§ 3.30 p.m.
My Lords, I beg to move that this Bill be now read a second time. It comes before your Lordships after two very full debates and a Committee stage which extended to four Sittings in another place. In the Commons, I am glad to say, the Opposition supported the Bill in principle. That was not altogether surprising, since the Bill is intended to amend the provisions of the Industrial Expansion Act 1968, sponsored by the previous Administration and designed to provide the necessary financial support for the British manufacturers engaged on the production of this remarkable aircraft, Concorde. I emphasise that what this Bill is concerned with is the production phase of this project, not the research and development phase.
I should like to give your Lordships a brief explanation of the reasons for the Bill and for the actual sums of money embodied in it. Those airlines which decide to purchase Concorde will normally make a small payment on the signature of a purchase contract, followed by 433 a proportion of the outstanding price in stages up to the date when the aircraft is delivered. At that point they will complete payment of the full outstanding price. The precise amount to be paid before delivery of the aircraft will of course be negotiated separately with each individual customer. Meanwhile, however, the manufacturers have to finance the actual construction of the aircraft before receiving full payment; and the purpose of the Bill, as indeed was the purpose of Section 8 of the Industrial Expansion Act, is to enable the Government to guarantee loans from the companies' banks or advance loans themselves to provide the essential bridging finance until the final payment is received from the customers. These loans will then be repaid by the manufacturers from the receipts of aircraft sales and eventually production will become self-financing.
The present limit on the amounts which may be advanced or guaranteed under the Act of 1968 is £125 million. I think most of your Lordships who are interested in these matters know that the two Governments concerned, the British and the French Governments, have authorised the production of the first 16 Concordes. So far, some £45 million has been spent on this production programme. However, the total commitments entered into by the British manufacturers in ordering materials, components and equipment for the 16 production aircraft is now close to the upper limit under existing legislation of £125 million. We estimate that the total amount of this bridging finance now required by the British Aircraft Corporation and Rolls-Royce (1971) Limited, after taking account of payments from airlines, may amount to £250 million. The bankers of these two firms have agreed to provide £25 million of this amount against a Government guarantee, and the remainder will be provided by the Government in the form of loans attracting the one-to-five-year Government interest rate. Hence the Bill.
Your Lordships may reasonably ask why it is necessary to raise the original ceiling of £125 million of loan finance to double that; namely, the £250 million figure written into the Bill. The answer is that since the original limit was calculated the development pro- 434 gramme has been reassessed and will take longer to complete than the forecast at that time. This has meant that the dates when aircraft can be delivered to airlines for service, and hence when final payments will be received for them, will now be later. Secondly, as we all know to our cost, there has been a period of sharp inflation since the original estimates were made, and this alone would have the effect of increasing the 1968 estimate by something like £50 million. When account is also taken of the effects of the aircraft's later entry into service, the figure of £250 million now proposed in the Bill represents little, if any, real increase over the limits originally provided in the 1968 legislation. The precise financial support needed by way of loans will depend upon a variety of factors, many of which must necessarily change as the programme proceeds. The total number of aircraft under manufacture, the number and timing of sales, the selling price achieved, the amount of advance payments negotiated with individual customers, and the size and pace of the eventual production programme will all affect the scale of loans or guarantees required.
My Lords, it would be tempting for me to speculate on the shape of the actual production programme. I must, however, resist that temptation. It is obvious that in order to offer competitive delivery dates the manufacturers must have a firm basic flow of aircraft under construction. But the actual number of aircraft being built in advance of actual orders at any one time involves a very difficult point of judgment. It depends on a great number of variable factors, some of which I have already mentioned. At the present time the manufacturers on both sides of the Channel, the British Aircraft Corporation and Aerospatiale, are examining variants of possible production programmes. When they have finished their examination, decisions by the British and French Governments will be required, but the necessary joint decision must of course await the appointment of the new French Government. In these circumstances, I am sure your Lordships will appreciate that I cannot be drawn into speculation as to the precise nature of the future production programme.
Meanwhile, assumptions have had to be made about the amount that may be 435 required as financing loans for the British firms involved in the programme. Our assumptions may prove over-pessimistic, in which case substantially less than £250 million will be needed. If, however, they prove over-optimistic, more may possibly be required and the figure could rise as high as £350 million—we are here speaking of loan finance, of course. The Government believe that in such circumstances Parliament should have the right to look at the matter again, and that is why the Bill provides that this extra £100 million should be authorised only by Affirmative Resolution. The present uncertainty which necessarily surrounds the actual size and shape and the pace of the future programme makes it difficult to forecast the date by when the loans will be repaid. The Bill therefore removes the provision in the 1968 Act that the loans and guarantees must be repaid by mid-1979. I would stress that this in no way absolves the manufacturers from repayment, which will be made automatically as the sales revenue builds up.
Concorde represents a major advance in the evolution of civil aviation, and indeed the first decisive technological innovation since the introduction of the jet some twenty years ago. It is entirely understandable in these circumstances that some airlines, who in this exceedingly competitive area of international commerce have formulated their plans for the immediate future—huge orders of subsonics, for example—may be reluctant to commit themselves at this stage to ordering so novel an aircraft as Concorde before they absolutely have to. However confident one may be of the outcome, the financial risks involved—and one would frankly acknowledge this—are considerable. As was confirmed by the previous Administration in establishing the basis for supporting the Concorde production programme, the manufacturers do not command the resources to undertake manufacture of the aircraft, and cannot be expected to bear all the risks. The Government have therefore agreed in principle with the companies arrangements which will give them a strong incentive to make a success of the project. Under these arrangements, profits will be shared between the manufacturer and the Government, and the manufacturers' level of profits will depend on the success achieved. The manufacturers have also, 436 I am glad to say, accepted that they will bear a risk of loss and the Government will indemnify them against the risk of losses above those levels.
My Lords, may I conclude these perhaps necessarily rather dry introductory remarks—after all, loan finance embodied in the formal phraseology of legislation is a fairly dry subject, even when we are speaking of figures of this magnitude—by a few brief observations of a more general and indeed of a more personal nature, and of course if there are any questions put to me or questions arising in the course of this debate I shall be glad to answer them in winding up. My Lords, I said just now that Concorde represents a great stride forward in the evolution of civil aviation. So it does, and I believe that all concerned with this project on both sides of the Channel, from the peaks of administration and management down to the humblest employee on the factory floor, can justly take a great deal of pride in what is by any standard, whatever one may feel about the commercial prospects, an outstanding technological achievement and an outstanding manifestation of Anglo-French and indeed European collaboration. My Lords, in speaking of pride we must always remember that nearly 24,000 people in the United Kingdom alone, many of them people of the highest talents and skills and of great dedication are employed on this project, the largest project of its kind which the world has known apart from the American space programme.
Having said that, I should like to emphasise, in concluding these introductory remarks, that this is not a project which we are pursuing out of any vain sense of prestige or national vainglory. The whole history of air transport demonstrates that the main commodity which it has to sell is a simple one, namely speed, and that is what Concorde in a pre-eminent degree offers the airlines and the public. Its capabilities were very clearly demonstrated on the tours which the prototypes have made. I remember very well the tour of the Far East last year in which I was privileged to take part. The aircraft halved travel time on a great many routes, and I know from personal first-hand experience the deep interest in the potential of supersonic travel which it aroused among the general public, the Governments concerned and 437 the airlines of the countries through which it passed.
My Lords, there is one illusion which the opponents of this project seek to propagate and which I should like to do my best to dispel; and here one touches on the philosophy behind this project. Concorde is often represented as a rich man's toy—the sort of aircraft from which only the international jet set would derive advantage. Nothing, in my view, can be further from the truth. One of the great advantages of air transport has been to bring within the reach of millions of people around the world the ability which was probably not theirs before to see and travel in countries far from their own. By and large, I think this is good. I am quite certain of one thing, and that is that travel of this sort, mass air travel, will enormously expand, whether we like it or not, in the years to come, and I believe that in the next two decades the great bulk of that particular traffic will be carried in the existing or the great new subsonic aircraft which are over the horizon and which are to come. But there will be other travellers for whom the ability to get at twice high subsonic speed to their destination will be of the greatest possible advantage. I am not referring here merely to the rich and to the privileged; I am referring to busy businessmen, to executives of all types, to professional men and women, to officials and diplomats—and I also have in mind even poor politicians.
Let me illustrate what I have in mind by one simple fact. My wife happened to join me in Tokyo for the Pacific leg of Concorde's tour, and because she happened to contract a rather juvenile disease called measles at an inauspicious moment she had to fly out direct to Tokyo. She flew out direct, and that very tiring journey took something like 17 or 18 hours. If that journey had been made in Concorde that time would have been cut in half. My Lords, time saving of that kind can really be of very great benefit indeed to many busy people all around the world, and there will be many routes on which savings of this order of magnitude will in fact be achieved. It is my view—and here I am expressing perhaps a personal conviction—that those airlines which are first to operate Concorde may well reap a rich harvest from their enter- 438 prise. It is with these larger considerations in mind that Her Majesty's Government, together with the French Government, have given and are giving their full backing to the manufacturers of this remarkable aircraft, and to the determined efforts which those manufacturers are making in what is admittedly a very difficult market. I hope that your Lordships will underline your agreement with the policy which is being pursued by the two Governments in their backing for all those involved in this enterprise by giving your support to this Bill. My Lords, I beg to move.
§ Moved, That the Bill be now read 2a.—(Earl Jellicoe.)
§ 3.46 p.m.
§ LORD SHACKLETON
My Lords, we have before us to-day a small Money Bill of a kind in regard to which we do not usually spend much time in your Lordships' House, but as on some other occasions this is a vehicle for a very important decision. It is, in fact, a question as to whether we should go on with Concorde. My Lords, this is a difficult area. It is an area in which one can go on making calculations, studies, projections, mathematical models; but the ultimate decision has to rest on judgment and to some extent on faith. In my opinion that has been true of many other advanced technological projects. It is not possible for us even now to prove that whatever decision we come to is necessarily the right one. I have myself come to a firm personal view, that although there are arguments that it is folly to go on spending money on this and on subsequent aircraft, it would be even greater folly to abandon the project at this stage. I should like to give my reasons to the House. Substantially they are the same reasons that I gave in the House nearly 10 years ago when we first debated the supersonic aircraft. There are arguments—they are indeed powerful arguments—that can be given against going on with Concorde. There is the argument that one ought not to throw good money after bad. My contention is that if we do put some more money in—and this is the purpose of the Bill—we shall redeem the advantages of the earlier investment, and it is not impossible that the advantages may be very much greater than the present times indicate.
439 My Lords, in discussing Concorde it is necessary to recognise that there are those, and they are some of my noble friends and probably noble Lords on the other side of the House, who take the view that because of the way the world is going we ought to spend less money and less time on Concorde, motorways, advanced technology generally and that even growth is not necessarily a good thing; and that we ought to go in for what is now popularly called "soft technology", which consists of living in a cottage in Wales in a small commune and relying for heating on a heat pump which you make yourself—and for which you would need a little bit of outside technology—and there you would be freed from the stresses, noises and pollution of the present-day world. That is very attractive, but the fact is that the world is as it is and it is one we cannot get off—except perhaps for a few astronauts who get to the moon. The decisions we have to take in politics, industry or in our private lives may never be the complete, perfect optimum solution. They have to be the best solution in practice.
I agree with the noble Earl, Lord Jellicoe, that speed of travel is a benefit. Many people ask why people want to go rushing around so fast; why it is that speed is so much in demand. Why do we all have motor cars? Of course, the motor car is not the most speedy way to travel; it merely happens to be more convenient—and when the railways are not working one must admit that perhaps a motor car is essential. But the great social argument in favour of speed in travel has been that it has brought the communities of the world closer together and I believe that it makes a substantial contribution to the effective operation of the world's economic systems where time is very important.
I do not wish to go into a mathematical dissertation on time and travel, but it is a fact that one cannot think simply in hours; one must think in terms of journeys. The advantage of the railways being able to increase their speed by the use of advanced passenger trains, so that passengers can get from London to Manchester in three hours or whatever the time may be, will be very good. Incidentally, that may knock out some of the airline business; but that is a natural 440 development. To people who have to go to New York frequently on business the advantage of being able to do it in three hours instead of six and a half hours is a real benefit. For the great majority of leisure travellers speed is not that important. It is not essential to fly to Australia in 13 hours or 14 hours instead of having to take 28 or 30. Probably these travellers would not want to fly direct in any case; they would want to make a stop on the way. But to an individual who has to undertake the journey in a hurry speed is crucial. The noble Earl gave a striking example when he quoted the experience of his wife, although I thought it was mumps and not measles from which she was suffering.
My Lords, of course the noble Lord, Lord Shackleton, is far better informed than I am, and he is quite right.
§ LORD SHACKLETON
My Lords, I think the noble Earl said that I was quite right. I am always delighted to give him additional domestic information. In the last 18 months I have flown twice non-stop to Australia, not with the noble Earl's wife, although he and I and his wife all flew in Concorde half way to New Zealand and back in a very short period during what I can only call the noble Earl's "sales tour". I have twice flown direct to Australia and it took 28 hours, and on the whole I am a fairly good air traveller. I sleep, and I do not worry and I try not to eat too much. But on each occasion it took me three days to recover from the journey, and I shall never do it again because it is not good for one's health. In future, if I have to go to Australia, as I may well have to do on business or for some other reason, I shall always make a stop. One may fly from Hong Kong to London in about 18 hours and that is a possible journey. One may stop and perhaps lose a day and altogether one may lose a couple of days. But whether we like or not, businessmen, industrialists, Ministers and Members of Governments will need to travel fast. These are the people who are travelling in the most comfortable way they can, which is in the first class section of the aircraft.
The noble Earl made the point that being able to fly fast in this first class manner is not just a question of privilege, and it is noteworthy—I cannot remember 441 whether the noble Earl made this point—that it is primarily a question of efficiency. It is interesting to note that the Russians have gone ahead with the TU-144. It may be that the Russians are élitists, but the Chinese are interested in buying Concorde and they are the least elitist nation in the world. The fact is that supersonic travel is with us whether we like it or not. Unquestionably the Americans will build some form of supersonic air transport at some stage. As was said by the National Aviation Authority to the Congressional House Aeronautics Sub-Committee, there will, in fact, be such an aircraft; and they observed that the first and the second generations of the supersonic transports are a threat to the United States posture in civil aviation. It is quite obvious that they hope that the Concorde will be rather like the Comet—I hope without the disasters that befell the Comet—and will blaze the way for other people to reap the benefit, as has happened in the past.
I think it clearly essential that we should take account of our experience in the past. One of the difficulties regarding profitability calculations is the load factor. It is a tragedy that the British flag carriers underestimated the attraction of the VC10 and as a result, although it has achieved a higher load factor than was expected, when the time came the production line had ceased; the aircraft were not there, and we did not reap the full advantage of that plane. I think it very likely that this time there will be a very much higher load factor. I cannot foretell what it will be. One may undertake all these complicated studies. I am told that the studies of the load factor are not at all ambitious but that it is rather a small load factor. My guess is that when B.O.A.C. and Air France can fly to New York in three hours instead of six and a half hours they will make an absolutely complete takeover of all those passengers who have to travel on business and there is a real prospect that Britain and France may, for a period of years, establish a commanding lead in the world air travel market.
As the noble Earl made clear, it is not just a matter of status or prestige, but also it should bring a very considerable commercial advantage. It is interesting to note that the Study from the Library 442 of Congress of February 15 of this year ends with these words:The outlook is not at all bleak for the first generation Concorde. Successful experience with this aircraft on the part of B.O.A.C. and Air France may well prompt other airlines particularly those competing with B.O.A.C. and Air France on the trans-Atlantic run to turn their options into firm orders over the next few years.My Lords, there is no country in the world, in my opinion, to whom Concorde could be more important than Australia. But whereas B.O.A.C. does not necessarily require a direct Sydney-Singapore flight, Quantas does. If I understand it correctly—it may be that the noble Earl can give the answer on this—it is only a question of marginally further development expediture to meet the Qantas requirement.
The question of route patterns is a complicated one. It is interesting to see that Concorde in its recent trials has met the requirements that were originally sought: I believe they have carried 28,000 lb over a stage length of 3,750 miles, which certainly in the days when I was in Government we were not expecting them to get anywhere near. The recent high level hot temperature tests have been successful; and I understand that some real progress has been made in regard to those agonising environmental questions. We are all deeply concerned about noise pollution, and there is no doubt that in future civilisation will tolerate this less and less. But I understand recent tests suggest that the Concorde will be no noisier than some of the existing aircraft, such as the 707 or the VC 10 which are operating now, and which, whether we like it or not, will be operating for many years to come. No one of course is going to tolerate the boom over inhabited areas. I am told, too, that the visible exhaust discharges, which have also been a marked factor in earlier versions of other aircraft, has largely been cured.
There is one other argument that I would use in support of Concorde—and here again one is in one of the more difficult areas; namely the advantages that may be derived by others from the development of an advanced technological project of this kind. It is interesting to look at the report of the Centre for the Study of Industrial Innovation on this now rather over-abused word "spin-off". I do not propose to go into the arguments 443 as to the particular advantageous types of spin-off from Concorde, but the number of firms which have claimed some advantages, and in certain cases significant advantages, from the work that they have been doing in association with B.O.A.C. is quite striking. The development of methods of quality control and production control all add to the ability that we need to have.
My Lords, in the light of all this, I think it is right for us to go on with Concorde. It is a strikingly beautiful aircraft. Its advantages could be very great, and I think it would be folly for us now not to follow up the heavy expenditure we have already made on this aircraft and seek to reap the advantages which I believe faith can bring us.