MILITARY AIRCRAFT PROCUREMENT

HL Deb 25 January 1968 vol 288 cc555-80

9.20 p.m.

THE EARL OF KINNOULL rose to ask Her Majesty's Government whether they are satisfied with the present methods and results of procurement of military aircraft. The noble Earl said: my Lords, may I start by saying, particularly owing to the lateness of the hour, that I consider it something of a compliment that the Leader of the House should be personally replying to this Unstarred Question on the procurement of military aircraft. May I take this opportunity of adding my congratulations on his recent appointment.

As the noble Lord will probably recall, this Question has been on and off the Order Paper ever since last November, and although a good deal has happened since that time, and I and my noble friends Lord St. Oswald and Lord Caldecote, have had to re-write our speeches at least twice to keep up with events, I greatly hope that to-night the noble Lord, Lord Shackleton, will be even more forthcoming than usual when he comes to reply, for the subject of military aircraft procurement is, as he well knows, causing the deepest concern and despair to the Royal Air Force and the British aircraft industry.

The frequency with which policy changes are made, and cancellation after cancellation of projects are announced, not only has undermined the confidence of those concerned with procurement in Britain, but has literally shattered the confidence of our potential customers abroad. The hard truth to-day, with this record of cancellations over the past few years and the vacillation of British policy on the future of the British aircraft industry, is that I believe the position has been reached where no country is prepared to risk its own security by placing an order for a British military aircraft project only to find that it is later cancelled.

One of the chief weaknesses in the present system of procurement, as I see it, lies in the process from the time the strategic and tactical requirement of a military aircraft project has been laid down by the Royal Air Force and their advisers, to the time that that project reaches its production stage. During this intermediate stage—and perhaps I should advise the House that I take my information from the Zuckerman Report of 1963, and from various friends in the industry—the full specification of the project is threshed out by committee after committee of civil servants, by experts after experts, and now by Government Department after Government Department.

Whereas one welcomes the thoroughness to which every project is subjected before large sums of public money are committed, the weakness of the process appears to lie in the appalling lack of decision during this period and, of course, arising from this lack of decision, the long and irritating delays in time. Also, there is the tendency for the specification of the project to be so enlarged and complicated in committee that ultimately it proves too expensive for the contractor to produce and is cancelled.

How one streamlines and improves this process, while retaining the safeguards for the public purse, I do not pretend to answer to-night; but what is obvious, even to an outsider like myself, is that unless the process is drastically streamlined British projects in the future will suffer the same fate as those in the past, and the public purse will continue to pay out large sums in cancellation charges. I believe it is urgently necessary for the Government to correct the faults that seem so apparent at the present time.

Many of us over the last few weeks will have read a number of leading articles in the Press on the cancellation charge of military projects. It is an interesting fact, and not, if I may say so, a political point, that the Minister of Defence has broken a number of records since he has been in office. During his three years he has cancelled five major aircraft projects and will, after the settlement of the F.111 charges, have dipped into the public purse and paid out well over £300 million in compensation, and there is not even a single altimeter to show for it. Secondly, the Minister has produced more White Papers and revised White Papers than any previous Minister; and, lastly, he has put his shirt on two horses, the A.F.V.G. and the F.111, both of which have failed to complete the course. It is not, I think he would agree with me, a proud record.

But the latest cancellation is to my mind the most damaging of all. It is, of course, the F.111. As the noble Lord, Lord Shackleton, himself stated last Tuesday, not only is this a body blow to the pride and effectiveness of the Royal Air Force, and not only will it cost this country an enormous amount in dollars on cancellation charges, but, even more important, it will cost the country in the future a sum that can never really properly be evaluated. It is the future American orders that British aircraft firms might have won but for the feeling of prejudice which might arise from this cancellation. This feeling of prejudice could well spread both in the military and civil markets.

There are four questions I should like to ask the noble Lord to-night on the cancellation charge of the F.111. First, can he give us an estimate of the likely total cost of the cancellation, bearing in mind the terms of the cancellation clause in the original contract? Secondly, will these charges be reduced? Because at the time of cancellation the performance of the aircraft had not reached anywhere near the stage of the guaranteed performance. Thirdly, before the cancellation took place was Australia consulted as to whether they would like to take on the British order, as they had no fixed ceiling price in their own contract? Finally, was the figure indicated last night by the noble and learned Lord, the Lord Chancellor, of £4.3 million per aircraft the total estimated cost of the aircraft, or was it a good deal less?

I should like briefly to turn to the military projects which have so far escaped the Government guillotine. I should like to ask the noble Lord for more information about the Harrier. This brilliantly designed aircraft has suffered, in my opinion, from the unaccountable delay of the Government to announce a firm order for the Royal Air Force. Instead of placing a firm contract, the Government have, as I understand it simply given the financial go-ahead for production. Such action, in my opinion, not only loses the chance of valuable publicity for the Harrier, but it the eyes of potential buyers abroad it must seem that if the British Government are not themselves prepared to place a firm contract, then the likelihood of cancellation must be "on the cards".

I should like also to ask the noble Lord about the British V.G. project, in the light of Mr. Healey's television interview last week. The noble Lord no doubt will recall that Mr. Healey seemed to indicate then that our future security would rest in the mid-1970s largely with our American friends giving us protection with their long-range strike reconnaissance aircraft. This, anyway, was the gist of what he said. Would the noble Lord to-night confirm that, if we can find no partner to join us with the V.G. project, we are prepared to go it alone? If not, what is the Government's contingency plan for equipping the Royal Air Force for a long-range strike reconnaissance aircraft when the Canberras are phased out? I should also like to ask the noble Lord, if he has time, to give information about the Jaguar and to say whether or not the project is proceeding satisfactorily in relation to time and cost. Further, could the noble Lord confirm if there has been any escalation in the cost of the Phantom project?

The policy of the Government on military aircraft procurement vitally affects the British aircraft industry. This great industry, which is one of only three aircraft industries in the world capable of actually designing and producing sophisticated modern aircraft, has suffered tremendously from Government policies in the past. Cancellation of projects has caused a severe loss of confidence among potential overseas buyers. Now, the industry is faced with a Government policy of collaboration often with European partners one-tenth its size. Experience of collaboration over military aircraft projects, with the notable exception of the Jaguar, has not been a happy one. Problems of design leadership, and even problems of mutual trust in the partners, occur. I hope very much that in future the Government will see it as their clear duty to give the industry every encouragement and to safeguard their interests, particularly their interests in regard to design leadership, when collaboration is arranged. I hope also that they will not only seek European collaboration, but also international co-operation with Australia, New Zealand and Canada. It has been estimated that over the next twelve years the potential market for military aircraft in Europe alone is over 6,000 aircraft, and I hope that to-night the noble Lord will re-affirm the Government's support of the aircraft industry in winning a share of this market.

The procurement policy of military aircraft for the Royal Air Force l as never somersaulted so many times as it has in the last three years, and although it may be argued by the Government that the Royal Air Force are, and will be, equipped to meet their commitments, it must seem to many people that it is, in fact, the commitments that have been tailored to meet the equipment. The Government's policy on military aircraft procurement is not a happy one, and tonight I do not envy the noble Lord in his job, particularly as an ex-Minister for the Royal Air Force, of trying to defend this unworthy policy.

9.31 p.m.

VISCOUNT CALDECOTE

My Lords, in accordance with our usual custom I must declare an interest in the subject of this debate, as I am connected with an aircraft company. It is very tempting, in debates of this kind, to use them to pay off old scores, to climb on hobbyhorses and to make Party points. But I will do my best to resist all those things because this is not in any way a petty matter, nor is it a Party issue.

Some people might think that this was a rather inopportune moment to debate the military aircraft procurement problems. I do not think so at all, and we are greatly indebted to the noble Earl, Lord Kinnoull, for instigating this debate. For I believe that this is a really serious national problem and also, as I hope I shall show later, a European problem. I agree wholeheartedly with the comment made about two years ago by the Plow-den Committee, when discussing the problems of the industry. They said: 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. That is as true now as it was when that Report was written.

I should like to spend a few moments on looking at the past, for it is from there that we must learn the lessons for the future. Following the very substantial rearmament at the time of the Korean troubles, there was a period of tremendous enthusiasm for new projects. The development work-load increased rapidly, and little or no effort was made to estimate the capacity of industry as a whole to meet that load. The first danger signals of bad planning arose, and in Government and industry the estimators and the cost controllers were overwhelmed by the technical enthusiasts. All this resulted in rising costs and long delays, and there followed a time, which might be called the period of the search for solutions, which was perhaps ushered in by the 1957 White Paper. It diagnosed correctly that there were unhealthy trends, but it prescribed the wrong remedy and very nearly killed the patient.

Then in the early 'sixties there were the first big mergers in the airframe and engine industries. They rightly demanded the formation of stronger units, and these were formed on very sound principles. Those mergers were carried through by agreement, on the promise of better planning and a steadier work load. There was at that time rising confidence in the industry and in the Services. There was a determination to profit by past errors, and there was, apparently, a growing appreciation of the importance of cost. But the scene, unfortunately, was still dominated by technical enthusiasts. At that time, for instance, the specification and so the cost of the TSR.2 was allowed to escalate. Performance, in fact, was still paramount.

I think we can say that that phase continued until about 1962, and then we entered what might be called the age of indecision, of vacillation and wasted opportunities—an age which extends, I am afraid, to the present. The Conservatives failed at that time to take decisions till far too late in many important areas. They set the bad example of beginning to buy large quantities of aircraft from the United States when they ordered the Phantom, and this "Rake's progress" of purchases from America has been continued by the present Government. But to be fair, and to the credit of the Government and Party of noble Lords opposite, they have set an example in taking the first steps for effective European co-operation in the co-operative development of military aircraft. So much for the past.

LORD ST. OSWALD

My Lords, I do not want to interrupt my noble friend, but the fact is that the Anglo-French variable-geometry project was not set in motion by the present Administration at all. It was set in motion by Mr. Julian Amery, when he was Minister of Aviation.

VISCOUNT CALDECOTE

My Lords, I accept that correction, but I think it is fair to say—one gives credit where credit is due—that the Jaguar is the first really effective co-operative military aircraft project. We must be fair in your Lordships' House.

My Lords, there are many complex issues involved in this, and we must avoid the temptation to go into too many details. However, there are a few broad conclusions which we can draw from the past. First of all, there are three undeniable facts. Nowadays, virtually any specification of performance can be met if sufficient money is made available. This is a new factor in the last 15 years. Since money is not unlimited, the specification must be limited to control the expenditure. In other words, the performance, the time and the cost of any aircraft project are closely linked together. You cannot give equal priority to cost and to performance at the same time. In the past, performance and time were paramount. Now, I believe, we have to make cost and time the first considerations.

Secondly, my Lords, the period from conception of a new aircraft to its delivery into service is some seven to ten years. The basic political cycle is, unfortunately, only four to five years, with very considerable perturbation at shorter intervals. Because this is very often not appreciated, apparently, many wrong decisions are taken, and many valuable resources are sorely wasted by attempts to alter development policy to fit in with short-term changes in political thinking. Thirdly, the development of any airborne vehicle, such as an aircraft, is of a different order of cost and difficulty from any other engineering project. There are many reasons for this, which we have not time to go into to-night. There are reasons of space, weight limitation and the very complex systems of engineering involved. Because of the very high cost and the difficulty, if we are to get good value for money, these considerations demand long production runs; and this points to the great advantages of European co-operation in these expensive projects and, perhaps even more important, the acceptance of market size as one of the prime considerations when the specification is being determined.

I believe that these three factors account for the vast majority of the difficulties that have beset us since the war in the procurement and development of military aircraft. The ability of the British aircraft industry to meet the specifications that have been demanded from them, is not, I believe, in question, and I do not think that any industry has a better record of producing first-class aircraft than the British aircraft industry. The trouble has all too often been that the specification has been wrongly drawn.

Those, my Lords, are in my view some major points in the diagnosis of our problem. What, then, is the cure? I think we must first appreciate that the most effective combination of design, development and production experience rests in industry, and that it is industry which can achieve the most cost-effective solution to the Service's problems. I believe, therefore, that if we are to exploit to the full this knowledge and experience in industry the problems of the Services should be given to industry at the earliest possible stage. Do not give industry a specification which is half-way towards a solution of the problem. Give industry as early as possible the problem that the Service wants to solve. Tell it the cost limitation on development and production; and give it the freest possible opportunities to exploit its experience. Do not hamstring it by saying that it may not have this or that industrial partnership, whether national or international. Tell it clearly what time-scale is required; and allow it—indeed, encourage it—to take full account of export potential. I believe that if that were done we should get much better value for money; industry would be completely involved in the project from the start, and they would be able to put forward the most economic and effective way of solving the Services' problem.

Secondly, let the Government do their long-term planning; let them order equipment on the best information available on what the requirement will be when the equipment goes into service. Let there be no question of cancellation in the future, provided that the specification is being met. Resist the temptation to abandon any project for reasons of short-term political expediency or re-assessment of a requirement many years ahead which may well alter again back to the original requirement.

Thirdly, as I have already said, to ensure value for money spent on very expensive developments, it is essential to ensure that there should be a long production run. It is very doubtful whether the British home market will ever be sufficient to achieve that. It is therefore of great importance to encourage a greater and greater European market. This is not at all easy to achieve because, unfortunately, every country wants to develop its own aircraft in each field, and this leads to excessive European competition. If that goes too far then, in my view, the European aviation industry will be killed stone dead, and by 1980 it will be totally dominated by the American industry.

It is true that, ideally, each European specification would be met by a single country with the other countries buying from the producer. This has been found to be impracticable in the past, and I do not believe that we can get to this situation in the near future. Thus we have to go (and have gone successfully in the case of Jaguar) to co-operative development by two or more countries with the hope that other countries will buy in large numbers. The objective, of course, must be to make such collaboration as efficient and effective as the development would be if it had been carried out by a single company. But however effective development is, it will be pretty useless if there is no market for it at the end of the road.

My Lords, I believe that it is of tremendous importance that the Governments of European countries should accept the principle that European-developed products should have some priority in meeting defence requirements. Some people will say that to achieve that state of affairs is totally impossible before we get together as a single European political unit. If that is true, then I am afraid that the prospects for a continuing, viable and independent European aviation industry are bad—because we are not going to get together politically in Europe within the next, I would guess, ten years. Time is not on our side. If we do not get together within a short time to avoid excessive European competition we shall lose a very large part of the market, which the noble Earl, Lord Kinnoull, suggested was of the order of 6,000 military aircraft. We shall lose a large part of that market to the American companies.

If that happens, I believe that we shall have taken an irretrievable step towards the domination of the European aviation industry by America. I would urge the Government to take the initiative in calling a conference of European Governments to look into what can be done to take a further step forward in agreeing common European specifications for military aircraft. I believe that if they did that they would be surprised at the response they would get. It may be said that industry ought to take the initiative in this respect. Already this has been done to a large degree. A.I.C.M.A., the Western European Aviation Trades Association, has already had a number of meetings and has set up working groups to investigate what can be done to improve the efficiency of European collaboration and to investigate other similar matters. But in the long run, of course, Governments are the customers for military aircraft, and all these activities will be of little avail unless the Governments can agree on common specifications for European military aircraft.

My Lords, I believe that it is of great interest to this country, and to Europe as well, that we should solve this problem of the efficient procurement of military aircraft. If we fail, we shall fail in the civil field, too. Europe will lose the important advantage of a stimulating, growing and exciting technological industry, in which Britain is very well equipped to play a leading part and earn her just and valuable reward.

9.46 p.m.

LORD ST. OSWALD

My Lords, after the previous two days of long and, for the Government, punishing debate, I intend to say very little of what could be said on this subject. Moreover, I am, if possible, even more reluctant than usual to rub salt into the wounds—partly self-inflicted though they be—of the noble Lord, Lord Shackleton. Many on this side of your Lordships' House who count themselves as warm friends of the noble Lord had reason to be proud of that friendship on Tuesday, when he bore himself with a dignified humility rare in our political breed. I hope that he will take my congratulations on his promotion to his new office as read.

Having said that, my Lords, I must also say that one of the less desirable political phenomena of our epoch is the inexpungible smugness of the Secretary of State for Defence. It was once said of a leading politician that he had a great deal to be modest about. Mr. Healey has nothing whatever to be smug about. Seldom can any senior Minister have handled his stewardship more deplorably in three-and-a-half years. I understand than, in a broadcast earlier this week he excused himself for his repeated contradictions in policy by implying that when it came to breaking pledges he was merely a cog in the machine. My Lords, if that be so he is a very slippery and poorly engineered cog, not able to obtain any real purchase on the driving parts of the machine of Government. I understand that in the same broadcast Mr. Healey also said: I learn more as time goes on … It must be the most expensive tuition that any British subject has ever been given at public expense, utterly eclipsing any saving to be made by the postponement of the higher school-leaving age.

The Labour Party, when in Opposition, taunted and growled at what they called our squandering of money on projects later cancelled. Government supporters still refer sneeringly to £84 million spent on Blue Streak. Yet Blue Streak is to-day serving the technological purpose of this Government as part of the experimental satellite launcher—par: of their handsome inheritance from the previous Government. Their squanderings, their cancellations, have been gargantuan. According to figures given a little earlier by my noble friend, which I shall not repeat, within weeks of taking office they had scrapped £195 million-worth of endeavour on TSR.2 and £2l million-worth on P.11–54—to name only two out of the products included under his figure. They have since been cancelling, or failing to provide, the replacements for what Conservative policy would have provided had the Conservative Party remained in Office. The Anglo-French variable geometry aircraft, once the core of Mr. Healey's air defence policy, fell through seven months ago. With my noble friend, I should like to know to what extent and in what manner this project is being carried forward without French participation. Together with my noble friend Lord Kinnoull, I was dismayed by the innuendo that this project was not going very well and might be dropped.

I should also like to know what the cancellation costs will be for the F.111K, the Chinook helicopters and the 10 cancelled Buccaneers. Could the noble Lord also tell us whether these costs are included in the advertised savings announced by the Prime Minister and the Secretary of State for Defence, or whether the savings will be reduced when the cancellation costs are paid—as they will have to be paid. In truth, as my noble friend Lord Kinnoull said earlier when he put down this Question, before the Recess, there was a good deal more to say about aircraft procurement, because a good deal more aircraft were apparently being procured.

One way of avoiding the sort of searching and no doubt discomfiting Questions put down by my noble friend is to cancel all weapons. We know that there is a strong body of the Government Party which would like to do just that. I hope that the noble Lord the Leader of the House, with his new power and strength within the Government, is aware of the extent to which we rely upon him to protect what remains of our defence, both in men and in weapons. We count upon him to do this so long as the present Government remain in office. He could then count upon us, and in particular upon my right honourable friend Mr. Enoch Powell, with an easy mind.

9.52 p.m.

LORD SHACKLETON

My Lords, the course of this debate has only confirmed to me the total unsuitability of Unstarred Questions when in the hands of the noble Earl, Lord Kinnoull, and the noble Lord, Lord St. Oswald. I should like to thank the noble Lord, Lord St. Oswald, for his kind remarks. If I reply in kind to his later remarks, I am confident that our friendship will not be damaged. I must confess that I was very shocked.

I am going to address most of my remarks to the noble Viscount, Lord Caldecote, because I think that it is a waste of time to talk to the other two noble Lords. When the noble Viscount made a very innocent remark which might smack slightly of praise of the Government, that drew the noble Lord, Lord St. Oswald, furiously to his feet.

LORD ST. OSWALD

Misplaced praise.

LORD SHACKLETON

I know that it is intolerable to say anything in praise of this Government. I had thought that the noble Earl, Lord Kinnoull, put down this Question with the desire to obtain information and that I should not be called upon, in his words, "to defend an unworthy policy". I would say to the noble Earl, as I have said before, that this is not a suitable subject for an Unstarred Question. On the last occasion he said that he had got into trouble because he went outside the terms of the Question. But I understand that an Unstarred Question, like any other Question, is designed primarily to obtain information, although it does give rise to a debate. I think that this is a matter which your Lordships' House will have to consider more closely. None the less, I am grateful to the noble Earl, Lord Kinnoull, because it will enable me to say something about the procurement of military aircraft. And because I thought that this Question was put down seriously for information and not for Party political purposes, I will do my best to answer his points.

THE EARL OF KINNOULL

My Lords, this Question was put down seriously. I thought that I asked some serious questions, and I hope the noble Lord will give me serious answers.

LORD SHACKLETON

Most certainly. Until I heard the noble Earl, there was not going to be a single word of Party politics in my speech. I shall try to follow the standard set by the noble Viscount, Lord Caldecote—and I hope that this will not cause trouble for him. Of course, things have advanced since the noble Earl read the Zuckerman Report, which was published in 1961 and not in 1963. If he was two years out of date in that, it is not surprising that he is two years out of date on the developments that have happened in recent years.

I should like to say something about methods. This is a subject to which, as an Administration, we have paid great attention, and I must make clear that the previous Administration, dissatisfied with the results, had understandably also paid attention to this. The noble Viscount, Lord Caldecote, gave a description of the changes and the vacillations, and I must confess that since my time as a Minister I have been extremely sympathetic to previous Governments. But it is true that the aircraft industry has suffered as a result, and as one of those who believe in the importance of the aircraft industry, I am very anxious to say something about the procedures which are now yielding very much better results.

The procedures which were in force when we took office had stemmed from the recommendations of the Zuckerman Committee, which reported in 1961. In April, 1964—and let me make clear that this was in the last days of the previous Government—a group of senior officials from the Ministries of Aviation and Defence were appointed to review how these procedures were working in practice and to examine the whole field of development cost estimating and control. They went most thoroughly into this subject and studied the practices both of Government and of industry, because clearly there was a need to improve the understanding and co-operation and to achieve greater efficiency. Case studies were conducted for the group in individual companies by industrial consultants, and we received throughout the most willing co-operation from industry. I should like to pay tribute to industry for the co-operation that we received. As a result, much valuable information was collected which had not been previously available.

The Group reported at the end of 1966. Their report contained a number of important recommendations. Some of these referred to organisation and training within the Ministry of Aviation—now the Aviation Group of the Ministry of Technology. We have accepted these recommendations, and are now implementing them. We accepted the Group's recommendation that more attention needs to be paid to the training of those concerned with project management, which has been steadily growing up as an important procedure. I remember taking part in some of the discussions. It is a very interesting field, the horizontal organisation versus the project management approach. But there is no doubt that the project management approach is the right one, and I am sure the noble Viscount, Lord Caldecott, would endorse this. We have instituted a two-weeks' residential course in project management techniques, and all members concerned with this vital job are going through the course as quickly as possible. It is also attended by industrial representatives. It is clear that the efforts put into this training are already having a considerable influence.

The Group endorsed the principles of project management as laid down in the Zuckerman Report, but came to the conclusion that too little emphasis had been placed on the project study phase of a development; that is to say, on the phase of project definition before proceeding to prototype acquisition. The noble Viscount, Lord Caldecote, will, I hope, agree that this is the crucial stage (I listened to what he said on certain aspects, and will deal with them) in which plans and estimates are drawn up and on which approval for full development is based. The Report recommended—and we have accepted this—that before full development is authorised there should be a more extensive project study, including a full investigation of new techniques to be employed. This has two objectives: first, to identify major technical obstacles earlier on, when there is still enough flexibility to make design changes; and, secondly, to ensure that the main programme consists principally of engineering development; which can be more reliably programmed and controlled than research work.

Nobody knows this better than the British Aircraft Corporation and the noble Lord himself. This approach has important implications for industry and we have had discussions with the S.B.A.C. and the Electronics Engineering Association about the implementation of the Report's recommendations. Here again, we are very grateful for the full co-operation we have had from these bodies.

The rephasing of the work resulting from the extension of the project study will not increase the overall development time-scale. Indeed, we may be able to reduce the very long time that it now takes to put a new idea into service because we shall be able to go ahead with greater confidence. We believe also that these new procedures will enable us and contractors to have increased confidence in the estimates produced at an early stage of a project. Thus there will be greater opportunities for incentive contracting during development, and in this way we shall be working towards one of the aims of the Plowden Report.

The investigation also showed that, while some companies have installed effective cost-control systems, and are employing advanced management techniques (and the noble Lord will realise it will be embarrassing if I say his company had, and did not mention those who had not, but we are thinking particularly of the major companies who are very well ahead), there remains a need to set out in definitive form the principles which should normally govern the management of complex development projects. To meet this need a Handbook of Procedures based upon the Group's work has been drafted. This and the Group's Report, following the discussions which we have had with industry, are now being prepared for publication.

The Handbook of Procedures is not intended to be mandatory but to recommend standards of best practice. Many firms already have systems which meet these standards; and one has watched the development, the original network analysis, critical path analysis, working up to Pert techniques and refinement of those techniques, which are fascinating and again involve, especially when it comes to costs, extensive use of computers. It is quite an exciting thing to see how these aspects of new technique under good project management, under good management, do succeed. Many firms have systems meeting these standards and we hope that as many more contractors as possible will adopt them.

More recently—and again this arose from the Plowden Committee—we have had the Elstub Committee, who are going further into the whole subject and to recommend measures to improve the competitive efficiency of the industry. The Ministry of Technology and the aircraft industry are each represented by four members, and there are also two independent members, in addition to the chairman. The Committee are making good progress. They have been very active. They have had 20 meetings, some of them at factories of the major airframe and engine companies, and there is evidence coming, written and oral, from outside bodies; and they are employing consultants. I am afraid it is too early as yet to report on this, but I have discussed and found out something about it, and we are very hopeful that it is progressing well.

VISCOUNT CALDECOTE

My Lords, before the noble Lord leaves that, is he satisfied that these new procedures will avoid the appalling delays that tend to occur at the end of studies before full development is put into practice?

LORD SHACKLETON

My Lords, I appreciate that here questions of Government policy, and the whole question of Government, may be a factor in those delays. But I have noted the point. It is no use going ahead and then having a very great delay in placing the orders. This is a matter that I will deal with in relation to the Harrier. I think the noble Viscount will not want me to deal at length with some of the other aspects of this problem of the equality of information, which is a matter we have discussed before and on which talks are going on. We understand that there are two points of view in this, and we hope that they will come to a satisfactory solution.

I was interested in the further point the noble Lord made with regard to what I should have said was a little bit of a simple approach, of saying to industry, "You do it". I do not think we should be able to go as far as he wants. There is a heavy responsibility in these matters. But, none the less, I think that, as cooperation develops and there is better understanding, we shall in fact succeed a good deal better than we have done in the past. It is of course a fact that we have succeeded a good deal better, and in this matter I am not seeking to make a Party point. I am not trying to claim the credit for this Government, although I think one could; and indeed if I followed the tone of the other two noble Lords I think it would be appropriate to do so. But I am trying to take this seriously and I should like to discuss the three legs of our military aircraft programme policy, and try to give the noble Lord some of the answers to his questions, although I am afraid I did not understand them all.

First let me deal with the projects which we are doing on our own; secondly, those that we are doing in collaboration with France; and, thirdly, our purchases from America—in which, of course, they are incorporating large amounts of British equipment, particularly in the case of the Phantom. Dealing first with our national developments, there is the Harrier, the world's first vertical take-off close support aircraft. It is a further development of the P.1127 which, as your Lordships know, has been flown previously as the Kestrel by the tripartite squadron. The performance of this aircraft, both in vertical take-off and landing, and in short take-off and landing, is really remarkable. It opens up a whole new concept of close support. I am glad to say that the development programme is going well. Seven of the aircraft are already flying, and the programme is well within the costs and time scales estimated over 2½ years ago. Sixty of these aircraft are being ordered for the Royal Air Force, together with ten two-seaters. We also believe that this aircraft—and this is something in which I have been extremely interested—will sell widely abroad. A year or two ago there were doubts about this, but recent most encouraging events suggest that there are now real prospects with regard to this aircraft.

The noble Lord asked me whether a contract had not been placed for the Harrier. Contractual negotiations have been in progress for some time with Hawker Siddeley Aviation for the development and supply of this Hawker 66 Harrier aircraft. Meanwhile—and I know this may sometimes have a hollow ring to noble Lords, but I am absolutely sure this is so—the company has all the contractual cover they need to press forward with the programme. Agreement has practically been reached, but we are still some way apart on price, and surely it is right that this should be properly negotiated. But I want to stress this, because I think it is important, when we have good prospects and some successes to talk about, that we should do so, in the interests of the industry and of this country.

There are some other main national developments. First, there is the Nimrod maritime reconnaissance aircraft. On this occasion I will refrain from making the old joke about the obsolescent aircraft it is replacing. This is a development of the Comet, using the Spey Mark 250 engine. It will be the most advanced strike aircraft of its kind for this particular role. There are many other national production programmes—Lightnings, Buccaneers, Wessex, Wasp and Sea King helicopters. I will go on to the new aircraft in a moment. These aircraft have achieved good export sales and are providing valuable employment and foreign exchange for the country. Military aircraft exports totalled nearly £70 million last year, and we are very confident (although I agree it is dangerous to be confident) that the new programmes which we have authorised will achieve equally good and indeed, we hope, better export records in the future. Let me make clear that this is to the credit of the industry as well as the people who work in that industry.

I now turn to the second leg of our programme, that of our collaboration with France. Before I do so, I should like to say again how much I agree with the noble Viscount, Lord Caldecote, who stressed the importance of getting European countries together for the production of new military aircraft. It is not, of course, as well he knows, quite such a simple matter, however obviously desirable it is, but it is the right policy, and that is our purpose. Again, he has made this suggestion of a European Conference and he has reinforced his arguments. This has been suggested before, and it has been the opinion of my right honourable friends that it was premature; and I ask the noble Lord to believe that this was a decision based on their judgment. But, none the less, I will convey to my right honourable friends what the noble Lord has said. His presidency of the I.C.M.A., which I believe he has just completed and which we all know he carried out very successfully, gives him the right to express opinions on this subject. I would say again that conferences are not much good unless you prepare the groundwork.

I would now say a little more about co-operation with France on military aircraft projects, which started in the middle of 1965 and represented a step forward of enormous significance. I must say to the noble Lord, Lord St. Oswald—although he need not have been quite so enraged with his noble friend—that I ant prepared to acknowledge that some of these ideas developed under the previous Government. I am very anxious to preserve fairness of approach, notably lacking from the noble Lord. Following the agreement with the French in May of that year, and as a result of two-and-a-half years' intensive work between the Governments and the industries concerned, we have reached the point where we can begin production of the Jaguar strike/trainer aircraft. I cannot remember whether the noble Lord mentioned that it was an old aircraft. There have been many ideas on the drawing board and some quite advanced studies, but the fact is that it has been further developed, and now B.A.C. have made significant improvements to the original designs. I think the noble Viscount, Lord Caldecote, can confirm this.

A very important supplement has now been signed between my right honourable friend the Secretary of State for Defence and the French Minister for Defence. As noble Lords know, there are to be 400 Jaguars—200 each. The first flight is due to take place this Spring, and it is really great evidence of the success of the development phase and of the faith which the two Governments have in the project that the production agreement has been signed for so many aircraft at such an early stage. This really is satisfactory progress within the space of two-and-a-half years.

We had hoped that the Government of the Federal Republic of Germany would join us and the French in the programme. This was one of the matters discussed between the Secretary of State for Defence and the German Minister of Defence. The German time-scale—and this, again, is the problem that has bedevilled us so often in Europe and in NATO—does not admit of a tripartite coproduction programme. But we still hope that the Germans will manufacture the Jaguar under licence. It is worth noting, since I am trying to give this picture of a successful industry producing saleable products of use to our own Service and exportable, that it is already being developed and produced in five versions for us and the French—the British and French strike versions, the British and French trainer versions and the French naval version. Equally, versions could be developed tailored to the German requirement. We hope that this may become a symbol of successful European collaboration.

I would just say something very briefly about the helicopter package. This is going well. Co-operation between Sud Aviation and Westlands, and Rolls Royce and Turbomeca is working well. The first project is the SA.330 which has an increased payload and is air portable; the second is the SA.340 required for communications and basic training. Then there is the Westland WG.13. The design lead in the airframe is being taken by Westlands, whereas in the case of the others it is the French. But, of course, the development and production is equitably shared between us, and we and the French are developing and producing some £200 million worth of helicopters. This is a partnership which we hope will project far into the future, and certainly as far ahead as we can see. I might just mention that in all these projects, wherever possible, we are employing fixed incentive price contracts at every stage of the programme.

Noble Lords referred to the variable-geometry strike-interceptor aircraft. As your Lordships know, the French felt obliged to withdraw from this project in the middle of last year, for financial reasons. The noble Earl, Lord Kinnoull, asked what we are now doing in this field. The position is that the project study at B.A.C. (Warton) is continuing, and the design team is studying variations in costs, complexity and time scale, so that we shall be able, we hope, to interest other countries with a similar requirement. It is most impressive to go to Warton. I wish that many of my colleagues in all political Parties could visit Warton and see something of the work and the enthusiasm. But I am sorry—I do not wish to mislead noble Lords—that I can make no undertaking about this. I can only express my personal hopes. We are having talks with other countries to see whether there is scope for collaboration in the development and production of an advanced combat aircraft, whether employing variable geometry or not, for the mid-1970s and beyond.

I cannot answer the noble Earl in regard to his perfectly fair question as to what is the replacement of the variable-geometry plane, which has been described as the core of our aircraft programme. Clearly, there is going to be hard thinking and hard work on this, and certainly talks are going on, in particular with the Germans, on this. We think that there might well be a substantial market for this sort of aircraft, and certainly the Ministry are giving full support.

Let me turn, quite briefly, to that part of the programme which has been most disputed, the procurement of aircraft from America. I will not repeat what I said about the F.111 and the extent of the blow. But I think I must say something about some of the figures of cost. I must confess that I totally fail to understand the noble Earl's calculation of £4.3 million. Did he say £4.3 million?

THE EARL OF KINNOULL

My Lords, was simply quoting what the noble and learned Lord the Lord Chancellor said last night, when I think he quoted one hundred aircraft—saying that if we bought one hundred aircraft it would cost us £430 million. So I divided accordingly.

LORD SHACKLETON

My Lords, of course we are not going to buy one hundred aircraft. But, whatever weird calculation the noble Earl may have made (and many people have been making these rather weird calculations) the fact is that my noble and learned friend was referring to the cost of the programme over the whole period. This includes supports, spares, United Kingdom research and development, running costs, air crews, petrol, oil and lubricants. I am sure that when the noble Earl buys a car he does not, in calculating its cost, add the price of the petrol over the next ten years. It has been most notable in all our discussions on this that there is a great danger in calculating in this way, and I shall be glad, the next time the noble Earl puts down an Unstarred Question, to give him a little help on the financial side, because I assure him that his assertions are wrong. I am sure he would not think it right to include, for instance, the pay and the cost of training of the pilots of the aircraft, expensive as this may be.

LORD ST. OSWALD

But if the noble and learned Lord Chancellor chooses to pick a high figure in order to demonstrate what a huge saving is being made, surely it is open to my noble friend to use that figure to demonstrate the cost it would have represented.

LORD SHACKLETON

If my noble and learned friend is explaining the cost of a programme over a period, it is no good just doing simple sums and translating them into the unit cost of the aircraft, including the cost of petrol, oil, spares, and so on. It was not, of course, the intention of my noble and learned friend to mislead. He was giving an indication of the total savings, not the cost of the individual aircraft. I should be very happy to pursue this matter with both noble Lords at a later date.

What I cannot say—and I have no intention of saying at the moment—is what the cancellation charges are. I must say, first of all, that I still believe it is a fine aircraft. Secondly, we are about to embark on negotiations on the cancellation charges, and I ask noble Lords to believe that, although the estimates have been fairly given in the totals, it would not be in the public interest at the moment for me to go into those particular costs.

LORD ST. OSWALD

My Lords, there was one specific question that asked; namely, have the estimated cancellation charges been set against the advertised savings?

LORD SHACKLETON

Yes; I assure the noble Lord that they are included in the general pattern. They are estimates, but they are to the best of my knowledge as accurate as we can get them. I an almost certain that I am right on this, but if by any chance I have gone wrong I will immediately let noble Lords know.

The noble Lord also asked about the effect on our offset contracts. This is a complicated business, and I give to the noble Lord that the cancellation of the F.111 is damaging in that respect. But of course, it is not related merely to the F.111, but to all our expenditure for American weapons—Polaris, Phantom, Hercules—against the expenditure in the United Kingdom. But I take the noble Lord's point, which is perfectly fair, and I should not wish to go into more detail about this matter.

I should like now to turn to the Phantom, the only major aircraft which was ordered by the previous Government. This is one aircraft, I fear, where costs, as is made clear in the Report of the Comptroller and Auditor General, have gone up. We have discussed this before. It is a very fine aircraft, but there is no doubt that the Anglicising which was decided by the previous Government has greatly added to the cost. The noble Lord probably has not had time to read the last report of the Public Accounts Committee, but he will find it all dealt with there. As I myself read it only recently, I should not like to go into this matter now. The main increase is partly the reduction in numbers, although the total number we are ordering for both the Services is slightly more than the ones which were originally ordered for the Royal Navy only; and there is the great problem of matching British engines and equipment with American airframes. It would seem so simple to Anglicise but, as the noble Viscount, Lord Caldecote, would confirm the costs somehow seem to mount.

I do not think I would go very much fruther beyond saying that the aircraft is promising. The development programme has been subject to some delay, but the first aircraft are expected to be delivered to the Royal Navy and Royal Air Force in March and April this year and they will be steadily coming off the production line.

I will not go into further detail about the C.130. Again, we know that this is coming steadily on. I agree with the noble Viscount about the importance of cost-effectiveness. I think I have already partly dealt with this aspect, but I am sure we shall have to look further at this question of closer contact, particularly in the formulation of operational requirements. I have heard this so eloquently argued by members of the aircraft industry, and I am hoping that now what was in the first instance just a gleam in the eye of a research scientist or an airman will result in working much more closely together. Of course, there is very good co-operation now, and I hope that the noble Viscount will confirm this. I was very impressed by the extent to which the Air Force servicing people work right in the factory, influencing design in small ways with regard to servicing.

I had intended to end on an entirely non-Party note. I hoped that we should recognise that the Air Force is certainly going to have some very fine aircraft, notwithstanding the loss to which I have referred. The great bulk of their programme is intact. But I really must say something to the noble Lord, Lord St. Oswald. I really cannot again go over those dreary debates we had about the cancellations of previous aircraft. The most important thing is that the Royal Air Force are now getting a number of advanced aircraft years sooner than they would have done if we had stuck to the aircraft for which the noble Lord's Government argued.

Also, I really do resent his reference to my right honourable friend the Secretary of State for Defence. He says that he did not hear the broadcast. If ever a man was talking honestly and truly on that occasion, facing very difficult music—and I happened to see this broadcast—it was my right honourable friend the Secretary of State. It is certainly not for me to defend him at great length, but I have a very high regard for him. I know that he has been heavily involved in a number of very difficult decisions, which all of my right honourable and noble friends have had to take. Perhaps I will attribute this charitably. It is after dinner, the noble Lord was upset by one casual remark of the noble Viscount, Lord Caldecote. But I must say on this burning rhetoric of his, in which he used words like "inexpungible" or something like that, that I really think it would have been much better if he had not written that.