HC Deb 09 December 1974 vol 883 cc45-52
The Secretary of State for Industry (Mr. Anthony Wedgwood Benn)

On 22nd July Hawker Siddeley Aviation notified the Government that, in its view, continuing expenditure under the contract for development of the HS146 aircraft, supported by the Government in August 1973, was no longer justified and that the HS146 was unviable as a commercial project at that time. Accordingly it proposed mutual termination.

The Government considered that the arguments put forward by the firm were not wholly convincing and began a careful examination of its case and the wider issues involved. As part of this review, I proposed to the firm that it should meet jointly with myself and the trade unions so that all those concerned in the future of: the aircraft could be involved in the issues. Hawker Siddeley refused. However, I have held full discussions separately with the trade unions and the firm and have received many views from Members and the public.

While the Government were still considering the matter, Hawker Siddeley Aviation wrote to me on 14th October saying it proposed to terminate work on 21st October unilaterally. This it did, cancelling simultaneously all the sub-contracts that had been negotiated. Since then it has stated to me that it is willing to contemplate carrying on only if the Government provide all the required funds from now on, which would be at least £120 million over the next three years at today's prices. This would represent a substantial increase on the original estimate due in part to underlying inflation and to extra costs arising on sub-contracts which would now need to be renegotiated.

The Government have now completed a thorough review of all the options. We have had to accept that the 50–50 funding is no longer open to us and we have decided, taking all the factors into account, that we cannot justify 100 per cent. Government funding. The Government are, however, concerned to maintain this type of capability in the civil aircraft industry, and to give the board of the new nationalised aircraft corporation the opportunity of reviewing the HS146 pro- ject itself in the light of the circumstances of the time and its plans for the industry as a whole.

Sir Arnold Hall, on behalf of Hawker Siddeley, has assured me that the company will retain the necessary jigs, tools and drawings on the HS146 and relevant design capacity. The Government will be prepared if necessary to contribute towards the relatively minor costs of keeping the option open.

I should add that I am now hopeful that a tripartite meeting will take place with the trade unions and Hawker Siddeley Aviation to discuss the situation and how best to maintain a design capability related to the HS146, and I have issued invitations for a meeting to be held later this week. I should also add that the Government are considering how the House could be provided with fuller opportunities for discussing this type of project in the future.

Mr. Heseltine

I should like to ask the Secretary of State three questions.

First, what is the Government's assessment of the prospects of the project, and where does it differ from that of the company? Secondly, will the right hon. Gentleman clarify the position about the funding arrangements to which his statement refers? Will the Government take on 100 per cent. of the responsibility for the interim period? If not, what less sum do they intend to take on? Thirdly, the right hon. Gentleman says that he cannot justify 100 per cent. funding of the project itself. Is not that precisely what his proposals for nationalisation of the industry will achieve, having added in the meantime the cost of buying out the private sector?

Mr. Benn

On the hon. Gentleman's first question, the assessment made by Hawker Siddeley was made on a 50–50 basis on the basis of the existing negotiated sub-contracts. By terminating the sub-contracts unilaterally, the Government were being asked not simply to transform themselves from 50 per cent. supporters to 100 per cent. supporters but to do it on the basis that the sub-contracts would have to be renegotiated at a new price.

On the question of the funding of the maintenance of the option, I do not think I can go beyond what I said in my statement, namely, that The Government will be prepared if necessary to contribute towards the relatively minor costs of keeping the option open". On the final question, the hon. Gentleman should have regard to the fact that, at a time when economic circumstances may be making it difficult for the private sector to fund aircraft projects, the rôle of public ownership in maintaining confidence is an important factor.

Mr. Whitehead

Will my right hon. Friend accept that most of us on this side of the House think that in the regrettable circumstances which have led to the present situation he has probably made the right decision? Speaking in the immediate future context of nationalising the aerospace industry, will his Department undertake a review of all the major possible aerospace projects, including the HS146 and the BAC311?

Mr. Benn

I can understand my hon. Friend's disappointment with what I have said, and I am grateful to him for realising that the Government had to do it. The new board of the nationalised aircraft corporation will be undertaking a strategy study. I hope that the House has not left out of account what I said at the end of my statement, that, in our view, the House should be provided with fuller opportunities for discussing aircraft projects.

Mr. Wall

As discussion started on the project in July, why has it taken so long to reach a final decision? Will the right hon. Gentleman say for how long the options to which he referred are likely to remain open? Will they be for one, two or three years, or longer?

Mr. Benn

To take the latter part of the hon. Gentleman's supplementary question first—and I know his interest— the tripartite meetings this Friday will begin the first joint examination there has been of the aircraft and will, I hope, be fruitful. As I said, I hope that the House will have fuller information than it has had in the past. The fact that it has not been possible hitherto to have these tripartite discussions explains why the Government took some time to examine the Hawker Siddeley arrange- ment. There was also an intervening election which deflected Ministers away from these matters.

Mrs. Hayman

I welcome the statement made by my right hon. Friend. What time scale does he envisage for a reassessment of the project? I recognise that the Department has made some contribution towards safeguarding the design staff, but is my right hon. Friend aware that redundancies will occur on the shop floor at Hatfield and other Hawker Siddeley branches when the contracts for the Tridents start to run out? Many of us are concerned that large-scale redundancies will occur throughout the industry in the interim.

Mr. Benn

My hon. Friend is right in saying that anxiety about redundancies does not arise in the immediate future. It is the run down of other work that makes the Hawker Siddeley 146 of such concern to those who work in the industry. Given the likelihood that the market for the aircraft has slipped somewhat and that the immediate redundancy position is not of major proportions but lies, as my hon. Friend says, in the midterm, I hope that we shall have time to consider these matters before any irrevocable decisions are taken.

Mr. Pardoe

Is the right hon. Gentleman aware that some of us on the Opposition benches are glad that he has at last been able to arrange a tripartite meeting and find it regrettable that it should have been refused by the company in the past? How many redundancies will there be as a result of this decision? Can the right hon. Gentleman say whether the Government would have continued this project on a 50–50 funding basis?

Mr. Benn

The last part of the hon. Gentleman's supplementary question is not answerable because it is hypothetical. Even retrospective hypothetical questions are difficult for Ministers to answer. The initiative for termination came from the firm and not from the Government, and that should be placed on record. The number of redundancies involved depends upon the capacity to absorb in other work those who are now working directly on the aircraft. The mid-term problem depends on whether other projects can be advanced and on the attitude that will be adopted by the new aircraft corporation on this project when the corporation has had a chance of assessing its strategy.

Mr. R. C. Mitchell

Will my right hon. Friend have talks with the Leader of the House on whether the whole matter can be discussed by a Select Committee of the House, so that when the industry is eventually nationalised there will have been in the intervening period an assessment of the future of the project?

Mr. Benn

Having had responsibilities for the aircraft industry over many years, I share my hon. Friend's view that the House should have more information about projects of this kind. Some Select Committees already have responsibilities and have reported on the matter. I shall certainly put what my hon. Friend said to the Leader of the House, but I feel sure that the handling of these difficult decisions—and this applies to Ministers of all parties—would be likely to be improved if we could get greater openness in the options and alternatives, as we did with Concorde earlier this year. That would be welcomed by management, unions, Members of Parliament and the public.

Mr. Tebbit

Will the right hon. Gentleman answer the question which my right hon. Friend the Member for Henley (Mr. Heseltine) put to him? What is the Government's assessment of the economic viability of the aircraft, and when was it made? Secondly, will the right hon. Gentleman say which was the heaviest handicap the project had to bear? Was it that it was not economically viable, that it was not subject to an unbreakable treaty or that it happened to be destined to be constructed at Hatfield and not at Bristol?

Hon. Members

Cheap.

Mr. Benn

The hon. Gentleman may perhaps do less than justice to Governments of any party which have to handle difficult decisions of this kind. The kindest thing to say is that on reflection the hon. Gentleman might wish that he had not said what in fact he said at the end of his supplementary question.

As to the assessment of the project, I have had some experience of assessments over the years, and all assessments of projects and their viability depend on assumptions made about the size of the market, the spread of the market, the time at which the aircraft can enter into service and what its competitors are likely to be. In addition, we have to add now the uncertainties arising from the world energy crisis, the prospects for world trade and various other factors. With the best will in the world, it is not possible for a firm or for a Minister to say with any certainty exactly what are the economic prospects. One reason why we are seeing that the option is maintained is to ensure that these matters can be studied on an ongoing basis.

Mr. James Johnson

Bearing in mind that the Labour Party made an election pledge to nationalise the industry, is my right hon. Friend aware that his statement warms the hearts of hon. Members who have aircraft workers in their constituencies and of workers on the shop floor who, to be blunt, were a little anxious about what he would say today? With his detailed knowledge, does my right hon. Friend think that the aeroplane is a winner, as do the workers on the shop floor, and does he think it possible to make it? If he does not, we may see the demise of the civilian side of the aviation industry in the 1980s.

Mr. Benn

Never in anything I have said have I expressed any doubt about the design significance of the HS146 which, coming from a company with such a fine record of producing and selling good aircraft, must commend itself on first examination to anyone who looks at it. That was the approach I made, and until the early part of July I had every reason to believe that that was the attitude which the company adopted. That is the attitude which those who work on the aircraft have consistently adopted.

I repeat what I said earlier. I am in agreement with my hon. Friend that at a time of great uncertainty, public ownership may well be the best way of building confidence in an industry that could otherwise find itself caught up by short-run calculations of profitability that might not relate to the country's long-term future as an engineering nation. Similarly, if the Conservatives had not brought Rolls-Royce into public ownership, I doubt that the RB211ℰ524 would now be going ahead.

Mr. Parkinson

Will the right hon. Gentleman elaborate what he meant by maintaining design capability? He went on to say that it would involve relatively minor expenditure, and he spoke of jigs, drawings and tools. He did not mention people. The hon. Member for Welling and Hatfield (Mrs. Hayman) subsequently congratulated the right hon. Gentleman on keeping the design team together, but I do not think that he actually said that in his statement. I cannot see how the design team could be kept together with only relatively minor expenditure. Because many of my constituents are involved, I am anxious that the right hon. Gentleman should clear up what he means by "maintaining the design capability".

Mr. Benn

I repeat that the Government's decision, which I have announced today, is not to go for 100 per cent. funding at a cost of £120 million. I know the hon. Gentleman's concern, but he will realise that this is not the only project, even in Hawker Siddeley Aviation. I drew special attention to the jigs, drawings and tools because at one stage anxiety was expressed by those who work in the company that those jigs, drawings and tools might be lost. I thought it right to give that degree of reassurance in my statement today.

Mr. Dalyell

What sensible advice can be given to potential sub-contractors on the time scale of decisions?

Mr. Benn

I wish that I could help my hon. Friend on that. The sub-contractors had their sub-contracts unilaterally terminated by the company and I am not in a position, therefore, to say anything about the possible future in that regard. Clearly, the statement I have made today will be studied by the subcontractors, as I hope it will be by those who work in the industry.

Mr. Heseltine

The Secretary of State has consistently refused to answer a crucial question raised by, among others, my hon. Friend the Member for Chingford (Mr. Tebbit). The right hon. Gentleman tells us that he has done a detailed examination. What the House wants to know is how the advice that he has been given differs from the advice given to him by the company.

Mr. Benn

The company gave us its view based largely on rates of inflation. This was known because the company made the statement itself. We have had to take into account, as best we can, all the factors I have mentioned in answer to earlier questions. A wide range of factors had to be taken into account. We have come to the conclusion that the 100 per cent. funding, after the renegotiation of sub-contracts at a higher level, would not be justified.

Mr. Heseltine

What is the figure?

Mr. Benn

If the hon. Gentleman will be patient, he will know that I ended my statement by saying that I felt that the House was entitled to fuller information. I put in that phrase consciously because when I was the Opposition spokesman on aviation I often used, unsuccessfully, to urge the same course on the hon. Gentleman.

Several hon. Members

rose—

Mr. Speaker

We must move on. We are in Private Members' time. I have allowed time for three statements and questions upon them, and I would remind the House that there will be an Adjournment debate on the subject of the HS 146 project on Thursday evening. Therefore, those hon. Members who have not been able to catch my eye today might like to listen to that debate.