AWACS Offset Agreement (Hansard, 11 July 1989)

§ 11. Mr. Lofthouse
To ask the Secretary of State for Defence what progress has been made by his Department in monitoring the number of jobs involved in contracts placed under the AWACS offset agreement.

§ Mr. Sainsbury
The offset obligation between Boeing and the Ministry of Defence is financial and is measured in terms of the value and quality of contracts placed with the United Kingdom industry. However, we are now setting in hand monitoring of employment created by contracts declared in future reports. I am glad to confirm that the level of agreed contracts won by United Kingdom companies has now reached a total value of some $624 million. This is well on the way to the $1.5 billion which Boeing is contracted to spend in the United Kingdom.

§ Mr. Lofthouse
When the Government cancelled the Nimrod contract and bought AWACS from Boeing, did not Boeing promise 4,500 jobs in the first year in the United Kingdom, increasing to 8,000 jobs? Has the Minister any evidence that those jobs will be provided?

§ Mr. Sainsbury
I think that the allegation to which the hon. Gentleman refers is based on advertisements which Boeing placed in the national press before the contract was awarded. The memorandum of understanding is based on financial achievements. Bearing in mind that quality is also involved, those financial achievements will create jobs throughout the United Kingdom. I hope that the hon. Gentleman will welcome the fact that we have already achieved some 40 per cent. by value of the target, although only some 32 per cent. of the time for the entire programme to be fulfilled has elapsed. That is a great achievement and very satisfactory for British industry.

§ Mr. Hind
Does my hon. Friend agree that the announcement that he has just made vindicates the decision to buy Boeing AWACS, which was one of the most difficult decisions that the Ministry of Defence has ever had to make? Does he agree that offset deals could not be achieved in any purchase of overseas equipment by the Ministry of Defence if it followed the Labour party policy of stringently limiting the scale of arms sales by Britain and 799 thereby undermining the effectiveness of DESO, the Defence Export Services Organisation, which has been partly responsible for the offset deal?

§ Mr. Sainsbury
My hon. Friend is quite right. There is no doubt that the policies set out by the Labour party stringently to limit defence exports would certainly be damaging to the British defence industry and would make the achievement of offset agreements that much more difficult. I remind the House that all the contracts involve high technology and high-quality goods and therefore are particularly valuable to industry.

§ Mr. Rogers
If anyone is destroying the British defence industry it is the Minister with his incompetence and mismanagement. On 18 December 1986 the Secretary of State for Defence said: Boeing is publicly committed to placing high-technology work with British companies and … job losses resulting from the cancellation of Nimrod would be equalled if not exceeded by job gains".—[Official Report, 18 December 1986; Vol. 107, c. 1353.] Now, three years later, those targets have not been reached, whatever the Minister says. There is evidence of that in the Select Committee report. The jobs that have been created are low-technology jobs. How is it that France has such a good agreement for just four Boeing AWACS aircraft while we have such a lousy deal?

§ Mr. Sainsbury
The hon. Gentleman apparently spends more time reading old copies of Hansard than more up-to-date reports. If he studies the Select Committee report he will find that we are getting high-technology, good-quality awards in respect of the offset agreement. That is written into the agreement. We have already achieved some $624 million. I should have hoped that the hon. Gentleman would have the grace to recognise that reaching 40 per cent. of the target in 32 per cent. of the time was a worthwhile achievement, rather than trying to rubbish the performance of the British defence industry.

§ Mr. Soames
Is my hon. Friend aware that although British companies with particular expertise came forward very promptly for the AWACS contract, nevertheless Boeing had to go searching the highways and byways of British industry to find other companies to take part in the contract? Does my hon. Friend agree that it is a measure of the success of the transaction that so many British companies have taken part in it?

§ Mr. Sainsbury
It is a measure of success that the benefits of the offset deal are very widely spread throughout British industry, particularly the electronics and engineering industries. One of the follow-on benefits that is not covered in the agreement is that many of the firms with contracts in the offset agreement have obtained further contracts not within the offset agreement but much to the benefit of the companies and the work force.