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House of Commons

Wednesday 9 July 1997

The House met at half-past Nine o'clock


[Madam Speaker in the Chair]

European Fighter Aircraft

Motion made, and Question proposed, That this House do now adjourn.--[Mr. Clelland.]

9.35 am

Mr. Lindsay Hoyle (Chorley): I am grateful for the opportunity to raise the crucial issue of the European fighter aircraft, and I am also grateful to the Under-Secretary of State for Defence, my hon. Friend the Member for Warley (Mr. Spellar), for being here to listen and reply to the debate. It is nice to remember that this is the 60th anniversary of Whittle's jet engine, which was developed in the north-west, so it is an opportune moment to discuss the future of the aircraft industry in the area. Clearly, this issue remains important to many hon. Members, and it is good to see several colleagues here to join the debate. This is also a timely moment to raise the subject once again.

One set of our partners in the project--the Germans--may well take a decision on their participation in the programme at a Cabinet meeting this week, on 11 July. In the past couple of weeks, press reports have suggested that the Treasury is unhappy with the costs of the Eurofighter and is looking to reduce our commitment to it, or to cancel it altogether. Since the Government have given assurances on numerous occasions that the project will proceed, I regard those reports as nothing more than inaccurate. However, it is helpful for the Government once more to have the opportunity to reaffirm their support for the EFA project, and I hope that Ministers from the Foreign and Commonwealth Office and the Treasury will bear in mind the points that are raised in this morning's debate.

The aerospace industry is without question one of the major sources of employment in the north-west, and the EFA is a major aerospace project in the United Kingdom at present.

Aerospace is a major employer in Lancashire, where it forms the backbone of the county's economy. Lancashire represents the largest concentration of aerospace production in the UK. However, it is not only Lancashire that is the beneficiary of this project, as there are more than 100,000 direct employees in the aerospace sector throughout Britain. In total, 500 establishments employ people directly in the aerospace sector. The EFA project includes sites in Surrey, Hampshire, Bristol and Humberside--it is truly a national project.

In Lancashire last year, 13,000 people, or 10 per cent. of the county's total manufacturing work force, were employed directly by the industry in more than 40 different establishments. Lancashire also accounts for

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13 per cent. of the national total employment in the industry. In my constituency alone in 1995, 400 people were working in the aerospace industry. Having said that, we must remember that many principal contractors buy in up to 70 per cent. of their requirements. The number of indirect jobs created by the aerospace sector is therefore higher than in many other industries.

Among the major employers are British Aerospace--particularly in Salmesbury and at Warton--Lucas Aerospace, and Rolls-Royce. In addition to the main contractors involved in the Eurofighter programme--British Aerospace, Rolls-Royce and GEC Marconi--there are 32 major equipment suppliers and 60 sub-suppliers involved in contracts for the manufacture of the airframe equipment and engine accessories.

Mr. Eric Forth (Bromley and Chislehurst): Is the hon. Gentleman's entire argument to be based on a job creation scheme, which is what it sounds like at the moment, or will he advance any arguments about the capability of the aircraft or defence capability generally?

Mr. Hoyle: The right hon. Gentleman seems to be a little impatient. Obviously a bad night's sleep has not done him much good--he might get better rest tonight, and become more responsible tomorrow morning.

So far, 11,000 people have been employed in the development phase, and estimates from the industry suggest that the peak of production could provide 16,000 jobs directly and another 16,000 among suppliers of goods and services. However, there are countless other firms and many more thousands of people who are linked directly to the aerospace industry, but not employed in it. For example, there are firms in precision and high-technology engineering and electronics, metals treatment, rubber, plastics, software development and design and testing services. More than 120 companies in Lancashire alone are directly or indirectly linked to the industry.

One example in my constituency is Computer Science Corporation of America. It has sited a new office on the Royal Ordnance factory site in Chorley, which Conservatives should remember as the subject of the disastrous decision that led to the factory's closure. CSC has created 400 jobs there, and is looking to double that number. Those are not aerospace jobs, but are linked to the aerospace industry, and more directly to the EFA. If the EFA were to be cancelled, CSC would have to consider its expansion plans.

Other examples of firms in my constituency of Chorley alone that are closely involved in the EFA programme include: Royal Ordnance, which makes weaponry and ammunition for the project; Lyndhurst Precision Engineering Ltd.; NIS Ltd., which undertakes engineering and design of equipment and is one of the leading firms in Europe in its field; and Xelflex Precision Moulders, which makes engineering and moulding equipment. All those firms play a key role in the success of the EFA project. The aerospace industry in Lancashire has been making purchases of raw materials, components and manufacturing supplies totalling more than £1 billion per annum, and it has spent more than £70 million on industrial services.

The EFA has not had the easiest history, because of changes in the international scene, notably the end of the cold war, and it has faced opposition because of budgetary

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pressures within the partner nations. Most notably, the German Government, faced with the huge costs of unification and the need to cut expenditure to meet Maastricht criteria, dragged their feet on the programme for many years. In fact, in 1995 they denied their commitment, and we are back at the same point today. In mid-1992, Germany announced its reluctance to go ahead with the production as then envisaged and even hinted that it wanted to halt the programme altogether, arguing instead for a cheaper, lighter version.

The Spanish and Italian Governments also dragged their feet, and it was decided to scale down the technical specifications in order to make the version cheaper. After a full review of the specifications and production method, a deal was reached in late 1995: Germany proposed to increase its purchase of Eurofighters from 140 to 180, while the UK would reduce its purchases by 20 to around 230. There has been continuing speculation about German involvement, despite that agreement and despite the fact that Germany is benefiting from 30 per cent. of the production work and will benefit also from future sales of the aircraft. Even now, there seem to be great doubts among certain sections of the German Government and Administration about the importance of the EFA.

I was grateful for the support of my right hon. Friend the Prime Minister, who, in one of his first trips abroad after taking office, went to Bonn and made a point of lobbying Chancellor Kohl for stronger support for the programme. On 18 June, when he came to the House to make a statement about the Amsterdam summit, I asked my right hon. Friend about German support for EFA and expressed gratitude for his continuing efforts. He said:

We are now told that the German Government will make a final decision on the programme at their Cabinet meeting this week on 11 July. I urge Chancellor Kohl and his Cabinet to re-affirm, once and for all, their commitment to this vital project. I see no reason other than internal politicking for this procrastination, and I hope that Ministers in the Foreign Office will make use of the last couple of days before that German Cabinet meeting to present the case for the EFA project. Once the decision to participate fully is taken--as I am sure it will be taken--I urge the Germans to consider it final. There should be no more lingering uncertainty and no more rumours about doubts or cancellations.

Another line of criticism of the EFA has been unattributable complaints that its technical performance is not up to scratch. The German magazine Der Speigel claimed recently that the steering and radar mechanisms were so bad that a complete overhaul of the design was necessary. It said:

Yet the aircraft has already flown 370 flight hours in prototype without any problems. It was warmly greeted at Farnborough last year, and it gave an impressive performance at Paris last month.

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Most important, the plane's pilots testified to its ability. One pilot said:

"The general impressions resulting from this sortie were of a fantastically powerful aircraft that was easy to operate and fly accurately". Another stated:

That does not sound like a plane with problems and, although nobody would expect it to be perfect at this stage in development, it is clearly not the liability that some parts of the press make it out to be.

Part of the problem may be the divisions within the German Government on this matter and I fear that it is being used as a political football. Sadly, with rumours and recent press reports of Treasury anxiety, I hope that similar tactics of doubt expressed by unattributed experts will not be used by the EFA's opponents in this country.

Having said that, I cannot understand the opposition to the EFA. It has the potential to be a world-beating product, with technology and design to last us for many years, yet its opponents continue to criticise. Sometimes I wonder whether the British tendency to knock our successes is the root cause of opposition in this country--the desire to pour cold water over anything at which we do well. Perhaps some individuals or groups are waiting for the Germans to delay further or to pull out completely, so that we have a face-saving excuse to cancel the British participation in the programme.

However, if people really do want us to cancel the EFA project, they must propose an alternative and, although there are no real arguments in favour of cancellation, we must listen to what others have to say. Of course, we could simply not replace the existing equipment and allow the country's defences to age and become obsolete. Then again, we could buy an off-the-shelf replacement from abroad. The only aircraft that can match the EFA in terms of technical ability is the American F22. Yet--at this point I am addressing the Treasury as well as the House--it is not a cheaper alternative. The Americans are not simply going to give us a fleet of their most advanced fighters; if we want the aircraft, we will have to pay for them.

The price of such a purchase would be high, albeit cheaper than developing our own alternative; but what would be the additional costs--the costs to the British aerospace sector and to British manufacturing industry? The money is going to be spent, so why not spend it in Britain and in Europe? More than 100,000 people are employed in the aerospace sector in this country; and, at the peak of manufacturing in the EFA programme, up to 250,000 will be employed throughout all the partner nations of Europe.

If we were to buy from abroad, most of those jobs would be lost. They are largely high-skilled, hi-tech manufacturing jobs, with high value added to the economy. They epitomise the way in which the Government have stated they want our economy to develop. As an illustration, in Lancashire the average wage in manufacturing is £14,400, yet in the aerospace sector it is £18,600.

To lose such an important part of our economy would be a catastrophic blow, which becomes even worse when we take account of the effect on the whole country and not just the north west. Just as important, we would be signalling our intention to leave the aerospace sector. That is the danger.

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The development of technology which can be transferred to other sectors, not simply to commercial aviation, would be lost, as would design and computer systems development--such as that carried out by CSC in my constituency. We would damage our position within the Airbus consortium. The strength and ability of Airbus to continu e technological development and to maintain the challenge to the major American manufacturers would also be damaged. Boeing and McDonnell Douglas were last week given outline permission to complete their merger, which will have a damaging effect on our aircraft industry.

Our ability to maintain the future large aircraft project, which is both a military and a civil design, would be put in jeopardy if the parallel project of the EFA development were to be taken away. That would affect the viability of BAe regional jet production, based mainly in Hatfield, where the BAe 146 aircraft has been a major success, and one of the country's most valuable exports. Indeed, the sale of BAe Hawk aircraft throughout the world generated £12 billion of business for the UK, with about £5 billion being returned to the Treasury--a fivefold return on investment. The EFA would give similar returns.

Some of the largest export contracts ever have involved British Aerospace projects, and have made significant contributions to Britain's balance of payments. The defence division of British Aerospace had a turnover of £5.3 billion last year. Already there has been sales interest in the EFA in countries as varied as Norway and the United Arab Emirates.

If press reports are to be believed that some forces in the Treasury are looking critically at the EFA programme, that Department has a simple choice. It can pull the plug on the Eurofighter programme, to save £16 billion. It can leave the Ministry of Defence to defend our country with obsolete equipment. Alternatively, having saved £16 billion, it can spend a large part of that on a suitable replacement, and spend the rest of the money paying for the huge unemployment in the aerospace sector and all those industries that rely on it.

Twenty years from now, we will still be paying for that unemployment because we no longer have an aerospace industry, our design and computing sectors are second-rate, and our balance of payments is damaged by the need to import those services from abroad, along with aircraft, while our aerospace exports have ceased to exist. All of a sudden, £16 billion does not seem a huge liability, but starts to appear more like a major investment in this country's future.

We have sold off our motor industry and run down our shipbuilding industry. During the past 18 years, our heavy engineering and manufacturing industry has fallen to a third of its previous capacity; yet in aerospace we remain a world leader. We cannot allow the Pacific rim and tiger economies to overtake us in that sector as well, and we cannot present our American competitors with a free hand to dominate the world market for aerospace. The technology that is developed with the aircraft can be transferred to the civil aviation industry and the future large aircraft programme.

For the sake of the Royal Air Force pilots who will have to defend this country, for the sake of the hundreds of thousands of jobs that rely on the Eurofighter project, and for the sake of the aerospace industry in Britain, which has been a success for us in terms of technology

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and exports, it is vital that we remove all doubt, that rumours from HM Treasury cease, and that we give our full support to the Eurofighter project.

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