HC Deb 01 March 1984 vol 55 cc403-8

4.9 pm

The Secretary of State for Trade and Industry (Mr. Norman Tebbit)

With permission, Mr. Speaker, I shall make a statement about the Government's policy towards the aerospace industry.

Last November the Government announced launch aid of £70 million to assist with the development of the E4 version of the Rolls-Royce RB211–535 engine, now powering all Boeing 757s in airline service. Earlier this month I informed the House that approval had been given for Rolls-Royce to participate in the V2500 project, and to collaborate with General Electric of the United States on larger civil engines. Those programmes represent the core of a civil engine strategy based on international collaboration and dedicated to commercial success. The House will be informed when launch aid arrangements for the V2500 are finalised but, as with the E4 scheme, the Government will expect a real return on the taxpayers' investment.

In September 1982 launch aid of £41 million to assist Westland was agreed for its W30 civil helicopter, and last month the Government announced £60 million in launch aid towards Westland's civil costs in the Anglo-Italian EH101 project for a helicopter for civil and naval use in the 1990s and beyond. These investments will help to bring Westland into the expanding civil market and will be repayable with a return in real terms by a levy on sales.

British Aerospace has now decided to participate in the A320 and to launch the advanced turbo-prop. The Government have reached agreement with British Aerospace on the terms of launch aid for the A320. Launch aid of up to £250 million, repayable on terms designed to yield a return in real terms on the Government's investment, has now been agreed. As a result of our agreement I understand that the company will now join its partners in formally launching the A320 programme. My hon. Friend the Minister of State, Department of Trade and Industry will be meeting his French, German and Spanish colleagues shortly to endorse this. British Aerospace will also proceed, without Government assistance, with the advanced turbo-prop aircraft. I am sure that the House will join me in wishing these projects every success.

Taken together, these decisions express a clear commitment by the Government to support the efforts of the aerospace sector to maintain its position as an internationally competitive industry for the future. I believe that the House will welcome our determination to see this sector of British industry, management and production work force alike, given the chance to succeed.

Mr. Peter Shore (Bethnal Green and Stepney)

On a day when the real unemployment figures have risen yet again, and after many months of campaigning by all the interests involved, especially the workers and management of the great establishments engaged in the aerospace industry in Britain, it would be churlish not to welcome a decision such as is contained in the statement. I have no intention of being churlish. I welcome it warmly. If the statement had not been positive and had not announced that launch aid is to be given to the A320 we should have been furious indeed. The House knows that the Secretary of State can always rest assured that when he acts in the national interest he will have the backing of the Opposition.

May I also point out what pleasure the Secretary of State's decision will give, especially on St. David's Day, to my hon. Friend the Member for Alyn and Deeside (Mr. Jones) and all those who are employed in the British aerospace industry, whether Welsh or not? Having said that, I should like to ask several questions which go to the heart of the matter. Both the Secretary of State and I know that there is a problem. I am glad that he has taken the trouble to set out his decision within the context of a series of decisions about the future of the aerospace industry. We needed clearly stated decisions about the V2500 engine and the Anglo-Italian EH101 to get a proper picture of the strategy for our aerospace industry.

With regard to costs, however, will the Secretary of State tell us what led him to the conclusion that the £430 million that British Aerospace seriously and deliberately asked for should be met with an offer of £250 million? Where is the additional £180 million to come from? The Secretary of State will know that the German Government's contribution, which was announced last week, is to be up to 90 per cent. of the cost. Is the Secretary of State not a little worried that if British Aerospace has to scrape the barrel of its resources to find the additional £200 million or so, that could prejudice the excellent prospects of going ahead with the ATP aircraft—I am glad that it is also mentioned in the statement—for which the Government have specifically told us there is to be no Government assistance?

My next question is fairly simple. The Secretary of State will clearly have to re-write the public expenditure White Paper, especially in the sections that deal with the part of the Department of Industry's expenditure which shows, when dealing with engines and airframes, nil expenditure for the year 1984–5 and minus £10 million in the following year. It is obvious that some adjustment is necessary. I assume—I shall not press the Secretary of State on it now — that although he has set forth his views in an important statement on the future of British civil aviation, he knows very well that he is leaving on one side, only for the time being, the important military projects about which we hope to hear more, and healthily sooner rather than later.

Mr. Tebbit

I thank the right hon. Gentleman for his general welcome for the statement. I especially welcome his assurance that he will always back me when I act in the national interest. That will make my job extremely easy and I shall get his backing every day of the week.

With regard to the amount of money being provided, we worked closely with British Aerospace examining its costings and the various assumptions that had been made to determine how we could most effectively provide backing through launch aid. That has been done and it has enabled us to find that British Aerospace is happy to launch on the basis of £250 million of launch aid. It is a tribute to our vigorous private sector company that it requires less Government assistance than its German or French counterparts. The fact that the company is going ahead with the ATP aircraft without Government aid is also a tribute to it. It is a testimony to the fact that the launch aid for the A320 is adequate.

With regard to the right hon. Gentleman's anxiety about public expenditure, the lines relating to my Department will clearly have to be amended to cover the project. I assure him, however, that the total expenditure that has been agreed for the Government will not increase.

With regard to military aircraft, I share the right hon. Gentleman's hopes that some of those programmes can go ahead. I hope that he will direct his questions to my right hon. Friend the Secretary of State for Defence when the time comes.

Several Hon. Members


Mr. Speaker

Order. I appreciate that there is a great deal of interest in this matter, but I have to protect subsequent business. Although the debate on the next item of business, the Northern Ireland order, can continue until 11.30 pm, we have another statement so I propose to allow questions on this statement to go on until 4.30 pm.

Mr. Edward du Cann (Taunton)

Is my right hon. Friend aware that this obvious vote of confidence in the British helicopter industry and its ability in future to compete in worldwide civilian markets is to be welcomed most warmly? On past experience it is undoubtedly fully justified. Is he further aware that right hon. and hon. Members on both sides of the House who have studied projects such as the EH101 believe that the prospects for it are excellent and that we are more than gratified that he has given such encouragement to the skilled and devoted work force of Westlands in Somerset? That work force also deserves that encouragement.

Mr. Tebbit

I am grateful to my right hon. Friend, especially for what he says about the suitability of the Westland helicopter project for support from the Government. That is especially important, knowing his particular interest in public expenditure.

Mr. Bruce Milian (Glasgow, Govan)

I welcome the right hon. Gentleman's statement on the A320 and his earlier statement on the V2500. I look forward to the details of launch aid for the latter. As Rolls-Royce did not succeed in penetrating the earlier Airbuses, is it a condition of the help for the A320 — or is there an understanding—that the V2500 engine will be genuinely available for the A320, and what are the respective time scales involved?

Mr. Tebbit

Not only shall we have adequate understanding within the Airbus consortium, because clearly I have spoken to my French and German colleagues about the matter, but, perhaps more important, there is little doubt that the engine will be the one that is demanded by most of the customers for the A320.

Mr. John Wilkinson (Ruislip-Northwood)

Does my right hon. Friend agree that this is a great day and one that will feature as a turning point in the history of the European aerospace industry? Does he agree that it will mark the point at which Europe took off to provide a true competitor to Boeing in civil aviation, and that we are at the threshold of a historic opportunity that should not be missed? In that connection, will he ensure that adequate launch aid is also available for the V2500 engine, since British Airways, which is probably the most important prospective customer for the A320, has always expressed confidence in Rolls engines?

Mr. Tebbit

Indeed, Rolls-Royce has already announced its intention of going ahead with the V2500 programme. Only the details of the financing are to be agreed. The fact that Rolls-Royce felt able to go ahead indicates its confidence.

Mr. Barry Jones (Alyn and Deeside)

I congratulate the right hon. Gentleman most sincerely on his wise decision to give the A320 project financial backing, but does he know that there will be relief and pleasure in the British Aerospace works at Broughton in my constituency where 4,000 workers are employed? Will he guarantee that my constituents will get a fair share of the Airbus A320 work, as they have on the A300 and the A310? Does he agree that the Broughton factory might be called the jewel in the crown of the British aerospace industry?

Mr. Tebbit

I thank the hon. Gentleman for his welcome. It is a particularly suitable announcement for St. David's day, as the right hon. Member for Bethnal Green and Stepney (Mr. Shore) said. I am sure that management and the other workers at Broughton will be well able to stake their claim for a proper share of the work on this aircraft. The distribution of work is in the hands of the management of British Aerospace, and it would not be proper for me to say more than that. I think that the hon. Gentleman's constituents are confident of their ability.

Mr. Robin Maxwell-Hyslop (Tiverton)

May I commend the balance in my right hon. Friend's announcement between purely British airframe products, a co-operative European venture and an engine programme which develops employment and income from spares as well as from the initial sale? Is it not worth pointing out that we are in a position to do this only because of the often painful economies which the Cabinet makes in other directions?

Mr. Tebbit

My hon. Friend is absolutely right. It is our tight control of public expenditure elsewhere that has enabled us to offer launch aid on several of these projects. It is a remarkable achievement of Rolls-Royce to have entered into collaborative arrangements with both Pratt and Witney and General Electric.

Mr. Stephen Ross (Isle of Wight)

May I also thank the Secretary of State for the aid he has given to Westlands, which has a very good work force, not only at Yeovil but in the Isle of Wight? It is a lifeline to those of us whose constituencies have an unemployment rate approaching 17 per cent. The Secretary of State has made the right decision on the British Aeorospace ATP because there are competitors. Has he not been slightly mean about the contribution to the Airbus? It was reported that the company wanted £437 million. Is the door still open if it needs to come back?

Mr. Tebbit

No. The amount of money is as agreed between the Government and British Aerospace. I do not think that it is a matter of being mean. One has to be careful in the use of taxpayers' money even on good projects. It is right that we have ensured that the taxpayers' interest is looked after as an investor in this just as much as the general interest of the economy in backing the project.

Mr. Rob Hayward (Kingswood)

May I congratulate the Government on coming to what I believe is a sound and sensible decision with British Aerospace? Is my right hon. Friend aware that the decision will be greatly welcomed in and around the Bristol area where British Aerospace is a major employer? Over what time scale will the Government funding, which he indentified as being £250 million, be phased?

Mr. Tebbit

I am glad to be bringing so much happiness to so many parts of the United Kingdom. In regard to the pattern, the launch aid will be paid so as to cover the launch costs of British Aerospace in the early years of the project. In the parlance of the day, it will be front end loaded.

Mr. Alfred Morris (Manchester, Wythenshawe)

As the Minister knows, there is heavy unemployment in greater Manchester, and 456 redundancies were announced recently by the Manchester division of British Aerospace. Is his statement today likely to allow any of those who were being made redundant to continue in employment? In this regard, is there anything more he can say about the ATP project, about which many of us on both sides of the House have had very strong representations from British Aerospace?

Mr. Tebbit

I do not think it would be right for me to take from management the responsibility for the announcements concerning numbers of staff who will be required or who may not be required, even at Manchester. Certainly the company's decision—it is the company's decision and not that of the Government—to go ahead with the ATP must be good news in Manchester. It is a 64 to 72-seat advanced turboprop aircraft. The first flight is scheduled for October 1986, with deliveries from September 1987. It is believed that there could be a market for as many as 900 aircraft of this category by the end of the century. British Aerospace would obviously hope to capture a reasonable proportion of that market.

Mr. Kenneth Warren (Hastings and Rye)

I applaud the Secretary of State's announcement. Will he tell the House why the combined public and private investment expected from this country for the A320 does not give us anything like the percentage of participation that the investment of the same sum of money gives the Germans in the A320 project? Will he be so kind as to tell us what form of public accountability will be available on all the projects he has listed this afternoon?

Mr. Tebbit

I think partnership shares and shares in this project are inevitably slightly different things. If my hon. Friend discusses the matter with British Aerospace, or if he talks to me about more of the detail than I can give at the Dispatch Box, where it is difficult to talk of too many details, I am sure he will find that the arrangements are satisfactory to British Aerospace. Of course, I hope it will also bring along many of the equipment manufacturers in this country who, I hope, will get a much better share of the work on this aircraft than on the earlier Airbus, where we were rather late in coming in as a full partner.

Mr. Lewis Carter-Jones (Eccles)

I congratulate the Secretary of State on his victory, for it has been a victory. Will he ensure that the V2500 engine is acceptable for the A320 without modification? Will he also congratulate British Aerospace on launching the advanced turbo-prop on its own? Will he keep a close eye on the needs of British Aerospace for funding for the A320 should difficulties develop? Above all, will he take the Prime Minister's advice and encourage the other part of his brief, trade, to ask British Airways to buy British in the A320?

Mr. Tebbit

The hon. Gentleman's latter point is not for me, since my Department is no longer the sponsoring Department for British Airways; that is the Department of Transport. In any case, it is in the interests of airlines that they should buy the best aircraft available for their purposes. I very much hope, of course, that British airlines will find that the A320 is the best aircraft and that the Rolls-Royce engine is the best engine to put on it. Now that the engine has been formally launched, the consortium is entering into discussions with Airbus Industrie with a view to ensuring that the engine is, indeed, on offer on the A320 from the beginning of the project. We are making it clear to the other Governments concerned that we consider it essential to the success of the A320 that the V2500 should be offered to potential customers on an equivalent basis to that on which the CFM56–4 is being offered now.

Mr. Michael Stern (Bristol, North-West)

I echo the comments of my hon. Friend the Member for Kingswood (Mr. Hayward) expressing the delight at the Minister's announcement that will be felt among those people working at Filton. Does my right hon. Friend agree that the effect of the decisions that he has either announced or confirmed this afternoon will be that the British civil aircraft industry can look forward to playing an active part in whatever project emerges for the remainder of this century and for the early part of the next century in civil aviation?

Mr. Tebbit

I thank my hon. Friend. I hope that British industry will engage not in every project, but in the profitable ones and not the unprofitable ones. That is the way that we should like it.

Mr. Ian Wrigglesworth (Stockton, South)

Is the right hon. Gentleman aware that his announcement of this public investment of taxpayers' money in these ventures is welcome on the alliance Benches and will be supported as long as the Government continue this partnership with industry that we have advocated for many years past? Will he explain to the House how British Aerospace will raise the £187 million that will be necessary to fund the rest of the A320 Airbus programme?

Mr. Tebbit

I thank the hon. Gentleman for what he has said. I am aware that he has always believed in such launch aid, whichever party he has belonged to at the time. In that he has at least been consistent, even if he has not been in many other things. The remainder of the cash will be found from British Aerospace's resources, not least from cash flow from other projects.

Several Hon. Members


Mr. Speaker

I am sorry that it has not been possible to fit in every hon. Member who wishes to ask a question. I shall bear them in mind when we return to this subject again.