I beg to move, That the Bill he now read a Second time.
It will be convenient to the House it my right hon. Friend the Minister winds up the debate tonight so that he can answer the many questions which will doubtless arise in the course of the day.
The Air Corporations Act, 1962,authorised my right hon. Friend to lend to the Corporations for the purpose of financing deficits incurred on revenue account. The powers under the Act were limited to deficits accruing before 31st March, 1964. The Act authorised lending only so long as the accumulated deficit on revenue account did not exceed £100 million in the case of B.O.A.C. and £10 million in the case of B.E.A. The purpose of the Bill is to extend these powers for a further two years to 31st March, 1966, and to increase the figure of £100 million in the case of B.O.A.C. to £125 million. B.E.A.'s ceiling will remain at £10 million.
It may be asked why B.E.A. should be mentioned in this Bill at all, because it is now doing very well indeed. At 31st March, 1963, its deficit stood at £2½ million but results so far this year are encouraging and I have every reason to believe that all, or almost all, the deficit will be extinguished next year. At the same lime, experience shows that the airline business can be subject to some very sharp fluctuations. It seems, therefore, only prudent to extend the period during which my right hon. Friend has authority to lend money to B.E.A. if the need arises. I would stress that there is no question of increasing the ceiling, and I should be very disappointed, and I am sure that B.E.A. likewise would be very disappointed, if it ever has to use these extended powers. Next year will see the introduction of the new Trident airliner into the service of B.E.A., and this will, I believe, further strengthen the Corporation's position and do much to maintain the reputation of the British aircraft industry.
I do not know whether we shall be debating the affairs of B.E.A. again before the end of the financial year. In case we do not, I should like, on behalf, I think, of all hon. Members, to salute Lord Douglas's achievement as Chairman of B.E.A. During the 15 years that he has led the Corporation, it has acquired a reputation for safety, service and efficiency which is the envy of all airlines. It is fitting, too, that his last year as Chairman should have witnessed a very impressive recovery in the Corporation's fortunes and opened up the prospect of prosperity ahead.
As the House knows, Lord Douglas is being succeeded in March next year by Mr. Anthony Milward, who has been in the service of B.E.A. for 14 years. For seven of those years he has been the Corporation's Chief Executive. I am sure that the House will join me in sending good wishes to him and all those throughout the Corporation who have combined to bring it to its present position.
I come now to B.O.A.C. There is much ground to cover in my speech and, therefore, it may be a little longer than I should otherwise have wished. I thought that it would be for the convenience of the House if I dealt with the problems of B.OA.C. first, as to the past, and then as to the future. We have had the White Paper on the financial problems of B.OA.C. and my right hon. Friend made a statement to the House twelve days ago. My purpose is to explain the Bill and to take the House through the White Paper. While I want, as far as possible, to avoid repeating what is already in the White Paper, I must, nevertheless, take the House through some of its main points.
The background to the Bill and to the request for extended lending powers is the heavy deficit already accumulated by the Corporation and the prospect of some further increases in the deficit before it can overcome the very difficult problems which lie ahead. The House will recall that the Select Committee on the Nationalised Industries reported in May, 1959, on the two air Corporations—a long and very valuable Report. The Ministry of Aviation discussed with B.OA.C. its future plans and prospects, and the Select Committee reported again in February, 1962.
When my right hon. Friend was appointed Minister of Aviation in July, 1962, one of his first actions was to examine the problems of B.OA.C. As a result of his assessment of the position, he appointed Mr. John Corbett to investigate B.O.A.C.'s position and prospects and to report to him. He also sought such other advice as he could, and this he sought over a very wide field indeed.
Mr. Corbett, in turn, commissioned special studies of certain areas of the Corporation's activities—from the Associated Industrial Consultants who studied engineering and maintenance organisation, from Messrs. Urwick, Orr and Partners, who studied the marketing organisation, and the separate management consultancy firm of Peat, Marwick, Mitchell and Co., who studied the Financial Comptroller's Division. I should like to take this opportunity of expressing the Government's thanks to Mr. Corbett and the consultants he appointed.
As paragraph 10 of the White Paper shows, the deficit we are considering amounted to £80 million at the end of March, 1963. I am afraid that, at the end of the present financial year, this is likely to have increased to £85 million. I should like to examine and analyse this figure of £80 million.
An airline, whether nationalised or not, must, like other industries, earn enough revenue to meet its operating costs such as salaries and fuel. It has to amortise its capital assets and has to meet the interest charges on any money which it has borrowed. The biggest element in the deficit is the sum of approximately £35 million in respect of losses on aircraft. Of this sum, only a small part was attributable to the Tudor, Hermes and Comet I aircraft, while the balance was attributable to the short in-service life of the DC7C, the Britannia and the Comet IV.
A large part of the loss stems from the disaster which befell the Comet I and the delays in introducing the Britannia into service. The Comet I was the first of the civil pure jets and it made a great impression on the travelling public and achieved a very high load factor compared with other aircraft.
At that time the future of B.O.A.C. looked very promising. But then, after a series of crashes which were eventually traced, as we know, to metal fatigue, the aircraft had to be taken out of service and was subjected to prolonged tests. Meanwhile, the Corporation had to buy aircraft off the shelf. They were mostly American piston-engined aircraft with less appeal to the travelling public than the Comet I. As a result, we lost the lead in civil pure jet commercial aircraft and B.O.A.C. suffered much as a result.
B.O.A.C. had also backed the lead which the British aircraft industry had taken in the development of the turboprop aircraft, in the early 1950s, many of the experts on both sides of the Atlantic: judged that for transatlantic and other long-range journeys the turboprop aircraft was the best investment because of its low operating costs.
B.O.A.C. backed the Britannia, hoping that it would be delivered in 1954 to 1955.
The introduction of the Britannia was delayed for two and a half years. The reasons for this were the introduction of a long-range version early in the production line, technical troubles, and additional structural testing after the Comet disaster. If the long-range Britannia had come into service on the North Atlantic when B.O.A.C. originally planned in 1954 it might have had several years of profitable operation, but as things turned out it did, in fact, come into service in 1957 and was only a year ahead of the large American jets.
B.O.A.C. suffered in two ways. First, because the new jets directed traffic away from B.O.A.C.'s slower turboprop aircraft; and, secondly, because of the short lives in service of the DC7Cs, which had been purchased as gap-fillers, of the Britannias and Comet IVs. I stress that I am here referring to the long-range Comet; the medium-range versions are still widely in use and in production. These troubles cost the Corporation about £35 million.
Another considerable item in the losses, as the White Paper tries to show, springs from development costs of introducing new aircraft such as training aircrew, carrying out route-proving flights—
I was referring to the costs of introducing new aircraft. Among them, I would stress, are training aircrew and the carrying out of route proving flights, adapting engineering and maintenance departments, and providing ground equipment and spares along the whole range of routes to be covered. While doing this, an airline has to service the capital cost of aircraft before they begin to earn. Between 1956 and 1962 five different types of aircraft were introduced into service with B.O.A.C. and cost about £13 million.
The losses which I have so far mentioned were largely due to ill luck. The Corporation was adventurous because it pioneered new and exciting British aircraft. Its success must depend not only on standards of safety, reliability and passenger comfort—where there is not much to choose between the best airlines—but on being first in the air with new aircraft of higher performance and increased passenger appeal. As we saw with B.E.A. and the Viscount, this can certainly pay off handsomely, but when things go wrong through ill luck I do not think that we should criticise the Corporation for following the adventurous course.
The widespread introduction of the big American jets on the long haul routes began in 1958. How did it come about that the full extent of the losses arising from this was not brought into B.O.A.C.'s accounts earlier? A note of warning was, indeed, added to the 1958–59 accounts that the book value of certain aircraft might be in excess of their realisable value on disposal, but the full effect was not brought into the accounts until 1961–62.
It was a more general statement, I think.
The full effect was not brought into the accounts until 1961–62, when the profit and loss account included a sum of nearly £32 million in respect of additional amortisation. It will be remembered that in the last debate in November last year my right hon. Friend referred to this point and his remarks were the subject of some controversy. It was even suggested, I believe, that the then Minister prevented the Corporation from writing down the capital value of the DC7Cs.
I have gone into this very carefully and I should like to give the House some of the facts. The Air Corporations Act, 1949, empowers the Minister to give directions as to the form of the Corporation's accounts, but he has no power to tell the Corporations what amounts they should include in these accounts. The Minister can rightly only concern himself with matters of form and not matters of substance.
The Corporation was aware of this, and in 1957 the Corporation's auditors drew up, following an earlier request of the Minister, a statement of the principles which they recommended for the future treatment of amortisation. Among their recommendations, which were agreed with the Minister and the Corporation, was the principle that the rates of amortisation should be reviewed and adjusted from time to time in the light of the changing values and changing expectation of life of the aircraft, but although the Corporation was aware of the likely change in values it still charged amortisation on the basis of seven years' useful life of the aircraft, after which they would still have a disposal value of 25 per cent, of the original cost. This is set out in paragraph 13 of the White Paper.
In the 1958–59 accounts the Corporation wished to show the reduction in value as a deduction from capital borrowing, or, alternatively, as an item on the assets side of the balance sheet under the heading of "Lost capital account" without bringing it through the profit and loss account. The Minister, concerning himself with the form only, as I said, of the accounts would not allow this. He considered that this would carry a clear implication that the Government had agreed to write off that accumulated deficit. In the event, as I said, the Corporation merely noted the fact of reduced value and continued to charge amortisation at the old rates. This continued for the two following years 1959–60 and 1960–61.
This was a matter of financial control and management by the Board of B.O.A.C. The Minister under the 1949 Act has no standing in this matter except only as to form; but looking back I can say this, that although the then Minister did warn the Corporation of the dangers it was running, it might have removed any possibility of misunderstanding if it had been made clear at that time that the Minister's rejection of the Corporation's proposals for writing down did not absolve it from adhering to the principles agreed with the auditors.
That was the figure the Corporation was talking about, yes.
But the Corporation knew what it was doing. It had been warned about it by the Minister. Indeed, the Select Committee drew attention to this sort of thing in paragraph 218 of its 1959 Report when it queried the degree of control which the Minister should exercise over the Corporation. The Minister would be wrong to tell the Chairman how to adjust the figures in the accounts.
I therefore hope that what I have said will clear up this point and will end the controversy on this matter.
I now turn to the losses incurred by the Corporation's associated and subsidiary companies. These amounted to over £15 million by 31st March last. I shall not go into the details of how B.O.A.C. first acquired interest in overseas subsidiaries. Some, such as the interests in Bahama Airways and British West Indian Airways date back to 1949. The main motive for investing in local airlines was to secure feeder traffic for the main trunk services and to protect transit and traffic rights.
It is very difficult to say how far this policy has been successful, but from information available it points to the conclusion that even if the policy itself was justifiable the execution of the policy was defective. For many years losses exceeded budget forecasts. Until recently the Board of B.O.A.C. had no recorded estimates of the extent of the feeder traffic, nor was there any recorded estimate of the financial consequences of a particular associate coming under control by a competitor. There were, no doubt, incidental gains in these arrangements to the British Aircraft industry, which we as a country have to set off in the balance sheet, in fostering the sale of aircraft.
One is bound to conclude that the losses would have been much less if the board had ensured that the purpose of each investment had been more clearly defined, if the benefits which each was expected to generate had been more carefully weighed against the costs involved, and if the expenditure had been more carefully controlled.
The hon. Member will want to be fair. He ought to make it clear that the person responsible in B.O.A.C. for these associated companies left the board quite a long time ago.
That is, indeed, well known, and I will come to those questions later.
There are other factors which can go into the balancing scales, and one of these is the loss of cabotage. In the early post-war years B.O.A.C. was in a strong position. To the East and to the South the geographical spread of the Commonwealth formed the basis of its route network, and competition from foreign carriers was comparatively slight. Traffic to Australia and East, Central and South Africa was shared solely with B.O.A.C.'s Commonwealth partners. The Corporation had a virtual monopoly of traffic between the United Kingdom and West Africa. Not least important, traffic between the United Kingdom and points on the routes in colonial or protected territory was reserved under established international practice to the British operator. Across the Atlantic the Corporation had the advantage of being based on London, which in the days of shorter-range aircraft also constituted the gateway for traffic coming from other points into Europe.
In recent years many of these advantages have been reduced. The number of airlines now competing for traffic on B.O.A.C.'s traditional routes has increased out of all proportion to the traffic growth. Newly independent territories have set up their own airlines, all claiming the right to a share of the traffic to and from their territories. Germany, Italy and Japan have also emerged as strong competitiors.
There is another question which we must also put in the scales—that of traffic rights, to which reference was made in the White Paper. We have always believed that the air transport industry in all countries would best thrive in a world in which national restrictions were kept to a minimum. But as more and more countries have entered the international airline business, and as competition everywhere has increased, the maintenance and expansion of routes has become increasingly, for all countries, a matter of hard bilateral bargaining. We must conserve what negotiating strength we have. We must concede rights only in exchange for rights of value to our own airlines, and we are forced to look very critically at the rights which we have granted in the past.
I should like to say a word about comparative costs, another factor which we have to put in the scales—comparative costs per unit of production, per capacity ton mile, for different airlines, about which much information was given to the Select Committee and is at the back of the White Paper. In this, B.O.A.C. comes out better than some and worse than others.
I do not think that too much should be made of these comparisons, because it is difficult to compare like with like in the airline business. Part of the difference in B.O.A.C.'s overall cost compared with Pan-American's may be due to the higher proportion of large jets in the Pan-American fleet. Nevertheless, if a competitor can operate at much lower costs, it is something which no commercial undertaking can afford to ignore. The cost levels of the most efficient airlines will increasingly set the standard to which the level of fares and freight rates will be related. If the Corporation's costs are any higher than they need be, whether because of the aircraft which they operate or for other reasons, this will seriously affect its financial viability.
As part of the general inquiry undertaken at the Government's request, studies were made by professional consultants into various aspects of B.O.A.C.'s activities. The first of these studies concerned B.O.A.C.'s engineering and maintenance organisation. There were several reasons for studying this particular part of the organisation. It accounts for nearly one-quarter of the total annual expenditure, and within it are employed a large part of the Corporation's labour force.
I should like to make it quite clear that there has never been any doubt about the technical excellence of the work carried out in B.O.A.C.'s engineering and maintenance division, but its high costs have long been a cause for anxiety. In 1957, the Corporation itself examined the costs and organisation of the division. It found that the Corporation was employing on this type of work from two-and-a-half to five times as many staff per flying hour as its competitors. There appeared to be no compensating factors, such as differences in workshop equipment, to account for this disparity. It seemed to be mainly due to defects of organisation, procedures and management. These were aggravated by the difficulty of operating a fleet composed of several different types of aircraft and by unsatisfactory labour relations.
After the 1957 investigation, the Corporation drew up plans which have since produced very considerable savings. Changes in the type and complexity of aircraft, in the age of the fleet and in the volume of output make precise comparisons difficult. Nevertheless, the consultants who recently examined the division found that there was still considerable scope for achieving further savings in costs without any danger of lowering the high technical standard of the work. It considered, for example, that there was an inadequate emphasis on accurate planning and cost control. The absence of reliable standards of work content and material cost prevents sufficient planning and control of manpower, material and equipment resources. There is scope for improvements in the techniques used for stock control of consumable materials, and considerable scope exists for improving methods and procedures in both workshops and offices.
As a result, the consultants said that it should be possible over the next three years to achieve further savings in costs associated with maintenance of the order of about £4 million a year as compared with the 1962–63 cost levels. They also considered that there should be substantial indirect benefits flowing from the increased utilisation of aircraft made possible by more rapid overhaul. The findings and recommendations of the consultants are clearly relevant in the context of the steps which must be taken if B.O.A.C. is to achieve financial equilibrium.
The second detailed study which the consultants made was of the Financial Comptrollers Division. This division was selected as being representative of the Corporation's headquarters administration. The consultants, on this occasion, came to the conclusion that there are opportunities for improving the organisation and methods of the division and also opportunities for reducing the size of the staff. Their most important conclusions, however, were that the division had not been allotted the part or the authority which it should have in a commercial undertaking the size of the Corporation.
A further study was made, this time of B.O.A.C.'s marketing organisation in this country—and I stress "this country"—and Europe. In the last two years B.O.A.C. has spent about 18 per cent, of its total revenue on sales and advertising. About two-thirds of this is incurred in the areas covered by the Western, Eastern and Southern routes, and the balance in Europe and the United Kingdom. The Corporation's percentage expenditure on advertising is materially less than that for most world airlines, but its other selling expenses, such as the cost of its sales office, its reservations system and the commissions paid to agents, are probably of the same order and size.
The consultants, I am very happy to say, were impressed by what they saw of B.O.A.C.'s sales, advertising and publicity in the area in question—this country and Western Europe. Their conclusion was that the Corporation had obtained a creditable share in most of the markets to which it and its pool partners had ready access. They thought that expenditure was at about the right level and that, although there was scope for various detailed improvements, the Corporation was getting good value for the money which it spent under this head.
So far, I have dealt with the past, endeavouring to show the House some of the causes of the deficit which has already arisen. The Bill before the House asks for an increase, in the figure of £100 million deficit on revenue account, to £125 million. This increase provides for continuing losses before the Corporation can overcome the problems which lie ahead.
What is likely to cause these losses? Here, I move on to the future. As the House knows, I fear only too well, world airlines are suffering from too much capacity. Competition is increasing. The number of airlines on the major routes has increased considerably and the general pattern will continue to change. There are always strong pressures for reduced fares, and B.O.A.C. are in full agreement with this policy, but the problem is to make the reductions in the right way so as to bring about a commensurate increase in traffic and not simply to lose revenue.
Fare cuts, if made now and if of the right kind, could, in the long run, improve airlines' finances. But in the immediate future we have to recognise that reduced fares will not improve B.O.A.C.'s position. It takes time for traffic to respond to fare cuts. For example, a 20 per cent, cut in fares requires at the very least a 25 per cent, increase in traffic to keep revenue stable.
I want to look to the future. Over the next three years B.O.A.C. will be involved in introducing into service an entirely new aircraft, the VC10. It has to be faced, as I explained earlier, that the costs of introducing it will fall heavily on the Corporation during this period. On the other hand, by 1966–67 B.O.A.C.'s fleet should be composed of only two types of aircraft, the Boeing 707 and the VC10, and at that stage the fruits of the VC10, once it has been run in, should be apparent.
This VC10 will have advantages over other similar long-range planes. Its rear enginss will mean quieter travel. Indeed, a forward-engine configuration in this class of aircraft may in a few years time possibly seem as obsolete to the passenger as a propeller does today. Moreover, it has been designed to use a blind landing capability. It remains to be seen what effect these advantages will have on the economics of operating this type of aircraft.
Therefore, when we are asking for this sum to cover increased deficits, these are the items for which we think we have to cater.
Later, we will come to the supersonic air transport. This is not due into airline service in the 'sixties, but in 1970. It will present considerable problems for management, particularly its economic phasing into the existing range of subsonic planes. When we consider all these formidable problems we ought not to take too optimistically—I am sorry to sound a note of caution—the recent forecasts of improved operating results, although, of course, we all hope that they will continue.
Another matter which will contribute to the continuing loss is the servicing of B.O.A.C.'s debt which, as we all recognise, and as was brought out in the White Paper, is a considerable part of B.O.A.C.'s burden. Some people say, "Why not write off the deficit now and let B.O.A.C. start the new financial year with a clean slate?"
I note the comment from the hon. Member. I well appreciate that it is bad for morale and highly unsatisfactory for the Corporation to have this deficit round its neck. The Government have decided that until the Corporation can see its way to solvency it would be premature to write off the losses. I doubt whether Parliament would accept the theory that when a nationalised industry has built up crippling losses, they should be automatically written off and the interest payments abrogated without any plan for recovery.
As the White Paper shows, my right hon. Friend intends to ask Sir Giles Guthrie to produce such a plan for recovery within 12 months—or before then if he can.
Is it not a fact that last year a full plan has been produced by Sir Matthew Slattery and that last spring another plan was submitted by Sir Basil Smallpeice? In what way will Sir Giles Guthrie's plan be able to differ so much from the earlier ones, particularly when one considers that he is not to be allowed to look at the Corbett Report?
We will have to wait and see what Sir Giles Guthrie produces. In a business such as a commercial airline a plan for recovery is best left to the management, for only they can size up the prospects and profitability in this rapidly developing industry.
Naturally, the Minister of Aviation will always be available for consultations so that the implications of Government policy can be thoroughly considered. As my right hon. Friend has frequently said, a Minister sitting behind his desk in Whitehall cannot, or should not, attempt to run a business. Once the plan is ready and has been studied, then, and only then, will we consider the question of whether to write off all or part of the debt.
In the context of possible economies, we have looked carefully at the question of the merger of the two Corporations. The arguments for and against are finely balanced. On the one hand, they have many functions in common which, if combined, might lead to some savings-better aircraft utilisation might be achieved under certain circumstances—but, on the other, there will doubtless be a loss on inter-line revenue and it is doubtful whether, owing to the different types of aircraft in operation on different schedules, there could really be much common maintenance. However, neither of the Corporations favours merger and the fact of their two very different financial situations makes it quite impracticable.
My right hon. Friend has, therefore, on his recent appointments to the board, taken steps to achieve a measure of interlacing between the two Corporations which willgo some way towards meeting the problem. Since 1956 the chairmen of both Corporations have had regular monthly meetings to resolve difficulties and stimulate collaboration. The results of these meetings have not proved very rewarding and I hope that this new cross-fertilisation will open up further prospects for economy.
As my right hon. Friend has already told the House, he has come to the conclusion that there is a need for a stronger management in B.O.A.C. While Sir Matthew Slattery has done a great deal to improve the position, the various investigations nevertheless show that there are still weaknesses. Some of these have been corrected; engineering costs have been steadily brought down over the years, although not far enough, financial control has been given a higher status and tightened up during the chairmanship of Sir Matthew, and subsidiary companies have, to a large extent, been streamlined, although there is still more to be done in this direction.
The second and equally important reason for strengthening the management is that the problems of B.O.A.C. are not becoming easier. As I have said, it would be wrong to infer from the improvement in B.O.A.C.'s financial position this year that the Corporation has turned the corner; that adequate remedies have been applied and that full recovery is only a matter of time. The airlines find themselves squeezed between the forces of rising costs, increased capacity and strong pressure for lower fares.
The task is a formidable one. It will call for much energy and drive—above all, concentration of direction and singleness of purpose. To achieve these things my right hon. Friend came to the conclusion that, in the immediate future at least, the chairman of the Corporation should undertake many of the duties that are at present carried out by the managing director, thus reverting to the pattern of organisation that existed before 1956.
This was discussed with Sir Matthew Slattery, who made it plain that he would not himself feel disposed to attempt this double task and accordingly my right hon. Friend decided that, on his retirement, he should be succeeded by Sir Giles Guthrie, a younger man with wide commercial, financial and aviation experience. The House is already aware of the terms of the correspondence exchanged with Sir Matthew and how Sir Matthew himself came to the conclusion that it would be in the best interests of the Corporation if the changes were not delayed until his term of office expired in July, 1964, but that they should be brought into effect as soon as possible so as to remove uncertainty and to move into the new régime.
Accordingly, it was agreed between Sir Matthew and my right hon. Friend that he should vacate the chairmanship on 21st December so as to make way for Sir Giles Guthrie to succeed him.
I will leave this matter to my right hon. Friend to answer when he replies to the debate tonight, because appointments are very personal matters and I suggest that my right hon. Friend should deal with these matters and not me.
This proposal was accepted and I am glad to say that Sir Giles Guthrie himself is ready to take up his appointment in the new year.
Sir Basil Smallpeice, the present managing director, also took the view that, to facilitate the reconstruction of the Board of the Corporation on the lines that had been suggested, he, too, should vacate his seat on the Board at the end of this year. Thus, from 1st January onwards, Sir Giles Guthrie will take up his appointment as chairman and will also carry out many of the responsibilities that were hitherto borne by Sir Basil Smallpeice.
I should like to take this opportunity of further expressing the Government's appreciation of the services of both Sir Matthew and Sir Basil. Sir Matthew undertook the task of chairman at a difficult time and there is no doubt that the work that he has done will be of enduring benefit to the Corporation. Sir Basil has served the Corporation faithfully and loyally for 15 years, during seven of which he has been managing director.
Sir Basil has served the Corporation faithfully and has rendered great service throughout this difficult time. To single out just one of the notable contributions among the work he has done is that of bringing into being the Commonwealth pool, which has been an important factor in B.O.A.C.'s efforts to adjust itself to the changing conditions of the Commonwealth and Colonial routes.
The terms of office of one of the full-time members and a number of part-time members of the board come to an end in 1964. Mr. Staple, the secretary of the board, will be retiring in January and his place on the board will be taken by Mr. Charles Hardie, an eminent accountant. Mr. Hardie is joining the board as a part-time member and is in no sense taking over the work as secretary which has been done by Mr. Staple. Mr. Staple has given the Corporation valuable service for many years as Secretary and Legal Adviser.
At the same time, the greatest tribute should be paid to those who fly, service, and support the planes of B.O.A.C. in a service which enjoys the highest reputation through the world. The Corporation's record of safety is such that there has been no fatal accident in B.O.A.C. since 1957. This is a record of which all those who serve in B.O.A.C. can be truly proud
While I recognise that I have not covered all the queries which have been raised in a variety of places, I have I hope given the House many of the facts relating to the past and an account of the way we look to the future. I apologise for any gaps, but time does not permit me to deal with them all. My right hon. Friend will deal with them tonight.
out, it is designed to increase the borrowing powers of B.O.A.C. at a time when its finances are not too sound. For that reason my hon. Friends and I would not wish in any way to embarrass whoever may happen to be in charge of the Corporation in the next few days. However, if it were possible by opposing the Measure for us to register our utter and complete opposition to the Government's extraordinary behaviour towards B.O.A.C, I would certainly advise my hon. Friends to oppose it.
It is interesting to note that the Bill to increase these borrowing powers comes before us at a time when B.O.A.C. is achieving considerable success in recovering from its very heavy deficit last year of more than £12 million. We have been told that after thirty-two weeks of the financial year, revenue this year is estimated at £66.4 million—£52 million better than the same time last year. In the publication B.O.A.C. News of 14th November, Sir Matthew Slattery wrote:
The momentum of B.O.A.C.'s financial recovery is now so great that it could carry us to a £3 million profit at the end of the financial year—enough to pay the interest on all our active capital.
and "active capital", I take it, excludes interest on accumulated deficit. He pointed out that sales in Britain had increased by 12 per cent, compared with last year and that in the four weeks ended—[Interruption.]—if hon. Members opposite wish only to denigrate B.O.A.C., I can assure them that I will try to do the opposite—12th October the Corporation was 21 per cent, ahead of the same period in 1962, the load factor now being over 54 per cent, as against less than 50 per cent, in the comparable period last year. He emphasised, and I ask hon. Members particularly to note these words:
Where we are operating comparable equipment on comparable routes, we are very nearly the lowest cost operator, beaten by only the narrowest of margins.
I am not arguing that this very good turn of events does not necessitate increased borrowing powers, but it is a good thing if we can keep in mind exactly what is at present happening and the fact that this turn of events has been brought about by the present management and Board of B.O.A.C. Even more important, since the Corbett Report has not be made available to the management and since the contents of the White
Paper were kept from the management—[HON. MEMBERS: "Oh."]—until it was published—it is not the case that the improvements we are now discussing can have anything whatever to do with the contents of the Corbett Report. In other words, they have been brought about by the efforts of everyone now employed in B.O.A.C.
In his statement on 21st November the Minister said that some losses were likely to take place before the new plan could be put into practice. That may be so. I am merely reporting the fact that the present employees and Board of B.O.A.C. have, of their own initiative and without the inspired influence of anyone else, turned a corner quite remarkably from the £12 million deficit to a position in which they hope to make a profit of over £3 million by the end of the financial year.
Is it not a remarkable thing that those charged with the conduct of B.O.A.C.'s affairs could for so long have been deprived of the advantages of Mr. Corbetl's opinions, opinions which took about ten months to compile and which is estimated by Flight magazine to have cost about £40,000? Until 19th November the Minister of Aviation thought that Sir Matthew Slattery would be the chairman of B.O.A.C. for a further eight months—in other words, for fourteen months after the Minister had received the Corbett Report. But, surely, if the Report contains findings which could be helpful in eliminating the causes of the losses and in proposing better methods for B.O.A.C. for the future, it is very, very wrong—indeed I would put it as a neglect of duty on the part of the Minister—to deprive the chairman and his board of the benefit of such findings.
We know from the little in the White Paper which is directly attributable to the Corbett Report that a very grave charge is made against the present management, namely, a weakness in financial control. Yet the Minister was prepared to allow this weakness in financial control to continue for a further long period, after he received such a major criticism, rather than show the Report to the chairman and the members of the present board. It would almost appear that, while complaining about the losses, he was afraid of the prospect of the present management getting back to profitability., if it had had the advantage of the Corbett Report. [HON. MEMBERS: "Oh."] If hon. Members opposite catch Mr. Speaker's eye, they can deal with that point.
There is a further complication about which we require an explanation. The Minister has comparatively recently extended the period of office of Sir Matthew Slattery from 31st May, 1963, to 28th July, 1964. This took place after the Minister had received the Report of the Corbett Committee which charged Sir Matthew with being either responsible for weakness in financial control or, in any event, of condoning that weakness. In such circumstances why did the Minister extend the period of office of the chairman? The issue is made even more remarkable by the statement in paragraph 52 of the White Paper which includes among the conclusions:
May I ask who was the chairman who was to prepare the plan? The White Paper was ordered to be printed on 20th November and the Minister told us that he received Sir Matthew Slattery's letter of resignation on 19th November. What are we expected to make of this? Is it that the White Paper was written on the night of 19th-20th November, and that the period of office of Sir Giles Guthrie was suddenly brought forward eight months because Sir Matthew had "reflected"—as the letter said—for a day or so before 19th November? The fact is that when the conclusions which I have read were written the authors knew that Sir Matthew Slattery, Sir Basil Smallpeice and probably Sir Wilfred Neden would be out by the end of this year. To believe otherwise stretches the credulity even of Members of Parliament beyond a reasonable point.
I think that the position was made impossible for the board and the officials of B.O.A.C. In other words, in plain English, they were fired out—[HON. MEMBERS: "Oh."] From the noises opposite I assume that that is considered to be a prejudiced opinion from members of the political Opposition. Perhaps I may be permitted to
read part of the leading article in Flight International for Thursday, 28th November: It says—[Interruption.]—if hon. Members opposite will shut up a bit they will hear something which, no doubt, they do not want to hear, but nevertheless they are going to hear:
Edward VI is said to have had a liege by name of Barnaby who would be flogged and humiliated in vicarious expiation for the errors of the King. Are Sir Matthew Slattery and Sir Basil Smallpeice of B.O.A.C. the Barnabys of the Minister of Aviation? … The Minister has spent six months reading Corbett and writing the White Paper … Then, without showing Sir Matthew and Sir Basil the White Paper, let alone the Corbett Report, he devises their resignation, pats in a new man with no experience of airline management and tells him to produce yet another plan within 12 months. The B.O.A.C. leaders are cast aside on the basis of evidence which, since it is known to the Minister alone, they cannot answer. Some may feel that that is a most disagreeable political act.
Incidentally, while we are discussing the Corbett Report, may I say that I have been looking at one or two things and I am sure that hon. Members opposite would like to have the benefit of my inquiries. Mr. Corbett has sat on a number of Government Commissions, including one which inquired into the affairs of N.A.A.F.I. Its report also was never published. The result of the N.A.A.F.I. inquiry was that N.A.A.F.I. got a new chairman—just like B.O.A.C. And now the present N.A.A.F.I. deputy-chairman is Mr. C. E. M. Hardie, the other Radio Rentals director to be appointed to the B.O.A.C. board in the course of the last few days. At any rate, no one could charge Mr. Corbett with a lack of consistency in these matters. It is just one of those coincidences.
It has taken the right hon. Gentleman quite a long time to produce the White Paper. I wonder, could it be that it is not quite the first effort that the Government made, and that in fact the first White Paper was declared by the Government to be "black" and was torn up? Could the reasons include the fact that the Minister was agreeing to write off the £80 million deficit and appoint Sir Matthew as joint chairman of both Corporations? Indeed, it could be a line of continuity for appointing Sir Matthew for a further period of office, as the Minister did after receiving the Corbett Report. After all, it is only a question of changing the tenses a little, from "The chairman has produced a plan and will therefore write off the £80 million", to "When the chairman has produced a plan we will write off the £80 million—and in the interval a small matter of a General Election will be out of the way. If the Labour Party win let them write it off. In the unlikely event of the Tory Party winning, it will be much easier to do it at the beginning of a new Parliament than in the last stages of the present Parliament."
I put it quite seriously to the House that as yet we have not heard an adult reason for refusing to publish the Corbett Report. I agree at once that there are certain types of documents which it is not advisable to publish for very good reasons. One very good reason, for example, would be that publication would assist overseas competitors; but I doubt whether anything in a domestic Report such as that of the Corbett Committee could possibly have that kind of effect on B.OA.C. I think that probably the true reason was given by the Minister on 13th May of this year—
—just a second—when he said:
A good many things have to be said which could conceivably be embarrassing either to the Government or to the Corporation".—[OFFICIAL REPORT, 13th May, 1963; Vol. 677, c 974.]
We all know how far the right hon. Gentleman will go in avoiding embarrassment to the Corporation. Therefore, perhaps we can draw our own conclusions as to the reason for its refusal—
—no—to publish the Corbett Report. I will give way to the hon. Gentleman in a short time. I wish to pursue this point a little further and to make an offer to the Minister over the publication of the Corbett Report—yes, an offer. We are reasonable people. We know of the procedure in this House regarding secret documents on matters which are important to the nation. Where it is deemed that publication is not appropriate there is a formula under which my right hon. Friend the Leader of the Opposition is permitted to look at such a document to ensure that the reasons for not publishing are good and adequate and connected with the national interest and that kind of thing.
If there is anything in the Corbett Report which would be detrimental to the national interest, and if that is the reason for not publishing, I ask whether the right hon. Gentleman will observe that formula, and permit either my right hon. Friend the Leader of the Opposition or some Privy Councillor nominated by him to peruse the document. If after that we are told that there are good reasons why, in the national interest, it cannot be published, I should not ask again for its publication. That would be an amicable way of resolving this difficulty. The right hon. Gentleman knows that he is practically alone in determining that this Report will not be published. The whole of the Press has been in favour of publication, and certainly my hon. and right hon. Friends and myself have been asking for publication since February or March last year.
If the hon. Gentleman had been in the position of my right hon. Friend and he had considered that this document contained information that ought not to be published, would he not have behaved precisely as my right hon. Friend has?
The short answer is that if I could see the thing I should be able to answer the hon. Member.
It is a strange coincidence that approximately twelve months ago we were engaged in a similar argument about the Minister's refusal to publish the B.O.A.C.-Cunard agreement. The House will remember the differences of opinion on that point between the two sides. On that occasion, we were invited to believe that it was by far too private an agreement for the House of Commons to be permitted to know anything about it. After all, the British people only own the B.O.A.C. Who are they to want to see the kind of agreement that their Corporation indulges in?
Yet in June of this year, Flight International magazine contained this news item:
M.P.s who unsuccessfully pressed the Minister of Aviation last November to give Parliament a sight of the B.O.A.C.-Cunard agreement may be surprised to learn that the
U.S. Civil Aeronautics Board has been given a copy.
Terribly secret this—secret within these four walls.
It was submitted by B.O.A.C, with the request it would be withheld from public disclosure, as part of the Corporation's application for an amendment of its U.S. permit to operate on behalf of B.O.A.C.-Cunard. The agreement will be seen by other parties to the case, namely Pan American, T.W.A. and Seaboard, though they had been asked by the C.A.B. to respect B.O.A.C.'s wishes that the agreement should be treated as confidential. A Ministry of Aviation spokesman said last week, when asked if a copy of the B.O.A.C.-Cunard agreement would now be given to Parliament: The provision of this agreement to the C.A.B. on a confidential basis and for a commercial purpose is not the same as making it generally available.
In other words, the chief competitors of B.O.A.C. in world aviation could see the agreement, but the representatives of this nation, and the nation itself, are refused the right to see it. If this is the kind of secrecy that we are to get on Corbett, we still have hopes that the American Press may be able to tell us what are tie contents.
If the Minister now argues that they had to reveal the contents of the Cunard agreement in order that B.O.A.C. could get amendments to landing rights to include B.O.A.C-Cunard, the answer is that the Government should never have agreed to that agreement, in which event there would never have been any need to ask for any amendment. One thing that clearly emerges from all this is that a private airline gained out of that agreement, which was the objective of the exercise when the Government accepted it.
In addition to the two documents to which I have referred, we are now to have a new chairman's plan. I believe that Sir Matthew Slattery has already drawn it up and that it could be issued the day after the new chairman takes over. Nevertheless we are told that we are to have a new chairman's plan. Would it be straining beyond breaking point the Minister's conception of democratic usage, if I ask whether, of his charity, he would be graciously pleased to permit us to know the contents of the chairman's plan when that plan is ready?
The Minister possesses a somewhat unorthodox sense of humour which seemed to get the better of him when
answering questions on his statement of 21st November. He read to us a letter from Sir Matthew Slattery in which that gentleman informed him that rather than accept the Minister's policy for forcing the chairman to undertake the managing director's duties in addition to his own, he proposed to clear out before 28th July, 1964, after which the Minister blandly informed us:
This letter makes it plain that there was no issue of policy at stake.
A correct reading, even of that letter which anyone with any knowledge of what has been going on knows, and which leaves out 99 per cent, of the policy differences between the chairman and the Minister, would have registered a pretty clear policy difference between Sir Matthew and the Minister. Incidentally—the issue being the question of whether the chairman should undertake the managing director's job as well—if one man could perform both jobs during the utterly critical period through which B.O.A.C. has passed, it would appear that for a long time both occupants have been shockingly under-employed—which I do not believe—or that, in future, someone will be terribly overpaid. I think that, from the angle of the House of Commons, it might be a good thing if we could find out which of those possibles it is likely to be.
Yes, indeed. The Minister then informed us that there had been no discussion of the question of writing off the accumulated deficits. Has he forgotten that it was financial policy, including failure to write off deficits, which Sir Matthew described as "bloody crazy"? Indeed, if there is no policy difference between them, can we take it that he accepts Sir Matthew's description as being the correct one? Perhaps a little more evidence of mutuality between them can be seen if I quote HANSARD of 6th November, 1962. The Minister said:
… What I tried to indicate was that to dismiss as 'bloody crazy'"—
I like using that in the House—
the idea that one should pay interest charges on borrowed capital was not something which in itself commended itself to me. It may well be that in a reorganisation, if a reorganisation should be called for, there would be a case
for writing off losses. I cannot say at this stage. But I do not think that there is a natural right on the part of any business, whether private or national, to write off losses such as these."—[OFFICIAL REPORT, 6th November, 1962; Vol. 666, c. 820.]
The point that I am making is that when the right hon. Gentleman said that there had been no discussion about this, surely he knew that he had discussed it publicly with Sir Matthew Slattery.
I turn now to current events. Can we be told about the present state of play in the resignation stakes? We know about Sir Matthew Slattery and Sir Basil Small peice, and we suspect that Sir Wilfred Neden may also have gone. What about the activities of the group composed of Lord Tweedsmuir, Lord Rennell and Mr. Lionel Poole? They seem to be opposing the Minister in his determination to sack them. We are entitled to know what is happening—who is to go and what kind of a board we are to have at the end of the night of the long knives, as it were. Indeed, I should have thought that people well beyond the Board of B.O.A.C. are getting rather worried about the activities of the right hon. Gentleman. He is beginning to look every day more and more like a modern vengeance, counting the heads as the guillotine does its work, and I think that the sooner he lets us know where and when this process is to end, the more we can expect stability in B.O.A.C.
Only two points emerged clearly from what the Minister said on 21st November. He denied that there was any crisis of confidence between the B.O.A.C. and the Government—and how relevant this is now—and that there were no policy differences between himself and the chairman. If the utter chaos now obtaining in the Corporation can be achieved by the Minister without either of these things, one's mind boggles at the thought of what would happen if they were present.
I do not propose to spend a great deal of time discussing the White Paper. It seems to be a document the first half of which was written, or could have been written, by Sir Matthew Slattery, and the second half by a number of persons who at some time may have had something to do with the B.O.A.C. or with the world of aviation, but who have been away from such work for some time and whose object in writing it is to justify getting rid of the present management.
The Minister has had a very bad Press indeed. I could give the House many quotations, but I should like to quote from Flight International of 20th November. Reviewing the White Paper it said:
That White Paper, a pitifully superficial document, contains scant justification for its assertion that 'there is a need for stronger management'. There is nothing in it to allay suspicion that these men are scapegoats for a Minister who, after wasting 16 months, had to do something politically spectacular.
Dealing with the question of financial control, the magazine said:
The charge of inadequate financial control is vague. What exactly does it mean? 'Slack budgetary control.' If it does, how can slack budgetary control have cut B.O.A.C.'s cost level from 40d. to 23d. per c.t.m. in six year.?, and reduced the all-inclusive break-even load factor from over 60 per cent, to less than 50 per cent, in the same period? These cuts are not just the fruits of higher-productivity aircraft, but of sheer hard work. It may be added that these figures take account of the cost of operating obsolescent types which other airlines havegot rid of. How can Mr. Amery substantiate his charge of 'ineffective financial control'?
That extract is from Flight International and is not something which has been thought up by the Opposition.
I have a number of Press articles, all of which express concern about various aspects of the White Paper, and in particular about the conclusion in paragraph 51. I hope that the right hon. Gentleman will answer some of the points that we make on this conclusion which says:
The Government think it necessary to reaffirm that the Corporation must operate as a commercial undertaking. If the national interest: should appear, whether to the Corporation or to the Government, to require some departure from commercial practice, this should only be done with the agreement or at the instance of the Minister of Aviation.
That obviously presupposes that commercial practice will, on occasion, be in complete opposition to the national interest; in other words, that B.O.A.C.'s commercial interests will run counter to the national interest. Such occasions will obviously include questions of purchasing policy, for instance, whether B.O.A.C. should buy British or foreign planes. Let us be quite clear about this. This conclusion gives the Minister a
complete right of veto over some of the vital decisions which the management of B.O.A.C. is called on to take.
I remind the House that a portion of the B.O.A.C.'s Report for 1962 was omitted on what may, for reasons of politeness, be described as the "advice of the Minister". I referred to this last year and pointed out that the six pages of the Report which were omitted were those which criticised the British aircraft industry, and it was suggested at the time that Part III of the Report, which criticised the aircraft industry, was omitted. My fear is that the Minister is now taking powers of veto over the B.O.A.C. management on purchasing policy and that, because of the precedent which he has set, it is unlikely that the facts will ever be revealed to the House or to the country.
For a long time my hon. Friends and I have been receiving complaints from practically all types of employees in the B.O.A.C.—including some types of management, the organisation to which the pilots belong, office people, and people in the workshops—who are utterly incensed at the kind of thing which is happening in their Corporation. They and I feel that there has been so much interference both by the Ministry and by the Minister that nobody can say that the B.O.A.C. is in fact in the hands of the board or of the executive itself.
The first thing to do is to get rid of the incompetent people and then we can get on with the job.
I was saying that there is no confidence among the people of B.O.A.C. that it is managing its own affairs. Let us consider what the Minister described as the sudden emergence of large figures of depreciation in the 1962 Report. The Parliamentary Secretary referred to these this afternoon. In 1959, the right hon. Member for Working(Mr. Watkinson), the then Minister of Aviation, refused point blank to allow the Corporation to write down the value of ten DC7s by £6£ million. This was because of the refusal to permit anticipation, but it meant that the B.O.A.C. was precluded from writing down the value of the Britannias at a later date. It meant that there was a great deal of accumulated deficit on the planes bought. Despite the fact that the B.O.A.C. board wanted to write down the value, it was refused permission to do so by the Government, and it then found itself criticised by the present Minister for not doing so. If that was not interference, I do not know what it was.
It was agreed with the auditors, Messrs. Whinney, Smith and Whinney, that the writing down should go through the profit and loss account, but the Corporation wanted to put it through the balance sheet.
We have argued this before. What I am arguing, and what the hon. Gentleman is not denying, is that the Corporation wanted to show a depreciation of £6½ million on that fleet of DC7s, but it was refused permission to do so.
When the Minister announced the Corbett inquiry, I suggested that there should be an inquiry not only into the B.O.A.C, but into its position vis-à-vis the aircraft industry as a whole, but the right hon. Gentleman refused to permit this. We would like to see the position in which the commercial interests of both Corporations are best served by buying exclusively from our own aircraft industry. The position of the industry without the VC10, the Trident, the One Eleven and the Concord does not bear thinking about. But to take away from the management the power of decision with regard to ordinary policy and then to stifle its criticisms while blandly instructing it to operate as a commercial undertaking, solves nothing, no matter how many managements are sacked. Clear instructions should be given. The Government should make it clear that all additional costs rising from the carrying out of such instructions will be met by the Government and not by the Corporation.
I said that the Press has been almost unanimous in condemning paragraph 51 of the White Paper. I do not often quote the Financial Times, but on 22nd November it pointed out that if it was the intention that Sir Giles Guthrie should produce a Beeching Plan for B.O.A.C. this surely would meet with opposition from the Foreign Office, the Defence Ministry, and all those Ministries which have an interest in those products and activities of the B.O.A.C. which it is not possible to estimate in a profit-and-loss account.
On the 21st I referred, in a Question to the right hon. Gentleman, to the southern routes of B.O.A.C. I said that there had been discussions between B.O.A.C. and B.U.A. on these routes. The right hon. Gentleman told me that there had been no such discussions. I did not say at the time that I knew that the right hon.Gentleman knew about them. He probably did not. I am not accusing him of not telling the truth to the House, but I want to know, when he replies, whether he now knows anything about those routes. Is it not the case that Sir Matthew Slattery saw Sir Miles Wyatt, chairman of Air Holdings, Ltd. and discussed the matter with him, that he met Lord Poole, who is deputy-chairman of Air Holdings and who has a certain connection with the party opposite, that this was reported to the B.O.A.C. board on 14th November, that it did not go on with the discussions in view of the present questions.
Following the Minister's announcement in the House there has been further discussion. Is it the case that the board met specially in London to discuss the matter and that it then had a letter before it from Sir Miles Wyatt expressing great interest in the proposition made? Is it not true that the board was very apprehensive and rejected any idea of a change on certain African routes and Latin American routes?
In the light of what I have said will the right hon. Gentleman now say that he is aware that discussions of this type have taken place and that he will give the House an assurance that we are not going to have any hiving off of lucrative routes to private operators to the detriment of B.O.A.C. itself?
The hon. Gentleman is perfectly entitled to his interpretation of what he thinks to be the truth, but is it not possible—I think there is a chance that it is possible—that Sir Matthew Slattery, in fact, took the initiative in this matter, discussed it with Sir Miles Wyatt and subsequently laid a draft letter before the board of B.O.A.C., that the matter was shelved and that in some way information about this leaked out from the board to an interested party, perhaps to the hon. Gentleman himself?
I am not answering the issues which I have raised. It is not my job to answer them. Every hon. Member knows that we do not raise issues if we know the answers to them. Therefore, I have suggested that certain negotiations took place, but that the Minister knew nothing about them. I am asking now whether the right hon. Gentleman has had time to look into these matters and to be able to reassure the House on the very great issue which I raise.
I have been suggesting that the Government's policies have been to use B.O.A.C. as something of a milch cow for the aircraft industry and for the private owners of airlines in Britain. I will give an instance. Let us look at the ordering of the VC1Os. Is it the case that, first of all, B.O.A.C. was not all that keen about an order of this character, that it then, under pressure, agreed to a programme which was to produce a plane comparable to the Boeing; that when it agreed it wanted to limit the numbers to some 25;that under pressure from the then Minister it was pushed up to 30, and that under further pressure from the Ministry it was increased to 35 with an option of some more, and, finally, that that option was made, again under pressure from the Ministry, into a firm order for 10 more?
The B.O.A.C. was proved to be right in its resistance because up to now three have been scrapped at a cost of some £700,000. We know that the Minister or the board has to make a serious decision yet as between the Boeing and the VC10. If it is the VC10 which is going to be cancelled, the compensation required will be at a far heavier rate than the compensation already paid. How does commercial practice come into all this. In other words, as I assert, the Corporation is being used by the Government as a milch cow for the aircraft industry and for the private owners in aviation.
I believe that because of the terrible chaos which has now been brought to a great Corporation, a Corporation, which, as the Parliamentary Secretary reminded us, has done an enormous amount to improve the standing of Britain in every quarter of the world in which its aircraft fly, and because of the attitude of the Minister, the morale of the staff—almost in every section of it—is now as low as it can be. I believe that because of these things and because of the way in which chaos now reigns in B.O.A.C. we have the right to demand the Minister's resignation, to demand that this chaos shall stop and to demand that this Corporation shall be allowed once again to get on with the job which it has done so well over the years in looking after the interests of Britain in the world of aviation.
I started by saying that we cannot divide the House on this matter, but I now give warning that we shall probably return to the subject on an occasion when we can censure the Government for a shocking display of inefficiency and bias.
We have just listened to a fine peroration by the hon. Member for Newton (Mr. Lee), but he has contributed nothing whatsoever to the debate. He told us nothing at all about how the Corporation was to be restored to its feet again, as the hon. Gentleman hoped it might be. His only solution was rather speciously to call for the resignation of the Minister, which will be far more harmful than anything else for the Corporation.
Having listened since twenty-five minutes to Ave o'clock to the hon. Gentleman, I think that we could probably have been spared a substantial amount of his speech. Most of it came from newspaper cuttings and journals which we, as well as the hon. Gentleman, had all read. We were all patiently waiting and searching for the hon. Gentleman to put forward an original solution.
I join with my hon. Friend the Parliamentary Secretary in paying tribute to the chairmanship of Lord Douglas of Kirtleside in B.E.A. and in saying, on behalf, I am sure, of all hon. Members on both sides of the House, how grateful those of us who have visited B.E.A. from time to time are to him for the courtesy and hospitality which he has always shown us.
B.E.A. is entering upon a very exciting period at the moment with its new Trident coming into service. This will add to the distinguished place which the Corporation already holds in the airlines of the world. I would like, too, to join with my hon. Friend in welcoming the appointment of Mr.Anthony Milward, of whom many of us have a very high opinion formed from meeting him over a number of years.
With regard to B.O.A.C., I think that we all join in paying a tribute to Sir Matthew Slattery. I can think of no more unthankful job than that of being chairman of a nationalised industry or corporation. It must be a most difficult task to perform. Sir Matthew has been through a very difficult time recently and will certainly have earned the respect of all hon. Members for the way in which he has acted in recent weeks. He has, I think, set an example which might well have been followed by some of his less distinguished colleagues.
I also join the hon. Member in paying tribute to the high standard of safety of the two Corporations under discussion. I also want to say a word of praise in honour of those who work in the Corporations, especially the engineers and the highly skilled pilots who fly the aircraft.
The hon. Member1; for Newton quoted the words of Sir Matthew Slattery, in which he referred to B.O.A.C.'s starting on a new period and having achieved a "momentum of recovery". Every hon. Member will hope that that is so, for nothing is more needed than a momentum of recovery in this Corporation. But what are the facts? The facts are that we have to face an accumulated deficit of nearly £80 million, which looks like rising, in the next year or two, and will probably reach about £100 million.
If, therefore, the momentum of recovery to which he drew attention is as great as he says, and as great as other hon. Members appear to believe, he and they should carry the courage of their convictions into the Lobby and vote against the Bill, because in their interpretation an increase in the deficit financing allowance is wholly unnecessary. If, however, it is not unnecessary, hon. Members opposite must recognise that this is a serious problem, which must be faced, and that something must be done about it. If all is so well with the Corporation there is no need for the Bill.
I ask myself why we have to have Bills of this kind, dealing with public corporations, which we do not get with other similar bodies. We do not have to have Bills dealing with liabilities to the taxpayer in respect of B.U.A., or British Eagle. The answer to this problem can be expressed in one word—"nationalization". The whole problem with which we are concerned today goes back to nationalisation, and I want to concentrate for a moment on this aspect of the matter.
What was the original purpose and point of nationalisation? Surely it was to make the industry efficient. We do not hear so much about it nowadays, but hon. Members opposite, in their speeches outside and even in the House, occasionally accuse certain industries and firms with being likely to fail the nation, and threaten to take them over and make them more efficient if they do. Is this what nationalisation has done for B.O.A.C? If so, we would not be concerned with the Bill today. If this is the aim and objective of nationalisation, how is the success of nationalisation to be judged? Surely it must be judged by the degree of efficiency attained by the industry which is taken into public ownership. The only way in which this can be done is by the amount of profit that is earned, or by the commercial success of the undertaking. If this organisation were commercially succsssful there would be no occasion for this piece of legislation.
I am very interested in the argument which the hon. Member is developing. Would he tell the House whether he thinks that under different management—supposing that B.O.A.C. had been a private corporation and had had precisely the same experience over the last few years, besides having to operate with the same route structure—it would have been able to make a profit?
It would not have had precisely the same experience. In the first place it would have had a different manager. Secondly, it would have been answerable directly to its shareholders. Thirdly, if it had not survived it would have gone out, and would not have continually added to the burden on the taxpayer.
Does not my hon. Friend agree that if an efficient private company owned this airline it certainly would not have introduced five types of aircraft in the period since 1956, and would not have had as many as four flying at the same time?
My hon. Friend is indicating some of the detailed aspects of the matter. I am stating the general principles which lie behind my approach to this point. I do not wish to take up my hon. Friend on those points of detail only because I know that other hon. Members wish to speak, and because there are special circumstances—for example, the loss of the Comet I, and the sudden off-the-shelf buying to which my hon. Friend the Parliamentary Secretary referred and which contributed to the state of affairs in which B.O.A.C. found itself at that time.
What I am concerned about—and what the hon. Member opposite, who spoke so fluently but said nothing at all, must be concerned about—is that if something is going wrong to the extent of £80 million or £100 million, something must be done about it. The hon. Member offered no solution to this problem. AH that he did was to attack what has been done by my right hon. Friend. At least what my right hon. Friend has done is to take a decision. That, in itself, is welcome. He has pointed the way from which a solution to the problem can be found.
Rather than reviewing the history of this Corporation it would be better to leave it—to forget about the background and the build up to the present situation, and the utterly impracticable ideology of hon. Members opposite—and to think for a change of the needs of the taxpayer, which were not given any consideration by the hon. Member. In my opinion, the Government, quite rightly, aim to make this Corporation a commercial success, just as they aim to make other nationalised industries a success. This is the fundamental consideration we should have before us today. There are various ways in which this can be done.
Does the hon. Member apply what he has just said about care for the taxpayer to the Government subsidy given to the British aircraft industry to produce the aircraft for this industry, which it has been compelled to fly?
The element of compulsion to which the hon. Member refers is itself worthy of consideration. I believe that a £2 million Press advertising campaign has just been launched about the wonders of the VC10, which was constructed to the specification of B.O.A.C, and which will be a very fine aircraft. I should not be surprised that if there has been an element of compulsion in that decision, B.O.A.C. will in due course corns to welcome it.
The aim of the Government is to make this Corporation a commercial success. I hope that hon. Members opposite will agree that that is a sound objective. If they do not agree—if they think that the whole of this Corporation's investment in the future should be subsidised by taxation—let them say so today. I agree with my right hon. Friend's decision not to agree to write off this deficit before the publication of a sound financial plan. He cannot ask this House to give him complete carte blanche—a blank cheque—to write off the whole sum, without at the same time being able to have a reasonable assurance that this sort of story will not be continued into the future.
This is not the only nationalised industry, unfortunately, with which the taxpayer must be concerned. We are likely to have to face the same sort of problem in transport, coal and other industries.
Yes. We shall probably have to face the writing off of many hundreds of millions of pounds in due course, and the electorate would do well seriously to consider the enormous burden which is likely to be placed upon their shoulders in the future from increases in taxation if the Labour Party ever gets a chance to further its nationalisation plans.
Hon. Members opposite also complain about political interference. They have sniped at my right hon. Friend and my hon. Friend the Parliamentary Secretary for political interference, for dictation, for having a say in the affairs of this industry. But what else does nationalisation do? If it does not amount to political interference, to what else does it amount? If it is not the most flagrant form of political interference in a commercial undertaking, what else is it? Hon. Members opposite should not be so free with their accusations against my right hon. Friend, whose sole concern in any intervention which he may make is to ensure that the industry becomes a commercial success and ceases to be a drain on national funds.
We have to look again at the whole of our attitude as a nation towards the nationalised industries. I will not go into the whole range of likely and possible solutions which should be considered, but we have to find a new form of partnership between Government and industry as a whole—not just between the Government and the nationalised industries, which is important enough in itself, although hon. Members opposite do not seem to face up to it.
I agree that we need a new definition of the role and purpose of the nationalised industries and of the extent to which they can be allowed to continue to be a burden on the State and of the country's attitude towards the monopolistic status which some of them enjoy. I agree that we must look for some new formula if we are serious about encouraging them to be a commercial success, and that we have to give them greater commercial freedom, for example, freedom to buy in the cheapest market. This is something which should have been taken up by hon. Members opposite, but which was not.
Certainly. This is an important matter. If we agree that this is to be a commercial operation, it must be backed by decisions which enable the industry to become a commercial success.
Turning to the future of B.O.A.C., we already have a reasonable hope that things will be much better, a hope based largely on the immediately successful months which are just coming to an end and on the fact that in future the Corporation will have fewer types of aircraft and that one of them will be the world-beating VC10, which will attract a much higher load factor. There will be plenty of time between the coming into service of the VC10 and the coming into commercial operation of the supersonic Concord transport for the VC10 to have a significant role in the Corporation's future.
I know that this decision has been made by other commercial undertakings and I am certain that it is a wise decision which will not be limited to British carriers, but which will probably be followed by oveseas operators—other than Ghana Airways whom we can already welcome—who will want to cash in on the passenger appeal of the VC10.
Then there is the fact that as a result of the new appointments and the new plans, the Corporation will have a substantially revitalised commercial department with a much more realistic approach to the problems with which it is concerned. I hope that we shall see closer liaison among all the departments within the structure of the Corporation, including the pilots, who again have made representations to some hon. Members—notably on this side of the House, and correctly so—for the part which they can play in deliberations of the Corporation's policy as a whole. I hope that when he takes over Sir Giles Guthrie will give serious thought to what they have to say.
Then we can look forward to the fact that my right hon. Friend is to review traffic rights, an important consideration. I was glad that my hon. Friend dealt with this and I hope that my right hon. Friend will pay attention not only to London but to other airports as well.
I welcome the fact that there is to be no merger between B.E.A. and B.O.A.C., although I hope that we will have a strengthening of the Airlines Chairmen's Committee. The fact that both Corporations are interchanging directors and that Sir Giles Guthrie and Mr. Mill-ward know each other well already augurs well for the future of B.O.A.C. We can expect to see a further streamlining of the work done in the engineering departments and I hope that the Corporation will do better than the £4 million a year improvement which is envisaged.
Finally, I am sure that we shall see a much more realistic appraisal of the Corporation's prospects, which will mean that its buying of aircraft will be more soundly based. I wish Sir Giles Guthrie every possible success in his undertaking as the Corporation's chairman and managing director. I am sure that his wide knowledge, experience and dynamic energy will soon be recognised throughout the Corporation and will bring it new hope and new spirit.
In conclusion, I welcome the White Paper, although it is not actually before us, and the decisions which it announces. My right hon. Friend has demonstrated on more than one occasion that he has the capacity to make up his mind. The country will welcome this and also the fact that he has had the courage in this case to stand by his convictions.
Mr. Austen Alba:
In the middle of his party political speech the hon. Member for Bournemouth, West (Sir J. Eden) seemed to have forgotten that at the beginning of his speech he had given considerable praise to British European Airways, also a nationalised industry. He also forgot that all the fuel and power industries, coal, electricity and gas, were now not only highly successful and profitable, but generally admitted to be among the best-managed industries in the country, on every possible criterion.
When he was referring to the heavy burden on the taxpayer, the hon. Member forgot that for every £1 which the British Overseas Airways Corporation receives from the British taxpayer, the British aircraft manufacturing industry probably has had at least £10. When he got to the more interesting part of his speech and dealt with the relationship between Government and industry, private and public, I thought that he might come to a more reasonable and less party partisan conclusion.
I do not want to make a long speech about the merits of demerits of the management of B.O.A.C., because we have no means of judging. For more than 10 years the House of Commons has had a Select Committee on the Nationalised Industries. In 1959, it produced a very full report on the airlines, following that up in 1962 with a short report which to some extent dealt with what had happened to its recommendations and which brought the statistics up to date.
In what way did the report which the Minister received from the consultants, sometimes referred to as the Corbett Committee, differ from the Report of the Select Committee? The only matter into which the Select Committee did not go and with which Mr. Corbett and his associates dealt was that of financial control, but there is little doubt that all the other conclusions of the Corbett Committee were similar to those of the Select Committee.
We do not know, because we have not seen it, the Corbett Report, whether the White Paper on the financial problems of B.O.A.C. was based on the Corbett Report. If it was, then it is interesting to note that two of its conclusions, on engineering and maintenance, and on sales, advertising and publicity, were very similar to those of the Select Committee.
In 1959, the Select Committee had drawn attention to the excessive engineering costs of the Corporation, but in 1962 it showed how those had been substantially reduced and were continually coming down. There is nothing in the White Paper or in the Corbett Report, presumably, of which the Select Committee has not already disposed.
I come to another matter not mentioned in the White Paper, and this is the crux of the matter. Did the Corbett Report make any comments on the relationships between the Minister and the board? Did it make any references to interference by the Minister in the
policy of the board through the exercise of powers without statutory authority? Here I refer to what the Select Committee said in 1959. I must weary the House by reading what it said in paragraph 217, since it is of vital importance:
These unofficial powers comprise a formidable collection. Thus, although the Minister has no express statutory control over the Corporations'capital expenditure, they always seek his approval (and that of the Treasury) for orders of aircraft, and these amount to 80 per cent, of their total capital expenditure. They have agreed not to open new routes without the Minister's consent. They fly on various routes, domestic and international, because he asks them to, and they lose money in the process. They seek his approval for all fares and rates on non-international routes. They refrain, at his wish, from keeping aircraft specifically available for charter work. They come to him for permission before creating or investing in a subsidiary company, and, in effect, get his authority before they dispose of such an investment.
In paragraph 218, the Committee further said:
But, faced with the total extent of the Minister's non-statutory powers,they"—
that is, the Committee—
are bound to ask if these do not add up to a degree of control far in excess of that envisaged by the statutes under which B.O.A.C. and B.E.A. were created, and so lead to an undesirable diminution in the authority of the Chairmen and Boards of the Corporations, and in their feeling of responsibility.
I remind the House that this was a Select Committee with a Conservative majority. If anyone is responsible for lack of firm management in these airlines, particularly B.O.A.C., responsibility must rest on the right hon. Gentleman and his predecessors. If I have any criticism of members of the Board of B.O.A.C. it is that they have not been strong enough in standing up to Ministers of Aviation and insisting that a Minister, if he wants to exercise these powers, must do so by direction or, if necessary, by asking for legislation from this House.
The reply to the 1959 Report was given by the then Minister in the usual way in which replies to Select Committee reports are given. He did not really answer this question. In so far as there was a reply it occurs in paragraph 5 of the Special Report of the Select Committee in 1960. Referring to the problem
of aircraft orders and investment, the reply said:
… it is considered that an adequate degree of control over these important capital transactions must continue to be a responsibility of the Minister …
Later, the Minister said:
Investments in subsidiary companies may also have political implications.
In other words, the Minister was refusing the Select Committee's recommendations except in so far as he agreed that some further assistance—the subsidy to which I was referring—should be given to the aircraft industry in the development of aircraft which the Minister wished the British airlines to purchase. The Corporations had complained of the cost of development and said that it was too much for them, the Committee had recommended the Minister to bear the cost and, to some extent, that was done.
In the last Annual Report of B.O.A.C. Sir Matthew Slattery says that during 1962 he raised a number of issues with Ministers of Aviation following the discussions which took place after publication of the White Paper on the Financial and Economic Obligations of the Nationalised Industries. These issues were concerned, in the main, with capital structure and the extent to which the Corporations had international commitments of a national and noncommercial kind and how these objectives were to be reconciled with its general economic aims.
Again, these were matters to which the Select Committee had referred in 1959, but to which we never got a satisfactory answer. It is impossible to debate this matter realistically while the information on which it can be debated is in the Government's possession and is withheld from the House. What is the point of having a Select Committee if the Government are unwilling to explain whether these industries are doing what the Committee has recommended they should do?
What did the Corbett Report say about relations between the Ministers and the boards? The conclusion I come to—and I ask the right hon. Gentleman to consider this seriously—is that he should refer the Corbett Report to the Select Committee. If part of the evidence given to Mr. Corbett was confidential, this would, as usual, be taken into account by the Committee. The point is, however, that the Committee would be able to report to this House on any differences between the Corbett Report and its own conclusions and the House would be better able to debate the matter.
There seems to be some sort of change in the attitude on the part of Ministers towards the Select Committee and the relationship between Ministers and the House. Last Friday, I drew attention to this. The Minister of Power, when questioned recently about the Lurgi process and about the structure of the gas industry, said that he would make his findings on the Lurgi process known to the Select Committee, and in the case of the question of structure said:
I shall soon tell the Select Committee …of my proposals for dealing with the questions it raised, but any change in the industry's present structure will need legislation."—[OFFICIAL REPORT, 20th May, 1963; Vol. 678, c. 11.]
It has always been the practice for Ministers concerned with the nationalised industries to make a formal reply once to the Select Committee's recommendations. The same process is followed with the Estimates Committee. But it has never been known for Ministers' subsequent communications to this House to go through the Select Committee. If, however, that is to be the case in future this isa very good example where it should be done. In fact, such a procedure might help to get the Minister out of his present difficulty.
I suggest that this is a way out of the difficulty for the Minister of Aviation. He could refer the Corbett Report to the Select Committee which could then consider the matter and report its findings to the House. For far too long we have been unable to debate many serious and important matters involving for example industry, scientific matters and defence because the Government keep back information which should be in possession of the House. This makes serious debate much more difficult.
That was a long time ago and I was not here for part of the period. But if that was the case I am sure that it was wrong and that the House should have been told.
But it is clear that there is far too much secrecy about many of the matters which we now discuss and that the House is far too ill-informed on matters on which it should be properly informed, matters which, very often, are of no party political content whatever and concern scientific policy or something of that sort. Both sides of the House should join in a demand that Governments, of whatever complexion, should better inform the House. The Minister could give a lead in this matter by following the course I have suggested.
I agree that Select Committees are very important to the House and should be fully informed, but the hon. Member for Edmonton (Mr. Albu) makes a false point in relating his argument to the Corbett Report. If information was given by members of the B.O.A.C. staff in confidence to Mr. Corbett, there would be no justification for the Minister supplying it to the Select Committee. But I entirely support the hon. Member in his idea that more information should be provided to the House through the Select Committees. Indeed, I would like to see an extension of the system of Select Committees applied, for example, to scientific policy.
Once again, the House meets to consider a Bill to extend the borrowing powers of the two Airways Corporations. I took part in the proceedings of the 1962 Act and to me these debates always have a rather desperate air, without finality, the difference this time being, perhaps, that we are recording the departure of some members of both boards. I wish to join in the tributes to Lord Douglas of Kirtleside. Let it be said about him that he always had the national interest at heart, but had a real flair for commercial operation of aircraft, and it may be, with the recent improvement in B.E.A. figures, that what might have been the result had he been chairman of B.O.A.C. is an interesting speculation. For 15 years he has been the most successful Chairman of an Airways Corporation which has met increasing competition.
I was very confused by the speech of the hon. Member for Newton (Mr. Lee). I could not find that he was enunciating any policy on behalf of the Opposition Front Bench. Would he have written off the total deficit of £80 million? I could not understand his policy there, if there was one. We expect the Opposition Front Bench to have some constructive policy about these problems. It is a very serious matter when a nationalised industry has a total accumulated deficit of £80 million.
I do not think that that is a fair point. The White Paper and other reports have given us the total accumulated deficit. I think that we know the facts. We know that for 1962–63 the deficit was £13 million and that there might be a small surplus for next year.
The hon. Member for Newton said that the Minister was afraid that B.O.A.C. would get back to profitability since he wished to maintain his grip on the board. I thought that was a frivolous statement. I should think that the one thing that the Minister is praying for is that B.O.A.C. will get back to profiability, because he has been having a hard time over the whole thing.
The hon. Member also said that the management should have been shown the White Paper, but I am sure that we would have had a bigger row and have had a great many more hon. Members opposite on their feet if any such thing had been done.
I am glad to see that there are signs of financial recovery in B.O.A.C. and I join in the remarks made about Sir Matthew Slattery and Sir Basil Small-peice in this connection. They have made a considerable contribution to the airline industry and we must remember that.
The volume of traffic in 1962 and 1963, according to B.O.A.C.'s report, showed a healthy growth, but surely it would be over-optimistic to suggest that the operating results of B.O.A.C.at present show that it is anywhere near being out of the wood. The report refers to the well known reputation for safety enjoyed by B.O.A.C. and I congratulate the Corporation on its record in this respect. Nevertheless, it still has a deficit of £80 million and that is something we should be tackling now. When a nationalised industry has built up a crippling deficit, should that deficit be automatically written off?
No hon. Member, certainly no hon. Member opposite, has answered that question. The answer, I suggest, is that no arrangements for writing it off should be made until the new chairman, Sir Giles Guthrie, has been able to put forward a financial plan. Sir Giles is a financial expert, and he is, surely, the one person that B.O.A.C. badly needs in its present situation.
No ordinary commercial enterprise with a record like B.O.A.C. could have survived at all. Let us remember that when we have arguments, rather useless arguments, I think, about nationalisation and private enterprise in this connection.
In my view, it is the job not only of my right hon. Friend and the board to see that B.O.A.C. is efficient; it is the job also of Parliament, through its Select Committees and in other ways, to ensure that the Corporation is efficient.
Surely, the hon. Gentleman will agree that a private enterprise has the opportunity of doing what B.O.A.C. could not do, was not permitted to do, namely, pass its dividend when in difficult times?
The cost is borne by the shareholders and not by the taxpayers. That is what the hon. Gentleman really means.
I have said that it is the job of Parliament also to see that B.O.A.C. is efficient. It is clear that the discussions about personalities which started in some quarters of the House are not likely to solve the ultimate problem. They may be very exciting to people outside the House, but they are no help in solving the problem of this large deficit and the crippling operating losses. The hon. Member for Glasgow, Govan (Mr. Rankin) is right in this, that there is a difference between B.O.A.C. as now constituted and a profit-making airline in that the Corporation has to pay interest on all its borrowings from the Government; but if that were the only cause, or even the main cause, of its troubles, I should see more force in the argument. In fact, it is not.
In the debate last year, if I may quote what I said then, I pointed out that
If the Corporation has been relieved during the years of its existence of interest on its accumulated deficit, the total deficit would still be more than £55 million, and, therefore, this does not really answer the very difficult problem of reorganisation and financing which we face."—[OFFICIAL REPORT, 6th Nov. 1962; Vol. 666, c. 854.]
If the payment of Government interest on borrowings were all that made the Corporation different from a private organisation, the position would be very different today. Unfortunately, of course, it is not so. There are other reasons which have added to the total accumulated deficit of over £80 million.
I do not think that anyone in the House or outside can lay at the door of any Minister the blame for the major commercial mistakes which, undoubtedly, have been made at various times in the past 16 years and simply echo the charge of Sir Matthew Slattery that having to pay interest on loans is crazy. After all, most people have to do that anyway. What is crazy is for Parliament to allow a nationalised board to make these operating losses, and Parliament is now, in this debate, making very clear to my right hon. Friend and the board that they should not continue and that things must be thoroughly reorganised.
I accept what the hon. Gentleman says. For example, the Corporation badly miscalculated capacity on the Atlantic route in 1961–62. If the hon. Gentleman will read my speech in the debate on 6th November, 1962, he will find the whole thing fully and accurately set out, not just quoting from a leader in Flight, as some speakers opposite today have done.
We are trying to prevent these things happening, and there must clearly be a reorganisation within B.O.A.C. for greater efficiency and a plan for putting the Corporation on to an economic footing. This is essential. I very much hope that Sir Giles Guthrie will collect round him a strong team for this purpose. This is as big a job as Dr. Beeching's, and just as difficult in many respects. I hope that Sir Giles will be able to dispel the present unhappy atmosphere in B.O.A.C., to which many hon. Members have referred, even if it does mean taking strong measures.
Other world airlines have had their losses and have recovered. Since the hon. Member for Nuneaton (Mr. Bowles) is interested in this, I refer him again to my speech of 6th November last year. T.W.A. lost nearly £14 million, and it has recovered by a very rapid administrative shake-up. S.A.S. lost £6 million in two years. The shake-up may have to be big.
Now, it would not be fair to blame Sir Matthew Slattery for things which happened when he was not in office. The fact that the Britannias were two and a half years late and that B.O.A.C. miscalculated their life accounted, we were told today by the Parliamentary Secretary, for the loss of over £30 million. Those events were certainly not his fault and he should not be blamed on that account. That was a very sad episode for the aircraft industry, but it may well have been that B.O.A.C. made mistakes at that time, in 1957, in having too many aircraft on hand, even apart from the Britannias. This may well have been so even before the Britannias went into service. Let us hope that no similar error of judgment will be made in regard to the VC10.
The hon. Gentleman should not make an unqualified statement like that. In those days, B.O.A.C.'s load factors were nearly 60 per cent., whereas now they are well under 50 per cent.
It may be that B.O.A.C. had not seen, as we have seen from subsequent history, that it had too many aircraft on order at that time. That is all I am saying, and I do not think that it is an unfair comment.
What is the cause of the balance of this enormous deficit, especially the net increase of £12.9 million since the House last debated the Report and Accounts? It is partly the interest payments, and I suggest that no settlement of this issue should be made until Sir Giles Guthrie has had time to make his report. An argument can be made about these interest payments, that they distort the Corporation's account, and the future system will have to be considered in that connection, but I do not think that anyone suggests that there should be immediate relief without consideration of what the future financial structure of the Corporation is to be, and this is something which must be settled by the new board.
What is needed also is an examination of the past two trading years. These are very important. The increase in capacity has not brought an increase in traffic, and perhaps the new management will judge capacity better than the old management, as I was suggesting when the hon. Member for Orpington (Mr. Lubbock) interrupted. So often, the board seems to have found itself unprepared for greater competition, and this certainly is not something for which my right hon. Friend can be blamed. Undoubtedly, there have been errors in this respect.
I am sure that there is a great future for the Corporation if it gets its financial structure right. I am sure, also, that Sir Giles Guthrie has the experience to judge what the best financial structure should be. I hope that he will concern himself principally with the long-term objectives of B.O.A.C. and be particularly careful about the surplus of aircraft when the VC10 comes into operation. We do not want another Britannia crisis in the next year or so.
The short-term job is to regain or recreate the morale of the staff. I hope that Sir Giles will be able to take the lead in doing this. I welcome the proposed interchange between B.E.A. and B.O.A.C, Mr. Milward being on the B.O.A.C board. I am sure that this will be a good thing, although I should not support a merger. I wish good luck to Sir Giles Guthrie in his new job and to my right hon. Friend in the present difficult situation, which, I am sure, he is handling very well. So far, no one has put forward an alternative to the way he is adopting now.
I hope that I do not embarrass the hon. Member for Abingdon (Mr. Neave) by saying that, in comparison, at least, with what fell from the hon. Member for Bournemouth, West (Sir J. Eden), his speech was very pleasant to listen to. I agree at once that there is no benefit on either side of the House in debating the arid question of whether this particular airline shouldor should not be nationalised or the logic of the argument of the hon. Member for Bournemouth, West that, as he does not believe in nationalised airlines, we should not now propose to increase the borrowing powers of the two nationalised airlines by so many millions of pounds. It is far more appropriate to consider, as the hon. Member for Abingdon suggested, how best the two airlines, particularly B.O.A.C, can be made as profitable as possible having regard to the responsibilities which the House has put upon them and which the country expects them to carry.
Clearly, there is more involved than simply strengthening the management, which, I gather, is a diplomatic euphemism for sacking the chairman and managing director, a far less elegant phrase but much more easily understood. There is much more to it than that, and we should consider the questions before us with as much material as we have available. I regret extremely that we have not more material available, especially as what we have has been prepared at the cost of the nation for presentation to the Minister and to the House. However, we have to do what we can with what we have to try to sort out what the elements are. I believe that there are three elements. I imagine that everyone will agree about what they are, but there will be disagreement about the weight to be attached to each. The three elements are mischance, mismanagement and Ministers of State.
I take mischance first. It is clear from all the known facts, which have been dealt with many times, that there was an element of mischance. The Comet disaster was a mischance. Clearly, the delay in the delivery of the Britannias was, for the airline, a misfortune. From the figures, one can see that a large part of the deficit can be set against this element. What the proportion is, I imagine, is beyond anyone's capacity to fix, but one may say that, perhaps, something like one-third of the total deficit was attributable to one of these three elements. [An Hon. Member: "More than that."] I regret that I even suggested a very round figure. It is open to anyone to read what he likes into it. I should not take the figures as they have been given to us and ascribe all to mischance. I should want to make many inquiries from management about forecasting before I was satisfied that every penny actually incurred was unavoidably or inevitably incurred. However, there was a large element which was mischance, and if I put so much as a third on it, a very big proportion of the total is eliminated on that aspect.
I am, however, still left in anxiety about why there has been this extreme delay in writing off this figure in the amortisation appearing in the accounts. Why has the Minister not yet been able to make up his mind about writing off the loss, which, again, is dependent on the first question? After all, we have known about it all for some time. Distinguished auditors who have been engaged in both airlines cannot very well give clean certificates as were given every year without matters like this being fully looked into. I do not understand the laconic statement in paragraph 19 of the Return, The Financial Problems of B.O.A.C, that
the Corporation made no change in the rate of amortisation until it presented the accounts for 1961–62
A revaluation then took place".
I dare say that those last five words are probably right, but why did not the
revaluation take place earlier? Surely, there was a revaluation at every accounting date. One could not very well prepare the accounts without these figures being looked at. It was a matter of decision that a certain rate of amortisation should be continued or discontinued. It was a matter well known to the Ministry.
The Minister has sufficiently broad shoulders to accept the responsibility for anything that happened in his time or in the time of his predecessor. If I may, I will in future refer merely to "the Minister". This was all known to the Minister throughout. Why does the Minister come to the House via the White Paper and cast criticism on the Corporation for not having written it off before, or is he criticising the Corporation for writing it off prematurely? Why did he interfere in the form in which it was to be written off? Why did he interfere to the extent, as I gathered from my hon. Friend the Member for Newton (Mr. Lee), that because there was an argument as to whether it was to be done in one document or another he said that it was not to be written off at all? This is a fantastic situation. I should almost have thought that the Parliamentary Secretary had got it wrong if I were not sure that he could not get anything at all wrong. The answer he gave to an intervention from this side of the House sounded extraordinary; because somebody wanted it written off in the profit and loss account and somebody else wanted it written off in the balance sheet, therefore it should not be written off at all. Which document it is written off in does not make two hoots of difference, because the profit or loss goes to the balance sheet anyway.
I am dwelling on this, fully recognising that it is past history, because it bears on what I think is the fundamental point of all this. Although the Minister in the finality says, "We must run this as a commercial corporation", the last thing he wants to do is to give it the freedom to do so. There is more than an element of politics in regard to his decision on amortisation and writing off. The hon. Member for Abingdon said that no case had been made out for writing this off finally and that it ought to wait until a new board had reconsidered it and decided whether it should be written off. I would have told the hon. Member for Abingdon, if he were in his place, that I have little hesitation in saying that any new board coming in and taking over the responsibility for this enormous loan and the charge on overheads that it represents will undoubtedly produce a first-class case for writing off this deficit immediately, if not before that.
We are only repeating history, because we have had a new board. We had a new board in the form of a new chairman. The new chairman put in his plan. Why was not that taken as a satisfactory situation—a new chairman and a new plan, put before the Minister with the request in clear and telling terms, I think I can say, that it should be written off? It was not written off. We must wait until yet a further change in the board takes place and a further plan is put forward.
I find no convincing argument in this. As everybody knows, getting rid of the problems of overheads, to put it in accounting terms, getting rid of the weight of guilt, to put it in psychiatric terms, being forgiven, to put it in religious terms—whichever way one looks at it—it is a first principle of sound management that one should not be faced for ever with the burdens of the past over which one has no control when one is being encouraged to tackle a new situation. This House would never say to anybody, certainly not to a nationalised industry—"Go ahead. Lose as much money as you like in the future and we will always make up your deficit."That is not the way we behave. That is not the way boards of nationalised industries, responsible men, expect us to behave.
To say that this amount must not be written off until they have satisfied themselves about the future, about profitability, and so on, is, I repeat, nonsense, and badly argued nonsense, because we have had it all before. We know for certain that whenever there is a change of board they will always say, "We do not want to be faced with the problems of the past". I repeat that that is the mischance part, but it has a bearing on the attitude of the Minister and of the Government.
I come to the mismanagement part. Here I am in a little difficulty. None of us can refer to what is in the Corbett Report. I cannot refer to it because I do not know what is in it. The Minister cannot refer to it because, if he did, he would have to lay it on the Table, which he is not prepared to do. I can only hope, as a matter of assisting in the rules of order, that the reference to a figure of £4 million does not come out of the Corbett Report. If it does, it is a quotation from the Corbett Report and I should have thought that the Minister has placed himself in some considerable difficulty by doing that and withholding from us the Report in which the figure was arrived at.
I do not illustrate that in that way because I want to raise a technical point of order. I am not raising points of order with the Minister. I would raise them with you, Mr. Deputy-Speaker. I mention the point because I think that it illustrates the difficulty in which the Minister is placing the House. All progress was delayed for a great number of months until the Report was ready. When the Report was ready, a further delay took place while it was being considered. This debate takes place on a White Paper which is based on the Corbett Report, as everybody knows, and yet we have no chance to see the Report and discuss its essentials.
Therefore, although hon. Members opposite are asking us for our considered views, I would say—if I may refer to the fact that I happen to be an accountant—that this is the first time I have been asked to express a view on anything relating to the management of any business when the whole of the information is kept from me. I do not say that it is inconsistent with my duties as a Member of Parliament either. I will do my best. The bricks will be poor bricks, because the straw is non-existent—the straw being the Corbett Report, which we are not allowed to see.
We had the White Paper the first time when we read it. We had it a second time when the Parliamentary Secretary made his speech today. I congratulate him. I would only say that he was in slight error on paragraph 45, which contains these words:
… the results achieved by this Committee have so far proved unrewarding.
When the Parliamentary Secretary made his speech he said, "The results achieved
by this Committee have so far proved not very rewarding." The Parliamentary Secretary really must be more accurate and keep precisely to the wording, otherwise he will spoil his reputation.
I want to deal with the three items referred to in that Report. The first study dealt with sales. On the first study, apparently, B.O.A.C. gets good marks, because it has done satisfactorily. The figures reveal in a striking way that that statement needs further explanation. Of all the things that appear from the figures—I have looked carefully at these nassive operating results—the first thing that stands out a mile is that B.O.A.C. was the only—I repeat "the only"—one of all the national airlines which suffered a fall in total revenue during the period under discussion, 1961–62. Every other airline had an increase of about 10 per cent. In total it averages about 10 per cent. Each one is approximately 10 per cent. B.O.A.C. had a fall of 1 per cent.
Nobody would argue that these figures are sufficient to judge the whole situation, but they are sufficient justification for me to say that I cannot for the life of me follow the study which said that B.O.A.C.'s sales were quite satisfactorily continued, when the one figure which is outstanding in all these fifteen items covering eleven columns shows precisely the reverse. Therefore, I repeat that until we have some more information I find that conclusion very difficult to accept.
The second study was that with regard to engineering and maintenance. We were told that the Corporation should in the future be able to save £4 million. We ought to be able to accept that conclusion because it is merely the figure which the Corporation passed to the consultants. The consultants put it into their Report. What happened was that the Corporation said to the consultants, "We are developing this satisfactorily. The costs are being cut down and over the course of the next few months or few years we should cut them down by a further £4 million". The consultants said, "That is an interesting figure. We will put it in our Report". When the Minister saw the consultants' Report he said, "That is an interesting figure. I will put it in the White Paper". Now it has come out in the White Paper as a criticism of B.O.A.C. I regard this as the most utter circumlocutory nonsense.
The third study is on financial control. Nobody would claim that all accountants understand financial control. But Sir Basil Smallpeice is a chartered accountant and I can well understand that he would have every possible reason for knowing all about financial control. To criticise; the board on the grounds of lack of financial control needs explanation. It sounds very odd to me. The general criticism against my profession is that far too many of us get involved in the running of companies and being on the boards of businesses. The justification is that, being trained in these qualities, one can perhaps when coming to management make use of them in terms of financial control, particularly over a large organisation like B.O.A.C. We are here given neither reason nor indication of how this conclusion was arrived at. It is a very biting criticism—a very telling criticism, indeed—and it has to be justified to the hilt.
We are told that there was lack of financial control. I regard that statement as very odd, and would want to see it justified to the full. I cannot accept from the Minister that this is the whole story. When we have one accountant, Mr. Cortett, saying about another accountant, Sir Basil Smallpeice, "You are not doing your accountancy very well," itis a matter of judgment whether thismethod of control has been carried sufficiently far or too far. I readily appreciate that one can carry a system of financial control too far in regulating a live, dynamic business. It is something that has to be dealtwith in proportion. Those who doubt that proposition should ask their wives whether they think that married life should be based on financial control—they will soon get an answer. There are other elements in this, such as letting people get on. Sometimes one has to risk losing 10d. from the petty cash. A wider view of such a matter is taken by some accountants than by others. All I say is that this statement is not made out by the Minister saying "This is the case," and not giving us the information on which we can judge for ourselves.
There is the question of investment in local airlines. The Minister said that the implementation of this policy was unsatisfactory. This matter has been going on for fifteen years—I do not know why it should justify the discharge or resignation of the present chairman, who has been there for less than three years, and the present managing director, who has been there for seven years, or thereabouts. I do not see how the Minister can wriggle out of his responsibility when we know—and as has just been confirmed by my hon. Friend from the Select Committee's Report—that this is a matter on which he regards himself as responsible, and requires the board to consult him before making these investments.
Here, again, one would want to see an impartial report directed to whether this running into what is admittedly an unsatisfactory state resulted from bad management, unimaginative management, unwise directions by the Minister, or the like. One cannot just say, "Here is the White Paper showing that the board has made all the mistakes, and the chairman and the managing director should therefore go, and I, the Minister, should stay". I do not follow the last part of that logic at all.
We are told that the rate of expenditure was unduly optimistic. I find it difficult in principle to criticise that the rate of expenditure on aircraft was unduly optimistic. A board engaged in running a large and important business is entitled to be somewhat optimistic, though not unduly so. Here, again, I have to go on such figures and statistics as are available to me, but there is the rate at which the Corporation turned over its capital. If one buys equipment, that is part of one's capital employed, and one's revenue is what one gets from the use of the capital employed. The ratio between the two was maintained over all these years, whereas in other companies it fell. It therefore looks as though, by comparison, other companies invested far more, proportionately, than did B.O.A.C. All these matters require very considerable investigation, but we have no means of investigating them and, on the face of it, the White Paper does not provide the answers.
I have dealt with mischance and mismanagement—I now deal with Ministers of State. I am on solid ground here, because I am dealing with my own observations. What the White Paper says, through and through, is that the great difficulty that B.O.A.C. has had to put up with is increasing competition from abroad which the board was, in some cases, unable to foresee, and which has put it into a position where it has too many planes, too few passengers, too many journeys, and a variety of difficulties—competition coming from Commonwealth countries that were previously not free to run their own airlines, and so on.
Yet the fact is that the one thing that has been a consistent element in the policy of all Ministers of Aviation has been the increased internal competition put against B.O.A.C. to make it more difficult for the Corporation, and to put it into a position where it had to divert its attention from competing with other national airlines to competing with domestic private enterprise airlines, whose existence is due solely to legislation produced by Ministers and supported by hon. Members opposite. This is the kernel of the whole problem, and this is why I say that it is just not possible to ride off all this on to mistakes by B.O.A.C., and say, "Sack them, but leave me—everything is fine."
The real difficulty is that although the Minister says that this Corporation ought to be run on a purely commercial basis—and I think that this was echoed by an hon. Member opposite—he knows full well that it is not possible; that B.O.A.C. is a flag carrier, or should be a flag carrier, and has to take the rough with the smooth. It has to do certain things that are not all that profitable and that it certainly would not do if it were not compelled to do so in the national interest. If the accounts covered the whole national-interest activities instead of only B.O.A.C. operations, we would see a very different result. If all the costs incurred in the national interest were taken out of the profit-and-loss account, we would find a very different story.
One knows that, as a flag carrier, a nationalised Corporation has to do a variety of these things and, as I say, carry the rough with the smooth. But what the Minister's attitude, and the political attitude on the other side of the House, favours is that there should be created private-enterprise firms, and that there should be hived off to those private-enterprise firms the smooth—[HON. MEMBERS: "No."]—oh, yes—so that the policy would then be that the nationalised Corporation has to carry the rough with the smooth while the private-enterprise firm has the smooth only.
That is not a possible policy. It is this muddle, this realisation on the part of the Minister that he is responsible for a nationalised organisation but, at the same time, wants to encourage free enterprise, that has caused a lot of the trouble and lack of clear policy directive. We cannot have pure commercial development, and it is nonsense for the Minister to say that we can. If he wants to carry on on the theory that we can have a pure commercial attitude if only we segregate everything that is not commercial, there will be every day a whole host of activities to be separately dealt with and put back to the Minister as being his concern.
The first cause of criticism of the Ministry is this lack of policy, and the second is the lack of a forward plan, which I have frequently referred to. I have recently seen, and the Minister has no doubt seen, the report of a symposium held at Cranfield College in October. It very strongly criticised the Government for lack of plan, for vacillation and, particularly, for lack of planning for five years ahead, or what they call the period of engineering gestation, which we all recognise is a very much longer period than the normal financial budgeting periods to which we are accustomed. These are the reasons why, in short, there would seem to me, on the lack of information available, to be some grounds for criticism both of the management and the Ministry, although there was some element of mischance.
We should get this in proportion. The hon. Member for Abingdon referred to the operating losses. If we are talking about operating results they are, of course, operating profits. In page 10 of the document we see that over the period involved the total figure of operating surpluses or deficits was an operating surplus of £14.3 million, in regard to which all sorts of other items were taken into account to change it into a deficit of £80 million. Nevertheless, there was an operating surplus. That is the sort of proportion we have to look at.
I am saying that although there was an element: of mischance there is an element, it seems to me, of unhappy management and, very distinctly, an element of Government interference for which the Government are not prepared to accept the responsibility. I agree with hon. Members opposite that, of course, a Minister has to interest himself in nationalised Corporations, but why does the Minister think it right that he should suggest to a Corporation what it should do, or tell it what it should do, and then not stand on his own feet and take the responsibility for the result?
If things turn out well, credit to the Minister. If things turn out badly, no credit to the Minister for the kind of thinking that accompanied his interference. As we must always have a Minister taking a share in consulting and co-operating with nationalised Corporations we shall always need a Minister who is prepared to take his share of the responsibility. The right hon. Gentleman has not taken the share. I suspect that the Corbett Report would throw some light on this, but it has been kept away from us.
The Report might indicate to what extent the remaining loss was the responsibility of the Corporation, and to what extent it was due to ill-advised interference by the Minister, but we are not given that Report. I know that the White Paper starts off with a few kind words about the chairman and the managing director. That is the sort of thing we might expect. We can disregard that as "Slattery flattery" and come down to the essence of the White Paper which is a criticism of the managing director and the chairman and no criticism of the Minister himself.
The Minister is a fair sort of person. Why does he not accept responsibility? Why does he not resign, too? Is there some difficulty about the figure of compensation in his case? Is not that as easily settled? I will willingly offer the right hon. Gentleman my services if that would help. I have negotiated this sort of thing many times in the past. I do not know what the rules of the House are about this, but the Minister might consider it. All I say is that it simply does not solve problems by the Minister sticking firmly, casting all the criticism on the board and trying to solve the problem by what he calls strengthening the management.
The right hon. Gentleman has certainly united the board. Its members are united, everyone of them, in opposition to the Minister, as far as I can see. I do not know what the right hon. Gentleman will say this evening about the present state of play on resignations. I do not know why he was not courteous enough to start the debate and give us the information which the Parliamentary Secretary did not, and said he could not, give. I do not know why the right hon. Gentleman wanted to hide behind the Parliamentary Secretary and tell him to make a long dreary speech to get the atmosphere down. Why did the right hon. Gentleman not tell us at the start instead of making us wait until the end when we have no chance of replying? If we had had all the information we might have got somewhere. As it is, we are left with the conclusion that the difficulties we want to solve cannot be solved, because unless we can analyse them we are totally unable to deal with them. Public anxiety is not allayed in this way. It is increased, and there are more and more resignations.
The Minister may keep his speech until the end of the debate, but he will not deny that the newspapers are getting this matter into the headlines day after day and the position is getting worse. The morale of B.O.A.C. is at its lowest. This is the Minister's achivement. He has united the board in criticism against him, and he has almost utterly destroyed the morale of that organisation. It is for these reasons that I think the right hon. Gentleman is to be highly criticised.
I think that all reasonable hon. Members would reject the accusation made by the hon. Member for Gloucester (Mr. Diamond) that my right hon. Friend the Minister of Aviation was sheltering for an ignoble purpose behind the Parliamentary Secretary. Those of us who know my right hon. Friend, on whatever side of the House we may sit, would wish in calmer moments to withdraw that unnecessary and inaccurate description of him.
The hon. Member for Gloucester again raised certain matters about the relationship between the independent companies and the Corporations. I should like to refer to that later. In the meantime, I take up his remarks and those of the hon. Member for Newton (Mr. Lee) on the Corbett Report and its secrecy or otherwise. It seems to me that this is a storm in a teacup and that the House of Commons is making unnecessarily heavy weather in this tiny teacup. If facts are supplied in confidence by someone who is carrying out an investigation on behalf of the Government it would be a breach of good faith for a Minister to disclose the contents of that document. It is unnecessary waste of time to talk about the report any further.
The hon. Member for Newton spoke about certain passages in an earlier B.O.A.C. report and about the efficiency or otherwise of the British aircraft industry. Although I am not a member of the industry in any shape or form, I resent these snide, sniping comments which can do no more than harm the sales efforts of the British aircraft companies which are struggling in the desperately competitive world in which we live. There are times and places for making comments of this kind, and we should be conscious of the impact which our words may have on the sale of British aircraft. Judging from the speeches of hon. and right hon. Members opposite, the initials S.S.T. should be recoined not to represent "supersonic transport" but "social service transport". They seem to think that the right thing to do is to write off all moneys and forgive past sins.
The hon. Member for Newton also raised the question of conversations which are alleged to have taken place between B.O.A.C. and one of the independent airlines. I know little of the details, but the hon. Member seemed to have a great deal of information, gleaned from I know not where. It would be very nice of the hon. Member to disclose how a record of this confidential discussion on the B.O.A.C. board came into his hands. If the hon. Member is willing to intervene I am willing to give way to give him the opportunity, but if he is not willing to disclose how he came across this information, presumably confidential to the board, I begin to have suspicions about the behaviour of the board in these matters in trying to leak things which would be difficult for the Minister.
In any case, if conversations took place, as I believe on the initiative of Sir Matthew Slattery, I welcome them because it seems to me that this is just the sort of way in which the Corporations and the independents can and should work. They should see whether they have any interests which they can share and how they can help each other on various routes and act as assistants to one another rather than act on the old terrible basis, which has been one of the crashing bores of the House of Commons for the past ten years, of arguing out the battle between the independents and the Corporations. I hope that they will continue to have the sense to discuss and work out problems together.
Although this is a Second Reading debate on the Bill, what we are really discussing is the reorganisation of B.O.A.C.
The question which is fundamental to the whole matter is how we can restore the efficiency and morale of this Corporation. The position in the past is now best forgotten. We should send our good wishes to Sir Giles Guthrie in his task of using the extra £25 million which I assume we shall give him, though in my view we shall give it very grudgingly. As my hon. Friend the Member for Bournemouth, West (Sir J. Eden) has said, we have to accept that losses will be greater in future before they begin to decline. Therefore, I suppose that, regrettably, this money must be voted.
I wonder whether the Minister could give us some indication of how soon Sir Giles Guthrie will be able to conduct his investigation and come to conclusions. The White Paper refers to 12 months. I hope that that is an outside limit and that remedial action will be taken on certain fronts well inside that period, if not immediately. There are certain matters, such as the method of communication inside the Corporation and the efficiency of the engineering base, which I believe should be looked at right away. At the end of the day, when we have the plan, we should decide what to do about the £80 million plus deficit. However, it would be utterly wrong for Parliament even to contemplate writing off this loss until we have a guarantee of better performance. This must be the "pro" for which we find the "quids" later on.
I welcome the Minister's refusal to merge the two Corporations. This may be a reasonable policy at a later stage, although frankly I have my doubts about it. I think that there is a conflict of interest between a short-haul undertaking and a long-haul Corporation. I cannot see how they can be merged. If comparisons are made, as happened in the Daily Express, with the amalgamation of British South American with B.O.A.C., I should say that that might have been a reasonable merger because it was a merger of similar long-haul operations. To merge with a short-haul undertaking would create greater difficulties than have to be solved.
I welcome the cross-posting of chairmen. This is the sort of ad hoc, step-by-step operation which we will have to carry out in finding solutions to B.O.A.C.'s problems.
Having said all this, there is surely some responsibility on the board for the accumulated loss of £80 million. One cannot, as hon. Members opposite appear to do—I will not put it higher than that—say that there is no responsibility on the board. Of course mere must be some. The White Paper shows this fairly clearly.
I mentioned the question of internal organisation of B.O.A.C. There are two things which need to be improved—one, lateral consultation and the other vertical communication of ideas, through the belt of top executive management, to the board. One thinks, for example, of the commercial department. Even today, in the shadow of this debate, with B.O.A.C. being attacked left, right and centre and criticised from most quarters, it is launching a mammoth advertising campaign. Is this quite the right moment to do it? Might it not have been better, in the commercial interests of the Corporation, to have held up an advertising campaign of this nature for two or three weeks until the present political disagreement had blown over?
Would it not have been better, in terms of internal organisation,if some way could have been found to consult more accurately and actively the views of pilots? The hon. Member for Gloucester referred to the fact that there have been conversations on both sides of the House on these matters. I am frankly astounded by the powder keg of views which the pilots hold which appear to have no expression upwards at all. [Hon. MEMBERS: "Hear, hear."] Hon. Members opposite agree. In so doing they are commenting adversely on the present board.
The hon. Member says, "And the Minister", but this is something for which the board is responsible. If the board is not responsible, it should be changed, and I trust that my right hon. Friend still has a few resignations in hand.
I turn to the question of financial policy and amortisation. What is the Holy Writ of seven years? The amortisation policy of the Corporations has been suspect for some time. Surely they should have had a better commercial view on how to handle this matter.
Then there is the question of the engineering base. The figure of £4 million is mentioned in the White Paper. It may be that this is an accurate figure, but hon. Members on both sides know that we have had considerable doubts about the efficiency of the engineering base for a long time. Perhaps the Minister has had doubts at various times, whoever he may have been. But surely the B.O.A.C. board should have known of these things and done something about them. If this is a question of saving £4 million, it is £4 million, not over a long period, but each year. It would be a great asset to those of us who have to vote the money if we could get an understand-taking that this saving will be carried out.
I come to the load factors of B.O.A.C. and world traffic. I suppose that hon. Members have seen the same figures that I have seen, brought together very conveniently by the British Air Line Pilots Association from the annual reports of I.A.T.A. and B.O.A.C. Whether one talks of the overall load factor or the passenger load factor, both these sets of figures show B.O.A.C. in a worse light than is the average case for world traffic. This is unfortunate—[An HON. MEMBER: "Very superficial."] The hon. Member says, "Very superficial", but £80 million is not a very superficial figure.
These figures are highly regrettable. The hon. Member for Gloucester fairly said that some of this is mischance and some of it miscalculation. We cannot, perhaps, always avoid mischance, but we should try to avoid miscalculation. As has been said from both sides of the House, a number of mistakes have been made by B.O.A.C.
I hope that my right hon. Friend, in replying to the debate, will indicate that at this very moment B.O.A.C.'s load factors are improving, for the figures which we have been talking about, certainly those in the B.O.A.C. Annual Report, relate only to the year ending 31st March. I hope that my right hon. Friend will give us some more up-to-date figures. If he can, and if he can assure us that Sir Giles Guthrie will conduct his review within the 12-month limit and will carry out certain acts immediately inside that period, I think that, in voting this financial cushion, we can look with some degree of confidence to the Corporation and hope that under inspired and new leadership it will carve out a brighter future in association with other British airlines in the international field.
I agree with some of the things that the hon. Member for Sunderland, South (Mr. P. Williams) said. With others I disagree. I agreed with him when he said that greater consideration should be given to the views and experience of the pilots. I should be glad if he would join me in supporting the view of the pilots that their experience might be best used on the B.O.A.C. board, because, after all, they are the people doing the contact work, as it were, which those in positions of authority at London Airport simply cannot undertake.
I disagree with the hon. Member's view that the Corbett Report is simply a storm in a teacup. The whole of this debate is about the Corbett Report, and the reason that the Minister decided to call in the help of Mr. Corbett was, as he said in the early part of this year—I think that it was at Question Time, or during a debate in the spring— that the situation of B.O.A.C., financially and in every other way, demanded a close inquiry.
My recollection is that on that occasion I asked the Minister whether the Corbett Report would be made available to the House. His reply, which was perhaps unguarded at that time, led me to believe that he intended to make the Corbett Report available to the House. Later, in reply to another Question, he qualified that statement and pointed out that the Report would be made to him and would not be available to hon. Members. In doing that, he robbed the debate of a good deal of its importance, because if we do not know the terms of the Report then it is almost impossible for us to deal sensibly and effectively with what the Government propose to do.
The hon. Member for Sunderland, South went on to state that the Corporations and the independent airlines should work together. The introduction of the word "work" at that point to describe the relationship between the Corporation and the independent airlines is new because the term which was used from the introduction of the Civil Aviation (Licensing) Act was "compete"—and that is what the Conservatives want. The hon. Member for Bournemouth, West (Sir J. Eden) put it very well, and I will comment on what he said. But the hon. Member for Sunderland, South said that he wanted them to work together, when he was in fact talking about competition.
As a result of Government efforts, we have the absurd situation at Renfrew Airport in which a B.E.A. aircraft leaves at 7.30 a.m. and at the same time a Cunard Eagle aircraft leaves. That is the outcome of the system advocated by the hon. Member, who was a member of the Committee which put the Civil Aviation (Licensing) Act on to the Statute. Book, and it is the system which he advocates now. It does no good to B.E.A. or to Cunard Eagle, because in order to fly those aircraft Cunard Eagle have to subsidise them by all sorts of methods which the hon. Member would vigorously condemn if they were used by B.E.A.
The failure of the Licensing Board is that it has licensed far too few flights for Cunard Eagle. It has given Cunard Eagle a licence to lose money instead of a licence to make money.
That is an outcome of the system which the hon. Member supported and still supports and which is supported by the hon. Member for Bournemouth, West. Competition in air services for a limited and relatively small percentage of the travelling public can result only in losses from those who enter the service to compete with the existing operators. This is one reason why B.O.A.C. is in this present situation.
They are flying to London. The largest part of the passenger load is on the flight to London.
The aim of this system is to hurt the nationalised corporations because, as the hon. Member for Bournemouth, West made clear, he does not believe in nationalisation. He put his finger on the crucial issue, which is that the Conservatives are fundamentally opposed to the concept of a nationalised service and are out to do their best to destroy it.
The hon. Member for Sunderland, South said, "Do not write off the deficit until we have the financial plan". It could more sensibly be said that there will be no financial plan until the deficit is written off. Nobody knows that better than the Minister. If Mr. Corbett were free to loosen his tongue, or if we had the chance: to read his Report, we should know that he said that the deficit must be written off. I prophesy that before the end of the present Session, before next summer, the deficit will be written off, whether or not we have from Mr. Corbett a financial plan.
The hon. Member for Sunderland, South referred to the fact that there must be some responsibility on the board for the deficit or £80 million. I do not think that any of my hon. Friends has for one moment made a statement to the contrary. The board cannot be rid of some responsibility for the creation of this debt. If nothing else, there is the responsibility of acquiescence in the policy of Governments which was basically responsible for the creation of the debt.
The hon. Member cast some suspicion on the way in which the London engineering base was being worked..My mind shot back to the opposition which I conducted in the House against the transfer of the Renfrew base to London Airport. In that opposition I was backed by the trade unions in Scotland, who were concerned that it would not be an economic success and thought it inadvisable for that reason to make the transfer. But now the Conservative Party, who put the change into operation, and carried it through by their majority in the House, are complaining that the airport to which the Renfrew engineering base was transferred is a topic of suspicion to them and that its conduct ought to be closely inquired into.
I was rather amused to hear the hon. Member for Bournemouth, West wanting to forget all about past history. The one bit of history he does not want to forget is the £80 million deficit. That is one piece of history he will keep alive. However, time does not permit me to develop my argument along those lines, particularly since I must remind the House of that hon. Member's astounding statement in contradiction of his own Government's policy. He advocated that B.O.A.C. should have the right to purchase aircraft in the cheapest market. I hope that when the Minister replies tonight he will dissociate himself from such a policy, for aircraft of that type have dangers—
The hon. Member for Bournemouth, West can word it in whichever way he likes, but when he advocates the purchase of goods in the cheapest market he is looking for cheap goods. Cheap goods often represent cheap labour and cheap labour often represents danger and a lack of safety, particularly in aircraft. If the Government have courage and wisdom they will dissociate themselves from that sort of policy.
The hon. Member has twisted my words and is trying to show that I advocated the purchase of unsafe aircraft. If B.O.A.C. did that, which is idiotic nonsense, it would certainly not prove a cheap policy. This shows that the hon. Member is talking absolute nonsense and knows it.
I do not completely disagree with the hon. Member, since so much idiocy comes from him that at times it is difficult to sort it all out. I took a note of his words. He may alter them at the appropriate moment, but I still say that he advocated, in my hearing, that the policy of the Government should be to purchase aircraft in the cheapest market. He used those words. How they appear in the OFFICIAL REPORT will be a matter for his discretion. [HON. MEMBERS: "Oh."] Why not? I said that it would be a matter for his discretion.
I now turn to what has been the chief bone of contention in today's debate, the load, the deficit, which rests on the shoulders of B.O.A.C. and which we must face. If the present Government remain in power they will have to wipe out this deficit and, if they do not wipe it out, the next Labour Government will do so as soon as we get a chance. In this connection, I wish to quote some statistics published in the Aeroplane last weekend. The magazine drew attention to the interest paid on borrowings by B.O.A.C. In 1948–49, the Corporation paid £490,000 on £22 million of money that had been borrowed. In 1962–63, the Corporation, on borrowings of £172 million, paid interest of £77–7 million.
I am quoting the figure published. If the decimal point is in the wrong place the figures still show that on borrowings of £22 million in 1948–49 and borrowings of £172 million in 1962–63 the Corporation has been faced with increases in interest payments from less than £½ million to nearly £8 million—that is, even if the decimal point is in the wrong place. It represents a tremendous increase in the financial commitments of the Corporation and whatever happens—whether or not B.O.A.C. has a good year—it must go on meeting these interest payments on its earlier borrowings.
That is not all. Beyond that, B.O.A.C. must do more than make money to cover its intromissions. It is required to support the British aircraft industry, though not the aircraft industries outside this country. It is required to show the flag on routes which may not necessarily be economic. We were told by the Government during the proceedings on the Civil Aviation (Licensing) Act that B.O.A.C. and B.E.A. had to show the British flag and it was clear that the Government were not thinking merely in terms of money but also in terms of showing the flag on uneconomic routes Another obligation upon the Corporations is that they must help the small associated companies.
In addition to these obligations, since the war B.O.A.C. especially has had to operate unsuitable aircraft. No one will dispute that many of them were developed simply as military types. B.O.A.C. was also penalised by the Comet failures, which cost £3 million, and by the delay in bringing the Britannias into service. That, according to the White Paper, cost about £31 million. No hon. Member will hold B.O.A.C. completely blameworthy in view of these failures, particularly when one remembers the huge interest bill which, according to the White Paper, has reached the enormous total of £34.2 million on the £80 million deficit.
On top of that we have the £153 million loss incurred largely due to Government instruction, because the Corporation was told to operate certain routes which would not have been operated except for that instruction. The Kuwait service is an example.
The Parliamentary Secretary quoted from the White Paper that in the view of the Government the policy of investing in associated companies was sound, but its implementation was unsatisfactory. I interrupted the hon. Gentleman to ask why—if that were the case and the Government were aware of it—when Questions were put on the matter the Government did not make the situation clear to the questioners, of whom I was one. As a result of these things a situation, created by the Minister and the Parliamentary Secretary has been perpetuated which now calls for the special intervention of the Minister in the affairs of B.O.A.C. I do not wish again to quote the findings of the Select Committee on the position of the Minister vis-à-vis the nationalised Corporations. But I think it fair to say that at the conclusion of the recommendations the Report demanded a clear-cut division of responsibility between the Minister on the one hand and the chairmen of the Corporations on the other.
As was pointed out by my hon. Friend the Member for Edmonton (Mr. Albu) so far the Government have not answered that question. Does the statement in paragraph 51 of the Return represent their reply to a question which was put to them in the Report issued by the Select Committee on 14th May, 1959? This is what it said:
The Government think it necessary to reaffirm that the Corporation must operate as a commercial undertaking. If the national interest should appear, whether to the Corporation or to the Government, to require some departure from commercial practice, this should only be done with the agreement or at the instance of the Minister of Aviation.
Now, nearly four years later, is this the answer to the recommendation which the Select Committee on Nationalised Industries made in May, 1959? If the Minister intervenes, will he do it publicly and state when he proposes to intervene in such a situation in this House, and give the House due warning?
This business is the crux of the problem with which we are faced tonight. In the editorial of The Times today it is stated:
What the House now needs from the Minister of Aviation is a clear outline of the future role of the Corporation. Does he expect them to take a commercial view of all their operations or does he assume that, on occasions, this is bound to be overridden by other considerations—the need to fly certain routes for prestige, to buy British aircraft, or even to make unprofitable investments? If so, how should this be dealt with in the corporation's accounts?
Is the Minister proposing to say that he will answer the query put in The Times and which has been put by almost every hon. Member who has spoken from this side of the House? Will he say that to the Corporations in order to give them a chance to flourish in the future—which is the desire of hon. Members on both sides of the House? Will he relieve the trading accounts of these capital investments which ought not to appear as deficits? I hope that the Government will face this problem. We all want to see B.O.A.C. succeed and expand. We want to see B.O.A.C. buy British aircraft and carry more passengers. But at the same time this will not be possible if it has to carry this load of debt. The Times and hon. Members on this side of the House have pointed out the way. We hope that both Ministers will follow the path we are trying to show them.
I have listened to the hon. Member for Glasgow, Govan (Mr. Rankin), as I have for many years previously on the subject of the Airways Corporations, and I support what has been said by other hon. Members—that we should not enter into an arid discussion on the merits and demerits of nationalisation as it affects aviation.
But, having said that, equally I should like hon. Members opposite not to be panicstricken about the minute amount of private enterprise flying permitted under the present regulations. It is absurd to have these grievous fears of these very weak and impotent independents. The independent concerns are impotent in terms of the resources available to the Corporations. I am distressed—I say this directly to those responsible—at the attitude of mind of those running the two Corporations. It reflects an extraordinary fear of this very limited competition which they should welcome as a contribution to British commercial aviation and accept as a challenge.
I wish to deal with the issue of B.O.A.C. I have done so on a number of occasions and perhaps I have been more outspoken about the need for the reformation of this Corporation than any other hon. Member. I have listened to the defence of B.O.A.C made today by hon. Gentlemen opposite, and all the arguments designed to prove that there is nothing materially wrong with B.O.A.C. would have some foundation were it not for the fact that B.E.A. is operating under precisely the same conditions regarding status and relationship with the Government.
It is no use hon. Members opposite telling a sad tale of woe about the life of B.O.A.C. and pretending that there is no material difference between the conduct of B.O.A.C. on the one hand and B.E.A. on the other. It is not so long ago that we were looking on B.O.A.C. as the giant with all the strength and regarding B.E.A. as the lame duck. If we see this transformation, we must accept the fact that there is something materially wrong.
I do not like nationalisation for one particular reason. It is that when something goes wrong in the conduct of a nationalised industry it is usually because someone at a high level is not good enough. When he is good enough, it is very pleasant for us to say, "What a good chap so-and-so is." It is very difficult and disagreeable for any hon. Member to have to say, "X is no darned good for the job." This is one of the difficulties that we have in dealing with a nationalised industry.
The difference between success and failure in a business is often very marginal; as, indeed, it is in war. It hinges very largely upon the ability, in most cases, of one individual. This is a disagreeable fact, but it is, nevertheless, true. I think that we must face up to the fact that B.O.A.C. has not had the sort of leadership over the past seven or eight years that it ought to have had.
It is no use hon. Members opposite talking about the Minister having cast the members of the B.O.A.C. staff into a state of despondency. Let me say, with some knowledge of the B.O.A.C. staff, that it has been In a pretty bad state for quite a few years. This is not a new situation. I say to the House that there has not been on the part of the members of the B.O.A.C. board the degree of leadership that is essential for this job. That is not a severe criticism of these men, because they are probably quite able men in various other capacities and directions; but the supreme test of whether a man is fitted for leadership of an industrial corporation is his quality of leadership. If his quality of leadership is deficient, he is useless in that situation. I say that there has been inadequacy of leadership in B.O.A.C.
I have listened to the pathetic tales which have been recited from Flight International, which seems to have a vested interest in the present B.O.A.C. board, and various other journals, but I ask the House to have regard to some of the factors which cannot be denied, and which are not based on prejudice against any individual or the board.
Let us look at a few of the figures and make a comparison with Pan American. I know that these figures are not exact, but they are not as superficial as an hon. Member opposite was foolish enough to suggest. There are some figures that, I think, demand the attention of the House.
The first is that Pan American has roughly twice the amount of carrying capacity of B.O.A.C. and—we ought to consider this in comparison with it—roughly twice the earning capacity of B.O.A.C. Pan American carries nearly five times the number of passengers of B.O.A.C. But the most significant fact of all is that, despite this extraordinary difference, the number of people employed by Pan American is hardly any more than by B.O.A.C. If one takes into account that Pan American has twice the carrying capacity, and twice the revenue, and can carry five times the passengers, it is exceedingly difficult by any objective examination to believe that 22,000 employees of B.O.A.C. are strictly necessary, and even more difficult to believe that this is efficiency.
Will my hon. Friend the Member for Cheadle (Mr. Shepherd) add to that that the wage and salary structure of Pan American is incomparably higher than that of B.O.A.C.?
The wage and salary structure of Pan American is much higher. Indeed, the air is the only sphere in which the British cannot beat the rest of the world. When it comes to train fares, road haulage, or shipping, we can beat the rest of the world, but when it comes to aviation we do not seem to be able to equal the rest of the world. This calls for a serious inquiry into the efficiency with which B.O.A.C. is run. I do not want to labour the inefficiency side, because I do not think that knocking British corporations or British products is a very useful occupation for British Members of Parliament, but some of the commercial judgments seem to be extraordinarily naive.
For example, we are told that there is to be an expenditure of £2 million on publicising the VC10. This went off with a big bang last week. I am all in favour of publicising the VC10, which, I believe, will be a first-class aircraft, but, had I been faced with this judgment, and knowing that this aircraft will not come into active service until 1965—[An HON. MEMBER: "1964."] No. the hon. Gentleman always gets it wrong; there is to be a very limited service in 1964—I would have thought that normal commercial prudence, bearing in mind that there is a deficit of £80 million to make up, would have caused the Corporation to say, "We will have a running experience of the VC10. Let us see how it does, if no 'bugs' appear we can put our advertising programme into operation, and it will coincide substantially with the introduction of the aircraft into service."
But the Corporation lashes out with a tremendous campaign all over the world at once. I do not want to say that there will necessarily be "bugs" in the VC10—but it will be a very unusual aircraft if it does not have "bugs"—and it would be prudent if the expenditure of so vast a sum as £2 million had been suspended until such time as it could have made its impact because of the extension of its service and one was happily certain that no "bugs" would appear in the operation of the aircraft. This is only a small thing, but if it is indicative of the way in which the whole of these judgments are taken, it is a desperate outlook.
I would say a word about the Corbett Report. I have never liked this Report. I think that it was misconceived from the beginning. I do not think that one man, who is an accountant, was suitable to carry out this investigation. He himself found that out after he had started the job. I would have preferred that some form of publication had been arranged, though I realise the difficulties. I would certainly say that if anything was to be to the disadvantage of the British aircraft industry, or British aircraft operators, it would have been taken out of the Report. Had it been to the disadvantage of the Minister we would, of course, not have worried about it. [HON. MEMBERS: "Oh."] Politicians must give and take knocks.
Let me turn to the solution which my right hon. Friend has proposed for the Corporation. I say at once that I do not particularly like the solution, and that I have very grave doubts whether it will work. One of the things which distresses me—and I hope that it will distress the House—is that in all the years of the Corporation's existence no man has risen in the Corporation who is capable of playing a dominant part in its affairs.
This is a serious criticism of the Corporation. It seems to show to me that its management selection and training is not very good. No single man capable of running the Corporation, or carrying out the duty of a chief executive or chairman, has arisen from the ranks throughout the long period that the Corporation has been in existence. That is a severe criticism of the management itself.
Before I criticise what has been done by my right hon. Friend, perhaps I might put my solution to the House. I would have made Mr. Milward the chairman of B.O.A.C. I suspect that he would have hated it immensely, but I think that he is sufficiently good a servant of the country to have accepted it even though he would have preferred to have taken on the job of chairman of B.E.A., a promotion which I think is agreeable and acceptable to all hon. Members. I would have put him in this job because I think that that is the only way in which we could have got the transformation which would have had the impact we need and provided the leadership we require.
What do we propose to do? We propose to put Sir Giles Guthrie into the B.O.A.C. in the position of something of a gauleiter. I am not happy that he is the right choice. I have nothing against Sir Giles Guthrie. Indeed, I know very little about him. I am told that he is an excellent fellow, and this I am prepared wholeheartedly to accept. But is he the sort of man who will make the difference between failure and success in this organisation? I think that the dice are loaded very heavily against him, because he is coming into a business that he does not really know and he will have to make a dramatic transformation in a relatively short period of time. I wonder whether this is the kind of man we require.
I do not think that Sir Giles Guthrie is the sort of man that we want for this job. The great industrial wealth of this country was not created by bankers or merchant bankers, or gentlemen who were directors of the Prudential or any other of those highly agreeable semi-social activities. It was created by men of immense energy and drive who were engaged in risk-taking and who spent their lives in arduous effort. I do not think that this gentleman, however able he may be in other spheres, is qualified as a man who has had substantial experience in a trading activity.
The running of an airline corporation is an immensely competitive trading activity. I should like to see at the head of such an organisation a man who has had experience of successfully running a substantial trading or industrial activity. I do not think that we have got this. Indeed, I feel, unhappily, that we are back in the amateur stakes, and this is where B.O.A.C. has been going wrong for so long. It has been running its business against highly professional competitors with what is virtually an amateur team at the top. This just does not work because the game is too hard. It is not a game for amateurs. It is a game for hard and seasoned professionals.
I find it difficult to support the view that this will be a particularly successful choice, and I am puzzled by the fact that this gentleman is to be given the job of both managing director and chairman. I confess that I do not know the precise manner in which the respective duties of the chairman and managing director are discharged, but I can conceive this possibility that a man who has the task in this Corporation of doing the job of both chairman and managing director will have so many people reporting to him that he will have no time for serious consideration of what he really has to do.
If we put a man into the position of being charged with the special responsibility of revamping the organisation, the last thing we ought to do is to saddle him with the day-to-day work of the Corporation. I should have thought that it was obviously necessary to keep him clear of these things so tha the could devote all his time to the question of looking at the pattern of the organisation and seeing where it went wrong.
I turn now to the question of the merger. I have never been desperately keen on this, because everybody knows that size—above a certain level—is the enemy of efficiency. I think that there is a case against the merger, but I have a feeling that this case is decreasing and that we ought to be turning our minds to the acceptibility of a merger. The Minister has gone some wayby the cross-posting of these chairmen, but it could easily be nothing more than a cross-posting. There could easily be a gentleman's agreement—"This is my preserve and that is your"—and there will be no real movement of co-operation between the two organisations. If this were to happen, I would regard it as almost disastrous, because I think that there could be substantial co-operation between these two organisations.
There is much more co-operation between the B.O.A.C. and foreign airlines than there is between the B.O.A.C. and B.E.A. This is an incredible state of affairs, but it exists, and if I were to propose, as I did 10 or 12 years ago, that there ought to be some co-operation between them, I would receive a wealth of information to prove that co-operation in training, catering, sales, or engineering, is quite beyond the bounds of possibility and practicability, and that nothing whatsoever can be gained from any form of co-operation. I did not believe that 10 or 12 years ago, and I disbelieve it today. I hope that my right hon. Friend will make certain that if there is a cross-posting this is not the end of the matter. There must be practical signs of a desire on the part of these two Corporations to work together.
One of the things that distresses me about the B.O.A.C. is its extraordinarily inadequate labour relations. No corporation of this size can exist if its labour relations are not good. I do not think that anybody who knows anything about this set-up thinks that the Corporation's labour relations are good. I am not referring to the state of morale, although I emphasise that it is not possible to run a big organisation in competition with other training organisations—which is what the B.O.A.C. is doing—if it is making a whacking loss every year while other organisations are paying their way. Such a situation is destructive of morale.
Apart from the effect of loss-making on morale, not enough interest is being taken in labour relations at the top level in the Corporation. I took an eminent member of the board to lunch and talked to him about the necessity for an eminent member of the board to sit on the main joint consultation committee and take a personal interest in these affairs. It was not being done, and, as far as I know, is still not being done. It is not possible to run a big show without those at the top taking a genuine interest in the work of consultation. Unless one takes everybody with one in an organisation as big as this, there is no hope of getting the sort of result that we all want.
Are we making the Corporation commercial, and if we want it to be commercial, how should we compensate it for what might be described as noncommercial activities? I think that one has to accept that the Corporation must becommercial, for the simple reason that one cannot maintain morale in this organisation if it is competing with other airlines in the world and is making a loss while others are making a profit.
So B.O.A.C. must be run as a commercial proposition if only for the sake of the morale of the people working for it. With an organisation that is not competitive, such as the Army or the Navy, it is possible to pour lots of money in without any trouble, but in the case of a competitive organisation, such as an airline corporation, there must be parity of performance with other world operators if morale is to be maintained.
Then there is the problem of buying the kind of aircraft the Government want the airline to buy, and the question of running special services for political and other reasons. I believe that there should be some sort of compensation, although an allowance should also be made for the fact that the Corporations have a virtual monopoly in national terms. Because of that fact, they ought to carry some degree of social benefit. I should like to see this assessed. But beyond the amount which they may properly be called upon to pay because of the fact that they have a virtual national monopoly, they ought to receive some allowance from the Government.
This can be done only restrospectively in respect of the introduction of aircraft. In sales terms it would be bad to offer such an allowance in any other way. In the case of airlines being flown purely for social or political purposes, arrangements could be made right away, and I think that some arrangement of this kind should be made, to give the Corporation a fair chance.
I support the writing-off of the £80 million as soon as we have some sort of a plan. It is nonsense to carry it on, besides being discouraging to those who are trying to run the business. As soon as a valid plan has been formulated, this £80 million should be eliminated.
I hope that B.O.A.C. will now turn the corner. It has had an extremely difficult time. It needs good leadership at the top. If, by the changes proposed, we can give it that leadership, it will be of immense value to the Corporation.
The hon. Member for Cheadle (Mr. Shepherd) has made an interesting speech. I agree with his remarks about the writing off of the cumulative deficiency,
or the waiving of the interest charges on it. The hon. Member repeated what many hon. Members on both sides of the House have said, namely, that the morale of B.O.A.C. is very low. I probably know as many employees of B.O.A.C. as any other hon. Member. In my view, one of the main reasons for low morale is that many of the staff believe that the Government do not want to make a success of the Corporation. After 12 years of Conservative government hon. Members who support the Government now say that the morale of the staff is very low. That is hardly an achievement for the Government. Again, most of the £80 million deficiency has been accumulated in the years from 1951 to 1963, when the present Government or their predecessors were in full control.
There is bound to be a certain amount of repetition in this debate. The Second Reading of the Bill gives the House the opportunity to examine the Government's civil air transport policies. For 12 years they have been in full control and have had a complete majority in the House. What the industry has lacked is firm Government policy and direction. The Government have appointed members to the Board of B.O.A.C, and criticisms of those appointments have been made, by the hon. Member for Cheadle among others. I agree with him that it is a great pity that no member of the staff of B.O.A.C. who has been through all the departments has yet risen to the Board. The Government are also responsible for the Corporation's financial policies and its problems.
The Conservative Party's well-known and undisguised dislike of public ownership, even when it is essential in the interests of British civil aviation and the nation, has been a heavy handicap to the Corporations. Many of the 22.000 people who work for B.O.A.C. are most critical of Government policies. This is confirmed by the criticisms expressed by the British Air Lines Pilots' Association, which represents 1,000 pilots in B.O.A.C., and 800 in B.E.A., and by the trade unions, who represent many grades of employees of all ranks in the Corporations.
I want to deal with B.O.A.C. first. I have always maintained that it has had a more difficult operating task than has B.E.A. It has faced strong and heavy competition from international airlines, especially from America on the North Atlantic route. B.E.A. has had an easier task in Europe, although it has done a splendid job.
Hon. Members have mentioned the tragically bad luck that B.O.A.C. had with the failures of the early Comets. This, combined with the late delivery of the Britannias, caused financial losses. It is interesting to note that the White Paper states that
Had the Comet I succeeded, B.O.A.C. would have kept the lead in jet operations for some years.
Financial losses have also been caused because of pressure by the Government to fly uneconomic routes and prestige routes. B.O.A.C.'s main business is not holiday traffic. A great deal of it is business traffic. When there are world trade recessions—and we have had several between 1950 and 1963—there are falls in airlines passenger receipts. It is not so marked in the operations of European airlines as it is on world airline routes.
Again, the change from turbo-prop to jet has involved the Corporation in heavy financial losses, in selling out-of-date aircraft because of having to compete with foreign airlines on the long international routes. Independent airlines who, in some cases, do excellent work, do not have to write down the value of their aircraft. They generally operate by using second-hand aircraft which have been bought from the Corporations. But when B.O.A.C. competes with America, or France, or other countries it must have jet aircraft equal to the aircraft of those foreign airlines.
Despite all these difficulties, the Corporation has had no encouragement from the Government. It has been the Government's deliberate policy to preclude B.O.A.C. from trooping, which has seriously affected the Corporation's earning capacity, especially with its obsolete aircraft such as the Britannias and the DC7s. Each Minister, in turn, has prevented B.O.A.C. from tendering for trooping and the Corporation has been forced to sell its Britannias and DC7s at low prices to independent operators to do this work. The Minister has promised to look into this question, but so far I have not heard from him about it.
The announcement of an accountant's inquiry came in one of our civil air transport debates. The Corporation has no lack of accountants. The Corbett inquiry must be on the list of secret weapons, for we have not been allowed to see its report, nor has the Corporation, the pilots' association, or the trade unions in the industry. In common justice to those people who are closely involved, the Minister should allow them to receive the report. 'Nothing gives rise to rumours and suspicions more than secret reports.
As to the future, B.O.A.C. is one of the world's premier airlines and has a great part to play in the development of British civil air transport and British prestige throughout the world, but the Government must encourage and support the Corporation and not allow their opposition to and dislike of public ownership to delay the extra effort which is needed. I hope that the Minister will again consider writing off the accumulated deficit, or waiving the interest charges on it. That would be an encouragement to the Corporation and would raise the morale of its staff.
A new chairman, Sir Giles Guthrie, has been appointed and is to combine the duties of chairman and managing director. I do not recall having met him, but I trust that he will endeavour to raise the morale: of his staff and to work in close co-operation with them and with the trade unions and the British Air Lines Pilots' Association who could be of great assistance. I hope that he does not share the Government's dislike of public ownership, for that could be a great handicap. I wish him every success in any endeavour to maintain B.O.A.C. as a first-class world airline.
Despite the handicap of Government policy of opposition to public ownership, even where it is essential to the country's prestige, thanks to the splendid leadership of Lord Douglas of Kirtleside, a fighter in war or peace, British European Airways has made substantial profits for seven years out of eight. This year has been a golden summer for B.E.A., with a record profit of £7½million during the seven months of the summer season. During the golden months from April to October, the airline flew more than 4 million passengers a total of 1,400 million miles. In its 17 years of operation, B.E.A. has carried 40 million passengers, and I congratulate Lord Douglas and his staff and all the employees of B.E.A. on this record.
I have met the new chairman of B.E.A., Mr. Milward, on a number of occasions. He has been the airline's executive officer for a number of years, working closely with Lord Douglas. His appointment is a good one and I wish him every success, for the success of B.E.A., like that of B.O.A.C., is essential to the country.
The two Corporations carry the Union Jack. They carry the flag for Britain. I hope very much that their handicap of the Government's dislike of public ownership will not injure their growth. If a private firm does well for this country, I am pleased. The Corporations should be the instruments of national policy to build the prestige of British civil air transport, for they are a vital link for the aircraft industry's home and export markets. If the employees of B.O.A.C. and B.E.A. are given the lead, these two Corporations will do the job for Britain.
I was pleased to hear the hon. Member for Feltham (Mr. Hunter) refer to the fact that the Corporations carry the Union Jack on their aircraft. I assure him that the independent companies are proud and happy to do the same.
I am delighted to know that there is to be no Division tonight, that hon. Members opposite will not divide the House against the Bill which proposes to raise the borrowing powers of B.O.A.C. to £125 million. I join with hon. Members on both sides of the House who have said that they would like the large capital sum, now standing at £80 million, to be written off when a new and good plan for the Corporation's future is produced. I make my own position perfectly clear. I am a director of one of the independent companies: but it is perfectly clear that all hon Members, even those not interested in aviation, recognise that the industry is very risky and complicated and that profits are difficult to make, that large sums of capital expenditure are necessary to equip oneself with the propel type of aircraft and that operations generally and the problems of the industry can involve companies in enormous losses.
No one would object if I said that today we were really dealing with the enormous accumulated loss by B.O.A.C. That is the position. We are talking not about hundreds of thousands of £s, not chicken-feed, but about £80 million of public money. The public has a right to know what is going on. Losses at the present rate must not be allowed to go on.
I was referring to the hon. Member for Dunbartonshire, East, (Mr. Bence). If he had sat through the debate as long as I have, he would have learned much more than by coming in and interrupting within two minutes of his entry.
It was the Minister's duty to make an investigation of the affairs of B.O.A.C. The public interest demanded it. It was in the interests of the board of the Corporation, which had been subjected to much criticism over a considerable period. It is certainly not in the best interests of employees, among whom there has been a good deal of unrest for some time, that there were not the best relations between them and the management. So I think that we can say that my right hon. Friend was right to institute an inquiry. I believe that he was right to employ an eminent chartered accountant in view of the inquiry decided upon, which I believe to have been the right type. I believe that because of that type of inquiry, because of the undertaking required from certain people who wished their information to be given in confidence and would not otherwise have given it, it is quite impossible for my right hon. Friend to publish this Report in full, quite apart from the fact that it would disclose information to overseas operators which would certainly do the Corporation no good.
I find nothing surprising about the fact that Mr. Corbett found certain grounds for criticism. Indeed, I am surprised in some directions that his criticism was not even stronger. I believe that it is really time that B.O.A.C. was viewed as an ordinary commercial undertaking in precisely the same way as those of us who are directors of independent concerns are in general viewed by our shareholders. Our concerns are viewed as commercial undertakings. We have a commodity to sell and must provide the best possible management, equipment and sales force in order to sell it as well and as freely as we can and still retain some profitability at the end of it. I believe that there is nothing wrong in that conception of any trading organisation.
I do not think that any one could quarrel with this objective, particularly if the Corporation is given—and I hope my right hon. Friend will remember this—the power to recoup itself for any particular routes it may be asked to develop or in any particular function it might be asked to carry out in the general interest of the country or of the Commonwealth, and which may not be good commercial possibilities. If there is power to recoup for that sort of thing, then I cannot see how hon. Members on either side can object to the idea that the Corporation should be treated as an ordinary commercial and business concern.
The losses, whatever may be implied, that have been made in recent years have not been caused by any Government interference in the route pattern.
The hon. Gentleman is the most extraordinary fellow. He hops up and down on every subject debated in the House. He really cannot keep quiet until any other hon. Member has finished a sentence.
I was not referring to the Corbett Report. I was referring to my own view. I said that it was my view, and it remains my view, that there is not a title of evidence that the Government at any stage in recent years have told B.O.A.C. what its route pattern is to be. I would be very happy if the hon. Gentleman could find any evidence and produce it. In my view there is no such evidence.
One of the biggest reasons for the losses of B.O.A.C. over recent years has been its failure to produce the right type of new aircraft at the right time. The Britannia 312 and the Comet 4 are classic examples of failure in this connection. Certainly the Britannia project was ill-conceived and badly carried out.
If the hon. Gentleman will restrain his impatience I am coming to that in my remarks. In the first place he is exposing, if he really believes that, one of the great failures of B.O.A.C. He says that the Corporation had nothing to do with the conception of the Britannia, but, after all, if B.O.A.C. was unable to tell the aircraft constructors what it wanted to fly, it was sadly lacking in its responsibility and that again is another reason for my right hon. Friend's action.
The Brilannia was introduced on the North Atlantic route in 1957 and a year later the Americans started using long-range jets. The Britannia was far too late in coining forward. Admittedly it was delayed for two and a half years through failures, but that would have given a lead of only three and a half years and the Boeing jet was on the drawing board long before then. This was something that apparently was not realised and I believe it should have been realised.
The hon. Gentleman should be fair about this. He must know that in 19'56 B.O.A.C. was most anxious to obtain Boeing jets but had the greatest difficulty in getting the Government to agree to purchasing any at all.
Of course it was, but that again is a most extraordinary intervention because after it had placed its orders for the Britannia, having presumably gone into its future requirements with the British aircraft constructors, one year before it was due to get the Britannias it said that it would like to cancel them and buy Boeings instead, because it had made a misconception about the future. With the emergence of the pure jets the great difficulties of the Corporation arose.
We must accept that there was bad luck over the Britannia but in any case the facts of the matter show quite clearly that even had it come forward on time there would still not have been a proper period of amortisation before it came into direct contact with the Boeing. So there must, therefore, have been an enormous loss however good the circumstances. However much bad luck might have been avoided, there still remained this misjudgment regarding the Britannia, which has involved the Corporation in a great deal of cost.
In future there must be the utmost co-operation between the Air Corporations and the aircraft constructors in assessing requirements and in meeting them. They each depend upon the other; and—let us be perfectly clear—we have, in the Viscount, a wonderful example of the way this co-operation can help the aircraft industry and provide employment and achieve success. Throughout the whole of that project there was the utmost co-operation, and that is something that is vital.
B.O.A.C's failure regarding its fleet was high-lighted by the fact that, between 1956 and 1962, it had five different aircraft and never less than four flying at the same time. Any hon. Member with any idea about management must know what that means. It means great problems in the training of pilots and tremendous duplication. It means an enormous increase in maintenance difficulties and costs, in the number of spares that must be funded and held. It creates all sorts of difficulties in selling space for passengers and freight.
All these problems must be created if one has a number of different aircraft types flying at the same time. I believe it is absolutely essential that B.O.A.C. now takes the first possible steps to clean up its fleet. That is one of the first things it must do. I hope that it will make up its mind that the VC10 is the right aircraft and will concentrate absolutely in getting every possible value from it. I hope that it will be encouraged to sell off the rest of its fleet as quickly as possible, and this might include disposal of the Boeings because they too can cause difficulties in maintenance and other ways if they are retained. The Corporation has certainly ordered enough VC10s to be able completely to fleet itself with them, and this is another indication of the necessity to clean up the fleet as soon as possible.
I am not blaming it for buying Boeings. That arose out of the earlier problems with regard to the Britannia and other aircraft. It had to buy Boeings then because the Britannia was obsolescent. But now it must try to get a single aircraft fleet together which will enable it to cut maintenance costs and give it the viability that it has not had for years. I believe that through this it should be able to improve its position tremendously.
Of course. I have never said that it was not. Who else would make the decision? If the board has to take responsibility for the good things it has done I am sure that the right hon. Gentleman will accept that it must take responsibility for the bad things as well. This is what we mean by turning it into a commercial operation. I find no quarrel with his argument at all.
Now I turn to the White Paper which has engendered most of the trouble. There are one or two points in it with which I must disagree. On page 6, in paragraph 9, it is said:
In the years since 1956 a number of colonies have become independent nations. B.O.A.C. has thus lost most of its valuable cabotage rights.
I find that statement very misleading. B.O.A.C. still has rights in Ghana. They are not exclusive rights but they are rights. It still has exclusive rights with Jamaica and Trinidad and is currently flying services there. Although Singapore is, independent, B.O.A.C. still enjoys the same degree of rights as previously. It still has the same rights in Nairobi.
Also in the same paragraph—this is glossed over, of course, but I think that the point should be made—we read:
This increase in the number of operators has coincided, in the last few years, with a decline in the rate of growth of air traffic generally.
This is just not true. I am sorry to have to tell my right hon. Friend that the White Paper is not right. I refer to "World Air Transport Statistics." Let us look at what is said about traffic growth in 1962 on the North Atlantic route, a very important part of B.O.A.C. business:
The traffic of 18 IATA members on the North Atlantic route improved considerably in 1962. They carried 2,587,000 passengers … passing the 2½ million mark for the first time. The increase of 18.4 per cent, in scheduled passengers compares with a 9 per cent, increase in 1961.
Twice as much, it will be noted.
Scheduled cargo traffic increased by 26.8 per cent, to 79,667 tonnes, and mail traffic by 12.8 per cent…. The average passenger toad factor moved up slightly to 51.6 per cent.".
I ask hon. and right hon. Members to bear those figures in mind for a few minutes. I shall shortly refer to a few more figures at the back of the White Paper which I regard as extremely revealing.
I turn now to page 9, the heading, "Investment in Associated and Subsidiary Companies". Quite a lot has been said about the position of the B.O.A.C. associated companies today, and I hope that I shall be forgiven for raising this point. I am not on the board of B.O.A.C.-Cunard—itcame away from my company—but I should have thought that, at least, it merited some mention in the White Paper. Although we do not see any B.O.A.C.-Cunard aircraft flying with anything on them except "B.O.A.C.", there is considerable investment there, an investment of which B.O.A.C. owns two-thirds of the stock. It is probably the biggest of all the associated companies, and I should have expected it to merit mention in the White Paper. I should be glad if my hon. Friend would refer that matter to his right hon. Friend.
What about the other associated companies? I believe that quite a number of them have gone wrong also because of bad management. In my view, they have been too remote from the central board of B.O.A.C. There has not been enough direct control over individual associated companies from the top management board of the Corporation. There has not been enough close attention paid to integration. Indeed, it seems to me that, at present, the Corporation's one idea regarding the associated companies is to scuttle out of them as quickly as possible. Although there have been heavy losses over the years—about £15 million, as we know—I think that, on balance, it is at this time quite wrong for us to scuttle out, particularly, of the newly developing countries.
I believe that we should go in on partnership terms there, if possible, or, if that is not possible, that this country should endeavour to open its own subsidiaries in those countries. Insufficient benefit has been obtained from them. Much more could have been done. I believe that much more can be done in the future. If my right hon. Friend really wants to look into this subject, and if there is any indication of B.O.A.C. wishing to get out of more of them, I hope that, before we close up entirely in those areas, the independents will be given an opportunity to say a word and offer their advice.
I refer next to page 11, parapragh 31, of the White Paper. We are told that
The first of these studies concludes that the Corporation's effort on sales, advertising and publicity has been at about the right level and well directed".
I cannot agree. I know that Mr. Corbett put in a group of consultants on this, but I suggest that that conclusion is definitely not borne out by the statistics given at the back of the White Paper. Already, my hon. Friend the Member for Cheadle (Mr. Shepherd) has referred to some of the statistics and pointed out that Panam had flown a total of twice the capacity ton-miles of B.O.A.C. with approximately the same number of staff, which causes one to
think. In 1962 among all the ten companies referred to in the table at the back of the White Paper, there was only one with a lower overall load factor than B.O.A.C. with 44.9 per cent., and that was Trans-World Airlines. In 1962, B.O.A.C. had the lowest passenger load factor among these ten companies, the nearest one to it being the 49.2 per cent, of Sabena; so B.OA.C. was almost 2 per cent. lower than the lowest of the other nine.
The hon. Gentleman has this document. He has access to the figures. If he is lucky enough to catch the eye of the Chair, he may wish to quote a few more figures. They are all in the White Paper and they cannot be contested. B.O.A.C. had the lowest passenger load factor of all the ten companies named.
I come now to a most extraordinary fact. If there were no other justification for the Minister's action in insisting on an investigation, these figures disclose quite enough reason. I refer to the number of passengers carried in 1961 and 1962. According to the White Paper—I have had the figures checked since—B.OA.C. carried 983,000 passengers in 1961. In 1962, despite the increase in traffic to which I have referred, B.O.A.C. carried 977,000 passengers. Thus, between 1961 and 1962, the number of passengers carried by B.OA.C. declined, whereas the passenger load of each of the other companies quoted in the White Paper increased. This is a very serious matter. Here is an indication of something very wrong somewhere, and it certainly does not bear out the statement in the White Paper that everything has been right on the sales side of the Corporation.
I have been critical in some ways, but we must speak out without being mealy-mouthed in these matters. This is a great Corporation. I have tried to be absolutely fair and logical in my approach. If, as we do our duty to the public, some of the present Board of B.O.A.C. are told that they have not been as efficient as they might have been, why should we refrain from stating it? I regret deeply that these matters have to be debated in the House, but this is one of the dangers in having a public corporation. If we face our responsibilities, as we ought, either as Ministers or as Members of Parliament, does any right hon. or hon. Member opposite dare to suggest that we should be doing our duty to the public if we were to remain silent?
I know, but this has not been the attitude.
I hope that the new management at B.O.A.C. will have great success. It is vital that it should. Of course, when the new plan of the board is announced, the Minister should come to the House as soon as possible and ask for leave to write off the accumulated deficit and then give the Corporation another chance. I hope that the new management of B.OA.C. will realise that they have tremendous responsibilities, also, towards the staff of the Corporation and will make every effort to ensure that the unrest which has been rippling the surface there for quite a long time disappears. Also, as regards the staff, I find it difficult to accept that even the staff would be prepared to resist changes when they realise that, at present, their biggest competitor, Pan American Airways, apparently does twice the amount of work of B.O.A.C. with about the same number of employees.
Of course, there will be problems. Everyone, on both sides of the House, wants to see B.O.A.C. successful. But an enormous effort will have to be made by all connected with the Corporation if it is to be put on the commercial basis which I believe will be best for it, best for the country and best for its staff.
The hon. Member for Gillingham (Mr. Burden) is an outstanding personalexample of the old adage that a little learning is a dangerous thing. I am rather surprised at this, considering that he claims to be a director of one of the independent airline operators. I do not intend to follow him in all the details of his speech, because I have too much of my own to say, but I shall take up the discussion which he began about the introduction of the Britannia into service and the 2½ years' delay. This is an important point, and the hon. Gentleman ought to understand the facts a little better than he does. I shall try to explain them to him.
If the Britannia had been introduced 2½ years earlier, and if the same rate of amortisation had been applied, writing the aircraft down to 25 per cent, of its original value over seven years, another 2½ years' depreciation, about £15 million, would have appeared in the Corporation's accounts over those 2½ years. The effect, therefore, would have been to reduce the £224 million special write-off in the 1961–62 accounts to only £7.4 million.
Another thing would have happened which the hon. Gentleman ignored completely. If the Britannias had been introduced into service that much earlier, it would have meant that B.O.A.C. would not have had to buy the DC7Cs and, therefore, the special charge in the 1961–62 accounts for the obsolescence of this aircraft amounting to £7.4 million would not have been necessary, plus some additional sum which I cannot extract from the accounts relating to the special expenses in relation to the training of crews, introducing the DC7Cs to the overhaul and maintenance base, and so on.
The hon. Gentleman has named me in this. Therefore, I should put him right. I do not "claim" to be a director of an independent company. I am actually a director. I would like to make that point very clear. Further, with great respect I would suggest, being and having been a director of an airline for about five years, that I might know just a little more than the hon.Gentleman, who, apparently, is not so engaged. My point was that anyone getting a new aircraft always has to accept that he will probably get quite a lot of "bugs" in it. It was evident to everybody in the very early stages of the Britannia project that there would be these long delays.
The hon. Gentleman has imposed on my courtesy by making such a long intervention. I shall be a little cautious about allowing him to intervene again.
This debate takes place not only against the background of the mounting losses in B.O.A.C., but also against the background of the Government's obstinate refusal to tell us the truth about how these have arisen and to give the House and the country any idea of how the further deficits which the Corporation might incur in future will be prevented. We heard a speech from the Parliamentary Secretary which was a paraphrase of the White Paper. In some cases he even followed the identical phraseology of that document.
I could not possibly disagree more with the statement of one hon. Member—it may have been the hon. Member for Sunderland, South (Mr. P. Williams)—that discussion of the Corbett Report should be at an end and that there is no need to pursue the matter further. I feel very strongly that the Report should have been published and that the Minister's refusal to do so stems not so much from any promises which he may have given to Mr. Corbett at the time that the inquiry was instructed as from the saga of political interference with the B.O.A.C. management which this document would have revealed.
I believe that Sir Matthew Slattery and his colleagues are being made the scapegoats for a situation created in reality by the meddling of successive Ministers. The present Minister made a revealing slip of the tongue when he said in a previous aviation debate, as the hon. Member for Newton (Mr. Lee) quoted earlier, that a good many things had to be said which could conceivably be embarrassing either to the Government or to the Corporation.
I believe that the public will be able to draw their own conclusions from that remark and that their suspicions might be confirmed if they compared the treatment of B.O.A.C's difficulties with those of British Railways. Why should not precisely the same considerations have applied to Dr. Beeching's Report? The answer is fairly obvious. British Railways were never forced into making uncommercial decisions by the Government of the day, whereas we know perfectly well that in at least one instance, probably in many others that the Government would like to conceal, this has happened to B.O.A.C. The one instance that is actually recorded is the investment in Kuwait Airways. That cost the Corporation, as the Parliamentary Secretary will no doubt confirm, £1.4 million alone, plus the interest on the money which the Corporation had to borrow to meet this accumulated loss.
I would like to ask the Minister, now that he has returned, whether he can tell us in plain terms what part of the rest of the £15.3 million which has been lost by the associated and subsidiary companies is directly ascribable by Mr. Corbett to Government interference. This is not the only aspect of the Corporation's affairs in which Government interference can be proved. The effect of the Civil Aviation (Licensing) Act, 1960, has been very harmful to the Corporations, particularly to B.O.A.C. This was commented on in the Corporation's Report for 1960–61, where it was made clear that the criteria laid down in the Act—that is, the material diversion of traffic and the investment in equipment by the Corporations—were not being followed by the Air Transport Licensing Board and that these things had not been taken into account.
Further, there is the question of traffic rights which have been granted to airlines like S.A.S. and K.L.M., which do not offer us any reciprocal facilities. We understand that discussions have opened this week between the United Kingdom and Scandinavian Government about the rights of S.A.S. to fly through Prestwick. B.O.A.C. claims that it neither has at the moment, nor does it want, any reciprocal rights from airlines such as S.A.S. or K.L.M. Therefore, these arrangements which allow S.A.S. in particular to fly through Prestwick should be reconsidered now.
If the Minister has not got anything to hide in the Corbett Report, I should like to make two suggestions to him. First, though I appreciate the argument that he has given an undertaking to Mr. Corbett and that he has some obligation there, I suggest that he could go to Mr. Corbett and ask him to release him from this undertaking, an undertaking which I think he had no right to give on a matter of such grave public interest. This demonstrates once again the contempt for the House which the Government are no longer attempting to conceal. Mr. Corbett himself will have realised just as well as anyone in the House that, if he were to waive this undertaking which was given, he would be meeting the demands of nearly everybody in this country as expressed by the whole of the national Press and indeed the aviation Press as well.
If, for reasons such as the effect on B.O.A.C.'s competitive position, it would not be possible to publish the whole Report verbatim, I think that the procedure which is generally followed in security matters should be adopted in this case. The Report should be shown to the Leader of the Opposition. Then it should be published, except for any parts of it which it is agreed between the two sides there are valid reasons for concealing. I entirely support what was said on the subject by the hon. Member for Newton.
If this proposition were to be accepted, the House would at least know what recommendations were made by Mr. Corbett. This is really what interests hon. Members, rather than the financial analysis of the deficit, which takes up some nine and a half pages of the thirteen pages of the White Paper. We could have got that information from the published reports and accounts of the Corporation in the last few years. We were led to believe by the Minister that Mr. Corbett was supposed to be concentrating on how these losses were to be eliminated in future rather than on an explanation of how they had arisen in the past.
The Minister said:
I have asked him … to advise me what needs to be done to put it on a sound commercial basis."—[OFFICIAL REPORT, 6th November, 1962; Vol. 666, c 809.]
It is a great strain on our credulity to believe that Mr. Corbett's only recommendation was to sack half the board, yet that that is all that has happened after the Minister has had the Report for more than six months.
Apparently, this was the true meaning of the euphemism in the White Paper that
… the Government propose … to strengthen the management of the Corporation …
Apart from that attempt to shift the responsibility from where it rightly
belongs, there is the instruction to the Chairman
… to prepare within twelve months, and present to the Minister, a plan for making B.O.A.C. financially sound.
This is where we came in.
What is the difference between presenting a plan to make the Corporation financially sound and advising them what needs to be done to put the Corporation on a sound commercial basis? Does it mean that Mr. Corbett has made certain recommendations that it would be politically disastrous for the Government to discuss in the period immediately preceding the General Election? The Minister is bound to deny that, of course, but he cannot conceal the unfortunate effects on the morale of Corporation employees, referred to by several hon. Members, of a further 12 months of doubt and uncertainty.
If the Minister would accept the advice given by both sides of the House to talk to the pilots, the maintenance engineers, and the others doing the real work there, he would soon discover that they are sick and tired of the denigration of their efforts, and yearn for real leadership to correct the faults they know have been made in the past. Apparently, they now have to wait another year for Sir Giles Guthrie's report to be submitted before they can get a diagnosis of the disease affecting the Corporation, and the prescription for its cure. And what guarantees have they, or anyone else, that Sir Giles Guthrie's report will be published when Mr. Corbett's was not? Whether the Minister decided to publish that report would be entirely a question of political expediency at the time.
Tory spokesmen are fond of claiming that the Liberal Party has no policy. They say it, no matter how many times that lie is exposed, but not only has the Government no policy for B.O.A.C. but they actually rejected a policy specially constructed for them by three of the most eminent consultants in the country at a cost of £40,000. The Parliamentary Secretary shook his head when that figure was mentioned; perhaps the Minister will correct it if it is wrong. The right hon. Gentleman might also, at the same time, confirm that the bill will be paid by him, and not by the Corporation.
Without having the benefit of this expensive advice, we think that we can see fairly clearly what needs to be done in principle, and I intend to devote the rest of my remarks to some of the constructive measures we should put forward—many of which I have already advanced in this House—which we think would put the Corporation on its feet again.
First, we agree with Sir Matthew Slattery that the financial structure of the Corporation has to be reorganised. The Minister is always implying that the Corporation should be judged by the strictest commercial standards, but in one fundamental respect its financial structure is not like that of any other commercial organisation in the world. It has no equity capital whatsoever, and comparisons with P.A.A. or T.W.A. and other airlines is entirely vitiated by that difference.
When we debated the Air Corporations Bill on 6th November. 1962, I suggested that the Minister should redeem all the medium-term advances he had made to the Corporation and replace them by equity capital to the equivalent amount-all of it to be held by the Government. On that occasion, the Minister wilfully misunderstood what I said, although it was plainly expressed. He pretended to think that I was advocating that B.O.A.C. should raise its fresh capital requirements on the market. As I said, I was contending that the equity capital should be held by the Government to replace the medium-term loans the Minister had advanced to the Corporation.
The accumulated deficit of B.O.A.C. is £80 million, and interest on the capital that is employed in the business and to meet this deficit amounted to over £8 million in the 1963 accounts. In the terms of the loans advanced by the Minister, the Corporation was to make repayments in those same accounts amounting to over £23 million.
Everyone knows that the Corporation cannot possibly be expected to carry this kind of burden, even if it becomes as successful as the foremost airline in the world. Pan American Airways has been mentioned. Last year it made £15 million, but if interest charges of £8 million are deducted there is left only £7 million and it would take the Corporation a long time at that rate of profit to wipe out this enormous deficit.
I believe that my proposal is also better than wiping out the £80 million deficit, which has been put forward by many hon. Members on both sides of the House and, for all we know, by Mr. Corbett. If we did what I propose we would continue to show the public money invested in the Corporation, and the Corporation would be relieved of annual interest payments amounting to £5 million in 1963 and rising at a pretty rapid rate.
Secondly, the Minister should make a capital grant to B.O.A.C. to cover the £1.4 million loss on Kuwait Airways, plus interest at current market rates on the total accumulated deficit in Kuwait Airways for the time being. In all fairness, the same should be done for any other part of the loss arising from noncommercial decisions forced on B.O.A.C. by Government action. We cannot do that now because we do not know the content of the Corbett report which might show to what extent these losses have been due to Government interference.
It may be surprising that I have dealt with these financial problems first, when one considers that their solution can only affect the picture as given by the Corporation's accounts and can have no bearing on the Corporation's activities when measured by objective standards. My answer would be that the reorganisation of the financial structure on the lines I have proposed would be an important first step in restoring the morale of the Corporation, a restoration which is badly needed at the moment.
It is even possible that the replacement of 24 different loans, all bearing different interest rates and with different repayment dates, by a single class of ordinary shares, might help in a small way towards the reduction of the financial staff of over 1,000 currently employed. I do not know what is meant by the White Paper when it speaks of a weakness in financial control, but with as many as one in 20 of the Corporation's staff employed on the financial side I do not think that this can be anything arising from staff shortage.
While it would be wrong to amalgamate B.O.A.C. and B.E.A. entirely, very much more can be done to ensure cooperation between them than merely appointing the chairman of one to the board of the other. My proposal, which I developed in a debate on 13th May was to form a new company or companies jointly owned by the two Corporations whose object would be to operate the services they have in common while leaving other operations, particularly in engineering, under the separate control of the Corporations as at present.
There is no reason, for example, why catering should not be under unified control, with a consequent saving in staff and the purchasing of food supplies and the stock control of those items. There is every reason why selling by the two Corporations should be completely integrated. It would put an end to wasteful duplication of effort, particularly in Europe, where B.O.A.C. has now 21 sales offices in cities which are already perfectly adequately covered by B.E.A. acting as agents on behalf of B.O.A.C., and which B.E.A. is willing to continue to do. Important economies might be realised by having a common London terminal at the newly developed Gloucester Road site where facilities now constructed would be adequate to handle the extra traffic. The Victoria terminal, which must be an extremely valuable building, could be sold off by B.O.A.C. These are a few examples of what could be gained by integration.
To show the world that we mean to keep British civil aviation out in front and that our efforts in this direction will be concerted in a way which has never happened before, I propose that the two Corporations should be renamed. B.O.A.C. should be called Air Britain Intercontinental and B.E.A. should be called Air Britain European. The aircraft of the two Corporations would be painted in identical colours and marked "Air Britain" with the words "Intercontinental" and "European" in very much smaller lettering afterwards.
A joint sales effort in other continents designed to sell B.O.A.C. and B.E.A. as the best possible medium for tours of Europe could be launched based on the use of publicity literature, with a common uniform layout, concentrating on the use of the name "Air Britain" which would mean something to the travelling public in most continents where at present B.O.A.C. and B.E.A. are just a collection of meaningless initials.
The White Paper says that B.O.A.C7s sales, advertising and publicity effort has been well directed. Perhaps it has, but has the Corporation been trying to sell the right product? The Britannias and DC7Cs have been taken out of service prematurely, in spite of the fact that S.A.S. are still, apparently, capable of operating DC7Cs across the North Atlantic, and they are making much of their position as the only I.A.T.A. carrier on the North Atlantic route still offering low far? nights. The drop in B.O.A.C.'s charter income of nearly £4 million between the 1962 and 1963 accounts arises directly from taking these aircraft out of service, but I doubt whether, even with our 707s, we are doing our best to get the business available.
Take the London-Chicago run, for example. A few years ago we offered a service equivalent to that of Pan American on this route. Then that concern started a direct flight from Chicago to London and B.O.A.C.'s sales, traffic and flying staff implored the management to do the same. But the management refused. It refused to cut out the intermediate stop at Montreal. The result has been virtually the elimination of B.O.A.C. on the Chicago-London route. A pilot told me that he flew twice out of Chicago recently and carried four and three passengers on the two flights respectively. Pan American, operating 30 minutes earlier, carried 34 and 63 passengers.
It seems plain that there could be serious criticism of B.O.A.C.'s route planning, a subject on which the White Paper is completely silent. If the Minister is interested, I could send him many other instances similar to the one I have quoted. It would be interesting to know whether I should be entitled to raise these matters with the Air Transport Licensing Board under Section 4 of the Civil Aviation (Licensing) Act, 1960.
There are many other things that I should have liked to say if there had been time, but I will have to keep them for the main debate which I hope we shall have on this subject. In conclusion, let me say once again how very seriously concerned I am about the Government's failure to take this House and the nation into their confidence in their attempts to deal with the problems facing B.O.A.C. We see now that the assurance given by the Prime Minister on television to the effect that he would take the people into his confidence and tell them his policies was nothing but empty words, like every other Tory promise we have heard over the last twelve years
. The true facts are being concealed from the public on the flimsy pretence of an undertaking which should never have been given to Mr. Corbett, and the man responsible for insulting the House like this and for failing to do a single thing to help B.O.A.C. out of the difficulties which have arisen is not Sir Matthew Slattery, who has been sacrificed to distract attention from the guilty man. The guilty man is the Minister, and the only honourable course for him to take is to resign.
I am grateful to the hon. Member for Orpington (Mr. Lubbock) for giving me five minutes in which to make some of the points that I wanted to raise. The Liberal Party at least has something over the official Opposition in that it has produced some proposals about what it would do. I have listened to every speech in the debate except for that of the hon. Member for Edmonton (Mr. Albu), and apart from the speech of the hon. Member for Orpington I have not heard a single, solitary constructive thought put forward by an hon. Member opposite.
In the few moments available, I want to look at one of the problems which I believe faces B.O.A.C. and which no one has mentioned in detail. The most significant point is that the Corporation has not thrown up any person of ability, imagination and drive out of its own ranks. This is the key to the whole problem which we are discussing. The hon. Member for Feltham (Mr. Hunter) said that he probably knew more B.O.A.C. personnel than any other hon. Member, and that is probably true. But hon. Members who apparently know B.O.A.C. personnel have voiced their own groans and moans, but have not put forward any of the views of these people.
Some of us talk to the pilots and other members of the Corporation in the Palace of Westminster and as we travel throughout the world. I always fly B.O.A.C. whenever that is possible. We have found some of the problems which face these people and which are the background to the economic inefficiency which has been illustrated here today. This is why I commend my right hon. Friend the Minister on the action which he has taken. We have also heard that we must get people with drive and efficiency at the head of affairs, and I hope that the new chairman meets that requirement.
Why is it that in B.O.A.C. the pilots' organisation has no direct access to top management inside the Corporation? The captains of the aircraft have long experience of operating conditions and they know whether it is worth while, on a return flight from the Far East, to call in at Zurich at 2 a.m. We know only too well that the pilots and other senior members of the staff of B.O.A.C. have no direct access to top management. I hope that the new chairman will take this into consideration.
As I have said on numerous occasions, all the evidence which I have received from B.O.A.C. personnel throughout the world is that it is the middle management of B.O.A.C. which is the difficulty. It is here that we have an inborn resistance built into the Corporation. These are people who played a tremendous part in Imperial Airways in the old days and who consider that they are permanent residents of the Corporation. It is to the resistance which they have created to modernising the Corporation and bringing it into line with efficient management that I hope the chairman of the Corporation will give his very close attention.
It is not the slightest good changing the top management of any organisation unless that management has the courage and the enterprise to sweep away resistance in the middle levels. This is why I believe that it is right that the new chairman, Sir Giles Guthrie, should combine both the post of chairman and the post of managing director. It is a power which he will not want in his hands for too long, but unless he has this power when he makes his investigation he will not be able to cut through what I believe is the dead wood in the middle management of B.O.A.C.
If he will direct himself to the problem of improving personnel relations in the Corporation and will listen direct, not through a smokescreen of subordinates, to the views and the problems of all sections of the Corporation, he will achieve the results which we very much desire. I wish him well in this great undertaking, because a great responsibility falls on his shoulders. I trust that he will succeed in sweeping the difficulties aside and will makea success of the Corporation.
I rise for just a couple of moments to make two observations to the Minister. For about six years I had to answer to this House for industries which were under national control. I found, as a universal experience, that the more publicity was given to the proceedings of the industries under national control the greater the efficiency that resulted. I never refused to answer any Question that any hon. Member tabled and I never said that this or that was a matter of day-to-day administration. I bitterly regret that the Minister has suppressed the Corbett Report, which is essential to the House to fulfil its proper duty towards B.O.A.C.
I hope that the right hon. Gentleman will tell us how much revenue would have come to the Corporations if they had been given their proper share, or, as I think, full control of trooping over the last 12 years. A large sum of money is involved and I can think of no conceivable reason why Her Majesty's Services should be deprived of what the White Paper calls the safest and most efficient service in the world. I hope that the Minister will give us that vital figure, because it is of great importance.
I only add that I believe that the VC10 will be, as the hon. Member for Macclesfield (Sir A. V. Harvey) said last year, a great leap forward in British aviation. That view is shared by the chairman of Rolls-Royce, thousands of whose workers are my constituents in Derby. It is disastrous that the Minister should now have turned out of their offices the men who made the decision to go forward with the VC10.
I only wish that my right hon. Friend the Member for Derby, South (Mr. P. Noel-Baker) had more time in which to develop his speech. However, I should like firstly to express great dissatisfaction at the Ministerial arrangements for replying to the debate. There is, from the point of view of B.O.A.C., a state of absolute confusion. Every few hours a new headline appears in the newspapers. We hear of more resignations or more people refusing to resign from the board. We hear hostile comments about the policy of the Minister. Indeed, we are in a state of fundamental crisis in British civil aviation.
Instead of standing up today and giving the House an explanation so that hon. Members could debate it, the Minister has chosen to take the more prudent course of winding up the debate, with the result that no one can criticise him. He has put up the Parliamentary Secretary, a most able Minister, who was obviously briefed to give us a precis of the White Paper. The Minister has been rather like a prudent bartender in a Wild West saloon—avoiding the bullets and leaving it to the pianist to stand in the way in the hope that the House would realise that the pianist is doing his best.
I should like to join the Parliamentary Secretary in expressing appreciation of the high services of Lord Douglas and pleasure that Mr. Milward has been made chairman of B.EA This is indeed a satisfactory appointment. All hon. Members will wish Sir Giles Guthrie well in what will be a difficult task under considerable handicaps. The Parliamentary Secretary mentioned that Mr. Charles E. Hardie has been appointed to the board with the express purpose of giving B.O.A.C. the benefit of his financial expertise. I think that that was the tenor of the Parliamentary Secretary's remarks. I hope that B.O.A.C. will be able to take advantage of this, because I have been told that this gentleman is already the director of twenty-four companies and is chairman or deputy chairman of six of them. However, I am sure that he will do his best.
The Parliamentary Secretary and the White Paper—in this case the terms are synonymous—mentioned the importance of B.O.A.C. operating as a commercial undertaking. There is an extraordinary history to this. Sir Miles Thomas and Sir Whitney Straight both wished to run B.O.A.C. as a commercial undertaking, and the principal reason why both left was that they were not permitted to do so. Sir Gerard d'Erlanger left B.O.A.C. largely for the same reason. Sir Matthew Slattery, the present chairman and Sir Basil Smallpeice, the present managing director, have constantly begged to be allowed to run B.O.A.C. as a commercial undertaking. In fact, Sir Matthew expressed this wish with a stridency which reached its crescendo when he made his famous "bloody crazy" speech. It seems to me rather superficial to hand it to us as being one of the wise conclusions of the White Paper, that B.O.A.C. should be run as a commercial operation.
Obviously the point has been missed that B.O.A.C. should not merely be run as a commercial operation and should not only, if the national interest requires it, make departures from commercial practices only with the agreement and at the instance of the Minister; but that the Minister should take clear responsibility when he insists on B.O.A.C. departing from commercial practices. This is where the Minister has let down B.O.A.C. in the past.
The Parliamentary Secretary referred to possible savings of £4 million a year on engineering and maintenance costs. This seems to me a little specious. The hon. Gentleman made no reference at all to the fact that B.O.A.C. has already instituted reforms which will save about £1,500,000 a year. It would have been more gracious, particularly to the outgoing managing director if this had been said before. It is easy for the Parliamentary Secretary to say that this money should have been saved in the past, but does he realise all the difficulties regarding the labour situation? Does he realise that when B.O.A.C. had a nine-day stoppage it cost the Corporation £3 million? All these difficulties must be borne in mind before one talks too easily of economies of £4 million a year.
The Parliamentary Secretary told us that it would not be possible to write off this £30 million deficit until a plan had been submitted to the Ministry to put the affairs of B.O.A.C. on a sound footing. Last year we had a plan from Sir Matthew Slattery, and in the spring we had a plan from Sir Basil Smallpeice. There has been a plan submitted by Mr. Corbett which we are not allowed to see. Now we are to await a fourth plan from Sir Giles Guthrie. Is not it possible to move without this constant continuity of plans? Are we to understand that the plan from Sir Giles will, in some intrinsic way, be completely superior to the plans which have been put before the Minister?
I do not think that I can let this occasion pass without saying once again to the Minister that we specifically wish him to publish the Corbett Report. It has been represented by hon. Members, and by people outside the House, that most of the evidence in the Corbett Report is of a confidential nature. But it is not necessary to publish the evidence. The recommendations and opinions of Mr. Corbett could be published. Or the Minister could arrange for the procedure to be adopted which was recommended by my hon. Friend the Member for Newton (Mr. Lee) and treat the matter in the same way as the Denning Report.
There is certainly no good reason why the Corbett Report should be completely concealed. One appreciates that occasionally there are confidential matters that should not be revealed to the public, but these confidential matters could be eliminated from the Corbett Report before it is published, by agreement through the usual channels. I therefore suggest that the only reason why the Minister is not publishing the Report is because he has something to hide. I think that we should find that the Corbett Report was considerably critical of the Government.
The Parliamentary Secretary referred to the extraordinary situation which arose when the right hon. Member for Woking (Mr. Watkinson) instructed B.O.A.C. to omit certain important figures about depreciation from its Report. The Minister gave us another explanation of this, and the Parliamentary Secretary gave us a third explanation today. I cannot pretend to the expertise of my hon. Friend the Member for Gloucester (Mr. Diamond), who is a chartered accountant, but it seems to me extremely odd. It looks, on the face of it, as though the Minister asked B.O.A.C. to make some improper deductions from its books. If the Minister, or his predecessor, asks B.O.AC, to cook its books, what sort of faith can we have in the books that the Minister writes?
I turn now to the main theme of my speech, and that is that B.O.A.C.'s difficulties—there is no doubt that it is in serious difficulties—have been to a very large extent the responsibility of the Government. I think that we ought to be careful not to lose sight of the fact, first, that the Minister is completely responsible for the Air Corporations. He has been given this statutory responsibility by the Air Corporations Act, 1949. He often pretends that he is an innocent bystander who has tried to repair the inefficiencies of B.O.A.C, but he and his predecessors have been completely responsible.
I should like the House to consider the figures of B.O.A.C.'s accumulated deficit. The White Paper says that £35 million is due to losses on the aircraft purchased. It also says that £10 million is due to introductory costs on aircraft, which has also been lost. Finally, the White Paper mentions £28 million as operating losses. All these losses are due to a very large extent to faulty aircraft procurement policy. Hon. Members on both sides of the House have made this point this afternoon. I should like the House to consider what is the procedure every time B.O.A.C. buys an aircraft. First, it has to borrow the money. It can borrow the money from the Treasury only. It can get the money from the Treasury only if it gives the Minister a full case for buying the aircraft. The Minister has to be satisfied that the aircraft is necessary and desirable and likely to be profitable before he can get consent from the Treasury to borrow the money. So every aircraft has been bought with the full and complete knowledge and agreement of the Minister. Yet the impression that one gets from the White Paper is that this is something that B.O.A.C. does entirely on its own responsibility.
I should like the House to consider, for instance, the specific difficulties of B.O.A.C. during the last few years. I think that hon. Members on both sides of the House have made it quite clear in this debate that one of the difficulties facing the B.O.A.C. is that it has lacked enough of the large jet aircraft which its competitors have. Up to the present time these aircraft have been manufactured entirely in the United States. I am talking about the Boeing 707 and the Douglas DC8. These are the only aircraft which can be run really economically on long-distance routes. If hon. Members have any doubt about this they have only to look at page 32 of the Corporation's Report for 1962 to see the big difference in the running costs of these large aircraft compared with the smaller ones which the B.O.A.C. has been obliged to use to a large extent during the last few years.
In 1956 the B.O.A.C, realised that it would be impossible to continue running these comparatively small high-costing aircraft. The Minister at that time gave reluctant permission for fifteen Boeings to be bought from the United States—and I think it would be fair to add that recently another two have been added—but he told the Corporation that it could not have any more American jet aircraft because no dollars were available.
I am glad that the Minister agrees.
Since then dollar liberalisation has taken place to an enormous extent and American goods have poured into this country, but as a direct result of Government policy the B.O.A.C. has been forced to operate only a small proportion of large jet aircraft on long-distance routes whereas its competitors have been using these large aircraft. Here we have another example of the Government having interfered directly with the commercial policy of the B.O.A.C.
I turn now to the VC10. One of the conspicuous omissions in the White Paper is the absence of any reference to this excellent aircraft. I know that Mr. Corbett went into the question of the VC10s, and it seems odd that in these circumstances there should be no reference to them, until one realises the Government's actions in the matter. In 1960 the right hon. Gentleman, who is now the Colonial Secretary, was then in the process of forming the big aircraft mergers. He put great pressure on Sir Gerard D'Erlanger to order 10 VC10s in addition to the thirty-five already ordered. Sir Mathew Slattery was appointed chairman of the B.O.A.C. in July, 1960. Before he took up his office he specifically requested Sir Gerard D'Erlanger not to commit himself to the purchase of these extra ten aircraft—and it must be remembered that they cost about £2 million each—but Sir Gerard, under pressure from the Colonial Secretary, went ahead and finalised arrangements to buy them. Only last May the B.O.A.C. announced that it could not properly use ten of these aircraft. Once again, as a direct result of Ministerial interference, the Corporation was not able to use its commercial judgment, and it has been saddled with extra aeroplanes which are greatly superfluous to its requirements.
There are other considerations to be borne in mind besides the interference of Ministers with regard to the purchase of aircraft. The Minister—and I say this in all sincerity—may have meant well, but he has been most negligent in the negotiation of traffic rights. As hon. Members know, when the B.O.A.C. flies an aircraft to a foreign country it is necessary foe traffic rights in that country to be negotiated by the Minister. These negotiations always take place on a quid pro quo basis. For example, if France gives traffic rights to another country's aircraft to fly into France she expects Air France to be given traffic rights to fly in the country concerned. But the Minister and his predecessors have formed the habit of giving away traffic rights to other countries without expecting any quid pro quo in return. For instance, Air France and Lufthansa now fly three or four flights a week on B.O.A.C. routes to Hong Kong. This has cost B.O.A.C. a great amount in revenue, and the Corporation receives nothing in return. S.A.S. fly from Scandinavia, through Prestwick, across the Atlantic. Again, no quid pro quo is exacted. B.O.A.C. probably loses about £3 million a year in revenue on this alone, simply because of the Minister's negligence in negotiating proper bilateral traffic rights.
We have already dealt with the baneful effects of the Civil Aviation Act, 1960, on B.O.A.C. The Corporation also suffers heavily because it is not allowed to do any trooping except on a very limited ad hoc basis. Hon. Members on this side of the House, year after year, have asked that the Corporation should be allowed to do a substantial amount of trooping, but on each occasion there has been a complete refusal by successive Ministers of Aviation. Pan American and T.W.A. —B.O.A.C.'s principal competitors —receive large sums, running into millions of pounds, for trooping contracts. I understand from B.O.A.C. that the loss of these trooping contracts, as a result of the Government's refusal, costs the Corporation no less than £4 million a year in revenue. That is the situation we find ourselves in when we have a Minister who is hostile to the Corporation for which he is responsible.
I now turn to paragraph 52 of the White Paper, dealing with the strengthening of B.O.A.C.'s management. Many hon. Members on both sides of the House have felt considerable disgust at the treatment accorded to Sir Matthew Slattery and Sir Basil Smallpeice. I do not think that in recent years two public servants have ever been treated in such a shoddy way. It is a fundamental principle of our justice that any accused person, whether in a private or a public matter, should be confronted with the evidence against him. In the White Paper Sir Basil Smallpeice and Sir Matthew Slattery have been accused of weakness of financial control, excess of spending, and weakness of management. These are grave charges, which will obviously have an effect upon their futures.
Both these gentlemen have said to the Minister, "Where is the evidence?" The Minister's reply has been, "It is confidential. It is in the Corbett Report. "The House would like to have this information, and the Press would like to have this information. But on every occasion we come up against a complete block—it is confidential; it is in the Corbett Report.
I suggest that this is the absolute negation of British ideas of justice and fair play. This is probably one of the most disgraceful miscarriages of justice that has occurred since the Dreyfus case. [Laughter.] Hon. Members opposite may laugh, but these two dedicated and efficient executives have been re- moved from office without any evidence having been produced against them. If hon. Members think that that is funny, I do not. I should like the House to consider the effect of their removal. They certainly had the confidence of the whole of B.O.A.C.'s worldwide organisation. Their dismissal is having a most profound and demoralising effect.
The effect on morale is equally serious when one considers what is happening to other members of the board. I hope that the Minister will give us some definite news about what is to happen to Sir Wilfred Neden. Will he let us know also what he is to do about the extraordinary situation which has now arisen on the board? None of us knows what is happening. We hear that some directors have resigned, some are about to resign, and some are saying that they refuse to resign. There seems to be complete confusion. [Interruption.] I am glad that the Minister finds this so amusing. No doubt he will give us an adequate explanation, but I hope that he will not continue to give the misleading impression which he gave in his statement the other day when he suggested that all these resignations had been amicably arranged. There is no doubt that Sir Matthew Slattery was told in a blunt and brutal manner at short notice that a successor had been found for him, and Sir Basil Smallpeice made it perfectly clear in a public statement that he was leaving through no wish of his own.
The real reason for this extraordinary explosion on B.O.A.C.'s board is the right hon. Gentleman's desire to hide the Government's culpability behind the smoke. The Prime Minister, who has just come into the Chamber, has told us on numerous occasions that the time has come to take the people into the Government's confidence. I hope that he will convey those views to the Minister of Aviation, because so far we have had nothing but smoke, obscurity and obfuscation on every possible occasion about the affairs of B.O.A.C.
Last year, the right hon. Member for Bromley (Mr. H. Macmillan) used exactly the same technique. When he was in serious personal difficulties, half the Government was dismissed. The Minister has learned this lesson and has adopted exactly the same principle as his father-in-law who, like the Turkish sultan, believed, "When in serious personal difficulties, let us have a massacre". That is exactly what took place on B.O.A.C's board.
On this occasion the right hon. Gentleman has done much more damage to B.O.A.C. than did his predecessor. B.O.A.C. has suffered in the past at the hand of the Government. It is suffering and will continue to suffer because it is a nationalised corporation. A corporation working solely for the public interest is a concept on the far side of an insurmountable mental barrier for hon. Members opposite. They simply cannot understand that any corporation would work solely for the public interest.
We can only ask right hon. Gentlemen opposite to minimise the damage that they are doing to B.O.A.C. while they still form the Government. To those thousands of dedicated men and women who work for B.O.A.C. we can offer only the consolation that with the inevitable approach of a General Election their burden will soon be greatly lightened.
The debate has taken place in very unsatisfactory circumstances. Although we have found a stage of complete confusion and chaos in B.O.A.C.'s affairs, we cannot vote against the Bill. However, I give notice that the Opposition intend to raise the matter in the House again at an early opportunity and in a manner which will enable the House to register a decision.
I hope that the hon. Member for Loughborough (Mr. Cronin) will acquit me of any intended discourtesy in winding up this debate rather than opening it. I made a statement a few days ago and answered questions on it; and I also published a White Paper. I then read in the Press that there was to be a storm and a devastating attack on me. My wife told me that the television bulletins had warned us that there would be the greatest storm for a long time, so I thought that I had better face it by answering the questions instead of trying to anticipate them. We have now had the storm. Following the good-natured speech of the hon. Member for Newton (Mr. Lee), I think that he will be as surprised as I was when I tell him that the B.B.C. described that speech as one of the most slashing attacks ever delivered on a Minister.
A number of right hon. and hon. Members have raised questions about the independents and B.O.A.C. and the competition that this may have caused it. This was raised by the right hon. Member for Derby, South (Mr. P. Noel-Baker), in particular. The 1960 Act setting up the Licensing Board and the licensing system has, so far as I can make out—and I have studied this carefully—made no contribution whatever to the deficit. No loss that I can identify has been incurred by B.O.A.C, in the existing deficit, because of that Act.
The B.O.A.C.-Cunard arrangement has proved very important and one day it may prove advantageous to the shareholders of Cunard. But, so far, it has merely led them into sharing some of the difficulties of B.O.A.C. The hon. Member for Newton asked about this arrangement. We have refused to publish it hitherto for fear of giving information to commercial competitors. But I think that he was on to a rather strong point when he said that the submission of the agreement to the American board rather changes the situation. I have, therefore, asked B.O.A.C. and B.O.A.C.-Cunard whether they would agree to my putting a copy of the Agreement in the Library of the House.
The right hon. Member for Derby, South referred to the trooping question. It has been established policy for a number of years that trooping should be reserved to the independents. I have made it quite clear that, as licences are granted and traffic rights secured, that situation will be reviewed.
The independents are, of course, and have been for some years, well established in the Nile Valley, and since 1960 there has been a 70–30 per cent, agreement between B.O.A.C. and Air Holdings. The introduction of the VC10s puts this agreement into question, because one would need 2½ VC10s in order to get 30 per cent, of the route, and one cannot split a VC10 without danger to safety.
Discussions have been going on at executive level for some time about the new situation. That brings me to the question put by the hon. Member for Newton about a possible carve up of the African routes, which he also put to me when I made my statement the other day. I have since been looking into it.
Sir Matthew Slattery saw me last week and told me—and the Air Holdings Company has confirmed this—that he had proposed that there should be something on the model of the B.O.A.C.-Cunard deal between Air Holding Limited and B.O.A.C. over part of the African routes. The question was discussed between the two Chairmen and the Board of B.O.A.C. was informed.
Before pursuing the matter in detail, Air Holdings wished to know what my attitude would be and a draft letter was under consideration by both chairmen. This was the situation when I made my announcement, 10 days ago, about the changes in B.O.A.C. The negotiations have since been in suspense, I understand, and will remain so until Sir Giles Guthrie takes over.
The hon. Member for Newton has kindly assured me that he fully accepts my word that I knew nothing of this and that no one in my Department knew. Sir Matthew was undoubtedly within his rights under the Air Corporations Act, 1949, in embarking on these negotiations and it is a very good example of the Government not interfering unduly in the arrangements of the Corporations.
There have been, broadly speaking, two lines of criticism of the Government. One has been that we have interfered too much, the other that we have not interfered enough. I will deal, first, with the charge that we have interfered too much and that the Coporation has been left in uncertainty as to its role. A number of questions were asked on this by the hon. Member for Newton, the hon. Member for Edmonton (Mr. Albu) and the hon. Member for Loughborough. I will take some of the different aspects in turn, beginning with aircraft purchasing policy.
The hon. Member for Loughborough said that we had been at fault in this. It is quite true that we have encouraged the Corporation by buy British aircraft. We have done this for broad national reasons and the Corporation has on the whole supported us for its own sound commercial reasons. I should say something about the broad national reasons. The aircraft industry makes a major contribution to our exports. It is a vital part of our defence—as vital in its way as any of the Armed Services—and the interaction of civil and military programmes is a very great help in keeping the industry at a reasonably stable level. It also makes a major contribution to our national technology. So support of the aircraft industry by the Ministry of Aviation is something which I would hope both sides of the House would support.
But B.O.A.C. has always had very good reasons of its own to fly British whenever good British aircraft were available. A small airline is well advised to fly proven aircraft, whatever the big airlines have tested in service and whatever is going cheapest in the world market. But when we get to an airline like B.O.A.C, which is the second largest long haul airline in the world, and when we consider that standards of reliability, safety, comfort and service to passengers, and so on, are very much the same between the great airlines, then the only way that such an airline ready gets ahead is when it brings into service and pioneers a really attractive new aircraft.
The House will have seen the figures in the White Paper. When the Comet came into service, the load factor on the African routes went from 60 per cent, to 85 per cent., I think, in a few weeks. This was because of the appeal of the new aircraft.
B.O.A.C. has been quite right, therefore, to go for British aircraft, and I have done everything I could, both in the White Paper and in all I have said in the House, to exonerate the Corporation completely from any of the financial liabilities which may have flowed from the accidents which occurred to the British aircraft which they ordered. The advantages of pioneering could have been very great with the Comet and the Britannia. B.E.A. has had very great success with the Viscount, a success which, I believe, it will now have with the Trident. I am also sure that the VC10, the BAC111 and the Concord will repeat the same successful result as that achieved with the Viscount in the past.
The hon. Member for Loughborough suggested that there might be occasions when the Corporation ought to buy American. Its record has not been very deficient in this respect. It has bought successively Stratocruisers, Constellations. DC7Cs and Boeing 707s. In fact, more American aircraft have been bought by B.O.A.C. than by the other Corporation. While the view of the Government and the view of the Corporation has been that it should buy British whenever possible, this has not been something on which we have insisted unreasonably.
Of course, Ministries are right to use their influence to try to persuade corporations to buy aircraft which Government policy wishes to see bought, but there is no obligation on them to yield. We wanted to see the Rotodyne brought into service by B.E.A., but we could not get Lord Douglas to play; and he was quite right.
The hon. Member for Loughborough referred to the VC10. The reason why there is no detailed reference to the VC10 in the White Paper is that no part of the deficit has resulted from the VC10 because it has not yet been introduced into service. It would be quite wrong to accept easily the idea that the VC10 was something pushed down the throat of the Corporation. It was not. I think that experience will show that this remarkable aircraft, the quietest aircraft in which I have ever flown, will prove a very great commercial success in a short time from now.
Now, routes. I can find no evidence that any uneconomic routes are being flown under Government instruction. No doubt, ambassadors from time to time have said that it would be a great help if we flew here or there; but all big international undertakings, oil companies and the like, are always subject to this kind of pressure and influence. Going as far back as 3rd July, 1958, Sir Gerard d'Erlanger, in his evidence to the Select Committee on Nationalised Industries, when asked whether he was under pressure to open up services on uneconomic routes, said:
I think it is absolutely right to say that all the routes we operate are operated of our own free will".
I cannot find any evidence different from that.
As regards the associated companies, I was asked, by the hon. Member for Edmonton, I think, whether it was true that the consent of the Ministry of Aviation had to be obtained before investment was undertaken. This is true of the placing of the investment, but, of course, we have had no say whatever in the control of the investment. In the case of Kuwait, we did specifically ask the Corporation to undertake the investment in Kuwait Airways. The Corporation said that this was contrary to its commercial interest, and it, therefore, requested from us a written instruction to undertake the investment. This we gave.
I think that this is the exception which proves the rule which I have been trying to explain. The only two instances I can find when we have directed the Corporation to act against its commercial interest were the case of Kuwait Airways and another one when we asked (he Corporation—and insisted—to advance payments to the Bristol Aircraft Company in respect of certain Britannias when Bristols were in financial difficulties. The fact that the Corporation insisted on having written instructions seems to me to show that it knew where the line should be drawn.
In his 1951–52 Report, Sir Miles Thomas made the point quite clear when he said, in paragraph 14:
… the fourth phase in reconstruction was the imprinting on the minds of the staff at all levels the idea that the Corporation was essentially a. commercial undertaking; that the financial aspect of every single activity mattered; and that the ultimate test of the Corporation's success was not only the standard of public service it provided, but also the normal business criterion of whether it could be made to pay its way.
I do net think that there is any justification for saying that the Corporation should have been, or had reason to be, uncertain about its r61e. It is unwise to compare B.O.A.C. and B.E.A. too closely, but B.E.A. never had any uncertainty on this point, and I do not see why B.O.A.C. should have had any. Even if it did, this is still no justification for unsuccessful control of foreign investment, for excessive engineering costs, or for inadequate financial control.
Nevertheless, we have thought it right in the White Paper to reaffirm that B.O.A.C's obligations are to operate as a commercial concern and that, where there is any need to operate otherwise than commercially, on Government instructions or in response to Government advice, this should be done only with the agreement, or at the instance of. the Minister.
I think that the proper answer to that is in the Air Corporations Act 1949. It is provided by Section 23(3) that
The report for any year shall set out any direction given by the Minister to the corporation during that year unless the Minister has notified to the corporation his opinion that it is against the national interest so to do.
The other charge has been that we have not, perhaps, supervised the activities of the Corporation enough, that we have allowed these deficits to grow without doing enough about them. At first sight, this is a rather more plausible charge, that we have not interfered enough about I have been looking into it. and I do not think that this charge can stick. As early as 1955, my right hon. Friend the present Chief Secretary was a bit worried about the way the accounts were being presented, and he asked the accountants to draw up principles for the presentation of the accounts.
In 1957, my right hon. Friend the Member for Woking (Mr. Watkinson) warned the Corporation that its depreciation charges seemed to him to be inadequate. In 1959, we had the Select Committee. I freely acknowledge, in response to what the hon. Member for Edmonton said, that many of its recommendations were of the greatest value and have subsequently been confirmed from other sources.
In 1961, partly following on sorms of the comments of the Select Committee about the associated companies, we instituted an outside inquiry into one of the associated companies, Middle-East Airlines, under the chairmanship of a Mr. Swash, a retired chairman of Woolworth's. This, also, increased our anxieties.
Then, in 1961, after the publication of the White Paper on the Financial and Economic Obligations of the Nationalised Industries, the Ministry of Aviation, like all other Departments concerned with the nationalised industries, entered into discussions with the Corporation to see what target it could hope to achieve. There were repeated meetings between my Department and the Corporation. They examined costs, revenue prospects, and estimates of one kind and another. The results of these investigations were very depressing and the Ministry felt convinced—this was before I came there—that drastic remedies would be needed. Plans were discussed, but no agreement was reached. It was in the course of these discussions that the full scale of the deficit emerged.
By July, 1962, we were faced with a rather serious situation. The choice really lay, in the Ministry's view, between holding a public inquiry into the affairs of B.O.A.C. and having a private inquiry by outside consultants. I may have been right; I may have been wrong; I accept full responsibility for this; but my own view is that the Government should not put themselves into commission. I do not think that we ought to ask an outside inquiry to settle our policy for us. I thought that the right course was to check the information which I had got from the Department, from previous inquiries like the one into Middle-East Airlines, and the advice of the Select Committee, by putting in some consultants, and to then try to arrive at a conclusion of my own about the situation.
It was in this spirit that I invited Mr. Corbett to inquire into the affairs of the Corporation and he, as the House knows, appointed three teams of consultants to help him in this process. I would like here and now to pay a very warm tribute to Mr. Corbett for the extremely helpful contribution which he has made to my and the Government's understanding of the problems of B.O.A.C.
The Corbett Report is not another Denning Report, as the hon. Member for Loughborough seemed to suggest. This is a business consultants' Report throwing some light—a good deal of light—on the affairs of the Corporation. We think that, as long as the Government are to be in the business of nationalised industries, they ought to be free to have access to consultants of this kind and not be under any obligation to publish the resulting report. Therefore, regretfully, but firmly, I must decline the different proposals which have been put to me for publishing the Report, in whole or in part.
I do not think that it is entirely in keeping with our constitution, which provides that the Government's job is to govern, that every aspect of what the Government do should be studied in detail by the Opposition. We might well have requests quite soon, were that right, for the Foreign Office telegrams to be shown.
That question is a sound one. I am sorry; I should have touched on this earlier.
Relevant sections of the Report have already been shown to the existing management of the Corporation—for example, those on engineering and maintenance—and I propose that all those sections which could be useful to the management should be shown to those branches of the management where it can help. What we have offered to the House is a White Paper which gives our analysis of the losses and how they have arisen, our forecasts of what is likely to come, and the proposals for which we and we alone can accept responsibility.
As I have said already, I think that half the losses—the hon. Member for Gloucester (Mr. Diamond) is perhaps right in saying one-third; at any rate, it is a substantial proportion—were due to bad luck. There was also a considerable element due to errors of management.
Many of the weaknesses shown up in the White Paper have been corrected and I should like to pay my own warm tribute to Sir Matthew Slattery and Sir Basil Smallpeice for what they have done in this field. They have done a great deal—
Some important weaknesses still remain, and I agree with my hon. Friend the Member for Abingdon (Mr. Neave) that there is no ground for complacency, particularly when we look at the forecast for the future—increased competition, downward pressures on fares, growing restrictions by other countries on our traffic, and the heavy cost that must attend the introduction of the VC10 and the Concord. That is the background against which we have had to decide our course of action, and against that we have had to seek a policy, and the men to carry it out.
The hon. Member for Loughborough described the changes made—and I suppose that we must acquit him of intending it seriously—as the greatest scandal since the Dreyfus case. This is on a par with the comment made by the hon. Member for Leeds, East (Mr. Healey) on the TSR2—that it was the greatest scandal since the South Sea Bubble. The truth is that life is not a school, with prizes and penalties. We are not, as one interjection put it, giving the present chairman and managing director the sack. We are not acting on the basis of particular paragraphs in any one report.
The situation is that B.O.A.C. is faced with a very serious crisis. It is my view, rightly or wrongly,—but I have to recommend a decision on this—that what is needed in this situation is one individual who will take on the leadership of the Corporation, and discharge, for a time at least, the functions of chairman and some of the functions of managing director. For this purpose, I chose, and recommended, Sir Giles Guthrie, who, with his merchant banking background, has great understanding of the financial aspects, who worked before the war with an airline—British Airways—and who has a life-long interest in aviation.
When I told Sir Matthew Slattery that this was my choice and recommendation, he said, as his letter shows, that he thought it better for him to go now rather than at the end of his term, so as to lift the uncertainty in the minds of the staff of B.O.A.C. I consider that to be a very public-spirited gesture on his part, and entirely in keeping with the attitude he has always adopted. The fact that Sir Giles will also take over many of the managing director's functions led, as a consequential development, to Sir Basil Smallpeice's retirement at the same time. I want to pay my tribute to both of these men for the very good work they have done for the Corporation.
The hon. Member for Newton asked me about the other members of the board, and particularly about the attitude of Sir Wilfred Neden, Lord Rennell, Lord Tweedsmuir, and Mr. Poole. A number of member sare due to retire from the board next year, and I have been anxious to get a balance between the necessity for continuity and the bringing in of new men. I have accordingly asked Sir Walter Worboys, Mr. Booth, Mr. Granville and Mr. Lee to remain on the board when Sir Giles Guthrie takes over, and they have agreed to do so. Mr. Granville's present term was due to expire in January, but I have reappointed him. In addition to Mr. Milward and Mr. Hardie, whose appointments I have already announced, Sir Duncan Anderson, Mr. Arthur Norman and Mr. Ron Smith have also agreed to join the board as vacancies arise.
Sir Duncan Anderson will be well known to many hon. Members. Among other notable achievements, he built the great Kariba Dam, in Central Africa, within the financial estimate and the time-scale forecast. Mr. Arthur Norman, the Managing Director of De La Rue's, is one of our most capable younger industrialists, and has a life-long interest in aviation. Mr. Ron Smith is a member of the N.E.D.C. and a leading trade unionist. His work has taken him all over the world by air and, in the process, he has acquired a deep interest in aviation.
It seemed to me that it would be helpful if these new members, who are to be associated with Sir Giles Guthrie in implementing his plan over the next few years, should be associated from the beginning with him in drawing it up. I accordingly asked Sir Wilfred Neden, Lord Rennell, Lord Tweedsmuir and Mr. Poole whether, in the circumstances, they would be prepared to make way in the early part of the year rather than await the end of their appointments which all fell in before the end of the year.
Sir Wilfred Neden, who is over 70, and was due to retire in June, saw at once the force of my suggestion, and he has agreed to retire in the new year. His resignation, of course, implies no reflection on his services. These have been most valuable, particularly with regard to staff matters. The other members, Lord Rennell, Lord Tweedsmuir, and, I understand, Mr. Poole, have so far declined to do so for reasons which no doubt seem good to them. They have, however, assured me that they will co-operate fully with Sir Giles Guthrie.
The plan is the next thing on which I should like to comment.
Will the right hon. Gentleman explain how Sir Giles Guthrie will carry through these policies of his if he has a board which to a large extent will not co-operate with him?
I do not think that he will have any difficulty. My experience of him already convinces me that he will be able to get his wise views accepted, and I am sure that the assurance of co-operation which I have received will hold good.
As for the plan, there has been criticism of asking for yet a further plan after we had the Corbett Report. I am convinced that one cannot separate policy from administration, and that one will only have a sound plan when it is produced by the management itself. As to how soon the plan will be ready, in reply to my hon. Friend the Member for Sunderland, South (Mr. P. Williams), a year is the outside limit but there will be no question of delay in implementation. We will go ahead as soon as each particular bit is ready. I cannot undertake to publish individual bits in full as they come along, but when the time comes to deal with the deficit I will seek to justify whatever action we propose to take.
The grave position of B.O.A.C. was one of the first problems I had to face when I came to the Ministry of Aviation. I tried to disentangle the cause of the losses and look into the future and form an estimate of the problems ahead. When I had done that I then had to decide how to act. In my view, the key to the problem lies in securing the right management. This is why I have acted as I have done. It has not been an easy or agreeable task. It has not been made any easier by some of the indiscretions and leaks of the past few days, but it is a duty which in my view it would have been quite wrong for a Minister of Aviation to shirk.
Britain has led the world in civil aviation. The pioneering traditions of Imperial Airways have been fostered by B.O.A.C. The Corporation, in its turn, has led the way in its standards of safety, reliability and passenger service. I simply refuse to believe that it cannot achieve similar standards of commercial efficiency. We are living in a boom period, and I believe that B.O.A.C. can do what private business is doing on every side. In asking the House to support the Bill I ask it to show faith in the future of the Corporation and determination that its financial success shall match its other achievements.