BRITISH OVERSEAS AIRWAYS BILL.

HC Deb 10 July 1939 vol 349 cc1831-945

Order for Second Reading read.

4.6 p.m.

The Secretary of State for Air (Sir Kingsley Wood)

I beg to move, "That the Bill be now read a Second time."

The House may recall that at the end of last year I announced that the Government had reached the conclusion that the most satisfactory instrument for the development of overseas civil aviation would be provided by the association of Imperial Airways and British Airways in a single public corporation. I have told the House from time to time how the negotiations have been proceeding, and on 12th May I read a statement that agreement had been reached and that in due course I should be bringing the matter before the House for the necessary approval. In the first place the main reason for the Government's proposal is the real necessity for advancing our position in reference to civil aviation overseas, and I believe that in the proposals contained in the Bill we have not only a sound plan, but greater possibilities of progress, and particularly what I think is so much needed, the development of a far-sighted, long-range policy in British aircraft production. I am satisfied that this cannot be attained in face of the development of the heavily subsidised competition of to-day by private companies, which must quite properly have regard to the primary interests of the shareholders who own such companies. I submit that under the new corporation national interests and national advance will come first. There are also great advantages in the unification of the two companies, such as the pooling of experience, equipment, ground organisation and technical resources. Again I would say that much also can undoubtedly be accomplished and achieved by the centralised control of the fleet, the training of personnel and the concentration of management and forward planning.

It may be truly said that there are dangers in a monopoly, but there will in fact be severe competition, both as regards the carriage of passengers and freight to and from the Continent of Europe and on the Empire and other long-distance routes, with the unified and heavily subsidised national air lines of other countries. It is true that it may be urged, for instance, that America encourages competition, but it has also to be rememberedthat successful companies like Air France, K.L.M., D.L.H., Sabena, and Swiss Air have long ago adopted the policy of concentration and State aid, so far as their overseas services are concerned, which is in fact contained in the Government proposal; and all those countries have adopted one chosen instrument for their purpose. I might also use the argument that effective competition in civil transport is, in fact, nowadays international. It is in fact between national organisations.

Again it must be remembered that competition between United Kingdom subsidised air-line operators on the same route has already been tried and has failed. The Hambling Committee in 1923 showed that competition between companies which are receiving subsidies from the same Government meant in effect that the Government was competing with itself, and it was the obvious objection to this which gave rise to the setting up of Imperial Airways in 1924. Again, true competition between Imperial Airways with their long haul Empire schemes, and British Airways with their concentration on the short haul European services would, as it would appear to me, never have been possible. The proposals in the Bill do not in fact kill competition between these two concerns, because in my judgment it would never have existed in reality.

I, therefore, suggest as my first point this afternoon that the Government are right in the proposals they have brought forward, and that it is more efficient and will make for greater progress to concentrate our available assistance in one large organisation and rely mainly on international competition to provide the necessary stimulus for progress and efficiency. So far as the future success of this corporation is concerned, I agree that a great deal will depend, as in any other similar organisation, upon the scope of its work and the vision and enterprise of its management. So far as the scope of the corporation's work is concerned, the House will see that under Clause 2 of the Bill the Mandate to the corporation is: To secure the fullest development consistent with economy of efficient overseas air transport services. A much wider interpretation of its objects than that, for instance, which is given to Imperial Airways, which is: To use its best endeavours to make its service self-supporting at the earliest possible moment. I suggest that with increased funds and always with the aim before it of securing the fullest development of air transport, there is little doubt that the corporation can secure important advances in civil aviation, and at the same time provide reasonable charges to the public.

I have observed what I suggest has been legitimate criticism of past policy. We have, perhaps of necessity, put the emphasis on cheap flying rather than on real aeronautical progress. With the new corporation and a broad and progressive policy, coupled with increased financial provision, of which I shall say something later, this country should, under these proposals now be enabled to take a big step forward, particularly in relation to our types of civil aircraft and the development of British overseas services generally.

There is another reason for this proposal. There is the important consideration of finance, In no country in the world to-day is aviation within measurable distance of paying for itself. All national operating companies are heavily subsidiscd by their Governments. So far as we are concerned, under the Air Navigation Act, passed last year, the statutory limit on the aggregate amount of British subsidies was increased to £3,000,000 per annum, and it was intended, as the House knows, to devote the greater part of this to overseas development. Therefore, large additional payments would fall to be made to the companies selected by the Government for this purpose. Another important aspect of the financial side of this matter was referred to by the Cadman Committee, who expressed the opinion that the subsidies granted to air transport companies should not be used for raising dividends to undue levels. They also added that it was desirable to take steps to ensure that the large additional capital needed for development should be raised on terms which would not prove unduly expensive to the Exchequer.

Both the two chosen instruments, Imperial Airways and British Airways, have large and desirable schemes of expansion in view, which require a big increase in their capital resources. It is, obviously, in the public interest that the additional capital required shall be raised and remunerated on the most economical terms. I do not hesitate to say that this can without doubt be best secured by the issue of stock with a Treasury guarantee. In fact, neither of the two operating companies could raise the capital that is needed for replacement and new equipment except on onerous terms. If present arrangements continued, the taxpayers might well have to pay increasing sums to provide interest on capital. That is certainly not the best finance, nor does it make for progress in civil aviation. The new corporation is accordingly enabled to borrow by the issue of airways stock, the principal and interest being guaranteed by the Treasury, both for the funds for the purchase of the two undertakings and the additional capital that is required for further expansion. The total amount which it is proposed can be borrowed at one time is fixed as not exceeding £10,000,000, and it will probably be necessary to issue about £7,000,000 of stock, in the first instance.

Mr. Pethick-Lawrence

I think the right hon. Gentleman said that the total amount to be issued at any one time could not exceed £10,000,000. Surely, what he meant was not the amount to be issued at one time, but the total is to be £10,000,000.

Sir K. Wood

I am obliged to the right hon. Gentleman for his correction. That is quite correct. Of the £7,000,000 which it is suggested we should have to issue in the first instance, £3,500,000 will be required for purchase and £3,500,000 as further capital which the corporation will require for immediate development, the principal item being the purchase of new aircraft. The Bill also provides, in Clause 28, that subsidies should be paid to the corporation until December, 1953, and that the total amount of subsidies payable in any year may not exceed £4,000,000, less the £100,000 earmarked until the end of 1943 for the assistance of internal air lines. I have stated that the previous subsidy laid down in the Air Navigation Act was £3,000,000 a year, a figure never yet reached, but more money will undoubtedly be needed to finance the extensive programme of overseas air services now being planned, and the amount is now being increased by £1,000,000 per annum.

The corporation will, or course, continue the overseas air services now being run by the constituent companies. Arrangements are also already in contemplation for the institution of new services in various parts of the world, the chief of which are extended services in Europe, the Trans-Tasman service, the service across the North Atlantic and the service to West Africa and across the South Atlantic. A Trans-Pacific service is also in contemplation.

Colonel Arthur Evans

Can my right hon. Friend say what provision there is in the Bill to develop inter-island services in the West Indies?

Sir K. Wood

In addition to the financial provisions which I have explained, there are one or two others of some importance. Until "the appointed day" on which the corporation will take over the existing undertakings, they are being carried on by the existing companies, under the present contractual arrangement, subject to certain limitations on the powers of the existing companies which are contained in the provisional contracts of sale, which are set out in the Second Schedule to the Bill. Between "the appointed day" and the 31st March, 1941, the corporation will be paid subsidy based on the actual deficiency arising on the operation of existing services and such new services as may be inaugurated with my approval, or at my direction.

After the initial period, the financial arrangements will be based on three-year periods. This will give considerable scope to the new corporation and enable them to plan well ahead. They will prepare in respect of any such periods a programme of the services which they propose to undertake, together with an estimate of the cost, for the consideration of the respective Departments. This new method' will also avoid the delays which have been inherent in our present system, which entailed the assessment of expenditure peculiar to a particular service, and also necessitated the separate and elaborate allocation of types of expenditure common to the whole of the activities of the companies now receiving subsidies.

Another important provision is made in Clause 16, which enables the corporation to place to the credit of its own general reserve account any excesses of revenue or savings in expenditure achieved as a result of efficient administration. By this means the new body will be enabled to build up a reserve which should provide a further stimulus for increasing efficiency and progress throughout the whole organisation. This fund will be at the disposal of the management, subject to one condition, that when the account reaches the sum of one-tenth of the cost of the corporation's assets, then one-half of any excess over that figure will be remitted to the Exchequer.

I should like now to say a few words about the price that we have paid for these two concerns, but before dealing with the question of price I wish to make one point clear to the House, and that is the personal position of my hon. and gallant Friend the Under-Secretary, who before his appointment to his present office was a director of British Airways. On being appointed, in accordance with practice, he immediately severed his connection with, and divested himself of all interests in, British Airways, or any other aviation concern. When the merger was first projected and became the subject of discussion, within the Department and with the companies concerned, my hon. and gallant Friend asked particularly that he should be allowed to take no part in the price negotiations. To this, of course, I agreed.

Mr. Montagu

Will the right hon. Gentleman say what he means by the corporation placing to reserve the results of special efficiency? I do not quite follow what that means.

Sir K. Wood

That was not quite the expression I used. I will repeat what I said. This is a provision which enables the corporation to place to the credit of its own general reserve account any excesses of revenue or savings in expenditure achieved as a result of efficient administration. When that has been placed to reserve, then it will be at the disposal of the corporation, subject to the condition that when the account reaches the sum of one-tenth of the cost of the corporation s assets, one-half of any excess over that figure will be remitted to the Exchequer. The provisional contracts for the acquisition of the two undertakings are set out in the Schedule to the Bill.

The price of the undertaking of Imperial Airways was fixed as at 31st March, 1938, and the price of the undertaking of British Airways was fixed as at 30th September, 1938. These dates were selected because they were the latest dates up to which the undertakings had produced completed accounts, and the dates at which the professional accountants employed by the Government, Messrs. Thomson, McLintock and Company, had made their examination of the assets and liabilities. I have already informed theHouse of the general basis upon which the prices of the two undertakings were agreed. They were arrived at after protracted negotiation, with the advice of the Treasury and a careful and detailed investigation by the accountants; and certainly, the Government believe them to be fair and reasonable. So far as Imperial Airways are concerned, the amount proposed will permit of the payment to the shareholders of 32s. 9d. for each ordinary share of £1, and this sum will amount to £2,659,085. Interest will be allowed on the purchase price at the rate of 4 per cent. per annum less Income Tax, as from 31st March, 1938, to date of payment. That interest may be said to represent a payment of 3½per cent. for the use of the shareholders' money and ½ per cent. for the company's managerial services in consideration of the fact that the company will pay no dividend after the date at which the price was fixed, namely, 31st March, 1938.

Mr. Benson

May I ask whether in the price there is anything or nothing for the deferred shares held by the Government?

Sir K. Wood

I am going to deal with that point. The date of actual payment will be the date fixed under the Bill as the appointed day for the transfer to the corporation of the undertakings of the two companies. The terms of sale were approved at a shareholders meeting of Imperial Airways on 22nd May, 1939. The issued share capital of the company is £1,623,869 of £1 ordinary shares each fully paid, and £25,000 of deferred shares of £1 each fully paid. The deferred shares are held by the Air Ministry in recognition of the Department's interest in the company, having regard to the subsidies which have been paid, and as any price paid for them would come back to the Air Ministry they were not taken into account in relation to the purchase price. The assessment of the price was arrived at by an examination of the value to be placed on the assets of the company as at 31st March, 1938, and on the amount of liabilities to be deducted, so that a fair value of the net tangible assets could be obtained. This value, together with any value to be attached to goodwill, development expenditure, and other tangible assets would represent the value of the company's undertaking at that date. The value of the net tangible assets at 31st March, 1938, was computed at £2,484,643. The development expenditure was assessed at £278,927 and the expenses of the share issue at £63,000, giving a total of £2,826,570.

From a careful examination of these figures it appeared that the proper price for the ordinary shares was the amount I have previously mentioned, which was made and accepted subject to Parliamentary approval. The figure of £2,659,086 is, therefore, made up of £2,484,643 representing the value of the net tangible assets as at 31st March, 1938, together with a little over £174,000 in respect of development expenditure and of assets written down to a nominal value, and generally the value of the organisations built up by the company in this country and overseas. At the figure proposed the Government are securing the written down assets for virtually nothing. These assets representing aircraft, engines, wireless equipment, premises and plant, originally cost £514,000; they are still in use and have substantial value. There are two points which have been suggested to me by way of questions in the House in regard to this transaction. It has been suggested, and I have seen it in one or two newspapers, that the Government are paying too much, the argument being that the assets have been created by the Government itself in making subsidies to the operating companies which alone made their continued operation possible. I respectfully suggest that that argument is fallacious because in each case the subsidies, like the payments made to the same company from the Post Office Vote for the carriage of mail, were payments made in fact in respect of services rendered.

It will be observed, especially by hon. Members who have special experience of this matter, that the Government subsidies are not being paid on a deficiency basis, and have in no sense guaranteed the profit or the capital of the existing companies. The development has, in fact, been undertaken by the shareholders in the two companies at their own commercial risk. The subsidies were given for services performed, they were not loans or temporary grants, and, therefore, I suggest that that particular argument, if it is carefully examined, is really not a fair one as far as this particular proposition is concerned.

Mr. Ridley

This is rather an important matter on which we should have the maximum amount of accuracy and clarity. I should have thought that a subsidy ceases to be a subsidy ifit is a payment made for services rendered, and perhaps the right hon. Gentleman will be able to divide the total amount paid and tell us how much has gone towards the carriage of mails and how much does not represent payment for services rendered?

Sir K. Wood

I am afraid the hon. Member has not followed the argument I am making. I am endeavouring to combat the suggestion that the Government have paid too much for this undertaking, the argument being that the assets of the company have been created by the Government, because payments have been made to the company for what, I submit, are services rendered. You have only to take the matter one step further. Does anybody suggest that if, in fact, these companies were transferred or sold to some concern other than the Government any distinction should be made on that account? The answer, I think, is certainly not. In fact in each case the two companies concerned, if they were not merged into a corporation, could have looked forward to a long period of operation during which they might have reaped the rewards of their early experience and expenditure. The only other criticism on this transaction is that it has been suggested that the price should have been assessed at the market quotation of the shares. As hon. Members probably know, the market price for these shares has in recent years fluctuatedwidely, for in- stance, from 62s. 6d. to 24s., and I suggest that you cannot fairly measure the value of a whole organisation by the price which happens to be quoted for a particular block of shares offered on the market and purchased at one particular time. It would have been an impossible transaction for the Government to carry out the purchase on those lines.

As far as British Airways are concerned, similar negotiations and examinations took place in connection with that company. The Government offered, and the shareholders accepted, subject to Parliamentary approval, to take over the assets and liabilities of the company as at 30th September on payment of £262,500 together with a repayment of advances which had been made by the principal shareholders amounting to £311,000. The shares which the company hold in two internal air line companies are not comprised in the sale. It is estimated that the holders of British Airways shares will receive a total amount of approximately 15s. 9d. for each £1 share. Again, the same process of examination took place, and the value of the tangible assets at 30th September, 1938, as ascertained by the professional accountants, was found to be roughly equivalent to the advances amounting to £311,000 which had been made by the principal shareholders. The further sum of £262,500 represents the amount which was attributed to the value of the organisation built up by the company and the experience it had gained, account also being taken, and properly taken, of the fact that the company had reached a stage in its growth when it could reasonably expect to obtain some return for its past expenditure on development. Regard must also be paid to the fact that, but for the projected merger, arrangements would have been made early last summer for a contract for a considerable period with the Air Ministry for the operation of European services. Again, it can be said, from the point of view of the company, that the date selected for its purchase was perhaps the worst that could have been chosen, as after serious initial difficulties the company might well have hoped for a long-term contract to work itself into a successful position. Let me now turn to the powers of the corporation, which are of some importance to the House and to civil aviation overseas.

Mr. John Wilmot

Can the right hon. Gentleman tell us the difference between the price at which the shares have been acquired and the market price on the effective date?

Sir K. Wood

I do not think there is any quotation for these shares on the market.

Mr. Wilmot

I am speaking of both companies.

Sir K. Wood

So far as the latter is concerned, there is no quotation for them.

Mr. Bracken

This is a very important point. This is a private company and the House of Commons has had no opportunity of considering this matter. I think the House should be supplied with a proper profit and loss account in regard to this company before public money is expended on the purchase of these shares.

Sir K. Wood

I am informed that its accounts are published and are available in the ordinary way. As far as the powers of the corporation are concerned, they are set out in Clauses 2 and 3 of the Bill. Those which require for their exercise the prior approval or general authority of the Secretary of State are contained in Clause 4. They arise where the taxpayers' money is involved, and concern major capital matters and major questions of policy. In many of the matters concerned, approval can be given by means of a general authority so as not to require the corporation to come to the Minister for specific approval in each case, and in many cases it will be possible to frame directions broadly, having regard to the needs of particular services. Many of these provisions exist in similar form in the Empire Agreement, and have not been found to create difficulties or delays, but they are considered reasonable requirements in respect of a corporation in receipt of assistance from public funds.

There is, then, the important question of management. The affairs of the corporation will be administered by a board, the members of which will be appointed by the Secretary of State and will consist of a chairman, a deputy-chairman and a varying number of other members, not being less than nine and not exceeding 15. The corporation will select their own chief executive and fix his remuneration, as well, of course, as their other officers and servants, upon whom will fall the main duty of administering the day-today affairs of the corporation. It is true —and I gather this is the meaning of the Amendment on the Paper in the name of hon. Members opposite —that the Bill does not provide for complete State ownership and State control, if that means making the corporation part of a Government Department. We believe that the system of management we are providing by these proposals is the better.

The remuneration of the members will be determined by the Secretary of State, with the approval of the Treasury. I would draw attention to the fact that the maximum number of members of the corporation has been fixed at 17. We had in mind in this connection the important matter of Dominion, Indian or Colonial representation, and we have provided for the above number in order to leave room for such representation if it should be proved to be practicable later on. Provision is also made in Clause 2 (3) for the corporation to appoint local boards or committees with such executive or other functions as may be appropriate. This would be another way of enabling the corporation on a wide foundation to develop the trunk routes of the Empire as a whole with the active collaboration of the Overseas Governments. In this connection, of course, there is the question of the financial participation of the countries concerned, and the development of this particular policy, if it is generally acceptable, will necessarily take time, but the Bill does provide for this if such an arrangement should prove to be possible. So far as the tenure of office of the members is concerned, it is contemplated that the Secretary of State should fix the period in the instrument of their appointment. In many important commercial undertakings ithas been found that automatic changes of members by rota is not desirable. There is a further point I must mention to the House. Following many precedents, like the London Passenger Transport Act, the Electricity Supply Act and the Fish Industry Act of last Session, it is proposed that no member of the corporation shall be capable of being elected to or of sitting in the House of Commons. It is the intention of the Government to give the members of the corporation full independence and freedom of action in all the day-to-day affairs of the corporation; but obviously responsibilities involving the considerable expenditure of public money must remain with the Secretary of State.

As far as Parliament is concerned, the corporation will submit an annual report on its operations, which will be presented to Parliament each year, and audited accounts will also be presented to Parliament each year. I think it can be fairly stated, without I hope going beyond my province, that there will be full opportunity for Parliamentary criticism and control on all major matters. The Secretary of State will, of course, be responsible to Parliament for the proper execution of the duties entrusted to him in the Bill. He will be able to be questioned on all such matters and the whole affairs of policy and progress of the corporation will, of course, be able to be reviewed on the appropriate Air Ministry Estimates. Hon. Members will be glad to know that due care has been taken with regard to the interests of the staff of the two existing companies. I understand that all of them will be transferred to the new corporation. It is also provided that the staff can retain membership of any existing superannuation fund. New entrants as well as existing employés will be able to form a new fund when the corporation commences operations. There is the usual requirement as to fair wages.

There is another important matter to which I would like to refer. I suggest that one of the most important matters that arises, with added weight with the formation of the new corporation, is the adequate and speedy development of aircraft. Not only is the existing fleet inadequate in capacity for the efficient conduct of existing services. Many of the aircraft are obsolescent and there is an immediate necessity, which is considerable, for replacements, apart altogether from the need of further aircraft. It is important from a national point of view that British civil air liners shall not only fully meet the future needs of the corporation, but that they shall also find a ready market throughout the Empire and in foreign countries. In fact, the Cad-man Committee has pointed out the danger of an operating policy which might disregard aircraft development and production and how this would adversely affect British design. They also stated that foreign manufacturers, particularly in America, not only dominated the European market, but had gained a footing in the Dominions. Accordingly, early this year I appointed a small committee under the chairmanship of Mr. Harold Brown to advise me as to why the methods used in the past for encouraging the development of new type aircraft had not been more successful and what methods should be used in the future.

I think it may be briefly said that in the past three methods of development of new type civil aircraft have been tried; leaving initiative to the industry, leaving initiative to the operating company, and leaving initiative to the Air Ministry. None of these three methods has succeeded. The important report which the committee submitted was recently presented to Parliament. I have accepted their main recommendations, and there will be shortly set up a permanent committee, of high status I hope, to be known as the Civil Aviation Development Committee. The main functions of this committee will be to co-ordinate the needs of air-line operators for new type aeroplanes so that construction may be concentrated upon a relatively few types for which there would be a good prospect of finding a sufficient market to justify production on an adequate scale. There is no doubt that the correlated needs of all United Kingdom operating companies, including the new corporation, as well as of air-line operators of the Empire overseas, whose co-operation would be sought, should be related to the demands of the world markets. And it will be the duty of the committee to advise the Secretary of State what types of civil aircraft are needed and how best the construction of those types can be facilitated and fostered.

The committee will be independent of the Air Ministry and will work through the staff of the recently formed Directorate of Civil Research and Production. It will have an independent salaried chairman and three other members representing the new corporation, the Air Registration Board and the Society of British Aircraft Constructors, and it is contemplated that other air-line operators shall be co-opted by the committee from time to time for the consideration of matters in which they are specially interested. I visualise that the fundamental aim of the committee will be to assist the British air transport industry to obtain British civil aeroplanes of outstanding merit at competitive prices, so as to meet the needs of British operators and compete successfully in the markets of the world, and also to ensure that such State aid as may be necessary in the development and production of these aeroplanes is applied to' the best advantage. A great deal will depend upon the co-operation of air-line operators, and they will be invited and expected to take their problems to the committee; and I contemplate that endorsement by the committee will normally be essential for any project for which assistance from public funds is sought.

The Government also accept the recommendation that civil type aeroplanes produced by British constructors should, wherever practicable, be used in the Royal Air Force for transport and allied purposes. In pursuance of this policy, an order has recently been placed for a certain number of the De Havilland "Flamingo"aeroplanes. It is also recommended that the Air Ministry should not in general lay down the detailed specification of a new type civil aeroplane and initiate construction by placing a direct Air Ministry order for it. The Government accept this recommendation, subject to the consideration of special cases as and when they arise. There is also the recommendation that assistance should be given from public funds towards civil research and development work and towards the development expenses of new type aircraft. This work is most important and the Government recognise the need for assisting in the finance of the research development work. I do not think it would be reasonable, however, to accept the implication that the cost of civil research and development work, and the development expenses of new type aircraft, should be defrayed principally and for all time from public funds. In so far as the results of this research and development work will benefit the United Kingdom manufacturing and operating industries, the primary obligation to carry on and finance this work rests on those industries themselves. The civil air transport industry already reaps considerable advantage from the aeronautical research and development work done by the State for the Royal Air Force, as many of the problems investigated are common to civil and military aviation, while I would suggest that the present prosperity of the aircraft manufacturers should enable them to set aside substantial reserves for future development. Therefore, the Government propose to make it a condition of grants from public funds for civil research and development work initiated on the advice of the new committee and for the development expenses of new type civil aircraft, that the aircraft manufacturing industry shall in general contribute, according to the circumstances of each project, a due share of the funds required.

I am indebted to the House for listening to me so long and with such patience this afternoon. In conclusion, I think it must be a matter of gratification to the House that we have been able to-day to consider what I would suggest are important and far-reaching proposals relating to civil aviation. This was surely the real and beneficent object which science and invention intended for mankind in the air, and aviation was meant to link the nations in the bonds of friendship and good will. The introduction of the Bill, at any rate, demonstrates that, despite our urgent military preoccupations, we are not neglecting the importance of British civil aviation. With our scattered Empire this is of particular moment to us, and flying must play an increasingly important part in binding the Empire still closer together. We are not, perhaps, too optimistic when we look forward to the time when the production of our military aircraft will be less urgent and when there will be an increased demand for civil aircraft throughout the world. Are we not rightly looking ahead to the time when our country should take, in this also, a leading part and be able to transfer some of its present great efforts and organisation to the civil field? These proposals, it is true, mean a new pattern into which important parts of our civil aviation organisation are to be set, but we have to plan ahead and adapt our methods and machinery to the age and conditions under which we must pursue our endeavours, and I suggest to the House that this new corporation will enable us to overcome many of the difficulties which have hitherto delayed the advance of British civil aviation, that it will enable adequate finance to be employed on reasonable terms and long-range plans to be projected, and also that it will assist us to obtain aircraft in keeping with the high engineering achievements of this country.

Mr. Montague

May I ask a question in reference to an important omission from the right hon. Gentleman's speech, especially in view of recent events? Will he state what is to be the policy of the corporation in respect to trade union rights, not only regarding pilots but also the ground staffs?

Sir K. Wood

I will ask my hon. and gallant Friend to deal with that when he comes to reply.

5.3 p.m.

Mr. Lees-Smith

I beg to move, to leave out from the word "That," to the end of the Question, and to add instead thereof: this House cannot assent to the Second Reading of a Bill which fails to establish a national unified air transport system to be operated solely in the public interest, and regrets that in the financial arrangements for the acquisition of certain undertakings His Majesty's Government have permitted speculative private profits resulting in an excessive capital burden. I listened to the early part of the right hon. Gentleman's speech with a good deal of enjoyment and pleasure and sympathy. This is a Bill for the purpose of transferring the marvellous expanding industry of civil aviation from private enterprise to public ownership, and, so far as its general purpose is concerned, my hon. Friends and I will give it our support. The Bill is an example of a strange spectacle which the House and the Government have presented for the last four years. When the subject is discussed in the abstract on Wednesday afternoons and in evenings on Private Members' Motions, the Government always stand forward as the champions of private enterprise and competition. Having done that, they spend the rest of the Session in passing Bill after Bill to help industry after industry to get rid of private enterprise and competition which is bringing them to disaster. In previous Sessions we have had the fishing trade, the shipping trade, the coal trade, iron and steel; last week it was the cotton industry, and now the right hon. Gentleman proposes to adapt the same principle to civil aviation. Indeed, when he began giving his reasons for the advantage of public ownership he really became quite lyrical. I thought he was going to burst into poetry. When I heard him speaking of the great advantages of centralised control and concentrated management, forward planning and care for the national interests as distinct from private interests, he reminded me of the very first speeches on these subjects that I heard 35 years ago in Hyde Park by the late Mr. Keir Hardie. But, when I come to look at the details of the Bill, the right hon. Gentleman is a very refractory and unwilling pupil, and he will have to do a good deal better than this before he can expect us to address him as "Comrade Wood."

We have certain objections to the structure of the Bill, but our major objections are to its financial foundations. He said something about the possible structure on which a Bill might be founded, and, indeed, there are two methods by which you can place an industry under public ownership. You can adopt the method that is adopted in the Post Office—have all the funds provided by the Government, have it responsible to this House and open to detailed questions in the House. That is a good system. I think it is one of the reasons why the Post Office is regarded by the country generally with pride and esteem, because it has a responsibility to this House and questions in the House, and more particularly the liability to questions in the House, keep the undertaking continually on the alert. But there is an alternative method, with which we are perfectly willing to see experiments made, and that is the method of a public corporation, of which a fairly good example is the London Passenger Transport Board. My impression is that, if you have a public corporation, it will not be found in practice to be so subject to detailed questions in the House as, say, the Post Office is. The London Passenger Transport Board and the B.B.C. are not directly responsible to the House, but they have the advantage of independent commercial management.

Taking the name of the new institution, the British Overseas Airways Corporation, I thought at first that it was going to be on the model of the London Passenger Transport Board and, if it had been simply that, I should have accepted it, but, in fact, it is not. When you look at the Bill in detail you find that this corporation is not to have rights of independent, commercial management. It is not to be comparable to the Passenger Transport Board. The capital is practically provided by the Government—it is guaranteed by the Government. The Board itself is directly appointed by the Government. The number of its members is determined by the Government, and I presume that they are subject to reappointment and dismissal by the Government. It cannot provide working capital, it cannot manufacture equipment and it cannot extend its services without the consent of the Secretary of State. In fact, this new corporation is in practice a Department of the Air Ministry, but it will not be subject to the same close control by this House as if it were a Department in name as well as in reality. I believe it will be found to have the disadvantages of both systems without the advantages of either.

I will give one example of a Clause which has been introduced into the Bill which could not have been introduced if it had been a direct Air Ministry service or under independent commercial management. In past years there have been a great many criticisms of Imperial Airways on account of the speed of the machines and their up-to-date character, and Imperial Airways has always replied that its machines are not its own responsibility. They are manufactured by an industry in which it has no share. Under those conditions may it not be very wise and advisable in future years for this corporation to have power to manufacture its own machines? It has power to manufacture equipment—to manufacture parts. Might it not be advisable that it should be able to assemble the parts into the complete machine? The Bill lays it down that the corporation shall not manufacture aircraft. Why not? The War Office has its own ordnance factories. The Admiralty has its own shipyards. If this were a department direct of the Air Ministry, you could not impose that limitation on the Air Ministry. The Post Office manufactures a large part of its own plant. If it were a perfectly independent corporation, like the railways, it could manufacture its own implements, as they manufacture their engines and rolling-stock. It is half-way between the two, and this is an example where it has neither the advantages of public ownership nor of independent management.

Mr. Simmonds

Has the right hon. Gentleman noted that, owing to the peculiar circumstances and technical development of aircraft, not even the Air Ministry takes to itself the privilege of manufacturing aircraft? Therefore he cannot say that, if the Air Ministry were to run civil aviation, it would in fact manufacture aircraft, which the corporation cannot do.

Mr. Lees-Smith

Perhaps it does not, but it is a point frequently discussed in the House whether it should, and undoubtedly if there were a change of Government it very likely would. Here is a Statute which says that the corporation shall not manufacture aircraft. If a Bill were introduced laying it down that the Air Ministry or the War Office or the Admiralty should not manufacture for itself any implement required for its own service, that Clause would not have a ghost of a chance of passing through the House.

Lieut.-Colonel Moore- Brabazon

The London Passenger Transport Board was prohibited from manufacturing, and the London Transport Bill was promoted by the Labour party.

Mr. Lees-Smith

It was introduced by the Labour party, but they did not carry it through. It emerged in its final form as the product of the present National Government.

I come now to the financial provisions. Let us begin with the broad facts of the situation. These are the facts on which the second part of our Amendment is based. I lay it down as a proposition that when the State acquires an undertaking, it ought not to pay more for that undertaking than private individuals or any commercial company would pay. It is intolerable that because the State is going to acquire an undertaking, the value of the shares should rise and that more should have to be paid by the State just because the Government is the purchaser. Let us look at what actually happened. I am dealing only with the finances of Imperial Airways. I cannot take an example from British Airways because it is a private company and its finances are not open to public examination. But taking Imperial Airways, we find that on the morning of nth November, 1938, the shares stood at 25s. 3d. There are about 1,623,000 shares, and that was the market valuation of the whole undertaking on that morning—a little over £2,000,000.

That, as I say, was the valuation of the company according to the market, before the Government made any announcement that any merger was to be formed. That afternoon in this House the announcement was made that this new merger would be formed and as a result the shares rose from 25s. 3d. to 29s.or 30s. That meant that the public were taking it for granted that the Government were going to be squeezed. The shares rose because that was the market estimate of the increase of price which the Government would pay when the financial arrangements of the corporation were complete. The statement was made that the corporation would be formed. It was then said that the actual price to be paid for the shares would be stated later, but it is clear from this figure of between 29s. and 30s., that that increase represented what the market expected the Government to pay. I say that never was there the widest surmise that the Government would suddenly decide to pay 32s. 9d. I say that no shareholder, no dealer, no stockbroker and no member of the public ever had the slightest expectation that this gift, as from on high, would be distributed to the shareholders.

I think I can show that these were rather peculiar events which took place on the Stock Exchange that morning when the final announcement was made, and I should like some explanation from the Government of those events before this Debate comes to an end. The announcement was made on 12th May, in the afternoon, in this House. At that time the shares stood at between 29s. and 30s. On the morning of 12th May, however, before any announcement had been made in this House, before any dealer on the Stock Exchange, or any member of the public knew of it, the shareholders of Imperial Airways had received a letter from the board, written on the day before—11th May —telling them that the Government would pay 32s. 9d. They were the only people who knew. They are not simple people, and naturally a considerable number of them immediately telephoned to their stockbrokers to buy up these shares at 30s. They did so throughout that morning and large sums of money passed because these people alone knew what the Government were going to pay.

Sir Patrick Hannon

What is the right hon. Gentleman's justification for the statement which has has just made? It is a very serious statement to make, that those responsible for the reconstruction of the finances of this undertaking gave some information which led to an excessive price being paid. The right hon. Gentleman should not make a statement of that kind to the House of Commons unless he is prepared to support it by evidence.

Mr. Lees-Smith

What I have said—and I hope the hon. Gentleman will follow me in this—is that the Minister made the announcement on the afternoon of 12th May and that the shareholders received the letter to which I have referred on the morning of 12th May. The letter was written on nth May. The hon. Gentleman asked me for proof. My proof is that I have the letter here and that it is dated from: Imperial Airways, Limited, Airways Terminus, Victoria, S.W.11. 11th May, 1939. It begins: Dear Sir. I am directed by the board, etc. This is the relevant passage: The terms of the offer subject to the approval of Parliament are that the corporation, as consideration for taking over the assets and assuming the liabilities and obligations of Imperial Airways, including transactions of the company since 1st April, 1938, shall pay the company such sum of money as will permit the payment to the shareholders of 32s. 9d. for each issued and fully-paid ordinary share of £1. That is my proof and I hope the hon. Gentleman is satisfied. I gather that he is. As he says, it is a very serious matter. Let the Government treat it as a serious matter. They have made no protest hitherto and have given no explanation to the House of what happened on the Stock Exchange when these dealings took place and this extra 2s. 9d. or 3s.was made by a number of people. When the jobbers who sold the shares found out later, that the shares had been bought at 30s.by those who knew that the price was going to be raised, they did not like the transaction. I am not familiar with the Stock Exchange but I have made very careful inquiries into this matter. I am told that it is very seldom that a jobber will go to a dealer and ask him to undo a bargain, but jobbers did so on this occasion. They thought it was unfair and numbers of them went to the stockbrokers and asked them to undo these transactions on the same day. Those who had already informed clients of the prices at which they had bought, could not do so, and this speculation in shares, to which we refer in the Amendment, actually took place.

This wants explanation. This, as I have said, is Imperial Airways. We have had to complain of it before, and we complain of it again. I understand that some explanation has been made to the Committee of the Stock Exchange but the shareholders will get the extra 2s. 9d., not only on their own original shares but on the shares which they bought as the result of their private information. I say that this is a subject which does not fall to be dealt with by the Stock Exchange alone. This is a rather unsavoury and reprehensible event, which concerns the Government itself, or which concerns a transaction with which the Government is indirectly connected. I think Imperial Airways should have made an explanation, not only to the Stock Exchange but to the Government and I hope that before to-day is out an explanation will be made to this House. All this shows how unexpected it was to industrialists and to the Stock Exchange that the Government were going to distribute this largesse to the shareholders of this company. What is the result? The final result is, as I say, that the shareholders were paid 32s. 9d. and that these 1,800,000 odd shares have cost £2,600,000 or a little more, which is £600,000 more than they could have been bought for before the public announcement of this merger was made in this House.

Mr. Assheton

Does the right hon. Gentleman suggest that it would have been possible to buy the number of shares required, on the market, on that date?

Mr. Lees-Smith

I do not, and I am coming presently to the right hon. Gentleman's defence of this valuation. But I have laid it down as a proposition that when the Government buy shares, one of the factors which ought to be taken into account in determining the valuation, is that the price should not be more than would be paid by a private individual or by another company which was absorbing the company in question.

Mr. Assheton

I agree.

Mr. Lees-Smith

I have given that account of what took place and I suggest that it shows how fortunate it is to be supported by the financial Press because this has not been commented upon by the financial Press. I do not think the transactions to which I have referred have been even mentioned in the financial Press, whereas I believe that if this enormous sum of public money had been handed over, and if this transaction had taken place under a Labour administration, those very financial papers would have tried to hound them out of office as wasteful spendthrifts unworthy to govern the country. The right hon. Gentleman has given us his explanation, a fairly careful explanation of how this particular sum was reached—this sum which, I say, was £600,000 more than the market valuation of these shares before the formation of the merger was announced in this House, What is his explanation? He says that there was an examination made by accountants of the various balance sheets of this company; that various assets were taken into account; that this was the figure finally reached, and that the market price of the shares is quite irrelevant to the final figure.

The right hon. Gentleman speaks as if a valuation by accountants were some process which gave you exact results and results which you could not question. But, as a matter of fact this kind of valuation by accountants only gives you a vague rough-and-ready figure which you are not entitled to take, without also taking into account other considerations such as the value of the shares. They try to value tangible assets such as stock in trade and there are also intangible assets such as goodwill. A number of items were set down in the balance sheet as worth nothing, on which, as the right hon. Gentleman said, a value was finally placed of £170,000. You cannot depend solely upon that kind of valuation by accountants. Differences of opinion between different accountants would easily give you variations of 20 per cent. to 25 per cent. in the valuations put upon the shares of an enormous company like this. For that reason I claim that, while the value of the shares in the market at the time may not be a complete indication, it ought to give a ceiling figure beyond which the Government should not be expected to go, and, once again, I lay down the proposition that there is no reason why the Government, in any circumstances, should pay more for these shares than an individual would need to pay for them if he bought them, in the ordinary way, through the Stock Exchange on that morning.

I was interested to follow the detailed account which the Secretary of State gave of the manner in which the negotiations were conducted for the Government because my opinion is that if negotiations are conducted in that way, the Government will always have a bad bargain made for them. The negotiations were conducted, the right hon. Gentleman says, largely through an independent firm of accountants, Messrs. Thomson, McLintock & Co., who acted more or less in an arbitral capacity in this transaction. On the other hand Imperial Airways were represented by their own accountants I remember a phrase in the Cadman Committee report in which they pointed out that Imperial Airways was a corporation which had always proved itself to be very unyielding in negotiations. So you had the unyielding accountants of Imperial Airways on the one side and Messrs. Thomson, McLintock, & Co., representing the Government, on the other side. In my view the Government ought to be represented in this kind of bargaining by an authority representing the Government themselves primarily, and not by independent accountants from outside. The proper people to conduct bargaining of this sort are the Treasury, and if the Treasury would deal with these companies with the same keenness as they deal with their brother Departments, they would not make a bargain like this.

Sir P. Hannon

Is not the right hon. Gentleman aware that these outside auditors stand in the first place in their profession?

Mr. Lees-Smith

I do not make any criticism of their system of accountancy, but I say that Imperial Airways in these negotiations were represented by their own officers and the Government ought to be represented by their own officers and not by any outside body. Take the case of the Post Office. This kind of transaction is nothing to the Post Office. It has engaged in negotiations with the cable makers ring, for telephone lines for overhead cables and for the apparatus needed for carrier waves, involving at least £20,000,000, compared with which this £3,000,000 is quite insignificant. Does the right hon. Gentleman think the Post Office would leave that sort of thing to outside accountants? They would never dream of doing so. The Post Office has its own Accountant-General and staff, and its own stores department, and I remember that the late Lord Inchcape, the first Lord Inch-cape, who spent many years in negotiating contracts with the Post Office on behalf of the P. & O. Line, telling me, when I was at the Post Office, that he had always flattered himself that nobody had ever got the better of him excepting the Post Office, which, he said, was the fiercest bargainer in the land. If the right hon. Member had not given this work to Messrs. Thomson, McLintock and Company, but had called in the Accountant-General's Department of the Post Office, he would have saved the nation hundreds of thousands of pounds. This is an example of what has happened before. We are buying this company at an inflated price, but it is the old story, on a smaller scale, of the National Telephone Company, it is the story of the London Passenger Transport Board, and it is what we always see in such cases. Public ownership is advocated and set on foot for the reason, which the right hon. Gentleman has explained, that it will give great economies in administration, but it is never tested out on fair conditions, because although it does give those economies, the economies are skimmed off by the Government in advance by taking the opportunity of handing over national assets to the shareholders of a private concern.

5.35 p.m.

Sir Hugh Seely

I shall not vote for this Bill, though not for the-same reason as that suggested by the right hon. Member for Keighley (Mr. Lees-Smith), who has just sat down. I was staggered at this idea, which is now put forward on behalf of the Government, that everything is right when you get nationalisation. Personally, I do not believe in it, and I am not one who wishes to extend it. The right hon. Member for Keighley made the most damning case against the Bill, but when he came to tell the House why he did not want to vote for it, I did not think he was very clear as to how he would have carried through this operation, and how wonderful it would be for the airways of this country if they were run on a national basis. He referred to the Post Office and the late Lord Inch-cape, who, he said, had found the Post Office the worst people to deal with. All that I would like to say with regard to that is that the late Lord Inch-cape did not die in great poverty and that the passengers on the steamship company which he ran were never very comfortable.

There are three questions in connection with this Bill: (1) Why has it been brought in? (2) The methods which have been employed to bring it in; and (3) What good will it do towards building up what everybody wants, namely, our Imperial air routes and the civil air routes in this country? The Bill has been brought in largely because of the Fisher Report, the Hambling Report, and the Cadman Report. It is curious, when you read those reports, to find the very strong criticism running through all of them against Imperial Airways, which are now to be made the big company, and against this system of subsidies to make it a success from an efficiency point of view. Whatever other people may think, certainly my hon. Friends and I and many people in this country do not believe that you will get real efficiency if it is based on a subsidised line. The Hambling Report refers to difficulties in such cases and tells of people who receive subsidies being very apt merely to continue just to make those subsidies, and all initiative dies. I agree with the right hon. Member for Keighley to a large extent that if you try to run both systems, you will not get benefit from either of them. You must either have the one, with initiative and drive, or the other, which will be pure State control.

These three reports have resulted in this Bill, and I do not think that anyone can really think that the way in which the Bill has been brought in is very good, with this valuation framed merely on the case of Imperial Airways and done by Messrs. Thomson, McLintock & Company, and the results which came from the enormous increase in what the public thought the value of this company was. I agree that you cannot say that what the shares are stated at on the Stock Exchange is necessarily the value of the company. That can quite obviously change to a large degree. In the case of the other company, although it is a private company, anyone who has seen the balance-sheet knows that it is not a question of shares. Anyone who knows that balance-sheet must know that that company was absolutely "broke." It had no money at all, and it was practically in liquidation. I am prepared to listen to anyone who likes to say that that is not so, but it is a fact that this company was "broke." It has now been taken over by the Government at the enormous figure of, I think, 15s. 9d. per share, and it must cause a great feeling of unrest that, when the Government wish to buy two companies to form a corporation, the financial arrangements are made in this way.

We in this House have a right to ask for more information than we have had on those points which were made by the right hon. Member for Keighley, as to what was the true state of the other company, because we have paid an immense sum of money, and it is those questions which cause such unrest. The three Commissions that we have had all showed us that we have to face the fact that civil flying, unless aided by the State, has great difficulties to contend with, particularly in Europe. I am not saying that you do not have to have some State assistance. They have been able in America, with longer routes, and with one country, practically, operating, to avoid what you get with another country competing, and it is no good trying to contend that there have not been direct subsidies from those other countries which we have had to face. I do not think, remembering the Debates in this House, that anyone can say that it was purely a question of money that put Imperial Airways where it was. We remember the Debate on pilots. Everyone who has flown by Imperial Airways knows the time, which has not gone yet, when there was a great deal of real inefficiency, with old-fashioned machines, which are still operating on lines such as that from Paris to London.

There was an answer given the other day by the hon. and gallant Gentleman the Under-Secretary of State that you had to have on the Paris-London line the old Hannibal machine, on which, hon. Members may remember, a dinner party was given some years ago to celebrate, I think it was, the 1,000,000 miles that it had flown. This was considered a great record in the history of the company, but to my mind it was a great disgrace, because it showed only too clearly that there had not been new machines coming forward; and it was nothing to boast about. We all thought that that sort of thing had changed, but these machines are still in operation. You have only to go on that line and you will see them now. We feel that merely to take over this corporation with the same people, as we now hear, operating it that operated it before, will be of no advantage. This corporation is really to have no interference, and it makes one wonder whether Imperial Airways is in the right hands at the present time. I know there have been changes on the board, and one hoped that they would been been very sweeping and that the whole policy would be altered, but anyone who has travelled in those machines —and I have, a great deal, one way and another —knows that it has not really changed, and that you have not got the real service which will attract money and make a success.

I cannot believe that the right hon. Gentleman believes in this system of State control, although he tried to cajole the House by saying that he had got Clause 16, and by saying what a great advantage it was that when, through their efficiency, after a certain time, if they made a sum of over one-tenth, one-half of the balance would be paid to the Exchequer. Actually that is a 50 per cent. tax on any efficiency which this company may be able to achieve. I cannot see that there is anything in that Clause about which the right hon. Gentleman, standing, as I presume he is, for private enterprise, should feel reason to boast. There are three points to be considered: Why the Bill has come, which is that there hasbeen a series of muddles and of inefficiency; the way it has been done, which is hardly a credit to the Government; and what it is going to do, of which we only heard something in the last words of the Minister. Personally, I hope that it will do a great deal; everyone hopes that; but I cannot believe that this is the right way to tackle the problem, and I cannot vote for the Bill.

5.45 p.m.

Lieut.-Colonel Moore-Brabazon

We have had two speeches from the Opposition in answer to the very clear exposition of this Bill by the Secretary of State. I was a little surprised that the Leader of the Labour party was unable to give the Bill that party's blessing. Speaking only the other day the leader of the London County Council, the right hon. Member for South Hackney (Mr. H. Morrison) said in the course of some remarks dealing with the personnel of the London Transport Board: There are problems of management as well which are worth consideration. This is important when you have this development of public corporations. The Government are bringing forward yet another, and if you get a Labour Government there will be a whole series of them in the process of socialisation, which will come with great speed. The Labour party are in favour of this type of development, and I think that to withhold their votes because of one special detail of valuation is not to deal with the Second Reading of the Bill as it should be dealt with. That is a question for Committee and nothing else. I should like to say one word in regard to what the spokesman of the Labour party said with regard to manufacture. If we were now in the position of giving powers to the railway companies I do not believe there is anybody who would ever again give them powers to manufacture. Some of the most outstanding things that have happened in connection with the manufacture of engines and rolling-stock would never have occurred if railways had not had the right to manufacture. The Transport Board have not been allowed to manufacture. On that point I should like to remind my hon. Friend that in a few years time, when we come to some normal state of affairs, there will be plenty of national aircraft factories up and down the country, and if they like to tender for civil aircraft —well, whoever quotes the lowest price will win. I noticed that my hon. Friend the Member for Berwick (Sir H. Seely) does not like this socialisation of aircraft, and I agree with him on the broad principle, but I think it is difficult for him to put forward an alternative which would really convince the House.

There are one or two things which I should like to say about this Bill. My first point is the dreadful name which has been given to it. I know that a rose will smell as sweet by any other name, but the Government need not have saddled the corporation with the name of a serpent. B.O.A. is really too much —a boa constrictor corporation. Really, initials do mean a lot in these days. My right hon. Friend set up an important committee which is now known as the C.A.D. Committee. Initials do count for something. A little thought and consideration might be given to the question of the title. I shall move in Committee that the corporation be called the Air Imperial Routes Corporation. It will then have the initials A.I.R., which I think sound very well. There is a precedent for changing the name of a company, even the name of a Ministry. I was in the House when the Ministry of Transport was introduced by Sir Eric Geddes, and I think it was introduced as the Ministry of Ways and Communications, but that name was changed in Committee to the Ministry of Transport.

My hon. Friend the Member for Berwick spoke as though one could run this business as an ordinary commercial undertaking. I must remind him that the aeroplane is a very inefficient commercial proposition. It has grown up, much to the disappointment of my hopes, under the stress of a hothouse growth during the War, with the result that it has never really developed upon normal lines at all. The great concentration of the nation was put into aeroplanes at the time of the War, with the result that engines were manufactured quite irrespective of cost. Machines were manufactured irrespective of their having to earn money. The running expenses of aeroplanes are far more than they would have been had they been developed along the ordinary lines. Mr. Holt Thomas, with great vision and great daring, and with all his money, tried to run civil aviation with war machines, with the result, of course, that he failed. But he did have a hope in his heart that one day there would be a divorce between the civil side and the military side of aviation, and we must remind ourselves that nowhere since the War has there been such a divorce. The best example we can show is what happened in America, where there was fierce competition of a private type —admittedly with subsidies —which did produce the modem Douglas machine. That was an enormous advance on anything which had previously been seen, but what was the tragic result? The machine turned out to be the world's best long-range bomber —and back we were again at the old business of developing aircraft entirely for war.

If that competition for technical developments had evolved a machine which could pay its way I should not be supporting this type of Bill at all, but the tragedy is that to-day there is no machine which will pay its way, and we cannot leave the position as we find it, with private companies competing against one another with vast subsidies from the State. That is the tragedy of the whole of this question. If it were only a small subsidy we might go in for the alternative of many different companies, lightly subsidies by the State, which could compete, not along parallel lines but along different lines, whereby we should be able to compare their efficiency and results, but these subsidies are so enormous, the taxpayer is asked to pay so much, that we really cannot face the idea of such companies existing and paying dividends which really, in effect, would be paid by the taxpayers. If the State pays, then the State must control. I think this corporation shows that balance between the hand of the State and the initiative of the private man which has been demonstrated in the institution of some of the great corporations which we see up and down the country to-day. I think it reflects the genius of our race that we have been able to construct that half-way house between complete socialisation, with its rather dead hand, and the initiative of private enterprise. The balance does us great credit.

Transport is a difficult subject when we are speaking about competition. Some people have advocated tremendous competition in transport, even in London. What would have been the result if we had left things to follow their own course? The motor buses of London could have killed the tubes. Would that have been of great advantage to London? Certainly not. Competition in transport means only that one day one particular route will go out of action, and that is not for the benefit of the travelling public. The position is different from that in ordinary trading, and for that reason I would hate to have seen private air companies subsidised by the State running against each other, anyhow on parallel lines.

Mr. Bracken

Some of the largest subsidies are paid to shipping lines. Does the hon. and gallant Member suggest that we should have one shipping corporation?

Lieut.-Colonel Moore-Brabazon

No, I do not, but in the case of shipping there is no subsidy on the scale which this system of transport envisages. The shipping companies are certainly fighting against each other, but the subsidy has only been given to help them to keep their heads a little more above water.

I do not want to become a sort of civil servant and say, "There are two points here," but I do want to draw attention to the fact that two important things have to be considered, one the running of the operating company and the other the production of the aircraft for that company. They are two separate things. The operating company is not to make aircraft. If the present company had machines which were 'way ahead of the world, and which were thoroughly efficient, they could run their enterprise a great deal better than is the case at present, but one of the troubles of this country is that our machines are frightfully out of date. The Secretary of State had the vision to appoint a Committee for the Production of Civil Aircraft and we must consider this Bill with what is to be found in its recommendations, because the things go absolutely side by side. On page 4 of its report we find that the terms of reference are: To consider, with the proposed merger of Imperial Airways and British Airways in view "— showing that they knew it was coming about — how best to improve the co-ordination between the aircraft constructors, air line operators and the Air Ministry in the production of civil air lines and how development work could best be inititated, controlled and financed. This is a document which I would ask everyone interested in this problem to read. Let hon. Members notice what is said on page 10: Unless the Government is prepared for many years to come to furnish considerable sums for civil aircraft development in addition to the subsidies to air-line operators, there is little or no hope of this country winning a leading place in civil aviation. Again, on page 12, the Committee say: We would also emphasise once again that no co-ordinating machinery can in itself remedy the backward state ofcivil aviation in this country. This can only be done by giving from public funds generous assistance towards civil research and development work and towards the development expenses of new aircraft. Without this there is in our opinion no prospect of this country taking a leading place in the civil aviation world. Even with such assistance on a liberal scale it must be several years before appreciable results can be expected. Those are very serious words. My right hon. Friend said that he was going to implement the recommendations of that committee, but the success of this new enterprise, wrapped up as it must necessarily be with the efficiency of new machines, is rather going to be handed over to the hands of this new committee, and what they will be able to do from the point of view of spending money in development I was not clear about from his remarks. I do not know whether they can embark on great programmes of development and design with State money. Whether that money will be independent of the money given to the new corporation was not quite clear, and I hope the Under-Secretary will be able to tell us more about that later. Consequently, this project is a trinity, though a comprehensible trinity —the corporation, the C.A.D. Committee and the Government, and the machine will work only if the wheels are beautifully oiled by money from the taxpayers. The whole thing really depends upon that. It will be easy to run the corporation; the key of the situation is the new committee, the C.A.D. Committee. If my right hon. Friend will put brains and men of vision there, and give them money, the future of the new corporation is assured; but they cannot make bricks without straw. They cannot be the great overseas development corporation that we hope if they are not able to have very good machines.

To me, this is a day of regret and also a day of great pleasure. I feel relieved that from now on we shall see that thing happening for which I have been hoping all my life, the divergence between military aviation and civil aviation. The Government, the House of Commons and the country have hitherto always looked upon civil aviation in the same way as a cow looks at a passing train —" very wonderful, but nothing to do with us." This matter is certainly of interest to us because it is basic to our Empire continuation. By means of this wonderful invention geography has been completely upset. We are no longer separated by distance but only by time. I hate the word "prestige," but I like to bring it in, for the reason that every English aircraft which travels from one side of the world to the other is a little bit of England. England will be judged by that little bit by those for whom that is the only thing they know of England. Wherever they go, English aircraft must be the best and the finest in the world. I have hoped, and I still hope, that aviation is at last to be changed from being a threat cursed by the world to something which will be a benefit. I sincerely hope and pray that these machines of ours which will be flying from one country to another will weave like a shuttle going to and fro the fabric of an internationalism which will bring peace and the blessing of understanding, but we have to start in a big way, with imagination and with money.

I believe we are doing it the right way. I believe that we are starting to-day upon a very big project. I wish that my right hon. Friend could always be in office in this Department to see that the thing gets the push and drive that it ought to have. I only hope that his successor will see it in the same light. Here is the dream; here is what we wanted many years ago. This is what all the pioneers hoped for when they gave their lives. I know that this opportunity is surrounded with difficulties. There are nettles, but we must grasp them firmly with both hands.

6.5 p.m.

Mr. Ridley

Not even my most caustic colleague would have dared to liken the Government to a herd of cows, except for the circumstance that, if they were left to each other, although they might have pride of ancestry they could not have any posterity. The hon. and gallant Gentleman who has just spoken has postulated a political opinion of which, I hope, my hon. Friends will take careful note. It is becoming a danger; it is that we may, if welike, nationalise anything which is not profitable, but woe betide us if we attempt to acquire for the State something which would yield a profit if the State were to acquire it. It means that the whole process of nationalisation is to be prostituted by a Government which does not believe in it in order to relieve their friends of the bankruptcy proceedings which they would otherwise have to experience.

I interrupted the right hon. Gentleman while he was making his statement, not because I wanted to engage in interruption but because I wanted to get from him a little clarification. He was attempting to contradict the view which he knows is held by some hon. Members that subsidy payments to Imperial Airways have made their capital assets, and that the purchase price of 32s. 9d. a share on the capital assets is not only an extravagant price compared with the market value of the shares but is more extravagant when account is taken of the fact that the subsidy payments have helped to build up the market share-value. The right hon. Gentleman referred to the fluctuation in the value of the shares of Imperial Airways, somewhere between 16s. and 30s. but hardly more than 10 years ago —in 1927 —the ordinary shares of Imperial Airways, the 15s. paid up, were standing at 6d. on the Stock Exchange. I ask the Minister how he came to use the strange phrase that subsidies were payments made for services rendered. A subsidy is a payment made in order to bolster up an undertaking that otherwise could not continue. A separate payment is made for services rendered which is not to be confused with a subsidy. The two things are very distinct and can easily be separated.

There is some confusion on this point. Perhaps the Under-Secretary will tell us what payments have been made to Imperial Airways since the formation of the company by way of subsidies, and what additional payments have been made for whatever services Imperial Airways have rendered to the State. If the subsidies were not necessary as subsidies, they were more extravagant than my hon. Friends assumed was the case. If they were necessary, as I assume they were, for the continuance of the undertaking, they must have formed part of their capital assets, in which case the State are now buying back capital assets to which the State has made a very substantial contribution.

I would ask the Under-Secretary three questions. First, whether there have been any talks with the representatives of the staff with regard to trade union membership. I was a little alarmed at the diffidence of the right hon. Gentleman in replying directly, specifically and immediately to a simple question on this point. I should have thought he could have told us that there would be no bar in respect of trade union membership and organisation, but he left it over for about four hours, when the Under-Secretary will have an opportunity of giving an assurance on that point. Would the Under-Secretary of State make it plain that there will be no obstacle at all in the way of trade union membership or organisation? Will the Under-Secretary say whether there has been any negotiation or conversation with the staff or whether representations have been made as to the superannuation arrangements incorporated in one of the Schedules? I should have thought, speaking with some minor experience in regard to superannuation funds, that it would have been preferable to provide for a new all-inclusive fund for the new corporation, say a new statutory fund, that would have brought into membership all the employés of the two constituent undertakings and all those who have entered into the employment of the new corporation. Perhaps the Under-Secretary will say whether the present staff are satisfied with the arrangements proposed in the Schedule.

I noticed one very strange and unfamiliar omission from the Bill. In his opening statement the right hon. Gentleman referred to the London Passenger Transport Board as an organisation on which, in a general sense, the new undertaking is being modelled. I would draw the attention of the Under-Secretary to the fact that in the Statute which established the London Passenger Transport Board, and in similar Statutes, including the Railways Act, 1921, and in all local government legislation, there is provision for compensating those persons whose services may not be required by the new undertaking or who will be adversely affected by their transfer to the undertaking. I see no such provision in the Bill. The Under-Secretary may say that there will be no need for a provision of that kind, but it is very dangerous to rely on that kind of assumption and to omit from the Bill such a very important provision.

My interest is further increased by what hon. Members will find on page 40 of the Bill in paragraph 4 of the Fifth Schedule which reads: Any person who is, immediately before the appointed day, in the service of the company and does not enter the service of the corporation, shall — It does not say for what reason he does not enter the service of the corporation, and it does not say: who does not enter the service of the corporation of his own volition. It may, in fact, be the case that the new corporation may determine that it cannot employ a person at the age of 45 or 53 or some other age short of 55 years of age, and it may, in those circumstances, dispense with those services without compensation and with loss of pension and of tenure. That sort of insecurity is implied in this legislation, and I am of opinion that there should be included in the Bill provisions similar to those included in the London Passenger Transport Act.

The Bill is the kind of legislative curiosity to which the Government are now accustoming the House. It contradicts all their public declarations and violates all the cherished convictions of the Tory party. There are, in principle, two outstanding economic phenomena. One is that public ownership is being used more and more to bolster up a weakening capitalism. The other is that public ownership of a bastard kind —I use the expression which the hon. Member for Oxford University (Mr. A. Herbert) used in this House some time ago without arousing the displeasure of the Chair or of the House as a whole —a kind of bastard public ownership is being used in practice by a Government professing not to believe in it in principle; and it is to be assumed that it is not being used in the right way, for no one who does not believe in doing a thing in the right way can manage to do it in the right way. That is the reason why the Bill does not take the form that it should take, and why my right hon. Friend has moved the reasoned Amendment which is now before the House.

Many years ago in this House there was a brilliant but rebellious Member, whose one-time constituency, curiously enough, is at this moment vacant because of the lamented death of one of our colleagues on these benches —the constituency of Colne Valley. I remember being at a meeting addressed by Mr. Victor Grayson when he was asked, "Do you regard the Post Office as Socialism?" He replied, "Well, I once knew an old lady who was very hungry. She prayed very hard for bread, and a loaf came down the chimney, all covered with soot. The Lord sent it, but the Devil brought it." We have a spate of this inconsistent legislation. There died a few days ago a gentleman who at one time occupied ministerial office and sat on the benches opposite, and who piloted to the Statute Book probably the greatest measure of public control, apart from actual public ownership, that this country has ever seen, namely, the Central Electricity Board. And that gentleman was at the same time the President of the Anti-Socialist Union and quite unconscious of his inconsistency.

We have had Governments professing not to believe in the principle but bringing into practice the sort of public ownership or control that is characterised by the Central Electricity Board, the British Broadcasting Corporation, and the nationalisation of mining royalties, and at the time of my election to this House the greatest disservice was done to my opponent, who proclaimed with fervour that the nationalisation of any part of the mining industry would be the gravest possible disaster. The result was a majority of more than 16,000 against my opponent. We have seen an ever widening measure of State control and State assistance such as would make Salisbury and Balfour and even Cobden and John Bright sleep uneasily in their graves. When I heard the hon. Member for Berwick-on-Tweed (Sir Hugh Seely) addressing theHouse, I could almost have closed my eyes and imagined that Cobden or John Bright had come back. In the face of growing and intensifying economic difficulties, in the case, for instance, of coal and transport, any Government, no matter what its professions and convictions may be, will be bound to apply some form of public ownership in practice, because it will be, as in this case, the only solution for the immediate problem. But doing the right thing in the wrong way, as is being done in this case, is nearly as bad, as Lincoln said about old John Brown, as doing the wrong thing itself.

No one who has read the Cadman Report can fail to see that private enterprise has not enough enterprise to nurse an infant undertaking like civil aviation, for the very important reason, if for no other, that it cannot find the investor who is willing, in a case of this kind, to wait for a long period of development and research. The investor must have an immediate return on his money; he must have his 5, 6 or 7 per cent. at the end of the first financial year; and in these circumstances there can be no considerable expansion and development of infant undertakings of this kind except under some form of public ownership and public control, and with some financial underwriting on the part of the Treasury. As has been said once or twice, even from the Liberal benches, the record of civil aviation under private enterprise, which is so clearly described in the Cadman Report and is so much within the personal experience of many Members of the House, is a record of poverty and inefficiency, of old-fashioned machines, of inadequate services and of unsatisfactory management, In these circumstances the State has no alternative but to come to its aid with the kind of subsidies that, so far as Imperial Airways are concerned, have been poured out during the last 10 years with no kind of State or Treasury control. The one redeeming feature of this Bill is that at least it gives the State some control over the money it is expending in this direction.

I am unable to reconcile some of the figures which are given, and I would beg a little help from the Under-Secretary in this matter. If he will look at the Air Ministry's statement on page 43 of the Cadman Report, and will total up the figures in column D, he will find that the total comes to £5,603,000. In the Imperial Airways' statement on page 85, I can only make the comparable figure something like £2,500,000 less, namely, £3,153,000. Then, in answer to a question which I addressed to the Minister on 5th June, I got still a third figure, which is not to be reconciled with either of the other two. If the hon. and gallant Gentleman can reconcile these figures for me, I shall be more than ordinarily obliged to him. Whichever of these figures may be the accurate figure, they seem to indicate that we are now buying back, within the terms of this Bill, capital values and profit expectations which the State itself has created by the subsidy commitments into which it has entered. Apparently even the present Government have been bound to recognise that that sort of experience cannot continue, and so a Bill embodying a form of public ownership is now before the House.

I should like to address myself for a moment or two to the wider terms of the Amendment. It does not quarrel so much with the administrative control provided in the Bill; it quarrels with the Bill because it is totally inadequate to the existing situation, because, so far as civil aviation is concerned, it should have been, not exclusive, but all inclusive and all-embracing. I do not know how many internal air line companies there are, but the number must be very considerable, and there must be immense possibilities in the sphere of civil aviation. I have no respect for Tennyson as a poet, though I would not wish to offend the Victorian susceptibilities of any other Member of the House, but I have a very great respect for Tennyson as a prophet, and I have never been able to understand how, in "Locksley Hall," he could say: Saw the heavens fill with commerce, argosies of magic sails, Pilots of the purple twilight, dropping down with costly bales; Heard the heavens fill with shouting, and there rain'd a ghastly dew, From the nations' airy navies grappling in the central blue. Unless there is to be some legislation of an all-inclusive and all-embracing kind, we shall have to go through, in the case of civil aviation, the same experience that we went through 100 years ago in the case of early railway development. Companies were floated to compete and conflict with each other, the investing public was gulled and fleeced in order to satisfy the rapacity of the company promoter. The history of early railway development shows that millions of pounds were lost on one fraudulent prospectus after another in those early days of railway development, to which I would liken these early days of the development of civil aviation. Even Gladstone could see, Tory Minister, curiously enough, as he then was, when he was President of the Board of Trade in 1844, that railways had to be nationalised in order to provide for an adequate measure of development, and there exists on the Statute Book to-day what is known as the Gladstone Act of 1844, which lays down the terms under which railways could now be nationalised if the Government cared to adopt those terms. I say that this industry, which requires the most careful development and research, needs the assistance of the Treasury and effective control by the State, not only over this exclusive area, but over the whole area of civil aviation, both internal and external. Because this half-hearted Measure does not go as far as that, my hon. Friends and I will vote for the reasoned Amendment which has been moved.

6.28 p.m.

Marquess of Clydesdale

I do not propose to follow the argument of the hon. Member for Clay Cross (Mr. Ridley) on the question of an all-embracing Measure. I am afraid I do not altogether agree with him at this particular juncture in the progress of aviation. I listened with great interest to the speech of the Secretary of State, delivered with his usual lucidity, eloquence and charm of manner, but I would like to tell him quite candidly that I have certain doubts as to the wisdom of this Bill. My right hon. Friend pointed out that there would be a great advantage in pooling experience, ground organisation and resources, but he went on to say, or at least I understood him to say, that competition has never really existed between Imperial Airways and British Airways; and that, I think, knocks the bottom out of his argument in this respect. After all, I think it is generally acknowledged that the most efficient air lines in the world are the American air lines, which are run by private companies. The Secretary of State mentioned the American air lines, and went on to point out that such air lines as K.L.M., Swiss Air, and Sabena, are national concerns. These are all very efficient companies, but I rather wish he had given —perhaps he may be able to do so later on —some comparison of the grants that are made to these companies as compared with the grant that it is proposed to make to the corporation, for, after all, it is with these companies that the corporation will be competing.

I do not wish to follow that argument of private enterprise versus nationalisation. I have risen mainly to point out that in this Bill there appears to be a real danger of the corporation interfering with internal air lines. We had a bitter experience in the case of Imperial Airways, which was set up in 1924. The Secretary for Air at that time undertook a flight in the first air liner ever to fly to India. We looked forward then to Imperial Airways giving a lead to the world in regard to long-distance air lines. We hoped that they would connect up the Empire thoroughly and comprehensively. Those hopes have been shattered. Imperial Airways have, to a large extent, developed their lines between London and Paris. That could have been done by much smaller companies. Their association with the railway companies I consider to have been a first-class blunder, and they have been implicated in the intolerable booking ban on travel agencies, which has done so much harm to air development in this country. On Empire air routes, Imperial Airways have been outstripped by K.L.M.; in Europe, they had been a laughing stock until quite recently, when the Empire Flying boats were started; and in this country, I fear, Imperial Airways have been more a hindrance than an encouragement to internal aviation. I believe that the Empire flying boats are a step forward, and I hope that they will be the forerunner of comprehensive expansion overseas.

Empire and internal aviation are completely different, but in this Bill the Secretary of State has power to allow the corporation to interfere with internal airways —in fact, to compete directly with internal air lines. I would ask the Air Minister whether he intends to give unlimited power to the corporation to compete, without reference to the licensing authority which is provided for in the Bill. As I read Clause 29, it removes the present discretion of the Secretary of State to increase the subsidy to internal air lines and prevents him from continuing the subsidy after 1943. Previously, the present subsidy was to have continued until 1953. This Bill may be definitely harmful to internal civil aviation. I have great confidence in my right hon. Friend, but I may not have nearly so much confidence in his successor; and these powers are also to be handed on to his successor. A certain amount of concern has been expressed on one point. After the Bill has passed its Second Reading, the Secretary of State is to move that it be referred to a Select Committee, and that all petitions presented after the Second Reading must be laid within five days. The British Airways Association who represent the interest of internal air lines, are very concerned about this point. It gives very little time for them to prepare their petitions, and I hope the Secretary of State will take that fact into consideration.

I hope that great expansion will take place, but here again we have been disappointed. In the Debate on the Cadman Report the Air Minister was pressed to see that the air line which had been in existence between this country and Norway should continue. A company known as Allied Airways had run a successful air line from Newcastle to Norway, and the Norwegian Government had given them their mail contract. The company had made successfully 160 crossings of the North Sea. I felt that it was extremely important that Norway should be directly connected with this country, for this route was the most direct connection with Helsingfors, Leningrad and Moscow. The only other line was British Airways, and they ran —and still do operate —through Germany. In the case of an international emergency, that line would be stopped. Surely it is of the greatest importance to have an air line running; direct to Norway, and by the shortest route to Soviet Russia, so that it could continue in an emergency. I thoroughly endorse my right hon. Friend's wish that the military side should be displaced by the civil side. I feel that in the case of aviation, more perhaps than in any other industry, it is possible to transfer military side to civil requirements. We all hope that there will be a time when it will not be necessary to apply such tremendous-effort and expenditure to the military side, and when civil aviation will indeed bring countries closer together in understanding and friendship.

6.39 p.m.

Sir Edward Grigg

I congratulate the Secretary of State, without hesitation or reserve, on this Bill. My hon. and gallant Friend the Member for Wallasey (Lieut.-Colonel Moore-Brabazon) said all that I should like to say on the main principle. I have a fear that the critics, including my noble Friend the Member for Eastern Renfrew (Marquess of Clydesdale), have not suggested any possible alternative. I see objections to this course —as to any —but, on the whole, it seems to me to be the most practicable and certain. If the hon. Member for Clay Cross (Mr. Ridley) was astonished at a Government of this character introducing a Measure of this kind, I assure him that he is in for a period of speechless bewilderment during the next 20 years. A great deal more is to be done on these lines, and the hon. Member may prepare himself for surprises. On the question of prices, my opinion would be of no value at all, but I listened with a great deal of anxiety to what was said about the communication addressed by Imperial Airways to its own shareholders before the announcement that the Government were to take over. I hope my right hon. Friend will investigate that. There may be some explanation, but it had, for me, a very unsavoury sound.

I rise mainly for one purpose —to deal with the question of the manner in which this Bill is going to affect the Dominions and Colonies. The concern of the Colonies is a direct one. They can claim to have a great say in civil aviation, inasmuch as some of them were a great deal ahead of the Imperial Government in the early days of civil aviation. I can say with some pride that when I was in East Africa Kenya was doing more for the East African air line than the Imperial Government would do at that time. The origination of these lines is due, to a great extent, to not only the keenness, but the subsidies of the Colonies. I assume that those subsidies, in some form or other, are still going on. I was very glad to hear what my right hon. Friend said about the representation of the Dominions and Colonies on the Board. I believe you will get the close co-operation of the Dominions and Colonies. It will be a wonderful thing if the board can be made representative of all the British-speaking parts of the Commonwealth —and indeed others —in aerial communication and transport.

There is one other point on which I should be glad of guidance. It is another aspect of the same matter. In Clauses 1 and 2 there are references to "the Secretary of State." In Clause 6 the reference is to "the Secretary of State for Air." I presume that, wherever the Secretary of State is mentioned in the Bill, the meaning is the Secretary of State for Air —not any Secretary of State. There is nothing about it in the Interpretation Clause. I take it that the intention of the Bill is that all the powers given to the Secretary of State mentioned are given to the Secretary of State for Air. No one knows better than my right hon. Friend that those powers are very wide. In Clause 6, he has power to discontinue or make any change in any air transport service or other activity which the board are operating. That is a thing that may profoundly affect a Dominion or Colony. I ask him to consider whether it would not be wise to provide that in the exercise of these powers he should share his responsibility with the Secretaries of State for the Dominions, India and the Colonies. I do not think it is desirable that those other Secretaries of State, who are going to be profoundly concerned, should have the right to approach him only as a colleague on friendly terms, and of asking whether he will consider this point or that. They should have a definite right of criticism, and it is desirable that this should be provided for in the Bill. Would my right hon. Friend in Committee give favourable consideration to an Amendment which made that possible —perhaps by inserting in Clause 6 some words about consultation with those other Secretaries of State? If he will do that, he will improve the reception that the Bill will get in other parts of the Empire, and will add very much to the chances that the Imperial Board —which he is so anxious himself to create, by means of appointments —will really, in due course, be realised.

6.45 p.m.

Mr. Benson

The hon. Gentleman the Member for Altrincham (Sir E. Grigg) will forgive me if I do not follow him on the points that he raised. I wish to get back to the main criticism of my right hon. Friend the Member for Keighley (Mr. Lees-Smith) on the financial arrangements arising under this Bill. The Bill arises, not through the sudden conversion to Socialism of the right hon. Gentleman the Secretary of State for Air, but from a realisation that he has to get himself out of the unutterable tangle into which he has already got himself. The situation with regard to airways and the Imperial Airways Company was such that something had to be done. I do not mean to stress the inefficiency of Imperial Airways, as most of the speakers who have spoken to-day have referred to it. One hon. Gentleman opposite referred to them as a laughing-stock, and I think that it was generally agreed everywhere that the company were inefficient and unsatisfactory. The Cadman Report stated that they were rapacious and uncooperative as regards the Government, and inefficient and unsatisfactory as regards the public. They were the chosen instrument, up to a couple of years ago, for an enormous expansion of flying.

In 1937 the Government allowed this company to raise £1,500,000 of capital. It was done by the consent of and agreement with the Government, The price was fixed as to the pound share. This was done in order to facilitate the development of an enormous Empire airmail scheme. The subsidy was doubled. It jumped from £560,000 in 1937 to £1,100,000 in 1938, in which year there was also an enormous hidden subsidy given by the Post Office of an annual payment of £900,000. This inefficient and unco-operative organisation was to become the nucleus of an enormous Empire air expansion. It simply would not work. The people who ran Imperial Airways were the wrong kind of people. They had proved themselves inefficient. The Cadman Report said that, although they were absolutely dependent upon Government subsidies, they were primarily concerned with their own selfish commercial interests. The result was that something had to be done. The right hon. Gentleman, having prepared for this enormous expansion, allowed the raising of £1,500,000 of capital, and made promises of subsidies amounting to nearly £2,000,000 a year, had to do something. When the right hon. Gentleman made his announcement, suddenly and apparently without any serious consideration, the shares of the company jumped by 3s., and when the Government announced the price which was ultimately to be paid there was another jump of 3s. The right hon. Gentleman defended himself by stating that the market value is not necessarily an adequate criterion, and I am prepared to agree, particularly so in the case of a company whose shares have been very largely a gambling counter. The shares of Imperial Airways have fluctuated, as the hon. Member for Clay Cross (Mr. Ridley) said, from 6d. up to 62s. You cannot take the market price as the absolute value, and I am very much of the opinion that, when the right hon. Gentleman made his announcement in November last, the market value was rather a high one.

The state of the company, as disclosed in the accounts issued in November, was by no means rosy. There had been an enormous drop in profits. It is true that they had paid 7 per cent. dividend, but they had only earned 7.8 per cent. They had paid out practically the whole of the profits they had earned, which is certainly not a sign of strength or of conservation of energy. Even the directors had realised that they had to do a little window-dressing, and for the first time they produced a dividend equalisation account by taking £60,000 from the carry forward and £90,000 from contingency. The right hon. Gentleman said that the payments of the Government were not really subsidies but payments for services rendered. It is a matter of definition. The actual position was that this company, so far as its gross revenues were concerned, was dependent entirely for its very existence upon revenues which came from the Government. In 1938 it received £1,100,000 in direct subsidy, and £900,000 from the Post Office, and it received ground services, which, at a very conservative valuation, were worth £200,000 a year. Thus from Government sources it received £2,200,000. The company was, as my hon. Friend reminds me "living on the dole." It could only continue to live in that way, for its commercial income was only £800,000. The Government had created the company and kept it alive, and any further prospects that the company had were dependent entirely upon the Government.

The Government had outlined an enormous scheme of expansion with Imperial Airways as the instrument, but Imperial Airways, as the right hon. Gentleman himself has said, could not possibly carry it out efficiently and economically. They would have had to raise an enormous amount of capital, and the right hon. Gentleman himself said that they could not raise the capital except on onerous terms. If a company can only raise capital on onerous terms, its shares are not worth 32s. per £share; the shares of such a company cannot be worth more than par. The right hon. Gentleman assured us that the company would have to raise £3,500,000 of fresh capital in order to be enabled to carry the proposed development.

Sir K. Wood

The two concerns.

Mr. Benson

The two concerns together. It means that you would have to double the capital of the two concerns. We are told that the material assets that we are getting from Imperial Airways are worth £2,500,000, and we find among those assets flying boats as ancient as the Hannibal. What was the use of pro- pounding a scheme of enormous expansion and attempting to use an instrument like Imperial Airways, whose plant was worn out and whose management was inefficient, presenting them, by virtue of the fact that you give them a 15 years' contract and a guaranteed subsidy, with a commercial asset which you had to buy back at an inflated price? The material and tangible assets amounted to £2,400,000. I asked the right hon. Gentleman while he was speaking what happened to the 25,000 deferred shares belonging to the Government, and he said that it was no use buying these because the money only came back to the Treasury. But these 25,000 deferred shares were worth a good deal more per share than the ordinary £shares. They were, in fact, a very important mortgage on the assets of £2,400,000.

Mr. Duncan

How can a deferred share be a mortgage?

Mr. Benson

It depends upon what terms the deferred shares were issued.

Mr. Assheton

Perhaps the hon. Gentleman will tell the House what were the rights of these deferred shares?

Mr. Benson

I am about to do that. The rights of these deferred shares on winding up were that, after the £1,600,000 of ordinary shares had been paid back £for £, the deferred shares would also receive £for £Any assets remaining would be divided as regards the first £200,000 on a 50–50 basis between ordinary and deferred shareholders, and thereafter on a 75–25 basis. What were those deferred shares worth on the valuation of the price paid of £2,600,000? They were, first of all, entitled to £25,000. Then they were to be entitled to half the first £200,000, and then there was £800,000 to be divided of which the deferred shareholders would get another £200,000. Thus the deferred shares were entitled to £300,000. The right hon. Gentleman said that they did not bother because the money would come back to the Treasury. The money ought to come back to the Treasury. The rights of these deferred shares have, as far as I can see, been entirely abandoned.

I started reading this Bill under the impression that it was a Bill to establish a corporation for the purpose of running airways, but when I came to examine it, I found that the corporation could do practically nothing whatever without the direct consent of the right hon. Gentleman. They can buy property, sell property, provide hotel accommodation and set up committees and promote Bills in Parliament without asking his permission, but when it comes to anything in the nature of flying, they have to get the consent of the Air Minister. And even those very minor powers of which I have spoken are subject to a general consent and power of refusal. In fact, the Minister in his attitude to the corporation reminds me of a fussy mother who said to the nurse, "Go and find out what the children are doing, and when you have found out, tell them not to." What is the use of Setting up a corporation like this without any powers except under special permission? Where does the responsibility lie? We have had enough of divided responsibility in the past. This Bill merely perpetuates divided responsibility. In the past we have had divided responsibility, and a divided incentive; as far as I can see here we have exactly the same thing. If there is any efficiency in setting up a board and if that board is going to be more efficient than the Air Ministry itself, I suggest that we hand over the whole of air rearmament and the whole of the R.A.F. to a corporation. Would that make them efficient? Of course it would not. If you can run the R.A.F., which is an enormous concern, if you can trust rearmament to the Air Ministry, why cannot the Air Ministry run this? Why should you have a board intervening? You have no board in the Post Office, and nobody would suggest that a board should intervene there. Why not get rid of this divided responsibility? Why not let us be in the position of being able to supply criticism in this House when it is necessary? So far as I can see, the only effect of this cumbrous proposal to establish a board, and a board without real powers, is that it will be a useful screen behind which the right hon. Gentleman can, when he wishes, take refuge.

7.2 p.m.

Sir Alfred Beit

I should like to say a few words on the financial arrangements of this scheme, but before doing so I wish to address myself to the first part of the Labour party's Amendment, which seems to express regret that we are not now establishing "a national unified air transport system to be operated solely in the public interest." I should have thought that the responsibility for efficiently developing the air routes to Europe, India, China, Malaya, West Africa, South and East Africa, Australia, New Zealand, Canada, the United States, the West Indies, and South America —indeed the whole globe —would have been a sufficient duty for any single corporation. I am therefore glad that separate and limited powers have been given to the Secretary of State with regard to the subsidising of internal air services.

A previous speaker has already pointed out that these internal air services offer an entirely different problem from the greater duties which attach to this corporation that we are discussing to-day. They have, in the first place, less strategic value, they require quite different types of aeroplane, and in a country like this, with its relatively small distances, its excellent road and rail facilities, and its poor climate, they offer far less commercial possibilities. Indeed, the only successful ventures in this direction have been those where water has to be crossed, such services as those to the Channel Islands, the Isle of Man, the Isle of Wight, and the Western Islands of Scotland. It would appear therefore that the £100,000 available for these services should be quite sufficient. But I would like to know, when the Under-Secretary comes to reply, what the Government propose to do after 1943, when this subsidy is determined. For my part I should like to see the responsibilities of this new corporation limited in certain directions, rather than extended.

I wish to refer especially to Rhodesia and South Africa, where there have been recently negotiations for the return of the Imperial Airways services to the Central African land route. I hope these negotiations will not mean that the corporation will oust all local enterprises from the field. It seems desirable, if the new corporation is to confine itself to obtaining and improving the through-trunk routes, that as much freedom as possible should be left to the local services in their own field. I do not mean to say that every Colony or Dominion served by the corporation should have the right of running its own section of the line, at the sacrifice of efficiency, speed or comfort, but I do urge that we should be careful to see that the through service is not operated by the new corporation in such a way that it gets more of the traffic than properly belongs to a through service, because in the long runthe interests of all are best served by a suitable division of the available traffic between the two types of transport. I therefore hope that the individuality of such firms as Wilson Airways and the Rhodesia and Nyasaland Airways will be maintained. The Bledisloe Commission on the amalgamation of the two Rhodesias stated in their report: Encouragement should therefore be given to the new Imperial Airways Corporation to extend its main trunk routes through the Rhodesias and South Africa on terms which take due account of the 'chosen instrument'. The words "the chosen instrument" in this respect are rather confusing. The Rhodesian and Nyasaland Airways Company has on many occasions been the "chosen instrument" of the Southern Rhodesia Government, and from a strategic viewpoint, being the largest aircraft operating company in the Rhodesias, is the only body capable at the present time of providing a pool of trained pilots. Should the "chosen instrument" of the British Government therefore be allowed to swamp the "chosen instrument" of Southern Rhodesia? I do not think so. On the contrary, I hope that in such districts as those to which I have referred it will be possible to arrange for the pooling of local traffic in such a way as to give maximum assistance to local companies, and I should be very grateful for any assurance to this effect.

With regard to the criticisms that have been made during the course of this Debate on the financial terms of the arrangement we are discussing, the right hon. Gentleman who spoke for the Labour Opposition told us that he was not very well acquainted with Stock Exchange methods, and I must say that his subsequent remarks proved that that was indeed the case. I have great respect for him —I am sorry he is not in his place at the moment —because I studied under him a good many years ago at the London School of Economics, but I am very glad that the subject he taught me at that time was not finance. He attempted to establish the proposition, which he subsequently modified somewhat, that the market value of the shares represents the actual value of the undertaking. If he really thinks that, I wonder if he has any idea of what would have happened to the value of Imperial Airways Shares had the Government gone into the market without warning and endeavoured to buy a million or more shares. The price, I think, would have risen to a far greater level than the actual price paid.

Of course, I do not mean to say that he did not reveal to us a rather unfortunate story with regard to the events of the morning of 4th May, and I hope we shall get some information on that. But I am surprised that he should think that the market price, at a time when the stock market had already been for the previous year in a period of unprecedented slump, should represent the capital value of the assets of the company. He also pointed out how much the shares had gained, but he omitted to say how much on previous occasions they had lost. Does he remember, for instance, that a few monthsprevious, at a time when it was decided to expand the activities of Imperial Airways, the Government had insisted on a new block of capital being floated at 30s. a share when the market price was over £2, and on that occasion there was an immediate slump in the value of the shares? Again, does the right hon. Gentleman remember that, at a time when the first issue in 1923 or 1924 of Imperial Airways shares was made, in spite of the bright prospects presented to the public in the prospectus, the shareholders in point of fact had to wait four years before they got any dividends?

I would like now to leave the Opposition Amendment and to consider to what extent the Bill will solve the principal difficulties from which civil aviation has suffered. I would list some of these difficulties as follows: —(1) a lack of adequate finance and subsidy, having regard to the continually increasing demand for new services, higher speed and the like; (2) a conflict of policy between the changing aims of economy, prestige, commercial success, and achieving supremacy over foreign air lines regardless of cost; (3) a conflict between the relative importance between mails and passengers; (4) differences of opinion as to the greater importance of developing European routes or Empire routes; and (5) inadequate coordination between Parliament, the Air Ministry and the "chosen instrument." I wonder to what extent the Government is satisfied that these difficulties will be got over by the terms of the present Bill.

There is one thing in the Bill with which I am particularly pleased, and that is that the new corporation is empowered to run a school for pilots. In this matter there has in the past been far too great delay. Imperial Airways have waited until several flying boats crashed before starting this much-needed institution. I think most hon. Members know that nine of the 28 Empire flying boats have come to grief, and with the possible exception of one which crashed through ice formation, all these accidents were due not to mechanical, but to human error. This. is an alarming state of affairs, and indicates that at the time when the expansion programme was adopted in 1936 there was a great shortage of pilots. Consequently men were transferred from land planes to flying boats without sufficient experience. Indeed the investigation of these crashes shows lack of experience, and in more than one case these crashes occurred on the first trip of the commander of the flying boat.

In connection with the employment of pilots I would like to refer to Clause 3 (2), which seems to make employment with the new corporation the private preserve of the Royal Air Force and the Auxiliary Air Force. Clearly, the Royal Air Force, with its short-service commission system, should be given every opportunity by the corporation when it comes to employing pilots, but why should they have this exclusive right? What about civilian schools like Hamble where young men are trained for three or more years in every branch of civil aviation, and where training in navigation, which is a most important aspect of training, is every bit as good as that of the Royal Air Force? I do not know whether I have misrepresented this part of the Bill, but it looks as if the pilots to be taken by the corporation in future will have to come out of the Royal Air Force or the Auxiliary Air Force. The analogy to that would be that those who are appointed to the Mercantile Marine should have been in the Navy first.

It seems to me that we are going a great step forward from the financial point of view in introducing this Bill. We are seeking to remedy the handicaps of the past, particularly the handicap of inadequate finance which faced the old Imperial Airways at the start. Everyone knows now what the borrowing powers and the subsidies are to be, but we are not told how near to the maximum the Treasury is prepared to go, although we were informed by my right hon. Friend that the first instalment of Airways stock will be £7,000,000, which is not bad for a beginning. I should be interested to know what sympathy the corporation will receive in regard to Supplementary Estimates under Clause 25. I should imagine that the sympathy from the Treasury in the present state of affairs will not be very warm. An indefinite period must clearly elapse before the corporation becomes self-supporting. The duties of the corporation are incompatible with an endeavour to earn dividends for shareholders, and therefore I welcome the fact that the ordinary shareholders are to be superseded.

Could the Minister give us an undertaking that the new corporation will be given definites instructions as to what it is to do, and then it will be given reasonable freedom of action to do it? Can we hold out any hope that before we set this new corporation on its course, its course is the one which Parliament desires, and that we in Parliament will have only ourselves to blame if the future is not quite as good as we hope it may be. We have been told that there will be greater power in future not only to criticise the activities of the corporation but to ask questions in regard to its activities. My right hon. Friend said that there would be opportunities, as there have been in the past, to discuss these matters on the occasion of the Air Estimates, but shall we be able to ask questions in a more satisfactory manner than has been the case in the past, when those questions have had to be referred to the chairman and the board of directors? I hope that in view of the fact that the Government are now becoming the dominant factor in the affairs of this great concern, it will be easy for us to obtain the information we require in regard to its activities.

I should like to make a small suggestion in regard to the name of the new corporation. The hon. and gallant Member for Wallasey (Lieut.-Colonel Moore Brabazon) spoke of the cumbrous name given to the now corporation. I join whole heartedly in that complaint. Whatever we may have had to say about Imperial Airways, it was a very well known name throughout the world, and I do not see that its successor, the British Overseas Airways Corporation is going to be a very satisfactory name. I should like to suggest as an alternative that my right hon. Friend should between now and the Committee stage consider two other names —the Universal Airways Corporation or, better still, the Royal Airways Corporation, which would have the advantage of having for it's initials R.A.C.

7.20 p.m.

Rear-Admiral Sir Murray Sueter

The hon. Member for South-East St. Pancras (Sir A. Beit) has suggested a new name for the corporation. I would suggest to the Secretary of State for Air that the name should be the British Empire Air-ways Corporation, for short, B.E.A. That would compare favourably with K.L.M. Air France, Swiss Air, and so on. I have read through the Bill very carefully and listened to the able and lucid speech of the Secretary of State. We have to ask ourselves whether the policy outlined in the Bill will provide efficient civil aviation and will ensure that our overseas air transport will be carried out at a reasonable charge. When the Secretary of State for Air was Postmaster-General he set up an air panel to go into the whole question of the delivery of mails, where they could be accelerated by air. That panel sat, and Sir Frederick Sykes and I found that Imperial Airways was rather overloaded, and we suggested that another company should be encouraged. Later, British Airways was encouraged and given a subsidy. They were not in competition with Imperial Airways, because they did not do the same work. They gave us a good deal of comparison data as to how a company should be run, and they were of very great value.

If we amalgamate these two companies, as outlined in the Bill, economically ft will be much better, because we shall be able to pool our administration, operations and staff. There will be the same methods of training of pilots and personnel. It will be altogether more beneficial economically to amalgamate the two companies into one corporation. I see no reason why the new corporation should not be as efficient as the B.B.C. or the London Passenger Transport Board. I would ask the Secretary of State for Air to see that the corporation acts a little more speedily than the Central Electricity Board. It took me 15 years to get electricity installed into my house in the country, after it had been promised by Lord Mount Temple, who was then Minister of Transport, that we should have it very speedily. I hope, therefore, that the Secretary of State for Air will see that the new corporation are a little more speedy than the Central Electricity Board.

Much depends on who are chosen for the personnel in the corporation. I see that there is to be a chairman, a deputy-chairman and not fewer than nine or more than 15 other members of the board. I hope my right hon. Friend will not allow the corporation to be the dumping-ground for ex-governors, or hangers on of any political party who want jobs. You want to choose the members of this corporation from certain business men of great repute, and the remainder should be airmen who have some knowledge of the air —men of great vision. That is what you want in order to make the corporation a success. I hope my right hon. Friend will give me an assurance that live-wire men will be chosen for the corporation, and that some of the members of the board will be representatives of the Empire.

I hope, also, that the Secretary of State will see to it that the corporation set up a planning panel. It is over four years since the hon. Member for Bury (Mr. Chorlton) and myself went to the Air Ministry and had a conference with the Director-General of Civil Aviation about the West Indies. We suggested the establishment of an inter-island air service in the West Indies connecting Antigua, St. Lucia, Barbados, Jamaica and British Guiana. We laid the whole thing before the Director-General, but it was only last Wednesday that the Undersecretary of State for Air said that the Air Ministry recently had a technical expert in the West Indies to go into the whole question. That is four years after we had laid a complete scheme before the Air Ministry. What is wanted is a planning committee to go into the whole question of establishing new air routes. The Australian flying boat Guba has just flown from Australia via the Cocos Islands, the Chacos Archipelago, the Seychelles Islands and Mobassa. There may be alternative routes and other routes that ought to be looked into by a planning committee, particularly a trans-Pacific route. I hope, therefore, the Secretary of State will see that a proper planning panel is appointed.

I should like some assurance with regard to the ordering of machines. The Air Ministry set up a committee to go into the question of the production of civil aeroplanes. Eighteen months ago the members of my Air Committee gave evidence before the Cadman Committee. We suggested that there should be set up a civil aviation development board. I notice now that the Harold Brown Committee have come to the same conclusion, but they call it the Civil Aviation Development Committee. I would suggest to my right hon. Friend that when he wants any constructive proposals he should come to the Air Committee of his own party, because we were 18 months in front of the opinion which has been arrived at by the Harold Brown Committee.

In regard to the ordering of machines I am not quite clear how it is to be done. Suppose you want certain machines for carrying out the West Indies Inter-Island Air Service —amphibian machines. Suppose the corporation wanted £100,000 worth of amphibian machines. Would they go direct to the Air Ministry and say they wanted these machines, or would they have to go to the Civil Aircraft Development Board, and get their concurrence before the Air Ministry gave approval for the order? Suppose the order for these amphibians turned out to be a dud order. Suppose the machines could not fulfil their purpose. Perhaps the engines could not reach the horse power that was necessary. Who would be responsible? Would the Air Ministry. the corporation or the Civil Development Aircraft Board be responsible? These practical points ought to be gone into and made very clear.

Now I come to the internal air service. Will the corporation be able to run internal air services between, say, the Channel Islands, Guernsey and Jersey, and come into competition with existing internal air services? The increased subsidy for the new corporation is, I understand, to be £4,000,000 a year less the £100,000 a year allocated until 1943 for the internal air lines. Did not the Air Minister give a pledge that the internal air services would get the £100,000 for the next 10 years until 1953? We ought to look very carefully into the subsidies that have been promised to the internal air lines.

The hon. Member for Chesterfield (Mr. Benson) made an attack on Imperial Airways. It is the fashion to attack Imperial Airways, but, after all, they have done great service to the State. I think Sir Eric Geddes and Major Woods Humphreys have done uncommonly good work. You have only to look up what happened last year. Over 800 tons of first-class mail were sent to Europe, and between 1,100 and 1,200 tons of first-class mail were sent by air to the Empire. Somebody arranged all that. It is a very great achievement, and represents millions of letters which have been sent all over the Empire and to all parts of the world for 1½d. per half ounce and id. per postcard. I submit that when you close down Imperial Airways the Secretary of State for Air should confer with the Postmaster-General and see if some recognition cannot be given to those men who have been responsible for carrying out such a great achievement. Exactly the same thing applies to the pilots of Imperial Airways who have done very great service, and also to the constructors of the flying boats. I would ask the Secretary of State to make a note of this and see if these services cannot be recognised in some way.

There is only one other point I desire to deal with, and that is Parliamentary control. I think there will be enough criticism in this House when the Secretary of State for Air presents his Estimates. I understand there will be a report of the corporation, and that we shall be able to discuss it. I would ask the Secretary of State for Air to arrange with Mr. Speaker that not too much detail of the internal administration of the corporation shall be allowed to be discussed in this House, otherwise we may get the grievances of pilots and so on put forward, and weshall have a little too much of it. We have had quite enough of Imperial Airways in the past, and we do not want to be overburdened with internal criticisms of that nature. During the War we built up from practically nothing with the good help of the Royal Flying Corps, the Royal Naval Air Service and the aircraft industry, a great air service which was second to none in the world. If we can do that in war time, surely we can develop civil aviation on great lines in peace time. We have the finest pilots in the world, fine designers, great constructors and engine builders. This corporation will have a wonderful opportunity. We want to secure all the air traffic we possibly can in exactly the same way as the Mercantile Marine have been the water carriers of the world for so many years. We want to do just the same in the air, and this corporation will have a wonderful chance. It will have to develop high speed machines for carrying air mails and lower speed machines for carrying passengers and light merchandise, and should carry that all over the world for the benefit of this country and Empire.

7.35 p.m.

Sir George Schuster

I want to intervene for only a few moments. The Debate has covered most of the aspects of the Measure and I rise as one who wishes to congratulate the Secretary of State for Air very heartily upon having brought this proposal before us. One of the criticisms which have been levelled from the other side is that this is a Measure to get him out of the intolerable mess in which the Government now find themselves owing to the relations with Imperial Airways. I do not imagine that the Secretary of State for Air is very much worried by that kind of criticism, because everyone who has examined the history of the relations between the Government and Imperial Airways must be ready to admit that there is some justice in the description of these relations as a mess, from which it is desirable in the public interest we should extricate ourselves. One thing, indeed, which we learn from the history of these relations is that where an enterprise cannot be effectively carried on as a commercial enterprise but must rely on a very large measure of State assistance, it is most undesirable that private shareholders' interests and possible speculators on the Stock Exchange should get mixed up with a venture of that kind. The past history of Imperial Airways shares shows only too clearly what evils may result from that sort of relationship.

I need not take the House over past history. I will only refer, in passing, to those incidents in 1937 when, it will be recollected, Imperial Airways' shares stood as the result of speculation at something like 62s., after they had even been up to 67s. 6d. in 1936, and that when a new issue had to be made and the question of what was a fair value to put on the shares had to be discussed between the company and the Treasury, the decision was reached that the shares ought not to be issued at a higher price than 30s. Hon. Members will probably recollect the unfortunate criticisms to which this circumstance gave rise, and on the ground alone that this new plan will avoid any repetition of such incidents I heartily congratulate the Secretary of State and I heartily welcome the Measure.

The one subject upon which I wish to say something is the price at which these undertakings are to be acquired. I agree with what was said by the right hon. Member for Keighley (Mr. Lees-Smith), that the Government in circumstances of this kind ought never to pay more than a private individual who was making the purchase would have to pay. But the right hon. Member then went on to criticise the Government for doing exactly what a private individual would have done in the circumstances. The Government employed a first-class firm of chartered accountants to make an examination of the company's accounts, to go over its assets, and it is mainly on the basis of the accountant's valuation of the assets that the purchase price has been fixed. I submit that that is exactly what a private individual would have done in the circumstances. A great deal has been said as to the relation between the price which is being paid under the proposal and the price at which the shares were quoted on the Stock Exchange. I put it to hon. Members opposite that that type of argument is extremely misleading. I have been interested in the subject and have taken the trouble to make some inquiry as to the number of shares in Imperial Airways which normally change hands, so as to get some idea of what is the normal market in the shares. On referring to the three leading jobbers in Imperial Airways share market who handle the greater part of the transactions in these shares, I find that during the month from nth April to nth May of this year they bought altogether 9,435 shares and sold 9,877.

I may remind hon. Members that in many cases the same transaction may appear two and three times separately. These transactions took place in lots of 100 to 250 shares, and what we are discussing is what the Government ought to pay for acquiring 1,624,000 shares. The mere fact that in the month up to the nth of May shareholders were ready to sell 9,435 shares at prices less than 32s. 9d. is absolutely no guide at all as to what the Government ought to pay when they acquire the whole undertaking. I think it is true that the vast majority of the shareholders of Imperial Airways were not willing sellers at all, and we must also remember the conditions under which we are living and under which this recent transaction has taken place. We have been living under the shadow of a great international crisis, there has been no reality in the stock markets at all. Some people have been anxious to sell shares. at any price regardless of their value, but on the whole markets have been completely lifeless. The quotations which one sees really do not represent the basis on which dealings in any large number of shares can be put through, and to base any argument as to what would have been a fair price on what has been in fact the ruling quotation day by day for Imperial Airways shares is to use an argument which has no actual value at all.

Mr. Montague

The hon. Member seems to miss the fact that the market has been pushed up as a result of this operation. That makes a big difference to the argument.

Sir G. Schuster

I am not quite sure what the hon. Member has in mind when he refers to the "result of this operation." I am perfectly prepared to admit, as anyone who studies the history of this concern must admit, that any valuation put upon Imperial Airways shares must rest largely on their relations with the Government, and therefore, I think there is a good deal of force in the argument which has been advanced and put to the Government, that they are buying an undertaking whose value they themselves have created. I do not wish to deny that, I am not speaking in any defence of past history. I am addressing myself to the practical question what should the Secretary of State for Air have done when he had taken the decision not to continue a state of affairs which was contrary to the public interest, and that he ought to acquire this undertaking for a public statutory corporation? If you put the question in that way I think the hon. Member must admit that the price you pay must be a fair price according to the present value of the undertaking, even though that may have been built up in the past on the basis of its relations with the Government. That was the position which the Secretary of State had to face and he faced it as any business man would face it, on a basis of valuation and mainly on a valuation of the assets. He arrived at that valuation by means which any ordinary business man would have followed, and I put it to the House that what was the actual quotation on the Stock Exchange for the shares has really no significance at all, and that the Secretary of State is on firm ground when he says that he fixed a fair value according to the undertaking he has taken over.

A good deal has been said about Imperial Airways, but very little has been said about what is being paid in the case of British Airways. It is worth while to pay a little attention to that case because it helps one to see the matter of price better from the point of view of those whose undertakings are being taken over. Imperial Airways are comparatively fortunate. They have been in operation for some time. They have got through the stage of paying out the money which they had to pay out in building up their organisation and gaining experience, and have got into a position where they have built up tangible assets of considerable value. British Airways have been caught at a much more. unfortunate moment. They have not been operating so long. The greater part of what they have paid out in the past has been paid out in running unremunerative services so as to get into the field and build up their organisation. They have not got tangible assets to show for this part of their expenditure. If hon. Members will look at the matter from the point of view of the man who put his money into that undertaking, I think they will appreciate that there is another side to the question.

I have seen the figures in support of the contention I am about to make; the figures can be easily verified, for there is no secret about them. Moreover the people who put their money into British Airways have been the same people all the way through, because it has been a private undertaking, with large financial houses interested in it. It is not like Imperial Airways whose shares have changed hands many times. If hon. Members go back to the beginning, they will find that for what those shareholders are now to be paid 15s. 9d. they have, in fact, spent, if one allows them a reasonable rate of interest on their money, a sum of 27s. 6d. I do not say that the deal has been an unfair one, but if one looks at the matter from the point of view of the people in that undertaking, who were by no means anxious sellers, one sees that there is another side to the question. I can tell the House that there are some very responsible City people who feel that my right hon. Friend the Secretary of State, with the Treasury behind him, has driven a very hard bargain indeed. I would not go as far as to say that. Looking at the two companies, and looking at both sides of the question, I think my right hon. Friend has fixed an extremely fair price, and that it would have been very hard to get nearer to equitable justice than under the scheme which he has put forward.

There is another point I would like to put to the House in connection with the price that is to be paid for these undertakings. It seems to me to be important that we should keep our sense of proportion. We are discussing now the purchase of two undertakings for the sum of about £3,250,000. Those undertakings are going into the hands of a corporation which, as the Minister told us, it is already contemplated will make capital expenditure of a further £7,000,000. They are going into the hands of a corporation which is to have the right to ask for, and I believe to a great extent the right to-control the expenditure of, grants from the Government of £4,000,000 a year. The price we are considering is a question of £3,250,000. Surely that is a relatively small amount and the latitude by which it could possibly have been varied is smaller still. By the most extreme exercise of the imagination as to what my right hon. Friend could have got, always-intending to be fair —and I am sure that hon. Members opposite do not suggest that he should be other than fair —if he had driven the hardest possible bargain, consistent with fairness —by what amount could he have varied the sum of £3,250,000? I suggest that at the very most he might have squeezed down the offer by another £250,000. The statement in the Amendment about submitting this great undertaking to unduly heavy capital burdens really boils down to this, that possibly they might have saved 3 per cent. or 4 per cent. interest on £250,000 a year. If one looks at the matter in that way, one sees it in its true proportion, and then, to say the least, one sees that the wording of the Amendment is based on an exaggerated conception of the position.

There is only one more point —a point of a general nature —in connection with the price to which I want to refer. It seems to me —and I believe the view is shared widely in the House —that, taking into account the way in which things are going, it is quite likely that over the next few years on many occasions private undertakings will, for public reasons, be acquired in a similar manner to that which is now being proposed, so that they may operate not merely from the point of view of making commercial profits, but in order to fulfil some public purpose. If that be the sort of condition in which we are living, I put it to hon. Members opposite that it is very undesirable to create an apprehension that, whenever the State thinks it advisable to acquire a private undertaking, it will do so only on terms which, if they err at all, will err on the side of harshness. I would put it exactly the other way round. I think it would be most valuable and would tend to the continued operation of this kind of undertaking in the best way in the public interest, if the impression were created that when it is necessary to acquire undertakings of this kind for a public purpose, the terms offered will, if they err at all, err on the side of generosity. I believe that would be to the public advantage.

In saying that, I do not speak as one who is defending the capitalist interests as such. I say openly that I should like to see capitalists, men of wealth, taxed as heavily as may be necessary in the interests of the country, and if necessary, for the sake of a redistribution of purchasing power on the proper distribution of which the prosperity of this country depends; but one may feel that as strongly as one can and yet feel unwilling to see any particular class of capitalist enterprise, particularly if it is a class of enterprise which the State is likely to want to acquire in the public interest, selected for penal treatment. A good deal of what has been said by hon. Members opposite seems to me to be based on the view that if these enterprises are to be acquired they must be acquired on harsh terms; in fact, that if there is to be Socialism, or any advance towards Socialism, it certainly must not be "Socialism without tears."

7.54 p.m.

Lieut.-Commander Fletcher

I support the hon. Member for Walsall (Sir G. Schuster) in what he said about the price to be paid for British Airways shares. There is a great contrast between the 15s. 9d. to be paid for the shares of British Airways, which worked up on private money only to a position at which it qualified for a subsidy, and the 32s. 9d. which is to be paid for the shares of Imperial Airways which has always enjoyed a subsidy and which has paid the dividend out of that subsidy which formed the basis of the price of its shares on the market.

There are one or two points I wish to put to the Minister in regard to internal air lines. As I understand the Bill, the Corporation is not to be allowed to run internal air services, but it may do so with the permission' of the Secretary of State, although the Secretary of State certainly did not give us any indication as to what are likely to be his views on that matter. However, in page 30, line 30 of the Bill, it will be seen that the Corporation is to purchase all the assets of Imperial Airways. I understand that those assets include a one-fifth holding in Railway Air Services, so that the Corporation, when it does acquire all those assets, will acquire an interest in Railway Air Services. By contrast, in page 34, lines 25 to 30, it will be seen that the British Airways holdings in Scottish Airways and other companies (in which the London Midland and Scottish Railway also hold stock) are not to be taken over. In fact, I believe that British Airways sold their holdings in Scottish Airways either to the London Midland and Scottish or the Railway Air Services —I am not quite sure which —for £20,000, although previously they had been offered £25,000 by North-Eastern Air Lines, which is, of course, independent of the railways. British Airways did not want to sell their holding and agreed to do so only as a result.of the provisions of this Bill.

In contrasting the treatment of Imperial Airways with that of British Air- ways in this matter, I cannot help asking myself whether, behind this Bill, there is a move to bring all internal air services under the control of the railways, in whose air services the Corporation will have an interest as a result of its purchase of the assets of Imperial Airways, and whose air services the Corporation will probably operate as successor to Imperial Airways, which is already the operating instrument for certain of the internal air lines. In this connection, I note, as did the hon. and gallant Member for Hertford (Sir M. Sueter), that by this Bill the period of the subsidy for internal airways has been cut down from 1953 to 1943, and there is also a rigid restriction on the amount of the subsidy which may go to internal air lines it being limited now to £100,000 although prior to the Bill the amount could be increased at the discretion of the Secretary of State. Those are points in regard to internal air lines as affected by the Bill with which I hope the Undersecretary of State may be able to deal.

Like all my hon. Friends, I am not very enthusiastic about the Bill. I hope that it is, at any rate, a definite indication that the Government have finally settled on a satisfactory long-term policy of development of British overseas aviation, because in the past our civil aviation certainly has suffered from too many changes of policy and too much chopping and changing altogether. About 15 years ago, we had a number of competitive companies. Then there was the Hambling Committee, which set up the principle of the "chosen instrument," that "chosen instrument," of course, being Imperial Airways, and they were given a mandate on the basis that they should try to arrange for civil aviation to fly by itself, without a subsidy, as soon as possible. That pious hope was defeated by foreign competition. Mainly owing to foreign competition, I think, that policy failed, and then came the doubts and disagreements which resulted in the setting up of the Cadman Committee, which showed that development was being hampered by inadequate subsidies, and recommended that the subsidies should be vastly increased and that the competitive element should be reintroduced. We had hardly started on the new policy of increased subsidies and reintroduction of the competitive element when the Government again changed their mind and introduced this Bill, which says that these two services, Imperial Airways and British Airways, shall be married in accordance with the provisions of the Bill.

It is for these reasons, because of these many chops and changes in policy as regards civil aviation, that I think we ought to examine this Bill very carefully indeed where the question of Parliamentary control is concerned. The whole history of civil aviation goes to show that it would not be where it is to-day but for the Parliamentary criticism which has been continually levelled and the interest which Parliament has shown in the matter. As regards Parliamentary control, in line after line of the Bill it is laid down that the new Corporation may or may not do certain things without the consent of, or without consulting, the Secretary of State. I believe that is absolutely necessary in view of the very large amount of public money which is to be used in subsidies, but I am inclined to doubt if the powers that are reserved to the Secretary of State in this respect are of a kind which will enable Parliament to have the kind of control which would be beneficial. I certainly think it is desirable and right that the Corporation should be as free as possible to carry out the mandate with which they arc being entrusted without day-to-day interference by the Secretary of State on matters of routine, but, looking back over past history, we find that matters continually arise in regard to civil aviation which have caused very considerable interest and concern to Parliament, and I think that has been to the benefit of civil aviation.

Parliament has always shown itself very interested in this question of the development of civil aviation, but in the first Schedule of the Bill it is laid down that no member of the new Corporation shall be a Member of this House. I think that is an excellent provision, but I am not sure that we should not do well to have a Member of the House on the board in an unpaid capacity, in exactly the same way that Members of Parliament work on the Bacon Marketing Board, the Pigs Marketing Board, and the Forestry Commission. Members of the House associated with those boards are not finally responsible for policy, but they are able to give us first-hand information about the activities of those bodies when matters affecting them come up for debate. I should like to ask why we cannot have the same thing in connection with this new Airways Corporation, and then in Debate we should have someone on the spot with first-hand knowledge of what is going on who could probably save the House a great deal of unnecessary trouble and inquiry. The difficulty which the Secretary of State will certainly experience in connection with a Corporation of this kind will be that, while he has the ultimate responsibility, he naturally will not want to interfere too much in matters of day-to-day policy, and on that account he will not be always able to deal fully or adequately with criticism that may arise here, criticism which can quite easily develop to a very undesirable extent if it cannot be dealt with as it arises.

There is another point in the Bill about which I should like to ask. Is the Secretary of State really satisfied that the maximum capital of £10,000,000 which is laid down is really sufficient? This Corporation is to have the responsibility not only of operating existing air services to China, India, East and South Africa, but as time goes on it will extend its operations to West Africa, South America, and across the North Atlantic to the United States and Canada. Not only are these additional lines to be operated in the future, but there is to be a general speeding up and multiplication of the existing services. The authorised share capital of Imperial Airways is £5,000,000, the issued capital is just over £1,500,000, of which the market value is about £2,500,000, and there is in addition the capital of British Airways which is to be merged in it. Having regard to these considerations, does the right hon. Gentleman really consider that £10,000,000 will be a sufficient maximum capital for the new corporation, having regard to the very much greater responsibilities that it is to have, and the fact that the Bill is to cover a period of 15 years? I fully appreciate that subsidies up to a maximum of £4,000,000 a year are contemplated, but I should have thought in the long run it might be better, possibly, to provide for more ample capital resources, and make certain savings in the subsidy.

There is one other point concerning finance to which I should like to refer. Clause 25 lays down that there may be supplementary grants in any accounting period if the Corporation undertakes any additional air transport service or other activity which is not included in the original programme, but I cannot see that the Clause makes any provision for other unexpected circumstances which might necessitate additional grants. I imagine that the Corporation will in very many cases be operating in competition with foreign air services and they may find that their revenues are being seriously cut into by such competition, or that their business is being damaged through foreign air services cutting their rates. In such a case what would be the position of the corporation? Whether they cut their rates or not, they might find that they needed a larger grant to enable them to face that competition. I cannot see that the Clause makes any provision for that kind of eventuality. I think these points that I have brought forward are important, and I hope that some of them, at any rate, may receive a reply.

As to the Bill in general, it seems to me to ensure the worst of both worlds. The Corporation is to be run by private money, with subsidies and with guaranteed dividends, but it can take practically no action whatever without the leave of the Secretary of State, and it is to be free from competition. The good points of the Bill seem to me to be that it gives us the basis at long last of a satisfactory long-term policy, and it shows that the Government realise the necessity for substantial expenditure if civil aviation is to be built up and established upon a really satisfactory footing. I do not like the Bill and I shall support the Amendment, but if the Bill eventually goes through, even in an amended form, one can only say that it marks one more stage in the very limping, halting progress of civil aviation, and one must hope, for the good of civil aviation, that the marriage between these two companies which the Bill effects may be a happy and a prosperous one.

Notice taken that 40 Members were not present; House counted, and, 40 Members being present—

8.11 p.m.

Mr. Bracken

Before this interlude, the hon. and gallant Gentleman the Member for Nuneaton (Lieut.-Commander Fletcher) said the House takes very great interest in civil aviation. I am glad to see that it is taking a compulsory interest at the moment in these problems. It is probably a pity in some ways that we do not have a better attendance at these Debates. But the hon. and gallant Gentleman really behaved in a very ungrateful fashion, because he looked the Government's gift-horse in the mouth. It is very wrong that the Socialist benches should criticise this sort of Measure at all. The best that you can say about it is that it is bureaucracy run mad. First of all, it is completely contradictory to the recommendations of the Cadman Committee. I do not quite understand the methods of the Government. They appoint a Committee, it spends a great deal of time in examining every aspect of the problem it was asked to solve, and then the Government scraps its report, and brings in something diametrically opposite.

Some of the arguments used by the Secretary of State in favour of the Bill were not impressive. But I think the Secretary of State can get away with anything. He comes to that bench with the greatest amiability, he nods his head at every suggestion, he keeps the House in perfect good humour, and he gets away with legislation which no other Minister could possibly hope to get through the House. To-day he used a series of very curious arguments. He said, for instance, that because these two companies were subsidised they should be amalgamated. But the Government are engaged in subsidising a large number of shipping lines in all parts of the Empire. Is it suggested that it would be a good thing for Great Britain if you amalgamated all the shipping lines into one company? If it is logical to amalgamate these air lines, it seems also logical to amalgamate all subsidised shipping. But I think logic is not what should really govern us in this matter. What saddens me is that air, the youngest and one of the most complex of all our transport enterprises, and the one which seems to me to have the greatest future of all transport enterprise, should be put under the control of a bureaucracy which can be guaranteed to damp down all the initiative that such a young service requires. It shocks me very much to see Imperial air transport put under the control of these commissions formed on the basis of the B.B.C. and the London Passenger Transport Board.

I wonder if hon. Members are very wise to accept the idea that these boards solve every one of the problems. I remember the time when hon. Members on the Socialist benches were full of praise for the London Transport Board. Do they like it as much now? I know that co-operative associations and trade unions and Socialists in my constituency are condemning it with all their might for having increased fares and not giving proper transport facilities. But this is not really a party matter. I ask hon. Members, particularly Socialist Members, to consider whether we are very wise to semi-nationalise industries and put them under the control of these uncontrollable corporations. I believe it would be much better to socialise them outright, because then we would have some control left, than to put them under the control of what is called an independent board with no shareholders to criticise that board, and few, if any, opportunities in Parliament of criticising them. That, I suggest, is a complete negation of democracy.

Look at the incredible system of committees which is being set up under this Bill. You have first the corporation —then the board to the affairs of which a large part of the Bill is devoted. Then you have the executive which, I presume, will run the business. On top of that you have what my hon. and gallant Friend the Member for Wallasey (Lieut.- Colonel Moore-Brabazon) described as the C.A.D. Committee and, above that, there is the Secretary of State for Air and the Air Council. As far as I can see, the Secretary of State can sack the whole board. It is an amazing system. After all the talk we have had about this great enterprise and the wide powers that were to be given to the board, and the wonderful way in which they would perform once the organisation was set up and all the smoothness with which they would function we have this Bill which enables my right hon. Friend to sack the lot. Some day there may be another Secretary for State. Suppose one of the hon. Members above the Gangway were to become Secretary of State. He could sack the whole lot without any interference from this House. It is, as I say, an incredible position. My hon. and gallant Friend the Member for Wallasey said that this Bill was the dream of airmen, the dream that they had nourished for years. It seems to me more like the dream of the bilious, bitter Karl Marx—

Mr. Poole

A nightmare.

Mr. Bracken

If you like, a nightmare but a Karl Marxian nightmare because the Bill has got none of the virtues, if one can use such a word in relation to nationalisation, and likewise it has none of the virtues of what is called private enterprise. It is, if I may use such an expression on this occasion and in this company, a bastard Bill and will please nobody. It will not work in practice. To set up a board of this type and to put it into competition with the powerful and ever growing American air enterprises is just to subject British civil aviation to one further defeat. If anyone tried to persuade me that the Americans would set up a contraption like this to run their airways, he would have to argue for a long time. At least the Americans believe in the spirit of private enterprise in the air. There was a time when I thought this Government believed in the principle of private enterprise, but I have been learning a lot lately. Ministers on the Front Bench—there are only two of them at present, or perhaps I ought to say one-and-a-half, because there is only a Minister and a Whip —the Ministers who father this Bill, and there is a nice collection of names on the back of it including three Secretaries of State, the Chancellor of the Exchequer, the Attorney-General, the Postmaster-General and my hon. and gallant Friend the Under secretary of State for Air—

Mr. George Griffiths

What more do you want?

Mr. Bracken

What I really want is an explanation. I would ask Ministers to remember for a moment the speeches which they were making about proposals of this sort in 1931. Those were wonderful, and, indeed, moving speehes. I remember hon. Members above the Gangway being condemned on moral grounds for having suggested the nationalisation of the banks —that bogy of the old women in this country, male and female. For my part I believe that it is easier to manage the banks than to manage air transport in the conditions which prevail in the world to-day. It is not a very difficult thing to manage a bank, but I should like to know where the collection of geniuses is to come from, to control this new Imperial Air Board or whatever the Secretary of State calls it. I am shocked to the core by this proposition of a Tory Government. I am deeply sorry that this young industry is to be subjected to this curious bureaucratic type of management which is neither Socialism nor capitalism, which is neither fish, flesh nor fowl, but just a curious crazy experiment which must, in the end, do harm to the air interests of Great Britain. Many of us have a real belief that the air is the most hopeful of all methods of transport for the British Empire. Now we propose to hand air transport over to a board of bureaucrats controlling the crazy contraptions to which I have already referred.

It is indeed a great pity that the Government should do this thing. I really wonder whether the Government can continue for very long to retain the support of Members of the Tory party throughout the country if they are to bring in Pills like this. I often wonder who puts the Government up to Measures of this type. I am certain it cannot be the good Tory Ministers who I used to know when they were so bitterly opposed to nationalisation, municipalisation and every other form of Socialism years ago. Can the inspiration for these Measures come from some of those refugees who are now in high places in the Tory party and the Government —Liberal refugees and Socialist refugees? I am very much afraid that those gentlemen have played havoc with the party morals of the Tory party. In fact, their conduct as expressed in this Bill reminds me of a saying by Mr. Burke: The rats are no longer tolerated for the sake of the ship; the ship is now being kept up for the sake of the rats

8.22 p.m.

Mr. Simmonds

I should like to say not only that I greatly enjoyed the speech of my hon. Friend the Member for North Paddington (Mr. Bracken) but that, very largely, I agreed with it. Having followed closely the development of British civil aviation for the last 20 years —though never having had any financial interest in it —I am dismayed at the prospect which this proposal opens before us. I am at a loss to understand why my right hon. Friend the Secretary of State, for whose achievements in the military sphere, at the Air Ministry, the House on all sides has the highest regard, should have presented a Measure of this kind, which seems to sterilise the efforts now being made to rid British civil aviation of those lets and hindrances so frequently discussed in this House of late.

I believe that my right hon. Friend cannot have realised the full import of this proposal and I take leave to hope that as a result of some of the speeches of this afternoon, he may even yet consider Amendments which would make this Measure more workable. Is it realised that this Measure is, for example, a departure from the recommendations of the Cadman Committee? My right hon. Friend called attention to the recommendations of that committee. I respectfully suggest that he selected the minor recommendations and ignored the major recommendations, and that in the Bill we are radically and fundamentally departing from the recommendations of that committee which reported so recently. Its report was published in March, 1938. It was a committee for which the country had the highest regard. I will briefly remind the House of some of its recommendations. On Page 32 of the report the committee say: British external air transport should be concentrated in a small number of well-founded and substantial organisations. The same external route should not be operated by more than one British company, so as to avoid indiscriminate competition. Imperial Airways should concern themselves primarily with the development of the Empire air services and certain other long distance air services …. British Airways …. should develop the other services in Europe. … For the Government to depart from these well-founded, carefully considered, and universally accepted decisions of the Cadman Committee there must have been some very powerful forces at work, and I always like to know, when policy is reversed, who has been busy reversing it. I think that in this case three forces have been at work. First, there has been the Treasury, and I think the Treasury's part is intelligible, because it has seen substantial subsidies being given and increasing dividends being paid, and I can understand that any Chancellor of the Exchequer would say, "This is not a system which can be allowed to continue," but I do not think that this Bill is necessarily the answer to that protest. Secondly, there was the position of the management of Imperial Airways. For many years they had a monopoly. Recently, and, I think it is fair to say, largely under the pressure of this House, the Government subsidised British Airways. British Airways brought to bear, whatever one may like to say about it, another method of operating British air transport, and that method was succeeding and continuing to succeed. We can understand that a large corporation such as Imperial Airways or this new corporation would be a good deal happier if this young upstart with new ideas could be eliminated from the picture. Therefore, I fancy that it has met the case of Imperial Airways much better to see British Airways incorporated in that organisation than to see it a separate affair.

Thirdly, there is the action, as I think, of the civil aviation section of the Air Ministry. That section has, in this House and in the country, for several years now during the terrible times for British civil aviation through which we have been passing, been threatened with losing the control of British civil aviation. I believe that it saw that it was essential to have a large buffer organisation, so that as far as possible Parliament and the country would not vent themselves so much upon the Air Ministry as the organisation responsible for running British civil air transport. I believe that those forces have brought about this volte-face since the Cadman Committee reported and had its recommendations accepted. Therefore, while I accept the Treasury contention, I feel, on the other hand, that the views of Imperial Airways and the civil aviation department of the Air Ministry are much too considerably in the nature of self-preservation to warrant very much consideration at our hands. As I shall briefly show, I think the point of view of the Treasury can be met in another way.

With what ruthless thoroughness this Bill sweeps aside all that is being attempted throughout the world by British air transport. If one thinks of this organisation, with so much leeway to make up in the air lines that it is now operating, with so much investigation, trial, and research to do on new routes that we ought to be operating, setting itself up to compete with all the air lines of the world, Government operated, Government supported, and those, as in America, which thrive on local competition, it seems to me that we are going to continue to place British civil aviation in the second-rate position in which it exists to-day for many years to come. I feel that one should also note that the operation of internal air lines is by no means excepted from the activities of the corporation. I admit that the corporation has to obtain the authority of the Secretary of State for Air before that can be done, but the fact remains that we are endeavouring to build up a series of internal air lines in this country by private enterprise, and if there is one thing that you should not do if you are interested in seeing your internal civil aviation thrive, it is to hold this sword of Damocles over the companies which are at present operating these services. I sincerely hope that my right hon. Friend the Secretary of State, when he comes to review all that has been said in this Debate, will consider completely eliminating that possibility from the Measure.

I said that I would indicate how I thought some of the worst objections to the Bill could be removed. I think it would be better, if possible, to have two separate corporations, and, in the same way as we have many shipping lines subsidised, as has been previously said, there is no difficulty in that at all. We should then have proper comparative competition, not along the same routes in the same way as we have shipping competition, but along parallel routes, which would indicate to this House and to the country what ought to be achieved in the present state of the art and with the facilities available. But if that should not be possible, it seems to me that the Measure could be so amended that with central financial control there could be two completely separate operating units. If that were done, I believe it would go a long way to meet the objections that many have to this Measure.

It is essential to retain a measure of competition in British overseas civil air transport, if we are to have the right type of air lines. May I remind the House that the American Douglas machines and the American Lockheed machines have come into being through the keen competition of the American air lines, and much as I appreciate the sterling technical qualities of many men in the Air Ministry and in the British aircraft industry, I do not believe that for many years they would be able to develop a specification of machines of this type as would result if we had keen competition between the operating companies, each striving to get the best type of air liner. As I believe also that as rearmament closes down it is imperative that we should build up a strong civil aircraft manufacturing industry, so I believe that we must start as soon as possible to develop prestige for our civil aircraft, so that buyer countries, instead of going to America for civil aircraft, may equally come to this country. I do sincerely hope, therefore, that some of the worst fears that many of us have about the Measure as it stands may be mitigated by some radical changes which I feel that even yet my right hon. Friend the Secretary of State can usefully make in it.

8.35 p.m.

Wing-Commander Wright

Most of the points which I was going to raise have already been very well put during this Debate, but there are still one or two things to which I should like to refer. The hon. Member for Duddeston (Mr. Simmonds) said the Bill was wrong because we were forming one powerful corporation instead of two or three less powerful corporations to fight, with Government assistance, against foreign competition. The hon. Member for Chesterfield (Mr. Benson), in an attack upon Imperial Airways, spoke of the very large subsidies which they had received from the Government, but if my hon. and gallant Friend the Under-Secretary would state what subsidies have been paid to the foreign lines with which Imperial Airways have had to compete, I think we should find that it has not been a case of the failure of private enterprise to compete with private enterprise, but, perhaps, a failure of private enterprise, with only a small subsidy to compete with very powerful Government-owned foreign corporations subsidised to almost any extent. The hon. Member for Walsall (Sir G. Schuster) went into a long explanation to show how wise the Government had been in buying these companies on a valuation of their assets rather than the market price of their shares. Anyone who is connected with industry and has had any experience of amalgamations knows that no one would be so foolish as to amalgamate businesses or to purchase a business on the market price of the shares; but, as the hon. Member for Walsall said, this point having been brought out, it may give a wrong impression outside this House, and therefore it is as well that we should under- stand how the market price of shares really does arise.

Of course, when things are booming it arises purely from the law of supply and demand. There are more people wanting to buy shares than people who are willing to sell them, and naturally there is an inflated price for the shares, but in depressed times such as the Stock Exchange has experienced for the last 12 or 18 months you get an entirely different picture. My hon. Friend referred to certain gentlemen who call themselves jobbers. Perhaps it is not generally understood that their business in life is to accept shares which are offered to them for sale. Within ordinary reasonable limits they have to accept those shares, and therefore when there is no great demand for shares the jobbers fix prices very low. They fix two prices, one at which they are prepared to sell and one at which they have got to buy. In that way one gets an entirely incorrect picture of the true value of shares. Anyone going into the market as a big buyer will find that almost immediately the prices which he has seen recorded as the jobbers prices have entirely changed. They immediately raise them, and the buyer has to pay a good deal more for the shares. One has known many instances of people who, seeing the shares of their own or some other company standing at a very low price, have gone into the market with the idea of buying a very large block of them, but with the result that almost within a few hours the shares have perhaps doubled or trebled in value. That is exactly what would have happened had the Government been so foolish as to go into the open market and endeavour to buy the shares of these companies.

Several speakers have referred to the complaints which are being made by the owners of internal air lines. There are two points which they do not like. One is that the Secretary of State is retaining the right to allow this corporation to run internal air services, and the other is the fact that he seems to be giving away what they believed was his right to increase the £100,000 worth of subsidy should he consider it to be necessary to do so. With regard to the first point, I do not suppose that my hon. and gallant Friend the Under-Secretary will have any difficulty in satisfying these internal operators, because obviously the Secretary of State for Air is not going to compete with one subsidised company working against another subsidised company; and in any case they are protected by the licensing board which has recently been set up. But I do think the Secretary of State should have the right to give this corporation the power to run internal services, because should any of the present companies fail to carry out their work efficiently or go out of business this might be the obvious way of filling the gap. In any case, surely the time is coming when people from the large provincial centres will not be content to have to come first to London in order to travel overseas by air. In fact it will be a physical impossibility for them to do so. Already in bad weather Heston and Croydon become dangerously overcrowded, and if and when civil aviation really assumes large proportions it will be ridiculous for people starting from the Birmingham airport to have to change at a similar airport in London before they can proceed overseas.

There is one point I should like to raise about the personnel of the suggested Civil Aviation Development Committee. It is to be composed of a chairman, a representative of the Society of British Aircraft Constructors, of the Air Registration Board and of the corporation. I would suggest that a representative of the Aerodrome Owners' Association should be included. On page 7 of the report the first reason given for the unfortunate fact that civil aviation has not developed faster in this country —and, of course, it is the main reason of the whole lot —is the absence of better ground organisation. In this country our policy with regard to ground organisation and the provision of airports has all along been entirely wrong. We have heard a great deal about the devolpment of American aeroplanes. It is not that America has had more experience of building aeroplanes, but in America they have specialised in ground organisation. Even with the finest aeroplanes in the world one cannot carry out civilian services to schedule in all weathers and day and night unless there is proper ground organisation. It is the basis of the whole industry. In this country we have worked on entirely the wrong lines. The civil side of the Air Ministry has always been at fault in this matter. They have given a great deal of advice to towns all over the coun- try in trying to get them to set up airports, but those airports have been developed principally with the idea of encouraging private-ownership flying and club flying, and always with the idea of creating a reserve for the Royal Air Force. We have suffered through all this development being under the control of the military side of the Air Ministry. As an hon. Member has already stated, we should have got ahead faster if civil aviation had been separated from the military side.

Now we have the committee, I hope they will consider not only the design of aircraft, but also the design of the aerodrome and will get this very vexed matter settled once and for all. We cannot go on year after year, saying that aerodromes have to be extended until they run half way round the town. I suggest that the time has come for the aircraft industry to be told that they have to produce aeroplanes that will land on the aerodromes, and that the aerodrome owner need not be told to build a still larger type of airport in order that the latest aeroplane may land there. It is high time that this problem was tackled, and that is why I should like to see a representative of the Aerodrome Owners' Association on this very valuable committee.

There are two problems in connection with the development of civil aviation and only one has been tackled in the past. First, there is the problem of the faster passenger service. In this country we have not had a very fast passenger service. That is what we have been trying to get. Equally important and perhaps more important by comparison is that of the slow freight service. The idea that you can build up a good freight service by using worn-out passenger machines, when they become very expensive to operate and are obviously not of the right design, is fallacious. A good deal of useful work can be done by the Committee if they will turn their attention to a really suitable, well-designed freight machine, which will be able to carry freights at reasonable rates and give a service that -we can trust. When this Bill is through I hope that what will receive the first consideration of the Secretary of State for Air will be the provision of satisfactory services. We have always heard a tre- mendous amount about the provision of satisfactory aircraft which is, of course, of vital importance, but the aircraft industry is pretty fully employed at the moment, and one can say that, with the best will in the world, it will be some years before the industry can produce aircraft which will enable the new corporation to compete satisfactorily with some of the foreign corporations.

I hope that the Secretary of State will be willing to use the power that I see he has retained for himself to get these services started, if necessary by buying the finest type of foreign machines. It is the service that matters and not the machine that is flying. Once you get the service started you will create a demand for the machines, and by that time perhaps our manufacturers will be in a position to supply them. I hope that the Secretary of State will be very careful in choosing the personnel for this new corporation. One of my hon. Friends put it well when he said he hoped that the corporation would not become merely a refuge for retired Governors. If the right hon. Gentleman will get keen young people who understand both business and flying, the corporation will be a very great success.

8.50 p.m.

Mr. Perkins

It is not often that I find myself in agreement with the Air Ministry, but I am in agreement with them tonight. I propose to vote for this Measure, and I shall do so for three distinct reasons. The situation in civil aviation is so bad that any change is better than no change. Secondly, I am supporting the Bill because I realise that the competition which we shall have to face in the future will come almost entirely from Government-controlled or partially Government-controlled air lines. Thirdly, I support the Bill because we ought to give Sir John Reith and Mr. Runciman a fair chance. Hon. Members know that a year ago, when Sir John Reith took over Imperial Airways, it was a very unhappy family. Since then there has been a complete change in the atmosphere of that company. The staff are now being treated as human beings, and the result is that there is a new spirit and the staff are all out to put up a good show. It is up to this House to give them every encouragement.

Nevertheless there are several matters which this House might consider in Com- mittee and which would improve this Measure. There is this very thorny question of the price of the shares. It seems absolutely monstrous that one company, which has been controlled in the past by an incompetent board of directors, un-progressive, lacking in imagination and initiative, a company which has been receiving large subsidies, far larger subsidies than this House realises, because many of them have been concealed subsidies, and when out of those subsidies the company has paid dividends as high as 9 per cent; when it has equipped its services with obsolete machines and obsolete equipment and has succeeded in bringing British prestige in Europe down to zero, such a company is to get 32s. 6d. The other company has had a live board of directors, progressive, full of initiative, full of imagination, receiving little or no subsidies until the last two years, equipping its fleet with modern machines and equipment, and it has succeeded in upholding British prestige in Europe. It is to get only 15s. 9d. Surely it is obvious to anyone that such a differentiation is unfair and indefensible. The right hon. Gentleman is always reasonable in these matters, and when we reach the Committee stage I am sure that he will be only too delighted to accept Amendments to secure that there shall be a fairer distribution of the swag.

Now there is the question of competition. It is often maintained that it is important to have two companies more or less in competition in order that we may have some kind of yardstick by which to measure their relative efficiency, but it seems to me that we have too much competition now in aviation. The way for me to prove that contention is to read particulars of some of the air lines so that we can see the competition that we are up against. First of all, I will take Europe. You can divide Europe into two services. The services by British Airways are run extraordinarily efficiently, with modem American machines. Their pilots are earning a very high reputation for this country, and they are rapidly beginning to recover lost ground in Europe. There is also the London-to-Paris service. Any hon. Member who has been on that service during the last six months will agree with me that it is far from right. I do not believe we shall ever get that service right as long as we use those old museum pieces, the "Scylla," and those flying octopuses, the "Hannibal," on that route. As long as they are in day-today operation I do not believe that we shall make much headway on that route. It makes my blood boil when I go abroad and, picking up Air France literature, I find that no less a person than the Chief of the Air Staff sends his family, when they go to Paris, by a French air line in preference to a British air line —a fact which is naturally used by Air France in their literature. It must be obvious to anyone that the competition in Europe is now acute, and that in the future it will become more acute.

Next there is the run to India and Australia. Anyone who has gone into the facts will, I am sure, bear me out when I say that we do not compare well with the. K.L.M., the Dutch air line. They have beaten us on printed schedules, and we have failed to maintain our printed schedule. I remember that three months ago I asked a question of the Secretary of State, and he answered that more than 50 per cent. of the British services through to Singapore were late; they are up against the Dutch, the French, and are beginning to be up against the Germans, because they are now going to Baghdad. Obviously, there is going to be keen competition on this run in the future. Then there is the South Atlantic run. The Germans started in 1934, the French in 1935, and the Italians are now starting in 1939. They are running a weekly service. The Germans are going to double their services this year, and I understand that the French are to do the same next year, but, although we have had repeated promises from the Air Ministry for an early start we were told the other day by the Secretary of State that he hoped to start this service somewhere in 1943 —nine years after the Germans, and eight years after the French. It must be obvious to everyone that by the time we get going on the South Atlantic route there will be very acute competition there.

As regards the North Atlantic, in spite of repeated promises which have been made in this House, the Americans have got away with it and have started first, and we all know that in the next five or 10 years there is not only going to be American competition, but German, French, Dutch, Belgian and Italian. Then there is the Pacific. The Americans have been crossing the Pacific for nearly three years, but we have not even started to talk about it, and everyone knows that when the Air Ministry starts talking about a thing nothing happens for at least 10 years. As far as I can see, there is no possibility of our crossing the Pacific until 1948 or 1950. Then there is the African run, and I must say that in that particular case we excel. We have built up a very fine reputation down to the Cape; our services are second to none, for the simple reason that there are no others, and there is no competition whatever. Finally, there is the West Indies. In spite of the fact that a scheme was put up to the Air Ministry in 1920, 19 years ago, for running services between the islands, we have not yet started, but the Dutch are running our services for us between the islands. Last year they carried 9,813 passengers. If you look at our services, you can only come to one conclusion, that wherever we are up against competition we are being defeated all along the line, except for the British Airways services in Europe. As far as I can see, there is too much competition now, and there is certainly going to be too much in the future.

Then there is the question of the management of this new corporation. I understand that the Secretary of State is going to have the power to nominate a committee of 15. It is obvious that the Prime Minister must find himself in rather a difficult position. I hear rumours that there are many members of the Cabinet who are anxious to become directors of the Suez Canal, but unfortunately there are not enough directorships going, so that the poor Prime Ministerfinds himself in rather a difficult position. But the Secretary of State has come forward, as he always does, and saved the Prime Minister from a difficult and embarrassing situation by creating no fewer than 15 more directorships. He has not disclosed what the salary is to be, but no doubt it will be in the neighbourhood of £5,000 a year. I want to ask my right hon. Friend in all seriousness: Are these new directorships going to be used in the future for pensioning off tired and broken-down CabinetMinisters? Of course, we have a precedent. There was a Chief Whip who became First Lord of the Admiralty, and when he left office, became the Government nominee on the board of British Airways. I have a kind of sneaking feel- ing that, although possibly now it is not the intention of the Secretary of State to fill this board with worn-out Ministers or governors, in the future there will be a tendency to do that. I suggest to my right hon. Friend that, when we reach the Committee stage, he might perhaps accept reasoned Amendments which would not only exclude Members of Parliament, but would also exclude all peers, and all ex-Cabinet Ministers, and should insist that no one should be on the board unless they were in possession of a current A licence, and therefore had some knowledge of aviation, and that no one should be a member of the board for more than five years.

The next subject to which I want to refer is that of the whole subsidy for civil aviation. I remember that, only four or five years ago, the Air Navigation Act laid it down that it was not allowed to have more than £500,000. Three years ago the figure was increased to £1,500,000, and, after the Cadman Report, it went up to £3,000,000. Now, my right hon. Friend is asking for £4,000,000. That is a very large sum of money, but in actual fact it is only about 2 per cent. of our total Air Ministry Vote, because this year we are spending £200,000,000 on the Air Force. In the future, possibly in a year, or in two or three years' time, there will be a measure of disarmament in the world, and, when that comes, our shadow factories will become shadow factories in fact; our municipal airports will find those volunteer reserve squadrons gone, and will once again become stagnant; the new housing estates which have been built to house the workers in shadow factories will become empty, and some of the most flourishing areas in this country will suddenly, in a night, become the most distressed. What is the solution of that problem? There is no solution; but it should be possible, by developing civil aviation now., at any rate to relieve it. Unfortunately, however, the Secretary of State is now asking for an upper limit of £4,000,000. I myself wish he had asked for £40,000,000, not to spend now, but in order that he may have the power up his sleeve, so that in the future, should we find ourselves up again rising unemployment, he would at any rate be able to go ahead and develop civil aviation. I believe that in the next three or four years some Secretary of State for Air and some future Minister of Labour will bitterly regret that my right hon. Friend put that figure of £4,000,000 in this Bill.

Then there is the position with regard to this Bill and this House. As the House knows, it is quite impossible for any Member to raise a question about the B.B.C., because, if we try to raise questions about the B.B.C., we are met with the answer that there is no Minister responsible, and that, therefore, the matter cannot be raised. I want to ask the Secretary of State to what exten he will accept responsibility for the actions of this Board. Will it be possible for the House to discuss it every year on the Air Estimates? Will it be possible for the House to heckle the Secretary of State day by day by question and answer at Question Time? Or is this new organisation to be a watertight compartment free from all criticism? Is Sir John Reith to be set up as a little tin god free from any possible criticism except that once a year he will be subject to some mild criticism, probably in the early hours of the morning? I would suggest to my right hon. Friend that there is one solution of that problem, and that is to make him an ex-officio member of this board. He never need turn up, but he will then have to assume full responsibility for it, and, therefore, will have to answer for the board in this House. I am going to move an Amendment to that effect when we reach the Committee stage.

I should also like to ask the Secretary of State whether we are going to have a change of outlook in this new corporation. I know that the Under-Secretary has been to many air displays on the Continent. So have I, and I am sure he will bear me out when I say that, whenever a new aerodrome has been opened on the Continent, or whenever there is a large air display, the local national air line is always there. Ten days ago a new airport for Scotland, half way between Edinburgh and Glasgow, was opened. All the main internal air lines were there. The Dutch sent a machine, the Belgians, Swedes and French were all there; but Imperial Airways were not there. They sent neither a machine nor a representative. Can the Secretary of State give an assurance that that will not happen again; that when there is a great national airport being opened in this country either Imperial Airways or this new corporation will back it up? Then there is the question of the very near future of civil aviation at home. At the moment, I believe the greatest enemy civil aviation has got is the railway companies in this country. The House will remember how those companies did everything they could, with the railway booking ban, to drive people to the railways, and prevent them from flying. When the House decided thatthat must stop, they changed their tactics. They adopted a much cleverer course of trying to buy up all the internal air lines and slowly strangling them. I have here the timetable of railway air services to Glasgow. There are two services a day. I imagine that the more convenient is in the afternoon. This leaves Victoria at 2.45, and, after three stops, arrives in Glasgow at 8.30. That is practically six hours traveling —roughly the same time as a train. Those are the internal air lines run by the London Midland and Scottish Railway. The railways are out, by any method, fair or foul, to strangle aviation in this country. I believe that in the future they are going to find allies in the cable companies, the shipping companies and the shipbuilding companies.

I do not suppose many hon. Members have had the opportunity or the time to read a report by the United States Maritime Committee on the question of big ships and flying boats. This report shows that six flying boats will be capable six years henceof carrying over the North Atlantic in one year as many people as the "Queen Mary" can in one year. They would maintain a weekly service; the comfort they would provide is about the same as a Pullman car, and the fare equal to, or slightly less than, that of the super-liner. This is what is going to happen in the future on the North Atlantic. When it comes, it is going to be a bitter pill for the cable and liner companies. If we are to fight all these companies we must have some such form of corporation asthis to do it with. It is because I believe that small companies are bound to fall by the wayside in this fight that I am supporting this Bill.

9.9 p.m.

Colonel Ropner

On more than one previous occasion I have attempted to defend Imperial Airways from onslaughts such as that which we have just heard from my hon. Friend the Member for Stroud (Mr. Perkins). When allegations of inefficiency are made against this company, it is only fair to point out that the subsidy it has received has been on a far lower scale than that received by its Continental competitors, to many of which the hon. Member referred. I have always thought, and still think, that Imperial Airways —and, for that matter, British Airways, too —are companies of which this country has no cause to be ashamed. I have complete confidence that the new corporation will take all that is best from both concerns, and will worthily represent this country on the Imperial, Continental and trans-oceanic routes which it will serve. I have made those preliminary remarks because, I suggest, on this occasion the House should be not less interested in our internal air services than in the more spectacular overseas airways.

It is to give expression to certain fears harboured by inland air-operating companies that I trespass on the time of the House. Under the Air Navigation Act, 1936, and the Air Navigation (Financial Provisions) Act, 1938, internal air routes became subject to a licensing authority, and in that respect the interests of the travelling public were safeguarded. At the same time, internal air lines were given a measure of security, since the overseas operating companies, which are very heavily subsidised, were prohibited from competing with internal air lines on internal routes. If Clause 2, Sub-section (2, a) Clause (4, a) and Clause (6, b) of this Bill are considered together, it will be seen that this new corporation may apply for and the Secretary of State may grant permission to operate on internal routes in competition with companies which could not live for more than a few weeks if faced with an attack by this monster corporation. I sincerely hope that the Minister will amend the Bill so that the new corporation shall be prohibited from encroaching on internal air lines. I hope that he will give that measure of encouragement to the internal air line companies, which, in the face of very great difficulties, are in many instances making a success of their venture.

In two other respects this Bill, if it became an Act without amendment, might hinder the development of internal air routes. As the law stands, the Secretary of State may use his discretion to increase the amount of subsidy for internal lines out of the common pool of —3,000,000, and whatever subsidy is received by internal air lines is guaranteed until 1953. This Bill not only limits to —100,000 per annum the subsidy which the Secretary of State can pay internal air lines, but it also shortens by no less than 10 years the time for which the subsidy is granted by Statute. I would like the Under-Secretary to give me an assurance, if he can, that his chief will be willing to retain power to increase the subsidy over the —100,000 if he thinks it necessary, and will be prepared to leave the terminal date of the subsidy period at 1953. I suggest that no one, not even the Secretary of State or the Under-Secretary, can say now what will be the relative importance of external and internal air lines in five years' time let alone 10 years hence. I have every confidence that the Secretary of State, with the discretion that I suggest he should retain, would use that discretion properly. As I have said, the internal air lines are having a very hard time. Distances are short and climatic conditions are extremely varied, and if the Minister can do what I ask it will bring renewed confidence to companies which require that confidence when looking into the somewhat murky and difficult future.

9.16 p.m.

Sir Robert Bird

I desire, first of all, to support my hon. and gallant Friend the Member for Barkston Ash (Colonel Ropner) in the measure of justice for which he asked in regard to Imperial Airways. I think that that body has been criticised in far too hard terms in this House over and over again, and that not enough consideration has been given to its very great achievements. I can speak of those achievements out of my own experience, because I have flown to the Continent many times upon the machines of the Imperial Airways since its inception, and indeed right from the inception of a series of predecessors of the Imperial Airways when commercial flying to the Continent was founded shortly after the War. I do not think that the hon. Member for Stroud (Mr. Perkins) has been, perhaps, quite just in his criticism of the machines of Imperial Airways. He said that anyone who has flown in the last six months has had still to fly in a machine of an old type, but it is a type which, I think, he will be the first to acknowledge, when introduced, proved to be not only one of the most successful aeroplanes ever designed, but also, as the record of its service shows, one of the very safest. Evidently he has not been to Paris lately because these machines, reliable and slow as they may have been, have now been replaced by two machines of a modern type, one type being equal in safety to the type which is flown by the French company, and the other type being even faster. They are in every way modern machines of which we in this country can be proud.

Those of us who have had much anxiety for the future of civil aviation awaited this Bill with eagerness in the hope that it would strike off the shackles which have fettered the development of civil aviation for so long in this country and give to it that imagination and freedom of development, and the use of the great wealth of technique that we have here, and place us in the matter of civil aviation not only equal to the best that is done in other countries, but, as nearly always happens with our British enterprises given sufficient time and opportunity, well ahead. I and a good many of my friends are very disappointed with this Bill. I do not speak of the financial side of it, as that has already been dealt with very adequately in the Debate, but we feel that on the operational side there is a lack of inspiration in the conception of the provisions of the Bill. I earnestly appeal to my right hon. Friend the Secretary of State for Air to breathe into this Bill as it passes through the various stages something of that enthusiasm, inspiration and imagination which we know he possesses.

One feature of the Bill which leaves so much to be desired is the enormous board of some 15 directors. I say so myself, "When these directors meet round the table for their board meetings, what are they to do, and what are they to say to each other?" They are fettered and shackled to such a degree that they cannot even be called "Yes men," because they will have nothing put to them upon which to give answers. This corporation, when it is formed and when at last it leaves its nest, will have its wings so pinioned that it will not only not be able to fly, but it will be able to do little more than flutter. Invitations are to be given to gentlemen in the Empire to take seats on the board —I understand that two seats, or perhaps three, are to be reserved for representatives of the Empire —and I feel that, when they realise how limited the contributions which they can make really are, they will feel that there is no compliment at all in the invitation.

Another example of the lack of inspiration is to be found in the very designation of the corporation. We have a cumbersome title and one which is, perhaps, a commonplace, and the sort of title you find on some prospectus which is offered to the public for some ordinary commercial development. I feel, as I believe do many Members in this House, that we ought to have a title worthy of the prestige of the British Empire and of what we hope that this great corporation will become. We want a title that is descriptive, and, above all, one which is not cumbersome. Mention has been made in the course of the Debate of the titles of the semi-government lines who compete with Imperial Airways on the Continental routes. The Air France, Luft-Hansa, S.A.B.E.N.A., K.L.M., and Al Littoria, all are titles which are descriptive and dignified and have prestige. I beg of the Minister to apply his own ingenious mind to this very important point. I hesitate to make a suggestion myself. All of us who were born in the Victorian era must have learnt at our mother's knees that "Britannia Rules the Waves." If that be true I think we can say to-day that Britannia subdues the winds. When those of us who were present at the opening of the great Birmingham Airport on Saturday, in the midst of the most terrible stormy weather, saw the display of some of our latest machines, we could really say to ourselves it is true that Britannia subdues the wind. I hesitate to make a suggestion to the Minister, but I think the name "Britannic Air" would be an apt one for this new enterprise.

9.26 p.m.

Mr. Montague

There is a long-standing prejudice against looking a gift-horse in the mouth, but if that horse is likely to become embarrassment to the subsequent owner it might be worth while to examine its teeth. A very bright and joyous speech was made by the hon. Member for North Paddington (Mr. Bracken), who said that this Measure was neither fish, flesh nor fowl —although I gathered he thought it pretty foul. I suppose it was good enough to serve as a red herring for the Labour party. We on this side do not oppose the Measure in its general principles. We are in favour of the development of social service in the air, or any other kind of social services which are part of the preliminary structure of socialism, and to that extent we certainly do welcome the Measure. But the most remarkable fact about the Measure, and about the speeches that have been made by those responsible, including the Secretary of State himself, is the conversion of the Government that has taken place, even within one short year.

I remember the Debate upon the Air Navigation Bill of last year, and the onslaughts that were made on the principle of collectivisation. The hon. and gallant Member for Accrington (Major Procter), for instance, thundered out the message to this House that we should not have Socialism at any price. The hon. and gallant Member for Wallasey (Colonel Moore-Brabazon) also made a speech last year; it was the same speech that he made this evening. He welcomed the Bill because of its necessity, but he had something to say about the bureaucratic features which it contained. Last year the Under-Secretary said: As regards the form of private enterprise, Imperial Airways and British Airways are controlled, but any losses fall upon those who have been bold enough to venture into this new and developing field of transport, in the hope of some return in the future, which return, if it does come, will be limited by Statutes passed by this House. …Actually the policy of the Government has been to temper the strength of monopoly by a reasonable measure of competition wherever there appears to be a sufficiency of traffic, and in the last two years that policy has been implemented by the selection of a second chosen instrument "— I like that theological expression — namely British Airways, to work alongside and to some extent in competition with Imperial Airways. The Under-Secretary will not make the same speech as he did last year, because the Government have come to the conclusion and the Secretary of State has said in practical effect, that the competition upon which the Under-Secretary relied, and which was so much the burden of speeches made during the course of that Debate, has been found to be useless and entirely undesirable in the development of at least oversea services.

I have listened to the Debate pretty closely this evening and I have heard the same abstract generalisations about this competition, which is supposed to be so necessary for the development of air services as of other services. I do not think that abstract generalisations really meet the case. No Socialist would contend that it is impossible to find instances of public enterprises which have been unsuccessful, which have represented the element of bureaucracy, but what a Socialist would say is that the record of public enterprise in the whole world in modern times is at least as good as the record of private enterprise. I suppose the hon. and gallant Member would say that the difference lies in the fact that in the case of private enterprise the losses are borne by private individuals. Do not make any mistake about that. Losses may be borne by private individuals, but they are borne by the whole of the industrial community and the common people of the country. The first people who feel the effects of failure in private industry are those employed in the business concerned, and no one would surely say that in the structure of capitalism allowance is not made for the inevitable margin of failures and the lack of success. The loss is passed on to the public if it is a failure, and if it is a success, well, the public are necessarily exploited.

But really it amazes me to hear arguments of that character about the value of competition and private enterprise when the same hon. Members criticise the majority of Imperial Airways —and I have had a good deal to say in criticism of Imperial Airways. The hon. Member for Stroud (Mr. Perkins), for instance, said that a director of Imperial Airways preferred to travel on a machine run by Air France. That may be a reflection on the management of Imperial Airways, but it is also a commendation of a concern which is much more a State monopoly than even this new corporation, and a State monopoly which includes internal air services, whereas this particular Measure does not at the moment propose to include them. I think that each case ought to be considered on its merits, and the point is that the Government themselves have come to the conclusion that a form of public corporation, this so-called monopoly —it is a monopoly but a public one, which makes all the difference —is necessary as a part of the industrial and operational development of the air services of this country. That is the case as the Socialist puts it. It is not a question whether this, that or the other experience is a failure or a success. After all, a social service must be a success if it performs the social service intended and if it is conducted upon principles of efficiency.

You can no more judge the success of any kind of public corporation or social service by the lines of a commercial return, a balance sheet, any more than you can judge the value of companies, as hon. Members have said this evening, by the actual price of shares upon the Stock Exchange. I believe that when some hon. Members get to Heaven, the first question they will ask will be: "What was the last dividend?" I am perfectly sure that the question of the value of service is the service that is given. Even if it is given with subsidies, on the one hand, or what would amount to the same thing, by the expanding of the service upon non-profitable lines, non-economic lines, whichever it is, if it is a necessary service and efficiency is applied to it, then the case is made out for that service under public enterprise.

The question really turns on the way in which the matter is handled. The hon. and gallant Member for Hertford (Sir M. Sueter) would be the first to see that the finest example of efficiency is to be found in the running of a modern battleship, and I suppose he would go on to say that if I gave him discipline he would give me efficiency. I say that if you give me patriotism and a sense of service and loyalty to the State, I will give you efficiency. The hon. and gallant Member gave the answer himself to the broad general arguments against public developments when he said that for this corporation you must find men of great vision, and live wires, I see no reason at all why the great vision and the live wires should not be found, although I hardly expect this Government to find them. It is perfectly correct to say that if you want a principle carried out, let those who believe in the principle thoroughly and earnestly be put into the position to carry it out.

This Bill is necessary. I have no tremendous hopes for it, but it is part and parcel of that inevitable transitional de- velopment towards full public service in which the Labour party believes. But let us look at the Bill. The principle of preserving the interests of the friends of the Tory party is always to be found in Measures of this character, whether it is a matter of agricultural organisation, subsidies or what not. Apart from the financial provisions, which have been adequately dealt with, in Clauses 3 and 4 there is set out what the corporation can do and what it cannot do. For instance, the corporation shall not use aircraft designed or manufactured outside His Majesty's Dominions except with the approval of the Secretary of State. They shall not operate any flight on charter terms within the United Kingdom except with the approval of the Secretary of State. They shall not manufacture parts of aircraft or aircraft equipment or accessories, except with the approval of the Secretary of State. Clause 5 says that: The corporation shall not manufacture aircraft. Nothing is said there about the discretion of the Secretary of State. Why? Because the other things, the manufacture of parts of aircraft or aircraft equipment or accessories is different from the manufacture of complete aeroplanes. These things may be required in exceptional circumstances and the Minister is allowed discretion in regard to them, but the Bill says that the corporation shall not manufacture aircraft. I suppose that is not a question of efficiency, because the corporation is allowed, with the consent of the Secretary of State, to do a large number of things other than those enumerated in the major part of the Bill. Why are they not to manufacture aircraft? I suppose it is because the manufacture of aircraft is a pretty profitable enterprise.

In our Amendment we should like the principle of the public corporation, public utility, applied to the whole aircraft industry in this country, but I do not say that we expect to get that from this Government. Whether it be a matter of manufacturing aircraft, which I admit goes rather a long way, or a matter of internal air lines, the principle is the same. Why are the internal air lines left out of this merger, except in so far as certain things may be done with the consent of the Secretary of State? Is this not an absurdity? A man can get into an aeroplane in Manchester in order to go to the other end of the Empire line, to connect up at Heston or Croydon for the Imperial machine, or a number of people may go for a similar purpose, but if one person stops in London, the thing is entirely out of order and in opposition to the terms of this Measure.

Why should not the internal air lines be brought into the same merger? Or the suggestion of the hon. Member opposite might be considered, namely, to combine the internal air lines in another merger, which should not run competitively with this corporation, but should run for the particular purposes of the internal air services. That would be a compromise worth considering. Are these fiddling little concerns, many of them private air lines run by railway companies, to go on keeping back the proper development of civil aviation in this country? If so, why? I suggest that it is because it is regarded as much more important to look after the interests of those people where there is no competition from the socialised services abroad.

I should like to say a few words on a matter which has been brought up on several occasions. I hope the Undersecretary in his reply will give us complete assurance about the relations of the new corporation and its employés. The House will remember that I had occasion to make a number of complaints about trade union recognition in respect of Imperial Airways. The report of Sir John Reith about the business was more or less satisfactory to the Government, and I accepted it; I understood the circumstances.

At the same time it will be admitted that what has been said in criticism of Imperial Airways has had a salutary effect and that there has been an improvement in the relations between the company and its employés. I hope that the principle will be carried on into the new corporation, and I should like the Undersecretary to assure us quite explicitly that there will be no interference with the principle of trade unionism, that the new corporation will enter into all those conversations which are necessary in the relations between those employed and their employers, and that this new policy will apply not only to pilots but to every section of those who are employed. The ground staff, the refreshment staff, everybody concerned, ought to come into relations with the corporation upon a basis of trade unionism fully and frankly realised just as it is in the large industries, where the principle has been of singularly valuable service in the development of industry. Hon. Members as well as myself have had a document, I believe, from a Captain Primrose, who apparently has been nipped in the bud. I do not know who Captain Primrose is, but in this document he makes an interesting suggestion that the Secretary of State for Air has had this forced on him by the Treasury against his better judgment, that the Treasury have been alarmed at the prospect of admitting the precedent of more than one chosen instrument, with the implication that the right to a subsidy may be claimed by every private enterprise establishing themselves as going to provide overseas facilities. The Cadman Committee in their report said it was in the interests of progress that there should be competition with Imperial Airways by another British company. That has been thrown overboard, and I can only wish that the principle had been carried to its logical conclusion and that this was a Measure which had the full and hearty support of the party I represent, instead of the rather half-hearted support we give it and which I am expressing this evening.

9.49 p.m.

The Under-Secretary of State for Air (Captain Harold Balfour)

I do not think there can be any complaint in any quarter of the House as to the Debate on this Bill. It has been most helpful, interesting and to a very considerable degree constructive. I was pleased to hear the hon. Member for West Islington (Mr. Montague) say in his speech that the Bill is necessary. It seems strange that he should vote for an Amendment to the Second Reading when he tells us, speaking for his party, that the Bill is necessary. The hon. Member also quoted some remarks of a speech which I have made. I was glad to hear the quotation, because it seemed to me to cover many of the points which have been made in criticism of the Measure regarding the fallacy of uncontrolled competition. The hon. Member made part of my speech for me when he supported the Bill, but he seems to think that I who support the Bill should vote against it, while he should vote against a Bill which he thinks is necessary. It seems to me to be a strange contradiction.

Mr. Montague

I do not intend to oppose the Bill, but we can surely move a reasoned Amendment expressing our point of view.

Captain Balfour

Many of the hon. Member's supporters have condemned the Bill whole-heartedly, although they agree that the Bill is necessary. It seems to me that the main principles of the Bill are not objected to to any great extent in any quarter of the House, with the exception of the hon. Member for Paddington (Mr. Bracken) who whole-heartedly condemned the Measure without putting forward any constructive suggestion in its place. Where the principles of the Bill have been objected to as they were by the hon. Member for Duddcston (Mr. Simmonds) I would say that the considerations which he put forward as grounds for the rejection of the Bill are the considerations to which due weight has been given by the Government, and, indeed, the problems which he has put before the House are the very problems which have led us to the conclusion that the Bill is the best method of advancing the interests of civil aviation at the present time and in the present circumstances.

The method of execution of the principle has been the chief ground of difference in the Debate. Sometimes we have been accused of not going far enough in the direction of a public corporation, and at other times we have been accused of copying, what is not quite clear to me, the policy which the Labour party would like to pursue if they had the opportunity. Many questions as to the method of execution have been raised. I have not the time to answer them all to-night but I am going to endeavour to answer the main criticisms, and I can assure hon. Members that those questions which I am not able to answer to-night will be given due attention. The right hon. Member for Keighley (Mr. Lees-Smith) and also the hon. Member for Stroud (Mr. Perkins) voiced the same misgivings. The hon. Member for Keighley in his speech admitted that the present form of corporation was not denying the right of close questioning and control by Parliament. He said we were getting the worst of both worlds. It seems to me that if this corporation can fulfil the following requirements the right hon. Gentleman will be satisfied provided that the general direction and day to day management should be endowed with a strong sense ofinitiative and responsibility, and should therefore, be freed from unnecessary detailed ministerial and Parliamentary supervision once the broad principles of policy have been laid down by Statute. I do not think any hon. Member can object to that. I would remind him that those are the words of the right hon. Member for South Hackney (Mr. H. Morrison) in connection with the national planning of transport. I think he should settle that little difference of opinion with his right hon. colleague and leave us the credit of doing something which he considers sufficient and which his right hon. Friend also considered adequate.

The second point of the right hon. Member was that the corporation are not allowed to manufacture aircraft. He said that they were to be allowed to manufacture parts, and that after all if they are to be allowed to manufacture parts why not assemble them and manufacture complete aeroplanes? The provision for the permissive manufacture of parts is included on purpose, in order to allow the corporation to carry out repairs and replacements for aircraft which may be stranded in far-away places. It is a very different thing from the design and manufacture of aircraft. The corporation will be living on public money, and therefore, I submit that it should not be free to compete with existing manufacturers. Even if the right hon. Gentleman does not agree with that remark, I think he will agree with this one. The corporation's primary duty is operation with the maximum efficiency. Every organisation has only a limited amount of directional brains and a limited amount of energy, and if in the distant future the time ever does come when the State will manufacture aircraft, I do not believe an operational corporation would be the right instrument for doing that, but rather I believe that their energy should be directed to the main purpose for which the corporation is being set up. [An HON. MEMBER: "Why?"] Because design and manufacture needs an entirely different type of organization, and we are trying to set up an operational organisation to give the maximum efficiency at the minimum expense.

I want now to pass to the next point made by the right hon. Gentleman. He put forward the proposition that when the State acquires an undertaking it should pay no more than would be paid by private purchasers. I accept that. But nor should the State pay less. It should pay a fair and reasonable price, which I maintain is being done in this case. For the reasons given by my right hon. Friend the Secretary of State, we cannot accept the Stock Exchange share market price ruling on the day on which the corporation was announced as being the basis for the value of the organisation we are to acquire. The right hon. Gentleman and various other hon. Members opposite have endeavoured to make that point. But supposing that were accepted, I put this to hon. and right hon. Gentlemen opposite. If they reject the net tangible asset basis for the valuation and ask for the share market prices, then let us go back to 1937, when the shares of this company were quoted at approximately 60s. on the Stock Exchange, although the assets were worth no more than they are to-day, and may even have been worth slightly less. What would hon. Members opposite have said if the Government at that moment had stated that they would set up a corporation and had adopted the principle which hon. Members opposite now ask us to adopt Why, we should then have paid approximately £5,000,000, instead of £2,500,000 for the assets of Imperial Airways.

Mr. Benson

May I point out to the hon. and gallant Gentleman that at that time the number of shares was 600,000 and not 1,600,000.

Captain Balfour

That does not interfere with the principle. The hon. Gentleman will remember that even after the share issue at 30s., the shares went up very considerably for a period of time. I repeat that if we had adopted the Stock Exchange valuation at that particular time, at a figure which was higher than the assets were worth, we should not have heard any hon. Member to-day saying that we ought to have adopted the Stock Exchange share valuation of the particular day. I believe that, in spite of the criticisms that have been made, the net tangible asset basis is the best basis for the purchase of this concern, and indeed, no other basis has been suggested by any critic to-day as being a practicable one.

I want to clear up completely one point which the right hon. Gentleman the Member for Keighley got a little wrong. It concerns the responsibilities of the Treasury, the Air Ministry and the firm of Sir William McLintock. The answer to the right hon. Gentleman is that the firm of Thomson McLintock, which I think everyone admits is a very fine firm of accountants and which has rendered signal service to the commercial community of this country, were employed to arrive, by means of discussion with the accountants of Imperial Airways, at an objective valuation of the tangible assets. It was with this valuation to go on and Messrs. Thomson McLintock's advice as to the intangible assets, that the Treasury and the Air Ministry were in a position themselves to conduct negotiations. The House would be the first to criticise the Air Ministry and the Treasury had we not gone to expert accountants in order to get advice as to the balance-sheet position of the company we were going to acquire. Thus, it will be seen that the Treasury took the major part in conjunction with the Air Ministry, in conducting these negotiations, and that the firm of Thomson and McLintock did not have any powers delegated to them, bat were only fact-finders and advisers, and that we had full responsibilities for arriving at a price agreement.

The right hon. Gentleman then asked me for an explanation, to which I think the House is entitled, of the events of 12th May. We appreciated the peculiarities of the situation and the need for a close synchronisation of the announcement to this House of the agreement as regards the price with Imperial Airways' notification to their shareholders, to whom they felt they had the first duty, that the agreement had been arrived at. It was for this reason that a Friday was chosen. It will be within the recollection of the right hon. Gentleman that my right hon. Friend the Secretary of State, at 11 a.m. on a Friday, made the announcement to the House, arid it was by the first post on that morning that the shareholders of Imperial Airways received a circular letter stating that agreement had been arrived at and what the price was. On that Friday morning, at approximately 10.30 a.m., a letter went by hand from Imperial Airways to the relevant department of the Stock Exchange —I think the shares and loans department, although, like the right hon. Gentleman, I am a child in these matters —and although the Stock Exchange opens at 11 o'clock, I understand that unofficial dealings can take place before that hour. Certain dealings did take place that morning before the announcement by the Secretary of State at 11 a.m., after which time dealings were suspended during the morning; but I can tell the House, from information I have managed to obtain, that out of approximately 1,500,000 shares, the amount that changed hands was about 500. Therefore, I do not think there was any manipulation or purchase or sale of the shares to an appreciable extent. I trust that the explanation I have given will show that the situation was appreciated and that we did our best to synchronise the two announcements.

I pass now to the speech of the hon. Baronet the Member for Berwick-on-Tweed (Sir H. Seely), who criticised the settlement with British Airways and said that the enormous figure of 15s. 9d. would be paid. I would only say that that figure does represent a loss to those who put up the money for British Airways to become a second chosen instrument, at the request of His Majesty's Government, and who, as my right hon. Friend said, might fairly be considered to have been on the verge of earning some reasonable return for the development expenditure in which they had involved themselves. However, my right hon. Friend wished to reassure himself and the Government that in these peculiar circumstances the price that was being paid was correct and therefore, at his request. Sir Frederick Marquis, Sir Andrew Duncan and Sir Archibald Campbell were asked to examine the offer finally made to British Airways, and these independent gentlemen reached the conclusion that the offer made was fair and reasonable.

I pass now to the speech of my hon. and gallant Friend the Member for Wallasey (Lieut. - Colonel Moore -Brabazon). I believe I shall be voicing the feelings of the whole House if I say that when we have No. 1 pilot in this country as a Member of this House, whether we agree or disagree with him in his speeches, his knowledge and experience merit our respect in all circumstances. I was particularly glad to feel that this new effort in the development of civil aviation merited my hon. and gallant Friend's support except in one or two small respects as regards names and, as I have noted that he intends to raise the question in Committee, I do not feel that I need say anything about it now. He asked me a very important question as to whether the funds for research and development for new types of civil aircraft are to be independent of the grants which the corporation will receive under the Bill. My answer is Yes. The money for research and development will be borne on Air Votes under the appropriate head as a separate item as at present.

The hon. Member for Clay Cross (Mr. Ridley) asked me if I could divide up the payment to Imperial Airways as between subsidy and payment for specific services. I cannot do that because the subsidy is in respect of services rendered both as regards specific carriage —passengers, goods and mail —and also in respect of the building up of a great Imperial organisation and the development of routes and the general development of technical services. It will be manifestly impossible to subdivide the total paid to the company —what is due to specific carriage and what is due to intangible development. He asked three specific questions with regard to the staff. There is no bar at all to trade union membership, and the Fourth Schedule —this is in answer to the hon. Member for West Islington —sets out the safeguards of the employés as regards fair wages. There will be no interference with trade union rights, and it is our hope, and I believe the hope of Members in all parts of the House, that the staff relationships with the company, which the hon. Member for Stroud (Mr. Perkins) said had been improving, shall continue to be a model of relationship between employer and employed.

Mr. Montague

Will it be the policy of the corporation to accept the principle of collective representation?

Captain Balfour

Yes, we hope so: Certainly there is no bar to trade union representation, and it is our desire that the relations between the staff and the employers shall be so interpreted as to be a model to other bodies.

The second point that the hon. Member for Clay Cross asked about was the superannuation fund, and he asked whether the staff were contented as regards the proposals. I understand that no representations have been received against the proposals in the Bill, which I think are really reasonable and fair. The two staff superannuation funds of the respective companies will continue, but it is intended, and the Bill makes provision for the formation of a new all-embracing staff superannuation fund, which any member belonging to either of the previous funds can opt into should he so desire, but there will be no compulsion if he does not wish to.

The third point that the hon. Member asked about was why is there no provision for staff compensation in the event of dismissal through redundancy. My reply to that is that all the staff of the two companies will be taken over, and a term of the contract of sale in the case of both companies is that all the staff shall be engaged. Indeed, we can look forward with some degree of confidence not only to the staffs of the two companies being engaged but to a considerable expansion of staff in the future as the corporation's activities extend and as the success which we hope will attend its efforts develops.

Mr. Ridley

I do not doubt the probability of that for a moment, but I think it unfortunate that, as a matter of pure principle, in legislation of this kind, since none of us can foresee with certainty what the next five years will bring, the House should be asked to assent to a Bill which does not contain a principle which is almost historic in all local government legislation and other legislation of a similar character that the House has been asked to approve.

Captain Balfour

I think the staff have adequate safeguards in the provisions of the Schedule and the terms of contract of sale. If one accepted the point that the hon. Member makes, it would virtually mean that in five years from now there might be some change of staff and some ex-member of one of the two companies now being taken over would leave the employ of the corporation. As far as I understand it, he says that man should be able to hark back to the previous days.

Mr. Ridley

Under the Act which established the Passenger Transport Board an employé of the board dis- missed for reasons arising out of the amalgamation is automatically entitled to compensation for his loss of office. I only seek to see the same principle included in this Bill.

Captain Balfour

There is no question of dismissing anyone because of the formation of the corporation. As to the conditions of dismissal or retention of staff of the new corporation, that is not the point that I am discussing but, as in the terms of contract of sale there is a provision that all the staff shall be taken over, there are adequate safeguards for the existing staff.

The hon. Gentleman next touched on the question of internal air lines a question which was also raised by the Noble Lord the Member for Renfrew (Marquess of Clydesdale), my hon. and gallant Friend the Member for Hertford (Sir M. Sueter) and my hon. and gallant Friend the Member for Barkston Ash (Colonel Ropner). I do not think one can draw comparisons as regards competition, or as regards the circumstances under which internal and external lines operate. External lines are operating against the competition of foreign countries subsidised by their Governments. Internal lines have the protection now, against uncontrolled competition, of the licensing authority set up under the Air Navigation Act. The general policy on internal lines was set forth by my right hon. Friend on 18th May, 1938. The hon. and gallant Member for Barkston Ash and one or two other hon. Members tried to read into Clause 29 a meaning which does not exist. Clause 29 really gives statutory effect to what my right hon. Friend said on 18th May. To say that my right hon. Friend had previously power to divert subsidy to any extent over £100,000 to internal lines and that he had power to give subsidy beyond four years, is not in accord with that declaration of Government policy and I think it will answer many hon. Members if I read the relevant passages from what my right hon. Friend then said: I would also like to say a word about the inland services in which I was very much interested when I was at the Post Office. We propose to devote some £100,000 to the inland services and we hope thus to help those companies which are suffering losses to establish themselves on a sound commercial footing and to enable all of them to press on with their services with even greater enterprise. The Government have therefore decided in view of the special circumstances of the moment and with particular reference to the defence situation that a sum not exceeding £100,000 in the first year and diminishing progressively in the subsequent four years shall be earmarked out of the increased subsidy limit of £3,000,000 for the purpose of subsidising internal air lines. I want to make it clear that this assistance will be given on the clear understanding that the companies should endeavour to establish themselves on a paying basis before the end of the period, and that no further assistance of this kind can be looked for after that date."—[OFFICIAL REPORT, 18th May, 1938; col. 429, Vol. 336.] I think that answers the questions about my right hon. Friend having previously had the power or the intention to go beyond the four years or beyond the £100,000 of annual subsidy. The Noble Lord the Member for Renfrew raised another point. He made a complaint that only five days were given before the lodging of petitions and said that it was too short a period. Internal lines really have not been very prompt if they wished to make representation because the Bill has been published for an unusually long period —since 12th June —and there has been plenty of time for petitions to have been prepared meanwhile in readiness to be presented on the first of the five days. Further, the Bill will finally come back to the House when undoubtedly any proposals such as the Noble Lord put forward can be considered.

Mr. Garro Jones

The hon. and gallant Gentleman says the Bill has been published for a certain length of time but how long has the Resolution appointing the select committee been published and has it been effectively published otherwise than on the Order Paper of the House?

Captain Balfour

I cannot tell the exact time at which the Resolution was published to send the Bill to a select committee, but any student of procedure like the hon. Member could have foreseen full well that the Bill was of a character which had to go to a select committee.

Marquess of Clydesdale

Arising from the point about competition, can the hon. and gallant Gentleman guarantee that the Secretary of State for Air will not allow the corporation to compete with internal air lines inside this country?

Captain Balfour

I was coming to that very point. The corporation has powers to run internal lines only subject to the specific permission and assent of my right hon. Friend. The powers are enabling powers. Any corporation of this size must take wide powers which it may never use, but I am authorised by my right hon. Friend to say that there is no intention of the corporation running internal air lines. Nevertheless, like a private company's memorandum of articles of association, which specify very wide powers for the company, so this corporation should have these powers. Furthermore, internal lines have the protection of the licensing authority, because no one, whether it be the corporation or whether it be an internal line, could run a line in this country without the authority and licence of the licensing body. If it is not clear that the corporation is not above the law in this respect, we are willing to clarify the point in Committee.

Mr. Marshall

Will it be possible under the Bill for the corporation to establish an aerodrome and run it in competition with the local authorities which have been endeavouring to fulfil the desire of the Ministry and have been doing it at a loss: and is it not a fact that those authorities will have only five days in which to make any protest against this procedure?

Captain Balfour

I think the hon. Member is referring to the Aerodrome Owners Association, of whose point of view I am fully aware. These authorities can be represented before the committee. It is possible in theory for the corporation to organise its own airport, but in practice there is no intention at all of the corporation so doing. Again it is but a wide enabling power such as you will find in the memorandum of articles of association of a limited liability company, and it is a mere protection, because it might conceivably be that in the future at some time the corporation might find need of an aerodrome, and these people who have so worthily devoted time and money to establishing airports might not be in a position to fulfil the need, and only in such a case would my right hon. Friend consider using the powers given to him under the Bill. My hon. and gallant Friend the Member for Hertford and one or two other hon. Members asked about the ordering of aircraft. These will be ordered and paid for by the corporation, but the capital expenditure, if it were, as it would be, of a major character, would have to be sanctioned by my right hon. Friend, and obviously he would sanction that capital expenditure only after due regard had been paid by the Air Ministry to the findings of the Civil Aviation Development Committee, which would endeavour to correlate the needs of the corporation and the need of being able to fulfil the orders of the commercial markets of the world for British aircraft.

My hon. Friend the Member for South-East St. Pancras (Sir A. Beit) asked what would happen after 1953. I do not think any of us in this House need worry ourselves unduly about what will happen after 1953, but the power of the Government to give grants to this corporation ceases after 1953, and I believe that neither those who oppose the principle, those who support the principle, nor those who are doubtful about the principle could take exception to having an opportunity of reviewing the work of the corporation, of ascertaining how it had functioned and whether it had fulfilled the hopes which we have had for it, should it be necessary in 1953. The hon. Member for South-East St. Pancras also asked about the participation of Empire air lines and mentioned Wilson Airways of Kenya and the Rhodesian Airways. The present position is protected as regards share interests and operational contracts, and provision is made to enable such contracts to be made in the future. He also asked why pilots must belong to the Royal Air Force or the Air Force Reserve. He is under a misapprehension. The Bill provides that a certain number of pilots to be specified by my right hon. Friend are to have a reserve liability, as in the case of Imperial Airways personnel. The hon. and gallant Member for Nuneaton (Lieut.-Commander Fletcher) asked various questions, but as he is not here, I think I may be allowed to write to him and save the time of the House. The hon. and gallant Member for Erdington (Wing-Commander Wright) asked me for certain foreign subsidy figures. I cannot give them at the present time. He also asked why we cannot have freight aircraft. That is one of the very points which the Aviation Development Committee should be able to study and advise the Government upon.

I have endeavoured to answer the majority of questions which have been put to me to-night, and I want to finish up in this way: As the hon. and gallant pioneer the Member for Wallasey said, civil aviation has turned away from the immediate concentration on a commercial objective. It seems a long while since the right hon. Member for Epping (Mr. Churchill) said in 1921 that civil aviation must fly by itself. Civil aviation seems to have become more and more an instrument of international policy, with services pushed out like tentacles for the purpose, often, not of commerce but of national prestige; and, indeed, the difference between the original conception of civil aviation and the present one is shown in the difference of mandates between Imperial Airways and the corporation to which my right hon. Friend referred in his opening speech. He pointed out how Imperial Airways were told to use their best endeavours to make the services self-supporting at the earliest possible moment, and how the corporation are now to secure the fullest development, consistent with economy, of efficient transport services.

I believe that one of the reasons why we in this country lag behind in civil aviation is that in addition to our concentration upon military efforts. which has affected greatly our ability to compete in the world's markets in civil aviation, we have clung too long to the idea of trying to achieve economy while other countries have abandoned it, We want this corporation to be a live body, we do not want it to be a home for retired gentlemen, whatever their rank or achievements. The Second Reading of this Bill is giving the House an opportunity of reviewing our present position. Hon. Members on all sides have said, and my right hon. Friend has admitted, that all is not well with our civil aviation at the present time; none can be satisfied, least of all those responsible for its direction at the present time; and I feel that I should be neglecting my duty if I did not tell the House that the immediate future is not going to be easy. Our military concentration is continuing. It takes one, two or three years to build aircraft and the air ports; also it takes some time to develop and train the necessary crews for air liners.

This Bill is sowing for the future to reap. We are at present passing through a period when we can harvest little from past sowing. We shall get through this period —I am sure of it —and I am convinced also that our civil aviation is going to lead the civil aviation of the world in the years to come; but just as I am dissatisfied with the present so I would appeal to the House, and, indeed, to the country, for an appreciation and understanding of the present position. It is going to take two or three years to remedy the present situation and for us to catch up our lag.

Civil aviation will for some time yet present an easy target to criticism. If I were on the benches opposite there would be almost no limit to the number of embarrassing questions which I could ask on the subject of this Bill but I would ask myself whether those questions would be really helpful, critical and such as would spur on those concerned to greater

efforts, or whether they would be questions which would expose weaknesses which, with the best will in the world, cannot be remedied except with the passage of time. While I suggest that the use of the spur should in no way be denied I make an appeal to the House to help us with constructive suggestion and frank criticism in a spirit which will help and which will advance civil aviation during the period which we have ahead of us. I believe that in the end our civil aviation will be the best in the world and that the Bill is the first major step towards that end.

Question put, "That the words proposed to be left out stand part of the Question."

The House divided: Ayes, 209; Noes, 130.

Division No. 225.]	AYES.	[10.32 p.m.
Acland-Troyte, Lt.-Col. G. J.	Donner, P. W.	Kerr, Colonel C. I. (Montrose)
Adams, S. V. T. (Leeds, W.)	Dorman-Smith, Col. Rt. Hon. Sir R. H.	Kerr, Sir John Graham (Soo'sh Univs.)
Albery, Sir Irving	Drewe, C.	Kimball, L.
Allen, Col. J. Sandeman (B'knhead)	Dugdale, Captain T. L.	Lamb, Sir J. Q.
Anderson, Rt. Hn. Sir J. (So'h Univ's)	Dunoan, J. A. L.	Lancaster, Lieut.-Colonel C. G.
Anstruther-Gray, W. J.	Eckersley, P. T.	Leech, Sir J. W.
Aske, Sir R. W.	Ellis, Sir C.	Leighton, Major B. E. P.
Assheton, R.	Elliston, Capt. G. S.	Lipson, D. L.
Balfour, G. (Hampstead)	Emmott. C. E. G. C.	Llewellin, Colonel J. J.
Balfour, Capt. H. H. (Isle- of Thanet)	Errington, E.	Lloyd, G. W.
Barrie, Sir C. C.	Erskine.Hill, A. G.	Looker-Lampion, Comdr. O. S.
Beamish, Rear-Admiral T. P. H.	Fildes, Sir H.	Loftus, P. C.
Beaumont, Hon. R. E. B. (Portsm'h)	Flndlay, Sir E.	Mabane, W. (Huddersfield)
Bernays, R. H.	Fleming, E. L.	MeCorquodale, M. S.
Blair, Sir R.	Fremantle, Sir F. E	MacDonald, Rt. Hon. M. (Ross)
Bottom, A. C.	Furness, S. N.	Macdonald, Capt. P. (Isle of Wight)
Boulton, W. W.	Gilmour, Ll.-Col. Rt. Hon. Sir J.	MeEwen, Capt. J. H. F.
Bower, Comdr. R. T.	Gluekstein, L. H.	McKle, J. H.
Boyce, H. Leslie	Glyn, Major Sir R. G. C.	Magnay, T.
Broadbridge, Sir G. T	Goldie, N. B.	Makins, Brigadier-General Sir Ernest
Brocklebank, Sir Edmund	Gower, Sir R. V.	Manningham-Buller, Sir M.
Brooke, H. (Lewisham, W.)	Greene, W. P. C. (Worcester)	Margesson, Capt. Rt. Hon. H. D. R.
Brown, Rt. Hon. E. (Leith)	Gridley, Sir A. B.	Markham, S. F.
Brown, Brig.-Gen. H. C. (Newbury)	Grimston, R. V.	Mills, Major J. D. (New Forest)
Browne, A. C. (Belfast, W.)	Gritten, W. G. Howard	Mitchell, H. (Brentford and Chiswick)
Bull, B. B.	Hacking, Rt. Hon. Sir D. H.	Moore-Brabazon, Lt.-Col. J. T. C.
Bullock, Capt. M.	Hammarsley, S. S.	Morris-Jones, Sir Henry
Burgin. Rt. Hon. E. L.	Hannah, I. C.	Morrison, G. A. (Scottish Univ's.)
Butcher, H. W.	Hannon, Sir P. J. H.	Muirhead, Lt.-Col. A. J.
Campbell, Sir E. T.	Harbord, Sir A.	Munro, P.
Cary, R. A.	Haslam, Henry (Horncastle)	Nail, Sir J.
Channon, H.	Haslam, Sir J. (Bolton)	Nicholson, G. (Farnham)
Chapman, A. (Rutherglen)	Haly-Hutchinson, M. R.	O'Connor, Sir Tarence J.
Clarke, Colonel R. S. (E. Grinstead)	Heneage, Lieut.-Colonel A. P.	O'Neill, Rt. Hon. Sir Hugh
Clydesdale, Marquess of	Hepburn, P. G. T. Buchan-	Palmer, G. E. H.
Cobb, Captain E. C. (Preston)	Hepworth, J.	Perkins, W R. D.
Colfox, Major Sir W. P.	Herbert, A. P. (Oxford U.)	Piekthorn, K. W. M.
Colman, N. C. D.	Hoare, Rt. Hon. Sir S.	Ponsonby, Col. C. E.
Colville, Rt. Hon. John	Hogg, Han. Q. McG.	Porrilt, R. W.
Cock, Sir T. R. A. M (Norfolk, N.)	Homes, J. S.	Pownall, Lt.-Col. Sir Assheton
Cooke, J. D. (Hammersmith, S.)	Horsbrugh, Flerence	Radford, E. A.
Cooper. Rt. Hn. T. M. (E'nburgh, W.)	Howitt, Dr. A. B.	Raikas, H. V. A. M.
Courthope, Col. Rt. Hon. Sir G. L.	Hudson, Capt. A. U. M. (Hack., N.)	Ramsbotham, Rt. Hon. H.
Craven-Ellis, W.	Hume, Sir G. H.	Reed, Sir H. S. (Aylesbary)
Crooke, Sir J. Smedley	Hunloke, H. P.	Reid, W. Allan (Derby)
Crookshank, Capt. Rt. Hon. H. F. C.	Hunter, T.	Remer, J. R.
Crossley, A. C.	Hutchinson, G. C.	Rickards, G. W. (Skipton)
Crowder, J. F. E.	Inskip, Rt. Hon. Sir T. W. H.	Ropner, Colonel L.
Culverwell, C. T.	Jarvis, Sir J. J.	Rosbotham, Sir T.
Davies. C. (Montgomery)	Jones, Sir G. W. H. (S'k N'w'gt'n)	Ross Taylor, W. (Woodbridga)
Denman, Hon. R. D.	Jones, L. (Swansea W.)	Rowlands, G.
Dsnville, Alfred	Keeling, E. H.	Royds, Admiral Sir P. M. R.
Ruggies-Brise, Colonel Sir E. A.	Spears, Brigadier-General E. L.	Watt, Lt.-Col. G. S. Harvie
Russell, Sir Alexander	Strauss, H. G. (Norwich)	Webbe, Sir W. Harold
Russell, S. H. M. (Darwen)	Strickland, Captain W. F.	Whiteley, Major J. P. (Buekingham)
Salmon, Sir I.	Stuart, Rt. Hon. J. (Moray and Nairn)	Wickham, Lt.-Col. E. T. R.
Salt, E. W.	Sueter, Rear-Admiral Sir M. F.	Williams, C. (Torquay)
Schuster, Sir G. E.	Sutoliffe, H.	Williams, H. G. (Croydon, S.)
Scott, Lord William	Tasker, Sir R. I.	Willoughby de Eresby, Lord
Selley, H. R.	Taylor, Vice-Adm. E. A. (Padd., S.)	Windsor-Clive, Lieut -Colonel G.
Shakespeare, G. H.	Thomson, Sir J. D. W.	Womersley, Sir W. J.
Shaw, Captain W. T. (Forfar)	Thorneyoroft, G. E. P.	Wood, Hon. C. I. C.
Shepperson, Sir E. W.	Thornton-Kemsley, C. H.	Wood, Rt. Hon. Sir Kingsley
Simmonds, O. E.	Titohfield, Marquess of	Wragg, H.
Simon, Rt. Hon. Sir J. A.	Tryon, Major Rt. Hon. G. C.	Wright, Wing-Commander J. A. C.
Smith, Bracewell (Dulwich)	Tufnell, Lieut.-Commander R. L.	Young, A. S. L. (Partick)
Smith, Sir R. W. (Aberdeen)	Wakefield, W. W.
Smithers, Sir W.	Wallace, Capt. Rt. Hon. Euan	TELLERS FOR THE AYES.—
Snadden, W. McN.	Ward, Lieut.-Col. Sir A. L. (Hull)	Captain Waterhouse and Major
Somervell, Rt. Hon. Sir Donald	Ward, Irene M. B. (Wallsend)	Sir James Edmondson.
Southby, Commander Sl. A. R. J.	Warrender, Sir V.
NOES.
Adams, D. (Consett)	Halt, G. H. (Aberdare)	Paling, W.
Adam., D. M. (Poplar, S.)	Hall, J. H. (Whitechapel)	Parker, J.
Adamson, Jennie L. (Dartford)	Hardie, Agnes	Pearson, A.
Alexander, Rt. Hon. A. V. (H'lsbr.)	Harris, Sir P. A.	Pethick-Lawrence, Rt. Hon. F. W.
Ammon, C. G.	Hayday, A.	Poole, C. C.
Banfield, J. W.	Henderson, A. (Kingswinford)	Price, M. P.
Barnes, A. J.	Henderson, J. (Ardwick)	Richards, R. (Wrexham)
Barr, J.	Henderson, T. (Tradeston)	Ridley, G.
Batey, J	Hills, A. (Pontefraet)	Riley, B.
Benn, Rt. Hon. W. W.	Hopkin, D.	Ritson, J.
Benson, G.	Hopkinson, A.	Robinson, W. A. (St. Helens)
Bevan, A.	Isaacs, G. A.	Rothsohild, J. A. de
Broad, F. A.	Jagger, J.	Seely, Sir H. M.
Buchanan, G.	Jenkins, A. (Pontypool)	Sexton, T. M.
Burke, W. A.	Jenkins, Sir W. (Neath)	Shinwell, E.
Cape, T.	Johnston, Rt. Hon. T.	Silkin. L.
Charleton, H. C.	Jones, Sir H. Haydn (Merioneth)	Silverman, S. S.
Chater, D.	Kennedy, Rt. Hon. T.	Smith, Ben (Rotherhithe)
Cluse, W. S.	Kirby, B. V.	Smith, E. (Stoke)
Collindridge, F.	Lawson. J. J.	Smith, Rt. Hon. H. B. Lees- (K'ly)
Cove, W. G.	Leach, W.	Smith, T. (Normanton)
Cripps, Hon. Sir Stafford	Lee, F.	Sorensen, R. W.
Daggar, G.	Leslie, J. R.	Stephen, C.
Dalton, H.	Logan, D. G.	Stewart, W. J. (H'ghtn.le-Sp'ng)
Davidson, J. J. (Maryhill)	Lunn, W.	Summerskill, Dr. Edith
Davies, R. J. (Westhoughton)	Macdonald, G. (Ince)	Taylor, R. J. (Morpeth)
Davies, S. O. (Merthyr)	McEntee, V. La T.	Thurtle, E
Dobbie, W.	McGhee, H. G.	Tinker, J. J.
Dunn, E. (Rother Valley)	MacLaren, A.	Viant, S. P.
Ede, J. C.	Maclean, N.	Walkden, A. G.
Edwards, A. (Middlesbrough E.)	Mainwaring, W. H.	Watkins, F. C.
Edwards, Sir C. (Bedwelty)	Marshall, F.	Watson, W. McL.
Edwards, N. (Caerphilly)	Mathers, G.	Welsh, J. C.
Fletcher, Lt.-Comdr. R. T. H.	Maxton, J.	Westwood, J.
Gallacher, W.	Messer, F.	White, H. Graham
Gardner, B. W.	Milner, Major J.	Whiteley, W. (Blaydon)
Garro Jones, G. M.	Montague, F.	Williams, E. J. (Ogmore)
Gibson, R. (Greenock)	Morgan, J. (York, W.R., Doneaster)	Williams, T. (Don Valley)
Green, W. H. (Deptford)	Morrison, Rt. Hon. H. (Hackney, S.)	Wilson, C. H. (Atteroiffe)
Grenfell, D. R.	Morrison, R. C. (Tottenham, N.)	Windsor, W. (Hull, C.)
Griffith, F. Kingsley (M'ddl'sbro, W.)	Nathan, Colonel H. L.	Woods, G. S. (Finsbury)
Griffiths, G. A. (Hemsworth)	Naylor, T. E,	Young, Sir R. (Newton)
Groves, T. E.	Oliver, G. H.
Guest, Dr. L. H. (Islington, N.)	Owen, Major G.	TELLERS FOR THE NOES.—
		Mr. Adamson and Mr. Anderson,

Question put, and agreed to.

Bill committed to a Select Committee of Seven Members, Four to be nominated by the House and Three by the Committee of Selection. —[Sir K. Wood.]

Motion made, and Question proposed, That all Petitions against the Bill, presented at any time not later than five clear days after the Second Reading of the Bill, be referred to the Committee." —[Sir K. Wood.]

10.40 p.m.

Mr. Craven-Ellis

I beg to move, to leave out "five," and to insert "ten."

The reason I move this Amendment is that municipal authorities, who have incurred very heavy expenditure in providing aerodromes, want to have time to examine their position under the Measure, and the five days allowed would give them very little opportunity.

Major Milner

I beg to support the Amendment. I know that five clear days is the usual period, but I think it must have been overlooked that in this case the five days will expire, in fact, on a Sunday. The Government should give a little more time, as, under the Bill, the corporation may be able to acquire or construct aerodromes in competition with aerodromes held by local authorities.

10.42 p.m.

Sir K. Wood

I am anxious to meet the point which has been raised. This matter is urgent, but, in order to meet the question of the Sunday, I am prepared, if my hon. Friend will withdraw his Amendment to move that the period shall be six days instead of five.

Mr. Craven-Ellis

I am grateful to my right hon. Friend for offering to make the period six days, and I am prepared to accept the offer.

Amendment, by leave, withdrawn.

Sir K. Wood

I beg to move, to leave out "five," and to insert "six."

Amendment agreed to.

Ordered, That all Petitions against the Bill, presented at any time not later than six clear days after the Second Reading of the Bill, be referred to the Committee.

Ordered, That the Petitions against the Bill may be deposited in the Committee and Private Bill Office, provided that such Petitions shall have been prepared and signed in conformity with the Rules and Orders of this House relating to Petitions against Private Bills.

Ordered, That the Petitioners praying to be heard by themselves, their Counsel, or Agents, be heard against the Bill, and Counsel or Agents heard in support o the Bill.

Ordered, That the Committee have power to report from day to day the minutes of evidence taken before them.

Ordered, That the Committee have power to send for persons, papers, and records.

Ordered, That three be the Quorum." —[Sir K. Wood.]