§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Goodlad.]7.15 pm
§ Mr. Rob Hayward (Kingswood)
I welcome the opportunity of raising the subject of the A320 and launch aid that might be given for it. This matter was discussed as recently as 2 December. Today I shall raise one or two of the issues that were mentioned by the Minister of State in his reply to that debate, and touch on some aspects that have arisen since then. I am conscious that a number of other hon. Members wish to speak in the debate, so I shall not take longer than I need, in order that they may have an opportunity to do so.
When I was preparing my speech, I was tempted merely to comment—Yugoslavia—and then sit down. We heard today that the Yugoslavian state airline is to order five A320s and that it has options on a further three A320s. That confirms the British Caledonian decision of month ago that the A320 is a good aircraft, by any measure. We are no longer talking about an airframe that is to be sold purely to airlines that have a vested national interest. British Caledonian is a highly regarded independent airline, and the Yugoslavian airline cannot be said to have any direct interest in the A320.
Before I say why launch aid should be granted to Airbus Industrie-British Aerospace, I shall comment on Airbus Industrie in the light of what my hon. Friend the Minister of State said on 2 December. My hon. Friend raised three matters which, in my opinion, are worth considering. First, he mentioned the productivity of Airbus Industrie compared with that of American manufacturers. There appears to be a poor comparison between the two. British Aerospace and the other parts of the Airbus Industrie have however made efforts during the past few years to improve their productivity. If the A320 is granted launch aid, the improvements that British Aerospace has made will, I believe, be continued, and the comparison between the American and European manufacturers will continue to improve. However, in view of the differences in labour legislation, we must remember that the same productivity can never be achieved by western Europe as can be achieved in the United States.
My hon. Friend the Minister mentioned the management structure. There is room for greater emphasis, in particular, on the non-French management in the Airbus Industrie consortium. Of course, Britain entered the consortium at a late stage, and if the Government see fit to grant launch aid, I hope that there will be an improvement in British representation in the 72 senior échelons of Airbus Industrie management. I say "British", but I realise that other nations may have an interest in a change in the management structure also.
My hon. Friend also mentioned subcontractors. It is important that Airbus Industrie considers not only the major contracts but the subcontracts. About 35,000 people in the United Kingdom are employed in companies with an interest in the avionics of civil aircraft. They should not be forgotten. It is important that the senior management in Airbus Industrie considers that if the Government see fit to grant launch aid.
The Government should be able to grant launch aid not only because of the arguments that were advanced on 2 December, but for a number of other reasons. We are discussing a non-party issue. About 190 signatures from hon. Members of all parties have been put to an early-day motion. The subject interests hon. Members of all parties and I shall welcome contributions to the debate from both sides of the House.
Long-term viability was a theme which interested my hon. Friend the Minister on 2 December. He was not interested purely in the question of whether the airframes could be sold, but in whether a financial return could be made. The Minister referred to the Viscount as the only plane that had been able to repay the grant aid given by the Government of the day. Today's circumstances are different from those which have applied in western Europe since the war.
Today more launch or pre-launch orders have been achieved for the A320 than for any other airframe by any manufacturer in western Europe since the war. Its marketability and saleability to any part of the world cannot be in question. If the Government give the go-ahead the 88 firm orders and options that Airbus Industrie already has will be built on substantially. We are not talking about new aircraft but replacements for old and aging aircraft. We are not trying to carve a new niche in the market.
We must consider what some of the authoritative bodies in the aircraft industry suggest are the potential markets for a 150-seat aircraft. Depending on whether one considers Boeing, Rolls-Royce, Merrill Lynch or any other authoritative consideration relating to 1997, 1998, 2002 or 2003, the general estimate is that 3,000 airframes are involved over the next 20 years. That is the average figure. Some of the estimates are above 4,000. The lowest for the next 15 years is 2,500. If Airbus had even a 30 per cent. share of that market it would involve over 700 airframes. At well under that figure the launch aid can be repaid. We are talking not of a grant that will not be repaid, but of a loan which if 700 airframe orders are achieved will be more than repaid.
A major argument against granting launch aid is that three major manufacturers are in the market and that one or two of them will inevitably make a loss, not merely in relation to airframes but to aero engines. There are only two major contenders in airframes—Boeing and Airbus Industrie. McDonnell Douglas has said that it is on the verge of withdrawing. It would be a bad day for European airlines, and airlines worldwide, if there were a monopoly supplier of this or any other airframe.
It is important that the launch aid be granted because the A320 will be built with or without British participation. If we do not participate job prospects will be transferred to other countries in western Europe, and possibly to Canada. The French have already decided to 73 go ahead. We know from orders by British Caledonian and the Yugoslav airline that the aircraft is viable. Other countries will snap up rapidly our opportunity to create jobs. The number of hon. Members here tonight and the different parts of Britain that they represent shows how many places will be affected by the decision. At a reasonable estimate at least 10,000 jobs are at stake.
If grant aid is not given immediately, between 350 and 500 jobs in the design team will be at risk. Jobs are associated not only with the wings and their moving parts, but with other aspects of British Aerospace and work outside that organisation.
Launch aid must be granted urgently. We cannot go on and on considering. As those involved in airframe manufacture know, we are already on a course of rising expenditure in terms of British Aerospace. My hon. Friend the Member for Cannock and Burntwood (Mr. Howarth) will discuss the details later. The curve rises with each month.
In some ways we are already late into the market. Some say that decisions should have been taken by Airbus Industrie and the Government many months ago so that the launch could have taken place several months earlier. We are now committed to a 1988 launch, which some say is too late.
If the Government defer a decision beyond early in the new year we shall endanger the whole project for the British. We could not blame the French, the Germans and other members of the consortium if they said, "I am sorry. We have waited too long."
On 2 December the Minister said that he hopedwe shall be in a position to reach a decision early in the new year."—[Official Report, 2 December 1983; Vol. 49, c. 117.]That must be before the end of January or we can guarantee that 10,000 jobs in the United Kingdom will be job opportunities in other parts of Europe. We shall guarantee that British Aerospace loses its place in the Airbus Industrie consortium and we shall destroy the longterm future of civil airframe manufacturers in Britain. I appeal to the Government to take a favourable decision on launch aid for the A320 early in the new year—that is January.
§ Mr. Lewis Carter-Jones (Eccles)
I congratulate the hon. Member for Kingswood (Mr. Hayward) on presenting an excellent case for the A320 airbus. I wish to indulge in a little nostalgia and sentimentality. The wing section for the Mosquito in which I flew in wartime was built at Broughton in north Wales and its Merlin engine was built by Rolls-Royce. Despite that, I believe that nostalgia and sentimentality never buttered any parsnips. What we need is launch aid to get the aircraft off the deck.
A greater sense of urgency has been apparent recently. I regret that our co-operation with Airbus Industrie has not been as good as it should be. We thought that the RB211 and Tristar would remain for ever and a day. Tristar has gone, manufacture has ceased and Lockheed is out of the civil aviation industry. McDonnell Douglas flashed through the sky with the DC10 and it, too, has now vanished from sight. We are left with Boeing or British Aerospace. The one aircraft that we need for the future is the A320.
The hon. Member for Kingswood was absolutely right —the death knell of the British aviation industry on the construction and power plant side will be sounded unless 74 launch aid is given. The A320 will get off the deck without our support and without our action, but no British civil aviation industry will be left. That is the reality of the position. If our product was inferior I should not mind too much, but we have a superior product. The high technology wing is welcomed by Airbus Industrie. It wants us as a partner, it needs us as a partner, but it can go alone. The hon. Member for Kingswood was right —time is running out, and running out very fast indeed.
What is intriguing is that the Secretary of State, British Aerospace and Rolls-Royce are coming closer together than I have ever known during my time in the House. There is a great sense of urgency and a tremendous willingness to co-operate. I believe that we should have a larger share of the high technology wing section. A great deal more should come to us. We deserve a great deal more, but we will deserve and get a great deal more only by our own efforts. No one will do it for us. If in fact we go ahead on the airframe side, we must make sure that there is compatibility between the airframe and the engine, and the pylons must be designed to take the Rolls-Royce V2500. That is essential.
I return to my little trip of nostalgia and sentiment down memory lane. In my days as a navigator on night fighters I used some of the most advanced radar equipment then available in the world the mark 10A1-air interceptor. There is nothing wrong with avionics that we produce today in this country. That must be another condition. An aircraft today can be divided into three component parts: the engine—that is the power plant—the airframe and the avionics. We want a cut of every one of those component parts. The Minister must make sure that this area of technology, in which we can hold our own with anyone, is not allowed to go down the drain.
The A320 must get airborne with the maximum amount of British component pars. We are as one in the House tonight. I endorse what was said by the hon. Member for Kingswood—we want action, we want it quickly and we want to make sure that the full weight of the Minister is put behind ensuring that we get the A320 with a substantial amount of British components.
§ Mr. John Wilkinson (Ruislip-Northwood)
I congratulate my hon. Friend the Member for Kingswood (Mr. Hayward) on introducing the debate this evening. He has taken a consistent interest in the aerospace industry and we are grateful to him. We appreciate also the contribution of the hon. Member for Eccles (Mr. Carter-Jones), who spoke from a wealth of experience. His contribution, I am sure, has been noted by the Minister.
We are coming to a crossroads in British civil aviation. We cannot delude ourselves about that. If we wish as a country to continue to participate in the manufacture of large civil jet airliners, Her Majesty's Government must provide launch aid for the A320. There can be no delusions about it.
The hon. Member for Eccles was perhaps exaggerating a little when he said that it would mark the demise of the British civil aircraft industry if Her Majesty's Government did not provide launch aid. I understand the spirit behind his remarks but I think that what he said was perhaps implicitly to decry to some extent the importance of such products as the BAe 146, the HS125-800 and the Jetstream 31, which are all making good progress at present.
§ Mr. Carter-Jones
I am guilty of exaggeration only in the sense that I was talking about large civil aircraft.
§ Mr. Wilkinson
I am most grateful to the hon. Gentleman. The hyperbole in which he indulges is part of his charm and effectiveness. In matters of this type one must put things over a little strongly at times if one is to be fully understood. I will not shirk on that tonight because, as I said, if we wish to remain in the large civil airliner business Her Majesty's Government must come up with the launch aid.
It is a decision of major strategic importance for this country. I cannot see an industrial decision of comparable magnitude in the foreseeable future. It would in a way be flying in the face of the great progress that we have already made as a partner in the Airbus project if we did not support the A320. Indeed, I wonder what our position would be on the Airbus consortium if Her Majesty's Government were not to support with launch aid on the A320 British Aerospace's participation in the project. It would be highly embarrassing because, as hon. Members on both sides of the House have said, the commercial prospects for the airliner are so good that we can be certain that another manufacturer would be found to build the wings and to take up the portion that we all hope would be the role of British Aerospace.
We should also remember—particularly those hon. Members with a Treasury background or Treasury interest —that British Aerospace's participation to date in the A300 has been without Government launch aid, that 350 Airbuses have been ordered and that 70 per cent. of the existing Airbus orders have been for export. The 767, which is the nearest Boeing equivalent to the B2-B4 Airbus, has 175 orders of which only 25 are for export. While the Americans have the advantage of a large home market, nevertheless, the European Airbus has shown itself to be appreciated worldwide by airlines, by the operators and by the travelling public. It is noteworthy that to date 46 airlines worldwide have chosen the Airbus. That is an important fact and a strong base on which to build.
When we are considering the future of the British airframe industry we should not ignore the strategic importance also of, and correlation with, our power plant industry —our our aero engine industry. They go hand in glove. The hon. Member for Eccles referred to the Lockheed 1011. That surely is an example of the great risk we would be undertaking if we were simply to provide launch aid for the IAE2500, the five nation consortium engine in which Rolls-Royce is participating, in the hope of hanging it on an American airframe. That was the great hope for the RB211, but Lockheed went out of the large civil airliner business and now it is much more difficult to find an airframe on which to hang the big RB211—only the 747 in fact. The RB211 derivative—the 535—we can hang on the 757, but the original big 211s were designed for the 1011, and therefore in the engine sphere we should be extremely vulnerable were we not to support the European airframe industry.
Experience with the Airbus tells us how unwise it would be for the United Kingdom not to get its Rolls-Royce power plant certificated for the A320. Rolls-Royce must now bitterly regret the fact that it never got the RB211 certificated for the B2—B4, and A310 Airbus. I am sure that the company feels today that it should never make the same mistake again. Equally, I hope that Her 76 Majesty's Government will not again make the strategic mistake that they made with the 1011 in relation to our airframe and aero engine industry.
I appreciate that large sums of money are involved, but it is not all money up front. There is a certain amount up front but, as with all launch aid, it will be supplied over a period of time. For the A320, British Aerospace is looking for £437 million from 1983 to 1991, and the peak of expenditure will come in the financial year 1986–87 at about £95 million. Thus, Her Majesty's Treasury should not become too apprehensive about the short-term consequences. It should, however, be worried about the long-term consequences for a major critical strategic industry if we were not participating.
Hon. Members have referred to the increasing dominance of Boeing in the market. Do we in Europe really want to be almost wholly dependent on Boeing for the supply of large airliners? To put it crudely, one must sell a lot of suit lengths and bottles of whisky to pay for the import of high technology, and particularly high value items such as civil airliners. I am sure that the Minister, who takes a particular interest in high technology, will be aware of that argument.
Market analysts in the member companies of which there are four — we are talking of Messerschmitt, (Deutsche Airbus), Aerospatiale, Casa and British Aerospace—have carefully done their calculations; they will not stake the future of their companies on what they believe to have been an ill-thought out and ill-judged venture. Indeed, unless Airbus Industrie has a family of aeroplanes to offer, it can be no true competitor to Boeing, for we know what the situation is in the market place. The Boeing company says to an airline, "We see that you have a requirement for some Jumbo jets. We see that you also have a requirement for a number of single aisle twinjets. We can do a nice package deal for you." Because the profit margin on the Jumbo is so huge — and it has a monopoly — the company can sell the single aisle twinjets, the 737s, at a knock-down price. Unless Airbus Industrie can offer a family of aeroplanes, it will never be able effectively to compete.
The clearest niche in the market at present is in the 150-seat category. Of the single aisle twinjets that were built, about 3,500 are still in existence—the 1-11s, Caravelles, F28s, DC9, Tridents 737s—and all must be replaced, and that is without making allowance for increased growth in air traffic—which is happening now —and without making allowance for the extra passenger appeal of an ultra fuel-efficient, quiet, economic aeroplane such as the A320. The niche is there and the airlines admit it. Companies such as Delta are waiting for the right aeroplane, and such airlines are not just waiting for derivatives.
It suits Boeing to keep its 737s churning out —Boeing has just produced its 1000th — in addition to which Boeing has its 737-300 and maybe a 737-400. Once Airbus Industrie comes into the market with a new aeroplane, the A320, which will offer a dramatic quantum jump in performance and economy, Boeing will have to come up with its 7X7, and it is not keen to do that, not only because it is beginning to make money out of the 737, but because the development costs of the 757 and 767 and the need, in addition, to produce yet another aeroplane—the 7X7 or whatever new 150-seater—will be difficult for the company.
77 The McDonnell Douglas company has made its decision. It has opted out, to all intents and purposes. It will continue with a derivative aeroplane, the MD80, but is not maintaining its position in the large civil airliner business.
Is this the moment for Her Majesty's Government to opt out? The French and German Governments are not opting out. They have already put £30 million into the project and we can be sure that the commitment of the French Government is complete because they know that if Europe is to mean anything in high technology it must have a major civil airliner capacity.
My hon. Friend the Member for Kingswood has done an excellent job in raising this matter. We have agreement on the key points, and those agreements Airbus Industrie has already undertaken. They include the provision that 20 per cent. of the work on the new project should be with British Aerospace and that the A320 will be designed from the start to take the Rolls-Royce consortium engine, the IAE 2500. Airbus Industrie has expressed the hope that 20 per cent. of the equipment supplied to the A320 will come from British contractors. I do not think that we can hope for better than that, so let us hope that Her Majesty's Government will not tarry and delay and miss this opportunity.
§ Mr. Hayward
My hon. Friend referred to 20 per cent. In a parliamentary reply on 2 December, the Minister of State referred to 26 per cent. as being the proportion that British Aerospace could reasonably expect.
§ Mr. Wilkinson
There is no conflict on this. I expressed the hope of the board of Airbus Industrie that it would be that percentage. After all, the company needs a project that will sell in the market place, so it must be at the right price and have the right performance. Accordingly, British equipment suppliers must come up with the goods in terms of price, quality and performance. The board expressed the hope of at least 20 per cent.
The time has come for us to decide to provide launching aid for the A320 and at the same time for the IAE2500 because the two go hand in hand. If the British Government do that, they will be spending money wisely for the future. After all, so much money has gone to so-called lame ducks such as British Leyland, British Steel and British Shipbuilders. Now we have a project that will meet the needs of the market. It has every expectation of making a profit. That is the kind of investment for the future that should be receiving the support of the British Government.
§ Mr. Stan Thorne (Preston)
I welcome the opportunity to participate in this debate. Not long ago, there was a major lobby here by people engaged in the aerospace industry. It is appropriate for me to declare my interest. I am sponsored by the Technical, Administrative and Supervisory Section of the Amalgamated Union of Engineering Workers, which has the largest membership of any trade union in the aerospace industry. In the course of that lobby, that union expressed its concern about this matter.
I particularly welcomed the observations of the hon. Member for Ruislip-Northwood (Mr. Wilkinson) about the funding of the A320 project. I recently participated in a meeting with the Secretary of State, and I am aware that 78 Government Members have also sought a meeting with him. The Secretary of State expressed some concern about the information about funding provided by British Aerospace. Like the hon. Member for Ruislip-Northwood, some Labour Members have also met Sir Austin Pearce and ascertained that a detailed presentation about funding has been submitted to the Secretary of State. As the hon. Gentleman has pointed out, there has been no demand for £400 million to be placed on the table early in 1984 We are talking about a phased programme of funding, and I am indebted to the hon. Gentleman for pointing out what that means.
At the root of the problem is our concern for the future of a major industry in Britain. I was brought up not very far from Trafford park in Manchester. In those clays, Britain was called the workshop of the world. In many countries, industries exist today because of the effort made by Britain to create those industries. In recent years, we have seen the erosion of many of our major industries, and that has been most disquieting. Will aerospace be another of those industries?
This debate is primarily about the A320. If I were to refer to the agile combat aircraft or the Rolls-Royce 2500 engine, I might be ruled out of order, but those two projects await an urgent decision by the Government and should be given favourable consideration.
I acknowledge the presence of the hon. Member for South Ribble (Mr. Atkins), who arrived in South Ribble by accident last June. Jobs are the main consideration of the work force in British Aerospace in the Preston area. It has been said that 10,000 jobs may be at stake. Boeing would laugh all the way to several banks in the United States if we allowed this opportunity to develop our own aerospace industry to go by default.
The Secretary of State mentioned at the meeting that he was slightly disturbed about the management of Airbus Industrie in Toulouse. I visited Toulouse with a number of my colleagues and a number of Conservative Members to see what was going on. It may be that we were blind. They say that there are none so blind as those who do not want to see. However, my impression was that it was an active, going concern with a management that would certainly serve us well by promoting the future of the aircraft industry.
I understand that an order for the A320 from Yugoslavia has been announced today. It may be said that an order for eight aircraft is not very important. However, I believe that it may be only the beginning of a flood of orders.
I am aware that other hon. Members wish to participate in the debate, so I shall be brief. There are some crucial questions that the Secretary of State should consider. Reference has been made to the need for investment in a variety of industries. There have been claims and counterclaims for investment. At a recent meeting, the Secretary of State mentioned biotechnology. We understand that there are competing demands for investment. What perturbs me is the fact that the Government are prepared to continue to tolerate an outflow of several thousand million pounds from this country in the form of investment in foreign industry. It is time that the Government made it clear to those who have the capacity to invest in the private sector that they should concentrate more of their resources within the United Kingdom. Conservative Members often talk in tones of pronounced patriotism, but 79 when pounds and pence are involved patriotism seems to go out of the window. Those with the capacity to invest in British industry should do so.
Before the general election, the Labour party was interested in the planning of investment. We wanted to promote the establishment of an investment bank. Circumstances beyond our control prevented us from developing our plans. I referred earlier to accidents, such as that which took place in South Ribble. An urgent decision is now awaited anxiously by all who have the interests of British Aerospace at heart, including those who work in the industry and those who wish to see it take a proud place in the international airways.
§ Mr. Gerald Howarth (Cannock and Burntwood)
My constituency will not be immediately affected by any decision taken early next month on this issue. However, I have some prime sites there which I will willingly make available to British Aerospace on favourable terms if it will bring new facilities to the constituency.
The path to No. 11 Downing street is a well trodden one. I trod it myself this evening when I went to collect a free drink, which I fear did not come from the United Kingdom. It is good to take something off the Chancellor, if only a couple of glasses of winter wine.
Supplicants to No. 11 Downing street often go there to seek just one more fix of taxpayers' money to help them go straight again. All too often, the supplicant goes back again to report that the money has been spent and that there is not a great deal to show for it. However, we all agree that the supplicant that we are discussing is very different. This is not some state-owned industry in which public funds have been swallowed by wage increases instead of being invested in new technology. It is a recently liberated and enterprising concern which is in genuine public ownership. In other words, real members of the public own shares in it. It is in the forefront of the new technology. Above all, it is a successful company which last year achieved sales of over £2,000 million, of which 64 per cent.—very nearly two thirds—was attributable to its export performance.
The company's trading profits last year were £112.8 million, of which nearly £8 million went to my right hon. Friend the Chancellor of the Exchequer to pay for a new school, a new hospital or some other worthwhile project. The company sustains 79,000 employees, all of whom reluctantly contribute to my right hon. Friend's hat every spring. British Aerospace plc is a success story.
The House has already debated the A320 once this month. My right hon. Friend the Prime Minister has received a presentation from BAe. The debate is a tribute to my hon. Friend the Member for Kingswood (Mr. Hayward) who is an old sparring partner from Young Conservative days many years ago and who I am delighted to support as we supported each other then. It is also a measure of the importance that many from both sides of the House attach to this issue.
It will be asked in some quarters why a public company cannot raise the £430 million launch aid that is required as British Aerospace's contribution to the Airbus Industrie consortium. If the loan is forthcoming, it will be the first state loan since British Aerospace was nationalised eight years ago.
80 During that time BAe has financed, entirely from its own resources, the Jetstream 31 which my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson) mentioned, the advanced turbo-prop aircraft and the HS125 executive jet, as we still know it. My hon. Friend the Member for Welwyn Hatfield (Mr. Murphy) has a particular interest in this matter. British Aerospace has launched the BAe 146 four-engine airliner which recently hit the headlines with the massive and welcome order for 45 aeroplanes from Pacific South West Airlines of the United States of America.
If that were not enough to be financed from the company's resources, in addition it has invested no less than £500 million of its own resources in the existing airbus family — the A300 250-seater and the A310 210-seater. In total that is nearly £1,000 million of privately raised capital for investment. Both sides of the House have been telling British industry that it must invest in the future. British Aerospace has been doing that.
§ Mr. Michael Marshall (Arundel)
My hon. Friend might want to add the share of £50 million going to the Unisat project from British Aerospace-Marconi which is in addition to the sums that he has been listing.
§ Mr. Howarth
Indeed. I did not intend that my list should be in any way exclusive. My hon. Friend is right. There are many other areas, particularly space, which make a substantial contribution to the company's overseas earnings. It is virtually all overseas earnings. That is a most welcome contribution.
We should look at the history of the matter. This heavy investment follows Government indecision in the late 1960s and early 1970s, and the reluctance of BAC and Hawker Siddeley, the forerunner companies, to invest in advance of Labour's nationalisation proposals. The result has been intensive investment and a catching-up operation which is likely, as my hon. Friend the Member for Ruislip-Northwood said, to peak at the same time as investment in the A320 is required. The company believes that its balance sheet could not take another £430 million in loans, and that it would be wrong to jeopardise the company's financial position by imposing upon it too onerous a debt-servicing burden or by imperilling the present healthy debt to equity ratio.
My right hon. Friend the Prime Minister, in a somewhat celebrated remark, said that she does not want another Concorde on her hands. I am sure that she did not mean that Concorde was or remains anything other than a brilliant example of British aeronautical engineering. It is the kind of thing that the hon. Member for Eccles (Mr. Carter-Jones) was talking about. However, my right hon. Friend is right to be cautious about spending taxpayers' money. The Government have no money of their own for public expenditure. It is raised from the taxpayer. Concorde was different. It was ahead of its time. It represented a substantial leap in technology. The Americans believed that they were out of the market, and they then sought to kill an aeroplane that did not originate from the United States.
The A320 is a different proposition. First, it is the latest addition to a family. It can draw on its A300 and A310 parentage. It is, as my hon. Friend the Member for Kingswood said, a relatively modern design and will be breaking into new technology. Secondly, the A300 has been a success. It has reached the financial break-even 81 point some nine years after its first flight. Thirdly, I pay tribute to the 146, but, apart from that aircraft, the A320 is BAE's only major civil aircraft project. It is the product of a proven partnership with the French, German and Spanish industries in which others, as has already been said, will be only too willing to take our place if we wish to duck out. The United Kingdom needs to retain these skills. Their loss would seriously impair our military aircraft construction capability as well as put any future civil aircraft development at risk.
The hon. Member for Eccles had a point when he mentioned avionics. If we have no home-grown civil aircraft market, will foreigners buy our avionics manufacturers to put their avionics on foreign aeroplanes?
Fourthly, in the debate on 2 December, the Minister of State said:It is essential, because of the large sums of money being sought, that the Government should be convinced that there are sound prospects of the commercial viability." — [Official Report, 2 December 1983; Vol. 49, c. 1175.]The Minister will know that the A320 goes into production with options or orders for 88 aeroplanes, eight of which were confirmed today, and, it must be remembered, include 10 from Britain's consistently successful flag carrier—British Caledonian—which never forgets that we have a choice and wants an aeroplane to make money.
Fifthly, it would be wrong to leave the market wide open to allow Boeing to become a monopoly supplier, with all that that implies for the customer. If Airbus, British Aerospace and the Government seize the initiative, there is a window of opportunity available to us which will shortly close. Independent assessments have all shown a requirement for between 140 and 240 of these aircraft per year between now and the next century.
This is not the death rattle of an expiring industry but the opportunity to advance an important and successful one. The A300 and the A310 were launched without a penny of Government money. British Aerospace has already put £12 million into the A320. As with the 146, it has backed its judgment with its cash. When we look at the investment of £3 billion in the coal industry since 1979, over £1 billion in British Leyland, British Steel Corporation and the rest, it surely puts the Airbus requirement into perspective.
For those of us who are interested in reducing Government expenditure, it does not come easy to ask for more. British Aerospace should not be penalised for its history, which in part is due to Government indecision and in part to the actions in this place whereby the forerunner companies were threatened with nationalisation.
§ Mr. Wilkinson
Does my hon. Friend agree that the distinction between this request for launch aid and the subventions enjoyed by British Leyland, British Steel Corporation, British Shipbuilders, and the rest is that, whereas those subventions, to some extent, went into the bottomless pit of their loss-making capacity, the Government will receive a levy on sales and therefore recoup the launch aid?
§ Mr. Howarth
I am grateful to my hon. Friend. That is absolutely right. It is a loan, not a grant. It is a tribute to BAe that it believes in and is committed to this project, but is not prepared to raise more loan capital because it believes that method to be unsound. Surely it is better that we take a decision based on good information today than that we encourage BAe to accept a financial burden that 82 it cannot bear and from which we shall have to rescue it three years later when it is up against the wall. We are talking of an individual project, not of bailing out an unsuccessful company. The thrust of my argument is that we are talking about success, not about another lame duck.
There is an overwhelming commercial and political case, as there was with the Viscount, for setting the A320 on the runway with the reluctant assistance of the British taxpayer. This being the season of good will, I hope that Father Christmas will be benevolent to BAe and that BAe will not miss the sleigh. We have a window of opportunity. I hope that the case that we have made will convince the Minister to give a firm date for a decision —a decision which I hope will be favourable.
§ Dr. John Marek (Wrexham)
This debate is important for civil aviation and for our future as an industrialised nation exporting top quality engineering products. Early-day motion 249 on this subject has attracted 193 signatures. That is more than most motions. In explaining the rationale behind the motion, I have found no hon. Members opposed to it. If hon. Members were not so busy, I am sure that there would soon be more than 325 signatures.
Since my election I have attended no debates until now in which I have agreed with everything said by Conservative Members, and this is not a party political issue. Hon. Members on both sides are urging the Minister to announce launch aid for this project as soon as possible. For the reasons that have been given, I agree that we need this decision before the end of January. If the decision is not favourable, not only would it be a great loss to this country, but we would lose yet another opportunity to contribute to an eventual economic recovery. As a result, there would be an American monopoly—probably only Boeing—in building civil airliners.
There is risk with the A320 venture, as there always is with such undertakings and as there was with Concorde — but there the similarity ends. BAe has made independent assessments of the project's viability. Even on a pessimistic forecast of aircraft sales, there is still great optimism that the project will be a commercial success.
Airbus Industrie has a track record of good sales of the A300 and A310 series. Further orders are coming in and it has work for the next two two and a half years at least. It can claim to have met all the deadlines on time and within the budget.
The A320 is a smaller aircraft—a 150-seater—and there is a market for it to replace aging aircraft such as the 727, 737, DC9 and 111. With the new CFM 56-4 engine, the Opposition believe that the A320 will be a winner. It will satisfy the new noise regulations, and will have lower fuel consumption and lower operating costs. Above all, the engine has proven capabilities. Rolls-Royce also has the opportunity to enter the project, and during the past two or three weeks those of us who have taken an interest in this matter have heard that it is just possible that the new Rolls-Royce engine may be ready in 1988, at the same time as the launch of the A320. My hon. Friend the Member for Eccles (Mr. Carter-Jones) referred to the pylons, but I am sure that that problem can be solved. With good will and, above all, with the Government's support—
§ Mr. Carter-Jones
I hope that the Minister will insist that there be compatibility for the pylon between existing engines and the proposed V2500.
§ Dr. Marek
If that is done, Britain can yet again play an important part as a supplier of civil aircraft to the world.
I am not concerned with how the Government find the money for the launch. It may be public or private money, or a mixture of both. However, if the public must bear some risk, I hope that eventually the profits will be returned to the public in the ratio of the risk that they have borne. Above all, I urge the Government not to compartmentalise the matter and to treat it on an economic basis on its own without looking further afield, even though, if they did that, they would find that the project was likely to be a commercial success. The project will have many benefits which may not be easily quantifiable.
The hon. Member for Ruislip-Northwood (Mr. Wilkinson) mentioned subcontractors, and many other benefits will flow from the project. I urge the Government to provide the necessary launch aid. It does not matter how they do it, as long as they do it, and I hope that they will give their decision by the middle of January at the very latest.
§ Mr. Timothy Wood (Stevenage)
I join my hon. Friends and Opposition Members in urging the Government to support the A320 project. At this stage in the debate many points have already been made, but I wish to highlight a few of them.
The Government must take a long-term and broad view of their overall approach to high technology projects. It is not good enough for them to consider in an ad hoc way how they will approach a project and to take many months or years in so doing.
Several hon. Members have reminisced, and I shall add to the reminiscences by saying that when I was at university I took a vacation job at Bristol. I looked at one or two aerospace projects and was involved in some critical path figuring. In each of those projects in those days there were hold-ups — waiting for Government decisions on whether the project should go ahead. Sadly, the position has not improved. However, it must improve, because if it does not old industries will die and we shall be reluctant and afraid to take the initiatives to ensure that new industries flourish. It is crucial that the Government reconsider their approach to such matters.
There is a European dimension in this matter. One reason why I was a firm supporter of joining the EC was that I hoped to see full co-operation in high technology ventures. In Airbus Industrie we have that co-operation, yet we hesitate, hesitate and hesitate again. If we continue to hesitate for much longer, Britain will fail and other countries will take the initiative. We can be confident about much in this venture. The A300 and the A310 are a clear demonstration that those aircraft can be highly competitive in world markets. We may not have achieved the rate of sales that we expected, not because of any failure on the part of those aircraft, but more because of the recession in the aircraft industry as in every other industry.
I believe that particularly with Boeing being the only major competitor likely to be in the field for this type of aircraft, Airbus Industrie is an essential competitor to Boeing. We must support Airbus Industrie in that venture. 84 British Aerospace has demonstrated its outstanding expertise over the years. It has outstanding experience in the development of airframes in various ways, whether small aircraft or in the contribution to enterprises such as Concorde. However, the contrast with Concorde could not be greater when one considers the financial viability of the overall project. We have in the A320 an established type of aircraft. Many aircraft are coming up for renewal. The A320 can provide what is so necessary in the coming years. It will provide better economy and fuel efficiency. It also produces much less noise, which everyone wants. It will be a popular aircraft. It will be a successful aircraft if only we do not hesitate for too long.
Let us consider the launch aid that has been requested. Some people have suggested that in this case the aircraft manufacturers are saying, "We do not want responsibility for funding this project. We are prepared to do it, but we are not prepared to take the risk." However, British Aerospace is prepared to take the risk, is putting money in and will continue to put money in during the development of the A320 project. If British Aerospace has carried out those analyses, I have sufficient confidence in it that it will be able to succeed with that aircraft.
In recent years, British Aerospace has put tremendous amounts of investment into a variety of projects. Some instances have been mentioned in the debate. I can add the investments in varied military projects, all consuming enormous amounts of development funding from British Aerospace. Now we have come to the time when, after the large amount of development funding from the manufacturers, it would be appropriate for the Government to give a definite sign of support. In that, I come back to my original point. All the decisions need to be taken quickly. A decision in a year's time would be a waste of time. It would be a tragedy. Let us have the decision in weeks rather than months.
§ Mr. Roger Stott (Wigan)
It might be convenient if I intervene at this point in the debate to set out the Opposition's view on the A320. Throughout the debate there has been remarkable unanimity. As this is the season of good will, I assure everyone present that I have no intention of spoiling it. Indeed, I intend to join in that spirit of unanimity as the debate progresses to its conclusion.
Hon. Members who have spoken have made a case for the British Government to involve themselves in the project and provide launch aid for the A320. The hon. Member for Kingswood (Mr. Hayward), who introduced the debate, followed in the footsteps of his hon. Friend and close neighbour, the hon. Member for Bristol, East (Mr. Sayeed), who on 2 December raised the matter of the A320. Again, because it is Christmas, it is nice to find myself in agreement with the hon. Members for Kingswood and for Stevenage (Mr. Wood), who were bitter opponents of mine on the Telecommunications Bill. It is good to see unanimity in the House tonight on such an important issue.
My hon. Friend the Member for Preston (Mr. Thorne) said how much we were impressed by the lobby which we attended a couple of weeks ago, which was on behalf of the work force of British Aerospace. Members of the work force came from all over the United Kingdom. Admittedly, they were trying to influence the decisions of Members of Parliament on a whole range of issues, not just 85 the A320 and the agile combat aircraft, but helicopters. They feel that they are at a crossroads in terms of their future employment and future projects.
§ Mr. Hayward
The hon. Gentleman referred to the work force of British Aerospace. There were also representatives from industries outside British Aerospace, which reflects the importance of the decision not only to British Aerospace but to other parts of the British aerospace industry.
§ Mr. Stott
The hon. Gentleman should be used to me by now. I was going to turn over the page of my notes and say that the decision on the A320 is not limited to those who are employed in British Aerospace, for whom it is vital, but is important for our avionics industry, which produces the instrumentation that is likely to go into our future civil aviation projects — for example, Lucas Industries, and not forgetting Rolls-Royce, which has been mentioned in the debate.
I think that I can dispense with all the facts and figures that I have collated about the importance of the project and the orders that are likely to come in if the Government go ahead with the launch aid. The market between now and the year 2000 will expand. That is evidenced by the rapid development of airport capacity throughout the world. One has only to look across the Atlantic to see what Pratt and Whitney and Boeing are doing to meet future aviation needs. We cannot ignore that need and the capacity.
I was interested to read in The Observer this weekend an article by Victor Smart and William Lord, which stated:Moves behind the scenes to inject private cash into building the 150-seater A320 airliner—and so defuse one of the biggest and toughest industrial decisions before the Government — have thrown up a flurry of proposals from merchant banks … Trade and Industry Minister John Butcher will come under pressure to reveal details of the Airbus financing. Opposition MPs are bound to raise fears that the City will cream off profits from the plane while enjoying Treasury financial guarantees.The Minister knows my views about the public sector borrowing requirement and the fact that the City might be prepared to put up money for the launch aid for the A320. I would not imagine that that would necessarily count in the PSBR. I have long argued that such things should not count in the PSBR unless the loan is called in, which I hope it never will be in this case.
Another article by Victor Smart in The Observer referred to the agonising dilemma facing Europe. It said:But Britain does not have the stomach to pull out of the civil aerospace big league. Hard-won expertise would be thrown away at a time when other countries without this know-how (notably Japan) are paying dearly for admission tickets to the aviators' club. Re-entry would be prohibitively expensive.We all share that view. Re-entry would be extremely expensive not only in terms of capital, the launch aid and research and development, but in terms of recruitment of engineers and designers, whom we could lose in the process. I am told that the Minister of State was on the radio today. He was interviewed about the topic that we are discussing and was asked:Now, what about the future of the British aerospace industry? Doesn't it depend on a decision in favour of British commitment to Airbus?The Minister replied:Well, this is obviously extremely important for our civil aerospace industry. We are only in the major civil aerospace projects, the large aeroplanes, through our membership of the Airbus Industrie consortium".That part of our aerospace industry is enormously important to us.
86 The Minister was then asked:Could the civil aviation industry survive without Airbus?",to which he replied:I don't think one could answer that question absolutely categorically. I think I would say the A320 is enormously important for our remaining in the large civil aerospace field.I second that comment. I agree absolutely and totally with the Minister. The A32.0 is essential to Britain if it is to remain in the big league.
I am reminded of a debate that took place a few years ago on whether launch aid was necessary or desirable. I served on the Standing Committee on the Aircraft and Shipbuilding Industries Bill, as several Opposition Members will be aware. That tortuous exercise brought British Aerospace into existence.
My right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman), who was then the Minister of State at the Department of Industry, announced during the proceedings on the Bill that the Government would support what was then Hawker Siddeley with launch aid for the HS 146. I remember that comments were made about whether launch aid was necessary or if the money would be well spent. My information is that the HS146 is a very successful aircraft. It has been bought as a feeder aircraft by Western Airlines in the United States. It is currently flying and carrying passengers in California, the heartland of Boeing, so it is a competitive aircraft. If the Government had not supported the aircraft with launch aid, it would not now be flying, nor would it be commercially successful. The decision was right then and the decision is right now.
§ Mr. Wilkinson
Although the Government injected launch aid into the HS146, is it not remarkable, when referring to the A320, that early-day motion No. 249 has no fewer than 193 signatures? Does my hon. Friend the Minister recollect any other occasion on which such unanimity has been expressed by the House? In those circumstances, would it not be difficult for the Government, by not granting launch aid, to fly in the face of the concerted view of the House?
§ Mr. Stott
I am grateful for the hon. Gentleman's comments, but he is making my speech for me. I was about to conclude on somewhat similar lines.
It is generally recognised that the work force of British Aerospace is committed to its task. It is highly skilled, highly trained and superbly technically educated—very similar to the work force of British Telecom. One can draw a parallel. It has been at the forefront in the defence of its industry. It has done so with much persuasion and dignity.
It was unfortunate—I now enter into the spirit of Christmas, otherwise I would choose more condemnatory prose — that the right hon. Lady the Prime Minister equated the A320 with Concorde when dealing with an off-the-cuff parliamentary reply about aid during Prime Minister's Question Time. The hon. Member for Stevenage said that there was no comparison between Concorde and A320. I hope that the Prime Minister will reflect on occasions that she is not the font of all wisdom and that such comments can be slightly damaging under the circumstances.
The House has had a remarkably good tempered arid good humoured debate, and displayed a level of unanimity the like of which I have not seen for a long time. The Opposition's view is not can we afford the launch aid required for the aircraft, but, for all the reasons stated by 87 my hon. Friends and by Conservative Members, can Britain afford not to have a piece of the action for the next generation of civil aviation? The Opposition believe that we must support the project.
§ The Under-Secretary of State for Trade and Industry (Mr. John Butcher)
There has, as many of my hon. Friends and Opposition Members have said, been an unnerving but understandable level of unanimity in the debate. My hon. Friend the Member for Cannock and Burntwood (Mr. Howarth) hinted that it may have something to do with the spirit of Christmas. I believe that the reason was that the debate and the issues were felt with great sincerity and not just for constituency reasons. Many hon. Members have been persuaded as to the merits of launch aid and have subsequently pressed the issue with great strength and vigour.
I thank my hon. Friend the Member for Kingswood (Mr. Hayward) who has done the House a great service and said, in his opening remarks, that this subject has become a non-party issue. He led us correctly to his view that productivity, which is one of the key aspects in launch aid, is important, and that signs exist that British Aerospace and the aerospace industry are starting to move towards the levels of productivity which were hitherto enjoyed only in the United States.
We congratulate the work force and the management in moving fairly rapidly in that direction. My hon. Friend the Member for Kingswood said that we should examine ways of maximising our components, systems and avionics suppliers into the airframe, and that we should do everything possible to enhance the prospects of our subcontractors. He was right to point out, as did many hon. Members, that we are dealing with jobs and skills and with keeping teams of skilled people together. He pressed the Government to make a decision at the earliest possible opportunity.
The hon. Member for Eccles (Mr. Carter-Jones) prefaced his remarks by saying that he would indulge in a little nostalgia. Having spent my childhood on airforce bases, I shall not bandy words with the hon. Gentleman about the Mosquito or its power unit. The Government are keen that the V2500 continues in the fine Rolls-Royce tradition of excellence in aero engine manufacture. We are aware that the British supply industry has magnificent expertise in avionics. We have progressed in the sphere of radar in ways that other countries are only just beginning to understand. The healthy precedent was set when the hon. Gentleman was perhaps not feeling nostalgic but a little harassed with flak around him at the time.
My hon. Friend the Member for Kingswood asked several questions. I join him in saying that we wish to have a greater British representation at the senior level of Airbus Industrie as the opportunities arise. We join him in the congratulations on the Yugoslavian order, which is greatly welcomed. It is further evidence of the commercial appeal of the A320. My hon. Friend was absolutely right to say that the orders and options for the A320 are at the largest pre-launch level achieved. We agree in general terms with my hon. Friend's argument that the market estimates for the 150-seat aircraft in the 20-year period from 1988 to 88 2007 range from between 2,500 and 3,500. If we consider the projection by Airbus Industrie of 25 per cent. to 30 per cent., about 700 sales would result.
My hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson), the chairman of the Aviation Committee, reminded us that the industry has nothing to be ashamed of. We have produced some magnificent aircraft recently, such as the BAe 146, the Jetstream and the HS 125. I join him in paying a tribute to the success of the Airbus to date. He also mentioned the need to get a Rolls-Royce power plant specified as early as possible, and to urge Rolls-Royce that certification for suitability for incorporation in the aircraft should be pursued with great vigour. We are aware that a family of aeroplanes is one of the best marketing tactics.
The hon. Member for Preston (Mr. Thorne) paid tribute to the TASS lobby. I fully understand why he did that —he led about 25 per cent. of it. I cannot mention the hon. Member for Preston without mentioning my hon. Friend the Member for South Ribble (Mr. Atkins)—the erstwhile Member for Preston, North—who has ensured that I say nothing that may be contradictory. He has great expertise in this area, and would not let me conclude my remarks without mentioning the agile combat aircraft and the great dependence of the folk of Lancashire on that.
I have a common motivation with my hon. Friend the Member for Cannock and Burntwood. I would be delighted if a number of high-tech industries established their presence in the Cannock area. I know that my hon. Friend will continue to press me on that matter.
The hon. Member for Wrexham (Dr. Marek) pressed for an early decision. My hon. Friend the Member for Stevenage (Mr. Wood), who has great expertise in high technology projects, argued in this debate, as he has in others, that we should not take an ad hoc approach and that we should look at the way that "UK Limited" moves towards a higher added value industry.
I take issue with my hon. Friend on one point— I would change the emphasis in his projection for older industries. I want the older established industries to use high technology to maintain their future prospects and get into a higher added value industry.
The current Airbus range is undoubtedly the largest and most important civil aerospace programme in Europe today. The Government fully appreciate the significance of the Airbus programmes to both the British and the European aerospace industries. It is most gratifying to see the success which Airbus Industrie — in which the British stake is represented by British Aerospace's 20 per cent. partnership share—has achieved in establishing a position second only to Boeing as a manufacturer of wide-bodied civil aircraft, and demonstrating that a European collaborative venture can rival the major United States manufacturers.
If it is to sustain and consolidate the market position that it has won, Airbus Industrie believes that it must broaden its product range into a family of aircraft. British Aerospace has explained in depth the implications of the project for the company, including the employment aspects, the maintenance of design and technological skills and the importance of collaborative projects.
When British Aerospace was privatised in February 1981, it was stated that the company would have the same eligibility for Government finance as other companies in the private sector, and as its predecessor companies had prior to nationalisation. The Government stand by that 89 statement and have repeatedly made it clear that we are prepared, in principle, to consider launch aid for participation by British Aerospace — and, indeed, by other aerospace companies — in viable new projects. Evaluation of the British Aerospace application for launch aid in respect of the A320 is proceeding as a matter of urgency, and the Government hope to reach their decision shortly.
We shall use our best efforts to deliver a decision within the time
§ Mr. Butcher
If I had been allowed to finish my sentence, I would have said that we were hoping to deliver a decision by the end of January, which is within the timescale mentioned by a number of my hon. Friends and Opposition Members.
On far too many occasions it has not been possible to achieve an adequate rate of return on the large sums invested in civil aerospace programmes by the Government and the companies themselves. Among the many civil aerospace programmes undertaken with Government support during the last 30 years or so, only the Viscount on the airframe side and the Spey, Avon and Tyne on the aero engine side have sold in sufficiently large numbers for the Government investment to have been repaid in full.
It is essential not only to the Government in the context of the very substantial amount of public funds being sought, but to British Aerospace — as the major constituent of our airframe manufacturing industry, and as an employer — to be assured that there are sound prospects for the commercial viability necessary to ensure that the A320 can contribute effectively to the company's overall industrial strategy and technological base.
I was asked a particular question by the hon. Member for Wigan (Mr. Stott) about funding. I join him in commending the great skill within British Aerospace and the need to maximise that skill. We are naturally interested in mobilising private sector funding for the A320. Careful consideration will be given to proposals that merchant banks or City institutions can devise to operate either an alternative form of launch aid or in conjunction with the more traditional form of launch aid. No decisions or commitments have yet been made, and no formal proposals have yet been commissioned or received. I hope that that meets the hon. Gentleman's point.
The House has excelled itself in putting forward a number of resolute but well-reasoned arguments. It has acted not out of charity but out of sound business sense. These are precisely the criteria that the Government will utilise in making their now urgent assessment of the application for launch aid.
I thank all hon. Members on both sides of the House —as it is Christmas—for their speeches today.