HC Deb 23 June 1971 vol 819 cc309-11W
Mr. William Rodgers

asked the Secretary of State for Trade and Industry what answer he has given to requests for him to give evidence before Congress on the RB211 engine.

Mr. Corfield

The following is the text of a statement which is today being transmitted to the Chairman of the Banking, Housing and Urban Affairs Committee of the United States Senate:

LAUNCHING AID The British Government gave launching aid of £47 million (about $110 million) in 1968 to assist the development of the RB211 by Rolls-Royce. The aid, like the company's own contribution to costs, was to be recovered from the sale of production engines and the British Government understands that this was fully reflected in the price quoted. The launching aid was given in accordance with long-standing Government policy to assist aerospace projects judged worthy of support; it does not give an unfair advantage to British aerospace companies as compared with those in other countries, which have the benefit of similar aid or large military programmes. Launching aid, in accordance with our standard practice, involved no Government commitment to support Rolls-Royce generally, or to support the RB211 beyond the £47 million agreed.

THE ORIGINAL CONTRACT BETWEEN LOCKHEED AND ROLLS-ROYCE The British Government were in no sense parties to this contract, and had no part in the price settlement which secured the RB211 order by Lockheed. It was the sole responsibility of Rolls-Royce. The Rolls-Royce price had, of course, to bear United States customs duty.

EXPORT CREDITS The British Export Credit Guarantee Department (E.C.G.D.) does not provide any finance; this is provided by United Kingdom commercial banks on the basis of E.C.G.D. credit insurance. The rate charged by United Kingdom banks on loans of $192.7 million to United States airlines was, effectively, about 6¼ per cent. per annum. This rate was not in any way special to Rolls-Royce and was the normal rate charged at the time to finance long-term credit for United Kingdom exports. The present effective rate is about 7¾ per cent. These rates should be compared with those charged or supported by Eximbank for United States of America exports. The length of credit for business underwritten by E.C.G.D. accords with international understandings on export credit for large civil jet aircraft.

THE APPOINTMENT OF A RECEIVER FOR ROLLS-ROYCE The decision to seek the appointment of a Receiver was taken by the Board of Rolls-Royce Ltd. on their own responsibility, having regard to the company's financial position and advice from their lawyers. This was in accordance with the requirements of Company Law in England. Under English Law, the directors of a company which continues trading at a time when there is no reasonable prospect of its creditors being paid, may incur both civil and criminal liability. The British Government had no duty or commitment to support the old Rolls-Royce company in business. However, the Government decided to acquire and to continue in operation the aero-engine assets of Rolls-Royce which were essential not only for United Kingdom defence purposes but also to many air forces and airlines throughout the world. In addition, in view of the effects both in the United Kingdom and at Lockheed if the RB211 were dropped, the Government immediately undertook to finance the project on an interim basis in order to keep open the option for Lockheed to retain the engine in the TriStar. The Government will, by 8th August, have spent some £40 million ($96 million) to this end: expenditure is running at a rate of almost $5 million per week.

FUTURE SUPPORT FOR THE RB211 The British Government has offered to fund the completion of development of the RB21I engine to meet the current requirements for the Lockheed TriStar aircraft. It has also offered to bear losses incurred in supplying the engine to present customers on the new terms negotiated with them and Lockheed, and to enable Rolls-Royce to maintain the necessary support facilities throughout the life of the engine. The total sum involved is likely to be around £130 million ($310 million). This support is essential if the engine is to go ahead: otherwise, the programme would collapse, with serious results to all concerned. How much of the British Government's contribution will be recovered will depend upon the eventual sales of the engine. A team of eminent experts whom the Government commissioned in February to review the RB211 programme reported that they were confident that the engine can be successfully developed to meet Lockheed requirements as a reliable and efficient engine. However, before finally committing itself to the very large amount of additional expenditure required to complete the RB211 programme, the British Government asked the U.S. Administration to assist in providing effective support for the TriStar project, in order that there could be an assurance that it would be completed.

ASSURANCE THAT THE TRISTAR PROGRAMME WILL BE COMPLETED The assistance of the U.S. Government takes the form of the guarantees for which the U.S. Administration is seeking Congressional authority, the amount of $250 million being that which the U.S. Administration expect will be sufficient to assure the continuity of the TriStar project. The British Government understand that before providing such guarantees to Lockheed, the U.S. Administration will have taken steps to satisfy themselves that the other requirements for the completion of the project (notably the confirmation of current airline orders) are met. If the guarantees mentioned above cannot be given by 8th August. 1971, the agreement between Lockheed and Rolls-Royce for supply of the RB211, and the British Government's offer of support, will not become effective. The parties principally concerned with the RB211 /TriStar project agreed that, since the announced date for the beginning of the summer Congressional recess is 6th August, it would be reasonable to expect a decision on the U.S. Administration's proposal to Congress by 8th August. Following its discussions with the U.S Administration and Lockheed, the British Government has taken the view that, just as support for the RB211 can be given only by the British Government, the future of the TriStar could not be adequately assured without U.S. Government support sanctioned by Congress. This view has been borne out, we understand, in testimony offered by United States banks and airlines, who are also anxious to have a decision by 8th August.