Examination of Witnesses (Questions 160
- 179)
TUESDAY 24 APRIL 2007
DTI
Q160 Chairman: Thank you for that.
I think it is inevitable that when a select committee has a minister
in front of it it probes and does not sit back and congratulate,
but I think it is right to record that we do understand that it
was a very good outcome in securing this technology for the UK.
Margaret Hodge: Thank you.
Q161 Chairman: Just because we ask
questions about the more difficult things does not mean we do
not recognise that that is the case. In that respect, can I ask
you briefly about what your understanding is about the implications
of the UK now being a trans-national centre of excellence for
the wing and pylon aspects of Airbus? How do you think these four
new centres of excellence will operate in comparison with the
old eight-centre approach they had before and what kind of advantage
will that bring to the UK?
Margaret Hodge: It brings us the
advantage of leadership really.
Q162 Chairman: What has changed to
your understanding?
Margaret Hodge: I think what EADS
is finally doing, and one could have argued that they should have
done it before, is really integrating the national companies into
a global entity. This is the beginning of that integration. We
have secured a key part which is going to be really important
in the future in terms of aerodynamics and in terms of weight
and in terms of fuel efficiency, if we can get it all right. We
can now lead on the innovation and technological developments
around wings and we will be responsible for ensuring that all
parts of the EADS empire or the Airbus empire that deliver production
of parts of the wing work well together. It is really good news.
I think we have secured one of the better parts of developing
and building an aeroplane and we are delighted. I do not know
if there is anything, Malcolm, you want to add to that.
Mr Scott: No. That is about the
size of it.
Q163 Chairman: The change that was
made should have been made sooner and it has worked out for us?
Margaret Hodge: I think what the
current management of EADS has done is finally grasp the nettle
in turning themselves into something which is commercially viable
and can build on the really good record they had of building their
market share but also secure the future for the European aerospace
industry. I think it has been an important set of new policies.
Chairman: Your powers of clairvoyance
are absolutely right. We do now want to turn to research and technology.
Q164 Mark Hunter: As you say, there
have been a number of references so far to the thorny issue of
research and technology support for aerospace. We are, of course,
aware of the new initiatives to support the aerospace sector,
including things like the integrated wing programme which we have
heard about and the national composites network funding as well.
However, despite that, the sector is still well below the £70
million per year recommended in the National Aerospace Technology
Strategy, and according to the figures supplied to us by the DTI,
in the current five-year period there was £2 million allocated
in 2005-06, £10 million in the current year 2006-07, £14
million in 2007-08, £12 million in 2008-09, and it drops
back to £4 million in 2009-10. That is a total of £42
million over the five-year period when the National Aerospace
Technology Strategy suggests it needs £70 million per annum.
Is it your view that the National Aerospace Technology Strategy
was just wildly optimistic or plain wrong, or is there some other
reason for the apparent under-funding, given what they say they
need?
Margaret Hodge: The figures to
which you have referred are specific Airbus figures. Airbus originally
had about £2 million a year. They are now at about £14
million a year, so that is a pretty extensive increase. If you
then look at the aerospace industry as a whole, before we embarked
on the technology strategy the aerospace industry was getting
about £20 million a year direct from Government into R&T.
That has now doubled to £40 million a year.I am very comfortable
and, indeed, proud of the record that the Government has had in
increasing its investment in this absolutely vital sector. If
you look at our technology programme, for example, which we have
had going now for two and a half years and where we have spent
over the last two and a half years something just under £400
million, a quarter of that has gone to the aerospace sector, so
I think that is a record of which we can be proud. Should we be
spending more on R&T? The answer always has to be, "I
wish we had more to spend". Of course, this is absolutely
vital to the future health and well-being of the sector, we recognise
that, they recognise that, you recognise that and, as we can afford
to spend more, I would always prioritise this area above all others.
We have not got to the £70 million that was the "ask"
in the National Air Technology Strategy document but we have managed
to double spending and we are working to do better. Let me give
you some examples of where we are working to do better. The RDAs
are increasingly—
Q165 Mark Hunter: I was going to
come on to those later.
Margaret Hodge: I will come back
to it then, because the RDAs are increasingly understanding the
importance of the aerospace sector. They have a budget of—I
am going to get the figure wrong—£1.3 billion a year,
or is it 2.3? God, is that not awful, I cannot remember now. I
have gone blank on it.
Chairman: What is the odd billion between
friends?
Q166 Mr Binley: It is 2.4.
Margaret Hodge: It is £2.3
billion a year. Compare that with £370 million which is the
technology strategy programme of the DTI and you can see the important
role that the RDAs can, are and should be playing in investing
in research and development. Also there was a bit of a hiccup
in the "asks" when we put out for a competition for
the technology strategy which we do twice a year. I think the
previous "ask" did not reflect the demands of the aerospace
industry, particularly in developing the expertise around composite
technology and turning that into a manufacturing process. An "ask"
that we put out at the beginning of April does and has got about
three or four elements in it which will enable us to ensure that
we can fund this important area of work and, indeed, we are in
discussions with Airbus and partners around a very big programme
specifically focused on the manufacture of composite-based wing
components, that technology. A mixture of the industry, Government,
the RDAs and Europe I hope will see the launch of a very substantial
programme in the next few months.
Q167 Mark Hunter: I am sure you will
understand the Committee is not trying to refute the fact that
there has been considerable Government assistance in some areas
on this project. I am simply pointing out that NATS themselves
talked about needing, not wishing for or ideally, £70 million
whereas according to our figures—and I do not think you
have challenged them—the DTI are saying they gave £2
million last year in this specific area.
Margaret Hodge: I am challenging
them.
Q168 Mark Hunter: You are?
Margaret Hodge: The NATS figure
was for the aerospace industry as a whole; the figure you are
quoting is an Airbus figure.
Mark Hunter: Right, but that is what
we are talking about specifically.
Q169 Chairman: Having re-read the
evidence, I understand the point you are making. I did not fully
understand the DTI memorandum.
Margaret Hodge: Sorry. I have
a very helpful table here which we can let you have on all the
R&T funding that has gone in both to Airbus and the aerospace
industry as a whole.
Q170 Mark Hunter: Does your figure
cover military expenditure as well?
Margaret Hodge: Actually it does
not, so you would add that in as well. You are quite right, that
is an additional figure. I can certainly let you have this one
pretty rapidly. If you want us to add in the defence investment
that would take—
Q171 Mark Hunter: I think it would
be helpful, Minister. I am very grateful for that. The gist of
my point is simply there would appear to be on the face of it
a considerable disparity on what NATS are saying they need and
what the Government at this stage feels able to support. You are
suggesting, I think, perhaps that disparity is not as great as
the figures I have in front of me would suggest. I am sure we
can get to the bottom of that and I am prepared to leave that
point on the table and we will no doubt look at the figures as
you supply them to us. Could I come on to the type of support
then, please, as a follow-up. A lot of the R&T support has
been ad hoc that has been allocated of late for specific
programmes and this, of course, has led to some criticism from
the industry itself; you might say you would be surprised if it
did not. Are you satisfied, as the minister responsible, that
the right type of support is being made here?
Margaret Hodge: To be absolutely
honest, I am a bit unclear as to where you think it has been wrong.
I think the support that we have given has been really in line
with the technology strategy.
Q172 Mark Hunter: It is not that
I think it has been wrong, I am saying that it has come in for
some criticism from the industry.
Margaret Hodge: The only criticism
I meet from the industry often and they always argue for is more
money—surprise, surprise—but I have not had a criticism
from them as to the nature of the investment so unless you can
clarify that—
Mark Hunter: SBAC.
Q173 Chairman: I am trying to recall
the oral evidence they gave us when they came before us, but they
made this point very clearly during their oral evidence with us.
Margaret Hodge: I think the only
criticism we have had is that the previous competition on the
technology strategy did not have the categories which enabled—
Q174 Chairman: That is it.
Margaret Hodge: Yes, I accept
that criticism, we have put that right in this current competition.
We have got £40 million now in advanced technology—I
have just found my note here—£15 million for lightweight
materials and £8 million for information communication technology,
all of which are relevant to aerospace. There was not a good category
for the aerospace sector in the last competition.
Q175 Mark Hunter: That concern has
been addressed as far as you are concerned?
Margaret Hodge: Yes, and more
than that because I think the work we have done, not just with
the technology strategy, but with the RDAs is giving again a more
optimistic future; it is never enough, they will always argue
for more. I think this very large programme that we are developing
as well with Airbus and partners will be really critical in our
developing that necessary expertise to maintain the advantage
in wing technology.
Chairman: It may be helpful, Minister,
if we got our officials to talk to each other to clarify exactly
what the evidence said to make sure that your answer has fully
addressed the criticism. I think it has and I think I welcome
what you have said, but I would like to make sure we have got
that right and perhaps get further written clarification if that
is appropriate.
Q176 Mark Hunter: Could I ask you
to say a few words about how R&T support for aerospace in
the UK differs from that of our European counterparts?
Margaret Hodge: I am asked that
question quite often. It is undoubtedly the case that Boeing gets
very much more substantial support from the American Government
in one guise or another than we are able to give under current
WTO rules.
Q177 Mark Hunter: I am talking about
Europe specifically, Minister.
Margaret Hodge: Europe, I think,
is more complex. The figures that I have looked at in Europe suggest,
for example, the Germans are putting in about €60 million
into R&T for aerospace, that is not dissimilar to the figure
we are putting in. The French, equally, have a figure that they
put in through the department of transport of about €60 million,
they then have another big €2 billion budget which they use
for various integrated projects and it is a bit unclear where
that goes, so I do not think we are very much out of line with
Europe. I do recognise that we are out of line with our American
competitors and, again, looking to the immediate future, so this
is not down the line, I think the current technology strategy
round and the programme that we are discussing with Airbus, which
will be funded in this tripartite way between the industry, ourselves
and the RDAs, will place us well in the league table on investment
in R&T.
Q178 Mark Hunter: Thank you for that
answer. Can I finally turn to the question about the RDAs that
you referred to a moment or two ago. Is it your view that the
RDAs provide effective and joined-up support for the aerospace
industry, or do you think there is scope for improvement? If you
do, perhaps you could tell us a little bit more about the kinds
of things you think that the RDAs ought to be doing that they
are not currently doing.
Margaret Hodge: I have been at
two meetings recently where the RDAs have been present and where
they have described and set out the changes they are making, so
that they provide a much better joined-up approach to the large
industries like aerospace. I hope that the work they are doing
in aerospace will provide a model for other sectors who find it
extremely difficult to deal with separate RDAs. They have not
done it particularly well in the past, it has provided difficulties
for this sector and other sectors, but they are now looking at
a common application form, common monitoring systems and a uniform
contract, so you sign one contract. I think those three changes
have been welcomed by the aerospace industry, will make life much
easier for them and will enable us to take advantage of the £2.3
billion and ensure that it is invested in those sectors which
provide for UK growth and prosperity. It has got better.
Q179 Mark Hunter: You have detailed
three specific things that are improving. Are there any other
specific initiatives from the Government's perspective that you
would like to see RDAs taking, where you think they could improve
their act?
Margaret Hodge: I am working with
the RDAs to try to improve the way in which they collectively
relate to sectors across the UK economy. I think it is one of
the challenges we need to get right and it is a difficult tension
between devolution, decentralisation and coherence facing outwards
towards industry.
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