RENTING OF CIVIL AIRCRAFT (Hansard, 15 March 1949)

LORD PAKENHAM

My Lords, there is a pleasant custom in this House according to which those who speak from this Box usually begin their remarks by saying how grateful they are to the noble Lord who has initiated any discussion. Sometimes it is sincerely meant, sometimes a trifle less sincerely. But this is one particular occasion when I can say with all my heart that I am grateful to the noble Lord, because he has given me an opportunity of explaining how these heavy sums have been expended and of removing a number of misunderstandings that have arisen. Of course, in addition, I am grateful to him for the tone of his remarks—widely different from the tone of some of the newspaper comments, and more particularly the tone, or lack of tone, in the headlines.

If your Lordships read the headlines of some extremely reputable newspapers recently in regard to this subject, you would imagine that my Ministry were engaged in a series of speculative trading transactions. I am bound to say that, 376 whilst I have the greatest regard for the air correspondents of the main newspapers, I feel that the sub-editors can be described (to use a phrase which comes into this discussion) only as substandard. Some of the sub-editors are perhaps the greatest enemies that the Ministry of Civil Aviation possess at the present time. If only we could tell the contrary to this journalistic circle, in which I believe the noble Lord moves rather more freely and consequentially than I, and clip the wings of the sub-editors who put out these headlines, we should be doing a great service. Be that as it may, and in spite of the lateness of the hour, I must ask leave of the House to dwell for more than one or two minutes on the issues that have been raised.

The noble Lord was good enough to point out that we were not in fact engaged in trading. If we were, we should have to comply with Section 5 of the Exchequer and Audit Departments Act, 1921. As a matter of fact, it appears that we shall have to comply with that Act in relation to aerodromes in the near future. In order to understand what we have been doing, it is necessary to go back a little way and to review the situation, well known to the noble Lord opposite—much better known at first hand, in fact, than it is to me—that existed at the end of the war. It will be recollected that long before the war had run its course this country had entirely ceased the production of civil aircraft, and towards the end of the war it was clear that unless some preparatory measures were taken, we should at the end of the war be left without any civil aircraft of our own, and without any dollars to buy American aircraft. It was in these circumstances that the Coalition Government—and I am certainly far from criticising them or trying to shirk responsibility for the decision—in 1943 and 1944 prepared plans, based on the recommendations of the Brabazon Committee, for post-war civil aviation.

The policy that was shaped at that time took the form of a two-stage programme—first, the adaptation or conversion of military aircraft and designs; and, secondly, the design and manufacture of new civil types, types that could not be expected to fructify for at least four or five years after the end of the war. The 377 various aircraft that the noble Lord, Lord Balfour, has mentioned this afternoon, such as the Lancastrian, the York, the Viking and, I might add, the Tudor, though that represents a rather different category, are all either straight conversions of military aircraft or derived from military aircraft in pursuance of the decisions of the Coalition Government. As the noble Lord will recollect, the Coalition Government went further. In their White Paper, British Air Transport, published in March, 1945, the Coalition Government announced their intention to rent civil aircraft to operators, including Commonwealth and foreign operators, in appropriate cases, during the period that interim types had to be used.

As I say, I am not trying to argue this in any Party manner, or to avoid any share of responsibility for myself or my Party, but I would point out that to-day we are discussing the consequences of the policy agreed on during the period of the Coalition Government. The policy, briefly, was based on this conception. Until new post-war types of aircraft were available, it was considered necessary for British operators to use interim or redundant types. Such interim types were expensive and uneconomical and, moreover, would be in use for only a comparatively short period until modern types were available. I stress that second point in particular. In these conditions, no business operating on commercial principles—as the Corporations were enjoined to do—would buy such aircraft outright, except, possibly, at very low prices, and the policy of leasing, where appropriate, was, therefore, decided upon by the Coalition Government.

The present Government have continued to follow that policy where it was considered desirable. Rents were assessed by a pricing committee on which the Departments concerned, including the Treasury, were represented. I would stress that the Departments concerned included the Treasury. This was not some game played in a corner by one particular Ministry; it was all worked out by a most authoritative committee on which the Treasury were represented. They took into account all relevant factors, such as the economic character of the aircraft operationally, its range and pay-load, and the estimated length of its useful life. 378 Broadly, the resulting price was what an operator, working on commercial principles, could reasonably be expected to pay. So much for the question whether the best prices were obtained.

I would turn aside to deal with the two very relevant questions asked by the noble Lord. He wanted to know in what circumstances aircraft were leased to foreign operators. Broadly, they were leased only where the foreign operator was providing feeder lines to our own Corporations. In addition it was usually calculated—indeed, I think it was always calculated—that it would be advantageous to rent. British aircraft, because it was likely that in that way a permanent market for British aircraft would be provided. I believe that in every case both these conditions were satisfied. The noble Lord also asks—and I am grateful to him for not trying to bustle us—whether at some time we could not set out in a White Paper all the facts about all these transactions. When the noble Lord asks me to consider something carefully I never say "No." To do that would be lacking in courtesy and discretion. I will, of course, think over the proposal, but I am bound to say that I am extremely doubtful whether it is possible, or whether in my place the noble Lord would think it possible, to present all the details of what are essentially commercial transactions. But I can tell the noble Lord that we really have nothing to hide. If noble Lords in any part of the House desire to know the details I shall be only too happy to supply them if they will see me in my office at any time.

I do not wish to weary your Lordships with detail, and it would be improper for me to anticipate the outcome of the deliberations in another place of the Select Committee on Public Accounts which will shortly examine both the Comptroller and Auditor-General and the Permanent Secretary of my Ministry upon the subject matter of the Auditor-General's Report. In view, however, of the rather glaring misrepresentations in the Press—there have been no misrepresentations by the noble Lord, but, as I say, there have been rather glaring misrepresentations in the Press—I would like to mention briefly the subject of the Vikings which the Auditor-General himself refers to as having been sold for under one-eighth of their cost. Those Vikings were ordered 379 in March, 1945, during the period of the Coalition Government. They were the first batch of civil production of that type, and it is no reflection at all on the good name of the manufacturers to say that, under the exacting conditions of operation on European routes, they proved sub-standard. The production had been deliberately urged and pressed forward so as to enable us to open up the routes with British aircraft at the earliest possible date. In fact, the aircraft met with certain problems new to our designers and constructors, and, as I have said, proved sub-standard. The information gained by the use of these aircraft, though admittedly expensive, led to the design and construction of the later type of Viking aircraft which, we all admit, is one of the most successful types of medium-range, post-war, civil air liners.

Let me pass from the particular case of the Vikings to the broader aspects of the story. Though I think it is fully appreciated by noble Lords, I should like to make it plain to the public beyond all possibility of misunderstanding that the policy pursued by successive Governments in respect to post-war interim and stop-gap types of aircraft was a deliberate policy. Its whole aim and object was the re-birth of British civil aviation as soon as the war was over. No one could pretend—no one who has been concerned with these matters could suppose—that that object could be achieved without cost. But the cost, in so far as it is connected with aircraft, has not been at the expense of the manufacturer. Whoever has had to pay, he has not. On the contrary, the policy enabled the manufacturer to employ at least some of his production potential at a time when a halt was called to the production of military aircraft, and it facilitated the solution of his problems of transition from war-time to peace-time production.

Nor could the cost of commercially uneconomic aircraft be laid on the operators, who, themselves, had an immense task to perform in opening up the routes in the face of international competition. In short, someone had to foot the bill, and that someone has proved to be the Ministry over which I have the honour to preside. It will not be news to any of your Lordships—indeed I think you are well aware of the fact—that the statutory 380 grants payable under the Act of 1946 to the British Airways Corporations were never intended to cover the whole costs of launching British civil aviation in the postwar years. Indeed, both the noble Viscount, Lord Swinton, and, I think, the noble Lord, Lord Balfour of Inchrye, and certainly I, myself, in the debate on civil aviation which took place in this House a few weeks ago, were at pains to point out the total costs of developing civil aviation in this country, which are somewhere of the order of £25,000,000 a year. So the Press are really wonderfully badly informed when they talk about the "mystery of hidden subsidies." No one in this House supposes that there is any mystery about the matter. I gladly accede to the invitation of the noble Lord to give as full information as possible at all times concerning those costs.

What of the future? We shall continue to pursue this policy of renting aircraft to operators where it is the only course appropriate to the particular situation confronting us. We shall attempt, where it is practicable and fair, to make hire charges which cover the actual costs, and, in fact, all leases of aircraft now in existence and finally settled accord with that principle. I feel bound to warn the House, however, that in two of the biggest cases, both of which have been mentioned by the noble Lord—namely, those of the Solent and the Tudor IV—I cannot give any guarantee that the costs will be repaid by the charges which can properly be made. As regards the Tudors, as I recently announced, they will be used for freight purposes, in the first instance on the Berlin air lift. It may well prove best and wisest to hire them out for those duties rather than to sell them outright, and the terms of hire will have to be related to the fact that they are to be used for freight and not for passenger carrying on the main airline routes of the world.

The Solent, to which the noble Lord referred, is another interim type that must be hired. The terms of the lease are still under discussion and negotiation. As noble Lords will be aware, this machine was derived from the military Sunderland flying boat. B.O.A.C. are now using it on the Empire routes, and I should like to be able to tell the House that there was every prospect of recovering the costs by renting these flying boats for five years and charging a rent that would recoup the 381 cost in that period. That is what one would like to do in all these cases—charge rent and draw rent for five whole years. Unfortunately, these flying boats are expensive to operate. There can be little expectation that B.O.A.C. will wish to operate them for so long a period, and, clearly, it would be quite improper for me to attempt to force these flying boats upon the Corporation for a longer period than they can usefully operate them. In both these cases, therefore—the Tudor IV and the Solent—I am afraid that I cannot give any guarantee as to the extent to which the costs of the aircraft will eventually be paid back.

I would like to end by expressing my genuine gratitude to the noble Lord for having given me a chance to expound this matter, albeit rather briefly. The details will fall to be considered by the Public Accounts Committee of another place; but on broad policy, with which we have been concerned this evening, I submit with confidence that neither this Government nor their predecessors, the Coalition and Caretaker Governments, have anything of which to be ashamed. Losses have been incurred and, I am afraid, until aircraft of new post-war design have been developed and have taken their place in the air routes of the world, more losses will yet be incurred in carrying out this policy. Meanwhile the costs under discussion are part of the total cost of carrying out the "Fly British" policy, a policy which we all endorse. As part of that policy, these costs are rightly reflected in the accounts of the Government.