LIAT-BAe: Aircraft Finance (Hansard, 19 February 1985)

§ Lord Hatch of Lusby
My Lords, I beg leave to ask the Question standing in my name on the Order Paper.

§ The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Lucas of Chilworth)
My Lords, the Government have offered support in the form of grant-aid from the aid trade provision representing some 38 per cent. of the value of British Aerospace's bid. The balance of the contract price has been offered on normal export credit terms.

§ Lord Hatch of Lusby
My Lords, is the noble Lord aware that the Answer that he has given will be welcomed on all sides of the House as evidence of support by the Government of British export industry? May I ask him whether it is the case that the first application made to the European Development Fund was turned down, or rather was constrained by the requirement to purchase a French-Italian set of 'planes rather than the British Aerospace 'planes? Can he comment on the relationship between the British Government and the European Development Fund, which appears to have been prejudiced against the British Aerospace industry?

§ Lord Lucas of Chilworth
My Lords, I am most grateful to the noble Lord, Lord Hatch of Lusby, for his first comment. However, the European Commission favoured, at the time the offer was made to LIAT, the Franco-Italian ATR 42 machine. The decision was of course entirely within the 479 Commission's responsibility and the Government concurred with that decision in February 1984.

§ Lord Beswick
My Lords, is the noble Lord aware that these aircraft have in fact been delivered, that they are operating and giving splendid service and that there is even talk of further aircraft? But is not the position with regard to European aid quite intolerable? It was laid down that that aid would only be forthcoming if LIAT bought the French aircraft. Can the noble Lord tell me what representations have been made to ensure that this situation does not arise again?

§ Lord Lucas of Chilworth
My Lords, two BAe. 748s are operating now, bought by the Leeward Islands Air Transport Organisation through a loan arranged with Citibank. As I said in my first reply to the noble Lord, Lord Hatch, the decision which the Commission made was entirely within their competence. It is not for us, in that respect, to question that competence because, as I said, we did concur.

§ Lord Beswick
But, my Lords, is that not quite unacceptable? The Brussels agency are dispensing funds to which we are a contributor. As a matter of fact we probably contribute more than anyone else. We are part of that organisation. Are we not making representations to ensure that, in future, if an operator or a possible customer wants to buy a particular aircraft it is not laid down that aid is only forthcoming if French aircraft are bought?

§ Lord Lucas of Chilworth
My Lords, the noble Lord, Lord Beswick, knows full well that the Commission have their criteria to meet in granting aid under EDF. We of course are party to agreeing to those criteria. The criteria were met according to the Commission and they agreed that the offer should be made in terms of the Franco-Italian ATR 42.

Lord Bruce of Donington
My Lords, is the noble Lord aware that the question raised by my noble friend Lord Beswick is one of the utmost importance? Is the House really to understand that it is within the power of the Commission, acting on its own, to stipulate that an advance can be made to a third party only if it buys a particular item from a particular country? If this is so, surely this is something that ought to be raised at the Council of Ministers very early indeed.

§ Lord Lucas of Chilworth
My Lords, again, the noble Lord, Lord Bruce of Donington, having been in Europe himself, knows—and I merely confirm—that it is for the Commission to determine, with the benefit of advice from independent consultants and in accordance with their obligations under the Lomé Convention, which aircraft represented the most economically advantageous solution.

§ Lord Beswick
My Lords, is it not absolutely ludicrous that the people in Brussels should say which is the best aircraft for a company to fly? The people who actually operate the aircraft should be the judges. Would the noble Lord be kind enough to write to me stating what are the criteria, who decided them, when they were decided and what input we made into that decision?

§ Lord Lucas of Chilworth
My Lords, the Leeward Islands Air Transport Organisation made it quite clear as to what aeroplanes they would prefer, it was in fact the BAe. Super 748. However, the Commission offered money and they offered it under the conditions which I have described. This was not acceptable to the Leeward Islands Air Transport Organisation, who separately bought two aeroplanes. They rejected the Commission, which they have a right to do. They bought two BAe. 748s from us and are currently negotiating with us for two more aeroplanes. Meanwhile they are considering a Canadian offer. But I repeat that because the aeroplanes were not acceptable to LIAT they refused the Community EC offer.

§ Lord Beswick
My Lords, I am sorry to press this matter, but would the noble Lord be kind enough to say whether he would send me the criteria on which the decision to allocate money was made by the Brussels agency?

§ Lord Lucas of Chilworth
My Lords, I cannot give the noble Lord that assurance. I am not quite sure, this afternoon, exactly what are the conventions with regard to that.

§ Lord Campbell of Alloway
My Lords, is my noble friend the Minister aware that if criticism is made of the rectitude of an administrative act by the Commission, there is full recourse under the treaty to the court of justice?

§ Lord Lucas of Chilworth
My Lords, I am most grateful to my noble friend for reminding me—and indeed your Lordships—of that point.

Lord Bruce of Donington
My Lords, is the noble Lord aware that the assurance given to him by his noble friend is of course completely wide of the mark? There are no practicable means of challenging the Commission unless Her Majesty's Government have the guts to challenge the Commission's decision. Will the noble Lord give the House an assurance that they will not act as a supine puppy dog every time the Commission wants something and decides upon something? This is what is at stake.

§ Lord Lucas of Chilworth
My Lords, Her Majesty's Government have no intention of being a supine puppy dog in any international affairs. Neither are they prepared to adopt a dictatorial attitude towards our colleagues.

§ Lord Hatch of Lusby
My Lords, is the noble Lord aware that the pleasure with which the House greeted his initial answer will be somewhat tempered by the fact that, as I understand him, he has said that the British Government concurred with the decision of the Commission in Brussels? Is it not the fact, as the noble Lord has confirmed this afternoon, that in this case there was a dispute between the judgment of the Commission in Brussels and the receiving company backed by 11 Caribbean governments, LIAT, which wanted British Aerospace? In these circumstances, where do the British Government stand? Do they support the Commission or do they support the 481 recipient, in particular the recipient of the product of British industry?

§ Lord Lucas of Chilworth
My Lords, LIAT quite clearly favoured the procurement of four new Super 748s, which could be delivered quickly and would not involve the cost and risks of introducing a new or different aircraft. That the Commission made an offer which LIAT did not find acceptable is a matter between LIAT and the Commission. LIAT subsequently entered into negotiation with the Canadians and into negotiation with ourselves. It was at that time that Her Majesty's Government had a standing. They had no individual standing in the matter while the Commission were dealing with LIAT.

§ Lord Hatch of Lusby
My Lords, but what attitude did the British Government take to the Commission's original decision, which was disagreed with by the recipient group of LIAT? What position did the British Government take in vis-à-vis the Commission's attempted insistence that the planes be supplied by a French-Italian firm?

§ Lord Lucas of Chilworth
My Lords, as I have already explained, the negotiations between LIAT and the Commission did not involve ourselves. Naturally, we should prefer to supply aircraft made by ourselves and that is the standing which we had at that time. When those negotiations took place between LIAT and the EC—and those were the only two parties engaged at that time—Her Majesty's Government took the steps necessary, and made provisions which I have described and LIAT have accepted, in principle, those provisions and have bought already two 748s and are currently in negotiation on the second two 748s.