To ask the Secretary of State for Defence, whether his Department holds a copy of the Andrew Goodall EADS internal audit report dated 17 December 2010.

To ask the Secretary of State for Defence, whether his Department holds a copy of the Andrew Goodall EADS internal audit report dated 17 December 2010.

To ask the Secretary of State for Business, Innovation and Skills what public funding from the public purse EADS received in the latest period for which figures are available.

To ask the Secretary of State for Business, Innovation and Skills what public funding from the public purse EADS received in the latest period for which figures are available.

To ask Her Majesty’s Government whether they intend to work with the governments of France and Germany to encourage new talks between BAE and EADS directors and managers regarding future collaboration.[HL2816]

To ask Her Majesty’s Government whether they intend to work with the governments of France and Germany to encourage new talks between BAE and EADS directors and managers regarding future collaboration.[HL2816]

I first pay tribute to the former Minister with responsibility for procurement. When we had problems and needed meetings to resolve difficulties, he was one of the very first to arrange such meetings. We never had a problem. Having said that, why did the Secretary of State not take into consideration the

shareholding issues experienced by BAE and its associates? Does he not understand that this has caused a lot of unease among them?

I first pay tribute to the former Minister with responsibility for procurement. When we had problems and needed meetings to resolve difficulties, he was one of the very first to arrange such meetings. We never had a problem. Having said that, why did the Secretary of State not take into consideration the

shareholding issues experienced by BAE and its associates? Does he not understand that this has caused a lot of unease among them?

I am not quite sure what the hon. Gentleman means by saying that I did not take account of shareholding issues. The Government made it clear that we understood the reasons why the companies were attracted to a possible merger and that we were willing to listen to the arguments for it, subject to setting out clear red lines about the UK’s national interest with regard to national security, our technology base and protecting jobs. It subsequently became clear that the UK’s red lines could not be satisfied while simultaneously satisfying those of the French and German Governments. It also became clear—I think that this is the point of the hon. Gentleman’s question—that not all the shareholders on either side of the transaction were satisfied that it made sense.

I am not quite sure what the hon. Gentleman means by saying that I did not take account of shareholding issues. The Government made it clear that we understood the reasons why the companies were attracted to a possible merger and that we were willing to listen to the arguments for it, subject to setting out clear red lines about the UK’s national interest with regard to national security, our technology base and protecting jobs. It subsequently became clear that the UK’s red lines could not be satisfied while simultaneously satisfying those of the French and German Governments. It also became clear—I think that this is the point of the hon. Gentleman’s question—that not all the shareholders on either side of the transaction were satisfied that it made sense.

I strongly support my right hon. Friend’s red lines, but I put it to him that the palpable failure of BAE’s business model—which, basically, focused only on defence—and the shortcomings in its current management should not be allowed to drive us into an unsatisfactory situation, and that, such is the value of the assets that it controls, we may in the long run have to take a less than entirely hands-off approach to the company.

I strongly support my right hon. Friend’s red lines, but I put it to him that the palpable failure of BAE’s business model—which, basically, focused only on defence—and the shortcomings in its current management should not be allowed to drive us into an unsatisfactory situation, and that, such is the value of the assets that it controls, we may in the long run have to take a less than entirely hands-off approach to the company.

As my hon. Friend would expect, the Ministry of Defence has a close working relationship with BAE Systems as our largest supplier. The company has a substantial order book, a profitable business and strong cash flow, and it will continue to operate as an independent British business. Clearly, it will face challenges as its principal customers shrink their budgets, and it will need to adapt its business model for the future.

As my hon. Friend would expect, the Ministry of Defence has a close working relationship with BAE Systems as our largest supplier. The company has a substantial order book, a profitable business and strong cash flow, and it will continue to operate as an independent British business. Clearly, it will face challenges as its principal customers shrink their budgets, and it will need to adapt its business model for the future.

It is not for the Government to pursue arrangements for the future of BAES, EADS or any other company, but we will of course listen carefully with an open mind to any proposals brought to us by any of these companies. Where we hold a golden share—a veto share—we will allow any such transactions to proceed only where the United Kingdom’s vital national interests can be protected.

It is not for the Government to pursue arrangements for the future of BAES, EADS or any other company, but we will of course listen carefully with an open mind to any proposals brought to us by any of these companies. Where we hold a golden share—a veto share—we will allow any such transactions to proceed only where the United Kingdom’s vital national interests can be protected.

Following the failure of the talks between EADS and BAE Systems, will the Government tell us about any more promising avenues for European defence co-operation that they are pursuing?

Following the failure of the talks between EADS and BAE Systems, will the Government tell us about any more promising avenues for European defence co-operation that they are pursuing?

I was involved in a number of discussions regarding the possible merger of BAE Systems and EADS, as proposed by the companies themselves, prior to their mutual decision to end negotiations on 10 October.

I was involved in a number of discussions regarding the possible merger of BAE Systems and EADS, as proposed by the companies themselves, prior to their mutual decision to end negotiations on 10 October.

To ask the Secretary of State for Business, Innovation and Skills what steps he is taking to separate his role under the Enterprise Act 2002 with regard to adjudicating on the proposed merger of BAE and EADS and his role as the guardian of the Government's golden share as a...

To ask the Secretary of State for Business, Innovation and Skills what steps he is taking to separate his role under the Enterprise Act 2002 with regard to adjudicating on the proposed merger of BAE and EADS and his role as the guardian of the Government's golden share as a...

To ask the Secretary of State for Defence what assessment he has made of the likely effect of the proposed merger of BAE Systems and EADS on the Scottish defence industry.

[122625]

To ask the Secretary of State for Defence what assessment he has made of the likely effect of the proposed merger of BAE Systems and EADS on the Scottish defence industry.

[122625]

To ask the Secretary of State for Scotland (1) what assessment he has made of the potential effect of the proposed merger of BAE Systems and EADS on employment in the Scottish defence sector;

[122302]

To ask the Secretary of State for Scotland (1) what assessment he has made of the potential effect of the proposed merger of BAE Systems and EADS on employment in the Scottish defence sector;

[122302]

(2) what recent discussions he has had with his ministerial colleagues on the proposed merger of BAE Systems and EADS.

[122303]

Margaret Curran:

(2) what recent discussions he has had with his ministerial colleagues on the proposed merger of BAE Systems and EADS.

[122303]

Margaret Curran:

My Lords, earlier today the Government were advised by BAE Systems and EADS that they have decided not to proceed with the proposed merger. The two companies will remain as independent companies, each with a significant presence in the UK. The Government were clear that the merger would only ever work if it met the interests of all the parties involved. Today the two companies decided that a merger cannot be concluded.

My Lords, earlier today the Government were advised by BAE Systems and EADS that they have decided not to proceed with the proposed merger. The two companies will remain as independent companies, each with a significant presence in the UK. The Government were clear that the merger would only ever work if it met the interests of all the parties involved. Today the two companies decided that a merger cannot be concluded.

My Lords, many of us will be disappointed at today’s breakdown in merger talks and the lost opportunity to create a unique, major, pan-European group across the defence and civil aviation sectors. Given the pressures on defence spend on both sides of the Atlantic and the move to UAVs—drones—away from more labour-intensive fighter aircraft, has not BAE Systems serious problems to face over the medium to longer term as a stand-alone plc? Does my noble friend know whether BAE Systems has a plan B? Sadly, are not further job losses inevitable?

My Lords, many of us will be disappointed at today’s breakdown in merger talks and the lost opportunity to create a unique, major, pan-European group across the defence and civil aviation sectors. Given the pressures on defence spend on both sides of the Atlantic and the move to UAVs—drones—away from more labour-intensive fighter aircraft, has not BAE Systems serious problems to face over the medium to longer term as a stand-alone plc? Does my noble friend know whether BAE Systems has a plan B? Sadly, are not further job losses inevitable?

It is important that BAE Systems, as an independent organisation, now delivers a strategy and business plan to satisfy its shareholders in terms of its future. As a Government, we will be looking very closely at that because we are obviously highly dependent on the company for our defence support. However, this is a terrific British business. It is not a business that we should question. It turns over £19 billion and is therefore of significant value to the economy. It makes £1.6 billion profit, which is of significant value to the taxpayers, and employs some 35,000 people. We look to hear from BAE on this matter, but I thank the noble Lord for this very topical Question at a very apposite time.

It is important that BAE Systems, as an independent organisation, now delivers a strategy and business plan to satisfy its shareholders in terms of its future. As a Government, we will be looking very closely at that because we are obviously highly dependent on the company for our defence support. However, this is a terrific British business. It is not a business that we should question. It turns over £19 billion and is therefore of significant value to the economy. It makes £1.6 billion profit, which is of significant value to the taxpayers, and employs some 35,000 people. We look to hear from BAE on this matter, but I thank the noble Lord for this very topical Question at a very apposite time.

My Lords, is this outcome entirely satisfactory from the Government’s point of view?

My Lords, is this outcome entirely satisfactory from the Government’s point of view?