§ 4.28 p.m.
§ THE MINISTER WITHOUT PORTFOLIO (LORD DRUMALBYN)
My Lords, with the leave of the House, I should like to repeat a Statement which my honourable friend the Minister for Aerospace is making in another place on the Rolls-Royce RB.211 and Lockheed TriStar. It is as follows:
"I wish to inform the House that two major decisions have been taken on the RB.211 programme. First, we have accepted proposals from Rolls-Royce (1971) Ltd. to develop the engine from 42,000 to 45,000 lb. thrust. Rolls-Royce (1971) estimate the development cost to be £31 million. They will meet 25 per cent. of this from working capital. If the development cost should exceed £31 million they will meet 50 per cent. of any increase up to a total project cost of £61 million. The remaining development costs will be met by the Government. Production costs will be met wholly by Rolls-Royce (1971) and arrangements will be made for recovery of the Government's development contribution.
"This stretched engine, to be known as the RB.211–24, will be used in the first instance in an extended range TriStar, the -2, which Lockheed are determined to develop with a view to introduction into service in 1975. Development of the engine, on which some preliminary work has been done by Rolls-Royce (1971), will start at once, because it will take longer than the modification of the airframe. Continuation of this programme will, of course, depend on a final decision by Lockheed to develop the -2, on which they have already started preliminary work, and on the conclusion of satisfactory contractual arrangements between Rolls-Royce (1971) and Lockheed.
"Second, the British Airways Board have decided that the introduction of the TriStar into their fleet best suits their particular commercial requirement. They have therefore decided, 783 provided Lockheed decide to develop the -2, to place an initial order for six TriStar -1 s with an option on six more aircraft which might be -Is or -2s. My right honourable friend has approved this decision, which is primarily one for the commercial judgment of the Board.
"There are possibilities of a European application of the RB. 211–24 in versions of the A.300B Airbus to which the Hawker Siddeley group are already making a substantial private contribution. I have made it clear to the French Minister of Transport, and Rolls-Royce (1971) have made it clear to Aerospatiale, that we are very willing to consider specific proposals for suitable applications of the RB.211. In doing so, I explained to M. Galley my view that for the future it will be essential for European countries to develop a more co-ordinated procurement policy for aircraft and a more integrated manufacturing capability. I have made clear my readiness to enter into discussions of these wider issues at any time with the French and other European Governments.
"I believe that these decisions should give a substantial new impetus to the RB.211. programme. They will also play a major role in securing the future prospects of Rolls-Royce (1971) which we are determined to maintain as a major manufacturer of aircraft engines in its own right and in due course as part of a wider European grouping."
That is the end of the Statement, my Lords.
§ 4.32 p.m.
§ LORD BESWICK
My Lords, may I thank the noble Lord for repeating that Statement and welcome the substance of what he had to say? Everything we have learned about the RB.211 since we discussed the affairs of the Rolls-Royce Company some months ago has gone to show that this is a quite remarkable engineering achievement, and we are pleased to think that it is now going to be used on the routes of a British carrier. I would like to ask one question of the noble Lord on the first part of the Statement. When it says in the Statement that if the development cost exceeds £31 784 million they (Rolls-Royce) will meet 50 per cent. of any increase up to a total project cost of £61 million, the remaining development costs being met by the Government, does that mean that anything over £61 million is going to be met by the Government as an open-ended commitment? What happens when it goes beyond £61 million?
As to the second part of the Statement, I should like to congratulate the Government on allowing the British European Airways Corporation or the British Airways Board to exercise their own commercial judgment—though I understand there was a good deal of pressure upon the Government to bring their influence to bear. I would just say in passing that it must have been a difficult decision to make in view of the excellence of the other contender in the field, the A.300B. May I ask a further question on the second part of the Statement? Where it is said that:I have made it clear to M. Galley my view that … for the future it will be essential for European countries to develop a more co-ordinated procurement policy for aircraft and a more integrated manufacturing capability"—may I ask along what lines it is proposed to achieve this more co-ordinated procurement policy and more integrated manufacturing capability? Will a Statement be made about that, and in particular about the Marshall proposals?
§ LORD AVEBURY
My Lords, may I point out an inconsistency in this Statement in that at one point it says that Lockheed are determined to develop the -2 and to go ahead, and later on in the same paragraph that continuation of the programme will depend on a final decision by Lockheed to develop the -2. Have they definitely decided one thing or the other, and what further information is required by Lockheed in order to decide whether or not they should go ahead? May I also ask the noble Lord what arrangements will be made for the recovery of the Government's development contribution mentioned in the first paragraph of the Statement? Is this to be done by means of a levy and, if so, can the noble Lord tell the House what will be the amount of the levy to be placed upon each of the engines to be sold? As a further question, may I ask whether the development of the -24 785 depends on any major advance in technology such as carbon fibre front fans, as was the case with the original version of the RB.211? Could the noble Lord say what response he had from M. Galley to the suggestion that was made?
We very much welcome the fact that the RB.211–24 should be used in a further version of the European Airbus. Finally, may I ask who will decide the total amount of money to be spent by the Department of Trade and Industry? I had imagined that following the White Paper on Research and Development, this was to be a function of boards within the D.T.I.; but it seems that this decision to spend up to £38.25 million if the development cost reaches the £61 million figure mentioned has been taken quite separately from any other decisions by the Government on research and development. It does seem to us a very large sum of money compared, for example, with the £40.2 million which has been allocated to I.C.L. for the development of their new computers. By what process in Government has this money been allocated to one particular project?
§ 4.37 p.m.
§ LORD DRUMALBYN
My Lords, first may I thank both noble Lords for having welcomed this Statement—I think they both did welcome it; certainly the noble Lord, Lord Beswick, did. The noble Lord asked what is to happen if the cost of the -24 development goes above £61 million. It is extremely unlikely that it will, because the estimate of the Rolls-Royce Company itself is that it will amount to £31 million, and this is roughly confirmed by such estimates as the Department has been able to make. Rolls-Royce (1971) of course, have a very great advantage in keeping prices down to that figure because on the first £31 million they pay only 25 per cent. of the cost, whereas they have to pay 50 per cent. if it goes above £31 million. On the other hand, they want to limit their total commitment, and that is the reason for the arrangements that I have outlined. In other words, if it should go above the £61 million, this would be a cost which the Government would have to meet.
The noble Lord then asked along what lines the integration with Europe referred to would take place. This has to be discussed. I think it will be realised that 786 we are at the very early stages of this integration, but the Government firmly believe that integration of some kind or another is very necessary and we shall pursue that as our policy. The noble Lord also asked about the Marshall Report. It is not likely that a Statement will be made on that Report before the next Session, but, as I said in an earlier debate, decisions arising out of the Marshall Report will be announced in due course.
The noble Lord, Lord Avebury, asked whether Lockheeds were really going ahead or not. They have to make the arrangements. They are determined to go ahead, but they still have to make the arrangements which will enable them to do so. If they are able to do so then the arrangement that we have made for the purchase of the TriStar holds, but not otherwise. We expect they will be able to tell us definitely about this towards the end of the year—probably in October or November.
The noble Lord asked about arrangements for the recovery of the Government contribution. These have yet to be made. The noble Lord will remember that the previous arrangements for Government contributions were criticised—I think by the Estimates Committee in another place—and these have yet to be made to supplement the contribution in this case. He also asked whether the development of the -24 depends on a major advance in technology. It is rather beyond my competence to speak on this point. I understand that it is a matter of compressors and the arrangements that had to be made for the higher temperatures involved. I gathered from what I was told that this represents no major advance in technology. The noble Lord asked who decides the total amount of money to be spent. This would normally come within the Estimates. If the Estimates are exceeded it would be a question of supplementary Estimates in order to meet this particular kind of aid, and it will be met from the contingencies aid fund. The noble Lord also asked about the response from M. Galley. M. Galley and my honourable friend have been in communication. M. Galley is disappointed that we have not bought the A.300B. This disappointment was inevitable. The fact remains that we were morally committed as soon as we had entered into 787 arrangements with Lockheed for the -1 to go ahead with the -2, and I think he appreciates this.
§ LORD ORR-EWING
My Lords, will my noble friend tell the House when the British Airways Board are likely to get delivery of the first TriStar 1 and when has the option to be taken as to whether they have the second six TriStars—either 1s or 2s? May we urge my noble friend to try to see that the Government take an early opportunity to outline the future of the aerospace industry by making a Statement on the Marshall Committee, which reported some eight months ago'? Could he strive on with the integration with Europe since clearly the French, who are using an American General Electric engine in the A.300B, may be persuaded to take the European engine—that is, the highly developed RB.211?
§ LORD DRUMALBYN
My Lords, I think that I am right in saying that delivery of the Lockheed-1 can be expected from April, 1974. The RB.211–22 will be in service in April next year.
§ LORD HARVEY OF PRESTBURY
My Lords, while welcoming the Statement from my noble friend, can he say whether Rolls-Royce have made an estimate as to how long it will take to develop the RB.211–24? Secondly, will my noble friend be a little more explicit about Lockheeds and their determination to build the TriStar-2, bearing in mind the difficulty they had last year in raising funds from the United States Government? Can we be absolutely certain that funds will be available that end in order to take the developed Rolls-Royce engine?
§ LORD DRUMALBYN
My Lords, dealing with the first question, the intention is that the TriStar-2 should be capable of being offered for sale in 1975. So far as the resolution of Lockheeds is concerned, the question here is clearly that what they want to do is to produce a new family of aircraft. This is extremely important for them. Obviously it will be much easier for them to sell TriStar-1s if they have a TriStar-2 in prospect as well. It is for this reason that they are so anxious to achieve this object and we believe that they will succeed.
§ LORD HARVEY OF PRESTBURY
My Lords, will my noble friend tell us whether we have to wait until Lockheeds have further orders for the Mark II TriStar before Rolls-Royce can be certain of getting orders for the engines?
§ LORD DRUMALBYN
My Lords, my understanding is that Lockheeds will reach a definite decision as to whether or not they will go ahead with the -2 in October or November of this year.
§ LORD WYNNE-JONES
My Lords, the noble Lord has made a very encouraging Statement; but he made a reply to a question from the noble Lord, Lord Avebury, which was a little disturbing. I think I am right in saying that the noble Lord said that the development of the RB.211–24 involved higher temperatures and that consequently one was not quite certain what the costs would be. Surely higher temperatures might easily cause Rolls-Royce to use new materials and the costs could be enormous.
§ LORD DRUMALBYN
My Lords, that may be so. I understand that engines with this thrust in the subsonic sphere have already been developed, and presumably the same physical conditions apply there also.
§ LORD AVEBURY
My Lords, can the noble Lord let us have the facts about the technical parameters of the new engine? Perhaps he could write to us, rather than answering questions across the Floor of your Lordships' House.
§ LORD DRUMALBYN
My Lords, perhaps the noble Lord would like to put down a Question for Written Answer, and I will endeavour to get the necessary information for him.
§ THE EARL OF ONSLOW
My Lords, when the noble Lord said that the Government will meet all costs above £61 million if this particular figure is exceeded, is he giving an open-ended commitment, especially in view of the fact that aerospacial estimates have been fairly inaccurate and that figures have been underestimated in previous years?
§ LORD DRUMALBYN
My Lords, I suppose that the answer to that question must be, "Yes". The British Airways Board are doing this in the confidence that the expenditure will not exceed anything like £61 million.
§ LORD THOMAS
My Lords, is the noble Lord aware that this is one of the most encouraging Statements that has been made in recent years on the aerospace industry? Unless Rolls-Royce puts "stretch" into the RB.211 accordingly with the -24, the likelihood of further orders coming to Lockheed for the TriStar will be very remote. By putting "stretch" into the British RB.211–24 it makes it possible for the stretched TriStar 2 to have a very much longer range which suits the route pattern of both British Corporations and independents. It also opens up the very great possibility of the European Airbus, the airframe of which is largely made from British component parts, being powered by a British engine. This gives the opening for a very much increased export business in British aerospace materials.
§ LORD DRUMALBYN
My Lords, I am greatly obliged to my noble friend. With his great experience he has been able to put this point over very much better than I could.