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Aircraft Industry

Volume 884: debated on Wednesday 15 January 1975

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I will with permission, Mr. Speaker, make a statement on public ownership of the aircraft industry.

It was announced in the Queen's Speech that legislation would be introduced this Session to bring the aircraft industry into public ownership, as part of our general industrial strategy. Our proposals are set out in detail in a consultative document published today. I am placing copies in the Library of the House and in the Vote Office. I plan to complete these consultations as soon as possible and introduce a Bill in good time for passage this Session.

We propose to vest in a new Aircraft Corporation the shares of any company in Great Britain which carries on the business of developing or manufacturing complete aircraft or guided weapons—but not including helicopters—the turnover of which, as shown in the accounts of its last financial year ending before 29th October 1974, together with that of its subsidiaries, exceeds £20 million. The companies which fall in this category are:
  • The British Aircraft Corporation Ltd.
  • Hawker Siddeley Aviation Ltd.
  • Hawker Siddeley Dynamics Ltd.
Together these companies account for about 80 per cent. of employment and turnover in the airframe and guided weapons sector.

The Aircraft Corporation will be operating in a highly competitive international environment. It should be able to adapt both its policies and its organisation quickly in response to changing circumstances and subject to the approval of the Secretary of State be able to diversify into other activities where its capacities and skills can be advantageously employed.

The powers of the Secretary of State will be the minimum needed to secure Government influence over the main strategies of the corporation and to protect the public investment in it. Experience with other nationalised industries has shown that statutory provisions, however carefully drawn in the first instance, can sometimes prove unexpectedly rigid. We therefore intend to provide that the powers and duties of the corporation and the powers of the Secretary of State may be capable of amendment by statutory instrument subject to affirmative resolution in both Houses of Parliament. This will introduce an important new element of flexibility into the statutory arrangements governing relations with a nationalised industry.

The Government believe that the proposals set out in the consultative document provide the basis for a successful and efficient aircraft industry and will command the support of those who work in it.

Does the Secretary of State recognise that this statement has been eagerly awaited and will be widely welcomed by the competitors of our industry throughout the world? Will he tell the House how much the proposals will cost and what the form of compensation will be? Will he also say where he sees the new organisation fitting into the development of the European aerospace industry? Finally, does he realise that the distorted priorities of this statement will do much to reinforce the view that his Department is now a major aggravator of the economic and industrial crisis facing this country?

It comes oddly from a Government that first bankrupted the jewel of the British aero-engine industry—[Interruption.] and then nationalised it—[HON. MEMBERS: "It was you."]—who did more damage—[Interruption.] The right hon. Gentleman bankrupted—

On a point of order, Mr. Speaker. Is the Secretary of State in order in making statements which he knows to be totally untrue?

It ill befits the hon. Gentleman and the Leader of the Opposition, who first bankrupted and then nationalised Rolls-Royce—

—to comment on a policy of the kind I have put forward today. The right hon. Gentleman—

On a point of order, Mr. Speaker. I distinctly heard the hon. Member for Stretford (Mr. Churchill) call out, "He is a liar".

Order. If the House will be a little quieter, I might be able to hear the hon. Member's point of order. Will he please repeat what he said?

Will the hon. Member withdraw that comment? [HON. MEMBERS: "No".] Order. That is not an expression that I am permitted to allow. Will the hon. Member withdraw it?

May I withdraw that remark and say that the right hon. Gentleman was guilty of a terminological inexactitude?

It saves time, when an hon. Member has used an unparliamentary term, if it is withdrawn without qualification.

On a point of order, Mr. Speaker. I distinctly heard the hon. Member for Henley (Mr. Heseltine) refer to my right hon. Friend as a liar. I would ask that that statement should be withdrawn.

Further to that point of order. On mature reflection I believe that my hon. Friend the Member for Stretford (Mr. Churchill) used a more accurate terminology, and I withdraw my original remark.

I wish to raise what I consider to be an important point about the conduct of affairs in the House. These difficulties arise because the Secretary of State, in particular, constantly makes statements in the Chamber which everybody knows bear no resemblance to the truth. If the level of debate is always to be lowered in that way, such incidents are unavoidable.

It would be in the interests of the House if both questions and statements were less provocative.

Order. It is in order to say that an industry has been bankrupted by a Government action. It may be correct or incorrect. It is certainly not out of order.

I apologise for continuing this with a further point of order. Would you arrange, Mr. Speaker, for all hon. Members on the Opposition benches who believe that the Secretary of State was at least inaccurate to rise?

Compensation provision will be fair. As to the hon. Gentleman's question about Europe, he knows as well as I do that the industry has collaborative arrangernents—I think nearly a thousand in all—not only with European manufacturers but with United States and other manufacturers. We intend international collaboration to continue and to be encouraged.

Is my right hon. Friend aware that those of our constituents who already have experience in the publicly-owned aero-engine industry will welcome his statement, although I think that they would all be somewhat bemused by the extraordinary scenes that followed it? In view of what my right hon. Friend said about the new public corporation being allowed to diversify, may I ask him how he sees the rôle of Hawker Siddeley within that corporation, as the firm has already diversified very far out of aviation as we understand it?

I shall do my best to answer. I confirm that Rolls-Royce in public ownership has done very well and has enjoyed the confidence of the people who work in it. My statement described the companies falling within the category I have described—BAC, Hawker Siddeley Aviation and Hawker Siddeley Dynamics. It will be open to the new corporation to diversify into areas which are capable of utilising the skill and ability of the people in the corporation, subject to the Secretary of State's approval.

Why has the Secretary of State not told the workers in the British aircraft industry that the people whom he is approaching to run his new national corporation are the very people at present managing the industry? Is not the exercise one in old-time politics, copied from Karl Marx once again, to nationalise the means of production, distribution and exchange, which is out of date and irrelevant for such a modern industry?

We advocated public ownership fully in two elections in 1974, and were assisted in our work of explaining the policy by Conservative Members, who contributed notably to seeing that everyone knew what our policy for the aircraft industry was. I should like to put on record my gratitude to the Leader of the Opposition, Aims of Industry and others who guaranteed that the policy was widely understood. It commanded wide support among those who work in the industry. It is a better way than nationalisation via a process of bankruptcy. It is not true that appointments have been made to the new Aircraft Corporation, nor does the speculation about appointments that might be made to an organising committee bear any resemblance to the truth.

Can my right hon. Friend give the House any hope of saving the HS 146 from being scuttled? It is the only viable civil aircraft we have to offer for the 1980s. If it is not saved, my right hon. Friend may find when he takes over Hawker Siddeley that there is nothing to take over.

I made a clear statement about the position at the time. Since I last reported to the House, there has been a tripartite meeting of the management of Hawker Siddeley, the unions concerned and myself. These meetings are continuing to discuss the future of the project. I made it quite clear that my statement about not being able to provide 100 per cent. funding at the time did not constitute a cancellation. The organising committee of the new Aircraft Corporation, which, under normal practice, would be set up in an early stage of legislation, will be able to take the project on board to consider as part of its corporate strategy.

What percentage of the total output of the three companies has been in the form of public contracts, either for the British Government or other Governments in recent years? What has been the level of public financial assistance to the companies?

In the consultative document the figures are given since 1966, but I can give the House the figures of public money that has, in one form or another, gone into the aircraft industry since 1964. Government support to the airframe sector for civil projects has been £350 million. Government expenditure on military research and development has been £450 million, and Government military procurement has been £1,100 million. Sales to the United Kingdom home civil market, mainly public sector purchases, have been £700 million. I think that it is reasonable to argue that in one way and another the relationship between the taxpayer and the British aircraft industry has been close. Under the arrangements I propose, we hope to be able to get it on a better basis.

What does the right hon. Gentleman expect will be the effect of the decision he has announced upon Short Brothers, Belfast? Will he ensure that the operations of that company are in no way prejudiced?

I assure the right hon. Gentleman that they are not prejudiced. We have seen Shorts in the context of the Northern Ireland economy. As the right hon. Gentleman will know, there is a big public stake in Shorts. Nothing I have said affects that position.

Against the background of the hollow indignation from the Opposition, I assure my right hon. Friend that his announcement has the support of this side of the House and is warmly welcomed. What arrangements will he introduce to carry out the other part of Labour's programme of public ownership, that of introducing workers' participation and control, as an example to the rest of industry?

My hon. Friend will find special reference to that matter in paragraph 11 of the consultative document, but in view of the importance of what he said I should like to read the following sentence:

"Industrial democracy should … develop organically from the views and proposals put forward by the management, workers and trade unions concerned."
The Government will consider, in the light of present consultations with all the parties in the industry, how the process can best be encouraged. I should like to take this opportunity of making clear that what are being brought into the public sector are some of the finest skills this country has produced, largely financed by public money. If there were more concern with those who make and design aircraft and manage the aircraft corporations, and less with the interests which the Conservative Party has espoused, we should make more sense of this and other industries.

Will the right hon Gentleman tell us what effects nationalisation of the airframe industry as he outlines will have on employment prospects in the industry?

There is no direct connection in the sense in which it might be interpreted. Clearly everyone in the industry and others know—I have made this clear in all the speeches that I have made to aircraft workers—that in the end an industry must survive on its market. There are at present problems concerning the world market although we believe that it will recover. The fuel crisis is especially affecting the aircraft market. I believe that the general effect will be to boost confidence in exactly the same way as it was possible for Rolls-Royce to go ahead with the—524 engine recently in circumstances that, in my judgment, would not have been possible if it had had to rely upon market financing.

Is my right hon. Friend aware that his statement will be welcomed by Hawker Siddeley Aviation in Hatfield and in other constituencies? Does he realise that they would welcome even more a positive statement of faith in the civil airframe industry, particularly design staff, technology and resources in human terms, to which my right hon. Friend has referred, by a more definite commitment on the HS 146 project. It is the only new civil aviation project that we have. I think that workers in my constituency would like me to point out that they are very concerned about the Government putting off a decision until the Aircraft Corporation is formed. That is a delay which will lose markets. They would rather have an answer on the project now.

I appreciate what my hon. Friend has said. Along with other Members from both sides of the House she has argued her case with great fluency over the past few months. She will also recognise that I set up the tri-partite meeting, and that we are now able to anticipate the establishment of an organising committee which will be able to consider the matter in a different context. We have been as good as our word. That is a matter that my hon. Friend could properly take back to her constituents who work for Hawker Siddeley. I am well aware of the welcome that my statement will receive in the industry. It has been my privilege to work out this policy with those representing the workers in the industry. There is no doubt that my statement will receive a warm welcome from them.

As the right hon. Gentleman has constantly mentioned Rolls- Royce, will he now acknowledge once and for all that Rolls-Royce went into liquidation because it was unable to carry out the terms of the contract on the RB-211 engine? The contract was negotiated under the right hon. Gentleman's authority as a Minister and under his personal persuasion. That is what drove Rolls-Royce into liquidation. The plain fact is that to put the whole of the aircraft industry into similar hands will have similar disastrous consequences.

The right hon. Gentleman has produced no justification for the policy which he has put forward today. He has less than 40 per cent. of the votes of the British people in support of it. The skills of the people in the British aircraft industry and the design teams were built up not by any Government but by private enterprise. It was private enterprise that was responsible for the establishment of the people to whom he is now paying tribute.

Lastly, does the right hon. Gentleman recognise that the measures that he has put forward will be opposed by my right hon. and hon. Friends by means of all the parliamentary procedures under our control?

The right hon. Gentleman has questioned our mandate. Will he please draw the attention of the House to the reference in his 1970 manifesto about his desire to bring Rolls-Royce into public ownership? He had no mandate for that. He campaigned vigorously against public ownership. Then, as he knows very well, within a few months of coming to power his own Government confirmed the RB-211 contract. The right hon. Member for Knutsford (Mr. Davies), who was then the Minister responsible, made a statement in the House in 1970 confirming that the project would go ahead and announcing a tranche of money. When Rolls-Royce went bankrupt the right hon. Gentleman addressed a meeting of Young Conservatives the following day. He said that this was the lesson that we must all learn. When the final compensation terms were announced it was clear that Rolls-Royce need never have gone into bankruptcy. The right hon. Gentleman inflicted very serious and unnecessary damage on the British aero-engine industry. He also endangered the reputation of Britain as a partner with Lockheed and others in the United States.

Once again the Minister has come forward with both untruths and half truths. The plain fact is that Rolls-Royce was liable to damages up to £400 million. The company knew that, and it is a public fact. That was why it was driven into liquidation by the contract made under the right hon. Gentleman's ministership. What we had to do was to try to rescue Rolls-Royce from the right hon. Gentleman's sins. The plain fact was that the company's liabilities were of such a scale that it could not be rescued from the disaster.

The right hon. Gentleman should consult the record. He will find that in July 1970, after the Labour Government left office, the chairman of Rolls-Royce made it clear at the annual meeting that in his judgment there were no problems regarding the funding of the RB-211. That judgment was confirmed in October by the Minister responsible when he came forward with a further tranche. As the right hon. Gentleman says, his Government chose bankruptcy so as to default on obligations confirmed by the Cabinet only some months earlier. That did great damage, and needless damage, to the reputation of the British aircraft industry. I ask the right hon. Gentleman to withdraw what he said.

On a point of order, Mr. Speaker. By way of comment on previous angry scenes and on what the right hon. Gentleman has just said, I point out that I happen to be wearing the mourning tie that was issued to mark the bankruptcy of the Beagle Aircraft Company, for which the right hon. Gentleman bears sole responsibility.

Order. The kind of tie that a Member wears has nothing to do with the Chair. Mr. Radice.