§ 5.15 p.m.
§ Lord KINGS NORTON rose to move, That this House takes note of the Fifty-first Report of the European Communities Committee of last session on the Action Programme for the European Aeronautical Sector (R/2461/75). The noble Lord said: My Lords, the report is, I believe, a document of considerable importance to the development of aeronautical policies and attitudes in the Community. It is a commentary on the EEC Commission document mentioned in the Motion, the Action Programme, which was published on 3rd October, 1975.1128
§ This programme, which proposes a highly centralised control by the Community of the aircraft industry and air transport systems of the Nine, was considered in detail by Sub-Committee F of your Lordships' Select Committee on the European Communities, under the chairmanship of the noble Earl, Lord Lauderdale. As a member of the Sub-Committee, I should like to tell those of your Lordships who are not members how much the Sub-Committee owes to the outstanding quality and vigour of the noble Earl's chairmanship.
§ The Sub-Committee devoted nine meetings to written and oral evidence from representatives of the British aircraft industry, of the British air transport industry, and of Government Departments; and in this way a spectrum of informed opinion became available to the Sub-Committee which was further helped by the attendance at private meetings of two members of the EEC Commission.
§ The Action Programme document be-gins by analysing the difficulties of the aircraft industry of the Member States arising from the alleged dispersal of its resources and inadequate co-ordination of decision-making, but recognising advantages in its technological abilities and developing opportunities. It concludes that:
"the development of the industry, with its important inputs of new technology, requires clear strategies, systematic long-term planning, and coherent management. And because of the high-level of investment which must be undertaken it requires a wide capital base, secure financing, good market prospects and the avoidance of the kind of waste that arises from duplicated efforts and lost opportunities for rationalisation."
§ It would indeed be difficult to disagree with these sentiments.
§ The document then proceeds to review the market, particularly the European market. Only the civil market is within the competence of the Commission, and in the civil area the Programme commits itself to a policy of creating a "European airspace" managed at Community level. This appears to mean, ultimately, central control of the Community's airlines and of their development in ways calculated to improve the market for the civil aircraft manufacturing industry. Indeed, the manufacturing industry and the air transport industry are seen as two sides of a single coin.1129
§ The Programme recognises however that the civil market is little more than 40 per cent. of the whole and states that,
any policy designed to strengthen and develop the aircraft industry must therefore include common action in the defence equipment field. To this end the Governments of the Member States should decide to create a joint arms procurement agency, responsible for joint development and purchasing of airborne weapons, to meet the needs of the European armed forces."
§ As the Programme document sees it, if the Community's aircraft industry is to have any future, the framework for its management would devolve from a proposal from the Commission to the Council. The Council, after consulting the European Parliament, would make the major policy decisions on programmes, Community financing and international agreements. On the basis of those decisions, the Commission would assume the management of the common aerospace policy. This awe-inspiring conception is made a little less frightening by the statement that the Commission would organise the management of the aircraft policy in such a way as to use the maximum existing national structures and to seek the greatest possible decentralisation. Nevertheless, Community financing of the aircraft policy would not be superimposed on national financing; it would replace it.
§ The Action Programme document concludes with, first, a proposal to the Council of the European Communities for a decision concerning the creation of a common policy in the civil aircraft and aviation sector and, secondly, a draft resolution for the Member States to consider relating to the creation of a military aircraft procurement agency. The decision proposed for the Council is that there should be, inter alia—T am not giving them in full:
"a common programme for all activities in connection with the manufacture of large civil aircraft, common financing (to replace national financing) of research, of development and of production tooling for the common programme, a common programme of basic research receiving community financing, financial support for marketing, harmonisation of the laws, regulations and administration provisions of the Member States dealing with certificates of airworthiness, the creation of a European airspace, managed on a Community basis, involving a system of regulated competition, the aim of which would be to provide services tailored to the public need at the best possible prices, joint negotiation of the Community's agreements with other countries,1130
particularly on traffic rights, so improving the Community's bargaining power and leading to optimizing international routes and services."
§ I have tried to give your Lordships a conspectus of the document which was the basis of the deliberations of Sub-Committee F. It has necessarily been sketchy, because the document contains a dozen pages of report and a score of pages of annexes.
§ Now I should like to turn to the report which is the subject of my Motion. In the Introduction, the report says with, I think, commendable restraint, that the draft decision and the draft resolution, which I have tried to précis for your Lordships, would have far-reaching implications. Their full impact, according to the report, cannot be assessed until the consequential draft regulations and directives are known. The report therefore examines the general objectives of the Action Programme, their justifications and how far they can be achieved through the Commission proposals.
§ The first critical note is struck when the report, in its paragraph 10, deals with the concept of a Community airspace to supplant both national sovereignty in airspace and national air transport regulations. The programme talks of "European" airspace, which the report regards as misleading. Also misleading, says the report, is the term "airspace" because in aviation circles "airspace" means the area above its territory in which a country enjoys national sovereignty. The Commission uses the term in a new and wider sense, to mean the whole paraphernalia of regulations and agreements controlling air transport operations. The Commission argue that a unified Community airspace, in the new sense, would help the realisation of proposals for aircraft manufacture. But, says the report, a little unkindly, so little argument is adduced in support of this view that some witnesses suggested the air transport proposals had been included as an afterthought.
§ The Report, my Lords, also reviews the legal implications of the Commission's Action Programme. Broadly, if it were implemented, it would seem that United Kingdom would be lost to the Community. Furthermore, the financing of research and development, and of United Kingdom sovereignty over the airspace above the United Kingdom would be lost 1131 to the Community. Furthermore, the financing of research and development, and of United Kingdom airworthiness standards and certification would have to pass under Community control situations demanding modification of existing legislation. Only noble Lords with a detailed interest in the administration of aircraft construction and aviation will find time to read the minutes of evidence in the report, but I hope that most noble Lords will study the conflation of this evidence in Part IV. The ideas in it are already concentrated into a small space, and a further précis would not be comprehendsive. However, in commending it to your Lordships, I would draw attention to some points which are particularly important.
§ First, the evidence did not seriously challenge the Commission's broad assessment of the industrial situation, though the Commission was thought to have underestimated the difference between air frame and engine manufacture. There was, however, little support from witnesses for any of the proposed solutions. Rolls-Royce, for example, were totally opposed either to unified Community control of engine manufacture or to financial incentives for greater collaboration in the engine field. From the Minister of State, Department of Industry, and from his officials, while there was naturally support for United Kingdom collaboration with other countries, there was none for a programme in which United Kingdom policy was submerged in a Community policy and the independence of the United Kingdom aircraft and engine industries lost.
§ Evidence was heard about co-operation between the civil aviation authorities of the United Kingdom, France, Germany, Italy, Holland and Belgium on drawing up joint airworthiness requirements. These are well advanced for airframes and complete for engines—the other countries accepted the United Kingdom engine code. The point is made, however—and it is a very important one—that agreement on standards does not guarantee uniformity of enforcement. I intend to return briefly to the subject of airworthiness later in my speech. Official support for the idea of a military procurement agency was noticeably qualified. While the need for co-operation and the co-ordination of operational requirements was endorsed, 1132 it was clearly felt that progress in those directions could be made without the Commission's proposed new agency.
§ The Report makes clear that the concept of a European airspace was received with considerable scepticism. To quote the Report:
"The proposals rest on the assumption that the manufacturing industry requires a community airspace. This assumed link is crucial to the argument but is neither explained nor justified."
§ in the Action Programme. The evidence before the Sub-Committee, summarised in part IV of the report, suggested that a common EEC transport policy is not necessary for helping manufacture. Furthermore, on more general grounds, it was felt that the EEC was not the right machine to bring about the changes. The weight of feeling, indeed, was that the area for co-operation was much greater than that of the Community, and that the development of co-operation was already satisfactorily progressing through the work of the European Civil Aviation Conference, the Association of European Airlines, the International Civil Aviation Organisation and the International Air Transport Association.
§ The opinion of your Committee, my Lords, is given in Part V of their Report. Again, I do not intend to give a comprehensive account, but to draw attention to important parts. For instance, they say that as the United Kingdom and France together account for some three-quarters of aircraft building in the EEC the addition of further layers of Community authority could only produce a steep organisational pyramid. The intervention of seven other Member States with limited interests in the matter would hardly encourage the political accommodation required. The Committee do not believe that the Community's institutions are well adapted to making prompt decisions of the type required.
§ While, say your Committee, it is not clear whether the Commission is, indeed, aiming at a protected EEC market for aircraft built inside it, attention must be called to the evidence, which was almost unanimously hostile to protection. Companies have shown, continues the report, that common action across national boundaries is neither impossible nor dependent on the evolution of European company law or Community action.1133
§ Aircraft manufacturers have made good progress in voluntary collaboration under economic pressures alone.
§ The Committee consider however that the Commission may well be right in averring that economic forces will not alone bring airframe manufacturers sufficiently together. The Committee would welcome it if the individual Governments, particularly of the United Kingdom and France, demonstrated a policy of active collaboration so that the independent national airframe came in future to be regarded as the exception rather than the rule. The Committee appreciate, however, the force of the argument put to them by Mr. Kaufman that for defence reasons the United Kingdom must be able to design and develop airframes independently if necessary. The Committee welcome the proposal that certain areas of basic research should enjoy Community financing, because increasing costs threaten to limit national efforts, but this must not be, says the Committee, at the cost of endangering present research centres.
§ On airworthiness, the Committee consider it better for the Community to encourage the present action on joint airworthiness requirements, than to risk changing to the system indicated by the Commission. As I have already said, the Committee consider that the case for a European—that is to say, an EEC—airspace has not been substantiated. Its implementation would duplicate and undermine valuable work being done by existing international bodies, and it might jeopardise the United Kingdom's relatively strong position in civil aviation.
§ The conclusion of the Committee I must read to your Lordships in full. It is not very long. This is it:
"The Commission's aim to improve the competitive strength of the aircraft and air transport industries results in proposals for no more than organisational action. This would be taken at one remove from the industries concerned. The intention is to ' go beyond the stage of intergovernmental co-operation '. The proposals would upset present co-operation in bodies of wider scope than the Community. The Commission imply that the new organisations, if set up, would be able to find solutions to the industries' problems on such matters as aircraft types, marketing, finance, routes and fare-structure. This is not demonstrated nor is it self-evident. The Committee can even foresee matters being made worse. While they support the principle of Community finance for basic research and1134
marketing, they think it would be wrong for approval to be given to the other and fundamental changes proposed, even in principle."
§ That is the conclusion of your Lordships' Select Committee. I have done my best to give your Lordships an idea of the Select Committee's 51st Report, and an idea of the EEC Action Programme which occasioned it. May I conclude with a few remarks for which no one is responsible but myself.
§ First, I would draw your Lordships' attention to Appendix 6 of the Select Committee's report. in which is given the Resolution adopted by the European Parliament on 6th July last on the Action Programme. It recommends the Commission to concentrate on getting decisions of principle out of the Council on industrial policy, and on putting its common air transport proposals into concrete form. I doubt very much whether, even if this recommendation is implemented, we shall be much further advanced. But I should like to ask the noble Lord who will be speaking for the Government whether he can tell us if the proposals of the Action Programme have indeed got any further through the EEC machinery. I think we should all like to know, too, whether there is any information about the attitudes of other Member States. Indeed, we should like to know whether there is any change in the attitude of the United Kingdom Government since the Sub-Committee took its evidence.
§ The attitude of the Select Committee is clear. It found the Action Programme largely unacceptable. I think it could be described as, at one and the same time, didactic and naive. To what extent it is typical of what might be called the Commission approach, I am not sure but I am clear from experience of other draft papers from the Commission in scientific and technological fields that it is not unique. I feel strongly that the philosophy of centralisation—and it is that, despite the disclaimer to which I drew attention earlier—is wrong and should he resisted. I feel, too, that the Action Programme was written by people with little first-hand knowledge of aircraft and aviation.
§ There is a type of official operating in Brussels called an "expert". In the fields of science and technology, he does not seem to be what you or my Lords, would call an expert. He appears to be an 1135 administrative civil servant who depends on the advice of the true expert—the scientist or the engineer. This must make the drafting of intelligent documents relating to the fields of technology—such as aviation—unnecessarily difficult. My belief is that collaboration and harmonisation are best achieved by experts in the United Kingdom sense; not experts in the EEC sense.
§ A great deal of collaboration between the United Kingdom aircraft industry and the aircraft industries of Europe has been achieved. I think it was all initiated before the Treaty of Accession. It has had, so far as the United Kingdom is concerned, nothing to do with the EEC. It was achieved by experts in the United Kingdom sense, and has resulted in the Tornado, the Jaguar and the Concorde, to give the most dramatic examples, and that is the way it should continue. Any attempt to impose collaboration from Brussels just will not work.
§ We see another example of the result of collaboration between experts, United Kingdom style, in the remarkable progress towards agreement in airworthiness standards. The Action Programme gave no indication that the Commission was even aware of it. And Sub-Committee F learned recently of another example of successful collaboration between real experts, unassisted by EEC experts. This was in the field of molecular biology. The lesson is obvious. If the EEC is to get anywhere in matters of science and technology, it must leave negotiation in the hands of people who know.
§ Finally, I want to make the point, of which in fairness I must say that the Commission show that they are not unaware, that there is not a civil aircraft industry and a military aircraft industry. There is just one aircraft industry. The fact that the military industry is not within the Commission's purview is, in my opinion, just another reason for drastic modification of the Action Programme for the European Aeronautical Sector, which the Select Committee consider raises such important matters of policy and principle that the special attention of this House should be drawn to them for debate. My Lords, I beg to move.
§ Moved, That this House takes note of the Fifty-first Report of the European 1136 Communities Committee of last session on the Action Programme for the European Aeronautical Sector (R/2461/75).—(Lord Kings Norton)
§ 5.39 p.m.
§ Lord CARR of HADLEY
My Lords, I am sure that we should all be grateful to our Select Committee on the European Communities, and particularly, of course, to Sub-Committee F, under the chairman-ship of the noble Earl, Lord Lauderdale, for drawing our attention to this EEC Commission document called Action Programme for the European Aeronautical Sector and for analysing its implications for us so thoroughly and yet so succinctly.
I am sure, too, that we are all grateful to the noble Lord, Lord Kings Norton, both for playing his part on that Committee and bringing his own personally great knowledge and experience in this field to bear on the problem before us and for the speech which he has just made. He has brought out for us, very clearly I think, the main objectives and recommendations that are contained in the action programme document and also the main criticisms of it which the sub-committee made.
It seems to me that the case made by the Select Committee against the Commission's main general proposals is very strong. Indeed, I believe that it is unanswerable and I hope that your Lordships and the Government will express strong agreement with the Select Committee's views. The case has been so well summarised by the noble Lord, Lord Kings Norton, that I am sure your Lordships will agree with me that I need not amplify it in any way. I should simply like to say that I agree, I think, with everything that the noble Lord has said.
One of the points which the noble Lord made was that the Committee's report showed considerable restraint. It certainly did, and so did he, and I must try to do the same, although that will not be easy. As the noble Lord has said, the proposals contained in the Action Programme are indeed awe-inspiring. In my view, they are in fact downright terrifying. Like many noble Lords, over the years I have read many plans for action which have been strong in diagnosis but weak in prescription. It seems to me, however, that this action programme is not weak in prescription; it is absolutely lethal. If the medicine were ever to be administered to 1137 our European aircraft industries they would be as good as dead.
From the moment it was mooted—that is, before the Treaty of Rome was finally agreed—I was a strong supporter of the European Economic Community. Then I was a strong supporter of the view that Britain should be a member of the Community. Therefore I find it all the more distressing when the Commission put forward recommendations such as those which are contained in this action programme document. Their proposals amount to centralisation run mad. Also, I fear that they typify the very worst kind of inward-looking approach which so many of the opponents of the Community feared. They feared that the Commission might develop in that way and we, the supporters of the Community, said that it must be our job to see that this did not happen. Certainly, I think that we have that job on our hands so far as this document is concerned.
Of all the industries which need to be more genuinely international in outlook and competitive power, I suppose the air transport, the airframe and the aero-engine manufacturing industries must be among the principal ones. For them to become locked in an inward-looking Community attitude, bureaucratically run from Brussels, would, I believe, be a disaster. The Community must, of course, strengthen its own aircraft and air transport industries, but it must not run fences around them either industrially, administratively or commercially.
Luckily I think that there is little danger that this Action Programme, and its proposals, will ever be implemented. Although that is fortunate in one way, it is depressing in another. To me, at least, it is extremely depressing that the Commission should put forward proposals so wildly out of touch both with the reality of the needs of these industries and also with the reality of what can and cannot be done.
What, then, should be our main conclusions about all this? Not, I think, that the Commission should keep its nose out of these matters. On the contrary, despite the great growth in European co-operation in these industries between Member countries and their aerospace industries I think that co-operation has not yet gone far enough or been made effective enough and that there is need 1138 for more of it. Although I have been so strongly critical of the proposals contained in the Commission's document, I strongly approve of much of their analysis, and I must quote with approval one or two of their main conclusions in that analysis of the problem.
They say that the future of the aircraft industry in Western Europe is of importance to the Community for a number of reasons; that the existing industry is a major source of employment; that it is one of the chief representatives of the type of employment—highly skilled, commanding sophisticated technologies and a high level of investment—towards which the Community must necessarily move in the future as the industrialisation of the Third World proceeds and the wider international division of labour unfolds. I believe that analysis to be profoundly true.
I agree also, and I quote again, that the research and development carried on by the aircraft industry has proved to be a major source of scientific invention and technological information across a wide range of products. I agree that Western Europe's capacity to make an appropriate contribution to its own defence must depend in large measure upon the strength of its aircraft industry. I agree, too, as the document says, that despite its importance, the European aircraft industry faces serious difficulties which have put a question mark against its future and that, in large part, these difficulties are due to the divergent policies of the Member States with regard to their aircraft industries.
The document goes on to outline in more detail the criticisms of the record in recent years and I think that we can probably all agree with the following three points. First, that resources have been spread over too many, sometimes competing, civil and military programmes; secondly, that no overall market orientated strategy to co-ordinate the various kinds of aeronautical programmes has been produced; and, thirdly, that there has been a lack of adequate support for marketing and for developing existing products.
With all of these basic points of analysis, and others which I have not quoted, I certainly strongly agree. I hope that your Lordships' House will agree with them and 1139 that we shall hear from the Government that they agree, too. Therefore I want to separate my praise from my criticism. I have, and I believe rightly, criticised very severely the Commission's proposals for action, but I support and agree with their analysis. Also, I want to say that we need the Commission to inquire, to report, to criticise and to suggest what needs to be done by the Governments, the aircraft industries and the airlines of the Member countries of the Community. Also, we need our own Government to play an active part and to give a strong lead to other Governments in the Community in correcting the failures and the weaknesses to which the Commission draws attention.
While, therefore, we shall be right, I hope, in condemning the Commission's proposals as to how these problems should be dealt with, I believe that we should be wrong if we turned a complacent, blind eye to the Commission's critical analysis of the situation because the present situation is potentially a dangerous one for these vital industries. We must have a European strategy for the development of our air transport industries and for the aerospace manufacturing industries which can supply the products that they need. If not, these great industries, which at the moment are creative, will end up—I say 10 years from now, although that is a guess, but at least some time from now—as no more than subcontractors. That, I believe, would be a great loss to Britain and to all the Member countries of the Community. The costs of aircraft development are now so enormous that collaboration is essential. Collaboration is essential on a wider scale than simply the European Community, and it must particularly bring in the United States of America. But it must not be just piecemeal collaboration between individual European and American companies based merely on medium-term commercial considerations because that would lead inexorably to the subcontractor status which I have just spoken about as being a danger which we must take seriously in Britain in particular and in Europe generally.
So I believe that in Britain, France, Western Germany and Holland, as the four countries in descending order of contribution which really are the heart of 1140 the aerospace industry in Europe, Governments and the air transport and aerospace industries themselves must now put some real heart into a European strategy, and do it urgently. We need the weight of the Community behind such a strategy and that is why, as I conclude, I want to make clear that fiercely though I criticise the recommendations for action by the Council in this document I praise their interest in it and I hope we shall tell them that we want them to continue to show that interest—inquiring, reporting, criticising, urging but, please, not establishing a great centralised bureaucracy which will defeat their own objects just as surely as ours.
§ 5.52 p.m.
§ Lord LLOYD of KILGERRAN
My Lords, I should like to join with the noble Lord, Lord Carr of Hadley, in congratulating the noble Lord, Lord Kings Norton, for his masterly and comprehensive speech in relation to this, the Fifty-First Report of the European Communities Committee on the aeronautical sector. If he will allow me to say so, the noble Lord is recognised as one of the great international authorities in the field of aeronautics. It is no exaggeration to say that had it not been for his skill, both in technology and administration, many of the great advances in aeronautics during the last thirty-five years would not have taken place.
I also had the privilege of serving on the Sub-Committee which produced this report. I do not propose to follow the noble Lord, Lord Kings Norton, in the analysis he has made of the technological aspects and aspirations expressed by the Commission in their action programme. In my view a Commission's report of this kind has to be judged from an entirely different standpoint; namely, a political standpoint. After the devastating criticisms of the noble Lord, Lord Carr of Hadley, perhaps I may be able to cast, as it were, a political lifeline to the basic themes on European unity behind this Commission's action programme.
It seems to me that the main weakness of this Commission's programme is that it almost completely fails to discuss, or even to consider, most of the political realities associated with its otherwise commendable analysis of the industrial and technological situation in the EEC 1141 in the aeronautical sector. In my view it is not enough for the Commission to produce documents such as this, mainly with a technological and scientific content. There is a great danger to the unity of Europe for the Commission to seek as its mission in such an important industrial sector as the aeronautical sector, to set up some kind of organisation or institution without also giving some guidance as to how their proposals can be achieved from a political point of view.
Also, it seems to me to be essential for the Commission to show how their proposals can help towards the political unification of the Community. Therefore it is from that point of view that I endeavour to assess the value of this Commission's report. This Action Programme of the Commission fails to appreciate or discuss the political implications of its proposals, many of which run counter to so many diverse national interests which are bound to impede progress. Therefore I say again that it is not enough for the Commission in this Action Programme to deplore, as it does, the failure of the basic political strategy in Europe in the 1960s and at other times without expressing some view as to the present and future political situation in Europe in relation to the industry with which it is endeavouring to deal.
Of course I realise that under the Treaty of Rome the Commission is in some difficulty because it is bound to look for political guidance to the European Parliament rather than national Governments, and at least until direct elections to the European Parliament are achieved the European Parliament cannot be said to be a very effective political instrument. But as the noble Lord, Lord Kings Norton, and also the noble Lord, Lord Carr of Hadley, have pointed out, the Commission's broad assessment of the industrial situation was not greatly challenged in the evidence recorded in the report of the Select Committee. I entirely endorse the general proposals in the Commission's programme urging a European strategy in the aeronautic sector, and in particular the proposals for an EEC package in certain market slots. These relate to the size of civil aircraft and are set out at pages 24 to 27 of the Action Programme in the Commission's Bulletin Supplement 11/75. I agree that these suggestions should be made a key theme of important 1142 commercial advantage to Europe, assisted by the form of export bank for finance purposes suggested in the report.
Again, I agree with the comments of the Commission—and I believe the noble Lord, Lord Kings Norton, and the noble Lord, Lord Carr, would agree with this—that for far too long the European market for both civil and military airframes has been dominated by American firms, and that in the absence of some sort of systematic European procurement agency, market opportunities for European aircraft have been lost. Again, I would agree with the view of the Commission that the future survival of European firms in the aeronautics sector may be greatly at risk. As the noble Lord, Lord Carr of Hadley, pointed out, their position is critical because of the concentrations of industry in the United States of America and the foothold which American firms are gaining more and more in Europe through some of the agreements with firms in the Member States, thus further imposing their monopoly on Western markets. But the apparent political superficiality of the Commission's proposals in this connection were aptly illustrated when the Minister of State pointed out in evidence to the Commission —and this is recorded in paragraph 598 of the Select Committee's report:… it would be an absurdity to imagine that in a world which is dominated both by the American market and the American industry we can ignore the American industry and simply have a European industry and a European market.As the noble Lords who have preceded me have pointed out, the Select Committee's reports have supported the Commission's views that certain areas of basic research should enjoy Community financing because mounting costs threaten to limit national efforts. There appears to be little political controversy of significance likely to arise in this field. I have also noted the Commission's sympathy to the desirability of encouraging innovation in the aeronautical field.
I could continue to quote areas of the Commission's proposals where it would have been helpful for the Commission to indicate at least in some detail the political implications of the proposals and how they might be resolved. It might be that if they had done this, the criticisms that your Lordships have heard tonight might not have been quite so severe. Therefore, 1143 it seems to me inevitable, in the absence of these political assessments, that the Select Committee should have come to the conclusion it has done in paragraph 67, which has been read by the noble Lord, Lord Kings Norton. This seems to me to be an unfortunate position to have reached. It must be frustrating for members of the Commission, particularly in view of the vast amount of work they have put into their programme, to hear and to read criticisms of their report by Members of your Lordships' House without having the right to reply directly.
My Lords, I should therefore like to presume to make a suggestion to the noble Lord the Minister and, indeed, if I may, to the noble Baroness, Lady Tweedsmuir of Belhelvie, who presides over this Select Committee. My suggestion is that after this debate has been concluded, it would be politically expedient to organise a further meeting, perhaps of Sub-Committee F, under the chairmanship of the indefatigable and noble Earl, Lord Lauderdale, so as to further consider all the matters raised in the report of the Select Committee and by noble Lords in the course of this debate. In my view, these discussions should be particularly in a political context, so as to assist if possible in the furthering of the bases of the Commission's desire for some kind of uniformity in Europe in the aeronautical sector.
The Minister of State, when he gave evidence to the Select Committee on 19th May 1976, clearly stated what was his preliminary view on the proposals of the Commission. At paragraph 595, the Minister said:… I think it is fair to say we would have our doubts as to whether an international, bureaucratic machinery would be better equipped to take account both of the overall problem and also of the needs of individual countries".This observation appears to me to summarise the political problems to which the Commission's programmes give rise.
I should like to say again that there is room even now for further discussion of the political problems raised by the proposals of the Commission. Where there is the political will, there must surely be a political way, even in the context of the Rome Treaty. Therefore, I feel that further discussion would be welcomed by representatives of the directorates of the 1144 Commission's concerned in these matters. I hope therefore that I may elicit from the noble Lord who will be replying to this debate on behalf of the Government, some sympathy for this proposal for further discussions.
§ 6.4 p.m.
§ Lord BESWICK
My Lords, I have an interest to declare on which I will not elaborate, for reasons which I think your Lordships' House will understand. I am also tempted to ask for the indulgence of the House in making a maiden speech, because although I have been in this House now for something over 12 years, this is the first occasion on which I have not spoken from either Dispatch Box. I propose to restrict my remarks to the airframe manufacturing element in this report, although I should love to try to sort out some of the airspace and air transport tangles, but maybe there will be another time for that. May I express my admiration of the way in which the Select Committee assembled and analysed the evidence submitted, and for the clarity with which they expressed their opinions. I make in passing only one observation on the procedures of the Committee. I see that they had the privilege of consulting two members of the EEC Commission, but I wonder whether it might not also have been of advantage to take evidence from one of two industrialists from the Continent. I can well see the difficulty of determining whether such evidence was widely representative, and there may have been other difficulties, but if the Select Committee are to offer opinions and if they are to carry weight—and after this I believe they will —it might be relevant if they hear the views of some of our friends from across the Channel.
May I also offer my warm congratulations to the noble Lord who moved this Motion. His exposition of the contents of the Community document, of the Report of the Select Committee, and his own comments, as the noble Lord, Lord Lloyd of Kilgerran, said, were quite masterly. We shall all benefit from his own comments. Few noble Lords in this House equal the knowledge and experience on aerospace matters accumulated by the noble Lord, Lord Kings Norton. We are fortunate to have his advice at our disposal.
I say immediately that with the noble Lord, Lord Carr of Hadley, I share the 1145 anxiety of the noble Lord, Lord Kings Norton, at the prospect of management responsibility for European aerospace being vested in some new body sited in Brussels. I would have said that a year ago, but having had some responsibility during the past year for planning a centralisation exercise for the United Kingdom I can see even more clearly how easy it could be to build up a central bureaucracy. But that danger for Britain must and will be avoided. While pitfalls and problems of centralisation can be avoided or overcome in a national exercise, I believe it to be sheer folly to imagine that we can impose a centralised management control upon the aerospace industries of nine countries, and still retain a credible competitive manufacturing industry in Europe. Having said that, I want also to say—and here I follow the noble Lord, Lord Carr of Hadley—that I do not think this report adequately commends the Community for its wisdom in singling out the aeronautical sector as being of prime importance if the EEC is to remain an important innovative industrial area of the world. I believe that the Commission have their priorities right when they underline the importance of this industry.
Moreover, as the noble Lord, Lord Kings Norton, said—and he was supported by much of the evidence offered to the Committee—the analysis by the Commission of the shortcomings of the industry was largely correct. As the noble Lord, Lord Carr of Hadley, said, it is not their diagnosis but their prescription which one can fault. I venture to suggest further that the report rather labours the point that the Committee are opposed to protection for the manufacturing industry. They say that the evidence wasalmost unanimously hostile to protection".It would not be entirely unfair to say there would have been similar hostility to the concept of laissez faire. "Protection" is a harsh and emotive word. But the Commission themselves did not introduce it. We are dealing with a situation which is far too complex to be considered in the context of such simple terms as "protection". In paragraph 15, the Committee say:The only industrial protection is to produce and to market effectively the best aircraft world-wide".1146 Of course, there is much truth in that. There is also much truth in the proposition that sunshine helps the success of summer holidays. I have little doubt that our American friends would applaud these sentiments of the Committee, although in a friendly aside they might also pay tribute to the assistance, direct and indirect, of NASA and of the existence of a large domestic market. That tribute for the help they get from their own Government funding of research and development and to their large home market would be a justified tribute. The fact is that the United States manufacturer has enjoyed and now enjoys some very real advantages. These advantages have led to success. And success in this field has a certain centripetal effect. If a manufacturer sells his equipment to an airline it is that much easier to sell the next generation of equipment to that airline. And a manufacturer with many customers finds it easier to get more customers.
It is to the credit of the Commission that they recognise that something extra has to be done if Europe is to stem and then reverse this trend towards the United States of America. It is true, as the report notes, that economic factors have compelled companies to come together both in Europe and in the United States. In the United Kingdom, of all the names we knew postwar only Scottish Aviation remains. Of the others, Vickers, De Havillands, A. V. Roe, Blackburn, Handley Page, Bristol, and the rest, all are gone. I understand that this House is now prepared to see this process of strength through unity in the United Kingdom extended even further. But even with the logical extension to one United Kingdom airframe corporation we cannot say that this will suffice unless more is done on a Community scale. Collaboration on a wider scale is inevitable, and we shall see more examples both within Europe and between Europe and the United States of America. The noble Lord, Lord Carr of Hadley, can be assured of that. But we need also to ensure that the European environment within which this collaboration extends is as favourable as is practicable.
I have said already that I agree with all noble Lords who have spoken, and with the Committee whose report we are considering, that we should dismiss the chimera of centralised management.
1147 Sophisticated collaboration, the right permutations of partnership—they can give us opportunities which we should never enjoy under a centralised bureaucracy. So I dismiss that. As to Community financing, this would have most powerful attraction if the Community had access to some newfound pot of gold separate from national contributions. But if it is proposed merely that money now provided nationally is to be handed over to a central fund, then the attractions I agree with the Committee, are less clear. The possibility of supporting sales by a European credit institution, in my view, deserves more study than is evident in the report. If the Commission can help eliminate competitive credit terms that are unfair, uneconomical or unethical, then that help should be encouraged. On the positive side it is surely worth exploring further the possibility of some European counterpart of the United States export-import credit facilities.
My Lords, on basic research, I warmly welcome the approach of the Committee as expressed in paragraph 61. It is absolutely essential that research resources be shared in Europe if we are to maintain a significant place in Western World aerospace. But this must not mean that we seek to impose some new Community establishment independent of present national facilities. The industrial experts to whom the noble Lord, Lord Kings Norton, referred have, with a zest which is most stimulating, already come together for work on common problems. Currently BAC, HSA, MBB and Aerospatiale have a research collaboration agreement which is working and could be widened. Very wisely specific problems have been identified for study. Collaborative work on composite materials has already yielded results. If extra funds can be found by the Community for this kind of practical functional collaboration, then that would be a real step forward. If new equipment can be funded—and I have in mind, for example, a new wind tunnel—then that would really be encouraging a Community sense. But the emphasis must be upon sense and not upon prestige. It should be Community policy that such new equipment would be integrated into a research establishment now existing.
With this same idea of building upon what we have, may I refer briefly to the 1148 recognised need to bring the airworthiness and certification authorities into line with technical and industrial developments. As the report notes, much has been done to achieve agreed common standards. But if it is considered necessary to go further and have one authority for all the Community, could we not again build upon what we already have. The ARB, now part of the CAA, has a quite outstanding reputation in Europe. It is highly respected in the United States of America. With the careful inclusion of selected professionals from other organisations in Europe, is it quite beyond the bounds of national susceptibilities to have the presently established British Authority as the chosen instrument for Europe?
So far I have had in mind only civil aircraft, and for reasons of time I had not intended dealing with the immensely important military potential. However, one sentence in a most interesting article in today's Times by Mr. Layton of the Directorate General of Industrial and Technological Affairs of the European Commission—who has the article printed, by a most pleasing coincidence, on this day on which we are discussing his report —provokes me to make one reference. Mr. Layton points out that the selling capability of the European manufacturers would be greatly enhanced if they were…. backed by the combined political weight of the European Community. I believe Mr. Layton is right. But we do not have to wait for some new collaborative civil project before this Community weight is tested. We already have fine examples of collaborative effort in the military sphere. The Anglo-French Jaguar is an example. If the combined political weight of the Community was put behind the sales effort of the Jaguar we could find ourselves with a dramatic growth in European aerospace.
Finally, my Lords, may I say again that the House should feel indebted to its Select Committee for the work which went into this report, and especially for the way in which it has been explained to this House. Judging by the less ambitious theme of Mr. Layton's article today, it would seem that the report has already been carefully studied in Brussels. The objectives of the Community's Action Programme I warmly applaud. I hope 1149 that the Select Committee's Report and this debate will help define more realistic action towards those objectives.
§ 6.20 p.m.
§ The Earl of LAUDERDALE
My Lords, by the law of averages one is bound sooner or later to follow a maiden speaker, but the law of averages is strangely distorted when I have the opportunity of congratulating such a distinguished speaker on a maiden speech, doing so from the bottom of my heart since I also regard him as a personal friend. When the noble Lord, Lord Beswick, addresses the House and brings to it such wide experience and authority, of course he commands an attentive audience. We are none of us—. those who have heard him before his maiden speech—surprised that what he had to say was thoughtful and constructive.
As chairman of the Sub-Committee, a layman—indeed, professional only as a kind of eternal gamma double-minus amid the scholars and the scientists—I must join Lord Beswick's applause for the European Commission having tackled the subject at all. This is the first major essay that the Commission has undertaken in the field of transport policy as distinct from relatively minor matters such as truck drivers' working hours and the social conditions of bargees on the Rhine. Perhaps I should say in reply to one point made by the noble Lord, Lord Beswick, that we were much tempted to go further into the industrial area. But our Sub-Committee is instructed to look at energy; transport and research and industry is really outwith our normal remit. Under that constraint, to say nothing of the pressure of time, we felt the best thing was to do what we could, so to say, from United Kingdom sources.
As chairman I must first of all thank my own chairman, the noble Baroness, Lady Tweedsmuir of Bethel vie, who presides over the whole operation of scrutiny of European proposals, and who presides in queenly fashion over no fewer than 80 of your Lordships spread among seven Sub-Committees, all beavering away with diligence but always encouraged by her smile and quite frequent attendance at our sessions—attendances that are always welcome.
I should like of course to thank the noble Lord, Lord Kings Norton, not 1150 only for the way he introduced this debate but for doing it at all. He is virtually a founder member of our Committee. I must thank other noble Lords who served on the Committee. I must thank our specialist advisers, Mr. Thorley and Professor Doganis, who bring acidity of wit and of pen to the benefit of our drafting sessions. Finally, one must thank our witnesses. Perhaps it is worth mentioning that it is open to any noble Lord, or indeed anybody in the country or, for that matter, abroad, to submit evidence to a Select Committee of this House, and, if they wish to be heard orally, to make a formal approach to the clerk or the chairman of the Committee. Such approaches are commonly made and invariably welcomed.
We are indeed grateful to two members of the Commission who came to give us evidence—though I think that "evidence" is not the technical word when we meet in secret under the EEC Commission's rules—or who came to attend our deliberations, both Mr. Le Goy and Mr. Christopher Layton. More is the pity that under the rules of the Commission their help cannot be published. I think they will now know what other witnesses would find when they come, that we treat witnesses gently. We have learnt from Samuel Johnson that questioning is not the mode of conversation appropriate to gentlemen. We do it as nicely as we can.
We were of course gratified this morning to find Mr. Christopher Layton's interesting article in The Times. which provided a useful trailer for this debate. Of course old lags from The Times must have smiled to themselves. I look back over 35 years since I was a staff member of that great newspaper, and I find, as I am sure other alumni of Printing House Square must find occasionally, that despite the whizkid appearance cultivated today, the old editorial and administrative muddles still go on. This report we are now debating was available to The Times five full days before it was published. The Times. was not represented at the Press conference which we took care to arrange at, I hope, a convenient time. They did give us a couple of sticks, to use the journalists' jargon, a couple of bits two inches long on an away page, and what they gave looked very much like a direct rewrite of the Press handout I had 1151 myself composed. The report of course goes into rather greater depth than Mr. Layton could accomplish in the three columns or so that he had at his disposal this morning.
It is important to grasp what this document proposes in the simplest terms. It invites the Nine in Council to decide on the common programme and indeed on a common airspace, and all this to be in the future subject to majority voting in the Council, which really means the Commission directly or indirectly entering the manufacturing and airlines' business as managers. If ever there was a prescription for planners to leap in the dark that would seem to have been it.
At the heart of it I think one can distinguish certainly three confusions which need to be brought out and which were ignored in Mr. Layton's article this morning. There is a confusion between the aero engine and the airframe manufacturing sides of the industry as if they were unified, as if they were single, as if their technologies were not in fact as different as male and female. And then there is the confusion which seems to identify, or seeks to amalgamate, aircraft industry policy with air transport policy. They are two very different things.
Finally, there is the fear of United States' influence. It is admitted that some 60 per cent. of all aircraft built in the United States and Europe are in fact for military purposes. So there is a consequential proposal for a Military Procurement Agency which can only be under NATO but which, in turn, is to a very great extent dependent on the United States. So there is at any rate a contradiction here too.
Then there is a general purpose, which is not stated baldly but clearly emerges from the logic of the proposal; it is that by regulated competition there should be advanced a gradual merger of airlines and co-ordination of all services and schedules so that one day nine transport markets will be merged into one. I say this is not stated baldly, but if that is not the logic of the argument then it is hard to find what it is. The background is common ground. There are too many manufacturers making too many types covering too many overlapping requirements. These 1152 are therefore produced on too short production runs with too high unit costs. They are so produced in order to supply too many and too small airline buyers. All this happens in a world where too many seats are chasing too few passengers. These conditions threaten the airframe manufacturers—who indeed appear to have been the inspiration behind the Commission's proposals—but not the aero engine builders, with a choice between bankruptcy and American takeover.
The common finance ideas seem so attractive at first that one rubs one's eyes and wonders whether they have not emerged from some Ministry of science fiction. Of course the two main manufacturers, Britain and France, would be likely to welcome any proposal that the other seven should help spread the provision of high risk capital. That would come as no surprise to anybody. But could it happen unless the seven increased their share of manufacture, which could only have the effect of dispersing manufacture from the two, or even the four, present manufacturing countries when the real need is concentration? This proposal seems to anticipate a genuine merging of nine sovereignties by anything from one to two decades.
Then there is all the philosophy about a common airspace, which does not appear to have been thought through really thoroughly. It would mean that the Community would take over the national oversea flying rights of the Nine, but of course the third countries concerned would be likely to seize any opportunity to renegotiate existing traffic rights in order to bargain for their airlines the opportunity to penetrate further into the Community, and goodness knows what American counteraction there might not be. Moreover, the common airspace proposal would very likely result in a Community traffic control instead of something that is already going ahead on a Europe-wide basis; at any rate, it is difficult to see how the one would fit in with the other.
On the question of airworthiness certification, to which Lord Beswick referred, here is a cardinal point both of opportunity but also of danger. Those of us who listened to the evidence about airworthiness were much struck by the explanations 1153 we were given of what happens in the United States; standards may be established, but their enforcement, to some degree regional, can lead to enforcement being subject to political pressures. The Civil Aviation Authority is utterly and completely independent. It must be one of the few independent bodies in the whole of this kingdom at the present time. Its independence is greatly respected not only in the United States but even in Japan and the Soviet Union, who seek to get aircraft certificated by the CAA in order to commend them in third countries. What one must fear is that were the CAA functions to be transferred to Europe, there might be unevenness in the application of their standards due to local political pressures, which would be a real step back.
Although inevitably one has needed to refer in a slightly negative way to certain points, one must again congratulate the Commission—I hope one can do this in no sense seeming to patronise—on at last making a really big essay in the field of transport policy. The proposals on rail, road and inland waterways which we have had up to now have not been great political documents, The proposal for ninefold finance of research is a positive and a useful step forward; as I have said, if United Kingdom standards and practice in airworthiness could be transferred to the EEC plane, all would benefit. I can speak only for myself on this point—the matter has been mentioned by the noble Lord, Lord Lloyd of Kilgerran, and by Lord Beswick—but surely it is time for further dialogue in this area. I know that colleagues on this Sub-Committee have always been eager for a two-way movement of ideas with the Commission, and they welcome any formal or informal steps that come along, socially or in any other way, to advance that end.
I think it is no secret that it is common practice in the Scrutiny Committee as a whole to dispatch members of Sub-Committees to Brussels for a confrontation, or at any rate a discussion or dialogue, with members of the Commission when a substantial report has emerged, particularly if there is any danger that it may raise people's hackles here and there. Not only that, but we have also surely to address ourselves—this is the purpose of debate in your Lordships' House—to the policy of the British Government. One 1154 hopes that the Government will recognise that Britain has a very strong base from which to contribute to the formulation of Community policy. We have the world's second largest civil aircraft and airline industry; we have the world's largest network of civil air agreements, thanks to our Imperial past. We have the world's largest and best certifier of airworthiness. And it is worth recognising that British Airways fly six out of ten of the most dense scheduled passenger routes in the Community, and carry 26 per cent. of all scheduled passenger traffic.
Despite that, when we received evidence from Mr. Kaufman we got a sense that the Government were still tentative in their approach. More than eight months after the document had been in their hands, Mr. Kaufman was quite frank in saying that the Government had scarcely considered it. Then we were told, in one of those rather incautious asides which one hopes do not represent the heart of Government thinking, that the aim of the manufacturing industry in the aircraft business was principally to provide jobs; I refer noble Lords to Question No.628 on page 118 of the evidence. It is always splendid to provide jobs, but the object of industry is not to provide jobs; it is the economic function of production to serve a need. I was rather surprised to find that Mr. Layton's article this morning began with the same sort of premise. Anyway, the Government accept the facts of life in regard to the predominance in this field of the United States—Question No.598 referred to that —and we were also reassured that the Government were determined to see an independent capability continuing, with freedom to collaborate with whoever seemed proper, whether within or outwith the Community.
Finally, I readily welcome the Government's view that they do not want all this to be submerged under the Brussels bureaucracy. But can the Government, having now had more time to think about it, go a little further? The Commission may indeed err in proposing solutions which are Community-wide to problems that are wider than the Community. This may be a mistake, but so far as one can judge thus far our own Government have appeared to take a line with a slightly Little England flavour about it, especially when the production of jobs 1155 rather than the production of aeroplanes seems to be thought of as a major target of purpose. We want to know the Government's strategic approach. The present is not the epoch for a provincial British attitude to these matters. Perhaps there has been too much provincialism of late in more than one quarter of Europe, and it is well to remember that all irregularity is catching.
§ 6.40 p.m.
§ Lord WYNNE-JONES
My Lords, I have been a member of this Committee and have found it an extremely interesting task, enlivened by the wit and humour of our chairman which he shows on every occasion. I feel that the impression may have been left—certainly not by the noble Earl, Lord Lauderdale, but perhaps by the noble Lord, Lord Carr of Hadley—that the Commission had no business to come forward with any proposals of this sort. I believe that if this impression got about it would be rather bad because it would mean that we did not appreciate the serious nature of the problem facing the whole aeronautical industry of Europe, which is not in a good state. I do not mean to say that the industry does not do some excellent things, nor that there are not some excellent companies, but if one looks at the figures in the Commission's Report one sees that, in the proposals put forward by the Commission in 1970, the percentage of the aircraft operated within the Community which were produced by the Community's aeronautical industry was 33 per cent. In 1975, it was 22 per cent.
In Europe as a whole in 1970 the percentage of the aircraft produced by European industry was 30 per cent., whereas by 1975 it had dropped to 17 per cent. In the United States of America in 1970, 2 per cent. of all the aircraft flown were manufactured in Europe. In 1975 it was 0.1 per cent., which is really derisory. In the whole of the Western world, leaving out the Soviet Union which has a very large industry of its own, 9.5 per cent. of the aircraft flown in 1970 were manufactured in Europe. In 1975 that had dropped to 8 per cent. In today's article ill The Times Christopher Layton points out that over the next 10 years the probable market for 1156 civilian aircraft in the whole world will be of the order of 60,000 million dollars. If the European percentage of that figure continues to drop we shall be producing a negligible proportion of the world's aircraft.
It is in this context that the Commission came forward with its proposals. It does not make sense to turn round and merely to say that its proposals are not acceptable. I sat on the Sub-Committee, and I agree with criticism made of the proposals, but the reason for the proposals still remains and, unless we are prepared to face this and realise that there must be some method of dealing with it, I am afraid that neither aeroplanes nor jobs will be available—and the two do go together.
So it is important for us to realise that the aeronautical industry of Europe is in a dangerous position—dangerous because it has been on the slide; dangerous because, if that continues, it will disappear. Therefore, it really becomes a very serious matter for us to consider and for the European Commission to consider. I cannot pretend that I have the answer. I am no expert in these matters. I merely spent months trying to find out what other people thought. However, we have a certain amount to look at from other parts of the world. One point is that referred to by the noble Lord, Lord Kings Norton. It is that one cannot dissociate the civil from the military aircraft side. It is quite impossible to do so because it is the same people who make both types of aircraft. If one looks at the position in this country, for instance, years ago, we produced a new, original, excellent aircraft—the Comet—as a civil aircraft. It had many problems and when the problems had been resolved by civilian effort it was used for military purposes, as a transport. The Americans do not do it in that way. They start by pushing their money into military aircraft. The whole cost of the development is borne on the military budget and, when they have solved all the problems, Boeing come along and produce their splendid 707, 727 and 747. These were all produced as a result of military prototypes and more than prototypes—the aircraft were actually manufactured. The Americans have been doing this all the time but we have not done it to anything like the same extent. We work the other way round.
1157 When we come to look at possible co-ordination, I feel that everyone must agree—and I am sure that all the members of the Committee agree—that it is impossible to run a British aircraft industry on its own without co-operation with any other country. It is not on. What is to be done? We may co-operate with one other firm in some other country. That is done on a firm to firm basis. It may work or it may not. I think that we ought to investigate and find out where and why it works. I suggest that there is something to be said for looking at the experience of the military aircraft, the MRCA—Multi Role Combat Aircraft which is now called the Tornado. This is produced by the industries of Germany, Great Britain, Italy and Belgium working together. France would not come in, and contracted out. The countries concerned set up an organisation called Panavia in order to supervise and organise the operation. From all I can understand, it has worked well; and if this has worked well, is there not something to be said for asking why it did so, and where it may have been weak, and for seeing whether we can use it as a model for going ahead?
It seems to me that if are to have effectively different national industries in our countries—and we are going to have separate national industries whatever we like to call them; 1 can only say that I think we have done little service to our own aircraft industry, by holding up the Bill which has delayed the establishment of an effective industry and that I do not think that that delay is doing any good to anybody at all and it is a pity that it ever happened—and an aircraft industry in this country, then that aircraft industry will have to collaborate with some other aircraft industry. If it does there has to be some organisation for collaboration. I do not believe, any more than the other Members of the Committee did, or any Member of the House who has spoken tonight believes, that we ought to have a special bureaucratic organisation set up in Brussels. But I believe that we ought to see whether something like Panavia might be a model, where one might get the industries of the major countries coming together and being prepared to create an organisation which looked after the production of the aircraft—not in the sense that they told the companies exactly 1158 what they had to do, but that they acted as a co-ordinating body and they looked after the sales and ensured that the sales were world wide. Remember, my Lords, that we are now thinking of a market in the next 10 years of 60,000 million dollars of which at the present time Europe would not get 8 per cent., and we ought surely to aim at getting much more than that.
Therefore, the matter is not a trivial one. It is not a matter to be dismissed as a misconception on the part of the Commission. Rather, I would say that the Commission are to be applauded for having put forward ideas that we have put forward from the Sub-Committee; we put forward certain criticisms of these ideas. But I think I can say that no member of the Committee would wish your Lordships to feel that we did not regard the matter as something which had to be pursued actively, and that some encouragement had to be given in order to get the industry working effectively.
§ 6.52 p.m.
§ Lord TREFGARNE
My Lords, I, too, had the honour to be a co-opted member of Sub-committee F and in that capacity I would wholly endorse and agree with the conclusions of the Sub-Committee expressed in the report. I should also like to be associated with the words of the noble Lord, Lord Kings Norton, and others relating to the chairman, the noble Earl, Lord Lauderdale, who has presided with such skill over that Sub-Committee, I believe since its inception. I want to make only one particular point tonight, and that relates to the Concorde and to its sales prospects. Mr. Kaufman gave evidence to Sub-committee F and he was asked about the financing of Concorde sales and was not I think able to be very helpful on that occasion. In my view—and I believe that this is a view held by others—the disappointing sales of the Concorde thus far are due in part at least to the difficulties in financing the sales. I do not want to minimise the other difficulties, such as landing rights in New York and elsewhere, and over flight rights in the Far East, but the problems of selling the aeroplane seem to be concentrating around the areas of finance, and I hope that the Government will be able to give some urgent attention to this problem.
1159 There are a number of possible solutions. The first has, I know, been canvassed and has been called leasing. The kind of leasing envisaged in these reports is not really leasing at all. It is a time charter arrangement whereby British Airways or Air France would purchase the aeroplane, or have it purchased on their behalf by the Government, and would hire the aeroplane by the hour or by the mile to smaller airlines which could not afford perhaps even to utilise a whole Concorde and would perhaps need one for only half of the time. A time charter arrangement such as this is widely used in civil air transport and it would, I think, indeed I know, have considerable attractions to a number of airlines, particularly in the Far East, like Philippine Airlines and Singapore Airlines.
I want to ask the Government whether they and their French colleagues have actively considered this proposal and whether it has been established that British Airways, and Air France if necessary, would be willing to perform this kind of service. I think that the smaller airlines would be well advised to embark upon supersonic transport by this fairly modest means. I think that the manufacturers of the aeroplane ought to be hesitant about pressing sales upon smaller airlines which may find the provision of ancillary support services difficult to meet. We have all read of the criticisms of the McDonnell Douglas Corporation, as to how it "sold"—and I use the words in inverted commas—the DC10 to an airline in the Eastern Mediterranean, which in the end, it was alleged, were not specially well able to operate it, and indeed an accident ensued. We want to try to avoid exposing ourselves to criticism of that nature in respect of the Concorde. Therefore I hope that British Airways and Air France will join with the manufacturers in offering a time charter service for some smaller airlines which might not be able to justify, or support, the purchase of one or more complete aeroplane or aeroplanes.
Then one must look at the problem of selling the aircraft to those larger airlines which are able to justify the use of at least one aeroplane. The difficulty at present seems to he centring on the rate and time of the finance offered. I am informed 1160 that prime purchasers of American equipment can, through the American Export-Import Bank, hope to secure credit terms of between 8 and 9 per cent. interest per annum and repayments over 10 years. I am also informed that the Concorde sales team cannot offer terms anything approaching those. The best that they can offer is 10 or 11 per cent. interest and only seven or eight years' repayment terms. As the Concorde is substantially more expensive than, for example, a Boeing 747, this means that the finance burden on the airline is very large indeed.
Of course, the Concorde is not such a productive aeroplane as the 747; that is to say, that the seat-miles it produces, given typical utilisation, are not as great as those of the Boeing 747, and therefore the financial terms have to be at least as attractive. Of course the seat-mile yield of a Concorde is higher than that of a 747 because of the premium fares that are presently charged. But I do not think that one can hope or expect that the premium rates attracted by the Concorde, or at least demanded by the Concorde, at present can be read across to provide a similar yield when the aircraft goes into service on some of the other routes.
I believe that the only way that this requirement can be met—and I believe it to be in the national interest of both this country and France that it should be—is by the establishment of a joint Anglo-French finance company which would, initially at least, have to be partially Government financed. We are already involved in Concorde finance to an enormous extent, but I fear that if we are to see the project come to full fruition by achieving a reasonable number of sales this course of action is the only one open to us. I recognise that it would cost a good deal of money to set up this project, but no more money I believe than has been involved in setting up the National Enterprise Board to date; and in any event, once it was running it would be self-financing.
Such a company could offer a number of different possibilities which would have to be tailored according to the customer's taxation position and requirements generally. It would have to provide a straightforward lease where the operating company did not require to depreciate the aircraft for tax purposes. That would be a lease in the true sense, I believe; 1161 namely, a monthly or annual rental arrangement. It would have to provide a lease-purchase arrangement for companies which wanted to take advantage of tax arrangements similar to those applying in this country; and it would also, I fear, have to provide finance facilities for the very expensive ancillary equipment that one needs to operate such an aeroplane as this successfully. I mean, of course, the ground-starting equipment, the baggage-handling equipment and possibly, for larger customers, even ground simulators.
The final point I would make in this context concerns the question of crew training. The Concorde heralds a new generation of aeroplanes. It is wholly more complex to operate than the conventional range of subsonic aeroplanes, and I think it essential that the crew training facilities which can he offered ought to be clearly underwritten by British Airways or Air France, or perhaps both. British Airways have had some difficulties of their own in crew training recently, but these have not, I believe, been anything more than of an industrial relations nature, and have anyway now been resolved. I think that the future of the Concorde project is dependent upon decisive action now to push the sales forward. I think that the upturn in the civil air transport industry is coming very shortly now, and we must be ready to take advantage of this with the aeroplane when it happens.
§ 7.2 p.m.
§ Lord WINTERBOTTOM
My Lords, I should like to preface my remarks by complimenting the Select Committee and its chairman on the work they have put into examining the Commission's Action Programme and into taking evidence from interested parties, and into their report of this work. I know that your Lordships will agree with me when I say that the report, quite apart from its value in its own right, has contributed greatly to the interest of this afternoon's debate; and I know, too, that your Lordships would not wish me to pass on, in part to reply to the debate and in part to state Her Majesty's Government's attitude toward the report, without, on behalf of the House, thanking the noble Lord, Lord Kings Norton, for the admirable opening speech with which he started our discussion. I thought it was a model of 1162 clarity and moderation; and, whether it encourages him or depresses him, it is very much in line with the thinking of Her Majesty's Government.
My Lords, may I clear out of the way the question which the noble Lord put to me towards the end of his speech concerning the progress to date in Brussels on the Action Programme, which is of course a matter of interest to us all. The Council have yet to discuss the Action Programme, but there have been procedural discussions in COREPER. I understand that noble Lords who take part in the activities at Brussels know what COREPER is. COREPER have asked officials of the Member States who are working under the auspices of the Economic Questions Group to establish the scope for future collaboration on future civil projects. Further discussions in COREPER appear unlikely until they have had the European and Economic Questions Group's report, and this should be completed by the end of the year. The Action Programme itself was, as noble Lords will know, the subject of a long and, at times, very confused debate in the European Parliament on the 6th July. Briefly, the European Parliament approved the Commission's proposals but with certain reservations similar to, but less strongly held than, our own. Perhaps many of us are afraid of being thought bad Europeans while having some reservations on the proposal of the Community views.
My Lords, having said that, it may in fact also act as a reply to points made by the noble Lord, Lord Lloyd of Kilgerran, and the noble Earl, Lord Lauderdale, and in fact my noble friend Lord Wynne-Jones. This is clearly only the beginning of the dialogue. Obviously, in a matter of such major importance, as the noble Earl the chairman of the Committee has pointed out, discussions will continue within the framework, perhaps the over-wide framework, set by the Commission on what is basically a subject of major importance to the European industrial community. So, although the Fifty-first Report of your Lordships' Select Committee has a slightly disinheriting countenance, nevertheless I think it is true to say that the criticism is constructive and that the House as a whole welcomes the initiative of the Commission. We now have to get down to producing workable policies; and 1163 in an industry which has such a long time-scale from the concept of an aircraft to its appearance in the airlines or in the fighting forces of the world, we must expect a long period of dialogue. I am certain that opportunities will be given to your Lordships' Select Committee and many other individuals to take part in that discussion.
Perhaps I may also take this opportunity, before launching into the Government's view, to reply to the noble Lord, Lord Trefgarne, about Concorde financing. It is not strictly within my brief, but it might be helpful if I were to indicate in general terms the Government's position on the leasing of Concorde as of now. We are prepared to consider leasing as an alternative to a sale, and indeed proposals have been put by the manufacturers to a number of airlines. However, your Lordships will understand that it would not be approppriate to disclose the detailed proposals, which form part of commercially confidential negotiations, or to indicate our attitude on detailed issues connected with leasing, which could provide commercially valuable information to our competitors. I think the noble Lord has raised an important point. However, I think that is the most I can tell him.
§ Lord TREFGARNE
My Lords, I am sorry to interrupt the noble Lord, and I hope he will understand that I do not want to interfere in commercial negotiations, which I recognise are confidential and private; but can he say whether the offers that he has referred to are pure leasing offers—in other words, simply financial transactions in relation to one piece of hardware—or are the offer of a service; namely, the use of the Concorde as opposed to the acquisition of it?
§ Lord WINTERBOTTOM
My Lords, I am afraid I cannot answer the noble Lord in detail. If he would care to put down an Unstarred Question properly phrased—that is something he would have to work out—I will see whether I can give him a wider answer than that which I have given him this evening. The Government have of course been looking at the implications of the Commission's proposals, but they have wished to hear the opinions of Parliament before reaching a final view. May t give your Lordships the Government's present thinking? As the Select 1164 Committee and noble Lords clearly appreciated, the proposals contained in the Action Programme have to be seen in the context of what is already taking place independent of any action by the Commission to foster closer collaboration both within the European aeronautical sector and beyond.
I will deal first with the question of civil aircraft manufacture. The Commission say that the survival of the national aircraft industries in Europe is dependent on closer collaboration, in particular so as to avoid domination by the major United States manufacturers. What concerns us is that there is in this a strong flavour that the European industries should unite to take on the Americans. Such a confrontation would be unrealistic and almost certainly financially disastrous. There is already a substantial degree of collaboration between the aerospace industries of the United States and Europe, and it is clear—and I say this in a European context—that our chances of survival will be greater if we work in association with the United States, where this is appropriate, rather than trying to compete with them head-on. We should not overlook the fact that the United States manufacturers currently supply 90 per cent. of the world's civil aircraft market—and this is a point made very strongly by my noble friend Lord Wynne-Jones—nor, indeed, as other noble Lords have said, the strong ties they have with many of the world's major airlines. Realism suggests that it would be better to try to capitalise on those ties rather than to contest them. Other countries in the EEC, notably France and Germany, are showing by their actions that they certainly do not rule out transatlantic collaboration.
I must stress that in using the terms association" and "collaboration", I am not envisaging a take-over or domination of our industry by the US companies such as the Commission seem to fear. What we seek is genuine collaboration on future civil aircraft projects to our mutual advantage. I believe the US companies are ready for such partnerships; that Boeing and their fellow manufacturers recognise, just as the European firms do, the need to spread the high risks and costs involved in launching new civil aircraft. I have no doubt, too, that they see co-operation with European manufacturers as a means of strengthening their position 1165 in the European market for civil aircraft which, outside the USA, is the largest in the world.
Against this background, I think the Commission's objective in seeking to promote closer collaboration within the Community in the manufacturing sector is one we can all share. But there are further qualifications which need to be entered. First, so far as the United Kingdom is concerned, I think a large majority of this House would endorse the view that collaboration must be based on the choice of commercially viable projects. It is the market which must determine which projects are launched. The choice cannot be predetermined simply by virtue of a desire to collaborate with particular partners; and certainly not by a central organisation in Brussels unable to draw on direct expertise and experience in the civil aircraft sector. A second and complementary qualification is that the interests of the United Kingdom industry and those of France, Germany and the other European countries, may not wholly coincide.
The Select Committee have said that they favour closer Anglo-French collaboration, in particular. The Government are wholly in favour, in principle, of European collaboration, either on its own, where this makes economic sense, or as a basis of transatlantic collaboration. This certainly applies to the French, whose industry is second only to our own in Europe in size and capability. My honourable friend the Minister for Industry, Mr. Gerald Kaufman, has made this abundantly clear to his opposite number in the French Government, M. Cavaille. Our situation and our problems are akin to those of France and the other European countries with major aircraft industries; that is, we all need work and recognise we can achieve greater strength in the market at less risk by collaboration. However, we are not necessarily all starting from the same basis so far as existing commitments are concerned. Collaboration on a mutually acceptable basis may be achieveable on some projects but not on others; like-wise with sonic particular partners in some cases but not in others. We each have to find the mix of projects best suited to our particular needs and capabilities and our respective long-term objectives.
1166 I would note in this context the opinion of the Select Committee that an important requirement from the United Kingdom point of view is to maintain an independent capability in the British industry so that it will be in a good position to take advantage of opportunities further in the future. I believe that the failure of the Commission in its Action Programme to take due account of the differences in the needs and starting positions of the various European industries is a major weakness. It is unrealistic to assume that there is any single, overall programme which could simultaneously satisfy the needs and effectively utilise the capacities of the European aircraft sector as a whole, especially if, as we should insist, profitability is the overriding criterion.
My Lords, these are some of the objectives which the United Kingdom industry is currently pursuing while at the same time seeking as large a share as it can of profitable new civil aircraft business, business which, it has been pointed out, will be worth 50 billion dollars over the next decade or so. Our industry is taking a leading role in the current round of international studies, both in Europe and across the Atlantic, aimed at defining future airline requirements and the possible industrial collaborative arrangements for producing them. There are many options and for the moment they all remain open.
The Select Committee have indicated a measure of agreement with the Commission's view that economic forces alone will not necessarily, of themselves, achieve the optimum degree of collaboration between manufacturers. I think the question of timing is the key one here. Public ownership is intended to bring about the long needed and long postponed rationalisation of the United Kingdom industry; but this is only part of the answer. Governments must urge and assist their industries to study with their counterparts in other countries all the possibilities for future collaboration. The British Government are doing all they can to encourage and help the United Kingdom industry, under the leadership of the Organising Committee, to advance their studies with the European and American manufacturers. I was glad to see my noble friend Lord Beswick here today to make his so-called maiden speech and to give us his valuable views on this subject which I am certain Her Majesty's 1167 Government will note with interest. The momentum of these studies has been stepped up and significant progress is being made. Our aim is to ensure that when the time comes for decisions on projects and partners, we can arrive at the best possible answers based on a thorough analysis of all the possibilities.
My Lords, I must here inject a warning about the position in which the United Kingdom industry finds itself. The airlines are not yet at the point of placing firm orders but the various technical objections are being narrowed down and refined. Important moves towards future collaborative groupings are imminent, but because of the uncertainty surrounding the future of the industry, the credibility of our manufacturers is being questioned by some of our potential partners, and ultimately the industry might for this reason be prevented from playing its full part. Opportunities missed then will affect jobs as well as the maintenance and development of our overall capability, with very serious long-term consequences.
In the Government's view—and we have had long discussions on this—the difficulties facing the industry can in the long-term only be solved by nationalisation and I would hope that this House can play its part to secure a future for the industry. To summarise what I have said so far, the Government certainly agree with the Commission that there is much to be gained by closer collaboration on civil aircraft manufacture in Europe. However, our objectives need to go wider and our approach must be different from that suggested by the Commission if we are to succeed in obtaining the maximum amount of profitable work for our industry. I have no doubt that this is also the attitude of the other European countries who, by way of their current negotiations with the US companies, have demonstrated very clearly that they also recognise the need to look beyond a purely European solution, in a pragmatic and open-minded way, with the aim of securing a work load mix which is best matched to their particular needs and capabilities.
My Lords, turning to the Commission's proposals for a military procurement agency, the Government fully support the emphasis in the Action Programme on the need to maintain healthy defence 1168 industries in Europe, with both design and production capability. This is to the benefit of NATO as a whole. We recognise the need for greater co-operation within Europe and we are looking to the European Programme Group as the principle vehicle for achieving this. We regard it as important to include in the Group's work the contribution of those European members of NATO who are not in the EEC, as well as the eight countries which are. This is a point stressed by at least one noble Lord today. Fortunately, the immediate industrial situation on military aircraft and guided weapons production, provided that current programmes are maintained, is nothing like so difficult as the civil aircraft question. Here, together with other interested Governments, there is time to plan for the future.
We do not support the Commission's idea of a European procurement agency. Different NATO allies often have, for example, different time-scales for replacing their equipment so that standardised procurement is not always possible. We believe that the work of the European Programme Group is the principal means by which progress towards co-operative and rationalised procurement by interested Governments can be achieved in Europe. This Group will also be working towards the development of co-operation between the United States and Europe.
My Lords, I should say a word here about the Commission's proposals on aerospace research. They propose that the Commission should take charge of all such research, whether civil or military. So far as defence research is concerned, we believe that co-ordination is handled through NATO. On the civil side, if European projects emerge, there may be a useful role for the Commission in co-ordinating associated research work by the partner countries and firms participating in the project. Moreover, although moves are already in hand towards further research co-ordination within Europe, I think it would be acceptable for the Commission to explore with Governmental and industry authorities the prospects for co-operative research activities required to fulfil the needs for the design of future civil aircraft. However, in essence, this is a matter which will largely depend upon the larger issue of collaboration on specific projects. This view is in harmony with the views expressed by your Lordships.
1169 The Commission also included in their Action Programme a number of recommendations with regard to civil air transport. The Select Committee has probed these closely and their views on air-worthiness, on the link between the manufacturing industry and the airline industry, and on the international regulation of air transport are in general accord with the prevailing views of the Government. I think it is fair to say that there is widespread scepticism of the need at the present time for additional institutional arrangements for the regulation of air transport and the airline industry in Europe—or that this is a necessary prerequisite to success in the manufacturing sphere.
Existing international organisations, the International Civil Aviation Organisation and the European Civil Aivation Conference, in which the Community Members play a full part, are already engaged in dealing with the problems the Commission have highlighted. The larger area covered by the 20 States which are members of ECAC, is a far more natural unit for the co-ordination of civil aviation policies than the much smaller area of the Community Members alone. Air traffic control of the upper air space in Europe is already organised under the aegis of Eurocontrol.
To conclude, I think I should be fairly summarising the views of your Select Committee and what has been said here this afternoon if I say that we see little reason to quarrel with most of the broad objectives which the Commission have set down in their Action Programme. The Commission document has served and, I am sure, will continue to serve as a valuable stimulant to international discussions of how these objectives can be achieved. On the other hand, and at this point in time, there appears to be general agreement that all that can be done to move towards those objectives is already being done —and that direct intervention by the Commission would not help.
However, their concern is appreciated and we should be grateful to them for the work they have done in focusing attention on the long-term goals, and the large scale of those goals, to which the Member States should be aiming. That position is 1170 broadly in accord with the preliminary views which the Government have formed, but I am sure that, in considering this matter further with a view to arriving at a fully defined United Kingdom position, they will be pleased to take account of the detailed consideration which your Lordship's House has given to the Commission's proposals. May I thank your Lordships for a most interesting debate to which I found it very pleasant to reply.
§ Lord KINGS NORTON
My Lords, before the noble Lord sits down, could he answer my question about the attitude of other Member States? Is it known what any of them have thought about the Commission's documents?
§ Lord WINTERBOTTOM
My Lords, I thought I said something; I may not have said it clearly enough. The Member Nations of the EEC—speaking, oddly enough, as Party delegations, I was interested to see—approved the Commission's proposals, but with certain reservations which were similar but less strongly held than our own. They were less strongly held because they had not so much at stake.
§ The Earl of LAUDERDALE
My Lords, if I may just add to that, other than what was said in the European Parliament, will the Minister give us any indication of the views of the Member Governments at Council level? We appreciate that matters have been handed down to COREPER and the Economic Group. Has the noble Lord any idea what the Belgians, Dutch, French and Germans are thinking?
§ 7.26 p.m.
§ Lord KINGS NORTON
My Lords, it is a pity that the other Governments have not the advantage of a Select Committee which makes reports of the kind that ours does; they do not have the same opportunities for expressing detailed views. The Select Committee will be very gratified with what the noble Lord has said about the Government's attitude. I want to study what he said in some detail; but the general impression that he has left with us is that the Government have very similar views to the Select Committee and broadly agree with what they have said.
1171 There may possibly have been a suspicion in some minds that I was critical of the Commission for even trying to put forward a plan; but that is not so. I think that we would all agree that it is a perfectly proper job for the Commission to do, and their objectives—as I think I said clearly—are such that we could not disagree with them. But we did, as is now clear, disagree with the detailed proposals.
I should like to thank all noble Lords who took part in this debate for their reaction to my remarks. It is very gratifying to have so many nice things said. The noble Lord, Lord Carr of Hadley, said he agreed with all I said. I agree with nearly all that he said. When he said that the diagnosis was right but the prescription was wrong, he put the whole matter in an appropriate nutshell. He said—and this is absolutely true—that we must have a European strategy. The point is how that strategy is best evolved. There is a suspicion in our minds that the present system in the Commission is probably not the best to evolve it. The noble Lord, Lord Lloyd of Kilgerran, made a point which has not been sufficeently emphasised, and that is the political aspects and the political implications of the Commission's proposals. I hope we can take the matter further in the way that he suggested.
All members of the Sub-Committee, like all Members of your Lordships' House, will be glad that the noble Lord, Lord Beswick, found it possible to come here this evening. We are all deeply interested in what he has had to say. I was particularly interested in his views on seeking the opinion of Continental industrialists. We did not do that. I do not think we will have an opportunity of doing it for the time being; but it would be worth while learning more about their attitude of mind. He emphasised, as others have done, the dangers of a central bureaucracy, and he said very wise words about those two notions, "protection" and "financeing". One remark pleased me more than anything else; it was a very daring suggestion but a highly practical one. It was that if the other European countries would like to ask the ARB to do the job of certification of airworthiness for the Nine, it would be a simple solution to an international problem.
1172 While it is a very daring suggestion. there is a great deal of evidence for its practicability, because all the countries in the joint airworthiness requirement group —there are six of them—have accepted the British engine code without any change whatsoever. They could perfectly well take the airframe code as well, but because they have had developments of their own in those directions there is some harmonisation (to use the current jargon) to be done. There was no harmonisation to be done on the engine side—we had the whole job finished before they had really started—but I hope they might be induced to think along the lines put forward by the noble Lord.
I was particularly glad to hear the tributes to our advisers from the noble Earl, Lord Lauderdale. We have had wonderful service from Mr. Thorley and Professor Doganis. We have got very used to them and I do not know what we should do without them. The noble Earl talked about the "three confusions" in the Action Programme document and I hope the Commission will read what he has had to say, because none of us were terribly happy about this particular contribution.
The noble Lord, Lord Wynne-Jones, gave some quantification to the diagnosis of the noble Lord, Lord Carr. The figures he quoted from the Action Programme are very disturbing indeed. I was very glad that he raised the point about the affinity of civil and military developments. The noble Lord pointed out that the Comet, a civil aircraft, has developed into the military type Nimrod. In the United States the process has been precisely the opposite. Because of their work on bombers during the War, they had no difficulty in translating it into civil transports in the early days after the War. We had no similar advantage, but in any case we do not seem to work in that way. I think something very interesting might happen in the United States in the next few years. It is my personal view that the Pentagon will select the B.I. for their next very expensive supersonic bomber, and that this will be the first step to the American SST.
What the noble Lord, Lord Wynne-Jones, said about Panavia is worthy of consideration. This is a case where people who really know how things should be 1173 done got together and made the best scheme for doing it. That is the best thing to do: to leave it to the experts to get the best kind of organisation, as I tried to say this afternoon. The remark of the noble Lord, Lord Trefgarne, impressed me enormously—you will notice I am wearing my Concorde tie today. I think that his views on time-charter service for smaller airlines and on an Anglo-French Finance Company should receive the greatest possible consideration.
I do not want to make a long speech. I have already ruined my record. Before I started today, my bowling average was for 14. 7, but I made a 25-minute opening speech and I have ruined it. I have now been going for seven minutes, which is more like my usual performance. I should like to conclude by saying that personally I found it extremely gratifying that the Government's general view was so much in accordance with that of the Select Committee. I am not quite sure what is going to happen next on the European front, but if it is felt in the Commission that they would like to confer with Sub-Committee F, I am sure we should be only too pleased to meet them.
§ On Question, Motion agreed to.