Power Politics: Political Encounters in Industry and Engineering

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Francis Tombs has had an outstandingly varied and successful career in industry. The major part was in the electricity supply industry where he was appointed to the top job in 1977, resigning in 1980 because of the government’s refusal to alter an inefficient, politically imposed, management structure. He considers major power cuts inevitable in the future because of the privatisation of the industry on the basis of that structure. After the successful rescue of two ailing companies, at the request of the Bank of England, he was then asked by the government to privatise the nationalised Rolls-Royce and, in doing so, laid the foundations of the modern company. He had extensive involvement in government advisory bodies, was knighted in 1989 and was created a life peer in 1990.

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POWER POLITICS POLITICAL ENCOUNTERS IN INDUSTRY AND ENGINEERING

FRANCIS TOMBS

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Published in 2011 by I.B.Tauris & Co Ltd 6 Salem Road, London W2 4BU 175 Fifth Avenue, New York NY 10010 www.ibtauris.com Distributed in the United States and Canada Exclusively by Palgrave Macmillan 175 Fifth Avenue, New York NY 10010 Copyright © 2011 Francis Tombs The right of Francis Tombs to be identified as the author of this work has been asserted by him in accordance with the Copyright, Designs and Patents Act 1988. All rights reserved. Except for brief quotations in a review, this book, or any part thereof, may not be reproduced, stored in or introduced into a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the publisher. ISBN: 978 1 84885 506 9 A full CIP record for this book is available from the British Library A full CIP record is available from the Library of Congress Library of Congress Catalog Card Number: available Designed and typeset by 4word Ltd, Bristol Printed and bound in Great Britain by CPI Antony Rowe, Chippenham

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This book has offered me the opportunity to express my gratitude to my wife of almost 60 years, Marjorie, without whom my life and career would have been duller, and this book probably never have been written.

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CONTENTS

List of Illustrations 1. Power Politics – An All-Party Imbroglio

ix 1

2. The Formative Years

17

3. Erith and Manufacturing

31

4. The South of Scotland Electricity Board

47

5. The Electricity Council and Politics

67

6. Some Fascinating Diversions

87

7. Rolls-Royce Back to the Stock Market

107

8. The Privatisation of the Electricity Supply Industry

131

9. Government and Industry

145

10. Some Interesting Byways

157

Epilogue Appendix 1. Pivotal People Appendix 2. List of Acronyms Index

169 179 185 187

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LIST OF ILLUSTRATIONS

1.

Lord Tombs.

2.

Sir Ronald Garrick – chief executive and later chairman of Weir Group plc.

3.

Sir Colin Hope – my successor as chairman of T&N plc.

4.

Stewart Miller – engineering director of Rolls-Royce.

5.

Peter Byrom.

6.

Longannet power station in Fife – the turbine hall.

7.

Longannet power station – external view.

8.

Lord Lawson of Blaby – a brilliant mind with a speed which sometimes neglected counter arguments.

9.

Sir Ralph Robins – my successor as chairman of Rolls-Royce.

10. Sir John Rose – CEO of Rolls-Royce since 1996. 11. Baroness Thatcher – an outstanding Prime Minister and the first with a scientific training in the country which created the Industrial Revolution.

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POWER POLITICS 12. Tony Benn – a mercurial character who always took account of political considerations in his ministerial roles. 13. Lord Varley – a former miner who examined problems in a carefully objective way and stood his ground.

x

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CHAPTER 1

POWER POLITICS – AN ALL-PARTY IMBROGLIO

Although the events described in the subsequent chapters of this book follow the chronological sequence of my career, the title, Power Politics and the title of this chapter, describe the main focus of my working life. The effects of a series of political decisions led in 1980 to my resignation as chairman of the Electricity Council, the federal body for generation and distribution activities in England and Wales. These and subsequent decisions, and their effect on eventual privatisation, have resulted in a situation where the reliability of electricity supply throughout the UK will be in serious jeopardy for many years to come. It would be impracticable to describe fully the reasons for this situation, and the causal actions of politicians, in the narrative of my career, and so I will set out here the structural management problems which have allowed politicians to seemingly rely on market forces to shape events in the industry, while simultaneously interfering to achieve quite separate objectives. The seriousness of the decisions, and the shallowness of the thinking behind them, is very disturbing. The roots of the problem lie back in 1957, when the Conservative Government of the day set up the Herbert Committee, under the chairmanship of Sir Alan Herbert, to consider the organisation of the electricity industry in England and Wales, which was then controlled by the British Electricity Authority following nationalisation in 1947. There

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34

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POWER POLITICS was at the time considerable disquiet in political circles about the great power which lay in the unfettered hands of the then chairman, Sir Walter (later Lord) Citrine, former general secretary of the TUC and an appointee of the preceding Labour administration. The Herbert Committee concluded that the generation side of the industry should be separated from the distribution activity and that a Council should be appointed with overall control. The notion of separation of generation from distribution and sales was an odd one since it separated design and production activities from the sale of the product – an error obvious to any commonsense observer. But the general proposal was accepted by the Minister for Energy, Aubrey Jones, who then proceeded to emasculate the proposed Council, thus laying the foundations for the continued dominance of the industry by the generating side and for the freedom of governments to dabble in the industry. This completed the political objective of restoring the previously devolved control of the industry to the Government. So were born the Central Electricity Generating Board (the CEGB) and the Electricity Council (or ‘toothless wonder’, as it became known), which were to survive until privatisation in 1988. The reason for these far-reaching decisions was entirely political, with little or no thought for the practical managerial consequences. For fortunate political reasons, Scotland and Northern Ireland were excluded from these proposals and became ‘all-purpose boards’ combining generation and distribution with great success. The independence of the Scottish boards provoked frequent comparisons, which usually favoured the Scottish boards, so that in practice a degree of competition existed within the nationalised electricity supply industry. The economists on the Herbert Committee were obviously seized with the notion of market forces producing higher managerial efficiency, an astonishing concept given the proposed monopoly position in England and Wales of the CEGB and its deliberate separation from the market. In fact, the industry became wholly production-orientated with its tariffs controlled by the Bulk Supply 2

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POWER POLITICS – AN ALL-PARTY IMBROGLIO Tariff, produced by the CEGB and imposed on the distribution boards. Indeed, the only occasion on which production costs were linked with demand to produce a coherent tariff was in 1978, during my chairmanship of the Electricity Council, when reorganisation of the industry was the objective of the then Labour government and was the subject of a draft Bill. One benefit of this uncertain situation was that, for a couple of years, the expectation of impending changes had weakened the barriers of the existing organisation and produced a general willingness to accept change. That new tariff was Economy 7, an off-peak tariff, which has survived all of the later organisational changes to the present day. It was essentially different in that the existing Bulk Supply Tariff was based on long-run marginal cost of electricity generation, resulting in a highly speculative tariff dependent upon future fuel costs and technology, and offering no indication of current production costs. Economy 7 severed this approach in its specific area of off-peak electricity, so separating a long-term economic theory from current considerations. The monopoly CEGB, like other nationalised industries, inevitably used its power to build power stations which were widely recognised to be ‘gold-plated’ and hence uncompetitive in those areas of the world where similar absolute power did not rest with the national generating authorities. As a result, UK industry became accustomed to designing and building extravagant equipment which could not readily be sold overseas. This left the manufacturing industries unprepared to compete in the wider world when home orders became scarce. I was very close to this situation during my years at the GEC power plant division at Erith and was constantly confronted with the high costs of our machines when compared with European or Japanese competitors. My resignation in 1980 from the chairmanship of the Electricity Council resulted from the inherent inefficiency of the arrangements introduced in England and Wales in 1957, which had resulted in the Electricity Council, 12 distribution boards and the monolithic CEGB, each reporting to the Secretary of State for Energy, and on the 3

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POWER POLITICS unsuitability of that organisation for privatisation, as proposed by the Conservative government elected in 1979. I urged on David Howell, the incoming Conservative Minister for Energy, the implementation of the Bill proposed by the previous administration to set up an Electricity Corporation, combining the fragmented industry in England and Wales. I was chairman-designate of this new body and envisaged its subsequent division into five autonomous companies, competing with each other and with the Scottish boards. Those integrated companies would form a basis for privatisation and the proposed companies would still be large enough to finance and build large power stations. Unfortunately, he saw it as politically impossible, even as an interim measure aiding privatisation, to adopt a course favoured by the previous administration. My arguments were of no avail although I forecast, with considerable accuracy, the damage which would result from privatisation of the weak distribution boards and of a broken-up generating side, retaining their separation. I therefore resigned, but my association with the problems was not allowed to end there. David Howell’s successor at the Department of Energy was Nigel Lawson (later Lord Lawson of Blaby and Chancellor of the Exchequer). He telephoned to ask if I would discuss with him the privatisation plans for the industry. I declined, saying that I had already spent too much of my life on the matter and that my views were well known to the Government. He was somewhat disconcerted and said that the Prime Minister, Margaret Thatcher, had asked him to discuss the matter with me. (She was aware of my views.) I reluctantly agreed to meet him and spent two hours repeating the arguments I had earlier put to David Howell. He was unmoved, citing again the difficulty of pursuing a measure favoured by the Opposition, and a general distrust of large organisations. I was subsequently approached by Cecil Parkinson (later Lord Parkinson), a later incumbent in a growing list of Secretaries of State for Energy, with a request to advise him on privatisation. I declined, outlining the objections I had put to his predecessors and adding that it 4

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POWER POLITICS – AN ALL-PARTY IMBROGLIO was now too late to implement my proposals, since the new organisation which I proposed would not have time to provide a suitable financial history for the privatisation prospectus. I was sorry about this, because he had a much better grasp of the problems than his predecessors and was accordingly more sympathetic to my solution. He was succeeded by John Wakeham (later Lord Wakeham) who proceeded to privatise the industry in its existing form. At about this time, I gave a memorial lecture for Wilson Campbell, senior partner of Merz and McLellan, well-known consulting engineers, and sent a copy to John Wakeham. In it I described the results which I saw as following his decision. Wakeham was somewhat alarmed when he read it, and asked whether I really thought the results to be inevitable. I confirmed that I did, but comforted him (possibly) by saying that all-purpose companies would evolve under Stock Market conditions. The remaining disadvantages, I explained, would be that they would probably be foreign-owned and that the industry would have no sense of strategic purpose – an essential need when issues of security of supply and future fuels would continue to be vital and the planning horizon for large power stations was 30 years – a situation entirely alien to the market mechanism. This has turned out to be the case. As privatisation approached I was telephoned by the DTI to ask my views on the regulator who had to be appointed by statute. I replied that I could think of no one in the industry who had a comprehensive knowledge of the industry and that an individual from either the generation or the distribution side would not command the trust of the other side. I suggested that Professor Stephen Littlechild, an economist who had been a leading adviser on the form of the privatisation, would perhaps be an appropriate choice, given his involvement in determining the proposals. He was appointed, and spent much of his term of office blocking mergers between generation and distribution companies, so remaining attached to his original, if mistaken, views. I had long ago formed the opinion that market economists could not resist framing organisations to use their theory of market forces (in which they believed totally), and quite enjoyed ‘playing at shops’. The same 5

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POWER POLITICS dangerous inclination was later to be seen in the privatisation of the railways and is shared by many politicians. Subsequent regulators took a more practical view of the undesirability of separating generation from distribution and allowed some all-purpose companies to evolve. But the movement was piecemeal and spasmodic and ended with the formation of mainly combined boards which were foreign-owned, as I had forecast. The first years of the new privatised industry were under a Conservative administration and much was made, politically, of the early fall in electricity prices. A great deal of this fall arose from access to cheap gas for electricity generation, which had previously been forbidden. Also, the practice of the earlier industry, with recent memories of fuel supply dislocations as a result of miners’ strikes and wars in the Middle East, had been to diversify its fuel supplies and to carry a generating plant margin sufficient to allow switching between fuels when difficulties arose. This policy ceased after privatisation, with scant regard for the effects on future security of supply. The notion of diversity of fuels vanished and the only new generating plant built after privatisation was gas-fired combined-cycle, which offered the advantages of cheap fuel, low capital cost and short construction time. Governments and companies were dazzled by this combination and quite lost sight of the arguments for diversification of fuel supplies. They therefore allowed the plant margin to fall, and the industry to move steadily into increasing dependence on gas and, importantly, on imported gas from politically dubious areas, as our North Sea fields became depleted. The resulting inactivity on building large power stations fuelled by a diversity of fuels lasted throughout the Labour administration, with a naive insistence by ministers that market forces would ensure reliability of gas supplies and that we had commercially secure contracts with our projected suppliers of gas. This was coupled with their belief that the industry would itself produce and implement a strategy which would ensure security of electricity supply. Recent events have shown how unrealistic these assumptions were – and we still have pitifully small gas 6

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POWER POLITICS – AN ALL-PARTY IMBROGLIO storage facilities, much smaller than those of our European neighbours who effectively also have first call on pipeline supplies from Russia and its neighbours. The failure to build large power stations also led to the collapse of our traditional turbo-generator and combustion plant industries, so that plant for the inevitable replacement stations will have to be obtained from overseas suppliers – a disaster which the industry would probably have avoided in its earlier, nationalised, form. In fact, all governments since privatisation have acted in a way as opposed to sensible strategic planning as can be imagined. Their two big decisions, apart from developing a growing and dangerous dependence on imported gas, took the form of building windmills and abandoning nuclear power and coal stations – so endangering the security of fuel supplies and of the industry. The love affair of the Labour Government with wind power arose from fears about climate change, an opposition to nuclear power and the declared belief that carbon dioxide was the principal cause of climate change. Renewable power became a requirement and the only available candidate was wind. Unfortunately, wind farms are expensive to build and their potential value has been greatly exaggerated. The facts, rarely acknowledged by politicians and renewable energy enthusiasts, are as follows: •

•

•

they can only operate when the wind speed is not too low and not too high and it is rare for a favourable wind regime to coincide with peak demand; when the conditions are not favourable, as is the case for much of the time, their output has to be replaced, often at very short notice, by fossil-fired plant; as a result, standby plant has to be kept running at considerable cost and producing additional CO2, so partially negating the objective of renewable energy.

The government estimate, in 2006, was that wind power would require a subsidy of £30 billion by the year 2020 – a sum more than sufficient 7

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POWER POLITICS to meet the total construction costs of replacing the then operating nuclear power stations. This wind subsidy will increase massively as the proposed offshore wind farms are built, with greatly increased construction and maintenance costs, which will be reflected in electricity tariffs. The subsidy is, of course, met by the electricity consumers – a stealth tax in all but name, and one designed to meet wildly unrealistic central government targets for reduction in carbon dioxide emissions. Other renewable sources are being researched, as some of them have been for the past 50 years. But they all, on the most favourable estimates, seem likely to exceed the costs of wind power for the foreseeable future, so requiring even greater subsidies, and most share with wind the handicap of interruptible supply. Politicians seem to be in thrall to renewable energies, disregarding their high costs and limited contribution to security of supply. There is an urgent need for an authoritative re-evaluation of the mix of generating sources in the light of costs and security and a recognition that there are available much cheaper ways of reducing carbon dioxide emissions. So where will future UK electricity supplies come from? That there will be a serious shortage is beyond doubt. The large power stations built in the 1960s and 70s had an expected life of 25 years, and many are now more than 40 years old. Their life is limited by the life of the high temperature steels used in their construction, as well as the ageing control systems and auxiliary plant. Their replacements are not planned as yet, with the exception of nuclear plant, where the first new station is envisaged for 2017, and a proposal, recently postponed, for one coal-fired station. The coal station has the unrealistic provision that it will have equipment capable of separating carbon dioxide from the flue gases and storing it underground – a highly optimistic project, with extra costs as yet unquantified, but certainly very large, and designed to achieve the highly optimistic government policy of carbon dioxide reduction. Little wonder that its promoter has deferred it. Over the next 20 years we are likely to require new generating plant of 30,000MW for replacement purposes alone, and little of that, 8

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POWER POLITICS – AN ALL-PARTY IMBROGLIO because of government procrastination, will be powered by nuclear energy or coal. This is a huge challenge, which cannot be met, as it should be, by direct replacement of large coal and nuclear power stations – because of planning and construction constraints and European requirements. We have seen that renewable sources will contribute little to the security of electricity supply, so it follows that the bulk of the new plant will have to be fuelled by gas imported from troubled areas, making our nation increasingly vulnerable to interruption of electricity supplies and subject to volatile and rapidly rising costs. On present form, we will also continue to build renewable energy plant with increasingly uncompetitive costs, requiring large and growing subsidies to be met by the electricity consumer. The effects of these developments on our economy can easily be imagined, and the responsibility rests clearly with the inactivity of the last Labour administration and their indifference, and that of preceding administrations, to risks which were readily apparent but consistently ignored. I organised an annual debate in the House of Lords from 2002 to 2008 when the situation was painstakingly spelled out by me and by others to a series of disinterested ministers who continued to describe the fictitious high security of our rapidly growing dependence on imported gas and to studiously evade proposals for nuclear power – the only generating source available to provide both fuel independence and carbon dioxide reduction on a reliable and economic basis. The visceral opposition of the Labour Government to nuclear power, and the accompanying obsession with wind power, stemmed from ministers at DEFRA and DTI who continued, year after year, to promulgate their personal prejudices and to deny the obvious dangers of doing so. Theirs will be a cripplingly expensive and damaging legacy, encouraged by the irresponsible support of the environmental lobby. This systematic dismissal of the readily available facts, and the inactivity which it bred, was ‘justified’ by a declared reliance on market forces – an astonishing position for a Labour administration to adopt – 9

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POWER POLITICS and by a tacit acceptance of that reliance by the Conservative and Liberal Democrat opposition parties. They all seemed unable to realise that Adam Smith described the ‘invisible hand’ of the market back in the eighteenth century, when roads were primitive, railways and aeroplanes non-existent, communications and international trade virtually non-existent, and technology played a tiny part in the nation states of the world – a far cry from the world of today. Today, we rely on major facilities to provide our accepted mode of living, and their financing and construction can require decades. During my time at the head of the electricity industry we had to look three decades ahead to plan and construct new generating capacity to meet the needs of a growing economy and improving standards of living. Improving technology offered great financial savings but a prudent balance in primary fuel supplies had to be adopted as the primary aim of the industry to maintain security of supply with the steady growth in demand. Industry, commerce, hospitals, communications all depend on reliable electricity supplies, and the planning horizon of the industry has to be sufficient to ensure an orderly situation in a highly uncertain world. The belief of politicians that a national strategy for the privatised electricity supply industry could emerge through the operations of the market is breathtakingly naive. First, because the politicians were busily intervening in the market through tariffs, renewable energy subsidies and hostility to nuclear power. Secondly, because the overseas owners of our electricity supply companies have no desire to get involved in the national energy policy of a foreign country in which they have invested. Their objective is simply to ensure that their investment is a profitable one – hence their investments in wind farms, heavily subsidised by electricity consumers by a surcharge on their bills. The credit crunch and its associated economic recession have reduced the demand of industry for electricity, and the high fuel prices in all sectors have encouraged economy in use. There may therefore be no growth in electricity demand for some years. But the effect of the need to replace worn-out power stations will eclipse such effects on demand, and the 10

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POWER POLITICS – AN ALL-PARTY IMBROGLIO investment requirements will be very large and certainly unwelcome to a government preoccupied with the crippling debts incurred since 1997. In a period of dominating debt repayments and stringent limits on capital expenditure, it will still be necessary to replace worn out plant and to meet electricity demand, and the only rational approach to this situation is to reduce further investment in heavily subsidised renewable energy, until it can be afforded on genuinely competitive terms. We sorely need a technically competent and independent body capable of long-term strategic planning for a national electricity supply industry, irrespective of its ownership. We have seen ample proof that management of our foreign-owned industry is unsuited to the task, and that Government is incapable of discharging it, but it is also far from clear that a domestically owned industry would be any more able to develop and implement a long-term strategy. I have often drawn Parliament’s attention to the situation in the 1920s, when rapid load growth was being met by hundreds of companies, some municipally owned and some private. The solution to the fragmented system lay in the creation in 1926 of a statutory body, the Electricity Commission, which served the nation well until the industry was nationalised in 1947, having performed well during a period of very rapid load growth and technical developments. The politicians responsible for finding a solution to the present situation and its daunting problems should examine history and devise a solution on similar lines, for the five years’ horizon which characterises politics is ill-adapted to tackling long-term problems, however serious the consequences of failure to do so. On recent form, we may have to wait for systematic electricity interruptions to secure the attention of politicians to the need for an independent body such as we enjoyed for much of the developing twentieth century. An exception to this reluctance by government to plan for longterm issues appears to have arisen in the subject of climate change, which has captured the attention of politicians nationally and internationally. This is in part due to the diligent efforts of environmentalists but also to 11

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POWER POLITICS the belief that the effects of climate change can be avoided by strenuous (and costly) measures to reduce carbon dioxide, the suggested principal villain of the piece. The enthusiasm with which this hypothesis has been accepted internationally is surprising. There is little doubt that the climate is changing – it has done so through millennia, sometimes with catastrophic effects. But the belief that carbon dioxide is mainly responsible rests on questionable assumptions. Meteorological changes take place over long periods, varying with the particular factors selected, and the system is a highly complex one with many factors being interactive in ways not always well understood. Additionally, many of the variables have differing time cycles, so that their effect varies in an apparently incoherent way. The proponents of climate change rest their case mainly on the efficacy of the highly complex computer models which they have developed over the past few years in an effort to represent – and even foretell – the behaviour of the highly complex factors in the meteorological system. It is worth remembering that some of these factors are terrestrially based, but other, very powerful ones, arise in the solar system in ways we do not understand and cannot control. The development of models in such a problematic environment is hazardous and relies largely on producing new hypotheses to explain unforeseen differences and then incorporating those new hypotheses into the already complex model. The performance of the resulting models may please their creators but they offer limited guidance in the long-term analysis of the system. The performance of comparatively distant predictions, as in the case of the notorious ‘barbecue summer’ six months ahead, does little to instil confidence in the models. A remarkable coincidence has sprung from the meteorological research into climate change. I say it is a remarkable coincidence, because it concludes that the principal cause of the hypothecated changes happens to be man-made carbon dioxide – one of the few factors that can be measured, and of the even fewer that might be susceptible to control! Both of these perceived possibilities are 12

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POWER POLITICS – AN ALL-PARTY IMBROGLIO attractive to the political and public groups which have reacted so strongly, and expensively, to the forecasts of the climate change scientists. The impression given of substantial unanimity among scientists on the question of apocalyptic climate change and its available solution is misleading and derives from its uncritical acceptance by politicians world-wide, shared by the desire of the media for a simple story. As a result, cripplingly expensive measures have been adopted in the belief that the threat of world disaster is real and can be avoided. Unfortunately, most of the measures adopted and advocated are not demonstrably capable of achieving the rescue mission for which they are proposed. The power of the climate change juggernaut is such as to suppress contrary analyses and proposed solutions, but the interested reader would do well to read An Appeal to Reason; A Cool Look at Global Warming, a thoughtful examination of the available evidence by Nigel Lawson, published by Duckworth Overlook. Another illuminating exercise is to type ‘climate change, sceptics’ into a search engine such as Google to see the breadth of authoritative scepticism that exists. It is easily shown that international plans for wind and other renewable sources are not capable of replacing carbon dioxide in the quantities and on the timescale claimed and required by the climate change models, but the sheer impracticability of the ‘solution’ seems to evade its supporters. We are thus, nationally and internationally, sleepwalking towards a series of measures, at enormous cost, which will not solve the predicted problem – itself not a hazard of great certainty. The bandwagon is rolling and seems likely to cause great damage. Perhaps fortunately there now exists a braking effect to these measures, in the form of severe economic pressures, which will radically affect their proposed adoption. An ill wind, perhaps? One of the major inconsistencies of current assessments of the declared problem and its solution is the way in which future electricity supplies are being put at risk while simultaneously proposing to extend 13

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POWER POLITICS the contribution of electricity to the reduction of carbon dioxide production, for example in transport. At the same time, technologies such as carbon sequestration and solar furnaces in the Sahara are blithely advocated without even a superficial examination of their practicability, security and economic demands. It is, of course, possible to claim that the UK is in good international company in its reckless approach to the certainty of the dire nature of the foreseen climate change, and to the variety of halfbaked solutions offered. But any responsible approach requires our own government to examine the evidence for the problem and its proposed solutions, before embarking on such a headlong course, based as it is on emotion as well as to some objective analysis. This will not be simple, given the size of the steamroller presently propelling the climate change movement. It is salutary, however to reflect that the UK contributes around 2 per cent of world emissions and that those of the developing world are going to rise enormously as China, India and many other developing nations increase their industrial base. So Britain is not a major player in the situation, contrary to the posturing of some of our politicians and environmentalists. One thing is already clear. Over the past decade, the money and efforts devoted to the predicted climate change and its solution could have been more effectively used to provide tangible contributions to offsetting foreseen effects by such measures as irrigation, flood defences and agricultural enhancements, as well as the large-scale adoption of nuclear power. Instead, we have created a huge meteorological research apparatus and adopted a range of renewable technologies which are both expensive and of little effect. In the UK this foolhardiness has been facilitated by the wishful thinking of politicians unable to judge the validity of the arguments and unwilling to listen to the opinions of the dissidents from the prevailing fashionable view. These are precisely the errors committed over the past 20 years in the approach to privatisation of the electricity supply industry. Dreams may be comforting, but they rarely form the basis for successful national strategy. 14

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POWER POLITICS – AN ALL-PARTY IMBROGLIO The growing insecurity in electricity supply, the headlong expenditure on renewable energy and the necessarily incomplete examination of the climate change threat and its possible mitigation all stem from a lack of competence in understanding the assumptions on which decisions have been, and are, reached. The sheer incompetence of a procession of politicians in government and opposition renders the need for an informed analysis of the most major decisions in the energy and environmental fields. This is exactly the lesson of the past 50 years in the industry which I had the honour and pleasure to serve for much of my working life. I continue, in spite of contrary experience, to be optimistic that we will discover an escape route from this morass, despite the experience with the electricity supply industry over the past five decades, a deplorable record for which all three main parties share responsibility, though to varying degrees. This problem is examined in Chapters 8 and 9 in a more general consideration of the structural deficiencies of UK government. Suffice it to say here that the quality of government has not improved in recent years and offers little promise of doing so without extensive change.

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CHAPTER 2

THE FORMATIVE YEARS

I was born in Walsall on 17 May 1924, the third surviving son in a happy, poor and industrious family. My father was a gardener when employment was scarce and erratic, and my mother kept a small grocery shop which provided a small degree of stability. Walsall was then a town on the edge of the Black Country, and so had its share of smokestack industry, but it was famed also for its leather goods; indeed, its football team is still known as the ‘Saddlers’. Prior to her marriage, my mother had worked in a leather factory and was proud of her trade. She remained a mistress of knitting and crochet throughout her life and her fingers were seldom at rest. The elder of my two brothers, Joe who was 13 years older than me, served with the Royal Armoured Corps in North Africa, returning home after the war to resume his job as the sales manager of a preserves company. He had been a grammar school boy and was offered officer-training but declined, preferring the company of his fellow troopers. My other brother, Denis, two years my senior, became a metal pattern-maker. He was a fine craftsman and, in his retirement, produced a number of beautifully made traditional games, such as Nine Mens’ Morris for his children and grandchildren. We were fortunate to be recipients of these games and still treasure them.

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POWER POLITICS All three of us remained close throughout our lives and took great pleasure in our families as they grew up. Close-knit families were a feature of the area and time and served us all well in later life, when we maintained close contact. Our shop was a typical small grocery store of the period. Food was rarely pre-packed: butter was delivered in large blocks and was cut and patted into shape, a chore I quite enjoyed; sugar and dried fruit were weighed and bagged; Woodbines cigarettes came in packets of five for 2½d (old pence), with Kensitas offering a separate pack of four cigarettes ‘free’ with a packet of 20 costing 11½d. I spent many hours ‘minding’, and serving, in the little shop and learned a great deal about human nature – including my own! I had an early lesson in social justice from the practice of some customers buying groceries from us ‘on the slate’ when times were hard, but returning to a larger store when they had hard cash – often stretching out their credit there until they were hard up again and returned to us. Our shop never made any money, but we certainly ate better than would otherwise have been possible. The outbreak of war brought the opportunity for my father to become a fire-watcher at a local factory, with a welcome, if small, regular income and a more suitable job for his failing health. Money was not plentiful, but my mother was a careful manager of the small family income and performed miracles with the cheapest cuts of meat; our Christmas turkey or, more probably, chicken, was bought in the town market by the flickering light of open gas flames when the traders were about to pack up and bargains were to be had. Personal pride and the work ethic were prominent, as was our Roman Catholic faith. Every Sunday morning saw us at Mass at St Mary’s, a large and elegant Georgian-style church where I duly became an altar server. Indeed, I also became Boy Bishop, an occasional appointment involving wearing vestments approximating to those of a bishop, processing to the church and delivering a sermon (written by the parish priest) to a sympathetic congregation. Latin Mass was the order of the day and I learned many of the beautiful liturgies and hymns which were led by Tommy Boyle, our senior-school headmaster 18

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THE FORMATIVE YEARS and a fine tenor. The faith which I gained during those years has been a constant and rewarding pillar of my subsequent years. My father had been gassed during the First World War and smoked cigarettes, and the combination of these resulted in his death from lung cancer in 1945, when I was 21. During the school holidays I accompanied my father to his various places of work as a gardener and greatly admired his steady, unhurried and expert work. (In later years I was to regret my failure to learn more of his craft in gardening and his love of birds.) Most of his employers were kindly and appreciative people but I still remember one, a bookmaker named Billy Preston, who delighted in driving and belittling my father, whose composure only served to incite him further! I remember my inward fury at the spectacle of that pompous little man baiting an employee who was worth ten of him. I did not know my father well, as was unhappily customary during that period, but my memories of him are of a quiet, contented man with enormous inner reserves of composure and a keen sense of justice and self-respect. He felt himself wholly responsible for his family and so spurned any form of state aid – limited though that was in those days – and had a hearty contempt for scroungers. When money was available he greatly enjoyed his pint of mild and bitter, and a flutter on the horses. When his horse won (not very often) we all celebrated with some special treat; when it failed, we didn’t mention it. Both he and my mother were lifelong Conservative voters, regarding that party as the custodian of hard work and self-reliance – a view which I have found a lifetime’s experience corroborates! My mother was no advocate for hospitals, which she regarded as places where people went to die, and nursed her family at home when the occasion arose. At the age of six months, I developed pneumonia and pleurisy, and one of my lungs was drained by my woman GP (a rarity in those days) and a colleague who administered the anaesthetic on our scrubbed kitchen table! I recovered quickly and can remember many other childhood complaints weathered at home in those pre-antibiotic days, especially 19

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POWER POLITICS the disinfectant-soaked blanket which covered the entrance to my bedroom, when scarlet fever prevented me from taking the 11+ examination. In those days, of course, there was no National Health Service, and poor families insured with a friendly society, in our case the Ancient Order of Foresters, for a few pence weekly, becoming ‘panel patients’ of a nearby ‘panel’ doctor. Our woman doctor was a fine physician and a very caring one. When I recovered from scarlet fever I was offered a place at a Catholic grammar school in Birmingham or one at a Central School in Walsall, and settled for the latter on the grounds of saving the cost of uniform, travelling and extras at the other school – a choice that I arrived at myself, under no pressure from my parents! My mother cared ceaselessly for her family and for many of our neighbours, and seemed tireless in her devotion, running the shop at the same time. She was a devout Catholic, who derived great strength and comfort from her faith, and her rosary was rarely far from her hand. Never happier than when helping others, she was a natural refuge for those in distress and always lent a sympathetic ear in addition to tangible help. In present times, she would undoubtedly have gone on to higher education and become a teacher, nurse or, perhaps, a doctor. In her rare ‘rest’ periods, she busied herself with clothing repairs, and with knitting and crocheting, both skills which she later passed on to her grandchildren. Her idea of bliss was time to read, and a theatre visit had to await my adulthood! But she held an unshakeable belief in the superior qualities of womenfolk and approved of much of the longawaited liberation of women which was to follow the war. There was, of course, no TV nor, for many years, any radio, which was beyond our means. I well remember, just before the war, the excitement of our first radio, powered by a wet battery known as an accumulator which was charged at a nearby hardware shop. For the children, there was a weekly Saturday afternoon film show at a nearby cinema known, for obvious reasons, as the ‘tuppenny rush’. There we enjoyed Tom Mix and other heroes to a tumultuous sound of cheering and booing. 20

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THE FORMATIVE YEARS I enjoyed my years at Elmore Green Central School, cycling 12 miles a day, there and back, and received a pretty good education. Central schools were the local authority alternative to grammar schools (although Walsall had both), and had gowned teachers, honours boards, and a pretty good university entrance record. Teachers are an important influence and I remember with gratitude the efforts of the mathematics teacher, who rejoiced in the name of Eric Mendelssohn Boot. He was a fine pianist, and produced a Gilbert and Sullivan opera each year. He restored my interest in mathematics after it had been damaged by an earlier teacher’s flagrant ridiculing of a fat boy with a blind spot for the subject. I well remember being outraged by the injustice of this misuse of power. The staff was generally enthusiastic and supportive and I seemed to be set on the road to an arts degree at university. Those were the days when schools considered arts superior to the sciences and when, for a time, my main ambition was to be a newspaper reporter – an ambition which I am eternally grateful not to have fulfilled! But in 1939, when war with Germany was declared, the school went on to half-time, because of the call-up of many of the staff. I decided that half-time was not for me and so left school at the age of 15 and got a job at GEC in Birmingham as an office boy. I completed my School Certificate subjects at evening classes, then universally known as ‘night school’. I was lucky enough to attract the attention of GEC management and was encouraged to take evening classes leading to an Ordinary National Certificate in Electrical Engineering at Walsall Technical College and became an apprentice at GEC. I also joined a first-aid post in Walsall, attending for three nights a week, with evening classes on three evenings and Saturday mornings. These activities were combined with a 40-hour week at GEC; I find today’s students quite incredulous about the workload, which I believe played an important and valuable part in my development. I learned much at the first-aid post at Hatherton Road, where the quiet periods between air raids were occupied by Scottish dancing (the 21

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POWER POLITICS Medical Officer was a Scot), bridge and listening to recorded music. I recall one game of bridge when my partner, a lady ambulance driver, bid seven spades in the first round of bids, leaving me to play an impossible hand while she adjourned to the toilet! On a more serious note, I remember an older man, Arthur Witheridge (a first-aid party leader with a white helmet) telling me during a record recital, which he enthusiastically organised, that I would come to like Brahms one day – he was quite right. A welcome relief from the pressures was the Sunday afternoon concerts by the City of Birmingham Symphony Orchestra, which founded and developed my love of music. The conductor was Leslie Heward and I recall one concert when he was joined by the City organist, G.D. Cunningham, the composer Victor Hely-Hutchinson and the Professor of Music at Birmingham University, W. D. Stanton – all of whom contributed to the concert by conducting, playing pianos or organ and by playing the simpler percussion in turn. It was a goodnatured and very enjoyable concert. We also heard many well-known soloists such as Myra Hess, Eileen Joyce and Moura Lympany. At first, I travelled to work at GEC by train, where I met my future wife, Marjorie, but in 1946 I acquired a 1937 Austin Ruby saloon and spent many happy hours with my brother, Denis, overhauling it – decarbonising, valve grinding, fitting new patented piston rings and so on. For some inexplicable reason, we called the car ‘Aggie’ and she served us well. We had a curate at Saint Mary’s at that time, Father Cyril Adams, who possessed a car of the same model as mine, and we helped him by doing the maintenance jobs. He later performed the marriage service for Marjorie and me, and remained a friend throughout his 60 years’ priesthood, memorably celebrated at his alma mater, Belmont Abbey. When I had completed my Ordinary National Certificate in Electrical Engineering I continued evening classes to complete my matriculation. At this time, the Head of the Department of Electrical Engineering, R.F. Beaton told me, rather disgustedly, that he had tried unsuccessfully to persuade the Principal, William Cooper, to nominate 22

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THE FORMATIVE YEARS me for a County Major award to study electrical engineering at Birmingham University. Cooper was unwilling to stick his neck out on my behalf despite Beaton’s urging and, in retrospect I am rather glad that he didn’t, because the course which I followed kept me well in touch with practical aspects and the shop floor – both great advantages in my later career. I was grateful to Beaton for his interest and effort, nonetheless. He was a brilliant teacher and a Whitworth Scholar and I learned a great deal from him. I was later given full-time release from GEC to do a six-month full-time intensive course leading to a Higher National Certificate in Electrical Engineering. This resulted in my being placed on the Central Technical and Scientific Register, which made me subject to direction as to occupation. They decided, to my disappointment, that I should continue to work for GEC. I say that this was disappointing because many of my contemporaries secured engineering commissions in the Forces, and had smart uniforms – and glamour! I tried to get around this by volunteering for the Royal Navy, but the system worked too well and I was hauled before a Committee of the Register and soundly dressed down for my impertinence. So at GEC I stayed until the end of the war, in a ‘reserved occupation’, continuing with my studies and first-aid post duties at night. During my years at GEC I made a good and long-lasting friend in Geoffrey Shepherd, who had lost both parents and a sister in an air raid. He and his brother were buried for some hours, Geoff sustaining a fractured pelvis and his brother losing his hearing. Geoff and I remained good friends for almost 50 years, until his death, and our paths crossed on many occasions. His cheerfulness, ready wit and generous nature were a great joy over that period. In 1946 he and I applied for graduate traineeships being offered by the City of Birmingham Electricity Supply Department – an unusual opportunity at that time, and one which illustrated the vision of some of the better municipal electricity undertakings. It is interesting to note that, of the original 12 members of the scheme, Geoff Shepherd 23

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POWER POLITICS became chairman of the Midlands Electricity Board, Ray Rockcliffe became chairman of the Northern Ireland Electricity Board, and the patient reader will read of my achievements later in this narrative. After about 16 months of the two-year training period Geoffrey Shepherd and I were both appointed as junior engineers at Hams Hall B power station, then being built as part of the post-war expansion of generating capacity, and began shift work. This was a hard-working time, when I learned the importance of personal responsibility and of teamwork. I was also introduced to the construction and operation of a large power station. I also experienced the solitude of regular rounds of the plant, looking for any unexpected signs of trouble, and realising that everything sounded worse at 3 a.m. – my general low-point. I acquired some familiarity with the process of plant miraculously recovering from its maladies as daylight approached. There was a great camaraderie among the junior engineers, and shifts were commonly exchanged for mutual convenience. I remember one period when illness and holidays resulted in two of us working 12-hour shifts for three weeks, and I spent the entire period on nights since it was too difficult to organise a change, which would have involved 18-hour shifts. But such situations were happily rare and our youth made it tolerable. When the industry was nationalised in 1947, I well remember a piece by Peterborough in the Daily Telegraph, who reported a dispute between British European Airways and the British Electricity Authority over the use of the initials BEA, and ventured an opinion that the claim of the electricity industry was stronger because they carried more passengers than the airline! In February 1949 I married Marjorie, who I had met some five years earlier when commuting to GEC, where she worked in the chemistry laboratory. This was the most important event of my life and we were to have a happy and rewarding marriage which lasted for almost 60 years, and was ended by her death in 2008. We were blessed with three wonderful daughters, all now pursuing their careers while happily married and providing us with a total of six grandchildren and, 24

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THE FORMATIVE YEARS to date, two great-grandchildren – all of them a constant source of joy and pride. We were unique among our friends in having a house when we married; we bought it from Geoff Shepherd for the sum of £1,850 on a mortgage interest rate of three and three-quarters per cent and a salary of £650 p.a. We were very happy there, and did a great deal of work improving the property. I remember replacing the galvanised steel hot water tank, which was heated by a back-boiler on the dining-room fire. Time had allowed a considerable amount of rust and scale to accumulate, and when I finally re-lit the fire the water remained stubbornly cold until the whole house suddenly shook with a deep rumbling sound and the blockage of debris cleared. For some weeks following, our hot water ran rustcoloured! In 1949, both Geoff Shepherd and I applied for, and obtained, posts as Junior Grid Control Engineers with the Central Electricity Board, which managed the electricity grid. I gained some useful experience in electricity transmission safety and generation load control, but none more useful than when, after promotion to a day job, I attended a meeting as ‘bag carrier’ for my boss, J.D. Findlay, the Systems Operation Engineer for our area. It concerned an electricity failure for which we were, in truth, responsible. Findlay remained silent, raking out and refilling his pipe, while the other side vented their considerable wrath. When they had expended their anger, and were beginning to feel sorry for us, Findlay produced one small error that they had made – and secured an abject apology. That taught me a great deal about tactics at difficult meetings! More seriously, I was occupied in ‘load-despatching’, by which power stations were instructed to produce power to meet the system’s varying demand and were selected on the basis of the marginal cost of generation at the time. The art of anticipation was aided by study of previous load demand curves and by examination of the radio schedules, to allow for popular programmes, which were regularly followed by substantial load increases as kettles were switched on all 25

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POWER POLITICS over the country – a practice which continues today. I also dealt with grid switching operations, involving the safety of personnel and the security of the grid when transmission lines were taken out of commission for maintenance or repair. I well remember two of the Senior Control Engineers with whom I worked in shifts. The first, Ross, was a taciturn, irascible Scot: the second a more equable character called Alderson. One evening, Alderson arrived in a state of some excitement and announced that he had won £30,000 on the football pools. Ross broke his customary silence with the question ‘for a penny?’ On being told that the stake had been sixpence he grunted and relapsed into his customary morose silence. After a couple of years I secured a much-coveted day job and worked on more theoretical matters such as load flow studies and costing of generation. During this time, I reported to an amiable and able man, Stan Dodd, whose daughter, Gina, had also been a GEC apprentice and who later became a leading authority on balancing large electrical rotors – no simple task! In 1950 our first baby arrived – a little girl whom we christened Catherine Barbara – who was to bring us great happiness when we had finally developed our parenting skills! She was born at home and I spent a disturbed night trying to persuade her to sleep, only to find the next morning that some building suppliers had tipped some sand which I had ordered in the road and I had to wheelbarrow, without delay, to the required site. During the next few months we all three learned a great deal about co-existence. Catherine was followed in 1952 by a sister, Elisabeth Jane, who benefited from our hard-won parental experience and also brought us great joy. Margaret Clare, our third daughter arrived in 1958, when we had moved to Kent, and she bore a congenitally dislocated hip, and its associated cumbersome splint, with the cheerfulness which was to become her hallmark. In 1952 I applied for, and gained, an appointment in Liverpool as the System Liaison Engineer for the Merseyside and North Wales 26

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THE FORMATIVE YEARS Division of the BEA. The grid control room for the area was in the neighbouring North West Division and I soon learned the difficulties in liaising from a position of almost complete weakness. My Manchester colleagues were friendly and helpful, and I learned from them some of the finer points of snooker! After a couple of years, it was decided to merge the two divisions, with the larger Northwest Division securing control. My position became superfluous, and I was appointed Operation and Efficiency Engineer at Ince Power station, then being built to supply the new uranium separation plant at Capenhurst. Commissioning the power station from scratch was a fascinating and taxing job, and I found it necessary to have a camp bed in my office when working up to 110 hours a week for several months. I was fortunate in that the station manager and his deputy were considerably older than I, and were quite happy to give me a free hand. We experienced, as is usual in a new project, a wide range of problems, but we had a young and enthusiastic team of engineers who relished the challenge and were unstinting in their efforts. There was a great spirit of camaraderie, accompanied by an active rivalry between the operations and maintenance departments, and I coined the phrase ‘it was working well until you mended it’, which never failed to achieve the desired effect! In the midst of the turmoil, I was asked to see an intelligence man who was vetting my friend Geoff Shepherd for a job in the design and building of the first civil nuclear power stations. I was naturally anxious to help but rapidly became irritated by the leisurely and oblique questioning, which dealt with lifestyle, integrity, hobbies and so on – this at a time when I was rushed off my feet! Eventually we approached the question of political sympathies and I said that Geoff was a member of a small, rather noisy, party of little real significance in the UK. My interrogator’s pen quivered, while he sought a way of asking which party I meant. His disappointment was palpable when I replied ‘the Liberal Party’ but the lengthy interview came to an end shortly afterwards and Geoff always claimed that he got the job despite my support! 27

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POWER POLITICS During the course of the commissioning of Ince power station I got to know the GEC turbine erector there, Jack Rourke, a valuable ally then and subsequently. He had a quiet sense of humour and, when approached by a somewhat green graduate trainee with the news that the vibration indicator on a turbine had risen by one graduation he replied ‘each of those divisions is one tenth of a thou – and there’s millions of them to an inch!’ The trainee looked puzzled but decided, wisely, not to pursue the matter. While at Ince I became frustrated by the level of bureaucracy which served no visible purpose. One example was the requirement to submit to divisional headquarters very detailed statistical reports, presumably for analysis and comparison, though the outcome never found its way back to us. I decided to stop submitting them, keeping them in a large drawer – and it was more than two years before their absence was noticed! On another occasion, I signed a requisition ‘not approved’ and it was approved by the next three signatories, of growing seniority, without question! I suppose that these measures seemed to be useful to the distant management, but they contributed little to the efficient working of the organisation, a lesson I tried to remember in future jobs. Also in the GEC team I grew to know and like the erection manager, Wally Read, an eccentric and crusty character with a welldisguised heart of gold. He was revered by his staff, whom he supported through thick and thin. Part of his stock-in-trade was a collection of well-rehearsed axioms, based upon naked prejudice, which he delivered with a pronounced twinkle in his eye – ‘you can’t trust a man with eyes as close together as that!’ for example. His colleague of many years, Douglas Smith, was manager of the GEC Power Plant Division, based at Erith in Kent. A big, quiet man he was a constant support during those difficult times and had developed a management style from which I was to derive great benefit and learn many lessons later. I profited greatly from his friendship, not least in sailing with him annually for about 30 years. 28

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THE FORMATIVE YEARS Together, these two decided that they would like me to join GEC to form a new Operational Services Department, responsible for commissioning plant throughout the world and providing troubleshooting services throughout its life. The proposition was attractive in terms of pay and conditions, but also offered technical interest and a degree of freedom unlikely to become available in the BEA. I accordingly accepted, Ince having been satisfactorily set to work, and I and my family moved in 1957 to Erith in Kent. This marked a major change in the direction of my career. I had learned a great deal and made many friends at Ince, two of whom were to work for me again later. Both had been Shift Charge Engineers at Ince and the first, Stan Dutton joined me in my next job at Erith. The second, Don Green, joined me at the SSEB (see Chapter 4) as a deputy power station manager, finally progressing, after my departure, to the post of Chief Generation Engineer. The years at Ince taught me a great deal about myself and others. For me, it was an endurance test, with long hours and taxing problems. It provided invaluable experience in managing quite a large and varied team. There were also, inevitably, continual contacts with construction staff and commercial relations to be handled. I greatly enjoyed the job, and made a lot of friendships which have lasted through the years.

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CHAPTER 3

ERITH AND MANUFACTURING

And so, after five happy, if turbulent, years in Liverpool I left the nationalised electricity industry to return to manufacturing industry. By coincidence, I was going to GEC, the same company at whose Witton Works I had received my early training. But that coincidence masked some vitally important differences. Witton was electrical, Erith was mechanical, and there was considerable rivalry between the disciplines, accentuated by the fact that the two works had to collaborate in the production of turbine-generators for electricity production. Erith controlled the overall design and sales effort, but Witton acted as a sub-contractor for the alternator and jealously preserved their design and erection autonomy, guarding their mystique from the ‘rude mechanicals’! This spirit of rivalry, founded in years of independence, was as strong at Erith as it was at Witton, and made my introduction as Manager of the new Operational Services Department a difficult one. I was seen by some as a ‘Witton man’ and I certainly did not qualify as an ‘Erith man’, since my remit was to cut across wellestablished departmental boundaries. Any anxieties I may have had on this score came to nothing, and I proceeded to settle in, gather a staff and develop a modus operandum. My acceptance probably owed more to the presence of my backers, Douglas Smith and Wally Read, both well respected and influential

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POWER POLITICS figures, than to my efforts but in any event the department began to take shape. I began by recruiting an experienced power station operator, Stan Dutton who had worked for me at Ince, and a graduate trainee, Bernard Cheek. The evolution of the department was interrupted after a few months, when the general manager at Erith, Arnold Lindley (later to become the managing director, and later chairman, of GEC, Sir Arnold Lindley), instructed me to personally look into a major breakdown of a turbo-generator at Kelvin power station in Johannesburg. Lindley had been chief engineer of GEC in South Africa and was an old Erith man. He felt personally responsible to his old clients in South Africa and plainly expected quick answers. He was to be disappointed, because it took a long time to dismantle the heavily damaged machine, and even longer to rebuild and restore it to service. As a result, I spent periods of weeks over the next year or so in South Africa dealing with Kelvin, while trying to launch a new department. Much of the resulting strain fell on my wife and two small daughters, Catherine and Elisabeth, who were settling into a new home and school with little help from me! I learned a great deal at Kelvin about how to deal with clients and their consulting engineers – in this case, Merz and McLellan of Newcastle, often represented at meetings in South Africa by their formidable partner, Wilson Campbell. He was a brilliant and sarcastic individual who pressed for rapid results without contributing much to the solution – a characteristic with which I was to become familiar in future dealings with consulting engineers! He displayed his sarcasm at an early meeting, when he welcomed me as ‘our funereal friend’ – an obvious play on my name, and not calculated to ease our relationship. At many of the meetings, I was accompanied by Wally Laing, chief engineer of the heavy machines division at Witton, who was considerably older than I and a tower of strength. A Geordie, he had vast experience, and deflected much of the wrath of Campbell. In all of the stress, the clients were models of courtesy and understanding, despite their obvious anxiety to see the plant returned to service. 32

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ERITH AND MANUFACTURING Indeed, on one occasion following a particularly acrimonious meeting at which Wilson Campbell had officiated, the general manager of the company, Bobbie Kane, came out to the airport the following day to see me off and brought a huge basket of fruit from his garden. Back at Kelvin power station the task of dismantling the badly damaged machine was progressing slowly. It was a daunting prospect, which would have defeated many. Fortunately, however, I had the good fortune of having secured the posting of Jack Rourke from Ince and he proved equal to the challenge. Dismantling was horrendously difficult and rebuilding comparatively simple, but the real challenge came with recommissioning, when the machine persisted in vibrating when running up, and resisted all of our efforts to calm it! Much correspondence and conversation took place between us and the designers at Erith and eventually the problem was solved by changing the turbine starting techniques. This was following a painstaking investigation of the movement of bearing pedestals with increasing temperature during the starting procedure. Interpretations of these measurements as the answer fell to the ground when I suggested repeating the tests on identical machines at Woolwich – which yielded similar results without similar problems! Released from this major diversion, I turned my full attention to the Operational Services Department at Erith, where acceptance of our new role was bringing an increasing demand for trouble-shooting services. Over the next few years the department dealt with a wide variety of problems at home and abroad and became accepted by clients and colleagues alike. One interesting episode related to the commissioning of Mount Isa power station in Queensland, Australia. We had undertaken the design and construction of this power station on a turnkey basis, with overall responsibility. Mount Isa was a mining town of some 12,000 inhabitants, situated in a desert area 1,200 miles from Brisbane. It was wholly self-reliant and had no connection to the national grid. I decided that Bernard Cheek should commission the station, despite his comparative lack of experience, and went out to help at the crucial time. He and I worked alternate 12-hour shifts for 33

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POWER POLITICS some weeks and things went quite smoothly. When we came to synchronise the station for the first time, the staff at the old power station decided, nonchalantly, that they were no longer needed, and shut down their plant. A few minutes later, we lost ignition on our only boiler and Mount Isa was plunged into darkness. Restoring supplies took some hours, because all of the air-conditioning tried to start simultaneously in that hot climate, so the system had to be put back in stages. The event was commemorated by the local press with a headline ‘Telegrams of congratulation read by the flickering light of candles’. This provided a staple legpull for quite a time. Another memorable experience came my way in South Africa, where a man named Bob Fenwick held a senior position in ESCOM, the state-owned electricity supply undertaking. The remoteness of South Africa from the generating plant manufacturing industries of Europe, Japan and the USA, made great demands on their engineering department because of the time and money involved in returning large components to the manufacturer for major repair. To solve one such problem, the bent shaft of a steam turbine (not one of ours), Bob Fenwick heated the shaft with gas torches on the side of the bend. The metal expanded and finally yielded, creating a high stress area which corrected the bend. The solution horrified me, for it involved a lot of guesswork – or art? – and ran the risk of developing cracks in the shaft, with possible dire consequences. In fact, the technique proved to be highly satisfactory when used with appropriate care and we used it at Erith on one or two occasions, saving time and money for the customer. These were exciting days, full of challenges and requiring long hours of work at distant sites. I was fortunate in having a very loyal team, who never spared themselves – a characteristic of the Power Plant division at that time which owed much to the leadership and example of the divisional manager, Douglas Smith. He was a remarkable man, modest in nature and unswervingly loyal to his staff – if they had done their best! He combined an easy manner with a shrewd judgement and an almost artistic view of problems, seeing 34

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ERITH AND MANUFACTURING through the detail. He often remarked that ‘instructions are intended for the guidance of intelligent people’, making it clear that they provided no substitute, or alibi, for personal responsibility. This made a great impression on me and formed a fundamental part of my subsequent behaviour. On one memorable occasion he sent for me and announced that I was to become Sales Manager, with a substantial salary increase. I replied, somewhat huffily, that I had no wish to become a salesman and was quite happy in my present job. He smiled and told me that the title was unimportant but necessary to secure the agreement of senior management to the salary increase; he wanted me to take an interest in all of the activities of the division and would back me in anything I wanted to do. Such a carte-blanche proposal was typical of the man; he gave his support unhesitatingly to those whom he trusted. It is an unusual tribute to him that many of his staff at Erith continued to visit him for dinner 30 years after his retirement. Under his leadership, GEC moved from a very small player in the turbine-generator market to a position of considerable strength, and its technical advantages were widely recognised. He was little appreciated by his seniors, many of whom were academically well qualified, having been recruited by the nascent Atomic Energy Division. They were often intoxicated by their achievements in the nuclear power field and assumed, wrongly, that those successes qualified them in other established fields of which they had no knowledge. Eventually, he was moved sideways and I became divisional manager, with the opportunity to appreciate the difficulties which can be created by poor senior management. An unusual example of this occurred when the general manager came into my office and told me to give up tendering to the Central Electricity Generating Board. He had had lunch with their board member for engineering and was convinced that we had no chance of success. I explained that I, too, had difficulties with CEGB, but that we required them as customers in order to be able to sell overseas. He replied that this was a matter of policy which he had formulated and was not open for 35

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POWER POLITICS discussion, and wrote me a memo with instructions to cease tendering to CEGB. I took the only practical course – I put the memo in a desk drawer and ignored it. Several months later, at Christmas, he came to see me and offered his congratulations on my division securing two large CEGB contracts. I couldn’t resist, after thanking him for his generous remarks, pointing out that the successes were in spite of his memo, which I produced from my desk drawer. He was not pleased and left without another word. Unhappily, this was not an isolated incident and I came to realise what a sterling job Douglas Smith had done in protecting the division from amateur management. The power of the CEGB was quite extraordinary. Setting out to be an informed buyer, with specialist staff, they rapidly began to dominate the manufacturing industry by specifying equipment which only they wanted to buy. Since they were the dominant UK buyer, and the home market was buoyant, the manufacturers did as they were told, and produced equipment of little interest to the export markets. Meanwhile, the sheer size and technical expertise of the CEGB allowed them to occupy a leading position in the world of electricity supply, and their determination to buy over-specified equipment at home excluded them from obtaining competitive equipment abroad. In the event, they managed to buy over-expensive equipment for their own satisfaction, while effectively ensuring that UK manufacturers were incapable of competing in export markets, apart from selling to a few ‘enlightened’ utilities in Australia and Canada who followed the CEGB lead. The CEGB of that period acquired an incredible arrogance from their position of supplier dominance, and yet they signally failed to produce good managers to run their rapidly growing empire. Indeed, it sometimes seemed to me that the essential requirement for promotion was eccentricity, which seemed to be regarded as an indication of a fresh, inquiring mind. All too often, as a result, eccentricity was cultivated by ambitious individuals who exploited the perceived rules and ended up as incompetent managers. This trend was certainly reinforced by the reliance of the senior CEGB management on the 36

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ERITH AND MANUFACTURING advice of a psychologist who was part of the interviewing panel for senior appointments. There were a few refreshingly competent managers who had somehow slipped through the net, many of whom were in the construction and design departments. There was also one, rare, example in the operations department, Arthur Hawkins, who became a good friend and went on to become chairman of the CEGB – although, by that time, he too had acquired the necessary trappings of eccentricity as a means to the desirable end of promotion, and the habit persisted in his new appointments. At the outset he recognised this and remarked that all chairmen of the CEGB had come eventually to practise ‘folies de grandeur’ and asked me, as an old friend, to tell him when this happened to him. I protested that, in that event he would not believe me – and such proved to be the case. The condition continued and grew. To be fair to the CEGB, their preoccupation with having an inordinate number of gold knobs on their equipment was not unique to them. Other nationalised industries shared their technical arrogance and dominance of the home market – the steel, airline, gas, coal and rail industries were all doing the same thing, and did great damage to our post-war manufacturing base – arguably as much as the trades unions, whose Luddite policies did much to cause the decline of British manufacturing industries. In common with many other industrialists of that time, I grew weary of trying to explain to overseas customers that our delivery obligations could not be met because of some wildcat strike or walk-out. About 1963, Arnold Lindley, now chairman of GEC, decided to buy Radio and Allied Holdings – a decision which was to have unforeseen consequences. For the managing director of that company was Arnold Weinstock (later Lord Weinstock), the son-in-law of the owner, Michael Sobell. The deal was for shares, and Radio and Allied became the largest shareholder in GEC, with Arnold a director. It was not long before Weinstock gained de facto control of GEC, becoming managing director and, with his old colleagues from Radio and Allied, Kenneth Bond and David Lewis, he proceeded to consolidate 37

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POWER POLITICS that position and to make it clear to all and sundry that cash was paramount and that risk was definitely for others, such as government, clients or insurers. To further his distant control of the various units, Weinstock appointed a number of people, stationed in the units, who reported directly to him, bypassing the local management. Our local man was an accountant, who irritated us all by referring to expenditure as being ‘my money’, a habit perhaps echoing the voice of his master! Much of what he offered was good common sense, but one never knew exactly what was being reported to head office. As a result, we didn’t always disclose the whole truth of the topic under discussion, inevitably frustrating the point of the exercise. At the time of Weinstock’s arrival, much of British industry was badly managed, with little regard for financial management. This was certainly the case at GEC, where there was little interest in contract control or cash management. Indeed, contracts were managed on the basis of man-hours estimated when bidding for the contract. Inevitably, a variety of factors often ensured that all of the man-hours had been used before completion of the work – with resultant losses on completion. As my responsibilities increased, I invited Tom Parker, of Merz and MacLellan, consulting engineers to join us as deputy contracts manager to try to get a grip on financial matters. He did a sterling job and soon became contracts manager. At about the same time I became aware that, in this new world of financial control, my engineering training was insufficient and so I embarked on a home-study course of study for a London University external degree in economics, with a special subject of accounting. After five years of study, much of it on aeroplanes and in overseas hotels, I sat the final examinations and I well remember going to Senate House to look at the results. I began with the pass list, and did not find my name. I then went to third class honours, with the same result and had a similar experience with the lower second class honours. With a falling heart, I went to the upper seconds and found my name there, to my great surprise, for the time available for study had been difficult to find, for reasons which the preceding passages will 38

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ERITH AND MANUFACTURING have made clear. I found the knowledge I had gained of accountancy immensely valuable then and throughout my subsequent career and was often secretly pleased by the astonishment of professional accountants at the financial knowledge of an engineer. I cannot say that the study of economics proved of much value – I often echoed the words of Lord Birkenhead in observing that it had made me better-informed, but none the wiser! But I opted for accountancy for Part Two of the degree and found that to be of great value throughout my subsequent career, principally because accountants I subsequently worked with were never quite sure how much I knew about their craft, and treated me with guarded respect in discussion. I distinguished ‘real money’, as cash flowing into and out of the company from ‘accountants’ money’, which was a matter of allocation in the accounts – the distinction, although very real in practice, never ceased to trouble them! The influence of Weinstock grew rapidly and was far-reaching. The whole culture of GEC changed, from an easy-going attitude to one of fear, for many of the edicts issued by him were implemented by acolytes who either failed to explain the rationale of the decisions or, more probably, didn’t understand it themselves. The emphasis was on cash generation, through pursuit of debtors, and cutting expenditure on capital investment but also on trivia such as the cost of newspapers. One of his colleagues was later to summarise Weinstock’s period in GEC as having made a good job of weeding the garden, but without planting anything new. But it must be admitted, in fairness, that he did much good for British industry in his concentration on cash flow and the reduction of overheads – all of this in an industry where management was often dynastic and rarely competent in world terms. The time came when Weinstock’s discomfort in dealing in a longterm technological market involving risks led him in 1966 to sell the Turbine Division at Erith to a competitor, Parsons, whose management was uncannily similar to that of GEC in the pre-Weinstock days. He could not foresee that later he would acquire, under pressure from the Industrial Reorganisation Corporation, AEI and English Electric, each 39

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POWER POLITICS with large turbo-generator interests (they were, of course, bargains!). With these, he also acquired indifferent British management of the day and was to openly lament the loss of his Erith management team. When he sold the business to Parsons for just over £3m, his right-hand man, Kenneth Bond, asked me what was the likely financial out-turn of some complete power stations under construction, where all of the plant such as civil works, boilers, condensers and feed heating plant were subcontracted by us, and there was some nervousness on the part of top management about their financial risks. I replied that I expected to retain about £3m of the provisions made for completion – this proved to be a sound estimate of the outcome. He asked why no one had told him of this favourable position, which had led him to sell the Division so cheaply to Parsons. I had the pleasure of telling him that he hadn’t asked the right people. He knew that he and Weinstock had relied on the direct bypass of local management and clearly saw the point! The engineering management at Erith was superb. Headed by John Mitchell, ably assisted by David Kalderon, it developed GEC turbines rapidly and with great success. By comparison, their rivals at English Electric, Parsons and AEI were pedestrian, tending to rely on their strong market position and their close relationship with CEGB, rather than real innovation. In the years following the acquisition of GEC by Parsons, John Mitchell became engineering director of Parsons and David Kalderon, after a few years with the CEGB as their turbine specialist, became engineering director of the new GEC company, formed by acquisition of English Electric and AEI, and of the succeeding GEC-Alsthom combination formed out of Arnold Weinstock’s oft-declared dislike of the financial vulnerability of largescale technology. But to return to the effects of the Parsons takeover of the GEC turbine business, their managing director paid quarterly visits to Erith, where I became general manager, to survey our performance. On one occasion, he was moved to congratulate me on our performance, remarking that on cash and profit we were doing very well indeed. 40

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ERITH AND MANUFACTURING After thanking him, I pointed out that we had a very short order book and that there were few orders for turbines about. As a result, I said that we were looking for some sub-contract work for our heavy machine tools and were just then talking to the Swiss firm Sulzers about making components for their large hydraulic presses. He bridled, and instructed me to break off the discussions immediately; our job, he said, was to manufacture steam turbines. In vain, I tried to point out that there were simply no orders around for steam turbines and that we were fast running out of work. He was adamant and we had to comply. Three months later, at our next meeting, he remarked on our short order book and said that we must look for sub-contract work. I suggested Sulzers, to which he replied angrily that that subject was closed! Behaviour of this kind on a number of occasions made me conclude that I couldn’t work for Parsons, whose management was even worse than that with which I had had to contend for the previous nine years, and I began to look around for alternatives. At the same time, Parsons offered me a series of posts and pressed me to take one of them. Since most involved working at Heaton, the main office, and I could not face a re-run of working for another incompetent management, I looked around for other opportunities, including the offer of a post with a well-known firm of management consultants, which I declined at the last minute – a fortunate decision in hindsight, and given my subsequent experience with consultants! At that time, the supply of turbo-generators to Canada required a substantial amount of local manufacture, for political reasons, and so Parsons acquired a 49 per cent stake in a large plant owned by Howdens of Glasgow and situated in Toronto. This left Howdens in effective control, although Parsons largely ran the turbine side of the business, with which they were of course, familiar. Perhaps seeking to strengthen their position, Parsons asked whether I would become president of the joint company, presumably with the agreement of Howdens, and suggested that I might give it a three months’ trial period. I was anxious to quit Parsons and this opportunity seemed to 41

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POWER POLITICS offer a limited prospect of distancing myself from Heaton. But this was no solution and, after visiting Canada I decided that I really didn’t want to bring up my family there. One factor was that my eldest daughter, Catherine, who had been offered medical studies places at both Cambridge and Oxford, would not be eligible, without further examinations, for a place at a Canadian medical school. I therefore declined the offer, to Parsons’ displeasure and, out of the blue, was offered the post of general manager of Howdens, including a seat on their main board and one on the board of the Howden-Parsons company in Canada. I accepted the offer and moved to Scotland, of which more later. But the Parsons difficulties were not over. It was usual practice in the GEC Pensions Scheme, which Parsons took over, to transfer one’s own contributions, together with those of the company, to another scheme, on leaving employment after a period of ten years’ service. This was subject to the approval of the company and was usually a matter of course. Parsons decided to withhold that approval in my case, perhaps believing that this would induce me to stay. In fact, it had the contrary effect and I became even more determined to leave Parsons. Before the day of departure I was summoned to meet the chairman of ReyrolleParsons, the holding company for Parsons, Jim Bennett, whom I had never previously met. He expressed regret that I had decided to leave, and asked what the company could do to make me change my mind. I replied that the only thing that could persuade me to stay would be unacceptable to him, so that there was really no point in discussing it. He pressed me to ‘try him’ and so I told him that I could not work with the present managing director of Parsons and he would require to be replaced before I could consider staying. He, understandably, declared this impossible and so our meeting ended, amicably. Little did either of us know that I would later become an important customer of ReyrolleParsons, then be invited to become chairman of a company which took them over (NEI) and, later, acquire that company, including Parsons. I left Erith, greatly enriched in experience and with a real sense of achievement, albeit with a diminished pension. The sense of 42

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ERITH AND MANUFACTURING achievement was due to the marvellous staff of the Power Plant Division, some of whom remain close friends almost 50 years later. They were let down by an ineffective and distant top management, not improved by the advent of Arnold Weinstock, who later lamented the loss of good talent in his sale of the Power Plant Division of GEC. Since he had made no discernible effort to appraise the position, he did not deserve any sympathy. So, I moved to Scotland in 1968 and found a house in Bridge of Weir, west of Glasgow, which I bought before my wife even saw it. She had her hands full in Kent, and the strain of frequent house-hunting trips to Scotland proved too much to handle. Happily, she and the children loved the house, and we spent ten happy years there. It was a delightful Victorian stone-built house with beautiful views and some remarkably elegant features, including a large first-floor drawing room, and had the added benefit of delightful neighbours – no small point in a strange country. I had been offered, and accepted, the job of general manager of James Howden Ltd, who manufactured a wide range of equipment, much of it for power stations, and had manufacturing plants in a number of overseas countries. One of these was the plant in Toronto, Canada, in which Parsons had taken a 49 per cent shareholding in order to be able to offer local manufacture of turbines for Canadian utilities, the principal one being Ontario Hydro. Howden-Parsons secured a number of contracts, their latest at that time being for the supply of four 800MW turbine-generators for the Bruce nuclear power station of Ontario Hydro. As often happened, load growth did not meet expectations and Ontario Hydro decided to delay the second two machines by some years. The Parsons sales director, playing golf one day with the procurement manager of Ontario Hydro, told him that the decision would not incur any additional costs. I was furious when I heard this, because the inability to recover overheads on those delayed machines would inevitably incur losses. I therefore told Parsons that there would, in fact, be a significant extra charge of some millions of pounds. They did not agree, but Howden had the controlling 43

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POWER POLITICS shareholding in Howden-Parsons so I insisted that a claim would be submitted. The dispute was referred upwards by Parsons, first to Douglas Hume, the group managing director, and then to his father, James Hume, the group chairman. Both supported me and a substantial claim was submitted and paid without demur. I remember asking Parsons whether, given their opposition, they intended to claim their 49 per cent share! There are no prizes for guessing their answer. Some time earlier, Howden had broken new ground in their fan department by winning contracts to provide gas circulators for the Advanced Gas Cooled Reactor nuclear stations being built at Hinckley ‘B’ in England, and Hunterston ‘B’, in Scotland. These were highly sophisticated machines, beautifully designed and manufactured, and gave excellent service. They required high-quality investment-cast fan blades and the contract for them was placed with Rolls-Royce, who had developed considerable expertise in the technique of investmentcasting for their own needs. They did not perform well on this contract and, by the time I joined Howden, had made more blades than were required for the entire contract without making one satisfactory blade. The contract was in serious trouble and I decided to visit Rolls-Royce to try to secure some effective action. During a full day’s meeting I got them to agree to approach the problem with a sense of urgency and to follow a number of possible solutions in parallel. At the end of the meeting, the Rolls-Royce managing director pointed out that these measures would involve much extra cost and that they would expect to renegotiate the price. I pointed out, as patiently as I could, that they had contractual responsibilities and could well incur huge penalty costs under the contract if they failed to meet them. They were stunned, and pointed out that their clients always met the extra costs in such circumstances! I explained the facts of commercial life to them and later advised some wealthy friends to sell their Rolls-Royce shares, thereby acquiring a wholly undeserved reputation for investment expertise. Two years later, in 1971, came the celebrated receivership of Rolls-Royce. That episode was to come back to me with force some 20 years later, when I joined the Rolls-Royce board. 44

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ERITH AND MANUFACTURING I enjoyed the various challenges of the Howden Group, where the top management was far superior to that at GEC or Parsons. The morale was generally good, although there was always an awareness of the management dynasty, which characterised many Scottish firms at that time. The founding family continued to run the firm, despite having reduced their shareholding to a very low level, and there was an expectation that this would continue without competition. My old friend Geoff Shepherd was at that time director of engineering of the South of Scotland Electricity Board and decided that the post of deputy chairman of the London Electricity Board would take him to London, where the true power lay. I decided to apply for his old job, which seemed to me to be absolutely ideal for me, offering a fascinating range of responsibilities involving generation, transmission and distribution of electricity in a Board which was independent of the CEGB! I was appointed to the post, to the dismay of Howdens, who had been very kind to me at a time of some difficulty in my career but were generously understanding of my dilemma. The opportunity was too good to miss, and I undertook to find a successor who would be better than I had been. I did this by recommending my former colleague, Bernard Cheek, who was unhappy at Parsons, and filled the post with great distinction, remaining there until his retirement. I remained on good personal terms with the Howden family, and Douglas Hume and his wife remained good friends for the rest of their lives.

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CHAPTER 4

THE SOUTH OF SCOTLAND ELECTRICITY BOARD

I became director of engineering of the South of Scotland on 1 October 1969. The SSEB had been spared the fate suffered by the electricity industry in England and Wales when, in 1957, the then Minister of Power, Aubrey Jones, accepted some of the ill-judged recommendations of the Herbert Committee and made matters worse by imposing his own organisational notions. In England and Wales, therefore, the generation of electricity was separated from its distribution and sale; happily, however, Scotland was exempted from that folly and, instead, its distribution boards and generating divisions were combined to form two boards, the South of Scotland Electricity Board (SSEB) and the smaller North of Scotland Hydro-Electric Board (NOSHEB), each of which both generated and distributed electricity and reported to the Secretary of State for Scotland. The SSEB was much the larger of the two Scottish Boards and had a number of coal-fired power stations and a nuclear power station in operation, with further coal-fired, oil-fired and nuclear plant under construction or planned. The NOSHEB relied almost exclusively on hydro power and also had statutory social obligations for the Highlands, a large and sparsely populated area. The two Boards collaborated through a Joint Generating Account, the object of which was to ensure a fair basis for the trading of electricity between the Boards.

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POWER POLITICS The SSEB was run by a Board appointed by the Secretary of State for Scotland and consisting at that time of a chairman, a deputy chairman and a number of part-time members. Its operations fell to two directors, not Board members, one responsible for engineering and the other for finance and administration. It served about 1.5 million consumers, employed more than 14,000 people and had a turnover of £120m. In 1969, for example, it burned the bulk of Scottish coal production, consuming more than 6 million tons. I quickly settled down at this large and fascinating Board and found its staff enthusiastic, hard-working and welcoming. There was no shortage of tasks to be addressed, for the scope of the Board was growing rapidly, along with the economy. Just four weeks after my arrival, on 29 October, I was roused from sleep early in the morning by a telephone call telling me that the whole of Scotland and the North of England had lost their electricity supply. With a somewhat sketchy geographical knowledge, I drove to the Grid Control Centre at Kirkintilloch to find that the problem had been caused by a fault on a super-grid line in Ayrshire which had persisted for 28 minutes due to a failure of the protective equipment. Good progress was being made in restoring supplies by starting up hydro and gas turbine plant and the first two of our largest 300MW steam units, which were just coming on stream at Cockenzie power station on the east coast. At this point I was approached by a worried young man who asked whether I was in charge and, when I said I was, proceeded to tell me that he had recently read a technical paper suggesting that in certain prolonged fault conditions the non-magnetic end-bells, supporting the end windings of the generators at Cockenzie, might crack due to heating, with a risk of extensive damage to the plant. He suggested that the Cockenzie machines should be shut down for investigation. I was faced with a choice. To follow his advice would have been a major step; examining the end bells would take about a month and prolong the disruption of electricity supplies in Scotland. I had little difficulty in dismissing the highly theoretical, though well-intentioned, suggestion, 48

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THE SOUTH OF SCOTLAND ELECTRICITY BOARD but decided that we would make an inspection at a convenient later date. Restoration of supplies continued apace and, in due course, we did examine the end bells on one Cockenzie machine, to find them in perfect condition! This was my first experience of the need to make rapid decisions with incomplete information in an essential service industry. The option of waiting for certainty is just not open and I am grateful that my working life was not lived in the stifling atmosphere of zero-risk and blame avoidance which characterises so much of our society today. I returned happily to the everyday tasks of project control, staff management, planning and the like which normally kept me busy, but soon had to address construction problems at our new Longannet power station in Fife, at that time to be the largest in Europe. The consulting engineers, Merz and McLellan were pretty ineffectual on the management of the project, which was running late, and showed no sense of urgency. I telephoned the senior partner, the same Wilson Campbell who I had encountered in South Africa some years earlier, and arranged a meeting at which I expressed my concern and made it clear that unless there was a marked improvement we would dispense with their services. At first his response was belligerent, but after discussion he accepted the challenge and assumed personal control of the project, with considerable success. I matched his personal commitment with my own, and regularly attended the project management meetings. The project rapidly made up its lost time and we became, and remained, good friends until his death. We next encountered a serious problem at Hunterston ‘B’ power station, then under construction, where the thermal insulation protecting the concrete pressure vessel from the high gas temperature, was found to be at risk due to the unexpected corrosion of the fixings (despite extensive laboratory work showing that corrosion would not occur). We concluded that the problem could be overcome by redesign of the insulation fixings to tolerate the corrosion, although the changes involved considerable cost and delay. 49

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POWER POLITICS Arthur Hawkins, the new chairman of the CEGB, who were building a similar station at Hinkley in Gloucestershire, rang me in some agitation to say that he was considering closure of the CEGB construction site until the problem was solved. This was a somewhat naive idea; restarting construction at sites which had been closed for technical problems would be a difficult task, for almost inevitably a level of assurance on the corrosion mechanism would be sought which would not be available. Our approach was to build into the design sufficient redundancy to overcome the likely problems for the life of the plant. I indicated that we had no intention of closing our site but would modify the design to accommodate the problem, and he asked for an urgent meeting which took place the following day. Arthur Hawkins was an old friend whose experience of power stations was limited; his background had been in operation of the transmission grid. He accepted our decision and adopted it, and the stations concerned have since operated with no problems in that area for some 40 years. This was the first of a number of difficulties between our Boards which we overcame without impairing our personal friendship.

Nuclear reactor choice This discussion on corrosion of AGR insulation took place in 1970, against a somewhat turbulent political background, fomented by supporters of the US-designed pressurised water reactors (PWRs) in preference to the British advanced gas reactors (AGRs). The AGR programme was experiencing considerable delays and cost overruns, at that time not uncommon on large construction projects, and it was argued that some comfort could be gained by adopting the US design, which was widely adopted internationally, instead of developing a different UK design which had attracted little overseas interest. Arnold Weinstock had considerable political influence and joined the PWR lobby which was attractive to him because others would take the risk of 50

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THE SOUTH OF SCOTLAND ELECTRICITY BOARD designing and building the reactors, with GEC supplying the conventional turbines, switchgear, transformers and the like, which would be relatively low-risk. The coalition of PWR supporters eventually resulted in the CEGB proposing a large programme of PWRs spread over five years and amounting to some 25,000MW – an enormous investment. At the same time, Weinstock reached an agreement with Framatome of France to supply the reactors, thus achieving his continuous aim of risk-avoidance for GEC. Central to such a plan was, of course, the substantial programme of work proposed by the CEGB. Parliament took an immediate interest in such a costly plan and a House of Commons Select Committee began hearings, at which I was asked whether I saw the need for such a national programme. I replied that I did not see the need to order a substantial quantity of any new generating plant and that I would prefer to stay with the AGR anyway. I added that, if it were judged that some orders were necessary to preserve a nuclear manufacturing capacity, and an alternative to the AGR had to be considered, then I thought that a programme of 5,000MW of steam-generating heavy water reactors (SGHWR), based on the Canadian design and on a 100MW prototype reactor at Winfrith Heath in Dorset, would be preferable. Battle was now joined in earnest and a Nuclear Power Advisory Board was set up, under the chairmanship of the Secretary of State for Energy. GEC and the CEGB had members and I represented the Scottish Boards. It is worth digressing at this stage to discuss, in simple terms, the arguments for and against the PWR. Developed by the US industry from the design for nuclear-propelled submarines, the PWR was the dominant reactor type in civil service, with a large domestic programme and a network of overseas licensees. But the reactor for a submarine operates under quite different conditions from those of a land-based power reactor, with the sea water providing natural shielding. I disliked the fact that, in accident conditions, the PWR was cooled by a highly variable mixture of water and steam, making design of the emergency safety systems dependent upon complex computer models. By contrast, the gas-cooled reactors employed a stable coolant and also enjoyed a 51

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POWER POLITICS long time-constant, a considerable advantage in accident conditions. A further consideration at that time was the possibility, subsequently shown to be less likely than was then thought, of a major fracture of the massive PWR steel pressure vessel. To aid the discussions, I called a meeting of all the involved technical staff at SSEB and discussed the pros and cons openly at an all-day meeting. The consensus was clearly in favour of the AGR or the SGHWR, and I proceeded on this basis. The Government decided to award a research and development contract of about £30m for the SGHWR, to be managed by GEC, and we had an early, rather illuminating, meeting during which the CEGB representative, Leslie Miller, was questioning GEC about what responsibility they were prepared to accept, as managers of the contract. The recognised GEC policy of refusing responsibility was presented by David Lewis, a lawyer and one of the two colleagues who came to GEC with Weinstock. I sought to calm the increasingly heated discussion by suggesting that Lewis did not really mean to say that they would not accept responsibility for their own negligence or incompetence. My good intentions came to naught, for Lewis promptly declared, to general astonishment, that that was exactly what he meant. It was a good example of the Weinstock attitude to commercial matters. Time passed, with further development taking place in spite of determined non-cooperation from GEC and the CEGB. I was abroad, on holiday, in 1975, when I received a telephone message from Eric Varley, the Secretary of State for Energy, asking me to attend a special meeting of the Nuclear Power Advisory Board and to meet him privately beforehand. I interrupted my holiday and returned to London to be told by Varley that the Cabinet had decided to proceed with a programme of 5,000MW capacity based on the SGHWR. He asked me about the prospects of success and I replied 30 to 40 per cent, explaining that the problem lay with the determination of GEC and CEGB to secure a PWR programme. He opened the subsequent meeting of the NPAB by saying very clearly that he would brook no opposition to the government policy which he was to announce, and 52

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THE SOUTH OF SCOTLAND ELECTRICITY BOARD that he would maintain a close supervisory interest in progress. A few weeks later, Varley was moved by Harold Wilson, the Prime Minister, to DTI, and replaced at Energy by Tony Wedgwood-Benn, the former DTI minister. Determination vanished and the programme was systematically delayed. The alternative of a large PWR programme died an early death. Progress on the nuclear front was later to be made, under the next Conservative Government, in 1979, by the building of two more AGR stations, one in England and the other in Scotland, and then one PWR station at Sizewell in Essex. This latter initiative involved a long public inquiry and was dogged by cost overruns and delays, many of them as a result of additional safety requirements by the Nuclear Installations Inspectorate which was the Government licensing authority. The AGR stations have run well over the past 40 years but their commissioning was followed by a long period of inactivity in ordering nuclear power stations world-wide because of economic conditions and two high-profile nuclear power station accidents. During that period, much effort went into designing much improved safety features into the PWR, so that the long wrangle can be seen to have been largely justified. There was during this time an active opposition to nuclear power, led by Friends of the Earth, and I suggested to Sir John Hill, chairman of the UK Atomic Energy Authority, that we should organise a public debate at which the issues could be discussed. We approached Sir George Porter, (later Lord Porter), then President of the Royal Institution, to use his premises for such a debate. He agreed, on condition that both parties would receive equal opportunities to debate the issues. Since we were confident that our arguments would defeat those of the opposition, we readily agreed. A public debate, lasting three days, was held. It was well attended, and featured on television. The publicity was generally favourable to the arguments of the industry and led to some televised debates which we easily won. The simple reason for the favourable outcome (from our standpoint) was that we had a huge amount of evidence to support our case, whereas the 53

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POWER POLITICS opposition relied on unsupported and extravagant generalisations – a position which remains similar today. It has been necessary to stray somewhat beyond my time at the SSEB in order to complete the nuclear saga, but life remained pretty hectic during the remaining years, to which I shall now return.

Life at the SSEB One of our concerns at the SSEB was the effect of our operations on the environment, and we were required to consult with the Secretary of State’s Amenity Committee on visual effects. The committee chairman in 1972 was an architect who declared at one of our meetings that he had no objection to our overhead transmission towers (or pylons, in popular parlance), but disliked the wires in between them. I could not resist replying that we were not clever enough to dispense with the wires but that, if we were, I wondered how long it would be before we were asked to provide a unifying motif for the isolated towers! The same individual remarked on another occasion that he disliked the single combined chimney, serving six large boilers at Longannet power station, and would have preferred six separate chimneys! In 1972 I became deputy chairman of the SSEB, with appointment as chairman to follow a year later. This stemmed from the poor health of the SSEB’s then chairman, Lewis Allan, but was unusual in that it committed to a further major appointment ahead of time. The Secretary of State responsible for this was Gordon Campbell (later Lord Campbell of Croy), a politician with a distinguished war record and a commitment to running his department well. There is no doubt, of course, that he relied heavily on the advice of Lewis Allan, and that of his deputy, Alan Christianson, whose age precluded his own promotion. Christianson, an accountant, was a determined, straightforward man whose major contribution to the industry, despite widespread management opposition, was the introduction of extensive staff reductions to increase productivity. His inspired leadership in this 54

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THE SOUTH OF SCOTLAND ELECTRICITY BOARD field made the industry in England and Wales, as well as Scotland, vastly more efficient during a period when great technological progress was also being made and offered considerable staffing economies. My appointment as deputy chairman was followed by a national coal strike, which brought forth much ingenuity in the SSEB. We had been building coal stocks for some time in the expectation of a strike, but were vulnerable to picketing, which could affect staff and essential supplies of lighting-up oil, hydrogen gas and water-treatment chemicals. Picketing of staff was overcome with the cooperation of the police and with the robust support of our own staff, notably the station canteen ladies who braved the picket line in company with other staff! Oil and hydrogen supplies were generally transported by road, so we made arrangements to take oil deliveries by sea and chartered a Dutch tanker. Hydrogen and other essentials were delivered by helicopter. In the event we managed to keep our load shedding below that in England and also to export considerable quantities of electricity to the English electricity boards. My appointment as deputy chairman required the appointment of a new director of engineering, and I approached Roy Berridge, then director of design and construction for the CEGB to apply for the post. He was successful and proved a tower of strength and loyalty, making it possible for me to fulfil the many national commitments which were now descending on me. All of those national meetings were held in London, which proved quite demanding for me and I suggested at one committee meeting that the committee should meet in Scotland with a frequency reflecting the committee membership. I was met by blank looks and a remark that Scotland was a long way from London. I replied, with a straight face, that it was a verifiable fact that the distance from London to Glasgow was exactly the same as that from Glasgow to London. This evoked even blanker looks and the meetings continued in London. One of many appointments which gave me great pleasure was that of Don Green as deputy station manager at our new Inverkip power station on the west coast. He had been a shift charge engineer 55

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POWER POLITICS with me at Ince power station and had subsequently remained with the CEGB, where his undoubted talents remained concealed below the proverbial bushel. After joining the SSEB he progressed rapidly to be station manager of our largest station, Longannet, and subsequently became chief generation operations engineer for the Board – an appointment made after I had left.

Inter-firm comparison At this time it was becoming common for companies to compare their organisation and costs with those of their competitors and I resolved to do so for the SSEB. The choice of comparator companies was not easy, for we were already demonstrably better in many areas than the CEGB and the English distribution boards, and NOSHEB were too dissimilar to provide useful data. After some careful examination of overseas utilities I concluded that the two companies most similar to the SSEB in size and scope were VEW of Germany and Commonwealth Edison of Chicago. Both companies received our overtures with enthusiasm and there ensued some years of profitable interchange of staff and comparison of methods. Some outside stimulus is necessary to keep up management standards and innovation, and our dealings with two publicly quoted and highly efficient companies proved valuable to all three of us.

Relations with NOSHEB Relations with our sister Scottish Board, of which I was a part-time member, were often difficult, probably because of the difference in size of the enterprises. I have mentioned the Joint Generating Account which was operated with the intention of securing fair trading between the Boards, but which became an annual joust with recondite 56

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THE SOUTH OF SCOTLAND ELECTRICITY BOARD arguments aimed at securing financial advantage for one Board over the other. I became impatient with this annual trial of strength – and patience – and proposed a simple formula. The NOSHEB staff saw more to be gained from a drawn-out negotiation and I made little progress until Sir Douglas Haddow, previously Permanent Secretary at the Scottish Office, was appointed chairman of NOSHEB in 1973. We were now able to discuss matters on a less emotional basis and, after a lengthy period of discussion, reached a much simplified agreement which lasted, virtually unchanged, until privatisation in 1988. Collaboration arose as another major issue when the North Board proposed the construction of a new power station at Peterhead. They originally obtained approval for an SGHWR nuclear station but, when that programme stalled, proposed a gas/oil power station to burn either oil or gas from the North Sea fields. In either case it was recognised that the NOSHEB did not have the necessary expertise to handle such a project alone and it was decided that the SSEB should provide the necessary support. Matters went very well and I recall being approached by David Kalderon of GEC to ask whether we would support their proposal to an overseas utility for a simpler and cheaper design of exhaust blading than the CEGB would consider. (Large exhaust area had long formed an article of faith in the CEGB to which I, in my Erith days, had been unsympathetic.) We agreed, and GEC secured the contract with that design, to the benefit of their subsequent export business. The chief engineer of NOSHEB was a Scot, Donald Miller, with considerable ability and I thought that some of our problems with him stemmed from his being in a small organisation. Accordingly, as my chairmanship approached, I considered recommending the promotion of Roy Berridge to the post of deputy chairman, with Donald Miller succeeding him as director of engineering. Both appointments took place in 1974 and proved highly successful, with Donald Miller eventually becoming chairman of SSEB and leading the Board into a privatisation process which, unhappily, involved the hiving off of the nuclear power which we had fought so hard to build. However, he was able to preserve the SSEB advantage of combined generation and 57

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POWER POLITICS distribution, which the Herbert Committee had ill-advisedly separated in England and Wales back in 1957. Another, related innovation which I introduced was management accounting, involving the delegation of operating budgets to management units, with monthly reporting of progress and re-forecasts of outcome. Common in the private sector, this step unleashed a tremendous initiative at the middle management level and prepared us for the inter-firm comparison, which I described earlier.

Coal consumption Another annual ritual was the negotiation of our annual coal burn, involving the Scottish Office and the National Coal Board. A characteristic of the Scottish coalfields was their heavy geological faulting, which resulted in generally poor coal quality, with accompanying high costs, and the production of larger quantities of ash than had been foreseen at the design stage. The usual pattern of negotiation was an argument on the quantity to be burned and on the price, which was invariably uncompetitive when compared to nuclear, oil, or foreign coal. The Scottish Office operated a coal support arrangement to induce us to burn more coal than we wished, and the discussions were usually protracted. When I became chairman in 1974 there was a rather more ambitious proposal for a longer-term arrangement and the negotiations were ably conducted by Roy Berridge, who ensured that sufficient flexibility was written into the agreement to protect us against major market changes. I have to say that, despite the importance of the agreement to us and the NCB, relations between us remained cordial – if at times precautionary. I recall one annual golf match between us when the Scottish chairman of the NCB, Jim Cowan, declared his handicap as 24, and produced a letter from his golf club secretary confirming it, but proceeded to play brilliantly. It was only after we had lost that he admitted that his real handicap was 6, but that he had failed to return 58

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THE SOUTH OF SCOTLAND ELECTRICITY BOARD the minimum number of cards and so had been relegated to 24 as a temporary punishment! Dubious legality, but he insisted on retaining his winnings!

Longannet power station At the time of its commissioning, Longannet was the largest power station in Europe, with four 600MW units. It was coal-fired, and was built on the new Longannet coal field in order to minimise coal transport costs. Unfortunately, both the quality and the cost of winning the coal proved to have been worse than anticipated when the scheme was initiated, with the result that a considerable quantity of coal had to be brought by rail and sea from other pits in Scotland and England. The power station design had allowed for this. Disposing of the Longannet ash, however, was more difficult, for the disposal plant had been designed on the basis of the forecast ash content of the coal, a very optimistic forecast. Commissioning the station involved the usual problems with a prototype plant, and it must be remembered that the rate of development of the electricity supply industry was very high, moving from 30MW units to 600MW units in some 20 years – and in an industry where the construction time was about seven years! The decision by my predecessors to build 600MW units was a courageous one, making substantial savings in capital cost. There are 30,000 or so welds in a large boiler, and in order to avoid the then common problem of defective boiler tube welds, it was decided to implement a programme of X-raying all of the welds, rather than the customary sample proportion. All seemed to be going well, until it was found that the X-ray method missed the joint between two stretches of weld – the most vulnerable area! Fortunately, the welding had been of a high standard, and little trouble resulted from this lamentable oversight. I was reminded of the story of a railway wheel-tapper who rejected 40 wagons, before finding that his hammer was cracked! 59

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POWER POLITICS However, we did have quite serious trouble with the GEC turbines, which encountered very severe vibration and proved incapable of running. At this time an advertisement appeared in the personal columns of The Times reading, more or less, ‘Weinstock: do you know that it takes six weeks to get a GEC fridge repaired? Sorry I can’t write to you, but I’m holding the lamb chops out of the window.’ One of my regular quarterly meetings with Weinstock was due and I asked him what he had done about it. He replied, naturally enough, that he had given the man a new fridge, which prompted me to rejoin that I had considered making a similar advertisement reading ‘Weinstock: do you know that I have four 600MW turbines broken down at Longannet? Sorry I can’t write to you personally, but the lights are out.’ He was not amused, but the problem acquired an increased urgency for him. It was solved, eventually, by my former colleague at Erith, David Kalderon, who had now become technical director of the GEC Power Plant division which by then encompassed the former English Electric and AEI companies. There were, of course, other problems, but Longannet proved to be a highly reliable station, thanks to the unstinting efforts of the design, construction and operating teams, and has been a mainstay of Scottish power generation for more than 30 years.

Arnold Weinstock I have mentioned Weinstock several times, often critically, and fairness requires that I acknowledge his considerable strengths as well as his weaknesses. He was a statistician by training, who had married the daughter of Michael Sobell and became the managing director of his Radio and Allied Holdings, later to be acquired by GEC. The then chairman of GEC, Sir Arnold Lindley, little realised the effect of his ‘takeover’, for he acquired a large shareholder and some very capable and hungry management in the form of Arnold Weinstock, who joined the board. He and his two colleagues, Kenneth Bond, an accountant, 60

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THE SOUTH OF SCOTLAND ELECTRICITY BOARD and David Lewis, a lawyer, together later formed the effective management committee of the GEC board. Weinstock’s ethos was risk avoidance, cash management and profitability. He introduced strict cash control into an engineering industry where cash had traditionally been regarded as, at best, an adjunct to the business, and saw the quick way to profitability as reduction of workforce and overheads. He set a good example by selling the large Kingsway headquarters and moving to much smaller premises in Stanhope Gate, which necessarily reduced the number of head office staff. He paid great attention to saving candle ends and established a system of performance reviews which terrified his unfamiliar staff. Alongside direct interviews of managers he established a network of observers who, planted in the operating units, carried his message and reported back. The net effect of this changed management style was a considerable improvement in the company’s financial performance, and the strength of its cash position became legendary. Unfortunately, his love of cash and his aversion to risk led to a highly conservative style of management. He was not a good judge of people and made a number of disastrous management decisions. One of his major errors was to fire Sel Ghalib, an engineer of great competence who had been responsible for building the most successful of the British nuclear power stations and who had become the managing director of the GEC company formed at government request to manage NNC, the merged nuclear energy business. Sel, who I knew well, told me that he had been summoned to meet Weinstock at short notice and didn’t know why. My knowledge of Weinstock’s methods suggested that the meeting would probably be serious for Ghalib and so I invited him to have lunch with me straight after the meeting. When he arrived he was distraught and told me that Weinstock had fired him, as I had feared. I immediately invited him to join the SSEB as a consultant, which he accepted with alacrity and some surprise. He remained for many years, serving my two successors there, and contributed greatly to the operations of the Board. 61

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POWER POLITICS Weinstock was outstanding among the industrialists of his day, and his methods came to infuse management methods in Britain and overseas. He was admired by government, and his uncompromising stance secured many attractive government deals and settlements. It is a sad reflection that his 40 years of labour in building up an industrial empire was to be squandered by a successor management which failed to learn from his basic management strengths, but it has to be acknowledged that he had been highly supportive of the appointment of his successor. He was a mass of internal contradictions, for his aversion to risk was accompanied by a passionate interest in horse-racing, including the ownership and breeding of horses. He could be cruel or caring towards staff, with no clear distinction. I think that he rather enjoyed his inconsistencies and consequent unpredictability and the effect this had on his staff. In spite of our sometimes difficult relations, he dispatched a GEC director, Bill Bird (a former English Electric director) in 1976 to invite me to join the GEC board in an executive role. I declined, and Bill Bird returned a few weeks later, to try to persuade me to accept and said that Arnold had asked him to tell me that I could ‘write my own ticket’. I again declined and was eventually approached by Arnold, who asked the reason for my repeated refusal. I replied that he and I had different industrial value systems, that consequently we would have serious differences, so that one of us would have to leave – and that I knew which one that would be, given his large shareholding in GEC! I could never quite decide whether Arnold wanted me to join him because he wanted my contribution, or because he wanted to silence a troublesome critic but, in any event, we remained on good terms until his death.

The Plowden Committee In 1976 the Labour Government appointed Lord Plowden to head a committee to examine the organisation of the electricity supply industry 62

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THE SOUTH OF SCOTLAND ELECTRICITY BOARD in England and Wales, which differed from that in Scotland in that distribution was divided among 12 autonomous Boards, with all generation concentrated in the Central Electricity Generating Board – a situation which had obtained since the Electricity Act of 1957 following the Herbert Report, of which I wrote earlier. In the course of their investigation they visited Scotland and took a deep interest in the combination of generation and distribution found in both Scottish Boards. In their report, they recommended to government that distribution and generation in England and Wales should be combined in an Electricity Corporation. Although they rejected the formation of a number of combined Boards on the Scottish model, they were concerned to ensure that the operations were effectively integrated and that the anarchic situation of 14 Boards, each reporting to the Secretary of State for Energy, should be ended. It should be noted, in passing, that the Electricity Council, while being statutorily charged with the co-ordination of the industry, had no effective powers and was constantly at the mercy of the other 13 Boards, with their direct responsibility to the Minister. Indeed, it was frequently referred to as the ‘toothless wonder’. In all of this, the CEGB played a highly independent role and displayed an Olympian disregard for the industry at large – an understandable attitude, given its technical and financial dominance. The distribution board chairmen, for their part, enjoyed their independence and indulged in a collective dislike of the CEGB, secure in the knowledge that they were spared any real responsibility for major decisions concerning the industry. The recommendation of the Plowden Committee was accepted by the Labour Government, whose Secretary of State for Energy was then Eric Varley, and I was invited to become chairman of the Electricity Council and chairman-designate of the proposed Electricity Corporation by his successor, Tony Benn. I was greatly attracted by the prospect of unifying the divided operations in England and Wales, which I had seen from the viewpoint of a manufacturer whilst at Erith and later, from the viewpoint of the industry itself whilst in Scotland. 63

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POWER POLITICS My intention was to organise the new Electricity Corporation into five areas, each combining generation and distribution, but competing with each other through the national grid. This would have formed a good basis for privatisation of the industry, a subject looming on the far horizon but not under discussion at that time. At about the same time I received an approach from Sir James Woodeson, the chairman of Northern Engineering Industries (NEI) who wanted me to succeed him as chairman. NEI had been formed by amalgamating Parsons (turbines and transformers), Reyrolle (switchgear), Clarke Chapman and International Combustion (boilers) and was the UK rival of GEC in the power field. I was attracted by the prospect of returning from nationalised industry to the private sector and was greatly touched when Bill Hanlon, the deputy chairman and chief executive of NEI declared his willingness to retire early if that would facilitate my move. After long consideration, I decided that the prospect of reorganising the electricity supply industry in England and Wales was irresistible, although less financially attractive than the NEI offer – or the earlier offer from GEC. Accordingly, I accepted the post of chairman of the Electricity Council and chairman-designate of the nascent Electricity Corporation, fully expecting the changes which I saw as essential for an efficient organisation capable of progressing to privatisation. When I told my deputy, Roy Berridge, of this I asked whether he would like to be considered as my successor. He replied that he would much prefer that I stayed with the SSEB but that, if I was determined to move, he would like to be considered for the succession. He duly succeeded me and proved a highly competent chairman. So ended eight happy and rewarding years at the SSEB. Looking back now, I see them as among the happiest years of my career, rivalled only by the years at GEC Erith and Rolls-Royce. In each case, the job was made infinitely simpler by the strong sense of loyalty which pervaded the organisation and the intense feeling of personal commitment which was apparent at all levels. Such experiences are 64

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THE SOUTH OF SCOTLAND ELECTRICITY BOARD uncommon, and the human chemistry which produces them is elusive. But I made many friendships in each of those organisations which have lasted throughout my life, and I left them both with a deep sense of sorrow mixed with gratitude for such abundant friendship and loyalty.

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CHAPTER 5

THE ELECTRICITY COUNCIL AND POLITICS

Politicians and reality In April 1977 I accepted the Government’s invitation to be chairman of the Electricity Council for England and Wales, and chairman-designate of the proposed Electricity Corporation. The new Corporation was to be created to unify the electricity supply industry in England and Wales by combining the CEGB with the 12 Area Electricity Boards. The proposal to unify the industry featured in the Queen’s Speech on 3 November 1976, and a draft Bill was published on 4 April 1978 (Cmnd 7134). As we shall see later, these good intentions eventually came to naught, despite reiteration of the proposals in the Queen’s Speech on 1 November 1978. But let us go back to the situation in the industry on my arrival. Generally speaking, the proposals for unification were well received by staff, unions, consumer organisations and industry. The situation with the CEGB which, as it was the most powerful of the individual Boards, might have been expected to be antagonistic, was overcome by the appointment of a new chairman, Glyn England, with the announced intention that he would become deputy-chairman of the Electricity Corporation. He was thus fully committed to the intended changes.

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POWER POLITICS Paradoxically, but in keeping with his predecessor as chairman of the CEGB, Glyn England had no experience of generation construction and operation, having spent his career with CEGB in the transmission planning area, before becoming chairman of the South-West Electricity Board. I was thus much more experienced in the generating area than he, and very familiar with the aspects in which he had specialised. The Electricity Council was quite unlike any organisation I had met before. With very little in the way of executive power it was required to co-ordinate the activities of a huge industry, divided into 13 statutory Boards, each with its own board of directors and each reporting to the Electricity Council – but also directly to the Secretary of State for Energy as, indeed, did the Electricity Council. Little wonder, then, that the Electricity Council was often referred to as the ‘toothless wonder’ of the industry and, because of this, I would certainly not have considered the appointment as interim chairman of the Electricty Council without a clear commitment by the government to the creation of the Electricity Corporation to combine the industry, as was now government policy. This commitment was clear, and supported by policy announcements, publication of a White Paper outlining the necessary Bill, and wide publicity. As we shall see, all of these good intentions were to fail, because of naked political considerations involving the change of the minister responsible and the strong political ambitions of his successor. The Electricity Council had existed for 20 years since the somewhat vapid conclusions of the Herbert Committee had been made even more impracticable by the intervention of the then Secretary of State, Aubrey Jones, in the 1957 Electricity Act. It was generally understood that the recommendation to divide the hitherto unified industry sprang from the belief that the then chairman, Lord Citrine (a former general secretary of the TUC), was excessively overbearing and had far too much power for the good of the industry – and certainly too much for the politicians of the day! The practical effect of that Act had been to concentrate the generating activities of England and Wales in a Central Electricity 68

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THE ELECTRICITY COUNCIL AND POLITICS Generating Board, making it completely dominant in the industry – a hardly surprising (if unintended) outcome of the legislation, given the fact that the CEGB was responsible for some 75 per cent of the industry’s costs and had great expertise in most of the major technical areas. The chairmen of the 12 Area Electricity Boards soon recognised this, and retreated to their own fastnesses, where they contented themselves with local politics, retailing electrical appliances and sundry local initiatives such as showrooms and small combined heat and power schemes. The Electricity Council had been intended to provide some central co-ordination to these disparate bodies, but its scope was very limited. It looked after industrial relations across the industry, with much consultation of course, and also provided some co-ordination of distribution and commercial activities. It had soon resigned itself to its limited powers, and settled for a quiet life and general acceptance of the CEGB fiat. In practice, the government of the day would turn to the Electricity Council for advice and co-ordinated action whenever a national problem arose, such as a strike of the industry’s workers or of the miners; at other, calmer, times government was content to indulge in occasional dabbling and sometimes mischief-making between the Boards. The unsatisfactory nature of these arrangements had soon become apparent to many, and to their credit, the Labour Government sought to improve them by increasing the powers of the Electricity Council in 1970. Unfortunately, that Bill was lost in the dissolution later that year. In 1975 a new Labour Government returned to the subject by appointing a Committee under the chairmanship of Lord Plowden to examine the organisation of the electricity supply industry in England and Wales. The Committee reported in January 1976, recommending unification of the industry in the form of an Electricity Corporation, but rejecting suggestions of separate power boards on the Scottish model because of the need for central control in such areas as load forecasting, planning, research, tariffs and marketing policy. These problem areas had, of course, always existed between England and 69

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POWER POLITICS Wales and the Scottish Boards, but had been effectively solved by cooperation and common sense, without any need for outside intervention or legislation. The Secretary of State for Energy at the time of the proposed change was Eric Varley (later Lord Varley), who accepted the recommendations of the Plowden Committee. Unfortunately for the electricity supply industry he was soon exchanged, for political reasons, with Tony Wedgwood-Benn, then Secretary of State for Trade and Industry and a firm believer in direct ministerial control. Given the advanced state of the reforms, Benn had little choice but to proceed with the announced Bill on the lines of the Plowden Committee’s recommendations, but dragged his feet in doing so and sought to sabotage its provisions. So, in spite of a draft Bill, published as a draft White Paper, and declarations of intent to legislate in the Queen’s Speeches of 3 November 1977 and 1 November 1978, the Bill was never presented to Parliament, and fell with the notorious Lib-Lab pact and the change of government in 1979. It does seem extraordinary that a Secretary of State could frustrate the declared legislative programme of his government. The answer lies in our constitution, in which a minister holds his office from the Queen, and is supreme in his department. The Prime Minister’s only weapons are movement to another post or dismissal – each likely to upset the delicate balance of support within the party and on the back benches. Tony Benn had already been effectively demoted by transfer from the DTI and was in a strong position to be difficult. Had he really wished to introduce a modified Bill he would have had to obtain the agreement of his Cabinet colleagues, but since his intention was to not do so, procrastination served his purpose. What, then was his motivation? This is quite difficult to guess, given the complexity of Tony Benn’s character. I believe that it lay in his conviction that he represented the soul of the ‘true’ (i.e. left-wing) Labour Party, as a result of which he devoted much of his time to cultivating his power base there in the expectation that he might one day come into its leadership. Be that as it may, he disliked the Plowden 70

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THE ELECTRICITY COUNCIL AND POLITICS proposals to weaken direct government control of the industry, and sought to delay action by inserting a highly provocative provision to the effect that everyone was entitled to a supply of heat and light, whether or not he/she could afford to pay for it. A safeguard against hardship already existed through the social security arrangements, in common with the provision of other basic needs, and so the provision was quite irrelevant to the proposed Electricity Bill. Its inclusion in the Bill was unacceptable both to the management of the proposed Corporation and to Benn’s Cabinet colleagues, but it be proved a very effective blocking device – as he undoubtedly intended. An interesting example of Benn’s political behaviour arose when a breakaway trade union for power station workers appeared in Yorkshire and organised extensive strikes to gain recognition by the management. It was quite clear to us in the industry that its success would lead to counter-action on the part of established unions, leading to a very difficult situation. We accordingly refused to recognise the breakaway movement. Tony Benn thought that they should be recognised, and met with them on a number of occasions, offering them his support and urging us to follow his example. We refused and the affair neared its end with a midnight telephone call from Benn to me, again urging recognition. I again refused. Next morning I was met by Bill Prior, the Electricity Council member for industrial relations, with the news that Benn had instructed him to prepare a press release stating that the Electricity Council intended to recognise the breakaway union and to meet him at midday with the draft statement. I naturally decided to attend the meeting, which turned out to be a large one involving civil servants from other departments, and told Benn that I had instructed Prior not to prepare such a statement and that our position remained unchanged following our midnight discussion. I pointed out, however, that he had a statutory power to direct us to follow the course which he favoured, subject to publication of that direction. He did not attempt to use the power and, two days later, the strikes were over – without recognition of the 71

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POWER POLITICS breakaway union. I regarded this whole affair as an example of Benn’s desire to build a power base in the Labour movement but also of his reluctance to use his statutory power publicly. Benn’s parliamentary private secretary, Brian Sedgemore MP, in his book, The Secret Constitution, claimed that I could not have adopted such a strong position without the encouragement of the Prime Minister, James Callaghan. In fact, at no time did I discuss our decision with Callaghan – or any other minister – but only with Benn, as the Secretary of State for Energy. I was quite clear that it was my responsibility to deal with the matter unless I received a written direction from the government – which never happened. Interestingly, Sedgemore’s book contains the following surprising (to me) passage: No two people in public life have ever been on better terms than Tony Benn and Sir Francis Tombs, the Chairman of the Electricity Council. In temperament and style they were much alike – calm, rational, determined. When they argued the argument was real and born of mutual respect. I remarked to Sedgemore that, as a barrister, he should have recognised that such a passage was actionable by at least one, and perhaps both, of the people referred to! Benn was a very complex individual. He seemed to possess several personae. In small groups his natural charm captivated his companions and provided a relaxed and cordial atmosphere. In quite large meetings which he chaired, he would digest his briefing thoroughly and proceed to play the meeting with rational interventions and a careful selection of the order of speakers combining to secure his desired outcome. At large public meetings he became an impassioned, spellbinding orator, hypnotised by his own rhetoric and swaying the audience in ways not dissimilar from Enoch Powell. But in one-to-one situations he was urbane, charming and mostly rational. He had something of a guilt complex about his inherited title, 72

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THE ELECTRICITY COUNCIL AND POLITICS which he had renounced, and also about the fact that he had had a sheltered upbringing and privileged lifestyle. He usually served his guest with tea in cup and saucer, while using a mug for himself. He relied heavily on his political advisers to brief him and to develop policy lines, and seemed never to be concerned about his earlier related decisions when considering issues. One of his ambitions was to establish a tri-partite management of the electricity supply industry, consisting of the industry management, the trade unions and the Secretary of State. Such a proposal was anathema to me and also to the trade unions, who saw it as divisive and interventionist in pursuit of Benn’s political ambitions. We all declined, politely and firmly, and Benn accused me of conspiring with the unions to defeat his proposals – a way of looking at the situation which cast him as the victim! Despite Sedgmore’s claims, I cannot claim to have enjoyed my regular discussions with Benn during the three years of his persistent procrastination on a Bill which was declared government policy and which I had been appointed by his predecessor to implement.

The Liberals’ view Plans to unify the industry were again diverted by the Lib-Lab pact, which ran from March 1977 to August 1978 as a result of the Government’s precariously small majority. Early in the pact, the Liberal energy spokesman, David Penhaligon, came to see me in order to explain that his party could not support the proposed electricity legislation. He gave two reasons – in addition to a general antipathy to Tony Benn. The first was that every post-war reorganisation had been a disaster. I replied, agreeing in general, and asked whether this meant that the Liberals were content to leave such disasters, of which the electricity supply industry was an outstanding example, unrectified. He did not reply. 73

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POWER POLITICS The second reason was that the Liberals did not consider the organisation of the electricity supply industry important enough to occupy Parliamentary time. I replied, with some astonishment, that an industry with 19 million consumers (most of them voters), 170,000 employees and an annual turnover of £5 billion surely qualified for Parliamentary attention. After further discussion, he suggested that he and I should meet David Steel, then the Liberal Party leader, to discuss the matter. The meeting took place shortly afterwards in Steel’s room at the House of Commons, in the evening, and lasted for about two hours. We went through the draft Bill in some detail and I answered all of the points raised. At the end, David Steel thanked me for answering all of the questions satisfactorily but added that it was a pity that the Liberals had already decided not to support the measure! I remember saying, prior to departing, that I didn’t much mind him wasting his own time, but I took great exception to him wasting mine! This episode did nothing to convince me that the Liberals were to be taken seriously, a view which remains unchanged today – and, after the break-up of the Lib-Lab pact, the Queen’s Speech of 1 November 1988 contained a reaffirmation of the government’s intention to establish an Electricity Corporation.

The Conservatives’ view Tony Benn’s long stonewalling innings came to an end with the Conservative election victory of 3 May 1979 and the appointment of David Howells as Secretary of State for Energy. He was a tall, shy man with a reflective manner and a background in journalism and economics. It did not take him long to decide against the reorganisation, largely on the grounds that he could not possibly be seen by the public to support a measure introduced by a Labour Government. I suggested that he might follow established precedent by altering the proposals 74

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THE ELECTRICITY COUNCIL AND POLITICS slightly and tabling them as his own, improved, version. He then reaffirmed the current Conservative mantra that centralisation was bad, that small was better and that privatisation was best of all and his eventual aim. I then tried to explain that I, too, was in favour of privatisation and that my proposed path could lead naturally and successfully to that end. Neither this nor arguments of industrial logic carried much weight with him, and I made it clear that I was not prepared to continue in post as chairman of the old-style industry since I had been appointed to reorganise the industry and had accepted the post on those terms. He asked if I would wait for a year to let him consult more widely and consider the matter more carefully and I, with some qualms, agreed to do so. My confidence in the declarations of ministers was then at a very low ebb. In July 1980 he told me, and then announced to Parliament, that he did not intend to introduce legislation to reorganise the industry, but would suggest some ideas for closer collaboration between the divided parts. I consequently resigned with effect from 31 December 1980 after almost four years of seeing a great industry again being used as a political football by a procession of politicians from all three parties. There could be no better demonstration of the folly of entrusting the control of great industries to politicians.

Some real, if temporary, achievements Although the original plans for the industry were thwarted, I was able to make some progress during my time at the Electricity Council. During the first two years of my chairmanship, when it seemed certain that the Plowden Report was to form the basis for legislation to reorganise the industry, the whole managerial ethos of the industry changed. Unsurprisingly, the prospect of unified management brought forth some encouraging changes in individual attitudes throughout the industry. 75

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POWER POLITICS The ‘barons’ of the CEGB and the Area Electricity Boards accepted the seemingly inevitable, and began to cooperate as parts of a single industry. Council meetings no longer ended with ‘agreements to which no-one took exception’, but instead were purposeful and constructive. For the first time in more than 20 years, a tariff proposal was constructed on the rational basis of considering production costs in relation to marketing opportunities, rather than deriving it from the CEGB bulk supply tariff to the Area Boards. This linking of production costs with marketing stemmed from the facts that electricity cannot be stored, and its production costs vary greatly with demand for it. As a result, the cost of night-time production was thoroughly researched and a tariff constructed to encourage demand during the night. That initiative unleashed a great deal of constructive thought and resulted in the Economy 7 night tariff, reflecting the lower costs of night-time generation, the framework of which has survived to the present day. During this period, I began to develop ideas for a change in management structure to form five all-purpose Boards, combining generation and distribution, each with its own profit and loss account and balance sheet. The discussion of such proposals had a remarkably liberating effect on the industry’s management, replacing a passive acceptance of the status quo with a questioning and imaginative approach. Had such a development been carried through, I have no doubt that the later privatisation of the industry would have been much simpler and that the inevitable fragmentation that followed would have been avoided, as would the subsequent widespread and rapid acquisition of the privatised companies by overseas companies. It is ironic, of course, that the Conservative Government of 1979, which put the final nail in the coffin of reorganisation of the industry, went on to oversee the privatisation of a fragmented organisation leading directly to unsatisfactory intervention by a series of regulators. These, while nominally independent, were subject to de facto control by successive governments in an opportunistic and inconsistent way. This, in its turn, was the inevitable consequence of a systematic failure then, 76

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THE ELECTRICITY COUNCIL AND POLITICS and also in earlier Conservative legislation, to confront the problems of a diffuse and leaderless management structure in an industry of great economic and strategic importance. Unsurprisingly, as the prospect of reorganisation receded, some of the industry’s barons began to withdraw their support, and the industry reverted to its historically divided state. The CEGB and some of the Area Boards, adopting this stance, made it clear to politicians that they were content, perhaps eager, to revert to their old ways. In doing so, they played a large part in the eventual disintegration of the industry which carried on into privatisation. They share with politicians of all parties a grave responsibility for the inadequacies of the privatised industry – inadequacies which are beginning to show in the growing risk of plant shortages in coming years and in the current disregard for maintaining a diversity of primary fuels in order to obtain flexibility for commercial and security reasons. The wilful development by the industry and governments of a dependence on imported gas has left the country in a highly vulnerable position, compounded by a starry-eyed reliance on intermittent renewable sources to deal with a problem which they could never solve by such means – that of security of supply on a continuous basis. My principal reason for not using the nationalised structure as the basis for privatisation was that the fragmentation of the industry would effectively preclude long-term planning essential to an industry with long time-scales for development and a solid commitment to security of supply. Both of these needs were easily foreseen and glossed over by politicians whose knowledge of the industry was non-existent. It took a long time for the present unhappy situation to emerge and, although I was constantly consulted on the practicalities of the situation, simple political prejudice consistently prevailed. More details of this appear later in Chapter 7. I must stress that a majority of Area Board chairmen remained committed to the reorganisation plans and I felt great regret in leaving them when I eventually did so. None the less, it was well known that I had accepted, and been denied, the task of unifying an unsatisfactory management structure of the industry and that I could not in good 77

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POWER POLITICS conscience remain. It was a sad parting, but many friendships have remained intact.

Nuclear power While all of this was going on, the battle between competing designs of nuclear reactor continued and the SGHWR was abandoned in the face of determined opposition by the CEGB and Lord Weinstock, backed by John King (later Lord King of Wartnaby), then chairman of Babcock & Wilcock who had ambitions to build the pressure vessels for pressurised water reactors and had invested substantially to that end. The Canadian CANDU reactor, markedly similar in construction to the British SGHWR (steam generating heavy water reactor) has enjoyed excellent reliability and export sales over many years. Its modern form, the Advanced CANDU reactor, has attracted overseas interest and should have been considered as a competitor for any future British reactor programme. It is especially gratifying to me, as a proponent of the SGHWR, that the Advanced CANDU reactor follows the SGHWR in its use of light water (instead of heavy water) as a primary coolant and uses enriched uranium fuel instead of natural uranium. These are greatly simplifying and cost-reducing measures which are entirely logical and were already foreseen in the SGHWR, which had been adopted for development in the UK in 1977. In 1978, as an interim measure, two more advanced gas cooled reactor stations were ordered at Heysham B in England and Torness in Scotland. After a somewhat depressing period during which the CEGB paid little attention to the initial problems of the AGR, so that Scotland was necessarily the driving force in that field, the CEGB added their weight to the drive for increased reliability with great success, and the performance of the reactors stands international comparison. The contribution of Harry Carpenter of the CEGB to these improvements was substantial and deserved greater recognition than the political climate of the time allowed. 78

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THE ELECTRICITY COUNCIL AND POLITICS The pressurised water reactor finally chosen by the CEGB for Sizewell B power station led to a public inquiry lasting three years, in which the safety case, and other issues, were examined exhaustively. Numerous safety modifications were made during this period resulting, in my view and that of many other observers, in a much improved design, though a more expensive one. This public airing of safety features, combined with the later Three Mile Island accident, and a lengthy gap in new reactor ordering, made it possible to re-examine light water reactor designs in a fundamental and wholly beneficial way, so that today’s PWR offerings from America are much superior to those of the 1980s which had been based on extrapolation of submarine reactor principles. Today, it seems inevitable that the UK, in common with other industrialised countries, faced with the challenges of increased dependence on gas supplies from politically difficult areas and the need to reduce carbon dioxide emissions, will soon have to embark upon a new nuclear programme. The decline of UK manufacturing capabilities during the years of political indecision means that we will rely on overseas design and, to a large extent, supply of reactors. When that decision comes to be made, I am happy that the long UK debate on reactor choice will have resulted in more acceptable, reliable and economic choices than have been available to us in the past. It is a cause of regret to me, though, that our own nuclear design and construction competence has deteriorated so much as a result of a long sequence of essentially political decisions and neglect.

Overseas relationships Relationships with overseas bodies, notably international bodies, such as the World Energy Conference and CIGRE, concerned with electricity transmission, occupied a considerable amount of my time at the Electricity Council. But we also had to meet and entertain a wide range of other bodies, and I led UK government-sponsored missions to Russia and China to discuss improved cooperation at the technical level. 79

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POWER POLITICS The Russian visit lasted a fortnight and was led on their side by a minister named Neporozhny who was a civil engineer. We got on well together and the mission saw a great deal of the Russian industry and staff. Entertainment was generous and very liquid, and dinners were, as usual in Russia, marked by a seemingly endless procession of toasts, all taken in vodka, with a bottle supplied for each guest. On one such occasion, when I was beginning to feel the effects, I leaned across the table and helped myself to a drink from Neporozhny’s bottle, which proved to contain water. I looked him in the eye and, through the interpreter, declared that he was 14 vodkas behind. He roared with laughter and poured and drank 14 glasses from my bottle, with little visible effect! This was an isolated, although memorable highlight in a very intense fortnight from which I learned a great deal about a fascinating country. On the morning of our closing lunch we were scheduled to visit what was described as an architectural monument at Zagursk, a short distance from Moscow, without our Russian colleagues. It turned out to be a monastery of the Russian Orthodox Church, at which we were astounded by the beautiful choral music which accompanied the Mass. There were a surprising number of Red Army soldiers present and I asked our interpreter why this was so. He replied that the celebrant, the Patriarch, had been a brigadier at Stalingrad, and had vowed to give his life to God if he and his men survived. The soldiers were there because the Patriarch was also a Hero of the Soviet Union. The Chinese mission, which also lasted two weeks, was a much more programmed experience, in which meetings were studiedly non-committal and orchestrated, and useful exchanges comparatively rare.

Nationalised industries as purchasers The widespread criticisms of the CEGB could equally have been applied to other nationalised industries. 80

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THE ELECTRICITY COUNCIL AND POLITICS The nationalisation of the ‘commanding heights of the economy’ (as Herbert Morrison put it) after the war did immense damage to UK manufacturing industry. Part of that damage resulted from the chronic over-manning which afflicted much of British manufacturing industry at that time, and was made more difficult to deal with in the nationalised industries by their monopoly positions. The period was noteworthy for frequent strikes and walk-outs, with a general acceptance by management and governments that buying them off was preferable to confrontation. But, in my view, much greater damage was done by the monopolistic position of the nationalised industries, which enabled them to specify equipment based wholly on their own preference that was of little interest to the competitive world overseas. As a result, the UK developed a whole range of British-made products in the electricity supply, aircraft, steel, railway and other nationalised industries which were uncompetitive in overseas markets. This denied British manufacturing industry the competitive spur which could have secured lower costs for home and export orders for its capital goods industries. Instead, they settled for the comfort of suppling a highly protected home market with over-specified expensive equipment. This became obvious to me when I was, at GEC Erith, competing for turbine orders overseas. In fact, the delusions of grandeur evidenced by the nationalised industries in the post-war years were incompatible with the size of our home market and the extent to which we could afford to ignore international competition. As a result, we squandered much of our technological inheritance by requiring manufacturers to disregard requirements of the international market. In my view this did more damage to the UK capital goods industry than did the trade unions, though I would not wish to minimise the unions’ contribution by their irresponsible behaviour, notably in the docks, the motor car industry, the mines and many other fields. The recovery of Rolls-Royce from 14 years of nationalisation, occurring in quite different circumstances, is described in detail in 81

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POWER POLITICS Chapter 7. The company had deteriorated in post-war years to a position where it accounted for only about 5 per cent of the world civil aviation market, which was dominated by two US manufacturers, who had been given our jet engine designs as part of the war effort. Rolls-Royce squandered the immediate post-war years by designing engines for military purposes which were abandoned without manufacture, and on civil engines for British aircraft which found few overseas markets. Those were the halcyon yet ruinous days, when National Plans were current and government saw its job as being to design the industrial framework. Rolls-Royce enjoyed the advantage of a superb design of engine, yet its development costs brought the weakened company to its knees and it went into receivership in 1971. But it managed by prodigious efforts to overcome this downfall, and today ranks equally with the two US engine manufacturers in market share.

Leaving the electricity supply industry When I had decided to resign as chairman of the Electricity Council I approached the Department of Energy on the subject of compensation, for what amounted to constructive dismissal. My letter of appointment had been as chairman of the Electricity Council and chairmandesignate of the intended Electricity Corporation, and had been accompanied by press releases to that effect. The changes had appeared in two Queen’s Speeches and had been the subject of a draft Bill in the form of a White Paper. My approach met with no sympathy from the new Conservative Secretary of State, David Howell, who dismissed my argument. In this connection, it was infuriating to read the following passage about this matter in the book by Nigel Lawson (later Lord Lawson), David Howell’s successor as Secretary of State for Energy and later Chancellor of the Exchequer, in his book, The View from No. 11, he says: 82

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THE ELECTRICITY COUNCIL AND POLITICS The structure was a manifest nonsense, and inter alia institutionalised conflict between the chairmen of the Council and the CEGB. When Frank Tombs (later Sir Francis Tombs, Chairman of Rolls-Royce, but originally from the more rationally organised Scottish electricity industry) had accepted from Benn the job of Chairman of the Electricity Council, it was on the express understanding that legislation would be introduced to change the structure and merge the Council chairmanship with the chairmanship of the CEGB. When David Howell abandoned this, in the belief that it represented undesirable Bennite centralization, Tombs understandably decided to depart and had to be bought out of his contract at considerable public expense. This last statement was quite wrong and Lawson subsequently apologised. I had taken legal advice from a leading firm of City solicitors who advised that, although I had a solid case in employment law, it was not possible to sue the Crown. So ended my career in the electricity supply industry, with four largely wasted years as the plaything of politicians! I always took care afterwards to ensure that government promises were solidly underwritten, and I would advise any potential recruit to a senior government post to insist on bankable assurances. Having decided to resign as chairman of the Electricity Council in July 1980 I announced that decision in October 1980, but had considered it impossible to seek another post before the announcement was made to our workforce and the public. To my surprise, just a few days after the announcement, I received a telephone call from Lord Victor de Rothschild, then chairman of N.M. Rothschild and Sons, inviting me to lunch. I had known Victor during his chairmanship of the Cabinet Office Policy Review Staff and liked his direct approach and detachment. I accepted his invitation and was met by him and Evelyn de Rothschild. Victor greeted me at their office with the words ‘My boy, I am very pleased with you. Not enough people tell Governments to get stuffed. Will you join our board?’ 83

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POWER POLITICS After recovering from the surprise I readily accepted and so began 14 happy years as a non-executive director of the merchant bank, during which time I learned much of City ways – a familiarity which was to stand me in good stead in later years. I became chairman of the bank’s audit committee, a post which I held for about ten years and which allowed me an unrivalled view of the bank’s operations. Shortly afterwards, John Raisman, chairman of Shell UK, asked me to join his board, and then a similar invitation arrived from Exxon. I chose the Shell offer as being closer to the scene of action in the North Sea, and spent 14 happy and interesting years as a non-executive director, although I never made any secret of my critical views on the labyrinthine organisation of the Shell Group; happily few of whose shortcomings were reproduced within the UK company. So ended my career in the electricity supply industry. During those years, I had some fascinating encounters with a variety of remarkable people, one of whom was Frank Chapple, the general secretary of the EETPU union and chairman of the manual trades union’ council, the NJIC, of the electricity supply industry throughout the UK. As I have said earlier, industrial relations was an area which was the responsibility of the Electricity Council, and our Personnel Director (in those happy days before it became fashionable to have Human Relations Directors) led the other bodies in Scotland in negotiations. Frank was a very principled and plain-speaking man for whom I formed a great respect. He had opposed, with Leslie Cannon, a determined effort by the Communist Party to control the union by blatant ballot-rigging – a dispute which reached the High Court, where the Communist Party were defeated. In the course of the dispute there was a great deal of ill-feeling and open threats to life and limb, and both Cannon and Chapple displayed great courage and determination. Negotiations were normally conducted by the personnel staff and I met the union leaders only in crisis times or when we met for an annual lunch. At one of these lunches, Frank made a speech of thanks but complained, jocularly, that it was surely unsatisfactory that the 84

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THE ELECTRICITY COUNCIL AND POLITICS union leaders had been served synthetic cream with their strawberries! I responded with the customary pleasantries and then turned to his complaint, saying that the cream he had received bore the same relationship to real cream as his productivity deal…! The rest of the sentence was drowned by a gale of laughter, in which Frank wholeheartedly joined. He was a likeable man, who negotiated issues with professional skill and determination, but always strove for a fair solution and always kept his word. We became good friends and he was a member of the Plowden Committee whose report led to the proposed formation of the Electricity Corporation. After his retirement, he was appointed a life peer and I recall meeting him in Victoria Street and asking him to pause for a chat, because I had always wanted to be seen talking to a member of the establishment. He was speechless with indignation! My future career had been far from clear at the time of my resignation, and I was pleasantly surprised by the opportunities which occurred from time to time, providing an unending series of interest and challenge. Inevitably, I regarded the four years as chairman of the Electricity Council as wasted time, but I consoled myself with the knowledge that I had done my best to guide my political masters, and a firm resolve not to repeat the experience.

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CHAPTER 6

SOME FASCINATING DIVERSIONS

With my pension from the electricity industry, and the Rothschild and Shell directorships, I now had time to consider seriously my future outside the industry of my choice and experience. I had rejected earlier approaches by GEC and NEI, and saw no attraction in trying to revive those. Instead, I decided that a period of readjustment would be helpful while I waited, Micawber-like, to see what turned up. In addition to a number of professional institutions and government advisory bodies, I soon became involved in three very interesting industrial situations.

The Weir Group The first of these was the chairmanship, at the invitation of Lord Benson, industrial adviser to the Bank of England, of the Weir Group of Glasgow. It was in severe financial difficulty, having a low share price with dissatisfied large investors and also a large overdraft with dissatisfied banks. The company was in imminent danger of collapse and the investors and banks approached the Bank of England for its support in a financial reconstruction and a change of top management.

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POWER POLITICS I knew Weirs quite well from my time at the South of Scotland Electricity Board, and had a high regard for their products and workforce. I also knew the then chairman, Viscount (Willy) Weir. I accepted the post with effect from 1 April 1981, but made it clear that I did not consider it as an open-ended one. I undertook to stay as chairman until the firm was firmly re-established on a sound commercial basis. I was under pressure from banks and investors to replace Lord Weir and some of the other board members, but refused to do so until I had made my own appraisals and arrangements. I found the company in quite a mess, with borrowings of £46m and shareholders’ funds of £23m. As part of the financial reconstruction, there had been an underwritten rights issue of shares which, to general surprise, were taken up by an American businessman, a friend of Lord Weir. Conspiracy theories abounded, but the American in question behaved impeccably and did not, as expected, seek a seat on the board, although I later offered him one. It quickly became clear to me that there was no shortage of financial information, all of it extensively analysed. The monthly computer print-out was remarkably comprehensive – and largely useless. Perhaps it was not entirely a coincidence that the managing director was an accountant! The sheer volume of data, all of it historical, was so indigestible as to cloud the performance of the operating units. Cash control was very poor and the output per employee dismally low. I began by simplifying financial reporting. I produced an A4 sheet, to be completed on one side only, eight days after the monthend, with 16 items which were to be compared with budget and to provide an estimated out-turn for the year. These were to be completed by operating unit managers and reviewed at the executive committee which I set up. This placed the spotlight on the responsibility of local managers to manage, and it quickly became apparent which ones were capable of doing so. Their attention was focused by a requirement that, if the financial information was not available within the eight days prescribed, they must estimate it – a daunting task for sleepy managers. 88

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SOME FASCINATING DIVERSIONS Cash was an immediate priority and I received daily reports of the cash balances and applied the necessary pressure on debtors, capital expenditure and working capital. Some of this stemmed from the methods I had learned from Arnold Weinstock and I readily acknowledge his legacy. But it was also quickly apparent that manpower reductions would be necessary, and we made the unions aware of this. To indicate that I meant business, I garaged the chairman’s chauffeurdriven Rolls and drove myself to work in a Ford Fiesta. The company had tried to diversify from pump manufacture into other fields, most disastrously steel castings. Getting out of that morass was expensive and long-term, but the cash control measures produced quite rapid results and the emphasis turned to implementing the planned manpower reductions. We operated on a very crude yardstick of annual sales per man, and made rapid progress. At the end of 1981, after only eight months, a pre-tax loss of £10m had been succeeded by a pre-tax profit of £8m, borrowings had halved and we were able to pay a token dividend. When becoming chairman I had made it clear that I saw the post as a temporary one which I would be happy to relinquish when we had achieved three objectives securing the firm’s position. These were: 1. to have paid three consecutive dividends; 2. to be lending money to the banks, for a change; 3. to have reconstructed the management of the company. As part of the financial reconstruction process I invited competitive bids from three firms of auditors, since I felt that the existing auditors had been somewhat sleepy. The existing auditors retained their position, but at a significantly lower fee, thanks to the competition. Thereafter, we had no cause for complaint. I now turned to the third of these objectives and found good management material to hand, awaiting promotion. Ron Garrick, an engineer with considerable IT experience, had been performing well in the Pumps Division, and became managing director in October 1982. 89

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POWER POLITICS He was suitably young and a thoughtful, decisive man. He subsequently led Weirs to a position of strength and stability which became the envy of many other companies and surprised the financial commentators. I used to say that he was a somewhat taciturn Scot who never used two words when silence would suffice! He received a welldeserved knighthood in 1994, and led Weirs to the prosperous and highly respected position which it continues to occupy today. At the same time we had another young Scot, Ian Boyd, who was financial controller. He was a highly competent, but somewhat shy, accountant who proved highly effective in implementing the accounting changes I introduced. He attended, with me, the regular meetings which were required by the committee of banks involved in the rescue package and was, I think a little horrified by the way in which I dismissed their request for detailed management reports. When our financial position began to improve I decided to test him by not attending one of these meetings myself, and leaving him to carry the flag. He was initially reluctant, but performed admirably and never looked back. He later became the group finance director. A happy day came when we met the committee of lending banks at one of our regular meetings, with a statement of our financing requirements and invited them to bid for the role of principal banker. There was some surprise but little dissent, since by then we had paid off our borrowings and had a healthy credit balance. In the event, the Royal Bank of Scotland retained the role, but on terms more attractive to us. Together with Bill Harkness, another young Scot who was already company secretary, these two appointments created a solid core on which to reshape the management. I then turned my attention to the position of Lord Weir. He was a man of great charm, who knew the company’s products well and had a wide range of international business contacts. He was a very able salesman and well liked by customers. His management abilities were, in my opinion, unsuitable for an executive role. I explained this to him and proposed that he should become non-executive chairman when I 90

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SOME FASCINATING DIVERSIONS retired, with Ron Garrick as chief executive. He readily accepted this proposal. I then proceeded to give full executive freedom to Ron Garrick and retired in May 1983, having achieved my objectives in just over two years. The responsibilities of the chairman and the chief executive were set out in a paper which I submitted to the board several months before I retired, and which received their formal approval. The timing of the whole operation was fortunate, since I had accepted an invitation from the Bank of England to become chairman of another troubled company, Turner & Newall, in November 1982. This was a much larger and more difficult challenge, of which more later. Looking back, it is clear that the main causes for the near collapse of Weirs were a reluctance to take difficult decisions and an absence of committed management. Management theory had become a substitute for initiative, and the company had slid steadily downhill. The board was a weak one and failed to recognise the problems as they arose. Rectifying the situation proved depressingly simple, but gave me much satisfaction. A final postscript. Our American investor, Daryl Ruttenburg, was very pleased with the recovery of the company (and its associated share price), and invited my wife and me to dinner at his newly acquired Scottish estate. After dinner, he and I repaired to the library for a nightcap, where he proposed a joint business venture in which he and I would seek out troubled firms and rescue them through a combination of his investment and my management, sharing the proceeds. I declined with little hesitation, since I did not relish the notion of exchanging my career as an engineer for one of company doctor. I saw both Weirs and Turner & Newall as interesting and worthwhile but lacking the excitement and satisfaction of major and long-term engineering projects.

Turner & Newall This new challenge was of a quite different magnitude to that of Weirs. Turner & Newall had been a very large and prosperous company whose 91

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POWER POLITICS fortunes had been founded on asbestos mining and products. A combination of the emerging health risks of asbestos and a management incapable of adjusting to an uncertain future led to a collapse in the company’s fortunes. The ensuing growth in borrowings, coupled with a large negative cash flow and the collapse of the share price, caused large investors and lenders to approach the Bank of England for their assistance in organising a financial restructure and a change of top management. The industrial adviser to the Bank, Lord Benson, invited me to accept the post of chairman. I was supplied by the banks with a report (commissioned and paid for by the company at the behest of the banks) by the management consulting arm of the firm’s auditors, Deloitte, Haskins and Sells, on the steps necessary to turn the company round, but I declined to commit myself to its recommendations before I had been able to make my own assessment. The attitude of the board was astonishingly relaxed under the circumstances and their chairman at first suggested that I should succeed him in a year’s time. I explained the urgency of the matter and we agreed an immediate succession on 25 November 1982. During a meeting of the board on the following day (which, of course I did not attend until elected to the board and the chair) I was, to my surprise, asked to agree a proposed severance package for the outgoing chairman. I explained that this was entirely a matter for the existing board and that I had no locus in the situation. After my election as chairman we had, of course, monthly meetings with the committee of lending banks, 19 in number, chaired by David Trenbath, the NatWest representative. At our first meeting I announced that I had no intention of following the Deloitte report commissioned at their request, which seemed to me to offer little chance of recovery. Asked what strategy I intended to follow instead, I replied that I would show them a detailed plan in about six months’ time – an announcement greeted with astonishment but accepted, I suspect, due to the stalwart support of David Trenbath who was to prove a tower of strength in this and later situations. I also refused 92

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SOME FASCINATING DIVERSIONS demands for extensive, frequent and detailed reporting of actions and results, on the grounds of management autonomy and commercial confidentiality. At this point I should describe the financial conditions under which I accepted the executive chairmanship. The challenge was plainly a high-risk one, with no guarantee of success, and it carried the possibility of considerable personal stigma in the event of failure. Rather than burden an ailing company with offsetting incentives, I decided that the banks and large investors, who stood to gain from any recovery, should provide suitable rewards in the event of my success. This was achieved by the banks agreeing to a contingent fee based upon shadow options for 2 million shares at a price of 23p and a ceiling of 50p – in effect, a maximum of £540,000. In addition, the major shareholders agreed options of 2 million shares at 23p, the then market price. As a result, I set my salary at the modest level of £50,000 p.a. There was much press comment at the time about this ground-breaking arrangement, but no reference to the fact that 40 per cent of any resulting reward accrued through tax to the Treasury, whose contribution to solving the company’s problems was far from apparent! My initial action was to begin the task of assessing the state of the company and deciding on the measures necessary for recovery. The first concern was to reduce overhead costs, and I closed the head office in central Manchester in February 1983, moving the staff to a factory site on Trafford Park industrial estate where we had unoccupied offices. At much the same time, I closed the little-used London office and flat in Curzon Street, London, in January 1983, putting the building and its contents (some fine antique furniture and paintings, including a Gainsborough) up for sale. I decided quite early to change the established advisers to the company. Schroder Wagg, the investment bankers who had a representative on the board, were replaced by Rothschild, in the person of Peter Byrom who I had already met and of whom I had formed a very good opinion. He combined a clear, analytical mind with an ethical approach (not always apparent in the City at the time) which appealed 93

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POWER POLITICS to me, and he was to prove a valuable adviser at Turner & Newall and, later, at Rolls-Royce. The auditors, Deloitte, Haskin and Sells, were also replaced, following a competition, by KPMG, represented by David Vaughan whose approach to problems was similar to that of Peter Byrom and was well suited to my requirements. He, too, was to prove a tower of strength at Turner & Newall and, later, at Rolls-Royce. I encouraged both Peter Byrom and David Vaughan, along with their staffs, to visit our plants and make themselves familiar with the middle management and the problems and strengths of the company. By so doing they made a real contribution to the evolving management strategy and took a view of our problems which was notably different from that prevailing among advisers at the time. I reduced head office staff by removing an unnecessary level of senior management and replaced the formidable, and largely useless, computerised monthly management returns by an adaptation of the single-sheet A4 manuscript reports which I had introduced at Weirs. I assumed the role of chief executive, the previous incumbent leaving at his own request, and formed an executive committee comprising the remaining executive directors and the company secretary. Each director became directly responsible for a group of subsidiary companies – somewhat to the surprise of both parties – and I outlined the ways in which we would set budgets and drive progress, using the same abbreviated monthly reports which I had designed for Weirs. This made it possible to form a view of the performance of more than 100 subsidiary companies in about three hours. I also embarked on a whirlwind tour of UK and overseas units to familiarise myself with their products, strengths and weaknesses. It quickly became apparent to me that the report commissioned by the company at the behest of the banks, at a cost of £250,000, to outline a recovery strategy, was useless and I was glad that I had declined to accept at the outset. It envisaged selling most of the traditional businesses and retaining a 63 per cent holding in a US speciality chemicals company, Hunt Chemical. This company had no synergy with 94

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Lord Tombs

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Plate 2 Sir Ronald Garrick – chief executive and later chairman of Weir Group plc

Plate 3 Sir Colin Hope – my successor as chairman of T&N plc

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Plate 4 Stewart Miller – engineering director of Rolls-Royce

Plate 5 Peter Byrom

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Plate 6 Longannet power station in Fife – the turbine hall

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Plate 7 Longannet power station – external view

Plate 6 Longannet power station in Fife – the turbine hall

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Plate 8 Lord Lawson of Blaby – a brilliant mind with a speed which sometimes neglected counter arguments

Plate 9 Sir Ralph Robins – my successor as chairman of Rolls-Royce

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Plate 10 Sir John Rose – CEO of Rolls-Royce since 1996

Plate 11 Baroness Thatcher – an outstanding Prime Minister and the first with a scientific training in the country which created the Industrial Revolution

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Plate 12 Tony Benn – a mercurial character who always took account of political considerations in his ministerial roles

Plate 13 Lord Varley – a former miner who examined problems in a carefully objective way and stood his ground

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SOME FASCINATING DIVERSIONS the company’s other operations and involved a substantial minority shareholding – a most unattractive situation for an ailing company in a highly litigious country. I therefore resolved to sell Hunt and the sale was completed on 1 March 1983, resulting in a reduction in gearing from 55 per cent to 30 per cent and an extraordinary profit of £10m. This enabled us to dispose of a number of other businesses and to close and restructure others. We next set about divesting companies with no obvious synergy, such as Storey’s Industrial Products, and BIP Vinyls, and closed a Payen gaskets factory at Chingford. At the same time we reduced the workforce at all levels in order to reduce production costs and resume profitability. These reductions were dismissed by the outgoing managing director as ‘not Turner & Newall’s style’. I am afraid that it was such thinking that had brought the company into such dire straits. Much of the company’s business came from the automotive industry, in the form of brake materials and gaskets, and prices had been forced down by powerful purchasers to the point where the company was operating at a loss. Management was terrified of losing large contracts and so was easy meat for tough buyers. I recall the case of a cylinder head gasket for Ford, which I selected at random and found we were supplying at 60 per cent of cost! I instructed the management to tell the customer that the new contract, then being negotiated, would be at a price 70 per cent higher than previously. The customer protested and placed the contract elsewhere. A year later, he returned to us at our price. Establishing this practice of product profitability across thousands of items was a huge task, but proceeded apace, encouraged by this example, and led to a recognition throughout the company of the need for profitability, which had been neglected for years. My recovery strategy, which I had promised to the banks at my first meeting, recognised three other problem areas: asbestos mining, asbestos products, and the difficulties of asbestos-related litigation, especially in the USA. Asbestos mining was mainly based in Zimbabwe, where we had a mining town at Shabanie with school and hospital facilities provided by 95

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POWER POLITICS the company. The government there was hostile to foreign investors and had declared their interest in taking an equity stake in the mines. I saw no point in this – the terms of any such stake would inevitably be unattractive and the government capacity for interference would be increased. Indeed, government interference was already at a level which induced us to deconsolidate the mines in our accounts, on the grounds that we were not fully in control! Accordingly, we put the proposal for a government stake on the back burner while addressing the core problem, that of international competition. It was plain that management in Zimbabwe was disheartened by the government’s failure to recognise the problems of retaining and motivating specialist expatriate technical staff, who were virtually confined to the country by foreign exchange restrictions. In addition, the management were forbidden by law to reduce staff in line with sales without prior government approval. We tackled the second of these problems by instituting a redundancy programme, with quite generous terms, in spite of government regulations to the contrary – this led to a series of showdowns with government in which plain talking won the day, doubtless assisted by the ponderous machinery of the State! Eventually, after the mines had been restored to profitability and a good level of foreign exchange earnings, the mining Minister congratulated me on the turnaround and stated formally that the government was no longer interested in taking an equity stake. I responded by thanking him for the resolute support of the government through a difficult period, and we both burst into laughter and shook hands. So, at last, we were able to reconsolidate the mines in our company accounts. The other problem, that of motivating senior staff in Zimbabwe, was addressed by importing high-altitude tennis balls for the enthusiastic families of the staff, providing television sets and video players and purchasing some holiday properties in Durban for staff use, which overcame the foreign exchange barrier. Last, but by no means least, we arranged to pay part of the salaries of key staff in sterling in London. 96

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SOME FASCINATING DIVERSIONS Eventually, it proved possible to dispose profitably of the mines to a Swiss-Belgian group, so terminating our interest in asbestos mining. The second strategic problem, of asbestos products, was dealt with by developing substitute materials for building products, brake pads and gaskets. This process, which was already beginning when I arrived on the scene, was accelerated by an increased R&D effort, with additional expenditure being committed as a priority even during the first years of very tight cash control. The third problem, of US asbestos-related litigation, proved much more intractable. Even before my appointment, my predecessor had pointed out in his annual report that of every dollar spent on asbestos litigation in the USA, only 25 cents reached the plaintiffs, the balance being consumed by contingency lawyers. Contingency litigation in the US has reached the point where it bankrupts large corporations, with the spoils being shared very inequitably between the contingency lawyers and the unfortunate victims – in our case, of asbestos-related diseases. Nevertheless, the USA is an unrepentantly litigious society whose future is ensured by a widely held view that it protects constitutional rights, and by the powerful network of lawyers in the various legislatures. We became involved in a number of initiatives, such as the Wellington agreement promoted by a leading academic lawyer, to redress the balance. All were short-lived – the momentum of the fabulously rich contingency lawyers proved unstoppable. But contingency law does not only apply to individual claimants, and we had two very large suits, each for a total of $150m in respect of asbestos materials in office buildings of the Prudential Corporation of Boston and Chase Manhattan of New York. We were fortunate in having very good, young lawyers who knew their way around the legal system, but the cases dragged on for several years, with steadily accruing legal costs. The cases, which had to be noted in each annual report, were damaging to our share price, partly because of the unfamiliarity of UK investors with the US legal system in evaluating the threat. 97

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POWER POLITICS Finally, a date was set for the Prudential trial and, as the date approached and discovery accumulated, we were approached with offers of settlement out of court. I had personally spent a great deal of time on this subject, and was convinced of the strength of our case, so that I had no difficulty in rejecting each of several approaches of steadily reducing amounts. In the event, all ten counts of the action were dismissed and no damages were awarded. The sting was in the tail, however, because we were not awarded any costs against the plaintiffs – and these costs were around $5m! An identical series of events took place later in New York when the Chase Manhattan claim came to trial. Award of damages to successful defendants in such cases is rare – another questionable facet of the US legal system. On the personal injury front, a practice had developed of contingency lawyers gathering a large number of claimants and claiming damages of around $8,000 per case. This was pitched at a level where settlement was cheaper than going to court. As a result, the lawyers reaped huge rewards for writing a few letters – a practice bordering on blackmail! Only a very wealthy nation such as the USA could afford the luxury of such a damaging system which, while ensuring access to the courts for poor plaintiffs, enriches contingency lawyers to a fabulous degree and damages industry and its employees. There were other time-consuming legal issues in the USA, involving insurance companies, but the ones I have described were the most important to the company and provide good illustrations of the legal minefield involved in trading in that market. The contingency fee system represents a considerable added cost, and uncertainty, and served to remind me how wise I had been to reject the accountants’ recommendation and to have sold US-based Hunt Chemicals at an early stage in the company’s recovery. The lending agreement with the banks was terminated in 1984, after two years in which the company returned to a healthy cash position. As at Weirs, we invited each of the banks involved to compete for our future business. National Westminster retained their lead role – 98

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SOME FASCINATING DIVERSIONS deservedly, in view of the expert leadership of David Trenbath, who died soon afterwards. He was a great loss to the bank and to the country. At the end of 1984 we reported profits before tax of £27m with gearing at 21 per cent, less than half of the figure only two years earlier. The company was running well, with asbestos litigation settling down to an affordable level; the time had come to consider a substantial acquisition. I had found the role of executive chairman quite taxing and had been looking for some time for a managing director, with little success. On 1 March 1985 Colin Hope joined us as group managing director, and showed early promise with a lively interest in doing deals which was easily diverted to acquisitions. He was to indulge that interest over the coming years. Part of our strategy was to exit building materials and to concentrate on automotive parts, so we looked at UK companies in that area of activity. One company which appealed to me was Lucas, which was then having a difficult time and offered good prospects for revival. After careful consideration we concluded that turning it round would prove too great a diversion for our enthusiastic but fully occupied management and, instead, we settled on Associated Engineering (AE), makers of automotive pistons and ancillaries. Their management was not receptive to our approach, despite having recommended an invited offer from GKN in 1983. Nevertheless, we bid for AE in August 1986, and failed by a margin of only 1 per cent, securing 49 per cent acceptances. A few days later, there were press reports of a placing of 10 million AE shares by the AE brokers, Cazenove, and we took up the matter with the Takeover Panel of the Stock Exchange. It emerged that those shares had been purchased during the bid period at the bid price of 240p and then sold, after the bid closure, at a price of 201p. The shares had been purchased by AE’s merchant bankers and two clearing banks, obviously with an indemnity against loss. The transactions were secret and the offer was restricted to those parties and had not been disclosed as required by the City Takeover Code. The shares thus ‘immobilised’ had 99

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POWER POLITICS clearly resulted in the defeat of our bid, and the Takeover Panel executive ruled that the Takeover Code had been breached, that the participants were worthy of censure and that, accordingly, we would be allowed to mount a new bid within the normally proscribed period of one year, with other useful relaxations. The censured parties appealed to the full panel, who upheld the decision. The importance of this finding to City practice cannot easily be exaggerated. What had taken place was a conscious and flagrant breach of the Code of Conduct which applies to all members of the Stock Exchange – and that by some of its most eminent members! It was argued that the actions were taken by the participants without the knowledge of AE. My hopes that this sorry episode would help to raise standards in the City were somewhat dashed when the responsible director of the Midland Bank, with whom we had ceased to do business, plaintively remarked that they would have done the same for us as they had done for AE, only to be told that he obviously still didn’t understand that we wouldn’t have wanted him to do so! Despite the satisfaction of a clear victory over wrongdoing, we took our time to consider whether to avail ourselves of the freedom to re-bid at any time and without some of the usual constraints. We decided to do so at the same price, and duly made an offer. At this, point another bidder entered the fray, in the form of Hollis plc, a company controlled by Robert Maxwell. In conversation with me, he expressed the lofty wish to do something worthwhile for the British engineering industry, and expressed his belief that Hollis would be better placed to do this than Turner & Newall. This seemed to me laughable, and I indicated our determination to press ahead. We won comfortably and proceeded to a happy integration of the companies, in which the AE employees came to relish our delegated management style. Robert Maxwell subsequently congratulated me on our success and conceded that our bid did have more industrial logic than that of his firm, Hollis. The failed first bid had cost us a lot of money, in the form of bidding costs, management diversion and lost opportunities, and I 100

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SOME FASCINATING DIVERSIONS decided to take legal advice on the prospects of their recovery. The advice was equivocal, but the sums of money, and the nature of the dealings involved, made me decide to press on, and a High Court writ was duly issued. The defendants insisted on their innocence (in law, anyway) and the case wended its leisurely way, and eventually led to a series of growing offers of settlement out of court – each recommended by our eminent silk. Eventually, I told our lawyers to discontinue their involvement and leave negotiations to me. The final settlement, for a very substantial sum, occurred after my retirement from Turner & Newall, the company having asked me to continue the negotiations on their behalf, in view of my close involvement. The affair thus ended happily, but with no thanks due to the expensive legal advice we had obtained on the way. Now to return to the progress of the company’s recovery. In 1985, profits before tax had risen by 44 per cent to £39.6m, and gearing fell to 23 per cent. In 1986, profit before tax rose to £44.7m and gearing was 59 per cent, the latter figure reflecting the cost of the AE acquisition. The following year saw the integration of AE into the group, a process in which Colin Hope, our recently joined managing director played a prominent part, and a rise in profit before tax to £77.3m, with gearing of 21 per cent, aided by a rights issue. In this year, the contribution from asbestos construction materials was 5.4 per cent (1983, 42 per cent) and that from Africa and India was 24.1 per cent (1983, 56.1 per cent), both figures illustrating the progress made in the strategic objectives I had set in 1983. Progress continued during 1988, with profits before tax rising to £91.3m, with gearing of 25 per cent, and turnover exceeding £1 billion (1983, £488.5m). It also saw the announcement, at the 1988 AGM, of my intention to retire in October 1989, to be succeeded as chairman by Colin Hope. In 1989 the profit before tax fell slightly to £84m, after an exceptional provision of £9m for asbestos litigation – a shadow of things to come! The subsequent eight years were of Colin Hope’s chairmanship, during which he struggled manfully with ill health, which never dimmed 101

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POWER POLITICS his activity and his enthusiasm for deal-making. A series of acquisitions took place against a background of US asbestos litigation; in 1997, a takeover bid from Federal Mogul of the USA was accepted, and the cash-hungry City seemed happy. The disregard of the City for the loyal workforce never ceased to amaze me, and would have troubled my conscience. Later, Federal Mogul underwent a financial collapse, with serious consequences for the Turner & Newall employees and pensioners. So, unhappily, ended the Turner & Newall saga.

Rolls-Royce In 1982 I was asked by the chairman of Rolls-Royce, Lord McFadzean, to join his board as a non-executive director, and promptly accepted. The reputation of Rolls-Royce was still outstanding, despite the fact that it had been state-owned since its collapse in 1971 and little investment had been available. My first personal experience of Rolls-Royce had been in 1968, during my brief period as general manager of Howdens, who were supplying the gas circulators for the advanced gas-cooled reactors at Hinkley Point B and Hunterston B nuclear power stations. These machines were technically very demanding and required gas impeller blades of high integrity. Accordingly, investment-cast blades were ordered from Rolls-Royce, who had extensive experience of the precision casting process, which was used for their turbine blades. The contract experienced serious difficulties and required determined action, described in Chapter 4, but a lamentable lack of management control and commercial appreciation had been evident on the part of Rolls-Royce. When I joined the Rolls-Royce board some 14 years later I found the aero-engine business both interesting and challenging. Lord McFadzean, a former chairman of Shell UK and of British Airways, was an effective chairman who did not suffer fools gladly. He was an economist, highly intelligent and somewhat irascible – a combination 102

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SOME FASCINATING DIVERSIONS which did not endear him to the then Secretary of State for Industry, Patrick Jenkin (later Lord Jenkin of Roding). A businessman to his fingertips, McFadzean had little patience with the ways of government and civil servants, and made no effort to conceal it. He recognised that Rolls-Royce, in common with other stateowned industries, was over-manned and was uncompetitive with its US rivals. He spent much effort in driving manpower reductions, with some success, reducing the workforce by 30 per cent during his tenure. Board meetings under his chairmanship were always stimulating occasions, but he felt greatly shackled by government inability to take a realistic view of market demands. In 1983 he asked if I would be prepared to succeed him as chairman on his forthcoming retirement. I replied that I would be delighted to do so but thought that the government might not have forgiven my resignation from the electricity supply industry three years earlier. He brushed this aside, saying that he would recommend my appointment. In the event, he was succeeded in April 1983 by Sir William Duncan, a former deputy chairman of ICI and a chemical engineer by training. Duncan was obviously aware of McFadzean’s recommendation, and asked if I would stay on as a non-executive director. I agreed to do so. Duncan’s background was in chemicals production and he had little familiarity with the long-term decisions required in a capital goods industry. It did not take him long to conclude that Rolls-Royce was unable to compete with its US rivals, because of the huge capital demands of engine development. He therefore proceeded to reach an agreement in January 1984 with General Electric. This took the form of each company investing 15 per cent in one of the other’s engine programmes, GE investing in the RB211-535 (for which they had no competitive equivalent), and RR investing in the CF6-80, which was to be the large GE engine for the future. The views of the participants to this agreement proved to be somewhat different, Rolls-Royce maintaining that they ‘were in the big engine market and must continue 103

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POWER POLITICS to support and develop the engines committed to its existing customers’, while GE believed that Rolls had given up all interest in developing large engines for the future. Duncan died at his desk on 5 November 1984, nine months after his signature of the agreement. Within days Geoffrey Pattie, the Minister of State at the DTI, telephoned me to say that since Arnold Hall and I were the only industrialist members of the board, he would like us to agree on one of us becoming acting chairman while headhunters searched for a permanent replacement. The following day, Hall announced to the board that Pattie had asked him to become acting chairman and that he had accepted. I saw no point in recounting my own conversation with Pattie, since I had no interest in acting as a stopgap chairman, and Hall had a wide experience of the aircraft engine industry. Early in 1985 I received a telephone call from the headhunters asking whether I would be interested in becoming chairman. I replied that I would, provided that the matter could be settled within the next few days, since I was negotiating for another post. They replied that they had been instructed that if I was interested they could stop looking, and that they would report the urgency of the matter. Within a few days I was interviewed by Norman Tebbitt, then Secretary of State for Trade and Industry, who offered me the appointment. I said that I would accept subject to two conditions, somewhat to his surprise. First, the government would have to be prepared to privatise Rolls-Royce before the next election, given my experience of the effect of a change of government which had led to my resignation as chairman of the electricity supply industry in 1980. He replied that if I could meet that timetable he would willingly guarantee the government’s acquiescence. Secondly, I said that I remained hostile to the PWR available at that time, and would not be prepared to refrain from public statements to that effect; consequently, if government would find that embarrassing from the chairman of a state-owned industry, they should not appoint me. He replied that he would have to refer that question to the Prime Minister; he 104

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SOME FASCINATING DIVERSIONS telephoned me soon afterwards to say that there would be no problem in my expressing my views freely. My appointment was recorded in the board minutes on 8 February 1985, just over three months after Sir William Duncan’s sudden death. I was pleased that Sir Arnold Hall agreed to remain on the board; his extensive experience and ability made him a valuable colleague. Subsequent events at Rolls-Royce are of sufficient importance and complexity to require separate treatment, and are to be found in the next chapter.

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CHAPTER 7

ROLLS-ROYCE BACK TO THE STOCK MARKET

The road to the Stock Market I became chairman of Rolls-Royce on 8 February 1985 with a feeling that here was a really challenging job – the restoration of the UK’s greatest engineering firm to its rightful place in the world market. It had spent almost 14 years in state ownership as a result of the financial collapse of the firm in 1971. The story was a sad one. Speculation about the future of RollsRoyce had been current in the press and the City for some months before receivers were appointed. The immediate problem lay in the international aero-engine market, where Rolls-Royce had contracted to supply its RB211 engines for the Lockheed Tri-Star aircraft, and the viability of the project had been a cause for concern. But the weakness of Rolls-Royce had owed much to its post-war dependence on military orders from the UK government, and the rapid succession of military projects which were cancelled before manufacture began. As a result, the company had carried out a huge amount of design work at government behest, but no manufacturing work had resulted. The company’s weak competitive position in the civil aircraft market was further worsened by the government decision to support an

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POWER POLITICS Anglo-French project for a supersonic aircraft, Concorde, which sold its product only to the project partners. All of these factors contributed, but Rolls-Royce was in a weak financial position in the late sixties and was finally declared bankrupt on 4 February 1971. The buck now rested firmly with the government, who regarded Rolls-Royce, correctly, as a centre of British engineering excellence and announced that it would nationalise the company. This must have seemed the only option at the time, but I am convinced, in the light of my experience at the Weir Group and Turner & Newall that, as in those severe cases, the company could have been turned around by a financial reconstruction led by the Bank of England and involving a complete change of management. Unfortunately, the Bank’s thinking had not then reached the maturity which it later acquired through the good offices of its industrial adviser Sir Henry (later Lord) Benson. So nationalisation it had to be; and the company languished in government ownership for 14 years, ceding much competitive advantage to its US rivals in the process. Those years were characterised by continual uncertainty and lack of commitment by successive governments. Governments invariably find the idea of commercial risk entirely alien, and take refuge in delay and evasion when confronted by the need for important decisions to be made. On one occasion, an application by RR for approval to develop a derivative engine waited for more than four years for the government’s final, half-hearted, agreement. It is impossible to compete in world markets with that sort of indifference and resulting lack of support. Anyway, the company was now, in 1985, on the starting block to be privatised by the then Conservative Government, returning to the Stock Market with a consequent welcome escape from government procrastination and evasion. Expectations were high among the staff... But first we had to take some steps to get ourselves into a position to allow the company to be floated. I began by introducing some new members to the Board. There were, initially, three: Sir Philip Shelborne, chairman of British National Oil Corporation and a 108

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ROLLS-ROYCE BACK TO THE STOCK MARKET former merchant banker; Sir Robin Nicholson, former Chief Scientist to the Government and a distinguished metallurgist; and Harold Mourgue, former finance director of Thorn-EMI, who had joined me as a non-executive director at Turner & Newall and had proved a staunch ally on financial matters. Later we added Professor (later Sir) Gordon Higginson, an engineer and Vice-Chancellor of Southampton University. Next, we needed to appoint merchant bankers and I opted, on the basis of my own experience, for N.M. Rothschild, and specified that Peter Byrom should lead the team. Working with him at Turner & Newall and Rothschild, I had come to recognise him as a man with a clear mind and a determined, ethical approach, which greatly appealed to me. We opened discussions in 1985 with government on a possible date for privatisation and found that the timetable was dominated by British Gas, a larger and so more attractive proposition for Government. Nevertheless, we managed to agree a date for Rolls-Royce’s privatisation, of 20 May 1987 – some two years after my appointment. The prospect of flotation was well received by the workforce at all levels, sometimes with uncritical enthusiasm. The move was seen by them, understandably, as an escape from the constraints of government ownership. What was not generally realised by them was that we were about to exchange those constraints for the discipline of the market and its often unpredictable analysts, commentators and investors. I had no doubt of the net value of the exchange, but the lack of experience of market forces on the part of virtually all senior staff was worrying and had to be remedied. This we did at question and answer sessions for staff to practise, and by example at the real sessions. It was a gruelling period, during which most of the teaching fell to me – and there wasn’t much time. An early illustration of the belief that life in the Stock Market was to be much easier than it had been in state ownership occurred at a meeting to consider investment in future engines. Our situation was bleak in relation to that of our competitors, of whom there were only 109

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POWER POLITICS two, General Electric and Pratt & Whitney, both US companies. Each was much larger and more diversified than Rolls-Royce, and had profited during our 14 years of slumber in government ownership. As a result, they dominated the civil aero-engine market, of which we then had about a 6 per cent share. In addition, they each had an impressive stable of engines, compared with our small and ageing offering, and an extensive spares business resulting from their large number of engines in service. To summarise our own position, we had a weak balance sheet, few modern engines, and no substantial cash flow from spares sales to ease the long-term capital investment required. Understandably, the competition did not appear to view our forthcoming flotation with any great concern! The problem crystallised when, at an early Rolls-Royce meeting, I was given a day-long presentation of our needs for investment in four new engines, with a careful and thorough analysis of market needs – and a business case which confined itself to those engines and paid no attention to the overall performance of the company. At the close of the presentation, I congratulated those present on the technical presentation, and asked which engine they would recommend. They looked aghast, and insisted that such a choice was impossible – all four were equally essential. I explained that we simply did not have any prospect of raising the financial resources required. This dialogue of the deaf continued for about 30 minutes until I closed the discussion by saying that the choice had to be restricted to one engine – or none. This certainly resulted in some recognition of the problems facing us all, but subsequent experience was to indicate that the transition to the real world, outside the cocoon of state ownership, was far from complete. Sometimes I wondered how to get the message across that we had to live within our means, and, on one occasion, suggested to senior managers that they should remove the nameplates from their desks and substitute the slogan ‘We can’t afford it!’ On another occasion, when walking, unaccompanied, around the Derby offices I chanced upon a meeting which was discussing some problems we were then having with 110

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ROLLS-ROYCE BACK TO THE STOCK MARKET an engine thrust-bearing – the meeting was attended by 37 people! I suggested to the site director that this was more in the nature of a public meeting than a committee, and that the number of chairs in a conference room should be limited to 10. But one decision which made some impression on senior management was to sell the larger of our company planes, a Gulfstream II executive jet. The economy itself was useful, but the psychological effect even more so. So I was somewhat heartened when, on a visit to Canada, an old Rolls-Royce hand, Bert Beattie, asked me over dinner if I knew I had a nickname in the company. I replied that I would be surprised if I hadn’t, whereupon he told me that the nickname was ‘Frugal Francis’. I was delighted by this indication that my efforts were making a mark! The general disregard for our means was evidenced by approaches from some quarters in the company suggesting acquisitions of other, not always closely related, companies. One of these, perhaps understandably for sentimental reasons, was Vickers, who then owned RollsRoyce cars (although the trademark name was owned by us). There was no real business case, and the same problems of affordability had to be recognised. Senior management had a touching faith in their ability (wholly unproven) to turn round and improve other companies, and were unable to recognise the practical difficulties of doing so. For them, Rolls-Royce had, quite simply the best available management – a fallacy stemming from before 1971, and one which had undoubtedly contributed to the bankruptcy. Fortunately, one small acquisition proposed was that of a specialist non-destructive testing company, Mateval, on which the construction of our submarine reactors was heavily reliant. That company was in financial difficulties, and a glowing business case was presented for its acquisition. We bought the company for a small sum of money and set its champions the task of justifying their recommendation. The experience was a salutary one, since those concerned had no experience of running a company within the necessary constraints of profit and cash flow; their experience was wholly based on running a 111

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POWER POLITICS nationalised company. Unsurprisingly, their forecasts proved unrealistic and unattainable. The experience gained was painful but valuable, in that while it never approached the levels of profitability predicted by its proponents, Mateval continued to provide an essential service to Rolls-Royce. I soon saw the need for the brief monthly operating reports which I had introduced at Weirs and Turner & Newall, and also of the weekly cash reports with an accompanying pressure on cash control and reduction of working capital in the forms of stock levels and work in progress. I took a direct personal interest in these figures and actions, and harried those involved unremittingly. Gradually, the measures induced a different approach in many of the Rolls-Royce staff, who at last came to see the performance of the company in relation to the market, rather than to a distant and idealised corporate plan. Meanwhile, discussions had been continuing with government on the shape of the forthcoming privatisation offer. They had employed merchant bankers in London and the USA who advised that a level of debt corresponding to 40 per cent gearing would be acceptable to the markets. I responded that it would certainly not be acceptable to the board of Rolls-Royce. Our competitive position and size would place us at a considerable disadvantage in the market from the outset, when our need would be for a strong balance sheet to support investment in new engines and modern manufacturing facilities. I was determined that we should float with zero debt. This ruffled a lot of feathers, most notably in the Treasury, who were concerned with maximising the returns to government. At one point, the government representatives asked me what options they had open to resolve our differences. I replied that there seemed to me to be three. The first, and simplest, was to accept my proposals. The second (which, I knew, was impracticable) was to delay the privatisation date. The third was to find a more compliant chairman! The civil servants and ministers involved were fortunate in having as their industrial adviser Sir Jeffrey (later Lord) Sterling, who understood the force of my arguments. They were also constrained by 112

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ROLLS-ROYCE BACK TO THE STOCK MARKET their invitation to me to become chairman after the sudden death of Sir William Duncan. In the event, we finally agreed on zero debt at flotation, and pacified the Treasury by showing that the interest payments avoided would justify a higher share price, so protecting their receipts – a pretty simple case to demonstrate! Unfortunately, the resulting share price at flotation also made it appreciably more difficult, in the early years, for the share option schemes to show any gains to management, to the understandable dismay of the staff involved, including me. While this familiarisation process was going on, the company had to continue to run, and here I found great support from Ralph Robins, an engineer and lifetime employee of Rolls-Royce, who had been appointed managing director, with my unqualified support, during the temporary chairmanship of Sir Arnold Hall. A hard worker, with a comprehensive knowledge of the products of Rolls-Royce and its competitors, he enjoyed the respect and trust of airlines all over the world. He it was who kept the wheels turning while I handled the privatisation and internal culture issues. His special talent was in constructing and agreeing sales deals, and he had the support of a committed and imaginative sales team. It was from him that I learned of the interest of Cathay Pacific, British Airways and others in an uprated version of the RB211-524 engine which powered their Boeing 747 aircraft. Developing this variant was easy for us to do, and attractive to our customers, but attracted great opposition from General Electric, who considered it contrary to the collaboration agreement signed by Sir William Duncan in 1984. Ralph Robins had had some rather difficult conversations with Brian Rowe, head of the GE aircraft engines division of GE, and was understandably troubled by the situation. The 1984 agreement contained no undertaking on the part of Rolls-Royce to discontinue the development of large engines, although it was possible for GE to view the collaboration as making independent development unattractive to us. But the Rolls-Royce board, of which I was then a member, had been resolute in maintaining 113

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POWER POLITICS the company’s independence on this issue during negotiation of the GE agreement. I therefore concluded, with the approval of the board, that we would continue to make improvements to the 524 engines and pursue any further developments which became possible, and arranged a meeting for Ralph Robins and myself with Brian Rowe and Ed Hood, a deputy chairman of GE on 17 November 1986. The GE representatives clearly saw the collaboration on their new large engine as excluding any independent development of large engines by Rolls-Royce – a view which we did not accept and which was not specifically supported by the agreement. We therefore made our position clear and agreed, after long and sometimes difficult discussions, that the agreement should be terminated. The GE representatives were very upset by the termination, but the new situation was welcomed by Rolls-Royce staff and made the task of constructing a prospectus for privatisation much simpler for me; indeed, I seriously doubted the practicality of preparing a prospectus based on the GE interpretation of the agreement. Our customers demonstrated their position by buying the uprated versions of the RB211-524 in welcome numbers. It should be added that newspapers, analysts and some advisers to the government expressed their reservations about the termination of the agreement, and the ability of Rolls-Royce to remain in the large engine business, but they were converted in the fullness of time. That decision was made possible by the modular development prospects of the RB211, and the resulting smaller financial demands of developing larger engines, which today underpin the prosperity of Rolls-Royce, and it brought to an end a period of uncertainty for staff, customers and management. Both the chairman and the chief executive of Rolls-Royce today have publicly acknowledged that the current prosperity of the company is founded on those strategic decisions, taken more than 20 years ago. The decision to terminate the agreement with GE, with its comforting assurance of the help of a powerful partner in developing 114

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ROLLS-ROYCE BACK TO THE STOCK MARKET the new large engines, was not an easy one. To reverse a policy introduced by the previous chairman is always hazardous, with the new incumbent assuming full responsibility for the possible failure of the change in direction. In this case, it rested upon my conviction that the three-shaft engine design adopted for the RB211 offered a low-cost entry into the market for engines to meet the emerging demand for much larger aircraft and, as a consequence, the prospect of restoring Rolls-Royce to a position of major player in the industry, rather than the sub-contractor position which would have been the inevitable outcome of the GE agreement as envisaged by GE. Against this was the predictable scepticism of the press, always looking for disasters, and also that of the investment community, with painful memories of the collapse in 1971. One prominent investment manager had told me flatly prior to flotation that he would never again invest in Rolls-Royce. Returning to the saga of privatisation, we now embarked on the Long Form Report, which necessitated a detailed examination of the company and, naturally, demanded a great deal of time from executives at all levels – and a great deal of supervision of them to restrain their enthusiasm! But there was one further hurdle to be surmounted with government. Having settled the shape of the balance sheet, we proceeded to draft the offer for sale. In keeping with my general views of the need for financial strength, I wanted to include a statement that ‘we would pursue a conservative dividend policy’. This was intended to convey a message of determination to potential investors and others, but was unwelcome to the Treasury, who saw it as unhelpful to the flotation. As a result, I received a telephone call from the Chancellor, Nigel Lawson (later Lord Lawson), asking me to drop the phrase. I declined and, a few days later was summoned to a meeting with the Chief Secretary to the Treasury, Norman Lamont (later Lord Lamont), at 10.30 p.m. The meeting lasted until 3 a.m. the following morning, and involved prolonged ‘corridor meetings’ between advisers. I remained adamant, and the warning was included. In the event, the flotation was heavily oversubscribed and the Treasury were presumably happy. 115

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POWER POLITICS During the preparation for privatisation senior staff had to become aware of the hazards of talking, to the press or to analysts, about the affairs of the company in a way which could reveal pricesensitive information. We had a few scares of this kind, some of them from staff who had been carefully warned of the dangers! But, gradually, the rules became widely known, and raw enthusiasm was replaced by healthy caution. This was just as well, because the weeks prior to Impact Day (the day of the flotation) were taken up by road shows, when we made presentations to analysts and investing institutions around the country. Although the presentations were made by me, and questions were dealt with by me with the support of senior managers, there was plenty of time before, during and after lunch for individuals to respond to questions and discussion, so that caution was needed both to ensure consistency and to observe the insider dealing rules of the Stock Exchange, when those having privileged information were restricted in their statements to groups of investors and analysts. The press, too, took increasing interest as flotation approached and had to be dealt with at group and individual level by appropriate people. Press conferences were preceded by an in-house dummy question-andanswer session, at which the line to be taken was agreed and the pitfalls identified. Finally, Impact Day arrived on 28 April 1987 and, with it, the publication of the prospectus for sale of the shares. The event was celebrated by a unique air display at Stansted Airport, involving aircraft powered by Rolls-Royce engines over a period of 70 years, from the Bristol fighters of the First World War to Concorde, in addition to many other civil and military aircraft. It was an occasion of great pride to staff and customers alike, and British Airways kindly arranged for a flypast by Concorde. During the show, I noticed a young secretary from head office standing alone by a Mosquito fighter and weeping quietly. She told me that she was thinking of the many young men who had flown such aircraft and given their lives before she was born. I felt deeply moved.

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Freedom and responsibility Freedom at last! The excitement and frenetic activity of the past year now gave way to the problems of running a listed company in a highly competitive international market. Naturally enough, our competitors, investors and customers waited to see events unfold and suspended their judgements meantime. For our part, we at Rolls-Royce had to be actively aware of the need to demonstrate our management ability. This meant the development of a strong balance sheet, while investing in R&D and manufacturing improvements and offering competitive bids to airlines. Our competitors, General Electric and Pratt & Whitney, both much larger than us and enjoying substantial cash and profit flows from spares sales, were not disposed to make the competition easy for us and were openly sceptical about our survival. Indeed, some GE people boasted that they would ‘blow us away’. So we had a difficult balancing act to perform and hard choices to make. The stimulating effects of privatisation led to enthusiastic demands from sales, manufacturing and design staffs for the provision of new funds to support progress in their areas – all very attractive, but we just couldn’t afford many of them. My earlier efforts to foster an awareness of the need for strong financial management throughout the company had largely been eclipsed by the staff euphoria with the new privatised regime, and I decided to ask the board to approve a financial strategy that could be disseminated throughout management. This was done in October 1987, six months after flotation, and formed a useful primer in business for those with little experience, making it clear that a strong balance sheet was a pre-requisite for successful trading as a stock market company and that its development would limit investment in engine development and manufacturing facilities.

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POWER POLITICS The paper identified three key areas: 1. Cash. 2. Profit before tax. 3. Distributable reserves. The tight control of cash, and a determination to increase spare prices despite dire yet unfulfilled warnings of catastrophe from the sales department, played their part and by 1992, the year of my retirement, the following results had been achieved in these three key areas: 1. Cash – the 1985 figure of £33m had increased to £479m, with the help of a rights issue of £300m. The cash balance remained positive throughout the period. 2. Profit before tax – the 1985 figure of £81m had fallen to a loss of £202m in 1992 as a result of a worldwide recession in the aviation market in that year; but this was the only loss during the period. 3. Distributable reserves had risen from £189m in 1985 to £323m, this latter figure after being depressed by the 1992 loss of £202m. Summarising, we had managed to stay afloat during a period of intense international competition, sustained development of new engines and heavy investment in manufacturing facilities. Our careful control of cash, manpower and capital investment had also made it possible to weather the market depression of 1992/3. During this period, the 535C engine, which had been developed to power the Boeing 757, began to attract sales, with BA as the launch customer. The competitive position of this engine was unique. Since GE did not have a suitable engine, our only competitor was Pratt & Whitney with an earlier and less attractive engine. Indeed, the 535 proved even more reliable than we had hoped for, with resulting lower spares sales than would normally have been expected – a situation 118

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ROLLS-ROYCE BACK TO THE STOCK MARKET which persisted for several years! But the superiority of the engine was so apparent that a number of Pratt & Whitney 757 customers changed to Rolls-Royce over the next few years and the engine was steadily uprated to meet the growing requirements of the aircraft and came to dominate the market for the 757. The success of that engine played an important part in the recovery then showing its first signs. We suffered a severe setback in 1989 when BA, one of our most loyal customers over many years, decided to choose the new GE90 engine for their initial order of the Boeing 777, a large twin-engined aircraft. GE had decided to produce a brand new engine, the GE90, incorporating the latest technology for their next high-thrust engine, having exhausted the possibilities of stretching existing designs. This was a somewhat risky route, regarded with caution by some airlines. The BA choice was not influenced by technical considerations, but rather by a very determined bid by GE, which included the purchase of the BA repair plant at Treforest, in South Wales for the sum of £280m as well as a competitive offer for the engines and a range of guarantees. GE had been anxious to obtain a high-class customer for their new engine and had been campaigning for some years to displace our flag airline from their attachment to us. I went to see Lord King, the BA chairman, and was assured that this would be an open competition, but it soon became clear that the GE terms were irresistible to BA and had been under discussion for quite a while. The decision influenced ANA of Japan to reverse their intention to buy Rolls-Royce, and caused world-wide concern among customers. Fortunately, Thai Airlines, Emirates and Cathay Pacific kept their nerve and ordered Rolls-Royce engines for their 777 aircraft, so that the apparent setback was short-lived. The GE90 engine, unsurprisingly, experienced considerable teething difficulties, and when BA came to extend their fleet, they returned to Rolls-Royce. No account of the recovery of Rolls-Royce would be complete without a recognition of the invaluable part played by Cathay Pacific, our most loyal customer over many years, some of them quite difficult ones. Key to this was the engineering director, Stewart John. He was a 119

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POWER POLITICS highly experienced aircraft engineer, widely respected throughout the airline industry and with an unshakeable respect for the three-shaft engine made by Rolls-Royce. His counsel was invaluable and his influence in Cathay was great. Cathay Pacific was owned by the Swire Group, whose leaders during this period were Sir John and Sir Adrian Swire, both shrewd businessmen with a deep wish to buy British – provided it really was best. Both Cathay and Rolls-Royce profited from a close association which met and surmounted obstacles of all kinds, and developed a deep and enduring mutual trust. Their part in this story is one of friendship, trust and business acumen, for which I was truly grateful.

Engineering developments The development of the 535 engine was the achievement of Stewart Miller, a tall and taciturn Scot with a modest manner and a brilliant engineering ability. He was later to add further lustre to his reputation by solving the problems we were having with a high-pressure compressor, which was our part of an international engine, the V2500, being made by a consortium including Pratt & Whitney and others. The compressor, as originally designed, was not able to deliver the required performance and it became apparent to me that part of the problem within Rolls-Royce was that the design was split between plants at Bristol and Derby, with divergent traditions. Once again, as with the problem of the GE agreement, I asked Ralph Robins to summon the participants, and others with wide experience, to a brainstorming session at Derby. The old-fashioned notion of a general arrangement drawing, showing the complete engine, illustrated the impracticability of the design and Stewart Miller was put in charge of the recovery. The project rapidly came under control, but relations with our partners had been through a torrid time, with threats of legal action against Rolls-Royce. The threat to us was a very real one and the rapid redesign of the V2500 compressor was a milestone in the history of the company’s recovery. 120

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ROLLS-ROYCE BACK TO THE STOCK MARKET With such a record, it is hardly surprising that we asked Stewart Miller to succeed Alan Newton, the director of engineering, on his retirement. Newton had been strongly in favour of the GE agreement, and was correspondingly disappointed by its demise. Stewart Miller was a superb successor, to whom much of the success of the privatised Rolls-Royce was due. This success rested on the development of modular engine improvements, for which the three-shaft engine, developed in the 1960s and not easily available to our competitors, was uniquely suitable. As a result, our development times and costs were greatly reduced and our task of developing a full range of engines was greatly simplified. So, ironically, the visionary design that contributed to the collapse of Rolls-Royce in 1971 was the means of its technical recovery and commanding world position today. Throughout this period, Ralph Robins contributed much to the developments I have described, which exploited the unique versatility of the three-shaft engine to meet the shifting demands of aircraft builders and airlines, and stimulated enthusiasm throughout the company. His life in the company had developed in him a sixth sense for probable needs and he fed those judgements into a receptive design team. The development path of Rolls-Royce was now clear; the only problem was to match our ambitions with the available financial resources. Cash had to be conserved in every possible way and the euphoria of many of our managers had to be curbed. We exerted great pressure on debtors, capital expenditure and payroll. The board’s remuneration committee were very unhappy about the low level of salary which I felt able to take in these circumstances, and approached me on several occasions describing it as well below the market level. They were, of course, aware that the circumstances of RollsRoyce imposed strains on its chairman which greatly exceeded those of more stable companies, which they saw as exacerbating the comparison. However, I have always believed that leadership begins at the top and 121

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POWER POLITICS I was not prepared to accept a salary so much greater than that of other board members. Of course, I had been sought for the post of chairman, and received a series of subsequent offers from other companies, but, again I had to recognise that my decision to restore independence as a major aircraft engine manufacturer locked me into the measures necessary to secure its success. During my seven and a half years as chairman of Rolls-Royce, my voluntary salary reduction cost me, on a conservative estimate, between £2m and £3m. Unfortunately, because of my decision to take a reduced salary, my pension was also much lower than would have been expected, resulting in a similar loss to date. But, on the positive side, I have the great satisfaction of knowing that my chairmanship transformed the company culture and laid the foundations for the world-class company which we see today, to which successive chairmen and chief executives have added their own substantial contributions.

Diversification Our two competitors, General Electric and Pratt & Whitney, both US companies, were highly diversified and so were much less reliant than we were on the cyclical demand of the aviation market. Coupled with their substantial sales of engine spares, this placed us at a serious disadvantage in competing with two well-established companies who virtually dominated the market. I therefore spent quite a lot of time considering our room for manoeuvre to, at least partially, redress this situation. I was looking for an engineering company, whose technology we understood, but with markets dissociated from aviation. By sheer coincidence, I found myself returning from a visit to Japan in 1988 in the unplanned company of Terry Harrison, chairman of Northern Engineering Industries, which I knew well from my electricity supply days as makers of steam turbines, boilers and a wide range of other equipment for power stations. During the refuelling stop at Anchorage we walked round the terminal and I explored the possibility of a 122

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ROLLS-ROYCE BACK TO THE STOCK MARKET merger. He was somewhat taken aback but, as we passed the polar bear for the third time, commented that he ‘did not find the idea wholly repugnant’. Coming from a Geordie, this was quite a concession! In late 1988, we acquired a modest shareholding in NEI and approached their board to discuss terms; the talks foundered on the price we offered. In April of the following year, we returned to the issue and secured the backing of the board for a public offer, acquiring the company for £306m, the same price as we had offered earlier. It was well known that NEI were experiencing difficulty in obtaining new orders, in common with power plant companies around the world, and also in the completion of a large power station project which they had secured at Rihand, in India. As a result, press comment on the merger was predominantly sceptical. My aims in the move were fourfold: 1. To introduce Rolls-Royce technology in turbine blading design and materials to NEI and to obtain a countercyclical contribution to profit and cash flow. 2. To combine the somewhat dispersed but complementary activities in the nuclear field. 3. To enhance Rolls-Royce’s industrial and marine activities. 4. To acquire some strong management, familiar with the constraints of competition and the Stock Market, and motivated by profit and cash control. At this point, I am sorry to say that the official Rolls-Royce history by Peter Pugh is wrong, when it says on page 33 of Volume 3: Before Rolls-Royce was working on Project Derwent, the Chairman, Sir Francis Tombs, thought he had found a way to help with the onerous development costs of the Trent family. Why not buy a company in another industry that was in a mature stage of its life and was throwing off some cash? 123

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POWER POLITICS This speculation failed to recognise my reasons for the merger, which I have set out above, and were well known at the time. I had no prior notice that this erroneous statement was to appear in the history, and was dismayed to see it. Following the merger with NEI, I saw no need to integrate the operations, since the products and markets differed, but we did succeed in fruitful collaboration in a number of engineering spheres, and the presence of hungry NEI managers soon made itself felt in Rolls-Royce. The difficult financial closure of the Rihand project was brought to a successful conclusion by Terry Harrison, with a lot of help from Peter Lockton, with whom I had worked 30 years earlier when he was at GEC Witton (later acquired by NEI). The acquisition of NEI also provided cash and profit contributions, allowing development of the Rolls-Royce engine family at a rate which would not have been possible otherwise. This was an important, but by no means the only, benefit of the merger. In 1989, Ralph Robins became deputy chairman and Terry Harrison succeeded him as chief executive. This enabled Ralph to devote more time to strategic issues and Terry to strengthen the management of the company, furthering the cultural change for which I had been striving almost single-handed. It also freed me to address some other important issues, among them my succession. In all of my senior posts through the years I had regarded an orderly and satisfactory succession as crucial to the success of the company. NEI was not our only activity in the diversification field. We had for some time been active in the area – indeed, there were three other active prospects. We had for some years been interested in acquiring Allison, a US company with a strong presence in smaller engines, notably for the US Air Force. The company was owned by General Motors, and on two occasions we were invited to meet with the chairman of GM, Roger Smith, to discuss the matter. On each occasion, having arrived in Detroit and had preliminary discussions, we were told over lunch that Allison was not for sale after all. It was clear that there had been political pressure on the GM management, of 124

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ROLLS-ROYCE BACK TO THE STOCK MARKET which our American competitors may not have been altogether unaware! Be that as it may, I remarked to Roger Smith that, should he wish to explore the possibility again, he should expect to meet me in London. The problem was solved eventually when Allison became a management buy-out, and were able to accept a bid from Rolls-Royce. Another prospect arose with an approach from Turbomeca of France for a merger of our helicopter and military engine activities. We had collaborated for some years, but the family of its founder, Sir Joseph Sidlowski, wanted a merger. I regarded such a move as unattractive in our then carefully-balanced operations, and nothing came of it. A third, very interesting, approach came from BMW who, like Rolls-Royce, had a tradition of high-quality design and manufacture of aero-engines and motor cars, although BMW had been out of the aeroengine business for a long time. We agreed to set up a jointly-owned German company to develop a new, small, engine and the project went well. At the beginning of our talks, I was anxious that BMW should fully understand the long time-scale involved in such a venture, but they were very relaxed. The arrangement was a happy and successful one, but BMW eventually decided that the aero-engine business was too long-range for them and Rolls-Royce acquired their shareholding. BMW subsequently acquired motor car rights to the Rolls-Royce name, which we owned, through a company in which we took a shareholding and a factory was set up in the UK.

Succession at Rolls-Royce Ralph Robins had spent all his of his working life with Rolls-Royce, which he had joined as a graduate trainee. During his working life he had acquired a deep knowledge of Rolls-Royce history and organisation and was deeply committed to the company. He had an understandable ambition to become chairman of Rolls-Royce and perhaps to be seen as a second Lord Hives, that great man who rose from being a motor car 125

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POWER POLITICS test driver to the position of chairman of Rolls-Royce before and during the Second World War. Hives was indeed a legend and very much an inspiration for Rolls-Royce staff. Since, understandably, Ralph was being approached by headhunters within a few years of privatisation, he pressed me for an indication of his prospects of succeeding me. I recognised his ambitions but had some reservations about his suitability for chairmanship of the company at that time. I expressed these reservations quite frankly to him, saying that his greatest strength was also his greatest weakness. I explained that his success in the sales area had induced in him a narrow view in which the excitement of the chase had obscured the potential adverse effects on the company of a successful sale. This is a wellknown hazard, present in many industries, of promoting ‘strategic sales’ without due regard to their profitability. Indeed, I had to veto one proposed tender which would have put the future of the company at risk if it had been successful. I said that he and I must give some thought to remedying this unacceptable practice of separating sales tactics from company performance, by providing him with a wider experience of company strategy. To his credit he recognised the problem and worked hard at remedying it. He went with me to more meetings with the press and financial analysts, and attended the audit committee where company performance was a constant topic and where the contingent liabilities of sales contracts were reviewed and declared, if necessary, in the annual report and accounts. His appointment as deputy chairman in 1989 was made with the express aim of furthering his progress in that field. The concurrent appointment of Terry Harrison as chief executive undoubtedly encouraged Ralph’s efforts to broaden his field of vision, and he began to make great improvements. After two years, I judged that he would be capable of succeeding me as chairman when I had succeeded in further stabilising the company financially. In 1991, therefore, I felt able to recommend him to the board as my successor. There was some pressure for me to remain beyond my proposed retirement date of October 126

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ROLLS-ROYCE BACK TO THE STOCK MARKET 1992, but I pointed out that his age was close to the limit at which one could convincingly appoint him as my successor, so that delay beyond 1992 would be undesirable. This was accepted and I am pleased to pay tribute to his highly successful occupation of the chair until his retirement in 2003, after 11 years in office. He appointed, as chief executive in succession to Terry Harrison, John Rose (later Sir John Rose) who had represented a participating US bank during the early years of my chairmanship of Turner & Newall. He was not an engineer but had a highly innovative approach to the complex financing problems which characterise the aero-engine industry. His logical and thoughtful approach served Rolls-Royce well and he served with flair and distinction a succession of part-time chairmen, who followed Ralph Robins.

Engineering technology Aero-engine design is a highly technical business, in which performance and weight constantly compete. Key to this is materials science, and we knew that both GE and Pratt & Whitney were spending vastly more than we could afford on research and development. On joining the company, I discovered that Rolls-Royce was funding research contracts at 29 UK universities, with little coherence. I discussed the problem with Ralph Robins and Stewart Miller, citing my experience of industry/university collaboration gained on a number of research bodies, of which more later. I proposed the setting up, at a smaller number of universities, of research units based on a technical area of interest to both parties. The units would be funded by us for a minimum of five years and there would be an active interchange of staff between the university and the company. The scheme, which proved a great success, was developed by Phil Ruffles, who was to succeed Stewart Miller as director of engineering on Stewart’s retirement. Topics included composite materials, steel alloys, combustion, precision casting, and acoustics. The University Research Centres (or URCs, as they came to be known) continue to 127

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POWER POLITICS form part of the research base of the company today. Building an active relationship between company and university based on topics of lasting interest to both parties was the key to a fruitful and lasting partnership. The URCs had some similarities with the Interdisciplinary Research Units set up by the Science and Engineering Research Council, whose earlier genesis I had been happy to be involved in. But there remained a further aspect of academic input into RollsRoyce which I wanted to address, and the opportunity came with the development of materials capable of handling increasingly high turbine gas entry temperatures. A well-known law of thermodynamics states that higher temperatures produce higher efficiencies. However, as so often in technology advance, there is a price to pay, and this manifests itself in the lifetime of the materials concerned. The trade-off is an important one and I was anxious to get the best possible advice, so I suggested an advisory academic group. The suggestion was not received with enthusiasm internally, but I insisted, and a committee was formed under the chairmanship of Sir Alan Cottrell, a distinguished metallurgist for whom I had formed a very high regard over the years. His committee was charged with examining current research and our present activities and to report to the board. When they did so, they concluded that we were seeking higher temperatures at a level where materials reliability was undesirably impaired – we had the balance wrong, in their opinion. Their recommendation was accepted with little opposition and the committee continued its work on a less elevated reporting plane. Some months later, I was asked by a number of Rolls-Royce staff who had formerly been sceptics of academic advisory committees, if I had any objection to the formation of a similar group to advise on gas flow technology and modelling, and was delighted to agree.

Job satisfaction Chairmanship of Rolls-Royce was an immensely enjoyable task. The ethos of the company was long-standing and excellent, even though it 128

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ROLLS-ROYCE BACK TO THE STOCK MARKET sometimes led to excessive self-confidence in areas unfamiliar to the staff. There had been a long history of effective separation of financial considerations from the engineering matters of design, manufacture and sales. I sometimes parodied this by asserting that the engineering departments thought that the chairman’s job was quite simply to provide the resources required by the engineering departments! That illusion has now been superseded by awareness at all levels that the success of the company requires good financial control and a level of performance capable of justifying investment, and in this respect Rolls-Royce staff had much to learn, in common with the staffs of GEC Erith, Weirs and Turner & Newall. There is a deep satisfaction to be obtained from leading such remarkable companies to a more competent management style, and I count myself fortunate to have had such challenging appointments. My final farewell dinner, in October 1992, included the usual plaudits and reminiscences from board members who had become good friends. But, when the speeches had ended and the presents been delivered, the sliding doors at the end of the dining room opened, and there sat a string sextet from the Goldberg Ensemble who had been well known to me for some years. They played the sextet from Strauss’s ‘Capriccio’, to which I refer in Chapter 10. It was a favourite piece of my wife and I, and we were deeply moved by the affectionate arrangements for its performance at our farewell, which came as a complete surprise. These arrangements had included the careful orchestration of my movements around the building to avoid rehearsals. So closed ten years with Rolls-Royce as a non-executive director and chairman. I enjoyed great support from board members, senior colleagues, the workforce, investment analysts, advisers and customers, without which my task would have been immeasurably more difficult. I believe that we can all feel proud of a signal achievement for British engineering and prosperity. 129

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CHAPTER 8

THE PRIVATISATION OF THE ELECTRICITY SUPPLY INDUSTRY After my resignation from the chairmanship of the Electricity Council in 1980, the privatisation of the electricity supply industry made very slow progress. Nigel Lawson succeeded David Howell as Secretary of State for Energy in 1981 and telephoned to ask me to visit him to discuss the form of the intended privatisation. I replied that I had no wish to discuss the matter again, since I had made my position clear to David Howell in 1980 and had resigned as a result of our disagreement on the matter. He replied that the Prime Minister had asked him to discuss the matter with me and that placed him in a difficult position. I accordingly agreed to meet him and we had a private discussion in his office, lasting more than two hours. I made it clear that implementation of the Electricity Corporation as proposed by the Plowden Committee, and accepted by the then Labour Government, was a necessary step towards a successful privatisation. He echoed David Howell’s argument that he disliked centralisation, and also any appearance of imitating Labour. I again pointed out that the existing structure provided no sensible basis for a privatisation and that forming an Electricity Corporation, combining the industry in England and Wales could, as I had intended, lead to the formation of five independent companies, each combining generation

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POWER POLITICS and distribution of electricity in its area. They would trade with each other through the national grid, also privatised. Each would be larger than the South of Scotland Electricity Board, which had operated with great success in developing its own distinctive strategy and supporting an extensive investment programme while trading with England and Wales. The proposed boards would be capable of forming a competitive market while avoiding the absurd separation of generation from distribution. Such boards would form a good framework for privatisation and each would be capable of developing its own policy and of providing the necessary large capital investment. Strategy would be the responsibility of a statutory Commission on the lines of the earlier Electricity Commission. Such a coherent structure would allow a long-term strategy to evolve in a way denied to the proposed fragmented structure. Vitally, the individual boards would have to trade for a few years before privatisation to demonstrate their organisational and financial performance at flotation. He seemed to listen with care, but rejected my arguments, despite my warning that proceeding with privatisation based on the existing structure would lead to a fragmented industry, without any agreed development policy and lacking the necessary financial strength for the substantial investment programme required. Instead, a number of weak, small, companies would emerge, incapable of making the long-term decisions and lacking the resources required. Concluding our discussion he asked what options he had. I replied that he could accept the Plowden Report, despite the Labour Government of the day having done so (but making sufficient changes to claim it as his own and using privatisation as the central argument). Or he could join the growing list of Secretaries of State for Energy who were aware of the problem, created by the Conservative Government in 1957, but who failed to tackle it. I added, gratuitously, that he should not completely exclude the possibility that a Labour Government could sometimes be correct in their analysis. Lawson had a quick and fertile mind, but his background was mainly in the media and politics. He also had great self-confidence, 132

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THE PRIVATISATION OF THE ELECTRICITY SUPPLY INDUSTRY which led him to discount opposition. Like many ministers of all parties, he placed each problem in the framework of his simplified core beliefs and gave little credence to alternative arguments. I could not escape the feeling that he had already decided to leave the organisation largely untouched and that our discussion was only a matter of form to satisfy the Prime Minister. This was the last opportunity for the Conservative Government to privatise the industry on a sensible basis, and was yet another example of how governments are hogtied by their own mantras and led by them into absurd positions – a fate which the electricity supply industry suffered four times at the hands of Conservative governments – in 1957, 1980, 1982 and at privatisation in 1988. The issue now languished and Nigel Lawson (later Lord Lawson of Blaby) moved on in 1983 to the Treasury, becoming Chancellor of the Exchequer. Some years of inactivity followed, due I suspect to a continued disagreement between Margaret Thatcher and Nigel Lawson on the desirable organisation to be adopted for the privatised industry. Successive Secretaries of State took refuge in inactivity until Cecil Parkinson (later Lord Parkinson of Carnforth) was appointed Secretary of State for Energy in 1987 with instructions to make progress on privatisation. He invited me to advise him on the Bill and I refused, explaining the reasons why it was now too late for the necessary organisational changes to be made to produce a successful outcome and adding that I had spent too much of my life trying to advise ministers who seemed not to want to listen. He pressed me three times more and I consistently declined. He was a thoughtful and wise man and I suspect that he was unhappy with the situation he had inherited, following the reluctance of his predecessors to grasp the nettle. When John Major became Prime Minister in 1990, he encouraged John Wakeham (later Lord Wakeham), the renowned government trouble-shooter, to privatise the industry in its existing, fragmented form. At about this time, I was invited to give the annual Wilson Campbell Memorial Lecture (readers will recognise the name) 133

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POWER POLITICS and decided to base it upon the privatisation proposals, spelling out the disadvantages at some length. I sent a copy of the lecture to John Wakeham who, horrified, asked me whether I thought that my predicted outcome was inevitable. I confirmed that to be my view, to Wakeham’s dismay, but ended our conversation on a slightly more encouraging note, saying that the markets would put the organisation right in the fullness of time by combining the myriad boards into a small number of boards responsible for both generation and distribution, but lacking any strategic plan. This has proved to be the case, after some 20 years, but all of the combined companies are foreign-owned, and are concerned with their profitable operations rather than UK national considerations. As a result, we still have no strategic direction for the industry and face tremendous challenges in overtaking the decision-vacuum of two decades, which continues today. I am staggered by the naivety of ministers who expected competing foreign-owned companies to devise and implement a UK strategy for a long-term service industry. In, practice, they are concerned with ensuring that their present investment makes a satisfactory return, and not with long-term decisions on national strategy. It is worth noting that none of the countries whose companies now dominate our electricity supply industry would allow us to make similar investments in their countries, despite the arguments of free market competition so often advanced by economists and politicians and the EU – and as frequently ignored by other countries. Events after privatisation gave no reason for optimism. The first regulator of the privatised industry, Professor Stephen Littlechild, had been deeply involved in the privatisation and continued to maintain the separation of generation from distribution by refusing proposals for mergers. During the privatisation my advice was sought on a suitable regulator and I suggested him as having some responsibility for the form of the new organisation and well-deserving of the task of making it work. He belonged to that school of economists who long for competition in a free market, without realising that such an option is not available for the electricity supply industry, where security of supply is (or should be) 134

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THE PRIVATISATION OF THE ELECTRICITY SUPPLY INDUSTRY paramount, planning horizons are at least 20 years and electricity is traded on the basis of short-run marginal cost with no provision for longterm investment. Subsequent regulators did allow a combination of generation with distribution, but in a piecemeal way, so that a medley of, mostly foreign-owned, companies emerged, all hypnotised (as was the DTI) by the short-term advantages of cheap gas as a fuel, coupled with the low capital cost and short construction time for gas-fired plants. As a result, the first two decades of the privatised industry saw an increasing dependence on imported gas and a continued reliance on existing coal and nuclear stations, but with no provision for their renewal as they steadily aged well beyond their design lives. This process was described enthusiastically by a succession of ministers as the operation of the free market – although a more accurate description would have been laissez-faire coupled with a manipulated market – for which successive Labour governments showed a growing attachment. Annual debates which I organised in the House of Lords drew attention to all of these problems but were uniformly dismissed by the Labour Governments of Blair and Brown, the latter of which, belatedly, recognised the force of the arguments, just prior to the election in 2010. A startling example of the muddled approach was the introduction in 2002, by the regulator Ofgem, of a new tariff governing the trading between the generators and the distributors, and called NETA. Ofgem and the DTI were subsequently, and justifiably, criticised by the National Audit Office for a lack of consultation with the generation companies, some of which were forced into liquidation. The price of generated power was suddenly and arbitrarily reduced by 40 per cent but, inexplicably, consumers failed to benefit at all by any change in the retail price! Of course, the situation was corrected, but too late to help the damaged generating companies. Notably, the problems which the haphazard introduction of NETA caused for British Energy, the nuclear company, allowed a cynical government to ‘rescue’ them (from a problem it had created in the first place). In seizing this opportunity to indulge their established hostility to nuclear power, they 135

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POWER POLITICS insisted on the sale of North American assets at low valuations, further weakening the company. It was a sad case of blind prejudice against nuclear power coinciding with the well-known greed for cash of the Treasury, and a good illustration of the saying that the Treasury know the cash price of everything and the value of nothing. The North American stations were soon afterwards valued at much higher prices. Throughout the period of privatisation, successive governments have been ardent advocates of wind power, the only source of renewable energy available in quantity, and that enthusiasm acquired support from the growing concern to limit carbon dioxide because of its perceived contribution to climate change. They failed to recognise that the contribution of wind power is intermittent, so that fossil and nuclear plant has to be kept on line to meet periods of inadequate or excessive wind – an expensive measure and one which reduces any claimed benefit in carbon dioxide reduction. An important factor in governments’ obsession with sources of renewable energy, despite their intermittent capability, has been the constant pressure from environmental organisations. Beginning as crusaders, they habitually exaggerated their support for ‘free’ energy coupled with their rejection of nuclear energy, and their propaganda has become more extreme and strident over the years during which they have evolved into prosperous organisations with career structures. It is heartening, though, to see in recent years that many prominent environmentalists have realised the limitations and uneconomic cost of renewable sources, and the resulting need for nuclear power and large coal power stations. The increasing reliance on imported gas and the failure to replace the ageing coal and nuclear power stations was accompanied by a growing international concern about the possibility of climate change resulting from growing emissions of carbon dioxide. This rapidly became an international political issue, with British politicians seeking to lead the emerging international efforts to reduce carbon dioxide, and resulting in the adoption of an ambitious programme to harness wind power. The Labour Government rejected the case for nuclear power out 136

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THE PRIVATISATION OF THE ELECTRICITY SUPPLY INDUSTRY of hand, and sought every financial device they could find to serve their hostility. They steadfastly refused to acknowledge that an intermittent source of energy, such as wind, could not meet the need for a reliable supply of electricity, since no method of large-scale storage is available. They recklessly poured subsidies into wind power, ensuring that electricity consumers would have to meet the subsidy of tens of billions of pounds. I pointed out during one of the House of Lords debates that the total cost of replacing our present nuclear power stations could be met by one half of the government’s estimated subsidy for wind power up to the year 2020! This startling revelation fell on deaf ears. To compound these grave errors, they ignored warnings that the growing dependence on imported gas brought with it an increasing dependence on countries with dubious political reliability and placed us at their mercy. The Russia/Ukraine disputes are a recurring illustration of our vulnerability. So, the muddling of governments since nationalisation in 1947, which reached a new and higher level under the last Labour Government, has brought us to a position where prolonged interruptions are likely for some decades to come in the supply of electricity which is essential in today’s society for water supply, hospitals, communications, transport, industry, domestic consumers, and countless other needs. What a pity that those responsible will have moved on by then! They may perhaps draw some comfort from the likelihood that supply interruptions may be mitigated by the inevitable increase in fuel poverty, reducing domestic demand, and also by the industrial recession serving to limit industrial demand! But the disaster of government meddling does not end there. The reliance on cheap oil and the abandonment of the policy of diverse supplies of primary fuel has resulted in no large coal or nuclear power stations being built in the past 20 years, with the result that their replacement is now an expensive but urgent need. It has also resulted in the loss of the related UK industries and their associated skills and employment. This means that the large traditional stations which we now have to build will have to come largely from overseas suppliers. 137

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POWER POLITICS The position I have described will inevitably result in hardship for this country in the form of additional costs of unemployment, balance of payments and reduced reliability of supply of electricity. The roots of this lie in the incompetence of politicians of all parties and their misplaced confidence in their ability to shape the future of a major service industry to fit the needs of the economy, coupled with a determination to disregard the advice of experienced practitioners. I have described, at some length, the unhappy experience of privatisation of the electricity supply industry. We have seen similar cases in other privatisations, where billions of pounds have been wasted in the pursuit of political dreams. The situation in the electricity supply industry continues to be one of ad hoc government intervention, with no strategic view of a complex industry lacking a mechanism for strategic decisions. History is instructive and may offer a solution. A similar situation existed in 1926 when the Weir Committee reported on the organisation appropriate for a highly fragmented and rapidly growing industry. Their accepted recommendation was that a strategic overview should be provided by a permanent statutory body, the Electricity Commission, which served the country well until nationalisation in 1947. So a solution is readily at hand if politicians can be persuaded of the need for decisions (or lack of them) to arise from expert and long-term approaches to replace their diffident, incompetent and fluctuating interest. I proposed this during the first of my annual debates in the House of Lords in 2002 and it was summarily dismissed on the grounds that an adequate strategy existed – a pipe dream if ever there was one! Perhaps recent and coming events will lead to a triumph of modesty over hubris! However, the House of Lords did succeed, against government opposition, in inserting into the Energy Bill a stipulation that the Secretary of State has a responsibility for maintaining the security of electricity supply. The practical effect of such a provision is not great, however, given the limited lives of ministers and governments when compared with the necessary planning 138

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THE PRIVATISATION OF THE ELECTRICITY SUPPLY INDUSTRY horizon and the inevitability that those responsible will have moved on to other occupations. But hubris has been a consistent part of government by both parties since the end of the war. Disastrous developments resulted from the post-war programme of nationalisation, during which vast sums of money which, had they been invested, might have improved the efficiency of those industries, found their way instead into supporting over-manning and weak, strike-ridden, managements. Attempts at their privatisation have produced a generally unhappy outcome, with only a few welcome exceptions. The reversal of nationalisation by privatisation all too often incurred further confusion and losses. I have no magic solution to these problems of politicians’ hubris. The Communist regimes in Russia and China had similar experiences. But we are generally supposed to be blessed with the superior practice of democratic government. What a pity that politicians seem to forget that so quickly on their election. In chapter 9, dealing with the relationships between industry, government and the civil service, I will make some suggestions as to how we might improve the obvious obstacles to closer cooperation between those groups. There have been a number of attempts to tackle this problem over the years, with no notable success. But the costs of present practices, and the rich rewards of any successful measures, surely require us to recognise the problems and address them again. Belatedly, towards the end of Gordon Brown’s administration, Labour ministers underwent a conversion to the real world and sought to promote large nuclear and coal power stations in order to avoid power interruptions. But the timescale of such developments means that the wasted years of DEFRA fantasies will ensure that power interruptions must be expected and that the cost of electricity will be substantially higher than it need otherwise have been. The problems will not be quickly solved and can be expected to persist for some decades. They are likely to seriously impair the recovery of the UK from the current economic depression. 139

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POWER POLITICS My forecasts of a fragmented industry, lacking any coherent strategy, have been fulfilled. It causes me great sadness to see how a great and essential public service industry has been so seriously damaged by a mixture of neglect, incompetence and complacency. I earnestly hope that an early opportunity will be taken to remedy the present situation. What is urgently needed is a statutory body responsible for requiring and approving new investment in generating and transmission plant. The body would deal only with strategy and would be technically competent to produce and implement a long-term strategy. It would not conflict with the regulator, Ofgem, the object of which is to supervise trading arrangements, essentially of a short-term nature although there may be some advantages in combining the bodies. It would have the following features, as did the Electricity Commission before the war: • •

• •

it would be responsible for the issue of licences to construct new power stations and for specifying their type; it would be a permanent statutory and independent body, not subject to political opportunism, and charged with forming a policy which would outlive governments; it would be technically competent to frame and supervise a national strategy for long-term investment; it would ensure that the responsibility for long-term electricity strategy was clearly identified, which is certainly not the case at present.

One could anticipate some opposition from those politicians who had responsibility for devising and implementing levies on generators, estimated by government at £30bn, to subsidise wind power. There is no comparable levy on other energy industries, and so the subsidy for power amounts to a tax on electricity consumers to implement a national policy. The Treasury has no part in this ‘tax’; it was designed by the DTI in conjunction with its agent Ofgem, and is a very inefficient way of reducing carbon dioxide and is expended without reference to 140

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THE PRIVATISATION OF THE ELECTRICITY SUPPLY INDUSTRY the Treasury and without any answerability to the Audit Commission or to Parliament. I doubt very much whether many of its actions to date would have been accepted by a technically competent body. It seems likely that such a proposal will prove attractive only when past failures result in prolonged power supply interruptions, and ‘lessons are learned’.

Renewable energy sources I have referred to the unsatisfactory and expensive wind power programme, and I will briefly examine the possible role of various competing technologies, if only to dispel some of the myths widely promulgated by their enthusiastic supporters. The present programme for wind envisages a large and rapid programme for offshore wind arrays. I know of no reputable observer who considers that the programme for this expansion is physically possible, but enthusiasts remain undaunted and we shall have to wait for the truth to become apparent – no doubt incurring extra costs in the process. But I would like to look briefly at the general question of renewable energy and to examine some of the technologies which are attracting current research and development. First, we should note that renewable energy is diffuse, and of low intensity, so that very large installations are required for its economic collection and conversion to electricity so that it can reach consumers. Wind, with its huge subsidies, is at present the least uncompetitive of these competing technologies. In general, the other renewal technologies are at experimental or early pilot stages. The problems of commercial scale construction and operation are not yet solved and so their economic competitiveness is not known, apart from being more expensive than wind power! Of the marine technologies, we have wave and tidal sources available. The first of these, wave power has been under development for the past 40 years, and some small demonstrators have been built. 141

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POWER POLITICS The problems are the hostile marine environment – corrosive salt, huge waves and high winds, transmission of the output to land, safety of shipping and, of course, intermittency. Substantial amounts of intermittent energy are available, but the scale required by economic considerations takes us well beyond existing experience. Several ingenious conversion devices are under small-scale development. Tidal power is not new. A medium-scale project was built some decades ago at La Rance, in France, and has operated satisfactorily. It has not been repeated. In the UK, there has been much interest in a Severn Barrage, and a number of detailed studies have been carried out over the past 30 years without making a satisfactory case – mainly failing on economic and environmental grounds. Interest in tidal power has now extended to the use of tidal streams, and several devices have been examined at small scale. Another substantial resource lies in solar power. Intermittency is again a problem, mainly because of night-time and location, and development has been on the use of the capture of heat (which can easily be stored), and the generation of electricity. The capture of heat is now well established and offers a reasonably attractive economic case over 40 years or so. Generation of electricity has proved less attractive. Here there are two candidates, photovoltaic cells and solar furnaces. In the first of these the sunlight is converted by photovoltaic cells into low voltage direct current, so that the cells have to be connected in arrays and their output converted to AC for transmission and use. The development of the cells has received widespread research and investment, but the process remains uncompetitive by a substantial margin. The solar furnace employs an array of mirrors to concentrate the sun’s rays onto a boiler, converting water to steam. A large demonstrator was constructed at Cadarache in France some decades ago, but has not been repeated. On the whole, renewable energy sources remain unattractive on economic and intermittency grounds, although they continue to command substantial support from groups unhampered by such 142

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THE PRIVATISATION OF THE ELECTRICITY SUPPLY INDUSTRY practical considerations. Research continues in all of the renewable energy areas in the hope of incremental improvements. The prospect of nuclear fusion continues to attract international support and investment in very expensive demonstrators designed to develop and establish the technology. Some technical progress has been achieved in the basic process, but its extension to commercial application still presents great challenges and its commercial viability is unknown. The timescale for commercial use will be many decades and its success may not be achieved at a commercial level. The foregoing sketch of renewable technologies shows that they are unlikely to solve the problem of carbon dioxide reduction which climate change predictions require. We will be forced to use established methods coupled with improved efficiency of use and energy savings. These are likely to be supplemented by lifestyle changes resulting from the present economic blizzard. A real danger, amply illustrated by the experience of the past two decades, is that practical solutions will be sidelined by governments in favour of wishful thinking and having a woefully poor understanding of physical laws. The combination of environmental lobbies and procrastinating politicians may continue to prove to be an expensive one. In the present context of renewable energy sources, the situation is made even more unsatisfactory than I have described by the initiatives of the European Union, whose politicians and staff appear to be even less numerate than our own civil service, and who exhibit a vulnerability to the environmental lobby but are not clearly accountable to the electorate. The task of remedying the present situation and renewing aged generating plant will be long and expensive. The temptation to defer or ignore the problem is likely to prove tempting to politicians, given their preoccupation with short-term electoral considerations. The problem has been highlighted over the past 20 years with little practical effect and that possibility remains, although the issue will be one of everincreasing practical urgency.

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CHAPTER 9

GOVERNMENT AND INDUSTRY

The problems of government The relationship between government and industry is a complex but important one. It is complex because of the large number of topics requiring decisions by government, of which industrial issues are comparatively few. It is important because a strong industry provides employment, tax revenues and balance of payments contributions. My own experience of the relationship has been very mixed, and I propose to examine what seem to me to be the principal difficulties. To aid this I have illustrated the argument by a case study, the nationalisation and privatisation of the electricity supply industry. That process has been described in Chapter 8, and makes sorry reading, but I want to ask how it went wrong and what can be done to avoid a repetition in the future. The serious situation which exists now places the nation at risk of supply interruptions in gas supply from overseas. Responsibility for this situation, which has been postponed by the current severe depression, arose from failures by both main parties when in power. The situation will worsen as the recovery begins, and construction of replacement power stations cannot be completed at the rate required because of constraints on planning consents, construction schedules, plant manufacturing capacity and capital requirements.

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POWER POLITICS The subject is a difficult one, embracing complex topics and political considerations, and it is addressed by a system in which transient politicians are aided by a permanent, but deliberately amateur, civil service. So, in a general sense, the political aims of a policy are the concern only of the politicians, who are aided, albeit inadequately, in managerial and administrative matters by civil servants. This sounds fine in theory but often fails in practice because ministers (and, occasionally, some civil servants) fail to recognise and observe the separation of roles, a failing most noticeable since 1997. But, even when the boundaries are observed, the system regularly fails and the fundamental reason for this is, I believe, the inability of both groups to understand the limitations of their intellectual approach in a highly technological age. Few Parliamentarians have any experience of management, or any scientific appreciation of today’s pressing problems. The situation has grown steadily worse in recent years, with a growing trend for new MPs to go from university straight into politics, with little or no intermediate experience of employment achievements and little familiarity with science; as a result, ministers find themselves increasingly dependent upon special political advisers, many of whom share their limitations. The ability of the civil service to fill this gap is impaired by the absence of technologically trained people in their senior ranks and by the practice of moving civil servants every few years in support of a style of management which continues to believe in generalism, in an increasingly technologically demanding age. I must make it clear that I would hate to see a civil service dominated by technocrats; the issues to be addressed call for a much broader approach. But, in a personal survey over some years I found that of the top 40 posts in the civil service, not one was occupied by a scientist, engineer or accountant – professions which I selected as broadly representing numeracy and the scientific method. Surely, some ten to 15 such occupants would be more sensible! Unsurprisingly, other countries take a more pragmatic approach – and they include our present trading competitors and the newly industrialising countries. 146

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GOVERNMENT AND INDUSTRY The essentially amateur approach of our civil service is compounded by the composition of the House of Commons and the Cabinet. For me, the most remarkable thing about Margaret Thatcher as Prime Minister was that she was the first (and still the only) scientifically trained person to hold that position in a nation which produced the Industrial Revolution and which is now struggling to maintain its position in an increasingly technological and competitive world. She was familiar with the scientific method and the roles of evidence and hypothesis in decision-making – alien considerations to most of our MPs and civil servants. She was also highly numerate – a similarly alien skill!

The problems of industry Industry has a different set of problems. The first of these is the urgency of decisions in a competitive international market. While RollsRoyce was nationalised, at least one product decision for which government approval was needed was delayed for more than four years, by which time overseas competitors had moved in and consolidated their position. The lesson must be to rely less on government for difficult industrial decisions and to encourage instead their role in setting a broad framework within which industry enjoys freedom of management comparable with that of their overseas competitors. Many of the factors described have been present in both nationalisations and privatisations and appear to be systemic in our government framework. The second problem is that of over-reliance by industry on government aid. The effect of government participation and its inevitable lengthy delays must be spelt out without compromise and made public if necessary, citing opportunities and jobs lost. Of course, that will not be a popular stance, but it has to be a recognised part of the government–industry dialogue.

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How are these problems confronted in politics? The limitations of both politicians and civil servants are easily recognised, but they are made immensely more difficult by the wide range of issues to be dealt with, ranging from social issues to defence, from foreign relations to social security, from health to education. The range would tax anyone, and is much broader than that facing industry. It is therefore unsurprising that politicians seek to develop a strategic vision which permits a general approach to highly disparate problems. Herein lies a fundamental flaw. General aims, such as centralised versus devolved control, may not fit all problems satisfactorily, and must be subject to some careful examination by the users. In principle, this should lie within the competence of the civil servants, but criticism of the suitability of the desired solution, even if available, may not be readily accepted by the minister involved. The case study which I am using for this chapter has been described in some detail in Chapter 8, where it is obviously the case that successive ministers were trapped by their rigid adherence to differing models – centralised control in the case of Tony Benn, and diversified management in the cases of David Howell and Nigel Lawson. I believe that all were wrong, and the correct solution was unacceptable to each group for differing reasons. The civil service, meanwhile, loyally accepted the contradictory policies of successive governments. We might pause at this juncture to ask what experience the politicians involved had of managing such a large and technically demanding solution as that required for the electricity supply industry. The answer is depressingly simple – none. But that did not prevent them from pursuing a course based on their cherished simplification of all problems they were called on to examine – I deliberately avoid the word ‘solve’. Ministers with real management experience, now increasingly rare, have little difficulty in recognising the fallacy of a uniform approach to all problems and show a readiness to examine the suitability of the ‘party’ model to the circumstances. Somehow, any 148

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GOVERNMENT AND INDUSTRY proposed solution to our present deficiencies must embrace a more pragmatic approach than is currently favoured. The situation is made even more intractable by the short spell in a post held by most ministers, coupled with the ambition of successive ministers to leave behind a legacy of some kind. The resulting frequent changes in policy are often very expensive, muddled and retrograde. In my experience in the public and private sectors, constant dabbling from policy level is gravely demoralising and confusing, especially so when it is undertaken in pursuit of a dimly recognised objective, independent of product or market. At least two changes would be helpful at the political level. The first is some regard for numeracy and the second a resolve to use the core policy of the politician’s party as a guide rather than a straitjacket. Both of these would require the unusual approach of appointing ministers with some independence of thought and action, prepared to look at the real considerations required for a satisfactory solution. I am afraid that the limitations of our political system would probably render these proposals unattainable in practice so that we may have to rely on a more effective civil service putting the arguments to a minister possessing a reasonably open mind and not driven by personal ambition.

How can the civil service be made more effective? The shortcomings of the civil service are, in my view, enshrined in its recruitment policy and its general approach to the analysis of problems. The roots of today’s civil service lie in its formation on a professional basis following a report on ‘The Organisation of the Permanent Civil Service’ by Sir Stafford Northcote and Sir Charles Trevelyan in 1854. Prior to this, appointments had been made on a highly variable basis by individual ministers. The report advocated a competitive examination for all entrants and did not advocate external recruitment. The report, consisting of 15 volumes, attracted a wide 149

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POWER POLITICS variety of interest and comment. One letter from the Reverend B. Jowett, Fellow and Tutor of Balliol College, recommended that entrance examinations should be organised in four schools: (1) classical literature, (2) mathematics with practical applications and natural sciences, (3) political economy, law and moral philosophy and (4) modern languages, modern history and international law. This was a commendable attempt to introduce a professional service with some applicable specialist knowledge. The adoption of the report was a huge step forward in seeking to address the growing complexity and specialisms of the day, and laid the foundations of the present-day civil service which has served the country well within its limitations and attracted much admiration from overseas governments. But it has gradually distanced itself from the original ambitions. Specialisation has been largely abandoned in favour of a carefully cultivated generalism. The possession of ‘a good mind’ has eclipsed the value of specific knowledge in depth – and this during a period when problems have multiplied and enlarged in almost every sphere of government and involve growing technical demands in an increasingly technological world. The desire for generalism is today exacerbated by regular transfer of promising civil servants so that they cannot become ‘impaired’ by too much familiarity with the nuts and bolts of problem areas which might affect their generalism. As it is, the deficiencies of the politicians which I have described are reinforced by the generalist approach of their professional advisers. C.P. Snow’s description of the two cultures (humanities and science) is enshrined in the thinking of today’s civil service in a way which offers little support to efficient government in a complex society. The problem is not simply one of the narrow qualifications of the most senior civil servants, although that is serious enough in itself. Rather the problem is the pressing need to change the distant intellectual bias of senior civil servants, and that requires an unreserved acceptance by them that the numerate and scientific disciplines are not excluded from the top levels of management but need, rather, to be embraced by all of them. 150

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GOVERNMENT AND INDUSTRY Much energy has been expended by senior civil servants over past decades in seeking a solution to these problems. One such important step was the introduction of cash limits as an admittedly crude device to control the operation of nationalised industries. In the case of the electricity supply industry, of which I was chairman at the time, it was singularly inappropriate, as I had the pleasure of pointing out to a group of Cabinet ministers and senior civil servants. Cash limits sought to set a figure for the cash balance of the industry on 31 March, the end of the financial year. It was thus set about a year earlier. I pointed out that in the case of the electricity industry, the cash performance depends largely upon the weather of the intervening winter, since bills are necessarily paid up to four months after the energy has been used. A hard winter means high sales, resulting in good profits but low cash receipts. Conversely, a mild winter reduces profits but lower consumer arrears and better cash flow. This simple relationship governs the cash performance of the industry in relation to the cash target set a year earlier, since the weather forecasts available cannot predict weather a year ahead, and the weather variations are large in comparison with the cash targets set. This was an example of a measure quite suitable for some industries proving quite unsuitable for others. A seemingly good idea foundered on its general application to widely differing industries. I have to add that, while the situation was eventually recognised by ministers and civil servants, the practice remained unaltered, with sterile and repetitive discussions at the end of each financial year. Another example of civil servants’ desire to exercise some control without the requisite background knowledge lay in the requirement for five-year strategic plans for each industry, produced annually. The detail involved was great, and the required document proved to be of little practical use to the industry. But the most annoying feature of this requirement was that, over a period of ten years of my experience, neither ministers nor civil servants showed any interest at all in discussing the sizeable documents submitted. 151

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POWER POLITICS Another facet of relations between government and industry emerged in the course of the periodic meetings I enjoyed with ministers and senior civil servants. I discovered that, although we regularly sent a copy of the meeting notes to them, we never saw a copy of their notes, which occasionally led to some differences. To avoid this, I made a practice, at the beginning of meetings, of saying ‘Secretary of State, we are going to discuss an important issue, to which my colleagues and I wish to give our undivided attention. Can we therefore have a copy of the departmental note of the meeting?’ Invariably, this led to a muttered discussion between the Secretary of State and the Permanent Secretary, which resulted in an acceptance of the request ‘on this occasion and without precedent’. This became a ritual and greatly simplified matters – at least from our standpoint! My comments on the civil service have been generally critical and I would not wish to suggest that the ones with whom I dealt over many years were anything other than highly conscientious, able and diligent. They found themselves prisoners of the tradition of generalism and a lack of knowledge of the problems presented to them. Most welcomed an in-depth discussion of complex issues when time permitted; unfortunately, political imperatives sometimes prevented this. In asking, as I have, how we can improve the performance of the civil service, I have so far dwelt on unsatisfactory attempts and practices. I would now like to offer some suggestions of my own for more general discussion, recognising that I may be falling into the trap of generalising failures in specific instances to markedly differing situations. 1. The selection and promotion processes for civil servants should take direct account of the educational background and experience of individuals, with an attempt to encourage an approach to specific problem-solving. This could usefully include the recruitment and promotion of scientists, engineers and accountants throughout the service. 152

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GOVERNMENT AND INDUSTRY 2. The intellectual tradition of the service should be adapted to provide more rigorous and practical analysis, bearing in mind the inevitable shortcomings of ministers, which I have described earlier. 3. A number of appointments, at all levels, should be made from industry, on a permanent or short-term basis. The career path of promising civil servants should mandatorily include secondments of three years or more to an appropriate company. 4. Time spent in individual posts in the service should be long enough for the contribution (and responsibility) of the individual to be recognised – and appropriately rewarded. The practice of rapid transfer, where no one is responsible for failures, is unacceptable. 5. The desire for secrecy should be abandoned, except in highly exceptional circumstances where the Official Secrets Act applies and can be used in court. The judicial overseeing of that Act should provide adequate protection for government and nation. The exposure, and acknowledgement, of administrative errors should be seen as a desirable route to administrative efficiency. Civil servants are, literally, the servants of the government – but also of the public. 6. The greatest peril for an efficient enterprise is a large administrative structure. Northcote Parkinson pointed out some years ago that ‘work expands to fill the capacity available’, and the inevitable results of an overmanned bureaucracy are an abundance of committees and bad communications. Both are all too visible in today’s civil service and were encouraged by the actions of the Labour Government from 1997, since when the staffing levels of the civil service have risen by almost a million. Reduction of present levels will not only achieve substantial cash savings, they will also improve decision153

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POWER POLITICS making and reduce long delays. The cherished notion that problems can only be solved by more supervision is a gross and wasteful fantasy which requires early correction.

How can politicians be made more effective? A growing proportion of new MPs enter Parliament without any experience of the world outside politics, often going directly from university to a job such as research assistant to a politician. This inevitably restricts their capacity to understand the problems with which they are confronted and the practicalities of their proposed solution. Their resulting inadequacy is compounded by the growing practice of Cabinet decisions being taken and enforced by the whips without debate in the Commons chamber. In fact, the House of Lords is often the only forum for close examination of proposed, and often defective, legislation – and this despite the fact that it is non-elected. Partly as a result of these factors, and the volume of inadequate legislation which results, the standing of politicians is worryingly low, as evidenced by the often low electoral turnout. But these are not the only responsible factors. The growing use of ‘spin’ has brought with it a disregard for honesty on the part of many politicians, who appear to believe that political survival trumps any desire for truth or admission of failure. Politics has become an end in itself, disregarding the public which politicians exist to serve. This, taken with the earlier points of lack of experience, creates a serious gap between political ambitions and electorate expectations which inevitably challenges any notion of democracy. This danger has been recognised by political leaders in the past and is in urgent need of attention today. It can only be solved by the political leaders of the day recognising their limitations and responsibilities. To make Parliamentary democracy effective there must be less legislation, and that properly scrutinised, less concern with spin 154

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GOVERNMENT AND INDUSTRY and a recognition of the fact that politicians are servants of the electorate – all practices well established in our past political system, but steadily eroded in recent years. But there are also some steps which could be taken to improve the quality of MPs and the Cabinet. I am a cross-bencher in the House of Lords simply, because, like others, I do not believe any party to be infallible – a conclusion based upon experience and, I think, illustrated by the decisions made on the organisation of the electricity supply industry, but by no means confined to that example. My suggestions do not rest on any political bias and are intended to focus attention on the present situation in which our legislators are increasingly distanced from the problems of the nation and their effective solution. As earlier in the case of the civil service, I will advance some suggestions in list form. They could: 1. fix a minimum age of 35 for most Parliamentary candidates; 2. require candidates to have some useful experience, responsibility and achievement; 3. reduce the volume of legislation so as to allow proper scrutiny of legislative proposals: quality not quantity is desirable; 4. reduce the use of the whips and rely more on arguments; 5. be less secretive about mistakes and failures; 6. encourage ministers to serve longer terms and to gain experience and the respect of department staff; 7. abandon spin and be honest with voters; 8. realise that government is a job of great responsibility, not a party game; 9. extend the role of Parliamentary select committees to include early discussion of objectives before introducing legislation. These, and the earlier suggestions on civil servants, are not intended to be in any sense prescriptive. I simply don’t have the experience to 155

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POWER POLITICS propose that. But government is in a mess, as I have shown, and is getting worse. There is a need for a radical reappraisal of its role, and it may be that a Royal Commission would be an appropriate tool, provided that its membership was not confined to politicians! Events surely show the need for a more effective government process, about which much has been said and written over the years. My plea is for a determined examination of weaknesses and a resolve to accept and introduce purposeful changes.

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CHAPTER 10

SOME INTERESTING BYWAYS

The title of this chapter is not meant to demote its contents to the status of ‘also-rans’. Rather, it seeks to describe activities, not in the mainstream of my career, which provided interest, and experience of great value.

N.M. Rothschild & Sons Ltd The first of these was my non-executive directorship of N.M. Rothschild & Sons Ltd, a merchant bank of great distinction. I had known Lord Victor Rothschild, chairman of the bank, through my association with the Cabinet think tank which he led, and its interest in nuclear power. Following the announcement in October 1980 of my resignation from chairmanship of the Electricity Council, he telephoned to ask me to lunch, at which he was accompanied by Mr (later Sir) Evelyn de Rothschild, then chief executive of the bank. Victor greeted me with the words ‘My boy, I’m very pleased with you. Not enough people tell Governments to get stuffed. Will you join our board?’ So began a rewarding association with a merchant bank of great standing, from which I was to learn much of the operations of the City in all of its activities, an experience of inestimable value to me in later

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POWER POLITICS years. I received a great deal of help and tuition from the corporate finance, banking, asset management and bullion departments of the bank, in all of which I found a refreshingly warm welcome and a lively, responsive attitude. I was consulted by members of the staff on a wide variety of subjects, to some of which I was able to contribute. The number of those increased with time and growing familiarity with the interface between the bank’s activities and industry. The monthly board meetings were also educative, and after a few years I was asked to become chairman of the bank’s internal audit committee, when the gradient of the learning curve steepened markedly! Evelyn de Rothschild, now chairman of the bank, attended these meetings and was very supportive. Non-executive directors were often consulted singly, or in small groups, on matters of policy, the most notable being the challenge offered by the ‘Big Bang’, when traditional barriers between various activities of the City were breached in a variety of ways, combining hitherto specialised activities such as stockbroking, corporate finance and banking in what came to be known as ‘the one stop shop’. N.M. Rothschild wisely elected to remain outside this trend and I recall saying that I was sure that many industrialists would welcome that decision. NMR remains a formidable player in corporate finance and other activities and dipped its toe (very profitably) in the new waters by acquiring a leading stockbroker, which it later sold at a satisfying price. Among the people with whom I formed especially close relations was Peter Byrom, a director in the corporate finance department. He had a lively, inventive mind coupled with a clear sense of ethics – a rare combination in those days. His advice was of great value in my early days at Weirs and I insisted on his handling the Turner & Newall account when that was awarded to Rothschild. He later also handled the Rolls-Royce privatisation. I learned much and gained many friends during my 14 years at the bank, from which I retired at the age of 70, despite suggestions that I should continue. 158

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SOME INTERESTING BYWAYS One amusing occasion arose when Victor Rothschild and I embarked on an undeclared competition of writing each other progressively shorter memos. (He was well-known for his passion for succinctness, and maintained that any proposal could be adequately dealt with on one side of a quarto sheet.) Eventually, I sent him a memo reading ‘Lord Rothschild, Yes.’ He came into my office, waving my memo above his head and beaming broadly. ‘“No” would have been shorter’, he said, triumphantly!

Shell (UK) Ltd Shortly after my retirement from the electricity supply industry I was asked, in 1981, by John Raisman, chairman of Shell (UK) to join his board as a non-executive director. The company was a wholly owned subsidiary of Royal Dutch Shell, but enjoyed some degree of autonomy, notably in the North Sea, where exploration for oil and gas was gathering speed at that time. I accepted, and a few weeks later was asked if I would like to join the board of Exxon in the USA. I decided to remain with Shell, rather than endure regular Transatlantic trips, and I enjoyed my 14 years’ subsequent service. After a few months, I found that the board was little more than a talking shop, where directors were informed of decisions, but no briefing or discussion took place. I went to see John Raisman and expressed the view that he was failing to use the non-executives properly and so missing a great deal of potentially valuable advice. I added that I would not wish to remain a director unless things improved. He responded positively, and the board meetings became more interesting and constructive – a situation which continued for my 14 years of service and which occasioned favourable comment from the Shell-UK executives and visiting Dutch representatives. During one period of my service there was a very active interest in acquisitions, with the nominal idea of diversification. This was a local initiative and so was severely restricted in scope. The resulting 159

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POWER POLITICS acquisitions were small and disconnected, so that the idea of diversification was unrealistic. I spent some fruitless meetings trying to point this out, without success, but felt justified when the acquisitions portfolio was liquidated at a significant loss! The exploration arm of the business was fascinating and I greatly enjoyed the involvement in exploration and production. The chemicals and refining businesses were active and interesting, too, and my colleagues and I could realistically claim to make useful contributions as time went by and the standard of both board papers and our own contributions improved. I retired at the age of 70, as with my Rothschild directorship, having made many friends and acquired an interesting insight into another long-range energy business.

Scientific research I was interested in the reliance of much of industry and engineering on scientific research and was invited to join several government funding bodies, including the Science & Engineering Research Council and the Advisory Board for Research Councils. The first of these covered research in science and engineering at universities and central laboratories; the second supervised the activities of all four research councils. I found the work interesting and stimulating, and gained some light relief from observing the academic rivalry for funds. The most interesting of the advisory posts I ever held was that of chairman of the Advisory Committee on Applied Research and Development (ACARD) and its successor, the Advisory Committee for Science and Technology (ACOST). Both required me to report to the Prime Minister, Mrs (later Baroness) Thatcher, an experience which I would not have missed for worlds. With her background of chemistry at Oxford, she had a ready understanding of scientific issues and a great interest in the role of science in industry, society and government. Our meetings always ran over the allotted time, with the typical remark to 160

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SOME INTERESTING BYWAYS her staff, drawing attention to her next meeting – ‘Go away, I’m enjoying myself.’ On one such occasion she asked whether she could attend a meeting of ACOST. I replied that she would be very welcome and asked whether she would like to take the chair. She replied that that was a matter for me, as chairman of the Council. I remember saying that I found it difficult to imagine her attending a meeting at which she was not in the chair. Somewhat taken aback, she accepted and chaired a very lively meeting, made so by her attempts to stimulate discussion. After one particularly provocative comment, she turned to me, put her hand on my arm, and said ‘Don’t say a word until you have cooled down!’ That had the desired effect in lightening the atmosphere! On another occasion she asked whether she could meet some talented young researchers, and offered to set aside a whole day at Number 10 for this purpose. I asked which areas of science she would like to cover and was rewarded with the typical reply, ‘Everything!’ With the aid of Sir David Phillips (later Lord Phillips of Ellesmere, now unfortunately deceased) I arranged for about a dozen young scientists from a very wide range of disciplines, to make presentations, each lasting about 20 minutes, and to answer questions. True to her word, Mrs Thatcher devoted a whole day to them and asked a lot of very good questions. The atmosphere was one of great enthusiasm and goodwill and the PM obviously enjoyed it greatly. At one point, one of the presenters asked me where else in the world a Prime Minister would show such a personal and lively interest in the work being done by young scientists. The day was a fascinating one in many respects and was attended by several Cabinet ministers. I was sitting next to Nicholas Ridley who, turned to me after one presentation and remarked ‘Well, I’m sure that was very interesting but I didn’t understand a b——y word!’. I imagine that his subsequent account of the meeting to his departmental chief scientist must have been quite entertaining! 161

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POWER POLITICS

The Engineering Council The organisation of professional engineers in the UK is carried out by some 40 separate institutions, each based upon the individual discipline represented. The principal ones are those for civil, mechanical, electrical and chemical engineering but that does not in any way diminish the importance of the others, each representing a specialised area. Each institution provides conferences and publications in its area and also takes a leading part in the academic training of its members. But it does give the impression to outsiders of an unwieldy conglomeration of disparate organisations, overlooking the fact that a similar pattern exists in, for example, medicine and the physical sciences. I was president of the largest of the engineering institutions, the Institution of Electrical Engineers in 1981, when there was a government-inspired debate on the structure of the engineering profession. Sir Monty Finniston, a metallurgist, had headed a committee to examine the issue and recommended the formation of an Engineering Council to consolidate the situation by replacing the multiple separate institutions. I was not enthusiastic about his approach, perhaps because I had seen the strengths of the institutions at close hand, and similar views were quite widely held in the institutions, large and small. The Engineering Council was formed in 1982. Its first chairman was Sir Kenneth Corfield, an old schoolfriend, who was then also chairman of STC plc – Standard Telephones and Cables. He was sympathetic to the cause of consolidation of the institutions and had little sympathy with the status quo. At the end of his statutory three years, I was asked to succeed him. I have generally preferred evolution to revolution and proceeded, in a more conciliatory way, through regular meetings with the presidents of the major institutions. I took the view that driven consolidation would only produce a large institution with many specialised divisions, and that we might exchange the present multiplicity for a consolidation more apparent than real. 162

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SOME INTERESTING BYWAYS We therefore proceeded on the basis that mergers were to be encouraged where those involved wanted them and could show a good case, but not just in pursuit of apparent tidiness. An important role was to be played by the Engineering Council in the attainment of C.Eng (chartered engineer) status, and this led to a close involvement in accreditation of engineering courses and a developing interest in update courses. I was fortunate in having as director-general Dr Kenneth Miller, who thought on similar lines, and we proceeded on a gradualist basis to forge links between institutions and to encourage mergers when desired by the membership. The Council has proceeded on similar lines since then and has become an important influence on the shape and development of the profession, with some reduction in the number of institutions. It continues today, a quietly effective force, well respected and widely recognised and the consolidation of some of the separate institutions has proceeded at a manageable pace.

The Royal Academy of Engineering At the same time as the discussions about the organisation of the engineering profession, some eminent engineers were discussing the formation of an engineering academy of distinguished engineers. This was not seen as a rival or intruder on the territory of the established engineering institutions, but rather as a body of engineers of all disciplines who would be capable of offering authoritative opinions and advice on engineering matters of policy and interest. The discussions led to a proposal for a Fellowship of Engineering to which members, already members of a chartered engineering institution, would be elected on the basis of distinction in their field. To begin the process, 60 engineers were invited to become fellows in each of the first two years, with an annual intake of elected members to follow. Membership would be on the basis of nominations and election. Its first President was Lord Hinton, a towering figure who performed engineering wonders in creating the nuclear industry which has served 163

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POWER POLITICS the country well for 60 years and is now undergoing a long-delayed renaissance. I was invited to become a Fellow in the second year, 1977, and so became a founder member of the Fellowship and partook in its first hesitant steps towards its present prominent and influential role as a vice-president and chairman of various committees. The Fellowship later became the Royal Academy of Engineering, with the enthusiastic support of its senior Fellow, HRH Prince Philip, whose interest has never flagged and whose contribution has been enormous. Today, its opinions carry great weight at national policy level and are sought by government and others as a matter of course. Its progress has been widely supported and welcomed by business, politicians, engineers and their institutions and it is difficult to imagine how we managed without such a body.

The Goldberg Ensemble While I was at Turner & Newall I had regular contact with the company’s medical consultant, Dr Rhys Williams. He invited me to a concert given at the Wigmore Hall by a small chamber orchestra, the Goldberg Ensemble. This was directed by Malcolm Layfield, a wellknown violinist, and consisted of young musicians hand-picked by him for their ability. They rehearsed intensively, and produced a beautiful sound and almost uncanny precision of playing. I was very impressed and subsequently developed my interest in their work. I was later invited to become their Patron (in about 1985) and remain so, though not very actively in recent times when their activities have included an increased amount of contemporary music. I took a considerable interest in their programming and suggested that they should make the first item after the interval an ‘atmospheric’ one, featuring their lovely string tone and offering some relaxation before the main work of the second part of the concert. This proved highly successful, and featured works by Barber, Tchaikovsky, Puccini, 164

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SOME INTERESTING BYWAYS Helen Glass and many others. The practice has been copied by other chamber orchestras, as has the playing in that slot of the sextet from Strauss’s ‘Capriccio’, which the Goldberg players had never encountered, but which my wife and I loved. The opera asks which is the more important in opera, the words or the music, and was a firm favourite of ours. Rolls-Royce sponsored a series of six concerts by the Goldberg Ensemble annually for about 15 years, and they were greatly appreciated by invited company staff and advisers, subcontractors, financial advisers, local government and others. They also developed an enthusiastic public audience. This sponsorship linked support of the arts with publicity and public relations in a highly effective way which I believe could be more widely used by companies.

The Association of British Orchestras In 1982 I was approached by John May, the secretary of the Association of British Orchestras with an invitation to become their chairman. The Association represented all of the professional orchestras in the UK, dealing mainly with the Musicians’ Union, on terms and conditions of employment, and the Arts Council, on matters of funding. I asked why they wanted me, and was told it was partly because they knew of my love of music but also because the orchestras didn’t want a member to represent them on such sensitive matters and so preferred an independent chairman. I replied that I thought that they should be capable of selecting one of their number as their chairman and that my acceptance of the post for a four-year term would be directed to that end. John May continued as secretary for a time and was then succeeded by a highly capable young woman, Charlotte Ash. The arts world is densely populated with highly competent youngsters and Charlotte worked very hard at extending expertise in the fields of marketing and community involvement – activities which bore early fruit and continue today. 165

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POWER POLITICS I had an enjoyable four years, meeting many interesting people and hearing a lot of good music, and at the end of my term I declared my intention to stand down and suggested Clive Smart, the well respected and popular managing director of the Hallé Orchestra. He was elected as chairman with acclaim, and the post has continued to be filled by an orchestral representative, to the undoubted benefit of a fine organisation which has made great strides in an always difficult financial environment.

University posts In 1985 I was invited to become chairman of the Council of Cranfield Institute of Technology, a post which I held until 1992. During that period we acquired the agricultural research organisation at Silsoe and the management contract for government defence research at Shrivenham. Cranfield was wholly devoted to post-graduate training and research and had acquired a considerable international reputation. Its tradition lay in aeronautics, but it diversified into a broader industrial engineering base, where it continues to serve industry in a highly collaborative manner which was well ahead of its time. Professor Pat McKeown was a pioneer of new machining methods, one of which, creep grinding, proved of great value to Rolls-Royce. The Vice-Chancellor of the Institute was Sir Henry (later Lord) Chilver, a civil engineer and it fell to me to organise his replacement on his retirement. We appointed as his successor Frank Hartley, a distinguished chemist, who served the Institute well and saw its conversion into Cranfield University, gaining a strong undergraduate presence, but retaining strong post-graduate research and teaching activities. I found the work at Cranfield very rewarding in dealing with a wide range of activities and opportunities and was sorry to leave in 1992, when I was invited to become Chancellor of Strathclyde University, in Glasgow. 166

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SOME INTERESTING BYWAYS This was a very different post. The first Chancellor of the University was Lord Alex Todd, Professor of Organic Chemistry at Cambridge University and a Nobel prize winner. He was President of the Royal Society and a proud Glaswegian. He attended the principal events at Strathclyde, but his busy international activities and distance from Glasgow limited his involvement, a not unusual situation. So the tradition had led to the visit of the Chancellor being an occasional event. This in no way diminished the mutual affection of Todd and the University, and the Student Bar today rejoices in the name of ‘The Lord Todd’, to mutual delight. I set out with the intention of being quite an active Chancellor in a post with few specified duties and found that even those had been performed by others over a period of more than 25 years. I asserted my intention of carrying out those myself and extended the number of degree convocations at which I presided to six or seven annually. Beyond that I was able to help in several ways, such as meetings with industrialists, opening conferences, speaking at faculty meetings and dinners, but the bulk of my activities were formal or ceremonial, and often repetitious. There was a superb ethos in the University, which trained more engineers than any other UK university – and to a standard highly valued by employers. The institution roots went back to John Anderson in 1796 when he founded an Institute dedicated to ‘useful learning’. The successor institutions have carried that aim proudly to the present day, and continue to do so without compromising its established academic standards. The immediate predecessor of the University was the Royal College, Royal status having been conferred by HM King George V following a visit to India, where he was greatly impressed by the number and quality of Strathclyde graduates. From then until its grant of University status it was a client of the University Grants Committee and a university in all but name. It was a stimulating experience to be its Chancellor and to be able to visit the many departments and engage in interesting and enthusiastic discussions with staff on a wide range of topics. But in 167

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POWER POLITICS 1999 I decided that the burden of travelling was becoming too much, and resigned from an appointment which was nominally for life, to be succeeded by an eminent judge, Lord Hope, who has the added advantage of being a Scot, as was my predecessor.

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EPILOGUE

My story has been one of a busy and interesting career, with major discontinuities and some substantial successes. In so far as I had any central plan or ambition, it was to rectify the absurdities of the Herbert Report, which led to the Electricity Act of 1957 and separated the generation of electricity in England and Wales from its distribution and sale. That such a step should have been taken for an industry which cannot store its product, and so has no stocks, beggars rational belief, and for long obstructed the efficient management of the industry. In this aim, I failed. As we have seen, the problems persist today and await urgent solution by politicians. I am a cross-bencher in the House of Lords and remain steadfastly unattached to any political party, having witnessed at close hand the self-imposed handicaps under which they all labour. My successes have been largely as a result of disregarding the wishes of politicians when, as so often, they almost guarantee unintended and unwelcome failure. I have been fortunate in having had a highly varied and enjoyable career. As one door closed, another opened, sometimes in a totally unexpected way. I have been able to influence events at a national level and have been confronted with a wide range of engineering problems. The pace has sometimes been quite demanding, but never without challenge and satisfaction. 169

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POWER POLITICS Most of these issues have been illustrated by specific examples in the course of earlier chapters, but I propose now to venture on to a more general examination of the manifest deficiencies in industrial management and politics which hamper the development of this great country. It is a personal view and strays into the hazardous area of prediction in fields which are not my main source of experience and familiarity. I do so only because the problems are there and are formidable; but I hope that the breadth of my experience will enable me to make some useful observations – and, yes, predictions. The first of these problems concerns industrial management. For many years, promotion to the board of a company has been seen as necessarily involving separation from the workforce. There is a widespread and undesirable belief in many cases that board membership is a highly privileged position, involving high salaries and a plethora of ‘perks’ not available to the ordinary employees. I have spent many years as a director or chairman of large companies, and never lost sight of the fact that I remained an employee of each company in exactly the same way as the machine shop foreman and operators. This is constitutionally the case, of course, and any good manager at any level knows how much he depends on those for whom he is responsible – and that relationship cannot end with elevation to the board. But it does become more difficult as more intermediate levels of staff are interposed. I tackled this problem by making a practice of visiting plants and sites and walking round, stopping to talk to individual employees. I eschewed any escort by local management and made a point of summarising what I had learned to the local manager and never gave instructions or reached conclusions during the visits. I learned a great deal during those occasions and followed up discoveries with local management later. I also discussed management problems and aims with local managers in an informal way, and followed up any concerns they had. My intention in doing so was to create an ethos in which individual 170

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EPILOGUE efforts could be seen to be important to the company and in which the general strategy was relevant to all. Importantly, I arranged for non-executive directors and professional advisers to make similar visits to plants and to discuss matters with local management, thus reinforcing my own visits. Of course, this requires confidence in their grasp of company policy and in their ability to listen, but I found it of great help at all three troubled companies which I led. It also improved the contribution of non-executive directors and advisers. This brings me to the importance of delegation and its difficulties, which are sometimes used to avoid its practice – to the disadvantage of all. There are two major and quite serious difficulties for a delegating manager. First, the delegatee will make mistakes which would not have been made by his boss – that is why he is the boss. Second, and more difficult for the delegator, the job will be done differently, and sometimes better, than hitherto. This should be a cause for rejoicing, not envy or incredulity. I believe that at every level, in every organisation, there is a need to feel observed and appreciated, and this involves reciprocal respect for one’s superiors and a feeling that they know what they expect and can demonstrate that in practice. This places great reliance on experience and is the death knell for amateur managers whose promotion has often been built on management theory or, even worse, favouritism. As the reader will have found, my own career has been studded with examples of incompetent managers, who were separated by lack of experience from the reality of the job. Much has been written about management, but the foregoing, for my money, sums it up: where employees are members of a team in which everyone cares about the product and its market, where every individual is valued and respected, and where one’s performance can be recognised by one’s boss. All are necessary contributions. In the companies which I had the privilege of ‘rescuing’, boards, advisers and senior management often thought such mundane matters were beneath their notice, and a chasm developed between top management and the ‘others’. That is a mistake which is not visible in 171

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POWER POLITICS successful companies, where job satisfaction and teamwork are paramount. Their active preservation rests progressively on senior levels of management and is ill-served by conscious isolation at top level. Many politicians, and others, have suggested that really good management can only come from the cooperation of management and workers. Tony Benn took this notion even further by advocating tripartite management, involving company management, trade unions and Government. This is nonsensical, for it distributes responsibility in a way destined to fragment the true basis of a cohesive effort which I have described and have always tried to practise. Most employees want to know how the company is performing, but have no ambitions to share management’s responsibility – quite rightly, they expect all employees to do their own job well.

The future – a different economic climate The economic climate has changed internationally and dramatically for the worse, since I began to write this book – and mostly following its substantial completion. The need to replace ageing power stations remains, but is complicated by the inevitable squeeze on capital spending and by the effect of the recession on electrical load growth. The effects of the major collapse of the banking system have been so far, and to a large extent, concealed by the measures taken to avert a complete collapse of the financial system on which we rely for national and international trade. The euphemistically named ‘quantitative easing’, which really means increasing national indebtedness by printing huge quantities of money, has served to allow a pretence that we are on the road to recovery. In fact we are vastly more indebted than we were when the crisis occurred, and the road to recovery has been made longer and more painful by the form of the intervention, necessarily experimental in its character. In the case of Western democracies, and particularly in the UK, the situation has been further complicated by political and electoral 172

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EPILOGUE considerations. This has resulted in politicians concealing the size of the problem and avoiding the inevitably painful measures which will be necessary to restore even the possibility of an orderly recovery. The debts we have accumulated in allowing the crisis to occur, plus those arising from the response to date, have created a need for borrowing on a scale hitherto unknown. As part of the pretence that we can see a solution and its timescale, to which all countries and their governments and central banks are parties, we have delayed taking the essential corrective measures and so increased the problem.

The financial crisis In the UK, as in other Western industrialised countries, those corrective measures will have to include dramatic reductions in public spending on projects and on people, increased taxation and a continuing high level of borrowing with its associated interest charges. Since all countries are in this situation the level of borrowing will be huge and lenders will react in two ways. First, they will pick and choose their debtors on the basis of credit-worthiness, and second, they will require interest rates to reflect total demand and their assessment of the prospects of recovery of the borrowers. At the time of writing, the UK Labour government showed little sign of understanding this. Indeed, saddled with enormous debts and a world recession, they continued spending and borrowing at an alarming rate. They should have heeded the warning given by a former Labour Chancellor, Denis (later Lord) Healey who said: ‘If you find yourself in a hole – stop digging.’ Since he suffered the indignity of an IMF rescue from a difficult financial situation, imposing demanding conditions, he should be heeded. The Coalition government have shown encouraging signs of grasping the nettle of the deficit burden and the need for early action to reduce the both deficit and public spending. This shows a welcome determination to live within our means and to restore our international credit-worthiness. 173

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POWER POLITICS The prolonged shortage of available finance will present difficult and unpopular choices. Projects which are cherished will have to be abandoned or, at best, postponed indefinitely. Two problems, discussed in previous chapters of this book, are the forthcoming shortage of electricity and the development of renewable energy sources; of these, the shortage of power is by far the more important. The high relative cost of renewable energy and its intermittent contribution makes it a luxury we can ill afford and one which should be abandoned as quickly as possible in the new regime of austerity. There are more effective and cost effective ways of reducing carbon emissions. Such a course will be unwelcome to some, but will be taken alongside other unpalatable decisions on cutbacks in defence expenditure, education, health, social benefits and many other areas. Their common result will be increased unemployment and a reduction in the services which form an important part of everyday life. Undoubtedly, life will become very hard for many and we, and most other countries, have to blame the ‘borrow and spend now’ culture which has afflicted personal and government spending for the past two decades. The acceptance of this by politicians and individuals as indicating the end of ‘boom and bust’ can now be seen as grossly ignorant and irresponsible. The crisis we face is without precedent and its worldwide nature serves to make it less tractable for any one country. Competition for borrowings will drive up interest rates and make remedial measures all the more difficult as inflation re-emerges, forcing prices up and reducing international competitiveness. Democracy will find this situation difficult to accept and will be severely tested. I take no pleasure at all in predicting this daunting scenario, but the facts are all too supportive of its inevitability. Recognition of the facts will only emerge in the UK when the government is faced with a full electoral general term in which to address the problems. The European Union will, of course, have problems arising from its constitution and monetary organisation and, in that area at least, the UK will have a comparative advantage in that we are not members of the euro currency zone. At present our restricted participation in 174

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EPILOGUE Europe nevertheless involves a considerable annual cost for which it is difficult to perceive a case in stringent times. It may well prove an extravagant luxury.

The transition from here Some will regard this whole scenario as dire, but there is a sense for me that life has come full circle. I grew up in a 1920s and 1930s world of high unemployment, where individual self-reliance was the order of the day for many, radio had barely arrived, television was a distant promise, holidays were for the few and Beveridge had never been heard of. Class distinction was well established and largely accepted, university education was a privilege, pension schemes were for the few and early retirement was unheard of. The Second World War was on the horizon, with Nazi Germany making the headlines, and memories of the Great War were still very much alive in the public mind. Since then, the welfare state and the consumer society have developed apace and credit cards have aided in the development of a debt-ridden society, living on credit made readily available by reckless financial institutions under the complacent eyes of politicians of all parties. In the 1920s and 1930s, debt was a danger to be avoided, and habitual borrowing a sure road to ruin. Perhaps we are going to see a swing of the economic pendulum which will restore some of those earlier habits and values. Perhaps, too, we will see a fairer distribution of world wealth, as the developing countries begin to build on their low wages and expectations to seize a larger share of world trade – indeed, that is already happening. We can, I believe, be sure that the post-war period of wealthy indolence is at an end, and that the luxurious 1970s and 1980s will soon become a part of history. We face a major and painful readjustment, but should remember that we have done so before, in the great depression of the 1930s and the World War of 1939. We survived those disruptions and will doubtless return from the present one to a state of some stability, 175

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POWER POLITICS although under what international conditions we have yet to discover. The only certain thing is that it will be very different and that the gilded comforts of recent years are unlikely to return. The determination of the people will shape the UK future, aided by their traditional inventiveness. Government will have to be determined, steadfast and resourceful and the rest of us will have to exercise patience for unfamiliarly long periods. We shall have to rediscover the resilience and endurance of earlier, more challenging, times and adapt to a changed world. Such a world will not necessarily be one of privation, and may bring welcome adjustments to social attitudes. Responsibility may return to its rightful position alongside rights, and individual responsibility may again come to be seen as preferable to dependence on the nanny state. Government may once again see its role as a mechanism for supplying national services to the electorate, rather than one for instructing them in life values and patterns. I believe that the emergence of such a society is essential to the health of this and other nations, and would have the added advantage of restricting the hubris of politicians, which has been responsible for so many of our present problems. The future belongs to the young and the contribution of their elders lies in not only returning the nation to financial health, albeit at a lower level, but in doing so without further mortgaging the future for our successors. By resisting the temptation to impose social structures with little regard for individual freedom, we may in time develop a reformed society that recognises and encourages the dignity of the individual while liberating innovation and enterprise. Wealth is not created by governments but by the initiative and drive of individuals freed from the shackles of central bureaucracy and a mistaken view of the role of government. I cannot end this book without thanking my many colleagues and friends for their committed and enthusiastic efforts in overcoming the wide range of formidable problems which we faced together. I believe that they enjoyed the experience as much as I did and that the solution to many of our current and future problems can be found in the liberation of managements combined with clear objectives. 176

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EPILOGUE Finally, I would like to thank my youngest daughter, Meg, for so generously contributing to this book through her expertise as an established author. Her familiarity with the world of publishing has been invaluable to a simple engineer.

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APPENDIX 1

PIVOTAL PEOPLE

There were a number of pivotal points in my life, which led to ever more senior positions of great interest and influence. These opportunities were generally due to individuals, many of them now dead and largely forgotten and this brief chapter gives me the opportunity to thank them and to give a brief description of their own personalities and achievements. There were many others, of course, who displayed their confidence by offering me posts in their organisations. To those, and to the many colleagues who supported me throughout the journey, I offer my deep thanks. Allan, C.L.C. Lewis Allan was chairman of the South of Scotland Electricity Board when I was appointed Director of Engineering in 1968. A civil engineer, previously chief engineer of the North of Scotland Hydro-Electric Board, he was a quiet, thoughtful, reserved man who bore his responsibilities with great care. He had to retire due to ill health in 1974 and arranged my succession with the active support of Alan Christianson, his deputy chairman. Lewis Allan was a proud and committed Scot, who played the bagpipes, and would make telephone callers wait until he had completed a pibroch he was playing. After his retirement, he took up the study of Gaelic literature.

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POWER POLITICS Benson, Sir Henry Henry Benson had been senior partner of Price Waterhouse and became, on retirement, industrial adviser to the Bank of England. When substantial companies got into serious financial difficulty he organised the banks and investment institutions involved and persuaded them to support a change in chairmanship of the troubled company. In this role, he asked me to become chairman of the Weir Group, a well known pump maker and, later, of Turner and Newall a company heavily involved in asbestos mining and products. Both companies quickly returned to financial health by the simple expedient of making difficult decisions without delay. Later, I became convinced that a similar solution could have been applied to Rolls-Royce in 1971, a decade earlier than Weirs or Turner & Newall. Such an adventurous move would have avoided 14 years of stultifying nationalisation, during which the US competitors expanded to dominate the rapidly growing market. Paradoxically, Henry Benson played a prominent part in the alternative solution of receivership which was adopted by the Government. Lord Campbell of Croy Gordon Campbell commanded a field battery in the Second World War and was decorated with the MC and bar. He was left with difficulty in walking and constant pain but was a fine Secretary of State for Scotland from 1970 to 1974. Faced with the ill-health of Lewis Allan, then chairman of the SSEB, he wrote to me on holiday in Majorca offering an early appointment to the post of deputy chairman, and that of chairman a year later. This was a most unusual procedure and is an example of his purposeful management style. He was a doughty spokesman in the House of Lords for the diabled and remained interested in many other topics, including energy. He was a politician of the old school, concerned with public service and of the highest personal integrity. I felt privileged to have known and worked with him. Christianson, Alan Deputy Chairman of the SSEB at the time of my appointment in 1958 as Director of Engineering, he chaired the 180

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PIVOTAL PEOPLE selection panel and was a constant source of wisdom and support. He retired early to make my succession as chairman as smooth as possible – his age precluded him from the succession. He was an accountant by training and a fine general manager, contributing much to the national drive for efficiency and manpower reductions necessary to keep pace with the rapid technological developments in the industry. He commanded a tank squadron during the second World War and was awarded the MC. Duncan, Sir William Bill Duncan was appointed chairman of RollsRoyce in 1984, succeeding Lord McFadzean. He reached the conclusion that the cost of engine developments made it necessary for Rolls-Royce to seek help from a major company and concluded an agreement with General Electric of the US. He died at his desk only fifteen months after his appointment and I was appointed as his successor. I took a more optimistic view of the company’s ability to remain independent and subsequent events have amply justified that judgment. Haddow, Sir Douglas Douglas Haddow had been Permanent Secretary of the Scottish Office when he was appointed Chairman of the North of Scotland Electricity Board, a post hitherto the prerogative of politicians. He contributed greatly to improved relations between the two Scottish electricity Boards, most notably in the simplification of the Joint Generating Account between them, which had previously been the source of an annual ritual of disagreement. He had a keen mind and an acerbic wit. Lord King of Wartnaby I first knew John King as chairman of Babcock and Wilcox, the boiler makers, during my time in the electricity supply industry. I met with him later when he was chairman of British Airways, who had an impeccable record of buying Rolls-Royce engines for their aircraft wherever possible. This practice ceased with the airline’s first purchase of engines for the new Boeing twin-engined 777. The engine selected was the General Electric GE90, a radically 181

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POWER POLITICS new design which, predictably, encountered teething troubles. BA subsequently reverted to Rolls-Royce engines for that and other aircraft. Lord McFadzean of Kelvinside Frank McFadzean was chairman of Rolls-Royce from 1980 to 1984, having been chairman of British Airways and Shell Transport & Trading, and a managing director of Royal Dutch Shell. An accountant by training, he combined a powerful personality with a critical intellect and a dislike of ‘flannel’. He invited me to become a non-executive director of Rolls-Royce in 1982 and told me in 1984 that he intended to retire and to recommend me as his successor. The Government of the day had different ideas, however. I had known him well in my days with Shell (UK) and advised him on a proposed relationship with Gulf Atomics. makers of high temperature helium cooled reactors. He didn’t suffer fools gladly and was not always popular, but he was very perceptive and determined. A veritable dynamo, he contributed much to Rolls-Royce. Porter, Lord of Luffenham George Porter was a distinguished chemist who won the Nobel Prize and was President of the Royal Society. When he was Director of the Royal Institution in the 1970s I asked him if I could organise a public debate there on nuclear power there. He agreed, on the strict condition that both sides of the argument should receive a fair hearing – a situation I regarded as essential. The debate attracted speakers from both sides of the argument and lasted for three days, with public access and television coverage. The pro-nuclear power arguments won easily, having the time to discuss arguments in detail, rather than in sound bites. Public airing of scientific arguments was dear to his heart and he took a prominent part in efforts to bridge the gap between scientists and laymen. Smith, Douglas McLeod Douglas Smith was manager of the GEC power plant division when he invited me to form an Operational Services Division, responsible for commissioning power stations worldwide, and trouble-shooting in all of GEC power stations. He was 182

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PIVOTAL PEOPLE a manger from whom I learned a great deal. He had an unorthodox management style with a habit of implicit trust, which had to be earned but which led to great delegation and a high degree of mutual trust. Unfortunately, the management of the day failed to recognise their luck in having such a man and he spent much of his time shielding us from them so that we could work unhindered. I learned a great deal from him, notably his saying that ‘instructions are intended for the guidance of intelligent people’ and not alibis for wrong management decisions. Trenbath, David David Trenbath was chairman of the committee of 23 banks involved in the change of chairman of Turner and Newall when I was invited by the Bank of England to take the post in 1982. David was a senior officer of the National Westminster Bank, the lead bank in the group and his support was of tremendous value to me when I had to deal with the committee. For example, I refused to follow the recommendations of the management consultants’ report on which the banks had insisted when agreeing the change. (In fact, I regarded the proposed strategy as nonsense and promised to provide details of my analysis in 6 months time.) Understandably, this created problems for the bank representatives vis-à-vis their head offices, but David Trenbath steered it through and provided solid support for methroughout the rescue period. The Bank loans were all repaid in three years and NatWest remained our principal banker. Wedgewood-Benn, Anthony Tony Benn was a (very) left-wing labour figure, occupying Cabinet positions in the Wilson and Callaghan governments. He was anxious to be seen as grass-roots Labour and a natural aspirant to leadership of the party. His transfer by Callaghan from the Department of Trade and Industry to the Department of Energy was wholly political and sealed the fate of the re-organisation of the electricity supply industry in England and Wales, approved by Benn’s predecessor Eric Varley, and adopted as Government policy. A sociable man of great charm, he never lost sight of his political ambitions.

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APPENDIX 2

LIST OF ACRONYMS

ACARD ACOST AE AEI ANA BA BMW CANDU CEGB CIGRE CO2 DEFRA DTI EETPU ESCOM Exxon GE GEC GEC-Alsthom

Advisory Council on Applied Research and Development Advisory Council on Science and Technology Associated Engineering Associated Engineering Industries All Nippon Airlines British Airways German motor car manufacturer Canadian heavy water reactor Central Electricity Generating Board International body for high-voltage electricity transmission Carbon dioxide Department of Environment, Agriculture & Fisheries Department of Trade and Industry Trade union of electricians and pipefitters Electricity Supply Commission of South Africa US oil company, including Esso General Electric Co. of US General Electric Co. of UK alliance of GEC with Alsthom of France

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POWER POLITICS GKN GM IMF KPMG MW NCB NEI NOSHEB PPS PWR RB211 RR SGHWR SSEB T&N TUC VEW

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Guest Keen & Nettlefold General Motors International Monetary Fund International firm of accountants and auditors One thousand kilowatts National Coal Board Northern Engineering Industries North of Scotland Hydro-Electricity Board, now Scottish & Southern Parliamentary Private Secretary – junior Minister Pressurised Water Reactor Three shaft Rolls-Royce aircraft engine Rolls-Royce Steam Generating Heavy Water Reactor South of Scotland Electricity Board Turner and Newall Trades Union Congress German electricity supply company

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INDEX

ACARD see Advisory Committee on Applied Research and Development (ACARD) ACOST see Advisory Committee for Science and Technology (ACOST) Advanced Gas-cooled Reactor (AGRs) nuclear stations 44, 51, 52, 78, 102 insulation, corrosion of 50 Advisory Board for Research Councils 160 Advisory Committee for Science and Technology (ACOST) 160, 161 Advisory Committee on Applied Research and Development (ACARD) 160 AE see Associated Engineering (AE) AEI see Associated Engineering Industries (AEI) AGRs see advanced gas-cooled reactors (AGRs) Allan, Lewis 54 Allison 124, 125 All Nippon Airlines (ANA) 119 Area Electricity Boards 67, 69, 76 asbestos mining 92, 95, 97 Associated Engineering (AE) 99, 101

Associated Engineering Industries (AEI) 39, 40, 60 Association of British Orchestras 165–6 Atomic Energy Authority, United Kingdom 53 BA see British Airways (BA) Babcock & Wilcock 78 Bank of England 87, 91, 92, 108 Beaton, R.F. 22, 23 Beattie, Bert 111 Bennett, Jim 42 Benn, Tony 63, 70, 71, 72, 73, 148 Benson, Lord Henry 87, 92, 108 Berridge, Roy 55, 57, 58, 64 Bird, Bill 62 Birmingham, City of Electricity Supply Department 23 BMW 125 Bond, Kenneth 37, 40, 60 Boyd, Ian 90 British Airways (BA) 102, 113, 116, 119 British Electricity Authority 1, 24 British Energy 135 British reactor programme 78 Brown, Gordon 139 Bruce nuclear power station 43

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POWER POLITICS Bulk Supply Tariff 2–3, 76 Byrom, Peter 93, 94, 109, 158 Cabinet Office Policy Review Staff 83 Callaghan, James 72 Campbell, Gordon (Lord Campbell of Croy) 54 Campbell, Wilson 5, 32, 33, 49 CANDU reactors 78 carbon dioxide 7, 8, 12, 136, 141, 143 contribution of electricity in reduction of 14 carbon sequestration 14 Carpenter, Harry 78 Cathay Pacific 113, 119, 120 Central Electricity Generating Board (CEGB) 35, 50, 57, 63, 68–9 abandonment of SGHWR programme 78 Bulk Supply Tariff 2–3 to Area Boards 76 Electricity council meetings 76 industrial monopoly 2, 3 inter-firm comparison 56 Nuclear Power Advisory Board 51 power of 36 PWR programme 51 tariff controll 2–3 Chapple, Frank 84 Cheek, Bernard 32, 33, 45 Chilver, Sir Henry 166 Christianson, Alan 54 CIGRE 79 Citrine, Sir Walter 2, 68 City Takeover Code 99, 100 civil service recommendations for improving performance of 152–4 and recruitment policy 149–54

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Clarke Chapman and International Combustion 64 climate change 7, 12–13, 136, 143 contribution of UK 14 threat and mitigation 15 coal-fired power stations 47, 59, 139 Cockenzie power station 48–9 Commonwealth Edison, Chicago 56 Concorde project 108 Corfield, Sir Kenneth 162 Cottrell, Sir Alan 128 Cranfield Institute of Technology 166 Cunningham, G.D. 22 Daily Telegraph comment 24 DEFRA (Department of Environment, Agriculture & Fisheries) 9, 139 Department of Trade and Industry (DTI) 5, 9, 53, 70, 104, 135, 140 Duncan, Sir William 103, 105, 113 Economy 7 (electric supply tariff) 3, 76 EETPU union 84 electricity generation load control 25 Electricity Act (1957) 63, 68 Electricity Bill 71 Electricity Commission 11, 132, 138, 140 electricity consumers, tax on 140 Electricity Corporation 4, 63, 64, 67–9, 74, 82, 85, 131 Electricity Council 2, 3, 63, 64, 67, 82, 83, 131, 157 distribution boards 3 industrial relations 71 Plowden Report 75 electricity distribution 132 electricity generation fuel pricing for 6

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INDEX Herbert Committee 47 marine technologies for 141–2 solar power for 142 tariff and cost of 3 turbine-generators for 31 electricity supply industry 2 achievements of 75–8 cash performance 151 Conservatives’ view on 74–5 draft Bill by Labour government 3, 4, 67, 69, 70, 74 government, problems of 145–7 Liberals’ view on 73–4 mechanism for strategic decisions 138 overseas relationships 79–80 politicians effectiveness, suggestions for improving 154–6 privatisation of 14, 77, 131 political issues and 147, 148–9 reorganisation of 3, 62, 64, 74 resignation from 82–5 tri-partite management of 73 unification of 67 electricity tariffs 2, 3, 8, 10, 76, 135 electricity transmission 79 safety issues 25 electric power generation plants, gas-fired combined-cycle 6 electric supply and contribution in reduction of carbon dioxide 14 Economy 7 tariff 3, 76 security of 6, 9, 15, 77, 138 Energy Bill 138 energy policy 10 Engineering Council, United Kingdom 162–3 England, Glyn 67, 68 English Electric 39, 40, 55, 60, 62

Erith 29, 32, 64 engineering management 40 GEC power plant division 3, 28 management team 40 Operational Services Department 33 Power Plant Division 43 trouble-shooting services 33 Turbine Division 39 Federal Mogul, USA 102 Fellowship of Engineering 163 Findlay, J.D. 25 Finniston, Sir Monty 162 fossil-fired plants 7 fuel supplies diversification of 6 for electric power generation 6 financial savings for 10 security of 7 Garrick, Ron 89, 91 gas circulators 44, 102 gas-cooled reactors 51, 78, 102 GE see General Electric Co. of US (GE) General Electric Co. of UK (GEC) 3, 31 bidding for contracts 38 capital investment 39 cash management 38 contract management 38 division based at Erith in Kent 3, 28 influence in turbine-generator market 35 Nuclear Power Advisory Board 51 Operational Services Department 29, 31 Power Plant Division 43, 60 research and development contract for SGHWR 52 General Electric Co. of US (GE) 103, 110, 113, 117, 122, 123

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POWER POLITICS General Motors (GM) 124 George V, HM King 167 Ghalib, Sel 61 Goldberg Ensemble 129, 164–5 Green, Don 29, 55 Grid Control Centre, Kirkintilloch 48 grid switching operations 26 Haddow, Sir Douglas 57 Hall, Sir Arnold 104, 105, 113 Hanlon, Bill 64 Harkness, Bill 90 Harrison, Terry 122, 124, 126, 127 Hartley, Frank 166 Hawkins, Arthur 37, 50 heavy water coolants 78 Herbert Committee 1, 2, 47, 58, 63, 68 Herbert, Sir Alan 1 Higginson, Sir Gordon 109 Hill, Sir John 53 Hinkley Point B nuclear power station 44, 102 Hinton, Lord 163 Hives, Lord 125, 126 Hollis plc 100 Hood, Ed 114 Hope, Colin 99, 101 House of Commons 74, 147 Select Committee 51 House of Lords 135, 137, 138, 154, 155 Howden-Parsons company, Canada 42, 43, 44 Howdens of Glasgow 41, 42, 45 Howell, David 4, 74, 82, 131, 148 Hume, Douglas 44, 45 Hume, James 44 Hunt Chemical 94, 95, 98 Hunterston ‘B’ nuclear power station 44, 49, 102

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Ince Power station 27, 29, 33, 56 commissioning of 28 Institution of Electrical Engineers 162 Inverkip power station 55 Jenkin, Patrick 103 John, Stewart 119–20 Jones, Aubrey 2, 47, 68 Kalderon, David 40, 57, 60 Kelvin power station, Johannesburg 32–3 King, John 78, 119 Laing, Wally 32 Lamont, Norman 115 Lawson, Nigel 4, 13, 82, 115, 131, 133, 148 Lewis, David 37, 52, 61 Lib-Lab pact 70, 73, 74 light water coolants 78 reactors 79 Lindley, Sir Arnold 32, 37, 60 Littlechild, Stephen 5, 134 load demand curves 25 Lockton, Peter 124 Longannet power station 49, 54, 59–60 Major, John 133 marine technologies, for electricity generation 141–2 Maxwell, Robert 100 McFadzean, Lord 102, 103 Merz and MacLellan consulting engineers 5, 32, 38, 49 Miller, Donald 57 Miller, Dr Kenneth 163 Miller, Leslie 52 Miller, Stewart 120, 121 Mitchell, John 40

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INDEX Mount Isa power station, Queensland (Australia) 33–4 Mourgue, Harold 109 National Audit Office 135 National Coal Board 58 National Westminster Bank 98 nationalised industries 3, 37, 80–2, 151 NEI see Northern Engineering Industries (NEI) NETA 135 Newton, Alan 121 Nicholson, Sir Robin 109 NJIC 84 N.M. Rothschild & Sons Ltd. 83, 157–9 Northcote, Sir Stafford 149 Northern Engineering Industries (NEI) 42, 64, 122, 123 Northern Ireland Electricity Board 24 North of Scotland Hydro-Electric Board (NOSHEB) 47, 56 relation with SSEB 56–8 North Sea oil and gas fields 6, 57, 84, 159 NOSHEB see North of Scotland HydroElectric Board (NOSHEB) NPAB see Nuclear Power Advisory Board (NPAB) nuclear fusion 143 Nuclear Installations Inspectorate 53 nuclear power 7, 8, 78–9, 136 and climate change 14 Nuclear Power Advisory Board (NPAB) 51, 52 nuclear power stations 8, 9, 47, 137, 139 accidents 53 British 61 civil 27 nuclear-propelled submarines 51 nuclear reactors 50–4 designs of 78

Ofgem 135, 140 oil-fired power stations 47 Ontario Hydro 43 overhead transmission towers (pylons) 54 Parker, Tom 38 Parkinson, Cecil 4, 133 Parkinson, Northcote 153 Parsons 39, 40, 41–5, 64 Pattie, Geoffrey 104 Penhaligon, David 73 Pensions Scheme, at GEC 42 Philip, HRH Prince 164 Phillips, Sir David 161 photovoltaic cells 142 Plowden Committee 62–5, 70, 85, 131 Plowden, Lord 62, 69, 70 Plowden Report 75, 132 politicians effectiveness, suggestions for improving 154–6 Porter, Sir George 53 power stations 3, 5, 10 building of 6, 7 coal-fired 47, 59, 139 commissioning of 27 nuclear 8, 9, 27, 47, 53, 61, 137, 139 oil-fired 47 pressurised water reactors 53 replacement of 8 and turbo-generator and combustion plant industries 7 Pratt & Whitney 110, 117, 119, 120, 122 pressure vessels 49, 52, 78 pressurised water reactors (PWRs) 50, 79, 104 domestic programme 51–3 power stations 53 pressure vessels for 78 safety features 53 steel pressure vessels 52

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POWER POLITICS privatisation, of electricity industry 2, 4, 6 disadvantages of 5 Pugh, Peter 123 Queen’s Speeches 67, 70, 74, 82 Radio and Allied Holdings 37, 60 Raisman, John 84, 159 Read, Wally 28, 31 renewable power resources 7–9, 77, 136, 141–3 subsidy for 10–11 technologies for harvesting 14 Reyrolle 64 Reyrolle-Parsons 42 Ridley, Nicholas 161 Robins, Ralph 113, 114, 120, 124, 125, 127 Rockcliffe, Ray 24 Rolls-Royce 44, 64, 102–5 aero-engine development 114, 118 aero-engine market 107, 110 agreement with General Electric 103, 113–15 capital investment 110 cash flow 118 Cathay Pacific, association with 119–20 civil aircraft market 107, 110 collaboration with BMW 125 Concorde project 108 Derwent project 123 development of 535 engine 120 modular engines 121 three-shaft engines 121 distributable reserves 118 diversification 122–5 engineering developments 120–2 engineering technology 127–8 entry to Stock Market 107–16

192

financial collapse in 1971 107, 108 financial management 117 financial reconstruction 108 freedom and responsibility 117–20 Impact Day 116 job satisfaction 128–9 Long Form Report 115 McFadzean, Lord 102 merger and acquisition of Allison 124–5 NEI 123–4 privatisation of 109, 115–17 profit before tax 101, 118 RB211-524 engine development 114 Rihand project, India 123, 124 succession at 125–7 University Research Centres (URCs) 127–8 Rose, John 127 Rothschild, Lord Victor de 83, 157, 159 Rothschild, N.M. 109, 158 Rourke, Jack 28, 33 Rowe, Brian 113, 114 Royal Academy of Engineering 163–4 Ruffles, Phil 127 Science & Engineering Research Council 128, 160 scientific research 160–1 Scottish Office 57, 58 The Secret Constitution 72 Sedgemore, Brian 72 Severn Barrage 142 SGHWR see steam-generating heavy water reactors (SGHWR) Shell (UK) Ltd. 84, 102, 159–60 Shepherd, Geoffrey 23–5, 27, 45 Sidlowski, Sir Joseph 125 Sizewell B power station 79 Smith, Adam 10

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INDEX Smith, Douglas 28, 31, 34, 36 Snow, C.P. 150 Sobell, Michael 37, 60 solar furnaces 14, 142 solar power 142 South of Scotland Electricity Board (SSEB) 29, 45, 47, 54, 88, 132 coal consumption 58–9 inter-firm comparison 56 operations 48 relations with NOSHEB 56–8 steam-generating heavy water reactors (SGHWR) 51, 52, 57, 78 research and development contract for 52 steam turbines 34, 41, 122 Steel, David 74 Stock Market 5 Rolls-Royce entry to 107–16 submarines nuclear-propelled 51, 79, 111 Swire, Sir Adrian 120 Swire, Sir John 120 Takeover Panel of the Stock Exchange 99, 100 Tebbitt, Norman 104 Thai Airlines 119 Thatcher, Margaret 4, 133, 147, 160, 161 Three Mile Island accident 79 tidal power 141–2 Todd, Lord Alex 167 trade unions 71, 73, 81 Trenbath, David 92, 99 Trevelyan, Sir Charles 149 turbine-generators for Bruce nuclear power station 43 for electricity production 31 supply to Canada 41

Turbomeca 125 Turner & Newall 91–102, 108, 109, 127 acquisitions 102 asbestos mining and products 92 asbestos-related litigation 97, 99 financial restructure 92 foreign exchange earnings 96 lending agreement with banks 98 negative cash flow and collapse of share price 92 problem areas associated with 95–6 profit before tax 99, 101 Prudential trial 98 recovery strategy 95 redundancy programme 96 Wellington agreement 97 workforce reduction 95 University Grants Committee 167 university posts 166–8 University Research Centres (URCs), Rolls-Royce 127–8 uranium fuel 78 separation plant 27 Varley, Eric 52, 53, 63, 70 Vaughan, David 94 VEW, Germany 56 Vickers 111 The View from No. 11 (Lawson) 82 Wagg, Schroder 93 Wakeham, John 5, 133, 134 Wedgwood-Benn, Tony 53, 70 Weinstock, Arnold 37, 39, 40, 43, 50, 60–2, 78, 105 Weir Committee 138 Weir Group 87–91, 108 borrowings and shareholders’ funds 88

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03 Power Politics 187-198

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POWER POLITICS Weir Group (contd) cash control measures 89 financial difficulty 87 financial reconstruction 87, 88 Pumps Division 89 recovery of 91 Weir, Viscount (Willy) 88

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Wilson Campbell Memorial Lecture 133 Wilson, Harold 5, 32, 33, 49, 53, 133 wind farms 7 construction and maintenance costs 8 subsidy for construction of 7–8 wind power 7, 8, 9, 136, 137, 140, 141 Woodeson, Sir James 64