§ 3.41 p.m.
§ THE MINISTER WITHOUT PORT-FOLIO (LORD DRUMALBYN)
My Lords, with permission, I will repeat a Statement made in another place by my right honourable friend the Minister of Aviation Supply. The Statement is as follows:
"The House will be aware that the British Aircraft Corporation and Rolls Royce have asked for launching aid for the BAC 311 and its RB211–61 engine at a cost to the Government estimated at some £144 million at present prices. We have also had an invitation from the French, Federal German and Netherlands Governments to rejoin the A300B project. The initial cost to the Government would be some £30 million if we took a share in the airframe part of the A300B project alone, or some £100 million if in addition the RB211–61 engine were also launched for this aircraft. This takes no account of further costs likely to be incurred during the production phase.
"After very careful consideration, the Government has decided that it cannot support either of these proposals, in view of the size of the public investment required. We have to take into account the large sums of money already being devoted to the support of civil aircraft and engines, and to bear in mind other calls on public funds.
"In the light of this B.E.A. will have the opportunity to choose between two alternatives, the Lockheed L 1011 and the A300B. Both include a large contribution by British industry. The Lockheed L 1011 has Rolls Royce RB 538 211–22 engines, for which Her Majesty's Government recently announced an increase in launching aid up to a limit of £89 million. As for the A300B, Hawker Siddeley are designing and manufacturing the main part of the wing.
"The decision in regard to the A300B does not imply any weakening of our interest in joint projects such as the multi-role combat aircraft, Jaguar and of course Concorde, to each of which Her Majesty's Government is making a very substantial contribution.
"I have already discussed with my colleagues in the other Governments"—
these are of course the words of my right honourable friend in another place—
"proposals for a joint study of the possibilities of increased co-operation between European aero-engine industries, and they have recently proposed that we should meet. I welcome these proposals and hope that they can be extended in due course to the rest of the aircraft industry."
My Lords, that is the end of the Statement.
§ LORD DELACOURT-SMITH
My Lords, I am sure the House will be aware that it has heard from the noble Lord a Statement of the greatest seriousness and one on which there will be wide repercussions both immediately and ultimately. There are many questions which at once spring to the mind. I trust that the noble Lord can tell us whether it is the intention of the Government with urgency to provide, either by means of a White Paper or in another appropriate form, the full background of this extremely important decision.
But I must at once ask certain questions which fall into three categories. First of all, will Her Majesty's Government not tell us whether the launching aid of £144 million to which the noble Lord referred would have been, as launching aid normally is, in fact a partnership between the Government and the companies concerned? Furthermore, will he tell us whether, on a reasonable expectation of sales, BAC 311 would or would not have been a viable proposition, clearly viable and beneficial to the national balance of payments? Will he not further comment on the fact that the airframe company 539 concerned has been continuing the work on this at its own expense for a considerable time? After five months in office, do the Government feel that they have no obligation to the British Aircraft Corporation in respect of that period of time? That is the first question: would the BAC 311 in the Government's opinion have been a viable proposition?
Secondly, can the noble Lord tell us what will be the effects upon employment and prospects in the aircraft industry over a foreseeable period of time?—because obviously in the aircraft industry one has to try to look ahead a number of years. For example, what does he expect are likely to be the effects of this decision in the '70s on the British Aircraft Corporation? What is the basis upon which the British Aircraft Corporation are to consider the possibility of Government launching aid in the future?
The third question is this. The noble Lord referred to British European Airways being (I think he said) free to choose. Are they to be completely free to choose in this matter? Will it be entirely a matter for B.E.A. to make the decision between types of aircraft which in the light of this Statement will be available to them; or will there be any kind of Government influence or Government suggestion in any form as to which choice they should make?
§ EARL AMHERST
My Lords, on behalf of noble Lords on these Benches I should like to thank the noble Lord for the Statement he has made. I have the same fears as the noble Lord who has just spoken as to what this Statement really means. In the first instance, I must ask whether abandonment of the BAC 311 really means the end of the British Aircraft Corporation as a manufacturing organisation. If it does mean that, what is to happen to the staff, to the expertise, to all the monies poured into it and, if there are such things (and I believe there are) to the pension funds and ancillary benefits. If it is to be abandoned, perhaps he would tell us about that.
Secondly he goes on to speak of the abandonment of participation in the airbus or in building the airframe or in the installation of Rolls Royce engines, leaving it to Hawker Siddeley to build a part, but not all, of the wing. Very well! The 540 noble Lord went on to say that the B.E.A. have a choice. But do they have a choice, my Lords?. The noble Lord who has just spoken asked that question; I ask it again. So far as I know, B.E.A. do not want either the Lockheed or the airbus; they want the BAC 311. Are they going to be inhibited from getting this?
Furthermore, would the noble Lord say whether, if the BAC 311 were allowed to go on, it would be viable? The Government have poured a lot of money into Rolls Royce enabling them to participate in the engineering of the Lockheed aircraft. Can he tell us if that aircraft is likely to be viable? According to my information, the prospects of future sales are not good, and Lockheed is in considerable trouble. Perhaps he will enlarge on that aspect.
I am wondering if, after answering these questions, the noble Lord would agree that this present Statement indicates that the Government are not taking the effective and energetic efforts they should take to help the British aircraft industry, not only in this country but, more important still, internationally.
§ LORD DRUMALBYN
My Lords, I will try to answer the questions put to me. I was asked first about the reasonable expectation of sales: whether, on a reasonable expectation of sales, the BAC 311 would have been viable? I take it that what this means is, should we be likely to get that amount of sales? It is always very difficult, as the noble Lord knows well, to estimate what sales would be likely to be obtained. All I can tell him is that it would need sales of 200 aircraft, plus spares, before B.A.C. would expect to get back their money; and it would need sales of 240 aircraft before the Government would begin to break even, even excluding interest payments over the years, representing another £50 million.
I was asked also, what would be the effect on employment and prospects over a foreseeable time. As the noble Lord will be aware, there has not been a great deal of work as yet; something like 500, I understand, have been employed by B.A.C. on this particular project. So far as Rolls Royce are concerned, this project has not as yet absorbed any significant effort. Regarding the basis on which the Government are to consider launching aid in the future, I can say that this 541 is unchanged. That is to say, launching aid will always be given consideration; but, of course, one must have regard to the other factors as well. As the Statement says, one must have regard to other calls on public funds and to money already devoted to the support of civil aircraft and engines. I may tell the noble Lord that civil aircraft support will cost £88 million this year, and will average some £70 million over the next four years.
The next question asked by the noble Lord, Lord Delacourt-Smith, was whether B.E.A. would be free to choose. My Lords, that is certainly the intention. The noble Earl, Lord Amherst asked whether this meant the end of the British Aircraft Corporation. Certainly not, my Lords. The British Aircraft Corporation at present has the Concorde on hand, and there is every prospect that this will be successful. Indeed, it has a great number of military aircraft on hand as well.
I was also asked: will B.E.A. be able to get the BAC 311? I am afraid the answer is, plainly not, if there is no basic support for the BAC 311, and if it is not to be manufactured. Then I was asked whether the Lockheed job is likely to be viable. On that I can only say that we have been keeping in close touch with Lockheed, and we believe they will secure their financial position and ensure the success of the Tri-Star. It certainly had a most impressive first flight, and that first flight was carried out right on schedule.
§ 3.53 p.m.
§ LORD BALFOUR OF INCHRYE
My Lords, may I ask the Minister two questions arising out of the rather complicated Statement he has made? The first is: do we understand now that British European Airways will have complete freedom of choice for the aircraft best fitted to their requirements which is obtainable in the market; that their choice will be absolutely unfettered in future? My second question, which I think will find some measure of support on both sides of the House, is this. Is the Minister aware that if he had gone to look at the tape an hour ago he would have seen a complete and accurate resumé of the statement he has made to the House to-day? Public relations are all very well, my Lords, but I think it is derogatory to this House and to Parliament that statements should be as it were, leaked to this degree before they 542 come before your Lordships' House. Will the noble Lord draw the attention of his right honourable friend to what has occurred?
§ LORD DRUMALBYN
My Lords, I will certainly draw the attention of my right honourable friend to that. My noble friend has great experience in these matters, and he knows what are the conventions in this regard. But I agree with him that Parliament has the right to expect a public announcement to be made first in Parliament.
I revert to the question of the freedom of choice. As I say, it is the intention that B.E.A. should have complete freedom of choice and this will go for the aircraft that are likely to be available. I might also have said to the noble Lord, Lord Delacourt-Smith, that one of the factors is that the BAC 311 introduces one more competitor into what is already going to be a highly competitive field, with one or two American competitors plus the Lockheed and the Douglas Tri-jet, winch makes it all the more difficult to say with any kind of certainty what the prospects of the aircraft will be.
§ LORD GRANVILLE OF EYE
My Lords, may I ask the noble Lord this question? Have the Government taken fully into account the effect this decision may have on aerospace exports, which are a very important part of the balance of payments? Can he also say (or, if he cannot say now, is a White Paper to be issued?) exactly what is meant by "launching aid", and whether the Government get this back almost intact? Thirdly, may I repeat a question which has already been asked: does this Statement mean that B.A.C. are really going to have a future in the aircraft industry?
§ LORD DRUMALBYN
My Lords, with regard to aerospace exports, the Government took all the factors into consideration in making up their minds, including the export prospects and balance-of-payments factor. So far as launching costs are concerned, it is true that the Government get their launching costs back over a period of time, but this may go on for a very considerable time; it might be fifteen or twenty years before the full costs would have been recovered. With regard to the issue of further information, I will bring to the attention of my right honourable friend what has 543 been said by the noble Lord, Lord Delacourt-Smith, and the noble Lord, Lord Granville of Eye.
§ LORD GLADWYN
My Lords, I would not wish to dissociate myself in any way from what my colleague, Lord Amherst, has said. I feel, not perhaps unnaturally, a little unhappy that, even if the BAC 311 is abandoned, it has not at least been possible to plump for the European Air-bus, thereby increasing our stake in Europe and perhaps facilitating our entry into the European Economic Community. May I ask whether it is not a fact that new and more favourable terms for our entry into this scheme were recently proposed by the other Governments concerned? And may I also ask the Government whether they will at least make a real effort to get agreement with other European Governments on the rationalisation of the whole European aero-engine industry (because I believe that that is what is needed) an industry which seems all too likely to go bankrupt if purely nationalistic policies are pursued?
§ LORD DRUMALBYN
My Lords, with regard to the second question, if the noble Lord will re-read what I announced in the last paragraph of the Statement, he will see that I said that the European aero-engine industries have recently proposed that we should meet, and that I hope these talks can be extended in due course to the rest of the aircraft industry. Therefore we certainly do intend to keep up the movement towards a single European aircraft industry.
So far as the first part of the question is concerned, this is a complicated matter, but while we had a further programme from the consortium it was not sufficiently precise and clear to enable us to base any firm estimates of what we were likely to get out of it. For example, it was not clear that the other countries were prepared to purchase even the first of the air-buses, and certainly not the second stretch version. As the noble Lord will be aware, there was no question of our being able to get the Rolls Royce engine into the first family of A300B. The question was whether it would be possible to get it into the next one, and here again there was no certainty. The 544 proposal was that it should be left free to the users to choose whether to instal a GE engine or the stretch version,—621.
§ LORD WYNNE-JONES
My Lords, the noble Lord, Lord Drumalbyn, will realise that his grave Statement naturally causes much concern in the House. Can he tell us what are to be the guiding principles in future in Government aid in connection with aircraft? It is well known that it is extremely difficult to get any aircraft put into production without some form of aid. The noble Lord's Statement rather suggests that the Government are going, to give aid to the aircraft industry only for the most extravagant projects, such as M.R.C.A. and Concorde. There is no suggestion, I think, that Concorde will ever prove economical.
§ LORD DRUMALBYN
My Lords, I do not think that that inference could fairly be made. What I said was that launching aid would be given on a basis of exactly the same considerations as have been taken in the past. This must depend on the amount of money already being spent for the purpose of aiding the launching, and on other claims on the public purse at the time. I indicated at what sort of level the claims are at the present time. It is true that it happens just now that a high proportion of this amount is going to Concorde; but this will not last for ever, and the same principles will apply throughout.
§ LORD TREFGARNE
My Lords, can the noble Lord confirm that B.A.C. were prepared to provide some launching aid to the BAC 311? Can he say what proportion that was of the total launching costs, excluding the engine? Can he say, further, whether there is any possibility of B.A.C. producing additional funds to meet the whole or the vast majority of the launching costs, now that the Government are unable to help?
§ LORD DRUMALBYN
My Lords, I am afraid that I am not in a position to answer the last part of the noble Lord's question. Unless I am mistaken, the intention was that 60 per cent. of the launching costs of the airframe part will be paid by the Government and 40 per cent. by B.A.C.
§ LORD MERRIVALE
My Lords, would my noble friend not agree that this Statement will come as a shock to 545 our European friends? He said that there was to be no weakening in joint projects, but does he not feel that there could be some unfavourable repercussions? Does he not also agree that our future from an industrial point of view lies in Europe, particularly with regard to co-operation in aerospace industries? As he mentioned the Concorde, would he not agree that there is an increasing feeling in both countries that the technological spin-off arising out of the development of the Concorde might be sufficient and that it might not be indispensable to proceed with this aircraft—which would be highly deplorable?
§ LORD DRUMALBYN
My Lords, I take note of the last comment of the noble Lord, which was really a statement in the form of a question. I do not think that I could add to what I have said on that matter. In regard to the first part of what my noble friend said, I have no doubt that in view of the new approach that had been made, our European partners will regret our decision. On the other hand, I feel certain that they will understand it. The reasons why the previous Government decided in 1969 not to go ahead with the A300B still apply in large measure, and because we have not been able to reach sufficient clarification of the prospects, this is perhaps one of the main factors that has made us consider that it is better not to come back into participation in the A300B at a late stage.
§ LORD MERRIVALE
My Lords, but have not more countries indicated that they wished to buy A300B than BAC 311?
§ THE MINISTER OF STATE, DEPARTMENT OF HEALTH AND SOCIAL SECURITY (LORD ABERDARE)
My Lords, I think that we have had a very long innings on this question and in the middle of a most interesting debate. I believe that the noble Lord, Lord Delacourt-Smith, wants to put one more question. May I suggest to your Lordships that this should be the last question on this particular subject before we resume the debate?
§ LORD SHACKLETON
My Lords, I always have great sympathy with any noble Lord filling the post of Leader of 546 the House. May I say to the noble Lord, Lord Drumalbyn, that he is always very painstaking, but I think that he has been almost too painstaking this afternoon. We should speed up proceedings after a Statement has been made if the first two questions are met and then noble Lords are allowed to put all their questions, rather than that every one is taken in turn. That would be very much better. On the other hand, I am bound to say that the noble Lord, Lord Drumalbyn, by his rather involved and willing replies, has not succeeded in making clear some of the answers we were seeking. I agree that we are in the middle of an important debate, but if the Government produce Statements of this sort it is quite usual—it has happened before—to take anything up to half an hour in order to try to get answers. We shall probably like to have a debate on this subject, but how we are going to find time to debate all the awful announcements the Government have in store for us I do not know. None the less, I agree with the noble Lord the Deputy Leader of the House, and if my noble friend could return to one or two questions, we could leave it at that.
§ LORD BYERS
My Lords, may I ask the noble Lord, Lord Aberdare, whether he does not think that we could get through Statements quicker if supplementary questions were much shorter? Instead of five, six or seven questions, it would be much better to confine them to two or three short questions.
§ LORD ABERDARE
My Lords, I have every sympathy with what has been said by the noble Lord the Leader of the Liberal Peers. May I also say how much I agree with the points made by the noble Lord, Lord Shackleton?
§ THE EARL OF KINNOULL
My Lords, before the noble Lord, Lord Delacourt-Smith, puts his question, could I couple my question with his, as it is very short? Can my noble friend say how many other British sub-contractors, besides B.A.C. would have been involved in the 311 project?
§ LORD DELACOURT-SMITH
My Lords, I am glad to know that I am in step with the noble Lord the Leader of the Liberal Peers, because I confined 547 myself to three questions, but I am afraid that I must come back to them and trust that the noble Lord, Lord Drumalbyn, when he replies, will be able to indicate that it is intended to lay a White Paper or give some similar body of information. The first question which I asked was about the viability of the BAC 311. I understood the noble Lord to say that the expectation was that the Government would have got their money back on sales of 240 of the aircraft—with the associated spares, of course. Can he say whether that would be regarded as a reasonable market, a reasonable expectation of sales, bearing in mind that the sales of the BAC 111, which is still in production, are already slightly over 200?
My second question related to employment prospects, and I specifically said that I was concerned about employment prospects in effect not only immediately, but during the 'seventies. Thirdly, the noble Lord has confirmed that B.E.A. will have a completely free choice. Will he confirm that they will have a completely free choice, save that the one thing they will not be able to choose is the aircraft which they have all along indicated they would prefer?
§ LORD DRUMALBYN
My Lords, the noble Lord's third question is certainly easy to answer. The answer is, Yes. May I just say this? Some of the questions have been fairly involved, and if you ask an involved question you are bound to get an involved answer. As to what would be a reasonable sale, perhaps my answer was a little too involved, but I did make it clear that there were a lot of aircraft in the field and it is difficult to assess what would be a reasonable estimate at the present time. So far as employment prospects during the 'seventies are concerned, this matter is really tied up with the question asked by the noble Lord, Lord Wynne-Jones, because it depends upon what aircraft are likely to come forward in the next few years, and it is not possible to say that. At the moment there is the Concorde and there are the military aircraft. I cannot say exactly what the prospects will be, but it does seem that there are reasonable prospects for the 'seventies. I should perhaps add that in the areas where these factories are placed there is, in any case, a pretty good demand for labour.