§ 3.41 p.m.
§ The Minister of Aviation (Mr. Frederick Mulley)
I beg to move,That this House takes note of the Report of the Committee of Inquiry into the Aircraft Industry, 1964–65 (Command Paper No. 2853).
§ Captain L. P. S. Orr (Down, South)
On a point of order, Mr. Speaker. May I ask whether you intend to call the Amendment—in line 3, at end to addbut rejects the recommendations of the Committee relating to Short Brothers and Harland".—standing in my name and the names of some of my hon. Friends?
§ Mr. Speaker
I had intended to make an announcement at the end of the Minister's speech, but to put the hon. Member for Down, South (Captain Orr) out of his misery, I will tell him now that I have not selected the Amendment.
§ Mr. Mulley
On 16th December last, when the Plowden Report was made available to the House, my predecessor expressed the thanks of the Government to Lord Plowden and the members of his Committee. Now that there has been time to study the implications of the Report in greater detail, I would like to add my personal thanks to the Committee for its sustained work and penetrating analysis of the problems facing the aircraft industry and for the thoughtful and comprehensive proposals put forward. These have been most helpful to the Government as a framework within which to formulate future policy and have more than vindicated my predecessor's decision to set up the Plowden Committee.
It was clear that the House desired an early opportunity to debate the Report and its far-reaching implications and to make known its views before any final decisions were taken by the Government on the more controversial aspects. Today, I propose to indicate the Government's views in general terms. I shall not present the precise formulation of policy, which must await further discussion and consideration and which will be presented to the House in due course. In seeking to meet the wishes of the House in this way I hope—but without too much confidence—that the Government will not be unduly criticised for not 891 presenting the House with final decisions on all the recommendations today.
Some of the recommendations—in particular, those relating to the possibility of Government participation in the ownership of the industry—have attracted a great deal of attention and may have obscured certain of the more fundamental aspects of the Report. I would like to discuss these before commenting on the detailed recommendations.
The situation which faced the Government when they came to office 15 months ago was that the aircraft industry was absorbing a disproportionate share of the country's resources. We were faced at the same time, with spiralling costs of projects, with financial losses on civil ventures and with falling exports. It was evident that a radical approach was necessary to the problems of the industry and that this necessitated changes in attitude as much as changes in policy.
In this situation, the primary task given to the Plowden Committee by my right hon. Friend was to determine the future place of the industry in the economy of the country and, indeed, to advise the Government whether it should have a place at all. The first question to which we have to address ourselves, therefore, is whether we still need an aircraft industry at all.
Since coming to office, the Government have had to take a number of very difficult and unpopular decisions. The military aircraft programme which we inherited was hopelessly overloaded and was so unrelated to the timing of the needs of the Royal Air Force that we therefore had no choice but to make some major cancellations. These, of course, affected the situation with which the Plowden Committee had to deal.
There could be no justification for delaying these decisions until the Plowden Committee had reported. Indeed, when the Committee was first set up, the hon. Member for Stratford-on-Avon (Mr. Maude), then the Opposition's principal spokesman on aviation, asked for and received from my right hon. Friend an assurance that the deliberations of the Committee would not be allowed to delay decisions on individual projects.
§ Mr. Victor Goodhew (St. Albans)
What orders have been placed since these 892 cancellations of British aircraft in the early part of last year?
§ Mr. Mulley
There is a Question on the Order Paper tomorrow. I think that it comes from the hon. Gentleman himself. I propose to give the full list then. There is a general rule that one should not anticipate Questions that hon. Members have put on the Order Paper. But if there is a demand for such a list, that can be attended to in the normal way.
§ Mr. Goodhew rose—
§ Mr. Mulley
I am sorry. I cannot pursue that now.
Ever since the cancellations in the military aircraft programme there has been talk of the impending demise of the industry. I make it clear now beyond doubt that the Government fully accept the case for this country having a substantial aircraft industry, both military and civil, and that we intend to carry out policies designed to make that possible.
I would like to enlarge two or three sentences which are among the most striking in the Plowden Report. After describing the difficulties facing the industry, the Report, in paragraph 207, says:Although this dilemma is particularly sharp in the aircraft industry, it is by no means confined to aircraft. It is true in a greater or lesser degree of every technologically advanced industry in this country. It is inherent in the whole position of the United Kingdom in the world economy in the second half of the twentieth century. For this reason we cannot afford to admit defeat in this particular industry while hoping that solutions will be found in others.The Government fully and unequivocally accept that analysis.
Let us be in no doubt that we are facing today a sustained and determined competition in world markets. I am convinced that the industry itself will meet this challenge and will do so successfully. It is the duty of the Government to help it to do so—not by feather bedding but by helping to create an environment in which the industry can save itself by its own exertions. This we intend to do.
In recent years the industry has been receiving substantial support from public funds. This has taken two main forms. Military aircraft have been developed at high cost in relation to the numbers required and much of the money contributed by the Government towards 893 launching new civil aircraft has not been recovered from sales. This support has hitherto been justified on the grounds of the special benefits that the industry has afforded the country. The value of this indirect contribution to the community in the past has unquestionably been considerable. But, as the central analysis of the Report shows, it is diminishing.
The traditional arguments for maintaining an aircraft industry for reasons of defence, general technology and balance of payments have become weaker and the Plowden Committee concluded that the level of support that the industry has been receiving is too high and should be reduced. It recognised that, in the short term, some special measure might be needed to avoid an uncontrolled rundown in the industry, but considered that the aim of policy should be to create conditions in which the industry can, in the long term—and I stress that we cannot achieve this overnight—thrive with no more support or protection than that given to comparable industries in Britain.
This is perhaps the key recommendation of the Plowden Report. It marks a turning point in attitudes towards the industry, which in some ways has been the prisoner of its own past achievement. There have been those both in the industry and outside who during recent years have asserted that, whatever happens and whatever the cost, we must maintain the aircraft industry. That is not so and it is no compliment to the industry to suggest that it is necessary. The industry must become as competitive as any other industry and I have no doubt that it has the ability, the technical skills and the determination to do so.
§ Mr. Cranley Onslow (Woking)
It would help if the hon. Gentleman could define what he means by the word "comparable" in this context. Can he tell us of one or two other comparable industries?
§ Mr. Mulley
The shortest and simplest example may be that of industries with similar technological problems and similar technological contributions to make to our economy.
§ Mr. Mulley
I was quoting from the Report, but the kind of industries which 894 I imagine would be comparable are some of the electronic industries, the computer industry, for example.
The basic problem, says the Committee, is that the British home market is too small and does not call for the volume of production needed to bear the extremely high initial costs of developing and producing aircraft. Of course, in addition there have been shortcomings on the part of both the industry and the Government. The Report does not mince words on this matter. Clearly, everything possible must be done to correct these failings in future. But with all this the Committee's considered view was:There is little prospect for substantially increased sales for the British industry standing on its own.We must turn to collaboration with other countries as the principal means of improving the relationship between the size of market and development and initial production costs and as the key to remaining a major force in aviation.
The Committee goes on to say that the major effort in future collaboration should be towards an association between the British and other European industries in a European aircraft industry. This does not imply, of course, that we should no longer try to collaborate with the United States. The agreement on the advanced lift engine, signed last October, is a good example of such collaboration, and we hope that there will be others.
Collaboration with Europe has been established policy for some years and we must continue to give priority to it. A great deal has already been achieved on a bilateral basis. We are working on a number of aircraft, engine and guided weapon projects with France, Germany and the Netherlands. My predecessor had most encouraging talks in Bonn just before Christmas and I myself look forward to visiting Paris on 17th February for discussions with M. Pisani, the new French Minister responsible, on the project which has become known as the airbus, a project which, it is already clear, will depend on such co-operation.
Other European countries are in substantially the same dilemma as Britain and this identity of interests should draw us together. There are many practical difficulties in multilateral collaboration, 895 but they must be overcome if a strong aircraft industry is to survive in Europe. The prize is great and we are determined to secure it.
We shall pursue the proposal in the Report for a European conference, but, of course, careful and detailed preparation is essential if an undertaking of this kind is to achieve practical results. This will take time and I doubt whether it would be sensible to arrange a conference before the end of this year, or, perhaps, early next.
The second broad policy proposed by the Plowden Committee is concentration on projects for which development costs are not disproportionate to the market. This may seem a fairly obvious principle, but it was ignored to our cost when the TSR2 was developed as a national project. Britain is unlikely to be justified again in embarking alone on an expensive new major project. We must aim to collaborate with European partners on all military and all major civil types which have good economic prospects as European projects. The more costly the development of the project, the greater the markets will have to be to justify it. For the largest and most complex military projects and for large and costly long-range civil aircraft the Committee took the view that even an association with several European partners was not likely to provide an adequate economic basis for going ahead. In these cases, it recommends that we should buy American.
This seems to me to be going too far. This recommendation has been criticised by the industry, which fears that it could be interpreted so as to condemn us in future to tackling only second-rate projects. We certainly do not accept that interpretation. Of course, everything depends on what is meant by "the largest and most complex aircraft". I doubt whether it is profitable to argue about it in a hypothetical way. We must look at each project on its merits. The important thing is that we and our partners should adopt strict economic criteria in deciding which projects to work on.
What we actually embark on will be a matter to be settled in consultation with our partners. Much will depend on the speed with which a European industry becomes effective and the character of the 896 propositions which emerge. We are already working on a number of important projects. The Jaguar strike trainer is already under development. Studies of the variable geometry aircraft are well advanced. We attach great importance to these projects for our future defence requirements.
§ Mr. J. Enoch Powell (Wolverhampton, South-West)
Can the right hon. Gentleman define a little further what he means by the strict economic criteria by which the Government would be guided?
§ Mr. Mulley
The strict economic criteria will depend very much on the particular project. With civil aircraft there must be a prospective possible market on completion of development. With military projects the whole economic position of the country will obviously have to be taken into account as well as the actual projected numbers and development costs.
§ Mr. Mulley
My experience of life, for what it is worth, is that there is no automatic economic formula which can be applied to every proposition which arises.
§ Mr. Julian Amery (Preston, North)
The right hon. Gentleman spoke of studies of a variable geometry aircraft. It would help the House if he could say whether it is envisaged as a replacement for the Canberra or the Phantom, so that we can know what job it has to do.
§ Mr. Mulley
The right hon. Gentleman must not tempt me into trying to predict my right hon. Friend's defence review, but I can assure him that we did not go into this project without being quite satisfied that there was a need for this aircraft in our future military defence programme.
As I said, we attach great importance to these projects for our future defence requirements. The prospects for a European airbus are being carefully examined. We are, of course, also working with the French on the Concord. None of these is in any sense a second-rate project. There is a challenge to all of us, Governments and industries, to devise projects which have a wide appeal and which can be developed and produced economically.
897 This leads me to the third main plank of the policy proposed by the Plowden Committee—a sustained drive to improve exports. This is essential no matter what degree of success is achieved with collaboration. The House will have noted with pleasure the export figures for 1965 at £145 million, about 50 per cent. over those for 1964. While the export negotiations are primarily matters for the companies concerned, the Government have played an active rôle in supporting them. My hon. Friend the Parliamentary Secretary has devoted much time and skill to this work and I know that his efforts are appreciated by the industry. The valuable report of Sir Donald Stokes, on which my right hon. Friend the Secretary of State for Defence made a statement last week, also bears on this.
There is a close similarity between the recommendations in both reports and arrangements are already in hand to implement them. The Committee also made recommendations touching on export credits. Until fairly recently the normal maximum credit allowed for a large jet aircraft was seven years from delivery. Some months ago it was decided that for the VC10 and the Trident this should, in appropriate cases, be extended to 10 years. These credit limits were again under review when the Plowden Report was received.
I can now tell the House that the Government have decided on a further extension. Where the buyer and the market are acceptable for this purpose, it will in future be open to the Export Credits Guarantee Department to provide cover on 10-year terms for the B.A.C.111 as well as for the two larger aircraft whenever such credit is commercially appropriate. This is the main framework of policy—international collaboration on economically sound projects allied to the maximum export drive.
I will now deal with some of the other aspects of the Report, taking civil aircraft first. The Committee thought that the immediate prospects were not favourable, but that the possible longer-term rewards made the effort of remaining in the business worthwhile. It proposed the same broad policy of European collaboration as for military aircraft. As regards Government financial assistance to the launching costs of civil aircraft it endorsed existing Government policy of seeking at least 898 a 50 per cent. contribution from manufacturers though acknowledging that in some cases the Government might have to pay more than half. I am sure that the 50–50 arrangement should remain the general policy. The Committee enjoins the Government, as soon as the results of the defence review are known, to take the industry fully into their confidence about future military procurement plans. We shall be doing this in order to provide a programme with more stability than in recent years.
The industry attaches great importance to this and the whole purpose of my right hon. Friend's defence review is to provide a firm basis for our defence expenditure in the next decade. This should enable us to minimise the uncertainty in the field of military contracts, which I accept has been a great problem for the industry in the last decade. At the same time, we should not underestimate the difficulties of producing stability in defence procurement where programmes stretch over many years and where changes in commitments, serious technical difficulties and massive increases in cost may occur. We must, however, aim to take firm decisions as soon as possible and stick to them except where very compelling reasons to the contrary arise.
The Committee recommends that to avoid more delays Governments should be ready, in suitable cases, to approve the development of promising components and techniques in advance of the system into which they would fit. This is already our policy, as we have shown in signing the Anglo-American agreement on the advanced lift engine.
A number of recommendations were made by the Committee concerning the procurement procedures of the industry and efficiency within the industry generally. In particular it stressed the need to reduce the detailed, technical and financial control of the industry exercised by my Department. I have decided to have a joint examination of these problems, and am discussing them with the Society of British Aerospace Companies. At the same time, I must point out that these controls spring, in a large measure, from the general requirements of this House, and especially the Public Accounts Committee, for the control of public expenditure. I do not know to what extent, if at all, the House would be 899 willing to relax them, whether there should be a Government shareholding in the industry or not. I am, however, willing to examine the whole problem and will do what is possible to seek improved procedures.
The Report touches on the problems of Short Bros. and Harland Ltd. This company has for several years faced the prospect of a severe decline in its work load as the programme on the Belfast freighter for the R.A.F. comes to an end. Notwithstanding action taken to minimise the decline by giving the company some sub-contract work on the R.A.F. VC10s, by the latter half of next year employment at the company is likely to drop to about half its present level. Work on the Fokker 28 and Phantom has also been secured, but is insufficient to prevent a fall in work from about next June. I believe that the management of the company must do its utmost to diversify, and measures to this end are under discussion with the Government.
These discussions will be greatly assisted by the recommendations for diversification which have been made by the consultants appointed for the purpose jointly by the company and the Government. I hope that Shorts will have a continuing part to play in the aircraft industry and I am considering with the chairman and his colleagues how this might best be achieved.
§ Captain Orr
The right hon. Gentleman has referred to the recommendations made by the consultants. Could he tell us what they are?
§ Mr. Mulley
The consultants made a long report jointly to my right hon. Friend the First Secretary and the company, covering a wide range of matters. I could not possibly summarise them. It might be more appropriate for questions about it to be addressed to the Minister responsible.
§ Mr. Eric Lubbock (Orpington)
In view of the fact that the right hon. Gentleman says that some short-term measures to sustain the company may be necessary, will he tell us what is the position with regard to the V.F.W. short-haul airliner?
§ Mr. Mulley
I thought that I had made that clear. This is one of the matters currently under discussion between my 900 officials and the company and I would not want to prejudge the outcome of those discussions.
§ Mr. Stratton Mills
On Tuesday of last week the right hon. Gentleman issued a statement saying that it was not intended to proceed, as far as Short and Harlands were concerned, with the consortium dealing with the V.F.W. Has there been a change in the position or is it possible that there may be second thoughts on the matter?
§ Mr. Mulley
I made no such statement. What was said, very clearly, was that no decision on the first point of issue, that of whether such an aeroplane could be supported by the Government, irrespective of who made it, had been taken. No such decision has been taken. This is one of the matters which is under discussion with the company.
I come to the important question of the future size of the organisation, and the ownership of the industry. As I have already made clear, the Government see no case for supporting the industry at any particular size. The size of the industry, as the Plowden Committee says, must depend upon the amount of work it succeeds in obtaining. I cannot yet tell the House of any decisions on particular defence projects. These must await the completion of the defence review, but it is clear that reductions in defence expenditure must produce reductions in spending on military projects.
Nor do we know exactly what civil and export work the industry will succeed in obtaining. The future pattern of likely airline purchases is difficult to predict and the present generation of sub-sonic aircraft may continue for many years. Increasing public reaction to problems of noise may also be a factor in determining the adoption of new types. But from all the information currently available it seems clear that there will be a significant drop in the load of work on the industry.
In our present view, this points to a likely reduction from the present work force of about 250,000 employees to not more than 200,000 in 1970, and we would expect the airframe side of the industry to feel it most. Though this is a substantial reduction, the industry would still be a very large one. In absolute terms it would be about twice the size 901 of the French industry. While the numbers employed seem certain to decline, it need not follow that the industry's contribution to higher technology diminishes also. Indeed, a smaller industry may depend more, and not less, on higher technology. It is against this background that the future organisation and ownership of the industry must be considered.
These are clearly the most controversial parts of the Report, and we must seek, as the Committee does, to put them in perspective. Proposals for the organisation and ownership are only the means achieve a more viable and efficient aircraft industry. They are not an end or policy in themselves. The range of options extends from the complete public ownership of the industry at one end to leaving everything as it is at the other, with innumerable permutations in between.
§ Mr. Robert Carr (Mitcham)
It is important that we should be clear about this. The Minister says that the range of options extends from full-scale public ownership at one end. That is so in theory. If the Government were to consider that, they would be going right outside the Plowden Committee's recommendations, would they not?
The right hon. Gentleman should listen a little more carefully. I did not say what the Government's view was. I was merely saying that in the discussion which has taken place since the publication of the Report a number of views have been expressed that there should be the full range. As the Economist said last weekend, this is worthy of respectable debate. At the other end of the argument, there are no doubt those who say that we should leave everything as it is.
The Committee distinguished between the situation of the two main airframe companies and the rest of the industry and recommended that the Government should take a shareholding in these companies—B.A.C. and the airframe and guided weapons elements of Hawker Siddeley. The Report sets out a number of arguments in favour of this, though Mr. Aubrey Jones takes a contrary view in his ingeniously argued note of dissent.
If I may put in my own words what I regard as the crux of the argument, it is whether the Government should 902 participate in the equity and management of an industry where they already provide so great a part of the working capital and take the critical decisions on projects. We consider that any partnership along these lines between the Government and the airframe companies should, if possible, be arranged on a mutually agreed basis and that the nature and terms of any Government participation should be settled in negotiations with the companies.
The Committee also thought that a merger of these airframe interests would offer scope for economies. It did not consider that the competition between the groups had been of great significance; the real competition, as we all know, comes from abroad. But, despite these considerations, the Committee felt that a decision on a merger could be made only when the future workload could be estimated with greater confidence. The Government have considered this question in the light of the basic analysis of the future of the industry and of the forecasts of future work since the Committee reported. This evidence points towards there being only one main airframe company in Britain.
This is not just because the workload is declining. It is also because as projects have become bigger and fewer there is a growing problem of maintaining a balanced workload, on design and production, in two separate groups. Since military business forms so important a part of the total work of the groups, the Government, in awarding contracts between the two, have pressed upon them many considerations other than that of which group is best fitted to undertake the work. These problems will get worse, not better, as the workload declines and as the number of projects continues to grow fewer. We cannot go on allocating contracts on the basis that it is Buggins' turn next.
It is sometimes argued that mergers in industry should come as a result of commercial forces in their own lime and manner. But it is doubtful whether a solution on these lines is realistic in the present situation. Both airframe groups are engaged on major projects for the Government and have considerable commitments to home and export customers. The matter cannot be left to the free forces of competition.
903 We therefore see force in the argument that a merger of B.A.C. and the airframe interests of the Hawker Siddeley group would be in the public interest and should be brought about on agreed terms. I intend further to discuss this matter and the question of possible Government shareholding with the two companies in the near future.
§ Commander Anthony Courtney (Harrow, East)
Would the right hon. Gentleman say a word about light aircraft? Is he aware, on the one hand, that there is not a single pure British light aircraft in production today, and, on the other—the Chief Secretary to the Treasury may laugh, but this is a very important point—that there is a very large export potential, quite apart from the home market which is now almost entirely dominated by American light aircraft?
§ Mr. Mulley
I agree that it is important that we should develop a light aircraft industry. It is, I think, fair to say that the Beagle 206 is in production. Some numbers of it have already been sold.
§ Mr. Mulley
I thought that it was a light aircraft. We cannot at this stage have an argument about terms. Beagle seems to me the best way to develop light aircraft in this country.
I have tried to indicate the Government's thinking on the most important of the recommendations of the Plowden Committee. The Report is, of course, a long one and makes a large number of detailed proposals. Many of these will, no doubt, be referred to by hon. Members in today's debate, and my hon. Friend the Parliamentary Secretary will deal with them when he winds up.
§ Mr. Lubbock
The right hon. Gentleman referred to the airframe companies and said that he thought that there should be a merger between B.A.C. and the airframe interests of Hawker Siddeley. He did not go on to deal with the position regarding Rolls Royce and Bristol Siddeley. Could he say something about that?
§ Mr. Mulley
Probably the hon. Gentleman should have realised that I did not deal with it simply because I had nothing to say on that theme.
§ Mrs. Shirley Williams (Hitchin)
Before my right hon. Friend leaves the question of the merger between B.A.C. and the airframe interests of Hawker Siddeley, would he say whether he has anything further to add about their guided missile interests?
§ Mr. Mulley
Perhaps I did not make the matter clear. I mentioned that Hawker Siddeley had weapons interests, but as that group is organised, guided weapons form a separate company. In the case of B.A.C., guided weapons form a division but an integral part of the company. I will be discussing with the companies both the airframe interests and the guided weapons interests. However, as I made clear, the Government have not come to a decision on these issues.
The House cannot have it both ways. If hon. Members wish, as I think is right, that the House should express itself on a Report of such importance as this, they cannot expect me to open the debate by saying exactly what decisions have been reached. We want to pay regard to all the points of view which will be expressed in the debate.
There is one last thought which I should like to leave with the House. Whatever the difficulties facing the industry and the Government, we cannot afford not to overcome them. The Plow-den Committee emphasised this point most strikingly in paragraph 522 of its Report:Indeed, the aircraft industry may be conceived as today embodying the predicament, as it has long embodied the aspirations, of the United Kingdom in the world. If the aircraft industry's problems are not solved, they will simply have to be tackled again elsewhere, while in the meantime the nation will have lost much.The Government accept this analysis and will do their part to discharge their share of the responsibility. If, as I confidently expect, the industry responds readily to the challenge which it faces, we can then go forward in a strengthened partnership; and the industry should emerge, as the Report advocates, smaller but stronger and make a valuable and 905 continuing contribution not only to the British, but also to the European economy.
§ 4.20 p.m.
§ Mr. Robert Carr (Mitcham)
It is my pleasant duty first to give a welcome to the right hon. Gentleman, on behalf, I know, of hon. Members on both sides, on the occasion of his first speech in the House as Minister of Aviation. I feel with him. If I had been in his position I should not have liked to have had to make my first speech in this context. It is not an easy task to open a debate the main purpose of which is to take the views of Parliament rather than to announce Government decisions. We appreciate the way in which the right hon. Gentleman has kept within those terms of reference.
Because it is the object of our debate today to collect the views of Parliament on this subject, I shall concentrate upon giving the views of the Opposition rather than entering into an argument point by point with many of the things that the Minister has said. Before I come to that, however, I think that the House and the country must set into its proper context the debate which we are having and the work which the Plowden Committee had to do.
By their cancellations of projects last year the Government deliberately created a vacuum in the industry without first having formed any idea of how that vacuum should be filled. In addition to the obvious wreckage in the industry caused by their actions, one of their most serious effects and one of the hardest to put right in the future has been the damage done to the credibility of the British aircraft industry in the eyes of the world.
Customers doubt whether it is any longer safe to buy current British aircraft and potential collaborators wonder whether there will be any British industry worth collaborating with in the future. Meanwhile, the sadness of the matter is that the salesmen of the United States industry have been rejoicing as they watch their chief competitor being delivered into their hands.
I sympathise with the Minister. He has to face the consequences of the disastrous legacy from the doings of the present Secretary of State for Defence and his 906 own predecessor, whom, in spite of his doings, we are glad to see for his courtesy in coming here today.
What nonsense the Government's actions during the past year make of that flatulent talk of which we heard so much about plans poised ready for instant action and encouraging a science-based industrial revolution. Incredible though it now seems, hon. Members opposite used once to deplore the brain-drain. Now, they actively encourage it.
That is the sad context in which the Plowden Committee had to attempt its task. Their Report contains much valuable information and excellent analysis of the problems which face the industry. Many of its practical recommendations are also most valuable. I wish, on behalf of the Opposition, as the Minister did, to thank Lord Plowden and his Committee for the hard and inevitably rather thankless and difficult task which they have undertaken. In the criticism which must be made of the Report, I hope that genuine thanks for the work which has been most valuable will not be overborne.
We have to admit that overall the Report is seriously inadequate. We needed in this country a series of positive long-term objectives of the kind which the United States Government and industry appeared to obtain from their 1961 inquiry Project Horizon. What we have, unfortunately, is more a series of non-objectives.
That is not the fault of the Plowden Committee, because in our opinion it was given an almost impossible task to do. Three major new military projects which existed at the time the Plowden Committee was set up were all cancelled within four months of the Committee coming into being. The Committee was not told, even in the broadest terms, by the Government what the future military workload for the industry might be, yet 70 per cent. or more of the industry's workload in the past, in the present and in the future is made up of military orders. It was impossible for the Committee to do its task properly in that sort of vacuum.
On top of that, as the Committee made clear in at least four paragraphs of its Report, it was not given adequate time to do the job which it should have done, and we cannot blame it for that. Also, 907 for the Committee to do its task properly, it should have been given the services of independent, highly-qualified teams to probe in depth the technical, managerial and economic aspects of the problem. It was not given any such resources. Therefore, for all these reasons, which were imposed upon the Committee by the Government and were not of its own making, we have from the Committee a hurried and incomplete job.
Some subjects are omitted altogether from the Report—for example, electronic equipment. Other subjects are dealt with only superficially—for example, efficiency of the industry, Government organisation and procurement methods, guided weapons and space. Some of the Committee's recommendations conflict with the analysis in the body of the Report and the whole Report is backed up by much too little investigation in the field. The Committee had time to visit only one aircraft factory and, in spite of the essential part which, in its Report, it attaches to European co-operation, time to visit only two European countries.
Hanging over much of the Report is a feeling of gloom and compromise accepted under the relentless pressure of time and circumstance. Nowhere is this demonstrated more clearly than in the recommendation regarding partial State ownership of the aeroplane industry. One member of the Committee rejects it altogether. The remainder are divided about the extent to which it should obtain.
We in the Opposition reject the suggestion absolutely and on this point we fully endorse the Minority Report by Mr. Aubrey Jones. The proposal for partial State ownership is, first, irrelevant to the main problems which the Committee diagnoses. It is extraordinarily naïve to think that it could remove the problem of excessive bureaucratic control with which the Committee was so rightly concerned.
The raising of partial State ownership as a question inevitably causes long negotiations and delay, perhaps controversial delay, when what is needed above all is rapid decision. Our most important objection is that partial State ownership would compromise the independent power of the Government as the industry's dominant customer, a power which, as I 908 shall show, should in our opinion be the chief instrument both for the making and for the implementation of policy.
The starting point of policy in this field is the basic question which only a British Government can answer: is it one of our long-term national objectives to have a technically advanced aircraft industry? I want to make it clear that the Conservative answer to that question is an unequivocal "yes". Yes, because it is essential to our defence; yes, because of the traditional importance to Britain of being in the van of world communications; yes, because it is an industry for whose products there is an expanding world demand; yes, because it is an industry with great potential for earning exports and for saving imports; and yes, because of its high technological fallout.
We welcome the fact that the Plowden Report agrees with us on that basic question, when it says, in paragraph 206:it is exactly the sort of industry on which Britain should concentrate.We regret that, having made that very true statement in paragraph 206, some of the Committee's major recommendations seem illogically at variance with it.
We agree with Plowden and with what the Minister said today, that the aircraft industry is one of a number in Britain and in Europe at a vital crossroads in history, and the way that we react to the problem will probably be a test case of great importance to the future. The way that we have to react to it is with our heads, sensibly. What I suggest to the House is that there has also to be a touch of heart in our reaction as well.
We welcome the Minister's assurance that the Government also agree in saying "yes" to the need for an aircraft industry of an advanced technical nature, but we cannot help remember that that has been said before and that they have done the exact opposite. The new Minister must now give proof that this time they are in earnest. He must renounce the old way and follow up this debate quickly by committing the Government to a firm long-term programme of projects for the industry.
Having answered that first basic question in the affirmative, we must turn to the second one, which is what sort of industry is it that we want to have? 909 First, what scope should it have? We agree with the Plowden Report that neither Britain nor Europe as a whole should in future try to be self-sufficient in the supply of their own aircraft on the military or civil sides. But we disagree emphatically with the Plowden Committee—and I was delighted to hear the Minister express his disagreement as well—that we should never in future undertake any of the larger and most complex projects.
We must retain capability at the highest level for defence reasons; because of the close connection between civil and military developments; because it is the only basis on which we can be attractive partners to other countries in Europe and because, on the Committee's own argument, we should be most unlikely to maintain for long on any other basis, the ability which the Committee desires, to produce engines and equipment suitable for incorporation in the most sophisticated planes produced by other countries.
The cost of maintaining at least one really advanced project in the European programme is a price which we and any partners who will come with us in Europe must be prepared to pay if, in the long run, we in Europe wish to avoid utter dependence on the United States of America.
So much for the scope. What about the size of the industry? Obviously, there may have to be some contractions in it. But I do not feel that we can tell about that in advance of a decision on the future programme. We reject setting any arbitrary size in advance. It seemed to me that the Minister appeared to reject that also and then, a few sentences later, he gave a figure. I do not believe that any figure should be given until we know what the advance programme is to be.
§ Mr. Mulley
Perhaps I can help the right hon. Gentleman. I thought that I had made it quite clear that the size of the industry will depend on its workload in that there are, particularly on the civil export side, a great number of imponderables. I thought, at the same time, that the House was entitled to know, as the figures were expressed in the Plowden Report, what the best view of my Department is on the future in 910 the light of what we know and the judgments that we can exercise. I agree that the size depends on the workload.
§ Mr. Carr
As long as the Government are to proceed in that way, studying the work load and seeing what is needed, rather than starting with a figure and working the other way round, that is all right. Meanwhile, by mentioning a figure 50,000 people may wonder what will happen. Emphatically, we do not agree that any size should be fixed. That is a most important point. That is the view stated by the Plowden Report in paragraph 456, yet the Committee produces a totally inconsistent conclusion when it says that the future size of the industry should be fixed by reducing the amount of support to that given for comparable industries in Britain.
That is a meaningless formula, because there is no comparable industry in Britain and, when challenged, the Minister could not provide one.
§ Mr. Carr
We could have a separate debate about comparable industries and, if we are to talk about them, we ought to have a rational debate on what is the proper level of support for, say, the computer industry. It might be wrong. It might be too high or too low. But to bring down the aircraft industry to the level of some other without more rational investigation of the point would be wrong. We maintain that there is no comparable industry in Britain. There are in other countries, but the Committee did not attempt to suggest how much support they received.
I turn now to the structure of the industry. Should there be further mergers? The engine side of the industry looks to us to be soundly based, and we think that it should be left well alone. On the airframe side the evidence, superficially at least, seems to be in favour of a single main British producer. One the other hand, we have doubts about creating too large an organisation. We also believe that there is still scope for further rationalisation within the two main existing groups without putting them together in what may yet be an ill-digested form.
One thing is certain, and it is that a Conservative Government would not force such a merger artificially. Nor, however, 911 would they share out the work for the sake of keeping two major firms in being. Let the Government, as customers, place their orders where they should go on merit and see what happens. Yes, let the wicked market work a little more than perhaps it has been allowed to in the past.
§ Mr. Mulley
Perhaps the right hon. Gentleman will help the House with his views on mergers and the allocation of contracts, and with his judgment after the mistakes made by his predecessors, particularly the right hon. Member for Streatham (Mr. Sandys), who forced mergers on the industry and allocated orders on the Buggins' turn basis.
§ Mr. Carr
The views that I have expressed are those which we believe to be the right policy in the current situation, and that is the matter which we are discussing.
If we follow such a policy as I have recommended, and it should produce a merger situation, it might well be in the interests of the Government has customers to assist in the marriage provided that it is a real merger offering singleness of purpose and unified management, and not simply the gathering together of separate units under a new umbrella.
Within the overall picture, Short's, of Belfast, provides a special and difficult problem. The Government have wrecked the programme on which Shorts future until 1970 depended. Having done that, in view of the particular circumstances of employment, and so forth, in Northern Ireland, they have a duty, we submit, to do two things, and to do them quickly and firmly. The first is to make a definite announcement of policy and to stop hedging on a series of ad hoc half-decisions. We need a firm announcement of real policy instead of a series of hedges.
Secondly, the Government must not prevent Short's getting contracts which it is able to win on its own abilities in its own right. Some of us have grave suspicions that that is just what the Government have been up to in recent months.
Before I leave the question of the sort of industry that we want, I should say something about research backing, because it seems to me that the Plowden 912 Committee's recommendation on this subject is, to put it mildly, very dubious. It recommends an arbitrary cut in research, without having made any market or technological evaluation. If we are to make any arbitrary cut, it might be applied to the staffs of the Ministries, but I would rather have seen no arbitrary recommendation for cuts. To make an arbitrary recommendation for cuts in research without having made any market or technological evaluation is sheer folly. In fact, a strong case can be made for saying—and it is a case which would need answering before any cuts were made—that an industry with a smaller and more selective programme for the future needs more and more intensified research effort if it is to select wisely and develop good planes quickly. I hope that that research recommendation will be looked at many times before there is any danger of it being accepted in the crude form in which it appears in the Report.
I turn now to the problem of how we should set about creating the sort of industry that we want. In our opinion the chief instrument of policy is the Government's power as a customer. The Government are a direct customer for about 70 per cent. of the industry's output, and in Britain, as in other countries, this dominant share of military projects seems likely to continue. The Government also have strong influence because of their provision of launching costs, and so on, over the remaining 20 per cent. to 30 per cent. of the civil work which makes up the industry's total order load. Thus it is the use of the Government's power as a customer which is their most direct and effective means both of making and of implementing policy.
That power is great, and in our opinion the Government need no other. For the Government to own part of the industry would not add to their effective power. It would merely compromise their power as a customer, and would introduce a perpetual conflict of interests when making decisions. Although the history of Short's is not entirely comparable, there are surely some painful lessons to be learned from what I am saying.
§ Mr. F. A. Burden (Gillingham)
Would not my right hon. Friend agree that because of the unique position in which the Government find themselves, taking 913 as they do 70 per cent, of the production of the aircraft industry, they not only have tremendous strength, but have considerable responsibilities for ensuring that manufacturers have stability not only in the amount of work which they turn out, but the way in which those contracts are handled, so that they can see into the future without the awful possibility of sudden changes and alterations in the Government's intentions?
§ Mr. Carr
I agree with my hon. Friend, and I hope that what I am about to say will satisfy him on that point.
For the aircraft industry to be successful, and for the public to get full value for money, the prime need on which we should concentrate almost all our attention is for the Government to organise themselves better as an efficient and demanding customer. No industry producing complex products with a long development time scale, such as the aircraft industry, can be efficient and dynamic unless it can foresee reasonable stability of demand over a long period ahead.
The first vital essential is for the Government to take and make known to the industry a firm decision regarding the minimum scale of their procurement expenditure for aerospace projects for at least five years ahead, and to commit themselves to a policy of spending a major proportion of that procurement budget on buying British and European rather than American equipment. Having taken that basic policy decision, the Government must then set about ruthlessly reorganising themselves to spend the money more efficiently, and in the process put themselves in the position to demand much greater efficiency from the industry itself. In our opinion the industry in future must first be given the opportunity, and then be compelled, to look for its profits from production rather than from development, modifications, and prototypes. This is one of the things that has been wrong.
The reforms required in governmental organisation and procurement procedure have nothing to do with party political policies. They are bound up in the whole history and evolution of our Parliamentary, governmental, and Service systems. But this is where modernisation has to begin, and I hope that from this 914 day forward both sides of the House, without making party points, can address themselves to this vital problem.
The Plowden Report makes some sensible recommendations in this field, with which we can all agree, for example, the need for stronger market research and technical intelligence services, much more regard to overseas markets when drawing up specifications, and better organised and stronger Government support for exports, when it comes however to the details of reorganisation the Plowden Report is, unfortunately, at its weakest both in analysis and in recommendation, and so I want to put forward some positive suggestions.
I cannot pretend that they will all necessarily work, but from experience outside this House, in industry, and from experience inside this House as Chairman for five years of one of the Subcommittees of the Estimates Committee, I believe that the sort of suggestions which I wish to put forward now are those which a Government ought seriously to consider and not turn down in the superficial sort of way which Governments, of both parties, have done in the past.
First, there should be greater continuity of control at every stage of a project. Frequent changes of personnel, particularly of Service officers, lead to delays and general inefficiency. This is a handicap which we can no longer afford. Career structures must be changed to allow for more continuity, however difficult it may be to do it.
Secondly, there should be incorporation in the Ministries concerned of more staff with industrial and higher technical experience. They should be incorporated not just as advisers, but as an integral part of the administrative hierarchy. It is not good enough to employ them just as advisers.
Thirdly, there should be closer and more effective association of technical and financial assessments of a project from its conception. The present tendency for these stages to be taken in series is fatal and runs contrary to the lessons of experience in managing large technological projects outside Government. The rigour of the assessment and the firmness of the commitment at every stage of the project should be just as firm on the financial side as on the technical side.
915 Fourthly, there should be closer formal association of the industry with the Government Departments from the conception of a project. This is essential for the achievement of cost effectiveness. Industry nowadays can make almost anything if it is ordered to do so, and it is, therefore, vital to appreciate at an early stage that the cost in time and money in achieving the last 5 per cent. of performance can be out of all proportion to the benefit obtained. The best in this field can easily become the destroyer of the good, and power to resist the very best is one of the essential qualities which our organisation must acquire, and which I fear it has not often possessed in the past.
Fifthly, there should be greater direct responsibility for the execution of projects. Control by committee and detailed interference from many quarters have got to be thrown out of the window. There cannot any longer be any hedging on this point. Instead, control should be placed with a specific project group under the command of a project director who should be a man with extensive technical and wherever possible industrial, experience, and he should be given a really wide degree of personal authority within the discipline of an overall allocation of money.
This project group should include members representing all the functions involved, including that of financial control, but all the members of the group must clearly be under the authority and command of project director. Anybody who has gone into the question of the management of large projects outside the Government knows that this is an essential requirement for doing the job successfully, and that the Government procedures in this respect are many years out of date.
Sixthly, there must be more freedom on the part of the prime contractor to take responsibility concerning the choice and sub-contracting of components.
Seventhly, we must devise more effective incentive contracts. This may need specialist study. It is part and parcel of the problem of improving cost estimating techniques. The object should be to provide prime contractors with the opportunity of a much higher return on capital 916 than is at present allowed, if they are successful in meeting the targets of time and performance, but it must equally be to inflict on them much more severe penalties if they fail to meet those targets.
The vast amount of work going on at present in holding contracts, without fixed prices, is one of the chief curses of the present system. The awful paradox is that this position comes about in the name of protecting public money. In practice, it is the chief cause of wasting public money. I am sure that if a Government were to face the difficulties which the Minister mentioned in the closing part of his speech, and put this point squarely to the House, it would be prepared to give up the semblance of the public control of money for the reality of it.
§ Mr. Mulley
I am grateful to the right hon. Gentleman for his completely nonparty approach and for his very constructive suggestions. I hope that he will feel that we can have talks together about this and see how we can carry forward the objective on which we all agree. We must try to avoid some of the problems with which the industry and the Government are faced at the moment.
§ Mr. Carr
Certainly. My colleagues and I would welcome that.
My eighth suggestion is that we should have some relaxation of security. We burrow about like moles under layers of security which are largely unnecessary. In the United States many details of defence contracts which are security-barred here are available for information and discussion not only within Congress, but by outside experts. Similar exposure here could have an equally healthy effect on policy-making and execution, and could also have important commercial advantages in backing exports.
My last suggestion, which I hope will commend itself to hon. Members on both sides of the House, is that there should be stronger parliamentary control by the development of the Select Committee procedure. The Reports of Estimates Committees in the past have often made valuable recommendations which have not been acted upon. For example, the Report on Transport Aircraft, published and presented to the House almost 917 exactly two years prior to the presentation of the Plowden Report contained a number of recommendations which were very similar to those made by the Plow-den Committee. Some progress has been made in this direction by the recent development under which the Estimates Committee's Sub-committees are now to specialise in particular fields. That progress should go further.
Lastly, I want to say a word on Anglo-European co-operation. Hon. Members on this side of the House wholeheartedly support the Plowden Report in this principle. When we were in Government we set this in motion and we want to see it vigorously pursued. It is a great pity that the Plowden Committee did not analyse the problems involved and make specific recommendations for overcoming them.
Several practical warnings must be sounded if success is to be achieved. It would be only too easy for us, as politicians, to grasp at the concept of European co-operation as a lifebuoy to cling to, and then to find, in a few years' time, that we were no better off. Even if we conceive complete Anglo-European integration in the aerospace industries, the European home market will still be much smaller than that of the United States. Thus, sales of European products on a large scale in world markets are essential to success. Therefore, European projects must be able to compete with those of the United States in design, cost and speed of introduction.
The benefits of European co-operation in spreading research and development costs and in enlarging the home market would be outweighed if they were achieved at the cost of later delivery times or of having to have two production lines in different countries when one is all that is required. The present form of Anglo-French co-operation was a good way—perhaps the only way—to make a beginning, but in the long run I am convinced that full efficiency requires unified management, and that that will not be achieved by a system of control based on inter-governmental and inter-company committees.
Full efficiency will, in the end, be achieved only along one or both of two lines—either genuine mergers between companies in different countries or a division of projects to single prime con- 918 tractors in particular countries, backed by an undertaking from all the cooperating countries to buy the resulting products.
But European co-operation must start at the market end rather than the production end. Establishing common European requirements is the first essential step. That will be difficult enough over military projects, where Governments are themselves the direct customers. It will be even more difficult for civil projects, where airlines, even when nationalised, are independent entities, charged with a duty to act commercially and subject to international competition. It will be difficult, even if it were right, to force European airlines to buy a European aircraft if an American one were available at a time or with a cost effectiveness which suited them better. The current short range air bus project will perhaps prove to be a critical test case.
There is a lot of hard work and detailed negotiation to be done, and done urgently. The meeting of European Ministers of Aviation proposed by the Plowden Committee requires the most full and careful preparation.
I want to make four final points about Anglo-European co-operation. First, it can be no substitute for putting our own house in order. Secondly, Britain must go into it wholeheartedly or not at all. This means that we must show ourselves to be ready at times to sacrifice our own pet ideas and, above all, to buy some European aircraft, and not merely to sell British ones to Europe. In this context, the decision and the handling of the decision regarding the Spey/Mirage is much more important than the Government have yet seemed to realise.
Thirdly, while Anglo-French co-operation is a natural starting point, because of the size of the British and French industries, great care must be taken to bring in other European countries from the beginning, as paragraphs 255–257 of the Plowden Report make clear. Fourthly and finally, European co-operation must not become exclusive. We should not in the long run find exclusive Europeanism any more beneficial than exclusive nationalism.
The aircraft industry presents us with a very urgent problem, and it requires immediate action. The Government, by their own action, have destroyed the 919 stability and balance of the industry. It has no coherent programme for the future, as yet. The production costs and sales prospects of its current projects have been gravely damaged. I repeat that this deplorable position is the direct result of the present Government's actions. It is the Government's job to repair the damage.
We are grateful to the Government for giving Parliament the opportunity to express its view before fundamental decisions are taken, but having taken the views of Parliament today it will then be the responsibility of the Government to put forward strong and definite proposals of policy, which we say should fall into three main parts—first, a balanced programme of future development providing clear long-term goals and the benefits of the associated evolutionary development and manufacture associated with them; secondly, a programme of the action required to further the development of European co-operation; and, thirdly, a rescue operation to tide the industry over its present desperate situation—which has been created by the Government—until new long-term policy can be made effective.
The Opposition demand that the Government publish these proposals in the form of a White Paper which can be considered and then debated by Parliament. We also demand that this should be done quickly, before Easter at the very latest. The fulfilment of these demands is the very least which the national interest requires.
§ 5.0 p.m.
§ Mr. John Cronin (Loughborough)
The right hon. Member for Mitcham (Mr. Carr) showed a limited enthusiasm for the Report of the Plowden Committee, but I am grateful to know that he is strongly in favour of our principal recommendation, which was Anglo-European collaboration. This is something to which we attached much importance. I am glad that we have a guarantee that we shall have the maximum co-operation from right hon. and hon. Gentlemen opposite when these suggestions are transformed into policy.
The right hon. Gentleman made several constructive suggestions which I hope will be adopted, but when he said that the 920 Government's power as a customer was the best means of implementing policy, I must remind him that the Government have had this power ever since the aircraft industry was born. Certainly, the power used by hon. and right hon. Gentleman opposite when they they were the Government was not so effective that the aircraft industry did not require a careful investigation when the Labour Government came to power.
I thought that I ought to attempt to catch your eye, Mr. Deputy Speaker, as I was a member of the Plowden Committee, but my speech represents entirely my own personal views. I do not propose to act as a spokesman for the Committee, because the Committee's views have been clearly put in the Report. Nevertheless, I intend to deal with some of the more contentious and controversial recommendations. I will also indulge in the luxury of dealing with them in an entirely non-party manner, as far as possible.
I should like, first of all to draw the attention of the House to the very hard work done by my former colleagues in the Plowden Committee. I attach no importance to my own share in this, because, like other hon. Members of the House, I am quite accustomed to sitting on Committees: this is part of our work. However, the other members of the Committee gave up much of their time and suffered a good deal of inconvenience and had to exhibit considerable patience during our investigations. I should like particularly to draw attention to the admirable work done by that superb public servant, Lord Plowden himself. It was his skill, patience and ability which went so far to producing our Report.
The Plowden Committee has received an unfavourable reception from some newspapers and limited enthusiasm for its Report has been shown by some hon. Members on the other side of the House. However, I should like to point out, as did the right hon. Member for Mitcham, that we started and finished our work in circumstances of considerable difficulty. The whole time that the Committee was sitting the aircraft industry was in a constant state of flux. There was the cancellation of the HS681, the P1154 and the TSR2 and the negotiations with France for the Jaguar and the variable geometry projects. All the time, the defence review was taking place and at 921 no time did we have any firm information as to what form that review would take.
At the same time, we were pressed continuously to produce our Report as rapidly as possible. The first date suggested was July last year and it was under considerable pressure that we actually produced the Report in November.
One of the criticisms which has been made by the Press is that the Plowden Committee did not find time to visit any factories in the aviation industry. This is not a very valid criticism. If one visits a factory—as most of us interested in aviation affairs have done from time to time—one sees workers milling and grinding parts and assembling them and many technical processes which convey little to the average person. I would suggest that the Plowden Committee was much more helpfully employed in getting representatives of the aviation industry to give their views in person, rather than in wasting the limited time at its disposal by actually going to factories.
The Plowden Report has left many questions unanswered. There is no doubt about this. We accept it. It is an interim Report compiled as a result of relatively brief investigations. No member of the Plowden Committee would suggest that it was the last word in wisdom on the aircraft industry. However, one of the criticisms of the Report is that it is supposed to have shown a certain amount of pessimism. I suggest that the state of the aircraft industry was far from satisfactory when the Plowden Committee was formed.
I welcome the information which we have had from the Minister of Aviation that last year there was a big increase in exports of British aviation products. Those figures were not available when the Committee sat, but the situation which we had to face was that the British share of world aviation exports had substantially decreased during the years before the Committee met. In fact, they decreased from 33 per cent. of the world total in 1959 to 14 per cent. in 1964.
§ Mr. Burden
Of course, this invariably happens. Industries producing highly technical articles have peaks followed by declines in that article, when other articles begin to sell. The 111 and VC10 were beginning to sell really well at this time.
§ Mr. Cronin
I appreciate the point that there are peaks and valleys in all technical industries, but it is obviously a source of disquiet when the movement appears to be largely downwards.
There are some obvious reasons for this. First of all, the United States aircraft industry is a colossus with which it is difficult to compete. It produces 80 per cent. of world production of aviation products. From the point of view of output, the United States aviation industry produces 3½ times more per man than the British aircraft industry. I am not suggesting that this is the fault of the British aircraft industry, but it is disquieting. One wants to discover how one can help.
The French aviation industry has about one-third of the manpower and is reputed to produce about half our total production. These figures may be a matter of some doubt: there must always be doubt about the accuracy of figures. But I suggest that the figures show that all is not well and that the Plowden Committee had a duty to adopt a sober attitude towards the condition of the British aircraft industry rather than one of somewhat irresponsible optimism.
One of our recommendations was that the purchase of the largest and most complex types of military aircraft and guided weapons should be made in the United States. I am sure that hon. Gentlemen on both sides of the House, and certainly all the members of the Plowden Committee would be very happy if we could manufacture, economically and helpfully to the national interest, the more complex aircraft and guided weapons in the future. But the record over the last few years has been far from encouraging in this respect; there has been little ground for optimism.
The finest large passenger aircraft in the world is undoubtedly the VC10, but it seems likely that the manufacturers will suffer a substantial financial loss as a result of the manufacture of this aircraft. It seems probable, for that reason, that the total number of VC1Os manufactured will be less than would otherwise have been the case.
§ Sir Arthur Vere Harvey (Macclesfield)
It is pleasant to hear the hon. Gentleman praise the VC10, but is he altogether surprised that it is not selling when, 18 months ago, leaders of B.O.A.C. and others belittled this aircraft and told the world that it was no good?
§ Mr. Cronin
I seem to recollect that about 18 months ago, when standing where the right hon. Member for Mitcham was standing a few months ago, I expressed disquiet and indignation at the fact that the Government of the day had allowed the VC10 to be the subject of such remarks.
§ Mr. Neil Marten (Banbury)
Does the hon. Gentleman recall from which source those remarks came? Is he aware that they came from A.S.S.E.T., the union which seemed to be getting all the information about the discussions which B.O.A.C. was having?
§ Mr. Cronin
I recollect that the majority of the remarks which received the most publicity were made by the chairman of B.O.A.C., who was certainly in day-to-day consultation with the then Minister of Aviation and who would not have made them if he knew that they would have had the strongest Government disapproval.
But I am being diverted from my main point, which is that these large and complex developments have so far proved to be rather difficult. The TSR2, for instance, which was cancelled last May, proved enormously expensive and to carry a very heavy cost penalty if we purchased it. If it had been continued, the TSR2 would have cost £300 million to develop and each aircraft would have cost about £3 million. The F111, on the other hand, can be purchased off the shelf for about £2 million or so.
§ Mr. John Rankin (Glasgow, Govan)
Would my hon. Friend give the House his authority for the statement that the F111 can be purchased for £2 million?
§ Mr. Cronin
I said "about £2 million". I am prepared to accept that it might be more. Nobody has yet fixed the final price of the F111. Suffice to say that it can be purchased much cheaper than the TSR2. If any hon. Member disputes that I hope that he will intervene now.
§ Mr. Burden
The hon. Gentleman must take into account the tremendous development cost of the TSR2, which had already been committed. The assessment which must be made is this: will the cost of the F111 be greater, taking account of the tremendous initial costs involved in the TSR2, particularly since the TSR2 was almost at the point of production?
§ Mr. Cronin
We could follow these financial ramifications indefinitely. I still adhere to my claim that it would have been more expensive to develop and buy the TSR2 than the F111 off the shelf.
One can go further back and think of our efforts in continental guided missiles. Hon. Gentlemen opposite will be familiar with the days of Blue Streak. I will not commit myself to saying how much Blue Streak actually cost, but it certainly went into millions of pounds, whereas Polaris missiles can be bought for a modest sum, certainly for much less than £1 million each. I hope that no hon. Member will contradict that.
It means that if we make all these complicated aircraft and missiles ourselves there is a heavy financial penalty to pay. This, therefore, simply means that the pilots, the users, will have a smaller number of aircraft available for a given expenditure—the Government must think in terms of what they will offer the user, the R.A.F. in numbers and quality, and what they will offer the country in cost.
I would suggest that there is considerable substance in the idea that large and complicated types of military aircraft and guided missiles should be purchased off the shelf in the United States—that is, unless it can be shown that they can be produced economically and in the public interest in this country.
The right hon. Member for Mitcham dealt with the question of mergers. I am, to some extent, in agreement with him. I have some doubts as to whether any useful purpose would be served by merging two aircraft companies which are utterly opposed to the whole idea of merger. I see the point that competition between the two airframe companies and their guided missiles divisions is to some extent hypothetical because the Government are obliged to keep them both fairly equally full of orders. At the same time, there could be competition, at least at the design stage, and this would be healthy because the unsuccessful company, from the design point of view, could receive substantial sub-contracts from the successful company.
§ Mr. R. J. Maxwell-Hyslop (Tiverton)
Why did not the hon. Gentleman express that view in the minority Report?
§ Mr. Cronin
That is a fair question. It should be remembered, first, that Plowden did not recommend that there should be a merger of the airframe companies and, secondly, that whenever one has a group of people sitting round a table there must be divergences of view which must be resolved in the general interest. A proliferation of minority reports reduces a report to an absolute farce.
I turn to the important question of the ownership of the airframe companies. There is no doubt that these companies have suffered considerably as a result of Government decisions, by both the present and former Governments. The managements of these companies have had to face the consequences. One cannot help feeling that if the Government had some definite financial interests in these companies the Government would be affected to a greater degree if they took a decision which hurt those companies. The Government would, therefore, be more careful in their making of decisions affecting the companies.
The main argument however concerns the whole question of financial and technical control. The airframe companies—indeed, the whole aircraft industry—has been subjected to the most meticulous and stringent financial controls which have often seriously interfered with the efficiency of those companies. The whole idea has been to make sure that the companies did not make excessive profits at the expense of the public. This idea has always been behind the controls; for example, to prevent any repetition of the Ferranti incident. But if the public, through the Government, were the recipients of part of this profit, the necessity for these stringent controls would be less than otherwise would be the case. This is the principal reason for having some degree of public ownership of the airframe companies.
The nature of public ownership must be a matter of careful consideration. I should be very strongly opposed to any outright nationalisation. I think that the most useful form of public ownership would lie in the Government taking part of the equity of the airframe companies, with the ability to appoint directors. I can reassure hon. and right hon. Members opposite that such a step has, from their 926 point of view, the most respectable antecedents. Sir Winston Churchill adopted this mechanism when dealing with British Petroleum before the First World War—
§ Mr. Onslow
But the hon. Member will recollect that B.P.s major customer is not the Government. Could he assist the House by telling us, as a member of the Plowden Committee, what he and the Committee meant by "comparable"? I can recall at least four places in the Report that stress the unique qualities of the industry and separate it from the electronics industry.
§ Mr. Cronin
The hon. Gentleman diverts me from my point. I can only refer him to the ordinary English dictionary definition of "comparable".
On public ownership, I suggest that the Government could certainly do worse than follow the example of Sir Winston Churchill before the First World War, purchase some of the equity of the airframe companies and put some directors on the board. I should not like to see their day-to-day running under direct Government or Parliamentary control, as that would make their position intolerably difficult The industry has to make the most advanced technological and involved commercial decisions, which are not the province of civil servants or Members of Parliament. There should, therefore, be no question of nationalisation, or of any form of ownership that would bring the airframe companies under direct day-to-day Ministerial control. That would be most undesirable.
The industry needs two things very desperately at present. The first is a decision with regard to Government policy. That is most urgent. It is not merely a question of the aircraft industry itself; the eyes of the world are on the industry, and the present state of indecision as to its future must be having a prejudicial effect on export markets.
There is also a great need for more definite and early decisions to be made throughout the life of every project in the industry. As far as I know, management is never consulted when requirements are made for military aircraft. There are often very long delays between the initial studies and the decision to go ahead. These projects are often of an unnecessarily complicated nature and 927 made to contain very many specifications that add enormously to the complexity of the aircraft that is the subject of the project.
We took some evidence in the Committee of a somewhat surprising nature. For instance, we were informed that on a certain occasion a committee met to study the replacement of a certain military aircraft. Hon. Members will appreciate that large committees always do this kind of work slowly; the smaller the committee the quicker the decisions, and vice versa. One might, therefore, feel some doubts on hearing that a committee consisted of more than 20 or 30 people, but in order to decide what should be the replacement of the aircraft in question a committee met consisting of 104 people.
I suggest that such a committee of such membership shows that the grip of Whitehall upon the aviation industry could usefully be relaxed a little, and that decisions could be made more expeditiously by far fewer people. This committee of 104 members is not so very extraordinary. I understand from the evidence that committees of over 40 members are common form when deciding military aircraft requirements. This reduces the procurement of military aircraft to a complete Babel. The sooner it stops the better.
Above all, the industry needs stability nothing can be more important than that. We know that there have been most extensive cancellations, with very wide-ranging effects—the HS68I, the P1154 and the TSR2. We know that 45 VC1Os were ordered originally, and then the order was reduced. The present situation is that 12 standards and 17 supers have been ordered, 10 are in abeyance and no one knows what is to happen about them. What company in any business can budget usefully and economically for the future when under the constant strain of cancellation of orders?
I hope that hon. Members opposite who applauded at this point will also agree with me that before the present Government took office the situation was equally unsatisfactory. I recollect that on 17th June, 1963, I asked the right hon. Member for Preston, North (Mr. J. Amery) how many cancellations there had been since 1951 and their total value. In his Written Answer in column 7 of 928 the OFFICIAL REPORT he told me that 33 projects had been cancelled, and that their total value was £230 million. Such a pace of cancelling projects right and left must reduce the industry to chaos. Whatever Government may be responsible, this practice should stop. The industry given the most complete stability possible.
We must remember that, above all, the aircraft industry is one that can use the country's talents to the maximum extent. It is labour intensive, it uses few raw materials and it can be of great help and effect in the vital export market. It is ready and willing to do its job, and merely wants the co-operation of the Government and this House. I hope that it will get more of that co-operation.
§ 5.28 p.m.
§ Sir Lionel Heald (Chertsey)
I am glad to have this opportunity of following the hon. Member for Loughborough (Mr. Cronin), particularly in his final remarks, and also, of course, because he was a member of the Plowden Committee. I should like, first, to make it quite clear that my concern in this debate is not only for the aircraft companies involved, still less any individual manufacturer, but for the whole of this great industry, from the board room to the shop floor; and also for the very large number of people outside the actual industry who depend upon it in one way or another, directly or indirectly, for their livelihood. That brings the numbers of those concerned to a very much larger total than the 250,000 people mentioned by the hon. Member.
I therefore have a very strong constituency interest in this subject, because the striking increase in both the population and the prosperity of the Chertsey area has undoubtedly grown up mainly round the B.A.C. factory at Brooklands, which is still known as Vickers. I must add at once that it is not only my own constituency that is involved. The aircraft factory itself is on the other side of the railway and is, therefore, in the safe and responsible hands of my hon. Friend the Member for Esher (Sir W. Robson Brown). My hon. Friend the Member for Woking (Mr. Onslow) is affected in the same way as I am, in that a number of his constituents go to the works every day, and many, as in my 929 own constituency, are engaged in auxiliary industries which depend for their whole existence on the aircraft industry. There are also all the traders and merchants, and all those who supply the families of the people actually engaged in the industry. So it is a very great industry and has a very great human interest in it.
The result is that the announcement of the appointment of the Plowden Committee was a very grave matter for these people. It is worth reminding ourselves of the situation at that time. The terms of reference asked the question at the outset,What should be the future place and organisation of the aircraft industry in relation to the general economy of the country?If we cast our minds back, I think we shall remember, although political memories are often short in these matters, that at the time when the Committee was set up, rightly or wrongly, there was a widespread belief that the Government were contemplating the shut-down of the whole industry. We need not go back to those days in detail, but it is impossible to forget such a phrase as "prestige project" which nearly brought the whole possibility of collaboration with France over the Concord to an end.
It was at that time, though again rightly or wrongly, that the Government were relying on technical advisers who, however pure their motives, were representing that we should completely sell out to the United States. I believe and always have done that the Plowden Committee was set up very properly and constitutionally by the Government to get an independent view on one fundamental point, whether we should or should not continue to have an aircraft industry. We ought in criticising the Plowden Committee, as certainly we have to in certain respects, to remember that that was what the Committee was set up for. It is not surprising, in view of the shortness of the time at its disposal and the urgent request for the Report, that it was not in fact able to go very far beyond that firm recommendation, except in questions of general principle.
I do not think I need, therefore, stress the fundamental importance of this clear recommendation of the Plowden Committee against the scrapping of the in- 930 dustry. Whatever anyone may say or think about the Report from various technical points of view, everyone interested in the aircraft industry should rejoice at this recommendation. The Committee put that recommendation in moderate and restrained terms, but there is no doubt what is recommended and it is no less impressive. In paragraph 204 the Report says:we conclude that Britain would suffer a serious loss if policies were followed which resulted in the speedy withering away of the industry.Paragraph 328 has been mentioned by the Minister and says that it is "worthwhile" for the industry to remain the producer of civil aircraft, for the country's sake. Even if there were nothing else in the Report, and I would not say that there is not, that is enough to justify our accepting this Report with gratitude. I hope it may be agreed—I believe it can—in all parts of the House that this House would wish the Government to accept this basic finding loyally and genuinely and set to work at once to find the best means of implementing it. I think we had that assurance from the Minister. His first reference to it was perhaps a little tentative and conditional, but I think at the end of his speech he made it quite clear that that would be the intention.
As to the Report itself, I believe it is accepted by those qualified to speak on the technical aspects as giving a sound and useful general analysis of the past, although it is fair to say that there is a feeling that some of the criticisms and judgments are based on rather meagre evidence and are matters perhaps more of opinion than actual evidence of fact. There also appears to be general acceptance of the principles and general considerations set out in paragraph 473 under five headings, but it is one thing to state general objects and principles and another thing to carry them out. I say with all due respect to the Committee that at that point the Report comes to a full stop, so far as concerns practical recommendations.
I do not think that a matter for condemnation. If it were to go into practical recommendations on that subject the Committee would have had to have very much further time and a very much deeper investigation. The result is, I 931 think, worth stating. It is and must be that there can be no question of what might be called "putting the Report's recommendations into operation". There can, of course, be Royal Commissions and Committees which can be treated in that way as regards their reports. Indeed, sometimes actual statutory provisions have been drafted by committees, although whether they have always been satisfactory afterwards is another matter. But this is not such a case. I think the House would agree that it would be the greatest mistake for the Government to try to produce specific measures for attaining these objects without considerable discussion of the practical details with all those qualified to offer opinions. Some kind of working party arrangement is required for that purpose. Indeed, I understood the right hon. Gentleman to suggest something rather of that kind in one connection. I hope that in this debate—this is a personal opinion and may not find favour with some of my hon. and right hon. Friends—we shall not allow ourselves to become involved in doctrinal arguments about the precise means of ensuring proper Government participation. I should be quite satisfied to adopt the view expressed by the Society itself in a document which I imagine most hon. Members have had, and which certainly has been issued to the Press. In paragraph 11.3 it says:The Recommendations of the Report do not contain sufficient detail regarding the manner in which State participation would be arranged, the terms and conditions on which State capital would be introduced, the necessary protection to be provided to private shareholders and other vitally important features of such a novel development. In view of the close relationship which already exists between the industry and the Government, it would be premature to dismiss outright on doctrinaire grounds the Committee's suggestions.That question is really a red herring and could easily divert us from more important matters. I say definitely, and I believe the hon. Member for Loughborough would agree, that not only would nationalisation be of no value, but a majority Government holding would not enable us to produce one more aircraft, still less to sell it. So I think we might forget about that today.
There are three points only—I know that a number of other hon. Members wish to speak in this debate—which I 932 wish to raise. Two of them have not yet been mentioned. As to dependence on the United States, I was glad to hear what the Minister said because it seemed in the Report in sub-paragraph (d) of paragraph 527, concerning collaboration with Europe, that there was a conflict with, or that it would be stultified by subparagraph (f), which said that we should go to America for large projects. We were all glad to hear what the Minister said. The hon. Member for Loughborough seemed still to be rather clinging to the American hook, and we ought to have that reaffirmed.
It is also a pity that no reference is made in the Report to possible collaboration with Canada, Australia or India. In all these cases it may well be that there are some prospects of collaboration. Mention is made of a single central Government organisation for the promotion of exports. The mention is vague. Nothing else is said. One reason may be that it appears to be based on certain proposals made by Sir Donald Stokes which are not before the House. Therefore, the mention is not very illuminating. If it is an important matter, we should be told something about it. Possibly the Minister knows more about it.
§ Mr. Mulley
If the right hon. and learned Gentleman consults the statement of my right hon. Friend the Secretary of State for Defence, he will see that there is a summary of Sir Donald's recommendations and of the action to follow. That is before the House. This will deal primarily, initially at any rate, with military aircraft. In my own Department I am centralising the responsibility for civil exports in one division and the head of that, a senior civil servant, will work very closely with the head of the new exports organisation in the Ministry of Defence, still to be appointed.
§ Sir L. Heald
I am obliged to the right hon. Gentleman. I apologise. Perhaps my mistake will lead to others being enlightened as well as myself. There is a recommendation in paragraph 527(p) about minimising delay in decision. I have searched the rest of the Report, but I cannot find any practical suggestions as to how this might be done. This is another way of asking: would it not be nice if we could do so? We would all 933 agree on this, but the Report does not help very much.
Light aircraft have been mentioned. I am sure that this proposal will be welcomed by those interested in private flying and gliding. I speak as one who has been involved in that in a humble way for some years. Before we can make it worthwhile for manufacturers to offer light aircraft on a considerable scale in this country, we want a much more sympathetic altitude from the Government towards private flying. We cannot go into that today, but I cannot think that anybody would suggest that our experiences during the last year have been very encouraging. I believe that there is perhaps a prospect of better things in the future.
My point of view is a very simple one, but I think it is sound. I suggest that the Report of the Plowden Committee, apart from the fundamental recommendation, which is vital, for the genuine continuance and encouragement of the British aircraft industry, can best be regarded as providing a useful foundation for technical discussions on practical lines, but no more, and that the process of working out a practical scheme for the attainment of the object which I am sure we all have in mind must be undertaken between the Government, the industry and all others interested and concerned, on the basis, not of Government direction, but of real co-operation and partnership.
§ 5.44 p.m.
§ Mr. John Rankin (Glasgow, Govan)
May I from this side of the House welcome my right hon. Friend the Minister to his new appointment and wish him every success in it. I assure him that we shall give him all the support he deserves; and I am certain that he will deserve our full support.
I have listened to all the speeches which have been made today. All of them have been full of interest. I have heard many figures stated as the price which will have to be paid for the F111. When my hon. Friend the Member for Loughborough (Mr. Cronin) said that it would cost £2 million, I was naturally interested and I interrupted my hon. Friend. I wondered on what authority he said that. It was very important, because I shall refer to that fact later. I wanted to be sure that my hon. Friend's figure was merely one of the rumours that 934 occasionally circle around in these debates.
This is another of the rumours which I have read. It was made in the debate on 13th December. The actual words used were:The Mirage 4 is a high flying plane, and to bring it down to 200 to 300 ft. above sea level would require avionics of a vastly different type than those at present in that plane."—[OFFICIAL REPORT, 13th Dec., 1965; Vol. 722, c. 999.]That statement is sheer nonsense. I know this because, in the company of the right hon. Member for Mitcham (Mr. R. Carr) and the hon. Member for Orpington (Mr. Lubbock), I saw the Mirage 4 in flight. I saw it climbing up into the blue until it disappeared from sight. The two Members who were with me will confirm that we were still gazing into the heavens to see if there was any sight of the plane when suddenly it flashed past us almost above our heads.
§ Mr. Rankin
All three of us, and the rest of the company, were startled to find that machine—one moment seen but not "gone for ever"—suddenly passing over our heads, not at supersonic speed, but to our ears it sounded like it. Not only can the plane fly at Mach 2, plus, with the power of delivering the obliterative weapon doubled—but it can also fly low and has strike qualities on the level, too. These things must be said, because later I want to consider the argument which is proceeding just now about the Spey/Mirage and the F111.
We also heard—this time from the Ministerial Bench—that the Spey/Mirage would not be available for service until two years, and perhaps longer, after the F111. We are assured that we could have the F111 by 1968 provided that she has got rid of all the "bugs" which are said still to be associated with her. But, equally, we are assured that the Spey/ Mirage 4 would be available by 1969 and not two years after the F111.
I wanted to make those points clear at the beginning because I believe, from all the advice which I have, that they are nearer the truth than some of the other remarks which we have heard.
§ Sir Ian Orr-Ewing (Hendon, North)
Will the hon. Gentleman tell us the 935 source of his possible date in 1968 for the supply of F111s to this country? My information is that when the American forces' need has been met and the Australian need has been met it will be very unlikely that we shall get ours till well into 1969, at a date comparable with that for the Mirage 4.
§ Mr. Rankin
I am quite willing to bow to the more accurate knowledge of the hon. Gentleman. So many dates have been buzzing in my head about the Mirage, the Spey/Mirage and the F111 that I thought that 1968 was the date for the F111. I frankly admit that I cannot quote off-hand the authority for it. Rumour must circulate occasionally inside our heads. It gets a grip, anyway.
If I understood him correctly, the right hon. and learned Member for Chertsey (Sir L. Heald) said that the Plowden Committee had been established in order to decide whether we should have an air industry or not. That effort would be pure redundancy. It never entered my head at any time that we should need to appoint a Committee to decide whether or not we should have an air ministry. I though that the Committee's purpose was to inquire into the efficiency of the industry and to see—
§ Sir L. Heald rose—
§ Mr. Rankin
Just let me finish the sentence. I shall give way in a moment, but I hope that hon. and right hon. Members will not blame me for making a long speech if they encourage me to go on by interruptions. My interpretation was not that it was the industry's existence which was in doubt but its efficiency and the need for continuing it as it was.
§ Sir L. Heald
Will the hon. Gentleman look again at the terms of reference and the Committee's Report? It is perfectly clear that the Committee thought that that was what it was there for.
§ Mr. Rankin
I am sorry. I cannot be responsible for the Committee's thinking in that respect. If it was right in thinking that that was its purpose, it was a waste of time for the simple reason that, when the Committee was appointed, there were 260,000 men engaged in the industry and to spend months on deciding whether or not we should displace 936 260,000 employees was a waste of time. However, as Rob Roy said, we will let that fly stick to the wa' in the meantime.
But, having mentioned that figure of 260,000, I must remind my right hon. Friend that in 1961 the number of persons engaged in the industry was 310,000, today it is 250,000, and in 1970 it will be 200,000. That is an enormous deflation in manpower within nine years. I hope that my right hon. Friend, or whoever is to reply, will be able to assure us that there are jobs waiting for those who will be displaced from their existing jobs by this cut in the industry, though I do not dispute that it may be necessary to run it down.
My right hon. Friend began by putting the question which the right hon. and learned Member for Chertsey put—"Do we need an aircraft industry?"—and he finished by saying, "Yes, we do". I said that before the Report was ever published or thought of, and I still say it. My right hon. Friend says that the industry will be smaller but stronger. I shall give him every encouragement and help in making it stronger, and I hope that the Government will ensure that those who contribute to the smallness of the industry will have their future safeguarded. We all know that the Government are taking special measures now to ensure that the standard of living of employees in industry who may become redundant will be safeguarded in the future more than in the past.
I do not want this industry to become the plaything of politicians. Therefore, when the right hon. Member for Mitcham started to blame the Government for the present condition of the industry or for what he said they had done in creating this state, I remembered what is said in Chapter 10 of the Report. It is paragraph 125:We list them here"—that is, the criticisms—lest we give the impression that we believe environmental factors alone to have been responsible for all the industry's troubles:That is the Tories again. I do not want to take this line. I do not want to see this industry the sport of the politicians, but, if right hon. and hon. Members 937 opposite start blaming my Government, I shall quote from the Report of the people who investigated it. That first criticism points straight at the Tory Opposition. The sooner the hon. Member for Orpington (Mr. Lubbock) thinks again, after Hull, and comes over here, the easier his conscience will be. Sub-paragraphs (b) and (j) state:
- "(a) Erratic Government policy in defence procurement during the last decade has denied industry the consistent objectives and stable programme needed for success".Delays within the Government in deciding whether new military or civil projects should be started have handicapped British manufacturers in competing with foreign rivals.The efforts of Government and industry to promote exports have not matched those of other countries, in particular the United States.Therefore, as I say, we should drop this business of blaming one another for the state of the industry.
I have already pointed out that I have had the chance of seeing the Mirage 4 and I heard a great deal. I would like to have heard much more. Much of what I wanted to hear when I returned to Britain is contained in reports of the inter-departmental committee on the variable geometry aircraft and the reports of the discussions and so on that are proceeding between our French friends and ourselves. I have discovered that these reports are being treated as secret. I hope that my right hon. Friend is listening.
§ Mr. Rankin
My right hon. Friend cannot escape my voice. We have been told today that as Members of this House we ought to have all the information that it is possible to give us in order that we may come to sensible conclusions on these matters. Yet here are most important discussions going on between British and French experts on the inter-departmental committee dealing with variable geometry aircraft and the papers have been declared secret.
I ask the Minister why that is so. Are these papers regarded as secret by the French? Do French Parliamentarians get them? Has it been jointly agreed by the British and the French that the papers are secret productions? I have tried to get them. I have sought them in the Library and in all the usual avenues. I have tried the Minister himself. I got the answer from his Department that these papers were secret.
938 I turn now to one particular aspect of the Report. In paragraph 523, the Plowden Committee recommends collaboration with Europe. Of course, we know from the Report that collaboration with Germany, France and other European nations is taking place. I would like to see that expanded and not have it limited merely to collaboration with Europe. I would like it extended to collaboration with the Commonwealth. I do not see why Britain, Europe and the Commonwealth should not form a great basis and unit of progress in the development of military and civil aircraft.
Collaboration is now taking place, and I would want to apply it particularly to the aircraft I have seen, in which I have sat and in which I would have flown if I had had the chance. However, that would not have been permitted, I suspect, for it might have been too dangerous. I do not suppose it would be easy to get permission to fly in a supersonic military aircraft.
§ Mr. Rankin
I do not mind interruptions in the least. I want to deal further with the question of collaboration and to boil it down to the question of direct co-operation with France on this project, because I want to point out that we cannot at one and the same time have both an Anglo-American and an Anglo-French defence equipment policy. They will not run together and we must make up our minds which we are to have.
A good many of us believe that if we decide—in my view, unfortunately—to collaborate with the United States, then in the long run it means American control of the type of aircraft we produce. The Americans will seek domination. This is not my view alone. It is the view of a great many people not only in Britain but in France.
We may say that these are interests, and I do not quarrel with that. But what is the wisdom behind the interests? There are interests everywhere in this business, and the one thing that I do not want to see us doing in this matter is to come under the domination of the United States or the French. But the point is that we have a greater chance of collaborating with France than we have with the United States.
939 Just after my visit to Dassault I saw that collaboration again in operation at Filton, when I sat in the reproduction model of the Concord, which is one of the most elegant aircraft I have ever seen and a magnificent tribute to the way in which the two companies are collaborating in the closest possible fashion to produce this "gentle giant". It will carry no death-dealing apparatus in its belly, unlike other aircraft I shall refer to.
There is a growing feeling that the United States wants to become the arsenal of Europe. I do not want to see that. Of course, we all recognise America's power. There is the tremendous home market for the development of the civil side of aviation. There have been subsidies from the American Government. I do not know whether they still continue, but either Pan-American or Transworld got over 100 million dollars a year to collect the debris found around Cape Canaveral following the failure of many space ventures. There is a subsidy in America for carrying the mail, and this economic power eases the development of the military side of the industry.
If this collaboration with America were to take place, the result would be that this country would become a production sub-contractor for America, and if the Americans fell on bad times at home they would have the chance to export unemployment to Britain. Our own scientific and technological industries would suffer.
This is already happening, because an American company, Comprehensive Designs Incorporated, has already been formed in this country to produce detailed designs of aircraft projects for export to the United States, and if men engaged in aircraft work here on the design and draughtsman side are made idle because of the diminution of the strength of our own industry, they will be snapped up by this company and paid more than they would be paid here, but less than they would be paid if they went to America. This would be a blow to our home industry. The headquarters of this firm are in Forte's Hotel at London Airport. This is the sort of thing we are now up against.
940 If we allow this to extend and, if we do not retain the design and research ability to tackle a selection of complete and complex projects ourselves, we cannot function as an equal partner with the United States in any such international collaboration. If, as I hope we will not, we choose the F111 instead of the Spey/Mirage, we have to remember that we shall get absolutely nothing out of it on the employment side. We shall get no extra work, no more scientific jobs and we shall not even get any chance of design work, because that will be exported to America in the way I have suggested. All we shall get will be the privilege of paying in dollars which are already in short supply.
Against that we have to weigh the fact that if we take the Spey/Mirage 4, 50 per cent. of the work will be done in Britain, as is the case with the Concord. Work on the engines will give jobs to our engineers and work on the airframes will give jobs to our airframe constructors. Because Spey engines will have to be used, the tailpiece of the aircraft will require to be adapted, or readapted, to carry the engine. There will be no expenditure of dollars and although we will have to pay francs, that will present no problem.
I hope that I have stated the problem with which Parliament is faced fairly and without bias and without anti-Americanism. I want it to be perfectly clear that I am not anti-American, even though I disagree with America's policy in Vietnam, a subject which I cannot debate at the moment. I am thinking of this country's interests and particularly the interests of Scotland. If we get more aviation work in Britain, perhaps a little more of it will spew over into Scotland. More than we have had in the past. I want English Members to remember that all we have in Scotland is the very important work which Ferranti is doing for B.A.C. It is important, but it is nothing to what is coming to the southern part of Britain.
I have spoken for aviation in Britain, but I conclude by saying that I would like the results to be spread more fairly over the whole of Britain than is presently the case.
§ 6.17 p.m.
§ Sir William Robson Brown (Esher)
I have been very impressed by the hon. Member for Glasgow, Govan (Mr. Rankin). I sense that in all he has said 941 he has had the support of the whole House. The Minister made some very soothing sounds and I hope that in their decisions, which should not be too long delayed, the Government will support the reassuring statements and implications of the right hon. Gentleman's speech. He said that Britain could not stand alone, but I question that, reminding him that in the last five years Holland, France and Sweden as individual nations have made spectacular progress in aviation.
There has been an emphasis on exports and I want to pay a compliment to the Parliamentary Secretary for the spendid work which he has been doing to my certain knowledge in many parts of the world in the promotion of the export of British aircraft, especially civil aircraft. I know that he has sometimes found the going pretty tough, and in one or two quarters so did I.
Unfortunately, the debate is being held in a vacuum. We do not have the substantial information which we require about the Government's intentions before we can reach proper conclusions about the proper future for the industry. I wholeheartedly agree with the majority of things said by my right hon. Friend the Member for Mitcham (Mr. R. Carr), but I am not quite so liberal in my praise of the Plowden Report itself. It was a curate's egg which was pretty rotten in many parts.
The Plowden Committee made a great mistake in visiting only one factory in Northern Ireland. It should certainly have visited one of the most advanced in Britain and without question should have gone to the United States of America to study the best which could be seen there. [HON. MEMBERS: "It did".] Factories? I was not aware of that. That does not take much space in the Report.
Reading the Report—and it is quite long—I came to the opinion that the Committee seemed to lose its way many times and contradicted itself in its conclusions far too often and, in the end, adopted attitudes which were most depressing and which showed the basic weakness of Governments' relying too much on committees and boards.
Circumstances often change while a committee is deliberating. More and more emphasis and regard is being paid to committees when less and less should 942 be paid. While the Committee was debating, the exports of this industry went up from £100 million to £150 million. At the same time, there was one order from the Middle East for £50 million. This is an industry upon which the Committee was carrying out a requiem mass. When I read the Report I wondered which industry it was discussing, and thought that perhaps it was the shipbuilding industry, or something of that kind.
The industry is not free from criticism and it has made many errors. I speak now of the criticism of the industry as one who has spent a long time with it. In recent years practically every British aeroplane has been built too late or has been too dear. That is the sort of criticism which we have to face. Because this has happened in the past it should not mean that it will happen in the future. We have learned some bitter lessons from the past and we can learn from what happened in the last decade. This is not a party political debate but I reckon that there have been 33 major projects which were cancelled either half-way through or towards the end, and everyone had to start all over again.
I would not have liked to have been a managing director in an industry or company faced with this year after year. There were projects which were well advanced and which were cancelled. It is a wonder that the designers did not completely lose heart. It is to their credit that they largely remained loyal to the industry. This must stop and here the Government have a great responsibility. If I were to say nothing else in this debate I would say that we have to decide that we shall go British, or, inevitably, we shall go 100 per cent. American. There is no half-way house about this, twist or turn as one likes. This is the 64,000 dollar question facing the Government. The Government should place before the country, in a White Paper, the long-term ideas for British military aircraft requirements.
At the same time, as has been said, for goodness' sake do not change all the people responsible for making the decisions within a couple of years. The kind of posting which has been going on at R.A.F. level has been a real handicap. This has to be related not only to our own requirements, but also in a way which we have never accepted 943 before, to international requirements for military aircraft.
I spoke of a £50 million order coming from the Middle East. These things are more within our reach than we probably realise. We are always looking for the great big plum when sometimes half a dozen smaller ones are just as good. I say let competition have a free rein. I believe in free competition, properly geared and organised. I do not want this compromise of either full nationalisation, partial nationalisation, partial investment or any one of these combinations. It will be a bad thing for the aircraft industry. The industry would feel that the minute the Government put up money the undertaking was being underwritten for all time and it would start leaning on these crutches. These tenders should go to the best team. They should not be given to any Muggins or Buggins. Let the order go to the firm which can make the best tender, carry out the best delivery promises and also be able to enjoy what our Front Bench speaker said about rewards and penalties.
This partial nationalisation or investment idea is creeping into political thinking these days. I do not want to depart from this debate, but in the end one finishes up by getting the worst of both worlds.
§ Mr. Norman Atkinson (Tottenham)
This debate is about the ownership of industry. This is an argument between private and public monopoly. Is the hon. Gentleman suggesting that we ought to go back to before 1960 and scramble the industry. If one is talking about real competition in that sense we are going back a number of years.
§ Sir W. Robson Brown
The hon. Member has not read the Report, or appreciated what we are debating. I am sorry that there is nothing which I can answer there.
Military defence expenditure should be British, let us have no nonsense about it. British aircraft defence should be British. We cannot carry out civil aviation projects without having British military support as well. They are tied together like Siamese twins; they are inseparable and if we try to avoid that basic fact we will get into more trouble again. We have to have a British military aircraft requirement and the basis 944 of that should form the launching ground for the civil aircraft contracts and finance.
The Plowden Report seems to take a most extraordinarily pessimisitic view. One sentence, above all others, for which I indict the Committee, saysThere is little prospect of substantially increasing the sale of products made by British industry on its own.What an extraordinary statement to make. In another section the Report suggests almost 100 per cent. reliance upon huge aircraft projects and big developments from the United States of America.
We are just throwing our hands in before we start. If, from now on, we operated from Plowden, we would be going straight down to rock bottom, and the industry might as well throw its hand in and its best brains emigrate to the United States. The Committee does not seem to have realised the extraordinary expansion that has taken place in the civil aviation field. What has happened is nothing to what will take place within 10 years. We are discussing today a great expanding industry if we had the courage to recognise it.
There is another angle of this which, up till now, I have not heard mentioned. Before a decade has passed the civil transport aircraft will be taking a great deal of trade away from shipping all over the world. Tonnage will go by air which people previously thought should inalienably go by steamer. The shipowners will get quite a shock and I recommend to them, even at this late stage, that they have another look at the feasibility of investing money in civil aviation projects, which perhaps will give them a better return than they would get from some of the projects which they are considering at present.
I view the future of the aircraft industry with great optimism. This optimism is based on experience in other industries of every class and kind. It is a modern, dynamic industry. It is no wonder that the United States are fighting tooth and nail to wrest it from us. I do not blame them; this is a competitive world. They are using every trick in the game to beat us. Perhaps the profit margins are not as good as they thought they were. I deprecate the abject defeatism of the Plowden Report. We have not yet seen the benefit of the recent mergers. 945 We cannot reorganise a great corporation like the British Aircraft Corporation in weeks or months. It takes years.
Let me turn to matters on which I feel that I am, in some degree, competent to speak. There is no question in my mind that the overheads in the aircraft industry are excessively high. I hope that as a result of the B.A.C. merger and the new appraisal of the industry the overheads will be pruned down to the keenest level. Linked with that, and even more important, is the question of management techniques in the industry, which could he very considerably stiffened. I believe that members of the management should go to America and study every angle of the American aircraft industry and apply here everything that they learn.
Production costs in the industry are something which I cannot comprehend. With wage costs 40 to 50 per cent. lower than they are in the United States, our manpower production costs are 2½ times higher. We will never get our own industry right as long as that state of affairs exists. It is no use skirting round this question; it has to be faced. Production costs need to be drastically pruned, and it will require very strong management and very understanding people to do it. But, in the end, we would have a viable industry able to give continuous and successful employment—perhaps to a smaller labour force.
There has been interest in the broad span of the debate without political bias. I suggest that we should have a consortium of brains and co-operation. The best brains of the Government, of management and of the trade union movement in the aircraft industry should form a consortium which would watch every move and act as the guide, inspiration and dynamic behind the industry. This is what is required. Tremendous benefits would result from this. I am a great believer in this tripartite way of working. It is the only way in which the nation can work successfully. The unions have greater experience in these matters than we realise, and their contribution would be invaluable.
The Government should decide the military programme over a definite period. They should decide civil aviation aircraft programmes in relation to the amount of money that they would inevitably require to give effect to them. I 946 do not believe that the Government should find a penny for anybody on vague generalisations or hopes. We have had too much of this in the past. In every project—I am talking particularly about civil aviation now—they should say, "You want this money. Tell us what you think you can do with it. Have you the market and have you the plane for it?" This must be based on world sales.
I wish to touch on the question of long-term European aircraft. There has been reference to the Anglo-French Mirage and Concord projects. The Society of British Aerospace Companies published a very good report, this morning or yesterday morning, in which it pointed out some of the difficulties in this matter. At the same time, it pointed out the possibilities. I hope that the Government have it in mind to bring together all the aircraft companies of Europe and to invite the collaboration of Australia, Canada and New Zealand, because those markets will be very much bigger than they have been in the past. Let us try some planning on a basis which will avoid misunderstanding. If the French committees and politicians pull one way and the British pull another there is a tug of war between the two nations and the project in question suffers. I have seen this happen. There is grave danger of the Concord costs escalating too far.
The future of the industry rests in the Government's hands. All of us on this side of the House, and, I am sure, all hon. Members opposite, and the 250,000 men in the industry and the associated industries will await with very considerable interest to see what is to happen to the industry. We are not debating two or three very big firms; we should be suffering under a delusion if we thought that. We are also debating 500 firms which are closely related to the aircraft industry whose work in electronic advancement has enabled the aircraft industry to expand in the way that it has and which could lead us into a new technological age.
I should like to say something which sounds as though it comes a little from the heart and not from the head. We have qualities of genius among the designers in the British aircraft industry. They have developed projects like variable geometry and others which have 947 been in advance of anything of their kind in the world. Men of this sort are still with us. We should not neglect them. We would do so at our peril. I suggest that the facilities at the Royal Aircraft Establishment, Farnborough, should be placed at their disposal so that they can develop their ideas. We have a very fine reservoir of talent here and we should take advantage of it before it is too late.
My right hon. Friend the Member for Mitcham said one thing which I thought had most powerful justification. He suggested that when the Government put a project in train they should appoint, as the Americans do—we would merely be taking a leaf out of the American's book—someone as the director of the project. He should have the responsibility and should be tied only within the financial rules of the game. We should not cripple him. That is what has happened in the aircraft industry. This has caused us more trouble than anything else. The history of the aircraft industry shows that all the successes have been linked with an individual personality, not committees. Therefore, I beg the Government to find the men we need and then, having found them, to put them to the maximum use.
§ 6.40 p.m.
§ Mr. G. R. Strauss (Vauxhall)
I am sure that the House has listened with great interest to the speech of the hon. Member for Esher (Sir W. Robson Brown). He is knowledgeable on this subject and although one does not agree with everything he says, his views come from experience and we have paid close attention to his observations.
The debate today and the Plowden Report remind me very much of the experiences I underwent about 20 years ago, when I had responsibility for the aviation industry as Minister of Supply. The problems that faced me and the Government at that time were almost identical with those facing the industry today.
We had an industry greatly expanded by the war and it appeared that the orders which we were likely to give to the industry, on both the military and civil sides, would not be anything like enough to keep the industry going fully for years to come. The problem arose of what was to be done about it.
948 The Government felt that it was their duty in those days to say boldly that the industry must be concentrated and a considerable part of it closed down. The Government prepared a plan, which we had worked out in the Ministry, for selecting those firms to which no future orders would be given, with the deliberate purpose of concentrating the industry at a much smaller capacity and making that section really prosperous.
That plan was never published. Indeed, nothing further happened. I am not sure to what extent the industry was aware of the designs which we had upon it at the time because the Korean War supervened. Naturally, that caused a substantial expansion of the industry and the problem of excessive capacity and inadequate orders disappeared.
Today, a similar problem confronts the industry and the Ministry, but for very different reasons, which I need not relate as they are set out in the Report and they have been mentioned by every speaker in the debate. I make only this comment. It has been generally said that the position which the industry is in today is the fault equally of the aircraft industry and of past Governments, that the industry took on orders too lightly without being fully satisfied that it would be able to recover its costs, that Governments were slow in giving orders, which they frequently cancelled, that there were constant delays, and change of plans.
That is true, but it must be remembered that we are speaking in hindsight and that the industry is in permanent flux. Enormous changes are happening the whole time. Looking back, it is easy to say that all these things are true. The military situation was changing during the whole period. New demands were made which conflicted with the old ones. It was impossible to forecast the costs of some of the new guided missiles and other items that were being built. Consequently, Governments hesitated justifiably in giving the industry new orders and they were justifiably hesitant in cancelling them. The industry was in constant difficulty. Much of its inefficiency which has been so much talked about was in fact the result of frequent changes of policy by the Government and the Airways Corporations. The industry is not wholly responsible for it.
949 The troubles of the industry arose, one might truly say, partly from historic reasons and it would be a mistake to put too much blame on either side. But whatever the cause the industry today is in difficulty. It is not my purpose to talk at length or to put forward remedies. I merely wanted to make one or two comments on matters which might be considered minor, but which arise from my experience as Minister of Supply many years ago.
First, there is discussion in the Report, but it comes to no conclusion, about whether the Ministry of Aviation should continue or should disappear. It would be a very great pity if the Ministry of Aviation were to disappear. It has an invaluable function. It is the Ministry which has no other function but that of looking after the welfare of this difficult industry. At a time when it is in a particularly grave state of flux, and when the future is uncertain, to get rid of the Ministry, which has close contact with and understanding of the problems of the industry, would be a grave mistake.
Secondly, the Ministry of Defence, which, it is suggested might take over responsibility for aviation, has too much work to do already and could not properly take on any more. It would be foolish to ask it to take on the very heavy job of the Ministry of Aviation on top of its present responsibilities. A third point is that if the Ministry of Defence undertook the responsibility it is almost inevitable that the civil aircraft side of the industry would suffer. At least, it might think that it was suffering. For that reason too, such a move would be undesirable.
My next point concerns Short Bros. & Harland. That company has had a chequered career. It has done very good work, it has a good design team and it has produced aeroplanes and guided missiles which are first class. The problem arises—it is also discussed in the Report—whether any preference should be given to this company and it is apparently considered doubtful by the Committee whether it should be kept alive. If, however, it is to be kept alive it is suggested that it should be only for social reasons. I should like to urge that the social grounds here are overwhelming.
950 If Short Bros. was inefficient, plainly and clearly less efficient than other elements in the industry, one might well look at the matter differently, but that is not the case. It is a good organisation and it has done some great work. It would be fantastic to suggest that this organisation in Northern Ireland, which employs about 8,000 people, very many highly skilled, most of whom could not be employed in any other job as there is no other work for them, should disappear and that the work which they are doing and will do in the future should be loaded on to aircraft factories in the Midlands, where there is plenty of alternative work.
If it is necessary to contract the industry anywhere, surely it should be contracted in the Coventry or Birmingham areas and not where it is highly desirable for social reasons that employment for skilled men should continue.
To my mind, the solution is quite simple. Steps should be taken to incorporate this company in one of the two big groups operating today. There are many ways in which this could be done. One of the big units should be asked to buy the company at asset value or some other value and the Government might in return supply the money for ordinary shares with which to do it. The financial side would not be difficult. It should, however, be clearly the duty of whichever of the two big groups takes over the company to give such orders as it can to Short Bros. & Harland to keep that company's works going. There would be no fear that it would not do its work exceedingly well.
§ Mr. Burden
Would not the right hon. Gentleman agree, however, that there might be a considerable difficulty that one of the bigger units which took over Short Bros. might tend to allow it to fritter away, because it would be better for the bigger unit to concentrate at its main works?
§ Mr. Strauss
The Government have such an influence on the aircraft industry that they can make almost any condition that they like in giving it contracts.
I will be open with the House and with the hon. Member for Gillingham (Mr. Burden). The argument has gone on for some years past among many of us about whether it was desirable at an earlier stage to nationalise the aircraft industry. 951 There was a strong case for it, but the most powerful counter-argument was that the Government have such control over the industry that, as its main customer, they could make the industry do almost anything they liked, within reason. There would be no difficulty in bringing about the reorganisation of one of the big groups in such a way that it could incorporate Short Bros. and Harland.
I want now to make one or two comments on the proposal about which apparently the Committee felt very keenly, and that is whether it is desirable that the Government should invest an unstated sum of money in both of the two groups in the aircraft industry.
I doubt whether doing so would achieve the purposes which they have in mind. There are many criticisms that one could make of the aircraft industry, and some were made by the hon. Member for Esher. Its management techniques are not as good as they could be and probably on efficiency grounds there is much to be done. One hoped that after the regrouping it would happen rapidly, and perhaps it will. I do not know. But, certainly, Government investment of money in these two groups will not by itself increase efficiency. It will not bring new or better designers into the industry, as all the best designers are there already. Therefore, on technical grounds, the improvement of output generally and improving the management techniques of the industry, it would serve no purpose.
It is not on those grounds that the investment is suggested by the Plowden Committee. It suggested other grounds which we should examine objectively, because hon. Members on this side of the House certainly are not frightened by the prospect of either partial investment of Government money in an industry or that the industry should be taken over wholly by the Government. My hon. Friends take the view that each case should be examined empirically. We are particularly not frightened about taking over an aviation firm, as we have in France the example of Sud-Aviation, a publicly-owned company which is outstanding and which produced the Caravelle. There is no reason why the same sort of thing should not happen here.
952 I might comment, incidentally, that the Society of British Aerospace Companies naturally does not look at the matter objectively. It has strong views on the subject and, in the statement that it issued, talked about the horror of creeping nationalisation, and that sort of thing. But the problem should be really considered objectively and free from preconceived doctrine as far as possible.
What is the purpose of investing some money—the amount is not stated or whether it is to be a majority or a minority shareholding, I do not know—in the shares of B.A.C. or Hawker-Siddeley? The reasons given are that a partnership between the supplier and the purchaser would be established, and that this is desirable.
Let us look at that. As Mr. Aubrey Jones points out, there is always a conflict between a supplier and a purchaser. It is inevitable, natural and proper. Would it really help to transfer that conflict into the boardroom, so that when matters of grave importance came up there were two groups of people with conflicting interests and conflicting purposes? I am not sure that it would not sour the atmosphere and lead to less wise rather than more wise decisions.
It is possible that I am wrong about that, but it is something that happens in practice. One has known it happen on many occasions when conflicting interests get on to one board, and there cannot be two more conflicting interests than those of the supplier and purchaser of the end product, as would be the case here. One would hope that when one got the two sides together everything in the garden would be lovely, but in practice what happens more often is that there are endless rows.
It is suggested that it will end the constant tug-of war between the purchaser and the supplier over costs and the meticulous care with which the Ministry must go into all contracts and follow up all the activities of an aircraft company, seeing everything that it does and constantly costing every activity. That is the situation which exists at the moment, and it has been criticised in the Report, rightly in my view. I must say that, when I had some responsibility for it, I often thought that my officers went too far and were an awful nuisance, but they were doing a necessary job to protect the 953 public against the aircraft companies and their shareholders making unreasonably large profits out of the State.
If the State takes over, shall we say, 50 per cent. of the shares, the problem does not disappear at all. It is there, just as much as ever. The House, the country and the Government will be just as anxious to see that the 50 per cent. of the shareholders who remain do not get fantastically large profits because of loose or generous contracts given by the State. That does not obviate this problem in the slightest. It still remains.
I agree with the Committee that all possible steps should be taken to prevent the tug-of-war going on the whole time which creates a feeling of conflict and hostility between the Department and the aircraft companies. The Government's taking over 50 per cent, or any other percentage of the shares does not of itself solve that problem.
The only other reason why the proposal is advocated of which I am aware, and it is one which must be given full consideration, is that the aircraft industry will require substantial financing in the future. It may do, and it may have difficulty in raising finance in the ordinary commercial way. It is a difficulty which may arise. As we know, in the development of a civil aircraft there is the good rule of 50/50: the Government contribute 50 per cent. and, if any profits are made, the Government is repaid its share out of those profits. That is sensible. But there may be requirements by the aircraft companies for further, and it may be substantial, finance which they may not be able to raise.
What is the best way to meet that? I think that the way is the one that is often done in industry through the banks. We have advocated in the past that it should be done on a number of occasions when the Conservative Government has wanted to subsidise a particular company—Cunard, or the steel industry, when it was contributing £50 million for the development in Scotland.
The simple and proper way to do it is to issue convertible debentures to the company. The Government have debentures and, therefore, they have security for their investment. If, as is hoped, the venture turns out well, the Government then have the right to exchange those 954 debentures into ordinary shares after five or 10 years. If the project is a successful and profitable one the Government or, rather, the taxpayers get back profit out of the money that they have invested. That is the simple and straightforward way of doing it which is adopted frequently in industry on a large scale.
If the difficulty is that the industry does not know how it is to raise substantial sums of money in the future which it will want, the answer is that under those conditions the Government can do it in a perfectly proper and fair way that protects the taxpayer if they approve the scheme and they are certain that the project that the aircraft company wants to undertake is a fair and wise one.
I can see some purpose and some benefit in taking over either the whole or part of the aircraft industry, but I do not believe that a partial investment, a partial shareholding, will solve any of the problems which the Committee described, and I therefore have great difficulty in supporting it in that respect.
§ Mr. Onslow
I have listened with great interest to the right hon. Gentleman's speech. Can he express an opinion on the likely effect of taking over the industry, either partially or totally, on what is vital, namely, increasing the size of the market?
§ Mr. Strauss
That is a different problem. Increasing the size of the market is a question of exports, and I do not think that Government investment here would have any effect whatsoever. This is a matter for the industry. Whether it has done all that it can to maximise its exports, I cannot tell, as I have not been in sufficient touch with the industry for many years.
The industry is in a difficulty at the moment. As I said at the beginning, this is not entirely the industry's fault. There are a number of historical reasons for it. There have been a number of miscalculations, some the fault of the Government, some the fault of the industry, and some just sheer bad luck, but the industry, with its large resources, with its high tradition of success, and with its fine designers, who in the past have brought about world triumphs in the production of aeroplanes, is not dead. Those assets are all there, and, given a reasonable opportunity, I think that the 955 industry will overcome the difficulties confronting it.
The Government are pressed to make quick decisions, but I ask them not to make them too quickly, because what is at stake is the future of one of our major industries and the livelihood of hundreds of thousands of our most skilled people. Decisions must not be made too quickly. If the Government make wise decisions, I am certain that the resources of the aircraft industry, particularly in technical manpower, and the high degree of skill of its work people and designers are such that it will once more achieve the triumphs which it did in the past.
§ 7.3 p.m.
§ Mr. Neil Marten (Banbury)
The speech of the right hon. Member for Vauxhall (Mr. Strauss) was one of the most interesting that we have heard in this debate. What I find so interesting is that it was made by an ex-Minister who has experienced the responsibility of the office about which we are talking, and who also has experience of business in the outside world. I was a junior Minister at the same Ministry, and I, too, am connected with business outside, but I feel that my speech will be the exception that proves the rule, that speeches from Ministers are interesting.
I should like to begin by congratulating the Minister on his appointment, and wishing him well in this office. From my short experience there, I can say that I found it quite the most fascinating Ministry, and I hope that before the right hon. Gentleman allows his colleagues to abolish it he will get to know it and cling tightly to it, because, as the right hon. Member for Vauxhall said, I think that it has a great rôle to play.
I was a little disappointed at the Prime Minister's attitude at Question Time today when he was asked about this. I sensed that he had it in mind ultimately to break up this Ministry, and I hope that the right hon. Gentleman will fight such a proposal, because, if it is broken up, we may throw up a few technicians who will make electric toasters, and electric washing machines, but I do not think that that is what we really want.
The right hon. Gentleman said that exports in the aerospace industry this 956 year were up by 50 per cent. over last year. We take great pride in that, because it is a national effort, but I hope that the Minister will not claim that as something which has happened during the first year of his party being in office, because nearly all the orders must have been placed when we were in power. We take great pride in that achievement. It is, however, essential to know the projected export figures for 1966, 1967, and 1968. With all the national planning about which we hear, no doubt that information can be obtained.
I propose now to deal with the question of European co-operation, which has been touched on by many hon. Members during this debate. I do so particularly because, as the Parliamentary Secretary knows, in January of this year the hon. Member for Orpington (Mr. Lubbock), the noble Lord, Lord Kennet, who is a member of the Labour Party, and I, were in Rome. We went there because the Italian airline, Alitalia, had announced that it was to order 28 American DC9s, costing 160 million dollars.
As back benchers, the hon. Member for Orpington and I got together and went to Rome because we were worried that the Italian Government and people were not showing evidence of their sincerity about Anglo-Italian co-operation across the industrial front. The object of our mission was to meet as many politicians as we could, and to probe and find out their real attitude to this.
I think that the hon. Member for Orpington will agree with me when I pay tribute to Lord Kennet for the extremely skilful way in which he handled not only the Italians but us. The fact that he was very fluent in Italian helped greatly.
We spoke to a number of Italian politicians, and nearly all of them said that they were very much in favour of Anglo-Italian co-operation, and I believe that 90 per cent. of the Members of this House are also in favour of it. That is fine, but that is only the politician's view.
When we spoke to the management of Alitalia, they said that they were in favour of collaboration, and so on, but they added that when it came down to brass tacks they were a commercial airline, and that their job was to make a profit. 957 They said that they had to be profitable, and, therefore, they had to buy aircraft which suited their route problems and their economies. I think that they were sympathetic towards co-operation with us, but, on the basis of a hard commercial choice, they came down in favour of the American DC9. The BAC111 did not quite fit their route patterns and economies as well as the American plane did.
In his speech my right hon. Friend the Member for Mitcham (Mr. R. Carr) brought out the practical lesson to be learned, that in the final analysis it is the efficiency of a plane and its cost which decides whether it is bought by commercial airlines, and I am sure that it is wrong, merely because an industry is nationalised, for the Government to say that it must have this aeroplane or that one.
As we move forward to, I hope, European co-operation, we must not expect the European market to be a captive one. The European aerospace industry will do its best to produce an aeroplane which it hopes all the European airlines will buy, but if, when such a plane is nearly off the production line, the Americans nip in and produce a plane which is marginally better, and possibly cheaper, I am sure that all the European commercial airlines will buy it. It would be wrong to make them buy a European plane simply because it is made in Europe.
§ Mr. Lubbock
I do not think the hon. Gentleman should say that the DC9 is a better aircraft. It is just that it is different, and it happens to fit Alitalia's route patterns, according to its judgment, slightly better than the British plane does.
§ Mr. Marten
I said that it fitted the route pattern of Alitalia better than the BAC111. When we get our European aircraft industry going I hope that we shall bear this fact in mind and not be too optimistic about having an easily captive market. The European industry must design for a world market and not merely a European market.
On political grounds we agree that we want European unity. This way of co-operation towards European unity 958 through industry is the real and pragmatic way towards political unity. Out of this collaboration will come such political unity as we want. On purely commercial grounds it is vital for Europe to have its own industry, because if America scoops the whole world market she will have no competition, and could then grow fat and flabby. Then we shall not get the progress that we will get if there is competition between America and a large European aerospace industry.
There may be cases in which Governments can force European countries to purchase European military aircraft, because in those circumstances Governments can accept a slight downgrading of the specification for the aircraft if it is in aid of and in furtherance of the political unity of Europe. But that does not apply to commercial aircraft.
I now turn to the question of space. Only one page is devoted to this subject in the Plowden Report. When we are considering the aircraft industry we must not forget this question. I do not want to enter into party politics, but it is my view that the "clobbering" of the aircraft industry by the Government's cancellation of these three aircraft has been a major disaster for the industry. The future economic competitiveness of these islands depends in part upon the dynamic exploitation of applied electronics throughout our industrial life.
This was very much in evidence in the aircraft industry. We are an industrial nation, surviving by our technically creative imagination, and we shall survive not by our research and development alone but by our research and development together with production and, above all, competitive selling. If the aircraft industry has been substantially "clobbered" much of its technology, such as the avionics for the TSR2, will go by the board. We must keep our scientists and technicians on the frontiers of knowledge. One way of giving our scientists a great incentive to work and think about the subject is to maintain an interest in space.
In due course I hope that the Government will announce a clear-cut space policy. At the moment, it is very dubious. There are holding contracts for Black Arrow, but no one knows where we are going. The Government could introduce a not very expensive space programme. 959 If we went in for a British military defence satellite and produced our own launcher, with Black Arrow, and put the satellite up over the Indian Ocean, thereby providing communications between Britain and the whole of Africa and Asia—where the interests of ourselves and our Commonwealth lie—we would have a clear-cut and not too expensive space programme which would enable those of our scientists who are interested to carry on work which will keep their technology up to date.
It would also allow our manufacturers to become expert in these subjects and when the time came for us to play our part in E.L.D.O. and E.S.R.O., and similar European and international organisations, it would be known that Britain had the necessary experience in the manufacture of launchers and satellites. In that way, and only in that way, shall we ever get space work coming into this country. It is, therefore, very important that we should have a clearly defined national space programme.
The other reason why we should have this programme, which is well brought out in Appendix J of the Report, is the much discussed question of the fall-out in industry which would occur from our going in for a space programme. Many good examples are set out in the Report, but I want to draw the attention of the House to only one, which goes right through industry. It concerns the question of reliability.
When we send a satellite into space it will be unattended for a long time—perhaps for five years. I should like to show how this reliability has improved. In 1945, electronic equipment, comprising 350 parts, failed after an average of 90 hours operation. In 1950, the failure arose after 300 hours, and in 1955 after 400 hours. At the moment, improvements in space equipment provide for a period of 20,000 hours' reliability between failures. The goal for 1970–25 years after we started—is 200,000 hours, in respect of this highly technical micro-miniaturised equipment in space, carrying on unattended and not giving out. That is a wonderful example of reliability. That knowledge passes into industry and goes right the way through it. I urge the Government to come forward as 960 soon as possible with a clearly defined national space programme.
Finally, I want to say a few words about what has caused the Plowden Report. If this country had had a bipartisan defence policy the Plowden Report would not have been necessary. Are we, as a Parliament and a country, getting any nearer to a bipartisan defence policy? The hon. Member for Glasgow, Govan (Mr. Rankin) referred to the aircraft industry as "a plaything". A defence policy is not a plaything. We could be moving nearer a bipartisan defence policy, and with it might go a bipartisan foreign policy, to which I would not object.
I would like to explain what I mean, because this is not always the most popular thing to talk about. The Labour Party was in opposition for 13 years and during that time it was not in our confidence in matters of defence planning, because of considerations of security, and so on. When the General Election approached the Labour Party produced its election manifesto, in which it put out some incorrect facts concerning projects for the future which it said it would carry out.
In part, this was guesswork, because the Labour Party did not know the real facts. I do not blame it for that. All political parties have a duty to allocate their resources as between defence, housing, pensions and whatever else they think fit. I am not trying to score party points, but I remember that the Labour Party said that it would renegotiate the Nassau agreement. It has not done so. It said that Polaris would not deter, yet we go on building Polaris. It said that all N.A.T.O. members would have a proper share in the deployment and control of the nuclear deterrent. They have not.
When the Labour Party came to power it clearly felt the responsibility of defending this country, and since it was shown the facts it has imperceptibly changed its attitude from what it had been at the hustings in 1964. Also, if Labour is in power a little longer—[Interruption.]—I apologise for having stirred up so much trouble in the Strangers' Gallery. Perhaps they might have added to the Conservative vote in Hull. If they had gone there, they might perhaps have been better placed.
961 I was just saying how I believed we should move towards a more bipartisan foreign policy. Another factor is that, before the election, there was the question of the TSR2, a question which still existed after the election. Now, the TSR2 is no more: it cannot be brought back. On this question, all the differences between us are out of the way. One can go through a number of cases like this and I believe that the margins between us may begin to disappear. Perhaps they will disappear reluctantly on our side and perhaps some of the hon. Members below the Gangway on the other side will not like it when they see the party opposite moving towards the centre on defence.
If we had such a bipartisan defence policy, the aircraft industry would know far better where it stood. When there is a change of Government, the same orders which the other party agreed to earlier would stand. Therefore, if we had had this, we should not have had this problem and the aircraft industry would have been in the very healthy state in which my party Left it.
§ 7.2 p.m.
§ Mr. Peter Mahon (Preston, South)
I do not regard the recommendations of the Plowden Report as either half a loaf or the thin end of any wedge leading to nationalisation. In a mixed economy, this appears to be a genuine compromise between the producer and the customer, a fair and demanding partnership between Government and private enterprise. The committee has based its conclusions on experience, much of it very bitter experience. The committee has reflected on the never-to-be-forgotten lesson of the TSR2, when miscalculation, negligence and a lack of ability to sell led to a catastrophic rise in cost and a wastage of manpower, talent, skills and hundreds of millions of £s.
I could never be induced to believe, as my right hon. Friend the Member for Vauxhall (Mr. Strauss) adduces, that much of our failure in this industry was due to bad luck. Other industries have endured many more trials, tribulations and vicissitudes and have ultimately succeeded. In the last decade, we had abundant unpleasant demonstrations from within the Government, at Ministerial level particularly, of how not to manage the aviation business. I agree that the industry has no predestined place in the 962 economy, but neither should it be regarded, particularly when harnessed with the endeavours of the rest of Europe, as the poor relation in our economy.
The Committee have stated that the present situation of the two main aircraft companies is unsatisfactory. The public investors and foreign buyers are losing confidence in the ability of these companies to control their own destinies. It follows as a natural corollary that the greatest uncertainty of all is to be found among the men engaged daily in the undertakings of the industry.
The most sombre note in the Report is the conclusion of the need for a reduction in the industry's present size. The Report says that it is a prospect which the industry must acknowledge. It is a prospect also that places on the Government the duty of taking the industry into their confidence as fully as possible about future plans. Further, it is a prospect which places on the Government the duty to ensure that a diversity of industries, akin, if possible, to aircraft manufacture and capable if required of further expansion, are introduced into those areas where, at present, the aircraft industry is so predominant. One of the most desultory facts arising from the Report is the puny manpower force engaged in the British aerospace programme.
It is a striking and painful anomaly that in this great contemporary search in space for a new frontier Britain contributes less than 1 per cent. of the contracting industry's labour force. I am not suggesting that we should start running off million-£ heats by way of training for renewed efforts in the space race. I believe, however, that our contribution to space research in collaboration with our European partners could, at some future date, in a Britain of far more economic poise, affect the total workload of the aircraft industry. Workers in my own constituency have contended with much disappointment and frustration within the aircraft industry, in which, despite all the difficulties, they have been proud to have been engaged.
To a conscientious craftsman, the loss of a skill is not secondary to the loss of a job. In Preston, the pendulum has moved full circle. Last year, it was feared that there would be 3,000 redundancies: today, there are 1,000 vacancies 963 to be filled, without prejudice to redundancy payments. This gladdens the heart and it does not go into the vacuum which was referred to earlier by the right hon. Member for Mitcham (Mr. R. Carr).
Let it be observed that workers today are not moving towards the industry with the same alacrity. It is oft-times said that man's happiness can be measured by the fewness of his wants. To most working men security of tenure in employment transcends other blessings. The less exciting but stable job, the job which does not expose workpeople so violently to the slings and arrows of outrageous fortune, is likely to be their choice in the future as against the more exciting but more transistory employment in the aircraft industry.
So often have their hopes been blighted with one cancellation being followed by another and yet another. If in Government and management the cost is counted, it is counted by workpeople with more fearful reckoning. The one in five redundancies predicted to occur between now and 1970 will strike some fear into the hearts of workpeople. This and many other most important facets of the situation have not been lost sight of in the Plowden Report. We have reason to be grateful to those who compiled it. They have rendered a splendid service to the industry and the nation.
§ 7.32 p.m.
§ Mr. Stanley R. McMaster (Belfast, East)
I regret that the Chair has not seen fit to call the Amendment standing in the names of my hon. Friend the Member for Down, South (Captain Orr) and many of my hon. Friends and me. I realise that on a Motion such as this it is unusual to place such an Amendment on the Order Paper and, of course, it reflects the sectional interests of a comparatively small number of hon. Members. Nevertheless, we tabled the Amendment because the Plowden Report was so damaging to the interests of the North of Ireland as a whole.
This has been reflected by the decision of the Prime Minister at Stormont to visit Ministers at Westminster. The same can be said of the Minister of Commerce and the trade unions concerned with Short Bros. & Harland, many of whom, at considerable expense to themselves, have 964 come to London for two days with 40 or 50 of their colleagues to express their anxieties over the Plowden Report and its effects on Shorts.
This subject has been debated many times in the House and has been mentioned by several hon. Members today. The Minister made it clear in his opening remarks that it was the intention of the Government to cut down the aircraft industry. It is clear from the findings of the Plowden Report, particularly those to be found on page 78, that those responsible for presenting the document, along with Lord Plowden, felt that there was very little future in the aircraft industry for a firm such as Shorts.
In paragraph 447 the Committee stated:They are also unlikely to be given any large new sub-contracts by B.A.C. or Hawker Siddeley.In paragraph 448 it stated:… in the Committee's view, they should cease to remain an independent company in the aircraft industry".In paragraph 450 the Committee, referring to the Skyvan and Seacat, the small light freighter aircraft, suggested that if Shorts closed down, those activities should be taken over by another company in the United Kingdom.
I take great issue with that finding of the Plowden Committee. The Committee was usurping the function of Government. This is an extremely serious matter. The Committee's terms of reference did not lay it down that it should make that type of detailed recommendation—so detailed as to say that if money were to be spent in Northern Ireland it would be better not spent in the aircraft industry. This is a political decision and it is no place of a committee such as the Plowden Committee to make a recommendation of that nature. The Plowden Committee was set upTo consider what should be the future place and organisation of the aircraft industry in relation to the general economy of the country, taking into account the demands of national defence, export prospects, the comparable industries of other countries and the relationship of the industry with Government activities in the aviation field; and to make recommendations on any steps and measures necessary.It is not for any committee, however high powered—and I have the greatest 965 respect for the members of the Plowden Committee—to suggest to the Government how much should or should not be spent on defence. That is a political decision for the Government of the day. It is not for any such committee to say how much of the money which the Government decide to spend on defence should be spent in the United States ordering American aircraft or in the United Kingdom. This, too, is a political decision for the Government of the day and the Government cannot hide behind a body such as the Plowden Committee when making decisions such as these. By the same token, the Plowden recommendation that money should not be spent on the aircraft industry in Northern Ireland is a political matter which can only be decided by the Government of the day.
We have in Northern Ireland one of the oldest aircraft manufacturing companies in the world. It was the first in the world to manufacture an aircraft designed by Wilbur and Orville Wright. It has since produced many fine aircraft, too numerous to name. To give an idea of the expertise which this company possesses, in 1920 it produced the first all-metal aircraft when the experts said that it could not be done. In 1924, it produced the little Cockle seaplane, carried out intensive research and produced many fine seaplanes which were sold to both the Armed Forces and civil airlines. Empire flying boats carried the name of Britain throughout the world and established B.O.A.C., particularly on the Far Eastern route.
During the war the company produced the Sunderland flying boat, the main aircraft of Coastal Command and a plane which was responsible for many U-boat sinkings. The Stirling bomber served throughout the war and was also produced by this company. Since the war and since Shorts was established in Belfast the company has carried on its research and development. It produced the first variable sweep aircraft, the SB5, in 1952. We have heard much about the F111, which is a variable sweep plane. Dr. Barnes Wallis' ideas of variable sweep were developed in this country 12 or 14 years ago, and given to the United States for nothing.
The company produced the Seamew in 1953 and, a year later, the PD16, which was later used by Transport Com- 966 mand and adopted in the Armstrong Whitworth Argosy freighter. Perhaps the most important of recent developments by Shorts has been the vertical multi-jet SC1, which first flew in 1958 and which I was proud to see displayed at Farnborough on two or three occasions, transforming successfully from vertical take-off to forward flight and back again to vertical landing. This is a development in which we led the world. It was designed in Belfast.
Having said all this, is it for the Plowden Committee, which did not even go to the trouble of visiting any of the Hawker or B.A.C. factories, to suggest that this company is not fit to manufacture aircraft? We have manufactured some of the most up-to-date and, without doubt, some of the finest aircraft in the world, not only before and during the war, but recently. The Seacat, which has been developed in the firm's missile branch, is the country's leading missile export. It has earned in exports about £7 million out of a total of £11 million, and it is estimated that by 1970 it will have earned Britain exports worth about £14 million. The missile is used by seven foreign countries.
Here we have a factory capable of handling the most intricate and highly developed work It has produced the Belfast. This aircraft has been criticised in the Press on grounds of drag, but I must point out that there is hardly an aircraft that does not have some drag problem. The VCI0 has it, and so have many other aircraft. The leading designers at Shorts are quite satisfied that they can deal with the drag problem.
The requirement of the Belfast has, of course, been very much changed since the original order was placed in 1958–59. It was not then anticipated that we should have to fly a route like that from Cyprus to Bahrein, over Turkey, or that we should lose over-flying rights over Saudi Arabia. Is it fair to blame Shorts for political developments that have changed the requirements that the aircraft previously had no difficulty in meeting?
The firm is at present collaborating with Fokkers in a way suggested by the Plowden Committee as being an appropriate avenue of activity for the industry. It has been collaborating for the past 18 months in producing the F28. Another German consortium, B.F.W., itself 967 approached Shorts to collaborate in the twin-engined twin-jet V.F.W.614. This was designed to replace the Dakota, the DC3, and there is a very big potential market for it. It has been suggested by some of the Ministry of Aviation requirement experts that the V.F.W.614 is not a suitable replacement—the very same experts who suggested that the B.A.C. —[Interruption.]
I should like briefly to examine the reason why Shorts was established in Northern Ireland. As the House well knows, we have in Northern Ireland a very difficult and—[Interruption.] To continue the debate on the Plowden Committee's recommendations, this firm was established in Northern Ireland as a means by which the Government sought to meet the employment difficulties which we have experienced there for many years.
Here was an industry which produced something ideally suited to Northern Ireland conditions. The product has a very high man-hour content. The finished aircraft are flown out which means that transport costs, which have for years bedevilled Northern Ireland and tended to increase production costs, so hindering the Northern Ireland Government in their efforts to attract new industries, do not apply as they do to most other industries there. This industry, in common with shipbuilding, brings in a very small quantity of raw material; the raw material represents a proportionately small part of the finished product.
Our main employment problem is to find work, in the main, for the men, of whom 7 per cent. are unemployed. About 7,000 or 8,000 men are employed in the aircraft factory. If the recommendations of the Plowden Committee are put into effect, it is suggested that some 4,000 of them should, within the next 18 months, be declared redundant. I question whether with the remaining 4,000 workers—1,500 of whom are employed on the missile side, leaving about 2,000 or 2,500 employees in the main aero factory—we can maintain Shorts as a viable aircraft-producing unit.
The decision facing the Government is not whether the work force should be halved, but whether it should be cut out completely. It is suggested that the work of the aircraft factory could be 968 diversified, but I suggest that there is no diversification that could take the place of the aircraft work in the time mentioned by the Minister in relation to redundancy. I suggest that it would be quite impossible and impracticable within the next 18 months to establish alternative industry in Northern Ireland—and find a market for the products—which would employ anything like the present number of men.
The National Plan contains many fine passages. It states that it is the Government's intention to make use of the available labour force in the United Kingdom, but how do the Government intend, in the light of Chapter 8 of the National Plan—that dealing with regional planning—to make use of the labour force in Northern Ireland? I suggest that there are only two ways in which they can do so. One is directly the direct way, by public expenditure on roads, schools and hospitals—and we have ambitious programme in Northern Ireland—but that will not employ aircraft workers.
The other way is by means of direct military orders. Why should these military orders be placed with Shorts? I have tried to establish that we are quite capable—and no one has questioned this statement—of building the best aircraft that can be built anywhere in the world. This work should go to Northern Ireland. If it is sent to English factories in Weybridge, Coventry or Kingston-upon-Thames, men will be employed who could easily find alternative employment in some other industry that is crying out for them, and could export its products—the motor car industry, for instance. There is no such alternative work available in Northern Ireland for these men.
What happens if employment is cut down in Northern Ireland to the extent envisaged by the National Plan? The best brains will go abroad; large numbers of men are already emigrating. Boeing and Douglas have attracted numbers of our skilled design staff—the very cream of the industry. Some go to South Africa and Australia. The men concerned will either go abroad or go on the unemployment list; in any case, they will be lost to the country. I therefore suggest as strongly as I can that this type of work is ideal for Northern Ireland—and not only good for Northern Ireland but for the country as a whole.
969 I do not like the idea of redundancy in the aircraft industry anywhere. It is equally bad for a man to lose his job in Weybridge as to lose it in Belfast, but at least the man in England can easily find alternative employment. That is not so with the men employed in Northern Ireland. I therefore ask the Government to look seriously at the policies they have announced; at their ideas of buying American aircraft and cutting down our own industry. An aircraft like the HS681, which was cancelled, is infinitely preferable to an out-of-date old aircraft like the Lockheed Hercules.
If the Government will not take the HS681, why not take the version of the Belfast? That does not seem to have been considered by the Government, yet when the original contract went to the HS681 the Belfast ran it a very close second. It failed only because it did not have an appropriate take-off characteristic, but it has a better take-off characteristic than has the Lockheed. In addition, the Belfast is at the beginning of its development, whereas the Lockheed is an old and out-of-date machine which cannot be further developed or stretched.
By buying British aircraft, the Government would not only save foreign exchange but help our balance of payments. The Government must remember that even if British aircraft cost more than United States' products, part at least of the price paid for British aircraft is returned straight away to the Government in taxes, while money spent on United States' products is totally lost to the Government.
On the question of the United States' policy of quoting cut prices to Britain for its products, the Plowden Report shows what a competitor the British aircraft industry has been to the Americans. On page 108 of the Report we find a table of exports of leading aircraft manufacturing countries. We find that in 1958 the United States aircraft industry as a whole exported £344 million of exports, whereas the British aircraft industry exported £151 million, almost half, but in the following year American exports had dropped to £274 million whereas the British had risen to £155 million. This was with an industry only 970 a fifth the size of the American aircraft industry.
The table continues to 1964 when we find that the U.S.A. exported £433 million worth against the British £96 million, almost £100 million. We find that Britain is the main competitor of the Americans. The Americans are out to cut the throats of competitors. Why are the Americans quoting these cut prices for Phantoms and Lockheeds? Is it not to put the British aircraft industry entirely out of business? I implore the Government to look very critically at this policy of the United States.
We have all heard of Henry J. Cuss and the efforts he makes to sell American equipment abroad and to run down British equipment. What could be more damaging to the British aircraft industry than for the Government to cancel projects such as the TSR2 and the HS681 and to receive orders from the United States? This has given great hostages to men like Cuss to run down our aircraft industry. We should not only reexamine the whole defence programme and the ordering or requirement programme, but also because of the importance of this industry to the economy of Northern Ireland, we should consider its importance in giving employment in Belfast to 7,000 or 8,000 workers, plus the many small shopkeepers and others who depend on the men in the industry who spend their earnings in the area.
My hon. Friend the Member for Belfast, West (Mr. Kilfedder) and I were glad to see the Minister on this matter and glad, also, that as a result the Minister agreed to see the trade unions and to hear them make some of these points, which I wish to emphasise. We need these industries in Belfast. We have there a factory with one of the biggest hangars in Europe and terrific production facilities. The Minister has been round the factory and seen its production, not only direct aircraft production, but production on the missile side and the attempts to diversify the production of hydraulic equipment, machine tools, analogue computers and many other projects.
The right hon. Gentleman knows the difficulties of diversifying industry and the uphill struggle it is, the amount of capital which has to be put in if we are to make, for instance, electronically 971 controlled machine tools. We would have to completely retool and write off national investment in great hangars and assembly sheds and the skill of men in Northern Ireland which has been built up over 15 or 20 years on the firm basis of the great reputation of Short Bros. and Harland.
I close by making some suggestions to the Government about this firm. Instead of cutting down the firm, they should consider strengthening it. They should strengthen it at all levels, the sales side, management side and production side. If there is waste or extravagance in the firm it should be more tightly controlled. Simply because, in the past, there have been mistakes in production, which I suggest have arisen through changing requirements by the Government rather than by any mistake in the company itself, there is no reason to accept the Plowden suggestion and cut the firm practically to nothing.
I am glad to see the Minister present to hear my concluding remarks. I call on him to make a clear pronouncement on Short Bros. The firm has been under a cloud of doubt for too long. We must have a clear decision. The Minister must remember the pledges he and his Government made to Northern Ireland. His predecessor, now the Secretary of State for the Home Department, said, as quoted in the Financial Times of 19th May, 1965:'Short's is part of the British aircraft industry and will remain part of it'. He affirmed the Government's intention that the company should continue its work in the missile as well as the aircraft field. He also said, that Short's is a unit of great technical value, not only to Northern Ireland but also to the United Kingdom as a whole.Less than a year ago this was reported:The First Secretary of State and Secretary of State for Economic Affairs, addressing Short's apprentices on 28th May, 1965, said:I would repeat the assurances given here by my colleague, the Minister of Aviation."—now the Home Secretary—'Short's is part of the British aircraft industry and will remain part of it. I can assure you that Short's will fulfil their commitments in the matter of delivery or after-sales service to anyone who has bought or intends to buy aircraft or guided weapons from your production lines American and other competitors take note.'That was a pledge given by the First Secretary 10 months ago.
972 The First Secretary, on 3rd June, said in this House, in reply to my hon. Friend the Member for Londonderry (Mr. Chichester-Clark):Certainly. The Minister of Aviation has said this. I said it in Northern Ireland. I repeat it here now. I think that it would be very good for Short's and for Northern Ireland if there were diversification of its interests and if it were not linked to this one form of enterprise. … we have both made it clear—using exactly the same words—that Short's is in the aircraft industry, it will remain part of the aircraft industry, and anyone who has bought or is thinking of buying any of its excellent products can be quite sure that the company will be able to fulfil all its after-sales and so on.The First Secretary is reported as having said on 1st February, 1965 as shown in col. 1017 of the OFFICIAL REPORT:The hon. Gentleman can go and find out. I am making a carefully considered statement and I think he will find that Short Bros. and Harland and Belfast are looked after by this Government far better than the last."—[OFFICIAL REPORT, 2nd February, 1965; vol. 705, c. 1017.]Is this the way the Government intend to look after the firm? The Minister said when opening this debate that he expected 4,000 men would be laid off in the next 18 months. Is that the way in which pledges are satisfied and the way in which the Government protect their 70 per cent. shareholding in the company? The Government have a major interest as a main shareholder in the company. I ask the Government to review any decision they are thinking of making about Shorts, to come out clearly and let the workers know what their intention is. I hope it will be to retain Shorts in the aircraft industry, not to go behind the company's back with a freely negotiated contract in Germany which is now officially supported by the Bonn Government.
I feel that I cannot do better than demand of the Government that they help British industry, that they buy British aircraft, that Shorts gets its fair share of this production work, and that we no longer look either to the United States or to aircraft companies which have sprung up in the past five or 10 years in Europe and share with them secrets and plans that we can well use here. There is a future for the aircraft industry in the United Kingdom. The 1957 White Paper was completely wrong. I read a recent report on the war in Vietnam, which has 973 been discussed a great deal through the Strangers' Gallery. [Interruption.] I am sorry, Mr. Speaker. I did not intend to provoke that one.
It is clear that the missile system there, known as S.A.M.—that is a missile system developed by the Russians and being used by the North Vietnamese—is not successful in stopping aircraft. Aircraft can continue in spite of this. The success rate of these missiles is less than 5 per cent. Therefore, there is a future for both military and for civil aircraft, and we must ensure that a proper proportion of these is built in the aircraft factories of this country.
§ 8.01 p.m.
§ Mr. Norman Atkinson (Tottenham)
I am certain that most of my hon. Friends will join forces with the hon. Member for Belfast (Mr. McMaster) in his reference to Shorts. It does not need emphasis from myself to underline the very valid points made by my right hon. Friend the Member for Vauxhall (Mr. Strauss) in his support of Shorts' case. I, as an active member of the Amalgamated Engineering Union, join forces with him in demanding of the Government the terms he laid down. We in the union have made our position very clear indeed both in this country and in Northern Ireland—or perhaps I should say that in both halves of our country we in the union have made our position very clear.
I have listened very carefully to every speech which has been made in the debate. It is obvious that one of the unmentionables in the debate is the question of the logic of public ownership, an extension to the Plowden Report. Before I go on to deal with unmentionables, perhaps I might congratulate my right hon. Friend the Minister on his statement that he did not want to make any dogmatic comment on Government policy on this matter until he had listened to the debate; he wanted fully to understand the views being put to him by various hon. Members.
This is a magnificent shift. It is the first time since I came to the House that we have had recognition of this type. One of the first things that happened to me on coming here was that I was lined up outside and told by the Whips that the service they operated here was a kind of chiropody, that it was looking after our feet rather than our heads. In fact, my 974 right hon. Friend the Chief Whip himself said that under no circumstances was I to expect any kind of psychiatric treatment from that department. Therefore, I congratulate my right hon. Friend the Minister on reversing the approach of having back-bench Members with very small heads and large feet and on now giving us some very big heads and presumably small feet to go with them.
I repeat that I welcome my right hon. Friend's approach. I remember, as a very active member of the Amalgamated Engineering Union, taking part in many of the discussions the union had on the question of the aircraft industry and its future. I promise the House that I shall try to be brief now. If everyone follows my example, we shall be able to get in one or two more speeches. There has been some extremely well informed discussion throughout the Confederation of Shipbuilding and Engineering Unions and also throughout the whole of my organisation on the question of Plowden. Before Plowden we have discussed for some two years now the question of the development of the industry, how we see its future and what sort of recommendations we would be prepared to make about the reorganisation of the industry's structure.
Last year the Confederation of Shipbuilding and Engineering Unions produced its own miniature Plowden, namely, "Plan for Engineering", which contains a very full résumé of the situation in the industry and sets out its recommendations. I shall return to these recommendations in a moment, without spelling them out in detail.
The first thing is that we as a union, and the Confederation also, welcome Plowden because it is a factual inquiry. We reject its conclusions in regard to future ownership. This is important, because this aspect will be debated at some length in the coming months from a union point of view. The policy of the Confederation and of the Amalgamated Engineering Union is quite clear. In our "Plan for Engineering" we spell out in some detail the reasons why we believe that the whole of the sections that constitute the industry should be totally publicly owned. This is the policy of the A.E.U. and of the Confederation. We hope this year both to influence the national conference of the 975 Labour Party and re-enter into the discussions started last year by the T.U.C.
I repeat that I do not want to go into the detail of this, not at this time of night, anyway, but I want to say that we now believe, having discussed Plowden, that this strengthens our conviction that public ownership of the industry is right. This seems logical to us. The possible merger suggested by my right hon. Friend makes little sense to us. To our way of thinking, it confirms still more the need for some public ownership as a means of rationalising the industry. We believe, too, that the only solution to the inherent problems which have been discussed at some length today is a political solution, in the sense that we need political power to change the whole system of the industry and thereby overcome the difficulties which have been spoken of.
We see the argument in the industry as one between private and public monopolies. This is a difference of principle that exists in the House. It is possibly a difference on this side of the House as to what the solution of the problems may be. None the less, we view the coming merger of the airframe groups as a furtherance of private monopoly. We believe that this strengthens our case that this is an argument as between private and public monopoly.
A challenge has been thrown down by various hon. Members opposite. I am sorry to re-create any indigestion from which they may have suffered or from which they said that they were suffering earlier on as a result of the argument on public ownership. Even if public ownership in itself did not produce another aircraft, and even if it did not add to the efficiency of the industry, we are convinced that it would not detract from it. Even if it added nothing technologically to the industry, it would certainly add a great deal in terms of industrial democracy. That is what we are very concerned about.
Therefore, even if the technological and managerial arguments are equal, in our view the scales are heavily weighed down in favour of a complete take-over of the industry. It is the union's policy to advocate that. I should like hon. 976 Members opposite to get a copy of, the confederation's "Plan for Engineering", because that sets out our policy very clearly and discusses at some length why we believe in public ownership. I promise not to detain the House by developing that argument, though it was my intention to do so tonight because I think it necessary that at least someone should spell out in detail the whole position as regards public ownership of the industry.
Another argument, which again comes from my own experience and is confirmed by the experience of people alongside whom I have worked in the technical world, is based on the inadequacy of the machine available at present for the exchange of ideas and the exchange of technological information. When we develop our ideas in this connection, too, we are led to the conclusion that there should be extensive public ownership throughout.
As the House can readily imagine, one of the subjects discussed a good deal in the trade union movement during the past month or so has been the Minority Report by Mr. Aubrey Jones. One of the reasons why we urge public ownership of the industry is not only that it would be an extension of industrial democracy but that it would form an integral part of our incomes policy. In our view, the Department of Economic Affairs would find part of its struggle against inflation and our economic troubles very much assisted by a recognition of the need for public ownership and the extension of the democratic structure in industry. For this reason, we read Mr. Aubrey Jones's Minority Report with some interest. We can see reflected there his present attitude towards the whole problem of an incomes policy in this country. It does not need me to tell the House that we totally reject that Minority Report as in no way representing the views of our union.
§ Sir Ian Orr-Ewing
I am sure the hon. Gentleman will remember that he is speaking for his constituents, not for a trade union or any other vested interest. I am sure that he would wish to accentuate his remarks in that direction because we are all here elected by our constituents.
§ Mr. Atkinson
I am grateful to the hon. Gentleman for making that point. It so happens that, by sheer coincidence, the great majority of my constituents are trade unionists, and a great proportion happen to be members of unions within the Confederation.
§ Sir Ian Orr-Ewing
Do they want nationalisation? If the hon. Gentleman has consulted his 55,000 constituents, is he sure that they are wholeheartedly for nationalisation of this industry and others?
§ Mr. Atkinson
As far as I know. The tests of opinion which we have made and the discussions which have gone on seem to confirm that view. But the point should be made that the trade unions have no lobby anything like so powerful as the various interests I have seen at work here which have given briefs to hon. Members opposite, including those who have spoken in the debate today. Let it be clearly understood that we have some responsibilities on this side of the House to put a point of view which is, in fact, the majority point of view among those who are employed in the industry.
I want to push on now and turn to some other criticisms made by the trade unions. One of the points we make is that Plowden did not visit factories, except Shorts, in order to take oral evidence from trade unionists working on the shop floor. We believe this to be important because of our concern about the imbalance in the industry and some of the alternatives and diversification projects of which we have heard so much. We are to some extent disheartened by the omission from Plowden of any reference to the question of diversification.
I come now to a point which has been mentioned today, latterly by the hon. Member for Esher (Sir W. Robson Brown), with reference to recommendation (b) in paragraph 523 of the Plowden Report,Concentration on projects for which development costs are not disproportionate in relation to the market.Here, I refer to the history, the very sad history, of helicopter development and of Westland in particular, which many of us consider has had a very raw deal. In our view, the treatment of Westland in the past ought to be rectified by the present Government and some of the un- 978 fortunate decisions taken in the past should be reversed.
On 26th February, 1962, both the Government of the day and B.E.A. withdrew support from what we believed at that time to be the most promising development in post-war aeronautical research in Britain. The right hon. Member for Monmouth (Mr. Thorneycroft) announced in the House, very casually, in answer to an Oral Question, that the Government had decided to scrub £11 million spent on the development of the Rotodyne. The right hon. Gentleman went on to make some brief comments about that decision, but what he was doing was disrupting the whole of the development upon which the Westland organisation had been built. Not only were we forgetting or writing off £11 million of the nation's money, but we were, in the view of my organisation and of the Confederation, making a fundamental error, as it has proved to be over and over again in subsequent years.
We condemned that decision by the right hon. Member for Monmouth as disastrous for our industry, and our appeal now is that we do all we can to get back to sanity in helicopter development and reorganise our ideas both in terms of military necessity—I think here of some of the ideas now emanating from the Ministry of Defence and the Ministry of Aviation—and in terms of market potential in this country and throughout the world. There is no need to exaggerate the needs which agriculture, for instance, has throughout the world for helicopters and for developments of the Rotodyne principle as it was in its earlier days. One of the tragedies is that, if developments had been carried further at that time, many of the initial problems experienced by the Westland designers in the early stages would by now have been overcome, as they have been overcome in other developments, and we should have been well on the way to capturing not only the European but the American market for this project. But the last Government denied us all that.
My last plea is for a reconsideration of what I regard as the somewhat stupid blanket embargo which seems to prevent our trading with Communist countries, not, of course, with weapons of defence or military aircraft but with such products 979 as would have come from the Rotodyne project and which offer great potential in terms of East-West trade. I appeal to the Government to be a little more flexible about it instead of maintaining a blanket embargo on aircraft products. Their present attitude is in many ways far too rigid. I want them to look at other openings for East-West trade in products of this kind. We now know that certain Eastern European countries are very interested in British aeronautical products, and we ought to look again at such projects as helicopter development in this country as a means of meeting the need of that market without at the same time undermining our defence arrangements or our commitments in accordance with the Anglo-American understanding on the embargo.
I apologise for having run away with my time, although I must point out that I have spoken for fewer minutes than most of those who preceded me. We on this side share with hon. Members opposite a tremendous faith in our industry and the brilliance, the absolute genius in many ways, of our design teams. We have a wonderful industry which is oozing with craft of the highest order. I am quite certain, and my organisation is certain, that, if we can take the correct political decisions, we are once again on the brink of establishing a very great aircraft industry in this country.
§ 8.18 p.m.
§ Mr. Eric Lubbock (Orpington)
I add my congratulations to those which have already been expressed to the Minister on his appointment and I wish him the very best of success in his extremely difficult task. If I may say so, the Prime Minister has chosen a rather peculiar moment to make the change, just at a time when so many difficult and, probably, controversial decisions are to be made, and the Minister, no matter how brilliant he may be, will certainly need time to pick up the threads and to understand the enormous problems of the industry. Seeing the Paymaster-General on the Government Front Bench, I am reminded that he used to say that the Tories changed their Ministers of Aviation three times a day, after meals. I hope that the Labour Government will not fall into the trap of changing Ministers of Aviation before meals.
980 The Plowden Committee was asked to report on the future place and organisation of the aircraft industry in relation to the general economy. One would have thought that such terms of reference would have required it to make some estimate, however broad, of the numbers who would be employed in future in the industry. Unfortunately, the Committee found itself unable to make even the roughest estimate of the future size of the industry and could only say that a substantial reduction in the numbers employed would be necessary.
Needless to say, this has caused the gravest anxiety among the industry's 250,000 workers and I am sure that many of them will be relieved to hear that the Government have in mind only a reduction to 200,000 as mentioned by the Minister, and not to a figure much lower than that which they may have got the impression was recommended by the Report.
I do not think that there can be any disguising of the fact that the Government's policy of buying large numbers of military aircraft in particular from the United States is partly responsible for the present state of affairs. But neither can the Tories escape their share of responsibility because, while in office, they initiated three vastly expensive projects—the P1154, the HS681 and the TSR2—which would have placed an insupportable burden on the taxpayers in the last few years of this decade if we had continued with all of them.
§ Mr. Mulley
Would not the hon. Gentleman also add that, had we continued these projects, the R.A.F. would have been left without adequate aircraft to carry out its defence duties?
§ Mr. Lubbock
Certainly. I agree with the right hon. Gentleman in that particular criticism of the last Government's policy. My quarrel with the present Government is not that they found it necessary to cancel these projects, but that they intend to replace all of them —assuming that the F111 decision goes the wrong way—with American planes and thereby cut down the size of our industry by much more than I consider necessary.
§ Mr. Burden
Would not the hon. Gentleman agree that the likelihood is 981 that, had the TSR2 project been continued, the R.A.F. would have got its aircraft probably earlier than it will if the F111 is ordered and that the TSR2 would probably have been an infinitely better aircraft?
§ Mr. Lubbock
The hon. Gentleman may be right, bearing in mind that we are told that the F111 delivery date is steadily being put back into the future. Neverthless, I think that we must admit that the TSR2 would have been a vastly expensive project if we had continued it and that, combined with the HS681 and the P1154, it would have meant—and let us put it in terms that people can understand—that we would have been asked to pay higher taxes. I understand the policy of the Conservatives to be, among other things, to reduce taxation. They must admit that to be consistent with that policy it would have been impossible for them to continue with all these three projects.
We understand from the Plowden Report that as much as 80 per cent. of the output of the industry is accounted for by military orders and since the Government are already committed to keeping defence spending to within a total of £2,000 million a year it must follow that no increase in the size of military orders can be permitted in the last few years of this decade. As I was saying, within this total, large sums have already been earmarked for two American planes—the C130 and the Phantom—so that there must inevitably be less work available for the British industry.
I was at Hull last week and the Chancellor of the Exchequer there accused me of being alarmist when I suggested that there should be contingency planning so as to ensure that alternative work will be available for the workers to be displaced from the industry—as many as 50,000, we learn today. I always thought that the Labour Party believed in planning, but there is no sign of a plan for the industry yet from the Government and I gather from the Chancellor's remarks that he does not consider that one is necessary. I think that it is vitally necessary that we should have a plan for the industry to take account of the decision on the Canberra replacement so that we can ensure the smooth transition of the industry to a smaller size without wastage of the talents and the training 982 of the workers to be displaced. In formulating that plan, there must, of course, be the fullest possible consultation with the unions concerned and with the managements.
I was interested to hear the right hon. Member for Mitcham (Mr. R. Carr) say that we should have a study along the lines of "Project Horizon", in the United States. This was a study of the future projects that the American aircraft industry should undertake and was initiated by the late President Kennedy. I suggested in this House on 13th May, 1963, that we too should have such a study. Tory Ministers neglected the opportunity to do something all the time they were in office. So I do not think that it lies in the mouth of the right hon. Member for Mitcham to make that suggestion now.
In looking at the next few years, I believe that the decision on the Canberra replacement is of absolutely vital importance and one of the main reasons for the two-month extension on the option to buy the F111 was so that we could have the opportunity to debate the Plowden Report and Ministers could hear the views of the House before coming to a decision. I am sorry that not more has been said by hon. Members on both sides about this aspect of the Report, therefore, or the implications of the Report for this decision.
I have said all along that I am bitterly opposed to purchasing yet another American plane, the F111. The hon. Member for Glasgow, Govan (Mr. Rankin) has already mentioned the visit that he and the right hon. Member for Mitcham and I paid to the Dassault works and the opportunity we had to discuss it with the three companies involved in the project. I am more convinced than ever that this is the plane we should order.
We in the Liberal Party agree wholeheartedly with the Plowden recommendation that far greater stress than in the past must be put behind the policy of collaboration with Europe—and here we have a crucial test of whether or not the Government accept that principle.
In the debate on the Canberra replacement held just before Christmas, it sounded as though the Secretary of State for Defence had made up his mind in 983 favour of the F111 and—worse—to distort the facts in favour of that decision when he spoke about the delivery date of the Spey Mirage 4. He was undoubtedly wrong. I happen to know, however, that he had the facts at his disposal at the time.
I beg the Secretary of State for Defence to think again. The Spey Mirage makes sense, technically, industrially, financially and politically. First, it can fulfil all the operational requirements of the OR343 except for take-off and landing distances. That is no obstacle in the case of the Phantom. The P1154 took off and landed vertically. That requirement was replaced by the Phantom, which needs 2,500 yards of concrete. So if a short take-off and landing is not required of the Phantom, why was it required of the Mirage?
§ Mr. Raphael Tuck
Not only that, but the cancellation of the HS681 and the P1154 by the Government might suggest that the Service chiefs place far less emphasis now on vertical or short takeoff than they did three years ago.
§ Mr. Lubbock
Absolutely. That was precisely the point I was trying to make, but I am grateful to the hon. Member for Watford (Mr. Raphael Tuck) for underlining it for me.
On the technical aspect of this decision, I want to point out that the Spey engine in the Mirage would be practically identical with that which we are having to put in the Phantom, thus decreasing the inventory of the Service and making the problems of maintenance very much less than they would otherwise be. This plane could be in squadron service by the end of 1969 if an order were placed now, not 1971 as the Secretary of State for Defence has said. Its avionics system is as good in practically every respect as that which the TSR2 would have had.
If the Royal Air Force requires the Canberra replacement to be in service even earlier than this date, then it could do worse than order Atar-engined Mirages which are now coming off the production line in quantity. We saw No. 50 coming off the production line, and this underlines what was said by the hon. Member for Govan about secrecy, for the French do not find it necessary to conceal the number of planes 984 which they have—the number of the aircraft is painted on the fuselage.
This project would make industrial sense because at least 50 per cent. of the work—and the hon. Member for Govan suggested that it would be 60 per cent.—would be done in British factories. It makes financial sense because the plane is at least £500,000 per copy cheaper than the F111, making a saving of £50 million on the whole project.
Finally, politically it would be a tremendous boost to Anglo-French co-operation. The hon. Member for Govan will confirm that the French look on every purchase of American planes by this country as a hole in the wall which we are trying jointly to build up against American technological domination, and I believe that they are right in this.
During the Recess, I went to Rome in the company of the noble Lord, Lord Kennet, and the hon. Member for Banbury (Mr. Marten), as the hon. Member for Banbury has already said. We discussed with Italian Parliamentarians the prospects for co-operation between our two countries on aircraft development and construction. We warned them then about the dangers of becoming too heavily involved with the United States, about the dangers of control and domination which the hon. member for Govan has mentioned, and in those discussions we received the full support of Her Majesty's Government. Surely the same arguments apply in the two cases. We can hardly go around preaching about Anglo-European co-operation in the case which happens to suit us with Italy while, at the same time, planning to undermine the future of our own aircraft industry by capitulating to American high pressure salesmen.
I want to refer to another immediate decision of great importance which has not been mentioned in the debate so far. It is what is to happen to the remaining 10 Super VC10s which are on the shop floor at Weybridge. I wrote to the former Minister on 23rd November, last year, after raising this issue in the debate the day before. I gave him some calculations of my own which did not seem to confirm those which B.O.A.C. had made of its future fleet requirements.
Since then there has been a powerful article in Flight by Mr. J. M. Ramsden— 985 it appeared on 27th January—pointing out that in the past B.O.A.C. had made enormous errors several times already in its capacity arithmetic. In particular, in July, 1964, it was saying that it needed only seven Supers by March, 1968, while a year later it agreed that it needed 17 between now and March, 1969.
I believe that it is still making the mistake of underestimating the capacity requirement in March, 1969—and I have said this to the Minister—because it has provided in its requirements for an annual rate of growth of only a little over 10 per cent., as compared with the 14 per cent. increase in capacity which has been provided in the present year, 196566, and that in spite of this increase of 14 per cent. which it is putting on this year, I am delighted to say that it has record load factors, particularly on the North Atlantic, its most lucrative route. B.O.A.C. should be expansive and plan for the steady rate of expansion which it has had in the past, and this is the opinion not only of myself, but of many in the industry.
Therefore, I think that B.O.A.C. should consider the possibility of taking up at least some of the remaining 10 Supers. It is under a contractual commitment to the British Aircraft Corporation for these aircraft and it would have to pay a substantial sum in compensation if the aircraft were cancelled. A note to this effect should have been included in B.O.A.C.'s last balance sheet and we should be given some idea of the sum involved. I think that it would run into many millions of pounds.
§ Mr. Lubbock
Which gives a sum of about £5 million. The public should know about this.
The other immediate issue on which I wish to touch—I will not deal with it at any length, because the hon. Member for Belfast, East (Mr. McMaster) has already gone into it in depth—is the plight of Short Bros. & Harland. I am given to understand, by the representatives of the trade unions who called on us yesterday, that the workload of the company is only sufficient to keep half the workers employed beyond the end of this year. The Plowden Committee took an extre- 986 mely pessimistic view on the subject of the company's future.
I agree with what has been said already about the undesirability of committees of this kind making comments on matters of political judgment, saying as this Committee did that if special assistance was justified in order to help employment in Northern Ireland, it should take the form of a measure for promoting general economic development, and not specific help for the aircraft activities of Shorts. It should not have made this comment, it is quite irregular, but I disagree with it in any case.
It is quite unacceptable as a guide to the short term measures required. It is unthinkable that any Government, of whatever complexion, should allow 4,000 trained men to be thrown on the scrap-heap in less than 12 months time. In the immediate future Shorts ought to have some direct support, some special measures to avoid an uncontrolled run-down—here I am quoting the Minister. In particular this means that the Minister must give Short Bros. the go-ahead on the V.F.W. 614 short-range airliner, for which there are tremendous potential markets.
I found that the Plowden approach to organisation was very difficult to understand. It said that there was very little competition between the groups whether on the civil or military side and either on engines or airframes. It said:Foreign rivals provide the real spur.It also says that mergers between two major airframe groups and two major engine groups would produce economies in overheads and design facilities and thus enable production to be rationalised. After saying all that it goes on to say that no firm conclusion on the matter of mergers would be justified. If we are to compete with the American giants on an equal footing then the aircraft industry must be concentrated.
I was glad to hear the Minister say that he would seek to direct a merger between B.A.C. and Hawker-Siddeley aircraft industries. I do not see why he does not follow this logically and seek to promote a merger between Bristol Siddeley and Rolls Royce engine companies. I would like to have a much more comprehensive explanation of the difference between these two problems 987 before I am satisfied that he is right on this.
The question of nationalisation is quite irrelevant to the real problem of the aircraft industry. Now that it is being raised in the Plowden Report it is bound to create the same kind of uncertainty within the industry that has existed for so long in the steel industry, thereby lowering the morale of the workers employed in that great industry.
As Mr. Aubrey Jones has pointed out in his Minority Report, if a case for the nationalisation of the industry has been made out on the grounds of a supposed conflict of interest between the taxpayer as the principal and practically only customer on the one hand, and the private shareholder on the other, then a similar justification could be advanced for nationalising a host of other firms whose products are bought, for example, by British Railways, by the National Health Service or by the Central Electricity Generating Board. While we are about it should we not also nationalise the manufacture of pharmaceuticals, the production of X-ray machines, of diesel locomotives or steam turbines? Precisely the same argument applies. All are suppliers to a body directly controlled by the Government or to a nationalised industry.
This is a very dangerous trend that ought to be recognised by anti-Socialists. There is no suggestion that the customer is being taken for a ride by the aircraft industry. In the one and only case where an excess of profit was made, the contractor was forced to hand back the whole of the sum to the Government, and quite rightly so. As far as I am aware, that is the only case on record. On the other hand, the Government, as is shown by the Plowden Report, have a shocking record as a customer of the industry.
As The Times says in a powerful article this morning, most of the present difficulties can be attributed to procurement delays, frequent changes in specifications and abrupt cancellations.
The last thing that we want to do is to make a capricious and unreasonable customer into the proprietor of the business. Instead, the Government should overhaul their own procurement machinery and this cumbersome incubus of financial and technical control. If 988 that is done, and a firm declaration is made, as the Minister made this afternoon, and repeated time and again that we intend to remain in business with our European friends in this rapidly advancing field of technology, the Plowden Report will have marked a turning point in the affairs of the aircraft industry.
§ 8.40 p.m.
§ Mr. Raphael Tuck (Watford)
We are told that aircraft make a lot of nasty noise, but the noise from these benches this afternoon has been in complete harmony. There has been so much harmony that the debate has been almost dull. Most of the ground has been covered. Therefore, I should like to highlight one or two points which I think should be highlighted.
First, I agree with the report of the Society of British Aerospace Companies when it says that national policy should encourage the growth of a technologically progressive industry and not stultify its advance by pressing for its contraction.
I welcome the recommendation in the Plowden Report for greater Government support for the industry, but it seems pessimistic about export prospects. In 1965, exports were 50 per cent. more than they were in 1964. However, I agree that much of the future of the aircraft industry, as the Report says, rests upon Franco-British co-operation. I do not think that that can be over-emphasised.
However, it is not only co-operation with France and Europe which is desired. Co-operation with the Commonwealth should be considered. I agree wholeheartedly with what my hon. Friend the Member for Glasgow, Govan (Mr. Rankin) and the right hon. and learned Member for Chertsey (Sir L. Heald) said. Co-operation with the Commonwealth would enable vast cuts to be made in research and development costs. I asked my right hon. Friend the Prime Minister a Question on this. He said that the matter was under review. I hope that the Government will consider it deeply and favourably, because it brings into view vast cuts in expenditure and great advantages in design and production.
I agree that purchases from the United States should be the exception and not the rule because in this way foreign exchange is preserved and the advance of technology in Britain stimulated. It 989 is all very well to say, "Let us find the cheapest market". The F111 is not the cheapest market. It is between £500,000 and £1 million dearer than the Spey/Mirage. But even assuming that it were the cheapest market, that consideration must give way to the political, economic and strategic consequences of buying abroad. It is all very well to say, "Let us give the R.A.F. the best plane possible. Nothing short of the best is good enough." I have to use a car. It would be all very well for me to say, "Let me have the best car available, the Rolls Royce", but my pocket does not extend to that.
§ Mr. Burden
The hon. Gentleman does not have to fight in a Rolls Royce or in the car which he has, whereas the aircraft which we are providing for men of the R.A.F. are weapons of war which they might be asked to fly, and they must have weapons which give them the opportunity to get back.
§ Mr. Tuck
I agree; but my analogy was not complete. The hon. Gentleman did not let me finish.
I need something which will get me from Parliament to home and to my constituency in reasonable time. A Ford will d o that, and, therefore, I get a Ford. Applying this analogy to aircraft, if the requirements to the R.A.F. east of Suez are satisfied by the Spey/Mirage, it does not mean that we need get an aircraft which does something that the R.A.F. does not want done. All that we need to do is to satisfy the requirements. It has been proved that the Spey/Mirage measures well up to the requirements of the R.A.F. and certainly to what could be done by the TSR2, with the exception of take-off; and I have said something about that with which the hon. Member for Orpington (Mr. Lubbock) agreed.
Participation by the government has been canvassed. The right hon. Member for Mitcham (Mr. R. Carr) said, "No State ownership; no participation by the Government". One would not expect him to say otherwise: he is a Conservative. But he who pays the piper should call the tune. In those circumstances, Government participation is vitally necessary. I will be accused of being a Socialist. I am a Socialist. I am for the 990 clause, the whole clause and nothing but the clause.
In welcoming the Report with the reservations which I have expressed, I ask the Government to consider deeply the consequences to the aircraft industry and to the prospects of it before they take the precipitate step of buying the F111.
§ 8.46 p.m.
§ Sir Ian Orr-Ewing (Hendon, North)
I welcome the opportunity at this late stage to take part in the debate. Most of us have been thinking about for a long time and studying the implications of the Plow-den Report. It is difficult in 14 minutes remaining to me to do justice to an extremely complicated subject.
We have debated this subject numbers of times. We had a Supply day on it on 9th February last year, we had the defence debate on 4th March, we followed that up by the Air Estimates debate on 10th March, we had the interesting interjection in the middle of the Budget speech about the cancellation of the TSR2 on 6th April and the censure debate on 13th April. So it has gone on throughout the year.
The last occasion when we debated the subject was 13th December. On each occasion we have been told from the Government Front Bench that we must await the outcome of the Defence Review, including our obligations east of Suez and in the Middle East. Therefore, one cannot help being a little disappointed that when we have now been told that we are not to get a defence review report, in spite of the build-up and ballyhoo which accompanied those statements, we still have not had anything very firm from the Government benches.
We have had the Plowden Report in our hands for nearly two months and, no doubt, the Government would have had a sight of its major recommendations earlier than that. Still we have no decisions. The only decisions concerning the aircraft industry are those which Mr. Worcester claims was his plan: that is to say, that we should have the wholesale cancellation of the three most promising projects and the Government would also have cancelled the Concord had we had the opportunity to do it.
Perhaps the greatest shame is that the industry should have been left in doubt, and for so desperately long. I do not 991 wish to embarrass hon. Members opposite too much, but I must remind them of what they were saying 15 months ago about the planning of British industry. We have had their National Plan, with a great deal of publicity from the First Secretary. In "Let's go with Labour for the new Britain", the party opposite said:Within the national plan each industry will know both what is expected of it and what help it can expect—in terms of exports, investment, production and employment.We have waited 15 months.
I was waiting open-mouthed, as many hon. Members must have been today, to hear whether, at last, we were to receive an indication of what was to be the future of this great industry. All that we have received from the Minister of Aviation, whom we wish well in his new job, was the statement that the Government would establish a further monopoly, if that were acceptable to both sides, in the airframe industry and that they would examine in what form public money might be put into the industry. We got nothing further. It is disappointing that for this important industry we should still have no clear indication of where the Government stand.
I now turn to three main factors which have emerged from this debate. If the Government wish to learn the feelings of both sides of the House, perhaps they will have got an indication from this debate. As to finance, in the short time that is available to me I cannot go further than support what I understand the right hon. Member for Vauxhall (Mr. Strauss) said in this respect. It is irrelevant and it is no solution to suggest that we should have partial nationalisation of the industry. That would solve none of the problems which have been highlighted in the Plowden Report. It would, in fact, be likely to slow down the ponderous machinery of government.
§ Mr. Burden
Is it not true that there has been what might be termed partial nationalisation of Shorts for a long time and that this has solved nothing for Shorts?
§ Sir Ian Orr-Ewing
That is absolutely true. The Plowden Report mentions that the Government directors would know exactly what was going on. From recent Press indications, however, it seems that 992 the Government directors of Shorts know very little of what is going on. This is certainly no solution in that respect.
§ Mr. Atkinson
Is not this a clear indication that we should now go the full distance because the Shorts experiment has failed? The reason for failure is that it was not integrated into the industry as a whole. Is this not the case for public ownership?
Sir Ian On-Ewing
I am sorry, I cannot follow that one. I have seven minutes in which to try to deploy some arguments on a serious note concerning the whole organisation of Government as it affects the aircraft industry.
I support what my right hon. Friend the Member for Mitcham (Mr. R. Carr) said in his admirable opening speech. believe, however, that the Government and our Service officers may have been too ambitious in framing the operational requirement. We still have not indoctrinated our service officers, great as they are, with the desirability of cost consciousness. A person who desires a long and successful future of service in his particular Department naturally wishes to build contingencies into any equipment that he is ordering so that it can be used in any possible circumstances, from the Arctic to the Equator and from nought to 100,000 feet. Practically everything is put in, including the kitchen stove. We cannot afford that, and I wonder if we are not too ambitious and if a better understanding between the customer and the producer would not lead to considerable financial savings and, incidentally, savings in time as well.
The trouble is that we have in our present organisation a buffer state between the user and the producer, and that buffer state is the Ministry of Aviation. I wonder whether we have not got too many people there of perhaps too low a calibre. Theirs is a highly technical job in a scientific sphere. The people who should be there are people of the highest possible training—industrial, engineering, scientific, cost accounting and financial training.
It is interesting to examine the Estimates for past years, because one finds that in 1959–60 there were 7,690 people in the headquarters of the Ministry of Aviation, whereas in the Estimates for the current 993 year, 1965–66, the figure is shown to have gone up to nearly 8,500. Nearly 1,000 people have been brought into the Department whilst the industry as a whole has been running down from a peak of 310,000 to 265,000.
The industry is carrying that burden, and the hon. Member for Loughborough (Mr. Cronin) mentioned—and how right he is—that some of these committees are quite unmanageable. It is really ridiculous to visualise a design committee of 140 persons, and I would like to know what the cost of that was to the taxpayer. However, it is the cost in time and efficiency with which we are more concerned, and I am sure that the new Minister of Aviation will come with a new broom and look at the situation with real care and attention.
I may say, having served in the Admiralty for five years, that he will discover that it is a very tough job to run down numbers within a Ministry. I commend this to him. Let him be ruthless and, where there is a choice between numbers and calibre, choose calibre every time. A small streamlined, high calibre Ministry can be of service to our community, rather than a large amorphous mass. I notice that the Sunday newspapers are still advertising under the heading of, "Join an Expanding Industry". That is a little hollow after all we have learned, and no doubt the right hon. Gentleman will put it right.
§ Mr. Mulley
If I understand the hon. Gentleman's message, it is that I should follow his precept and not his example in the Admiralty.
§ Sir Ian Orr-Ewing
I gave an undertaking in the Admiralty that I would cut numbers of staff by 5 per cent., 1 per cent. in every year. Whilst I was there, I kept to it, and I hope that the right hon. Gentleman will do just as well. I may say that I cut down the number of admirals, although when before the election the Prime Minister quoted them he quotes such people as the Duke of Edinburgh and one or two other honorary admirals in order to inflate the numbers.
I turn now to the other matter which has been entirely left out. Plowden completely missed the organisation of the industry itself. I reflect whether perhaps in retrospect it was wise to choose a man, 994 a very distinguished ex-civil servant trained in the Treasury, to head the examination.
This was an examination in an industrial sphere. It seems to me to have much of the stamp of the Treasury candle-end philosophy, looking always at the monetary set-up and not the motivation of an industry of this nature. I am afraid that the Plowden Report reflects that Lord Plowden does not understand how designers, engineers and project people really feel about their dedication to the industry and what they could do if given a clear lead by the Government of the day.
If one reorganises an industry which arose out of the policy of the right hon. Member for Streatham (Mr. Sandys) and in the early 1960s produces shotgun marriages and a streamlined or rationalised industry, obviously one has tremendous management problems. I think that when anyone who knows some of the problems of getting good management, and co-ordinated management, looks at the geographical map which appears in the Report at page 112 and sees the factories which are scattered all over the country, he realises how difficult it is to produce a really efficiently organised and managed industry.
Plowden makes much also of the fact that productivity in the industry is low, but surely this again is a slight reflection on the Government's organisation. I am not seeking to blame any particular Government. On many occasions the industry has had to wait while the Government, or the Minister of Aviation, have been trying to clear the matter with the Treasury. It is always on a hand-to-mouth basis. Very seldom is the industry allowed to go ahead and plan a proper development and production line.
I wonder whether we have the trade unions with us. I was glad to hear one hon. Gentleman opposite say that he was speaking for the A.E.U., and I hope that, unlike what happens in the shipbuilding industry, there is no question of demarcation. Certainly, productivity in this industry is low, as is shown by the Plowden Report, but if one takes to heart the series of Daily Mirror articles, one sees that it is not lower, compared with other countries, than in the chemical industry or the steel industry. In all these spheres it was found that in this country 995 about three men did the same amount of work as one man in the United States. Therefore, the figures which we read in the Plowden Report are not radically different from those which the Daily Mirror published concerning other industries.
Nearly a year ago we heard the Chancellor of the Exchequer say in this House that as a result of cancelling British aircraft we could deploy the displaced skilled personnel in aid of our exports. That was a pipe dream. I do not know who put it in the right hon. Gentleman's brief, but it was absolute nonsense. One does not redeploy people from the aircraft industry to make exports.
I have grown up in the electronic and light engineering industry, and in one of the firms with which I am associated we tried to engage some aeronautical people. They are dedicated men, but they work to very close limits indeed. They work very slowly and accurately, but they do not work to the commercial standards which one needs in the export market, and the idea that one can ship across 50,000 people and make use of these highly skilled personnel to help our export trade is a pipe dream and unrealistic.
That is why so many of them have gone abroad, to work in South Africa, where the armament industry is expanding, in Germany, and in the United States. They have done so because they are dedicated people. They believe that there is a future for our industry. They want to work in it, and now they are waiting, as we all are, for some firm lead from the Government to show that this industry has the future which we on these benches believe it has.
§ 9.2 p.m.
§ Mr. Keith Stainton (Sudbury and Woodbridge)
The Motion is that this House should take note of the Report of the Committee of Inquiry into the aircraft industry, the Plowden Report, and I must repeat what my right hon. Friend the Member for Mitcham (Mr. R. Carr) said, that we are grateful to the Government and to the Minister for handling the matter in this way. I think that the exchange of ideas this afternoon has proved that both sides are anxious to root out the essential difficult problems of this large and important industry, and to try 996 our best to assist in its future sane and economic development.
We on this side of the House are grateful for what I imagine is an almost unprecedented offer by a Minister of the Crown to exchange views with an Opposition spokesman regarding the planning of a Government Department and its relationships with industry. I say this not facetiously but for the record. We are grateful for that gesture, and I am sure that my right hon. Friend will contribute whatever he can to this end.
We must take note of this Report against a background which I think must be spelled out somewhat. First, it is against the background of the cancellation of the TSR2, the HS681 and the P1154, and the fact that by depleting the industry's order book the Government have clearly aggravated whatever essential difficulties there were. It may be that sooner or later—and probably sooner rather than later—the Government would have had to face what are clearly structural problems within the industry. There is no doubt that these cancellations have precipitated a very difficult situation.
The Minister was slightly, precocious in suggesting that the production of these three aircraft would have left the Royal Air Force without the aircraft it needs. I say "slightly precocious" guardedly but advisedly, since it is difficult to compare these aircraft unless and until they are in service, and from all we know the TSR2 was certainly the most sophisticated aircraft on the stocks.
The cancellations to which I have referred were all in lines of succession. My hon. Friend the Member for Esher (Sir W. Robson Brown) referred to 33 major projects having been killed halfway through during the past decade. The position with which the industry is now confronted is that the only development work of any magnitude left to it at the moment is the Concord and the Jaguar, and in place of the cancellations we face dollar expenditure running into hundreds of millions of pounds in the purchase of United States aircraft of inferior performance at a time when we are deeply concerned with the future of the £ and with paying our way in the world.
This possible link-up with America was referred to by the hon. Member for Orpington (Mr. Lubbock), when he 997 hinted at the possible danger it might imply to future Anglo-European cooperation. I ask the Parliamentary Secretary to bear in mind the fact that whatever the rights and wrongs of the Spey/Mirage the fundamental point of European co-operation cannot be lightly put on one side.
Before passing from that to other aspects of the subject I would also query the progress which the Concord is making, in reference to the storm cloud that may be threatening the industry. Is it true that the research and development costs have escalated to £380 million and will shortly break through the £400 million mark? Are we really concerned with a programme that is going to cost between £1,000 million and £2,000 million for about 120 or 140 aircraft? We must have some answer to this question tonight because the magnitude of these figures has an enormous bearing on the future viability of our aircraft industry.
These cancellations have led to about 8,000 redundancies, and several aircraft manufacturing plants throughout the country, including Short Bros. at Belfast, are feeling deep anxiety. Speaking on behalf of the Opposition, I cannot say that for all time Short's will carry on in the aircraft industry, at least on its present basis, but I do say unhesitatingly that it is intolerable to think that the work there might diminish by half and that the payroll might be cut down by between 3,000 and 4,000 workers by the end of the year. There must be a controlled rundown, and I was delighted to hear the Minister talk in terms of avoiding an uncontrolled rundown.
But we did not have a very straightforward intervention on the question of the VFW614. Perhaps the Parliamentary Secretary will be a little more forthcoming about that tonight. One of the principal arguments advanced by the Minister's predecessor was that redundancies in the aircraft industry would release skilled labour for other highly technical trades. Of the 8,000 or so redundancies the Minister of Labour has records of not more than half, and about three quarters of that half have left the aircraft industry. Perhaps the most valuable element—the design element—has emigrated to the Continent, South Africa and America.
998 There are also three further background points which must be noted with some force when considering the Report. I would point first to the non-appearance of the long-awaited Defence Review. As the Report says:In the Defence field, the outlook is particularly obscureand goes to on say:and might remain so even when the outcome of the current Defence Review is known.Perhaps, then, we are missing little, but at least it would have been preferable if the House itself had made this judgment instead of debating Plowden now in a complete vacuum about our future defence requirements.
My second background point is the inhibitions which exist at present in the aircraft industry as the result of what might best be described as "post-Ferranti nerves". My understanding is that there has been a tightening of contract terms which is self-defeating because of the administrative log-jam within the Ministry. Perhaps this could be the reason for the advertisements by the Minister of Aviation:Technical class career in cost and estimating—you get plenty of scope and variety within our expanding organisation.But the fact remains that there is this tremendous log-jam and a series of holding contracts.
A much more important point is that despite the fact that the Lang Committee reported as long ago as the first volume's appearance in July, 1964—the second volume appeared in February, 1965—there has been as yet—I am open to contradiction by the Parliamentary Secretary on this point—no fundamental change in the technique of price-fixing as between the Government and the aircraft industry.
The third background point which, oddly enough, has not been touched on, let alone developed, in the debate concerns the implications of the new investment incentives. As I understand the present situation, the policy now sponsored by the Government leads to the exclusion of aircraft from investment incentives, which seems certain to hit sales to British independent airlines. The exclusion of aircraft from these grants is surely also a serious disincentive to the development of the use of light aircraft 999 in Britain, where we already lag far behind the United States and Europe. Furthermore, the exclusion of capital assets destined for use abroad on leasing terms could also be a most severe setback to the industry's exports, as we have witnessed in part, I believe, with the frustration of the exports to the Lebanon.
Were it not so tragic it would be amusing to contrast the endeavours of the President of the Board of Trade with his export incentives of 1½ to 2 per cent. with the abolition of investment allowances, which, in this context, were worth about 30 per cent. of the initial cost—
§ Mr. Mulley
Would the bon. Member explain how he sees investment allowances applying to the sale of aircraft abroad?
§ Mr. Stainton
I do not want to get too involved in this, but I think that I defined it reasonably well when I talked about "capital assets destined for use abroad on leasing terms". The asset remains the property of the company in this country and the capital cost of the export is returned by way of a leasing, a rental for a period of years. This equates just the same over a period as an export financed by the Export Credits Guarantee Department, for example. So much for the immediate background points.
There is one other matter which must be placed in proper perspective, and I hope that in doing so I will succeed in getting the record of the British aircraft industry somewhat straighter, whatever may be its shortcomings. In his introductory speech this afternoon the Minister talked about a comparable industry. When he was challenged, he muttered about computers and machine tools which, by any definition, are not comparable since one must define the starting point in any of these things. I suggest that the narrowest comparability is in terms of the aviation industry overseas.
We have heard much about the losses and lack of success of the British aerospace companies. I will return to this later, when I will try to define the problems confronting us. It is no use sweeping the issue under the carpet, for there are problems of great magnitude. Let us 1000 equally appreciate that the Americans, too, have had a very good quota of troubles and setbacks. Reading the Report of the Task Force on National Aviation Goals—Project Horizon—which was set in hand by the late President Kennedy in March 1961, it is clear that that Report, like Plowden, was stimulated not only by the need to try to peer into the future but, just as much, as a result of deep financial worries among both the United States airlines and the American air vehicle manufacturers, a very close parallel indeed to the situation which now exists here.
Professor Sturmey, in his paper in the Economic Journal of December 1964, quoted the following cumulative losses to 1962 on three American civil aircraft; the Boeing 707, £59 million, the DC8, £88 million, and the Convair 880–990, £152 million. The Convair was produced by General Dynamics, and I believe that that company returned the biggest corporate loss at any time in any one year anywhere in the world. Fortune magazine was stimulated in early 1962 to run a series of articles entitled "How a great corporation got out of control".
To this list of civil United States aircraft can be added the military failures, headed no doubt by North American Aviation's XB70, costing perhaps 270 million dollars each spread over the three or four only which have been produced. While I am full of praise for the French Aviation industry and the Caravelle, it should be noted that it is understood that even with sales of 220 the Caravelle is still financially in the red.
This reference to United States experience is also helpful in so far as it leads to the observation that even in America, despite the size of the market, to operate in a highly competitive civil sphere the aircraft manufacturer requires a substantial cushion of other activities and sources of revenue where the United States Government is the dominant factor.
It is a fair generalisation to say that United States aircraft manufacturers are deeply worried if these other activities fall below 75 per cent. to 70 per cent. Of great significance is the fact that the industry there has turned to the United States Government for financial investment in the development of supersonic transport aircraft.
1001 This feature was touched on by my hon. Friend the Member for Esher in terms of the relative position of the British industry—the "Siamese twins", as he called them, of military and civil production. Unless we keep this essential link in mind there will be a gap; and this link has, in the structure of the industry, been important and, in part, lacking in this country.
So far I have, I hope, established, first, the background of the immediate and sizeable difficulties in the United Kingdom industry and, secondly, the difficulties of the industry and the problems of analysis which have not been alleviated by the absence of the Defence Review and which have probably been aggravated by the lack of action on the Lang Report, new investment incentives and so on. Thirdly, I have established the fact, I hope, that the United Kingdom's problems are by no means unique in this sphere.
In any event, it is clear that the industry's future gives cause for deep concern. Costs are at a great disadvantage when compared with those in America, but there are various elements of costs, and the fact that, in terms of productivity, the American industry is about 3 to 3½ times as productive as our own industry causes us to ask: what is the efficiency and organisation of our own industry? Again, the returns on assets to the industry would be strikingly less even than the Plowden Report shows them to be if one added back the losses that had been borne by the Government.
In reviewing this debate, I suggest that the House must address itself to three basic questions. First of all, do we want an aircraft industry and, if so, how do we ensure its economic soundness and competitive position? Secondly, how do we support the search for knowledge on which technical progress depends? We cannot just have an aircraft industry and then put up the shutters and hope that it will chug merrily along. Thirdly, where in all this should the Government's financial control and regulatory and other responsibilities begin and end? These are the three themes that one extracts from Plowden and from this debate.
The Plowden Report helps us substantially, but not completely, to discern 1002 some of the answers to those three questions. I say "not completely", because, for example, on the subject of efficiency the Committee says in paragraph 430:We lacked the time to look ino these aspects of efficiency deeply enough to make detailed recommendations.It suggested, in fact, that another committee should be set up in this area.
On the other hand, in paragraph 48 we read that… the United States worker … is provided with 3–3½ times the fixed assets available to the British worker.The British Aircraft Corporation has, I believe, only twelve electronically-controlled machine tools. McDorrell, in America, with roughly the same manpower as B.A.C., has an output which is probably threefold, and currently a 3-year investment programme of £18 million for this type of machine tool, with the United States Government providing half. The B.A.C., to judge from its accounts, is just absorbing in new capital investment last year its annual depreciation figure of £3 million; colloquially, it is just topping up.
On the question of research, there is little analysis in the Report of precisely the areas of past activity and general adequacy and competency to form a clear view of the future level of requirements. On the question of the future of the Ministry of Aviation, although considerable useful data emerges on the Government complex as a whole, we find it stated in paragraph 505:We have not considered this subject at all deeply.As my hon. Friend the Member for Banbury (Mr. Marten) pointed out, the whole question of space is only just touched on. Finally, on the question of a Government shareholding in B.A.C. and Hawker Siddeley, there is the powerful dissenting memorandum over the signature of Mr. Aubrey Jones.
We on this side draw a number of conclusions from the Report and from the debate, and before I briefly run through them, perhaps I could preface them with a reminder to the Government of the demand made by my right hon. Friend the Member for Mitcham for the publication of a White Paper on these matters before Easter. We feel that it is essential to get stability of some sort 1003 back into the industry as quickly as we possibly can.
The first point is that we want an aircraft industry. I was rather charmed by the way in which the Minister asked: do we need an aircraft industry? That is how the right hon. Gentleman put it. My answer to that question is, "Yes, we do want an aircraft industry," and I am sure that that is the overpowering opinion of the House tonight.
Secondly, we on this side of the House are not prepared to prejudge the size of the aircraft industry, but we recognise that in the event a decline is probably inevitable. We do not accept within this context that the most advanced type of aircraft is not for us. That is far too sweeping a conclusion. Advanced today is "old hat" tomorrow. That seems to be our position as accurately as I can put it now. Therefore, design work is urgently required in the industry. This is a point we are deeply concerned about. Fresh work is urgently required in terms of design unless design teams are to proceed to disintegration. We should welcome very much an indication from the Parliamentary Secretary as to the views on airbus, the short haul air liner and, possibly, the future of the variable-wing development with the French.
Production work may also be necessary. I was very impressed by the case put forward by the hon. Member for Glasgow, Govan (Mr. Rankin) and the hon. Member for Orpington regarding the possibility of the Spey/Mirage to fill in the gap in lieu of the F111. I am not prepared to voice an opinion on this point, but the case is important and the Government should give a reasonable reply to those statements. We are concerned about the industry's basic efficiency. It must be improved and the whole speed of its operations may be radically speeded up.
On the present finance, research and development, work should not be curtailed but should be re-aligned. We protest at the arbitrary manner in which Plowden has tackled this problem in the Report. I reiterate our conviction that we should develop European co-operation on a thorough-going basis. One can be far too facile on this point. I thought the Minister a bit free and easy when he was talking about our identity of interest 1004 with Europe this afternoon. The politics of the situation are clear. Europe regards the British cupboard quite bare. The Dutch are thriving. It is quite possible that the Germans will team up with the Americans just as likely as with the British, and, of course, the French are very cock-a-hoop at present. This will call for much more careful planning and much more serious thought than the Minister seemed to wish to give to it when he spoke this afternoon.
In the meantime, I suggest that the Government might also give serious thought to the idea of an aerospace development council as canvassed by the Cranfield Society. If we are to plan the transition of this industry from one side to another there might be a forum both for trade unionists and management to participate in the development of the industry in its next phase. We reject the idea of State participation. We think the whole basis of profit-sharing could well be improved. As regards financial control we think that a sharper differentiation of direct and indirect costs and a fresh look at the treatment of overheads, especially on the lines of dealing with these as a specific quantum and not just on a lazy percentage basis, could provide much of the answer. On this point, perhaps the Parliamentary Secretary may care to tc11 the House about the inter-Governmental inquiry recently completed into the control and costing of the Concord project. Is that report to be made available to hon. Members?
The other important point which emerged this afternoon was the possibility of amalgamation between two airframe companies. The Minister appeared to like the idea and to be prepared to pin his colours to the mast on this. From our point of view, this does not seem to offer, on the evidence so far submitted, any cost improvements in the next five to ten years which could not come from further extensive plant rationalisation by each of the two firms. It would appear that the optimum size of an aircraft factory at present is of the order of 10,000, at the most 15,000, employees. Why impose a merger on these two companies at present, when they are still struggling with the rationalisation placed on their backs three or four years ago? Why not let them see that through and then take 1005 stock of the situation from the point onwards rather than trying to produce an artificial and unhealthy merger at this point of time?
I want to finish on a note of compliment to the Parliamentary Secretary in terms of the export assistance which the Government are providing to the industry. Indeed, the Minister spoke about the new organisation which is being set up in the Ministry of Defence and said that they had not as yet found anybody to head it up. If he is looking for a likely candidate, I would think that the aircraft industry would be very pleased to see the Parliamentary Secretary transferred to that appointment.
The debate has been part and parcel of the continuing debates about the economic capabilities and the health and posture of this nation. We believe that the problems of the aircraft industry are solvable along the lines put forward in the debate today. We believe that the problems are worth solving [Interruption.] Indeed, we believe that the solving of them will contribute to the solving of even greater national technological problems. We believe that the answer must come through vigorous action, both on the part of the Government and on the part of the industry itself.
§ 9.32 p.m.
The Parliamentary Secretary to the Ministry of Aviation (Mr. John Stone-house)
The whole House will, I think, agree that this debate has been very constructive and thoughtful. This is a compliment to the action of my right hon. Friend the Home Secretary who, as the responsible Minister at the time, asked Lord Plowden and his Committee to conduct the inquiry. The Committee's Report has given rise not only to a great deal of thoughtful comment within the House today, but to a great deal of interesting comment outside. I believe that this will help us to find the right formula to solve the problems of the aircraft industry in Britain. I do not believe that there has been a single word of criticism of the action taken by my right hon. Friend in establishing the Committee. We are all grateful for the work the Committee has done and for the advice we have had from it.
We should get our perspective right. We are not here conducting an inquest 1006 into the demise of this great industry, nor are we disparaging the great successes in the design of aircraft in Great Britain—successes like the Comet, the Viscount, the Hunter, the Canberra, and the present generation BAC111, the VC10, the HS125 and the Lightning. We can all rightly have a sense of pride in the fact that Britain can produce these very fine aircraft.
The industry does not lack the brains and the design skills required to create the most up-to-date aircraft. We can match any country in the world in this respect. Man for man our design teams are as good as any others that can be produced. In a sense the aircraft industry is a victim of its own successes. The pace of technological innovation in aircraft is faster than in any other industry. In some ways it is also the pace setter for other associated industries, like electronics. No sooner is one aircraft conceived than new sophistications on that design have been found and perhaps even completely new concepts developed. This creates the need for a new production line before the old one has proved economic. The changes are really quite dramatic. Indeed, we can well ask what would be the position of the ship building or motor car industries in Britain if they had had to cope every few years with the revolutionary changes of design and power units with which the aircraft industry has had to cope.
The United States has had a huge domestic market which has enabled it to obtain a huge production run for many of the new aircraft which it has developed, but, as the hon. Member for Sudbury and Woodbridge (Mr. Stainton) said, even the Americans have had monumental failures and great expensive flops, although they have been able to absorb these because they have had many more successes. This is so because they are able to sustain a production run of about 1,000 aircraft for each design type whereas the maximum we can run to for many of our types is about 100, one-tenth of theirs.
I ask the House to have some sympathy for our plane makers. It is facile to assume that they are fat and complacent, relying smugly on past laurels. They are as much pioneers on the frontier as plane makers in any other country. There is, of course, inefficiency and waste of resources, which can be put right, and we 1007 want to play our part in helping to put it right. But it has been as much the fault of Governments as of the firms themselves. Put simply, the industry has tried to produce too many separate designs of aircraft for too small a market. As a result, it has made a production profit on all too few of the aircraft developed. The industry must accept some responsibility for this. It has far too readily accepted the easy orders which it has obtained, without trying hard enough to mould and change specifications to enable it to meet the demands of overseas buyers. In the past, manufacturers have not tried aggressively enough to sell abroad.
The last Government are not immune from blame. They failed to rationalise and to co-ordinate military operational requirements with those of Commonwealth countries and our allies. They failed to guide the Airways Corporations towards buying aircraft which would have a real export potential. The Trident is an example of that. We are now providing launching aid for the Trident 2E. What a pity that this variant was not developed at the outset. When I was in Australia a few days ago, I understood that there would have been a very good chance indeed of the Australians buying the Trident 2E as it is now developed rather than the Boeing 727 if we had developed the Trident 2E a long time ago.
§ Mr. Marten
Is it not a fact that after the original design for the Trident about which the hon. Gentleman is speaking, Lord Douglas, then chairman of the nationalised B.E.A., came along and altered it to the present Trident?
§ Mr. Stonehouse
I do not absolve B.E.A. from some blame, but what I am saying is that the last Government allowed the Corporations to get away with this sort of thing. I am saying that that Government were not immune from blame. They must accept some of the blame. [Interruption.] I do not want to get bogged down in recrimination about the past. The House is only too well aware of the mess left behind for us to clear up.
At the beginning of his otherwise good speech, the hon. Member for Sudbury and Woodbridge started to make allegations about the cancellation of projects last year. Is there anyone in his senses 1008 who can deny that, if those projects had gone on, they would have cost the country many millions of pounds which, on any cost-effectiveness analysis—[HON. MEMBERS: "What about dollars?"]—pounds or dollars—would certainly have cost us a great deal of money, and the result would have been a burden on the economy which we could ill afford.
The industry cannot put itself in order with expensive military projects of this kind. They would have helped it to have remained soft and flabby, the sort of thing which most of the leaders of the aircraft industry want to escape from.
§ Mr. McMaster
What is the total bill in pounds sterling for the Hercules, the Phantom and the F111?
§ Mr. Stonehouse
There is no final decision on costs on these aircraft. But without any shadow of doubt the costs of the projects which were being developed in Britain would have been very much greater than the cost of obtaining those three aircraft from the United States.
The Plowden Report has passed to us the fact that the real answer to the problem of the British aircraft industry is to widen the market for British aircraft. If we can widen that market, we can sustain research and development costs. The problem can be divided into two aspects. The first is the immediate future—say, the next five years. The second is the long-term prospects, from 1970 onwards. In regard to this latter period, as my right hon. Friend has said, we wish to engage in collaborative projects with our allies. This also is necessary in order to share research and development costs and to ensure a wider market. It is as simple as that.
We have, however, got prospects in the next five years, perhaps even longer, of getting a wider export market for aircraft that are already developed and on which the research and development costs have already been incurred, and it is our policy to obtain the maximum possible sales for aircraft that have already been developed.
My right hon. Friend referred to the success in exports last year—50 per cent. up on the year before. The most heartening aspect of this is that much of that success was in new aircraft, whereas, 1009 in past years, a very small proportion of our total aircraft sales was in new aircraft. Last year, we sold many more new aircraft abroad, which must spread over the next 10 years an equal value in the supply of spares and components. This is a real investment in future exports. It is also very satisfactory to note the part that Rolls Royce played in last year's success story.
The fact that we have achieved these orders is sufficient guarantee to prospective customers overseas with regard to the continuance of supplies and after-sales support. The Government are very anxious to endorse the security which the aircraft firms are guaranteeing to overseas customers and to refute the scaremongering allegations, put out by some of our competitors, that if exporters buy from Britain they will not be able to rely on spares in years to come. We absolutely refute such allegations.
§ Sir Ian Orr-Ewing
But if we are to believe reports from Washington earlier this year we are to spend £600 million in taking up the options on American aircraft. Are we not, therefore, also obligated to buy spares and continuing maintenance spares for these same machines.
§ Mr. Stonehouse
That is true. If we buy the aircraft we shall also be committed to the spares. But analysis shows that from the point of view of cost effectiveness, we shall still save money—although payment will be in dollars—in buying these aircraft from the United States. But I cannot confirm or deny figures that are being quoted.
Let us look at some of the existing aircraft that we want to assist. There is the Super VCIO, which is a really superb aircraft, a wonderful plane, a plane that is proving itself on the highly competitive North Atlantic run. Although it has a higher power to weight ratio than many of its competitors, which puts up its direct operating cost—a disadvantage to many airlines—nevertheless it is proving to be an attractive aircraft, with greater passenger appeal. We believe that there are still prospects for sales of this aircraft and we want to give every help to B.A.C. to realise those prospects.
The BAC111 is another example of a plane which has sold very well and for 1010 which the prospects are extremely good. We are glad that the actual orders for this aircraft now reach 91 and that the options are 20 giving a round figure of 111 as the number of aircraft being sold. This aircraft could well have a success story like that of the Viscount. We certainly hope that it will.
Last night I returned from a visit to New Zealand where we are very hopeful that the New Zealand internal airlines will decide to buy the BAC111. The Americans have made tremendous attempts to win this market which has been traditionally loyal to British aircraft. I am glad that our present sales tour there with the demonstration of the BAC111 is having such an impact. I was very proud a few days ago at the Auckland air show to see BAC111 demonstrated and to see the impact which it made on the vast crowds and the Cabinet Ministers who will eventually make the decisions about this aircraft.
I should like to make it absolutely clear that we do not want the New Zealanders or any other customers to take aircraft which are not absolutely suited to their needs. We do not want to twist their arm to make them buy things which do not correspond to their requirements, but we are satisfied from independent reports which we have seen that for New Zealand the BAC111 is as good as, if not superior to, any other competitive aircraft, and we hope that the New Zealanders will see their way clear to buying it.
§ Mr. R. Carr
Before the hon. Gentleman leaves the current sales of aircraft of the British Aircraft Corporation, in view of his welcome eulogies about the attractions and competitiveness of the Super VCIO, can he say whether B.O.A.C. will take up its remaining order?
§ Mr. Stonehouse
It is too soon for me to make any announcement about that. I was going on to the HS125 and the HS748. More than 100 of each of these aircraft have been sold, many of the 125s in the United States. Then we have the Handley Page Jet Stream, a new concept of the small Handley Page organisation. We wish that company success in promoting this new aircraft. Finally, with civil aircraft there is the BN2 Islander, a very small aircraft which is costing a small amount of money to develop. I am glad that the 1011 present Government are providing some money to assist this energetic little firm in the Isle of Wight to develop an aircraft which we hope will have a great export potential.
With military aircraft, the Lightning success story in Saudi Arabia proves that there are prospects for this plane in the Middle East, and I hope that we will realise more of them.
Among the measures which we are now adopting in order to assist the current export drive are regular meetings with Sales Directors of the aircraft firms so that we can exchange ideas and pool information. We also keep in touch with individual firms which can come to see us at any time with suggestions for the help or assistance which they may require. We are in constant touch with the Society of British Aerospace Companies whose suggestions we are glad to have. We make intensive use—and some of them are only too willing to give their best assistance—of the support of our ambassadors and High Commissioners and military and service attachés. I cannot speak too highly of the efforts which many of our representatives abroad are now making on behalf of British aircraft exports. We have commissioned market surveys and, where they are required, we will obtain more in future. As my right hon. Friend said in his speech this afternoon, credit terms have been improved; that would very much help our exporters. As the Secretary of State for Defence announced last Tuesday we have the new appointment of the Head of Defence Sales, and this will help military sales very considerably. I can say without any risk of contradiction that no administration has given more help to aircraft exporters at any time in the past. We hope that we can even improve on what we are now doing.
The hon. Gentleman the Member for Banbury (Mr. Marten) asked what were the projected export figures for 1966, 1967 and 1968. It is too early to give actual sterling estimates, but we have every confidence that this year we will achieve more than last year, and that this year will include even more new aircraft exports than last year. There will be much more investment in the future than there was last year.
1012 I agree with what he said as far as European collaborative projects are concerned. We must aim to meet not only the European market, but must go all-out to meet world needs as well. The right hon. Gentleman the Member for Mitcham (Mr. R. Carr), who I thought gave us one of his most forceful and constructive speeches, made one or two points which were interesting reflections upon his right hon. Friends who held ministerial responsibility in past years. The fact was that so many suggestions were criticisms of past practices, of neglect on the part of his right hon. Friend. He also said that he would not associate himself with any coercion to effect mergers of aircraft firms. This hardly corresponds with the action taken by the last Administration.
I want to deal with one or two key points in his speech. He said that the Government, as a customer, have no particular need to involve themselves as a shareholder in the firms supplying them with equipment. This was also dealt with by the hon. Gentleman the Member for Orpington (Mr. Lubbock). They have both neglected one of the essential aspects, which is that the industry is not now able, and will be unable in the future, to finance all its research and development. It is looking to the Government not only as a customer for its products but to finance its operations.
This is amply described in the Plowden Committee Report and in particular in paragraph 326 on page 58 which says:One of the major airframe groups has already indicated that if it is to continue to produce civil aircraft, it will require a larger contribution from the Government than in the past towards the launching costs of any new project. The other airframe group has not gone so far as this, but the Committee doubt whether even this group would in practice find the money for a 50 per cent. contribution towards any totally new large aircraft project.The question which the House has to ask itself is if the Government and the taxpayer are going to be called upon to provide these very large sums of money, some of which are described in the Appendix at the back of the Report, on page 126, should not the Government, on behalf of the community, expect to have some share in the industry?
1013 It is not a question of simply being a customer. The question is if the Government are putting up so much of the money, are they not entitled to have some share in the industry?
§ Mr. Maurice Edelman (Coventry, North)
Perhaps my hon. Friend can give me a little guidance? The Labour Party has gone on record at the Blackpool conference as being in opposition to the principle of shares in industry. Will he say whether the Government propose to reverse that policy?
§ Mr. Stonehouse
We are concerned to deal with the practical problems as they exist in relation to particular industries. We are not being doctrinaire about this. Here we have a problem about the aircraft industry, which is not only a supplier to the Government but which looks to the Government for a lot of money. We say that there is a case, in all justice for the Government to have a share. What we want—
§ Mr. Stainton rose—
§ Mr. Stonehouse
No. I want to reply to the question of the hon. Member for Orpington. We are not trying to force this on the industry. We want to achieve this result by negotiation, and my right hon. Friend is now involved in talks with the industry which we hope will result in a satisfactory conclusion.
§ Mr. Atkinson
Would not my hon. Friend agree that, on the basis of the same case, there is also a case for public ownership of the industry?
§ Mr. Stonehouse
If we have shares in the industry, as suggested by the Plowden Committee, this is a measure of public participation. As my right hon. Friend said, the options range from complete ownership to no participation at all. We have not yet made up our minds about what is the right solution.
The hon. Member for Esher (Sir W. Robson Brown) asked how it was that Holland and Sweden can stand on their own in aircraft development. He is not entirely correct. The Dutch value inter-European co-operation. The Dutch Fokker Friendship aircraft, which has been a tremendous success story—we see it flying all over the world—is more than 60 per cent. British. Rolls-Royce supply the Dart engines and many other British 1014 components go into it as well. Sweden does not have an aircraft industry which exports in any quantity. It is producing hardly any civil aircraft. The military aircraft produced are for Sweden's own Air Force and it relies on imported designs for power plants for these aircraft.
We agree with the hon. Gentleman on the need for market surveys for civil projects. That is what we are doing. We agree on the need for improved efficiency in the industry, and my right hon. Friend proposes to have a joint inquiry with the S.B.A.C. about that.
My hon. Friend the Member for Glasgow, Govan (Mr. Rankin) asked about the size of the employment force in the industry and the effect of cancellations. In January, 1965, before the cancellations, the figure was 269,000. In November, 1965, it had fallen to 259,000 —a drop of about 10,000. But, within that figure, there has been redeployment in the industry. I think that we can claim that as a result of the cancellation of these expensive military projects more men are now involved on the development of exports, which are making a very substantial contribution to our economy. My hon. Friend the Member for Preston, South (Mr. Peter Mahon) referred to the fact that there are vacancies in Preston because the men who originally would have worked there on TSR2 have been transferred to working on an export order for the Lightning, which will be of real value to the economy.
§ Mr. McMaster rose—
§ Mr. Stonehouse
I cannot give way; I have not time.
Finally, I want to refer to an interesting article written by the right hon. Member for Preston, North (Mr. J. Amery).
§ Mr. James A. Kilfedder (Belfast, West) rose—
§ Captain Orr rose—
§ Mr. McMaster rose—
§ Mr. McMaster
I hope that the hon. Gentleman will mention Short Bros. and Harland before we decide whether to divide for lack of a satisfactory answer.
§ Mr. Stonehouse
The right hon. Member for Preston, North wrote in the Daily Telegraph this morning that American aircraft are 10 or 20 per cent. cheaper. If he analyses the figures he will find that the gap between the cost of American aircraft and the cost of producing aircraft in Britain is much wider. Therefore, the argument which he deployed in his piece this morning cannot really be sustained.
I hope that the House will continue to give general support to the actions of the Government in working towards a viable and efficient industry.
§ 10.59 p.m.
§ The Parliamentary Secretary to the Treasury (Mr. Edward Short) rose in his place, and claimed to move, That the Question be now put.
§ Question, That the Question be now put, put and agreed to.
§ Question put accordingly and agreed to.
That this House takes note of the Report of the Committee of Inquiry into the Aircraft Industry, 1964–65 (Command Paper No. 2853)