Examination of Witnesses (Questions 20-39)|
MONDAY 4 FEBRUARY 2002
20. I have to push you a little further, you
are drawing a comparison with France and the USA, and you acknowledge
that there is long gap between us and the Americans, surely you
have a figure? You would like to see the figure increased, you
must have a figure in your mind that you would like, whether it
is the French level or higher than the French level, where we
can help you to do what you would like to see? It is important
for this Committee to know what that figure is.
(Mr Maciver) I think you need to broaden it a little
bit. That is the focus on the direct support for civil research.
I am not trying to duck the question, what I am saying is that
where money is spent todayand there is very substantial
provision for science and technologymuch of that money
could be linked better to programmes which will have an industrial
benefit in the long term. It is very difficult to give a specific
figure. Clearly I would love to quote to you the US figure and
believe that it was possible, but that is not realistic, and nor
do I expect the problem to be resolved overnight. We would certainly
like to see some progression. I spoke personally to the French
equivalent of the SBAC two weeks ago and they were utterly astonished
to find out we were worse off than they were. They thought they
were in a very sorry situation and yet they are spending twice
as much as we do. It is very difficult to put a figure on it,
the better way to develop it is to look at how that money would
be spent, what kind of demonstrator programmes there are for the
future and try to build up a common strategy.
21. Do we get value-for-money from the money
that the government is putting in? Would you say that when you
link the money for R&T with the turnover that our equity is
far superior than the French and Germans? Do we need to use that
as a better measure of success rather than allocating for R&T
at such a base level?
(Mr Maciver) The government and the national economy
have benefited enormously from the investment of 20 or 30 years
ago in aerospace. The industry creates substantial value. It has
a positive trade balance and it takes the economy in the right
direction of creating more high value jobs, it is very much in
the area of value creation. I think the industry will stand comparison
with anyone on that. I would argue that as an investment in our
future economy it is very beneficial and the figures, which we
can go into, speak for themselves in many ways.
(Mr Marshall) If I could just add something to that.
I think the crunch also comes for companies who can undertake
that work somewhere else. If they believe that it is in their
industrial interests to have a technology or pursue it and they
cannot pursue it to the full extent possible in this country that
they might have been able to, say, 15 or 20 years ago, when the
levels of funding were much higher, and then they choose to go
somewhere else, all the consequences Mr Maciver spoke about then
follow. It is an issue of choice in a sense for making this a
competitive environment in which to carry on work.
22. I know you say in your submission that people
go abroad but how many people have gone abroad?
(Mr Maciver) I think it is very, very easy to do this.
Certainly most of the major companies like my own and those in
the middle area (less so for the smaller companies) where much
of the technology exists today, they will have operations certainly
in North America and in some cases, as in my own, in France, and
it is very, very easy to shift the focus of your long-term research
and technology investment from one country to another. It would
not impact on production or employment in the first five or ten
years but beyond that, and this is a long-term industry, there
is no doubt it would impact because it is very clear that if you
develop the technology in one country that is where you will end
up building the product. It is not fanciful at all, it would be
remarkably easy to do. I think there are a number of practical
examples of that today which, I am glad to say, so far have not
resulted in any major shift but the threat is real.
23. Finally, Mr Maciver, you have said that
you want to see greater coherence in R&T funding as between
the civil and defence programmes. Have you had any response from
the Government on this?
(Mr Marshall) I think we alluded in our evidence that
we wrote to the Secretary of State in SeptemberI think
the letter was dated 11 September, which was unfortunate I supposereally
setting out the case. What we are waiting to see, because we knew
that we were putting it into a time when government would be considering
its next round of spending, particularly the three year look,
is to see now how that turns out. Frankly, that is where we are.
Are we going to be regarded as one of the priorities or not? We
might take some comfort from the Secretary of State's recent speech
on manufacturing, which certainly did pick out aerospace as a
key sector and picked out some of the messages we were talking
about, but did not put sums of money down. That is where our plea
sits and we are waiting, essentially, on the budget round.
24. Presumably there is a fine line between
governments providing funds for research and technology and subsidising
the industries directly? Do you feel that other governments subsidise
in different ways than this country does in a way that disadvantages
you as industries in this country? Is that an issue that you think
(Mr Maciver) It is difficult to answer because the
biggest example is the United States which would claim that defence
spending was defence spending, but there is no question at all
that there has been an enormous spin-off into the civil sector.
Whether you call that a subsidy, I think they would disagree with
that term, but does it help? Of course it does. A case in point,
a very direct one, is the US plan to replace the air refuelling
tanker fleet. That would be a very direct benefit to the US industry
at a time when civil production is down. Just as in any other
industry, direct subsidy is something that is watched very closely
in the European Union and would be subject to the normal rules.
It is certainly not what we are looking for and it is not what
we are talking about. The biggest example of what you say is the
huge US defence sector which undoubtedly has a benefit directly
and indirectly to US industry in total.
25. From your point of view, it is a question
of British industry not getting enough money from government rather
than other countries getting too much money from government in
a round about way?
(Mr Maciver) Yes. If I may perhaps suggest a change
of wording. We are not looking for money to spend; we are looking
for a greater partnership. Historically all governments spend
money in the aircraft industry on research. There is very little
spent here. We are spending ourselves for the most part at a very
high level and the various reports, I cannot quote the precise
one published recently, show that this is one of the very few
industries, together with pharmaceuticals, that compares favourably
in terms of our own investment with international competition.
It is not a question of supporting our investment; it is a question,
I would suggest, of partnering it.
26. Are you also saying the key in some ways
to that if we follow the US is to pump money into military projects?
(Mr Maciver) Not necessarily at all. There should
be much greater harmony on technology between the defence expenditures
and civil, but the most disadvantaged sector today, and the most
mobile sector, is the civil sector. Much of the technology we
discussed earlier on in the context of the A400M was developed
in partnership with government many years ago. That is an example
of what happens in this industry.
Sir Robert Smith
27. Are you saying in a way that the lead time
between investment and the out-turn is such that it is very difficult
from the figures you have given us to make a comparison because
you are showing a big drop? You are showing in your figures on
page 8 how much more is spent in other countries, and yet clearly
from a simple reading of those figures we get a lot more return
for our investment because we are so much more successful here
than those other countries in turning that money into productive
capacity. Have you got figures you can give us at some point of
the historybecause I think that would be more interestingof
what you think is the lead time to get back your investment?
(Mr Marshall) The key is not only the numbers but
what it was invested in. You can see the point we were just making.
When investment was high and we were creating the technology 15
to 20 years ago in certain areas, we are now seeing that in production.
So the return on that investment is not in the year you spend
it, it is a long way into the future.
28. How did they pick them or were there other
ones we have not seen benefit from?
(Mr Marshall) We were spending at a much higher level
so there were probably technologies that were not used. There
is no doubt there is a degree of discipline that comes to bear
if money is not freely available, but I think our track record
is good in this industry in coming up with innovation. What we
are trying to do is to get that innovation into products we are
making here and not somebody making it somewhere else.
(Mr Maciver) And properly spent, which is a concern
generally. We have a good record of bringing the technology into
production. In other words, if it is done the right way we will
see tangible benefits. Without quantifying itand we can
do thatthere is no question at all we were spending heavily
and constructively 15 or 20 years ago on technology in a way and
in total that we are not doing today. A very rough rule of thumb
is that you would have to be demonstrating the technology ten
years ahead of the programme and then perhaps the programme would
startthe timescales get shorter and shorterfive
years ahead of production. These are the sort of timescales. These
programmes all pay back. They all generate profits and value to
29. You are coming up with a figure for extra
money. You are saying that if the money that is being spent out
there on academia could be spent in a more focused way. Are you
arguing that academia needs to be doing more of the industry's
development research for it, that the current pot that goes into
academic research should be more focused on development research?
(Mr Maciver) I do not think it is doing the work for
us. We carry the burden of the development and we carry a significant
part of the burden on long-term technology. It is bringing that
level up in total to a competitive level that will see the industry
continue into the future. You could argue that if all other governments
did not support that technology it makes no difference, but that
is not the case.
(Mr Marshall) It is also focusing it. It does not
seem to us to be valuable to have too many universities, if you
like, concentrating in one area of technology as opposed to creating
some focus and critical mass. At the moment we have a system which
appears to achieve more of that than the focus and we think we
can help with that if we achieve it.
30. But even further down the line academia
is the only place where speculative fundamental research can be
undertaken. Rutherford went around saying his research was useless
and he delighted in the pursuit of the useless, but many others
since then, for good or ill, have benefited from what he found
(Mr Maciver) There will always be that. And that we
do not know until we see it. Let me give you an example which
might be helpful. Aircraft are moving away from hydraulic systems
and becoming more electric. These areas are ones where a number
of companies in Britain could claim they were world leaders. We
continue to invest in those areas but there is no specific programme
or co-ordinated programme on electrical systems on aircraft today.
In Germany, by comparison, which has not been a player in this
field, they have a complete flying laboratory working on actuation
systems. If they take that business based on our technology, it
can only come from one place. It is unlikely to be taken from
the United States; it is likely to be us. That is not looking
at your Rutherford example but something slightly more immediate
where there is a high degree of activity in an economy which sees
it as a direct competitor of the United Kingdom for the aircraft
31. How do you see that decision being taken
to get that?
(Mr Maciver) It has to be taken as partners. That
is very much the purpose of our submission to the DTI. All of
that has to be allied eventually with defence spending on technology.
We have made not necessarily the only ones or necessarily the
right ones, but we have made very specific proposals as to where
money can be spent in a constructive way for the long term.
(Mr Marshall) I think you have to decide
the grounds on which you are going to stand, I think is what we
are saying. There are certain technologies and areas of the aircraft
we are particularly successful in which begin to form the high
ground. That will be the starting point for where you want to
go. It would not be everywhere but on that high ground.
32. Just quickly on the R&D monies or R&T
monies, depending how you describe it. Obviously we are still
a world leader. Do you genuinely believe that if the Government
does not come up with more money for research that we really will
be in trouble and we will lose our world advantage that we have
got at the moment? Secondly, do you believe that there is better
technology transfer between defence and civil that we are not
using at the moment?
(Mr Maciver) The answer to the first part, and you
may talk on the last part David, is that yes there is a threat.
Clearly the individual companies will assist it as much as possible,
but if we do not have a clear will to have an aircraft industry
and a strategy at the technology end which will take us there
then there is a threat. We will not get everything right, but
we must get enough of it right and we must spend enough jointly
between government and industry to ensure that we are there for
the future. You also raise the very important issue of the linkages
between civil and military. David?
(Mr Marshall) We would like it to improve. We would
like it to get back in some senses to where it has been in the
past. There has been a breakdown, frankly, in the transfer of
civil and military technology, particularly in the last five or
six years, and with the change of the Defence Research Establishment
into a company that is going to be in the private sector, I think
there must be a concern about whether we are going to create a
capability as we have done in the past with the research establishments
that work very well and produce some of the technology that we
were just talking about. I think that is one thing where we do
not know yet because we do not know how some of these new organisations
are going to work out, but it is certainly critical to our plea
that the money the Government does spend, whether it is in defence
or civil or universities, we can make a whole picture of and not,
as we do at the moment, allow them just to happen and hope that
they join up at the end, and often they do not.
(Mr Maciver) Let me give you an indication of where
we are. If you asked us or anyone else in total how much is spent
and where is it spent, we could not answer that.
33. Mr Marshall, you said something very interesting
early on to Sir Robert Smith's question about money being spent
too thinly across universities and academia. That is the first
time I heard that said in this context. I have always believed,
and ministers have been saying, that the money is focussed very
well in the aerospace technology and you are saying quite the
opposite to that. I wonder if you can elaborate on that, how many
universities? Could you shed some more light on this? I have not
heard this said before, because this is one very focussed industry
where research money has been allocated through the university
(Mr Marshall) As ever it is rather a mixed picture.
There are some parts of the industry/university relationship that
have been developed and worked very well. One company, Rolls-Royce,
has what it calls university technology centres. It decided that
there are a set of technologies it wants to pursue with universities,
it chooses a university and develops a partnership with them over
a long period. Some of them are now 10 years old. That has caused
that focussing to happen. What I am referring to is that our observation
has been that absent that kind of process it does not happen everywhere
in our industry or in others. The system tends to allow a university
if it feels it should operate in some sphere to simply do so,
apply for research grants, which may be granted. I am not saying
at an individual level they may not have a good idea, but what
that leads to is fairly small packages of work being done all
over the United Kingdom. We now have a very wide spread of universities.
I can certainly seek to illustrate that to you with some more
numbers in a written reply. That is what I am referring to. We
would like to see more of the Rolls-Royce example, not only does
it focus the university but it focuses the industry too on some
specific key technologies. Also, which would help here, is this
point we have made about linking some of the technology spend
to tangible demonstration of the technology, demonstration programmes,
which are very long term. While some money will be spent on things
that are a long way from coming to fruition some of it will be
closer to home, within a 20 year period, let us say.
34. I am just trying to get clear in my head
what you are saying about how the system is not working. Perhaps
we can explore the example you mentioned about the electric aircraft
demonstrator issue. In appendix 1 to Annex B of your submission
you talk about what support there has been round, if you like,
the development of the electric aircraft, but then properly make
the point there, which you made today, Britain has not gone as
far as creating an electric aircraft demonstrator. Can you take
me through what has stopped that happening? There has been a process
of discussion, that there are the right people sitting in the
same room at the right time but nobody said, that is what we need.
Is it that you floated it with some bit of government and you
were told, "Look, that will cost too much, do not go down
that road", or is it that somebody is saying, "No, you
are wrong, that is not what we need as far as the development
of electric aircraft is concerned". I am trying to work out
where the blockages are in the system that prevent things like
(Mr Maciver) My perceptionMr Marshall
may have a longer history of itis there is simply not that
discussion on how much money and how it is spent. In other words,
it is not a question of anyone really taking a view of what the
priorities are and looking at the coordinated effort between the
defence expenditure, the academic research, the needs of the industry
and bringing it to some form of tangible conclusion. By comparison
the very, very close relationships which existed in the past between
the government research establishments and the industry, there
is no parallel that I am aware of today.
35. What will it need to allow that discussion
to take place? What needs to happen? In a sense, what is to stop
you picking up the phone and saying, "Look, Patricia, there
is a big gap here, there is not the formula for doing it in, let
us establish it".
(Mr Marshall) In your analogy she also has to pick
up the phone to Mr Hoon and say to his department, "Will
you spend money in parallel with me?" At the moment there
is no mechanism to do that. There is no mechanism for aerospace
that there can be a joint programme in this way between the DTI
and the MoD. Then you said, why does this particular one not happen?
If you look at the total amount of funding that the DTI have been
able to make available for civil aircraftthe £20 million
a year we mention hereit would not reach, spread thinly
as it is, enough to make this a critical programme.
(Mr Maciver) There are two things that need to happen,
one is, not on all of it, but on at least some of the science
and technology spend there has to be a greater focus on areas
where there is common agreement that these are technologies for
the future in aerospace. That does not exist today. We do not
claim we have the sole font of knowledge on what these should
be but we have made, to the best of our ability, practical suggestions.
Likewise there has to be, as has just been said, a similar focus
jointly with the defence project because it is difficult to see
how we can sustain aerospace technology with a complete separation
between defence and civil, because whatever we do the funds will
be stretched to remain competitive with international competition
in this area. There is room for an agreement on the critical technologies
for the future between industry and whatever funds the DTI might
have to spend on industry, at present quite a small amount, the
science and technology budgets and the relevant research and technology
budgets in the Ministry of Defence. That is really what has to
happen. There has to be a greater focus and possibly greater spending
at least if we are to use such monies and we do spend much more
effectively than we have in recent years.
36. Before we move on to the export issue I
am in a wee bit of difficulty here, it seems that everything that
you have a bright idea about should be on the agenda. Maybe you
are the people who do not have enough focus. You have 16 projects
here, significantly without any time scale or without any budget,
I am talking about Appendix 1 to Annex B, for discussion with
government. Do you think not that is a wee bit of a big agenda
for discussion? You are going to spend more time talking about
it than you are going to get any money out of them. You say the
government should be focussed butGod Almighty!you
have 16 different items down here.
(Mr Maciver) This is a complex industry and covers
a wide span of technology.
37. You cannot necessarily expect to be world
leaders in everything, why should we necessarily reinvent the
wheel with a Union Jack round it every time somebody in Britain
has a marginally brighter idea than somebody else, where there
might well be a bigger critical mass in another country?
(Mr Maciver) You may have a point about precisely
what the number ought to be, I cannot claim I have a single answer
38. You do suffer from incrementalism here!
(Mr Maciver) Not really. The technologies we mentioned
here we pulled that together by taking the people in the industry,
people that lead the technology for our individual companies,
and these are all areas where we believe we are in a potentially
good technical position, where we have genuine capability. If
we continue to spend at the right rate we believe these are the
technologies of future aircraft and we believe British industry,
with the right level of expenditure, will participate in these
technologies. It is, very clearly, for debate, and it is not a
simple debate because some of these are difficult technologies
and in some cases, you are quite right, we might have to come
to the conclusion this is one not really worth pursuing, this
is a mainstream activity and this one we will pursue. What we
have tried to do is to give examples of what we are talking about
here. As I say, they are not easy subjects, they are difficult
technologies and that is why the whole question of research is
(Mr Marshall) I would also say they are all topics
which the industry believesthe industry that we have at
the momentare important to it in the future. If they cannot
be pursued here because we cannot afford it or we do not want
to take this mass then they are going to be pursued somewhere
else. I do not think they will disappear in importance because
we crossed them off the list is what, I suppose, I mean.
(Mr Maciver) It is also true to say that one of the
strengths of the industry is we have been able to maintain capability
across a range of the industrywe are not a niche player.
For the industry to flourish it is very important we do not become
a niche player. This is one industry where we have genuine capability
across the board in this country.
39. Do you think you could provide us with information
from these 16 items for areas, give us some idea of the ball park
figures that you think would be necessary to develop them and
the time span over which the developments should go? If you say,
for example, this would be sensitive because it would be commercial,
there is sensitivity attached to it, then we would treat it with
the appropriate degree of respect. What I am concerned about is
that you have presented us with what is to all intents and purposes
a wish list. I think we want to get prices, we want to get time
scales and we want to get a wee bit of weighting on this. My inclination
is that you will have to wait a lot longer than the time since
September 10 on your letter. They would say, "God Almighty,
they are looking for this lot". I can understand that you
have a broad range of activities but it is quite an intimidating
wish list. It might be helpful to get a time span and a wee bit
(Mr Maciver) I think we can do that. When you say
time span, some indication of when you would see this product
in service or the critical points in its development? The reality
is, this is the sort of thing that is entailed in staying in this
industry, but we will clarify that.