§ Lord Trefgarne
My. Lords, with your Lordships' permission, I should like to repeat a Statement that is being made in the other place by my right honourable friend the Secretary of State for Defence on the selection of a new basic trainer aircraft for the Royal Air Force. The Statement is as follows:
"My right honourable friend the Minister of State for Defence Procurement informed the House on 18th December 1984 that best and final offers were being invited from British Aerospace and Shorts to clarify and amplify certain aspects of their tenders for aircraft to meet the Royal Air Force's requirement in order to enable a final decision to be reached. It was subsequently agreed that Westlands and Huntings, who had also submitted tenders in the first round, could submit their own best and final offers. All four tenders have now been fully evaluated.
"The prices quoted by Westlands and Huntings, although substantially reduced compared with their original offers, remain well in excess of the other two bids, thus confirming our earlier assessment that on cost as well as technical grounds the choice effectively lay between the PC9, proposed by British Aerospace in association with the Swiss firm, Pilatus, and the Tucano, proposed by Shorts in association with the Brazilian firm, Embraer. Procurement of either aircraft would provide much better value for money than the alternative option of refurbishing the Jet Provost fleet.
"The choice between these two fine aircraft has proved to be evenly balanced. Both comfortably meet the minimum specification and either is capable of meeting the RAF's training needs very satisfactorily. Selection of either would boost jobs for British industry, both directly through the order for the RAF and indirectly through the export safes which the successful firm could be expected to win.
"In the end, cost has been the decisive factor. Our policy is to reduce the cost of defence equipment through the maximum use of competition, thus providing better value for money for the taxpayer 661 and stronger defences for the country within the resources available.
"Of the two best and final offers, Shorts' is the cheaper by a clear margin. Subject to final completion of contractual negotiations, therefore, we shall be placing an order with Shorts for 130 Tucano aircraft. The contract will be on a firm price basis: that is to say, the price is fixed in cash terms, and any cost escalation or foreign exchange risks will be borne by Shorts.
"Allowing for potential overseas sales, our decision should result in over 1,000 job opportunities in the United Kingdom, with over half of them in Northern Ireland. In addition the American firm, Garretts, who will be supplying the engine for the Tucano, have given offset undertakings which will bring further work to British industry.
"Shorts' partnership with Embraer in this venture should open up many commercial opportunities. I should tell the House that the decision I have just announced is an important one in the context of our enhanced competition policy. The price of the contract is approximately £60 million or 35 per cent. less than that which my department had originally envisaged in its forward costing process. Mr. Speaker, this is a good decision for the Royal Air Force, for British industry, for jobs and for the taxpayer."
My Lords, that ends the Statement.
§ Lord Graham of Edmonton
My Lords, we are grateful to the noble Lord the Minister for repeating the Statement that has been made by his ministerial colleague in another place. Will the Minister accept from this side of the House that we understand and appreciate not only that this decision has not been taken lightly but that it has indeed caused the Minister and his colleagues deep thought and, I would guess, some anxiety as well?
I am sure that the Minister takes fully on board the great significance of the many factors which surround the prime decision—the importance of the prestige, which had to he weighed as a factor, as well as the crucial issue of providing jobs for British craftsmen. There will be deep disappointment that the contract has not gone to the all-British Firecracker nor to the tender from British Aerospace. I have to put it to the Minister, as I have done before, that the House is entitled to an absolute and categoric assurance on these points. Is he fully satisfied, having eliminated two runners, one of which was the all-British aircraft, that the Tucano, which he tells us is the cheapest, gets 100 per cent. endorsement on technical and performance criteria? Will the Minister tell the House of any spin-off trade for British industry arising from the announcement? Did this play any material part in making the final decision?
The Statement refers to the American firm Garretts. Will the Minister elucidate on that particular paragraph in the Statement? The Statement tells us that allowing for potential sales overseas the decision should result in more than 1,100 job opportunities in the United Kingdom, with more than half of them in Northern Ireland. Can we be told how this total of 662 1,100 job opportunities compares with the number of jobs estimated in the other tenders?
The Statement tells us that the contract will be on a firm price basis and any cost escalation or foreign exchange risks will be borne by Shorts. Can the Minister tell the House of the extent to which Shorts are at present recipients of the British taxpayers' largesse for, let us say, the last two major financial supports given? Will it mean that detrimental financial setbacks referred to in the Statement may ultimately add to the taxpayers' burden?
Finally, does the Minister recall that in the debate on the trainer in this House on 17th October I reminded him that only the British Government had a prime responsibility to respect British enterprise; that only a British Government had a prime responsibility to encourage British companies; that only a British Government had a responsibility to fight for and find jobs for British workers; and that only a British Government had a prime responsibility to get value for money for the British Exchequer? Is the Minister able to assure the House that those criteria have been fully met in the announcement that has just been made?
§ Lord Grimond
My Lords, we, too, should like to thank the Minister for repeating the Statement. Is he aware that the public at large will greet with some alarm and puzzlement the apparent fact that the British cannot design an aircraft of this kind on their own but apparently have to have the help of the Brazilians or the Swiss? Is he also aware that it will puzzle them still further that they cannot even supply the engine? Will he be good enough to enlighten us as to why this is?
Secondly, while this may be a good decision for some people, is it not the case that it will he gravely disquieting for Prestwick? Is it not the case that had British Aerospace got this contract, most of it at any rate would have been undertaken at Prestwick? Can the noble Lord say whether any of the spin-off which he mentioned in the Statement will give employment at Prestwick or whether he has any hope at all to hold out now for the employees at Prestwick and at other centres of British Aerospace?
§ Lord Trefgarne
My Lords, I am obliged to both noble Lords. I share the disappointment that it has not been possible to select what has been called an all-British aircraft for this contract. One needs to recognise, however, that there was no all-British aircraft tendered for this contract. Not one of them proposed an English engine, for example, regrettable though that may be—if I may respond to the noble Lord, Lord Grimond. There was simply no suitable British engine available. Two engines were considered, as noble Lords will recall from when we discussed this some months ago. The one that has eventually been selected is the Garrett air research engine, an engine of United States origin but of which about one-third will be manufactured in this country for this contract.
The amount of spin-off that will follow from this order precisely remains to be seen, because of course it will depend upon the export success which the successful company will achieve. Incidentally, it is worth saying that they have secured as part of the deal with Embraer the rights to sell the aircraft not only in the 663 United Kingdom but to, I think, 22 other countries around the world, which I believe will be of substantial benefit to them.
As for jobs, as was said in the Statement about 1,100 jobs are in prospect following from this contract as far as the RAF order is concerned. About a half of those jobs will be directly provided in Northern Ireland with the Shorts Company and about the same number again will be made available from the supply of components and other items for the aircraft; that is to say, indirectly from the contract itself. The number of jobs was about the same, incidentally, regardless of which of the aircraft had been selected for the order. Whether any of that work goes to Scotland remains to be seen. That will be a matter for Shorts in the first instance, but I would not be surprised if some does in due course.
The noble Lord, Lord Graham, asked me about the specification. I can of course assure him that the aircraft we have chosen fully meets the specification of the Royal Air Force. It differs in some respects from the other aircraft that were considered, but as the Statement says, it fully meets the requirements of the Royal Air Force and will I am sure do a great job in their training role in due course.
On the question of Shorts, about which the noble Lord asked me, I hope and believe that this will be a successful and profitable contract for Shorts. I do not have in front of me the figures for the other support Shorts have had over the years. I think that nowadays they are receiving much less support than they used to, not least because of the recent order they received from the United States Air Force with regard to the Sherpa aircraft which has recently come into service with that air force.
§ Lord Fitt
As I look across the House I can see the noble Earl, Lord Gowrie, and the noble Viscount, Lord Whitelaw, and from their involvement in Northern Ireland they will realise as I do just how important this announcement is. It will give great confidence to the people in Northern Ireland to know that they have achieved this contract on their merits. It would not be right to say that the decision of the Government was not influenced by political considerations in Northern Ireland. Just as political considerations were uppermost in the mind of the Government in sending the ill-fated De Lorean enterprise to Northern Ireland—that was political—I have no doubt that the decision announced in the Statement today was to some extent influenced by political considerations.
Tremendous pressures must have been exerted by terribly well intentioned people on this side—those who were supporting the Firecracker and the British Aerospace projects. This decision was taken in the interests of the British economy, in an atmosphere which I would freely acknowledge, being not entirely 664 unbiased. In view of all of that, and given the record of Shorts in building aeroplanes and other missiles which may have to be used in the defence of the United Kingdom, surely this was the right decision, taken at the right time. All the people in Northern Ireland will be very, very glad.
The noble Lord will not be unaware that there may be certain political parties in Northern Ireland who will not be extremely happy that this contract has been given to Shorts. But overriding all such considerations, and in the interests of the Royal Air Force and of Northern Ireland, this was the best decision, taken at the right time.
§ 4.30 p.m.
§ Lord Trefgarne
My Lords, I am grateful to the noble Lord for the sentiments he expresses but this decision was taken on the basis of the merits of the proposal which Shorts put to us. The fact that it will result in some useful employment in Northern Ireland is an added bonus. However, I must emphasise that this decision was taken on the basis of the proposal made to us by Shorts in relation to the price and specification of the aircraft and in accordance with the requirements of the Royal Air Force.
§ The Earl of Kimberley
My Lords, can my noble friend say whether there is any truth in the suggestion that one of the factors which influenced this decision was that Brazil wanted to buy £100 million of defence equipment from our country? If so, how are they going to pay for it?
§ Lord Trefgarne
My Lords, if that is the intention of the Brazilians, they have kept it secret from me.
§ Lord Beswick
My Lords, is the Minister aware that there will be considerable regret that the aircraft which the professionals at the RAF have consistently wanted—namely, the PC9—has not been chosen, especially as it made such an attractive training package with the Hawk? May I also ask the Minister whether he is aware that now the decision has been taken, all of us wish that splendid team at Shorts all good fortune in the manufacture of this aircraft, and in the consequent export sales which it is hoped they will obtain?
§ Lord Trefgarne
My Lords, I am sure that the noble Lord is right, and I know that the Royal Air Force are looking forward very much to receiving their Tucano aircraft.
§ Lord Gisborough
My Lords, my noble friend will be aware how disappointed we are; but will he answer three questions? First, will carbon fibre be used in the construction of this aircraft? If so, will it be British carbon fibre or Japanese carbon fibre? Secondly, can he give the House some idea of the difference in cost that lies between the Firecracker and the aircraft chosen? Is it very vast? He mentioned a sum of £60 million below his estimates; but what kind of figure are we talking about? Thirdly, my noble friend mentioned that there would be a lot of exports of British-produced aircraft. Does he not think that aircraft will also be produced by the Brazilians themselves and that they will have a very much better chance of selling theirs?
§ Lord Trefgarne
My Lords, I shall deal with my noble friend's final supplementary question first. As I said earlier, the arrangement between Embraer and Shorts is such that Shorts will have exclusive sales rights in certain countries of the world while Embraer will retain their right in certain other countries. For example, it is obviously preferable for Embraer to be advancing sales in Latin America, and in Egypt where they already have a significant presence. As for the price of the Firecracker, I can assure my noble friend that it was significantly greater than the price which we are proposing to accept in respect of the Tucano. But my noble friend will be aware that it is not our practice to go into detail on these matters, for obvious reasons of confidentiality. On the question of whether British or Japanese—or indeed any—carbon fibre is to be included in the construction of this airplane, that is not a detail that I have in front of me but I shall find the answer and let my noble friend know.
§ Lord Mulley
My Lords, I am bound to ask the Minister whether he does not feel that this is an extremely sad day for all those concerned with British defence or with the British defence industry for him to come to this House and announce that the Royal Air Force is obliged to buy Brazilian-designed aircraft? I would share the enthusiasm of my noble friend Lord Fitt had the plane been produced by Shorts and not just bought off the shelf.
With regard to exports, sales rights to 22 countries does sound like quite a concession, but I should like to know which 22 countries they are. I can think of 22 countries which would not produce a couple of orders. Will the Minister arrange to publish in the Official Report the names of the 22 countries in which there is a restricted export order? I believe that this decision may save a few million pounds in the short run on the defence Vote but that it will cause immense damage not only to our defence industry but to all our industries in their export efforts throughout the world, when our competitors will say that the state of British industry is such that Britain must go to Brazil to buy trainer aircraft for the Royal Air Force. It has been stressed that one of the attractions is that Brazil will buy a lot of defence equipment from us. If that is the case I shall be interested to know which of our banks will volunteer to either carry or re-schedule the debts involved.
These are all very big issues, and this House should discuss at some time the whole question of procurement. I am bound to say that, in my view, if other procurement issues are approached in the same way as this rather small matter of a trainer aircraft then, with the Government having already virtually ruined civil manufacturing industry exports, we shall be well set to repeat the performance in respect of our defence industry, which is at present fairly satisfactorily placed in respect of its orders.
§ Lord Trefgarne
My Lords, as I said earlier, I share the general disappointment that it has not proved possible to select a wholly British aircraft to meet this requirement. But this is not the first time the RAF has acquired a foreign-built aircraft. Indeed, it is not the first time the RAF has acquired a foreign-built trainer. The Harvard, for example, which was used as an 666 advance trainer in the late 1940s and early 1950s, was of United States manufacture. As for sales to Brazil, I want to say that there was no horse trading done with regard to this contract. There was no question of our agreeing to buy one product in return for the Brazilians agreeing to buy another. As to the names of the countries to which exports may flow following this contract, perhaps I may convey that information to the noble Lord in writing.
§ Lord Shinwell
My Lords, does the Minister not appreciate that in an important matter of this character the Government have the primary responsibility? We have yet to ascertain what the Government think about this decision. We have heard references made to an aircraft that is regarded as being the cheapest as a result of tenders. References have been made, rightly, to the possibility of creating a number of necessary and desirable jobs. All that is very attractive and we are bound to accept it.
However, the question that protrudes above all the others—and it is the one to which I want an answer—is this. Having regard to the most modern techniques and to the average (if such a term is acceptable in this context) life of this machine, will the training facilities provided be consistent with the kind of machine that is being produced? If we may have an assurance in that respect, then it could make all the difference in the world. It is not a matter of cheapness or of providing jobs. The question is this: are we getting the right machine? The responsibility for deciding that lies with the people who are behind the Government; the chiefs of staff, those associated with aircraft production; and those associated with the task of meeting aggression at some time or another. All those matters must be taken into account. I ask this question as an ex-Minister of Defence and as an ex-Secretary of State for War. All those interested in defence matters and the security of our nation want answers to these questions.
§ Lord Trefgarne
My Lords, I can give the noble Lord an unequivocal assurance on the point that he put to me. This aircraft will fully meet the requirements of the Royal Air Force. It would have been unthinkable to acquire an aircraft that did not do that, and I hope that was made clear in the Statement.
§ Viscount Montgomery of Alamein
My Lords, is my noble friend aware that this decision will be very widely welcomed by those of us who labour in the field of the promotion of Anglo-Brazilian trade? Is he aware that this trade has been somewhat in the doldrums lately due to difficult circumstances? In the light of Brazil's return to civilian government, and in the light of the economic recovery there, this decision will provide a very welcome stimulus of which we should all, in this country, be able to take very considerable advantage.
§ Lord Trefgarne
My Lords, I am grateful to my noble friend for that intervention. The return of Brazil to civilian government, as he says, was in fact presided over by my noble friend Lord Whitelaw only recently.
§ Lord Barnett
My Lords, is the noble Lord aware—and I am sure he is—that in the past the Public Accounts Committee has frequently criticised the 667 Ministry of Defence for starting with one figure on a procurement and finishing with a very much larger one? Your Lordships will have heard the Minister say that this is a fixed price contract, but that has not always prevented such contracts eventually finishing up at a substantially higher figure because of renegotiating a tender. Can the Minister give a categorical assurance that that will not happen in this case? Secondly, from what the Minister told us of the substantial savings to the Ministry of Defence from this acquisition on the original expectations, do we take it that the Ministry of Defence budget will now be reduced to that extent?
§ Lord Trefgarne
My Lords, I doubt whether I can give the noble Lord an assurance on the last point that he raised. Such money as is not spent on this project will no doubt find other useful purposes within the defence budget generally. We are determined to ensure that we get the maximum value for money from the total amounts we can make available for defence purposes, and the competitive process that has led to this result will contribute to that desirable end.
§ Lord Kennet
My Lords, the House has rightly praised the addition of what jobs there are and the fact that they are going to Northern Ireland. Many misgivings have been voiced. May I voice two more in the form of questions which I think can be readily answered? It is generally held at present that it would be good if we, as a NATO country, were to undertake joint weapons procurement programmes with other European NATO countries. Was any weight given to the desirability of doing this in the choice of the basic trainer which of course is with two countries which do not belong to NATO and which flies in the face of that generally accepted aim?
Secondly, on the fixed price contract which Shorts has agreed to, is it not the case that Shorts will be topped-up and helped by the Government again in the future, as it has so often in the past, if it is not able to stick to the fixed price? Are there not back-channels by which the company may be helped out? If so, will the House not be rather relieved that that is the case because we do not want to lose Shorts? In more detail on the exchange guarantee, does it cut both ways? Will Shorts guarantee to find the price if the pound falls against the dollar and the cruzeiro? But let us suppose that it goes the other way—the future of the Brazilian currency is not rosy at the moment and nor does the United States dollar appear as impregnable as it did a day or two ago—
§ Lord Kennet
A question, my Lords! Let us suppose both currencies go down. Will Shorts keep the profit or will it go to the Government?
§ Lord Trefgarne
My Lords, I can unequivocally answer the noble Lord, Lord Barnett and the noble Lord, Lord Kennet, who put similar points. There can be no question of renegotiating the price at which we are to acquire these aircraft. The risk will cut both ways. If some advantage is to accrue to Shorts as a 668 result of a favourable movement in the exchange rates, or for other reasons, then good luck to the company. If the advantage accrues the other way, the Ministry of Defence will not be paying any additional amounts. That I think was the principal point behind the question put by the noble Lord, Lord Kennet.
My Lords, is my noble friend aware that this astonishingly courageous decision by his right honourable friend to buy an aircraft built by the second largest debtor country in the world will certainly not be regarded as dull? May I ask two further questions? Of the 22 countries which my noble friend assures us Shorts will supply with their needs for a basic trainer, how many have air forces? Secondly, my noble friend has not answered the question concerning how much of the taxpayers' money will be needed to finance the manufacture of these aircraft by Shorts, which has managed to submit a tender which is very much lower than the other contenders. Furthermore, is my noble friend aware that many people will welcome this decision in that it is directly in line with the Conservative philosophy of supporting private enterprise in this country rather than state-owned corporations?
§ Lord Trefgarne
My Lords, I promised to write to, I believe, the noble Lord, Lord Mulley, on the details of the 22 countries where Shorts will be able to sell the aircraft. I shall be happy to send a copy of that letter to my noble friend. In answer to a noble Lord who put this point earlier, I indicated that Shorts has in the past received substantial Government support. That support has declined in recent years as the company has become more successful. I think that that success is amply demonstrated by the way it has secured this contract.
§ Lord Taylor of Blackburn
My Lords, the Minister has read out a Statement which was made in another place. As he has probably gathered from the questions and the interest from all sides of the House, many of us are not satisfied with the way in which this matter has been conducted. I am glad that the Leader of the House is present because a number of us intend giving notice that we want a full debate, and we shall do this in the appropriate way. We cannot debate the matter fully today and we cannot get the answers we want today. The Minister, quite rightly, cannot answer our questions so the only way we can satisfy ourselves on the matter is to seek a debate in the appropriate way, and we shall do that.
§ Lord Trefgarne
My Lords, that is a matter for others than myself. I am sorry that the noble Lord has not had answers to questions; but, then, he did not put any.
§ The Earl of Onslow
My Lords, we congratulate the Government. If they have found the cheapest and best aircraft for the Royal Air Force, that must be right. Is it not slightly unattractive to sneer at other countries just because they are like Brazil? It is like saying, "All wogs begin at Calais and they should not build aeroplanes". If the Brazilians can build a very good aircraft for the Royal Air Force which does not impinge on our defence capability or our political 669 feelings and it is the best for the Royal Air Force is there anything wrong in that?
§ Lord Trefgarne
My Lords, of course none of the contenders for this contract proposed to build outside the United Kingdom. The Brazilian-designed aircraft which has now been successful will, as I have already indicated, be built in Northern Ireland.