§ 4.10 p.m.
§ THE MINISTER OF DEFENCE FOR THE ROYAL AIR FORCE (LORD SHACKLETON)My Lords, I apologise to your Lordships for intervening just as the noble and gallant Viscount, Lord Montgomery of Alamein, is about to speak, but I fear I shall give offence to the noble and learned Viscount, Lord Dilhorne, if I do not repeat here a Statement which has already been made in another place by my right honourable friend the Minister of Aviation on the cancellation of Super VC 10s. The Statement is as follows:
"As Members will know, work on ten of the Super VC l0s originally ordered by B.O.A.C. from Vickers Limited has been in suspense since April, 1963, by agreement between the parties. If B.O.A.C.'s judgment of their future requirements later changed, 1129 this would still have allowed the aircraft to be delivered following the seventeen "—
Super VC 10s—
"which B.O.A.C. have in service or in the course of construction.
"The Board of B.O.A.C. has again reviewed its future needs for passenger aircraft and foresees no requirement for more Super VC 10 aircraft after the seventeen have been delivered. In these circumstances the Board has negotiated terms with Vickers for the cancellation of the last ten aircraft. These involve a payment by B.O.A.C. to Vickers of £7½ million in respect of cancellation charges. The amount of compensation is, of course, entirely a matter for negotiation between the two parties to the contract. Vickers have also left B.O.A.C. in no doubt of their wish for an early conclusion of this matter.
"Before giving effect to this decision B.O.A.C. naturally informed me of their intention, and I have had discussions with the Chairmen of B.O.A.C. and Vickers. I asked Sir Giles Guthrie to defer action for the time being so that both B.O.A.C. and the Government could assess the full implications of this decision. Despite this opportunity for review, B.O.A.C. have informed me that they still have no requirement for any Super VC l0s after the seventeen; B.O.A.C. moreover recognise that in no foreseeable circumstances will the Government approve the purchase by B.O.A.C. of any further passenger aircraft of a comparable size from a foreign source to augment their fleet.
"I have again yesterday asked B.O.A.C. whether the recent tragic accident to one of B.O.A.C.'s aircraft in Japan modifies their view, but they have confirmed to me that this loss could not effectively be rectified by the purchase of an additional Super VC 10 for delivery at a much later date.
" In these circumstances I have regretfully come to the conclusion that I cannot ask the parties to the contract to defer further the agreement they have reached for the cancellation of these ten aircraft. I take this occasion however to say that this cancellation implies no reflection on the 1130 Super VC 10 itself, which is giving every satisfaction in service and is second to none in its current attraction to the travelling public."
§ VISCOUNT DILHORNEMy Lords, whilst I should like to thank the noble Lord for repeating this Statement here, in accordance with the usual custom, I would assure him that there is no question of offence to me but merely of complying with the custom of this House, and I am glad he has done that. I would say that this Statement is, of course, sad news for the aircraft industry. I myself had something to do with the negotiations in 1963, and all I would wish to ask, in relation to this Statement, is this. Is it not the case that the VC 10, broadly speaking, has proved so satisfactory and so remarkable an 'aircraft that B.O.A.C. find they can now meet their requirements with fewer aircraft than they originally anticipated would be the case?
§ LORD SHACKLETONMy Lords, I cannot precisely answer the last point, but in general terms I am in full agreement with the noble and learned Viscount. It is a matter of calculation of the amount of traffic; and certainly the VC l0s are proving very attractive and very successful, and are taking considerably improved passenger loads.
LORD REAMy Lords, may I also thank the Minister for his Statement and say that, of course, we sympathise with him in this state of affairs, which I think the House recognises with some anxiety. Apart from the fact that this decision will hit the aircraft industry, as the noble Viscount has said, there are just two points that I should like to put to the noble Lord. The first is: who is going to pay the £7½ million to Vickers? I gather it is going to be B.O.A.C. Will that come out of the taxpayer's pocket, or in what other way will it be raised? The other point is: I wonder if the Minister knows whether there is any truth in the rumour that Boeings might be grounded; and, if they were, would that not very seriously affect the position?
§ LORD SHACKLETONMy Lords, if I may take the last point first, I should certainly deprecate any suggestion that Boeings are about to be grounded. I 1131 have no knowledge of this, and I think it would be most unfortunate if that rumour were to be given circulation. This is no reflection on the noble Lord, of course. As to the question of payment of the cancellation charges, this is a matter for B.O.A.C. They have not asked for any special assistance from the Government in financing the cancellation charges, and they will charge them against their 1965–66 profits. But, of course, under the legislation which has now passed through your Lordships' House, there is provision to write them off against the reserves for which the Air Corporations Bill—or Act, as it probably will be to-morrow—provides.
My Lords, this is a sad decision. It is a hangover from the past. I shall not reflect on the circumstances of this, but if anyone wishes to study them he can refresh his memory by reading the Report of the Select Committee on Nationalised Industries, which describes how this decision has now become necessary.
§ LORD BYERSMy Lords, in view of the fact that these machines are quite exceptionally magnificent flying machines, may I ask the Minister whether any effort has been made to sell them overseas?
§ LORD SHACKLETONMy Lords, I am quite sure that every effort has been made by the British Aircraft Corporation, with the support of the Government. I entirely agree with the noble Lord in his view of these machines; unfortunately, we have not succeeded in selling enough of this group of aircraft.
§ VISCOUNT DILHORNEMy Lords, am I correct in thinking that the noble Lord's statement does not mean that it may be possible for Vickers to supply some of these cancelled aircraft to other possible purchasers?
§ LORD SHACKLETONNot so far as I know, my Lords.
§ LORD MERRIVALECould the noble Lord say what is the total cost of the ten Super VC l0s which are cancelled?
§ LORD SHACKLETONI am very sorry, I cannot; but I did give the cancellation charges.