NORTH ATLANTIC SHIPPING BILL

HL Deb 10 July 1961 vol 233 cc5-53

Order of the Day for the Second Reading read.

THE JOINT PARLIAMENTARY SECRETARY, MINISTRY OF TRANSPORT (LORD CHESHAM)

My Lords, I beg to move the Second Reading of the North Atlantic Shipping Bill, which is, of course, a Certified Money Bill. Its purpose is to ensure the continuance of the British express passenger service across the North Atlantic run by the Cunard Steam Ship Company, and I should not need to explain at any length the exceptional importance of that service. It is not only that it is the special pride of the Cunard Company, but it is the best known service operated by any section of the British shipping industry, and probably the best known shipping service in the world.

The two "Queens" remain the largest ships in the world, among the most remarkable and best-known products of British shipyards, and they operate between the two most prosperous and thickly populated industrial communities in the world. They run, therefore, on the most thickly travelled route and provide the best possible medium for advertising the cream of the British maritime "know-how" that we have and the skill of British engineers and shipbuilders. If there is any doubt, may I say that other maritime countries certainly regard it in this way. It is, therefore, the most fiercely competitive sea route in the world, and because it is the kind of competition in which national prestige is involved it has become the most heavily subsidised route in the world; and I shall say more about such subsidies in a moment. But, despite all this, the weekly service operated by the "Queens" has for long been absolutely outstanding (I will not use the word "supreme") for efficiency, regularity and standards of service. Over the years it has come to occupy a very special place in public opinion, both here at home and all over the world.

The question of the future was brought to the Government's attention some two to three years ago, when it was explained that the "Queen Mary" would reach the end of her life about 1965 and the "Queen Elizabeth" several years later. From the depth of their own very long experience, the Cunard Company believed that the service would continue to be a commercial proposition even after the retirement of these ships, but they could not find themselves able to provide enough capital from their own resources to replace them with new ships of the same class at current high shipbuilding costs. Sooner or later, therefore, the Government would have to make a choice: either this service would ultimately cease to exist, and the route would have to be abandoned to foreign competitors; or the Government which had, my Lords, provided assistance for the building of the present "Queen", as earlier they had, for instance, for the "Mauretania" and "Lusitania", would have to provide assistance again to make sure the service continued. The decision on the replacement of the "Queen Mary", therefore, could not be long postponed, and this was the choice that was before the Government, as to-day it is before your Lordships.

When the Government came to consider the question, the first thing that was very clear was that to allow the "Queens" service to die out would be a serious blow to our national prestige. It would be interpreted around the world as a sign that we were beginning to relinquish our traditional leading maritime position if we let this splendid service which we had pioneered go and be carried on by the Americans and the French.

But, apart from that, there would be distinct advantages for us in continuing the service. The "Queens" service directly earns a very large amount of dollars and other foreign currency, and a lot of these earnings would very probably be diverted to foreign shipping lines and air lines if the service were allowed to lapse. It contributes also indirectly to the balance of payments by attracting to this country foreign tourists who might otherwise never have come here. Finally, of course, it was clear that the British shipbuilding industry was before long going to have a rather lean period before it, and a new order for a big ship of this kind would give employment and encouragement, both of which were much needed. I have very much condensed these reasons for supporting the continuance of the service, but I am sure your Lordships will agree that they are very strong ones. I want now to turn to the reasons against it.

First, of course, there was the cost to the taxpayer. Clearly, this would have to be assessed and looked at very carefully before the Government could commit themselves to providing any particular sum. Secondly, there was the question of principle. It could be argued that to subsidise the Cunard Company was a departure from the Government's policy not to subsidise the shipping industry and to persuade other countries not to subsidise their shipping industries either. But it is generally recognised that the North Atlantic express passenger trade is quite unique, both in its intrinsic importance and in the weight of international competition from subsidised shipping lines and air lines. It simply cannot be regarded as being on a par with any other shipping service. A decision to subsidise it 'therefore would not constitute a precedent for a subsidy to any other British shipping service, nor would it prejudice the stand we have taken in international maritime circles against shipping subsidies in general.

Weighing all these matters up, the Government came to a provisional decision in principle. They decided that it would be quite wrong to allow this unique service to die out simply because the company concerned could not, by itself, afford to continue it against foreign Government subsidised competition. The Government, therefore, ought to assist. This decision, though, was made subject to two conditions: first that it must seem, after impartial investigation, that there were genuine commercial prospects for the continuance of the service; and, secondly, that a reasonable financial settlement could be reached with the company to run it. The Government therefore announced in their Election Manifesto, issued in September, 1959, their determination to support its continuance.

At the same time, the Government announced the appointment of an independent Committee, under the chairmanship of Lord Chandos, to advise them on the many complex matters that were involved: matters like the commercial prospects of a continued service and its possible alternatives.

VISCOUNT ALEXANDER OF HILLSBOROUGH

My Lords, is that report to continue to be suppressed from Parliament?

LORD CHESHAM

My Lords, I shall be dealing with that point a little further on, if the noble Viscount will forgive me. I was mentioning the matters which were referred to the Committee—first, the commercial prospects of a continued service and any possible alternatives. Then there were the questions of the type of ship that would be needed, and how much it would cost; how much the Government would have to contribute, and in what way and on what terms. The Chairman of the Committee, the noble Viscount, Lord Chandos, needs no introduction from me. He was assisted, as your Lordships will know, by the late Sir John Hobhouse, a shipowner, and by Sir Thomas Robson, a chartered accountant, both of them men of very great experience and distinction in their respective professions.

In the months that followed, the Chandos Committee made a most exhaustive study of the whole problem, and I think I should express at this stage the Government's appreciation of the very able and conscientious way in which they carried out a very difficult task. All the evidence available, both from the Cunard Company and from outside sources, they went into very thoroughly. The Economist Intelligence Unit was brought in to make a long-term survey of the trends likely to affect travel by sea. Another firm, Research Services, Limited, provided an analysis of the reasons why passengers travel by sea and an assessment of whether the same motives were likely to hold good in the future. Shipowners were consulted, and many other bodies that had an interest in the proposal. The Committee went particularly thoroughly into the question of what type of ship would be the most suitable, and in this complicated and, in part, very technical matter, the Committee were very ably and extensively assisted by the staff of the Yarrow-Admiralty Research Department. I shall shortly be returning to this point.

The Committee reported in May, 1960, and a summary of its report was published in Hansard on June 1. In brief, the Committee recommended the best and most economical type of ship to replace the "Queen Mary", and on the financial side that its total cost should not exceed £30 million. Of this Cunard should contribute £12 million as equity capital, and the remainder, not to exceed £18 million, should be provided by the Government as loan capital at an interest rate of 4½ per cent. per annum. There were also recommendations, with which I will not burden your Lordships at this stage, on the question of depreciation and the redemption 'of the Government loan and provision for its security. Finally, the Committee recommended that the construction of the new ship should be put out to open competitive tender with all British shipyards who could build it.

The noble Viscount, Lord Alexander of Hillsborough, has raised the question of what has happened to the Chandos Report and used what, frankly, I found to be a slightly offensive term. He said that the report has been "suppressed". It has not been suppressed: I should like to make that perfectly clear. Had it been possible to publish it, this would have been done. It was recognised, however, when the Chandos Committee was set up, that if it was going to obtain all the evidence necessary to enable it to do its job properly, it would have to give a guaranteee of confidence to those from whom it was hoping to obtain this evidence, as there would obviously be a high degree of commercial confidence involved. My right honourable friend the Minister of Transport's predecessor, therefore, promised Lord Chandos that his report would not be published, and Lord Chandos was able to pass this guarantee on to those who gave evidence before the Committee. In this way, the Committee obtained a good deal of information which was most helpful to their task and which could certainly not have been obtained without this guarantee of confidence. I admit that not all the evidence given to the Committee was given in confidence, but it would clearly be quite misleading to publish only part of the evidence on which the Committee based its recommendations.

VISCOUNT ALEXANDER OF HILLSBOROUGH

Hear, hear!

LORD CHESHAM

I am delighted to hear the noble Viscount say, "Hear, hear!" to it all.

The next important point is that the recommendations of the Committee were on lines which were acceptable to the Cunard Company, and after further consideration and discussions with the company, the Government announced in October, 1960, that they had accepted these recommendations subject to certain minor modifications. The Bill which is now before your Lordships is, of course, the result of that decision. The White Paper sets out the main points of the provisional agreement which has been arrived at between the Government and the Cunard Company to enable the Chandos Committee's recommendations to be carried out. The detailed formal agreement between the Government and the Cunard Company is now being drawn up on the basis of the White Paper, and this will, when it is completed and agreed, be laid before both Houses of Parliament in accordance with the provisions of the Bill.

My Lords, I do not intend to say very much now about the differences, which are not of a major character, and are in fact mostly in the Government's favour, between the Chandos Committee's recommendations and the arrangements which the Government has actually agreed on a provisional basis with the Cunard Company, but one or two points I must touch on.

The main change is a matter of form rather than of substance; instead of a loan at 4½ per cent. interest, the same total sum will be provided partly in the form of a loan at the current rate of interest for 25-year loans from the Public Works Loan Board, and partly in the form of a grant. The split between loan and grant will be so calculated as to be equal in value to a loan of the same total sum at 4½ per cent. The only purpose of this change is to make clear the amount of subsidy involved, because we think it right for this to be seen clearly for what it is. It has been provisionally calculated at £3¼ million, which is the sum named in the Bill, and is the extent of the subsidy, as distinct from the loan.

My Lords, I want to stress that this amount of £3¼ million is extremely moderate, and represents only about 11 per cent. of the total cost of the ship. Compare this with what Cunard's competitors are given by their Governments. The United States Government paid no less than 58 per cent. of the cost of building the "United States" and in addition to this they pay about 28 per cent. of the annual running costs of that ship. The French Government are paying about 20 per cent. of the cost of the "France", which is due to come into service next year and they will also make up any losses incurred by the company which will run it. Against this, we are proposing to pay only 11 per cent. of the cost of the new "Queen", and we shall pay none of the running costs whatever.

I should also like to emphasise the nature of the Government's interest in this enterprise. We are not in it to make high profits. Competing against foreign Governments is not the kind of undertaking in which very high profits are likely to be made: if it were, the Cunard Company would probably not have found it necessary to ask this Government for assistance and this Bill might never have been presented. Our aim has been simply to make the con- tinuance of this service possible at the minimum of cost and the minimum of risk to the taxpayer. I would say that if a basic motto for the Government element of participation is to be devised, it would be: "Make possible and get out." We have therefore concentrated on security and early repayment of the Government's loan. The loan will be given in the form of a debenture, and a charge will be held over the new ship and all the assets of the Cunard-White Star Company, including the depreciation fund which will be built up annually out of the earnings of the ship.

If the ship does well, as we certainly trust it will, we have made sure that the profits will not all go to the Cunard Company, leaving the Government with their loan still at risk. The Cunard Company's return on its capital will be limited to 7½ per cent. per annum, less income tax, until all the Government loan has been repaid with interest. Until then any excess earnings over 7½ per cent. will be devoted towards the early (that is to say, accelerated) repayment of the loan. In other words, having made the continuance of this service possible, our intention is to withdraw from the enterprise as soon as we can. This is very important because of the commercial prospects. In the Chandos Committee's view, the first half of the new ship's life is likely to be the most profitable; and after that, with increasingly faster and more comfortable air competition, the prospects are more doubtful. But, my Lords, by the arrangements we have made the ship's earnings in the first half of her life should be enough to provide cover for the repayment of almost the whole of the Government loan with interest. After that the risk will fall increasingly on the company, not on the taxpayer.

There have been suggestions that the Government should take an equity interest in this enterprise. Your Lordships will have gathered from what I have just been saying that in the Government's view this would be a quite unjustifiable risk to take with the taxpayers' money. To meet this point a further suggestion has been put up: that the Government's debenture in the company should be convertible at the Government's option into an equity holding. The intention would presumably still be to give the Minister a financial gain in the hypothetical event of the company's making large profits but without the risk involved in a straight equity holding. But in fact the Government have already struck the hardest bargain they can with Cunard, and any further concession by way of a convertible debenture would therefore have to be matched by a quid pro quo somewhere else in the proposed arrangements.

VISCOUNT ALEXANDER OF HILLS BOROUGH

When the noble Lord says that the profit will be limited to 7½ per cent. on the share capital, I take it that he is referring to the share capital on "Q. III" alone, and not the whole Cunard company.

LORD CHESHAM

Yes, that is right. When I have said "the company", have been perhaps a little loose in my term; I meant the Cunard-White Star Company which is to operate this ship.

If I may return to my point, if there were to be a convertible debenture that would mean, in practical terms, that the Government would have to accept a lower rate of interest on their loan, or less satisfactory security, or less prompt repayment. This would mean exchanging something of real practical value—the present arrangement—for something which is unlikely to be of anything like such value. I think that the cost of grasping at this particular shadow is one which might ultimately have to be met by the taxpayer in a substantial form.

My Lords, I should like now to refer to a matter on which a good deal of heat was generated in the later stages of this Bill in another place. This was brought about by the application by Cunard Eagle Airways, a subsidiary company of the Cunard group, to the Air Transport Licensing Board for a licence to operate transatlantic flights and the company's announcement at the same time that they intended to spend £5 million or £6 million on the purchase of Boeing aircraft to operate this proposed service. It has been said that this meant that Cunard had available from their resources—and should therefore provide—more than £12 million for the replacement of the "Queen Mary"; it has been said that the Government assistance for this ship was indirectly enabling Cunard to find the money for the aircraft, which would then compete with B.O.A.C.; and it has been said that the amount of Government assistance should therefore be reduced in order to prevent this.

I believe that this argument is totally misconceived. In the first place, it has never been suggested that Cunard could not raise a good deal more than £12 million—possibly by raiding the funds set aside for the replacement of their other ships, or by pledging all the assets of the Cunard group, or something of that kind. Equally obviously it would have been highly imprudent for the company to take any such desperate measure for a project of this kind in the face of heavy foreign subsidised competition, and wholly unreasonable for the Government to expect them to do so before coming to their assistance. In fact, however, it is clear from Cunard's accounts —which have been produced to, and examined by, the Chandos Committee—that £12 million was just about all the company had available from their own resources for the replacement of the "Queen Mary".

Secondly, there is no real connection anyway between the Boeings' enterprise and the proposals for the new "Queen". The point is that the funds needed for the purchase of the Boeings were raised on the security of some of the company's property in the United States. You can ask, perhaps, my Lords, why could this not have been done to raise more money for the ship, and thus save the taxpayers' pocket. I would answer that raising money for Boeings is a very different proposition from raising money for a new "Queen". The Boeings should pay for themselves in five to eight years or in any case, as they are aircraft which are in use all over the world, could be sold at any time for little less than their written-down value. A new "Queen", on the other hand, would involve a much greater total sum, a far longer period to pay for itself, and a far wider pledge of security; and in addition, of course, there would be little scope for using it or selling it for some other purpose if the need arose. So the fact that Cunard can manage to buy Boeings does not mean that they can reasonably be expected to put up any more money for the new "Queen". I would humbly suggest to your Lordships that the whole point is somewhat of a red herring.

Thirdly, whether or not one approves of Cunard's competing with B.O.A.C. (their application although so far granted, is subject to appeal and, therefore, still in a sense sub judice so that I cannot say much about it), it would be quite wrong to suppose that the Government's help for a new "Queen" makes it easier for Cunard to compete with B.O.A.C. In fact, I think the exact opposite is nearer the truth, since if the Government were not intending to help as much as they are, there would be no question of a new "Queen", and Cunard would have another £12 million free to invest in one way or another as seemed desirable. If they could secure additional traffic rights on the air route, this might well be spent on further aircraft. So the Government's assistance for the new "Queen" certainly does not look to me as if it would help any further ambitions Cunards may have in the air.

I should now say something about the type and size of ship which is intended. A great many suggestions for this have been made from time to time. The Chandos Committee thought that the exacting requirements of the North Atlantic express passenger service leave one very little room for choice. A crossing must be made in five days or less. This is the standard set by the existing "Queens", by the "United States" and by the "France", and it is essential if a regular weekly schedule is to be maintained with two ships. A five-day crossing means a high service speed if the programmes are to be maintained in the face of Atlantic weather. That kind of speed demands a ship of about 1,000 feet in length, if a reasonable degree of passenger comfort is to be provided in winter. So already it is clear that we must have a ship of considerable size—upwards of 50,000 tons. If a ship of that length and speed is to be reasonably economic it must have accommodation for a very large number of passengers and if the service is to be competitive the accommodation must be reasonably spacious. All this means a ship of something in the region of 75,000 gross tons, a service speed of 29½ or 30 knots, a length of 990 feet and a passenger capacity of 2,270, as indeed the Chandos Committee recommended. There is really very little room for difference in this standard once the requirements are set down. The Chandos Committee did investigate most thoroughly a number of alternatives, but found that none of them would really fill the bill.

Your Lordships need have no doubt that a very fine ship will be built. As your Lordships know, invitations to tender have been sent out by the Cunard Company to the six appropriate shipyards in this country, including, of course, Northern Ireland. Tenders are expected to be received at the end of this month. My right honourable friend the Minister of Transport, who will once again have the advice of the Yarrow-Admiralty Research Department, will be associated with the Cunard Company in the assessment of the tenders. May I say once more that the contract will go to the firm which submits the best tender. This will not necessarily be the lowest price: it will be the best all-round proposition in terms of value for money—price, technical details and delivery date.

My Lords, I must finally turn to the second clause of the Bill which makes provision for the insurance of the new ship. There will be no element of subsidy in this provision. The point is simply that the value of the new ship will be so high that the normal insurance market may not be able to cover it all. The Government therefore propose to provide insurance for such part of that value of the new ship as the normal insurance market cannot absorb after first refusal of the business. The Government will charge the company normal commercial rates. Your Lordships may remember that this was done before for 'both the "Queen Mary" and the "Queen Elizabeth", in accordance with a special Act of Parliament in 1930. As this one is now, the arrangement was quite separate and distinct from any other financial arrangements, and as it turned out, the Government made a considerable profit from its insurance of these ships. I hope that it will be so again.

I have not yet said anything about any need to make a decision about the "Queen Elizabeth". She will have several years of active employment before her, even after the new ship enters service. The Chandos Committee, therefore, explicitly refrained from making any recommendation about the "Queen Elizabeth" because it recognised that, by the time her replacement had to be considered, conditions might be quite different. We might take a different view of the commercial prospects of the service, or it might then be possible to think of building quite a different kind of ship. Our present proposals for the replacement of the "Queen Mary" therefore leave the question of the "Queen Elizabeth" entirely open. The Government have entered into no commitment whatever about the "Queen Elizabeth", by statement or by implication.

My Lords, it would be wrong for anyone to read too much into this Bill. It does not purport to solve the problems of the shipping or shipbuilding industries. It is not intended to set a pattern for the Government's policy towards those industries or on the general question of public investment in private industry. The case for enabling the Cunard Company to continue the British express passenger service has been considered entirely on its own merits. This is a service which, as I have said, is up against peculiarly heavy competition of a noncommercial kind. It is also a service which I am sure we as a nation should not and would not be prepared to see abandoned. I would ask your Lordships to consider the case on its merits in the same way that the Government have done, and to give the Bill a Second Reading. I beg to move.

Moved, That the Bill be now read 2^a. —(Lord Chesham.)

3.20 p.m.

VISCOUNT ALEXANDER OF HILLSBOROUGH

My Lords, it seems quite clear to me that the noble Lord has done his very best with the case, which he regards as a good one but which I regard as less good. He stuck very faithfully to the contents of the White Paper, with other remarks here and there in reference to the debates in another place. But I certainly find nothing in his speech that would be likely to soften or reduce my criticism of the proposal contained within this Bill. I know it is not easy for anybody in any Party to come out with specific criticisms, although it has been done in another place, because the criticisms come from both Parties. It depends a great deal always upon what is a vested interest and whether you have a particular local vested interest, or supposed interest, in employment and general social conditions arising therefrom in a particular locality.

I must say in the first place that I feel very critical of the Government because of their extraordinary way of approaching the problem. I do not say that it is new in Conservative history—it may not be new—but in the course of this and the last Administration of Government we have seen develop a kind of practice which is not to be admired, and one which I hope will certainly not be a permanent part of Government Adminisitration. I mean that, when you suddenly have a problem submitted to you, you decide what you are going to do—at any rate in principle, if not in detail —and after that, in order to satisfy the public outside that all possible precautions are being taken, you set up an expert Committee—in this case, a Committee of three men.

They included a very able business man and politician, Lord Chandos; Sir John Hobhouse, very experienced in shipping, though not so much in this particular kind of commercial shipping, the Atlantic crossing; and then you have a very expert chartered accountant. Such a man, of course, is always useful on any committee. Then you get a report, but apparently beforehand it is decided that that report cannot be submitted to Parliament or to the public because the Government want to get evidence of such a breadth of character that it can be treated absolutely as confidential. There are a number of issues that come before Parliament from time to time which have to be looked at purely from the confidential and highly dangerous security point of view, but I have not been able to reconcile in my mind why it is necessary to have such extraordinary confidentiality in a case, such as this, where a vested interest is asking for public money. That is where we part company with the Government on this point. I half expected that during the debate in another place, or here, the vast services of the "Queens" during the war for which I was so grateful, might lead to the possibility of matters being raised in discussion which would be of a high security value in regard to defence; but nothing of that kind has been said, so far as I can tell, in either place.

I think that we have to decide mainly two things: first, whether, in the present world circumstances operating with regard to luxury travelling, it is a good investment to do what is being asked; and secondly, who is to pay the bill? This committee procedure has been adopted now on two occasions. The Government suddenly announced, some time ago, they were going to reconstruct entirely the British nationalised railway administration; and after they had made the announcement they set up a special committee to advise them how to do it. So we bad the Stedeford Committee. As in the present case, with the Chandos Committee, the Stedeford Committee's report was never submitted to Parliament. That Committee was concerned with a vast organisation, covering a great deal of commerce and other things; and on that occasion the evidence—which perhaps was so highly political that some of it could not be shown—was withheld from Parliament. I thought that was a very important error, but that the procedure should be followed again in the case of the Chandos Committee is a Parliamentary tragedy, and not the kind of thing to increase the confidence of the community at large in its Parliamentary system.

The noble Lord says that the cost to the Government is not very great. All Government expenditure is now of vast importance, however. Here we are, trembling on the brink of a financial precipice, so to speak, with new powers given to the Chancellor of the Exchequer to bring in any kind of alteration in the taxation of the subject without any reference to Parliament of the powers granted to him in the Finance Bill. So this general question of Government expenditure becomes vastly important to the whole community. We are told that the cost is going to be £3¼ million. I wish I had the financial brain of my noble friend Lord Pethick-Lawrence to try to calculate what are the risks in this particular cost. I lam not at all sure. As I read the White Paper—I see quoted the fact that the present rate is 6¼ per cent.—what you are doing is banking on the current cost of money for this purpose on the commercial market of 6¼ per cent. but that the maximum charge that will fall on the Exchequer is estimated at £3¼ million. Who knows? I wonder if the noble Lord, Lord Mills, will be able to tell us that at the end it will be £3¼ million as a minimum.

It does seem to us from time to time that the present Government do know how to look after their friends; and that seems to be increasingly so. We have just seen (if I may quote something in support of what I say), that the great steel firm of Colville's are apparently quite confident of being able to raise a new £15 million on the market in respect of their undertaking. It was said, when a loan of £50 million was being promised —and I note it is not all paid over yet so I do not want to over-paint the picture—that it was absolutely vital and necessary that it should be put and guaranteed by the Government if this very important part of the steel industry was to be improved and made more productive and commercially prosperous than it was at that time. Here we have another case.

The arguments that have been put by the Government and repeated here to-day (I am not charging the noble Lord, Lord Chesham, with anything that has not already been said on behalf of the Government, so I hope he will not think I am attacking him personally in any way) seem to me to be very inadequate indeed. What sort of consideration did the Chandos Committee give to the real prospects of luxury travel as a whole for the future? I cannot find any real answer, in the debates in the other place, to the points which were made weeks ago on the Second Reading by Mr. Strauss as to what was the latest information then available to him on transatlantic traffic. What I do know is that only three or four years ago there were fewer passengers across the Atlantic by air than by sea, and that in 1959 there were 958,000 passengers by sea and rather more, something over one million, by air. And by 1960 the number of passengers going by sea had dropped to 960,000 while that of air-transported passengers had risen to over 2 million.

I begin to understand the force of at least one argument by the noble Lord, Lord Chesham, this afternoon: that if you give this money and build this great ship the commercial prospects for the first half of its life are good. In the second half of its life, however, while I recognise that the repair bill, and that kind of thing, is heavier, the biggest risk is the extent to which, as the Cunard Eagle Company have recognised, the air traffic so increases that it becomes more and more difficult to get the commercial results desired from one of these great passenger liners. That seems to me to be quite clear from the argument which the noble Lord, Lord Chesham, has given to us this afternoon.

VISCOUNT MASSEREENE AND FERRARD

My Lords, might I ask the noble Viscount whether he is quoting in the passenger figures the express sea service or the figures for all North Atlantic passenger services as well as the express sea passenger service. That is extremely important; they are two different things.

VISCOUNT ALEXANDER OF HILLSBOROUGH

I should have to refer to my right honourable friend in the other place to get the detail of that point, though I shall be very glad to get it. But I remember that he did say in the other place that the figures he was quoting were quoted from the letter of an expert in The Times on this particular single issue of this passenger liner traffic, and had never been controverted in The Times. Nor could I find anything in the reply of the Ministers which controverted the general position which was outlined by Mr. Strauss in that respect. If I find I am in error I shall be glad to apologise to the noble Viscount, but so far as I know I am speaking the facts as they have been ascertained. In any case it would be vastly better for us if the Chandos Report were before us and they gave us their own detailed examination of the comparative prospects in detail. We in Parliament Should then know where we were. But we have not got that report. I think it is the Government who should be cross-examined, if I may say so, by the noble Viscount, Lord Massereene and Ferrard, and not myself. I simply gave the prospects which one is entitled to assume would be the prospects on the information submitted to the other House of Parliament.

It is no use, I think, hiding from ourselves the fact that the shipping industry itself is split on this matter. I do not think the noble Lord, Lord Mills, who has such a vast business experience, and who probably in all these matters is quite skilled in probing, will be able to say to us that the whole of the shipping industry is agreed about the policy of the Government upon the two "Queens"—not by any means. I have talked to a good many people in the shipping industry, and that is not agreed. Nor am I—and nor are many people in the shipping industry—convinced by the argument of the financial kind the noble Lord has given this afternoon.

Let us take another great shipping company, the P. and O. Take the wonderful ship of its class so recently put into service, the "Canberra", a very big ship, of 45,000 tons. It cost a vast sum of money. The P. & O. provided the whole of the cost out of their own resources. Would you say that the P. & O. is not subject to competition or subsidised competition? I have lived a long time with shipping in its various aspects, and I have asked all sorts of questions in the last 30 years. I have tried to find out a great deal upon the different kind of shipping problems that would have to be looked at if one were dealing with maritime defence—for example, what the prospects are; what the traffic is, and what the liabilities are. I should like to break off for a moment, if your Lordships will excuse me, to say how much I regretted the passing a fortnight ago of the late Sir William Currie, who was a very old friend, a very great servant to his own industry and to the nation.

To return to my argument, I would say that, if you look now at the class of ship that is really needed, it is quite idle to say we should depend entirely upon prestige, on size, or even on a knot or two extra in speed. My mind goes back to the time of the "Titanic" disaster, and to what a terrific blow it was to the old White Star Company. But I sailed in its two subsequent ships, the Britannic" and the "Georgia" —in fact I sent a signal to the "Georgia" in the Great Bight, South Australia, in December, 1950, when I saw her, still plodding along with emigrants, still going strong.

I have travelled in the "Queens". Personally, as a passenger I should prefer at any time to travel in the "Britannic" or "Georgia" as they were then. We could have such ships, perhaps of another few thousand tons, and still of great speed, and it would be possible to maintain a regular service, whether it is a five-day service or six-day service. They would not mean the same overall cost per passenger carried, or the same liability to carry as you have in the "Queens". Nor would you have quite the amount of insurance required to be taken under Government auspices as required in the case of the "Queens". It may be, as the noble Lord says, that that has been more a question of profit to the Government than not, although it seems to me rather extraordinary that the private interest for such a thing should have to go to the Government for its insurance. There is great competition in the insurance world to offer the insurance on the most favourable terms. Does it mean that the Government rate is more favourable even than can be obtained from a private company?

LORD CHESHAM

If the noble Viscount will forgive my intervening, I do not know whether I did not make it clear, but I tried to say that the Government would enter this only in the event of there being any part of the value of the ship which was not taken up by the normal market. There is no question of competition or of more favourable rates. It is merely "last ditch" almost, to make sure that the whole of the ship is insured, in case the market cannot take up the full value.

VISCOUNT ALEXANDER OF HILLSBOROUGH

I am very much obliged. It just makes me go back to some of my original political thoughts. It is astonishing how the resources of the State can be tapped if it is for private enterprise. It is astonishing what a row goes up if it is attempted to take over the whole of the development, in the interests of the whole nation, of other specific great organisations by planned economy—very, very strange.

The next thing I would say this afternoon is that the conditions under which the two "Queens" might be of great strategic value in time of defence in the future are utterly different from what they were. I pay great tribute to the ships as they were; what they did in the way of passages, more often than not, after the preliminary period, unescorted, and how they escaped attack so fre- quently. Their speed was high, and the navigation and steering capacity of the most excellent kind for such an enormous weight. But the speed of a German submarine under water in the past is a vastly different thing from the present underwater speed of any enemy nuclear submarine from a country which has both the "know-how" and the resources to equip such a vessel. Instead of being of a low knottage underwater it would have quite a high speed.

That is one reason why I do not complain much about the "Dreadnought", which has been laid down by the British Government, being a hunter and not a fully usable nuclear ship on the same basis as the American ships. She will be of vast importance. At the same time, one has to remember that if it is a Russian submarine with German scientific expert knowledge behind it, nuclear and maritime, and it achieves a high speed underwater, it will have the advantage of being able to use the newest type of homing torpedo launched at that higher underwater speed. So the question of having a vast tonnage of high speed ships in that kind of warfare is going to be nothing like the advantage to us that it has been in previous experience.

Therefore, I myself should much prefer, if you want to keep employment going in the shipbuilding yards, that you do not concentrate upon a subsidy in regard to one ship in one particular locality. If it is absolutely essential to subsidise shipbuilding—and I hope it is not—then build ships in two or three shipyards, so that the social benefit is spread over more than one area. I shall be most happy if some of my doubts and fears upon this particular matter are not realised. Probably I shall not be here to see the final results. Nevertheless, I am concerned about my country. Once you begin upon a wrong track like this, in this particular case, so it will spread from place to place. I should be most disappointed, if I should look down from some other place later and find that the Government had failed in the final objective in regard to this ship. I should wonder why, at the same time as you were lending at 4½ per cent. for the project of this "Queen" you tell our Colonies, which need development, that you cannot afford to let them have any more money, even at 5½ per cent. I think the Government ought to reconsider this Bill.

3.45 p.m.

LORD OGMORE

My Lords, I feel that this is a bad Bill. It is a Bill which provides for a gift and loan out of public funds to a private company. The noble Lord, Lord Chesham, has spoken about a hard bargain. I only wish that someone would make a hard bargain with me and give me £3¼ million, or anything like it. In my view, the onus is on the Government to prove that this is necessary in the public interest, not in the interests of the Cunard Line. The Government have failed to do so, among other things by reason of the fact that they have failed to publish the Chandos report which would give us information. In fact we are asked to buy a pig in a poke; we have no information to go upon.

This is the first time that I remember — and noble Lords here have much longer Parliamentary experience that I —when any matter of this kind has come before Parliament and there has been a Committee sitting upon it, and we have had no information as to the content of that Committee's report. As for the Parliamentary background of this Bill, your Lordships will remember that it appeared in the Queen's Speech and a statement was made by the noble Lord, Lord Mills, on November 3, 1960. At that time I challenged the Government on the subject, so my opinion now is not a novel one—I did not like it at the start. I, and other noble Lords, challenged the Government during the debate on the Address which followed shortly afterwards, and at that time I pressed the Government to publish the report of the Chandos Committee.

I feel that this proposal is objectionable for several reasons. First of all, it is objectionable—indeed, in my view, it is improper—for public funds, taxpayers' money, to go in this way to the shareholders of a private company. The second reason is that it is a subsidy given to one company and not to an industry. As a general rule I am not in favour of subsidies for anybody. They are evil. Sometimes they are necessary evils, but they are always evil. But if a subsidy is necessary at all, it should be a subsidy to an industry and not to one company.

What of the other companies? The noble Viscount, Lord Alexander of Hillsborough, has spoken of the P. & O. This is what the Chairman of that company has to say on this matter. Sir Donald Anderson made a statement referring to the two new ships of the P. & O., the "Canberra" and the "Oriana." He said: This is the background against which we have made an investment of some £30 million in these two ships. We are a purely commercial enterprise with no support from the taxpayer, and our business now is to secure a return on the outlay. Sir Donald Anderson was obviously there referring to the Cunard Company. He said that the P. & O. have no support from the taxpayer". Have the P. & O. no highly subsidised foreign competition? The noble Viscount has pointed out that they have, and we all know that they have. They have intense competition on some of their routes; yet they have put up out of their own resources £30 million for these two new ships—not one vast ship, but two fast, modern ships that are going to get, they hope, the cream of the traffic. Good luck to them; I hope they will!

Then there is in fact a hidden subsidy to the shipbuilding industry, because only a closed number of shipbuilding firms were asked to compete. I should like to see the shipbuilding industry putting its house in order before a subsidy, either direct or hidden, is given to it. Your Lordships may have seen the Report which I have in my hand, the Report of the Sub-Committee of the Shipbuilding Advisory Committee, which was published by the Stationery Office a short time ago. The gentlemen who formed the sub-committee were by no means hostile critics of the shipbuilding industry. In fact, in one way and another, except for the secretary and chairman, they seem all to be connected with it. They came from the Shipbuilding Conference, the Shipbuilding Employers' Federation and the Confederation of Shipbuilding and Engineering Unions. Except for the chairman and secretary, they were all members and they made very severe criticism in paragraphs 53 to 64 of this Report on the employer-employee relationships in the shipbuilding industry. While that is so and while these various old-fashioned methods are still pursued in the industry, why should they get any subsidy at all from the taxpayer? I believe it is quite the wrong lesson.

In my view one of the problems we have to face in this country—and we have to face it quickly—is that of getting our industries prepared to meet foreign competition. For many years past they have been bolstered up and comforted and cosseted by high tariff barriers, and when they come out into the world and have to meet foreign competition they find a very great difficulty. That is one of our problems to-day. This is a completely wrong lesson; to give a subsidy in order to put their ship on the sea is completely the wrong way of dealing with the situation.

Then, finally on my objections to this, it is the wrong type of ship, as we have been informed by those who know more about it than certainly I do. There have been great doubts in shipbuilding circles and great doubts among the shareholders of the Cunard Company itself, as we have seen in the case of the gentleman who is now circularising the shareholders—I have forgotten his name for the moment but I have a copy of a letter to the Press from him here. There are great t doubts about whether it is desirable to have this monster built at this time and Whether faster and smaller ships, as are used in the case of the P. & O. line, would not be more to the point. One is afraid that in a few years' time, after this great ship is built, it will be left on the shore high and dry, gasping like a stranded whale, having no real market for its accommodation.

In my view (we all have different views on this subject because we are talking about the future) the future of the transatlantic passenger traffic is in the air. We have had figures from the noble Viscount, Lord Alexander of Hillsborough, and whether or not he is absolutely accurate to a few thousand, the trend he was referring to is the correct one; I am perfectly certain of that. It means that over the years more and more traffic, passenger traffic and not necessarily freight, will be going by air, and less and less will be going by sea. After all, it takes six, eight or ten days to cross the Atlantic by boat. The North Atlantic is in certain seasons, particularly in the equinoctial gales and in the winter, a pretty stormy place. You can get a very bad tossing indeed in the Atlantic. Who would necessarily wish to stand up to that sort of trip, being tossed about in mountainous seas and in tumultuous winds, for eight to ten days, when in six hours you can be across the Atlantic by 'plane?

THE PAYMASTER GENERAL (LORD MILLS)

My Lords, may I interrupt the noble Lord? Surely he knows that this is a proposal to build a ship which will cross the Atlantic in any weather in five days.

LORD OGMORE

All right, my Lords, let us take it as five days. I do not mind. It is only a day less. There is not much difference between five days and six days as compared to five or six hours. That is my point. I am sure that in time that will be the development we shall see. In fact, I feel certain that there would be far more air passenger traffic now than there is if it were not for two circumstances: the first is the price, and the second is safety. As to price, the reason why the air traffic passenger fare is high is the arrangements by all the companies to keep the fares up. They are allowed to make, or they do make, some minor concessions such as smarter handbags or champagne or caviar or liqueur brandy for the passengers who want it, but in fact the fare is governed by agreement between all the airlines. It is a highly protected industry where there is no free competition whatever.

LORD HAWKE

My Lords, is it a fact that all the world airlines are making losses at these fixed fares? If they reduced fares further would they make profits or still greater losses?

VISCOUNT MASSEREENE AND FERRARD

My Lords, might I further point out that hundreds of millions of pounds of subsidies have gone into these trans-Atlantic airlines?

LORD OGMORE

My Lords, whatever has happened, this is the point. I believe myself that if the airlines reduced the fares materially the extra traffic they would get would more than make up for the losses they are now sustaining. Remember the reason why they are making losses. It is the Blue Riband run across the Atlantic that is concerned. I do not know whether there are so many losses on that particular line, but even if there are, the reason why they make losses is that they are flying with a very low seat factor. It is something like 40 to 60 per cent. The reason for that is that the fares are too high. If they lowered the fares and cut out some of the flummery that we get with air travel I am quite certain that they would be able to fill their seats to capacity.

LORD HAWKE

My Lords, it could be that people do not like to come to Europe for holidays in the winter.

LORD OGMORE

That is perfectly true; but they do not want to come to Europe by sea in the winter, so the same argument applies to liners as to airliners. In fact, more people could come if they could get across in five or six hours instead of five days at sea. I have travelled in both the "Queen Mary" and the "Queen Elizabeth" and have had very rough trips in both, so I know what I am talking about.

The second reason why people do not travel so much by air as they otherwise would is the question of safety. Here, again, I think we are at fault, the Government are at fault and the airlines are at fault, because they will not adopt the safety devices that are available. It is not their fault in this instance, but there is the case of the Decca navigational system. The noble Earl, Lord Bathurst, and I have often discussed this matter across the Floor of the House and I am sure he would agree that it is remarkable. It was not adopted because it is a British-Canadian system, and the American manufacturers brought pressure to bear on the United States Government, who in turn brought pressure upon their customers in other countries to vote it down when it came up for adoption internationally.

Another way in which the Government here could help is by a joint system of air control. The present system is just like having two systems of signalling on the railways, and we all know what chaos that would bring. We have a civil system and a military system. Although there is collaboration between them, that is not good enough. We really need one control for all aircraft that are flying. The noble Lord, Lord Chesham, told us that the Cunard Company itself had gone into the air. But he missed the point. He was saying that if they had not gone into the air they would have had more money for ships.

LORD CHESHAM

My Lords, I hesitate to interrupt the noble Lord. What I said was actually the other way round. If they had not built the ships they would have had more money for air transport.

LORD OGMORE

My Lords, I was not wilfully misinterpreting what the noble Lord said. But that does not matter. Whatever his statement was, it misses the point. It is not a question of whether they would have had more money for one thing rather than the other; that is not the point at all. The fact is that a shipping company which is getting a subsidy and a loan from the Government to build a ship is itself going to run an airline. To my mind, that is a most extraordinary thing to happen. I can understand a shipping line saying, "We believe in ships. We think that ships are the answer and there is going to be great traffic in the Atlantic." That is one argument. But when a shipping line says, Give us £3¼ million, and lend us enough to make it up to £18 million altogether, while we at the same time use our money and that obtained by loan from America to run an airline in competition with our own ships," the proposal makes complete nonsense to me. I can see no logic whatsoever in it: and that is the point the noble Lord, Lord Chesham, completely missed. It is completely illogical, and I do not see that any shipping company which does that sort of thing has any right whatsoever to come to Parliament for a grant or a subsidy. As I have said, I believe myself that this is a bad Bill. I think that, even at this stage, the Government should withdraw it. We have little power over it ourselves, because it is a Money Bill, I gather. Is it not?

LORD MILLS

My Lords, I was going to correct that when I spoke. It is not a Money Bill in that sense.

LORD OGMORE

We were told that it is a Money Bill, were we not?

LORD CHESHAM

My Lords, I apologise to the House. I made a slight error about it. My noble friend Lord Mills was going to correct it later, but I must apologise now for my error.

LORD OGMORE

I am grateful to the noble Lord for correcting himself on that point. If it is not a Money Bill, then presumably we can amend it if necessary, although it is difficult to see how, because you either take it or leave it. We could knock out the £3¼ million, I suppose, if the Government Back Benchers in this House take the same objection to it as did those in the other place. However, I think the Government ought not to try to perpetuate the past. I think they ought to think of the future; and the future so far as the Atlantic is concerned, I think, lies in the air.

4.2 p.m.

VISCOUNT SIMON

My Lords, I am afraid that I do not feel able to offer this Bill any warmer welcome than it has yet had from noble Lords on the other side of the House. In saying this, I should like to make it clear that, although I have had a long connection with the shipping industry, I have had no consultations with anybody about this. I speak entirely for myself. In fact, my only consultations have been with the chairman of the Cunard Company, who was kind enough to go to considerable trouble to explain to me some of the very difficult technical problems involved and also some of the thoughts which had affected his board.

Now it seems to me that this Bill runs right against the general policy of this country in regard to shipping. British shipping has complained for years about the subsidies given by foreign countries, and it has asked successive Governments to use their influence and their bargaining power to get subsidies of this kind reduced or eliminated. In passing, may I say that 'I venture to disagree with the noble Lord, Lord Ogmore, in his reference to high tariffs. Of course, the shipping industry does not shelter behind a tariff wall: it has no tariff wall to shelter behind. I think that, on reflection, the noble Lord will agree that the problem of giving a subsidy to the shipping industry is really not one of giving it to an industry which is supported or bolstered up, I think he said, by high tariffs. But, be that as it may, that has been our policy, and I ask myself whether the influence and the bargaining power of the Government is going to be improved if this Bill is passed into law.

It may be that the argument now is: the time has come to abandon this policy; we have done all we can; other countries continue to subsidise their ship- ping; we can do no more, and the time has now come to give counter-subsidies to our own shipping. But, my Lords, if that were the case, then, of course, we should have a completely different Bill before us to-day. It seems to me, as I have said, that, in the present circumstances, this Bill runs counter to our general policy. It is argued that this is a special case. It has been said, and it was repeated by the noble Lord, Lord Chesham, that this is the most heavily subsidised route in the world. I should like to ask the noble Lord who is to reply to the debate what exactly that statement means. The subsidies which are granted by foreign Governments are usually related either to the tonnage or to the cost of the ships, and occasionally, I think, to the speed. Here we have a route where the largest, the most expensive and the fastest ships are used. Therefore, it stands to reason that the subsidy given is the largest. But the statement that it is the most heavily subsidised route in the world seems to me to imply that the subsidy in relation to the shipping utilised is greater than in other areas, and I should very much like to know whether Her Majesty's Government have any evidence that that is the case.

Those of us who are associated with the shipping industry in any way know that the United States' subsidy rules are based primarily on differentials. The noble Lord referred to the 58 per cent. of the cost of the "United States" which was paid by the United States Government. I do not know the exact figures, and I take them from him, but I should like to know whether that is not the basic constructional subsidy, which represents the difference between the cost of building a ship in the United States and building it elsewhere. I agree that a subsidy of that kind is very hard to monitor, if I might use that word, and it may well be that, from time to time, the subsidies offered are greater than are really required by the facts of the situation. The same applies to the operational subsidy: that, again, is based primarily on the difference between the operating costs of American and foreign shipping. Another question I should like to ask the noble Lord is: have we ascertained from the American Administration whether, if this subsidy is granted for the construction of this new ship, a corresponding figure will be added to the subsidy which the American Government pay to their ships? Because, if so, it is not going to get us very far. In any case, it seems to me, that we have before us a curious inversion of the traditional excuse for an unfortunate mistake—that it is only a very little one. We are asked here to excuse it because it is a very big one.

The question has been discussed as to whether this is a good commercial proposition. The noble Lords who have spoken from the other side of the House came to the conclusion, I think, that it was probably not a good proposition. I should be rather more optimistic, and I should, indeed, happily adopt the view of the noble Lord, Lord Chesham—which I must say surprised me by its optimism—that under the accelerated repayment scheme it was likely that the total of the Government debt would be repaid by half-way through the ship's life. Now the Government debt is 60 per cent. of the cost of the ship. Presumably, depreciation will I have been provided on the rest of the ship as well; and, in addition, the equity holders, by implication, will have received 7½ per cent. on their money. If the ship has been paid for to the extent of 80 per cent. in 12½ years while the equity holders have been getting 7½ per cent. on their money, it seems to me a very good proposition. In those circumstances, I really do not understand why it is necessary to come to Parliament for assistance.

It seems to have been assumed—the noble Lord, Lord Chesham, said it, and it was also said, I think, in the Chandos report—that, because the company was unable to finance more than £12 million of this ship, it was therefore necessary to come to the Government. But I ask myself why. It surely should be possible to get this money outside; to raise debenture capital from the market—especially if it is as good a proposition as it is now held out to be. It may be said: "Look at the difference in the interest". I ask your Lordships just to consider that for one moment. The rate of interest suggested under the Bill is 4¼ per cent. I suppose the rate in the market would probably be more than the 6¼ per cent. mentioned in the Memorandum; it might be 7 per cent. But if you apply that to the 60 per cent. advanced under the Bill, you will find that the total difference is very little more than 1 per cent. on the total cost of the ship. I am sure that the Chandos Committee had very good advice from the people from whom they sought evidence, but I do not believe that anybody could possibly have estimated the future profitability of this business to within 1 per cent. It seems to me that it would have been just as easy to say that this money could be raised outside, and that the shareholders would take their chance, perhaps, of getting a little less than 7½ per cent. during the early years.

Now, my Lords, I turn to the other side, because we must consider what are the arguments put forward in support of this special arrangement. We have already had the argument that it was recommended by Lord Chandos' Committee. With great respect, I think that is hardly fair. Because Lord Chandos' Committee was not asked whether this was a good thing to do. They were asked merely what was the best way to do it, on the assumption that it was a good thing to do. Therefore, I do not think we have any reason—at least, I certainly have no reason, because as noble Lords have already said, the report has not been published—to think that they would have recommended this if, in fact, they had been asked what they recommended.

It is also suggested—and this is an important point—that this ship will be a good dollar-earner. That is indeed true; but there are many other good dollar-earners, and we have not hitherto made any attempt to subsidise them. The hotel industry in this country is a very good dollar-earner, and I think it has made repeated efforts, without success, to get purchase tax relaxed on its equipment. I might also add that in the representations which have been made to other countries in regard to subsidisation one of the points constantly brought out by other countries is that some sort of assistance is necessary in order to conserve foreign exchange. So far as I know, however, until now we have regularly turned that argument down.

Then we come to this very difficult question, the question of the relief of unemployment. Here I agree with the noble Viscount, Lord Alexander of Hillsborough, that if you wanted to relieve unemployment in the shipbuilding industry, this is not the way you would go about it. I feel sure that if the Chandos Committee, or any body like that, had been asked to recommend how the shipbuilding industry could be assisted with an expenditure of this order they would not have suggested building one great ship, which necessarily must be built in one great yard. It has been suggested in the course of the discussions in another place that this is not as bad as it looks, because the sub-contracts will be spread around the country. But I assume that the sub-contracts will also be decided on the same basis as the main contract; that is, on the basis of whoever makes the best proposal, and it will be only a matter of chance if we find that the sub-contracts are spread around the country. Moreover, I think some of your Lordships would be surprised to discover how many of the sub-contracts for a big ship, and particularly for a big passenger ship which requires a lot of domestic equipment, and so on, are not placed in shipbuilding areas at all. A very large number of sub-contracts will, I feel sure, be placed in the Midlands, and probably a good many in and around the London area. So I do not think we shall find that the sub-contracts necessarily bring to the shipbuilding industries much relief in unemployment.

Then there is the argument that, if we do not do this, there will be no service. I entirely agree with the noble Lord, Lord Chesham, that it would be a thousand pities if this great service which we pioneered, and which we have developed to such a remarkable extent thanks to the skill and courage of the Cunard Company, should disappear. But, after all, is not the position this? Here is a service; and if the users of the service will not pay enough to make it pay, there is really no reason why the taxpayers should subsidise it.

Here I would differ slightly from the noble Lord, Lord Ogmore. My information, based on past experience and some knowledge of these matters, is that without any doubt the large, fast ship is the most economical ship for this trade. Indeed, I would give this comfort to the noble Viscount, Lord Alexander of Hillsborough: that when he sees (with his own eyes, I hope; and not looking down from another place) the passenger traffic by sea across the Atlantic falling away, he will see that the big ships will retain the last of it and will win against the small ships, because, in fact, provided they are well-constructed and well-designed, they are the most economical. Finally, there is the question of prestige. That again is, no doubt, a matter of great importance, though I wonder whether prestige is not just a little tarnished if it is known that it comes as a result of public assistance. I am not sure that, if we did our best standing on our own feet, we should not in fact gain a little more prestige in other countries.

I do not want to detain your Lordships for much longer, but I want to refer briefly to the memorandum of agreement. I am in a little doubt here, because I do not quite understand from the Bill what the status of this document is. According to subsection (5) of Clause 1 of the Bill the ultimate agreement is to be laid before Parliament. Clearly it cannot be this document, which has been produced before the Bill has been passed. In the preamble to the document, it says that the agreement will be based upon this. That seems to me fairly broad, so that any agreement of the same general shape and pattern could be said to be based upon it even though some of the figures were substantially different. I hope that is a correct interpretation, and that the Government have not closed their minds to the possibility of negotiating a better agreement, in spite of the fact that the noble Lord, Lord Chesham, thinks that this is as far as the Government can push the Cunard Company.

It is rather curious that this agreement, as I see it, is not subject to Parliamentary sanction at all. If your Lordships look at subsection (2) of Clause 2, which deals with the insurance agreement, you will see that it is to be placed before Parliament and approved by Resolution of another place. I am not aware that this agreement has ever been approved. We are told simply that the Minister is going to table it, and that it is based upon the document which we had before us. Not knowing more about it, one must assume that this document is the document which will, in effect, be a draft of the agreement.

I have only one comment to make. Clause 17 (b) of the Memorandum explains how excess earnings are calculated for the purpose of accelerated repayment. They are calculated when the Q. III Company—that is, the Company owning the new ship—is able to pay its shareholders, the Cunard Company, in excess of 7½ per cent., less tax. Now, drawing on my own experience, I would venture to suggest that, if a service is being run by two ships—the "Queen Elizabeth" and the new ship—there is no doubt whatever that in the early years of the operation the old ship will make much more money than the new ship. This will be particularly so when the "Queen Elizabeth" is completely written off, as she will be quite soon. I would suggest to Her Majesty's Government, on the assumption that they have not yet committed themselves and that their minds are not closed, that both ships should be put into the Q. III Company so that the accelerated repayment can benefit from what I believe will be, in the early 'years, the greater earnings—I mean, of course, the greater net earnings —of the "Queen Elizabeth". There would be the added advantage that there would be some further security for the loan.

My Lords, those are the reasons why I think that, both in principle and in detail, this is a bad Bill and I join with the noble Lord, Lord Ogmore, in hoping that, even at this late stage, the Government may reconsider it. But, in view of their apparent impermeability to argument in the House of Commons, I confess that I have not high hopes. Therefore, I would make one concrete suggestion for the future. The noble Lord, Lord Chesham, has said that the Government are in no way committed to replacement of the "Queen Elizabeth". When that time comes, will the Government consider approaching the United States Administration to see whether an arrangement can be made for this prestige service to be run jointly by our new ship and the "United States", which has many years of life left to her, so that they need not replace her with a second ship and we need not replace ours with a second ship? It seems to me that that would be a valuable exercise in Anglo- American co-operation. Perhaps it might break the vicious circle of competition and subsidies which 'has hung around our necks for so long.

4.22 p.m.

VISCOUNT MASSEREENE AND FERRARD

My Lords, we have heard a lot of adverse criticism of this Bill but I, for one, support it wholeheartedly. My noble friend Lord Chesham gave a masterly speech on the reasons why the Government are to partake financially in the North Atlantic express sea service. To start with, he explained how we have a precedent to guide us, from 1903, when the Government stepped in with a subsidy, a loan of £2¼ million, to help to build the "Mauretania" and the "Lusitania". Again, in 1934 and 1937, the Government gave further loans to help build the Queen Mary "and "Queen Elizabeth". So, on the ground of precedent, the Government certainly have every right to do this. We also heard my noble friend Lord Chesham tell us the other advantages for the United Kingdom in running these great liners in the North Atlantic express sea service. This is a very specialised service. I think that a great many people are inclined to get mixed up between the ordinary North Atlantic passenger ship service and the express sea service, which are entirely different things, as different as chalk is from cheese.

One of the advantages is the hard currency that these express ships earn this country. I understand that on the average the two "Queens" earn every year not far short of 20 million dollars net, and that the new ship, when she is built, is expected to earn us about 13 million dollars net annually. If we take the great drop we have suffered in the last three years in our invisible exports from shipping of from £200 million to £20 million, surely we cannot begrudge this extremely small subsidy of £3¼ million to try to redress the balance.

There are Jonahs who say, "But ah!, air traffic will make this ship obsolete". It is true that passengers on air traffic are increasing a great deal but, on the other hand, the sea passengers crossing the Atlantic are also increasing. If we take the figures from 1948 until to-day, we find that passenger traffic across the North Atlantic has increased by two-thirds. And I am told that the increase in passengers carried from Southampton is over 6,000 in 1960, as compared with 1959. We are inclined to forget that while there are many more people travelling by air, owing to the more affluent society in which we now live, there are far more people travelling generally and this also applies to sea travel.

I think that many people will always prefer to travel by sea, certainly those who like to have the true flavour of travel and who abhor this moronic tendency to hurtle across the world by air in a few hours. We are having a reaction from speed. For instance, many people have taken up riding. There are almost ten times the number of riding schools in this country compared to the number before the war. Surely it is quite logical to presume from this reaction of people from speed on the roads that there will also be a reaction from travelling by air, and many people will prefer to enjoy the luxury of a short holiday on the sea.

Are we, as the greatest maritime nation, merely to contract out of the North Atlantic express sea route? Are we going to leave it open to the Americans, the Dutch and the French? When we compare this £3¼ million subsidy, which is only 11 per cent. of the capital cost of the ship, to subsidies given by other nations to their North Atlantic liners, we find that 58 per cent. of the cost of the "United States" was provided by the American Government, 20 per cent. of the cost of the "France" was provided by France and 40 per cent. of the cost of the "Rotterdam" by the Dutch Government, at a low rate of interest and with the proviso that if she does not pay, the interest is waived. Why we, as the greatest sea nation, cannot afford to subscribe this tiny subsidy is quite beyond me. We have also heard that perhaps the Government should provide the whole £30 million and build the ship themselves. Well, the State have not proved very successful, from the profit point of view, in running the railways, mines and certain other undertakings. I cannot see that the Chancellor of the Exchequer would be justified in putting the taxpayers' money into a ship as a gamble.

Then one noble Lord said that it would be far better to have several smaller ships. But the object of this Bill is to provide a ship for the North Atlantic express sea passenger service. Anybody who has any knowledge of ships knows that if you are going to have a ship of, say, 25,000 tons going at 30 knots you must have her over-engined, and it becomes quite uneconomic with the number of passengers she can carry. We also have the Report of the Chandos Committee and Yarrow Admiralty Research Department and you must take the advice of experts on a question like this.

Mention has been made of the question of prestige. Of course, "prestige" has become rather an unfashionable word to-day, particularly among our woolly intellectuals. But I have travelled around the world enough to know that every blow aimed at our prestige is a blow at our standard of living. If we have these great ships on the Atlantic route, it advertises British craft and engineering and they are great ambassadors for our country. Everyone who travels in these great Cunarders gets a very good idea of everything that is best in Britain.

I should like to express the hope (perhaps this is not quite the time to say this) that this help for Cunard may be the forerunner of assistance for other shipowners to rebuild their fleets, because, while the financial institutions of this country have been extremely willing to lend money to build blocks of flats and offices, it has been very hard to get any money out of them to build a ship. The noble Viscount, Lord Simon, suggested that Cunard should have gone to the public, to the institutions, for this money, and perhaps in the case of Cunard that might have been possible; I do not know. But certainly for the small shipowner that is extremely difficult. The Government have helped by the 40 per cent. investment allowance, but it has come rather late. It is rather like shutting the stable door after the horse has bolted. Our competitors have got so far ahead now with their free flags that, no matter what help the Government give, it will be extremely hard to catch them up.

I would express the hope that this ship will be built in Belfast, where unemployment is the highest in the United Kingdom. I appreciate that it must all depend on the best tender, but provided the tender is 100 per cent. quality—price should not be everything in this tender—the object ought to be to have a ship which is years ahead of anything else on this sea route. She must catch the imagination of the world and be a real floating symbol of Britain.

I have listened to all this adverse criticism of the Cunard Company requiring this 11 per cent. subsidy, but I personally think it a great credit to the Company that they can build this big ship and require only an 11 per cent. subsidy. After all, they have all their ships and commitments throughout the world. We should remember that since the war they have built about £30 million worth of other ships. I do not think we are being quite fair to the Cunard Company, and I wholeheartedly support this Bill. We have heard several noble Lords say that it is hard on the taxpayer, but I think that is complete nonsense, when you think of the hundreds of millions which Governments have spent on projects which are of no benefit to the taxpayers at all—and I can think of several, including the groundnuts scheme. In hard currency alone this £3 million-odd will "bring the bacon home"; and, at any rate, out of the taxation on the dividends and company taxation on the profits of the ship—if she makes a profit, as we presume she will—the Government will get that £3 million-odd back. So I honestly think all this talk about the poor taxpayer is a storm in a teacup. I think it is going to be of great benefit to the taxpayer, and I support the Bill.

4.40 p.m.

LORD PETHICK-LAWRENCE

My Lords, in the absence of the two noble Lords who intended to give their words of wisdom to this House, I have been asked by my noble Leader to say a few words before the noble Lord, Lord Mills, rises to reply in defence of the Government's Bill. The noble Lord will remember that I took part in a discussion a few months ago on this very subject, and my attitude to the Bill and the main criticisms I had to make have not changed substantially since then. Broadly speaking, the case that I made against this Bill remains true, as I feel it, to-day.

I should like to say this in principle at the start. I understand that the principles of the Party to which I belong are that public enterprise is in general better, for certain purposes, at any rate, than private enterprise. I understand the point of view of noble Lords opposite, who think that wherever possible private enterprise should deal with the situation, and only when, for some reason, private enterprise fails that public enterprise should take its place. This seems to me a sort of hybrid affair in which private enterprise ex hypothesi does not fill the Bill, and therefore the Government step in to buttress up private enterprise in order to enable it to do either what it will not or cannot do, and which the Government therefore think the taxpayer should do in its place. Broadly speaking, that seems to me quite a wrong principle. And I should have thought it was not a very good example of the advantages of private enterprise, because admittedly, it seems to me, private enterprise is falling down and the Government are having to buttress it up at the expense of the ordinary taxpayer.

Now what are the arguments against it on the other side? First of all, the Government have to argue that this enterprise—because that is what it is—may be run at a profit. Indeed, as I understand their case, they think it probably will be. If they really think it will be run at a profit, why has not the Cunard Company produced the money from its own resources? Or, if it is unable to do that, why cannot it issue a prospectus to the people throughout the country in order to raise the money? It seems to me that the whole genesis of this Bill is that this is not likely to be a profit-making concern. "Well", say the Government, "even if it is not going to be a profit-making concern, it is in our view a prestige-providing concern." I always rather suspect arguments which are based on prestige. I think they are very dangerous, and if prestige is the one argument put forward, I am inclined to think that it is the last possible argument—and it is generally a bad one.

The question is: does it assist our prestige to do something if, in the end, it does not pay? I should very much doubt that. In the second place, this alleged prestige is not for running a successful ship across the Atlantic, but for the purpose of presenting a super-luxury ship, such as the "Queens" have always been, and which this new "Queen" in particular—if it is going to be called a "Queen" at all—will be, par excellence. It is attempting to capture the money of the super-rich, and to leave the ordinary person crossing the Atlantic to go either by air or by a cheaper ship, taking perhaps a few hours longer with rather less luxuries, and without winning the Blue Riband of the Atlantic, which these Cunard ships are supposed to have.

That is a very dangerous argument, and when the noble Lord, Lord Chesham—who I think made as good a defence of an impossible proposal as anyone could have done—says that it may make a profit, my answer is that that does not seem to me very likely from the facts that I have just suggested. If it does make a profit, then we shall get our money back. If it does not, and never seems likely to in the various circumstances, then the taxpayers' money will be lost. I do not think it is good for the prestige of this country to start out on an enterprise if that enterprise is going to be an unprofitable one when the time comes.

There is another point that I raised in the debate a little while ago. We must not only have this one "Queen" but the other "Queen." The noble Lord, Lord Chesham, attempted to meet that case and he said—as his colleague, the noble Lord, Lord Mills, said in a previous debate—that there are no commitments at all with regard to paying a similar sum on loan and gift in the event of the question of the replacement of the other "Queen"—that is, the "Queen Elizabeth"—arising. That is all very well. It is perfectly clear that there has been nothing said, and, therefore, strictly speaking, the Government are not committed with regard to that. But it is a well-known fact that, to make a cross-Atlantic service pay with a particularly high class of ship, you must have not one ship, but two. Therefore, if you once agree to spend Government money on building the one ship, a new "Queen", what is going to happen when the second ship is no longer able to operate and something has to be done about that?

Subject to the remarks (which I did not quite understand) of the noble Viscount, Lord Simon, who made a suggestion about making some bargain with the United States in the matter, it seems to me that when we reach the time when the second "Queen" has to be replaced, however little we may be committed in so many words, we shall find ourselves to a very large extent committed to spending, not only the same, but probably a larger sum of money in making good the deficit on the building of the first "Queen". I may be wrong over that, but to my way of thinking there will be no way out except to take a similar course or to allow the service completely to run down and treat the whole money spent on the first "Queen", the new "Queen Mary", as a dead loss. That, I think, is a serious consideration. Apart from the defence that the noble Lord, Lord Chesham, made in the course of his speech, no one has really animadverted to that, and I think that is a consideration which should weigh with us in our attitude towards this proposal.

That being so, I think the Government are convicted of taking a very serious wrong view with regard to building this ship. I think it is contrary to the principles of those who support private enterprise as against our view of supporting public enterprise. I think it is an expenditure of the nation's money on an enterprise which is so doubtful that Cunard themselves are not prepared to put their own money up or to raise money from the public. In those circumstances, I cannot see that we ought to support it.

Now to the last point, which, as I understand it, relates to this decision of the Cunard Company to spend its own money, or money that it can raise on floating a company, to run a rival service—namely an airborne service—which will cut through the profit, if any, which might be made by the "Queens". I believe that a company which is prepared to run a rival service against a Government-supported service of its own is putting itself in an entirely wrong position; and the Government, in so far as they are a party to allowing the Cunard Company, after promising it this subsidy, to run a rival service to cut the throat of its own shipping service, seem to me entirely in the wrong. For all these reasons I find this measure one that is not worthy of support, and I hope that the Government, even at this late stage, if it is possible, will decide to abandon it.

4.51 p.m.

THE PAYMASTER GENERAL (LORD MILLS)

I should like to say straight away that the Government have no intention of abandoning what they look upon as a very useful and proper Bill. The noble Viscount the Leader of the Opposition said he was afraid that he would look down and see that the Government had failed in its objective; but I hope he will be alive to see that the Government have succeeded in their objective. What is the Government's objective? It is to make possible the maintenance of the cross-Atlantic shipping trade, because they believe in it—and for that reason only.

The noble Viscount, Lord Alexander of Hillsborough, said that he was going to be very critical of the Government for coming to a decision in principle and then setting up an expert Committee to advise them on how their decision could best be carried out. I should like to ask the noble Viscount: what is the matter with that? What are Governments for, except to lead: except to come to decisions in principle, and then to see that they are properly carried out? The noble Viscount could not resist, of course, throwing in the point about luxury travelling, and the noble Lord, Lord Pethick-Lawrence described it as "super-luxury" travelling. This was the very argument used in 1934, when the "Queens" were built, and I think we are all very proud of what our "Queens" have been and are. They are not just luxury travelling; there are the cabin and tourist classes, as well as the first class; but, of course, if you wish to condemn the company for trying to get first-class passengers to pay for the things they are willing to pay for, that is just too bad.

The noble Viscount asked what are the prospects. The prospects, of course, are that more and more people are travelling, and more and more people are going to travel. I do not think anyone would dispute that, and I believe it is equally wrong to think that all these additional travellers will go by air. It is true that the rate of progress in the air has been greater than that on the sea, but there is a very good prospect for this venture, a very good prospect indeed. Therefore the Government have as their chief objective to make possible the continuance of a profitable cross-Atlantic service.

VISCOUNT ALEXANDER OF HILLS-BOROUGH

My Lords, if that is so, perhaps the noble Lord will explain to us in even more detail than did the noble Lord, Lord Chesham, why the Cunard Company do not get the money on the market. That is the whole basis of our case. If the prospects are so good, why do they not get it on the market?

LORD MILLS

I will answer that; and I have also to answer the noble Viscount, Lord Simon, on the same subject. The point of view is this: the company have got to look at least twenty years ahead to see the life of this ship carried through. With a developing air traffic twenty years is a long time ahead. They can look ahead for ten years and are prepared to look ahead for ten years as ordinary commercial prudence. But the Committee under Lord Chandos who looked into this matter said it would be unwise for the company—this is, in fact, what they said—to attempt to commit themselves to paying more than 4½ per cent. for the large sum of money which had to be borrowed. I would not have any doubt that the company could have gone to the market and could have borrowed the money, but it would not have been at 4½ per cent.; it would have been much more than 4½ per cent. The Chandos Committee said that they thought the company would get through all right if they could borrow this very large sum of money at 4½ per cent.

And I should remind your Lordships that there is nothing new about advancing money to this private industry to enable it to undertake heavy capital commitments on the Atlantic. There is nothing new except that this time we have come right out and said that instead of charging a low rate of interest we are going to charge a normal rate of interest and we are going to give them a subsidy too. In the 1903 agreement with Cunard £2.6 million were advanced at 2¾ per cent. for building the "Lusitania" and the "Mauretania", and that agreement was for 20 years from 1907. In the case of the "Queen Mary" and the "Queen Elizabeth" agreements, in 1934 the Government advanced £3.95 million to Cunard, the first £2¾ million at below the bank rate until January 1, 1940; and in 1937 a loan of £5 million was made for building the "Queen Elizabeth" on similar terms. They are two that took place in our lifetime. This is the third, and I do not see that it is any different except that it is not quite so easy to see as clearly ahead as perhaps it was in 1903 and 1934.

VISCOUNT ALEXANDER OF HILLS-BOROUGH

My Lords, may I just point out that if you take the original subsidy for the "Mauretania", you say it was a loan at 2¾ per cent. when the Government were borrowing at 2½ per cent. and 3 per cent. There is nothing very much of a subsidy about that. You just let them have the money, that is all, because they thought they could not raise it on the market. The cost to the country was very little. Is that the position now?

LORD MILLS

That was not the position then, either. The Government loaned the Cunard Company this money at a lower rate of interest than that at which they could borrow themselves.

The noble Viscount also asked, was the shipping industry consulted? The Chandos Committee in their report said that they had consulted shippers and all kinds of other interests that were concerned.

LORD OGMORE

My Lords, is the noble Lord quoting from the Chandos report and not just making a summary of it? It is twice he has done this. He will, of course, have to lay it. It is the second time he has quoted what the Chandos report said, and I ask the noble Viscount the Leader of the House, as we have no Speaker, to help us in this matter. It is quite clear that if the Government quote it they must lay it.

LORD MILLS

I have not quoted from the Report, nor did I say I had. I am quoting from the summary of the report of the Committee which was reported to the House on June 1, 1960. It is all there.

The noble Viscount also tried to say we were doing something for private industry which we would not do for a planned economy. I do not think there is any truth in that statement. This Government has supported the expenditure of very vast sums on the various nationalised industries. I think the noble Viscount was only making a point, as indeed he was about defence. The question of defence has never been put forward as any justification for financing the building of this ship, which is to do an ordinary trade across the Atlantic. I was very interested in what the noble Viscount had to say about defence and I am sure he speaks from very great experience in these matters, but it really is not an issue in this case at all.

Then he made a plea that if we wanted to benefit employment and social matters we should build in two or three shipyards. That, again, was not the conclusion, which was reported to Parliament, of the Chandos Committee. It was that we should build one ship, and tenders actually went out to the Tyne, the Clyde, Belfast and the Mersey, in fact all the shipyards in this country which were capable of building a ship of this type.

VISCOUNT SIMON

My Lords, may I intervene? When the noble Lord says that the Chandos Committee recommended this, may I ask whether the Chandos Committee were invited to make recommendations in regard to the alleviation of unemployment?

LORD MILLS

Not at all. I was merely replying to the noble Viscount the Leader of the Opposition, who said that it would be better if ships were constructed in three yards to relieve unemployment.

VISCOUNT SIMON

And did you not reply that the Chandos Committee recommended that it should be done in one yard?

LORD MILLS

The Chandos Committee, having nothing to do with unemployment, recommended that one ship should be built of a particular size and type, and tenders have gone to all the yards capable of building that ship. We have not accepted what the noble Lord, Lord Ogmore, had to say on a previous occasion when he urged that we should invite foreign competition. The Government have no intention of doing that.

LORD OGMORE

That is a pity, my Lords, but that is not the point. What I am getting at is that again the noble Lord is quoting from the Chandos report. We are in an impossible position. We have not seen it, and I think it makes a mockery of Parliamentary procedure when time after time the Minister quotes from the report, or quotes bits of it, and does not lay it. It has always been my impression that in those circumstances he should lay it.

LORD MILLS

With respect to the noble Lord, I am quoting from a summary which was laid before Parliament in both Houses.

LORD OGMORE

What summary?

LORD MILLS

The summary of the Chandos recommendations. I was careful to say so. If the noble Lord does not care to listen to me but just jumps to the conclusion that I am breaking the Rules of the House when I am doing nothing of the sort, there is nothing I can say except to keep on saying I am quoting from the summary which was laid before Parliament.

The noble Lord, Lord Ogmore, rather confused me. He talked about industrial relations in the shipyards and said that they were so bad that it was wrong to subsidise a shipyard. But we are not subsidising a shipyard; we are subsidising the Cunard Company to the extent of £3- million. Then the noble Lord went on and expressed his personal view, to which he is quite entitled, that we were doing a wrong thing; that we ought to be building small ships and not this large ship. I can only refer him again to the summary of the recommendations of the Committee presided over by Lord Chandos, which were reported to the House on June 1, 1960.

VISCOUNT ALEXANDER OF HILLS-BOROUGH

My Lords, surely that is no reason, when the Government have first taken the decision and then referred the matter to a small Committee of three persons, to say that we have to take their word, like the law of the Medes and Persians, that this is the only thing the Government can do. Surely they are subject to Parliamentary debate and criticism, and opportunity to do what the noble Viscount, Lord Simon, said—withdraw it and have a better look at it.

LORD MILLS

I agree that the Government are entitled to take such account as they wish of their advisers and to report to Parliament what they would like to do and ask permission of Parliament to do it. That is all they are doing. It is quite right that the noble Lord may have another opinion and think small ships should be built, and should say so; but equally I have to say why the Government take another view.

The noble Viscount, Lord Simon, in his speech against these proposals, asked why we said that the North Atlantic was the most heavily subsidised area. I am told that that is the case. My noble friend Lord Chesham quoted in his speech that these proposals amounted to a subsidy of 11 per cent. in the case of the Cunard Company; that the French Government not only had given a subsidy of 20 per cent. on the "France" but were covering for some time ahead any operating loss which might ensue; and that the "United States" had actually sustained a subsidy of 58 per cent., and that 28 per cent. of its operating charges were being borne by the United States Government. I have no doubt there are very good reasons why the United States Government wished to do that, but those are the facts with which we are faced and those are the facts which led us to accept that the utmost that the Cunard Company could pay was 4½ per cent. They could not borrow on the market on those terms, and therefore we had either to let them have money at 4½ per cent. or, if we were going to charge the full rate of interest, to make it up by way of subsidy.

The noble Viscount, I am afraid, assumed in the course of his remarks that the company can count on getting 7½ per cent. profit. That is not true at all. I hope they will. Seven and a half per cent. is the figure at which any further profits, over and above that 7½ per cent., go in earlier repayment of the Government loan.

VISCOUNT SIMON

I fully appreciated that. It was because the noble Lord, Lord Chesham, said that he anticipated that the loan would be repaid halfway through the life of the ship that I assumed that this accelerated arrangement would be in operation. I do not think the company would bring it into operation before they are earning 7½ per cent.

LORD MILLS

I think that is governed by my words. I hope that may prove to be the case. But the Cunard Company has to earn 7½ per cent. before it can come into operation. If they do not, they are still liable for the rate of interest on the Government loan; and there is no condition that if they do not make money the Government will reduce the rate of interest. That is not there.

The noble Viscount also spoke about the relief of unemployment. Obviously, we are always glad if.that can be accomplished. But that was not the object of this particular exercise. The object was to maintain the service on the Atlantic with this type of ship, in the hope that it would prove profitable and add greatly, as the previous "Queens" have done, to the prestige—and I am not afraid of the word "prestige"—of our trans-Atlantic travel. The noble Viscount was good enough to say that he felt it would be a thousand pities if this service should disappear. I could not agree with him more. The Government have chosen their way in making a recommendation to Parliament in the belief that it will prevent that happening. The noble Viscount also threw out the suggestion that the Government should consider, when the time comes, a proposal to run a joint enterprise, with the United States. I do not expect that he will want me to comment on that now, except to say that the proposal is one which is noted and will have consideration in the proper quarter.

Then I was glad to receive some support from somewhere—important support too, because the noble Viscount, Lord Massereene and Ferrard, I thought really put his finger on what is likely to happen: namely, that trans-Atlantic travel will go on expanding, and that it is not too much to hope that shipping will get some share of it. He too was not afraid to talk about prestige. I think prestige is important—not empty prestige, but prestige which you can earn and about which you can be proud.

VISCOUNT ALEXANDER OF HILLS-BOROUGH

That seems to be another reference to the great prospects of this service. What I cannot understand is, why, if there are such good prospects, the Government do not take an equity share interest? I had one answer from the noble Lord, Lord Chesham, that to take equity share interest would be too great a risk. I do not know what leg the Government particularly stand on. At one time it is a good prospect, and at another it is not such a good prospect: it is too great a risk to have the Government taking equity shares.

LORD MILLS

If I remember rightly, we debated this point before; and so far as the Government are concerned, unlike noble Lords opposite, they think it better to take such steps as are designed to cover the taxpayer against the risk of loss, and to get the highest rate of interest possible, rather than to share in the risks of an enterprise. After all, this is an enterprise. One can have faith in enterprises. If we did not, nothing would ever get done. A great deal has been done by people who have faith in what they are doing. But that does not say that we should get the taxpayer into that position when we can reasonably safeguard him against a loss by making a loan to something of an exceptional kind such as this is. The noble Viscount, Lord Massereene and Ferrard, said he thought that we might capture the imagination of the world. He may be right—we might. But one thing I am certain of: we should be wrong, we should be failing in our trust, if we allowed this project to be abandoned.

I listened, of course, with great interest and respect to the noble Lord, Lord Pethick-Lawrence. But he really summed up at the outset what was in his mind. He said that public enterprise is better than private enterprise in many cases, and asked why we are supporting the Cunard Company. My Lords, we are supporting the Cunard Company because they have had the experience and they have the knowledge. If anybody can ensure that the trans-Atlantic service will be run at a profit. I am sure the Cunard Company will. The noble Lord also talked, and rightly, about the possibility of this leading up to our thinking about a second "Queen". We have already thought about a second "Queen". We have come to the conclusion that this is not the right time to think about it, but we should see what the future developments are. We have time—there is a good deal of time—before we express a view on that. As the noble Lord understands, the Government have not at the moment entered into any commitment whatever about it; nor do they intend to do so in the near future.

Then he spoke about the development of Cunards into air travel, and said that that was cutting the throat of the shipping enterprise. Surely that is not the right way to look at it? Is there not room both for trans-Atlantic surface travel and trans-Atlantic air travel? We think there is, and for that reason we are certainly not going to admit that a company which is showing enterprise in other directions is cutting its own throat. I find that a very far-fetched argument. We have had a debate on this matter. I can only say that I believe the enterprise is one well worthy of support, and that in this Bill the Government are putting forward the right way to support it. I hope that your Lordships will now give the Bill a Second Reading.

VISCOUNT SIMON

My Lords, before the noble Lord sits down may I ask for clarification on one point? I am still not clear whether this Memorandum is one to which the Government are so far committed, in advance, I might say, of approval, that it cannot be altered, or whether there is any chance of considering getting the "Queen Elizabeth" put into the QIII Company, so that with the acceleration we should enjoy her earnings.

LORD MILLS

My Lords, I think I can best answer that by saying that this Memorandum comprises the heads of agreement with the Cunard Company. There are certain matters in this Memorandum which have to be worked out on the date of signature. It is then that we shall establish whether the amount of subsidy is £3- million or something less. But I do not think it would be possible to introduce a new element entirely into this Memorandum. That was the reason for Clause 5 (2).

On Question, Bill read 2^a, and committed to a Committee of the Whole House.