P(70) 1 -
The Queen's Speech on the Opening of P a r l i a m e n t .
P r e s i d e n t of the Council
Memorandum by the L o r d
2
- M e m b e r s h i p of the European Communities: Opening Statement for 30 June.
Note by the Secretary of State for F o r e i g n and Commonwealth A f f a i r s
3
-
4
- M e m b e r s h i p of the European Communities: Opening Statement for 30 June.
Note by the Secretary of State for F o r e i g n and Commonwealth A f f a i r s
5
- National Docks Dispute.
Memorandum by the S e c r e t a r y of State for
Employment and P r o d u c t i v i t y
6
-
7
- Industrial Relations Situation.
Employment and P r o d u c t i v i t y
8
- B i l l to Implement P r i o r i t y Social Security P l e d g e s .
S e c r e t a r y of State for Social S e r v i c e s
9
- Misuse of Drugs B i l l .
Department
The Queen's Speech on the Opening of P a r l i a m e n t .
P r e s i d e n t of the Council
The Queen's Speech on the Opening of P a r l i a m e n t .
the Cabinet
Note by the L o r d
Note by the S e c r e t a r y of
Memorandum by the S e c r e t a r y of State for
M e m o r a n d u m by the
Memorandum by the S e c r e t a r y of State for the Home
10 - P r o c e d u r e for Obtaining P o l i c y D e c i s i o n s .
Note by the P r i m e Minister
11 - A n a l y s i s and the D e c i s i o n Taking P r o c e s s .
Memorandum by the L o r d P r i v y Seal
The R o l e of the Business T e a m .
12 - Sale of A r m s to South A f r i c a .
Memorandum by the S e c r e t a r y of State for
F o r e i g n and Commonwealth A f f a i r s
H
13 -
P a y of the Higher C i v i l S e r v i c e : Tenth R e p o r t of the Standing A d v i s o r y
Committee.
Memorandum by the L o r d P r i v y Seal.
14 - Salaries of the Higher Judiciary.
15 -
Concorde.
Memorandum by the L o r d Chancellor
Memorandum by the Minister of Technology
16 - P o s t a l and Remittance S e r v i c e C h a r g e s .
Treasury '
17 -
C o n c o r d e : The L e g a l P o s i t i o n in July 1970.
General and the S o l i c i t o r - G e n e r a l
18 - Coal P r i c e I n c r e a s e s .
19 -
Memorandum by the Chief Secretary
M e m o r a n d u m by the A t t o r n e y -
Memorandum by the Chief S e c r e t a r y ,
The Situation in Northern Ireland.
for the Home Department
Treasury
Memorandum by the S e c r e t a r y of State
CP(70) 20
-
21 -
Public Expenditure R e v i e w .
Treasury
B A C 3-11 A i r c r a f t .
Memorandum by the Chief S e c r e t a r y ,
Note by the Minister of Technology
22
- A g r i c u l t u r a l P o l i c y : Changes in Support A r r a n g e m e n t s .
the Minister of A g r i c u l t u r e , F i s h e r i e s and F o o d
M e m o r a n d u m by
23
-
Concorde.
24
-
The Economic Outlook.
Memorandum by the P r i m e Minister
25
-
Concorde and B A C 311.
Memorandum by the Chief S e c r e t a r y ,
Memorandum by the P r e s i d e n t of the Board of T r a d e
Treasury
HIS D O C U M E N T IS T H E P R O P E R T Y OF H E R B R I T A N N I C M A J E S T Y S G O V E R N M E N T
T
CP(70) 1
COPY NO ^
d
23 June 1970
CABINET
T H E Q U E E N S S P E E C H ON T H E O P E N I N G OF P A R L I A M E N T
f
Ivlemorandum by the L o r d P r e s i d e n t of the Council
1.
I attach f o r the consideration of m y colleagues a draft of
The Q u e e n s Speech on the Opening of P a r l i a m e n t .
f
2.
W e have not yet had t i m e to settle our l e g i s l a t i v e p r o g r a m m e f o r
the new Session and the Speech must t h e r e f o r e , as on p r e v i o u s o c c a s i o n s
when there has been a change of G o v e r n m e n t , be in the main a g e n e r a l
statement of the G o v e r n m e n t s a i m s and p o l i c i e s .
T h e p r e s e n t draft has
been based on the Manifesto and except f o r the section on o v e r s e a s a f f a i r s
has not been seen by D e p a r t m e n t s .
I should draw p a r t i c u l a r attention to
the specific p r o p o s a l s f o r l e g i s l a t i o n on industrial r e l a t i o n s (paragraph 17),
pensions (paragraph 21), i m m i g r a t i o n (paragraph 2 2 ) , l o c a l r a d i o
(paragraph 26) and the Land C o m m i s s i o n (paragraph 2 7 ) .
3.
The draft runs to about lfiZO w o r d s , c o m p a r e d with the t a r g e t of
1,000 w o r d s or s o .
We should t h e r e f o r e a5m to avoid lengthening it.
W W
P r i v y Council Office SW1
23 June 1970
T H E Q U E E N S S P E E C H ON T H E O P E N I N G OF P A R L I A M E N T
y
M Y L O R D S A N D M E M B E R S OF T H E HOUSE OF C O M M O N S
1.
M y Husband and I look f o r w a r d to our v i s i t to Canada on the
o c c a s i o n of the centenaries of the Northwest T e r r i t o r i e s and of the
P r o v i n c e of Manitoba.
2.
M y Government have w e l c o m e d the opsning on the 30 of June of
negotiations f o r m e m b e r s h i p of the European C o m m u n i t i e s .
Throughout
the neogiations they w i l l r e m a i n in c l o s e consultation with our
Commonwealth and E F T A p a r t n e r s and with the I r i s h Reptiblic.
3.
M y G o v e r n m e n t w i l l w o r k f o r the maintenance of the defensive
strength of the North A t l a n t i c A l l i a n c e and to seek a genuine reduction of
tension in relations between E a s t and W e s t in E u r o p e .
4.
M y Government w i l l w o r k f o r a f a i r and lasting p e a c e in the
Middle E a s t and f o r a peaceful settlement of the conflict in Indo-China.
T h e y w i l l c o - o p e r a t e with our a l l i e s and f r i e n d s in m e a s u r e s a i m e d at
maintaining p e a c e and stability in Commonwealth t e r r i t o r i e s in South-East
Asia.
T h e y w i l l consult with l e a d e r s in the Gulf on how our c o m m o n
i n t e r e s t s in that a r e a may best be s e r v e d .
5.
M y G o v e r n m e n t w i l l w o r k f o r s c h e m e s of d i s a r m a m e n t and a r m s
control.
6.
In this 25th A n n i v e r s a r y y e a r of the United N a t i o n s , m y
G o v e r n m e n t w i l l lend their full support to efforts t o strengthen peace and
h e l p developing c o u n t r i e s .
T h e y w i l l pursue an expanding aid p r o g r a m m e
to further w o r l d e c o n o m i c d e v e l o p m e n t and w i l l s e e k international
a g r e e m e n t on tariff p r e f e r e n c e s f o r developing c o u n t r i e s .
7.
M y M i n i s t e r s w i l l take a full part in the m e e t i n g of Commonwealth
Heads of G o v e r n m e n t in Singapore in January 1971.
8.
M y Government w i l l make a further e f f o r t to find a sensible and just
solution of the Rhodesian p r o b l e m in a c c o r d a n c e with the f i v e p r i n c i p l e s .
9.
M y G o v e r n m e n t w i l l w o r k f o r the d e v e l o p m e n t and p r o g r e s s of
B r i t a i n ^ dependent t e r r i t o r i e s , p a r t i c u l a r l y in the e c o n o m i c and social
fields.
10.
A B i l l w i l l be placed before you to p r o v i d e f o r the independence of
Fiji.
11.
M y M i n i s t e r s w i l l d o a l l in their p o w e r to ensure f o r e v e r y c i t i z e n
of N o r t h e r n Ireland the equality and f r e e d o m f r o m d i s c r i m i n a t i o n enjoyed
by other citizens of the United K i n g d o m and to p r o m o t e the p r o s p e r i t y of
the P r o v i n c e and p e a c e and h a r m o n y between its c o m m u n i t i e s .
M E M B E R S OF T H E HOUSE OF C O M M O N S
12.
E s t i m a t e s f o r the public s e r v i c e s w i l l be laid b e f o r e you.
M Y L O R D S A N D M E M B E R S OF T H E HOUSE OF C O M M O N S
13.
A t home M y G o v e r n m e n t s f i r s t c o n c e r n w i l l be to curb inflation
and strengthen the e c o n o m y .
R i s i n g production and a steadily growing
national income must p r o v i d e the r e s o u r c e s f o r improving the s o c i a l
s e r v i c e s and the e n v i r o n m e n t in which we l i v e .
The e n e r g y and e n t e r p r i s e
needed to achieve this w i l l be encouraged by r e f o r m i n g and reducing
taxation, providing new i n c e n t i v e s to saving and liberating industry f r o m
u n n e c e s s a r y intervention by G o v e r n m e n t .
14.
M y M i n i s t e r s attach the g r e a t e s t importance to maintaining full
e m p l o y m e n t and an e f f e c t i v e r e g i o n a l development p o l i c y .
They will
stimulate l o n g - t e r m growth Li the l e s s p r o s p e r o u s a r e a s by increasing
their e c o n o m i c attractions and i m p r o v i n g t h e i r a m e n i t i e s .
£Investment
w i l l be encouraged through a s y s t e m of tax a l l o w a n c e s , in place of the
p r e s e n t investment g r a n t s , with s p e c i a l treatment f o r development a r e a s / .
15.
A new s y s t e m of financial support w i l l be d e v e l o p e d to encourage
the expansion of f a r m output.
16.
Training a r r a n g e m e n t s w i l l be extended and i m p r o v e d .
The w o r k
of the industrial training boards w i l l be r e v i e w e d and w i d e r and b e t t e r
training f o r management e n c o u r a g e d ,
17.
A B i l l w i l l be introduced to establish a f r a m e w o r k of law within
which I m p r o v e d industrial r e l a t i o n s can d e v e l o p and a code of p r a c t i c e w i l l
be p r e p a r e d laying down standards f o r good management and trade union
practice.
18.
My Government b e l i e v e that v i g o r o u s competition is the best
safeguard f o r the c o n s u m e r .
/JThey w i l l sharpen the r e q u i r e m e n t s
governing d i s c l o s u r e in the accounts of public companies and set up an
inquiry into other a s p e c t s of company law/.
19.
M y M i n i s t e r s w i l l pursue a v i g o r o u s housing p o l i c y a i m e d at
housing the h o m e l e s s , c l e a r i n g slums and m o d e r n i s i n g older h o u s e s ;
housing subsidies w i l l be r e d i s t r i b u t e d to g i v e m o r e help to those in
greatest need.
H o m e ownership w i l l be encouraged by extending the scope
of m o r t g a g e a s s i s t a n c e .
20.
M y Government w i l l expand educational opportunities at a l l l e v e l s
as g r o w i n g r e s o u r c e s make this p o s s i b l e , with p r i o r i t y f o r the i m p r o v e m e n t
of p r i m a r y s c h o o l s .
T h e y w i l l r e s p e c t the right of l o c a l education
authorities to d e c i d e what is best f o r their a r e a and w i l l encourage the
w i d e s t possible v a r i e t y of p r o v i s i o n .
A n inquiry w i l l be instituted into
t e a c h e r training.
21.
L e g i s l a t i o n w i l l be brought f o r w a r d to p r o v i d e pensions f o r the
o v e r - 8 0 o , to i m p r o v e the benefits payable to the s e r i o u s l y i l l and to
widows and to introduce a constant attendance a l l o w a n c e f o r the most
seriously disabled,
[A new State pensions scheme w i l l be d r a w n up t o
p r o v i d e s e c u r i t y f o r those not c o v e r e d by occupational pension schemes/.
22.
L e g i s l a t i o n w i l l be introduced to establish a single new s y s t e m of
control o v e r a l l i m m i g r a n t s f r o m o v e r s e a s .
M o r e assistance w i l l be g i v e n
to l o c a l authorities with a high p r o p o r t i o n of immigrants, in t h e i r a r e a s .
23.
M y Government w i l l f u l l y implement the kfapertairt r e c o m m e n d a t i o n s
of the Boundary C o m m i s s i o n on the r e d i s t r i b u t i o n of P a r l i a m e n t a r y s e a t s .
24.
P r o p o s a l s w i l l be laid b e f o r e P a r l i a m e n t f o r giving the Scottish
people a g r e a t e r say in t h e i r own a f f a i r s .
25.
N e w p r o p o s a l s w i l l be w o r k e d out, in full consultation with a l l
c o n c e r n e d , f o r a m e a s u r e of l o c a l g o v e r n m e n t r e f o r m a s s o c i a t e d with a
g e n e r a l devolution of power f r o m the c e n t r a l (Government.
26.
A B i l l v/ill be introduced to p e r m i t p r i v a t e l y owned l o c a l r a d i o
stations under the g e n e r a l s u p e r v i s i o n of an independent broadcasting
authority.
27.
A B i l l w i l l be brought b e f o r e you to abolish the Land C o m m i s s i o n /and the betterment levyy. 28.
My M i n i s t e r s w i l l intensify the d r i v e to r e m e d y past damage to the environment and w i l l s e e k t o safeguard the beauty of the B r i t i s h countryside and s e a s h o r e f o r the future. 29.
My G o v e r n m e n t w i l l strengthen the p o l i c e f o r c e .
T h e y w i l l make it their special duty to protect the f r e e d o m of the individual under the law and w i l l examine w a y s in which this may be m o r e e f f e c t i v e l y
30.
safeguarded. Other m e a s u r e s w i l l laid b e f o r e you. M Y LORDS A N D M E M B E R S OF T H E HOUSE OF C O M M O N S I pray that the blessing of A l m i g h t y God m a y r e s t upon your c o u n s e l s . ii
4
13 DOCUMENT IS T H E P R O P E R T Y OF H E R B R I T A N N I C M A J E S T Y S G O V E R N M E N T
r
CP(70) 2
COPY NO
g 0
23 June 1970
CABINET
M E M B E R S H I P OF T H E E U R O P E A N C O M M U N I T I E S : O P E N I N G S T A T E M E N T F O R 30 JUNE Note by the S e c r e t a r y of State f o r F o r e i g n and Commonwealth A f f a i r s 1.
H e r M a j e s t y ' s G o v e r n m e n t , together with the G o v e r n m e n t s of
D e n m a r k , N o r w a y and the Irish R e p u b l i c , which have a l s o applied f o r full
m e m b e r s h i p of the European C o m m u n i t i e s , have been invited by the
European Communities to a meeting in Luxembourg on 30 June to open
negotiations.
The meeting w i l l be a short one, and an o c c a s i o n f o r f o r m a l
statements only.
I attach f o r approval by m y colleagues the draft of the
statement which the Chancellor of the Duchy of L a n c a s t e r p r o p o s e s to make
at the conference In Luxembourg on 30 June.
2.
P r o v i s i o n a l a r r a n g e m e n t s have been made by the Community f o r
the opening of their b i l a t e r a l negotiations at M i n i s t e r i a l l e v e l with the
United Kingdom f o r m a l l y to start on 21 July. ( T h e other three candidates
would have to wait until S e p t e m b e r ) .
A t this opening meeting the
United K i n g d o m r e p r e s e n t a t i v e would seek to set the stage f o r the
negotiations p r o p e r , which wouJd begin in the autumn.
During this initial
p e r i o d , after the f o r m a l opening and before the negotiations p r o p e r , we
should s e e k , through working p a r t i e s set up in July, to examine j o i n t l y
with the Six and in considerable d e t a i l , the v e r y c o m p l e x p r o b l e m s which
w i l l have to be s o l v e d .
During this initial p e r i o d of study of the p r o b l e m s
it w i l l not be n e c e s s a r y f o r the United Kingdom to put f o r w a r d , or
t h e r e f o r e to have decided on, its negotiating objectives? and one advantage
of this approach is that by proposing no solutions we exclude none, and can
examine a l l ,
A s e r i e s of b r i e f s by officials w i l l be put b e f o r e M i n i s t e r s
during the coming w e e k s j on the basis of these we can decide on our
objectives.
3.
We a r e a l r e a d y being p r e s s e d f o r our a g r e e m e n t to the opening
b i l a t e r a l s e s s i o n on 21 July and w i l l have to g i v e an answer at the l a t e s t
by the meeting on 30 June.
1
4.
I t h e r e f o r e seek the a g r e e m e n t of m y colleagues to a c c e p t this
date f o r the following r e a s o n s
a.
It is in our interest to persuade the Community to undertake
with us a joint examination of the p r o b l e m s to be s o l v e d .
If we
can a g r e e on a common a s s e s s m e n t it w i l l be e a s i e r to s e c u r e
a g r e e m e n t on solutions.
The p r o c e s s of examining the p r o b l e m s
w i l l enable us to t r y out v a r i o u s p o s s i b l e lines of solution without
c o m m i t m e n t and make it e a s i e r to decide on the solutions w e can
a i m f o r with reasonable hope of s u c c e s s .
b.
It i s in cur i n t e r e s t that the Community should d e a l with
our negotiations in a buoinesslike manner.
We are proposing
on 30 June to make the point that we have waited so long to begin
the negotiations that it is in our mutual interest to l o s e no m o r e
t i m e ; it could t h e r e f o r e be r e g a r d e d by the Community as
inconsistent to ask f o r a postponement of the meeting p r o p o s e d f o r
21 July,
c.
K w e w e r e to seek a postponement of our f i r s t b i l a t e r a l
meeting with the Community until the autumn it would by then
have become much m o r e difficult f o r us to f o l l o w the t a c t i c s
described above.
The C o m m u n i t y would expect us by then t o
h a v e decided on and to d e c l a r e our o b j e c t i v e s , and to p r o p o s e
solutions; a constructive p e r i o d of joint examination would be
h a r d e r to interpose in the p r o c e s s of negotiation,
5.
T h e Chancellor of the Duchy of L a n c a s t e r is of the same m i n d .
A D-H
F o r e i g n and C o m m o n w e a l t h Office SW1
23 June 1970
2
Opening Statement f o r
When t h e
signatories
of
30 June
the T r e a t y
E u r o p e a n Economic Community t h e y c a l l e d
of Europe
to
join in
E u r o p e a n union,,
call,
were
it
If
efforts
Europe
to u n i t e .
if
i n Europe,
continued
the v e r y
Mr. Heath,
spoke
t h a n the u n i o n o f E u r o p e
consequences
the
core
of
it
follow
would be
the Western A l l i a n c e " ,
opening n e g o t i a t i o n s
and e c o n o m i c
power
extent,
become e s s e n t i a l .
that,
with
is
a larger
in a world
becoming
the
or
concentrated
has
we can
all
perish".
B r i t i s h Government p r o c l a i m e d
" u n l e s s E u r o p e i s u n i t e d and s t r e n g t h e n e d
t o meet t h e c h a l l e n g e
where
European u n i t y
Faced w i t h the t h r e a t s
Europe must u n i t e
as
day
of
t o such a g r e a t
be a b l e
to
t h a t would
and s a i d t h a t
increasing realisation
And t h e p r e v i o u s
Churchill
achieved".
the grave
canker gnawing a t
us
ago.-.
Mr. Macmillan f o r e s a w
see,
S i r Winston
and we l o o k f o r w a r d w i t h c o n f i d e n c e
political
we
seen
when t h a t u n i o n w i l l b e
"the
if
B r i t i s h Governments have
"We must aim a t n o t h i n g l e s s
Communities,
this
But s u c c e s s i v e
twenty-two years
1961,
to
for
the need f o r
division
closer
and t h e d e c i s i o n was n o t
clearly
a whole,
peoples
an e v e r
solved
the
members,
one.
that
to create
was b e c a u s e r e a l p r o b l e m s had t o be
t o become f u l l
October
on t h e o t h e r
B r i t a i n seemed s l o w t o r e s p o n d
an e a s y
said
their
o f Rome c r e a t e d
of
the world
in July
1967
she w i l l
not
today",
"a.
in
i n July
2.
of
the B r i t i s h
1961
the s i g n a t o r i e s
on t h a t r e s p o n s e
tion
is
applied
i n the need f o r
are unimpaired.
civilisation
For
that
extent
been borne
i n on e a c h
alone
peoples
advance.
is
join
the E u r o p e a n
as f u l l
previous
Communities.
determina­
of
the p a t t e r n
of
its
of
of physical
for
its
It
set
that
for
is
o u r own
or
social
dangerous.'
share
our
has
none
t h e w o r l d i s no l e s s
assume a g r e a t e r
and
But i t
or economic
That
Europe
the pace
w h i c h we d e s i r e
own d e f e n c e .
of
joint
concern.
h*
Europe's
inseparable.
political
and e c o n o m i c
Our p l a c e
i n the
d e t e r m i n e d b y t h e gro?/th o f
our t e c h n o l o g i c a l
technological
e c o n o m i e s and our
our r e s o u r c e s
development.
development
markets.
int-ere.sts
w o r l d w i l l be
today
are
largely
and t h e p a c e
And e c o n o m i c
growth
require
we u n i t e
that
and
embracing
human p r o g r e s s .
security
t h a t Europe s h o u l d
terms
stronger.
component n a t i o n s
t h e ends
other
and s t r e n g t h e n e d
the most p o t e n t and
Beyond our f r o n t i e r s
responsibility
members on f a i r
grown
call
set
the
i n B r i t a i n and o u r
the r e a s o n s have
can g a i n
i n terms
right
the
The h o p e s
I n May 1967
t h e w o r l d has s e e n .
to a large
acting
Rome.
a united
Europe was t h e c r a d l e
3.
of
answered
ways i n w h i c h B r i t a i n may j o i n w i t h t h e
i n the Communities
our b e l i e f
It
to
a new Government
to find
partners
the T r e a t y
were d i s a p p o i n t e d .
B r i t i s h Government
Now t h e r e
of
Government
of
and
our
5.
A u n i t e d Europe must,
account
of
the v i e w s
other parts
of
the
of
of
its
world.
are
taking part
in
these
our
common o b j e c t i v e
course,
friends
But l e t
his
we s h o u l d f a i l
objective.
for,
that
For given
do more
relationship
to promote
6.
We want
are
of
with you.
Europe
alone,
prosperous
c a n n o t make i t s
the Communities
are
we
enlarged
join
full
has
its
and we
contribution
to i n c l u d e
can
trade.
to
you.
seek
any more t h a n y o u
own f r o n t i e r s
hope
countries..
But we do n o t
w i t h you t h a t Europe s t i l l
.
and more
international
We b e l i e v e
t h a t Europe
in
that
and w e s t ,
for
t o make b e y o n d i t s
let
European c o n t r i b u t i o n
less
of
c o u l d be
a closer
prosperity
tion
And
t h e r e a s o n s why we want t o
to p r o s p e r
sight
we can n o t o n l y
work f o r
the growth of
the problems
These
lose
it
in
us who
to achieve
between Bast
And we can make a f u l l e r
solving
think
this base,
b u t more e f f e c t i v e l y
fruitful
none o f
o f European u n i t y .
taking part
full
and a l l i e s
negotiations
n o - o n e who i s n o t
interest
take
do.
contribu­
believe
unless
Britain,
/7.
7.
We warmly welcome the d e c i s i o n s
of the Governments
of Denmark, the I r i s h Republic and Norway t o apply to
the Communities.
We a l s o b e l i e v e that a number of
c o u n t r i e s which do not
European
j o i n the Communities as f u l l members
w i l l have a v a l u a b l e c o n t r i b u t i o n t o make t o many of
common o b j e c t i v e s ,
of us that
and that
our
i t w i l l be in the i n t e r e s t
these c o u n t r i e s should f i n d a mutually
r e l a t i o n s h i p w i t h the enlarged
8.
join
of
all
satisfactory
Communities.
Both Mr Heath in a speech l a s t month and the p r e v i o u s
B r i t i s h Government have made i t
Treaties
c l e a r that we accept
the
e s t a b l i s h i n g the t h r e e European Communities and t h e
d e c i s i o n s which have flowed
from them,
the p o s i t i o n of Her M a j e s t y ' s
I c o n f i r m that
Government,
subject
this
is
to the
p o i n t s to which I now turn.
9­
The l i s t
of
questions which we wish t o see covered
in
n e g o t i a t i o n s remains the same as those put forward by the
p r e v i o u s B r i t i s h Government
in July 1967.
For Euratom and the
European Coal and S t e e l Community we seek only a very
transitional
p e r i o d . Adaptation to the o b l i g a t i o n s
short
of the
European Economic Community w i l l r e q u i r e more time than t h a t ,
though here t o o I hope i t
possible
can be agreed t o move as soon as
in each case t o f u l l
of membership.
application
of t h e
obligations
We s h a l l need t o discuss w i t h you s o l u t i o n s
to our main p r o b l e m 3 * which must be solved by agreements
certain agricultural policy
q u e s t i o n s ; our c o n t r i b u t i o n
to
Community budgetary e x p e n d i t u r e ; Commonwealth sugar e x p o r t s ;
New Z e a l a n d ' s s p e c i a l problems; and c e r t a i n o t h e r Commonwealth
quest i o n s .
Ao
10.
The p o s i t i o n which our p r e d e c e s s o r s took in July
1967 was, of
course, subject
t o developments in the
Community in the meantime. I n the f i e l d
of
Community
budgetary arrangements, these developments have made the
problems f a c i n g
our membership more d i f f i c u l t .
our p r e d e c e s s o r s had looked forward
As you know,
to B r i t a i n ' s
taking part
a f u l l member in the n e g o t i a t i o n of the f i n a n c i a l
f o r the p e r i o d a f t e r the end of 1969.
arrangements
Had we done so,
r e s u l t i n g agreement would no doubt have made f a i r
f o r us as i t
Communities.
as
the
provision
has f o r each of t h e e x i s t i n g members of
the
But we were not p a r t y t o your agreement.
And the
arrangements which must in any case be agreed t o enable a new
member t o take part
in the budgetary p r o v i s i o n s of
European Communities w i l l
constitute
the
one of the c r u c i a l
in the n e g o t i a t i o n on which we are embarking.
When the
European Commission gave i t s Opinion on our candidature
September 1967,
i t was r e c o g n i s e d t h a t
arrangements would,
if
the e x i s t i n g
a p p l i e d to B r i t a i n ,
elements
in
financial
"give rise to a
problem of balance in sharing of f i n a n c i a l b u r d e n s " . The new
d e c i s i o n s have f o r
us made that problem of balance more
severe.
We must t o g e t h e r f i n d a s o l u t i o n to t h i s problem which w i l l be
f a i r and sound f o r the e n l a r g e d Community and f o r a l l
members.
For unless such a s o l u t i o n i s found,
the United Kingdom would become i n t o l e r a b l e
Government
stability
could contemplate
and c o n f i d e n c e ,
joining.
Communities would be l a c k i n g .
the burden on
and no B r i t i s h
Moreover,
and the community of
w i l l bo e s s e n t i a l t o the f u r t h e r
development
its
of
the b a s i s
interest
the
of
which
11.
For the Communities must develop
I am confident
that
further.
our ideas f o r t h e i r development
much in l i n e w i t h yours.
As Mr Heath d e c l a r e d
are
very
a few weeks ago,
we share your determination, to go on from what has a l r e a d y
been achieved
i n t o new spheres of c o o p e r a t i o n b e g i n n i n g w i t h
economic and monetary m a t t e r s , but at the same time l a y i n g
foundations f o r
a new method of working t o g e t h e r
f o r e i g n p o l i c y ' and defence.
the
in
In a l l these problems, he
added, we should seek to a c h i e v e s o l u t i o n s which are
Community s o l u t i o n s .
We welcome t h e moves which you have
undertaken towards c l o s e r economic and monetary
integration.
In other a s p e c t s of economic union we s h a l l a l s o want to see
further progress;
most
important part
regional policy,
field
in i n d u s t r i a l p o l i c y ,
which should be a
of the Communities p r o g r e s s ;
whore we have common problems;
in
and in the
of t e c h n o l o g y where we - re a l r e a d y engaged w i t h you and
n
others in work on a number of s t u d i e s ,
and where so much
more can be done once the Communities have been
A?
enlarged.
12.
I have said enough today to show you that, like their
predecessors the British Government is determined to work with
you in uniting Europe in new spheres;
has a coherent character of its own.
to develop;
in building a Europe which
If the Communities are
and if we are to find Community solutions to our
common problems, we shall need the machinery to take the decisions.
That means sharing in the continued development of effective
institutions - effective to carry out the tasks which our joint
experience shows to be necessary.
That has always been our
approach to institutional change.
What matters - to you and
to us - is that OUE objectives are the same, and we no less than
you, will want the institutions to match those objectives.
13.
I have said that, like the previous Government, we accept
the Treaties and their objectives.
But it is not simply a question
for us of accepting what you have done.
future.
Like you we look to the
As the Commission recognised in its Opinion of last
October, the accession of the candidate countries will be of great
value for the Communities both in their internal development and
in the exercise of increased responsibilities in the world,
lh.
I have referred to the main points which we wish to see covered
in negotiations.
Go far as other matters are concerned, I would
suggest that wherever it is reasonable we should settle them after
oifir entry into the Communities and so in accordance with your
procedures.
We hope that negotiations can be kept short and
confined to essentials.
I notice that the problems which you
have been discussing for the last six months in preparation for
these negotiations are very much the same as were set out by
/the the previous British Government in 1 9 6 7 .
We regard, these
problems as common problems for us and for you - how to enable an
enlarged Community to function most effectively for the advantage
of all.
Our wish is to look together in the spirit of the
Community for solutions which in the words of the Commission's
Ophion of 1969 will ensure the cohesion and the dynamism which
will be indispensable in an enlarged Community.
15.
-After waiting so long, it is surely in our mutual interest
to lose no more time.
We shall be prepared to meet whenever you
are ready to meet, as often and as long as you wish.
16.
Mr. Chairman, now - at last - we have the opportunity to
realise together a Europe which has a coherent character of its
own.
We have the same defence interests;
our political
interests are growing every day progressively closer.
As we
develop new policies together we shall, as I have said, find it
natural to develop the institutional machinery which we shall need
to execute these policies.
economics and politics.
But this is not just a matter of
The history and culture of our Continent
are the birthright of us all.
we all share it.
We have all contributed to it and
The vision which the founders of the Communities
set before Europe was a generous vision for Europe as a whole.
share that vision.
We
Our wish to join you derives from the sentiment
which, as Europeans, we all share and from the idea we have of the
part which our Continent should play in the world.
If we can
together succeed in the negotiations now begun "then as Sir
Winston Churchill said there will be no limit to the happiness,
/to to the prosperity and glory which Europe's people will enjoy. So let none of us spare any effort in these neogtiations. Inspired by goodwill and united by so many aims and hopes and interests, wc can and must succeed. 17.
Mr. Chairman;,, in view of the historic importance of this meeting I am arranging for the text of ay statement to be made public in.the United Kingdom. RET THIS DOCUMENT IS THE P R O P E R T Y OF H E R B R I T A N N I C M A J E S T Y * S G O V E R N M E N T C O P Y NO
CP(70) 3
52
26th June 1970
CABINET
THE QUEEN'S
S P E E C H ON T H E O P E N I N G OF P A R L I A M E N T
Note by the L o r d P r e s i d e n t of the Council
I-have r e v i o e d th-a d r a f t of The Queen's Speech on the Opening of
P a r l i a m e n t in the light of our discussion on Thursday and now
r e c i r c u l a t e it f o r the c o n s i d e r a t i o n of my c o l l e a g u e s .
I must r e m i n d
them that it is e s s e n t i a l that we r e a c h f i r m conclusions on Monday.
2.
In its r e v i s e d f o r m the d r a f t runs t o about 1, 040 words - a l i t t l e
longer than usual but, I think, a c c e p t a b l e .
W W
P r i v y Council Office S W l
26th June 1970
THE Q U E E N ' S S P E E C H ON T H E O P E N I N G OF
PARLIAMENT
MY LORDS A N D M E M B E R S OF THE HOUSE OF C O M M O N S
1.
My Husband and I l o o k f o r w a r d to our v i s i t to Canada on the
occasion of the centenaries of the N o r t h w e s t T e r i i t o r i e s and of the
P r o v i n c e of Manitoba.
2,
The m a j o r international interests of B r i t a i n a r e the maintenance
of p e a c e , the promotion of p r o s p e r i t y , the settlement of disputes by
conciliation and a g r e e m e n t , and the encouragement of trade and peaceful
exchanges between nations.
3.
My G o v e r n m e n t have w e l c o m e d the opening on the 30 of June of
negotiations f o r m e m b e r s h i p of the European C o m m u n i t i e s .
In these
negotiations they w i l l seek t o r e a c h a g r e e m e n t on t e r m s f a i r t o a l l
concerned and w i l l r e m a i n in. c l o s e consultation with our Commonwealth
and E F T A partners and with the I r i s h R e p u b l i c .
4.
My Government w i l l w o r k f o r the maintenance of the defensive
strength of the N o r t h Atlantic A l l i a n c e and f o r a genuine reduction of
tension in relations between E a s t and W e s t in E u r o p e ,
5.
My M i n i s t e r s w i l l take a full part in the meeting of Commonwealth
Heads of Government in Singapore in January, 1971.
They w i l l c o - o p e r a t e
with our Commonwealth f r i e n d s in m e a s u r e s a i m e d at maintaining peace
and
6.
stability in Commonwealth countries in South-East A s i a .
My G o v e r n m e n t w i l l w o r k f o r a f a i r and lasting peace in the M i d d l e
E a s t and f o r a settlement of the conflict in Indo-China.
They w i l l consult
with l e a d e r s in the Gulf on how our c o m m o n i n t e r e s t s in that a r e a may b e s t
be s e r v e d .
7.
My G o v e r n m e n t w i l l make a further e f f o r t to find a sensible and
just solution of the Rhodesian p r o b l e m in a c c o r d a n c e with the f i v e p r i n c i p l e s ,
8.
In this 25th A n n i v e r s a r y y e a r of the United N a t i o n s , which opens
the Second D e v e l o p m e n t D e c a d e , M y G o v e r n m e n t w i l l lend their full support
to e f f o r t s to strengthen p e a c e , to promote d i s a r m a m e n t and to further
w o r l d e c o n o m i c development.
They w i l l pursue an expanding aid p r o g r a m m e
and w i l l s e e k a g r e e m e n t on tariff p r e f e r e n c e s for developing c o u n t r i e s .
1
9.
My Government w i l l w o r k f o r the development and p r o g r e s s of
B r i t a i n ' s dependent
t e r r i t o r i e s , p a r t i c u l a r l y in the e c o n o m i c and s o c i a l
fields.
10.
A B i l l w i l l be placed b e f o r e you t o provide f o r the independence of
Fiji.
/Tl.
My Government w i l l r e v i e w the r o l e and size of the T e r r i t o r i a l
and A r m y Volunteer R e s e r v e ^ /
12.
My M i n i s t e r s w i l l support the N o r t h e r n Ireland G o v e r n m e n t in their
efforts to p r o m o t e peace and harmony among a l l communities on the b a s i s
of equality and f r e e d o m f r o m d i s c r i m i n a t i o n , and to further the p r o s p e r i t y
of the P r o v i n c e .
M E M B E R S OF T H E HOUSE OF C O M M O N S
13,
E s t i m a t e s f o r the public s e r v i c e s w i l l be laid b e f o r e you.
M Y LORDS A N D M E M B E R S OF T H E HOUSE OF C O M M O N S
14.
A t home My G o v e r n m e n t s f i r s t c o n c e r n w i l l be to strengthen the
economy and curb the inflation.
R i s i n g production and a steadily g r o w i n g
national income must provide the r e s o u r c e s f o r i m p r o v i n g the s o c i a l
s e r v i c e s and the environment in which we l i v e .
The e n e r g y and e n t e r p r i s e
needed to a c h i e v e this w i l l be e n c o u r a g e d by r e f o r m i n g and reducing the
burden of taxation, providing new incentives t o saving and l i b e r a t i n g
industry f r o m unnecessary intervention by G o v e r n m e n t .
15.
My M i n i s t e r s attach the g r e a t e s t importance t o p r o m o t i n g full
e m p l o y m e n t and an e f f e c t i v e r e g i o n a l development p o l i c y .
They will
stimulate l o n g - t e r m growth in the l e s s p r o s p e r o u s a r e a s by i n c r e a s i n g
their e c o n o m i c attractions and i m p r o v i n g their a m e n i t i e s .
16.
My M i n i s t e r s w i l l start d i s c u s s i o n s with a v i e w to encouraging
a g r i c u l t u r a l expansion by changes in the present s y s t e m of f i n a n c i a l
support and promoting the efficient d e v e l o p m e n t of the fishing industry.
17.
The w o r k of the Industrial T r a i n i n g B o a r d s w i l l be r e v i e w e d and
the f a c u l t i e s f o r r e s t r a i n i n g and f o r management training i m p r o v e d and
extc
2
18.
A B i l l w i l l b e introduced to establish a f r a m e w o r k of law within
which i m p r o v e d industrial relations can d e v e l o p and a code of p r a c t i c e
w i l l be p r e p a r e d laying down standards f o r good management and trade
union p r a c t i c e .
19.
M y G o v e r n m e n t b e l i e v e that v i g o r o u s competition is the best
safeguard f o r the c o n s u m e r .
20,
T h e y w i l l c a r r y out a r e v i e w of company law.
M y M i n i s t e r s w i l l launch a v i g o r o u s housing p o l i c y , giving p r i o r i t y
to housing the h o m e l e s s , c l e a r i n g slums and m o d e r n i s i n g older houses.
They w i l l s e e k t o r e d i s t r i b u t e housing subsidies to g i v e m o r e help to those
in g r e a t e s t need.
21,
Steps w i l l be taken to encourage home ownership.
My G o v e r n m e n t w i l l expand educational opportunities as growing
r e s o u r c e s make this p o s s i b l e , with p r i o r i t y f o r the i m p r o v e m e n t of
primary schools.
A n inquiry w i l l be instituted into t e a c h e r training.
L o c a l authorities in Scotland w i l l be set f r e e to take e f f e c t i v e d e c i s i o n s on
the organisation of their s c h o o l s .
22,
R e s p o n s i b i l i t y f o r p r i m a r y and secondary education in W a l e s w i l l
be t r a n s f e r r e d t o the S e c r e t a r y of State f o r W a l e s ,
23.
L e g i s l a t i o n w i l l be brought f o r w a r d t o provide pensions f o r persons
now o v e r 80 who w e r e too old t o enter the p r e s e n t insurance scheme and
f o r c e r t a i n younger widows and t o provide a constant attendance allowance
f o r the v e r y s e r i o u s l y disabled.
24.
L e g i s l a t i o n w i l l be introduced on Commonwealth i m m i g r a t i o n .
M o r e a s s i s t a n c e w i l l be p r o v i d e d for a r e a s of s p e c i a l s o c i a l n e e d ,
e s p e c i a l l y those in which l a r g e numbers of i m m i g r a n t s have settled.
25.
E f f e c t w i l l be g i v e n to the recommendations of the i m p a r t i a l
Boundary C o m m i s s i o n s f o r the r e d i s t r i b u t i o n of P a r l i a m e n t a r y s e a t s .
26.
P r o p o s a l s w i l l be worked out in full consultation with a l l c o n c e r n e d ,
f o r l o c a l g o v e r n m e n t r e f o r m in England, Scotland and W a l e s , associated
with a g e n e r a l devolution of p o w e r f r o m the central G o v e r n m e n t .
There­
after plans w i l l be laid b e f o r e P a r l i a m e n t f o r giving Scottish people a
g r e a t e r say in t h e i r own a f f a i r s ,
27.
P r o p o s a l s w i l l be put f o r w a r d f o r permitting c o m m e r c i a l l o c a l
r a d i o stations under the g e n e r a l supervision of an independent broadcasting
authority.
3
28.
A B i l l w i l l be brought b e f o r e you t o abolish the Land C o m m i s s i o n .
29.
My M i n i s t e r s w i l l intensify the d r i v e t o r e m e d y past damage to the
environment and w i l l seek to safeguard the beauty of the B r i t i s h countryside
and seashore f o r the future.
30.
B i l l s w i l l be laid b e f o r e you to i m p r o v e the a r r a n g e m e n t s f o r the
administration of justice in England and W a l e s in a c c o r d a n c e with the
recommendations of the R o y a l C o m m i s s i o n on A s s i z e s and Quarter Sessions
and t o i m p r o v e the organisation of the Sheriff Courts in Scotland.
31.
My Government w i l l make it t h e i r s p e c i a l duty t o p r o t e c t the
f r e e d o m of the individual under the l a w and w i l l e x a m i n e ways in which this
may be m o r e e f f e c t i v e l y
32.
safeguarded.
Other m e a s u r e s w i l l be laid b e f o r e you.
M Y LORDS A N D M E M B E R S OF T H E HOUSE C F C O M M O N S
I pray that the b l e s s i n g of A l m i g h t God may r e s t upon your counsels.
4
DOCUMENT IS T H E P R O P E R T Y OF H S R B R I T A N N I C M A J E S T Y ^ G O V E R N M E N T
CP(70) 4
COPY NO
54
26 June 1970
CABINET
M E M B E R S H I P OF T H E E U R O P E A N C O M M U N I T I E S ;
O P E N I N G S T A T E M E N T F O R 30 JUNE
Note by the S e c r e t a r y of State f o r F o r e i g n and
Commonwealth A f f a i r s
I circulate a r e v i s e d v e r s i o n of the Opening Statement f o r 30 June following
the Cabinet discussion on Thursday 25 June.
A D-H
F o r e i g n and Commonwealth Office SW1 26 June 1970 O P E N I N G S T A T E M E N T F O R L U X E M B O U R G 30 JUNE 1970
1.
I should l i k e to begin by saying what a p l e a s u r e it is to be able to
start our p r o c e e d i n g s h e r e in L u x e m b o u r g , and to thank the Luxembourg
G o v e r n m e n t f o r the f a c i l i t i e s and the hospitality which they a r e s o
g e n e r o u s l y providing today.
2.
May I a l s o t e l l you, M r C h a i r m a n , since this is I b e l i e v e the last
day of your t e r m of office as P r e s i d e n t of the Council of M i n i s t e r s of the
European C o m m u n i t i e s , how much we a p p r e c i a t e a l l that you and your
c o l l e a g u e s have done in the last six months to enable us a l l to m e e t
together n o w ?
Since your h i s t o r i c meeting at T h e Hague l a s t D e c e m b e r ,
held at the initiative of the P r e s i d e n t of the F r e n c h R e p u b l i c , we h a v e all
m o v e d along c o n v e r g i n g paths to L u x e m b o u r g .
3.
I would a l s o l i k e to pay tribute to Monsieur R e y f o r a l l that he and
his c o l l e a g u e s in the European C o m m i s s i o n have done f o r the cause of a
united E u r o p e , and f o r the e n l a r g e m e n t of the E u r o p e a n C o m m u n i t i e s .
I know a l l the m e m b e r G o v e r n m e n t s of the C o m m u n i t i e s w i l l m i s s h i m ;
and so shall w e .
4.
M r C h a i r m a n , b e f o r e I turn to the substance of today*s m e e t i n g ,
I hope that I m a y be a l l o w e d a p u r e l y p e r s o n a l w o r d .
A f t e r 20 y e a r s of
p o l i t i c a l l i f e , I can think of no g r e a t e r challenge than t o conduct these
negotiations on behalf of H e r Majesty*s G o v e r n m e n t .
I come new to the
details of European a f f a i r s , but I have f o l l o w e d these m a t t e r s f o r long enough
to r e c o g n i s e , on the one hand, the g r e a t advantages f o r a l l of us if these
negotiations s u c c e e d , but, on the other hand, our need to face up to the
v e r y r e a l p r o b l e m s which, t o g e t h e r , w e shall have to s o l v e .
5.
None of us in this r o o m knows whether w e shall succeed - whether
we shall u l t i m a t e l y be able to a g r e e upon t e r m s which a r e mutually
acceptable.
But at l e a s t we can say t h i s .
We m e e t today with g o o d w i l l on
all s i d e s and, I b e l i e v e , with a d e t e r m i n a t i o n on the part of a l l of us to do
everything p o s s i b l e to reach a f a i r solution.
1
6.
Nine y e a r s a g o we began negotiations f o r m e m b e r s h i p of the
European C o m m u n i t i e s .
We entered those negotiations with high h o p e s ,
but they w e r e not to be f u l f i l l e d .
Government applied to j o i n .
T h e n , in May 1967 the p r e v i o u s B r i t i s h
And now, today, I want m y c o l l e a g u e s in the
Communities to know that the new G o v e r n m e n t in Britain a r e confident that,
with g o o d w i l l , these negotiations now beginning can s u c c e e d .
together, to w o r k out t e r m s which a r e f a i r .
Our task i s ,
And if none of us l o s e s sight
of the compelling reasons f o r uniting and strengthening Europe - r e a s o n s
which have g r o w n s t r o n g e r with the y e a r s - then f a i r t e r m s w i l l be found.
7.
The fact is that none of us acting alone can gain the ends which we
d e s i r e f o r our own people in t e r m s of p h y s i c a l security or e c o n o m i c or
social a d v a n c e .
Looking beyond our own f r o n t i e r s , there a r e s t i l l d a n g e r s ,
and it is right that Europe should assume a g r e a t e r share of r e s p o n s i b i l i t y
f o r its own d e f e n c e .
8.
That too is our joint c o n c e r n ,
And it is wholly unrealistic t o separate the p o l i t i c a l and e c o n o m i c
interests of E u r o p e , because our place in the w o r l d , and our influence,
w i l l be l a r g e l y d e t e r m i n e d by the growth of our r e s o u r c e s and the pace of
our technological d e v e l o p m e n t .
E c o n o m i c growth and t e c h n o l o g i c a l
development today r e q u i r e that we unite pur e c o n o m i e s and our m a r k e t s .
9.
A united Europe must, of c o u r s e , take full account of the v i e w s of its
friends and a l l i e s in other parts of the w o r l d .
But let none of us w h o is
taking part in these negotiations l o s e sight of our common o b j e c t i v e of
European unity.
And let no-one who is not taking part think it could be in
his interest that we should f a i l to a c h i e v e that o b j e c t i v e .
F o r g i v e n the
base of European unity, we can not only hope f o r , but m o r e e f f e c t i v e l y w o r k
f o r a c l o s e r and m o r e fruitful relationship between E a s t and W e s t .
do m o r e to p r o m o t e the growth of international t r a d e .
We can
A n d we can make a
fuller European contribution to solving the p r o b l e m s of l e s s p r o s p e r o u s
countries.
10.
T h e s e a r e the reasons why w e v/ant a united E u r o p e .
to p r o s p e r .
you d o .
. W e want Europe
But w e do not seek p r o s p e r i t y f o r Europe a l o n e , any m o r e than
We b e l i e v e with you that Europe s t i l l has its contribution to make
beyond Its own f r o n t i e r s and we b e l i e v e that Europe cannot make its full
contribution unless the Communities a r e e n l a r g e d to include B r i t a i n .
2
11.
The G o v e r n m e n t s of D e n m a r k , the I r i s h Republic and N o r w a y have
also decided to apply to join the C o m m u n i t i e s , and we w a r m l y w e l c o m e
their d e c i s i o n s .
W e a l s o b e l i e v e that a number of European countries
which do not j o i n the Communities as full m e m b e r s w i l l n e v e r t h e l e s s have
a valuable contribution to make to many of our c o m m o n o b j e c t i v e s , and that
it w i l l t h e r e f o r e be in the interest of all of us that these countries should
find a mutually s a t i s f a c t o r y relationship with the e n l a r g e d C o m m u n i t i e s .
12.
Both M r H e a t h , in a speech last month, and the p r e v i o u s B r i t i s h
Government have made it c l e a r that we accept the T r e a t i e s establishing
the three E u r o p e a n Communities and the d e c i s i o n s which have f l o w e d f r o m
them.
I c o n f i r m that this is the position of H e r M a j e s t y s G o v e r n m e n t ,
t
subject to the points to which I now turn.
13.
The l i s t of questions which we w i s h to see c o v e r e d in negotiations
remains the same as those put f o r w a r d by the p r e v i o u s B r i t i s h G o v e r n m e n t
in July 1967.
F o r E u r a t o m and the European C o a l and Steel Community
we seek only a v e r y short transitional p e r i o d .
Adaptation t o the
obligations of the European E c o n o m i c Community w i l l c l e a r l y r e q u i r e m o r e
time than that, and it would be u n r e a l i s t i c not to f a c e up to the f a c t , at the
outset, that there a r e s o m e v e r y difficult p r o b l e m s to be s o l v e d .
Our m a i n
p r o b l e m s , a s you know, concern certain m a t t e r s of a g r i c u l t u r a l p o l i c y j
our contribution to Community budgetary expenditure;
C o m m o n w e a l t h sugar
e x p o r t s ; N e w Z e a l a n d s s p e c i a l p r o b l e m s ; and c e r t a i n other Commonwealth
t
questions.
14.
The p o s i t i o n which the p r e v i o u s B r i t i s h G o v e r n m e n t took in July 1967
w a s , of c o u r s e , subject to developments in the Community in the m e a n t i m e .
F i s h e r i e s p o l i c y m a y p r o v e to be one such d e v e l o p m e n t .
In the f i e l d of
Community budgetary a r r a n g e m e n t s , recent d e v e l o p m e n t s h a v e . m a d e the
problems facing our m e m b e r s h i p m o r e difficult.
A s you know, our
p r e d e c e s s o r s had looked f o r w a r d to B r i t a i n s taking p a r t as a full m e m b e r
f
" xn the negotiation of the financial a r r a n g e m e n t s f o r the p e r i o d a f t e r the end
of 1969.
Had w e done s o , the resulting a g r e e m e n t would no doubt have made
fair p r o v i s i o n f o r us as it has f o r . each of the existing m e m b e r s of the
Communities,
But we w e r e not p a r t y to your a g r e e m e n t .
3
And the
arrangements which must in any case be a g r e e d to enable a new m e m b e r to
take part in the budgetary p r o v i s i o n s of the European Communities w i l l
constitute one of the c r u c i a l e l e m e n t s in the negotiation on which we a r e
embarking,
When the European C o m m i s s i o n gave its Opinion on our
candidature in September 1967, it was r e c o g n i s e d that the existing
financial a r r a n g e m e n t s would, if applied to B r i t a i n , " g i v e r i s e to a p r o b l e m
of balance in sharing of financial b u r d e n s " .
I think it w i l l be g e n e r a l l y
agreed that the new decisions have f o r us made that p r o b l e m of balance
more s e v e r e .
And so we have to w o r k together to find a solution t o this
basic p r o b l e m which w i l l be f a i r and sound f o r the e n l a r g e d Community and
for all its m e m b e r s .
E I appear to labour this point, it is only b e c a u s e ,
unless such a solution is found, the burden on the United Kingdom would
become intolerable and no B r i t i s h Government could contemplate joining.
M o r e o v e r , without such a solution, the whole basis of stability and
confidence, essential to the further development of the C o m m u n i t i e s ,
would be lacking,
15.
A f e w w e e k s a g o M r Heath spoke about the future development of the
Communities.
He said that we shared your d e t e r m i n a t i o n to g o on f r o m
what has a l r e a d y been achieved into new spheres of c o - o p e r a t i o n beginning
with e c o n o m i c and monetary m a t t e r s , but at the same time laying the
foundations f o r a new method of working together in f o r e i g n p o l i c y and
defence.
In a l l these p r o b l e m s , he added, w e should seek to a c h i e v e
solutions which a r e Community solutions.
W e w e l c o m e the m o v e s which
you have a l r e a d y made towards c l o s e r e c o n o m i c and m o n e t a r y integration,
and a r e r e a d y to play our full p a r t .
And there a r e other aspects of p o l i c y
where w e shall l i k e w i s e w e l c o m e further p r o g r e s s ;
in industrial p o l i c y , in
regional p o l i c y , and of course in the f i e l d of technology w h e r e w e a r e
already working t o g e t h e r , but where so much m o r e could be done once the
Communities had been e n l a r g e d .
16.
I have said enough today to show you that the new B r i t i s h G o v e r n m e n t
is d e t e r m i n e d t o w o r k with you in building a Europe which has a coherent
character of its own.
If the Communities a r e to d e v e l o p ! and if w e a r e to
find Community solutions to our c o m m o n p r o b l e m s , we shall need the
4
machinery to take the d e c i s i o n s .
That means sharing in the continued
development of e f f e c t i v e institutions - e f f e c t i v e to d o those things which
our joint e x p e r i e n c e shows to be. n e c e s s a r y and advantageous to a l l .
That
has always been our p r a c t i c a l approach to institutional c h a n g e . . What
matters - to you and to us - is that our objectives a r e the s a m e , and we no
less than you, w i l l want the institutions to match those o b j e c t i v e s .
17.
I have said that w e accept the T r e a t i e s and their o b j e c t i v e s .
is not s i m p l y a question f o r us of accepting what you have d o n e .
we look to the f u t u r e .
But it
L i k e you
A e the C o m m i s s i o n r e c o g n i s e d in its Opinion of l a s t
October, the a c c e s s i o n of additional countries w i l l be of g r e a t value f o r the
Communities both in their internal d e v e l o p m e n t and in the e x e r c i s e of
increased r e s p o n s i b i l i t i e s in the w o r l d .
18.
I have r e f e r r e d to the main points which we wish to see c o v e r e d in
negotiations.
We hope that the negotiations can be kept short and confined
to e s s e n t i a l s .
I a m told that the p r o b l e m s which you have been discussing
f o r the l a s t six months in p r e p a r a t i o n f o r these negotiations a r e v e r y much
the same as o u r s .
So these a r e c o m m o n p r o b l e m s f o r us and f o r you - how
to enable an e n l a r g e d Community to function m o s t e f f e c t i v e l y f o r the
advantage of a l l .
Our wish is to l o o k together in the s p i r i t of the
Community f o r solutions which in the w o r d s of the C o m m i s s i o n s Opinion
of 1969 w i l l ensure the cohesion and the d y n a m i s m which w i l l be indispensable
in an e n l a r g e d C o m m u n i t y .
19.
M r C h a i r m a n , after many y e a r s we now have the opportunity to
r e a l i s e together a E u r o p e which has a coherent c h a r a c t e r of its own.
have the same defence i n t e r e s t ;
day p r o g r e s s i v e l y c l o s e r .
We
our p o l i t i c a l i n t e r e s t s a r e g r o w i n g e v e r y
A s we d e v e l o p new p o l i c i e s t o g e t h e r w e shall, as
I have s a i d , find it natural to d e v e l o p the institutional m a c h i n e r y which we
shall need to execute those p o l i c i e s .
If we can together succeed in the
negotiations now begun then, as Sir Winston Churchill said, t h e r e w i l l be no
l i m i t to the h a p p i n e s s , to the p r o s p e r i t y and g l o r y which E u r o p e s people
t
w i l l enjoy.
So l e t none of us spare any e f f o r t in these n e g o t i a t i o n s .
Inspired by g o o d w i l l and united by so many a i m s and hopes and i n t e r e s t s ,
this time we can s u c c e e d .
5
DOCUMENT IS T H E P R O P E R T Y OF H E R B R I T A N N I C M A J E S T Y ' S G O V E R N M E N T CP(70) 5
COPY NO
*M
29th June 1970
CABINET
N A T I O N A L DOCKS D I S P U T E
Memorandum by the S e c r e t a r y of State f o r
E m p l o y m e n t and Productivity
A n official national dock s t r i k e , involving v i r t u a l l y a l l the
country's 47,000 d e c k e r s , is threatened for Tuesday 14 July by the
T r a n s p o r t and G e n e r a l W o x k e r s Union ( T G W U ) and other d o c k e r s ' unions.
This is in support of their longstanding c l a i m f o r an i n c r e a s e in the
national weekly time rate f r o m the p r e s e n t £ 1 1 . I s . 8d ( f i x e d in
January 1966) plus £2 " m o d e r n i s a t i o n " supplement (introduced on
decasualisation in September 1967) to an inclusive £ 2 0 .
2.
The National A s s o c i a t i o n of P o r t E m p l o y e r s ( N A P E ) have
consistently refused any i n c r e a s e in this b a s i c r a t e
They argue that
any such i n c r e a s e would l e a d , with n o offsetting i m p r o v e m e n t in
productivity, to i n c r e a s e s in a v e r a g e weekly e a r n i n g s which (including
o v e r t i m e , p i e c e w o r k and a v a r i e t y of other payments) a r e a l r e a d y w e l l
o v e r £35 (having i n c r e a s e d by 57 per cent since January 1966).
Moreover
it would perpetuate this obviously absurd pay structure.
3.
The N A P E take the v i e w that any basic i m p r o v e m e n t in d o c k e r s ' pay
should be sought in the c u r r e n t p o r t - l e v e l " D e v l i n Stage 2 " negotiations.
These a r e designed to r e p l a c e a l l existing national and l o c a l pay s e t t l e ­
ments by a s e r i e s of separate p o r t a g r e e m e n t s , providing new pay
structures t a i l o r e d to l o c a l needs.
In particular many ports a r e seeking
to get away f r o m the p i e c e w o r k s y s t e m with its endless opportunities f o r
dispute and e s c a l a t i o n of earnings by ship-side bargaining.
4.
In the London e n c l o s e d d o c k s , f o r e x a m p l e , a g r e e m e n t has already­
been reached with the T G W U (though not with the National A s s o c i a t e d
S t e v e d o r e s and D o c k e r s ' union ( N A S D ) ) to abolish p i e c e w o r k in favour of
a fixed weekly wage of £ 3 4 . 10s. (£37 f o r men working on s h i p s ) .
S i m i l a r a g r e e m e n t s have been r e a c h e d in Southampton and some s m a l l e r
ports.
Negotiations a r e w e l l advanced in a l l the other m a j o r ports
except L i v e r p o o l where they have just started.
N A P E f e a r that any g e n e r a l
increase in earnings through national negotiations at this juncture would
prejudice these l o c a l n e g o t i a t i o n s , particularly the a l r e a d y s l i m chances in
London of bringing the N A S D into line with the T G W U .
1
5.
W h i l e t h e r e f o r e standing f i r m on the b a s i c r a t e , N A P E have
within the l a s t f e w days indicated p r i v a t e l y to the unions willingness to
increase the w e e k l y earnings g u a r a n t e e , at p r e s e n t £16 (£17 in London)
to £20 (in a l l p o r t s ) .
N o man would go home with l e s s than this amount,
so r e m o v i n g any possible argument about low individual earnings c o n c e a l e d
in a v e r a g e f i g u r e s .
Since f e w e a r n l e s s than this there would be little
effect on a v e r a g e earnings and no danger to D e v l i n 2 negotiations.
'' .6.
It is understood that the unions a r e unlikely to accept this offer e v e n
as a b a s i s f o r negotiation, but a r e at this stage s t i l l p r e s s i n g f o r an
increase in the b a s i c r a t e .
With the strike deadline s t i l l t w o weeks off
they may y e t change their m i n d s .
M o r e o v e r some of the e m p l o y e r s are
likely to be in s e r i o u s financial difficulties in the event of a strike and
might t h e r e f o r e initiate further e f f o r t s t o reach a settlement.
There is,
h o w e v e r , a s e r i o u s r i s k that the strike w i l l take p l a c e .
7.
Whether or not t h e r e is trouble on a national s c a l e , trouble in
London s e e m s inevitable within the next few weeks because of the refusal
of the NASD to accept the a g r e e m e n t a l r e a d y r e a c h e d with the T G W U .
The London e m p l o y e r s have now r e f e r r e d this issue to the National
Modernisation C o m m i t t e e ( N M C ) , a body established by the two sides to
o v e r s e e the D e v l i n n e g o t i a t i o n s , with an independent chairman
( M r Goowge C a t t e l l ) and v i c e - c h a i r m a n ( M r . T o m C l a r o ) appointed
at their r e q u e s t by m y p r e d e c e s s o r , and s e r v i c e d by the D E P .
The N M C
w i l l probably m e e t to c o n s i d e r this towards the end of next week,
It is
difficult at this stage to s e e how they can r e s o l v e the issue without
upsetting e i t h e r the T G W U or the N A S D .
In v i e w of the l o n g - t e r m
benefits t o the e m p l o y e r s of the productivity f e a t u r e s of the a g r e e m e n t
reached with the TGWU,, it is possible they w i l l eventually i m p r o v e the
money o f f e r e d , so as to s e c u r e acceptance by the N A S D ,
But much
w i l l depend on the c o u r s e of national negotiations m e a n w h i l e .
8.
Officials of m y D e p a r t m e n t a r e keeping in c l o s e touch with both
s i d e s , both nationally and in London, on an i n f o r m a l basis as w e l l as
through the s e c r e t a r i a t of the N M C .
I do not propose any f o r m a l i n t e r ­
v e n t i c c by the G o v e r n m e n t at this s t a g e .
I shall keep those of my
colleagues who a r e p r i n c i p a l l y c o n c e r n e d informed of developments
R L C
Department of E m p l o y m e n t and P r o d u c t i v i t y SW I
26th June 1970
THIS D O C U M E N T IS T H E P R O P E R T Y OF H E R B R I T A N N I C
MAJESTY'S GOVERNMENT
CP(70) 6
COPY NO
d4
1 July 1970
CABINET
T H E Q U E E N ' S S P E E C H ON T H E O P E N I N G OF P A R L I A M E N T Note by the S e c r e t a r y of the Cabinet I c i r c u l a t e f o r the information of the Cabinet a
copy of The Queen's Speech on the Opening of
P a r l i a m e n t in the f o r m in which it has been approved by
The Queen.
Signed
Cabinet Office S W l
1 July 1970
BURKE TREND
T H E QUEEN'S SPEECH O N T H E O P E N I N G O F PARLIAMENT M Y LORDS AND MEMBERS OF THE HOUSE OF COMMONS
My Husband and I look forward to our visit to Canada on the
occasion of the centenaries of the Northwest Territories and of the
Province of Manitoba.
The major international interests of Britain are the maintenance
of peace, the promotion of prosperity, the settlement of disputes by
conciliation and agreement, and the encouragement of trade and
peaceful exchanges between nations.
My Government have welcomed the opening on the 30th of June
of negotiations for membership of the European Communities.
In
these negotiations they will seek to reach agreement on terms fair
to all concerned and will remain in close consultation with our
Commonwealth and E F T A partners and with the Irish Republic.
M y Government will work for the maintenance of the defensive
strength of the North Atlantic Alliance and for a genuine reduction
of tension in relations between East and West in Europe.
My
Ministers
will
take
a
full
part
in
the
meeting
of
Commonwealth Heads of Government in Singapore in January 1971.
They will co-operate with our Commonwealth friends in measures
aimed at maintaining peace and stability in Commonwealth countries
in South-East Asia.
I M y Government will work for a fair and lasting peace in the
Middle East and for a settlement of the conflict in Indo-China.
They will consult with leaders in the Gulf on how our common
interests in that area may best be served.
M y Government will make a further effort to find a sensible and
just solution of the Rhodesian problem in accordance with the five
principles.
In this 25th Anniversary year of the United Nations, which
opens the Second Development Decade, M y Government will lend
their full support to international efforts to strengthen peace, to
promote disarmament and to further world economic development.
They will pursue an expanding
aid programme
and will seek
agreement on tariff preferences for developing countries.
M y Government will work for the development and progress
of Britain's dependent territories.
A Bill will be placed before you to provide for the independence
of Fiji.
M y Government will review the role and size of the Territorial
and Army Volunteer Reserve.
M y Ministers will support the Northern Ireland Government in
their efforts to promote peace and harmony among all communities
on the basis of equality and freedom from discrimination, and to
further the prosperity of the Province.
I have noted with pride the
patience, skill and fortitude with which M y Armed Forces are
carrying out their difficult task.
MEMBERS OF THE HOUSE OF COMMONS
Estimates for the public services will be laid before you.
M Y LORDS AND MEMBERS OF THE HOUSE OF COMMONS
A t home M y Government^ first concern will be to strengthen
the economy and curb the inflation.
Rising production and a steadily
growing national income must provide the resources for improving
the social services and the environment in which we live. The energy
and enterprise needed to achieve this will be encouraged by reforming
and reducing the burden of taxation, providing new incentives to
saving and liberating industry from unnecessary intervention by
Government.
M y Ministers attach the greatest importance to promoting full
employment and an effective regional development policy.
They
will stimulate long-term growth in the less prosperous areas by
increasing their economic attractions and improving their amenities.
M y Ministers will start discussions with a view to encouraging
agricultural expansion by changes in the present system of financial
support.
They will promote the efficient development of the fishing
industry.
The work of the Industrial Training Boards will be reviewed and
the facilities for re-training and for management training improved
and extended.
A Bill will be introduced to establish a framework of law within
which improved industrial relations can develop and a code of
practice will be prepared laying down standards for good management
and trade union practice.
M y Government believe that vigorous competition is the best
safeguard for the consumer.
They will carry out a review
of
company law.
M y Ministers will pursue a vigorous housing policy with the
principal aim of improving the position of the homeless and the
badly housed.
After consultations with local authorities, housing
subsidies will be refashioned so as to give more help to those in
greatest need.
Home ownership will be encouraged.
i
My
Government
growing
resources
will
make
expand
this
educational
possible,
with
opportunities
priority
for
as
the
improvement of primary schools. An inquiry will be instituted into
teacher training.
Local authorities in Scotland, as in England and
Wales, will be set free to take effective decisions on the organisation
of their schools.
Responsibility for primary and secondary education in Wales
will be assumed by the Secretary of State for Wales.
Legislation will be brought forward to provide pensions for
persons now over 80 who were too old to enter the present insurance
scheme and for certain younger widows and to provide a constant
attendance allowance for the very seriously disabled.
Legislation will be introduced on Commonwealth immigration.
More assistance will be provided for areas of special social need,
especially those in which large numbers of immigrants have settled.
Effect will be given to the recommendations of the Boundary
Commissions for the redistribution of Parliamentary seats.
Proposals will be worked out in full consultation with all
concerned, for local government reform in England, Scotland and
Wales, associated with a general devolution of power from the central
Government.
At
a later stage plans will be laid before
you
for giving the Scottish people a greater say in their own affairs.
Proposals will be put forward for permitting commercial local
radio stations under the general supervision of
an independent
broadcasting authority.
A
Bill will
be brought
before
you
to
abolish
the
Land
Commission.
M y Ministers will intensify the drive to remedy past damage to
the environment and will seek to safeguard the beauty of the British
countryside and seashore for the future.
Bills will be laid before you to improve the arrangements for the
administration of justice in England and Wales in accordance with
the recommendations of the Royal Commission on Assizes and
Quarter Sessions and to improve the organisation of the Sheriff
Courts in Scotland.
M y Government will make it their special duty to protect the
freedom of the individual under the law and will examine ways in
which this may be more effectively safeguarded.
Other measures will be laid before you.
M Y LORDS AND MEMBERS OF THE HOUSE OF COMMONS
I pray that the blessing of Almighty God may rest upon your
counsels.
DOCUMENT IS T H E P R O P E R T Y OF H E R B R I T A N N I C M A J E S T Y S G O V E R N M E N T
:
CP(70) 7
COPY NO
54
1 July 1970
CABINET
INDUSTRIAL RELATIONS SITUATION
Memorandum by the S e c r e t a r y of State f o r
E m p l o y m e n t and Productivity
Since industrial strife is unfortunately a l m o s t c e r t a i n t o be a
major feature of our l i f e in the coming months and since the industrial
climate has changed s o much since 1 64, I thought it might be helpful
to circulate this m e m o r a n d u m analysing the m a i n f e a t u r e s of the current
industrial r e l a t i o n s situation.
Major c u r r e n t disputes and those which
may a r i s e in the coming months a r e listed in the annex.
N o attempt is
made in this m e m o r a n d u m to suggest m e a s u r e s f o r dealing with the
situation.
I shall be putting b e f o r e my colleagues in due course p r o p o s a l s
for a f r a m e w o r k of l e g i s l a t i o n within which r e f o r m of our industrial
relations s y s t e m can be pursued,
Q
I N C R E A S E IN D I S P U T E S
2.
A s the table b e l o w shows, there has been a m a r k e d downward
trend f o r the last ten y e a r s (and in f a c t f o r c o n s i d e r a b l y l o n g e r ) in the
number of s t r i k e s in c o a l - m i n i n g , matched by a f a i r l y steady i n c r e a s e
in the number of s t r i k e s in the r e s t of the e c o n o m y .
Because of these
two opposite t r e n d s , the total number of s t r i k e s , while fluctuating f a i r l y
widely, did not until r e c e n t l y show any consistent tendency to i n c r e a s e or
decrease.
Since 1966, h o w e v e r , there has been a continuous i n c r e a s e .
In 1967 and 1968 this was within the l i m i t s of p r e v i o u s y e a r - t o - y e a r
fluctuations but in 1969 and e a r l y 1970 there was a m a r k e d a c c e l e r a t i o n
in the r a t e of i n c r e a s e ; the f i g u r e f o r 1969 (which was the highest on
r e c o r d ) was 30 per cent o v e r that f o r 1968, and the p r o v i s i o n a l f i g u r e f o r
the f i r s t 5 months of 1970 is 50 per cent o v e r that f o r the corresponding
period of 1969 (1876 c o m p a r e d with 1234).
TABLEi
N o . beginning
in y e a r
I960
1961
1962
1963
1964
1965
1966
1967
1968
1969
S T R I K E S i960 Other
Industries
Coalmining
1,666
1,453
1,205
987
1,058
740
553
394
221
186
1,166
1,228
1,244
1,081
1,466
1,614
1,384
1,722
2,157
2,930
Total
2,832
2,686
2,449
2,068
2,524
2,354
1,937
2,116
2,378
3,116
3.
The 1969 f i g u r e of working days l o s t , just o v e r 6. 8 m i l l i o n , was
the highest since 1957 when there was a l o s s of o v e r 8. 4 m i l l i o n w o r k i n g
days of which about 4 m i l l i o n w e r e accounted f o r by a national s t r i k e in
engineering.
In 1969* although nearly 1 m i l l i o n days w e r e lost in the
unofficial s t r i k e in coalmining in O c t o b e r , the high figure of w o r k i n g days
l o s t was due mainly to the i n c r e a s e in the number of s t r i k e s .
4,
The p r o v i s i o n a l total number of w o r k i n g days lost during the
f i r s t 5 months of 1970 - nearly 4 m i l l i o n - w a s the highest f o r the
c o m p a r a b l e p e r i o d of any y e a r since 1962, and w ? s a l m o s t double
the figure f o r the c o r r e s p o n d i n g p e r i o d of 1969.
A g a i n it was m o r e due
t o the i n c r e a s e in the number of s t r i k e s than to the s i z e of any one s t r i k e .
5.
N o f i g u r e s a r e available to show the extent to which other f o r m s
of industrial action e . g. go s l o w s , w o r k i n g t o r u l e , o v e r t i m e b a n s , e t c .
have been u s e d , but it is safe to assume that r e s o r t to these f o r m s of
industrial action is a l s o on the i n c r e a s e .
6.
The s t r i k e p r o b l e m is most s e r i o u s in a s m a l l number of
industries which account for a v e r y l a r g e p r o p o r t i o n of disputes and
working days l o s t - f o r e x a m p l e in the d o c k s , m o t o r a s s e m b l y and
components and shipbuilding.
The i n c r e a s e in the number of s t r i k e s
has-, h o w e v e r , affected v i r t u a l l y a l l m a j o r i n d u s t r i e s .
Industries,
s e r v i c e s , or companies that w e r e p r e v i o u s l y v i r t u a l l y s t r i k e - f r e e a r e so
no l o n g e r .
D o c t o r s , t e a c h e r s and other ? *white-collar " occupations
have taken or threatened major strike action f o r the f i r s t t i m e .
It is
a l s o noticeable that while the g r e a t m a j o r i t y of s t r i k e s a r e s t i l l of
short duration, the long and difficult s t r i k e at company or plant l e v e l
( e . g. P o r t T a l b o t , P i l k i n g t o n s , F o r d , Standard T r i u m p h ) is b e c o m i n g
an i n c r e a s i n g p r o b l e m .
8
(
2
7.
A s the Donovan C o m m i s s i o n pointed out, negotiating a r r a n g e m e n t s
and disputes p r o c e d u r e s in much of B r i t i s h industry a r e in need of
overhaul.
Although the Donovan R e p o r t gave an impetus t o discussion of
the need f o r r e f o r m , in p r a c t i c e r e l a t i v e l y l i t t l e r e a l p r o g r e s s has been
made.
The acknowledged defects of negotiating and disputes m a c h i n e r y
do not h o w e v e r p r o v i d e an explanation of the m a r k e d i n c r e a s e in s t r i k e s
last y e a r and t h i s , and the Donovan C o m m i s s i o n was c l e a r l y w r o n g in
assuming that if p r o p e r m a c h i n e r y w e r e established at company and plant
l e v e l , the p r o b l e m of unofficial and unconstitutional s t r i k e s would shortly
disappear.
Militancy has paid too w e l l to be e a s i l y given up.
This is
particularly true in industries such as m o t o r a s s e m b l y and components,
n e w s p a p e r s , and the docks where s m a l l groups of w o r k e r s can e x e r c i s e
immediate and c r i p p l i n g industrial p r e s s u r e s and e m p l o y e r s find it - at
any rate in the short t e r m - l e s s e x p e n s i v e to make c o n c e s s i o n s than
resist.
8.
The i n c r e a s e in militancy has been r e f l e c t e d in the high l e v e l of
settlements.
D u r i n g the last twelve months the a v e r a g e s i z e of wage
and salary s e t t l e m e n t has been about 9 per cent.
(During the l a s t s i x
months, it has been between 10 and 11 per c e n t ) .
Some of those
industries which had b i g i n c r e a s e s in s u m m e r and autumn last y e a r a r e
coming f o r w a r d again f o r i n c r e a s e s in the 1970-71 round.
The outcome of
these negotiations w i l l be c r u c i a l f o r the g e n e r a l l e v e l of i n c r e a s e in
1970-71.
MILITANT
LEADERSHIP
9.
W h i l e the d e t e r i o r a t i o n in the situation cannot be wholly attributed
to the growth of m i l i t a n t l e a d e r s h i p in the unions, or by the previous
a d m i n i s t r a t i o n ^ defeat in the confrontation with the unions in 1969, there
is no doubt that these have r e i n f o r c e d the trend.
The p r e s e n t l e a d e r s of
the two l a r g e s t unions, the T r a n s p o r t and G e n e r a l W o r k e r s Union ( T G W U )
and the A m a l g a m a t e d Union of E n g i n e e r i n g and Foundry w o r k e r s ( A E F )
owe their position to the support of shop f l o o r m i l i t a n t s , and both a r e
c o m m i t t e d , M r . Jones of the T G W U m o r e than M r . Scanlon of the A E F ,
to pursue p o l i c i e s which w i l l enable shop f l o o r militants t o m a k e the
running.
In the T G W U officials a r e appointed by the g e n e r a l s e c r e t a r y
and M r . Jones is appointing m e n who a c c e p t his v i e w s t o key p o s i t i o n s .
In the A m a l g a m a t e d E n g i n e e r i n g Union (the e n g i n e e r i n g section of the A E F
and the m o s t p o w e r f u l unit within i t ) p o w e r is m o r e d i s p e r s e d .
The
executive is s p l i t , but t h e r e is a m a j o r i t y of l e f t - w i n g e r s .
The elected
d i s t r i c t c o m m i t t e e s , often m i l i t a n t , enjoy v i r t u a l autonomy within their
areas.
The A E F ' s c u r r e n t m e r g e r with two s m a l l e r unions, the
Constructional E n g i n e e r i n g Union and the D r a u g h t s m e n ^ and A l l i e d
T e c h n i c i a n s ' A s s o c i a t i o n , which Stave strongly l e f t - w i n g l e a d e r s h i p s , w i l l
r e i n f o r c e its m i l i t a n t t r e n d .
10.
M o s t of the " s e c o n d t i e r " of l a r g e unions - the G e n e r a l and
Municipal W o r k e r s Union, the E l e c t r i c a l , E l e c t r o n i c and T e l e c o m m u n i c a t i o n s
Union/Plumbing T r a d e Union (the f o r m e r E T U ) , the National and L o c a l
Government O f f i c e r s A s s o c i a t i o n , the Union of Shop D i s t r i b u t i v e and A l l i e d
W o r k e r s and the A m a l g a m a t e d Society of W o o d w o r k e r s , e t c - have m o r e
moderate l e a d e r s h i p , though in n e a r l y a l l there a r e some m i l i t a n t s in
elected office nationally or l o c a l l y .
In any e v e n t , because of the militant
3
shop f l o o r t a c t i c s pursued by the T G W U and the A E F , and the success with
which they have been attended, the m o r e m o d e r a t e unions often find it
necessary f o r m e m b e r s h i p reasons t o adopt militant t a c t i c s t h e m s e l v e s ,
or at any r a t e to make no g r e a t e f f o r t to contain them if pursued on the
shop f l o o r by t h e i r m e m b e r s .
11,
The g r o w i n g a w a r e n e s s of power on the shop f l o o r and the
increasing p a r t played in negotiations by shop s t e w a r d s and other shop
floor r e p r e s e n t a t i v e s have disrupted established patterns of negotiations.
It is not uncommon nowadays f o r s t r i k e s to occur with little or no notice
and even b e f o r e a f o r m a l c l a i m has been lodged.
Established procedures
are widely i g n o r e d .
C l a i m s a r e frequently i l l defined.
Strikes c a l l e d in
these c i r c u m s t a n c e s a r e often run by unofficial c o m m i t t e e s without
defined p o w e r s or r e s p o n s i b i l i t i e s , with m e m b e r s h i p subject to unforeseen
changes and s o m e t i m e s set up in opposition t o the r e c o g n i s e d s t e w a r d s .
Such bodies a r e by t h e i r nature vulnerable to penetration by s u b v e r s i v e
influences and it is difficult f o r m o d e r a t e union l e a d e r s h i p t o a s s e r t
control o v e r t h e m , e v e n if the w i l l to do so w e r e p r e s e n t .
The l a c k of
cohesion and negotiating e x p e r t i s e of these bodies and the f a c t that they
are not bound by defined r e s p o n s i b i l i t i e s have been important f a c t o r s in a
number of r e c e n t long and difficult s t r i k e s .
In r e c e n t y e a r s there has
been a c o n s i d e r a b l e i n c r e a s e in the number of l e f t - w i n g militants holding
position of influence on union e x e c u t i v e s , and among full - t i m e o f f i c i a l s ,
and branch and w o r k p l a c e r e p r e s e n t a t i v e s ,
12.
Inter-union r i v a l r i e s have sharpened in r e c e n t y e a r s , though they
now centre m a i n l y on m e m b e r s h i p and power I r i v a l r i e s o v e r job
demarcation a r e l e s s prominent.
The m a j o r unions whose m e m b e r s h i p
has i n c r e a s e d as a r e s u l t of amalgamations and m e r g e r s a r e a l l v i r t u a l l y
g e n e r a l unions, and a r e r e p r e s e n t e d side by side in negotiating m a c h i n e r y
at industry, company and plant l e v e l .
Competition f o r m e m b e r s h i p
c r e a t e s c o m p e t i t i o n in m i l i t a n c y .
In the w h i t e - c o l l a r f i e l d outside the
public s e c t o r trade union recognition is s t i l l r e l a t i v e l y r e s t r i c t e d and
there is a r e a l danger that the extension of trade union organisation in
this f i e l d w i l l g i v e r i s e t o serious conflicts between w h i t e - c o l l a r unions
proper such as the A s s o c i a t i o n of S c i e n t i f i c , T e c h n i c a l and M a n a g e r i a l
Staffs and the C l e r i c a l and A d m i n i s t r a t i v e W o r k e r s Union, and the
predominantly manual unions who a r e seeking to r e c o u p t h e m s e l v e s f o r the
shrinking f i e l d of r e c r u i t m e n t among manual e m p l o y e e s by expanding
m e m b e r s h i p among w h i t e - c o l l a r w o r k e r s .
R O L E OF T H E T R A D E S U N I O N CONGRESS ( T U C )
13,
The T U C concerned itself little with individual s t r i k e s p r i o r to
last y e a r * s " c o n c o r d a t " , which c o m m i t t e d the T U C t o a m o r e interventionist
r o l e in inter-union disputes and major unconstitutional stoppages.
Although M r , F e a t h e r ' s p e r s o n a l a c t i v i t i e s and p a r t i c u l a r l y the publicity
given t o them have g i v e n the i m p r e s s i o n that the T U C has made a
determined attempt t o honour its " s o l e m n and b i n d i n g " undertaking, the
p r a c t i c a l r e s u l t s of the T U C s e f f o r t s have been l i m i t e d .
TUC inter­
vention has b e e n useful in a number of inter-union d i s p u t e s , but it has
4
c l e a r l y felt unable t o take a f i r m line where m a j o r unions have been
involved.
It has in g e n e r a l been unable t o d e a l with m a j o r unofficial
strikes.
W h e r e it has i n t e r v e n e d , it has not attempted to do s o by­
pressing unions t o take f i r m a c t i o n , e . g. d i s c i p l i n a r y m e a s u r e s , to
secure a r e t u r n t o w o r k .
In such situations, the tendency has been f o r
the T U C t o t r y t o assume a conciliation r o l e w h i c h , g i v e n the T U C s
ultimate l o y a l t y t o its constituent unions, has usually enabled it to shift
r e s p o n s i b i l i t y f o r continuance of an unconstitutional stoppage to
m a n a g e m e n t , i n c r e a s e d p r e s s u r e f o r c o n c e s s i o n s by management to
secure a r e t u r n t o w o r k , and caused o c c a s i o n a l e m b a r r a s s m e n t to
moderate unions f o l l o w i n g a s t r i c t l y constitutional l i n e .
Given the
power of the l a r g e r unions within the T U C , and the r e a d i n e s s with which
they have a l l o w e d shop f l o o r p r e s s u r e s to make the running, it is u n r e a l i s t i c
to e x p e c t the T U C t o attempt t o play a m o r e objective and constructive r o l e .
MANAGEMENT ATTITUDES
14.
By and l a r g e managements now accept union organisation of
manual and t o a l e s s e r d e g r e e of w h i t e - c o l l a r e m p l o y e e s as a fact of
industrial l i f e .
Backwoodsmen d e t e r m i n e d t o ignore the existence of
unions a r e r a r e .
The e x t e n s i v e damage which stoppages can cause is
understood, and in s e r i o u s disputes it is now c o m m o n f o r decisions t o be
taken on the management side at v e r y senior l e v e l s .
F e w managements
are h o w e v e r equipped in t e r m s of training and ability to handle with
consistency and s k i l l the continuing industrial r e l a t i o n s p r o b l e m s which
face t h e m , and the difficulties of dispute situations a r e oftent compounded
by a p r e v i o u s h i s t o r y of ineffective m a n a g e m e n t in industrial r e l a t i o n s
matters.
Inability t o f o r e s e e and find a way through the industrial
relations implications of m a n a g e r i a l p r o b l e m s often s e v e r e l y r e s t r i c t s
the capacity of managements t o plan and i m p l e m e n t n e c e s s a r y changes.
T h e r e would be no h a r m either if managements demonstrated l e s s
infrequently that they have the ability t o choose judiciously the ground
they w i l l stand on, and the r e s o l u t i o n to d o s o .
Department of E m p l o y m e n t and P r o d u c t i v i t y , S W l
30 June 1970
5
CONFIDENTIAL
ANNEX
CURRENT MAJOR DISPUTES
1.
The major p r i n t i n g unions have submitted substantial pay claims i n general
printing and p r o v i n c i a l newspapers.
An improved o f f e r - an increase o f £3 15s
in two yearly instalments - has been r e j e c t e d ,
2.
An u n o f f i c i a l and unconstitutional strike in support o f a £9 a week pay
claim by 650 workers making die castings f o r the Lucas organisation has l e d to
5,000 lay offs i n other Lucas f a c t o r i e s .
£3,
The company have so f a r o f f e r e d about
Prospects of a settlement seem remote.
I f prolonged the s t r i k e w i l l lead t o
substantial lay o f f s by the major motor manufacturers during the next week owing
to shortage of e l e c t r i c a l components.
3.
At the B r i t i s h S t e e l Corporation, Corby, an u n o f f i c i a l and unconstitutional
strike by 21 00 maintenance workers i n support of a claim f o r increased bonus
payments has caused upwards o f 4^000 production workers to be l a i d o f f and a
substantial cut i n the production of s t e e l tubes.
The BSC fear that any improvement
in their o f f e r of bonus increases of up t o £3 w i l l lead t o consequential claims
for production workers,
4.
In the docks a national delegate conference held by the TGWU and other main
dockers unions on 23 June c a l l e d for a national dock s t r i k e from Tuesday, 14 July,
1
unless there i s further progress on t h e i r long-standing claim f o r the national time
rate (for a 40 hour ?/eek) to be increased to £20 from the present £11 1 s 8d
absorbing the present ^modernisation" supplement of £2 and overtaking the present
minimum earnings guarantee of £1 6 (£17 in London).
The National Association of
Port Employers have consistently refused any general improvement i n t h i s national
rate in view of the current p o r t - l e v e l negotiations f o r a completely new pay
structure under Devlin Stage 2
9
the l e v e l of average weekly earnings (£35 13s 6d
for the f i r s t quarter of 1 970) and the fear that any s i g n i f i c a n t increase would
be carried through i n t o earnings, so raising the price f o r Devlin 2 generally and
negativing such agreements as have already been reached.
In the absence o f a
direct request by e i t h e r party the DEP i s not taking any public i n i t i a t i v e , but
treating the matter as an issue between the p a r t i e s at t h i s s t a g e .
I t seems
probable that the employers w i l l o f f e r some improvement - probably in the
guarantee - but at present they claim t o be determined to r e s i s t any sizeable
general improvement i n earnings.
PROSPECTIVE NEGOTIATIONS
5,
Most of the major claims which w i l l be under negotiation i n the coming
months are i n the public s e c t o r .
Doctors and dentists remuneration i s the most
immediate major issue, and the s i z e of the increase given to t h i s highly-paid
professional group w i l l undoubtedly influence the l e v e l of expections in
other negotiations.
6,
Claims f o r a 20 per cent increase (plus 10 per cent where no productivity
schemes operate) are in for manual workers in l o c a l government (750,000 workers)
and in National Health Service (250,000 workers).
will need to be s e t t l e d i n July/August.
The l o c a l government claim
A settlement in l o c a l government i s
invariably followed by a settlement of the same size i n the NHS.
The s i z e o f
the local government settlement w i l l be strongly influenced by a recent
settlement of around 1 5 per cent i n the i n d u s t r i a l c i v i l
7.
service.
Teachers (England and Wales) are expected t o submit a claim i n the coming months for a very large increase to take e f f e c t from 1 January 1971 . 8.
Settlements w i l l also have to be reached i n the next few months i n a
number of the nationalised i n d u s t r i e s .
come to a head i n the l a t e summer.
Negotiations i n e l e c t r i c i t y supply w i l l
The unions have already made i t plain that
they expect to get a settlement which w i l l take account of a 1 5 per cent
increase in the gas industry in Pebruary 1970 (as against 10 per cent for
e l e c t r i c i t y supply l a s t autumn).
A large claim i s expected i n coalmining
and the negotiations w i l l probably take place i n the autumn.
9.
The negotiations between BOAC and BALPA over the l a t t e r ' s claim f o r very large increases f o r f l y i n g Boeing 747s are now l i k e l y to be held up because o f a split within BALPA. II
10.
Craftsmen i n the s t e e l industry intend to make a claim f o r a 10 per cent
increase in basic rates and other improvements despite the f a c t that the
industry's 3-year agreement does not expire u n t i l March 1972.
11.
The two b i g g e s t agreements i n the p r i v a t e sector - the national agreements
in engineering and building are on a long-term basis and are not l i k e l y to be
re-opened i n 1970*
Probably the most important settlement in the private sector
(luring the next two or three months w i l l be f o r c l e r i c a l workers in the
engineering industry (500,000 workers).
In addition to these industry-wide
negotiations, increases i n pay are l i k e l y to be sought through company
negotiations eg in the case of non-federated firms, and through plant and shop
floor negotiations on piece work and bonus payments.
Among the company
negotiations that involving Rootes, Coventry, In which a settlement in the range
of 9 to 12 per cent has been reached i n one plant i s l i k e l y to influence the
size of other settlements within the company and to set a target f o r negotiations
elsewhere in the motor industry l a t e r in the y e a r .
12.
There i s a serious r i s k o f disruption o f a i r services at London, Heathrow
over firemen's pay and the operations of a ground handling services company,
A committee of inquiry appointed by the previous administration w i l l be reporting
shortly on these disputes, and publication of the reports - that dealing with
the firemen's pay dispute should appear in about 10 days time and that dealing
with the ground handling s e r v i c e s company 2 to 3 weeks l a t e r - may g i v e r i s e to
industrial unrest.
3
CONFIDENTIAL
/
DOCUMENT IS T H E P R O P E R T Y OF H E R B R I T A N N I C M A J E S T Y ^ S G O V E R N M E N T
CP(70)8
COPY NO
54
1 July 1970
CABINET
BILL, T O I M P L E M E N T P R I O R I T Y S O C I A L SECURITY PLEDGES Memorandum by the S e c r e t a r y of State f o r Social S e r v i c e s My colleagues w i l l wish to know that I shall be presenting and
publishing a B i l l on F r i d a y 3 July which w i l l r e q u i r e R o y a l A s s e n t by
24 July.
The B i l l w i l l implement our 3 p r i o r i t y E l e c t i o n p l e d g e s
T o g i v e some pension as of right to the o v e r - 8 0 s who now get no
r e t i r e m e n t pension at a l l .
T o i m p r o v e the present situation w h e r e a w o m a n who i s just o v e r
50 when she is widowed gets a pension but a widow just under 50
gets nothing.
T o introduce a constant attendance allowance f o r the m o s t s e r i o u s l y
disabled.
The last two p r o p o s a l s a r e the same as p r o p o s a l s made by the p r e v i o u s
Government,
PENSIONS F O R N O N - P E N S I O N E R S
2.
R e t i r e m e n t pensions w i l l be paid to p e r s o n s who did not qualify
under the pre-1948 schemes and who w e r e unable t o b e c o m e insured under
the present scheme because they w e r e o v e r pensionable a g e at July 1948.
P r o v i s i o n w i l l a l s o be made f o r w i v e s and w i d o w s , Including widows whose
husbands would have acquired title had they l i v e d .
T h e r e w i l l be a simple
residence t e s t .
The single rate of pension is to be £3 and the m a r r i e d rate
£4 17. 0,
( T h e v e r y few people in this age group who qualified f o r modified
pensions below this rate w i l l be brought up to i t ) .
T h e r e m a y be up to
100,000 b e n e f i c i a r i e s , and the cost in the f i r s t full y e a r would be £7 m i l l i o n
net of savings in supplementary benefits, t h e r e a f t e r falling r a p i d l y ,
provided that we can (as we must) r e s i s t p r e s s u r e to extend the new pension
to people outside this age group drawing l e s s than the standard pension.
The,
cost is to be m e t f r o m the E x c h e q u e r ; ' The e f f e c t i v e date is planned to be
4 N o v e m b e r 1970, coincident with the forthcoming Supplementary Benefit
increases.
1
J
PENSIONS F O R Y O U N G E R WIDOWS
3.
A woman w h o in future i s widowed when between 40 and 50 or who
ceases to be entitled to widowed m o t h e r *s allowance when between these a g e s
will qualify f o r a widow & pension at a rate which w i l l depend upon h e r age
at the t i m e .
The rate w i l l be stepped down f r o m the standard rate by
7 per cent f o r each y e a r by which h e r age f a l l s short of 50, i e . the pension
will range f r o m 30 p e r cent if she was 40 to 93 p e r cent if she w a s 4 9 .
Regulations w i l l apply these p r o v i s i o n s to w o m e n a l r e a d y w i d o w e d who would
have met the conditions.
It is e s t i m a t e d that there w i l l be 100,000
beneficiaries at an annual cost of £13 m i l l i o n net f r o m the National Insurance
Fund.
The e f f e c t i v e date of this p r o p o s a l has yet to be d e c i d e d , but it is
highly d e s i r a b l e that it should f o l l o w as c l o s e l y as p o s s i b l e a f t e r R o y a l A s s e n t .
A d m i n i s t r a t i v e l y this would be p r a c t i c a b l e in A p r i l 1971.
f
ATTENDANCE ALLOWANCE
4.
The attendance a l l o w a n c e , designed to be an e n t i r e l y new benefit
for the most s e v e r e l y d i s a b l e d , w i l l be a w e e k l y allowance of £4 ( l e s s f o r
young c h i l d r e n ) f o r anybody who is so s e v e r e l y disabled that ­
a.
he r e q u i r e s f r o m another p e r s o n , in connection with his
bodily functions, frequent attention throughout the day or r e p e a t e d
attention during the night; or
b.
he r e q u i r e s continual supervision f r o m another p e r s o n in
o r d e r to avoid substantial danger to h i m s e l f or o t h e r s .
The need f o r attendance must have l a s t e d f o r six months; it is not intended
to provide f o r s h o r t - t e r m acute or t e r m i n a l i l l n e s s e s .
The a l l o w a n c e w i l l
be payable out of the Exchequer subject only to the satisfaction of conditions
as to r e s i d e n c e or p r e s e n c e in G r e a t B r i t a i n ,
5.
The question whether anyone needs attendance to the extent r e q u i r e d
will be d e t e r m i n e d by the Attendance A l l o w a n c e B o a r d , a new body to be
composed m a i n l y of highly qualified d o c t o r s .
6.
The total c o s t of the a l l o w a n c e at the proposed r a t e of £4 f o r adults
(and £2 a w e e k f o r young c h i l d r e n ) is estimated t o be of the o r d e r of
£10 m i l l i o n in the f i r s t full y e a r on the basis of 50,000 successful c l a i m s .
I must e m p h a s i s e , h o w e v e r , that the f i g u r e of 50, 000 successful c l a i m s can
in the nature of things itself be by no means p r e c i s e .
7.
I hope to be able to start payment of the allowance f r o m the beginning
of A p r i l 1972.
The timetable n e c e s s a r y to achieve this date i s a l r e a d y a v e r y
tight one - we have to set up and consult the Attendance A l l o w a n c e Board and
do much other p r e p a r a t o r y w o r k and then need time to take on as many as
100, 000 c l a i m s .
But the t i m e t a b l e can be adhered to g i v e n R o y a l A s s e n t to
the n e c e s s a r y l e g i s l a t i o n b e f o r e the s u m m e r R e c e s s , and I p r o p o s e t o
announce the intended starting date in the House in the c o u r s e of the
proceedings on the B i l l .
2
PENSIONS F O R Y O U N G E R WIDOWS
3,
A woman who in future is widowed when between 40 and 50 or who
ceases to be entitled to widowed r n o t h e r s allowance when between these a g e s
will qualify f o r a w i d o w s pension at a rate which w i l l depend upon h e r age
at the t i m e .
The rate w i l l be stepped down f r o m the standard rate by
7 per cent f o r each y e a r by which h e r age f a l l s short of 50, i e . the pension
will range f r o m 30 p e r cent if she w a s 40 to 93 per cent if she w a s 4 9 .
Regulations w i l l apply these p r o v i s i o n s to w o m e n a l r e a d y widov/ed who would
have met the conditions.
It is e s t i m a t e d that there w i l l be 100,000
beneficiaries at an annual cost of £13 m i l l i o n net f r o m the National Insurance
Fund.
The effective date of this p r o p o s a l has yet to be d e c i d e d , but it is
highly d e s i r a b l e that it should f o l l o w as c l o s e l y as possible after R o y a l A s s e n t ,
A d m i n i s t r a t i v e l y this would be p r a c t i c a b l e in A p r i l 1971.
l
r
ATTENDANCE ALLOWANCE
4.
The attendance a l l o w a n c e , designed to be an e n t i r e l y new benefit
for the most s e v e r e l y disabled, w i l l be a w e e k l y allowance of £4 ( l e s s f o r
young children) f o r anybody who is so s e v e r e l y disabled that ­
a.
he r e q u i r e s f r o m another p e r s o n , in connection with his
bodily functions,, frequent attention throughout the day or r e p e a t e d
attention during the night; or
b.
he r e q u i r e s continual supervision f r o m another p e r s o n in
o r d e r to avoid substantial danger to h i m s e l f or o t h e r s .
The need f o r attendance mu?t have lasted f o r six months; It Is not intended
to provide f o r s h o r t - t e r m acute or t e r m i n a l i l l n e s s e s .
The allowance w i l l
be payable out of the Exchequer subject only to the satisfaction of conditions
as to r e s i d e n c e or p r e s e n c e in G r e a t B r i t a i n ,
5.
The question whether anyone needs attendance to the extent r e q u i r e d
will be determined by the Attendance A l l o w a n c e B o a r d , a new body to be
composed m a i n l y of highly qualified d o c t o r s .
6.
The total cost of the allowance at the proposed rate of £4 f o r adults
(and £2 a w e e k f o r young c h i l d r e n ) is estimated to be of the o r d e r of
£10 m i l l i o n in the f i r s t full y e a r on the basis of 50, 000 successful c l a i m s .
I must e m p h a s i s e , h o w e v e r , that the f i g u r e of 50,000 successful c l a i m s can
in the nature of things itself be by no means p r e c i s e .
7.
I hope to be able to start payment of the allowance f r o m the beginning
of A p r i l 1972.
The timetable n e c e s s a r y to achieve this date is a l r e a d y a v e r y
tight one - v/e have to set up and consult the Attendance A l l o w a n c e Board and
do much other p r e p a r a t o r y w o r k and then need time to take on as many as
100, 000 c l a i m s .
But the timetable can be adhered to g i v e n R o y a l A s s e n t to
the n e c e s s a r y l e g i s l a t i o n before the s u m m e r R e c e s s , and I p r o p o s e t o
announce the intended starting date in the House in the course of the
proceedings on the B i l l .
2
PUBLICITY
8.
M y colleagues w i l l w i s h to know that I p r o p o s e to make a
in the House on F r i d a y 3 July to announce these p r o p o s a l s ; and
is in hand.
K J
Department of Health and S o c i a l Security SE1
30 June 1970
; DOCUMENT IS T H E P R O P E R T Y O F H E R B R I T A N N I C M A J E S T Y * S G O V E R N M E N T 54
CP(70) 9
COPY NO
u
a
3 July 1970
CABINET
MISUSE OF DRUGS B I L L
M e m o r a n d u m by the S e c r e t a r y of State for the H o m e Department
1.
T h e r e is c o n s i d e r a b l e public i n t e r e s t and c o n c e r n about m i s u s e of
drugs and I a m convinced that l e g i s l a t i o n on this subject should have a high
p r i o r i t y in this Session.
2.
The p r e v i o u s G o v e r n m e n t s M i s u s e of Drugs B i l l , which was half­
way through the Commons Standing C o m m i t t e e when P a r l i a m e n t was
d i s s o l v e d , was based on consultations with a w i d e r a n g e of p r o f e s s i o n a l ,
c o m m e r c i a l and other i n t e r e s t s and its broad p r i n c i p l e s and o b j e c t i v e s
w e r e g e n e r a l l y endorsed by a l l P a r t i e s ,
YsTe, in opposition, put down
a number of amendments to c l a r i f y points of d e t a i l and a d m i n i s t r a t i v e
intention, m o s t of which w e r e withdrawn upon explanations being given.
But our p r i n c i p a l o b j e c t i v e s w e r e ­
i.
T o a l t e r the predominant e m p h a s i s of the B i l l on penal
p r o c e d u r e s , in favour of a m o r e balanced deployment of p r e v e n t i v e
and s o c i a l m e a s u r e s such as education, t r e a t m e n t , rehabilitation
and r e s e a r c h .
ii.
T o r e m o v e f r o m the B i l l e l a b o r a t e p r o v i s i o n for control of
i r r e s p o n s i b l e p r e s c r i b i n g , which, w e a r g u e d , should p r o p e r l y be
the r e s p o n s i b i l i t y of the G e n e r a l M e d i c a l Council and other
professional bodies.
A number of other c o n t r o v e r s i a l issues awaited discussion when the
B i l l was l o s t - notably the proposed l e v e l of p e n a l t i e s , the question
whether, as r e c o m m e n d e d by a m a j o r i t y in the r e p o r t of a Sib*-Committee
of the A d v i s o r y C o m m i t t e e on Drug Dependence (of which M r . Deedes was
C h a i r m a n ) , p o l i c e p o w e r s to stop and s e a r c h suspected drug offenders
before a r r e s t should be maintained, the status of cannabis, and the
possibility of c e n t r a l monitoring of distribution and p r e s c r i b i n g of
drugs to d e t e c t new trends and suspicious a c t i v i t i e s .
3.
It i s c l e a r that the specific m a t t e r s mentioned above r e q u i r e a good
deal of further consideration and consultation b e f o r e the c a s e for r e v i s i o n
of the p r o p o s a l s in the B i l l could be a s s e s s e d .
I p r o p o s e , with m y
interested c o l l e a g u e s , to pursue those enquiries during the Summer
Recess.
I shall v/ant to take account of the suggestions made in the
Bow Group r e p o r t .
I a m not at this stage sanguine that we shall be
able to produce new p r o p o s a l s on e v e r y point or that on m e r i t 3 it w i l l
be found r i g h t to do s o .
Some of our p r o p o s a l s m a y be susceptible of
a d m i n i s t r a t i v e r a t h e r than l e g i s l a t i v e action.
These matters, however,
a r e all o f i m p o r t a n c e and a new A d m i n i s t r a t i o n should be seen to have
given t h e m full consideration b e f o r e i t e n d o r s e s all or any of the solutions
proposed in the p r e v i o u s G o v e r n m e n t s l e g i s l a t i o n ,
4.
In m y v i e w the question for d e c i s i o n now i s whether to introduce
the M i s u s e of Drugs B i l l b e f o r e the Summer R e c e s s in its o r i g i n a l f o r m ,
or to d e f e r introduction of a B i l l until we have c o m p l e t e d as much of our
r e v i e w as may be p o s s i b l e by the end of the autumn.
I strongly favour
the f i r s t c o u r s e b e c a u s e it w i l l show the G o v e r n m e n t s intention to tackle
the subject s p e e d i l y , w i l l g i v e us further opportunity to take P a r l i a m e n t a r y
opinion on the p r i n c i p l e s of the B i l l , and w i l l a l l o w outside i n t e r e s t s to
focus on specific p r o p o s i t i o n s .
In introducing the B i l l I would wish to
make c l e a r that while the G o v e r n m e n t accepted the b r o a d p r i n c i p l e s and
o b j e c t i v e s it r e s e r v e d its position on subsidiary i s s u e s and its r i g h t , after
r e v i e w of the R e p o r t s of the A d v i s o r y C o m m i t t e e on Drug Dependence
(Cannabis, R e h a b i l i t a t i o r , A m p h e t a m i n e s and L S D , P o w e r s of A r r e s t
and S e a r c h ) and of other m a t t e r s such as barbiturate m i s u s e and
c o m p u l s o r y t r e a t m e n t , to b r i n g f o r w a r d n e w p r o p o s a l s at the C o m m i t t e e
stage.
5.
If this w e r e a c c e p t e d , I think it would be r i g h t to make no a m e n d ­
ments to the B i l l b e f o r e introduction, a. because p a r t i a l amendment
would c r e a t e uncertainty about our attitude to what w a s unamended,
but b . , and m o r e important, because it would be i m p r a c t i c a b l e , in
any event, for the s e v e r a l Departments c o n c e r n e d j o i n t l y to p r e p a r e ,
and to consult outside i n t e r e s t s upon amendments., even of a m i n o r
c h a r a c t e r , in the time a v a i l a b l e b e f o r e the s u m m e r adjournment.
6.
I a c c o r d i n g l y invite m y c o l l e a g u e s to a g r e e that the M i s u s e
of Drugs B i l l should be r e i n t r o d u c e d now unamended, with a v i e w to
a Second R e a d i n g debate b e f o r e the R e c e s s .
R
Home Office SW1
3 July 1970
M
DOCUMENT IS T H E P R O P E R T Y O F H E R B R I T A N N I C M A J E S T Y ' S G O V E R N M E N T
C P ( 7 0 ) 10
6th July 1970
CABINET
P R O C E D U R E F O R O B T A I N I N G P O L I C Y DECISIONS
Note by the P r i m e M i n i s t e r
N o w that the main Cabinet C o m m i t t e e s have been constituted
I should like t o r e m i n d m y c o l l e a g u e s of the importance of ensuring
that a l l the m a i n issues of G o v e r n m e n t p o l i c y a r e fully e x a m i n e d by
the a p p r o p r i a t e C o m m i t t e e s b e f o r e they a r e submitted to the Cabinet.
Where possible they should be d e c i d e d by the C o m m i t t e e c o n c e r n e d ;
and questions should only be r e f e r r e d upwards t o Cabinet if they a r e of
major importance or involve s e n s i t i v e p o l i t i c a l i s s u e s .
The r i g h t of
a l l M i n i s t e r s t o appeal t o the Cabinet w i l l , of c o u r s e , r e m a i n u n i m p a i r e d .
But I hope that they w i l l use this r i g h t s p a r i n g l y ; and I shall n o r m a l l y
be guided by the v i e w of a C o m m i t t e e C h a i r m a n in deciding whether an
appeal to the Cabinet should be a l l o w e d .
Once we have taken a d e c i s i o n
we must stick t o it.
W e must a l s o ensure that it has the m a x i m u m
impact on public opinion; and I ask m y c o l l e a g u e s , t h e r e f o r e , t o take
particular c a r e t o make c e r t a i n that the L o r d P r e s i d e n t s Office is
informed in adequate t i m e of a l l f o r t h c o m i n g announcements of p o l i c y
in o r d e r that the L o r d P r e s i d e n t m a y c o n s i d e r both their presentation
and their m o s t appropriate t i m i n g .
2.
It is understandable that under the p r e s s u r e of our f i r s t f e w days
of office it should have been n e c e s s a r y to take and s o m e t i m e s t o announce
policy d e c i s i o n s without full consultation with c o l l e a g u e s .
But this
should no longer be so and I must a s k a l l M i n i s t e r s t o ensure that i s s u e s
of policy a r e not h e n c e f o r w a r d d e c i d e d without a thorough d i s c u s s i o n in
the r e l e v a n t C o m m i t t e e .
I should l i k e them a l s o t o r e m e m b e r that this
A d m i n i s t r a t i o n w i l l not introduce l e g i s l a t i o n with r e t r o s p e c t i v e e f f e c t
unless it is advantageous t o the o r d i n a r y c i t i z e n .
I a m sure that it is
important that we should be seen f r o m the outset t o o b s e r v e this
principle.
E H
10 Downing S t r e e t S W l
6th July 1970
C P ( 7 0 ) 11
COPY NO
5i
14th July 1970
CABINET
A N A L Y S I S A N D T H E D E C I S I O N T A K I N G PROCESS
T H E R O L E O F T H E BUSINESS T E A M
Memorandum by the L o r d P r i v y S e a l
M y colleagues w i l l be a w a r e of the plans we made o v e r the l a s t
y e a r or s o f o r the i m p r o v e m e n t of the d e c i s i o n taking apparatus of
Government and the management of G o v e r n m e n t a c t i v i t i e s , involving
the use of selected businessmen,
The object of this paper is t o i n f o r m
the Cabinet of the action that has been tak^n since we came into office
to put these plans into p r a c t i c e .
2.
M r . R. A . M e y j e s , f r o m Shell International, has joined us t o be
the head of a s m a l l h i g h - p o w e r e d g r o u p of b u s i n e s s m e n .
A t the outset,
they w i l l a c t as a t e a m of consultants, led by h i m , available to c a r r y out
investigations and studies in a wide v a r i e t y of a r e a s of G o v e r n m e n t
activity.
They w i l l r e p o r t to the L o r d P r i v y S e a l and w i l l be b a s e d in the
C i v i l S e r v i c e Department, which w i l l p r o v i d e them with staff support, but
their s e r v i c e s w i l l be at the d i s p o s a l of any M i n i s t e r or D e p a r t m e n t ,
T h e i r w o r k w i l l b e d i r e c t e d by a s m a l l c o m m i t t e e of M i n i s t e r s , which the
P r i m e M i n i s t e r has a g r e e d to c h a i r .
Its t i t l e w i l l be the Manageire nt
P r o j e c t s C o m m i t t e e and its t e r m s of r e f e r e n c e w i l l be j ­
" T o r e c e i v e and where a p p r o p r i a t e initiate p r o p o s a l s
(including those of the business t e a m s ) f o r individual
project studies d i r e c t e d to the i m p r o v e m e n t of the
G o v e r n m e n t s d e c i s i o n - m a k i n g p r o c e s s and of the
management of G o v e r n m e n t a c t i v i t i e s ; t o authorise
such s t u d i e s ; to r e c e i v e r e p o r t s a r i s i n g f r o m t h e m ,
and t o d e c i d e upon and s u p e r v i s e t h e i r implementation.
M i n i s t e r s concerned with p a r t i c u l a r p r o j e c t s w i l l be invited to attend
meetings of the c o m m i t t e e in the usual way.
A t a l a t e r s t a g e , when as
a r e s u l t of a p a r t i c u l a r study changes in s o m e part of the m a c h i n e r y of
Government or the management of a G o v e r n m e n t a l a c t i v i t y a r e decided
upon, individual m e m b e r s of the t e a m can be detached in o r d e r t o a s s i s t
in the p r o c e s s of implementation.
-1
3,
The f i r s t p r o j e c t t o be undertaken by the business t e a m has
already been authorised.
T h i s is t o study, together with the r e l e v a n t
officials in the public s e c t o r group of the T r e a s u r y , ways and means of
improving the analytical capability of that group in its analysis of public
sector expenditure p r o g r a m m e s .
The w o r k w i l l at f i r s t be d i r e c t e d
towards relating costs and p o l i c y objectives m o r e c l o s e l y than has been
done hitherto in particular i n s t a n c e s , and w i l l n e c e s s a r i l y involve a
joint e f f o r t with the D e p a r t m e n t concerned in each particular c a s e .
While the a i m in the longer t e r m w i l l be the application of these
techniques m o r e g e n e r a l l y , the s c a r c i t y of the r e s o u r c e s of s k i l l e d
manpower needed to b r i n g it about is such that e a r l y r e s u l t s w i l l probably
need to come f r o m s e l e c t i n g particular a r e a s of expenditure f o r a
concentrated analytical approach.
4.
This w o r k is of fundamental importance to the i m p r o v e m e n t of
the dec is ion-making capacity of the Government as a whole in r e s p e c t
of its expenditure p r o g r a m m e s .
B y itself, h o w e v e r , it w i l l not
complete the central capability f o r d e c i s i o n making t o be at the d i s p o s a l
of the Cabinet which we have in m i n d .
A further study, t h e r e f o r e , w i l l
be needed to enable us to d e c i d e what e l s e is required,,
I am therefore
considering with the M i n i s t e r s c o n c e r n e d , and the S e c r e t a r y of the
Cabinet, the nature and functions of the machinery we r e q u i r e .
I t would
be my intention to put p r o p o s a l s t o the Management P r o j e c t s C o m m i t t e e
at the latest by 1 October next.
T h i s w o r k w i l l take account of the i n t e r ­
departmental staffs which have b e e n c r e a t e d in the Cabinet Office t o
provide advice and support t o the C o m m i t t e e s responsible f o r d e v e l o p i n g
forward thinking in b r o a d a r e a s of policy.
It is expected that the t e a m
of businessmen w i l l have a valuable contribution to m a k e in this a r e a a l s o .
5.
A number of other p r o j e c t s have b e e n identified in which the
business team can play a p a r t .
T h e s e include p r o c u r e m e n t (in the sense
of government purchases of standard items which is a l r e a d y being
investigated by a unit within the T r e a s u r y ) ; manpower s e r v i c e s ; r e s e a r c h
and development a c t i v i t i e s ; and computer s e r v i c e s (including s p e c i f i c a l l y
the Inland R e v e n u e ) .
S p e c i f i c proposals in these a r e a s w i l l be submitted
to the Management P r o j e c t s C o m m i t t e e .
6.
It is obviously important that these studies, and the others on
which the business t e a m w i l l be e n g a g e d , should be c o - o r d i n a t e d with any
other s i m i l a r a c t i v i t i e s , whether or not involving the use of b u s i n e s s m e n ,
which particular M i n i s t e r s may decide t o e m b a r k on within their own
Departments.
I should t h e r e f o r e be glad if my colleagues would consult
me before r e c r u i t i n g a businessman for a major management study or
similar task, or undertaking such a study by other m e a n s , e . g. by the use
of management consultants,
J
Civil Service Department, SWl
13th July 1970
2
CP(70) 12
C O P Y NO
54
15 July 1970
CABINET
S A L E OF A R M S T O SOUTH A F R I C A
M e m o r a n d u m by the S e c r e t a r y of State f o r F o r e i g n and Commonwealth A f f a i r s The Cabinet w i l l wish to consider the p o l i c y we should adopt on the
sals of a r m s to South A f r i c a and the draft statement on this which it is
proposed that I should make after Questions on Monday 20 July.
2.
The draft statement r e f l e c t s a g r e e m e n t reached with m y colleagues
in the Defence and O v e r s e a P o l i c y C o m m i t t e e on the t e r m s to be used in
defining our future p o l i c y and on its g e n e r a l presentation.
Our intentions
have been explained on this g e n e r a l basis in m e s s a g e s sent to
Commonwealth Heads of Government and to c e r t a i n other G o v e r n m e n t s .
This p o l i c y is consistent with r e s e r v a t i o n s made Li r e l a t i o n to S e c u r i t y
Council Resolutions on a r m s f o r South A f r i c a by the previous C o n s e r v a t i v e
Administration,
l
3.
W i d e s p r e a d speculation about the p r o s p e c t of our r e n e w a l of a r m s
sales to South A f r i c a has a l r e a d y led to e x p r e s s i o n s of concern and
opposition both o v e r s e a s , p a r t i c u l a r l y in A f r i c a , and d o m e s t i c a l l y .
Against this background the following paragraphs s u m m a r i s e the p r o s and
cons of our adopting the p o l i c y outlined in the statement, and announcing it
early.
THE P R O S
4,
The f o l l o w i n g a r e some of the main arguments in favour of our
proposed p o l i c y and of proceeding with an e a r l y announcement;"
Defence i n t e r e s t s
a.
A s a P a r t y , w e have consistently said during all the y e a r s
of opposition that when we w e r e returned to p o w e r we would operate
the Slmonstown A g r e e m e n t s and l i c e n s e a r m s f o r South A f r i c a in the
context of e x t e r n a l d e f e n c e .
CP(70)12
C O P Y NO
54
15 July 1970
CABINET
S A L E OF A R M S T O SOUTH A F R I C A
M e m o r a n d u m by the S e c r e t a r y of State f o r F o r e i g n and Commonwealth A f f a i r s The Cabinet w i l l wish to consider the p o l i c y w e should adopt on the
sale of a r m s to South A f r i c a and the draft statement on this which it is
proposed that I should make after Questions on Monday 20 July.
2.
The draft statement r e f l e c t s a g r e e m e n t reached with m y c o l l e a g u e s
in the Defence and O v e r s e a P o l i c y C o m m i t t e e on the t e r m s to be used in
defining our future p o l i c y and on its g e n e r a l presentation.
Our Intentions
have been explained on this g e n e r a l basis in m e s s a g e s sent to
Commonwealth Heads of Government and to c e r t a i n other G o v e r n m e n t s .
This policy is consistent with r e s e r v a t i o n s made Li r e l a t i o n to S e c u r i t y
Council Resolutions on a r m s f o r South A f r i c a by the p r e v i o u s C o n s e r v a t i v e
Administration,
3.
W i d e s p r e a d speculation about the prospect of our r e n e w a l of a r m s
sales to South A f r i c a has a l r e a d y led to e x p r e s s i o n s of c o n c e r n and
opposition both o v e r s e a s , p a r t i c u l a r l y in A f r i c a , and d o m e s t i c a l l y .
Against this background the following paragraphs s u m m a r i s e the p r o s and
cons of our adopting the p o l i c y outlined in the statement, and announcing it
early.
THE PROS
4.
The following a r e some of the main arguments in f a v o u r of our
proposed p o l i c y and of proceeding with an e a r l y announcement
Defence interests
a.
A s a P a r t y , we have consistently said during a l l the y e a r s
of opposition that when we w e r e returned to p o w e r w e would operate
the Simonstown A g r e e m e n t s and l i c e n s e a r m s f o r South A i r i c a in the
context of e x t e r n a l d e f e n c e .
b.
T h e r e a s o n f o r that attitude has been the increasing
e n c r o a c h m e n t of the communist p o w e r s into the Indian Ocean.
The S o v i e t m a r i t i m e build-up, p a r t i c u l a r l y their submarine f l e e t ,
constitutes a latent threat to the continued s e c u r i t y of the Cape
r o u t e , upon w h i c h , m o r e than any other nation, we a r e dependent
in t e r m s of c a r r y i n g goods and o i l .
The existing Russian influence
in A d e n and Somalia w i l l be much increased when the Suez Canal
is open.
c.
T h e Chinese have been expanding their influence in
Tanzania.
In addition to building the T A N Z A M r a i l w a y they a r e
training Tanzanian f o r c e s and building a base f o r the Tanzanian
navy,
Mauritius has concluded an a r r a n g e m e n t f o r giving f a c i l i t i e s
f o r a Soviet fishing f l e e t .
d.
T o the extent that other West European natioxis a r e a l s o
dependent on the route, our action in allowing the South A f r i c a n s
the m a r i t i m e defence equipment they need is important to W e s t e r n
defence a s a w h o l e .
N A T O does not accept r e s p o n s i b i l i t y f o r the
s e c u r i t y of a l l i e d shipping in the Indian Ocean; and we cannot
guarantee safe passage In these seas by o u r s e l v e s ,
The
South A f r i c a n s a r e the only country in the a r e a equipped to contribute
to this task.
Evolution in South A f r i c a
e.
F r o m the point of v i e w of peaceful evolution within
South / i f r i c a , it is important that South A f r i c a i s not further
isolated.
This could only have the effect of strengthening those
i m o s t opposed to evolution, of making them l e s s susceptible to
e x t e r n a l p r e s s u r e s and of creating a l e s s favourable c l i m a t e f o r
the o p e r a t i o n of those e c o n o m i c f o r c e s which a r e most l i k e l y to
produce i n the long run the kind of change in their s o c i a l s y s t e m
a l l would l i k e to s e e .
Effect on British-South A f r i c a n r e l a t i o n s
f.
Although there is no hard evidence that the a r m s e m b a r g o
has affected our g e n e r a l trade with South A f r i c a , it has affected
g e n e r a l r e l a t i o n s and there has always been the r i s k that this could
r e f l e c t on a s p e c t s of our t r a d e .
A d e c i s i o n now to maintain the
a r m s e m b a r g o without any r e l a x a t i o n would be a bitter disappointment
to white South A f r i c a n s and would l e a v e cur relations even w o r s e than
they have been, with consequently g r e a t e r r i s k of damage to our
economic interests.
C o n v e r s e l y a d e c i s i o n to r e l a x the p o l i c y would
p r o m o t e a better c l i m a t e f o r these i n t e r e s t s , quite apart f r o m the
d i r e c t benefits f r o m s a l e s of defence equipment coming within the
proposed policy.
2
g.
T o backtrack now, a f t e r havkig told Commonwealth
G o v e r n m e n t s of our intentions, would inevitably be interpreted
as giving In to implied threats and would i n c r e a s e p r e s s u r e s o n u s
in the future o v e r other i s s u e s .
D e l a y in announcing our p o l i c y
would I n c r e a s e present p r e s s u r e s and the r i s k of p r e - e m p t i v e
action, e g . at the United N a t i o n s .
THE CONS
5.
A r g u m e n t s against the p r o p o s a l s include
African relations
a.
A f r i c a n G o v e r n m e n t s w i l l see the d e c i s i o n as a d e l i b e r a t e
choice by H e r M a j e s t y s Government in favour of their m o s t hated
e n e m y and t h e r e f o r e against t h e m s e l v e s .
T h e y w i l l r e a c t against
what they r e g a r d as B r i t a l n s bringing South A f r i c a back into
r e s p e c t a b l e company, and giving h e r encouragement in h e r p r e s e n t
policies,
T h e i i strong emotions w i l l tend to make it m o r e
difficult f o r us t o w o r k with or influence them in the i m m e d i a t e
future, and w i l l p o l a r i s e e v e n m o r e the attitudes north and south of
the Z a m b e z i ,
I
f
The Commonwealth
b.
A f r i c a n r e a c t i o n s wi?l be shared La varying d e g r e e by a
number of other Commonwealth Governments outside A f r i c a ,
including Canada.
T h e r e have a l r e a d y been i n t e r - G o v e r n m e n t a l
communications on the question, stimulated by Z a m b i a .
A t the
w o r s t , r e a c t i o n s could be built up to the extent that there might be
p r e s s u r e s on some Govei*nments to l e a v e the Commonwealth or ­
m o r e l i k e l y - to boycott the forthcoming meeting of Commonwealth
Heads of G o v e r n m e n t , or to show d i s p l e a s u r e otherwise in the
Commonwealth context.
United Nations
c.
R e a c t i o n s against our p o l i c i e s a r e l i k e l y -to be brought to a
focus at the United N a t i o n s .
T h e r e a r e a l r e a d y signs of A f r o - A s i a n
intentions of promoting a Security Council debate v/ith the a i m of
passing p r e - e m p t i v e Resolutions against any weakening of the a r m s
embargo.
The Soviet Union a r e encouraging these a c t i v i t i e s .
G e n e r a l l y , and at l e a s t in the short t e r m , our standing at the
United Nations w i l l be a d v e r s e l y affected by a change in p o l i c y .
T h i s w i l l i n c r e a s e our p r o b l e m s o v e r e g . Rhodesia and South West
Africa.
3
d.
In s o m e c a s e s A f r o - A s i a n r e a c t i o n s m a y lead to decisions
affecting United Kingdom m a t e r i a l i n t e r e s t s :
i.
ii.
P o s s i b l e l o s s of contracts by United K i n g d o m s u p p l i e r s .
C o m m e r c i a l d i s c r i m i n a t i o n against the United K i n g d o m .
Strategic
e.
It is said that the emotional r e a c t i o n of A f r i c a n governments
could make it e a s i e r for the Russians and the Chinese to i n c r e a s e
their p o l i t i c a l and m i l i t a r y influence, p a r t i c u l a r l y in Tanzania and
Zambia.
G e n e r a l l y , r e a c t i o n s by e x t r e m i s t A f r i c a n s denouncing
the B r i t i s h stand w i l l r e d u c e the ability of the m o r e m o d e r a t e
A f r i c a n l e a d e r s to hold to reasonably balanced i n t e r n a l and external
policies.
In fact the Russians do e x a c t l y what they l i k e .
f.
The United States have i n f o r m a l l y e x p r e s s e d some c o n c e r n
l e s t our c o m m o n i n t e r e s t s in A f r i c a should be affected by the
c o n s i d e r a t i o n s mentioned above,
M r . R o g e r s has said that the
United States Government a r e for the p r e s e n t c o m m i t t e d to
maintaining the a r m s e m b a r g o .
He w i l l try to r e c o g n i s e that
we have a s p e c i a l position and p r o b l e m s o v e r o i l routes which
A m e r i c a d o e s not have.
g.
The South A f r i c a n Minister of Defence has suggested a
r e v i s i o n of the Simonstown A g r e e m e n t .
He is p r i m a r i l y concerned
with the continuity of the supply of s p a r e s and no doubt interested
in a p o s s i b l e c l o s e r association with N A T O .
A S S E S S M E N T OF E C O N O M I C I N T E R E S T S
6.
A b r i e f r e f e r e n c e i s made above to the p o s s i b l e effects of a change
in p o l i c y on our economic i n t e r e s t s .
R e c e n t studies by the A s s e s s m e n t s
Staff c o n f i r m e a r l i e r conclusions that our stake in Black A f r i c a in t e r m s
of trade is about the same as in South A f r i c a .
D i r e c t p r i v a t e investment
in Black A f r i c a i s rather l e s s than in South A f r i c a and outstanding p o r t ­
f o l i o investment by United Kingdom residents i s only about one-tenth of
that in South A f r i c a .
T h i s , h o w e v e r , excludes o i l i n v e s t m e n t which, in
N i g e r i a a l o n e , substantially e x c e e d s oil investment in South A f r i c a .
The
l a r g e holdings of s t e r l i n g balances in Black A f r i c a c a n , in this a s s e s s ­
ment, be set against the need to take account of our aid expenditures
there.
LYYYY :
R E COMMEND A TIONS
7,
It is c l e a r that a change of policy even when it is confined to a r m s
supply for the defence r o u t e s , w i l l rouse e m o t i o n s , in p a r t i c u l a r among
A f r i c a n m e m b e r s and s o m e A s i a n m e m b e r s of the Commonwealth.
It
is to be hoped that their r e a c t i o n s w i l l be l i m i t e d to w o r d s .
I will report
the l a t e s t indications to Cabinet.
8.
A g a i n s t these r i s k s w e have to p l a c e our consistent and published
v i e w and our duty to m a k e our own judgment of our own defence i n t e r e s t s .
9.
I t h e r e f o r e invite m y colleagues to a g r e e that I should make a
statement on 20 July anncuncing our policy on the lines set out in the
Annex.
A D-H
F o r e i g n and C o m m o n w e a l t h Office SV/l
15 July 1970
Annex
Arms f o r South A f r i c a
DRAFT STATEMENT TO THE HOUSE OF COMMONS
I promised t h a t I would make a statement b e f o r e
the
House r o s e on the Government's a t t i t u d e to the Simons town.
Agreement w i t h South. A f r i c a .
2.
The l a s t C o n s e r v a t i v e government operated the arms
l i c e n s i n g system so as to d i s t i n g u i s h between those arms
which might be used i n c i v i l
be used f o r e x t e r n a l
3.
s t r i f e and those which could
defence.
I t was t o mark t h i s d i s t i n c t i o n t h a t the government
v o t e d i n the U n i t e d N o t i o n s f o r a ban on arms which could
contribute to enforcing apartheid while expressly
Britain's
r i g h t t o e x p o r t arms aooording to tho torma of
-Charter i n r e l a t i o n t o e x t e r n a l defence^
4.
light
preserving
* jjT ^ ^
tho
cia^kr
The government have now re-examined the matter i n the
of present and f u t u r e
strategic
needs and have been
i n c l o s e communication w i t h a l l i e s and f r i e n d s both
inside
and o u t s i d e the Commonwealth.
5.
HMG's p a r t i c u l a r
r e s p o n s i b i l i t y and concern i s f o r
the
f r e e passage of ships i n a l l circumstances on the v i t a l
sea
r o u t e s round southern A f r i c a .
Our own defence
t h e r e f o r e r e q u i r e t h a t we should g i v e e f f e c t
of the Simonstown Agreement.
t o the purposes
With these c o n s i d e r a t i o n s
mind, HMG- have d e c i d e d i n f u t u r e
to accept o r d e r s f o r
from South A f r i c a but only i n s o f a r as they a r e
r e l a t e d t o maritime defence
have r e f e r r e d .
the j o i n t purpose
of
security
Britain.
HMG have made abundantly c l e a r t h e i r
disagreement w i t h the r a c i a l p o l i c i e s
Government.
within
I n so a c t i n g , HMG
the Simonstown Agreement and s e r v i n g the
6.
arms
directly
Applications for licences f a l l i n g
c o n s i d e r t h a t they w i l l be f u l f i l l i n g
of
in
of the sea r o u t e s t o which I
t h i s d e f i n i t i o n w i l l be c o n s i d e r e d .
requirements
interests
fundamental
of the South A f r i c a n
Under the p o l i c y which I have announced,
our
/licensing
Annex
l i c e n s i n g arrangements w i l l
ensure t h a t arms a r e not
exported which would a s s i s t i n the enforcement
or i n t e r n a l r e p r e s s i o n :
(contd)
of
apartheid
the d e c i s i o n which has been made
is f u l l y i n accordance w i t h our o b l i g a t i o n s under the United
Nations Charter and w i t h the p o s i t i o n adopted i n the S e c u r i t y
Council i n 1963 and 1964 by the previous
Administration.
Conservative
T h e circulation of this m e m o r a n d u m has been
r e s t r i c t e d to m e m b e r s of the Cabinet and to M i n i s t e r s
in charge of D e p a r t m e n t s ,
Recipients are accordingly
asked to ensure chat the s e c r e c y of its contents is
strictly observed.
C P ( 7 0 ) 13
COPY NO
39
15 July 1970
CABINET
P A Y OF T H E HIGHER C I V I L S E R V I C E : T E N T H R E P O R T
OF T H E S T A N D I N G A D V I S O R Y C O M M I T T E E
Memorandum by the L o r d P r i v y S e a l
Introduction
A t the m e e t i n g of the M i n i s t e r i a l C o m m i t t e e on E c o n o m i c P o l i c y
on 13 July I was invited to c i r c u l a t e in readiness f o r discussion by the
Cabinet a m e m o r a n d u m which would r e s t a t e my r e c o m m e n d a t i o n s for
dealing with the Tenth R e p o r t of the Standing A d v i s o r y C o m m i t t e e on
the Pay of the H i g h e r C i v i l S e r v i c e ( c h a i r e d by L o r d P l o w d e n ) and which
would set out in some d e t a i l the i m p l i c a t i o n s of the c o u r s e I r e c o m m e n d
for the pay of other highly paid groups in the public s e c t o r .
The Plowden R e p o r t
2.
The background t o the p r e s e n t r e p o r t is set out in the note at
Annex A and a copy of the r e p o r t is at Annex B.
My r e c o m m e n d a t i o n s
f o r dealing with the r e p o r t a r e as f o l l o w s s­
(a)
W e should extend to the A s s i s t a n t S e c r e t a r y and equivalent grades the c e n t r a l pay i n c r e a s e of 8f per cent paid t o l o w e r g r a d e s on 1 A p r i l 1970 and f r o m the same date. (b)
While t h e r e is a strong case f o r implementation at once of the
balance of the i n c r e a s e s r e c o m m e n d e d by the C o m m i t t e e in
its Ninth R e p o r t last s u m m e r , Stage I I of the i n c r e a s e s
should be paid on 1 July 1970 (as announced e a r l i e r by the
previous G o v e r n m e n t ) and Stage I I I on 1 January 1971.
Meanwhile U n d e r - S e c r e t a r i e s should r e c e i v e an i n c r e a s e
of 84 per cent on 1 July 1970 instead of the i n c r e a s e of
6. 2 p e r cent due under Stage II (and Stage I I I should be
adjusted a c c o r d i n g l y in t h e i r c a s e ) .
3.
The p r o p o s a l at (a) above p r e s e n t s
application of c e n t r a l pay i n c r e a s e s t o the
bean c u s t o m a r y in the past and is in e f f e c t
the c e n t r a l pay settlement itself f o r which
endorsement is no m o r e than a f o r m a l i t y .
1
no d i f f i c u l t i e s .
The
A s s i s t a n t S e c r e t a r y grade has
an inevitable consequential of
the P l o w d e n C o m m i t t e e ' s
4,
F o r m o r e senior grades the C o m m i t t e e u r g e s immediate
implementation of the balance of the i n c r e a s e s r e c o m m e n d e d in their
report last year.
These i n c r e a s e s w e r e substantial but w e r e r e g a r d e d
by the C o m m i t t e e as meeting " m i n i m u m s t a n d a r d s " of c o m p a r a b i l i t y in
the c i r c u m s t a n c e s of mid-1969 and r e f l e c t e d the extent t o which the pay
of the H i g h e r C i v i l S e r v i c e had f a l l e n behind outside r a t e s .
Since then
salary l e v e l s e l s e w h e r e h a v e , of c o u r s e , m o v e d further ahead.
If we
refuse t o implement the balance of the i n c r e a s e s at a reasonably e a r l y
date we shall m e r e l y postpone a p r o b l e m which w i l l have t o be faced
sooner or l a t e r and w i l l g i v e r i s e t o s e r i o u s doubts about our r e a d i n e s s
to honour the principle of " f a i r c o m p a r i s o n " f o r H i g h e r C i v i l S e r v i c e pay.
In addition undue d e f e r m e n t w i l l maintain the d i s t o r t i o n of internal
r e l a t i v i t i e s (which w i l l w o r s e n as t i m e p a s s e s ) and w i l l have a permanent
and quite s e v e r e e f f e c t in r e l a t i o n t o the pensions of those r e t i r i n g or about
to r e t i r e ,
I a m convinced that our treatment of this issue w i l l be widely
r e g a r d e d within the C i v i l S e r v i c e as a whole as a t e s t case of our
intentions and that in face of the P l o w d e n C o m m i t t e e ^ two r e c e n t r e p o r t s
it is e s s e n t i a l for us tc accept implementation in f u l l of the i n c r e a s e s
r e c o m m e n d e d last y e a r ,
I b e l i e v e that t h e r e is in fact a good case f o r
bringing both Stage I I and Stage I I I into effect f r o m 1 July 1970.
But I
accept that this might c r e a t e s e r i o u s p r o b l e m s f o r us e l s e w h e r e on the
wages f r o n t .
I t h e r e f o r e propose that implementation of Stage I I I
should be d e f e r r e d to 1 January 1971.
5.
W h i l e the Plowden C o m m i t t e e suggested the payment of 8-g- per cent
to U n d e r - S e c r e t a r i e s as an a l t e r n a t i v e if Stage I I I w e r e not implemented
"on 1 July 1970 or at any e a r l y date t h e r e a f t e r (not l a t e r than the end of
1970)" I r e c o m m e n d that an i n c r e a s e of 8\ per cent should r e p l a c e the
Stage I I i n c r e a s e of 6. 2 per cent due f o r Under " S e c r e t a r i e s on
1 July 1970.
T o withhold t h i s , while implementing Stage I I I at the latest
possible date which might justify this a c c o r d i n g t o the Plowden C o m m i t t e e ,
would lead t o further distortion of internal r e l a t i v i t i e s and would, for the
sake of withholding a m a r g i n a l i m p r o v e m e n t of 2. 3 per cent, s e r i o u s l y
impair our chances of persuading the Staff Side t o accept our decisions
because of the traditional entitlement of U n d e r - S e c r e t a r i e s to c e n t r a l pay
increases.
6. : It is important f o r us t o r e a c h e a r l y d e c i s i o n s on the C o m m i t t e e s
recommendations s o that we can r e l e a s e the r e p o r t and make known our
decisions on it b e f o r e the P a r l i a m e n t a r y R e c e s s .
The Staff Side have
r e c e i v e d c o p i e s of the r e p o r t on a confidential b a s i s and p r e s s u r e to
publish it w i l l quickly d e v e l o p .
l
7.
The m e e t i n g of the M i n i s t e r i a l C o m m i t t e e on E c o n o m i c P o l i c y on
13 July was disposed in principle to a c c e p t m y r e c o m m e n d a t i o n s f o r
dealing with the Plowden R e p o r t but it was suggested that further
c o n s i d e r a t i o n should be given to their possible r e p e r c u s s i o n s on the pay
of other highly paid public s e c t o r groups.
2
8.
A d e c i s i o n to i m p l e m e n t P l o w d e n Stage I I I f o r the H i g h e r C i v i l
S e r v i c e f r o m 1 January 1971 w i l l have implications f o r a number of
other groups.
In some c a s e s it may be p r e f e r a b l e to d e f e r d e c i s i o n s on
these until we have decided whether there should be some independent
machinery to r e v i e w p o l i t i c a l l y sensitive top s a l a r i e s ,
( a )
National Health S e r v i c e (NHS) a d m i n i s t r a t i v e " d e s i g n a t e d "
grades ( 3 , 000).
This group has a link at the top with the
higher c i v i l s e r v i c e ( U n d e r - S e c r e t a r y / A s s i s t a n t S e c r e t a r y
l e v e l ) and at the bottom with the C i v i l S e r v i c e H i g h e r E x e c u t i v e
Officer.
Both these link points w i l l m o v e f r o m 1 January n e x t ,
and there w i l l thus be consequential i n c r e a s e s f o r the NHS
group? the amount of the l o w e r c i v i l s e r v i c e i n c r e a s e s depends
on the outcome of pay r e s e a r c h , but the percentage f o r U n d e r S e c r e t a r i e s at Stage I I I w i l l be about 4 per cent.
( b )
These again have e s t a b l i s h e d links
L o w e r judiciary (400).
with H i g h e r C i v i l S e r v i c e s c a l e s at around U n d e r - S e c r e t a r y
l e v e l , so that they would r e c e i v e i n c r e a s e s in the r e g i o n of
4 per cent f r o m 1 January next,
( c )
Nationalised industry b o a r d c h a i r m e n and m e m b e r s (120).
The r e c o m m e n d a t i o n s in the National B o a r d f o r P r i c e s and
Incomes ( N B P I ) R e p o r t N o . 107 on the s a l a r i e s of the
c h a i r m e n and m e m b e r s of nationalised industry boards w e r e
c l o s e l y p a r a l l e l with those in last y e a r * s Plowden C o m m i t t e e
R e p o r t , which was partly based on the same e v i d e n c e .
The
recommendations w e r e to be put into e f f e c t in three s t a g e s ,
of which the f i r s t two have b e e n implemented f r o m A p r i l 1969
and A p r i l this y e a r .
In these c i r c u m s t a n c e s I b e l i e v e that it
would be difficult f o r the G o v e r n m e n t to avoid i m p l e m e n t i n g
Stage I I I f o r nationalised industry b o a r d s , either on 1 January
next or possibly on 1 October ( r e f l e c t i n g the f a c t that the
operative dates for Stages I and I I w e r e 3 months e a r l i e r than
f o r the H i g h e r C i v i l S e r v i c e ) ,
My own v i e w is that the
sensible course would be to go f o r a common date
i, e. 1 January.
T h i s would i n v o l v e an addition of around
9 per c e n t , costing the nationalised industries some £100,000.
(d)
H i g h e r judiciary (120).
The judges had a 15 per cent i n c r e a s e
f r o m 29 M a y , roughly c o r r e s p o n d i n g with Stage I f o r the
Higher C i v i l S e r v i c e .
A s the annexed table (Annex C ) s h o w s ,
the s a l a r i e s of High Court judges have kept a f a i r l y c l o s e
relationship with those of P e r m a n e n t S e c r e t a r i e s in the past,
although there has b e e n no p r e c i s e pay link.
Judges' pay has
n e v e r b e e n r e v i e w e d by an independent body, but under the
previous A d m i n i s t r a t i o n the judges a g r e e d that t h e i i . ealasrfcss
should be looked at by the proposed S p e c i a l Panel of the
C o m m i s s i o n f o r Industry and M a n p o w e r .
I have no doubt that
j u d g e s pay cannot be left as it is after Stage I I I has been
implemented f o r the H i g h e r C i v i l S e r v i c e .
It is f o r
consideration whether we should a i m to settle this v e r y quickly
by m e a n s of an internal r e v i e w and a Government d e c i s i o n on
r a t e s roughly in line with those of the H i g h e r C i v i l S e r v i c e , or
whether we should set up some hide pendent machinery which
could r e v i e w these and other top s a l a r i e s of a p o l i t i c a l l y
s e n s i t i v e kind.
r
( e )
Senior S e r v i c e O f f i c e r s (800).
The highest S e r v i c e ranks w e r e
g i v e n v a r y i n g but substantial percentage i n c r e a s e s in s a l a r y as
part of the N B P I r e v i e w of S e r v i c e pay, which was put into
e f f e c t f r o m 1 A p r i l this y e a r .
N B P I said in their R e p o r t N o . 142
that these r a t e s took some account of c u r r e n t pay l e v e l s in the
H i g h e r C i v i l S e r v i c e , having r e g a r d to the fact that i n the past
the G o v e r n m e n t , in d e t e r m i n i n g pay f o r senior o f f i c e r s , has had
the pay of H i g h e r C i v i l Servants in m i n d , though the relationship
does not appear to have b e e n made e x p l i c i t " ; this relationship
is shown, at the General/ P e r m a n e n t S e c r e t a r y l e v e l , in the
annexed t a b l e .
But the B o a r d said that the f i g u r e s which they
had " a r b i t r a r i l y c h o s e n " w e r e p r i m a r i l y t o maintain reasonable
d i f f e r e n t i a l s between r a n k s , and that they intended to r e v i e w the
position in t w o y e a r s ' t i m e .
A t that date the Plowden
r e c o m m e n d a t i o n s w e r e a l r e a d y known, but it was subsequently
decided that senior S e r v i c e o f f i c e r s should not have to wait the
full two y e a r s b e f o r e their next i n c r e a s e , but should be included
among the groups t o be r e v i e w e d by the C o m m i s s i o n f o r Industry
and Manpower S p e c i a l Panel.
Thus once again, as f o r j u d g e s ,
there is no link with the H i g h e r C i v i l S e r v i c e which makes it
possible to a s s e s s the amount of the consequential i n c r e a s e s
which would be justified in the light of the G o v e r n m e n t s
d e c i s i o n to i m p l e m e n t Stage I I I f o r the H i g h e r C i v i l S e r v i c e
f r o m 1 January
H o w e v e r , given the existing standing
r e f e r e n c e of S e r v i c e pay t o the N a t i o n a l B o a r d for P r i c e s and
I n c o m e s , it would b e reasonable to ask the B o a r d t o undertake
an e a r l y r e v i e w of these s a l a r i e s , in the light of the C i v i l
Service increase.
u
0
( f )
M i n i s t e r s and M e m b e r s of P a r l i a m e n t .
T h e r e is no doubt
that a G o v e r n m e n t d e c i s i o n to implement Stage I I I on
1 January w i l l i n c r e a s e the p r e s s u r e to r e v i e w M P s s a l a r i e s ;
in the past a number of M e m b e r s have p r e s s e d f o r a definite
pay link with the H i g h e r C i v i l S e r v i c e .
But there a r e c l e a r
difficulties in the way of any ad hoc r e v i e w of these s a l a r i e s by
the G o v e r n m e n t itself.
I t h e r e f o r e think a d e c i s i o n on this
must await our further consideration of future m a c h i n e r y f o r
r e v i e w i n g top public s e r v i c e s a l a r i e s g e n e r a l l y .
1
9.
T o sum up, m y v i e w s on the main r e p e r c u s s i o n s f r o m the
proposals I have made about H i g h e r C i v i l S e r v i c e s a l a r i e s a r e as
follows
( i )
( i i )
We should accept the d i r e c t consequential i n c r e a s e s f o r
NHS a d m i n i s t r a t o r s and the l o w e r j u d i c i a r y ; these a r e
r e l a t i v e l y m i n o r changes which would not need to be
mentioned in the announcement,
The Stage I I I r a t e s f o r the c h a i r m e n and m e m b e r s of
nationalised industry boards should be implemented
f r o m 1 January 1971; and this d e c i s i o n should be
announced at the same t i m e as the corresponding
d e c i s i o n f o r the H i g h e r C i v i l S e r v i c e .
( i i i )
The judges should be told that the Government a g r e e s to
a r e v i e w of their pay in the light of these d e c i s i o n s ,
e i t h e r hy a new independent body if this can be set up in
reasonable time or f a i l i n g this by s o m e ad hoc i n t e r ­
d e p a r t m e n t a l body r e p o r t i n g in the near future to
Ministers.
( i v )
S i m i l a r l y , senior S e r v i c e o f f i c e r s should be told that
the N B P I w i l l be asked t o c a r r y out an e a r l y r e v i e w
of their pay, in the light of the changes for the H i g h e r
C i v i l S e r v i c e , under the standing r e f e r e n c e of S e r v i c e
pay.
( v )
A s to the s a l a r i e s of M i n i s t e r s and M e m b e r s of P a r l i a m e n t
we must seek to r e a c h an e a r l y d e c i s i o n on new
independent m a c h i n e r y f o r r e v i e w i n g these and other
s e n s i t i v e top s a l a r i e s in the future.
Conclusion
10.
I invite my colleagues t o e n d o r s e the conclusions of the E c o n o m i c
P o l i c y C o m m i t t e e , as f o l l o w s : ­
( a )
A s s i s t a n t S e c r e t a r i e s and equivalent grades should r e c e i v e the c e n t r a l pay i n c r e a s e of 8j p e r cent f r o m 1 A p r i l 1970, ( b )
A s announced, Stage I I 6hould be paid f r o m 1 July 1970, with
the exception that U n d e r - S e c r e t a r i e s should r e c e i v e an
i n c r e a s e of 8f per cent instead of the Stage I I r a t e .
( c )
Stage ITI should be i m p l e m e n t e d in f u l l f o r a l l grades on 1 January 1971. ( d )
These d e c i s i o n s should be announced b e f o r e the R e c e s s .
11.
I a l s o invite m y c o l l e a g u e s t o a g r e e that we should deal with the
consequences f o r other groups on the lines p r o p o s e d in paragraph 9
immediately above.
J
C i v i l Service Department SWl
15 July 1970
ccruET
5
ANNEX A PAY OP THE HIGHER C I V I L SERVICE:
BACKGROUND TO THE
10TH REPORT OF THE STANDING .ADVISORY COMMITTEE
Introduction
1.
On 16 June t h e S t a n d i n g A d v i s o r y C o m m i t t e e on t h e P a y o f t h e
Higher C i v i l S e r v i c e ( u n d e r t h e c h a i r m a n s h i p o f L o r d P l o w d e n )
presented i t s T e n t h R e p o r t t o t h e t h e n P r i m e M i n i s t e r .
The R e p o r t
(a copy o f w h i c h i s a t A n n e x B ) f o l l o w e d n o t i f i c a t i o n t o t h e
Committee ( i n a c c o r d a n c e w i t h n o r m a l p r o c e d u r e s ) o f t h e 1970
c e n t r a l pay a g r e e m e n t f o r l o w e r g r a d e s w i t h i n t h e n o n - i n d u s t r i a l Civil Service.
The S t a n d i n g A d v i s o r y
Committee
2.
The i n d e p e n d e n t S t a n d i n g A d v i s o r y C o m m i t t e e on t h e P a y o f t h e
Higher C i v i l S e r v i c e was e s t a b l i s h e d i n F e b r u a r y 1957 t o a d v i s e on
the pay o f t h o s e g r a d e s o f t h e A d m i n i s t r a t i v e C l a s s ( A s s i s t a n t
S e c r e t a r y and a b o v e ) and e q u i v a l e n t g r a d e s i n o t h e r C l a s s e s who
are o u t s i d e t h e s c o p e o f t h e C i v i l S e r v i c e A r b i t r a t i o n A g r e e m e n t .
In the case o f t h e A s s i s t a n t S e c r e t a r y t h e C o m m i t t e e n o r m a l l y d o e s
no more than e n d o r s e t h e outcome o f d i s c u s s i o n s b e t w e e n t h e O f f i c i a l
and S t a f f S i d e s on t h e b a s i s o f pay r e s e a r c h s u r v e y s w h i c h a r e
undertaken f o r t h e A s s i s t a n t S e c r e t a r y g r a d e on t h e same b a s i s as
for more j u n i o r g r a d e s .
But i n t h e c a s e o f Under S e c r e t a r y , D e p u t y
S e c r e t a r y and Permanent S e c r e t a r y g r a d e s t h e C o m m i t t e e f o r m u l a t e s
i t s own r e c o m m e n d a t i o n s t a k i n g i n t o a c c o u n t s a l a r i e s i n c o m p a r a b l e
posts o u t s i d e t h e S e r v i c e .
3
3.
The Committee s u b m i t t e d t o t h e Government l a s t summer a m a j o r
report ( t h e N i n t h ) .
On t h e b a s i s o f a c a r e f u l s t u d y o f s a l a r y
l e v e l s o u t s i d e t h e S e r v i c e , t h e C o m m i t t e e recommended s u b s t a n t i a l
i n c r e a s e s i n pay f o r t h e s e n i o r g r a d e s w i t h i n t h e H i g h e r C i v i l
S e r v i c e w h i c h i n t h e i r v i e w w o u l d " d o no more t h a n a c h i e v e minimum
standards o f c o m p a r a b i l i t y '
i n the circumstances o f mid-1969.
They
expressed t h e hope t h a t t h e s e i n c r e a s e s s h o u l d b e i m p l e m e n t e d w i t h
as l i t t l e d e l a y as p o s s i b l e " ' , b u t t h e y went on t o s a y t h a t i f t h e
Government f o u n d " i t n e c e s s a r y t o h a v e r e g a r d t o t h e / i n c o m e s
P
. . 7 c e i l i n g / o f 3i p e r c e n t p e r annum t h e n i n f o r c e / " and t o
defer t h e f u l l i n c r e a s e s , t h e y p r o p o s e d a p a t t e r n o f s t a g e d
i n c r e a s e s o v e r 2 y e a r s as s e t out i n t h e n o t e a t AnnexJS). The Committee
went oh t o s a y t h a t t h e Government s h o u l d i m p l e m e n t t h e i n c r e a s e s
more r a p i d l y t h a n t h i s i f d e v e l o p m e n t s i n i n c o m e s p o l i c y a l l o w e d .
1
, ;
o l l c
y
k.
I n a s t a t e m e n t on 11 J u l y 1969 t h e p r e v i o u s Government s a i d
that i t was s a t i s f i e d t h a t t h e p r o p o s e d new r a t e s a r e r i g h t i n
P r i n c i p l e and s h o u l d b e i m p l e m e n t e d when t h e r e q u i r e m e n t s o f
incomes p o l i c y a l l o w ' .
The Government a c c e p t e d t h a t t h e f i r s t
stage i n c r e a s e s recommended b y t h e C o m m i t t e e s h o u l d b e i m p l e m e n t e d
from 1 J u l y 1969 and s a i d t h a t " t h e r e s t o f t h e i n c r e a s e s
recommended b y t h e C o m m i t t e e w i l l n e e d t o b e c o n s i d e r e d i n t h e
l i g h t o f t h e d e v e l o p m e n t s i n i n c o m e s p o l i c y o v e r t h e n e x t two
years".
On 25 March 1970 i t was announced t h a t t h e Government
, ;
1
1
had d e c i d e d t o i m p l e m e n t S t a g e I I o f t h e i n c r e a s e s f r o m 1 J u l y 1970
but t h e announcement made no r e f e r e n c e t o t h e i m p l e m e n t a t i o n o f
Stage I I I .
N o t i f i c a t i o n t o the Standing A d v i s o r y
Central P a y I n c r e a s e
Committee
of
the
1970
5.
I n a c c o r d a n c e w i t h t h e r e c o m m e n d a t i o n s o f t h e R o y a l Commission
on the C i v i l S e r v i c e 1953-55 t h e p r i m a r y f a c t o r i n d e t e r m i n i n g p a y
in t h e n o n - i n d u s t r i a l C i v i l S e r v i c e i s a f a i r c o m p a r i s o n " w i t h
the r a t e s p a i d f o r c o m p a r a b l e w o r k o u t s i d e t h e C i v i l S e r v i c e .
The
main C i v i l S e r v i c e pay n e g o t i a t i o n s a r e t h e r e f o r e b a s e d on d e t a i l e d
evidence o f t h e pay and r e l a t e d c o n d i t i o n s o f f u n c t i o n a l l y
comparable p o s t s i n o u t s i d e e m p l o y m e n t .
In order to prevent c i v i l
s e r v a n t s l a g g i n g t o o f a r b e h i n d o u t s i d e r a t e s o f pay d u r i n g t h e
i n t e r v a l between t h e s e n e g o t i a t i o n s , annual i n t e r i m i n c r e a s e s ,
called c e n t r a l pay i n c r e a s e s , have been n e g o t i a t e d i n r e s p e c t o f
c i v i l s e r v a n t s n o t c o v e r e d b y pay r e s e a r c h n e g o t i a t i o n s i n t h e
year i n q u e s t i o n .
, :
6.
The 1965 R e p o r t o f t h e S t a n d i n g A d v i s o r y C o m m i t t e e ( t h e n
c h a i r e d b y L o r d F r a n k s ) recommended ( i n l i n e w i t h p r o p o s a l s b y t h e
O f f i c i a l S i d e ) t h a t " H i g h e r C i v i l S e r v i c e g r a d e s up t o and
i n c l u d i n g t h e Under S e c r e t a r y s h o u l d i n f u t u r e r e c e i v e t h e
e q u i v a l e n t o f c e n t r a l pay i n c r e a s e s .
We recommend t h a t i n f u t u r e
c e n t r a l pay i n c r e a s e s s h o u l d b e r e p o r t e d t o us on t h e u n d e r s t a n d i n g
that when c e n t r a l pay i n c r e a s e s a r e r e c e i v e d b y P r i n c i p a l s , we
s h a l l n o r m a l l y recommend s i m i l a r i n c r e a s e s f o r g r a d e s i n t h e
Higher C i v i l S e r v i c e whose f i x e d r a t e s o r s c a l e maximum do n o t
exceed t h e Under S e c r e t a r y r a t e .
i ;
7.
I n l i n e w i t h a g r e e d p r a c t i c e , t h e r e f o r e , t h e O f f i c i a l and
S t a f f S i d e s s u b m i t t e d a j o i n t memorandum t o t h e C o m m i t t e e on
Ui A p r i l 1970 g i v i n g t h e d e t a i l s o f t h e 8-g- p e r c e n t c e n t r a l pay
s e t t l e m e n t c o n c l u d e d t h e p r e v i o u s month and a l s o r e p o r t i n g ,
f a c t u a l l y on t h e G o v e r n m e n t ' s i m p l e m e n t a t i o n o f S t a g e s I and I I
of the 1969 P l o w d e n i n c r e a s e s .
The N a t i o n a l S t a f f S i d e s u b m i t t e d
a s e p a r a t e memorandum e x p r e s s i n g t h e i r d i s s a t i s f a c t i o n o v e r t h e
G o v e r n m e n t s f a i l u r e t o i m p l e m e n t i n f u l l t h e 1969 i n c r e a s e s and
i n v i t i n g t h e C o m m i t t e e t o recommend t h e e x t e n s i o n t o g r a d e s up t o
and i n c l u d i n g t h e U n d e r S e c r e t a r y o f a pay i n c r e a s e e q u i v a l e n t t o
the c e n t r a l pay i n c r e a s e o f 8-g- p e r c e n t a p p l i c a b l e t o P r i n c i p a l s
from 1 A p r i l 1970 and f r o m t h e same d a t e .
Tenth R e p o r t
of
the Standing Advisory
8.
The R e p o r t ' s
follows: ­
main s u b s t a n t i v e
Committee
recommendations
are
as
(a)
t h e e x t e n s i o n t o t h e A s s i s t a n t S e c r e t a r y and s i m i l a r
g r a d e s a t t h a t l e v e l o f t h e 81- p e r c e n t c e n t r a l pay i n c r e a s e
w i t h e f f e c t from 1 A p r i l j
(b)
t h e i m p l e m e n t a t i o n o f S t a g e I I I o f t h e C o m m i t t e e ' s 1969
recommendations " a t the e a r l i e s t p o s s i b l e d a t e " .
If this
w e r e d o n e , e i t h e r on 1 J u l y o r a t an e a r l y d a t e t h e r e a f t e r
( n o t l a t e r t h a n end o f 1 9 7 0 ) , t h e g r a d e s up t o and i n c l u d i n g
Under S e c r e t a r y s h o u l d n o t on t h i s o c c a s i o n r e c e i v e a l s o
the 8-g- p e r c e n t c e n t r a l pay i n c r e a s e .
In that event the
Committee p r o p o s e t o t a k e a c c o u n t o f t h e c e n t r a l pay i n c r e a s e
when t h e y n e x t c o n s i d e r H i g h e r C i v i l S e r v i c e p a y i n 1971;
(c)
i f t h e S t a g e I I I i n c r e a s e s a r e n o t i m p l e m e n t e d on
1 J u l y 1970, o r a t an e a r l y d a t e t h e r e a f t e r , t h e n f r o m
1 J u l y 1970 t h e S t a g e I I i n c r e a s e s f o r t h e Under S e c r e t a r y
(and r e l a t e d g r a d e s ) s h o u l d h e r e p l a c e d b y new amounts
r e p r e s e n t i n g 8-g- p e r c e n t i n c r e a s e "on t h e S t a g e I f i g u r e s
( a s o p p o s e d t o t h e 6.2 p e r c e n t i n c r e a s e on t h e S t a g e I r a t e
r e p r e s e n t e d by Stage I I ) .
[
Staff
Side
Attitude
I
9.
T h e r e has b e e n g r o w i n g i m p a t i e n c e a t t h e e f f e c t o f t h e t i m e
lag which i s b u i l t i n t o t h e C i v i l S e r v i c e pay s y s t e m ;
the recent
high l e v e l o f wage i n c r e a s e s g e n e r a l l y w h i c h has n a t u r a l l y u n d e r ­
lined t h i s .
F o r more j u n i o r g r a d e s t h e 1970 c e n t r a l pay s e t t l e m e n t
(which was c o m p a r a t i v e l y g e n e r o u s b y p r e v i o u s s t a n d a r d s ) and an
agreement t o move t o a t w o - y e a r i n s t e a d o f a t h r e e - y e a r p a y r e s e a r c h
cycle h a v e gone some way t o i m p r o v e t h e a t m o s p h e r e and t o combat
growing m i l i t a n c y .
The main g r i e v a n c e has b e e n t h e p r e v i o u s
G o v e r n m e n t s d e c i s i o n , c o n t r a r y t o t h e C i v i l S e r v i c e Pay
Agreement, t o s t a g e p a y r e s e a r c h i n c r e a s e s i n two a n n u a l i n s t a l ­
ments w i t h o u t r e t r o s p e c t i o n .
The c o n t i n u e d s t a g i n g o f t h e p a y
i n c r e a s e s recommended f o r t h e H i g h e r C i v i l S e r v i c e l a s t y e a r i s
widely r e g a r d e d b y t h e S t a f f S i d e as a w h o l e as f u r t h e r e v i d e n c e
of t h e G o v e r n m e n t ' s u n w i l l i n g n e s s t o t r e a t i t s e m p l o y e e s f a i r l y .
I
11. The p r e v i o u s G o v e r n m e n t s ennouncement i n March o f a d e c i s i o n
to implement on 1 J u l y 1970 S t a g e I I o n l y o f t h e i n c r e a s e s
recommended l a s t y e a r l e d t o an u n p r e c e d e n t e d and w e l l - a t t e n d e d
protest m e e t i n g o f s e n i o r c i v i l s e r v a n t s .
Subsequently, the then
Lord P r i v y S e a l saw a d e l e g a t i o n from t h e N a t i o n a l S t a f f S i d e
which p r e s s e d f o r i m m e d i a t e payment o f t h e o u t s t a n d i n g 1969
increases.
The N a t i o n a l S t a f f S i d e a r g u e t h a t t h e r a t e o f pay
increases o u t s i d e t h e S e r v i c e has made i t i m p o s s i b l e t o j u s t i f y
continued d e f e r m e n t o f i n c r e a s e s due as a minimum i n m i d - 1 9 6 9 .
They a r e v e r y c o n c e r n e d a b o u t t h e permanent e f f e c t o f s t a g i n g on
the p e n s i o n s o f s e n i o r c i v i l s e r v a n t s n e a r t o r e t i r e m e n t , s i n c e
pensions i n t h e C i v i l S e r v i c e a r e b a s e d on an a v e r a g e o f s a l a r y
over t h e t h r e e y e a r s p r i o r t o r e t i r m e n t .
I t i s c l e a r that the
handling o f t h i s i s s u e w i l l b e r e g a r d e d as i n d i c a t i v e o f t h e new
Governments i n t e n t i o n s t o w a r d s t h e C i v i l S e r v i c e as a w h o l e .
3
CONFIDENTIAL
ANN ex
STAGING ADVISORY COMMITTEE ON THE PAY OP THE HIGHER C I V I L
8
SERVICE
TENTH REPORT
Submitted t o
the Prime M i n i s t e r
on 16 June
1970
IMPLEMENTATION OP OUR NINTH REPORT
1,
In our N i n t h R e p o r t , p r e s e n t e d on 30 May 1 9 6 9 , we recommended new
levels o f s a l a r y f o r t h e H i g h e r C i v i l S e r v i c e a t t h e g r a d e o f U n d e r Secretary and a b o v e , and s a i d t h a t t h e y w e r e a p p r o p r i a t e i n t h e
circumstances o f m i d - 1 9 6 9 , w i t h o u t any a l l o w a n c e f o r f u t u r e d e v e l o p m e n t s
outside the C i v i l S e r v i c e .
H o w e v e r , we t h o u g h t t h a t t h e Government
might f i n d i t n e c e s s a r y t o c o n s i d e r p h a s e d i m p l e m e n t a t i o n , and f o r t h a t
purpose we recommended, w i t h some r e l u c t a n c e , payment i n 3 s t a g e s , on
1 July 1969, 1970 and 1 9 7 1 , e x p r e s s i n g t h e h o p e t h a t , i f any
developments i n i n c o m e s p o l i c y made more r a p i d i m p l e m e n t a t i o n p o s s i b l e ,
the Government w o u l d a c t a c c o r d i n g l y .
The Government a c c e p t e d o u r
recommendations i n p r i n c i p l e , d e c i d e d upon i m p l e m e n t a t i o n i n s t a g e s
and paid t h e f i r s t s t a g e from 1 J u l y 1969.
2,
A j o i n t memorandum d a t e d 14 A p r i l 1970, w h i c h we h a v e r e c e i v e d
from the O f f i c i a l and S t a f f S i d e s o f t h e N a t i o n a l W h i t l e y C o u n c i l , d r e w
our a t t e n t i o n t o t h e G o v e r n m e n t ' s s t a t e m e n t o f 26 March 1970 w h i c h s a i d
that the s e c o n d s t a g e o f t h e i n c r e a s e s would be p a i d from 1 J u l y 1970
but made no m e n t i o n o f t h e t h i r d s t a g e .
Prom t h a t d a t e , t h e s a l a r i e s
for the g r a d e o f U n d e r - S e c r e t a r y and a b o v e w i l l a c c o r d i n g l y b e a s
shown i n Column- ( 2 ) o f t h e f o l l o w i n g t a b l e :
-
SALARY RATES
(1)
T 2 ]
Prom
Current
£
1 July
-
1970
(3)
Pull Rates
recommended i n
Ninth Report
£
Under-Secretary
6,000
6,375
6,750
Deputy
7,100
8,050
9,000
9,800
11,900
14,000
10,400
12,700
15,000
Secretary
Permanent
Secretary
Head o f t h e C i v i l
etc.
Service
3.
W e - r e c e i v e d a f u r t h e r memorandum f r o m t h e S t a f f S i d e o f t h e
National W h i t l e y C o u n c i l , on t h e same d a t e a s t h a t m e n t i o n e d i n t h e
preceding p a r a g r a p h .
T h i s S t a f f S i d e memorandum s t a t e d t h a t t h e y w e r e
d i s s a t i s f i e d w i t h t h e G o v e r n m e n t ' s d e c i s i o n t o i m p l e m e n t from
1 July 1970 o n l y t h e s e c o n d s t a g e o f our N i n t h R e p o r t ' s recommended
increases and w e r e " p r e s s i n g t h e Government t o pay t h e b a l a n c e o f t h e
overdue i n c r e a s e w i t h o u t f u r t h e r d e l a y " .
4.
We e x p l a i n e d i n our N i n t h R e p o r t why we a t t a c h e d i m p o r t a n c e t o t h e j
e a r l i e s t p o s s i b l e f u l l i m p l e m e n t a t i o n o f our r e c o m m e n d a t i o n s .
These^
were, we t h o u g h t , t h e minimum s t a n d a r d s f o r pay i n c o m p a r i s o n w i t h o t h e r ;
employments open t o i n d i v i d u a l s o f t h e t y p e a t p r e s e n t a t t a i n i n g t h e
higher l e v e l s o f the C i v i l S e r v i c e .
F a i l u r e t o pay s a l a r i e s a t t h e s e
rates might l e a d t o a p r o g r e s s i v e diminution o f the appeal o f a C i v i l
Service c a r e e r t o the most a b l e i n d i v i d u a l s :
and the e f f e c t s o f t h i s
might, by the time they were a p p a r e n t , have become i r r e v e r s i b l e , e x c e p t
over a p e r i o d o f many y e a r s .
The g e n e r a l l y accepted need f o r g r e a t e r
mobility between the C i v i l S e r v i c e and o t h e r employments would be
hampered u n l e s s t h e r e was a r e a s o n a b l y c l o s e comparison between pay
rates on the two s i d e s of the exchange.
I n a d d i t i o n , the r e s t r u c t u r i n g
of the grades i n the Higher C i v i l S e r v i c e on the l i n e s recommended by
the Pulton Committee r e q u i r e d l a r g e r d i f f e r e n t i a l s between g r a d e s i n the
Higher C i v i l S e r v i c e , both t o accommodate a new grade s t r u c t u r e and t o
leave room f o r a system o f range pay r a t h e r than f l a t s a l a r y r a t e s f o r
each grade;
and in any event the present d i f f e r e n t i a l s seemed
inadequate t o reward the g r e a t e r r e s p o n s i b i l i t i e s of the h i g h e s t g r a d e s .
5.
In 1970 the c o u n t r y ' s economic circumstances seem i n g e n e r a l t o be
more s a t i s f a c t o r y than i n mid-1969.
One d o u b t f u l trend i s the much
higher r a t e o f i n c r e a s e i n wages and s a l a r i e s , acknowledged t o some
extent as e a r l y as l a s t December i n the G o v e r n m e n t s l a s t White Paper
on P r i c e s , P r o d u c t i v i t y and Incomes P o l i c y a f t e r 1969 (Cmnd 4 2 3 7 ) , and
i'n i t s abandonment o f v i r t u a l l y a l l s t a t u t o r y c o n t r o l s o v e r incomes
increases.
But t h i s i s not i n i t s e l f a reason f o r moderating an
increase i n pay f o r t h e Higher C i v i l S e r v i c e , which on grounds of e q u i t y
and good management we r e g a r d as j u s t i f i e d , and indeed p r o v i d e s a s t r o n g
argument f o r speeding i t up.
We had hoped t h e r e f o r e t h a t t h e
Government would have f e l t a b l e t o proceed a t once t o the f u l l t h i r d
stage, or a t l e a s t t o improve upon the t i m e t a b l e f o r paying t h e second
and third s t a g e s o f our Ninth R e p o r t s recommendations.
6.
I t i s f o r the Government t o d e c i d e whether i t i s s t i l l e s s e n t i a l t o
maintain the s t a g i n g o v e r t h r e e y e a r s .
However, t h e r e a r e c e r t a i n
developments s i n c e l a s t y e a r which g i v e added emphasis t o t h e arguments
for e a r l i e r i m p l e m e n t a t i o n .
7.
F i r s t , the c e n t r a l pay i n c r e a s e f o r the n o n - i n d u s t r i a l C i v i l
Service from 1 A p r i l 1970 i s i n p r i n c i p l e (and on the b a s i s o f
recommendations from t h e Government and the N a t i o n a l S t a f f Side i n 1965)
due to be extended t o A s s i s t a n t S e c r e t a r i e s and U n d e r - S e c r e t a r i e s from
that date.
I f i t were c o n f i n e d on t h i s o c c a s i o n t o A s s i s t a n t
Secretaries, the d i f f e r e n t i a l between the A s s i s t a n t S e c r e t a r y maximum
and the U n d e r - S e c r e t a r y r a t e (which i s a t p r e s e n t £800 and which i n our
Ninth Report, on the b a s i s o f 1969 c o n d i t i o n s , we recommended should be
1,550) would be reduced on 1 A p r i l 1970 t o £358.
On 1 J u l y 1970 i t
would however, r i s e t o £733, when t h e r a t e s i n d i c a t e d i n Column ( 2 ) o f
the table i n paragraph 2 above became p a y a b l e .
£
2 .
CONFIDENTIAL
8, Second, t h e r e i s t o be a Pay Research r e v i e w f o r the A d m i n i s t r a t i v e
Class, a i & r e s u l t o f which i t seems t o us v e r y l i k e l y that t h e r e w i l l
be a further i n c r e a s e from 1 January 1971 f o r grades up t o and i n c l u d i n g
the Assistant S e c r e t a r y , thus compressing a d i f f e r e n t i a l which might at
that time a l r e a d y be o n l y £ 7 3 3 .
9,
There i s one f u r t h e r c o n s i d e r a t i o n .
The r e t i r e m e n t pension f o r
non-industrial c i v i l s e r v a n t s ( i n c l u d i n g the Higher C i v i l S e r v i c e ) i s
calculated as a p r o p o r t i o n , depending on l e n g t h o f s e r v i c e , o f the
average s a l a r y a c t u a l l y r e c e i v e d i n the l a s t t h r e e y e a r s of s e r v i c e .
This means t h a t , f o r a l l those Higher C i v i l Servants whose l a s t t h r e e
years i n c l u d e any p a r t o f t h e time s i n c e mid-1969 when t h e i r pay
increases have been s t a g e d , t h e r e i s an a b s o l u t e and permanent l o s s o f
pension.
These i n d i v i d u a l s w i l l l o s e , n o t only a y e a r ' s or two y e a r s '
increase i n pay, but a c o n t i n u i n g amount e v e r y remaining y e a r o f t h e i r
lives; since t h e i r pensions w i l l not be r e c a l c u l a t e d when the f u l l
salaries come i n t o f o r c e f o r those s t i l l i n employment.
10, For these r e a s o n s , we again urge the Government t o implement a t the
earliest p o s s i b l e d a t e the t h i r d s t a g e o f the recommendations i n our
Ninth Report,. i . e . t o pay the r a t e s shown i n Column ( 3 ) o f the t a b l e i n
paragraph 2 a b o v e .
APPLICATION TO THE HIGHER CIVIL SERVICE OP THE 1970 CENTRAL PAY INCREASE
FOR THE NON-INDUSTRIAL CIVIL SERVICE
11. The J o i n t Memorandum o f 14 A p r i l 1970 from t h e N a t i o n a l W h i t l e y
Council a l s o r e p o r t e d the agreement on a c e n t r a l pay i n c r e a s e to be p a i d
to most n o n - i n d u s t r i a l c i v i l s e r v a n t s , e i t h e r o f 6 per cent from
1 January 1970 or o f 8 $ per cent from 1 A p r i l 1 9 7 0 .
The N a t i o n a l S t a f f
Side memorandum r e c a l l e d the recommendation of our Seventh Report ( o n
an agreed p r o p o s a l by t h e Government and the S t a f f S i d e ) t h a t i n f u t u r e
central pay i n c r e a s e s f o r grades up t o and i n c l u d i n g the P r i n c i p a l should
be reported t o u s , on the understanding t h a t we would then normally
recommend s i m i l a r i n c r e a s e s f o r grades i n the Higher C i v i l S e r v i c e whose
i fixed r a t e s or s c a l e maxima d i d not exceed the U n d e r - S e c r e t a r y r a t e , w i t h
I tapering adjustments i m m e d i a t e l y above t h a t l e v e l .
I 12, On t h i s o c c a s i o n we recommend t h a t Higher C i v i l S e r v i c e grades w i t h
\ fixed r a t e s or s c a l e maxima not e x c e e d i n g the maximum of the s c a l e o f
I the Assistant S e c r e t a r y should r e c e i v e an i n c r e a s e i n pay o f 8 i per cent
I from 1 A p r i l 1 9 7 0 .
13. U n d e r - S e c r e t a r i e s and grades above t h a t l e v e l a r e due t o r e c e i v e
I from 1 July 1970 s t a g e 2 o f our Ninth Report ' s recommended pay i n c r e a s e s
I and in paragraphs 4 - 1 0 above we urge the Government t o a c c e l e r a t e the
I payment o f s t a g e 3 o f t h e s e i n c r e a s e s .
, Government d e c i d e s t o implement
14. We recommend f u r t h e r t h a t , " ^ W - S ^ a T i n c r e a s e s e i t h e r on
otage 3 o f our N i n t h R e p o r t ' s recommended pay i n c r e a s
^
^
i l y the
1970 grades
or a t aup
n . etaor l yand
d aitne c lJu d i n
f g
^ n^^eLrr ^
- Seeccrr ee tt a. rxyy should not on th
IW
1970)
occasion r e c e i v e a l s o t h e 8 i per cent c e n t r a l pay
f the
event, when c o n s i d e r i n g i n t h e f i r s t n a n
h
e
r
3
e
B
u
l
t
B
0
Ifoinistrative C l a s s Pay R e s e a r c h r e v i e w ( a s m e n t i o n e d in paragraph 8
ibove), we sncuid p r o p o s e to t a k e into a c c o u n t t h e 8 ^ per c e n t pay
Increase w h i c h would n o r m a l l y h a v e been g i v e n t h i s y e a r t o U n d e r Secretaries and t b s i r e q u i v a l e n t s , and i n t h e l i g h t o f t h i s t o make new
Recommendations f o r t h e pay o f t h o s e g r a d e s ,
15, I f , however., the Government d o e s n o t d e c i d e a t once t o i m p l e m e n t
stage 3 of our Ninth R e p o r t s recommended p a y i n c r e a s e s on 1 J u l y 1970
jr at an e a r l y date t h e r e a f t e r , t h e n we recommend t h a t from 1 J u l y 1 9 7 0 ,
for the g r a d e s up t o and i n c l u d i n g U n d c r - S e c r e t a r y , the f i g u r e s f o r
etage 2 o f the phased i n c r e a s e s proposed i n our N i n t h R e p o r t s h o u l d b e
replaced by new amounts r e p r e s e n t i n g an 8-g- per c e n t i n c r e a s e on t h e
stage 1 f i g u r e s .
F o r U n d e r - S e c r e t a r i e s , t h e amounts would b e a s f o l l o w s
Ninth
Stage
1
£6,000
Report
Stage
New 1 J u l y 1970
salary rate
a s now recommended
2
£6,375
£6,510
The pay of g r a d e s w i t h f i x e d r a t e s o r s c a l e maxima a b o v e t h e l e v e l o f t h e
Inder-Secretary. r a t e and up t o ( b u t n o t i n c l u d i n g ) t h e D e p u t y S e c r e t a r y
rate should be i n c r e a s e d by amounts r i s i n g from t h a t o f t h e new i n c r e a s e
IOW recommended for U n d e r - S e c r e t a r i e s t o t h a t o f t h e s t a g e 2 i n c r e a s e f o r
leputy S e c r e t a r i e s e m e r g i n g f r o m o u r N i n t h R e p o r t .
16, I f t h e Government f o l l o w t h e c o u r s e recommended i n t h e p r e c e d i n g
laragraph, we s h o u l d p r o p o s e i n 1971 t o c o n s i d e r w h e t h e r a n y c h a n g e i s
required i n s t a g e 3 o f our N i n t h R e p o r t s recommended pay i n c r e a s e s , f o r
[rades up t o and i n c l u d i n g U n d e r - S e c r e t a r y .
7. I t i s p o s s i b l e t h a t by t h e f i r s t h a l f o f 1971 o u r f u n c t i o n s w i l l
Lave been t r a n s f e r r e d t o a S p e c i a l P a n e l o f t h e p r o p o s e d C o m m i s s i o n f o r
industry and Manpower, w h i c h w i l l be c o n c e r n e d w i t h a d v i s i n g t h e
lovernment on t h e pay o f a number o f p u b l i c s e c t o r g r o u p s i n c l u d i n g t h e
ligher C i v i l S e r v i c e .
Should t h a t happen b e f o r e t h e r e v i e w w h i c h we
isve mentioned i n p a r a g r a p h 8 , we assume t h a t t h e S p e c i a l P a n e l w i l l
lake account, a s a p p r o p r i a t e , o f t h e p o i n t s made i n p a r a g r a p h s 14 t o 1 6 ,
fetch we would w i s h t o commend p a r t i c u l a r l y t o t h e i r a t t e n t i o n .
4
ANNEX C Permanent
Secretary
1 10 50
1
54
1
56
1
7 57
5
k 58
1
2
1
4 60
1
8 63
1
64
1
9 65
5 9
4,500
6,000
7,0C0
8,200
8 600
?
(28.5%)
High Court
Judge
5,000
(since
8,000
(60%)
( 3 3 % )
Field
Marshal
1832) 4,186
(12.9%)
3,730
(11.6%)
5,673
(34.9%)
4,943
(31 .9%)
General
5,991
(
5.6%)
5,261
(
6,724
(12.4%)
5,816
(10.5%)
7,999
(19%)
6,822
(17%)
8,179
(2%)
7,047
(3%)
7,500
Board
Member
5,000
10,000(33%)
7,500
(50%)
12,500(25%)
9,300
(25%)
15,000(20%)
10 450
(10%)
6.4%)
(16.6%)
(18%)
(4%)
10,000
(25%)
1
6 6
1
68
8,749
(7%)
7,545 ( 7 % )
1
69
9,071
(3.7%)
7,818
1
7 69
9,800
Major P u b l i c
Chairman
(13.9%)
(3.5%)
5
(1957)
INCREASES RECOMMENDED BY THE PLOWDEN COMMITTEE I N THE 9TH REPORT OF SUMMER 1969
Grade.
Pre 1 7
Rates
Stage 1
(naid wef 1 7 6 9 )
69
£
£
Stage 2
i m p l e m e n t e d on 1 7 7 0 )
Increase
as % o f p r e
a s . % of
1- 7 69 r a t e s
Stage i rates
(to be
Increase over
pre 1 7 69 rates
£
Permanent
Secretary
8,600
9,800
14.0%
11,900
2h,k%
21.h%^
Deputy
Secretary
6,300
7,100
12.7%
8,050
15.1%
13.h%
Under
Secretary
5,500
6,000
9.1%
6,1)75
6.8%
6.2%
.
Stage 3
-payment on 1 7 71
Increase
as % o f p r e
as % o f
1 7 69 r a t e s
S t a g e 2 rates
(suggested
£
for
2h.h%
17.6%
9,000
15.1%
11.8%
6,750
6.8%
5.9%
1h,000
;
T h e a v e r a g e i n c r e a s e ( c a l c u l a t e d as a p e r c e n t a g e o f t h e p r e 1 7 6 9 r a t e s ) r e c e i v e d b y t h e 1 , 0 0 0 o r s o s e n i o r
c i v i l s e r v a n t s a f f e c t e d w i l l b e a b o u t 10 p e r c e n t a t S t a g e 2 and a f u r t h e r 10 p e r c e n t a t S t a g e 3 .
The S t a g e
2 i n c r e a s e r e p r e s e n t s an a v e r a g e amount o f a b o u t 9 p e r c e n t o v e r t h e S t a g e 1 f i g u r e c u r r e n t l y i n p a y m e n t , ^and
t h e S t a g e 3 i n c r e a s e an a v e r a g e o f a b o u t 8 p e r c e n t o v e r t h e S t a g e 2 f i g u r e .
:
The a d d i t i o n
Stage 3
to
the
annual s a l a r y b i l l
will
b e about £ 0 . 6 m i l l i o n
at
Stage
2 and a f u r t h e r
£0.6 m i l l i o n
at
(This
Document is the Property of Her Britannic Majesty's Government)
C P ( f O ) 14
15th July 1970
Copy No.^.
*
CABINET Salaries of the Higher Judiciary Memorandum by the Lord Chancellor 1.
I have not yet had an opportunity of seeing the Lord Privy Seal's Memorandum about the pay of the higher Civil Service which I understand is to be considered by the Cabinet at its meeting tomorrow. However, I have had the advantage of seeing in advance a copy of the passage which I understand that the Lord Privy Seal intends to include in his Paper dealing with the repercussions of any increase in the pay of higher civil servants on the salaries of the higher judiciary. It is apparently proposed that if we agree to give the higher civil servants on the 1st January 1971 stage 3 of the salary increase recommended by the Plowden Committee then the Judges should be told that the Government agree to a review of their pay in the light of this decision, either by a new independent body, if this can be set up in reasonable time, or failing this by some ad hoc interdepartmental body reporting to Ministers. 2.
In its present form I cannot regard this as at all acceptable. As I explained to colleagues on - 1 -
SEGUE!
the Economic Policy Committee, I am faced with serious dissatisfaction on the part of the Judges (who, it will he remembered, are recruited entirely from members of a profession earning incomes far in excess of what we can offer and eagerly sought after with offers of highly paid posts in commerce and industry) at the way in which they have been treated by our predecessors. If the Lord Privy Seal's proposal were accepted, the inevitable result would, I am advised, be an explosion of anger which, in my judgment, would bo entirely justified, and would seriously jeopardise recruitment at a time when Beeching and other reforms notoriously require additional manpower. 3.
If I may summarise the recent history. So recently as a year ago (30th June 1969) the Judges' salary stood at £10,000 whilst that of a Permanent Secretary was £8,600 - a margin in favour of the Judges of £1,400. The result of stage 1 was to put up the Permanent Secretary's salary to £9,800, thereby reducing the margin to £200. In view of the prospective further increase in stage 2 which put up the Permanent Secretaries' salaries to £11,900 our predecessors put up the Judges' to £11,500 at the end of May this year but explained that this was only an interim increase pending a review by the special panel which they proposed to set up but which has now fallen by the wayside as the result of the Election. The effect of these changes was to convert the margin in favour of the Judges to an adverse differential of £400 at least for the time being. 4.
What is now proposed is to give Permanent Secretaries £14,000 as at the 1st January 1971 whilst doing nothing more for the Judges than promise a review, thus converting an adverse margin of £400 into an adverse margin of £2,500, with no definite undertaking for the future. The Judges would inevitably regard this both as a manifest injustice and as a breach of faith. The minimum required to avert the explosion of which I am warned is to let the Judges know that the Government have decided to give them at least the sum which Permanent Secretaries are to receive on the 1st January pending any further review which may be required to establish what relativity (if any) betv/een Judges and Permanent Secretaries should be maintained. H. of St. M. House of Lords
London S.1T.1.
15th July 1970. C P ( 7 0 ) 15
C O P Y NO
J i
17 July 1970
CABINET
CONCORDE
M e m o r a n d u m by the M i n i s t e r of T e c h n o l o g y
The previous Government a g r e e d to p r o c e e d with Concorde until
the end of June 1970 and informed the F r e n c h Government that it r e g a r d e d
its c o m m i t m e n t s as l i m i t e d tc chat d a t e .
M y p r e d e c e s s o r had a c c o r d i n g l y
arranged to m e e t the F r e n c h M i n i s t e r of T r a n s p o r t cn 16 June t o r e v i e w
the position and t o d e c i d e on the b a s i s of any future c o m m i t m e n t .
This
meeting was postponed because of the E l e c t i o n .
It is important in o r d e r
that there should be no doubt about our intentions that this meeting should
be r e - a r r a n g e d as soon as p o s s i b l e .
I now seek the a g r e e m e n t of m y
colleagues to the line I p r o p o s e to take at that m e e t i n g .
2.
The Annex to this paper d e s c r i b e s the present position on the
project.
Although the technical position is s t i l l subject to a number of
uncertainties there is nc case on technical grounds f o r cancelling the
project.
The flight t r i a l s have gone w e l l and officials b e l i e v e there is a
The
good chance of C o n c o r d e s meeting its target p e r f o r m a n c e .
c o m m e r c i a l p r o s p e c t s a r e not at p r e s e n t encouraging but it should be borne
in mind that no a i r l i n e w i l l c o m m i t Itself until after the f l i g h t tests at
cruising speed, which w i l l take place in the autumn.
H o w e v e r , if the
lowest estimate of sales in the C o n c o r d e E c o n o m i c P r o s p e c t s C o m m i t t e e
( C E P C ) r e p o r t ( s e e paragraph 27 of the A n n e x ) is achieved ( i e , 50 a i r c r a f t ) ,
there w i l l be f o r e i g n exchange earnings of some $1,200 m i l l i o n .
t
3.
I b e l i e v e it is too e a r l y to make a final judgment of c o m m e r c i a l
prospects,
Concorde cannot In any case be judged s o l e l y in e c o n o m i c
terms.
T h e r e is too much at stake both industrially and p o l i t i c a l l y .
4.
The cancellation of Concorde at its present stage of d e v e l o p m e n t
would be a s e r i o u s blow to the a i r c r a f t industry.
The B r i t i s h A i r c r a f t
C o r p o r a t i o n would a l m o s t c e r t a i n l y have to c l o s e down their F i l t o n f a c t o r y
and the cancellation of the Olympus 593 would reduce the R o l l s R o y c e B r i s t o l
Engine D i v i s i o n in s i z e , importance and technical a b i l i t y .
T h e r e would be
an i m m e d i a t e l o s s of upwards of 20, 000 j o b s .
We would a l s o be giving up
the only m a j o r advanced technological project in which w e have a w o r l d l e a d ,
1
and inflicting a blow which would h a v e r e p e r c u s s i o n s on industrial m o r a l e
g e n e r a l l y and on our standing as an advanced technological country.
Above
a l l . the w i l l of this country e v e r again to bring a m a j o r p r o j e c t to a
successful concltision would be s e r i o u s l y in doubt.
5.
T h e F r e n c h v i e w is that the technical and c o m m e r c i a l p r o s p e c t s of
Concorde cannot be a s s e s s e d with any certainty until the flight tests at
cruising speed have been a n a l y s e d .
1£, t h e r e f o r e , we w e r e to s e e k to
withdraw now, it would be in the f a c e of F r e n c h opposition.
T h i s could
only lead t o b i t t e r r e c r i m i n a t i o n s between o u r s e l v e s and the F r e n c h who
would argue that w e w e r e breaking a T r e a t y .
T h i s could have a m o s t
damaging effect on our C o m m o n M a r k e t negotiations.
A unilateral
withdrawal on our part would a l s o be l i k e l y to be taken by other E u r o p e a n
Governments as a sign of bad faith and our r e l i a b i l i t y as a partner could be
s e r i o u s l y called into question.
6.
I c o n s i d e r that it would be p o l i t i c a l l y indefensible and do us
c o n s i d e r a b l e h a r m internationally if w e withdrew against the w i s h e s of the
F r e n c h and at a time when we a r e only a f e w months f r o m the c r i t i c a l
flight tests which w i l l show whether Concorde can m e e t its technical
specification.
It w i l l take until about the end of M a r c h 1971 f o r these
tests to be analysed and to obtain some c l e a r e r indication of a i r l i n e s '
reaction t o selling p r i c e and p e r f o r m a n c e m e a s u r e m e n t s .
It must be
r e m e m b e r e d that a i r l i n e s w i l l not place f i r m o r d e r s until the B r i t i s h
O v e r s e a s A i r w a y s C o r p o r a t i o n ( 3 Q A C ) and A i r F r a n c e have done s o .
A i r F r a n c e have not completed their studies and a r e understood to be
awaiting the r e s u l t s of flight t e s t s .
BOAC, however, are already
maintaining that the introduction of Concorde would l e a d to a l o s s of
revenue.
I must t h e r e f o r e w a r n colleagues that, if the results at M=2
prove s a t i s f a c t o r y , we shall have to be p r e p a r e d co persuade B O A C to buy
Concorde.
7.
I seek the a g r e e m e n t of m y colleagues that w e should p r o c e e d with
Concorde until 31 M a r c h 1971 when we should r e v i e w the position a g a i n in
the light of the flight test r e s u l t s and the a i r l i n e s r e a c t i o n ; and that I
should d i s c u s s the position with the F r e n c h M i n i s t e r of T r a n s p o r t on this
basis,
1
G R
Ministry of T e c h n o l o g y SW1
16 July 1970
ANNEX The development o f Concorde s t a r t e d i n November 1962
f o l l o w i n g an agreement between the then B r i t i s h and French
Governments. Development i s b e i n g funded e n t i r e l y by the
two Governments who w i l l a l s o be r e q u i r e d t o p r o v i d e o r
guarantee the working c a p i t a l needed t o f i n a n c e Concorde
production.
The main c o n t r a c t o r s f o r Concorde are BAC and
SNIAS f o r the a i r f r a m e and R o l l s Royce and Snecma f o r the
propulsion system.
2.
The d e s i g n aim o f Concorde i s t h a t i t should be able
to carry a t a c r u i s i n g speed o f 11=2 ( t w i c e the speed o f
sound) a payload on i n i t i a l entry i n t o s e r v i c e o f 20,000 l b
between Paris/New York and 25,000 l b two y e a r s l a t e r .
The
number o f passengers Concorde w i l l c a r r y w i l l depend on the
s e a t i n g arrangement adopted i . e . s i n g l e c l a s s approaching
f i r s t c l a s s standard or mixed c l a s s .
In a single class
c o n f i g u r a t i o n i t would c a r r y about 110 p a s s e n g e r s .
Officials
c u r r e n t l y assess t h a t Concorde i s l i k e l y t o e n t e r s e r v i c e
in mid-1974-.
3.
The French p r o t o t y p e f i r s t f l e w i n March 1969 and the
B r i t i s h p r o t o t y p e i n A p r i l 1969. The f i r s t f l i g h t a t super­
sonic speed was a c h i e v e d by the French p r o t o t y p e i n October
1969o Concorde has now been flown up t o a Mach number o f
j u s t o v e r 1.5 as compared w i t h the c r u i s i n g Mach number o f 2 .
Approximately 4,500 hours o f t e s t and endurance f l y i n g w i l l
be r e q u i r e d b e f o r e Concorde can o b t a i n a c e r t i f i c a t e o f
airworthiness enabling i t to enter a i r l i n e s e r v i c e .
7 or
p o s s i b l y 8 a i r c r a f t w i l l e v e n t u a l l y be i n v o l v e d i n the
f l i g h t t e s t programme - two p r o t o t y p e s , two p r e - p r o d u c t i o n
a i r c r a f t and t h e f i r s t t h r e e o r p o s s i b l y f o u r p r o d u c t i o n
aircraft.
The f i r s t p r e - p r o d u c t i o n a i r c r a f t i s due t o f l y
i n mid-1971 and the f i r s t p r o d u c t i o n a i r c r a f t i n mid-1972.
4-.
The c r i t i c a l t e s t s which are s t i l l t o come a r e those
at Concorde's c r u i s i n g speed o f 11=2. I t w i l l be on the
r e s u l t s of t h e s e t e s t s t h a t the manufacturers w i l l d e c i d e
what performance guarantees can be g i v e n t o the a i r l i n e s
and the a i r l i n e s w i l l assess the a i r c r a f t ' s p a y l o a d and
o p e r a t i n g economics.
These t e s t s are c r u c i a l s i n c e a
commercial supersonic a i r l i n e r ' s p a y l o a d i s e x t r e m e l y s e n s i t i v e
q u i t e small changes i n performance.
A 1% i n c r e a s e , f o r
example, i n e i t h e r aerodynamic drag o r f u e l consumption i s
e q u i v a l e n t t o a l o s s o f about 1,200 l b o f p a y l o a d i . e . about
the l o s s o f s i x passenger s e a t s .
/The
to
The t e s t s so
far
5.
The French and B r i t i s h p r o t o t y p e s have "between them now
completed 223 hours o f f l i g h t t e s t of which 32 hours have been
at supersonic speed,. The French p r o t o t y p e reached a Mach
number o f 1.5^ b e f o r e , i n accordance w i t h the programme, b e i n g
grounded at the b e g i n n i n g o f February f o r m o d i f i c a t i o n s t o
bring i t up t o the standard r e q u i r e d f o r f l i g h t t e s t s a t Ms2.
I t w i l l s t a r t f l y i n g again i n September.,
The r e s u l t s from the
f l i g h t t e s t s have been s a t i s f a c t o r y .
The h a n d l i n g q u a l i t i e s
and the behaviour o f the a i r c r a f t : and i t s e n g i n e s have been
very good o v e r the whole speed range i n v e s t i g a t e d so f a r .
6.
The B r i t i s h p r o t o t y p e resumed f l y i n g i n March 1970 and
completed 12 hours o f s a t i s f a c t o r y f l y i n g up t o a rlach number
of 1=35 b e f o r e i t was grounded i n A p r i l t o i n s t a l l the more
powerful engines necessary f o r t e s t i n g a t 1^=2.
T h i s ground­
ing has taken l o n g e r than e x p e c t e d because o f a l a b o u r
d i s p u t e , which has now been s e t t l e d , a t BAC o v e r
overtime and weekend w o r k i n g .
These labour d i f f i c u l t i e s have
delayed the achievement o f f l i g h t s a t 11=2.
The t e s t s s t i l l
t o be done^
7.
When the Concorde D i r e c t i n g Committee r e p o r t e d t o
M i n i s t e r s l a s t November i t was e x p e c t e d t h a t some measurements
of performance at M=2 could be made by the end o f June 1970
but t h a t the r e s u l t s from t h e s e t e s t s would n o t be f u l l y
assessed i n terms o f p r o d u c t i o n a i r c r a f t performance b e f o r e
t h i s Autumn
As a r e s u l t o f the time l o s t by the l a b o u r
d i f f i c u l t i e s a t BAC the B r i t i s h assembled p r o t o t y p e i s now
u n l i k e l y t o f l y b e f o r e e a r l y August o r t o a c h i e v e Ms 2 u n t i l
September. O f f i c i a l s are u n l i k e l y t o complete t h e i r
e x t r a p o l a t i o n o f the M=2 r e s u l t s t o the performance o f the
production a i r c r a f t b e f o r e the b e g i n n i n g of 1971 o
0
8.
In November l a s t , the f i r m s t a r g e t date f o r o b t a i n i n g a
c e r t i f i c a t e o f a i r w o r t h i n e s s was mid-1973 compared w i t h an
o f f i c i a l s ' e s t i m a t e of Spring 1974-- As a r e s u l t o f a
re-examination o f the programme combined w i t h d e l a y s t o the
f i r s t t h r e e p r o d u c t i o n a i r c r a f t , the firms have a d j u s t e d t h e i r
t a r g e t t o September 1973 w i t h a contingency o f f o u r months
g i v i n g a " r e a l i s t i c " date o f January 1974.
Officials believe
that on the e x i s t i n g programme a c e r t i f i c a t e o f a i r w o r t h i n e s s
could be a c h i e v e d by mid-1974- by u s i n g another p r o d u c t i o n
a i r c r a f t (making a t o t a l o f f o u r ) i n the f l i g h t t e s t
programme. I t w i l l , however, now be necessary f o r a new
n o z z l e t o be a v a i l a b l e a t e n t r y i n t o s e r v i c e ,
( s e e para.,11
below).
The programme f o r t h i s new n o z z l e i s e x t r e m e l y t i g h t
and could l e a d t o the c e r t i f i c a t e of a i r w o r t h i n e s s b e i n g
delayed beyond mid-1974-o
/Payload
- 2 ­
Payload/Range
Performance
9.
I n November o f f i c i a l s c o n s i d e r e d t h a t improvements t o
the p r o p u l s i o n system then under a c t i v e development by the
firms could l e a d t o a payload at entry i n t o s e r v i c e o f
16,000 l b t o 17,000 l b which t o g e t h e r w i t h minor changes i n
a i r l i n e r e g u l a r i t y and o p e r a t i n g c o n d i t i o n s should a l l o w the
t a r g e t p a y l o a d on i n i t i a l e n t r y i n t o s e r v i c e f o r the P a r i s /
New York d e s i g n m i s s i o n o f 20,000 l b t o be achieved., A new
n o z z l e ( s e e paragraph 11 b e l o w ) was c o n s i d e r e d n e c e s s a r y t o
assure the t a r g e t p a y l o a d o f 25,000 l b two y e a r s a f t e r e n t r y
into serviceo
10o P o l l s Royce are a t p r e s e n t r e l u c t a n t t o guarantee an
improved engine performance a t entry i n t o s e r v i c e .
I f the
performance a t e n t r y i n t o s e r v i c e i n f a c t p r o v e s no b e t t e r
than R o l l s Royce are a t p r e s e n t w i l l i n g t o g u a r a n t e e , then
p r e s e n t assessment o f payload a t entry i n t o
officials
s e r v i c e f a l l s t o 14,500 l b .
O f f i c i a l s now have a h i g h
degree o f c o n f i d e n c e t h a t the engine performance promised by
R o l l s Royce a t e n t r y i n t o s e r v i c e can be achieved.,
Officials
however c o n s i d e r t h a t the t a r g e t payload of 20,0001b a t e n t r y
i n t o s e r v i c e can s t i l l be met by the i n t r o d u c t i o n o f the new
n o z z l e which could g i v e an i n c r e a s e o f payload 3,500 l b t o
4,000 l b and by a small change which i s e x p e c t e d t o be
a c c e p t a b l e t o the r e g u l a t o r y a u t h o r i t i e s i n the speed a t
which the a i r c r a f t should h o l d o v e r a i r p o r t s .
Officials
c o n s i d e r t h a t w i t h t h i s new n o z z l e and change i n h o l d i n g
procedure the t a r g e t p a y l o a d o f 25,000 l b two y e a r s a f t e r
entry i n t o s e r v i c e can a l s o be a c h i e v e d .
1
11. P r e l i m i n a r y s t u d i e s l a s t November suggested t h a t a
fundamental r e - d e s i g n o f the n o z z l e system would i n c r e a s e
O f f i c i a l s now c o n s i d e r on the
payloads by about 5,000 l b .
b a s i s o f e x p e r i m e n t a l work completed s i n c e then t h a t the
payload b e n e f i t i s l i k e l y t o be between 3,500 l b and 4,000 l b .
I f R o l l s Royce do not i n c r e a s e t h e i r guarantee on improved
engine performance at e n t r y i n t o s e r v i c e t h i s new n o z z l e w i l l
be necessary t o a c h i e v e the t a r g e t payload o f 20,000 l b at
entry i n t o s e r v i c e as w e l l as the t a r g e t p a y l o a d o f 25,000 l b
two y e a r s l a t e r .
12. The f i r m s ' p r o v i s i o n a l e s t i m a t e of the i n c r e a s e i n
development c o s t s as a r e s u l t o f the i n t r o d u c t i o n o f t h i s
new n o z z l e i s £20m of which about £6m would be e x p e n d i t u r e
at the UK f i r m s .
O f f i c i a l s b e l i e v e on the e v i d e n c e a v a i l a b l e
at p r e s e n t t h a t t h e e x t r a c o s t i s u n l i k e l y t o be l e s s than
£30m. While t h e r e i s now a much sounder b a s i s f o r o f f i c i a l s '
e s t i m a t e s o f the c o s t and t e c h n i c a l b e n e f i t of the new n o z z l e ,
a number o f key experiments need t o be completed b e f o r e a
much b e t t e r judgment can be made. I t i s u n l i k e l y t h a t t h i s
judgment can be made b e f o r e the end o f the y e a r .
/Officials'
-
3 ­
13. O f f i c i a l s ' b a s i c e s t i m a t e of performance i s , i n the
absence o f 11=2 r e s u l t s , s u b j e c t t o c o n s i d e r a b l e u n c e r t a i n t y
( I about 8,000 l b )
T h i s u n c e r t a i n t y w i l l not be s i g n i f i c a n t l y
reduced u n t i l 11=2 r e s u l t s have been a s s e s s e d .
I t is unlikely
that t h i s w i l l now be b e f o r e the b e g i n n i n g of 1971 Officials'
present e s t i m a t e s o f payload thus c o v e r a b r a c k e t which at i t s
h i g h e r end would l e a d t o a c o n c l u s i o n t h a t Concorde w i l l be a
t e c h n i c a l success but which a t the l o w e r end would l e n d t o the
conclusion t h a t Concorde would be a t e c h n i c a l f a i l u r e .
0
Airfield
14-.
Noise
Measurements on the p r o t o t y p e a i r c r a f t
suggest
that:-
Approach n o i s e i s l i k e l y t o be about the same as t h a t
o f the Boeing 707 o r DC 8 a i r c r a f t .
L a t e r a l n o i s e w i l l almost c e r t a i n l y be h i g h e r than t h a t
o f e x i s t i n g a i r c r a f t - the most l i k e l y f i g u r e b e i n g about
3 PNdB h i g h e r o
F l y o v e r n o i s e on some days i s l i k e l y t o be 2/3 PNdB
above the l e v e l s c u r r e n t l y p e r m i t t e d a t London and
New Y o r k .
15- Work i s c o n t i n u i n g on improved, s i l e n c e r s and i t i s hoped
that t e s t s during the remainder of t h i s y e a r w i l l confirm
t h e i r p r e d i c t e d b e n e f i t s ( r e d u c t i o n of about 2PHdB).
O f f i c i a l s remain o f the v i e w t h a t t h e r e i s a good chance
that t h e s e improved s i l e n c e r s w i l l be ready f o r e n t r y i n t o
service.
16. C o n c o r d e ' s engine n o i s e continues t o be a source o f
concern. H o p e f u l l y , Concorde may a t e n t r y i n t o s e r v i c e j u s t
scrape i n s i d e the e x i s t i n g l i m i t s a t Heathrow and Kennedy.
Any i n c r e a s e i n the s e v e r i t y o f the e x i s t i n g l i m i t s would have
a s e r i o u s e f f e c t on the o p e r a t i o n o f the a i r c r a f t o
Development Costs
17. I n November 1969 the b a s i c development e s t i m a t e was
£'727m a t October 1969 p r i c e s w i t h a c o n t i n g e n c y o f £109m
g i v i n g an upper b r a c k e t of £836m. The then M i n i s t e r o f
Technology informed the House on 26th January t h a t the
development c o s t s were e s t i m a t e d a t £730m a t October 1969
prices.
He made i t c l e a r t h a t t h i s e s t i m a t e excluded the
costs o f improvements t o the p r o p u l s i o n system which were
l i k e l y t o be necessary and t h a t the c o s t s o f t h e s e i m p r o v e ­
ments would be w i t h i n the margin o f 15% o f the b a s i c e s t i m a t e .
( I n the p r e v i o u s May the M i n i s t e r had s t a t e d i n the House t h a t ,
i f f u r t h e r changes beyond the then b a s i c e s t i m a t e of £730m a t
January 1969 p r i c e s were proposed such as t o i n c r e a s e the
estimated development c o s t by more than some 15% the Government
would p r o b a b l y be f a c i n g a demand f o r a fundamental r e - d e s i g n
of the a i r c r a f t ) .
/When
18. When allowance i s made f o r improvements t o the e n g i n e ,
the e x t e n s i o n o f the date f o r the c e r t i f i c a t e of a i r w o r t h i n e s s
u n t i l mid-1974 and f o r c e r t a i n o t h e r changes, the b a s i c
estimate becomes £755M a t October 1969 p r i c e s . When
converted t o January 1970 p r i c e s t h i s becomes £770m. To t h i s
has t o be added the c o s t o f d e v e l o p i n g the new n o z z l e which
o f f i c i a l s e s t i m a t e i s u n l i k e l y t o he l e s s than £30m.
This
g i v e s a b a s i c e s t i m a t e at January 1970 p r i c e s of £800m.
19- This e s t i m a t e c o n t a i n s margins t o c o v e r only such
unplanned work as may normally be e x p e c t e d t o a r i s e during
the programme as c u r r e n t l y e n v i s a g e d .
The p r e v i o u s upper
bracket o f £836m at October 1969 p r i c e s i s e q u i v a l e n t t o
£853m at 1970 p r i c e s .
Thus the o v e r a l l c o n t i n g e n c y has now
been reduced t o £53m.
20. I f r e s u l t s a t £1=2 t u r n out t o be s i g n i f i c a n t l y b e t t e r than
o f f i c i a l s currently expect, there i s a reasonable prospect of
costs b e i n g c o n t a i n e d w i t h i n the p r e s e n t upper l i m i t o f £853m.
I f , however, the r e s u l t s prove t o be v e r y much as o f f i c i a l s
p r e d i c t , t h e r e w i l l s t i l l be a number o f u n c e r t a i n t i e s remaining
and t a k i n g i n t o account t h e f a c t t h a t f i v e o r s i x y e a r s o f
development remain, some i n c r e a s e i n t h e upper l i m i t i s l i k e l y
to be n e c e s s a r y .
I n the v i e w of UK o f f i c i a l s t h i s could be o f
the o r d e r o f £50m. I n c e r t a i n circumstances the i n c r e a s e could
be g r e a t e r .
O f f i c i a l s w i l l not however have a f i r m b a s i s on
which t o assess the upper l i m i t u n t i l the
t e s t s have shown
the e x t e n t o f what f u r t h e r m o d i f i c a t i o n s , i f any, need t o be
made.
Selling
Price
21. The firms have proposed t h a t the s e l l i n g p r i c e at January
1970 p r i c e s should be an average o f $24.8m on the b a s i s o f a
production run o f 150. They have warned t h a t i n t h e i r v i e w
t h i s p r i c e i s a l r e a d y high ( t h e l a s t f i g u r e mentioned t o
a i r l i n e s was $21.5m) and the market would not bear s i g n i f i c a n t
increase i n t h i s p r i c e .
However o f f i c i a l s ' p r o v i s i o n a l v i e w ,
subject t o d i s c u s s i o n s w i t h the f i r m s , i s t h a t the f i r m s '
estimates o f p r o d u c t i o n c o s t s are u n d e r s t a t e d by about 10%.
-
5
­
22.
I f , as i s p r o b a b l e , t h e r e remains a s u b s t a n t i a l gap
between o f f i c i a l s and f i r m s ' e s t i m a t e of what the s e l l i n g
p r i c e should b e , we w i l l f a c e a d i f f i c u l t s i t u a t i o n w i t h
the firms and p o s s i b l e a l s o the French.
23. At the Concorde D i r e c t i n g Committee French o f f i c i a l s have
taken the l i n e t h a t the two Governments should not f i x
the
s e l l i n g p r i c e but t h a t t h i s should be l e f t t o the commercial
judgment o f the firms who should be made t o b e a r the consequen­
ces i f t h e i r judgment proves wrongs
The French p o s i t i o n i s
somewhat u n r e a l since t h e i r firms are l a r g e l y under p u b l i c
ownership and any l o s s e s on Concorde would u l t i m a t e l y f i n d
t h e i r way back t o the French Government.
I f , however, the
French s t i c k t o the l i n e they have taken so f a r , i t w i l l
present v e r y r e a l d i f f i c u l t i e s f o r us s i n c e the only
production f i n a n c i n g arrangement the UK f i r m s have so f a r
been prepared t o contemplate i s one under which HMG would b e a r
any l o s s e s t h a t may be i n c u r r e d .
A i r l i n e Orders and Commercial P r o s p e c t s
24. 16 a i r l i n e s have taken out 7^ o p t i o n s f o r Concorde.
They have p a i d i n d e p o s i t s about £3.5m in. t o t a l (£1.8m t o B A C ) .
The o p t i o n s do no more than r e s e r v e a p l a c e i n the d e l i v e r y
queue. The o p t i o n s , which were r e - n e g o t i a t e d i n Spring 1969,
e x p i r e d at the end of June 1970 and the f i r m s are c u r r e n t l y
v i s i t i n g the a i r l i n e s t o n e g o t i a t e an e x t e n s i o n of the
options u n t i l 31st March 1971 - I f , as o f f i c i a l s e x p e c t ,
the r e s u l t s o f the f l i g h t t e s t s at M^2 cannot be assessed
u n t i l the b e g i n n i n g o f 1971, i t i s u n l i k e l y t h a t the f i r s t
c o n t r a c t s w i t h a i r l i n e s w i l l be signed b e f o r e A p r i l 1971­
25. Other a i r l i n e s w i l l not order Concorde u n t i l BOAC and
A i r France have done s o . BOAC and A i r France t h e r e f o r e h o l d
the key t o a i r l i n e o r d e r s .
The a t t i t u d e o f A i r France i s n o t
known and they w i l l not have completed t h e i r assessment of
Concorde u n t i l September.
B.O.A.C.,
however,
/are
- 6 ­
are p e s s i m i s t i c about the e f f e c t t h e i n t r o d u c t i o n o f Concorde
would have on t h e i r p r o f i t a b i l i t y . S t u d i e s by an o u t s i d e
consultant s u g g e s t t h a t t h e r e are ways i n which BOAC c o u l d
improve t h e i r f i n a n c i a l p o s i t i o n by o p e r a t i n g Concorde, but
BOAC could improve t h e i r f i n a n c i a l p o s i t i o n by o p e r a t i n g Concorde,
but BOAC c o n s i d e r t h a t these s u g g e s t i o n s are i m p r a c t i c a b l e and
f i r m l y m a i n t a i n t h a t the i n t r o d u c t i o n of Concorde w i l l worsen
t h e i r f i n a n c i a l position.,
Their l a t e s t expenditure f o r e c a s t s
implied t h a t t h e y would l e a s e Concorde.
There i s a s t r o n g
p o s s i b i l i t y t h a t t h e y w i l l r e f u s e t o o p e r a t e Concorde w i t h o u t
a subsidy,
26.
A i r l i n e s g e n e r a l l y a r e g o i n g through a d i f f i c u l t
f i n a n c i a l p o s i t i o n and they are f i n d i n g i t d i f f i c u l t t o r a i s e
credito
No US a i r l i n e has o r d e r e d any more o f the b i g new
subsonic a i r c r a f t f o r more than a y e a r .
Estimates o f when the
p o s i t i o n w i l l ease v a r y c o n s i d e r a b l y but i t i s g e n e r a l l y agreed
that c a p i t a l f o r f u r t h e r a i r c r a f t purchases w i l l be d i f f i c u l t
to obtain f o r a c o n s i d e r a b l e time t o come and t h a t i n t e r e s t
rates w i l l be h i g h . I n t h i s f i n a n c i a l s i t u a t i o n , US a i r l i n e s
would appear t o be t h i n k i n g i n terms of o n l y o r d e r i n g t h e
minimum number o f a i r c r a f t n e c e s s a r y t o m a i n t a i n t h e i r competitive
position.
E a s t e r n A i r l i n e s have d e c i d e d t o renew t h e i r o p t i o n
but have s a i d t h e y w i l l need l e s s
than s i x a i r c r a f t .
American
A i r l i n e s e x p e c t t o renew t h e i r ! o p t i o n but do not e n v i s a g e a
large f l e e t .
TWA c o n s i d e r they w i l l is&re t o buy a few i f
Concorde e n t e r s s e r v i c e w i t h PanAm. U n i t e d c o n s i d e r t h a t the
routes on which t h e y could use Concorde l o o k u n a t t r a c t i v e
because the t r a f f i c i s almost w h o l l y t o u r i s t w i t h an i n c r e a s i n g
emphasis on group and p r o m o t i o n a l f a r e s but w i l l p r o b a b l y renew
t h e i r o p t i o n as a d e f e n s i v e measure,
PanAm b e l i e v e the advent
of SST o p e r a t i o n s t o be premature but a c c e p t t h a t t h e y might
be f o r c e d t o o r d e r Concorde i f BOAC and A i r France d i d ,
27,
B e f o r e t h e s e v i e w s o f a i r l i n e s were o b t a i n e d , o f f i c i a l s attempted t o a s s e s s Concorde's o v e r a l l commercial p r o s p e c t s . Mr. Wedgweod Benn a g r e e d when he met M, Mondon l a s t December that o f f i c i a l s should up-date a r e p o r t made i n 1967 by a Committee o f B r i t i s h and French o f f i c i a l s , known as the Concorde Ecogom^c^Prospects Committee (CEPC). The Committee r e p o r t e d -at the
28.
There i s r e a s o n a b l y c l o s e agreement between the UK and French Members o f the Committee on the l i k e l y range of s a l e s at a p r i c e o f $28m i n January 1970 p r i c e s UK members o f t h e Committee e s t i m a t e t h a t the range o f p o s s i b l e s a l e s i s between 50-150 and the French Members 85-155,
The UK Members, however, c o n s i d e r t h a t the balance o f p r o b a b i l i t i e s i s t h a t sales a r e more l i k e l y t o be w i t h i n the lower end o f the range i , e . 50-100 w h i l e the French Members b e l i e v e t h a t the most l i k e l y l e v e l o f s a l e s w i l l be about 130. /29.
Both the
29o Both the UK and French Members o f the Committee a r e
agreed that t h e r e i s no p r o s p e c t of r e c o v e r i n g any of the
£4-80m the two c o u n t r i e s w i l l have spent or committed by
30th June, They a r e a l s o ageed t h a t only a p r o p o r t i o n ,
depending on the numher of s a l e s , of the e x p e n d i t u r e o u t ­
standing a f t e r 30th June w i l l be r e c o v e r e d ,
30c
The f o r e i g n exchange b e n e f i t s and i m p l i e d p r e f e r e n c e s
for the UK a s s o c i a t e d w i t h t h e v a r i o u s e s t i m a t e s a r e as
follows:­
- 8 ­
All money figures in £m and not; of
import content
8% of cost)
Discount r a t e = 10%
No. of
Sales
Development
c o s t ^ £800m
Undiscounted
expenditure
UndisU n d i s -
counted
counted surplus
receipts (Deficit)
Discounted
receipts
(89)
447
289
158
55%
DisImplied/^\ I n t e r n a l
counted p r e f e r e n c e r a t e o f
l o s s
return
50
679
590
100
1099
1148
- 51
655
514
14-1
27%
.4%
150
1482
1687
205
831
728
103
14%
3*3%
(116)
466
289
61%
Negative
23
178
674-
514
177
160
850
728
122
17%
50
706 590
Development
c
w o s t = £853m
100
1125
1148
O
150
1509
1687
m
Discounted
expenditure
Negative
31%
mm
m
F
J m
O
JO
( 1 )
1=15
Note ( i )
Discounted l o s s as % o f
receipts.
discounted
m
H
The d i s c o u n t e d f i g u r e s assume t h a t Concorde s a l e s w i l l i n c l u d e an a v e r a g e o f 10 y e a r s c r e d i t
f o r 80% o f t h e purchase p r i c e , and t h a t , the e x p o r t c r e d i t i n t e r e s t r a t e w i l l a v e r a g e 6-5-%.
The d i f f e r e n c e between t h e e x p o r t c r e d i t i n t e r e s t r a t e and t h e d i s c o u n t r a t e has been taken
i n t o account i n calculating the d i s c o u n t e d " r e c e i p t s " column.,
( i i ) The c a l c u l a t i o n s a l s o assume t h a t c o s t s , r e c e i p t s , and l o s s e s w i l l be shared e q u a l l y
between t h e two c o u n t r i e s .
I n p r a c t i c e the U.K. w i l l be r e s p o n s i b l e f o r l e s s than h a l f
o f t h e p r o d u c t i o n and t h e i m p l i e d p r e f e r e n c e s would range between 2-8 p e r c e n t a g e p c i n t s
h i g h e r than t h e s e i n d i c a t e d a b o v e .
I t should be noted t h a t -these c a l c u l a t i o n s take no account
of c o s t s r i s i n g beyond the present upper l i m i t o f £853m o r
the p o s s i b i l i t y t h a t i t may not be p o s s i b l e t o r e a l i s e a
s e l l i n g p r i c e of 028m i n which case the l o s s e s would be
g r e a t e r than those i n d i c a t e d above.
Production Programme
3 1 . The f i r m s c u r r e n t l y have a u t h o r i t y t o continue
manufacture o f the f i r s t 6 p r o d u c t i o n a i r c r a f t ( o f which t h e
f i r s t t h r e e - and p o s s i b l y the f o u r t h - w i l l be used i n the
f l i g h t t e s t programme) u n t i l September 1970- A u t h o r i t y has
also been g i v e n up t o September 1970 t o o r d e r l o n g - d a t e d
m a t e r i a l s f o r a i r c r a f t 7 - 1 0 and to o r d e r m a t e r i a l s f o r an
i n i t i a l batch of p r o d u c t i o n e n g i n e s .
Matching engine
a u t h o r i s a t i o n s have a l s o been g i v e n .
32. According t o the p r o d u c t i o n programme t o which the
firms have been working, a u t h o r i t y t o s t a r t manufacture o f
a i r c r a f t 7-10 and t o o r d e r m a t e r i a l s f o r the next batch o f
a i r c r a f t ( N o s . 1 1 - 1 6 ) should have been g i v e n at the end o f June
1970. O f f i c i a l s recommend, however, t h a t t h e s e f u r t h e r
a u t h o r i t i e s should not be g i v e n t o the f i r m s b e f o r e a
number o f f l i g h t s at M=2 have been a c h i e v e d .
Production Financing
33* Phe I n d u s t r i a l Expansion Act p r o v i d e s f o r t h e Government
to l o a n or guarantee £125m t o f i n a n c e Concorde p r o d u c t i o n .
I t was e s t i m a t e d f o r the l a s t P u b l i c Expenditure Survey
Review t h a t t o f i n a n c e 150 a i r c r a f t programme the Government
would need t o l e n d £160m and t h e Banks p r o v i d e a g a i n s t
Government guarantees a f u r t h e r £25m. This e s t i m a t e i s
c u r r e n t l y b e i n g r e - a s s e s s e d i n the l i g h t o f t h e changes t o
the p r o d u c t i o n programmes.
34. Terms f o r f i n a n c i n g p r o d u c t i o n have not y e t been
agreed w i t h BAC or R o l l s R o y c e . P r o d u c t i o n i s a t p r e s e n t
being f i n a n c e d under d i r e c t c o n t r a c t from the Department.
BAC and R o l l s Royce have so f a r r e j e c t e d any scheme which
would l e a v e them w i t h a r i s k o f l o s s on the grounds t h a t t h e
r i s k i s t o o l a r g e and t h a t , since Concorde i s a j o i n t
p r o j e c t , t h e y are not i n f u l l c o n t r o l o f t h e s i t u a t i o n .
The o n l y scheme which seems t o be n e g o t i a b l e i s one i n which
the companies would r e c e i v e a minimum r e t u r n on c a p i t a l
employed, although one s u b s t a n t i a l l y below the standard
non-risk r a t e f o r Government c o n t r a c t s , even i f t h e
p a r t i c u l a r a i r c r a f t batch or p r o d u c t i o n programme as a whole
r e s u l t e d i n a l o s s t o t h e Government.
/The p r e s e n t
- 10 ­
The p r e s e n t f i n a n c i a l
position
35.
The UK share o f the present b a s i c e s t i m a t e of Concorde
extramural development c o s t o f £800m at January 1970 p r i c e s
i s £394m, o f which about £230m had been spent by June 30th 1 9 7 0 ,
I f Concorde were c a n c e l l e d a d d i t i o n a l c a n c e l l a t i o n c o s t s would
probably amount t o between £20m and £30m,, Assuming no f u r t h e r
e s c a l a t i o n on t h e b a s i c estimate c a n c e l l a t i o n on June 3 0 t h
would t h e r e f o r e have i m p l i e d a s a v i n g o f about £135/145m, t o
which should be added about £15m o f o u t s t a n d i n g intramural
and o t h e r m i s c e l l a n e o u s development c o s t s .
The breakdown of
t h i s saving by y e a r s would be as f o l l o w s :
1970/1C -) 1971/2
3
2/12
1972/5
1975/4
1974/5
1975/6
Later years
35
24
18
12
12
47
(l)
assumes a l l
cancellation costs f a l l
i n 1970/1
36.
I n a d d i t i o n t o meeting the c o s t o f development, the
Government w i l l a l s o be r e s p o n s i b l e f o r l e n d i n g or g u a r a n t e e i n g
the working c a p i t a l n e c e s s a r y t o f i n a n c e p r o d u c t i o n .
Expenditure t o June 3 0 t h 1970 t o t a l l e d about £12m, and the
net c a l l s on Government funds ( i . e . the c o s t o f p r o d u c t i o n
net o f f o r e c a s t r e c e i p t s and e x c l u d i n g sums guaranteed by t h e
Government but p r o v i d e d from o u t s i d e s o u r c e s ) are expected on
the l a t e s t e s t i m a t e s a v a i l a b l e t o f a l l as f o l l o w s :
1970/1^
12
(l)
1971/2
1972/5
1975/4
1974/5
29
51
48
12
e x p e n d i t u r e from 3 0 . 6 . 7 0
only
37"
I I we continue t o March 31st 1971 we s h a l l i n c u r a
f u r t h e r £35m on extramural development p l u s £3/4m on
intramural development and about £10m on p r o d u c t i o n : say
£50m i n
all.
16 July 1970
CP(70)16
C O P Y NO
54
17 July 1970
CABINET
P O S T A L A N D R E M I T T A N C E SERVICE CHARGES
M e m o r a n d u m by fche Chief S e c r e t a r y ,
Treasury
A t the request of. the E c o n o m i c Strategy C o m m i t t e e I have discussed
with the M i n i s t e r of P o s t s and T e l e c o m m u n i c a t i o n s the P o s t Office*s
proposals f o r i n c r e a s i n g tariffs f o r postal and r e m i t t a n c e c e r v i c e s .
The
main p r o p o s a l is f o r an i n c r e a s e of 2d next January (to 6d and 7d) in the
basic t w o - t i e r postal r a t e s ; these would be converted (in a c c o r d a n c e with
the n o r m a l c o n v e r s i o n table) fco 2gp and 3p on d e c i m a l i s a t i o n .
2.
The proposed I n c r e a s e s in postal r a t e s would y i e l d come
£130 m i l l i o n in a full y e a r .
The P o s t Office e s t i m a t e that this would
convert an expected l o s s of £263 m i l l i o n into a profit of £4-0 m i l l i o n o v e r
the 5 y e a r s ending March 1973: this would enable the P o s t Office v e r y
nearly to r e a c h their financial objective on postal s e r v i c e s o v e r the p e r i o d ,
which is to c o v e r c o s t s and return an additional 2 per cent (about
£8 m i l l i o n a y e a r ) on expenditure.
3.
In m y v i e w the assumptions underlying these f o r e c a s t s a r e , if
anything, o p t i m i s t i c .
Earnings a r e assumed to r i s e by 5 f p e r cent a y e a r ,
compared with 10 p e r cent ( a l r e a d y a g r e e d ) in 1970-71.
P r o d u c t i v i t y , which
in the past has r i s e n by no m o r e than jr p e r cent a y e a r , is assumed t o build
up to lj p e r cent a y e a r , f o r a l a b o u r - i n t e n s i v e industry with an immediate
prospect of diminishing t r a f f i c , this w i l l not be e a s y .
4.
T h i s means taking a tough attitude to wage d e m a n d s .
The
Government can r e i n f o r c e their determination on this issue by stating
publicly that no further i n c r e a s e s In postal c h a r g e s should be needed f o r
at least 3 y e a r s .
If in the event a further i n c r e a s e w e r e n e e d e d , the
Government would then be able publicly to identify the cause as e x c e s s i v e
wage i n c r e a s e s .
5,
T h e f o l l o w i n g table g i v e s the financial p r o s p e c t s in g r e a t e r d e t a i l .
This shows accumulated l o s s e s assuming future wage i n c r e a s e s ( a ) of
5j p e r cent a y e a r (the P o s t O f f i c e s assumption) and ( b ) of 8 p e r cent a
year.
It a l s o shows the effect on these l o s s e s of increasing the basic
tariffs by Id and 2d r e s p e c t i v e l y ,
T
1
A c c u m u l a t e d L o s s e s / P r o f i t s on P o s t s (excluding G i r o and
R e m i t t a n c e S e r v i c e s ) in £ m i l l i o n
A t current t a r i f f s
(a)
5l%
Id increase ( f p )
(b)
8%
(a)
(b)
8%
1
-
1
19
-
19
47
38
-
40
56
* 66
6
-
4
88
-119
+
9
-130
-159
End 1968-59
-
1
-
1
-
1
-
1
1969-70
-
19
-
19
-
19
-
19
1970-71
-
64
-
66
- 45
-
1971-72
-150
-161
-
1972-73
-263
-296
-
-305
-338
Surplus (-f-) or
Shortfall (-)
on t a r g e t o v e r
5 years
2d i n c r e a s e ( l p )
(b)
(a)
5f%
8%
+
39
3
-
33
6.
T h e s e f i g u r e s show that, g i v e n the accumulation of l o s s e s f r o m the
past, e v e n a r i s e of 2d next January would, on optimistic assumptions,
b a r e l y enable the P o s t Office to m e e t their financial objective o v e r the
p e r i o d : at the same time it should m e a n that no further i n c r e a s e s would be
r e q u i r e d f o r at l e a s t three y e a r s .
E v e n if a l o w e r financial s y s t e m w e r e
set the case f o r a tariff i n c r e a s e v/ould not be affected..
With an i n c r e a s e
of only Id the postal s e r v i c e s would n e v e r get out of the r e d , and would be
left with cumulative l o s s e s approaching £100 m i l l i o n by 1972-73, A s m a l l e r
i n c r e a s e than the P o s t Office a r e asking f o r (and, a f o r t i o r i , no i n c r e a s e
at a l l ) v/ould l e a v e the postal s e r v i c e with a substantial deficit which could
only be m e t by c r o s s - s u b s i d i s a t i o n f r o m the telecommunications side of the
business.
A m o n g the objections to this a r e :
i.
Suspending the n o r m a l discipline on the P o s t Office to
act c o m m e r c i a l l y would be bad f o r m o r a l e and e f f i c i e n c y .
i i .
In e c o n o m i c t e r m s , there is a risk that c r o c s - s u b s i d i s a t i o n
would l e a d to a m i s a l l o c a t i o n of r e s o u r c e s as between posts and
t e l e c o m m u n i c a t i o n s , with consequential a d v e r s e effects on industrial
efficiency generally.
i i i .
T h e r e would be a l o s s to the Exchequer of up to £130 m i l l i o n
a y e a r - equivalent to say 3d in the £ on income tax,
i v .
The gain in t e r m s of influencing the w a g e - p r i c e s p i r a l is
doubtful: allowing f o i the demand effects of the l o s s of r e v e n u e , it
a p p e a r s unlikely that postal tariffs have any a p p r e c i a b l e impact on
wage c l a i m s .
v .
T h e r e is no r e a s o n in equity why the cost cf the postal
s e r v i c e s should f a l l on the taxpayer rather than the c o n s u m e r .
2
vi.
Once a f o r m of subsidy has been d e l i b e r a t e l y introduced,
there would be continual p r e s s u r e f o r its use to be extended.
vii,
W e should need a succession of tariff i n c r e a s e s (say three
i n c r e a s e s of Id within two y e a r s ) to get back on c o u r s e , v/lthout
the opportunity we now have of attributing them to the position w e
have inherited.
7.
Curtailment of the s e r v i c e offers no immediate solution.
The
P o s t O f f i c e s v i e w is that the only reduction cf s e r v i c e which could make a
significant impact on finance would be to do away with the second d e l i v e r y .
T h i s would save no m o r e than £15-£20 m i l l i o n p e r annum, would take some
y e a r s to b e c o m e fully e f f e c t i v e , and would t h e r e f o r e not m a t e r i a l l y effect
the c a s e f o r the p r i c e I n c r e a s e s now p r o p o s e d .
The P o s t Office advise
that it would be unwise, and would produce the w o r s t p o s s i b l e public
r e a c t i o n , to combine a tariff i n c r e a s e with a worsening of s e r v i c e .
t
CONCLUSION
8.
F o r these r e a s o n s I conclude that our best course is not to stand in
the w a y of the P o s t O f f i c e s p r o p o s a l s on postal and r e m i t t a n c e s e r v i c e s ,
A d e c i s i o n is needed u r g e n t l y to enable the P o s t Office to p r e p a r e for the
change and f o r d e c i m a l i s a t i o n : It w i l l a l s o help to connect the i n c r e a s e s
m o r e c l o s e l y to v/age settlements a l r e a d y a l l o w e d .
The following a r e my
recommendations:
t
i.
That the P o s t Office should be allowed to consult the P o s t
Office U s e r s National Council at once about their tariff p r o p o s a l s .
T
ii.
Pending the C o u n c i l s R e p o r t , the M i n i s t e r of P o s t s and
T e l e c o m m u n i c a t i o n s should f o r m a l l y r e s e r v e the G o v e r n m e n t s
position,
iii.
When the i n c r e a s e s a r e eventually a g r e e d , the Government
should state that in their v i e w no further i n c r e a s e s should be needed
on postal tariff 3 f o r at l e a s t another three y e a r s ,
iv.
The M i n i s t e r of P o s t s and T e l e c o m m u n i c a t i o n s might be
invited to' consider the need f o r a longer t e r m study of the postal
s e r v i c e s , to include organisation and management, the future of the
two-tier system and the consequences of c r o s s - s u b s i d i s a t i o n .
M V M
T r e a s u r y C h a m b e r s SW1
17 July 1970
3
C P ( 7 0 ) 17 C O P Y No
54
17 July 1970
CABINET
C O N C O R D E j T H E L E G A L P O S I T I O N I N J U L Y 1970
M e m o r a n d u m by the A t t o r n e y - G e n e r a l and
the S o l i c i t o r - G e n e r a l
If the B r i t i s h G o v e r n m e n t decided that it wished to withdraw
f r o m the Concorde p r o j e c t it is unlikely that F r a n c e would a g r e e t o
cancellation.
If B r i t a i n withdrew unilaterally F r a n c e would probably
take the c a s e to the International Court a l l e g i n g a b r e a c h of the o r i g i n a l
A n g l o - F r e n c h M e m o r a n d u m of Understanding of 29 N o v e m b e r 1962, and
claiming damages.
This Memorandum of Understanding is r e g i s t e r e d
as a T r e a t y at the United Nations and it would be e n f o r c e d by the
International Court of Justice as such.
It contains no p r o v i s i o n
e x p r e s s l y p e r m i t t i n g either party t o withdraw f r o m it.
2.
E f f o r t s in 1967 and 1968 by the B r i t i s h G o v e r n m e n t to reach
a g r e e m e n t with F r a n c e upon the c i r c u m s t a n c e s in which the p r o j e c t
should be c a n c e l l e d culminated in an exchange of c o r r e s p o n d e n c e in
September 1968 between M r . Wedgwood Benn and the then F r e n c h
M i n i s t e r of T r a n s p o r t , M . Chamant,
T h i s exchange included p r o v i s i o n
to the e f f e c t . ­
(a)
that the future of the p r o j e c t must be judged by its c o m m e r c i a l p r o s p e c t s j and, (b)
that if at the end of 1969 the e s t i m a t e d d e v e l o p m e n t c o s t e x c e e d e d £600 m i l l i o n at January 1966 p r i c e s , each of the two
M i n i s t e r s was " t o propose t o their r e s p e c t i v e Governments an
amendment t o the o r i g i n a l Memorandum of Understanding of 1962 r e l e a s i n g each Government f r o m any automatic obligation
t o continue the p r o j e c t j o i n t l y " .
In the e v e n t the £600 m i l l i o n
f i g u r e was e x c e e d e d b e f o r e the end of 1969. 3.
A t the end of 1969 the F r e n c h M i n i s t e r said that soundings amongst
his c o l l e a g u e s indicated that if he proposed such an amendment to t h e m ,
his G o v e r n m e n t would refuse to a c c e p t it.
D i f f e r e n c e s a r o s e between the
two Governments as t o the interpretation t o be put upon the c o r r e s p o n d e n c e ,
and since these d i f f e r e n c e s could not be r e s o l v e d , each Government
continued f r o m the end of 1969 on the b a s i s of its own a s s e r t i o n as to the
1
c o r r e c t interpretation.
In p a r t i c u l a r , the B r i t i s h G o v e r n m e n t made it
c l e a r that it maintained its v i e w as t o the extent of our c o m m i t m e n t as
set cui in the e a r l i e r c o r r e s p o n d e n c e and n e g o t i a t i o n s , but that without
prejudice t o this v i e w it was p r e p a r e d t o continue with the p r o j e c t until
the end of June 197 0.
4.
Having r e v i e w e d the B r i t i s h l e g a l position in the light of the
history of the p r o j e c t and the negotiations that have taker, p l a c e , we
have c o m e to the f o l l o w i n g conclusions.
LIABILITY
5.
The f i r s t question is w h e t h e r , if B r i t a i n withdrovv u n i l a t e r a l l y at
this s t a g e , the International Court would hold B r i t a i n liable in d a m a g e s to
France.
The B r i t i s h c a s e would r e s t on t h r e e p r i n c i p a l grounds.
( a )
That t h e r e had b e e n such a fundamental change in the c i r c u m s t a n c e s
surrounding the p r o j e c t since 1962 as t o justify us in international
l a w as withdrawing f r o m the treaty,
(b)
The Benn/Chamant c o r r e s s p o n d e n c e r e f e r r e d t o a b o v e .
K
F r a n c e refused to r e l e a s e B r i t a i n , the B r i t i s h c a s e would be ­
( c )
( i )
that in so doing the F r e n c h w e r e not acting in good faith
and that w h a t e v e r the construction t o be put upon the
c o r r e s p o n d e n c e , it did at l e a s t show that in 1968 the two
G o v e r n m e n t s w e r e in a g r e e m e n t that c i r c u m s t a n c e s
could a r i s e in which it would be quite unreasonable to go
on with the p r o j e c t ;
( i i )
that in v i e w of a l l the set-backs and the e s c a l a t i o n in
c o s t s since 1968, it was utterly unreasonable of F r a n c e
t o demand that B r i t a i n should g o on,
B r i t a i n would argue that it was f r o m the outset i m p l i c i t in the
a g r e e m e n t that the continued participation of the t w o G o v e r n m e n t s
in the p r o j e c t was dependent upon c r i t e r i a of cost and c o m m e r c i a l
p r o s p e c t s , and that this i m p l i c a t i o n had b e e n f o r t i f i e d by the
subsequent Benn/Charnant exchange.
A s things had turned out
these c r i t e r i a could not be m e t , with the r e s u l t that we w e r e
entitled to withdraw.
W e d o not know t o which of these grounds the Court would attach
m o s t weight.
W h i l e the outcome of litigation b e f o r e the International
Court is always difficult to p r e d i c t , on the whole we think the Court would
be m o r e l i k e l y t o find in our favour than t o find against u s .
In our opinion
the odds can be a s s e s s e d as t o 6 to 4 in our f a v o u r .
2
6,
We have c o n s i d e r e d the v a r i o u s heads under which F r a n c e might be
expected to c l a i m d a m a g e s .
We understand that the possibility of the
F r e n c h continuing with the p r o j e c t alone can be discounted, since the burden
on their e c o n o m y would be unacceptable.
On this assumption, F r a n c e
would no doubt c l a i m under the following h e a d s : ­
(a)
( a )
P a s t expenditure.
( b )
L o s s of f o r e i g n exchange.
( c )
Cancellation c h a r g e s .
P a z t Expenditure
The F r e n c h would argue that the money a l r e a d y spent was money thrown
away.
We understand that there is nothing substantial in the way of
incidental benefits (technological fallout s o - c a l l e d ) that B r i t a i n could c l a i m
to set off against what the F r e n c h have spent.
They have spent or
c o m m i t t e d s o f a r about £230 m i l l i o n .
The B r i t i s h r e p l y would be that
this was money thrown away anyway and that e v e n if we had continued they
would have got none of it backs
This appears f r o m paragraph 30 of the
Minister of T e c h n o l o g y ' s present paper, b a s e d upon the a s s e s s m e n t of the
joint E c o n o m i c P r o s p e c t s C o m m i t t e e .
In f a c t by cancelling now we w i l l
be saving t h e m money because on any showing not a l l future expenditure
w i l l be r e c o v e r e d , as that paper e x p l a i n s .
H o w e v e r , we cannot be sure
that the International Court would accept this argument.
The Court might
take the v i e w that the making of profits w a s not the p u r p o s e , or at a l l
events the sole p u r p o s e , of the t w o Governments,.
It they took that v i e w
the Court might a s s e s s damages payable to F r a n c e on two b a s e s : ­
( i )
( i i )
That F r a n c e was entitled t o b e compensated to che extent
of the whole of the money thrown away, that is to s a y ,
£230 m i l l i o n .
That total r e i m b u r s e m e n t to that extent was quite u n r e a l i s t i c ,
but that F r a n c e was entitled to s o m e payment to compensate her
f o r what one
might c a l l " l o s s of p r e s t i g e " resulting f r o m
the failure of the p r o j e c t .
It is impossible to f o r e c a s t what
the m e a s u r e of damages might be on this footing.
The Court
might take a f i g u r e vaguely equivalent to the cancellation
c h a r g e s discussed under sub-paragraph ( c ) b e l o w , say
£20 m i l l i o n - £30 m i l l i o n .
A s between these two p o s s i b i l i t i e s , we c o n s i d e r that it is m o s t unlikely
that the toical r e i m b u r s e m e n t basis would commend itself t o the C o u r t , but
one cannot e n t i r e l y exclude that p o s s i b i l i t y .
The " l o s s of p r e s t i g e " b a s i s
is much the m o r e probable.
3
The F r e n c h might argue that because of the B r i t i s h withdrawal they a r e no
longer in a position to earn the f o r e i g n exchange that they would have
earned f r o m the sale of the a i r c r a f t a b r o a d , and that B r i t a i n was liable t o
compensate them f o r this l o s s .
In c e r t a i n c i r c u m s t a n c e s , the incurring of
expenditure m a y be justified in o r d e r t o e a r n f o r e i g n exchange.
Beyond a
c e r t a i n point the c o s t is such as no longer t o justify the expenditure.
Where
this point l i e s is a matter of judgment, and depends upon e c o n o m i c
circumstances.
In the r e p o r t of the C o n c o r d e E c o n o m i c P r o s p e c t s
C o m m i t t e e it is said that there would be a l o s s o v e r the whole range of
possible s a l e s .
If it w e r e d e c i d e d to c a n c e l the p r o j e c t B r i t a i n would argue
that the f o r e i g n exchange benefit was being earned at the expense of a quite
d i s p r o p o r t i o n a t e use of r e s o u r c e s .
In any event it is difficult t o see how
any such l o s s could be quantified in t e r m s of compensation.
W e do not
think that B r i t a i n would be held liable to pay d a m a g e s under this head.
(c)
C a n c e l l a t i o n Charges
Ji B r i t a i n c a n c e l l e d the Concorde p r o j e c t the G o v e r n m e n t would have to pay
c a n c e l l a t i o n c h a r g e s t o the manufacturers as r e s p e c t s contracts a l r e a d y
e n t e r e d into.
T h e s e would be of the o r d e r of £20 - £30 m i l l i o n and the
F r e n c h G o v e r n m e n t officials have Indicated that they would be under a
s i m i l a r l i a b i l i t y to the F r e n c h c o n t r a c t o r s .
The F r e n c h might be
expected t o c l a i m f r o m Britain the charges they had to pay.
Our f e e l i n g is
that this would be a difficult c l a i m to r e s i s t and c o n s i d e r our c o l l e a g u e s
should a s s u m e that if B r i t a i n l o s t b e f o r e the International C o u r t , she would
at least be l i a b l e to pay the F r e n c h their cancellation c h a r g e s .
C O N C L U S I O N ON D A M A G E S
7.
If B r i t a i n l o s t before the International Court our a s s e s s m e n t of
l i k e l y l i a b i l i t y i s as f o l l o w s ; ­
(a)
Much the most probable a s s e s s m e n t is that the B r i t i s h liability
would be between £40 m i l l i o n and £00 m i l l i o n m a d e up of the
F r e n c h cancellation c h a r g e s and d a m a g e s f o r " l o s s of p r e s t i g e " .
(b)
One cannot e n t i r e l y exclude the p o s s i b i l i t y , though it is unlikely,
that B r i t a i n might be held liable f o r F r e n c h expenditure to d a t e ,
that is t o say £230 m i l l i o n .
T H E L E G A L P O S I T I O N IN T H E F U T U R E ,
D E C I D E S T O C O N T I N U E NOW
I F THE G O V E R N M E N T
8.
The G o v e r n m e n t may d e c i d e t o continue with the p r o j e c t at this
s t a g e , but may wish t o withdraw l a t e r .
The next natural b r e a k point
would be when the results of t e s t s at mach 2 a r e a v a i l a b l e .
T h i s , we
Understand, w i l l be at about the end of M a r c h next y e a r .
The question i s
w h e t h e r , if B r i t a i n went on until M a r c h , the l e g a l position would be b e t t e r
or w o r s e than it is now.
We a s s u m e , as s e e m s p r o b a b l e , that the test
4
r e suits which would then be a v a i l a b l e would do no m o r e than c o n f i r m the
predictions in the current r e p o r t of the Concorde Directing C o m m i t t e e .
In t h o s e c i r c u m s t a n c e s the F r e n c h would no doubt argue that nothing new
had e m e r g e d since July 1970, and that, having gone on in July against
the background of those r e p o r t s , B r i t a i n could not justify withdrawal in
March.
The B r i t i s h answer to this would be that continuation up t o that
point was justified and e n t i r e l y l o g i c a l on the ground that the completion
of the m a c h 2 tests was exactly the point in the development p r o g r a m m e
that M. Chamant the then F r e n c h M i n i s t e r of T r a n s p o r t , proposed in his
l e t t e r to the M i n i s t e r of Technology of 27 September 1968.
T h i s was
p r e c i s e l y the time at which a decision was t o be taken on the continuation of
the p r o j e c t based en c o m m e r c i a l p r o s p e c t s .
Our feeling is that these t w o
arguments a r e evenly balanced and that t h e r e would be no m a t e r i a l
difference between B r i t a i r . s ] e g a l position now and in March 1971.
r
TACTICS
9.
If the Cabinet decided to withdraw now, the question would a r i s e of
how and when this should be e f f e c t e d .
One factor to be borne in mind is that
the International Court in deciding on the m e r i t s of the B r i t i s h c a s e on
l i a b i l i t y , would pay r e g a r d to the manner of withdrawal.
The defence
could be m o s t favourably presented if B r i t a i n had f i r s t attempted t o
negotiate an a g r e e d t e r m i n a t i o n of the whole p r o j e c t , or failing that, f o r
withdrawal on a g r e e d t e r m s .
Such negotiations could of course be v e r y
prolonged.
During thia time the p r o j e c t would have to continue at a c o s t
of another £5 m i l l i o n a month.
This money would have been spent in an
attempt to reduce the 40 per cent r i s k of Britain having to pay probably not
m o r e than £60 m i l l i o n (but, it must be added, c o n c e i v a b l y , the higher
figure of £230 m i l l i o n ) .
On b a l a n c e , we consider that negotiation f o r m o r e
than a v e r y short period can s c a r c e l y be justified on purely l e g a l grounds.
Upon this footing there should probably be the minimum of delay in
informing the F r e n c h of any d e c i s i o n to withdraw, consistent, of c o u r s e ,
with c u s t o m a r y diplomatic c o u r t e s i e s , f o r the c l o s e r to the mach 2 test
r e s u l t s , the m o r e vulnerable B r i t a i n would be to the c r i t i c i s m that she
should at l e a s t have continued the p r o j e c t until then.
10.
U the Cabinet decided to continue with the p r o j e c t at this s t a g e , it
would be n e c e s s a r y to make it c l e a r to the F r e n c h , as the Government did
last D e c e m b e r , that this further c o m m i t m e n t on B r i t a i n s part was
s i m i l a r l y l i m i t e d , and f u r t h e r , that in continuing beyond July, B r i t a i n was
not to be taken as accepting that indefinite continuation of the p r o j e c t was
justified on the b a s i s of current r e p o r t s .
r
S U M M A R Y OF CONCLUSIONS
11.
(a)
If B r i t a i n withdrew against the wishes of the F r e n c h G o v e r n m e n t , and w e r e taken t o the International C o u r t , the Court would on balance be m o r e l i k e l y to find in B r i t a i n ' s favour than against. (b) If the Court found against B r i t a i n , liability would
probably be of the o r d e r of £40 - £60 m i l l i o n but the
possibility of an a w a r d of up to £230 m i l l i o n cannot be
excluded.
( c ) If the Cabinet w e r e t o d e c i d e to withdraw f r o m the p r o j e c t ,
t h e r e is no significant l e g a l distinction b e t w e e n taking
that d e c i s i o n now and taking it in M a r c h 1971.
PR
G H
Law Officers
1
Department W C 2
17 July 1970
6
CONFIDENTIAL DOCUMENT IS T H E P R O P E R T Y OF H E R B R I T A N N I C M A J E S T Y ^
C P ( 7 0 ) 18
17 July 1970
GOVERNMENT
COPY NO
54
CABINET
C O A L PRICE INCREASES
Memorandum by the Chief S e c r e t a r y ,
Treasury
The National Coal B o a r d ( N C B ) have proposed i n c r e a s e s in coking,
industry and e l e c t r i c i t y c o a l p r i c e s in o r d e r to b r e a k e v e n on c o l l i e r y
account in 1970-71 and to avoid reaching the statutory d e f i c i t l i m i t of
£5 0 m i l l i o n .
2.
The N C B assume that cost i n c r e a s e s would r i s e o v e r a l l by
8 per cent in 1970-71 c o m p a r e d with 1969-70, including an allowance f o r
an a v e r a g e wage i n c r e a s e of 16 per cent next N o v e m b e r .
(About
55 per cent of costs a r e wage a)
Without the wage i n c r e a s e the cost
i n c r e a s e would be about 5 per cent.
Other f a c t o r s r e l e v a n t in considering
the p r o p o s a l a r e : ­
(a)
C o a l demand is buoyant in the United Kingdom and e l s e w h e r e ;
supplies cannot be r e a d i l y i n c r e a s e d and stocks a r e expected
t o f a l l t o v e r y l o w working l e v e l s .
A t present we a r e not in
any position to f a c e a s t r i k e .
(b)
The industry has had a good productivity r e c o r d ( o v e r the l a s t
ten y e a r s an a v e r a g e i n c r e a s e of 4. 9 per cent a y e a r ) ; a
9 per cent i n c r e a s e la 1968-69 r e f l e c t e d i n c r e a s i n g use of
new m a c h i n e r y and a high rate of c l o s u r e s ; the i n c r e a s e was
no m o r e than 2 p e r cent in 1969-70; the r i s e s o f a r this y e a r
has been 3 per cent.
( c )
A b s e n t e e i s m in the c o a l industry is too high and m a c h i n e r y
utilisation t o o l o w ; the N C B ' s f o r e c a s t s assume no m o r e than
that the p r e s e n t position w i l l be held.
(d)
T h e r e a r e no proposals f o r increasing bituminous d o m e s t i c c o a l
p r i c e s , and there would be no i m m e d i a t e or d i r e c t e f f e c t , of
any s i g n i f i c a n c e , on the c o s t of l i v i n g .
( e )
Coking c o a l i s used p r i m a r i l y by the B r i t i s h S t e e l C o r p o r a t i o n ( B S C ) ;
and the e l e c t r i c i t y industry is much the m o s t important user of
industrial c o a l ; the i n c r e a s e s would t h e r e f o r e make t h e i r i m p a c t
through t h e i r e f f e c t on e l e c t r i c i t y and s t e e l p r i c e s ; and BSC
would want t o make consequential adjustments a t once and the
e l e c t r i c i t y industry to d o so f r o m O c t o b e r ; the total e f f e c t on
p r i c e s g e n e r a l l y would be about 0. 3 per c e n t ; v e r y e a r l y
d e c i s i o n s on these consequentials w i l l be needed.
1
(f)
If the N C B s accumulated d e f i c i t w e r e a l l o w e d t o i n c r e a s e
f u r t h e r , t h e r e would be l i t t l e p r o s p e c t that it could e v e r
be wiped out.
( g )
The N C B b e l i e v e they can get out of the r e d in a s e l l e r ' s m a r k e t ;
s t r i c t l y t h e r e is no power t o stop t h e m , and a p r i c e i n c r e a s e
would be an a p p r o p r i a t e r e s p o n s e to the m a r k e t situation.
l
3.
The National Union of M i n e w o r k e r s ( N U M ) have asked f o r wage
i n c r e a s e s of 22 per cent.
The N C B have assumed i n c r e a s e s of 16 per cent.
The M i n i s t e r of Technology a g r e e s that, in the g e n e r a l context of the
inflationary s p i r a l , this i s t o o high, but is of the v i e w that a settlement at
such a significantly l o w e r l e v e l as t o justify insisting on a much l o w e r
p r i c e i n c r e a s e now, is unlikely.
A L T E R N A T I V E R A T E S OF I N C R E A S E
4.
The tables b e l o w show the estimated e f f e c t in the c u r r e n t and the
next financial y e a r of a l t e r n a t i v e r a t e s of i n c r e a s e in wages and p r i c e s .
The f i g u r e s f o r 1971-72 a r e v e r y t e n t a t i v e , and based on n e c e s s a r i l y
a r b i t r a r y assumptions
It i s not possible to give e s t i m a t e s f o r any l a t e r
y e a r because the v a r i a b l e s involved (the r a t e of i n c r e a s e in productivity,
the supply/demand sittiation f o r c o a l , the l e v e l of possible wage d e m a n d s )
a r e subjec t t o t o o much uncertainty.
F o r this r e a s o n , nc financial
objective has y e t b e e n f i x e d f o r any p e r i o d after M a r c h , 1971.
The
tables illustrate the e f f e c t on the N C B c o l l i e r y account (deficit or
surplus) of i n c r e a s e s in both wages and p r i c e s ranging f r o m 0 - 1 5 per cent.
F o r e x a m p l e , a wage i n c r e a s e of 5 per cent with a p r i c e i n c r e a s e of
10 per cent would produce a surplus of £ 1 million? if wages r o s e by
10 per cent then a c o a l p r i c e i n c r e a s e of about 12^ per cent would be
n e c e s s a r y f o r the B o a r d t o b r e a k e v e n .
5.
The e f f e c t i v e date assumed f o r p r i c e i n c r e a s e s is m i d - A u g u s t ,
the e a r l i e s t f e a s i b l e date.
F o r w a g e s N o v e m b e r is assumed.
Each
month s delay in i n c r e a s i n g p r i c e s means lost revenue in 1970-71 of
£ 4 0 0 , 000 f o r each 1 p e r cent of a p r i c e i n c r e a s e .
The tables show the
position f o r 1970-71 and 1971-72.
r
1970-71 E S T I M A T E D C O L L I E R Y A C C O U N T
Percentage prices
increase
1
1
0
5
10
OUTTURN
15
£ million
P e r c e n t a g e wages
4- 22
0
- 23
-
7
+
5
- 31
- 15
+
1
+ 16
10
- 39
- 23
-
7
H- 8
15
- 47
- 31
- 15
0
2
7
CONFIDENT] Percentage prices
increase
0
5
10
0
f 24
* 48
15
£ million
P e r c e n t a g e wages
0
- 24
-
5
- 42
- 18
*
6
* 30
10
- 61
- 37
- 13
4- 11
15
- 79
- 55
- 31
-
7
F U T U R E PRICE INCREASES
6.
In v e r y b r o a d t e r m s the NCB*s proposals a r e designed t o
a c c o m m o d a t e a wage i n c r e a s e of 16 per cent without a further p r i c e
increase.
If the m i n e r s got 16 per cent and the p r i c e i n c r e a s e
were
reduced t o . ­
( a )
10 per cent, a further p r i c e i n c r e a s e would have t o f o l l o w
quickly a f t e r w a r d s if deficits on c o l l i e r i e s w e r e t o be a v o i d e d ;
e v e n taking into account profits on a n c i l l a r i e s , a further p r i c e
i n c r e a s e would be needed not l a t e r than the spring of 1971;
(b)
12^ per c e n t , there would be a g r o w i n g deficit on c o l l i e r i e s ;
this might just be held until the autumn of 1971 by profits on
a n c i l l a r i e s , but it would be an uncomfortably c l o s e thing.
7.
The weak position of the N C B in dealing with the f o r t h c o m i n g
wage c l a i m is the l o w l e v e l of c o a l stocks.
It would not be sensible t o
hold c o a l p r i c e s down during a p e r i o d of shortage.
Our object must be
to enable the NCB t o rebuild their stocks b e f o r e the next round of wage
negotiations.
8.
The tables above show that the s i z e of p r i c e i n c r e a s e s depend
l a r g e l y on the l e v e l of wage i n c r e a s e s negotiated.
An a v e r a g e wage of
16 per cent would be f a r too high f o r our management of the e c o n o m y .
If the G o v e r n m e n t persuades the N C B to accept a l o w e r p r i c e i n c r e a s e
than they think n e c e s s a r y , it w i l l be f o r c i n g t h e m , in c o n s i d e r i n g the
m e a s u r e s which they must take t o avoid a d e f i c i t on c o l l i e r y account,
to assume a l o w e r l e v e l of wage i n c r e a s e s than they m a y in the event
be able t o n e g o t i a t e , bearing in mind that we cannot r e a l l y t o l e r a t e a
c o a l s t r i k e this autumn.
3
9.
Our a i m should be to stiffen, the N C B ' s handling of wage c l a i m s ,
and the f o l l o w i n g points a r e important e s p e c i a l l y if a b i g p r i c e i n c r e a s e
is accepted
( a )
T h e r e is no question of taking l e g i s l a t i o n t o enable the N C B to
e x c e e d the present statutory l i m i t on their d e f i c i t on the
c o n t r a r y a l l p r a c t i c a b l e steps must b e taken t o reduce it as
quickly as p o s s i b l e ; the a i m must be to have no d e f i c i t on
c o l l i e r y a c t i v i t i e s ; we shall want to consider discontinuance
or d i s p o s a l of those a n c i l l a r y a c t i v i t i e s which have no r e a l
connection with the N C B * s main business (at p r e s e n t t h e s e
a n c i l l a r i e s bring in a p r o f i t of about £12 m i l l i o n a y e a r ) .
( b )
Strenuous e f f o r t s must be made t o reduce a b s e n t e e i s m among
m i n e r s and t o i m p r o v e machine utilisation, as L o r d R o b e n s
said in his speech to the N U M .
The f o r t h c o m i n g r e p o r t by
the N a t i o n a l B o a r d for P r i c e s and Incomes is l i k e l y t o contain
useful suggestions about methods of c o s t saving.
W e shall
l o o k f o r the c o - o p e r a t i o n of the N C B in putting them into e f f e c t ,
and s e c u r i n g a good r e s p o n s e f r o m the mine w o r k e r s .
( c )
We cannot change overnight the conditions in which the N C B
o p e r a t e , but it is d e s i r a b l e t o e x p o s e the N C B t o g r e a t e r
c o m p e t i t i o n as quickly as p o s s i b l e .
I n c r e a s e d use of other
fuels ( o i l and g a s ) offer some opportunity in the c o u r s e of t i m e .
A number of proposals f o r converting power stations t o o i l w i l l
be c o m i n g f o r w a r d ; the G o v e r n m e n t a r e l i k e l y to a p p r o v e t h e s e .
But no further c o n v e r s i o n s a r e p r a c t i c a l until next y e a r and the
opportunities t h e r e a f t e r a r e r e s t r i c t e d by the l i m i t a t i o n s on the
number of stations which the hard p r e s s e d e l e c t r i c i t y s e r v i c e
can take out of s e r v i c e at a t i m e .
(d)
A d d i t i o n a l competition m i g h t a l s o be produced in the l o n g e r
t e r m by allowing i m p o r t s of c o a l .
But this is not an i m m e d i a t e
p o s s i b i l i t y , f o r t h e r e a r e no l a r g e supplies a v a i l a b l e ; only s m a l l
spot c a r g o e s .
It would a l s o be n e c e s s a r y t o c o n s i d e r the
balance of payments i m p l i c a t i o n s .
And there is no doubt that
t h e r e would be an i m m e d i a t e r e a c t i o n f r o m the m i n e r s
(A
w e e k ' s s t r i k e costs n e a r l y 3 m i l l i o n tons and t h e r e is no
p o s s i b i l i t y of making this good b y imports q u i c k l y . )
It i s
r e g r e t t a b l e , but the r o o m f o r m a n o e u v r e is l i m i t e d .
10.
It w i l l put us in a s t r o n g e r position to take a tough line with the
NCB on these questions if, as the M i n i s t e r and I p r o p o s e , we a g r e e t o
extend the e x i s t i n g power to g i v e s p e c i a l assistance t o the N C B in
connection with the s o c i a l costs of the rundown of the industry.
The
M i n i s t e r w i l l be putting p r o p o s a l s on this t o the M i n i s t e r i a l C o m m i t t e e on
Economic Policy.
4
CONCLUSIONS
11.
A s I see i t , t h e r e a r e t w o a l t e r n a t i v e s .
The f i r s t is a p r i c e
i n c r e a s e at a l e v e l which a s s u m e s no i n c r e a s e in wages at a l l in
November.
In p r a c t i c e this would m e a n another p r i c e i n c r e a s e very­
soon, though it would then be apparent to a l l that the second p r i c e
i n c r e a s e was d i r e c t l y attributable t o the intervening wage i n c r e a s e .
12.
The second a l t e r n a t i v e is t o a l l o w a b i g enough p r i c e i n c r e a s e to
enable the N C B to c a r r y on f o r at l e a s t a y e a r
T w o p r i c e i n c r e a s e s in
quick s u c c e s s i o n would be disadvantageous f r o m e v e r y point of v i e w .
I 2 f per cent - c o m p a r e d with the 15 per cent now proposed by the N C B ­
is the l o w e s t f i g u r e offering a r e a l p r o s p e c t of avoiding a second i n c r e a s e
within months.
M y conclusion is t h e r e f o r e that this is the f i g u r e we
should go f o r .
a
M V M
Treasury Chambers SWl
17 July 1970
5
COPY NO
C P ( 7 0 ) 19
54
20 July 1970
CABINET
THE SITUATION IN NORTHERN IRELAND
Memorandum by the S e c r e t a r y of State f o r the H o m e D e p a r t m e n t
The celebrations of 13 July went off better than anyone expected and
as a result there has been a reduction of tension but the situation r e m a i n s
potentially v e r y dangerous.
F e e l i n g s of antagonism have been e n f l a m e d .
The Catholics a r e still stunned by the F a l l s Road episode of a f e w w e e k s
back.
The country is full of a r m s , l e g a l and i l l e g a l , and the I r i s h
Republican A r m y ( I R A ) who remained s t r a n g e l y quiet during the Orange
c e l e b r a t i o n s could at any moment step up their campaign,
2.
Our objective must be to make p r o g r e s s with the reduction of tension
and plan f o r a gradual return to m o r e n o r m a l conditions and the withdrawal
of the A r m y f r o m the task of maintaining public o r d e r which should b e c o m e
or-ce again the p r o v i n c e of the p o l i c e .
T h i s w i l l take time but it is u r g e n t .
The dangers come f r o m two s i d e s .
We m a y see a r e c r u d e s c e n c e of v i o l e n t
protest by the Catholic population with the connivance or stimulation of the
IRA.
T h i s v/ould c a r r y with it, in addition to the threat to law and o r d e r ,
further dangers f o r M r Lynches Government in Dublin.
W e must w a l k v e r y
w a r i l y w h e r e Catholic susceptibilities a r e c o n c e r n e d .
The other d a n g e r is
p r e s s u r e f r o m the Orangemen on Major Chichesfcer-Clark, v/hose
G o v e r n m e n t s position is f a r f r o m s e c u r e .
H e is under continuous threat
f r o m P a i s l e y and only a f e w m o r e defections would put h i m in a v i r t u a l l y
i m p o s s i b l e position.
T h i s f o r us is a v e r y g r i m prospect indeed.
An
e x t r e m e Unionist Government at Stormont which would a l m o s t c e r t a i n l y want
to g o back on the r e f o r m p r o g r a m m e i s h a r d l y l i k e l y t o be one with which we
could c o - o p e r a t e or for whose support we could justify the use of the
British A r m y ,
T h i s in turn might f o r c e us to take o v e r the G o v e r n m e n t
ourselves,
3.
T h e r e a r e two immediate p r o b l e m s that r e q u i r e handling and I
discussed them on F r i d a y with Major C h i c h e s t e r - C l a r k .
H e has d e v o l v e d a
scheme which by tackling both p r o b l e m s simultaneously should in m y
judgment stand a good chance of s u c c e s s , though there a r e c l e a r l y s e r i o u s
risks involved.
But no p o l i c y in N o r t h e r n I r e l a n d , e v e n a p o l i c y if inaction,
is f r e e f r o m r i s k .
1
4.
The f i r s t p r o b l e m is that of the s o - c a l l e d "no g o " a r e a s - some
Catholic a r e a s of Belfast and the Bogside a r e a of L o n d o n d e r r y , which
have not been m o r e than thinly policed f o r some y e a r s , w h e r e f o r some
time n o r m a l l a w and o r d e r has v i r t u a l l y been suspended and the R o y a l
U l s t e r Constabulary ( R U C ) withdrawn.
T h e y a r e at p r e s e n t returning in
f o r c e to the F a l l s and A r d o y n e a r e a s in B e l f a s t , but they have not so f a r
been able to r e t u r n to the B o g s i d e , save in c e r t a i n l i m i t e d p a r t s in company
with m i l i t a r y p o l i c e .
C l e a r l y this situation cannot be t o l e r a t e d .
No
g o v e r n m e n t can f o r long acquiesce in an absence of law and o r d e r in any
part of its t e r r i t o r i e s .
T h e s e "no g o " a r e a s a r e c e n t r e s of K.epublicanism
and the w i t h d r a w a l of the R U C has meant both a l o s s of contact and
intelligence on the one hand and f r e e r opportunities f o r the Republicans on
the other.
F i n a l l y P a i s l e y is making the continuation of the "no g o " a r e a s
the m a i n f e a t u r e of his attack on Major C h i c h e s t e r - C l a r k and is succeeding
in doing h i m c o n s i d e r a b l e p o l i t i c a l h a r m thereby.
5.
The other p r o b l e m is the f o r t h c o m i n g m a r c h e s .
T h e r e is in
p a r t i c u l a r the m a r c h oi the A p p r e n t i c e Boys of D e r r y on 12 August which
has caused much trouble in the past.
F o r the r e s t of the y e a r there w i l l
be further p a r a d e S j v i r t u a l l y a l l P r o t e s t a n t .
6.
What e m e r g e d f r o m m y discussion with M a j o r C h i c h e s t e r - C l a r k was
a plan to return the R U C to the "no g o " a r e a s and to i m p o s e a ban on
p o l i t i c a l m a r c h e s until the end of this y e a r .
I had f e a r e d that he would
wish to r e - e n t e r the Bogside as a major gesture with a c o n s i d e r a b l e display
of f o r c e but the p r o p o s a l is now that the R U C , who incidentally no l o n g e r
c a r r y w e a p o n s , should p r o g r e s s i v e l y return accompanied at f i r s t by the
military police.
T h e y would c a r r y out the n o r m a l functions of p o l i c e m e n
on the beat and would be careful to avoid p r o v o c a t i v e a c t i o n s .
T h i s plan,
incidentally, h a s the support of the Chief Constable, S i r A r t h u r Young, who
is a notable d o v e in any matter of p o l i c e t a c t i c s .
7.
Major C h i c h e s t e r - C l a r k b e l i e v e s that if this w e e k some substantial
p r o g r e s s can be made in r e s t o r i n g n o r m a l p o l i c e patrolling in these a r e a s ,
he w i l l be able to i m p o s e a ban on m a r c h e s f o r the r e s t of the y e a r without
a violent Orange r e a c t i o n .
The point is that while the "no g o " a r e a s a r e
C a t h o l i c , and in a sense the return of the p o l i c e m a y be r e g a r d e d as a
v i c t o r y of the P r o t e s t a n t s , the Catholic p r o c e s s i o n s d o not r e a l l y come
again until E a s t e r and t h e r e f o r e the ban on p r o c e s s i o n s f o r the r e s t of the
y e a r w i l l s e e m l i k e a v i c t o r y f o r the C a t h o l i c s ,
&.
I b e l i e v e this plan is worth t r y i n g .
It is c l e a r l y sensible and
m o d e r a t e and d e s i g n e d to a c h i e v e p r o g r e s s towards n o r m a l i t y coupled with
the reduction of p r o v o c a t i o n .
I do not see how there can be r e a s o n a b l e
objection if the PJLTC, now u n a r m e d , take up again n o r m a l p o l i c e duties in
the "no g o " a r e a s .
But I must not disguise f r o m m y c o l l e a g u e s the r i s k
that is involved if the police should c o m e under v i o l e n t attack.
It would be
n e c e s s a r y in those c i r c u m s t a n c e s to p r o v i d e them with m i l i t a r y support, the
extent of which would have to be c a r e f u l l y defined, because if they w e r e
m e r e l y withdrawn in the f a c e of v i o l e n c e there would be a f i n a l c o l l a p s e of
the m o r a l e of the R U C and probably of the position of M a j o r C h i c h e s t e r - C l a r l ^ s
Government.
2
9.
We cannot stand still and m e r e l y await the next t r o u b l e .
colleagues w i l l a g r e e that we should indicate support f o r
Major C h i c h e s t e r - C l a r k in this g e n e r a l approach.
R M
Home Office 37/1
20 July 1970
I hope m y
C P ( 7 0 ) 20
C O P Y NO J 1
:
20 July 1970
CABINET
PUBLIC EXPENDITURE
REVIEW
M e m o r a n d u m by the Chief S e c r e t a r y ,
Treasury
1.
W e a r e f u l l y c o m m i t t e d to achieving l a r g e e c o n o m i e s in public
expenditure.
T h e i m m e d i a t e objective is to provide scope f o r reductions
in p e r s o n a l and company taxation, as part of our s t r a t e g y f o r encouraging
initiative and e n t e r p r i s e and stimulating savings and thus contributing
towards a h i g h e r rate of growth in national output.
2,
The plans we have inherited i m p l y a f a s t e r growth of public
expenditure o v e r the next f e w y e a r s (an a v e r a g e annual rate of about
3. 7 p e r cent) than the p r o s p e c t i v e growth of national output ( G D P ) ( l e s s
than 3 per c e n t ) .
T h i s would have inevitably involved still further
I n c r e a s e s In r a t e s of taxation.
We o u r s e l v e s have undertaken new
c o m m i t m e n t s , in d e f e n c e , s o c i a l expenditure and o t h e r w i s e .
In f a c e of a l l
this to a c h i e v e the actual reductions in taxation to which we a r e pledged is
a f o r m i d a b l e task, which w i l l r e q u i r e difficult p o l i c y c h o i c e s ,
3.
We have taken as the i m m e d i a t e target f o r net savings in expenditure
by 1974-75 the f i g u r e of £1,700 m i l l i o n , with a start of some hundreds of £
m i l l i o n s in 1971-72.
N e a r l y £700 m i l l i o n w i l l come f r o m abolishing
investment g r a n t s , but so tight is the liquidity of companies that v i r t u a l l y
a l l of this w i l l have to be returned to the company s e c t o r if investment is
not to suffer.
T h i s l e a v e s about £1, 000 m i l l i o n .
But n e a r l y two-thirds
of this w i l l be r e q u i r e d to eliminate the e x c e s s i v e growth in expenditure
p r o g r a m m e s inherited f r o m our p r e d e c e s s o r s to which I have r e f e r r e d .
The r e m a i n d e r w i l l not be enough by itself f o r reductions in p e r s o n a l
taxation on the n e c e s s a r y s c a l e .
T o m e e t that objective in full v/e must
r e l y at l e a s t in part on our p o l i c i e s to stimulate a f a s t e r growth of the
e c o n o m y in due c o u r s e .
But e x p e r i e n c e d e m o n s t r a t e s c o n c l u s i v e l y the
f o l l y of p r e - e m p t i n g additional r e s o u r c e s before they become a v a i l a b l e .
A n y further growth in output w i l l r e p r e s e n t a bonus available f o r a l l o c a t i o n
by us in v/ays that s e e m d e s i r a b l e at the t i m e .
4,
In seeking f o r a r e a s in which to make e c o n o m i e s in public expenditure
I suggest that we should be guided by the following c o n s i d e r a t i o n s :
a.
The public sector is providing services which could more
appropriately and efficiently be provided by the private sector.
eg. industrial research projects, purchase of land for development,
and activities of nationalised industries falling outside their main
purpose.
b.
The method and scope of support by grants from public
funds for particular sectors of the economy, notably manufacturing
industry and agriculture, are unsuitable or work against the
objective of reducing taxation, or both,
c.
Other forms of assistance to Industry, notably in aircraft
and aerospace projects, but going beyond them, use our resources
wastefully,
d.
Some personal subsidies in the housing and social services
field are being distributed to large numbers of people who are well
abl* t o pay for the services in whole or in part.
e.
In some areas expenditure which may in principle be
desirable is growing at a rate which cannot be justified given other
needs and objectives, eg, money spent by the Research Councils.
5.
The Treasury hr-c &uineh*d & thorough review of all the main fields of public sector expenditure where it was thought worthwhile savings could he found. With the co-operation of all Departments concerned, preliminary studies have been made. These suggest that we should seek our main sources of savings as follows. ASSISTANCE T O INDUSTRY
6.
i.
Investment Grants. Yfe are committed to ending them,
and I suggest that we agree to announce this in October. We must
give careful consideration to the most effective alternative ways of
restoring company cash flows and assisting investment by tax
allowances and changes in company taxation. These points, which
will have to be covered at the same time, need further discussion
between the Ministers concerned so as to
reach agreement in time for the October announcement.
ii.
Agriculture.
We are committed to replacing the deficiency
grants by import levies, with some fall-back to price support to
sustain f a r m e r s incomes. The main problems are international
and include the effects on our balance of payments, trade agreements
with Commonwealth and other countries, and our negotiations for
joining the Six. I understand the Minister of Agriculture is proposing
to arrange for examination of all these matters. W e shall need to
decide what to say in the autumn statement.
1
2
Hi,
A i r c r a f t and Space P r o j e c t s .
A l l m a j o r p r o j e c t s a r e now
subject to r i g o r o u s cost/benefit a n a l y s i s .
We should take resolute
a c t i o n , w h e r e this analysis d e m o n s t r a t e s evident e c o n o m i c w a s t e .
iv.
Industrial R e o r g a n i s a t i o n C o r p o r a t i o n ( I R C ) .
We are
c o m m i t t e d to scaling down d r a s t i c a l l y the scope of I R C s a c t i v i t i e s .
T h e r e Is a c a s e , which I support, f o r eliminating thi3 I t e m of
expenditure a l t o g e t h e r .
T
v.
Technological Services.
I think appreciable savings can
and should be made in technological support f o r industry g i v e n
d i r e c t and in v a r i o u s other ways by the Ministry of T e c h n o l o g y .
I suggest we take as our a i m a 50 p e r cent saving in this block of
expenditure and study further what is i n v o l v e d .
Much of this is
r e s e a r c h and d e v e l o p m e n t ,
vi.
Other A s s i s t a n c e to Industry.
But f o r our p r e - E l e c t i o n
undertakings w e should have wanted to phase out the R-egional
E m p l o y m e n t P r e m i u m as soon as p o s s i b l e .
It Is f o r consideration
whether a start on this should be made before 1974-75 or whether
we must wait until then and phase out with all due speed.
In any
case w e must examine v e r y c r i t i c a l l y applications f o r s p e c i a l
assistance f r o m particular f i r m s or industries including ship
building and w e should r e p e a l the main p r o v i s i o n s of the Industrial
Expansion A c t ,
If w e decide to support specific industrial projects
we shall w h e r e n e c e s s a r y take specific p o w e r s through new
legislation.
DEFENCE
7.
Our E a s t of Suez c o m m i t m e n t w i l l make it hard to contain defence
expenditure, but we must make e v e r y e f f o r t to d o s o .
The Defence
S e c r e t a r y has set on foot a number of studies d e s i g n e d , f i r s t to a s c e r t a i n
how savings on the f o r e c a s t l e v e l s of defence expenditure can best be m a d e ,
and second, to a s s e s s the costs and p r i o r i t i e s of new defence p r o j e c t s .
A t a t i m e when many p r o g r a m m e s a r e being h e a v i l y cut, I suggest as a
reasonable objective that defence expenditure should not be allowed to
e x c e e d the f i g u r e s 3et out in C m n d , 4234.
SCIENTIFIC RESEARCH
8.
The G o v e r n m e n t s support f o r pure r e s e a r c h is provided mainly
through a block grant a l l o c a t e d by the Council f o r Scientific P o l i c y to the
main R e s e a r c h C o u n c i l s .
T h i s is supported by the G o v e r n m e n t because
the pay-off is usually too r e m o t e f o r Industry or p r i v a t e institutions to be
w i l l i n g to c a r r y any significant l o a d .
The total has been rising f a i r l y fast
and is p r o g r a m m e d to g o on r i s i n g .
W e should seek savings h e r e and
r e v i e w the whole b a s i s of the s y s t e m .
9.
I d o not think we should cut v e r y substantially into the m a i n
m o t o r w a y , trunk road and p r i n c i p a l road p r o g r a m m e .
On the other hand
some reduction in the l a t e r y e a r s should not be too difficult, and w o r k on
the l e s s important roads needs r i g o r o u s scrutiny.
Expenditure on
transport infrastructure p r o j e c t s ( e g . the F l e e t l i n e ) is planned to r i s e
rapidly.
I b e l i e v e we should apply stiffer cost/be:iefit c r i t e r i a to these
p r o j e c t s , which should produce worthwhile s a v i n g s .
SOCIAL SERVICES
10.
A careful balance must be struck h e r e .
T h e r e a r e basic needs of
high p r i o r i t y which w i l l continue to r e q u i r e l a r g e allocations of public funds.
In some a r e a s , h o w e v e r , m o s t l y p e r i p h e r a l to the main s e r v i c e s , publicly
p r o v i d e d or h e a v i l y subsidised s e r v i c e s a r e made too w i d e l y a v a i l a b l e ;
and in o t h e r s , notably the health o e r v i c e , we need a study of o b j e c t i v e s and
a l t e r n a t i v e ways of securing t h e m .
A substantial contribution must be
made f r o m this s e c t o r If we a r e to find sufficient s a v i n g s .
Detailed
p r o p o s a l s w i l l r e q u i r e further w o r k ; but I suggest that the d i r e c t i o n s in
which we should look should b e : ­
i.
H i g h e r c h a r g e s - p o s s i b l y even new types of c h a r g e s - in
the Health S e r v i c e
c
II.
Withdrawal of w e l f a r e and school m i l k , and of the subsidy
On school m e a l s .
iii.
Substantial savings on housing as l o c a l authority rents a r e
brought c l o s e r into line with the true value of the a c c o m m o d a t i o n .
In a l l these c a s e s a r r a n g e m e n t s must be made to avoid hardship by
s e l e c t i v e r e l i e f or a s s i s t a n c e .
iv.
L i m i t i n g future upratings of the main national insurance
benefits,
v.
F a m i l y support (a study to be made of the scope f o r
rationalising of f a m i l y a l l o w a n c e s and child tax a l l o w a n c e s ) .
vl.
T h e Open U n i v e r s i t y , which I p r o p o s e that we c l o s e down
immediately.
LOCAL AUTHORITIES
11.
i.
I m p r o v e d organisation of l o c a l environmental s e r v i c e s
( m a i n l y public health and anti-pollution) may produce e c o n o m i e s ,
though the s e r v i c e s can probably not be cut.
E a r l y savings a r e
p o s s i b l e on capital expenditure f o r urban development and on l o c a l
authority assistance to industry.
4
SIGillT
ii.
The m e a s u r e s I have a l r e a d y r e f e r r e d to w i l l reduce
c u r r e n t expenditure of l o c a l a u t h o r i t i e s .
A g e n e r a l squeeze
through the rate support grant negotiations would encourage
e c o n o m i e s including m a n p o w e r .
N A T I O N A L I S E D INDUSTRIES
12.
Capital spending (at present about £1,500 m i l l i o n a y e a r ) should
be r e d u c e d . I propose that officials examine the implications of cuts of
5 per cent and 10 per cent in 1972-73.
This would produce savings a l s o
in 1971-72.
Meanwhile new optional investment, e s p e c i a l l y in
subsidiary a c t i v i t i e s , should be avoided,
COST R E D U C T I O N
PROGRAMMES
13.
Separately f r o m the consequences of the m e a s u r e s l i s t e d above
f o r manpower and other a d m i n i s t r a t i v e expenditure, the m a n p o w e r
r e q u i r e m e n t s of Departments w i l l be under intensive r e v i e w .
14.
A l l the p r o p o s a l s set out a b o v e , fully i m p l e m e n t e d , would s t i l l
not m e e t in full the objective d e s c r i b e d in paragraph 3.
Treasury
officials have been instructed to examine other p o s s i b i l i t i e s , and I would
w e l c o m e further suggestions f r o m m y c o l l e a g u e s .
If some of the s p e c i f i c
savings I have suggested a r e found on c l o s e r examination to be i m p r a c t i c ­
M o s t of the
able or u n d e s i r a b l e , we shall have to substitute o t h e r s
p r o p o s a l s r e q u i r e further study b e f o r e we can take f i r m d e c i s i o n s and
instructions f o r such studies chowld be given now.
r
15.
F i n a l l y , there is the question of new demands.
W h i l e we are
working t o s e c u r e m a j c r e c o n o m i e s p r o p o s a l s f o r further expenditure
a r e being m a d e .
In some f e w c a s e s these w i l l be unavoidable.
For
the r e s t we must ask our c o l l e a g u e s t o defer their p r o p o s a l s until we
can see the picture as a whole.
CONCLUSIONS
16,
I ask m y colleague s . ­
a.
t o endorse the b r o a d o b j e c t i v e s of this public expenditure
review;
b.
t o a g r e e that we should seek the savings in the d i r e c t i o n s
outlined in this m e m o r a n d u m ;
c.
t o a g r e e that further o f f i c i a l studies of these savings
should be urgently pursued with the T r e a s u r y , and r e p o r t s
made t o T r e a s u r y and D e p a r t m e n t a l M i n i s t e r s c o n c e r n e d s o
that a g r e e m e n t can be r e a c h e d in each c a s e ;
5
d.
to a g r e e that officials should e x a m i n e any other a r e a s of
expenditure w h e r e worthwhile savings could be found,
17.
W e shall need to consider in September the results of the r e v i e w
and the d e c i s i o n s r e a c h e d , with a v i e w to publication of a White P a p e r on
public expenditure as soon after the R e c e s s as p o s s i b l e .
In the meantime I
hope that T r e a c u r y M i n i s t e r s may be authorised t o a g r e e w i & £he M i n i s t e r s
concerned the f o r m and timing of any announcements that m a y be r e q u i r e d
before the White P a p e r .
M V M
T r e a s u r y C h a m b e r s SW1
20 July 1970
II 6'' t' .1
CP(70)21
C O P Y NO
20 July 1970
CABINET
BAC 3-11 A I R C R A F T
Note by the M i n i s t e r of T e c h n o l o g y
1.
The Cabinet w i l l wish to know about the p r o p o s a l f o r the B A C 3-11
a i r c r a f t and its P*olls-Royce engine,
2,
T h i s p r o j e c t is one of g r e a t importance and both the B r i t i s h A i r c r a f t
C o r p o r a t i o n ( B A G ) and R o l l s - R o y c e a r e pressing f o r a v e r y e a r l y d e c i s i o n ,
BAC have spent some £3 m i l l i o n of their own money a l r e a d y , and w i l l not
be able to hold their dates unless they now sharply i n c r e a s e their rate of
spending.
T h e y a r e being p r e s s e d to enter into firm, c o m m i t m e n t s with
s u b - c o n t r a c t o r s h e r e and o v e r s e a s .
A t R o l l s - R o y c e , continued uncertainty
about H e r M a j e s t y s G o v e r n m e n t s support f o r their next round of c i v i l
engine d e v e l o p m e n t places their whole future in doubt.
Meanwhile B r i t i s h
European A i r w a y s a r e a l s o wanting e a r l y confirmation that they can have
this a i r c r a f t .
T
3.
I b e l i e v e the B A C 3-11 to be a sound and worthwhile e c o n o m i c p r o j e c t
quite apart f r o m its importance f o r other r e a s o n s .
I a p p r e c i a t e the
difficulties of an immediate d e c i s i o n to support the B A C 3-11 b e f o r e w e have
decided what savings a r e possible e l s e w h e r e but I hope that Cabinet w i l l
a g r e e that I should discuss these proposals with the Chief S e c r e t a r y ,
T r e a s u r y , and other colleagues concerned with a v i e w t o d e c i s i o n s being
taken as soon as p o s s i b l e .
G R
M i n i s t r y of T e c h n o l o g y SW1
20 July 1970
iuWEX
BAC 3-11 AND RB211
T h i s paper d i s c u s s e d t h e case f o r Government f i n a n c i a l
support o f t h e BAC 3-11 a i r c r a f t and o f a R o l l s - R o y c e
engine f o r i t .
The BAC 3-11 would be a s h o r t t o medium
range w i d e - b o d i e d a i r c r a f t designed t o c a r r y 200-300
I t s two
p a s s e n g e r s o v e r s t a g e s o f up t o 2,000 m i l e s .
e n g i n e s (RB211-61) would be a s t r e t c h e d v e r s i o n o f
t h e RB211-22 which i s c u r r e n t l y b e i n g d e v e l o p e d f o r
t h e Lockheed t r i j e t .
Launching a i d and economic
appraisal
2o
The sums i n v o l v e d ( a t March 1970 p r i c e
(£M):a r e as f o l l o w s
levels)
Total
Launching
Cost
^ BUG
Launching
"Aid sought
140
84 (60%)
Aircraft
60
Engine
42 ( 7 0 % )
(EB211-61)
­
200
m
126(63%)
These a r e g r o s s f i g u r e s and do not t a k e account o f
any t a x a t i o n o r investment allowance e f f e c t s .
3o
F u r t h e r expenditure o f perhaps £10M on an
improved v e r s i o n o f t h e a i r c r a f t would be n e c e s s a r y
i n due c o u r s e , but Government a i d i s not now
r e q u e s t e d o r i n any way committed. The RB211-61
might a l s o b e s o l d t o Lockheed f o r a s t r e t c h e d
v e r s i o n o f t h e i r t r i v e t ( s e e paragraph 1 3 . b e l o w ) .
F u r t h e r e x p e n d i t u r e o f £10M would be i n v o l v e d ,
o f which we should be asked t o f i n d £7M.
4.
Government payments ( i n c l u d i n g t h e £7M f o r
p o s s i b l e Lockheed a p p l i c a t i o n ) would be phased
r o u g h l y as f o l l o w s ( i n £M)
1970/71
4
71/72
23
72/73
33
the
75/74
74/75
75/76
Total
37
25
11
133
/5
**
0 0
5o
The manufacturers and t h e M i n i s t r y o f Technology
have c a r r i e d out a c a r e f u l a n a l y s i s o f t h e market
p r o s p e c t s f o r t h e a i r c r a f t and we have based t h e
economic a p p r a i s a l on s a l e s ranging between 150 and
240 a i r c r a f t .
I t i s not expected t h a t s a l e s w i l l f a l l
l o w e r than 150 (BEA and t h e o t h e r a i r l i n e s who a r e
p r e p a r e d t o o r d e r at t h e o u t s e t as "launching
customers" would o r d e r some 40 a i r c r a f t i n i t i a l l y
and r e q u i r e about 100 i n t o t a l ) , and t h e r e i s some
chance ( e g i f BAC gained an American p a r t n e r ) t h a t
s a l e s would exceed 240.
BAC are a l r e a d y planning
to sub-contract p a r t s of the a i r c r a f t overseas t o
Canada, Belgium, Rumania, and J u g o s l a v i a and t h i s
should improve t h e p r o s p e c t s o f o r d e r s from n a t i o n a l
airlines.
The s a l e s f o r e c a s t assumes t h a t t h e
Americans w i l l capture some 700 o f a t o t a l w o r l d market
o f about 1100; no American manufacturer has y e t
e n t e r e d t h e f i e l d and a l l t h r e e are i n some f i n a n c i a l
difficultyo
S a l e s o f 240 f o r t h e BAC 3-11 would
r e p r e s e n t some 22% o f t h e w o r l d market.
This
compares w i t h n e a r l y 20% captured by t h e BAC 111
a g a i n s t c o m p e t i t i o n from Boeing and Douglas
0
6.
The r e s u l t s o f t h e economic a p p r a i s a l o f t h e
p r o j e c t a r e s e t out below i n terms o f t h e " i m p l i e d
p r e f e r e n c e " ( i . e . the p e r c e n t a g e by which t h e
n a t i o n a l r e s o u r c e s used exceed the f o r e i g n exchange
b e n e f i t ) and t h e " i m p l i e d subsidy" ( i . e . t h e
p r o s p e c t i v e Government l o s s as a p e r c e n t a g e o f
t h e f o r e i g n exchange b e n e f i t ) ?
The f i g u r e s i n t h e
bottom l i n e o f t h e t a b l e t a k e account o f t h e f a c t
t h a t many o f t h e a i r c r a f t w i l l be e x p o r t e d on l o n g ­
term c r e d i t backed by ECGD; the low r a t e o f i n t e r e s t
we n o r m a l l y charge r e p r e s e n t s a f u r t h e r " i m p l i e d
preference".
T h i s i s , however, a f e a t u r e common
t o many c a p i t a l goods e x p o r t s :
/(a) ..
*U0TE.
A l l e x p e n d i t u r e and r e c e i p t s a r e
discounted a t 10% p e r annum t o
g i v e a net p r e s e n t v a l u e i n 1970*
10% i s chosen as t h e t a r g e t o r
" t e s t d i s c o u n t r a t e " as r e p r e s e n t i n g
t h e amount which i n d u s t r y would
e x p e c t t o earn ( a f t e r t a x ) on a
normal i n v e s t m e n t . Hence, f o r
example, a z e r o i m p l i e d p r e f e r e n c e
would mean t h a t t h e p r o j e c t was
earning t h i s 10%.
-2­
At 150 sales
a) Government loss/
gain (in cash
terms ­
undiscounted)
-£40M
h)
£750M
Foreign exchange
"benefit (in
cash terms ­
undiscounted)
At 240 sales 4- £1QM
£1250M
c) Implied subsidy
18%
8%
d)
18%.
4%
22%
9%
Implied
preference e) Implied
preference
(taking
account of
export credit)
7o
If the aircraft sells well, it may be possible
to increase its selling price (as was done for the
BAC 111) and improve its profitability; on the
other hand, if costs rise, profitability will
suffer. If we inflate faster than our competitors
(mainly America), profitability will again suffer
but this would be a national problem affecting all
exports. At the extreme, these various effects
might cause a swing of 10 points either way in
the implied preference so that the figures in
line (e) could vary between:At 150 sales At 240 sales Implied preference
12-32%
0-19%
(the implied subsidy remains unaffected). 8.
The Ministry of Technology believes, in
the light of the technical work which has already
been done on the aircraft, and the thorough
analysis of costs and sales prospects, that
judgment can reasonably be based on the implied
preference figures in paragraph 6 above.
9.
If the EB211-61 was also sold to Lockheed, the
results would be substantially improved (see Full
Table at Appendix).
The European Airbus A500B 10. The aircraft would b" in direct competition
with the European Airbus, A300B, from which we
withdrew in 1969 but which the French and
/Germans .. -3­
Germans are c o n t i n u i n g ,
w i t h p r i v a t e p a r t i c i p a t i o n by
Hawker S i d d e l e y , and the s a l e s f o r e c a s t s a l l o w f o r "this,
as w e l l as.-for an American c o m p e t i t o r .
1 1 . We withdrew from the A 3 0 0 B because t h e r e was
a t the time no assurance of a i r l i n e i n t e r e s t , i n s u f f i c i e n t
f i n a n c i a l p a r t i c i p a t i o n by i n d u s t r y , and doubts about
t h e e f f e c t i v e n e s s o f French p r o j e c t management.
These
o b j e c t i o n s remain v a l i d and, even i f i t were f e a s i b l e
f o r us t o do s o , i t would n o t be i n our i n t e r e s t t o
attempt t o r e - e n t e r the A300B.
There would, i n
p a r t i c u l a r , be no p r o s p e c t t h a t the s t r e t c h e d EB211
c o u l d be e s t a b l i s h e d as t h e prime engine f o r the a i r c r a f t
- R o l l s - R o y c e ' s d a t e s are t o o l a t e , and the French have
i n any case shown a strong p r e f e r e n c e f o r i t s American
r i v a l , the General E l e c t r i c CF.6.
12.
I t i s not y e t c e r t a i n t h a t the French w i l l fund
t h e A3OOB t o c o m p l e t i o n , s i n c e t h e y have a r i v a l
Dassault p r o j e c t ( t h e 150 s e a t Mercure) and are h e a v i l y
stretched in other d i r e c t i o n s ;
but t h e y and the Germans
can be expected t o p r o t e s t v i g o r o u s l y i f we d e c i d e t o
launch t h e BAC3-1'1o However, on t h e i r own world market
f o r e c a s t s (of 1200-1400 a i r c r a f t ) t h e r e i s room f o r both
p r o j e c t s , and i f we c o n s i d e r t h a t the BAC 3^1 i s i n the
n a t i o n a l i n t e r e s t i t would be wrong t o abandon i t i n the
f a c e of p r e s s u r e from f o r e i g n c o m p e t i t o r s . Whatever we
d e c i d e about the BAC 3-11, i t need not be regarded as a
major f a c t o r j f i n our approach t o Europe or i n the
l o n g e r term p r o s p e c t s of a i r c r a f t c o l l a b o r a t i o n f o r
which we should continue t o work.
Lockheed requirement
13.
We s h a l l p r o b a b l y not know u n t i l l a t e t h i s y e a r
or e a r l y next whether Lockheed want the RB211-61 engine
f o r a stretched v e r s i o n of t h e i r t r i j e t ;
i n any case
i t would almost c e r t a i n l y n o t be economic t o launch the
engine f o r Lockheed alone (though not t o launch under
t h e s e circumstances might cause Lockheed t o turn t o an
American engine and worsen s a l e s of the p r e s e n t RB211).
A d e c i s i o n about the engine
/must
- 4 ­
must t h e r e f o r e he taken now, i n t h e BAC 3 1 1 c o n t e x t .
I f L o c k h e e d ' s p r e s e n t cash d i f f i c u l t i e s (which
a r i s e out o f l o s s e s on m i l i t a r y c o n t r a c t s ) grow any
w o r s e , s a l e s o f t h e p r e s e n t t r i j e t and R B 2 1 1 may
well suffer.
S a l e s o f t h e engine i n t h e BAC 3 - 1 1
w i l l then he o f c a r d i n a l importance f o r R o l l s - R o y c e s
future i n the c i v i l aero-engine f i e l d .
1
14.
BEA want t h i s a i r c r a f t and judge t h a t i t s
o p e r a t i n g c o s t s ( i n terms o f s e a t - m i l e s ) w i l l be some
5% b e t t e r than t h e Lockheed t r i j e t which would be
t h e i r second c h o i c e , a l l o w i n g an o v e r a l l saving t o
t h e a i r l i n e o f some £1-jM p e r y e a r .
On p r e s e n t showing,
t h e y \tfould be r e l u c t a n t t o buy t h e A 3 0 0 B .
15.
BEA's i n i t i a l purchase would be 20 and f u l l
requirement f o r t h e BAC 3 - 1 1 and any s t r e t c h e d
v e r s i o n perhaps 60. I f t h e Lockheed t r i j e t were
purchased i n s t e a d , t h e d o l l a r b i l l i n t h e decade o r
so a f t e r 1 9 7 4 i s l i k e l y t o be about £400M ( t h i s i s
t a k e n account o f i n t h e economic assessment at
paragraph 6 a b o v e ) .
16.
I n a d d i t i o n t o t h e BEA i n i t i a l o r d e r , BAC
b e l i e v e t h a t t h e y can g e t about 20 launching o r d e r s from
o t h e r s m a l l e r a i r l i n e s h e r e and i n Europe.
The
u l t i m a t e requirement of t h e a i r l i n e s thus committed
would p r o b a b l y be around 1 0 0 a i r c r a f t .
Although
i t would be b e t t e r i f a major American a i r l i n e
were i n c l u d e d among t h e f i r s t customers, orders
f o r 40 would r e p r e s e n t an adequate b a s i s f o r launching
the a i r c r a f t .
I t i s b e t t e r than European a i r c r a f t
f i r m s have achieved i n t h e p a s t , and compares
f a v o u r a b l y w i t h US p r a c t i c e .
The arguments f o r and a g a i n s t
17.
Given t h e p u b l i c expenditure i n v o l v e d , t h i s
i s a d i f f i c u l t decision.
The case f o r supporting t h e
BAC 3-11 can be summarised as f o l l o w s
( a )
I t r e p r e s e n t s our b e s t remaining chance t o
a v o i d t o t a l dependence on America f o r subsonic
c i v i l transport a i r c r a f t .
We ought t o r e t a i n
some c a p a c i t y t o d e s i g n and b u i l d t h e s e
a i r c r a f t , f i r s t l y because o f t h e growing
e x p o r t market (we p r e d i c t t h a t t r a f f i c
w i l l be a t l e a s t t w i c e as l a r g e by 1980
as i t i s n o w ) , and s e c o n d l y because we have
a l a r g e home market - t h e l a r g e s t a i r l i n e
i n d u s t r y i n t h e w e s t e r n w o r l d o u t s i d e America.
/(b)
-5­
..
( b )
I t a l l o w s us t o e x p l o i t t h e v e r y good
worldwide r e p u t a t i o n which BAC and R o l l s Royce have b u i l t up o v e r the y e a r s w i t h
t h e V i s c o u n t , VC.10 and BAC 1 1 1 .
The
combined c i v i l e x p o r t earnings 01 t h e
two companies during t h e l a s t 5 y e a r s
has been £400M.
( c )
I t w i l l s u b s t a n t i a l l y reduce t h e i n d u s t r i a l
d i f f i c u l t i e s i n v o l v e d i f f o r any reason
t h e Concorde i s d i s c o n t i n u e d .
( d )
We cannot a f f o r d t o become s u b s e r v i e n t
t o t h e French and German i n d u s t r i e s i n any
European c o l l a b o r a t i v e s e t - u p .
( e )
BEA want
( f )
A major a i r c r a f t o p e r a t i n g on w o r l d
a i r l i n e r o u t e s i s a good demonstration
o f our t e c h n o l o g i c a l a b i l i t i e s and, as
such, w i l l i n d i r e c t l y h e l p o t h e r
engineering exports.
( g )
D i r e c t l y , i t w i l l h e l p our a i r c r a f t
equipment i n d u s t r y t o a c h i e v e s a l e s i n
foreign aircraft.
( h )
Large s u b - c o n t r a c t s are e x p e c t e d t o go
t o Shorts i n Northern I r e l a n d and t o
S c o t t i s h A v i a t i o n at Prestwick.
it.
A g a i n s t t h i s can be s e t t h e f o l l o w i n g
points:
( a )
t h e high, government e x p e n d i t u r e
involved;
( b )
t h e r i s k t h a t c o s t s w i l l i n c r e a s e and t h a t
t h e p r o j e c t w i l l f a i l t o come up t o
expectations.
But t h e f i r m s w i l l be under an
i n c e n t i v e t o h o l d c o s t s down s i n c e t h e y
w i l l have t o b e a r t h e i r share (40% i n
t h e case o f BAC and 30% i n t h e case o f
R o l l s - R o y c e ) , and w i l l be c o n t r a c t u a l l y
responsible f o r cost over-runs.
/Technical
.
Technical f a i l u r e i s u n l i k e l y since the
design of the a i r c r a f t i s already w e l l
e s t a b l i s h e d as a r e s u l t o f t h e l a s t two y e a r s
work by BAC.
They have a v e r y e x p e r i e n c e d
c i v i l a i r c r a f t team, and have p r o v e d themselves
i n t h e i r BAC 111, as xd.th t h e V i s c o u n t e a r l i e r ,
a b l e t o s e l l a i r c r a f t throughout t h e w o r l d ;
( c )
i t w i l l temporarily exacerbate r e l a t i o n s with
t h e French and Germans.,
However, though i t i s d i s a p p o i n t i n g t h a t
we d i d not f i n d a b a s i s f o r c o l l a b o r a t i o n on
a European a i r b u s ,
i t was not f o r want o f t r y i n g ,
and we should earn no r e s p e c t f o r a show o f
weakness now i n the f a c e o f t h e i r p r o t e s t s ;
( d )
c i v i l a i r c r a f t launching a i d ( a l t o g e t h e r
a p a r t from t h e l a r g e sums spent on Concorde)
has been a constant d r a i n on t h e Exchequer,,
S i n c e 1960, we have spent o r committed £120M
and have r e c o v e r e d so f a r o n l y £6M.
However, t h e p o l i c y d i d have c e r t a i n
o t h e r o b j e c t i v e s - n o t a b l y , t o keep BEA
f l y i n g B r i t i s h w i t h t h e T r i d e n t 5B and
BAC 1 1 1 / 5 0 0 - and i t has l e d t o d o l l a r earning
o r d o l l a r - s a v i n g s a l e s worth some £800M
w i t h more t o come.,
( e )
E q u a l l y good export earning o r import
s a v i n g uses could be found f o r t h e r e s o u r c e s
i n v o l v e d which would make no c a l l on
Government a i d .
But we cannot be sure about t h i s
A i r c r a f t i s one o f t h e advanced t e c h n o l o g y
i n d u s t r i e s on which our e x p o r t s must
s u r e l y i n c r e a s i n g l y depend. There are no
immediate a l t e r n a t i v e p r o j e c t s f o r R o l l s - R o y c e
and BAC. The BAC 5-11 would h e l p t h e
a i r c r a f t i n d u s t r y t o maintain i t s e x p o r t s ,
now running a t t h e r a t e o f some £500M p e r y e a r .
0
19O
There i s a f u r t h e r more g e n e r a l p o i n t o
Launching a i d f o r approved p r o j e c t s should not n o r m a l l y
exceed 5 0 % t o ensure an adequate commercial s t a k e .
N e i t h e r BAC nor R o l l s - R o y c e a r e prepared t o f i n d 5 0 % ,
R o l l s - R o y c e because t h e y cannot a f f o r d i t ( t h e y are
h a v i n g t o spend some £ 7 0 M o f t h e i r own money on t h e
b a s i c RB211; and BAC because t h e y a r e not prepared
t o i n c r e a s e t h e i r launching c o s t r i s k beyond £56M
( 4 0 % ) , which i s o f course a v e r y l a r g e sum i n a b s o l u t e
terms f o r a p r i v a t e company.
I n f a c t , BAC p r e d i c t
/that
eowFrefewiAL
..
t h a t "by 1975, t a k i n g account o f p r o d u c t i o n work
i n p r o g r e s s , t h e y w i l l have i n a l l some £6CM o f t h e i r
own c a p i t a l t i e d up i n t h e p r o j e c t , and t h a t t h i s w i l l
r i s e t o a peak o f £75M i n 1980.
20o The c o n t r i b u t i o n s which, t h e f i r m s now propose
a r e t h e r e s u l t o f l o n g n e g o t i a t i o n s , and i t would
n o t b e r e a l i s t i c t o expect them t o f i n d more.
Company Finances
21o S i n c e BAC and R o l l s - R o y c e w i l l be r e s p o n s i b l e
n o t o n l y f o r t h e i r share o f launching c o s t s , but a l s o
f o r c o s t overruns and f o r p r o d u c t i o n , we have been
concerned t o ens .re t h a t b o t h companies have s u f f i c i e n t
f i n a n c i a l s t r e n g t h t o undertake t h e p r o j e c t *
-8­
22 , BAC are at p r e s e n t u n d e r - c a p i t a l i s e d i n r e l a t i o n
t o the l e v e l o f business proposed; t h e y have now put
forward p r o p o s a l s f o r an i n c r e a s e o f £6M i n t h e i r
c a p i t a l hy a p r i v a t e p l a c i n g of l o a n s t o c k s .
We must
ensure t h a t t h i s sum, a t l e a s t , i s a v a i l a b l e b e f o r e we
become p u b l i c l y committed t o t h e p r o j e c t .
Though BAC
are s e e k i n g 60% launching a i d , t h e y want 75% p r o g r e s s
payments i n the e a r l y y e a r s ( w i t h c o r r e s p o n d i n g l y
lower payments l a t e r ) t o ease t h e i r cash p o s i t i o n .
This i s a p o i n t which can be l e f t t o the normal course
of n e g o t i a t i o n .
23.
R o l l s - R o y c e have been f a c i n g a major cash
shortage and a d e c l i n e i n p r o f i t a b i l i t y , owing i n
l a r g e p a r t t o d i f f i c u l t i e s w i t h t h e b a s i c RB.211
engine f o r Lockheed, which w i l l c o s t the company
some £7011 i n launching c o s t c o n t r i b u t i o n s i n s t e a d o f
the £20M o r i g i n a l l y budgeted f o r .
The d i f f i c u l t i e s
should be r e s o l v e d when RB.211 d e l i v e r i e s g e t under
way ( p r o v i d e d the Lockheed t r i j e t i s not scrapped ­
see b e l o w ) .
To t i d e o v e r the next few y e a r s , the
IRC i s making loans o f up t o £20M a v a i l a b l e , and has
agreed w i t h R o l l s - R o y c e c e r t a i n measures t o improve
t h e i r commercial performance.
I n a d d i t i o n , because
o f the d i f f i c u l t cash s i t u a t i o n (which t h e y expect
u n t i l about 1 9 7 3 ) , R o l l s - R o y c e are asking t h a t the
70% Government c o n t r i b u t i o n t o launching c o s t s
should be made f i r s t , and payment o f t h e i r 30% share
d e f e r r e d u n t i l 1973 and 1 9 7 4 . They f u r t h e r ask t h a t ,
i f t h e i r p r o f i t s i n those y e a r s f a l l below a d e f i n e d
l e v e l , t h i s 30% payment should be f u r t h e r d e f e r r e d .
While t h i s i s unwelcome, i t i s c l e a r t h a t R o l l s - R o y c e
cannot a t p r e s e n t a f f o r d t o o f f e r anything b e t t e r ;
t h e IRC concurs i n t h i s judgment.
24
W i t h i n t h e s e l i m i t s , R o l l s - R o y c e and BAC
t h e r e s o u r c e s t o c a r r y out the p r o j e c t , g i v e n
amount o f Government a i d now p r o p o s e d , and t o
the usual r e s p o n s i b i l i t y f o r c o s t o v e r - r u n s .
t h e r e i s l i t t l e room f o r m i s t a k e s .
have
the
carry
But
/25-
If
2p,
I f Lockheed f a i l , or are f o r c e d u l t i m a t e l y t o
drop t h e i r t r i j e t , t h e r e w i l l be no immediate o u t l e t
f o r the E B o 2 1 1 - 2 2 e n g i n e , on which R o l l s - R o y c e and
we are spending so much, money. Under t h e s e c i r c u m s t a n c e s ,
t h e expected improvement i n R o l l s - R o y c e f i n a n c e s would
not appear, and t h e y would r e g a r d i t as even more
important t o s e l l the R B . 2 1 1 - 6 1 i n t h e BAC 3 - 1 1 .
26,
We have thus a d i f f i c u l t background f o r the
d e c i s i o n which, i s now r e q u i r e d .
I n n e i t h e r B1C nor
R o l l s - R o y c e i s the s i t u a t i o n w h o l l y s a t i s f a c t o r y ,
and major d i f f i c u l t i e s or cost o v e r - r u n s c o u l d l e a d
t o f u r t h e r r e q u e s t s f o r Government s u p p o r t .
In a
s e n s e , t h i s i s u n a v o i d a b l e i n a p r o j e c t of such
magnitude; the sums of money i n v o l v e d are beyond t h e
resources of p r i v a t e industry.
Even i n America, the
a i r c r a f t companies are a b l e t o f i n a n c e c i v i l a i r c r a f t
o n l y on the back o f massive m i l i t a r y and space c o n t r a c t s .
Escalation
27.
The i n c l u s i o n o f an e s c a l a t i o n clause i n
launching a i d c o n t r a c t s i s a new f e a t u r e .
I n the
p a s t , we have p r e f e r r e d t o t i e launching a i d t o a
f i x e d or maximum sum, i n c l u d i n g an allowance f o r
e s c a l a t i o n e s t i m a t e d i n advance and w i t h i n which the
f i r m has t o l i v e .
I t now seer:.s b e s t t o concede an
escalation clause, s t r i c t l y t i e d to o f f i c i a l indices
o f labour and m a t e r i a l s .
This w i l l o b v i a t e the need
f o r a l a r g e c o n t i n g e n c y allowance now, and w i l l (most
i m p o r t a n t l y ) enable us t o t i e our l e v y t o a c t u a l
s a l e s p r i c e s which should b e n e f i t from the e f f e c t s
of i n f l a t i o n .
An e s c a l a t i o n clause w i l l not l e a v e
f i r m s f r e e t o concede e x a g g e r a t e d wages. They w i l l
s t i l l remain l i a b l e f o r t h e i r share o f launching
c o s t , and t h e y w i l l remain under the s t r o n g e s t
i n c e n t i v e t o avoid increases i n t h e i r production c o s t s .
- 10 ­
Labour I m p l i c a t i o n s
28 . B A C s p r e s e n t t o t a l labour f o r c e i s about
37,000.
The f i r m e s t i m a t e t h a t the BAC 3-31 w i l l
occupy some 2,500 o f t h e i r employees by t h e end
o f 1971, r i s i n g t o a peak of about 9,000 by the
mid 1 9 7 0 ' S O
2 9 . R o l l s - R o y c e ' s p r e s e n t t o t a l labour f o r c e on
a e r o - e n g i n e s i s about 70,000. The RB211-22 w i l l
employ some 20,000 p e o p l e a t peak i n 1971- The
RB211-61 w i l l employ some 1,200 by the end of
1971 r i s i n g t o 9-15,000 (depending on whether
Lockheed o r d e r as w e l l as BAC) by the m i d - 1 9 7 0 ' s .
5 0 . Employment i n firms o t h e r than BAC and R o l l s Royce would be about as much a g a i n .
Conclusion
31 . A d e c i s i o n i s now r e q u i r e d whether Government
launching a i d o f £126M should be committed t o the
BAC 311 a i r c r a f t and i t s e n g i n e .
BAC need a d e c i s i o n
immediately.
They had hoped f o r a d e c i s i o n e a r l y
t h i s y e a r , hut engine and o t h e r u n c e r t a i n t i e s o u t s i d e
t h e i r c o n t r o l d i d not a l l o w t h i s .
They are. now
spending more than £j-M p e r month and a r e u n w i l l i n g
t o continue t h i s f o r many weeks l o n g e r .
But t h e y
ought now t o i n c r e a s e t h e i r spending and e n t e r i n t o
f i r m commitments w i t h f o r e i g n p a r t n e r s and sub­
c o n t r a c t o r s , o t h e r w i s e the a i r c r a f t w i l l miss BEA
d a t e s and the b e s t of the o v e r s e a s market.
32 . The RB211-61 engine may a l s o be r e q u i r e d by
Lockheed t o power l a t e r v e r s i o n s of t h e i r t r i j e t ,
so t h a t we may be f a c e d e a r l y n e x t y e a r w i t h a r e q u e s t
t o support i t even i f we do not go ahead w i t h the
BAC 5 1 1 .
20
July 1970
- 11 ­
At 150 sales
At 240 sales . £^QM
a) Government loss/
gain (in cash terms ­
undiscounted) -£40M
b) Foreign exchange
benefit (in
cash terms ­
undiscounted)
£750M
£1250M
c) Implied subsidy
18%
8 /,'0
d) Implied
preference
18%'o.
4%
e) Implied
preference
(taking
account of
export credit)
22%
9%
H
0
7o
If the aircraft sells well, it may be possible
to increase its selling price (as was done for the
BAC 111) and improve its profitability; on the
other hand, if costs rise, profitability will
suffer. If we inflate faster than our competitors
(mainly America), profitability will again suffer
but this would be a national problem affecting all
exports. At the extreme, these various effects
might cause a swing of 10 points either way in
the implied preference so that the figures in
line (e) could vary between:At 150 sales At 240 sales
Implied preference
12-32%
0-19%
(the implied subsidy remains unaffected). 8.
The Ministry of Technology believes, in
the light of the technical work which has already
been done on the aircraft, and the thorough,
analysis of costs and sales prospects, that
judgment can reasonably be based on the implied
preference figures in paragraph 6 above.
9o
If the EB211-61 was also sold to Lockheed, the
results would be substantially improved (see Full
Table at Appendix).
The European Airbus A300B 10. The aircraft would b.- in direct competition
with the European Airbus, A300B, from which we
withdrew in 1969 but which the French and
/Germans ., BAC 3-11 & KB 211-61 ., RESULTING- PROFITABILITY
IMPLIED PBCIEIU^OE
For BAC 3 - H
alone
22%)
) C+10%) See Notes
At 1 5 0 s a l e s
At 240 s a l e s
9%)
For BAC 5-11 and Lockheed
At 150 s a l e s -\­ 100 Lockheed
At 240 s a l e s + 200 Lockheed
12%)
) C+10%) See Notes
0%)
"
IMPLIED SUBSIDY
For BAC 3-11 alone
18%
At ISO s a l e s
At 240 s a l e s
For BAC 5-11 and Lockheed
At 150 s a l e s + 100 Lockheed
12%
At 240 s a l e s 4- 200 Lockheed
4%
btes ( 1 )
I f the t r e n d of r e c e n t y e a r s c o n t i n u e s , p r e f e r e n t i a l e x p o r t c r e d i t
i l l he a l l o w e d f o r most f o r e i g n s a l e s o f the BAC 5-11 ( a s f o r most
ttier c a p i t a l goods e x p o r t s ) .
No exact c a l c u l a t i o n o f the e f f e c t i s p o s s i b l e b u t , assuming an
BGD guaranteed r a t e o f 7i% (which i s h i g h e r than the c u r r e n t r a t e ) and
.test r a t e of 10%, t h e r e i s an o v e r a l l worsening o f i m p l i e d p r e f e r e n c e
f some 4 o r 5%. T h i s i s taken i n t o account i n the above f i g u r e s ,
(2)
The i m p l i e d p r e f e r e n c e would a l s o be a f f e c t e d by v a r i a t i o n s
a costs and s e l l i n g p r i c e s .
The f i r m s ' c o s t e s t i m a t e s on which t h i s
ippraisal i s based have been c a r e f u l l y examined and endorsed by the
i n i s t r y o f Technology.
R e a l i s t i c c o n t i n g e n c i e s have been i n c l u d e d i n
bth development and p r o d u c t i o n e s t i m a t e s .
These are counted as c o s t s
'ather than p o t e n t i a l p r o f i t s f o r the purpose o f c a l c u l a t i n g t h e i m p l i e d
preferences.
/Cost
- 2 ­
BAC 3-11 & RB 211-61 I,
RESULTING- PROFITABILITY
IMPLIED PEJFExv^oE
For BAC 3-11 alone
At 150 s a l e s
22%)
) C+10%) See Notes
9%)
At 240 s a l e s
For BAC 3-11 and Lockheed
At 150 s a l e s -h 100 Lockheed
At 240 s a l e s -t- 200 Lockheed
12%)
) C+10%) See Notes
0%)
IMPLIED SUBSIDY
For BAC 5-11 alone
At ISO s a l e s
18%
At 240 s a l e s
8%
For BAC 3-11 and Lockheed
At 150 s a l e s + 100 Lockheed
12%
At 240 s a l e s + 200 Lockheed
4%
Notes ( 1 )
I f the t r e n d o f r e c e n t y e a r s c o n t i n u e s , p r e f e r e n t i a l e x p o r t c r e d i t
rill be a l l o w e d f o r most f o r e i g n s a l e s of the BAC 3-11 ( a s f o r most
other c a p i t a l goods e x p o r t s ) .
No exact c a l c u l a t i o n of the e f f e c t i s p o s s i b l e b u t , assuming an
iCGD guaranteed r a t e o f 7-?% (which, i s h i g h e r than t h e c u r r e n t r a t e ) and
a t e s t r a t e of 10%, t h e r e i s an o v e r a l l worsening o f i m p l i e d p r e f e r e n c e
of some 4 o r 5%. T h i s i s taken i n t o account i n the above f i g u r e s .
(2)
The i m p l i e d p r e f e r e n c e would a l s o be a f f e c t e d by v a r i a t i o n s
in c o s t s and s e l l i n g p r i c e s .
The f i r m s ' c o s t e s t i m a t e s on which t h i s
appraisal i s based have been c a r e f u l l y examined and endorsed by the
jlinistry o f T e c h n o l o g y .
R e a l i s t i c c o n t i n g e n c i e s have been i n c l u d e d i n
both development and p r o d u c t i o n e s t i m a t e s .
These are counted as c o s t s
rather than p o t e n t i a l p r o f i t s f o r t h e purpose o f c a l c u l a t i n g the i m p l i e d
preferences.
/Cost
-
2 ­
Cost overruns may be o f f s e t by i n c r e a s e s i n s e l l i n g p r i e s ?
The
extent t o which t h i s can be done depends on the c o m p e t i t i v e s i t u a t i o n
but there i s u s u a l l y some room f o r manoevre once the a i r c r a f t or
I n the judgment of the M i n i s t r y o f
engine has e s t a b l i s h e d i t s e l f .
technology t h e n e t v a r i a t i o n o f c o s t s and r e c e i p t s f o r a g i v e n l e v e l
of sales i s u n l i k e l y t o exceed ^5% o f the agreed e s t i m a t e s .
A r a t e o f i n f l a t i o n i n excess o f e s c a l a t i o n i n competing c o u n t r i e s
could also upset the f o r e c a s t of p r o f i t a b i l i t y .
B r i t i s h c o s t s i n money
;erms would then r i s e i n circumstances where t h e a b i l i t y t o i n c r e a s e
prices would be l i m i t e d by c o m p e t i t i o n .
T h i s problem i s shared w i t h
other i n d u s t r i e s which depend on heavy i n i t i a l investment f o r a l o n g ­
term pay o f f .
These two e f f e c t s combined c o u l d v a r y the i m p l i e d p r e f e r e n c e
within 10% e i t h e r way, so t h a t ( f o r example) 150 s a l e s o f the BAC 3 - H
could mean an i m p l i e d p r e f e r e n c e v a r y i n g between 12% and 32%. But
22% has been adopted as a r e a s o n a b l y c o n s e r v a t i v e , and most p r o b a b l e ,
result.
20th July, 1970
i
GP(70) 22
COPT NO
20 July 1 970
CABINET
AGRICULTURAL POLICY:
CHANGES IN SUPPORT ARRANGEMENTS
Memorandum by the Minister of A g r i c u l t u r e , F i s h e r i e s and Pood
Our declared a g r i c u l t u r a l policy has two associated o b j e c t i v e s ­
a.
t o expand home production in the i n t e r e s t s of import saving,
which w i l l he important i f the n e g o t i a t i o n s to get i n t o the Common
Market come to nothing and probably even more so i f they succeed; and
b.
to r a i s e market prices by means of l e v i e s on imports, so that
deficiency payments from the Exchequer are no longer necessary t o
secure the home producers' return.
2.
We have always recognised that the introduction of levy arrangements
on t h i s basis w i l l not be welcomed by overseas suppliers.
But we have
also recognised that there w i l l be very substantial b e n e f i t s to the
Exchequer both from savings on deficiency payments costs and from l e v y
revenue.
We have accepted that in order to secure these b e n e f i t s we
shall have to be prepared to take a firm l i n e i n t e r n a t i o n a l l y .
expect to get them e a s i l y by agreement.
made plain during the E l e c t i o n .
We cannot
Our p o s i t i o n on these issues was
The Prime Minister has previously
put the Governments of New Zeland and A u s t r a l i a , as w e l l as other
governments i n no doubt as to where we stood, and both Mr Godber and myself
have taken every occasion open t o us to r e i n f o r c e our determination to
carry our p o l i c y through.
3.
We must now decide how t o set about implementing our p o l i c y .
In
t h i s memorandum, I have set out the main problems and I i n v i t e the agreement
of my colleagues t o the l i n e of action t o be f o l l o w e d .
1
INTERNATIONAL OBLIGATIONS
k-,
We are committed to t a l k to our major overseas suppliers before we
make changes.
They w i l l be expecting us to begin t a l k s soon, and w i l l of
course be expecting us to take a firm l i n e .
Some w i l l acknowledge the
importance t o t h e i r own economies of a strong B r i t i s h economy, not under­
mined by recurrent balance of payments d i f f i c u l t i e s , but they are not l i k e l y
to say so openly.
Our market, protected at present from dumped and subsidised
supplies only t o a l i m i t e d exbent, remains a t t r a c t i v e t o supplying countries
and they w i l l c e r t a i n l y press us to keep the market open and to maintain
t h e i r share of
5.
it.
As colleagues know there are the international obligs/bions, both
general and s p e c i f i c , that l i m i t our a b i l i t y to introduce import controls
of a kind and a t a time of our own choosing.
We shall have to get out of
these i f we are to adopt the comprehensive system of v a r i a b l e l e v i e s
foreshadowed in our manifesto over a three year changeover period.
To
r e a l i s e the f u l l p o t e n t i a l benefit during the l i f e t i m e of t h i s
Government, we would have to make a start very soon.
EEC NEGOTIATIONS
6.
The opening of the negotiations has brought a new element into the
situation.
Although our proposals for v a r i a b l e l e v i e s are in many respects
similar t o the arrangements we should have to adopt on accession to the
European Economic Community (EEC), there i s a b i g difference in adopting
them with the United Kingdom in i s o l a t i o n and with the United Kingdom
negotiating t o j o i n an enlarged European Community.
While the introduction
of methods o f support more akin to the Common A g r i c u l t u r a l P o l i c y (CAP) i n
p r i n c i p l e would be welcome to the Six themselves, the imposition of l e v i e s
on our imports from them would not.
But u n t i l we are actually members, i t
would be hard t o j u s t i f y p r e f e r e n t i a l treatment f o r them.
Denmark and the I r i s h Republic i s especially d i f f i c u l t .
o b l i g a t i o n s to them are onerous enough:
The position of
Our existing
but as f e l l o w applicants t o join
the EEC they are bound to r e s i s t strongly the application of l e v i e s on
t h e i r trade at a time when they are looking forward to improved access in
an enlarged Community, including the United Kingdom.
Thus i t i s clear that
there would be great d i f f i c u l t i e s in conducting negotiations f o r introducing
a comprehensive l e v y system on the basis that the United Kingdom remained
outside the EEC at the very time we were negotiating t o get i n :
present circumstances, i t might be thought unwise to t r y .
2
and, in
7.
I f my colleagues are cf the opinion that the EEC negotiations must
have the p r i o r i t y , the implications are c l e a r .
Early implementation of our
new a g r i c u l t u r a l support p o l i c y in i t s e n t i r e t y becomes impossible and the
f u l l savings we have been looking t o achieve f o r the Exchequer w i l l have t o
be postponed,
OTHER POSSIBILITIES
8.
I f i t i s decided not t o pursue our proposals f o r comprehensive changes
in our support arrangements while negotiations with the EEC are going on,
we cannot simply leave matters there and do nothing more.
We must be
ready, in case the EEC negotiations f a i l , to put those changes i n t o operation
without further delay.
9.
We must make preparations f o r t h i s now.
I do not b e l i e v e however that the EEC negotiations preclude us from
doing anything.
There are some changes we could make which, even i f more
l i m i t e d In scope than our comprehensive proposals, would nevertheless he a
move in the d i r e c t i o n we want and could achieve worthwhile economies soon.
We ought t o go ahead with these, f o r we must not be seen to have abandoned,
once in o f f i c e , the p o l i c y we are committed t o .
Moreover, to keep up
pressure on t h i s front would enable us more r e a d i l y t o move forward with
that p o l i c y i n f u l l ,
should we not succeed in Europe.
I recommend t o my
colleagues that we should go ahead with schemes for b e e f , c e r e a l s , and lamb.
10.
There are several reasons why i t i s appropriate t o make a start with
beef and c e r e a l s .
These are key commodities for a g r i c u l t u r a l
expansion
whether we are in the EEC or out, and our farmers w i l l be watching t o see
what we do about them.
Inaction w i l l be interpreted as meaning that we
are having second thoughts about our p o l i c y
doubt.
and that expansion may be in
A minimum import price/levy scheme for cereals i s already in
operation, and a scheme for beef has been under negotiation for some time.
Thus we have an e x i s t i n g basis on which to b u i l d .
already f a m i l i a r with the arrangements.
expecting us to make a move.
Whitehall generally i s
The overseas suppliers w i l l be
Unless we do so, we s h a l l begin to l o s e
c r e d i b i l i t y , and the momentum behind our hew policy w i l l start to evaporate.
11,
Although lamb i s not in the sane category, we should go ahead at the
same time with a lamb scheme.
This would help us to firm up market p r i c e s f o r
meat g e n e r a l l y t o the b e n e f i t of the Exchequer.
Given the nature of the
trade, the aim, for the present, would be a r e l a t i v e l y simple l e v y scheme.
3
12.
We should also introduce l e v y schemes f o r milk products other than
butter and cheese.
These would not d i r e c t l y save Exchequer money, since
the milk guarantee i s financed by the consumer.
But they would increase the
dairy industry's income and have a profoundly favourable e f f e c t on i t s
confidence; provide some l e v y income; and should someivhat reduce the import
bill.
This should be examined urgently between Departments and with the
domestic i n t e r e s t s concerned.
13.
My proposals f o r beef, cereals and lamb can be taken forward without
c o n f l i c t i n g with our negotiating position with the EEC.
They can be
progressively developed to f i t the system we shall have t o adopt i f
vre go
into the Common Market or the one we are committed to introducing i f we
stay out.
We shall have to take a firm l i n o with our p r i n c i p a l
and show our determination to carry t h i s through.
suppliers
I do not underrate the
d i f f i c u l t i e s of negotiating these arrangements which a f f e c t the Eive Party
Cereals Agreement and, so far as meat i s concerned, the o b l i g a t i o n s to
Australia, New Zealand and the I r i s h Republic.
We may w e l l not succeed in
getting agreement and some of t h e i r r e c i p r o c a l o b l i g a t i o n s to us may be rvfc
risk.
We have always recognised t h i s p o s s i b i l i t y .
But unless we make a
determined move we shall never succeed in achieving our o b j e c t i v e s .
14.
The measures I propose should secure useful and e a r l y b e n e f i t to the
Exchequer provided we open negotiations at once.
They should also provide
grea/bor confidomc among farmers by safeguarding against the disruption of
our market by imports.
Both these aspects are important because we need
urgently to get a g r i c u l t u r a l expansion moving forward.
One of the surest
ways in which we can l i m i t the cost of going i n t o the EEC i s by growing more
food at home.
But even i f cor negotiations to go into the EEC f a i l we shall
s t i l l badly need extra home £jroduction
o n
balance of payments grounds.
These
were the reasons we advanced in cur manifesto in pledging ourselves to
increased production.
The sooner we can get t h i s under way tho moro valuable
i t will be.
I
15.
i
Production has not been increasing, however, to the extent needed and
since the l a s t P r i c e Review farmers' costs have already r i s e n
I b e l i e v e some i n c e n t i v e s w i l l be necessary in the autumn.
substantially.
I need more
information on the way things are developing before I can say what w i l l be
required, but I foresee no reason for changing the established Special
Review machinery.
4
16.
Cereals.
The scheme we now operate provides f o r minimum import p r i c e s
f o r the main cereals supported by country l e v i e s i n the case o f imports
from countries which have agreed to observe, whore p o s s i b l e , the minimum
import prices and by general l e v i e s on other imports.
The purpose of the
scheme (which was introduced by the previous Conservative administration)
was to put a f l o o r i n t o the market, not to replace d e f i c i e n c y payments.
t h i s respect i t has been reasonably successful.
In
Levy revenue ( c u r r e n t l y about
£0.5 m i l l i o n per annum) i s l e s s than would be tho case i f general l e v i e s
operated across the board based on the lowest price o f imports from any
source; but world competitive f o r c e s hove minimised the balance of payments
disadvantage of the co-operating country arrangements.
We cannot make
s i g n i f i c a n t changes in the existing arrangements without the agreement of
the co-signatories t o the F i v e Party Agreement, which runs u n t i l June 1971.
But I propose that we should go a l l out meantime t o get agreement t o r a i s e
minimum import p r i c e s by about £3 per t e n .
There could be some increase in
l e v y income and some saving in deficiency payments, the amount of which
would be bound to depend on how the market in home produced grain moves.
I t i s impossible to quantify these e f f e c t s , but the i n i t i a l importance of
the move, i s that i t w i l l l i m i t the potential l i a b i l i t y to the Exchequer.
For each £1 per ton by which the market i s l i f t e d , l i a b i l i t y f o r
deficiency
payments on cereals i s reduced by some £12 m i l l i o n .
17*
Beef.
some months.
A scheme has been under discussion with overseas suppliers for
Like the cereals scheme, the o r i g i n a l aim was to put a f l o o r
into the market and g e t a greater measure of market s t a b i l i t y by securing a
t a r g e t price by means of general l e v i e s .
scheme.
We should press on with t h i s
I propose a t a r g e t price of 200/- per cvrt.
This compares with the
f i g u r e of 197/- t which the actual market price i s now estimated f o r t h i s
a
year.
At those f i g u r e s we could expect Exchequer savings on d e f i c i e n c y
payments at the rate o f nearly £4 m i l l i o n a y e a r .
As with c e r e a l s , there
could be a big reduction i n p o t e n t i a l Exchequer l i a b i l i t y .
Each 1/- per
cwt. l i f t in the, market p r i c e reduces l i a b i l i t y by £ I 5 m i l l i o n .
Beef prices
are at present high and the improvement since the 1970 Annual Review i s
already expected to y i e l d a saving of £3f m i l l i o n on the estimated expenditure
then foreseen f o r t h i s y e a r .
A strong market l i k e t h i s i s just the situation
in which i t i s easiest to go for a firm f l o o r p r i c e a t the sort of
I have suggested.
level
In negotiations we should need to r e t a i n freedom t o r a i s e
the t a r g e t price in f u t u r e .
We must also be f r e e to adjust the arrangements
5
f o r market d i s c i p l i n e on the home producers provided under t h i s scheme,
so that over time we can bring them into l i n e with our proposals f o r a
f a l l back guarantee which forces producers to watch the market while not
holding back expansion generally.
The scheme would need to provide
special arrangements f o r the I r i s h Republic on whose produce we could not
put l o v i o s at the present time.
I heave i n mind to establish a dii-ect
r e l a t i o n between I r i s h d i r e c t support and our own, so that the two would
move together.
17.
Lamb.
Becau.sc of the nature of the trade and the position of New
Zealand as the dominant supplier, the r i g h t course i n i t i a l l y would bo t o
go f o r a general levy at f l a t rates to be determined from time to t i n e i n
r e l a t i o n t o tho i n t e r n a l market price we aim t o achieve.
I t would not
As with beef,
be practicable to get a direct c o r r e l a t i o n between the two.
we should have t o make special arrangements f o r the I r i s h .
for a l e v y of some 3d per l b .
We should aim
This would y i e l d a revenue of around
£S-jr m i l l i o n , and i f there were a corresponding increase in prices of hone
produced lamb a reduction of some £5 m i l l i o n in l i a b i l i t y f o r
payments.
This would mainly a f f e c t Now Zealand.
of our general p o l i c y .
deficiency
They are w e l l aware
With tho increase in lanb prices over tho l a s t
year or so they have been doing very w e l l out of our market.
18.
To the extent that cereals prices r i s e , there w i l l bo consequential
increases in animal feed costs.
Higher costs on milk can be passed on
v i a tho r e t a i l price without a f f e c t i n g Exchequer expenditure.
But
while higher beef and lamb prices would tend to firm up tho returns on
other l i v e s t o c k products (with some b e n e f i t to the Exchequer) more d i r e c t
compensation through guaranteed prices of the main l i v e s t o c k products nay
bo needed and would be an additional charge to the Exchequer to be set
against the gains.
Allowing f o r t h i s , tho changes I propose should
y i e l d rather more than £10 m i l l i o n over a year from savings i n d e f i c i e n c y
payments and lovy revenue.
This may not soon a very big sun:
nevertheless w e l l worthwhile going f o r .
it
is
The r e a l l y important
consideration at this stage however i s that wo should be keeping tho
market firm and be s t a r t i n g the move i n t o the period of changeover
at l e a s t three years) during which market prices w i l l be raised
6
(of
successively so as t o replace d e f i c i e n c y payments.
At the outset, food
prices nust not r i s e too quickly, and the overseas suppliers and our own
trade nust have t i n e t o adjust.
Perhaps oven nore important i n i t i a l l y
i s that tho changes, by g e t t i n g a higher f l o o r into tho narkot, would
reduce the potential Exchequer l i a b i l i t y f o r deficiency payments to the
tune of many £ m i l l i o n .
As tho f l o o r i s successively raised i n
(accordance with the p o l i c y o b j e c t i v e , d i r e c t savings increase and the
potential l i a b i l i t y i s s t i l l further reduced.
MASTERS FOR DECISION
19.
" 0 must now decide whether or not to go f o r the comprehensive changes,
to which wo aro pledged, concurrently with the negotiations with the EEC.
20.
I f we decide that we cannot conduct those two major negotiations
sinultaneousl3 , then I i n v i t e my colleagues to agree that ­
r
a.
negotiations should bo started forthwith on the schemes for
beef, cereals and lamb described above
t
with the i n t e n t i o n o f
introducing then this autumn.
b.
O f f i c i a l s should be instructed to report as soon as practicable
on arrangements f o r l e v y schemes f o r milk products, other than
butter and choose.
c.
Preparations should be nade f o r introdiicing tho comprehensive
changes in the support syston t o which we aro committed, i n case tho
EEC negotiations break down.
I propose that o f f i c i a l s
should bo
instructed accordingly, and asked t o report by, say the turn of the
year.
They must bo givon a p o s i t i v e remit, and f o r that purpose
we must-confirm the basis on which our now agricultural p o l i c y was
decided, namely that we shall take a firm l i n e with supplying
countries i n order t o secure our o b j e c t i v e s .
J P
Ministry of A g r i c u l t u r e , Fisheries and Food 3W1
20 July 1970
7
CP(70) 23
COPY NO
21 July 1970
CABINET
CONCORDE
Memorandum by the President of the Board of Trade
1.
I am d i r e c t l y concerned with three aspects of Concorde - B r i t i s h
Overseas Airways Corporation^ (BOACs) requirements, exports and n o i s e .
These are not f u l l y brought out i n the papers I have so f a r seen.
They
only form p a r t of the assessment on which our decision has t o be made
but are none the l e s s serious.
BOACs REQUIREMENTS
2.
BOAC have analysed i n d e t a i l the f i n a n c i a l e f f e c t s of operating
Concorde on the 5 major routes which they consider most s u i t a b l e , including
London-New York.
They are very w i l l i n g t o f l y supersonic a i r c r a f t
provided the operation i s reasonably economic, or at l e a s t breaks even, and
I have no doubt that BOAC have t r i e d t o make an honest and o b j e c t i v e
appraisal.
Their work suggests that even f o r a small network of 5 r o u t e s ,
which would require 5 a i r c r a f t , they would be considerably l e s s w e l l
off
with a mixed f l e e t of Concordes and 747s than with an all-7V7 f l e e t ,
p a r t i c u l a r l y i n the i n i t i a l y e a r s .
This i s primarily because of the
d i f f i c u l t y of o f f s e t t i n g the very high operating costs of the Concorde
with higher load factors and f a r e s , except on the New York route where
business t r a f f i c i s dense.
They estimate a l o s s of between £1 m i l l i o n
and £3 m i l l i o n per year per Concorde.
Thero must at t h i s stage be
assumptions i n t h e i r work which could be open t o argument but the a v a i l a b l e
evidence c e r t a i n l y points t o an o v e r a l l worsening of t h e i r f i n a n c i a l
p o s i t i o n i f they operate Concorde,
1
3.
In terms of the t o t a l market f o r Concorde, BOACs work as I t now
stands would be consistent with an outcome r i g h t at the bottom end of
the range of 50-150 sales put forward by the United Kingdom members of
the Concorde Economic Prospects Committee.
Even i f allowance i s made
f o r the p o s s i b i l i t y that BOAC may have been unduly pessimistic i t seems
that the t o t a l market would not be greatly increased.
I t looks therefore
as i f both we and the French are faced with considerable losses i n terms
of Government expenditure.
As the Minister of Technology has pointed out,
there would be sizeable f o r e i g n exchange earnings but only at a high cost in
sterling.
Indeed i f 50 a i r c r a f t were sold we would be exporting at an
exchange r a t e of about $1 ,50 t o the £ 1 .
4.
I f Concorde i s completed, BOAC are l i k e l y t o seek a subsidy from the
Government f o r operating i t .
Though they are doing very w e l l at present,
they f o r e c a s t a considerable downturn i n p r o f i t s over the next few years
l a r g e l y due t o world over-capacity from the 7V7.
A subsidy might be given
d i r e c t l y or i t might take the form of a reduced t a r g e t rate of returnj
in
e i t h e r case i t would become known to other a i r l i n e s and Governments and
would be l i k e l y t o a f f e c t t h e i r a t t i t u d e to purchases.
NOISE
A i r p o r t Noise
5.
The use of Heathrow and J F Kennedy airports i s v i t a l t o the i n i t i a l
commercial success of Concorde.
Both airports i n s i s t on compliance with
a l i m i t on take-off noise which i s monitored at various points i n the
v i c i n i t y of the a i r p o r t j
t h e i r standards are much the same.
Even i f
the
noise l e v e l s associated with the prototypes prove t o be c h a r a c t e r i s t i c of
the production model under f u l l load and i f improved s i l e n c e r s reduce noise
as much as i s hoped, i t seems probable that the compliance of the a i r c r a f t
with Heathrow and Kennedy l i m i t s w i l l be marginal.
The normal remedy of
reducing payload or f u e l i s l e s s open i n the case of Concorde as both are
c r i t i c a l t o the a i r c r a f t s perfornance.
!
6,
I t i s within our powers t o adjust the l i m i t s at Heathrow t o accommodate
Concorde;
but i t would be a most unpopular measure with those l i v i n g near
the a i r p o r t e s p e c i a l l y as Concorde creates a very high l e v e l of l a t e r a l
2
n o i s e , which i s not at present regulated.
different.
The s i t u a t i o n at Kennedy i s
The Port of New York Authority i s under no o b l i g a t i o n of
national i n t e r e s t t o bend i t s rules i n favour of Concorde and, i n contrast
with the law i n the United Kingdom, i t can be sued f o r nuisance.
7.
By the time Concorde comes i n t o a i r l i n e s e r v i c e , a new generation of
subsonic j e t a i r c r a f t w i l l have appeared.
They w i l l be much quieter than
t h e i r predecessors and Concorde w i l l stand out i n marked contrast t o other
new types.
By 1974 or soon afterwards the pressure of public opinion may
well have brought about a reduction i n take-off noise l i m i t s , and the
introduction of l a t e r a l noise l i m i t s , at Kennedy and other major a i r p o r t s .
Noise C e r t i f i c a t i o n
8,
The International C i v i l Aviation Organisation has undertaken the task
of drawing up a noise c e r t i f i c a t i o n scheme f o r supersonic transport a i r c r a f t .
In addition the American authorities have announced t h e i r intention of
introducing draft domestic regulations t h i s year f o r the noise
of supersonic transport a i r c r a f t .
certification
I t i s our intention t o press f o r
Concorde's exclusion from such schemes on the basis that i t i s an a i r c r a f t
i n an advanced state of design which should not be subject t o any
r e t r o s p e c t i v e noise design standards;
a l t e r n a t i v e l y , we can argue that the
i n i t i a l standards should be designed t o accommodate Concorde with a
tightening of standards f o r subsequent supersonic t y p e s .
Whether these
arguments w i l l be accepted i n t e r n a t i o n a l l y or by the Americans remains t o
be seen.
Supersonic Boom
9.
In a White Paper issued i n June the previous Administration made known
t h e i r view that commercial supersonic f l i g h t s over the United Kingdom should
be banned f o r f l i g h t s which cause the boom t o be heard on the ground.
were to be appropriate consultations before a f i n a l decision was made.
There
We
s h a l l have t o decide s h o r t l y , f o r a i r t r a f f i c control purposes, whether or
not t o confirm t h i s d e c i s i o n .
However, i t has always been assumed that
there would be a ban on supersonic f l y i n g over populated t e r r i t o r i e s , so
t h i s decision w i l l not a f f e c t the assessment of Concorde's commercial
prospects.
The United States has already introduced a d r a f t " r u l e " banning
commercial o v e r f l y i n g of the States (including Alaska) and other countries
have announced t h e i r intention of taking similar a c t i o n ,
MAC N
Board of Trade SW1
21 July 1970
3
HIS D O C U M E N T IS T H E P R O P E R T Y OF H E R B R I T A N N I C M A J E S T Y S G O V E R N M E N T
8
C P ( 7 0 ) 24
COPY NO
£ ,1
si %
21 July 1970
CABINET
THE ECONOMIC O U T L O O K
Memnrandum by the P r i m e M i n i s t e r
I should like m y colleagues t o be a w a r e , when they c o m e t o
consider the m e m o r a n d u m by the Chief S e c r e t a r y t o the T r e a s u r y on
public expenditure ( C P ( 7 0 ) 2 0 ) , of the e c o n o m i c situation in which we
find o u r s e l v e s , the p r o s p e c t which we f a c e , and its implications f o r
our policy o b j e c t i v e s .
In b r i e f , the m e s s a g e is that, if we want r o o m
f o r m a n o e u v r e , we have to c r e a t e it f o r o u r s e l v e s .
ECONOMIC SITUATION AND PROSPECTS
2.
W e now have the benefit of a r e c e n t l y completed p r o j e c t i o n by
the T r e a s u r y f o r e c a s t e r s .
3.
E c o n o m i c a c t i v i t y has been l e s s buoyant so f a r this y e a r than was
expected at the t i m e of the Budget, and there is probably a little slack in
the economy.
But the evidence is conflicting.
Industrial production has
been reasonably buoyant; the l e v e l of u n e m p l o y m e n t , though high by
p o s t - w a r standards, r o s e v e r y little in the f i r s t half of the y e a r ; and
there a r e signs of an i n c r e a s e in c o n s u m e r s ' expenditure.
I doubt
whether c o m p a r i s o n s of the actual l e v e l of unemployment with previous
y e a r s p r o v i d e a r e l i a b l e indication of s l a c k , because generous redundancy
payments and e a r n i n g s - r e l a t e d benefits enable w o r k e r s to take longer in
moving jcbs.
The p r e s s u r e of demand is high in manufacturing
( e s p e c i a l l y capital g o o d s ) i n d u s t r i e s , and in the South-East and the
Midlands.
A g a i n s t this background we must assume that a g e n e r a l
i n c r e a s e in demand f a s t e r than the i n c r e a s e in productive potential would
quite quickly lead t o shortages and i n c r e a s e d i m p o r t s .
4.
The f o r e c a s t s and the other evidence a v a i l a b l e suggest that output
can f r o m now on, in the absence of any p o l i c y c h a n g e s , be expected to
g r o w b r o a d l y in line with productive potential.
The c o m p o s i t i o n of the
growth of demand is not ideal.
C o n s u m e r s ' expenditure is f o r e c a s t to
i n c r e a s e by about 2\ per cent a y e a r ( r e f l e c t i n g the l a r g e r i s e in money
i n c o m e s ) ; public expenditure on goods and s e r v i c e s is f o r e c a s t t o
i n c r e a s e substantially; manufacturing investment is expected t o l e v e l out,
and then f a l l slightly in 1971. W a g e s and s a l a r i e s a r e f o r e c a s t t o r i s e by
11 per cent this y e a r , and n e a r l y as much again next y e a r .
The r e t a i l
p r i c e index is f o r e c a s t to r i s e by b\ per cent this y e a r and nearly
S\ per cent next y e a r .
1
5.
The f o r e c a s t e r s s t i l l e x p e c t a surplus of about £500 m i l l i o n on
the current account of the balance of payments this y e a r and again next.
This s e e m s t o m e t o be o v e r - o p t i m i s t i c in the light of the t r a d e f i g u r e s
in r e c e n t months,
I cannot b e l i e v e that it is consistent with a
continuance of the p r e s e n t rate of inflation.
W e cannot e x p e c t the capital
account of the balance of payments to continue as f a v o u r a b l e as it was in
1969.
T h e r e is a net outflow on official c a p i t a l account (mainly aid
l o a n s , repayments of the p o c t - w a r Joans f r o m N o r t h A m e r i c a and
repayments of E x - I m Bank loans t o finance purchases of United States
military aircraft).
The net outflow of e x p o r t c r e d i t is £300 m i l l i o n a
y e a r and s t i l l r i s i n g .
N e t p r i v a t e investment abroad is expected
substantially to e x c e e d p r i v a t e investment f r o m abroad in this country.
We shall r e c e i v e an allocation of £120 m i l l i o n of s p e c i a l drawing rights
next y e a r , and perhaps some s h o r t - t e r m capital i n f l o w ! but our ability
to repay o v e r s e a s debt between now and the end of 1971 looks like being
significantly l e s s than the repayments due.
W e cannot i m p r o v e the
c a p i t a l account without adding to the existing constraints on capital
transactions (which of course we c r i t i c i s e d in O p p o s i t i o n ) .
A current
account surplus of £500 m i l l i o n is not in these c i r c u m s t a n c e s an
u n n e c e s s a r y luxury.
POLICY
IMPLICATIONS
6.
W e have f i r s t and f o r e m o s t to slow down the r a t e of inflation.
This is not a m a t t e r f o r crash action but of p r o g r e s s i v e r e t a r d a t i o n ,
which means above a l l sustained d e t e r m i n a t i o n among o u r s e l v e s , and
the encouragement of s i m i l a r d e t e r m i n a t i o n among e m p l o y e r s in the
public s e c t o r as w e l l as in the p r i v a t e s e c t o r , in the f a c e of c l e a r l y
e x c e s s i v e wage demands.
A s we a r e now s e e i n g , this c o u r s e w i l l
involve s t r i k e s , and s h o r t - t e r m costs in t e r m s of e x t e r n a l trade or
f o r e i g n e x c h a n g e ; but there w i l l be l o n g - t e r m gains p r o v i d e d that our
m a n a g e m e n t of a f f a i r s continues t o command confidence among o v e r s e a s
h o l d e r s of s t e r l i n g and in industry h e r e .
7.
T h e r e is not the s o r t of s l a c k in the e c o n o m y which would a l l o w
the Chancellor of the Exchequer t o make l a r g e reductions of taxation
unless we can a c h i e v e a r e a l i m p r o v e m e n t in p e r s o n a l savings and m a j o r
reductions in public expenditure,,
T r e a s u r y M i n i s t e r s a r e , I know,
looking into the p o s s i b i l i t i e s on p e r s o n a l s a v i n g s , but these w i l l not by
themselves be sufficient.
If we want to make the m a j o r change of
d i r e c t i o n we have p r o m i s e d , we shall have a l s o to be r e a d y f o r
significant reductions in public expenditure on goods and s e r v i c e s (not
just in t r a n s f e r p a y m e n t s ) .
If we can get t h e m , s o as to provide
o u r s e l v e s with r o o m f o r corresponding reductions in the burden of
d i r e c t taxation on individuals and on company p r o f i t s , we can l o o k , after
a t i m e , f o r i n c r e a s e s in p r o d u c t i v i t y and i a industrial e f f i c i e n c y .
But
there is a long way t o g o .
Our p r e d e c e s s o r s published r i s i n g
p r o g r a m m e s of public e x p e n d i t u r e , which would have r e q u i r e d i n c r e a s e d
taxation.
W e shall need d e t e r m i n a t i o n , and a w i l l i n g n e s s among spending
M i n i s t e r s t o a c c e p t reductions in p r o g r a m m e s which f r o m a purely
D e p a r t m e n t a l standpoint they would be reluctant t o m a k e .
2
SECRET
8.
On the e x t e r n a l front we must t r y to deal with our indebtedness
on a l e s s hand to mouth b a s i s than our p r e d e c e s s o r s .
W e should a i m
at reducing the prospective total of e x p o r t c r e d i t , which is i n c r e a s i n g
m o r e r a p i d l y than we can afford.
W e should s e e k to fund or r o l l
f o r w a r d some of the short and m e d i u m - t e r m debt.
This should not
present insuperable problems so long as we have the g e n e r a l situation
and the management of public expenditure w e l l in hand.
But this is a
field in which we shall be w i s e not t o publieise our a s p i r a t i o n s .
We
a r e m o r e l i k e l y to find our c r e d i t o r s w i l l i n g negotiators if we do not
appear t o take their willingness f o r granted in a d v a n c e .
And we
should seek t o i m p r o v e the capital account in other w a y s ,
9.
The conclusion is quite simply stated.
If we a r e to g i v e
o u r s e l v e s che f r e e d o m of m a n o e u v r e which we need t o fulfil our
pledges t o reduce the burden of taxation and to r e s t o r e the c o m p e t i t i v e
v i t a l i t y of B r i t i s h industry, we have not only t o reduce the rate of
inflation and to i m p r o v e the rate of p e r s o n a l savings but a l s o to
secure a l a r g e reduction in the t o t a l of public expenditure.
It w i l l not
be e a s i l y or quickly done, and reductions of public expenditure take
time t o w o r k through the e c o n o m y .
!£ we want t o produce r e s u l t s by
1972, we must take decisions now.
E H
10 Downing S t r e e t S W l
21 July
l ,?Q
c
3
K
G P ( 7 0 ) 25
COPY NO
4
21 July 1970
CABINET
C O N C O R D E A N D B A C 311
Memorandum by the Chief S e c r e t a r y ,
Treasury
I should like to bring to m y c o l l e a g u e s attention the financial
and e c o n o m i c consequences of the M i n i s t e r of T e c h n o l o g y ' s p r o p o s a l s
f o r Concorde and the B A C 311 p r o j e c t as set out in his papers C P ( 7 0) 15
and C P ( 7 0 ) 2 1 ,
1
2
The net cost to G o v e r n m e n t funds over the life of this P a r l i a m e n t
would be approximately
t
lUAUA
Concorde
75
B A C 311/RB 211
22
97
111WA
86
-
-33.
119
1973/74
72
JJL­
110
1974/75
30
-2555
V i r t u a l l y a l l this would be saved by abandoning these p r o j e c t s because it
should be p o s s i b l e , I understand, t o make most (tf the cancellation payments
to United Kingdom f i r m s in the p r e s e n t financial y e a r (1970-71),
T h e r e is
a chance that the F r e n c h might sue us in the International Court ( a c c o r d i n g
to the L a w O f f i c e r s ) and a l e s s than e v e n chance that they would w i n ; even
if they won the advice of the L a w O f f i c e r s is that the damages should not be
g r e a t ( C P ( 7 0 ) 17).
Concorde
3.
If we go ahead with Concorde we cannot get back any of the
£480 m i l l i o n spent or c o m m i t t e d so f a r by the B r i t i s h and F r e n c h
Governments,
B r i t i s h and F r e n c h o f f i c i a l s a g r e e that, after w r i t i n g off
e v e r y t h i n g sjsent so far and ;taMng into account only future expenditure
(development and production) Concorde would lead t o a l a r g e r e s o u r c e l o s s .
1
SACHET
4.
The n o r m a l p r o c e d u r e ( s e e A n n e x ) f o r the e c o n o m i c a s s e s s m e n t
of c i v i l a i r c r a f t p r o j e c t s produces the f o l l o w i n g r e s u l t s s-
N o . of
Sales
Total
development
costs
Test
Discount
rate
Costs e x c e e d
benefits to
U. K. b y ;
Implied
preference
50
£850 m i l l i o n
10%
£177 m i l l i o n
61%
150
£800 m i l l i o n
10%
£ 103 m i l l i o n
14%
W h i l e the t w o Governments w i l l r e c e i v e
of H e r M a j e s t y ' s Government being able
d e v e l o p m e n t ( l e t a l o n e , of c o u r s e , what
these l e v i e s .
A t best if 150 Concordes
t o spend on d e v e l o p m e n t w i l l e x c e e d our
than some £75 m i l l i o n (discounted),,
l e v i e s on sales there is no p r o s p e c t
t o r e c o v e r its future expenditure on
we have a l r e a d y spent) out of
a r e s o l d , the amount we s t i l l have
r e c e i p t s f r o m l e v i e s by not l e s s
5.
The m o s t optimistic f o r e c a s t of s a l e s is 15 0 a i r c r a f t .
French
officials have f o r e c a s t 130, B r i t i s h the l o w e r part of the range 5 0-15 0.
It is m o s t l i k e l y that further development costs w i l l r i a e f r o m £ 800 m i l l i o n
t o at l e a s t £85 0 m i l l i o n .
A s the f i g u r e s g i v e n above show even on the m o s t
optimistic e s t i m a t e s Concorde is not e c o n o m i c a l l y w o r t h w h i l e .
W e should
be paying too high a p r i c e in t e r m s of r e a l r e s o u r c e s used f o r the
$1,200 m i l l i o n of possible e x p o r t p r o c e e d s quoted b v the M i n i s t e r of
Technology.
6.
M o r e o v e r the Government would f a c e possible additional l o s s e s
(a)
Since it would be financing the production of Concorde on loan,
f e w e r sales than the number assumed f o r a m o r t i s i n g the initial
production investment would b r i n g l o s s t o H e r M a j e s t y ' s
G o v e r n m e n t - f o r the f .rms have f l a t l y r e f u s e d t o b e a r eny
r i s k of loss on production; they a r e in f a c t asking for a
guaranteed profit,
:
(b)
K , as the M i n i s t e r has w a r n e d , B r i t i s h O v e r s e a s A i r w a y s C o r p o r a t i o n have to be " p e r s u a d e d " - h e . subsidised - to buy the C o n c o r d e . B A C 311
7.
The M i n i s t r y of T e c h n o l o g y s a n a l y s i s of the m a r k e t p r o s p e c t s
suggests that s a l e s might be in the range 150 t o 240.
A p a r t f r o m the
B A C 111 t h e r e is nothing in the r e c e n t history of the United Kingdom
a i r c r a f t industry to suggest that these f o r e c a s t s a r e l i k e l y t o be a c h i e v e d .
But e v e n if the f o r e c a s t s a r e r i g h t , the f o r e i g n exchange benefits
resulting would be obtained at a high p r i c e in t e r m s of the use of national
resources.
IE costs a r e kept within the e s t i m a t e s and s a l e s r e a c h 240
the p r o j e c t ( a i r f r a m e and engine combined) shows an i m p l i e d p r e f e r e n c e in
t e r m s of f o r e i g n exchange of 9 per cent.
But s a l e s may w e l l f a l l short of
1
t h i s , and the total of r e s o u r c e s used on the p r o j e c t e x c e e d present
estimates.
A t 150 s a l e s , and assuming a 10 per cent d e t e r i o r a t i o n
in the r a t i o of costs to selling p r i c e , the figure would be 32 per cent.
T h i s is much t o o high a p r e m i u m t o pay f o r f o r e i g n exchange.
8.
A g a i n the Government would l o s e heavily on its own investment.
E v e n if 240 a i r c r a f t w e r e sold the Government would stand to l o s e
£40 m i l l i o n on a discounted b a s i s .
With sales of 240, I take it that the
f i r m would be making a substantial p r o f i t .
If this is so the t e r m s on
which the M i n i s t e r is proposing that we should support this p r o j e c t
s e e m g r o s s l y inequitable.
Conclusions
9.
Concorde;
The e c o n o m i c a s s e s s m e n t assumes that the a i r c r a f t
can m e e t a l l its t a r g e t s .
I suggest t h e r e f o r e that there is no point in
delaying a d e c i s i o n until after the Mach 2 t e s t s .
Since the G o v e r n m e n t is
c o m m i t t e d to reducing public expenditure and Concorde can, at b e s t , make
only a substantial l o s s , I conclude that we should withdraw f r o m the p r o j e c t
forth, with.
10.
BAG 311.
Unless this w e r e abnormally and improbably successful,
the p r o s p e c t i v e f o r e i g n exchange benefits would not be sufficient to justify
its high cost in national r e s o u r c e s ,
E v e n in the unlikely event of s e l l i n g
240 a i r c r a f t the Government would not, in discounted t e r m s , r e c o v e r its
investment.
M V M
T r e a s u r y Chambers S W l
21 July 1970
ANNEX A
ECONOMIC ASSESSMENT OF AIRCRAFT PROJECTS
The f o l l o w i n g
concerned, f o r
projects( a )
i s the p r o c e d u r e , a g r e e d by the Departments
economic assessment of c i v i l a i r c r a f c and aeroengine
In " b r i e f ,
the c a l c u l a t i o n i s
intended t o r e v e a l :
The b a l a n c e of payments b e n e f i t s
a particular project,
likely
compared w i t h the r e s o u r c e
of the development and c o n s t r u c t i o n of
and/or a e r o e n g i n e .
( b )
2.
the
aircraft
preference.)
compared w i t h
the
(The i m p l i e d
subsidy.)
Preference
The purpose of
t h i s p a r t of the c a l c u l a t i o n i s t o assess
economic outturn of an a i r c r a f t p r o j e c t ,
b e n e f i t earned.
the f o r e i g n
exchange
Expenditure and r e c e i p t s are e s t i m a t e d on an
annual b a s i s over the l i f e
of the p r o j e c t and then discounted
p r e s e n t v a l u e s at 10 per cent ( t h e "test discount r a t e f o r
i n the p u b l i c s e c t o r )
to y i e l d t o t a l f i g u r e s f o r
A l l o w a n c e s are made f o r
imported p a r t s and f o r
export c r e d i t
to
investment
the p r e s e n t
value
import s a v i n g s , f o r the c o s t
the c o s t i n n a t i o n a l r e s o u r c e
terms o f
terms which w i l l apply t o most e x p o r t s a l e s
completed a i r c r a f t and i n i t i a l
spares.
or l o s s on the
t h e r e i s a l o s s , t h i s l o s s , expressed as a p e r c e n t a g e
of
the
of
From the n e t t o t a l s
obtained can b e c a l c u l a t e d the net p r o f i t
If
the
on a Discounted Cash Flow
( D C F ) b a s i s , i n terms of the p r i c e paid f o r
of b o t h .
cost
l o s s , i f any, t o t h e Government on i t s own
contribution.
Implied
(The i m p l i e d
The balance o f payments b e n e f i t
financial
t o a?ise from
thus
project.
of
r e c e i p t s , can b e r e g a r d e d as the premium f o r t h e f o r e i g n exchange
benefit
earned.
/ I m p l i e d Subsidy
I m p l i e d Subs i d y
mmw iiirn *i ii - m m mm
3o
mn i i i mm
Government a s s i s t a n c e
to c i v i l
aircraft
and aeroengine
takes the form of a c o n d i t i o n a l grant (known as launching
s u b j e c t t o a maximum cash f i g u r e
aid)
which i s expressed as a p e r c e n t a g e ,
normally 50 per c e n t , o f the agreed launching c o s t s ,
( i n the case
o f Concorde, o f c o u r s e , the U.K. and French Governments are
the whole R. and D. c o s t s . )
Launching a i d i s paid i n
over the e a r l y y e a r s of a p r o j e c t and e n t i t l e s
recover
l e v i e s on s a l e s .
instalments
the Government
i n c l u d i n g any Government intramural e x p e n d i t u r e ,
the net c o s t of
to
The i m p l i e d subsidy c a l c u l a t i o n s t a r t s
the e x p e c t e d l e v i e s on s a l e s ( s i m i l a r l y d i s c o u n t e d ) .
figure for
paying
the Government
from the p r e s e n t v a l u e ( d i s c o u n t e d a t 10 per c e n t ) of
contribution,
projects
the p r o j e c t
less
The r e s u l t i n g
t o the Government can then
b e expressed as a p e r c e n t a g e of the f o r e i g n exchange b e n e f i t .