§ (6) The Minister may by order—
- (a) substitute for the duty imposed by subsection (4) of this section a financial duty expressed otherwise than by reference to a rate of return on net assets; and
- (b) for that purpose, direct that the foregoing provisions of this section shall have effect subject to such modifications as may be specified in the order and make such other incidental and transitional provisions as appear to him to be necessary or expedient;
§ (7) Any order under the last foregoing subsection shall be made by statutory instrument and may be varied or revoked by a subsequent order under that subsection.
§ On 21st December, in Standing Committee, the right hon. Member for Mitcham (Mr. R. Carr) moved an Amendment the object of which was to enable the Minister to vary the financial duties of the Corporation and to allow for moneys other than those from the State to be invested in it. We felt that 1333 we could look sympathetically at the first part of his proposal but had to reject the second part because it would have involved private shareholders being allowed to invest in B.O.A.C. or B.E.A. However, we valued the initial point which the right hon. Gentleman made, and I undertook in Committee to bring before the House an Amendment which would take account of this point. This is the Amendment.
§ The Amendment is designed to enable the Minister to change the financial duty of the Corporation if it is so desired. There may be ways in which this duty can be expressed other than is now provided in the Bill. We want to have that flexibility.
§ 5.30 p.m.
§ As the right hon. Gentleman said in Standing Committee, his original proposal was designed to take the Minister of the day out of a straitjacket and to give him that little flexibility—a valuable proposal. We have taken it up and made the proposal contained in the Amendment to meet the point of view put forward by the right hon. Gentleman in Committee. I hope that the House will accept it.
§ Mr. R. Carr
I simply once more express gratitude to the Government. One is encouraged to feel that Committee stages of Bills can be constructive in this way and we are grateful for what has been done. I must warn the Government that on some other occasion we shall return to the charge about the other half of oar original Amendment to which the Parliamentary Secretary referred.
§ Amendment agreed to.
§ Mr. Keith Stainton (Sudbury and Woodbridge)
I beg to move Amendment No. 3, in page 4, line 15, after the words last inserted, to insert:(6) The Corporation shall ensure that any moneys advanced to subsidiary or associated Companies of the Corporation, where the other sole shareholder is not a nationalised corporation (in which case this subsection will not apply), bear interest at the commercial rate applicable for the time being.I move the Amendment with a certain amount of disappointment, because when a similar, but not precisely identical, Amendment was before the Committee upstairs, the Parliamentary Secretary in his concluding remarks said that if the Opposition would agree to withdraw their 1334 Amendment, which, I admit, was less adequate than the present one, the Government would undertake to consider the valuable points which had been raised. The hon. Gentleman said thatif we can meet some of the points raised we shall be very pleased to do so. We recognise the validity of some of them."—[OFFICIAL REPORT, Standing Committee A, 9th December, 1965; c. 133.]From what one can see from the Amendment Paper, no gesture has so far been forthcoming from the Government in terms of what we have in mind.
The Amendment proposes to insert an additional subsection. We put it forward to meet what we consider to be real concern on both sides—concern which was expressed volubly on Second Reading by hon. Members opposite, who, alas, are not in their place this afternoon, about the B.O.A.C.-Cunard agreement and concern which was expressed from this side, despite the rightness, as we see it, of that agreement, that in one important respect concerning its working it is not perhaps tight enough.
We are concerned here with a mixed Corporation. Capital is held in part by B.O.A.C. and in part by the Cunard Steam-Ship Company. B.O.A.C. borrows money at a highly proferential rate. If one takes account of the past losses that are written off by the process of the Bill, one finds that B.O.A.C. has borrowed at zero interest in recent years. Let us, however, accept a nominal rate of interest, which of itself is highly preferential. We are concerned that this preferential rate should not be passed on beyond the public Corporation to the private purse, that it should not be filtered through to the other part of the B.O.A.C.-Cunard partnership.
The Amendment concerns something which is much worse than not simply passing on a preferential rate of interest. From Appendix D-6 at page 104 of the last accounts produced by B.O.A.C. for the year to 31st March, 1965, one sees that it is not just a question of a small amount of money. Some£8½million was involved, and the Parliamentary Secretary confirmed in Standing Committee that for a variety of reasons, which to us on this side did not appear to carry much conviction, the£8i million had no interest charge whatever attached to it.
We are concerned, therefore, not merely about the filtering of preferential loan 1335 money from B.O.A.C. to a mixed public and private enterprise body—B.O.A.C.Cunard. We are concerned also that at a certain point in time in the accounts of B.O.A.C. there are advances from the parent company to the subsidiary totalling£8½ million, and the Parliamentary Secretary is on record to the effect that not one penny of this enormous advance attracts any rate of interest.
The object of the Amendment should be fairly clear from what I have said. We do not want to cast aspersions on B.O.A.C. as such. We simply wish to put what we regard as important questions and to try to find better ways of achieving a satisfactory working relationship between B.O.A.C. and B.O.A.C.-Cunard.
One point to which I should draw the Minister's attention is that in the present version of the Amendment as opposed to the one which was moved in Standing Committee, we have endeavoured to exclude advances to subsidiaries where the other shareholder is a nationalised Corporation, the intention being that the effect of the Amendment that advances should bear interest at commercial rates should be applicable only in those situations where the public Corporation is in partnership with a private interest.
We regard this as an important Amendment. It raises important questions of public financial policy and control. We were far from satisfied with the explanations that we were given in Committee of obscure accounting reasons why interest rates could not be applied. It struck us as nothing more than teaming and lading in a manner which would be undesirable between any parent company and its subsidiary, and we must insist upon this whole issue being clarified.
§ Mr. Mulley
It may be for the convenience of the House if I reply to the reasonable speech of the hon. Member for Sudbury and Woodbridge (Mr. Stain-ton). My hon. Friend the Parliamentary Secretary gave an undertaking in Committee that this matter would be further examined, and it has been. It is quite usual that when Governments give undertakings to examine matters, until the debate takes place they cannot express their views on the Amendment Paper. That is the only reason why nothing 1336 appeared on the Paper. Had the hon. Member inquired, we would have been willing to explain the circumstances that, in our opinion, make it wrong to put down an Amendment. Nevertheless, I agree with the hon. Member that a full explanation is necessary and that steps are required to prevent the occurrence of what he has described unless there are very good reasons for it.
I agree at once that the lending of money by a public corporation to any subsidiary which is not wholly publiclyowned—as the Amendment recognises, it would be an exceptional case—at less than commercial rates, certainly at less than the rates at which the money was borrowed, would be bad policy and a bad principle of administration.
I want to stress that the only reason I do not accept the Amendment at once is that such a precept ought not to be written into a Statute of this kind. Following the previous Administration, rightly I think, the Government accepted in the terms of the letter of 1st January, 1964, that the fundamental responsibility of the corporations to act in accordance with their commercial judgment should not be interfered with unless absolutely necessary.
I would suggest to the House that while on grounds of principle it might be proper to write into the Bill this particular restriction on their commercial judgment, it would be rather odd if at the same time we did not draw up a code of what they were supposed to do and not supposed to do.
The fundamental right that we need to preserve is the right of the House to be informed and to question the Minister if any such unsatisfactory practices are thought to have taken' place in future.
I have discussed it fully with the Chairman of B.O.A.C., and I have an assurance from him that on the one hand he foresees no circumstances where this kind of lending could recur in the future and, on the other, although one can think of such circumstances as a short-term arrangement or something of that sort, if there were any special circumstances he would refer them to the Minister and would not make any loan without prior reference to the Minister and, of course, in those special circumstances if the Minister agreed he would be liable to account to the House.
§ Mr. Burden
This is a very interesting point because, in principle, the Minister has agreed that it is wrong for a corporation to lend to a subsidiary at a lower rate of interest than that at which it borrows itself, or at no interest, and also that it should not be done without the Minister being asked. Is it possible for a system of Statutory Instrument to apply in a case where such a loan is made? If it were made by Statutory Instrument it could lie on the Table so that the House would be able to examine it.
§ Mr. Mulley
Frankly, a system of operation by Statutory Instrument would be rather cumbersome. What the House is asked to consider now is a total prohibition. As any hon. Member with business experience knows, it is a frightful restriction on what in proper circumstances would be the right thing to do if it cannot be done without going through the necessarily long process of amending legislation.
It is only for that reason that I would ask the House not to press the Amendment in legislative form but to accept that I have an assurance in writing from the Chairman of B.O.A.C. that, on the one hand, these types of loans are most exceptional and he does not anticipate that it will arise again and, on the other hand, if for good reasons such a question should arise he would not make the loan without prior reference to the Minister.
In the terms of that assurance, without wishing to fetter the commercial judgment of the board of B.O.A.C. too much, I hope that the House will feel that it can let the matter rest there and, therefore, that the hon. Gentleman might feel willing to withdraw his Amendment.
§ Mr. Lubbock
I am bound to say that I am not at all satisfied with the answer that the Minister has given. He has not explained how this loan arose in the first place. As I understand it, the aircraft were acquired by B.O.A.C., but they were being used by B.O.A.C.-Cunard and were subsequently transferred to the ownership of B.O.A.C.-Cunard, which was not able to pay for them all at the time and therefore it was financed meanwhile by an interest-free loan which at the time of the last annual accounts of the corporation amounted to no less than 1338 £8 million. During the whole time that the loan was current, B.O.A.C.-Cunard did not pay one penny of interest to the parent company.
The first thing that I should like to know before I accept the Minister's plea to withdraw the Amendment is what arrangements have been made by B.O.A.C.-Cunard to pay interest at commercial rates on the loan for all the time that it was in being.
The House is dealing not with a particular case, of course, but with a general prohibition for the future. If the House passes the Amendment, it will not have a bearing on previous loans. While I will, if the hon. Gentleman wishes, see that he is sent a full explanation of the questions that he is posing, I do not think that we ought to judge these matters in the light of one particular case. I have given the assurance that such loans will not be made in future without prior reference to the Minister.
§ 5.45 p.m.
§ Mr. Lubbock
I will come on to that point. I should have thought that the Minister could tell the House now whether or not arrangements will be made by B.O.A.C. for interest on this money to be paid back to B.O.A.C., which it was entitled to in the first place. I am glad to know that such loans will not be made in future, and therefore the corporation has accepted the principle which he has enunciated in the debate, that it was at fault in making the loan in the first place and does not intend to do so again in future.
If that is so, coming on to his second point, I cannot see why he is reluctant to incorporate the Amendment in the Statute. No circumstances could arise which would make a loan of this kind proper, and therefore a statutory restriction would not in effect hamper B.O.A.C.'s proper commercial interests.
If the Minister is not prepared to have it in the Act, he ought to issue a general directive to both corporations that in future they should not make loans of this kind to subsidiary companies of which part of the shareholding is private.
§ Mr. R. Carr
The House is in some difficulty here. On the one hand, we on this side certainly believe that 1339 B.O.A.C. and other nationalised corporations ought to act as commercial bodies in a commercial way. This is not only putting commercial pressures upon them and opening them to commercial sorts of competition but, to be fair, it also means giving them the sort of freedom that ordinary management ought to have. For that reason, I am inclined to listen to what the Minister has to say.
On the other hand, there is our duty to act as guardians of public money. The agreement between B.O.A.C. and Cunard has been under heavy attack from the benches opposite. I do not know what the personal view of the present Minister is, but his predecessor and also the present Parliamentary Secretary made it very clear that they did not like this sort of agreement and that if they got the chance they would rescind it.
We do not take that view on this side. We believe that it can be useful for public corporations to be able to enter into associations and form subsidiary companies with private interests, and we want them to be free to do so. But, because we want them to be free to do that, we feel that we have an even greater duty to make quite sure that through that association public money cannot in any way be filtered off unfairly to the benefit of outside private interests.
No one in the House is suggesting that men of the kind who run the British Overseas Airways Corporation would deliberately do such a thing, and I want to make it very clear that there is no element of suspicion in our minds when we press this case. This is rather like justice not only having to be done, but being seen to be done. I am a little unhappy about it and I should like the Minister to try to explain a little more why this loan was interest-free in the first place, and why, for example, there should not now be a repayment of interest from B.O.A.C.-Cunard to the parent company, B.O.A.C.
If we could understand a little more why this happened in the first place, then, together with the assurance which the Minister has just given, we might be prepared not to push the matter to the point of getting it written into the Bill, but I do not think that I can just accept that without first asking the Minister to 1340 explain a little more what the issues have been.
§ Mr. Mulley
With the leave of the House, perhaps I might reply to the right hon. Gentleman. I am not sure that I have any power to direct B.O.A.C. as to what it does about charging interest in future on this particular loan. I can only assume that the loan was made interest-free because it had other incidental financial advantages, but I am in this difficulty—and I think that the House ought to recognise this—that on the one hand I am criticised for not interfering, and not knowing the actual motivations and intentions of the board of B.O.A.C., and on the other hand I am criticised for undue interference in the affairs of the company and the corporation. One has to decide whether one runs the corporation on commercial lines and gives the chairman and members of the board responsibility for their commercial activities, subject to the overriding reserve powers of the Minister, or not.
Perhaps I might illustrate the kind of difficulty in which I find myself. Very properly the Plowden Report and the right hon. Member for Mitcham (Mr. R. Carr), and others, raised the point that my Ministry exercised too great a technical and financial control of the aircraft industry generally, but at the same time I had to reply to an hon. Gentleman opposite who asked me to investigate a complaint which he had received from one of his constituents that a certain employee of Hawker Siddeley was earning 10s. an hour, and in the opinion of that constituent he was not worth it.
We cannot have it both ways. I do not think that it is my job to go into every particular financial transaction. I have said that I will seek an explanation from the chairman of the board, and when I receive it I shall transmit it to both the right hon. Gentleman and the hon. Member for Orpington (Mr. Lubbock). I shall find out his intentions, and give him the view of the House about the loan to B.O.A.C.-Cunard, and the fact that it thinks that interest should be paid at the proper commercial rate.
The Chairman of B.O.A.C. has given me an assurance in writing, and having regard to his standing I should have thought that the House would accept it.
1341 In his letter of 3rd February, that is today, he said:I would like to put in writing the substance of our discussion on the practice of B.O.A.C. in making loans to its subsidiary or associated companies as you may wish to make a statement to the House on the further stages of the Air Corporations Bill. (The making of such loans at other than commercial rates is in any case most exceptional and I do not anticipate that it will arise again in the foreseeable future.)You know that I adhere strongly to the principles set out in the then Minister's letter to me dated 1st January, 1964, which has been published, that 'It is important that the interchange of views between the Government and the Corporations should not blur the fundamental responsibility of the Corporations to act in accordance with their commercial judgment.'Nevertheless I accept that there is much public interest in these matters and accordingly I give you an assurance that B.O.A.C. will not make any loans at less than ruling commercial rates to its subsidiary or associated companies in which there is a private shareholding, without prior reference to you.That seems to me to be the kind of assurance which the House can accept without breaching the fundamental issues set out in the letter of 1st January, 1964, as to the division between the Minister's responsibility for the public interest on the one hand, and the Board's responsibility for the commercial operations of the corporation on the other, and in the light of that, I ask the House to accept that assurance.
§ Mr. Lubbock
I should like to ask the Minister a question before he sits down. If he were chairman of an important public company which had a subsidiary company which had outside interests, and he discovered from the accounts of the public company that an interest-free loan had been made by the parent to the subsidiary, would not he feel entitled to go to the annual general meeting to ask the chairman why this loan had been made and expect to receive a full explanation at that meeting? Are not we in the position of the shareholders of such a company?
§ Mr. Mulley
I am bound to tell the hon. Gentleman that I have no experience of attending annual general meetings of companies, but the advice that I have been given by those who have is that they are not the best place to go to get information of a detailed character about 1342 the affairs of the company, or about anything else.
§ Mr. Stainton
I hope that I might have the leave of the House to make a few comments before asking leave to withdraw the Amendment.
It strikes me that the Minister has been far too glib in mixing up the public purse with the private pocket, and unless he is careful he will precipitate a new rumour about Heathrow bond washing.
This loan of£8½million, interest-free, has an exact analogy in the reference made by the hon. Member for Orpington (Mr. Lubbock) to an ordinary public company making advances to another company in which it had no financial interest. I am sure that in those circumstances it would come in for the utmost criticism.
The Minister has adopted a false premise in deploying the argument that we do not want to fetter commercial judgment, and that we want to get this balance between freedom and control. He might do better if he could demonstrate what element of commercial judgment would be prejudiced if the Amendment were accepted, but he did not dare to extend his argument to that point.
Nevertheless, in the light of the undertaking given by the Chairman of B.O.A.C., we on this side of the House are prepared to withdraw the Amendment, but I must make it clear to the Minister that we reserve our right to raise the whole question of back interest on loans furnished to date. I beg to ask leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ Mr. R. Carr
I beg to move, Amendment No. 5, in page 4, line 15, after the words last inserted, to insert:(6) If, at the express wish of the Minister, the Corporation establishes, alters or continues to maintain an airline service and satisfies the Minister that the airline service so established, altered or continued to he maintained has been operated at a loss in any financial year after due provision is made for reserves, such loss shall be indicated separately in the accounts of the Corporation and shall be relevant to any decision of the Minister in respect of section 2(3)(a) and (b) and section 3(7) of this Act.I think that I can explain the purpose of this Amendment quite shortly. The general policy of this side of the House is that the nationalised corporations 1343 should be expected to operate in a commercial manner, and that they should have their commercial operations judged by commercial standards, which means, as far as possible, by the measurement of profit and loss. That is our general policy, and one reason why we have welcomed the Bill in principle from the beginning is that it is leading to that position in respect of B.O.A.C.
But we also recognise the fact that the nationalised corporations may sometimes have to undertake non-commercial operations. Some disadvantages may attach to nationalised corporations, but one of the advantages should be that they can more easily be asked to carry out noncommercial operations than can private undertakings, and that it may be in the public interest that they should do so. But where they do so the results of those non-commercial operations should not be obscured or allowed to cloud the judgment of the question whether the corporation concerned has or has not performed as it should have done over the major part of its operations, which should be judged on commercial standards.
The Amendment therefore seeks to ensure that any loss which may be incurred on any such operations carried out by B.O.A.C. at the express wish of the Minister shall be separately shown in the accounts, and that that loss shall be relevant to any decision of the Minister's in fixing financial targets for B.O.A.C. I do not need to explain the purposes further. All that I would say in further support of the Amendment—because in Committee the Parliamentary Secretary ruled it out on several grounds, the most important of which were grounds of practicability—is that in drafting the Amendment and following this idea we are not being entirely theoretical. We are almost exactly—certainly as nearly as we can—copying the practice which has existed in Australia for some years. This is what is done in Australia, and as far as we know none of the practical difficulties to which the Parliamentary Secretary referred in Committee has arisen in Australia. That is why we feel that our proposal is not only sound in theory but has some backing in practice.
§ Mr. Kenneth Lewis
I support the Amendment. I should have thought that it was the kind of Amendment which might appeal to the Government. The Government have introduced a Bill in which they clearly indicate that private companies ought to set out their accounts so that the public will know exactly how profits and losses are made. If this principle is to apply to ordinary companies it is even more important that the public should know exactly how the profits or losses of a nationalised industry are made up. This is especially so since the House of Commons must from time to time vote these nationalised industries large sums of money, which the taxpayers have to find.
Both nationalised airline corporations are running services at a loss. The surprising thing is that, as was admitted by the Parliamentary Secretary in Committee, almost all, if not all, B.E.A.'s internal services are run at a loss. We do not know how much the loss is, but we know that it is a loss. We should be told how much it is, because we have to meet the bill, and also because some of us believe that these internal services are being run at a loss so that B.E.A. can unfairly compete against British Railways.
British Railways are heavily subsidised by the Government. The railwaymen are told that they cannot have a rise unless they provide increased profits and productivity, yet British Railways are competing on many main lines against a nationalised airline which is running at a loss because its prices are too low. B.E.A. is subsidising these internal lines out of other income. No doubt it would say that there is a good reason for this, namely, that it is providing feeder services. I do agree that it is impossible to apportion a sum of money in the accounts, from the income provided on the internal lines, for feeder services to the Continent.
The Government must find themselves in a Gilbertian situation, in that they are not only subsidising B.E.A. but that, because of this, they are having to subsidise British Railways even more. If the accounts could show exactly how much profit or loss is made on the internal services we would know how to deal with the matter. A smokescreen is being put up by both nationalised airlines. 1345 They do not particularly want these figures to see the light of day, but it is the Minister's duty to tell them that they must produce the figures, and it is the duty of the House to try to make the Government act.
There is a completely different situation in B.O.A.C. to that in B.E.A. That airline runs some overseas services at a loss for prestige reasons. In Committee the Parliamentary Secretary referred to them as "diplomatic reasons". He used the word "diplomatic" instead of "prestige", implying that there was a good argument for not revealing them. But basically they are run at a loss for prestige reasons and we should not use the excuse, in defence of B.O.A.C., that this matter comes into the realm of foreign affairs or diplomacy.
There may be a case for B.O.A.C. in running certain routes at a loss for prestige reasons. If the accounts showed how much actual money was being made or lost then the House of Commons and the Minister could determine whether, if, say, the loss were marginal, it would be better to hand over the route concerned to a private airline.
We already have the experience of B.O.A.C.'s giving up the very important prestige route to South America. It was running this route because it said that it had to do so in the national interest, but that it did not really want to do so. Eventually it gave up the route. British United Airways took it over and made it pay. I give the Minister credit for congratulating the independent airline upon its success on this route. Is it not conceivable that other routes might be equally marginally loss-making, and that if we could see this from the accounts we might decide that it was better to hand over these routes to independent airlines rather than allow the nationalised airline to continue to run them at a loss?
It is important that the House and the country should have information on this subject. No one wants to be unfair to the nationalised airlines, but we want to be able to determine what action we should take from a full consideration of the facts and figures. Since the Amendment calls for the facts and figures I hope that the House will accept it.
§ Mr. Rankin
I want to congratulate the Opposition on the change of front 1346 which they have displayed tonight over holding B.E.A. and B.O.A.C. accountable for losses which they may incur. Most hon. Members will remember that it was the Air Transport Licensing Act, brought in by the party opposite when in power, which laid down the blunt injunction that B.O.A.C. must show the flag, irrespective of the cost and any effect which it might have on the corporation's accounts.
It was well known at that time that B.O.A.C. could not continue certain services without running them at a loss, however, no attempt was made then to ensure that its annual report should include an account of the losses which it was incurring as a result of the policy laid down by the Opposition when in power, thus clearly stating them to the people. A change has taken place and I welcome this sign of progress.
The hon. Member for Rutland and Stamford (Mr. Kenneth Lewis) said that B.E.A. was running at a loss in order to compete with British Rail. One of its great losses is on the Irish services, which I assume the hon. Member uses. One would find it difficult to say that, in flying from Belfast or Dublin to this country, B.E.A. is competing directly with British Rail. It is partly, of course, but not completely. It may be true that there is competition, but I am surprised to hear the Opposition complaining about that. I would ask the hon. Gentleman and others to explain their change of attitude since we dealt with the new Clause which they withdrew. They then deplored the lack of competition, but the hon. Gentleman now regrets our using it as a reason for B.E.A. running certain routes.
There is another reason and a more important one, even if one accepts some of what the hon. Gentleman said. There is no British Rail service between the Western Islands of Scotland and the mainland. The services there are being run for social reasons. No Government—either the present Government or a Conservative Government—has ever quarrelled with the need to provide social services, nor at any time has B.E.A. ever sought to conceal the cost of its social services. The figure is well known. The loss on the Western Islands and Irish Sea services are known. B.E.A. has repeatedly stated that it could run those 1347 services, which it was expected to run, only if it made profits on other services.
It has always been my view that the corporation should be run as a complete unit and that we should look at its total profit and loss account and not try to diversify it. Diversifying it means, in a way, exaggerating it in the public mind, and discouraging the corporation from undertaking services which are necessary for social reasons but which may not be profitable. I do not think that anything is asked for in the Amendment which is not now being done.
I do not know the mind of the Government on these matters and I am therefore merely stating my own view—that if we were to accept the Amendment, no profound change would take place, other than, of course, the change in Opposition thinking. However, I believe that there would be a change of attitude on the part of the corporation. As I have said, the corporation might feel that it was not being encouraged to carry out essential services because it would be accused —as it has repeatedly been accused—of running unprofitable services.
On balance, I feel that the status quo is the proper attitude towards the Amendment. I hope that my hon. Friend will also take that view.
§ Mr. George Younger (Ayr)
I do not want to detain the House with all the arguments which were so well put in Committee on a similar Amendment, but I wish to make two simple points. I believe that everyone in the House could accept them entirely except, unfortunately, for the Parliamentary Secretary, if what he said in Committee is to be taken as his final word. I cannot accept that it is impossible—or even nearly—so to established, within broad limits, what an existing airline service is losing or gaining.
According to the OFFICIAL REPORT of the Standing Committee debates, the hon. Gentleman said in reply to the Amendment that it was certainly very difficult, if not impossible, to establish this. Yet are we really to believe that the independent airlines—indeed, all airlines all over the world—do not know what any one of their services is making 1348 or losing? Are we to imagine that the modern science of accounting is so imperfect that it is impossible to tell whether or not a loss is being made and, if it is being made, how much it is? No one in the House who has been an accountant and had experience of these things would support such a proposition.
I therefore start by making the point that I am convinced that it would be possible to establish what the services make or lose in any given year. Over the years some hon. Members have tried to obtain new or extended air services in, for example, parts of Scotland. Whenever we have approached an airline, particularly B.E.A., to start a new route the airline has, quite understandably, said, "We are already losing money on the Highland services".
The Amendment would help because it would enable the corporations to be asked to say on which services they are losing money and we would then know how much loss or profit was being made on any one service. The public of Scotland is entitled to have this picture of the situation. If we knew how much was being lost on a service we could then discuss, openly and frankly, the position with those concerned, including the local authorities and various Government Departments. We could also see how the money which is used to kep these services going is spent and I believe that this would lead to an extension of services. When one tries at present to encourage the authorities to open a new route one is told, "We are already losing money. How can you expect us to extend this type of service further?"
Throughout the world air travel is in no way a declining industry. It is rapidly expanding and we should try to create an atmosphere in which people are encouraged to open new routes. I therefore cannot agree with the hon. Member for Glasgow, Govan (Mr. Rankin) that the Amendment would discourage people from expanding these services. On the contrary, it would offer them the prospect of the facts being brought out into the open, with people knowing how much the individual routes were losing and where the money was going.
I hope that the Minister will give a more up-to-date and helpful reply today 1349 than he did in Committee. If he does he will be doing a great service to the Highlands and Islands of Scotland, remembering that air travel is of paramount importance to this area and that the people there want to see the routes greatly increased in number.
§ Mr. Burden
The Parliamentary Secretary has learned a lot about the airline business in a short time. He has been assiduous in his duties and, because he has gained this knowledge, he has frequently given way on points on which he had taken a somewhat strong line when the proposals were first made. Although he expressed the view in Committee that nothing could be done on this issue, I hope that, upon more mature consideration, he will agree that we are making a not unreasonable proposal. I suggest that this is an eminently practical proposal which could have satisfactory repercussions.
Anybody who runs a business, if he is a business man at all, knows through his accountant's costings, budgeting of fixed overheads and so on, what is likely to be his profit or loss. He knows that if his budget is not maintained a loss is likely. There should, therefore, be no difficulty in the corporations stating, within a small area of discrepancy, their losses on particular routes.
I hope that there is no sinister idea behind any possible objection to this point; that nobody believes that the public should not know which part or parts of the corporations—particularly B.E.A., since we are mainly discussing B.E.A. at the moment—are profitable and which internal services cause a loss. Why should there be anything wrong in saying—and I am assuming that the figures can be made available—that an excellent public service is being given to a certain part of the Highlands or Islands at a considerable loss? Why should B.E.A. not have the opportunity of pointing out that this or that service is causing difficulties in its balance sheet? Why should the public not be able to weigh up the efficiency of B.E.A. on certain routes which would appear to be profitable but which might not show a profit? These things are possible only if the accounts are made public in this way. Indeed, this may be a veil being drawn over the whole thing. I hope it is not.
1350 It would be interesting to see what improvement is gradually being made in areas causing high losses, how the improvement has occurred, where losses are mounting and so on. There is nothing wrong or difficult in any of this and in these days of computers—remembering that B.E.A. is computerising a great deal of its accounts—it is merely a question of asking a machine the question and receiving the answer without half the difficulty the Minister frequently has in answering the questions hon. Members put to him.
I have known the Minister for a long time and have a great deal of respect for him. That being so, I am convinced that the Parliamentary Secretary has no desire whatever to prevent the public or this House from obtaining information that can properly be provided about the public corporations. I believe that this information could be provided without any difficulty and that it is right and proper that it should be so provided.
§ Mr. Doig
I will answer that later. If it is said that the general public want the information, I have never heard their request for it. Neither have I heard a request for information about losses made on certain bus routes. Only about one-fifth of bus routes pay in my constituency. On one occasion information was published in the Press about the losses incurred on this form of transport, but nobody showed the slightest interest. That is why I wonder why the Opposition are so anxious to have this information.
From what has been said, it would seem that only the nationalised corporations are running air services at a loss. This is certainly our experience when we ask for new routes to be opened; in other words, no company, private or public, is prepared to consider running a service unless it will prove profitable in the long run. I refer to a service from the city of Dundee, and I say what I have said because from the almost 1351 identical city of Aberdeen there is a direct service to London. That service pays, and it is now proposed to have a second service. All the indications are that this Dundee service would pay, yet we find that neither a private airline nor the corporation is prepared to look at it unless it gets a guarantee that losses will be made up—
§ 6.30 p.m.
§ Mr. Kenneth Lewis
On that basis, the hon. Member should be supporting the Amendment, because if they indicated what their losses were on other routes and said, "This might also happen in the case of Dundee," and if this House of Commons decided that in the other case, on social grounds, a subsidy was justifiable, Dundee would clearly also qualify for a subsidy.
§ Mr. Doig
If the hon. Member can tell me of any way in which we can get a service run by anyone for social reasons, I shall be happy to listen. As it is, we have exhausted almost every possible means of getting a service.
My point is that the only people who would welcome the information which the Amendment seeks to get are the private airlines. They would be able to tell at a glance, without any trouble, exactly which routes it would pay them to go into and which it would pay them to keep out of. It would be very useful information.
§ Mr. Burden
I assure the hon. Gentleman that the private airlines have an intelligence service. They know which routes would probably prove profitable and which would probably prove unprofitable. They do not need the corporations to tell them that. The reason for this Amendment is that the corporations come from time to time to the London money market. The Stock Exchange now demands that anyone seeking new capital shall issue half-yearly accounts which must give a great deal of information. It is right and proper that the corporation should do the same.
§ Mr. Doig
Throughout this debate I have waited for the hon. Member for Worthing (Mr. Higgins) to come out with the arguments he used in Committee, but I have waited in vain. At that time I said that they were revolutionary proposals 1352 to come from his side, and they must have been too revolutionary, because he has not repeated them—
§ Mr. Onslow rose—
§ Mr. Onslow
On a point of order. I think the hon. Member is mistaken in referring to my hon. Friend the Member for Worthing (Mr. Higgins). I think that he must be referring to what I said—
§ Mr. Doig
I am not making any mistake. I can distinctly remember what happened in the Committee. The hon. Member for Worthing said that if a subsidy was justified for any air service it should be offered to any company applying to run on that route. Those were not his exact words, but that was their effect.
§ Mr. Higgins
I think that the hon. Member is confused and that he is actually referring to my hon. Friend the Member for Woking (Mr. Onslow).
§ Mr. Onslow
Perhaps I might explain that as I am anxious that the House should make progress I have not sought to repeat at length the remarks to which the hon. Gentleman refers and which are on the record. I hope that he will do the same.
§ Mr. Doig
In that case, I am quite willing to abandon the point. I still regret that he did not repeat his remarks, because they were so silly that I prepared a careful answer and have since patiently waited for someone to repeat those remarks. I am disappointed that they have not been repeated, but I will leave the matter there.
I still cannot understand why hon. Members opposite want this information made public. Let us realise this fact. If, for example, it were to turn out, as was suggested in the Committee, that the profitable routes were those to the Continent and the unprofitable routes were those in Britain—I do not know whether or not that is true—and we were to publish the figures, what would it be? 1353 It would be an open invitation to the private airlines to come in on the Continental routes—
§ Mr. Doig
It would be a great invitation for them to do that.
Secondly, it would be a great incentive to the people who used the Continental routes to agitate for a reduction in fares. If this Amendment were to succeed it would mean that instead of a loss being carried partly by these other people from their profitable routes it would have to be carried partly by the British taxpayer. Of the two, I know which I prefer, and I know which most other people would prefer. The best thing is to reject the Amendment.
§ Mr. Stonehouse
The right hon. Member for Mitcham (Mr. R. Carr) has moved the Amendment very persuasively, and I can frankly tell the House that my right hon. Friend and I have every sympathy with the objectives hon. Members opposite have in mind. They want to clarify the operations of the corporations in order to make sure where they are operating in a commercial fashion and where they are not. We are entirely with them there. The public are entitled to have this information about the operations of the corporations they own. We do not, however, agree with the form of this Amendment, although I freely acknowledge that it is very skilfully drafted.
First, there are no B.E.A. services to which this Amendment could refer, because B.E.A. is not running any services at a loss at the express wish of the Minister. As for B.O.A.C., there was the case of Kuwait Airways, which B.O.A.C. did not actually operate but in which it invested at the request of the Minister. B.O.A.C. showed the loss it had incurred on that investment.
The Scottish Highlands and Islands routes on which B.E.A. incurs a loss are not operated at the express wish of the Minister. They are an historic responsibility. Of course, if they were withdrawn by B.E.A. there would be such a public uproar, particularly in Scotland, that it would perhaps be necessary for my right hon. Friend to express the wish that B.E.A. should continue to operate them. In that case, of course, the ex- 1354 press-wish provision in the Amendment would apply.
B.E.A. already shows the losses it incurs on these routes. Here I would refer the hon. Member for Gillingham (Mr. Burden), in particular, to page 87 of the last annual report of B.E.A. He will there see in very great detail the revenue account and the expenditure account for the Scottish Highlands and Islands services, and he will notice a total loss on operating account of£147,879. Therefore, B.E.A. is already showing what loss it incurs on these "social service" routes. B.O.A.C. has acted similarly in relation to its investment in Kuwait Airways. The fact remains that there is no service directly operated at a loss by either of the corporations at the express wish of the Minister in the way mentioned in the Amendment. It is, however, the policy of my right hon. Friend to adhere to the dictum laid down by the right hon. Member for Preston, North (Mr. J. Amery), who wrote to the Chairman of B.O.A.C. on 1st January, 1964:If the national interest should appear, whether to the Corporation or to the Government, to require some departure from the strict commercial interests of the Corporation, this should be done only with the express agreement or at the express request of the Minister. How losses, if any, resulting from such a political decision should be presented in the accounts will depend on the circumstances in each case.We do not in the event wish to be tied on such an express wish by B.O.A.C. or B.E.A. to show the losses in the exact form proposed in the Amendment, although the House would want to be advised, as indeed my right hon. Friend wishes, as a matter of good commercial practice that the corporation should show results in a particular case where a loss is incurred, and that is already published. We do not think it would be to the advantage of the corporations or in the public interest for this provision to be written into the Bill.
§ Mr. Kenneth Lewis
The hon. Gentleman has said something rather important. He has said that where there is a continuous loss it may be that the Minister would want to point it out and ask that the matter should be rectified. B.E.A. makes losses, as I indicated, on all internal services. Many people take the view that B.E.A. need not necessarily make 1355 a loss but is doing so by over-cutting. Will the Minister say if he wants B.E.A. as an objective in its internal services to run them profitably?
§ Mr. Stonehouse
The hon. Member for Rutland and Stamford (Mr. Kenneth Lewis) made a point in his speech which is not relevant to this Amendment. Operations of B.E.A. on domestic routes are not conducted at a loss at the express wish of the Minister. So his observations do not apply to this Amendment.
§ Mr. R. Carr indicated assent.
§ Mr. Stonehouse
I am glad to see that the right hon. Member for Mitcham agrees with me. The description which the hon. Member for Rutland and Stamford has given of the services is also not correct. B.E.A.'s domestic services do not all run at a loss, but they run at an overall loss. Some run at a profit but, when added together, there is a loss. I hope that will clarify the mind of the hon. Member. Certainly none is operated at a loss at the express wish of the Minister, so this Amendment would not apply to those services.
I do not rest my objection to the Amendment on the point I raised in Committee that it would be difficult for the loss to be identified, but I am sure the House will agree that there could possibly be complications in this respect. The allocation of overheads, for instance, could be a matter of dispute. We have also to consider whether some part of the operation of a service run at a loss would not be to the commercial advantage of the corporation on another of its routes. These are matters which could be subject to disputes. I draw these points to the attention of the House, but I do not rest my objection to the Amendment upon them. I ask the right hon. Member not to press his Amendment in view of the points made today and in Committee.
§ 6.45 p.m.
§ Mr. Stainton
While we are grateful to the Parliamentary Secretary for his remarks, I must make quite clear that in our opinion he has failed completely to embrace one of the two important issues in the Amendment. The identification of losses on those routes run at the express wish of the Minister is the first objective of the Amendment. The second is that 1356 where losses are incurred on those routes losses should be borne in mind and relevant to any decision of the Minister in respect of Clause 2(3,a), which is the determination of the dividend and that the losses shall be deducted from profit before deciding dividend. There is also an aspect which should appeal very much to hon. Members from Scotland and this would vastly strengthen the case—
§ Mr. Stonehouse
The hon. Member will remember that in Committee I made the point that the financial duty of B.E.A. is assessed at a lower rate according to its responsibility on routes in Scotland, so we already accept the point which he is proceeding to make.
§ Mr. Stainton
I do not accept that as an answer to my point. We are concerned principally with B.O.A.C. at this stage, in fact exclusively for it is in Amendment No. 9 that we refer to operations by B.E.A. Even in the case of B.E.A. I have severe reservations about the point made by the Parliamentary Secretary. The first point is about identification of the losses and the second is the relevance of those losses to determining the profits under Clause 2(3,a) out of which dividends are to be paid. Clause 2(3,b), determines the size of the reserve or the conversion from time to time of that reserve fund into additional share capital. If the Amendment were accepted losses on routes run at the express wish of the Minister would have direct relevance to the size of those funds.
The Amednment is also worded to bring into the net of Clause 3(7) where the Minister seeks to give himself powers as from three years hence to claw back to the Treasury any accumulated surplus. We say that before taking back that surplus regard should be had to the losses imposed on the corporation at the express wish of the Minister. The Parliamentary Secretary takes refuge in the argument that the express wish of the Minister is an irrelevance since at present there are no routes run at a loss at the express wish of the Minister and even on the B.E.A. Highlands and Islands route on which the figures are admittedly shown, the services are not run at the express wish of the Minister but merely as a result of an historical occurrence. We are legislating for the future, perhaps for a decade or two hence. I therefore fail to see that because 1357 a situation cannot be demonstrated to obtain at the moment we should not make what we regard as an eminently sensible provision to put into balance the whole of the financial obligations of the corporation.
I am glad that the Parliamentary Secretary did not rest his argument on the difficulty of allocating profit or loss to various lines and the difficulty of allocation of overheads. I fail to see how he could do so and at the same time refer us to a schedule dealing with the
§ Highlands and Islands services in the B.E.A. account. I am glad that we have reached the point where the Parliamentary Secretary has rejected ideas expressed in Committee that this kind of exercise is quite impossible and impracticable. We on this side of the House are determined to adhere to this Amendment.
§ Question put, That those words be there inserted in the Bill:—
§ The House divided: Ayes 112. Noes 123.1359
|Division No. 20.]||AYES||[6.48 p.m.|
|Anstruther-Gray, Rt. Hn. Sir W.||Grant, Anthony||Maydon, Lt.-Cmdr. S. L. C.|
|Awdry, Daniel||Grant-Ferris, R.||Meyer, Sir Anthony|
|Batsford, Brian||Griffiths, Peter (Smethwick)||Mills, Stratton (Belfast, N.)|
|Bell, Ronald||Grimond, Rt. Hn. J.||Mitchell, David|
|Bessell, Peter||Hamilton, M. (Salisbury)||More, Jasper|
|Biffen, John||Harris, Frederic (Croydon, N.W.)||Mott-Hadclyffe, Sir Charles|
|Birch, Rt. Hn. Nigel||Harvey, Sir Arthur Vere (Macclesf'd)||Onslow, Cranley|
|Black, Sir Cyril||Harvey, John (Walthamstow, E.)||Page, R. Graham (Crosby)|
|Bossom, Sir Clive||Hawkins, Paul||Peel, John|
|Box, Donald||Hay, John||Percival, Ian|
|Boyd-Carpenter, Rt. Hn. J.||Heald, Rt. Hn. Sir Lionel||Pickthorn, Rt. Hn. Sir Kenneth|
|Brinton, Sir Tatton||Higgins, Terence L.||Powell, Rt. Hn. J. Enoch|
|Brooke, Rt. Hn. Henry||Hooson, H. E.||Price, David (Eastleigh)|
|Brown, Sir Edward (Bath)||Hornby, Richard||Prior, J. M. L.|
|Buck, Antony||Hunt, John (Bromley)||Pym, Francis|
|Bullus Sir Eric||Hutchison, Michael Clark||Shepherd, William|
|Burden, F. A.||Iremonger, T. L.||Sinclair, Sir George|
|Carr, Rt. Hn. Robert||Irvine, Bryant Godman (Rye)||Smith, John|
|Clark, William (Nottingham, S.)||Johnston, Russell (Inverness)||Smyth, Rt. Hn. Brig. Sir John|
|Cooke, Robert||Joseph, Rt. Hn. Sir Keith||Spearman, Sir Alexander|
|Cooper, A. E.||Kershaw, Anthony||Stainton, Keith|
|Corfield, F. V.||Kilfedder, James A.||Steel, David (Roxburgh)|
|Craddock, Sir Beresford (Spelthorne)||Kirk, Peter||Studholme, Sir Henry|
|Crawley, Aidan||Langford-Holt, Sir John||Summers, Sir Spencer|
|Crosthwaite Eyre, Col. Sir Oliver||Lewis, Kenneth (Rutland)||Thatcher, Mrs. Margaret|
|Crowder, F. P.||Lloyd, Rt. Hn. Geoffrey (Sut'nC'dfield)||Tilney, John (Wavertree)|
|Curran, Charles||Lloyd, Ian (P'tsm'th, Langstone)||Turton, Rt. Hn. R. H.|
|d'Avigdor-Goldsmjd, Sir Henry||Longbottom, Charles||Ward, Dame Irene|
|Dean, Paul||Longden, Gilbert||Weatherill, Bernard|
|Dodds-Parker, Douglas||Loveys, W. H.||Webster, David|
|Doughty, Charles||McAdden, Sir Stephen||Whitelaw, William|
|Eden, Sir John||Mac Arthur, Ian||Wilson, Geoffrey (Truro)|
|Elliott, R. V. (N'c'tle-upon-Tyne.N.)||Mackenzie, Alasdalr (Ross&Crom'ty)||Wise, A. R.|
|Emery, Peter||Mackie, George Y. (C'ness & S'land)||Younger, Hn. George|
|Foster, Sir john||McLaren, Martin|
|Gammans, Lady||Maddan, W. F. M.||TELLERS FOR THE AYES:|
|Gibson-Watt, David||Marples, Rt. Hn. Ernest||Mr. Ian Fraser and|
|Goodhew, Victor||Marten, Neil||Mr. Dudley Smith.|
|Gower, Raymond||Maxwell-Hyslop, R. J.|
|Abse, Leo||Diamond, Rt. Hn. John||Hazell, Bert|
|Armstrong, Ernest||Doig, Peter||Holman, Percy|
|Atkinson, Norman||Donnelly, Desmond||Houghton, Rt. Hn. Douglas|
|Bacon, Rt. Hn. Alice||Duffy, Dr. A. E. P.||Howarth, Harry (Wellingborough)|
|Blackburn, F.||Edelman, Maurice||Howie, W.|
|Boston, Terence||Evans, Albert (Islington, S.W.)||Hughes, Cledwyn (Anglesey)|
|Bowden, Rt. Hn. H. W. (Leics S.W.)||Finch, Harold (Bedwellty)||Hughes, Emrys (S. Ayrshire)|
|Bradley, Tom||Fitch, Alan (Wigan)||Hunter, Adam (Dunfermline)|
|Brown, R. W. (Shoreditch & Fbury)||Fletcher, Raymond (Ilkeston)||Hynd, H. (Accrington)|
|Butler, Herbert (Hackney, C.)||Floud, Bernard||Hynd, John (Attercliffe)|
|Butler, Mrs. Joyce (Wood Green)||Foot, Michael (Ebbw Vale)||Jeger, George (Goole)|
|Callaghan, Rt. Hn. James||Gourlay, Harry||Jeger, Mrs. Lena (H'b'n&St.P'cras,S.)|
|Coleman, Donald||Greenwood, Rt. Hn. Anthony||Johnson, Carol (Lewisham, S.)|
|Corbet, Mrs. Freda||Griffiths, Rt. Hn. James (Llanelly)||Jones, Dan (Burnley)|
|Cousins, Rt. Hn. Frank||Hamilton, James (Bothwell)||Jones, J. Idwal (Wrexham)|
|Crossman, Rt. Hn. R. H. S.||Hamilton, William (West Fife)||Jones, T. W. (Merioneth)|
|Davies, Ifor (Gower)||Hamling, William (Woolwich, W.)||Kerr, Mrs. Anne (R'ter &Chatham)|
|de Freitas, Sir Geoffrey||Hannan, William||Kerr, Dr. David (W'worth, Central)|
|Delargy, Hugh||Harper, Joseph||Lever, Harold (Cheetham)|
|Dell, Edmund||Hart, Mrs. Judith||Loughlin, Charles|
|McBride, Neil||Pane, Derek (King's Lynn)||Slater, Joseph (Sedgefield)|
|MacColl, James||Palmer, Arthur||Small, William|
|MacDermot, Niall||Pannell, Rt. Hn. Charles||Soskice, Rt. Hn. Sir Frank|
|Malnnes, James||Park, Trevor (Derbyshire, S.E.)||Steele, Thomas (Dunbartonshire, W.)|
|McKay, Mrs. Margaret||Parker, John||Stonehouse, John|
|Mack[...]e, John (Enfield, E.)||Pavitt, Laurence||Strauss, Rt. Hn. G. R. (Vauxhall)|
|McLeavy, Frank||Peart, Rt. Hn. Fred||Summerskill, Hn. Dr. Shirley|
|Marsh, Richard||Perry, Ernest G.||Thomas, Iorwerth (Rhondda, W.)|
|Mayhew, Christopher||Popplewell, Ernest||Tuck, Raphael|
|Mikardo, Ian||Prentice, R. E.||Varley, Eric G.|
|Millan, Bruce||Probert, Arthur||Wallace, George|
|Molloy, William||Rees, Merlyn||Weitzman, David|
|Morris, Alfred (Wythenshawe)||Richard, Ivor||Wellbeloved, James|
|Morris, Charles (Openshaw)||Robertson, John (Paisley)||Wells, William (Walsall, N.)|
|Morris, John (Aberavon)||Robinson, Rt. Hn. K.(St. Pancras, N.)||Williams, Alan (Swansea, W.)|
|Mulley, Rt. Hn, Frederick (SheffieldPk)||Rogers, George (Kensington, N.)||Williams, Clifford (Abertillery)|
|Murray, Albert||Ross, Rt. Hn. William||Williams, W. T. (Warrington)|
|Newens, Stan||Shore, Peter (Stepney)||Wilson, Rt. Hn. Harold (Huyton)|
|Noel-Baker, Rt. Hn. Philip (Derby,S.)||Short, Rt. Hn. E. (N'c'tle-on-Tyne,C.)||Zilliacus, K.|
|Norwood, Christopher||Silverman, Julius (Aston)|
|Ogden, Eric||Slieffington, Arthur||TELLERS FOR THE NOES:|
|Oswald, Thomas||Slater, Mrs. Harriet (Stoke, N.)||Mr. Lawson and Mr. Grey.|