HC Deb 09 March 1966 vol 725 cc2110-6
The Minister of Aviation (Mr. Frederick Mulley)

With permission, I wish to make a statement about the cancellation of Super VC10s.

As Members will know, work on 10 of the Super VC10s orginially ordered by B.O.A.C. from Vickers Limited has been in suspense since April, 1963, by agreement between the parties. If B.O.A.C. 's judgment of its future requirements later changed, this would still have allowed the aircraft to be delivered following the 17 which B.O.A.C. has in service or in the course of construction.

The Board of B.O.A.C. has again reviewed its future needs for passenger aircraft and foresees no requirement for more Super VC10 aircraft after the 17 have been delivered. In these circumstances, the Board has negotiated terms with Vickers for the cancellation of the last 10 aircraft. These involve a payment by B.O.A.C. to Vickers of £7½ million in respect of cancellation charges. The amount of compensation is, of course, entirely a matter for negotiation between the two parties to the contract. Vickers has also left B.O.A.C. in no doubt of its wish for an early conclusion of this matter.

Before giving effect to this decision, B.O.A.C. naturally informed me of its intention, and I have had discussions with the Chairman of B.O.A.C. and Vickers. I asked Sir Giles Guthrie to defer action for the time being so that both B.O.A.C. and the Government could assess the full implications of this decision Despite this opportunity for review, B.O.A.C. have informed me that it still has no requirement for any Super VC10s after the 17; B.O.A.C., morever, recognises that in no foreseeable circumstances will the Government approve the purchase by B.O.A.C. of any further passenger aircraft of a comparable size from a foreign source to augment its fleet.

I have again yesterday asked B.O.A.C. whether the recent tragic accident to one of B.O.A.C. 's aircraft in Japan modifies its view, but it has confirmed to me that this loss could not effectively be rectified by the purchase of an additional Super VC10 for delivery at a much later date.

In these circumstances, I have regretfully come to the conclusion that I cannot ask the parties to the contract to defer further the agreement they have reached for the cancellation of these 10 aircraft. I take this occasion, however, to say that this cancellation implies no reflection on the Super VC10 itself, which is giving every satisfaction in service and is second to none in its current attraction to the travelling public.

Mr. R. Carr

This is yet another very gravely damaging blow to the British aviation industry—and one that was very nearly hushed up until after the election. Is the Minister aware that in our opinion he has been extremely weak in this mat- ter, and that he should have insisted on B.O.A.C. taking the remainder of the Super VC10s—[HON. MEMBERS: "Oh."]—even if that involved selling some of the Corporation's existing fleet of American aircraft, as was advocated by his predecessor, the present Home Secretary, before the last election?

Does the right hon. Gentleman also realise that this will leave the British Aircraft Corporation with hopelessly uneconomic production schedules? Will he therefore at least arrange for B.O.A.C. and the Royal Air Force to take quicker delivery of the 22 outstanding planes that have still to be completed?

Mr. Mulley

On that last point, the right hon. Gentleman's view is different from that of the Chairman of Vickers and, on the whole, I prefer the view of the Chairman of Vickers about his own production schedules.

This is the most outrageous statement that I have heard in this House for a long time—[HON. MEMBERS: "Hear, hear."] Wait for it. This suspension was made by the party opposite. The over-ordering of this aircraft was forced on B.O.A.C. by Conservative Ministers, and this suspension was agreed by them.

Not content with this, in the following year, 1964, the then Minister, the right hon. Member for Preston, North (Mr. Amery), indulged in a blow-by-blow public controversy about the VC10 before it had come into service, and severely damaged the aircraft and destroyed what chance it had.

For the party opposite to have the impertinence to say that we have damaged the aircraft industry by coming to a decision now and in accepting the commercial judgment of B.O.A.C. so that it can continue to make a profit in future as it has done since the Labour Government took office, is an improper view.

Sir W. Robson Brown

Is the Minister aware that the directors of B. A.C. do not wish to have the aircraft cancelled? They wish to continue with its manufacture and to keep operations at Weybridge going. This decision will cause acute dismay and anxiety to management, staff and workers at the Weybridge factory. Will he reconsider it?

Mr. Mulley

I should make it clear that I have no legal status in the matter at all. After the discussion we have had about constitutional powers of Ministers, I should make clear that this is a contract between the Corporation and the company. I have no powers directly to intervene. It will be no surprise to anyone in the industry, I think, that this order, which has been suspended for so long and was followed by a large-scale cancellation of these aircraft by the previous Government, is not to be completed. I agree that it will be disappointing, but in the circumstances I see no way out of the situation.

Sir L. Heald

In view of the Minister's statement of 7th March that the American Boeings were under suspicion of structural weakness, is it not criminal lunacy to cancel this magnificent British aircraft at this moment?

Mr. Mulley

I should correct the right hon. and learned Gentleman. I said that the preliminary investigation had shown a structural failure. I did not indicate that we knew at present of any structural defect in the aircraft which had been flying since 1960. The hard facts are that if the order were to be completed for this aircraft it would not come into service until 1969, and there are still a number awaiting delivery. It may be possible for them to be speeded up in relation to this matter, but the parties to the contract will discuss that between them.

Mr. Rankin

While recognising that this is a matter between the Corporation and the company, it still has come before Parliament on the eve of its dissolution. Have we not an interest in the matter? Could not the final decision be held over until the new Parliament assembles?

Mr. Mulley

I have spent the last month trying to find a way—[Laughter.] I do not know why hon. Members opposite should find this amusing. I have been trying to pick up the future of the VC10 from the abysmal position in which we inherited it.

The Parliamentary Secretary has devoted hours and days and many journeys to trying to sell this aircraft. At the moment, the VC10 is on demonstration in Czechoslovakia, where we hope to get an export order. We have done all we can to further the sales of this aircraft. I hope that people outside will realise that on the benches opposite this has been found to be amusing.

Mr. Lubbock

Is the right hon. Gentleman aware that we on this bench deplore Sir Giles Guthrie's decision, although we do not blame him? But we think Sir Giles Guthrie has seriously underestimated the future passenger requirement of B.O.A.C. bearing in mind that he has provided for a growth rate of only 10 per cent. between now and 1969? If his calculations of fleet requirements were right last week, and B.O.A.C. had the right number then, how can it still have the right number when it has lost one in a tragic accident at Tokyo?

What would be the cost of completing these 10 aircraft at Weybridge? Will the Minister consider placing an order with B.A.C. himself and reselling them to the Corporation when the Corporation finds that it has a requirement, as it certainly will?

Mr. Mulley

I am extremely glad that the hon. Member raised the point about cost, because I should make clear to the House that when the previous Government agreed to the suspension of delivery of these aircraft generally they also agreed to the suspension of the price clause; and the price for taking up these 10 or any part of them would now be substantially higher than the price which B.O.A.C. is paying for the existing order. This is one of the additional difficulties.

I have not been able to get the exact price, because in view of the fact that the cancellation has been agreed there is no case for them to negotiate between themselves for a new price, but I am told that it would be substantially higher than the earlier price. In the circumstances, I do not think that the Government would be justified in buying aircraft which the Board, not merely the chairman but the Board of B.O.A.C., which is charged by this House for day-to-day commercial operations, has decided to cancel.

Mr. A. Henderson

Is it not a fact that the VC10 is becoming known as probably the finest passenger aircraft flying today? Can we be assured, in spite of the statement which the Minister has felt justified in making—[Laughter.] This is not a laughing matter. Can we be assured that B.O.A.C. and other passenger transport companies will have an adequate supply of VC10s in order to maintain the very fine service which I had the pleasure of using only yesterday?

Mr. Mulley

We shall do everything possible to further exports, but I am bound to tell the House that the experience so far is disappointing. If one has to put a finger on the cause, it was the tremendous denigration of this aircraft before it came into service by the previous Minister of Aviation, the right hon. Member for Preston, North, and the public controversy about its merits which he conducted in the public Press between himself and the Chairman of B.O.A.C.

Mr. Doughty

Is the Minister aware that at present there is none of these aircraft flying on B.O.A.C. 's longest route to Australia and New Zealand and none is announced for so doing? Does he realise that this is a serious blow to the British Aircraft Corporation following as it does on the failure to obtain an order from Middle Eastern airlines because of the investment policy of the party opposite?

Mr. Mulley

I agree that it is disappointing for workers in the organisation, but Vickers has been pressing for this cancellation statement to be made. On the question of routes, under the previous Government there was deliberate delay in delivery of more VC10s. I am sure that they will be introduced to more routes as they are delivered under arrangements made by the previous Government.

Mr. R. Carr

Will the Minister say whether he has considered, and, if so, why he has turned down, the proposal which was put forward seriously before the last election by his right hon. Friend that B.O.A.C. should replace some of its existing Boeing 707s fleet with Super VC10s?

Mr. Mulley

If I recall it this was exactly the point of great argument in 1964 between the right hon. Member for Preston, North and the Chairman of B.O.A.C We have, of course, considered all possibilities, but the facts are that the Boeing 707s fly at a depreciated cost and the cost per seat mile is, therefore, below that of the VC10, which could not in any case be delivered for another three or four years.

Several Hon. Members

rose—

Mr. Speaker

Order. We must get on.

Mr. Onslow

On a point of order, Mr. Speaker. In view of the statement which the Minister has made, would I be debarred from raising this matter in the debate on the Consolidated Fund (Appropriation) Bill?

Mr. Speaker

The hon. Member has every opportunity of raising it on the debate on the Consolidated Fund (Appropriation) Bill, but it will take its place at the appropriate place on the list I have drawn up according to the chronological sequence in which hon. Members have applied to the raising of subjects.