THE AIRCRAFT INDUSTRY

HL Deb 01 March 1966 vol 273 cc584-670

2.50 p.m.

EARL JELLICOE rose to call attention to the Report of the Committee of Inquiry into the Aircraft Industry (Cmnd. 2853); and to move for Papers. The noble Earl said: My Lords, it is now over a year since we last discussed the aircraft industry. That was on a Motion most ably introduced by that much-missed Member of your Lordships' House, the late Lord Gosford. Since then, a lot of water—some of it perhaps a little muddy—has flowed beneath the aviation bridge. It is right, therefore, that we should now have another look at the aircraft industry, more especially as the noble Lord, Lord Plowden, is now with us, both on paper and in person, and since the Government have told us, and rightly, that they wish to take the views of Parliament before they commit themselves to final decisions on the trickier parts of Plowden, if there are such tricky parts.

Let me first of all make my bow to the noble Lord. His Report has not been without its critics. To be frank, if I were a don and the noble Lord were one of my pupils, I should not be able to give him his usual alpha plus for this term's report. The deliberate omission of avionics is rather surprising. I think, also, he might have made a rather better fist of space. Nevertheless, any fair-minded man must think that this Report was produced in very difficult circumstances. His distinguished Committee was given very little time, and while the noble Lord, Lord Plowden, and his fellow practitioners were dissecting the aircraft industry, the Government surgeons were constantly popping in and carving up the victim. In any event, I believe this to be a valuable Report, and I am sure your Lordships will agree that, once again, the noble Lord has placed both Parliament and the country in his debt.

The main conclusions of Plowden are well and clearly set out at the end of his Report in paragraphs 520 and 526. I should like to say straight away that, with two-and-a-half reservations, I endorse those conclusions and the policies which flow from them. It is implicit in the Report that this country needs an aircraft industry. My minor qualification is that I think it is rather a pity that this view finds so muted an expression in the Report. Personally I prefer the rather more robust language of the new Minister of Aviation, whom we all welcome. In another place on February 1 Mr. Mulley said that the Government fully accept the case for this country having a substantial aircraft in-industry both military and civil, and that we intend to carry out policies designed to make that possible."—[OFFICIAL REPORT, Commons, Vol. 723 (No. 38), col. 892]

My second qualification—this is an unqualified one—is that I do not myself believe that the proposal that the Government should take a substantial financial share in the two main airframe groups will in any way help us to maintain a substantial and healthy aircraft industry. It seems to me that Mr. Aubrey Jones, in his powerful note of reservation, had the better of the argument here. My third qualification, again unqualified, is to the Committee's view that we should in future rely upon the United States for any really advanced weapons systems which we may need. I agree that this could well be so, but it might also be better for us to keep our options here more open. Provided that Europe is prepared to will the means, I cannot for the life of me believe that Western Europe has not the resources for even the bigger and more complicated projects.

That said, I would wholeheartedly endorse the Committee's plea for co-operation in Europe and with Europe. Furthermore, I entirely agree with the Committee, in their statement that The combined resources of English and French industries, marshalled in good time towards common objectives, offer a basis, probably the only basis, for maintaining a major aircraft industry in Europe through the 1970s. The key words here are "marshalled in good time". But in fact there is precious little time. I quoted just now Mr. Mulley's admirable sentiments about the need for a substantial British aircraft industry. The sentiments are fine. But sentiments alone will not sustain a British or European aircraft industry: we need also constructive policies and firm projects.

I do not wish unduly to weary the House with a Sears Roebuck category of projects, and I shall be saying something in a few moments about policies. But your Lordships will recall that while Plowden recommended that as soon as the Defence Review was out—and it is now out, after its rather tedious accouchement—the Government should take the industry fully into their confidence about their future military procurement plans. I trust that, since the Review is now out, the Government will in fact be taking the industry fully into their confidence, as Plowden has recommended. I trust, too, that they will be taking the country fully into their confidence. I grant that they have made a promising start. I believe that as a result of this White Paper we know more about military procurement than we have learned from some other White Papers, but we have still a good long way to go. To-day, for example, almost every schoolboy in the United States can learn more about military procurement from a glance at the American technical Press than can all but the most assiduous Members of Parliament here.

My concern here—and I think probably the industry's concern also—is not so much about production. Broadly speaking, the programme sketched in Part I of the White Paper should keep the production side of our aircraft industry reasonably stretched for some time to come. This is fairly difficult to judge precisely, without more information about the status of some of the projects which are, I hope, now moving beyond the development stage—I refer to the Marti-time Comet and the P 1127. Can the noble Lord tell us whether firm production orders have been placed for both these aircraft, and when the P 1127 is now due to come into service?

However, it is not production so much as development which should concern us when we are thinking of the aircraft industry as a whole at this stage. Three major military aircraft projects were axed by the Government. Although this may be the place, it is certainly not the time to argue the rights and wrongs of their decapitation. But the fact remains that thereby a substantial chunk of development was cut out of the industry, and unless sufficient and challenging development work is reinstated, the industry's design teams are bound to wither away and the hæmorrhage of their best blood will not be arrested. So when Plowden asks for the industry to be taken into the Government's confidence, I trust that the noble Lord can confirm that this applies to development just as much as it does to production plans.

I speak pretty well as a layman in these matters. However, as a layman, I can think of a wide range of military projects to which I assume the Government have been giving the closest attention during this fairly prolonged period of Defence Review incubation, and I hope the noble Lord can confirm that they are now prepared to discuss this range of projects, or something like it, with industry with a view to hatching out real aircraft. There is the next generation of military transport aircraft; there is the military helicopter force. One of Lord Plowden's recommendations was that, if we wished to retain a helicopter design capability in this country, it was desirable for the Government to decide, without delay, their future requirements for military helicopters. Vietnam has, once again, demonstrated—if any demonstration was needed—the vital part which the helicopter plays on and around the modern battlefield. Can the noble Lord tell us something about the Government's thinking on this matter?

These are, of course, the sort of projects which we could very well carry out by ourselves, if we are so minded and if we judge this to be right. Some of them, such as the medium helicopter replacement, are ones which it might be better—I have not any fixed view here—to carry out on a European basis. In any event, there are already, as your Lordships know, two very important military aircraft being developed in conjunction with the French at the present time. There is the Jaguar—the light strike and trainer aircraft. We know that it is being developed, but we do not know much else about it. Will it, in fact, have a Rolls-Royce engine, as I understand it may? When will it enter service? What sort of numbers will the Royal Air Force require, and is there a wider interest among our European partners in this aircraft?

We know still less about the proposed Anglo-French variable geometry aircraft. True, we have been told in the White Paper that both operationally and industrially, this constitutes the core of our long-term aircraft programme ". To our knowledge, we have been discussing this in one way or another with the French for at least two years, and if, in fact, it is as important as all that—and I grant that it is—I hope that some of the mystery surrounding this aircraft can be unwrapped. I hope, therefore, that the noble Lord who will be replying will be able to tell us that the specifications for this aircraft have now been defined and, I hope, agreed by the respective Air Staffs. At the very least, I hope that lie will be prepared to confirm that the Government recognise the need for making haste quickly in this field.

Whatever the Government may say, their decision to buy the F 111s from the United States has affected French confidence in Anglo-French co-operation. If we back out of the ELDO programme, about which there have been rumours, this confidence will receive a further jolt. So it is all the more important that we should allay, in every possible way, the French fears that we shall not put all possible weight behind this project. I would grant that the White Paper has some reassuring words to say, but what is now required are reassuring deeds and specific and signed inter-governmental agreements. Speed is also required, I would suggest, because I understand that both the American Air Force and the United States Navy have issued project studies for a light variable geometry fighter aircraft. If we do not get the Anglo-French project right, and if we are together not able to bring it in at the right moment, we may very well lose the considerable world market which exists for this type of aircraft, and find ourselves, worse still, once again tempted to shop for military aircraft across the Atlantic.

The Government are also coming to a critical period of decision, I would suggest, on a whole wide range of civilian aircraft. My own view is that we should probably continue to develop nationally the medium-size civilian aircraft. We are already doing pretty well with the BAC 111 and with the small Hawker-Siddeley executive aircraft, the Hawker-Siddeley 125. There will also, undoubtedly, be a very large market through the 1970s—I have heard it put as high as 1,000 aircraft—for the smaller 50-seater (or thereabouts) twin-jet aircraft. The successful introduction of this type of aircraft on world markets will, of course, call for very careful and good timing, and also some extremely skilled engineering. There is also, I believe, a good market for the smaller turbo-prop executive aircraft. Finally, as Lord Plowden has made clear, there is a lot of scope in the world market for light aircraft, which, in recent years at least, we have failed fully to exploit. There are designs existing here: for example, the Hawker-Siddeley 136, and the Handley Page Jetstream.

If and when the Government are satisfied that these designs, if put into production, stand a real chance in the export markets, and if the firms concerned are prepared to put down a sufficient amount of their own money, I hope that the noble Lord will be able to assure us that Government support for these two very promising projects will be forthcoming. By the same token, I should be glad to hear anything which noble Lords opposite may be able to tell us about the Government's plans for stimulating a larger British share in the world light aircraft market.

These may be in their way quite difficult decisions, but they are much less difficult than decisions facing us with the larger types of civil aircraft, where we need to base ourselves on a solid foundation of European co-operation. There are, of course, the supersonic transports, such as the Concord—and I hope that there will be no faltering over this. But there is also a need for us to define, and to define pretty quickly, our attitude over three other possibilities. Air travel is growing fast. I suppose that it is the most consistent growth industry in the world to-day, and this growth in the 1970's will call for large numbers of big subsonic aircraft, as well as for smaller numbers of supersonic aircraft. They are likely, as I see it, to fall into two main groups. First, there will be the big, probably four-engined, trans-oceanic passenger and freight aircraft, like the 747, designed by Boeing, or the DC 10, designed by Douglas. Then there will be the large, but not quite so large, regional aircraft like the air-bus.

I have had one estimate from a very well-placed authority which suggests that anything up to 950 of these great aircraft are likely to be produced in the Free World alone, by the end of the next decade. If that is so, the total spent on these aircraft will be of the order of £4,000 million. The question confronting us, and Europe, is whether we should decide to have a go for this market, or whether we should leave it to the Americans, and possibly the Russians. My own feeling, for a whole host of reasons, is that Europe should decide to opt in to this market. However, if we try to cover both bets—the bet on the great trans-oceanic subsonic aircraft, and the bet on the air-bus type of aircraft—I think we shall probably end by falling between both stools. I suspect, too, that this may be the Government's appreciation. If the noble Lord can confirm (I do not know whether he can) that the Government have decided not to back the super Super-VC 10, the so-called Superb, I trust all the more that we as a country, in co-operation with Europe, will do all we can to back a European air-bus venture.

I am sure that the attitude of the European airlines, above all that of B.E.A. and Air France, will be crucial here. It is my belief that both Air France and B.E.A. would like to fly a European airbus, if they are absolutely certain that there is going to be one and that it will be on time. And here the attitude of B.E.A. may be the deciding factor. They are faced, I gather, with an equipment gap. If B.E.A. are to remain competitive, they will need to order big new jet aircraft before the air-bus comes into service in the early 1970s. The choice here, as I understand it, lies between an American aircraft—the big Boeing 727–200, as it is called—and the larger Trident, the stretched Trident. It is also my understanding that if B.E.A. were to decide to order the Boeing, it would be extremely uneconomic for them to go back to British equipment in the future; and once one were to read that B.E.A., who have always flown British, were going to fly American, this would, I believe set a pattern for the rest of Europe, possibly for all time. It would certainly mean the end of the air-bus venture.

I hope it will be recognised that we are at a turning point here, and I trust that the noble Lord who is to reply will be able to confirm that if a suitable basis for co-operation can be found with Europe, with the airlines and with industry, Her Majesty's Government, for their part, will give full backing to the air-bus and to all that goes with it—which, as I understand it, includes the stretched Trident. As I have said, I believe that this is a really crucial decision, not only for the airframe industry but also for the air-engine industry. We have in the British air-engine industry, around which I believe the future European air-engine industry will coalesce, one of our most important national assets. This is an area—one of the very few areas—where we are able to compete on rather better than equal terms with the United States.

One point which I wish the noble Lord's Committee had emphasised even more strongly was the interdependence between the airframe and air-engine manufacturers: because, my Lords, I am quite certain that, unless there is a British or European airframe in which the great new aero-engines under development in this country can be flown and demonstrated, we have no chance at all of getting those engines into the great subsonic aircraft which are about to be developed and produced in California. Bristol Siddeley are designing an engine in this power range. Rolls Royce will be testing such an engine in the spring, and they are already tendering for its incorporation in the great new Boeing. There is a great deal at stake here—about £1,000 million worth of business in the 1970s—and much turns on whether we decide to go ahead first with the stretched Trident and then with the airbus. I hope that the present Government, even in these hard times, will back this one.

My Lords, I have dwelt, possibly at undue length, on these projects, but I will only half apologise for doing so, because they are the real flesh and blood of this industry. I should now like to turn, in conclusion, to one or two broad policies which I hope the Government will pursue, or at least examine. First, there are the national policies. In the first place, if we are to get our aircraft industry back on the footing on which it should be, not only greater stability in Government policies but also quicker decision-making on the part of Governments is certainly required in the future. This is much easier to say than to do, and the specific requirements here were outlined by the Shadow Minister of Aviation, in a remarkable speech in another place last month, with far greater skill and ability than I can command, and I will not repeat them. But it does mean certain things.

First, it means getting down to brass tacks with the industry forthwith on specific projects. Secondly, there is the need, when these projects are decided upon, for both Government and industry to chance their arm. There should be no more ordering in driblets. Once a project is decided upon, one must go flat out. Third, and most important of all, we shall not, I feel, get the stability we require both in the aircraft industry and in these air projects so long as all this is at the whim of every passing political opinion and current, and so long as neither the public nor Parliament is properly informed about these matters. At present, we still grope very much in the dark; and I hope that it may be possible, by one means or another—perhaps by an improvement of the Select Committee machinery—to improve the ways and means by which knowledge about this sort of thing is passed on. There is, of course, the need to improve exports. I will not dwell on this, because my noble friend, Lord Watkinson, will be covering this aspect of the matter.

Finally, there is the question of Government structure. Again, I do not wish to go into any detail. I would say only one thing here, and that is that I am convinced, from the short year which I spent at the Ministry of Defence, that, other things being equal, there should be a much more direct and much closer link than exists at present between the consumers (who in this case are the Services and the Ministry) and the producers, the aircraft industry. I am not competent to express a considered and full judgment on whether this means that the Ministry of Aviation should go, but it is my firm belief that, so far as military procurement is concerned—and this is sometimes at least 70 or 80 per cent. of the matter—the position would be much better if this buffer state between the purchaser and the consumer were removed.

My Lords, as for Europe and European collaboration, the noble Lord, Lord Plowden, has emphasised the importance which he attaches to this, and I have touched on it. In a way, I believe that it was perhaps rather a pity he was not able to go into rather greater detail about the techniques of collaboration, but this is perhaps a matter which can be explored further later. But he did refer to one matter which I should just like to touch upon, and that was the possible need for a more permanent structure of European collaboration in these matters. I am myself sure that he was right to dwell on this. I personally would hope that the ministerial conference which he has proposed between European Ministers would not be delayed too long, and that our Ministers should go to it with at least some embryonic plans for a more permanent structure. Could we not suggest to our European partners here that this ministerial conference might become a Standing Conference with a small, permanent but highly-qualified secretariat? Might this conference form an umbrella not only for our aircraft co-ventures but also for European co-operation in space? An umbrella there is very badly required. And would not some such Standing Conference form a natural adjunct to the European Armaments Board, which the Assembly of Western European Union has proposed, and which I personally believe to be absolutely vital if we in Europe are to be able to maintain in future advanced armaments and aircraft industries?

Finally, my Lords, there is the question of co-operation with the United States. On that, I should like to say only this. The enormous predominance in the Free World of the American aircraft industry emerges very clearly indeed from the most cursory perusal of Lord Plowden's Report. This predominance is already affecting our military posture; it militates against, or aggravates, our balance-of-payments problems, and it also impinges on our advanced technology. In the longer run, it could have an even more harmful effect. If we in Europe become dependent upon the United States in these and other advanced fields of technology, this could, I believe, bedevil the future political relationships between the two great power centres in the West—North America and Western Europe. I am equally sure that this is not in the interests either of Europe or of the United States, and that the wiser Americans fully appreciate this.

Therefore, it is not only in our interests and in the interests of Europe but also, I believe, in the interests of the United States that we in Europe should be able to maintain a really firm and solid aircraft industry. I would hope that, with that in mind, quite apart from the longer-term efforts that we are making, whenever we are faced with a need to make aircraft purchases in the United States, as the Government have felt the need in the recent past, we would be determined, as I believe the Government are now determined, to exact for that a really adequate quid pro quo, if possible, in the advanced field of technology also.

My Lords, I have talked a bit about hardware—perhaps too much; I have talked to a certain extent about what our national approach might be within Europe and towards the United States. I have not talked about perhaps the most important element in this equation: the quarter of a million men and women in our aircraft industry to-day. They have had in recent times a pretty rough ride and, in certain cases, a rather raw deal. I am not talking about the redundancies. What I am really talking about is the feeling of these men and women that their skills and energies are not being fully harnessed to the job that they can do better than almost anybody else in the world. I am not suggesting that the aircraft industry should be of any particular size; nor am I suggesting that adjustments, upward or downward, are not required from time to time. Of course they are. All I am suggesting is that, for one reason or another, a rather false picture of our industry has been allowed to emerge recently.

The men and women who work in it are, I believe, among the most skilled, hard-working, dedicated and, I venture to say, patriotic men and women in this country. Their industry is capable of making a very great contribution, not only to our economy, but also to our sense of purpose and national pride. Since October, 1964, the Government have felt themselves obliged—and I am not saying that they were either right or wrong about this—to be (in the Shakespearian sense) pretty bloody towards this industry and those who work in it. I would only suggest that it is now time for them to show themselves, not only bloody, but also bold and resolute in their approach towards this industry. I hope I am not asking too much. My Lords, I beg to move for Papers.

3.22 p.m.

THE MINISTER OF DEFENCE FOR THE ROYAL AIR FORCE (LORD SHACKLETON)

My Lords, it is customary to thank noble Lords who raise a subject for discussion in this House, but I should particularly like to express my thanks to the noble Earl for what the whole House must agree was a most interesting, comprehensive and useful speech. It is rather pleasant, perhaps, in this pre-Election lull that we can discuss a matter of very great importance to the country and discuss it in a way that this House is peculiarly fitted to do. And when we look at the list of speakers we can see that we are going to have an interesting, and indeed a knowledgeable, debate and I am myself looking forward to the maiden speeches of the noble Lords, Lord Cole and Lord Trefgarne. I would say that, whatever is said in this debate—and I have made this promise on other occasions, and fulfilled it—the Government will take very careful note of the opinions expressed.

It goes without saying that we are all very grateful to the noble Lord, Lord Plowden, and we certainly look forward with interest to hearing Plowden on Plowden. It will not be the first time that Plowden has performed on Plowden, and there will be points of interest on which he may, in the light of some of the great debate that has gone on since, wish to elucidate his views a little further—I would not say change them. I am sure that, whatever reservations any of us may have—and I think they are very few: the noble Earl made clear those on which he had unqualified qualifications—it is obvious that the country broadly accepts the con- clusions of the Plowden Report. It is, of course, a most detailed analysis of the problems facing the industry, with also a pretty comprehensive set of recommendations for dealing with these. I can say, as has already been said in another place, that it is a great help to the Government in considering future policy.

I should like to remind the House of the picture which the industry presented at the end of 1964, which prompted the Government to set up this inquiry. The industry, in the view of the Government—and this was, I think, confirmed by the subsequent inquiries—was absorbing a disproportionate share of the country's resources and was not, on the face of it, giving full value in return. In saying that, I am not accusing the aircraft industry of anything; I am merely stating the economic facts. I shall have a little more to say about the circumstances that have led to this. The Government felt clear that, in the changing military and economic circumstances of the world, there really must be a fresh and dispassionate look at the rôle of the industry; and this is the task we gave to the noble Lord, Lord Plowden, and his Committee.

The answer, broadly, was that provided that right policies are adopted by the Government, and the right spirit, and indeed the right management, exist in the industry, there is a worth while future for the industry; and this the Government wholeheartedly endorse. We fully accept, as my right honourable friend did in another place (and I think I can almost use the same words) the case for this country having a substantial aircraft industry, both military and civil, and we intend to carry out policies designed to make that possible.

I am sure that the noble Earl as a member of a previous Government will know that the carrying out of policies in this field is not always quite as easy as declaring those policies. This does not mean feather-bedding the industry. It is the duty of Government to create an environment in which the industry can prosper by its own efforts. It has been suggested that there has been a tendency in the past for the industry to live on its former achievements and to consider that it was owed a living. I think that if this can be said of the aircraft industry, it can also probably be said of quite a large number of the inhabitants of this island—if not consciously, at least unconsciously. None of this will do in the harsh economic circumstances of today.

The Report also suggests that the industry has been receiving too much support from the Government. This support has taken two main forms. Taking into account the high research and development costs in relation to the numbers required, we paid over the odds for military aircraft, more than we should have had to pay for similar aircraft from abroad; and this, of course, springs from the limitations of the market for these very highly sophisticated aircraft, of which the TSR.2 is an example. Much of the money contributed by the Government towards launching new civil aircraft has not been recovered from sales. Government support has been justified in the past on the grounds of the special benefits provided by the industry to defence, general technology and the balance of payments. These are all powerful arguments, but these benefits are weakening, and I think it is right that we should also take a hard look at the economic consequences of the policies of Government support of this kind. I think that in the past all political Parties, including my own, have been inclined to look not quite ruthlessly enough at the return for Government money spent or invested.

The central theme of the Plowden Report is that the level of support should be reduced, and that the aim should be to create conditions in which the industry can in the long run thrive with no more support or protection than that given to comparable industries in Britain. Perhaps I should say, since there has been sonic questioning on the term "comparable industries", that what we understand the Committee to mean is the range of industries with an engineering or technological base, as opposed, for example, to agriculture. In other words, it simply means that the industry must become as competitive as any other industry. The Report recognises that this is a long-term objective and that some special measures of support may be necessary to avoid an uncontrolled run-down of the industry. This is an important reservation, but it must not deflect the Government or the industry from their main objective, however difficult this may be in an industry which we know is bound to have the Government as its main customer.

The Plowden Report contains a number of detailed proposals of policy designed to create the conditions in which the industry can achieve this objective. I will not weary the House by going through all these proposals, but I should like to say something about a few of the more important. The principal recommendation concerns collaboration with partners overseas. Much of the noble Earl's speech was concerned with this. I do not think that there will be any disagreement among us about the need for, and the desirability of, extensive collaboration with our allies, particularly those in Europe, on future aircraft and guided weapon projects. Indeed, this has been Government policy in this country for some years and several joint projects were launched under the previous Administration. We ourselves have promoted a number of important projects within the last twelve months.

As announced to the House at the time, a Memorandum of Understanding on the joint development of two military aircraft was signed by British and French Ministers on May 17 last year. I should like to say something about these two aircraft because the noble Earl referred to them. One, as the noble Earl may know, is a strike-trainer known as the Jaguar, and the other is a variable geometry aircraft. These form an important part of our collaboration with Europe and are also the mainstay of the future military aircraft programme of this country.

The position with regard to these aircraft at the moment is this. On the Jaguar, Breguet and B.A.C. are collaborating on the airframe, and Rolls-Royce and Turbomeca are collaborating on the engine. The noble Earl asked what the engine would be. It will be a joint development of the Rolls-Royce RB 172 and the Turbomeca T 260. Project studies by these firms are well in hand and will be completed by the end of March. By the same date, Bristol Siddeley and their French partners, SNECMA, will have completed a joint project on the engine for the V.G. aircraft. The engine that is currently being studied is the M 44. The airframe has been the subject of national feasibility studies by the designated contractors, B.A.C. and Dassault, and the results are now being evaluated prior to the placing of project study contracts.

As noble Lords will appreciate, there is a natural line of development in this matter: first of all, the feasibility studies, then the project studies, and after these the further stages of development. These are all being pressed on as fast as they can. As I have already said, both these projects occupy significant places in our future defence plans. The Jaguar will be used both as a trainer and as a ground support aircraft and will be needed in considerable numbers; but, anxious as I always am to give numbers to the House, I am afraid that I do not yet know what the numbers are, so I cannot answer that point.

The V.G. aircraft is a most exciting and flexible project. It will be capable of filling a number of roles, but it is primarily a tactical strike aircraft. Although it can equally be given an air defence capability as a fighter, it is intended primarily to phase into service when the V-Bombers go out. The V-Bombers themselves, as the noble Earl will appreciate, will by 1970 have given up their role of providing the nuclear deterrent and will be transferred to a tactical strike role. The V.G. aircraft will replace them in the tactical strike role. Of course, these will be an essential complement to the F 111. The next aircraft will be a most advanced concept.

I fully agree with what the noble Earl has said about not missing the boat in regard to these projects. He mentioned a number of others, but I do not want to delay too long. My noble friend Lord Beswick will be dealing with some of these on the civil side. The noble Earl was good enough to give in advance some of the points he would raise, but to answer them all would take several hours and I am afraid that it is not possible now, but some of these, including the civil projects, are projects around which we hope that a major European industrial effort will coalesce.

The Plowden Report made the constructive proposal that there should be a conference of European aviation Ministers, arranged with the object of formulating a common long-term policy for aircraft manufacture and procurement in Europe. Such a conference would be aimed at providing the political stimulus necessary to overcome to the maximum the many administrative and technical problems involved in this widespread collaboration. The Government intend to pursue this proposal, but it is essential that there should be careful and detailed preparation if it is to succeed. Furthermore, we need to clarify some of our own domestic problems first. I think that it would be unrealistic to expect such a conference to take place much before the end of this year. I also noted the noble Earl's remarks in regard to organisation subsequently. He will not expect me to comment on them to-day, beyond saying that I was interested to hear them.

In putting forward their proposals to develop a comprehensive range of European projects, the Plowden Committee made one substantial reservation. They came to the conclusion that for the largest and most complex aircraft even an association of all the European countries was unlikely to provide an adequate economic basis for going ahead. We think that this is going a bit too far at this stage. Certainly this may be relevant in some cases, and we recognise the reasoning behind it, but the Government are reluctant to accept this as a final or inevitable conclusion. There may well be projects of an advanced kind which we shall decide are unjustified by economic standards, but it would be unwise to dismiss altogether from the reckoning a complete category of aircraft; and I think that the House will be glad that the Government are taking this view. Every project must he examined on its merits. But we agree that we and our partners must adopt strict economic criteria in deciding these matters.

Exports are treated at length in the Report. We are to hear from the noble Viscount, Lord Watkinson, who knows a great deal about this field, and I will not spend time on this. But we must accept that this is very important and I think most of us will agree with the recommendations of the Committee. In some cases the Government have pressed farther ahead in the field of the export of defence equipment. With the helpful advice, not only of the Plowden Committee, but also of Sir Donald Stokes, we have already done a number of things to increase the backing the industry needs from the Government in its campaigns in world markets. For example, in the particular circumstances of the F 111 deal we have obtained some useful and valuable reciprocal concessions, which we may be debating, perhaps in a rather warmer atmosphere, when we discuss Defence next week.

Finally, on the Defence side, the Plowden Committee emphasised the need—and again I wholeheartedly agree with this—for efforts to harmonise new requirements, including operational requirements with those of our overseas Allies, and the need for world-wide export potential to be taken fully into account whenever new projects are being formulated. Within the Ministry of Defence, we shall be making every possible effort in these respects.

The Report has a good deal to say about the arrangements in the Government for dealing with the industry, and about the Ministry of Aviation and its procedures. There has been a great deal of comment about the Ministry in recent weeks, some critical and some particularly concerned with its part in the management of these vast programmes, in the problems of estimating and so on. This is one area where we really must face facts. Noble Lords will be familiar with (and if they are not, I would strongly recommend them to read it) the Report of the Comptroller and Auditor General on the 1964–65 Civil Appropriation Accounts. It traces the escalation of R. and D. costs in relation to the TSR 2, rising from a figure of £80 to £90 million to a figure that may well have been £600 million. I would not suggest that some of the procedures which were being produced would not in time be successful, but it is vital to endeavour to erase all uncertainty and to improve on our estimating.

But we have to keep all this in perspective. We know that other countries have had the same problems. It is worth noting what Mr. Charles Hitch, whom I am sure the noble Earl knows well, has had to say about the United States Department of Defence: The record of the Department…over the past fifteen years in such estimating has been spectacularly bad. He goes on to list some of the things that must be done to put it right, including the development of a much more adequate and sophisticated capability to make independent cost estimates, i.e. independent of contractor estimates. I do not envy the Ministry of Aviation in their task. I think, despite all the hard things that have sometimes been said of them, that we must recognise that there has been some devoted and thorough work going on in the Department.

I should now like to say something about the future size of the industry. The Plowden Committee set no figures to this, mainly because they were uncertain about the Defence programme. The Defence Review is now published, and, as the noble Earl said, we have a clearer indication of the likely level of future aircraft orders. There are still some uncertainties on the civil side. But, making reasonable assumptions, we expect that there will be by 1970 a reduction in the number of workers in the present work force from about 250,000 to 200,000, and more of this will fall on the airframe side. This is not a firm estimate. Indeed, one of the encouraging, or possibly discouraging, things is the way that labour in this industry has tended to be rather immobile. One of the objects, both of this investigation by the Plowden Committee and of Government policy, is to ensure that there is no uneconomic content within the industry. But, even so, it will be a very sizeable industry—twice the size of the French industry.

Another important section of the Report was devoted to the ownership and organisation of the industry. This is a sensitive topic which has attracted a good deal of public attention: indeed, in some ways I would say that it has attracted too much public attention. I am sure that the Committee did not necessarily intend this to be the most important conclusion. It certainly led to a good deal of controversy. Their most controversial recommendation was that the Government should seek a share in the equity of the two main airframe groups. The essence of this matter, of course, is whether the Government should participate in the equity and management of an industry in which they put most of the working capital and make most of the critical decisions. But the Government's view is that any partnership along these lines between Government and industry should, if possible, be arranged on a mutually agreed basis, and that the nature and terms of any Government participation should be settled in negotiations with the companies. The Government, indeed, are approaching this in a pragmatic frame of mind, with no firm theoretical or doctrinaire ideas of how this should be done.

The Plowden Committee say that one of the objectives in the Government's having a share in the ownership of the industry would be to facilitate a decrease in the financial and technical control of the Ministry of Aviation, which they say has become so onerous as to hamper efficiency. This is a difficult question. I should be interested to hear the noble Lord, Lord Plowden, tell the House how this will work. I must say that I, personally, feel some doubt as to how far a degree of ownership will provide the justification for weakening this particular control. My experience is that this sort of detailed technical cost control cannot be carried out from the board room. Whereas there may be other arguments in general terms—and I have given some of them—for the Government's taking some share in the equity of the industry, I must say in regard to this particular point—I am speaking personally, but I think my colleagues in the Government would not disagree—that I found myself more in agreement with Mr. Aubrey Jones than with the Committee, because it seems to me that this question of technical control does not turn simply on ownership or part ownership, and involves much more detailed considerations. Indeed, in recent years, judging by the Public Accounts Committee's Reports, there is a need for more, and not less, control. But, clearly, it has to operate in a way that is not hindersome to the main objective. I hope that the noble Lord, Lord Plowden, will have something to say on this subject.

The Committee also considered the possibility of future mergers. While pointing to certain advantages, they made no positive recommendations, but said that this was a matter to be determined when the future workload on the industry was clearer. I have already said that we expect, in the light of the knowledge now available to us, which the Committee did not have, that the in- dustry will contract substantially. Moreover, although there will still remain a substantial amount of work for the industry, as the noble Earl said, the tendency will be for this to be concentrated on a decreasing number of larger projects.

As we all know, a company needs to have a steady flow of projects succeeding one another, so that as one passes out of the design office another can be building up, and as production tails off on one, it can be starting on another. As the number of projects decreases, therefore, it is becoming increasingly difficult for the two main airframe groups to maintain a balanced programme of research and development and production, even though, at first glance, it might seem that there might be enough work for two. For this reason, we see strength in the argument that a merger of B.A.C. and the airframe interests of the Hawker-Siddeley Group would be in the public interest and should be brought about on agreed terms. I do not want to go into this further today, because we shall be discussing this factually and, I am sure, co-operatively, and the question of possible Government shareholding, with the two companies in the near future.

I come finally to one aspect of the Report which is closest to my own departmental responsibility—namely, the forward Defence programme. The Report rightly emphasises the importance of Defence procurement to the industry. I have already dealt with the Anglo-French projects. So far as can be seen, military orders must provide the bulk of the industry's work, and it is important that this programme should have as much firmness and stability as is compatible with a dynamic Defence policy. This I am sure every Government in the past would have said, putting their hands on their hearts and meaning it, but it is quite clear that we must do better in this respect in future. It is important—and again I agree with the noble Earl—that there should be the closest consultation between Government and industry in matters which bear on the future of the industry. In the recent Defence Review, the Government examined the nation's Defence needs in the next decade, and the results have appeared in the White Paper. We shall be debating this shortly, so I will not go into it in more detail, beyond saying that it provides a set of specific decisions on the Government's forward aircraft requirements.

The White Paper also provides, we think, a coherent appreciation of the defence and foreign policy environment, all of which affects decisions on procurement over the next decade. Though the load on the industry is no doubt less than they would like, it is still considerable, and the programme is a great deal clearer. It is worth mentioning that there are a large number of aircraft on which production is going on, or will go on: And-overs, Bassets, Belfasts, military VC 10s, Jet Provosts, Buccaneers and Lightnings. In the last three cases, the industry is working on important export orders. The Services are to spend no less than £130 million a year over the next ten years on spares, maintenance and repair work. Development work on military aircraft covers the P 1127—which, I freely tell the noble Earl, we hope will come into service in 1969—and progress is going ahead on this. There are still some areas of technical uncertainty which have to be settled, but it is our intention that it should come into service in 1969.

The noble Earl also asked me about the maritime reconnaissance Comet, the Shackleton replacement. Here again, may I say to the noble Earl (although he did not ask me to do so) something on numbers? There will be within the range of 38 to 40 aircraft, and this will provide some important and valuable business. I have already mentioned the two Anglo-French military aircraft. I hope that I am answering some of the noble Earl's questions. He asked about helicopters. I cannot say anything about helicopters to-day, if only because we are in the middle of a whole series of studies on future helicopters, and the particular mix of helicopters that we shall need is a pretty complicated subject when one considers the different types of military need, the heavy lift need, the tactical helicopter, the anti-submarine Naval need, and so on. But these are important studies, and we realise that it is important to take decisions urgently, whether they will lead to international collaboration or production in this country.

The noble Earl said something about collaborative R. and D. Perhaps this is a subject which one day, in another context, we might be able to debate, because it is one of the most interesting and difficult subjects; and, of course, if it is to serve a useful purpose, it is vital that it should at some stage pay off with production for this country. At any rate, the total Defence spending in the industry of aircraft and missiles looks like being up to £300 million a year for the next few years.

I will not say anything more on the civil aircraft side. My noble friend Lord Beswick will deal with this, but here again there is considerable business of an important kind, and we believe that this should give the industry a greater measure of stability, both in this field and in the military programme, than it has had in the past decade. It should now be possible for us to attain within our procedures a closer consultation between Government and industry, both in the evolution of our procurement policies and in the selection of the best new projects to undertake in the future. I hope that we have taken a major step towards creating the setting in which the industry can fulfil, within the British and European economy, a contribution of the kind foreshadowed for it in the Plowden Report.

I am sure that this will be a valuable debate. I think it is characteristic of this House on occasions of this kind that we achieve, as a rule, a degree of objectivity which might almost justify the description of "symposium" for a House of Lords debate, especially since we do not always debate with one another quite so much as is done in another place. These problems are, in a way, a microcosm of our national problems. It is interesting that to-morrow we shall be debating computers, where there are similar problems and certain issues which the Government will have to decide. One thing is certain, and that is that we must all do better—and this means both Government and industry. We are not approaching the problems to-day in an atmosphere of recrimination. We all know too well the failures of the past, and the Plowden Committee have played a valuable rôle in bringing out some of the difficulties, and certainly some of the faults. There is no doubt that management, both within the industry, and, if I may say so, also within Government, has to be improved in this sort of field, and to be sharpened in its decision-making and in the apparatus of decision-making. Money has in truth been poured down the drain during these last years, and though some of these tragic failures have not been wholly on the debit side, we all acknowledge that we cannot go in for that sort of thing in the future.

This is certainly one of the subjects which is worthy, if not of national debate, at least of detailed discussion. There are some very good brains thinking about these problems, both inside and outside the industry, and outside Government; and that is why we welcome the initiative of the Royal Aeronautical Society. I should also like to pay a tribute to the Cranfield Society, which has produced some exceedingly interesting papers from time to time, which are carefully read, and frequently tell Ministers something which, somehow, they do not seem so easily able to find out within their Ministries. We clearly need to improve our organisation so that some of this effervescence of ideas can lead to results.

I would add only one personal point. Whatever may be said of other parts of British industry—about lack of technical innovation, and so on—nobody can accuse the British aircraft industry of lacking either inventiveness or ideas, optimism or courage, or willingness to go in for technological innovation. Indeed, this creativeness has brought its own problems when set against the hard economic facts of life. While we must remain on guard against previous errors and excessive optimism—and introduce, as I say, both effective decision-making and reality—the spirit and brains which produced so many brilliant aircraft and contributed to the survival of this country, in more ways than one, should not be lost from the industry but will, we hope, be in future matched with contemporary realities.

3.58 p.m.

LORD PLOWDEN

My Lords, the noble Earl, Lord Jellicoe, said that he would not award my colleagues and me an alpha plus. I was disappointed that he would not tell us what he would have done. None the less, on behalf of my colleagues and myself, may I say that we are grateful for the nice things that he and the noble Lord, Lord Shackleton, said about our Report?

I want to begin by briefly discussing the main conclusions reached by our Committee, together with some of the reasoning that lay behind them. I believe this is necessary because so much attention has been focused on the recommendation of State participation in the two airframe companies, while what we regarded as perhaps the more important points have been misunderstood or ignored. Our first and most important conclusion was that Britain should continue to have a substantial aircraft industry. Now this may seem obvious and platitudinous, but just because it was not obvious our Committee was set up to inquire into the industry, and, as the noble Lord, Lord Shackleton, has reminded us, it certainly did not seem obvious a year ago. We have long had a most distinguished and great aircraft industry which has rendered us incalculable service in two world wars. But there is no inherent reason why we should continue to have a large aircraft industry.

My Lords, this was the spirit in which we began our inquiry, but the evidence led us firmly to believe that Britain should continue to have a substantial aircraft industry. I hope we can now all agree on this. Whatever difficulties and debates may continue to surround the industry, I hope that no one will any more speak of its early demise. However, the next step is more difficult and leads to argument. How much should we, as a nation, be prepared to pay in national resources for the capacity to produce our own civil and military aircraft? There is no reason to regard the size and activities of the industry in recent years as immutable and sacrosanct. Our three main conclusions about the future of the industry were that it should continue to be substantial, that it should no longer attempt to cover the whole field, and that it should in the fullest possible way co-operate with other European countries.

The aircraft industry embodies a basic dilemma. In one sense it is exactly the sort of industry on which this country ought to concentrate. It uses relatively little imported materials and a relatively large proportion of our main national asset, highly skilled and trained manpower. On the other hand, aircraft overheads, in the form of development and initial production costs, are high and are rising all the time in relation to variable production costs, so that unit costs are crucially dependent on the size of the market.

For this reason the dominance of the United States of America in world aircraft production and sales puts the United Kingdom and all other Western countries at a serious disadvantage. United States purchases account for about 75 per cent. of free world military and space purchases and about 50 per cent. of world civil aircraft purchases. The United Kingdom and the Common Market countries together only buy one-quarter as much as the United States. At the same time the United States accounts for 80 per cent. of world production and some 60 to 70 per cent. of world exports. The results of this dominance can be seen in the relative lengths of production runs. For aircraft first introduced into service between 1955 and 1961, the average length run in the United States of America was three times ours for military aircraft—530 as compared with 177; and 4½ times ours for civil aircraft—320 compared with 68.

These are most striking figures and they cannot be dismissed. Their implication is that even if the British industry is as efficiently run in every way as the American, unless there is some dramatic expansion in markets, British aircraft will normally be more costly than American, just on account of this higher overhead. But the position in recent years has been somewhat worse. British productivity and efficiency appear to have been lower than that in America, and Government methods of procurement and control have been bad. With all these three factors operating it is not surprising that the British Government in recent years have been paying more for British aircraft than they would have had to pay if they had bought the aircraft abroad.

Now even if we could not improve any of these three factors, we, as a Committee, believed that there was still a case for some domestic aircraft-producing capacity. First, there are the needs of defence, although I do not think we should accept that there is any longer an overwhelming defence argument for producing all our aircraft; but, none the less, we believed it was worth paying something more in order not to be entirely dependent on foreign sources of supply. Secondly, there is the so-called technological fall-out. A technologically advanced industry like the aircraft industry, always pressing against the unachievable, throws up scientific and engineering discoveries which can be used throughout industry generally. Third, there are the obvious dangers in creating a monopoly position abroad. Fourth, there is the need to save foreign currency, because the balance of payments is likely to be difficult enough over the next few years to make a pound of foreign currency worth rather more than a pound of domestic currency.

My Lords, all these are familiar arguments which are easy to assent to in general terms. They establish the case for some industry quite convincingly, but what some of the more enthusiastic supporters of the industry sometimes forget is that simply invoking these arguments does not justify any scale of aircraft activity at any cost. The main contribution to an objective analysis of the position which we tried to make was to see what degree of special Government support was necessary in the long run to secure these various indirect benefits to the nation. We concluded that in the long run it certainly was not worth paying what we had been paying and that therefore a number of changes ought to be made. However, I think we all felt that, even in the long term, to possess an aircraft industry it would be worth paying a somewhat higher price than the country would be willing to pay for most other manufacturing industries, but that policy should be based on the assumption that the industry will, in the end, be able to thrive with no more protection or support than that given to comparable industries in Britain.

I think the word "comparable" was not a good choice of word. By "comparable industries" the Committee had in mind various forms of engineering and precision intrument making. I think it is pointless to try to be too precise. No industry is exactly comparable to the aircraft industry, which in itself covers the various forms of production—engine making, frame making, electronics, and so on. Moreover there is a wide range of tariff protection accorded to British industry. However, it is impossible to escape the conclusion that the support given to the aircraft industry is significantly greater than that given in the form of tariff protection to most engineering and precision instrument-making industries. Our calculations suggest that, on average, the aircraft industry has probably been receiving support equivalent to a tariff of between 30 and 45 or 50 per cent., and in some cases even more. In contrast the tariff on most precision industries varies between 16 and 33⅓ per cent. For motor cars it is 25 per cent. For most forms of machinery it is between 10 and 20 per cent., for computers it is only 14 per cent. Moreover, these are the full rates of duty, and for EFTA countries and the Commonwealth they are, of course, lower.

Our first and perhaps somewhat negative point is that we should no longer try to compete in the areas where we are at the largest inherent disadvantage: this is, the largest and most complex aircraft. For these the ratio of overhead to production costs is at its most crippling, and the cost difference between buying at home and buying abroad is at its greatest. For example, the F 111 is, we are told, to cost just over £2 million compared with something between £5 and £6 million which, we were told, would be the cost of the TSR 2. I submit that there is no reason why this country, even in conjunction with Europe, should try to cover the entire range of aircraft flying to-day, and if we do not cover the full range the largest and most complex planes seemed to us self-evidently the best to be out of.

The noble Lord, Lord Shackleton, has said that he thinks this recommendation goes too far and that the right procedure should be to look at each project on its merits, adopting strict economic criteria in deciding which projects to work on. But our point is that if one adopts these strict economic criteria it is pretty well a foregone conclusion, for the reasons I have given, that it will be the largest and most complex aircraft which will fail to meet them. Given this presumption, there is an advantage in laying down a general policy rule, even if it sounds slightly arbitrary, to prevent the waste of effort involved in toying with projects that never come off and to help give a firmer idea to the industry of future policy. It is nonsense to suggest that such a rule condemns us to technological backwardness or second-rate scientific status. The whole of aircraft production is in the technological vanguard. Who can claim that the Anglo-French variable geometry aircraft will not be among the most advanced projects in the world? Indeed, I thought that was what the noble Lord, Lord Shackleton, was saying.

There is indeed scope for much more sophistication in short and medium range aircraft. Merely to keep out of the areas of greatest economic disadvantage is to acknowledge our position relative to the United States for what it is, not second-rate, but unavoidably second-rank. It is quite unrealistic to pretend that with our size and wealth and resources we could equal America in these vastly expensive areas.

It is often alleged that to buy abroad puts a strain on the balance of payments while to make at home does not. The issue is, of course, not a simple one; but an aircraft produced at home at a high money cost and with poor export prospects may itself put a strain on the balance of payments. If an aircraft were bought abroad instead, and the capital and labour involved in making the domestic aircraft were redeployed in other industries, it might enable the nation to earn more in foreign exchange through extra exports than the cost in foreign exchange of the imported aircraft.

However, whatever view is taken about the largest and most complex aircraft the most important thing to be done in relation to the industry as a whole is to expand the markets for those aircraft it does make. If we cannot greatly enlarge those markets our unit costs will progressively become more uncompetitive with those of the United States. There are many ways of improving our exports, but perhaps in the end they all come down to taking trouble to make sure that the planes that we do build are the ones which are wanted by the widest possible range of customers. It is most satisfactory to see that the Government have secured an opportunity for the British aircraft industry to compete on level terms with the American aircraft industry for certain kinds of equipment to go into American aircraft. I do not think that this guarantees sales, but it does, it seems, guarantee an opportunity, one of which I am sure the British aircraft industry will avail itself.

The main way in which the markets can be expanded, we believed, was by collaboration with other European countries. Fundamentally they are in the same position as ourselves, though of course each individual country has its individual successes and failures. It is in their interest as well as in ours that common specifications, both civil and military, be hammered out and the production work shared. To begin with, I imagine it will be necessary to share production of individual aircraft, as has been done with the Concord, but this is really a wasteful procedure. As the techniques of collaboration become better understood and mutual confidence grows, I hope that the sharing will be more on the basis that different countries each produce a whole individual aircraft.

But whatever method is adopted, the main point is, as the noble Earl pointed out, that a strong and firm initiative is needed from this country. There are really great difficulties and much inertia to overcome, and a piecemeal approach within the present administrative framework will not be enough. The Government, having accepted this recommendation by our Committee, will, I hope, press on with all speed. I accept that a European Conference takes time to prepare, but I hope that this will not be made an excuse for delaying it until it is too late. I do not accept that collaboration with Europe is impossible if we buy our most sophisticated aircraft from the United States, as we have done with the F 111.

Of course, there are voices in France, just as there are in this country, who plead for the maximum volume of work for the industry, regardless of cost, and who perhaps regard it as some kind of surrender to accept the limitations that size and wealth impose upon countries like ourselves and France. But if we try to do more than we can economically afford we shall impoverish ourselves and end by doing less. If it is prestige we are thinking about, true prestige comes not from spending scarce resources on unattainable goals but from success in achieving attainable ends.

The third main thing that we have to do is to increase efficiency. Doubtless there is much room for increased efficiency in the industry itself, just as there is throughout British industry generally. Our Committee were criticised for not making detailed recommendations on the industry's efficiency. If I may say so, I think this is a complete misunderstanding of the task that we were set. We should have been most arrogant had we tried to do so. The aircraft industry is large and complex. To produce anything useful on this subject it would have been necessary to have a team of professional consultants working full-time for many months, and I think it would have been positively damaging to make superficial pronouncements. Hence, our decision not to spend our short time on visits to factories. Without detailed experience of a particular industry it is impossible to reach useful conclusions by walking round production lines.

There is a further point. The efficiency with which the industry is run is not the primary question to which our Committee had to address themselves; nor, I venture to say, the question to which we should be addressing ourselves here to-day. The larger question is the efficiency with which we deploy our natural resources. Even if the aircraft industry were perfectly run, it might well be in the national interest that it should be smaller. Moreover, the efficiency with which the industry runs itself is only half the problem. It is just as necessary to increase the efficiency with which the Government handle the industry. I cannot convey to your Lordships how often and to what depressing effect the weaknesses of Government or the Government machine were revealed to us in evidence: vacillation, delay and bureaucratic control have left a deep mark.

Major changes in Defence policy, though naturally extremely disturbing, must be reckoned as part of life. It is aiming at the impossible to urge that Governments should fix, and then refuse to change, their overall long-term policies. We live in a rapidly changing world, and obviously our Defence policy must be capable of changing with the changing strategic situation. Aircraft producers can never hope for long-run stability in this sense. However, they have every right to demand that, within the long-term context, decisions, either yes or no, be reached quickly; that they be stuck to in the absence of overriding strategic changes; that amendments to specifications are made only under rigorously controlled procedure which reveals clearly the costs as well as the benefits of any change.

As our inquiries proceeded, our Committee became increasingly disturbed at the extent of the technical and financial control exercised by the Ministry of Aviation over the industry, and in particular over the airframe companies. No one should underestimate the difficulties of relaxing such control. Certainly I, as a former Treasury official do not. None the less, I submit that this control must somehow be drastically lightened and simplified. It is imposed in the name of Parliamentary accountability and the taxpayer; but I submit that one of its main effects has been to keep profits low and costs high. In the ultimate, it is Parliament which must decide how much control it needs and at present the tendency seems to be to want more. With the exception of Mr. Aubrey Jones, the members of my Committee believed that this control was unlikely to be significantly reduced while the airframe companies were wholly in private hands.

The noble Lord, Lord Shackleton, asked me whether I could say how I thought that this control could be reduced if there were some Government participation in the airframe companies. First, let me repeat what I have already said, that I realise how extremely difficult it is, given the fact that this industry is almost wholly in the hands of Government so far as purchases and finance are concerned. Indeed, if I may quote from our Report, one witness said: It stands as an island of commercial activity surrounded by public authorities, and is dominated by issues of public policy outside its control. It is no good complaining about this. This is a fact of life. But we thought that by some participation of the Government in the equity of the companies there were two things which would occur: a greater sense of partnership could be accepted by Parliament, and they would appreciate that they were beneficial owners of part of any profits that might be made.

Another thing that struck us in evidence from the industry was that they repeatedly said that the Government do not appear to understand what is the effect that their decisions have upon the operation of the industry. I think that if the Government were part owners of these companies this might certainly be lessened. I do not feel that this ownership should be in the form that the Government should be given the shares and should then nominate some part-time directors to the board: they should feel that they are part of the active management of the companies. But, as your Lordships know from what we reported, my Committee were not fully agreed on how this should come about. If the Government are able in any other way to mitigate this dead bureaucratic hand, no one would be better pleased than I, and also, I think, probably the majority of the members of my Committee.

LORD OGMORE

My Lords, as one who has had some experience of the dead hand of the Government in this sort of corporation, may I ask the noble Lord this question? Is it not a fact that, in all likelihood, the result would be exactly the opposite from what he hopes—in other words, the aircraft manufacturing corporations would be even more bureaucratically controlled than they are at present?

LORD PLOWDEN

I did not hear the last sentence of the noble Lord.

LORD OGMORE

I said, Is it not a fact that the end result would be even worse than the present one; and that there would be even more bureaucratic control than there is at present in the dead hand of the Government in the aircraft industry?

LORD PLOWDEN

Well, this must obviously be a matter of speculation. I do not think we can argue it across the Floor here. Obviously, if it were badly run it would come out as the noble Lord suggests.

LORD OGMORE

If we are not going to argue the point across the Floor here, where are we to do so? The whole point of Parliament is, surely, to enable argument on these questions across the Floor. One of the great issues of the day is the amount of interference or control in an industry of this kind which there should be from the Government. As one who has had years of experience as a director in a Government organisation, I can tell the noble Lord that this recommendation of his Committee is complete nonsense.

LORD PLOWDEN

Well, my Lords, I thank the noble Lord for his observation. Obviously, there is room for a great deal of difference of view about this. I can only say that my Committee, thinking about this particular problem, felt that some Government participation in the ownership of the airframe firms would mitigate the degree of bureaucratic control. I should be the first to agree that if you carry it to its logical conclusion, it might be possible to say that in that case it should be wholly owned. I myself have had experience of running a nationalised industry, the Atomic Energy Authority, where it was possible not to have detailed control from Whitehall. My Minister was the noble Marquess, Lord Salisbury, and I think that we were able to manage without duplication of control. I do not believe this is necessary in the case of the aircraft industry. I should prefer, speaking for myself (and I am throughout speaking for myself, and not for the Committee), to see some partial Government participation rather than full Government ownership. I hope that the good sense of both the industry and the Government will enable some mitigation of this control to be brought about.

I feel that I have dwelt rather long on this matter but obviously it is one on which a great deal of public debate has centred. Quite naturally, it is one on which people hold strong views. We did not consider the matter on doctrinaire lines. We considered the question of ownership only in terms of the best method of securing really important changes in the relations of the industry with the Government. I do not believe that the present arrangement makes much sense. Certainly it cannot be described as one in which the firms involved are exposed to the stimulated disciplines of the market which can be relied on to produce a survival of the fittest.

The aircraft industry in all countries is dominated by Governments. Government purchases of aircraft account for some 85 per cent. of the world output, and some 70 per cent. Of the United Kingdom output. As things stand at present, a policy of cutting down the work-load of the United Kingdom industry and simply letting the firms sink or swim would probably hit the British Aircraft Corporation particularly hard. They are the ones who suffered most from the cancellations, because the TSR 2 was in a very advanced stage of development, but it is the British Aircraft Corporation who are working with the French on the Concord and, as the noble Earl has reminded us, on the two new military aircraft. They are the manufacturers of the only British civil aircraft, the BAC 111, which is currently selling to airlines throughout the world.

The disturbance created by a sink-or-swim policy would have far outweighed any theoretical advantages, but, as have already said, if the Government believe—if Parliament believes—that the necessary changes can be brought about without Government participation in the equity of the two airframe companies, I, for one, would welcome it. Noble Lords cannot imagine that I, as Chairman of an industrial group with two steel companies on the list for nationalisation, am an enthusiastic advocate of further extension of Government ownership of industry. None the less, if some form of participation is the only way to relax the heavy hand of bureaucracy, I would still advocate some form of Government participation. I welcome the discussions the Government have started with the two airframe companies.

I should like now to touch on the whole question of how problems such as the one put to our Committee should be dealt with. I do not think that an ad hoc Committee such as ours is the right way. The members of our Committee were largely ignorant of the industry when we were appointed. This was deliberate. We were chosen as a "jury"—a body of men without preconceptions or already fixed positions on the subjects we were investigating. We were extremely short of time, and pressed against our will and judgment to report in less than a year after we were appointed. This meant that most of our time was absorbed by taking evidence and learning the basic facts. Even two more months would probably have doubled our "thinking" time, and the paradox is that, just as we were reaching some understanding of the problems of the industry, we finished our Report and the Committee disbanded. The expertise, so painstakingly and expensively acquired, is unlikely ever to be used again. Incidentally, the Minister to whom we reported and whom we thought would deal with our Report was almost immediately removed to another job.

How much more sensible it would have been to have had this job done by a Standing Committee such as the noble Earl, Lord Jellicoe, suggested—a committee with a strong permanent secretariat charged with the continued study of the problems involved, on the lines of the joint congressional committees of the United States Congress. It might be a committee composed of Members of both Houses of Parliament, or even with some members drawn from outside. There are a wide range of subjects, particularly in the realm of defence and defence procurement, which could be handled by committees of this kind. The Select Committee on Nationalised Industries is a good example of what can be done.

It is now three months since we reported. The Defence White Paper has been published, and the Government have indicated the size of the military demand on the industry. As the noble Earl, Lord Jellicoe, has said, it is becoming clear that there is likely to be a new generation of civil subsonic jets. I think he said that four were being developed in America. European industry must share in this market. We should press ahead to make a European aerobus project, and should develop in Europe an engine capable of being used in these aircraft, whether they are built in Europe or in the United States.

The noble Lord, Lord Shackleton, said he thought the time had come to consider the amalgamation of the two airframe firms. Speaking for myself, I think this is right and that this should come about with or without Government participation. I think that both companies at present have adequate work, and therefore it is always a temptation to postpone the difficulties which such amalgamation would bring about. None the less, this is what one ought now to be thinking about. If there is to be a European aero-engine for this new market to ensure the maximum technical strength, it would be wise to consider whether this could not be brought about by some union of the two great British aero-engine companies. The main burden of developing a European aero-engine is bound to fall on this country.

VISCOUNT CALDECOTE

My Lords, before the noble Lord leaves that point, could he elucidate a little on what advantages he considers would come from further mergers of the industry? Is he implying that the companies as at present organised are not sufficiently powerful to do what he is describing?

LORD PLOWDEN

What I was trying to say was that, although the two aircraft companies to which I believe the noble Viscount was referring are at present, as I understand it, well furnished with work, the world aircraft industry in the next few years will become increasingly competitive. So, while at the moment they may be powerful enough to survive, in the long run it is going to be more difficult. I should have thought that for that reason now, while they are in a strong position, they should be considering whether they should get together so as to be strong enough to survive in the future.

The aircraft industry has had a most difficult time over the past eighteen months. I believe that the thinking behind the cancellations was right. We were trying to do too much and we had to set our sights lower. But the industry needs, and has the right to be given, firm contracts soon, in a form that allows them to plan ahead to provide the capacity and to order the materials and components, so as to obtain the most economical and efficient production. They must be given this kind of certainty if we are to be able to produce efficiently.

The problems posed in ensuring that the industry remains prosperous and strong are particularly challenging and important. I should like to quote a paragraph from my Report: Many of them are difficulties which, in a somewhat less acute form, face all technologically advanced industries in this country. Indeed, the aircraft industry may be conceived as to-day embodying the predicament, as it has long embodied the aspirations, of the United Kingdom in the world. If the aircraft industry's problems are not solved, they will simply have to be tackled again elsewhere, while in the meantime the nation will have lost much. I believe that the future for this country lies in Europe. At present it is not possible for us to join the Community. For many industries the benefits of large markets must wait. But the aircraft industry is in the fortunate position that, since its main customers are Governments, the benefits of integration can in its case be enjoyed without political or economic union. I strongly hope that all possible efforts will be made to achieve these. Perhaps, as a by-product, European integration itself will be brought nearer. Most important of all, the aircraft industry is an example of the choices facing the British people. We cannot do everything. We cannot go on living in a fantasy built of dreams of the past. Dreams have their place, but they must be dreams of the future. They must spring from an appreciation of our position as it is now: our size, wealth and geography.

4.43 p.m.

LORD COLE

My Lords, I crave the indulgence of the House on this, the first time I speak in a debate in your Lordships' House. My own business experience might be thought partly to qualify me to participate in this debate and partly to suggest that I am not likely to know what I am talking about. My connections with a large international business have furnished me with an extensive experience of operating under various degrees of State control, all the way from being left almost free to make what profits my competitors would allow me, to nationalisation without compensation or even being made to pay for that privilege. On the other hand, the industries with which I have had most experience rarely produce articles that are large and complex. They are much more likely to be a basket of groceries than a BAC 111.

As for nationalisation, I agree with the noble Lord, Lord Plowden, when he states that he is not an enthusiastic advocate of further expansion of Government ownership in industry. That puts my own position very well. As for the production side, there is one thing which is common to all industries of which I have had experience, and I have no doubt that this experience is also shared by other industries, including that of aircraft production. This common experience is that every good business is also an efficient business; and I suggest that it is in this spirit and with this firmly in mind that we should look at the Report.

As I see it, the two basic economic considerations underlie what we are debating. First, the size of the market available to this country; and, secondly, the fact that the research and development cost associated with modern aircraft is very high indeed, and is probably rising. Government expenditure on research and development for military aircraft must invariably result in benefit to the civil aircraft side of the industry. The cost of learning in the industry is extremely high, and therefore any firm which can learn at the expense of Government is in a strong competitive position. It is clear that the United States aircraft industry, with its enormous home market, both civil and military, can achieve production runs of much greater length than any other individual non-Communist country, and the Report shows quite clearly in paragraphs 51 to 54 how the spreading of initial research and development expenditure over long runs reduces the unit cost of the aircraft.

In this situation the possibility that the United Kingdom will be able to match the United States seems very slight indeed, unless it can increase the size of its market or contract sharply and concentrate on a limited number of probably not very complex aircraft. I am quite confident that everyone would agree that we should continue to have a substantial aircraft industry. But the reasoning I have outlined leads to the conclusion that it should b e somewhat smaller, and not strive to cover the whole field which, outside the Communist countries, only the United States and ourselves attempt to do. For no country, just as no business, can go on indefinitely maintaining assets, however intrinsically valuable they may be, if, in fact, they cannot be employed in producing a competitive product. This argument is made even stronger, if we consider the over-full employment situation in the country and the growing need for many of the men and much of the equipment in other branches of industry.

The salvation—I do not know if that is the right word—of the aircraft industry, as I understand it, now seems to lie, as the Report suggests, in expanding the market and in some controlled reduction of the size of the industry; but neither of these is something that can be done ad hoc. Each must be done in an orderly and planned way. A serious point made in the Report is that the efficiency of the industry can be improved only by a great deal of hard work. In all discussions of nationalisation or participation, for and against, this seems to me the point on which debate and arguments should concentrate. There is no magic road to efficiency, and unless we are entirely doctrinaire in our approach this must be a point on which all businessmen and politicians are agreed.

The economic considerations are well and fully set out in the Report. Some means should be sought to relax the form of detailed control now exercised by the Ministry of Aviation, and whether or not this is done by some form of Government participation is quite incidental. We should all be in favour of any scheme which would reduce any damage which might be done by too much Government interference. It may well be that some measure of State participation is the answer, especially if it is done, as we have had indicated to-day, by mutual agreement. It is certainly a point that the State gives most of the orders and pays most of the Bills. This may sound strange coming from my lips. "Why not", it may be asked, "let the market forces, the simple play of supply and demand, determine the size of the industry?" The answer is quite simple. In a case where there are only two manufacturers and a handful of buyers, of which two or three are overwhelmingly the largest, there is no certainty that the market forces will give the best results. It could well be that the withdrawal of one or two of these very large buyers from the market, even temporarily, would leave the whole industry in disarray.

Now that the White Paper on Defence has been published, it is possible to form some idea of the future size of the total aircraft industry, and it is probably wise at least to see whether the two main aircraft firms, and perhaps the two main engine firms, should not be amalgamated in order to strengthen their competitive position against American groups. But neither merger nor nationalisation, nor participation, will save any industry if it goes short of managerial and technical managerial capacity. It seems to me a complete delusion to suppose, as many do, that a merger or nationalisation or participation will in itself improve the supply of such managers. Doubt about the future of the industry will certainly be damaging in this respect. I conclude, then, that if we have to look outside the country for the expansion of the market it could well be that this could be most successfully achieved by collaboration with the French, as suggested by the Report. Indeed, it could produce its own technical fall-out for the benefit of industry generally. As a bonus, it could well be that the path to European unity can be laid with just such types of industrial agreements.

My Lords, I must thank the House for listening with patience to my maiden speech, in which, dealing with a subject which must be charged with emotion, I trust that I have remained within the customary bounds of being non-controversial.

4.52 p.m.

VISCOUNT WATKINSON

My Lords, it is a great pleasure to welcome to our counsels, the noble Lord, Lord Cole, a very distinguished industrialist, and one of whom I feel I may venture to say, after listening to his speech, that he is going to say what he has to say with considerable force and agreeable brevity. I am sure we shall welcome his speeches and listen to him most carefully in the future. May I personally, as one who has known him and admired him for a great many years, say with what great pleasure I listened to his speech here to-day?

My Lords, this is, as the noble Lord has just said, a difficult subject—one that it is easy to charge with emotion. I will do my best to endeavour not to mar the almost perfect symmetry of this debate so far, but I must say that it appears to me, looking at it from the point of view of the outside world, that we have not faced certain disagreeable facts. Many of us felt that it might have been better had we had Plowden first and the surgery afterwards. Indeed, a good many of us on this side of the House said so when we debated this matter over a year ago. As it turned out, we had the surgery first and Plowden in the middle. This, I think, makes it somewhat unfair to discuss this Report unless one is willing to discuss it against the background of what has happened to this great industry in the past eighteen months.

When I ventured to address your Lordships about a year ago on this subject, I said that I felt, from the export point of view—and it was from some fairly recent experience in export markets—that what was then forecast would be likely to damage in a very material fashion the prospects of this great industry. It is sad that I have to say to-day that, jobbing backwards over the past twelve months, I do not see anything that has happened to cause me to alter that point of view. It rather reinforces it. I think one has to say to-day that, looking at this from the point of view of selling British aircraft overseas, we are in grave danger of ceding our leading position in the technologies of aero-space to other countries, primarily the Americans.

There are no doubt noble Lords in this House who will say that they do not agree with this view. What I am expressing is the language of the market; what I am expressing is what our competitors say about us when they watch the way we have knocked this industry about in the past twelve months. And these are the facts with which those who seek to sell British aircraft overseas to-day have to cope. Therefore, I think it is fair, initially, just to look back for a moment and try to assess, I hope quite impartially, whether we have been right to proceed down this road, in order that we can judge what we may best do in the future. Because at least I think there is no division in this House that we want to see a strong and viable British aircraft industry in the future. Let me take one example in the balance sheet.

As I understand the figures as they have been recorded in the Press, I wonder whether we were wise to cancel a highly sophisticated aircraft, the TSR 2, at what I understand is likely to be a cost of something like £200 million (that is entirely lost money which can never be recovered), and to buy in its place a no doubt equally sophisticated aircraft, at a cost of some £300 million. In other words, my Lords, we have already spent on the Canberra replacement £500 mil- lion, with all the disadvantages of being labelled in every export market of the world as having to go for advanced aircraft to the Americans, being unable to make them satisfactorily for ourselves. This is something that it is disagreeable to have to say, but I am trying to present to this House the language of the market overseas as I see it.

My Lords, what is the other side of this medal? It is said that, despite the figures I have quoted (and I hope that, if they are wrong, the noble Lord, Lord Beswick, will correct me, when he replies), there has still been a large cost saving. All costs—and perhaps the noble Lord, Lord Plowden, would not disagree with this—are somewhat illusory when seen in terms of statistics. But, frankly, what is the cost of opting out of the aircraft industry for our sophisticated industrial nation? I think it is quite incalculable. And as I shortly have to go to the United States of America to try to help my Export Committee sell more British aircraft—particularly, in this event, the BAC 111—I think it is fair to ask ourselves whether what the Government have done in the past twelve months has made it easier or more difficult to sell that aircraft. And I do not think it is very difficult to answer that question.

Then we come to a second statement, and that is that, whether we were wise to buy abroad—this may or may not be true—in any case it does not present us with a dollar burden because we have had valuable concessions from the American Administration which will enable our industry to secure many valuable orders in the United States. I am afraid that I do not agree with the noble Lord, Lord Plowden, that this situation is very likely to materialise. I am not in any sense, of course, questioning the good faith of the American Administration; but they have Congress to deal with. They have the American lobbies and the pressure groups which, despite that of the British aircraft industry, are very much more powerful and successful in persuading their Government to do what they think is right. Therefore I say that we should be unwise to judge that these orders do not present a direct dollar drain, and therefore an increasing difficulty for my Committee, which is charged with the task of trying to balance trade between the United States and ourselves.

LORD PLOWDEN

My Lords, I did not say—at least, I did not mean to say—that I thought that this would necessarily result in orders. I said that I should be glad if it gave an opportunity. Expressing a personal opinion, I think it will be extremely hard to get orders for the British industries in the United States, just for the reason the noble Viscount has given.

VISCOUNT WATKINSON

My Lords, I am very grateful to the noble Lord for his intervention, because with his wide experience, both in Government and in industry, he has said, much better than I could have said myself, that we ought not to count too much on this particular balancing act. At the same time, as I said before, in the language of the market, whatever the arguments may be in this House, we have lost a leading place in this most important world market, at least for the moment.

My Lords, there it is. If we look at this, then, from the export point of view, I think one must say that we have made the task of those who seek to sell British aircraft round the world, either civil or military, a great deal more difficult. Yet I thought that we were living in an era and with a Government that always got its priorities right, and that certainly one of its overall priorities is the necessity for this country to earn its keep by selling more goods abroad. Certainly, that is what the members of the British National Export Council thought we were charged to do. Well, if that is so, then we need what perhaps I might call a total export concept; in other words, all actions of the Government—and I hope of industry—should be conducive towards increasing our opportunities to pay off our debts and earn our keep by selling more abroad. What I have to say to-day is that I do not think that what happened to the British aircraft industry in any way follows that particular dictum.

However, it is done; and in this kind of debate, which is clearly not very controversial, in an attempt to be constructive I should like now to try to say something on the constructive side. What has been done is done. We cannot recreate the TSR 2, however much it is a tragedy. We cannot alter a decision like the cancellation of the 1154; although I find it difficult to see why we are spending great sums of money on the 1127 which was already a somewhat outmoded concept when the previous Government placed an order for the 1154 to succeed it. Is this good planning? I am not sure.

My Lords, what can we do now? I notice that the Prime Minister the other day said that he hopes there will be a great debate about decisions on defence. It appears that there is going to be a great debate about many things. I hope there will be a great debate about the future of the British aircraft industry and about whether the recent decisions have been to its benefit and to that of all its workers, or to its detriment. I think a more constructive role might have been followed on some of these things. I am delighted to see that we are all agreed upon, for example, partnership in Europe, which the Report brings out most clearly and which is absolutely essential. But I must say that we cannot now have second thoughts again on something like the Concord, even if it is difficult, even if it is expensive. In my view there is no aircraft project in the world that does not cost a great deal more than was envisaged when it was in its first phases. Even with their technology and skill, the Americans found that they could not control the cost of aeroplanes or aerospace projects any more than we can.

Therefore we must not lose our nerve with the French. If we are partners we are partners all the way. If we want a joint industry, we must not lose our nerve if things get difficult. Secondly, we must not scuttle out of ELDO. This is perhaps not the particular subject of this debate, but it is in the Report and I think it is absolutely vital. I want to give only one reason. If we are not in ELDO with our European partners, then we shall have ceded the world monopoly of communications to the United States. Well, this may be a good thing; but I do not think that good allies are allies that are too unequal; though I entirely accept what the noble Lord, Lord Plowden, and others have said about the immense difference in scale between the American activities and our own. None the less, if we opt out of space communication, if we do not remain in ELDO, our children will regret it. I hope that there will be no scuttling from ELDO. My noble friend asked that some assurance might be given about that before this debate concludes. I hope that we may get that assurance.

I think we must determine to get back into the business. I do not disagree with what speakers before me have said. Of course we cannot do everything. We must not regard this as purely a prestige occupation or a status symbol, but we have to-day convinced too many of our customers that we are getting out of the business. We must do a great deal more if we are to get back, if we want to maintain anything like the enormous contribution that the British aero-space industry has in the past years made to our total export figures.

Lastly, as to the future of the industry itself. I venture to think that if certain parts of it want to merge, that perhaps is their business. I should have thought if it was in their commercial interests for them to do so they would get on with it. I would venture a view on this thorny problem, which fortunately nobody seems enamoured about—the problem of direct Government shareholding. I was pleased to hear the noble Lord, Lord Plowden, say that what he wanted was to get Government control off the back of the industry. I think that is what he said; he will correct me if I am wrong. I hope that this could be done without direct Government shareholding and participation. The Government, in my view, is a supremely honest, very awkward and extremely cumbersome bedfellow—if that is not mixing my metaphors too much. To have the Government with you in business which has to compete in a tough foreign market is to have quite an impossible situation. I think the Government will do so at their peril.

There will be plenty of opportunity elsewhere to debate these matters in the weeks to come, but I think—and it is my personal view based on some practical experience—that we have done this great industry a considerable disservice in the task of selling its goods overseas. Yet that is what we require from it. We require it to sell; otherwise our chances of increasing our exports and entering markets like the United States are small indeed. We cannot have it both ways. Therefore, without wishing at this stage to go further into what I believe were the tragic mistakes of the past, I should like to reinforce what my noble friend and others have said: that at least the industry should now be told where it stands, what it has to do; and that there should be no going back on our partnership with Europe either in aircraft or in space.

5.7 p.m.

LORD TREFGARNE

My Lords, I must begin by asking for your indulgence as this is the first time I have ventured to speak in your Lordships' House. Secondly, I must, according to custom, declare my interest. I am a director of a small, embryonic airline which hopes in the near future to order a small number of aeroplanes. I do not intend to take up a great many points from the Report of the noble Lord, Lord Plowden, but to enlarge upon one or two of the more important aspects, particularly in the civil field.

It seems to me that the difficulties in which the industry now finds itself have been brought about primarily by a lack of success in the export field, and that this lack of success has in turn been brought about, not so much by technical failings (though there have been some), nor by price (though prices may sometimes have been marginally higher), but by an apparent lack of moral support both from the Government of the day and from the State air Corporations. B.O.A.C., in particular, seem on occasions to have been less than fair. The vast deficit that they accumulated—and which was recently so conveniently written off—was brought about, they allege, by their having had to spend vast sums on introducing and operating what they judged to be uneconomic British aeroplanes. B.O.A.C. have never, so far as is known, been refused permission or foreign exchange to buy American planes—and they have often done so. I do not suggest that, in the interests of the British aircraft industry, such permission should always have been refused. It seems to me that perhaps there were one or two occasions when this purchase was essential. But was it always essential to buy these foreign aeroplanes? In particular, was it essential to buy the D.C. 7s to fill the gap caused by the delay in the Proteus engine for the Britannia? The Bristol Aircraft Company offered to supply Britannias fitted with Centaurus piston engines. Why was this offer not taken up?—rather than to spend many millions of precious dollars on an aircraft which remained in front line service for only a short time.

When the Comet l's met with their disasters, B.O.A.C. had no option but to order Boeing 707s. However, it was about this time that Vickers, in conjunction with B.O.A.C., were drawing up the specification for the VC 10. During the subsequent design and development period B.O.A.C. made at least one major change to the specification, leading to the Super VC 10. Then, when the present Chairman took office, he announced, in what appeared to be some haste, that B.O.A.C. had too many Super V.C. l0s on order and he proposed to cancel some 20 of the 30 or so that had been asked for. We are told that the then Minister of Aviation had given instructions to get B.O.A.C. "out of the red". Did that instruction grant authority for the mass cancellation of Bristol aircraft and the ordering of more 707s? Again, I would not deny that the initial acquisition of 707's was probably essential to keep B.O.A.C.'s position competitive, but was it right to order further 707s?

Perhaps I may digress for a moment in order to compare these two aircrafts. The VC 10 is certainly about £200,000 more expensive, and though its seat-mile costs are something higher, it is a second generation jet transport and, therefore, a much safer aircraft. For example, the primary control circuits on the VC 10 are in all cases duplicated while, in the event of a hydraulic control failure on the 707, the control system reverts to manual mode, which at once makes the aircraft much more difficult to control due to the great stick forces involved, which I am told can reach 100 lb. Indeed, the British Air Registration Board were so unhappy about some aspects of the 707 order placed by B.O.A.C. that they would not in the first instance issue a public transport certificate of airworthiness, and the first aircraft came across the Atlantic on a private category certificate.

Furthermore, the structural design of the VC 10 includes many fail-safe features not found in the 707. This involves a certain weight penalty, but safety and comfort are not free, and it is therefore hardly surprising that the VC 10 is marginally more expensive to operate, and perhaps B.O.A.C. have had occasion to complain on that ground. However, once they put the aircraft into service it became clear that these slight cost disad- vantages were of no importance, because they were offset by the higher load factors they were able to obtain by virtue of the VC l0s greater comfort, silence and so on. It is even now rumoured that the B.O.A.C. want to reinstate at least part of their cancelled order for VC 10s. But the damage they have already done to the export potential can surely be repaired only with difficulty.

B.E.A., on the other hand, have consistently bought from British manufacturers and have not amassed the vast deficit of B.O.A.C. It is perhaps a pity that Hawker Siddeley so readily acquiesced in B.E.A.'s requirement for an aircraft to fit precisely all of their routes. This necessitated an aircraft with a high maximum landing weight and, above all, a high zero fuel weight, both of which must result, and did result, in overall weight penalties. Why could not B.E.A. have solved their requirement for flexibility by buying some Tridents and some BAC 111s, and so allowed Hawker Siddeley to make the Trident a more attractive aircraft to the many airlines who bought the Boeing 727, which is, broadly speaking, comparable to the Trident?

Government support for the aircraft industry must lie largely in the military sphere, but not entirely. The recent loss of the Middle East Airlines order for VC l0s must be placed squarely on the Government's shoulders. The airline industry is very much puzzled by the Government's action in altering the arrangements for depreciation allowances, particularly in view of the mass military cancellations which occurred last year, which it was thought gave grounds for continued support for the industry in the military aircraft field.

In the light aircraft field, the Government have announced their support for various projects, such as the Britten-Norman Islander, and this is warmly welcomed. But announcements alone do not pay wages or buy materials. The much-vaunted grant of £600,000 to Beagle to develop their range of light aircraft was confirmed by the present Government when they took office, but has not yet been paid. Meanwhile, the brain-drain continues apace, and it may soon be too late. May I venture into the military sphere a moment, to mention the Beagle Basset? This aircraft was designed largely to R.A.F. requirements as a replacement for the Avro Anson, but to date only 20 have been ordered, and at least as many Ansons remain in service. I do not intend to make any further comment on the military field. Other noble Lords who are far more expert than I in that aspect will tell the story in detail.

In conclusion, may I suggest that the troubles of the industry are due not so much to poor technology, high prices and long deliveries—so often cited as the reasons for our lack of export success—as to the vicissitudes of the major customers. B.O.A.C. and B.E.A. should realise that they are the shop windows of the British aircraft industry, and they should be prepared to buy and operate British aircraft, even at some commercial penalty—although there is no evidence that this has ever been necessary. If they were to do that, the industry could look forward to a better and more secure future. I thank your Lordships.

5.16 p.m.

LORD KINGS NORTON

My Lords, I count myself fortunate in being the first to congratulate the noble Lord, Lord Trefgarne, on his maiden speech. I think that we have all been impressed by his deep knowledge of his subject. I hope that he will always take part in the debates in your Lordships' House upon aviation. May I, too, add my congratulations to those which the noble Lord, Lord Cole, has already had. His words deserve our deepest and most careful study.

I fear that my own contribution may be tinged with more emotion than his, because for nearly all my life I have been close to the aircraft industry, to its airframe companies, to its engine makers and to its great complex of accessory manufacturers. To-day, I am Chairman of the Air Registration Board, Chairman of the Governors of the College of Aeronautics and a director of Boulton Paul Aircraft Limited.

I mention these facts, not only by way of a declaration of interest, but to indicate that, though my present connection with the industry is not perhaps intimate, I have some qualification to take part in this debate, a qualification which is, I think, complemented by the fact that I have, since the end of the war, had ample opportunities to get to know other industries, and so, when appropriate, to make comparisons. I have made them, and they lead me to believe that the aerospace industry of this country is one of our great achievements. To use a term which I have picked up in my reading for this debate, it is a "leader" industry. I believe it to be a great national asset—at this moment of time, regrettably, a wasting asset; but this is a phase from which, quite undoubtedly, it can lift itself, and, if I read aright the recent speech in another place by the Minister of Aviation, a phase from which the Government—and, I hope, its successor—intends it shall be encouraged to lift itself.

This is an industry which has always had a high incidence of outstanding men. It still has them. Whoever else may have gone, the captains have not departed, but they will need encouragement to get the export figures back to the level of five years ago. I hope they will get it. This industry can be one of the biggest contributors to the credit side of the balance-of-payments account.

The industry has been widely criticised, but I believe, whatever its imperfections, any defects in its performance are due less to inherent faults than to the devastating effects of delayed and changed decisions. Whatever changes the future may hold, customers—and this means largely Government, not this Government particularly, but the great Whitehall machine—must make up their collective mind much more quickly in future, and it must stay made up. The Plowden Report brings this point out clearly, it is emphasised in the reservation of Mr. Aubrey Jones, and the noble Lord, Lord Plowden, has this afternoon emphasised it still more in a speech which I may say I greatly admired. Unfortunately, we do not seem to be agreed upon the measures to be taken to improve the working of the Government machine.

If the Guinness Book of Records ever turns its attention to technological firsts, and technological firsts in aviation in particular, it will be found that this country is near or at the top of the league. This country will be found, too, ever since the First World War, to have abandoned too many of what were subsequently found to be world-beating innovations. But the abandonment of innovation after the Second World War was a much more serious business than in between the wars. Innovation had become vastly more expensive, and its abandonment correspondingly costly.

Do your Lordships realise what the abandonment of the V 1000 transport has meant to this country? After an instruction to proceed to Vickers in 1952, a contract for one in 1953, a contract for six in 1954, at the end of 1955, six months before the date planned for the first flight of the prototype, the whole project was cancelled. That is how we wasted a large sum of money, and how we threw away the chance of a transatlantic aeroplane competitive and contemporary with the Boeing 707, after the nearly fatal error of the war-time decision to leave the development of transports to the U.S.A. while we concentrated on fighters. We are recovering the lost ground with the VC 10, but we came very near to not having that great aircraft either. Considering the blows it has sustained in this field of jet transport, I think the industry should be congratulated on its civil sextet, the VC 10, the BAC 111, the Trident, the HS 125, the HS 748 and the Herald.

This charge of abandonment of innovation is not a charge against the present Government but against Government in general. It is a charge against what I call the Whitehall machine. It is a charge against a national attitude which is more concerned with comfort and safety than the progress and initiative. But our place in the world depends upon our initiative, and our technological initiative in particular. What we can do when we try is exemplified by the jet propulsion story. What that story would have been but for the stimulus of war I do not know; I fear that it would have been different. But, in fact, led by Sir Frank Whittle, the British aircraft industry, and its engine component in particular, changed the face of aviation—no mean achievement. We led in vertical take-off, and we have nearly thrown away the lead. But, thank goodness!, not quite. The P 1127 was flying five years ago—and it had a predecessor—but we have had to wait until last week for the decision to order it in quantity. And the other great innovation of recent times was Dr. Wallis's swing-wing design. I remember it was in the early 1950s that he told me of the great 30-foot span radio-controlled models he had been flying. But the first swing-wing aeroplanes for the Royal Air Force, fifteen years later, are American.

I know as well as anyone that we cannot afford the development of all our bright ideas; but we must find a way of spotting the winners, and when we cannot afford to bring them to the starting gate alone we must look for partners. The policy of collaboration with European organisations, which has been mentioned several times this afternoon, is one which I think we must all support.

The Minister of Aviation has gone on record as saying—and the noble Lord, Lord Shackleton, this afternoon has confirmed it—that the present view of the Government is that there will be a likely reduction in the work force of the industry from 250,000 to not more than 200,000 in 1970. With respect, I suggest that we should not proceed on the assumption that there will be reduction but on the assumption that the industry is going to remain highly competitive with the American and French industries, and that the work force will adjust itself to the demand. Increased productivity may well mean an ultimate decrease in men employed, but assumptions of decrease are demoralising. The great danger is that they will lead not only to the inefficient dissipation or redistribution of workshop skills but to the loss of technological and design talent.

Already designers are leaving the industry to join the British-based design office of an American firm. This, indeed, is a very serious matter. I am informed that this company is offering about 40 per cent. more than the British aircraft industry is paying. I do not know what can be done about this, but if they are not already doing it, I suggest that the Department of Economic Affairs should see whether there is any remedy other than an auction, which will ultimately increase still more the price of aircraft.

I want to suggest that if for a time it is not possible to fill the British companies' design offices with aircraft developments, the companies should be encouraged not to cut down but to seek work appropriate to their expertise in other fields. I must reiterate that the aircraft industry is a highly sophisticated one. Its influence on the advance of technology in other industries has been, and is, significant. But to depend upon the process of technical "fall-out" and the casual translation of demoralised staff is a very poor way of benefiting from this influence.

There are two far better ways. It would be far preferable for the industry to apply its own expert knowledge of aerodynamics, structural engineering, hydraulics, electrics, mechanical engineering, and electronics in other less advanced areas of technology. This would have the advantage of maintaining the design staffs in existence, stimulating the other industries and providing the aircraft industry with a valuable diversification, and possibly growth. In the accessory side of the industry, and in the engine industry, this sort of thing is happening already to some extent. I believe it should happen more and extend into the airframe field. I am not proposing that the aircraft industry should take work out of other industries' mouths. There is so much technological work to be done that no such outcome need be contemplated. Where, for example, but in the aircraft industry could we effectively tackle the development of air-cushioned land transport?

The other way for industry at large to benefit from the advanced state of aircraft technology is educationally. We are fortunate in this country in having at Cranfield a unique establishment in which postgraduate studies in aircraft and areospace technology are side by side with postgraduate work in production engineering, mechanical engineering, materials, automobile engineering and management studies. Here, postgraduate students in these other fields I have mentioned are benefiting in the most effective way from their contact with the aircraft world. And, of course, the aircraft students, too, many of them with experience in the industry, are benefiting from their contacts with industrial attitudes different from their own. These people are sharing professorial staff, sharing facilities, and interchanging ideas. Cranfield, my Lords, is another national asset, and not for the aircraft industry alone.

A great deal of what I have said is said somewhat differently, and generally, I felt—and I hope that I am not unfair— a little less enthusiastically, in the Report of the Plowden Committee. In its appreciation of the aircraft industry it was, to me, a curious mixture of warmth and lukewarmth, the lukewarmth dropping to below room temperature in the view expressed in paragraph 210, that there would be cases in which, even in partnership with Europe, there was no recourse but dependence on the United States.

I, too, feel that the Report too readily concedes superiority, now and in the future, to that great, but not omnipotent, country. Their aircraft industry has its troubles, too. The advantage of their large domestic market is, of course, undoubted. But Europe provides a large market, too, and what we and our European collaborators need is an efficient market research organisation to assess its future demands. This should not be beyond their and our powers of co-operation. For me, one of the most important parts of the Plowden Report was the section in Chapter 27 on market research, and I think the industry should take it to heart.

In this important summing-up paragraph, which I have mentioned, paragraph 210, the point with which one is in absolute agreement is the point to which I have already briefly referred—increasing aircraft and aerospace exports. The industry has some excellent wares to sell. I have mentioned some of them earlier. One of its great difficulties is to meet orders on time. As the excellent performances of these British machines are demonstrated in service, other airlines want them, and often the delivery dates are discouraging to them. If only there were machines in course of construction in anticipation of demand, how different the picture would be, and how cumulative the effect on the order book! The best encouragement the Government could give the industry would be, for a time at least, to underwrite the production lines.

I have addressed your Lordships on two previous occasions, and on each I have mentioned the axiom which I ask your Lordships' forgiveness for repeating: the advance of the economy depends on the advance of technology and on the efficient management of our resources. The aircraft industry, with the nuclear energy industry and electronics industries, is in the van of technological progress. We cannot afford for it to be other than strong. If it is to be more compact, it must be the compactness of high productivity. High productivity in ideas is always found easy; for high productivity in aircraft per man per annum it needs good market research, quick and firm decisions, and the confidence of Government in its undoubted ability to deliver the goods. This confidence must be manifest. It has been not only doubts about delivery dates which have held back orders from abroad: it has been doubts about the continued existence of the industry. Those doubts must be liquidated, and what the noble Lord, Lord Shackleton, has said to-day gives me hope that they will.

Finally, the characteristic of the Report which I have heard criticised most—not here, but outside—has been the absence from it of any picture of the future. I wonder whether, despite the terms of reference given to the Committee, anyone should have expected such a picture. It is asking a lot that a Committee so strong in common sense, critical faculty, and industrial and administrative experience, should have also the gift of aerial clairvoyance. It was certain from the date of its appointment that the Committee would not have much of a fan mail, but, in fairness, criticism would, I think, have escalated to greater heights if a group not qualified in aeronautical technology had gone further than it has. But where there is no vision, my Lords, the people perish. In the present context, the people are the aircraft industry, and it is imperative that they see the way ahead, and a long way ahead.

Moreover, it is to them, and to the organisations close to them—the Royal Aeronautical Society and the Cranfield Society, which have already had honourable mention this afternoon—that we look for the vision of the future, for the steel successors to the Concord, for the extrapolations of vertical take-off technology, for the refined development of variable geometry, for the European space vehicles, and for the dramatic applications which are decided by aeronautical discoveries in other fields. This kind of vision, the vision of the engineers, must never be obscured. I hope that the Report of the Plowden Committee has made Government and industry look at themselves and each other constructively. Clearly, there is a major job of organisational streamlining to be done, and the sooner the better. For it is now urgent to look at the future, not through rose-coloured spectacles and, equally, not through black glasses but critically and sensibly to decide which are the objectives, middle and long term, on which we should now set our sights.

5.35 p.m.

VISCOUNT CALDECOTE

My Lords, in accordance with our usual practice, I must declare a close interest in the subject of to-day's debate, and I would emphasise that I speak on behalf of no one but myself. I should also like to offer congratulations to the noble Lord, Lord Trefgarne, on his excellent maiden speech full of interest and practical detail. I am sorry that I was out of the House when the noble Lord, Lord Cole, spoke, but I shall read his speech with tremendous interest.

As many noble Lords have already said in this debate, and as the Plowden Report says in its introduction, that Committee was set up because doubt had been cast on the future of this industry. Probably no Committee has ever done a job in more difficult circumstances. Its basis was shifting all the time, and it was under considerable pressure to report earlier than it wished to do. In spite of all the criticisms that have been made, we ought to be grateful to the noble Lord, Lord Plowden, and his colleagues, for the very clear conclusion they reached on the great importance to this country of a substantial and flourishing aircraft industry. No doubt some of the less acceptable recommendations of the Report are due to the great pressure of time under which the Committee were working. But with so many problems identified, and after such prolonged study and useful analysis, it was, I think, a little disappointing, though perhaps inevitable, that so much attention has been directed to the group of recommendations concerning mergers and Government participation in the industry. It seems to me that these are at best irrelevant, and of secondary importance and at worst a positive interference to increased efficiency.

Here I must venture to disagree with the noble Lord, Lord Plowden. In the 1960 mergers there was a clear policy that relatively small companies were to be brought together to make more viable units of adequate strength to compete with our great American competitors. I believe that that was a right policy. But as one who went through the mergers, I would assure your Lordships that it is not an easy matter. It involves a great deal of sweat and toil, and a great deal of diversion from the real job of efficient management of the work of the company. If there is a real and useful objective, then all the sweat and toil and dislocation are worth while. But we have to remember that the design teams—and this is where the main problem lies—exist as coherent units. They cannot be moved about. Their members cannot be re-allocated and still have an effective design team in being at the end of the operation. They need new design projects every two, three or four years, perhaps, to keep them strong and in being.

This need exists whether the teams are in one, two or three companies. The teams have still to be loaded, and contracts have to be placed with them at reasonable intervals, if they are to survive. The mere throwing them together in one company does not seem to me in any way to solve this problem, or to achieve anything in itself. Sensible forward planning is still of the utmost importance. If the load falls, and one company ceases to be viable, then, clearly, there is a case for merger, but in other circumstances it does not seem to me that this idea of merging as a solution to these problems has any merit at all.

So let us turn to more important issues than mergers and ownership. Let us face the fact that serious doubts have been cast on the traditional primary role of this industry, which has always been to provide equipment for the Armed Services and airlines, and without which its very existence is threatened. In Chapter 12 of the Report, the recommendations of the Ministry of Defence for the future are set out. The recommendations are, briefly, that we should no longer depend on home production to meet British requirements. We should not depend on home production alone. That in itself is not an unreasonable proposal, but surely it goes far too far in recommending dependence on America and other countries for the vast majority of our development, and absolute dependence on America for the largest and most com- plex types. I am very glad that in another place the Minister of Aviation has made it clear that the Government do not accept these recommendations completely. Such a policy would not even lead to the conclusion contained in paragraph 151, that, the research and development competence proposed would enable British manufacturers to retain a foothold in the new techniques of airframe, aero-engines, electronics, and aircraft equipment development. A foothold?—possibly a toe-hold. And, as for a climber clinging to the face of a mountain, a toe-hold which would gradually get weaker and weaker until the climber falls and becomes entirely dependent on the rope for his support. And in this case it is found that the end of the rope is in the strong and capable hands of the United States of America.

Policies such as these are policies of despair, tragic in their outcome and virtually irreversible; for as with cutting down a great tree, the strength built up over a century can be destroyed in a day by a wrong policy decision. Of course, my Lords, purchases from abroad should not be ruled out; of course collaboration in development has an important part to play. But if the British aero-space industry is to remain in the forefront of technology, where it must be if it is not to perish (and here I must say how much I enjoyed the speech of the noble Lord, Lord Kings Norton), it must undertake a reasonable proportion of development of complex equipment of all types, so long as it is needed. It is often argued that the technological resources required to do this can be much better employed elsewhere—and I think the noble Lord, Lord Plowden, used this argument. But, my Lords, where? This argument is valid only if the resources released can produce exports greater in value than the foreign exchange needed for the purchase of the equipment.

So let us turn to the future. Let us see how the damage over the past years may be repaired and strength renewed. In another place the Minister of Aviation has already made a very firm statement, which has been quoted by the noble Earl, Lord Jellicoe. It was a fine, courageous statement, and the only concern in the industry is whether it will be implemented. I hope that the noble Lord, Lord Beswick, who is to reply, will confirm firmly, without any equivocation at all, that this policy is going to be implemented. I hope he will remove any lingering doubt that that statement was mere words intended to influence events at the end of this month. The fact is that a huge slab of research and development work has been removed from the industry by the cancellation at the beginning of this year; and to minimise the damage caused by this action, and to implement the declared policy of Her Majesty's Government, immediate action is needed.

Broadly, as has already been said, the current production is no problem. The order books of the major airframe and aero-engine companies run to many millions of pounds. The long-term position is not too bad either, some of the projects were mentioned by the noble Earl, Lord Jellicoe, such as the Jaguar, the variable geometry air-bus and others, but it is necessary to speed up decisions on R. and D. work in the immediate future to maintain the strong teams which are needed to implement the declared policy. Where immediate decisions on development programme, such as the airbus or similar projects, cannot be taken, studies must be commissioned on important aspects of these projects. In fields where new Defence equipment will be needed in the 1970s, further feasibility studies on military aircraft, such as the successor to the C 130, missiles and equipment should be put in hand without delay, so that whether development ultimately proceeds in collaboration, or in the United Kingdom alone, the strength and competence of our design teams may be fully maintained.

There is another way in which the Government can greatly help in this respect. At the moment, the Government have virtually no coherent policy on space. Could we not expedite the taking of decisions in this field so that contracts may be placed for space activity? Again, this would help to maintain our design and development teams in a healthy state. There must be long-term planning, too, now that the Defence Review is complete, so as to bring stability, which is so essential for industrial morale and efficiency.

I believe that one of the fair and major criticisms of the Plowden Committee's Report is that it made virtually no contribution towards solving the basic problem of conflict between a long R. and D. cycle of eight to ten years, and a short political cycle of one to four years. I believe that this problem will be solved only by accepting that once a long-term policy has been worked out it should be modified only on the same long-term basis on which it was formulated. In this connection, I would draw your Lordships' attention to the proposals of the Royal Aeronautical Society for an Aero-space Planning Authority analogous to the Atomic Energy Authority.

There are many problems, but I am sure that those proposals are well worth looking at. We welcome the statement made by the Minister of Aviation in another place that the Government accepts the Plowden Committee's recommendations to take industry fully into its confidence in the future procurement plans, and the statement by the Minister that we shall be doing this in order to provide a programme with more stability than in recent years. We look forward to this consultation as being of tremendous importance for the future. Outside industry, I think it is probably difficult for noble Lords to appreciate the appalling dislocation and the inefficiency that results from cancellations, abrupt changes of policy and delays in decision taking. Ultimately, what really matters is the increase in overall efficiency of the whole procurement machine. This is a problem to the solution of which both Government and industry must contribute.

Probably the biggest single problem on Defence procurement has been that of escalating costs, particularly of research and development work. This is a combined problem. Industry must become much more efficient at estimating costs for a given task, and in controlling costs of development. The Government must not complicate and confuse the task by excessive demands on performance and by delays in essential decisions. But what is needed, above all, is greater discipline and clarity—discipline to enforce the best possible accuracy of estimating and control of costs, and clarity to prevent confusing and blurring of responsibilities.

In my view, two major changes are needed: first, an entirely new outlook on Government organisation for the management of Defence projects. The principle must be accepted (I have said this before in your Lordships' House, I make no apologies for saying it again) of personal responsibility combined with full authority over financial, contractual, technical production and operational aspects within defined ample limits. We must give that responsibility to one man, to a project manager. In my view, he should be a Ministry of Defence man, with all the resources of the Ministry of Aviation behind him on technical issues. He must have authority to switch allocated resources to meet the demands of the programme. Only in this way can modern management techniques, such as PERT (Programme Evaluation Review Technique), be effectively used.

Many people talk about PERT as if it were a magic solution to all problems. All it does is to indicate whether the programme is getting behind, and the precise part of the programme which is getting behind. It is then necessary to take action to see that more effort is concentrated on that part of the problem, to recover the time that has been lost and so prevent the final completion date going still further out. Time is money and it is no good being cheeseparing in the early stages of a development contract, trying to save money when ultimately the final completion will be delayed, for that will inevitably mean escalation of costs. Equally, superior performance costs money, and this project director must be free to influence the design, to prevent wasted effort through striving for the last 5 per cent. of performance.

When discussing this with people who are interested it is often argued that it may be a fine proposal the men to do this job just do not exist in the Government service. If that is the case, they must be trained and arrangements must be made to keep them in the Government service, neither of these things will happen until such jobs are specified and created. In the first place, it may be essential to recruit from outside the Government service for men to fill such jobs as these.

Secondly—and I make these suggestions with great respect to another place, who have the prime responsibility for financial control—I believe there must be a completely new Parliamentary approach to cost control. The Auditor General's comments are always penetrating and relevant, as are those of the Public Accounts Committee. But they are largely post-audits, locking the safe after the money has gone. The powers of the Select Committee on Estimates should, in my view, be strengthened and adequate staff provided for it. To be effective, these Committees must have much greater information than they now have. Why should we not publish full details, as is done in America, of every major research and development contract?

There may be reasons for not publishing full details of production contracts, because numbers would be disclosed; why not publish full details of the cost of research and development contracts each year? When increases occur, let industry and Government Departments be put "on the mat" before the relevant Select Committee; let them explain the reasons, whether they be bad estimating, delays in decision taking, inadequate control, increased complexity or just plain bad luck. I would emphasise that I am not proposing more detailed Government control—quite the reverse. What I am proposing is more effective and less onerous Government control, which is what we are after.

LORD SHACKLETON

My Lords, may I interrupt the noble Viscount? I am very interested in what he is saying. As part of this, and as a means of reducing the amount of Government control, I should be interested in his views on the possibility of having firms give their costs after the completion of either research and development projects or on production. They make their estimates before, this could be a question of confidence. I realise that it is a delicate one, and since the noble Viscount occupies a delicate position, almost comparable to that of a Minister, in relation to his industry, he may prefer not to answer that question.

VISCOUNT CALDECOTE

My Lords, the noble Lord has drawn attention to a very delicate point, so far as research and development contracts are concerned, there is no difficulty at all; there is full disclosure of costs already, because these are normally done on a cost-plus basis. But the problem arises on fixed-price contracts (and this is entirely my own personal view), because the rate of profit allowed on them by the Government is so ridiculously small. Noble Lords will appreciate that no business can run on a gross profit of 6, 7 or 8 per cent. The sort of profit on which the normal business runs is 12 or 15 per cent., or even more. If figures of that kind—let us say 15 per cent.—were allowed by the Treasury on fixed-price contracts, in my view there would be no difficulty at all about presuading the industry that full disclosure of costs should take place, because then we should negotiate on the basis of the 15 per cent. profit rate. If we were very clever in doing the work, we should make more; if we were not so clever, we should make less. But it is quite impossible to negotiate on the basis of full disclosure of costs with a profit rate of 7 or 8 per cent. I do not know whether that answers the noble Lord.

LORD SHACKLETON

Not quite; because if I understood the noble Viscount correctly, firms in such circumstances would not wish to publish their costs because the result would be so depressing to their workers or their shareholders. At some stage they have to "come clean". I am sure this is not really what the noble Viscount is saying. I am saying that as a measure of confidence in this matter, particularly in relation to this question of Government control, if post-costs could be given freely and examined, this might lead to greater confidence, and possibly a little more relaxation of control.

VISCOUNT CALDECOTE

I was explaining to the noble Lord that in my view—it is only my personal view—there would not be any difficulty about persuading companies to disclose actual costs if they were based on a profit rate of, say, 15 per cent.

I should also like to welcome the statement made in another place by the Minister of Aviation when he was talking about one of the Committee's recommendations. He said, speaking of the Committee: In particular it stressed the need to reduce the detailed, technical and financial control of the industry exercised by my Department. I have decided to have a joint examination of these problems and am discussing them with the Society of British Aerospace Companies."—[OFFICIAL REPORT (Commons), Vol. 723 (No. 38) col 898: 1/2/66.] I hope that these discussions will go ahead and make real progress, because this is a very important aspect of the Plowden Committee's recommendations with which I am in full agreement. To return to the proposal that I was making earlier, to which this statement by the Government is very relevant, I very much hope that in the future Government and industry will be able to go along, each responsible in its own sphere for any changes in estimates that occur during, for instance, a development contract. I hope that they will be able to account separately, and so far as possible publicly, for their actions, for I am sure this is the shortest way to better discipline and control of costs. But these two proposals go hand in hand. For without the personal responsibility I do not believe that one will ever get down to the real facts and the truth of the case, and we shall never get the improvement we need, since so many of these issues get blurred by the complex committee structure.

The fact is that in Government, as in industry, administration by gifted amateurs must give place to control by competent professionals. Then, as the Ministry of Defence and the Treasury gained confidence in the estimates that were given to them by the Government Departments, and by industry, we should reach a stage where the forward planning of Defence budgeting would become very much easier, and it would greatly facilitate giving a maximum proportion of research and development work for British Services' equipment to British industry. In my view, progress along these lines is of vital importance in implementing the Government's declared policy.

So much more could be said—I have spoken too long already—on the value and practical problems of international collaboration; on how to choose the right project, and how to increase productivity of the industry; how to make the best use of technological fall-out; how to increase exports. But all these problems, and many more, are already being actively studied by the industry. They are problems not confined to the aircraft industry, and I draw attention in that respect to paragraph 207 of the Committee's Report, in which, emphasising the importance of the aircraft industry as a technological leader, and the difficulty of competing with the United States in such an industry, the Committee say: Although this dilemma is particularly sharp in the aircraft industry, it is by no means confined to aircraft … And they go on to say that, for reasons which appear earlier in the Report: … we cannot afford to admit defeat in this particular industry while hoping that solutions will be found in others. Rather we must seek a solution here which may also have more general application. I make no apology for repeating this point, which has been made already by the noble Lord, Lord Plowden, because I believe it to be of such paramount importance. It is only too true that these same problems are arising in many major technological fields, such as nuclear power and computers.

It is easy enough to rely on American know-how, through licences or subsidiaries of American companies. Certainly that would be the softest option; and it is tempting, too, because it allows resources to be diverted to objectives which in the short term, and particularly in times like March, 1966, are particularly attractive to democratic Governments. But does such a policy lead in the long term to worthwhile objectives? Will it produce the kind of country in which we want our children to brought up? The right answer is surely an emphatic. No. For, however generous and farsighted Americans are, the policy of dependence cannot be right or consistent with the maintenance of enterprise and of the self-respect of a great nation. To remain independent and able to contribute to the European Community as an independent force will require sacrifice now in support of future prosperity. As in aircraft, so in other fields this is a choice that must be made. I hope that the choice will be faced and action taken which will indeed lead to the maintenance of a substantial and prosperous British aircraft industry, not primarily for the sake of those who work in it, for the great benefit of the whole nation.

6.2 p.m.

LORD KENNET

My Lords, may I draw your attention for a moment to one or two cases on the overseas side—to difficulties in respect of overseas business of the aircraft industry—which happen to have come to my attention recently. A few weeks before the upheaval in Nigeria I happened to be in that country and learned that there was a smooth running arrangement between B.O.A.C. and Nigerian Airways, whereby we provided the VC 10 for the Nigerian Airways and trained the Nigerian aircrew through B.O.A.C. as fast as we could. There was at that time a Minister of Aviation in Nigeria called Mr. Jaja Wachuku. He was already fairly well known for an episode when he was a Nigerian negotiator at the Geneva Disarmament talks, and had said that personally he greatly hoped that there would be some disarmament one day, because then Nigeria and other countries like that would be able to buy some second-hand weapons.

When he came to be the Minister of Aviation of his country, the Boeing Aircraft Corporation and Pan-American Airways saw a chance to try to upset the British-Nigerian arrangement, then in vigour. They sent to Nigeria a young woman who became known in the Nigerian Press as the "100,000-dollar girl". I was never able to find out what the 100,000 dollars was—whether it was her annual salary, or whether it was the total cost of the advertising campaign which she carried on. She was always being photographed going in and out of glass doors in Lagos and she created quite a national sensation. The Minister of Aviation, it was universally believed, accepted a "dash", a bribe, of some tens of thousands of pounds. It created such a scandal that he was expelled by his own Party, he could not be unseated from the Government. Far from that, he succeeded in sacking the administrative director of his own national airline, and in taking on that job himself as well as the political job of being Minister. One of the happier results of the tragic coup d'état in Nigeria recently has, I understand, been that that particular American-Nigeria deal is off, and that they are back with B.O.A.C. as originally planned.

I was recently with an all-Party Parliamentary mission in Rome. I went with friends, one Conservative and one Liberal, from the House of Commons, to talk with Italian Parliamentarians about the long-term projects for a European aviation industry. We found a universal agreement I think in all the Italian Parties in what they call the democratic sector—that is, everybody except the Communists—that there should be a West European aircraft industry, and that this should be protected and caused to grow up in an orderly way over the coming years.

The great case that we talked about was the re-equipment of the Italian national airline Alitalia, wheer there had been an offer from British Airways Corporation and an offer from the Douglas Corporation. As with all such deals, the choice was terribly difficult and complicated. I went into it as fully as I could from a layman's point of view. Both companies offered a bit of production to the Italian aircraft industry. The British company offered an element of joint design in an aeroplane in regard to which the Italians might want to have a say in the precise specifications. By and large, my own conclusion as a layman was that the American offer was, for the needs of the Italian airline, 1 or 2 per cent. better, if everything was taken into consideration, or 1 or 2 per cent. preferable. The Italian airline has a remit from the Italian Parliament and State to conduct a profitable airline according to economic and technical criteria. I think therefore that the provisional decision that they have taken to acquire D.C.9s, and not BAC.111s, is justifiable according to technical and economic criteria.

But there are also long-term political criteria. Do we want to have an aircraft industry in Western Europe in twenty or thirty years' time? If we do, I think it would probably be a proper object of State intervention in our different countries, and of collaboration between the Governments in our different countries, to ensure that where possible and where reasonable our airlines buy European. This is just a case which happens to have been in point in the last weeks.

May I now turn your Lordships' attention to ten years' back, to the case which has already been mentioned, that of Dr. Barnes Wallis and the Swallow, his radio-controlled swing-wing aircraft which was flying so long ago. I should like to ask my noble friend who is to reply whether he can throw any light upon a story which appeared in the New Scientist of February 24, last week's issue. This story said that when Dr. Barnes Wallis brought his plans to the Government they financed it to a certain stage and then said, "Sorry, we have no more money." I am talking about ten or twelve years ago. They said, "What you ought to do is to go to a certain United States organisation based in Paris which had authority and responsibility to support work in Europe"—I repeat "in Europe"—"which might be of value to NATO". Dr. Barnes Wallis did this and, according to the story in the New Scientist, the plans and drawings and everything were forwarded straight to the American industry in the United States. And the end of the story we now know: we are buying the F.111 from them.

Is this true? Is there any danger of it repeating itself? What are we to think of the story yesterday or the day before in regard to Mr. Cockerell and the Hovercraft? What interpretation should the public put on the fact that the National Research and Development Board is authorising the manufacture of Cockerell-designed Hovercraft in the United States and in Japan under licence? Is it worth it just from the point of view of the licence royalties we can get? Are we quite certain that even now we could not throw caution to the wind and thumb that thing which I think is an obvious winner for the future—if you have ever seen it, it is an obvious winner—up to the hilt, and keep the manufacture in this country, or at any rate in a European consortium of manufacturers?

LORD SHACKLETON

My Lords, may I interrupt my noble friend? I am not in a position to comment on the Hovercraft incident, which is rather recent. I did inquire some while ago—I saw the story in question—into the swing-wing story of Barnes Wallis's aircraft. I have been assured by those who have been closely involved that of course the American F.111 swing-wing aircraft is of a quite different design from the Barnes Wallis one. I would not suggest for one moment that his work did not lend a great deal of confidence to this development. I am as sure that it does not arise directly out of it.

LORD KENNET

I thank my noble friend for that clarification. In general, I agree with so many noble Lords who have said that the aircraft industry is a sort of test case for advanced technology industry in general. What applies to it applies generally to the computer industry, to man-made fibres, to power producing reactors, to reactors for desalination—all the kinds of things on which this country is bound to be living in ten or twenty years' time. This is the area on which we are going to have to live from now on.

If and when the proposed conference of aviation Ministers comes about—and I hope it will come about soon; though, of course, one sees the force of the argument that the domestic uncertainties and consultations must be carried through before we can take the lead in calling such a conference—I hope the Government will have a look at the possibility of joint production, with Western European companies joining themselves together, on the analogy of the oil companies which are jointly owned by this country and Holland, and there are a few such examples already. A complete integration of these industries would in the long run be the best solution.

We should make no bones about it. What we are talking about are the dangers proposed to the economic future of Western Europe by American competition. To say that, is not in any way to criticise the United States. It is not their fault that they are enormous, or that they are the richest country in the world, or that they are the biggest exporters and builders of aircraft in the world. But one can see a conflict in American policy and in the mind of American policy-makers. On the one hand, they are in favour of West European economic integration as well as of Atlantic integration. On the other hand, they are in favour of commercial freedom and good fast business. These two aims cannot be pursued with full energy at the same time without coming into conflict. I would conclude by saying that if one's best friend is an economic hurricane, it is justifiable to make sure that one has an economic umbrella—not a national umbrella, but perhaps a Continental one.

6.12 p.m.

LORD MERRIVALE

My Lords, it is highly significant that the Committee should have made out such a strong case in favour of co-operative ventures; that is, European collaboration. I would agree with the Committee that a greater effort is required than has been exercised in the past, with a clearer sense of direc- tion. This clearer sense of direction which was pressed for in the Committee's Report can surely emerge only if there is a clearer political sense of direction.

As has been stressed by other speakers, a comprehensive policy of collaboration with France should be sought after, but we should not overlook the advantages of maintaining a close liaison with Germany, Italy and Holland. For, as was mentioned in the Plowden Report, the Western European market for military aircraft is three and a half times the size of our own, and nearly four times the size of our own for civil aircraft. However, apart from France, liaison and co-operation might perhaps be more rewarding with Italy and Holland, in view of the increasing dependence of Germany on the United States. I feel, too, that the partnership with France must be backed—or should I say led—by a much stronger political will for it to be really effective.

Appendix L, on pages 136–137, lists the main collaboration projects on which this country is at present engaged. With France one sees that there are only research and development agreements and a couple of projects under discussion. The production agreements with other European countries are of somewhat lesser importance. So there is still much to be done. Apart from the practicability of collaboration, the first essential is surely a desire to align, so far as practicable, one's political aims and objectives with those of one's partners. What are the Government doing in this respect?

The noble Lord, Lord Shackleton, said earlier in the debate that there were political implications in the setting up of this Aviation Ministers' Conference at the end of the year. But is this going far enough? A great opportunity was missed in the realm of decisions with a political implication when the Government decided to order 50 F 111A's instead of the Spey-engined Mirage IV, which, we are told by the manufacturers, could have been supplied in substantial quantity by 1969, with a suitable avionics fit—that is, including the E.M.D., Anti-lope, a forward radar. This would have put it well within the TSR 2 requirement.

LORD SHACKLETON

My Lords, may I interrupt the noble Lord to tell him one thing, flatly and categorically? It would not have met the TSR 2 requirement.

LORD MERRIVALE

Perhaps one can beg to differ on this.

LORD SHACKLETON

I happen to have the facts. The noble Lord does not.

LORD MERRIVALE

Then I bow to the noble Lord's greater wisdom.

LORD SHACKLETON

Knowledge, not wisdom.

EARL JELLICOE

My Lords, may I interrupt my noble friend to ask the noble Lord in what important respects it would have fallen behind the TSR 2 requirement?

LORD SHACKLETON

Not to-night.

LORD MERRIVALE

I thank my noble friend for that useful intervention. Perhaps I may continue. I should like to mention an article which I recently read in a French paper, L'Express. I should like to translate a short passage, which is as follows: Does Mr. Wilson not realise, M. Pierre Messmer's entourage were saying, that the United States are deliberately out to break the aeronautical independence of Europe. Therefore, a Government decision in favour of the joint venture, the Spey-Mirage, could have been a political choice supporting European independence.

Again, according to the information I have—which seems to be different from that which the noble Lord has—it was the best technical and operational alternative to the F 111A. Last Wednesday, the Foreign Secretary, Mr. Michael Stewart, when addressing British and French editors at a conference organised by the International Publishing Corporation, said that Britain and France needed each other: we were discovering a new style of relationship in trade, business and science, and Britain was determined to make a success of joint projects. He also went on to say: I believe it will often be desirable to broaden the Anglo-French partnership to include those other Europeans who may wish to join. So far so good, and from those words one might well imagine that there was a political tendency to look more towards Europe. On studying the Defence White Paper, one reads that defence must be the servant of foreign policy, not its master", but at the end of one's study of this White Paper one comes to the conclusion that the servant is, equipment-wise and politically, still more dependent on the United States. We see, too, that we must either reduce or share our commitments. The emphasis at the moment would seem to be on the latter—that is, on sharing our commitments. at what political price vis-à-vis the United States and not Europe? This kind of interdependence with the United States might well affect our chances or the timing of our entry into Europe.

The Plowden Report rightly stresses the need, too, for a political initiative with a strong momentum, if progress in interdependence in aircraft development and production is to be achieved over the next five or ten years. Regarding a conference of European Aviation Ministers, I am wondering whether such a suggestion could not best be initiated within the Western European Union organisation, starting off with the main Common Market countries and ourselves. I am sure that we should all agree that a harmonisation of requirements is essential for effective collaboration.

Bearing in mind the remarks in paragraph 293 of the Report, to the effect that the Ministry of Defence should make a maximum effort towards this end, with our European allies, would the noble Lord, Lord Beswick, not agree that the key to this problem lies mainly in closer co-operation and a better understanding between his right honourable friend the Minister of Defence, Mr. Denis Healey, and Mr. Pierre Messmer, and their respective Departments? So far as one can gather from the Defence Minister's remarks in another place last Tuesday, there is shortly to be a meeting between Mr. Healey and Mr. Messmer to discuss collaborative projects. But there has been no mention of talks on harmonising military requirements, or of discussions on Defence commitments.

At this point, I feel I should mention that France has already honourably been able to trim her foreign commitments and, while remaining faithful to her friends, has avoided taking on heavy obligations to support an American position, or posture, in the Far East with which she does not agree. She has also been able to reduce her forces in Germany, and, finally, to a very large extent, she has relied on French manufactured military equipment. For instance, the French Air Force is equipped entirely with French aircraft.

On the civil side, the picture would appear to be a little rosier. B.O.A.C. and Air France have an equal requirement for the Concord, and at the other end of the scale, following Mr. Mulley's visit to Paris on February 17, the French Council of Ministers last week recognised the interest of proposals for an Anglo-French air-bus. Mr. Pisani, the Minister of Equipment, spoke of the advantages, especially in Europe, of a big subsonic aircraft with a capacity of 200 to 250 passengers, operating in stages of 600 to 1,000 miles at two-thirds of the cost of present air fares.

The noble Lord, Lord Shackleton, referred to the setting up of a Conference of Aviation Ministers towards the end of the year. But prior to the setting up of such a Conference, I am wondering whether one should not endeavour to investigate talks between the French and British Ministers of Defence along the lines I have adumbrated. Finally, it would seem to me that the harmonisation of our Anglo-French civil aircraft requirements and its spread to Europe is encouraging, but I should like to ask the noble Lord, Lord Beswick, what are the Government's intentions regarding the harmonisation of our military aircraft requirements.

6.27 p.m.

LORD BESWICK

My Lords, we have had a most interesting and useful debate, and I should like to say at the outset how agreeable it is for me to be able to take part in an aviation debate in your Lordships' House. I confess that in earlier years, at the other end of this building, we did not always refer to the discussions taking place in your Lordships' House in the most generous terms. But invariably it was said that the debates on aviation were debates which one ought to read, and they were always considered to be most authoritative and informative. Some of the Members of your Lordships' House who used to take part in those debates—Lord Brabazon of Tara, Lord Winster and Lord Nathan—have now passed on, but, clearly, from the evidence before us to-day, we still have a number whose authority is absolutely unimpeachable.

We have been most fortunate to have with us the President of the S.B.A.C., the Chairman of the Air Registration Board, and the Chairman of the Governors of Cranfield Aeronautical College. In addition, we have here the noble Viscount, Lord Watkinson, a former Minister of Aviation, whose taste for controversy has not been lost as a result of his transference to this House, and the two noble Lords who made their maiden speeches to-day. One was the noble Lord, Lord Trefgarne, whose pungent style was very reminiscent, if I may say so, of that of his father. I only regret that he is speaking from that side of the House and not this. The other was the noble Lord, Lord Cole, and, clearly, with his wide experience of industry and his clarity of expression, we are going to find his observations on aviation of great value. We have had all this pooling of constructive thought and are particularly grateful to the noble Earl, Lord Jellicoe, for providing us with the opportunity for this debate. Like my noble friend Lord Shackleton, I thank him for the constructive way in which he approached this subject, and I personally found what he had to say most instructive. Then, of course, we are especially fortunate in having with us this afternoon the noble Lord who has given his name to this Report, and I should like to add my appreciation to that already expressed to the noble Lord, Lord Plowden, for the public-spirited way in which he and his colleagues undertook a task which would have been exacting in any case but which, in the particular circumstances in which they had to discharge it, I think lesser spirits might well have given up halfway through the year. I thought the paragraph in the Report in which they referred to the "year of upheavals", and to the fact that this had meant that their task was made more difficult, was a most engaging exercise in restraint.

My Lords, I think it is now rather more than ten years since, as a spokesman for the Labour Party in another place, I asked for a full-scale authoritative, grassroots inquiry into the aircraft industry. The example we had before us at that time, the American example, was the Finletter Report, which came out earlier than Project Horizon, which I think many people pointed to as being an example of the sort of thing which ought to be done in this country. At that time, ten years ago, when we were asking for an inquiry of this kind, optimism was the order of the day. I recall that there used to be great, expensive advertisements in the newspapers advertising British aircraft. All the resources of public relations were brought to bear on boosting up this industry. I cannot myself think that this extravagant public relations activity ever sold one British aircraft to the British people. I could not see that a reader of the Daily Express, looking at these half-page advertisements, ever thought that he would go out and buy one of the products to which reference was made.

However, the atmosphere created by that type of publicity meant that it was most difficult in those days to have an objective, critical appraisal of the industry; and we thought that, with this public relations activity, and with the equally difficult and dangerous curtain that was drawn over this field by security, it was essential then to have someone who would be given the opportunity of cutting through this mush and getting at the facts. It is a tragedy that the inquiry did not come sooner. Now that it has come, from that optimism—that quite unqualified optimism—which was displayed ten years ago there is a tendency to-day, I think, to have an equally unmerited pessimism. I would say to the noble Lord, Lord Plowden, that I think some people tend to think of the Report for which his Committee were responsible as being a little too pessimistic, and I was therefore very glad that he opened his speech this afternoon by disclaiming pessimism and by calling attention, quite properly, to those paragraphs of the Report which underlined his faith in the future of the British aircraft industry.

But the noble Lord went on to give some words of caution, and he gave interesting figures to support his view that caution was necessary when we were contemplating investing national resources in aircraft production. I was most impressed, as I think was the noble Lord, Lord Cole (because he referred to them), by the figures given in paragraphs 64, 65 and 67 of the Report. It is made clear there that, leaving out the Communist countries, production in the United States currently accounts for 80 per cent. of world production of aircraft, in terms of value. Alongside that, the British industry's share is 8 per cent. The United States' share of world exports is something like 60 to 70 per cent., whereas our share of the total of world exports in aircraft has fallen from 33 per cent. in 1959 to 14 per cent. in 1964. Then in paragraph 67 we read: In spite of the scale of American exports, their home market is nine times larger than their export sales. This is against the British ratio of 3½ to 1.

If we take those figures in conjunction with the hard facts given in the Plowden Report about the reduction of unit costs which are made possible by long production runs, anyone who is predisposed to defeatism might well say that the United States, which dominates the market to-day, will monopolise it to-morrow. But I absolutely agree with the noble Earl, Lord Jellicoe, and the noble Viscount, Lord Caldecote, that it is not in the interests of this country, certainly, or of Europe—or, in the wider political sense, in the long-term interests of the United States itself—that there should be only one aircraft industry in the Western World. And that belief, I can assure the noble Viscount, Lord Caldecote, who asked for such an assurance, is the view of Her Majesty's Government. But if we accept that, then the question arises: what precisely are we to do about it?

I personally confess—and here again I was rather sorry that the Plowden Report was not able to make more hard and precise recommendations—that I am inclined to agree with those who have already said that the mere fact of merging two airframe companies into one, or having 100 per cent. public interest, as against a majority or minority interest, will not of itself be the answer to our difficulties. But I repeat "of itself", because I believe that a part-public ownership can assist in creating that atmosphere and sense of partnership between State and industry which are required if maximum possible efficiency is to be achieved.

Having said that, I accept what the noble Viscount, Lord Caldecote, said: that the immediate question is whether we can ensure sufficient work to keep the men employed, especially those on the design side of the industry, and so achieve our objective of establishing an industry which, though probably smaller, is efficient and one that will be a major factor in our world position. I think it will be agreed that it must not be simply a matter of providing work; it must be challenging and stimulating work. We used to talk of the glint in the designer's eye; and unless we have projects which still call forth this glint in the designer's eye, and unless we have work which can give real satisfaction on the floor of the production shop, we may as well give up the attempt to remain in this business.

My noble friend Lord Shackleton has given a description of the Service workload now available to the industry, and it is quite an impressive list. To the list of aircraft which he gave I would add, on the civil side, the Trident, the BAC 111, the VC 10, the Herald, the Hawker-Siddeley 748 and 125, the Sky-van, the Beagle 206, and, as the noble Lord, Lord Trefgarne, reminded us, that cheeky little aircraft (as I would call it), the Islander, which made such an impression at the Paris Show, which is being supported by the Government and will, I hope, find for itself an important market.

The question which noble Lords will now put is whether this programme of work—the Service projects to which my noble friend referred and these civil projects—be adequate, especially in the immediate future. I accept that here there is cause for some concern, and I know that the Government accept the justification for this concern. They are prepared to consider sympathetically proposals for worthwhile projects involving financial support for development work. The industry has placed one or two projects before them and a final decision on some of them has yet to be made. This does not rule out the possibility of other development work if, as I say, suitable ideas are submitted.

The noble Earl, Lord Jellicoe, asked about the Handley Page Jetstream. I understand that an application for financial support for this aircraft was received by the company this morning.

EARL JELLICOE

Was it received by TARC?

LORD BESWICK

I am sorry; I meant to say that it was received from the company. The noble Earl will not be surprised to learn that a decision has not yet been reached on this aircraft. There is also the question of the possibility of development for the Trident 2. This is under discussion between the Department and B.E.A.; but it is too early yet to say what will materialise from that. Questions have been asked about the "air bus" and, as the noble Lord, Lord Merrivale, said, the British and French Ministers have agreed to set up a joint working party to investigate the potential market prospects, and the feasibility and commercial attractiveness of a short-haul, high-density air liner or air bus, as everyone now refers to it. It is agreed that there might well be development on a collaboration basis.

My right honourable friend the Minister of Aviation discussed this report with M. Pisani, the French Minister of Equipment, in Paris last week, on February 17. The Ministers agreed that it would be desirable if possible to have West German participation in the development, and a further meeting has been arranged between the three responsible Ministers of Britain, France and Germany. If such an aircraft is produced it will not only represent a reduction in short-haul operating costs for the air transport companies but will be a most important step forward in European collaboration. The noble Earl, Lord Jellicoe, asked about the HS 136. There is no Government requirement for this type of aircraft which I suppose could be referred to as the Dakota replacement, a requirement which has cropped up during the last fifteen years, but it is a type for which there appears to be a wide potential world market. The Government would certainly consider sympathetically any proposal from Hawker Siddeley to go ahead with this. The initiative at present remains with the company.

It has been proposed in the Plowden Report and in the Report of the Select Committee, previously published, that to enable the Government of the day to identify these possible projects more certainly and at an earlier stage, we ought to give more responsibility to the Transport Aircraft Requirements Committee. I must say—speaking personally—that it is discouraging to me to find the Plowden Report again having to refer to this matter, a proposal which, as the noble Lord, Lord Plowden, I think, said, had been put forward by that most valuable Report of the Select Committee some two or three years earlier. It is a proposal which various Members of Parliament had pressed even earlier than that. But we are still unable to say—and now I am speaking not personally but on behalf of the Government—that the idea of strengthening the Transport Aircraft Requirements Committee to the point recommended by the Plowden Committee has been altogether accepted.

The Plowden Report proposed that TARC should be serviced by a full-time secretariat. This proposal has not found favour with the Ministry; but they are considering strengthening the secretariat on a part-time basis to enable the secretariat to devote more time to the work of the Committee. Without going to the extent suggested by the Plowden Report, the Government would like to make more effective the consultations on new requirements between the Government, operators and manufacturers which has taken place on TARC. Probably it is only fair to add that the Government Department is not the only reluctant party on this Committee to the proposed reshaping of its responsibilities. The air transport operators themselves are naturally hesitant to agree to a course which appears to vest in an outside authority responsibility for determining their re-equipment policy of the future.

One of the changes that has taken place to enable TARC to operate more effectively has been the institution within the Ministry of Aviation of an Executive Group whose task, subject to TARC, is to scan the horizon for promising long-term civil projects, to be referred then to TARC for closer consideration, and on which market research might be conducted. This group, I think, can be a most valuable body. I recognise that it is unlikely to be considered an adequate substitute for the more ambitious policy-making and project-identifying body which has been put forward by such organisations as the Royal Aeronautical Society. I know that there are many informed and responsible people outside Whitehall—and reference has been made to them to-day in this debate—who have felt for a long time that a body, sometimes called an Aeronautical Council, ought to be established and charged with the responsibility of formulating a longterm policy for the industry and given all the information which would enable them to discharge this task.

This concept has been considered carefully by the Government, as it deserves to be, but the Ministerial reasoning on this proposal runs something like this. It is difficult to see how any supreme body outside a Government Department, an Aeronatutical Council or call it what you may, can be given authority to survey the whole field of aircraft development and yet reconcile their responsibility with the fundamental responsibility of the Minister of Defence, who could scarcely abdicate his responsibility to a body of this kind. The Minister of Defence is, and must ultimately be, solely responsible for the selection of equipment for the Services. I can say, in answer to the noble Viscount, Lord Caldecote, that the Minister is willing to go as far as is possible in confiding to manufacturers his future plans and in consulting them closely, so that their interests, and particularly their views on the prospects of saleability overseas, are taken fully into account when decisions on new projects are made.

I was asked by the noble Lord, Lord Plowden, and I think by the noble Earl, Lord Jellicoe, and by the noble Lord, Lord Cole, about what was being done to improve the efficiency of the industry. As I think was indicated by the noble Viscount, Lord Caldecote, the Plowden Committee proposed a joint examination of this problem by the Government and the industry. The Government agree that a joint examination would be useful, and the Minister of Aviation is discussing the matter with the Society of British Aerospace Companies. At the same time he is raising the question of detailed technical and financial control of work in industry by the Ministry which, as the noble Lord, Lord Plowden, said, was a factor referrd to him time and time again as being one which hampered efficiency. This control, as he rightly says, springs in large measure from the requirement of Parliament for the control of public expenditure. The present examination should help in finding out more about what the problems are, so that we can see what may be done.

Relating to this same point of administrative efficiency, questions were asked about project management organisation in the Ministry of Aviation and the problem of giving the project director an adequate responsibility in a vertical chain of command for the activities of experts handling specialised parts of a weapons system, who also have a horizontal line of responsibility under a specialist director covering their field of activity. I must say that just talking of this shows how confusing it may well be. There is no easy answer to problems of this kind, as anyone who has had any experience with it will agree, but changes which have recently been made in the Ministry's project management organisation are set out in the Plowden Report and I am sure that these changes, not in themselves fundamental, clearly define and reinforce the responsibilities of the project director and should give improvements. It is suggested that these changes should be given a fair chance, at least until the end of the year, in order to prove themselves.

Then I was asked questions about cost estimating. If we could make some substantial improvements in this field we should go far to removing one of the major causes of cancellations and changes of programme. Nothing is so fatal to good planning as the escalating costs that we have seen in many defence projects. The noble Viscount, Lord Watkinson, said what a difficult problem it was and that no country had yet resolved it. In that connection, I must say that it is really not good enough for him to brush aside the cost problem of the TSR 2 and suggest that it was almost irrelevant in the cancellation of the project.

VISCOUNT WATKINSON

My Lords, I did not brush it on one side. I asked the noble Lord a specific question. Perhaps he would be kind enough to answer it, if he wishes so to do. It seems to me that the cost of the Canberra replacement, which was where the whole story started, had already reached £500 million, for which we lost a technically advanced British aircraft and got a tech- nically advanced American aircraft, to some detriment to our overseas sales.

LORD BESWICK

My Lords, it is quite true there has been some detriment to overseas sales. But the noble Viscount did dismiss the case which the Government have set out for the cancellation of the project, because, as he put it, the difference between the cost of one and the other did not justify the decision which has been taken. He gave some figures. I would put them in this way. In a buy of 50 aircraft, the cost of TSR 2 works out at £9 million per aircraft, as compared with £2 .1 million for the American aircraft with American equipment, or £2.5 million with British equipment. When we have this disparity, the noble Lord must surely accept that there is a case for buying abroad, although I regret as much as he that the decision had to be taken. Again, when one is considering the lessons of the past—

LORD PLOWDEN

My Lords, the noble Lord mentioned the figure of £9 million. On how many aircraft was he basing that figure?

LORD BESWICK

My Lords, I said on a buy of 50. I hope that the noble Viscount will not mind if I pick him up on this point, but he introduced this controversial political note of the wickedness of the present Government. But if he is thinking of wickedness in this field, perhaps he may find time to answer the very proper questions put by the noble Lord, Lord Trefgarne, about the purchase of the DC 7. Why was it necessary to go overseas, at the time the noble Viscount was responsible, for the purchase of American civil aircraft? And, if the noble Viscount is going to get on his feet, will he also explain away why the Government he supported were responsible for the Barnes Wallis episode, referred to by the noble Lord, Lord Kennet?

VISCOUNT WATKINSON

My Lords, I do not want to prolong affairs, but as the noble Lord invited me to get on my feet, may I venture to say that a buy of 50 TSR 2s at £9 million each is still less than the cost of cancelling the TSR 2 and buying F 111s. Why the DC 7s were bought is certainly known to the noble Lord, because he is an expert in these matters. It was because of the sad failure of the inverted U-tube air intake of the Britannia engine, which was nobody's particular fault. I have a letter in my possession, if the noble Lord is interested, from the Chairman of B.O.A.C., thanking me for allowing them to buy these aircraft and thus keep their operations going.

LORD BESWICK

My Lords, no doubt the present Chairman of B.O.A.C. will be writing to my right honourable friend thanking him for allowing B.O.A.C. to buy other American aircraft. But I regret both letters.

VISCOUNT WATKINSON

I agree.

LORD BESWICK

The noble Lord has arranged figures to suit his argument. I arrange mine to suit my argument. This is a matter which we may pursue at some other time, but I think that we can now agree that we both regret that the purchase of American aircraft is essential and we both look forward to the day—and may it not be too long away—when we shall have an important Anglo-French aircraft operative by both British and French services.

On this question of cost estimating I am told that the Ministry of Aviation has been taking a fresh look at the problem over the last year. Just how fresh this fresh look is still has to be seen. To my own certain knowledge, a fresh look has been taken every other year for the past fifteen years, but this look, as the noble Viscount, Lord Caldecote, will be aware, is being taken with the help of a number of the principal contractors and outside consultants. And the Royal Aeronautical Society has recently been devoting increased attention to the problem of managing development projects. These examinations have confirmed the view, expressed already by the noble Viscount, Lord Watkinson, that there is no easy road to a good estimate and it is necessary to spend both time and money thoroughly to study projects and the uncertainties associated with them.

I was particularly interested to hear what the noble Lord, Lord Plowden, said about the value of a Committee of the kind of which he was Chairman. He said, if I heard him aright, that he did not think that an ad hoc body of that kind was really the best for an inquiry into this industry; and such an opinion from him must be taken very seriously indeed. I have already indicated that, as spokesman on behalf of the Labour Party for many years, I asked for a top level inquiry of the sort which my right honourable friend Mr. Jenkins eventually established, but I do not believe that this concept of an ad hoc occasional inquiry is inconsistent with the idea expressed by the noble Lord of effective democratic criticism and control by some standing, specialised, all-Party Select Committee. This is not a matter, of course, for the Minister of Aviation. It involves Parliament. What I think can be said is that opinion, especially Back-Bench opinion, on both sides of the House is moving steadily in that direction. Moreover, more and more people outside are now demanding the opportunity for discussion, as full and free and informed as possible, of these technical and technological matters in which we are putting so much public capital.

I read an interesting article this week in Flight International, headed "Where Reforms Begin", which quoted opinions stated by various national newspapers on the same subject. The Times for example says: The dialectic of defence and foreign policy should be as open as possible. A fresh and healthy public understanding of these matters can be brought about only if the Government engages constantly in two-streams of discussion with the outside world, carried on largely in Parliament, the Press, and the universities. The Guardian and the Daily Mail, and subsequently, I understand, the Economist and other journals, have joined in demanding something of this same kind of democratic control and discussion of these matters.

There is one other point to which I would refer—it was mentioned by the noble Lord, Lord Kings Norton, and concerns the people engaged in this industry. I agree with him in thinking that there is in this industry a very special type of devotion. It is a devotion to one's work which is not found everywhere in commerce and in industry. It is a devotion from people who are anxious to play a full and constructive part in the work of air transport and aircraft production. I have the privilege to be the Vice-President of the Airline Pilots' Association. I recall that when I was invited to accept this post I said that I was particularly glad to accept it, because as a union they were not concerned with taking out of the industry what they could, but were concerned with putting something into it. I am sure that most people will agree that the time spent voluntarily by pilots on technological committees, matters of flight safety, cockpit layout, air traffic control and so on, represents a most valuable contribution to the development of air transport services.

I know, too, that on the aircraft production side there are people who are equally ready to come forward and do what is possible, if they are given the chance. I hope that the debate which we have had this afternoon will enable them to feel that there is still a future for their industry: an industry which may be smaller than it is to-day, but more compact; an industry that will be more efficient and able to play an important part in the development of our industrial life in the years ahead.

EARL JELLICOE

My Lords, before the noble Lord finally resumes his seat, may I ask him one more question? He has been most generous in giving information to the House, but I did ask about two projects on which he has not given any inkling of the Government's views. Could the noble Lord tell us what is the position now regarding the Superb, the so-called super-super VC10? Finally, and above all, could he tell us anything about the Government's thinking as to the possible launching by this country of a very big engine, in the 40,000lb. thrust class—the Rolls Royce R178 or its Bristol equivalent?

LORD MERRIVALE

My Lords, before the noble Lord resumes his seat, may I ask him whether it is possible for the Government to consider the question of the harmonisation of military requirements? He may not be able to answer now, but if not, would he write to me?

LORD BESWICK

My Lords, I shall be glad to write to the noble Lord. As I have said, there is a meeting taking place between the three Ministers responsible in France, Britain and Germany.

LORD MERRIVALE

That is on the civilian project?

LORD BESWICK

Yes, on the civilian project. Consultation is also taking place between M. Messmer and the Secretary of State for Defence here on these matters in general. If there is any further information to be given about this, I will write to the noble Lord.

So far as the two projects mentioned by the noble Earl, Lord Jellicoe, are concerned, as he knows the Superb has been the subject of a market research operation. This is one of the occasions when an outside firm of consultants was called in to see what sort of market there was for a project. Technically it is obviously very attractive. The question is whether there is a market for it, and a decision about the aircraft has not been taken. I am afraid that I cannot give the noble Earl any other information about the 178. But, again, I will make inquiries, and write to him if there is anything useful I can say.

7.5 p.m.

EARL JELLICOE

My Lords, I am sure that most noble Lords are familiar with the sight of a mover of a Motion rising to his feet to say that he does not wish to prolong the debate, and doing precisely that. I shall do precisely that, but only for two moments, and in order to thank noble Lords who have taken part in this discussion. I should like to thank, first, the two noble Lords who made such admirable maiden speeches; secondly, the other distinguished participants in our debate, all of whom have brought very special knowledge and experience to the debate—and not least the two noble Lords who have spoken for the Government. Thirdly, and above all, I would thank the distinguished author of this valuable Report, the noble Lord, Lord Plowden. I am sure we are all grateful to him for the further light he has shed upon his Report.

The noble Lord asked me a straight question of what marks I would have given it, and I will give him a straight answer—alpha-minus, minus. I hope he will not mind that it is a much lower mark than he usually gets, and a much higher mark than I ever got when I was at school. I can assure him that if he had had those two extra months. I am certain that he and his Committee would have earned an alpha-plus. With those few words, I beg leave to withdraw the Motion.

Motion for Papers, by leave, withdrawn.