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House of Commons

Thursday 15 February 2001

The House met at half-past Eleven o'clock


[Mr. Speaker in the Chair]


City of London (Ward Elections) Bill (By Order)

Order for further consideration, as amended, read.

To be further considered on Thursday 1 March.

Colchester Borough Council Bill [Lords]

Read a Second time, and committed.

Oral Answers to Questions


The Secretary of State was asked--

Civil Aerospace Projects

1. Mr. John Wilkinson (Ruislip-Northwood): How much launch aid for civil aerospace projects in the United Kingdom was invested by his Department over the past 10 years; and what royalties on sales in the civil aerospace sector were received by the Government in this period. [148999]

The Minister for Competitiveness (Mr. Alan Johnson): The Government receive a return on their launch investments through levies on the sales of engines and aircraft.

In the financial years 1990-91 to 1999-2000, £999 million was awarded in launch investment; in the same period, £915 million was received. Further returns will be received from launch investments. The details of individual investments remain commercially confidential, but the Government expect to receive a substantial real rate of return on all launch investments made in the past 10 years.

Mr. Wilkinson: Does the Minister agree that those returns are broadly satisfactory? The programme of launch investment in the Airbus series of aircraft initiated by Baroness Thatcher, with some £220 million for the A320, is now to be followed by Government investment of some £250 million in the engine sector for the Trent 600 and 900 power plants? Does that not show that Governments of both persuasions recognise the strategic

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importance of the British aircraft industry as a whole to the United Kingdom, and that the money is well invested and well spent?

Mr. Johnson: I agree entirely with the hon. Gentleman's comments--it has been a great success. Money is still being received for the A320, which was introduced in 1988, which shows that the aid was a good investment for the British taxpayer.

Mr. Peter L. Pike (Burnley): Does my hon. Friend accept that launch aid has been crucial to retaining aerospace jobs resulting from the Airbus work in Burnley and north-east Lancashire? It is welcome, and we want it to continue. Aerospace is an important part of the local economy and the British economy as a whole.

Mr. Johnson: My hon. Friend makes an important point. This is a great British success story. The aerospace industry has contributed an average of £2 billion to our balance of trade over the past 21 years. The venture that my hon. Friend mentions--the A380, previously known as the A3XX--will create 22,000 new jobs and safeguard 62,000 existing jobs.

Mr. Gerald Howarth (Aldershot): Welcome as the news was, it was unfortunate that on the "Today" programme the Secretary of State did not pay tribute to the previous, Conservative Government. As my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson) made clear, a Conservative Government looked carefully at the A320 programme and decided that, even though politicians were not generally the best at making commercial decisions, a decision could be made. The result was that all launch aid for the A320 was repaid with interest by December 1999. The Government are now receiving dividends on Britain's most successful post-war civil aircraft programme.

Mr. Johnson: On the issue of aerospace, the whole House can unite in supporting a great British industry. As for the previous Government's record, even a broken clock is right twice a day.

Trade Tariffs

2. Mr. Harry Cohen (Leyton and Wanstead): What representations his Department has made to the European Commission regarding the everything but arms proposal. [149000]

The Minister for Trade (Mr. Richard Caborn): My Department has made many representations to the European Commission about its proposals, urging rapid implementation while at the same time taking account of the legitimate concerns of those such as the non-ACP less-developed countries that might be affected.

Mr. Cohen: Does the Minister agree that the everything but arms proposal, which provides tariff-free access for 919 products, is a welcome initiative? Will he put his weight behind it so that it is approved by the Council of Ministers as swiftly as possible? Will he point out to its critics that it will cost the EU less than £5 million a year--a small price to pay, considering the substantial prosperity that it engenders in developing

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countries and the poorest countries? Does he recognise that, as well as helping the poorest countries to strengthen their economies, it sends out a strong message that it is better to trade in civilian goods than in arms?

Mr. Caborn: I completely agree. My right hon. Friend the Prime Minister made this country's position clear in his Mansion House speech. Indeed, we are taking the issue to the European Union, where we hope to be able to reach an agreement that will assist the least developed countries. We are talking about 0.5 per cent. of world share--of economies in which the gross domestic product is less than $1 per person a day. We have a responsibility to those countries, and we shall push very hard indeed on that matter in the EU.

Mr. John Bercow (Buckingham): There is fog of Government confusion on this matter. Why, in referring to the everything but arms proposal on 22 November last year, did the Prime Minister say, in terms, "We are concerned about the proposal", when, on the same day, his right hon. Friend the Secretary of State for International Development said that the Government strongly support the proposal? Which of them was off-message?

Mr. Caborn: We strongly support it; the Prime Minister made that clear in his Mansion House speech. Indeed, we have led in the EU on the issue, to ensure that we push hard for the inclusion of the three items that, as the hon. Gentleman knows, have created difficulties--bananas, rice and sugar. The Prime Minister and the Government are as one on that.

Ms Julia Drown (South Swindon): This initiative is likely to result in only small gains for less developed countries. Does my right hon. Friend agree that, if the agreement does not come off as a whole, it will seriously call into question Europe's commitment to competition? Will he urge all his European colleagues to agree to the initiative in full, so that, at the next World Trade Organisation negotiations, our motives on trade liberalisation and competition are shown to be serious and in everybody's interest?

Mr. Caborn: That is a fair question. My hon. Friend is right: the EU must show leadership, especially as we approach another round of WTO negotiations. The vast majority of the 140 WTO countries are developing countries that look for a lead from developed countries. It is incumbent on the EU to take a lead.

Climate Change Levy

3. Mr. Tim Loughton (East Worthing and Shoreham): What recent discussions he has held with the steel industry about the effects of the climate change levy. [149002]

The Secretary of State for Trade and Industry (Mr. Stephen Byers): My ministerial colleagues and I have held regular discussions with the steel industry about the effects of the climate change levy.

Mr. Loughton: It sounds as though Ministers have not listened. How does the Secretary of State think that he is helping to combat global warming--let alone supporting

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British manufacturing industry--by his insistence on imposing an additional £10 million energy tax burden on the UK steel industry, which is already under great pressure, even though it is one of the most efficient in the world and has halved its carbon dioxide emissions since 1970? The loss of capacity in the UK will be taken up by our European competitors, many of which exempt their steel industries from energy tax altogether; or, worse still, will go to countries that now account for more than 40 per cent. of world production and are not covered by Kyoto emissions targets and where control of harmful emissions is a low priority?

Mr. Byers: The hon. Gentleman is right to point out that a balance needs to be struck between the desire for environmental protection and ensuring that, in achieving that objective, we do not affect the competitive position of British business. If the hon. Gentleman studies the evidence given by the chairman of Corus to the Select Committee on Trade and Industry yesterday, he will see that for Corus--the major steel producer in the United Kingdom--the climate change levy has had, or will have, very little impact.

Mr. Martin O'Neill (Ochil): Is my right hon. Friend aware that about £8 million of the £10 million to which the hon. Member for East Worthing and Shoreham (Mr. Loughton) referred is accounted for by Corus? The rest of the British steel industry accounts for the remaining £2 million. When the CCL was first mooted, the figure was to have been more than £120 million. As a consequence of negotiation with my right hon. Friend's officials, it was reduced to about £8 million. The last thing on which Corus can blame the redundancies is the impact of the CCL.

Mr. Byers: My hon. Friend makes an important point; £8 million of the amount relates to Corus. The company has pointed out that an issue of the greatest concern is that, if the exchange rate between the pound and the deutschmark changes by just one pfennig, it is the equivalent of an £8 million difference. That is why we need currency stability in the UK--one of the benefits that we would receive from joining a successful single European currency.

Mr. Patrick McLoughlin (West Derbyshire): Does the Secretary of State believe that he is making a contribution to British industry by levying a charge on it? A company in my constituency will see the price of its gas rise next year from £300,000 to £600,000--its third largest cost after materials and salaries. Does the right hon. Gentleman think that the Government need to tell that company to try to reduce its energy costs?

Mr. Byers: Manufacturing industries, in particular, welcome the economic stability that the Government have created. Inflation is now 1.8 per cent. and interest rates were reduced last week. We now have the lowest long-term interest rate for some 35 years. That is the economic stability that manufacturing industry craves. If the hon. Gentleman looks at the gas and electricity figures, he will see that over the past few years the price

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of gas has gone up in real terms by 4 per cent. for industrial users, but that that has been more than compensated by reductions in electricity prices.

Mr. Eric Illsley (Barnsley, Central): Will my right hon. Friend consider an aspect of the steel industry--the foundry industry? Although not on the same scale as the major steel producers, foundries suffer from the climate change levy, and throughout the country they are working to very tight margins. Has he had any discussions with representatives of that industry? Will he consider its predicament?

Mr. Byers: My hon. Friend makes an important point about specific issues affecting the foundry sector, and we have been carefully considering the support that we can give it. The exemption arrangements that we are putting in place give due regard to the position of the foundry sector of the steel industry.

Mr. David Heathcoat-Amory (Wells): In the Secretary of State's statement on the 6,000 steel industry job losses at Corus earlier this month, he explicitly denied that the climate change levy was a factor. Is he aware that, on the very same day, the chairman of Corus said:

That is a direct quote from the management. Is the right hon. Gentleman so out of touch with manufacturing industry that he does not know that damage is already being caused by that £1 billion extra tax, or does he know that damage is being caused but is too weak to stand up to the Treasury and simply denies it? Which is it?

Mr. Byers: The right hon. Gentleman clearly did not follow the evidence that the chairman, Sir Brian Moffat, gave to the Select Committee yesterday, when he was quizzed very carefully on exactly those issues. I trust the evidence that the chairman of Corus gave to the Select Committee. He made it very clear that the climate change levy was not an issue for Corus. That is on the record; it is exactly what he said yesterday before the Select Committee. I much prefer to rely on evidence given to a Select Committee than on any quote in a national newspaper.

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