HC Deb 25 April 1988 vol 132 cc21-30 3.31 pm
The Secretary of State for Defence (Mr. George Younger)

With permission, Mr. Speaker, I wish to make a statement about the European fighter aircraft.

In the summer of 1985, we agreed with the German, Italian and Spanish Governments on the essential characteristics of a European fighter aircraft, or EFA, and on arrangements for a phase of project definition to explore the technical content and cost of a programme to develop such an aircraft. Project definition has been completed successfully, and the four nations have now to decide whether to embark on full development of the aircraft. I am very pleased to say that the Government for their part have decided to do so, subject of course to similar affirmative decisions by our three partners, which I understand should be made shortly, and subject also to final negotiation of acceptable contractual terms and conditions.

EFA is needed by the Royal Air Force to replace its air defence Phantoms and ground attack Jaguars at the end of their lives and to complement the Tornado F3 air defence aircraft. The Warsaw pact is well equipped with modern high performance fighters, and an agile aircraft with the characteristics of EFA is essential to maintain effective air defences beyond the late 1990s. EFA will also have a secondary ground attack capability.

The specification for EFA which has emerged from project definition has been rigorously and realistically examined in comparison with a number of possible alternatives. After an exhaustive investigation, I am in no doubt that EFA is the best and most cost-effective option to fulfil this essential military role. The prime contractors will be the Eurofighter consortium for the aircraft as a whole and the Eurojet consortium for the EJ200 engine. British Aerospace and Rolls-Royce respectively will play key roles in these consortia, drawing on invaluable experience gained during the experimental aircraft programme and the XG40 engine demonstrator programme, both of which have been partly funded from the defence budget. Overall the United Kingdom will have a 33 per cent. work share in the development of the aircraft. This will open up major opportunities for British industry, and I estimate that the development task alone will give direct long-term employment to between 3,000 and 4,000 people in the United Kingdom.

The cost to the United Kingdom of full development will he some £1.7 billion. This will be accommodated within the planned defence expenditure totals published last autumn by my right hon. Friend the Chancellor of the Exchequer.

The EFA programme is of vital importance to the United Kingdom aerospace industry. Although the technology involved is highly advanced, it is based on concepts proven during project definition and by the various demonstrator programmes to which I have referred. We have insisted that the prime contractors accept a very tight commercial package and the contracts that we are drawing up will place the technical and financial risks firmly where they should be, on the industrial consortia rather than on the Governments. All subcontracts for the aircraft's equipment will be subject to competition.

EFA will fulfil a vital defence need in the best and most cost-effective way. It will continue the trend of successful European collaboration in aerospace. It will ensure that our industry remains in the forefront of this technology to the end of the century and beyond, while ensuring the best possible value for money for the taxpayer. I commend the Government's decision to the House.

Mr. Denzil Davies (Llanelli)

The right hon. Gentleman's statement, after all the doubts and delays of the past, will be greeted with some relief within the Royal Air Force and in Britain's aerospace and defence industries. There will also be relief that on this occasion at least the Government have been forced to support British and European industry and technology as they did not do in the case of Nimrod and Westland. What will be the total cost to Her Majesty's Government of the whole project? take it that the £1.7 billion will not be the project's total cost. What will be the unit cost per aircraft to the United Kingdom?

Will the Royal Air Force get the 250 aircraft that it needs? Will the Secretary of State give the House that assurance? How many aircraft will be ordered by our European partners? We need to know that, because it affects the budget and unit costs. As the defence budget is under so much pressure, what projects will be cancelled and what commitments dropped to pay for the costs of this aircraft? Clearly, in view of the Government's nuclear obsession, no nuclear project will be dropped or cancelled.

Is the Secretary of State aware that there is considerable public concern as to whether he and his Department are capable of managing such a complex project in view of the appalling record of successive Tory Defence Ministers on early-warning aircraft, radars, torpedoes and missiles and including the appalling record of the Secretaries of State for Defence since 1979? Will he now satisfy hon. Members on both sides of the House that he has the will on this matter to put his own house in order and not waste even more taxpayers' money?

Mr. Younger

I am grateful for the right hon. Gentleman's welcome for this decision. I agree that it is good to feel that the project is coming under way. The total cost has still to be defined absolutely, but I would expect it to be of the order of £6 billion to £7 billion when it is completed. There is no change in the United Kingdom's declared production offtake, which remains 250 aircraft. It is too early in the project to forecast with certainty the eventual size of the United Kingdom purchase, or indeed, other partners' purchases of EFA.

It is inevitable when anything is spent on defence that something else must make way for it in the programme. However, after exhaustive discussion, I am certain that this project is affordable within the defence budget. As a matter of interest, it is likely to be considerably cheaper than the Tornado programme, which we are already accomplishing successfully.

The right hon. Gentleman shows some courage in raising the management of those projects. As he knows, we have followed a policy over the past few years of a major change in the procurement process under the leadership of Mr. Peter Levene and the Procurement Executive. In the type of project that we are drawing up nowadays—EFA, is a typical example—the responsibility is placed firmly on the main contractor. I hope that the right hon. Gentleman will not object to my mentioning that all the cases that he has cited of things that have gone wrong involved, in almost every case, contracts placed and drawn up under the previous Labour Administration which we have had to put right.

Mr. Norman Tebbit (Chingford)

Will my right hon. Friend extract more amusement or derision from the spectacle of the right hon. Member for Llanelli (Mr. Davies), the Labour party Front-Bench spokesman, trying to disagree with a decision with which he really wants to agree?

Secondly, would my right hon. Friend not agree——

Mr. Bob Cryer (Bradford, South)

How much is the right hon. Gentleman going to receive from British Aerospace?

Mr. Tebbit

Nothing is the answer to that—nothing.

Would my right hon. Friend agree with me that on this occasion the British Government are taking their decisions on a major international project in a timely fashion, which enables us to lead rather than be dragged along behind?

Mr. Younger

I entirely agree with my right hon. Friend. I was somewhat relieved to find that the right hon. Gentleman supported this project, as he has not supported any of the others that have come forward recently. As for timeliness, I also agree with my right hon. Friend that it is desirable that, having made our decision, we should make that fact clear, as I am sure our partners will greatly appreciate Britain's leadership in this important European undertaking.

Mr. A. J. Beith (Berwick-upon-Tweed)

The progress being made with the project is good news for European defence and European co-operation. When does the Minister hope to have affirmative decisions from the other countries involved?

Mr. Younger

I thank the hon. Gentleman for his comments. Having been in touch with all the other partners, I am confident that they will be making their decisions within the next week or two and that we may therefore expect firm decisions from them all in the near future.

Mr. Michael Stern (Bristol, North-West)

Does my right hon. friend agree that this decision will be particularly welcome to British Aerospace and Rolls-Royce, in that he has today announced that they are expected to be in the lead in respect of two essential aspects of the aeroplane? Does he further agree that his announcement brings to an end a period of uncertainty to which a material contribution was made by the constant poor-mouthing we heard from the Opposition Front Bench time and time again, when they seemed to be the only people willing to oppose the project?

Mr. Younger

I appreciate my hon. Friend's comments. So much gloomy speculation is made in advance of the facts of such matters that it can discourage people. I pay tribute to the way in which British Aerospace and Rolls-Royce not only kept themselves working hard on the project but put a considerable measure of their own resources into it; they will feel very pleased with today's decision.

Mr. Peter Hardy (Wentworth)

Can the right hon. Gentleman inform the House whether the French still have any interest in this aircraft and whether, if they decide to renew that interest, he will ensure that they will not receive quite the bargain they seemed to be pursuing a year ago?

Mr. Younger

I appreciate the hon. Gentleman's point. I would not exclude the possibility of other countries joining or rejoining the project. I am bound to say that its form is clearly defined and I would not wish to interrupt its progress by any such negotiations. As for France, we are in close touch with the French in respect of many procurement matters. If at any point we can usefully collaborate with them, I should certainly be prepared to discuss that possibility.

Sir Geoffrey Pattie (Chertsey and Walton)

Is my right hon. Friend aware that the international procurement machinery which produced the Tornado was widely regarded as unnecessarily large and bureaucratic? What action will he take to prevent that being true in respect of the new project?

Mr. Younger

I have heard such views expressed at times, and I know that my right hon. Friend knows a great deal about that matter. We will try to avoid any features of the Tornado organisation that were unduly bureaucrat-ic. However, it is worth recording that the Tornado project was outstandingly successful and has produced an aircraft which, almost without doubt, is the best of its kind in the world.

Mr. Brynmor John (Pontypridd)

The Minister will know that the unit cost will depend upon each country taking the number of aircraft in which it declares an interest. Any comparison with the Tornado and its unit costs must also depend on the numbers being taken up. What contractual provision is there for tying each country firmly to taking the number of aircraft that they say they want?

Mr. Younger

There is no procedure in existence to tie any of the countries to a future decision at the time of the next stages. This is not the stage at which we decide precisely how many individual aircraft each country will order; it is the stage at which we decide together to go forward, on the basis of the numbers already declared, to the full development stage. When the next stage is reached, each country will make its own decision, in the same way that we will.

Mr. John Cartwright (Woolwich)

In view of the importance of promoting successful European co-operat-ion, can the Secretary of State be more forthcoming about the cost effectiveness of the EFA project? Will he confirm that, if research and development costs are taken into account, the unit cost of the project will be in the region of £36 million? How does that compare with the likely cost of the alternatives?

Mr. Younger

As the hon. Gentleman will, I think, appreciate, we would never discuss unit costs of an aircraft of this sort publicly, for obvious reasons. I can tell him, however, that the greatest possible care and effort has been made to compare all the possibilities, including any aircraft which are available elsewhere and which could play a comparable role. I am absolutely satisfied that the proposed EFA is the most cost-effective way of meeting the threat that we are likely to face.

Mr. Kenneth Hind (Lancashire, West)

I congratulate my right hon. Friend on this project and on the 33 per cent. share, which will be welcomed by the hundreds of British Aerospace workers in the military aircraft division in Lancashire. Following his comments, I hope that he can confirm that we shall now see an end to the speculation from the Opposition that is sowing doubts in people's minds. Can he also confirm that this finally means the end of any involvement of the French as a major partner in the project?

Mr. Younger

I am grateful to my hon. Friend. I know that all those concerned in the various British Aerospace, Rolls-Royce and many other factories in British industry will take this as a very encouraging development. Like my hon. Friend, I hope that those who have seen fit to cast doubts on the likelihood of the project's proceeding will now feel that they were wrong.

As for the work share, I believe that, together with subcontracting and business for many firms of all sizes, the project will employ many thousands before it is finished. In answer to my hon. Friend's question about French participation, we would always be willing to collaborate with France in any parts of such a project, but I do not think that at this stage we will wish to interrupt the progress of the four-nation plan to bring in another partner.

Mr. Gavin Strang (Edinburgh, East)

Does the Secretary of State recognise the potential importance of the project to Ferranti? Does he also acknowledge that, if we maximise the direct and indirect benefits of the work to British industry, it is vital that the high-technology contracts go to indigenous European consortia, rather than to foreign-based multinationals?

Mr. Younger

That point is certainly very much in our minds as these matters are decided. Contracting for the EFA, for all sorts of reasons, will clearly be on a basis of the best bid being accepted, but I am glad to say that British companies are well represented in all the alternatives.

Mr. Michael Jack (Fylde)

I am sure that my right hon. Friend will receive grateful thanks for his warmly welcomed announcement by my constituents who work at the military aircraft division headquarters of British Aerospace at Warton, in my constituency. Will he tell us whether he will now urge the other partner countries and the United Kingdom Government to pursue every export opportunity for the European fighter aircraft?

Mr. Younger

I am grateful to my hon. Friend, who has played a prominent role in pressing for the aircraft. I am sure that he feels very glad about the decision.

As for export opportunities, we certainly hope—all the partners hope—that by the mid to late 1990s there will be a considerable market for this type of aircraft. We also hope that the EFA will be very well placed for overseas sales.

Mr. Donald Anderson (Swansea, East)

The costs per unit will ultimately depend on the market. Can the right hon. Gentleman tell what market assumptions are made about purchases by our partners and, indeed, by third parties?

Mr. Younger

That will be a very relevant consideration when we come to the necessary decision about production investment. So far, we have concentrated on ensuring that the staff requirement for the EFA suits our own needs, and we believe that it will also suit export needs.

Mr. Jonathan Sayeed (Bristol, East)

My right hon. Friend's welcome announcement is an endorsement of industry in Britain, and a commitment to the defences of Britain and of NATO. The Jaguar and Phantom aircraft will require replacement in about the mid-1990s. Is the EFA project on line and on time for that?

Mr. Younger

Yes, I can confirm that we aim for EFA to come into service in the late 1990s, which should be just about the right time. My hon. Friend is absolutely correct in saying that it is because we have extremely capable industries in Europe, which can without any difficulty or doubt embark on such a complicated project, that we are able to make progress of this sort. I think that it is very important from the point of view of Eurospace industry that the project should be successful and I am sure that it will be.

Mr. Bob Cryer (Bradford, South)

Does the definition of the plane include evading radar, in which case, would it not be cheaper to buy single-engined Cessnas of the type that flew into Red square in Moscow and to put the investment into civilian aircraft, in which this country is lagging behind, to the extent that British Airways is almost totally dependent upon Boeing? Why are those huge sums so readily available for such a project when the Lucas Aerospace shop stewards committee had the greatest difficulty in applying their technology, for example, to kidney machines? Why cannot the National Health Service, education and social services have that sort of money put into them to create jobs?

Mr. Younger

I am sure that people in British industry who are hoping and expecting to get a lot of work for many years out of the project will note that the hon. Gentleman is pretty hostile to the whole idea. With regard to spending the money on other things, I do not see a great benefit in having the most marvellous kidney machines or whatever in this country if the country is unable to defend itself when it needs to.

Mr. Keith Mans (Wyre)

I welcome my right hon. Friend's statement, which will greatly reassure many of us in the north-west. Will he outline the mechanism for work sharing that will be used on the project to reflect the number of aircraft that each nation decides to buy, when it decides to buy them and, more specifically, to reflect the occasions when a country such as ours finds exports on its own? That country may find that, if there is a set percentage from the outset, a lot of the work is carried out by other member countries.

Mr. Younger

I appreciate my hon. Friend's point about work share. At present, we are talking about the work share in the full development phase. That is based on the declared numbers now, which gives the United Kingdom a 33 per cent. share of the work in that full development stage. In future, when we come to decisions on production investment and the production stage, the work share will be defined on the basis of the aircraft ordered. One of the great benefits of such a collaborative effort is that, in the overseas sales, all the partners benefit from the production of the aircraft. That is why costs are containable in this high-technology project. It means that everybody benefits from the export sales made, although the country that does the exporting has a greater benefit than any other.

Several Hon. Members


Mr. Speaker

Order. I have to bear in mind the fact that subsequent business today is under a guillotine. I shall allow questions on the statement to continue until 4 o'clock and then move on.

Dr. Dafydd Elis Thomas (Meirionnydd Nant Conwy)

Does the Secretary of State accept the key importance of the project for the regional economy in Britain, in the areas that are dependent upon the aerospace industry? In designing the project, has he had an opportunity to study the regional implications throughout Europe of such public procurement decisions, which will be important for job opportunities in many European regions? Will he address himself to the question raised by the official Opposition spokesperson, the right hon. Member for Llanelli (Mr. Davies), about the defence role of the aircraft and confirm that the aircraft is to be involved in conventional, non-nuclear activity?

Mr. Younger

On the regional implications, we expect each member country to have its own policies on those matters. As far as we are concerned, as the hon. Gentleman will know, the British aerospace industry is fairly well spread throughout the country, and various policies have been followed to try to spread it more widely. On the hon. Gentleman's second point, the contracting of the project will be spread throughout the European industry. I think that that is the main reassurance that he needs.

Mr. Robert Hayward (Kingswood)

Does my right hon. Friend remember that only a few months ago both the right hon. Member for Llanelli (Mr. Davies) and the hon. Member for Kingston upon Hull, North (Mr. McNamara) went to Bristol and one or two other aerospace constituencies in an attempt to frighten constituents into voting Labour, on the basis that the project would be cancelled? The lie has now been given to their rumourmongering and attempt to frighten.

Will my right hon. Friend confirm that the EJ200 will be available for the first production unit of EFA, or will an interim engine be used in the meantime?

Mr. Younger

I note my hon. Friend's initial remarks. It does not surprise me in the least to find that scare stories that are not based on fact can be dealt with easily by him. It is clear that those concerned listened not to the other advice but to his advice, which is right.

I understand that good progress is being made on the EJ200 engine. A decision will be made fairly soon on how long the interim engine solution will last before the main proper engines can be introduced.

Mr. Tam Dalyell (Linlithgow)

Will the Secretary of State gracefully admit that the Opposition have always seen the need for this role and that every Labour Member representing a constituency in the east of Scotland, including my hon. Friend the Member for Edinburgh, Leith (Mr. Brown), in whose constituency Ferranti is, have approached management and Ministers about the project? Will the right hon. Gentleman explain what he means by "best bid", which is the phrase that he used in answer to my hon. Friend the Member the Edinburgh, East (Mr. Strang)? Will this take into account the real needs and overheads of research and development, since Ferranti has been a world leader in this area of technology?

Mr. Younger

We take into account the bids that are submitted in the round. We do not necessarily consider only price. We take into account what is put into the bid, the technology and the reputation of the firm that lies behind the bid. Having said that, we look also for the best bid that we can get.

It is fair to say that Opposition Members have frequently advocated projects such as the EFA, and have done so genuinely. The trouble is that they seem to forget that when voting for huge reductions in the defence budget and advocating the abolition of the Defence Sales Organisation. What they say to constituents is sometimes not compatible with what they say in Parliament.

Mr. Bill Walker (Tayside, North)

Is my right hon. Friend aware that the public generally and those in the Royal Air Force especially will see the EFA as another example of the Government giving the RAF the aircraft that it needs to carry out the tasks that it has been assigned? Many of the comments coming from other quarters will be seen for what they are—scaremongering and nothing to do with reality. Will my right hon. Friend take it from me that the RAF will be delighted that the prime contractors will be responsible for the jobs as assigned?

Mr. Younger

I am grateful to my hon. Friend. I can confirm that the RAF is unanimous in the view that the EFA is the right aircraft to meet the threat that it, the RAF, will be required to meet. That is an important factor in considering whether it is right to spend the sums that will be involved on the project.

Mr. Dick Douglas (Dunfermline, West)

Will the Secretary of State acknowledge that there is considerable doubt among the public generally and those who are knowledgeable about the defence industry about the competence of the Ministry of Defence to manage projects such as the EFA? To plead in aid one individual—Peter Levene—does little to allay this fear. It will continue unless there is a clear sign that the Ministry is to be strengthened.

May we have some assurances about the response of the Secretary of State and representatives of other Governments who are involved in the project to overtures that are likely to come from the United States that it should be a partner in the project?

Mr. Younger

As I said to the hon. Member for Edinburgh, East (Mr. Strang), we do not exclude the possibility of other nations participating in this programme. We shall be prepared to discuss that if any proper proposals are made to the partners on that basis.

The hon. Gentleman has referred to the contracting problems of the Ministry of Defence. I say to the hon. Gentleman, who knows more than most about this subject, that any observer will know that a number of serious things have gone wrong with contracting in this areas in recent years. Any serious observer will agree, however, that major steps have been and are being taken to put matters right, and that the new forms of contract, of which the EFA is a clear example, do not have in them the bad features of the old contracts which led to cost overruns. It is my determination to try to ensure that in contracting practice from now on there will be much less likelihood of any overruns of the sort that we have had in the past.

Mr. Hugh Dykes (Harrow, East)

Does my right hon. Friend agree that in this project above all it is essential to ensure that the radar equipment and all the electronics are supplied by British and other European contractors and not from across the Atlantic?

Mr. Younger

I hope that all these major items will be supplied with the maximum participation of British firms. I cannot give a blanket guarantee that, whatever the bids that are put in, British firms will have preference over all others. Above all, we are looking for value for money and the best hid, taking all factors into account. I am sure that that is the right way in which to proceed and to avoid cost overruns of the sort that have occurred in the past.

Mr. Julian Brazier (Canterbury)

I welcome the statement, but was my right hon. Friend surprised to hear the Opposition refer to difficulties with torpedo programmes? Will he confirm that, when the Government took office, they brought the Sting Ray torpedo programme under control——

Mr. Speaker

Order. The Secretary of State has made a statement on the European fighter aircraft.

Mr. Brazier

—and ensured that it would be the best of its kind in the world?

Mr. Younger

I appreciate my hon. Friend's point. Perhaps I tended to be rather too kind to Opposition Members by not rubbing in too much the fact that most of the sad failures in procurement policy were contracts engaged in during their time in government. But I do not make too much of that.

Mr. Allan Rogers (Rhondda)

Will the Minister take this opportunity to refute the untrue allegations made by Conservative Members that we have opposed the project? If any confusion has been caused, it is because of the Government's procrastination in making up their minds. That is why we welcome the fact that the programme is going ahead.

In his statement and in answer to questions, the Secretary of State said that the plane will come into operation in the late 1990s. On 8 December and 26 January, the Under-Secretary of State for Defence Procurement said that the plane would go into service in the mid-1990s. Are we to understand that there has been a five-year slippage since January, or is the plane due to go into service in the mid to late 1990s?

Will the Secretary of State be a little firmer on the radar issue? When will the suite for the aircraft be ordered? Will we be in the ridiculous situation that we were in with the Tornado and type 23 frigates? There was a first-class vehicle with no radar, no combat capability, and no command and control system, because of the Government's appalling mismanagement of our defence economy.

Mr. Younger

I note what the hon. Gentleman says. I hope that his voice is the real one from the Opposition about welcoming the project. He should have a word with the hon. Member for Bradford, South (Mr. Cryer), who appears to he deeply hostile to the project. Perhaps I could leave it to them to sort it out between themselves. [Interruption.] No problem.

As regards the date, I said the mid to late 1990s. Perhaps I was being unduly cautious. I hope that it will be ready for service about the mid-1990s.

As I said earlier, when the Government decide which consortium is to produce the radar, responsibility will be firmly placed on one main contractor. It will be required to provide the radar to specification and on time before it gets paid. That is the incentive contract, which is our real security for procurement decisions from now on.