthony	Montgomery, Fergus	Seymour, Leslie
Hutchison, Michael Clark	More, Jasper (Ludlow)	Sharples, Richard
Iremonger, T. L.	Morgan, William	Shaw, M.
Irvine, Bryant Godman (Rye)	Morrison, Charles (Devizes)	Shepherd, William
James, David	Nabarro, Sir Gerald	Smith, Dudley (Br'ntf'd & Chiswick)
Jennings, J. C.	Neave, Airey	Smyth, Rt. Hon. Brig. Sir John
Johnson, Eric (Blackley)	Noble, Rt. Hon. Michael	Spearman, Sir Alexander
Jones, Arthur (Northants, S.)	Nugent, Rt. Hon. Sir Richard	Speir, Rupert
Jones, Rt. Hn. Aubrey (Hall Green)	Oakshott, Sir Hendrie	Stainton, Keith
Kaberry, Sir Donald	Orr, Capt. L. P. S.	Stevens, Geoffrey
Kerans, Cdr. J. S.	Orr-Ewing, Sir Ian (Hendon, North)	Steward, Harold (Stockport, S.)
Kerby, Capt. Henry	Osborn, John (Hallam)	Storey, Sir Samuel
Kerr, Sir Hamilton	Osborne, Sir Cyril (Louth)	Studholme, Sir Henry
Kershaw, Anthony	Page, Graham (Crosby)	Summers, Sir Spencer
Kirk, Peter	Panned, Norman (Kirkdale)	Tapsell, Peter
Kitson, Timothy	Partridge, E.	Taylor, Sir Charles (Eastbourne)
Lambton, Viscount	Pearson, Frank (Clitheroe)	Taylor, Edwin (Bolton, E.)
Lancaster, Col. C. G.	Peel, John	Taylor, Frank (M'ch'st'r, Moss Side)
Langford-Holt, Sir John	Percival, Ian	Teeling, Sir William
Leavey, J. A.	Pickthorn, Sir Kenneth	Temple, John M.
Lewis, Kenneth (Rutland)	Pike, Miss Mervyn	Thatcher, Mrs. Margaret
Linstead, Sir Hugh	Pitman, Sir James	Thomas, Sir Leslie (Canterbury)
Litchfield, Capt. John	Pitt, Dame Edith	Thompson, Sir Kenneth (Walton)
Lloyd, Rt. Hn. Geoffrey (Sut'nC'dfield)	Pounder, Rafton	Thompson, Sir Richard (Croydon, S.)
Lloyd, Rt. Hon. Selwyn (Wirral)	Powell, Rt. Hon. J. Enoch	Thorneycroft, Rt. Hon. Peter
Longbottom, Charles	Price, David (Eastleigh)	Thornton-Kemsley, Sir Colin
Longden, Gilbert	Price, H. A. (Lewisham, W.)	Tilney, John (Wavertree)
Loveys, Walter H.	Prior, J. M. L.	Touche, Rt. Hon. Sir Gordon
Lucas, Sir Jocelyn	Prior-Palmer, Brig. Sir Otho	Turner, Colin
Lucas-Tooth, Sir Hugh	Proudfoot, Wilfred	Vaughan-Morgan, Rt. Hon. Sir John
McAdden, Sir Stephen	Pym, Francis	Vickers, Miss Joan
MacArthur, Ian	Ramsden, Rt. Hon. James	Walder, David
McLaren, Martin	Rawlinson, Rt. Hon. Sir Peter	Walker, Peter
Maclean, SirFitzroy (Bute&N. Ayrs)	Redmayne, Rt. Hon. Martin	Walker-Smith, Rt. Hon. Sir Derek
Macleod, Rt. Hn. lain (Enfield, W.)	Rees, Hugh (Swansea, W.)	Wall, Patrick
McMaster, Stanley R.	Rees-Davies, W. R. (Isle of Thanet)	Ward, Dame Irene
Maddan, Martin	Renton, Rt. Hon. David	Webster, David
Maginnis, John E.	Ridley, Hon. Nicholas	Wells, John (Maidstone)
Maitland, Sir John	Ridsdale, Julian	Williams, Sir Rolf Dudley (Exeter)
Markham, Major Sir Frank	Rippon, Rt. Hon. Geoffrey	Williams, Paul (Sunderland, S.)
Marples, Rt. Hon. Ernest	Roberts, Sir Peter (Heeley)	Wills, Sir Gerald (Bridgwater)
Marshall, Sir Douglas	Robertson, Sir D.(C'thn's & S'th'ld)	Wilson, Geoffrey (Truro)
Marten, Neil	Robson Brown, Sir William	Wise, A. R.
Mathew, Robert (Honiton)	Rodgers, Sir John (Sevenoaks)	Wolrige-Gordon, Patrick
Matthews, Gordon (Meriden)	Roots, William	Woodhouse, Hon. Christopher
Maudling, Rt. Hon. Reginald	Ropner, Col. Sir Leonard	Woollam, John
Mawby, Ray	Royle, Anthony (Richmond, Surrey)	Worsley, Marcus
Maxwell-Hyslop, R. J.	Russell, Sir Ronald	Yates, William (The Wrekin)
Maydon, Lt. Cmdr. S. L. C.	Sandys, Rt. Hon. Duncan
Miscampbell, Norman	Scott-Hopkins, James	TELLERS FOR THE NOES:
		Mr. Finlay and Mr. J. E. B. Hill.

Main Question put and agreed to. Resolved.

Resolved, That this House takes note of the Report from the Select Committee on Nationalised Industries, on the British Overseas Airways Corporation.