HC Deb 03 February 1966 vol 723 cc1359-67
Mr. R. Carr

I beg to move Amendment No. 9, in page 5, line 26, to leave out subsection (1) and to insert:

  1. (1) The Minister shall from time to time determine with the approval of the Treasury and after consultation with the British European Airways Corporation, as respects such period as he may so determine, the rate of return on net assets which he considers it is reasonable for the Corporation to achieve in that period; and the Minister may, with the like approval and after such consultation as aforesaid, vary a determination under this section in respect of any period by a further determination.
  2. (2) In subsection (1) above the reference to the rate of return on net assets is a reference to the amount of profits for the period in question (as defined for the purposes of section 2(6) of this Act but before deducting interest on moneys borrowed by the Corporation) expressed as a percentage of the total assets of the Corporation after deducting liabilities of a current nature.
  3. (3) The Minister shall give notice to the Corporation of any determination under subsection (1) above.
  4. (4) The Corporation shall conduct its affairs during any period in respect of which a determination has been made under subsection (1) above with a view to achieving a rate of return in that period not less than that specified by the determination as for the time being in force.
  5. (5) The Corporation shall from time to time during any such period as aforesaid review the financial results of its operations during the preceding part of the period, and if it appears to the Corporation that those results have been such that, unless special measures are taken, the Corporation is unlikely to be able to perform its obligation under subsection (4) above, the Corporation shall forthwith inform the Minister of that fact and consider what special measures can be taken, and the Corporation shall inform the Minister of the special measures which it proposes should be taken.
  6. (6) If, at the express wish of the Minister, the Corporation establishes, alters or continues 1360 to maintain an airline service and satisfies the Minister that the airline service so established, altered or continued to be 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 5(3) of this Act.
  7. (7) 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.
  8. (8) In addition to its obligations to report under sections 22 and 23 of the principal Act, the Corporation shall, by the end of the thirty-second calendar week of each financial year, publish an interim statement of results covering the first six months of operations, which interim statement will embrace as minimum requirements, the corresponding stipulations currently in force for companies whose shares are quoted on the London Stock Exchange, together with a summary of important movements on capital account and a review by the Corporation of major trends affecting its profitability.
The Opposition believe that, as far as possible, the financial duties laid upon the two corporations should be the same. We realise that they cannot be exactly the same, because the Bill introduces the experiment of an equity holding in B.O.A.C. but not in B.E.A. Therefore, there must be a technical difference between the financial duties to take account of that capital structure. Apart from such differences as are required by the capital structure, the Opposition feel strongly that the financial duties imposed on the two corporations by Parliament should be identical. We can see no reason in common sense or from any other point of view why there should be a difference.

When the Bill came before us we thought that it was extraordinary that, although the Government were for the first time specifically laying down the financial duties of these corporations they chose to provide a different standard for B.E.A. from that provided for B.O.A.C. Hon. Members will see that in the first five subsections of the Amendment we duplicate exactly the corresponding five subsections of Clause 3 which lays down the financial duties of B.O.A.C. With the substitution of the name of the other corporation, they are the same. This is the main purpose of the Amendment.

The three remaining subsections of the Amendment deal with slightly different matters which we have already debated in connection with B.O.A.C. either in the House or in Committee. Subsection (6) deals with the non-commercial operations of B.E.A., the matter which we have just discussed with reference to B.O.A.C. Subsection (7) deals with interest on loans to subsidiary companies, a matter which we discussed earlier in connection with B.O.A.C. Subsection (8) lays a requirement on B.E.A. to produce interim reports, and this we raised in Committee in connection with B.O.A.C.

The last three subsections raise three separate matters. It is to the first five subsections that we wish the Minister to address particular attention because it is to those that we attach the greatest importance. These are the subsections which define for B.E.A. its financial duties in exactly the same way as for B.O.A.C'., and it seems to us in logic and commercial sense the right thing to do.

Mr. Mulley

It may be convenient if I indicate the Government's view at this stage. I agree that it is an extremely big issue, although it does not require a long debate, there being a clear difference of view on, perhaps, a question not so much of principle as of timing. I accept the very proper view put by the right hon. Member for Mitcham (Mr. R. Carr) that we should not seek, just because the points are contained in the Amendment, to traverse ground already covered on interest charges and non-commercial services. However, with reference to subsection (8) of the Amendment, I should say for the record—I think that it will be of interest to the House—that both corporations have agreed and will make interim statements on the lines proposed in the Amendment, starting from the next financial year, that is, making their interim statements public in the autumn. In any event, it would not have been right, I think, to lay down a tight rigmarole of this kind, but the corporations will seek to give, broadly, the same kind of information as is given by public companies along the lines indicated by the London Stock Exchange requirement. I hope that this will be acceptable to the House. I am sure that it will be an improvement in the information which hon. Members and the public should have about the operations of the public corporations.

The main issue is simple, but difficult. Should we impose the same kind of financial targets, the same kind of financial requirements, on British European Airways as we have imposed on B.O.A.C.? The Government's view is that it is neither possible nor proper to do so without a restriction of the capital of the corporation so that it is on the same lines as that of B.O.A.C. There is an immense difference now between the two corporations in the sense that B.O.A.C. has Exchequer dividend capital and to a large extent, therefore, does not have to pay interest on that part of its capital and is subject to the other requirements laid down in Clause 3.

On the other hand, there is no suggestion, and there is no possibility in the present Bill, of doing a complete reorganisation of the capital of B.E.A. so that it, too, should have some Exchequer dividend capital. It may well be argued that it ought to have. It may be argued that this ought to be a principle applied widely to public corporations throughout nationalised industry. The Government do not rule this out. As was made clear when the Bill was introduced, the purpose of the new kind of capital structure proposed under the Bill is in the nature of an experiment, a pilot scheme, and we recommend it to the House on this basis. I am sure that if it succeeds, my colleagues and I would wish to think about it further with reference not only to the other air corporation but to the new Airports Authority as well, which at present stands on the same basis as B.E.A., not on the basis now proposed for B.O.A.C.

One has to judge whether the new capital structure, the new system of accountability, proposed for B.O.A.C. should be applied, rather arbitrarily, without a capital reorganisation, to B.E.A. simply because it also is an air corporation. I think that the proper view is that, as we are dealing with B.O.A.C. as a special case, as a pilot scheme, one should distinguish its position, financial target and accountability not only from B.E.A. but from all public corporations and nationalised industries which have not got this element of Exchequer capital.

Mr. Stainton

To make that argument logically complete, the right hon. Gentleman should not just reject it on the ground that the capital structure of B.E.A. is different from that of B.O.A.C. He must show the House why, because it is different, it is impossible to apply the disciplines which we suggest.

Mr. Mulley

The hon. Gentleman can have his own view about what I ought to do. I shall carry on trying to explain the matter as I see it. I do not accept the argument that, simply because these are two corporations dealing with airway matters, they must somehow be brought together although their capital structure and the history of their financial affairs are quite different. Incidentally, although the Opposition are quite willing to apply their suggestion to B.E.A., they leave the Airports Authority out although it is concerned very much with air matters.

I take the view that we should try this scheme with B.O.A.C. and follow for B.E.A. what is laid down in Clause 5(1) as it stands, which is related to the doctrine established by the previous Government in Cmnd. 1337 for the financial and economic obligations of the nationalised industries. For the first time, it is given statutory form for B.E.A. in that subsection: The British European Airways Corporation shall so conduct its affairs as to secure that its revenue is not less than sufficient for making provision for the meeting of charges properly chargeable to revenue, taking one year with another. As my right hon. Friend the Chancellor of the Exchequer has said from time to time, the Government are reviewing the development of the nationalised industries. We do not stand on any particular formula. It is in this context that the experiment of the new arrangement set out in the Bill is of interest and relevance. It is proper to have a pilot scheme in one authority of this kind and not seek to apply targets and financial rules which are not strictly appropriate to another concern merely because both are in the same line of business.

We have to distinguish between this special arrangement for B.O.A.C. and the rules laid down on financial targets and pursued vigorously by my colleagues for all the other public corporations other than B.O.A.C., for which, as I say, special provision has been made for special reasons.

Mr. R. Carr

I am afraid that the Minister has not satisfied us. He asked why we should do this for B.E.A. and not for the Airports Authority. There is a simple reason. The Airports Authority does not come within the Bill and we would not be in order to try to apply this provision to it. If it had been included in the Bill we might well have tried to do so.

Then the right hon. Gentleman said that he saw no particular reason why B.E.A. should be put on the basis we propose just because another airline is on that basis. But the Bill puts B.E.A. on the same basis as, for example, the National Coal Board. To me there is more logic in putting one airline on the same basis as another than there is in putting an airline on the same basis as the National Coal Board.

I believe that it is true that the Minister sets a target of financial performance for B.E.A. I believe that the right hon. Gentleman's predecessors in both Governments have done so. But if it is done, why not say so in the Bill? If we are to say in this Bill that the Minister should set a target for B.O.A.C. and if, for many years, Ministers of Aviation have set targets for B.E.A., why not say that in legislation as well? It seems nonsense that the Government should not be prepared to say so in legislation. The capital structure of B.O.A.C. has nothing to do with the principle. The two corporations may have different capital structures but that does not vitiate the principle of setting out in legislation the target appropriate to the capital structure.

Mr. Mulley

I said that financial targets are set out not only for B.E.A. but also—and in this we follow the line of the last Government—for other nationalised industries. The difference is not over whether there should be a target but over whether it should be a statutory target. If the right hon. Gentleman now takes the view so strongly that it should be statutory, one may inquire why, in their many legislative arrangements, the last Government did not impose statutory targets for public corporations. They are developing a new philosophy?

7.15 p.m.

Mr. Carr

I need not detain the House long on this point. We are moving forward. It is a poor argument to say that because one did or did not do something five or ten years ago one should not do it in future. We are all able to learn by experience and I admit that we did not do what we now propose. Statutory financial targets were not set. Now, however, the House is writing into this Bill a target for B.O.A.C. and we think it logical and right that we should do the same for B.E.A.

In fairness to the two corporations, I should point out that the different structures they have from now on will allow B.O.A.C. on paper to produce a much more favourable result than B.E.A. will be able to produce. That should be clearly stated. One way of making it clear is to judge the two corporations not just by what their results appear to be but how they are doing in relation to the targets that the Minister sets for them. He should set one target for B.O.A.C. and another for B.E.A. and be known to have done so. Then the public at large will judge the two corporations not by superficial differences which flow from capital structure but how they do or do not match up to the targets the Minister sets.

Mr. Mikardo

It is true that the fact that the party opposite did not do these things for 13 years is no reason for saying that they should not be done now, but it is a good reason for saying that it provides evidence that the right hon. Gentleman and his right hon. Friends did not really believe that this should be done and that what they are doing now is therefore a charade.

Question put, That the words proposed to be left out stand part of the Bill:—

The House divided: Ayes 119, Noes 106.

Division No. 21.] AYES [7.16 p.m.
Abse, Leo Hamilton, James (Bothwell) Mikardo, Ian
Armstrong, Ernest Hamling, William (Woolwich, W.) Millan, Bruce
Atkinson, Norman Hannan, William Molloy, William
Bacon, Rt. Hn. Alice Harper, Joseph Morris, Alfred (Wythenshawe)
Blackburn, F. Hart, Mrs. Judith Morris, Charles (Openshaw)
Boston, Terence Hazell, Bert Morris, John (Aberavon)
Bowden, Rt. Hn. H. W.(Leics, S.W.) Holman, Percy Mulley, Rt. Hn. Frederick (SheffieldPk)
Bradley, Tom Howarth, Harry (Wellingborough) Murray, Albert
Brown, R. W. (Shoreditch & Fbury) Howie, W. Newens. Stan
Butler, Herbert (Hackney, C.) Hughes, Emrys (S. Ayrshire) Noel-Baker, Rt. Hn. Philip (Derby,S.)
Butler, Mrs. Joyce (Wood Green) Hunter, Adam (Dunfermline) Norwood, Christopher
Callaghan, Rt. Hn. James Hunter, A. E. (Feltham) Ogden, Eric
Coleman, Donald Hynd, H. (Accrington) Oswald, Thomas
Corbet, Mrs. Freda Hynd, John (Attercliffe) Page, Derek (King's Lynn)
Cousins, Rt. Hn. Frank Jeger, George (Goole) Palmer, Arthur
Crossman, Rt. Hn. R. H. S. Jeger, Mrs. Lena (H'b'n&St.P'cras,S.) Parglter, G. A.
Davies, Ifor (Cower) Johnson, Carol (Lewisham, S.) Park, Trevor (Derbyshire, S.E.)
de Freltas, Sir Geoffrey Jones, Dan (Burnley) Parker, John
Delargy, Hugh Jones, J. Idwal (Wrexham) Pavltt, Laurence
Dell, Edmund Jones, T. W. (Merioneth) Peart, Rt. Hn. Fred
Diamond, Rt. Hn, John Kelley, Richard Perry, Ernest C.
Doig, Peter Kerr, Mrs. Anne (R'ter & Chatham) Popplewell, Ernest
Duffy, Dr. A. E. P. Kerr, Dr. David (W'worth, Central) Prentice, R. E.
Edelman, Maurice Lever, Harold (Cheetham) Probert, Arthur
Evans, Albert (Islington, S.W.) Loughlin, Charles Rees, Merlyn
Finch, Harold (Bedwellty) McBride, Neil Richard, Ivor
Fitch, Alan (Wigan) MacColl, James Robertson, John (Paisley)
Fletcher, Raymond (Ilkeston) MacDermot, Niall Robinson, Rt. Hn. K.(St. Pancras, N.)
Floud, Bernard McInnes, James Rogers, George (Kensington, N.)
Foot, Michael (Ebbw Vale) Mackle, John (Enfield, E.) Ross, Rt. Hn. William
Freeson, Reginald McLeavy, Frank Shore, Peter (Stepney)
Gourlay, Harry Marsh, Richard Short, Rt. Hn. E. (N'c'tle-on-Tyne,C.)
Griffiths, Rt. Hn. James (Llanelly) Mayhew, Christopher Silkin, S. C. (Camberwell, Dulwieh)
Silverman, Julius (Aston) Thomas, Iorwerth (Rhondda, W.) Williams, Alan (Swansea, W.)
Skeffington, Arthur Thomson, George (Dundee, E.) Williams, Clifford (Abertillery)
Slater, Mrs. Harriet (Stoke, N.) Tuck, Raphael Wilson, Rt. Hn. Harold (Huyton)
Small, William Varley, Eric G. Zilliacus, K.
Soskice, Rt. Hn. Sir Frank Wallace, George
Steele, Thomas (Dunbartonshire, W.) Weitzman, David TELLERS FOR THE AYES:
Storehouse, John Wellbeloved, James Mr. Lawson and Mr. Grey.
Summerskill, Hn. Dr. Shirley Wells, William (Walsall, N.)
NOES
Anstruther-Gray, Rt. Hn. Sir W. Gower, Raymond Maddan, W. F. M.
Batsford, Brian Grant, Anthony Maude, Angus
Bell, Ronald Grant-Ferris, R. Maxwell-Hyslop, R. J.
Bessell, Peter Griffiths, Peter (Smethwick) Maydon, Lt.-Cmdr. S. L. C.
Biffen, John Grimond, Rt. Hn. J, Meyer, Sir Anthony
Birch, Rt. Hn. Nigel Hamilton, M, (Salisbury) Mills, Stratton (Belfast, N.)
Black, Sir Cyril Harris, Frederic (Croydon, N.W.) More, Jasper
Box, Donald Harvey, Sir Arthur Vere (Macclesf'd) Mott-Radclyffe, Sir Charles
Boyd-Carpenter, Rt. Hn. J. Harvey, John (Walthamstow, E.) Onslow, Cranley
Brewis, John Hawkins, Paul Page, R. Graham (Crosby)
Brinton, Sir Tatton Hay, John Peel, John
Brooke, Rt. Hn. Henry Heald, Rt. Hn. Sir Lionel Percival, Ian
Brown, Sir Edward (Bath) Higgins, Terence L. Powell, Rt. Hn. J. Enoch
Buck, Antony Hooson, H. E. Price, David (Eastleigh)
Bullus, Sir Eric Hornby, Richard Prior, J. M. L.
Burden, F. A. Hunt, John (Bromley) Pym, Francis
Buxton, Ronald Hutchison, Michael Clark Shepherd, William
Carr, Rt. Hn. Robert Iremonger, T. L. Sinclair, Sir George
Clark, William (Nottingham, S.) Irvine, Bryant Godman (Rye) Smith, Dudley (Br'ntf'd & Chiswick)
Cooke, Robert Johnston, Russell (Inverness) Smith, John
Cooper, A. E. Joseph, Rt. Hn. Sir Keith Spearman, Sir Alexander
Corfield, F. V. Kershaw, Anthony Stainton, Keith
Craddock, Sir Beresford (Spelthorne) Kilfedder, James A. Steel, David (Roxburgh)
Crosthwalte-Eyre, Col. Sir Oliver Kirk, Peter Studholme, Sir Henry
Crowder, F. P. Langford-Holt, Sir John Summers, Sir Spencer
Curran, Charles Lewis, Kenneth (Rutland) Tilney, John (Wavertree)
d'Avigdor-Goldsmid, Sir Henry Lloyd, Rt. Hn. Ceoffrey (Sut'nC'dfield) Turton, Rt. Hn. R. H.
Dean, Paul Lloyd, Ian (P'tsm'th, Langstone) Ward, Dame Irene
Deedes, Rt. Hn. W. F. Longbottom, Charles Weatherill, Bernard
Dodds-Parker, Douglas Longden, Gilbert Webster, David
Elliott, R. W. (N'c'tle-upon-Tyne,N.) Loveys, W. H. Whitelaw, William
Emery, Peter McAdden, Sir Stephen Wilson, Geoffrey (Truro)
Foster, Sir John Mac Arthur, Ian Wise, A. R.
Gardner, Edward Mackenzie, Alasdair (Ross&Crom'ty) Younger, Hn. George
Gibson-Watt, David Mackie, George V. (C'ness & S'land)
Goodhew, Victor McLaren, Martin TELLERS FOR THE NOES:
Mr. Tan Fraser and Mr. Mitchell.