BRITISH EUROPEAN AIRWAYS (AIRCRAFT)

HC Deb 15 December 1967 vol 756 cc779-84

11.5 a.m.

The President of the Board of Trade (Mr. Anthony Crosland)

With your permisison, Mr. Speaker, and that of the House, I wish to make a statement about the re-equipment of British European Airways.

The House will be aware that the Government have been considering a proposal from B.E.A. that it should be authorised to purchase 30 or more BAC 2–11 aircraft. To develop the BAC 2–11, and its engine, might cost the Exchequer as much as £120 million, and there is no certainty that there would be sufficient sales of the aircraft to justify the investment of so large a sum.

In these circumstances, and in the light of the urgent need to limit new public expenditure at the present time, the Government have decided that they cannot support the development of the BAC 2–11. We have, however, indicated to B.E.A. that we are prepared to meet a share of the launching costs of the Hawker Siddeley Trident 3B and to approve the purchase of that aircraft by the Corporation should it so decide.

Mr. Onslow

This is an important statement which leaves a great deal unsaid, and the House may well wish to debate its implications fully as soon as possible. What does the right hon. Gentleman mean by the words "should it so decide" at the end of his statement? Does not this simply add insult to injury for the B.E.A. management, or does the right hon. Gentleman see that it has some alternative? What is the right hon. Gentleman's thinking on B.E.A.'s running costs, to which he has not referred, and the connected question of a financial reconstruction? What effect does he expect the decision to have on the morale of airline staff? How does the right hon. Gentleman think the industry's long-term sales prospects will be affected?

The House has grown used to having statements made on aviation subjects in this way and at this time. Sometimes they have been made through Written Answers to planted Questions. It is most unsatisfactory, and grossly discourteous to Members. The House and the industry would be glad if the Minister could explain why it has once again been necessary to convey a decision of this kind in this shabby way.

Mr. Crosland

I am not aware of what is shabby about making a statement to the House. I made it as soon as I could after the Government had taken their decision for a very obvious reason, which must be very familiar to the hon. Gentleman, that, to put it frankly, this is a very leaky industry and a leaky subject. It was quite clear to me, and it has been confirmed by reading the newspapers this morning, that if we had waited until, say, Monday to make the statement it would have given more notice, but the whole of the weekend Press would have been full of speculation and rumour on the subject. For that reason, it seemed to me not merely proper but courteous to the House to make a statement at the first opportunity.

The hon. Gentleman's first question was about the meaning of the phrase, "should it so decide". It is the Government's clear view in this situation that purchase of the Trident 3B would be a sensible policy for the Corporation, but I do not wish to prejudge what its Board might decide, and I am anxious that it should first meet to consider the new situation and put proposals to the Government before saying what the Government's definite view is.

It is not in dispute that for B.E.A. the BAC 2–11 would have been preferable to the Trident 3B in terms of running costs. But after devaluation the Trident 3B is as attractive in terms of running costs as the Boeing 727, for which the Corporation originally asked in July, 1966.

On financial reconstruction, the Government have undertaken that they will take steps to ensure that B.E.A. can operate as a fully commercial undertaking with the fleet it acquires. That still stands.

On the question of morale, there is no concealing that the decision is not that for which the Corporation hoped. On the other hand, we must bear in mind the advice to the House of the Select Committee of the Nationalised Industries that the purchase that B.E.A. may want is not necessarily that which is in the interests of the country as a whole. Therefore, I do not think—and this was made clear in the Select Committee's Report—that the Government are necessarily under an obligation to choose the aircraft the Corporation prefer.

Mr. Ellis

Can my right hon. Friend give an assurance that the ordinary people affected by the decision, those who depend upon the livelihood that they obtain from the British Aircraft Corporation, will be borne in mind? Will there he enough work to keep them fully employed?

Mr. Crosland

There would have been people affected whichever decision we had taken, whether for the BAC 2–11 or the Trident 3B, though it is true, as my hon. Friend implies, that the number of people affected will be greater because we have decided for the Trident than if we had decided for the BAC 2–11. The point that my hon. Friend mentions is very much in our minds. We shall certainly accept a responsibility for finding alternative work for those involved.

Mr. Fortescue

I should also like to ask a number of questions—

Mr. Speaker

A question.

Mr. Fortescue

Then, Mr. Speaker, may I ask the Minister a question, a longish question? Can he tell us where this decision will leave the British aero-engine industry, and, in particular, whether it means that the European airbus has now been abandoned and that it is likely that B.E.A. will now buy the American airbus with British engines, and will he also say what prospects there are for the sales, especially the export sales, of the Trident 3B?

Mr. Crosland

With the best will in the world, I think that one could not put the export sales of the Trident 3B at a very high figure, although after devaluation it may be that there is some possibility not so much of export sales but of import saving sales.

The airbus has not been abandoned. Our commitment remains exactly of the same kind as before.

As to engines, Rolls-Royce in particular, there is still the prospect of building the RB207 for the European airbus, and I would very much hope—we all would —that sales prospects for the RB211, particularly after devaluation, are extremely favourable.

Mr. McNamara

While congratulating my right hon. Friend on his speed and characteristic courtesy in coming here and telling us of the decision as soon as it was made, and also remarking that some of us regard it as being a five-day week in the House, may I ask him to tell me what he estimates to be the launching costs for the Government of the Trident 3D 3B, and to what extent the work on this aircraft will be channelled to Brough, which, if the Cabinet make the right decision this morning, may find itself a little short of work on the Buccaneer?

Mr. Crosland

The launching cost of the Trident 3B, after allowing for a contribution from the company, will be about £15 million.

So far as Brough is concerned, I imagine that Hawker-Siddeley has not yet, so soon after the decision has been taken, had time to decide how it will distribute its work between the different factories.

Mr. Ridley

What is the point of continuing to have B.E.A. as an independent airline if the right hon. Gentleman is going to take all the major decisions for it, and, what is more, probably take them wrong? Will he in any event undertake to give a general directive to B.E.A. if it does not concur in the decision that he has taken?

Mr. Crosland

I think there is a misunderstanding in the hon. Gentleman's mind on the question of the Government overriding B.E.A. I will read the relevant sentence from the Second Report of the Select Committee on Nationalised Industries on this subject: As the assistance "— that is, assistance on launching costs— comes direct from the Government and not from B.E.A., it seems clear that the Government has no obligation to B.E.A. to cause the aircraft of B.E.A.'s choice to be developed, if it can be shown that the development of another type will be cheaper, taking into account all the expenses involved. From this point of view it is an extremely sensible statement. It is in terms of that policy that we are operating.

Mr. Rankin

Is it not the case that if B.E.A. had been able to run the aircraft of its choice it could have done so without any subsidy? Can my right hon. Friend say what measure of subsidy will be required for B.E.A. to run the Trident? Can he also say what type of engine will be used in the Trident?

Mr. Crosland

It will be the Spey engine. On the question of the subsidy, it is perfectly clear that the Government have accepted the obligation which I quoted in answer to a previous supplementary Question, and details of this will be given to the House in due course.

I am not denying the fact, as I have said, that from the point of view of the operating costs of the Corporation the BAC 2–11 was the more attractive case, but the enormous gap in the launching costs that would have fallen on the Government as between the two cases was a very much more decisive factor.

Mr. Doughty

Does it mean that the British Aircraft industry, apart from this plane, has no aircraft, military or civil, that it can sell to foreign airlines or Governments?

Mr. Crosland

What this decision means is that we have accepted the broad recommendations of the Plowden Committee Report, that in terms of major aircraft projects we should look in future to European co-operation. That seems to me to be a policy that has had fairly widespread support on both sides of the House.

Mr. Emery

Does it not really mean that the Government are contracting out, so far as the British industry is concerned, of any new generation of transport aircraft? This must be a death knell to the industry as a whole.

Mr. Crosland

No; of course it will not be a death knell to the industry as a whole, as the hon. Member would dis- cover if he talked to Hawker-Siddeley. What the Government are doing is accepting the recommendation of the Plowden Report that for all major civil types in future, association with partners in Europe is likely to provide the only satisfactory foundation for launching a project which can compete with the United States.

Mr. Frank Taylor

Have the Government taken into account the question of noise? Is not the BAC 2–11 expected to be easily the quietest big aircraft in prospect? Noise is an enormous and increasing problem, and surely full consideration should be given to it?

Mr. Crosland

The noise factor was taken into account. My hon. Friend is right in saying that the BAC 2–11 would have been quieter. It belongs to the new generation of quieter aircraft. On the other hand, the Trident 3B will be no noisier than the Boeing 727, which was B.E.A.'s original choice. But all these factors—the more attractive noise element, the more attractive operating costs, and so on—at the end were easily outweighed by a difference in launching costs between £120 million in one case and £15 million in the other. Hon. Members opposite who are constantly urging us to economise on public expenditure cannot in all conscience say that we should have taken on that extra £105 million burden.

Mr. Onslow

I should like to disabuse the right hon. Gentleman of his view that the Plowden Report, which has in any case been much overtaken by events, commands all-party support. How does he foresee that the RB211 engine can be sold to overseas purchasers when there is no British airframe in which it is likely to be put?

Mr. Crosland

I will not mention names, but I have in mind two particular overseas purchasers by whom the engine was being considered before there was a firm order from B.E.A. for the BAC 2–11. If one looks at the figures after devaluation, the RB211 particularly is an extremely attractive engine, and I have very strong hopes that it will be adopted by the American airbus. Its export prospects are admirable.