Power Politics-1848855060(1)

Francis Tombs has had an outstandingly varied and successful careerin industry. The major part was in the electricity supply industry wherehe was appointed to the top job in 1977, resigning in 1980 becauseof the government’s refusal to alter an inefficient, politically imposed,management structure. He considers major power cuts inevitable inthe future because of the privatisation of the industry on the basis ofthat structure.

After the successful rescue of two ailing companies, at the requestof the Bank of England, he was then asked by the government toprivatise the nationalised Rolls-Royce and, in doing so, laid thefoundations 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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POWERPOLITICS

POLITICAL ENCOUNTERS ININDUSTRY AND ENGINEERING

FRANCIS TOMBS

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Published in 2011 by I.B.Tauris & Co Ltd6 Salem Road, London W2 4BU175 Fifth Avenue, New York NY 10010www.ibtauris.com

Distributed in the United States and Canada Exclusively by Palgrave Macmillan175 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 beenasserted 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 partthereof, may not be reproduced, stored in or introduced into a retrieval system, ortransmitted, 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 LibraryA full CIP record is available from the Library of Congress

Library of Congress Catalog Card Number: available

Designed and typeset by 4word Ltd, BristolPrinted and bound in Great Britain by CPI Antony Rowe, Chippenham

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This book has offered me the opportunity to express my gratitudeto my wife of almost 60 years, Marjorie, without whommy life and career would have been duller, and this book

probably never have been written.

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CONTENTS

List of Illustrations ix

1. Power Politics – An All-Party Imbroglio 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 169Appendix 1. Pivotal People 179Appendix 2. List of Acronyms 185Index 187

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LIST OF ILLUSTRATIONS

1. Lord Tombs.

2. Sir Ronald Garrick – chief executive and later chairman of WeirGroup 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 some-times 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 firstwith a scientific training in the country which created theIndustrial Revolution.

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12. Tony Benn – a mercurial character who always took account ofpolitical considerations in his ministerial roles.

13. Lord Varley – a former miner who examined problems in a care-fully objective way and stood his ground.

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CHAPTER 1

POWER POLITICS – AN

ALL-PARTY IMBROGLIO

Although the events described in the subsequent chapters of this bookfollow the chronological sequence of my career, the title, Power Politicsand 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 myresignation as chairman of the Electricity Council, the federal body forgeneration and distribution activities in England and Wales. These andsubsequent decisions, and their effect on eventual privatisation, haveresulted in a situation where the reliability of electricity supplythroughout the UK will be in serious jeopardy for many years to come.

It would be impracticable to describe fully the reasons for thissituation, and the causal actions of politicians, in the narrative of mycareer, and so I will set out here the structural management problemswhich have allowed politicians to seemingly rely on market forces toshape events in the industry, while simultaneously interfering to achievequite separate objectives. The seriousness of the decisions, and theshallowness of the thinking behind them, is very disturbing.

The roots of the problem lie back in 1957, when the ConservativeGovernment of the day set up the Herbert Committee, under thechairmanship of Sir Alan Herbert, to consider the organisation of theelectricity industry in England and Wales, which was then controlled bythe British Electricity Authority following nationalisation in 1947. There

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was at the time considerable disquiet in political circles about the greatpower which lay in the unfettered hands of the then chairman, SirWalter (later Lord) Citrine, former general secretary of the TUC and anappointee of the preceding Labour administration.

The Herbert Committee concluded that the generation side ofthe industry should be separated from the distribution activity and thata Council should be appointed with overall control. The notion ofseparation of generation from distribution and sales was an odd onesince it separated design and production activities from the sale of theproduct – an error obvious to any commonsense observer. But thegeneral proposal was accepted by the Minister for Energy, AubreyJones, who then proceeded to emasculate the proposed Council, thuslaying the foundations for the continued dominance of the industry bythe generating side and for the freedom of governments to dabble inthe industry. This completed the political objective of restoring thepreviously devolved control of the industry to the Government.

So were born the Central Electricity Generating Board (theCEGB) and the Electricity Council (or ‘toothless wonder’, as it becameknown), which were to survive until privatisation in 1988. The reasonfor these far-reaching decisions was entirely political, with little or nothought for the practical managerial consequences.

For fortunate political reasons, Scotland and Northern Irelandwere excluded from these proposals and became ‘all-purpose boards’combining generation and distribution with great success. Theindependence of the Scottish boards provoked frequent comparisons,which usually favoured the Scottish boards, so that in practice a degreeof competition existed within the nationalised electricity supplyindustry.

The economists on the Herbert Committee were obviously seizedwith the notion of market forces producing higher managerialefficiency, an astonishing concept given the proposed monopolyposition in England and Wales of the CEGB and its deliberateseparation from the market. In fact, the industry became whollyproduction-orientated with its tariffs controlled by the Bulk Supply

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Tariff, produced by the CEGB and imposed on the distribution boards.Indeed, the only occasion on which production costs were linked withdemand to produce a coherent tariff was in 1978, during mychairmanship of the Electricity Council, when reorganisation of theindustry was the objective of the then Labour government and was thesubject of a draft Bill. One benefit of this uncertain situation was that,for a couple of years, the expectation of impending changes hadweakened the barriers of the existing organisation and produced ageneral willingness to accept change.

That new tariff was Economy 7, an off-peak tariff, which hassurvived all of the later organisational changes to the present day. It wasessentially different in that the existing Bulk Supply Tariff was based onlong-run marginal cost of electricity generation, resulting in a highlyspeculative tariff dependent upon future fuel costs and technology, andoffering no indication of current production costs. Economy 7 severedthis approach in its specific area of off-peak electricity, so separating along-term economic theory from current considerations.

The monopoly CEGB, like other nationalised industries,inevitably used its power to build power stations which were widelyrecognised to be ‘gold-plated’ and hence uncompetitive in those areasof the world where similar absolute power did not rest with thenational generating authorities. As a result, UK industry becameaccustomed to designing and building extravagant equipment whichcould not readily be sold overseas. This left the manufacturingindustries unprepared to compete in the wider world when homeorders became scarce. I was very close to this situation during my yearsat the GEC power plant division at Erith and was constantlyconfronted with the high costs of our machines when compared withEuropean or Japanese competitors.

My resignation in 1980 from the chairmanship of the ElectricityCouncil resulted from the inherent inefficiency of the arrangementsintroduced in England and Wales in 1957, which had resulted in theElectricity Council, 12 distribution boards and the monolithic CEGB,each reporting to the Secretary of State for Energy, and on the

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unsuitability of that organisation for privatisation, as proposed by theConservative government elected in 1979.

I urged on David Howell, the incoming Conservative Minister forEnergy, the implementation of the Bill proposed by the previousadministration to set up an Electricity Corporation, combining thefragmented industry in England and Wales. I was chairman-designate ofthis new body and envisaged its subsequent division into fiveautonomous companies, competing with each other and with theScottish boards. Those integrated companies would form a basis forprivatisation and the proposed companies would still be large enoughto finance and build large power stations. Unfortunately, he saw it aspolitically impossible, even as an interim measure aiding privatisation,to adopt a course favoured by the previous administration. Myarguments were of no avail although I forecast, with considerableaccuracy, the damage which would result from privatisation of the weakdistribution boards and of a broken-up generating side, retaining theirseparation.

I therefore resigned, but my association with the problems wasnot allowed to end there. David Howell’s successor at the Departmentof Energy was Nigel Lawson (later Lord Lawson of Blaby andChancellor of the Exchequer). He telephoned to ask if I would discusswith him the privatisation plans for the industry. I declined, saying thatI had already spent too much of my life on the matter and that myviews were well known to the Government. He was somewhatdisconcerted and said that the Prime Minister, Margaret Thatcher, hadasked him to discuss the matter with me. (She was aware of my views.)I reluctantly agreed to meet him and spent two hours repeating thearguments I had earlier put to David Howell. He was unmoved, citingagain 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 LordParkinson), a later incumbent in a growing list of Secretaries of Statefor Energy, with a request to advise him on privatisation. I declined,outlining the objections I had put to his predecessors and adding that it

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was now too late to implement my proposals, since the neworganisation which I proposed would not have time to provide asuitable financial history for the privatisation prospectus. I was sorryabout this, because he had a much better grasp of the problems thanhis predecessors and was accordingly more sympathetic to my solution.

He was succeeded by John Wakeham (later Lord Wakeham) whoproceeded to privatise the industry in its existing form. At about thistime, I gave a memorial lecture for Wilson Campbell, senior partner ofMerz and McLellan, well-known consulting engineers, and sent a copyto John Wakeham. In it I described the results which I saw as followinghis decision. Wakeham was somewhat alarmed when he read it, andasked whether I really thought the results to be inevitable. I confirmedthat I did, but comforted him (possibly) by saying that all-purposecompanies would evolve under Stock Market conditions. Theremaining disadvantages, I explained, would be that they wouldprobably be foreign-owned and that the industry would have no senseof strategic purpose – an essential need when issues of security ofsupply and future fuels would continue to be vital and the planninghorizon for large power stations was 30 years – a situation entirely aliento the market mechanism. This has turned out to be the case.

As privatisation approached I was telephoned by the DTI to askmy views on the regulator who had to be appointed by statute. I repliedthat I could think of no one in the industry who had a comprehensiveknowledge of the industry and that an individual from either thegeneration or the distribution side would not command the trust of theother side. I suggested that Professor Stephen Littlechild, an economistwho had been a leading adviser on the form of the privatisation, wouldperhaps be an appropriate choice, given his involvement in determiningthe proposals. He was appointed, and spent much of his term of officeblocking mergers between generation and distribution companies, soremaining attached to his original, if mistaken, views. I had long agoformed the opinion that market economists could not resist framingorganisations to use their theory of market forces (in which theybelieved totally), and quite enjoyed ‘playing at shops’. The same


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dangerous inclination was later to be seen in the privatisation of therailways and is shared by many politicians.

Subsequent regulators took a more practical view of theundesirability of separating generation from distribution and allowedsome all-purpose companies to evolve. But the movement waspiecemeal and spasmodic and ended with the formation of mainlycombined boards which were foreign-owned, as I had forecast.

The first years of the new privatised industry were under aConservative administration and much was made, politically, of theearly fall in electricity prices. A great deal of this fall arose from accessto cheap gas for electricity generation, which had previously beenforbidden. Also, the practice of the earlier industry, with recentmemories of fuel supply dislocations as a result of miners’ strikes andwars in the Middle East, had been to diversify its fuel supplies and tocarry a generating plant margin sufficient to allow switching betweenfuels when difficulties arose. This policy ceased after privatisation, withscant regard for the effects on future security of supply.

The notion of diversity of fuels vanished and the only newgenerating plant built after privatisation was gas-fired combined-cycle,which offered the advantages of cheap fuel, low capital cost and shortconstruction time. Governments and companies were dazzled by thiscombination and quite lost sight of the arguments for diversification offuel supplies. They therefore allowed the plant margin to fall, and theindustry to move steadily into increasing dependence on gas and,importantly, on imported gas from politically dubious areas, as ourNorth Sea fields became depleted.

The resulting inactivity on building large power stations fuelled bya diversity of fuels lasted throughout the Labour administration, with anaive insistence by ministers that market forces would ensure reliabilityof gas supplies and that we had commercially secure contracts with ourprojected suppliers of gas. This was coupled with their belief that theindustry would itself produce and implement a strategy which wouldensure security of electricity supply. Recent events have shown howunrealistic these assumptions were – and we still have pitifully small gas

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storage facilities, much smaller than those of our European neighbourswho effectively also have first call on pipeline supplies from Russia andits neighbours. The failure to build large power stations also led to thecollapse of our traditional turbo-generator and combustion plantindustries, so that plant for the inevitable replacement stations will haveto be obtained from overseas suppliers – a disaster which the industrywould probably have avoided in its earlier, nationalised, form.

In fact, all governments since privatisation have acted in a way asopposed to sensible strategic planning as can be imagined. Their twobig decisions, apart from developing a growing and dangerousdependence on imported gas, took the form of building windmills andabandoning nuclear power and coal stations – so endangering thesecurity of fuel supplies and of the industry.

The love affair of the Labour Government with wind power arosefrom fears about climate change, an opposition to nuclear power andthe declared belief that carbon dioxide was the principal cause ofclimate change. Renewable power became a requirement and the onlyavailable candidate was wind. Unfortunately, wind farms are expensiveto build and their potential value has been greatly exaggerated. Thefacts, rarely acknowledged by politicians and renewable energyenthusiasts, are as follows:

• they can only operate when the wind speed is not too lowand not too high and it is rare for a favourable windregime to coincide with peak demand;

• when the conditions are not favourable, as is the case formuch of the time, their output has to be replaced, often atvery short notice, by fossil-fired plant;

• as a result, standby plant has to be kept running atconsiderable cost and producing additional CO2, sopartially negating the objective of renewable energy.

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


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to meet the total construction costs of replacing the then operatingnuclear power stations. This wind subsidy will increase massively as theproposed offshore wind farms are built, with greatly increasedconstruction and maintenance costs, which will be reflected inelectricity tariffs. The subsidy is, of course, met by the electricityconsumers – a stealth tax in all but name, and one designed to meetwildly unrealistic central government targets for reduction in carbondioxide emissions.

Other renewable sources are being researched, as some of themhave been for the past 50 years. But they all, on the most favourableestimates, seem likely to exceed the costs of wind power for theforeseeable future, so requiring even greater subsidies, and most sharewith wind the handicap of interruptible supply. Politicians seem to be inthrall to renewable energies, disregarding their high costs and limitedcontribution to security of supply. There is an urgent need for anauthoritative re-evaluation of the mix of generating sources in the lightof costs and security and a recognition that there are available muchcheaper ways of reducing carbon dioxide emissions.

So where will future UK electricity supplies come from? Thatthere will be a serious shortage is beyond doubt. The large powerstations built in the 1960s and 70s had an expected life of 25 years, andmany are now more than 40 years old. Their life is limited by the life ofthe high temperature steels used in their construction, as well as theageing control systems and auxiliary plant. Their replacements are notplanned as yet, with the exception of nuclear plant, where the first newstation is envisaged for 2017, and a proposal, recently postponed, forone coal-fired station. The coal station has the unrealistic provision thatit will have equipment capable of separating carbon dioxide from theflue gases and storing it underground – a highly optimistic project, withextra costs as yet unquantified, but certainly very large, and designed toachieve the highly optimistic government policy of carbon dioxidereduction. Little wonder that its promoter has deferred it.

Over the next 20 years we are likely to require new generatingplant of 30,000MW for replacement purposes alone, and little of that,

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because of government procrastination, will be powered by nuclearenergy or coal. This is a huge challenge, which cannot be met, as itshould be, by direct replacement of large coal and nuclear powerstations – because of planning and construction constraints andEuropean requirements. We have seen that renewable sources willcontribute little to the security of electricity supply, so it follows that thebulk of the new plant will have to be fuelled by gas imported fromtroubled areas, making our nation increasingly vulnerable tointerruption of electricity supplies and subject to volatile and rapidlyrising costs.

On present form, we will also continue to build renewable energyplant with increasingly uncompetitive costs, requiring large and growingsubsidies to be met by the electricity consumer. The effects of thesedevelopments on our economy can easily be imagined, and theresponsibility rests clearly with the inactivity of the last Labouradministration and their indifference, and that of precedingadministrations, to risks which were readily apparent but consistentlyignored.

I organised an annual debate in the House of Lords from 2002 to2008 when the situation was painstakingly spelled out by me and byothers to a series of disinterested ministers who continued to describethe fictitious high security of our rapidly growing dependence onimported gas and to studiously evade proposals for nuclear power – theonly generating source available to provide both fuel independence andcarbon dioxide reduction on a reliable and economic basis.

The visceral opposition of the Labour Government to nuclearpower, and the accompanying obsession with wind power, stemmedfrom ministers at DEFRA and DTI who continued, year after year, topromulgate their personal prejudices and to deny the obvious dangersof 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 theinactivity which it bred, was ‘justified’ by a declared reliance on marketforces – an astonishing position for a Labour administration to adopt –


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and by a tacit acceptance of that reliance by the Conservative andLiberal Democrat opposition parties. They all seemed unable to realisethat Adam Smith described the ‘invisible hand’ of the market back inthe eighteenth century, when roads were primitive, railways andaeroplanes non-existent, communications and international tradevirtually non-existent, and technology played a tiny part in the nationstates of the world – a far cry from the world of today.

Today, we rely on major facilities to provide our accepted modeof living, and their financing and construction can require decades.During my time at the head of the electricity industry we had to lookthree decades ahead to plan and construct new generating capacity tomeet the needs of a growing economy and improving standards ofliving. Improving technology offered great financial savings but aprudent balance in primary fuel supplies had to be adopted as theprimary aim of the industry to maintain security of supply with thesteady growth in demand. Industry, commerce, hospitals,communications all depend on reliable electricity supplies, and theplanning horizon of the industry has to be sufficient to ensure anorderly situation in a highly uncertain world.

The belief of politicians that a national strategy for the privatisedelectricity supply industry could emerge through the operations of themarket is breathtakingly naive. First, because the politicians were busilyintervening in the market through tariffs, renewable energy subsidiesand hostility to nuclear power. Secondly, because the overseas ownersof our electricity supply companies have no desire to get involved in thenational energy policy of a foreign country in which they have invested.Their objective is simply to ensure that their investment is a profitableone – hence their investments in wind farms, heavily subsidised byelectricity consumers by a surcharge on their bills. The credit crunchand its associated economic recession have reduced the demand ofindustry for electricity, and the high fuel prices in all sectors haveencouraged economy in use. There may therefore be no growth inelectricity demand for some years. But the effect of the need to replaceworn-out power stations will eclipse such effects on demand, and the

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investment requirements will be very large and certainly unwelcome toa government preoccupied with the crippling debts incurred since1997. In a period of dominating debt repayments and stringent limitson capital expenditure, it will still be necessary to replace worn outplant and to meet electricity demand, and the only rational approach tothis situation is to reduce further investment in heavily subsidisedrenewable energy, until it can be afforded on genuinely competitiveterms.

We sorely need a technically competent and independent bodycapable of long-term strategic planning for a national electricity supplyindustry, irrespective of its ownership. We have seen ample proof thatmanagement of our foreign-owned industry is unsuited to the task, andthat Government is incapable of discharging it, but it is also far fromclear that a domestically owned industry would be any more able todevelop and implement a long-term strategy.

I have often drawn Parliament’s attention to the situation in the1920s, when rapid load growth was being met by hundreds ofcompanies, some municipally owned and some private. The solution tothe fragmented system lay in the creation in 1926 of a statutory body,the Electricity Commission, which served the nation well until theindustry was nationalised in 1947, having performed well during aperiod of very rapid load growth and technical developments. Thepoliticians responsible for finding a solution to the present situationand its daunting problems should examine history and devise a solutionon similar lines, for the five years’ horizon which characterises politics isill-adapted to tackling long-term problems, however serious theconsequences of failure to do so. On recent form, we may have to waitfor systematic electricity interruptions to secure the attention ofpoliticians to the need for an independent body such as we enjoyed formuch of the developing twentieth century.

An exception to this reluctance by government to plan for long-term issues appears to have arisen in the subject of climate change, whichhas captured the attention of politicians nationally and internationally.This is in part due to the diligent efforts of environmentalists but also to


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the belief that the effects of climate change can be avoided by strenuous(and costly) measures to reduce carbon dioxide, the suggested principalvillain of the piece. The enthusiasm with which this hypothesis has beenaccepted internationally is surprising.

There is little doubt that the climate is changing – it has done sothrough millennia, sometimes with catastrophic effects. But the beliefthat carbon dioxide is mainly responsible rests on questionableassumptions. Meteorological changes take place over long periods,varying with the particular factors selected, and the system is a highlycomplex one with many factors being interactive in ways not alwayswell understood.

Additionally, many of the variables have differing time cycles, sothat their effect varies in an apparently incoherent way.

The proponents of climate change rest their case mainly on theefficacy of the highly complex computer models which they havedeveloped over the past few years in an effort to represent – and evenforetell – the behaviour of the highly complex factors in themeteorological system. It is worth remembering that some of thesefactors are terrestrially based, but other, very powerful ones, arise in thesolar system in ways we do not understand and cannot control. Thedevelopment of models in such a problematic environment ishazardous and relies largely on producing new hypotheses to explainunforeseen differences and then incorporating those new hypothesesinto the already complex model. The performance of the resultingmodels may please their creators but they offer limited guidance in thelong-term analysis of the system. The performance of comparativelydistant 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 meteorologicalresearch into climate change. I say it is a remarkable coincidence,because it concludes that the principal cause of the hypothecatedchanges happens to be man-made carbon dioxide – one of the fewfactors that can be measured, and of the even fewer that might besusceptible to control! Both of these perceived possibilities are

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attractive to the political and public groups which have reacted sostrongly, and expensively, to the forecasts of the climate changescientists.

The impression given of substantial unanimity among scientistson the question of apocalyptic climate change and its availablesolution is misleading and derives from its uncritical acceptance bypoliticians world-wide, shared by the desire of the media for a simplestory. As a result, cripplingly expensive measures have been adopted inthe belief that the threat of world disaster is real and can be avoided.Unfortunately, most of the measures adopted and advocated are notdemonstrably capable of achieving the rescue mission for which theyare proposed. The power of the climate change juggernaut is such asto suppress contrary analyses and proposed solutions, but theinterested reader would do well to read An Appeal to Reason; A CoolLook at Global Warming, a thoughtful examination of the availableevidence by Nigel Lawson, published by Duckworth Overlook.Another illuminating exercise is to type ‘climate change, sceptics’ intoa search engine such as Google to see the breadth of authoritativescepticism that exists.

It is easily shown that international plans for wind and otherrenewable sources are not capable of replacing carbon dioxide in thequantities and on the timescale claimed and required by the climatechange models, but the sheer impracticability of the ‘solution’ seems toevade its supporters.

We are thus, nationally and internationally, sleepwalking towardsa series of measures, at enormous cost, which will not solve thepredicted problem – itself not a hazard of great certainty. Thebandwagon is rolling and seems likely to cause great damage. Perhapsfortunately there now exists a braking effect to these measures, in theform of severe economic pressures, which will radically affect theirproposed adoption. An ill wind, perhaps?

One of the major inconsistencies of current assessments of thedeclared problem and its solution is the way in which future electricitysupplies are being put at risk while simultaneously proposing to extend


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the contribution of electricity to the reduction of carbon dioxideproduction, for example in transport. At the same time, technologiessuch as carbon sequestration and solar furnaces in the Sahara areblithely advocated without even a superficial examination of theirpracticability, security and economic demands.

It is, of course, possible to claim that the UK is in goodinternational company in its reckless approach to the certainty of thedire nature of the foreseen climate change, and to the variety of half-baked solutions offered. But any responsible approach requires ourown government to examine the evidence for the problem and itsproposed solutions, before embarking on such a headlong course,based as it is on emotion as well as to some objective analysis. This willnot be simple, given the size of the steamroller presently propelling theclimate change movement. It is salutary, however to reflect that the UKcontributes around 2 per cent of world emissions and that those of thedeveloping world are going to rise enormously as China, India andmany other developing nations increase their industrial base. So Britainis not a major player in the situation, contrary to the posturing of someof our politicians and environmentalists.

One thing is already clear. Over the past decade, the money andefforts devoted to the predicted climate change and its solution couldhave been more effectively used to provide tangible contributions tooffsetting foreseen effects by such measures as irrigation, flooddefences and agricultural enhancements, as well as the large-scaleadoption of nuclear power. Instead, we have created a hugemeteorological research apparatus and adopted a range of renewabletechnologies which are both expensive and of little effect.

In the UK this foolhardiness has been facilitated by the wishfulthinking of politicians unable to judge the validity of the arguments andunwilling to listen to the opinions of the dissidents from the prevailingfashionable view. These are precisely the errors committed over the past20 years in the approach to privatisation of the electricity supplyindustry. Dreams may be comforting, but they rarely form the basis forsuccessful national strategy.

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The growing insecurity in electricity supply, the headlongexpenditure on renewable energy and the necessarily incompleteexamination of the climate change threat and its possible mitigation allstem from a lack of competence in understanding the assumptions onwhich decisions have been, and are, reached. The sheer incompetenceof a procession of politicians in government and opposition renders theneed for an informed analysis of the most major decisions in the energyand environmental fields. This is exactly the lesson of the past 50 yearsin the industry which I had the honour and pleasure to serve for muchof my working life. I continue, in spite of contrary experience, to beoptimistic that we will discover an escape route from this morass,despite the experience with the electricity supply industry over the pastfive decades, a deplorable record for which all three main parties shareresponsibility, though to varying degrees. This problem is examined inChapters 8 and 9 in a more general consideration of the structuraldeficiencies of UK government. Suffice it to say here that the quality ofgovernment has not improved in recent years and offers little promiseof 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 ahappy, poor and industrious family. My father was a gardener whenemployment was scarce and erratic, and my mother kept a smallgrocery shop which provided a small degree of stability.

Walsall was then a town on the edge of the Black Country, and sohad its share of smokestack industry, but it was famed also for itsleather goods; indeed, its football team is still known as the ‘Saddlers’.Prior to her marriage, my mother had worked in a leather factory andwas proud of her trade. She remained a mistress of knitting andcrochet throughout her life and her fingers were seldom at rest.

The elder of my two brothers, Joe who was 13 years older thanme, served with the Royal Armoured Corps in North Africa, returninghome after the war to resume his job as the sales manager of apreserves company. He had been a grammar school boy and wasoffered officer-training but declined, preferring the company of hisfellow troopers.

My other brother, Denis, two years my senior, became a metalpattern-maker. He was a fine craftsman and, in his retirement,produced a number of beautifully made traditional games, such as NineMens’ Morris for his children and grandchildren. We were fortunate tobe recipients of these games and still treasure them.


All three of us remained close throughout our lives and tookgreat pleasure in our families as they grew up. Close-knit families werea feature of the area and time and served us all well in later life, whenwe maintained close contact.

Our shop was a typical small grocery store of the period. Foodwas rarely pre-packed: butter was delivered in large blocks and was cutand patted into shape, a chore I quite enjoyed; sugar and dried fruitwere weighed and bagged; Woodbines cigarettes came in packets offive for 2½d (old pence), with Kensitas offering a separate pack of fourcigarettes ‘free’ with a packet of 20 costing 11½d. I spent many hours‘minding’, and serving, in the little shop and learned a great deal abouthuman nature – including my own! I had an early lesson in socialjustice from the practice of some customers buying groceries from us‘on the slate’ when times were hard, but returning to a larger storewhen they had hard cash – often stretching out their credit there untilthey were hard up again and returned to us. Our shop never made anymoney, but we certainly ate better than would otherwise have beenpossible. The outbreak of war brought the opportunity for my father tobecome 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 managerof the small family income and performed miracles with the cheapestcuts of meat; our Christmas turkey or, more probably, chicken, wasbought in the town market by the flickering light of open gas flameswhen the traders were about to pack up and bargains were to be had.

Personal pride and the work ethic were prominent, as was ourRoman Catholic faith. Every Sunday morning saw us at Mass at StMary’s, a large and elegant Georgian-style church where I duly becamean altar server. Indeed, I also became Boy Bishop, an occasionalappointment involving wearing vestments approximating to those of abishop, processing to the church and delivering a sermon (written bythe parish priest) to a sympathetic congregation. Latin Mass was theorder of the day and I learned many of the beautiful liturgies andhymns which were led by Tommy Boyle, our senior-school headmaster

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and a fine tenor. The faith which I gained during those years has beena constant and rewarding pillar of my subsequent years.

My father had been gassed during the First World War andsmoked cigarettes, and the combination of these resulted in his deathfrom lung cancer in 1945, when I was 21.

During the school holidays I accompanied my father to hisvarious places of work as a gardener and greatly admired his steady,unhurried and expert work. (In later years I was to regret my failure tolearn more of his craft in gardening and his love of birds.) Most of hisemployers were kindly and appreciative people but I still rememberone, a bookmaker named Billy Preston, who delighted in driving andbelittling my father, whose composure only served to incite him further!I remember my inward fury at the spectacle of that pompous little manbaiting an employee who was worth ten of him.

I did not know my father well, as was unhappily customary duringthat period, but my memories of him are of a quiet, contented manwith enormous inner reserves of composure and a keen sense of justiceand self-respect. He felt himself wholly responsible for his family andso spurned any form of state aid – limited though that was in thosedays – and had a hearty contempt for scroungers. When money wasavailable he greatly enjoyed his pint of mild and bitter, and a flutter onthe horses. When his horse won (not very often) we all celebrated withsome special treat; when it failed, we didn’t mention it. Both he and mymother were lifelong Conservative voters, regarding that party as thecustodian of hard work and self-reliance – a view which I have found alifetime’s experience corroborates!

My mother was no advocate for hospitals, which she regarded asplaces where people went to die, and nursed her family at home whenthe occasion arose. At the age of six months, I developed pneumoniaand pleurisy, and one of my lungs was drained by my woman GP (ararity in those days) and a colleague who administered the anaestheticon our scrubbed kitchen table!

I recovered quickly and can remember many other childhoodcomplaints weathered at home in those pre-antibiotic days, especially

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the disinfectant-soaked blanket which covered the entrance to mybedroom, when scarlet fever prevented me from taking the 11+examination. In those days, of course, there was no National HealthService, and poor families insured with a friendly society, in our casethe Ancient Order of Foresters, for a few pence weekly, becoming‘panel patients’ of a nearby ‘panel’ doctor. Our woman doctor was afine physician and a very caring one.

When I recovered from scarlet fever I was offered a place at aCatholic grammar school in Birmingham or one at a Central School inWalsall, and settled for the latter on the grounds of saving the cost ofuniform, travelling and extras at the other school – a choice that Iarrived at myself, under no pressure from my parents!

My mother cared ceaselessly for her family and for many of ourneighbours, and seemed tireless in her devotion, running the shop at thesame time. She was a devout Catholic, who derived great strength andcomfort from her faith, and her rosary was rarely far from her hand.Never happier than when helping others, she was a natural refuge forthose in distress and always lent a sympathetic ear in addition to tangiblehelp. In present times, she would undoubtedly have gone on to highereducation 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 onto her grandchildren. Her idea of bliss was time to read, and a theatrevisit had to await my adulthood! But she held an unshakeable belief inthe superior qualities of womenfolk and approved of much of the long-awaited liberation of women which was to follow the war.

There was, of course, no TV nor, for many years, any radio, whichwas beyond our means. I well remember, just before the war, theexcitement of our first radio, powered by a wet battery known as anaccumulator which was charged at a nearby hardware shop. For thechildren, there was a weekly Saturday afternoon film show at a nearbycinema known, for obvious reasons, as the ‘tuppenny rush’. There weenjoyed Tom Mix and other heroes to a tumultuous sound of cheeringand booing.

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I enjoyed my years at Elmore Green Central School, cycling 12miles 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 withgratitude the efforts of the mathematics teacher, who rejoiced in thename of Eric Mendelssohn Boot. He was a fine pianist, and produceda Gilbert and Sullivan opera each year. He restored my interest inmathematics after it had been damaged by an earlier teacher’s flagrantridiculing of a fat boy with a blind spot for the subject. I well rememberbeing outraged by the injustice of this misuse of power.

The staff was generally enthusiastic and supportive and I seemedto be set on the road to an arts degree at university. Those were thedays when schools considered arts superior to the sciences and when,for a time, my main ambition was to be a newspaper reporter – anambition which I am eternally grateful not to have fulfilled!

But in 1939, when war with Germany was declared, the schoolwent on to half-time, because of the call-up of many of the staff. Idecided that half-time was not for me and so left school at the age of15 and got a job at GEC in Birmingham as an office boy. I completedmy School Certificate subjects at evening classes, then universallyknown as ‘night school’.

I was lucky enough to attract the attention of GEC managementand was encouraged to take evening classes leading to an OrdinaryNational Certificate in Electrical Engineering at Walsall TechnicalCollege and became an apprentice at GEC. I also joined a first-aid postin Walsall, attending for three nights a week, with evening classes onthree evenings and Saturday mornings. These activities were combinedwith a 40-hour week at GEC; I find today’s students quite incredulousabout the workload, which I believe played an important and valuablepart in my development.

I learned much at the first-aid post at Hatherton Road, where thequiet periods between air raids were occupied by Scottish dancing (the

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Medical Officer was a Scot), bridge and listening to recorded music. Irecall one game of bridge when my partner, a lady ambulance driver,bid seven spades in the first round of bids, leaving me to play animpossible hand while she adjourned to the toilet! On a more seriousnote, I remember an older man, Arthur Witheridge (a first-aid partyleader with a white helmet) telling me during a record recital, which heenthusiastically organised, that I would come to like Brahms one day –he was quite right.

A welcome relief from the pressures was the Sunday afternoonconcerts by the City of Birmingham Symphony Orchestra, whichfounded and developed my love of music. The conductor was LeslieHeward and I recall one concert when he was joined by the Cityorganist, G.D. Cunningham, the composer Victor Hely-Hutchinson andthe Professor of Music at Birmingham University, W.D. Stanton – all ofwhom contributed to the concert by conducting, playing pianos ororgan and by playing the simpler percussion in turn. It was a good-natured and very enjoyable concert. We also heard many well-knownsoloists such as Myra Hess, Eileen Joyce and Moura Lympany.

At first, I travelled to work at GEC by train, where I met myfuture wife, Marjorie, but in 1946 I acquired a 1937 Austin Rubysaloon and spent many happy hours with my brother, Denis,overhauling it – decarbonising, valve grinding, fitting new patentedpiston 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 thattime, Father Cyril Adams, who possessed a car of the same model asmine, and we helped him by doing the maintenance jobs. He laterperformed the marriage service for Marjorie and me, and remained afriend throughout his 60 years’ priesthood, memorably celebrated at hisalma mater, Belmont Abbey.

When I had completed my Ordinary National Certificate inElectrical Engineering I continued evening classes to complete mymatriculation. At this time, the Head of the Department of ElectricalEngineering, R.F. Beaton told me, rather disgustedly, that he had triedunsuccessfully to persuade the Principal, William Cooper, to nominate

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me for a County Major award to study electrical engineering atBirmingham University. Cooper was unwilling to stick his neck out onmy behalf despite Beaton’s urging and, in retrospect I am rather gladthat he didn’t, because the course which I followed kept me well intouch with practical aspects and the shop floor – both great advantagesin my later career. I was grateful to Beaton for his interest and effort,nonetheless. He was a brilliant teacher and a Whitworth Scholar and Ilearned a great deal from him.

I was later given full-time release from GEC to do a six-monthfull-time intensive course leading to a Higher National Certificate inElectrical Engineering. This resulted in my being placed on the CentralTechnical and Scientific Register, which made me subject to direction asto occupation. They decided, to my disappointment, that I shouldcontinue to work for GEC.

I say that this was disappointing because many of mycontemporaries secured engineering commissions in the Forces, andhad smart uniforms – and glamour! I tried to get around this byvolunteering for the Royal Navy, but the system worked too well and Iwas hauled before a Committee of the Register and soundly dresseddown for my impertinence. So at GEC I stayed until the end of thewar, in a ‘reserved occupation’, continuing with my studies and first-aidpost duties at night.

During my years at GEC I made a good and long-lasting friend inGeoffrey Shepherd, who had lost both parents and a sister in an airraid. He and his brother were buried for some hours, Geoff sustaininga fractured pelvis and his brother losing his hearing.

Geoff and I remained good friends for almost 50 years, until hisdeath, 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 offeredby the City of Birmingham Electricity Supply Department – an unusualopportunity at that time, and one which illustrated the vision of someof the better municipal electricity undertakings. It is interesting to notethat, of the original 12 members of the scheme, Geoff Shepherd

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became chairman of the Midlands Electricity Board, Ray Rockcliffebecame chairman of the Northern Ireland Electricity Board, and thepatient reader will read of my achievements later in this narrative.

After about 16 months of the two-year training period GeoffreyShepherd and I were both appointed as junior engineers at Hams HallB power station, then being built as part of the post-war expansion ofgenerating capacity, and began shift work. This was a hard-workingtime, when I learned the importance of personal responsibility and ofteamwork. I was also introduced to the construction and operation of alarge power station.

I also experienced the solitude of regular rounds of the plant,looking for any unexpected signs of trouble, and realising thateverything sounded worse at 3 a.m. – my general low-point. I acquiredsome familiarity with the process of plant miraculously recovering fromits maladies as daylight approached. There was a great camaraderieamong the junior engineers, and shifts were commonly exchanged formutual convenience. I remember one period when illness and holidaysresulted in two of us working 12-hour shifts for three weeks, and Ispent the entire period on nights since it was too difficult to organise achange, which would have involved 18-hour shifts. But such situationswere happily rare and our youth made it tolerable.

When the industry was nationalised in 1947, I well remember apiece by Peterborough in the Daily Telegraph, who reported a disputebetween British European Airways and the British Electricity Authorityover the use of the initials BEA, and ventured an opinion that the claimof the electricity industry was stronger because they carried morepassengers than the airline!

In February 1949 I married Marjorie, who I had met some fiveyears earlier when commuting to GEC, where she worked in thechemistry laboratory. This was the most important event of my life andwe were to have a happy and rewarding marriage which lasted foralmost 60 years, and was ended by her death in 2008. We were blessedwith three wonderful daughters, all now pursuing their careers whilehappily married and providing us with a total of six grandchildren and,

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to date, two great-grandchildren – all of them a constant source of joyand pride.

We were unique among our friends in having a house when wemarried; we bought it from Geoff Shepherd for the sum of £1,850 on amortgage interest rate of three and three-quarters per cent and a salaryof £650 p.a. We were very happy there, and did a great deal of workimproving the property.

I remember replacing the galvanised steel hot water tank, whichwas heated by a back-boiler on the dining-room fire. Time had alloweda considerable amount of rust and scale to accumulate, and when Ifinally re-lit the fire the water remained stubbornly cold until the wholehouse suddenly shook with a deep rumbling sound and the blockage ofdebris cleared. For some weeks following, our hot water ran rust-coloured!

In 1949, both Geoff Shepherd and I applied for, and obtained,posts as Junior Grid Control Engineers with the Central ElectricityBoard, which managed the electricity grid. I gained some usefulexperience in electricity transmission safety and generation loadcontrol, 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, theSystems Operation Engineer for our area. It concerned an electricityfailure for which we were, in truth, responsible. Findlay remainedsilent, raking out and refilling his pipe, while the other side vented theirconsiderable wrath. When they had expended their anger, and werebeginning to feel sorry for us, Findlay produced one small error thatthey had made – and secured an abject apology. That taught me a greatdeal about tactics at difficult meetings!

More seriously, I was occupied in ‘load-despatching’, by whichpower stations were instructed to produce power to meet the system’svarying demand and were selected on the basis of the marginal cost ofgeneration at the time. The art of anticipation was aided by study ofprevious load demand curves and by examination of the radioschedules, to allow for popular programmes, which were regularlyfollowed by substantial load increases as kettles were switched on all

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over the country – a practice which continues today. I also dealt withgrid switching operations, involving the safety of personnel and thesecurity of the grid when transmission lines were taken out ofcommission for maintenance or repair.

I well remember two of the Senior Control Engineers with whomI worked in shifts. The first, Ross, was a taciturn, irascible Scot: thesecond a more equable character called Alderson. One evening,Alderson arrived in a state of some excitement and announced that hehad won £30,000 on the football pools. Ross broke his customarysilence with the question ‘for a penny?’ On being told that the stakehad been sixpence he grunted and relapsed into his customary morosesilence.

After a couple of years I secured a much-coveted day job andworked on more theoretical matters such as load flow studies andcosting of generation. During this time, I reported to an amiable andable man, Stan Dodd, whose daughter, Gina, had also been a GECapprentice and who later became a leading authority on balancing largeelectrical rotors – no simple task!

In 1950 our first baby arrived – a little girl whom we christenedCatherine Barbara – who was to bring us great happiness when we hadfinally developed our parenting skills! She was born at home and Ispent a disturbed night trying to persuade her to sleep, only to find thenext morning that some building suppliers had tipped some sand whichI had ordered in the road and I had to wheelbarrow, without delay, tothe required site. During the next few months we all three learned agreat deal about co-existence.

Catherine was followed in 1952 by a sister, Elisabeth Jane, whobenefited from our hard-won parental experience and also brought usgreat joy. Margaret Clare, our third daughter arrived in 1958, when wehad moved to Kent, and she bore a congenitally dislocated hip, and itsassociated cumbersome splint, with the cheerfulness which was tobecome her hallmark.

In 1952 I applied for, and gained, an appointment in Liverpool asthe System Liaison Engineer for the Merseyside and North Wales

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Division of the BEA. The grid control room for the area was in theneighbouring North West Division and I soon learned the difficulties inliaising from a position of almost complete weakness. My Manchestercolleagues were friendly and helpful, and I learned from them some ofthe 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 positionbecame superfluous, and I was appointed Operation and EfficiencyEngineer at Ince Power station, then being built to supply the newuranium separation plant at Capenhurst.

Commissioning the power station from scratch was a fascinatingand taxing job, and I found it necessary to have a camp bed in myoffice when working up to 110 hours a week for several months. I wasfortunate in that the station manager and his deputy were considerablyolder than I, and were quite happy to give me a free hand.

We experienced, as is usual in a new project, a wide range ofproblems, but we had a young and enthusiastic team of engineers whorelished the challenge and were unstinting in their efforts. There was agreat spirit of camaraderie, accompanied by an active rivalry betweenthe operations and maintenance departments, and I coined the phrase‘it was working well until you mended it’, which never failed to achievethe desired effect!

In the midst of the turmoil, I was asked to see an intelligence manwho was vetting my friend Geoff Shepherd for a job in the design andbuilding of the first civil nuclear power stations. I was naturally anxiousto help but rapidly became irritated by the leisurely and obliquequestioning, which dealt with lifestyle, integrity, hobbies and so on – thisat a time when I was rushed off my feet! Eventually we approached thequestion of political sympathies and I said that Geoff was a member ofa small, rather noisy, party of little real significance in the UK. Myinterrogator’s pen quivered, while he sought a way of asking which partyI meant. His disappointment was palpable when I replied ‘the LiberalParty’ but the lengthy interview came to an end shortly afterwards andGeoff always claimed that he got the job despite my support!

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During the course of the commissioning of Ince power station Igot to know the GEC turbine erector there, Jack Rourke, a valuableally then and subsequently. He had a quiet sense of humour and, whenapproached by a somewhat green graduate trainee with the news thatthe vibration indicator on a turbine had risen by one graduation hereplied ‘each of those divisions is one tenth of a thou – and there’smillions 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 bureaucracywhich served no visible purpose. One example was the requirement tosubmit to divisional headquarters very detailed statistical reports,presumably for analysis and comparison, though the outcome neverfound its way back to us. I decided to stop submitting them, keepingthem in a large drawer – and it was more than two years before theirabsence was noticed!

On another occasion, I signed a requisition ‘not approved’ and itwas approved by the next three signatories, of growing seniority,without question! I suppose that these measures seemed to be usefulto the distant management, but they contributed little to the efficientworking of the organisation, a lesson I tried to remember in futurejobs.

Also in the GEC team I grew to know and like the erectionmanager, Wally Read, an eccentric and crusty character with a well-disguised heart of gold. He was revered by his staff, whom hesupported through thick and thin. Part of his stock-in-trade was acollection of well-rehearsed axioms, based upon naked prejudice, whichhe delivered with a pronounced twinkle in his eye – ‘you can’t trust aman with eyes as close together as that!’ for example.

His colleague of many years, Douglas Smith, was manager of theGEC Power Plant Division, based at Erith in Kent. A big, quiet man hewas a constant support during those difficult times and had developeda management style from which I was to derive great benefit and learnmany lessons later. I profited greatly from his friendship, not least insailing with him annually for about 30 years.

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Together, these two decided that they would like me to join GECto form a new Operational Services Department, responsible forcommissioning plant throughout the world and providing trouble-shooting services throughout its life. The proposition was attractive interms of pay and conditions, but also offered technical interest and adegree of freedom unlikely to become available in the BEA. Iaccordingly accepted, Ince having been satisfactorily set to work, and Iand my family moved in 1957 to Erith in Kent. This marked a majorchange in the direction of my career.

I had learned a great deal and made many friends at Ince, two ofwhom were to work for me again later. Both had been Shift ChargeEngineers at Ince and the first, Stan Dutton joined me in my next jobat Erith. The second, Don Green, joined me at the SSEB (see Chapter4) as a deputy power station manager, finally progressing, after mydeparture, 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 variedteam. There were also, inevitably, continual contacts with constructionstaff 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 thenationalised electricity industry to return to manufacturing industry. Bycoincidence, I was going to GEC, the same company at whose WittonWorks I had received my early training. But that coincidence maskedsome vitally important differences. Witton was electrical, Erith wasmechanical, and there was considerable rivalry between the disciplines,accentuated by the fact that the two works had to collaborate in theproduction of turbine-generators for electricity production.

Erith controlled the overall design and sales effort, but Wittonacted as a sub-contractor for the alternator and jealously preservedtheir design and erection autonomy, guarding their mystique from the‘rude mechanicals’! This spirit of rivalry, founded in years ofindependence, was as strong at Erith as it was at Witton, and made myintroduction as Manager of the new Operational Services Departmenta difficult one. I was seen by some as a ‘Witton man’ and I certainly didnot qualify as an ‘Erith man’, since my remit was to cut across well-established departmental boundaries.

Any anxieties I may have had on this score came to nothing, andI 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


figures, than to my efforts but in any event the department began totake shape. I began by recruiting an experienced power stationoperator, Stan Dutton who had worked for me at Ince, and a graduatetrainee, Bernard Cheek. The evolution of the department wasinterrupted after a few months, when the general manager at Erith,Arnold Lindley (later to become the managing director, and laterchairman, of GEC, Sir Arnold Lindley), instructed me to personallylook into a major breakdown of a turbo-generator at Kelvin powerstation in Johannesburg. Lindley had been chief engineer of GEC inSouth Africa and was an old Erith man. He felt personally responsibleto his old clients in South Africa and plainly expected quick answers.He was to be disappointed, because it took a long time to dismantlethe heavily damaged machine, and even longer to rebuild and restore itto service.

As a result, I spent periods of weeks over the next year or so inSouth Africa dealing with Kelvin, while trying to launch a newdepartment. Much of the resulting strain fell on my wife and two smalldaughters, Catherine and Elisabeth, who were settling into a new homeand school with little help from me!

I learned a great deal at Kelvin about how to deal with clients andtheir consulting engineers – in this case, Merz and McLellan ofNewcastle, often represented at meetings in South Africa by theirformidable partner, Wilson Campbell. He was a brilliant and sarcasticindividual who pressed for rapid results without contributing much tothe solution – a characteristic with which I was to become familiar infuture dealings with consulting engineers! He displayed his sarcasm atan early meeting, when he welcomed me as ‘our funereal friend’ – anobvious 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 wasconsiderably older than I and a tower of strength. A Geordie, he hadvast experience, and deflected much of the wrath of Campbell. In all ofthe stress, the clients were models of courtesy and understanding,despite their obvious anxiety to see the plant returned to service.

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Indeed, on one occasion following a particularly acrimonious meetingat which Wilson Campbell had officiated, the general manager of thecompany, Bobbie Kane, came out to the airport the following day to seeme off and brought a huge basket of fruit from his garden.

Back at Kelvin power station the task of dismantling the badlydamaged machine was progressing slowly. It was a daunting prospect,which would have defeated many. Fortunately, however, I had the goodfortune of having secured the posting of Jack Rourke from Ince and heproved equal to the challenge. Dismantling was horrendously difficultand rebuilding comparatively simple, but the real challenge came withrecommissioning, when the machine persisted in vibrating whenrunning up, and resisted all of our efforts to calm it! Muchcorrespondence and conversation took place between us and thedesigners at Erith and eventually the problem was solved by changingthe turbine starting techniques. This was following a painstakinginvestigation of the movement of bearing pedestals with increasingtemperature during the starting procedure. Interpretations of thesemeasurements as the answer fell to the ground when I suggestedrepeating the tests on identical machines at Woolwich – which yieldedsimilar results without similar problems! Released from this majordiversion, I turned my full attention to the Operational ServicesDepartment at Erith, where acceptance of our new role was bringing anincreasing demand for trouble-shooting services.

Over the next few years the department dealt with a wide varietyof problems at home and abroad and became accepted by clients andcolleagues alike. One interesting episode related to the commissioningof Mount Isa power station in Queensland, Australia. We hadundertaken the design and construction of this power station on aturnkey basis, with overall responsibility. Mount Isa was a mining townof some 12,000 inhabitants, situated in a desert area 1,200 miles fromBrisbane. It was wholly self-reliant and had no connection to thenational grid. I decided that Bernard Cheek should commission thestation, despite his comparative lack of experience, and went out tohelp at the crucial time. He and I worked alternate 12-hour shifts for

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some weeks and things went quite smoothly. When we came tosynchronise the station for the first time, the staff at the old powerstation decided, nonchalantly, that they were no longer needed, andshut down their plant. A few minutes later, we lost ignition on our onlyboiler and Mount Isa was plunged into darkness. Restoring suppliestook some hours, because all of the air-conditioning tried to startsimultaneously in that hot climate, so the system had to be put back instages. 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 ofSouth Africa from the generating plant manufacturing industries ofEurope, Japan and the USA, made great demands on their engineeringdepartment because of the time and money involved in returning largecomponents to the manufacturer for major repair. To solve one suchproblem, the bent shaft of a steam turbine (not one of ours), BobFenwick heated the shaft with gas torches on the side of the bend. Themetal expanded and finally yielded, creating a high stress area whichcorrected the bend. The solution horrified me, for it involved a lot ofguesswork – or art? – and ran the risk of developing cracks in the shaft,with possible dire consequences. In fact, the technique proved to behighly satisfactory when used with appropriate care and we used it atErith on one or two occasions, saving time and money for thecustomer.

These were exciting days, full of challenges and requiring longhours of work at distant sites. I was fortunate in having a very loyalteam, who never spared themselves – a characteristic of the PowerPlant division at that time which owed much to the leadership andexample of the divisional manager, Douglas Smith. He was aremarkable man, modest in nature and unswervingly loyal to his staff –if they had done their best! He combined an easy manner with ashrewd judgement and an almost artistic view of problems, seeing

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through the detail. He often remarked that ‘instructions are intendedfor the guidance of intelligent people’, making it clear that theyprovided no substitute, or alibi, for personal responsibility. This made agreat impression on me and formed a fundamental part of mysubsequent behaviour.

On one memorable occasion he sent for me and announced thatI was to become Sales Manager, with a substantial salary increase. Ireplied, somewhat huffily, that I had no wish to become a salesman andwas quite happy in my present job. He smiled and told me that the titlewas unimportant but necessary to secure the agreement of seniormanagement to the salary increase; he wanted me to take an interest inall of the activities of the division and would back me in anything Iwanted to do. Such a carte-blanche proposal was typical of the man; hegave his support unhesitatingly to those whom he trusted. It is anunusual tribute to him that many of his staff at Erith continued to visithim for dinner 30 years after his retirement. Under his leadership,GEC moved from a very small player in the turbine-generator marketto a position of considerable strength, and its technical advantages werewidely recognised.

He was little appreciated by his seniors, many of whom wereacademically well qualified, having been recruited by the nascentAtomic Energy Division. They were often intoxicated by theirachievements in the nuclear power field and assumed, wrongly, thatthose successes qualified them in other established fields of which theyhad no knowledge. Eventually, he was moved sideways and I becamedivisional manager, with the opportunity to appreciate the difficultieswhich can be created by poor senior management. An unusual exampleof this occurred when the general manager came into my office andtold me to give up tendering to the Central Electricity GeneratingBoard. He had had lunch with their board member for engineering andwas convinced that we had no chance of success. I explained that I,too, had difficulties with CEGB, but that we required them ascustomers in order to be able to sell overseas. He replied that this wasa matter of policy which he had formulated and was not open for


35


discussion, and wrote me a memo with instructions to cease tenderingto CEGB. I took the only practical course – I put the memo in a deskdrawer and ignored it.

Several months later, at Christmas, he came to see me andoffered his congratulations on my division securing two large CEGBcontracts. I couldn’t resist, after thanking him for his generous remarks,pointing out that the successes were in spite of his memo, which Iproduced from my desk drawer. He was not pleased and left withoutanother word. Unhappily, this was not an isolated incident and I cameto realise what a sterling job Douglas Smith had done in protecting thedivision from amateur management.

The power of the CEGB was quite extraordinary. Setting out tobe an informed buyer, with specialist staff, they rapidly began todominate the manufacturing industry by specifying equipment whichonly they wanted to buy. Since they were the dominant UK buyer, andthe 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 allowedthem to occupy a leading position in the world of electricity supply, andtheir determination to buy over-specified equipment at home excludedthem from obtaining competitive equipment abroad. In the event, theymanaged to buy over-expensive equipment for their own satisfaction,while effectively ensuring that UK manufacturers were incapable ofcompeting 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 fromtheir position of supplier dominance, and yet they signally failed toproduce good managers to run their rapidly growing empire. Indeed, itsometimes seemed to me that the essential requirement for promotionwas eccentricity, which seemed to be regarded as an indication of afresh, inquiring mind. All too often, as a result, eccentricity wascultivated by ambitious individuals who exploited the perceived rulesand ended up as incompetent managers. This trend was certainlyreinforced by the reliance of the senior CEGB management on the

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advice of a psychologist who was part of the interviewing panel forsenior appointments. There were a few refreshingly competentmanagers who had somehow slipped through the net, many of whomwere in the construction and design departments. There was also one,rare, example in the operations department, Arthur Hawkins, whobecame a good friend and went on to become chairman of the CEGB– although, by that time, he too had acquired the necessary trappingsof eccentricity as a means to the desirable end of promotion, and thehabit persisted in his new appointments. At the outset he recognisedthis and remarked that all chairmen of the CEGB had come eventuallyto practise ‘folies de grandeur’ and asked me, as an old friend, to tellhim when this happened to him. I protested that, in that event hewould not believe me – and such proved to be the case. The conditioncontinued and grew.

To be fair to the CEGB, their preoccupation with having aninordinate number of gold knobs on their equipment was not unique tothem. Other nationalised industries shared their technical arroganceand dominance of the home market – the steel, airline, gas, coal andrail industries were all doing the same thing, and did great damage toour post-war manufacturing base – arguably as much as the tradesunions, whose Luddite policies did much to cause the decline of Britishmanufacturing industries. In common with many other industrialists ofthat time, I grew weary of trying to explain to overseas customers thatour delivery obligations could not be met because of some wildcatstrike or walk-out.

About 1963, Arnold Lindley, now chairman of GEC, decided tobuy Radio and Allied Holdings – a decision which was to haveunforeseen consequences. For the managing director of that companywas Arnold Weinstock (later Lord Weinstock), the son-in-law of theowner, Michael Sobell. The deal was for shares, and Radio and Alliedbecame 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 Radioand Allied, Kenneth Bond and David Lewis, he proceeded to consolidate


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that position and to make it clear to all and sundry that cash wasparamount 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, whoreported directly to him, bypassing the local management. Our localman was an accountant, who irritated us all by referring to expenditureas being ‘my money’, a habit perhaps echoing the voice of his master!Much of what he offered was good common sense, but one never knewexactly what was being reported to head office. As a result, we didn’talways disclose the whole truth of the topic under discussion, inevitablyfrustrating the point of the exercise.

At the time of Weinstock’s arrival, much of British industry wasbadly managed, with little regard for financial management. This wascertainly the case at GEC, where there was little interest in contractcontrol or cash management. Indeed, contracts were managed on thebasis of man-hours estimated when bidding for the contract. Inevitably,a variety of factors often ensured that all of the man-hours had beenused before completion of the work – with resultant losses oncompletion. As my responsibilities increased, I invited Tom Parker, ofMerz and MacLellan, consulting engineers to join us as deputycontracts manager to try to get a grip on financial matters. He did asterling job and soon became contracts manager.

At about the same time I became aware that, in this new world offinancial control, my engineering training was insufficient and so Iembarked on a home-study course of study for a London Universityexternal degree in economics, with a special subject of accounting.After five years of study, much of it on aeroplanes and in overseashotels, I sat the final examinations and I well remember going toSenate House to look at the results. I began with the pass list, and didnot find my name. I then went to third class honours, with the sameresult and had a similar experience with the lower second classhonours. With a falling heart, I went to the upper seconds and foundmy name there, to my great surprise, for the time available for studyhad been difficult to find, for reasons which the preceding passages will

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have made clear. I found the knowledge I had gained of accountancyimmensely valuable then and throughout my subsequent career andwas often secretly pleased by the astonishment of professionalaccountants 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 hadmade me better-informed, but none the wiser! But I opted foraccountancy for Part Two of the degree and found that to be of greatvalue throughout my subsequent career, principally becauseaccountants I subsequently worked with were never quite sure howmuch I knew about their craft, and treated me with guarded respect indiscussion. I distinguished ‘real money’, as cash flowing into and out ofthe company from ‘accountants’ money’, which was a matter ofallocation in the accounts – the distinction, although very real inpractice, 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 oneof fear, for many of the edicts issued by him were implemented byacolytes who either failed to explain the rationale of the decisions or,more probably, didn’t understand it themselves. The emphasis was oncash generation, through pursuit of debtors, and cutting expenditure oncapital investment but also on trivia such as the cost of newspapers.One of his colleagues was later to summarise Weinstock’s period inGEC as having made a good job of weeding the garden, but withoutplanting anything new. But it must be admitted, in fairness, that he didmuch good for British industry in his concentration on cash flow andthe reduction of overheads – all of this in an industry wheremanagement was often dynastic and rarely competent in world terms.

The time came when Weinstock’s discomfort in dealing in a long-term technological market involving risks led him in 1966 to sell theTurbine Division at Erith to a competitor, Parsons, whose managementwas uncannily similar to that of GEC in the pre-Weinstock days. Hecould not foresee that later he would acquire, under pressure from theIndustrial Reorganisation Corporation, AEI and English Electric, each


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with large turbo-generator interests (they were, of course, bargains!).With these, he also acquired indifferent British management of the dayand was to openly lament the loss of his Erith management team.When he sold the business to Parsons for just over £3m, his right-handman, Kenneth Bond, asked me what was the likely financial out-turn ofsome complete power stations under construction, where all of theplant such as civil works, boilers, condensers and feed heating plantwere subcontracted by us, and there was some nervousness on the partof top management about their financial risks. I replied that I expectedto retain about £3m of the provisions made for completion – thisproved to be a sound estimate of the outcome. He asked why no onehad told him of this favourable position, which had led him to sell theDivision so cheaply to Parsons. I had the pleasure of telling him that hehadn’t asked the right people. He knew that he and Weinstock hadrelied on the direct bypass of local management and clearly saw thepoint!

The engineering management at Erith was superb. Headed byJohn Mitchell, ably assisted by David Kalderon, it developed GECturbines rapidly and with great success. By comparison, their rivals atEnglish Electric, Parsons and AEI were pedestrian, tending to rely ontheir strong market position and their close relationship with CEGB,rather than real innovation. In the years following the acquisition ofGEC by Parsons, John Mitchell became engineering director of Parsonsand David Kalderon, after a few years with the CEGB as their turbinespecialist, became engineering director of the new GEC company,formed by acquisition of English Electric and AEI, and of thesucceeding GEC-Alsthom combination formed out of ArnoldWeinstock’s oft-declared dislike of the financial vulnerability of large-scale technology.

But to return to the effects of the Parsons takeover of the GECturbine business, their managing director paid quarterly visits to Erith,where I became general manager, to survey our performance. On oneoccasion, he was moved to congratulate me on our performance,remarking that on cash and profit we were doing very well indeed.

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After thanking him, I pointed out that we had a very short order bookand that there were few orders for turbines about. As a result, I saidthat we were looking for some sub-contract work for our heavymachine tools and were just then talking to the Swiss firm Sulzersabout making components for their large hydraulic presses. He bridled,and instructed me to break off the discussions immediately; our job, hesaid, was to manufacture steam turbines. In vain, I tried to point outthat there were simply no orders around for steam turbines and that wewere fast running out of work. He was adamant and we had to comply.

Three months later, at our next meeting, he remarked on ourshort order book and said that we must look for sub-contract work. Isuggested Sulzers, to which he replied angrily that that subject wasclosed!

Behaviour of this kind on a number of occasions made meconclude that I couldn’t work for Parsons, whose management waseven worse than that with which I had had to contend for the previousnine years, and I began to look around for alternatives. At the sametime, Parsons offered me a series of posts and pressed me to take oneof them. Since most involved working at Heaton, the main office, andI could not face a re-run of working for another incompetentmanagement, I looked around for other opportunities, including theoffer 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 asubstantial amount of local manufacture, for political reasons, and soParsons acquired a 49 per cent stake in a large plant owned byHowdens of Glasgow and situated in Toronto. This left Howdens ineffective control, although Parsons largely ran the turbine side of thebusiness, with which they were of course, familiar. Perhaps seeking tostrengthen their position, Parsons asked whether I would becomepresident of the joint company, presumably with the agreement ofHowdens, and suggested that I might give it a three months’ trialperiod. I was anxious to quit Parsons and this opportunity seemed to


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offer a limited prospect of distancing myself from Heaton. But this wasno solution and, after visiting Canada I decided that I really didn’twant to bring up my family there. One factor was that my eldestdaughter, Catherine, who had been offered medical studies places atboth Cambridge and Oxford, would not be eligible, without furtherexaminations, for a place at a Canadian medical school.

I therefore declined the offer, to Parsons’ displeasure and, out ofthe blue, was offered the post of general manager of Howdens,including a seat on their main board and one on the board of theHowden-Parsons company in Canada. I accepted the offer and movedto Scotland, of which more later.

But the Parsons difficulties were not over. It was usual practice inthe GEC Pensions Scheme, which Parsons took over, to transfer one’sown contributions, together with those of the company, to anotherscheme, on leaving employment after a period of ten years’ service. Thiswas subject to the approval of the company and was usually a matter ofcourse. Parsons decided to withhold that approval in my case, perhapsbelieving that this would induce me to stay. In fact, it had the contraryeffect and I became even more determined to leave Parsons. Before theday of departure I was summoned to meet the chairman of Reyrolle-Parsons, the holding company for Parsons, Jim Bennett, whom I hadnever previously met. He expressed regret that I had decided to leave,and asked what the company could do to make me change my mind. Ireplied that the only thing that could persuade me to stay would beunacceptable 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 withthe present managing director of Parsons and he would require to bereplaced before I could consider staying. He, understandably, declaredthis impossible and so our meeting ended, amicably. Little did either ofus know that I would later become an important customer of Reyrolle-Parsons, then be invited to become chairman of a company which tookthem over (NEI) and, later, acquire that company, including Parsons.

I left Erith, greatly enriched in experience and with a real senseof achievement, albeit with a diminished pension. The sense of

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achievement was due to the marvellous staff of the Power PlantDivision, some of whom remain close friends almost 50 years later.They were let down by an ineffective and distant top management, notimproved by the advent of Arnold Weinstock, who later lamented theloss 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 didnot deserve any sympathy.

So, I moved to Scotland in 1968 and found a house in Bridge ofWeir, west of Glasgow, which I bought before my wife even saw it. Shehad her hands full in Kent, and the strain of frequent house-huntingtrips to Scotland proved too much to handle. Happily, she and thechildren loved the house, and we spent ten happy years there. It was adelightful Victorian stone-built house with beautiful views and someremarkably elegant features, including a large first-floor drawing room,and had the added benefit of delightful neighbours – no small point ina strange country.

I had been offered, and accepted, the job of general manager ofJames Howden Ltd, who manufactured a wide range of equipment,much of it for power stations, and had manufacturing plants in anumber of overseas countries. One of these was the plant in Toronto,Canada, in which Parsons had taken a 49 per cent shareholding inorder to be able to offer local manufacture of turbines for Canadianutilities, the principal one being Ontario Hydro.

Howden-Parsons secured a number of contracts, their latest atthat time being for the supply of four 800MW turbine-generators for theBruce nuclear power station of Ontario Hydro. As often happened, loadgrowth did not meet expectations and Ontario Hydro decided to delaythe 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 wasfurious when I heard this, because the inability to recover overheads onthose delayed machines would inevitably incur losses. I therefore toldParsons that there would, in fact, be a significant extra charge of somemillions of pounds. They did not agree, but Howden had the controlling


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shareholding in Howden-Parsons so I insisted that a claim would besubmitted. The dispute was referred upwards by Parsons, first toDouglas Hume, the group managing director, and then to his father,James Hume, the group chairman. Both supported me and a substantialclaim was submitted and paid without demur. I remember askingParsons whether, given their opposition, they intended to claim their 49per cent share! There are no prizes for guessing their answer.

Some time earlier, Howden had broken new ground in their fandepartment by winning contracts to provide gas circulators for theAdvanced Gas Cooled Reactor nuclear stations being built at Hinckley‘B’ in England, and Hunterston ‘B’, in Scotland. These were highlysophisticated machines, beautifully designed and manufactured, andgave excellent service. They required high-quality investment-cast fanblades and the contract for them was placed with Rolls-Royce, who haddeveloped considerable expertise in the technique of investment-casting for their own needs. They did not perform well on this contractand, by the time I joined Howden, had made more blades than wererequired for the entire contract without making one satisfactory blade.The contract was in serious trouble and I decided to visit Rolls-Royceto try to secure some effective action. During a full day’s meeting I gotthem to agree to approach the problem with a sense of urgency and tofollow a number of possible solutions in parallel. At the end of themeeting, the Rolls-Royce managing director pointed out that thesemeasures would involve much extra cost and that they would expect torenegotiate the price. I pointed out, as patiently as I could, that theyhad contractual responsibilities and could well incur huge penalty costsunder the contract if they failed to meet them. They were stunned, andpointed out that their clients always met the extra costs in suchcircumstances! I explained the facts of commercial life to them andlater advised some wealthy friends to sell their Rolls-Royce shares,thereby acquiring a wholly undeserved reputation for investmentexpertise. Two years later, in 1971, came the celebrated receivership ofRolls-Royce. That episode was to come back to me with force some 20years later, when I joined the Rolls-Royce board.

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I enjoyed the various challenges of the Howden Group, wherethe top management was far superior to that at GEC or Parsons. Themorale was generally good, although there was always an awareness ofthe management dynasty, which characterised many Scottish firms atthat time. The founding family continued to run the firm, despitehaving reduced their shareholding to a very low level, and there was anexpectation that this would continue without competition.

My old friend Geoff Shepherd was at that time director ofengineering of the South of Scotland Electricity Board and decidedthat the post of deputy chairman of the London Electricity Boardwould take him to London, where the true power lay. I decided toapply 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 wasindependent of the CEGB!

I was appointed to the post, to the dismay of Howdens, who hadbeen very kind to me at a time of some difficulty in my career but weregenerously understanding of my dilemma. The opportunity was toogood to miss, and I undertook to find a successor who would be betterthan I had been. I did this by recommending my former colleague,Bernard Cheek, who was unhappy at Parsons, and filled the post withgreat distinction, remaining there until his retirement.

I remained on good personal terms with the Howden family, andDouglas Hume and his wife remained good friends for the rest of theirlives.


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CHAPTER 4

THE SOUTH OF SCOTLAND

ELECTRICITY BOARD

I became director of engineering of the South of Scotland on 1October 1969. The SSEB had been spared the fate suffered by theelectricity industry in England and Wales when, in 1957, the thenMinister of Power, Aubrey Jones, accepted some of the ill-judgedrecommendations of the Herbert Committee and made matters worseby imposing his own organisational notions. In England and Wales,therefore, the generation of electricity was separated from itsdistribution and sale; happily, however, Scotland was exempted fromthat folly and, instead, its distribution boards and generating divisionswere combined to form two boards, the South of Scotland ElectricityBoard (SSEB) and the smaller North of Scotland Hydro-Electric Board(NOSHEB), each of which both generated and distributed electricityand reported to the Secretary of State for Scotland.

The SSEB was much the larger of the two Scottish Boards andhad a number of coal-fired power stations and a nuclear power stationin operation, with further coal-fired, oil-fired and nuclear plant underconstruction or planned. The NOSHEB relied almost exclusively onhydro power and also had statutory social obligations for the Highlands,a large and sparsely populated area. The two Boards collaboratedthrough a Joint Generating Account, the object of which was to ensurea fair basis for the trading of electricity between the Boards.


The SSEB was run by a Board appointed by the Secretary ofState for Scotland and consisting at that time of a chairman, a deputychairman and a number of part-time members. Its operations fell totwo directors, not Board members, one responsible for engineering andthe other for finance and administration. It served about 1.5 millionconsumers, employed more than 14,000 people and had a turnover of£120m. In 1969, for example, it burned the bulk of Scottish coalproduction, consuming more than 6 million tons.

I quickly settled down at this large and fascinating Board andfound its staff enthusiastic, hard-working and welcoming. There was noshortage of tasks to be addressed, for the scope of the Board wasgrowing rapidly, along with the economy.

Just four weeks after my arrival, on 29 October, I was rousedfrom sleep early in the morning by a telephone call telling me that thewhole of Scotland and the North of England had lost their electricitysupply. With a somewhat sketchy geographical knowledge, I drove tothe Grid Control Centre at Kirkintilloch to find that the problem hadbeen caused by a fault on a super-grid line in Ayrshire which hadpersisted for 28 minutes due to a failure of the protective equipment.Good progress was being made in restoring supplies by starting uphydro and gas turbine plant and the first two of our largest 300MWsteam units, which were just coming on stream at Cockenzie powerstation on the east coast.

At this point I was approached by a worried young man whoasked whether I was in charge and, when I said I was, proceeded to tellme that he had recently read a technical paper suggesting that in certainprolonged fault conditions the non-magnetic end-bells, supporting theend windings of the generators at Cockenzie, might crack due toheating, with a risk of extensive damage to the plant. He suggested thatthe Cockenzie machines should be shut down for investigation. I wasfaced with a choice. To follow his advice would have been a major step;examining the end bells would take about a month and prolong thedisruption of electricity supplies in Scotland. I had little difficulty indismissing the highly theoretical, though well-intentioned, suggestion,

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but decided that we would make an inspection at a convenient laterdate.

Restoration of supplies continued apace and, in due course, wedid examine the end bells on one Cockenzie machine, to find them inperfect condition! This was my first experience of the need to makerapid decisions with incomplete information in an essential serviceindustry. The option of waiting for certainty is just not open and I amgrateful that my working life was not lived in the stifling atmosphere ofzero-risk and blame avoidance which characterises so much of oursociety today.

I returned happily to the everyday tasks of project control, staffmanagement, planning and the like which normally kept me busy, butsoon had to address construction problems at our new Longannetpower station in Fife, at that time to be the largest in Europe.

The consulting engineers, Merz and McLellan were prettyineffectual on the management of the project, which was running late,and showed no sense of urgency. I telephoned the senior partner, thesame Wilson Campbell who I had encountered in South Africa someyears earlier, and arranged a meeting at which I expressed my concernand made it clear that unless there was a marked improvement we woulddispense with their services. At first his response was belligerent, but afterdiscussion he accepted the challenge and assumed personal control of theproject, with considerable success. I matched his personal commitmentwith 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’ powerstation, then under construction, where the thermal insulationprotecting 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 notoccur). We concluded that the problem could be overcome by redesignof the insulation fixings to tolerate the corrosion, although the changesinvolved considerable cost and delay.

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Arthur Hawkins, the new chairman of the CEGB, who werebuilding a similar station at Hinkley in Gloucestershire, rang me insome agitation to say that he was considering closure of the CEGBconstruction site until the problem was solved. This was a somewhatnaive idea; restarting construction at sites which had been closed fortechnical problems would be a difficult task, for almost inevitably alevel of assurance on the corrosion mechanism would be sought whichwould not be available. Our approach was to build into the designsufficient redundancy to overcome the likely problems for the life ofthe plant.

I indicated that we had no intention of closing our site but wouldmodify the design to accommodate the problem, and he asked for anurgent meeting which took place the following day. Arthur Hawkinswas an old friend whose experience of power stations was limited; hisbackground had been in operation of the transmission grid. Heaccepted our decision and adopted it, and the stations concerned havesince operated with no problems in that area for some 40 years. Thiswas the first of a number of difficulties between our Boards which weovercame 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 bysupporters of the US-designed pressurised water reactors (PWRs) inpreference to the British advanced gas reactors (AGRs). The AGRprogramme was experiencing considerable delays and cost overruns, atthat time not uncommon on large construction projects, and it wasargued that some comfort could be gained by adopting the US design,which was widely adopted internationally, instead of developing adifferent UK design which had attracted little overseas interest. ArnoldWeinstock had considerable political influence and joined the PWRlobby which was attractive to him because others would take the risk of

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designing and building the reactors, with GEC supplying theconventional turbines, switchgear, transformers and the like, whichwould be relatively low-risk. The coalition of PWR supporters eventuallyresulted in the CEGB proposing a large programme of PWRs spreadover five years and amounting to some 25,000MW – an enormousinvestment. At the same time, Weinstock reached an agreement withFramatome of France to supply the reactors, thus achieving hiscontinuous 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 aHouse of Commons Select Committee began hearings, at which I wasasked whether I saw the need for such a national programme. I repliedthat I did not see the need to order a substantial quantity of any newgenerating plant and that I would prefer to stay with the AGR anyway.I added that, if it were judged that some orders were necessary topreserve a nuclear manufacturing capacity, and an alternative to theAGR had to be considered, then I thought that a programme of5,000MW of steam-generating heavy water reactors (SGHWR), basedon the Canadian design and on a 100MW prototype reactor at WinfrithHeath in Dorset, would be preferable. Battle was now joined in earnestand a Nuclear Power Advisory Board was set up, under thechairmanship of the Secretary of State for Energy. GEC and the CEGBhad members and I represented the Scottish Boards.

It is worth digressing at this stage to discuss, in simple terms, thearguments for and against the PWR. Developed by the US industryfrom the design for nuclear-propelled submarines, the PWR was thedominant reactor type in civil service, with a large domestic programmeand a network of overseas licensees. But the reactor for a submarineoperates under quite different conditions from those of a land-basedpower reactor, with the sea water providing natural shielding. I dislikedthe fact that, in accident conditions, the PWR was cooled by a highlyvariable mixture of water and steam, making design of the emergencysafety systems dependent upon complex computer models. By contrast,the gas-cooled reactors employed a stable coolant and also enjoyed a


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long time-constant, a considerable advantage in accident conditions. Afurther consideration at that time was the possibility, subsequentlyshown to be less likely than was then thought, of a major fracture ofthe massive PWR steel pressure vessel.

To aid the discussions, I called a meeting of all the involvedtechnical staff at SSEB and discussed the pros and cons openly at anall-day meeting. The consensus was clearly in favour of the AGR or theSGHWR, and I proceeded on this basis. The Government decided toaward a research and development contract of about £30m for theSGHWR, to be managed by GEC, and we had an early, ratherilluminating, meeting during which the CEGB representative, LeslieMiller, was questioning GEC about what responsibility they wereprepared to accept, as managers of the contract. The recognised GECpolicy of refusing responsibility was presented by David Lewis, a lawyerand one of the two colleagues who came to GEC with Weinstock. Isought to calm the increasingly heated discussion by suggesting thatLewis did not really mean to say that they would not acceptresponsibility for their own negligence or incompetence. My goodintentions came to naught, for Lewis promptly declared, to generalastonishment, that that was exactly what he meant. It was a goodexample of the Weinstock attitude to commercial matters.

Time passed, with further development taking place in spite ofdetermined non-cooperation from GEC and the CEGB. I was abroad,on holiday, in 1975, when I received a telephone message from EricVarley, the Secretary of State for Energy, asking me to attend a specialmeeting of the Nuclear Power Advisory Board and to meet himprivately beforehand. I interrupted my holiday and returned to Londonto be told by Varley that the Cabinet had decided to proceed with aprogramme of 5,000MW capacity based on the SGHWR. He asked meabout the prospects of success and I replied 30 to 40 per cent,explaining that the problem lay with the determination of GEC andCEGB to secure a PWR programme. He opened the subsequentmeeting of the NPAB by saying very clearly that he would brook noopposition to the government policy which he was to announce, and

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that he would maintain a close supervisory interest in progress. A fewweeks later, Varley was moved by Harold Wilson, the Prime Minister, toDTI, and replaced at Energy by Tony Wedgwood-Benn, the formerDTI minister. Determination vanished and the programme wassystematically delayed. The alternative of a large PWR programme diedan early death.

Progress on the nuclear front was later to be made, under the nextConservative Government, in 1979, by the building of two more AGRstations, one in England and the other in Scotland, and then one PWRstation at Sizewell in Essex. This latter initiative involved a long publicinquiry and was dogged by cost overruns and delays, many of them as aresult of additional safety requirements by the Nuclear InstallationsInspectorate which was the Government licensing authority.

The AGR stations have run well over the past 40 years but theircommissioning was followed by a long period of inactivity in orderingnuclear power stations world-wide because of economic conditions andtwo high-profile nuclear power station accidents. During that period,much effort went into designing much improved safety features intothe PWR, so that the long wrangle can be seen to have been largelyjustified.

There was during this time an active opposition to nuclear power,led by Friends of the Earth, and I suggested to Sir John Hill, chairmanof the UK Atomic Energy Authority, that we should organise a publicdebate at which the issues could be discussed. We approached SirGeorge Porter, (later Lord Porter), then President of the RoyalInstitution, to use his premises for such a debate. He agreed, oncondition that both parties would receive equal opportunities to debatethe issues. Since we were confident that our arguments would defeatthose of the opposition, we readily agreed. A public debate, lastingthree days, was held. It was well attended, and featured on television.The publicity was generally favourable to the arguments of the industryand led to some televised debates which we easily won. The simplereason for the favourable outcome (from our standpoint) was that wehad a huge amount of evidence to support our case, whereas the


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opposition relied on unsupported and extravagant generalisations – aposition which remains similar today.

It has been necessary to stray somewhat beyond my time at theSSEB in order to complete the nuclear saga, but life remained prettyhectic 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 onthe environment, and we were required to consult with the Secretary ofState’s Amenity Committee on visual effects. The committee chairmanin 1972 was an architect who declared at one of our meetings that hehad no objection to our overhead transmission towers (or pylons, inpopular parlance), but disliked the wires in between them. I could notresist replying that we were not clever enough to dispense with thewires but that, if we were, I wondered how long it would be before wewere asked to provide a unifying motif for the isolated towers! Thesame individual remarked on another occasion that he disliked thesingle combined chimney, serving six large boilers at Longannet powerstation, and would have preferred six separate chimneys!

In 1972 I became deputy chairman of the SSEB, withappointment as chairman to follow a year later. This stemmed from thepoor health of the SSEB’s then chairman, Lewis Allan, but was unusualin that it committed to a further major appointment ahead of time. TheSecretary of State responsible for this was Gordon Campbell (later LordCampbell of Croy), a politician with a distinguished war record and acommitment to running his department well. There is no doubt, ofcourse, that he relied heavily on the advice of Lewis Allan, and thatof his deputy, Alan Christianson, whose age precluded his ownpromotion. Christianson, an accountant, was a determined, straight-forward man whose major contribution to the industry, despitewidespread management opposition, was the introduction of extensivestaff reductions to increase productivity. His inspired leadership in this

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field made the industry in England and Wales, as well as Scotland, vastlymore efficient during a period when great technological progress wasalso being made and offered considerable staffing economies.

My appointment as deputy chairman was followed by a nationalcoal strike, which brought forth much ingenuity in the SSEB. We hadbeen building coal stocks for some time in the expectation of a strike,but were vulnerable to picketing, which could affect staff and essentialsupplies of lighting-up oil, hydrogen gas and water-treatment chemicals.Picketing of staff was overcome with the cooperation of the police andwith the robust support of our own staff, notably the station canteenladies who braved the picket line in company with other staff! Oil andhydrogen supplies were generally transported by road, so we madearrangements to take oil deliveries by sea and chartered a Dutch tanker.Hydrogen and other essentials were delivered by helicopter. In theevent we managed to keep our load shedding below that in Englandand also to export considerable quantities of electricity to the Englishelectricity boards.

My appointment as deputy chairman required the appointment ofa new director of engineering, and I approached Roy Berridge, thendirector of design and construction for the CEGB to apply for the post.He was successful and proved a tower of strength and loyalty, making itpossible for me to fulfil the many national commitments which werenow descending on me. All of those national meetings were held inLondon, which proved quite demanding for me and I suggested at onecommittee meeting that the committee should meet in Scotland with afrequency reflecting the committee membership. I was met by blanklooks and a remark that Scotland was a long way from London. Ireplied, with a straight face, that it was a verifiable fact that thedistance from London to Glasgow was exactly the same as that fromGlasgow to London. This evoked even blanker looks and the meetingscontinued in London.

One of many appointments which gave me great pleasure wasthat of Don Green as deputy station manager at our new Inverkippower station on the west coast. He had been a shift charge engineer


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with me at Ince power station and had subsequently remained with theCEGB, where his undoubted talents remained concealed below theproverbial bushel. After joining the SSEB he progressed rapidly to bestation manager of our largest station, Longannet, and subsequentlybecame chief generation operations engineer for the Board – anappointment made after I had left.

Inter-firm comparison

At this time it was becoming common for companies to compare theirorganisation and costs with those of their competitors and I resolved todo so for the SSEB. The choice of comparator companies was not easy,for we were already demonstrably better in many areas than the CEGBand the English distribution boards, and NOSHEB were too dissimilarto provide useful data. After some careful examination of overseasutilities I concluded that the two companies most similar to the SSEBin size and scope were VEW of Germany and Commonwealth Edisonof Chicago.

Both companies received our overtures with enthusiasm andthere ensued some years of profitable interchange of staff andcomparison of methods. Some outside stimulus is necessary to keep upmanagement standards and innovation, and our dealings with twopublicly quoted and highly efficient companies proved valuable to allthree of us.

Relations with NOSHEB

Relations with our sister Scottish Board, of which I was a part-timemember, were often difficult, probably because of the difference in sizeof the enterprises. I have mentioned the Joint Generating Accountwhich was operated with the intention of securing fair trading betweenthe Boards, but which became an annual joust with recondite

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arguments aimed at securing financial advantage for one Board overthe other. I became impatient with this annual trial of strength – andpatience – and proposed a simple formula. The NOSHEB staff sawmore to be gained from a drawn-out negotiation and I made littleprogress until Sir Douglas Haddow, previously Permanent Secretary atthe Scottish Office, was appointed chairman of NOSHEB in 1973. Wewere now able to discuss matters on a less emotional basis and, after alengthy period of discussion, reached a much simplified agreementwhich lasted, virtually unchanged, until privatisation in 1988.

Collaboration arose as another major issue when the North Boardproposed the construction of a new power station at Peterhead. Theyoriginally obtained approval for an SGHWR nuclear station but, whenthat programme stalled, proposed a gas/oil power station to burn eitheroil or gas from the North Sea fields. In either case it was recognised thatthe NOSHEB did not have the necessary expertise to handle such aproject alone and it was decided that the SSEB should provide thenecessary support. Matters went very well and I recall being approachedby David Kalderon of GEC to ask whether we would support theirproposal to an overseas utility for a simpler and cheaper design ofexhaust blading than the CEGB would consider. (Large exhaust area hadlong formed an article of faith in the CEGB to which I, in my Erith days,had been unsympathetic.) We agreed, and GEC secured the contractwith that design, to the benefit of their subsequent export business.

The chief engineer of NOSHEB was a Scot, Donald Miller, withconsiderable ability and I thought that some of our problems with himstemmed from his being in a small organisation. Accordingly, as mychairmanship approached, I considered recommending the promotionof Roy Berridge to the post of deputy chairman, with Donald Millersucceeding him as director of engineering. Both appointments tookplace in 1974 and proved highly successful, with Donald Millereventually becoming chairman of SSEB and leading the Board into aprivatisation process which, unhappily, involved the hiving off of thenuclear power which we had fought so hard to build. However, he wasable to preserve the SSEB advantage of combined generation and


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distribution, which the Herbert Committee had ill-advisedly separatedin England and Wales back in 1957.

Another, related innovation which I introduced was managementaccounting, involving the delegation of operating budgets tomanagement units, with monthly reporting of progress and re-forecastsof outcome. Common in the private sector, this step unleashed atremendous initiative at the middle management level and prepared usfor 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. Acharacteristic of the Scottish coalfields was their heavy geologicalfaulting, which resulted in generally poor coal quality, withaccompanying high costs, and the production of larger quantities of ashthan had been foreseen at the design stage. The usual pattern ofnegotiation was an argument on the quantity to be burned and on theprice, which was invariably uncompetitive when compared to nuclear,oil, or foreign coal. The Scottish Office operated a coal supportarrangement to induce us to burn more coal than we wished, and thediscussions were usually protracted. When I became chairman in 1974there was a rather more ambitious proposal for a longer-termarrangement and the negotiations were ably conducted by RoyBerridge, who ensured that sufficient flexibility was written into theagreement to protect us against major market changes. I have to saythat, 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 Scottishchairman of the NCB, Jim Cowan, declared his handicap as 24, andproduced a letter from his golf club secretary confirming it, butproceeded to play brilliantly. It was only after we had lost that headmitted that his real handicap was 6, but that he had failed to return

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the minimum number of cards and so had been relegated to 24 as atemporary punishment! Dubious legality, but he insisted on retaininghis winnings!

Longannet power station

At the time of its commissioning, Longannet was the largest powerstation in Europe, with four 600MW units. It was coal-fired, and wasbuilt on the new Longannet coal field in order to minimise coaltransport costs. Unfortunately, both the quality and the cost of winningthe coal proved to have been worse than anticipated when the schemewas initiated, with the result that a considerable quantity of coal had tobe brought by rail and sea from other pits in Scotland and England.The power station design had allowed for this. Disposing of theLongannet ash, however, was more difficult, for the disposal plant hadbeen designed on the basis of the forecast ash content of the coal, avery optimistic forecast.

Commissioning the station involved the usual problems with aprototype plant, and it must be remembered that the rate ofdevelopment of the electricity supply industry was very high, movingfrom 30MW units to 600MW units in some 20 years – and in anindustry where the construction time was about seven years!

The decision by my predecessors to build 600MW units was acourageous one, making substantial savings in capital cost. There are30,000 or so welds in a large boiler, and in order to avoid the thencommon problem of defective boiler tube welds, it was decided toimplement a programme of X-raying all of the welds, rather than thecustomary sample proportion. All seemed to be going well, until it wasfound that the X-ray method missed the joint between two stretches ofweld – the most vulnerable area! Fortunately, the welding had been of ahigh standard, and little trouble resulted from this lamentableoversight. I was reminded of the story of a railway wheel-tapper whorejected 40 wagons, before finding that his hammer was cracked!


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However, we did have quite serious trouble with the GECturbines, which encountered very severe vibration and proved incapableof running.

At this time an advertisement appeared in the personal columns ofThe Times reading, more or less, ‘Weinstock: do you know that it takessix weeks to get a GEC fridge repaired? Sorry I can’t write to you, butI’m holding the lamb chops out of the window.’ One of my regularquarterly meetings with Weinstock was due and I asked him what hehad done about it. He replied, naturally enough, that he had given theman a new fridge, which prompted me to rejoin that I had consideredmaking a similar advertisement reading ‘Weinstock: do you know that Ihave four 600MW turbines broken down at Longannet? Sorry I can’twrite to you personally, but the lights are out.’ He was not amused, butthe problem acquired an increased urgency for him. It was solved,eventually, by my former colleague at Erith, David Kalderon, who hadnow become technical director of the GEC Power Plant division whichby then encompassed the former English Electric and AEI companies.

There were, of course, other problems, but Longannet proved tobe a highly reliable station, thanks to the unstinting efforts of thedesign, construction and operating teams, and has been a mainstay ofScottish power generation for more than 30 years.

Arnold Weinstock

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

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and David Lewis, a lawyer, together later formed the effectivemanagement committee of the GEC board.

Weinstock’s ethos was risk avoidance, cash management andprofitability. He introduced strict cash control into an engineeringindustry where cash had traditionally been regarded as, at best, anadjunct to the business, and saw the quick way to profitability asreduction of workforce and overheads. He set a good example byselling the large Kingsway headquarters and moving to much smallerpremises in Stanhope Gate, which necessarily reduced the number ofhead office staff. He paid great attention to saving candle ends andestablished a system of performance reviews which terrified hisunfamiliar staff. Alongside direct interviews of managers he establisheda network of observers who, planted in the operating units, carried hismessage and reported back.

The net effect of this changed management style was a considerableimprovement in the company’s financial performance, and the strengthof its cash position became legendary. Unfortunately, his love of cash andhis aversion to risk led to a highly conservative style of management.

He was not a good judge of people and made a number ofdisastrous management decisions. One of his major errors was to fireSel Ghalib, an engineer of great competence who had been responsiblefor building the most successful of the British nuclear power stationsand who had become the managing director of the GEC companyformed at government request to manage NNC, the merged nuclearenergy business. Sel, who I knew well, told me that he had beensummoned to meet Weinstock at short notice and didn’t know why. Myknowledge of Weinstock’s methods suggested that the meeting wouldprobably be serious for Ghalib and so I invited him to have lunch withme straight after the meeting. When he arrived he was distraught andtold me that Weinstock had fired him, as I had feared.

I immediately invited him to join the SSEB as a consultant, whichhe accepted with alacrity and some surprise. He remained for manyyears, serving my two successors there, and contributed greatly to theoperations of the Board.


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Weinstock was outstanding among the industrialists of his day,and his methods came to infuse management methods in Britain andoverseas. He was admired by government, and his uncompromisingstance secured many attractive government deals and settlements. It isa sad reflection that his 40 years of labour in building up an industrialempire was to be squandered by a successor management which failedto learn from his basic management strengths, but it has to beacknowledged that he had been highly supportive of the appointmentof his successor.

He was a mass of internal contradictions, for his aversion to riskwas accompanied by a passionate interest in horse-racing, including theownership and breeding of horses. He could be cruel or caring towardsstaff, with no clear distinction. I think that he rather enjoyed hisinconsistencies and consequent unpredictability and the effect this hadon his staff.

In spite of our sometimes difficult relations, he dispatched a GECdirector, Bill Bird (a former English Electric director) in 1976 to inviteme to join the GEC board in an executive role. I declined, and Bill Birdreturned a few weeks later, to try to persuade me to accept and said thatArnold had asked him to tell me that I could ‘write my own ticket’. Iagain declined and was eventually approached by Arnold, who asked thereason for my repeated refusal. I replied that he and I had differentindustrial value systems, that consequently we would have seriousdifferences, so that one of us would have to leave – and that I knewwhich one that would be, given his large shareholding in GEC! I couldnever quite decide whether Arnold wanted me to join him because hewanted my contribution, or because he wanted to silence a troublesomecritic 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 acommittee to examine the organisation of the electricity supply industry

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in England and Wales, which differed from that in Scotland in thatdistribution was divided among 12 autonomous Boards, with allgeneration concentrated in the Central Electricity Generating Board –a situation which had obtained since the Electricity Act of 1957following the Herbert Report, of which I wrote earlier.

In the course of their investigation they visited Scotland and tooka deep interest in the combination of generation and distribution foundin both Scottish Boards. In their report, they recommended togovernment that distribution and generation in England and Walesshould be combined in an Electricity Corporation. Although theyrejected the formation of a number of combined Boards on theScottish model, they were concerned to ensure that the operations wereeffectively integrated and that the anarchic situation of 14 Boards, eachreporting to the Secretary of State for Energy, should be ended. Itshould be noted, in passing, that the Electricity Council, while beingstatutorily charged with the co-ordination of the industry, had noeffective powers and was constantly at the mercy of the other 13Boards, with their direct responsibility to the Minister. Indeed, it wasfrequently referred to as the ‘toothless wonder’. In all of this, theCEGB played a highly independent role and displayed an Olympiandisregard for the industry at large – an understandable attitude, givenits technical and financial dominance.

The distribution board chairmen, for their part, enjoyed theirindependence and indulged in a collective dislike of the CEGB, securein the knowledge that they were spared any real responsibility for majordecisions concerning the industry.

The recommendation of the Plowden Committee was acceptedby the Labour Government, whose Secretary of State for Energy wasthen Eric Varley, and I was invited to become chairman of theElectricity Council and chairman-designate of the proposed ElectricityCorporation by his successor, Tony Benn. I was greatly attracted by theprospect of unifying the divided operations in England and Wales,which I had seen from the viewpoint of a manufacturer whilst at Erithand later, from the viewpoint of the industry itself whilst in Scotland.


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My intention was to organise the new Electricity Corporation into fiveareas, each combining generation and distribution, but competing witheach other through the national grid. This would have formed a goodbasis for privatisation of the industry, a subject looming on the farhorizon but not under discussion at that time.

At about the same time I received an approach from Sir JamesWoodeson, the chairman of Northern Engineering Industries (NEI)who wanted me to succeed him as chairman. NEI had been formed byamalgamating Parsons (turbines and transformers), Reyrolle (switch-gear), Clarke Chapman and International Combustion (boilers) andwas the UK rival of GEC in the power field. I was attracted by theprospect of returning from nationalised industry to the private sectorand was greatly touched when Bill Hanlon, the deputy chairman andchief executive of NEI declared his willingness to retire early if thatwould facilitate my move.

After long consideration, I decided that the prospect ofreorganising the electricity supply industry in England and Wales wasirresistible, although less financially attractive than the NEI offer – orthe earlier offer from GEC. Accordingly, I accepted the post ofchairman of the Electricity Council and chairman-designate of thenascent Electricity Corporation, fully expecting the changes which I sawas essential for an efficient organisation capable of progressing toprivatisation. When I told my deputy, Roy Berridge, of this I askedwhether he would like to be considered as my successor. He repliedthat he would much prefer that I stayed with the SSEB but that, if Iwas determined to move, he would like to be considered for thesuccession. He duly succeeded me and proved a highly competentchairman.

So ended eight happy and rewarding years at the SSEB. Lookingback now, I see them as among the happiest years of my career, rivalledonly by the years at GEC Erith and Rolls-Royce. In each case, the jobwas made infinitely simpler by the strong sense of loyalty whichpervaded the organisation and the intense feeling of personalcommitment which was apparent at all levels. Such experiences are

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uncommon, and the human chemistry which produces them is elusive.But I made many friendships in each of those organisations which havelasted throughout my life, and I left them both with a deep sense ofsorrow 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 ofthe Electricity Council for England and Wales, and chairman-designateof the proposed Electricity Corporation. The new Corporation was tobe created to unify the electricity supply industry in England and Walesby combining the CEGB with the 12 Area Electricity Boards.

The proposal to unify the industry featured in the Queen’sSpeech on 3 November 1976, and a draft Bill was published on 4 April1978 (Cmnd 7134). As we shall see later, these good intentionseventually came to naught, despite reiteration of the proposals in theQueen’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 bystaff, unions, consumer organisations and industry. The situation withthe CEGB which, as it was the most powerful of the individualBoards, might have been expected to be antagonistic, was overcomeby the appointment of a new chairman, Glyn England, with theannounced intention that he would become deputy-chairman of theElectricity Corporation. He was thus fully committed to the intendedchanges.


Paradoxically, but in keeping with his predecessor as chairman ofthe CEGB, Glyn England had no experience of generation constructionand operation, having spent his career with CEGB in the transmissionplanning area, before becoming chairman of the South-West ElectricityBoard. I was thus much more experienced in the generating area thanhe, and very familiar with the aspects in which he had specialised.

The Electricity Council was quite unlike any organisation I hadmet before. With very little in the way of executive power it wasrequired to co-ordinate the activities of a huge industry, divided into 13statutory Boards, each with its own board of directors and eachreporting to the Electricity Council – but also directly to the Secretaryof State for Energy as, indeed, did the Electricity Council. Littlewonder, then, that the Electricity Council was often referred to as the‘toothless wonder’ of the industry and, because of this, I wouldcertainly not have considered the appointment as interim chairman ofthe Electricty Council without a clear commitment by the governmentto the creation of the Electricity Corporation to combine the industry,as was now government policy. This commitment was clear, andsupported by policy announcements, publication of a White Paperoutlining the necessary Bill, and wide publicity. As we shall see, all ofthese good intentions were to fail, because of naked politicalconsiderations involving the change of the minister responsible and thestrong political ambitions of his successor.

The Electricity Council had existed for 20 years since thesomewhat vapid conclusions of the Herbert Committee had been madeeven more impracticable by the intervention of the then Secretary ofState, Aubrey Jones, in the 1957 Electricity Act. It was generallyunderstood that the recommendation to divide the hitherto unifiedindustry sprang from the belief that the then chairman, Lord Citrine (aformer general secretary of the TUC), was excessively overbearing andhad far too much power for the good of the industry – and certainlytoo much for the politicians of the day!

The practical effect of that Act had been to concentrate thegenerating activities of England and Wales in a Central Electricity

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Generating Board, making it completely dominant in the industry – ahardly surprising (if unintended) outcome of the legislation, given thefact that the CEGB was responsible for some 75 per cent of theindustry’s costs and had great expertise in most of the major technicalareas. The chairmen of the 12 Area Electricity Boards soon recognisedthis, and retreated to their own fastnesses, where they contentedthemselves with local politics, retailing electrical appliances and sundrylocal initiatives such as showrooms and small combined heat and powerschemes.

The Electricity Council had been intended to provide some centralco-ordination to these disparate bodies, but its scope was very limited. Itlooked after industrial relations across the industry, with muchconsultation of course, and also provided some co-ordination ofdistribution and commercial activities. It had soon resigned itself to itslimited powers, and settled for a quiet life and general acceptance of theCEGB fiat. In practice, the government of the day would turn to theElectricity Council for advice and co-ordinated action whenever anational problem arose, such as a strike of the industry’s workers or ofthe miners; at other, calmer, times government was content to indulge inoccasional dabbling and sometimes mischief-making between the Boards.

The unsatisfactory nature of these arrangements had soonbecome apparent to many, and to their credit, the Labour Governmentsought to improve them by increasing the powers of the ElectricityCouncil in 1970. Unfortunately, that Bill was lost in the dissolutionlater that year.

In 1975 a new Labour Government returned to the subject byappointing a Committee under the chairmanship of Lord Plowden toexamine the organisation of the electricity supply industry in Englandand Wales. The Committee reported in January 1976, recommendingunification of the industry in the form of an Electricity Corporation,but rejecting suggestions of separate power boards on the Scottishmodel because of the need for central control in such areas as loadforecasting, planning, research, tariffs and marketing policy. Theseproblem areas had, of course, always existed between England and

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Wales and the Scottish Boards, but had been effectively solved by co-operation and common sense, without any need for outside interventionor legislation.

The Secretary of State for Energy at the time of the proposedchange was Eric Varley (later Lord Varley), who accepted therecommendations of the Plowden Committee. Unfortunately for theelectricity supply industry he was soon exchanged, for political reasons,with Tony Wedgwood-Benn, then Secretary of State for Trade andIndustry and a firm believer in direct ministerial control. Given theadvanced state of the reforms, Benn had little choice but to proceedwith the announced Bill on the lines of the Plowden Committee’srecommendations, but dragged his feet in doing so and sought tosabotage its provisions. So, in spite of a draft Bill, published as a draftWhite Paper, and declarations of intent to legislate in the Queen’sSpeeches of 3 November 1977 and 1 November 1978, the Bill wasnever presented to Parliament, and fell with the notorious Lib-Lab pactand the change of government in 1979.

It does seem extraordinary that a Secretary of State couldfrustrate the declared legislative programme of his government. Theanswer lies in our constitution, in which a minister holds his office fromthe Queen, and is supreme in his department. The Prime Minister’sonly weapons are movement to another post or dismissal – each likelyto upset the delicate balance of support within the party and on theback benches. Tony Benn had already been effectively demoted bytransfer from the DTI and was in a strong position to be difficult. Hadhe really wished to introduce a modified Bill he would have had toobtain the agreement of his Cabinet colleagues, but since his intentionwas 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 inhis 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 tocultivating his power base there in the expectation that he might oneday come into its leadership. Be that as it may, he disliked the Plowden

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proposals to weaken direct government control of the industry, andsought to delay action by inserting a highly provocative provision to theeffect that everyone was entitled to a supply of heat and light, whetheror not he/she could afford to pay for it. A safeguard against hardshipalready existed through the social security arrangements, in commonwith the provision of other basic needs, and so the provision was quiteirrelevant to the proposed Electricity Bill. Its inclusion in the Bill wasunacceptable both to the management of the proposed Corporationand to Benn’s Cabinet colleagues, but it be proved a very effectiveblocking device – as he undoubtedly intended.

An interesting example of Benn’s political behaviour arose whena breakaway trade union for power station workers appeared inYorkshire and organised extensive strikes to gain recognition by themanagement. It was quite clear to us in the industry that its successwould lead to counter-action on the part of established unions, leadingto a very difficult situation. We accordingly refused to recognise thebreakaway movement.

Tony Benn thought that they should be recognised, and met withthem on a number of occasions, offering them his support and urgingus to follow his example. We refused and the affair neared its end witha midnight telephone call from Benn to me, again urging recognition. Iagain refused.

Next morning I was met by Bill Prior, the Electricity Councilmember for industrial relations, with the news that Benn had instructedhim to prepare a press release stating that the Electricity Councilintended to recognise the breakaway union and to meet him at middaywith the draft statement. I naturally decided to attend the meeting,which turned out to be a large one involving civil servants from otherdepartments, and told Benn that I had instructed Prior not to preparesuch a statement and that our position remained unchanged followingour midnight discussion. I pointed out, however, that he had a statutorypower to direct us to follow the course which he favoured, subject topublication of that direction. He did not attempt to use the power and,two days later, the strikes were over – without recognition of the


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breakaway union. I regarded this whole affair as an example of Benn’sdesire to build a power base in the Labour movement but also of hisreluctance to use his statutory power publicly.

Benn’s parliamentary private secretary, Brian Sedgemore MP, inhis book, The Secret Constitution, claimed that I could not have adoptedsuch a strong position without the encouragement of the PrimeMinister, James Callaghan. In fact, at no time did I discuss our decisionwith Callaghan – or any other minister – but only with Benn, as theSecretary of State for Energy. I was quite clear that it was myresponsibility to deal with the matter unless I received a writtendirection 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 thanTony Benn and Sir Francis Tombs, the Chairman of the ElectricityCouncil. In temperament and style they were much alike – calm,rational, determined. When they argued the argument was real andborn of mutual respect.

I remarked to Sedgemore that, as a barrister, he should haverecognised that such a passage was actionable by at least one, andperhaps both, of the people referred to!

Benn was a very complex individual. He seemed to possessseveral personae. In small groups his natural charm captivated hiscompanions and provided a relaxed and cordial atmosphere. In quitelarge meetings which he chaired, he would digest his briefingthoroughly and proceed to play the meeting with rational interventionsand a careful selection of the order of speakers combining to secure hisdesired outcome. At large public meetings he became an impassioned,spellbinding orator, hypnotised by his own rhetoric and swaying theaudience in ways not dissimilar from Enoch Powell.

But in one-to-one situations he was urbane, charming and mostlyrational. He had something of a guilt complex about his inherited title,

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which he had renounced, and also about the fact that he had had asheltered upbringing and privileged lifestyle. He usually served hisguest with tea in cup and saucer, while using a mug for himself. Herelied heavily on his political advisers to brief him and to develop policylines, and seemed never to be concerned about his earlier relateddecisions when considering issues.

One of his ambitions was to establish a tri-partite management ofthe electricity supply industry, consisting of the industry management,the trade unions and the Secretary of State. Such a proposal wasanathema to me and also to the trade unions, who saw it as divisive andinterventionist in pursuit of Benn’s political ambitions. We all declined,politely and firmly, and Benn accused me of conspiring with the unionsto defeat his proposals – a way of looking at the situation which casthim as the victim!

Despite Sedgmore’s claims, I cannot claim to have enjoyed myregular discussions with Benn during the three years of his persistentprocrastination on a Bill which was declared government policy andwhich 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 theGovernment’s precariously small majority. Early in the pact, the Liberalenergy spokesman, David Penhaligon, came to see me in order toexplain that his party could not support the proposed electricitylegislation. He gave two reasons – in addition to a general antipathy toTony Benn.

The first was that every post-war reorganisation had been adisaster. I replied, agreeing in general, and asked whether this meantthat the Liberals were content to leave such disasters, of which theelectricity supply industry was an outstanding example, unrectified. Hedid not reply.


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The second reason was that the Liberals did not consider theorganisation of the electricity supply industry important enough tooccupy Parliamentary time. I replied, with some astonishment, that anindustry with 19 million consumers (most of them voters), 170,000employees and an annual turnover of £5 billion surely qualified forParliamentary attention.

After further discussion, he suggested that he and I should meetDavid Steel, then the Liberal Party leader, to discuss the matter. Themeeting took place shortly afterwards in Steel’s room at the House ofCommons, in the evening, and lasted for about two hours. We wentthrough the draft Bill in some detail and I answered all of the pointsraised. At the end, David Steel thanked me for answering all of thequestions satisfactorily but added that it was a pity that the Liberalshad 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 wereto be taken seriously, a view which remains unchanged today – and,after the break-up of the Lib-Lab pact, the Queen’s Speech of 1November 1988 contained a reaffirmation of the government’sintention to establish an Electricity Corporation.

The Conservatives’ view

Tony Benn’s long stonewalling innings came to an end with theConservative election victory of 3 May 1979 and the appointment ofDavid Howells as Secretary of State for Energy. He was a tall, shy manwith a reflective manner and a background in journalism andeconomics.

It did not take him long to decide against the reorganisation,largely on the grounds that he could not possibly be seen by the publicto support a measure introduced by a Labour Government. I suggestedthat he might follow established precedent by altering the proposals

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slightly and tabling them as his own, improved, version. He thenreaffirmed the current Conservative mantra that centralisation was bad,that small was better and that privatisation was best of all and hiseventual aim. I then tried to explain that I, too, was in favour ofprivatisation and that my proposed path could lead naturally andsuccessfully to that end.

Neither this nor arguments of industrial logic carried muchweight with him, and I made it clear that I was not prepared tocontinue in post as chairman of the old-style industry since I had beenappointed to reorganise the industry and had accepted the post onthose terms. He asked if I would wait for a year to let him consult morewidely and consider the matter more carefully and I, with some qualms,agreed to do so. My confidence in the declarations of ministers wasthen at a very low ebb.

In July 1980 he told me, and then announced to Parliament, thathe did not intend to introduce legislation to reorganise the industry, butwould suggest some ideas for closer collaboration between the dividedparts. I consequently resigned with effect from 31 December 1980 afteralmost four years of seeing a great industry again being used as apolitical football by a procession of politicians from all three parties.There could be no better demonstration of the folly of entrusting thecontrol of great industries to politicians.

Some real, if temporary, achievements

Although the original plans for the industry were thwarted, I was ableto make some progress during my time at the Electricity Council.During the first two years of my chairmanship, when it seemed certainthat the Plowden Report was to form the basis for legislation toreorganise the industry, the whole managerial ethos of the industrychanged. Unsurprisingly, the prospect of unified management broughtforth some encouraging changes in individual attitudes throughout theindustry.


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The ‘barons’ of the CEGB and the Area Electricity Boardsaccepted the seemingly inevitable, and began to cooperate as parts of asingle industry. Council meetings no longer ended with ‘agreements towhich no-one took exception’, but instead were purposeful andconstructive.

For the first time in more than 20 years, a tariff proposal wasconstructed on the rational basis of considering production costs inrelation to marketing opportunities, rather than deriving it from theCEGB bulk supply tariff to the Area Boards. This linking of productioncosts with marketing stemmed from the facts that electricity cannot bestored, and its production costs vary greatly with demand for it. As aresult, the cost of night-time production was thoroughly researched anda tariff constructed to encourage demand during the night. Thatinitiative unleashed a great deal of constructive thought and resulted inthe Economy 7 night tariff, reflecting the lower costs of night-timegeneration, the framework of which has survived to the present day.

During this period, I began to develop ideas for a change inmanagement structure to form five all-purpose Boards, combininggeneration and distribution, each with its own profit and loss accountand balance sheet. The discussion of such proposals had a remarkablyliberating effect on the industry’s management, replacing a passiveacceptance of the status quo with a questioning and imaginativeapproach. Had such a development been carried through, I have nodoubt that the later privatisation of the industry would have been muchsimpler and that the inevitable fragmentation that followed would havebeen avoided, as would the subsequent widespread and rapidacquisition 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 organisationleading directly to unsatisfactory intervention by a series of regulators.These, while nominally independent, were subject to de facto control bysuccessive governments in an opportunistic and inconsistent way. This,in its turn, was the inevitable consequence of a systematic failure then,

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and also in earlier Conservative legislation, to confront the problems ofa diffuse and leaderless management structure in an industry of greateconomic and strategic importance.

Unsurprisingly, as the prospect of reorganisation receded, some ofthe industry’s barons began to withdraw their support, and the industryreverted to its historically divided state. The CEGB and some of theArea Boards, adopting this stance, made it clear to politicians that theywere content, perhaps eager, to revert to their old ways. In doing so,they played a large part in the eventual disintegration of the industrywhich carried on into privatisation. They share with politicians of allparties a grave responsibility for the inadequacies of the privatisedindustry – inadequacies which are beginning to show in the growingrisk of plant shortages in coming years and in the current disregard formaintaining a diversity of primary fuels in order to obtain flexibility forcommercial and security reasons. The wilful development by theindustry and governments of a dependence on imported gas has left thecountry in a highly vulnerable position, compounded by a starry-eyedreliance on intermittent renewable sources to deal with a problemwhich they could never solve by such means – that of security of supplyon a continuous basis. My principal reason for not using thenationalised structure as the basis for privatisation was that thefragmentation of the industry would effectively preclude long-termplanning essential to an industry with long time-scales for developmentand a solid commitment to security of supply. Both of these needs wereeasily foreseen and glossed over by politicians whose knowledge of theindustry was non-existent. It took a long time for the present unhappysituation to emerge and, although I was constantly consulted on thepracticalities of the situation, simple political prejudice consistentlyprevailed. More details of this appear later in Chapter 7.

I must stress that a majority of Area Board chairmen remainedcommitted to the reorganisation plans and I felt great regret in leavingthem when I eventually did so. None the less, it was well known that Ihad accepted, and been denied, the task of unifying an unsatisfactorymanagement structure of the industry and that I could not in good


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conscience remain. It was a sad parting, but many friendships haveremained intact.

Nuclear power

While all of this was going on, the battle between competing designs ofnuclear reactor continued and the SGHWR was abandoned in the faceof determined opposition by the CEGB and Lord Weinstock, backedby John King (later Lord King of Wartnaby), then chairman of Babcock& Wilcock who had ambitions to build the pressure vessels forpressurised water reactors and had invested substantially to that end.

The Canadian CANDU reactor, markedly similar in constructionto the British SGHWR (steam generating heavy water reactor) hasenjoyed excellent reliability and export sales over many years. Itsmodern form, the Advanced CANDU reactor, has attracted overseasinterest and should have been considered as a competitor for anyfuture British reactor programme. It is especially gratifying to me, as aproponent of the SGHWR, that the Advanced CANDU reactor followsthe SGHWR in its use of light water (instead of heavy water) as aprimary coolant and uses enriched uranium fuel instead of naturaluranium. These are greatly simplifying and cost-reducing measureswhich 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 cooledreactor stations were ordered at Heysham B in England and Torness inScotland. After a somewhat depressing period during which the CEGBpaid little attention to the initial problems of the AGR, so that Scotlandwas necessarily the driving force in that field, the CEGB added theirweight to the drive for increased reliability with great success, and theperformance of the reactors stands international comparison. Thecontribution of Harry Carpenter of the CEGB to these improvementswas substantial and deserved greater recognition than the politicalclimate of the time allowed.

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The pressurised water reactor finally chosen by the CEGB forSizewell B power station led to a public inquiry lasting three years, inwhich 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 innew reactor ordering, made it possible to re-examine light water reactordesigns in a fundamental and wholly beneficial way, so that today’s PWRofferings from America are much superior to those of the 1980s whichhad been based on extrapolation of submarine reactor principles.

Today, it seems inevitable that the UK, in common with otherindustrialised countries, faced with the challenges of increaseddependence on gas supplies from politically difficult areas and the needto reduce carbon dioxide emissions, will soon have to embark upon anew nuclear programme. The decline of UK manufacturing capabilitiesduring the years of political indecision means that we will rely onoverseas design and, to a large extent, supply of reactors. When thatdecision comes to be made, I am happy that the long UK debate onreactor choice will have resulted in more acceptable, reliable andeconomic choices than have been available to us in the past. It is acause of regret to me, though, that our own nuclear design andconstruction competence has deteriorated so much as a result of a longsequence of essentially political decisions and neglect.

Overseas relationships

Relationships with overseas bodies, notably international bodies, such asthe World Energy Conference and CIGRE, concerned with electricitytransmission, occupied a considerable amount of my time at theElectricity Council. But we also had to meet and entertain a wide rangeof other bodies, and I led UK government-sponsored missions to Russiaand China to discuss improved cooperation at the technical level.


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The Russian visit lasted a fortnight and was led on their side by aminister named Neporozhny who was a civil engineer. We got on welltogether and the mission saw a great deal of the Russian industry andstaff. Entertainment was generous and very liquid, and dinners were, asusual in Russia, marked by a seemingly endless procession of toasts, alltaken in vodka, with a bottle supplied for each guest. On one suchoccasion, when I was beginning to feel the effects, I leaned across thetable and helped myself to a drink from Neporozhny’s bottle, whichproved to contain water. I looked him in the eye and, through theinterpreter, declared that he was 14 vodkas behind. He roared withlaughter and poured and drank 14 glasses from my bottle, with littlevisible effect! This was an isolated, although memorable highlight in avery intense fortnight from which I learned a great deal about afascinating country.

On the morning of our closing lunch we were scheduled to visitwhat was described as an architectural monument at Zagursk, a shortdistance from Moscow, without our Russian colleagues. It turned out tobe a monastery of the Russian Orthodox Church, at which we wereastounded by the beautiful choral music which accompanied the Mass.There were a surprising number of Red Army soldiers present and Iasked our interpreter why this was so. He replied that the celebrant,the Patriarch, had been a brigadier at Stalingrad, and had vowed togive his life to God if he and his men survived. The soldiers were therebecause the Patriarch was also a Hero of the Soviet Union.

The Chinese mission, which also lasted two weeks, was a muchmore programmed experience, in which meetings were studiedlynon-committal and orchestrated, and useful exchanges comparativelyrare.

Nationalised industries as purchasers

The widespread criticisms of the CEGB could equally have beenapplied to other nationalised industries.

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The nationalisation of the ‘commanding heights of the economy’(as Herbert Morrison put it) after the war did immense damage to UKmanufacturing industry. Part of that damage resulted from the chronicover-manning which afflicted much of British manufacturing industry atthat time, and was made more difficult to deal with in the nationalisedindustries by their monopoly positions. The period was noteworthy forfrequent strikes and walk-outs, with a general acceptance bymanagement and governments that buying them off was preferable toconfrontation.

But, in my view, much greater damage was done by themonopolistic position of the nationalised industries, which enabledthem to specify equipment based wholly on their own preference thatwas of little interest to the competitive world overseas. As a result, theUK developed a whole range of British-made products in the electricitysupply, aircraft, steel, railway and other nationalised industries whichwere uncompetitive in overseas markets. This denied Britishmanufacturing industry the competitive spur which could have securedlower costs for home and export orders for its capital goods industries.Instead, they settled for the comfort of suppling a highly protectedhome market with over-specified expensive equipment. This becameobvious to me when I was, at GEC Erith, competing for turbine ordersoverseas.

In fact, the delusions of grandeur evidenced by the nationalisedindustries in the post-war years were incompatible with the size of ourhome market and the extent to which we could afford to ignoreinternational competition. As a result, we squandered much of ourtechnological inheritance by requiring manufacturers to disregardrequirements of the international market. In my view this did moredamage to the UK capital goods industry than did the trade unions,though I would not wish to minimise the unions’ contribution by theirirresponsible 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


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Chapter 7. The company had deteriorated in post-war years to aposition where it accounted for only about 5 per cent of the world civilaviation market, which was dominated by two US manufacturers, whohad been given our jet engine designs as part of the war effort.

Rolls-Royce squandered the immediate post-war years bydesigning engines for military purposes which were abandonedwithout manufacture, and on civil engines for British aircraft whichfound few overseas markets. Those were the halcyon yet ruinous days,when National Plans were current and government saw its job asbeing to design the industrial framework. Rolls-Royce enjoyed theadvantage of a superb design of engine, yet its development costsbrought the weakened company to its knees and it went intoreceivership in 1971. But it managed by prodigious efforts toovercome this downfall, and today ranks equally with the two USengine manufacturers in market share.

Leaving the electricity supply industry

When I had decided to resign as chairman of the Electricity Council Iapproached the Department of Energy on the subject of compensation,for what amounted to constructive dismissal. My letter of appointmenthad been as chairman of the Electricity Council and chairman-designate of the intended Electricity Corporation, and had beenaccompanied by press releases to that effect. The changes hadappeared in two Queen’s Speeches and had been the subject of a draftBill in the form of a White Paper. My approach met with no sympathyfrom the new Conservative Secretary of State, David Howell, whodismissed my argument.

In this connection, it was infuriating to read the following passageabout this matter in the book by Nigel Lawson (later Lord Lawson),David Howell’s successor as Secretary of State for Energy and laterChancellor of the Exchequer, in his book, The View from No. 11, hesays:

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The structure was a manifest nonsense, and inter aliainstitutionalised conflict between the chairmen of the Council andthe CEGB. When Frank Tombs (later Sir Francis Tombs,Chairman of Rolls-Royce, but originally from the more rationallyorganised Scottish electricity industry) had accepted from Benn thejob of Chairman of the Electricity Council, it was on the expressunderstanding that legislation would be introduced to change thestructure and merge the Council chairmanship with thechairmanship 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 outof his contract at considerable public expense.

This last statement was quite wrong and Lawson subsequentlyapologised.

I had taken legal advice from a leading firm of City solicitors whoadvised that, although I had a solid case in employment law, it was notpossible to sue the Crown. So ended my career in the electricity supplyindustry, with four largely wasted years as the plaything of politicians! Ialways took care afterwards to ensure that government promises weresolidly underwritten, and I would advise any potential recruit to asenior government post to insist on bankable assurances.

Having decided to resign as chairman of the Electricity Councilin July 1980 I announced that decision in October 1980, but hadconsidered it impossible to seek another post before the announcementwas made to our workforce and the public. To my surprise, just a fewdays after the announcement, I received a telephone call from LordVictor de Rothschild, then chairman of N.M. Rothschild and Sons,inviting me to lunch. I had known Victor during his chairmanship ofthe Cabinet Office Policy Review Staff and liked his direct approachand detachment. I accepted his invitation and was met by him andEvelyn de Rothschild. Victor greeted me at their office with the words‘My boy, I am very pleased with you. Not enough people tellGovernments to get stuffed. Will you join our board?’


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After recovering from the surprise I readily accepted and sobegan 14 happy years as a non-executive director of the merchantbank, during which time I learned much of City ways – a familiaritywhich was to stand me in good stead in later years. I became chairmanof the bank’s audit committee, a post which I held for about ten yearsand which allowed me an unrivalled view of the bank’s operations.

Shortly afterwards, John Raisman, chairman of Shell UK, askedme 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 theNorth Sea, and spent 14 happy and interesting years as a non-executivedirector, although I never made any secret of my critical views on thelabyrinthine organisation of the Shell Group; happily few of whoseshortcomings were reproduced within the UK company.

So ended my career in the electricity supply industry. Duringthose years, I had some fascinating encounters with a variety ofremarkable people, one of whom was Frank Chapple, the generalsecretary of the EETPU union and chairman of the manual tradesunion’ council, the NJIC, of the electricity supply industry throughoutthe UK. As I have said earlier, industrial relations was an area whichwas the responsibility of the Electricity Council, and our PersonnelDirector (in those happy days before it became fashionable to haveHuman Relations Directors) led the other bodies in Scotland innegotiations.

Frank was a very principled and plain-speaking man for whom Iformed a great respect. He had opposed, with Leslie Cannon, adetermined effort by the Communist Party to control the union byblatant ballot-rigging – a dispute which reached the High Court, wherethe Communist Party were defeated. In the course of the dispute therewas a great deal of ill-feeling and open threats to life and limb, andboth Cannon and Chapple displayed great courage and determination.

Negotiations were normally conducted by the personnel staff andI met the union leaders only in crisis times or when we met for anannual lunch. At one of these lunches, Frank made a speech of thanksbut complained, jocularly, that it was surely unsatisfactory that the

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union leaders had been served synthetic cream with their strawberries!I responded with the customary pleasantries and then turned to hiscomplaint, saying that the cream he had received bore the samerelationship to real cream as his productivity deal…! The rest of thesentence was drowned by a gale of laughter, in which Frankwholeheartedly joined. He was a likeable man, who negotiated issueswith professional skill and determination, but always strove for a fairsolution and always kept his word. We became good friends and he wasa member of the Plowden Committee whose report led to theproposed formation of the Electricity Corporation.

After his retirement, he was appointed a life peer and I recallmeeting 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 theestablishment. He was speechless with indignation!

My future career had been far from clear at the time of myresignation, and I was pleasantly surprised by the opportunities whichoccurred from time to time, providing an unending series of interestand challenge. Inevitably, I regarded the four years as chairman of theElectricity Council as wasted time, but I consoled myself with theknowledge that I had done my best to guide my political masters, and afirm 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 andShell directorships, I now had time to consider seriously my futureoutside the industry of my choice and experience. I had rejected earlierapproaches by GEC and NEI, and saw no attraction in trying to revivethose. Instead, I decided that a period of readjustment would behelpful while I waited, Micawber-like, to see what turned up.

In addition to a number of professional institutions andgovernment advisory bodies, I soon became involved in three veryinteresting industrial situations.

The Weir Group

The first of these was the chairmanship, at the invitation of LordBenson, industrial adviser to the Bank of England, of the Weir Groupof Glasgow. It was in severe financial difficulty, having a low shareprice with dissatisfied large investors and also a large overdraft withdissatisfied banks. The company was in imminent danger of collapseand the investors and banks approached the Bank of England forits support in a financial reconstruction and a change of topmanagement.


I knew Weirs quite well from my time at the South of ScotlandElectricity Board, and had a high regard for their products andworkforce. I also knew the then chairman, Viscount (Willy) Weir.

I accepted the post with effect from 1 April 1981, but made itclear that I did not consider it as an open-ended one. I undertook tostay as chairman until the firm was firmly re-established on a soundcommercial basis. I was under pressure from banks and investors toreplace Lord Weir and some of the other board members, but refusedto do so until I had made my own appraisals and arrangements.

I found the company in quite a mess, with borrowings of £46mand shareholders’ funds of £23m. As part of the financial reconstruction,there had been an underwritten rights issue of shares which, to generalsurprise, were taken up by an American businessman, a friend of LordWeir. Conspiracy theories abounded, but the American in questionbehaved 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 offinancial information, all of it extensively analysed. The monthlycomputer print-out was remarkably comprehensive – and largely useless.Perhaps it was not entirely a coincidence that the managing director wasan accountant! The sheer volume of data, all of it historical, was soindigestible as to cloud the performance of the operating units. Cashcontrol was very poor and the output per employee dismally low.

I began by simplifying financial reporting. I produced an A4sheet, to be completed on one side only, eight days after the month-end, with 16 items which were to be compared with budget and toprovide an estimated out-turn for the year. These were to be completedby operating unit managers and reviewed at the executive committeewhich I set up. This placed the spotlight on the responsibility oflocal managers to manage, and it quickly became apparent which oneswere capable of doing so. Their attention was focused by a require-ment that, if the financial information was not available within the eightdays prescribed, they must estimate it – a daunting task for sleepymanagers.

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Cash was an immediate priority and I received daily reports ofthe cash balances and applied the necessary pressure on debtors, capitalexpenditure and working capital. Some of this stemmed from themethods I had learned from Arnold Weinstock and I readilyacknowledge his legacy. But it was also quickly apparent that manpowerreductions would be necessary, and we made the unions aware of this.To indicate that I meant business, I garaged the chairman’s chauffeur-driven Rolls and drove myself to work in a Ford Fiesta.

The company had tried to diversify from pump manufacture intoother fields, most disastrously steel castings. Getting out of that morasswas expensive and long-term, but the cash control measures producedquite rapid results and the emphasis turned to implementing theplanned manpower reductions. We operated on a very crude yardstickof 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 bya pre-tax profit of £8m, borrowings had halved and we were able to paya token dividend.

When becoming chairman I had made it clear that I saw the postas a temporary one which I would be happy to relinquish when we hadachieved 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 competitivebids from three firms of auditors, since I felt that the existing auditorshad been somewhat sleepy. The existing auditors retained theirposition, 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 goodmanagement material to hand, awaiting promotion. Ron Garrick, anengineer with considerable IT experience, had been performing well inthe Pumps Division, and became managing director in October 1982.

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He was suitably young and a thoughtful, decisive man. Hesubsequently led Weirs to a position of strength and stability whichbecame the envy of many other companies and surprised the financialcommentators. I used to say that he was a somewhat taciturn Scot whonever used two words when silence would suffice! He received a well-deserved knighthood in 1994, and led Weirs to the prosperous andhighly respected position which it continues to occupy today.

At the same time we had another young Scot, Ian Boyd, who wasfinancial controller. He was a highly competent, but somewhat shy,accountant who proved highly effective in implementing the accountingchanges I introduced. He attended, with me, the regular meetingswhich were required by the committee of banks involved in the rescuepackage and was, I think a little horrified by the way in which Idismissed their request for detailed management reports. When ourfinancial position began to improve I decided to test him by notattending one of these meetings myself, and leaving him to carry theflag. He was initially reluctant, but performed admirably and neverlooked back. He later became the group finance director.

A happy day came when we met the committee of lending banksat one of our regular meetings, with a statement of our financingrequirements and invited them to bid for the role of principal banker.There was some surprise but little dissent, since by then we had paidoff our borrowings and had a healthy credit balance. In the event, theRoyal Bank of Scotland retained the role, but on terms more attractiveto us.

Together with Bill Harkness, another young Scot who was alreadycompany secretary, these two appointments created a solid core onwhich to reshape the management.

I then turned my attention to the position of Lord Weir. He wasa man of great charm, who knew the company’s products well and hada wide range of international business contacts. He was a very ablesalesman and well liked by customers. His management abilities were,in my opinion, unsuitable for an executive role. I explained this to himand proposed that he should become non-executive chairman when I

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retired, with Ron Garrick as chief executive. He readily accepted thisproposal.

I then proceeded to give full executive freedom to Ron Garrickand retired in May 1983, having achieved my objectives in just over twoyears. The responsibilities of the chairman and the chief executive wereset out in a paper which I submitted to the board several monthsbefore I retired, and which received their formal approval. The timingof the whole operation was fortunate, since I had accepted an invitationfrom the Bank of England to become chairman of another troubledcompany, Turner & Newall, in November 1982. This was a much largerand more difficult challenge, of which more later.

Looking back, it is clear that the main causes for the near collapseof Weirs were a reluctance to take difficult decisions and an absence ofcommitted management. Management theory had become a substitutefor initiative, and the company had slid steadily downhill. The board wasa weak one and failed to recognise the problems as they arose. Rectifyingthe situation proved depressingly simple, but gave me much satisfaction.

A final postscript. Our American investor, Daryl Ruttenburg, wasvery pleased with the recovery of the company (and its associated shareprice), and invited my wife and me to dinner at his newly acquiredScottish estate. After dinner, he and I repaired to the library for anightcap, where he proposed a joint business venture in which he and Iwould seek out troubled firms and rescue them through a combinationof his investment and my management, sharing the proceeds. I declinedwith little hesitation, since I did not relish the notion of exchanging mycareer as an engineer for one of company doctor. I saw both Weirs andTurner & Newall as interesting and worthwhile but lacking theexcitement 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


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fortunes had been founded on asbestos mining and products. Acombination of the emerging health risks of asbestos and amanagement incapable of adjusting to an uncertain future led to acollapse in the company’s fortunes. The ensuing growth in borrowings,coupled with a large negative cash flow and the collapse of the shareprice, caused large investors and lenders to approach the Bank ofEngland for their assistance in organising a financial restructure and achange of top management. The industrial adviser to the Bank, LordBenson, invited me to accept the post of chairman.

I was supplied by the banks with a report (commissioned andpaid for by the company at the behest of the banks) by themanagement consulting arm of the firm’s auditors, Deloitte, Haskinsand Sells, on the steps necessary to turn the company round, but Ideclined to commit myself to its recommendations before I had beenable to make my own assessment.

The attitude of the board was astonishingly relaxed under thecircumstances and their chairman at first suggested that I shouldsucceed him in a year’s time. I explained the urgency of the matter andwe agreed an immediate succession on 25 November 1982. During ameeting of the board on the following day (which, of course I did notattend until elected to the board and the chair) I was, to my surprise,asked to agree a proposed severance package for the outgoingchairman. I explained that this was entirely a matter for the existingboard and that I had no locus in the situation.

After my election as chairman we had, of course, monthlymeetings with the committee of lending banks, 19 in number, chairedby David Trenbath, the NatWest representative. At our first meeting Iannounced that I had no intention of following the Deloitte reportcommissioned at their request, which seemed to me to offer littlechance of recovery. Asked what strategy I intended to follow instead, Ireplied that I would show them a detailed plan in about six months’time – an announcement greeted with astonishment but accepted, Isuspect, due to the stalwart support of David Trenbath who was toprove a tower of strength in this and later situations. I also refused

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demands for extensive, frequent and detailed reporting of actions andresults, on the grounds of management autonomy and commercialconfidentiality.

At this point I should describe the financial conditions underwhich I accepted the executive chairmanship. The challenge was plainlya high-risk one, with no guarantee of success, and it carried thepossibility of considerable personal stigma in the event of failure.Rather than burden an ailing company with offsetting incentives, Idecided that the banks and large investors, who stood to gain from anyrecovery, should provide suitable rewards in the event of my success.This was achieved by the banks agreeing to a contingent fee basedupon shadow options for 2 million shares at a price of 23p and a ceilingof 50p – in effect, a maximum of £540,000. In addition, the majorshareholders agreed options of 2 million shares at 23p, the then marketprice. 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-breakingarrangement, but no reference to the fact that 40 per cent of anyresulting reward accrued through tax to the Treasury, whosecontribution to solving the company’s problems was far from apparent!

My initial action was to begin the task of assessing the state ofthe company and deciding on the measures necessary for recovery. Thefirst concern was to reduce overhead costs, and I closed the head officein central Manchester in February 1983, moving the staff to a factorysite on Trafford Park industrial estate where we had unoccupied offices.At much the same time, I closed the little-used London office and flatin Curzon Street, London, in January 1983, putting the building and itscontents (some fine antique furniture and paintings, including aGainsborough) up for sale.

I decided quite early to change the established advisers to thecompany. Schroder Wagg, the investment bankers who had arepresentative on the board, were replaced by Rothschild, in the personof Peter Byrom who I had already met and of whom I had formed avery good opinion. He combined a clear, analytical mind with an ethicalapproach (not always apparent in the City at the time) which appealed


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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 Vaughanwhose approach to problems was similar to that of Peter Byrom andwas well suited to my requirements. He, too, was to prove a tower ofstrength at Turner & Newall and, later, at Rolls-Royce.

I encouraged both Peter Byrom and David Vaughan, along withtheir staffs, to visit our plants and make themselves familiar with themiddle management and the problems and strengths of the company.By so doing they made a real contribution to the evolving managementstrategy and took a view of our problems which was notably differentfrom that prevailing among advisers at the time.

I reduced head office staff by removing an unnecessary level ofsenior management and replaced the formidable, and largely useless,computerised monthly management returns by an adaptation of thesingle-sheet A4 manuscript reports which I had introduced at Weirs. Iassumed the role of chief executive, the previous incumbent leaving athis own request, and formed an executive committee comprising theremaining executive directors and the company secretary. Each directorbecame directly responsible for a group of subsidiary companies –somewhat to the surprise of both parties – and I outlined the ways inwhich we would set budgets and drive progress, using the sameabbreviated monthly reports which I had designed for Weirs. This madeit possible to form a view of the performance of more than 100subsidiary companies in about three hours.

I also embarked on a whirlwind tour of UK and overseas units tofamiliarise myself with their products, strengths and weaknesses. Itquickly became apparent to me that the report commissioned by thecompany at the behest of the banks, at a cost of £250,000, to outline arecovery strategy, was useless and I was glad that I had declined toaccept at the outset. It envisaged selling most of the traditionalbusinesses and retaining a 63 per cent holding in a US specialitychemicals company, Hunt Chemical. This company had no synergy with

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Plate 1 Lord Tombs

PS Power Politics PLATE SECTION 16/11/10 09:00 Page 1

Plate 2 Sir Ronald Garrick – chiefexecutive and later chairman ofWeir Group plc

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


Plate 4 Stewart Miller – engineeringdirector of Rolls-Royce

Plate 5 Peter Byrom


Plate6

Long

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wer

stationin

Fife

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ll


Plate6

Long

anne

tpo

wer

stationin

Fife

–theturbineha

ll

Plate7

Long

anne

tpo

wer

station–ex

ternal

view


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

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


Plate 10 Sir John Rose – CEO of Rolls-Roycesince 1996

Plate 11 Baroness Thatcher – anoutstanding Prime Minister and the firstwith a scientific training in the countrywhich created the Industrial Revolution


Plate 12 Tony Benn – a mercurialcharacter who always took accountof political considerations in hisministerial roles

Plate 13 Lord Varley – a formerminer who examined problems in acarefully objective way and stood hisground


the company’s other operations and involved a substantial minorityshareholding – a most unattractive situation for an ailing company in ahighly litigious country. I therefore resolved to sell Hunt and the salewas completed on 1 March 1983, resulting in a reduction in gearingfrom 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 toclose and restructure others.

We next set about divesting companies with no obvious synergy,such as Storey’s Industrial Products, and BIP Vinyls, and closed aPayen gaskets factory at Chingford. At the same time we reduced theworkforce at all levels in order to reduce production costs and resumeprofitability. These reductions were dismissed by the outgoing managingdirector as ‘not Turner & Newall’s style’. I am afraid that it was suchthinking that had brought the company into such dire straits.

Much of the company’s business came from the automotiveindustry, in the form of brake materials and gaskets, and prices had beenforced down by powerful purchasers to the point where the companywas operating at a loss. Management was terrified of losing largecontracts and so was easy meat for tough buyers. I recall the case of acylinder head gasket for Ford, which I selected at random and found wewere supplying at 60 per cent of cost! I instructed the management totell the customer that the new contract, then being negotiated, would beat a price 70 per cent higher than previously. The customer protestedand placed the contract elsewhere. A year later, he returned to us at ourprice. Establishing this practice of product profitability across thousandsof items was a huge task, but proceeded apace, encouraged by thisexample, and led to a recognition throughout the company of the needfor profitability, which had been neglected for years.

My recovery strategy, which I had promised to the banks at myfirst 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 amining town at Shabanie with school and hospital facilities provided by


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the company. The government there was hostile to foreign investorsand had declared their interest in taking an equity stake in the mines. Isaw no point in this – the terms of any such stake would inevitably beunattractive and the government capacity for interference would beincreased. Indeed, government interference was already at a level whichinduced us to deconsolidate the mines in our accounts, on the groundsthat we were not fully in control!

Accordingly, we put the proposal for a government stake on theback burner while addressing the core problem, that of internationalcompetition. It was plain that management in Zimbabwe wasdisheartened by the government’s failure to recognise the problems ofretaining and motivating specialist expatriate technical staff, who werevirtually confined to the country by foreign exchange restrictions. Inaddition, the management were forbidden by law to reduce staff in linewith sales without prior government approval. We tackled the second ofthese problems by instituting a redundancy programme, with quitegenerous terms, in spite of government regulations to the contrary –this led to a series of showdowns with government in which plaintalking won the day, doubtless assisted by the ponderous machinery ofthe State! Eventually, after the mines had been restored to profitabilityand a good level of foreign exchange earnings, the mining Ministercongratulated me on the turnaround and stated formally that thegovernment was no longer interested in taking an equity stake. Iresponded by thanking him for the resolute support of the governmentthrough a difficult period, and we both burst into laughter and shookhands. So, at last, we were able to reconsolidate the mines in ourcompany accounts.

The other problem, that of motivating senior staff in Zimbabwe,was addressed by importing high-altitude tennis balls for theenthusiastic families of the staff, providing television sets and videoplayers and purchasing some holiday properties in Durban for staff use,which overcame the foreign exchange barrier. Last, but by no meansleast, we arranged to pay part of the salaries of key staff in sterling inLondon.

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Eventually, it proved possible to dispose profitably of the mines toa Swiss-Belgian group, so terminating our interest in asbestos mining.

The second strategic problem, of asbestos products, was dealtwith by developing substitute materials for building products, brakepads and gaskets. This process, which was already beginning when Iarrived on the scene, was accelerated by an increased R&D effort, withadditional expenditure being committed as a priority even during thefirst years of very tight cash control.

The third problem, of US asbestos-related litigation, provedmuch more intractable. Even before my appointment, my predecessorhad pointed out in his annual report that of every dollar spent onasbestos litigation in the USA, only 25 cents reached the plaintiffs, thebalance being consumed by contingency lawyers.

Contingency litigation in the US has reached the point where itbankrupts large corporations, with the spoils being shared veryinequitably between the contingency lawyers and the unfortunatevictims – in our case, of asbestos-related diseases. Nevertheless, theUSA is an unrepentantly litigious society whose future is ensured by awidely held view that it protects constitutional rights, and by thepowerful network of lawyers in the various legislatures. We becameinvolved in a number of initiatives, such as the Wellington agreementpromoted by a leading academic lawyer, to redress the balance. Allwere short-lived – the momentum of the fabulously rich contingencylawyers 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 ofasbestos materials in office buildings of the Prudential Corporation ofBoston and Chase Manhattan of New York. We were fortunate inhaving very good, young lawyers who knew their way around the legalsystem, but the cases dragged on for several years, with steadilyaccruing legal costs. The cases, which had to be noted in each annualreport, were damaging to our share price, partly because of theunfamiliarity of UK investors with the US legal system in evaluating thethreat.


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Finally, a date was set for the Prudential trial and, as the dateapproached and discovery accumulated, we were approached withoffers of settlement out of court. I had personally spent a great deal oftime on this subject, and was convinced of the strength of our case, sothat I had no difficulty in rejecting each of several approaches ofsteadily reducing amounts. In the event, all ten counts of the actionwere dismissed and no damages were awarded. The sting was in thetail, however, because we were not awarded any costs against theplaintiffs – and these costs were around $5m! An identical series ofevents took place later in New York when the Chase Manhattan claimcame to trial. Award of damages to successful defendants in such casesis rare – another questionable facet of the US legal system.

On the personal injury front, a practice had developed ofcontingency lawyers gathering a large number of claimants and claimingdamages of around $8,000 per case. This was pitched at a level wheresettlement was cheaper than going to court. As a result, the lawyersreaped huge rewards for writing a few letters – a practice bordering onblackmail!

Only a very wealthy nation such as the USA could afford theluxury of such a damaging system which, while ensuring access to thecourts for poor plaintiffs, enriches contingency lawyers to a fabulousdegree and damages industry and its employees. There were othertime-consuming legal issues in the USA, involving insurance companies,but the ones I have described were the most important to the companyand provide good illustrations of the legal minefield involved in tradingin that market. The contingency fee system represents a considerableadded cost, and uncertainty, and served to remind me how wiseI had been to reject the accountants’ recommendation and to havesold US-based Hunt Chemicals at an early stage in the company’srecovery.

The lending agreement with the banks was terminated in 1984,after two years in which the company returned to a healthy cashposition. As at Weirs, we invited each of the banks involved to competefor our future business. National Westminster retained their lead role –

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deservedly, in view of the expert leadership of David Trenbath, whodied soon afterwards. He was a great loss to the bank and to thecountry.

At the end of 1984 we reported profits before tax of £27m withgearing at 21 per cent, less than half of the figure only two years earlier.The company was running well, with asbestos litigation settling down toan affordable level; the time had come to consider a substantialacquisition. I had found the role of executive chairman quite taxingand had been looking for some time for a managing director, with littlesuccess. On 1 March 1985 Colin Hope joined us as group managingdirector, and showed early promise with a lively interest in doing dealswhich was easily diverted to acquisitions. He was to indulge thatinterest over the coming years.

Part of our strategy was to exit building materials and toconcentrate on automotive parts, so we looked at UK companies inthat area of activity. One company which appealed to me was Lucas,which was then having a difficult time and offered good prospects forrevival. After careful consideration we concluded that turning it roundwould prove too great a diversion for our enthusiastic but fullyoccupied management and, instead, we settled on AssociatedEngineering (AE), makers of automotive pistons and ancillaries. Theirmanagement was not receptive to our approach, despite havingrecommended an invited offer from GKN in 1983.

Nevertheless, we bid for AE in August 1986, and failed by amargin of only 1 per cent, securing 49 per cent acceptances. A few dayslater, there were press reports of a placing of 10 million AE shares bythe AE brokers, Cazenove, and we took up the matter with theTakeover Panel of the Stock Exchange. It emerged that those shareshad been purchased during the bid period at the bid price of 240p andthen sold, after the bid closure, at a price of 201p. The shares had beenpurchased by AE’s merchant bankers and two clearing banks, obviouslywith an indemnity against loss. The transactions were secret and theoffer was restricted to those parties and had not been disclosed asrequired by the City Takeover Code. The shares thus ‘immobilised’ had


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clearly resulted in the defeat of our bid, and the Takeover Panelexecutive ruled that the Takeover Code had been breached, that theparticipants were worthy of censure and that, accordingly, we would beallowed to mount a new bid within the normally proscribed period ofone year, with other useful relaxations. The censured parties appealedto the full panel, who upheld the decision.

The importance of this finding to City practice cannot easily beexaggerated. What had taken place was a conscious and flagrant breachof the Code of Conduct which applies to all members of the StockExchange – and that by some of its most eminent members! It wasargued that the actions were taken by the participants without theknowledge of AE. My hopes that this sorry episode would help to raisestandards in the City were somewhat dashed when the responsibledirector of the Midland Bank, with whom we had ceased to dobusiness, plaintively remarked that they would have done the same forus as they had done for AE, only to be told that he obviously still didn’tunderstand that we wouldn’t have wanted him to do so!

Despite the satisfaction of a clear victory over wrongdoing, wetook our time to consider whether to avail ourselves of the freedom tore-bid at any time and without some of the usual constraints. Wedecided 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, acompany controlled by Robert Maxwell. In conversation with me, heexpressed the lofty wish to do something worthwhile for the Britishengineering industry, and expressed his belief that Hollis would bebetter placed to do this than Turner & Newall. This seemed to melaughable, and I indicated our determination to press ahead. We woncomfortably and proceeded to a happy integration of the companies, inwhich the AE employees came to relish our delegated managementstyle. Robert Maxwell subsequently congratulated me on our successand conceded that our bid did have more industrial logic than that ofhis firm, Hollis.

The failed first bid had cost us a lot of money, in the form ofbidding costs, management diversion and lost opportunities, and I

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decided to take legal advice on the prospects of their recovery. Theadvice was equivocal, but the sums of money, and the nature of thedealings involved, made me decide to press on, and a High Court writwas duly issued. The defendants insisted on their innocence (in law,anyway) and the case wended its leisurely way, and eventually led to aseries of growing offers of settlement out of court – each recommendedby our eminent silk. Eventually, I told our lawyers to discontinue theirinvolvement and leave negotiations to me. The final settlement, for avery substantial sum, occurred after my retirement from Turner &Newall, the company having asked me to continue the negotiations ontheir behalf, in view of my close involvement. The affair thus endedhappily, but with no thanks due to the expensive legal advice we hadobtained on the way.

Now to return to the progress of the company’s recovery. In1985, profits before tax had risen by 44 per cent to £39.6m, andgearing fell to 23 per cent. In 1986, profit before tax rose to £44.7mand gearing was 59 per cent, the latter figure reflecting the cost of theAE acquisition. The following year saw the integration of AE into thegroup, a process in which Colin Hope, our recently joined managingdirector 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 thisyear, the contribution from asbestos construction materials was 5.4 percent (1983, 42 per cent) and that from Africa and India was 24.1 percent (1983, 56.1 per cent), both figures illustrating the progress madein 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, ofmy intention to retire in October 1989, to be succeeded as chairman byColin Hope. In 1989 the profit before tax fell slightly to £84m, after anexceptional provision of £9m for asbestos litigation – a shadow ofthings to come!

The subsequent eight years were of Colin Hope’s chairmanship,during which he struggled manfully with ill health, which never dimmed


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his activity and his enthusiasm for deal-making. A series of acquisitionstook place against a background of US asbestos litigation; in 1997, atakeover bid from Federal Mogul of the USA was accepted, and thecash-hungry City seemed happy. The disregard of the City for the loyalworkforce never ceased to amaze me, and would have troubled myconscience. Later, Federal Mogul underwent a financial collapse, withserious consequences for the Turner & Newall employees andpensioners. 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 factthat it had been state-owned since its collapse in 1971 and littleinvestment had been available.

My first personal experience of Rolls-Royce had been in 1968,during my brief period as general manager of Howdens, who weresupplying the gas circulators for the advanced gas-cooled reactors atHinkley Point B and Hunterston B nuclear power stations. Thesemachines were technically very demanding and required gas impellerblades of high integrity. Accordingly, investment-cast blades wereordered from Rolls-Royce, who had extensive experience of theprecision casting process, which was used for their turbine blades. Thecontract experienced serious difficulties and required determinedaction, described in Chapter 4, but a lamentable lack of managementcontrol and commercial appreciation had been evident on the part ofRolls-Royce.

When I joined the Rolls-Royce board some 14 years later I foundthe aero-engine business both interesting and challenging. LordMcFadzean, a former chairman of Shell UK and of British Airways, wasan effective chairman who did not suffer fools gladly. He was aneconomist, highly intelligent and somewhat irascible – a combination

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which did not endear him to the then Secretary of State for Industry,Patrick Jenkin (later Lord Jenkin of Roding). A businessman to hisfingertips, McFadzean had little patience with the ways of governmentand civil servants, and made no effort to conceal it.

He recognised that Rolls-Royce, in common with other state-owned industries, was over-manned and was uncompetitive with its USrivals. He spent much effort in driving manpower reductions, withsome success, reducing the workforce by 30 per cent during his tenure.Board meetings under his chairmanship were always stimulatingoccasions, but he felt greatly shackled by government inability to take arealistic view of market demands.

In 1983 he asked if I would be prepared to succeed him aschairman on his forthcoming retirement. I replied that I would bedelighted to do so but thought that the government might not haveforgiven my resignation from the electricity supply industry three yearsearlier. He brushed this aside, saying that he would recommend myappointment.

In the event, he was succeeded in April 1983 by Sir WilliamDuncan, a former deputy chairman of ICI and a chemical engineer bytraining. Duncan was obviously aware of McFadzean’s recommendation,and asked if I would stay on as a non-executive director. I agreed to doso.

Duncan’s background was in chemicals production and he hadlittle familiarity with the long-term decisions required in a capital goodsindustry. It did not take him long to conclude that Rolls-Royce wasunable to compete with its US rivals, because of the huge capitaldemands of engine development. He therefore proceeded to reach anagreement in January 1984 with General Electric. This took the form ofeach company investing 15 per cent in one of the other’s engineprogrammes, GE investing in the RB211-535 (for which they had nocompetitive equivalent), and RR investing in the CF6-80, which was tobe the large GE engine for the future. The views of the participants tothis agreement proved to be somewhat different, Rolls-Roycemaintaining that they ‘were in the big engine market and must continue


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to support and develop the engines committed to its existingcustomers’, while GE believed that Rolls had given up all interest indeveloping large engines for the future.

Duncan died at his desk on 5 November 1984, nine months afterhis signature of the agreement. Within days Geoffrey Pattie, theMinister of State at the DTI, telephoned me to say that since ArnoldHall and I were the only industrialist members of the board, he wouldlike us to agree on one of us becoming acting chairman whileheadhunters searched for a permanent replacement.

The following day, Hall announced to the board that Pattie hadasked him to become acting chairman and that he had accepted. I sawno point in recounting my own conversation with Pattie, since I had nointerest in acting as a stopgap chairman, and Hall had a wideexperience of the aircraft engine industry.

Early in 1985 I received a telephone call from the headhuntersasking whether I would be interested in becoming chairman. I repliedthat I would, provided that the matter could be settled within the nextfew days, since I was negotiating for another post. They replied thatthey had been instructed that if I was interested they could stoplooking, and that they would report the urgency of the matter.

Within a few days I was interviewed by Norman Tebbitt, thenSecretary of State for Trade and Industry, who offered me theappointment. I said that I would accept subject to two conditions,somewhat to his surprise. First, the government would have to beprepared to privatise Rolls-Royce before the next election, given myexperience of the effect of a change of government which had led tomy resignation as chairman of the electricity supply industry in 1980.He replied that if I could meet that timetable he would willinglyguarantee the government’s acquiescence. Secondly, I said that Iremained hostile to the PWR available at that time, and would not beprepared to refrain from public statements to that effect; consequently,if government would find that embarrassing from the chairman of astate-owned industry, they should not appoint me. He replied that hewould have to refer that question to the Prime Minister; he

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telephoned me soon afterwards to say that there would be no problemin my expressing my views freely.

My appointment was recorded in the board minutes on 8February 1985, just over three months after Sir William Duncan’ssudden death. I was pleased that Sir Arnold Hall agreed to remain onthe board; his extensive experience and ability made him a valuablecolleague.

Subsequent events at Rolls-Royce are of sufficient importanceand complexity to require separate treatment, and are to be found inthe 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 feelingthat here was a really challenging job – the restoration of the UK’sgreatest engineering firm to its rightful place in the world market. Ithad spent almost 14 years in state ownership as a result of the financialcollapse of the firm in 1971.

The story was a sad one. Speculation about the future of Rolls-Royce had been current in the press and the City for some monthsbefore receivers were appointed. The immediate problem lay in theinternational aero-engine market, where Rolls-Royce had contractedto supply its RB211 engines for the Lockheed Tri-Star aircraft, andthe viability of the project had been a cause for concern. But theweakness of Rolls-Royce had owed much to its post-war dependenceon military orders from the UK government, and the rapidsuccession of military projects which were cancelled beforemanufacture began. As a result, the company had carried out a hugeamount of design work at government behest, but no manufacturingwork had resulted.

The company’s weak competitive position in the civil aircraftmarket was further worsened by the government decision to support an


Anglo-French project for a supersonic aircraft, Concorde, which sold itsproduct only to the project partners.

All of these factors contributed, but Rolls-Royce was in a weakfinancial position in the late sixties and was finally declared bankrupton 4 February 1971. The buck now rested firmly with the government,who regarded Rolls-Royce, correctly, as a centre of British engineeringexcellence and announced that it would nationalise the company.

This must have seemed the only option at the time, but I amconvinced, in the light of my experience at the Weir Group and Turner& Newall that, as in those severe cases, the company could have beenturned around by a financial reconstruction led by the Bank of Englandand involving a complete change of management. Unfortunately, theBank’s thinking had not then reached the maturity which it lateracquired through the good offices of its industrial adviser Sir Henry(later Lord) Benson. So nationalisation it had to be; and the companylanguished in government ownership for 14 years, ceding muchcompetitive advantage to its US rivals in the process.

Those years were characterised by continual uncertainty and lackof commitment by successive governments.

Governments invariably find the idea of commercial risk entirelyalien, and take refuge in delay and evasion when confronted by theneed for important decisions to be made. On one occasion, anapplication by RR for approval to develop a derivative engine waitedfor more than four years for the government’s final, half-hearted,agreement. It is impossible to compete in world markets with that sortof indifference and resulting lack of support.

Anyway, the company was now, in 1985, on the starting block tobe privatised by the then Conservative Government, returning to theStock Market with a consequent welcome escape from governmentprocrastination and evasion. Expectations were high among the staff...

But first we had to take some steps to get ourselves into aposition to allow the company to be floated. I began by introducingsome new members to the Board. There were, initially, three: SirPhilip Shelborne, chairman of British National Oil Corporation and a

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former merchant banker; Sir Robin Nicholson, former Chief Scientistto the Government and a distinguished metallurgist; and HaroldMourgue, former finance director of Thorn-EMI, who had joined meas a non-executive director at Turner & Newall and had proved astaunch ally on financial matters. Later we added Professor (later Sir)Gordon Higginson, an engineer and Vice-Chancellor of SouthamptonUniversity.

Next, we needed to appoint merchant bankers and I opted, onthe basis of my own experience, for N.M. Rothschild, and specifiedthat Peter Byrom should lead the team. Working with him at Turner &Newall and Rothschild, I had come to recognise him as a man with aclear mind and a determined, ethical approach, which greatly appealedto me.

We opened discussions in 1985 with government on a possibledate for privatisation and found that the timetable was dominated byBritish Gas, a larger and so more attractive proposition for Government.Nevertheless, we managed to agree a date for Rolls-Royce’s privati-sation, of 20 May 1987 – some two years after my appointment.

The prospect of flotation was well received by the workforce at alllevels, sometimes with uncritical enthusiasm. The move was seen bythem, understandably, as an escape from the constraints of governmentownership. What was not generally realised by them was that we wereabout to exchange those constraints for the discipline of the marketand its often unpredictable analysts, commentators and investors. I hadno doubt of the net value of the exchange, but the lack of experienceof market forces on the part of virtually all senior staff was worryingand had to be remedied. This we did at question and answer sessionsfor staff to practise, and by example at the real sessions. It was agruelling period, during which most of the teaching fell to me – andthere wasn’t much time.

An early illustration of the belief that life in the Stock Market wasto be much easier than it had been in state ownership occurred at ameeting to consider investment in future engines. Our situation wasbleak in relation to that of our competitors, of whom there were only

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two, General Electric and Pratt & Whitney, both US companies. Eachwas much larger and more diversified than Rolls-Royce, and hadprofited during our 14 years of slumber in government ownership. As aresult, they dominated the civil aero-engine market, of which we thenhad about a 6 per cent share. In addition, they each had an impressivestable of engines, compared with our small and ageing offering, and anextensive spares business resulting from their large number of enginesin service. To summarise our own position, we had a weak balancesheet, few modern engines, and no substantial cash flow from sparessales to ease the long-term capital investment required. Understandably,the competition did not appear to view our forthcoming flotation withany great concern!

The problem crystallised when, at an early Rolls-Royce meeting, Iwas given a day-long presentation of our needs for investment in fournew engines, with a careful and thorough analysis of market needs –and a business case which confined itself to those engines and paid noattention to the overall performance of the company. At the close ofthe presentation, I congratulated those present on the technicalpresentation, and asked which engine they would recommend. Theylooked aghast, and insisted that such a choice was impossible – all fourwere equally essential. I explained that we simply did not have anyprospect of raising the financial resources required. This dialogue of thedeaf continued for about 30 minutes until I closed the discussion bysaying that the choice had to be restricted to one engine – or none.This certainly resulted in some recognition of the problems facing usall, but subsequent experience was to indicate that the transition to thereal world, outside the cocoon of state ownership, was far fromcomplete.

Sometimes I wondered how to get the message across that wehad to live within our means, and, on one occasion, suggested to seniormanagers that they should remove the nameplates from their desks andsubstitute the slogan ‘We can’t afford it!’ On another occasion, whenwalking, unaccompanied, around the Derby offices I chanced upon ameeting which was discussing some problems we were then having with

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an engine thrust-bearing – the meeting was attended by 37 people! Isuggested to the site director that this was more in the nature of apublic meeting than a committee, and that the number of chairs in aconference room should be limited to 10. But one decision which madesome impression on senior management was to sell the larger of ourcompany planes, a Gulfstream II executive jet. The economy itself wasuseful, but the psychological effect even more so.

So I was somewhat heartened when, on a visit to Canada, an oldRolls-Royce hand, Bert Beattie, asked me over dinner if I knew I had anickname in the company. I replied that I would be surprised if Ihadn’t, whereupon he told me that the nickname was ‘Frugal Francis’. Iwas delighted by this indication that my efforts were making a mark!

The general disregard for our means was evidenced by approachesfrom some quarters in the company suggesting acquisitions of other,not always closely related, companies. One of these, perhaps under-standably for sentimental reasons, was Vickers, who then owned Rolls-Royce cars (although the trademark name was owned by us). There wasno real business case, and the same problems of affordability had to berecognised.

Senior management had a touching faith in their ability (whollyunproven) to turn round and improve other companies, and wereunable to recognise the practical difficulties of doing so. For them,Rolls-Royce had, quite simply the best available management – a fallacystemming from before 1971, and one which had undoubtedlycontributed to the bankruptcy.

Fortunately, one small acquisition proposed was that of a specialistnon-destructive testing company, Mateval, on which the constructionof our submarine reactors was heavily reliant. That company was infinancial difficulties, and a glowing business case was presented for itsacquisition. We bought the company for a small sum of money and setits champions the task of justifying their recommendation. Theexperience was a salutary one, since those concerned had no exper-ience of running a company within the necessary constraints of profitand cash flow; their experience was wholly based on running a


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nationalised company. Unsurprisingly, their forecasts proved unrealisticand unattainable. The experience gained was painful but valuable,in that while it never approached the levels of profitability predicted byits proponents, Mateval continued to provide an essential service toRolls-Royce.

I soon saw the need for the brief monthly operating reports whichI had introduced at Weirs and Turner & Newall, and also of the weeklycash reports with an accompanying pressure on cash control andreduction of working capital in the forms of stock levels and work inprogress. I took a direct personal interest in these figures and actions,and harried those involved unremittingly. Gradually, the measuresinduced a different approach in many of the Rolls-Royce staff, who atlast came to see the performance of the company in relation to themarket, rather than to a distant and idealised corporate plan.

Meanwhile, discussions had been continuing with government onthe shape of the forthcoming privatisation offer. They had employedmerchant bankers in London and the USA who advised that a level ofdebt corresponding to 40 per cent gearing would be acceptable to themarkets. I responded that it would certainly not be acceptable to theboard of Rolls-Royce. Our competitive position and size would place usat a considerable disadvantage in the market from the outset, when ourneed would be for a strong balance sheet to support investment in newengines and modern manufacturing facilities. I was determined that weshould float with zero debt.

This ruffled a lot of feathers, most notably in the Treasury, whowere concerned with maximising the returns to government. At onepoint, the government representatives asked me what options they hadopen to resolve our differences. I replied that there seemed to me tobe three. The first, and simplest, was to accept my proposals. Thesecond (which, I knew, was impracticable) was to delay theprivatisation date. The third was to find a more compliant chairman!The civil servants and ministers involved were fortunate in having astheir industrial adviser Sir Jeffrey (later Lord) Sterling, whounderstood the force of my arguments. They were also constrained by

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their invitation to me to become chairman after the sudden death ofSir William Duncan.

In the event, we finally agreed on zero debt at flotation, andpacified the Treasury by showing that the interest payments avoidedwould justify a higher share price, so protecting their receipts – a prettysimple case to demonstrate! Unfortunately, the resulting share price atflotation also made it appreciably more difficult, in the early years, forthe share option schemes to show any gains to management, to theunderstandable dismay of the staff involved, including me.

While this familiarisation process was going on, the company hadto continue to run, and here I found great support from Ralph Robins,an engineer and lifetime employee of Rolls-Royce, who had beenappointed managing director, with my unqualified support, during thetemporary chairmanship of Sir Arnold Hall. A hard worker, with acomprehensive knowledge of the products of Rolls-Royce and itscompetitors, he enjoyed the respect and trust of airlines all over theworld. He it was who kept the wheels turning while I handled theprivatisation and internal culture issues. His special talent was inconstructing and agreeing sales deals, and he had the support of acommitted 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 RB211-524engine which powered their Boeing 747 aircraft. Developing thisvariant was easy for us to do, and attractive to our customers, butattracted great opposition from General Electric, who considered itcontrary to the collaboration agreement signed by Sir William Duncanin 1984. Ralph Robins had had some rather difficult conversations withBrian Rowe, head of the GE aircraft engines division of GE, and wasunderstandably troubled by the situation.

The 1984 agreement contained no undertaking on the part ofRolls-Royce to discontinue the development of large engines, althoughit was possible for GE to view the collaboration as makingindependent development unattractive to us. But the Rolls-Royceboard, of which I was then a member, had been resolute in maintaining


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the company’s independence on this issue during negotiation of theGE agreement.

I therefore concluded, with the approval of the board, that wewould continue to make improvements to the 524 engines and pursueany further developments which became possible, and arranged ameeting for Ralph Robins and myself with Brian Rowe and Ed Hood, adeputy chairman of GE on 17 November 1986.

The GE representatives clearly saw the collaboration on their newlarge engine as excluding any independent development of largeengines by Rolls-Royce – a view which we did not accept and whichwas not specifically supported by the agreement. We therefore madeour position clear and agreed, after long and sometimes difficultdiscussions, that the agreement should be terminated. The GErepresentatives were very upset by the termination, but the newsituation was welcomed by Rolls-Royce staff and made the task ofconstructing a prospectus for privatisation much simpler for me;indeed, I seriously doubted the practicality of preparing a prospectusbased on the GE interpretation of the agreement.

Our customers demonstrated their position by buying the upratedversions of the RB211-524 in welcome numbers. It should be addedthat newspapers, analysts and some advisers to the governmentexpressed 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 wasmade possible by the modular development prospects of the RB211,and the resulting smaller financial demands of developing largerengines, which today underpin the prosperity of Rolls-Royce, and itbrought to an end a period of uncertainty for staff, customers andmanagement. Both the chairman and the chief executive of Rolls-Roycetoday have publicly acknowledged that the current prosperity of thecompany is founded on those strategic decisions, taken more than 20years ago.

The decision to terminate the agreement with GE, with itscomforting assurance of the help of a powerful partner in developing

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the new large engines, was not an easy one. To reverse a policyintroduced by the previous chairman is always hazardous, with the newincumbent assuming full responsibility for the possible failure of thechange in direction. In this case, it rested upon my conviction that thethree-shaft engine design adopted for the RB211 offered a low-costentry into the market for engines to meet the emerging demand formuch larger aircraft and, as a consequence, the prospect of restoringRolls-Royce to a position of major player in the industry, rather than thesub-contractor position which would have been the inevitable outcomeof the GE agreement as envisaged by GE. Against this was thepredictable scepticism of the press, always looking for disasters, andalso that of the investment community, with painful memories of thecollapse in 1971. One prominent investment manager had told meflatly prior to flotation that he would never again invest in Rolls-Royce.

Returning to the saga of privatisation, we now embarked on theLong Form Report, which necessitated a detailed examination of thecompany and, naturally, demanded a great deal of time from executivesat all levels – and a great deal of supervision of them to restrain theirenthusiasm! But there was one further hurdle to be surmounted withgovernment. Having settled the shape of the balance sheet, weproceeded to draft the offer for sale. In keeping with my general viewsof the need for financial strength, I wanted to include a statement that‘we would pursue a conservative dividend policy’. This was intended toconvey a message of determination to potential investors and others,but was unwelcome to the Treasury, who saw it as unhelpful to theflotation. As a result, I received a telephone call from the Chancellor,Nigel Lawson (later Lord Lawson), asking me to drop the phrase. Ideclined and, a few days later was summoned to a meeting with theChief 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. Iremained adamant, and the warning was included. In the event, theflotation was heavily oversubscribed and the Treasury were presumablyhappy.


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During the preparation for privatisation senior staff had tobecome aware of the hazards of talking, to the press or to analysts,about the affairs of the company in a way which could reveal price-sensitive information. We had a few scares of this kind, some of themfrom staff who had been carefully warned of the dangers! But,gradually, the rules became widely known, and raw enthusiasm wasreplaced by healthy caution.

This was just as well, because the weeks prior to Impact Day (theday of the flotation) were taken up by road shows, when we madepresentations to analysts and investing institutions around the country.Although the presentations were made by me, and questions were dealtwith by me with the support of senior managers, there was plenty oftime before, during and after lunch for individuals to respond toquestions and discussion, so that caution was needed both to ensureconsistency and to observe the insider dealing rules of the StockExchange, when those having privileged information were restricted intheir statements to groups of investors and analysts. The press, too,took increasing interest as flotation approached and had to be dealtwith at group and individual level by appropriate people. Pressconferences were preceded by an in-house dummy question-and-answer session, at which the line to be taken was agreed and the pitfallsidentified.

Finally, Impact Day arrived on 28 April 1987 and, with it, thepublication of the prospectus for sale of the shares. The event wascelebrated by a unique air display at Stansted Airport, involving aircraftpowered by Rolls-Royce engines over a period of 70 years, from theBristol fighters of the First World War to Concorde, in addition to manyother civil and military aircraft. It was an occasion of great pride to staffand customers alike, and British Airways kindly arranged for a flypast byConcorde. During the show, I noticed a young secretary from head officestanding alone by a Mosquito fighter and weeping quietly. She told methat she was thinking of the many young men who had flown suchaircraft 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 yearnow gave way to the problems of running a listed company in a highlycompetitive international market. Naturally enough, our competitors,investors and customers waited to see events unfold and suspendedtheir judgements meantime.

For our part, we at Rolls-Royce had to be actively aware ofthe need to demonstrate our management ability. This meant thedevelopment of a strong balance sheet, while investing in R&Dand manufacturing improvements and offering competitive bids toairlines. Our competitors, General Electric and Pratt & Whitney,both much larger than us and enjoying substantial cash and profitflows from spares sales, were not disposed to make thecompetition 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 tomake.

The stimulating effects of privatisation led to enthusiasticdemands from sales, manufacturing and design staffs for theprovision of new funds to support progress in their areas – all veryattractive, but we just couldn’t afford many of them.

My earlier efforts to foster an awareness of the need forstrong financial management throughout the company had largelybeen eclipsed by the staff euphoria with the new privatised regime,and I decided to ask the board to approve a financial strategy thatcould be disseminated throughout management. This was done inOctober 1987, six months after flotation, and formed a usefulprimer in business for those with little experience, making it clearthat a strong balance sheet was a pre-requisite for successfultrading as a stock market company and that its development wouldlimit investment in engine development and manufacturingfacilities.


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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 pricesdespite dire yet unfulfilled warnings of catastrophe from the salesdepartment, 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 balanceremained positive throughout the period.

2. Profit before tax – the 1985 figure of £81m had fallen to aloss of £202m in 1992 as a result of a worldwide recessionin the aviation market in that year; but this was the onlyloss during the period.

3. Distributable reserves had risen from £189m in 1985 to£323m, this latter figure after being depressed by the 1992loss of £202m.

Summarising, we had managed to stay afloat during a period of intenseinternational competition, sustained development of new engines andheavy investment in manufacturing facilities. Our careful control ofcash, manpower and capital investment had also made it possible toweather the market depression of 1992/3.

During this period, the 535C engine, which had been developedto power the Boeing 757, began to attract sales, with BA as the launchcustomer. The competitive position of this engine was unique. SinceGE did not have a suitable engine, our only competitor was Pratt &Whitney with an earlier and less attractive engine. Indeed, the 535proved even more reliable than we had hoped for, with resulting lowerspares sales than would normally have been expected – a situation

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which persisted for several years! But the superiority of the engine wasso apparent that a number of Pratt & Whitney 757 customers changedto Rolls-Royce over the next few years and the engine was steadilyuprated to meet the growing requirements of the aircraft and came todominate the market for the 757. The success of that engine played animportant part in the recovery then showing its first signs.

We suffered a severe setback in 1989 when BA, one of our mostloyal customers over many years, decided to choose the new GE90engine for their initial order of the Boeing 777, a large twin-enginedaircraft. 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. Thiswas a somewhat risky route, regarded with caution by some airlines.The BA choice was not influenced by technical considerations, butrather by a very determined bid by GE, which included the purchase ofthe BA repair plant at Treforest, in South Wales for the sum of £280mas 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 newengine and had been campaigning for some years to displace our flagairline from their attachment to us. I went to see Lord King, the BAchairman, and was assured that this would be an open competition, butit soon became clear that the GE terms were irresistible to BA and hadbeen under discussion for quite a while. The decision influenced ANAof Japan to reverse their intention to buy Rolls-Royce, and causedworld-wide concern among customers.

Fortunately, Thai Airlines, Emirates and Cathay Pacific kept theirnerve and ordered Rolls-Royce engines for their 777 aircraft, so that theapparent setback was short-lived. The GE90 engine, unsurprisingly,experienced considerable teething difficulties, and when BA came toextend their fleet, they returned to Rolls-Royce.

No account of the recovery of Rolls-Royce would be completewithout a recognition of the invaluable part played by Cathay Pacific,our most loyal customer over many years, some of them quite difficultones. Key to this was the engineering director, Stewart John. He was a


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highly experienced aircraft engineer, widely respected throughout theairline industry and with an unshakeable respect for the three-shaftengine made by Rolls-Royce. His counsel was invaluable and hisinfluence in Cathay was great. Cathay Pacific was owned by the SwireGroup, whose leaders during this period were Sir John and Sir AdrianSwire, both shrewd businessmen with a deep wish to buy British –provided it really was best. Both Cathay and Rolls-Royce profited froma close association which met and surmounted obstacles of all kinds,and developed a deep and enduring mutual trust. Their part in thisstory is one of friendship, trust and business acumen, for which I wastruly grateful.

Engineering developments

The development of the 535 engine was the achievement of StewartMiller, a tall and taciturn Scot with a modest manner and a brilliantengineering ability. He was later to add further lustre to his reputationby solving the problems we were having with a high-pressurecompressor, which was our part of an international engine, the V2500,being made by a consortium including Pratt & Whitney and others. Thecompressor, as originally designed, was not able to deliver the requiredperformance and it became apparent to me that part of the problemwithin Rolls-Royce was that the design was split between plants atBristol and Derby, with divergent traditions. Once again, as with theproblem of the GE agreement, I asked Ralph Robins to summon theparticipants, and others with wide experience, to a brainstorming sessionat Derby. The old-fashioned notion of a general arrangement drawing,showing the complete engine, illustrated the impracticability of thedesign and Stewart Miller was put in charge of the recovery. The projectrapidly came under control, but relations with our partners had beenthrough 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 V2500compressor was a milestone in the history of the company’s recovery.

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With such a record, it is hardly surprising that we asked StewartMiller to succeed Alan Newton, the director of engineering, on hisretirement. Newton had been strongly in favour of the GE agreement,and was correspondingly disappointed by its demise. Stewart Miller wasa superb successor, to whom much of the success of the privatisedRolls-Royce was due.

This success rested on the development of modular engineimprovements, for which the three-shaft engine, developed in the1960s and not easily available to our competitors, was uniquelysuitable. As a result, our development times and costs were greatlyreduced and our task of developing a full range of engines was greatlysimplified. So, ironically, the visionary design that contributed to thecollapse of Rolls-Royce in 1971 was the means of its technical recoveryand commanding world position today.

Throughout this period, Ralph Robins contributed much to thedevelopments I have described, which exploited the unique versatilityof the three-shaft engine to meet the shifting demands of aircraftbuilders and airlines, and stimulated enthusiasm throughout thecompany. His life in the company had developed in him a sixth sensefor probable needs and he fed those judgements into a receptive designteam.

The development path of Rolls-Royce was now clear; the onlyproblem was to match our ambitions with the available financialresources.

Cash had to be conserved in every possible way and the euphoriaof many of our managers had to be curbed. We exerted great pressureon debtors, capital expenditure and payroll. The board’s remunerationcommittee were very unhappy about the low level of salary which I feltable to take in these circumstances, and approached me on severaloccasions describing it as well below the market level.

They were, of course, aware that the circumstances of Rolls-Royce imposed strains on its chairman which greatly exceeded those ofmore stable companies, which they saw as exacerbating the comparison.However, I have always believed that leadership begins at the top and


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I was not prepared to accept a salary so much greater than that of otherboard members. Of course, I had been sought for the post ofchairman, and received a series of subsequent offers from othercompanies, but, again I had to recognise that my decision to restoreindependence as a major aircraft engine manufacturer locked me intothe measures necessary to secure its success. During my seven and ahalf years as chairman of Rolls-Royce, my voluntary salary reductioncost me, on a conservative estimate, between £2m and £3m.Unfortunately, because of my decision to take a reduced salary, mypension was also much lower than would have been expected, resultingin a similar loss to date. But, on the positive side, I have the greatsatisfaction of knowing that my chairmanship transformed the companyculture and laid the foundations for the world-class company which wesee today, to which successive chairmen and chief executives haveadded their own substantial contributions.

Diversification

Our two competitors, General Electric and Pratt & Whitney, both UScompanies, were highly diversified and so were much less reliant thanwe were on the cyclical demand of the aviation market. Coupled withtheir substantial sales of engine spares, this placed us at a seriousdisadvantage in competing with two well-established companies whovirtually dominated the market. I therefore spent quite a lot of timeconsidering our room for manoeuvre to, at least partially, redress thissituation. I was looking for an engineering company, whose technologywe understood, but with markets dissociated from aviation. By sheercoincidence, I found myself returning from a visit to Japan in 1988 inthe unplanned company of Terry Harrison, chairman of NorthernEngineering Industries, which I knew well from my electricity supplydays as makers of steam turbines, boilers and a wide range of otherequipment for power stations. During the refuelling stop at Anchoragewe walked round the terminal and I explored the possibility of a

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merger. He was somewhat taken aback but, as we passed the polarbear for the third time, commented that he ‘did not find the ideawholly repugnant’. Coming from a Geordie, this was quite aconcession!

In late 1988, we acquired a modest shareholding in NEI andapproached their board to discuss terms; the talks foundered on theprice we offered. In April of the following year, we returned to the issueand secured the backing of the board for a public offer, acquiring thecompany for £306m, the same price as we had offered earlier. It waswell known that NEI were experiencing difficulty in obtaining neworders, in common with power plant companies around the world, andalso in the completion of a large power station project which they hadsecured at Rihand, in India. As a result, press comment on the mergerwas predominantly sceptical.

My aims in the move were fourfold:

1. To introduce Rolls-Royce technology in turbine bladingdesign and materials to NEI and to obtain a counter-cyclical contribution to profit and cash flow.

2. To combine the somewhat dispersed but complementaryactivities 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, andmotivated by profit and cash control.

At this point, I am sorry to say that the official Rolls-Royce history byPeter Pugh is wrong, when it says on page 33 of Volume 3:

Before Rolls-Royce was working on Project Derwent, theChairman, Sir Francis Tombs, thought he had found a way to helpwith the onerous development costs of the Trent family. Why notbuy a company in another industry that was in a mature stage ofits life and was throwing off some cash?


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This speculation failed to recognise my reasons for the merger, which Ihave set out above, and were well known at the time. I had no priornotice that this erroneous statement was to appear in the history, andwas dismayed to see it.

Following the merger with NEI, I saw no need to integrate theoperations, since the products and markets differed, but we didsucceed in fruitful collaboration in a number of engineering spheres,and the presence of hungry NEI managers soon made itself felt inRolls-Royce. The difficult financial closure of the Rihand project wasbrought to a successful conclusion by Terry Harrison, with a lot of helpfrom Peter Lockton, with whom I had worked 30 years earlier when hewas at GEC Witton (later acquired by NEI). The acquisition of NEIalso provided cash and profit contributions, allowing development ofthe Rolls-Royce engine family at a rate which would not have beenpossible otherwise. This was an important, but by no means the only,benefit of the merger.

In 1989, Ralph Robins became deputy chairman and TerryHarrison succeeded him as chief executive. This enabled Ralph todevote more time to strategic issues and Terry to strengthen themanagement of the company, furthering the cultural change for which Ihad been striving almost single-handed. It also freed me to addresssome other important issues, among them my succession. In all of mysenior posts through the years I had regarded an orderly andsatisfactory succession as crucial to the success of the company.

NEI was not our only activity in the diversification field. We hadfor some time been active in the area – indeed, there were three otheractive prospects. We had for some years been interested in acquiringAllison, a US company with a strong presence in smaller engines,notably for the US Air Force. The company was owned by GeneralMotors, and on two occasions we were invited to meet with thechairman of GM, Roger Smith, to discuss the matter. On eachoccasion, having arrived in Detroit and had preliminary discussions, wewere told over lunch that Allison was not for sale after all. It was clearthat there had been political pressure on the GM management, of

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which our American competitors may not have been altogetherunaware! Be that as it may, I remarked to Roger Smith that, should hewish to explore the possibility again, he should expect to meet me inLondon. The problem was solved eventually when Allison became amanagement buy-out, and were able to accept a bid from Rolls-Royce.

Another prospect arose with an approach from Turbomeca ofFrance for a merger of our helicopter and military engine activities. Wehad collaborated for some years, but the family of its founder, SirJoseph Sidlowski, wanted a merger. I regarded such a move asunattractive in our then carefully-balanced operations, and nothingcame of it.

A third, very interesting, approach came from BMW who, likeRolls-Royce, had a tradition of high-quality design and manufacture ofaero-engines and motor cars, although BMW had been out of the aero-engine business for a long time. We agreed to set up a jointly-ownedGerman company to develop a new, small, engine and the project wentwell. At the beginning of our talks, I was anxious that BMW shouldfully understand the long time-scale involved in such a venture, butthey were very relaxed. The arrangement was a happy and successfulone, but BMW eventually decided that the aero-engine business wastoo 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 shareholdingand 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 hehad acquired a deep knowledge of Rolls-Royce history and organisationand was deeply committed to the company. He had an understandableambition to become chairman of Rolls-Royce and perhaps to be seen asa second Lord Hives, that great man who rose from being a motor car


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test driver to the position of chairman of Rolls-Royce before and duringthe Second World War. Hives was indeed a legend and very much aninspiration for Rolls-Royce staff.

Since, understandably, Ralph was being approached by head-hunters within a few years of privatisation, he pressed me for an indi-cation of his prospects of succeeding me. I recognised his ambitionsbut had some reservations about his suitability for chairmanship of thecompany at that time. I expressed these reservations quite frankly tohim, saying that his greatest strength was also his greatest weakness. Iexplained that his success in the sales area had induced in him a narrowview in which the excitement of the chase had obscured the potentialadverse effects on the company of a successful sale. This is a well-known hazard, present in many industries, of promoting ‘strategic sales’without due regard to their profitability. Indeed, I had to veto oneproposed tender which would have put the future of the company atrisk if it had been successful. I said that he and I must give somethought to remedying this unacceptable practice of separating salestactics from company performance, by providing him with a widerexperience of company strategy.

To his credit he recognised the problem and worked hard atremedying it. He went with me to more meetings with the press andfinancial analysts, and attended the audit committee where companyperformance was a constant topic and where the contingent liabilitiesof sales contracts were reviewed and declared, if necessary, in theannual report and accounts.

His appointment as deputy chairman in 1989 was made with theexpress aim of furthering his progress in that field. The concurrentappointment of Terry Harrison as chief executive undoubtedly encour-aged Ralph’s efforts to broaden his field of vision, and he began tomake great improvements. After two years, I judged that he would becapable of succeeding me as chairman when I had succeeded in furtherstabilising the company financially. In 1991, therefore, I felt able torecommend him to the board as my successor. There was some pressurefor me to remain beyond my proposed retirement date of October

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1992, but I pointed out that his age was close to the limit at which onecould convincingly appoint him as my successor, so that delay beyond1992 would be undesirable. This was accepted and I am pleased to paytribute to his highly successful occupation of the chair until hisretirement in 2003, after 11 years in office. He appointed, as chiefexecutive in succession to Terry Harrison, John Rose (later Sir JohnRose) who had represented a participating US bank during the earlyyears of my chairmanship of Turner & Newall. He was not an engineerbut had a highly innovative approach to the complex financing problemswhich characterise the aero-engine industry. His logical and thoughtfulapproach served Rolls-Royce well and he served with flair and distinc-tion a succession of part-time chairmen, who followed Ralph Robins.

Engineering technology

Aero-engine design is a highly technical business, in which performanceand weight constantly compete. Key to this is materials science, and weknew that both GE and Pratt & Whitney were spending vastly morethan we could afford on research and development. On joining thecompany, I discovered that Rolls-Royce was funding research contractsat 29 UK universities, with little coherence. I discussed the problemwith Ralph Robins and Stewart Miller, citing my experience ofindustry/university collaboration gained on a number of researchbodies, of which more later. I proposed the setting up, at a smallernumber of universities, of research units based on a technical area ofinterest to both parties. The units would be funded by us for aminimum of five years and there would be an active interchange ofstaff between the university and the company.

The scheme, which proved a great success, was developed by PhilRuffles, who was to succeed Stewart Miller as director of engineeringon Stewart’s retirement. Topics included composite materials, steelalloys, combustion, precision casting, and acoustics. The UniversityResearch Centres (or URCs, as they came to be known) continue to


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form part of the research base of the company today. Building an activerelationship between company and university based on topics of lastinginterest to both parties was the key to a fruitful and lasting partnership.The URCs had some similarities with the Interdisciplinary ResearchUnits set up by the Science and Engineering Research Council, whoseearlier genesis I had been happy to be involved in.

But there remained a further aspect of academic input into Rolls-Royce which I wanted to address, and the opportunity came with thedevelopment of materials capable of handling increasingly high turbinegas entry temperatures. A well-known law of thermodynamics states thathigher temperatures produce higher efficiencies. However, as so often intechnology advance, there is a price to pay, and this manifests itself inthe lifetime of the materials concerned. The trade-off is an importantone and I was anxious to get the best possible advice, so I suggested anadvisory academic group. The suggestion was not received withenthusiasm internally, but I insisted, and a committee was formed underthe chairmanship of Sir Alan Cottrell, a distinguished metallurgist forwhom I had formed a very high regard over the years. His committeewas charged with examining current research and our present activitiesand to report to the board. When they did so, they concluded that wewere seeking higher temperatures at a level where materials reliabilitywas undesirably impaired – we had the balance wrong, in their opinion.Their recommendation was accepted with little opposition and thecommittee continued its work on a less elevated reporting plane. Somemonths later, I was asked by a number of Rolls-Royce staff who hadformerly been sceptics of academic advisory committees, if I had anyobjection to the formation of a similar group to advise on gas flowtechnology and modelling, and was delighted to agree.

Job satisfaction

Chairmanship of Rolls-Royce was an immensely enjoyable task. Theethos of the company was long-standing and excellent, even though it

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sometimes led to excessive self-confidence in areas unfamiliar to thestaff.

There had been a long history of effective separation of financialconsiderations from the engineering matters of design, manufactureand sales. I sometimes parodied this by asserting that the engineeringdepartments thought that the chairman’s job was quite simply toprovide the resources required by the engineering departments!

That illusion has now been superseded by awareness at all levelsthat the success of the company requires good financial control and alevel of performance capable of justifying investment, and in thisrespect Rolls-Royce staff had much to learn, in common with the staffsof GEC Erith, Weirs and Turner & Newall. There is a deep satisfactionto be obtained from leading such remarkable companies to a morecompetent management style, and I count myself fortunate to have hadsuch challenging appointments.

My final farewell dinner, in October 1992, included the usualplaudits and reminiscences from board members who had becomegood friends. But, when the speeches had ended and the presents beendelivered, the sliding doors at the end of the dining room opened, andthere sat a string sextet from the Goldberg Ensemble who had beenwell 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 ofmy wife and I, and we were deeply moved by the affectionatearrangements for its performance at our farewell, which came as acomplete surprise. These arrangements had included the carefulorchestration of my movements around the building to avoidrehearsals.

So closed ten years with Rolls-Royce as a non-executive directorand chairman.

I enjoyed great support from board members, senior colleagues,the workforce, investment analysts, advisers and customers, withoutwhich my task would have been immeasurably more difficult. I believethat we can all feel proud of a signal achievement for Britishengineering and prosperity.


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CHAPTER 8

THE PRIVATISATION OF THE

ELECTRICITY SUPPLY

INDUSTRY

After my resignation from the chairmanship of the Electricity Councilin 1980, the privatisation of the electricity supply industry made veryslow progress.

Nigel Lawson succeeded David Howell as Secretary of State forEnergy in 1981 and telephoned to ask me to visit him to discuss theform of the intended privatisation. I replied that I had no wish todiscuss the matter again, since I had made my position clear to DavidHowell in 1980 and had resigned as a result of our disagreement on thematter. He replied that the Prime Minister had asked him to discussthe matter with me and that placed him in a difficult position. Iaccordingly agreed to meet him and we had a private discussion in hisoffice, lasting more than two hours.

I made it clear that implementation of the Electricity Corporation asproposed by the Plowden Committee, and accepted by the then LabourGovernment, was a necessary step towards a successful privatisation.

He echoed David Howell’s argument that he dislikedcentralisation, and also any appearance of imitating Labour. I againpointed out that the existing structure provided no sensible basis for aprivatisation and that forming an Electricity Corporation, combiningthe industry in England and Wales could, as I had intended, lead to theformation of five independent companies, each combining generation


and distribution of electricity in its area. They would trade with eachother through the national grid, also privatised. Each would be largerthan the South of Scotland Electricity Board, which had operated withgreat success in developing its own distinctive strategy and supportingan extensive investment programme while trading with England andWales. The proposed boards would be capable of forming a competitivemarket while avoiding the absurd separation of generation fromdistribution. Such boards would form a good framework forprivatisation and each would be capable of developing its own policyand of providing the necessary large capital investment. Strategy wouldbe the responsibility of a statutory Commission on the lines of theearlier Electricity Commission. Such a coherent structure would allow along-term strategy to evolve in a way denied to the proposedfragmented structure. Vitally, the individual boards would have to tradefor a few years before privatisation to demonstrate their organisationaland financial performance at flotation.

He seemed to listen with care, but rejected my arguments,despite my warning that proceeding with privatisation based on theexisting structure would lead to a fragmented industry, without anyagreed development policy and lacking the necessary financial strengthfor the substantial investment programme required. Instead, a numberof weak, small, companies would emerge, incapable of making thelong-term decisions and lacking the resources required. Concluding ourdiscussion he asked what options he had. I replied that he could acceptthe Plowden Report, despite the Labour Government of the day havingdone so (but making sufficient changes to claim it as his own and usingprivatisation as the central argument). Or he could join the growing listof Secretaries of State for Energy who were aware of the problem,created by the Conservative Government in 1957, but who failed totackle it. I added, gratuitously, that he should not completely excludethe possibility that a Labour Government could sometimes be correctin their analysis.

Lawson had a quick and fertile mind, but his background wasmainly in the media and politics. He also had great self-confidence,

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which led him to discount opposition. Like many ministers of allparties, he placed each problem in the framework of his simplified corebeliefs and gave little credence to alternative arguments. I could notescape the feeling that he had already decided to leave the organisationlargely untouched and that our discussion was only a matter of form tosatisfy the Prime Minister.

This was the last opportunity for the Conservative Governmentto privatise the industry on a sensible basis, and was yet anotherexample of how governments are hogtied by their own mantras and ledby them into absurd positions – a fate which the electricity supplyindustry suffered four times at the hands of Conservative governments– in 1957, 1980, 1982 and at privatisation in 1988. The issue nowlanguished and Nigel Lawson (later Lord Lawson of Blaby) moved onin 1983 to the Treasury, becoming Chancellor of the Exchequer.

Some years of inactivity followed, due I suspect to a continueddisagreement between Margaret Thatcher and Nigel Lawson on thedesirable organisation to be adopted for the privatised industry.Successive Secretaries of State took refuge in inactivity until CecilParkinson (later Lord Parkinson of Carnforth) was appointedSecretary of State for Energy in 1987 with instructions to makeprogress on privatisation. He invited me to advise him on the Bill andI refused, explaining the reasons why it was now too late for thenecessary organisational changes to be made to produce a successfuloutcome and adding that I had spent too much of my life trying toadvise ministers who seemed not to want to listen. He pressed methree times more and I consistently declined. He was a thoughtful andwise man and I suspect that he was unhappy with the situation he hadinherited, following the reluctance of his predecessors to grasp thenettle.

When John Major became Prime Minister in 1990, heencouraged John Wakeham (later Lord Wakeham), the renownedgovernment trouble-shooter, to privatise the industry in its existing,fragmented form. At about this time, I was invited to give the annualWilson Campbell Memorial Lecture (readers will recognise the name)

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and decided to base it upon the privatisation proposals, spelling out thedisadvantages 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 ourconversation on a slightly more encouraging note, saying that themarkets would put the organisation right in the fullness of time bycombining the myriad boards into a small number of boardsresponsible for both generation and distribution, but lacking anystrategic plan. This has proved to be the case, after some 20 years, butall of the combined companies are foreign-owned, and are concernedwith their profitable operations rather than UK national considerations.

As a result, we still have no strategic direction for the industryand face tremendous challenges in overtaking the decision-vacuum oftwo decades, which continues today. I am staggered by the naivety ofministers who expected competing foreign-owned companies to deviseand implement a UK strategy for a long-term service industry. In,practice, they are concerned with ensuring that their present investmentmakes a satisfactory return, and not with long-term decisions onnational strategy. It is worth noting that none of the countries whosecompanies now dominate our electricity supply industry would allow usto make similar investments in their countries, despite the arguments offree market competition so often advanced by economists andpoliticians and the EU – and as frequently ignored by other countries.

Events after privatisation gave no reason for optimism. The firstregulator of the privatised industry, Professor Stephen Littlechild, hadbeen deeply involved in the privatisation and continued to maintain theseparation of generation from distribution by refusing proposals formergers. During the privatisation my advice was sought on a suitableregulator and I suggested him as having some responsibility for the formof 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 afree market, without realising that such an option is not available for theelectricity supply industry, where security of supply is (or should be)

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paramount, planning horizons are at least 20 years and electricity istraded on the basis of short-run marginal cost with no provision for long-term investment. Subsequent regulators did allow a combination ofgeneration with distribution, but in a piecemeal way, so that a medley of,mostly foreign-owned, companies emerged, all hypnotised (as was theDTI) by the short-term advantages of cheap gas as a fuel, coupled withthe low capital cost and short construction time for gas-fired plants.

As a result, the first two decades of the privatised industry saw anincreasing dependence on imported gas and a continued reliance onexisting coal and nuclear stations, but with no provision for theirrenewal as they steadily aged well beyond their design lives. Thisprocess was described enthusiastically by a succession of ministers asthe operation of the free market – although a more accuratedescription would have been laissez-faire coupled with a manipulatedmarket – for which successive Labour governments showed a growingattachment. Annual debates which I organised in the House of Lordsdrew attention to all of these problems but were uniformly dismissed bythe Labour Governments of Blair and Brown, the latter of which,belatedly, recognised the force of the arguments, just prior to theelection in 2010.

A startling example of the muddled approach was theintroduction in 2002, by the regulator Ofgem, of a new tariff governingthe trading between the generators and the distributors, and calledNETA. Ofgem and the DTI were subsequently, and justifiably,criticised by the National Audit Office for a lack of consultation withthe generation companies, some of which were forced into liquidation.The price of generated power was suddenly and arbitrarily reduced by40 per cent but, inexplicably, consumers failed to benefit at all by anychange in the retail price! Of course, the situation was corrected, buttoo late to help the damaged generating companies. Notably, theproblems which the haphazard introduction of NETA caused for BritishEnergy, the nuclear company, allowed a cynical government to ‘rescue’them (from a problem it had created in the first place). In seizing thisopportunity to indulge their established hostility to nuclear power, they


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insisted on the sale of North American assets at low valuations, furtherweakening the company. It was a sad case of blind prejudice againstnuclear power coinciding with the well-known greed for cash of theTreasury, and a good illustration of the saying that the Treasury knowthe cash price of everything and the value of nothing. The NorthAmerican stations were soon afterwards valued at much higher prices.

Throughout the period of privatisation, successive governmentshave been ardent advocates of wind power, the only source ofrenewable energy available in quantity, and that enthusiasm acquiredsupport from the growing concern to limit carbon dioxide because ofits perceived contribution to climate change. They failed to recognisethat the contribution of wind power is intermittent, so that fossil andnuclear plant has to be kept on line to meet periods of inadequate orexcessive wind – an expensive measure and one which reduces anyclaimed benefit in carbon dioxide reduction.

An important factor in governments’ obsession with sources ofrenewable energy, despite their intermittent capability, has been theconstant pressure from environmental organisations. Beginning ascrusaders, they habitually exaggerated their support for ‘free’ energycoupled with their rejection of nuclear energy, and their propaganda hasbecome more extreme and strident over the years during which theyhave evolved into prosperous organisations with career structures. It isheartening, though, to see in recent years that many prominentenvironmentalists have realised the limitations and uneconomic cost ofrenewable sources, and the resulting need for nuclear power and largecoal power stations.

The increasing reliance on imported gas and the failure to replacethe ageing coal and nuclear power stations was accompanied by agrowing international concern about the possibility of climate changeresulting from growing emissions of carbon dioxide. This rapidly becamean international political issue, with British politicians seeking to leadthe emerging international efforts to reduce carbon dioxide, andresulting in the adoption of an ambitious programme to harness windpower. The Labour Government rejected the case for nuclear power out

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of hand, and sought every financial device they could find to serve theirhostility. They steadfastly refused to acknowledge that an intermittentsource of energy, such as wind, could not meet the need for a reliablesupply of electricity, since no method of large-scale storage is available.They recklessly poured subsidies into wind power, ensuring thatelectricity consumers would have to meet the subsidy of tens of billionsof pounds. I pointed out during one of the House of Lords debates thatthe total cost of replacing our present nuclear power stations could bemet by one half of the government’s estimated subsidy for wind powerup to the year 2020! This startling revelation fell on deaf ears.

To compound these grave errors, they ignored warnings that thegrowing dependence on imported gas brought with it an increasingdependence on countries with dubious political reliability and placed usat their mercy. The Russia/Ukraine disputes are a recurring illustrationof our vulnerability.

So, the muddling of governments since nationalisation in 1947,which reached a new and higher level under the last LabourGovernment, has brought us to a position where prolonged inter-ruptions are likely for some decades to come in the supply of electricitywhich is essential in today’s society for water supply, hospitals,communications, transport, industry, domestic consumers, and countlessother needs. What a pity that those responsible will have moved on bythen! They may perhaps draw some comfort from the likelihood thatsupply interruptions may be mitigated by the inevitable increase in fuelpoverty, reducing domestic demand, and also by the industrial recessionserving to limit industrial demand!

But the disaster of government meddling does not end there. Thereliance on cheap oil and the abandonment of the policy of diversesupplies of primary fuel has resulted in no large coal or nuclear powerstations being built in the past 20 years, with the result that theirreplacement is now an expensive but urgent need. It has also resultedin the loss of the related UK industries and their associated skills andemployment. This means that the large traditional stations which wenow have to build will have to come largely from overseas suppliers.


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The position I have described will inevitably result in hardship forthis country in the form of additional costs of unemployment, balanceof payments and reduced reliability of supply of electricity. The roots ofthis lie in the incompetence of politicians of all parties and theirmisplaced confidence in their ability to shape the future of a majorservice industry to fit the needs of the economy, coupled with adetermination to disregard the advice of experienced practitioners. Ihave described, at some length, the unhappy experience of privatisationof the electricity supply industry. We have seen similar cases in otherprivatisations, where billions of pounds have been wasted in the pursuitof political dreams.

The situation in the electricity supply industry continues to beone of ad hoc government intervention, with no strategic view of acomplex industry lacking a mechanism for strategic decisions. History isinstructive and may offer a solution.

A similar situation existed in 1926 when the Weir Committeereported on the organisation appropriate for a highly fragmented andrapidly growing industry. Their accepted recommendation was that astrategic overview should be provided by a permanent statutory body,the Electricity Commission, which served the country well untilnationalisation in 1947. So a solution is readily at hand if politicians canbe persuaded of the need for decisions (or lack of them) to arise fromexpert and long-term approaches to replace their diffident, incompetentand fluctuating interest.

I proposed this during the first of my annual debates in theHouse of Lords in 2002 and it was summarily dismissed on thegrounds that an adequate strategy existed – a pipe dream if ever therewas one! Perhaps recent and coming events will lead to a triumph ofmodesty over hubris! However, the House of Lords did succeed,against government opposition, in inserting into the Energy Bill astipulation that the Secretary of State has a responsibility formaintaining the security of electricity supply. The practical effect ofsuch a provision is not great, however, given the limited lives ofministers and governments when compared with the necessary planning

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horizon and the inevitability that those responsible will have moved onto other occupations.

But hubris has been a consistent part of government by bothparties since the end of the war. Disastrous developments resulted fromthe post-war programme of nationalisation, during which vast sums ofmoney which, had they been invested, might have improved theefficiency of those industries, found their way instead into supportingover-manning and weak, strike-ridden, managements. Attempts at theirprivatisation have produced a generally unhappy outcome, with only afew welcome exceptions. The reversal of nationalisation by privatisationall 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 practiceof democratic government. What a pity that politicians seem to forgetthat 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 tohow we might improve the obvious obstacles to closer cooperationbetween those groups. There have been a number of attempts totackle this problem over the years, with no notable success. But thecosts of present practices, and the rich rewards of any successfulmeasures, surely require us to recognise the problems and addressthem again.

Belatedly, towards the end of Gordon Brown’s administration,Labour ministers underwent a conversion to the real world and soughtto promote large nuclear and coal power stations in order to avoidpower interruptions. But the timescale of such developments meansthat the wasted years of DEFRA fantasies will ensure that powerinterruptions must be expected and that the cost of electricity will besubstantially higher than it need otherwise have been. The problemswill not be quickly solved and can be expected to persist for somedecades. They are likely to seriously impair the recovery of the UKfrom the current economic depression.


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My forecasts of a fragmented industry, lacking any coherentstrategy, have been fulfilled. It causes me great sadness to see how agreat and essential public service industry has been so seriously damagedby a mixture of neglect, incompetence and complacency. I earnestlyhope that an early opportunity will be taken to remedy the presentsituation. What is urgently needed is a statutory body responsible forrequiring and approving new investment in generating and transmissionplant. The body would deal only with strategy and would be technicallycompetent to produce and implement a long-term strategy. It would notconflict with the regulator, Ofgem, the object of which is to supervisetrading arrangements, essentially of a short-term nature although theremay be some advantages in combining the bodies.

It would have the following features, as did the ElectricityCommission before the war:

• it would be responsible for the issue of licences toconstruct new power stations and for specifying their type;

• it would be a permanent statutory and independent body,not subject to political opportunism, and charged withforming a policy which would outlive governments;

• it would be technically competent to frame and supervise anational strategy for long-term investment;

• it would ensure that the responsibility for long-termelectricity strategy was clearly identified, which is certainlynot the case at present.

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

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the Treasury and without any answerability to the Audit Commission orto Parliament. I doubt very much whether many of its actions to datewould have been accepted by a technically competent body.

It seems likely that such a proposal will prove attractive onlywhen past failures result in prolonged power supply interruptions, and‘lessons are learned’.

Renewable energy sources

I have referred to the unsatisfactory and expensive wind powerprogramme, and I will briefly examine the possible role of variouscompeting technologies, if only to dispel some of the myths widelypromulgated by their enthusiastic supporters.

The present programme for wind envisages a large and rapidprogramme for offshore wind arrays. I know of no reputable observerwho considers that the programme for this expansion is physicallypossible, but enthusiasts remain undaunted and we shall have to waitfor the truth to become apparent – no doubt incurring extra costs inthe process.

But I would like to look briefly at the general question ofrenewable energy and to examine some of the technologies which areattracting current research and development. First, we should note thatrenewable energy is diffuse, and of low intensity, so that very largeinstallations are required for its economic collection and conversion toelectricity 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 orearly pilot stages. The problems of commercial scale construction andoperation are not yet solved and so their economic competitiveness isnot known, apart from being more expensive than wind power!

Of the marine technologies, we have wave and tidal sourcesavailable. The first of these, wave power has been under developmentfor the past 40 years, and some small demonstrators have been built.


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The problems are the hostile marine environment – corrosive salt, hugewaves and high winds, transmission of the output to land, safety ofshipping and, of course, intermittency. Substantial amounts ofintermittent energy are available, but the scale required by economicconsiderations takes us well beyond existing experience. Severalingenious conversion devices are under small-scale development.

Tidal power is not new. A medium-scale project was built somedecades ago at La Rance, in France, and has operated satisfactorily. Ithas not been repeated. In the UK, there has been much interest in aSevern Barrage, and a number of detailed studies have been carried outover the past 30 years without making a satisfactory case – mainlyfailing on economic and environmental grounds. Interest in tidal powerhas now extended to the use of tidal streams, and several devices havebeen examined at small scale.

Another substantial resource lies in solar power. Intermittency isagain a problem, mainly because of night-time and location, anddevelopment has been on the use of the capture of heat (which caneasily be stored), and the generation of electricity. The capture of heatis now well established and offers a reasonably attractive economic caseover 40 years or so. Generation of electricity has proved less attractive.Here there are two candidates, photovoltaic cells and solar furnaces. Inthe first of these the sunlight is converted by photovoltaic cells into lowvoltage direct current, so that the cells have to be connected in arraysand their output converted to AC for transmission and use. Thedevelopment of the cells has received widespread research andinvestment, but the process remains uncompetitive by a substantialmargin.

The solar furnace employs an array of mirrors to concentrate thesun’s rays onto a boiler, converting water to steam. A largedemonstrator was constructed at Cadarache in France some decadesago, but has not been repeated.

On the whole, renewable energy sources remain unattractive oneconomic and intermittency grounds, although they continue tocommand substantial support from groups unhampered by such

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practical considerations. Research continues in all of the renewableenergy areas in the hope of incremental improvements.

The prospect of nuclear fusion continues to attract internationalsupport and investment in very expensive demonstrators designed todevelop and establish the technology. Some technical progress has beenachieved in the basic process, but its extension to commercialapplication still presents great challenges and its commercial viability isunknown. The timescale for commercial use will be many decades andits success may not be achieved at a commercial level.

The foregoing sketch of renewable technologies shows that theyare unlikely to solve the problem of carbon dioxide reduction whichclimate change predictions require. We will be forced to use establishedmethods coupled with improved efficiency of use and energy savings.These are likely to be supplemented by lifestyle changes resulting fromthe present economic blizzard.

A real danger, amply illustrated by the experience of the past twodecades, is that practical solutions will be sidelined by governments infavour of wishful thinking and having a woefully poor understanding ofphysical laws. The combination of environmental lobbies andprocrastinating politicians may continue to prove to be an expensiveone. In the present context of renewable energy sources, the situation ismade even more unsatisfactory than I have described by the initiativesof the European Union, whose politicians and staff appear to be evenless numerate than our own civil service, and who exhibit avulnerability to the environmental lobby but are not clearly accountableto the electorate.

The task of remedying the present situation and renewing agedgenerating plant will be long and expensive. The temptation to defer orignore the problem is likely to prove tempting to politicians, given theirpreoccupation with short-term electoral considerations. The problemhas been highlighted over the past 20 years with little practical effectand that possibility remains, although the issue will be one of ever-increasing practical urgency.


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CHAPTER 9

GOVERNMENT AND

INDUSTRY

The problems of government

The relationship between government and industry is a complex butimportant one. It is complex because of the large number of topicsrequiring decisions by government, of which industrial issues arecomparatively few. It is important because a strong industry providesemployment, tax revenues and balance of payments contributions.

My own experience of the relationship has been very mixed, and Ipropose to examine what seem to me to be the principal difficulties. Toaid this I have illustrated the argument by a case study, the nationalisationand privatisation of the electricity supply industry. That process has beendescribed in Chapter 8, and makes sorry reading, but I want to ask how itwent wrong and what can be done to avoid a repetition in the future.

The serious situation which exists now places the nation at risk ofsupply interruptions in gas supply from overseas. Responsibility for thissituation, which has been postponed by the current severe depression,arose from failures by both main parties when in power. The situationwill worsen as the recovery begins, and construction of replacementpower stations cannot be completed at the rate required because ofconstraints on planning consents, construction schedules, plantmanufacturing capacity and capital requirements.


The subject is a difficult one, embracing complex topics andpolitical considerations, and it is addressed by a system in whichtransient politicians are aided by a permanent, but deliberately amateur,civil service. So, in a general sense, the political aims of a policy are theconcern only of the politicians, who are aided, albeit inadequately, inmanagerial and administrative matters by civil servants. This soundsfine in theory but often fails in practice because ministers (and,occasionally, some civil servants) fail to recognise and observe theseparation of roles, a failing most noticeable since 1997. But, evenwhen the boundaries are observed, the system regularly fails and thefundamental reason for this is, I believe, the inability of both groups tounderstand the limitations of their intellectual approach in a highlytechnological age.

Few Parliamentarians have any experience of management, or anyscientific appreciation of today’s pressing problems. The situation hasgrown steadily worse in recent years, with a growing trend for new MPsto go from university straight into politics, with little or no intermediateexperience of employment achievements and little familiarity withscience; as a result, ministers find themselves increasingly dependentupon special political advisers, many of whom share their limitations.

The ability of the civil service to fill this gap is impaired by theabsence of technologically trained people in their senior ranks and bythe practice of moving civil servants every few years in support of astyle of management which continues to believe in generalism, in anincreasingly technologically demanding age.

I must make it clear that I would hate to see a civil servicedominated by technocrats; the issues to be addressed call for a muchbroader approach. But, in a personal survey over some years I foundthat of the top 40 posts in the civil service, not one was occupied by ascientist, engineer or accountant – professions which I selected asbroadly representing numeracy and the scientific method. Surely, someten to 15 such occupants would be more sensible! Unsurprisingly, othercountries take a more pragmatic approach – and they include ourpresent trading competitors and the newly industrialising countries.

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The essentially amateur approach of our civil service iscompounded by the composition of the House of Commons and theCabinet. For me, the most remarkable thing about Margaret Thatcheras Prime Minister was that she was the first (and still the only)scientifically trained person to hold that position in a nation whichproduced the Industrial Revolution and which is now struggling tomaintain its position in an increasingly technological and competitiveworld. She was familiar with the scientific method and the roles ofevidence and hypothesis in decision-making – alien considerations tomost of our MPs and civil servants. She was also highly numerate – asimilarly alien skill!

The problems of industry

Industry has a different set of problems. The first of these is theurgency of decisions in a competitive international market. While Rolls-Royce was nationalised, at least one product decision for whichgovernment approval was needed was delayed for more than four years,by which time overseas competitors had moved in and consolidatedtheir position. The lesson must be to rely less on government fordifficult industrial decisions and to encourage instead their role insetting a broad framework within which industry enjoys freedom ofmanagement comparable with that of their overseas competitors. Manyof the factors described have been present in both nationalisationsand privatisations and appear to be systemic in our governmentframework.

The second problem is that of over-reliance by industry ongovernment aid. The effect of government participation and itsinevitable lengthy delays must be spelt out without compromise andmade 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 ofthe government–industry dialogue.

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How are these problems confronted in politics?

The limitations of both politicians and civil servants are easilyrecognised, but they are made immensely more difficult by the widerange of issues to be dealt with, ranging from social issues to defence,from foreign relations to social security, from health to education. Therange would tax anyone, and is much broader than that facing industry.It is therefore unsurprising that politicians seek to develop a strategicvision which permits a general approach to highly disparate problems.

Herein lies a fundamental flaw. General aims, such as centralisedversus devolved control, may not fit all problems satisfactorily, and mustbe subject to some careful examination by the users. In principle, thisshould lie within the competence of the civil servants, but criticism ofthe suitability of the desired solution, even if available, may not bereadily accepted by the minister involved. The case study which I amusing for this chapter has been described in some detail in Chapter 8,where it is obviously the case that successive ministers were trapped bytheir rigid adherence to differing models – centralised control in thecase of Tony Benn, and diversified management in the cases of DavidHowell and Nigel Lawson. I believe that all were wrong, and thecorrect solution was unacceptable to each group for differing reasons.The civil service, meanwhile, loyally accepted the contradictory policiesof successive governments.

We might pause at this juncture to ask what experience thepoliticians involved had of managing such a large and technicallydemanding solution as that required for the electricity supply industry.The answer is depressingly simple – none. But that did not preventthem from pursuing a course based on their cherished simplification ofall problems they were called on to examine – I deliberately avoid theword ‘solve’.

Ministers with real management experience, now increasinglyrare, have little difficulty in recognising the fallacy of a uniformapproach to all problems and show a readiness to examine thesuitability of the ‘party’ model to the circumstances. Somehow, any

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proposed solution to our present deficiencies must embrace a morepragmatic approach than is currently favoured.

The situation is made even more intractable by the short spell ina post held by most ministers, coupled with the ambition of successiveministers to leave behind a legacy of some kind. The resulting frequentchanges in policy are often very expensive, muddled and retrograde.

In my experience in the public and private sectors, constantdabbling from policy level is gravely demoralising and confusing,especially so when it is undertaken in pursuit of a dimly recognisedobjective, independent of product or market.

At least two changes would be helpful at the political level. Thefirst is some regard for numeracy and the second a resolve to use thecore policy of the politician’s party as a guide rather than a straitjacket.Both of these would require the unusual approach of appointingministers with some independence of thought and action, prepared tolook at the real considerations required for a satisfactory solution.

I am afraid that the limitations of our political system wouldprobably render these proposals unattainable in practice so that we mayhave to rely on a more effective civil service putting the arguments to aminister possessing a reasonably open mind and not driven by personalambition.

How can the civil service be made more effective?

The shortcomings of the civil service are, in my view, enshrined in itsrecruitment policy and its general approach to the analysis ofproblems. The roots of today’s civil service lie in its formation on aprofessional basis following a report on ‘The Organisation of thePermanent Civil Service’ by Sir Stafford Northcote and Sir CharlesTrevelyan in 1854. Prior to this, appointments had been made on ahighly variable basis by individual ministers. The report advocated acompetitive examination for all entrants and did not advocate externalrecruitment. The report, consisting of 15 volumes, attracted a wide


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variety of interest and comment. One letter from the Reverend B.Jowett, Fellow and Tutor of Balliol College, recommended thatentrance examinations should be organised in four schools: (1)classical literature, (2) mathematics with practical applications andnatural sciences, (3) political economy, law and moral philosophy and(4) modern languages, modern history and international law. This wasa commendable attempt to introduce a professional service with someapplicable specialist knowledge.

The adoption of the report was a huge step forward in seeking toaddress the growing complexity and specialisms of the day, and laid thefoundations of the present-day civil service which has served thecountry well within its limitations and attracted much admiration fromoverseas governments. But it has gradually distanced itself from theoriginal ambitions. Specialisation has been largely abandoned in favourof a carefully cultivated generalism. The possession of ‘a good mind’has eclipsed the value of specific knowledge in depth – and this duringa period when problems have multiplied and enlarged in almost everysphere of government and involve growing technical demands in anincreasingly technological world. The desire for generalism is todayexacerbated by regular transfer of promising civil servants so that theycannot become ‘impaired’ by too much familiarity with the nuts andbolts of problem areas which might affect their generalism.

As it is, the deficiencies of the politicians which I have describedare reinforced by the generalist approach of their professional advisers.C.P. Snow’s description of the two cultures (humanities and science) isenshrined in the thinking of today’s civil service in a way which offerslittle support to efficient government in a complex society.

The problem is not simply one of the narrow qualifications of themost senior civil servants, although that is serious enough in itself.Rather the problem is the pressing need to change the distantintellectual bias of senior civil servants, and that requires an unreservedacceptance by them that the numerate and scientific disciplines are notexcluded from the top levels of management but need, rather, to beembraced by all of them.

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Much energy has been expended by senior civil servants over pastdecades in seeking a solution to these problems. One such importantstep was the introduction of cash limits as an admittedly crude deviceto control the operation of nationalised industries.

In the case of the electricity supply industry, of which I waschairman at the time, it was singularly inappropriate, as I had thepleasure of pointing out to a group of Cabinet ministers and senior civilservants.

Cash limits sought to set a figure for the cash balance of theindustry on 31 March, the end of the financial year. It was thus setabout a year earlier. I pointed out that in the case of the electricityindustry, the cash performance depends largely upon the weather of theintervening winter, since bills are necessarily paid up to four monthsafter the energy has been used. A hard winter means high sales,resulting in good profits but low cash receipts. Conversely, a mildwinter reduces profits but lower consumer arrears and better cash flow.This simple relationship governs the cash performance of the industryin relation to the cash target set a year earlier, since the weatherforecasts available cannot predict weather a year ahead, and theweather variations are large in comparison with the cash targets set.

This was an example of a measure quite suitable for someindustries proving quite unsuitable for others. A seemingly good ideafoundered on its general application to widely differing industries. Ihave to add that, while the situation was eventually recognised byministers and civil servants, the practice remained unaltered, withsterile and repetitive discussions at the end of each financial year.

Another example of civil servants’ desire to exercise some controlwithout the requisite background knowledge lay in the requirement forfive-year strategic plans for each industry, produced annually. The detailinvolved was great, and the required document proved to be of littlepractical use to the industry. But the most annoying feature of thisrequirement was that, over a period of ten years of my experience,neither ministers nor civil servants showed any interest at all indiscussing the sizeable documents submitted.


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Another facet of relations between government and industryemerged in the course of the periodic meetings I enjoyed with ministersand senior civil servants. I discovered that, although we regularly sent acopy 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 apractice, at the beginning of meetings, of saying ‘Secretary of State, weare going to discuss an important issue, to which my colleagues and Iwish to give our undivided attention. Can we therefore have a copy ofthe departmental note of the meeting?’ Invariably, this led to amuttered discussion between the Secretary of State and the PermanentSecretary, which resulted in an acceptance of the request ‘on thisoccasion and without precedent’. This became a ritual and greatlysimplified matters – at least from our standpoint!

My comments on the civil service have been generally critical andI would not wish to suggest that the ones with whom I dealt over manyyears were anything other than highly conscientious, able and diligent.They found themselves prisoners of the tradition of generalism and alack of knowledge of the problems presented to them. Most welcomedan 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 thecivil service, I have so far dwelt on unsatisfactory attempts andpractices. I would now like to offer some suggestions of my own formore general discussion, recognising that I may be falling into the trapof generalising failures in specific instances to markedly differingsituations.

1. The selection and promotion processes for civil servantsshould take direct account of the educational backgroundand experience of individuals, with an attempt toencourage an approach to specific problem-solving. Thiscould usefully include the recruitment and promotion ofscientists, engineers and accountants throughout theservice.

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2. The intellectual tradition of the service should be adaptedto provide more rigorous and practical analysis, bearing inmind the inevitable shortcomings of ministers, which Ihave described earlier.

3. A number of appointments, at all levels, should be madefrom industry, on a permanent or short-term basis. Thecareer path of promising civil servants should mandatorilyinclude secondments of three years or more to anappropriate company.

4. Time spent in individual posts in the service should belong enough for the contribution (and responsibility) ofthe individual to be recognised – and appropriatelyrewarded. The practice of rapid transfer, where no one isresponsible for failures, is unacceptable.

5. The desire for secrecy should be abandoned, except inhighly exceptional circumstances where the OfficialSecrets Act applies and can be used in court. The judicialoverseeing of that Act should provide adequate protectionfor government and nation. The exposure, andacknowledgement, of administrative errors should be seenas a desirable route to administrative efficiency. Civilservants are, literally, the servants of the government – butalso of the public.

6. The greatest peril for an efficient enterprise is a largeadministrative structure. Northcote Parkinson pointed outsome years ago that ‘work expands to fill the capacityavailable’, and the inevitable results of an overmannedbureaucracy are an abundance of committees and badcommunications. Both are all too visible in today’s civilservice and were encouraged by the actions of the LabourGovernment from 1997, since when the staffing levels ofthe civil service have risen by almost a million.

Reduction of present levels will not only achievesubstantial cash savings, they will also improve decision-


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making and reduce long delays. The cherished notion thatproblems can only be solved by more supervision is a grossand wasteful fantasy which requires early correction.

How can politicians be made more effective?

A growing proportion of new MPs enter Parliament without anyexperience of the world outside politics, often going directly fromuniversity to a job such as research assistant to a politician. Thisinevitably restricts their capacity to understand the problems withwhich they are confronted and the practicalities of their proposedsolution.

Their resulting inadequacy is compounded by the growingpractice of Cabinet decisions being taken and enforced by the whipswithout debate in the Commons chamber. In fact, the House of Lordsis often the only forum for close examination of proposed, and oftendefective, legislation – and this despite the fact that it is non-elected.Partly as a result of these factors, and the volume of inadequatelegislation which results, the standing of politicians is worryingly low, asevidenced 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 manypoliticians, who appear to believe that political survival trumps anydesire for truth or admission of failure. Politics has become an end initself, disregarding the public which politicians exist to serve.

This, taken with the earlier points of lack of experience, creates aserious gap between political ambitions and electorate expectationswhich inevitably challenges any notion of democracy.

This danger has been recognised by political leaders in the pastand is in urgent need of attention today. It can only be solved by thepolitical leaders of the day recognising their limitations andresponsibilities. To make Parliamentary democracy effective there mustbe less legislation, and that properly scrutinised, less concern with spin

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and a recognition of the fact that politicians are servants of theelectorate – 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 improvethe quality of MPs and the Cabinet. I am a cross-bencher in the Houseof Lords simply, because, like others, I do not believe any party to beinfallible – a conclusion based upon experience and, I think, illustratedby the decisions made on the organisation of the electricity supplyindustry, but by no means confined to that example. My suggestions donot rest on any political bias and are intended to focus attention on thepresent situation in which our legislators are increasingly distancedfrom the problems of the nation and their effective solution.

As earlier in the case of the civil service, I will advance somesuggestions 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 isdesirable;

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 introducinglegislation.

These, and the earlier suggestions on civil servants, are not intended tobe in any sense prescriptive. I simply don’t have the experience to


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propose that. But government is in a mess, as I have shown, and isgetting worse. There is a need for a radical reappraisal of its role, and itmay be that a Royal Commission would be an appropriate tool,provided that its membership was not confined to politicians! Eventssurely show the need for a more effective government process, aboutwhich much has been said and written over the years. My plea is for adetermined examination of weaknesses and a resolve to accept andintroduce purposeful changes.

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CHAPTER 10

SOME INTERESTING

BYWAYS

The title of this chapter is not meant to demote its contents to thestatus of ‘also-rans’. Rather, it seeks to describe activities, not in themainstream of my career, which provided interest, and experience ofgreat 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 hadknown Lord Victor Rothschild, chairman of the bank, through myassociation with the Cabinet think tank which he led, and its interest innuclear power. Following the announcement in October 1980 of myresignation from chairmanship of the Electricity Council, he telephonedto ask me to lunch, at which he was accompanied by Mr (later Sir)Evelyn de Rothschild, then chief executive of the bank. Victor greetedme with the words ‘My boy, I’m very pleased with you. Not enoughpeople tell Governments to get stuffed. Will you join our board?’

So began a rewarding association with a merchant bank of greatstanding, from which I was to learn much of the operations of the Cityin all of its activities, an experience of inestimable value to me in later


years. I received a great deal of help and tuition from the corporatefinance, banking, asset management and bullion departments of thebank, 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 ofsubjects, to some of which I was able to contribute. The number ofthose increased with time and growing familiarity with the interfacebetween the bank’s activities and industry. The monthly boardmeetings were also educative, and after a few years I was asked tobecome chairman of the bank’s internal audit committee, when thegradient of the learning curve steepened markedly! Evelyn deRothschild, now chairman of the bank, attended these meetings andwas very supportive. Non-executive directors were often consultedsingly, or in small groups, on matters of policy, the most notable beingthe challenge offered by the ‘Big Bang’, when traditional barriersbetween various activities of the City were breached in a variety ofways, combining hitherto specialised activities such as stockbroking,corporate finance and banking in what came to be known as ‘the onestop shop’. N.M. Rothschild wisely elected to remain outside thistrend and I recall saying that I was sure that many industrialists wouldwelcome that decision. NMR remains a formidable player in corporatefinance and other activities and dipped its toe (very profitably) in thenew waters by acquiring a leading stockbroker, which it later sold at asatisfying price.

Among the people with whom I formed especially close relationswas Peter Byrom, a director in the corporate finance department. Hehad a lively, inventive mind coupled with a clear sense of ethics – a rarecombination in those days. His advice was of great value in my earlydays at Weirs and I insisted on his handling the Turner & Newallaccount when that was awarded to Rothschild. He later also handledthe Rolls-Royce privatisation.

I learned much and gained many friends during my 14 years atthe bank, from which I retired at the age of 70, despite suggestions thatI should continue.

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One amusing occasion arose when Victor Rothschild and Iembarked on an undeclared competition of writing each otherprogressively shorter memos. (He was well-known for his passion forsuccinctness, and maintained that any proposal could be adequatelydealt with on one side of a quarto sheet.) Eventually, I sent him amemo reading ‘Lord Rothschild, Yes.’ He came into my office, wavingmy memo above his head and beaming broadly. ‘“No” would have beenshorter’, he said, triumphantly!

Shell (UK) Ltd

Shortly after my retirement from the electricity supply industry I wasasked, in 1981, by John Raisman, chairman of Shell (UK) to join hisboard as a non-executive director. The company was a wholly ownedsubsidiary of Royal Dutch Shell, but enjoyed some degree of autonomy,notably in the North Sea, where exploration for oil and gas wasgathering speed at that time. I accepted, and a few weeks later wasasked if I would like to join the board of Exxon in the USA. I decidedto remain with Shell, rather than endure regular Transatlantic trips, andI enjoyed my 14 years’ subsequent service.

After a few months, I found that the board was little more than atalking shop, where directors were informed of decisions, but nobriefing or discussion took place. I went to see John Raisman andexpressed the view that he was failing to use the non-executivesproperly and so missing a great deal of potentially valuable advice. Iadded that I would not wish to remain a director unless thingsimproved. He responded positively, and the board meetings becamemore interesting and constructive – a situation which continued for my14 years of service and which occasioned favourable comment from theShell-UK executives and visiting Dutch representatives.

During one period of my service there was a very active interestin acquisitions, with the nominal idea of diversification. This was a localinitiative and so was severely restricted in scope. The resulting

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acquisitions were small and disconnected, so that the idea ofdiversification was unrealistic. I spent some fruitless meetings trying topoint this out, without success, but felt justified when the acquisitionsportfolio was liquidated at a significant loss!

The exploration arm of the business was fascinating and Igreatly enjoyed the involvement in exploration and production. Thechemicals and refining businesses were active and interesting, too,and my colleagues and I could realistically claim to make usefulcontributions as time went by and the standard of both board papersand our own contributions improved. I retired at the age of 70, aswith my Rothschild directorship, having made many friends andacquired an interesting insight into another long-range energybusiness.

Scientific research

I was interested in the reliance of much of industry and engineering onscientific research and was invited to join several government fundingbodies, including the Science & Engineering Research Council and theAdvisory Board for Research Councils. The first of these coveredresearch in science and engineering at universities and centrallaboratories; the second supervised the activities of all four researchcouncils. I found the work interesting and stimulating, and gained somelight relief from observing the academic rivalry for funds.

The most interesting of the advisory posts I ever held was that ofchairman of the Advisory Committee on Applied Research andDevelopment (ACARD) and its successor, the Advisory Committee forScience and Technology (ACOST). Both required me to report to thePrime Minister, Mrs (later Baroness) Thatcher, an experience which Iwould not have missed for worlds. With her background of chemistry atOxford, she had a ready understanding of scientific issues and a greatinterest in the role of science in industry, society and government. Ourmeetings always ran over the allotted time, with the typical remark to

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her staff, drawing attention to her next meeting – ‘Go away, I’menjoying myself.’

On one such occasion she asked whether she could attend ameeting of ACOST. I replied that she would be very welcome andasked whether she would like to take the chair. She replied that thatwas a matter for me, as chairman of the Council. I remember sayingthat I found it difficult to imagine her attending a meeting at whichshe was not in the chair. Somewhat taken aback, she accepted andchaired a very lively meeting, made so by her attempts to stimulatediscussion. After one particularly provocative comment, she turned tome, put her hand on my arm, and said ‘Don’t say a word until youhave cooled down!’ That had the desired effect in lightening theatmosphere!

On another occasion she asked whether she could meet sometalented young researchers, and offered to set aside a whole day atNumber 10 for this purpose. I asked which areas of science shewould like to cover and was rewarded with the typical reply,‘Everything!’ With the aid of Sir David Phillips (later Lord Phillips ofEllesmere, now unfortunately deceased) I arranged for about a dozenyoung scientists from a very wide range of disciplines, to makepresentations, each lasting about 20 minutes, and to answerquestions.

True to her word, Mrs Thatcher devoted a whole day to them andasked a lot of very good questions. The atmosphere was one of greatenthusiasm and goodwill and the PM obviously enjoyed it greatly. Atone point, one of the presenters asked me where else in the world aPrime Minister would show such a personal and lively interest in thework being done by young scientists.

The day was a fascinating one in many respects and was attendedby several Cabinet ministers. I was sitting next to Nicholas Ridley who,turned to me after one presentation and remarked ‘Well, I’m sure thatwas very interesting but I didn’t understand a b——y word!’. I imaginethat his subsequent account of the meeting to his departmental chiefscientist must have been quite entertaining!


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The Engineering Council

The organisation of professional engineers in the UK is carried out bysome 40 separate institutions, each based upon the individual disciplinerepresented. The principal ones are those for civil, mechanical,electrical and chemical engineering but that does not in any waydiminish the importance of the others, each representing a specialisedarea. Each institution provides conferences and publications in its areaand also takes a leading part in the academic training of its members.But it does give the impression to outsiders of an unwieldyconglomeration of disparate organisations, overlooking the fact that asimilar pattern exists in, for example, medicine and the physicalsciences.

I was president of the largest of the engineering institutions, theInstitution of Electrical Engineers in 1981, when there was agovernment-inspired debate on the structure of the engineeringprofession. Sir Monty Finniston, a metallurgist, had headed acommittee to examine the issue and recommended the formation of anEngineering Council to consolidate the situation by replacing themultiple separate institutions. I was not enthusiastic about hisapproach, perhaps because I had seen the strengths of the institutionsat close hand, and similar views were quite widely held in theinstitutions, large and small.

The Engineering Council was formed in 1982. Its first chairmanwas Sir Kenneth Corfield, an old schoolfriend, who was then alsochairman of STC plc – Standard Telephones and Cables. He wassympathetic to the cause of consolidation of the institutions and hadlittle sympathy with the status quo. At the end of his statutory threeyears, I was asked to succeed him. I have generally preferred evolutionto revolution and proceeded, in a more conciliatory way, throughregular meetings with the presidents of the major institutions. I tookthe view that driven consolidation would only produce a largeinstitution with many specialised divisions, and that we might exchangethe present multiplicity for a consolidation more apparent than real.

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

The Royal Academy of Engineering

At the same time as the discussions about the organisation of theengineering profession, some eminent engineers were discussing theformation of an engineering academy of distinguished engineers. Thiswas not seen as a rival or intruder on the territory of the establishedengineering institutions, but rather as a body of engineers of alldisciplines who would be capable of offering authoritative opinions andadvice on engineering matters of policy and interest.

The discussions led to a proposal for a Fellowship of Engineeringto which members, already members of a chartered engineeringinstitution, would be elected on the basis of distinction in their field. Tobegin the process, 60 engineers were invited to become fellows in eachof the first two years, with an annual intake of elected members tofollow. Membership would be on the basis of nominations and election.Its first President was Lord Hinton, a towering figure who performedengineering wonders in creating the nuclear industry which has served


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the country well for 60 years and is now undergoing a long-delayedrenaissance.

I was invited to become a Fellow in the second year, 1977, and sobecame a founder member of the Fellowship and partook in its firsthesitant steps towards its present prominent and influential role as avice-president and chairman of various committees. The Fellowshiplater became the Royal Academy of Engineering, with the enthusiasticsupport of its senior Fellow, HRH Prince Philip, whose interest hasnever flagged and whose contribution has been enormous. Today, itsopinions carry great weight at national policy level and are sought bygovernment and others as a matter of course. Its progress has beenwidely supported and welcomed by business, politicians, engineers andtheir institutions and it is difficult to imagine how we managed withoutsuch a body.

The Goldberg Ensemble

While I was at Turner & Newall I had regular contact with thecompany’s medical consultant, Dr Rhys Williams. He invited me to aconcert given at the Wigmore Hall by a small chamber orchestra, theGoldberg Ensemble. This was directed by Malcolm Layfield, a well-known violinist, and consisted of young musicians hand-picked by himfor their ability. They rehearsed intensively, and produced a beautifulsound and almost uncanny precision of playing. I was very impressedand subsequently developed my interest in their work. I was laterinvited to become their Patron (in about 1985) and remain so, thoughnot very actively in recent times when their activities have included anincreased amount of contemporary music.

I took a considerable interest in their programming and suggestedthat they should make the first item after the interval an ‘atmospheric’one, featuring their lovely string tone and offering some relaxationbefore the main work of the second part of the concert. This provedhighly successful, and featured works by Barber, Tchaikovsky, Puccini,

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Helen Glass and many others. The practice has been copied by otherchamber orchestras, as has the playing in that slot of the sextet fromStrauss’s ‘Capriccio’, which the Goldberg players had neverencountered, but which my wife and I loved. The opera asks which isthe more important in opera, the words or the music, and was a firmfavourite of ours.

Rolls-Royce sponsored a series of six concerts by the GoldbergEnsemble annually for about 15 years, and they were greatlyappreciated by invited company staff and advisers, subcontractors,financial advisers, local government and others. They also developed anenthusiastic public audience. This sponsorship linked support of thearts with publicity and public relations in a highly effective way which Ibelieve could be more widely used by companies.

The Association of British Orchestras

In 1982 I was approached by John May, the secretary of the Associationof British Orchestras with an invitation to become their chairman. TheAssociation represented all of the professional orchestras in the UK,dealing mainly with the Musicians’ Union, on terms and conditions ofemployment, and the Arts Council, on matters of funding.

I asked why they wanted me, and was told it was partly becausethey knew of my love of music but also because the orchestras didn’twant a member to represent them on such sensitive matters and sopreferred an independent chairman. I replied that I thought that theyshould be capable of selecting one of their number as their chairmanand that my acceptance of the post for a four-year term would bedirected to that end. John May continued as secretary for a time andwas then succeeded by a highly capable young woman, Charlotte Ash.

The arts world is densely populated with highly competentyoungsters and Charlotte worked very hard at extending expertise inthe fields of marketing and community involvement – activities whichbore early fruit and continue today.


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I had an enjoyable four years, meeting many interesting peopleand hearing a lot of good music, and at the end of my term I declaredmy intention to stand down and suggested Clive Smart, the wellrespected and popular managing director of the Hallé Orchestra. Hewas elected as chairman with acclaim, and the post has continued to befilled by an orchestral representative, to the undoubted benefit of a fineorganisation which has made great strides in an always difficult financialenvironment.

University posts

In 1985 I was invited to become chairman of the Council of CranfieldInstitute of Technology, a post which I held until 1992. During thatperiod we acquired the agricultural research organisation at Silsoe andthe management contract for government defence research atShrivenham. Cranfield was wholly devoted to post-graduate trainingand research and had acquired a considerable international reputation.Its tradition lay in aeronautics, but it diversified into a broaderindustrial engineering base, where it continues to serve industry in ahighly collaborative manner which was well ahead of its time. ProfessorPat 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 onhis retirement. We appointed as his successor Frank Hartley, adistinguished chemist, who served the Institute well and saw itsconversion into Cranfield University, gaining a strong undergraduatepresence, but retaining strong post-graduate research and teachingactivities.

I found the work at Cranfield very rewarding in dealing with awide range of activities and opportunities and was sorry to leave in1992, when I was invited to become Chancellor of StrathclydeUniversity, in Glasgow.

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This was a very different post. The first Chancellor of theUniversity was Lord Alex Todd, Professor of Organic Chemistry atCambridge University and a Nobel prize winner. He was President ofthe Royal Society and a proud Glaswegian. He attended the principalevents at Strathclyde, but his busy international activities and distancefrom Glasgow limited his involvement, a not unusual situation. So thetradition had led to the visit of the Chancellor being an occasionalevent. This in no way diminished the mutual affection of Todd and theUniversity, and the Student Bar today rejoices in the name of ‘TheLord Todd’, to mutual delight.

I set out with the intention of being quite an active Chancellor ina post with few specified duties and found that even those had beenperformed by others over a period of more than 25 years. I asserted myintention of carrying out those myself and extended the number ofdegree convocations at which I presided to six or seven annually.Beyond that I was able to help in several ways, such as meetings withindustrialists, opening conferences, speaking at faculty meetings anddinners, but the bulk of my activities were formal or ceremonial, andoften repetitious.

There was a superb ethos in the University, which trained moreengineers than any other UK university – and to a standard highlyvalued by employers. The institution roots went back to John Andersonin 1796 when he founded an Institute dedicated to ‘useful learning’.The successor institutions have carried that aim proudly to the presentday, and continue to do so without compromising its establishedacademic standards. The immediate predecessor of the University wasthe Royal College, Royal status having been conferred by HM KingGeorge V following a visit to India, where he was greatly impressed bythe number and quality of Strathclyde graduates. From then until itsgrant of University status it was a client of the University GrantsCommittee and a university in all but name.

It was a stimulating experience to be its Chancellor and to beable to visit the many departments and engage in interesting andenthusiastic discussions with staff on a wide range of topics. But in


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1999 I decided that the burden of travelling was becoming too much,and resigned from an appointment which was nominally for life, to besucceeded by an eminent judge, Lord Hope, who has the addedadvantage 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 majordiscontinuities and some substantial successes.

In so far as I had any central plan or ambition, it was to rectifythe absurdities of the Herbert Report, which led to the Electricity Actof 1957 and separated the generation of electricity in England andWales from its distribution and sale. That such a step should havebeen taken for an industry which cannot store its product, and so hasno stocks, beggars rational belief, and for long obstructed theefficient management of the industry. In this aim, I failed. As we haveseen, the problems persist today and await urgent solution bypoliticians.

I am a cross-bencher in the House of Lords and remainsteadfastly unattached to any political party, having witnessed at closehand the self-imposed handicaps under which they all labour. Mysuccesses have been largely as a result of disregarding the wishes ofpoliticians when, as so often, they almost guarantee unintended andunwelcome failure.

I have been fortunate in having had a highly varied and enjoyablecareer. As one door closed, another opened, sometimes in a totallyunexpected way. I have been able to influence events at a national leveland have been confronted with a wide range of engineering problems.The pace has sometimes been quite demanding, but never withoutchallenge and satisfaction.

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Most of these issues have been illustrated by specific examples inthe course of earlier chapters, but I propose now to venture on to amore general examination of the manifest deficiencies in industrialmanagement and politics which hamper the development of this greatcountry. It is a personal view and strays into the hazardous area ofprediction in fields which are not my main source of experience andfamiliarity. I do so only because the problems are there and areformidable; but I hope that the breadth of my experience will enableme to make some useful observations – and, yes, predictions.

The first of these problems concerns industrial management. Formany years, promotion to the board of a company has been seen asnecessarily involving separation from the workforce. There is awidespread and undesirable belief in many cases that boardmembership is a highly privileged position, involving high salaries and aplethora of ‘perks’ not available to the ordinary employees.

I have spent many years as a director or chairman of largecompanies, and never lost sight of the fact that I remained an employeeof each company in exactly the same way as the machine shop foremanand operators. This is constitutionally the case, of course, and any goodmanager at any level knows how much he depends on those for whomhe is responsible – and that relationship cannot end with elevation tothe board.

But it does become more difficult as more intermediate levels ofstaff are interposed.

I tackled this problem by making a practice of visiting plants andsites and walking round, stopping to talk to individual employees. Ieschewed any escort by local management and made a point ofsummarising what I had learned to the local manager and never gaveinstructions or reached conclusions during the visits. I learned a greatdeal during those occasions and followed up discoveries with localmanagement later.

I also discussed management problems and aims with localmanagers in an informal way, and followed up any concerns they had.My intention in doing so was to create an ethos in which individual

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efforts could be seen to be important to the company and in which thegeneral strategy was relevant to all.

Importantly, I arranged for non-executive directors and professionaladvisers to make similar visits to plants and to discuss matters with localmanagement, thus reinforcing my own visits. Of course, this requiresconfidence 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. Italso improved the contribution of non-executive directors and advisers.

This brings me to the importance of delegation and itsdifficulties, which are sometimes used to avoid its practice – to thedisadvantage of all. There are two major and quite serious difficultiesfor a delegating manager. First, the delegatee will make mistakes whichwould 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 donedifferently, and sometimes better, than hitherto. This should be a causefor rejoicing, not envy or incredulity.

I believe that at every level, in every organisation, there is a needto feel observed and appreciated, and this involves reciprocal respectfor one’s superiors and a feeling that they know what they expect andcan demonstrate that in practice. This places great reliance onexperience and is the death knell for amateur managers whosepromotion has often been built on management theory or, even worse,favouritism. As the reader will have found, my own career has beenstudded with examples of incompetent managers, who were separatedby lack of experience from the reality of the job.

Much has been written about management, but the foregoing, formy money, sums it up: where employees are members of a team inwhich everyone cares about the product and its market, where everyindividual is valued and respected, and where one’s performance canbe 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 matterswere beneath their notice, and a chasm developed between topmanagement and the ‘others’. That is a mistake which is not visible in

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successful companies, where job satisfaction and teamwork areparamount. Their active preservation rests progressively on senior levelsof management and is ill-served by conscious isolation at top level.

Many politicians, and others, have suggested that really goodmanagement can only come from the cooperation of management andworkers. Tony Benn took this notion even further by advocating tri-partite management, involving company management, trade unions andGovernment. This is nonsensical, for it distributes responsibility in away destined to fragment the true basis of a cohesive effort which Ihave described and have always tried to practise. Most employees wantto know how the company is performing, but have no ambitions toshare management’s responsibility – quite rightly, they expect allemployees to do their own job well.

The future – a different economic climate

The economic climate has changed internationally and dramatically forthe worse, since I began to write this book – and mostly following itssubstantial completion. The need to replace ageing power stationsremains, but is complicated by the inevitable squeeze on capitalspending and by the effect of the recession on electrical load growth.The effects of the major collapse of the banking system have been sofar, and to a large extent, concealed by the measures taken to avert acomplete collapse of the financial system on which we rely for nationaland international trade. The euphemistically named ‘quantitativeeasing’, which really means increasing national indebtedness by printinghuge quantities of money, has served to allow a pretence that we are onthe road to recovery. In fact we are vastly more indebted than we werewhen the crisis occurred, and the road to recovery has been madelonger and more painful by the form of the intervention, necessarilyexperimental in its character.

In the case of Western democracies, and particularly in the UK,the situation has been further complicated by political and electoral

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considerations. This has resulted in politicians concealing the size of theproblem and avoiding the inevitably painful measures which will benecessary to restore even the possibility of an orderly recovery. Thedebts we have accumulated in allowing the crisis to occur, plus thosearising from the response to date, have created a need for borrowing ona scale hitherto unknown. As part of the pretence that we can see asolution and its timescale, to which all countries and their governmentsand central banks are parties, we have delayed taking the essentialcorrective measures and so increased the problem.

The financial crisis

In the UK, as in other Western industrialised countries, those correctivemeasures will have to include dramatic reductions in public spendingon projects and on people, increased taxation and a continuing highlevel of borrowing with its associated interest charges. Since allcountries are in this situation the level of borrowing will be huge andlenders will react in two ways. First, they will pick and choose theirdebtors on the basis of credit-worthiness, and second, they will requireinterest rates to reflect total demand and their assessment of theprospects of recovery of the borrowers.

At the time of writing, the UK Labour government showed littlesign of understanding this. Indeed, saddled with enormous debts and aworld recession, they continued spending and borrowing at an alarmingrate. They should have heeded the warning given by a former LabourChancellor, Denis (later Lord) Healey who said: ‘If you find yourself ina hole – stop digging.’ Since he suffered the indignity of an IMF rescuefrom a difficult financial situation, imposing demanding conditions, heshould be heeded. The Coalition government have shown encouragingsigns of grasping the nettle of the deficit burden and the need for earlyaction to reduce the both deficit and public spending. This shows awelcome determination to live within our means and to restore ourinternational credit-worthiness.

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The prolonged shortage of available finance will present difficultand unpopular choices. Projects which are cherished will have to beabandoned or, at best, postponed indefinitely. Two problems, discussedin previous chapters of this book, are the forthcoming shortage ofelectricity and the development of renewable energy sources; of these,the shortage of power is by far the more important. The high relativecost of renewable energy and its intermittent contribution makes it aluxury we can ill afford and one which should be abandoned as quicklyas possible in the new regime of austerity. There are more effective andcost effective ways of reducing carbon emissions.

Such a course will be unwelcome to some, but will be takenalongside other unpalatable decisions on cutbacks in defenceexpenditure, education, health, social benefits and many other areas.Their common result will be increased unemployment and a reductionin the services which form an important part of everyday life.

Undoubtedly, life will become very hard for many and we, andmost other countries, have to blame the ‘borrow and spend now’ culturewhich has afflicted personal and government spending for the past twodecades. The acceptance of this by politicians and individuals asindicating the end of ‘boom and bust’ can now be seen as grosslyignorant and irresponsible. The crisis we face is without precedent andits worldwide nature serves to make it less tractable for any one country.

Competition for borrowings will drive up interest rates and makeremedial measures all the more difficult as inflation re-emerges, forcingprices up and reducing international competitiveness. Democracy willfind this situation difficult to accept and will be severely tested.

I take no pleasure at all in predicting this daunting scenario, butthe facts are all too supportive of its inevitability. Recognition of thefacts will only emerge in the UK when the government is faced with afull electoral general term in which to address the problems.

The European Union will, of course, have problems arising fromits constitution and monetary organisation and, in that area at least, theUK will have a comparative advantage in that we are not members ofthe euro currency zone. At present our restricted participation in

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Europe nevertheless involves a considerable annual cost for which it isdifficult to perceive a case in stringent times. It may well prove anextravagant luxury.

The transition from here

Some will regard this whole scenario as dire, but there is a sense for methat life has come full circle. I grew up in a 1920s and 1930s world ofhigh unemployment, where individual self-reliance was the order of theday for many, radio had barely arrived, television was a distant promise,holidays were for the few and Beveridge had never been heard of. Classdistinction was well established and largely accepted, universityeducation was a privilege, pension schemes were for the few and earlyretirement was unheard of. The Second World War was on the horizon,with Nazi Germany making the headlines, and memories of the GreatWar were still very much alive in the public mind.

Since then, the welfare state and the consumer society havedeveloped apace and credit cards have aided in the development of adebt-ridden society, living on credit made readily available by recklessfinancial institutions under the complacent eyes of politicians of all parties.

In the 1920s and 1930s, debt was a danger to be avoided, andhabitual borrowing a sure road to ruin. Perhaps we are going to see aswing of the economic pendulum which will restore some of thoseearlier habits and values. Perhaps, too, we will see a fairer distributionof world wealth, as the developing countries begin to build on their lowwages and expectations to seize a larger share of world trade – indeed,that is already happening. We can, I believe, be sure that the post-warperiod of wealthy indolence is at an end, and that the luxurious 1970sand 1980s will soon become a part of history.

We face a major and painful readjustment, but should rememberthat we have done so before, in the great depression of the 1930s andthe World War of 1939. We survived those disruptions and willdoubtless return from the present one to a state of some stability,

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although under what international conditions we have yet to discover.The only certain thing is that it will be very different and that the gildedcomforts of recent years are unlikely to return.

The determination of the people will shape the UK future, aidedby their traditional inventiveness. Government will have to bedetermined, steadfast and resourceful and the rest of us will have toexercise patience for unfamiliarly long periods. We shall have torediscover the resilience and endurance of earlier, more challenging,times and adapt to a changed world. Such a world will not necessarilybe one of privation, and may bring welcome adjustments to socialattitudes. Responsibility may return to its rightful position alongsiderights, and individual responsibility may again come to be seen aspreferable to dependence on the nanny state.

Government may once again see its role as a mechanism forsupplying national services to the electorate, rather than one forinstructing them in life values and patterns. I believe that the emergenceof such a society is essential to the health of this and other nations, andwould 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 elderslies in not only returning the nation to financial health, albeit at a lowerlevel, but in doing so without further mortgaging the future for oursuccessors. By resisting the temptation to impose social structures withlittle regard for individual freedom, we may in time develop a reformedsociety that recognises and encourages the dignity of the individual whileliberating innovation and enterprise. Wealth is not created by governmentsbut by the initiative and drive of individuals freed from the shackles ofcentral bureaucracy and a mistaken view of the role of government.

I cannot end this book without thanking my many colleagues andfriends for their committed and enthusiastic efforts in overcoming thewide range of formidable problems which we faced together. I believe thatthey enjoyed the experience as much as I did and that the solution tomany of our current and future problems can be found in the liberation ofmanagements combined with clear objectives.

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Finally, I would like to thank my youngest daughter, Meg, for sogenerously contributing to this book through her expertise as anestablished author. Her familiarity with the world of publishing hasbeen invaluable to a simple engineer.

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177



APPENDIX 1

PIVOTAL PEOPLE

There were a number of pivotal points in my life, which led to evermore senior positions of great interest and influence. Theseopportunities were generally due to individuals, many of them nowdead and largely forgotten and this brief chapter gives me theopportunity to thank them and to give a brief description of their ownpersonalities and achievements. There were many others, of course,who displayed their confidence by offering me posts in theirorganisations. To those, and to the many colleagues who supported methroughout the journey, I offer my deep thanks.

Allan, C.L.C. Lewis Allan was chairman of the South of ScotlandElectricity Board when I was appointed Director of Engineering in1968. A civil engineer, previously chief engineer of the North ofScotland Hydro-Electric Board, he was a quiet, thoughtful, reservedman who bore his responsibilities with great care. He had to retire dueto ill health in 1974 and arranged my succession with the active supportof Alan Christianson, his deputy chairman. Lewis Allan was a proudand committed Scot, who played the bagpipes, and would maketelephone callers wait until he had completed a pibroch he was playing.After his retirement, he took up the study of Gaelic literature.


Benson, Sir Henry Henry Benson had been senior partner of PriceWaterhouse and became, on retirement, industrial adviser to the Bankof England. When substantial companies got into serious financialdifficulty he organised the banks and investment institutions involvedand persuaded them to support a change in chairmanship of thetroubled company. In this role, he asked me to become chairman of theWeir Group, a well known pump maker and, later, of Turner andNewall a company heavily involved in asbestos mining and products.Both companies quickly returned to financial health by the simpleexpedient of making difficult decisions without delay.

Later, I became convinced that a similar solution could have beenapplied to Rolls-Royce in 1971, a decade earlier than Weirs or Turner &Newall. Such an adventurous move would have avoided 14 years ofstultifying nationalisation, during which the US competitors expandedto dominate the rapidly growing market. Paradoxically, Henry Bensonplayed a prominent part in the alternative solution of receivershipwhich was adopted by the Government.

Lord Campbell of Croy Gordon Campbell commanded a fieldbattery in the Second World War and was decorated with the MC andbar. He was left with difficulty in walking and constant pain but was afine Secretary of State for Scotland from 1970 to 1974. Faced with theill-health of Lewis Allan, then chairman of the SSEB, he wrote to meon holiday in Majorca offering an early appointment to the post ofdeputy chairman, and that of chairman a year later. This was a mostunusual procedure and is an example of his purposeful managementstyle. He was a doughty spokesman in the House of Lords for thediabled and remained interested in many other topics, including energy.He was a politician of the old school, concerned with public service andof the highest personal integrity. I felt privileged to have known andworked with him.

Christianson, Alan Deputy Chairman of the SSEB at the time of myappointment in 1958 as Director of Engineering, he chaired the

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selection panel and was a constant source of wisdom and support. Heretired early to make my succession as chairman as smooth as possible– his age precluded him from the succession. He was an accountant bytraining and a fine general manager, contributing much to the nationaldrive for efficiency and manpower reductions necessary to keep pacewith the rapid technological developments in the industry. Hecommanded a tank squadron during the second World War and wasawarded the MC.

Duncan, Sir William Bill Duncan was appointed chairman of Rolls-Royce in 1984, succeeding Lord McFadzean. He reached the conclusionthat the cost of engine developments made it necessary for Rolls-Royceto seek help from a major company and concluded an agreement withGeneral Electric of the US. He died at his desk only fifteen monthsafter his appointment and I was appointed as his successor. I took amore optimistic view of the company’s ability to remain independentand subsequent events have amply justified that judgment.

Haddow, Sir Douglas Douglas Haddow had been PermanentSecretary of the Scottish Office when he was appointed Chairman ofthe North of Scotland Electricity Board, a post hitherto the prerogativeof politicians. He contributed greatly to improved relations between thetwo Scottish electricity Boards, most notably in the simplification of theJoint Generating Account between them, which had previously beenthe source of an annual ritual of disagreement. He had a keen mindand an acerbic wit.

Lord King of Wartnaby I first knew John King as chairman ofBabcock and Wilcox, the boiler makers, during my time in the electricitysupply industry. I met with him later when he was chairman of BritishAirways, who had an impeccable record of buying Rolls-Royce enginesfor their aircraft wherever possible. This practice ceased with theairline’s first purchase of engines for the new Boeing twin-engined777. The engine selected was the General Electric GE90, a radically

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new design which, predictably, encountered teething troubles. BAsubsequently reverted to Rolls-Royce engines for that and other aircraft.

Lord McFadzean of Kelvinside Frank McFadzean was chairman ofRolls-Royce from 1980 to 1984, having been chairman of BritishAirways and Shell Transport & Trading, and a managing director ofRoyal Dutch Shell. An accountant by training, he combined a powerfulpersonality with a critical intellect and a dislike of ‘flannel’. He invitedme to become a non-executive director of Rolls-Royce in 1982 and toldme in 1984 that he intended to retire and to recommend me as hissuccessor. The Government of the day had different ideas, however. Ihad known him well in my days with Shell (UK) and advised him on aproposed relationship with Gulf Atomics. makers of high temperaturehelium cooled reactors. He didn’t suffer fools gladly and was not alwayspopular, but he was very perceptive and determined. A veritabledynamo, he contributed much to Rolls-Royce.

Porter, Lord of Luffenham George Porter was a distinguishedchemist who won the Nobel Prize and was President of the RoyalSociety. When he was Director of the Royal Institution in the 1970s Iasked him if I could organise a public debate there on nuclear powerthere. He agreed, on the strict condition that both sides of theargument should receive a fair hearing – a situation I regarded asessential. The debate attracted speakers from both sides of theargument and lasted for three days, with public access and televisioncoverage. The pro-nuclear power arguments won easily, having the timeto discuss arguments in detail, rather than in sound bites. Public airingof scientific arguments was dear to his heart and he took a prominentpart in efforts to bridge the gap between scientists and laymen.

Smith, Douglas McLeod Douglas Smith was manager of the GECpower plant division when he invited me to form an OperationalServices Division, responsible for commissioning power stationsworldwide, and trouble-shooting in all of GEC power stations. He was

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a manger from whom I learned a great deal. He had an unorthodoxmanagement style with a habit of implicit trust, which had to be earnedbut which led to great delegation and a high degree of mutual trust.Unfortunately, the management of the day failed to recognise their luckin having such a man and he spent much of his time shielding us fromthem so that we could work unhindered. I learned a great deal fromhim, notably his saying that ‘instructions are intended for the guidanceof intelligent people’ and not alibis for wrong management decisions.

Trenbath, David David Trenbath was chairman of the committee of23 banks involved in the change of chairman of Turner and Newallwhen 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 leadbank in the group and his support was of tremendous value to mewhen I had to deal with the committee. For example, I refused tofollow the recommendations of the management consultants’ report onwhich the banks had insisted when agreeing the change. (In fact, Iregarded the proposed strategy as nonsense and promised to providedetails of my analysis in 6 months time.) Understandably, this createdproblems for the bank representatives vis-à-vis their head offices, butDavid Trenbath steered it through and provided solid support formethroughout the rescue period. The Bank loans were all repaid inthree years and NatWest remained our principal banker.

Wedgewood-Benn, Anthony Tony Benn was a (very) left-wing labourfigure, occupying Cabinet positions in the Wilson and Callaghangovernments. He was anxious to be seen as grass-roots Labour and anatural aspirant to leadership of the party. His transfer by Callaghanfrom the Department of Trade and Industry to the Department ofEnergy was wholly political and sealed the fate of the re-organisation ofthe electricity supply industry in England and Wales, approved by Benn’spredecessor Eric Varley, and adopted as Government policy. A sociableman of great charm, he never lost sight of his political ambitions.

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APPENDIX 2

LIST OF ACRONYMS

ACARD Advisory Council on Applied Research andDevelopment

ACOST Advisory Council on Science and TechnologyAE Associated EngineeringAEI Associated Engineering IndustriesANA All Nippon AirlinesBA British AirwaysBMW German motor car manufacturerCANDU Canadian heavy water reactorCEGB Central Electricity Generating BoardCIGRE International body for high-voltage electricity

transmissionCO2 Carbon dioxideDEFRA Department of Environment, Agriculture & FisheriesDTI Department of Trade and IndustryEETPU Trade union of electricians and pipefittersESCOM Electricity Supply Commission of South AfricaExxon US oil company, including EssoGE General Electric Co. of USGEC General Electric Co. of UKGEC-Alsthom alliance of GEC with Alsthom of France


GKN Guest Keen & NettlefoldGM General MotorsIMF International Monetary FundKPMG International firm of accountants and auditorsMW One thousand kilowattsNCB National Coal BoardNEI Northern Engineering IndustriesNOSHEB North of Scotland Hydro-Electricity Board, now

Scottish & SouthernPPS Parliamentary Private Secretary – junior MinisterPWR Pressurised Water ReactorRB211 Three shaft Rolls-Royce aircraft engineRR Rolls-RoyceSGHWR Steam Generating Heavy Water ReactorSSEB South of Scotland Electricity BoardT&N Turner and NewallTUC Trades Union CongressVEW German electricity supply company

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ACARD see Advisory Committee onApplied Research and

Development (ACARD)

ACOST see Advisory Committee forScience 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

INDEX


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

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 24DEFRA (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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188


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

INDEX

189


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

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

POWER POLITICS

190


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 Hydro-Electric 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

INDEX

191


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

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 72Sedgemore, Brian 72

Severn Barrage 142

SGHWR see steam-generating heavy waterreactors (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

POWER POLITICS

192


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

INDEX

193


Weir Group (contd)cash control measures 89

financial difficulty 87

financial reconstruction 87, 88

Pumps Division 89

recovery of 91

Weir, Viscount (Willy) 88

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

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Documents

Power Politics-1848855060(1)