§ The Secretary of State for Defence (Mr. Tom King)
With permission, Mr. Speaker, I wish to make a statement about the selection of the radar for the European fighter aircraft.
The House will be aware that the great majority of contracts for the development of this aircraft, including those for the engine and the airframe, have already been let, and good progress is being made in those. However, the decision on the choice of the radar has remained outstanding. The radar is the key element of the aircraft's weapon system as it governs EFA's ability to detect and identify airborne targets beyond visual range and to engage those that are hostile, and to achieve this in a very difficult electronic environment. The radar is thus required to meet a most demanding specification, and it has required the most rigorous scrutiny of the alternative proposals to establish whether they meet the necessary criteria.
Against that background, the NATO EFA manage-ment agency proposed the selection of the ECR90 radar offered by the consortium led by Ferranti. There were, however, concerns about the possible technical, commer-cial and financial risks involved in pursuing that choice.
Those concerns have now been resolved and I can inform the House that the four EFA partner nations—Germany, Italy, Spain and the United Kingdom—have selected an international consortium, known as Euroradar, led by GEC Ferranti Defence Systems Limited, to develop the ECR90 radar for EFA. Accordingly, Eurofighter, the EFA airframe prime contractor, is today awarding the radar sub-contract to them. The development contract will be awarded on a firm price basis and will be of six years' duration.
I am pleased to be able to make this announcement today, and I express my gratitude to my ministerial colleagues in our partner nations and their officials for their constructive and helpful approach. I also pay tribute to my hon. Friend the Minister for Defence Procurement and the officials of the Procurement Executive for their considerable efforts in bringing matters to such a satisfactory conclusion in what the House will recall were exceptionally difficult circumstances.
My statement today represents a major milestone for British airborne radar technology in this most important multinational development project, and I commend it to the House.
§ Mr. Martin O'Neill (Clackmannan)
I welcome the Secretary of State's understandably long delayed statement on the award of the EFA radar contract to the ECR90 consortium led by Ferranti Defence Systems. This will provide the job security guarantees for which the workers in Edinburgh and throughout the United Kingdom have waited for so long.
Can the Secretary of State comment on the employment consequences for other GEC employees at present working for Marconi Radar? Now that the Ferranti Defence Systems financial base has been re-established, may I ask him to explain the means by which the technical, commercial and financial risks to which he referred have been resolved? In particular, can he dispel the rumours mentioned in Jane's Defence Weekly of 17 March 1990 34 that the British Government had signed a memorandum of understanding with the West German Government covering indemnification by Britain in the event of cost overruns in the development budget? Has consideration been given by the parties involved to the suggestion by the Luftwaffe that a more defensive role could be sought for the aircraft?
Again, I express my congratulations and those of my right hon. and hon. Friends to all those who have been involved in winning this contract, which we hope will remove the last obstacle from the realisation of the project, which is so important for the defence of Europe and the cutting edge of British technology.
§ Mr. King
I am grateful to the hon. Gentleman for what I take to be a clear welcome for the Government's efforts in this respect. Perhaps he would prefer to forget his earlier comments when he suggested that there had been some kind of dirty dealing. He is right in saying that there has been a major effort to achieve this important contract, which will be of great benefit, not least to those who work in the old Ferranti radar division and who are a key part of GEC Ferranti Defence Systems. While I cannot answer the point that he raised about Marconi, I am authorised by GEC to say that it expects that 95 per cent. of the British share of the work will be done in Edinburgh. That assurance is important because it implies recognition that the technical contribution of Ferranti workers is important.
There is not a memorandum of understanding because a memorandum of understanding exists between all member countries in the consortium. However, the British Government have given a side letter to the German Government, of which the House was notified in a departmental minute. It gives assurances about any extra costs that might be incurred by the German company responsible for the integration of the radar. That side letter is backed by a back-to-back indemnity from GEC, the parent company of GEC Ferranti Defence Systems. Therefore, there is no risk to public money and the commercial risks have been properly backed by a properly resourced defence contractor. That is an important element, the achievement of which was a key ingredient in securing this important contract.
§ Mr. Michael Jack (Fylde)
This news will be of great relief to and will be warmly welcomed by my constituents in Fylde who work on the prototypes of the aircraft. I congratulate my right hon. Friend and his hon. Friends on their efforts.
Will my right hon. Friend confirm that the announcement could not have been made if the four partner countries were not fully committed to the project all the way through the development to the production phase? Can he assure me that the selection of the radar will present no barriers to export possibilities for the aircraft and that export customers will be fully involved at an early stage in the development to ensure that what orders are available can be executed quickly?
§ Mr. King
On the latter point, that will certainly be true, subject to the normal controls on the export of military equipment. I can give that assurance, and my hon. Friend understands that well.
I thank my hon. Friend for his welcome. I am aware that this has been a worrying period for many people involved in the project. The House does not need me to 35 rehearse the exceptionally difficult commercial develop-ments that occurred and the previous difficulties of Ferranti, which threatened to jeopardise the whole project. It has been a matter of some encouragement that we have found other companies that were prepared to become involved in the way that they have. It is encouraging for the future of British industry that the project has gone ahead in the way that it has.
§ Mr. Menzies Campbell (Fife, North-East)
The Secretary of State will be aware that his announcement will be met with unanimous approval throughout the United Kingdom, not least because it removes an economic and military uncertainty.
On the point raised by the hon. Member for Clackmannan (Mr. O'Neill), did I understand the right hon. Gentleman to say that there is no risk to the United Kingdom Government in financial terms in the event of any cost overruns on the project? He will be aware that this year general elections are planned in Germany and that a body of opinion is not wholly in favour of continuing German participation in the EFA project. As Secretary of State for Defence, what consideration has he given to the possible consequences for United Kingdom defence policy if Germany reduces or even withdraws from its agreed participation in the EFA programme?
§ Mr. King
The hon. Gentleman's understanding is correct in that the undertaking in the side letter given by the British Government of entering into a contingent guarantee, which has been reported to the House, is backed by a back-to-back indemnity—a total indemnity —against any such costs arising from GEC. Therefore, the answer to the hon. and learned Gentleman's point about whether costs fall to the British Government is no.
The hon. and learned Gentleman asked what cognisance we took of a possible change of Government in the Federal Republic of Germany. I do not know what cognisance the German Government thought of taking of any possible change in this country. I do not know what the project's future or the prospects of workers in Ferranti Defence Systems would be were the appalling prospect of a change in the Government here to come about. Our purpose is to deal with the position as it is and work in this country's best interests. I am sure that all our efforts and those of the workers in GEC Ferranti Defence Systems will ensure that there is no such change of policy.
§ Mr. Keith Mans (Wyre)
I welcome my right hon. Friend's statement. Does he agree that his announcement ensures that this country and Europe will remain at the forefront of airborne radar development into the foreseeable future, which is important?
§ Mr. King
I am grateful to my hon. Friend. I think that this is recognised by those with a far greater expertise than me to be a significant development in radar that will give a significant capability to EFA. As I made clear in my statement, that is the key element in the aircraft's capability. We believe that we have now achieved the best radar for the purpose and the alliance—one that will give it a fine aircraft. I hope that the prospects for the aircraft with the radar will be extremely good.
§ Mr. Gavin Strang (Edinburgh, East)
Is the right hon. Gentleman aware that he has been absolutely right to 36 stand firm in support of the ECR90 system because of its enormous importance in relation to the development of indigenous European technology and British industry but, above all, because he has a responsibility to the pilots who will eventually fly the planes? In standing firm, he has ensured that they will have the best radar system available. Does he accept that by confirming the GEC Ferranti Edinburgh operation as world leaders in airborne radar he is providing the basis for probably thousands of jobs in the next century, radar systems that will go into the European fighter aircraft and systems that will be sold for other planes and, hopefully, other civil uses?
§ Mr. King
I am grateful to the hon. Member. I am aware of the close interest that he takes, and has done for a considerable period, in this matter. That is understandable because of his constituency interests. I note his comments, which I presume to take as a measure of the confidence of his constituents who work for the company in their prospects, provided the contract can be achieved. I take great encouragement from that.
§ Mr. Jonathan Sayeed (Bristol, East)
I congratulate my right hon. Friend and his fellow Ministers in the Ministry of Defence on standing firm on this contract. The contract is excellent news. Does he agree that, despite the commercial difficulties that Ferranti has had, the decision to take the ECR90 is a ringing endorsement of the technical expertise of the GEC Ferranti company, not just by us, but by other countries, some of which were trying to promote their own radars?
§ Mr. King
I am grateful to my hon. Friend. I think that there is wide recognition of the technical skills and capability of those involved, particularly in the original Ferranti company. Financial resource is required as well as technical skill on a project with the length of life that this one is likely to have. That is why the development of GEC Ferranti Defence Systems was a key element in the successful achievement of the contract.
§ Dr. John Reid (Motherwell, North)
This is good news for Britain, British technology and particularly for Scotland and Scottish workers in GEC Ferranti, including those in my constituency. Will the Secretary of State make it plain that, whatever discussions took place during Ferranti's troubled period, today's decision had nothing to do with political pressure but was taken on the merits of the case? Is that not a vindication of the importance that was placed on Ferranti throughout that troubled period by hon. Members on both sides of the House? Will he join me in congratulating all involved in Ferranti on their efforts, as I congratulate him—it would be less than generous not to do so—for his efforts and sterling work to ensure that the contract eventually came to where it should, Britain?
§ Mr. King
I am grateful to the hon. Gentleman. I hope he did not think that I was churlish. I have sought to pay tribute to the technical competence and capability of those who worked in the original radar side of Ferranti. Clearly technical merit, confidence in management capability, and the resources available in support of the project have been key elements in the achievement. While it has been the responsibility of the companies to demonstrate their commercial and technical capability, I hope it is also seen that the Government have fully backed and supported their efforts.
§ Mr. Hugh Dykes (Harrow, East)
Does my right hon. Friend agree that this welcome announcement once again vindicates the strength and purpose of European-wide collaboration which can work successfully if properly handled? Does he also agree that it vindicates that an acquisition carried out in circumstances of rescue can create a strong, combined defence equipment entity which can compete in international markets? Does he agree, therefore, that the merger was justified?
§ Mr. King
The latter point is interesting. Looking to the future, with perhaps some changes in procurement and in response to the changing defence scene, it is difficult to see how much work there would have been for two companies in airborne radar. I think that the strengthened grouping could have exciting prospects. Obviously the benefits of a European collaborative approach can be seen. We look at these matters on a case-by-case basis. There are other cases where we have not thought it so profitable or advantageous to proceed. We consider the cases in a genuinely pragmatic sense.
§ Mr. Alexander Eadie (Midlothian)
The Minister will be aware that his announcement will be welcomed by the work force at Ferranti Defence Systems in Edinburgh, among whom are some of my constituents. Perhaps we should not repeat on this favourable announcement what they have been through recently. Can the Minister tell us what will happen to the other factories which were hived off as a consequence of the GEC Ferranti Defence Systems takeover? For example, I have a Ferranti plant in Midlothian. Can the Minister tell us whether, as a consequence of his announcement, there will be a spin-off in work for people employed in other factories?
§ Mr. Robert Hayward (Kingswood)
I welcome my right hon. Friend's announcement. As he will be aware, it is of particular import to thousands of workers in and around Bristol. I may be touching on areas of commercial confidentiality, but can he say whether there have been any discussions with the French Government about their possible involvement in the project in view of the fact that it will go ahead and is clearly a better alternative than the Rafale project which they are putting forward as potential competitors?
§ Mr. King
I am grateful to my hon. Friend. I know of his constituency interest and of the interest of people in the west country. I am not aware of any change of view since the French decided to go another way. I am not aware of any changed proposal. They have made certain offers to me, but I am not sure that they have been open to offers themselves.
§ Mr. Tani Dalyell (Linlithgow)
Amid the swirl of congratulations, could we spare a word for the electronics and physics departments of universities which have made this triumph possible? In particular, could the Ministry of 38 Defence use its considerable influence in aid of Professor Des Smith and his unit at Heriot-Watt university which, like many other physics and electronics departments, is chronically short of money, particularly for postgraduates? Can the Ministry of Defence talk to universities about the issue?
§ Mr. Ian Bruce (Dorset, South)
What proportion of the contract will each of the partner countries receive? Does my right hon. Friend welcome what appears to be a defence consensus from all the Opposition parties? They seem to be supporting the idea of the European fighter aircraft, but does he suspect that, while they are interested in the jobs that will go to Scotland, they might well cancel the project if they had the defence of the realm in their hands?
§ Mr. King
We estimate that the development contract is worth about £300 million and our share under the EFA project will be approximately 33⅓ per cent. The German share is also 33⅓ per cent., with 21 per cent. for the Italians and 12 per cent. for the Spanish company. As well as the design leadership, that represents about £100 million worth of work for GEC Ferranti Defence Systems.
My hon. Friend referred to the attitude of the Opposition. Perhaps I have been showing my usual moderation today. However, it appears that the other Labour party is absent from the Chamber. On other matters, two thirds of the Labour party call for a £5 billion cut in our defence expenditure and there is not the slightest prospect of any future Labour Minister—should there ever be one—being able to make an announcement of the sort that I have made today.
§ Mr. Nigel Griffiths (Edinburgh, South)
Is the Secretary of State aware of the criticism over the delay in the final settlement and announcement? For a year thousands of jobs have hung in the balance and the delay over the statement and the resolution have contributed to that. Does he think that the Government could have done more to bring about an earlier resolution? What steps did the Government consider to try to speed up the process during a year of delay which may well have been unnecessary?
§ Mr. King
The hon. Gentleman could make those comments only if he was supremely ignorant of some of the background to these matters. It is highly significant that his hon. Friend the Member for Edinburgh, East (Mr. Strang) singularly omitted any such criticism because he has a far more profound understanding of the difficulty of the issues with which we have been grappling. I hope that I do not embarrass the hon. Member for Edinburgh. East by saying that.
I assure the House that the prospects for making the announcement that I have had the honour to make to the House were very bleak a few months ago. If it had not been for some extremely hard and dedicated work by some of the people to whom I have referred, we could not have been at all sure that the announcement could be made today.
§ Mr. John McFall (Dumbarton)
I am the only member of the Select Committee on Defence who is present, but I 39 am sure that I speak for the entire Committee when I say that I welcome the contract and the efforts of the Secretary of State and his Department. Bearing in mind the difficulties that have surrounded the project, can the Secretary of State tell us how confident he is that the aircraft will be built? There is a view that EFA will not go beyond the developmental stage, and that is not only a minority view which is held by individuals in West Germany, in particular.
§ Mr. King
Provided Britain keeps a Conservative Government, I am confident that the project will go forward. The hon. Gentleman must search his conscience, if he has ambitions in another direction, to see whether he could answer that question himself. It is important to achieve the development programme. My announcement means that the cost of a very important development programme will be shared. It effectively puts the last piece in the jigsaw of the European fighter aircraft development. That major programme now goes ahead and the sharing of costs at the most important stage has been achieved. If others decide at a later stage that they want fewer aircraft, it will be much less of a problem than if we had not achieved joint development.
§ Mr. Bob Cryer (Bradford, South)
Will the Secretary of State accept my congratulations on his recognition that public expenditure both develops and maintains jobs? Will this particular expenditure definitely result in civil aviation advantages? When the work is completed, will the firm depend on further defence contracts, or does the right hon. Gentleman consider that, in view of the current changes in Europe, steps should be taken to direct the skill, expertise and high technology from which the work force benefits towards peaceful civil aviation work?
§ Mr. O'Neill
May I reiterate that, since 25 April 1988, when my predecessor as defence spokesman—my right hon. Friend the Member for Llanelli (Mr. Davies)—said in the House that he welcomed the original decision to proceed with the project, the Labour party has backed it, and will continue to do so? We recognise the importance of a contract that will provide jobs, not only in the short term but well into the 21st century. It will also provide a stepping stone for the radar technology that will be required by future aircraft, both civil and military.
We also recognise the significance of the European fighter aircraft for the defence of our continent. We believe that others too will wish to buy it, because of its large British element, in which we can take pride and from which the continent of Europe can take comfort.
§ Mr. King
I am grateful to the hon. Gentleman. It would be churlish of me to criticise him, especially in view of his final comments. He knows, however, that the project will involve the expenditure of some £8 billion to provide the aircraft and to cover the development costs, in the United Kingdom alone. Since the clear statement of support that, according to the hon. Gentleman, was made in 1988, the 1989 Labour party conference has proposed and carried—by a majority of two to one—a reduction of £5 billion per annum. We can now clock up the certainty that the EFA is sacred and will not be touched: that was helpful of the hon. Gentleman. On some future occasion we may try to draw him further on the subject of which items are sacred and where the cuts are to be made.