BRITISH OVERSEAS AIRWAYS CORPORATION (Hansard, 25 March 1971)

§ The Under-Secretary of State for Trade and Industry (Mr. Anthony Grant)

I beg to move, That the British Overseas Airways Corporation (Government Investment) Order 1971, a draft of which was laid before this House on 4th March, be approved. The purpose of this Order is to allow the continuation beyond 31st March, 1971, of the provisions in the Air Corporations Act, 1967, for the investment of non-redeemable capital, which has come to be known as public dividend capital, in B.O.A.C. The essence of public dividend capital, apart from being non-redeemable, is that it is remunerated by annual dividends payable out of profits and reserves, in contrast to the fixed interest payable on loan capital, which forms the capital finance of most nationalised industries. Dividends, unlike fixed interest, are variable and can reflect each year's trading results in the same way as dividends on equity capital in the private sector.

Public dividend capital was introduced for B.O.A.C. in the Air Corporations Act, 1966, on an experimental basis for five years from April, 1965; so the Act provides for the arrangements to lapse on 31st March, 1971, unless extended by Order for a further period or permanently. The draft Order now before this House extends the arrangements for a further five years until 31st March, 1976.

I think hon. Members will agree that the experiment has been successful so far. The Government have received £44¼ million by way of dividends—far more than they would have received in interest on a corresponding amount of loan capital. B.O.A.C. is keen to retain public dividend capital because it puts its capital structure broadly in line with that of its main competitors, most of whom have a 1073 proportion of equity, and so enables the Corporation's financial performance to be more readily and directly related to theirs.

The Government have, therefore, decided to extend the arrangements for a further period until financial responsibility for both B.O.A.C. and B.E.A. is taken over by the proposed Airways Board.

I commend this Order to the House.