Chapter Ten

Some One Had Blundered

In this chapter I give details from four different fields to justify the contention made in the introduction that the philosophical errors listed there have been at the root of disasters of many kinds.

The reorganisation of the National Health Service was typical of what I have called solutioneering, a far-reaching change undertaken with only vague and untestable objectives, such as the general improvement of the efficiency of the service, and without any built-in assessment of whether those objectives were being attained. Before reorganisation there was a genuine problem created by the lack of suitable accommodation for disabled people who, while no longer in need of the facilities of a hospital, were not able to manage in an ordinary home. The Regional Hospital Boards had no power and no money to build the hostels needed. The local authorities had both, but gave the hostels a very low priority. The result was that costly hospital beds were clogged by people who had no need of their expensive facilities. It would clearly have been ridiculously easy to devise an ad hoc solution to this problem. It could have been made a duty for local authorities to provide hostels; Regional Hospital Boards could have been given the money and the duty to use it for this purpose; or special authorities could have been set up with the one function of filling this gap.

Yet the need to solve this problem was the only concrete example that Sir George Godber, then the Chief Medical Officer to the Department of Health and Social Security, gave in an hour long lecture to NHS staffs in Portsmouth to justify the enormous upheaval that his Department were advising the government to embark on. The clean sweep that was carried out made it impossible to predict the consequences except that the administration of the new service would be enormously more costly than the old. The estimate was that initially administration would cost an additional £56,000,000 annually - a classic example of Heller's quip about estimating, or rather underestimating! (see page 3).

The irony is that the new Regional Health Authorities have found themselves in the same position as the old local authority health departments. They have the power and the money to build hostels, but they have what they see as far more pressing calls on their necessarily limited funds. In other words the whole huge upheaval has failed to solve the one concrete problem that its architects realised as needing to be solved, while the problem itself is more severe now than it was then. It is a fact that, through lack of suitable accommodation outside, men are being sent to prison.

It is by no means only governments and nationalised undertakings that behave irrationally. In 1972 I was intrigued by reading an advertisment for the then new Jaguar XJ12 car, which confirmed what I had previously read in motoring correspondents' gossip that this car priced at about £3,500 could immediately be resold on the open market for about £5,000. The advertisement took pride in this fact and mentioned that customers were being asked to sign an undertaking that they would not resell.

I was so puzzled as to what could be the reason for this apparent eagerness to subsidise their customers to the tune of some £1,500 a time that I wrote to the Managing Director, who was good enough to reply. I pointed out that if the firm were to charge £5,000 and make a profit of £1,500 on each car while the going was good, this profit could be ploughed back into the business in order to increase production and make them more able to compete, for example, with Mercedes. We carried on quite an exchange of letters. The gist of his answers was that the high market price was the consequence of the large demand for a car in very short supply. When, as they hoped it soon would, supply increased, the market price must fall. If, therefore, they charged £5,000 now, they might well soon find that they would have to reduce the price in order to maintain demand. 'There is no doubt that in these circumstances we should be accused of blackmail.' I replied that I thought their potential critics were under the same delusion as themselves, that the price charged must be related to current costs of production. If they were to reduce their price in the future, they would, on the contrary, be praised for their efficiency in cutting their costs. Indeed they would be able to make the announcement of a reduction of price, proudly, in these terms - of 'being able' to reduce it.

The letter repeatedly talked of looking forward to what they called a 'free market situation'. In fact they seemed almost to be planning for, if not looking forward to, the day when their cars would be a drag on the market. It seemed, as I said to them, as though they had never heard of the law of supply and demand or imagined that it had been superseded. By all means give the customer the feeling that he was getting a good buy, by pricing the car a few hundred pounds initially below the market price; but £1,500 below seemed beyond all sense.

It seemed that they were so flattered at being told that their product was exceptionally good value for the money, that they lost sight of what should have been their problem, namely how to do the best for their employees, shareholders, and the country as a whole, without disregarding the interests of their customers. Had they been manufacturing a vehicle for invalids one could have defended their attitude; but, as I told them, their potential customers would seem to be among the last to deserve charity.

The same situation pertains now in regard to Land Rovers and Range Rovers which are under-priced in relation to the market. The consequence is the encouragement of quasi-criminal organisations which divert vehicles to those who are prepared to pay up to £2,000 above the market price but are not prepared to wait. The evil of the system is not only that profits that should go to the manufacturers (publicly-owned) go to the racketeers but that the firm's employees see these people pocketing far more money than they themselves can ever hope to earn by productive work. The high charges that we all have to pay for electricity - charges which have led to great hardship for many who depend on electricity for winter warmth - are higher than they would be if we were not carrying in this country an excess of generating capacity.

The amount of generating output capacity required is governed by the simultaneous maximum demand, S.M.D. In order to allow a margin of safety for breakdowns etc., the aim is to have output capacity 20 per cent in excess of the S.M.D. However, in 1976 there was an excess capacity of 55 per cent (i.e. 35 per cent above the target) and this is likely to increase for a number of years as the S.M.D. is rising more slowly than the output. As it takes from five to ten years from ordering a new station to bringing it on line, this degree of over-estimation might seem excusable; and it has in fact been blamed on the unexpectedly low rate of economic growth, on the oil crisis, and on the advent of natural gas. However the Open University's Energy Research Group have convincingly shown that these excuses will not do and that the errors date from the early 1960s before any of these factors was operative. The mistakes were in fact examples of trendism, of assuming that an observed trend is a kind of law and that it will go on indefinitely. In this case there was clear evidence that it was not doing so.

The S.M.D. for electricity grew between 1923 and 1950 roughly exponentially, that is to say (cf page 98) the growth could be expressed as a constant percentage (about 5 per cent) of the previous year's demand. But the figures show that since 1960 demand has grown only linearly, and since 1970 even less rapidly than that. Yet the forecasters continued to estimate an exponential growth. The Energy Research Group say:

"It would be unreasonable to expect a forecaster in 1954 to anticipate a change from exponential to linear growth in 1960... it would require a very sharp forecaster to have spotted the turnover by 1960 (when forecasts for 1966-68 were being made). However, by 1964 the trend is obvious, and it requires a very blinkered forecaster to persist in using an exponential projection from 1964 to 1974 when the trend is clearly not exponential ... The only reasonable conclusion is that the industry planners did not want to see a trend away from exponential growth - so they didn't."

Their conclusion is borne out by this quotation from electricity forecast documents:

"From 1954/55 to 1962/63 total sales expanded at the rate of 11.6 per cent per annum, but during the subsequent period 1972/73 the annual growth rate fell to 6.3 per cent and between 1972/73 and 1974/75 the average growth rate was only 2.1 per cent. (Electricity Council 1975)."

These are the words of somebody who insisted on seeing a straight line as something that perversely kept on deviating from a curve.

And there were those who were not blinkered. In his diaries, Richard Crossman describes the agonies that ministers went through in meeting after meeting during the financial crisis of 1968 in deciding what cuts to make in public spending in order to placate the International Monetary Fund. He mentions a report by the Brookings Institute which recommended big cuts in what they believed was the gross over-investment programme of the Central Electricity Generating Board. Crossman commented: 'Even a fractional slow-down of these programmes could ... avoid any cuts in the social services.' But it was not to be. The axe fell, as it did in the repeat performance in the middle 1970s and again in 1979, mainly on social expenditure.

A number of plausible explanations were advanced for the failure of the electricity industry to predict demand; but 'By and large', say the Energy Research Group, 'these explanations start from the presumption that the forecast was actually correct and that the world behaved perversely.' The capital costs of power stations account for about 25 per cent of current electricity generating costs. If these are about 35 per cent too high through over-investment, it means that our charges are about 8 per cent too high. By 1980 the corresponding figures are likely to be 38 per cent and 9 per cent. If it had not been for the very large recent disproportionate rise in fuel costs the forecasters' errors would have been even more apparent. In that event the capital costs would have formed a much larger proportion of the whole and, therefore, a miscalculation of them would have had a greater effect on the consumer charges.

Unfortunately the effects of the miscalculation are not confined to the price the consumer has to pay. The over-capacity threatens the electrical engineering industry. For the obvious remedy to the situation is to order no more power stations until the S.M.D. approaches the output capacity and this may not occur for many years as the gap is probably widening. To do this would be to kill an industry which will be needed again sometime in the future. Already the government has been forced, in order to save the industry, to order a power station which is not in fact needed. So far-reaching are the effects of a naive belief in trends.

In the early months of 1979, in spite of the excessive surplus of generating capacity, we were brought to the brink of a large-scale electricity shut-down for rather absurd reasons. A period of unusually cold weather resulted in both the National Coal Board's stockpiles and the C.E.G.B.'s own coal stocks being frozen (literally) so that they could not be moved to the power stations. There were days when there was a margin of only 2 per cent - 45,000 megawatts of available capacity facing 44,000 MW of demand. A C.E.G.B. statement (reported in the Guardian - 1 February 1979) took the opportunity to hit back at those who had criticised them. The narrow escape from disaster, they insisted, showed that the country `cannot run on smaller generating margins'.

In replying to this statement, Professor J. W. Jeffery was provoked to derision. 'Obviously we must build more power stations', he said in a letter to the Guardian, 'but supposing their coal stocks get frozen up also?' If just some of the heat that went to warm the rivers and the sea were used instead to keep the coal heaps warm, he pointed out, we should have had 32 per- cent excess capacity in the coldest spell for many years. 'They plan for 20 per cent overcapacity, achieve 32 per cent (50 per cent if you count the 'mothballed' stations) and then, with enough waste heat available to warm a large proportion of the nation's houses ... get to the edge of breakdown because their coal stocks are frozen solid.'

Had the mental attitude of the C.E.G.B. been one of facing problems rather than solutioneering, it is inconceivable that they would have come up with the answer they did. Faced with the problem of preventing their huge surplus of plant from being immobilized by frost, they could hardly have proposed to solve it by looking towards a still larger surplus.

As a final example of irrationality in high places, I cite what was, in terms of money and of Britain's earning ability as well as our reputation as a technological nation, the most expensive of all blunders. This was the series of misjudgements which led to the probably irretrievable decline of our aerospace industry. It was comprehensible, I think, only in terms of the philosophical errors that this book is concerned with. No band of conspiratorial saboteurs could have hoped to have destroyed so much.

In the many discussions that took place after the end of the second world war regarding Britain's economic future, it was frequently stated, and I think generally agreed, that this country should, so far as a choice was possible, put its eggs into the aircraft as opposed to the car industry, because of our comparatively poor raw material resources and our comparatively high resources of human skill and ingenuity.

By 1951 it appeared that we were well on our way to capturing a good share of the world market for aircraft. The Comet I ... was well on the way to entering service as the world's first pure jet commercial transport, while the Viscount was in production at Weybridge as the first turboprop commercial airliner. At Filton, Bristol were assembling the prototype Britannia long-range turboprop aircraft. A series of, at the time unexplained, crashes grounded the Comet I; but this need not have been the end of Britain's hopes.

Derek Wood in his book, quoted above, Project Cancelled, describes in detail the events leading to the cancellation of a whole series of promising aeronautical projects on which a total of £1,000 million at 1974 prices had been spent. He does not suggest that all should have been allowed to go on; but he does suggest that a substantial number had, at the time of their cancellation, good commercial prospects, far better in fact, than Concorde ever had. I shall touch on just two of these - the Vickers VC7 airliner and the Fairey FD2 supersonic fighter project.

In 1949, in accordance with a suggestion from the Air Ministry, the Fairey company embarked on a design for a transonic research aircraft. They decided to design it so that, if successful, it could be developed into a fighter. The plane, the Fairey Delta, turned out to be much faster than anybody outside the design team ever expected. It caused amazement when, in March 1956, it broke the (American held) airspeed record of 822 mph by more than 300 mph, setting a new record of 1132 mph.

Fairey at once set their sights on a development of this aircraft, called FD2, to meet the Air Ministry's specification, OR329/F.155T, which called for a two-seater fighter capable of climbing to 60,000 feet and achieving Mach 2 (twice the speed of sound) in six minutes. Owing to regulations about supersonic flying over Britain, Fairey came to an agreement with the French firm Dassault to use. their airfield in France for development flying. The FD2 made 47 such flights in October and November 1956. On 1st April 1957, Fairey were tipped off by the Ministry of Supply, Wood says, that their FD2 was favourite for the F.155T contract. Three days later Mr Duncan Sandys announced in the Commons that development of all high performance piloted aircraft was to cease and that we were to rely henceforth on rocket-propelled missiles.

Dassault were developing a similar design to the Fairey Delta. The silhouettes of the two machines were almost identical. The fact of Fairey's speed record probably influenced the French government to give the development contract to Dassault; and the success of the FD2's proving flights from the French airfield undoubtedly confirmed Dassault's confidence in their own design, which went into production as the Mirage. Twelve hundred machines of this type were subsequently sold all over the world. The FD2 never flew again. Dassault is said to have told a British aviation chief later that `if it were not for the clumsy way you tackle things in Britain, you could have made the Mirage yourselves'.

The first of the four jet `V' Bombers, the Vickers Valiant, flew in 1951. The Ministry of Supply suggested to Vickers that they should develop a transport version for the R.A.F. Work on it, the V1000, began in October 1952 to a Ministry of Supply specification. The design was such that it could be easily modified to a civil airliner, to be called the VC7. In 1955 the R.A.F. began to have cold feet. Under Treasury pressure they moved towards cancellation, saying there was no longer requirement for an all jet transport. On the civil side B.O.A.C. (British Overseas Airways Corporation), the only potential British customers, had as long ago as 1949 ordered the Britannia. This turboprop airliner was potentially more economical than a pure jet but much slower. Before this was even in service B.O.A.C. ordered 60 of its rather faster successor type (which, in fact, never materialised) still on the drawing board. While B.O.A.C. dithered about the VC7, the President of Trans Canada Airlines flew to Britain specially to implore the Minister of Supply (Mr Reginald Maudling), to go on with the VC7 because he wanted it for his airline. This action seemed to prompt Sir Miles Thomas, the head of B.O.A.C., to say that he would not buy it. The upshot was an announcement by Mr Maudling on the 11th November 1955 that both the military V1000 and the civil VC7 were cancelled, the latter because `BOAC have no requirement for it, as the aircraft they already have on order will fully meet their needs until well into the 1960s'. Nearly £4,000,000 of public money had been spent on the V1000. Only one year later, on the 24th October 1956, the Minister of Transport and Civil Aviation announced that the government had approved the purchase by B.O.A.C. of fifteen American Boeing 707s at a cost of £44,000,000. The VC7 could have been in nonstop Atlantic service by 1959. The Boeing 707s, which started in service in August 1959, had at that time to make one stop en route. Mr Maudling afterwards said, perhaps with some truth, that there was nothing that he could have done. Neither the R.A.F. nor the B.O.A.C. were prepared to place an order. Certainly B.O.A.C. had a lot to answer for. Nationalisation does not seem to ensure that decisions are taken in the national interest.

There is a strong possibility that behind these muddles there lurked the mistaken quest for certainty. Ministers, airline bosses, and air marshals were discouraged by such things as the disasters to the first Comets and the inability of prototypes of other designs to meet the requirements at once. For example, at the time of its cancellation, the Rolls Royce engines for the VC7 could not take the plane nonstop across the Atlantic, but `stretched' versions of the engines were being developed (and B.O.A.C. knew about this); and these more powerful engines were, in fact, fitted to the Boeings which B.O. A. C. subsequently purchased. There lurked in the heads of the people who took these decisions the idea that, if things were not right straight off, there was something radically wrong with the design. Better then wait until the Americans had got something proven to offer and then buy that. They failed to appreciate the trial and error nature of aircraft design, as of everything else.

Wood tends to blame the technical ignorance of ministers and civil servants for these disasters. I think one must blame their failure to realise that a good decision, a reasonable plan, can only emerge from a situation of criticism. It may be objected that in the case of a fighter aircraft secrecy is essential. Certainly it would have been difficult to arrange a fully public discussion. But Professor R. V. Jones has described how, even at the height of the war, he was allowed by Churchill to argue his case, that rockets were being developed at Peenemunde, against the establishment view. Even if a discussion cannot be fully public it is much better to allow discussion among those who are privy to the secret than no discussion at all. The fact that someone in the Ministry of Supply was able to tell the Fairey company to expect the go-ahead on the FD2 when three days later the Minister announced a cancellation of all such projects, shows that the decision was taken in extreme secrecy, excluding officials who knew about the existence of the project.

In the case of the VC7 and of the other airliner plans that were cancelled, discussion and criticism could have been fully public. What was lacking was the institution whereby these cancellation decisions could only be taken in the framework of a fully argued discussion. What was wanted was something like the institution of listed building consent, whereby no sudden decision can be taken to pull down a listed building but procedures exist whereby the case for not pulling it down can be forcefully argued.

Popper's dictum, that we must so organise things that even incompetent rulers cannot do too much damage, is the point. It is no good arguing that we must have better ministers or better civil servants. Here were two ministers whose other actions have shown that they were well above the average level of competence. The same could be said of Mr Roy Jenkins and Mr Wilson who, later on, cancelled Britain's TSR2 in favour of the American F.111, which was in an early stage of development and which later got bogged down as badly if not worse than the TSR2, in technical difficulties and escalating costs, so that the British order for that, too, was eventually cancelled. It was the lack of proper institutional safeguards for criticism that enabled these very competent ministers to deal deathblows to the whole industry and thereby wound the whole economy.

In a final example, not of a blunder committed but of one towards which we may be heading, I want to emphasise that criticism of large national projects needs to be wide-ranging. The current nuclear energy controversy, as publicly argued at present, turns mostly on the questions of environmental hazards and costs. But a recent study has shown how employment prospects are also affected. Dr D. Elliott of the Open University has compared likely employment in the energy-producing industries by the year 2000 in the event of a nuclear 'strategy' with that under a 'fairly moderate non-nuclear programme'. The latter would combine conservation technologies - that is straightforward energy-conserving measures as well as C.H.P. (page 103), and heat pumps - with a wide range of renewable energy technologies: solar, wind, wave, and tidal power, biosynthesis and geothermal energy. Elliott draws on official documents for his estimates of what is feasible, what the cost would be, and the likely employment. His conclusion is that the nuclear programme would create about 660,000 person-years of employment up to AD 2000 and would cost about £35,000 million. The non-nuclear programme would make available about the same amount of energy at a cost of about £21,200 million and create about 1,520,000 person-years of work in the same period. It seems likely that we lack the proper institution for the taking of this vital decision so that the various experts can criticise each others' views in public.

Chapter Nine           Chapter Eleven

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