ADHERENCE TO TARIFFS

HC Deb 28 February 1978 vol 945 cc375-96

"It shall be an offence to sell or offer to sell in the United Kingdom to any other person any services consisting of or including passenger air transportation on terms which so far as the air transportation is concerned include any arrangement whereby any person whether by way of discount, rebate or any other means whatsoever, pays any lesser sum than the minimum approved by the appropriate authorities for the route or category of ticket concerned or which otherwise fail to comply with the conditions laid down by the appropriate authorities; and for this purpose the appropriate authorities shall be the Civil Aviation Authority for British carriers and the Department of Trade for foreign carriers or such bodies as the Department of Trade may appoint for this purpose."—[Mr. McCrindle.]

Brought up, and read the First time.

Mr. R. A. McCrindle (Brentwood and Ongar)

I beg to move, That the clause be read a Second time.

I start by declaring an interest as the parliamentary consultant to the Guild of Business Travel Agents. I am aware that the very words "Adherence to tariffs" sound, in themselves, protectionist and illiberal and not at all compatible with the aim of providing the lowest fare for the maximum number of passengers, in a period in which, certainly in the United States, mass travel has become a political football, and certainly it threatens to do the same on this side of the Atlantic.

I can understand why some colleagues, in considering the new clause, might tend to bristle. I shall be seeking to show that adherence to tariffs is in the best interests of the passengers and that protectionism in the travel trade is neither what is sought nor is it considered necessary.

It is no secret that this clause, or one very like it, appeared in the original Bill. It is not for me to interest myself further at this stage in the reasons why that clause was deleted from the original Bill. It is, however, my contention that there is a strong case for the reinsertion in the Bill of what has now become New Clause No. 2.

I am, of course, aware that the clause can be construed as being anti consumer, anti low fares, pro international cartel and pro the big travel agencies and tour firms. I shall seek to show that it is none of these things but, rather, the best and the safest—I emphasise "safest"—way for us to move towards low fares for the maximum number of people.

I hope to prove that the experience of the last few years has shown how dangerous it is to risk the all-out, cut-throat competition of what I shall call back-street bucket-shop travel agencies.

Dealing in people's dreams, we are told, is what the travel business is all about. Whether or not that is right, I hope that the House will at least concede that we have no right to run the risk of allowing people to risk the loss of their life savings on what have in the past turned out to be non-existent low fares opportunities.

The bucket shops, as they are called, are not the little travel agencies fighting back against the competition of the major chains. On the contrary, they are those which, without responsibility, peddle wares that have in the past come from a variety of sources, including stolen tickets.

At this stage, I should like briefly to hark back to the history of airline ticket discounting. I must say that the International Air Transport Association is certainly far from guiltless as a result of its contribution towards the development of airline discounting. Its lack of flexibility in the fare structure has led to this. Nor can I exonerate the airlines from having encouraged the development of this trend.

Going back some years, it could, I suppose, be contended that the introduction of charter trips was the beginning of the encouragement to discount. The formation of a large number of bogus clubs to enable people to gain cheap fares is something which most hon. Members recall. This was added to at a later date by what I can only call the dumping of airline tickets by the airlines to relieve themselves of the excess capacity that had developed for a variety of reasons, which I shall leave for another occasion to place before the House.

Coming more up to date, one of the bases upon which this discounting has continued is the flouting of regulations to which the Government have been a party in what is called the accommodation inclusion approach to airline ticketing. The jungle of IATA fares has certainly lent itself to the development of airline discounting. IATA can certainly be criticised for failing to respond sufficiently early to the pressure for low fares from the public.

The airlines can also be criticised for the dumping of airline tickets. In 1975 there dawned upon the airlines the realisation that, as a result of their contributing to the dumping of airline tickets, they were losing tens of millions of pounds in revenue. It may be asked "Why should this not be so? If they took a commercial decision and as a result the ordinary man in the street was able to obtain a lower price for a flight, why should that not be so?" The problem was, and continues to be, that by this intensification of airline ticket discounting some of the airlines, particularly those not able to rely on Government subsidies for survival, came close, in some cases alarmingly so, to extinction. At the same time, bona fide travel agents, required to comply with the many international regulations, became to say the least, a little concerned about the development of this trend.

There was, therefore, a move in 1975 by the Guild of Business Travel Agents, to which I am attached, to set up its own ticket discounting organisation. That was sufficient for the airlines to recognise that probably the time had come to start moving in the direction of some normality in airline fares. So what has been nicknamed "operation clean-up" was launched by the airlines with the approval of IATA and the Department of Trade, as outlined in a Press circular at that time. There came into being the Board of Airline Representatives in the United Kingdom, or BARUK as it has now become known colloquially.

The idea was that in the attempt to reverse the development to which I have referred airlines should police the activities of airlines engaging in discounting. After all, they were doing this, and continued to do it, in violation of the British Government's membership of IATA. It was no secret that among the airlines engaged in this activity was the State airline, or airlines before the merger forming British Airways took place.

I pay full tribute to British Airways and to BARUK for having recognised in 1975 that something had to be done, and for launching "operation clean-up". I also take the opportunity of congratulating the Government and, in particular, I congratulate the Minister who is to reply to the debate on his understanding of what had to be done, and on his continuing support of the airlines. I hope that he would agree in turn that the Guild of Business Travel Agents and the Association of British Travel Agents have equally been well to the forefront in supporting the move.

There has been considerable success as a result of the introduction of "operation clean-up", but that has always been a second best to outlawing the practices which were undesirable from the consumer's point of view and tending in the process to dilute the finances of the airlines. Hence the new clause, which would not, I hasten to stress, supersede "operation clean-up" but considerably strengthen it. I therefore urge its acceptance upon the Government.

I want now to answer some of the points made, such as that consumer choice and consumer protection are not compatible with the clause that I am urging upon the House; that the balance of competition, in which the acceptance of the clause would result, is inimical to the interest of the consumer; and, finally, that the international cartel, as IATA is frequently called, is no champion of the consumer, the purchaser of airline tickets.

There is, of course, no shortage of cheap fares to the United States, to Europe, or to other parts of the world. Equally, there is no doubt that competitive pressures, and the gradual introduction of a greater flexibility in IATA's approach to these matters, have resulted in many of these cheaper fares becoming widely and legally available to members of the public. That is something that I warm to, because I am moving the new clause at least as much in the interest of the consumer as anything else.

There is, of course, much still to be done. Strong pressure by Her Majesty's Government and the Civil Aviation Authority on IATA is, in my view, necessary. There is a great demand for cheap travel, I readily concede, but there is no demand for cut-throat competition. I have only surely to mention such names as Clarkson's Horizon and—most recently perhaps most emotively of all—the Overseas Relatives Reunion Club, for us to realise that those are corpses on the road to unfettered competition.

It is no good, in my judgment, taking the trouble, in the interests of the consumer, to arrange for the bonding of tour companies and the introduction of the air travel levy, if we are then to encourage people to go for the cheapest air fare, irrespective of whether at the end of the day, when the passenger turns up for his flight, the journey can take place. If we go on in the way that we are at this moment, I believe that we shall have more of the scandals to which I have made reference, and people will then come to Parliament expecting some action to be taken retroactively. The purpose of the new clause is to try to prevent that necessity from ever developing.

There are many service industries which advertise their services and which are required to conform to certain standards. Services are unlike consumer goods in this respect. I submit that there is a strong case for the widest range of air fares to all destinations being available, depending on individual requirements, but equally there is a strong case for rendering illegal the discounting of these fares. Let the travel agents and the airlines compete in every way possible, but let the consumer know that when he is buying his dream it is not calculated to turn into a nightmare.

I have criticised IATA for its inflexibility, yet it would be unfair not to recognise that as airline passengers we owe a considerable debt to IATA. It has been of considerable assistance to the travelling public with regard to laying down safety standards, introducing a clearing house and the like. I hope it will now recognise that there is a need for more Skytrain-type projects, for more imagination at the headquarters of IATA and for a development of cheap fares for all, but for all with safety.

So far I have stressed the consumer interest. I concede that the travel trade is concerned and interested in this new clause. It has a right to expect some protection in return for the competitive world in which it is obliged to live. I contend that the interests of the consumer, the interests of the travel trade and the interests of the House coincide in the acceptance of this new clause. It is in that spirit that I move it.

10.15 p.m.

The Under-Secretary of State for Trade (Mr. Clinton Davis)

It may be helpful to the House if I intervene immediately following the hon. Member for Brent-wood and Ongar (Mr. McCrindle), who has argued a strong case in a characteristic and moderate way.

I have a great deal of sympathy with the objectives in the new clause which is designed to outlaw the so-called bucket-shops operation. On the other hand, one has to recognise the attractions to the consumer of being able to buy tickets at prices well below the published fares. Indeed, the hon. Member for Cornwall, North (Mr. Pardoe) strongly expressed this view in his speech on Second Reading.

Another side to the coin—these are points that were elaborated by the hon. Gentleman—is that passengers have been badly let down by involving themselves in transactions with bucket shops. Tickets for which payment has been made have not been forthcoming, passengers have been stranded abroad and there has been trafficking in stolen tickets, although that is a matter which is more readily amenable to being dealt with by the criminal law.

What we should aim at is for the customer to buy tickets at the lowest prices consistent with his safety and comfort and which at the same time do not jeopardise the finances of the industry. That in a nutshell was the case presented by the hon. Gentleman.

Regulation of ticket sales does have a part to play, but to tackle this problem at its roots we must deal with the airlines by limiting the over-provision of capacity and by taking action against those airlines which release discounted tickets on to the market.

We are dealing with both these aspects, first, by making capacity limitations a condition of the issue of operating permits to foreign airlines and, secondly, through "operation clean-up" in which airlines operating to and from the United Kingdom are co-operating to reduce bucket-shop operations.

Where evidence of discounting exists, the Government already have powers to take action against the airline concerned. Article 58 of the Air Navigation Order deals with the capacity of the Government to revoke or suspend permits and Article 84(6) deals with the possibilities for prosecution. But the problem that has always confronted Governments dealing with these matters is that of obtaining sufficient evidence on which to base any action, either administrative or through the courts. With great respect, I do not think that the new clause would do anything substantial to eliminate this difficulty.

The measures that we have taken already have reduced the scale of bucket-shop operations. One result has been an improvement in the revenues of British carriers on the routes in question, a fact which the hon. Gentleman is well aware of.

In any event the new clause is defective in that it contains no penalty although it proscribes the offence. Even if it did, it is considered that the chance of enforcing the new clause would be slim and, therefore, we should be still left with the problem of producing sufficient evidence to satisfy the courts.

I am very conscious of the concern felt by the travel trade about the sale of discounted tickets. I have met representatives of the travel trade about this matter. Accordingly, I am proposing that there should be set up a working party consisting of representatives of ABTA, the Guild of Business Travel Agents, the airlines, the airline users and my Department to examine this question and to consider ways of dealing with a very difficult and contentious problem.

I hope to be able to make a further announcement shortly about the terms of reference of the working party, its composition, and the period within which it is expected that it will be able to make its report available. I hope, too, that the House will regard this as a genuine effort to achieve the resolution of a difficult issue, which will involve, we hope, the reconciliation of strongly held but conflicting views, through machinery in which the voice of the consumer, the airline user, will also be heard, and that is an important voice in this matter.

In the circumstances, I hope that this course will commend itself to the House and that the hon. Member for Brentwood and Ongar will feel it appropriate, either immediately or in due course, to withdraw his new clause.

Mr. John Pardoe (Cornwall, North)

The amendment seeks to undo the good which the Liberal Party has already done to the Bill.

It is no secret that the Government wished to forbid British travel agents selling cut-price tickets below the price at which British airlines are allowed by the relevant authorities to sell.

I find it extraordinary that this amendment should be moved by a Conservative Member, and I trust that those hon. Members on the Opposition Front Bench who speak on trade matters will in no circumstances add their names to this kind of restrictive nonsense.

The Conservative Party spends much of its time these days paying lip service to the principles of Adam Smith. One of my favourite quotations from "The Wealth of Nations" is: People of the same trade seldom meet together even for merriment or diversion but the conversation ends in a conspiracy against the public or in some contrivance to raise prices. It is a great pity that the Conservative Party does not study Adam Smith more closely and pick the right bits, because it is clear that the Conservative Party is part of the conspiracy described by Adam Smith. It is in favour of competition in theory, but it is in favour of monopoly and restrictive practices in practice.

It is no secret that the Conservative Party has been lobbied very hard by ABTA, and I find it shaming and disgraceful that its Members have been far less robust than we in the Liberal Party have been in rebutting that lobbying.

The case which will be put forward by the Opposition spokesman is that it is nonsense to talk of free market competition in the airlines business because there is no such thing as a free market in the airline business. We know that it is subject to one of the most powerful and restrictive monopolies in the world economy today. But saying that one cannot have competition in any part of the airline sector because IATA operates monopoly practices is rather like saying that, because perpetual motion does not exist, the bicycle must be impossible.

Clearly, we ought to allow the free market to do its work wherever possible. It is far better at doing it than governmental price control. Price control is sometimes legitimate where monopoly actually exists. But surely it is only then legitimate in ensuring that monopolies cannot raise their prices above the free market level. To suggest that price control should be introduced to stop free marketeers offering prices below the monopoly level seems to be complete nonsense.

We have heard in this debate about the bucket shop, and it has a dreadful sound to it. It sounds like a back street abortionist. However, this clause would not apply to just a selective bunch of agencies. It would apply to every airline and travel agent who sold discount tickets.

Discounting in the London market is extremely widespread. Many hon. Mem- bers may not understand that. They may think that this is some kind of closed black market practised by shoddy and disreputable people. That is not so. It is practised by the great majority of airlines in the world today, and by thoroughly reputable ABTA travel agents, although they do not always cares to say so.

Mention has been made by the Minister and by the hon. Member for Brent-wood and Ongar (Mr. McCrindle) of stolen tickets. The connection between stolen tickets and discounting is very interesting. There has been a major prosecution at the Old Bailey of a travel agency for supposedly dealing in stolen tickets. The prosecution case was brought by TWA, who said that because the agency had received these tickets at what was regarded as a ludicrously cut price, it should have known that they were stolen property.

The agents were a Mr. Bowater and a Mr. Groombridge, and their defence was that discounting and cutting prices were so common in the London market that they could not possibly have known that the tickets were stolen. It is interesting to quote the views of the Metropolitan police inspector who was in charge of the case. I quote from an account of the case in the winter issue of "Business Travel" which says: under cross-examination, Inspector Arkett of the Metropolitan Police said that the police had worked on the assumption that airline tickets were no different from other goods that were frequently stolen—if they were offered at substantially below the generally accepted market price, and a potential buyer did not inquire too deeply into their origins, he was knowingly running the risk of receiving stolen goods. The Inspector told the Court that at no time had TWA, as the complainants, informed the police of the scale or nature of the IATA airlines' activities on the London discount market". The judge accepted that evidence as being wholeheartedly in favour of the defence case and threw out the prosecution. He was extremely cricital of TWA for bringing the case at all. I quote that because it was the major court case on this subject of the last two years, and it brought to light the fact that discounting was extremely widespread.

The list of airlines using the practice not only includes foreign airlines, which might be desperate for hard currency, but also major British airlines. There is no doubt at all that British airlines in the last 18 months have unloaded millions of tickets at well below what the Minister would regard as the allowable price in the circumstances, and have unloaded them through ABTA agents in the London market. Therefore, it is absolute hypocrisy to say that this new clause would deal with the so-called bucket shops.

We have heard the Minister announce that he will establish a working party. Before I give that any kind of welcome, I am bound to say that it sounds rather like Adam Smith's description of a price ring. I do not know who will serve on this working party, but they may all get together to conspire cosily to produce reasons why the Minister should come before us at a future date with regulations to control cut price tickets.

Mr. John Nott (St. Ives)

The hon. Member for Cornwall, North (Mr. Pardoe) should get on the working party.

10.30 p.m.

Mr. Pardoe

I had thought of that. I think it would be a good idea. If the hon. Member for St. Ives (Mr. Nott) were on it, too, we might do a good job on behalf of the consumer.

There is no shadow of truth in the suggestion that consumers are getting a raw deal as a result of cut-price operations. Of course, if a customer goes into a travel agency and buys a ticket to Timbuctoo at a price that is well below that quoted by airlines generally, he must recognise that he is taking some sort of risk. He must measure that against the price he pays. That is the situation facing every consumer who buys something cheaply, whether a pork pie or an airline ticket.

The best way to get prices down is to allow the agency of unfettered competition to do it for us. Let us have no regulations or lower-end price control. The only legitimate price control is to stop monopolists jacking up prices, Price control should have no place in stopping the free market from selling tickets at well below the price that airlines wish to charge.

We are faced with over-capacity in the airline market and airlines will do their damnedest to fill their planes. It will make no difference if the Minister sets up his working party or the new clause is passed. If airlines have spare capacity and want to fill their planes, they will fill them with passengers who are prepared to pay only cut-price fares.

That is the basis of the working of the free market and, for my money, it is a basis in favour of the consumer. I intend to have no truck with the new clause. It is utterly against the interests of the consumer. I want low-price air travel and I know that I can get that from the operation of the free market.

Mr. Norman Tebbit (Chingford)

It may help if I intervene at this stage. We are indebted to my hon. Friend the Member for Brentwood and Ongar (Mr. McCrindle) for introducing the new clause. Clearly it has defects, apart from the objection raised by the Minister that it creates an offence without a penalty. It is the obverse of the Government's incomes policy, which creates a penalty without an offence. The new clause would probably also preclude airlines from allowing their employees to buy tickets cheaply and, as a former airline employee who still has some small privilege, I suppose I should declare my interest.

We have heard something of the curious history of the new clause. Apparently it was stillborn originally because of the Lib-Lab pact. It is about time that the Minister recognised that if he wants to introduce sensible legislation in this area—and I believe that he does—he would do better to negotiate for the support of myself and my 279 hon and right hon. Friends than negotiate with the ridiculous rump of a once great party.

The hon. Member for Cornwall, North (Mr. Pardoe) made an interesting speech. His philosophy came out clear and strong—none of this consumer protection nonsense, let us get away from that; the only thing that matters is the free play of competition; let the buyer beware. I cannot wait for the hon. Gentleman to move new clauses to the appropriate Bills or to introduce a Private Member's Bill to get rid of the Office of Fair Trading and all the consumer protection offices around our town halls that have prospective Liberal candidates propping them up in between falling over broken paving stones. It was a contemptible speech by a contemptible Member. I was surprised that he even reached such depths of sheer misinformation and misleading of the House about the principles and policies of his party.

As I understand it, the Liberal Party is now committed to a free market and no restriction on the price of anything except wages, the price of labour. That is the one area in which it wants statutory provision to control prices. The hon. Member for Cornwall, North must grow up and get over this idiotic child-like politicking of the Liberals.

I cannot recommend my right hon. and hon. Friends to support the new clause.

Mr. Pardoe Now we are getting to the truth of the matter.

Mr. Tebbit

That has never been in any doubt. I do not think that the clause should be enacted. I recognise the dangers of bucket-shop discounting operations. There are hazards to the traveller. I notice that it was the hon. Member for Cornwall, North who chose to say "Let the buyer beware", but on another occasion, no doubt, he will come crying to us with the tale of how some unfortunate crippled half-wit Liberal child was done down by a vicious bucket-shop operator and asking for legislation to cover such operations. However, there are hazards to the traveller, and the hon. Gentleman should recognise that.

In many instances there is a process which is nothing other than dumping, and because it is the dumping of airline seats it is no different from the dumping of shirts, socks, shoes or any other commodity. That is because there are two sorts of airline in the world. There are the airlines that go into the business with the intention of making a return on their capital, and there are those that we might generally refer to as mumbo-jumbo airlines, that are not commercial businesses and are merely seeking either to extend national prestige or to buy foreign currency cheaply, by dumping capacity at below the cost at which they allow their own nationals to buy the product in their own country. It is that mixture of commercial and non-commercial airlines that bedevils fair competition. It is not IATA that is preventing fair competition but the mixture of commercial and non-commercial operations. Unless we deal with that we shall never get proper, fair competition among airlines.

I deplore monopolies, whether they are in the hands of the State, the trade unions or private investors. I do not like resale price maintenance or price fixing—and that even goes for price fixing in the labour market—unlike the hon. Member for Cornwall, North.

In present circumstances it is inevitable that we have some attempts at price fixing among airlines, but I do not think that it would be right to make it an offence to try to buck the system. It would be dangerous if discounting were again excessively and capricously to dilute airline revenues, but it is just as well to ensure that there is no criminal sanction behind which high tariff operators could be placed to prevent mass travel, which would act merely as a mattress for somnolent and inefficient airlines to doze away their years.

The Minister has replied, and his offer of setting up a committee was the most that an Under-Secretary of State could offer. Had it been the Prime Minister, I suppose that he would have offered a Royal Commission. I do not think that we should expect more out of the inquiry that the Minister has promised than we should expect out of most Royal Commissions. However, we should wait to see what comes of the proposal. We shall examine it with interest. In the meantime I hope that the new clause will be withdrawn in the light of the inquiry that has been offered, for what it is worth, and the indication that there would not be a great support in the House for any move to make discounting a criminal offence.

Mr. Michael Neubert (Romford)

As someone who has been involved in the travel industry for the last 18 years, I formally declare my interest at the outset.

It is possible to represent this issue as one more round in the all-important fight against inflation by bringing prices down, as a blow for competition and for the consumer; and if at the same time one can undermine IATA—that notorious international cartel—so much the better. It is possible to represent the issue in those simple terms and, in the politics of naivety as practised by the Liberals, it is being represented as such.

Unfortunately for the expedition of business and the simplistic nature of that argument, on the subject of scheduled air fares we are faced tonight with a unique and, for that reason, unusual set of circumstances. We should recognise that our unwillingness to engage in more than a one-step argument is no service to the public in this or any other matter. We are paid to persuade and to inform. When I listen to the hon. Member for Cornwall, North (Mr. Pardoe) expound what passes for Liberal economics, I sometimes think that we are paid too little. If he is now to pass himself off as an authority on aviation as well, life will scarcely be worth living.

We are required to give some thought to a difficult matter. It is all too easy to mutter the pass words "market" or "competition" and then to move on to the next pressing engagement. But the circumstances are different.

What is discounting? In practice, it tends to be certain airlines offering tickets at cut-price rates in order to boost their own revenues. They do that at the expense of others. As my hon. Friend the Member for Chingford (Mr. Tebbit) pointed out, in practice it tends to be those who are unsuccessful unloading their seats on the market at the expense of successful airlines.

I thought that our policy was to back winners, not losers but that is what we are doing. It is a drain on the revenue of airlines such as British Airways. The scale of losses in 1975 was put at £40 million in London and the United Kingdom alone. If we examine the profitability of airlines operating out of the United Kingdom in that year, we realise the significance of that drain on the revenue of our nationalised airline.

Incidentally, the hon. Member for Cornwall, North asserted that British Airways had been guilty of such discounting in large measure in the last 18 months. However, he offered no evidence of that whatsoever. I do not think that British Airways has been completely innocent of the practice in the past, but I think that it is less likely in the more recent than in the more distant past.

Mr. Pardoe

I quoted that remark in the context of the court case at the Old Bailey and the evidence that was adduced. The hon. Gentleman is suggesting, as his hon. Friend the Member for Chingford (Mr. Tebbit) suggested, that this practice is carried out by third-rate airlines. Does he accept that Alitalia, Sabena, British Caledonian, Icelandic Airlines and TWA are not in that category?

Mr. Neubert

I had in mind the six airlines that have been reported to the Department of Trade for these discounting offences. Five were Third world airlines. We must make up our minds whether we are backing Britain, which again I thought was our policy, or Bangladesh. No one needs to remind me that Bangladeshi Airlines is a non-IATA airline. It does not seem to matter too much to Bangladesh and it does not matter too much to my argument, because the majority of these airlines are Third world airlines. That is the outcome of our backing bucket shops.

I appreciate that this may be an ingenious scheme on the part of those who want to see more overseas aid for under-developed countries—that is, by draining away revenue from our nationalised airline. If so, why should British Airways be singled out as a victim of this international largess on our part? The unfortunate fact of life is that most of the airlines to which the discounting revenue goes make either no profit or so small a profit as not to represent a profit in real terms, even if they publish the figures. The money will go not to the starving thousands in the Sahel or the flooded homeless in Bangladesh but on wasted aviation fuel, at a time when world energy resources are scarce, and on the gold-braided prestige of the national airline.

I realise that the Minister, by making a generous offer to set up a working party, may feel that what I have said is superfluous to the debate. However, having sat here watching and listening to the debate on the Housing (Financial Provisions) (Scotland) Bill for hour after hour and having waited for this opportunity to expound my views on this subject at some length, I hope not to test the hon. Gentleman's patience to the point where he objects to my doing so.

10.45 p.m.

My next point is that the overall result is a drain on airline profitability. Airlines are facing a massive programme of investment in new equipment. They have to raise revenues. If cut price fares are offered the result is that the tariff is put higher still. That increases the injustice between one passenger and another travelling on the same aircraft. It raises the cost to the business man making a trip to secure an export deal, for example, to the advantage of someone going for two weeks in the sun to visit in-laws. Is that what we want? Is that fair?

The suggestion that IATA can operate a free market is laughable and the idea that it can rapidly reform itself is scarcely less unrealistic. IATA consists of 109 airlines. Most of them are national airlines. For that reason IATA consists of 85 nations. These airlines are the creatures of Governments, not normal industrial enterprises. Expecting them to come forward with a free market is nonsense. How can the market be free? If an airline makes a loss by, for instance, selling pound notes for 80p, the Government of the country concerned meet the loss. They never go out of business. The Government see to that. As for the IATA fare structure, to seek to emulate Sir Winston Churchill's description of Russia, it is a maelstrom set in a maze enveloped in a miasma. Its complexity is daunting and inevitable. The tariff conferences to change fares make the Tokyo Round talks at Geneva look like a question and answer session on the ten-times table.

There are some who believe, and would have us believe, that cut-price fares herald a new dawn in which the rising sun is Freddie Laker. I yield to no one in my admiration for Freddie Laker. As someone who flew on his first time-charter 111 flight to Djerba in the mid-sixties, I regard myself as having been with Laker Airways from the beginning. But anyone who thinks that he is a brilliant exponent of the free market misunderstands the nature of his achievement. It is not as if he went down Crawley High Street hawking tickets to people and then took off for New York the next day. He had a dozen legal and licensing hurdles to overcome. Every single detail of his operation is controlled by Governments. Departure and arrival, airports, frequency, capacity, in-flight catering, booking conditions and, most important of all, fares are controlled by Governments. The flight on Skytrain from London to New York costs £59. Even if the great Freddie Laker were to charge as little as £1 less, he would be in breach of his licence and likely to lose it.

What is the effect on the consumer? In the short term it is of considerable benefit, but that applies to all cases of dumping. That does not mean that we allow it to offset our anti-dumping measures. It was not the consumer who complained about £6 suits from Romania any more than it was the consumer who complained about cheap shirts from Pakistan. We soon moved to stop them. Why do we allow empty seats on Pakistan Airlines to be off-loaded on to the British market?

My colleagues are never more outraged than by the thought of the cut-price shipping rates being offered by Soviet Russia and other Communist countries. Shock, horror and sensation—every word in their vocabulary is used to express indignation at such a practice. But when Aeroflot discounts tickets on the London market at below cost rates to secure hard currency and bolster its revenues, nobody objects. That is apparently fair and unfettered competition. There seems at least to be a certain inconsistency in that to which we must address ourselves.

This has an unfortunate subsidiary effect on British travel agents, 4,000 of them, typical small businesses. I thought that this party of ours was in favour of legitimate small business. But we insist that these businesses have adequate premises from which to operate, that they are financially secured against all possible commercial risk, and that their staffs are competent and professionally qualified. Yet when clients are given correct advice about fare structures by these agents, the agents are made to look complete fools when the clients go off to find cut-price operators. They look fools and lose their legitimate business. That is our responsibility and we cannot escape it. I speak as a member of an Opposition who will in a short time be up against these dilemmas and responsibilities as the next Government. We have to face them, and we may as well start facing them now. We have to ensure that if rules are set by the Government they must be observed.

It will be argued that IATA and its appointed agents should put their own affairs in order so as to achieve lower fares, but IATA is virtually dealing with Governments. It has very limited powers for policing its own members. We have to ensure that we take our proper responsibility in this matter. Those who support this limited area of discounting and bucket-shop operations are not unlike those who would turn a blind eye to the back-street bargain which consumers would welcome of, say, a television for £9.95, as advertised on "Police 5", having just fallen off the back of a lorry. This is a dubious morality. The tickets are being sold below approved rates and as Members of this House we have to show a greater degree of responsibility in matters that are primarily our responsibility, not the responsibility of IATA, its appointed agents or the airlines.

Mr. Robert Adley (Christchurch and Lymington)

I agree with a lot of what my hon. Friend the Member for Romford (Mr. Neubert) said. He speaks with many years' practical experience in the business. The new clause is well intentioned, but I cannot support it. I am grateful to the Minister for saying that he is to have an inquiry.

Perhaps I can illustrate the point that my hon. Friend the Member for Ching-ford (Mr. Tebbit) made about AITA being the creature of Governments. It is significant that the one country where there is free market competition, an ideal which was espoused by the hon. Member for Cornwall, North (Mr. Pardoe), is North America. The seat-mile costs on the competing airlines there should shame every other sphere of aviation in the world into utter disgrace.

Mr. Tebbit

They do not have an incomes policy.

Mr. Adley

The role of the Government is to use the negotiations for traffic rights more in order to control the activities of Bangladeshi airlines, or whatever. Traffic rights can be used by Governments as a flexible weapon in trying to control the activities of the airlines that are trying to dump their seats.

There is a difference between a cut-price fare and a concessionary fare. Whether we are talking about empty seats on buses or on aeroplanes, there must be some form of accommodation which should enable the passenger transport operator to sell the seats he has available a short time before departure at a lower price, albeit an agreed price, than the seats that are taken up in advance.

I hope, therefore, that when the Minister sets up his inquiry he will find a legitimate way whereby operators such as British Airways and others can sell their seats at a reduced price under strictly controlled regulations. In that way, and that way alone, shall we find an accommodation between what my hon. Friend wants to do and what will not be totally contrary to the interests of British Airways and others who have to have a guaranteed revenue as airlines, and who otherwise will not be able to buy the new aircraft built, as we hope, in British aircraft factories. That, however, is another matter which I will not go into now.

Mr. Clinton Davis

I intervene very briefly—

Mr. Tebbit

With permission.

Mr. Deputy Speaker (Mr. Oscar Murton)

It is not needed.

Mr. Davis

It is not needed. Not for the first time, the hon. Gentleman is wrong.

I intervene briefly to say that I think the House has benefited by the debate started by the hon. Member for Brentwood and Ongar (Mr. McCrindle). A number of hon. Members have injected some positive thinking into this, which I regret to say to a large extent was missing from the speech of the hon. Member for Cornwall, North (Mr. Pardoe). Liberals are entitled to the occasional aberration, of course, and maybe it happened tonight, but I thought it was a bit thick when the hon. Member contended that no one else in the House understood these problems, when all his remarks were as ingenuous as they were. The fact is that there is a problem here, even if the hon. Member does not recognise it. There is a threat to the consumer caused by abuses, and a penalty is paid by the consumer in consideration of those abuses

I particularly wanted to take issue with one of the hon. Member's remarks which I hope he will reflect upon and withdraw. He said, in effect, that members of the working party would conspire together to produce a result which I would find comfortable—in other words, that I would intervene in their considerations and dictate to them the sort of result which would be amenable to me. That is unfortunate, misconceived, and a reflection on those who will form a part of this working party. I hope that he will think it right to withdraw that most unfortunate remark.

Mr. Pardoe

The Minister has drawn a completely nonsensical implication from my remark. I said that they would conspire to produce a report which was very comfortable to him. So they will. He will not have to do a thing. He will not have to lift a finger to get that sort of result.

Mr. Davis

That adds insult to injury. He is reflecting on the capacity of the members of the working party, whoever they may be, including the one who will be reflecting the consumer interest, to come to a fair judgment. Although the House will not pass judgment officially on what the hon. Member for Cornwall, North, said it will wish to rebuke him for what he said.

Mr. Richard Wainwright (Colne Valley)

Will the Minister give way?

Mr. Davis

No.

Mr. Cecil Parkinson (Hertfordshire, South)

Is this the Lib-Lab pact?

Mr. Richard Wainwright

Give way now.

Mr. Davis

No. The Lib-Lab pact is bigger than this. We can withstand the odd insult from the hon. Member for Hertfordshire, South (Mr. Parkinson).

The hon. Member for Cornwall, North owes it to the House to produce evidence, because he asserted that a number of airlines have been guilty of discounting heavily. I ask him to produce evidence, not now, but later and in a way which will satisfy a court. We have intervened with administrative action previously, and the hon. Member has accepted that that has been successful. I believe that to be right. If he has evidence, I challenge him to produce it. I hope that the House will feel that my constructive suggestion has been helpful.

Mr. McCrindle

If I were pleased for no other reason that I had moved the new clause and forced this debate, I should be positively delighted to have had the revelations of the hon. Member for Cornwall, North (Mr. Pardoe) by which the House was entertained. It was clearly a case of everyone being out of step except our John. I was also struck by the family feud that tended to break out between the Labour Party and the Liberal Party towards the end of our deliberations. That was not a bad reason for initiating the debate, even if there had been no other.

11.0 p.m.

Mr. Adley

My hon. Friend will have heard the Under-Secretary say that it is not a family. I presume that we must therefore accept that the Labour Party and the Liberal Party are living together in sin.

Mr. McCrindle

What they are living together in is no concern of mine.

I listened to what the Minister said about the setting up of a working party and to what my hon. Friends said about the intention behind the clause but about its defective wording and so on, and I am prepared to withdraw it in expectation of the creation of the working party.

First, however, may I be forgiven for expressing a little scepticism which I feel every time I hear of the creation of a working party. That scepticism is only slightly less on this occasion. The saving grace of this working party is that whilst it will be up to the Minister to decide on the membership, it will be up to the trade and consumer representatives, working in conjunction with the Minister, to bring to the Government the proof that they consider they lack to enable them to take action now. In those circumstances it is possible for me to approach the working party with a little less scepticism. Therefore, with good grace I am happy to accept the Minister's offer. I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.