§ 4.0 p.m.
§ Miss Mervyn Pike (Melton)
I am very glad to have the opportunity of raising the question of the Beagle Aircraft Company and that it has been so fortunate as to be the first on the long list of topics for debate on the Bill. I will be as brief as possible.
When I asked for this debate, I had two considerations in mind. The first, which in some respects is the overriding one, is the importance of maintaining a viable British light aircraft industry. I think that the majority of hon. Members want to see such an industry maintained if it can be done in proper economic and financial circumstances.
The second and perhaps most important consideration is the constituency interest which I have in that the Rearsby factory is in my constituency and that 300 or more people are employed there who now face redundancy.
When I put in for the debate, on Friday, it was thought that negotiations for the sale of the business had fallen through and that it was inevitable that the works would close. Indeed, a great number of redundancy notices have gone out. However, late last night I heard that there is reason to hope that negotiations which are going on at the moment may result in the firm being sold and con- 1216 tinuing as a going concern. In the circumstances, I do not wish to say anything to prejudice those negotiations or inhibit anyone who is able and willing to take over the firm and make it into a viable, going concern. I know that other hon. Members will feel the same.
However, that does not hide the fact that a great many of us are very disturbed at the Government's handling of the business in the 18 months in which they have had it under their control. Later, when this business is concluded, either happily or unhappily, we shall wish to inquire fully into the financial and managerial circumstances of the business as we know it at present. That is for the future. For the moment, our greatest concern must be for those who are now facing redundancy.
I have told the Minister about many of the questions that I wish to ask, because I want to be sure that we have the fullest answers to them. It is important to have detailed answers, because these are matters of important human concern.
The people employed at the Beagle Factory heard about their fate on 2nd December of last year. Since then, they have been living in great uncertainty about their future. Negotiations are still proceeding about redundancies. Nevertheless, the great bulk of them are reconciled to the unhappy fact that they will become redundant within the next few weeks.
The main question that I want to ask about the redundancy payments is the basis of their calculations. A great many people on the shop floor are piece workers, and their normal take-home pay is greatly enhanced by bonuses and piece-working payments. Since the receiver came in on 2nd December, the factory has been working short-time. Many people have been on 24 hours' waiting time and, in a great many cases, their wages have been drastically reduced, by £6 or more. This is a great hardship to them. They have not felt themselves able to move from their employment. For some time, on a bare minimum wage, they have been facing commitments which they took on when they felt that the future of the firm was set fair.
I have been told, though I hope that it is not right, that the basis of calculation for redundancy payments is to be the four weeks prior to notice. It will not 1217 be based upon their normal wages, but upon their wages in the present reduced circumstances. Surely it is only fair that the redundancy payment should be based on four normal working weeks before the receiver came in and the statement of 2nd December. That is only natural justice, and I hope that the Minister will be able to give me an assurance on the point.
The other problem is the delay that people have experienced in receiving their redundancy payments. The last estimation, which I received yesterday afternoon, is that it will take from four to six weeks before the payments can be made. That is an improvement on the first settlement, so we are going forward. But, in a situation where people have suffered reduced earnings and the hardships which have gone with them, I hope that it will be possible for them to have their redundancy payments before then. There has been plenty of time for the necessary computations to be made. In the circumstances, we must ask that they receive the payments as soon as possible.
The third point concerns the difficulties being encountered in agreeing a basis for the enhanced redundancy payments. I know that negotiations on this matter are continuing at top level, and, again, I do not want to interfere in any way which will have a bad effect on any solution which is reached. However, the Minister must ensure that an adequate sum is given in the circumstances.
When the right hon. Gentleman made his statement, we were given to understand that the Government would act as a good employer. If the enhanced redundancy payment amounts in many cases to less than a week's wages, that is not good enough. In the negotiations, I hope that the Minister will seek to be as generous as possible and realise the difficulties of many of the workers at Rearsby.
The other very important point concerns the 90 or so people who will be left to wind up the works if it is not sold within the next few weeks. It is important that a new wage rate should be negotiated for them. They are working on the basis of wages which were geared to full production in the factory. At the moment, those wages take account of overt me and production bonuses. If these people are to continue in this situa- 1218 tion of complete uncertainty, they should have a new wage rate. This is of special importance in regard to their redundancy pay if the four-week period is not to be calculated as being the four weeks prior to the receiver going into the factory.
Those are the four main points which I want to put to the Minister about the employees at Rearsby. Of course, what happens there is also pertinent to those employed at Shoreham, who are equally anxious that they should get as good a deal. However, if I appear to fight harder for those employed at Rearsby. I think that that is not unreasonable, and I know that my hon. and gallant Friend the Member for Arundel and Shoreham (Captain Kirby) will seek an opportunity to fight equally hard for those employed at Shoreham.
Another problem that I want to bring to the Minister's attention is that of the private contracts of some of the managerial staff. There is great worry about them now. I know that the shop floor workers are suffering great hardships and uncertainties, but the middle management is perhaps in a more difficult situation. Many of the workers at Rearsby have benefited from working there, because they have had skilled training and, if they can get suitable employment, it may be that that training will be to their advantage in the long run.
But some of those in management, who have been there for a considerable time and have had great difficulties with the ups and downs at this factory, are on private contract, and it is essential that these private contracts are honoured in full. There is some fear that they will be regarded as unsecured creditors and will have to fight for their rights. This would be the greatest of injustices if it were so.
I should like an assurance from the Minister that these people will have their private contracts honoured in full. In these circumstances, we must have great regard for the difficulties of these managers who have given so much of their time, skill and energy in trying to bring this company round.
I believe that the superannuation problem has now been settled satisfactorily. It caused a great deal of worry and anxiety, as the Minister knows. This sort of thing cannot be counted as being 1219 in the realms of good management in any way. If we claim to be good managers and employers, it is essential that, when people are faced with uncertainties and redundancy, short time, and all the rest, they should know what their rights are and what they are to receive by way of pension and benefits. I am glad that the superannuation position is now clear. I hope that these people will get their superannuation payments as quickly as possible.
I believe that the Works Committee, and particularly Mr. McCavish, at Rearsby, and Mr. Clark, at Shoreham, have acted remarkably well in the circumstances in which they have found themselves. Both Mr. McCavish and Mr. Clark have been remarkably patient and have shown extremely good leadership. They have worked very hard on behalf of their members. They have been co-operative with everybody. We owe a great debt to them and to the management, but particularly to Mr. McCavish and his Works Committee, for the way that the negotiations have been conducted. I am sure that many people on the shop floor think that they have not worked hard enough on their behalf, but I should like it to go out from this House that those of us who have been deeply involved realise how hard they have worked and can and are doing their best now.
I should also like to express appreciation to the Melton Employment Exchange, which is doing its very best to make certain that people get good jobs. This is all on the credit side.
Another matter which I want to bring up, but which I will not elaborate, because you, Mr. Speaker, have asked us to be brief, and I know that other hon. Members want to catch your eye, is the position of the suppliers to this firm. The words and actions of the Minister led all of us to believe that all was set fair both for Government support and for the future of this factory. Only a month or two before the receiver went in, the Minister was at Rearsby praising everyone for the progress that had been made and giving everyone to believe that they were sot fair for some time.
In these circumstances, it is understandable that the suppliers should believe that they had the full backing of the Gov- 1220 ernment, that this was a going concern, and that they were really within their rights and it was wise of them to give this firm the utmost credit to enable it to go on with economic production. I hope that their position will be safeguarded.
The hon. Member for Leicester, South-East (Mr. Peel), who is at the Council of Europe in Strasbourg, and cannot be here today, has worked closely with me in this matter and wishes me to speak up for his constituency, as does my hon. Friend the Member for Leicester, South-West (Mr. Tom Boardman), who is in Australia, and who was particularly concerned about the suppliers. All three of us are anxious that once this business is over the whole matter should be thoroughly investigated and that there should be a full-scale inquiry into the future of the firm. Given the right finances and the right management, I believe that there is a future for this firm.
Aircraft have already been delivered to Holland, Australia, Sweden, Switzerland, the U.S.A. and Iraq. These are all markets which have been broken into. The Beagle is a first-class aircraft. I have seen it and flown in it. I have not flown it myself. I wish that I could. I have heard from customers and from my constituents what a first-class aircraft it is. If we could get the finances and the management right I believe that we could have a first-class light aircraft industry based on this aircraft in this country.
Germany, Belgium, Japan, Zambia, Canada and Sweden have already ordered aircraft. Most of us know of Sweden's particular interest in the Bulldogs. Orders have been placed, or are hoped for, for about 100 aircraft in the near future. These are all hopes for the future. These are all pointers to show that this firm, if properly run and given a proper chance, could be viable.
After all the difficulties that it has gone through, production was picking up. The total number of Pups completed was 154, the total number of Pups delivered was 128, and the total number of sets of major components was 220. The rate of production was at least getting up to one Pup a day and one and a half sets of components every day. Bulldog production is now well under way, and the 1221 first deliveries were hoped to be made in August or September this year. Production of the B206 has ceased, but there are 11 completed aircraft in stock, plus 11 sets of parts.
With first-class aircraft on the stocks, I believe that, given the right sort of financial help, management, guidance and support, which it has not so far had from the Government, we can look forward to a viable British light aircraft industry. In the meantime, we must make certain that the employees at this factory who have worked so hard are given the greatest consideration. I hope to hear from the Minister today that the points that I have raised will be adequately met.
§ Several Hon. Members rose—
§ Mr. Speaker
A number of hon. Members have risen who have not indicated to me that they wish to join in this debate. We are on the Consolidated Fund Bill, but I must preserve each debate to a topic. It will help if the Chair knows in which debates hon. Members wish to speak. Mr. Russell Kerr.
§ 4.18 p.m.
§ Mr. Russell Kerr (Feltham)
It is a genuine pleasure to follow the hon. Member for Melton (Miss Pike), who has certainly earned the gratitude of the House for the fair-minded and cogent way that she has stated the case for her constituents and the local employees of the Beagle Aircraft Company.
The hon. Lady said that she had a constituency interest in this matter at Rearsby. Likewise, I must say that I have a trade union interest. I speak not only as a Member of Parliament who, like most other hon. Members, is interested in the economic consequences of Beagle's failure for the employees involved, but also as a member of the National Executive of the Association of Scientific, Technical and Managerial Staffs which, I am sure the hon. Member for Melton knows, is one of the unions principally involved and which recently sent a deputation to see the noble Lord Delacourt-Smith on the question of severance pay and the other entitlements of the workers, including holiday pay and that kind of thing.
The reason for the special concern of my union with the Beagle situation is that this is not just another company, 1222 but a company wholly owned by the Government—a de facto nationalised industry—and for which the Government must accept a far greater measure of responsibility, particularly concerning the workers involved, than would be the case were this a private firm in imminent danger of collapse.
Speaking for the moment for my union executive, I say categorically that we are not prepared to accept from the Government, who I repeat are the sole owners of Beagle Aircraft, standards of behaviour with regard to potentially redundant employees which, however common in the jungle of private enterprise, have so far, happily, been almost totally absent from public enterprise which, by and large, has tended to treat its redundant employees with reasonable generosity and even in one example not 100 miles from London Airport, with something rather like profligacy. However, that is another story which I am sure would catapault me rather rapidly out of bounds were I to continue it.
§ Mr. Kerr
Neither I nor the people for whom I speak can possibly accept the proposition that employees of this wholly Government-owned company can be treated in the cavalier way in which many thousands of employees who have been made redundant by commercial failure, or mergers, or take-overs, or whatever, have been treated in the private sector of industry.
As we see it, when the Government take over a concern like Beagle they are doing much more than acquiring a commercial interest in a company about whose commercial future they can afford to be relatively indifferent. In addition to hazarding public money by investing in this type of commercial enterprise, the Government are accepting certain obligations, some legal, but for the most part moral, which mean not only that contractors and others who supply the firm with goods and services, know that they are dealing with a company backed by the resources and integrity of the Government—what my right hon. Friend the Prime Minister would, I am sure, call a "copper bottomed" proposition were he able to be with us this afternoon—but, also, that employees who make the 1223 decision to go to work for this company take this element of guarantee into consideration when they seek such employment.
Without this apparent security, I have little doubt that many hundreds of Beagle employees, and particularly those who joined the company after it was taken over by the Government three years ago, took very much into account when deciding about the nature of the firm which they were joining, and also contrasted the relative security of this type of employment with other possible job opportunities which they forgo when they agree to accept an offer of employment from Beagle.
That brings me to the question of severance pay and other entitlements of those who have been threatened with redundancy. As the House probably knows, the Government have informally intimated their intention of making available a sum of money for distribution to employees as enhanced severance pay. It is understood throughout the company that the sum of money mentioned by the Government is £75,000, though there are rumours abroad that if both their arms are twisted half way up their back the Government may be persuaded to provide as much as £100,000 for this purpose.
That higher figures sounds quite generous, but, in fact, it is nothing of the kind. After employees' entitlements have been met, including the proper amount of notice, or money in lieu, due to them either under the Contracts of Employment Act, or under individual contracts, it is my union's estimate that the rumoured £100,000 pay out by the Government will result in about one weeks extra wage or salary for the employees concerned. We hope that we are wrong in our figuring, but that is how it seems to us at the moment.
If that is so, we say that it is a quite disgraceful way for the Government to behave in a situation where their responsibility is total and complete, and doubly so at a time when astronomical sums of public money are being lashed out to subsidise one and another section of private industry in which the Government neither have, nor have claimed, any equity.
I should be out of order if I were to refer to the activities of the I.R.C. in 1224 this debate, but if the tight-fisted attitude which it appears likely the Government will take in regard to the Beagle employees, their own employees in this case, is contrasted with the profligacy which they have shown towards major private enterprise which has been engaged in merger and take-over operations in the recent past, I can understand the reports that Mr. Arnold Weinstock, and others of his ilk, have been "laughing all the way to the bank".
I can only hope that the Labour Government will get some small compensation for their generosity, in the shape of a lifelong promise of support from Mr. Weinstock and his friends that, come heaven, hell, or high water, the Government have their support.
§ Mr. Kerr
Only close notes.
The Government's last word has not been heard, and therefore, while there is still time, I should like to appeal to them to face their responsibilities. If, as I hope, they decide, against their present intention, to keep this company in existence, which, as the hon. Lady said, will involve a major reorganisation and perhaps a major change of management, this will be the best solution of all. But if this is not now a serious possibility, after all that has happened under the present management, then we, as responsible Members of Parliament, have the right to demand that the employees affected are treated with consideration if not generosity. Anything less would, in my view, be a betrayal of those who put their trust in the Government.
§ Several Hon. Members rose—
§ Mr. Julian Amery (Brighton, Pavilion) rose—1225
§ 4.26 p.m.
§ Mr. Hector Monro (Dumfries)
I rise to support my hon. Friend the Member for Melton (Miss Pike), who has put the case very well from the point of view of her constituents—the dedicated aircraft workers who now, unfortunately, are likely to find themselves redundant.
I want to look at this issue more in the context of the light aircraft industry. I have always been a great supporter of light aviation, and, therefore, it grieves me to find Beagle in the position in which it is now, although I am not surprised, having been to both Rearsby and Shoreham. At this stage, I am not going into the details of the financial situation, because I am sure that this will be investigated later.
I think we accept that Beagle arose out of a small company, but that perhaps it grew too quickly, and now we find ourselves going into the 'seventies without a British light aircraft capable of reasonable production in relation to the potential market. The world market is doubling every five years, and there could be upwards of 1 million light aircraft in the world by 1980. I am talking about light aircraft valued at less than £12,500.
Why have we failed to compete in this market? I think that primarily we must refresh our memories of a particular paragraph of the Plowden Report of 1965, which said:Manufacture of light aircraft ought to be well suited to the aptitudes and resources of British industry. The market is buoyant, the sums at risk in development are not excessive, and lower wage rates should give British manufacturers a marked initial advantage over their American competitors.We must not look at this too much with hindsight, but the Government accepted that hook line and sinker, though I regret to say they did not appear to follow it through, and, therefore, must accept responsibility for the position as we see it today.
They purchased the Beagle Aircraft Company, which was then producing good solid aircraft which were rather expensive to buy and to fly. I have flown the Airedale for many hours, and I have found it an excellent and reliable plane. It was one of the last designs of the old Beagle Company. The 1226 Government should have realised—and this is important to my argument—that it is no use setting up a light aircraft industry without giving encouragement, however modest, to the operators of British aircraft and equipment, and this includes radio equipment, because it is devastatingly expensive, and in relation to the total cost of a light aircraft this, more than anything else, probably puts off purchasers.
I accept that there is an import duty on foreign aircraft, but we pilots look very jealously at European countries such as France and Italy which give generous incentives to those operators who fly aircraft made in those countries. I think they realised, and we ought to have realised years ago, that a healthy home market is vital to the production of light aircraft. It is absolutely so in Britain as well, and it is sad to recall that it was the present Government who removed the petrol tax rebate which was very valuable to light aircraft operators.
I wish to make some comparisons in relation to the Beagle position. Jodel, in France, has 120 workers yet it produces 200 light aircraft a year similar to the Beagle. The French Government give substantial help to the operators. In Italy, Oscar has 80 workers who, by this year, will be producing 80 aircraft per year. Yet Beagle has upwards of 1,000 workers and has now produced not a great deal more than 100 aircraft.
Looking at this very much in the context of comparable countries on the Continent, there are also the Cessner and Piper in America, and Rallye, in France, are parts of enormous empires, but I do not think they are strictly comparable with what we are talking about today.
But under the present management, Beagle designed the Pup and continued developing the 206. I have flown them both and I am very impressed with the Pup, though eventually, if this was to be a viable aeroplane, the four-seater would be the one to develop. I do not think that one can survive indefinitely with what is only a training aircraft. People who can afford a modern aircraft want a four-seater for touring purposes and communication. The Pup was a delight to fly and was fully aerobatic, which is rare among modern light aircraft; and, whilst it did have its initial snags, that 1227 was not anything to be critical of in a new design. They were principally problems with the canopy and the wheels and have been overcome.
I think that what could not be overcome was the multiplicity of parts. I am told that the Beagle Pup has perhaps one-and-a-half times as many parts as a comparable American plane, so it is perhaps this cost which defeated the company. It is certainly one of the reasons why we have had disappointing production.
But now that development costs can be written off—I note the expense to the taxpayers—surely there can be a future for the possibility of another company purchasing the rights to carry on production of this aircraft. I urge the Minister, through his help with the receiver, to do all he can to see that a sale is finalised, because it is to the interest of all of us as taxpayers that this should happen.
The Minister must also realise that if the Beagle Company is purchased by another company it is essential that he take complementary steps to see that the operators of British aircraft and equipment are given incentives and encouragement to use British equipment. We also want to think, in terms of the possible market for light aircraft, of what other aircraft are being built in the United Kingdom. Very few aircraft are being built in comparison with the market. The Britten-Norman Nymph, the Condor—which is a lovely plane to fly—and Luton are all producing light aircraft in very small numbers. There is an air tourer which is now being built in New Zealand and reassembled here.
If purchasers were found for Slingsby and Handley Page we cannot give up hope of finding a purchaser for Beagle. We must try to make Beagle a continuing enterprise for a while longer to effect a sale both at Rearsby and Shoreham.
There are after all many aircraft on the production line—the B206 and the Basset which we have produced. We have sold 40 civil offers and 22 Bassets and I understand there are 17 on order. Again, I hope that the Royal Air Force has not forgotten that we have a British light aircraft industry and more so in relation to the Pup and the Bulldog. After all, I understand that we have 1228 actually delivered 121 Pups and that there were 276 on order, many of those for export. We do not want to forget that, either. There are 58 orders for the Bulldog for Sweden and 13 for other countries.
Where does the Royal Air Force stand in all this? It has stood on the fence. It is an exceptional training aircraft and the Chipmunk must surely be obsolete by now. Has it written off the Bulldog entirely? I hope not. There are substantial assets at Rearsby and at Shoreham and I hope that this will tempt another company to take over Beagle.
The nation has put a lot of cash into the Beagle enterprise and equally important into aviation engineering. We have produced an aircraft which has been easy to sell and have had first-class test pilots selling these aircraft throughout the world; and they have sold well because they have handled so well in the end. At the same time, Britain has always had a very high reputation for its design of airframes, but we fall down on finance and production.
That was not the fault of the workers in the constituency of the hon. Lady the Member for Melton. The fault was that organisation, and help from Government sources did not materialise. I think that the climate is right to make every endeavour to keep a light aviation industry in this country. We must give incentives to operators. I impress upon the Minister—and I think that this is the crux of the issue—that there should be encouragement for aviation in this country and for British construction.
I hope that the Minister will realise that, somehow or other, in the interest of the taxpayers, as well as the aircraft industry, he must make one last effort to find a purchaser for this company.
§ 4.39 p.m.
§ Mr. Robert Howarth (Bolton, East)
I intervene briefly to express my concern at the developments with regard to the Beagle Aircraft Company. I begin by commenting on three features of this short debate so far.
First, I am sorry that speakers subsequent to the hon. Lady the Member for Melton (Miss Pike) have not had the benefit of hearing both my hon. Friend the Parliamentary Secretary and the 1229 Opposition spokesman. It would have been useful to the debate if they could have been heard before it concluded rather than, as I gather, right at the end.
The hon. Lady, who was fortunate to obtain first place in the Ballot—I dread to think what would have happened if she had been placed No. 15 in the list—criticised the Minister for making optimistic statements in the summer and she feels that subsequent developments contradicted what he said then. She should look to some of her own hon. Friends who have, in my opinion, been knocking Beagle very badly for a year or two now. I have taken part in several debates in which lion. Members opposite made remarks which were not at all helpful in the struggle which Beagle was having. I wish that the hon. Lady, and some of those hon. Members whom she appears to be representing by proxy, had at that stage stood up for the company and the work which it was doing.
My hon. Friend the Member for Felt-ham (Mr. Russell Kerr)—he has had to leave the Chamber—spoke of the Government's direct responsibility. My comment to him is that it was the Government vv ho, much to their credit, rescued Beagle in the first place and spent many millions of pounds of public money on the company. It was a step which I and other hon. Members urged them to take. I am sorry that the Government have now decided not to give support in the future, but it is worth remembering that, but for the Government's earlier action, Beagle would have gone out of existence some time ago. Tribute should be paid to the Government's decision and their initiative at that time.
It may well be that the management was at fault. Perhaps the Company's policy in the models it went for, at least initially, was in error. It is hard for me to judge, not being an expert in the way the, hen. Member for Dumfries (Mr. Monro) is, being a pilot. We can all be wise after the event, but I consider that tribute should be paid to the support given by the Government to Beagle at least up to this time.
§ Sir Douglas Glover (Ormskirk)
I have listened to the debate with a good deal of fascination. Why should the Govern- 1230 ment be congratulated on having taken over a company which, apparently, was going out of business, and for injecting millions of pounds into it, when it is now going out of business?
§ Mr. Howarth
I and other hon. Members urged the Government to do it because, as the hon. Member for Dumfries said, we believe that Britain should try to carve out for herself a place in the manufacture of light aircraft. There are other companies, one of which is quite successful. It would be most regrettable if this company were to go out of existence. With the sort of growth about which the hon. Member for Dumfries told us—it is well known to me, too—to contract out of this field is short-sighted.
The investment of millions of pounds in Beagle by the Government has given Britain a first-class aircraft. Even the B206, the twin-engined aircraft, was in many ways a highly successful, sophisticated aeroplane, though it took on the Americans in precisely the field in which they are dominant. That, undoubtedly, cost the company and the taxpayer a great deal of money, but having flown in it, at least as a passenger, I find it a very attractive and comfortable aircraft, and it has sold in export markets against strong American competition.
It is particularly in the design and production of the Pup-Bulldog, the single-engine aerobatic aircraft, that Beagle has come up with a first-class aeroplane and one which has already been proved to have a tremendous potential, able in the long term to bring quite a good return to the company and to the country as a whole. It is worth considering for a moment the success of the Britten-Norman company, mentioned by the hon. Member for Dumfries. This company has had Government support, by the way. [Interruption.] I think that at one stage it allowed the company to continue when, without that help, it would have been in great difficulties. As with the Pup and the Bulldog, that company has found the right part of the market, as we have seen from its success in the Britain-Australia race, designing a first-class aeroplane and producing it in large numbers for export.
As I said at the outset, but for Government support, the Beagle Company would have failed long ago.
I join with my hon. Friend the Member for Feltham in asking my hon. Friend 1231 the Joint Parliamentary Secretary to uge his right hon. Friend to reconsider the decision not to continue supporting the Beagle Company. I reckon that I may do that as a Member on this side who believes in a partnership between Government and industry—I think that the popular word at the moment is "interventionist"—rather in contrast to the views of some right hon. and hon. Members opposite. I look forward with interest to hearing what the Opposition Front Bench spokesman has to say on the question, unless he chooses to skip round what might be an ambarrassing subject for him. There is a good measure of ambivalence on this topic opposite. There are hon. Members who talk, as did their spokesman at the weekend, as though we ought to leave the market forces to work out their own and the nation's salvation.
In the circumstances, I cannot understand how hon. Members opposite can still urge the Government to continue supporting Beagle. We on this side who believe that, if a case can be made for Government support to a company which is important in the national interest and which eventually can give a return on the money, can urge the Government to reconsider their unfortunate decision and, one hopes, give support to Beagle.
The bill mentioned was £6 million. I understood that it would be spread over a period of years, so that it would not literally be a bill for £6 million deposited at the Treasury in one go. It might well be spread over three or four years, which makes the amount of money much more acceptable.
I can only hope that my hon. Friend will look again at his calculations. I hope that the Government have taken into account both the good export prospects of this aircraft and—I am not sure that this is often taken into account at the Treasury—the import saving which will result if the Pup and Bulldog particularly, and the B206, I hope, continue in production. Without these aircraft, we shall have to buy foreign aeroplanes for the various requirements of the Royal Air Force and private owners, which would be extremely regrettable and, in my opinion, bad business.
I believe that, in the long term, there can be a return on the money already 1232 invested in Beagle and on the money now requested to enable the company to keep going. On every count, therefore, I strongly urge the Minister to look again at this request for support for the Beagle Company.
§ 4.48 p.m.
§ Mr. Julian Amery (Brighton, Pavilion)
I apologise for not giving notice to the Chair that I wished to intervene in the debate. Some of my constituents work in the Shoreham Beagle factory, but I had not intended to intervene until I listened to some of the speeches already made, at which point I felt it my duty to say a few words on this subject.
I had a good deal to do with the beginning of the project. I persuaded the Royal Air Force to take it on. I flew in the prototype; in fact, in one of the prototypes the day before it crashed, resulting in a fatal accident. I thought that both marks, the two-engine and the single-engine, showed great promise, and the sales and orders since confirm that that was so.
I agree with the hon. Member for Felt-ham (Mr. Russell Kerr) that, if the company is to be wound up, it is the Government's duty to see that the people who work in it have proper treatment. But I wonder even today whether we should not persuade the Government to look again at the whole question.
I have been very critical of the present Government's policy towards the heavy, expensive range of aircraft, the cancellations which took place early in the lifetime of this Government, of the TSR2 and P1154, and so on. I think they made great mistakes, but they based themselves on the philosophy in the Plowden Report. One of the things that that report dwelt on was that we had played a leading part in the development of light aircraft and that this was one of the ranges of aviation in which we could still play a world rôle. I did not agree with a great deal of the Report, but that was a sensible comment.
My own impression and information is that the Ministry of Technology felt strongly that we had a part to play in light aircraft and that Beagle was an instrument through which we could reassert the lead which we once had in this range. It was on the initiative of the 1233 Ministry of Technology that the Government and the Treasury were persuaded to take or Beagle when it first got into difficulties. My regret is that the Ministry of Technology no longer seems to be in charge of the project and that the Treasury has reasserted its control.
Whether one is thinking of public enterprise or private, when one is dealing with aircraft, even with light aircraft, the period over which one builds up sufficient sales to reach a break-even point is a long period. One must take a risk and back one's project, which will often cost more than one thinks. Having gone as far as they have—both the Conservative Government, when they persuaded the Royal Air Force to start adopting Beagle, and the present Government, when they decided to take over control of the works themselves—having put their hand to the plough, they should go on.
If they did—it is only a question of the cash flow which is at stake—for another two or three years, if they ran the risk, I think that they would find that they could look back on something of which they could be proud. As it is, they are withdrawing far too soon, at a point when the hopes which have been set on this aircraft have not been disappointed, when it has, technically, proved a great success, when the order book is improving markedly and when there is every chance of making a great British achievement in a field in which, traditionally, we have been leaders.
§ 4.53 p.m.
§ Mr. Fergus Montgomery (Brierley Hill)
I agree with my hon. Friend the Member for Melton (Miss Pike) that this is an unfortunate business. I could be forgiven, I think, for giving a wry smile when the hon. Member for Bolton, East (Mr. Robert Howarth) was speaking proudly of how this Government had rescued Beagle Aircraft. If this is the way that this Government perform their rescues, then, with this Government as a friend, who needs an enemy?
My hon. Friend spoke movingly about the employees of Beagle who live and work in her constituency. I should like to say something about the people who are owed money by this firm. This was touched on by the hon. Member for Feltham (Mr. Russell Kerr), who used 1234 a phrase of the Prime Minister's about "copper-bottomed guarantees". So far as the creditors are concerned, there seems to be too much bottom and not enough copper in the guarantees so far. It is a plea for the creditors that I am making today.
A firm in my constituency was a major sub-contractor to Beagle Aircraft. It granted a great deal of credit to the firm. When the Minister became virtually the sole shareholder, the firm believed that there could be no doubt about the financial credibility of this firm. It is alarmed now, because it is not clear whether the Minister will meet his obligations.
I would remind the Minister that an agreement was signed on 12th December, 1966, in which the Minister solemnly said that he would take over all liabilities, with certain exceptions which were clearly noted. If liabilities have accrued since the date of that agreement, I think that the Minister has a responsibility.
Because of the concern felt by the firm in my constituency about the amount of money due to it from Beagle Aircraft, I wrote to Lord Delacourt-Smith. I am afraid that his reply can only be described as "naÏve" All he told me was that I should tell the firm concerned to register its interest with the receiver and manager, and gave me the address. Any firm will immediately register its interest: we did not need Lord Delacourt-Smith to tell us that.
But much more to the point was the article written by the hon. Member for Bosworth (Mr. Wyatt) in the Daily Mirror, under the title "No Way to Run a Business". The hon. Member, with whom I do not agree very often, said:The Beagle Aircraft Company is owned by the Government. That is why suppliers, including a company of which I am chairman, were willing to give it credit.It never occurred to me that the Government would dishonour the obligations of a company which it owned. Otherwise, when the Beagle Aircraft Company was slow in paying its debts, as it was, supplies would have been put off.Now, however, the Government is hiding behind the fact that Beagle Aircraft is a limited company whose affairs are in the hands of the Receiver. Therefore, according to the Minister of Technology. Anthony Wedgwood Benn, it will pay its debts only if it has any money left after the Receiver has sorted things out.1235No respectable company would fail to meet the debts of a subsidiary. For the Government to do this is to follow the worst business ethical standards, not the best.Mr. Benn is very keen on the Government getting more and more mixed up with industry. With this example in mind, he will find that in future suppliers will be inclined to say, 'Cash with order' or no dice.And that is no way to run a whelk stall or a business.I do not agree with this Government or any Government getting more and more mixed up with business. I do not believe that this Government could even run a whelk stall, but I agree with the general tenor of that article; this Government have a moral responsibility to the creditors of Beagle Aircraft. These debts have been incurred by a company in which the Government are the sole shareholder.
I congratulate my hon. Friend the Member for Melton on initiating this debate. I hope that, after the Parliamentary Secretary has replied, I shall be able to congratulate the Government on doing what is honourable. I hope that they will not leave these creditors, who gave credit in good faith, to whistle for the money due to them.
§ 4.58 p.m.
§ Mr. John Farr (Harborough)
I, too, would like to congratulate my hon. Friend the Member for Melton (Miss Pike) on her initiative in raising this matter. This is an important subject to her and her constituents and, in a lesser degree, it affects my constituents, because a number of Beagle aircraft workers live in and around my constituency. My hon. Friend clearly dealt with the problems of any redundant worker, which my hon. Friend the Member for Brierley Hill (Mr. Montgomery) also mentioned—the problems which will arise should the company be wound up and the debts remain outstanding.
I should like to take a more hopeful view. It is my earnest wish, as it is of hon. Members on both sides, that Beagle should continue. The ideal outcome is the possibility—I understand that it is a possibility only—of this company being taken over by a British company and continued as a producer of British aeroplanes.
There are faults in the past history of Beagle. But, as my hon. Friend the 1236 Member for Melton said, they certainly do not lie with the work people. They have done a first-class job for Beagle—both at Reasby and at Shoreham. Should the worst come to the worst and the company fold up, their interests must be fully and properly protected.
My hon. Friend the Member for Dumfries (Mr. Monro) gave some illuminating statistics of the labour forces in comparative companies on the Continent of Europe. He put his case in such a clear way that it seems apparent to the layman that real economies in the labour force of Beagle will have to be made if this is to continue as a viable company in the production of aircraft.
§ Mr. Robert Howarth
Many hon. Members would not accept the comparison which the hon. Member for Dumfries (Mr. Monro) made with the companies he mentioned on the Continent. I understand that the aircraft produced by those companies do not compare with the sophistication of the Pup and Bulldog and that they are relatively simple aircraft.
§ Mr. Farr
I was about to say that wherever the fault lies it certainly does not appear to lie, from what I have learned from my constituents and my hon. Friends, with Beagle Aircraft. It has been demonstrated that its planes are first-class. Perhaps they are a little too sophisticated in terms of the number of parts required to assemble them. However, they are first-class, reliable machines for which it has been proved there is a good market at home and overseas.
I want to discover where the fault lies for Beagle's temporary failure. What has been the rôle of the Government in this affair? As far as one can discover, in 1966 the Government spent a lot of money taking over a big debt which the company owed to Pressed Steel. That debt amounted to about £3.3 million. In July, 1968, presumably after receiving advice in depth, they decided to fully 1237 acquire the company at a cost of just over £1 million and to discharge certain additional debts which the firm had incurred, and that cost a further £½ million, making a total of about £6 million of public money invested in Beagle.
Whether or not that action was right I am not prepared to say. But if the Government were prepared to invest £6 million of the taxpayers' money in Beagle Aircraft only 18 months ago, something must be wrong when, only 18 months later—this is merely a day in terms of aircraft production—they suddenly put up the, butters and say, "No more".
Either the advice which was given to the Government in July, 1968, was inadequate and failed to look sufficiently far into the future, or the advice which they have received today is inadequate and fails to look far enough ahead. There must be a fault somewhere when only 18 months after a massive injection of capital the Government have declined to carry on with the project and have decided to wash their hands of the whole thing.
There is no doubt that there is great confidence in the types of aircraft Beagle produces. I hope that the present negotiations will be successful, and I make a suggestion which I trust the Minister will pass on to the Chancellor of the Exchequer. If this company, at this twelfth hour, so to speak, is saved within the next few days and continues manufacturing as a major British light aircraft firm, will the Minister recommend the Chancellor to agree that for five years the import duty on foreign light aircraft should be doubled so that Beagle is given a breathing space?
§ 5.5 p.m.
§ Sir Douglas Glover (Ormskirk)
It is the tradition of the House for hon. Members taking part in a debate such as this to declare any interests that they may have. I have an interest to declare. It is that I know nothing about the aircraft industry.
After what the Government have done, it would be wrong and not in the national interest for them to allow Beagle Aircraft to close down. I cannot understand why, when the State took over an organisation such as this, the debts owed to Pressed Steel, worth £3 million, were immediately 1238 paid. Considering that creditors are often paid, say, 2s. in the £ before a viable, alert, free-enterprise organisation takes over an organisation, thereby saving itself a lot of money, why the State felt it incumbent to shoulder this amount of debt I do not know; but perhaps that is beside the point.
What I have heard in previous debates on the aircraft industry is akin to what has been said today. For example, when my hon. Friend the Member for Dumfries (Mr. Monro) pointed out the basis of the light aircraft industries of Italy and France, the hon. Member for Bolton, East (Mr. Robert Howarth) immediately rose to declare that Beagle aircraft were much more sophisticated. Perhaps that is part of the trouble and, to be blunt with my right hon. Friend the Member for Brighton, Pavilion (Mr. Amery), he is not without blame in this respect.
I have never had the nerve to intervene in an aircraft debate before. Having heard these debates for about 17 years, I am convinced that the whole industry is geared too much to making what is acceptable to the R.A.F. When producing a light aircraft it is, therefore, not a question whether it will be suitable for Mr. "Joe Soap" in which to travel from A to B, but whether the R.A.F. will place an order for, say, 50 machines.
I suggest that in Beagle aircraft we have what in motor car parlance is the Rolls-Royce, or at least the Rover 3.5. These are de luxe civil private aircraft. In the 'twenties and 'thirties the motor car industry was producing supersophisticated models. Eventually, Henry Ford broke through with a motor car for the masses, and that is what is required in the light aircraft industry. The masses in Europe and elsewhere will buy an aircraft such as this if a break-through can be achieved.
We have heard how Beagle aircraft are capable of aerobatics. If anybody persuaded me to buy an aircraft the last thing I would want would be to loop the loop. I would want to travel on an even keel. In other words, half the fault lies in the fact that we, who for years had a reputation for producing quality—history will show the quality of Beagle aircraft and whether sales come in—are producing in this firm aircraft in the luxury class compared with what is 1239 being produced by the company's competitors.
This is exemplified by, for example, what is being produced by Britten-Norman. I understand that this company is producing a superb light aircraft that is no more than a truck with wings. It is simple to fly and can land almost anywhere. It has no sophistication and, therefore, suits the unsophisticated market. It is selling well and, I believe, has a good future.
Of course, we do not take the same pride in that as in aircraft produced by the Beagle organisation, but we have to bear in mind in this changing growth of the mass market that we are getting out of a market in which people want Rolls-Royce or Daimler limousines and into one where they want jalopies, mini-minors and Ford T models.
My hon. Friend the Member for Dumfries told me that the average production of these aircraft in Italy works out at one aircraft per man per year. That gives an indication of the sort of atmosphere in which the industry should work in producing private small light aircraft. If we want to produce an aircraft which will meet ancillary needs of the R.A.F. with a semi-military correlation, it is a totally different problem. It is completely non-viable in the civilian field, because it is too expensive and will have to be subsidised by the State, as no one will want to buy it with the exception of a few Greek shipping tycoons who can afford to do so. It is beyond the market demand.
What seems to have gone wrong with the Beagle organisation? When I am told that it has an employment figure of 1,000 compared with companies in France and Italy producing one aircraft per man, there must be something wrong with the basic thinking of the company. This does not come back purely to the management and whether the factory is run efficiently, but to the basic thinking of what it is that the company is trying to do. The Government here have a long-run responsibility. They took this organisation over and took on a lot of debts. It would be a disaster if, having put money into it and the organisation having a reasonable chance of breaking through, when a company is supposed to be independent but is in fact Government-owned, it is abandoned.
1240 Government guidance is very important, but all the time there has been to much thought that what is being produced may be of some use to defence or the structure of the R.A.F. and not nearly enough thought has been given to how to get into the growing and potential mass market which has to produce a very unsophisticated piece of machinery at the lowest possible price and the fewest man-hours in construction and the lowest cost of maintenance with the fewest spare parts.
I therefore hope that the Government will change their mind and allow the Beagle company to go on. I hope that they will give it a remit to go for successful production of aircraft which is less sophisticated than it has been in the past.
§ 5.14 p.m.
§ Mr. F. V. Corfield (Gloucestershire, South)
I, too, join in congratulations to my hon. Friend the Member for Melton (Miss Pike) for raising this matter, which is of great concern to employees and those who represent them, to those who are interested in light aviation in particular and aviation generally, and, of course, to those who, as all of us have, have a responsibility for overseeing Government investment.
We are, however, to some degree inhibited this afternoon from pursuing this matter in the detail which may well be appropriate in a week or two for fear that something may be said which could prejudice the purchase of this company by an outside body. I am bound to say that, although I have been in touch with several people who are interested, it would not be fair to hold out any great hope. I think that it is remote, but even though it is remote let us hold on to the hope and trust that it will materialise.
I was fascinated by the speech of my hon. Friend the Member for Ormskirk (Sir D. Glover). I understand that the aircraft in which purchasers are interested is a more sophisticated model, the Bulldog rather than the earlier marks of the Pup. The reason is that the earlier models of the Pup—the Bulldog is technically a Pup but let us consider them as separate aircraft for the purpose of the debate—have been selling as mark I for £4,350 and mark 2 for £5,350. There has been a failure to recognise that it costs over £6,000 to produce each item. 1241 What sort of costing and management that is seems beyond my comprehension.
I very much take issue with the hon. Member for Bolton, East (Mr. Robert Howarth), who suggested that hon. Members on this side of the House had been banging the product. I refer to the Committee stage of the Industrial Expansion Bill, when my hon. Friends the Members for Worthing (Mr. Higgins), Eastleigh (Mr. David Price), Cirencester and Tewkesbury (Mr. Ridley) and others put forward perfectly responsible and valid criticism and questioning of the commercial wisdom of this operation. It must surely be accepted that the commercial wisdom of undertaking something is quite different from the technological possibilities or desirability.
If money is no objection almost anyone can produce a perfect article in his field. It must always be a question of what looks like being a commercial runner. This is our criticism. From information that reaches me I have to warn the Minister that very serious questions will have to be answered. The present is not the time for that, but I ask the hon. Gentleman to find for a future occasion what commercial advice was taken.
The hon. Member for Bolton, East said that the Government should be congratulated on their initiative, but they have done the very worst possible thing they could have done. They have supported And rescued the organisation and are paying off all the creditors and acquired this company to get it going to enable 128 Pups to be delivered, largely abroad. Who is to back them up? What is to be the reputation of the British aircraft industry as a whole if parts cannot be supplied in two years' time? What arrangement have the Government in hand for ensuring that the back-up of this aircraft can be maintained?
This is essential to the sale of the Pup and to the reputation of British business and the aircraft industry. I hope that the hon. Gentleman will be able to tell us that an organisation will be kept going to back up the aircraft already sold. I also remind him that if there is a possibility of this enterprise being sold it rests very largely on the continuance of the Swedish Air Force order. I hope that he will be able to give an assurance that every effort will be 1242 made by the Government to ensure all the help the company needs in retaining that Swedish order for 56 Bulldogs with an option on a further 45.
I remind the hon. Gentleman that in the Standing Committee on the Industrial Expansion Bill, the then Joint Parliamentary Secretary said:The Ministry will be entitled to nominate the chairman, managing director and financial director, which, in effect, gives the Ministry a majority on the Beagle board."—[OFFICIAL REPORT, Standing Commitee E, 14th March, 1968; c. 368.]It is clear that, in addition to its being the sole shareholders, it had a legal right to nominate the whole lot. What is abundantly clear is that the Minister had managerial control beyond responsibility for seeing that managers of competence and ability were appointed to carry out the Ministry's policy in regard to the running of the company.
I want to refer back to the statement which the Minister presented to the Standing Committee at the instigation of my hon. Friends giving an account of the situation of the Beagle Aircraft Company as he saw it at the time it was proposed that the Government should buy it. At that time the total value was estimated to be £1,475,000. We were told that the total Government finance required for the transaction was estimated to be £5.6 million, the purchase price together with interest being £1.1 million, and Government payments up to 31st March 1968 £2.5 million and further Government payments £2.0 million.
The Minister further said that it was envisaged that the fluctuating balance of working capital would be provided by bank facilities. The banks were being invited to extend credit on the face of the Government ownership. Again, I would like the Minister to tell us if there is a guarantee that the banks debt will be met.
The Minister then told my hon. Friends that the undertaking's estimated further cash flow requirements up to a break-even point in 1972 were spread as to April 1968-March 1969 £1.25 million, 1969–70 £0.75 million, 1970–75 £0.5 million—total, £2.5 million.
I want to emphasise the point made by the hon. Member for Feltham (Mr. Russell Kerr) that this company was a de facto nationalised corporation. Those 1243 who extended their credit, as well as those who offered their labour, had every justification for believing that that gave a degree of guarantee to both the financial stability and probity and the permanence of their employment.
I strongly stress that we shall want to know what arrangements the Government propose to make with regard to people who extend credit, many of them, from letters I have seen, solely because they felt they could rely on the fact that the enterprise was owned by the Government.
Are we to assume that from henceforth any undertaking that extends credit to the Coal Board does so at its peril because of the state of the board's accounts? This is exactly the same principle. I hope that we shall be assured that something more respectable will be put forward to secure these people. My hon. Friend the Member for Brierley Hill (Mr. Montgomery) quoted a case. I have details of another case here; a firm of solicitors wrote to my hon. Friend the Member for Worthing in exactly the same strain.
At the end of the Minister's statement to the Standing Committee some very rough effort was made to recognise what my right hon. Friend the Member for Brighton, Pavilion (Mr. Amery) pointed out, that there is inevitably a considerable delay between the conception of an aircraft and reasonable cash flow situation. What I find absolutely staggering—other hon. Members have drawn attention to this—is that the Minister's statement was made in April, 1968, and on 2nd December, 1969, he told the House that he had decided that this is not worth taking further from a commercial point of view—because this can be the only interpretation of his statement. We can only boggle at the ineptitude of the forecasting of the cash flow situation on which the Minister made his initial decision. In the opinion of my right hon. and hon. Friends and myself, the House is entitled to a much fuller explanation of this on a future occasion than we can ask for today.
It is abundantly clear that the total assets of the company which are now available for a purchaser are made up of £98,000 only in really tangible assets—that is, plant and machinery £81,000, office furniture and fittings £17,000. The property comprises two leaseholds, one of 1244 which has expired, and the other of which has only a short time to run. According to a statement by the receiver, the whole of the rest of this sum, coming to £1.2 million, it taken up by work in progress, which, if nobody buys the undertaking to continue that work, is absolutely useless except for scrap. I would think that £10,000 is a generous estimate for the value of the scrap.
§ Sir D. Glover
Did not the same position arise when the Government made their previous rescue operation? Did they not pay a grossly over-inflated price for the assets then?
§ Mr. Corfield
Yes. I indicated that the Government bought at an inflated price but appeared to be taking an entirely different attitude to their own creditors and employees, as indeed they are.
So there is very little in the way of assets other than scrap value, unless a purchaser can be found who is prepared to go ahead with the building of these aircraft.
If the Government believe that there is a case for a light aircraft industry in Britain, and if they believe that the Beagle Pup and its modifications can continue to command a market—I think there is a case for this—there is an overwhelming case for disposing of this company, if they can get an offer, at a very "knock down" price, because it is not worth more than scrap value if they do not get a bid, except for the sub-contract work for Rolls-Royce, Hawker Siddeley and Bristol Aircraft.
To heap even more coals on to the fire, it is a remarkable thing that this company was operating the aerodrome for the boroughs of Worthing, Brighton and Hove and even managed to make a loss of £13,000 a year on that. The managerial situation here terrifies me.
I hope that the Government will not attempt to resist a full investigation into the affairs of this company—into the use of public money—at an appropriate time. We all hope that a purchase will be made, but it will not be made if we hold out for the maximum value for a lot of tooling, and so on, much of which already is probably obsolete and the rest of which will become scrap unless somebody can be found to carry on. The important 1245 thing is to find somebody who is competent to go on building that aircraft. What he pays for it becomes of secondary importance in the light of the accounts as they stand.
§ Mr. Russell Kerr
Was not the statement which the hon. Gentleman has just made about the economics of local airport management naive, if not simple minded?
§ Mr. Corfield
Not at all. Anyone with any sense who undertakes under a contract to run an airport for a firm, for a borough or for an individual will fix a rate under the contract. In my view, he should not make a loss. I am nor saying that airports can necessarily be run except at a loss. It is for the owners of the airport, if they want it to be run, to stand the loss, not for the agent who is running it.
§ 5.30 p.m.
§ The Joint Parliamentary Secretary to the Ministry of Technology (Mr. Neil Carmichael)
We have had a very interesting debate and are grateful to the hon. Lady the Member for Melton (Miss Pike) for raising the matter. As she probably knows, in the Ministry of Technology, we have had much correspondence from hon. Members, both those whose constituencies are interested in the Beagle Aircraft Company and those whose constituents include creditors of the company. Therefore, many of the questions raised in the debate have already been looked at. One or two new ones have arisen. Those which I am unable to answer I will take away for consideration, and no doubt there will be further opportunities for Questions in the House about them.
Perhaps it would assist the House if I first went through the history of the acquisition of Beagle Aircraft Ltd. and why the Government became involved. It arose very largely out of the Plowden Committee's Inquiry into the Aircraft Industry. That report, made available in December, 1965, recommended that at the present juncture light aircraft manufacture merited Government assistance. It added, however, that the period of such assistance should be strictly limited. The committee took the view that the Government should review progress from time to time in the hope that within a few 1246 years the industry would be self-sufficient. If, on the contrary, the light aircraft business was not approaching this objective by then, the case for continuing assistance would be open to question.
In early 1966, Pressed Steel, the then owner of Beagle, informed the Government that it proposed to cease the operations of Beagle. The Government wished to preserve a stake for the United Kingdom in the expanding world market for light aircraft, and agreed in June, 1966, to purchase the assets of the company as soon as statutory authority had been obtained, the Minister being precluded from manufacturing civil aircraft under a proviso to Section 1(i) of the Civil Aviation Act, 1949. Authority was obtained under Section 12 of the Industrial Expansion Act, 1968, and the transaction was completed on 30th July, 1968. In the intervening period the company was kept going by grants from the Government on a "no profit, no loss" basis for Pressed Steel.
Government advances in this period totalled £3.3 million, part of which was, of course, reflected on acquisition by the Government as work-in-progress and in the written-off development costs of aircraft not yet in production. Since July, 1968, the company's needs for working capital have been provided by the Government in the form of interest-bearing loans. Interest payments on these loans were deferred until March, 1971, and have not, therefore, been a factor in the company's failure.
But the problem exercising many people is: what went wrong? Basically, it was a question of scale. As was explained to the House during the passage of the Industrial Expansion Bill, the company then expected to break even in 1972. Despite considerable achievements in the intervening period, the board came to the conclusion in the autumn of 1969 that a commercially viable future would require the development and introduction of a wider product range, including new designs of twin-engined aircraft.
Production would be needed on a large scale, demanding larger sales, and these necessitated a significant penetration of the American market, where the bulk of world light aircraft sales take place. 1247 This programme, the board estimated, would require some £6 million of new capital over the next few years and probably more later to build on the foundations which would by then have been laid.
§ Mr. Cranley Onslow (Woking)
Is the hon. Gentleman saying that August, 1969, was the first time that it came to the Government's notice, as managers of the company, that it would be necessary to extend the range of products?
§ Mr. Carmichael
As has been explained frequently by my right hon. Friend, the board of the company, composed of distinguished and experienced people, was required to run the company as a commercial concern. This was repeatedly stated in the House, and, indeed, was asked for and wanted by the House. But, on examination of the future market, the board concluded that the product range needed expansion and that the sales force should be increased, and that this would cost about £6 million.
§ Sir D. Glover rose—
§ Mr. Carmichael
I cannot give way again. It would be unfair to keep on doing so. On the list there are 25 subjects. I have frequently been in the situation, when at the Ministry of Transport, of having the Adjournment debate after the Second Reading of the Consolidated Fund Bill. In fairness to those who are well down the list, I must get on.
I come now to the question why the Government did not provide the additional £6 million requested. As the Minister said in the House on 2nd December, 1969, the Government regretfully concluded, after giving the most careful consideration to the company's proposals, that, having regard to the need to contain Government expenditure, there was not sufficient priority to justify the investment of further public funds in Beagle in the face of many competing demands on national resources.
The House then had an opportunity to ask Questions why the Government felt it necessary to take this step. It was not a step which my right hon. Friend, who had been very anxious to support the light aircraft industry, felt happy about. My hon. Friend the Member for Bolton, East (Mr. Robert Howarth) asked 1248 whether the balance of payments advantages were taken into account in the decision not to support Beagle any longer. One of the factors always taken into account in these matters is the effect on the balance of payments, and, naturally, consideration was given to it in this case before the decision was taken.
The whole point arises whether it was a mistake to take Beagle on in the first place. The Government have no regrets that we made this attempt to bring the industry back to its feet. There is inescapably a risk of failure in projects of this kind which the Government support. Indeed, if there were no risk there would probably be no need for Government support. When it becomes clear that success cannot be achieved at an acceptable cost, we must be prepared to cut our losses, as we have done in this case.
How much has been spent? In the period between mid-1966 and July, 1968, non-repayable grants amounting to £3.3 million were made to Beagle. This money was used to finance the operations of the company, and no profit, or loss, was made by the owner, Pressed Steel, during this time. Acquisition of the assets in July, 1968, together with interest payable and the legal costs of incorporating a new company to which the assets could be transferred, cost some £.1.1 million. Since July, 1968, the company's financial requirements were met by loans totalling £1.5 million.
How much has been lost? The final loss cannot be precisely calculated at the moment. It will, for example, depend on the sum realised for the assets. However, I would expect the greater part of the £6 million or so expended—much of it before the company was taken over—to be irrecoverable.
Many hon. Members have asked about the receivership and what is involved, and what has been happening since the receiver moved in. The receiver and manager has been holding discussions with a number of parties concerning their possible purchase of the undertaking as a whole on a going concern basis. The Government have held themselves ready to join in talks at any time and have, indeed, had discussions with prospective purchasers on several occasions.
Unfortunately, the prospects have receded. While certain possibilities are not 1249 finally dismissed the receiver had by last week reached a point where he had no alternative but to issue redundancy notices on a considerable scale. Nevertheless, a substantial part of the business is being, continued for the time being and may be disposed of in part sales in due course. Regrettably, uncertainty as to the future is unavoidable in a receivership situation, and it is impossible to give any firm long-term assurances to the remaining workers.
At this point, it would be wrong of me to try to give any idea which companies, both here and abroad, have expressed interest in the Beagle. It is something better left to the receiver in making his commercial dealings.
I have been asked about support of aircraft in service. This is a matter for the receiver and manager. It is not unreasonable to expect the rights to manufacture spares, etc., for existing aircraft to be taken over by another or other companies. The same applies to the R.A.F. Bassets as in the case of civil aircraft. Certainly, spares and support services will be required for the Bassets for a considerable time.
I come now to the position of the management. When a situation such as this arises, it is understandable that there should be a tendency to blame the management or the workers. In this debate, some hon. Members have said that one cannot blame the management and others have said one cannot blame the employees, by implication supporting one group or the other. It cannot be said in this case that a top-heavy management structure was created after the Government put money into the company. The number of directors was smaller than under the former ownership. The overhead structure was pruned, leading to a number of redundancies fairly soon after acquisition by the Government in 1968.
A number of other points have been raised in the debate which have worried probably more people than any other aspect. These include questions about redundancy payments and the superannuation fund. With regard to the superannuation fund, the arrangements which the company had made with the life assurance companies broke down on the appointment of the receiver. Arrangements have accordingly been made between Her Majesty's Government 1250 and the life assurance companies to ensure that valid claims are met as if contributions to the funds had been fully paid up to the date of the receiver's appointment.
All workers made redundant are assured of their statutory entitlements under the Redundancy Payments Scheme. The hon. Lady asked about redundancy payments specifically in relation to Rearsby, particularly with regard to piece-workers. The rules for calculating the payments are laid down in the Redundancy Payments Act, which provides that the entitlement for pieceworkers is related to their average earnings in the period of four weeks prior to the date on which they are given notice. Because there has been some falling off in work and, therefore, in earnings at Bearsby recently, this means I am afraid, that the amount of the redundancy payment to be made under the Act will be affected.
This is also the case with practically every company running down. Wages or earnings are, naturally, less than otherwise. I understand that the same problem does not exist at the Shoreham factory because piece-work earnings are not involved. Arrangements will also be made for severance pay, which will to some extent make allowance for the redundancy payments.
§ Mr. Carmichael
This will ultimately be a matter for discussion between the receiver and the trade unions concerned. Rather than speaking in terms of global sums, I would prefer that a scheme was worked out between the receiver and the trade unions and then an approach made to me about the total. It may seem that either the global sum or the other way are the same, but I think that we are sophisticated enough to know that there is quite a difference.
§ Mr. Russell Kerr
It is my understanding that this reference to the global sum comes essentially from the Government's way of looking at things rather than from the workers concerned. They are, naturally, concerned to have so many extra weeks' or months' payment in lieu.
§ Mr. Carmichael
My information is that the Government have suggested to the trade unions concerned that they should go about this in the way that I have described. I know that some figures have been used; £75,000 was mentioned earlier. I do not think that this figure was recognised by the Government. What I am now suggesting is that the trade unions and the receiver should get together and work out a reasonable and fair scheme.
§ Mr. Russell Kerr
I understand that they have at least had informal consultations along those lines. Would my hon. Friend not agree that if those negotiations were to result in something like only one week's pay additional to their statutory entitlement, that would be a very undesirable result?
§ Mr. Carmichael
I hope that whatever result is arrived at will be reached by agreement between the two sides. The Government have asked Mr. Cork, the receiver and manager, to carry on discussions with the employees' representatives with a view to a satisfactory severance pay decision. My latest information is that there is still some way to go.
§ Mr. Corfield
If an agreement is reached which is in excess of the legal entitlement—which we all hope may be possible—can we take it that the difference will be made up by the Government and not the other creditors?
§ Mr. Carmichael
There has been an understanding with the Government. Mr. Cork will be acting for us not as the receiver in this instance but as the representative of the Government. It will be an act of grace on the part of the Government. As to further employment of redundant workers, I understand from the Department of Employment and Productivity that there have been consultations and that the Department's local organisation is making special arrangements to assist such workers. Teams have interviewed them.
§ Mr. Carmichael
I have made inquiries but without result at present. If the hon. Lady will give me time to look into this I will write to her. The Government have received representations from a number of creditors from the company which raise a number of issues some of which are still the subject of legal advice. A further statement will be made as soon as possible.
Hon. Members have asked if there would be an inquiry into what happened at Beagle. This suggestion certainly will not be overlooked but at present I cannot see how an inquiry would be justified. Naturally any question relating to the general policy of the Government in the acquisition of Beagle and its performance can be raised in the House. I am sure that with the interest that hon. Members have not only in the aircraft industry but in the whole question of the Government's rescue of companies, many hon. Members will avail themselves of the opportunity to discuss this case.