§ 2.38 p.m.
§ LORD BALFOUR OF INCHRYEMy Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
§ [The Question was as follows:
§ To ask Her Majesty's Government what is the present position of negotiations with British European Airways on the Corporation's request for authority to order new civil aircraft to replace and supplement their existing fleet, and in particular for how long this question has been under discussion with the Corporation and when it is expected authority will be given for such orders to be placed.]
§ THE MINISTER OF STATE, BOARD OF TRADE (LORD BROWN)My Lords, since my right honourable friend the Minister of Aviation made a statement in another place on August 2, British European Airways have been considering their requirements for new British jet aircraft. This consideration necessarily involves detailed examination of the types of aircraft available, in varying combinations, from both technical and financial points of view. Government Departments have been closely associated with this work.
The Chairman of British European Airways wrote to my right honourable friend the President of the Board of Trade on October 28 to inform him of a resolution by his Board that the Corporation should place an immediate order for eighteen BAC 1-11/500 aircraft, with an option for a further six aircraft. He explained that this purchase would meet the first part only of B.E.A.'s requirement for jet aircraft. Under the terms of the Board's resolution, this initial order was made conditional upon the Government's agreeing that B.E.A. should have, by not later than April 1, 1968, a capital reconstruction and that this should be "on the same terms as that now accorded to B.O.A.C."
My right honourable friend the President of the Board of Trade replied 4 on November 3 that this condition was unacceptable to him since, even if a financial reconstruction of B.E.A. were, in principle, the right course (which had still to be discussed), it would be impossible to settle the terms of such a reconstruction or to decide what assistance the taxpayer should be asked to provide, until the Government had before them a full picture, both of the British aircraft fleet that B.E.A. would wish to buy and of the Corporation's financial prospects. My right honourable friend reaffirmed the Government's pledge of August 2 that they would ensure that B.E.A. was able to operate as a fully commercial undertaking with the fleet it acquires. Since this exchange of letters further discussions have been taking place between the Board of Trade and the Corporation. My right honourable friend is satisfied that all concerned are aware of the importance he attaches to establishing the conditions in which an early decision can be reached on B.E.A.'s proposed purchase of the BAC 1-11s.
§ LORD BALFOUR OF INCHRYEMy Lords, arising out of that reply, may I ask the Minister three questions? First, is he aware that every week of delay in respect of the fleet that is needed for operation in 1968 is prejudicing B.E.A.'s future competitive ability in Europe? Secondly, is it fair and reasonable to expect B.E.A. to operate under a general Government pledge for some financial aid, undefined in amount, at an unknown time in the future, instead of arriving at a fair and business-like decision now as to what assistance the Corporation should have for its future operations? Finally—and on the last point the Minister made—is it really fair and reasonable that B.O.A.C. should be granted a capital reconstruction to enable it to buy American aircraft, and that B.E.A. should be denied similar treatment in order to buy British aircraft?
§ LORD BROWNMy Lords, on the first supplementary question concerning the prejudicing of B.E.A.'s competitive position because of delay, I would point out to the noble Lord that negotiations are in progress and that it takes the agreement of both sides in a negotiation to come to the right decision. My right honourable friend the President of the Board of Trade is anxious to conclude 5 these negotiations as reasonably soon as he can, but in view of the fact that large sums of taxpayers' money are involved a careful review of this matter is essential.
On the second point, the noble Lord asked whether B.E.A. can operate currently under these financial difficulties. The undertaking has already been given that this question is going to be very closely looked at, and this does not seem to be a matter which at the moment is prejudicing B.E.A.'s operations overseas. He has the assurance of my right honourable friend that this matter will be looked at, as indeed the pledge was given by the Minister of Aviation in the other place on August 2. On the third matter, a comparison has been made between the position of B.E.A. and B.O.A.C. I do not think this comparison can fairly be made, and the situation with regard to B.E.A. must be looked at as it stands and in the light of the assurances already given.
§ LORD HARLECHMy Lords, is it not a fact that in the statement of August 2 it was made perfectly clear that B.E.A. wished to buy American aircraft but they were instructed by the Government to buy British aircraft? Was it not also clear from that statement that the Government had undertaken to make up the difference in operating costs between these two kinds of aircraft? Why can they not now give a straight reply to B.E.A. about these matters?
§ LORD BROWNMy Lords, on a previous occasion a debate in another place on the affairs of B.O.A.C. gave rise to statements about the efficiency or economy of certain types of British aircraft which were extremely damaging to the future prospects of companies selling those aircraft overseas. The linking together of this question of examining the total financial structure of B.E.A. and the current contention that B.E.A. shoud buy British aircraft is likely to give rise to similar inferences about British aircraft. I should like to say that the aircraft under consideration are first-class aircraft which are competitive with all others in the variable circumstances to he found in the operation of aircraft. The question whether the aircraft are economic to operate is entirely dependant on the circumstances in which they are placed, so I would suggest that a debate along the lines suggested by the noble Lord should 6 not proceed because it might damage the interests of British aircraft manufacturers.
§ LORD HARLECHMy Lords, I must say I resent that, because it was the British Government's statement made on August 2 which linked these two things together perfectly clearly. It was made clear that B.E.A. wished to buy American aircraft but were being instructed to buy British aircraft, and it was said later on that the British Government had given certain undertakings to make up the difference in money. I know everything about the BAC1-11—it is a very fine aircraft—but the question is whether it is exactly suitable for the whole of the fleet that B.E.A. want at this moment.
§ LORD BROWNMy Lords, I can only say that if someone rose and asked whether a Vauxhall was better than a B.M.C. car the answer would be that one has to consider the circumstances in which they operate, and the same sort of considerations apply to the economy of operating different types of aircraft.
§ LORD CARRINGTONMy Lords, my noble friend is not asking that. He is asking what the Government are going to do to carry out the pledge which they have given to B.E.A.
§ LORD BROWNMy Lords, I have already, on behalf of the President of the Board of Trade, given the undertaking that this pledge will be carried out.
§ LORD BALFOUR OF INCHRYEMy Lords, in many enterprises in the past vague promises have been made by successive Governments, which have never really worked out satisfactorily. Surely it is not unreasonable for the Corporation to ask now for a specific conclusion as to what help they will be getting when they commence the operation of these aircraft, because unless they know it now they cannot properly plan ahead.
§ LORD BROWNMy Lords, in the light of the fact that the Minister of Aviation gave an assurance in the House on August 2, which has since been reaffirmed by my right honourable friend the President of the Board of Trade, I think it is quite unreasonable to question whether this undertaking will be carried out. The question of the speed with which it will be carried out is a matter of 7 negotiation between two parties. If they can settle their discussions quickly then the undertaking will be carried out quickly; if one side delays in the discussions the procedure will be somewhat slower. But the undertaking has been given and it will be carried out.