HC Deb 15 February 1960 vol 617 cc957-64
The Minister of Aviation (Mr. Duncan Sandys)

With permission, I will now answer Questions Nos. 14 and 21.

The Government regard it as essential that the United Kingdom should maintain a strong and efficient aircraft industry, capable not only of providing the Armed Forces with aircraft and guided weapons, but also of playing a prominent part in the world wide development of civil aviation.

On my appointment as Minister of Aviation, four months ago, I discussed the whole position with the aircraft industry. I expressed to it the view that the increasing cost and complexity of modern aeroplanes, together with the intensification of foreign competition, now made it necessary for manufacturers to possess much greater financial and technical resources than hitherto. For this reason, I suggested that they might consider creating stronger units by the amalgamation of suitable firms. I explained that the pattern I had in mind would consist of five major groups—two making fixed wing airframes and guided weapons, one making helicopters, and two making aero-engines.

I found a ready acceptance of the need for radical reorganisation; and I wish to express to the industry my appreciation of the prompt manner in which it has acted. In fact, the initial process of regrouping is now virtually completed, though, naturally, much remains to be done by the new groups to consolidate and rationalise their resources.

The sharp reduction in Government orders for military aircraft, which represents such a large part of the industry's business, has made it urgently necessary to expand sales of civil types at home and overseas; and the Government have been considering ways of helping manufacturers adjust themselves to this changed situation.

In order to provide a sound technological foundation, the Government will for the present continue to maintain a substantial programme of aeronautical research.

Except where specialised requirements or public policy make it necessary to do otherwise, we intend to concentrate Government orders on the five major groups. At the same time, we shall seek to harmonise the characteristics of military and civil types of transport aircraft.

In view of the growing importance of the civil market, the Government have decided to provide increased support where appropriate, for promising civil aircraft projects and aero-engines. The nature and extent of the assistance will vary. The Government may contribute towards the development, tooling or other initial costs of launching a new type. In order to enable earlier delivery dates to be offered, the Government may also, in suitable cases, take a share in the risks involved in producing a limited number of aircraft beyond those for which firm orders have been received. Futhermore, the Government may be prepared to contribute towards the cost of proving a new type of civil aircraft and of introducing it into regular air line service.

Suitable arrangements will be made for the Government to participate in the proceeds from sales. The manner in which these will be shared between the Government and the firm will vary and will depend, among other things, upon the proportion of the risks borne by each.

Concentrated thus in a small number of strong units and adequately backed by the Government, I am confident that the British aircraft industry will now be better fitted to meet the needs of modern defence, and will be better able to secure its due share of the expanding market for civil aircraft throughout the world.

Mr. Strauss

The House will welcome the statement which has just been made, which has been long awaited. The Minister said that he had consulted the aircraft industry at an early stage. Did he consult the unions, who, naturally, have great experience of this industry, and have strong views about it? If the Minister has not yet consulted the unions, will he say whether he intends to do so at an early stage?

The right hon. Gentleman has proposed that in future there should be a closer partnership between the Government and the industry than there has been in the past; the Government are prepared to take greater risks and, on the other hand, are to ask to participate in any profits which are achieved. In the past, we have not been able to discover exactly on what terms that partnership has been based.

In view of the large amount of Government money which is likely to be involved and the very important question of principle which is before us, can the Minister say whether, in future, we shall know the extent to which the Government are participating in the profits as well as the losses of the industry to which they give orders, so that we may be able to form an opinion of the correctness of the Government's policy and judge whether the Government have adequate control and are receiving adequate benefits from the large sums of public money which they now propose to invest in the industry?

Mr. Sandys

Up till now the consultations have been concerned with the structure of the industry—the amalgamations between the firms—but I am sure that the unions have an important part to play in making a success of these new arrangements.

I have no doubt that the mergers will make a stronger aircraft industry, with better prospects for sales at home and overseas, and will, for that reason, improve the prospects of employment.

With regard to the question of partnership—as the right hon. Gentleman called it—between the Government and the aircraft industry, and the money invested in it, I will do my best to show as much as possible of this side of the matter in the Estimates. The right hon. Gentleman, who is a former Minister of Supply, will know that it is not always easy to separate the figures in all cases, to show completely how expenditure is divided between civil and military projects, especially in the sphere of research.

I can assure the right hon. Gentleman that we shall see to it that there is adequate Government control. I do not think that there will be any difficulty in having that control in regard to those projects where the Government are themselves making a contribution.

Mr. Strauss

In the past, when the Government have invested sums amounting, perhaps, to millions of pounds, in the development of a certain firm, we have not known what return the Government would receive if that investment proved profitable. In future, where there is a Government contract with a firm, involving the investment of £5 million or £10 million of Government money, shall we be told the exact contract details, and the degree of Government participation in losses and profits likely to arise from such a contract? These details have been refused in the past.

Mr. Sandys

I will see what details can be given, but I think that the right hon. Gentleman knows the difficulties involved in disclosing details of contracts of that kind.

Sir A. V. Harvey

I congratulate my right hon. Friend on his success in this matter so far, but in regard to any future orders placed for research and development will he bear in mind that, if this country is to succeed in this matter, he must be careful not to have too many different developments taking place at the same time? Will he try to bring his officials much closer to the industry than was the case with the Ministry of Supply, so that there is co-operation in regard to future thought, and the industry is informed?

Will my right hon. Friend confirm that companies which are not taking part in this rationalisation will not be excluded if they have something which is new and different from the other groups? Will he further bear in mind that, having brought about this rationalisation, the troubles of the industry will be just beginning, as will the sorting out of the problem, and that this will require further efforts by all concerned?

Mr. Sandys

I think that what my hon. Friend had in mind is that we should not back too many what might be called conflicting or competing projects. Normally, that would not be the intension of the Government. But the House must recognise that we are not starting with a blank sheet and in the first stage. I should not like to rule out the possibility of the Government supporting two overlapping projects, provided that the commercial prospects justified it.

I hope that some of the firms not so far included in the new groups will still join, but of course, as I made clear in my statement, we do not exclude the possibility of placing orders outside the groups for specialist requirements. For example, there may be a firm building a small aircraft which is not within the programme of the major groups, or it might be social or public policy to place a particular order.

Mr. Diamond

Can the right hon. Gentleman say, first, what is the likely future of the labour force of the aircraft manufacturing industry having regard to everything that he has said this afternoon? Secondly, do any of the risks which the right hon. Gentleman has in mind take the form of investing in equity shares in any of the regrouped companies?

Mr. Sandys

The answer to the second question is, "No." Various guesses have been made in the past about the size of the industry, and I do not propose to add any new ones of my own. It is no part of the Government's business to try to tailor the aircraft industry to any particular size.

Mr. Eden

When he is considering giving support to any project or placing an order, may I ask my right hon. Friend to make a decision as early as possible in the development stage, rather than leaving the developers in any degree of uncertainty for too long a time? If there is a further change in the structure of employment as the result of the regrouping, will my right hon. Friend, in consultation with his right hon. Friend the Minister of Labour, ensure that everything possible is done to find alternative employment for any who may become redundant? Lastly, is there any chance of the House being able to debate the whole of this question, particularly in view of the substantial Government expenditure now envisaged?

Mr. Sandys

The question of a debate should be addressed to my right hon. Friend the Leader of the House.

It is, of course, always our intention to try to place orders as early as we possibly can, but it is not easy, as hon. Members who have been concerned with this business will know. All sorts of changes take place in the development stage and until one knows exactly what it is that one is ordering it is difficult to place a production contract.

Mr. Holt

Am I right in thinking that in these amalgamations many activities other than the manufacture of aircraft have been included? In view of the monopoly position now to be provided for some of the aircraft firms and support by the Government, are not very important matters raised regarding the competitive position and other activities—including the making of refrigerators, for example? Will not the Government make a further statement on this aspect at an early date?

Mr. Sandys

I do not think that the House need be alarmed about any lack of competition in the aircraft industry. The industry would be dead unless it could export on a large scale and there is no sphere in which there is keener international competition than between the manufacturers of aircraft.

Mr. Chetwynd

Can the Minister say now how much public money will be put into the industry? Can he say what orders have been placed under the scheme or which it is hoped will be placed in the near future? In view of the highly complicated financial arrangements which are being made, would the right hon. Gentleman consider issuing a White Paper on the subject, so that we may know exactly what we stand to gain or lose?

As we have now to expand our exports tremendously to make up for the loss of military orders, can the right hon. Gentleman say what initiative there will be to promote an aggressive sales policy overseas?

Mr. Sandys

My discussions with the aircraft manufacturers are still going on and I cannot, therefore, give the House any picture about costs at the moment. In reply to the right hon. Member for Vauxhall (Mr. Strauss), I undertook to show as much information as possible in the Estimates for the current year.

The pursuit of an aggressive sales policy is primarily a matter for the industry. I hope that the measures we are taking will enable the industry to take greater risks. One of the difficulties has been that firms have not been strong enough either to get their designs through quickly enough—an enormous design staff is necessary in the production of complex modern aircraft—or to provide sufficient capital to permit them to take the risks involved.

I will consider the question of issuing a White Paper, but I do not think that one would be appropriate at the moment.

Several Hon. Members


Mr. Speaker

Order. We cannot debate this matter now.

Mr. Emrys Hughes

On a point of order, Mr. Speaker. In view of the fact that nothing that the Minister has said affects Scotland and particularly Prestwick, I beg to give notice that I will raise the matter at the earliest possible opportunity.

Mrs. Castle

On a point of order, Mr. Speaker. It is not a question of our wanting to debate this matter now, but as we have no White Paper, and no guarantee of one, there are some questions to which we must have an answer. Could not an opportunity to speak be given to those of us who have been attempting to ask questions in order to obtain concrete information?

Mr. Speaker

I have much sympathy with the hon. Lady, but I have to look after the interests of hon. Members in general. It often happens, if we have a statement or an answer to a Question at the end of Question Time, that some iregular debate arises. I believe it to be in the interests of the House that we should endeavour to put some check to that practice. I am in sympathy with the hon. Lady, but if some check is to be set, someone must be excluded.

Mr. Rankin

On a point of order.

Sir K. Pickthorn

It is not a point of order.

Mr. Rankin

Is it not a fact that United Kingdom finance is being utilised to promote these mergers? Therefore, does it not seem unfair that Scotland, which will contribute her share of the money, has no guarantee that she will get a single job as a result of these mergers?

Mr. Speaker

Frankly, what is unfair is to present matters which are not points of order under the guise of a point of order.