CIVIL AVIATION.

HL Deb 21 January 1948 vol 153 cc503-82

2.42 p.m.

VISCOUNT SWINTON rose to call attention to the condition of British civil aviation, and the operation and financial results of the national airline Corporations; and to move for Papers. The noble Viscount said: My Lords, I would ask your Lordships' indulgence if I deal rather fully and in some detail with the matter which is before us to-day. It is a very wide field, and the reports and accounts of these three Corporations afford the principal, and may be the only, opportunity we have for considering the activities of civil aviation companies. I am sure your Lordships will agree that the accounts and the reports call for thorough and indeed meticulous consideration.

We now have the reports and accounts for the year ended March 31, 1947, of all three of the Government air Corporations. Two of them present indeed a very gloomy picture. I doubt whether any of your Lordships expected to see great profits, but I do not suppose any of your Lordships expected to see such enormous and formidable losses. The B.O.A.C., whose accounts cover a full year, have lost no less than £8,000,000. The B.E.A., doing the European and the domestic services, whose accounts cover only eight months, have in that eight months lost over £2,000,000. British South American Airways, whose accounts were published last night, present an agreeable and striking contrast. Without taking credit for the profit of about £75,000 which was made in the first four months by the private enterprise company which was established to run those South American airways and which the Government Corporation took over (and I am glad to see that the Corporation still has the same Chairman and Managing Director, and, to judge by the results, the same method of conducting business) B.S.A.A. in the last eight months have shown a profit of £32,000.

There are the three results. B.O.A.C., in a long report, give a great many reasons why they have incurred these losses. They have had to use uneconomic aircraft; they have had to use scattered and improvised maintenance bases; they have encountered difficulties in route organization; and other reasons are given. Well, we shall consider in debate how far those reasons are valid or wholly valid: but twelve excuses for failure do not constitute a success. And are not these problems very much the same as those with which the South American Company have had to contend? They had to use what are called improvised aircraft, and, in the financial year with which we are concerned, the Lancastrian and the York—the same machines that B.O.A.C. have been flying. Since the close of their financial year they have been flying, I understand, with the Tudor IV, about which I shall have a word to say presently. They must also have had improvised bases, and inadequate hangars. They are all in the same boat. And the organization over the route—in part the same route as the others—has certainly not been perfect on the South American or the Caribbean route.

In passing, I may observe that when, in the National Government, I proposed that this company, formed by the shipowners who were conducting the South American lines, should have services to South America and the Caribbean, one of the criticisms advanced was that the area was too small, that they could not run enough services to spread and sustain their overheads. Yet they have made a profit where the other people have made a loss. And, be it observed, on this line they have not had it all their own way; they have had international competition as keen as, if not keener than, that on either of the other lines. I am informed that there are no fewer than six competing lines flying from Europe to South America; and if you take into account the formidable competition of the American lines flying to South America it means that they have seven keen competitors.

Let us pause for a moment to compare these results. I know that it may be said that comparison betwen one line and another operating in different areas is not completely satisfactory, and is not entirely comparing like with like; but, broadly, the comparison is not an unreasonable one to make. Let me take one or two parallels. One would expect. I think, that in any airline the number of people employed would bear some sort of relation to the number of aircraft: or rather that the more aircraft a company had, the fewer per aircraft there would be of staff. A company with only two aircraft may require quite a lot of people. I do not mean just to run the aeroplanes, but in the organization of the lines. Let us have a look at the figures. It may not be an exact comparison, because one must have regard to the types of aircraft and the length of routes. But the facts are these, and the Minister can check them. B.O.A.C., taking all its staff, has 140 for every aircraft; B.E.A., with a good deal fewer aircraft, has 57; B.S.A.A., with a good deal fewer aircraft than either of them, has only 49 people per aircraft. In fact, the ratio is exactly the opposite to that which one would expect.

If it be said that that ratio of personnel to aircraft is not wholly a fair one, let me take another standard of comparison—a general comparison of receipts and expenditure; and the ratio of receipts to expenditure!—which I think everybody would regard as essentially reasonable. Let me take it (I think it is fairer) as between B.E.A. and B.S.A.A. It is not very easy, but I think I have made this comparison right; I hope it will be checked. I notice from the report that the European Corporation make their returns in. ton-kilometres while the South American Corporation make their returns in ton-miles. However, the conversion is not difficult for those who know their vulgar fractions—I do, although I was not at Cambridge. According to my calculations, the ton-miles flown by the two Corporations were approximately the same. B.S.A.A. had a rather lower Lord factor than B.E.A. The total revenue was not very different. Your Lordships will see that the accounts are all in the same form, so we can compare like with like. B.E.A. had a total revenue of £1,206,000; B.S.A.A. had a total revenue of £1,021,000—not very different. But when you come to the total expenditure, the contrast is really alarming. The total expenditure of B.E.A. is £3,300,000; the total expenditure of B.S.A.A. is under £1,000,000— £909,000. B.E.A. is spending three times as much.

I ask the Minister why the operating costs of one Corporation should be three times as great, and the ratio more than three times as great, as the corresponding costs of the other. I hope I shall not be considered as introducing a controversial element if I venture to suggest that in the case of the South American Corporation, those business methods which actuated the Chairman and Managing Director, and no doubt many of the staff, when they were a company operating for profit, have continued to animate them now that they are a company operating for the State. I should be glad to hear what other explanation there is. Nor, I think, is it irrelevant to observe during all this time the results of the charter companies who have not been greatly helped by the Government. They have certainly not been given any undue preference in the way of hangars and aircraft facilities; they have to take what is left. I am not complaining. Naturally, the Government would give the first cut in the hangars to their own Corporation—jobs for the aircraft, as well as jobs for the boys! We cannot complain about that. But the charter companies have certainly not had any undue preference in this matter. They have had to operate on the same routes, with the same facilities—or with the same absence of facilities—and yet some of them have managed to pay their own way and to keep going.

I would like, first, to make some observations and to put some questions affecting all the Corporations (I have given the Minister notice of everything I am going to raise), and then I want to deal with some matters affecting individual Corporations. I have selected a few of what I think are the more important and outstanding matters, for one cannot cover the whole field. Let me take a few matters which affect them all. The accounts, as your Lordships will observe, are in similar form. What I would like to know is this: Are all the Corporations following a similar practice in the way in which they make up their accounts? For example, is the same standard of depreciation (which is very important) applied by each of the Corporations in depreciating their aircraft and other wasting assets? Then I observe that both B.O.A.C. and B.E.A., and perhaps also B.S.A.A.—to use these rather Russian abbreviations—have a number of aircraft on lease or on loan from His Majesty's Government, from the Air Ministry or the Ministry of Civil Aviation. Your Lordships will see the details set out in a schedule. Are those aircraft which are loaned or leased to these Government Corporations being charged for at a strictly commercial rent?

Your Lordships will observe that that is very important because, if they are not being charged for on a strictly commercial basis, then it means that part of the cost of those aircraft and their maintenance, and their depreciation, which has to come from somewhere, is being borne by one of the Ministries and is not being charged to the Government. I am not making any charge about this, but it is a thing which the House ought to know, because it is clear that, if everything is not being charged for at a strictly commercial rate, then there is a concealed subsidy and the loss which has actually been incurred is considerably greater than that which is disclosed in the accounts, heavy enough though that is. I would also ask whether apart from the specific cost of aircraft about which I have asked, there are any facilities which are not being charged for at a commercial rate.

Then I want to come to a most extraordinary matter. This applies to all the Corporations. All the Corporations complain that they are not allowed to order their own aircraft, to order their own engines, or even to order their own spares. It is so important that I venture to trouble your Lordships with two quotations. In the report of B.E.A., on page 13, we find this: Our difficulties in obtaining firm prices for spares for aircraft and engines are largely attributable to the practice under which these spares were purchased on our behalf by the Ministry of Supply without quotations for our requirements being first asked for and given. We have on several occasions represented to your Department"— that is the Minister— that we would prefer to deal direct with the suppliers."— I am not surprised at that. We believe that we would then be able to establish the normal commercial procedure of quotation preceding order, a procedure which would be of immediate benefit, financially and from the point of view of our airline operations. This is not a criticism advanced by somebody on this side of the House, making a political point. This is the criticism of the Government's own selected board, a unanimous report by the board to the Minister.

The South American Corporation, which made a profit in spite of these handicaps, put it no less forcibly, and it cannot be suggested that Mr. Booth and Air Vice-Marshal Bennett do not know what they are talking about. Page 12 of the South American report says: … it is necessary to state that the present system of ordering aircraft through the Ministry of Supply is entirely contrary to the interests of the Corporation. It imposes a third party between the user and the manufacturer, causing delays and misunderstandings. It takes control from the Corporation but leaves it with the responsibility. It adds to the cost of aircraft, as the manufacturer's price is loaded with departmental overheads. One of the prerequisites of successful airline operation is that the right aircraft shall be available at the right time at the right price. Under the present system, the Corporation has no control over price, is in the hands of the Ministry of Supply as to priority of deliveries, and is subject to very considerable interference as to design. That is the report of the Government's own directors.

Then they set up the Courtney Committee, and a more able body of people one could not have. Something is said about this matter in the Interim Report of the Committee of Inquiry into the Tudor Aircraft (Cmd. No. 7307). If your Lordships look at that Report, at paragraph 89, you will see that the Committee say: The fact that B.O.A.C. were not themselves the buyers of the aircraft also played its part in causing delay. The paragraph goes on to say: On the one hand they were not subject to the restraining consideration that the cost, direct and indirect, of every modification was to fall on them; on the other, A. V. Roe, Ltd., could not be certain how far they had to do what B.O.A.C. asked if they felt that their demands were unreasonable. It seems to me that this practice, which the Government still insist on following, is really senseless. There is now no question—and there can be no question—as there was in the war, of the Government having to apportion every order, and every inch of floor space. I think it was quite right that in the war, when they could take only a fraction of a factory for civil aircraft, that the one co-ordinating Ministry (in that case the Ministry of Aircraft Production), had to place the order. Bat why should that be so now?

The factories are not full. The Government, with their solicitude for defence, are not filling the aircraft factories of this country so full of Service orders that the civil people cannot get a look in. Over and over again we have debated this, quite apart from the principle of nationalization, and there has been a large measure of agreement as to the principles which should govern us when we are trying to run a nationalized industry. Ministers have repeatedly told us that the nationalized Corporations must be free to manage their own concerns, and say that that is one of the reasons why they cannot give any information about the Corporations. But what is one of the first functions (and I would say the first function) of management? It is to order the tools with which to work. If you are a transport company, you order the lorries with which you conduct your business. What would you say was the first function of management in a shipping company? Surely, it is to buy a ship. Why is it different with an aircraft? Why is it different because the thing which carries the people goes in the air and not on the sea?

Of course, the Government have the right to lay down the general principle of how far these people are to buy British, and how far they may buy from foreign countries. Indeed, the Corporations could not spend a dollar without going to the Treasury for permission. Subject to that, surely the Government will cease to be so obstinate, and will respond not just to my appeal but to the appeal of their own Corporations to let them place their own orders. I would add (to anticipate a possible argument) that I think there is a function for the Government in regard to the placing of orders, and the direct placing of orders by Corporations would not in the least preclude the Government from engaging in long-range research and development projects. I think that may be very right and proper.

Such projects are large. They affect the whole of civil aviation. Indeed, they do more than that; they overlap with the Royal Air Force requirements, if you take matters like pressurization, or the development of jet engines and long-range projects of that sort. It may be perfectly reasonable for the Government, in close consultation with those concerned, to place those orders. I would not dissent a bit from that. It would be a good case for having a Committee, but not for placing the ordinary orders for the commercial aircraft of different firms which are going to make a profit or loss. I have never heard of it being done anywhere else. It is not done in any other business. It was not even done in the aircraft industry before the war. Before the war Imperial Airways and the other operators all ordered their own aircraft from the makers. Why cannot we go back to that?

Here, it may be convenient if I ask what is the policy about aircraft generally. The delay over the Tudors has been very unfortunate. It has been far longer than was ever anticipated. I well recollect the forecast which was given to me by the firm and the Ministry of Supply, and from which B.O.A.C. did not dissent. They were with me in all the discussions in May of 1945, when we were just going into the first meeting of the Commonwealth Air Transport Council, a most valuable body. It was very important to give accurate forecasts to the Dominions. We had given them one forecast in London or Montreal a few months before, but we had to revise that because there was some further delay. I was most anxious. The Dominions were going to buy these machines, and perhaps some of your Lordships may remember our dealings with South Africa. We were to lease them the Yorks, and the Tudors were to take their place; and we hoped that they would go on all these Commonwealth routes. Therefore it was vitally important that we should be able, so far as possible, to give a firm figure. And the figures underwritten by everybody were these.

In regard to the Tudor I the prototype was to fly in June of 1945, and the twenty on order were to be delivered between September, 1945, and May, 1946. The Tudor II, about Which, of course, we do not know much, was to my mind more important than the Tudor I, because it was to go on all the Commonwealth routes in the partnership. That prototype was expected to fly in November, 1945, and delivery of those on order—I think to the number of eighty or eighty-five—was to be made between November, 1945, and December, 1946. I have checked these figures. I checked them some time ago and I have checked them again recently for another purpose. I feel sure that the Minister will be able to verify them. Orders, of course, had been given long before—I think in 1943. But neither Tudor I nor Tudor II is yet in service.

What did seem to me very odd was this. Tudor I and Tudor II were ordered in 1943 and this forecast of delivery had been given to us and to the Commonwealth people in May, 1945. They have not got into service, but yet the Tudor IV, a newer Tudor, has come through and is apparently giving complete satisfaction to B.S.A.A., the South American Corporation. I am sure your Lordships will have wondered, as I have done, what is the explanation. Did the fault lie with the makers, or was it that B.O.A.C. failed to finalize their requirements and kept on asking for modifications? I asked myself this question, for during the short time that I was at the Ministry of Civil Aviation I impressed upon the makers the importance of these aircraft both to the Commonwealth Air partnership as a whole and for the Atlantic, and the importance of recognizing that producing a civil aeroplane (derivative from a bomber though it was) was quite a different thing from building a fleet of bombers. At the same time I impressed no less forcibly, and perhaps more forcibly, upon B.O.A.C. that they really must take rapid, firm and practicable decisions as to the layout and equipment of the plane.

Now we have the Report of the Courtney Committee on Tudor I. No doubt a Report on Tudor II will follow. The Report which we have is very revealing. It is quite clear from it—and I want to be quite fair about this—that the relationship between B.S.A.A. and the firm and the relationship between B.O.A.C. and Avro's was very different. I think it was that difference in relationship which probably accounted for the Tudor IV coming out and getting into service, and also, in some part, accounts for Tudor I and Tudor II still being on the stocks. I think it is clear that though the Courtney Report finds errors of judgment in the firm—errors in regard to alterations which they made themselves (I think there was some alteration to the rudder and to the tail-plane), an error of judgment in not bringing in Farnborough soon enough and in not flying soon enough with the full load, which I consider is very important indeed—when all is said and done, the firm of Avro's were no doubt greatly handicapped and delayed by the failure of B.O.A.C. to finalize requirements and to control the medley of people in their Project Department who appear to have been putting in un-co-ordinated demands, and by B.O.A.C.'s failure to balance the practical against the ideal.

As the Courtney Committee pertinently point out—I will not quote the Report again; I have already done so—all this might have been very different if B.O.A.C., and not the Ministry, had been the responsible buyer, because then B.O.A.C. would have had direct responsibility. The Courtney Report asks: "Could the Ministry have done more to abate friction and resolve difficulties?" Again I want to be quite fair, and I will speak as to what I think was the responsibility. I have told how I myself impressed upon both sides the need for finality and for reasonable agreement. I do not think that it would have been right or proper for the Ministry to usurp the whole function of management of B.O.A.C. and say: "Look, these are the exact specifications and modifications which you are to have." That sort of thing cannot be done. The decision on those matters must rest with the user. But the Ministry could have done more, and at last they have. The user must decide and decide reasonably, but I think the Ministry could and should have insisted with the Chairman and Board of B.O.A.C. that they must finalize their demands and control their team. That is a matter of general policy and not of detail. Now, in the end, but a bit late I suggest, they seem to have done it.

The Courtney Committee have presented a most exhaustive Report on the past. What about the future? The Courtney Committee make two proposals on which the Government, at the beginning of this document, offer what they call some observations. I am rather glad that they do not say that they offer a policy, because "observations" is accurate and "policy" would not he a correct description. But I am bound to say—and I hope that I am not being offensive in so doing—that I find the Government's observations rather woolly. Two proposals are made by the Courtney Committee. The first is that the Tudor I should be used—assuming it goes through some trials and gets a certificate of air-worthiness—on the Atlantic route, United Kingdom to Canada. As I read the Government's observations, they take no decision upon that at all. If I may put it shortly, but I think accurately, they "pass the buck" to B.O.A.C. and the aircraft company to say what they are going to do about it.

Therefore I am going to venture to make a suggestion myself. I do it with a good deal of reserve, but I do not want to be wholly unconstructive, as indeed I hope I have not been in the past, and shall not be in the future. Anything an outsider can say, however, is, of course, limited by the fact that he has No 1nside knowledge but only the knowledge which comes from these Reports, full though they are. I observe that the Courtney Committee, in paragraph 112, I think, say that with the Constellations which B.O.A.C. have, there is some doubt as to whether there will be sufficient traffic to warrant using the Tudors as well on the Atlantic service. I understand that in addition to these Constellations there are some Boeing Stratocruisers on order—I suppose that they will be delivered very shortly, and they will certainly be put into service on the North American route, for that is what they have been purchased for. I would venture to think that it might be sound policy to convert these Tudor I's into Tudor IV's. I understand that that can be done pretty easily and at no great cost. The Tudor IV has been flown by the B.S.A.A. with great success and great satisfaction. When converted, these Tudors, I suggest, should be used on the Commonwealth routes where the York has long been obsolete and where for years we have been longing to get the Tudor into service. I make that suggestion, although I realize that there may be many arguments against it. In the face of the evidence which is given in the Report, however, it seems to me that that might possibly be the right course.

The other proposal which is made by the Courtney Committee is one with which I have already dealt—namely, that the Corporations should order their own aircraft. There, I must admit, the Government have taken a decision, but they have taken the wrong decision. They have come down absolutely flat-footed against the Corporations being allowed to order their own aircraft. They say, in their observations on the Courtney Report, that the Corporations may be represented on a Committee—that is a great privilege! They shall he made financially liable for the results of a policy over which they have no control, but they shall not have the elementary responsibility of ordering the aircraft they are to use. In other words, "Auntie knows best." Or "Uncle knows best"—I am not quite sure where the responsibility is divided. It must be hard for competent and self-respecting men to carry on in face of such frustration. Does this unexplained and senseless policy apply in the case of other nationalized industries? What is happening there? Does the Minister of Transport buy the railway engines and rolling stock which are used by the Transport Commissioners, or is that left to the Commissioners? Does the Minister of Fuel buy the mining machinery, or is it left to Lord Hyndley and his staff? I assume that no such folly is committed by other nationalized industries. If not, why cannot that policy be followed here? No reasons are given. I trust that the Minister will give us some to-day, and we shall certainly await with interest any information which he can give us.

Before passing from aircraft, I should like to add that the controversy over the Tudor I and II has overshadowed the achievements of other British aircraft. The Tudor IV seems to be doing all right. The Viking is doing very well indeed. One of the Corporations, the B.E.A., who use it most, say that after teething troubles the Viking has "gained great popularity on all routes." It is economical and efficient. This is especially agreeable to me, because I must admit having had very considerable responsibility for ordering the Viking. The Dove has also done very well and has sold in quantities overseas, and in this smaller range others are coming forward well. In engines, whether of normal reciprocating type or varieties of jet, we still hold our pride of place.

The next complaint the Corporations have to make is that of lack of accommodation and unsuitable airfields. There were a great many airfields and hangars constructed in this country during the war, to accommodate Transport Command, Fighter Command and Bomber Command, and, as we were glad to do, the vast American Air Force as well. There must be a great deal of accommodation. Some of the noble Lords on the Bench opposite will remember that in the National Government Mr. Churchill laid down that there must be a great deal of co-operation in the future between Civil Aviation and the R.A.F. We had to "muck in" together and have common user of airfields and facilities. I should like to ask if that policy is being carried out, because I should have thought there was enough accommodation to go round. If there is an airfield peculiarly suited to civil aviation but not essential to the R.A.F., there ought to be reasonable give and take between the two. I am sure the Government could do more about that.

They next complain—B.E.A. make this complaint particularly in paragraph 12—about the confusion in booking arrangements. There has been much expense in building up offices and staffs overseas to handle traffic. I cannot refrain from this reflection: How much wiser and cheaper it would have been not to have rejected the proposal I and the National Government made for a partnership of the railways, the shipping companies and the travel agencies, with all their vast experience and world-wide connexions? If that had not been discarded, they would have taken all this in their stride and we should not have so many millions of deficit to-day. While I am critical about that matter, let me, in justice—because I have been travelling by air a great deal in the last few months—pay tribute to two sets of people. One are the staffs on the airfields and the planes. I have received invariable courtesy wherever I have gone, and not just courtesy to an ex-Minister. I should like to pay equal tribute to a set of people who do not so often receive compliments—the officers of the Board of Customs. When I have arrived early, I have deliberately sat and watched these gentlemen carrying out what, under all the regulations about currency and everything else, is a very thankless, invidious and delicate task. I do not think I have ever seen people, the ordinary rank and file, discharging their duties with greater courtesy or more thoroughness. I would like to pay my little tribute to them.

I want to put one or two other questions which relate specifically to individual Corporations. First of all, I will deal with the B.E.A., which has made a loss of £2,000,000. The pre-war operators of all these airlines were doing very well. They, and the railways, the shipping lines and the travel agencies were prepared to join together and put up the whole capital themselves and carry on these services without any subsidy. We know the loss for the eight months to April, 1947, but I want to ask this question, because I wish to give the Minister a chance to show that it is getting better. I hope it is. I cannot believe it is not. What have been the financial results from April, 1947, to, I do not say the present time, but to the time the various travel restrictions were imposed? Those created a new situation, but there were some months in which there must have been normal operation during the late spring and early summer, which the B.E.A. regard as the best travelling months for internal services, which depend on the season. Obviously the Corporation must know these results because every company knows month by month whether they are making a profit or loss. Then there was the fuel crisis—and I thought it was tactless of the Corporation to refer to the losses owing to the fuel crisis. That is all behind us, please God! The fuel crisis must have been over. Then the Vikings, which are now giving such satisfaction, were coming into increasing use. All those things are on the right side, and I trust the B.E.A. have been doing much better. I would like the Minister to give the House some consolation by telling us what are the results.

Then may I ask him a question about the internal services? If I may say so, there are some very odd statements in paragraph 13 of the B.E.A. report, which I cannot follow. Why can no replacements of obsolete aircraft be available before 1949 at the earliest? Why should navigational and blind-approach aids be a prerequisite to the introduction of a replacement type on these routes? I ask that particularly, because the report emphasizes that on the internal services it is the summer months that count. I really do not see why a new type of machine should not be operated on these short inland services without getting in a completely new set of blind-landing approach aids. Then they say that the fares are much below the Continental rates. If that is so, why is it?

Lastly, let me ask this question about B.E.A., because it deals with a complaint which they make. Why do not the Government Departments pay for the priority reservations which they give up too late for the company to sell? It seems to me not unreasonable that they should pay for them. It may be said that it is a book-keeping transaction, and the wretched taxpayer pays out of one pocket or another. As a matter of fact, I think there is far too much of this priority. I have had some talks with foreign companies about this matter, and I never find any difficulty in getting on a foreign line. It really must be a handicap to the company, and it would be a great deal simpler to cut out most of these priority reservations. If the Foreign Secretary wants a passage, if he is not taking his own aircraft, it could always be arranged, as with the shipping lines, that he should get a place on the plane. It is not sensible that places should be reserved for a lot of clerks. Sometimes, I should have thought, these people might even take their chance with the business men. But perhaps that is rather an outrageous suggestion.

I have dealt with a number of points that are common to both Corporations, and now I want to put two points in connexion with B.O.A.C. Your Lordships will see on page 6 of the B.O.A.C. report that they complain that some services were operated, not because they were commercially attractive, but because they were required for reasons of Government policy. That is one of the reasons they gave for the loss. I would like to ask the Minister what the services were which the Corporation did not want to operate but which were operated because they were required for reasons of Government policy; and what proportion of this £8,000,000 loss, on a fair assessment, is due to those services, and not to other causes. On page 20 reference is made to the reduction of fares made by international agreement or direct negotiation. I should like to ask whether the other operators who were affected by these international agreements lost money through those fares. That ought to be quite easily ascertained, because the Chicago Convention provided for companies supplying regular statistics of operating costs.

I am not sure that we are not asked to give too many statistics. I think we have to be careful that we do not set up a tremendous organization in Montreal, or wherever it may be, and have far too many forms sent in. But I am not sure that this Government are very good people to bring that proposal forward. I think it might be said to them: "Physician heal thyself." Seriously, I think there can be far too many forms. If an international body is set up, naturally it would like all the information in the world. But it is much better to concentrate on the few things that really matter just as good business concentrates on the information and returns that really matter. Anyway, with all the mass of paper there is, we must know whether the other people are making or losing money. I believe K.L.M. made a very good profit. I have seen the Reports of Sabena, the Belgian Line, and I understand that they were able to make enough profit, presumably on these fares, to pay back to the Belgian Government all the subsidies which they had had from them over the past three or four years.

I apologize for having kept the House so long, but I thought that these subjects were so important that they must be presented in a proper perspective. I have one specific question to ask, of which I have given the Minister special notice. I would like him to tell us about the extraordinary story of the West African Service. West Africa is a very air-minded place. Both the Civil Service and the commercial community want to send their people out and bring them back home by air. It is a very good pay-load. The people come home and go out again all through the year. When I was Resident Minister I went into the figures and received returns from the commercial firms and from the Government. I found they were all extremely anxious to have the service, and there was a very good clientele all through the year. The great bulk of these people, of course, come from the two great Colonies of Nigeria and the Gold Coast, and more particularly from Nigeria. The quick direct route is across the Sahara—to Algiers or Tunis, Kano, and on to Lagos and Accra.

The Belgian Air Line, Sabena, has for eighteen months or more been flying a regular service; though it has a much smaller clientele, it is flying, I think, several times a week. I believe they used to carry our air mail for us; I do not know whether they still do. Air France are also flying a service direct across the Sahara to Brazzaville. K.L.M., the Dutch company, are flying a similar service once or twice a week across the Sahara, stopping at Kano and going on to Johannesburg. The only people who were not flying on that route were ourselves—to our territories. The only British service was by Dakota, down the west coast of Africa and then along the 2,000 miles or more of the bend, through Bathurst and Sierra Leone, and past all the French territories to Accra, taking three or four days against one day or eighteen or nineteen hours of direct flying across the Sahara to Kano.

What happened? Skyways, a Charter Company, made an offer to the Nigerian Government and to the Gold Coast (the Nigerian Government were the principals in the matter) that they would charter a weekly service with a Skymaster, which, I am informed—and I made particular inquiries—was there and then available, and the service could be started within a month. That service would have flown once a week to Kano, on from Kano to Lagos and Accra, and back the same way. The aircraft could carry thirty-six passengers; the fares were to be similar to the fares which the foreign lines were charging, and, as I have said, the service could be ready to start within a month. The Nigerian Government were willing to guarantee this venture. It was not at all an onerous guarantee, because I can assure your Lordships that the amount of traffic which certainly is available on a service out of Nigeria and the Gold Coast would far more than fulfil the guarantee. I would like to underwrite it and keep half the profits; I would take that on at any time. They offered to guarantee £75,000 a year. It would not have been less than that; indeed it would have been far more. Nigeria, naturally, was anxious to close with this offer. His Majesty's Government forbade them to do so, and they said: "Instead of this, we will put in a service run by Halton aircraft, and we will run three of these a week."

I am informed that the Halton aircraft can carry only ten passengers across the Sahara—if so many—and that therefore every trip involves a heavy loss. I have taken considerable care to verify my facts, and I shall be greatly interested if the Minister contradicts one of them. I ask the Minister, therefore, this question: How much are B.O.A.C. losing every week on this Halton service across the Sahara? By that I mean really losing. I do not mean simply what is the cost of the petrol they put into the 'plane. I mean what is the loss on a proper commercial assessment, attributing to the service all the proper costs for hire, depreciation of aircraft and every other proper charge. That is the first question I ask: How much is the weekly loss upon that service? If, as I suspect, it is considerable, I ask him these further two questions: Why was this Nigerian service forced upon the Government of Nigeria, and why was this additional loss forced upon the British taxpayer? I beg to move for Papers.

3.42 p.m.

THE MARQUESS OF READING

My Lords, I ought perhaps to begin by saying, on behalf of my noble friends, whose absence from these Benches at the moment is perhaps somewhat blatant, that it is due neither to lack of interest in this particular Motion, nor to any neo-Athenian revival of the practice of ostracism in regard to myself, but to the unfortunate fact that a meeting was arranged some time ago before to-day's business was known. The noble Viscount who has just spoken has acquired in obvious ways so great a store of knowledge and experience of this particular subject that it need be no surprise to any of us that his oratorical take-off this afternoon was so expert, his flight so smooth, or his landing so safe. If, occasionally, his remarks were punctuated by a burst of machine-gun fire we have to remember that he is not only an ex-Minister of Civil Aviation but also an ex-Secretary of State for Air.

I can speak upon this matter merely as a member of the public and as an occasional passenger—perhaps a somewhat scared passenger, not always entirely-reconciled to finding himself suddenly with no visible means of support. I make no apology for speaking without technical knowledge or experience, for after all this matter—and in particular the two main topics we are discussing this afternoon—is one which the taxpayer is not only deeply concerned with, but deeply concerned by. Here is a service with immense potentialities, a service which might hold great possibilities of dollar-earning capacity and which, equally, might bring to this country immense prestige. Neither of those two considerations is to be lightly dismissed. In the B.O.A.C. report, which your Lordships will have read, there are advanced a number of reasons why it was difficult, if not impossible, for that Corporation to show a profit for the year's working. No doubt those considerations, in varying degrees, have had an influence upon the balance sheet which is now presented. But without any desire to over-state the position, I think it is true to say that the public has been genuinely shocked at the figure of loss of over £10,000,000 for these two Corporations, and that, even taking into account the adverse factors, some explanation is required for those figures.

We are accustomed in these days to speak in large amounts in dealing with matters of public finance. I sometimes picture in my mind members of the Government, in their rare moments of relaxation, gathered in the Cabinet Room for a quiet game of "shove million." But even so, £10,000,000 is a very substantial amount. Although this may be the first year of the working of the B.O.A.C., I have no doubt that your Lordships and another place will carefully watch this next year's transactions and will hope for a very much more favourable result at the end of that period. This, and the question of the Courtney Report, both have an importance outside their actual application to the question of civil aviation. They have an importance of general application, particularly in view of the trend of modern legislation. After all, nationalization is not, or should not be, an end in itself, but rather a means to an end. It is not an incantation; it is a social economic and political policy. The results which flow from it depend not merely upon pronouncing some magic word of incantation, but primarily upon the organization and administration which, once the method of nationalization is accepted, is applied to meet the requirements not of every industry which may be nationalized, but of the particular industry which is being dealt with as the moment. This House will no doubt watch with interest the various features which become common as matters progress in the different industries to which nationalization has been applied.

Before I turn briefly to the Courtney Report, it is perhaps fair to say that much had happened, both in regard to the accounts and in regard to the history of the Tudor aircraft, before the present Minister found himself suddenly caste in the rô le of Ariel. I think that it may well be that he deserves a measure of sympathy from the House for having acquired a not very attractive inheritance and because the time he has had may not have given him a full opportunity of exercising authority over his new domain. But I am bound to say, viewing it from a perfectly detached and dispassionate aspect, that the Courtney Report is a deplorable document: admirably considered, carefully drafted, but, in what it reveals, a deplorable and horrifying document. It seems to me to contain almost every ingredient which those who like bureaucratic control hoped would be avoidable and those who dislike it prophesied would be inevitable. It would be almost possible to reduce it to the terms of a recipe in the work of the late lamented and invaluable Mrs. Beeton: "Take two Departments, a Corporation and half a dozen Committees; rub well the wrong way until all are thoroughly sour; cut up responsibility into as many pieces as possible; add procrastination, hesitation, lack of co-ordination, lack of imagination, lack of control"—in fact almost every ingredient except of or ginger—"do not stir. Leave to simmer for several years and serve lukewarm."

The summary of this Report is contained in a paragraph to which the noble Viscount, Lord Swinton, referred but did not I think actually read, and it is perhaps worth reading. It comes immediately after the paragraph which he read. It is paragraph 90 on page 20, and it reads as follows: Summing up, we consider that the root cause of the trouble lay in defective cooperation between user and producer where there should have been single-minded concentration on the primary object, namely, to get the aircraft into service as quickly as possible; there was such an effective division of constitutional responsibility among the organizations concerned that each could find unimpeachable reasons for keeping its constructive activity within moderate limits; and on none of the parties was there such clear financial responsibility as would have impelled action. None the less effective leadership could have come from either of the two Departments, but for reasons which doubtless seemed good at the time, it did not. There is the typical example of too many authorities intervening in a procedure the essence of which is speed of execution.

And even now, when we turn to the recommendations of B.S.A.A., to which the noble Viscount has already referred, where they criticize the intervention of the Ministry of Supply, and then turn to the observations of His Majesty's Government on the Courtney Report, we find there is one clear omission. The B.S.A.A., having called attention to the system of ordering aircraft, put as their first recommendation, as a condition precedent of their being able to conduct their affairs on a satisfactory basis That the Corporation has control over as well as responsibility for ordering its aircraft. "Has control over"—that surely is the essential ingredient. Yet when we come to the Government's observations, after they have had time to consider this Report and have presumably been in consultation with B.S.A.A. and the other Corporations, we find they are careful to omit those essential words which give to the Corporation control of its buying operations. They go no further than to give themselves a gentle pat upon the back and say that the procedure for the ordering of aircraft was altered as long ago as September, 1946, and that for any contracts placed since that date "the Corporation take full financial responsibility." Nothing about transferring to those Corporations this all-important aspect of control. I do not pretend to be well versed in the inter-relations of Government Departments, but I confess I find it very difficult, reading this Report with the history of the past that it gives, to come to any logical conclusion as to why the Ministry of Supply were allowed to intervene and hold up this matter at all from beginning to end. And yet obviously the presence of the extra and extraneous Department was one of the prime causes for the muddle and delay which has unfortunately taken place.

I hope that the Government's observations attached to the Courtney Report do not represent the distillation of their ultimate wisdom on the subject. I hope that they are still considering the matter with the intention of making some radical changes and amendments; because, quite plainly, from the balance sheets and from the findings of the Courtney Report there is ample room for very serious heart-searching as to an adjustment of the present balance between the parties concerned, and for the introduction of a great deal more satisfactory machinery of administration than exists at the present moment. I would suggest that the venerable slogan "Peace, Retrenchment and Reform" may perhaps commend itself to the Minister: peace between the conflicting, or at any rate non-co-operating, bodies who are associated or should be associated in these operations; retrenchment which will at least bring the figures of loss down to a more reasonable size; and reform which will enable us to avoid in the future being confronted with any such document as unfortunately we have to consider to-day.

3.58 p.m.

The MINISTER of CIVIL AVIATION (Lord Nathan)

My Lords, in his opening observations the noble Viscount, Lord Swinton, made it clear that he was going to cover a pretty wide field, and he sought the indulgence of your Lordships' House for the time which he would occupy. If he will allow me to say so, I do not think that any of your Lordships will feel that he occupied a moment too long. I have to ask for a similar indulgence, and I shall cover very much the same field. The noble Viscount brought to bear on this subject many years of experience and much interest in aviation, both in the military field and in the civil; and I regard it as right that this debate on the presentation, for the first time, of reports by the Corporations should be initiated by one who was the first Minister of Civil Aviation.

The noble Viscount addressed himself to this matter without reference to the political implications which I think we are agreed are behind us. He discussed the subject from the point of view of business, and it is from that same standpoint of business that I propose to address myself to it. I apologize to the House for the fact that the report of the British South American Airways Corporation was in the hands of noble Lords only last evening. I had promised that I would push forward the printing of the accounts without delay; I indeed did so hut, for various reasons, they did not reach me until rather late. I ought to pay a tribute to His Majesty's Stationery Office for the effort they made to ensure that your Lordships should have the accounts before you for the purposes of this debate.

Let me say a word or two on the general form of the report and accounts. It is provided by Statute that I, as Minister, should prescribe the general form of the accounts to be followed by the Corporations; but when I have once prescribed the form, my responsibilities end. The reports and. accounts have been produced by the Corporations without any intervention on my part. From the beginning I impressed on the Corporations that these reports were to be their own, submitted by them to me. Accordingly, I must not be deemed necessarily to endorse everything that is included in the reports, although I feel that I may say—I believe I shall have your Lordships' concurrence in this—that the boards of the Corporations are to be congratulated on having presented very full and informative accounts to me. I, as Minister, in the position of a trustee shareholder, have laid these accounts before Parliament, as representing the general body of shareholders. I think it may be agreed that the accounts reveal a clear and frank statement of the affairs of the Corporations during the year in question. I have been pleased to observe the favourable comments in the Press about the form of the accounts, and I think I may fairly claim that the provisions of the Act, which lay down that the accounts shall be in a form complying with the best commercial standards, have been followed to the full.

So much for the form of the reports and accounts. Let me say a word as to the story they unfold. Let me make it clear, in the first instance, that I have not come here to-day to offer apologies. Losses, substantial losses, have, of course, been incurred by two of those Corporations. I will show why these losses have been incurred, why indeed they were inevitable. But consider, first, the other side of the picture—what has been achieved. Do not forget that the period we are considering is a period which ended last March—nearly a year ago. It began almost two years ago, within a few months of the end of hostilities. It is sometimes difficult to place oneself in the position of a past period, but we must do that in considering these accounts. They begin at a period shortly after the end of the war. During the war the whole of B.O.A.C's effort was directed to war tasks, in association, of course, with Transport Command. But the tasks of war are very different from the tasks of peace. You cannot train and organize a large-scale airline for a war task and expect it, in the twinkling of an eye, to transform itself into an efficient instrument for the completely different function of competitive airline operation, with the pretty high standards demanded in peace time. The whole organization has to be re-cast; you have to absorb and train new personnel; and, perhaps most difficult of all, you have to re-train your existing staff in new methods and instil in them a completely different set of values.

That is not a quick task, and it is certainly not an easy one. The Government could have said to B.O.A.C. "We appreciate the magnitude of the task before you, so we will ask you to undertake no new tasks until you feel that you are ready to shoulder them." We decided not to do that. We decided to take a different line, and I am sure that we were right. We said in effect to B.O.A.C.: "Opportunity waits for no man. Whatever the difficulties, the tasks must, in the national interest, be undertaken now, on the instant. Not only must you develop your services to Dominion and Colonial countries, but you must assist the development of civil aviation in those Colonial territories. You must make your technical services readily available to foreign countries with which this country has important historical and economic connexions." The result was that immediately the Japanese war came to an end, B.O.A.C. were called on to do simultaneously two very difficult and very different things. One was to reorganize their whole undertaking for peace-time operations in a highly competitive international field; the second was to expand their services in all parts of the world. In addition to that, they had to undertake a large number of responsibilities in the Colonies and in foreign countries which served important national and Commonwealth interests. I know of no airline that has been called upon to undertake such large-scale undertakings in such a short period of time. It has all been accomplished without any lowering of the high standards of safety and of service.

I may fairly ask your Lordships to look a little more closely at what has, in fact, been achieved. As a general indication of the effort achieved, I might mention that B.O.A.C.'s net route mileage in 1946–47 was 53,998; and 62,000 in August, 1947. B.E.A.C.'s route mileage by the latter date was already 17,000, after only one year's effective operation. B.S.A.A.'s figure was 21,000. Remember, too, though it is often forgotten, that B.O.A.C., as such, had had no previous peace-time experience; it was born only in 1940, when the war had already started. On the North Atlantic, the Constellation service started on July 1, 1946. Actual deliveries of the aircraft did not start until May. By November, 1946, four services a week were in operation, and since that date a service utilization of more than eight services a week has been attained, representing—I would draw your Lordships' attention to this—more than 3,000 hours per aircraft per annum—a very high utilization. Then, on the route to South Africa, the York services were increased in February, 1947, from two to six a week. Communications were maintained with West Africa (about which I shall have more to say later), and an extensive network of services was operated to and within the Middle East.

I want to say a word about those services in the Middle East. The noble Viscount asked me about unremunerative services undertaken for purposes of public advantage. Here is an outstanding example of services, not economic in themselves but essential in the national interest. They were originally operated by B.O.A.C. during the war as an adjunct to the war effort, and they were continued thereafter, at the repeated request of our authorities in the Middle East, as being essential to the discharge of our national responsibilities in that area. Those services undertaken for reasons of public importance cost some £600,000.

VISCOUNT SWINTON

Is that dead loss—no revenue at all?

LORD NATHAN

The cost was £600,000; it was not revenue; it was dead loss. I could continue the story of these achievements: increased services to India; a three times a week flying boat service to Australia, inaugurated to supplement the express Lancastrian service, a flying boat service from Singapore to Hong Kong, in addition to through services to both places from the United Kingdom, and so on. So much for the trunk services.

But in the year in question, B.O.A.C., with the active encouragement of my Ministry and the other Ministries concerned, associated themselves with, and actively assisted, a number of local air transport companies. In East and West Africa, for instance, local airline Corporations were set up, the general managers of both being seconded from B.O.A.C., and the resources of B.O.A.C. being made freely available to both. Then in the Middle East B.O.A.C. were also associated, in the capacity of technical advisers, with local airlines, as, for instance, in Iraq. This process has since been carried further. It would have been easy for me, as Minister, and for the Board of B.O.A.C., to have said that B.O.A.C. had too much on their hands to participate in these local developments. But would the broad national interest have been served if we had adopted that course? Had I come to you to-day and told you that these countries had been forced to look elsewhere for assistance, would you not have held me responsible? Would you not have said that I had neglected an important aspect of long term development?

I ought not to pass from this brief résumé of the achievements of B.O.A.C. in this year of transition and development which we are considering without placing on record a tribute to the services of B.O.A.C.'s late Chairman, Lord Knollys, to his untiring efforts, his extensive travelling, and his vision. Sir Harold Howitt, Deputy Chairman of B.O.A.C., placed his resignation in my hands fifteen months ago, but held it at my request till now. I should like to acknowledge his loyal and valuable services over the past critical years. As your Lordships know, Sir Harold Hartley succeeded Lord Knollys, and Mr. Whitney Straight was appointed to the post of Chief Executive, which was revived on the retirement of Lord Knollys. Sir Miles Thomes will be joining the board in March as Deputy Chairman and will concentrate mainly on problems of organization.

Now let: me turn for a moment to the other Corporations. Their achievement has been no less marked. I am not going to traverse the ground already covered very clearly in their reports, but if you will just glance—I hope you have already—at the maps in the reports, you will, I am sure, agree that both Corporations deserve the greatest credit for the development which has occurred in the face of very great difficulties. In the case of B.E.A.C., not only were they faced with the problem of forming an efficient unified organization out of the pre-existing companies operating internal services, the activities of which had been taken over by them, but, as their report shows, they were called on to tackle exceptional technical difficulties.

Of these, the main was the withdrawal of Vikings from service in December, 1946, for modification to remove the aircraft's instability in flight in certain icing conditions. The noble Viscount opposite referred to that matter. The aircraft were not reintroduced into service until after the close of the period under review. Of course:, these events had a serious adverse effect both on the revenue earned and on the costs incurred. Again, like B.O.A.C., B.E.A.C. have entered into association with overseas companies, a process which has since been considerably developed. In the case of B.S.A.A., not only were services on the trunk route to Buenos Aires, with a later extension to Santiago, started and developed well ahead of their competitors, but a new route opened to the Caribbean and extended to Venezuela, Peru and down the west coast of South America to Santiago. Thus, for the first time, not only the main countries of South America but also our British possessions in the Caribbean were connected by air with the United Kingdom.

I am confident that the long-term benefits of this development, economic and political, will be considerable. Let me add here that, on the best estimates presently available, in the twelve months ended December 31, 1947, B.E.A.C. flew 17,400,000 capacity ton-miles as compared with 5,400,000 for the eight months' period ended March 31, 1947. This represents an increase over the previous eight months' period of no less than 220 per cent. In the same twelve months' period ended December 31, 1947, B.S.A.A. flew an estimated 13,000,000 capacity ton-miles as compared with 9,200,000 for the twelve months ended March 31, 1947, representing a 48 per cent. increase, and B.O.A.C. 61,700,000, as compared with 59,300,000. These are important and significant figures and they show great progress. I have indicated briefly something of what has been achieved. It would have been easy to attempt less and it would have certainly cost less. But had we attempted less, had we been less courageous, in years to come we should have regretted our short-sightedness. Whatever criticisms you may level against the Corporations, you cannot say that they have failed in the face of great and, indeed, appalling obstacles, to show the British civil air ensign on every major air route of the world. That is something to be proud of.

Now I come to the question: Could what we have done have been more cheaply accomplished? Why is it that one Corporation has made a small profit and the other two substantial losses? Those are questions which were pertinently put by the noble Viscount opposite and by the noble Marquess, Lord Reading. Well, on the first point, the noble Viscount opposite rather indicated that his answer would have been "Yes, by private enterprise." But I do not see a particle of solid evidence on which to base his claim. It may be argued—I rather think the noble Viscount was inclined to argue—that Skyways and other charter operators have made money, but—

VISCOUNT SWINTON

What I said in comparing the three airlines was that the one which started as a private company and which presumably carried on with the same management, made a profit, as had its private predecessors; the others made very heavy losses.

LORD NATHAN

Well, all the D rectors principally concerned, the Chairmen and executives of all the three Corporations, come from very much the same school of experience. There is no argument, I think, to be deduced from that. I must point out to your Lordships that there are very different considerations and circumstances facing the scheduled and the unscheduled operators. I say nothing of the fact that Skyways have the advantage of owning a number of American aircraft. Quite apart from that, in the first place, the charter operator is free to choose the route he will fly, and when he will fly it. He is not required to maintain scheduled services on routes that may be uneconomic but are required in the national interest. In fact, he has been free to exploit to the full the abnormal backlog of travellers seeking passages at any price resulting from the war years.

In the second place, the charter operator sells the whole of the space in his aircraft before he sets off on a journey at all, so he is always, in effect, operating as if his aircraft were 100 per cent. full. Then, again, the charter operator is free to charge what the traffic will bear. He is not bound, as are the scheduled operators, by internationally agreed fares. Also, he has no responsibility for providing such extensive and expensive ground facilities as B.O.A.C. and B.E.A.C. have had. I would draw your Lordships' attention to the fact that in the case of B.O.A.C., station costs, after allowing for revenue received in the form of service charges to other operators, amounted to £2,736,241. There is nothing like that to be met by the charter operator.

VISCOUNT SWINTON

Surely the charter operator is charged the full commercial rate by B.O.A.C. or any other Corporation for the services they do for him. I am told, in fact, that they charge more than K.L.M.

LORD NATHAN

I have made it clear that after allowing for the revenue received in the form of service charges to other operators these expenses fall upon B.O.A.C. In the case of B.E.A.C., the figure was £524,000. In fact, charter operators, in return for modest user fees, have benefited considerably from the ground facilities that B.O.A.C. have had to provide and operate on a twenty-four hour day basis at their own expense at many overseas stations. I must make it clear that in mentioning these points I have no wish to detract from the achievements of our charter operators. Far from it. Their achievements have been considerable. I have repeatedly pointed out that as Minister of Civil Aviation I have a responsibility to charter operators in their legitimate sphere, no less than to our nationalized Corporations in their legitimate spheres. I have welcomed the formation of the British Air Charter Association, and I regret only that Skyways have not seen fit to join. It is a development which I have done my best to encourage. Moreover, I think I may claim that the relations between my Ministry and British charter interests have been relations of mutual respect and understanding. And I hope that our British charterers will feel, as is my wish, that my Ministry are doing all they can to help the operators in the field open to them under the Act. What I said earlier was merely to show that such comparisons between scheduled and unscheduled operators serve no useful purpose and certainly prove no point.

I may perhaps refer now to United States airlines, of which some mention has already been made. United States airlines are not socialized, but they illustrate the different character of scheduled airlines operating regularly to meet an uncertain public demand. So far as one can secure the comparative figures, in the period broadly covered by the present reports of the Corporations—that is for the year up to June 30, 1947—the three United States companies operating across the Atlantic lost on these services a total round sum of some 15,000,000 dollars. In the year ended June 30, 1947, which corresponds broadly with the period under review, the combined losses of United States internal airlines amounted to about 22,000,000 dollars. That is after taking into account any subsidy elements that may be included in the mail payments. So air transport, whether it be socialized or non-socialized, in the present state of the industry and the science presents difficulties from the point of view of profit making.

I come now to the reasons why one of the three Corporations has been able to earn itself a small profit. I do not think the noble Viscount sufficiently appreciated (he certainly did not make clear) that the circumstances facing the three Corporations were very different; and I must enter a warning against deductions made on misleading or mistaken hypotheses. Like cannot be compared with unlike. During the period of this account, B.S.A.A. were operating two long-distance trunk routes, one between the United Kingdom and Buenos Aires, with a later extension to Santiago, and the other from the United Kingdom to the Caribbean and the West Coast of South America. As B.S.A.A. will certainly be the first to admit, the fact that they were first in the post-war sphere of Europe and South Atlantic operations ensured to them a good traffic demand, concentrated on two routes, demanding the minimum ground organization—at first seven, and then thirteen, staging posts outside the United Kingdom. By contrast, B.E.A., with roughly the same traffic turnover, were operating on fourteen overseas routes, as well as on a network of internal services, many of them uneconomic but required in the national interest. The character and size of the ground organization required in these widely divergent circumstances is vastly different. In fact, B.E.A.C. maintained twenty-four overseas stations and twenty-seven at home. Furthermore, B.S.A.A. were operating with two types of aircraft, Lancastrians and later Yorks. Their operational fleet consisted of five Lancastrians and eleven Yorks. The former were hired to them at £2,000 a year each, an exceptionally low charge for aircraft in the budget of any operator.

VISCOUNT SWTNTON

Are they charged less than B.O.A.C. for their Lancastrians?

LORD NATHAN

That is not on the same footing at all. There were other factors, which I need not mention in detail, which favoured B.S.A.A. Their operational fleet was a small one, consisting of sixteen aircraft of two types, compared without about 140 of nine types in the case of B.O.A.C. This enabled them to save on aircraft maintenance costs by concentrating their maintenance at a single aerodrome, in close proximity to the aerodrome from which they were operating.

I feel that it is a little ungracious to make these comparisons, but it has been essential in view of the argument put forward by the noble Viscount. I have touched on these points not to detract from the merit, for it is merit, of what B.S.A.A. have been able to achieve, but to show that no effective comparison can be made between the efficiency of our three Corporations which does not give due weight to the very different circumstances in which they were placed and to the very different problems which they had to solve.

Now I must deal for a moment with certain problems of wider application In the course of their report the board of B.O.A.C. say: There is only one conclusion. Heavy deficits will inevitably continue until the Corporation has the aircraft and facilities to make it financially self-supporting in a highly competitive international business. I endorse that statement. It is no secret that some time ago the Board of B.O.A.C. represented to His Majesty's Government—as it was their duty to do—the extremely unfavourable competitive position in which they would be placed if they were required to operate interim types of British aircraft when their foreign rivals could use tried American types. Purely from the operator's point of view there could be only one answer to that. But the operator's point of view is not the only one of which account must be taken. His Majesty's Government decided, on grounds of national policy, that approval could not be given to the purchase of aircraft from the United States. In taking this decision the Government were not blind to what it would mean to B.O.A.C. themselves. The issues are so well known that I will not take up your Lordships' time in recapitulating them. But I must make it clear that the Government are determined that the British aircraft industry shall have the opportunity to make good these seven yeas that the locusts of war have eaten. The road we have chosen is a hard road, but I do not think any of your Lordships would say that it is not the right road. So let us not be misled by the comparative results of B.O.A.C.'s competitors who have been free to buy the types of aircraft they require in a free market.

Have you considered, quite apart from the direct operating costs of the aircraft they use, the problems with which B.O.A.C., unlike their competitors, are faced? Nine different types of aircraft mean nine different sets of spares—and spares on the scale required to back up scheduled operations are extremely expensive. It means conversion courses for air and ground crews—and crew training is an extremely expensive item. It means the maintenance of two separate organizations, one to deal with land planes and one to deal with flying boats, with all that that means in the way of ground facilities for flying boats, for which B.O.A.C., as the only flying boat users, are to a large extent responsible. The cost to the B.O.A.C. of their marine organization alone exceeded £1,000,000. In these circumstances, is it really surprising that a heavy loss has been incurred? And let me add this. These losses were not unpredicted. They were foreseen as an inevitable corollary of the policy to which I have referred. The figure of £10,000,000 which appeared in the Civil Aviation Act, 1946, was no shot in the dark. When the Civil Aviation Bill was before your Lordships in 1946, my predecessor in my present office warned your Lordships that he could not be certain that the whole of the £10,000,000 would not be required in the first year. But this loss is part of the price we have to pay if the British aircraft industry is to have the chance to produce the new breed of aircraft which we are confident will lead the world.

Another point you must not forget is that our air transport is in a period of development. Now development in all fields costs money. Consider, for example, the millions of pounds poured into the development of our railways a hundred years ago, and how much of that money was lost irretrievably. Any normal commercial undertaking expects to incur development expenses which it meets out of share capital over a long period of years. Had B.O.A.C. been a normal commercial undertaking, they would have said, first, that development would have to wait until suitable types of aircraft were available, and, secondly, that in their period of growth the tasks they could undertake would have to be limited. Would anyone suggest that either course would have been in the national interest?

Let me now mention one or two points in the accounts in this connexion. Take, first, crew training. People speak very lightly of crew training, but this is a large figure. In the case of B.O.A.C. it amounted in the year in question to no less than £1,095,000, and in the case of B.E.A. to £590,500. It would have been normal airline practice to spread these costs over, say, a five or seven year period. We have not adopted that course. The whole cost has been borne in this year's accounts, and the deficit increased accordingly. Another point is that an ordinary commercial company starts life with a share capital which is not repayable during the life of the company. Our Corporations have no share capital, only loan capital, which has to be redeemed and on which interest has to be paid currently. Substantial provision has been made in the accounts of B.O.A.C. for amortizing their loan capital.

I should like to say a little more on this point. Since the Corporations are working on loan capital, their accounts bear an interest charge of 2½ or 3 per cent. on the whole of their capital. Moreover, as soon as an Airways Corporation issues stock it incurs another charge on its revenue, which is in addition to anything private enterprise ordinarily has to meet in the early stages of a company's existence. This charge is the provision of annual contributions to a sinking fund sufficient to cover the redemption of stock at the due date, usually thirty to thirty-five years hence. The annual contributions are therefore equivalent to about 3 per cent. on capital, and, together with interest charges, impose on B.O.A.C. (the only Corporation which has yet issued redeemable stock) an annual capital charge of 5½ to 6 per cent. Thus, if B.O.A.C. were to break even, it would be equivalent to the earning of a dividend of at least 5 per cent. by private enterprise operating with the same amount of capital. We have provided not only for full amortization of all assets but also for the redemption of stock. We have, in fact, adopted a policy, not in this connexion only but elsewhere in the accounts, which is not merely conservative, not merely austere. We have adopted a financial policy which is even sadistic. No commercial firm would adopt a policy so puritanical as that adopted by these Corporations.

Having dealt in general terms with a good many points to which it seems to me the attention of your Lordships should be directed, and incidentally having touched upon some of the points mentioned by the noble Viscount, let me come to the specific questions he has put, or as many of them as your Lordships' patience will permit me to answer. He wants to know why the Nigerian Government were forbidden to make a charter agreement with Skyways; why B.O.A.C. operate the service with Halton aircraft at heavy loss, and whether Skyways could have operated with Yorks without subsidy.

VISCOUNT SWINTON

No, with Constellations.

LORD NATHAN

Skymasters. I will deal with the Skymaster point first. Skyways were authorized to buy Skymasters for a limited and specific purpose which did not include this purpose.

VISCOUNT SWINTON

I am sure the noble Lord would want to make the matter quite clear. Assuming they were authorized to buy mem to run on Route A, and they were not required for that, and it was in the interests of Nigeria and the British taxpayer to run them on Route B, why should that not be done?

LORD NATHAN

Skyways sought permission to use foreign currency for the purchase of Skymasters for use for a specific, stated, limited, authorized purpose and for no other purpose. At the time this matter came up for consideration, His Majesty's Government had already refused permission to the British Corporations to buy American aircraft. It would be an impossible position that the Government which refused the Corporations the right to buy American aircraft should allow another organization to compete with them on their own routes with American aircraft, when those aircraft were authorized for an entirely different purpose. At the time Skyways approached the Nigerian Government to operate a service between West Africa and the United Kingdom, B.O.A.C., as I think the noble Viscount said, were already operating a coastal service with Dakotas and were also planning to replace their service with Haltons. We have always held the view, which, I gather from the White Paper, is shared by the noble Viscount, that it is uneconomic to duplicate services unnecessarily. The main responsibility for providing imperial air services devolves on the United Kingdom, and it was an understanding with the Colonies, which has since been formally confirmed, that they would not normally seek to establish services competing with services provided by the Corporations. It was in pursuance of this policy, and of the fact that B.O.A.C. were planning a trans-Saharan service, that the agreement with Nigeria and Skyways as a long-term venture was discouraged.

Nevertheless, a contract was placed with Skyways during the interim period until the Halton service came into operation. It is part of the Government policy—which, again, seems to have been shared by the noble Viscount—that the respon- sibility for developing Imperial communications, which are of such importance to us, should be assigned to B.O.A.C. Moreover, under the Civil Aviation Act, 1946, these services are reserved by Statute to the Corporation.

When the war ended B.O.A.C. were obviously confronted with a formidable task in securing the necessary aircraft capacity to develop the Empire routes. In accordance with the policy of using British aircraft for this purpose, the Corporation had unavoidably to acquire Haltons in order to obtain sufficient capacity to develop their network of services. The Corporation did not wish to use this particular aircraft, but it must be realized that this course was unavoidable if they were to secure all the capacity necessary to develop Empire trunk routes. There are a limited number of routes for which these aircraft are suitable, and it was decided to use them on the United Kingdom—West Africa service, as well as to some extent on other routes. Wherever these aircraft were employed, their passenger-carrying capacity was no greater than on the United Kingdom—West Africa service and a loss of operation was bound to be involved. The noble Viscount asked what is that loss. It is approximately £9,500 a week operational.

VISCOUNT SWINTON

A loss of £9,500 a week, when the Skymaster could have done it with no cost to taxpayer?

LORD NATHAN

That must not be assumed.

VISCOUNT SWINTON

If the noble Lord means that the Skymaster would have made a loss, let him say so openly.

LORD NATHAN

I cannot enter into competition with the noble Viscount as to how the Skymaster operations would have worked out. I have told him how the B.O.A.C. operations would work out. It must be obvious that in the situation facing the Corporation, the development of this wide network of Commonwealth services, there were possibilities for a freelance private organization to offer a more economical service on a particular route or section of a route. But the Corporation is entitled to reserve to itself the right to develop the routes for which aircraft capacity has been planned and provided, rather than to allow private companies to single out a particular route which they think may temporarily be remunerative. It will be clear on reflection, I think, that if the principle were admitted that for every private company which foresaw the possibilities of running a particular route temporarily more economically than the Corporation were able at the moment to do, the position of the Corporation, charged with the responsibility of developing all the Imperial communications, would have been undermined. The companies would skim off the cream and leave the Corporation with the inherently uneconomic services. I do not think I need take that matter further, because there are a considerable number of other matters to which I must refer.

Reference has been made, quite properly, both by the noble Viscount and by the noble Marquess, to the Report of the Courtney Committee and the use of the Tudor IV. The Government statement annexed to the Courtney Committee's Report deals with the use of the Tudor I. The Tudor II, of which the first prototype was destroyed, has not yet completed its trials, and until more is known about its performance the question of its use must be deferred. The noble Viscount then asked about the Tudor IV. The Tudor IV is an adaptation of the Tudor I, the principal structural change being a lengthening of the fuselage by six feet. The Tudor IV, which has been developed almost concurrently with the Tudor II, has had the benefit of the incorporation during production of modifications found necessary in the Tudor I, following the operational trials of last year. Your Lordships will recall that the first prototype of the Tudor II crashed, but a second prototype has now reached Boscombe Down for trials.

I do not propose to say much on this occasion on the Interim Report of the Courtney Committee. All our efforts must be concentrated, and are concentrated, in getting the aircraft into service. With this in view, and with my encouragement, the Chief Executive of B.O.A.C. has been in touch with the senior executives of A. V. Roe & Company, the manufacturers, and a joint statement was issued on January 19. In case your Lordships did not see it in the Press, I would like to quote that statement here: B.O.A.C. and Messrs. A. V. Roe entirely concur with the Courtney Committee that the aircraft manufacturer and the operator should work together with enthusiasm and harmony. With this in view the Corporation and the Company will co-operate fully in order that the Tudor aircraft should be put into operation on the B.O.A.C. routes at the earliest possible moment. In fact, they are already conferring as to the best means of giving effect to the wishes expressed in paragraph 4 of His Majesty's Government's observations on the Courtney Report. I think your Lordships will agree with me that that is a good spirit to have developed, and will be pleased to learn of this announcement. I myself am anxious to say nothing, and I am sure others will say nothing, here to-day that might adversely affect the efforts that are being made. I must, however, make one comment upon the observations of the noble Viscount, Lord Swinton, in commenting upon the Government's observations. The noble Viscount suggested that possibly the Tudor I's in question might be converted into Tudor IV's. That is an interesting suggestion well worth taking into account, and I will certainly undertake to the noble Viscount that the suggestion shall have—if, indeed, it has not already had—very careful consideration.

There is another matter to which I must refer in this connexion. In a daily newspaper to-day there appeared a statement—indeed, similar statements have appeared, in actual terms or by inference, elsewhere—to the effect that B.O.A.C. had been ordered to use the Tudor I on the Atlantic. I must make it entirely clear that any such statement is wholly without foundation. No such order has been given, and the position is precisely as stated in paragraph 4 of the Government's observations, and in the joint statement by the operators and the manufacturers, to which I have already drawn your Lordships' attention.

The Report of the Courtney Committee naturally brings me to the important subject, to which both the noble Viscount and the noble Marquess referred, of ordering procedure. It is not quite such a simple matter. The ordering procedure for aircraft involves the reconciliation of the interests of a number of parties—the Corporations, the Ministries, and the manufacturers. These interests are interlocked and they cannot be dissociated or treated in isolation. The Corporations are financially responsible for the purchase of their aircraft requirements, but in certain cases the Government have assumed initial liability for the development of new types, a responsibility which, both in this country and the United States, has been acknowledged frequently to be beyond the resources of the operators and the manufacturers. The working of the procedure for reconciling these interests in a manner consistent with their liabilities and responsibilities is being constantly watched, and has been adjusted since the orders for Tudors and contemporary types were placed. Nevertheless, the Government are not entirely satisfied with the existing procedure, and have decided to call into consultation a few men of wide business and administrative experience to assist them in reviewing that procedure.

The noble Viscount opposite asked me about loaned or leased aircraft. No aircraft at present operated by B.O.A.C. are loaned or leased to them, but any leasing arrangements, if justified as an alternative to purchase, would be at an economic rental. The Jupiters, or JU 525, operated for a short time by B.E.A., were hired to them at a low rental. The earlier short-nosed Viking was loaned to B.E.A.C. at an economic rent pending replacement by the later version.

VISCOUNT SWINTON

The noble Lord is much more familiar than I am with this matter, but I notice at the end of the report of the B.O.A.C. a list of aircraft about half of which are stated to be owned by the company and the other half loaned or leased.

LORD NATHAN

If the noble Viscount will leave that point for now, I will see that an answer is given.

VISCOUNT SWINTON

Is every aircraft charged to the Corporation at an economic rate?

LORD NATHAN

I have given the facts with regard to the Jupiter aircraft which were hired at a low rental. If I find my observation erroneous, then I will correct it, but I understand the position to be as I stated it.

VISCOUNT SWINTON

At an economic rent?

LORD NATHAN

Yes. Various considerations have to be taken into account. For instance, at present, with so many interim types of aircraft in service, the prospective life of an aircraft is probably rather on the low side. That takes info account the probable future life of the aircraft.

VISCOUNT SWINTON

Thirty-eight aircraft are shown in this list as being on loan. If the noble Lord will look in the B.O.A.C. report, Appendix B, at page 38, he will see that there are 133 aircraft which are owned by B.O.A.C. Then it says: "Aircraft on loan from the Air Ministry," and of those there are thirty-eight.

LORD NATHAN

I think the noble Viscount would like me to give him a definite reply.

VISCOUNT SWINTON

The noble Lord will appreciate that if they are not charged at an economic rent, he is taking a loss. He is giving a concealed subsidy, and the loss of B.O.A.C. is even greater than appears.

LORD NATHAN

My understanding is that these are paid for at an economic rent. As the noble Viscount challenges me on a particular instance, I feel I should verify my facts. I should not like to mislead the noble Viscount. But, of course, I understand the implications of his argument.

With regard to priority reservations, I do not think the noble Viscount clearly differentiated between the releasing of priority reservations and the cancellation of priority reservations. They may be released some considerable time before the due date, and in that event they are given back to the Corporations in order that the seats may be sold in the ordinary way. But where there is a cancellation in inadequate time, as opposed to a release, then the Government Department concerned bears the cost. The noble Viscount would be much mistaken were he to think that these priority seats are limited to Ministers or Government officials. Most of them are reserved at the instance particularly of the Australian and South African Governments for business men. A question was also raised about aircraft replacement. Many of the airfields which aircraft employed by B.E.A. have to use are difficult of access to any known replacement type, and accordingly there is no alternative but to continue existing aircraft in operation. On other services the existing types are being replaced by Dakotas released as Vikings are brought into service on Continental services.

The noble Viscount then asked me about fares. The position with regard to fares is as follows. There is an International Air Transport Operators' organization, where the international operators meet together and come to some conclusion as to the fares which should be charged. A reduction was made in the fares not very long ago. The United States airlines, as I have already indicated, incurred losses. It is difficult to indicate the full measure of losses of foreign operators compared with those of B.O.A.C. because of the practice in a number of countries of making generous mail payments which reduce the losses. I think I have covered the main questions put to me by the noble Viscount. I have already made large claims on your Lordships' patience, and I have no time to deal with other main aspects of civil aviation, but I feel I should say this to those concerned in private flying, in which I take a great interest. I can make no promise except that the interests of private flying will continue to engage my close attention, and that I will sympathetically consider any proposals designed to foster the well-being of this important part of our civil aviation, in so far as they are practicable, in the situation in which we find ourselves.

I have indicated to your Lordships something of what has been achieved. It was always envisaged, as far back as 1946 when the Civil Aviation Bill was before Parliament, that in these years of development heavy deficits would be unavoidable. I have explained in general the reason why these deficits have occurred. Indeed, I should be lacking in frankness if I did not warn the House that we are not at the end of our difficulties. We have accepted with open eyes the consequences of "flying British," which will involve continuing loss for the next few years until our new types on which we rely to lead the world become available. But the Government is determined that there shall be no element in that loss which powerful management or ruthless economy control can obviate. I realise, of course, that the House is disturbed at the results disclosed by the accounts of the Corporations. We are all to some degree disturbed. I have shown that unavoidable causes lie at the root of these results.

I ought perhaps to say to the House that I have observed in the Press various suggestions about the fundamental re-organization of civil air transport. I think it may be assumed that any such proposals, which would undoubtedly involve amending legislation, would emanate from the Minister of Civil Aviation. I have made no such proposals. Civil aviation arouses considerable interest in Parliament, but fortunately not political antagonisms. We all have the common objective of making our air transport the success which the enterprise, skill and resourcefulness of our people can make it. We have the finest air crews, maintenance and traffic staffs which the world produces. They are all loyally doing their utmost to carry out a policy dictated by the national interest and by the legacies of the war. By their efforts, in the face of these handicaps, they have already achieved marked success, in establishing in the air a reputation for safety and quality of service such as that for which we are traditionally renowned on the sea. The Government does not seek to evade criticism of its policies even if such criticism may prove to be groundless. I am sure we shall at least unite in avoiding criticism which may be misinterpreted by those responsible for carrying on the work as a reflection on their efforts. They are deserving of the fullest measure of our encouragement and the fullest measure of our confidence in their ability to triumph over unavoidable temporary disadvantages. It is for us to see that these disadvantages are indeed only temporary, and it is to that task that we bend ourselves.

5.1 p.m.

VISCOUNT KNOLLYS

My Lords, I find myself to-day in a rather unusual position. For the first time for many years my lips have become unsealed. I am taking the opportunity of speaking in this debate with the object, not of striking out wildly in various directions in virtue of any knowledge I may have accumulated, but of trying to add to the general information and to give some further information on various factors in the development of British air transport. I was very glad that, so far as the Corporations were concerned, the noble Lord, the Minister of Civil Aviation, was able to fill in some of the gaps in the information regarding their results and the conclusions which have been drawn generally from those results. I was particularly glad that he went back to some of the fundamental questions of policy and to the objects with which, as the noble Viscount, Lord Swinton, will remember, we began several years ago. Our main object was to put civil aviation on the map. It was to ensure that there was an effective British air service linking the whole of the world and particularly the various parts of the British Commonwealth. I think there was No 1llusion on anybody's part but that, if the only aircraft to be used were to be the British ones which were available, we were bound to pay a heavy price for our policy. The price, as the Minister has said, is now being paid.

But I think it is only fair to those who are concerned with civil aviation now, and particularly to the staffs of the Corporations who, under the greatest difficulties, have been labouring during these past few years to produce British air lines, and very worthy ones at that, to point out what have been the achievements and the developments. It has been suggested that very little has been obtained for the £10,000,000 which has been lost. Incidentally I was surprised that anybody should wonder that the figure was in the neighbourhood of £10,000,000, because only a comparatively short time ago that very figure was mentioned, and further deficits of a rather similar amount in the future were allowed for. But it is a question of what the country has got for its money. I need not go further into that now, because the Minister has covered the point fully and filled in some of the gaps which may have been left in the references of previous speakers to the deficits which have been published As to the cause of the deficits, it is true to say that it is always rather dangerous to put forward too many reasons for losses. That point was made very well, if I may say so, by the noble Viscount, Lord Swinton. But as one who has experienced, at extremely close quarters, those particular difficulties, I might mention one or two points with which everyone may not be familiar.

Two of the main problems which have been mentioned are those of uneconomic aircraft and of scattered bases, and perhaps I may say a word about the second one first. It is not perhaps realized that every passenger which B.O.A.C. carries, to and from the far parts of the world, embarks and disembarks at Heathrow Airport, London; and until very recently, and then only to a small extent, it has not been possible to stable, so to speak, at the point of embarkation and disembarkation, any of the aircraft which actually carried those passengers. These aircraft have been stationed at four different bases in England, at a base in Montreal, at a base in Durban, and at a base in the Middle East. Imagine what the position would be with a railway company in such a case, not only in cost but in loss of efficiency. There was indeed a time when very active preparations were being made for bringing Tudor I into service and the preparations were well advanced, and the aircraft had to be put in the only place which we could find any-where, and that was at Ringway aerodrome, Manchester.

A great deal has already been said about the question of uneconomic aircraft, but one point has not been brought out. Perhaps the Minister or whoever is replying to the debate may be able to give your Lordships a rough estimate as to the amount of the deficit or loss which would be eliminated, either in the past or now, if it had been practicable for the Corporations to use some kind of economic aircraft such as are used not only by their competitors, the K.L.M. and other European airlines, but even now, I am sorry to think, by their colleagues, the Qantas, operating in Australia, and the South African Airways in South Africa. I believe that the figure is very large. May I quote an authority who will, I think, meet with general approval, namely, somebody from the shipping world—people who are always supposed to be able to run airlines better than anyone else. I quote from a letter which appeared in The Times on January 8 from Major Thornton, in which he speaks of the possibility of a reduction of the operating loss from £7,000,000 to about £3,500,000 if aircraft had been designed for the special job. His remarks illustrate what uneconomic aircraft really mean. Major Thornton says in his letter: Ask a shipping man how much he would like to operate a cargo ship of 7,500 tons gross but capable of lifting only 4,500 tons weight of cargo, and watch his face. I think it is realized that it is a very proper policy to use British aircraft, but that that policy must be paid for. It is only fair to the Corporations, however, that we should in some way be able to draw a distinction between those parts of the results which are due to national policy and those parts which are due to the ordinary commercial functions of the Corporations. If that can be done, and I believe it can—I do not think it is impossible for a competent accountant to produce these figures and then for them to appear in the annual reports—it would enable proper criticism to be directed to the results of the Corporations so far as their ordinary commercial operations and functions are concerned.

It is difficult to divide up the very large deficits of two of the Corporations into the amount which can be taken as a fair test of their ability and the amount which, on account of national policy as regards aircraft, they cannot control. I hope it may be possible to give these figures, if not now, in the future. There must be, of course, ways in which such a deficit could be largely reduced by the Corporations themselves if they were entirely free in their actions. There may have been proposals, as indeed there were at one time, as to how that could be done, although they may not have been recorded in the policy of the Government.

I would like to say rather more than has been said up till now on the all important question of equipment—in other words, aircraft. The question of equipment affects every phase of the Corporations' activities and is the primary factor in the whole of air operation. I will not to-day refer—I do not think it would be appropriate for me to refer—to what is in the Report of the Courtney Committee, because I myself might be held to be involved in it; but I will allow myself to refer to one point in it. Your Lordships may well remember debates some years ago regarding the great activities of the very energetic Director-General of B.O.A.C. at that time, General Critchley. His energy and activity were the subject of questions both in this House and in another place. Your Lordships must have been very interested in the criticism which was made at that time that there was a lack of drive in the attitude then of General Critchley and the B.O.A.C.

I would like to say something on a point which is not mentioned very much in the Report, but only rather indirectly, and that is the. all-important question of the procedure in ordering aircraft. That matter has been referred to by the noble Viscount who opened the debate and also by the noble Marquess, Lord Reading. I would like to support very strongly what has been said in that regard and also what has been said by the board of British South American Airways in their report, which puts the points of difficulty very clearly indeed. It is a question of finding the right procedure in this matter which, in my opinion, has had a great effect upon the difficulties of the past. I think I might be allowed to say that, looking back on it now, I always felt that the greater part of the difficulties in the development of, for example, the Tudor, would never have occurred had there been more direct responsibility placed on the Corporation. Had it been possible for them to talk those matters over, man to man, round a table and, what is more important, to take a final decision, they would have been enabled to get over many of these difficulties. It is the hardest thing in the world, when one is trying to get over rather difficult negotiations, to have to hold back and be constantly looking over one's shoulder.

But that is the past. Let us concentrate on what can be done in the future, and try to see how matters can be improved. The first thing one has to realize is that there are five parties to the development and production of aircraft for the air routes. There are four very active ones and one which is—but not for long—a sleeping partner: the Ministry of Supply, the Ministry of Civil Aviation, the user, the manufacturer, and, in the background, the Treasury. When I have been engaged in negotiations which were of a rather odd kind I have been reminded of a game of bridge. There were the two partners on either side—one a very senior partner and the other a very junior partner. On one side there were the Minister of Civil Aviation and the user, and on the other side there were the Minister of Supply and the manufacturer. I can say that the bidding was very much in the hands of one partner on each side, and I think I know from experience who was generally the dummy! Direct contact is all very well but it is not the least bit of good unless it is effective contact enabling decisions to be taken direct between the parties concerned.

In the observations of His Majesty's Government on this Report, the point has been made that the Corporations have been given, at some date which I did not find it easy to recognize, complete financial responsibility, and there was an allusion to the Self Committee, which in itself was a very valuable Committee but is not the solution to this problem. The giving of financial responsibility without power seems to me to be likely to make the position of the Corporations worse. I wish to be constructive. I would like to put to your Lordships, and perhaps for the consideration of the Government, a more constructive approach to the problem. I recognize from the very start, as I think all those connected with the Corporations have recognized, all that has to be done in the early stages in the way of consultation and all the various factors outside the direct interests of the airline, the user and the manufacturer, which have to be taken into account, but I still think that a way can be found round the difficulties. If we could carry it through on these lines, I suggest that we would get somewhere near the answer.

We have first to clear up the question of the broad amount of financial outlay which is involved in the production of an aircraft. The relationship between the airline operator and the Ministry of Civil Aviation comes naturally through the discussion of the Estimates in another place. In the first place, the size of the undertaking and the cost of its provision can be settled. You must, of course, clear up the question of military needs and also the question of the importance of delays to the aircraft industry as a whole. You must be quite sure that that is settled so that the operator can then deal with the aircraft manufacturer, who must not have too much imposed upon him, if he has a large amount of military work to do as well as the production of civil airliners. Having cleared up those matters very properly with the Government Departments concerned, then, and from then onwards, I can see no reason why there should not be full financial, technical and contractual responsibility between the user and the manufacturer, with the power to take effective decisions within the broad policy which has been agreed.

There were always problems about modifications, whether it was in the Air Force or in airlines before the war, but it is possible to solve problems when two people know that they can take their own decision after discussions. That is what one means by having effective direct contact. I think that we should be able to solve many of the problems which are facing the Government, and clear up these matters, both in regard to policy and finance, and yet give effective power to produce the aircraft to the two people concerned at that stage, the user and the manufacturer. I am perfectly sure that if we do that we shall be able to get the right aircraft at the right time. If the matter drifts on under the present conditions we are likely to have a constant repetition of the problems which have been illustrated by the Tudor Report.

There is one other point which I would like to make. This debate to-day, I am sure, has been invaluable from the point of view of everyone. I am sure that the same will be true of debates which will take place in another place later on the reports of the Corporations. But after the matter has been fully ventilated and discussed and criticized—and no one would have any objection to proper criticism in these debates—I would ask this question: When are those who are really responsible for operating airlines, and who face immense difficulties in every part of the world, going to have a real opportunity to settle down to do the job for which they are there? I would not suggest for a moment that there should not be proper criticism. I say only that it should not be at too frequent intervals and at too regular times. The inquiry into the Tudor I was very necessary, and there may be others; but I would ask your Lordships to think for a moment of the effect on those people who are trying to do their day-to-day work in running airlines.

In connexion with that, a recent incident will illustrate the point. The Courtney Committee were set up on September 27. They had an extremely difficult and full task to fulfil, but the Report was signed on December 11 and was published on January 19. It is to be followed by another Report on a slightly different aircraft from the same stable. There are, I believe, eight different marks of Tudor, and if there are to be a series of inquiries into each of those, and separate Reports, with all that that means in regard to effort and thought for building for the future, I think it will impose a very big and perhaps unnecessary handicap on the airlines themselves. There is, as your Lordships will know, an immense amount of work to be done in regard to the preparation of material and discussion, particularly when it goes back four years into the middle of the war, as it does in the last case. Naturally the airlines want all the help and co-operation they can get.

Those are the facts, and they are extremely disturbing to any smooth-running organization, or one which those concerned are trying to make smooth-running. I wonder whether we can find some way of having a close season for pulling out by the roots the various plants of civil aviation to look and see how they are growing, to see exactly why any individual crop is slightly withered, or why another has produced too many leaves and not enough flowers. I make that appeal mainly on behalf of the magnificent staffs of these Corporations throughout the world. Those at the top of these Corporations—the Board and, if I may say so, particularly the Chairman—are there for the purpose of taking the burden of this kind of public statement and criticism. It is their job to do that. It is not of them that I am thinking, although they have my sympathy; it is of the whole of the rest of the staff, who are most enthusiastic and desperately anxious to do a good job in what they very rightly look upon as a great national undertaking which needs to be developed for the benefit of this country.

Those of your Lordships who have had experience of the running of a large organization, as many of you have, will realize what a delicate flower is the enthusiasm, the loyalty and the esprit de corps of the staff. It is very delicate indeed. It is very difficult to build up. That spirit is there with the staffs of the Corporations now, and I hope they are going to have a chance to feel that they can look forward and apply their energies with some continuity, without reading regularly every week in the papers how extremely inefficient in one way or another their managers are. That, I think, is a most important matter in making a business a success—the human side and the feelings of the staff in the matter. It is on that account that I make that plea to you, to give all those fellows a real chance to be able to get on with the job.

5.28 p.m.

LORD KERSHAW

My Lords, in accordance with the custom of this House I must declare that I am a member of the British South American Airways Corporation, the Corporation that has been the subject of very generous tributes by the noble Viscount who initiated this debate. Unless I am mistaken, the accounts in the report which the House has been discussing to-day refer to a period before I was a member of the Corporation. Therefore, whatever tribute may have been paid to my colleagues could not possibly refer to me. I would, however, like to pay this tribute. In the six months that I have been a member of this Corporation I have come to certain conclusions which I feel entitled to ventilate in the House at this time. Before I do so, however, I would like to join in the tribute that has been paid to the officers and the staff of the Corporation. From a long experience of public and commercial life, I venture to say that no undertaking could have officers keener, more enthusiastic, and with more initiative than my colleagues who are responsible for the day-to-day administration of this Corporation. They would be the first to say that the pleasure which they have derived from the progress of their Corporation is limited only by the difficulties with which the other Corporations have been faced.

Parliament, in its wisdom, intended that the Corporations should be very much more than air transport organizations. They had to be responsible for the development of civil aviation as such. A loss was foreseen and provided for, and it is, I think, a compliment to those who made the estimate of loss that the loss over the whole is only 2 per cent. above the estimate. I repeat that when the Act of Parliament under which the Corporations work was passed, Parliament understood quite clearly that in view of the extra-commercial services that the Corporations had to undertake there was bound to be a loss. But the moment the accounts are presented the whole world appears to forget these extra-commercial responsibilities which have been placed upon the Corporations. It is quite natural that it should be so; generally speaking, one cannot complain about it. Naturally, people who look at accounts and reports relating to these Corporations cannot avoid applying the ordinary commercial test which they would apply to the balance sheet of an ordinary commercial enterprise. That is done even in quarters where it can be least excused.

No doubt your Lordships will have listened to the news broadcast yesterday, in the course of which the accounts of the British South American Airways Corporation were mentioned. The only comment from the B.B.C. was to the effect that the accounts of that Corporation had shown a profit while the accounts of the others had shown losses. Nothing is said of the research carried on by other Corporations, or of their development services which are of such value to the nation as a whole. Who would dare to assess the value of the work that is now being undertaken by these three Corporations if ever there should be another Battle of Britain? The tendency to regard the Corporations as purely operational undertakings, and to look at their profits or losses from the standpoint of an ordinary commercial enterprise—that is to say, as the only measure of the efficiency or otherwise of the administration—is quite wrong. The emergence of a profit or a loss—and this is a matter which has been touched upon already by the noble Viscount, Lord Knollys—undoubtedly has a psychological effect on everyone associated with the industry, and not least on its rank and file. It is not good for the morale of the workers, the staff or the executive, that the making of a profit should be utterly impossible under this or any other system.

The noble Viscount, Lord Swinton, who, I am sorry to note, is not now in his place, was careful to interrupt the Minister to make quite sure that there were no further losses, hidden losses, in the accounts. The noble Viscount must have known that there were any number of hidden profits to the nation in the accounts. I agree with the noble Viscount, Lord Knollys, who has had much more experience of this business than I, that with the accounting knowledge at our disposal it should be possible to devise a system to separate more clearly factors which can be regarded as purely commercial from others. In the latter category I include research, design development, political factors, national, Commonwealth and other factors, operational and otherwise, all of which are vital to the nation, but which, except to a limited extent, would not be the concern of an ordinary commercial undertaking. There is, of course, considerable detailed analysis in the accounts, but there is no clear division between that which is purely commercial and that which is extra-commercial.

The principle of more accurate segregation of these factors in the accounts is not new. It is significant that in the report of the British European Airways Corporation on Page it, they say: our technical experts are undertaking practical research into two projects which may govern the trend of civil aviation in the future. … Your Ministry has recognised the value of this research work by arranging that the cost of the experiments will be borne by the Government departments concerned, and will not fall on B.E.A. I would like to see an extended recognition of these services, which it appears are largely responsible for the deficit in the accounts. There should be a clear recognition of what is purely commercial and what is required by the nation, either for the development of aircraft as such or for the maintenance of communications which could in no circumstances be neglected.

The same report mentions a matter which I think ought to be considered, and that is the relatively high scale of landing fees charged in this country; also the fact that radio navigational and blind approach aids are inadequate. Then the report goes on to say, as is. perfectly true, that "the foundations of our success as airline operators in the years ahead must be laid now." But by whom? By the Corporations which the public, and even people better informed than the everyday public, judge by the balance sheet at the end of the year, or by the Government Department which is subject to Parliamentary control on the development charges? I believe that the moral effect on the Corporations—as on any other undertaking, for that matter—of not being able to contemplate, even in the remote future, a profit on their undertakings is bad. It is bad for the personnel from the top to the bottom. Private commercial enterprise might appear to be able successfully to run the business of air transport, but, as I think was mentioned by the Minister, they can run profitably only by eliminating all that I have referred to as extra-commercial factors and by limiting their operations to those things which are commercially profitable at a given moment of time.

The nation has a much wider interest in civil aviation than that Parliament has said so. There is the vital interest of the air communications with the Commonwealth as a whole, and, as I have said, there are other, to many of us most disappointingly, more tragic reasons why Britain cannot neglect aviation. I do not want to detain your Lordships at this late hour, but I would like to throw out a suggestion. It is this. It may be that because of the youth of the civil aviation industry, it is bearing a very much higher educational cost than any other industry in the country. It has not been in existence long enough to draw in its youth at the bottom, and gradually educate them up into its own sphere of work and technology. I mention this only because I believe it may be a factor tending to produce the deficits which, as I have indicated, it might be possible to segregate more clearly.

One other point was mentioned by several speakers, and I am glad that the noble Viscount, Lord Knollys, with his greater experience, also advocates it. I have quite clearly come to the conclusion in the short time that I have been associated with this task, that it is sound business to eliminate the Ministry of Supply from this work. I gather, from what the noble Lord, Lord Nathan, said, that the Government intend to look closely at that matter. The very fact that we are desirous of concentrating all our Government connexions in the Ministry of Civil Aviation is an indication that our relations with that Ministry are of the very highest and best order. That is not to say there are no differences of opinion at various levels within the Ministry and with the Corporations; but no Minister, certainly not a Minister associated with the Labour Party, would desire that the Corporations should be bodies of yes-men, kow-towing in every way to what the Minister wanted. We have these differences of opinion, but we are all convinced of the sincerity of everyone concerned. It cannot be disputed that everyone wants to provide for this country a lead in civil aviation.

5.43 p.m.

THE EARL OF SELKIRK

My Lords, I listened with great interest to what the noble Lord, Lord Kershaw, said, but I do not think it is desirable to emphasize over and over again that there is no chance of making aviation balance. It is not simply a search for profit; cost accounting is essential, and that is why I think it is desirable that there should be some approach to a balance. After all, it is in the payment of fares that the public expresses its wish to travel and it is when the aircraft are non-commercial that the public does not pay enough. Therefore, the requirements of the public are not being met. The requirements of the Corporations are totally inadequate. When the noble Lord, Lord Nathan, says that B.O.A.C. have too much on their hands, I agree. It was his predecessor who gave them more in their hands than they could manage. I deprecate the reference to the estimate of £10,000,000. That was not an estimate; it was a safeguard. I also deprecate bringing in such matters as the Battle of Britain. That has nothing to do with it. It is an entirely different subject.

We have heard much about the disadvantages that B.O.A.C. suffer, and it would be fair to recapitulate all its advantages. It is a statutory monopoly, with power to do almost anything it likes. The Minister took ample powers under the Act. He collected what he thought was the cream of civil aviation traffic, and if he has failed to produce what he wants it is not because he lacks power but because he lacks the capacity to use those powers effectively. The Corporations are not pioneers of these routes. They were more or less pioneered not only before the war but also by the Air Forces during the war. A great volume of development took place at the public expense during the war, although some of it was not entirely what was wanted and changes have had to be made. It was basically, however, of tremendous value to our airfields. The number of trained personnel, although admittedly they require conversion, is considerable. The impression one gains from these advantages is that there must be some very heavy millstones hanging round the necks of the Corporations.

The first is the supply of British aircraft. That is a terrible thing to say, but that is one millstone. The second is the manner in which they are assisted by the Ministry. I say that with regret. If we look at the Report on the Tudor we see that the procedure for the ordering of aircraft was altered as long ago as September, 1946. I should like to refer to the reply given to the Select Committee on Estimates by the present chairman of B.O.A.C., when asked about the difficulty, of ordering aircraft. He said: The difficulty in answering that question absolutely specifically is that we have nothing in writing from anybody."— and later on: I think perhaps we have reached a gentleman's agreement not to try to barge our way into industry. I wonder what sort of agreement that "gentleman's agreement"is? I think it is a genteel way of saying, "We are just muddling through."

The noble Lord, Lord Nathan, said they had been puritanical and sadistic about the Corporation's accounts. There are one or two items, particularly in B.E.A.C. accounts, which I think hardly merit these terms. On a company with borrowed capital of £2,000,000, there is an estimated liability of £2,000,000. I doubt very much if public accounts ever contained such a statement in the history of commerce in this country. The impression one has is of a complete muddle. One point I should like to press on the Minister in regard to accounts, and I think it is essential for aircraft accounting, is that we should know exactly the value of aircraft which the Corporations have at their disposal. There is a statement in the accounts, but I think it is perfectly clear that it does not include a complete valuation of all aircraft. B.E.A.C. are stated to have £400,000 worth of aircraft, but a casual examination of the aircraft listed shows that there is at least £3,000,000 worth of aircraft there. B.O.A.C. accounts are the same, but the discrepancy is not so great.

There is nothing in these reports to show the flying hours per aircraft. That is fundamental to successful operation, and we have no knowledge of what these hours are. In the B.O.A.C. report it is stated that one type of Constellation averaged 3,000 flying hours a year. That is possibly the minimum on which an aircraft can be operated commercially. That is very satisfactory, but it should be known what hours all aircraft are operating. It would seem that the Tudors are doing something like 1,000 flying hours a year. I feel obliged to say one word about the Tudor Report. The noble Marquess, Lord Reading, has described it as horrifying, and I entirely agree. It is a showing-up which is certainly very shocking, but I feel that the Tudor Report has criticized the one sign of clear-cut decision. It criticizes B.O.A.C. because it has refused to accept the Tudor I.

That criticism, I think, is unfair. I do not see how at that date, in the spring of 1947, B.O.A.C. could have done anything else but refuse to accept that aircraft. It was commercially and economically unsound. Two years before, the Constellation had been flying, and this aircraft, I believe, is still without a certificate of airworthiness. I may be wrong about that, and if I am I shall be corrected. I feel that in criticizing B.O.A.C. for taking a decisive action, the lack of which is shown throughout the whole Report, the Committee are putting the blame where it should not be. I am not one for defending B.O.A.C. generally, but in this particular they took the correct action in regard to an aircraft which could not have been used, except at considerable cost to the taxpayer of this country. It is stated that one reason why they ought to have used the Tudor I is for the manufacture. If I may say so, it is quite a different thing for the Government to order B.O.A.C. to use it, and for B.O.A.C. to accept it on their own responsibility. I would respectfully suggest that this country should have followed the example of the action taken by Canada, in which Trans-Canada Airways flew Lancastrians for two years, thereby gaining experience, no doubt equally valuable to themselves and to the Avro Company, and then went over to their North Star, which is substantially a satisfactory aircraft, and, contrary to the statement in this Report, is now pressurized. At all events, the new models are being pressurized as they come in. That is an aircraft built in Canada, with a Rolls Royce engine from the United Kingdom. I do not see why we could not have followed that example.

I think it is a great mistake to assume that aircraft cannot be operated commercially. Obviously, commercial operation should meet the interests of the community—I entirely agree with that—but there is no reason why it should not do both. At the moment, operation charges are rising, and the services are inadequate. I ask those who do not think the services are inadequate to try and book a passage to New Zealand or Johannesburg. If they want to go to New Zealand in the next two months, they will have to go via America. I think it is deplorable that we cannot operate economically in this country. Sabena, the Danish Air Lines and K.L.M. have done so, and aircraft have been operated for many years in America at a much lower cost. I have here a statement which refers to coal, but it appears to have some reference: Certainly, we must avoid waste. Certainly we must keep down costs. … But to deduce from these important platitudes the doctrine that every nationalized industry must necessarily pay its own way is to make a mockery of Socialism. Is it a fact that it is expected that these industries will always remain subsidized, or is it not?

5.53 p.m.

LORD POLWARTH

My Lords, it was not originally my intention to detain your Lordships with any remarks, but having heard the debate this afternoon I feel that there are a number of points which still require to be mentioned. The debate has been carried on so far almost entirely by members of your Lordships' House who either occupy or have occupied positions concerned with the management and direction of airlines. I think the only previous speaker who has spoken from the point of view of the taxpayer and passenger is the noble Marquess, Lord Reading. It is from that same angle that I wish to raise one or two points. I hope the remarks of the noble Viscount, Lord Knollys, about sparing the Corporations for a while from some criticism, are not intended to apply to this debate, because there are remarkably few opportunities that the taxpayer and passenger have of raising points which vitally concern them. I regard this occasion as something in the nature of an annual general meeting, when we are able to examine and criticize the annual accounts.

LORD MORRIS

It is a very poor attendance.

LORD POLWARTH

The only exception seems to be that this is more in the nature of a protest meeting of the preference shareholders, because we are in fact unable to vote the directors out of office.

LORD MORRIS

The Chairman is not here.

LORD POLWARTH

I would like first to raise two points on which I want to question the accuracy of the reports, and I will follow them with a number of points which I hope will not be destructive criticisms of the operation of our internal air services. The first point concerns the report of B.O.A.C. Your Lordships will have seen that on page 10 where the report discusses the maintenance facilities, it mentions that for some time past the aircraft on the North Atlantic service have been maintained and overhauled at the base at Montreal. The statement made is: Apart from the advantages offered by Dorval, no suitable base was available in the United Kingdom, a fact which has been confirmed by subsequent examination. That is rather a remarkable statement, if it means that we continued to use this base for maintaining our aircraft, and did not go into the question of whether we should maintain them here until some time afterwards. It seems apparent that a very large number of dollars must have been spent on the maintenance and overhaul of these aircraft—and that at a time when, because of the dollar position, the Government refused to allow the purchase of more than five American aircraft.

I want to ask the Minister (and as he is not here I hope that one of his colleagues will bring it to his attention) whether serious investigation was carried out into the possibility of maintaining these aircraft in this country. I want to ask him whether be investigated the possibility of maintaining them at Prestwick, in Scotland. I believe the facilities were available at this base. It is a fact that the company operating at this airport endeavoured at one stage to purchase Constellation aircraft for their own use, and because of the currency position were not allowed to do so. Do you think it likely, my Lords, that they would have endeavoured to purchase these aircraft if they had not the facilities for maintaining and overhauling them? That is my first point.

My second point concerns the report of the British European Airways. Paragraph 31 of the report deals with the charter of aircraft and crews. As your Lordships know, on a number of occasions B.E.A. had to charter aircraft from private operators to enable them to maintain the services which were scheduled. In paragraph 31 a remark is made which I consider to be rather unfair to the companies that provided these charters. It is said there: "We found these charters to be uneconomic." I do not suppose your Lordships have examined the actual figures quite in the detail that I have, but from the number of service hours flown by aircraft of charter corporations, compared with the cost of these charters, you will find that the rate paid for them has been in the neighbourhood of about £61 an hour. I am told, in fact, that at the standard rate for a Dakota aircraft—and most of the machines were Dakotas—if you compare the £61 rate with the cost of flying the Corporation's own aircraft, the equivalent sum covers only items under the heading of standing charges, maintenance and overhaul, flying operations, and, finally, the passenger service.

The amounts under those headings alone come to over £61 an hour, and the total expenditure of the Corporation on its own operations works out at something in the neighbourhood of £150 an hour. In those circumstances, I think it is most unfair to charge the charter companies with having provided uneconomic hire. It is also stated in the same paragraph that the regularity and other features of the arrangement were unsatisfactory. I think no further comment is needed except to say that in the majority of cases these charters were necessary in order to fill the irregularity which arose from the Corporation's own services.

There are just a few points of detail concerning B.E.A. internal services to which I would like to draw attention. I hope your Lordships will not think they are too much points of detail, because, as I said before, there are very few opportunities of raising them. Thanks to the offices of B.E.A., I was able this morning to breakfast in Edinburgh and to lunch in your Lordships' House. I was conveyed down here in great comfort and with great efficiency, but I was extremely disappointed to find that the complement of the aircraft consisted of myself and three other passengers—this in a Dakota capable of carrying twenty-one passengers. I would like your Lordships to think of the reasons which cause this state of affairs. First of all, there is no doubt that in our winter climate passengers on the whole are a little chary of taking means of transport which they cannot be certain will land them at their destination in time to carry out their obligations. But I think there are a certain number of other points to which attention could be given, and which would result in the more economical running of these internal services.

I know that a number of people think that this Island is too small for the economical operation of internal services, but I am quite certain that that is not the case if attention is given to points of this nature. The first, which may sound strange at a time when the Corporation is losing a large sum of money, is that the fares are too high. They were in fact raised some two months ago. I did not notice very much publicity being given to the fact that they were raised, although a great deal of publicity was given at the same time to the fact that rail fares were raised. The increases vary on different routes. In the case of the Edinburgh to London and Glasgow to London routes the rise was rather more than one-sixth of the fare. I am quite convinced that this level of fares—which is, in fact, well ahead of the first-class railway fare—will have the opposite of the desired effect. It will not bring in more revenue but will choke off the traffic. Servants of the Corporation to whom I have spoken say that they have noticed a distinct fall in traffic on some of these internal lines since the rise in fares. As matters stand at the moment, the only people who can afford to use them are those who have their fares paid either by His Majesty's Government or by their own businesses.

The second point is the question of the routes which are being operated. A large number of them, particularly in the North, are admirable and most essential, but certain of them are operating in direct competition with some of the most efficient rail services in the country, and I am referring particularly to the services from London to the North. As things stand at present, there is very little advantage in taking the air service as compared with travelling by night. Indeed, the loss of daylight time is considerably greater if you travel by air. I think the Corporation would do well to be much more bold in its experiments with other routes—routes of a cross country nature which at present present formidable journeys by rail. I should like to see some form of route from the North-East to the South-West of England. Similarly, there is a route which was operated for a short time last year, but which has now been taken off, from Newcastle to Carlisle and Belfast. There are other possibilities in Scotland. There could be through services from Edinburgh to the West, and particularly to Northern Ireland. There could be services from Edinburgh to Inverness. Most of these are journeys which occupy at least a whole day in travelling by the existing facilities, and which could be done by air in a matter of a few hours.

I know that the attitude of the Corporation at the moment is that there is not the demand for these services. Well, there will not be a demand until the facilities are provided. And it is not just a question of providing the service—it is a question of advertising it and pushing it. I do not mean just putting a few advertisements in the Press giving details of the time-tables. Much more progressive advertising is needed, giving details of the advantages which could be gained from using these services. In that connexion I should like to see co-operation between the Corporation and the two Tourist Boards. We hope to bring a lot of tourists to this country this summer, and we hope to bring in some dollars with them. I should like to see joint advertising by the two to show how best use can be made of these services. The other objection, I dare say, is that there are not enough aircraft. I would suggest that the Corporation should charter aircraft from the private companies to run these services. That is not contrary to the spirit of the Civil Aviation Act—in fact, it is expressly provided for—and at present, in the absence of such arrangements, companies in this country are being obliged to go abroad to find work for their own aircraft. I suggest those aircraft would be much better employed being used by the Corporation in this country.

My next point concerns the types of aircraft which are in use on the internal services. As your Lordships probably know, a large number of them, particularly in the north, are still being operated by the Dominie aircraft. The number of services in Scotland and the Islands looks very impressive in the time-table, but it is not quite so impressive when you realize that the capacity of these aircraft is six seats, and that a large number of the services—as I discovered to my own cost—would carry a Lord of only four passengers. I hope the noble Lord, the Minister, or somebody else, will be able to tell us what are the plans for replacing these Dominie aircraft on the more local and less frequented services, because I think there is a great need for an intermediate size of aircraft of something up to ten or twelve seats. The Dakota is too big for some of these remote services. I know that some of the outer Islands and other places have magnificent airfields, a legacy of the war, where you could land any aircraft you like. But there are a number of other places to which services must be developed, and it is no good relying on bigger and larger aircraft, because we simply cannot afford to keep up the size of airfields for these internal services. I hope we shall hear what type of aircraft is coming forward to fill the place of these Dominie aircraft, and how soon we may expect them.

Finally, at the risk of being slightly parochial, I want to try to find out what is the position about the airport for the City of Edinburgh. Numerous promises have been made on this subject. Some time ago we were told that work was going ahead for extending the runways so as to take Vikings and for giving private maintenance facilities. At the moment, there are no maintenance facilities whatever. Nothing much appears to have been done, but I hope we shall be able to hear when in fact something is to happen, and when something will be done. Another point, which again may sound local but which I consider is of wider importance, concerns the International Musical Festival which is to be held for a second time next summer in Edinburgh. Last year we were promised on several occasions that services would be provided direct to Edinburgh from other centres in this country and the Continent. In fact nothing has happened about those services, and I never saw any reason given why they were not provided. Is it too much to hope that this year, when we hope to make a major international event of this festival, some such air services will be provided?

I hope these criticisms have not been entirely destructive, and I should like to emphasize what several other noble Lords have said, and that is how very much we owe to the servants of the Corporations, the men and women who are doing the job. One thinks of many instances of courtesy and help, and perhaps I may be allowed to record two. One is of a navigator who insisted on providing me with a map and showing me exactly where we were going, on a journey round the Outer Islands. Another was of a commandant, again in one of the Outer Islands, who sent a telegram for me to inform some friends of ray time of arrival—and insisted that it should be paid for by the Corporation. I gather that is strictly against the rules! That is the sort of thing which constitutes service, and it is the sort of thing too that will sell our civil aviation. I only hope that that spirit of service will not be stifled by the system.

6.11 p.m.

LORD BALFOUR of INCHRYE

My Lords, I do not intend to detain your Lordships for very long, because the debate has already covered a wide range. Nevertheless, I think we are entitled, as the Opposition, to criticize some of the statements we have heard from the Minister this afternoon. But before making any criticism, I would like to associate myself most heartily with the tributes that have been paid to the air crews and the ground staffs of all three Corporations, who have carried out their duties, sometimes in spite of the Government, in circumstances not at all easy. If we must criticize some aspects of our civil aviation, let us set on the credit side the high standard of safety that has been maintained throughout the period which we are discussing and, indeed, up to the present. I am sure it is the wish of all noble Lords on all sides of the House that we should make "Safety first, Safety second and Safety third" the main plank of our civil aviation policy, irrespective of what Government it comes under.

This is, after all, a special occasion, and I think we are entitled perhaps to sit a little late, as we are doing, because it is the first time that we have debated a loss on one of the many nationalization measures that have been passed by this Government since the General Election—though I hazard a guess that it is not going to be the last time that we shall be debating a nationalization loss. I should like to refer for a moment to the very effective speech made by the noble Viscount, Lord Knollys, which was very clear except for one passage in which I was not quite sure what he was getting at. When he was dealing with what he called the "morale" of the staffs of the Corporations, he was making a plea, as I understand it, for a "holiday" from criticism and from debate. If I am wrong, I shall be delighted if the noble Viscount will correct me.

VISCOUNT KNOLLYS

I should like to make it clear that I meant a "holiday" between the regular occasions—that there should be the fullest possible debate and criticism at those times, but not continuous criticism.

LORD BALFOUR OF INCHRYE

But it is, after all, the duty of the Opposition, on behalf of the taxpayers of this country, to penetrate as deeply as they can into a loss of £10,000,000. If the Opposition do not do it, I do not think the noble Viscount, the Leader of the House, will bring forward a Motion for the discussion of the accounts. Indeed, I heard him or someone saying "Hear, hear" to the noble Viscount, Lord Knollys, when he was pleading for that freedom from debate and criticism.

VISCOUNT ADDISON

I will tell you what I meant by saying "Hear, hear" when I get up.

LORD BALFOUR OF INCHRYE

I look forward to hearing what the noble Viscount has to say. We on this side do not want fractious criticism, but we must take every opportunity presented to us in our Parliamentary life of raising these matters. Frankly, I have never heard a £10,000,000 loss to the taxpayers explained away so quickly as it was by the Minister of Civil Aviation this afternoon. And the only assurance which he gave us was that the loss is going to be repeated to some extent. That was the only assurance contained in his speech. There was no promise of better things, but there was a promise of further losses in the future. I do hope that the Leader of the House will be able to tell us broadly at what rate the present loss is continuing. After all, March, 1947, is as the Minister said, nearly a year ago and if we could know, not necessarily exactly but to some extent, whether the loss is approximately the same now, or a half, or a quarter, I feel sure that those who have to provide the money for these losses would be reassured.

The noble Viscount, Lord Knollys, and the noble Lord, Lord Kershaw, dwelt on the heavy price we had to pay for civil aviation, and made a plea that civil aviation should not be regarded as a commercial enterprise in commercial terms. But I think what we want to know is, could the price which we have to pay for the development of civil aviation be any less than it is? That seems to me the kernel of the problem. We admit that there are bound to be deficits. The Minister said that the noble Viscount, Lord Swinton, was inclined to make the point that things might have been different under private enterprise. My own view is that under a system of private enterprise there would, of course, have been losses, under the present set of conditions, but the losses would probably have been less; and secondly, those losses would not have fallen upon the taxpayers of this country. The Minister made play with the heavy American airline losses of £6,500,000; but at any rate not one cent of that loss has fallen on the back of the taxpayer in America; it has fallen on the investors and their reserves and those who operate in financial or other markets, and the important effect of that loss which America has suffered is that it will spur those concerned with commercial aviation to greater efforts in economy. It is that advantage that I would concede, and I think it is not unfairly conceded, to private enterprise as against State monopoly ownership. Of course, there are bound to he losses.

I liked the proposal of the noble Lord, Lord Kershaw, and other noble Lords, that we should try in future to segregate to a greater extent what I would call the development lines being run at Government behest, as against lines which are run for commercial purposes and which commercial traffic can reasonably be expected to make pay. If we could know how much the national development side costs we should be better able to judge the commercial results of the Corporations. One of the reasons why I think private enterprise would have made smaller losses is that undoubtedly there is a feeling that the administrative staffs of Corporations are somewhat out of proportion to those who are actually conducting operations. Noble Lords who, like myself, were in the National Government, will remember that Mr. Churchill was always chasing us in the Service Departments to see that the tail did not grow too big. He was always getting at what was behind the line, making the comparison of the number of men we required for maintaining the details of administration as against the number required for fighting. He was a constant spur in those days, and I believe that civil aviation needs something comparable in the way of a constant spur. If we do not get it from a commercial motive, then under nationalization the Government must try to import that constant spur.

There has been a recent appointment of Sir Miles Thomas to the board of B.O.A.C. I do not think that that really fulfils the requirement. Constructive criticism from within an organization is good and helpful, but it is not the same thing as an outside review. The Secretary of State for Air, or the Under-Secretary of State for Air, looking at the establishments in relation to the air crews, was not the same as the Prime Minister coming along and, as it were, beating us up about them. I would like to see a commission of business men who have had to forge their way ahead with great enterprise allowed to review and survey the establishments and the general administrative lines of organization of both B.E.A. and B.O.A.C. I do not think it would be infra dig. to ask the boards of directors to enable such a commission of outside business men to operate, and I hope that the Government will be prepared to consider that suggestion. After all, when you look at K.L.M. and at B.O.A.C—I know comparisons are very difficult to make and we have been told how dangerous they are—you find that the costs per ton-mile capacity of B.O.A.C. are approximately twice those of the Dutch K.L.M. company which is operating world routes and showing a profit at the present time.

The Minister put down the losses to various reasons. His first was that there was a loss in respect of the immediate post-war period, and he said that that brought about great difficulties in regard to staff and to getting the undertakings going. But, after all, the very difficulties that he said were, to some extent, the reason for the losses, were the same difficulties that B.S.A.A. had to face when they started from scratch and made a success of it. Then there were the high costs of route development and of training—the Minister reeled off a formidable list of figures as to what those costs had been. But is he really convinced in his mind that those costs could not be pruned somewhere by careful survey and careful investigation? Of course, we must accept that losses are inevitable, but let us make sure that, if those losses are to be accepted, they are not one penny greater than need be.

I want to say only one word about the procurement policy, the policy of buying aircraft, to which I think there is nothing really to add after the clear exposition of the position and the suggestions made by the noble Viscount, Lord Knollys, who speaks with such first-hand knowledge. The Minister said that the Government were not entirely satisfied, so another committee has been appointed. This committee, at any rate, has this advantage over other committees: that it is a committee of outside men and not of Government officials. But would the noble and learned Viscount, the Leader of the House, be so good as to say whether, if we ask him in a few weeks' time when the committee have reported to the Government and they have considered the matter, we may he apprised of what changes will be brought about as a result of the advice the Government may receive from those outside representatives?

I want to say a word on the Courtney Committee's Report on the Tudor aircraft, which is fairly critical of both the Corporation and the Government. The Minister will have noted the passage where it says that his Department was too busy nationalizing to give that lead at a critical time which the Committee felt should have been given. I do not think we ought to let this debate pass without saying that we on this side of the House have noted that what we said at the time of the Second Reading of the Civil Aviation Bill has come true, in that, instead of getting on with the job, the Government were too busy trying to push their particular doctrinaire policy on to the Statute Book in the shortest possible time. But the most critical part of the Courtney Committee's Report is its strictures on the internal organization, the organization as it existed at that time. We read of the technicians, the projective branch, running off, as it were, on their own, without adequate control by those who are commercially responsible for the success of the Corporation. We read how those experts made decisions on their own, havered, dithered, altered their decisions and in fact generally led an uncontrolled life.

I remember that in the Air Ministry in 1939 we got to a stage when production of aircraft: had almost come to a standstill because of modifications. Finally, Sir Wilfrid Freeman, when Sir Kingsley Wood went to the Air Ministry, was deputed as the man to look after modifications, and all those hordes of little experts were not allowed to introduce particular modifications; none could be accepted without the personal consent of Sir Wilfrid Freeman. It seems to me as if something of the same sort of condition has gradually grown up within the Corporation. I am sure that noble Lords, both on this side of the House and on the opposite side, would like some assurance that the internal administration and organization of the Corporation have been so strengthened that to-day the experts will not pursue one particular line of policy of their own without proper control by those who are administratively responsible.

I want now to refer to one question which the Minister dealt with, the question of West Africa. If the noble Lord will allow me to say so, I thought the weakest part of his speech was when he tried to justify the: position which the noble Viscount, Lord Swinton, exposed. The fact is that when we passed the British Overseas Airways Act, as the Minister said, we deputed to that Corporation the development of overseas lines, but we did expect that the Corporation would be able to do something about it. At that time the Corporation could not do anything about it and somebody else could do something about it.

VISCOUNT ADDISON

I do not quite follow that.

LORD BALFOUR of INCHRYE

The Minister said that when we had passed the B.O.A.C. Act, we had deputed to the Corporation the task of developing overseas air lines, the inference, therefore, being that the other line, Skyways, could not run on that route. When we passed that Act, we all assumed that, as the requirement was there, the Corporation would be able to fulfil it. Then the Minister said that, of course, it was an agreed policy that there should be no duplication of services. You cannot call a service requiring a journey of three or four days on a Dakota round the coast of West Africa a duplication in any sense of a direct service across Africa in eighteen hours. The real fact is that, in order to protect the Government's monopoly policy—I do not think I have put it unfairly—the Government felt it necessary to refuse facilities which would have brought many white men and women back from West Africa to this country for well-earned, much wanted leave. Many of those people have been unable to obtain their leave or have been delayed considerably by this close adherence to the policy of State-owned monopoly. It does seem to me that it is a doctrinaire outlook, which we on this side of the House have criticized in the past, and will continue to criticize in the future, and which has been responsible for this very regrettable and deplorable instance.

I have one further question to put to the noble Viscount, the Leader of the House, if he will be good enough to answer it. I have given notice of this question, and it is with regard to the Irish Company. We own 30 per cent. of the Irish National Aviation Company, and we pay half the loss on services. We do not control the company, but we pay half the loss. If the Irish Government felt it necessary for their own national reasons—reasons which we have been talking about to-day with regard to ourselves—to run a prestige service to Tim-buctoo, let us say, would the British taxpayers have to pay for half that service—a service ordered by another Government to be carried out by a company in which we are minority shareholders? If so, it seems an extraordinary position. There may be a safeguard whereby the minority shareholders have the right to exercise some control over what the company does. If so, I am sorry that such a safeguard was not made clear in the Report.

I ask that question in all fairness, in order to elicit a reply as to whether the British taxpayers are at the mercy, as it were, of a Government which wants to run prestige services. The same applies in regard to the Italian Company, in which we own 40 per cent. of the share capital but which we do not control. Suppose a new Government in Italy wished to run a prestige service daily, let us say, to Moscow, would that be run at the expense of the British taxpayer? Those are questions which I would like to have answered. I trust I have not detained your Lordships too long, and that at any rate my remarks, which may appear to have been critical, have, nevertheless, been constructive. I hope also that this debate, far from being the last on civil aviation, will be followed by many more in the future.

6.33 p.m.

THE LORD PRIVY SEAL (Viscount Addison)

My Lords, I feel quite sure that a good many benefits will follow this debate and, except in the respect that I will mention in a moment, I think that the general influence of the debate will have been advantageous. Before I come to answer the various points which have been raised, I should like to clear up a little point that was left in some doubt, I understand, in an answer given to the noble Viscount who opened the debate. It referred to the terms affecting certain loaned aircraft, and I promised the noble Viscount that I would obtain a precise statement on the subject. Perhaps I may give that now and so clear it out of the way. These aircraft, which are mentioned in the appendix to the B.O.A.C. accounts, were special aircraft loaned by the Air Ministry for the operation of local services in the Middle East. These services are required for military and other official purposes, and they are those to which my noble friend referred as having incurred £600,000 in loss or cost. The noble Viscount asked the further question as to what was the rent which was paid for those loaned aircraft. The answer is that no rent was paid for the loaned aircraft and, therefore, in so far as they were provided without a rent, it was in that respect a subsidy. That is the correct answer to the question.

I should like now to take up the general point raised by the noble Viscount, Lord Knollys, and to express my sincere gratitude that he made it; that is to say, the general effect of debates of this kind upon the well-being and development of these great Corporations. I am sure that every one of us is impressed with the necessity of so conducting our business that we do not intentionally do harm. I agree with the noble Lord who has just spoken that Parliamentary criticism is to be expected, and is inevitable; but in cases of this kind it depends, shall I say, upon the form and frequency of the criticism whether it is helpful or not. We have to remember that, for the most part, these Corporations, with their immense responsibilities, are being conducted by men of great business experience; and we have to remember that they must be given a fair chance. We do not pull things up by the roots every few months to see whether they are growing or not, and therefore we have, I think, to remember that in cases of this kind, with the inevitable attachments to which I will refer in a moment, we must be careful that we do not disparage the machine which we have deliberately created.

For my part, before I sit down I would say a word in sincere appreciation of what these great Corporations are doing, a thing that is apt to be clouded when we conduct our debates purely from the point of view of a £10,000,000 loss. Your Lordships will remember that a little more than a year ago we passed an Act of Parliament, and that Act of Parliament deliberately provided £10,000,000 which we expected would be a public charge for some time in the course of the development of this great service. That was provided by Parliament and, quite frankly, I do not think, although I cannot recollect, that the noble Viscount opposite objected to it. I think he recognized that to some extent it was inevitable. Whether it was to be £10,000,000 or not was another point.

Here I would like to reply to the noble Earl, Lord Selkirk. Nobody suggests, and least of all this Government, that there should be avoidable waste; of course not. I am quite sure that those who are conducting the affairs of the Corporations are just as anxious as anybody else to curb any avoidable or discovered waste. But I noticed that the noble Earl opposite did go so far as to give us this present—that there would have been some loss, even under private enterprise. He went on to say that he thought it might not have been so great a loss, or words to that effect. I would also point out to him that I am absolutely certain that under private enterprise there would not have been so many services. There certainly would not, because as a nation we have deliberately gone out of our way—taking this £600,000 of which I have just spoken—to ask these Corporations to carry out development in the national and Commonwealth interests, knowing quite well that for some time to come those services would not be remunerative in the commercial sense.

Private enterprise certainly would not have undertaken the running of those services, and I would not blame private concerns for not doing so. It is not their business. Their business is to provide a decent return for their shareholders; so, as I say, I am not blaming them. The point I make is this. There would certainly have been some losses, even by private enterprise, in running undertakings of this kind, though they might not have been so great. The chief reason why they might not have been so great is that private enterprise would not have undertaken so many services.

THE EARL OF SELKIRK

Will the noble Viscount forgive me for interrupting him? Before the war the Railway Air Services used the airport at Weston-super-Mare. B.E.A.C. I understand, because they have operated so uneconomically. have just had to close that airport.

VISCOUNT ADDISON

That may well be true, but I am afraid I do not know anything about individual air services using Weston-super-Mare. I have not been given any notice of that matter. But even if that airport has had to close down because of uneconomic working, I would readily believe that a private enterprise concern would never have opened it.

THE EARL OF SELKIRK

A private enterprise concern did open it before the war.

VISCOUNT ADDISON

Then that shows how wise they were to pass it on to B.E.A.C.

LORD GIFFORD

May I interrupt the noble Viscount for a moment?

VISCOUNT ADDISON

No, please. We cannot discuss this great matter in terms of trifles. The noble Lord must really allow me to develop my case in my own simple way. As I say, we deliberately decided as a nation—that is to say, Parliament did, and noble Lords opposite, I believe, approved—that we would try to build up these services on the basis of British aircraft provision. When we came to that decision we knew that we should be committing this country to great expense for many years. We knew that, and no one has ever concealed it. It has been my duty to have charge of a Committee which has looked into these difficult matters, and it seems to me, on the whole, that a fair average interval between the time of the conception of an aircraft and the time it flies and carries people about is from six to seven years. I see that the noble Lord opposite shakes his head. At first I was told that the period was from four to five years, but as an entirely disinterested critic I came to the conclusion that that was an over-sanguine estimate. I put the period at between six and seven years.

Take the case of the Constellation, which is a really successful aircraft. I inquired into the genesis of the Constellation, and it appears that about seven years elapsed from the time when the machine was first thought of, designed, and construction started, to the time when it became a successful commercial aircraft.

LORD BALFOUR of INCHRYE

Including the war years.

VISCOUNT ADDISON

Yes, including the war years. If the period between the conception and the successful putting into service of an aircraft is going to be less than six or seven years, all the better. I shall be delighted. So will the Government, and the taxpayer. But I am simply trying to tell the House what I honestly believe to be true. From such information as has been provided to me by experts, I have formed the opinion that having regard to the getting out of the design, the time taken by questions arising thereon which have to be bandied backwards and forwards between different experts, the development of the prototype, flying it, the remedying of any faults which may develop, the making of various amendments and so on, the time which must elapse until finally it becomes an aircraft for carrying people is a period of several years.

Then, as a rule, so far as I can make out—it is the exception if it proves otherwise—various modifications have to be made. Each modification means that the machine has to go back to the workshop, and it may be there for a month, two months, or six months. So matters go on, until finally the machine emerges as a complete, acceptable and successful aircraft. That long and tedious process occupies several years, and I have put it, in all, at six or seven years.

As I say, we made a deliberate decision, I believe with the assent of noble Lords opposite. We realized that we had to pay the penalty for what we suffered in the war, and we sought to encourage the British aircraft industry. What did that mean? During the war the immense productive capacity of the United States, so far as aircraft were concerned, was not taken up wholly with military machines. In this country the whole of our aircraft industry, with all its technicians, artisans, factory workers and all the rest, was devoted to the production of military machines. A large part of the United States productive capacity was devoted, and quite properly devoted, to the building of transport machines. As a result, the manufacturers in the United States really had five or six years' start. That is a fact. And it was of advantage to the world that they had such a start, because we have had these successful machines of their making.

That was the position at the end of the war, so far as the British aircraft manufacturer was concerned. So we decided that we would try to develop the British aircraft industry and to encourage the production of civil aircraft by it. We are now in the stage of what are commonly called "teething troubles." I am afraid that there are a good many such troubles, and we are nothing like out of the wood yet. That is only my own opinion, of course, and I may be wrong. I believe that in due time we shall find that just as the British manufacturers produced the best aircraft in the war, so in time to come we shall have the best civil aircraft in the world. But we shall not get them yet. A good deal of work is being undertaken on some of these very promising machines, and I hope that the sanguine anticipations of those who are responsible for them will be realized.

The noble Viscount opposite knows a little about the history of the Brabazon I. It has been my painful experience to learn something about it. This machine was projected during the war, and I as a raw amateur have had to preside over investigations into this matter. I found that whilst elaborate provision was being made for the completion of this machine there were no facilities available for getting it off the ground when it had been built. The result was that we had at great public expense to make a runway several hundred yards long—about half a mile, I believe. To do this we had to buy a number of houses, a public house, a farm, and various odds and ends of that kind. This meant great public expense, but it had to be done before there was any hope of getting the machine off the ground. It did not seem to me that those responsible originally had shown as much foresight as I would have liked.

LORD BALFOUR OF INCHRYE

I have actually a memorandum which I wrote before going to West Africa in 1944 drawing attention to that very matter of the houses having to come down.

VISCOUNT ADDISON

I now understand that the runway was a mile and a half long. I am glad the noble Lord thought about this in 1944. What I, as a raw amateur, complained about, was that nothing had been done about it. That was the trouble. I am not making fun; I am saying that these things involve great expense and take a long time to develop. All kinds of difficulties emerge. The noble Lord indicated with great truth that he had often found, to use an old adage, that the good was the enemy of the best. I think that that accounts for some of the troubles of the Tudor I. I am not going into them, but we all know how, when something is nearly completed, somebody has a bright idea, and the machine is put back into the workshop and fresh difficulties arise. We have to safeguard against that kind of thing. The question of ordering procedure has been mentioned several times, and the history of the Tudor I is a good example of the kind of difficulties which emerge. A man cannot order aircraft in the same way as he orders a motor car—it is not quite so easy as that. What he is going to order, what type of machine, has to be determined beforehand.

The Ministry of Supply and what was the Ministry of Aircraft Production have, as noble Lords know, an elaborate and brilliantly staffed research organization, and it costs a lot of money. We cannot expect any private firm to be able to bear the costs of research and development which necessarily accompany the development of this industry, and they are borne by the Ministry of Supply. There always comes a point when development has reached such a stage that it becomes a question of giving a production order. These two stages necessarily overlap, and I do not think we could ever avoid overlapping. It is in the nature of the case. It is because of these developments, and the alterations and modifications of design arising out of them, that the difficulties have arisen. It is no good pretending that there have been no difficulties. There are bound to be difficulties. I remember that in the Ministry of Munitions, in the early days of the First World War, we were involved in these kinds of difficulty for eighteen months before we emerged from them.

It is essential that the good will and loyal co-operation of these great Corporations should be obtained. We want to see that the method of procurement is designed to be as efficient and as satisfactory as possible to the different parties concerned; but we do not want to do anything which will endanger development on the one side or to cripple the Corporations on the other. I have dealt rather at length with that particular point because it is fundamental to the issue. But behind it all there is also this. The costs which have been incurred and which I am afraid will continue to be incurred by the Corporations—I am not going to mislead your Lordships—in the development of airfields and services, sometimes in tropical places under immense difficulties, mean an immense expenditure. But it is a great British development. I am not justifying a pennyworth of waste—of course not-—but it will cost money. I expect the House to face up to that fact, and to recognize that it is inevitable. If we pay, we shall have for the whole of our Commonwealth a fine, efficient and loyal air service, and we shall build the British manufacturing aircraft industry into the best in the world.

6.58 p.m.

VISCOUNT SWINTON

My Lords, I am glad that the Leader of the House has taken part in this debate. He speaks with very long experience of administration, as an ex-Minister of Munitions and as Chairman and would-be co-ordinator of a good many committees, and he also speaks with great frankness. I am obliged to him incidentally for clearing up the point about the forty aircraft. They were given free, so the loss upon the services was considerably more than appears on the accounts. I am not going to follow him, certainly not at this hour, into the interesting speculation as to how long it takes to build aircraft. I ordered the four great bombers of the war in 1937.

They took four years to produce, partly in peace-time and partly in war. It must have been four-and-a-half years before they were with the squadrons. But of course they were very new—the Stirling, the Halifax and the Lancaster which emerged from Manchester. We had very little experience in building at that time. When I went to the Air Ministry we had never built a single stress-skin monoplane, much less the great four-engined stress-skin bombers. It all depends on the novelty involved in the aircraft.

The Americans could have produced the Constellation quicker, but, very wisely, as they had not got to produce until they did, they waited until every problem was solved. The Viking came into use very quickly. It is a very good machine. There was a bit of trouble with icing at first but now many foreigners want it. It came out extremely quickly. I think it was eighteen months before it came into use, but in that case we were dealing with a machine which is a derivative. It is in every way a much more modern machine than the Dakota. The Tudor was a derivative. It changed a great deal from the original in the course of its progress, and I think some of us may have been unduly optimistic about the date of its production.

I had hoped that the Minister would be able to say something about what has been happening since the close of the 1947 financial year at the end of March. I had hoped that he would be able to give us a more hopeful picture (I did mention this) certainly so far as European Airways are concerned. He must know what is happening in these companies—every business man knows what is happening in his company from month to month. We have not been told, and I can only hope that the loss is being converted into a break-level, or, at any rate, that it is not going to be so great. But I really cannot accept what the noble Viscount the Leader of the House has said. The Bill was passed with the provision regarding the £10,000,000 in it; but he is not going to pretend that we liked the Bill. We passed it, but that does not mean that we liked it. If a loss of £10,000,000 is going to be made, I would far rather see it put into the Bill.

I always thought that B.O.A.C. would suffer a loss. I do not think they could have developed the Empire routes—certainly not with stop-gap aircraft—without suffering a loss. But I am entitled to remind the noble Viscount that if the policy and plan on which we all agreed in the National Government had been pursued, both the South American Airways and the European Airways, with an enormous schedule of services, would have had the whole of their capital subscribed without a penny of cost to the taxpayer, and would be operating without any subsidy at all.

I must say one word about the really extraordinary explanation which was given us with regard to the West African Service. The explanation was as unconvincing as the result was disastrous. There is no doubt that here there was an aircraft—I do not care what service it was bought for; it may have been bought for a service to Timbuctoo, for all I know—which was not wanted on that service at the time. It was available to put on to this West Africa service. It would have carried on that service without any loss. The service would have made a very considerable profit above the £75,000 guarantee of the Nigerian Government. I would ask for no better financial investment than to have underwritten that, and to have taken the surplus. The aircraft was there, and it would have run the service. The Governor of Nigeria was forbidden by His Majesty's Government to make that contract and to have that service, and His Majesty's Government ordered B.O.A.C. to run a service with three Halton aircraft, which were incapable of carrying more than ten passengers across the Sahara. The Minister has admitted to-day that that service is costing the British taxpayer in dead loss something like £10,000 a week. That is the story.

Then he says: "Well, I had to do it under the Act." I have never heard such nonsense! The Act never provided anything of the sort. The Act did provide that primarily scheduled services should be the perquisite of these Corporations. It was not unreasonable, if we were to have this nationalization scheme at all—though I would not have given them all the services of the future. What was the object of that provision? Its object was that it would be only fair (this was the argument) to say to the Government Corporation: "You shall run a number of unremunerative services as well as a number of remunerative ones; you must lake the rough with the smooth. You will not have someone cutting in on the remunerative services to skim the cream off the milk." The noble Lord, Lord Beavcrbrook, had an even more vigorous and descriptive analogy, but I have forgotten what it was. It was never supposed that that Act was going to force the Corporation to engage in unremunerative services, if someone was prepared to render that service without any cost to the taxpayer. The Act is not a very good Act, but it is not quite so stupid an Act as that.

It was perfectly possible, within the Act, for the Governor of Nigeria to have made the very business-like arrangement which he wished to make to have this service, and it was the duty of the Minister to save this country £500,000. To-day the taxpayer of this country is paying £500,000 more in this colossal loss, because the Minister of Civil Aviation decided that he would force one of his companies to run this unremunerative service. I must say that I regard it as a very unsatisfactory transaction. I know what would happen to a chairman of a public company if that were done. But no doubt to-day the Minister's great aim is to attain his target of £10,000,000 loss. That is one of the targets we have attained. A lot of the industries are doing very well. The steel industry is not doing so badly. The Minister of Civil Aviation has done best of all; he has attained his target of loss of £10,000,000, and he hopes to do better next year!

I really cannot understand the Government's opposition to allowing the Corporations to buy. To me it is quite unintelligible. All the Corporations are against them on it, and all business experience is against them. The noble Viscount, the Leader of the House, said that it is not quite so simple; that you have to have development expenditure on prototypes, and so on. I allowed for that in my speech. It is really more a question of arrangement as between the Ministry and the aircraft-producing firm. That has been the common practice for years. It was the common practice while all the civil aviation companies were buying their things direct. It was still the practice that Famborough worked in close touch with the makers, and projects were put in hand; orders for this or that experiment, or this or that prototype, were placed. There is nothing to prevent the Government from doing that, and I think it is a very proper function for the Government to undertake. As a matter of fact, they always make an arrangement with the maker about how the cost is to be borne. The Government in the past have always borne a fair proportion of the cost of the research.

At the same time, if Firm A or Firm B develops a very valuable machine on a prototype ordered by the Government, then perhaps the Government may pay £500,000 for the first prototype. They say to the firm: "We are going to recoup ourselves a bit on that, and when you sell that machine in the market you have got to charge so much for development charges. You must put that on to the machines you sell, and in proportion as you are successful so will we recoup ourselves." That is a well recognized procedure which we have been following all the time, but that is no earthly reason why, when the machine is a commercial machine put upon the market, the operating company should not buy. Indeed, I say this: I am perfectly sure that Air Chief Marshal Courtney and the Directors are right. You will never get these losses effectively reduced, you will never get the proper relationship between the operator and the firm, and will never get the business satisfactory, whether your company is a nationalized company or a free company, unless you let the user buy what he uses.

I believe that this debate has been valuable. I do not think we have too many of them. The Minister and the noble Viscount, Lord Knollys, said that there must not be too much interference by debate. We do not want to interfere, but on the other hand it is our duty to have a proper degree of supervision. I should not be ending on a controversial note, but I am sure that what handicaps these companies is not so much interference by debate in either House of Parliament, but interference by a brace of Ministries. I beg leave to withdraw my Motion.

Motion for Papers, by leave, withdrawn.