HC Deb 02 December 1970 vol 807 cc1286-94
The Minister of Aviation Supply (Mr. Frederick Corfield)

With your permission, Mr. Speaker, and that of the House I wish to make a statement about airbuses.

The House will be aware that the British Aircraft Corporation and Rolls-Royce have asked for launching aid for the BAC311 and its RB211-61 engine at a cost to the Government estimated at some £144 million at present prices. We have also had an invitation from the French, Federal German and Netherlands Governments to rejoin the A300B project. The initial cost to the Government would be some £30 million if we took a share in the airframe part of the A300B project alone, or some £100 million if in addition the RB211–61 engine were also launched for this aircraft. This takes no account of further costs likely to be incurred during the production phase.

After very careful consideration the Government have decided that they cannot support either of these proposals in view of the size of the public investment required. We have to take into account the large sums of money already being devoted to the support of civil aircraft and engines and to bear in mind other calls on public funds.

In the light of this, B.E.A. will have the opportunity to choose between two alternatives, the Lockheed 1011 and the A300B. Both include a large contribution by British industry. The Lockheed 1011 has Rolls-Royce RB211–22 engines, for which Her Majesty's Government recently announced an increase in launching aid up to a limit of £89 million. As for the A300B, Hawker Siddeley are designing and manufacturing the main part of the wing.

The decision in regard to the A300B does not imply any weakening of our interest in joint projects such as the M.R.C.A., Jaguar and of course Concorde, to each of which Her Majesty's Government are making very substantial contributions.

I have already discussed with my colleagues in the other Governments concerned proposals for a joint study of the possibilities of increased co-operation between European aero-engine industries, and they have recently proposed that we should meet. I welcome these proposals and hope that they can be extended in due course to the rest of the aviation industry.

Mr. William Rodgers

The right hon. Gentleman will know that many hon. Members, on both sides of the House, will have been deeply disturbed by his grave news. There will be an unhappy suspicion that the fate of what might have been a fine aircraft, with real export potential, has been settled not on merit but according to preconceptions of public expenditure and public intervention.

I should like to ask the right hon. Gentleman a number of questions. First, can he say what the effect on employment will be, including the employment of those sub-contractors whose work may be taken back by B.A.C. as a result of this decision? Second, will the right hon. Gentleman make it clear, in confirmation of what his statement seems to say, that B.E.A. will have an unfettered choice of aircraft when the time comes?

Third, will the right hon. Gentleman confirm that it is not the Government's intention to support Rolls-Royce in the development of the next generation of RB211 engines, and that is what the decision on the RB211-61 means? Fourth, can the Minister say whether we are now to accept the decline of the airframe industry, an indigenous industry, while options for engines are being kept open? Will he place before the House at the earliest opportunity a White Paper setting out all the facts which his statement does not give as a basis for a debate in Government time?

Mr. Corfield

The hon. Gentleman has asked me a number of questions. The first relates to the effect on employment. As I understand it, about 500 people have been employed to date on this project at B.A.C. I understand that it is hoped to reduce any redundancies to about 300 at the most.

On the question of overall employment, I am not in a position to differentiate between the estimates of additional jobs that might have been created and the estimates of jobs which would retain people in their present employment. The hon. Gentleman will have to await the decision of the company.

On the matter of B.E.A.'s choice, I am sure the hon. Gentleman knows that this is primarily the responsibility of my right hon. Friend, but there has been no agreement with European countries to force B.E.A. one way or the other.

On the question of the next generation of Rolls-Royce engines, the decision announced today applies only to the -61 engine for one or other of these two aircraft.

The hon. Gentleman suggested that the airframe industry was being left to run down. I remind him that we are spending no less than £88 million in launching aid this year. Over the last four years it has averaged £75 million, and over the next four years it is expected to average £70 million.

Mr. William Rodgers

What about the White Paper?

Mr. Corfield

I shall consider giving more information to the House, but I cannot think that a White Paper would be suitable.

Mr. Onslow

Is my right hon. Friend aware that many hon. Members on these benches know how much he must regret having to make his statement today? Is he aware that if anyone is to be held to blame for this disappointing decision it is not, as the Front Bench opposite implied, himself, but the right hon. Member for Bristol, South-East (Mr. Benn), because it is clear that this Government's ability to support the airframe industry has been gravely damaged by the disastrous costs resulting from the Lockheed-Rolls-Royce contract, which the previous Government underwrote? As so much depends, both for B.A.C. and for the nation, on the success of Concorde, will my right hon. Friend assure us that this project is still receiving the Government's fullest backing?

Mr. Corfield

The answer to the last part of my hon. Friend's question is "Yes", and I think that it is one of the utmost importance that B.A.C. should appreciate, as I am sure it does, that to a large extent its success will depend upon overcoming the technical problems that are outstanding with the greatest possible expedition.

Mr. Walter Johnson

Is the right hon. Gentleman able to estimate what effect his decision will have upon the position of Rolls-Royce? Will this mean further launching aid to Rolls-Royce to deal with the situation arising from his statement?

Mr. Corfield

I can see no possible connection between the decision that I have just announced and any demand from Rolls-Royce for further launching aid. As regards the position of Rolls-Royce, the effort in terms of labour employed on the development of the -61 which is in an embryonic stage, has so far not been significant.

Mr. Mather

I sympathise with my right hon. Friend on the dilemma in which he has been placed by the improvidence of the previous Government, but is he aware of the widespread dismay which will be caused in my constituency at Weybridge not only because the jobs of workers and of the design teams have been placed in jeopardy but because we firmly believe that Britain builds the best aircraft? Is my right hon. Friend further aware of the rumour that the vacuum which has been caused by the cancellation of the BAC311 may now be filled by a new Douglas twin-engined aircraft?

Mr. Corfield

We have taken into very careful consideration the employment factors which my hon. Friend mentions. With regard to the gap being filled, the House must appreciate that the BAC311 would have been in direct competition with the A300B, and there is little doubt that there would also have been an American competitor. To a considerable extent, the market for the A300B and the BAC311 overlaps with the shorter-range Tristars, and the American market is facing a considerable cash shortage.

Mr. Jay

Is the Minister aware that many of us deeply regret the Government's decision not to support the BAC311, apparently for the sake of a short-term budget saving, as this is likely to be highly damaging in the long run both to the aircraft industry and to the British balance of payments?

Mr. Corfield

The right hon. Gentleman talks about short-term budget saving. At no stage did any of the calculations, even on the most optimistic assessment of the market, show anything but a very substantial loss for Government funds.

Mr. Temple

Is my right hon. Friend aware that there will be widespread appreciation of his difficulties, and widespread understanding of the fact that he has not permitted the Government to enter into further open-ended commitments? Is my right hon. Friend further aware that Hawker-Siddeley took on a job which was left in the air by the previous Government, and that the company is to be commended for its private enterprise in going forward with its share of the European airbus?

Mr. Corfield

I am grateful to my hon. Friend. One of the dilemmas that has faced the Government, and the previous Administration no doubt, is that B.A.C.'s application for launching aid would have involved the Government in supporting a project in direct competition with another project in which Hawker-Siddeley was engaged without public assistance.

Mr. Whitehead

Will the Minister tell the House whether at any stage a firm commitment was made by the three European Governments to share in the cost of developing the -61 engine, what proportion of the costs they were prepared to bear if such an offer were made and for what aircraft he sees the -61 engine being developed which could not have been developed with the two engines now rejected by the Government?

Mr. Corfield

The answer to the first part of the question is "No". The second question does not arise. I cannot see any application for the -61 at the moment, and it is not the Government's intention to proceed with it.

Mr. Marten

As one of the important things is to try to keep the British Aircraft Corporation design team together, will my right hon. Friend say whether B.A.C. has any propositions to put forward about a short take-off passenger plane?

Mr. Corfield

I have had no such propositions brought to my notice. If they are, I shall look at them on their merits.

Mr. Rankin

Will the right hon. Gentleman verify two figures which he gave? I understood from what he said that unemployment at Rolls-Royce would be affected by his decision only to the tune of 500. Is that correct? I also understood that the amount of aid still being given to Rolls-Royce is £88 million. What is the right hon. Gentleman doing about B.A.C.?

Mr. Corfield

I am afraid the hon. Gentleman is a little bit muddled. I was referring to the 500 total staff hitherto employed at B.A.C. I have just been informed by the company that it hopes to keep the redundancies within that 500 to less than 300. That, of course, is in the immediate future. The more distant future will have to be a matter for consideration. What I said about Rolls-Royce was that there had been no significant effort devoted to the -61 in terms of labour up to date.

Mr. Warren

As last week we found that we were having to subsidise the American aircraft industry through Rolls-Royce, may I ask my right hon. Friend whether this week he will consider this decision in relation not only to the British airframe industry but to the 50,000 people in the British aircraft equipment industry who will be affected by it?

Mr. Corfield

I appreciate that the more British aircraft projects there are the more opportunities there are for the avionics and equipment firms, and, of course, they will be disappointed. Nevertheless, we must face the fact that they have had considerable opportunities with Concorde and in the various military programmes—Nimrod, Harrier, Jaguar—and there is no reason to doubt that they will have considerable opportunities with M.R.C.A.

Mr. Benn

As the right hon. Gentleman knows better than I do, the decision announced today is really the watershed decision for the airframe Indus- try. Will he answer my hon. Friend's question about publishing figures? He referred to calculations, maybe of implied subsidy and implied preference involved in supporting the BAC311 or the A300B. Will he please publish the calculations, because the House cannot reach a judgment unless those calculations are available for study? Secondly, will the right hon. Gentleman tell the House whether this means that launching aid is not available on public expenditure grounds for projects that might emerge, as this would be a significant change of policy? Will he say whether launching aid can be considered in future?

Mr. Corfield

The right hon. Gentleman must appreciate that any application for launching aid, or for any other assistance at any time to any Government, has to be considered against the background of the sum involved, the period over which it is required, the funds available and the other demands upon those funds. This is a characteristic of Government throughout the ages. My present inclination is to see no objection to publishing the figures. I will certainly consider it and discuss it with the right hon. Gentleman.

Mr. Wilkinson

I associate myself with the condemnations from this side of the House of the turgid tergiversation of the right hon. Member for Bristol, South-East (Mr. Benn) on this issue. Will my right hon. Friend ensure that the British airframe industry does not become the jerry-builder of foreign designs? Will he also make sure that balance of payments interests are paramount and that a virile industry is maintained in the future?

Mr. Corfield

My hon. Friend will appreciate that B.A.C. in particular is the British contractor for the largest and most costly civil project that has ever been undertaken, to wit, Concorde.

Mr. Dalyell

To get back to the point raised by my right hon. Friend the Member for Bristol, South-East, what does the Minister mean by the phrase in his statement, "further costs likely to be incurred" in relation to the BAC311? Is it the suggestion that the B.A.C. calculations are not as frank as they should be? What does it mean?

Mr. Corfield

If the hon. Gentleman had listened he would have appreciated that that remark was entirely in relation to the A300B. It is not in any way a reflection on the calculations of B.A.C. or anyone else. It is clear that the terms we were offered to rejoin the consortium opened up a number of other liabilities, our best estimate of which was that the £30 million entrance fee, so to speak, would probably not be recovered.

Mr. Biffen

Is my right hon. Friend aware that, whilst there will be general understanding of the anxiety expressed by hon. Members in whose constituencies aircraft interests exist, there will be a general welcome for his statement from those of us who hope that, in future, Government procurement policies will reflect a much wiser attitude towards public expenditure? Will he confirm that, as a result of his decision, the nationalised airline companies will have commercial freedom in the choice of the aircraft that they wish to purchase?

Mr. Corfield

I appreciate my hon. Friend's sympathy under both heads, but I remind him that the freedom of B.E.A. and B.O.A.C. is a matter for my right hon. Friend the Secretary of State for Trade and Industry.

Mr. Douglas

Will the Minister concede that the development of the RB211-61 engine is an integrated process and that, therefore, his decision today undermines the possibility of technological development and the use of carbon fibres? Secondly, will he indicate clearly that there will be no difficulties in employment of Rolls-Royce workers in Scotland, because we can afford no more redundancies in that region?

Mr. Corfield

I really do not know what the hon. Member means by "integrated process". The -61 is only one of about half-a-dozen variations of the 211 which have been put forward from time to time. As to employment in Scotland, the hon. Member must wait for the decisions by the management of the companies concerned.

Mr. McMaster

As the decision announced by my right hon. Friend will undoubtedly favour Lockheed, particularly in view of the statement by the Chairman of B.E.A. in expressing preference for these aircraft, will he consider whether it is posible to renegotiate the Rolls-Royce contract with Lockheed in view of the escalation of costs, or would he favour supporting an upgraded Rolls-Royce engine for a more advanced Lockheed?

Will my right hon. Friend also look favourably on the production of a British vertical or short take-off aircraft for the future, in order to protect our research and development teams in the British aircraft industry?

Mr. Corfield

My study of the Lockheed contract and the prospects of renegotiation has proved to be one of the most unproductive exercises I have ever undertaken. As to V.T.O.L. or S.T.O.L. development, my hon. Friend will realise that a very large number of problems have to be considered and overcome before we can look at this as an immediate future project.

Mr. Kinnock

I find difficulty in recalling any specific answer by the Minister to the fourth question of my hon. Friend the Member for Stockton on Tees (Mr. William Rodgers) concerning the future of the airframe industry. Will the right hon. Gentleman now give a discernible answer to that question so that the fears of people in my constituency may be allayed?

Mr. Corfield

If the hon. Member will have the courtesy to remind me of the question, I shall endeavour to answer it.

Mr. Kinnock

My notes of my hon. Friend's fourth question are probably less copious than those of the Minister. [Interruption.] After all, I am not a Minister. The wording as I have it was whether the Minister would give an undertaking to safeguard against the decline of the airframe industry. I do not have more copious notes than that.

Mr. Corfield

As I have explained already, the amount of launching aid currently being given to the aircraft industry is £88 million this year, £75 million on average over the last four years and an estimated £70 million in the next four years, without taking into account any new project which may come along. That is not the measure of a declining industry.

Several Hon. Members rose—

Mr. Speaker

Order. I must protect the business of the House.