HL Deb 09 December 1974 vol 355 cc439-45

4.20 p.m.

Lord BESWICK

My Lords, with permission I will repeat a Statement which has been made this afternoon in another place by my right honourable friend the Secretary of State for Industry. It is as follows:

"On 22nd July Hawker Siddeley Aviation notified the Government that in their view continuing expenditure under the contract for development of the HS146 aircraft, supported by the Government in August 1973, was no longer justified and that the HS146 was unviable as a commercial project at that time. Accordingly they proposed mutual termination. Government considered that the arguments put forward by the firm were not wholly convincing and began a careful examination of their case and the wider issues involved. As part of this review I proposed to the firm that they should meet jointly with myself and the trade unions so that all those concerned in the future of the aircraft could be involved in the issues. Hawker Siddeley refused. However, I have held full discussions separately with the trade unions and the firm and have received many views from Members and the public.

"While the Government were still considering the matter Hawker Siddeley Aviation wrote to me on 14th October saying they proposed to terminate work on 21st October, unilaterally. This they did, cancelling simultaneously all the sub-contracts that had been negotiated. Since then they have stated to me that they are only willing to contemplate carrying on if the Government provide all the required funds from now on which would be at least £120 million, over the next three years at today's prices. This would represent a substantial increase on the original estimate due in part to underlying inflation and to extra costs arising on sub-contracts which would now need to be renegotiated.

"The Government have now completed a thorough review of all the options. We have had to accept that the 50-50 funding is no longer open to us and we have decided, taking all the factors into account, that we cannot justify 100 per cent. Government funding. The Government are, however, concerned to maintain this type of capability in the civil aircraft industry, and to give the board of the new nationalised aircraft corporation the opportunity of reviewing the HS146 project itself in the light of the circumstances of the time and their plans for the industry as a whole. Sir Arnold Hall, on behalf of Hawker Siddeley, has assured me that the Company will retain the necessary jigs, tools and drawings etc on the HS146 and relevant design capacity. The Government will be prepared if necessary to contribute towards the relatively minor costs of keeping the option open. I should add that I am now hopeful that a tripartite meeting will take place with the trade unions and Hawker Siddeley Aviation to discuss the situation and how best to maintain a design capability related to the HS146, and I have issued invitations for a meeting to be held later this week. I should also add that the Government are considering how the House could be provided with fuller opportunities for discussing this type of project in the future."

My Lords, that ends the Statement.

Lord ABERDARE

My Lords, I should like to thank the noble Lord, Lord Beswick, for repeating that Statement, which I think will be received with a mixture of sorrow and relief. I think there will be sorrow that a project which at one time seemed full of possibilities has now finally fallen by the wayside, but there will be relief that the Government have accepted what was the commercial judgment of the firm concerned, Hawker Siddeley Aviation, that this project was not, in present circumstances, viable. I think that on this side of the House there was a nasty feeling that the Government might go ahead, as they did in the case of the Meriden motorcycle works, and back a project which commercially was not justified. It would be wrong at this stage to commit as much as £120 million to public expenditure, although I would suggest to the noble Lord that he could save even more money by not going ahead at all with the nationalisation of the aircraft industry.

My Lords, also I think that it is sensible to keep the viability alive. I welcome the fact that the company and the Government have come to an agreement on that point. Can the noble Lord say what this design capability would cost? Has any estimate been made as to what he calls "relatively minor costs", and of the proportion of those which would be carried by the Government? Can the noble Lord say what saving will now accrue to the Government as a result of the final cancellation of the project? Presumably the 50 per cent., which the Government were expecting to have to find will be saved. Lastly, may I ask the noble Lord whether he can say a little more about the last sentence of the Statement: … the Government are considering how the House could be provided with fuller opportunities for discussing this type of project in the future. That refers to another place. Would it apply also to this House? And what has the noble Lord in mind?

Lord LLOYD of KILGERRAN

My Lords, may I also join in thanking the noble Lord the Minister for making this important Statement. As Government action, it will involve the employment of many people. Therefore, I congratulate the Minister that he has issued invitations so quickly to the three parties concerned, so that information can be given to the trade unions about the action of the Government. May I ask the noble Lord whether it is possible for the Government, or the Minister, to inform this House of the progress in these important tripartite negotiations which we hope will take place this week?

4.26 p.m.

Lord BESWICK

My Lords, I am grateful to both noble Lords, Lord Aberdare and Lord Lloyd of Kilgerran, for the understanding way they have received the Statement. The noble Lord, Lord Aberdare, had to get in a bit of a "dig" about nationalisation, but the fact of the matter is that by taking the industry into public ownership there is no cost to real resources at all. If the industry is under public ownership I hope we can ensure that we do not get into the position of starting this sort of thing and then having to cancel it at this point. That is what we want to stop. Undoubtedly, there will be greater confidence in the industry as a result of public ownership.

My Lords, I was asked how much would be saved by cancellation. I did not use the word "cancellation". It is wrong to use that word. The project has been put "on ice", if you like. The possibility is that when the new nationalisation board takes over, and has an opportunity to review the market, we can start again on an aircraft which, it was thought up to a few months ago by Hawker Siddeley Aviation, would have a very bright future. The cost of keeping it "on ice" will be minimal. It is impossible for me to say yet how much. The Chairman of Hawker Siddeley Aviation says there will be no real cost because the jigs and tools are there, and it is expected that the design staff will be maintained in employment anyhow, so the cost of keeping the project "on ice" will be minimal.

So far as the saving on the project is concerned, the original estimate was £40 million for Her Majesty's Government, but it had risen to something of the order of £54 million. Of course, this will not now be incurred. In answer to the noble Lord, Lord Lloyd of Kilgerran, on the subject of invitations, I would remind the noble Lord that invitations to get together with us were issued to the company and are of some weeks standing. They have only just been accepted. Certainly I shall be glad to keep the House informed of the result of the discussion.

Lord SHINWELL

My Lords, might I ask the noble Lord who originated this project, and whether any compensation is to be paid?

Lord BESWICK

My Lords, the project was a Hawker Siddeley project and any question of compensation to the sub-contractors, if that is what the noble Lord, Lord Shinwell, has in mind, will be a matter for the Government and the company.

Lord BALFOUR of INCHRYE

My Lords, it seemed to me that in his Statement the noble Lord the Minister is rather critical of the action of Hawker Siddeley in suspending this project. May I point out to the noble Lord that Hawker Siddeley have a worldwide intelligence sales organisation. If, in new circumstances, that organisation came to the conclusion that the aircraft was not viable, surely Hawker Siddeley would be fully justified, in the interests

of everyone (including those who own the company) in dropping the portcullis there and then, as they did? If, after further review of sales prospects, the aircraft is unfortunately (in the changing circumstances of the aircraft world) found to be unviable, will Her Majesty's Government have the courage to come forward and say, "Yes, it is not a viable proposition", or for the sake of employment, will they continue something which is not viable?

Lord BESWICK

My Lords, so far as the company's position is concerned, I should be the last to criticise the commercial judgment of this company. Nevertheless, the fact is that up to July, so far as we were aware, they thought this aircraft had a very bright future, and then there was a very sudden notification that they intended or wished to cancel. There is always a matter of judgment here, but it certainly seemed to us that there should have been much deeper consultation before this decision was reached. As for the future, the decision will be made largely on the recommendations of those who will have the responsibility for running this industry in the future.

Lord DAVIES of LEEK

My Lords, is my noble friend aware that while it serves no purpose whatsoever to castigate the British plane makers, who must be among the best in the world, nevertheless we are now facing a situation in society where Conservative, Liberal or Labour Governments, where they exist, are forced to put taxpayers' money into massive enterprise that used to be called private, and it is wrong for the dinosaurs of capitalism to be vindictive about the new face of public enterprise and public ownership? Consequently, I hope this House will have an opportunity of discussing carefully and without Party bitterness this whole problem of the new economics of the 20th century.

Lord ORR-EWING

My Lords, is the noble Lord aware that his touching confidence, that in the future when this industry is nationalised no mistakes will ever be made, will not be accepted universally either in this House or the country outside? The Ministry of Defence has long been "nationalised", if I may use that term; but I recall that the Government cancelled the HS681, they can celled the TSR-2, they cancelled the 1154, and they bought £1,000 million of American aircraft to replace them. One wonders what the future of the British aerospace industry is going to be if no risks and no ventures are ever undertaken. They are earning £700 million in spares, aircraft and engines, many of them conceived quite a long while ago. We must have a future, and I hope the Government are going to consider whether they ought not to review, as the previous Government said they would, what is the future of the British aerospace industry. If we are to discuss these matters in the House, something I would welcome, would not a Joint Select Committee of both Houses be an appropriate body to consider technical problems and projects of this sort? There is lots of talent in this House, not least on the Cross-Benches, to add a great deal of knowledge to the Joint Select Committee.

Lord BESWICK

My Lords, if I were to say that I am equally touched by the noble Lord's confidence in the private enterprise sector, I do not think it would get us much further. Both he and I have seen over the years the way in which the capital involved in research and development of large aircraft has got bigger and bigger. It has got beyond the possibilities of a private company. It is now getting beyond the possibilities of one single country, certainly of this country. This is really at the base of the difficulties that face the Hawker Siddeley Company. I am suggesting that they do require the greater financial stability that public ownership can give them. So far as the Joint Select Committee idea is concerned, that is certainly a point of view that I have on various occasions put forward, and if it were possible to press this forward no one would be happier than I myself.

Lord TREFGARNE

My Lords, may I say to the noble Lord that, like others, I am sorry to hear this Statement, but I believe that the Government have, on this occasion, taken the right decision, at least for the time being. May I ask the noble Lord whether he is aware of the details of the licence agreement with Rolls-Royce for the manufacture of the engine for this aircraft, and whether the fact that the aircraft will not for the moment be built will have repercussions on that company? May I also ask the noble Lord whether when he joins in these three-cornered conversations, as no doubt he will shortly, he will convey to the trade union members our appreciation of the very civilised way in which they conducted their quite effective lobby on this matter over recent weeks?

Lord BESWICK

My Lords, I am greatly obliged to the noble Lord for what he has said on that latter point. Perhaps I may be allowed to say that one of the things which has encouraged me in recent weeks is the way in which, both in the steel industry and in this industry, we have seen what a wealth of intelligence and a wealth of knowledge is there if properly mobilised. In reply to the noble Lord's point about the engines, I think he must be under a misapprehension. The engines were, of course, Lycoming engines. There was no agreement of which I am aware for Rolls-Royce to manufacture them, and the question of the future of the engines will be a matter for discussion.