§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Dobson.]
§ 9.59 p.m.
§ Mr. Victor Goodhew (St. Albans)
I am grateful to you, Mr. Speaker, and to the House, for the opportunity to raise the subject of Handley Page Aircraft Ltd. this evening. I last initiated a debate in connection with Handley Page on 4th April, 1962. At that time, I had been fighting the Government for some months—my own Government, I may say—trying to persuade them to adopt the Dart Herald as the medium-haul transport aircraft for the Royal Air Force.
Despite a persistent campaign, I lost the battle. I lost it, in my view, for one reason only, and that was that Handley Page had preferred to remain independent rather than become part of a large consortium.
§ It being Ten o'clock, the Motion for the Adjournment of the House lapsed, without Question put.
§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Dobson.]
§ Mr. Goodhew
The Government had promised to give orders for aircraft to those manufacturers which had agreed to merge. That was why, I believe, the Avro 748 was selected instead of the Dart Herald.
There are those who believe that this prejudice against Handley Page remains to this day—that the company has not yet been forgiven for its late founder's robust independence and that this is in no small measure a contributory factor in the present situation. However, the present situation is difficult to define, for there is much confusion caused by a constant stream of rumours and unconfirmed reports. It is easier, perhaps, to go back to the summer of last year and try to trace the course of events since then.
It was on 8th August that the news broke that Handley Page Ltd., only seven weeks after celebrating its 60th anniversary, asked Barclays Bank to call in a receiver. There had already been an extensive boardroom reshuffle and an injection of £2¾ million into the company 1697 in June, so the news of a receiver being appointed came as a considerable shock.
The company's principal project, the Jetstream, an 18-seater, 280 m.p.h. executive and short-haul feeder mini-airliner looked a certain winner, even at that time. The market surveys had shown a promising future and options had been taken out by the International Jetstream Corporation, of St. Louis, Missouri, and C.S.E. Aviation of Oxford, for 165 aircraft, even before the first test flight in August, 1967.
In December, 1967, came an initial order for 11 of the military version of the Jetstream required by the United States Air Force, with an option for a further 300. I understand that Her Majesty's Government were anxious that this order should be acquired, but diversion of effort into the special Mark III version seems to have held up the development of the Mark I civil version, and in the meantime costs soared frighteningly.
In June, 1969, the company had received firm orders for 91 aircraft, and nine had been delivered. The appointment of a receiver in August was, therefore, bound to be a great shock. Despite the three rights issues totalling £4.6 million, another £42 million was needed to get the Jetstream "over the hump" and on to a paying basis. I am bound to wonder what the Government's attitude was at that stage.
Here was an old-established aircraft company with a considerable design and production capacity and firm orders valued at about £20 million, mostly in dollars. Furthermore, there was the requirement for the conversion of Victor Mark II bombers into tankers, a task which Handley Page could carry out more economically than any other firm because it had the men who knew the aircraft; and this was an order worth between £20 million and £30 million.
Why, then, did the Government refuse to give a bridging loan through the I.R.C. in the summer of last year? In the absence of any Government help, a receiver was appointed in the person of Mr. Kenneth Cork, and he set about trying to save the company. The obvious choice was an approach to the Craven Corporation, whose offshoot, the International Jetstream Corporation, had the marketing rights in the United States 1698 and was, therefore, more likely to be interested than either Hawker Siddeley or the British Aircraft Corporation.
In October, an agreement was reached with the Craven Corporation and a new company, Handley Page Aircraft Ltd., was formed and subject to certain conditions, among which was one which said that a continuation of the Stock Exchange quotation of the old company should remain, the equity in the new company was to be transferred to the old company and Craven Corporation was to hold 90 per cent. of the equity of the old company, leaving the existing shareholders holding 10 per cent. A loan of £2 million was made available to the new company in instalments which were paid between the date of completion and the end of December, 1969. It was, of course, expected that further sums of money would be made available as needed and that by the autumn of this year the Jetstream production would be well under way and the company out of trouble.
Then, suddenly, on Friday, 27th February, a further bombshell was dropped on the scene at Radlett. It was announced that the new owners were appointing a receiver and on Monday, 2nd March, the employees arrived at the works only to be sent home with a notice announcing the closure of Handley Page. We do not need to have much imagination to appreciate the effect of all this on those so suddenly dismissed, many of them after years of loyal and devoted service to the company. It was an appalling shock, coming, as it did, "out of the blue" at a moment when those on the floor thought that the company had been saved only last autumn after some weeks of grave anxiety.
Certainly, no one could have imagined or envisaged that a company which took over Handley Page in the autumn, knowing full well that the concern had to be seen through a difficult year, would suddenly announce that there were no more funds available after less than five months of operating it. The Government certainly seem to have been taken completely by surprise. I understand that they learned of the situation only on the Thursday prior to the Monday closure. They acted quickly to protect Government contracts, arranging for Hawker Siddeley to send a party over on Monday morning and re-engage 700 or 800 men 1699 employed on Government contract work. I understand that some of these have been discharged since.
Apart from this, the Government appear to have done absolutely nothing. Except for those taken over by Hawker Siddeley and a mere handful retained by Handley Page Aircraft Limited to safeguard the company's assets, the remainder of the 2,800 work force were discharged, that is, somewhere between 1,500 and 1,800 men. It is difficult to get the accurate figures. I find it difficult to obtain accurate information.
The Department of Employment and Productivity moved with commendable speed. It was there on the Monday morning to issue claim forms to those discharged and it had a special office opened by the Tuesday morning to deal with Handley Page employees. On the Thursday morning, when I visited this office, there were representatives of Hawker Siddeley Aviation, Hawker Siddeley Dynamics, Westland Aircraft, the British Aircraft Corporation, Vauxhall Motors and Ether Engineering, of Hemel Hempstead, all available to interview and engage staff. I pay a special tribute to all those concerned in producing this one bright feature in an otherwise extremely gloomy situation.
However, this is only a palliative. The discharged men have received no redundancy pay, no accrued holiday pay, no accrued bonuses, and no cash in lieu of notice. They are thus owed a considerable sum of money and are rightly anxious about whether they will receive it. Even more important, they do not want to see Handley Page die. It has been the lifeblood of a large part of my constituency. It has been a pioneer in the aviation world for more than 60 years. It was the first company to be incorporated in the United Kingdom for the purpose of manufacturing aircraft.
I have only to look back over the years to think of Handley Page Aircraft, which was formed before I was born. During the First World War Handley Page bombers were flying and I remember seeing the Hannibal airliners fly to Paris when I was a young boy at school. In the last war I was hauled through the air in a glider behind Halifax bombers. I have seen Hastings and Victor bombers fly over my house regularly as they come 1700 back from the R.A.F. for servicing at Radlett.
Those who have formed this formidable team of designers and constructors wonder how the Government can allow such a valuable national asset to be dissipated. So do I.
I should like to ask the Minister certain questions, and I hope that he will be able to answer them. First, why did the Government not grant a loan through the I.R.C. when the company was in need last summer? What steps did the Government take to ensure that the Craven Corporation, having taken over the company and announced its intention to see it through this difficult year, carried out its intention? Did they seek any guarantee or agreement, or did they merely satisfy themselves about the financial position of the corporation?
Why were the Government taken by surprise by the sudden collapse of this company? Did not the Ministry of Technology keep an eye on what was going on at Radlett when it had contracts being carried out by the company? Why did it take so long for the Government to confirm the R.A.F. requirement for the Victor Mark II tanker conversion? I know that the matter of the VCIO was introduced, but I think unnecessarily, because these aircraft were available and have been sitting on the airfield for nearly two years—probably deteriorating to a great extent. I am astonished to find that, though I was told only last week, the requirement was confirmed in January, 1969. In a letter of 28th October which I received from the Minister of State, he uses the phraseif this requirement is confirmed.So, even on 28th October last year, the requirement had not been confirmed, according to the Minister of State. The requirement having been confirmed, as I assume it must have been, why did it take so long to get down to negotiating a contract for the design of this work? I cannot help wondering whether the Government were anticipating the collapse of this company and were dragging their feet.
Why did the Government refuse an offer of Jetstreams for the Royal Air Force in September last year at a very reasonable price? What are they doing now to see that the Jetstream and its 1701 valuable export potential is not lost to this country?
I hope that the Government Departments concerned will agree to a meeting with the unions, which are anxious to try to preserve this company and wish to see Government representatives on it.
Will the Victor Tanker conversion now be carried out at Radlett by Hawker Siddeley by employing ex-Handley Page employees, or is this work to be taken to Woodford, near Manchester? This is the rumour. It will be absurd to take all these aircraft and the jigs and tools to Woodford and to train new people to the the job when there are men at Radlett already trained to do it and who could do it more speedily and economically. In any event, the R.A.F. must need these in-flight refuelling tankers, rather than want to wail a further year whilst this matter is dealt with.
What is the Minister of Technology doing, if anything, to ensure the continuation of Handley Page? Will the hon. Gentleman advise his right hon. Friend the President of the Board of Trade to hold an inquiry into this sorry affair? The lives of about 2,800 employees and their families, which means about 10,000, in addition to many others dependent upon them for their livelihoods, have been thrown into turmoil. The shareholders, who had faith in the company and continued to put cash into it right up to last summer, are in danger of losing everything. They all demand that a thorough inquiry should be held. I hope that the Parliamentary Secretary has come to the House tonight to give an undertaking that this will be done.
§ 10.15 p.m.
§ The Joint Parliamentary Secretary to the Ministry of Technology (Mr. Neil Carmichael)
I am grateful to the hon. Member for St. Albans (Mr. Goodhew) for raising this matter tonight. There is, quite understandably, great public concern that a business with the proud name and traditions of Handley Page has had to stop trading. This is especially tragic when, after the crisis of last autumn, it seemed that the threat of closure had been averted and that the firm was set for a promising future.
I share fully in the concern and regret at what has now happened. But it is clear from what has been said both 1702 inside and outside this House that there is considerable misunderstanding both about the rôle that the Government should have played and about the action that they took in this affair. I am glad to have the opportunity to put the record straight and to show that the Government have nothing to be ashamed of and nothing to apologise for.
Over the last few years Handley Page has had two main areas of business, one the private venture development and production of the Jetstream and the other its work on R.A.F. aircraft, covering support of Victors and Hastings, with the prospect of a fairly large contract for the conversion of Mark II Victor bombers to the tanker rôle. Neither field of work on its own was enough to sustain the Radlett factory as a viable business. The R.A.F. work was needed to provide bread and butter support for the private venture: on the other hand, the R.A.F. work can only be carried out by a firm which can support continuously a competent design staff and has other business to cushion the inevitable ups and downs of Service demands.
At the time when the old company began to run into substantial difficulties in the second half of 1969 the Government had three main interests to safeguard. These were, first, the need for meeting the R.A.F.'s requirements on a sound long-term basis and, secondly, the general sponsorship interest of the aircraft industry, and also its launching aid interest, to the extent of £1¼ million in providing for the continuation of the Jetstream—provided that, but only provided that, it was commercially viable, particularly in the export field.
The third point was the preservation of settled employment for the workers in the factory, many of whom had spent their working lives in it. This, in turn, depended on the viability of the Jet-stream, since without it the firm could have no future.
Those were the three interests of the Government. I must say, quite plainly, that they did not include an obligation to maintain a business by subsidy from public funds if it should have no prospect of paying its own way. Hence when, through the receiver's efforts, certain American interests, headed by Mr. Cravens, emerged in October, 1969, as the only commercial concern likely to 1703 carry on the business, we had, in the interests of the workers and of the future of the Jetstream, no predisposition to stand in the way.
I should perhaps deal with the hon. Gentleman's remarks that the Government had some objection to Handley Page for having stayed out of any consortia. The Government have been extremely correct and fair with Handley Page and were anxious that the work should go to Radlett. The one decision which was ours to make, and which we were called upon to make, was whether we would entrust R.A.F. work to the new concern. If we had refused to do so, the deal would not have gone through, the factory would have been closed and the workers discharged last October. Before taking the decision we confirmed that the Cravens' interests had the desire and the means to support the business.
Among his other substantial interests, Mr. Cravens controlled the International Jetstream Corporation, the distributors of the Jetstream in North America. This meant not only that he was in the best position to judge the saleability of the Jetstream, but that he had an obvious personal interest in the maintenance of the business. At my Department's request, Mr. Cravens stated in writing that he was fully aware of the need for further working capital and that it could and would be provided as appropriate for the needs of the company from time to time.
In these circumstances, the Department stated that it would be prepared to assign its current Handley Page contracts to the new company on terms and at a date to be agreed and that, again subject to the negotiation of satisfactory terms, it would give it the Victor conversion work. It was, however, made clear that before more than an interim contract was placed for this work the Department would wish to satisfy itself that the company had adequate managerial and financial resources. After receiving this assurance, qualified as it was, the Cravens' interests concluded their negotiations with the receiver and took over the management of the Radlett factory.
From the management and the technical points of view we were satisfied with the way things were going. As I have said in answer to a Question on 23rd Feb- 1704 ruary, there was a competent design staff and the Victor tanker conversion development work was making good progress. At the same time, we had been pressing the new company for its revised estimates for the totality of the development and conversion work and for the full cash flow projection.
On Friday, 27th February, it was publicly stated that the company was almost entirely out of funds and that nothing more was forthcoming from Mr. Cravens. What influenced Mr. Cravens to change his mind between October and February, it is idle for me to speculate. I am informed that he is very seriously ill. This may be part of the problem. However that may be, by the evening of 27th February no receiver had been appointed to take charge, and the situation that faced us was that without emergency action all workers arriving for work on the following Monday morning, 2nd March, would be sent home. There would be an immediate hiatus in the support work for Victors and Hastings, for the supply of spares, for the maintenance of the contractor's working parties on R.A.F. airfields and so forth. Something had to be done.
In this situation, the Department acted very promptly. We had already, in the events of the previous autumn, just before the Cravens' take-over, carefully considered what we would do if the Handley Page Company collapsed. We had come to the conclusion that the Victor tanker conversion job was so big and needed such skilled post design services support, that we could only entertain the claims of the two major aircraft companies, Hawker Siddeley Aviation and the British Aircraft Corporation, and for a number of reasons we concluded that Hawker Siddeley Aviation should be chosen.
When the crisis broke over the weekend at the end of February my right hon. Friend, having confirmed that the previous assessment still held good, turned to Hawker Siddeley Aviation and asked it to step into the breach. This it immediately did, and I should like to acknowledge its prompt and effective response. The task of transferring all the R.A.F.'s work from Handley Page to Hawker Siddeley Aviation is now well in hand.
§ Mr. Carmichael
Hawker Siddeley has stated that the work will almost certainly go to Manchester. Once it had been given to Hawker Siddeley it was for Hawker Siddeley's commercial judgment as to where the pre-conversion work should go.
§ Mr. Longden
is the Minister saying that all the aeroplanes, all the jigs and tools and all the technical skill available at Radlett should be transferred to Woodford?
§ Mr. Carmichael
I am saying that we were in a very difficult situation. We had to get someone to do the work with very little notice. We had previously evaluated B.A.C. and Hawker Siddeley and had decided on Hawker Siddeley; and this is a matter for the commercial judgment of Hawker Siddeley. I believe that we did everything reasonably possible to keep Radlett in being. It finally became impossible and we stepped in and made immediate arrangements to safeguard the R.A.F. work. We acted responsibly and decisively.
There has been reference to the position of the work people, on which I can perhaps give some assurance. It has been established with the Department of Employment and Productivity that those employees who received dismissal notices from Handley Page on 2nd March and who subsequently accepted employment with Hawker Siddeley will not thereby have forfeited their entitlement to redundancy payment. There is no question that those who were dismissed will not get their redundancy payments. These payments are safeguarded by the Redundancy Payments Act, 1965, which provides that, in such cases as this, the whole payment may be made from the Redundancy Fund set up under the Act.
There is also the question of vacancies. I understand that, within 20 miles of Radlett, there are vacancies for 1,000 skilled engineers. The D.E.P. is working very hard and is doing an excellent job. The question of redundancy pay is a matter for negotiation with the receiver.
One of the points which must be dealt with is the implication of the statement that there has been a costly deterioration of the Victors stored in the open. Handley Page had the contract of preserving the 1706 aircraft. I understand that there is a weekly inspection and that there is no evidence of any marked deterioration. Nor should there be, since, had the aircraft been on an airfield, they would have been stored in the open there.
The hon. Gentleman also asked whether I would consider asking my right hon. Friend the President of the Board of Trade to have an inquiry into the affairs of this company. But he will recall that, in reply to the hon. Member for Portsmouth, South (Mr. Pink) on 11th February, my hon. Friend the Parliamentary Secretary to the Board of Trade said that she did not think that such an inquiry would be justified. Since then, of course, we have had the unhappy development at Handley Page Aircraft Ltd. as against the earlier company, but my hon. Friend states that she knows of no new facts arising out of this which would cause her to change her mind.
The Board's powers to investigate a company's affairs, including the actions of a receiver for debenture holders, are contained in the Companies Act, 1948. The relevant provisions mean that the only grounds for an investigation are circumstances suggesting fraud, misfeasance or other misconduct in relation to the company's affairs. I have to tell the House that, from the information available to the Government, none of the requisite conditions apply and that, in particular, the receiver was justified in entering into the arrangement with the Craven Corporation last October.
I now come to the question whether the Government delayed in the conversion decision, which has been discussed before. I have discussed it with the hon. Gentleman privately. There is no time to go into it more fully now, but I should point out that, before a decision on whether there should be a conversion could be reached, there had to be a decision on whether the aircraft would be required. It was not until the end of 1968 that all the operational, technical and financial information for such a decision became available. A decision to go ahead with the conversion programme was taken in March, 1969. There is no evidence here of unreasonable delay.
§ Mr. Goodhew
But I have a letter dated 28th October last, which says:… if this requirement is confirmed …1707 Therefore, according to the Minister of State, Ministry of Technology, the decision had not been taken by 28th October. 1969.
§ Mr. Carmichael
I think that the reference in that letter is to the question whether the full job should go ahead on the basis of the development work that had been done by Handley Page. I am informed that the final decision was made at the end of 1968 to go ahead and that 1708 the final decision to start the development programme of conversion was in March, 1969. There is no evidence of unreasonable delay. But by this time, of course, Handley Page Ltd.—
§ The Question having been proposed at Ten o'clock and the debate having continued for half an hour, Mr. SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
§ Adjourned at half-past Ten o'clock.