§ 5. Mr. WallaceTo ask the Secretary of State for Defence what discussions he has had on improvements to the offset arrangements on the contract to buy the AWACS early warning system from the United States of America.
§ Mr. YoungerThe Boeing company has every intention of fulfilling the contractual undertaking on the AWACS offset programme. My Department keeps in close touch with the company on the detail of the arrangements.
§ Mr. WallaceI am sure the Secretary of State remembers that when he made his announcement to the House in December 1986 he said that for every £100 we spend on Boeing's E3A, £130 would be spent in contracts to British companies. Given that Plessey has said that rather than having had an expected £150 million worth of contracts in the first year it has had less than 1 per cent. of that, is not the faith of the Ministry of Defence somewhat misplaced, and were not the warnings from Opposition parties that that offset agreement should be contractually binding the correct judgment at the time?
§ Mr. YoungerThe offset agreement is contractually binding. The Boeing company has undertaken under contract to provide 130 per cent. of the value of the AWACS deal in work for British firms that have to compete for that business. Boeing has every intention of fulfilling that undertaking, and has set up an office in London to ensure that it does.
§ Dr. HampsonIs it not true that British companies, even on offset deals, must put forward competitively priced tenders? As we have seen the Ptarmigan problems, is my right hon. Friend convinced that British companies are not merely taking things for granted but are genuinely putting forward competitively priced efforts to win these offset deals? If they are not, there will be wide repercussions for our purchasing in this country.
§ Mr. YoungerMy hon. Friend is correct. I believe that British companies are well aware that that is what they must do. Many of them are doing so, and the more widely this can be publicised the better.
§ Mr. DuffyDid we not receive similar contractual commitments in respect of Trident and star wars? How much work and how many jobs resulted from them? The right hon. Gentleman goes on expressing faith in Boeing, but I was in Seattle in January and I must tell him that although I cannot be as close to Boeing as he must be— necessarily—I was in the presence of one of his hon. Friends there. Neither of us received by any means the same assurances for which he is presumably prepared to settle. How many jobs have been created so far as a result of this offset, and how many does the Secretary of State expect?
§ Mr. YoungerWith respect to the hon. Gentleman, those comparisons are not correct, because in neither the Trident programme nor the SDI programme is there an offset agreement. On the main previous occasion when Boeing had an offset agreement with Britain—involving the purchase of helicopters—it more than fulfilled its undertaking. That is what it intends to do this time.
§ Mr. MansWill my right hon. Friend state the total value of offset contracts for the AWACS programme so far placed in Britain?
§ Mr. YoungerThe total that we have received from Boeing is a listing of contracts worth $141 million. We are still evaluating its report, but hope to make a fuller statement in the near future.
§ Mr. RogersThe Secretary of State knows very well that he told the House that, as an integral part of the Boeing deal, more than 4,000 jobs would be created as a result of offset agreements and that contracts worth £1.5 billion would be placed here. He now tells us that the total value of contracts is just over £100 million. [HON. MEMBERS: "No, dollars."] It was $141 million, so it is probably not much over £100 million. Is the Secretary of State not ashamed of that? The Under-Secretary of State said in reply to a question on 9 December:
Any breach of the agreement would therefore constitute a breach of the contract and … the Government would have recourse to English law in respect of any perceived damages. —[Official Report, 9 December 1987; Vol. 124, c. 214.]When will the Secretary of State take measures to protect British jobs and ensure that we have our side of the agreement?
§ Mr. YoungerI honestly think that, in the accepted language of these days, this is much ado about nothing. The agreement is exactly the same as it originally was. In other words, 130 per cent. of the value of the AWACS contract has been undertaken to be provided in offset agreements. That is how it is expressed and that is how it will be carried out. The figures that I have quoted cover the first six months. As the whole period lasts for eight years, and as Boeing is contractually committed to giving us the work, there is no reason to think that the agreement is not proceeding extremely satisfactorily and will not be fully met.
§ Mr. FavellJobs would flow if the surplus Nimrod airborne early warning airframes were adapted to other uses. Is my right hon. Friend able to say what has happened?
§ Mr. YoungerWe are examining what other uses can be found for the surplus Nimrod airframes, but we are not yet able to make a statement.