THE AIRCRAFT INDUSTRY

HL Deb 17 February 1965 vol 263 cc518-608

4.11 p.m.

Debate resumed.

LORD SHACKLETON

My Lords, after that interruption, I should like first of all to thank the noble Earl, Lord Gosford, for the very moderate way in which he proposed the Motion now before us, and I am sure that everybody on this side of the House welcomes the counsel he gave us, to learn from the mistakes of our predecessors. I thought that in this matter his speech was more acceptable to us than that of the noble Earl, Lord Jellicoe, who urged us to be constructive but made a speech in which the constructive part was confined to the last minute. He was concerned mainly with querying the very difficult decisions that have had to be taken. I shall deal as far as possible with a number of the detailed points that he made in his speech (some of which he was kind enough to give us notice about) and I shall deal also with some of the points of the noble Lord, Lord Byers. I have some difficulty in dealing with them because, in certain respects, I was unable to recognise the facts that he stated.

I am sorry in some ways that this debate has been postponed from the earlier date, but I would repeat that I think the noble Earl, Lord Gosford, was entirely right, in the event, in postponing it, because, as a result— especially when the discussions on the Concord, at that moment at a crucial stage, have been successfully concluded—we are able to have a much fuller discussion both on the aircraft industry and on the recent decisions on the aircraft procurement programme for the R.A.F. I must apologise in advance, but I am afraid that this is a subject of a very wide canvas, and I shall have to speak at some length. The reasons on which the Government's decisions are based are necessarily of a complex kind. Admittedly, a good deal has been said in another place, and I think it might have repaid the noble Lord if he had studied a little more carefully some of the arguments that were put forward. But I shall try to deploy these arguments again in enough detail to show that the decisions taken by the Government were, to my mind, and would be, I think, to that of any fair judge, absolutely inevitable.

I will start by speaking on the subject of defence (and I make no apology for this), first of all as Minister of Defence for the R.A.F., which is the Service most affected; and, secondly, because the primary object of the aircraft which have been the subject of so much recent controversy has been to defend the country. Of course it is the Defence requirements, and particularly the Defence requirements of the R.A.F., that are paramount. It was the previous Secretary of State for Defence who said that the issues are of almost exquisite complexity. I am afraid they were both too exquisite and too complex for me. Briefly (and I would ask noble Lords to listen to these particular dates, because this is the crux of the case; and perhaps it may also help the noble Lord, Lord Byers, in the very proper questions he put), the need is to replace the Canberra, which started its service life in 1951; the Hunter, which has been with the R.A.F. since 1954; the Hastings and the Beverley, which entered service in 1948 and 1955 respectively. I shall say a word in a moment about the Shackleton; but this, of course, is in a slightly different situation.

The plan we inherited was to introduce the TSR 2, the P 1154 and the HS 681 in place of these aircraft. In addition, room had to be found, at an earlier date than had previously been planned, for an aircraft to replace the Shackleton 2—and I stress that it is the Shackleton 2; for the Shackleton 1 is already out of service and the Shackleton 3 will continue in service for quite a time—which has given yeoman service since it first joined the front line in 1953. I must admit that for many years I have been asking successive Governments to provide such a replacement, and it is very satisfying to me that it is to come about. This particular proposal was still being studied when the present Government took over.

When we looked at the plan which was left to us, two points stood out. First was the cost; and second was the dilatoriness. I should like to say a little more later about cost, because I want to be able to make my opening remarks on the military needs for this decision. At this stage I would say that the Government's decisions on the P 1154 and the HS 681 were not simply related to the acute present economic situation which confronted the Government when we came into office. What we found was that, because of delays in ordering aircraft and (to use the technical term, to which the noble Earl, Lord Jellicoe, referred) slippage in their development, we should have been confronted in the early 1970's with a very high Defence bill—and the noble Earl referred also to this. He will know that it is not possible for me to give the actual figures; but I am asking him to accept my assurance that, at a time when other countries—America and the U.S.S.R.—were beginning to cut down the proportion of the gross national product on defence—ours would have been rising.

Noble Lords, and Lord Jellicoe, in particular, will be aware that long-term costings in the Ministry of Defence, which were developed under the previous Administration, are well established; and they take into account—and I would stress this point—not only the capital costs of the projects but also the cost of maintaining and operating the equipment in service. This means not only oil, fuel, spare engines and other spares, but also the cost of the men who operate and maintain the equipment and all the associated other expenditure. As I have already said, it is not possible to reveal these costings in detail; but I would ask noble Lords to believe that we should have been confronted with an extremely unbalanced situation and an enormous concentration of expenditure in the early 1970's. It may be that we can pursue this aspect further, though I do not think I can give any actual figures—the previous Government never did so. And I am sure the noble Earl will accept my statement.

One of the first things I found in the Ministry of Defence was this great concentration in the 1970's and a desire, purely on sound budgetary grounds, to move some of it forward into the late 1960s.

EARL JELLICOE

My Lords, I apologise for interrupting: I do not want to interrupt the flow of the noble Lord's argument. But I am disappointed that the present Government are sheltering behind this excuse of not giving full information about these budgetary matters. The noble Lord says there is a precedent in what the past Government did. But when the noble Lords were in opposition (and when the noble Lord himself was in opposition) what they were pressing all the time was for further information on these matters. I am sure the noble Lord is aware that it was the intention of the late Secretary of State for Defence to give far fuller information on these matters in the Defence White Paper if he had been issuing it this year.

LORD SHACKLETON

I think the noble Earl would do better to let me make my speech. I never pressed the last Government to give details on numbers or on costs. It is certainly the intention of my right honourable friend to give much more information in the White Paper; and we shall be able to discuss this in detail. But, if the noble Earl will recall, it is much more likely to relate to functional costings than to these detailed matters. I think that it is quite useless for any Opposition to press too hard on this point. Either they believe that the Government are making up the figure or they do not, in which case there is no possibility of mutual agreement. I can only give the noble Earl my personal assurance in this matter.

It could be argued that, in some circumstances, in the interests of national defence such a concentration of expenditure would have to be accepted, despite the strain that it would have imposed on the economy. The effect would have been serious, and clearly it was necessary for the Government to review all these issues, particularly the more pressing ones. It was our duty to face this task squarely, regardless of the risk of harming particular interests—and I stress this point, because we are getting a lot of "special interest" pleading (I do not mean of an improper kind), as opposed to the national interest—and regardless of the risk of serious inconvenience and even of the risk—a painful one to this Government—of some short-term unemployment. If the previous Administration had remained in office, I cannot conceive, from the information at my disposal, that they would have been unable to avoid facing this problem and carrying out a review of a similar stingency; and it is conceivable (though I am beginning to doubt it) that they might have had the resolution to come to the same conclusions as we did.

I should like to come back to the second point, of the dilatoriness of the programme which we found on taking office. We found that the P 1154, intended as the Hunter replacement, could not have been in squadron service at any time before 1970 or 1971, at the best, and that, even on an optimistic view, some of our R.A.F. front-line squadrons would still have been equipped with Hunters in 1973, and possibly even as late as 1975. This was an unacceptable proposition. These facts were known to the previous Government.

It was not possible to tolerate this position, and I would further emphasise this point by reminding your Lordships that some of the countries to which Hunters were exported in the last decade have already replaced them with newer models of aircraft. This is not to mention the possibility that we might be involved with countries which we might have expected to have less sophisticated aircraft but which now have supersonic aircraft, and it is a fact, known to your Lordships, that at the moment, we have no supersonic aircraft in the Far East. We also discovered that there was no prospect of the HS 681 being in full service before 1971 or 1972. Even then it would have started its life without the highly desirable short take-off characteristics, and it would have taken several years to replace the Hastings and Beverleys.

Room also had to be found in the programme for the Shackleton 2 replacement, because the long-term replacement for the Shackletons Mark 2 and 3 had slipped to the mid-1970s, whereas the re-equipment of the Shackleton 2 force must take place in four or five years time; and this issue had to be resolved, if they were not to fall to pieces. Such delays in the introduction of new aircraft no responsible Government could tolerate, and despite the skill and brilliance with which the Royal Air Force fly and maintain their aircraft, it would have been unforgivable not to provide the Service with new aircraft at an earlier date than was provided for in the plan we inherited.

I come back for a moment to the question of cost. I have already spoken about the unmanageable concentration of capital expenditure in the early 1970s, which we found in the programme we took over on assuming office. This conflicts directly with the rational planning of military expenditure which, I think all noble Lords will agree, must be the main objective of defence equipment policy. It is the essence of such planning that major re-equipment programmes should be properly phased in relation to each other, taking full account of the need to meet military requirements for the replacement of old aircraft. By no stretch of the imagination could this objective be said to have been achieved in the plans which we inherited.

If major programmes were to be superimposed one on the other, in the way envisaged by the previous Administration, the consequence must have been a complete loss of control over the growth of the Defence Budget. Such piling-up of demand could have been absorbed in the national Budget only with great difficulty, and it would also have been difficult for the aircraft industry, which cannot be expected to cope efficiently with violent fluctuations in demand.

This was not the only aspect that gave us concern. We found that the research, development and production costs for the TSR 2, the P 1154 and the HS 681 had doubled or trebled since the early stages of planning. Since the last two projects, at least, were in the early stages of development, there was no certainty that the cost would not increase further, and I think it very unlikely that that would not have happened. The original estimate for the development of the TSR 2 was £90 million. This figure has now risen to something approaching £300 million. The best estimate we can make, based on the figures of the previous Government, is that the final cost of 150 aircraft is about £750 million, or £5 million per aircraft. This is 25 times the cost of the Canberra. There is no doubt that the TSR 2 is a superb and sophisticated conception, but the figures I have quoted, together with the running costs, which have to be added, and its potential serviceability, are of a kind that cannot be brushed aside in considering the equipment of the R.A.F.

The noble Lord, Lord Byers, talked of the TFX 4 and the noble Earl, Lord Gosford, about the TFX 1, and I am not sure which aircraft they were dealing with. I would stress that the TFX 2, from the aerodynamic and engine points of view, is largely the same as the TFX 1. We have a good idea of the likely increase in costs as a result of the introduction of a new nav/attack fit or avionics.

The noble Earl, Lord Jellicoe, is right in asking how we can estimate a saving when we have not stated the number of aircraft we intend to order. The saving is calculated on the number of aircraft we should have ordered at home, together with the number to match that total that we should need to order from the United States. Therefore, it is a perfectly tenable comparison. But there is a major Defence Review pending and it would be foolish if we were to settle the number at this stage. One of the advantages of the situation is that we are not compelled to order an actual number at the moment. We must await the outcome of the further development of the TFX 2 before we can consider getting them, even if the TSR 2, should be cancelled. I hope that I have dealt with that point.

The first estimate of the development cost of meeting the operational requirement, for which the HS 681 was proposed, has doubled and the unit cost has also greatly increased. The cost of developing the V.T.O.L. supersonic fighter, for which the P 1154 was proposed, has trebled since the first estimates. I make no apology for referring to these figures, because these are statistics which we had to take into account.

My Lords, this continued escalation of costs, to use the current jargon, is not a disease from which Britain alone suffers. One must admit that other countries, including the United States, have suffered from this also. But we must learn to live with the brute fact that as the years go by more and more money buys fewer and fewer aircraft. This is not a problem which is simply solved by increasing the striking power and efficiency of aircraft and by offsetting increased costs by increased effectiveness. Obviously, the aircraft of to-day are much more efficient; but numbers are still important, not only because this country's international obligation and consequent defence responsibilities are worldwide and call for certain numbers of aircraft, but also because we must have an element of flexibility. If you had one of the most perfect aircraft in the world it really would not be much use. This is a situation which is almost visible over the horizon. In other words, to put it shortly, no aircraft, however good, can be in more than one place at the same time.

To illustrate the change to your Lordships, it might be worth looking at the situation ten years ago. Ten years ago the Royal Air Force used to take delivery of more aircraft in a single year than we found to be planned for the next ten years at six or more times the cost. This is not intended as a criticism of the Government, but is a statement of reality. This even allows for the difference in the value of the pound. These aircraft were not so sophisticated, but they were pretty good. It is interesting to note that a decade ago in one year no fewer than 200 Canberras, 230 Hunters and over 400 Vampires, Meteors and Venoms were delivered to the Royal Air Force. If evidence be needed of the need for co-operative ventures in the future and of the vital importance of tight control over operation requirements, it is surely contained in these figures.

It was against this background that the Government had to take their decisions: a severe congestion of expenditure in the early 1970s, and dangerous delays, from an operational point of view, in the P 1154 and HS 681 projects, which were threatening to put at risk the operational efficiency of the Royal Air Force and the survival of its air crew. Again, we were confronted with this continuing escalation in research, development and production costs and a great growth in the unit cost of the new aircraft. The decisions to cancel the P 1154 and the HS 681 were very hard to take, and I would assure your Lordships that they were reached only after the most thorough and searching examination. But I am quite convinced, both in my capacity as a Service Minister and as somebody who has been aware of these facts, that they were the right decisions, not only in terms of defence, but in relation to the economy as a whole; and in the longer term, I might say, they may be in the interests of the aircraft industry in particular.

Let it be remembered that these decisions will not only produce a saving of at least £300 million over the next ten years in terms of Government expenditure, even without taking into account further escalations in the cost of British aircraft, but will also ensure—and there really is an important bonus for the Royal Air Force here—that the Royal Air Force will be guaranteed delivery of the aircraft that they need years earlier than would otherwise have been the case. The Air Force in this matter had not perhaps been as well served as the Navy was by the noble Earl, Lord Jellicoe, who faced this hard decision and had the courage to go for the American Phantom. I was gratified that the noble Earl felt, in those circumstances, that he was unable entirely to condemn the Government for a foreign buy. There is a further point, and that is the dividends which servicability and reliability can pay in taking over well-tried aircraft.

I should now like to deal with some of the criticisms which have been made of these decisions and the reasoning which has lain behind them. First, the question has been asked why the aircraft industry should have been apparently singled out to bear the first impact of the Government's search for economy in Defence expenditure. The answer is that, for a number of reasons which I have given, the Government could not afford to wait to take decisions on these aircraft projects, both on costs—because money was being expended—and also for operational reasons. Some of these decisions were long overdue and should have been taken by the previous Government. But I must make it clear that the whole range of Defence expenditure will come under the most vigorous scrutiny, and every aspect of Defence will be judged in terms of strategic need and cost effectiveness and with the advantage of the scenarios to which the noble Earl referred.

I wish now to say something more about the requirements. I have already referred to the spiral in costs of the major new projects. Let me make one thing clear, because criticisms have been made. Not only has the number of changes in the requirement for the TSR 2, the P 1154 and the HS 681 been remarkably small—it has always been blamed on the Government of the day, or this Government, or the Royal Air Force, that they changed the operational requirement—but the net effect of any changes has been downward. But a heavy price has been paid for the vacillation in failing to order the aircraft in time by the previous Government. They vacillated over the P 1154, as the noble Earl well knows. These aircraft might have been coming into service if they had ordered them in time; but they preferred to put off facing either the cost or the decision, and that is why we find ourselves in this situation.

These projects, in the event and in the time scale, have been found to be too ambitious and too complex to meet the demands of time and cost. This has been aggravated by the inability, either to forecast cost with any real sense of the order of magnitude involved, or to control these costs once the project has started. I say, quite frankly, that the estimation of controls in this advanced area of technology is a formidable problem, and there is no easy solution. But the Government, I assure noble Lords, are determined to do better than their predecessors: not only to take all possible steps to define the operational requirement correctly before the long process of development gets under way, but also to see that the projects are kept under rigorous scrutiny thereafter.

Right from the start what is all important for the future (and it is one of the lessons to which Lord Gosford, or it may have been Lord Byers, pointed) is the absolute necessity, difficult though it may be, to establish common requirements with other countries and possibly collaborative projects. I know that the noble Earl was as keen on this as anyone, and tried as hard as anyone. The machinery does now exist in the Ministry of Defence for a closer scrutiny of these new requirements. They are scrutinised on a Defence, rather than on a single Service, basis, with the aim of subjecting them to really critical examination and preventing duplication of effort.

There have been criticisms that as a result of the Government's decision we shall no longer be meeting Defence requirements, and I should now like to turn to the actual aircraft buys and try to meet the points that have been made in criticism, because, frankly, I think these criticisms are ill-founded. It is difficult to get at the facts—I was about to say except by reading the newspapers, which usually seem to get some of the facts that you generally think are secret; but generally it is difficult to sort out what is fact and what is not, and it is not possible for the Government always to confirm these things. But I should like to give some authoritative and, I hope, accurate information.

The essence of the requirements of the P 1154 was to try to combine in one aircraft supersonic performance with a vertical and short take-off and landing capability. In this respect the P 1154 was unique. But it has had to be rejected on grounds of time and cost. We simply could not afford to wait; we could not afford to wait while the problem of the Hunter was still unsolved. But it is entirely logical that the Kestrel and the Phantom should be introduced together in the place of the P 1154. The Kestrel may not have much air defence capability, but it will be an admirable lowlevel ground attack aircraft, and either in combination or fulfilling their specialised rô les, this is a mix that we are advised is a satisfactory one. Of course, we shall get this at an earlier date with far less demand on our resources.

It has also been suggested, in rather cruder language than I would use in your Lordships' House, that the C 130 is an obsolete aircraft. In answering this, I should like again to give some of the history which led to our decisions. As the noble Earl said, I have been in favour of buying the C 130 before and I would say straight away to the noble Lord, Lord Byers, that we considered the Belfast very carefully. I would ask him to accept my assurance—and I will go into it in more detail—that it simply does not meet the tactical requirement. The capacity that he mentioned is not one that is valid in the particular circumstances. I do not want to go into detail on the facts and to knock the Belfast, but it really is one aircraft (although we considered it carefully) which was simply not "on" from a tactical point of view.

LORD BYERS

My Lords, is the noble Lord referring to the Belfast as it was intended to develop it, or the Belfast as it was?

LORD SHACKLETON

I am referring to the Belfast as it is, and saying that if we had waited until the Belfast was developed—and there was considerable doubt about this—the cost would have been enormous, and again we should have run into the difficulty of the timescale. I may say that I have been interested in this development myself, and I give full credit to the ingenuity and enthusiasm of those who manage Shorts, who have pressed this very well. But I can assure the noble Lord that the R.A.F. and the Air Staff gave full consideration to this. I would stress that in settling on an aircraft it is not usually a single factor, and it is not purely the S.T.O.L. factor, but a combination of factors which leads to the selection of a particular type of aircraft. These are the requirement time-scale and price, and none of these stands still.

It is against this changing background that Governments have to review and, if necessary, change decisions. In 1961, again, when the firm operational requirement was issued for the Beverley and Hastings replacement, it was proposed that the aircraft should be in service by 1968-69. This may have been wishful thinking. The forward thinking of that time included an S.T.O.L. performance as one, but only one, of the factors to be included in the aircraft.

Now let us look at what has happened since the requirement was stated. The research and development costs and the production costs have both increased greatly. Even worse, the delivery date has slipped appreciably, and in the intervening years there have been changes in the international situation, and some change in the emphasis of our strategy and our tactical requirements, and in the equipment of our Forces. Putting all these factors together, we came to the conclusion that it would be not only cheaper but better operationally to get an aircraft into service sooner which met most of the operational requirements. I say "most of the operational requirements" because of the absence of the pure S.T.O.L. performance of the C 130E in which the noble Lord, Lord Byers, was interested.

On airfield performance, the choice is not just between black and white, nor is the requirement quite so absolute. The C 130E can operate off a graded earth surface; it does not need a concrete runway. The version which the R.A.F. will be taking will have an appreciably better take-off distance than the C 130E at present in service in the United States. With a reduced fuel load, and for comparatively short distances, it will be able to operate at nearly full operational load, which is 35,000 pounds but with a reduced fuel load, from a 3,000 feet rough strip. Using the same take-off and landing conditions and runway lengths as the Beverley, the C 130E can carry a similar payload at least five times as far. Further, an analysis of the available airstrips in various parts of the world in which we are likely to operate suggests that the C 130E in most instances can operate within a hundred nautical miles of the scene of any likely ground operations; and this situation is improving year by year.

It should also be remembered that the HS 681 would require a strip, and there will be available also smaller shortrange aircraft like the Andover to support operations and, of course, air drop facilities. The speed—and let us not pretend that the C 130E is a particularly fast aircraft—is not so important in the tactical transport rô le, as for example in the bomber or fighter rô les. It has a very much better cruising speed than the Beverley, Hastings or the Argosy. It has certain other advantages. The R.A.F. will be able to operate it at high intensity as soon as it comes into service because it is a fully tested aircraft which will not have the inevitable teething troubles of a new type. The build-up can be concentrated almost at once, instead of the aircraft dribbling into service, because there is a larger production line. Thirdly, in the most important Far East theatre, there will be advantages in flexibility and serviceability in that the four Air Forces, the American, the Australian, the New Zealand and ours, will all operate the same type of aircraft. Finally, of course, the C 130E will supplement our strategic air-lift capacity, again very much sooner. I am personally satisfied that in the C 130E the R.A.F. is getting value for money, and it will provide the Army with the lift it requires significantly earlier than would otherwise have been the case.

I must apologise for speaking for so long, but I should like to go on putting these facts. I have explained why we must buy American aircraft, in order to close the gap in our deficiencies much earlier. There are a number of other advantages and these, of course, are inherent in the difficulties in which we find ourselves. The unit cost of aircraft is lower when they are part of a much larger production line. Secondly, the larger size of the production line means that deliveries can be more concentrated, and this slow build-up is of course one of the problems we have to take into account. There is also the advantage of the release of resources, and I shall have more to say about that shortly.

On this question of orders, we can now take options, and this is a very valuable flexibility. We can adjust the size of the order in the light of the outcome of the defence review. Of course, the main drawback as the noble Earl, Lord Gosford, said, is the dollar cost. It might be convenient at this point to give an outline of the arrangements which have been made following upon the decision announced by the Prime Minister a fortnight ago that we would buy the F 4, the Phantom and the C 130E. The arrangements envisage the placing of a small initial order for the Phantom and the C 130 with options for further sizeable follow-on orders. The arrangement also meets other important points. First of all—and this is a matter which I know has been of concern to people—is the priority we should enjoy, not only in the production and development fields, but also in the most important field of continuing supply and support arrangements. It has been agreed that we shall receive equal priority with the United States Forces in all three fields, and at the same prices as apply to them also—the same price, in fact, that the United States Forces themselves pay. Close day-to-day contact will be maintained by British project officers working alongside their American colleagues.

Secondly, there is the payment and the phasing of the payment. Because with this programme we should be getting large numbers much earlier, we should have a peak not only in Defence expenditure but also in dollar costs towards the end of this decade. The United States Government have therefore helped by making what, to us, seem commercial but none the less satisfactory arrangements, under which the dollar cost of the programme can be spread over ten years, and I do not say that we are not getting the C 130 at a knockdown price. Dollars can be borrowed at the rate of 4¾ per cent.; and over the next three years the foreign exchange cost to the United Kingdom will be minimal.

Thirdly, there is the expenditure to which we may be able to reduce the dollar content of our purchases without any exceptional penalties in costs or delivery rates. There are a number of ways, but in order to save time I will move on. Clearly, however, we know about the possibility of putting in Spey engines and of using Martin Baker ejection seats; and there will be co-operation on equipment and development of particular production, so far as this is possible within the scope of the arrangements.

EARL JELLICOE

My Lords, I am grateful to the noble Lord for giving way, as he criticised me the last time I interrupted. On the question of the Spey engine, as this is, of course, a matter of great concern to one of our great engine producers, can the noble Lord tell us whether there is any chance of persuading the Americans to put it into their own Phantoms?

LORD SHACKLETON

My Lords, this is envisaged but I should not like to mislead the House by being too optimistic about it; it is a little late in the day. This is one of the difficulties where the Phantoms are concerned. I assure the noble Earl we are pressing it as hard as we can.

I should now like to turn to the aircraft industry. No one—and I wish to make this clear—recognises more than Her Majesty's Government the technological achievements of the British aircraft industry. There is no need for me to repeat them; they are too well known. They range from the development of the well-known fighters of the war and before to the jet engine and the introduction of the VTOL. They include great advances in equipment, such as the blind landing system, and there are other examples, including, of course, variable geometry. The fact that we have not got variable geometry in British aircraft is not the fault of Her Majesty's Government, nor is the fact that the United States will get some of the advantages of it.

Up to the latter part of the 1950s the record of the industry in the commercial field was also an impressive one. Again, I could go through the whole range, but, of course, it is too well known to your Lordships, and I will mention only the Canberra. The aircraft industry had a very fine achievement, and, of course, our engines are still the world's best. It is a familiar statistic, but none the worse for repeating, that Rolls-Royce engines power half the Free World's jet airliners. Certainly, the aircraft industry still has plenty of inventiveness. I would not suggest for one moment it has lost any of this.

But since the late 1950s there have been disquieting signs of trouble. These troubles find their origin in the programmes of military development undertaken by the previous Administration, and I admit to the difficulties with which they were confronted. The problem which we and other countries face in the military field is all too well known. It is essentially that modern combat aircraft are extremely complicated and are available in much smaller numbers, and, as I have already said, there are the development costs.

There are conclusions to be drawn from this. In the first place, there must be a limit to the number of areas in which we try to compete, and we must, as the noble Earl, Lord Jellicoe, said, be sensible, and buy "off the shelf" sometimes. In the second place, we must ensure that the aircraft we do produce are saleable abroad. Unfortunately, in the case of the TSR 2 there has not so far been much prospect of overseas sales. In the third place, there must be a much greater measure of international collaboration.

All this must have been obvious to the previous Administration. Indeed, they, like the noble Earl, Lord Jellicoe, acknowledge this. Unfortunately, instead of applying these principles they proceeded to tie this vast area of national resources to some very expensive and ambitious projects which have proved uncertain to meet our own Defence needs in an economical and timely fashion or to be attractive to a wider market. This is what has led to the serious and massive miscalculation in which the previous Government landed this Administration. It is in this situation—that they had, in fact, failed to take into account the growing costs and certain principles—that we have been confronted with decisions which we have had to face.

In 1958, the industry exported over £150 million worth of equipment—over 30 per cent. of its total output. By 1964, the value of exports had dropped to just under £100 million, about 20 per cent. of output. This trend is all the more serious when we take into account the expansion by about one-third of the world market between 1958 and 1964, and when we compare our record with that of other countries, in particular with that of the French industry. Admittedly, many of their projects are powered by British engines, but their industry is half the size and they have, in fact, achieved a very important export record.

There are signs of improvement this year, particularly encouraging in relation to civil aircraft but not, alas, in military, or at any rate combat, aircraft. The great bulk of these increased sales will relate to civil aircraft, particularly the BAC 111. On this, of course, the Government are already giving extensive help: something like £9 million to £10 million. Half the cost of development is paid for by the Government, and I do not see how, in these circumstances, the Government are in a position to allow the aircraft industry to sail off on their own if taxpayers' money is involved. As the noble Earl, Lord Gosford, said, this is one of the inherent difficulties of the situation. But certainly it is the intention of Her Majesty's Government to give full support to the BAC 111 and also to other aircraft, notably, of course, to development in the Beagle aircraft field.

Whereas in the past we exported large numbers of military aircraft, we cannot hope to do so to-day. My right honourable friend the Minister of Aviation in another place referred in detail to the increase in the Defence budget. He also quoted some highly significant figures about the aircraft industry's use of technical resources. In 1964 the aircraft industry earned 2½ per cent. of our export revenue but it employed 3 per cent. of our manufacturing labour and one in ten of our most highly qualified scientists and technologists, including a quarter of all mathematicians in industry. Despite this concentration of power and skilled technology, the tragedy was that the programme of aircraft on which they were embarked was not able to bring home the export bacon. We have been getting the worst of both worlds; we have been investing in large and expensive projects which we have been failing to get in time and which are yielding very little, apart from the somewhat arguable question of fall-out or spin-off, as it is known to some people.

These decisions have not been palatable ones, but the Opposition have grossly exaggerated their effect on the aircraft industry. My right honourable friend the Minister of Aviation in another place referred to the steps that were being taken, and of course special consideration is being given, particularly to Shorts, who have shown great initiative, as I have said, in facing their difficulties over the last few years.

The problems we have tackled are only the immediate ones. It is the development of collaborative projects that is important. I should like to make it clear that it is no part of Her Majesty's Government's policy to abandon the market to the United States or to any other country, and this is a definite assurance. Our objective is to help the industry to go forward on a realistic basis. This means that there must be more realism in the projects themselves. In the second place, we shall have to make greater efforts to reach agreement with our allies, particularly in the United States and in Europe, to co-operate in an increased number of research and development projects and indeed new production of aircraft. There are many arguments which I could go into in favour of this, but I am sure the House will accept it.

We are planning to expand our existing programme of co-operation with the United States, and among the projects which are being considered is one for the joint development of an advanced lift engine for vertical and short take-off aircraft. It is quite clear that it is France and Europe which offer in some ways the best prospects of co-operation on equal terms. I can assure noble Lords opposite that this Government and my right honourable friend the Minister of Aviation are determined to make every effort in this direction. I am glad to see that at the recent meeting with M. Jacquet the conversations were of the friendliest kind, and the Press communiqué showed that there was an enthusiasm and determination to press on with the Concord. I hope that similar results will be yielded in other fields, particularly in relation to the P 45, the aerobus and many of the projects to which the noble Earl referred. I would only say that we are as interested in them as he is, and we are in a position to do something about it. We shall do our utmost to achieve collaboration in this field.

EARL JELLTCOE

My Lords, while the noble Lord is on that matter, may I ask whether his statement covers the AJ 168?

LORD SHACKLETON

It does, but I would rather not be drawn further on the AJ 168 in relation to its operational use; it also will depend on the scenarios. Certainly there is every intention to continue this project if the need is shown.

Noble Lords are familiar enough with the proposals of the Plowden Committee for me not to have to say much about it. I would only point out to noble Lords who are worried about unemployment in the aircraft industry that the numbers have fluctuated much more greatly than is going to result from the present cancellation of these two aircraft. Indeed, it is conceivable that by 1967 the number employed in the aircraft industry, despite the cancellation of the HS 681 and the P 1154, may be of the same size or even larger. But these are figures within a tolerance which has always existed, and a fluctuation of 10,000 or 15,000 employed in the aircraft industry in a single year is perfectly normal. They employed 310,000 in 1957 and within two years the number dropped by 30,000, far more than the figures on which the Opposition are crying havoc. It was the previous Government which foresaw the decline in the aircraft industry to 150,000, and not a cry of horror from them—none of these remarks about destroying the aircraft industry which have tripped so freely off the tongue, I must admit not so much of noble Lords in this House but Opposition Defence leaders in another place, especially when they were speaking on television or privately to the Press.

The most astonishing thing to me about all this is that it is the Party who were responsible for our affairs for these last few vital years who now seek to attack the Government for grasping the problem which they so lamently failed to tackle themselves, and it is clear that much of the trouble—and noble Lords who have been interested in the Services and the R.A.F. will be as aware of this as anyone—stems from the original Sandys White Paper which saw virtually no future for manned aircraft and put all the emphasis on the independent deterrent, the ill-fated Blue Streak. It was the last Government and their platoon of Defence Ministers—I am very glad to see an exmember of the platoon, the noble Viscount, Lord Watkinson—who cancelled project after project, totalling £300 million of wasted development, far more than is at stake at the moment. The noble Viscount was responsible for the biggest of the lot, Blue Streak, and I congratulate him on being so.

VISCOUNT WATKINSON

My Lords, the congratulations were not noticeable at the time.

LORD SHACKLETON

I lamented it, and I think the noble Viscount did his bit. Every Defence Minister had a reasonable share of cancellations. But of course they failed, as we have learned now to our cost, to produce a properly phased aircraft programme.

They left to us a programme with future bills which the country simply could not have met without grave dam- age to our prosperity and capacity to fulfil our obligations for peace-keeping, which of course are not all in the military sphere; a good deal of it is in peaceful production. It is. after all, they who have put the employment of aircraft workers and designers at hazard as a result of those decisions and they have grossly exaggerated the effect of changes, rather like Demetrius, with the silversmiths of Ephesus who stirred up fears of unemployment among the workers who manufactured statues of Diana. It is they who now in this gap have compelled us to spend dollars. I am inclined to except the noble Earl, Lord Jellicoe, from this criticism, although he was a member of the Government. They failed to provide the aircraft which the Royal Air Force needed.

There is one other point to which I would refer. Certain Opposition Defence spokesmen, and in particular one member of the previous Government, have broken all British political tradition in seeking to involve the Chiefs of Staff. We have several times been asked what advice we have had, and the Government have been reluctant to express anything until, in fact, the Opposition started referred to the advice they had, and even then the Government have not done more than say that their advisers have accepted it and are satisfied. It has been said and this notably happened last Thursday I understand, at a private, unattributale, off-the-record Press reception—that the previous Government had been misled. I really think this is something too objectionable. If the previous Government really believe this, then I think they should express their willingness to allow the papers that relate to that period of administration to be published, because although I have not seen those papers I am confident that the Government then were not without the necessary advice on the dangers of the situation in which we have now found ourselves.

What is now important is that, instead of squandering the industry's energies on ill-conceived and diffuse activities, we should concentrate them on projects which will work to the greatest benefit of our economy and the successful and sustained defence of this country and its international obligations. This the Government intend to do.

5.10 p.m.

THE LORD BISHOP OF COVENTRY

My Lords, for a short time I propose to take your Lordship's attention away from the purely technological to the sociological aspect. I hope you will not think that unimportant, because the two are closely intertwined; the one is inescapably part of the other. It appears almost certain that, as a result of recent decisions by the Government, the aircraft factory in Coventry is to be drastically curtailed—perhaps, indeed, closed down. It is not my purpose to question the Government's decision on aircraft policy; that is the proper field of those who are technically qualified to do so. But I do wish to raise some of the social issues involved in these decisions, which must have been extremely difficult.

Five thousand men and women work in the Coventry factory of Hawker Siddeley Aviation, Limited. This crisis, therefore, affects a possible total of fifteen thousand people, or more, when wives and children are considered, as considered they must be. Coventry is an area of high employment; but this large redundancy is, at any rate on paper—and I have ascertained these facts most carefully—nearly four times the size of the total of all vacant jobs available at the moment in Coventry, and is likely to exert heavy pressure on the total number of jobs available in the area as a whole, quite apart from the fact, of course, that the actual social problem cannot be solved by merely doing division sums on paper.

As we all know, men come to love their jobs, and it is not easy suddenly to be uprooted from the kind of work in which they have been employed for many years. Furthermore, within the past twelve years or more, the people of Coventry have been encouraged to believe that employment and high salaries were permanent. Many therefore—and rightly, I think—have become deeply involved in hire-purchase payments and in house-purchase agreements. There is nothing particularly wrong in that. There is, of course, in this particular factory, a core of highly skilled men whose skill is certainly urgently needed in British industry. This crisis will no doubt mean an unpleasant upheaval for these men and their families; but they are likely to find work, and work paid for at similar rates to which they are used and which they are now receiving. It is not so much for those highly skilled workers that one is worried.

There are, however, far more men and women who are not in this category, unskilled and semi-skilled people, and a particularly large force of clerical workers, many of whom are no longer young and who are likely to have considerable difficulties. This anxious situation is likely to apply wherever the Government's decisions are to cut down the aircraft industry. It is therefore my first intention to make the strongest possible plea that this painful situation be approached with the utmost sense of social responsibility, as indeed one hopes it will be. It is incumbent upon the Government to do everything they possibly can to assist the companies concerned, and the employment exchanges concerned, to mitigate, so far as possible, the social effects of their decisions.

The question of severance pay and compensation will arise, and I trust that the measures taken will be appropriately generous, since the men and women concerned—and this is important—are the casualties of a national policy adopted by the Government for the nation's total good. They are not simply the victims of a private enterprise that has miscarried. Therefore, the nation, as such, through the Government and their organs, should do all it possibly can to help. It would, I think, be a sad reflection on our scale of values if this upheaval were dismissed simply as the sort of thing that is likely to happen in an age of fastmoving, technical change, with little responsible regard for the people concerned.

That takes me to my other point. This sort of situation is likely to arise as the ways of technology and industry change so fast around us. It arouses in me, and I think in others, a fear that we are in many respects far from being adequately prepared to meet this situation, particularly in respect of cushioning in a responsible way the social effects of change. We must, of course, be ready to change, and to respond to the needs and potentialities of the age: but ready and responsive not just in terms of technology, but in terms of social responsibility as well. We must support and further every effort already undertaken in this direction. We must question and criticise every gap and failure that still remains. A married man with two children who becomes unemployed, even with the new rates of benefit introduced less than a month ago, is paid unemployment benefit at less than half the national average wage, and only about one-third of the wages being earned by many in many parts of Britain. A drop in income of one-half or two-thirds gives no assurance of security. And whatever schemes there may be for wage-related benefits, the fact is that we have not got them yet. Most people in this country are still working in firms which have no redundancy schemes or severance-pay arrangements, whatever schemes for the future may be in mind.

There are in Britain to-day (I referred to this not long ago) only 26 Government training centres, and these cater for a maximum of 200 people each, and mostly for only 150. Yet the provision of facilities for re-training men and women from one job to another, whether in industry itself or in the training centres, is all part of the responsibility of an industrial nation adapting to change; and one can but hope that in the not too far distant future there will be a substantial increase in the number of such training centres.

These are some of the gaps in our measures for giving people an adequate assurance of security. Without responsible arrangements for security, the mobility of labour will be hard to achieve; and without reasonably acceptable arrangements for mobility we are unlikely to respond to this age in the ways that our survival and our progress are likely to require. This implies, among other things, the consideration of arrangements for the transference of pensions.

I therefore see the situation that has arisen in our aircraft industry as an example of what the times may require in more than one area of our industrial life. Of course we must become more flexible and more progressive, more ready to take risks and more intelligent in analysing what the affects of those risks may be. But our social mechanisms must keep pace with our technology. To ignore them, to regard them as secondary, to sit tight to social concern and hope for the best, is to invite the worst. For unless people's fears are intelligently understood and efficiently provided for, they are unlikely to respond. Social arrangements cost money, and the Government are endeavouring to get the economy on to such a footing as may be able to pay the bill. The painful decisions about aircraft are, so they believe, part of their effort in this direction. I only trust that, as their policies develop, and as we become a more and more efficient nation, they will achieve this, not least by their regard for the social implications of what they have set out to do.

5.20 p.m.

LORD WYNNE-JONES

My Lords, as a novice both in your Lordships' House and in national politics, I hope that I may claim your indulgence. I should not have intervened in this debate if it were not for the fact that I acquired during a period of the war a great interest, and indeed affection, for aviation and the aircraft industry. I was fortunate enough to spend two years at the Royal Aircraft Establishment in charge of the Chemistry Division.

Some of your Lordships' may wonder what business chemistry has inside a Royal aircraft establishment. Indeed, I remember that the Director, Sir William Farron, put this very question to me on one occasion and asked whether I thought chemistry could play any part—rather, I take it, challenging me to prove my indispensability. I was able to reassure him, I hope and I think, by pointing out to him that without the lubricants, which the chemist was largely responsible for producing, without the rubber, which also the chemist was responsible for producing, it would scarcely have been possible even to wheel an aircraft along the runway. And certainly, without the fuel which the chemist was responsible for, the aircraft would never get off the ground.

So I hope that your Lordships will forgive me if I spend a little time, not in discussing the main economic or technical aspects of the aircraft industry, which others much better qualified than myself have already shown you all about (in fact, if I may say so, your Lordships show remarkable fortitude in dealing with (shall we call it?) the escalation of sophisticated argument which proceeds on these matters); but, rather, in taking up the point which was mentioned by the noble Earl, Lord Gosford, in his introduction when he referred to the industry as one which was concerned with the frontiers of knowledge. I think that there is a lot of truth in this, and it is on this aspect that I should like to say something this evening.

It is often claimed that an industry which is concerned with the frontiers of knowledge produces what has been referred to as a fall-out (which is a rather unfortunate term in relation to the aircraft industry) or a spin-off, as the Americans call it, which is perhaps a little better, and that this spin-off is able to give such benefits to the whole of our economy and the rest of our industry that, at almost any cost, it is worth while producing this spin-off. One really wants to be careful about what one means by the "spin-off". I suppose the first aeronautical manufacturer, Daedalus, might have claimed that there was a certain technological spin-off when, as a result of Icarus's unfortunate fall into the sea, it was proved that wax was melted by the sun; and this might have had a considerable effect on materials technology. But I think the information could have been got in another way. This applies to a good deal of the other so-called advantages of spin-off. It is, of course, perfectly possible to heat a room with a refrigerator. The heat to run the refrigerator goes to heating the room, but it would be a highly inefficient way to heat a room to spend £100 on a refrigerator in order to get something like 70-watts or so to heat the room.

If one looks at various examples of this spin-off which are being put forward one is a little surprised. In America (where, as has already been said by several speakers, the aircraft industry is rather tough, and they do not mind lobbying pretty hard—a thing I cannot imagine they would do in this country) the National Aeronautical Space Agency produced several illustrations of what they considered to be advantageous developments which came from the vast expenditure on aero research. One illustration given was that the supports of brassieres could be strengthened much more satisfactorily in consequence of the work; and another was that a new method had been developed of producing lemon squeezers by exploding the metal, instead of by cutting it out in a more normal way. One cannot help feeling that an expenditure in America of some 4,000 million dollars per annum was a rather high cost for such products. One sees that all the way through the same thing is true wherever one turns—that this so-called spin-off is really quite negligible.

I know that, as a technologist, I ought to be careful about saying this sort of thing because we often boast of the great advantages of the particular things we are doing and of how far they will produce effects elsewhere. I know perfectly well that when I have put in an application for a substantial grant for carrying out research I have added a whole lot of interesting, somewhat hypothetical, suggestions about the way in which the whole economy will benefit from what I am going to do. This, I must admit, is done rather frequently. But one has to realise that the real justification for doing any particular piece of work never lies in this spin-off. It always lies in the value of the job itself. And one cannot justify spending the vast sums of money that we spend on aeronautical research and development merely by producing a slightly better refrigerator or a somewhat more comfortable pair of shoes. It can only be justified by producing the aircraft which are wanted, at the time at which they are wanted and in the quantities which are wanted.

This is really the difficulty about our situation in this country. If one looks at the cost of production of any type of aircraft one finds that it has necessarily been increasing enormously. I would say that it has gone up roughly by a factor of four every five to ten years. I may be underestimating it, but it has certainly gone up sensationally. This is not anything for which we can blame the aircraft industry. I know that the aircraft industry has superb people in it; I know that it has technical experts of the finest quality, and I do not for one moment question their ability. But what I do say is that the industry necessarily is one in which costs go on rising because we have to produce things which are more and more (to use that horrible word) sophisticated. These things which are being produced can only be produced at a cost which is within our economic compass if sufficient can be produced. It is no good thinking that you can run an aircraft industry producing a small number of aircraft. I am quite sure that the noble Earl will agree entirely with this. Because of this, it means that we are no longer a big enough country to be able to afford to run a large aircraft industry unaided.

This simple fact cannot be got round by any nostalgia. It is no good referring to the glories of the past; these are irrelevant. What matters to-day is that we look at our industry and decide what we can do and do well, and try to work in with every other country with which we can work. This is a matter of political, economic and commercial judgment. I am not competent to say which countries we should work with, but I do say that it is absolute fantasy for us to think that we, with 50 to 60 million people, can maintain an aircraft industry of the same size as the Americans, who have five times that population. So I would say that it is absolutely essential that we look at our aircraft industry now, critically and harshly; but, nevertheless, with sympathy because we want it to remain as good as it possibly can, and in this world only the best is worth while.

5.31 p.m.

VISCOUNT WATKINSON

My Lords, I know that your Lordships would wish me to congratulate most sincerely the noble Lord who has just sat down, who said, if I may say so to him, so many apposite things in such a short time. This House is noted for contributions from its Members who have a deep and wide background of technical and scientific knowledge, and clearly we have gained another Member of that select band. I thought, if I may add just one other word, that he was rather brave in a maiden speech to venture into highly controversial matters. But that, again, no doubt shows that his future contributions will always be listened to with great care and attention in this House.

Perhaps I should start by declaring a rather deep interest in the matter under discussion. I was an engineer before I became a Minister, and I am associated with the engineering industry now. Some eleven years in the Ministry of Labour, the Ministry of Civil Aviation and the Ministry of Defence at least gave me the opportunity of seeing this problem from a large number of different aspects. Therefore, I should be the last to speak about any Government, to diminish the very difficult decisions which any Government has to take in this particular sector of the economy. Successive Conservative Governments had to take difficult decisions, and, despite the Party political polemics of the noble Lord, Lord Shackleton, I think that on the whole, in the light of the conditions of the day, they took them fairly and with judgment which was right for the interests of the country. This is what any Government has to do.

The first thing I have to say, therefore—and it is a matter of sincere regret to me, as it is to a great many other people who want only to see done what is, on the whole, in the national interest—is about the present Government's approach to these problems: the air of haste, the decisions made, unmade, modified and all the rest. How much of this was their own, how much they may say was in the Press, I know not. I am dealing merely with the facts; and the facts appear to be that decisions were forecast, withdrawn, modified and all the rest. All I want to say is that, sadly enough, this has made the problems of this great industry a great deal more difficult to solve, and for that reason—

LORD SHEPHERD

My Lords, can the noble Viscount help me? He has made a statement, and he has also suggested that there might be some mistake in the Press, and otherwise. But just to help me when I am winding up, perhaps he could refer to a particular case.

VISCOUNT WATKINSON

Yes, my Lords. Perhaps the noble Lord would like to obtain—and no doubt his Department will provide him with them—the almost endless cuttings on the Concord, for example. If he wants some more, perhaps he would like to collect all the cuttings on the TSR 2, which caused very great alarm and despondency to a great many men who used to be my constituents, and who serve one of the greatest aircraft factories in this country. So I was only endeavouring to be kind to the noble Lord in anticipating his alibi, which no doubt would be that most of this vacillation was the fault of the Press and not of Her Majesty's Government. But I think, on the whole, that it was the fault of Her Majesty's Government, and that the Press has the facts entirely right.

However, before I try to deal with one or two specific projects, I should like to follow my noble friend Lord Gosford who moved this Motion, and who said in his opening remarks that he wanted to turn the attention of your Lordships to the problems of the aircraft industry with regard to exports. I, too, should like to do this first, because I have a special interest at the moment in exports. We live in an age—and I think the Government are perfectly right to say this—when as a country either we have to make our export targets, or we have very little future at all. Therefore I think it is fair to look for a moment at what any Government ought to do with regard to this great industry; and I was very glad that the noble Lord, Lord Shackleton, said that the present Government recognised that the aircraft industry was a great industry.

In this case, what ought any Government to do to assist the industry to play its maximum part in the export trade? I do not think anybody challenges that its past record in this field has been a good one. One only has to think of the Viscount, as one example. I do not think anyone challenges the fact that, as my noble friend said, it is the most valuable export in terms of money for metal, so to speak, that we have in this country. I believe that it is not challenged, either, that we need the contribution of this industry if we are to increase our export targets.

Perhaps I should say here something about a common fallacy. As regards the American market, in which I am naturally interested as Chairman of the Committee for Exports to the United States of America, it really will not do to say that if we lose vital aircraft exports, worth, say, at least £1 million an aircraft, we can suddenly or easily replace these with consumer goods; or, if you like, with sports goods, motor cars or anything else. These single large items of capital equipment are so large, and so important to our export targets, that I hope it is accepted that exports of them cannot readily be replaced by anything else at all. If that is so, then surely no one would challenge the concept that this industry ought to be aided to contribute as much as it possibly can to the export trade of our country.

No doubt the Government will immediately say that that is what they seek to do, and that they are quite right in what they have done, because military aircraft make little or no contribution to export sales. At the moment, I suppose the only military aircraft which is making any contribution is the P 1127 vertical take-off aircraft, which I negotiated for the then Conservative Government with Herr Strauss, the then German Minister of Defence, and Mr. McNamara, then, as he is now, the American Secretary of Defence. I agree that, apart from that particular order, perhaps military aircraft are not making a contribution. But I hope that the Government will turn their attention to the fact that, if we are a nation which has no military aircraft projects, then we cannot be a nation which can support a significant civil aircraft industry. To accept that this will not happen is the most dangerous and misleading hypothesis. It is just the same as saying (and I see that some people are saying it) that we can be a major manufacturer of aircraft engines if we do not have an airframe industry. If the aircraft engine manfacturer in Britain cannot collaborate in completed aircraft made in Britain, then in the long term his scope, too, is going to be reduced to a point at which the industry will make little or no contribution to our export trade.

I must say that this thesis, if it be true, is the more damaging if we replace British aircraft by buying from abroad, whether we buy from America or anywhere else; and even worse if we accept the doctrine that we will manufacture here, under licence, projects which have been developed overseas. I am not denying that there are financial attractions in this prospect, and I think the noble Lord was perfectly fair and perfectly accurate in saying that, if you buy an aircraft off the end of a long run, you will buy it more cheaply than if you are making it for yourself in a very short run. That, one has to accept.

But again I should like to follow the noble Lord, Lord Byers, and I think all the noble Lords who have spoken, who said that there really is no tougher business in the world to-day than the complex of industries which is now called the aero-space industry, and that salesmanship of the most ruthless kind has to be adopted in these industries if they are to maintain any sort of place in the world to-day, and to survive. I recently saw the triumphant introduction of the Boeing 727 into the Australian market, but what is the Boeing 727? It is in fact a copy of our Trident—no more and no less. Yet here it is, knocking the Trident out of the Australian market. Good luck to the Americans—it is free competition—but let us realise what the British aircraft industry is up against in world markets if it is to make as significant a contribution to our export needs as it has so far done.

Again, I wonder whether the Government have taken cognisance of two facts—and I want to deal only with facts, and facts that I know. First, let us take the Boeing 707. The whole of the development costs of this aircraft was written off, and the whole of the "bugs" got out of it, so to speak, when it was a tanker for the U.S. Air Force; and it was not introduced into civilian service until it was a proved aircraft—all of this, of course, at the expense of the U.S. Defence Department. My Lords, there is nothing wrong with that except that, again, if we opt out of military aircraft, particularly military passenger aircraft, so to speak, we are denying ourselves this proving ground for new generations of British civil aircraft—and that, again, is just a fact. I think it is very sad, therefore, that we have not gone on with some form of advanced transport for the Royal Air Force which could have been a proving ground for future versions of British civil aircraft.

The second thing—I must be frank about this, and there is plenty of chapter and verse for it—is that we really cannot blame our competitors if they go round the world, as they are at the moment, saying, "Well, by all means buy British civil aircraft; they are, on the whole, very good aircraft; but you will need spares and you will need service, and there is not going to be a British aircraft in four or five years' time. Therefore, are you going to run the risk?". One may say that that is a very exaggerated statement, but this is what I meant by saying in the beginning that all the excitement and trauma which the Government have created about this great industry has led our competitors to take advantage of this situation, and you cannot blame them a bit if they do, because in this tough market somebody has got to win.

Again, to raise another fact, a member of my Committee for Exports to the United States is very intimately concerned with selling BAC 111 aircraft to the American market. I do not think his chances will be much increased by the events of the last three or four months. Again, if the TSR 2 is cancelled, here is an aircraft, as I know from my own personal knowledge, made in the same plant as the 111. There is inevitably a sharing of overheads between the projects, and I believe I am correct in saying—I am sure the noble Lord will correct me if I am wrong—that if the TSR 2 is cancelled, then the current prices, the service arrangements and all the rest of it for the 111s are put into hazard. The Government might say they would subsidise it in order to see that this did not happen, but, on the whole, it might be better to leave matters alone.

Again, the Douglas Company, with their DC 9, have now produced a copy of the 111. One or other aircraft must dominate world markets, and here is a market of Viscount size—in other words, perhaps the biggest market for any single civil aircraft that exists in the world today. It is either going to be taken by the 111 or by Douglas. I wonder whether the Government have really considered the ill-effects of recent events on the chances of selling the 111 at this very critical moment in its history. If the argument is to turn on money, then I understand that the orders for the 111 in America at the moment are something of the order of, I believe, 200 million dollars; and I believe that the orders earned by the British Aircraft Corporation over the last decade for exports were something like £400 million. I am giving these examples only to show that merely to say that the British aircraft industry is at the moment not making a significant contribution by this kind of mix of civil and military projects is, frankly, to deceive, and really to delude people about the true facts of the job. Therefore, I hope we shall not try to settle this argument on grounds of pure money or pure politics.

This is why many of us had hoped that the Government would hold their hand until they were in possession of the Plowden Committee's Report. I think this would have been a fair and reasonable thing to do. The noble Lord says—and quite fairly, of course—that they could not let the expenditure run on that long. My Lords, they have let it run on six months, and I should have thought it would have been wiser to let it run on a little longer, until they were in benefit of the Plowden Committee's Report. Anyway, so much for exports. I only hope now that the damage that has been done—and quite a lot has been done—to the possibilities of exporting British civil aircraft can be repaired. Certainly a firm statement on the future of the British Aircraft Corporation at the earliest posible moment would help. So would a statement on the future of Hawker Siddeley's, who also have important export orders in hand.

LORD SHACKLETON

My Lords, may I interrupt to ask the noble Viscount what sort of statement he wants to be made on the future of Hawker Siddeleys?

VISCOUNT WATKINSON

I would have thought a helpful statement. I gather that the noble Lord does not challenge my statement that it would be very helpful to make a statement about B.A.C. as soon as possible. If he wants to know what sort of statement I want to be made on the future of Hawker Siddeley's, then, as he said to my noble friend, if he will wait while I continue with my speech I will illustrate exactly what I meant by what I said.

Coming to the military side for a moment, I think it is perfectly fair that the Government should have had another look at all the projects placed in front of them. This is what any new Government of any colour clearly ought to do. But I really think that arguments about cost are difficult to answer until we have seen the Defence Estimates, and in this I support the noble Lord, the Minister. I certainly would not press him to give any more facts about expenditure on military aircraft than he thinks proper. I am sure that is right. Therefore, it is very difficult to argue whether there is an enormous surplus of expenditure in the early 'seventies or not. All I would say is that in my day—and I am talking only about things of which I know—there was not this prospective bulge in the 'seven- ties; and, even if there had been, then all I would say is that if the country is not prepared to pay its proper bills for Defence, then it cannot expect to pay an insurance policy for peace or survival; and I do not think the Government ought to cut back their Defence expenditure because they think it is inconvenient or perhaps peaking at any particular period. All I am trying to say is that I do not think that expenditure should stand between a Government and proper decisions as to the future of an enormous industry with a very large export potential.

LORD SHACKLETON

May I just interrupt the noble Viscount again and tell him why there was, in fact, overconcentration of expenditure in the 'seventies? It was because he had failed to order the aircraft.

VISCOUNT WATKINSON

That is demonstrably untrue. I do not want to go into great details of my three years as Minister of Defence, but if the noble Lord has it looked up by his own people he will find that the TSR 2 was ordered during that period, and was properly provided with a checked progress as to cost, delivery dates and all the rest—all matters which, so far as I know, have been properly kept. And even at that time we assumed, as all prudent Ministers of Defence do, that when you get an estimate you have to multiply it, as the noble Lord said, by a factor of three or four if you are to make a "guesstimate" of final end costs. This was not, nor is it, anything very new in the Ministry of Defence or in any other Ministry of Defence—for example, in America.

So all I want to say here is that if we are to judge these matters on exports, then I think the decision is quite plain, and it has been the wrong one. If we are to judge them on military availability, serviceability and so on, then I think, too, that it is a great pity that the present Government did not wait a little longer to examine this in close detail, because both the TSR 2 and the 1154 have not at the moment an adequate competitor anywhere else in the world. The TSR 2 possesses a low-flying, contour-flying, capacity not matched by the TFX in its present form, or, so far as I know, in any future projected form. The 1154's vertical take-off capacity, equally, is not matched by any other aircraft which is at present projected or which is anywhere near the production stage in the world. Therefore, let us face the fact that, if we are saving a little money—and maybe this is true; I do not know enough about it to know—we are at the same time buying aircraft that are inferior to aircraft which we were developing for ourselves.

Again, coming back to exports, the point is that all our foreign competitors will judge this not as a prudent decision on the part of the Government but as a confession of utter technical incompetence. I am not saying that this is true, but I am saying that this is what people in world markets will think. They will think that the British aircraft industry was not capable of going through with these particular projects. That is all the thanks we shall get for trying to save a little money which, in total, may be a very illusory sum when the final bill conies to be paid.

I hope, too, that the Government will bear one or two other points in mind. First, that all British Ministers of Defence since the end of the war have tried this doctrine of interdependence. In logic, it is right; in practice, it is depressingly barren of real results. Moreover, if the noble Lord opposite will have the files turned up and will look at the projects over the last decade (or even since 1946, if he likes) he will see that we have tried joint projects with one country after another; and he will be alarmed to see the number of projects that have not come to any practical fruition. And this is not for want of trying on the part of all the countries concerned.

For example, in the case of America, it is the disparity in the size and the scale of their industry compared with ours. It is impossible to mate those two industries. They are too disparate in size. In the case of France, and in the case of other countries, there are similar reasons which are equally honourable. I am only saying this: though it is now fashionable to say that we should do everything with everybody else, let us try to see that there is some purpose in so doing, or, otherwise, stand on our own feet, so that we do not at the end find ourselves in an even worse position than that in which the present Government now claim we are, by standing on our own feet.

My Lords, there is one other matter—and if I am wrong about this, I hope I shall be corrected—that I would mention. A prominent American said in London the other day that the American Defence Department are using the provisions of the "Buy American" Act to require a price preference of at least 50 per cent. in favour of domestic suppliers to the Department of Defence. If this is true, how can we hope to sell anything to America against a barrier of 50 per cent.? If it were a small percentage barrier, that would be fair. Therefore, my Lords—and I hope that this is a not very controversial point—if the Government hope to buy large numbers of aircraft from America, I hope that they will see that this matter is put right so that we shall have a chance to sell in return.

In summing up—and I do not want to treat this matter as a Party political one; I think it is rather more important—I would beg noble Lords opposite to take another look at this whole problem. I beg them, as the noble Lord himself said, to recognise that if we strike away the exports on which the British aircraft industry and its ancillary industries are working—the space industries, the electronic industries and the engineering industries, the manufacturers of spare parts and all the rest; if we strike this weapon out of the hands of our exporters, those of us business men seeking and working fairly hard to try to increase our export trade will feel that a major weapon has been quite unfairly, and indeed quite unnecessarily, taken out of our hands.

If the Government are willing to think again, as the noble Earl, Lord Jellicoe, asked them, then I believe that there are still a number of sensible things they could do. If they want to order the TSR 2 (as I think they should and must, for they should put this part of the industry out of its misery quickly), and want to cut costs, they could have a de-sophisticated version of this aircraft. I do not want to go into details because these are things which ought not to be mentioned, I think, in your Lordships' House or anywhere else. I know from personal knowledge that the cost of the specification which was, rightly, written for this aircraft at the time by the Air Staff, in its original days, when I had anything to do with it, was high. If we want a simpler aircraft, perhaps for a simpler type of operation, I do not see that this is a very difficult thing at all. It will still, I think, be tragic if we do not order a reasonable number of the fully-automated version. I cannot call it anything different from that.

My Lords, there is another possibility. If the Government want to be really brave they could perhaps reverse the decision of my Conservative successor and say that the Navy and the R.A.F. have got to live with the 1154 and not have the Phantom at all. This would be a very good thing for the British aircraft industry. I do not think it is right, certainly, to shelter behind the Chiefs of Staff. I would say, therefore, that my decision when I sat in this chair was that it would be a good thing for both Services to learn to fly a common aircraft—both a light-blue and the darkblue version—and the right aircraft was the 1154. The Government might have earned a lot of credit for themselves in the aircraft industry by insisting that this should happen, because in the end the Fleet Air Arm and the R.A.F. will have to fly a common aircraft. I hope that it will not be American aircraft.

My Lords, I wonder myself whether this whole problem did not really arise from the perennial trauma that falls on every Ministry of Defence when the Chancellor of the Exchequer comes along and says that his estimates are entirely unacceptable and that they must be reduced by £x -hundred million. This happens to every Minister of Defence every year and with every Chancellor. If the Minister of Defence is worth his salt, he says: "I will give this the gravest consideration. I will talk to the Chiefs of Staff and will do everything necessary." But if he puts his head on the block he will get by with a few cuts that will not do the damage to the aircraft industry and to the Services that I think these decisions will do. I will not say that they were ill-considered, but the decisions that have been taken were taken on a time-scale that made proper consideration and proper judgment quite impossible.

If the Minister of Defence had said he would issue a holding White Paper, or no White Paper at this time, I do not think he would have had much criticism in another place or in this House. I think the necessity, or apparent necessity, tor rushing this problem (like a great many other problems which appear to have had little consideration) has done what I fear may be lasting damage to this great industry. I ask the Government now to think again—and if they do they will have the support not only of this House but of the country—to see whether, by more mature judgment, they can put right some of the mistakes which in their hearts I think they must know they have made.

5.59 p.m.

THE LORD BISHOP OF SOUTH-WARK

My Lords, there are matters with which this debate is concerned which are of a technical, financial and political nature completely beyond my competence, and which it would be an impertinence for me even to attempt to discuss. On the other hand, the future of the aircraft industry is a matter of grave importance not simply for those engaged in it but for all citizens of this country. It is as one of these that I speak; and not least because hundreds of those who are involved in our immediate difficulties, and are therefore anxious for their future, live in my diocese, and many of them have discussed these matters with me.

In the last few weeks there has been more than one demonstration in London of aircraft workers. These demonstrations have been unusual in several ways. They were not ignored by the Press; they were widely reported and had the support of newspapers which do not always encourage demonstrations. Further, they demonstrated the desire among many, who would otherwise be found in demonstrations of rather a different kind, to preserve military aircraft. There were sectional interests at work on both sides, both the employing and employed sides.

This leads to the first thing that I believe has to be said. It is that the community at large has to look at the general interests of the whole community. We have to make things because they are needed, and not just to keep people in employment—if we did that we should still be making stage coaches, sailing vessels and airships. Decisions about military aircraft have to be made in the light of general decisions about world peace and cannot be effected by sectional interests. But it would be wrong to stop at that point. I have referred to sectional interests. That is a phrase which is often used as a term of abuse. I meant it in no such sense. It is not merely inevitable, but right, that everybody engaged in an industry should be concerned with the future of that industry. It is right that men should be concerned with the technical efficiency and development of that branch of human affairs by which they live. It is right that men should be concerned with their own livelihood and that of their family.

I think that it is intolerable in a civilised country that any group of men should be put in the false position of having to choose between urging a manufacture which may not be of general interest and abandoning the welfare of their wives and children. It follows that, if it is judged right to abandon the production of a particular aircraft and there is in consequence unemployment, there should be no question of men simply being put on unemployment insurance benefit, which reduces savagely their standard of living. This is one of the great fears in the minds of people to-day. Perhaps it is exaggerated, but it does exist, and we should be foolish to ignore it. If the nation has made a mistake, the nation must pay for it. The men who are the victims of this mistake should receive their full wages until satisfactory alternative employment is found. The way this could be done, in the form of compensation, would not be too difficult a matter to carry out.

To say this, however, is again not to go nearly far enough. It is often said that the aircraft industry of this country is too large. Certainly it may be too large in relation to the products it is now selling, but I do not think that anybody really knows how large it ought to be, because we are not yet clear as to what it ought to sell and could sell. It is certain that the number of world aircraft to-day is not too large for real world needs. Again, it is cruel and wasteful that highly skilled draughtsmen and workers of all kinds should be set aside, as though their dearly acquired skills had no significance for the rest of the community. This country cannot afford that kind of waste. It is, indeed, to avoid it that the trade union side of industry has tended to back the Concord project—so that it could absorb highly skilled men who would no longer be needed in the industry if the TSR 2 were abandoned.

The deeper need of the aircraft industry to-day is, surely, a really far-sighted review of possibilities and requirements. The Commonwealth Prime Ministers' Conference could play a large part in this. What aircraft are the Commonwealth countries going to require in the next, say, fifty years for all purposes—transport systems, agriculture and so on? More than this, I should like to see this country going to the countries of Asia and Africa and to the United Nations Commissions charged with helping underdeveloped countries and asking them what they think they need for the rapid development of their countries and what problems could be met by financing such projects. The production of British aircraft to help world development would make a major contribution to world peace-making, as well as safeguarding and developing both the skills and quality of the industry, thereby helping their development. Indeed, it could make entirely new calls on the inventive capacity of our designers. What I believe workers in all sections of this industry are asking for—and what I think they are entitled to ask for—is a planned transition to the really constructive use of their energies and skills, and to this I hope noble Lords in all parts of the House, and in the Government, will give their fullest support.

6.6 p.m.

EARL FERRERS

My Lords, I am sure that it is highly desirable that your Lordships should have an opportunity this afternoon of debating the aircraft industry, particularly in view of the farreaching decisions which have been taken in the past few weeks. Although I am bound to say at the outset that I regret many of the decisions which Her Majesty's Government have taken, I fully accept that they had many problems of an irreconcilable nature which they had to try to reconcile. The result of this was the decisions with which we are familiar—the cancellations of the P 1154 and HS 681, the stay of execution on the TSR 2 and the rather lukewarm willingness to go forward with the Concord.

I appreciate that the future of the aircraft industry was merely one of the factors which they had to take into account before arriving at these decisions, and that it might well not have been the most important. Nevertheless, it is important, and the decisions have had a far-reaching effect upon this industry. Whatever the arguments may be in favour of the cancellation of these projects—and I readily accept that there are many weighty arguments—the result is that we have effectively extinguished two of the leading projects in this field and shrouded the other two in doubt. I am not convinced that a sufficient case has been made out by Her Majesty's Government for these decisions.

We are told that part of the decision was due to cost, and that the replacement of the HS 681 and the P 1154 with American aircraft would save £30 million a year for ten years. I accept what the noble Lord, Lord Shackleton, said: that had we gone ahead, we should have been involved in heavy capital expenditure in the 1970s. But I find it extremely difficult to understand how these figures are arrived at, because when the noble Lord, Lord Shackleton, replied only last Thursday to a Question by my noble friend Lord Jellicoe on how much it would cost to purchase the replacements to the P 1154 and HS 681, the noble Lord said that the total dollar costs are dependent on the total number of aircraft bought, on which no decisions have yet been taken and no contracts placed. If that is so, on what basis do Her Majesty's Government calculate that they will be saving £30 million a year for ten years? The figure in itself has been misleading, I suggest. And I find the cost factor the least convincing of all the arguments which have been put forward for cancelling the British projects.

No allowance appears to have been made for the fact that the American aircraft will have to be purchased in dollars, which will affect our balance-of-payments situation. No allowance appears to have been made for the loss of export orders for the aircraft industry as a result of its diminution by these decisions. No allowance appears to have been made for the tax loss which will result from the loss of employment of the highly paid and highly taxable people at present engaged in the aircraft industry. No allowance appears to have been made for the fact that the Americans charge less for the original aircraft and more for the spare parts than we do. No allowance appears to have been made for the fact that we are introducing less modern and older-fashioned aeroplanes and will have to begin to spend money on replacing them earlier than we should have had to do had we gone ahead with British aeroplanes. Therefore, I consider the figure of £30 million, in the first place, suspect, and secondly, even if it were true, unconvincing.

I find the argument that the new planes will not be ready in time much more serious, but yet possibly unproven. It is sometimes rather wildly alleged that a type of aeroplane will come out of service at a certain date, but this is, of course, never a fixed time. Old aeroplanes are phased out of service as new aeroplanes are phased in, and the life of an aeroplane and its component parts depends on the stresses and strains which the aeroplane has to bear. It is true that an engine, a bolt or a spar may have a fixed period of life, but if those parts are changed or renewed at the appropriate time, then the whole aircraft can be serviceable for a longer period of time. I do not believe that a sufficient case has been made out, even by the noble Lord, Lord Shackleton, that had we continued with the purchase of the P 1154 and HS 681 the Royal Air Force would have been left without operational aircraft.

It is tragic to see two first-class aircraft, which were far in advance of the aircraft which are to replace them, being cancelled for the sake of a few million pounds or a few months in delivery. We have a substantial lead over the Americans in vertical take-off propulsion, and this is now largely to be thrown away, except for the subsonic versions of the P 1127. This is a remarkable aircraft in so far as it was the first vertical take-off aircraft of its kind. But will it ever be truly operational? It has a very short range. It has no vertical take-off with a full bomb load. And it is subsonic. Indeed, the R.A.F. appear to be happy with it only if it has Phantom cover. But the whole advantage of a vertical take-off aeroplane is lost if it can operate only with an aeroplane with a conventional take-off. Yet the P 1154, which is certainly more costly, but which has vertical take-off and is a supersonic machine, and has been designed with a range and payload to meet the exacting requirements of the Services, has been cancelled. Again, the HS 681 is a plane infinitely more modern, more up to date and more serviceable than the C 130 which is to replace it. The HS 681 was expected to come into service in the early 1970s as a jet freighter, but it is now to be replaced with the C 130, which needs a far longer runway, as the noble Lord, Lord Shackleton, said this afternoon, of over 3,000 yards.

LORD SHACKLETON

No.

EARL FERRERS

If the noble Lord does not agree, and it is not 3,000 yards, perhaps he will correct me.

LORD SHACKLETON

My Lords, I said with a light fuel Lord 3,000 feet, and in ordinary operational conditions 4,000 feet. I have noticed this confusion. The former Secretary of State for Defence also talked about yards when he meant feet.

EARL FERRERS

I am grateful to the noble Lord for putting us on to the right system and not taking us into the metric system. It is a much less superior aeroplane, in so far as, even if it requires 3,000 feet, it is still much in excess of the requirement of the HS 681, and it is also a piston-engined aeroplane. In ten years' time the HS 681 would still be a modern aeroplane, whereas the C 130 will be antiquated.

LORD SHEPHERD

My Lords, which is the piston-engined aircraft to which the noble Earl referred?

EARL FERRERS

I think the noble Lord, Lord Shepherd, will agree that the distinction I am trying to make is that the HS 681 is a jet aeroplane, and the C 130 is not.

LORD SHEPHERD

But it is not a piston-engined aircraft, as the noble Earl suggested.

EARL FERRERS

In that case, I stand corrected. But it is not a jet aeroplane, and has not anywhere near the speed of the HS 681.

LORD SHACKLETON

I am sorry to interrupt the noble Earl, but it is difficult to say that the HS 681 is a superior aircraft to the C 130 if it does not exist. The C 130 will shortly be in service, and to that extent I cannot help feeling that in terms of existence it is superior.

EARL FERRERS

The same might well be said of the TFX 2, which the Government feel they may well purchase but which in fact is not in existence and has not been tested. I think we must bear one thing in mind when considering the cost of these aircraft, and it is that, while this country may have the closest relationship with America, and while the points of friendship indeed run deep and true, and while the Government of America may be very favourably disposed towards the Government of this country, the American aircraft industry requires only one thing of the British aircraft industry, and that is its extermination. The British aircraft industry is the only main serious competitor of the American aircraft industry. If the British aircraft industry no longer existed the Americans would have a complete monopoly, not only in Britain, but throughout the whole of the Western world. It is therefore well in the interests of the American aircraft industry to make their prices and their delivery dates as attractive as possible. Indeed, it would almost pay them to give us these aircraft. Unfortunately, Her Majesty's Government have used as one of the prime arguments for dispensing with the British aircraft the question of cost, and they have, to my mind, failed to support the aircraft industry in the way in which one might have hoped they would—though I readily accept that there are other and weighty arguments which they have had to take into account, and that the decision has not been easy.

I agree that there is no advantage in having an aircraft industry if it is not competitive and is not fulfilling a useful purpose. But, my Lords, I suggest that it is; and it is one of our leading industries in the country. It is an industry whose researches apply, not only to itself, but also to many other spheres of industry. It is, for instance, as a result of the research done in the aircraft industry that we have been able to design the microminiature components which have been used so widely in computers and many commercial products. This is, of course, not an argument for retaining an industry, but it is a useful bonus to have from an industry that is already in existence.

My Lords, much is spoken about the size of the industry. I do not consider that there is any specific size which the industry ought to be. The real criterion is what you want the industry to do. If we are to have a Defence commitment, it seems logical to suppose that we in this country should provide as much of the equipment as it is possible for us to provide. For if we do not, it merely means that we shall have to purchase it from abroad with dollars that have to be earned out of increasing exports from other industries. Equally, it is naive to suggest, as has been suggested in many quarters, that we should have a civil aircraft industry and not a military aircraft industry. The fact is, as noble Lords know only too well, that it is impossible to have a civil aircraft industry without the research, information and techniques gained from a military aircraft industry.

If the Government decide, as I hope they will, that it is desirable to have an aircraft industry, then I hope that everyone involved in the construction and use of the aircraft will back the project up, and back it up well. I do not say that the industries should not be subject to criticism, or that projects should never be cancelled, but what I think is pitiable is that whenever we have a potential world beater it is subjected to devastating denigration by one interested section of the community. As soon as the VC 10 came into service, B.O.A.C. wished to cancel half their orders because they considered the aircraft allegedly too expensive to run. While this request was made with the best of motives, the deliberations about it took place in the glare of publicity, much to the detriment of this very fine aircraft, and it added greatly to the difficulties of those who tried to sell it.

Practical experience has shown, however, that on B.O.A.C's East African route the VC 10 has a Lord factor of 75 per cent., which is extremely good, as the break even point is about 60 per cent. Similarly, the TSR 2, which is a superb piece of sophisticated engineering, such as has never been contemplated before, not only an aircraft, but in itself a complete weapon system, has been subjected to violent discussion. So also is it with the Concord, where we have a lead of two years over the Americans. This has been classed as a prestige project which we could not afford, and which would, in any event, be uneconomic.

We must be prepared to have the courage of our convictions and back these major projects of British ingenuity, even if at times there is risk attached to them. The damage which has been done to the aircraft industry over the last few months by this desperate scrutiny in the public gaze, with all its attendant publicity, has been immense. In other countries, as the noble Viscount, Lord Watkinson, has said, where we are endeavouring to export our aircraft against fierce competition, our manufacturers have found another new hazard. Their competitors are advising their prospective purchasers that they may be unwise to purchase British aircraft such as the BAC 111; they say, "Will the British Aircraft Corporation be in production in five years' time to provide you with the spares?"

We are deluding ourselves if we think, as has been stated in various quarters, that we can have a flourishing components industry without necessarily a flourishing aircraft industry. How long can one make engines if there are no planes in which to put them? How long can one make complicated instruments that go in the aircraft if there are no aircraft in which to put them? It is said that we can fit British engines into American planes. Of course, that is perfectly true for a limited period of time. But how long will the American aircraft industry be prepared to sell air-frames without selling the engines to go in them?

Again, it is said that we can make American planes on license in this country; but that does not resolve the problem of the design teams. A design team may consist of 200 or 300 up to 1,800 men. They are teams which have worked together for many years, and have produced the British planes which we know so well. They have a great esprit de corps—and let no one minimise the advantage of that. One cannot cut a design team in half. Once a design team is split up, it is split up for good and can never come together again. It is true that some of its members are strictly engineers, and would be prepared to find other jobs as engineers. But others in these teams are basically plane designers. Their life and their interest is designing aeroplanes. If their services are not wanted in this country, then they will go elsewhere where they can continue to design planes. These are our best and most productive brains which we shall be turning away, and we shall have to decide whether in the long run we wish to retain, foster and encourage the services of these people, and so remain in business as an inventing and creating nation, or whether we wish to become a nation of shopkeepers who are prepared to buy and sell the goods that are the product of the imagination of others.

I come back to the point at which I started, when I said that I readily appreciated that the problems which confronted Her Majesty's Government about the aircraft industry were many and diverse and not easy of solution. But I believe that the damage which has been inflicted upon the industry as a whole, and upon the country as a whole, cannot be measured in terms of pounds. We have now come to the point where we must ask ourselves: do we want an aircraft industry? If the answer is, Yes, as I believe without question it should be, then Her Majesty's Government must be determined to back up that industry and support it with all the power they can command. I would suggest to them that they give it a full blooded "go ahead" for the TSR 2, and not just a half-hearted nod, with yet the possibility of the project still being cancelled. With regard to the Concord project and the men engaged in it, I would suggest that we should back it up, and I would ask Her Majesty's Government whether, even at this late hour, it is not yet still possible to reconsider the HS 681 and the P 1154.

Finally, I would suggest that the industry should be given the long-range confidence which it requires; that Her Majesty's Government should let it know what is required of it, and eliminate the indecision and the desperate damage engendered by constant reversal of policies. This is not meant only for noble Lords opposite. It is a facet of the industry which it has had to live with over a period of years. The industry must know what is required of it in the future.

6.27 p.m.

LORD MORRIS OF KENWOOD

My Lords, there are many experts who have spoken and are to speak in to-day's debate, but I hope that I may not be considered immodest if I say that I believe myself to be the only person in the Chamber to-day who has flown the Hawker Hunter operationally. I think it would therefore be appropriate for me to approach the problem of the aircraft industry in its military capacity from the operational point of view, rather than from the point of view of the economic factor. Whilst it is of course impossible entirely to divorce the two sides of the picture, there are many here who are much more able than I to discourse on the economic factors involved in the decisions which have been taken. I shall therefore confine my remarks in the main to the equipment now in use and that intended for the future.

Let me in the first place talk about the fighter or attack aircraft. The Hunter first came into service in 1954, and in its original rô le was intended for the defence of Great Britain. It was a replacement for the Meteor in its day interceptor guise. Subsequent variants of the aircraft were intended for ground attack, photographic reconnaissance and forward support. It is in these rô les that the aircraft is at present primarily employed. In its original rô le it has been replaced by the English Electric Lightning, about which very little indeed has been said, and it would appear that, due to its short range and other factors, this aircraft does not figure in the future plans of the Government. The Hunter was, and still is, a very successful and useful aircraft, particularly in the rô les I have just mentioned. But this usefulness is now approaching its end. The aircraft is scheduled for phasing out in 1968-69.

However, let us face facts. Operationally this aircraft is no match for many of the supersonic aircraft which are already in the possession of several minor countries, apart from what these countries may well have in 1968-69. This is a point which I think should be borne in mind by the noble Earl who has just spoken. This is an intolerable position, and while it is known and recognised that the R.A.F. pilot has no betters and few equals, he would be at a very grave disadvantage indeed even at this time if he were called upon to engage in air-to-air battle with these aircraft. I believe it is gross mismanagement by previous Administrations that he should be placed in such an invidious position.

It was the defence policy of Mr. Duncan Sandys in 1957 that there should be no more manned aircraft which is primarily responsible for the unhappy position in which the industry finds itself to-day. Ideally, it was when the Hunter was brought into service that action should have been taken on its successor. This, I believe, was intended when the Lightning was first planned. But it was not until 1961 that action was initiated with the P 1154, and although firm orders were due in December of that year, a further two years or more were to elapse before a decision was taken; in the case of the R.A.F. to replace the Hunter with the P 1154, and in the case of the Royal Navy to replace the Sea Vixen—an aircraft which had entered service five years after the Hunter—with the Phantom. This meant that the P 1154 would not have been in service at the earliest until 1971-72 and this, in turn, would have meant that some of the Hunters would still have been in service in 1973, 1974 and even 1975.

This operational gap created by these discrepancies could not be acceptable if the R.A.F. were to continue as an efficient fighting force, and it this reason, as well as the escalating costs and time delays involved in the P 1154, which decided the Government to cancel that project and opt for the American Phantom. This aircraft, even when account is taken of the delay due to the fitting of the Spey engine and possibly other ancillary equipment, should be in operation in 1968-69, when the Hunter is due for phasing out. The Phantom is an exceedingly fine aircraft. It is capable of interception and ground attack and has been fully proved in both these fields; and I am given to understand that the R.A.F. is very pleased at the prospect of getting it. Unfortunately it cannot reasonably fulfil a forward support rô le, and it is for this reason that the Government have decided to go on with the P 1127, the Kestrel. Even this aircraft has suffered from the dither- ing of the previous Administration and could not be in operational service, with the higher-rated Pegasus engine which it will need, until 1967.

The criticisms levied against the P 1154 are equally true in the case of the Hawker Siddeley 681, and it was again with reluctance that the Government turned to America for replacement. The C 130E, in spite of suggestions that it is an obsolescent aircraft and such words which have been used to-day but which I will not use, is a most successful transport aircraft which, in its earlier marks, has been well proven by the United States Air Force and the Air Forces of Canada, Australia and New Zealand. It will prove a very worthy and much needed successor to the Hastings, which has already been in service for nineteen years, and the Beverley, and will combine with the Andover, which has been previously mentioned, in supplying the forward based Kestrels. Much more important, it will start coming into service in 1966.

On this question of supply aircraft, I am very much concerned on the question of the Valiants. As your Lordships know, Valiants were recently grounded owing to metal fatigue, and since their rô le was primarily that of a tanker aircraft, and we have no other aircraft operating in that capacity, I shall be very pleased to hear what the Government are intending to do on this matter, since at the moment the efficiency of the R.A.F. is seriously impaired.

LORD SHACKLETON

My Lords, perhaps the noble Lord, who is so familiar to us as a former fighter pilot, will allow me to answer that point. Frankly, I should have done so in my speech, but I did not do so as it was already so long. This is something on which we have some good news. The noble Lord, Lord Morris of Kenwood, and other noble Lords will remember that my right honourable friend the Minister of Aviation was going to have discussions with the firm with a view to hurrying on the Victor as a replacement for the Valiant. It rather looks now as if the Victor tankers will be available a good deal earlier than was originally planned. There is a good prospect that the first two tankers will be in service, in a partly modified condition, in early April and four more at the end of August this year. If this improvement in the programme is achieved we should take note and say that Handley Page have earned some compliments.

SEVERAL NOBLE LORDS

Hear, hear!

LORD MORRIS OF KENWOOD

I am very grateful to my noble friend for that information. It certainly is very good news indeed.

As one who flew and appreciated British aircraft and was very proud of them, and while I regret as much as anyone that for practical purposes it is obviously necessary for the Government to pursue the present policy of buying some aircraft from abroad, at any rate for the time being, it seems to me that this is the only method of ensuring that for the next few years our Air Force is equipped to a standard not only that is expected of it but which it has a right to expect. Coupled with this there must be, of course, long-term planning to ensure that the British aircraft industry is maintained as a leading force, but within the scope of our economic possibilities.

It must be recognised that the days when Britain could "go it alone" are over. By co-operating with our European friends on such projects as the Concord, the aero-bus and the light strike trainer aircraft, I feel sure that the technicians and the research and other skilled craftsmen will find ample scope for their unbounded talents within the industry. What this country wants, my Lords, is the right aircraft for the right rô le, at the right time and at the right price; and this the Government are endeavouring to obtain.

6.38 p.m.

LORD MERRIVALE

My Lords, first of all I should like to apologise to the noble Lord, Lord Shepherd, if I am not in my place when he replies for the Government. I trust he will forgive me, because his noble friend Lord Walston is acting as host in this connection.

With the time scale on the one hand and the need to maintain a technologically advanced and competitive aircraft industry on the other, and with so many conflicting opinions coming from all sides, it is indeed difficult to take a balanced and constructive view of the present problem. Regarding our export position, with its most advanced technology the aircraft industry is of the greatest use and assistance to other industries, who are thus enabled to compete more effectively abroad. Among them I would mention the structural engineering industry. As an example at home, four of the transducers, to measure changes of slope, which are fitted to the Museum Radio Tower in London were originally designed for aircraft testing and are, I understand, very accurate. I would draw the attention of the noble Lord, Lord Shepherd, also to an interesting paper which was presented on January 28 last by Sir Alfred Pugsley to the Institution of Structural Engineers, entitled "Aeronautics and the World of Engineering Structures".

The increase in exports of the aircraft industry itself has not been inconsiderable over the years. For instance, in 1946 it was only £15 million, and I understand that this year, according to the industry's order books, it will reach a figure of around £180 million. The equipment industry, which has been mentioned and which exists primarily to supply equipment to the aircraft industry and to engine constructors, also does a considerable direct export business in its own rights. This can be sustained only by a vigorous home market which is maintaining its technological lead. This exporting capability of the equipment industry cannot be sustained only by specifying British equipment in aircraft purchased abroad. If we opt out of advanced technologies in the aero-space equipment business serious damage could be done to our national technical capability in the emerging fields of automation and control.

This need to maintain and improve advanced technologies—and in parenthesis I would say, if this country is to be strong in the new growth industries it must attract young people into technology—brings me to the question of design teams, which has already been referred to by other speakers. In the realm of the tactical and strategic bomber, the fighter, the transport and the coastal patrol aircraft, the uncertainty regarding the future of the TSR 2 has caused some designers to seek employment in Germany and in the United States. And the cancellations will certainly cause the breakup of renowned aircraft design teams. To mention one, such a team comes under the leadership of Sir Sydney Camm, which has produced many well-known aircraft including the P 1127, which has been previously mentioned, as well as the P 1154. It is encouraging to see that the P 1127 is to be continued and developed, but it is still only a subsonic aircraft. The P 1154—to quote the words of Sir Roy Dobson, a world beater aircraft—is being discontinued despite the lead this country has in development in the vertical take-off field.

Therefore, what I should like to know, and I feel many of your Lordships would like to know, is what is to be on our drawing boards in the advanced technological sphere towards the end of the 1960s and early 1970s. What plans have Her Majesty's Government for joint development—that is, development in collaboration with Europe—on sophisticated (and I would stress "sophisticated") aerospace projects? It is certainly true to say, I think, that unless we co-operate with the European aircraft industry American manufacturers will have a considerable edge on us in unit costs and we shall lose the momentum of any present technical lead we may have.

Regarding the cancellation of the HS 681, I understand that this is viewed with grave concern by both the R.A.F. and the Army, for it was to provide strategic speed—not tactical speed—and range, with a facility to land on short mud strips. On a short term basis the Government may have been right in considering the acquisition of the Phantom 4 and the C 130E, though I understand the industry are saying that the P 1154 could be ready by 1968 or 1969 when the Hunters could be phased out. But what is planned on a long-term basis to replace the C 130 which has already been in service some time? It might be logical to assume that it could be something on the lines of the HS 681, for the Americans are already working on the C 141, a jet military transport of greater range and speed than the C 130.

By that time—the late 1960s or early 1970s—some of our best design teams will have been broken up and some of our best design brains will have been dispersed. Therefore, I would take this opportunity to ask the noble Lord who is to reply if he can say whether his right honourable friend the Minister of Aviation had any discussions yesterday with M. Marc Jacquet, his opposite number in France, regarding any AngloFrench research and development of an advanced technological nature. I do not mean the aerobus or similar projects like that.

On February 9 the Minister of Aviation stated that one seventh of our present design staff would be affected by the Government's cancellations, but that does not take into consideration the staff that may be affected if the TSR 2 is cancelled at a later date. The Minister also reminded another place—and I quote his words—that: design teams are not usefully employed in the industry unless they are designing planes for which there is a real demand." [OFFICIAL REPORT (Commons), Vol. 706 (No. 53), col. 239, February 9, 1965.] Therefore, I welcome the discussions which are taking place with France to align national requirements. But in that respect cannot more be done? For instance, I was interested to read recently a suggestion contained in the December, 1964/January, 1965 issue of the publication NATO's 15 Nations, which is edited in Amsterdam by General H. J. Kruls. In this technical periodical there was this suggestion: If the subsequent trials uphold the great possibilities now made evident, the TSR 2 may well be put forward as the basis of a great NATO nuclear force". I should like to ask the noble Lord, Lord Shepherd, whether anything is being done with regard to seeing that the TSR 2 could be used as the basis of a great nuclear force; in other words, are the Government working on a suggestion such as this?

To end, I would urge Her Majesty's Government to state at the earliest what long-term plans they have for the retention of our top design teams; and secondly, I would urge them to state what is their programme for a long-term sophisticated research and development programme for our aero-space industry.

6.50 p.m.

LORD FRANCIS-WILLIAMS

My Lords, I come into this debate as what might be described in aircraft terms as an outsider, although, of course, like all members of the British community, a paying outsider, since I gather that if the TSR 2 is to be continued its cost will work out at about £50 a family; so we all have a somewhat direct interest in these matters. I think we have had what is often called a good and reasonable debate, though I noted that in the course of his speech the noble Earl, Lord Jellicoe, managed to toss in, among various other adjectives (too many altogether for me to note) '"disastrous", "savage", "destructive", and so on, in referring to the present Government's policy. Indeed, if I were the noble and learned Viscount, Lord Dilhorne, in pious thought, I might be tempted to describe some of his remarks as veering quite near to an electioneering speech.

However, looking at this matter as many in this House and many more outside must look at it, not as a technological expert, but as somebody concerned with the national interest and doing his best to keep abreast of affairs, I ask myself what are the principles which ought to guide us in our concern for the aircraft industry. I take it that they are twofold. First, it should provide us with the defence services required for specific operational needs in specific theatres at specific times; and, secondly, it should have a practical and continuing relationship to our economic position. As has been said by several noble Lords, it is no good having the best planes in the world if they are only available too late, and if we have bankrupted a part of our economy in the process of producing them.

When I look at these two principles I am bound to say, with the best will in the world, that I really cannot find that the last Administration proved itself successful under No. 1. Its record is littered with indecision and muddle. It started and scrapped altogether, I think, no less than 26 projects; and it is true that it scrapped Defence Ministers almost at the same rate—I believe, nine in twelve years. The noble Viscount, Lord Watkinson, who spoke (I am sorry he is no longer with us), was one of them. I cannot quite remember whether he was the seventh or the eighth. He must have been quite glad, I should think, to be out of a rather over-crowded profession. And, of course, it continues. The latest "shadow" Defence Minister, Mr. Thorneycroft. I see from the latest list of members of the "Shadow Cabinet", has now also been moved, bringing it up to a round ten. Indeed, this has begun to take on something of the aura of a rather bad Western in which there is an immense amount of noise and smoke and banging, and other things are going to be done, and then, as each episode ends, all one can say is, "And another Conservative Defence Minister bites the dust!" Of course—it is perhaps understandable—the Conservative Administration found it easier to replace obsolescent Defence Ministers than to replace obsolescent planes, and they are less sophisticated projects.

I do not for one moment want to suggest that in this policy of indecision and muddle, delay and revision and so on, that distinguished the late Administration, and which faced the present Administration with the problems that it had to grapple with when it began to look into this situation, there was any failure on the part of the Conservative Administration in regard for the national interest. I am sure that all Parties in this country in this matter have an equal regard. But I think that some of its failures arrived in part from an excessive desire for perfection—to have the best plane irrespective of the cost or the time when it would be available.

When I was a young man I once had the great privilege of talking with President Franklin Roosevelt and of asking him what he regarded as the most dangerous pitfall into which a Government could fall; and he said, in a phrase: I would put it as that of rejecting the possible for the perfect. I suggest to your Lordships that, again and again, the Conservative Administration, partly by its failure to plan in time, partly by its almost hypnotic state in relation to high sophistication in planes, made this basic failure of good administration, with the result that it seems to have left the aircraft industry in what Paycock in Juno and the Paycock would have described as a fine "state o' chassis". Now we have this sort of line: this wicked Labour Administration comes along and upsets this perfectly happy, perfectly competent and admirable industry doing a wonderful job!

The noble Lord, Lord Merrivale, who spoke just now, quoted Sir Roy Dobson. It is worth while quoting Sir Roy Dobson at a little more length, though I am sure that some noble Lords opposite are no doubt by now a little weary of his words. In his brash, robust way, he called the recently demoted "shadow" Defence Minister, Mr. Thorneycroft, a "twerp". I do not know the exact meaning of the word "twerp", though so far as I can find out from a dictionary it means an undersized youth. Whatever its exact meaning, certainly it cannot be interpreted as a vote of thanks. He went on to say that The Labour Government is implementing what the Conservative Government would have liked to have done. I am not a Socialist, but the Conservatives just would not make up their minds about anything. They just waffled. And he continued: In the light of what has happened before it is very difficult to quarrel with Jenkins and Healey"— whom he described as brilliant.

I know that it has often been said, and frequently since he opened his mouth in this way, that Sir Roy Dobson is a not-wholly-representative figure; that he is a man who likes to throw his weight about. Indeed, I am told that among his directorships outside the aircraft industry his favourite one is of a company with the title "Activated Sludge"; and I have no doubt that he is happy in his work. He was, in fact, only saying out Lord what has been said privately by leaders of the aircraft industry for a considerable time.

Some noble Lords opposite look as if they do not quite believe me, but I would not, for one moment, ask them to accept me as a witness in this matter. I will call in evidence a voice that even less than Sir Roy Dobson's could be regarded by anybody as a Socialist voice, the voice of the Financial Times, that guardian of the interests of the City, of commerce and of industry. This is what it had to say on February 11, the day following Sir Roy's sharp comments. It says: Whatever his board may say, Sir Roy simply said in public precisely what many other top men in the industry have been saying privately for a long time. And their language has sometimes been stronger than his. Their bitterness about the Conservative indecision is deep-seated and withering. That is from the Financial Times, a most sober, reliable interpreter and reporter of business opinion. It went on to say that although it might surprise somebody that Sir Roy should have left Mr. Healey and Mr. Jenkins completely outside his strictures, and indeed should have praised them, the fact is that Mr. Jenkins, in particular, has gone down outstandingly well with the aircraft industry.

I quite understand the wounds to their prestige and pride which noble Lords on the Benches opposite feel when a new Government come in and are compelled to declare, after the closest examination of the state of things which the previous Government have left behind them in this important industry, that they find it was largely incompetent. But I suggest that we should have a little pause in the claim that the aircraft industry was getting on fine, in complete confidence and harmony with them, until this wicked and interfering Labour Administration came along. Because that is, on the industry's own showing, the most absolute and complete nonsense.

What about the second principle, the highly important principle of the relationship between the national economic position and this industry? The aircraft industry, with fewer than 300,000 men, has direct use of Government funds in excess of £300 million; and about as much passes through its hands, indirectly, to electronics, and so on. In this position, it is obvious that its planning, its future, the pattern of its developments, must be closely related with the plans of any competent Government, whatever its colour or views. This is essential. It is also true that, although there are now hopes of an increase in exports, in fact the export showing of the aircraft industry just recently has been bad. It seems to me that in such circumstances the whole position had to be re-examined by any competent Government. And what a value it is to a Government if only they can succeed a competent one, instead of an incompetent one, so that they can get on with the real issues of policy which concern them, instead of having to clear up the deficiencies of Defence left behind for them! Any competent Government not only must take a fresh look at such an industry, but must consider action—and I realise the difficulty involved—as to how far that industry can be developed in the future in co-operation with the industries of other allied countries.

I fully realise the slight shudder that goes through many Members opposite, as is the case on this side, at the fear that we may be wholly engulfed and swallowed by a very forceful and ruthless American aircraft industry. There are also dangers of its happening in fields other than the aircraft industry. Indeed, I put down my fears in that respect in a book called The American Invasion, which was published more than three years ago. But the facts are that, in the strategic and defence situation as it is, it is only common sense to buy some of the American planes which are available in order that our Air Force shall have the planes it needs. It is even more sense, and capable of longer-term benefits, to develop the closest co-operation with France and other European countries and to make a complex which can measure up to some extent with this immense American giant.

But what clearly is important is that both the Defence problem and the economic problem shall be looked at in the hard, cold light of common sense. It is because this Government are doing just that that I believe that even noble Lords on the Benches opposite, once they have got over the first shock to their prestige, will agree that this Government are doing the right thing.

7.10 p.m.

LORD AMPTHILL

My Lords, it is with some diffidence that I rise to support my noble friend in front of me, in the Motion which he has on the Paper—diffidence because I have no detailed knowledge of the aircraft industry, and know no more than I read in the newspapers about the various types of aircraft which have been mentioned to-night. But I must say that I have learned a good deal from one or another of your Lordships about all the many-lettered, many-numbered aircraft. However, I do not propose to follow up that side.

It is customary to disclose an interest, and therefore I must first tell your Lordships that I have a small shareholding in a company manufacturing helicopters. However, my real interest in the aircraft industry, and the only reason I speak to-night, is my absolute conviction that the honour, safety and welfare of this country depend upon maritime strategy, and we must consistently pursue a worldwide maritime strategy. I have often expressed this view in your Lordships' House, and I am quite sure that I shall do so again when we come to discuss Defence matters. I do not intend tonight to pursue in any detail this particular bee in my bonnet. I want to concentrate on my main theme, which will appear in a moment. But before I do so, I should like to tell the noble Lord, Lord Shackleton, how much I welcome the fact that something has been done to replace the Shackleton Mark 3s. The only thing I was not clear about was whether we were replacing the Shackleton Mark 3s. or whether we were calling the Comets Shackleton Mark 3s. However, that is a detail. Perhaps they will be called Shackleton-Comets.

I need not remind your Lordships that in this day and age maritime power, maritime supremacy, depends as much on control of the air as it does on control of the sea. Over it, on it and under it, we must support our maritime strategy with aircraft, as well as with ships and submarines. For centuries past our efforts have been supported with the backing of a well-established and thoroughly efficient shipbuilding industry. This industry has not only provided our fighting ships; it has provided the ships which carry our men and our supplies to and fro across the ocean. The shipbuilding industry has not only provided ships for both protecting and carrying our trade, but in doing so has made a very valuable contribution to our exports, visible and invisible.

I could expand on this theme at great length, but I think I have said enough to show that my main theme is that the aircraft industry should be to the Royal Air Force and to the users of commercial aircraft what the shipbuilding industry has been, and still is, to the Royal Navy and the Royal Merchant Marine. It is true that in their present state of development aircraft are not vital to our bulk-carrying trade, but so far as passengers—military, civil or otherwise—are concerned, aeroplanes are, of course, every bit as important as ships, and possibly more so. I think there can be no doubt that the aircraft industry can make an ever-increasing contribution to our exports, visible and invisible. It is, of course, already making a considerable contribution, which is every bit as important as that provided by shipbuilding.

But, even more important, the aircraft industry has from its inception played a vital part in technical developments of all sorts. I listened with great interest to the maiden speech of the noble Lord, Lord Wynne-Jones, and I should like to tell him how much I enjoyed his speech. I am not going to follow the noble Lord, Lord Wynne-Jones, in referring to brassieres and other "spin-offs". I am merely going to mention—because they are well known to all of us—the unceasing search for stronger and lighter metals, for more powerful and even lighter engines, for miniaturisation of electronic equipment of all sorts—the list is endless. This industry has done a development job which cannot be measured in any precise terms. For example, only recently I read that from the need to air-condition and pressurise high-flying aircraft has been developed a hyperbaric medical operating chamber which I understand, and I am sure, will be of great use to medicine and surgery. I think that is a most valuable bit of "spin-off".

It is very easy, my Lords, when one is talking or thinking about the aircraft industry, to get the impression that it is concerned only with TSR 2s, Concords and all the other sophisticated aircraft we have heard about to-night. It is so easy to get the impression that this important industry is concerned only with producing fighting aircraft, defensive aircraft and a few high-speed sophisticated aircraft, to fly people about the world in incredibly short spaces of time. But, of course, this is not so. The importance of the aircraft industry to the life and well-being of the people of this country goes far beyond that. It has played, is playing, and must continue to play, a most important part in every sphere of technological advance.

"Technology" is a word of which this Government are very fond. They have a Ministry of Technology, and I gather that the Minister is at last available to provide answers in another place on his Ministry. But what is the present state of this important aircraft industry? There is no doubt in my mind, and there is doubt, I think, in precious few minds on this side of the House, that at the moment its morale is at the lowest ebb ever. It has lost confidence in itself and, even worse, the confidence of potential customers in world markets. The American aircraft industry must have been patting itself on the back over the last few weeks, and in no mood to co-operate (if they ever were, which I doubt) with their one-time most dangerous competitor, now discredited and denigrated by its own Government. One noble Lord, speaking about the American aircraft industry, said that their salesmen were tough. They are tough. In my paper this morning there is a photograph of a C 130 at Northolt yesterday, with a row of American Air Force officers in front of it. It was a special demonstration, and it was extremely prompt advertising, was it not, for the C 130?

What is the reason for this disastrous situation? Without any doubt it is simply the first fruits of the famous, or infamous, Hundred Days of so-called dynamic and purposeful government. The Government have been stumbling and fumbling through the Corridors of Power, aided by inept and ill-timed statements. I do not know whether they have been aided or hindered by many so-called inspired statements or leaks. Maybe their aim has been disconcerted by the sounds of a discordant Hungarian Rhapsody rolling through the Corridors of Power—I do not know. All I do know is that they have largely destroyed international confidence in our economy, and particularly in our aircraft industry.

I readily concede that any Government on taking office have the right, nay, the duty, to review their predecessor's policy in many matters including, of course, the aircraft industry. It is not this I am criticising: it was their duty to do it. It is the way they have done it that I feel so critical about—and it has had disastrous results to the industry. Earlier this evening two right reverend Prelates spoke in the debate, and I listened to part of both their speeches. They were on a subject which I do not intend to deal with at any length, but it is really summed up to-day as the subject of industrial relations. If the Government had to take these decisions—and let us assume that they were right to take the decisions they have taken—they should have realised earlier that this was really a problem of human relations. They have made the industry really upset. We do not have thousands of men marching up here to Westminster, having taken the day off and lost money, and paying for special trains, if the industry is not really upset.

What of the R.A.F. in all this? Do these matters go far deeper than purely commercial considerations? What quicker way is there of undermining the morale of a fighting Service than by casting doubts on the organisation which designs and produces the weapons with which it has to fight? I have a great friend who is a very distinguished retired Air Chief Marshal, and he told me—and I believe him because he has had plenty of experience and should know—that fighting in the air is such a personal and individual business that it is doubly important that the young men who have to fly and fight in these machines should have complete confidence; and I do not think that any noble Lord in this House would disagree with that.

LORD SHEPHERD

My Lords, the noble Lord would obviously agree with my noble friend Lord Morris of Kenwood, an ex-fighter pilot.

LORD AMPTHILL

I agree if he said what I have just said. I do not remember his talking about confidence.

LORD SHEPHERD

Confidence in his aircraft.

LORD AMPTHILL

The airman has to have confidence in his aircraft. Nobody can disagree with that. My Air Chief Marshal friend went on to say that the airman does not have quite the same advantage of collective morale as does the sailor or the soldier: the airman is so dependent on himself and on his weapon. I mention this because, except for the noble Lord opposite who is a fighter pilot—and I am very glad he spoke—there has been very little talk about the Royal Air Force and their feelings in this matter, and I thought it was right to bring this in. But the question we all face now is this: How can we best and most quickly restore confidence in this great industry? It is vital to do so, not only from the point of view of the R.A.F. and of commercial users, but to prevent the industry from losing its best men. Dragging our feet in this matter of aircraft development, even for a short time, will rapidly lose us all our men of value, and will reduce us to a fifth-rate or lower air Power.

I have made a lot of criticisms, and I should like to say something constructive, but it is very difficult for a Back Bencher like myself. I have no background information or details, and it has been a long time since I was serving afloat and since I had to do with Service people. However, there are one or two suggestions that I should like to make. In the first place, I believe it to be essential to bring the Royal Air Force and the commercial air users in this country into the closest possible relationship with the industry—much closer than hitherto. Broadly speaking, I consider that the Royal Air Force and the commercial air users should be in the same relationship to the aircraft industry as the Royal Navy and the Merchant Navy are to the shipbuilding industry. In such a relationship I do not think there is any place for the Ministry of Aviation. The last Administration very nearly pushed the Ministry of Aviation under the carpet at the time they were reforming the Ministry of Defence, and, to be perfectly frank, I thought at the time it was a great pity they had not pushed it out of sight. I really do feel that the Ministry of Aviation in its present form is a fifth wheel in the coach, and is really a hindrance to the rapid development and procurement of aircraft, whether they be for military or for civil purposes, and I urge noble Lords opposite to look at that again.

The other thing I want to say is this. I know from the few Service people I have been able to speak to that the Royal Air Force have a very good operational requirements division of the Air Staff, and I am told that it is staffed by highly-qualified officers with plenty of experience. Nevertheless, I want to repeat a suggestion which I made in the last Defence debate—and again I urge noble Lords opposite to have a look at this. I think the Royal Air Force should seriously and very carefully consider having for themselves a Royal Corps of Aircraft Constructors on the same lines as the Royal Navy has the Royal Corps of Naval Constructors. There are only 200 men, I think, or 220 men, in the R.C.N.C, so there is not a large number of men involved in it; but if the Royal Air Force had a R.C.A.C. (as I shall call it for brevity) I think it might help them in the way that, down the years, the R.C.N.C. has proved its value time and time again to the Royal Navy.

My Lords, I do not know whether these suggestions are any good at all—it is not for me to say—but what I do say is that it is the duty of this Government to take whatever sleps they possibly can—"purposeful" steps: that is the word they are very fond of—to restore the confidence of all concerned in the aircraft industry so that it may rapidly reclaim the proud position it has held for so long as a world leader in that industry. I am sure that the Royal Air Force, with its well-known skill and courage, will undoubtedly continue to play its full part in support of our vital, world-wide maritime strategy, but I for one—and I expect they would, too—would prefer to "fly British" because British aircraft are the best, and we simply cannot entrust our honour, welfare and safety to the whims of the United States Government, and still less to the pressure groups of the American aircraft industry.

7.28 p.m.

VISCOUNT BRIDGEMAN

My Lords, during this debate we have heard praise and blame apportioned as people think fit; we have heard some very expert speeches on technical aircraft matters, and we have also touched on some of the lessons that will have to be learned by all concerned if situations like the present one are not to occur again. I intend, for only a moment or two at this time of night, to touch on one aspect of the lessons, and that is the need for a setup in Whitehall which will ensure that decisions are as easy to take as possible, and not as difficult. That point has been dealt with from time to time in this debate by my noble friends Lord Watkinson, Lord Ferrers and Lord Ampthill, and by the noble Lord, Lord Francis-Williams, who I am sorry to see has just left the Chamber.

I suppose there is no subject in Government in which the strain and the weight on responsible Ministers is so great as it is in this matter. There is the Defence aspect; there is the immense weight of money involved, and there is the need to distinguish between differing technical advice and to steer a way between the various kinds of hard-selling and hard-line stories which even the outsider knows the responsible Minister has to face.

The present position was laid down in the White Paper of July, 1963, when the Ministry of Defence was reorganised, and, as all noble Lords know, it was reorganised in such a way that the Ministry of Aviation retained a concurrent responsibility with the Ministry of Defence for dealing with the sort of matters we have been discussing this afternoon. There was, at that time, some doubt, as I think my noble friend Lord Ampthill said, whether this was a wise plan to continue. The doubt really came out in the White Paper; and I will read paragraph 76. It says: The reason for keeping the Ministry of Aviation in the picture was the heavy additional load, much outside the Defence sphere, which would have to be borne by a single Minister if the whole responsibility was to be transferred to him. That might have been thought so, although doubts were expressed at the time. Indeed, I myself expressed some doubts in this House.

But now I think one of the lessons to be learned, or one of the points to be looked at—to put it at the lowest—is to see whether that dual responsibility has not contributed in large measure, as I suggest it has, to what has appeared as indecision and vacillation, and all the other things of which critics of the late Government have accused them. I think there is bound to be what passes for indecision or vacillation if the Minister, or the Cabinet, or anybody else, are under an obligation to listen to advice put up by two sets of experts, each backed by subordinate experts and people who want to sell things. I believe that if the Minister of Aviation had not been in the picture, or, in other words, if those responsible had only one source of advice, many of the things complained of in some quarters would not have happened.

I do not think there is any need to say more. The problem is there, and I am certain that those responsible should look carefully to see whether a simplification of the set-up for reaching decisions on these matters cannot and should not be made. This is not a short-term matter. The organisation of Departments like the Ministries of Defence and of Aviation is surely a long-term and continuing thing; and if the Leader of the Opposition is to be associated with these studies this would seem to me to be a very appropriate matter to be discussed between him and the Prime Minister. There is the problem; and I do not think I can make it any clearer by addressing your Lordships any longer.

7.33 p.m.

VISCOUNT DILHORNE

My Lords, my noble friend who has just sat down has raised a question of great interest and, indeed, importance. I myself would doubt whether delays that have occurred in the past have been due to the existence of a Ministry of Aviation as well as a Ministry of Defence; and I will come back to that later, if I may. I think the problem goes deeper than that. I am not sure that one would always arrive at the right solution if, in fact, one provided for the Minister only one source of advice. This would place an even greater responsibility than now exists on the Civil Service; and the noble Lord, Lord Shackleton—and I am sorry to see that he is not here, although I am sure he will soon be back—might well say something about any reference being made to the advice received.

I am sure your Lordships will agree with me that the matter we have been discussing tonight is a subject of the first importance, and that we all owe a debt of gratitude to the noble Earl, Lord Gosford, for raising it. Speeches of the greatest interest have been made by those qualified to speak with great authority on these matters (my noble friend Lord Watkinson obviously falls into that category) and to their words serious attention ought to be paid by everyone, including members of Her Majesty's Government. I do not intend to take up your Lordships' time by referring in detail to every speech that has been made in the course of this debate—I do not think you would wish me to do so—but I should, in passing, like to pay a tribute to the speech made by my noble friend Lord Jellicoe, which covered a very wide field and which put the whole matter, as I thought, in perspective. I also thought that my noble friend Lord Ferrers raised points which the noble Lord, Lord Shepherd, may find some difficulty in dealing with to anyone's satisfaction.

LORD SHEPHERD

Not at all.

VISCOUNT DILHORNE

We shall see. Last, but not least, I should like to pay a special tribute to the speech of the noble Lord, Lord Wynne-Jones. It was a maiden speech and he, too, was one of those who spoke with great authority. I see that he has moved closer to the Front Bench. That is no doubt due to the excellence of his maiden speech, but it may have a more sinister aspect; it may be that the Leader of the House wants to keep him under closer control. He concluded his speech with the observation, based with all his authority behind it, that: "In this field nothing but the best will do." I think I have quoted his words precisely. As a result of the Government's decisions, the Government which he supports, one thing at least is clear: the R.A.F. are not going to get the best, but something less than the best, in the years to come.

I myself make no claim to speak on this subject with any particular authority, but I must say, having heard the greater part of this debate and having read the report of the debate in another place, that I find the Government's explanations lacking in clarity and extremely unconvincing. They differ remarkably. You have only to read the speeches of the Minister of Aviation, the Secretary of State for Defence and the noble Lord, Lord Shackleton, to see with what variation the case is put. I will say this: the noble Lord, Lord Shackleton, clearly did his best, and I should like to congratulate him on making a most skilful speech. Frankly, I had a great deal of sympathy with him, for I know what it is to hold a brief when the case is not a good one; and as counsel for the defence he was most skilful. But, to me at any rate, the verdict should be still one of "Guilty".

LORD SHACKLETON

My Lords, may I say to the noble Viscount that the only trouble was that he did not hear all of my speech.

VISCOUNT DILHORNE

I heard the beginning. Unfortunately, I had to fulfil a short engagement; but my noble friend gave me a full note of the parts I did not hear. I thought the parts I did not hear read just as unconvincingly, but as skilfully, as the parts I did hear. Perhaps the noble Lord, Lord Shepherd, will do better. No doubt he will try.

My Lords, at this late hour I want to keep my speech as short as possible, and I wish only to stress the points which I think it is really incumbent on the noble Lord to answer. Some of them have been raised already, and one in particular was asked of the noble Lord, Lord Shackleton; but so skilful was his advocacy that he never referred to it at all. I will mention them, not in order of importance but rather as they arose in this debate.

The first matter dealt with in his speech by my noble friend Lord Gosford was the question of exports. He made the point that we shall have to export far more just to pay for the planes that we buy, and that we shall lose or seriously damage our prospects of exporting aircraft as a result of the Government's decisions. I do not think that either proposition can really be disputed, and, as my noble friend Lord Watkinson pointed out, we cannot replace by other exports the benefit of the export of one aircraft sold for £1 million. It was only last week that we had an equally important debate on exports. The Government then invited us to give them a pat on the back for their initiative. Now we can see the picture more fully. The Government's initiative has been to strike a great blow at the export prospects of the export industry. And why?

The noble Lord, Lord Shackleton, put forward two reasons. He said that the cost of these aircraft would be concentrated in the 1970s. I hope it will be the case that this Government will not be in office then. The second was what he called dilatoriness. It is to be noted that the noble Lord put the cost in the 1970s first, and he made a not unexpected effort to create an alibi by putting the blame on the previous Conservative Government. There can be no mistake about it—the responsibility for these cancellations rests on this Government, and on this Government alone.

The task of the aircraft industry, so far as Defence requirements are concerned, is solely to supply what the Services ask for. The Services say what they want and the industry has to try to meet their requirements. I stress this because one of the main criticisms advanced by the Minister of Aviation in relation to the three projects which have been cancelled was, to use his own words, that "they are geared to the British market almost exclusively". If that be the fact, it should be made clear that the responsibility for that does not rest with the aircraft industry at all. Their job is to produce what the Services want, and it is not their fault if there is only a British market for what they do produce. Our world-wide commitment dictate our Defence requirements, and few other nations have such commitments; so I do not myself find it astonishing that the aircraft which are wanted by the Royal Air Force were, to repeat the Minister's words "geared to the British market almost exclusively", and I do not find that at all a convincing reason for the cancellations. It must be a most difficult task to assess our requirements over the years ahead and to say what we shall be wanting in the 1970s, because that must depend on the assessment—I did not catch what the noble Earl the Leader of the House said.

THE LORD PRIVY SEAL (THE EARL OF LONGFORD)

My Lords, I only remarked sotto voce, but perhaps I should not have done, that the noble Viscount the Leader of the Opposition was a very skilful debater. I hope that he will not be offended.

VISCOUNT DILHORNE

My Lords, I am glad that I asked the noble Earl to repeat that, and I thank him for the compliment. I am trying to put this matter as clearly as I can. I may not be making it any easier for the noble Lord, Lord Shepherd, but that is not my objective.

I was saying, when I invited the interruption and secured a compliment—which was very surprising—that it must be extremely difficult to assess what our world-wide commitments are likely to be many years ahead and also to assess what are likely to be the requirements for aircraft wanted in those years. And I am not in the least surprised that it takes a considerable time before the experts on these subjects can reach a conclusion (to use a colloquialism) about which horse to put their money on. I think that that is much more likely to be the reason for any delay that occurs in drawing up a specification, and in making a decision as to what will be wanted, than the fact that perhaps more than one source of advice for members of the Government is concerned. I think that it takes so long to produce sophisticated aircraft, that assessment has to be made many years ahead.

There can be no doubt that until very recently the aircraft P 1154 and HS 681 were what the Services said—and, I gather, said most emphatically—they wanted. I do not think that that can be disputed. They produced specifications for these aircraft, and nothing less would do. The time-scales involved were known, and until the present Government came into power no less sophisticated aircraft were acceptable. The C 130, which we are now to have, was rejected as completely unsuitable for operational requirements. With regard to P 1154, of course, it was known that the time-scale presented a difficulty, but the view was taken that the combination of vertical take-off and supersonic flight was so essential that they must insist on this project going forward. Now it is cancelled.

At the beginning of his speech in another place, the Secretary of State for Defence said this: I hope that no one on either side will deny that the first responsibility of Her Majesty's Government in military aviation is to see that our forces have the weapons they need to fulfil the tasks which we give them and have them when they need them."—[OFFICIAL REPORT, Commons, Vol. 706 (No. 53), col. 323.] No one will quarrel with that statement. It correctly expresses their first responsibility. Bearing that in mind, what is the reason for this sudden reversal of policy in this most important field? I have read all that has been said by Ministers on this question, and despite all the efforts to justify the Government's decision, I do not think that their reasons are clear or convincing, and I fear that they have been, certainly in one respect, much less than frank. I hope that when he comes to reply, the noble Lord, Lord Shepherd, will be able to deal both clearly and frankly with the matter and tell us what the reasons were.

Can it be said that the estimate of our likely commitments in the future have been altered? If so, we should have been told. Are the operational rôles our aircraft might have to undertake significantly different from those it was thought that they might have to undertake only a few months ago? If so, again we should have been told. But, so far. that has not been suggested. So I assume that they remain the same. If so, we are now faced with the position that, with no change in our estimated commitments, or in the operational rôles of our aircraft in the future, we are told, with all the authority of the Government, that the aircraft which only a few months ago were thought to be essential so that our forces (to quote the Secretary of State again) have the weapons they need to fulfil the tasks which we give them are no longer necessary. Instead, because there is a gap, to which the noble Lord, Lord Shackleton, drew attention, the R.A.F. are to get planes of inferior capacity and inferior capabilities, and will have to keep those planes throughout the years to come. They are not to get the superior planes which the Service wanted. Because of the gap, these cancellations are going to take place—and they are permanent cancellations. It seems to me most extraordinary.

Was anything said about this when the Prime Minister was in Washington? Was any deal discussed then? Ever since his return there have been rumours of a large deal to "go American". And this, of course, is what has happened. Why? Is it just because of expense? Of course these are very expensive aircraft; they were bound to be. But if the country were told frankly that these aircraft were regarded as essential—and they were so regarded only a few months ago—and that the choice lay between incurring the expense involved and getting something which, though cheaper, was not adequate, I myself have no doubt whatever what the country's answer would be.

But we are now told that aircraft with lesser capabilities and less expensive will suffice. If an arbitrary ceiling had been imposed on expensive aircraft, I could well understand the view being taken that that ruled out any possibility of getting the aircraft which, in the view of the Services, are really wanted and. that the only alternative was to get as many cheaper, less satisfactory and less sophisticated aircraft as could be secured. My noble friend Lord Jellicoe posed the question with regard to the possible limit with reference to the £2,000 million; and I hope that the noble Lord, Lord Shepherd, will say something about that. If that was done, and if such a ceiling was imposed, then the matter becomes comprehensible, though not justifiable.

A great deal was said by the noble Lord, Lord Shackleton, about the expense of the P 1154 and the HS 681. When the decision was made to cancel the HS 681 was any effort made to find out whether the British aircraft industry could provide an aircraft of a lower specification? That was the question asked by my noble friend Lord Jellicoe, to which the noble Lord, Lord Shackleton, made no reply.

LORD SHACKLETON

Would the noble Viscount like me to reply to this?

VISCOUNT DILHORNE

I should be content if this were—

LORD SHACKLETON

I could not answer every question in an hour's speech. That is all.

VISCOUNT DILHORNE

I thought that this was one of the questions which the noble Lord might have regarded as of great importance. But I shall be content to have the answer from the noble Lord, Lord Shepherd. I think perhaps the noble Lord had better hear what I have to say on this before he tries to answer.

I was dealing with the HS 681, and I was asking the question: was the British aircraft industry given any real chance to supply such aircraft? It may be very surprising, but my information is that the British aircraft industry was not. When it came to a discussion of cancellation of the HS 681, I am informed that the Government were asked by the company whether the company could not be given a chance to provide a cheaper aircraft, and the company put in a fixed price tender for such an aircraft, only to be told that the Government were already committed to the American C 130. It goes into considerable detail. I am told that the Government said that if the company could come within 25 per cent. of the American time and price-scale the Government would seriously consider it. But when the fixed price tender was put in for an aircraft which is thought—it may be rightly or wrongly—to be superior to the C 130, they were told that the Government were already committed.

LORD SHACKLETON

My Lords, since it is difficult for my noble friend Lord Shepherd, who was not involved, to do so, I will answer this specific point. It did not come in either the price or the time scale. I may say that there were good reasons for believing that it would not, because it would involve a degree of research and development. There were grounds, also, for believing that it would not have met the operational need.

VISCOUNT DILHORNE

I am interested to see that the noble Lord has this matter so fresh in his mind at the moment. But he has not denied that, when the company tendered, what they were told was that the Government were already committed to buying an American aircraft, the C 130. I must say that I think it absolutely astonishing that Her Majesty's Government—it is true that they have not been there so long—when they decided that the HS 681 was too sophisticated and too expensive an aircraft and would be produced too late for the requirements of the Forces, did not make any effort at all of their own initiative—and I stress that—to find out whether the British aircraft industry could supply one which would meet their requirements. Why was that? It seems to me most astonishing. The fact that they did not do so seems to me to lend some support to the rumours that something was said about this, some arrangement was made, when the Prime Minister was in Washington. It is an astonishing story.

May we be told now when the Government were first committed to buying American? They were asked this question at the outset of the debate in another place on February 9. They concealed the fact—it can hardly have been inadvertently—that the Secretary of State had signed (and I use his word) an arrangement the day before to secure an American aircraft. Was that arrangement made in implementation of an arrangement made by the Prime Minister in Washington?

THE EARL OF LONGFORD

My Lords, perhaps I may interrupt the noble and learned Viscount. As a member of the Cabinet, I can assure noble Lords opposite and anyone else interested that the Cabinet were completely free to discuss the question on its merits without any commitment made by the Prime Minister in America.

VISCOUNT DILHORNE

I am grateful to the noble Earl, because I think it is probably useful that we should get that cleared up. But the question still remains to be answered: why was no effort made to secure aircraft of a lower specification in place of the HS 681 at an earlier time before the Government had decided finally to cancel the HS681?

I now turn to other matters—and I do not want to take too long. I do not think anyone can dispute that the damage done to the aircraft industry, as a whole, by this is very great. Design teams will be broken up. The possibility of getting back at the top of the league for manufacturing aircraft will at least be imperilled, if not destroyed. Many people, I fear, will lose their employment—it may be necessary. I hope that when the next Election comes they will remember what they were told at the last Election. I have here an Election pamphlet, issued by the Labour Party, which contains the words: Aircraft workers. Your future is more secure with Labour". And, secondly, the words: Reverse the Tory policy of increasing dependence on foreign supplies. Of one thing I am sure, and it is that this country will not accept that the defence of its interests must depend on the provision of foreign aircraft.

I am not saying that it is always wrong to buy defence equipment from abroad—no one would say that. But what is surely unacceptable is that we should become wholly, or almost wholly, dependent on foreign countries for the provision of weapons for our defence. And yet, as a result of what has now been done, this may well be the consequence; and with the cancellation of these projects, projects of the most sophisticated and technical character, we are abandoning our position as leaders in this technological field. The effect of the civil aviation side has been fully deployed already in this debate. Reference has been made to the Concord, and I shall not repeat it. I shall listen with interest to what the noble Lord has to say in justification—if he can justify them—of the Government's decisions.

8.1 p.m.

LORD SHEPHERD

My Lords, I do not think there is any doubt that we have had, as is customary on the aircraft industry, a very interesting debate. I echo all the thanks that have been made to the noble Earl for initiating this debate. Apart from the speeches from the well-tried Members—those that we always expect to see on these occasions—we can now welcome the noble Lord, Lord Wynne-Jones, distinguished in chemistry. We on this side of the House welcome his support, and I am quite certain the whole House will join with us in looking forward to the next occasion when he makes a contribution to our debates. I should also like to express thanks to my noble friend Lord Morris of Kenwood. It is not often that we have a recent fighter-pilot taking part in our deliberations. I know he came with great difficulty, and I am sure the House appreciated very much what he had to say. I have also had regrets for not being now present, apart from those expressed by my noble friend, from the noble Lord. Lord Merrivale, from my noble friend Lord Francis-Williams, and from the two right reverend Prelates, who spoke most movingly on the problems of redundancy.

The Government have welcomed this debate. It gives an opportunity for Ministers, perhaps, in a cool and calm atmosphere, to deploy an argument, and even noble Lords opposite will accept that this is a very difficult exposition. It is involved, and one of the difficulties—and I am sure the noble Earl, Lord Jellicoe, himself experienced it—is that some piece of material that would make the case for you may come under the security ban and you are denied the opportunity of using it. Therefore one has to be very careful in the way one approaches this subject.

I have wondered, in the course of the debate, how best I could reply to it. I should like to remind the House of the circumstances that surrounded the Government examinations and decisions that were finally arrived at on the aircraft industry; then try to answer a number of the points, some of which were underlined by the noble Viscount the Deputy Leader of the Opposition, and then in a few words endeavour to put forward how the Government see the future of the aircraft industry.

I think all will accept that you cannot look at the aircraft industry in isolation. It is part and parcel of our industrial production; it absorbs manpower; it absorbs national wealth; it absorbs Government finance and, as we have heard, makes a contribution to our export industry. But I feel bound to remind noble Lords of the gravity of the economic situation, in particular the balance-of-payments position, and I would, if I may, commend the speech which was made by the noble Viscount, Lord Watkinson, yesterday (I think it was) in regard to our export effort. There are some people who would like to believe that the economic difficulties of this country are short term; that they arose from the date October 16. Noble Lords opposite deploy this argument for political reasons. But they are intelligent men, they are men who read and study facts, and I am quite sure that in their own heart of hearts they recognise the deep-rooted causes of this country's difficulties, in particular in regard to the balance of payments.

Last Wednesday—and I think it was the noble Earl, Lord Gosford, who referred to the debate—there was a little jubilation from noble Lords opposite on the balance-of-payments figures for December. They said—and they must admit that the figures were attractive to everyone's eye—"This is what we said would happen." We on this side of the House were not prepared to accept one month's figures as a sign of a major recovery. We now have the January figures. They may be showing a good trend, an encouraging trend, but the gap still shows the extent to which this country, its industry, and its workers, have to fight against some of the toughest salesmen in the world—and not only of the United States. They are tough, but so are the Dutch, the Germans, the French and the Belgians. We have got to fight. This is a long-term fight.

It would not be out of place if I reminded your Lordships again of the importance of this country's economy to our Defence expenditure. First of all, let us recall that the total expenditure of the public sector, plus the investment of the nationalised industries, is now taking some 40 per cent. of our national wealth. Of all public expenditure, Defence, on the figures of the last financial year—that is. the year 1963-64—takes about 17 per cent. This means that of our total national resources about 7 per cent. is now being devoted to the Defence effort. This is a formidable burden, by any standards; it is a burden that no other country, except the United States, has been prepared to undertake. It is the view of Her Majesty's Government that the proportion of our gross national product taken by Defence must, in the years ahead, be either held or reduced. It must be held or reduced partly because the burden is too great.

LORD ST. OSWALD

My Lords, the noble Lord has mentioned the United States as being the only other nation which spends a comparable proportion on its defence. He has not mentioned Soviet Russia. Does he know the figure for Soviet Russia?

LORD SHEPHERD

I think in most of these things we usually refer to our Allies and the Western World.

EARL JELLICOE

It is relevant.

LORD SHEPHERD

It is; because this represents a heavy demand on some of our scarcest and most valuable resources. Thus, of some 140,000 qualified scientists and technologists engaged on work in this country, other than in education, one-seventh are now occupied on Defence work of one kind or another. Of the 46,000 who are engaged in research and development, no less than one-fifth are employed on Defence.

There can be no doubt that the employment in Defence work of so high a proportion of our qualified scientific and technological manpower must impede developments which are desirable in the economic interests of this country. This is not to say that such Defence work does not sometimes have civil application, or stimulate technological advance in other fields. These side advantages do occur, and are welcome; but this is not necessarily the only way, or the best way, of securing such advances, and it would be of greater benefit to the economy if the resources in question could be deployed so as to achieve those aims by working directly towards them.

Defence expenditure has contributed to the general overstrain on the economy and pre-empted resources which need to be released for other economically justified purposes. When to this is added the important fact that there is a large element in our Defence expenditure which, because it falls overseas, bears directly on our balance of payments, it will be seen that there is a strong case indeed for bringing about a reduction or holding in check the burden of Defence that is now imposed upon it.

LORD ST. OSWALD

By buying American airplanes.

LORD SHEPHERD

Perhaps the noble Lord will be patient. I know that I am fair game; I have sat on the Bench opposite and made the life of the Government difficult. But I am prepared to take it only so long as we do not delay the House too long.

The House will remember that when I moved the Second Reading of the Finance Bill I stated that the Government were going to review all aspects of Government expenditure. That is what we are now doing. It is necessary, because it became utterly clear to us that the commitments which the previous Administration had undertaken would have meant that they would have exceeded our capabilities unless this country was able to obtain a 4 per cent. growth. As noble Lords know, this rate of growth has been achieved, I believe, only twice in thirteen years, and it would seem to us unlikely to be achieved in the early days.

The noble Viscount, Lord Dilhome, asked me about this £2,000 million. As he knows, the last provision in the Budget for Defence was slightly short of that figure—it looked better for the 1964 Election year. But the noble Viscount knows that it is unusual, and I should have thought undesirable, to have projected in this House or in another place what the figure is likely to be, as we see it, for the year 1969-70.

VISCOUNT DILHORNE

Perhaps I did not make myself clear to the noble Lord. I was asking whether a ceiling had been imposed. The figure of £2,000 million had been reported and rumoured in the Press. I referred to my noble friend's comment on it. I was not asking for a specific figure; I was asking whether a ceiling had been imposed.

LORD SHEPHERD

That is fair enough. The figure to which the noble Viscount has referred is the type of figure we should hope to aim for. That is what we should like to see, and I am quite certain that most of us, in our heart of hearts, would like to see a smaller figure. But certainly we are going to try to keep as close as possible to that figure which the noble Viscount has mentioned, although none of us can know what will be the atmosphere politically, or even whether there is a war in two or three years' time.

EARL JELLICOE

My Lords, I am sorry to interrupt the noble Lord as he has already been interrupted several times, but I should like to be quite clear on this point. We are talking in terms of 1969-70, are we not?

LORD SHEPHERD

Yes. The point, as I understand it, is that my noble friend was challenged in his reference to the fact that we believe that the Budget, if it were projected forward into the year 1969-70, would be beyond this 7 per cent. share of the gross national product. Obviously we cannot give that figure. In company with my noble friend Lord Shackleton, I have seen that figure, and I give your Lordships my word in this House that the figure would very much exceed that 7 per cent. share of the gross national product. I think the reason, as my noble friend said, is due to the fact that we had these various aircraft coming forward and they would be grouped at the end of this particular decade.

Apart from this particular factor (and I think there is something to be said in what the noble Earl, Lord Gosford, mentioned in regard to exports), it does not seem a great deal that we did only 2½ per cent.; but it amounted to £100 million or so. Certainly we should like to see the figure increased, and we hope that with the BAC 111 it will be.

But we must equally take into account the heavy demands on manpower, and it is interesting that the Defence budget is absorbing 25 per cent. of the national research and development expenditure of this country: 25 per cent. of what we spend in research and development in all our industries is confined to the Defence industry. In regard to mathematicians, the figure I have is that there are 500 mathematicians in the Defence industry out of the 2,000 in the country.

We took the view, as my noble friend Lord Shackleton said, that, apart from the escalating costs of these aircraft, we face a very heavy burden at the end of the decade. We not only had to take into account the TRS 2, the P 1154 and the HS 681, but we had also to take into account the need for the replacement of the Shackleton. The figure I saw in another place is that this would represent, over a decade, a sum of £1,700 million. If that were bunched at the latter end of the 1960s, one can visualise the impact there would be on the Defence budget. The Government took the view that this was an intolerable position. As my noble friend said, the previous Government did not recognise, or did not appear to recognise, that the essence of the planning of major re-equipment is that it should be phased in relation to one another; that the burden should be a steady one, and that it should not be allowed to escalate and group in a particular period.

My Lords, a good deal of criticism has been made of the Government for the purchase of American aircraft. I am sure that noble Lords opposite, Lord St. Oswald, Lord Gosford and others, will know that my noble friend and I, when we were on the other side of the House, repeatedly complained that after thirteen years of Conservative rule we were still dependent on having to purchase aircraft overseas. We complained, I remember—at least I did—of the Phantom for the Royal Navy and the purchase of helicopters from the United States and Italy; and of course the noble Earl gave the usual Ministerial reply. Now we know a great deal of the truth.

There has been a lot of criticism about the HS 681. As my noble friend said, the Beverley came into service in 1955. It is proposed, or it was proposed, that it would be phased out in 1966. The Hastings is more a vintage aircraft; it came into service in 1946. I suppose most aircraft brought in about that time would be expected to retire fairly shortly. The operational requirement of this aircraft, the HS 681, was placed in 1961 for the aircraft to come into service round about 1966-67. The full development order of that aircraft was not placed until February, 1964. This is an advanced, exciting aircraft. The case of every noble Lord opposite was that this aircraft was a break-through. Do you believe that an order placed in February, 1964, for development—not for production, but for development—could mean that the aircraft could be in service at a reasonable time to replace the Beverley and the Hastings? As we know to-day, we should not expect to see this aircraft, if it were proceeded with, in service before 1971-72, and possibly 1973. I wonder whether the noble Earl would rise and say whether that gap, in his view, was a gap that he would have regarded as acceptable when he was First Lord of the Admiralty.

EARL JELLICOE

My Lords, I should like to reply with another question, and that is, could the noble Lord answer the question I posed: Why, if there was this gap—and I certainly would not gladly have accepted any such gap had it fallen within my own responsibility—could it not have been filled by an interim purchase of Argosies?

LORD SHEPHERD

The noble Earl— and here I do not want to get into the realms of security—is well aware of the situation operationally, shall we say in Singapore, and the need for fairly long flights. The Argosy is a very good aircraft, but it would not come up to the HS 681 or the requirement of the Royal Air Force.

EARL JELLICOE

But that, with respect, was not the question put by me. We are here talking of the Beverley replacement, which we all agree could be met only by the HS 681.

LORD SHEPHERD

In any case, if we had used Argosies to fill the gap, that would have been a great deal more added expenditure. But let us move forward from the HS 681 and look at the story of the P 1154. This is a supersonic fighter, V.T.O.L., revolutionary. It was to replace the Hunter, which, as my noble friend said, is outclassed by the aircraft held by such countries as Indonesia and Iraq. According to my information, it should have gone out of service about 1968-69. In regard to the P 1154, which was to be its replacement, the requirement was sent out in 1960; contract study was ordered in November, 1962; authorisation for the more advanced research and development was made in February, 1964. Is there anyone here who really believes that in four years the aircraft industry, with all its resources, could have brought that aircraft into service to replace the Hunters? This is the reason why we have said, time and time again, that the reason why the Royal Air Force will not have this aircraft as its Chiefs of Staff originally wanted was not the failure of the aircraft industry—and I hope the noble Viscount, Lord Watkinson, will bear with this—but the failure of the previous Government to place the order.

LORD ST. OSWALD

My Lords, I really must question the noble Lord on the Tightness of what he is saying. I was never directly involved in these matters, but my understanding at the time was, and remains to-day, that there was a choice between having a less advanced aeroplane in a short time or a highly advanced aeroplane by waiting slightly longer, and the preference of Ministers as well as Service chiefs was to wait slightly longer in order to have the better and far superior plane.

LORD SHEPHERD

I am not quite sure what the noble Lord is getting at. I am trying to pin, as I believe I have effectively pinned, on the Benches opposite the reason why the Royal Air Force cannot have the aircraft that noble Lords opposite would like them to have. The failure lies on the Benches opposite.

VISCOUNT DILHORNE

My Lords, the noble Lord really cannot get away with that. The reason why the Air Force will never get this plane is because the Government has decided to cancel the orders. You may have filled a gap or not filled a gap as the case may be, but the present Government have decided, as a matter of policy, that the Air Force will never have this very sophisticated plane.

LORD SHEPHERD

Let us proceed in this slight examination of the noble Lords opposite. The noble Earl, Lord Jellicoe, when he was First Lord of the Admiralty—or I think he may have been then Minister of Defence for the Royal Navy—managed to get authorisation for the buying of the Phantom in place of the Sea Vixen. And yet the Sea Vixen came into service five years later than the Hunter. I do not like to pin the noble Earl down, but since I believe he is the main spokesman on Defence for the Opposition in this House, would he accept that a gap from 1968 to 1973 of a fighter aircraft, of a combat aircraft, is a tolerable one? Would he have accepted it for the Navy? Of course he did not. He was able to get the Phantom. We have heard a great deal from noble Lords opposite about the cancellation of these aircraft.

EARL JELLTCOE

My Lords, since the noble Lord half invited me to get to my feet, I should wish to do so. The point is that with the Sea Vixen replacement there was no alternative save the Phantom—none whatsoever. There is a perfectly good alternative in the case of the Hunter—the P 1154.

LORD SHEPHERD

My Lords, is the noble Earl accepting that this gap was tolerable, or would have been tolerable, to the Royal Navy? I do not think he would. For that reason, when the new Government took office, apart from the cost aspect, when we saw this gap we took the view that it was intolerable in the interests of Defence and our commitments overseas. That was the reason why we had to cancel these two particular aircraft.

VISCOUNT WATKINSON

My Lords, may I interrupt? I do not want to get into this act, because this is all after my time; but I do hope that the noble Lord will remember that we had a few Lightnings about the place.

LORD SHEPHERD

My Lords, the noble Viscount is slightly out of date. The Lightning is not called upon to perform the same functions as the Hunter or the P 1154. Therefore, it is irrelevant to the present argument.

VISCOUNT WATKINSON

No, not entirely.

LORD SHEPHERD

However, I think we have at least laid that particular bogey as to why the Government were forced to take this action. There was no joy on this side of the House, or anywhere, because we were forced to go to the United States. In spite of what noble Lords opposite would like to say, we are not buying broken down, obsolete aircraft, as I heard suggested. In the case of the C 130E we are buving an aircraft that is now coming into service with the United States Air Force. We are able to buy it, and to obtain spares and support, as though we were members of the United States Air Force, on the same terms. In reply to the noble Lord, Lord Byers, this is not a case of having a bargain deal; we pay the right price.

LORD BYERS

My Lords, is the noble Lord not afraid that that is a mistake?

LORD SHEPHERD

When I look at the value of this aircraft and at the alternatives, I can say in reply to those noble Lords who have asked, "Why could we not go in for some of the other English alternatives?" that, apart from the price, there was the delivery factor. In the case of the 802 this would have been nearly as bad as having to wait for the HS 681, because it would have been a relatively new aircraft.

LORD BYERS

My Lords, has the noble Lord, on behalf of the Government, examined this idea of having some form of lease-lend for a short period?

LORD SHEPHERD

My Lords, I must admit that I personally have not considered it. But no doubt it has been considered, and if there was something in it we should have done something about it, because it sounds attractive.

LORD BYERS

There is still time.

LORD SHEPHERD

But in the case of the Belfast, let me say that most of us on this side of the House have been particularly concerned about the position of Shorts of Belfast. We should have liked to see something done, but the military advisers—I use this term only in the sense that one must always in military and technical matters rely on their judgment—have reluctantly advised that that aircraft would not meet their commitments, their needs, as a tactical transport aircraft. I think it is a matter of regret. The House may know that we have had a mission—if that is the right phrase—out in Belfast, to examine the possibilities of other types of development of industry in that area. It Is too soon to be able to make a statement, but I hope that one will be made shortly.

To turn to the points dealing with redundancy, I hate the word "redun- dancy" wherever it may occur, whether in the aircraft industry, the mines or the railways. But, all the same, I have been rather surprised that certain members of the Party opposite have sought to make political capital out of redundancy and the extent to which it is due to the Government's decision. The advice I have received is that it is unlikely that there will be massive redundancy in the aircraft industry. I have seen some figures in regard to Hawkers in particular (who I think were mentioned by the noble Earl, Lord Gosford) that by 1967 they may well be employing more men than they are to-day.

EARL JELLICOE

My Lords, I wonder whether I might interrupt the noble Lord. I think he has misunderstood the point. Incidentally, I was not aware that anybody on this side of the House had sought to make political capital out of this issue. This is complete news to me, but I will carefully read Hansard tomorrow to see what it says. But the point I was making, and which I think other noble Lords were making, is this. We welcome what the noble Lord has said about the level of employment forecast in the aircraft industry, but if all the major projects are to go, as seems to be possible—the TSR 2 is in suspension—there will be nothing to encourage the energies and the brains of the industry, the younger executives, the design staff, and the drawing office staff.

LORD SHEPHERD

My Lords, I am glad that the noble Earl welcomes what I said. When I referred to members of the Party opposite, I was not referring to noble Lords. The political capital I had in mind was the television statement made just prior to the small "General Election" by Mr. Du Cann, who is now, I believe, the Chairman of the Conservative Party.

The noble Earl referred, I think, to the drawing office staff. I have here an interesting "Stop Press" item from the Ministry of Labour, dated to-day, saying: Information has just been received that 230 drawing office staff will be receiving notice by lunch-time to-day. Immediately after lunch employment officers will attend the factory with details of about 400 vacancies in drawing offices within daily travelling distance of Coventry, and a considerably larger number farther afield. I do not think that there should be any feeling of disquiet about employment for these men in all the regions, except perhaps at Belfast. This has always been regarded as a special area, and special treatment will have to be devised for it. It is rather difficult to see that re-training is likely, because I think that most of the skilled men will be well absorbed into local industries of a similar type. But the Ministry of Labour are fully aware of the matter and, if it is found to be necessary, are ready to co-operate.

If I may make one plea in this matter, it is that if there are any companies that have likely redundancies, they should not put them into effect on Friday evening, with the pay packet. They should note the effects, and what the numbers of redundancies are likely to be, not only those arising out of the aircraft industry and the difficulties there, but from all types of industry. If the Ministry of Labour are informed at a fairly early stage, a great deal can be done to see that these men and women are found the right jobs, so relieving a great deal of anxiety.

I should now like to turn to the speech of the noble Viscount, Lord Watkinson. I thought he struck rather a dismal and despondent note. He more or less suggested that the cancellation of these three aircraft has struck a death blow at the aircraft industry.

VISCOUNT WATKINSON

I never said that.

LORD SHEPHERD

That was the impression one received. I am glad the noble Viscount does not believe that.

VISCOUNT WATKINSON

If the noble Lord is referring to me, perhaps I may refer to his impression of what I said. Certainly, if the Government are to go on down the road with all the threatened cancellations, they will have dealt a death blow to the British aircraft industry. If you meant that, then I said it.

LORD SHEPHERD

The aircraft industry has sustained many cancellations. I will not weary the House in going through the numbers quoted by the late Minister of Aviation, Mr. Amery. But the industry got over that. But we do not believe that the cancellation of these two aircraft will in any way affect export orders.

On the facts available we do not believe that the HS 681 had a ready or likely overseas market. As to the P 1154 there might have been a possibility. But when one looks at all the signs (I think this is generally now accepted in most parts of the House), where one has these sophisticated aircraft, the number of buyers is small, and grows smaller. But if a future is to be found for such an aircraft, it can be done only in co-operation with other countries. In the case of the P 1127, we are already having exercises and carrying out developments with a number of countries. We believe that there is some potential there. But we do not believe that the cancellation of the P 1154 will have cut off any possible orders. It may well be, having regard to the fact that these are two Hawker aircraft, that they might have an effect on some of their civil production. As we have already informed the House, we are placing an order for the P 1127, and a very formidable order for Comets. I am sorry the noble Earl, Lord Gosford, referred to it as "a sop".

THE EARL OF GOSFORD

My Lords, I did not want to interrupt the noble Lord, because I shall have a chance to discuss this point again in the Defence debate. I did not really mean a sop so much in the way the noble Lord thinks of it. I think of it as a sop in the way that this sort of project is not worthy: that it will not keep the aircraft company itself up to the mark.

LORD SHEPHERD

We shall have to wait and see.

There are a number of prospects—as has been announced in another place, and as my friend Lord Shackleton mentioned earlier—of further collaboration in what I should have thought were exciting aircraft. It may well be that we may not have to use the same number of design teams because we shall be dividing the effort with our Continental friends. But there is still a future. I would not accept that men who are at the moment aircraft design teams have not a contribution to make in other types of advanced industry. In fact, as I said earlier, we should welcome some transfers.

The noble Viscount, Lord Watkinson, spoke about American competition. Of course the American companies are very big and powerful. We experienced it some years ago in our difficulties in selling first-class British aircraft to some of our Commonwealth friends, particularly our friends in Australia. This is one of the facts of commercial life. To take aircraft like the BAC 111, the VC 10, and a number of other civil aircraft where there is a very good future, I would say to the noble Viscount (and I do not think I need really to say this to him as he is the head of an organisation which is doing so much in the development of exports) that Her Majesty's Government will do all they possibly can to aid and support our aircraft industry in selling their aircraft oveseas. Lord Watkinson will be aware of the effect in the shipbuilding industry of the credits announced some three or four weeks ago. They have already brought in orders of considerable value from Scandinavia, all due to the new type of credit. In regard to these companies who wish to sell their aircraft overseas, we will do our best to give them all possible support. If the noble Viscount has any connection with them and feels we can do anything for them—although they are pretty vocal industries and have a pretty powerful lobby—we should always be prepared to consider what could be done to help them.

I feel that I have been speaking for a long time and yet have not covered all the points, but it has been a long day. I should like to say that if there are any further points which need to be answered specifically I will see that noble Lords are comunicated with either to-morrow or the following day. I conclude by saying this. We as a Labour Government are in no way averse or opposed to industry, whether it is public or private, whether it is aircraft or any other.

If that industry has a part to play in the economic development of this country, and in the short term in our balance of payments, this Government will be active in their support of it. I do not think that in our situation to-day it helps in any way to try to distort the actions and attitudes of this Government. We can be attacked, we can be criticised: the Government are fair game. But distortion of the position of This Government, as from time to time occurs, neither reflects credit on the person who distorts, nor is it of service to his country.

8.47 p.m.

THE EARL OF GOSFORD

My Lords, I was very glad to hear the noble Lord's final remark, that the Government intend to help the aircraft industry in its exporting rô le. It is vital that its morale should be restored at the earliest possible moment and that its image abroad should also be restored. We have been sitting here for some six hours or so discussing this subject. It has been an interesting debate, and I do not intend to prolong it. I should like to thank all noble Lords who have taken part. It would be invidious to single out any particular speech, but I would add my congratulations to those expressed by other noble Lords to the noble Lord, Lord Wynne-Jones, upon his excellent speech. It is always a delight to hear an expert on his own subject, particularly if he can put it across, which the noble Lord certainly did. My Lords, I beg leave to withdraw the Motion.

Motion for Papers, by leave, withdrawn.