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6 Dec 2006 : Column 103WH—continued

The question is where we go from here. I am sure that all hon. Members present visit their local Airbus plants regularly and regularly hear that they are always thinking not so much about next year, but about many years down the track and the next model. There is a constant process of looking ahead. Only last Friday, EADS, the parent company, announced the industrial launch of the long-range A350 Xtra Wide Body—XWB—family of aircraft. That is critical to the future of UK jobs. I will not claim to be an expert on the technology, but it is not possible to go into an Airbus
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factory without hearing talk about composites and one has to nod knowingly. That is critical cutting-edge technology as part of the wing, and it is vital to UK business that that technology is maintained and developed in the United Kingdom.

Mr. Nigel Evans (Ribble Valley) (Con): I congratulate the hon. Gentleman on securing the debate. A number of my constituents work at BAE Samlesbury on composite parts, metallic and carbon fibre, of aircraft from the A318 up to the A321, and work with sub-assembly parts as well. My fear when BAE Systems disposed of its 20 per cent. stake in Airbus was for the future and where Airbus manufacturing was going in this country. As the hon. Gentleman said, we are not talking only about BAE Systems, but about a number of other, smaller firms, which supply to BAE Systems because they have those orders. Does he agree with me that the one thing that we hope the Government will do is to be in constant dialogue with BAE to ensure that the jobs that are already involved in Airbus will be secured for the future?

Steve Webb: I am grateful for that intervention. Obviously, the hon. Gentleman will know that the issue that he raises is a particular reason why, notwithstanding the fact that the short-term situation looks very positive, there is understandable uncertainty about the long term. I hope that the Minister will say more about that. I know that there has been dialogue between Ministers and Airbus at the highest level and I hope that she will say more about that.

There is a written answer on that point to a question tabled by the hon. Member for Newark (Patrick Mercer). It was about the impact of the sale of shares and it is quite interesting. I hope that the Minister can slightly clarify this; it was her own written answer. She said that the Secretary of State for Trade and Industry made this announcement at the press conference following the Airbus ministerial meeting at Farnborough in July:

That is critical. My understanding is that it means that the UK, by value, would get 20 per cent. or thereabouts of the work on each succeeding generation, but there are two very important questions. First, how long has that promise been made for? Will it apply to the next generation of planes or the one after that? How firm a guarantee is it? How public a guarantee is it? What does it mean? That is a very important specific question.

Secondly, it might sound odd to say that there is a good 20 per cent. and a bad 20 per cent.—it is all money and it is all jobs—but for the UK aerospace industry it is very important that we are at the cutting edge of the technological developments. Some of the perhaps more routine manufacturing and assembly work could easily over time be outsourced. There is Chinese interest in the project. Therefore, it is vital that we are at the cutting edge and get the high-tech work. In the context of the A350 XWB, I understand that that involves the technology for the wing and the
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composite technology. Can the Minister give us any reassurance or encouragement that when that decision is announced, probably in a matter of weeks, it will be good news for Britain and for Filton? There is great uncertainty and anxiety, as she will have discovered when she talked to trade union representatives on Monday, and I hope that she can offer some reassurance today.

The subject of the debate is Government support for Airbus and the question is: what issues are we interested in? As the hon. Member for Alyn and Deeside (Mark Tami) pointed out, we are not talking about handouts. A written answer to my hon. Friend the Member for North Devon (Nick Harvey) stated that Airbus had received £1.23 billion in repayable launch aid and had paid back £1.24 billion over a 20-year period. Last year—2005-06—Airbus received no repayable launch investment because we are not at that point of the cycle, but paid back £110 million. In some years there is a net inflow and in others a net outflow, but I was staggered by the figures because they give a different impression. One assumes that the Government subsidise the industry, but this is undoubtedly a good investment for taxpayers.

What more can the Government do? First, they can ensure that when Government support is available for research and technology and so on—all Governments provide that and I am not talking about a bidding war between national Governments—it is easy for industry to access it. One concern that has been raised with me and, I am sure, with the Minister, is that the Spanish Government have a hard-nosed, deliberate strategy of encouraging such technology and have focused their technology support in a narrow area, whereas a company such as Airbus may have to dip into many different pots, to get consortiums of regional development agencies together, and to apply for six-monthly Department of Trade and Industry bidding rounds. There is huge cost, delay and uncertainty in that.

A concern that is expressed throughout the industry is that to some extent companies have to fit their technology programmes around the DTI’s requests for bidding, rather than the DTI’s request for bidding reflecting where the companies are commercially. It is a two-way street. I shall be interested to hear more from the Minister about how the DTI can ensure that when it invites bids for technology assistance it is on the button of where industry’s needs are and how far industry is involved in determining that strategy.

Secondly, Government support for environmentally friendly transport is welcome and we must think about environmental issues in the context of the aircraft industry. My impression is that the DTI’s environmentally friendly transport initiative does not have much of an aviation stream, if at all. It would be interesting to hear from the Minister whether more could be done under that initiative to ensure that when there is investment in cleaner, greener air travel and if the Government put more money up for more environmentally friendly transport, aviation is an important part of that and not a marginal part. The Minister knows that the new generation of Airbus aeroplanes are substantially more environmentally friendly than their predecessors, but with the huge growth in air travel that analysts are predicting there
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are big environmental issues, so the more that can be done to minimise the environmental damage the better.

The third area is the European Union dimension. On Monday, the Minister was briefed about the EU clean sky initiative—I am sure that she was already aware of it—to support the aeronautics industry’s work on environmental issues. My understanding is that with the number of different competing projects in the EU there is a risk that, without appropriate pressure from national Governments and our own Government, that could slip down the agenda and, again, manufacturers’ ability to prioritise environmental activities would be impeded.

I am well aware that the Government have taken an active interest in the future of Airbus, particularly since the sale of the 20 per cent. stake. I welcome the Minister’s visit and the Secretary of State’s interest in the matter, which are positive. Clearly, more can be done to persuade Airbus that the United Kingdom is the place to site its high-tech research, development, technology and manufacturing, and I hope that the Minister can tell us a little more about what she has been doing and what she believes the prospects are for the UK Government doing everything they can to make Airbus even more of a success in the future than in the past.

11.15 am

The Minister for Industry and the Regions (Margaret Hodge): I join other hon. Members in congratulating the hon. Member for Northavon (Steve Webb) on securing this debate. I cannot let it pass without paying enormous tribute to my hon. Friends the Members for Bristol, North-West (Dr. Naysmith) and for Alyn and Deeside (Mark Tami) on their work in supporting the aerospace industry, particularly the Airbus capacity in their constituencies. I have endless conversations with both about the present and future Airbus presence in their constituencies, and I know that they spend a lot of time visiting the Filton and Broughton Airbus bases in their patches. I congratulate them.

I want to start by speaking about the aerospace industry to put the matter into context. It is a very successful industry and sales are up. The latest figures are in the annual survey covering 2005. Sales were up by 26 per cent. last year, at just under £30 billion. Export sales, importantly, were around £15 billion. New orders were up by 33 per cent. throughout the industry as a whole at more than £30 billion. Employment was up by 9 per cent. at just under 125,000. We are now the second largest employer of people working in the aerospace industry and second only to the USA. We also have the second largest turnover in the aerospace industry after the USA. Research and development is up by 31 per cent. year on year and is now £2.7 billion. The figures for productivity are good and up 15 per cent. The number of graduates now stands at 34 per cent. and wages in the UK aerospace industry are 44 per cent. above the national average at more than £33,600 per annum, the manufacturing average for the UK being about £25,600. It is a very healthy part of an important part of the manufacturing sector in the UK economy.

I entirely agree with the hon. Gentleman that Airbus is a success story. I did not recognise his figures and if I am wrong, I will write to him. The figures that I have
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for launch investment are in the region of £1.2 billion and the return has been around £1.3 billion, of which £530 million went into the A380 and £700 million into the A320, the A330 and the A340. The Government and taxpayers are getting a good return on that investment, which demonstrates the success of those Airbus projects. Airbus is now the ninth biggest company in the UK, so it is a substantial presence here. Not only have we invested money in launch investment, but we have recently put around £250 million into Rolls-Royce to develop its Trent 900 engine, which will be used in the A380. According to figures given to us by Airbus, about 40 per cent. of the total value of the A380 will be produced directly in the UK and around 400 UK companies will benefit directly or indirectly from the development of the new aeroplane. While we, like the hon. Gentleman, regret that that is being delayed, I agree that the long-term prospects for the plane look good. As he has done, I welcome the recent news that Qantas has added to its order for a number of A380s.

Like the hon. Gentleman, I also welcome last week’s announcement that Airbus intends to go ahead with the A350 Xtra Wide Body plane. Composite technology is being developed, particularly in relation to the wings, which are of special interest to the UK. That is crucial, not just for the aerospace industry or for ensuring that more environmentally friendly aeroplanes are built—composite technology, on the whole, ought to lead to lighter and therefore more environmentally friendly aircraft—but because composite technology, of itself, has huge repercussions across all sectors of manufacturing. We take it seriously, which is why we are investing, out of our technology strategy, the hefty sum of £30 million in a national composites network. We see that as a key element for future investment.

We welcome the announcement that I mentioned. Clearly, we are in discussions to ensure that the UK gets its fair share, particularly in respect of the development of the wing technology and the production of the wings. It makes sense for those two things to be developed together in the UK, as the technology cannot be divorced from the production. The long-term development of that technology has repercussions not just for civil aircraft, but for defence aerospace capacity in the UK. We are giving that extensive thought.

The hon. Gentleman asked me a number of questions, including what the Secretary of State had agreed with EADS on the position of Airbus following the sale by BAE Systems of its shares. An agreement was reached in principle in Farnborough on a number of issues.

The first such issue was whether a transfer of undertakings was given to BAE Systems by EADS when Airbus was first created. Those undertakings have now transferred to the UK Government. There is no time limit on them, and they will clearly be subject to commercial good sense over time, but a clear commitment was made by EADS to transfer those undertakings.

The other commitments in principle, which we are now discussing in detail with EADS, include a transparency mechanism in the decision making of
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EADS, so that we can ensure that everything that is done is fairly open. We also agreed in principle to establish a research and development centre in the UK for EADS, and we are pursuing the details of that. Another such agreement was for a UK national—not a Government appointee—to sit on the EADS board, which we thought was important, given the sale of the shares by BAE Systems. We also secured from EADS a commitment to consider giving secondary listing on the London stock exchange.

Steve Webb: I know that the Minister has limited time to respond, but will she just clarify this business about the 20 per cent. share? I might have misunderstood the nature of what was agreed. Has EADS said that Britain will continue to get 20 per cent. of the work? Is there any such guarantee, and if so, for how long would it apply?

Margaret Hodge: All the detailed negotiations are currently taking place. As soon as they have reached a conclusion, we will be able to talk about them more openly. Our aim is to secure Britain’s best interest in the development of the new A350 XWB, and we are engaged in close negotiations on those issues with EADS and with the other Governments who have a stake in its development and production. I understand the hon. Gentleman’s point that we want not only to secure the 20 per cent. but to ensure that we maintain our research and production capabilities in respect of the wings.

I hope that response deals with the questions that the hon. Gentleman asked about the 20 per cent. He talked a little about accessing technology. Aerospace has done pretty well out of Government technology funding over the past few years. I believe that about £370 million-worth of technology funding has been given over the past couple of years, although I might be wrong about that time frame, and if so, I shall write to him. Out of that sum, aerospace has secured £130 million, or about a third of the investment that we have given through the technology strategy. That is not bad, and reflects the importance that we place on the sector.

Between 2004 and 2006, Airbus itself has received £43.4 million-worth of technology funding for things such as the integrated wing and the electric landing gear, and as a contribution to the composites network. We are examining an offer for more than £10 million—nearly £11 million—some £8.8 million of which will come from the Department of Trade and Industry and a further £2 million from the regional development agencies, in respect of the centre for fluid mechanics simulation. That is a considerable sum. People always ask for more, and we are examining that in our discussions with EADS and Airbus. The company has done pretty well out of the available funding, which, as the hon. Gentleman will be aware, is new funding.

Let us consider the general funding on research and development, and investment in aerospace. The hon. Gentleman talked about investment in environmentally better projects, particularly in respect of civil aeroplanes. That is not marginal to us. It is pretty central to us, and I have no doubt that he will see that in the future allocation of technology resources. The environmentally friendly engine research project, to which he referred, is
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being led by Rolls-Royce. I believe that it involves £30 million from the DTI and a further £13 million from the regional development agency. That is a considerable sum to put into trying to develop a better engine with fewer emissions.

We are also putting £30 million into the national composites network, of which more than £15 million is coming from Government, and a further £32 million into the Autonomous Systems Technology Related Airborne Evaluation and Assessment programme, which is on unmanned aerial vehicles.

The hon. Gentleman concluded by asking what we are doing. He will know that we are clear that it is in the UK’s interest to maintain a strong aerospace capacity here and, as part of that, to maintain a strong Airbus presence, both in research and development, and in production, particularly in the production of wings using the new composite materials. That is what we are aiming to do.

We recognise that it is not just the industry itself that is crucial to the UK manufacturing infrastructure. It also brings other jobs to the UK. We reckon from Airbus itself that 60,000 jobs are dependent in some way or another on the 13,000 jobs in Filton and Broughton. Doing our utmost to ensure the continuation of that situation is of critical importance to our economic infrastructure.

We will have to negotiate our way forward with the company. It faces considerable challenges at present, but I agree with the hon. Gentleman that it has a good long-term future. If we can see it through its immediate problems, and work with it and the other countries that have an interest in ensuring that there is a good European aerospace capacity to compete with the American capacity, that will be of benefit to ourselves and to the company.

11.30 am

Sitting suspended until half-past Two o’clock.

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British Waterways

2.30 pm

Mr. Mike Hancock (in the Chair): Order. Before I call Sir Peter to speak, I urge all those Members who want to take part in the debate, and a terrific number do, that we have a limited amount of time. May I ask the Minister and the Front-Bench spokesmen to bear that in mind, too? I shall try to call as many Members as possible, and I hope that they bear my request in mind when making interventions. An overlong intervention is not helpful, and if other Members are going to make a speech, it just uses up a lot of time.

Sir Peter Soulsby (Leicester, South) (Lab): Thank you, Mr. Hancock.

The Minister may not feel that he needs my sympathy yet, but I have considerable sympathy for him. He is standing in for his hon. Friend the Under-Secretary of State for Environment, Food and Rural Affairs, who would normally deal with these matters, and I thank him for doing so at such short notice. I had intended to express my sympathy to the Minister whom we might have expected to reply, because the budgetary problems of the Department for Environment, Food and Rural Affairs did not occur on his watch. However, the Minister of State who is to reply was on watch, and he may well be able to respond to some of the issues that predate the appointment of his colleague.

I have some sympathy for the Department, because it is under siege from farmers and people concerned about the Rural Payments Agency. We should have some sympathy for the Minister and his colleagues, too, because although the waterways, canals and rivers are a national asset of the highest profile, delivering valuable outputs, those outputs are for the most part not the direct responsibility of his Department. In brief, he and his colleagues must feel that they are taking the rap for problems that they did not cause and dealing with issues that are far more important to other Departments than their own. They also deserve our sympathy because they may well feel that DEFRA can do little about the situation when the Treasury is breathing down its neck. I intend to suggest what the Minister and his colleagues can do about it, and why it is vital that they take action.

The debate is not about how the Department got itself into that position, which is a matter for debate elsewhere, but about the impact of funding cuts on British Waterways and what needs to be done about that. Whatever the reasons for the cuts, they are absolutely nothing to do with British Waterways—indeed, they are nothing to do with any other bodies affected by the DEFRA budget crisis.

British Waterways is one of this Government’s major successes. [Laughter.] Opposition Members may laugh, but the Government have invested in British Waterways on an unprecedented scale. That has brought new confidence to all of us who care about the waterways, it has shown that the Government are prepared to invest, and that investment has been followed by the investment of many others who have seen renewed confidence and vigour in the waterways.

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