HC Deb 26 July 2000 vol 354 cc1212-20

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Dowd.]

9.58 pm
Mr. Lindsay Hoyle (Chorley)

I am pleased that we have time to discuss the important matter of people being made redundant at British Aerospace sites throughout the country. We also have the opportunity to consider what is going on in BAE, as we hear many rumours. The title of the debate is slightly misleading. The purpose of the debate is to discuss the future of employees at BAE Systems in the light of recent redundancies.

I warmly welcome the Government's announcement this week of support for BAE with the launch aid for the A3XX, the choice of A400M heavy lift aircraft and the accompanying contracts. Air France and Emirates Airlines have also supported the A3XX, and we know that there are another nine orders on the books. There are now 17 firm orders for A3XX. We can thank the Government for that. I am sorry that no Opposition Members are present for the debate. The Opposition seems to have been using the press to suggest that the Government is at fault and that the Labour party takes no interest in the industry. I want to put the record straight. The Labour party is interested in these matters, and the Government is fully committed to aerospace and will continue to support it in the future. I am grateful for the Meteor and Eurofighter projects, which are very important.

It being Ten o'clock, the motion for the Adjournment of the House lapsed, without Question put.

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Dowd.]

Mr. Hoyle

The Government deserve congratulation for their support of the contracts given for the A3XX, the A400M heavy-lift aircraft, and the Eurofighter. The Meteor project safeguarded 1,200 jobs. When it is up and running, the A400M project will involve 10,000 jobs, 3,400 of them at BAE Systems. A total of 22,000 jobs are involved in the A3XX project, 8,000 of them at BAE Systems. These are firm orders and firm contracts for the future. More orders are expected, and that is good news. The A3XX will be a super aircraft, and everyone involved deserves our congratulations.

I want to discuss aerospace manufacturing sites in the Northwest. The plant at Broughton will make the wings for the A3XX. The Lostock facility will have the Meteor project. The sites at Warton and Salmesbury will also benefit from the orders, as will the Royal Ordnance facility at Chorley.

It is therefore disappointing to learn that 3, 800 people—or 3.5 per cent. of the work force—will be made redundant. A total of 750 jobs will go at Warton and Salmesbury. Redundancies will also occur in the constituency of my hon. Friend the Minister. That is not good news. Many people in Chorley and South Ribble will suffer from the shake-out that is happening in the aerospace industry, and my hon. Friend the Member for South Ribble (Mr. Borrow) and I will be involved with them.

A strong rumour among those in the industry who lobbied Parliament recently was that work would be contracted out abroad, to firms in Poland and elsewhere. Is that true? I understand that the amount of work involved would be about 1.5 per cent. of the total, but I hope that my hon. Friend will confirm that. Orders arising out of the work sent to Poland could benefit the Northwest, but the transfer of work could be a problem, and it needs to be addressed. Contracting out work abroad is an attempt to reduce production costs. I understand the need for that, but British jobs are important to the House and should not be put at risk.

Government announcements earlier this year were regarded as a boost for British manufacturing, and as an investment in the future of high-quality, well paid jobs. They were welcomed for those reasons. However, those announcements are undermined by the decision taken by BAE Systems, which establishes the worry that more work may be sent out of the UK.

It is clear from my meetings with BAE employees from Salmesbury and Warton that there are growing anxieties among workers about the future of their jobs and of aerospace manufacturing in the Northwest. Hundreds of companies in the area contribute to the supply chain, so it is important to consider the future of the jobs provided by the industry.

I am worried about second and third-tier work being contracted overseas, which ought to go to UK companies. There is a danger that other parts of Europe will benefit from the money that the Government have made available for launch aid. The problem is not so great with first-tier contracts, but British companies are not getting their fair share of second and third-tier work. The money being used comes from British taxpayers, and British companies should be given the best opportunity to supply work for the industry. Thousands of jobs are at risk in second, third and even fourth-tier industries.

Mr. Hilton Dawson (Lancaster and Wyre)

My hon. Friend makes a powerful argument about the impact of possible redundancies on the North-west. Does he accept that Members representing constituencies across the Fylde, including myself, my hon. Friends the Members for Blackpool, North and Fleetwood (Mrs. Humble) and for Blackpool, South (Mr. Marsden) and the right hon. Member for Fylde (Mr. Jack) have constituents who must have thought that their jobs were secure and that things would go very well, given the amount of support given to the industry by the Government? They are consequently in a state of shock about what BAE Systems is presenting to them.

Mr. Hoyle

Absolutely. There is great shock and concern about British Aerospace and BAE Systems, which we want to highlight tonight. I am pleased that my hon. Friend the Member for Lancaster and Wyre (Mr. Dawson) has made that point, because there is not a constituency in the North-west that will not be touched by what is happening.

We want to call on the Government to seek assurances from BAE Systems that the investment that has been put in the United Kingdom aerospace industry will benefit the entire United Kingdom. We must look after UK manufacturing. Small and medium-sized enterprises are at risk. We must ensure that launch aid money from British taxpayers will support small and medium-sized businesses as well as BAE Systems. We must get that message across loud and clear. We are concerned about the supply chain as well as BAE Systems.

Although I appreciate that we have to compete and keep costs to a minimum, work should not be subcontracted out to the extent claimed. The mass redundancies that have taken place threaten the future of UK aerospace plants. There are no two ways about that—there is a great danger of huge numbers of people disappearing overnight because of redundancies.

I would like the Department for Education and Employment, the trade unions and BAE Systems to help redundant workers find alternative employment. Although redundancies are taking place within BAE Systems, there are also many vacancies. We must match the skills to the vacancies. The skills of the people who have been made redundant should be honed. Those people should be retrained so that they can fill the vacancies. That makes a lot of sense. It will cost money, but it is money that should be spent, and we should look forward to spending it. I believe that the Government, as well as BAE Systems, can match those vacancies by working with the people who have been made redundant. It is not impossible. In that way, rather than our seeing large numbers of redundancies, people could move into different jobs in this huge company. It is important to get them round the table.

Mr. Gerald Howarth (Aldershot)

I am most grateful to the hon. Gentleman for giving way, particularly as I did not indicate beforehand that I wanted to intervene. I should like to take him back to what he said about the A3XX. I agree with him wholeheartedly about the support that the Government have given to the programme, and remind him that it was the previous Government who supported the A320 programme, which has probably been the most successful civil aircraft, programme since the war. My discussions this morning with the chairman of the company indicate that it is halfway towards getting the orders that it needs to launch the A3XX.

Mr. Hoyle

Of course. I know of the hon. Gentleman's keen interest in aerospace matters. It goes without the saying that the previous Government used launch aid. It has been very successful and rewarding. Let us not kid ourselves—it is not some kind of grant. There is a mystique about it in that people outside think that we are giving the company money. We are not—far from it. We are investing in the company which repays the money when the aero planes that are manufactured become profitable.

It is important to get the message across that launch aid is successful not just for the company, but for the Government. To be fair, it was the previous Government who took the risk, and we are now seeing the benefits—so much so that this Government are not only replicating what was done but have gone way beyond it. With the contracts that have been awarded, we believed that we might get only 50 per cent. of what we wanted at the beginning, instead of which we have got everything that we asked for on behalf of British aerospace companies. We must get that message across loud and clear.

Training is important, but so is matching the skills to the vacancies. That will be difficult and BAE Systems will need Government support; it will cost a lot of money. However, it is important that the highly skilled people whose skills are not needed by the company are retrained within BAE System's family of companies. That is important because we cannot afford a massive shake-out, whether in the North-west or on the east coast at Hull. We must ensure that those people are valued in future because they are important to the family of BAE Systems, and the company must realise that.

BAE Systems is a huge company, and part of it may go down while another is booming, so people could be moved around successfully. It is lucky that the company is still at the forefront of the aerospace industry. We are lucky that aerospace is one of the few industries in which we in the United Kingdom are still world leaders. I never want to lose sight of that fact, and I want to ensure that we all support the industry.

The Government have gone way beyond our expectations—and may they continue to do so. I am pleased with the Government, and I shall continue to say how proud I am to be a Government Member because they have given so much financial support. It is important to recognise that fact. We must also recognise that BAE Systems must compete in the world, but I still believe that its first moral obligation is to the work force in the United Kingdom. Airbus Industrie, whether in the military sector or the commercial sector, must continue to be successful and we must keep the technology in the United Kingdom.

Mr. Howarth

I wonder wether the hon. Gentleman is aware that one of the themes of the Farnborough air show is encouraging young people to enter aerospace engineering, and that BAE Systems has led the way by inviting young people to marvellous exhibitions so that they can see what an exciting career it is. That is especially important given what the hon. Gentleman has said about redundancies and vacancies.

Mr. Hoyle

That is absolutely right; the hon. Gentleman is absolutely spot on. The danger is that engineering is not trendy in the United Kingdom. It is trendy in Germany and Japan. If we are to compete in the world market, we must show young people that engineering has a future. BAE Systems must also show that it has a future; it does not do much for people's morale when they hear about such redundancies. BAE Systems has a part to play in showing that engineering is important and trendy, and that it is the future.

We must show people that engineering represents the way forward through the new millennium. If we do not keep the people or the skills in the United Kingdom, they will go to Germany, which is desperate to get its hands on the wing technology. My hon. Friend the Member for Derby, North (Mr. Laxton), who is here tonight, knows that only too well. He has lobbied Rolls-Royce, saying, "Don't miss the boat with the A400M." The clear message to Rolls-Royce is that they must get a move on otherwise they will lose the race, and we cannot afford to do that.

We are world leaders in aero engines. The Government have supported that aircraft, and Europe has followed us because we have pushed ahead with the project. I would hate to think that Rolls-Royce could miss the boat because it is not taking seriously what will happen in the European aerospace industry. The French would love to put their engines on it, which would be a disaster for most of the United Kingdom, because many companies supply Rolls-Royce.

We should send Rolls-Royce a clear message not to miss the boat. We must also tell the trade unions what a good job they have done in lobbying Parliament. Workers from different aerospace companies lobbied both major political parties last week about their worries. We must listen and take on board what is said without losing sight of what they want. They want to be reassured that work will not go to countries in which labour costs are much lower than ours. We must tell them not to worry and that we will stand by them and by BAE Systems. We must talk, retrain and put people into vacancies.

10.15 pm
The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Alan Johnson)

I am grateful to my hon. Friend the Member for Chorley (Mr. Hoyle) for giving the House an opportunity to discuss a sector of the economy in which British industry, from its prime contractors and right up the supply chain, is among the world's leaders. It is particularly welcome to be debating the matter while the Farnborough air show is displaying what a great industry we have, by showing our talents and abilities alongside those of our global competitors.

Mr. Gerald Howarth

I can share with the Minister the latest information that I have from the show. So far, orders worth £18 billion have been taken on the first two days, eclipsing the amount taken during the whole of the last show, two years ago. That is very good news for the air show and for Britain.

Mr. Johnson

The hon. Gentleman articulates a message that has come back to us from the show. It is a great success for the British aerospace industry, of which my hon. Friend the Member for Chorley is a great champion. I shall move on shortly to his specific points, but should like first to dwell on the industry's success.

Mr. Hoyle

I do not know whether my hon. Friend is aware of the many rumours around tonight about good news on the A400M. That would be good for the United Kingdom and good for the military airbus in Europe.

Mr. Johnson

I am sure that there is very good news, but tonight's debate is not the right place for me to announce it. The whispers are certainly coming loud and clear.

My hon. Friend made several important points, rightly mentioning recent Government announcements in support of BAE Systems and the wider industrial supply chain. I am grateful for the warm support that he and the hon. Member for Aldershot (Mr. Howarth) have given the Government's actions. We were delighted to announce launch investment support for the Airbus A3XX programme, which is being offered precisely to ensure that the UK receives the many economic benefits that flow from projects of that scale and complexity.

There will be direct financial benefits to the Government because, as my hon. Friend said, launch investment is not a grant but a risk-sharing partnership in which the Government's investment is repaid at a rate of return as real as that for product sales in the marketplace. The hon. Member for Aldershot mentioned the success of earlier endeavours from which we are still reaping the rewards. That was an enormously important investment for the Government.

Mr. Howarth

The Minister is absolutely right. Does he have a figure to show just how much the Government are reaping in return on the A320 investment?

Mr. Johnson

I regret that I do not have a figure, but the project is the most successful aircraft venture that we have ever known. Its success is absolutely astounding.

The A3XX will be the largest civil aircraft project ever undertaken, representing a major step change in aircraft capability. It means the development of new techniques and technologies and a myriad of opportunities for UK industry at the cutting edge of the knowledge-driven economy.

Such programmes are rare. The Boeing 747 has enjoyed a life of more than 30 years. We hope that the A3XX will now set the standard for many years to come, providing long-term sustainable benefits to the United Kingdom economy.

When my right hon. Friend the Secretary of State announced the A3XX launch investment in March, he said that the project was expected to create 22,000 new jobs—that is, 8,000 in BAE Systems and UK supply companies and 14,000 more widely in the economy through induced employment.

In addition, the project is expected to safeguard a further 62,000 jobs—20,000 on current Airbus programmes and 42,000 in induced employment. However, it will take some time for those full benefits to flow to the economy. My hon. Friend the Member for Chorley is probably aware of the present position on A3XX—it is changing from day to day as the Farnborough air show continues, incidentally. Airbus has been offering the aircraft formally to airlines since 23 June and a full launch is expected when a reasonable number of firm orders have been received. This week, as has been mentioned, we saw the first order for five passenger versions and two freighters from the Emirates.

In addition, Air France has signed a letter of intent with Airbus for 10 A3XXs. A number of other airlines have expressed interest on that very positive basis. The hon. Member for Aldershot has said that it has received orders to half the level that it is expecting, which is extremely good news.

Airbus hopes to launch the aircraft fully at the end of this year, or early next year, with entry into service taking place as early as 2005. If, as we hope and expect, the aircraft continues to be successful, production would ramp up after that.

The first benefits are already being felt in the integrated wing design team at Filton in Bristol, where BAE is working alongside key UK equipment and aerostructure supply companies. In addition, BAE Systems has begun a large-scale recruitment drive for design engineers on the A3XX—about 300 this year and a further 300 next year.

My hon. Friend is doubtless also aware that, as well as the commercial launch of the A3XX, the Airbus partners also announced their agreement to create the Airbus integrated company. Indeed, that was an essential element of our agreement to give launch investment to the A3XX. That company is expected to begin operations formally on 1 January 2001 and will represent a major change in the way in which Airbus runs itself, with BAE having a 20 per cent. stake in the European Aeronautic Defence and Space company.

Airbus management will therefore be basing its procurement decisions very much on commercial grounds and UK companies must ensure that they are as competitive as possible to secure work on the A3XX. My Department has a number of initiatives with the aerospace industry to help them in that respect. It may help if I mention a couple.

On manufacturing, the Government is keen to see the highest possible participation of UK supply companies. My Department is working actively with the industry to ensure that that happens. The Department of Trade and Industry has been working with the Society of British Aerospace Companies and BAE Systems with a view to holding a conference in the autumn for potential suppliers to the A3XX project. The purpose of the conference will be to make all potential UK suppliers aware of the opportunities that the A3XX offers and to encourage the maximum involvement on the project from UK sources.

The conference will also enable BAE to explain to potential suppliers what they will need to do to get on to the project, including the need for financial investment where appropriate and the necessity for competitive value-for-money solutions.

There will not be any handouts on the A3XX project. British companies will have to win the contracts in a very competitive market, but I am extremely hopeful that the competitiveness improvement work that the DTI has sponsored will help to put UK suppliers in a good position to do just that.

In addition, my Department has worked with the industry to enable improved links between UK suppliers and Airbus procurement managers in Toulouse. The result has been the creation of an office there, run by the Society of British Aerospace Companies, supported for the first year by my Department. Reference has been made to the decision by my right hon. Friend the Secretary of State for Defence to select the A400M military transport aircraft and Meteor missile for Eurofighter, which was good news for British industry.

However, the topic of our debate, and the important point made by my hon. Friend the Member for Chorley, is his regret at the announcement of job losses at BAE sites throughout the UK. My hon. Friend mentioned my concern, given that the Brough site is close to west Hull, and referred to the right hon. Member for Haltemprice and Howden (Mr. Davis), with whom I am working closely on these matters as a constituency Member of Parliament and who knows the very real, dramatic effects that job losses can have on local communities. It is important to recognise that the majority of jobs affected are affected as a result of the consolidation and rationalisation following the BAE merger with Marconi Electronic Systems. The objectives are to reduce product overlap and the duplication of facilities and resources, to improve efficiency and consolidate activities to maintain competitiveness in the global marketplace. In that way, BAE will be in the best possible position to compete for and win more business for Britain.

BAE has confirmed that it is committed to several measures to mitigate the effects of the announcement on its employees and will use every measure available to avoid compulsory redundancy. My hon. Friend made an important point about matching skills to vacancies, on which all Members of Parliament for affected constituencies—including myself—are working hard with management, the unions and BAE Systems. I understand that the company is in discussion with the unions and has opened a selective voluntary redundancy agreement across the affected areas. In addition, BAE has a good reputation on retraining and reskilling. The company also aims to maximise redeployment and give assistance with relocation.

Furthermore, to protect core competencies and the UK's manufacturing capability, BAE plans to recruit about 2, 000 engineers over the next 18 months and about 1,000 young people over the next two years, as has been mentioned. Officials in the Employment Service have kept in close contact with BAE and are offering appropriate support. Jobcentres in Blackburn and St. Anne's that deal with Salmesbury and Warton have been in touch with BAE since 9 June.

Once the picture on possible compulsory redundancies becomes clearer, it will be possible to draw up a detailed strategy. For example, the Employment Service has the option to designate redundancies as large scale, enabling early access to its job search programmes. Warton and Salmesbury TEC has also offered a tailored package of support. My hon. Friend drew attention to a trend in BAE to give increasing quantities of subcontract work to countries with lower labour costs. However, I am sure that he appreciates from talking with the people involved, not least the unions, that they take an extremely constructive approach to these issues and recognise the realities of globalisation and fighting for orders in a fiercely competitive market.

BAE is under increasing commercial pressure to keep costs down to remain competitive. Importantly, however, when subcontract work is placed abroad, it is sometimes part of a marketing campaign to win overseas contracts and bring more work to the UK. Some of those orders could not be achieved unless an element was placed abroad. I know that my hon. Friend accepts those points, but it is as well to put them on the record.

In conclusion, my hon. Friend made three points. There are usually good commercial reasons for decisions on where to place subcontract work. As my hon. Friend suggested, placing contracts overseas may be a result of lower production and is sometimes done because equipment cannot be procured locally. Sometimes, as I said, it forms part of a marketing strategy or offset requirement to win foreign contracts and bring even more work to Britain. In any event, BAE needs to keep the pressure on costs if it is to remain competitive in the global market.

As I have highlighted, BAE is working with the trade unions to keep the number of compulsory redundancies to a minimum. Through the work that BAE is undertaking with its suppliers, as well as the A3XX conference on the Airbus in the autumn, which I mentioned, the approved suppliers list for A400M and BAE's support for various competitive improvement programmes, the company is demonstrating the seriousness with which it approaches its responsibilities. The responsible approach of the trade unions that have lobbied the House has played an important part in keeping aerospace companies at the forefront of the world economy.

Question put and agreed to.

Adjourned accordingly at half-past Ten o'clock.