Select Committee on Trade and Industry Minutes of Evidence

Examination of Witnesses (Questions 20 - 39)



  20. It is one thing to ensure compliance but surely what you are suggesting is maybe moving at the speed of the slowest if at all, that nobody will do anything. I have the impression that you are hoping that it will not happen, therefore you are ignoring it, apart from what you have to do.
  (Mr Rose) No, what I was saying was that unilateral action clearly has consequences. It is important to balance the consequences they are likely to have with the other objectives that we have as a nation. There are bodies which govern emissions legislation and so on that are in place and with whom we all as an industry have to comply.
  (Mr Maciver) It is legitimate to be concerned at differentials opening up. That does not really reflect our view as an industry. We are fortunate in a sense that as an industrial undertaking it is not the most difficult area from an environmental point of view. Nevertheless, we take it very seriously and all of us are improving processes wherever possible, removing harmful materials which have been traditionally used. Not only that, the SBAC has taken a wider view and we have made a quite conscious decision that we should positively engage on environmental issues rather than simply saying we will do things when we are made to. It might be helpful if Mr Marshall made some comment on the approach we have taken in the Society on this.
  (Mr Marshall) Together with a number of other organisations, we have formed a grouping across the aviation community in the UK under a broad banner called Air Travel: Greener by Design. The key point in it really is that these future solutions to improving the environmental impact of aircraft are not just in the hands of the manufacturers, it also involves the operators, it also involves the air traffic system. It involves a whole lot of activity which goes on around airports, not just in the air but on the ground. An holistic solution is needed. That group is going to deliver a report round about April time this year with recommendations from a UK point of view. Mr Rose's point is important, that we should not do anything which is other than try to move this along internationally. It could not be to our advantage either to try to instigate a unilateral approach to the environment from the point of view of aircraft, nor to see somebody else do it. When we have developed our ideas, we shall then be pushing those internationally. I do not sense a reluctance on people to do that because they realise this is a key area, if the industry is going to go on growing at the rate it is. The reason the civil business has flourished so much over that period is because air travel has continued to grow. Environment is one of the issues which has to be tackled if it is going to go on growing at that rate in the future.

  Chairman: We shall wait to see what you bring out. We shall also be interested to see to what extent ECGD will be happy with that as a formal environmental streaming. Obviously this is one of the things which is coming up on their agenda. It is not near the top but it did come up in our discussions with them.

Helen Southworth

  21. May I return to the SME issues? What impact are you expecting from the Lean Aerospace Initiative in terms of effect on working practices in the UK industry?
  (Mr Maciver) The Lean Aerospace Initiative started off really looking at what constituted a competitive company in the aerospace industry. Out of that I am afraid we quite unashamedly copied things from the motor industry. The core is a series of master classes which over a 15-day period really provide in the workplace help and advice to a company to improve its practice in a very practical way. I think we have run some 100 of those now. Typically I think we would improve the effectiveness by some 30 per cent; in some cases very much more. Really the nature of the industry is that we have seen other industries where we were laggards. We cannot afford to be laggards in the aerospace industry. We have to be in the forefront of competitiveness. While that may be painful in some cases, at the individual level it is the surest safeguard of long-term employment in the industry. I do not know whether it feels like that from the point of view of somebody who has used these things.
  (Mr Wood) Let me talk on behalf of my own company. We started working along similar lines some three or four years ago and then made substantial progress in terms of improving our own cost competitiveness. However, with the arrival of the master classes we saw an opportunity to move up another ten gears and accelerate the rate of change. I genuinely believe, and this is a belief shared by the SMEs who are also members of the SBAC, that we simply have no choice. We simply have no choice. It has to be very complete in its application and I am not alone in having put myself and my senior management teams through the practical classes, building product, and then middle management, supervisors and then the operators themselves. We simply have no choice. But the benefits are substantial and crucial to our existence.
  (Mr Maciver) On the question of working practice it does actually make a profound change. It gives greater responsibility to the individual employees, it puts more demands on them, in fact it tends to require a wider skill base. All this is pushing in the right direction of a higher skilled workforce and ultimately higher value employment in the industry. It does put additional demands and in addition to the programme, I think most of the large companies would be investing a great deal in training to support this kind of industrial redesign. Indeed, whilst the master class in itself takes us so far, the individual companies such as Mr Wood's have to complete the process thereafter.

  22. Where are you finding that most action needs to be taken? Where are the problems in the industry? What is being tackled?
  (Mr Maciver) While I would argue that the British industry is a competitive industry, there is room for further improved competitiveness. There are examples in other industries which we should not like to follow. We would wish to be ahead and that means we really have to push productivity and effectiveness and with the related issues of quality and on-time delivery we have to push these as far as we can. All the experience says that if you tackle a traditional industrial area which has not been thought through on modern lines, you will see the opportunity for very large improvements indeed. We quote the modest figure of some 30 per cent. I would argue that in most cases you can go further and possibly double the performance of an individual area. That imposes stresses and strains but long term, if you do not do that, somebody else will and we will not be competitive.

  23. Are you seeing the impact, is the change actually happening on the ground? Are you getting the returns through yet?
  (Mr Maciver) Speaking for my own company, without any doubt. Frankly, if we had not embarked ourselves on this type of programme, we would not be in business, or maybe still in business but with no future in business. It has transformed the way we operate. We have some way to go but it has made an enormous difference. You will be interested in the comments from the other individual companies on this.
  (Mr Rose) We have been investing very heavily in improved practices and investing in infrastructure and capital. It is really important to understand that this is not just about changing behaviours of the small companies, it is about changing the behaviours of the big companies too. We have to enable the smaller companies to be as successful as they can be and that has not always been the case. Huge strides have been made but there is still a long way to go in making that a more productive relationship. A lot of the cost does not come out of simply doing things better, but actually not doing things at all which they did not need to do in the first place. We imposed practices and behaviours on our supply chain which were quite unnecessary in some cases. We did not know we were doing it necessarily, but once you asked the question it was pretty clear that was what was happening. It is quite a complicated activity and it is not simply a small company issue, it is the whole of the supply chain.
  (Mr Weston) It is very difficult to give a simple answer to that because it is such a complex question. For us it actually starts with the way we get people involved and what we are trying to do in the business. I might characterise it in that 15 years ago everybody who worked for us thought we were a big, rich company and their prosperity depended on how well the unions did in the annual headbutting competition with management. We have moved that relationship on to getting everybody involved in thinking about what it is that gives us the availability of cash in the business, whether it is to invest in pay rises, new plant and equipment, technology or new products, which this is all about. Do we have customers out there who are prepared to pay a margin above our costs? That removes a lot of the barriers. You are never going to see eye to eye with the unions on everything, but it puts you in the same boat in terms of whether you have a competitive business, so you can get out there and sell. This would not be true of every industry, but in the United States for example we probably have about an eight year lead over a lot of the US industry in terms of the way we actually involve everybody who works in the company and focusing on what we needed to do to get performance improvement. Beyond that it was about focusing on specific issues, like how we get the design for manufacture right, whether we have systems which provide us with the right data at the right time, whether we have one set of databases and one set of information so we are not wasting a lot of time trying to correlate different sets of data which are supposed to be measuring the same things, whether we have the logistics and flow of the production processes right. That is where we begin to reach down into the supply chain, looking at just-in-time deliveries and the way we organise working capital in the business so we do not have a vast amount of money sitting around non productively for significant periods of time. You really need to look across that entire spectrum of activities to see whether the improvements have come in. I think we have made some huge strides over the last decade but we can never be complacent about it. It is something we need to keep working away at and we can always do things better.

  24. You said earlier that this is not a one-way flow system, it is a two-way flow system that the big operators are learning from this process too. Are you confident that the relationship is sufficiently robust? As big suppliers, big operators, you are expecting a tremendous amount from the small companies in terms of flexibility and focus and development but also in terms of capital investment. They are making very major commitments in terms of their size for companies which are global and can take global decisions and shift around the place.
  (Mr Wood) There is an important point to make. Your comments about the rate of change and the increasing pressure are absolutely right, but then they are increasing pressures for everybody within the industry. Another important point is that a lot of work is already done collectively and we have talked about the master classes and the Lean Aerospace Initiative. Most of the smaller and medium-sized enterprises have run classes or workshops with their larger—in some cases much larger—customers. A considerable amount of work is done together. That does not remove the commercial pressures which are quite naturally and quite rightly applied to us. At the end of the day there is a very clear understanding that we are talking about competing supply chains—if you will pardon the jargon. It is in our best interests for all of us to work closely together and that is what we are doing in many cases, notwithstanding the fact that I recognise that my customers have a choice to make.
  (Mr Maciver) We have no interest in unsuccessful suppliers at that level. It is very important that they are able to invest and are able to take the business forward. They do have a choice and businesses that choose not to modernise along the lines we are talking about will not survive in the industry. It is as simple as that. Those who are able to adjust and are able to adapt, as clearly Mr Wood's own company is doing, will form a very secure part of the supply chain, which is absolutely necessary. We can be stopped making these sophisticated products because of one small supplier employing 50 people. That is of no help to anyone, so we have a very strong vested interest in a secure strong supply chain. It is not just companies like Rolls-Royce but companies like my own, a step below in the supply chain. We are also outsourcing things which we are perhaps not the best people at doing and it will go to smaller companies. We are asking them to do more and they have to equip themselves to do that. It is a very positive step for the SBAC to provide practical assistance in making that change.
  (Mr Weston) In the exchange of best practice through some of our preferred supplier initiatives—and we learn from them as well as they learning from us—I would entirely endorse the comment that it is in everybody's interests that you have a healthy supply base. What we really need is for them to take out cost, not to be cutting back margins in the investment they actually have for the future. It is cutting out the cost and the waste which is in everybody's interest and that is why we really need to focus in making the supply chain work as an effective part of the same entity.

Mr Hoyle

  25. I find this huge commitment which seems to be being shown to the supply chain very interesting. Is it not fair to say that the problem with the supply chain is that these companies which have invested quite heavily and adapted to the way the big boys want to work suddenly find the work has been transferred abroad? They are now paying the price for their investment. I think that is the danger. The real commitment is not there. We are paying a lot of lip service and some very fine words are coming out this morning, but the reality is that jobs are going abroad and that is at the expense of the supply chain whichever way we look at it.
  (Mr Maciver) The fact is in the United Kingdom—this may be unpalatable—lower value added jobs and a number of the simple processes will go to the cheapest source. Fact. That does not mean at all that there is any cynicism in the approach. There are many companies which do not fall into that category among the small and medium-sized enterprises. It is very important that we have suppliers who are closely integrated with us in terms of linking into our supply chain and integrating from a lower level products which come to us. A case in my own company. One of the first companies we did this with was in fact in Northern Ireland. That company integrates products—in some cases very simple products from Indonesia. But that company has improved its position and created additional value by integrating products into assemblies and kits which go into our factories and are immediately transformed into a finished product. I do not think the issue is anything to do with the initiative to improve the supply chain. The two things will happen. It is much better to have a supply base close to home. The fact is some simple products will migrate overseas, as we have seen in all the advanced economies. What we have to do is create additional higher value and increase the skills in our labour force. If we do not do that we shall be competing totally as an industry with the lowest labour costs and that is something we will not win. To me that is an economic fact.

  26. I find your views very questionable. What you are saying is that human rights do not matter so long as the price is right; you will accept that work from anywhere. Indonesia is certainly a questionable country to place work in.
  (Mr Maciver) I certainly did not say that and certainly in my own company we would not countenance practices in any factory of the kind I think you were alluding to. We would have no interest in that. In this industry we depend on high quality at any level, but equally, if you take the view that all countries are suspect and do not put work into them, it says very little for their chances of economic development. There is a proper compromise and indeed in my own company every employee of ours has to sign up formally to an ethical code of conduct which is enforced and we believe it and we believe it is in our economic interest as well as being a point of principle. I am sure the others will say the same thing. We would certainly not countenance malpractices of the kind I think you are alluding to.
  (Mr Rose) You made the assertion that we were paying lip service as an industry to the support of the supply network. I think the facts actually speak against that. In our particular case our obligation is to be competitive and that is the thing which gives the best opportunity for the supply chain. As a result of being competitive, we have doubled the jobs in the supply chain because we have sold more product and a large proportion of that product comes from the supply chain. The facts are that we have increased our spend to over £1 billion and that has had the impact of creating probably around 15000 jobs in the supply chain. There is a commitment to it, but underlying that commitment we have to be competitive and we have to be cognizant of the fact that we compete in a very, very global industry in which there are major players who are determined to get us out of business. If you were to look for instance at General Electric, which is a non trivial business with a market capitalisation of £500 billion, they buy about 90 per cent of their components for any aero engine in the supply chain and are actively trying to force their suppliers to source those components in places such as Brazil, Mexico, Russia and so on. They will be creating the cost environment in which we are operating and we cannot ignore that. If we ignore that we will have nothing to put in the supply chain. The facts are that we are committed to the supply chain, but we have to be committed to a supply chain which is competitive otherwise we shall not be.

Helen Southworth

  27. I suppose the question I was asking previously and which we have extended here is that you are expecting the supply chain to have high value added, to develop, to progress, to become very competitive. That does not just require reskilling, that also requires considerable capital investment and it also employs very considerable intellectual investments. You said that you were copying some practices from the Japanese car industry. We have seen some quite shocking decisions made by a global market in the car industry which have had very detrimental effects on a supply chain which has been competitive, which has put considerable capital investment in, which has put considerable intellectual investment in and has woken up one morning and gone into work and heard on the radio that the entire thing has fallen apart. I hope those are not practices you are going to be looking at.
  (Mr Rose) We have to make a distinction between the practices of making an efficient factory and a proper investment in capital and so on and the management practice. That speaks to the real issue which is: where is the decision made and where is the IPR owned? The decision to exit a country can be made by someone who owns their route to market, their design capability and their IPR and so on elsewhere and is then looking for the cheapest source of assembly or whatever it is they have chosen. What we have to do is retain the decision-making capability here as much as possible, which means we need to own the route to market and any intellectual property which keeps on coming back to an investment in research and technology and the fundamental capabilities to be competitive. Then we made the decisions about where this work is prosecuted and it is not made by people elsewhere.
  (Mr Maciver) This is really at the root of it and it is a fundamental difference with the car industry. It is perhaps easier in aerospace, because it is a regulated, high technology industry, so it is not perhaps as easy to do what you say. The fact is, a lot of things are internationally mobile and the more global the industry becomes the more that will be a fact of life. What we have to look at—and this is something we spend a great deal of time on—is what the factors are which will enable us to continue with a healthy UK based aerospace industry at all levels. That is really fundamentally important. The fact that some simpler components go offshore is not the main issue; it is an issue but it is not the main issue. Once we have set up a secure supply base we cannot lightly do that. You cannot simply change supplier in what is a regulated industry. So provided the right decisions are made, there is no reason why that should happen. The absolutely fundamental issue in determining whether this country has a continuing successful aerospace industry is that the technology is based here and that sufficient of the decision making is based here. If that is the case, if we were cynical about the supply base, we would not be investing our own money in developing the supply base, which we do. I think you are quite right that there is a threat; but it is a threat we are very anxious to avoid. Some of the points we have made to you today are really to seek your support and encouragement in pursuing that. In the industry the role of the Government is inextricably intertwined in terms of decision making, in terms of investment in skills—a very, very important factor—and in terms of the overall R&T that goes into the industry. We have a common cause but you are quite right to diagnose a threat which we have to counter and I see no reason why we cannot.

Mr Morgan

  28. May I follow up the original theme of the last questions about the Competitiveness Challenge which takes up a fair amount of money, though I suspect not proportionally a lot in terms of your industry. How do you measure the improvements which you have actually got or hope to get?
  (Mr Maciver) There are many dimensions to it. When you are familiar with this subject most of us here would recognise waste and waste takes many forms: half-finished parts sitting for weeks at a time before anyone gets round to working on them. In a very old-fashioned business that would be typical of the kind of waste you would find. What you find as you improve these things are obviously more competitive costs which hopefully come through in the prices through the supply chain. You would certainly see much closer adherence to delivery deadlines, not a strong point historically in the aerospace industry. You would certainly expect to see a marked improvement in quality or the quality ultimately is right but the cost of getting that quality is very often far too high. I mean quality in the sense that the product is absolutely right when it is produced. There are many dimensions to it. We would expect to see all these things.
  (Mr Wood) Within these initiatives the industry has worked to establish a standard approach, a standard way of driving for improvements but just as importantly a standard way of measuring improvements. We do actually have an agreed set of seven matrices which cover just those indicators of performance which Mr Maciver has flagged. We are able to measure in hard terms what those improvements are.

  29. We have a memorandum from the DTI which sets out what they say the objectives of the Competitiveness Challenge were. It also says what has actually happened and I have had some difficulty relating that back to the original objectives. There is certainly one I notice which you can perhaps explain to me because maybe I am misunderstanding it. One of the objectives was to improve the average business excellence model score by 200 points. Later on it says that the average BEM score has gone up from 242 to 296, which to me is an improvement of 56. Does that mean you have not reached the objective or am I misunderstanding that?
  (Mr Maciver) In a sense it probably does, but that is only one issue. What we had to do after the initiation of the Competitiveness Challenge, was to decide among ourselves what the factors were that we wanted to measure. You are quite right that we have to measure otherwise we have no idea whether we are getting results and moving in the right direction or not. I cannot comment on the specific figures but the business excellence model is an overall way of self audit. It is when companies actually audit themselves and it covers a multitude of factors in what constitutes an effective business. It is a reasonable indication of the overall standard for the industry. Mr Wood referred to some very, very specific measures which we live with day by day in our everyday life in terms of delivering to customers and what have you. I cannot remember the seven precisely.
  (Mr Wood) They come back to delivery, performance, turnover per employee, operational effectiveness, sales per square foot and a number of standard measures of that nature, customer returns, quality and so on.

  30. The DTI lists three objectives of which the BEM score was one; the other two are to improve market share by one per cent, equivalent to £1 billion. Has that been met?
  (Mr Maciver) That is when we cannot measure in a short-term sense. My impression is that without doubt the industry has much more than achieved that.
  (Mr Marshall) Not only attributable to the Competitiveness Challenge.
  (Mr Maciver) No; due to many factors.

  31. Your market share has improved by one per cent.
  (Mr Marshall) Yes.

  32. What you are saying is that there is no point measuring the Challenge by this particular measure because it does not actually say anything at all.
  (Mr Wood) The business excellence model actually allows you to measure a number of different aspects with any given business and they can be related to manufacturing performance, design, development performance and also people matters. What we have been concentrating on in initiatives such as the Lean Aerospace Initiative are very much focused initially on manufacturing performance. Therefore I suspect—I am pretty certain—that what you will see is significant increases in terms of performance within purely manufacturing related operations but we still have considerable opportunity in the other areas and we can achieve that through extending the approach we are taking.

  33. Some of the other things the DTI say have been achieved are that an internet marketing based facility has been established, a careers video has been produced, there has been a national survey of human resource management in aerospace to establish the benefits for competitiveness of high performance HR practices such as team working, appraisal, job rotation. I should have thought such stuff was pretty obvious. Are these really achievements or do you have firms which are significant laggards in these areas?
  (Mr Maciver) When you put them the way you have done—

  34. It is the DTI which is putting them not myself.
  (Mr Maciver)—they are obvious but sometimes you do not always do the obvious. The Competitiveness Challenge addressed a number of things. Just to remind ourselves, we addressed the supply chain relationships in aerospace, how companies worked together so that we worked together in a proper intelligent way. The Lean Aerospace Initiative which has given very practical help in the manufacturing area, the marketing tool which was designed to help small companies address remote markets which they could not afford to access directly without help was rather a different thing. That was very practical assistance to small companies seeking to market for example on the west coast of the United States. Lastly, all of these things relate to the development of people in the business. You cannot run a lean manufacturing operation without a properly motivated and properly skilled employment of people at all levels, managers and people who assemble products or whatever. They are all interrelated and they are achievements. As an industry we have managed to work with remarkable cohesion to make some progress in these areas.
  (Mr Weston) May I pick up a point about the business excellence models which really is quite important? The business excellence model, the European Federation quality model and the model in the US are all essentially the same thing, but it is an extremely thorough process and looks at everything you do in business from a whole set of enablers, from leadership management, the processes, all the way through to your impact on society and business results. I guess the bulk of the UK industry ten years ago would have been probably scoring something like 250 on that. To win a British standard quality award you need about 650 and if you get 750 out of 1,000 that is absolutely a world class company. Two comments on that. We use this throughout all our businesses as a standard tool. It is not something you shift in five minutes because in all of those elements you not only have to put measures in to take those forward, you actually have to demonstrate in a closed loop system that you have been effective in getting the results and you have to go round the loop quite a long time before you really begin to see things moving. Trying to shift the whole of industry 200 points on the BEM score in that sort of period is an extremely stiff target. If we have actually shifted the entire industry by 50 points over a four-year period, that is actually not bad. In some of our businesses we have worked on this for eight years and in eight years we managed to take our military aircraft business from a score of 250 points to winning the British standard quality award. That is moving really quite fast. I do not think you should undersell the extent of that achievement in the industry.

  35. Was that shift of 200 points the target? If so, was it a target which was meant to be met by a certain stage? If it was a totally unrealisable target, why was it the target?
  (Mr Weston) It was a stretching target. We like to set stretching targets otherwise you do not stretch people beyond their normal achievement levels to do it.

  35A. Was that built into the original programme?
  (Mr Marshall) Yes. At the beginning of the Competitiveness Challenge process some work was done measuring companies against the business excellence model; because there were no other matrices around at that time, that that might be a basis of setting a very stretched target. What we have developed to now are much more specific things. May I just mention the Marketing Centre? That was actually extraordinarily innovative. Nobody else had done anything like it in the industry that we could see and across British industry to provide such an internet based marketing tool. One of the things in a sense which it has led to is another innovation in that a number of small companies and some medium-sized ones now have a bureau in Toulouse. They need a presence there but it is not cost effective to do that on their own, so we provided a framework for that and that came out of thinking done through the Marketing Centre.


  36. If these things are so self-evidently good, why does the Government have to cough up so much money to get you to do it, the best part of £1 million for something which by your own admission keeps you in the premier league in the world? Why should the British taxpayer pay for you to get working?
  (Mr Weston) Which £1 million is that?

  37. It is just a flea bite but it is the SBAC Competitiveness Challenge initiative set up and in October 2000 DTI agreed to provide an extra £1 million over 2.5 years to attract equal industry funding. It is as though you have to get the money from the Government before you put in something yourself. I just find it a bit difficult to understand why, if it is that important and that good, we, the taxpayers, have to cough up.
  (Mr Wood) May I respond on behalf of the small and medium-sized enterprises? With regret I would have to say that had that not been there many, if not most, of the SMEs would not have woken up. The industry is going through dramatic transformation and this funding has allowed us to send a very strong wakeup call through the SME base. As somebody who has regular contact with other SMEs, with regret I have to say that had that not been there and had those initiatives not been there, there would have been relatively few SMEs who would have woken up and responded accordingly.
  (Mr Weston) That is absolutely the point. I sat for many years on the national manufacturing council of the CBI and after five or six years of really working hard around the industry on how to improve our efficiency levels, how to aspire to raise our standards of efficiency and competitiveness, we became aware on the big company circuit that we were all preaching to the converted and having a wonderful time making each other feel good in terms of sharing our experiences of where we had made progress. The real challenge was how to get out there among the thousands and thousands of small and medium-sized enterprises where it is not immediately apparent to an individual entrepreneur that he needs to be taking time from the day job, when he is running a factory with 50 people in, to start asking how he could do it fundamentally better. He is very much keeping the wolf from the door and you have to find a way of getting their attention and making them recognise that by doing some of these really simple things they can actually transform the performance of their business. Therefore the sort of things that the CBI and the SBAC and the other trade bodies have been doing together with DTI have been very much directed in that direction. I would have to say that £1 million spent on that is £1 million of Government money very well spent.

Mr Chope

  38. Mr Maciver was talking earlier about the importance of technology and that it was the critical success factor in maintaining the UK aerospace as our most successful export manufacturing industry. As somebody who has a significant part of that industry represented in his constituency in Christchurch, I should like to ask you a bit more about the CARAD programme. First of all, perhaps we can clarify what the acronym actually stands for because there seems to be a dispute in the evidence from what the DTI tell us and what the SBAC have told us. Can you tell us what CARAD actually stands for?
  (Mr Marshall) I believe it stands for a Civil Aerospace Research and Demonstration.
  (Mr Maciver) I am afraid the aerospace industry is full of abbreviations and acronyms.

  39. We have just had a third version because in the SBAC evidence you say it is the Civil Aviation Research and Development programme. The Department of Trade and Industry in their evidence say it is the Civil Aviation Research and Technology Demonstration programme and you have come up with a third one. Whatever it is, a very critical month is coming up which is March 2001, because that is the month in which the Government has said it is going to announce the future programme. You have already said how it has dropped over the years since it was initiated and it is now down to some £20 million a year. Do you have any inkling as to what sorts of sums of money are going to be available from April 2001 and what the contents of that programme might be? Considering the last programme was over five years, it seems to a layman like me quite short notice to announce the amount of money for a programme starting in April, leaving it right up until the last minute in March. Could you comment about that and more generally on the point you make in your paper that UK aerospace is living off the results of past investment in technology and this seedcorn is not being replaced at a rate which will enable the UK to retain its position in world markets.
  (Mr Maciver) To take the very broad part first, clearly in total there are large sums spent both by the individual companies through the defence channel through Government support to relevant academic research etcetera. The concern some of us have is the totality of that. CARAD is a very, very important element because it is the one direct investment in civil aviation research, small though it is. Its continuation would be a matter of very serious concern to us.
  (Mr Marshall) I am obviously not the person to answer why it cannot be decided closer to the deadline that there is going to be a continuation. I can only suppose that is because of decisions having to be taken in the Department about their budget as a whole. We certainly hope it does continue. There was a time a few years ago, indeed two or three years ago, when it was threatened with being cut altogether, one of the arguments being that £20 million does not get you anything so you will not miss it if you do not have it at all. Although as we say in our evidence it has gone down in real terms from £100 to £20 million, £20 million is still very important. It is important to emphasise that although you have different meanings of the acronym, all the ones you mentioned have the same important ingredients. That is that it is civil not military. It is for aerospace aviation and it is research and demonstration. In a sense that is a very key point. We have mentioned technology and we have mentioned development, but there is a step in between those two which is very important in the aerospace industry, which is the demonstration of that technology before you commit it to a product. If you fail to take that step in some form or other, then the risks tend to be very great and often not worth taking up. So the demonstration part is very key and a good deal of the programme as it is being spent is being put towards that aspect of it, albeit at a small level.
  (Mr Maciver) The other very important issue is, not regardless of the amount because the amount is obviously important, that to have a situation where the British Government were the only Government with aspirations to have a successful aerospace industry that was not directly engaged at all with civil research would be a very strange situation and send a difficult signal. That link, just as the link and partnership on the earlier subject of the Competitiveness Challenge, is very important as an issue. The net answer is that we do not know but we are very anxious that it should continue.

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