Orders of the Day — Rolls-Royce (Launching Aid)

– in the House of Commons at 12:00 am on 23rd November 1970.

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3.40 p.m.

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

I beg to move, That this House notes the decision to give a further £42 million launching aid to Rolls-Royce for the RB211 engine, but regrets the lack both of consistency and of effective accountability in the industrial policy for the private sector pursued by Her Majesty's Government.

Photo of Dr Horace King Dr Horace King , Southampton, Itchen

May I announce that I have selected the Amendment standing in the names of the Prime Minister and several of his right hon. Friends.

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

The House will have opportunity today to debate three matters of considerable concern. First, we shall consider the Government's decision to give a further £42 million to Rolls-Royce. Second, we shall have the opportunity to discuss the affairs of Rolls-Royce, one of Britain's most famous companies. Third, we shall have an opportunity to examine, in the light of this affair, the relations, and particularly the financial relations, between Government and industry. There could hardly be a more important subject, and I was glad to read in the Financial Times that the Secretary of State for Trade and Industry intended himself to take the opportunity today to make a major statement on relations between the Government and industry.

Whatever the outcome of the debate may be, Parliament and the public are entitled to know the truth about the relations which obtain, as revealed by the particular circumstance of the RB211 order. Since I was responsible from February, 1967, until this summer for the affairs of Government in relation to Rolls-Royce, perhaps I might be allowed to give details of the circumstances in which Rolls-Royce won the original RB211 order.

This was announced by Lockheed at a Press conference in New York on Friday, 29th March 1968. Rolls-Royce had won against very stiff competition by General Electric, which had offered its CF6 engine, the engine order for the Lockheed 1011 Tristar aircraft. The value to Rolls-Royce of that initial order, on its launching for two airlines, was £98 million, and it was estimated at the time that the whole order with spares could be worth as much as £350 million to Rolls-Royce, possibly the largest export order ever.

I wish to pay a tribute to Rolls-Royce for the work which it did in connection with the engine and with the order. The RB211 engine is a considerable engineering achievement. It is a larger engine than it has ever built before. It is a quieter engine and a more powerful engine. It was not only the engineering achievement which aroused public comment. There was also the fact that Rolls-Royce put so much effort into selling this engine. Sir Denning Pearson and Sir David Huddie worked for months personally on the marketing of this engine. I read in Aviation Week, a reliable American aviation magazine, that Rolls-Royce had told them that it had spent no less than 840,000 dollars on the marketing campaign alone. My evidence confirms what I read, also, in Aviation Week, that there had been 250 individual trips totalling 3 million miles by Rolls-Royce executives back and forth across the Atlantic in order to win the order. and Sir David Huddie and his family moved to New York in order to be on the spot.

This also involved Rolls-Royce in offering to open service and repair facilities in the United States, which in turn could employ up to 1,000 people, and to make a substantial investment in the United States. It was a formidable achievement to secure the order. I wish that some of the critics in the City of some of our major companies would be a little more respectful towards the difficulty of winning orders of this kind against that sort of competition. Some articles written by people who could not mend a puncture in their own bicycle seem to make light of the engineering problems in building a complex aero-engine. It really makes it very hard for those engaged in the export business to do their work well.

But Rolls-Royce did not win this order alone. Sir Denning Pearson at the Press conference at which it was announced very generously said that he had received the greatest help and co-operation from the British Government. Since we are debating relations between the Government and industry, I think that it would be helpful if I filled in the detail of what was meant by the phrase, "the greatest help and co-operation from the British Government". The RB211 order was a product of co-operation between the company, my old Department and the civil servants working in it, the civil servants who worked as engineers and scientists in the research and development establishments, the British Ambassador and the Embassy in Washington, and the taxpayer who picked up the bill. I wish now, therefore, to devote a few minutes to tell the House the background.

First, let us examine the previous support before the RB211 order which Rolls-Royce received from the Government. From 1960 to 1968, Rolls-Royce received £11·25 million in launching aid for three varieties of the Spey engine and the RB178. In addition, it received 100 per cent. financing of the Olympus 593 for Concorde, now costing the British taxpayer in total about £1 million a week and involving the company in every substantial receipts from the taxpayer. All this money which went from the taxpayer into Rolls-Royce contributed to fund the research and development for the RB211 engine.

Lest the House be too shocked to hear those figures in relation to the figures we are debating today, may I set them against the background of American support for the American aerospace industry? For the purpose of comparison, I think it helpful to take the figures for research and development by the Pentagon and N.A.S.A., the American space agency, for the year 1967, the year exactly preceding the year of the RB211 order. The Pentagon and N.A.S.A. had a research and development budget between them of 2,932 million dollars, of which a very great deal found its way into the aerospace industry, and much of it into the two engine manufacturers, General Electric and Pratt and Witney, which were the competitors of Rolls-Royce on that occasion. That is the background against which the House debates the matter today.

In addition, there was specific financial support by my Department for Rolls-Royce in the final months before the contract came to be won, and a proportion of the costs incurred by Rolls leading up to the date of 29th March was paid by the Government. In addition to that, Rolls-Royce had decided to introduce into the RB211 carbon fibre or Hyfil high speed compressor blades, which were invented in the Royal Aircraft Establishment, Farnborough, worked on in Atomic Energy Research Establishment, Harwell, licensed to Rolls by N.R.D.C., all being organisations funded by the taxpayer.

In addition, the National Gas Turbine establishment at Pyestock, also a Government establishment funded by the taxpayer, built special test facilities, which Rolls-Royce, being the only aero engine company in this country, depended on almost entirely for its specialist testing. In addition, Shorts in Belfast was kept going by the previous Government when, on a profit and loss basis, it would have gone bust, and got the huge order for the pods for the RB211.

In addition, to that, negotiations were opened, in which I was involved, for the Royal Air Force to lease a VC10 so that the RB211 engine could be tested in flight before taking its first flight in the 1011 aircraft. On top of that, the Ambassador and his staff in Washington worked continually with us, and with Rolls-Royce, in order to pave the way for the order.

That was how the matter stood in March, 1968. Rolls-Royce had submitted tenders to two American airframe manufacturers, Douglas for the DC10—its option with Douglas expired on 30th April, 1968—and Lockheed for the 1011. The Government had agreed to 70 per cent. of the launching aid on the basis that the engine would be launched only if either Douglas or Lockheed came forward with three airlines ready to order with the Rolls-Royce engine.

At 5.30 on Wednesday, 27th March, Rolls-Royce came to me and said that Lockheed had decided to go ahead with only two airline orders, and it required another £20 million, which it must have five hours later if it was not to withdraw altogether from the race. It explained that if it went with Lockheed with two airlines, and if by the end of April Douglas held it to its pledge to go ahead as well it would have to produce two sets of prototypes of the RB211, one for each airframe manufacturer. That would cost it another £20 million, and it needed the £20 million by 10 o'clock that night because the Lockheed board was meeting then in New York to reach a decision. The Rolls board had to decide whether it could afford to go ahead with Lockheed and Lockheed whether it would be right to go ahead with Rolls. An immediate decision was necessary.

I have heard it said many times—I have heard it said by hon. Gentlemen opposite and seen it on television in "The Power Game" and "The Plane Makers"—that Governments are very slow when it comes to major industrial decisions, that only businesssmen can take big risks at critical moments. Because my memoirs are not appearing in the Sunday Times. perhaps I can be allowed to give them to the House. In fact,5½ hours later—I noted the time in my diary—at four minutes past 11 that night I rang Rolls-Royce and authorised a guarantee not for £20 million but for £9 million to carry it over that four-week period.

How was that money offered, under what legislation? It was under the provisions of the Industrial Expansion Act, which the Secretary of State for Trade and Industry now says he will not use. Rolls-Royce accepted the Lockheed proposal on the basis of the £9 million guarantee. The order was announced in New York 48 hours later and at the end of April, since Douglas did not select the Rolls-Royce engine, the option lapsed and the £9 million guarantee was not required.

That is the reality of Government-industry relations. That is what actually happens when it comes to the point of decision about an order of that magnitude. The Secretary of State in his old capacity as the head of the C.B.I. bitterly attacked the Industrial Expansion Act and has now announced that he does not intend to use it. The House should note that had his Administration been in power in March, 1968, Rolls-Royce would not have got that order.

That was not the end of the degree of Government support. To get the order there had to be an offset arrangement, which was to be undertaken by Air Holdings Ltd. Air Holdings Ltd., supported and led by Lazards, included a number of shipping interests: British and Commonwealth Shipping; P. and O. Steam Navigation—Lord Cowdray personally, as far as I could make out; and Eagle Star Insurance. They offered to buy 20 Lockheed 1011s, with exclusive worldwide rights to sell them anywhere outside the United States and when they had sold the 20 were committed to buy up to a total of 50. That was part of the deal which led Rolls-Royce to get the order.

When the order was announced, Conservative Members in droves joined in signing a Motion congratulating the company and the "financial institutions of this country which assisted so materially in the British triumph." Of course, the Air Holdings operation was also carried by us, in the sense that these marvellous financial institutions which had come to the support of Rolls-Royce had to be underpinned by Government. It was known at the time that Government backed the Air Holdings operation. I can give hon. Members the reference if they want it.

It did not end there. After the Government had injected their money into Rolls-Royce through the launching aid we became partners with Rolls and Lockheed in the business of selling the aircraft. There were endless consultations continuing between the Government, Rolls-Royce and Lockheed to try to get not only the Rolls-Royce engine more widely used but also the 1011 which contains it.

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

The "we" of whom I am speaking is the taxpayer, a function which unites us all.

An Hon. Member:

Did the hon. and gallant Gentleman think it came out of my right hon. Friend's pocket?

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

What I am trying to bring home to the hon. and gallant Gentleman is that such an operation is not possible without Government support.

Later, indeed a year ago, when Rolls-Royce's difficulties became apparent to us, we invited the Industrial Reorganisation Corporation to look at Rolls-Royce. The proper place for businesmen working with Government is not trying to be Ministers or civil servants at No. 10 Downing Street, but actually engaged in the business of supervising and watching Government investment in industry. The I.R.C. made a report identifying the problems of the management of Rolls-Royce. It put Lord Beeching on the board as its spokesman and watchdog and also Mr. Morrow. It agreed to provide £10 million, and another £10 million was indicated in order to provide the finance Rolls-Royce needed to carry this very large order and its other business.

Now, besides the Industrial Expansion Act having been put into cold storage, the I.R.C. is to be wound up, and no such supervision is available.

The reason I have gone into such detail is this—and this is what I was coming to if the hon. and gallant Gentleman had not interrupted. The truth is that this is how Government-industry relations actually work, that every Government does what we did, and if right hon. and hon. Gentlemen opposite, were they not so hog-tied by their own ideology, would have done exactly the same as we did in March 1968.

Nobody need say that they did not know, because on the board of Rolls-Royce was the then Member for Cities of London and Westminster, John Smith, a member of the Rolls-Royce board since 15th July, 1958. What I have now told the House was known to everybody who had any reason to know it in the C.B.I. or industry in general. That was the background to the order we are now debating.

Criticise my judgment if you like, say that it was wrong to support Rolls-Royce, and that that was the wrong judgment to make. Hon. Members may say that the fixed price was unwise. That was the Rolls-Royce decision in a highly competitive position. It may be said that it was unwise for Rolls to put its money on the Hyfil carbon fibre when it was partly untested; that the escalation that occurred later through doubt on the capacity of Rolls-Royce to analyse its likely costs. But, for heaven's sake, do not say that private enterprise had much to do with the operation that we have discussed, because that is how government must operate in the areas of highly competitive international business.

Mr. J. Crimond:

What the right hon. Gentleman has told us is very interesting. Can he give us any estimate of the total amount of taxpayers' money advanced to Rolls-Royce during the period about which he has been talking?

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

I have given some figures up to 1968. I have given the figure of £47 million and the £10 million from the I.R.C., and the other £10 million which is part of that deal. I asked the Minister of Aviation the other day whether he would give the total figures. No doubt he will do so in winding up. Those figures leave out of account entirely the Government money Rolls-Royce received for Concorde and that it will receive as the makers of the MRCA RB199 engine and so on. The right hon. Gentleman rightly identified that Rolls-Royce received a certain amount of the taxpayers' money, if that was the object of his question.

Now let us compare this little bit of reality with the statements made by the party opposite on the subject of Government industry relations. Let me begin with a speech in Edinburgh by the Prime Minister, then Leader of the Opposition, reported in the Sunday Times of 3rd September, 1967, which said: 'It is no good kowtowing to a Labour Government in order to get money for investment which the Labour Government's taxation makes it impossible to get inside the firm or on the open market,' he declared in Edinburgh. 'Private enterprise must fight for the free enterprise system'. Or let us take what the Secretary of State for Social Services said in a speech reported in the Daily Telegraph of 9th February, 1970, in which he referred to a speech I had made about Rolls-Royce, though I had not then gone into such detail. He said: Benn boasted in the same speech that Rolls-Royce would not have won its huge RB211 export order without Government support.This is monstrous cheek. Or take the little leaflet that was pushed through my door during election. It was published by Conservative Central Office. On page 3 was an item headed: "The Great Divide". It said: Between Conservative and Labour attitudes to privately owned business is a great divide. The Conservative Party believes wholeheartedly in Free Enterprise and in the market economy. Or take the maiden speech by the Secretary of State to the Conservative Party conference, a speech that earned him enormous applause from the delegates. This is what he said—and I quote from the Conservative Party hand out issued by Central Office. He said that industry is in poor shape … because self-reliance and initiative have been undermined by intervention and the pursuit of false objectives …". Let us take the right hon. Gentleman's great speech in the House of Commons on 4th November. We do not need the Whips to get our Members here to listen to the right hon. Gentleman because we enjoy him. He said: We believe that the essential need of the country is to gear its policies to the great majority of people, who are not lame ducks, who do not need a hand, who are quite capable of looking after their own interests and only demand to be allowed to do so. A little later, he added: The vast majority lives and thrives in a bracing climate and not in a soft, sodden morass of subsidised incompetence."—[OFFICIAL REPORT, 4th November, 1970; Vol. 805, c 1211–2.] Having made that speech in the House, he discovered that his right hon. Friend was coming along to ask for £42 million. He was rather surprised, so he went to the electronic dinner and said, according to The Times of 20th November, To try and pretend that Rolls-Royce is just like any other company is laughable to the point of the ridiculous. I hope he was rightly quoted. He went on: The alternative would certainly have been to wave goodbye to the original launching aid of £47m., not to speak of the consequences to the vast civil and military programme for which Rolls-Royce is responsible. But, of course, Rolls-Royce would have gone bust if the right hon. Gentleman had not been prepared to support it. At least the right hon. Member for Wolver-hampton, South-West (Mr. Powell) is honest about it. He knows that the logic of the prospectus upon which he and the Secretary of State were elected is that Rolls-Royce should go bust, and I greatly admire the right hon. Member for Wolver-hampton, South-West, although I disagree with much of what he says, because at least he has the guts to articulate the gobbledy-gook that lurks beneath the surface of his mind and to accept the consequences of what he says. Not so the Secretary of State.

Of course Rolls-Royce would have gone bust. Of course so would the British shipbuilding industry have gone bust if the Government had not been prepared to support it. If the right hon. Gentleman had been in power at the time Upper Clyde Shipbuilders came for help, there would have been 13,000 more people unemployed on the Clyde. Harland and Wolff would have gone bust if it had not been for Government support. Anyone who looks at the profit and loss account of Harland and Wolff alone, without considering the political consequences of massive unemployment in Northern Ireland with the possible military consequences which might have flowed from that, is simply blinding himself by his own ideology just to take a narrow view of this whole problem of industry.

Then there was the case of the Furness shipyard, where 5,000 jobs were at stake in one of the best-equipped yards in the industry. Indeed, it did go bust and, without the £1 million which we, the taxpayers, put up, so that Furness could join the Swan Hunter group, it would not now be working to get the exports that it is doing.

Photo of Lieut-Colonel David Mather Lieut-Colonel David Mather , Esher

The right hon. Gentleman, in quoting the Secretary of State's Blackpool speech, missed out what my right hon. Friend said about the aircraft industry.

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

I have read the speech with great care. The right hon. Gentleman said that the aircraft industry was different. I am now dealing with the shipbuilding industry to show that the aircraft industry is not different. I will quote the figures of the American taxpayers' support for the American shipbuilding industry which the right hon. Gentleman used to justify supporting Rolls-Royce with £42 million. I checked the figures with the American Embassy by telephone today.

Only a few days ago the United States Government raised their subsidies to the American shipbuilding industry by 81 million dollars, so that in the current year the American taxpayers are paying 199 million dollars of their money to keep the American shipbuilding industry going.

If anyone doubts the good consequences of our policy, let him look at today's Times. He will see that the total output of British shipbuilders this year could exceed £1·5 million gross, a level which has not been surpassed since the 1939–45 war. It is because of the support which the Labour Government gave to the shipbuilding industry that we have been able to bring it to and retain it in its competitive position.

Of course, the computer industry would have gone bust without Government support. Make no mistake about it. With I.B.M. and the other big American computer company dominating the world, if we had not put £17 million—in this case in equity—under the Industrial Expansion Act into I.C.L., the alternative, to use the right hon. Gentleman's own words, would have been "to wave goodbye" to the British computer industry.

Do not think that the American taxpayers do not finance their computer industry, since N.A.S.A. has spent about 50,000 million dollars on the space programme. That was not just for a one-way ticket to the moon. It was money which filtered out right through the American electronics industry—and the right hon. Gentleman talked about I.C.L. as a lame duck. Short Bros. and Harland would have gone bust, so would British Motors, A.E.I. and parts of English Electric.

The only industrial country that has a Government today preaching a medieval policy is this one. I quote to the House the words of the Scientific American in its report on relations between Government and industry in Japan. It said this: The relations between the Japanese government and business are difficult to describe in Western terms. The relations are close. Government and business work in partnership towards goals which are for the most part mutually agreed on; it is often difficult to say where government action ends and business action begins. The Economist, also commenting on Japan, said: … the ultimate responsibility for industrial planning, for deciding in which new directions Japan's burgeoning industrial effort should try to go, and for fostering and protecting business as it moves in those directions, lies with the government. Competition as it is preached by the Prime Minister and the Secretary of State, between firms in a laissez-faire atmosphere, has not existed for 100 years except in margarine and detergents, which is no doubt why the Government appointed Lord Cole to take over Rolls-Royce when they decided to give it money.

No one knows that better than the Secretary of State. As head of the C.B.I., he knew everything which went on between Government and industry and from his previous experience in the oil industry he knows more about rigged markets than almost anyone else. The only competition in the oil industry is in advertising, when one firm says that it has a tiger in its tank. Is he the tiger in the Tory Government's tank, which is what I suspect? May I borrow from the thoughts of Chairman Mao—he is a "paper tiger" in their tank and he is "living in a soft morass of subsidised incompetence".

What of the future projects which will have to be discussed when this debate is over? What of the BAC311 and the A300B? We do not expect clear answers from the Government today, but we want to probe. In the absence of clear statements, I have tried to find out as best I can the thinking of the Minister of Aviation Supply. I went back to an election leaflet published in Chipping Sodbury, which I think is in his constituency. This pamphlet was published during the election and it is called "Labour and the Aircraft Industry". It is a bitter attack on the Labour Government and contains a reference to the BAC311. It quotes Sir Anthony Milward very approvingly—he was not described then as speaking "stridently" as he was the other day. This is what is said in a leaflet about the BAC311: Even if a decision to go ahead is given now, precious time has been lost, and the A.300 B, to a large extent aimed at the same market will have secured an invaluable lead. That was when the right hon. Gentleman was campaigning for votes among the aircraft workers. But what did he say when he was appointed a Minister?

He gave an interview to the Bristol Evening Post on 17th October. Let me read his words. He was being probed about the future and he said: If the industry can find most of the money itself and come to the Government for, say, no more than 10 per cent., it would be healthier all round. Once the right hon. Gentleman was elected to office there was a very different tone. Then he wonders why we laugh at him when, about three weeks after he talks of 10 per cent., he comes here and asks for 70 per cent. for the continuation of the Rolls-Royce order.

The Government's problem has been made much worse by the setting-up of his own Department. Within one Department comparisons between support for computers, shipbuilding and the aircraft industry could be made using a common criterion and we could compare across the board. The right hon. Gentleman is not in the Cabinet, he has to rely on his right hon. Friend to speak for him and he has my sympathy. It is not a very happy position to be a Minister for a single industry out of the Cabinet when these decisions have to be made.

These are difficult problems. Anyone who has to make decisions involving the future of great companies and thousands of workers, and involving this country's export trade knows how difficult and exceptional they are. Adam Smith is no help. Private enterprise is not what we are talking about and we never have been talking about it. We are talking about a new type of relationship, call it partnership, call it what you like, a new relationship between Government and industry which exists now in every modern industrial society. It cannot be looked at solely in terms of the profit and loss, on an agricultural time cycle year by year. We are talking about skills that have been acquired over decades, we are talking about other costs. If we go wrong, as we could have done in Northern Ireland, the other costs that may be involved in a decision to cancel enter the decision. We are talking about a new strategy of international competition.

Some of my hon. Friends would say that this is a case for the public ownership of the aircraft industry. [HON. MEMBERS: "Hear, hear."] It is arguable whether one should buy out the aircraft companies at prices inflated by the contracts which they have received from Government. There must be realism in discussing these issues. There must be clear criteria, consultation and accountability and these things are not secured by the proposal that the Government have made which have occasioned this debate.

The Motion we have tabled notes the decision to give Rolls-Royce the £42 million. Why does it note it? We cannot do more than note it because the right hon. Gentleman who came forward with this said that it was subject to a further check on the figures. Who has every heard of a Minister saying he wants £42 million subject to a further check on the figures? Until we have the figures and we know that it is correct, how can we approve this in detail? We have also put in our Motion our regret that there is a lack of consistency between the aircraft industry and other industries, improper accountability and, with the disappearance of the I.R.C., no supervision other than what might be given by the Ministry, over enormous sums of public money.

Then we come to the Government's Amendment. I read today how clever this Amendment was because it would put us in a spot. I assure the House that it does not put us in a spot at all. It begins by approving what the previous Government did. Then it talks about the existing rate of 70 per cent. launching aid. I would be interested to know where the adjective "existing" came from. There never has been 70 per cent. launching aid until the Rolls-Royce RB211. That was the first time. If the right hon. Gentleman, having said that 10 per cent. is his objective is now talking about 70 per cent. as the existing rate then he is giving a commitment going far beyond anything he has so far said.

The final laugh of the Amendment comes when it says that they welcome the fact that this has been: … handled through the resources of the company itself. Handled through the resources of the company itself! This is a company that has been propped up and has received public money to retain its competitive position. To ask the House to congratulate the Government on having arranged that it should be handled through the resources of the company itself when the debate is to approve £42 million more in public money is nonsensical.

The issue today is not support for Rolls-Royce. This side of the House takes the view that, having taken a very big decision on the 211 it is right to follow it through. No Government did more for Rolls-Royce than the previous Government, although others may think it wrong to have done so. The issue today is the consistency of the Government, the credibility of the Government, in handling problems affecting millions of people in Britain—not only in the aircraft industry—their jobs and their prospects. The Amendment to be moved by the right hon. Gentleman reeks of odious hypocrisy and I ask the House to reject it.

4.16 p.m.

Photo of Mr John Davies Mr John Davies , Knutsford

I beg to move, to leave out from "House" to the end of the Question and to add instead thereof: approves Her Majesty's Government's decision to continue the established policy of providing launching aid for appropriate projects in the aircraft industry including in particular the Rolls-Royce 211–22 engine at the existing rate of 70 per cent., subject to independent accounting procedures, up to a total of £89 million, and welcomes the fact that the financial problems encountered by Rolls-Royce are being handled through the resources of the company itself and other non-governmental institutions. The whole sense of the Motion tabled by the Opposition and of the speech by the right hon. Member for Bristol, South-East (Mr. Benn) has been to demonstrate that the decisions which have been put forward in relation to this great project are ones seen as being in sharp contradiction with our declared policy in the whole area of industrial prosperity. The object of the Amendment is clearly to bring before the House the need to welcome and approve the decisions taken, and I mean to show that these decisions are in no way contradictory to our industrial policy but fall squarely within its framework.

First, there is the issue of launching aid. I am grateful to the right hon. Gentleman because he clearly presented a reasonable and fair statement of the attitude of mind of his party when in government to this problem. I should like to reiterate some of the points which have had to be reviewed in taking these different decisions. The whole system of launching aid was adopted about 10 years ago. It has since been practised by successive Governments in relation to particular projects and problems inherent in major developments within the aircraft industry. There is no doubt that the aircraft industry presents important problems which are different from those of any other industry. I have never made a secret of that. It presents exceptional difficulties because the sheer size, complexity and time scale of the problems involved are of a kind which increasingly exceed the capacity of any normal company's resources to meet on its own account. Over the years all these factors have grown extensively. The size, the extent, the time-scale and the complexity have all grown very much.

I shall illustrate the point. The development of that great aircraft the VC10 involved, both from private and public resources, about £50 million to see it safely off the ground. Yet today we are discussing the BAC311, which can give rise to three times that amount.

The great Spey family of aero-engines cost between £30 million and £40 million to put into production. Yet today we speak of an RB211/22 which on present estimates will cost £135 million to develop. If that were carried forward into what is called the "Dash 60" version—the extended version with larger thrust—we would be speaking of an amount approaching £200 million.

These projects are enormous. They present not only the difficulties of size and complexity, but also great unknowns. The right hon. Gentleman rightly referred to the problems inherent not only in developing and putting into use new materials in the development of such projects but no less in the demanding, in stress terms, on existing materials of exacting requirements hitherto unknown.

In confronting the problem of the RB211 engine Rolls-Royce was moving into a genuinely new technological dimension which it never had to confront before. This kind of development is wholly unlike the development problems of any other industry. No industry has to face this size and complexity of individual development projects with the resources of individual companies.

Every country which has and seeks to preserve a major aircraft industry faces the problem. They overcome the problem by a variety of different methods of support. They recognise that the development and putting into effect of projects of this kind exceeds the normal resources of single companies in private industry. We do too, and I have never made a secret of that.

Another vital factor is that directly or indirectly Governments are often the principal customers, either in defence or in direct terms, and they have a major part to play as customers in that relationship. In America, as the right hon. Gentleman said, the matter is catered for by enormous military development programmes which are unequalled in Europe. We have no military base of a kind to justify the amount of such programmes, and therefore we have no equivalent capacity.

I remind the House that the principal rival to the 211 engine is the CF6. This was developed entirely as a military project, in its original form, to power the C5A transport aircraft of the United States forces.

Photo of Mr Tam Dalyell Mr Tam Dalyell , West Lothian

If the Government are the chief customers, why are better arrangements not made for public accountability? Why, particularly, has the right hon. Gentleman chosen to dismantle the I.R.C.?

Photo of Mr John Davies Mr John Davies , Knutsford

I shall come to those questions in due course. I do not dissent from what the right hon. Gentleman has said about the importance of association of public and private operations in joint ventures of this kind. I understand that these are necessary. It is wrong to build up the public contributions or the private contribution as being the more important. They have a joint part to play and they play it effectively. There is, though, nothing sacrosanct about launching aid as a sysem for attaining these purposes. It may be that in the future we shall see some variation of it, but at present it is a method which has been used both by the party opposite when in Government and by ourselves. It seems, therefore, not an inappropriate method to deal with the problems with which we are currently faced.

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

Could the right hon. Gentleman tell the House how he differentiates between Government support given indirectly to the aircraft industry in the United States with the direct subsidies for their shipbuilding industry and the equally indirect and equally important American taxpayers' contribution to the computer industry, the electronics industry and all those other industries which he says are totally different to the aircraft industry?

Photo of Mr John Davies Mr John Davies , Knutsford

The position of the American shipbuilding industry, in relation to the level of support which he mentions, is surprising, in that its position in the line up of world-wide fleets would not seem to have shown an enormous result from the expenditure made—[Interruption.] That is exactly the question the right hon. Gentleman put to me. If, therefore, we accept that the launching aid method is not an inappropriate method for dealing with situations of this kind, we have to consider whether the project justifies it. I should have thought that the project in question could hardly be a matter of controversy between us.

When in Government, the Opposition put up £47 million, on the basis of 70 per cent. of the estimated development costs which were then set at £65 million, and the 70 per cent. represents some modest deductions from that figure. They did it because they realised, as the right hon. Gentleman said, that we had in the project an enormous achievement by a British company, an achievement which was, as he said, in the face of great competition problems. They therefore had no doubt that they were supporting an operation which justified Government help and the joint venture principle to which I have referred. They did so also because in their investigations, though the right hon. Gentleman did not mention it I have no doubt that they satisfied themselves that the likely outlet for such an aircraft in relation to the total expenditure level of world fleets should guarantee both to the Lockheed Company, which was the airframe generator, and the engine manufacturer a reasonable and sensible future in terms of the outlet. From the Opposition's point of view, they saw in this project, as we do, a project of major importance, with a likely outcome which would not be unsatisfactory.

I hope that I have the agreement of the whole House when I say that one could only be happy to have seen the successful first flight of this aircraft last week with the Rolls-Royce engines in it performing so well.

It might be said that what had been assessed as being a reasonable and sustainable project on the basis of £75 million, as it subsequently transpired to be in terms of development costs, becomes unreasonable and unsustainable when the cost rises to such a high figure as £135 million, as we now find out. But I do not think that it is reasonable to suppose that the very great increase in development costs necessarily undermines the prospects of the project. After the most careful appraisal, we came to the conclusion, albeit this large increase in costs, that there were on balance undoubtedly advantages in preserving the project and continuing to play that proportionate part in it to which the right hon. Gentleman gave authority when he was Minister of Technology.

The alternative would have been to have lost the whole of the stake that he put in it. Without continuing, Rolls-Royce would not have been able to fulfil its undertakings. It would have had to face a traumatic experience in terms of the claims which would have been brought upon it. Undoubtedly it would have failed to register any engine sales, and the whole basis of the launching aid, being related to a levy based upon engine sales, would have fallen. Both from the company's and the Government's point of view, the result could only have been damaging in the extreme.

There were a lot of consequential damages involved. Rolls-Royce is a company which is not only a supplier of spares, maintenance and engines to an enormous number of airlines of other buyers throughout the world but is at the very basis of our own defence procurement programme. Any risk of losing that would have represented most serious consequences—

Photo of Mr John Davies Mr John Davies , Knutsford

Was the record of Rolls-Royce itself wholly unacceptable? We learned of the sharp deterioration in the development cost factors about the middle of August for the first time. In due course, I will deal with the part that the I.R.C. played in the scrutiny which we then had to undertake to establish what the extent of the excess cost was likely to be.

I would not hesitate to say, nor would the company, that serious shortcomings had existed in the capacity of the company to get timely warning of the increase in costs and to have its financial forecasting systems in a form which allowed it to take action in time to obviate the real difficulties into which it had fallen. But that is not the same as castigating the company as generally incompetent. That is simply not the case. It is a company, after all, which alone outside the United States of America has been able to preserve a capacity for competing in the most sophisticated and variegated aero engine projects. It has undertaken a vast number with great success, and currently it is concerned with some major collaborative projects with Europe. I need only refer to the Olympus and Concorde, to the Adour engine for Jaguar, the RB199 for MRCA, and the M45H, all of which are most important collaborative projects in relation to our European interests. If in the future there is to be retained in Europe any self-contained individual aircraft capability of a total kind, it cannot be without Rolls-Royce.

There is no occasion on that account to condone the financial shortcomings to which I have referred, and new men and methods are being introduced to set that right.

As to the arrangement itself, I should be surprised if it could be regarded as objectionable. We have had to face the fact that Government support has to rise to the very high figure of £89 million. However, that total sum is redeemable on engine sales and, on present calculations at least, the total redemption should be possible within the sale of 225 Tristars, which involves not only the three engines per aircraft, but also the spares provision and excess engine provision plus a further 100 engines sold for other purposes. The redemption of the total amount involved is not entirely without—on the contrary, it is well within—the concept of a reasonable outlet for this great aircraft.

Although the right hon. Gentleman was rather derogatory about the private interests in Rolls-Royce in this regard, those private interests have not only produced another £18 million to add to their very extensive existing commitments to the company, but with the shareholders, take in the last resort the full result of the profit and loss outcome of the project and of any others in which the company is concerned.

Photo of Mr Robert Sheldon Mr Robert Sheldon , Ashton-under-Lyne

Will the right hon. Gentleman confirm the reports in the Financial Times and elsewhere that the £18 million is being put up by private backers, and will he say who they are?

Photo of Mr John Davies Mr John Davies , Knutsford

No. I am not at liberty to reveal who the private financial backers of the company are. It is a matter which is privy to them. It is not a subject which they are required to reveal under the companies legislation.

Photo of Mr Harold Wilson Mr Harold Wilson , Huyton

The right hon. Gentleman has now used the word "private". He is reported in the Press as saying that they were private. Can he say that they are entirely private backers?

Photo of Mr John Davies Mr John Davies , Knutsford

The funds are entirely private. The source of the funds is entirely private. But I am not prepared to declare who are the firms concerned. That is a matter about which the company is entitled to maintain in its confidence.

Photo of Mr Harold Wilson Mr Harold Wilson , Huyton

I am sure that the right hon. Gentleman does not want to mislead the House. I asked him whether he was satisfied that these interests were entirely private. Is he saying that these are private banks, meaning joint stock banks or merchant banks? Can he assure us that no public institution is involved?

Photo of Mr John Davies Mr John Davies , Knutsford

I will not give any such assurance—[HON. MEMBERS: "Oh."] I will simply say that the sources of the funds are private sources. I hope that that will satisfy the right hon. Gentleman.

Photo of Mr Harold Wilson Mr Harold Wilson , Huyton

All that I ask the right hon. Gentleman to say, without, pressing for the names of the institutions—I can understand some discretion on his part—is that no public institution is involved. Will he say that no public institution is involved?

Photo of Mr John Davies Mr John Davies , Knutsford

No. I have simply said that no public funds are involved. I think that that must satisfy the right hon. Gentleman. It is as far as I am prepared to go.

Mr. Thrope:

rose

Photo of Mr John Davies Mr John Davies , Knutsford

I do not wish to resist the right hon. Gentleman—

Mr. Deputy-Speaker:

Order. The right hon. Member for Devon, North (Mr. Thorpe) knows, I am sure, that unless the Secretary of State gives way he must remain in his seat. Mr. Davies.

Photo of Mr John Davies Mr John Davies , Knutsford

I do not wish to resist the right hon. Member for Devon, North (Mr. Thorpe). My sole intention is to continue on this point to the end of what I have to say so that he might take that into account in any question that he wishes to put to me. [HON. MEMBERS: "Answer."] I have answered the question. The point that I wish to add is simply to say that the Government's input of funds would not take place until such time as we had the necessary reassurance from a review undertaken by independent accountants on our account. The right hon. Gentleman found some objection to that which I was not able to understand. The truth of the matter, as he knows better than anybody, is that the extraordinary complexity of accounts in terms of forward estimates of development is of a kind that needs deep and close examination. The I.R.C. is able to carry out a certain measure of examination, but not in the depth that the Government require before they put their money in.

Photo of Mr Jeremy Thorpe Mr Jeremy Thorpe , North Devon

I am sorry to intervene at a difficult moment, but would the right hon. Gentleman not consider that if the British taxpayers are being asked to go into financial partnership with others they are entitled to know with whom they are going into partnership?

Photo of Mr John Davies Mr John Davies , Knutsford

The truth is that they are going into financial partnership with Rolls-Royce. Rolls-Royce is a concern which has a variety of different sources of financial support, some of which are well known through the operations of the Share Register; some of which are not publicly declared, through the operations of normal banking practice. It is those that I seek to respect.

Photo of Mr John Davies Mr John Davies , Knutsford

No. I have repeatedly given way to the right hon. Gentleman. Perhaps as a matter of clarification—

Photo of Mr Andrew Faulds Mr Andrew Faulds , Smethwick

There's a lame duck for you, a sitting bloody target.

Photo of Wing Commander Sir Robert Grant-Ferris Wing Commander Sir Robert Grant-Ferris , Nantwich

Order. We seem to be getting a little hot. I think we should take care not to do so. I am sure the House would agree that a very good reception was given to the speech by the right hon. Member for Bristol, South-East (Mr. Benn). The House, which is one of the fairest places in the world, will want to give the same hearing to the Secretary of State. The House has put me in my present position to see that a fair hearing is given, and I appeal to hon. Members to give just that now.

Photo of Mr John Davies Mr John Davies , Knutsford

I have at this point to take up the question of the position in this matter of the I.R.C. Under arrangements made by the right hon. Member for Bristol, South-East at the end of last year, the I.R.C. undertook an examination of the affairs of Rolls-Royce with a view to seeing whether additional funds should be provided. After that and following protracted negotiations, they did in fact, under an arrangement which was agreed by the right hon. Gentleman, put in a sum of £10 million and they undertook, moreover, in response to the need which they expressed for certain satisfaction on the subject of improvements in Rolls-Royce's control system, to make a further £10 million available during the course of next year. In the event, the arrangements which have now been made embrace that second tranche of £10 million to which I have referred, and it will therefore not be made.

If, as I think, the launching aid system, the project itself, the company, itself and the agreement into which we have entered with it are matters which, on the whole, do not demand dissent from the other side of the House, as far as I can understand from the right hon. Gentleman's speech, it must be that the Opposition feel that what would be right for them to do is wrong for us. Apparently they would seem to indicate that, while they would agree to its being done—[HON. MEMBERS: "Not at all."]—well, this would certainly seem the inference of the Motion—I would simply say that I do not consider that it is in any way incompatible with the industrial policy we have so clearly declared. [An HON. MEMBER: "You have not got one."]

So far as I was able to understand, the right hon. Gentleman, in moving the Motion, referred to a great series of industries which he found to be in a struggling, if not catastrophic, state. It struck me that perhaps that was as serious an indictment of the conduct of industrial affairs in this country as we have heard in the last two years. Our declared industrial policy is manifest. We have made clear that we dissociate ourselves and wish to disengage from an excessive degree of intervention in private industry. Equally, we wish to bring about a reduction in public expenditure which such disengagement arouses. We have already given an earnest of our intentions in this regard. We have made it clear that we believe in stimulating, by all the means available to us, the profitability of private industry.

We have also given an earnest of our intentions in this regard in relation to the reduction of corporation tax and in replacement of the investment grant system by a tax-related allowance system. We have made it clear that we propose to reduce the contrast to which the Labour Government gave such emphasis in discriminating between the manufacturing and service sectors of industry, and we have already shown some evidence of our intention to move in that direction. We have declared our belief that, by measures the Government themselves can take, we can sharpen the climate of competition within which private industry lives. I shall soon be stating precisely by what means we propose to attain that end.

We believe that private industry can and should stand more and more on its own feet. In that regard we have already instituted a very careful examination of all those fields, be they research, export support and the like, where the Government have increasingly over the years sought to back up the whole of private industry's own affairs. We have decided to disband the I.R.C. We have done so not because we consider the corporation to have carried out its mission in any way imperfectly. On the contrary, we thought that both the Corporation and its executives, within their remit, carried out their task well. But we believe that the existence of the I.R.C., as it stands at the moment, is a temptation to do other than to have recourse to the proper private enterprise system for sustaining industry. These factors and their development are now the industrial policy of this Government and they will be pursued.

We believe that they will produce a much more viable economy, which is quite essential if we are to realise the increased resources which the Labour Party, during their period in Government so signally failed to achieve in terms of the growth of our national product and the sustainability of our external competition. We have seen nothing in this to contradict the purpose of undertaking a joint venture of the kind to which the Motion refers with a company—and here the Opposition agree with us—which requires a joint venture of this kind.

We believe that such joint ventures are of immense importance. They have a vast impact not only on our international prestige, but on our foreign earnings. They have an enormous importance in the whole field of technical and scientific achievement. They conduce to the growth of our industrial prosperity, but they cannot be accepted, they cannot be effective, unless they can also be proved to be cost-effective in real terms, and this, also, this Government will see to.

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

The Amendment asks the House to approve what the right hon. Gentleman has done, on the basis that this will be handled by non-governmental institutions. The right hon. Gentleman now says that the Government will see to it that these things will happen. Can he say how?

Photo of Mr John Davies Mr John Davies , Knutsford

I commend to the right hon. Gentleman the terms of the Amendment which says: … through the resources of the company itself and other non-governmental institutions. I am coming to the question which is implicit in the Motion and which refers to the question of effective accountability. I find this part of the Motion most perplexing of all. I am not able to understand quite what is aimed at. Is it the question of the accountability of Rolls-Royce to its shareholders, which in any case is provided for within the framework of the Companies Act, and which is well known to the public? Is it thought that Rolls-Royce will in some way or other conceal the facts about the whole of its customer relationships with Lockheed or other customers?—[Interruption.]—Not at all. I am living within the framework of confidence in the company. Is it perhaps the concern of the Opposition that the facts upon which we are undertaking this operation are themselves incorrect? The very purpose of having instituted an independent examination by accountants is to find out whether that is so. Is there some fear that the Government will not submit to the normal scrutiny of Parliament and the Comptroller and Auditor General? Of course the answer is "No".

I maintain that what we have done is wholly consistent with the Government's industrial policy, is fully safeguarded by both public and private accountability, and is the result of careful appraisal and analysis. I ask the House to dismiss this vague and woolly Motion tabled by the Opposition and to support our Amendment.

4.53 p.m.

Photo of Mr Peter Shore Mr Peter Shore , Stepney

I think that we have heard an extremely vague and woolly speech from the right hon. Member for Knutsford (Mr. John Davies) and, further, a rather disappointing one. The real reason why the right hon. Gentleman disappointed the House on this occasion was that he decided to take on a mythical foe. He fought a pitched battle with an enemy that was not there. He had received some party political intelligence to the effect that we on this side of the House, having undertaken over the years this immense supportive effort which my right hon. Friend the Member for Bristol, South-East (Mr. Benn) described in his opening speech, would suddenly at this stage of the game decide that we should withdraw from it and oppose its continuance.

I must tell the right hon. Gentleman that nothing is further at least from my mind. The decision, though a difficult one, was right. I am certain that it was a decision which, having been taken, we should continue unless there were some new factors which would cause us to revise our judgment, and no such new factors have been adduced.

The only people with whom the right hon. Gentleman might have been engaged in large numbers were some of his hon. Friends behind him. There are some rather stoney-faced people who clearly believe that the Government ought not to support Rolls-Royce, and ought not to support British industry in its efforts to win large export orders. Some of them were here from Wolverhampton and Oswestry, and no doubt there were others on the benches opposite who took that view, but not on this side of the House.

The second reason why the right hon. Gentleman has disappointed us is that he has not cleared up the important question of what the Government's policy is towards the support of private industry the circumstances, the nature and the amount of that support—outside of the aircraft industry. That is what we were expecting to hear from the right hon. Gentleman and what the country and industry generally also want to know.

I shall devote most of my remarks to that topic, but I should like to say a few more words about the Rolls-Royce issue itself. I am very sorry to hear that the I.R.C. arrangement—the £20 million that had previously been provided by the I.R.C.—is not to be carried out in full, and that the second tranche of £10 million is to be withdrawn and to be, as it were, superseded by the new launching aid arrangement.

I am sorry about that for a good reason, and one that will appeal to my right hon. and hon. Friends. It is simply this, that when large sums of money are made available to private industry it is right that the nation should be satisfied that it is getting a fair return on its investment, and I have never taken the view that that return was fully met simply by getting a levy on the sales of the completed engines. There are other forms of participation in the profitability of a company so helped which we have in the past pursued and which we should pursue in the future.

The essence of the I.R.C. investment is that not only did it make £20 million available, but it took out a convertible stock option so that it could, if it thought the condition right, turn that into substantial equity holding in the company itself. I regret that this form of aid has been withdrawn and has been replaced by the launching aid about which we heard earlier.

Why have my right hon. and hon. Friends put down this Motion? The answer is clearly so that they can go beyond simply a discussion of aid for Rolls-Royce and the aircraft industry. They have put it down because it reflects the concern which we on this ide of the House all feel about the performance of the private sector of British industry and our desire to make certain that the policies and practices in the private sector add up to and conform to the national interest as we know it.

The Government's policy on this appears to be really a non-policy. They seem to be telling themselves and the House that they believe that the Government should withdraw as much as they conceivably can from involvement in and active concern in the affairs of private industry. That appears to be their philosophy.

In this argument there is a strong element of ideology on both sides. It is none the worse for that. But the reason why the party opposite—like the Labour Party—came to the conclusion that broad, widely spread Government intervention in industry was necessary was not that it was convinced by the ideological case for intervention; on the contrary, it was convinced by the hard facts of its experience in Government during the 13 years up to 1964.

I want to put to the House two points which make my case in a summary form. It is a remarkable coincidence—if we look through the national accounts—that whenever company profits reach a new peak the national accounts reach a new depth. There appears to be a directly contrary relationship between the overall profitability of industry and the performance of the nation as measured in its most difficult area—the balance of payments. That should make anyone reflect on the simple proposition that what is good for industry is good for the nation. I regret to say that that is not the case. I wish it were true, but it is more complicated than that.

If the right hon. Gentleman looks back over the 13 years in which his party was in office and thinks of the period in terms of quinquennia he will find that from 1952 onwards there was a steady decline in our national economic performance over each five-year period, and the last five years—1960 to 1964—was the period in which we chalked up a balance of payments deficit of about £1,150 million.

Taking the five years from 1960 to 1964, there were two periods of major crisis. It was not the time of a Labour Government. The then Chancellor of the Exchequer, the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) and, later, the right hon. Gentleman who is now Home Secretary, found themselves forced to abandon the empty slogans of free enterprise with which they had begun their period of power in 1951. They began to grope their way forward, late and in an inadequate fashion, to a new concept of industrial planning. It was the right hon. Gentlemen opposite who formed and founded the N.E.D.C., the N.I.C., and many other instruments of intervention in industry, in the very teeth of their ideological beliefs. They did it because of the hard facts of experience. By now it surely must be recognised that it is not enough to leave the prosperity and performance of this country's industry simply to fiscal, monetary or exchange rate policies. Governments are bound to intervene in the economy. We should be concerned now that the intervention should be certainly as cheap as possible and—still more important in many ways—as effective as possible.

The right hon. Gentleman and his colleagues have restated their ideology and have announced some of the decisions which they hope will give effect to it. On 27th October the Chancellor said that investment grants would go. Incidentally, it is interesting to note why they must go. Investment grants are a system of selectively stimulating investment. That is their real crime; that is the unacceptable part of the investment grants. They actually discriminate between manufacturing industry and service industry. Why do they discriminate? It is because in the whole experience of 1951 to 1964 it was clear that the real area of weakness in the British economy was in the performance and, above all, the investment, of British manufacturing industry.

On 30th October, on a Friday morning, the right hon. Gentleman told the House that we were to see the end of the I.R.C. He said that he liked the chaps who had helped. He thought that they had done a splendid job, and he could not fault them; but they had been given the wrong remit. Let him recall what the remit was. It was to strengthen the structure of British industry. It was not a remit that was carried out by a certain Minister, following his own prejudices and, perhaps, insufficiently advised. He might have objected if that had been so. It was a remit carried out by people who, by his own admission, constitute the outstanding talent of British industry. They were given the job of advising, and the power to carry out their decisions, to carry through the restructuring of British industry.

If the right hon. Gentleman thinks that the firms that were restructured are a lot of lame ducks who should not have been helped, he should look carefully at the list of firms who have been helped. It is almost a roll-call of the great names of British industry. The plain truth is that the I.R.C. was doing a job which, for many good reasons of which we are all aware, was not being done by the normal agencies of the private sector.

What else was the I.R.C. doing to cause it to be slain? It was taking up Section 2(1)(b) powers under which it was able to direct aid support to firms which were making a contribution to our exports, or to import saving. He knows of the grants made in my time as Secretary of State in respect of the de-inking process in two paper-making firms which we thought would make a contribution to our balance of payments of about £2 million a year.

We are also told that the Industrial Expansion Act is to be repealed. The right hon. Gentleman surely remembers that that Act enabled us to finance the aluminium smelters which, next year, will be contributing £40 million a year in import saving to our economy.

To complete the package of slaughter of the interventionist bodies that we had established, the Prices and Incomes Board is to go, even in its rôle as a provider of information, let alone its ability to lead the action against prices. Even in respect of its ability to provide the country and the House with information on prices and incomes it is to be dismantled and thrown aside.

This is a curious and wanton course of destruction, and I am not clear that the right hon. Gentleman knows what he is doing. His policy is very fuzzy at the edges. He has told us that aircraft are the great exception, although how much of an exception they are he has not defined. I have read his recent speech to the electronics industry, and I would ask him to re-read it to see what he said. The crucial factor with Rolls-Royce, apparently, is not just that it is related to aviation, but that it is of crucial importance to our defence effort. How many other firms come into that category? Are they eligible, and if so under what terms, for such assistance? The right hon. Gentleman went on to say: Market forces alone may not always produce acceptable solutions. He was not talking solely about aviation then. He was referring, indeed, specifically to the electronics industry. Microelectronics and computers also apparently are to be eligible under his own doctrine for help.

If the right hon. Gentleman consults other members of his Government, he will know that his predecessor in his present post, who was there very briefly and is now unfortunately engaged on a wholly disagreeable task, delivered himself on the subject of shipbuilding. In the debate in July, he said: We intend to continue to give special assistance for particular industries like shipbuilding."—[OFFICIAL REPORT, 9th July, 1970; Vol. 803, c. 882.] I cannot imagine what the other industries are, but we should like to hear. If the right hon. Gentleman cannot give me the replies, perhaps he will see that his right hon. Friend supplies them in winding up.

We attach great importance to Government policy towards private industry. It is not just a question of helping particular firms which are in difficulty: much more than that, it is accepting that there is an inter-relationship' and an increasing interface between Government and industry, and that it is far better to be in a relationship with industry before disaster strikes than to try to pick up the pieces when the thing has already reached a stage where one can no longer help except at great cost.

One cannot separate policy towards industry, the private sector in particular, which accounts for so large a part of our exports and imports, from policies which are related to the economy as a whole.

There are many different ways of affecting the economy. One of them of course is to use tax policy. The right hon. Gentleman and his colleagues are obviously very keen to reduce taxation, which they maintain will create a good climate. They could also, if they wished, have tried to operate directly on industrial costs, with some form of prices and incomes policy. That, they have made perfectly clear they have no intention of doing.

They could also have attempted to operate, as we did with increasing success, on what I call the supply side of the economy, in a real attempt to remove those constraints which always appear whenever the economy, over the last 10 or 20 years, has begun to expand. That of course was the real aim of the greatly increased industrial interventionism in which my right hon. Friend and some others of us were involved in these last few years. The right hon. Gentleman clearly will not do that.

He has rejected that particular weapon as well, and the House must face just what he is left with. At the moment, no one can pretend that the British economy is in a very healthy condition. There certainly is a great deal of inflation, and there appears to be very little evidence that anyone knows how to deal with it. Certainly, we hear different voices giving different remedies among Government spokesmen in the other place. At the same time, investment is falling, production is growing far below productive potential, and unemployment this last month, at over 600,000, was the highest figure that we have had for 30 years.

What is left in the armoury of weapons which the right hon. Gentleman and his colleagues can deploy now on the economy? He has destroyed interventionism in industry, he has rejected any attempt at a prices and incomes policy, he has used up what he can do at present at any rate in cutting taxation.

I can think of only two further instruments which are left to him. One would be to operate on the exchange rate, and I have no reason to believe that that is their intention. We have all heard about what the Chancellor said during his visit to Copenhagen.

So it comes down to one last regulator—unemployment. It is the throttling of the economy, the so-called free market economy, that they are trying to deflate with monetary controls and rigid d.c.e.

formulae, in which they are placing their hopes. It is in that broad context that the House should recognise their folly in rejecting and moving away from the very constructive work on industrial partnership, on micro-economics, which we had certainly embarked upon and could most fruitfully have developed in the years ahead.

5.16 p.m.

Photo of Mr Michael Grylls Mr Michael Grylls , Chertsey

I ask for the traditional tolerance and kindness that the House always accords to a maiden speech. I am very conscious that it will be difficult for me to emulate my predecessor, Sir Lionel Heald, who represented my constituency with such distinction for the last 20 years. For his successor, he set the very highest standards. Sir Lionel was greatly admired in the House of Commons, and in the short time that I have been here, I know how much he is missed. In Chertsey, he looked after his constituents with exceptional care and humanity.

One of the problems in which Sir Lionel always took a great interest, and which I have inherited, is the long-term future of the B.A.C. factory at Weybridge, where many of my constituents work. The factory's future prosperity, or lack of prosperity, affects literally thousands of my constituents. It is one of the largest aircraft factories in Europe, and its future is a national problem as well as a constituency one.

It has a record of which it is rightly proud. It has exported over £800 million worth of civil aircraft in the last 20 years. The famous names that have rolled off the Weybridge assembly line are legion. It was in 1945 that the Brabazon Committee decided to support the propeller-turbine aero-engine, rather than the pure jet, which at that time was running into problems of development.

So the famous Weybridge design team was born, under Sir George Edwards, the present Chairman of B.A.C. This team gave birth to perhaps the most famous of all civil airliners—the Viscount. It was a milestone in British aviation history. It was the first British aircraft to sell in quantity in the United States, and it subsequently went into service throughout the world. Some 445 of these aircraft were sold at an export value of £177 million—rather cheaper than the prices we are talking about now.

The Viscount was followed by the Vanguard, and then by the VC10, which was the most popular aircraft on the North Atlantic, and then the 111, which has sold over £200 million worth in the last few years, with 72 aircraft sold to the United States.

We all know what marvellous aeroplanes these are, and the majority have been built at Weybridge by many of my constituents—or Sir Lionel's at that time. Today, Weybridge has a large part of the Concorde programme. I am told that it has the difficult part, that nobody else can do, but since that may offend other hon. Members, I will not pursue it. Its long-term future in the 'seventies depends on the development of the BAC311.

Here the Government's choice is between building the 311 or joining in with the European airbus venture.

B.A.C. has shown that it can build a very financially successful modern aircraft, as it has done with the 111. If it achieves the same market penetration with the 311 as it has with the 111, it will easily be able to repay all the launching aid that it would need from the Government. Many of the 111 customers want the 311 as the natural successor, it is very much easier for them to buy a follow-on aircraft. And at home B.E.A. has said that it wants to buy British, and it wants the 311. The greater part of it would be produced in this country and most observers want the 311. The aero-engine for the airbus could be made by the American General Electric Company in which case there would be no need for any further expensive launching aid for the Rolls Royce 211–61.

Sad though it would be to have to drop that new developed engine, I believe that it is unrealistic in the present economic climate to expect the Government to produce still more money to back yet another new aero-engine. If that happened, we would have an Anglo-American airbus which would be useful and which would greatly help us with our sales in North America. For an aircraft project to be really successful, it must sell well in the North American market, and this is a factor which I commend to hon. Members.

I suspect that the financial proposals put by B.A.C. to the Government are largely acceptable, but I hope that my right hon. Friend the Minister of Aviation Supply will comment on this when he replies to the debate. On the other hand, I cannot believe that the European airbus, an aircraft with a very limited export potential in which Britain would have only the smallest share, is really in the national interest. It would, I suppose, suit the European airbus developers to see the 311 permanently grounded but, were this to happen, it would be disastrous not only for this country as a whole but for 6,000 of my constituents in particular. Indeed, it could in the long run mean the end of the British aeroplane industry.

B.A.C.'s marketing studies of the 311 are probably the most carefully prepared of any aircraft project. B.A.C. estimates the sale of 280 aircraft with an export value of £1,500 million, and this would be a significant contribution to Britain's balance of payments in the late 'seventies and early 'eighties. I therefore urge the Government to end the suspense for me and my constituents by giving the 311 the go-ahead. Tonight would be an excellent moment for an announcement, and I shall look forward to it with anticipation. The Government should hesitate no longer.

As the Minister said on 11th November, Rolls-Royce's need for the extra launching aid for the RB211/22 became apparent to my right hon. Friend only late in August. This means that the present Government came into the picture very late in the day in the middle of the Rolls-Royce/Lockheed saga. No doubt Rolls-Royce should have insisted on a tougher contract. No doubt the I.R.C. could have looked more closely into the problem before giving launching aid. But that is history.

Today, we are dealing with the present. I believe that the last Government were right to have given Rolls-Royce launching aid. However, while not wishing to whitewash any management failures on the part of Rolls-Royce, we should recognise the intense difficulties of estimating projects of such advanced technology. Rolls-Royce was pioneering the carbon fibre development for a new engine with all the problems inherent in such inventions. I understand that the difficulty was the bird-repellent qualities of the engine. Who would have thought that it would cost £42 million to get the better of a bird? That is indeed inflation. Despite this, I hope the House will recognise the considerable achievement involved in getting a British-designed engine into a major American airframe.

In the debate earlier this month and today, hon. Members have expressed concern about the Government's financial control over the rest of the RB211/22 programme and I, too, am rather worried about this. My right hon. Friend said on an earlier occasion that he would talk to Lord Beeching, the I.R.C.-appointed director, about it. I welcome that, and I hope that the noble Lord will continue to look after the Government's interests on the Rolls-Royce board. Perhaps it would not be out of order for me to suggest that Lord Beeching be invited to address an all-party meeting of the House upstairs so that we may question him directly.

I thank the House for listening to me with great patience as I have made my maiden speech. I felt that this afternoon was a wonderful opportunity for me to make my first contribution on a subject about which my constituents and I feel passionately. Again, I thank hon. Members for extending great courtesy to a maiden speaker.

5.27 p.m.

Photo of Mr Maurice Edelman Mr Maurice Edelman , Coventry North

It is a privilege to speak following the hon. Member for Chertsey (Mr. Grylls) because it gives me an opportunity to congratulate him on a maiden speech that was made with great conviction, elegance and charm. I know that the whole House will look forward to hearing him on many occasions. He spoke persuasively on behalf of his constituents and on behalf of the cause of British aviation, a subject which is close to the hearts of many hon. Members who wish to take part in this debate.

I hope that the debate will not resolve itself into a discussion between the interventionists and the non-interventionists. The Minister made it clear that he has renounced the case for non-intervention. He has made it perfectly clear that, henceforth, despite all their ideological protestations, the Government are not so strictly bound by their past affirmation that, where they feel it necessary, they will not intervene to assist private industry.

Those on this side of the House who have always approved of appropriate Government intervention to assist private industry and to promote the public good will not dissent from that. With the exception of perhaps the right hon. Member for Wolverhampton, South-West (Mr. Powell), hon. Members accept that Rolls-Royce is a company of such great strategic and economic importance to the country that it should not be allowed to fall into a condition of bankruptcy.

For this reason, to preserve the industry's various teams—scientific, design and so on—and to make provision for all the technical skill of the workers at Rolls-Royce to be maintained and used, it was right that the Government continued to give the company support to try to safeguard its future.

But that is not the end of the matter. Apart from the hon. Member for Chertsey, I am surprised that so far no one on either side has made any detailed reference to the nature of the RB211 contract, or has tried to explore the cost of making the engine and the nature of the profit or loss which had to be endured in the early stages and which is likely to be increasingly endured in the future. That aspect seems to me to be the heart of the matter, and it is to that that I propose to address myself.

I would not wish to pretend in any sense that when the contract was first announced on 29th March, 1968, I was not absolutely delighted that Rolls-Royce had landed it. I congratulated the Government at the time. I said that we in Coventry, which is directly affected by the order, all welcomed the fact that by a partnership of Government and private industry a deal had been arranged which was likely to guarantee employment in the aero-engine industry for at least 10 years.

At that time The Times newspaper even had a leading article from which I will read two very short extracts. It described the Rolls-Royce deal as "a triumph of expertise", and went on: In any terms the order that Rolls-Royce has won for its engines in America is a triumph. Most immediately, it is a commercial triumph for the company. It went on: This order, initially worth £150m. but potentially worth far more (the company estimates £1,000m.) secures Rolls-Royce's place among the world's top three or four aero-engine makers for the next 10 years. And this is also important, not for the modest thrill of pride the fact brings to every Briton, but because it is a position held entirely on the merits of the company's products. To describe our reaction at the time as a modest thrill of pride is to understate that reaction to what seemed to be a massive achievement. We were all delighted at the prospect of what Rolls-Royce had done. My right hon. Friend the Member for Bristol, South-East (Mr. Benn) to this very day obviously recalls with more than a modest thrill of pride the way in which Rolls-Royce salesmen went to and fro across the Atlantic; the manner in which offices were set up, and the way in which there was coming and going between Whitehall and the Rolls-Royce company. He recalled that it was the finest hour of the Ministry of Technology.

So it seemed at the time, and I do not complain that the joy in that order still persists. Yet we must look a little at the inwardness of that contract, because if we look at the deal for the RB211; at the fact that this was a fixed-price contract which seems to have made little provision even for the normal process of inflation; at the fact that it deals with an untried material—Hyfil carbon fibre—and consider all the technical snags and difficulties which might arise; at the penalty clauses which have been announced in connection with the contract and, in addition, if we consider that this contract was won in the teeth of the most fierce competition from General Electric and Pratt and Whitney, who eventually pulled out of the competition, then, with that hindsight which is supplied to everyone here today, we must ask whether the terms of the contract were wisely drawn.

Accountants cannot achieve miracles in industry. When a company runs into trouble the immediate call is for some accountant to be introduced to see where the trouble lies. I have the greatest respect for accountants: they are admirable when doing one's own books and when resisting the Treasury. On the other hand, I do not believe that accountants, especially accountants who do not have either the expertise or the general experience to examine costs—some of which at times are not even disclosed—can work miracles.

When Mr. Ian Morrow, an admirable executive, was introduced into the company he was even then working, and the Minister will correct me if I am wrong, only two days a week as a part-time executive. Now, when Rolls-Royce was progressively sinking into a mire with the RB211 contract which, whatever its technical merits—and they were and are extremely great—became an albatross, as it were, round the neck of the company, the fact that Mr. Morrow did not earlier discover what was going on is something for which Rolls-Royce and its management must be held responsible.

Photo of Mr Frederick Corfield Mr Frederick Corfield , Gloucestershire South

It is only fair to Mr. Morrow to point out that he was not actually appointed till July, although the I.R.C. had been pressing for his appointment very much earlier.

Photo of Mr Maurice Edelman Mr Maurice Edelman , Coventry North

I am delighted to hear it. But even at that time, and even to this day, the actual costing methods used by Rolls-Royce have not been disclosed. Perhaps the right hon. Gentleman will tell us later what is now being done to obtain adequate disclosure of the internal costs of Rolls-Royce so that we will know where the money is going. That is absolutely essential.

The fact that we now have Sir Henry Benson—who, I understand, is to be an independent accountant—looking after the developments in Rolls-Royce, is to some extent encouraging. It will be remembered that Sir Henry Benson was responsible for another, though smaller, firm of Rolls—Rolls Razor—though he was rather too late to carry out the purpose to which he might, much earlier, have made such a great contribution. I hope that in this case we shall have a different experience.

I should like to know from the Government what they mean by talking about the support which they have given to the company as being … subject to independent accounting procedures … That seems to me to be the greatest mystery in the whole Rolls-Royce enigma. What does that phrase mean? Does it mean that every month or so Sir Henry Benson and his team will get figures from the company; that they will look at them; that they will evaluate the money that is going in to see to what purpose it is to be applied? It all seems to me to be inadequate to the problem of the public accountability and the proper control of public moneys that are being put into the company.

What I believe is necessary, and this is most important of all, is that we have to look again at the RB211 contract. We have to consider whether, if we make 180 sets of engines, it is true that according to present indications the loss which the company and—therefore, partially the public exchequer—will incur will be of the order of £35 million. Perhaps we can be told that we are putting up a very large sum of money which will make a guaranteed loss of £35 million.

If that is so, Rolls-Royce, Lockheed, and the British and American Governments should re-examine the nature of the contract and see what can be done in the best interests of everyone. The firm of Lockheed is in cash difficulties. It has made a settlement with the United States Administration by which it will be bailed out, for the time being, of some of its problems, but the civil airlines which had intended to make long run purchases of Tristar also have their own difficulties and are hesitant about buying forward long runs of aircraft.

Therefore, it is not only a Rolls-Royce problem but an inter-related problem facing Lockheed. For these reasons, just to continue blindly presevering with the RB211 in a kind of vacuum without direct contact or relationship with the United States is something which is bound to lead to increasing loss, and will lead. I forecast, to increasing demands for subsidies from Her Majesty's Government.

There has been a malaise of management in the Rolls-Royce Company. Sir Denning Pearson's very honourable retirement is surely a pointer to the fact that all has not been well with the Rolls-Royce management.

Photo of Mr Robin Maxwell-Hyslop Mr Robin Maxwell-Hyslop , Tiverton

As I understand it, Sir Denning has not retired; he has been retained as deputy chairman.

Photo of Mr Maurice Edelman Mr Maurice Edelman , Coventry North

I said that Sir Denning had honourably retired from his chairmanship and had been promoted to another place, where no doubt his services will be of the greatest value. Over the weekend I was talking to some Rolls-Royce workers in my constituency. One of these workers said to me, "The trouble with this place is that there are more sheriffs than cowboys". His point was that Rolls-Royce has been overloaded with management and that, although it has had some remarkable salesmen and outstanding engineers who, in the great tradition of the company, have performed, and are performing, feats which must command everyone's admiration, in commercial administration and commercial management there is clearly much to be desired.

What of the future? First, the RB211 contract must be reconsidered very carefully to see whether the company can persevere in the project without a situation being persisted in which every new engine that is manufactured means an added loss to the company and therefore, in the present situation, for Britain.

I have said—I have sponsored a Motion to this effect which is not on the Order Paper—that I believe in the public ownership of Rolls-Royce, because that is the only way to achieve direct public accountability. After all, public ownership is only another degree of public intervention, which hon. Members opposite now accept. Public investment demands public accountability.

If we cannot have public ownership of Rolls-Royce, the Government must recognise that they have a duty to the nation as part of their stewardship to ensure that on the board of Rolls-Royce there are directors nominated by the Government who will have the task specifically of caring for public investment. Only by this drastic means can Rolls-Royce become commercially viable again and give Britain the great service in the future which it has given in the past.

5.43 p.m.

Photo of Mr Stanley McMaster Mr Stanley McMaster , Belfast East

I congratulate my hon. Friend the Member for Chertsey (Mr. Grylls) on his excellent maiden speech. He spoke of B.A.C. I want to speak of the firm in my constituency of Short Brothers and Harland.

I welcome the fact that Rolls-Royce has received the Government's further support on the RB211/22. Short Brothers and Harland are engaged in this deal and have been manufacturing the pods for the engines. The firm looks forward, if the Government decide in favour of the BAC311, to valuable sub-contract work on this aircraft.

The British aircraft industry is in a very special case. My right hon. Friend the Minister said that he recognises that the aircraft industry is not generally to be classified as the lame duck in Britain. Because of the vast amount of public money which is required to support new projects and because of the type of competition it faces from abroad, it requires very special help from the Government.

If this help is not forthcoming, Britain will lose technological leadership in many of the most advanced aspects of technology, an outstanding example of which is the carbon fibre which Rolls-Royce has unfortunately had so much trouble in developing for the blades of the engine which is the subject of the Motion. Britain can benefit from this type of technological progress, can gain worldwide prestige, and gain the "know-how" which is so essential to the economic well-being of a trading nation, only if the Government are prepared to support our aircraft industry.

Obviously the risks involved are not of an ordinary commercial nature. I therefore welcome the fact that the Government, in spite of their general policy of not supporting lame ducks, are prepared in the case of Rolls-Royce, and presumably in the case of other aircraft projects, to make an exception to the general rule.

I am very concerned with the employment position in my constituency. Between 6,000 and 8,000 people are employed by Short Brothers and Harland. Much of the work done by that firm has been a valuable help to Britain. The firm's present project—manufacturing light Skyvan aircraft—is meeting success in its export drive throughout the world. Sales of this aircraft have doubled in the past year. The firm is also involved, not only in the podding for the RB engine, but in sub-contract work on the Fokker aircraft in Europe. This is a type of collaboration with the European aircraft industry which the Government particularly favour.

In missile development Short Brothers and Harland, with Sea Cat and Tiger Cat missiles and the new project—Blowpipe—have won many valuable export orders.

Therefore, not only would I seek to justify a decision in favour of the 311 on the grounds of the employment which it would create both for BAC and in respect of sub-contract work in my constituency, but I can make a good and strong case on the ground of the success that the company has had in its own small way—because it is a small way compared with the rest of the aircraft industry—with projects such as the Skyvan and the missiles. The large freighter aircraft—the Belfast—has been used very successfully by the British Armed Forces and has made a valuable contribution to the British defence effort.

In addition, the company has, though its technical training school, set a standard of technological progress and education which has been a great help to Northern Ireland over the past years and which, in view of the present disturbed state of affairs in Northern Ireland, is absolutely essential. At the moment it is proving increasingly difficult to attract new industry to our shores. This has a bearing not only on the general Motion relating to Rolls-Royce but on the wider wording when it discusses the Government's entire policy of industrial aid. Northern Ireland stands to lose from the transfer from investment grants to investment allowances. Therefore, unless companies such as Short Bros and Harland are encouraged by the Government, quite openly and deliberately, it may well prove impossible to attract the new industry which is so essential to us in order to take up the slack which comes from the rundown of our traditional industries, such as linen and shipbuilding.

It has been estimated, and special surveys have shown, that Northern Ireland requires to create 50,000–60,000 new jobs each year. In the past year little interest has been shown by expanding firms in Britain or elsewhere in setting up business in Northern Ireland because of the well-known risks.

Photo of Mr Tam Dalyell Mr Tam Dalyell , West Lothian

I am following the hon. Gentleman's argument with interest and some sympathy. But if it is right to give help to Short Bros.—and I believe it is—why not extend the powerful arguments that he has adduced in relation to the Northern Ireland problems, to Harland and Wolff for shipbuilding too?

Photo of Mr Stanley McMaster Mr Stanley McMaster , Belfast East

I am obliged for that intervention. In so far as it is in order on the present Motion I will, of course, extend my argument to cover the shipbuilding industry. Indeed, during the defence debate a week ago on the Government measures, I did so extend it.

I feel that it might be in order to say a little about this, particularly as the right hon. Member for Bristol, South-East (Mr. Benn) made particular mention of Harlands in my constituency. Much of the argument from the Front Bench opposite was based on the competition that this country has to face abroad, in the case not only of the aircraft industry but such industries as shipbuilding, and so forth, and the figures which the right hon. Member for Bristol, South-East quoted support this particular special pleading in which I am engaged. I therefore feel that while, in general, one must support the Government's policy, one cannot agree with the way in which the Opposition, when in office, were carried away by their policy of assisting industry willy-nilly. The policy basically has good sense. If one has to face a special case such as the aircraft industry with a technological spin-off, or the shipbuilding industry which is subsidised abroad to the tune of 15 per cent.—

Photo of Miss Betty Harvie Anderson Miss Betty Harvie Anderson , Renfrewshire East

Order. I hope the hon. Gentleman will not address himself too much to shipbuilding. The debate is mainly about aviation.

Photo of Mr Stanley McMaster Mr Stanley McMaster , Belfast East

Mr. Deputy Speaker, I should like to refer to the Motion on the Order Paper which reads as follows: That this House notes the decision to give a further £42 million launching aid to Rolls-Royce for the RB211 engine, but regrets"— and this is what I am addressing myself to at the moment— the lack both of consistency and of effective accountability in the industrial policy for the private sector pursued by Her Majesty's Government. I apologise if I have tried the patience of the House, but it is those words in the Motion referring to the private sector which led me up this attractive avenue.

May I return to my main remarks on the aircraft industry? With regard to the last phrase in the Motion, while it is easy to be carried away once one embarks on a policy of subsidy, to be completely seduced, to lose sight of the main aim, which must be to produce a viable and effective industry in this country—while one can be completely carried away by the social argument, the argument that I was advancing a moment ago about employment and "know-how"—one must keep one's eyes mainly on the final result for the country as a whole.

Therefore, so far as the aircraft industry is concerned, and support for the BAC311, when I ask the Government to give a favourable answer to this problem, I would point out that by so doing they would not only indirectly assist the British aircraft industry, but, because of the export record of this industry and the potential exports of an aircraft like the BAC311 in the future, would pay a real dividend to this country in the long run.

Government support is required only because in the short run the amount of money and risk capital necessary is not forthcoming from the City. But I am sure that those hon. Members, many of whom I see in the Chamber today, who have a deep and detailed knowledge of the aircraft industry, will all agree when I say that the future of the aircraft industry lies with the large, wide-bodied type of aircraft, the airbus. At the moment we have the Lockheed airbus which has just had its maiden flight in America, with Rolls-Royce engines. We have the A300B, on which the metal is being cut; and there is a projected scheme by Boeing in America to produce a Boeing version, perhaps a version of the 747, adapted for short haul—another American airbus.

There is, however, room for a British airbus. I suggest that Britain must also remain in this valuable activity of the future. Unless the Government are prepared to support the BAC311, Britain is in danger. Our airframe industry, in the shape of the British Aircraft Corporation, and our main engine producer—in fact, Europe's engine producer—Rolls-Royce, are all in danger of going out of business altogether unless the Government are prepared to show their confidence in our aircraft industry and give it this type of special support which is so essential for it.

5.58 p.m.

Photo of Mr Joseph Mallalieu Mr Joseph Mallalieu , Huddersfield East

It is an even bet that when the hon. Member for Belfast, East (Mr. McMaster) addresses this House he will make some mention of Short Bros. and Harland—and quite right, too. During the time that I have known him he has been the great protagonist of that company and, indeed, of Harland and Wolff, which it seemed to me he was in order in mentioning. I, too, share his interest especially in some of the products of that firm.

I wish to ask the Minister of Aviation Supply who will wind up the debate—to whom personally I offer my best wishes in the job that he is doing—what has happened to the Skyvan. They had reached a dicey point in about July and I should be delighted to hear that that point has been passed successfully.

The Minister faces some very serious difficulties, difficulties for which the solution may be the more difficult because of the seemingly aggressive dogmatism of his right hon. Friend. The trouble with dogma is that, when one lays it on the line, almost at once some facts of life which do not fit that dogma come up behind one with a piece of lead piping. That is pretty well what has happened with Rolls-Royce. It may conceivably happen in the whole aerospace industry, and, indeed, I am much afraid that it may happen with things outside that industry altogether.

On matters outside the industry, I have two questions to put to the Minister, and, although the Departmental responsibility is not directly his, perhaps he could obtain some briefing on them. First, what about the pre-production order scheme which was initiated by the old Ministry of Technology? As the House knows, it was a scheme designed to try to overcome the almost inevitable conservatism of users in this country, a conservatism which tended to discourage the designing and building of new machines. The scheme allowed the Government to buy newly designed machines and to put them out into industry where they could be tested and where their value could be properly assessed. This is not a scheme for standing on one's own feet. It is a scheme for direct intervention. I should be horrified if the Government, just following dogma, were to say tonight that the pre-production order scheme was to be abandoned, and I hope that the right hon. Gentleman will give me an assurance about it.

My second point on matters outside the aircraft industry concerns the future of the industrial liaison officers. These are trained engineers, not politicians or civil servants, who are most effective agents for disseminating throughout industry new ideas, some from the Government research establishments and some from elsewhere. I am certain that industry itself has had tremendous benefit from their operations. But the grants under which they operate are due to finish in March, unless renewed. I very much hope that dogma here will not prevent the continued operation of a first-class scheme, and I ask the Minister to give an assurance about the future of the industrial liaison officers.

I turn to Rolls-Royce. I shall not go over the whole history of this contract, which was so lucidly exposed by my right hon. Friend the Member for Bristol, South-East (Mr. Benn) in opening, but from almost every speech we have had so far it has become clear that the whole House recognises that Rolls-Royce cannot stand on its own feet and that there is not sufficient help forthcoming from the City to enable it to carry on. This company needs Government support. In my view, that support cannot be confined to the dishing out of temporary sums of money. It cannot be confined even to making sure that this great company at last does its sums right. Rolls-Royce is a national asset. Because it is a national asset, it is of direct concern to the people of this country and their Government to see where the company is going and to help it in the right direction.

Here is an example of what I mean. One of the biggest problems in the aircraft engine industry today is the problem of noise. People are getting so fed up with aircraft noise that they just will not stand for it much longer. Therefore, the engine company which first produces the quiet engine will scoop the world. It is the Government's job, in part, to make certain that Rolls-Royce, this great national asset, is spending enough money on research and development into the quiet engine. But I seriously doubt that that is being done at present.

I will offer a few words about the airframe side of the industry. Because of the tragedies of the Comet and the VC10, both of them potentially wonderful aeroplanes, we are out of the long-haul side of the business except for the Concorde. I should be in favour of scrapping Concorde and so going right out of the long-haul business if the tests which are still going on produce technically unsatisfactory results. I have a question to put about those tests. I remember being told that the Concorde payload would have to be at least 18,000 lb. The only estimates of likely payload which I could find at the time ranged from 8,000 lb. to 22,000 lb., as wide a spread as that. If he touches on Concorde, as perhaps he will, could the Minister say what the payload looks like being now?

Also, could the right hon. Gentleman say something about a rather disturbing rumour which I heard when I was in the United States a few weeks ago, the rumour that the airport authorities in New York and Los Angeles are proposing to refuse entry to S.S.T.s—in this instance, Concorde—not on the ground of boom but on the ground of airport noise? I heard that rumour quite strongly in the United States. Have the Government heard it, too, and, if so, what representations, if any, are they and their French colleagues making to the American authorities on the subject?

However, subject to the payload being right and subject to whatever answers the Minister can give about the attitude of the American authorities, I should say that, now that we have spent so much money on Concorde, we ought to go on with it. There is no doubt that, if one airline puts it into service, all the other long-haul airlines will have to do the same, and, in spite of the cost, it will produce a great saving on the balance of payments.

I come to the other end of the scale of the airframe industry. Apart from the Skyvan—I have said that I should like to know how that rugged little aircraft is going on, if it is still going on—there is the Britten-Norman Islander, again, potentially, an absolute winner, as also, I think, is the Nymph. These are being supported to some extent out of public funds. I hope that no dogma will interfere with the present Government's continuing that support, for I believe that, whatever the City may feel about the financing, we have in those two real winners.

What of the medium haul? I do not believe that it would be a tragedy if the Government decided to back neither the Continental airbus, the 300B, nor the BAC 311, or that, if they so refused, we should thereby put ourselves for all time out of the medium-haul market. Much of the future in medium haul will rest not with the conventional planes at all but with vertical take-off. Here, we in Britain still have a lead over the rest of the world. The Harrier is an example—a magnificent plane. In the commercial side of the business, we still have a long lead. I hope that no considerations of dogma, of standing on one's own feet, will prevent the British nation and the British industry from maintaining the lead in vertical take-off which we at present hold.

Those are some reflections arising mainly out of this debate. As every speaker has already said, the aero-space industry in this country is very important, and possibly vital to this country. It is vital in terms of the balance of payments, employment, defence and technical spin-off. The Government would be totally disregarding their duty if, in this industry, as in some others, they tried to stand aside. They have a duty not merely to help with the finance and the accountancy but to consider whether there should not be still further amalgamations in this industry. I am not sure that we can any longer afford two companies like Hawker Siddeley and B.A.C. It is possible that an amalgamation of those two would be in the best interests of the industry. Beyond integration at home, there must be a great deal more integration with firms in Europe if we are to stand against the great American giants.

So I say to the Government—please disregard some of these more fanciful expressions of dogma which have come from the Secretary of State for Trade and Industry. There is no possibility of this great industry being able to stand on its own feet. If it is to have a future, as I hope it will, it will have to be in partnership with the Government.

6.13 p.m.

Photo of Mr John Temple Mr John Temple , City of Chester

I would congratulate my right hon. Friend the Member for Knutsford (Mr. John Davies) on a performance reminiscent of his eminent predecessor, who was so very robust in this House. I feel that my right hon. Friend is getting the feel of what I call the slightly slippery turf of this House. It was significant that, as he was speaking, such was the interest of the Opposition that their benches were crammed. Such is their interest in their Motion of censure that there have been only four backbenchers sitting there for about the last hour—and two more have come in in the last few moments.

I have for many years taken a considerable interest in the aircraft industry. I should like to congratulate all those involved in the industry—the aircrew, the operators, the airframe manufacturers, the engine manufacturers and the financiers. Everyone connected with the industry must have iron nerves to survive.

My recollections of the aircraft industry and of aircraft operators go back to the days when British Airways, as it was called then, was operating Hannibals. That seems a long time ago, because they were bi-planes in those days. I had a little personal ambition in that era—to fly round the world by buying a ticket. I got most of the way around by starting off in Hannibals, but I was defeated—this was in the 'thirties—by the fact that the Graf Zeppelin in winter did not fly the Atlantic. Things have moved on since those days. Today, of course, there are aircraft flying the Atlantic with immense frequency. In those days, it was only the Graf Zeppelin which did so.

Connected with Chester as I have been for many years, and its Member of Parliament for some 15 years now, I have seen the vicissitudes of the aircraft industry at reasonably close quarters. I well remember the great promise of the Comet, the traumatic experiences which the hon. Member for Huddersfield, East (Mr. J. P. W. Mallalieu) mentioned, which everyone had with that great aircraft. I forecast that the industry will go through traumatic experiences again, but that is no reason why we should not stay in that industry.

Tonight, I make no apology for dealing with one aspect of the industry—the air-bus side. I shall say something about aero-engines as well, because the airframes and aero-engines are inter-linked, but I believe that we are now looking at another generation of aircraft. This generation will undoubtedly embrace the air bus, whether it is built in the United States, the U.S.S.R., Britain or a combination of Britain and Europe.

One must clear one's mind first of a few irrelevancies with regard to comparisons of the advantages and disadvantages of the European airbus and the BAC311. One of the irrelevancies is the suggestion that, by backing the European airbus, one is backing the project so as to crawl into the Common Market. The European airbus has nothing to do with Common Market negotiations. It was in existence long before the new application and will go on even if that application is unsuccessful.

Another irrelevancy is that, if the United Kingdom backed the BAC311, it would help Rolls-Royce. My hon. Friend the Member for Chertsey (Mr. Grylls), in an admirable maiden speech, said that the 311 might well use the American General Electric engine.

Then there is the other irrelevancy, which we hear from people in high places, that international consortia do not work. If they do not work, why are all the great power projects around the world built by international consortia?

I should now like to make my one quotation, from Sir Anthony Milward, speaking in 1965 of the B.E.A. airbus requirements: It is clear that if such an aircraft is to have general European support, it will have to be an international venture. Those are not the words being used today by the Chairman of B.E.A. but at that time—decisions had to be made long in advance in the aircraft industry—they were the views of Sir Anthony Milward himself on international ventures.

So these are the irrelevancies which we must dismiss from the argument straight away.

Photo of Mr John Nott Mr John Nott , St Ives

Would my hon. Friend include as another of his irrelevancies the fact that whether the European airbus has a Rolls-Royce engine is as much an irrelevancy as whether the BAC311 has one?

Photo of Mr John Temple Mr John Temple , City of Chester

I said that I would come to aircraft engines, but I entirely agree with my hon. Friend. I always admire his sagacity in these matters.

I congratulate once again my right hon. Friend the Secretary of State for Trade and Industry because he has spelled out clearly—I know that he annoyed the Opposition by doing so—the policy of Her Majesty's Government in regard to non-intervention in industry.

Photo of Mr John Temple Mr John Temple , City of Chester

No, the hon. Member has had his opportunities before. He intervenes in every speech, but he will not intervene in mine. He can make his own speech later on, with your permission, Mr. Deputy Speaker.

We must look extremely closely at the financing of the so-called all-British 311. I speak about the "all-British BAC311 in no derogatory manner. I admire the British Aircraft Corporation but one must look at the financial implications which the country would be taking on it if it was the single backer of this project. First, the airframe. To get the scale of magnitude of the proposition, one has to look around the world. The A300B—the so-called European airbus—needs a funded launching capacity of about £500 million. The DCIO needed £600 million. So I think it is naïve to suppose that the BAC311 can be funded on any lesser basis. The B.A.C. has said that it wants about £140 million, 60 per cent. of which would come from the Government. But I doubt whether the company could find the odd £400 million, a sum which takes a bit of financing in any city circles round the world today, in order that the proposition can be viable without considerably more Government help.

Photo of Mr John Wilkinson Mr John Wilkinson , Bradford West

Can my hon. Friend inform the House of any occasion when B.A.C. has had to come to the Government again for launching aid further to that for which it asked in the first place? Can he also bring into his speech, if he thinks that it is not naïve, the question of the balance of payments in the matter of the airbus?

Photo of Mr John Temple Mr John Temple , City of Chester

The short answer is that B.A.C. has never been involved in a project of this magnitude single-handed before. Time will show. I am only posing a question whether it can raise £400 million. I am not endeavouring to answer it. I am asking it because it is extremely pertinent.

I refer now to the engine for this air bus. Unfortunately, a suitable Rolls-Royce engine does not exist. It has been estimated that launching aid would be required of about £60 million plus, and I think that all hon. Members know, that when I refer to an initial figure of £60 million, that is just a starter in these circles. I have great sympathy with the Government in this quandary, for they have been let in for the most appalling gamble with the engine for the Lockheed 1011. Details of the contract have already been asked for in the debate and there are details which need probing. The Government have already involved themselves on a great deal of launching aid for the RB211, and I doubt whether it would be wise, their having done so on that particular tack, to back the BAC 311, which, as I say, might bring an involvement of about £400 million. As my hon. Friend the Member for Chertsey said, this aircraft would probably have an American General Electric engine, and certainly a Rumanian tail plane and a Yugoslav undercarriage, so one could hardly say that it would be an all-British project.

My speech is essentially one of a practical nature, so I turn now to the world market for air buses. It has been reliably estimated that the world market in the late 1970s and early 1980s will be about 1,100 aircraft. If one omits the slightly longer-haul aircraft of a similar nature, like the Lockheed 1011, at the upper end of the scale, and smaller aircraft at the lower end, one arrives at a practical market for such aircraft of about 850. The European airbus is aiming to achieve about half that market. It is estimated reliably that the United States aircraft industry would take another half—about 450. If the BAC311 is financed and put into the air, it is aiming at a market of about 300 aircraft to make it viable. If the European end of the market is split two ways, if the BAC311 achieved 200 and the European airbus 200, probably at that stage both propositions would become unviable.

Now I come to what I call the case for the European airbus, the A300B. I have a constituency involvement in this matter, and I can inform the House that this is not a "drawing board" aircraft. It is being built now. It has a 20 per cent. United Kingdom content, and I had the privilege only last Friday of seeing the wings being fabricated in the great factory of Hawker-Siddeley very close to the City of Chester. This was most interesting because the wings are being fabricated by an entirely new process. The skins of the wings are going to take most of the weight of the aircraft—in other words, the spars inside will be a relatively small factor, the skins taking most of the load and the stress of carrying the aircraft.

The jigs are in existence and the size of the jigs and the equipment is so immense that I thought to myself, when I saw the anodising tank, that it would make rather a good miniature Olympic swimming pool. That indicates the size of the project which is already being fabricated and which is a major part of the European airbus.

As I was sitting in the managing director's office, a telex came in from Sud-Aviation requesting the wing assembly to be brought forward by two months. That indicates that there is a great pressure to get this aircraft into the air. It will fly by 1972 and be in operational service by 1974. Judged by any standard, that aircraft will be two years ahead of any comparable BAC311 project.

Now I turn to the consortium building the aircraft because it is important that the House should satisfy itself that the consortium is in existence, is operative and has a reasonable hope of getting orders. The consortium consists of France, West Germany and Holland. Under the last Government, Britain had rather an unfortunate record of blowing hot and cold and at the moment is not directly involved. But the firm of Hawker-Siddeley is involved in the construction.

Orders are fantastically important. Air France, the biggest airline in the world, and Lufthansa and five other airlines have given orders of intent to purchase some 130 aircraft. The project is definitely in business. It will use a proved engine, the General Electric, and there will be no difficulty about funding the research and development for a special engine.

I ask whether the Minister of Aviation Supply will be able to tell us whether the Government have decided to take up the offer made to them recently with regard to a share of the consortium building the European airbus. If the British Government take up the share on what I believe to be rather favourable terms, our country might well construct much more than 20 per cent. of the project.

I promised to be brisk and brief, so I will draw my remarks to a close by saying that, in my view, the hard evidence points straight in one direction. I advise the Government to press on with this practical proposition full funded and backed up by a sound order book. The stakes in the world aircraft industry are gigantic and the competition extremely fierce. I know all the political chicanery that goes on at the top with regard to the manoeuvring in the world aircraft industry. [HON. MEMBERS: "Oh."] Perhaps I should not have used that word and perhaps "manoeuvring" would have been better. There are no survival kits for failed aircraft manufacturers. The only survival kits are those manufactured by governments. I do not want our Government to get involved in the manufacture of survival kits for airframe manufacturers. Britain cannot afford prestige products that have little chance of financial success.

6.31 p.m.

Photo of Mr Tam Dalyell Mr Tam Dalyell , West Lothian

Perhaps I may begin by explaining why I sought to intervene in the speech of the hon. Member for the City of Chester (Mr. Temple). The truth was that I could not contain my curiosity about whether his opening remark was made tongue in cheek or seriously. If, as is unlikely—we know that he is a very shrewd man—it was serious, then one wonders at his naivety. I can only say, tongue in cheek, that I thought it about the rudest insult that I have heard during some eight years in this House, coming as it did from a back bencher about one of his own senior Cabinet Ministers. It was so neatly done with such a sharp sword that perhaps even the right hon. Gentleman will forgive his colleague, but it is not for me to enter into this kind of internecine warfare. [An HON. MEMBER: "You have done so."] I had to explain why I tried to interrupt his speech, but all of us must at least appreciate such swordsmanship as the hon. Gentleman displayed.

Photo of Mr John Nott Mr John Nott , St Ives

I was listening to the speech of my hon. Friend the Member for City of Chester (Mr. Temple) and I heard him say that my right hon. Friend made a very good speech. I do not understand what the hon. Member for West Lothian (Mr. Dalyell) is worrying about.

Photo of Mr Tam Dalyell Mr Tam Dalyell , West Lothian

I interpreted what the hon. Gentleman said as being that the right hon. Gentleman, with some practice, might if he perseveres come up to the standard of the hon. Gentleman's former colleague, Sir Walter Bromley-Davenport.

Photo of Mr John Temple Mr John Temple , City of Chester

The hon. Gentleman could not have been listening to what I said. I said that he would soon get up to the robustness of my former hon. Friend.

Photo of Mr Tam Dalyell Mr Tam Dalyell , West Lothian

It is a good thing that we have cleared that matter up.

I wish to put a number of factual questions. The first concerns the exchange that took place between my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) and my hon. Friend the Member for Huyton (Mr. Harold Wilson) and the Government Front Bench. Is it not the case that the merchant banks which might be expected to undertake long-term lending have been reluctant to come forward, that most of the £18 million comes from the joint stock banks and that the joint stock banks do not have a tradition of long-term lending? Therefore, this is a rather exceptional financial circumstance which would appear to destroy, in a sense, the argument that the traditional markets of the City of London have come forward to play a traditional rôle.

It would serve the country much better if the Government were candid about this matter. It does not leave much to the imagination to think what will happen if any real mystery is allowed to develop from the circumstances. Perhaps when the Government reply to this debate this evening they will be a little more candid about the matter. I am not saying that there is anything disreputable involved, but it is better that the House should know the truth about where the £18 million has come from.

My second question was raised during the statement by the Minister of Aviation Supply on 11th November. I asked why there was to be a further check by independent accountants and the Minister replied: On the question of an independent accountant, I took the view, which I sensed to be the view of the whole House, that the magnitude of these figures was such that it was right that they should be checked and it was right that any Government support should be subject to that check. Perhaps we may be told in the reply a little more about the rôle of the independent accountants and why they had to be introduced.

There are some of us—and incidentally I am a great supporter of Rolls-Royce—who simply do not believe that the figure will stick to £89 million. Questions must be asked about this figure, and as a supporter of the project I ask the Government about their commitment to £89 million. What happens if it is a great deal more? Is there an open-ended commitment?

My third question is to ask whether we are to hear more about the basis of the calculation of the appropriate levy to the right hon. Gentleman's Department about which he spoke in his opening remarks. The Minister of Aviation Supply replied: As regards the levy, I am sure the hon. Gentleman realises that the normal arrangement is for a rising amount per batch of aircraft. I could not give the details in an oral answer now, but I shall be glad to publish the information in the OFFICIAL REPORT."—[OFFICIAL REPORT. 11th November, 1970; Vol. 806, c. 406.] I may have missed something, but after checking I could not find it in the OFFICIAL REPORT. Perhaps this information on the levy could be brought to the notice of the House as soon as possible since it is a matter of some consequence.

To return to the £89 million. I should like to draw attention to a report in Aviation Weekly under the heading "RB211 Back-up Blade under Impact Tests" which appeared on 9th November. Derby. England—Rolls-Royce is conducting bird impact tests on a rotating hollow titanium blade being developed as a backup in the RB211–21 power-plant programme for the Lockheed L-1011. Project officials here said research into the hollow blade is being conducted in parallel with work on the Hyfil carbon fibre blade, which is showing improved strength after changes in lay-up at the root. Resin mixes have been changed, and tests have shown higher sheer strength. Hollow titanium blade work is being conducted at Rolls here and involves a blade that is filled with honeycomb for added strength. I will not continue quoting that report, but any research costs on that kind of basis will mean money with a capital "M". If there is to be research into these hollow blades and into the whole subject embracing these vast technical and engineering problems, can we be sure that the limit would be only £89 million?

I do not wish to go into all the technical matters involved, but simply wish to ask what is the Government's commitment if posts turn out to be very much higher than those estimated at present? My first experience of the House of Commons was to hear a solemn assurance given in a Ministerial statement by the right hon. Member for Brighton, Pavilion (Mr. Amery), now Minister of Public Building and Works, that the research costs of Concorde would be between £75 and £85 million between Britain and France. I, like my right hon. Friend the Member for Bristol, South East (Mr. Benn), keep a diary. "Bet that it reaches £200 million", I wrote in it. How naïve can one get! These troubles have been with us before. It is not in any curmudgeonly spirit that I wish to ask the Government Front Bench whether there is any certainty that £89 million will be the end of the story and that we shall not be faced with an open-ended commitment. If so, what will be the consequences for public accountability?

Perhaps something could be said in the Government's reply this evening about the eventuality of an open-ended commitment. There are some people who think that the Government will be lucky indeed to get away with a figure not of £89 million but of about £150 million. I do not say this in any way disparagingly of British industry, which of course I hope will succeed. We all know that Pratt and Witney have equal problems, as have others. These are problems that face all major world aircraft manufacturers. I see the hon. Member for Oswestry (Mr. Biffen) nodding his head and with his experience of the Public Accounts Committee the House will respect his opinion in these matters. If the hon. Gentleman wishes to intervene, I will of course give way.

I should like to refer to a passage in a recent book by my friend and former colleague, Eric Moonman, the former Member for Billericay, who would have been speaking in the debate had he been a Member of the House: In February, 1969, the Select Committee on Science and Technology reported on the state of development and in so doing, pinpointed the problem which is central to this whole question of industries of innovation and the relationship between government and industry: 'A technological advance of the greatest importance has been made by government scientists. The advent of carbon fibre reinforced plastics, metals, ceramics and glass may well influence the entire practice of engineering on a vaster scale than any previously developed new material. How then is the nation to reap the maximum benefit without it becoming yet another British invention to be exploited more successfully or more fully overseas?' This is the nub of an important question which has to be faced. Related to this is the question of the dismantling of the I.R.C., on which I interrupted the right hon. Gentleman, I hope courteously, in his opening speech. With the best will in the world, it is not sufficient to do as he said and say that it can be handed over to the workings of private enterprise, because with respect I say to him that that is thinking in slogans. It cannot be handed over to private enterprise, because who will monitor the situation, or is there to be no public accountability? I am somewhat more sympathetic about this than are many of my colleagues. Six years ago I was a member of the Public Accounts Committee which examined the Bloodhound question, and one of the difficulties arising was that there was a shortage of technical costs officers.

Monitoring is not easy, but is such monitoring as has to be done in fact achieved by the men in Millbank Tower? I have the same regard for many of them as has my right hon. Friend the Member for Bristol, South-East. But no one in his right senses thinks that these civil servants, however talented they may be, can do the kind of monitoring operation required in these circumstances and with the dismantling of I.R.C. I cannot get it out of my head that it is all through political pique. Without I.R.C. how do the Government intend to do any kind of meaningful monitoring? If monitoring is not to be done—

Photo of Mr John Nott Mr John Nott , St Ives

I am sure that the hon. Gentleman visited the I.R.C. on many occasions, as I did. There was never any capacity on the part of the I.R.C. which was capable of carrying out the function which the hon. Gentleman is suggesting. The I.R.C. had an executive of no more than ten people, five or six of them being young people, who had the same background that I had in a merchant bank. They had none of the capacities which the hon. Gentleman suggests and were not equipped to do that sort of job.

Photo of Mr Tam Dalyell Mr Tam Dalyell , West Lothian

There is a point of disagreement here. It is true that both the hon. Gentleman and I have studied the workings of the I.R.C. Although the I.R.C. would do the job somewhat imperfectly, at least that was the embryo of the machinery to do it. Do the Government intend that there should be any, even fairly rough, monitoring of this substantial amount of public funds, or do we just hand the money over and trust Rolls-Royce? Those are two possible points of view. I should not be unduly shocked if the answer were to hand it over in a lump sum and give it to this famous firm. But we ought to know the answer. The worst of all possible worlds is to pretend that there is public accountability when there is none. Therefore there is an obligation on the Government to say, first of all, what kind of public accountability is intended, and secondly, to say what is possible.

The right hon. Gentleman referred to total redemption. As I understood it, the total redemption would be achieved on the basis of 225 Tristars plus 100 engines for other purposes. I should like to be clear as to what are these other purposes. Is it the amount of naval orders which we have been reading about in the Sunday Press, or have I misunderstood this and does the other 100 refer to something else? If the right hon. Gentleman wants to clear up that matter, I will give way to him.

My next question concerns the so-called big engine and what the Government's attitude is to the RB211 75/80. Is it a big paper dream or does it approach the reality of an engine? This is relevant to the future of Rolls-Royce. In all this discussion, there is a problem for the House as to the public treatment of a great firm.

I should like to conclude on this matter. I reflect that it is of considerable concern that in no other country would one have this sort of public examination of a great engineering organisation. For example, can we imagine the West Germans doing to Siemens what we have done to Rolls-Royce if they got into difficulties? Do the Americans do it? It is inconceivable that this could happen among our competitors in Japan. What contrast there was between what happened over the QE2 and all the public rows that that involved—my hon. Friend the Member for Clackmannan and East Stirlingshire (Mr. Douglas) will remember that well—and the fact that at the same time a Japanese tanker broke its back in Mid-Pacific and aroused only a minor paragraph in the Japanese Press, Asahi Shimbun. That is an indication of the difference in the way in which we treat our various industrial knotty problems.

I am worried about this endless business in the Sunday Press of examination into Rolls-Royce. It is hard to recall when we last had such a display of hindsight as that exuded from the Sunday Press on Rolls-Royce eight days ago. Not many months ago the same pundits were telling us in chorus what heroes of export were Sir Denning Pearson and Sir David Huddie. I have worked with Sir Denning Pearson in his frequent and courteous contact with the Labour Party Association Group. He has been very kind to me. In a sense I have an axe of personal friendship to grind. It is nauseating that these sabbath starlings have now alighted on another perch. We are expected to believe that the Rolls-Royce management, having been heroes of export, are now fallen aristocrats who have led us astray. That is easier for someone on these benches to say. I have a feeling of nausea at the treatment of those men.

The truth is that they are neither as bad now nor perhaps as good as in 1968–69 as is made out. The euphoria when the American contract was signed was created not at the instigation of Rolls-Royce but by non-technical leader writers caught up in the export craze. With recently acquired insight, those gentlemen may assure us that engineers, however good, are not suitable people to be bosses of great engineering firms. Apparently, we are told, accountants do the job so much better.

Whatever else it is, this is a somewhat different tune from the refrain played throughout the 1960s which contrasted the success of American and British firms and attributed it partly to the fact that in the States it was easier for an engineer to become vice-president or managing director of his company. Was Sir Paul Chambers really so much more successful at I.C.I. than Sir Alexander Fleck? Certainly not, I would think.

However, there is a related substantial point which has not been clearly perceived. It is that sheer size at a certain level creates a fundamental difference in the task to be performed at the top. Whatever a man's training, can he be expected in his 60s to jump from running a large firm like Rolls-Royce was to a new giant organisation created, in this case, by the merger of Rolls-Royce and Bristol-Siddeley? This is a matter of some importance on which the Government should reflect. The same query applies to Lord Stokes at British Leyland as it does to Pearson and Rolls-Royce.

This is a matter about which we as a society have to think. I am not convinced that handing over a great industry to an accountant is in any way a panacea or cure. To go on with the Sunday Press for a moment, in the Observer, Mr. Eglin proceeded to attack Rolls-Royce for not knowing how much the Hyfil blade fibre cost the company. If he had attended the debate on the Report of the Public Accounts Committee last week, he would have learned how difficult, expensive and sometimes impossible it is to isolate such costs. This, again, seems to be a real argument against rushing to take refuge in the accountant as the panacea for our troubles. It is my strong impression that, even if Rolls-Royce had had a financial genius in the shape of Mr. Ian Morrow for the last five years, the situation would have been only marginally better.

The truth is that no firm in the world engaged in this sort of activity has kept remotely to its cost estimates. The troubles of Pratt and Witney, Rolls-Royce's most formidable American competitor, with the Jumbo JT90 engine are most spectacular, and General Electric lost at least a cool £14 million on its estimate for the engines in the giant C5A.

In the absence of perfect foresight, who would have guessed at the rate of cost escalation over the past 18 months due to worldwide inflation? It was unpredictable. Certainly it was unpredicted. Nor is it sufficient to reply that Rolls should not have signed fixed-price contracts. I am sorry that my hon. Friend the Member for Coventry, North (Mr. Edelman) is not here at the moment. It strikes some of us as being far too easy to say with hindsight that Rolls should not have signed fixed-price contracts. It is my understanding that, if the company had not been prepared to do so, it would not have been in the hunt for the contract. The quick answer is that, if the company had not been willing to sign fixed-price contracts, it would not have been in the running for an order. Moreover, in the fixed-price approach the company was supported by my right hon. Friend the Member for Bristol, South-East.

The Rolls dilemma once again raises the whole issue between the State as a purchaser and private industry as a supplier, military and civil, of goods which depend on a large degree of innovation which as yet is not within the known state of the technical art, to adopt a phrase very often used by the Parliamentary Secretary, the hon. Member for Eastleigh (Mr. David Price). I agree very much with much of what the hon. Gentleman has said and written in the past on these many important points.

At one level, it is simple. Either we take a risk and innovate, as with carbon fibres, or timidly we opt out of the lead. The right hon. Member for Wolverhampton, South-West (Mr. Powell) might turn his mind to how major innovation should take place in a modern industrial society if it is somehow not to be underpinned by the State.

The Sunday pundits have been guilty of another piece of double-think. How often have they lectured us in the past to the effect that Britain makes the inventions and leaves others to exploit them. The stock examples are Whittle and the jet engine and the British development of variable-geometry techniques in aircraft and our related failure to exploit them. But what happens when a British company, in this case Rolls-Royce, makes a genuine attempt to leapfrog into the future and comes to grief? Mr. Eglin pontificates in the Observer about Rolls' Abortive essay into carbon fibres". In my view, he might just as easily have been writing an article rebuking British industry for not taking advantage of developments at the R.A.E., Farnborough, and using carbon fibres to reduce aero-engine weights to the advantage of the balance of payments. The Sunday papers and other commentators have to get it clear that it would be very unfortunate if the example of Rolls-Royce and carbon fibres were used as a deterrent to British industry undertaking this kind of innovation risk.

As I have said, it is easy to write an article saying that Rolls made an abortive essay into cargon fibres". But when that comes from the same people who have made such a fuss about about our not taking advantage of jet engines, variable-geometry techniques and a host of other British inventions, it seems to be hypocrisy to a degree which we should begin to challenge.

Mr. Michael MacNair-Wilson:

Is not the hon. Gentleman asking too much of the Press? Surely the Press tends to act as a watchdog for the ordinary person, including the shareholders of Rolls-Royce. The company has got itself into a mess which could lead to bankruptcy. Surely it is fair for a reporter to make his comments.

Photo of Mr Tam Dalyell Mr Tam Dalyell , West Lothian

It may be fair to make them, but is it wise? There is no doubt that the job of our exporters is made far more difficult by this country than that of the exporters of any other country is made by their own Press and so-called influential establishments.

Photo of Mr Tam Dalyell Mr Tam Dalyell , West Lothian

My hon. Friend says "Television". If I may follow his example, viewers watched for a solid hour a gradual analysis of the British motor industry and Leyland in particular. I have an interest in this, because the Bathgate factory of British Leyland is in my constituency. My hon. Friend the Member for Birmingham, Northfield (Mr. Carter) may know even more about it, since the major Longbridge factory is in his constituency. That television programme was shown widely and seen not only in this country. Much of it was reproduced in Japan. As those of us who have been to the United States recently know, some of it was shown to American audiences. They were amazed that the British should embark on what they regard as a course of self-destruction. We are a curious people.

I do not look at the situation from the point of view of shareholders but from that of the country's export performance. Here, in the context of Rolls-Royce, we have to ask some rather less glib questions than have been asked by many of those who earn their bread and butter by writing offhand articles. In writing their articles, I hope that they will in the future reflect a little more on the issues at stake. There is no ideal solution to these problems, but I have not the least doubt that the best instrument so far devised in any modern industrial country is the Labour Government's I.R.C. It may have been inadequate. As the hon. Member for St. Ives (Mr. Nott) pointed out, it may have had a staff of only 15 or 20 people. But it could have been built up into a satisfactory organisation. The trouble with the present Government is that I can see no sign of any organisation which will look after such problems.

It is rather important to keep the whole saga of the RB211 in perspective because the truth is that it represents only about one-quarter of Rolls' total work. I do not just speak about Rolls-Royce as the main private employer in Scotland because that does not directly affect my constituency. The position has to be kept in perspective. The production of diesel and industrial engines, gas turbines and other similar manufactures is going well.

It would be a pity if we inflict wounds, by what we say inside this House or outside it, on a British company, or if we to couple some parliamentary criticism which would astonish our industrial competitors. In such Press criticism I have to couple some parliamentary criticism because it is not up to us in Parliament, whatever else we do, to make unnecessarily and gratuitously more difficult the problems of those who export for this country.

7.0 p.m.

Photo of Mr Peter Rost Mr Peter Rost , Derbyshire South East

It cannot be often that a new Member is given the opportunity to intervene for the first time in a debate of such importance on a subject so directly affecting his own constituency. South-East Derbyshire is Rolls-Royce country. Many thousands of my constituents depend for their livelihood upon the prosperity of Rolls-Royce, not only through direct employment but through sub-contracting industries and the service industries.

The previous Member for Derbyshire, South-East—Mr. Trevor Park—has my humble admiration for the work that he did on behalf of his constituents. It is an honour for me to pay tribute to him. Although he belonged to a different side of the political spectrum, I found myself admiring his frequent and forceful criticisms of his own Front Bench. If it were not the tradition of this House for a maiden speaker to be non-controversial, I would be tempted to add that such criticism was entirely justified.

I am intervening in this debate because I believe that it is time someone spoke up for Rolls-Royce. I have listened patiently to a number of hon. Members opening their remarks by saying that of course they support Rolls-Royce—and then they went on to devote the rest of their address to tearing the company to pieces. In South-East Derbyshire we are justly proud of Rolls-Royce. We are not amused by the denigration and sniping that has been going on for some weeks now, undermining the self-confidence and morale of the company and those involved with it, as well as damaging the potential export prospects of a great British industry.

I do not regard kicking an organisation when it is down as a particularly endearing or particularly British characteristic. I urge the House to consider ceasing from this activity, at least within the Chamber. Knocking the British aero-engine industry is entirely unjust. It has a world-wide reputation for technological achievement. It has met overseas contractual obligations with honour in the face of extreme difficulties and even financial loss. That is not something to be criticised. The eventual rewards which some such commercial risk brings is well accepted in this country.

I find the suggestion by some hon. Members that nationalisation is the solution to be somewhat disturbing. Surely nationalisation has been proved time and again as the one formula for failure, inefficiency and financial ruin. Can any hon. Member suggest one nationalised industry that has made any contribution of significance to the British export market?

Those critics of the Government's policy should ask themselves whether they would be sitting in this House today had it not been for Rolls-Royce in, say, 1940. We undoubtedly owe our salvation to that brilliant team, the saviours of Western civilisation in a time of great crisis. I challenge those critics to stand up in this House and say that there may never come a time when this country will again depend upon Rolls-Royce for its future survival, will never again depend upon the skills of those who now work on the thresholds of advanced aero-space technology.

Those critics who are most adamant have a lot to answer for because of their previous policies. This Motion asks us to discuss accountability, yet those who are asking us to do this are the very people who got their own sums wrong for six years, every single one of them. As a Government, they were only bailed out from bankruptcy by the world's banks. These are the people now criticising accountability in Rolls-Royce.

It is also true that the whole country has been left in a run-down condition. The problem facing aviation, and Rolls-Royce in particular, is to a great extent the result of the rundown of British industry over the past six years. Could we not say that Britain as a whole is a lame duck and this is just one example of what happens when industry becomes starved of cash flow, crippled with taxation, when incentive and enterprise is largely removed, when capital investment has been stifled and risk capital is impossible to obtain? There has been a continuity of increasing squeeze on profits which are the lifeblood of British industry.

Meanwhile, we have had a background of raging inflation, little improvement in productivity and industrial stagnation, with a failure to make any effort to improve industrial relations. It is against that background that we must view a company like Rolls-Royce and an industry such as aviation in its present difficulties. We cannot expect to solve the problems of British aviation until we change the economic environment, and this is where our new Government's policies will take effect. We will ensure that the climate of industrial expansion is improved and in that climate companies such as Rolls-Royce will once again be allowed to flourish. Until we have achieved an effective improvement in the economic environment, there must be an interim period. We are now in that interim period when many companies are in difficulties.

It is right for the Government to help those companies back to economic prosperity, to repair some of the damage that has been done over the last few years, and aviation is undoubtedly an industry where special help is necessary. I therefore endorse the future prosperity of this industry by supporting the BAC311 project, which is essential if we are to have an airframe industry in this country into which we can put British engines. I also endorse and congratulate the achievements of the Tristar RB211 development. This is a magnificent and encouraging sign for the future. I hope that the British aviation industry will be given the opportunity to develop STOL and vertical takeoff and landing, and supersonic flight, without allowing our competitors to take the lead from us once we have developed in these advanced fields, as has happened, so often with innovation in this country.

It is right for the Government to support an industry which makes a major contribution to our export markets and which has proved its success in the past, not only technologically, but financially. I am sure that it is right to support an industry which will make even greater contributions to the nation's future prosperity and prestige. Britain's aerospace achievements are justly admired and respected and, indeed, feared all over the world. These achievements are an incalculable symbol of Britain's inventive genius, and in South-East Derbyshire we are rightly proud and confident of further advances and future successes. It is for these reasons that I support the Amendment and find the censure Motion completely unworthy of this House.

7.12 p.m.

Photo of Mr Phillip Whitehead Mr Phillip Whitehead , Derby North

It is a particular pleasure for me to follow the hon. Member for Derbyshire, South-East (Mr. Rost), my near neighbour, for several reasons. First, because I had not expected to find so much on which I might agree with him, but we have found common ground in Rolls-Royce, a great firm which means so much to the Borough of Derby.

The hon. Gentleman might perhaps have expected and, indeed, might yet get, congratulations from someone more experienced than myself in the ways of the House, but at least I offer him the condolence that he and I share the honour of our recently surrendered maiden-hoods and inexperience in the House with the right hon. Member for Knutsford (Mr. John Davies). In the eloquence and, indeed, the style in which the hon. Gentleman spoke he does not suffer by comparison with others more eminent in his party, and I am relieved to see that he has put so large a gap between himself and the right hon. Member for Wolverhampton, South-West (Mr. Powell), whom he rather seemed to echo at times, one thought, during the election campaign.

I should like to speak, at least partly, from the point of view of the 70,000 people occupied in Rolls-Royce, working for the aerospace industry not only in Derby, but in Bristol, Coventry and many other places. They are deeply concerned with, and extremely proud of the industry in which they work. They are not happy to think that they might have been dumped in a morass of subsidised incompetence. They would be even unhappier to feel and believe that they were going to be abandoned either to unemployment or to take-over by the already unwieldy and over-reached American aerospace industry, which would be the fate that would befall them if the doctrines of the right hon. Member for Wolverhampton, South-West were to be followed. Luckily, on both sides of the House, his doctrines have received small support tonight.

There is considerable agreement about the further support which Rolls-Royce has received. That does not, I think, appear to be the major point between us tonight. We, just as much as hon. Gentlemen opposite are agreed that that support should have been given. The argument tends to come much more on the level of public accountability, because if we are in a situation where this firm is largely subsidised as a result of Government contracts—and this is a matter which goes back to 1938 or 1939; it is not something that has happened from 1964, or 1968 or 1970—and also from Government orders, as my right hon. Friend the Member for Bristol, South-East (Mr. Benn) said, surely public accountability must be clearly established. That is why the Minister cannot be surprised at the lack of confidence felt and shown on this side of the House at the bland way in which he dismissed the I.R.C. and said that it was doing a pretty good job, but he did not think that private enterprise should be encouraged in feeling that there were people there to bale it out.

We endorse the policy of intervention in the aerospace industry, without, I think, indulging in the orgy of self-congratulation which has been rather notable on the other side of the House, but there are things wrong with it, and there have been things wrong with this industry. When one is dealing with millions of pounds for the cost of developing this engine, which is the central point of the debate—the RB211 project in its various forms is costing in excess of £200 million—of course we have to be serious about the kind of mistakes that can be made, and have been made, and it is no good saying, "Do not let us knock British industry. Let us go on with this project because somewhere along the line we shall get the money back". It does not work out that way any more. We have to be realistic.

The right hon. Gentleman would perhaps agree that even if ducks fly at supersonic speed they may be lame all the same. We have to look at projects realistically and see what we are getting. When we come to the affairs of the Lockheed Air Company and its involvement with Rolls-Royce, there is a matter for concern, and that concern has been expressed on this side of the House.

Over the last few years the aviation industry has been in a bonanza situation. By and large, projects have been launched, and aircraft have been developed, and because one airline, or two airlines, have taken them up, others have followed. The public have gone on buying tickets, industry has expanded, trade has expanded, and the airlines have boomed.

That is not the situation any more. Some hon. Members may have seen the report in the United States News & World three weeks ago of the crash in the profits of the American airlines. In 1967 they reached profits in excess of £400 million In the three years since, that has been converted to a loss of £50 million. Anyone who has been in the United States recently and has flown on almost empty jumbo jets lurching unprofitably from one airport to another, and who has been confronted with the situation at American airports of one aircraft after another failing to take off on time, would realise that things are not—hon. Gentlemen opposite seem to be disagreeing with me. Would they disagree with the fact that two of the largest American airlines, American Airlines and T.W.A., are contemplating merging?

Photo of Mr John Temple Mr John Temple , City of Chester

The hon. Gentleman accused American airlines of not keeping time. In my experience they are pretty good timekeepers. That was my reason for disagreeing with the hon. Gentleman.

Photo of Mr Phillip Whitehead Mr Phillip Whitehead , Derby North

That is a matter of personal experience. My experience after some hours in the stack over these airports is that they are not good because of the congestion of aircraft over airports. There are too many aircraft circling airports because there are too many in service. That is why I believe that we may be in a situation in which airlines are not only contemplating mergers, but are grounding some aircraft, and may be looking closely at future orders.

That brings me to the troubles of the Lockheed Company. This company, one of the three major airframe companies in the United States, is in the most trouble, not only because of the C5A transport plane, but because of the difficulties that it has in raising adequate financial backing. If I am right in thinking that there may arise a situation in which the American airlines which have dominated the American domestic market are going back on orders, which firm is most likely to suffer? My belief is that it is likely to be Lockheed, and not Boeing—which has a comprehensive range of aircraft—or Douglas, which is doing extremely well in both short-range and long-haul aircraft, and has far more orders for the DC10 than the Lockheed Tristar, whose last civil aircraft was the Electra, which was not a particularly happy precedent.

We may be in a situation where the optimism shown by the right hon. Gentleman that we can reach a profitable position quickly in which 225 aircraft will be sold with 100 additional engines would be unjustified, because it might be false optimism and because we are seriously lagging in the other projects mentioned by hon. Members.

We may see in these cases how the mistakes endemic in much of our backing of these immensely complex and expensive aircraft projects in the past may be avoided. My feeling is that they can best be avoided if we look at what we are getting. The Minister said in the debate that joint ventures have a great impact not only on prestige but on foreign earnings, provided we are cost-effective. That principle of cost effectiveness should be followed rigorously in the selection of the European airbus or the BAC311 which is now being offered, because all too often we see these costs, as mentioned by my hon. Friend the Member for West Lothian (Mr. Dalyell), escalating out of all belief, because of the complexity of the research involved. What we have seen all too often is a project that is given its launching aid and which then fails to come up to the sales estimate made in a spirit of enthusiasm and adventure by the company concerned.

B.A.C. will have to sell 280 or 300 of its series 111. It has not done so yet, and it is unlikely that it will. It claims that it will sell at least 280 of its series 311. Again, I doubt that it will, although there is an airbus market. That is why I think we should look at the A 300 B, because what we are looking at here is a European project with a very wide spread of capital cost involved in the launching scheme and also, I understand, a firm offer for co-operation with the Rolls-Royce company, with the development of the Rolls-Royce 211 series engines which would get us into a wide European market, with an aircraft which, at the moment, has no comparable competitor, and into a market into which the Lockheed Tristar is not venturing very successfully.

The DC10 has done much better in its European orders. If we can get into Europe at least with this aircraft in a way that guarantees our own aerospace industry and which is not, as is the case with so many projects, likely to leave us at the end of the day with a new stake in the industry but no conceivable financial remuneration, not only will we and our aerospace industry be much better off, and more likely to be preserved, but we shall get the prestige that is so often invoked by hon. Members opposite and also the safeguard for the future employment of the 70,000 people in Rolls-Royce and those working in the rest of the aviation industry and its allied concerns in this country, who are themselves equally committed and tied to the future.

What is at issue is the effective selling power of British aviation in the next decade. We cannot do everything, but I beg the House and the right hon. Gentleman to consider that in what we are committing ourselves to we must be certain that we shall do well.

7.24 p.m.

Photo of Mr Kenneth Warren Mr Kenneth Warren , Hastings

The Motion is rather too glib, despite some of the very commendable phrases with which the right hon. Member for Bristol, South-East (Mr. Benn) introduced it. It seeks to conceal—but fails to conceal—the bad relationship which developed between British technology and the previous Government. It gives my hon. Friends and me an opportunity to explore this a little further than I would have expected possible. The Motion notes the decision to give £42 million in aid to Rolls-Royce but happily does not mention the £47 million launching aid that the last Government gave to Rolls-Royce.

I start by asking exactly what hon. and right hon. Gentlemen opposite were doing whilst that sum of £47 million was being expended by Rolls-Royce. The escalation occurred under their noses but apparently out of their sight. The hon. Member for Huddersfield, East (Mr. J. P. W. Mallalieu) put forward another analogy. He said that it came up behind them. It was an escalation that took place long after the previous Government must have had full knowledge of the terms and conditions of the contract into which Rolls-Royce had entered with Lockheed. It is extraordinary to find note being taken of the £42 million but no mention being made of what happened to the £47 million.

The RB211 engine has been said to have been started many years before the contract was won by Rolls-Royce. It was started in 1961, and there was over six years' basic design of the engine before the contract was won. A great tribute is due to the engineers at Derby, as my hon. Friend the Member for Derbyshire, South-East (Mr. Rost) mentioned in an excellent maiden speech. I hope that we shall hear much more of him in the near future. Throughout the negotiating period Her Majesty's Government appeared to be very closely involved in all the negotiations, and in the last six months of the negotiations were intimately involved in discussing the offset deal with Lockheed. In February, 1968, when the Air Holdings concept was put forward, it was said to have been approved by Her Majesty's Government, but in the terms and conditions of the contract there is also a liability to buy through Air Holdings. Her Majesty's Government at that time apparently approved the liability in respect of imports into this country of 850 million dollars' worth of aircraft as part of the offset deal. I should like to know whether the Government were fully aware of the terms and conditions of that liability as well as the original contract.

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

I should like to correct the hon. Member on one point. There was no question of the import of Lockheeds into this country. This was the worldwide sale of Lockheeds outside the United States. The two figures are not comparable.

Photo of Mr Kenneth Warren Mr Kenneth Warren , Hastings

The Air Holdings company is registered in this country. The commitment was, first, to buy 20 aircraft and to have an option on 30 more.

Photo of Mr Kenneth Warren Mr Kenneth Warren , Hastings

It is the import into this country, and therefore the implied sale here.

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

No. Air Holdings undertook to purchase the aircraft for sale outside the United States but there was no commitment that the aircraft would be bought for use inside the United Kingdom. Therefore the hon. Member's point does not arise.

Photo of Mr Kenneth Warren Mr Kenneth Warren , Hastings

I fully accept the right hon. Gentleman's intervention. I am sure that he was intimately concerned with the situation at the time, but it appears that if these aircraft were not sold there would be a liability.

I want to deal with the contract. It was said that it would provide 10,000 jobs and £3,000 million in sales over 15 years. Those are not the words of anybody on this side of the Atlantic but the words of one of the representatives of the State of Ohio where the General Electric Works are situated, which found itself having to lobby its own senator on the effects of the deal going out of the United States. That offset contract was probably the way in which Rolls-Royce eventually won the order. When Trans-World Airlines and Eastern Airlines wanted to buy Rolls-Royce engines, it was this offset deal that made it possible. When the order was achieved in March, 1968, it was the fulfilment of six years' work by Rolls-Royce to try to break into the world market. I am convinced that it was quite right to back Rolls-Royce at the time. In the tributes paid to Rolls-Royce it is worth repeating what was said by Mr. Haughton, the president of the company immediately after the Lockheed Tristar flew. He said: The people of Rolls-Royce have a great reputation. Nobody has one higher. It is a wonderful thing to have teamed with such a fine company. In mentioning Sir Denning Pearson, I should like to mention also Sir David Huddie, an engineer whom I have had the privilege of knowing for over 20 years. A great tribute is due to that man, who did all he could to win that contract. It is a particular personal tragedy for me to know that he has had to retire because of the personal effort that he put into winning that contract and starting it off.

The State aid which was given to help win that contract was a good thing. It was a welcome change from what was commented on in Aviation Week, the "reliable magazine" referred to by the right hon. Member for Bristol, South-East, which said, only two months before that contract was won: The British aerospace industry will decline badly without some firm decisions and intelligent support that the Labour Government appears incapable of providing. With that switch, and coming two and a half years forward, it would be interesting to know whether, today, a Labour Government in power would have allowed Rolls-Royce to go bust. It would be very interesting to know whether—recognising that this is the responsibility which is now upon us, with this £42 million of extra investment—if they were not willing to support it, they would also have committed Lockheed to liquidation. This is something of a responsibility which has not been brought out adequately today.

I am very concerned with this £47 million which was spent. The Opposition select in their Motion the phrase, "lack of effective accountability". This is like pretending that history has never happened. What did they do about the £47 million? Two and a half years ago and today, they were crowing about the tremendous help that they gave Rolls-Royce, yet last year, when they were in power, when the Rolls-Royce accounts came up, one heard nothing about any worry being expressed about the danger signals which were being flown.

One could see in the Rolls-Royce research and development expenditure, which was normally running at about £30 million a year, a sudden creeping up, as the Olympus and RB211 engines reached the peak of expenditure, to £40 million in 1968 and £50 million in 1969. One has seen examples. The last five engine types which Rolls-Royce developed for the civil market came to a total of just over £120 million in all, yet here was the RB211 going up from £65 million to £75 million and then being shrouded in silence.

There is a great deal that the last Government have to answer for. Did they really know the terms and conditions of the contract, and did they really monitor what was going on in Rolls-Royce with the taxpayer's money? The right hon. Member for Bristol, South-East did not tell us about that.

Two further questions arise. First of all, if they did know what was going on, why did they not put in the effective accountability that they want us to talk about now? Secondly, if they did not know, why did they put in money without effective accountability? It cannot be because they did not know how to manage this. They had had not only the Zuckermann Report on management and control of research and development, which they hailed, but, in 1966, they had the Downey Report on development cost estimating.

It is significant that this all took place when there was supersonic escalation of costs going on on the Concorde. Again, there was constant surprise for hon. Members whenever the right hon. Member for Bristol, South-East had to tell us of the latest and greatest increases which were being incurred.

What we have to do now, therefore, is to probe the reality of the Opposition's attitude towards the future relationship of State aid to industrial ventures which have chances of success. These are mentioned in the Amendment, and many people have turned this afternoon to looking at the problems of the A300 and the BAC311. It would be worth while knowing exactly what is the attitude of the Opposition Front Bench towards this airbus venture.

We are told that we can have the A300B, or the BAC311, or nothing at all. The hon. Member for Huddersfield, East said that we should have nothing at all, but go straight on to vertical take-off and so on. With respect, he missed out a very important need in aviation—continuity. One cannot do a quantum jump. This is where the Comet came unstuck, to put it at its mildest. This continuity cannot be produced unless one continues in the civil air transportation game.

In my judgment, as an aeronautical engineer, there is no doubt that it is the expensive route that we must take in order to succeed properly. That expensive route lies through an investment of some £100 million in the BAC311. The prime point about that aircraft is that it is one that the market needs. It is not an aircraft which has been made to satisfy some unworkable political consortium. It is coming from a proven organisation, as opposed to an unproven co-operative consortium among a group of companies none of whom has ever worked together before.

With great respect to my hon. Friend the Member for the City of Chester (Mr. Temple) and the hon. Member for Derby, North (Mr. Whitehead) and their statements about the aeroplane, which they are personally backing, I should like to comment that, in backing what was called the all-British 311, we are not talking of an irrelevancy. There is a difference of £1,000 million on the balance of payments between the 311 and the A300, since the latter would incur a deficiency on the balance of payments.

Surely this is not a venture to which we want to attach ourselves at the moment. The aircraft has only one-fifth British content. Why should we back something with such a small British content, which yet costs so much money?

Some of the comments of my hon. Friend the Member for the City of Chester on wing design made me resolve that if I were walking up to that aeroplane, I would back off and go by Tristar. But I have a feeling that the consortium for the A300 cannot build the aeroplane without British help.

Some of the questions which are posed at the moment and which I hope the Government will consider in reaching their final decision, are questions that the customers want answered far more than the taxpayers in choosing a particular aeroplane.

First, and fundamental, who on the A300 would be in charge of the consortium? Second, arising out of this, who will be picked when things go wrong? Third, what aircraft have the consortium built before? Fourth, what experience have they of working together?

Last, and perhaps most important, what product support have the consortium to offer on a worldwide scale? The airline expects to buy an aircraft which can be kept going for at least 10 to 15 years. The 311 will sell in the main world market—North America—but I do not think that the A300 has a chance of getting off the ground on that side of the Atlantic.

Returning to the Motion and the Amendment, what has worried me most about the considerations that we have had before us today is that I hope that the Government have the courage to stand up for this particular British capability, and that they will not be put off by debates about lame ducks. I hope that the Opposition will also have the courage to support such a decision. It would be a very good thing if we backed an all-British project, because I believe that there is a good deal of public emotion involved now in this decision and that the British public themselves want to see the 311 get going.

There is absolutely no virtue in trading our technological capability across the counter of the Common Market negotiations. We must negotiate from a position of strength. We have gained nothing in the past from being involved in co-operative ventures with Europe. The Concorde shows this. It got us nowhere nearer the Common Market.

A very difficult question that we have to face in this choice, if it is to be the 311, is how then will both sides of the House feel if my right hon. Friend comes before us to say, "B.A.C. believe that it must be a Rolls-Royce engine for the 311, but they will need another £60 million to get that engine going." This is a very difficult choice, and one of the tremendous questions we face is whether or not it would be more desirable to go for an American engine to ease the British taxpayer of that extra burden of the £100 million which B.A.C. needs to get it started.

We do not want to forget that the sum total of the venture, an investment of £100 million or £160 million, will bring this country overseas sales of about £1,000 million to £1,200 million. At some time we must accept somebody's figures. I accept B.A.C.'s findings, which have been checked. B.A.C. has a tradition of achievement and Lockheed and Douglas both think B.A.C. is right.

The Motion is constraining. All the time hon. Gentlemen opposite are trying to lock us into a particular attitude towards this industry. This exposes their prime collective weakness, which is lack of adequate experience of the British aircraft industry and, above all, of the selling of British aerospace products abroad. The needs of export customers are always evolving and one must maintain a flexible, mobile relationship between Government and industry if one is to take advantage of the changes which occur, as they occur, in the market.

It has been said that the big trick in industry is always to back the winners. Obviously, one does not make much money putting small stakes on losers. In all the years I spent as an aeronautical engineer, I was never of the opinion—I say this with respect to hon. Gentlemen opposite—that the Labour Party ever had a lasting awareness of the problems of the aircraft industry, and that is the basic trouble with the Motion.

Hon. Gentlemen opposite should have known what decision to take over the RB211, but what a calamity it was when they cancelled the TSR2. The hon. Member for Stepney (Mr. Shore) said that we must get into a relationship with the industry before disaster strikes, but as he was talking I was reminded of that shambles which became the Beagle Company, with all that that meant in terms of "ineffective accountability". The hon. Member for Huddersfield, East talked about getting into VTOL technology but I recalled how, in 1965, we had the cancellation of the P1154 and the Hawker HS681 projects, which set back vertical take-off and landing progress in this country at least ten years.

I had a small example of what this means. I recall that under the last Government I was on one occasion seeking some help from them in an export battle in the United States. The help I got was to have a competitor introduced against me.

Time and again the last Government handed over design leadership. For example, there was the Jaguar, an advanced variable geometry aircraft about which we were in collaboration with the French and a multi-rôle combat aircraft. There is no tradition on the benches opposite to commend the Motion. We must try as a Government to help industry to face up to modern developments, and that is what hon. Gentlemen opposite never did when they were in power. Perhaps their belief in Clause Four has a lot to do with their attitude.

To me as an engineer the Motion is rather like a damp squib in that it resembles "the white-hot technology" of 1964 to 1970. I hope that tonight we will find a genuine awareness of the capabilities and objectives of advanced technology, because it is in this way that the Government should be helping the industry.

7.45 p.m.

Photo of Mr Jon Rankin Mr Jon Rankin , Glasgow Govan

I regretted the change of tone and attitude which the hon. Member for Hastings (Mr. Warren) adopted towards the end of his speech. Earlier I thought that I would be able to congratulate him on an excellent contribution, but then he began to fish in the murky depths in which his party lay and lowered the tone of his effort completely.

As I listened to him, my mind went back to a matter that occurred in my constituency some years ago. On that occasion, my local shipbuilding industry was threatened with closure. Fortunately, the Labour Party were in power. The Government stepped in; provided £1 million for Fairfield Shipbuilding; and the day was saved.

On that occasion the then Minister, who is now Lord George-Brown, rose to give the House the details of the £1 million that was being made available. The right hon. Gentleman who is the present Chancellor of the Exchequer was about to get to his feet, obviously to protest at the Government's sinking—as he would have put it—£1 million of public money in Govan constituency. Seated beside him was the present Prime Minister, who grabbed him by the coat tails and pulled him back on to the Opposition Front Bench. I thought then that what the present Chancellor might have said on that occasion was in the minds of many of his hon. Friends. That was a wonderfully redemptive act on the part of the Labour Government. It was, after all, the Government performing one of its functions, which is to assist industry.

How can the hon. Member for Hastings and some of his hon. Friends decry the efforts which were made by the Labour Government? Are not the present Government doing more or less the same thing—having taken a leaf out of our book? We took that step in Govan in 1954 and in a recent period, when Labour were in power, similar acts to help industry were done.

Had the shipbuilding industry in my constituency closed, thousands of jobs would have gone, hundreds of shopkeepers would have had to put up their shutters and great institutions such as the Co-operative movement, which had its central premises for that part of the city in my constituency, would have lost many of its supporters because thousands of men and women—women as well, because they, too, are employed in shipbuilding—would have left my constituency seeking work.

The engine under discussion is a Rolls-Royce engine and I hope that if it is decided to use it to power the BAC311 Scotland will get some benefit from the decision. We certainly badly need some such benefit at present. Just recently, 2,500 men were dismissed by Rolls-Royce, bring our total unemployed up to 96,000. Against the background of London or England in general that number may not seem very big, but in Scotland it represents 2·5 per cent. of the employed population.

The programme would generate more than 72,000 jobs over our country as a whole, but the effect would not stop there. We are assured that a world market awaits this aircraft, and we can all accept that as a fact. Current provisional orders confirm it. Even at this very early stage we are told that 43 aircraft are on order for eight operators, four of whom operate overseas, and the order is expected to expand eventually to at least 100 aircraft. That is only a beginning. It would be bound to have a benevolent effect on our balance of payments and would mean, additionally, through the generation of jobs an improvement in the national income. It would enable the Government to speed up their social programme. These are things that any Government would want to do.

The programme would also benefit our European relationships. The BAC311 could be a most helpful link in that process. In view of the time I will not further expand the topic. I have given some examples of the good that would derive from a decision which I hope will be fully implemented.

7.55 p.m.

Photo of Sir Anthony Meyer Sir Anthony Meyer , Flintshire West

I will not follow the hon. Member for Glasgow, Govan (Mr. Rankin), because I I am not quite sure where he was going, nor am I sure whether he himself quite knew where he was going either. I wish, however, to comment briefly on the speech of my hon. Friend the Member for Hastings (Mr. Warren), who is about to leave the Chamber. My hon. Friend has a very good case. The BAC311, if it is ever built, will be an excellent aircraft. It is a pity, however, to spoil a good case, if one has it, by abusing a rival product. It inevitably gives rise to the suspicion that one's own case is not so impeccable as it might at first seem.

I am quite sure that if the BAC311 is ever built it will be a magnificent aircraft, but it is two years behind its immediate rival—the European product, the A300B. It requires a large investment by the British Government. I doubt whether any of the champions of the BAC311 can put their hands on their hearts and swear that the figure they are now giving as the maximum investment required from the British Government is likely to bear any relationship whatever to the eventual figure if the product is carried out to its conclusion.

There is an even more powerful argument. Even if the BAC311 is an magnificent as, say, the VC10, it will have to fight for a share of a limited market not only with American tri-jets but also with the European A300B, which is an aircraft that is now being made. Like my hon. Friend the Member for City of Chester (Mr. Temple), I have seen the metal for that aircraft being cut, and early next year the wings are being flown to Toulouse.

It is all very fine to say that an untried consortium is manufacturing the aircraft and that untried consortia do not produce good aircraft—like the committee designing a horse, which turned out to be a camel. Nevertheless, the plane is being made, and will continue to be made—perhaps for reasons of which we might not approve—whatever may be the decision of the Government. Therefore, whatever the Government decide, if the BAC3111 goes ahead it will have to fight with a European project for a share of a limited market.

One thing certain is that in that case both aircraft will lose money; that neither can possibly recover its research and development and initial construction expenditure—

Photo of Mr Robert Adley Mr Robert Adley , Bristol North East

Can my hon. Friend in his turn put his hand on his heart and repeat that the aircraft is being made and will continue to be made in any case? I ask because many of us suspect that if there is not British Government backing for the 'plane some prototypes will be developed but the 'plane will never go into commercial service.

Photo of Sir Anthony Meyer Sir Anthony Meyer , Flintshire West

I can certainly say that there is every intention to proceed with the 'plane and that the decision is not dependent on any decision of our Government to participate. Perhaps the aircraft will not be a success, and maybe it will lose a lot of money: the point is that the European Governments, perhaps for political reasons of their own, are determined to go on with it, thus ensuring the failure of both aircraft if both are proceeded with.

It is all very well to lose money in the aircraft industry if we are operating at the frontiers of knowledge. It is all very well to lose large sums of money building an aircraft like the Concorde. But we cannot for ever live on an aircraft industry which is taking in its own washing. Somewhere or other the industry must pay its way. If ever there were a generation of aircraft which should be able to stand on its own feet and pay its way, it must be this wide-bodied, relatively short-haul airbus. These things must be made profitable ventures.

It is all very well to have an emotional argument about the need to maintain a profitable British aeroplane industry, but "profitable" means selling an aeroplane at a profit, or can we contemplate a situation in which the British Government go on paying high subsidies for what should be a bread-and-butter aircraft?

Therefore, the British Government have three courses of action open to them to meet an admitted need now for a large-capacity medium to short-haul airliner. The first is the specious course, which is to back the BAC311—a very fine 'plane but one which is certain to lose money for the Government.

The second course is the short-term course, which is to authorise B.E.A. to fall back on its second choice, which is to purchase the Lockheed Tristar. I should have declared my interest earlier. Many of my constituents work at Hawker Siddeley [An HON. MEMBER: "Ah."] In response to that "Ah" may I also say that an equal number of my constituents work for Pilkingtons, which have asked me to support the BAC311 project; so I can claim to be reasonably disinterested in the matter.

If B.E.A. is authorised to purchase the Lockheed aircraft, it is not the ideal solution for Hawkers, but they will live with it and they reckon that they can still make a profitable venture out of their private participation in the A300B project.

The present Government have made it a point of policy to cling to the long-term rather than to the short-term solution. The Government have decided to look wherever possible into the distant future and to ignore excitements in the short term. There are powerful long-term arguments for Britain to invest in the stretched version of the A300B, which will also provide a long-term outlet for the creative capacities of Rolls-Royce.

This long-term argument has nothing to do with what is sometimes called crawling into Europe. I believe that we can perfectly well decide to back the BAC311 and that it would not in any way affect our chances of getting into the European Community. Equally, I believe that we could back the A300B and not join the European Community. These two questions are to that extent distinct. The decision on the aircraft will not affect the negotiations one way or the other.

Why do we want to join the European Community? If we are merely thinking in terms of signing the Treaty of Rome to participate in the limited arrangements which exist here and now for abolishing economic frontiers and for a limited pooling of economies, we shall not derive from the E.E.C. the advantages which could come to us from it.

If we are looking further ahead, and if our object in joining the European Community is to recover for Western Europe as a whole a measure of true sovereignty in world affairs—by "sovereignty" I mean an ability to exercise influence in world affairs—an indispensable element in that recovery of sovereignty must be the maintenance of an effective modern technology in Europe.

We are faced with a decision which I think is critical in this process of retaining an effective modern technology in Europe. Every time the question arises—how can we contribute to maintaining an effective aircraft industry in Europe, an effective electronics industry in Europe, an effective atomic energy industry in Europe?—voices will be raised in Britain, France and Germany saying, "We have a better aircraft industry in Britain", or "We have a better chemical industry in France or "We have a better electronics industry in Germany and therefore we should not combine our resources. We should go for the purely national model".

We have a perfect instance in the present case of the airbus. This is an instance where probably, if we went ahead with our purely British airbus, we would create a better technological project but we would be fatally sabotaging a perfectly good opportunity for promoting active co-operation in European technology.

Photo of Lieut-Colonel David Mather Lieut-Colonel David Mather , Esher

Has my hon. Friend taken into consideration the fact that if we do not decide to go for the BAC311 it will hit the British aircraft industry in a very big way? This means that one of our most important bargaining counters in entering the E.E.C. will have gone. The fact that we have a high technology industry—the aircraft industry—in which we are pre-eminent as a going concern, which we shall have if we choose the BAC311, will be a very important bargaining counter when the time comes to get down to hard negotiations.

Photo of Sir Anthony Meyer Sir Anthony Meyer , Flintshire West

I am grateful to my hon. Friend. There is a tendency to think that the British aircraft industry begins and ends with the British Aircraft Corporation. I remind hon. Members that Hawkers are the largest airframe manufacturers in Europe. This is a very large element in the British aircraft industry.

I greatly hope that, if the Government decide to participate in the stetched version of the A300B, ways can be found of associating B.A.C. actively in this enterprise. I agree with my hon. Friend the Member for Esher (Mr. Mather) that there must be a healthy British aircraft industry as an indispensable element of a European aircraft industry. I am convinced that by insisting on building our separate British airbus we shall contribute to the disaster both of the British and of the European aircraft industry.

I beseech the Government to view the problem in this light, to bear in mind the possibility of an open-ended commitment which may take them a long way down the road to Government financing, and to take the longer, the more difficult, but I believe ultimately the right, decision of backing the A300B.

8.7 p.m.

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

I have listened with great interest to the hon. Member for Flint, West (Sir A. Meyer). I still disagree with him about the choice between the 311 and the European airbus.

The Government are constantly telling us that they mean to make the defence of British interests the main criterion of their policy. I hope that they will observe that principle in reaching a decision on the BAC311, because I believe that support of this aircraft is the overwhelming British interest at present.

Unlike some hon. Members, I have no constituency or other personal interest in this. It is simply that two years of experience of responsibility for civil aviation, which brought me very close to this problem, as well as the Rolls-Royce/Lockheed project, left me in no doubt that if Britain is to have a real aircraft industry in the future the case is conclusive for Government support for the 311. Subsequent evidence has only confirmed that.

The hon. Member for Flint, West spoke of the long-term argument. Let us look briefly at this from the point of view of Britain's industrial future. We must excel in high technology industries, and high technology industries with a large re-export potential with expanding world markets. Civil aviation and the manufacture of civil aircraft is certainly one of these.

This is an industry where technique is so specialised and investment so vast that once a country has dropped out there is little chance of its getting back again. For 100 years ship-building and shipping were the major pillars of the British balance of payments. In passenger traffic, the aircraft is rapidly superseding shipping. Therefore, if we drop out of the aircraft manufacturing industry our balance of payments is bound to suffer severely in the long-term future. This decision is one of those types of decision which have a tremendous effect, perhaps irreversibly, on our economic future.

Of course, the decision must also depend on producing the right aircraft at the right time and at a reasonable cost, but it seems to me that the more one considers the choice from that point of view the stronger is the case for the 311. First of all, B.A.C., who I fully agree are not the whole British aircraft industry, have great confidence in it as they have shown by the money which they have already invested.

What impresses me is that the companies now forming B.A.C. have produced the two most successful British civil aircraft since the war—the Viscount and the 311—which have contributed many hundreds of millions of £s to the British balance of payments over the last 20 years. B.A.C. assured me, as a Minister, as far back as 1965, when there were many sceptics around, that they would sell 200 BAC111s, and offered what seemed to me, though not certain, nevertheless convincing evidence at that time. They have now sold 201 to date and they expect to sell over 250. That is an ounce of experience against a good deal of theory. I think that the vindication of their estimates is strong support for their prediction that they should be able to sell over 250 311s in the 10 years between 1975 and 1985. Indeed, since the war—this is fact, which I do not think the hon. Gentleman will dispute—B.A.C. have sold nearly 250 aircraft of all kinds in the United States, and there is no other non-American company which can compare with that.

Next, it seems to me that we are fortunate at this time in that both B.E.A. and B.A.C. have confidence in the same aircraft which B.A.C. is able to manufacture. It has been one of the misfortunes of the British aircraft industry since the war that there has been a tendency for the manufacturers either to design an aircraft which British airlines did not want, like the VC10, despite all its merits, or to manufacture one like the Trident which was specifically tailored for one airline and other airlines did not like to buy it.

Photo of Mr John Wilkinson Mr John Wilkinson , Bradford West

Does the right hon. Gentleman think that B.E.A. would be justified in going to the Government for subsidy if they were forced by the Government to accept the aircraft which they wanted least—the 300B—for their future requirements, instead of the BAC311?

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

I think they would. I do not say that they would get a subsidy, but they would have a strong case for compensation, which I think is the word usually used. But this time we have a golden opportunity to produce an aircraft which B.E.A. have strongly supported in the past five years and still support, and for which aircraft already there are provisional orders for 43 up to date. We shall be lucky if that opportunity occurs again in the near future.

Of course, the cost matters very much indeed; but what B.A.C. are asking for is not a subsidy but launching aid. The Government in their Amendment tonight are asking the House quite rightly to approve the principle of launching aid. No hon. Gentleman will suggest that we could hold our place in aircraft or civil aviation in the world without very considerable Government support. Indeed, that was the burden of one part of the speech of the Secretary of State today, and it is quite incontrovertible. Neither the American, the Russian nor the French aircraft industries could possibly survive without it.

I believe that at this moment Lockheed are earning 90 per cent. of their total receipts from the Government of the United States. In my view, this aid should take the form not of direct subsidies or grants but rather of risk-taking investment by the Government, and that surely is the essential principle of launching aid, because in proportion to sales, money returns to the Government who originally advanced it. Indeed, this has happened already on quite a major scale with both the Viscount and the BAC111.

I understand that the figures are—the Minister can correct me if I am wrong—that in the 20 years from 1950 to 1970 B.A.C.'s civil aircraft have benefited the United Kingdom balance of payments by about £800 million, and the amount of launching aid now oustanding after allowing for the levies which have come back to the taxpayer is only £25 million and is still falling as more and more 111's are sold at home and abroad. That shows, on the basis of actual experience, that similar aid for the 311 would be a reasonable risk financially even in a field in which obviously complete certainty cannot be obtained. If we ask for complete certainty we shall build no aircraft at all, and other will.

I understand—again the Government can give us their estimates—that if the B.A.C. estimate of 311 sales turned out to be as reliable as their estimates of 111 sales, the gross export return over the whole life of the aircraft would approach £1,100 million with the Rolls-Royce engine and would approach £1,000 million even if we had to use the G.E.C. engine. That is far higher than any balance-of-payments return which can possibly be obtained for this country by the so-called European airbus, whatever its merits may be, and even on the assumption that it goes ahead as presumably it will in any case. It seems to me that important as are the employment and taxation arguments, the balance-of-payments argument and our whole industrial future ought to be the conclusive factor.

However, the clinching arguments seem to me to be these, and here I agree with a great deal of what the hon. Member for Hastings (Mr. Warren) said: if we lose this particular British aircraft, now that we have the chance to make it a success, we shall lose design leadership in the airframe industry, and it is very unlikely that we shall recover it for as far ahead as we can see. If we lose the airframe industry we shall risk losing the aero-engine industry as well, because we shall no longer be able to influence to the same extent the orders for aeroengines. That would be a major industrial disaster.

I hope, at any rate, that the Government will take this decision on the ground of the technical and economic realities and not out of any political doctrine one way or the other. Let us remember that the so-called European airbus is not really a European aircraft. It is predominently a French aircraft, far more under the control of the French Government than of anyone else, and likely to bring far more reward and more strength to the French aircraft industry than to our own.

The other argument which seems to me to be decisive is this—and here again I agree with the hon. Member for Hastings: experience is aircraft production, both back in wartime and in the far more complicated circumstances of today, has shown that modern aircraft and missile projects are so complex as well as expensive, and so many parties are involved in them, that beyond a point they become unmanageable. That is one reason for the failure of so many missile projects and for the difficulties over the Concorde, of which we all know.

If, in addition to the airframe manufacturers, the aero-engine manufacturers and a host of sub-contractors as well as the airline customers and three or four Government Departments, which is bad enough, we bring in two or three other countries with a corresponding array of authorities there, then in my judgment the chances of conflict and confusion are so great that we have proportionately reduced the chances of success and made them pretty remote. If we keep these complexities and conflicts within bounds by confining them within British control, we shall have by far the best chance of bringing off the whole project.

Let us be realistic and not too starry-eyed about this. It is pretty clear that the somewhat frantic efforts of the French aircraft industry and the French Government to prevent our building the 311 at all are the strongest testimony to the prospects of success of that aircraft. If it had little chance of success, they would not be so exceedingly keen on preventing our building it. I think that it is also some sign of the strong desire overseas to undermine the British airframe industry, too. At any rate, that is the real issue at stake in this choice, behind all the statistics and the technicalities, and I strongly urge the Government on this issue, even if they do not do it elsewhere, genuinely to put British interests first.

8.21 p.m.

Photo of Mr Robert Adley Mr Robert Adley , Bristol North East

It is unusual for me to agree almost entirely with the right hon. Gentleman the Member for Battersea, North (Mr. Jay) while finding myself in conflict with my hon. Friends the Members for the City of Chester (Mr. Temple) and for Flint, West (Sir A. Meyer), who have conducted a most successful pincer movement this afternoon on behalf of the Motion, with its five signatures, in favour of the A300B. Those of us—the 73 hon. Members on both sides—who have signed the Motion supporting the BAC311, have, perhaps, not had proportionately quite so many opportunities to catch the eye of the Chair.

What is the argument put in favour of the airbus? First, the proponents consider that it is a great advantage to be first in the field. As a marketing man, I regard timing as more important than speed. In my view, B.A.C. has its timing right. It has done a great deal of research into when the airlines, its customers, feel that the wide-body airbus will be needed. In my opinion, there is no question of rushing into production at the very earliest opportunity, and, apart from that, experience shows that aeroplanes which are, perhaps, built too quickly do not always come out best in the long run. The 311 ought to get off the ground quickly from a production point of view, but not necessarily be rushed straight into production without adequate testing time.

My hon. Friend the Member for the City of Chester spoke of Air France as being the biggest airline in the world, and he argued that, because it is the biggest airline in the world, the A300B should be pushed ahead immediately, because Air France wants it. In fact, Air France is not the biggest in the world by a long way. Moreover, history shows that no aircraft which has been built purely on the basis of what one might call blackmail orders from airlines whose Governments have forced them to buy it has ever yet been a commercial success. The greatest strength of the BAC311 is that it is being built for airlines which want it, but, not because they are being forced to have it.

In their Motion, the Opposition "note" the decision to support Rolls-Royce, but in the debate so far, with one exception, I have yet to hear an hon. Member opposite openly come out and welcome the Government's decision to provide further aid to Rolls-Royce. The Motion goes on to criticise, the lack both of consistency and of effective accountability in the Government's policy. As for lack of consistency, we are following the Labour Government's example in providing £47 million for the launching of the RB211 engine by Rolls-Royce. So there is no lack of consistency there.

Right hon. and hon. Members opposite have tried to show that my right hon. Friend the Secretary of State for Trade and Industry has been lacking in consistency by pointing to his references to lame ducks and his assistance thereafter to Rolls-Royce. The lack of consistency, I suspect, is in the ear of the listener in this instance. Hon. Members opposite continue to refer to only one speech by my right hon. Friend. I shall refer them to his speech at the Conservative Party conference—just three sentences— I recognise that some industries, like for instance the production of aircraft, are going through a period of world wide disarray and need a supporting hand. But I will not accept involvement in an openended liability. To do so is simply to throw good money after bad—and it is your money at that. The Government are consistently following the line which the Secretary of State has indicated. If we could have a little less reference to Rolls-Royce as a lame duck and reference to it as, perhaps, a swan with cartilage trouble—which might be more appropriate—it might be more helpful to that great company in its present difficulties.

We have heard words of support for Rolls-Royce from the hon. Gentleman the Member for West Lothian (Mr. Dalyell). I entirely agree with his words in the latest issue of the New Statesman, when he described Rolls-Royce as A priceless national asset without which there would be no aero-engine industry in the West, outside the United States. That is the nub of the matter. If Europe does not hang on to Rolls-Royce—if we do not hang on to Rolls-Royce—we shall for our future civil and defence aviation requirements be entirely dependent upon the Americans. In his article in the New Statesmen, the hon. Member for West Lothian makes a point about the exorbitant cost of spares for American aircraft. It would be fatal if, by failing to support Rolls-Royce, we finished up having to rely indefinitely for the supply of aircraft and spares on a North American manufacturer.

The Opposition have made much play of accountability. I thought that my hon. Friend the Member for Hastings (Mr. Warren) very successfully dealt with the point of the original £47 million which the previous Government gave to the support of Rolls-Royce for the RB211 engine. I take the point a little further. Why should we chastise Rolls-Royce if, in its hour of need, it requires money for investment for the development of an engine which should in return create great assets for this country, when we rarely hear from hon. Members opposite of some of the other large sums of money which have been poured out of the public purse in the past few years?

Here are two examples. The figures are available in respect of British Rail from 1956 to 1969. During that time, the British taxpayer has been called upon to provide £1,524·9 million to support this nationalised monolith. I do not know how much British Rail has exported, and I am not aware of the value of its efforts to our balance of payments. As the right hon. Member for Battersea, North (Mr. Jay) said, the balance of payments is the vital factor here.

Photo of Mr Arthur Palmer Mr Arthur Palmer , Bristol Central

Surely the hon. Gentleman must take the point that the nationalised industries belong to the nation. Rolls-Royce does not.

Photo of Mr Robert Adley Mr Robert Adley , Bristol North East

If I am offered the opportunity of something which costs me £1,524·9 million, I might well decline.

The National Coal Board from 1947 to 1969 showed a deficit of £149·5 million. This does not take into account the number of neat phrases like "Excluding any contribution towards central charges" and so on.

There is a very good case for supporting Rolls-Royce, and I am delighted that the Government are supporting this great industry, because it has enormous potential for our future. We have heard about carbon fibres. The technological spinoff from Rolls-Royce is enormous, and set alongside the sums of money provided for British Rail or for the National Coal Board it shows that there is no sense in denying Rolls-Royce the funds it needs.

Photo of Mr Charles Loughlin Mr Charles Loughlin , Gloucestershire West

Is not the hon. Gentleman misrepresenting what the differences between the two sides are? What we say is that the inconsistency of the Government's policy is that they are advancing money to Rolls-Royce, in my view correctly, but will deny it to other organisations which are vital to the economy. Does not the hon. Gentleman agree that if British Leyland, for instance, which makes a tremendous contribution to our balance of payments, were in a similar position to Rolls-Royce it would be wrong of the Government to refuse to assist it?

Photo of Mr Robert Adley Mr Robert Adley , Bristol North East

British Leyland, to my knowledge, has never asked for Government funds to date—

Photo of Mr Robert Adley Mr Robert Adley , Bristol North East

I took the hon. Gentleman's point. British Leyland has never asked for funds in the way that industries to which my right hon. Friend the Secretary of State referred are asking for funds to bail them out of difficulties into which they have got time after time, industries in which there is no future, no export potential, no balance of payments content. I ask hon. Members opposite to differentiate between lending a company money for investment and providing funds for inefficient and out-dated industries. Over the past six years at any rate, they bailed out for political rather than commercial reasons or reasons of future benefit, organisations which bring profit to this country.

"Technological spin-off" is a much misquoted phrase. I have mentioned the deficits of the coal mines and the railways and I could pick many more. Since industrial derivatives of aero-engines came into being in 1958, when the first conversions took place, Rolls-Royce has exported £56·6 million-worth of derivatives of the aero-engines which it has been developing, and this is a continuing process. Two of the main derivatives are marine turbines and turbines for electrical generation.

On the marine side, the new Type-42 destroyers, the first of which, H.M.S. "Sheffield", is coming into commission soon, will be the first new major warships in the world to be powered entirely by gas turbines. That is a great achievement by British technology and in itself would be a major justification for assisting a company like Rolls-Royce to develop into an entirely new field. The "Sheffield" and her sister ships will be able to fit engines in complete packages, and the RB211–22 engine, which we are discussing, will slip into those ships without any drastic alteration. That is a major technological innovation which we should all support. I believe that it is now official that all future Royal Navy warships will be powered by gas turbines, as pioneered by Rolls-Royce.

The hon. Member for Bristol, Central (Mr. Palmer) will perhaps agree that in the same way as Brunel led the world with the SS. "Great Britain", Rolls-Royce is helping to lead the world yet again in technology connected with ships.

Photo of Mr Arthur Palmer Mr Arthur Palmer , Bristol Central

I hope that Rolls-Royce is more successful than was that ship.

Photo of Mr Robert Adley Mr Robert Adley , Bristol North East

It has attracted a great number of visitors! I think that the hon. Gentleman will find that as a tourist attraction it will be extremely successful in our city.

The Olympus engine, which is being developed in Concorde and was initiated with the Olympus 101 in 1947, has a tremendous future. Its derivatives are probably the most successful adaptations of the products of one industry to the needs of another. This is the direction in which we should be moving in the years ahead.

In 1963 the first Olympus engine was installed at, I think, Hams Hall power station outside Birmingham. Now, Rolls-Royce has installed over 180 jet engines in United Kingdom electrical utilities. Here again we have a tremendous potential deriving directly from investment in the aircraft industry.

Abroad, gas turbines are now being used on the trans-Canada natural gas pumping stations. There is great export potential here.

I am aware of the numbers of other hon. Members who want to speak, so I shall end with a few remarks dealing with the point made by the hon. Member for Huddersfield, East who referred to Concorde noise. He expressed a fear that the American airport authorities will be opposing Concorde on environmental grounds. I believe their opposition to be a real threat. I believe it equally to be a bogus threat.

We are all aware of the trials and tribulations of the Comet when it was first introduced and the difficulties place in its way, which miraculously disappeared when the Boeing 707 came on the scene. I am confident that, with the experience of the Comet, plus the extra strength of an Anglo-French battlehead against the Concorde's natural and unnatural enemies in North America, the British and French Governments will ensure that the Concorde is not subjected to unnatural and undue pressure.

I am sure we shall be supporting the Government's Amendment tonight and I echo the words of my hon. Friend the Member for Hastings, who said that, in the last six years, the Government have been acting as the only merchant bankers to which companies like Rolls-Royce could turn. I am hopeful that the present Government will restore the position whereby merchant banking is carried out by merchant bankers and not by Government, and I would add that perhaps after the VC10 and the BAC111 we can finish up with EC3.

8.36 p.m.

Photo of Mr Raymond Carter Mr Raymond Carter , Birmingham, Northfield

The hon. Member for Bristol, North-East (Mr. Adley) suggested that no speaker on this side of the House has so far supported the latest grant to Rolls-Royce. He suggested that the Opposition was, as a whole, critical of the grant. He must have been listening to a different debate from that which I have been hearing. The biggest criticism of the grant has come from his own side.

Last week, in a debate which covered aviation, the hon. Member for Oswestry (Mr. Biffen) observed that it would be better to support Carnaby Street than the British aircraft industry. The hon. Member for Oswestry is a disciple of the ghost which I see lurking opposite and who has some influence there, and I suggest that there is a significant number of hon. Members opposite who, if they were to come out in the open, would be severely critical of the Government's new grant.

The debate has ranged far and wide. My hon. Friend the Member for Huddersfield, East (Mr. J. P. W. Mallalieu) referred to the future of the industrial liaison centres. I want to dwell on this for a while because I have been in correspondence with one of the officers of those centres who is concerned at the possibility of the vindictive axe of the Government falling on this most worthwhile service.

I mentioned in the House last week that these centres have produced benefits shown by a survey to be of the order of £750,000 to industry and, incidentally, at minimum cost. I have been informed, however, that the survey was based on only ten centres and that if we take them all into account the benefits would amount to about £3 million. I sincerely hope that, before the Government take any decision on these centres, they will examine closely the benefits they have given to industry at minimum cost and in a way which has benefited not only small and medium-sized industries but the polytechnics and the technical institutions upon which they are based.

I thought it worthwhile to dwell on that matter for a moment because, although it is not perhaps as important as Rolls-Royce, it was a very important development by the Ministry of Technology and, although small, proved to be highly successful. We should not forget it.

Turning to Rolls-Royce, I find it remarkable that two years after the Press contained wonderful tales of the achievements of Rolls-Royce in gaining massive orders in the United States we should now be discussing an apparent tragedy for the company. But in fact it is not a tragedy. The sum of money recently granted to Rolls-Royce is merely a matter of taking up the complete instalment. It is not an additional amount. We must also bear in mind that the Government initially were not buying anything but were merely backing up a research and development programme.

Politicians should clearly understand the problems encountered in research and development, particularly in matters of high technology on the frontiers of advanced knowledge. We do not always know where we are going and therefore, if the Government step in with a commitment, they should be prepared at the end of the day if there is failure—although in this case there is no failure—to stand up to criticism. In the case of Rolls-Royce private capital could not be found and the Government, rightly in my view, saw fit to step and safeguard a valuable national effort. I believe that the State was right to step in.

I have one point of departure, and this point has been voiced by other speakers. If the State is to be asked to step in and take a risk, it should at the same time be able to retain control of its capital. The problems involved, whether the industry remains private or public, are precisely the same. Whereas politicians are always prepared to accept success and to bask in the glow that radiates from it, they are not always prepared to accept failure. In this sense politicians should be prepared, as some of my earthy car-worker friends might observe, to put their money where their mouth is.

Having said that the State should step in, I ought to say why I feel it should do so. In aviation, competition is international. We have seen a gradual reorganisation and restructuring of the British aircraft industry to a point at which there is virtual monopoly. Therefore, Britain and its aircraft industry find themselves in competition with the world. If necessary, the State must step in to ensure that British industry, which is vital to our balance of payments and so on, is viable and the State should retain control of the capital invested.

Research and development is extremely expensive. I speak with some experience for I worked for some years in research and development and I know some of the problems that are encountered by engineers. Research and development, as in many other areas of activity, is concerned with success, and success is equal to time-over-money. If, for instance, Rolls-Royce had had sufficient capital they probably would have reduced the time factor. That is extremely important. The Government side of the House know a good deal about the problems of aerospace. For 13 years they had charge of this vital sector of the economy, but for most of the time did precious little about it. The profit and loss argument is constantly flung at us from the Government. They forget that defence is a vital area of Government activity which is extremely difficult to determine in terms of profit and loss.

The hon. Member for Bristol, North-East referred to the Labour Government's failures. But they are nothing when compared with the failures in defence matters during the Tories' 13 years in office. Millions of pounds were squandered for absolutely no return, yet they are not prepared when they return to office to advance marginal sums of capital to industry which could have a vital bearing on our economic performance. British industry is still in a state of crisis. Some of the reasons for that are known. But the Government have given the impression that they are without philosophy and that, in pursuing or not pursuing that rôle, they have not got far.

The Rolls-Royce affair has caught them with their trousers down. They have reacted in the only way possible. I suggest that the Government will not get too far and that their trousers will still be hanging round their knees when another such incident occurs. I hope that by that time they will have acquired a philosophy based on State intervention, because in these vital and strategic areas of advanced technology, only Governments can play the most useful and productive rôle. In the United States, for example, there is not one advanced technological project that is not supported by the Federal Government. The same will apply in Britain and in Europe in the years ahead.

I hope that the Government will see reason and that, when other problems crop up, they will ensure that our basic industries get their support.

8.48 p.m.

Photo of Mr Michael McNair-Wilson Mr Michael McNair-Wilson , Walthamstow East

Listening to the hon. Member for West Lothian (Mr. Dalyell) during the debate, one had a feeling that, to misquote, the only stain on Rolls-Royce's reputation was to be the whitewash. He is wrong when he suggests that we should applaud everything a British industry does but should not probe and knock if we are required to do so.

Rolls-Royce is taking £89 million of the taxpayers' money. Our task is to be watchdogs of how that money is spent. A company which can start with a figure of £65 million as being the likely cash needed and end with a figure of £134 million is not being as careful as it should be with the money being invested in it.

To some extent, that is a red herring. The debate is about whether the help given by the Government to Rolls-Royce somehow breaches the general policy which was enunciated by my right hon. Friend, to the extent that it was not a Government's task to help lame ducks. I agree totally with him. The only difference is that Rolls-Royce is probably not the sort of lame duck about which my right hon. Friend was thinking.

It could be argued that, far from being a lame duck, Rolls-Royce is a golden goose which at the moment is egg-bound. I say that because, in my view, the company has taken on rather more than it can cope with, which is why the Government are asked to bail it out. But it is also guilty of mismanagement, and that is a charge which can be fairly levelled against its management and which has promoted changes in its top management. One cannot escape that. If the men were blameless, why were they changed? If they were blameless, the Labour Party is also blameless. But the men are not blameless, and it follows that the Government who originally accepted their quotations must admit either that the Ministry of Technology was taken for a ride by Rolls-Royce or that its sums were as clearly wrong as Rolls-Royce's.

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

Before the hon. Gentleman leaves that point, I hope that he will make it clear that we were not the customers for the RB211. Rolls-Royce came with a project which they were selling to someone else, and we offered the company a fixed sum of £47 million. It is not like a Government contract where escalation automatically falls back on the Government and where it would have been open to the present Government to refuse to give the company further assistance, though I am glad that they did not do that.

Photo of Mr Michael McNair-Wilson Mr Michael McNair-Wilson , Walthamstow East

Of course we were not the customer. We were an investor. However, I have never met an investor who is so profligate that he does not check the investment over and over again, especially when the money is not his but the taxpayers'.

We on this side must now follow through the logic of our action and our threats when we talk about not propping up lame ducks. We have accepted that Rolls-Royce, mainly because of its defence contribution and because it has to honour this contract, must be supported to the point where the Lockheed Tristar flies and where all 200 aircraft have their three Rolls-Royce engines.

Let us remember that Rolls-Royce will lose £25,000 on every engine which goes into the Tristar aircraft and, therefore, that it is not until the 200 aircraft have been supplied and sold that any profit will flow back to the Government and thus to the taxpayer from the investment in the aircraft. It follows, therefore, that we have a vested interest in the success of the Tristar in world markets. The tragedy is that the Tristar is a direct competitor with the BAC311, into which so many hon. Members today have asked the Government to put money, and of the A300B airbus.

Following the argument through, though we have a vested interest in the success of the Tristar, in its stretched version the aircraft will require another mark of Rolls-Royce engine, which will cost at least another £60 million. Today, we have questioned whether the British Government should spend £42 million on bailing out the company. What are we to do when Rolls-Royce says that it must have the 211–61 because the engine is crucial to what it should be able to offer in the civil market? Shall we have another debate and question once again whether the lame duck is being propped up, or have we thought through our policy and come to the conclusion that the only way in which Rolls-Royce can continue without repeated borrowings from the Government is by broadening the base upon which the company stands and seeing that it is the only European aero-engine manufacturer? Once we accept Rolls-Royce in those terms, we have to see how Europe can be persuaded to invest in the company and so share the enormous bills.

There is a way. It is not a matter of arguing the pros and cons of the 311 or the A300B. The BAC311 will require at least £90 million more of Government money. The farcical situation is that, even if it is given that money, the aircraft may then be powered by American engines. So one would be supporting the Tristar with its Rolls-Royce engines and supporting the BAC311 with American engines—clearly a crazy situation, since both are competing for the same market.

On the other hand, even assuming shortcomings in the A300B, one fact stands out—that no Government money is required, and the Europeans, if we go back into the project, are prepared to invest in Rolls-Royce. Immediately, one has begun to broaden the base of that great company and to find new finance for it. Immediately, one is picking it up and turning it into what it should be—the European aero-engine manufacturer. Immediately, one is being logical about our policy of not supporting lame ducks, and of letting private industry cope with its own problems.

We are talking not only of the A300B but also of a stretched version. This is the aeroplane that B.E.A. will buy, and it will be largely designed in this country by Hawker Siddeley and will mean a great deal of work for our aero industry. Surely we must decide tonight whether we want to go on supporting industries which have now become too complex and costly for one nation, or whether we are going to be logical and take the right step, which is a step towards Western Europe and towards putting our industry on a totally new and much more important basis.

8.57 p.m.

Photo of Mr Dick Douglas Mr Dick Douglas , Clackmannan and East Stirlingshire

The hon. Member for Walthamstow, East (Mr. Michael McNair-Wilson) will forgive me, I hope, if I do not comment on his general argument, because of the shortage of time. I want to deal particularly with the effective accountability in industrial policy in the private sector which the Government are pursuing. Both sides of the House will agree that, in the prevailing circumstances, we should have been highly critical of Rolls-Royce if it had decided some years back not to go forward with the development of the RB211. It was essential at the time, as history shows, that the firm should undertake this type of development in order to stay in the major league.

This type of advanced technological development is complex, costly and capital-intensive, and requires a large market. Hon. Members opposite must decide what the alternative cost is of not supporting such a venture. It is all very well to say that there are lame ducks—a phrase which will be much used and abused in the days to come—in industry, but what does one do if one decides against supporting certain branches of industry? The capital and labour there are specific, and one cannot transfer this type of technological manpower into other industries overnight. The Government must take a much longer term view than the annual balance sheet of any firm or industry.

That is our major criticism. The Minister has a great deal of accountancy knowledge. We know from the Rolls-Royce balance sheet that they started capitalising the research and development of this project as early as 1967. I wonder whether, in his monitoring of this development, the Minister will look at the nature of the capitalising of this type of development in future, because we will have more of this. It is right to do this if one is reasonably sure of the market. I will not go into the argument about the marketability of this engine, but the market must be taken into consideration in allowing a company whose development one is underwriting to do this.

The Minister said that some funds had been acquired from joint stock banks in the City and that the Government are to look at the overall investment now in prospect, of nearly £90 million. We criticised the Government for destroying the I.R.C. This was a unique device which had gathered to it expertise to look after this type of capital development. Will the organisations of the Ministry and the banks concerned do the same job as the I.R.C., that is, will they have more than a banker's responsibility for this type of investment? As the latest report of the I.R.C. pointed out, there must be more concern for such investments than ensuring their security. There must be a concern with the purpose of the investment and the rate at which exports, productivity, capital and labour develop as a result of it.

What organisation has the Ministry or the banks to ensure this sort of monitoring? These questions have a long-term relevance, going far beyond the present debate because of the nature of the industrial process upon which the United Kingdom has to embark to remain in the forefront of the technological race.

I disagree with hon. Gentlemen opposite who say that the private sector can carry out such research and development on the basis of its own risk capital. This is not so and the international comparisons prove that Governments must intervene in this type of investment. I hope that hon. Members will restrain their criticism of engineers at such times because such experts must be acquired to do a proper job and we do not have a proliferation of them. We must accept that it is right to have this further launching aid, there should not be any disagreement about that.

What we look to the Government for is a set of criteria by which they will help industry and a clear acknowledgement that they will have another look at the device of the I.R.C. which was uniquely geared to this type of job, dealing with such investments and underwriting British engines and other devices in the technological sphere.

9.3 p.m.

Photo of Mr John Wilkinson Mr John Wilkinson , Bradford West

I will not burden the indulgence of the House too much because I know that my right hon. Friend is champing at the bit. Where I come from they say: When in doubt, say nowt, but if tha' must say owt, say it quickly. I wholeheartedly endorse the Government Amendment. It is a fact that 25 per cent. of the world's civil aero-engine market will be held by Rolls-Royce by 1975 as a result of this launching aid and the SRB211–22 going ahead. It is another fact that world demand for civil-commercial aircraft has doubled in the last 10 years and will double yet again in the next decade.

The Government are wise to ensure that Britain will play her part in this expansion. In the next decade the big power plants, that is the 40,000 lbs thrust plus plant, will have 60 per cent. of the market. If the Government had not gone ahead with this launching aid we should have been out of the big league for good, and that is something we cannot afford to have happen. There are three other important Rolls-Royce projects in hand. We are alone outside the States and the Soviet Union in having a proper supersonic power plant, the Olympus, the Adour military power plant has a magnificent reheat to dry thrust ratio and the RB199 is an advanced engine with a three-shaft layout.

In terms of employment, about 65 per cent. of the work force in the European aero-engine industry is in Rolls-Royce. We must not only consider them; we must also consider those working in component manufacturing industries. In my part of the world, which has a notoriously low earnings record in industry, we have Hepworth and Grandage who are producing turbine blades and are one of the high-earning companies. In Barnoldswick, Rolls-Royce has an important plant in an area suffering a severe industrial decline. This is an industry that affects us right across the board, in terms both of our balance of payments and of employment.

I am delighted to see both my right hon. Friends here, and in particular the Secretary of State for Trade and Industry with his colours nailed so firmly to the mast, with such a fine B.A.C. tie on.

9.6 p.m.

Photo of Mr William Rodgers Mr William Rodgers , Stockton-on-Tees

We have had a good debate, with no fewer than 18 contributions from back benchers. Among these have been two excellent maiden speeches, which had the virtue—not always found in maiden speeches—of being appropriate to the occasion, to the extent that they referred to their constituencies and yet were relevant to our debate. I was delighted to hear the maiden speech of the hon. Member for Chertsey (Mr. Grylls), and I am looking forward to hearing from him again. I missed the speech of the hon. Member for Derbyshire, South-East (Mr. Rost) but I hope that on a subsequent occasion I shall be able to hear him add to the reputation that he has created for himself today.

The debate is not on a random Motion, on a peripheral issue; on the contrary, we have been debating not only crucial decisions affecting a large sector of British industry but the whole declared philosophy of right hon. Gentlemen opposite. We have been doing so against the background of a Government under attack not only from this side of the House but from many of their own friends outside the House.

To help fill in the background I want to give a short quotation. Even the veterans with the longest memories find it difficult to recall a similar precedent when confidence in a new Government, not only at Westminster but in the City, in business and industry, and even in Fleet Street, proved so sluggish, obstinate and unimpressed. That is not Tribune, or the New Statesman, or the Guardian or even the Economist; it is the Investors Chronicle.

Another quotation from the Investors Chronicle brings us even nearer our debate today. It is: Even in the case of I.R.C., M.P.s"— and the Investors Chronicle means Tory Members of Parliamentsuspect that in the end the Government must recognise that a body like it must be restored to fill the vacuum. It was good politics to claim that I.R.C., being a Socialist Government's creation, must be evil so it must be killed off, but it's bad economics, and certainly bad for the economy and many companies, to leave so many uncertainties and question marks about future policy. That is precisely our starting point today—that decisions have been made which, in our view, are damaging to the country and have been made for narrow political reasons. I had hoped that after the right hon. Gentleman's speech the position would have been clearer, not necessarily or mainly for our sake but because many people were listening to what he said. The questions that we must ask now are precisely those that were being asked before today's debate.

I quote again from the Investors Chronicle, which puts the position clearly: Just how far will John Davies apply the tough squeeze to all those 'lame ducks' which he suspects have been kept alive by state help in various forms? Who are they? When would he feel justified to intervene himself to help industries and firms on the lame duck list? And will he help to wring the necks of others? Those are fair questions but we are no clearer now as to precisely what the new brutalism means.

For some hon. Gentlemen opposite more and more bankruptcies might be the measure of the right hon. Gentleman's success, and it is at least arguable, in the tough, rough spirit of freedom that is now to prevail, that steps will be measured by how many companies, large or small, go under. I would be prepared to bet that as time goes by the right hon. Gentleman will receive many more complaints from his hon. Friends than we ever received during the period of the Labour Government.

We shall hear, though we did not hear it very much this afternoon, the spurious, intellectual case for this policy. We shall be told—we have been told—that what is painful in the short run will be bracing in the long. We shall be led to believe in a relationship between industry and Government of sublime and elevated simplicity, where each knows its place, and the boundaries are clearly shown, but the real world is different. I thought that my hon. Friend the Member for Huddersfield, East (Mr. J. P. W. Mallalieu) put it very well this afternoon. He was making, not a political point, but a plea to the Government when he said that experience shows that "preconceived notions of this kind simply are not relevant to the real problems which the Government have to solve".

I was interested to read a speech made in another place last week during the censure debate. After a reference to the views of the right hon. Member for Knutsfor (Mr. John Davies) the speaker went on: … it will not work. It is impossible to put the clock back half a century. For better or worse, the Government, industrial management, the trade unions and the City of London are enmeshed in the modern world and you cannot undo that mesh, ever, however hard you try. The Government occupy the driver's seat, and they cannot take their hands off the steering wheel as they now seem anxious to do."—[OFFICIAL REPORT. House of Lords, 17th November, 1970; Vol. 312, c. 1010.] The speaker on that occasion was not my noble Friend, Lord Shackleton, or Lord Balogh, or even my old boss, Lord George-Brown. It was none other than the former Conservative Member for Aberdeenshire, East, Lord Boothby.

This afternoon my right hon. Friend the Member for Stepney (Mr. Shore) put the Government's decision into an historical perspective. I thought that he spelled out very clearly the development of informed opinion over the last 25 years. He made it clear that in the early part of the 1960s the then Government, a Conservative Government, were forced to adopt policies which they had previously not supported because experience told them that other instruments were needed. I believe that in their heart of hearts right hon. Gentleman opposite know that their new policy will not work. The more experienced of them see that, faced with other crucial and sensitive decisions like that on Rolls-Royce, with which we do not disagree in so far as it goes, they will have to make the same sort of decision.

If there is one thing worse than the single-minded pursuit of a mistaken theory, it is to deviate at frequent intervals when the obstacles are great, while claiming that one's own destination is the same. It induces schizophrenia in oneself, and total confusion in others. That is how it is with the Government today in the Rolls-Royce case. They have made a decision with which we would not quarrel, but they have not answered the question that was put by a number of hon. Members, on both sides, about precisely how they would act presented with cases which are similar in a number of respects, but which may, or may not, be within the aircraft industry.

In his speech at Blackpool the right hon. Gentleman said: I believe that simply to abandon great sectors of our productive capacity at their moment of maximum weakness would be folly indeed. I do not quarrel with that view, and it is the view which the right hon. Gentleman has put forward as the excuse for his decision on Rolls-Royce, but the difficulty still is, as my hon. Friend the Member for Gloucestershire, West (Mr. Loughlin) made clear in an intervention, and as the hon. Member for Waltham-stow, East (Mr. Michael McNair-Wilson) asked in his thoughtful speech, what will happen in other circumstances outside the aircraft industry?

The hon. Member for Belfast, East (Mr. MacMaster) hoped the Government would intervene, if need be, despite their stated philosophy, in the shipbuilding industry. A similar hope was expressed by my hon. Friend the Member for Glasgow, Govan (Mr. Rankin). We are entitled to know whether the aircraft industry is exclusive or whether there are circumstances in which other industries could qualify in the way the right hon. Gentleman suggested in his Blackpool speech.

British Leyland may or may not be in danger of imminent collapse. Indeed, it could, I suppose, limp along for many years without really making the contribution to our economy of which it is capable. British Leyland employs nearly 200,000 men, in 70 factories, in probably one-quarter of the constituencies represented in this House. It has a dependent labour force of half a million and total sales of £1,000 million, a considerable proportion of which are concerned with exports, a point to which my hon. Friend the Member for Battersea, North (Mr. Jay) referred.

This is by any criteria one of the great sectors of the economy. We are entitled to know whether, in the event of British Leyland needing help from the Government, the right hon. Gentleman would rule it out on principle or whether he would consider it on its merits. If he were to rule it out on principle. Would he be prepared to see British Leyland dismembered, with parts going into American and part into Continental ownership? Would he also be prepared to see substantial unemployment in the motor industry as a result of major closures? This is a fair question and I hope that the Government's attitude will be made more precise.

The right hon. Gentleman's Blackpool speech provides a better text than anything he said today. In that speech he referred to a point raised today by the hon. Member for Bristol, North-East (Mr. Adley), about aircraft production going through a period of worldwide disarray. It was the hon. Member for the City of Chester (Mr. Temple) who referred to traumatic experiences in the aircraft industry. He must know that this industry is subject, as a chronic disease, to traumatic experiences. It is in the nature of the business.

It is, therefore, no good the right hon. Gentleman saying, as he said in Blackpool, that this is a once-and-for-all step as far as the aviation industry is concerned. What he has done on this occasion he may be obliged to do time and again if he is to rescue not only the engine industry but the airframe industry from disaster. In this area there can be no disengagement by the Government and I hope that hon. Gentlemen opposite have got that wholly clear.

We are discussing not only the future of the RB211/22, on which a decision has been taken by the Government, but also the future of the RB211/61, the whole next generation of new technology engines. The right hon. Gentleman must know now whether he is in principle prepared to consider launching aid for the next generation of aircraft, or whether in principle that is ruled out under the rules which he has laid down. I shall return to this subject shortly. I have referred to the BAC111 and I must make a passing reference to the Concorde, a subject which is in all our minds today.

It would be—and here, again, I join with the hon. Member for Walthamstow, East—a very dangerous doctrine if we were not to discuss the performance of any aircraft receiving large sums of public money on the grounds that commercial confidence was at stake. When vast sums of public money are involved it is not only the right but the duty of hon. Members to probe, and I hope that the right hon. Gentleman will confirm that. I do not for a moment think that the hardheaded bosses of the world's airlines will make their decisions on the basis of what is said in this House: when the presidents of Pan Am and T.W.A. make cautious statements it is entirely because they are concerned with Concorde's commercial viability.

No one doubts—I certainly do not—that Concorde is a remarkable technical and engineering achievement reflecting great credit on its designers and engineers. Nor do I doubt that in ten or 15 years' time flying the world supersonic will be commonplace, and that in 20 years it will be routine. What is at stake is whether Concorde is the right plane at the right time in the right place. So it is reasonable that we should express our reservations or hesitations here without being dogmatic in any way about the future the aircraft will have.

One can only say that even with a very substantial surcharge of 30 to 40 per cent. on fares, it will be the next generation of S.S.T.s that will make the killing. In those circumstances, it is reasonable to ask at what point enough will be enough. When will the Government decide—and I do not press them to decide now, nor do I say what the limit should be—that whatever the situation the escalation of development costs can go no further? When will the kissing have to stop?

So I come to the BAC311. On this subject we have had a great exchange of views today. I found six hon. and right hon. Members in favour of going ahead with it, and I found four who would put their money on the airbus. This is a reasonable difference of opinion, and it is a cross-bench difference of opinion. It is a very difficult decision for the Government to make. My right hon. Friend the Member for Battersea, North made a very powerful case for the BAC311, and I think that, generally speaking, the House is more convinced at the moment that this aircraft should go ahead than that the Government should back any other.

As I say, this is a very difficult decision. The Minister of Aviation Supply is on the spot. I do not envy him the decision he has to make, or the announcement of it in the House. But I have a respect for the right hon. Gentleman and his knowledge of this industry, and it is fair to say that that is true of the House as a whole. The Minister knows his stuff, if he will not mind my putting it that way. Although I might quarrel with his decision, I would be prepared to give him the benefit of the doubt.

But it is not the Minister's probity that is most likely to determine the issue. It is not what is best for Britain that will decide which aircraft we back. The right hon. Gentleman is being squeezed between his right hon. Friend the Secretary of State, with his preconceived notions of what is right and what is wrong for the Government, and his right hon. Friend the Chancellor of the Exchequer who is concerned wholly and exclusively with problems of public expenditure. If I felt that the decision, when it came, was the right hon. Gentleman's decision I would find it difficult to differ from him, though I might ask questions, but I do not believe that it will be his decision: I believe that it will be made by others.

I hope that the right hon. Gentleman will spell out for us this evening precisely what the decision means in employment terms. We must know the figures, because even if he has not yet made the decision, and is not to announce it to the House, he must know, broadly speaking, the parameters within which the decision lies. So I hope that he will not hide behind false arguments of commercial security but will tell us frankly what is involved in terms of employment if one solution is adopted rather than another.

Then there is the position of B.E.A. The hon. Member for Bradford, West (Mr. Wilkinson) made a very shrewd point about the decision which would have to be made. What is B.E.A. to do if the 311 does not go ahead? Will it be then free to buy off the shelf the aircraft which suits its needs best?

I remember, as I am sure that the Minister of Aviation Supply does, a debate we had just over a year ago on the Air Corporations Bill. We were dealing with the question of compensation to B.E.A. for being obliged to take the Trident 3B instead of the 727 which would have been available earlier. The then Opposition did not vote on Second Reading but we had some very constructive exchanges about the difficult problem of buying aircraft for B.E.A.

The hon. Member for Cirencester and Tewksbury (Mr. Ridley) said this: In future, the right policy for the country will be to trade in the world as a whole, to design aircraft for the world as a whole, and to sell them in the world as a whole and perhaps—who knows?—to subsidise them, and I am not saying that we should not. … If the Government wish to subsidise the aircraft industry, let them aid and supplement its revenues directly and let them tell B.E.A. and B.O.A.C. to buy their aircraft in the world market and to buy aircraft which suit them most. The hon. Member for Cirencester and Tewksbury is now the Under-Secretary of State for Trade and Industry. I wonder whether he holds the same view today.

In that debate the Minister of Aviation Supply, then speaking on behalf of the Opposition, said this: I agree with my hon. Friend … that in future the aircraft manufacturers … will have to aim at world markets. If they are successful, and a particular aircraft does not quite fit B.E.A., we should be able to afford, … either to let it buy the foreigner or certainly to subsidise the cost of the British aircraft …".—[OFFICIAL REPORT, 7th July, 1969; Vol. 786, c. 1111–15.] That was the Minister only a year ago. Has he changed his mind; and, if not, which is it to be—a subsidy or freedom for B.E.A.? If a subsidy is ruled out as a result of the doctrinaire rigidity of the Secretary of State, will the right hon. Gentleman at least make it clear that he will extend to B.E.A. the freedom which he is so anxious to extend to everybody else? It is reasonable that we should know, and it is reasonable that B.E.A. should know where it stands.

I again ask the right hon. Gentleman to undertake to place before the House, if he is not prepared to give us the figures we want in advance, a White Paper once the decision is made; because nobody doubts that this decision will affect the aviation industry right through the 1970s. It will affect not only the airframe industry—what will happen to B.A.C. and Hawker Siddeley—but it may well have a bearing on the future of Rolls-Royce, on whether it will have the funds to develop the RB211 in its next generation—the 61 and others in that series. May we have an undertaking that we shall have a White Paper in due course?

I am sorry that today we have not spent more time discussing the question of accountability, because this is a far more serious matter than the right hon. Gentleman suggested this afternoon. I.R.C. has gone and I, as a political realist, do not expect that, whatever pressures are brought to bear on the right hon. Gentleman, he will reverse that decision tonight or next week.

However, let him not believe that the matter of accountability can be dismissed. It is not sufficient to leave the responsibility with a Government Department which is both too close to and too far from those who are spending the money. Although I should like to believe that our own Public Accounts Committee can extend its activities into policing this sort of expenditure, at the end of the day there must be an instrument of some kind.

I hope that the hon. Gentleman will think, free from his ideological ties, of a formula which will meet a need which, if he cannot see it now, he will find as time goes by. In so far as it is comprehensible—and I have very grave hesitations about this—the industrial policy of the Government is based on political dogma and not on the country's needs. In so far as most of it remains obscure, it creates continuing uncertainty and conditions.

There are real, hard, serious issues to be faced, not least in the field of aviation, and they ought to be faced coolly, objectively and consistently in the best interests of our long-term future. I hope that when this debate is over, right hon. and hon. Members will face these complex problems with the proper responsibility, which they are not at present showing.

9.31 p.m.

Photo of Mr Frederick Corfield Mr Frederick Corfield , Gloucestershire South

I think this is the first time that I have had the pleasure of congratulating from the Front Bench two hon. Friends on maiden speeches. My hon. Friends the Members for Chertsey (Mr. Grylls) and for Derbyshire, South-East (Mr. Rost) both referred to their predecessors in terms which I am sure will find an echo in all parts of the House, for both were highly respected. Both my hon. Friends spoke on behalf of parts of the aviation industry in their constituencies, and I was reminded of my own maiden speech, when I think the Britannia was the aircraft of the day, and I also spoke of B.A.C., which is those days stood for the Bristol Aeroplane Company. I am sure we were all delighted to hear my two hon. Friends. They clearly have a great deal to contribute to our deliberations, and we look forward to hearing them again.

My hon. Friend the Member for Derbyshire, South-East made the point that nobody does any good by knocking a great firm like Rolls-Royce. We all appreciate that. But, as the hon. Member for Stockton-on-Tees (Mr. William Rodgers) has just said, we must all accept that where large sums of money are concerned there is an obligation of scrutiny.

Both my hon. Friends and, indeed, many other hon. Members, referred to the 311 and the 300B, and the hon. Gentleman has obliged me by giving me the score. I can assure hon. Members that all of the arguments that have been put to me—the questions of employment, of B.E.A.'s preference and so on—are all factors which will be taken into account. I also undertake that when the decision is made I shall be as forthcoming as possible, although I will not guarantee at the moment the actual form which the information will take.

I confess that I was a bit mystified by the right hon. Member for Bristol, South-East (Mr. Benn). He chided me for saying that life would be easier if these sums were not so large. Indeed, it would be. I do not think that this is a matter which any of us who are not wholly indifferent to public expenditure would dispute. I make no apology for saying that, and I was surprised that the right hon. Gentleman thought otherwise.

At the outset I wish to apologise to the hon. Member for West Lothian (Mr. Dalyell), because I promised to send him some information. The draft letter is in my in-tray. I am sorry that it is not in my out-tray, but it will be there tomorrow and I hope the hon. Gentleman will receive the letter shortly afterwards.

As to the hon. Member for Stockton-on-Tees, I should like to refer briefly to some of his questions. I should like to deploy them more fully a little later in my speech, but for fear that time does not allow me to do so, I would not wish him to feel that I had been discourteous in ignoring his questions. In response to his first question, I assure him that the Government continue to accept the policy of launching aid and will look at all such projects on their merits, as they will in relation to other projects outside the advanced technological industries about which he specifically asked. But he will know from his own experience that the criteria are inevitably different and one must, therefore, look to the merits of each particular case.

Next, as regards Concorde, the hon. Gentleman asked when the kissing would stop. All I can tell him is that I do not think that there is much difference on this subject between his right hon. Friend the Member for Bristol, South-East and myself. I have always maintained, and he has always maintained, that only when it is reasonable to expect options to be turned into firm orders would it make sense to try to judge the commercial viability of this project. Obviously, as the right hon. Gentleman himself said, what will matter is whether the airlines will buy.

We have, I understand, heard about egg-bound geese and about a swan with a broken cartilage. We have had some discussion about lame ducks. We have had a lot of fun with them, but a lame duck is no advantage to the Minister who promotes it. I assure the House that I have no desire to allow something to come forward which could be a lame duck."—[OFFICIAL REPORT, 3rd April, 1970; Vol. 762, c. 466.] I am sure that the right hon. Gentleman will recognise those words from his own speech on the Industrial Expansion Act in April, 1968.

I was glad that the right hon. Gentleman opened the debate by recalling some of the history of the Rolls-Royce contracts. Earlier, he had explained—it was not clear from the Motion—that the intention for the debate was to discuss the Rolls-Royce operation, to discuss Rolls-Royce affairs, and to consider the general relationship between the Government and industry. I was glad, therefore, that he recalled some of the history of the contracts, on the one hand, the contract between Rolls-Royce and Lockheed with regard to the supply of the RB211 for the 1011 Tristar, and, on the other hand, the contract between Rolls-Royce and Her Majesty's Government in regard to launching aid and certain other financial support, among other things, the air holdings contract, which I hope to have time to refer to later.

When I took over responsibility for this Department—I remind the right hon. Gentleman that it has been only four weeks; he was delaying a decision for many more months than I have been there weeks—and I began to learn some of the details of Rolls-Royce's financial predicaments, the feature which struck me most forcibly was the appallingly large estimated losses on production engines, amounting, I think, to between £35 million and £45 million on approximately the first 500 engines.

I was interested to note that the hon. Member for Coventry, North (Mr. Edelman) underlined that aspect of the situation. It arises from Rolls-Royce having tied itself to a price which events have shown to be much too low in relation to actual costs. While this state of affairs is, of course, a reflection of the technical problems encountered and the cost of their solution, it is a reflection also of the very rigid contract which Rolls-Royce had entered into with Lockheed.

I fully share—or, perhaps, I should say shared—the enthusiasm and delight of the hon. Member for Coventry, North at the time in the achievement of this contract by Rolls-Royce. But there is no doubt that, with the advantages of hindsight, it is abundantly clear that to have entered into a contract of such rigidity in terms of the penalties, on the one hand, and the price, on the other, was, against the background of the technological problems involved, unwise, to say the least of it. But I deliberately prefaced that comment with the words "with advantages of hindsight", because it is also clear, as the right hon. Gentleman said, that any attempt then or at any other time, to achieve the adoption of a British engine in an American airframe was bound to encounter the fiercest possible competition, particularly from General Electric, which had the great advantage of having developed its own immediate competitor largely, if not entirely, under a military contract for the C5A.

But the whole basis of launching aid, certainly as applied by this Government, and I think at any rate in intention by the previous Government, has been for the Government to examine projects put forward by firms and satisfy themselves that they represent a commercial proposition. As I listened to the right hon. Gentleman, with his enthusiasm for the amount of money that he has offered to Rolls-Royce at every stage, I could not help wondering whether he had not given it some encouragement to put its commercial considerations at a rather lower level of its priorities than we would have hoped.

I return for a moment to the contract, and here I am really replying to the hon. Member for Coventry, North again. It was abundantly clear when we considered the matter that the contingencies for breach of contract, bearing in mind that the contract involved not only Lockheed but direct contractual relationships with many of the airlines as well, were such that the way in which the hon. Gentleman wished the problem to be solved would have been devastatingly expensive.

It is at least open to doubt, even without the advantages of hindsight, whether it was not apparent at the time when the contract was agreed that the fierceness of the competition to which I have referred forced Rolls-Royce into accepting a degree of risk higher than would otherwise have been regarded as commercially prudent.

However that may be, there were apparently no reservations in the mind of the right hon. Gentleman. Certainly he did not give us the impression this afternoon that there were any reservations, then or now. This is what he said when he announced to the House in 1968 the decision to back Rolls-Royce. In the light of the wording of the Motion, it is perhaps not entirely out of place that that statement was made on 1st April. He said: Her Majesty's Government gave Rolls Royce full support in its efforts to obtain the order. In accordance with normal practice, the Government have agreed in principle to grant launching aid for the RB211, subject to agreement on satisfactory contract terms. This aid takes the form of a contribution by the Government to the costs of developing the engine and getting it into production. It will be recoverable over sales of the engine and was therefore reflected in the price Rolls Royce quoted. Alas! Details of the launching aid are being negotiated."—[OFFICIAL REPORT, 1st April, 1968; Vol. 762, c. 44.] When the right hon. Gentleman mentions accountability, at any rate if he has in mind accountability to the House, it is of some interest that the actual sums involved were not disclosed to the House until some 19 months later. But it is inherent in any very advanced technology such as that with which we are here concerned, that the costs of resolving the hitherto unresolved are by definition extremely difficult to estimate in advance. That is one of the factors, in association with the long-term nature of the investment, plus the sheer magnitude of the sums involved, that has made it impracticable for the aviation industry in any country in the world to keep pace with modern technology without some form of Government support. As my right hon. Friend and others have pointed out, in the United States the aircraft industry relies on massive military support. Whether that in future will be adequate remains to be seen.

The principle of launching aid has been adopted and applied by successive Governments from both sides of the House in this country. Indeed, the last Government extended the policy by increasing significantly the percentage up to 70 per cent. in this contract over and above everything else that had gone before. If one can reasonably overlook the right hon. Gentleman's over-confidence on 1st April, 1968, one finds it difficult to acquit him and his right hon. Friends of hypocrisy in sponsoring the Motion. It notes but carefully refrains from specifically welcoming the Government's action in regard to Rolls-Royce, action required to remedy a miscalculation to which he was a party. They have said in the debate that they approve our decision and I think therefore that we may leave it at that. But I would underline what has been said by many hon. Members—namely, the importance of Rolls-Royce to our defence and to the whole of Europe, if, indeed, Europe is ever to have an aero-engine industry which can begin to compete with the United States.

Photo of Mr Robert Maclennan Mr Robert Maclennan Shadow Spokesperson (Scotland)

The hon. Gentleman refers to the importance of the defence aspect of Rolls-Royce. Is he prepared to say more about this than was the right hon. Gentleman earlier—as to whether or not this is the crucial criterion which differentiates Rolls-Royce from other industries which may be seeking similar assistance?

Photo of Mr Frederick Corfield Mr Frederick Corfield , Gloucestershire South

I made it clear that each case would be considered on its merits and clearly this is one of the considerations one takes into account.

The Motion goes on to accuse us of inconsistency, and of being inconsistent in applying both our own policy of launching aid and that of the last Government. In this case, we have applied the further launching aid of £42 million on almost exactly the same basis as they applied the original launching aid of £47 million. It is a little difficult to think of any action which can be more consistent. It is no good hon. Member opposite defending themselves by saying that this is not the inconsistency with which they are charging us. It is no good their saying that they are only concerned in this regard to draw comparison between the Government's approach to the aviation industry or other industries of advanced technology on the one hand and industries which do not come into that category on the other.

It is no good the Opposition saying that, first, because the subject of the debate, which is the sole choice of the Opposition, has consistently been advertised and is shown on the Order Paper as concerning "aviation supply", and second, because my right hon. Friend has been equally consistent, in relation to direct Government involvement in industry, in drawing a specific and special distinction between the aviation and other advanced technology industries and industries which may from time to time apply for assistance. Of course the special considerations which affect the aviation industry are well known to the House and have been enumerated on a number of occasions.

I turn now to the question of accountability. I should like first to look at the record. It was first apparent to the Department, then headed by the right hon. Gentleman, in October last year—certainly in the autumn of last year—that Rolls-Royce might be running into serious financial difficulties. It was then that the right hon. Gentleman invited the I.R.C. to investigate its finances. It is only fair to the I.R.C. to state that at that time the technological difficulties with which Rolls-Royce were faced in the development of this engine were as yet too ill-defined to permit any accurate assessment of the increased cost likely to be incurred.

Nevertheless, it having become increasingly clear to I.R.C. over the ensuing months that Rolls-Royce had failed to appreciate the inadequacies of its resources in relation to mounting costs, the full magnitude of this shortfall did not, however, become apparent, or reported, until after the appointment to the board, at the suggestion of I.R.C., of Mr. Morrow and Lord Beeching in July.

I am not casting aspersions on the I.R.C., but since so much had been said about I.R.C. in connection with this debate and since the implication has been that the Government have disposed of some irreplaceable weapon of accountability, it is relevant to remind hon. Members opposite that, as the right hon. Member for Stepney (Mr. Shore) pointed out, the I.R.C. was designed basically to restructure industry. It was not designed as a rescue operation, as something to investigate firms which were in financial difficulty.

What the right hon. Gentleman was doing was to employ I.R.C. in these particular circumstances and ask it to do something which it was not designed or equipped to do. The right hon. Gentleman or one of his colleagues in the then Government made it clear when the Corporation was given statutory form that its function was basically in restructuring industry and in bringing about mergers which might otherwise not take place and would be in the national interest. Indeed, the Chairman of I.R.C. had consistently boasted that, rightly and justifiably, it had managed to keep a very small staff which was not large enough to undertake the sort of investigation that was thrust upon it.

The principal reason for the appointment of Mr. Morrow to the board to a position in which he could study the financial situation and the reason that it was so long delayed was that, until Rolls-Royce agreed to accept from I.R.C. the £10 million loan, or whatever was the figure, the I.R.C. had no locus whatever to put anybody on to the board of the Company. That, of course, against the background of this unhappy affair, shows clearly that had the Government acted directly, and not within I.R.C., the accountability would certainly have been more prompt and more accurate.

Photo of Dr Horace King Dr Horace King , Southampton, Itchen

The right hon. Gentleman is giving way to the right hon. Member for Bristol, South-East (Mr. Benn).

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

Is the Minister saying that I or my Department should have placed a Government director on the board of Rolls-Royce rather than have asked I.R.C. to do it?

Photo of Mr Frederick Corfield Mr Frederick Corfield , Gloucestershire South

I do not think that is the issue. I am saying that, had the Government of the day adopted the procedure that we have adopted and put in a firm of accountants at once, I have very little doubt that the discrepancy in the sums put forward from time to time by Rolls-Royce as to what was in fact the shortfall would have come to light much earlier. Furthermore, had they done so, we must face the possibility that the escalation would have been less rapid and less large.

One or two hon. Members asked what was meant by the £42 million being subject to the appointment of an outside accountant. It was solely because the sums varied so rapidly and so often. I thought it right, because of the magnitude of the sums, to make sure exactly what the shortfall was, because the sums required to meet the cash flow depend upon the degree of shortfall.

If the full extent of the problem had been revealed earlier, as it could have been, perhaps we could have prevented the escalation which took place. If there are no aspersions to cast upon the I.R.C., I ask the House to consider the standard of accountability adopted by the party opposite. When we were in opposition, as with Oppositions in any circumstances, we had very limited access to the details of transactions of this sort. Hon. Members will agree that there were many grounds for suspicion many months ago that the financial position of Rolls-Royce was not all that it might be. But one hesitates to make any public statement of suspicion rather than fact, which risks damaging both Rolls-Royce in this case, and the nation. I would willingly have given the right hon. Gentleman every credit for any similar reservations which may have influenced him at that time. Unfortunately he made it abundantly clear that he had no reservations of that sort and has none today.

Photo of Mr Richard Marsh Mr Richard Marsh , Greenwich

Now that the right hon. Gentleman has had the opportunity of carrying out some of these investigations, will he say, first, what rate of return he expects on the public money which has been invested, and, second, how much, if any, of this money is guaranteed by the bank?

Photo of Mr Frederick Corfield Mr Frederick Corfield , Gloucestershire South

I am sure that the right hon. Gentleman will agree on reflection that neither of those questions is strictly relevant to launching aid. If not, no doubt his right hon. Friend the Member for Bristol, South-East will be willing to re-educate him.

The right hon. Gentleman was sufficiently disturbed to ask the I.R.C. to intervene as early as October of last year, but he was content to stand by until 19th May of this year before any information was given to Parliament, and then only in a short answer by his Minister of State in another place. In it Parliament was told that the I.R.C. had arranged to give a £10 million loan, with the possibility of a further £10 million being required later. If anybody imagines that the situation in Rolls-Royce changed to the extent of requiring the injection of some £60 million, between 20th July and 20th August, it is abundantly clear that any ground for censure will be against the right hon. Gentleman for failing to realise the situation which was developing under his very nose.

Question put, That the Amendment be made:—

The House divided: Ayes 297, Noes 263.

Division No. 33.]AYES[10.0 p.m.
Adley, RobertBoardman, Tom (Leicester, S. W.)Chataway, Rt. Hn. Christopher
Alison, Michael (Barkston Ash)Body, RichardChichester-Clark, R.
Allason, James (Hemel Hempstead)Boscawen, R. T.Churchill, W. S.
Amery, Rt. Hn. JulianBossom, Sir CliveClark, William (Surrey, East)
Archer, Jeffrey (Louth)Bowden, AndrewClarke, Kenneth (Rushcliffe)
Astor, JohnBoyd-Carpenter, Rt. Hn. JohnClegg, Walter
Atkins, HumphreyBraine, BernardCockeram, Eric
Awdry, DanielBray, RonaldCooke, Robert
Baker, Kenneth (St. Marylebone)Bnewis, JohnCoombs, Derek
Baker, W. H. K. (Banff)Brinton, Sir TattonCooper, A. E.
Balniel, LordBrocklebank-Fowler, ChristopherCordle, John
Barber, Rt. Hn. AnthonyBrown, Sir Edward (Bath)Corfield, Rt. Hn. Frederick
Batsford, BrianBruce-Gardyne, J.Cormack, Patrick
Beamish, Col. Sir TuftonBryan, PaulCostain, A. P.
Bell, RonaldBuchanan-Smith, Alick (Angus, N & M)Critchley, Julian
Bennett, Sir Frederic (Torquay)Bullus, Sir EricCrouch, David
Bennett, Dr. Reginald (Gosport)Burden, F. A.Crowder, F. P.
Benyon, W.Campbell, Rt. Hn. G. (Moray & Nairn)Curran, Charles
Berry, Hon. AnthonyCarlisle, MarkDalkeith, Earl of
Biffen, JohnCarr, Rt. Hn. RobertDance, James
Biggs-Davison, JohnChannon, PaulDavies, Rt. Hn. John (Knutsford)
Blaker, PeterChapman, Sydneyd'Avigdor-Goldsmid, Sir Henry
d'Avigdor-Goldsmid, Maj.-Gen. JackJones, Arthur (Northants, South)Reed, Laurence (Bolton, East)
Dean, PaulJopling, MichaelPees, Hn. Peter (Dover)
Deedes, Rt. Hn. W. F.Kaberry, Sir DonaldRees-Davies, W. R.
Digby, Simon WingfieldKellett, Mrs. ElaineRenton, Rt. Hn. Sir David
Dixon, PiersKerby, Capt. HenryRhys Williams, Sir Brandon
Dodds-Parker, DouglasKershaw, AnthonyRidley, Hn. Nicholas
Douglas-Home, Rt. Hn. Sir AleeKilfedder, JamesRidsdale, Julian
Drayson, G. B.King, Evelyn (Dorset, South)Rippon, Rt. Hn. Geoffrey
du Cann, Rt. Hn. EdwardKing, Tom (Bridgwater)Roberts, Michael (Cardiff, North)
Eden, Sir JohnKinsey, J. R.Roberts, Wyn (Conway)
Edwards, Nicholas (Pembroke)Kitson, TimothyRodgers, Sir John (Sevenoaks)
Elliot, Capt. Walter (Carshalton)Knight, Mrs. JillRossi, Hugh (Hornsey)
Elliott, R. W. (N'c'tle-upon-Tyne, N.)Knox, DavidRost, Peter
Emery, PeterLambton, AntonyRoyle, Anthony
Farr, JohnLane, DavidRussell, Sir Ronald
Fell, AnthonyLangford-Holt, Sir JohnSt. John-Stevas, Norman
Fenner, Mrs. PeggyLegge-Bourke, Sir HarrySandys, Rt. Hn. D.
Fidler, MichaelLe Marchant, SpencerScott, Nicholas
Finsberg, Geoffrey (Hampstead)Lewis, Kenneth (Rutland)Scott-Hopkins, James
Fisher, Nigel (Surbiton)Lloyd, Rt. Hn. Geoffrey (Sut'nC'dfield)Sharples, Richard
Fletcher-Cooke, CharlesLongden, GilbertShaw, Michael (Sc'b'gh & Whitby)
Fookes, Miss JanetLoveridge, JohnShelton, William (Clapham)
Fortescue, TimMcAdden, Sir StephenSimeons, Charles
Fowler, NormanMacArthur, IanSinclair, Sir George
Fox, MarcusMcGrindle, R. A.Smith, Dudley (W'wick & L'mington)
Fraser, Rt. Hn. Hugh (St'fford & Stone)Maclean, Sir FitzroySoref, Harold
Fry, PeterMcMaster, StanleySpeed, Keith
Galbraith, Hn. T. G.Macmillan, Maurice (Farnham)Spence, John
Gardner, EdwardMcNair-Wilson, MichaelSproat, Iain
Gilmour, Ian (Norfolk, C.)McNair-Wilson, Patrick (New Forest)Stainton, Keith
Gilmour, Sir John (Fife, E.)Maddan, MartinStanbrook, Ivor
Madel, DavidStewart-Smith, D. G. (Belper)
Glyn, Dr. AlanMarples, Rt. Hn. ErnestStodart, Anthony (Edinburgh, W.)
Coodhart, PhilipMarten, NeilStoddart-Scott, Col. Sir M.
Goodhew, VictorMather, CarolStokes, John
Gorst, JohnMaude, AngusStuttaford, Dr. Tom
Gower, RaymondMaudling, Rt. Hn. ReginaldSutcliffe, John
Gray, HamishMawby, RayTapsell, Peter
Green, AlanMaxwell-Hyslop, R. J.Taylor, Sir Charles (Eastbourne)
Grieve, PercyMeyer, Sir AnthonyTaylor, Frank (Moss Side)
Griffiths, Eldon (Bury St. Edmunds)Mills, Peter (Torrington)Taylor, Robert (Croydon, N. W.)
Grylls, MichaelMills, Stratton (Belfast, N.)Tebbit, Norman
Cummer, SelwynMiscampbell, NormanTemple, John M.
Gurden, HaroldMitchell, Lt.-Col. C. (Aberdeenshire, W)Thatcher, Rt. Hn. Mrs. Margaret
Hall, Mist Joan (Keighley)Mitchell, David (Basingstoke)Thomas, John Stradling (Monmouth)
Hall, John (Wycombe)Moate, RogerThomas, Rt. Hn. Peter (Hendon, S.)
Hall-Davis, A. G. F.Molyneaux, JamesThompson, Sir Richard (Croydon, S.)
Hannam, John (Exeter)Money, ErnieTilney, John
Harrison, Col. Sir Harwood (Eye)Monks, Mrs. ConnieTrafford, Dr. Anthony
Harvey, Sir Arthur VereMonro, HectorTrew, Peter
Haselhurst, AlanMontgomery, FergusTugendhat, Christopher
Hastings, StephenMorgan, Geraint (Denbigh)Turton, Rt. Hn. R. H.
Havers, MichaelMorgan-Giles, Rear-Adm.van Straubenzee, W. R.
Hawkins, PaulMorrison, Charles (Devizes)Vaughan, Dr. Gerard
Hay, JohnMudd, DavidWaddington, David
Hayhoe, BarneyMurton, OscarWalder, David (Clitheroe)
Heath, Rt. Hn. EdwardNabarro, Sir GeraldWalker, Rt. Hn. Peter (Worcester)
Heseltine, MichaelNeave, AireyWalker-Smith, Rt. Hn. Sir Derek
Hicks, RobertNicholls, Sir HarmarWall, Patrick
Higgins, Terence L.Noble, Rt. Hn. MichaelWalters, Dennis
Hiley, JosephNott, JohnWard, Dame Irene
Hill, James (Southampton, Test)Onslow, CranleyWarren, Kenneth
Holland, PhilipOppenheim, Mrs. SallyWeatherill, Bernard
Holt, Miss MaryOrr, Capt. L. P. S.Wells, John (Maidstone)
Hordern, PeterOsborn, JohnWhite, Roger (Gravesend)
Hornby, RichardOwen, Idris (Stockport, North)Whitelaw, Rt. Hn. William
Hornsby-Smith. Rt. Hn. Dame PatriciaPage, Graham (Crosby)Wiggin, Jerry
Howe, Hn. Sir Geoffrey (Reigate)Peel, JohnWilkinson, John
Howell, David (Guildford)Percival, IanWolrige-Gordon, Patrick
Howell, Ralph (Norfolk, North)Peyton, Rt. Hn. JohnWoodhouse, Hn. Christopher
Hunt, JohnPike, Miss MervynWoodnutt, Mark
Hutchison, Michael ClarkPink, R. BonnerWorsley, Marcus
Iremonger, T, L.Pounder, Raft onWylie, Rt. Hn. N. R.
Irvine, Bryant Godman (Rye)Price, David (Eastleigh)Younger, Hn. George
James, DavidPrior, Rt. Hn. J. M. L.
Jenkin, Patrick (Woodford)Pym, Rt. Hn. FrancisTELLERS FOR THE AYES:
Jennings, J. C. (Burton)Quennell, Miss J. M.Mr. Reginald Eyre and
Jessel, TobyRawlinson, Rt. Hn. Sir PeterMr. Jasper More.
Johnson Smith, G. (E. Grinstead)Redmond, Robert
NOES
Abse, LeoFraser, John (Norwood)Mendelson, John
Albu, AustenFreeson, ReginaldMikardo, Ian
Allaun, Frank (Salford, E.)Galpern, Sir MyerMiller, Dr. M. S.
Archer, Peter (Rowley Regis)Garrett, W. E.Milne, Edward (Blyth)
Armstrong, ErnestGilbert, Dr. JohnMolloy, William
Ashley, JackGinsburg, DavidMorgan, Elystan (Cardiganshire)
Ashton, JoeGordon Walker, Rt. Hn. P. C.Morris, Alfred (Wythenshawe)
Atkinson, NormanGrant, George (Morpeth)Morris, Charles R. (Openshaw)
Bagier, Gordon A. T.Grant, John D. (Islington, East)Morris, Rt. Hn. John (Aberavon)
Barnes, MichaelGriffiths, Eddie (Brightslde)Moyle, Roland
Barnett, JoelGriffiths, Will (Exchange)Mulley, Rt. Hn. Frederick
Baxter, williamGrimond, Rt. Hn. J.Murray, Ronald King
Beaney, AlanGunter, Rt. Hn. R. J.Ogden, Eric
Benn, Rt. Hn. Anthony WedgwoodHamilton, James (Bothwell)O'Halloran, Michael
Bennett, James (Glasgow, Bridgeton)Hamilton, William (Fife, W.)O'Malley, Brian
Bidwell, SydneyHannan, William (G'gow, Maryhill)Oram, Bert
Bishop, E. S.Hardy, PeterOrbach, Maurice
Blenkinsop, ArthurHarper, JosephOrme, Stanley
Boardman, H. (Leigh)Harrison, Walter (Wakefield)Oswald, Thomas
Booth, AlbertHart, Rt. Hn. JudithOwen, Dr. David (Plymouth, Sutton)
Bottomley, Rt. Hn. ArthurHattersley, RoyPadley, Walter
Boyden, James (Bishop Auckland)Healey, Rt. Hn. DenisPaget, R. T.
Broughton, Sir AlfredHeffer, Eric S.Palmer, Arthur
Brown, Hugh D. (G'gow, Provan)Hilton, W. S.Panned, Rt. Hn. Charles
Brown, Bob (N'c'tle-upon-Tyne, W.)Horam, JohnPardoe, John
Brown, Ronald (Shoreditch & F'bury)Houghton, Rt. Hn. DouglasParker, John (Dagenham)
Buchanan, Richard (G'gow, Sp'burn)Howell, Denis (Small Heath)Parry, Robert (Liverpool, Exchange)
Butler, Mrs. Joyce (Wood Green)Huckfield, LesliePavitt, Laurie
Callaghan, Rt. Hn. JamesHughes, Rt. Hn. Cledwyn (Anglesey)Peart, Rt. Hn. Fred
Campbell, I. (Dunbartonshire, West)Hughes, Dr. Mark (Durham)Pendry, Tom
Cant, R. B.Hughes, Robert (Aberdeen, North)Pentland, Norman
Carmichael, NeilHughes, Roy (Newport)Perry, Ernest G.
Carter, Ray (Birmingham, Northfield)Hunter, AdamPrentice, Rt. Hn. Reg.
Carter-Jones, Lewis (Eccles)Irvine, Rt. Hn. Sir Arthur (Edge Hill)Prescott, John
Castle, Rt. Hn. BarbaraJanner, GrevillePrice, J. T. (Westhoughton)
Cocks, Michael (Bristol, S.)Jay, Rt. Hn. DouglasPrice, William (Rugby)
Cohen, StanleyJeger, Mrs. Lena (H'b'n & St. P'cras, S.)Probert, Arthur
Coleman, DonaldJenkins, Hugh (Putney)Rankin, John
Concannon, J. D.Jenkins, Rt. Hn. Roy (Stechford)Reed, D. (Sedgefield)
Conlan, BernardJohn, BrynmorRees, Merlyn (Leeds, S.)
Corbet, Mrs. FredaJohnson, James (K'ston-on-Hull, w.)Rhodes, Geoffrey
Cox, Thomas (Wandsworth, Central)Johnson, Walter (Derby, South)Richard, Ivor
Crawshaw, RichardJones, Rt. Hn. Sir Elwyn (W. Ham, S.)Roberts, Albert (Normanton)
Cronin, JohnJones, Gwynoro (Carmarthen)Roberts. Rt. Hn. Goronwy (Caernarvon)
Crosland, Rt. Hn. AnthonyJones, Barry (Flint, East)Robertson, John (Paisley)
Cunningham, G. (Islington, S. W.)Jones, T. Alec (Rhondda, West)Roderick, Caerwyn E. (Br'c'n&R'dnor)
Cunningham, Dr. J. A. (Whitehaven)Judd, FrankRodgers, William (Stockton-on-Tees)
Dalyell, TamKaufman, GeraldRoper, John
Darling, Rt. Hn. GeorgeKelley, RichardRose, Paul B.
Davidson, ArthurKerr, RussellRoss, Rt. Hn. William (Kilmarnock)
Davies, Denzil (Llanelly)Kinnock, NeilSheldon, Robert (Ashton-under-Lyne)
Davies, G. Elfed (Rhondda, E.)Lambie, DavidShore, Rt. Hn. Peter (Stepney)
Davies, Ifor (Gower)Latham, ArthurShort, Rt. Hn. Edward (N'c'tle-u-Tyne)
Davies, S. O. (Merthyr Tydvil)Lawson, GeorgeSilkin, Rt. Hn. John (Deptford)
Davit, Clinton (Hackney, Central)Lee, Rt. Hn. FrederickSilkin, Hn. S. C. (Dulwich)
Deakins, EricLestor, Miss JoanSillars, James
de Fraltas, Rt. Hn. Sir GeoffreyLipton, MarcusSilverman, Julius
Delargy, H. J.Lomas, KennethSkinner, Dennis
Dell, Rt. Hn. EdmundLoughlin, CharlesSmall, William
Dempsey, JamesLyon, Alexander W. (York)Smith, John (Lanarkshire, North)
Doig, PeterLyons, Edward (Bradford, East)Spearing, Nigel
Douglas, Dick (Stirlingshire, E.)Mabon, Dr. J. DicksonSpriggs, Leslie
Douglas-Mann, BruceMcBride, NeilStallard, A. W.
Duffy, A. E. P.McCann, JohnSteel, David
Dunn, James A.McCartney, HughStewart, Donald (Western Isles)
Dunnett, JackMacColl, JamesStewart, Rt. Hn. Michael (Fulham)
Eadle, AlexMcElhone, FrankStoddart, David (Swindon)
Edelman, MauriceMcGuire, MichaelStonehouse, Rt. Hn. John
Edwards, Robert (Bilston)Mackie, JohnStrang, Gavin
Edwards, William (Merioneth)Mackintosh, John P.Strauss, Rt. Hn. G. R.
Ellis, TomMaclennan, RobertSummerskill, Hn. Dr. Shirley
English, MichaelMcMillan, Tom (Glasgow, C.)Swain, Thomas
Evans, FredMcNamara, J. KevinTaverne, Dick
Faulds, AndrewMacPnerson, MalcolmThomas, Rt. Hn. George (Cardiff, W.)
Fernyhough, E.Mallalieu, E. L. (Brigg)Thomas, Jeffrey (Abertillery)
Fisher, Mrs. Doris (B'ham, Lady wood)Mallalieu, J. P. W. (Huddersfield, E.)Thomson, Rt. Hn. G. (Dundee, E.)
Fitch, Alan (Wigan)Marquand, DavidThorpe, Rt. Hn. Jeremy
Fletcher, Ray mend (likes ton)Marsh, Rt. Hn. RichardTomney, Frank
Foley, MauriceMason, Rt. Hn. RoyTorney, Tom
Foot, MichaelMayhew, ChristopherTuck, Raphael
Ford, BenMeacher, MichaelUrwin, T, W.
Forrester, JohnMellish, Rt. Hn. RobertVarley, Eric G.
Wainwright, EdwinWhite, James (Gasgow, Pollok)Wilson, Alexander (Hamilton)
Walden, Brian (B'm'ham, All Saints)Whitehead, PhillipWilson, Williams (Coventry, S,)
Walker, Harold (Doncaster)Whitlock, WilliamWoof, Robert
Wallace, GeorgeWilley, Rt. Hn. Frederick
Watkins, DavidWilliams, Alan (Swansea, W.)TELLERS FOR THE NOES:
Weitzman, DavidWilliams, Mrs. Shirley (Hitchin)Mr. Kenneth Marks and
Wells, William (Walsall, N.)Williams, W. T. (Warrington)Mr. John Golding.

Main Question, as amended, put and agreed to.

Resolved,That this House approves Her Majesty's Government's decision to continue the established policy of providing launching aid for appropriate projects in the aircraft industry including in particular the Rolls-Royce 211–22 engine at the existing rate of 70 per cent., subject to independent accounting procedures, up to a total of £89 million, and welcomes the fact that the financial problems encountered by Rolls-Royce are being handled through the resources of the company itself and other nongovernmental intitutions.