Helicopters: UK Design and Manufacture

Lord Henley Excerpts

Tuesday 10th July 2018 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Henley) (Con)]

My Lords, I thank the noble Lord, Lord Ashdown, for securing this debate and for allowing us a chance to move on, as the noble Lord, Lord Stevenson, put it, from bees to helicopters; I do not know whether that is a more or less important subject, but each to their own, and I am sure that the noble Lord is equally at home talking about bees and helicopters.

I also give an assurance that, although a similar debate to this was answered in the other place by a defence spokesman—and certainly on another occasion a question on these matters was answered by my noble friend Lord Howe, the Minister for Defence—and I am now answering as a Minister for BEIS, all of us as Ministers are answering on behalf of Her Majesty’s Government. It is a matter of equal importance to both departments, just as it is a matter of importance to the people of Yeovil and to the Department for International Trade. I hope to make it quite clear that all departments have an interest in these matters and that all of us could answer on it.

It is also right that the noble Lord, Lord Ashdown, was keen to stress that proud tradition we have in Yeovil and other parts of the country of both designing and manufacturing helicopters. Much of that domestic capability is delivered down in Yeovil by Leonardo helicopters in the noble Lord’s former constituency.

[Lord Ashdown of Norton-sub-Hamdon]

I am sorry to intervene so early. The noble Lord said that “Yeovil and other parts of the country” are committed to the design and manufacture of helicopters. What other parts of the country apart from Yeovil can design and manufacture helicopters?

[Lord Henley]

No other parts of the country, as I will make clear, can do everything. However, there are other interests in this, and in other parts of the south-west, as the noble Lord well knows, the supply chain benefits from all that work in Yeovil.

I will again mention Yeovil, the noble Lord’s former constituency, because he quite rightly praised his successor but one, Marcus Fysh, for all he has done to raise the profile of this matter. I can assure to the noble Lord that my honourable friend Marcus Fysh, the current Member for Yeovil, has been engaged in discussions with Ministers in the Ministry of Defence, including the Minister for Defence Procurement and my right honourable friend the Secretary of State, and with colleagues in BEIS, including my right honourable friend the Secretary of State and others. Again, officials from the department will also continue to be actively involved with Leonardo. I was grateful for what the noble Lord said about the history of what has been going on in Yeovil, and on this day, when we mark the 100th anniversary of the RAF—although the RAF is one of just three services that use helicopters—we are reminded of just how long we have been reliant on helicopters and of the important role they play, not only for the Armed Forces but in other areas.

Last year alone, the Ministry of Defence spent £18.5 billion with United Kingdom industry and commerce, directly supporting hundreds of thousands of jobs in every nation and region of the United Kingdom. We are rightly proud of the leading achievement of our defence sector. It has a turnover of some £23 billion and had exports of almost £6 billion, supporting 142,000 direct defence sector jobs.

Over recent years the Government have spent considerable sums investing in our helicopter capabilities, and over the next 10 years we have a planned spend of £10.6 billion. Much of this investment has obviously been focused on Leonardo, with more than £1 billon spent on the development and manufacture of 62 Wildcat helicopters, some £800 million spent delivering 30 Merlin Mk2 into service and around £330 million spent developing the Merlin Mk4 upgrades across a 25-aircraft fleet, the first of which was delivered to Commando Helicopter Force in May. That investment is vital in ensuring that we have the helicopter capability that we need in the world of defence for decades to come.

As I have just said to the noble Lord, Lord Ashdown, we recognise that Leonardo is now the only helicopter manufacturer in the UK offering end-to-end capability—from research and design through to production, service support and upgrades. The ability to innovate and develop the next generation of rotary wing technologies allows Leonardo to lead the world in blade design and to compete internationally with game-changing designs for the unmanned air systems of the future. That work is supported by my department, BEIS, via the Aerospace Growth Partnership and through programmes delivered by the BEIS-funded Aerospace Technology Institute.

This is not just about military investment. As the noble Lord will be well aware, Leonardo is working to diversify into oil and gas, search and rescue and VIP transport. Again, BEIS has supported Leonardo via innovation programmes and regional growth funding and, most recently, by supporting the new iAero innovation centre at Yeovil—another plus for the town.

The noble Lord, Lord Stevenson, talked about the industrial strategy and the need to develop local clusters. He could have gone on to say how much we emphasise the importance of place in the industrial strategy and the need to work with both local authorities and LEPS. We look forward to seeing what they might come up with in their local plans in due course. We recognise just how important the UK helicopter capability will be to Yeovil and the wider south-west economy. The Government are working to enable support locally, including, as I said earlier, through Local Growth Fund projects that benefit Yeovil, and they are engaging with Leonardo Helicopters and the other organisations that I mentioned, such as the LEP and the county council, to ensure that that support is co-ordinated.

Last year the MoD’s highest spend per person in the UK was in the south-west, where £920 was spent for each member of the population, totalling around £5 billion. Defence spending in the region also supported one in every 60 jobs there—the highest proportion of jobs support by MoD expenditure in the UK, totalling some 33,500.

We fully recognise the capabilities of the UK aerospace industry and its role in ensuring that the UK joint force enjoys strategic and operational advantage. How we deliver future rotary capability for the Armed Forces will be considered in the modernising defence programme as part of the MoD’s work on the industrial strategy and will be informed by our recently refreshed policy. As the noble Lord, Lord Ashdown, put it, the threat is growing and changing and the MoD will reflect on current and future threats as part of the modernising defence programme.

The best way we can help sustain high-quality defence industry jobs is through a competitive, innovative and export-focused industry. Helping industry to grow and compete successfully in the global market is therefore the core objective of the defence industrial policy launched last year. That refreshed policy outlines further steps to help UK industry grow and compete while reaffirming its commitment to the principle of open competition and a free, fair and responsible defence trade.

[Lord Ashdown of Norton-sub-Hamdon]

I am sorry to take more of the Minister’s time. I notice he has three minutes left. He has been brilliant at identifying that this is not only a community asset for Yeovil but a national asset that is replaceable nowhere else, and has described very well the importance of the high technology there. Perhaps I may ask a direct question. The Government have a strategy to preserve our capability to produce fast jets and ships. This has an impact on procurement. If it is that important as a national asset, will they offer the same opportunity to preserve this unique capacity by making sure that British procurement now prefers Britain to elsewhere as the place where the new generation of aircraft will be produced?

[Lord Henley]

The noble Lord is eternally optimistic if he expects to get a commitment from me today. He is a realist and will have to listen to my speech—with the permission of the House I will go a little beyond 12 minutes—when I set out what we can and cannot say at this stage. He will know that there are reviews afoot and announcements to be made.

The noble Lord will be aware that my right honourable friend the Secretary of State for Defence has invited Philip Dunne to conduct a review of defence contribution to prosperity, which will be published before the summer Recess. He will also be aware that he is not going to get an answer out of me this afternoon and he will just have to live with that.

As stated in this House as recently as 14 June, we have established a long-term close relationship with Leonardo Helicopters through the strategic partnership arrangement. I appreciate that the noble Lord, Lord Ashdown, would like us to go further but he agrees that that has its merits. It is a unique 10-year arrangement from 2016 which allows us to maintain a continuing dialogue with the company to ensure that we are speaking the same language on capabilities, needs and requirements.

However, the Government also recognise that budgetary pressures mean that we are unlikely to be able to maintain national industrial capability in every single area of our defence requirements. The Government will consider maintaining industrial capability where that is in the national interest but, in general, they will continue to operate a policy of competition to ensure best value for money, capability and innovation.

The noble Baroness, Lady Smith, wished to take us on to the wider helicopter market in the United Kingdom, and I hope that the noble Lord will allow me briefly to move away from Yeovil. We are proud to have manufacturing capability in other parts of the country. Airbus provides the majority of police and emergency services helicopters and has the largest share of the UK’s civil and military market. Its main base is in Oxford where it modifies and customises helicopters, although the design and manufacture functions are based in France. We are in contact with and have regular discussions with the company. We are also engaging with the aerospace industry in the United Kingdom across both the civil and defence sector interests. The Aerospace Growth Partnership and the Defence Growth Partnership enable government and industry to engage on a formal basis to tackle barriers and unlock market opportunities across these sectors of the economy. As I made clear earlier in my remarks, that engagement is co-ordinated across my own department, BEIS, the MoD and the Department for International Trade.

Lastly, given that the noble Baroness, Lady Smith, mentioned Brexit, I cannot leave the debate without making a brief mention of it. We understand that the negotiations on our future arrangements are leading to a level of uncertainty for all industries. That obviously applies to aerospace as much as to any other. We are working closely with the aerospace industry and we understand the implications and the opportunities that are presented by the departure of the United Kingdom from the European Union. Through our future partnership with the European Union, we want to explore just how our industries can continue to work together to deliver the capabilities that we need.

House adjourned at 6.01 pm.