HC Deb 01 February 1967 vol 740 cc576-87

6.42 p.m.

Mr. Tim Fortescue (Liverpool, Garston)

I am sure that the House will be happy to turn from the troubling and somewhat formidable problems east of the Scilly Isles to the comparatively narrow issue which I wish to raise on Supplementary Estimate Class IV(7), Number E5 on page 15 of the Supplementary Estimates—the loan to Britten-Norman Limited of £180,000.

I say at once that I have no intention of being controversial about this matter or of criticising the fact that the loan has been made, the object of my intervention being solely to elicit some information from the Government about why the loan has been made, in what circumstances it was made, how the firm is getting on and what the future prospects of this very good light aeroplane appear to be.

I want very briefly to trace the history of this matter. On 19th October, 1966, in a Written Answer to a Question, the then Minister of Aviation said that an interest-bearing loan to Britten-Norman Limited of £250,000 was being made. There was no mention of what the interest rate would be. The reason for the loan was given as an expansion of the original production plan and that additional assistance from public funds was desirable. We heard absolutely nothing about this loan or about what was going on in Britten-Norman until the other day when the Supplementary Estimates were published. They say: As announced in the House of Commons on 19th October, 1966, by the Minister of Aviation, H.M. Government has agreed to make to Britten-Norman Limited an interest bearing loan of £250,000, on certain conditions … with no mention whatever of what those conditions are.

On 24th November last year, we read in the Press that a full certificate of airworthiness was to be granted imminently and that production of this light aeroplane would be four per month in the next few months. We know that the first aircraft flew on 3rd June, 1965, but that the first production aircraft did not fly until September, 1966. We know that £250,000 of public money is being lent to help this plane to get off the ground and that £180,000 is now being asked for in the Supplementary Estimate.

I have three questions to put to the Minister and I hope that he will be able to give factual answers to all of them. First, what are these certain conditions which are mentioned rather coyly in the Supplementary Estimate? For instance, what is the rate of interest? What is the time scale of repayment? We know that the loan is to be repaid in full by 1969, but is it to be repaid at that time all in one sum or gradually over the years until then? Does the Minister consider that any further loan will be necessary over and above the £250,000 after 1969?

My second question is very broad. I would like to know, and I am sure the House would like to know, why it was thought necessary, at the time, or now, to give assistance from public funds to this small firm. I am sure that there is a good reason and I am not criticising the fact, but the reason which we have been given is inadequate. All we know is that it is to aid production.

Finally, why are American engines now being installed in this light aeroplane? It started with Rolls-Royce engines, but has now switched to Lycoming engines, which are American. I have always understood that we made the finest aircraft engines in the world, and yet here we have an example of the Government's lending money from public funds for an aeroplane into which are being installed American rather than British engines. I would like to be told why that is necessary.

6.47 p.m.

Dr. Reginald Bennett (Gosport and Fareham)

I support my hon. Friend the Member for Liverpool, Garston (Mr. Fortescue) in his interest in and inquiries about this firm. It happens to be a very close neighbour of mine and I have known it since its early days, since it started, after a certain amount of crop spraying, to make the cushion craft variant of the hovercraft, and it has now branched out most gallantly into making this twin-engined Islander aircraft which I have buzzing around my ears for most of the year when I am down there.

This is an excellent little company and one thing which commends it to me and which will commend it to the House is the fact that it starts without that vast superstructure of overheads which de-devils most of our aircraft industry. It is a very worthy company and I am sure that it is worthy of the Government's support. Although the sum with which we are concerned is only one thousandth of the sum with which we are dealing in the Bill, we want to know a little more about this Supplementary Estimate. For once we agree with something which the Government are doing, but what are some of these conditions which have not been clearly and explicitly mentioned? What is the rate of interest? What sort of security has been claimed? Is the loan on the same basis as any other moneys which may be outstanding? What specific share in the proceeds of the sales is being demanded by the Government in return for this subvention? Is the money specifically for the Islander only, or is it to go into other ventures, such as the cushion craft? If so, what are the prospects which the Government have in mind for the order book of this aircraft?

Having committed the taxpayers' money to this admirable company, are the Government to give assistance to the company in promoting sales of this aircraft abroad, sales for which there must be a very ready market? If taxpayers' money is involved, the Government have a duty to assist the company in that way. These are important questions which I put in expressing my general good will and support for this extremely venturesome company, one of the few growth points in the aircraft industry for some years.

6.50 p.m.

Mr. Mark Woodnutt (Isle of Wight)

I am very pleased that my hon. Friend the Member for Liverpool, Garston (Mr. Fortescue) has raised this matter because it has given me an opportunity of supporting the Government in what they have done and of paying a tribute to this wonderful little company in the Isle of Wight. I also appreciate the tribute that he has paid to the company, and can quite understand that more information is required about the Government loan.

I can deal with the point about the United States engines. Most of the exports of this aeroplane will be to the United States, and it so happens that it will be much more convenient to put United States engines in them. This company is a small and courageous company operated by a dynamic staff.

The Minister of Aviation (Mr. John Stonehouse)

indicated assent.

Mr. Woodnutt

I am pleased to see the Minister agreeing; he has been down and seen the company. It is owned and run by quite brilliant young men, and the team of 300 employees all work with a will, not hesitating to work weekends if necessary to get the production line running. It is deserving of all the assistance that it can get. It has designed and developed this 10-seater feeder airliner, which I have no hesitation in saying will compete with any aircraft in the world of a similar type, as to price, quality and technical achievement.

The House will be interested to know, when we are discussing a figure of £250,000 in all, that of the £640,000 that this project has so far cost, the Government have contributed only £240,000. The rest has been raised by the firm, by these dynamic people at Bembridge, Isle of Wight, who do crop spraying all over the world, and ploughed everything they have made into the development of this aircraft at a time when the British aircraft industry was in the doldrums.

The aircraft first flew in 1965 and, to give the House an idea of the enterprise of these people, it flew for the first time four days before the Paris Air Show. It was taken straight off to Paris and landed there, just after the giant Russian airliner, and stole most of the publicity that the Russians would have got. As a result of this, and at the 1966 Show—and this is the point of this Government assistance—the company got an order book, with no direct advertising or publicity at all, of something in excess of 40 aircraft.

Two-thirds of these orders were for export. This is just what we want. Here is a firm in a little island off the South Coast—I usually refer to Great Britain as an island off the north coast of the Isle of Wight but that is irrelevant at present—which is really deserving of support. The company had originally planned to produce 35 aircraft a year, to which it was building up over a period.

When one suddenly gets an order book, with no direct advertising, in excess of 40 aircraft, one must aim at a bigger throughput of 35 aircraft, and, in order to aim at a throughput of one a week in a shorter period of time, the company needed this extra support and applied to the Government for £250,000. I am very pleased to see that the Government then, and at an earlier stage, when they helped with the launching costs, contributing a rather lower figure, were so willing to help this very progressive young firm—this is in spite of the fact that the Government appear to be doing their best to destroy the British aircraft industry.

This is a good commercial investment for the Government because they are getting 1 per cent. above Bank Rate for the money and it has to be repaid within a short period of time. In addition, they have a debenture on the company's assets. From the money originally advanced, half the launching costs, amounting to £190,000, they will get a levy on every aircraft sold. The Government are therefore in a good position, sharing in the profits of this private enterprise firm. If we have to put up with a mixed economy, this is the best example I can think of, with Government cooperating with private enterprise.

I see that the agreed loan is £250,000 and the Minister has put in the Supplementary Estimate a figure of £180,000 as being the amount required or expected to be required before 31st March, 1967. I understand that the company has already had £100,000 of this and that it is to put in for a further £50,000 for January, another £50,000 for February and £40,000 for March. This makes £240,000 and the balance of £10,000 it wants in April.

The requirement of £240,000 is £60,000 in excess of the Estimate of £180,000. Perhaps the first part was in the original Estimate, and if that is the explanation, then all is well. If it is not, then I hope that the Minister does not intend to cut down on the requirements for January, February and March, because in working out its cash flow the company really needs this amount of money to achieve this production throughput in order to obtain an output of one aircraft per month in the period that they have told the Government it would do so. I would finally like to say how much I appreciate the assistance that the Government have given this company.

6.56 p.m.

Mr. Robert Carr (Mitcham)

Like my hon. Friends I want to make it quite clear that any comments I make are not intended as criticism of this Government action. I have had the pleasure of meeting Mr. Britten and Mr. Norman, as well as seeing their aircraft at the Farnborough Show last September, and, like anyone else who has had contact with the company and its products, I was immensely impressed. They are not the sort of people who wish to be feather-bedded at the taxpayers' expense.

Their enterprise and willingness to put their own work and money at risk and to throw everything into the project was obvious, and it is pleasant to be helping a British company showing such enterprise and initiative. All of us must have felt very great sympathy when one of their aircraft crashed so tragically returning from a sales trip to the Continent. It was right that my hon. Friends should have asked these questions, because we should be able to maintain a situation in this House when we ask questions not only about public expenditure of which we are critical, but also about public expenditure which we feel it right to be informed on and when there is approval on all sides of the House for it.

I should like to add one question to those of my hon. Friends. Is it possible for the Minister to give us some idea as to how the help that he is giving to Britten-Norman ties in with his strategy for aiding what I may loosely call the lighter end of the aircraft industry as a whole? Unfortunately, the amount of aid is bound to be limited and there is always the danger of spreading the amount available too thinly over too many projects, even though each project may be thoroughly good and desirable. There is the aid to Handley-Page on their Jetstream, the commitment which the Government have taken over with the Beagle and there is this—all examples of aid to the light end of the industry. If the Minister can give any indication as to how this fits into his strategy of aiding the lighter end of the industry, such information will be useful to the House.

6.59 p.m.

The Minister of Aviation (Mr. John Stonehouse)

The House is grateful to the hon. Member for Liverpool, Garston (Mr. Fortesque) for initiating this short debate on a very enterprising firm. I agree with what has been said, particularly by the hon. Member for the Isle of Wight (Mr. Woodnutt), about this enterprising, dynamic, go-ahead firm.

I first saw its Islander aircraft at the Paris Air Show in 1965. I was very impressed with it indeed. As the hon. Gentleman said, it created quite a stir when it appeared there. There was a lot of interest in it, and I think that orders started flowing in on the first day. Following that, I went on a visit to Bembridge and saw something of the work at first hand so that I could advise my Ministerial colleagues about their proposals. I am glad to say that after that the Government agreed to put up £190,000 in launching aid to get this aircraft developed.

Without that aid, it is unlikely that the firm could have gone ahead, because in the City and elsewhere it was impossible for it to raise the sort of money it required on terms which it was prepared to accept. It would have been possible for it to have sold out to the United States or someone abroad. We, together with the firm, thought that inadvisable and therefore we gave it 50 per cent. of the launching aid for this aircraft.

We made the decision at that time because we believed that there were real prospects for the development of this small plane and it was thoroughly consistent with the policy which the Government adopted in October, 1964, for assisting viable, economic projects in the aircraft industry.

I thought that the hon. Member for the Isle of Wight spoilt an otherwise very good speech by saying that it was the Government's intention to destroy the aircraft industry. Nothing could be further from the truth. We want the aircraft industry in Britain to be successful. We want it to play a very important part in the export drive. But the aircraft industry now understands and I believe accepts that we cannot work out large sums of public money for projects which will not bring a return to the economy as a whole. But in this case we were satisfied that, in the long run, this would be a viable project and, therefore, deserved our assistance.

Following that decision, the firm went ahead to obtain permission for the development of a new factory and to start its production programme. By the middle of 1966 it was fairly obvious that the aircraft was attracting more support than the firm had expected. It received as many as 200 inquiries from as many as 67 countries. The first 30 aircraft due to come off the production line were sold and yet the first aircraft had not been built. This was a remarkable success story considering that aircraft in this category are usually sold off the shelf and not from brochure.

We therefore considered with Britten-Norman what could be done to assist the company in improving and expanding, its production plans. It worked out a plan with our Department for expanding production to about ten aircraft per month. Under this plan, 150 aircraft would be produced by early 1969 rather than by about the end of that year. The programme was being pushed forward to improve deliveries by about eight or nine months or more, so that customers putting in orders for the aircraft would have deliveries quite a considerable time before they would have done if the company had not had this special assistance.

This is where the extra £250,000 comes in. It is additional to the launching aid which appeared earlier in the Consolidated Fund account. As the hon. Member for the Isle of Wight said, this amount is being transferred to the company according to its requirements. The figure of £180,000 is what we estimate, in consultation with the firm, is required before the end of March this year. Of this sum, £100,000 has already been paid. If the firm has any observation to make to us about the phasing of this assistance, perhaps it will make it.

Mr. Woodnutt

The firm has had £100,000 already. It has applied for £50,000 in January, £50,000 in February and £40,000 in March. That is £240,000, not £180,000. Could it be that some of it was in the original estimate?

Mr. Stonehouse

No. This relates to the total figure of £250,000. The balance will be paid in the next financial year. The phasing has been agreed with the company. Already £100,000 has been paid. The payment of the further £80,000 between now and the end of March is a phasing of payments agreed with the firm. If it has any other observation to make to us, I hope that it will make it because we are only too anxious to give the sort of assistance which it needs to get the production line effectively established.


I am sorry to press the Minister, particularly since he is being so helpful, but this does not accord with the figures which I have. I was on the telephone to the company this afternoon. Would the Minister look at this again? If the Government give this help it is vital that it is phased in the way in which the company wants it, or the whole project will fall down.

Mr. Stonehouse

I do not think that this is an absolutely vital point. We are talking only of tens of thousands of pounds. It is not such a vital question whether the company receives the money before the end of March or in the following two or three months. This phasing has been agreed with the company. If it has any other observations to make, we shall consider them. My information does not accord with that which the hon. Gentleman has received.

I wish to deal with some of the questions raised in the debate. The hon. Member for Garston asked what were the conditions on which this money was being advanced. In particular, he asked about the rate of interest. It is a commercial rate of interest, which fluctuates according to the Bank Rate. The sums will be repaid as aircraft are sold. It will not be a lump sum repayment in June, 1969. The phasing will be from June, 1968, for the following twelve months. We shall have a protection of our investment, and if by any mischance the firm defaults on its repayments we shall have the right to appoint to the board.

The hon. Gentleman asked why we had to give aid. We had to give aid because this firm could not have increased its production programme to meet export orders unless we stepped into the breach to provide financial assistance. This demonstrates beyond any shadow of doubt what an important rôle the Government can play, not only in the aircraft industry in general, but particularly in the light aircraft end of the industry.

Hon. Members opposite who so often castigated us for our failure to help the aircraft industry should pay attention to the observations made during this debate, for which I was grateful, because they demonstrate what a useful job the Government can do, even though the sums of money involved may be small com- pared with what we have spent on other aircraft. It demonstrates how valuable it is to a small firm like this that it can get this sort of assistance from us.

Mr. Cranley Onslow (Woking)

Is it not fair to say that the conditions in point of time and the general availability of capital in which this firm found itself in need of money were not the easiest and that the difficulties which faced it were the direct result of Government policy?

Mr. Stonehouse

I do not accept that at all.

The third question asked by the hon. Member for Garston was why American engines are being installed. The Lycoming is being used because it is an engine with higher performance, and so it increases the saleability of the aircraft but does not increase its price. Therefore, from the firm's point of view, it is a very good thing to have this engine installed. Notwithstanding that, the import content of the value of this aircraft will still be fairly small and we will be able to earn substantially from the export of the aircraft.

Dr. Bennett

Is it a question of higher horsepower or is it an engine of less weight for the same horsepower?

Mr. Stonehouse

It is of higher horsepower, which will give a better performance. Therefore, from the viewpiont of the feeder airlines which buy it, it will be a more attractive proposition.

Mr. Woodnutt


Mr. Speaker

Order. We have a number of debates ahead of us.

Mr. Stonehouse

The hon. Member for Gosport and Fareham (Dr. Bennett) made the important point that this firm can be successful in producing light aircraft because it does not have a superstructure of overheads. I remember very well that when I went to the firm and was invited into the office of the managing director to discuss the proposal with him, there simply were not enough chairs when three or four of us were brought in for the discussion. The firm is operating on a shoestring. This is a very good thing. It helps to keep down the cost of the aircraft and make it attractive, particularly to customers abroad.

We are providing a great deal of assistance for the export of this aircraft, as we do to all firms. Any firm, whether or not it receives financial assistance from us, can come to us for this sort of aid and we will give it every possible help. I am glad to say that at this stage it is not shortage of orders that is any embarrassment. If anything, the problem is to get on with production, to get certification and to get these aircraft provided to customers abroad. Overall, by 1969 they should produce an export value of something like £2 to £3 million. This, although a small contribution, is a very welcome one to the export earnings of the United Kingdom.

The employment position in the Isle of Wight is marginally improved by the assistance that we have provided.

Mr. R. Carr

Can the Minister say a word about my point concerning strategy?

Mr. Stonehouse

This goes rather wider than the sum which we are discussing. However, the assistance which we are providing to Britten-Norman in no way conflicts with the wider strategy which we are adopting for the light aircraft industry. The Beagle range, the aircraft in which Short's have been involved and the Jetstream produced by Handley Page are in no way competitive with this aircraft. It fills a particular slot in the market and there is no suggestion that by giving assistance to Britten-Norman we will embarrass any of the other proposals for assistance which we have in mind.

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