HL Deb 18 June 1992 vol 538 cc309-32

4.54 p.m.

The Earl of Kinnoull rose to ask Her Majesty's Government what is the future of the European Fighter project.

The noble Earl said: My Lords, the subject changes now from dog welfare to defence welfare. I only wish that the noble Lord, Lord Houghton, was taking part in the debate.

I am grateful to my noble friend the Minister for agreeing to this short debate on the European Fighter Aircraft at relatively short notice. I am also indebted to other noble Lords who have indicated that they wish to take part. I recall asking the noble Lord, Lord Shackleton, a question on the F-111 project a long time ago when he was Minister for the Royal Air Force. I am delighted that he is taking part today. I am also delighted to see the name of my noble friend Lord Trefgarne on the list of speakers: he was the Minister responsible for putting together the development partnership for EFA in 1988. I am sure that he will be characteristically robust in his comments on recent events which have called into question the future of EFA. That is the purpose of the debate.

EFA is the sixth major European aerospace project put together over the past 25 years. Concorde, the Airbus, the Jaguar, the Tornado, the EH I helicopter and now EFA, demonstrate clearly that the aerospace industries of Europe can collaborate successfully. There are obviously many difficulties relating to design leadership, the sharing of know-how and co-ordination, but the results have shown that there is a European aerospace industry which works, which retains the capacity for high technology design and which competes successfully and effectively against the United States.

The House will recall that EFA, known then by different initials, was a ghost concept in the 1970s and came alive when strategic requirements were agreed among the NATO partners. France remained independent but in 1988 agreement was reached among four partners—Britain, Germany, Italy and Spain—to develop and eventually order for service an indicative figure of 750 aircraft or more.

I gather that the development stage of the project has gone extremely well with no long delays or large budget increases. Flight tests are due to start late this summer. It is always at the stage when governments have to commit production finance and when people in the Treasury are sharpening their pencils that projects are at their most vulnerable to threats of cancellation or withdrawal. EFA has proved no exception.

The German Government announced last month that they were reviewing the possibility of withdrawing from the project altogether. Germany has a 30 per cent. share in the development stage at present. More ominously, the German Defence Minister stated that he would advise his government to withdraw on two grounds: first, that Germany could not afford its share of the cost of the project in view of the heavy burden of reunification; and, secondly, that the aircraft was no longer required because the Cold War was over.

I do not know whether the German military support the second reason. I am sure that from our air staff downwards few would accept a proposition so dangerous to our own security and that of Europe. Never before have we faced such political instability within Europe as we do now following the liberalisation of Eastern Europe which has unleashed ethnic rivalries, territorial disputes and a serious threat of economic, social and political turmoil. We have a wounded elephant on our doorstep in the shape of Russia, still with the most powerful military force in the world and with a very fragile political leadership bolstered up, temporarily perhaps, by cocktail parties in Washington. Recent experience in the Gulf war proved air superiority to be of paramount importance. Finally, the Middle East shows no signs of tranquillity or peace.

All of that uncertainty reinforces the need for a credible level of security. I humbly believe that the requirement for a new aircraft remains as good today as it was in 1988. It would be much appreciated, I am sure, if my noble friend could leave us tonight in no doubt that that is the view of Her Majesty's Government.

I hope very much that Germany will reconsider the consequences of withdrawal. Politically in Europe it would be very damaging and misunderstood. It would cast doubts on the credibility of the German commitment towards European unity and co-operation despite all that Germany has said in the past to the contrary. The decision could not have come at a worse time, following the Danish referendum. European member countries need to show leadership and unity in Europe at this time and not cast doubts on commitments, particularly those of a member with the strongest economy in the Community.

If the EFA should be cancelled what are the options for the Royal Air Force in replacing its ageing fleet within the next seven years? None appears very attractive. There are two Russian aircraft—the Su-27 and the MiG-29—which are both very sophisticated and no doubt available to the Middle East. However, there are obviously doubts about spare parts availability. There is the F-22, the Stealth bomber, which, with support costs, could cost, I am told, some three times the amount of the EFA. There is also the French Rafale, which I understand would not meet our requirements. Then, I suspect there is the Treasury favourite: prolonging the life of existing aircraft.

None of those options is a good one for the Royal Air Force. Therefore, what happens if Germany, followed by Spain, pulls out of EFA? What is the contingency plan of Her Majesty's Government and what prospects are there for sales of aircraft beyond the partners. I hope that my noble friend can say something about that. I ask him specifically: if Germany withdraws, does it expect to be repaid for its share of the development costs?

Finally, I mention our long-suffering aerospace industry. Despite the cancellation of projects in the past, it remains a uniquely successful industry. It has retained its capability; it is in the forefront of technology design. Above all, it achieves very important and impressive export orders. The EFA is all important to the future of our military aerospace industry. Fifty thousand jobs depend on the programme. In my view it is unthinkable to consider cancellation of the project because of German wobbling. I hope that my noble friend will take the opportunity in his reply to reaffirm that view.

5.3 p.m.

Lord Shackleton

My Lords, I am very grateful to the noble Earl for raising this issue. I hope that we shall receive a forthright answer from the Government. That is what is called for.

A debate on a fighter aircraft for the RAF takes me back to times when this House debated the TSR-2 and other great issues and when things were very different. In those days there was an enemy in sight. Today there is no enemy in sight. But that does not mean that there is no threat. The European Fighter Aircraft is an essential component in the stability and safety of our civilisation.

It is a political issue, but it is not a political issue for this country. It is a political issue for Germany. I should like to put the case, as an Englishman who is very much committed to German welfare, of its importance to Germany. The considerations are well argued and well known in Germany. It looks as though there is a real danger that Germany, which has been of such strength in Western defence, may fail on this occasion. It is not only the fighter that is involved; the German air force needs a fighter anyway. The whole security component of Western civilisation is at stake. That is what we are considering. We do not need to argue at length, or as long as my noble friend argued about the dogs, because the issues are clear. There is no party difference. Some of my colleagues may take a more pacifist view, and it is a legitimate point of view. But I believe that the Labour Party strongly supports the creation of the European Fighter.

The damage to Germany will be immense. If the Germans pull out, at risk are not merely the loss of the fighter aircraft, the threat to the whole of the West and the danger of leaving us in an exposed position without an adequate aircraft to meet an unknown threat from unknown aircraft which are manufactured we know not where (though some may have an idea of where they may come from); it will also threaten the solidity of Western Europe and our allies.

I hope very much that the Government will make clear that this is an international issue to which the British lend their full support, with full sympathy and understanding of the problems of the Germans. The Germans do not wish to spend the money. They have to consider the enormous expense involved in looking after Eastern Germany. Nonetheless, their part in this project is essential. Therefore, I strongly support the noble Earl's efforts and hope that your Lordships will encourage the Government to take the right action.

5.6 p.m.

Lord Trefgarne

My Lords, I join in the gratitude expressed by the noble Lord, Lord Shackleton, to my noble friend Lord Kinnoull for raising the matter at this particular moment. The European Fighter Aircraft programme is a programme of the very highest importance. I do not think it an exaggeration to say that it is by far the most important defence procurement programme in prospect at the present time.

As my noble friend said, the development programme for this aircraft started as far back as 1988. Although the flying part of the programme has not yet been completed, clearly a very substantial part of the development stage of the programme is complete and very large sums of money have already been spent. Until now, at least, it has been an excellent example of European collaboration. It builds upon the excellent groundwork of the Tornado programme, although of course with the addition of our Spanish friends.

The decision in 1988 to proceed with the development programme was not easily or hastily reached. On the contrary, to be truthful even at that time our German friends were to some extent less than wholly convinced about the programme. I recall being involved in some very heated arguments about the merits of a particular radar set, about some of the decisions relating to the engine fit and other such important aspects. Just before the inauguration of the development phase our partners arrived at what were called the Turin parameters. Those were a number of important criteria which, it was agreed, had to be met if the programme were to proceed successfully. Those parameters related to the weight, size and performance of the aeroplane. I hope that when my noble friend comes to reply he will tell us that those parameters have been met and the anxieties that were then expressed about them have been overcome.

As I said, the important part of the development programme is now complete. Most of the money, or a large part of it, has been expended. So what would be the outcome if our German friends decided that they could not proceed beyond the present position? It is widely assumed that the programme at that point would collapse. But I wonder whether that is the case. Would it be possible for the programme to proceed without German participation? Presumably they would not be entitled to have their contribution repaid, though no doubt they would seek to do so. As the noble Lord, Lord Shackleton, said, it would perhaps do more damage to the Germans than it would to the other partners in the programme. It would undermine Germany's credibility as a reliable collaborative partner and would not do much for collaboration generally.

Having said that, I have always taken the view that collaboration is not an end in itself; it is a means to an end. There have been some appallingly unsuccessful collaborative programmes. I am thinking, for example, of the infamous and ill-fated NFR-90 programme, which was designed to produce a new frigate for the 1990s. No fewer than nine nations were involved in that programme and, believe it or not, nine different frigates were to emerge from it.

Much of the development cost has now been met. Therefore, it follows that if the Germans were to withdraw we should he moving to the production phase fairly soon; or at least having to make commitments towards the production phase fairly soon. Of course, there would have to be some redistribution of design responsibility as we moved into the production phase and no doubt a resharing of production responsibilities. I recall that it was intended that there should be two assembly lines for the aircraft as and when production began. If the Germans withdraw, clearly that will not be necessary; we shall have a single assembly line here in the United Kingdom. Doubtless the other partners will wish to have an additional share in the production if they are to take an additional share in the programme.

One of the important aspects of the programme that has not yet been finalised is the question of how many aircraft are to be manufactured. I know that the United Kingdom's decision on the matter had not been made when I was in the Ministry of Defence. I dare say that matters are clearer now. However, it must be recognised that the production costs are inevitably controlled by the number of aircraft which are eventually ordered.

My noble friend Lord Kinnoull referred in his opening remarks to the industrial implications of the programme. Indeed, they are enormous. The programme is far and away the biggest presently in prospect for British Aerospace. I imagine that it is the largest programme in prospect for Rolls-Royce, which is the lead partner as regards the engine. I dare say that other major British manufacturers also regard the programme as important. Therefore, it is essential to consider the number of jobs that are involved not only as regards the United Kingdom but also as regards the other partners.

Finally, I wish to touch on the question of the requirement, a matter referred to by my noble friend Lord Kinnoull. By that I mean the operational requirement of the aeroplane. It is manifestly obvious that the threat which was faced as recently as 1988 has since changed out of all recognition. I hope that my noble friend Lord Cranborne will give the House an indication of the work that has been done to reassess the nature of the threat which the aircraft will face. In addition, I hope that he will convince us, as I am sure he can, that the capability of the aircraft will meet the threat as we perceive it to be when the aircraft comes into service.

The programme is crucially important for both the Royal Air Force and the industrial concerns behind it. Therefore, I hope that the Government will persist with it wholeheartedly and will not necessarily be wholly discouraged if, in the event, our German friends withdraw.

5.15 p.m.

Lord Jenkins of Putney

My Lords, when the project was first conceived in the late 1970s there was considerable justification for it. I hope to show your Lordships that that justification has disappeared and that today the entire project has become extremely undesirable and a total waste of money. I hope that the Government will take that view on board and will reach the conclusion that on this occasion the Germans have made the right decision. I further hope that, instead of trying to persuade the Germans to the contrary, the Government will join them in stopping the waste of money which the Germans see as being involved in the venture.

Perhaps I may go back to the beginning. The RAF had been flying Jaguars for some time during the 1970s and 1980s. They were used mainly in a ground attack role for at least a decade. That was an Anglo/French collaborative project and it was designed in the mid- to late 1960s. It was given a long gestation period because all such collaborative projects take longer than anyone expects. At that early stage it was decided—and now one thinks, wisely—to plan a successor for the 1990s.

At first it was thought that the Jaguar replacement would be a very different type of aircraft. Later other possibilities were included; for instance, purchase from the United States was considered, and so forth. No firm decision was taken but towards the end of the 1970s the situation began to firm up. The decision to go ahead with the project which we are now discussing was taken in 1981 against a background of heightened East/West tension. There had been the Soviet intervention in Afghanistan and developments of Soviet military capability which were then seen as threatening NATO security.

In the 1981 RAF debate, the then Minister of State, Mr. Blaker, stated: The Soviet tactical air forces have also been greatly enhanced and now number about 5,000 aircraft". He went on to describe them. In speaking about one of those aircraft, called a Fencer, he said that it: is a light bomber with the ability to carry a heavy weapon load over long distances and in certain flight profiles could reach South-East England. By the middle of this decade we expect 1,000 of these aircraft to be available". Of course, that did not happen. Mr. Blaker continued by saying: When one takes into account the greatly improved avionics and increasing accuracy of their [Soviet] weapons and delivery systems, the threat from the air to the United Kingdom and NATO can be seen to be great and continually increasing".—[Official Report, Commons, 23/6/81; col. 149.] How does that compare with the situation today? What is great and continually increasing? What actual threat do we face? The truth of the matter is that we are into a situation and the reason why we do not want to get out of it is not in itself totally invalid; it is simply because we are in it! That poses problems all round. A great deal of money has been invested in the project. We do not need the project any more; we have no purpose for it whatever.

In addition, employment is involved. We have witnessed the rather sad spectacle of Labour Members of Parliament who have a constituency interest going to the German Embassy and threatening the Germans with a breakdown in international relations between the two countries if they dare to pull out of the project. In other words, they were saying, "If you are sensible, if you are not as silly as we are and continue with something for which we have no use at all, you will disrupt the relationship between our two countries". I hope that the Germans take no notice whatever of such silly threats coming from Back Bench Members of Parliament of whatever party.

Why do I say that this project is undesirable? Let us ask one or two questions about why it is desirable. What purpose does it serve? No possible enemy has planes as good as our Tornados. Why are we investing in new planes? I hope that we are not going to try to sell the new aircraft. Are we going to increase armament exports and, if so, where to? Perhaps we shall sell them in the Gulf. Are we contemplating Saudi investment to replace the German investment, if the Germans pull out? If the Germans pull out, the cost per aircraft will have doubled. It is already an extremely expensive operation when the Germans are paying one-third of the costs of the 450 aircraft which have been ordered. The project becomes an absolute impossibility if we reduce the project to 250 aircraft and carry the cost ourselves. Therefore, if we are to continue the project, we shall be forced to sell the armament all over the world.

It is extremely undesirable that modern aircraft should become available in any part of the world, and particularly undesirable in the Gulf. I have a letter from five American Congressmen, including two Republicans, addressed to the Prime Minister, begging him not to develop a modern aircraft and, above all, not to sell that aircraft in the Gulf. I have not seen the Prime Minister's reply but I have tabled a Question asking whether it is possible to place a copy of the reply in the Library so that we can see what he says to American congressmen who have seen, as clearly as the Germans have seen, that this project is of absolutely no value to us whatever and, indeed, has become an embarrassment.

Would it not be more productive to prevent threats by controlling the arms race? That would be better than continuing with this outdated project, which is outdated before it begins. Will the Government respond to the call from Democrats and Republicans in the United States to halt the sale of F-15s and Tornados in the Gulf, let alone developing a new and even more alarming aircraft which we may have to sell once the project is completed?

I understand that the Germans are going to abandon the project and that the German Air Force does not want it. I do not know whether or not that is the case. The Minister is shaking his head. He may have more up-to-date information and it may be that the Germans have changed their minds. However, there is no political support for this anywhere in Germany, and certainly there is no support for it among the German people.

Therefore, at present the position seems to be rather unsatisfactory. I have a document here which was prepared by the House of Commons Research Department. Therefore, it may be considered to be a reasonably objective document. It reaches this conclusion: the debate now beginning about the future size and shape of the UK defence budget could place this in doubt by 1992". This document was written in 1989 and published in February 1990. It goes on: The problem is not that the requirement has disappeared, but that the scale of the requirement may have fallen since the project was begun and that a reduced order for EFA could undermine the economic viability of the whole enterprise". Since that was written, the requirement has disappeared. We do not need it. Therefore, we are continuing with the project because we cannot conveniently get out of it.

I suggest to the Government that they should think again about this matter. Are we really going ahead with the project simply because we got into it at a time when it was sensible and are we now continuing with it when there is no requirement whatever? I suggest that the time has come to abandon the project and replace it with something much more sensible.

5.25 p.m.

Baroness Hooper

My Lords, I have been most interested to listen to the debate on the Question posed by my noble friend Lo rd Kinnoull. I look forward to hearing the response by my noble friend Lord Cranborne. My intervention is prompted by the fact that I have recently been appointed a member of the parliamentary delegation to the WEU—the Western European Union. I attended my first plenary session some two weeks ago in Paris. It was addressed by Volker Ruhe, the new German Defence Minister, Pierre Joxe, the French Defence Minister, and the new Swedish Defence Minister. In passing perhaps I may say that I hope that my right honourable friend the Secretary of State will attend a future plenary session of the WEU to state our case and to answer questions in the same way.

As I was aware of the importance we attach to the development and production of the European Fighter Aircraft, I took the opportunity to ask Volker Ruhe if he would comment on Germany's continued participation in the project. Naturally enough, he did not care to comment in any great detail, emphasising his budget difficulties and not in any way attempting to make the case which the noble Lord, Lord Jenkins of Putney, has just attempted to make. I suppose that that was hardly surprising only two days before my right honourable friend the Prime Minister was due to meet Chancellor Kohl and this issue, I understand, was on their agenda.

However, I found it to be of considerable interest. I wish to draw attention not so much to the response I received from the German Minister but to the fact that other colleagues in that assembly—one from Italy and one from Spain—returned to the question. They supported the fact that I had raised it as an issue and left the German Minister in absolutely no doubt that it was not only of UK interest but that Spanish and Italian jobs were also on the line. Indeed, their political priorities were very much involved.

Unlike my noble friend Lord Trefgarne, and possibly because I do not have the same depth of background knowledge of defence matters, I am inclined to believe that the European partnership or collaboration that has developed on this project is almost as important as the development of the aircraft itself. It seems to me that it is exactly the sort of commitment which we sought when we negotiated the security provisions of the Maastricht Treaty. It is certainly one of the reasons why the UK should, in my view, continue the process of ratification of that treaty.

Therefore, I ask the Minister to give some reassurance that the United Kingdom Government at the meeting of WEU foreign and defence Ministers, which I believe is due to take place tomorrow, will continue to emphasise the importance of this issue, not just from the UK's point of view but as an excellent example of a viable Euro-project.

5.30 p.m.

Lord Hollick

My Lords, I should like to thank the noble Earl, Lord Kinnoull, for initiating this debate on the EFA project at such an opportune time. I am sorry that my late arrival deprived me of hearing his opening remarks. I look forward to reading them in Hansard tomorrow. I should like to preface my remarks by informing the House that I am a director of British Aerospace, the prime British contractor in the EFA project.

As it approaches the end of the £6 billion development phase, the EFA project has, following political changes in Germany, reached a critical juncture. The new defence minister has cast doubt on the need for Germany to continue with the EFA project, citing two main issues; first, operational necessity and, secondly, cost. It is unsurprising that a new broom in the defence ministry in Bonn should raise those issues, particularly in the light of the costs of unification in Germany and also the approaching general elections in that country.

With regard to the operational necessity, it is widely agreed that the Tornado will not be a match for the USF22, the French Rafale or the new MiG-29, which are to be deployed at the turn of the century. The dramatic improvement in European security following the collapse of the Soviet Union, to which my noble friend Lord Jenkins of Putney referred, can, and will, lead to a progressive reduction in defence expenditure. But it is vital that the leading western European nations maintain the minimum necessary effective force to be deployed in the event of trouble, not only in Western Europe but further afield. The Gulf war was a case in point. The rapid deployment of advanced aircraft ensured air superiority and led to the swift expulsion of the Iraqis from Kuwait and, most importantly, helped to keep casualties at a remarkably low level. In a world which remains uncertain and unpredictable the need for advanced aircraft which can match the operational capabilities of those being developed by the US and Russia, and which can also be sold to other countries, has persuaded politicians of all major parties in the four participating countries to support the project since its inception in 1985.

The high cost of advanced military projects is always an anxiety, and rightly so. At constant prices the cost of EFA is some 20 per cent. below the cost of the air defence variant of the Tornado. Since the beginning of this year, and with a little encouragement from the politicians, the project costs have been further reduced by more than 5 per cent. The cost will continue to be scrutinised in the year or so before production begins. Because of the importance of the project to the long-term wellbeing of the businesses involved, all the participating companies have a strong incentive to deliver a cost effective aircraft which can meet the high level of operational criteria required.

The EFA project is the single most important collaborative defence project in Europe. It exemplifies the economic and industrial co-operation that lies at the heart of the EC. On the one hand, European nations are co-operating to promote continuing security and stability; on the other, they are working together to consolidate Europe's position as a major developer and manufacturer of advanced aerospace technology. The continuance of the EFA project is an important test of the resolve of European nations to work together and to stick to negotiated agreements despite short-term political difficulties or expediences. The collapse of EFA at this time would undermine the confidence in the whole notion of European co-operation, which, following the result of the Danish referendum, has begun to appear a little shaky. If Europe cannot see the EFA project through, then the four countries will probably have to turn to the United States for their future advanced combat aircraft needs. That would seriously undermine the defence and the civil aerospace industry in Europe and hand a dominant position in this market to the US. I am not surprised that US politicians are lobbying our Prime Minister to close down the project.

Europe, with the exception of France, which is developing its own smaller and less sophisticated Rafale combat aircraft, will be quitting a major industrial sector which it will be virtually impossible to re-enter. The adverse effect on jobs, on the technological and industrial base and on the economy in each of the four countries will be far reaching. While I am sure that German politicians pay close attention to proceedings in your Lordships' House, I think it is for the Germans themselves to calculate the consequences for their own economy of a decision to pull out. However, I should like to focus on the likely consequences for the British economy of a German withdrawal and a subsequent collapse of the whole project.

I turn first to jobs. Over the past three years the aerospace industry has had to shed 25 per cent. of its workforce in response to defence cutbacks and the recession in civil aviation. The industry estimates that the cancellation of the EFA project would lead to further job losses of more than 30,000 within the aerospace industry and a further 30,000 in supporting companies. That is only part of the story; it is estimated that the project will, overall, create up to 100,000 new jobs in the UK economy. With export packages such as training, infrastructure and maintenance included, that number could rise two-or threefold. The 60,000 or so jobs that will be lost in the event of cancellation will be lost immediately and there will be little prospect of those highly trained staff of engineers, draughtsmen and production workers being redeployed. The loss of those valuable human skills will be compounded by the loss of the advanced technology products which are being developed as part of the EFA project.

Our technological base in this country is effectively a large pool of expertise in research, development and production which is available to both the military and civil businesses. EFA technologies will be rapidly applied to the civil aerospace sector under the so-called "trickledown", and will strengthen our position in that sector. Almost all the major defence technology products which are under development are incorporated into EFA and the abandonment of the project would mean that those key defence technologies would be lost to the defence and the civil aircraft businesses alike.

The financial consequences of cancellation are extremely serious. The anticipated production value to the UK of the whole project is just short of £10 billion, and the latest estimate for the value of export orders is around £20 billion. In the event of cancellation the Treasury would be expected to lose some £300 million annually as a result of lost tax from former aerospace workers. That is before the further cost to the Government in the form of unemployment benefits and support for the badly affected economies in the South-West, South-East, and so forth. In addition, the Exchequer would forfeit its substantial share in the overall project through VAT and corporation tax. Replacements for the Tornado air defence variant, the Jaguar and eventually the Harrier would have to be purchased abroad, and it is unlikely that there would be any offsetting production arrangements in the UK. As a result, the full cost of re-equipment will fall on the taxpayer with no offsetting economic activity in this country. That will in turn leave a large hole in our balance of payments.

The effect on the 30 or so main suppliers and the 60 sub-contractors would be devastating. EFA represents about one-quarter of the UK's anticipated military engine output and some 40 per cent. of expected new business. Without EFA the military engine and defence aerospace business would be undermined and we should be reduced to a minor player in the world league.

In 1991 defence aerospace contributed some £2 billion to our balance of trade. The prospects for export sales based on EFA technologies will allow the industry to continue to make a contribution of that order over the next decade.

If Germany does pull out, can Britain, Italy and Spain go it alone? I believe that they can and, for the employment, industrial and economic reasons which I and other noble Lords have outlined, I believe also that they should. The key question in such an eventuality is whether the programme could be managed without a significant increase in cost. Germany is of course committed to its full share of the development budget and its contribution will represent a windfall to the other partners. The production work planned to be completed in Germany will be moved to the other countries, with the consequent employment and economic benefits. The removal of production from the high cost German economy will help to offset some of the increase which will follow their departure. Industry estimates suggest that EFA can continue without the Germans at no significant increase in costs. The continuation of the project will bestow even greater technological and economic benefits on the three remaining partners, serving to improve the competitiveness of their respective aerospace industries.

We must hope that the Germans decide to remain in the project. However, if they do decide to pull out, it is important that the other partners keep their nerve and accept the challenge of proceeding with EFA to the great benefit of both national security and industry, and of the economy.

5.40 p.m.

Lord Lyell

My Lords, I too would like to add my thanks to my noble friend Lord Kinnoull for raising this Question. From the list of speakers it seems that myself and the noble Lord, Lord Jenkins, are the only two who do not fly, produce or have great knowledge of the production, procurement or other operations of this aircraft. I shall therefore approach the subject in a spirit of humility and learning. However, I hope that the future for the European fighter aircraft is promising and indeed fruitful.

I have read reports in the media of the continued expenditure on this aircraft. The noble Lord, Lord Hollick, has just made a very forthright speech in support of the aircraft. The continued expenditure on the part of our German colleagues may not be entirely popular throughout that country. In their latest opinion poll, such as one can take them, 84 per cent. of those questioned believed that continued expenditure on this operation was not in the interests of German defence and did not make economic sense. That may be hardly surprising. Perhaps other noises are being heard from Mr. Theo Waigel, a Minister representing the Bavarian Christian Social Union. I understand that most of the enterprises engaged in the production and development of this aircraft, and hence the employment, are situated in Bavaria and Baden-WŨurttemberg. We might obtain a great deal of support from that area. We may find that some of our German colleagues are perhaps singing a happy duet.

It is never safe to assume what might be a cliché —that is to say, that the cold war is over. All noble Lords who have discussed defence in your Lordships' House over the years will know that we have three watch words in any defence debate—"You never know". Many of us remember speaking in a powerful defence debate in July 1990 and within a fortnight there had been major and long-lasting developments in the Gulf.

We heard from my noble friend Lord Trefgarne that the decision had already been taken. I believe he mentioned the year 1988 as being relevant for a decision on one part of the aircraft, be it the development, procurement or something else. The message from your Lordships' House this evening should be that as far as possible we should ask our German colleagues to stick to this decision. Strong support for that was given by my noble friend Lady Hooper.

We have heard of alternatives to this aircraft such as the Su-27, the MiG-29, the F-22 from the United States and the French Rafale. To myself, but perhaps not to my noble friend Lord Trefgarne, with his notable aeronautical experience, all these might appear to be interesting toys. They will all do different things. They have different power-to-weight ratios and so forth. With all these alternatives we must look at the cost and the effectiveness. Above all we must consider availability of spares. A notable comment was made by one of the honourable Members down the corridor about another alternative which on the face of it seemed to be cost-effective. He made one point: where will we get the spares? Will they be there when we need them? The answer was no.

My noble friend Lord Trefgarne also mentioned the Turin parameters. We must see that these are met. He and other noble Lords have focused on the essential aspect of this aircraft; namely, that the operational requirements of the Royal Air Force for the next 20 and perhaps 25 years must be met. It is in that spirit that my support will be added to that of my noble friend Lord Kinnoull and, I hope, that of my noble friend the Minister when he comes to wind up. I hope that we can send a message to our German colleagues, "Please stick to it", or in European terms, "Bitte, geben sie nicht auf". I support everything that my noble friend has said.

5.46 p.m.

Lord Prior

My Lords, perhaps I may crave the indulgence of the House to make one point only. Having listened to the debate, and declaring my interest as chairman of GEC, I draw your Lordships' attention to a book written by Correlli Barnett, whom I consider to be one of the great historians. It is called Engage the Enemy More Closely. It is an account of the Royal Navy from the Battle of Jutland to about the end of the Second World War. The point that he makes and its relevance to this debate is that, if only we had carried on with the technologies of the First World War through the period of peace between the two wars, we should not have been in the terrible state that we were. We should not have had to rely on the bravery of British troops and sailors. We would have had a technology which matched that of other nations.

What we need to do is to keep that technology going, as noble Lords have pointed out this afternoon. There will be an enormous tendency over the next few years, when the Treasury is trying to cut the defence budget, to go on saying that we need not go into these new technologies because they will not be needed or used. But we never know whether they will be. It is a very unwise policy not to keep the technologies going. That is the crucial point and why the European Fighter Aircraft has to succeed. All the talk about co-operation and keeping technologies going is very important.

5.47 p.m.

The Earl of Harrowby

My Lords, I hope that noble Lords will forgive me too for rising. I do so as a recently retired chairman of an industrial company which is not the prime manufacturer of the EFA and the EAP but which has a very significant part in it. I am told that it is the tradition to make just one point if you are an intervener, and that I will do.

The wind has been taken out of my sails by my noble friend Lord Prior, who has made much the same point as I wanted to make—that is to say, that the Government have to find a way. This issue will come up in future. I hope that the points made by the noble Lord, Lord Hollick, are manifested and come to fruition. However, sooner or later there will be an issue which arises where a project will not go forward. The Government have to find some way of making it possible to maintain the advance of technology even if a project is not going forward. My noble friend Lord Prior said that in much better language. I want to emphasise the importance to your Lordships of finding a system which will not grind technological advance to a halt.

5.48 p.m.

Lord Mayhew

My Lords, we on these Benches agree with a large number of the comments that have been made by the noble Earl in introducing this debate; not least the tribute he paid to the British aerospace industry. There was evidence of surprise and delight shown when it was announced that the development of this project was on schedule and within budget. That is an almost unprecedented achievement by the Ministry of Defence since the Polaris project for which I was partly responsible many years ago. We also agree very much with the noble Lords, Lord Hollick and Lord Trefgarne, about the appalling impact on the aerospace industry and employment if this project does not go ahead. We agree with the noble Lord, Lord Shackleton, that the Germans would be doing themselves no service by backing out.

I am a little puzzled by the contribution made by the previous two speakers. The noble Lord, Lord Prior, said that we should have kept on the technology of the First World War to the Second World War. He did not mean it. Nevertheless, it struck a slight note of alarm with me. At the back of my mind I have a horrible feeling that in putting all our cards on the manned aircraft rather than on the surface-to-air missile we might be making the mistake, made by so many defence planners through so many periods of British history, of fighting the next war with the weapons of the last.

I was interested that the admirable Commons Select Committee on Defence went into this matter with its usual skill and penetration. But it never asked the question: What about the development of surface-to-air missiles by the end of the century? That is a question which one is surely entitled to ask. I know that it was asked 30 years ago. I believe the question appeared in a defence White Paper. However, to ask that question then was premature. Quite rightly, we continued to produce manned aircraft. I believe that it was the noble Lord, Lord Hollick, who said that Iraq still shows the enormous power of the manned aircraft. However, Iraq has also shown us something else—the stupendous increase in the power of surface-to-air missiles. Therefore, I believe that it is legitimate to ask the question again: What is the future of manned aircraft?

At the end of the century when the European Fighter Aircraft becomes fully operational, what new advances will have been made in the Patriot-type missile? We know now that land-based missiles can shoot down not only aircraft but missiles in flight. Where would we rather he at the end of the century —in the cockpit of the EFA or with the hand-held Patriot on the battlefield? I am not saying that that should in any way deter us from going ahead, but I have been stimulated by the previous two speeches. The advance of technology does not necessarily mean an advance in the field of manned aircraft. It might be a terrible trap.

I return more directly to the question under dispute. Everybody agrees that the development of the European Fighter Aircraft has been successful so far and should go ahead. I do not question that at all. However, I should like to ask the Government a question. Granted that we go ahead with the development, what reasons can we give the Germans and ourselves for saying that we must now commit ourselves to production? That is the question. I have read in the newspapers that, according to the public opinion polls, 84 per cent. of the German people are against the EFA. If this question is put to the German Government now, might it not be counter-productive? How can we be sure about the outcome? Instead of demanding that they commit themselves to production, suppose that we put to them the demand that they continue with development, which is about 5 per cent. of the cost, for a year or two. What do the Government feel about that? I do not know why we have to commit ourselves to production now rather than in one or even two years' time, which would give us time to sort out some of the other problems.

In the meantime, could the Defence Operational Analysis Establishment make a new study of the anticipated development of surface-to-air missiles? It must have done so previously. Strangely, again, I see no sign that it has done so or that the Government have taken that factor into account. The admirable Select Committee on Defence in another place never asked that question—although that was before Iraq and before Patriot. Nevertheless, although it is an elementary question, it is a profound question, so I should like to ask the Government whether the proper analyses have been made, and if so, with what result? If they are not hurrying up with the commitment to production, that would give them an opportunity to make such an analysis.

In addition, if we do not now take the decision on production, we can assess the threat a little better. I do not think that we should rule out altogether the remarks made by the noble Lord, Lord Jenkins of Putney. The noble Earl has described Russia today as a "wounded elephant", as a cause of fear and apprehension to us all. However, I do not think that that is a realistic assessment. It would be going too far in the opposite direction to describe Russia as a "one-legged beggar" but the truth is somewhere between the two.

Let us consider the changes that have occurred since the specifications for this aircraft were drawn up in 1985. Perhaps it is worth reflecting for a moment on the atmosphere in the Ministry of Defence at the time that the specifications were laid down. This is the Ministry's assessment of the threat for which the EFA specifications were designed: "The Soviet Union inherited the product of many centuries of Russian expansion; … These traditions … have been combined with an ideology dedicated to the ultimate victory of communism. The evidence suggests that these ideological goals will be pursued with caution and discretion, but that opportunities will be grasped if the price is limited and acceptable And so on. That is a past world. Even in 1991 when the revised assessment of the threat was made and described in the report from which I have just quoted, the Russian threat was greatly exaggerated.

We are now living in a world where MiG-29s, formerly the arms of Eastern Germany, are part of NATO's order of battle. I hope that this is not typical, but I note that the war games of the German Ministry of Defence cast Britain and France—in heavy disguise —as the enemies instead of Russia. We are living in a different world, but there is no sign that there has been any change in the specifications for the EFA or in the number that we require.

Therefore, I should like an assurance from the Government not only that they will continue the development but that, especially in view of the German situation, they will not demand now—either from the Germans or from themselves—a commitment to production. Let it be delayed for a year or two so that the other questions can be answered. If the Minister gives a good reply today, we shall support him. If he gives a good reply at some later date, we shall support him. But if the Government want the widest support for this project they must answer some of the serious questions that have been asked about it.

5.56 p.m.

Lord Williams of Elvel

My Lords, the House will be grateful to the noble Earl, Lord Kinnoull, for tabling the Question, especially at this time because it is fraught with controversy. I shall try to answer some of the questions that have been raised. I shall also put certain questions which I hope the Minister will respond to.

Two issues seem to be involved. The first is the United Kingdom's defence requirement; the second relates to the jobs involved and the financial consequences of cancellation. I have nothing to add to what my noble friend Lord Hollick said about jobs and the financial consequences of cancellation, which seemed a persuasive argument for the project going ahead.

I endorse what my noble friend Lord Shackleton said about the Labour Party's support for the EFA programme. That was made clear in another place by my honourable friend Mr. Martin O'Neill on 2nd May last year. We are quite clear that we support the programme and we look forward to making continued progress with it.

However, there is no blank cheque. As my noble friend Lord Hollick rightly said, we must be absolutely certain that we are getting value for money. It is when we come to the point about value for money that we hope very much that the Government will exercise the very highest degree of scrutiny of the costs, especially if the Germans, as is feared, pull out of the project.

Perhaps I may first address the defence requirement and then put four questions to the noble Viscount, Lord Cranborne, which I hope he will be able to answer. Indeed, the questions have already been raised in this short debate. I am afraid that I must differ from my noble friend Lord Jenkins of Putney and, in certain respects, from the noble Lord, Lord Mayhew, on the point about the defence requirement. I agree that the European Fighter Aircraft was originally required to fulfil an air defence role due to the possible threat from new Soviet aircraft. That was the original specification. There was a secondary ground support application. Clearly, the Soviet Union has disappeared, but there must be considerable concern about the possible export from the former Soviet Union of MiG-29s and Su-27s to countries outside Europe. It is that threat that we have to face. It would be desirable to have an all-embracing embargo on arms sales from one country to another. If that could be negotiated, I would join in the cheers which I am sure would go up from all sides of the House. I have a feeling, however, that it is rather difficult to persuade people to deny themselves that possibility, particularly given the economic conditions in which the successor states to the Soviet Union now find themselves.

If the United Kingdom becomes involved in conflicts outside Europe, the ability of the Royal Air Force to acquire and maintain air superiority may well be crucial to the particular operation. The Gulf conflict showed us that the Tornado F-3 was not especially good and especially agile in air-to-air combat with Iraqi planes. Indeed, I believe—the noble Viscount will correct me if I am wrong—that it was primarily United States aircraft that established air supremacy, thereby allowing the Tornado to carry out the functions that it performed extremely well in the Gulf. Therefore a replacement for the Phantom and the Jaguar, which is what EFA is about, to maintain air superiority in that kind of localised conflict is essential to the United Kingdom defence requirement.

Having said that, I have four questions for the noble Viscount. The first was put quite properly by the noble Lord, Lord Trefgarne. Have the Government made a definitive decision about the number of aircraft to which they are committed? We are told that the original plan was for 250 aircraft. Is there any advance on that thinking?

Secondly, can the noble Viscount confirm whether or not the Government have made any assessment of the industrial consequences, to which my noble friend Lord Hollick and the noble Lord, Lord Prior, referred, of Germany's decision to withdraw from the EFA project? What would be the consequences? Who would pay what? And how would we then proceed? Thirdly, what is the Government's latest information with respect to the commitment of the Italian and Spanish governments to this project? If recent newspaper reports that the Spanish Government want to reduce jet production by 30 per cent. are true, will that affect the Spanish Government's commitment to the EFA project?

My fourth question is the crunch question and is the one raised by the noble Earl. If the Germans—against, in my view and in the view of other noble Lords, their own interests—drop out of the project, are the Government still committed to going ahead with it?

From what I have said your Lordships will recognise that many of us are saying the same thing. I join the noble Lord, Lord Mayhew, in saying that we need a clear statement from the Government on where they stand. We believe that EFA is necessary for our future defence requirements. We believe that the employment and financial consequences of cancellation, if that should occur, are extremely severe and should be borne in mind. All these matters point to the need for a clear statement from the Government now about whether we are going ahead with the project and under what circumstances. I hope very much that the noble Viscount will be able to give us that clear statement.

6.5 p.m.

The Parliamentary Under-Secretary of State, Ministry of Defence (Viscount Cranborne)

My Lords, my first duty is to thank my noble friend Lord Kinnoull for the clear and forceful way in which he has raised what is clearly one of the most important defence, industrial and technological questions facing this country at the moment. I seem to remember during a short career in another place a Back-Bench axiom which went something like this: "Beware when both Front Benches are in agreement. There is something wrong there". I have to say that there are exceptions to every good rule and it seems to me that this is one of them.

One of the most gratifying features of this debate was the extraordinary degree of unanimity, with perhaps one distinguished exception. That unanimity is extremely useful to the Government in being able to argue the case for the continuance of the EFA project. It is a unanimity which will be noted in areas where it must be noted during the present rising uncertainty. Although perhaps one does not want to rub in the advantages of sitting in your Lordships' House, it is clear from the extraordinary range of knowledge and skill displayed in the debate today that the conclusions which the overwhelming majority of your Lordships have reached in regard to the European Fighter Aircraft are conclusions informed by long experience and by an extraordinary depth of knowledge. I need only refer to the noble Lord, Lord Hollick, who delivered his case with very great clarity, and to my noble friend Lord Prior. I should also mention my noble friend Lord Trefgarne, whose seat I am perhaps merely keeping warm for him.

Much has been said about the nature of the threat. In all defence matters the nature of the threat is what we should start with. There can be no doubt that the Government see a clear and continuing need for an aircraft with the capabilities of the European Fighter Aircraft for the defence of the United Kingdom but also to support our armed forces wherever they may be required to operate. The noble Lord, Lord Williams of Elvel, and other noble Lords quite rightly referred to the unexpected nature of what can happen and to the importance of developing air superiority in any conflict, whether in defending the United Kingdom or in an out-of-area conflict such as the Gulf itself.

It is vital that this aircraft should be developed, because it is a key part of NATO's future flexible force structure. We know that there is considerable, and some would say increasing, instability in areas adjacent to those covered by the NATO pact. We also know that the former Soviet Union developed a series of extraordinarily sophisticated and effective combat aircraft. Those aircraft, even now, are operated by a surprising number of nations; for example, so far as I know, MiG-29 is already in service with over 30 countries worldwide.

We should bear in mind that, when the European fighter aircraft is developed, it should be in service for over 20 years. Therefore, those of its what one might call "half-hearted supporters" who argue that perhaps its capability should be downgraded must remember that that kind of penny pinching will not necessarily counter the threat from other forms of aircraft that are already in service, subject to new development or any new forms of aircraft which may come along. In other words, much can change during the anticipated life of this extraordinarily versatile aircraft. If it is to work, it must be able to match the potential threat.

That potential threat is one which is spreading. The present financial situation of the former Soviet Union —that is, as the noble Lord, Lord Williams, has already said, the countries that used to make up the Soviet Union—makes, perhaps, proliferation of sophisticated weapons systems rather easier than any of us would like. We know that the systems of control of sales of weapons, however well intentioned, for example, the Russian Government may be, are by definition in their present situation leaky at the least. Therefore, the prospect of an Su-27, in the hands of someone like Saddam Hussein, confronting an F3 Tornado and trying to deny it air superiority in some future conflict really would be to send our own people out on the most unfair mission. That is where I have to agree with my noble friend Lord Prior. He drew attention to the remarkable book by the great historian, Correlli Barnett. His point was well made and, if I may say so, extraordinarily well taken.

As regards the question of how we counter the threat, the noble Lord, Lord Mayhew, asked whether in fact we were in danger of countering the threat of a future war with the weapons of the last war, however much they may have been updated. Of course, someone with the noble Lord's knowledge and experience is well aware of many historical instances where such a thing has happened. I must say that anyone who tries to satisfy a defence requirement to counter a perceived threat can only do his best. The best assessment that the Government and the Ministry of Defence can make is that there is indeed a very strong requirement for an aircraft with the versatility and of the nature of the EFA.

So far as concerns surface-to-air missiles, it is probably worth telling the noble Lord that studies have been made and continue to be made into that important question. It would perhaps horrify some of the more economically minded of your Lordships to know that some of those studies may come to the conclusion that both are theoretically needed. However, I should not like noble Lords to take me too far down that path. All I shall say to the noble Lord, Lord Mayhew, is that his point is one of whose importance the experts in the Ministry of Defence are well seized. Nevertheless, despite his advice, and the other voices raising the same question, there is no doubt in our minds that the European Fighter Aircraft is a requirement that we must satisfy. I see that the noble Lord, Lord Jenkins of Putney, wishes to intervene. I gladly give way.

Lord Jenkins of Putney

My Lords, I am much obliged. As I am perhaps a lone voice in the matter, does the Minister recognise that, in addition to the quotations made by the noble Lord, Lord Mayhew, the House of Commons Defence Committee, as recently as last April, said: It remains open to question how far the RAF still requires an aircraft with the full level of performance offered by EFA". The noble Viscount will realise that there are Conservative members on that committee—indeed, they are in the majority—as well as Labour members.

Viscount Cranborne

My Lords, there may be questions about the full level of capacity necessary to build into EFA. However, like the noble Lord, I had the advantage of reading the report of the House of Commons Defence Committee. I believe that he will agree with me that the committee fully supported the principle of the development of the EFA and that any criticisms made were put down as suggestions in the margin.

As the noble Lord, Lord Jenkins, has intervened at this point, it may be a suitable opportunity, during the course of what I hope will be my reasonably brief remarks, for me to try to answer the question that he posed. He suggested that the cost of cancellation would be very high. I must tell him that the Germans have already made clear, as other noble Lords have said, that they regard themselves as liable to pay the full development costs of the development phase. In answer to the noble Lord's question, I understand that, in the event of cancellation, those costs are not returnable. That would no doubt seriously undermine the financial assessments that he made.

I believe it is clear—and something that is common ground very nearly throughout your Lordships' House—that the threat and the need are there. As regards the project itself, I can confirm to my noble friend Lord Trefgarne that progress in the development phase continues satisfactorily. The first prototype is nearing completion in Germany; indeed, it should make its maiden flight in the autumn. Moreover, the costs so far are within the original funding approval given in, I think, 1988 by my noble friend.

Once the design of the EFA has been proven, I hope that the full partners will be able to proceed to the production investment and production phases of the programme. I can confirm to noble Lords who raised the question that, so far as concerns Her Majesty's Government—and this point has lately been reconfirmed—Italy and Spain remain committed to the project. With the United Kingdom, those countries are doing all that they can at all levels to convince Germany that EFA is the most cost-effective solution to their requirements. I could enter into some detail on that argument. However, I do not want to waste your Lordships' time because most noble Lords already know the arguments. The only point that I make is that one of the European alternatives being suggested to the Germans as a possible alternative buy would be the French Rafale. It is worth pointing out, as other noble Lords have done, that this is an aircraft without the capability of EFA and that, according to Her Majesty's Government's assessments, even if customers were to buy the Rafale, they would, per aircraft, be more expensive than the EFA. It cannot be a good buy.

Many noble Lords have already pointed out that EFA is probably the largest collaborative programme in Europe at present. It is very important militarily, politically and industrially. Above all, it would be a great blow to the United Kingdom aerospace industry. I can do no better than echo every word that the noble Lord, Lord Hollick, with his great knowledge and experience of such matters, said in his, if I may say so, remarkable analysis. I certainly would not dream of trying to improve upon it. However, if she will allow me, I should like to say that my noble friend Lady Hooper gave a most helpful contribution. I say that because it is worth pointing out to our European partners that it is not only British jobs that are at stake, but also jobs in Spain, Italy and Germany. Indeed, there are very good grounds for supposing that German public opinion, notably Bavarian opinion, is not united on the subject of cancellation—very far from it. I suggest to your Lordships that it would be unwise to assume that the Germans have cancelled. They have not done so yet. There are many reasons why they should not, and Her Majesty's Government, supported by a very large number of Members of Parliament, industrialists and Members of your Lordships' House, are engaged in trying to show our German friends why it would be a good idea for them to continue. That is not something for me to comment on; it is not for me to tell the German Government what their job should be inside Germany.

However, I say to the noble Lord, Lord Williams, that one of the arguments that we are deploying—and one which he made with great effectiveness—is that the financial control of the project is in very good order. We are constantly reviewing the value for money aspects of contracts and we are continually making sure that Governments are getting best value for money. I can quite honestly reassure the noble Lord on that front.

I should like to finish by pointing out to your Lordships—and this is a point which has been made already in the debate—that the collaborative aspects of this project are as important as the industrial aspects. Many of your Lordships have pointed out that this is not merely a defence project, it is not merely an industrial project, it is a project in which the credibility of Europe is at stake.

We are all aware of the status that Germany has given for itself of being one of the principal advocates of a united and collaborative Europe. We greatly welcome the practical evidence of the German assertion that that is so which the European Fighter Aircraft project represents. We continue to welcome the fact that the Germans have not decided yet to withdraw. At the same time I have to say that, if the Republic of Germany is to continue with the rhetoric that it has employed hitherto about the future of Europe, its credibility would certainly be at stake if it were to withdraw from the European Fighter Aircraft project. It would be very difficult for any of Germany's European partners to be able to look Chancellor Kohl, or any of his successors or ministers, in the eye and to say, "We believe you when you tell us that you are good Europeans, that you believe in collaboration and that you believe in the future of European technology".

The debate this afternoon would, I submit, be very useful in making those points clear to our partners and making sure that the Government do not have to decide how they are to proceed if the Germans indeed withdraw.