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The Economy and Welfare Reform

Thank you, Madam Deputy Speaker, for giving me the opportunity to take part in the debate. I begin by congratulating the hon. Member for Bristol, West (Stephen Williams) on his maiden speech, and all the other Members who have made their maiden speech today. I should like to make special mention of my right hon. Friend the Member for Torfaen (Mr. Murphy), who has tirelessly served the people of Northern Ireland and Wales for so long. Over the past week we have been debating the Government’s programme for the forthcoming year and a half. We face many challenges, but we have built a sound base and delivered the longest period of economic growth in modern history. To maintain that success, we need successful industries and businesses generating income and jobs and making sure that Britain moves forward in the face of tough international competition. Airbus UK is at the forefront of meeting that challenge. The hon. Member for Bristol, West mentioned Airbus, and it is clearly important in his area as well. It shows that European co-operation can deliver a world-beating company. I am delighted that the Prime Minister and the Chancellor found time to visit Airbus UK’s Broughton site during the election campaign and to meet some of the company’s numerous apprentices. Airbus UK provides tangible evidence of what can be achieved when we invest for the future. The company represents one of the UK’s most knowledge-intensive industries, requiring a highly skilled work force applying the latest technologies and the use of high precision, lean manufacturing processes. Working in partnership with its trade unions, it is a model that many other industries could follow. However, just as no country, not even the most successful, can take its prosperity for granted, nor can any company. Just as there is a need for the Government to pursue policies that entrench stability and promote long-term growth, so, too, companies must adapt and innovate to secure the very same long-term growth and success. Following the successful first flight of the A380, attention is now focused on the A350, the new long-range aircraft—the hub-to-point aircraft, as it is known. That market is expected to grow by 35 per cent. over the next 20 years, and the A350 would provide a competitive Airbus product to meet that need. For Airbus UK, the A350 poses both opportunity and threat. The company, which employs 13,000 people and supports an estimated 135,000 UK jobs, plays a leading role globally in wing design, technology and manufacturing. Airbus UK and its supply chain undertake the design and production of the wing, landing gear and fuel systems integration. However, that leadership is based on a metallic wing solution, while the A350 marks the beginning of the next era in wing technology, which is the large-scale use of composites. The future for Airbus overall is composites. However, because many composites have already been used in current products, namely the A380 and the planned A400M, the military transport aircraft, composite design and technology expertise has been built up over the years in many Airbus sites, namely those in Germany and Spain. While the UK has developed experience in this technology, the A350 is the first Airbus civil product with the wing primary structure made largely from composite. Airbus is now considering investments for this product and the decisions on work-sharing activities, and it is important that those decisions be taken in the near future. Success for the UK in winning the A350 would mean the creation of almost 11,000 jobs in the aerospace sector and a further 21,600 jobs being supported in the wider economy through induced employment. Those will be long-term jobs and many of them will be highly skilled. It is well known that other Airbus countries, namely Germany and Spain, are keen to see those high-value jobs brought to their sites. Whoever secures the work on the A350 will be much better placed for the future and the next generation of aircraft, as the decision on the A350 will have a significant bearing on where that work and investment will go. In order for Airbus UK to win this vital wing business, considerable investment in new engineering and manufacturing facilities and work force training in composite processes is needed. Airbus has therefore applied to the Government for repayable launch investment for the A350. As Airbus is a successful company, one may ask why the British taxpayer should stump up repayable launch aid for it. But why should we not invest in success? In the past Governments of all political colours have tended to respond only to crisis and collapse, often with little long-term gain. For aircraft manufacturers, development costs in the industry are often greater than the total share capital of the company developing a new aircraft, while the pay-back period for these costs can be over a 15 to 20-year cycle. The financial markets do not find that particularly attractive, so Government commitment via repayable launch investment is a key method of ensuring market confidence. As a public-private partnership, the process works very well. Without it the UK will lose out to other European countries that already have competence in the area. Quite apart from all those arguments, repayable launch investment is a sensible decision for the British taxpayer because it is repayable. For example, the Government supplied £250 million in repayable launch investment towards the A320. Repayments from Airbus UK to the Treasury now total more than twice that amount and continue to grow with each aircraft, with royalties being paid. If we mean what we say about wanting to build a true partnership with industry, to invest in science and skills, to develop high-tech modern manufacturing and to build prosperity for Britain in a global economy, we must not, at this crucial moment, turn our backs on the potential of Airbus UK. Nor should we be intimidated by the loud, self-serving voices of some of our American cousins, whose cries of principled objection to repayable launch investments surface only in the wake of Boeing’s lost market share. While we would all like the disagreement between the United States and the European Union to be concluded, that conclusion must reflect the fact that although Airbus receives direct but repayable loans from EU member countries, Boeing receives huge subsidies, be they in the form of NASA or Department of Defence contracts, or even of tax breaks. Europe has been accustomed over the years to American allegations of unfair subsidies to Airbus. US hostility tends to intensify when Airbus launches a new plane or opens up a significant lead in the marketplace. That Boeing is comfortable with direct subsidy for aircraft manufacture is evident from the fact that its strategic partners in Japan are funding a share of the development of the 7E7 Dreamliner. Japanese partners are to receive repayable grants and, in addition, other low-interest repayable loans will come from the Development Bank of Japan. They will be worth almost $1 billion in total. Boeing’s Japanese partners on the 7E7 will receive more than $1.4 billion in subsidy, and some of that will not even be repayable. That demonstrates that the direct support which Boeing and the US Government believe is completely unjustified when adopted in Europe is acceptable if granted to a partner working on the Boeing programme. Airbus UK’s application for repayable launch investment for the A350 represents an opportunity for the Government to work in partnership with industry, to invest in high-skilled jobs and to prepare and equip our nation for the challenges ahead. It is an opportunity to build our modern manufacturing strength and to ensure British leadership in science, enterprise, education and trade. Let us not pass up that prospect for long-term growth and prosperity, and let us ensure that our aerospace industry leads the world.