§ 21. Mr. Warrenasked the Secretary of State for Trade and Industry if he will make a statement on the negotiations between Her Majesty's Government and the Hawker Siddeley company concerning the funding of the HS146 airliner.
§ Mr. Michael HeseltineI announced on 29th August that the Government are to invest £40 million at January 1972 688 prices in this project. This sum will be adjusted in accordance with movements in the general price level and any overruns in non-recurring costs, not attributable to price level movements, will be borne by the company. The Government's investment will be recovered, by levy on sales, on terms which broadly reflect the respective contributions of the two parties.
With permission, I will circulate further details in the OFFICIAL REPORT.
§ Mr. WarrenWhilst wishing every success to the aircraft and the workers engaged on it, may I ask my hon. Friend to expand a little on the Government's role in financing high-risk projects like this? For instance, it is presently understood that more than one-third of the expenditure on the project will be subcontracted to foreign suppliers. Is any preferential rôle written into the terms of Government loans like this in projects of this nature?
§ Mr. HeseltineMy hon. Friend is referring to the fact that the project has Lycoming engines, purchased from that American company. The possibility of work on these engines being carried out by Rolls-Royce is being discussed, although it is a matter for commercial discussion between Rolls-Royce and the engine company.
It is, as the House will appreciate, a question of balance to work out where the advantage lies from the point of view both of the company and of the British taxpayer in negotiating deals of this sort. The Hawker Siddeley company put to the Government a package that included an element of overseas procurement. It seemed to the Government that, as Hawker Siddeley was investing £40 million plus of its own money, the Government would like to accept its commercial judgment on the total viability of the package and not seek to interfere with individual parts of it.
§ Mr. KaufmanWould not the taxpayer be better protected if this company were taken into public ownership?
§ Mr. HeseltineThere always has to be a precedent, and that would be a remarkable one.
§ Mr. TebbitI congratulate my hon. Friend on deciding to support this project. Does he think that the noise level 689 of the HS146 will be sufficiently low for it to operate unrestricted into Heathrow?
§ Mr. HeseltineThe manufacturers are optimistic about the noise levels of the 146, but as to the precise conditions applying at Heathrow when the aircraft takes off and operates in service towards the latter part of this decade, we shall have to see what conditions are then prevailing at Heathrow.
Following are the details:
I announced on 29th August that the Government are to invest £40 million at January 1972 prices on this project. This sum will be adjusted in accordance with movements in the general price level and is roughly equivalent to £46 million at current prices. It represents about half the estimated non-recurring costs of the project. Should these costs turn out to be higher than forecast, the company will bear full responsibility for any cost over-runs not attributable to movements in the general price level. I am satisfied that Hawkers have the resources to undertake the project on these terms. This is an arrangement for a full risk-sharing investment by the Government rather than the launching aid which has been given in the past. The Government's investment will be recoverable by a levy on sales. The recovery terms broadly reflect the respective contributions of the two parties and the Government will share in the profits throughout the life of the project. This is the first major new aircraft launched in this country for more than a decade. I am convinced that it has excellent prospects of success, both technically and commercially, and that it will bring great benefit to the British aircraft industry as a whole.