§ Order for Second Reading read.3.47 pm
§ The Secretary of State for Trade (Mr. John Nott)
I beg to move, That the Bill be now read a Second time.
The Bill has two main objectives. First, it paves the way for a change in the status of British Airways from that of a nationalised undertaking governed by statute to that of a normal private sector company incorporated under the Companies Acts. Second, it amends the Civil Aviation Act 1971 so that the award of new routes and the maintenance of the existing route structure reflects the major changes which have taken place in the world airline business over the past few years.
I shall deal with each part of the Bill in turn, but both of them have the common purpose of fostering a vigorous United Kingdom air transport industry ready to respond to the needs and pocket of the airline passenger and then to meet and beat foreign competition for his custom.
British Airways are now the world's largest international scheduled operator. They are big enough and powerful enough to stand on their own feet as an independent airline, without Government guidance, without Government targets, without Government guarantees, and, above all, without Government interference. British and foreign airlines one-tenth their size, without their long traditions, financial strength and huge prestige, buy modern aircraft, provide safe and efficient services and run a profitable enterprise as independent companies. If those airlines can do it, so can British Airways.
British Airways' services represent two-thirds of the total British airline business. The corporation has prospects of carrying out one of the most exciting investment programmes in the world. Its 57,000 employees share a substantial pride in their corporation, and a substantial number of these employees want to share financially it its future. By opposing the Bill, the Labour Party has shown 37 that it wants to stop them doing that. There is not one reason why, except that it is gripped by a strange and thoroughly irrelevant ideology. As a by-product of that ridiculous condition, the Treasury controls the investment programme and the targets of British Airways, Ministers approve the corporate plan, the Secretary of State appoints all the directors and in any real sense the shares are owned by nobody at all.
We have to ask why right hon. and hon. Members imagine that they are more competent to supervise the airline than the management. What special managerial qualities are possessed by right hon. and hon. Members that are not shared by the chairman and chief executive of the airline? What special insight do they feel that they possess that entitles them to speak of what the employees want, and what is the talent in the Treasury, which now effectively oversees the corporate plan of the airline, that provokes the Labour Party's fascinated admiration?
For years my right hon. and hon. Friends have heard the Labour Party call for more genuine participation, more worker involvement, and more democracy in the ownership of business. However, when we come forward with a plan that gives such real opportunities and freedom from the pettifogging interference of Government, the Labour Party oppose it.
What is so wrong with the structure and independence of British Petroleum? Are the employees and the management of BP demanding the warm embrace of Government? Not a bit of it. If it is wrong to sell some shares of British Airways, why was it right for the previous Government to sell BP shares to the public? This is not merely my opinion. Our proposals have captured the imagination of not only the British people generally but the employees of British Airways. My hon. Friends who represent constituencies in which the staff and employees of British Airways live—
§ Mr. Nott
I accept that the Labour Party is opposed to our policy. However, it is not only the shop floor that has deserted it on this issue. Even its intellectual and ideological allies have deserted it. I shall refer to a leader that appeared in The Guardian the day after the announcement of our proposals. The leader stated:The decision is basically a sensible one"—that was its comment on our proposals—which the Labour Party ought to ponder rather than decry. To begin with, the whole idea that State ownership of the commanding heights of the economy brings power to the people has been badly undermined by many years of practical experience.It continued:by providing British Airways with shareholders it will give its chairman something which many nationalised industry chairmen dream of: a measure of independence from Whitehall.It was a long leader that was mainly in favour of our proposals, with a few questions here and there. It concluded:If its worker-shareholders become more committed to the company and its managers are invigorated by their new freedom, then we shall all have learned something useful.
§ Mr. Cranley Onslow (Woking)
On a point of order, Mr. Speaker. Would not it be more courteous if the hon. Member for Feltham and Heston (Mr. Kerr) rose to his feet occasionally, if he can do so?
§ Mr. Nott
I must offer special congratulations to my hon. Friend the Member for Wokingham (Mr. Onslow) on having caused the hon. Member for Felt-ham and Heston (Mr. Kerr) to rise to his 39 feet. I am well used to receiving interventions from that quarter while the hon. Gentleman is in a sedentary position.
On the appointed day, British Airways will be changed from a nationalised industry into an ordinary Companies Act company, with all its shares held on behalf of the Crown. At the appropriate time the Government will sell a minority of the shares in British Airways, making provision for a genuine, attractive and substantial shareholding for the staff and employees of the airline. We anticipate that of the shares not taken up by the employees the overwhelming proportion will be acquired by pension funds and other institutions representing the interests of millions of pension beneficiaries throughout the country. We believe that many small investors will seek to put some of their small savings into the airline at that time.
I do not doubt that the pension funds of the trade unions and Transport House will, as usual, and wisely so, be substantial investors in such an opportunity. The trade unions are normally the first institutions to grasp an exciting investment opportunity when they see one.
We shall be providing for public ownership in the true and proper meaning of the term. For the first time our national carrier will be genuinely publicly owned.
At the time of the quotation the Government will cease to crawl over and interfere with British Airways' procurement programme. The purchase of new aircraft—the corporate plan of British Airways envisages expenditure of about £2 billion on new aircraft during the next five years—will go forward on its merits. We believe that the management, in consultation with the employees and its shareholders, is best able to judge the numbers and types of aircraft required to enhance its competitive position and maximise results. My Department will thereafter cease to approve each decision for new aircraft purchases. At present I approve each of the aircraft purchases of British Airways, and I see no reason for that.
The Treasury will relinquish control of the airline's finances. The commercial borrowings of the airline will fall outside the Government's accounts. Thereafter, British Airways will not be subject to the 40 traditional cutback in its investment programme every time the Government, of whatever party, go in for general public spending reductions. The right hon. Member for Lanarkshire, North (Mr. Smith) will remember the occasions on which his party has indulged in public spending cuts.
When the airline has become a company, it will be governed by the ordinary provisions of the Companies Acts. Our objective will be to appoint initially an experienced and independent board that will in future determine business policy and assure the continuity of management at both board and lower levels. I do not readily foresee circumstances in which the Government would seek to mobilise their shareholding in opposition to the board.
Furthermore, the airline will no longer be subject to statutory financial targets, nor will it be subject to cash limits. We shall not take the power to guarantee its borrowings or to make it loans. However, like other shareholders, the Government will be able to subscribe to the rights issues of the company.
British Airways are not a monopoly. They have to operate commercially in an increasingly competitive market. The mechanism of an arbitrary Treasury target will be replaced by a far more appropriate and realistic discipline, namely, the need to maintain the confidence of those who invest in the airline, which will include the staff, its employees and those who travel on its services. The single greatest service that we can afford to the employees of British Airways and their passengers is to allow the airline to get on with its job without Government interference and control. Although the Government will retain a substantial majority shareholding, the airline will cease to be their creature. It will stand or fall by its own efforts.
§ Mr. Douglas Jay (Battersea, North)
Will the directors be appointed by the Government, or will some be appointed by the minority shareholders?
§ Mr. Nott
We anticipate that when the company becomes quoted the majority of the directors will have been appointed by the Secretary of State. That is the present position. Thereafter we anticipate that the shareholders generally will be 41 responsible ultimately for choosing the board. We do not foresee circumstances in which the Government will seek to mobilise their shareholding—I think that that covers the right hon. Gentleman's question—in opposition to the board, or in order to appoint particular directors. It is not intended that the Government, after quotation, should take a power to appoint their own creatures to the board.
§ Mr. Nott
The Government as the Government will not appoint the directors as such. But the Government as a majority shareholder will have the right, under the Companies Acts, to appoint directors if they should seek to do so. As a majority shareholder the Government clearly will have the power to do that. But it is not our intention to mobilise that right. We shall allow the shareholders, generally, to choose the directors to the board, and we shall not seek to appoint our own creatures.
§ Mr. John Smith (Lanarkshire, North)
Is the Minister serious about that? Is he saying that after the company has been floated, with the Government as the majority shareholder, they will not use their normal rights, as trustees of the public shareholding, to appoint directors? Or have the Government not thought out any policy on that yet?
§ Mr. Nott
We have a policy and I have explained it to the right hon. Gentleman. As a Government we do not intend to appoint directors to the board. However, we shall have rights under the Companies Acts to do so. We do not intend to take a power which precludes us from appointing directors to the board. The matter will be entirely open and will be no different from the position which now applies to the majority of British companies, where the majority of shareholders do not, in practice, get together and select directors for the board, although under the Companies Acts they have the final right to do so.
§ Mr. S. C. Silkin (Dulwich)
The right hon. Gentleman made the comparison with British Petroleum. As we know, for 50 years the Government have appointed 42 one or two directors to the board of BP. Is it intended to depart from that practice in this case and, if so, why does the right hon. Gentleman make that comparison with BP?
§ Mr. Nott
British Petroleum is very different. There is no direct analogy with BP. Under special arrangements entered into many years ago—an exchange of letters between the Government and BP, known as the Bradbury letter—the Government specifically reserved to themselves the right to appoint two Government directors to the board of BP. We do not intend to take any special powers in the Bill for the appointment of Government directors. We do not intend to have an exchange of letters, such as exists between the Government and BP, entitling us to appoint two specific directors. As majority shareholders, we shall always have the right to do so, but it is a right that, as I stand here, we do not intend to mobilise. I do not think I could have been clearer, and I leave it to my hon. Friend to answer further questions on this subject during the debate.
§ Mr. Russell Kerr
Is the Minister seriously telling us that there is a comparison between British Petroleum and British Airways? Do not the Government have an overwhelming majority in the equity ownership of British Airways? Is it not, therefore, a total abdication of our present ownership, if one likes to put it that way, not even to suggest the appointment of one or two directors? To me that seems a travesty of fair play.
§ Mr. Nott
I say quite genuinely that if right hon. and hon. Members feel very strongly on these matters and are determined to insert a clause in the Bill or introduce amendments which would involve the Government actually appointing, in the way that they do now, a number of directors nominated by them, we can debate that in Committee. But our intention is that this company will proceed like any other company incorporated under the Companies Acts. The majority shareholder will have the right to mobilise its shareholding—as, indeed, any majority would have—but it is not our present intention to make a special objective of the appointment of our particular nominees to the board. We intend to hold back from that and to allow the company to proceed in the normal way.
43 Institutions in this country do not normally go out of their way, where they have a substantial shareholding of, say, 30 per cent., to appoint 30 per cent. of the board, and we shall act in the same way.
§ Mr. J. Enoch Powell (Down, South)
I wonder whether the right hon. Gentleman would be generous enough to carry the matter a little further. As I understand it, as regards British Petroleum, the Government have, as a matter of policy and historically, forsworn the use of their position as the majority shareholder in order to influence the policy of a company. Is he or is he not saying that a similar enunciation will be made in respect of the successor company? Is he saying that, although the Government will be the major shareholder, appointment of directors apart, they will not seek, although they are the overwhelming majority shareholder, initially to influence the conduct of the affairs of the company?
§ Mr. Nott
Yes, I am saying just that. Apart from the rights which will obviously stem from the Companies Acts—because the shareholders will be, according to the Companies Acts, the owners of the company—the Government want to stand entirely apart from British Airways. We want them to act commercially, and we do not foresee circumstances in which we, as the majority shareholder, would seek to influence the commercial decisions of the airline. That is precisely what I am saying.
We are getting into a Committee stage debate, but what I think the right hon. Gentleman was asking was whether we intend to have an exchange of letters or whether we intend to go further and preclude ourselves, legally, morally or in any other way, from ever taking any kind of position. The answer to that is "No".
§ Mr. Robin Maxwell-Hyslop (Tiverton)
Do I understand my right hon. Friend to say that if the minority shareholders put up a candidate for election to the board the Government will not use their majority shareholding to outvote the minority shareholding that has nominated that director? I understand my right hon. Friend to have said that, but I do not want to misunderstand him.
§ Mr. Nott
No. I am saying that it is our present intention not to interfere, as a majority shareholder, with board appointments. I hope I have satisfied my hon. Friend.
We cannot continue debating this matter now. I suggest that we debate it at length in Committee. If right hon. and hon. Members wish to table amendments and to change the position, we shall have to look at those amendments. I have explained that it is our intention that this corporation should become a company incorporated under the Companies Acts, and should be treated like any normal company quoted in the market.
§ Mr. Nott
If the minority shareholders seek to mobilise themselves into some kind of body to decide whom they should nominate as directors, they will, as shareholders, have a right to vote on that matter in general meeting. If they seek to do so, the Government will also have the right, by virtue of the fact that they are shareholders, to mobilise their shares in general meeting. What I said, and hoped I had made clear, was that the Government do not foresee circumstances in which they will mobilise their shareholding in such a way. We shall treat the company in precisely the same way as most shareholders treat a company. Most shareholders do not set out to appoint their own creatures as directors.
I turn to part II of the Bill which is described as "Miscellaneous". There are a number of minor provisions amending the existing law, but I want to concentrate on clauses 10 and 11 which deal with the Civil Aviation Authority.
This part of the Bill, in many respects, heralds a more substantial and important change for the future of our civil aviation industry than Part I. Although "ownership" is significant—and part I is concerned ultimately with ownership—the key to the future lies in an aviation policy that brings the maximum benefit to airline users, commensurate with the need 45 to develop our airlines on a profitable, safe and stable basis. Thus, while we are making major changes that reflect current conditions in the airline business, I am anxious to ensure that we do not damage the airlines' stability in difficult times.
The court of appeal case in 1976—Laker Airways v. the Department of Trade—made a change in the guidelines inevitable. It would not be given to any mere mortal to arrive at a change that brought about universal acclamation from British Airways, British Caledonian, Laker Airways and all the other private operators. Indeed, to bring forward such universal acclamation from all of these would lead me to wonder whether our policy was right or whether it would not eventually founder in recrimination.
There is, inherent in a sound policy for awarding routes, a strong element of tension. I do not expect that tension to disappear. I shall have done a good job if none of our airlines is entirely happy. That would indicate that we had achieved a degree of impartiality and a balance in our proposals.
§ Sir Anthony Royle (Richmond, Surrey)
When my right hon. Friend talks about balance between the various airlines and makes the point that none of them should feel badly done by, will he take note of the fact that in this Bill he does not appear to change the position of airlines that are in fact British but are not based within the United Kingdom? One such airline is Cathay Pacific, which is in this position and is therefore at a significant disadvantage in competing for routes in the future. My hon. Friend the Member for Howden (Sir P. Bryan) will raise this matter in more detail in his speech, and I hope that my right hon. Friend will take it into account.
§ Mr. Nott
I shall certainly take account of that point when I hear my hon. Friend the Member for Howden (Sir P. Bryan) speak. If any of my hon. Friends wishes to come forward with particular points that affect non-British airlines with a close connection with this country, or airlines that are British but are not based in this country, he may table amendments in Committee and we shall be glad to look at them.
Although the changes give more authority to the Civil Aviation Authority, 46 there are a number of features in our policy which will not change. The Government will continue to appoint the chairman and the board members of the CAA, and of course the chairman and the board members know it. This Bill reflects the Government's general policy towards the future and it is important that any chairman maintains the confidence of the Government and vice versa.
Moreover, the world environment in which the CAA will make its judgments remains subject to a vast multiplicity of air service agreements. There are 101 of these agreements now in being and they will remain the responsibility of the Department of Trade.
There is no single area of the Department's work that takes up more time and causes more trouble and frustration than this field of endeavour—the negotiation of air service agreements. We are dealing here with national prestige, national aggrandisement, national ambition and just plain nationalism, sometimes regardless of any financial reality and often without any real concern for the cost to airline passengers. A number of foreign nations regard their airlines as entirely separate from a commercial operation, and this is an area that is still rife with the worst kind of protectionist attitudes. It is an area in which the provider of services takes precedence far too often over the consumer of those services.
I take the United States as an example of this. Hon. Members may feel that it is the one example that I would be unlikely to take. The United States talks about de-regulation and open skies, but when it talks about open skies I think that it means the routes between the United States and London. The route between New York and London is the jewel of international routes, on which it is sensible to offload as much as possible of one's marginal costs. I do not, however, see any real likelihood of the United States' Civil Aviation Bureau awarding "cabotage" routes to British Airways to fly between New York and Chicago, for example. Neither do I see it allowing Laker to fly from Los Angeles to Detroit, or British Caledonian to fly from New Orleans to New York. That is really what open skies would be all about—giving British airlines an equal opportunity with 47 American airlines to fly around the world in a totally de-regulated atmosphere.
§ Mr. Michael Neubert (Romford)
I must declare an interest in matters of air travel. What limitation will be placed on British Airways fringe activities? Although my right hon. Friend said that British Airways is not a monopoly—and that is true in its international operations—within the United Kingdom it certainly has a dominant position in the air travel market. Activities on the margins, such as hotel keeping, running retail travel agencies and tour operating which might be accepted as fair competition from an ordinary commercial company, might be regarded as unfair competition from a company that still has a substantial Government majority holding. I believe that that is why the United States places restrictions on its national airlines, which are privately owned.
§ Mr. Nott
I do not foresee any directions or other instructions being given to British Airways to divest themselves of these activities. One of the principal purposes of what we intend, namely, allowing other shareholders to have a substantial minority interest in the airline, is that then financial sanctions and the sanctions of the market will apply to British Airways in the same way as they apply to other companies. I believe that British Airways must make a decision within that context as to what they intend to do with these activities. I do not propose that any part of British Airways should be broken up or sold off. I propose that the airline as a whole should be quoted and it will then be for the board of directors to take decisions on how they organise their business.
I was talking about the real meaning of "open skies". It does not just mean freedom on the route between New York and London; it means de-regulation in the sense that we could compete with the United States openly in what is the most profitable and the largest internal market in the world. That is something that we would look at with considerable interest if it were proposed to us. I mention this only to emphasise that in the last resort the decisions of the CAA are dictated by the facts of what my Department is able to negotiate in air service agreements.
48 I shall outline briefly a few details of the policy. The Civil Aviation Act 1971, which established the CAA, gave it certain statutory functions, but also provided for Ministers to issue guidance to the Authority. The Authority was required to perform its functions in such a manner as it considered would best attain its statutory objectives and give effect to the guidance given to it. This approach was an innovation, but I must say that it has not proved satisfactory. Guidance has been given in 1972 and 1976, but an important part of the 1976 guidance was found, as I have already said, tobe ultra vires, in the case of Laker Airways v. Department of Trade.
When the Under-Secretary of State and I considered this area of policy, we concluded that it was wrong to place responsibility for an area of policy on a independent organisation and then so to hem round its freedom that it was hardly able to pursue an independent line. If we wish to hive off certain functions of Government—the CAA provides an excellent example of the way in which independent bodies can undertake this task—we must be ready to take both hands off the wheel, or as the Under-Secretary would say, both hands off the joystick.
Clause 10 therefore removes the power for me to give guidance and instead describes those statutory duties within which the CAA must operate. I hope that the House will consider this to be a constitutional improvement. In principle it must be right for the Act to express the will of Parliament—rather than have that Act provide a paving stone for ministerial guidance.
Under the 1971 Act—I am referring to section 3—the CAA had two primary objectives: first, to secure that British airlines provide services which satisfy all substantial categories of public demand at the lowest charges consistent with a high standard of safety and an economic return to efficient operators and with securing the sound development of the civil air transport industry in the United Kingdom—it was not notable for its grammatical elements; secondly, to secure that at least one major airline other than British Airways has opportunities to participate in providing those services. Subject to those two objectives, the CAA was required to encourage the United Kingdom civil air transport industry to 49 increase its contribution towards the United Kingdom balance of payments and economic prosperity. Finally, and subject—I emphasise "and subject"—to its first three objectives, the Authority was required to further the reasonable interests of users of air transport services.
The whole emphasis of the task to which the CAA was charged in 1971 was to put the airlines first and to promote the British civil aviation industry. The airline users' interest was not the first consideration.
Let me say immediately that I do not denigrate the objective of promoting our airline industry. We should feel a great deal of pride in the determination and innovation which has made Britain one of the leading nations in this field.
§ Mr. Nott
Moreover, the passenger will, of course, be best served by the maintenance of a thriving aviation industry. But I feel that the statutory duties have to be redefined.
Clause 10 therefore strikes out the second and third duties—relating to opportunities for airlines other than British Airways and to the balance of payments—and places the two remaining duties on an equal footing. Thus the reasonable interests of air transport users will now rank equally with the objective of securing that British airlines provide air services to satisfy all substantial categories of public demand at the lowest charges consistent with a high standard of safety and an economic return for efficient operators. These will become the primary objectives of the Authority.
The later subsections of clause 10 impose further duties: to ensure that British airlines compete effectively on international routes; to secure the most effective use of airports in this country; and to consider the effects of any proposed new services on existing services provided by British airlines.
I should like to make a particular comment about the first of these duties. British airlines have an excellent record in introducing competition in international aviation. British Airways and the private sector airlines have done a great deal to lead the way in introducing low fares on European routes. Laker 50 has, of course, changed the whole climate on the North Atlantic. The growth of airline traffic owes a great deal to the promotional efforts of our airlines, and I am sure that we shall see a continuation of the spirit of enterprise in all British airlines which has already done so much to open up opportunities for travel.
When I consulted the major airlines about my proposals, more than one respondent expressed the view that the abolition of policy guidance would make it difficult to know the rules of the game and might increase the risk of arbitrary licensing decisions by the Authority. In view of this, clause 11 requires the Authority to publish a statement of its policies. As an aid to hon. Members' consideration of this clause the Authority intends to publish a draft of such a policy statement, which will be available in time for the Committee stage.
§ Mr. Jim Craigen (Glasgow, Maryhill)
On the domestic front, does the Minister foresee that the fares on the shuttle between London and Glasgow, for example, are likely to come down? There have been rumours that the return fare could be rising to £100.
§ Mr. Nott
These matters are considered by the CAA at present and will still be considered by the CAA under the new arrangements. I cannot say precisely in particular cases how this will affect the future route structure. However, by our amendments to the Act, we have endeavoured to give the interests of the consumer—the airline passenger—a more prominent position.
§ Mr. Onslow
What my right hon. Friend has said about the CAA publishing a draft of its policy statement will be generally welcomed by the airline industry, and I am very glad to hear him say it. However, would it not also follow from that that the bringing into force of that new statement need not be delayed so far as the Bill envisages giving the CAA up to six months after clause 10 comes into force before it publishes a final statement? The sooner that we can have it, the better.
§ Mr. Clinton Davis (Hackney, Central)
Does the effect of this mean that, apart from Parliament considering the matter at the Committee stage of the Bill, in future, if the Bill is enacted, Parliament will be denied the opportunity of scrutinising properly the guidance that is offered by the CAA, because the Minister will presumably say "I have no responsibility for this. It is devolved on the CAA"? Is not that something which ought to concern Parliament?
§ Mr. Nott
But surely the House of Commons is always complaining, and rightly so, about the volume of secondary legislation, ministerial guidance and the the nudge-and-wink process of conducting government. What I am seeking to do here is to include as an amendment to an Act of Parliament the actual terms under which the CAA will operate. There is nothing very radical about that. I consider it to be a constitutional improvement to contain within an Act of Parliament the basis upon which the CAA should operate rather than to contain it in ministerial guidance. As a lawyer, the hon. Gentleman should approve of that simple means of proceeding. However, no doubt he will be speaking in the debate and he may wish to go into this matter further.
§ Mr. S. C. Silkin
I am not quarrelling with what the right hon. Gentleman has just said. The difficulty, as I recall it, in the Laker case was that the existing powers of the CAA were held to override the ordinary powers of the Crown when the Crown was trying to negotiate with the Americans in order to produce an intergovernmental agreement. Is the effect of the Bill's provisions to restore the unfettered power of the Crown to negotiate, will that power be further fettered, or what will be the position?
§ Mr. Nott
My understanding was that the Act overrode the guidance and that this was fundamental to the case. I think that what we had in the Laker case was a conflict between ministerial guidance, on the one hand, and the Act of Parliament, on the other. I am trying to avoid that problem arising in the future by disposing of the guidance altogether and 52 containing the requirements directly in the Act.
§ Mr. Nott
The right hon. and learned Gentleman's points have been taken on board by my hon. Friend the Under-Secretary, who will certainly answer them in replying to the debate.
There will continue to be a right of appeal to me against air transport licensing decisions. However, I intend to continue the practice of the previous Administration in not interfering with the Authority's licensing decisions unless there are good reasons for doing so; but the right of appeal is a safeguard against arbitrary decisions by the Authority.
Before I pass from the provisions relating to the CAA, I should mention that clause 13 terminates certain Government controls over the Authority. These controls were imposed in the first place because the CAA was going to be largely dependent upon grant in aid for the first few years of its existence; but by now grant in aid covers less han 20 per cent. of its expenditure and is necessary for reasons which have nothing to do with the Authority's own efficiency. It is therefore proper to put the CAA into the position which is normal for a body which is not predominantly funded by the Government—so that it may be able to employ such staff and pay them such salaries as it thinks fit without reference to the sponsoring Minister. Government control over the pension scheme is also brought to an end.
§ Mr. R. C. Mitchell (Southampton, Itchen)
Will the Minister indicate what is meant by subsection (3) of clause 10 with regard to the licensing of aerodromes, where he introduces factors concerning the invironment and disturbance to the public? Is this a new factor? Will it apply to privately owned aerodromes, such as, for example, Southampton and Hamble, where it is very difficult at present to get any reasonable settlement and agreement about environmental questions?
§ Mr. Nott
Perhaps I may quickly go over this clause. The Bill requires the Authority, subject to new duties and amended general objectives,to have regard to the need to minimise any adverse effects on the environment and disturbance to the public53 generally when dealing with both air transport licensing and aerodrome licensing at any aerodrome specified for the purpose by the Secretary of State.
The list of objections and duties may appear long, but, as an indication of our general approach, we have included a final requirement that the authority must impose on the industry and its customers the least restriction consistent with the performance of its duties. Therefore, the answer to the hon. Gentleman's question is "Yes." We shall be able to debate further in Committee the subsidiary requirement with regard to the environment.
§ Mr. Nott
I have described the main purposes of the Bill. My hon. Friend the Member for Chingford (Mr. Tebbit) will answer any questions that may be raised during the debate.
As the explanatory memorandum contains a description of the clauses, I shall not weary the House further with a description of the Bill's minor provisions.
In conclusion, I repeat that our intentions are to foster a vigorous air transport industry in this country and to build upon the innovation, enterprise and good service that has characterised so much of what our airlines have already achieved in the decades since the war.
§ Mr. John Smith (Lanarkshire, North)
Having listened to the explanations offered by the Secretary of State—indeed, his failure to answer some pertinent questions put by my hon. Friends—it will be clear that the twin major proposals in the Bill—the selling off of profitable assets of British Airways and the abdication by the Government of responsibility for civil aviation licensing policy—have little to do with improving the fortunes, the efficiency or the prospects of Britain's principal national airline. Indeed, we fear the reverse. We believe that it is a bad deal for the airline and for the British taxpayer, who will perhaps lose hundreds of millions of pounds as a result of these manoeuvres, and that it will cause unnecessary and debilitating uncertainty to British Airways.
54 We believe that the Bill is motivated more by financial manipulation to reduce the public sector borrowing requirement than by any strategy to improve British civil aviation. That is no doubt why the proposal to sell off the profitable assets of British Airways did not receive even a mention in the Conservative Party's election manifesto. There were references to selling off aerospace and shipbuilding, to selling shares in the Natonal Freight Corporation and to selling off parts of the holdings of the National Enterprise Board, but for any citizen interested in the Conservative Party's policy on the future of British Airways there was not a word in its election manifesto.
I do not know whether this is a speciality of the Secretary of State for Trade, but a similar policy was followed on the Price Commission in the Conservative Party's election manifesto. Therefore, it cannot claim to have any mandate from the public for carrying through this proposal.
The plans to sell off a substantial share of British Airways were either hatched long before May of this year and deliberately concealed from the electorate—I believe that, on balance, to be the probability—or there were no plans in this regard when the Government took office on 3 May. Certain comments by the Secretary of State about the nature of these proposals make me wonder whether that is a possibility, as there do not appear to be any clear policy lines on some of the issues raised by the Bill.
§ Mr. Russell Kerr
Is my right hon. Friend aware that there would appear to be one tiny clue regarding the total absence of any reference to these matters in the Conservative Party's pre-election propaganda, namely, an interview given by the hon. Member for Chingford (Mr. Tebbitt), now of far greater standing than he was then, in which he indicated—[Interruption.] I am sorry if I am amusing hon. Members. [An hon. Member: "Sit down."] Forgive me, Mr. Deputy Speaker, but I have been put off my stroke. I shall return to the attack later.
§ Mr. Smith
I think that my hon. Friend the Member for Feltham and Heston (Mr. Kerr) was carried away with his generosity to the Under-Secretary of State 55 for Trade—the hon. Member for Ching-ford (Mr. Tebbitt). I think that the point that my hon. Friend was trying to bring to my attention was that the hon. Member for Chingford said something during the election campaign. We did not pay a great deal of attention to it at that time. Perhaps we should have done.
§ Mr. Kerr
Perhaps my right hon. Friend will forgive me. It has now come back to me. There was an interview in the Airport News, which appeared conveniently on the day after the election, in which the hon. Member for Chingford indicated the possibility that they were going to start flogging off the airline for the general benefit, I assumed, of their friends.
§ Mr. Smith
My hon. Friend confirms that trying to discover the Conservative Party's policy on this matter before being returned to power is a Sherlock Holmes exercise in trying to get stray pieces of evidence here and there.
If the Government had plans, as they stated, for British Aerospace and announced that policy in their manifesto, as they did, why did they not do the same for British Airways? Why was there a deliberate concealment of their policy towards British Airways? Were they ashamed of their proposals? Did they think that they would not go down very well in certain constituencies? Had they not formulated any plans at all?
Before the debate began I felt that these proposals had been deliberately concealed, but having listened to the Secretary of State's explanation about the Government's policy towards the directors on the board I am veering towards the decision that the plans were concocted after the Government took office. There certainly appear to be gaping holes in their strategy, which we shall have to explore further. I leave the decision as to which of these alternatives was the reason for these proposals being omitted from the Conservative Party's manifesto to those more skilled in sniffing out the trails of Tory policy.
Another important feature is that no consultation took place with anyone in the airline at any level of employment from the baggage handlers at the airport to the top management of British Airways. 56 The Government presented a fait accompli to the airline's employees—
§ Mr. Smith
—and then said "We would like to consult you about the details of our proposals." It is almost unthinkable that the Government should take a decision about the ownership of British Airways, in which thousands of employees have invested their working lives and efforts, without doing them the courtesy of consulting them about the proposals before the policy was announced. There was nothing to stop the Government issuing a White Paper, a Green Paper or some other indication of their policy and letting the matter be argued out fairly.
§ Mr. Craigen
Surely my right hon. Friend appreciates that the Government do not believe in industrial democracy.
§ The Under-Secretary of State for Trade (Mr. Norman Tebbit)
How much consultation was there with the workers of Bristol Channel Ship Repairers before the Labour Government embarked on their abortive attempt to nationalise that company without their consent? That attempt was stopped only because they could not even draw up a Bill that was not hybrid.
§ Mr. Smith
The Labour Government's proposals were well known and were canvassed in an election manifesto before they came to power. British Airways employees had no notice from the Conservative Party's election manifesto, let alone consultation after the Government came to power.
This background must make us ponder whether we can believe that the Government will sell only a minority share. The device in the Bill of changing British Airways from a public corporation to a Companies Act company is a legislative blank cheque from Parliament for the Secretary of State. There is nothing in the Bill that holds the Government to selling only a minority shareholding in the subsequent successor company.
57 Once that company is formed, the Government will have little control over it and, indeed, they appear to want little control. The Secretary of State goes out of his way to say that he will have no control over it. What is to stop the company, or the board of directors, deciding to sell more shares or assets which belong to British Airways? As the Government lurch from one financial crisis to another will they not be tempted to sell more of out profitable national assets?
In the press today several articles advocated that the Government should sell off the profitable parts of nationalised industries. If British Airways become a Companies Act company, and if the Secretary of State distances himself from it and the directors do not exercise minimal rights, who will look after the protection of the profitable assets held by British Airways on behalf of the public?
The House should be on its guard, bearing in mind the history of the proposal and its development. We fear that this may only be the beginning of the story. I hope that the Government will guarantee today that they have no intention of selling off any of the profitable assets owned by British Airways, such as the helicopter services serving the North Sea oil industries.
The hon. Member for Romford (Mr. Neubert) requested that British Airways should step back from their activities in terms of hotels and travel agencies. I hope that the Under-Secretary of State will give the House a clear undertaking that the Government will not sell off profitable assets, thus leaving the responsibilities for other services to rest upon the public, and that they will intervene if a future board of directors seeks to follow such a policy.
§ Mr. Onslow
If it is their objective and duty to make a profit, why should they seek to sell off profitable activities?
§ Mr. Smith
The hon. Gentleman should ask that question of the Secretary of State, who, I think, said that the Government do not intend to do so at present. It would be blatantly against the public interest to sell off those profitable sections of British Airways, leaving the rest of the scheduled services to become a burden upon the taxpayer. Some of those scheduled services do not make a 58 profit, but they provide a valuable social service. I appeal to the hon. Member for Woking (Mr. Onslow) in his capacity as a taxpayer rather than as a Conservative ideologist.
Despite the difficulties that all airlines face because of rising fuel costs, British Airways have a bright future. They have embarked on a massive re-equipment programme that will give them a new fleet of aircraft designed for future markets. A total sum of £2.4 million will be spent. British Airways are therefore at a crucial stage of their development. Of all the times to create new uncertainties, the present must be the worst.
It is an even worse time to consider disposing of shares in the company. The uncertainty surrounding British Airways has been caused by doubts about whether the ownership will be changed, at what price, in what conditions, and with what results. The Government's abandonment of responsibility for civil aviation licensing policy leaves British Airways in the dark about their future route structure. The Government are devaluing an asset at the same time as they offer it for sale.
The Bill, as we have discovered today, leaves many questions unanswered. What restrictions, if any, will there be on who can buy the shares? Will foreign interests be allowed to buy their way into our national flag carrier? If the Government sought restrictions, would those restrictions be compatible with the Treaty of Rome? What will the effect be for aircraft ordered by British Airways if the minority shareholding uses its rights under the Companies Acts to influence decisions on the purchase of British aeroengines?
What will be the relationship between the Government and the directors? That point has not been answered so far. I suspect that the Government have not yet developed a policy, but if they have, no doubt we will be informed. What will be the responsibility of the new company for those vital, but unprofitable, air services to such areas as the Highlands and Islands of Scotland?
Those questions indicate the range of difficulties caused by these proposals. They give rise to a debilitating uncertainty about the future of British Airways. We fear that the Government will use their parliamentary majority to railroad the 59 Bill through Parliament before sufficient answers have been given. When the Bill is enacted a successor company will be set up and there will be little that Parliament can do to control any further decisions made by that company.
It is not only Parliament that should be on its guard but also the British taxpayer, because he will lose heavily as a result of the sale of these shares. The shares will probably be sold well below their real value, because of the present stage of British Airways' capital development programme. The Labour Party has not dreamt up that assumption. There was an instructive article in the Financial Times of 23 July this year that pointed out that this, of all times, was the wrong time to sell shares in British Airways. That article said:In the private business world only doubts about the management's expectations or a desperate need for cash would account for the sale of such a huge company when the time is so unripe … It makes little sense to sell a company at the start of its recovery, as any of the several merchant bankers in the Government must be well aware.I do not know whether the Secretary of State fits that description but perhaps he should have asked one of his right hon. Friends.
The most important aspect of that article was the allegation that if the Government sell their shares at a price that is bound to be based on current, rather than prospective earnings, British taxpayers will suffer a loss of several hundred million pounds. That is the sober assessment of the Financial Times. It is a high price to pay for the prejudices of the Conservative Party.
§ Mr. Nott
I have another article from the Financial Times, published on the same day, which welcomes our proposals. I think that the right hon. Gentleman was referring to the leader. It made a host of hypothetical guesses about the proportion of shares to be sold, the price, timing and so on. The Government are naturally waiting to see how markets develop, and how British Airways profits materialise. Therefore the timing of the issue is not contained in the Bill.
§ Mr. Smith
I take that intervention to be a guileful way of saying that the Government are backing off from their intention to sell, by postponing putting 60 forward proposals for some time. The Government are beginning to realise that if they go ahead the result will be that predicted by the Financial Tittles. In another article on 17 April 1979 the Financial Times went more deeply into the question and drew the same conclusions.
§ Mr. R. A. McCrindle (Brentwood and Ongar)
Whilst I am grateful that the right hon. Gentleman has found some improved reading, in the shape of the Financial Times, should he not be directing his attention to everything that has been said since the first announcement in July or to the contents of the Bill as regards the timing of the sale? If the right hon. Gentleman does that, he will come to the conclusion that no indication has yet been given as to the immediacy of the Government's intentions.
§ Mr. Smith
If that is the case, why are the Government in such a hurry to bring the Bill forward. It is one of the first Bills to be produced. If the matter could have been approached in the casual way suggested, I am sure that many other Departments would have been prepared to put forward Bills. It is unfair to the taxpayer if the Government hold on to the unprofitable part of a nationalised industry but sell off the profitable parts. That theme runs through Government policies.
The taxpayer always loses, and no doubt those who buy cheaply will wish to sell at a high price when those assets are reacquired by a future Labour Government. The Labour Party intends to reacquire those assets, because it believes in the public ownership of a national airline. The financial manipulation involved in buying cheaply and selling at a high cost is one reason why the Labour Party and the TUC reflected at recent conferences the deep resentment and anger at these proposals. They resolved that those who bought the shares should not expect compensation for unjustified capital enrichment at the expense of the British taxpayer. They are now engaged, in a working party, in tackling some of the problems that are recognised to exist, but at this stage it is only fair that proper warning should be given to potential purchasers who might seek to benefit from the Government selling the taxpayers short in the way that I have described.
61 The other major issue in the Bill is covered by the proposals in clauses 10 to 13, under which the Government will give up responsibility for deciding the principles upon which civil aviation licensing policy will depend.
Instead of the Government's reaching a view, whatever it is, and facing up to the task of devising a licensing policy at a crucial stage in the development of civil aviation in this country and elsewhere, by means of this Bill the Government abdicate that responsibility and leave it, at this stage, to the Civil Aviation Authority—an unappointed and largely unaccountable body.
In clause 11(1), which I would describe as the "pass the buck" clause, the responsibility is given to the CAA. All that it is obliged to do is to engage in some consultation within the industry, which I imagine can be as perfunctory as the CAA likes, and in six months or earlier—as I think the Secretary of State said—it must come up with a policy. It is a surprising constitutional innovation for a Secretary of State to say, "I do not wish to have a policy at the moment but I will make sure that before Parliament goes into the matter the people to whom I have passed the buck will come up with a draft of a policy that they think desirable."
§ Mr. Smith
With great respect, the policy is not in the Bill. The Bill offers a number of criteria, some of which—as is often the case with these criteria—collide with one another. That is one of the inherent problems in the Bill. But no guidance is offered to the CAA in the carrying out of this policy.
§ Mr. Tebbit
The right hon. Gentleman is ill-advised to continue with this line—for his own benefit. He must recollect what happened to the guidance issued by his Government. It finished in the courts. It was found to be ultra vires. The right hon. Gentleman knows that legislation would have had to be introduced to end the uncertainty that has existed ever since the Laker case humiliated his predecessor.
§ Mr. Smith
No, it does not. It says, "The Government have no views on civil aviation licensing policy, but we have thought of a new wheeze. We will not decide it. We will get the CAA to decide it for itself. But we will ask it, out of decency to those affected by the decisions, to come forward with the policy within six months or earlier." We are promised that members of the Committee that considers the Bill may get a look at the draft of the policy that this unelected and unaccountable body will produce, which will have enormous effects upon the interests of the taxpayers and the legitimate commercial interests of many people in civil aviation.
It is wholly innocent for the Government to think that they can stand back in this way. As the Secretary of State himself said, the whole business of international civil aviation is covered by bilateral agreements of great complexity and difficulty—not always approached from the point of view of pure commercial criteria. When a British airline obtains access to another country under a bilateral service agreement there is usually a request for a quid pro quo.
§ Mr. Smith
As my hon. Friend says, that is always the case. For the Government to think that they can approach civil aviation licensing as though it were the licensing of rural bus routes, without taking into account the international dimension, seems to us extremely foolish. It is certainly looked on with severe suspicion by British Airways, who are very worried that their route structure will be imperilled by the Government's proposals. In the sophisticated world of international—
§ Mr. S. C. Silkin
I am sure that my right hon. Friend understands that that was the point of my question about the Crown prerogative, which the Secretary of State did not seem even to understand.
§ Mr. Smith
I am grateful for my right hon. and learned Friend's earlier intervention, which showed that a too simplistic approach will not ultimately serve the British national interest, as defined in 63 British Airways or in another independent British airline, perhaps run by commercial interests. I therefore hope that the Government will have second thoughts and not seek to get around a problem by pretending that it does not exist, or by asking someone else to solve it, because it will come back into their laps.
I ask Parliament to be aware of this device of handing over responsibility to another body. What will be the position of Members of Parliament who ask questions about these matters? Will not the Secretary of State say, "I have no ministerial responsibility for this matter; I have given it over, or it has been given over by Parliament, to the CAA and I do not propose to answer any of these questions."?
Of course appeals can be taken to the Secretary of State, but as he said, he does not see an extensive role for himself in that capacity. He will of course be able to plead the sub judice rule when questions are asked in that connection, until the decision has been made.
It is therefore wrong of the Government to run away from policy making in this way. If they disagree with the previous Government's policy, good and well—let them say what changes they propose, let them put them into guidance for the CAA—with the benefit of hindsight they can no doubt couch them in a way of which the Court of Appeal will approve—put it to Parliament and let us thrash it out so that there can be clear guidance from the Secretary of State and from the House to the CAA on carrying out its functions.
The Government are making a serious mistake in thinking that merely to produce a number of criteria is any substitute for the guidance that it is their responsibility to give. However, even on the limited criteria that exist, we believe that it would be fair to include a fair wages criterion, so that licences are given only to airlines which behave properly in terms of wages and conditions.
We condemn the Bill roundly on its two principal planks—the selling of good profitable assets in our national airline at what we believe will be a heavy loss to the British taxpayer and the abdication 64 of responsibility for licensing policy that it seeks to enshrine. Today we are articulating our reasoned opposition to these proposals. We shall back that with our votes in the Lobby. We give notice to the Government that we will fight these proposals every inch of the way.
§ Sir Paul Bryan (Howden)
This is the first and probably the last speech that I shall ever make on civil aviation. I do not have the expert knowledge of this subject possessed by other hon. Members who will take part in this debate. I intervene briefly in my capacity as chairman of the all-party Hong Kong group.
In my speech I shall try to show that section 3 of the Civil Aviation Act 1971 has treated Hong Kong unfairly and that this Bill does nothing to remedy that injustice. The Secretary of State will know that three airlines are currently applying to the Civil Aviation Authority for the issue of licences promoting the operation of scheduled services to Hong Kong. They are British Caledonian Airways, Laker, and Cathay Pacific Airways. As the applications are due to be heard shortly, the matter is sub judice and it would be improper for me to discuss their merits. However, I do not think that I will be deemed out of order if I point out the unfair circumstances under which those hearings seem likely to take place.
If Hong Hong were an independent country, it would naturally demand reciprocal rights on this route with Great Britain. In return for a British airline being granted landing rights in Hong Kong, a Hong Kong airline could count on corresponding rights at Gatwick or Heathrow. As a dependent territory, Hong Kong does not enjoy that automatic quid pro quo. In the contrary, its landing rights are forfeit, to become a considerable asset in the hands of Great Britain.
Hong Kong suffers a double injustice. In addition to its being denied the natural privilege of bargaining its home landing rights with landing rights in the United Kingdom, section 3 of the Civil Aviation Act 1971, which requires the CAA to ensure that services are provided by British airline, defines a "British airline" as one whose principal place of business is in the United Kingdom, the Channel Islands or the Isle of 65 Man. Cathay Pacific is an airline based in Hong Kong and will therefore be at a clear disadvantage at the CAA hearing.
This was brought to the attention of the Hong Kong Government and I understand that representations were made at governmental level, seeking action to remove the legislative bias against CPA before the hearing.
However, the Bill contains no provision to amend section 3 of the 1971 Act. I suppose that, when the Act was drafted, it was assumed that no dependent territory was likely to have an airline sufficiently substantial to take on the responsibility of a major inter-continental route.
Cathay Pacific, with its assets of £120 million and extensive routes, already carries that scale of responsibility. What is more, by the end of 1982 it will be the only international airline in the world to have an all Rolls-Royce powered fleet. It is very British indeed.
I am not in a position to say, and it would not be proper for me to do so, that these are conclusive reasons why the Hong Kong route should be given to a Hong Kong company, but they are sufficient grounds to justify a Hong Kong company competing on equal terms with the other applicants, both of them famous companies with fine, adventurous records.
All that seems necessary is an amendment in Committee to say that an airline that has its principal place of business in a dependent territory is to be regarded as a British airline when making an application for a route between that territory and the United Kingdom. I shall be glad to hear the attitude of my hon. Friend the Under-Secretary towards such an amendment when he winds up the debate.
§ 5.2 pm
§ Mr. J. Enoch Powell (Down, South)
It would be impossible for an hon. Member representing the part of the United Kingdom that is far more vitally dependent on air transport than any other not to take the opportunity afforded by the Second Reading of the Bill to refer to some of the major anxieties of his constituents and some of the major improvements that they hope to see take place speedily under the successor company. I shall do that later as briefly as I can; but I wish principally to draw the attention of the House to the far-reaching constitutional and parliamentary implications of 66 the Bill—implications that the Secretary of State and the Government are far from having grasped, let alone dealt with.
When the House passed a series of nationalisation statutes 30 years ago, on what was called the Morrison model, it initiated a constitutional innovation which took some decades to digest. Eventually, though imperfectly, the House has come to grips with the problem of exerting proper control over the old-style nationalised industry, both on capital account and in its operations, without destroying the notion of semi-commercial operation which was embedded in the statutes that set up such industries.
Here we are embarking upon an entirely new model and the constitutional questions raised by the Bill are serious and immediate. Before coming to the heart of the matter, I want to get out of the way a question of presentation, which was referred to by the right hon. Member for Lanarkshire, North (Mr. Smith). In the course of lengthy exchanges following the Secretary of State's initial announcement, the right hon. Gentleman said:If the share issue goes through successfully, about £1,000 million of what is classified as public expenditure will come out of Government accounts. I want that sum to be outside the balance sheet of the Government, because I see no reason for its being there."—[Official Report, 20 July 1979; Vol. 970, c. 2190–91.]There is a puzzle here. May I say what the puzzle is, and then invite a solution? If by "the share issue going through" the right hon. Gentleman means the sale of a substantial minority of the shares in the successor company, the cash yield of that sale must be brought into Government account. No doubt it would assist in meeting the public sector borrowing requirement of that financial year; but that cannot really be described as £1,000 million of public expenditure "coming out" of Government accounts.
So I take it that the Secretary of State must mean not the initial share issue and the sale of a minority of the shares initially created by the Bill but the sale of what he called in his speech a rights issue, by which additional new capital, 100 per cent. of which would otherwise have to come from Government borrowing re-lent to the corporation, would be raised directly from the public. In other words, I take it to be a reference to his 67 aspiration that the British air transport industrywill in future satisfy its financial requirements from capital markets both at home and overseas."—[Official Report, 20 July 1979, Vol. 970, c. 2183–2191.]The natural meaning of these words—and this was lent colour by the right hon. Gentleman's speech today—is that there will be no further financing upon Government credit, through Government borrowing—through the creation of gilt-edged debt—of the future investment of the successor company. However, if that is so, what is the purpose and effect of clause 5? It enables new shares to be created and offered—that is presumably the "rights issue" to which the right hon. Gentleman referred—and it enables the Secretary of State under subsection (4), which is, appropriately, in italics, to take those up out of moneys provided by Parliament.
On the face of the Bill, therefore, wisely in my view, the Government are providing themselves with the means to secure—and so presumably entertain the expectation—that in future the investment of the successor company will still have to be, in part at least and perhaps in large part, met out of Government borrowing.
§ Mr. Powell
I see that I have the assent of the right hon. Gentleman. So any notion that we are getting shot, or that the Government think that we are getting shot, of gilt-edged issues and Government borrowing as the source of new investment for the successor company is refuted by the Bill itself.
§ Mr. Nott
The right hon. Gentleman was right to assume that the Government will no longer advance loans to British Airways and no longer guarantee the airline's borrowings. However, the Government, as a shareholder in British Airways, will be entitled to subscribe to equity issues by the airline. The right hon. Gentleman is therefore both right and wrong in his assumptions.
§ Mr. Powell
Actually, I think that I was right on both counts. I was right in the assumption which the right hon. Gentleman has verified; but I am also right in saying that the Government expect 68 to be financing, out of moneys provided by Parliament, future investment in the successor company. That is written into the Bill and the right hon. Gentleman has not denied it. The means will be the taking up of new shares with public money; but in the future, as in the past, it will be substantially public money which will finance the new investment of the successor company. Perhaps the Government indeed will succeed in selling to the public £1,000 million of new "rights issues", as the Secretary of State calls them. But there should not be any misapprehension as to what the Bill does. The Bill enables the Government to go on, under another form, putting public money into the future investment and operations of the successor company.
Having got that clear with the assistance of the right hon. Gentleman, I come now to the heart of the matter, which is Government responsibility. It is useful to have the exchanges of 20 July for purposes of comparison, because at that time Government thinking was even more embryonic than it is this afternoon. At that time the right hon. Gentleman said:As to precisely whether the Government as a majority shareholder should have directors on the board and how many there should be, these are all matters clearly for decision at the time of the share issue."—[Official Report 20 July 1979; Vol. 970, c. 2186.]One of those decisions, at any rate—so we learned this afternoon—has not been put off so long, because we heard that the Government have taken the decision that though a majority shareholder they will not appoint directors to the board. We heard that the Government's representation, whatever it is, will not be in the form of appointed directors as in the case of BP. But the major constitutional question for this House still remains: "How will the responsibility of Government be discharged for their holding of public assets and for the use to which those are put by the successor company?"
It is no good the right hon. Gentleman saying "Oh, we shall not mobilise our power as shareholders." Indeed, he was flushed out of that position by the hypothesis put to him by the right hon. Member for Lanarkshire, North, who suggested "Suppose the minority mobilises its power?" "Oh, well, then", 69 said the Secretary of State, "fair's fair, and we shall mobilise our own position as majority shareholders".
That only touches the hem of the argument, however. The right hon. Gentleman, and I suspect the Government, have not faced the underlying constitutional issue. In the case of BP, they forswore in principle the intention to influence the policy of BP. In principle, they were declared on the record sleeping partners who would remain asleep. There would be no prince who could ever awake those sleeping beauties—the Government directors on the BP board. That is not what the right hon. Gentleman says this afternoon, and I do not think that it is what the Government can say. I do not think that they can say "We shall be majority shareholders in this company, but we shall not be accountable in any way to Parliament for the manner in which the Board administers those public assets, in so far as they remain public assets."
It should be observed that throughout there is one decision that the Government have taken, which is that they will remain majority shareholders. Why? If they do not want any control, if they are to take no interest whatever in the way in which the successor company runs its affairs, and if they do not believe that the national interest should be brought to bear upon the conduct of the successor company in any circumstances, why not sell a bit more? If they can sell 49 per cent. of the shares, whoopee, why should they not sell 51 per cent., 60 per cent., 70 per cent., 80 per cent. or 90 per cent.?
§ Mr. Powell
I am not so sure that that is what is in the Government's mind. It is significant that they intend the sale of only a minority shareholding. They will keep the majority shareholding—not for financial reasons, but for reasons of control. So we have the impossible constitutional position, if it is to be attempted, in which the Government say to Parliament "We shall keep control over the successor company, but we forswear all responsibility for the way in which it manages its affairs." They cannot do that.
The mere fact that in any particular instance the Government do not 70 "mobilise", as the right hon. Gentleman called it, "their majority holding" does not mean that the Government are not responsible. It is an interesting point as to whether the Table could refuse to accept a question on any aspect of the policy of the successor company, or whether the Chair would rule debate upon it out of order, once it is admitted that the Government could, whether or not they actually did, intervene to influence the management.
After all, the Government have come forward with a policy that rests upon possessing the power to control. They cannot, merely by forswearing the intention to exercise control in most circumstances, slip out from under responsibility to this House. They are accountable, and will be held accountable, for the circumstances in which they have not used their majority shareholder power as well as those in which they have done so. Once they admit that they have that power, and once they admit that in some circumstances they could use it, they can be held to account whenever they fail to do so. In other words, I submit that the capital structure of the successor company which is to be set up leaves this House in control, because it leaves the Government responsible to this House for the management of the successor company and, therefore, effectively in control of it.
§ Mr. Tebbit
As always, the right hon. Gentleman is interesting and persuasive. Can he say at what level of holding he thinks that a substantial shareholder loses control in the sense in which he has been speaking? Is it 49 per cent. or is it some lesser amount?
§ Mr. Powell
He certainly does not lose it if, as the Government intend, he is a majority shareholder. We are discussing a policy based on the assumption that the Government will remain a majority shareholder. Of course, if the Government were deliberately to place themselves in a minority, they might well be in a position to say to the House "You cannot hold us accountable because we have disposed of our power to control". But that is not the Government's intention.
I see a look of amusement on the faces of both the Secretary of State and the Under-Secretary of State. I think that as time goes by, and they realise the implications of the position in which they have 71 put themselves, that amusement and apparent satisfaction will be less evident.
I come to circumstances in which it may be reduced almost to vanishing point. That is the whole question of disposal. It is all very well to say "We will dispose of a minority of the shares." Of course, minority holdings in quoted companies are constantly being created, disposed of and changing hands. They do so freely and readily at market price upon the judgment of those who buy and sell them. But that will not be the position with minority shareholdings in this company.
I say this particularly with regard to the shareholdings which the employees will be persuaded or encouraged to take up. I think I have indicated on a previous occasion that I am no unrestricted admirer of the principle of shareholding by employees, as tending to embark in the fortunes of a company the assets of those who work for the company but who may not have adequate control over the management of that undertaking in which they are investing their savings. That will happen here, if the Government succeed in selling shares, upon a large scale. Each shareholder, be he small or large, who takes up some of the shares of the successor company, must say to himself: "This Government have told us that they do not expect often to mobilise their position as majority shareholders and that it is their general policy and intention to remain sleeping partners—but not like BP, for they have no intention of making any such documentary renunciation of the natural powers of the majority shareholder."
He will go on to reflect that this majority shareholder is different from majority shareholders in other companies; for this majority shareholder is a Government; it is a political shareholder. Nor is it not just the present Government, but any future Government. This shareholder consists of those whose business it is to be responsive to political pressures and, to put it on a higher level, to what at any particular time they conceive to be in the national interest.
The potential minority shareholder will therefore have to take into account that the policy of the company will not necessarily be conducted with a view to maximising the value of his shareholding or 72 maximising the dividends that he expects from it. On the contrary, he will reflect that he has often seen the policy of the old-style nationalised industries turned, through the power and direction of Ministers, in a direction that was certainly not commercially justified, although it might have been justified politically or nationally. He will therefore consider whether it is wise to entrust his investment to a company, over which not only will he as a minority shareholder have no control, but over which the majority control is held in the national and political interest by what, in effect, is a Government.
I believe that when that reality is seen—and it cannot be concealed—the Government's hope to find many takers, institutional and individual, for the shares they have to sell may be less bright than they initially think.
I am not sure that that may not be a good thing; for I am not sure that it would be right, either for individuals who are earners in the air transport industry or for those who administer pension funds, to entrust their own money, or the moneys over which they have control, to a company of which the ultimate control will still be vested in political hands and subject to political power.
This will be a long debate that has been initiated for the first time by the Bill and will continue for some years to come. I have merely at this stage endeavoured to draw attention to the large constitutional and parliamentary issues which are almost concealed by its apparently simple, almost simplistic, provisions.
I now want briefly to say something about the way in which we in Northern Ireland hope that the successor company will run that part of its operations upon which so much in the Province depends. I restrict myself to three matters. The first is the intolerable manner in which the requirements of alleged security interfere with the freedom and speed of travel, which is particularly important for those who either have business in Northern Ireland or are contemplating bringing investment, and thus employment, to the Province.
There are, I believe, no other routes in the world where it is impossible for a passenger to take on board with him not 73 merely a briefcase but even a leather folder containing papers that he might need for a negotiation to be completed that day. He cannot even take an umbrella or a bunch of flowers into the cabin with him. These are removed and, after being carefully checked, are put in cellophane of various degrees of opacity, after which they disappear out of his view or control until they are eventually recovered, sometimes after long delay, from carousels or other places at the terminus where he arrives.
The representative of a seat in Northern Ireland will, if all people, be sensitive to the requirements of security; but I do not think we can be satisfied with that pretext when we see that the same authorities who insist on this pantomime being imposed on air travellers to and from Ulster are perfectly willing to admit to the air terminal in Northern Ireland persons who are not travelling by air and who can mingle freely with those who are arriving or departing, something that was previously considered deeply inimical to security. Those authorities are also about to open a duty-free shop at the airport with all the implications for possible breaches of security that that involves.
§ Mr. John Wilkinson (Ruislip-Northwood)
I am sorry to interrupt the right hon. Gentleman's interesting and important remarks, but would it not be more fair to the operators to acknowledge the care and scrutiny with which they attend to their duties? The right hon. Gentleman will be aware that an explosive device was found on a British Airways aircraft in flight, and, quite honestly, the safety of passengers is the most important factor in air travel. No measure to ensure safety should be overlooked, even if it proves awkward for VIP travellers.
§ Mr. Powell
That is an admirable idea, and I hope that the hon. Member for Ruislip-Northwood (Mr. Wilkinson) will advocate applying the same measures to the flights betwen Dublin and Heathrow, and to Glasgow and elsewhere.
§ Mr. Powell
So the hon. Gentleman is with me. That is splendid: we shall soon be rid of the whole lot. If travellers on any other route were exposed to the 74 absurdities to which travellers on the routes between Northern Ireland and the rest of the United Kingdom are exposed, the whole business would be speedily wound up. We are asking not for anything that is unreasonable or risky, but that there should be, as there always has to be, a more rational balance between security and mobility.
Finally, one has to bear in mind that, while a businessman's papers are removed from him so that he cannot walk straight off the plane and out of the terminal or transact business or study his papers in flight, the handbags of lady passengers travel in the same cabin. Those bags have of course been inspected; but it is not to inspection that I am objecting.
I hope that with the new company we shall see a new approach to the whole business.
There is a further aspect of security that has more direct financial implications and perhaps a more grievous impact on the reliability and time keeping of the services. It will hardly be credible to hon. Members that every evening the crews of British Airways aircraft which land in Northern Ireland are flown to Glasgow for the night, whence they return in the morning for the first flight.
That is an absolutely unaccountable activity. It cannot be accounted for on the ground that it is to prevent the aircraft from remaining on the ground at the airport and thus being vulnerable to attack, because often the shuttle aircraft do remain at the airport—and the second shuttle aircraft too—while the crew fly away to Glasgow in a Viscount. It cannot be maintained that it is necessary for the safety of the crew, for the crews of the British Midland aircraft, like the remaining 1½ million inhabitants of the Province, spend the night exposed to whatever the dangers are. Nor can it be that the British Airways crew are bigger cowards than the crew of British Midland Airways. They are, after all, the sons and daughters of the men who flew Spitfires and Lancasters.
Yet this meaningless piece of mumbo-jumbo costs scores of thousands of pounds a year; and whenever there is difficulty about early flights out of Glasgow, Ulster services are disrupted which otherwise would have run normally throughout the day.
§ Mr. Onslow
I share the right hon. Gentleman's feelings on the subject, and what he says is not news to me. However, I wonder whether he has inquired of the airline or the unions that represent the flight and cabin crews why that happens and whether they have any part in making it happen?
§ Mr. Powell
Over the last few years there have been extensive discussions between my hon. Friend the Member for Antrim, South (Mr. Molyneaux) and myself on behalf of our colleagues and those who are concerned with security and the management of such affairs; and at the end we can still find no rational grounds to justify this uneconomic activity, which interferes grossly with the efficiency of the service.
I come, finally, to the subject of fares. It is the aspiration of the Secretary of State to see lower fares. As he said on 20 July:I want to see air fares come down. That is our wish."—[Official Report, 20 July 1979; Vol. 970, c. 2193.]The right hon. Gentleman cannot say that with as much intensity and conviction as the inhabitants of Northern Ireland. But we do not see our fares coming down; we see them going up in real terms, not year by year, but more frequently than that. We know that in circumstances where there was real competition the services would be run for half the cost or less to the customer, releasing the unlimited demand in the Province for air travel between it, the mainland and the rest of the world, which could be better satisfied at a lower cost.
We do not even wish to wait for the successor company. Nevertheless, we hope that the successor company will pay attention to these uncommercial aspects of the present operation, and that we shall see some effects, albeit indirectly, of the expected increase in competition in the lowering of the real costs of air travel between the mainland of the United Kingdom and the Province, whose citizens are under constant attack because they maintain their fundamental right and heart's desire to remain part of the United Kingdom.
§ Mr. R. A. McCrindle (Brentwood and Ongar)
It is characteristic of the right 76 hon. Member for Down, South (Mr Powell) to probe behind the facade of a Bill. He has lived up to his reputation by dealing with some of the constitutional aspects of the Bill that are not always apparent to other hon. Members. I hope that he will forgive me if I do not follow him down that line. That is not because I have failed to find his observations fascinating but because I have a number of—I hope—more practical observations to make on the Bill.
I extend a warm welcome to a Bill which, while providing for greater public participation in British Airways, does not ignore the interests of the employees in the corporation. The Bill seeks to provide a greater competitive spur over the whole range of British aviation and it enshrines the interests of the travelling public as being paramount. At the same time, it does not overook the interest of the tens of thousands of people who earn their living in British aviation in one way or another.
Having started by welcoming the Bill, I have to say that I have substantial reservations about it—some of emphasis, some of detail and some that are even more fundamental. In particular, I have a reservation about the timing of the sale of British Airways shares to the public. I have a reservation about the possible instability which I contend may be being forced upon British Airways by the deregulatory aspects of the Bill. Perhaps my most profound reservation is about the role that the Bill lays out for the Civil Aviation Authority and the hint of competition that goes beyond that which I believe to be desirable if a viable civil aviation industry is to remain. It should be remembered that the competition will take place in an industry where the road to bankruptcy, if the past is any guide, is all too easy.
I should like to place myself on record as an admirer of British Airways. The management team of British Airways is at least the equivalent of any other nationalised industry team with which I have had dealings. That team will welcome the greater freedom to manage which is enshrined in the Bill. I believe that it will also welcome the increasing need for a commercial attitude to be shown by the successor company to British Airways. However, to most outside observers, British Airways appear to 77 be over-staffed. In whichever other way we may admire the performance of British Airways, it is to be regretted that there should be a better performance in staff productivity.
British Airways are seen as a national asset by all hon. Members. They are, perhaps, Britain's greatest currency earners. Any action that we may take, as a result of the Bill, which would reduce the proven earning capacity of British Airways would not be so much against the interests of the corporation as against the interests of the country. To attempt to provide for the, as yet, questionable earnings by untried entrepreneurs could be extremely dangerous.
I have expressed my admiration for the commercialism of British Airways. I want to see them yet more commercial. I also want the issue of the shares to the public and the employees of British Airways to be a resounding success. I noticed an indication of dissent from the Under-Secretary about my introductory remarks on timing. I believe that the timing of the disposal of part of the shares of British Airways is crucial. There are three reasons why I believe the timing to be as important as the principle itself. First, the disposal has to follow a period of good profitability. When else is it proper to launch a prospectus for the sale of shares to the public? Secondly, we must allow for the assessment of the value of British Airways to take account of the route structure which is so important to the corporation. Thirdly—and much more important to my hon. Friends and myself—the disposal must be a success as much for the Government's sake as for anybody else's. I say that as a believer in the disposal of a shareholding in some of the nationalised corporations.
If undue haste is brought to the disposal of the shares it would become infinitely more difficult to follow the pattern in the future. I hope that the disposal is a sufficient success so that we shall be able to follow the pattern in the future. I support my right hon. and hon. Friends on the Front Bench in what they propose, but I ask them not to rush the disposal of the minority shares. If the sale is mistimed, it could result in British Airways being unable to continue the re-equipment programme of its fleet, because money would become progressively difficult to raise on the open markets. I 78 should like to underline to the Under-Secretary that he, perhaps above every other Member of this House, must realise that airline investment the world over is seen as a risky business, and it would be a misfortune if we were to compound that inherent risk by undue and unnecessary haste.
§ Mr. Tebbit
The whole construction of the Bill indicates that we intend to retain the maximum flexibility in the timing of the change from a statutory corporation to a limited company, and then the change from the Government being the 100 per cent. shareholder to selling off a substantial minority of the shares. We do not wish to precipitate a crisis in the airline in which we are selling an interest. That seems to me to be obvious. I cannot understand the fears of my hon. Friend.
§ Mr. McCrindle
Whether or not my hon. Friend can understand my fears, I hope that he will give me the benefit of the doubt when I say that before I made my observations I gave considerable thought to what I could deduce about the timing of the disposal from the statements so far made by Government Ministers. In the light of my hon. Friend's remarks, I am pleased that I intervened, because it has given the Government the opportunity now—and I hope to a greater extent in the reply—to give me the assurance that I sought, which I suspect will be welcomed by many hon. Members who wish the Minister well in what he proposes to do, but who are afraid of the effect of a precipitate disposal of the shares. I am grateful to my hon. Friend for his intervention.
§ Mr. Nott
I have read the press release put out by British Airways, as has my hon. Friend. I have had at least three discussions with the chairman of British Airways on this issue. My hon. Friend cannot be in any doubt. From the outset, and since my statement on 20 July, I have said that the timing of the issue is for subsequent decision. I should like to know what, apart from the document put out by British Airways, gives my hon. Friend so much concern.
§ Mr. McCrindle
My right hon. Friend, as one not entirely unconnected with the aviation industry, and as one who has had equal experience in the fortunes of 79 airlines, must not deduce that I am basing my remarks on the press release issued by British Airways. I, too, have had wide-ranging discussions within the industry. It is as a result of those discussions and as a result of the failure to outline the position clearly—I am pleased that that has now been done—that I chose to raise this matter today.
Having obtained satisfaction, I make no apology for raising the matter.
§ Mr. McCrindle
I have a great deal more to say, and I do not feel that it would be wise for me to allow further interventions, but I will give way to the hon. Member for Hackney, Central (Mr. Davis).
§ Mr. Clinton Davis
I am obliged to the hon. Gentleman. Could he have made the deduction about the timing of the issue from the words of the right hon. Gentleman, when he said that the Government couldconsider all these matters"—that is, the prospectus and so on—in the next year or so".—[Official Report, 20 July 1979; Vol. 970, c. 2186.]
§ Mr. McCrindle
The hon. Gentleman would be wrong if he adduced any one reason for what I said this afternoon, just as my right hon. Friend the Secretary of State was wrong in assuming that he had said sufficient previously to satisfy me.
I now turn to the part of the Bill which deals with de-regulation. When I reflect on the history of cheap fares to the United States over the past few years, I am at first impelled to welcome the development which has opened up so many new horizons to so many people. Having said that, and having conceded that the whole operation of competition played a large part in it, I think it would be fair to assume that these fares, having gone down to a very low level, are now inexorably rising again, perhaps for reasons other than the cost of fuel.
The question of air fares to Europe must be high on the agenda. The need for greater competition within Europe is a proven fact. Fares are too high. I hope that the Government will not overlook the fact that in some areas particularly—if I had to single out one country 80 it would be Germany—there are very real difficulties in allowing true competition to operate. Rightly or wrongly—the Secretary of State repeated it this afternoon—we cannot in this country ignore the existence of air service agreements. If Germany refuses, for its own good reason, to allow competition—in which we all believe—to operate, I do not believe it would be wise to delude the British public that in these spheres there is any opportunity for competitive European air fares. With that aspect in mind, and with rising fuel costs taken into consideration, I predict that although there is a powerful case for European air fares to fall, and I believe that they will fall—I sometimes feel that I am a lone voice in trying to accept the realism of the situation—European air fares will rise again unless there can be a guaranteed and permanent increase in the traffic.
That is why I welcome the moves by such airlines as British Caledonian, which, in its miniprix approach to European air lanes has been anxious to tap entirely new markets, rather than to give the impression that we can retain the market at approximately its present size and somehow reduce fares while costs of fuel, wages and so on continue to rise. More competition is certainly welcome. I wish to place that absolutely on record. On whatever other aspects hon. Members may disagree with me, I wish to place it clearly before the House that I believe in more competition.
But if we analyse that major area of competition in air fares, where it has already been tried and tested, we need look no further than the experiment of Skytrain into New York. I consider that that experiment is an unqualified success, and I pay my tribute to Sir Freddie Laker. But Sir Freddie Laker's airline was given the opportunity of flying a similar service to Los Angeles, and because it was impossible to create new trade, the rules of Skytrain, which were introduced when the New York service opened, have now been changed. Advance booking is now possible, cargo can now be carried, and so on. I do not complain about that, but if they had not been necessary, because the mere exercise of competition was sufficient, these changes would never have taken place.
One other aspect which concerns me when I am considering competition 81 among the airlines—with particular reference to the United States—is that the Government have recently agreed to reopen discussions on what is called the Bermuda 2 agreement, that is to say, the air service agreement with the United States. They are perfectly within their rights. I listened with care to what the Secretary of State said about air service agreements, but one of the purposes of the Bill is to see the operation of competition taken still further. I would approve of that, until I ask myself this question! If we have at the moment, flying the route from London to Miami, two airlines, British Airways and National Airlines, both of them making a profit, would that necessarily be the case if the other two airlines which also wish to fly the route, Braniff and Transworld Airlines, were to be given the opportunity? It seems to me, therefore, that unqualified, unfettered, competition is not always the order of the day.
I turn now to the role of the Civil Aviation Authority. The Bill provides for a considerable increase in the powers of that body. In my experience, that body has not always been infallible in its judgments. I am wondering whether the Government are right to increase the powers of the CAA while at the same time, it seems to me, shrinking the area within which the Secretary of State receives appeals from a decision of the CAA. If I were to put a point to the Secretary of State, it would be to ask whether he should not look again in Committee at the way in which these appeals can be received by him, and whether the whole system should not be widened.
§ Mr. Tebbit
I am puzzled to know why my hon. Friend thinks that we are reducing the possibility of appeal to the Secretary of State. There is nothing about that in the Bill.
§ Mr. McCrindle
By implication, the increase in the powers to be given to the CAA would lead, I would deduce, to a rather lesser importance being given to the ultimate appeal to the Secretary of State. If I am now being told that that is not the case—the Under-Secretary of State is shaking his head—I have twice achieved a breakthrough during the course of my speech, and I happily accept what he says.
82 I wonder whether my hon. Friend can give me another assurance. If he is unable to give it now, perhaps it can be done in the reply. If a Second Reading speech by a Government Back Bencher is anything it is surely an examination of Government legislation. I give my hon. Friend fair warning that I am not prepared, on this or any other Bill, merely to accept, without probing it, the wisdom of the Government.
I want to probe it a little further. What is to happen to the spheres of influence policy in relation to the competitive approach of the Government? Is it to stay or is it to go?
§ Mr. McCrindle
In that case, I take it that I am correct in deducing that British Caledonian, having been assisted to be, arguably, the leading private enterprise entrepreneur in this field by having been given some sort of guarantee on the routes to South America and West Africa, will have these guarantees withdrawn, and will have to face the competition of British Airways—which would, I suspect, dearly like to be brought back into the routes to South America, now that they have been made profitable by British Caledonian, and perhaps even into the routes to West Africa. If that is the case, so be it, but it underlines the fact that competition is very much a two-edged weapon.
It is to the credit of my hon. Friends that they are carrying their belief in competition to its logical conclusion, but I hope that they will forgive me for pointing out that whether that is in the best interests of the British Caledonians and the Lakers of this world is very much to be questioned.
It will surprise my right hon, and hon. Friends on the Front Bench to know, as I come to the end of my speech, that I actually favour the Bill. I repeat that British Airways is a national asset and the timing of the sale is crucial. I readily accept the reassurance that I have been given on that point. Competition is welcome, but if it becomes cut-throat competition, it will, in my judgment, help no one. I believe that the powers of the CAA are too wide and that, although I have received some assurance, the Secretary of State should beware of 83 seeming to wash his hands of even residual control of one of the quickest ways to bankruptcy known to any business enterprise.
§ Mr. Walter Johnson (Derby, South)
I intervene, Mr. Deputy Speaker, in order to deal with two aspects of the Bill. The Secretary of State, when he introduced the Bill, gave the impression that the workers in the industry would welcome it, and that they were quite enthusiastic about its terms. That is not in accordance with the views that we have been able to obtain from any of the unions involved in the industry; in fact, the contrary view is expressed very clearly indeed by one of the more responsible—if I may put it in that way—of the trade unions in the industry.
The British Airline Pilots' Association had this to say:Let it be understood that in principle we are against the sale of shares in British Airways to help to reduce the public sector borrowing requirement. However, if one accepts the principle of denationalisation, which we do not, there is nothing in this Bill which engenders a feeling of confidence which would seem an essential requirement for a successful civil aviation industry for the future. British Airways in particular would face the daunting challenge of the 1980s not knowing from whence a large part of its funds would come and being unable to plan with a reasonably secure knowledge of its future route structure. The Bill makes it hard for us to understand the Government's precept that freedom from Government interference leads to a more stable commercial environment.There is no doubt at all that the workers within the industry do not want the Bill. They believe the Bill to be unnecessary.
§ Mr. Onslow
The hon. Gentleman is quoting from a handout put out, no doubt by the BALPA leadership—Mr. Mark Young and some others. Would the hon. Gentleman care to tell us whether that handout was submitted to the test of opinion of the majority of the BALPA membership, and whether he has any knowledge that any pilots in the airline agree with what he said?
§ Mr. Johnson
Yes, and in addition to that we have taken the opportunity of consulting and discussing the matter with other unions in the industry. That is something that the Government have not done during any part of the drawing up 84 of the Bill. That is absolutely disgraceful when dealing with the livelihood of people in a major industry in this country. One of the main complaints of the people in the industry is that there has been no proper consultation with them in dealing with the various aspects of the Bill.
As for the Government's impression that the workers in the industry will fall over backwards to buy shares when they become available, I do not consider that that will be the experience. I remember very well—as will other hon. Members who have been in this House for any length of time—the experience of Rolls-Royce workers who invested their life savings in workers' shares in Rolls-Royce. Who would have thought that Rolls-Royce, one of the major companies in this country, would go broke and that workers' shares would be put in jeopardy? In the end, those shares were met at par, but at no more than par. That experience of the Rolls-Royce workers will be understood by the workers in the civil aviation industry, and particularly in British Airways. I believe that great difficulty will be found in selling those shares.
The Bill is quite unnecessary. Labour Members are accused from time to time—this was particularly the case when we were in Government—of clinging to political dogma. If there was ever a case of political dogma, it is in the selling of shares in British Airways and in the bringing forward of this Bill. I believe the Bill to be irresponsible. It is irrelevant to the national need. It is not in the national interest.
Why is the Bill being introduced? Is it being introduced, as has been suggested already, to provide the additional funds that the Government find necessary because of their economic policies which have so far been disastrous?
I ask the Government to look again to see whether it will be possible to introduce more clauses into the Bill in Committee to provide some of the safeguards required. I ask them in particular to make it clear that they will take into account the point of view of the workers in the industry and carry out proper discussion and consultation with those who have invested their lives in the industry. 85 Why interfere unnecessarily with a successful national corporation such as British Airways? British Airways have a reputation throughout the world as a successful and safe airline. They are a credit to the country, and I hope that hon. Members on the Government Benches will see the sense of voting against this Second Reading. If the Bill gets a Second Reading I hope that in Committee we can find better safeguards than are contained in the Bill as drafted.
§ 6 pm
§ Mr. Cranley Onslow (Woking)
I start by declaring an interest, in that I have for some years acted as a consultant in the aviation industry, although I think that the company that I advise is unlikely to be much affected by this legislation.
I welcome and generally support this legislation. I have been interested to hear some of the things said in the debate so far. If the right hon. Member for Down, South (Mr. Powell) will forgive my saying so, he seemed to be making out an extraordinarily good case for the Government's selling 51 per cent, of the equity in British Airways. I am not at all sure that clause 5 does not actually empower them to do that, because there is no stipulation in that clause, if a rights issue is made, that obliges the Government to ask the Treasury whether they can take it up. I am glad to see that the right hon. Gentleman and I are moving along parallel lines, even though we may not be in total accord.
Before I turn to the main provisions of the Bill, I should mention in passing the ritual war dance that is always performed on these occasions on the Opposition Front Bench, where, from time to time, a storm of synthetic fury is whipped up. I have sat through several aviation Bills, and I recognise the symptoms. And there, below the Gangway, of course, is the old witch-doctor himself, the hon. Member for Feltham and Heston (Mr. Russell Kerr) in his sedentary position—the only position in which he is able to do any thinking, as we have established today. No doubt we shall be hearing the cauldrons bubble on and off, and we might actually get the hon. Member on to his feet once more.
To return to the Bill, a point that has been made by more than one hon. Member 86 is that British Airways are a national asset. I do not quarrel with that. All profitable companies are national assets, but we must not use the phrase "national asset" as a sort of juju, to suggest that because a company is nationalised it is, ipso facto, a profitable national asset, or vice versa. We ought to be talking about the task that faces the airline operators, a major one of which are British Airways, in the years ahead. I hope no one on either side of the House is saying that there is anything about British Airways that should make them afraid of fair competition. I doubt very much whether the management of British Airways would say that, and I hope that the staff of British Airways are not saying it. The preservation of British Airways as a national asset depends upon keeping the airline profitable, not on keeping it in public ownership.
§ Mr. S. C. Silkin
Will the hon. Gentleman explain what the Bill has to do with fair competition? British Airways are subject today to international and national fair competition. How in the world does this Bill, by altering the way in which the ownership of the company may be held, add to or detract from that position?
§ Mr. Onslow
I am grateful to the right hon, and learned Gentleman for pointing out the obvious as a preamble to my being able to help him with something that is obviously not so clear to him. The Bill will alter the status of British Airways. There is no question about that. It should expose British Airways in areas where they are at present shielded from fair competition. Of course, the airline is exposed to competition on international routes. Some of that competition is unfair. In other areas the airline is also protected from competition from other British operators, who should also be encouraged as national assets to develop more profitable enterprises in their own right.
If the right hon, and learned Gentleman studies the matter with some care and attention—which I hope he will do—he will find that this Bill may act as a stimulus to British Airways to make them more profitable and better able to compete. After all, it is within public knowledge that British Airways were turned down, at a recent hearing concerning an internal route, on the grounds that 87 they were not efficient. That is a matter that should concern all of us.
I hope that my hon. Friend the Member for Brentwood and Ongar (Mr. McCrindle) will not misunderstand me when I say that we must be clear in our minds that we will not necessarily be doing anybody a good turn by putting off the disposal of shares in British Airways into the middle or distant future. My hon. Friend said that he wanted to see a period during which British Airways would be able to develop profits that would enable them to write an attractive prospectus. I know that this is the view of British Airways' management, but how long a period does he envisage? Will it be two or three years, or is he saying that British Airways should, at most, be given another 12 months to get out of some of their present difficulties? I would like to know.
§ Mr. McCrindle
I am saying neither. I am asking my hon. Friend—and I ask those who take the same view—whether he can give me some examples of successful public flotations of companies, not previously nationalised, where that flotation has been made after a period of falling profits.
§ Mr. Onslow
I did not think that my hon. Friend was speaking on that point at all, but let us take his point as a valid one. If the showing of profits over two years is to be a precondition of the timing of the sale, I am by no means certain that we should accept that as the major consideration. British Airways are very seriously overmanned. That factor diminishes their profitability significantly and so diminishes the return on the national assets invested in the corporation. That is not to the collective advantage of the British taxpayer.
It is very much to our advantage that British Airways should be exposed to the full stimulus of competition sooner rather than later. I know there was a time in the Nicolson era when the fashionable theory was that there were no overmanning problems that could not be solved by buying more machinery. That was how British Airways were run in the days when Mr. David Nicolson—as he then was—was chairman. It was a mistaken policy. That fact emerged clearly when Sir Frank McFadzean took over. It was 88 clearly established then that there had been bargains with the unions, which meant that the more aircraft British Airways bought the more staff they must employ. Management should have known that that did not give them a way of buying the company out of its overmanning problem.
I hope that my right hon. Friend will not listen too closely to some of those siren voices that say "Give us time, and we will show good profits," What we want to hear is "Get on with putting your house in order, and make yourself profitable as soon as you can. We will not hang about for ever." If British Airways cannot make themselves profitable, that fact must determine the price at which they are sold. When we talk about setting a price, we must understand that among all the factors the dread threat of the Labour Party to renationalise without compensation, if it comes back to power, is a remote one. It may scare some people, but the most effective and relevant consideration in the minds of potential investors should be whether they are being offered shares in a profitable enterprise. They should ask themselves whether they could look forward to a good return.
So I hope that my right hon. Friend will not listen to those siren voices any more than he will listen to the siren voice of the hon. Member who so amiably represents Derby, South (Mr. Johnson). He seems to think that trade union leaders know the minds of all their members and that when they say something it represents the collective view of their entire membership. My hon. Friend the Under-Secretary of State for Trade—the hon. Member for Chingford (Mr. Tebbit)—has, in his time, been a member of that union and he may have something to say to the hon. Member for Derby, South about that sort of statement.
§ Mr. Onslow
The hon. Gentleman is catching the "Feltham" disease. If he cares to rise I shall be happy to give way to him, but if he sits there muttering I shall have to ignore him.
I agree my hon. Friend the Member for Brentwood and Ongar on one point. There has been a good deal of nervousness in the minds of some other airline 89 operators—not merely British Caledonian and British Airways—about the new status that the Civil Aviation Authority will enjoy if the Act reaches the statute book. They all need certainty if they are to plan.
This is a business in which major investment decisions have to be taken. They need to be forecast over a fair time scale, and it is right that the operators should be able to look forward over that time scale with the minimum avoidable uncertainty in their sights. So I was glad to hear that we are to have a draft of the statement of policies from the CAA, and I hope that there will be ample time in Committee to give that close scrutiny.
I was also glad to hear the categorical assurance that the appeals procedure under section 24(6) of the existing Act is not being watered down. This is important. I hope that there will be no misunderstanding any longer on that score.
I also hope that the new statement of policies will be agreed, approved and embodied at an early date and that it will recognise that airlines exist to serve passengers and not to fly aeroplanes and employ airline staff. They are a service, and that cannot be said too often. Competition gives the passenger what he or she is most likely to want, which is choice. It may be choice in terms of price, but it may be choice in terms of convenience or of some other commodity which the customer values, and that is part of service.
§ Mr. George Foulkes (South Ayrshire)
How is there choice in terms of price between, for example, London and Glasgow?
§ Mr. Onslow
I should be in favour of competition on the London-Glasgow route. If that is what the hon. Gentleman is saying, I am with him.
§ Mr. Foulkes
One of my hon. Friends pointed out earlier that currently there is competition. It is not a question of competition. It is between who the competition is. There is competition between British Caledonian and British Airways at the moment, but fares are high because of the arrangements for fixing them. How will this Bill alter that?
§ Mr. Onslow
I hope that in the statement of policies there will be a clear pronouncement on price rings. Competition 90 that consists of fixed prices is not competition at all. It is just a choice of flag. It is not a choice of costs. I am surprised that the hon. Gentleman terms that "competition" in any relevant sense.
One other point which may surprise the hon. Member for South Ayrshire (Mr. Foulkes) is that we have to be a little careful about the rush for cheaper fares. The history of public transport over the past 150 years is littered with bankruptcies of one kind or another. They started with the railways, and they continued with bus services. We do not want to see the same happening in the airlines, not merely because financial instability may be a major ingredient leading to a lack of safety but because, in the end, financial instability leads to a contracting industry or one where the State has to come in and pick up the pieces, which is much the same thing.
I hope that it will be recognised in the CAA's policy that there should be some floor below which prices should not lightly be allowed to go. If we are committed to an open skies policy, that, too, should be qualified by reality. I have heard it said that if the average operator of an air service across the North Atlantic were asked what he would most like to do today his reply would be "Give all my passengers £5 to fly with another airline, because that would bring me closer to profitability than I am at the moment."
I do not wish to detain the House for long, but I should like to comment on the environmental clause—clause 10—subsection (3) of which places an additional duty on the Civil Aviation Authority to take account, in its aerodrome licensing policy, of environmental factors.
I am not sure that the clause is phrased as well as it could be. The words "reasonably practicable" are almost infinitely elastic and imprecise. I should prefer a different stipulation to require consistency with safe and efficient operation of the aerodrome. This is a matter to which I have already drawn my hon. Friend's attention, and no doubt we can come back to it in Committee.
What is the position about appeals from CAA decisions on environmental matters? Are we importing a means by which an environmental lobby will be 91 able to appeal to the Secretary of State against the licensing of an aerodrome or against conditions on the licensing of an aerodrome? If we are doing that, are we sure that it is wise? I feel that it might obstruct rather than promote some of the other objectives which we all want to see.
I return briefly to the licensing of services. I was interested to hear what my hon. Friend the Member for Howden (Sir P. Bryan) said, and I have a great deal of sympathy with the case which he stated for Hong Kong. For far too long, Hong Kong has been used simply as a piece of barter coinage in the negotiation of British overseas civil air rights, and there is a very strong case for amending this legislation in the way my hon. Friend suggests. I hope that we shall succeed in doing that in Committee.
I come finally to what may not appear the most important clause but one which may need close examination in Committee. I refer to clause 9, which enables the Secretary of State in time of war or of great national emergency to commandeer anyone's aircraft or other assets. No doubt few of us will quarrel with this provision as being a sensible and necessary one with which to arm the Secretary of State against such contingencies. However, it is not wholly clear what happens to the personnel. Do the powers in the clause extend to BALPA members who might be otherwise tempted to sit down and negotiate a special rate for landing under fire, and to pensioners and reservists who might find themselves called up?
In itself, this power will prove insufficient unless it is fleshed out. Unless there are personnel who can be made available to operate the aircraft—not all regular aircrew will necessarily be trained to fly 10–11s or air buses—there may be some difficulty in obtaining the necessary skills. The answer, of course, is to form some kind of civil air reserve. The Under-Secretary of State for Defence for the Royal Navy announced recently the formation of a Royal Naval Air Reserve. At the moment this is to be a fairly modest body, but it is a welcome step forward. I understand that it will be composed mainly of helicopter pilots.
92 I see no reason why we should not go further and do better in this context by forming a Royal Air Force reserve, or whatever it may be called, which will not merely embody personnel who will be called to the colours to fly the aircraft in times or war or national emergency but will provide them in the interval with the kind of training, organisation and planning without which their services on the day will be of little use. Am I right in thinking that this clause represents a move towards this kind of reserve structure? If so, it would seem to be a welcome and necessary development.
With those comments, I welcome the Bill, and I look forward to some fun in Committee.
§ Mr. George Foulkes (South Ayrshire)
I rise to oppose the Bill. I was glad to hear the Secretary of State move the Second Reading. His principal argument that the Bill was to enable the workers of British Airways to participate in the running of the operation seemed to hang rather uneasily upon his shoulders and to trip rather hesitatingly from his lips.
In the Opposition's view, this is a facade. The real purpose, of course, is to provide some profit for the friends of the Conservative Party. Certainly that will be one of the results of the Bill.
If the Government wanted genuinely to encourage employee participation, wanted the staff of British Airways to share in the corporation's future, and wished to encourage to participate not just those who had the financial ability to buy in, they would have put forward entirely different proposals.
They would have prepared arrangements to allow management and workers to participate jointly in discussion and decision making, allowing the workers to participate fully in the operations of British Airways. They would have brought forward suggestions that there should be full disclosure to the workers and the recognised unions within the industry of all the financial and operational arrangements of British Airways. They would have introduced arrangements whereby workers were consulted on future policy, and they would have brought forward proposals for involving the workers directly on the board of British Airways 93 and the boards of other public sector undertakings.
It is therefore clear to me that the proposals now before us have nothing whatever to do with workers' participation or with what the Secretary of State said about allowing people working in the industry to participate in it.
However, I oppose the Bill also because it seems to me that it will deepen the threat to the future of Prestwick airport, an airport about which I have particular concern. I oppose the Bill because it is irrelevant to some of the main concerns of people in the industry, not just in British Airways but in allied industries and operations which are affected by what British Airways do. I oppose the Bill because it will increase the risk and put further in jeopardy a number of jobs at Prestwick airport, an airport vital to Scotland and to Ayrshire in particular.
1 do not say that the present arrangements are ideal, but already under the present arrangements there is uncertainty about the future of Prestwick airport generated by the management of British Airways. This uncertainty will be far greater if the Bill is passed. The chairman of British Airways, Mr. Ross Stain-ton, has already suggested that they have not made a decision regarding the possible transfer from Prestwick to Abbotsinch of transatlantic flights coming into the northern part of the United Kingdom, and this has thrown great uncertainty over the whole of British Airways' operations out of Prestwick.
The Secretary of State said that part of the raison d'etre of the Bill was that British Airways would have a greater responsibility to operate commercially and profitably. These, we understand, will be the important considerations, and little or no other consideration will come into the corporation's thinking.
If that be so—if it becomes more the case than it is at present—Prestwick will be under much greater threat. Inevitably, if British Airways were allowed to move their operations out of Prestwick, Western Orient would follow. Inevitably, therefore, the airport would close, and well in excess of 1,000 jobs would be lost in Ayrshire, a county already reeling under the impact of the closure of Monsanto and Massey-Ferguson. There would 94 be irreparable harm done to employment prospects in the area.
§ Mr. Wilkinson
I do not see how the Bill will of itself detract in any way whatever from the great aeronautical advantages which Prestwick has, with its superlative weather factor and its exceptionally long runway. In clause 10 the Bill makes clear that the Civil Aviation Authority, in granting licences, must proceedin the manner … best calculated … to secure the most effective use of airports within the United Kingdom.
§ Mr. Foulkes
I am grateful to the hon. Gentleman for pointing out the undoubted advantages of Prestwick airport. Those advantages will remain, but the fear is that if British Airways are put under pressure to operate more profitably or more commercially, the inevitable consequence of the Bill will be that they will press to move their operations—I shall show in a moment that they are already trying to do it—out of Prestwick. Western Orient would then follow, and Prestwick would cease to be an airport in any commercial sense. It might continue as a reserve airport or fall-back airport, but there is uncertainty as to whether it would be viable for the British Airports Authority to maintain even in that role.
I reinforce what the hon. Gentleman has said. Prestwick is an ideally situated airport. When many other airports throughout the United Kingdom are suffering difficulties of one kind or another as a result of bad weather, fog, snow and so forth, Prestwick, strangely enough, is often the United Kingdom's only airport which can remain open.
Under the present arrangements—apart altogether from the exacerbation which will arise in future—the considerations and decisions of British Airways are based on a potential operational saving of tens of thousands of pounds because they would not have to keep their separate operation in Prestwick—separate, that is, from that in Abbotsinch in Glasgow. Already, Dr. Watson, the Scottish director of the British Airports Authority, tells me that the cost to the public purse—we know of the pressure in that direction already coming from hon. Members on the Government Benches—would be about £50 million to convert Abbotsinch—or Edinburgh, since various options arise—to enable those airports to take transatlantic flights.
95 It would be ridiculous if British Airways were to take a commercial decision of that kind to save tens of thousands of pounds only to result in the British Airports Authority having to spend in excess of £50 millon to enable them to do it.
In my view, therefore—this is the direct relevance of the matter to the Bill—if we lose the kind of control that we have at present here in Parliament, and if we increase the pressure on British Airways to consider only the profit motive, other considerations, such as public expenditure, the national interest, which also is important, and social factors, will be irrelevant. They will not be taken into account in any decision.
In this connection it is interesting to note that under the Bill the Civil Aviation Authority is asked to pay particular attention in the licensing of airports to adverse effects on the environment, to problems of noise and of pollution. The House should know that in the case of the two airports of particular concern in Scotland—Prestwick and Abbotsinch—the view of the local representatives is clear.
As for Abbotsinch, the parliamentary representatives, the local government representatives and all the people representing the population in Glasgow around Abbotsinch are unanimously of the view that they do not want more flights coming into that airport, being convinced that such flights would cause environmental pollution, noise pollution and undue difficulties of other kinds.
At the other end of the West of Scotland, however, in Ayrshire, the local representatives—the Members of Parliament, the local authorities and local associations representing interests in the area—are equally unanimous in the view that not only do they want Prestwick airport to continue to develop and expand but they want flights into Prestwick to develop and expand.
It would therefore seem crazy, just from that narrow point of view, apart from the wider grounds on which I oppose the Bill, to allow British Airways to make such a move as I have outlined.
It has been suggested to me—it does not seem beyond the bounds of possibility—that there might be no need for a third London airport, given the growing use 96 of jumbo jets and the consequent or parallel development of Prestwick airport as the airport dealing with traffic from the North of England as well as from Scotland. I suggest that that might be an argument that hon. Members on the Government Benches, as well as my right hon, and hon. Friends who are concerned about the development of a third London airport, could well bear in mind.
I conclude with a quotation from one of my predecessors. I notice that it is a regular practice to quote from Hansard. but I shall go rather further back than most of the quotations that I have heard in my few months in the House. I go back to 29 March 1945, when my predecessor, Alex Sloan, then Member for South Ayrshire, said:we will fight to the last ditch for the retention of Prestwick airport, which will mean so much to the social and economic life of Scotland."—[Official Report, 29 March 1945; Vol. 409 c. 1571–2.]That remains as true today as it was in 1945. In my view, the passage of the Bill, with all its associated detrimental consequences, will have the effect of putting under greater threat than at present the future of Prestwick airport, and I regard that as an extra reason for opposing it
§ Mr. John Wilkinson (Ruislip-Northwood)
I shall not take up the argument of the hon. Member for South Ayreshire (Mr. Foulkes), although I have considerable sympathy for his remarks about Prestwick airport. However, there are other airports that are under-utilised, such as Stansted, Castle Donington, Yeadon and Speke. These are national assets that could be used to much greater advantage than at present.
First, I declare two interests. British Airways have a major administrative centre in my constituency, at Bealine House, Ruislip. Secondly, I have a commercial interest as I am a strictly non-executive director of an air transport company.
The Government's main interest, and their correct purpose, is to do everything within their powers to ensure that British Airways, and the successor company in particular, are profitable, sound and expanding enterprises that provide a future for everyone who works in them, and that they meet the needs of the 97 travelling public. I am pleased that my right hon. Friend did his best to allay anxieties that may exist on the part of employees by telling my hon. Friend the Member for Romford (Mr. Neubert) that he had no intention that British Airways should divest themselves of any of their ancillary activities. In other words, my right hon. Friend was saying that they would stand or fall on their own two feet in their present form. He said that their primary activities and their secondary activities would remain intact. It would be wrong for anyone to accuse the Government of hiving off or asset stripping, or to use any other emotive terms to describe that form of activity, in relation to British Airways.
In my constituency there is also a considerable number of British Airways employees who work at Heathrow. It is noteworthy that neither since the Bill has been published, nor since my right hon. Friend's statement in July, has anyone in my constituency complained to me. My constituents who work for British Airways have not felt that their employment has been jeopardised. The attendance of Labour Members is an indication of the degree of anxiety that exists among the Opposition.
§ Mr. Foulkes
Does the attendance of Conservative Members indicate the degree of enthusiasm of the Government's supporters for the Bill?
§ Mr. Wilkinson
Some of my colleagues tell me sotto voce that the Opposition outnumber us two to one. However, I hope that the fervour of our remarks will make up for any numerical lack of support that we may have. I am confident that the quality of my hon. Friends' contributions—there will be much quality—will compensate for any lack of numbers Let me return to the Bill.
Clause 1 envisages a £160 million reduction in public dividend capital. That will have the effect of ensuring that the managements of British Airways and the successor company do their best to ensure that the expensive aircraft procurement programme is the right one. As my right hon. Friend said, the procurement programme will go forward on its merits. Major decisions have been taken. For example, it has been decided only by Eastern Airlines and by British Airways to purchase the Boeing 757. Such decisions 98 merit careful scrutiny, and no doubt the board of the successor company will want to give them exactly that.
It has rightly been observed that the major asset of an airline is its route structure. My hon. Friend the Member for Brentwood and Ongar (Mr. McCrindle) made the observation extremely eloquently. When examining the hundred and one air service agreements that exist I ask my right hon. Friend to do his best to ensure that in any diplomatic or intergovernmental contacts there may be Her Majesty's Government try to ensure that they promote a healthy and competitive air environment.
Clause 10 proposes to amend section 3(1) of the Civil Aviation Act 1971, which is concerned with aerodrome licensing, by inserting section 3A. My hon. Friend the Member for Woking (Mr. Onslow) spelled out the implications. It is suggested hat the Civil Aviation Authority shouldhave regard to the need to minimise so far as reasonably practicable—That is fraught with potential difficulty I have already declared that I have worked for a considerable number of years in business aviation in executive air charter. Business aviation is one of the areas of aviation that is expanding most rapidly. That is because in many instances it best fulfils the needs of the travelling public. For example, it enables the would-be traveller to leave from the airfield nearest his home to travel to an aerodrome closest to his ultimate destination, and avoids the necessity to go through a major internationl airport.
- (a) any adverse effects on the environment and
- (b) any disturbance to the public."
If the Bill is to inhibit the development of that form of civil air transport, it will be a severely retograde measure. I ask my right hon, and hon. Friends to consider that carefully. If the Bill remains in its present form, it will expose the CAA to litigation, especially by including the phrase "as reasonably practicable". That could be argued over in the courts until the cows came home.
The right approach is aircraft certification. In the United States there are already regulations imposing aircraft noise limits that may not be exceeded beyond 1986. In Europe the regulations 99 will apply from 1985 or thereabouts. That is surely the right approach.
§ Mr. Stephen Dorrell (Loughborough)
Does my hon. Friend accept that while certain measures may be achieved by concentrating attention on the licensing of aircraft, some of my constituents who live, for example, in the immediate vicinity of an airfield will regard the enforcement by statute of environmental considerations in the licensing of airfields as a major step forward?
§ Mr. Wilkinson
They may. All that I am doing is injecting a note of caution. Aviators are practical people. As those who have had to manage civil air transport know, aviation has to be regulated in clearly defined ways. For example, if an airfield is to be licensed the runway has to be a certain width, the cleared area has to be a certain width, there has to be a particular sort of crash vehicle and a certain number of crew men to man it, there have to be first aid facilities and there must be no obstacles within a certain radius of the runway. The regulations are quantifiable and measurable. However, "reasonably practicable" will be a matter of subjective judgment. I am sure that it will lead to disputation and litigation in the courts. I add my personal caveat.
§ Mr. Tebbit
If it is felt that certain provisions in the Bill require tightening or amending, I shall be only too happy to discuss those matters in Committee. My hon. Friend will have noted that the duty will apply only at airfields designated by the Secretary of State. The duty will not be slapped on regardless all over the place.
§ Mr. Wilkinson
I am most grateful to my hon. Friend for that thoughtful reassurance, which is helpful.
The Bill incorporates a proposed amendment to section 24 of the 1971 Act relating to the licensing of air transport. It provides for the insertion of a subsection, which states:To secure the most effective use of airports within the United Kingdom.That tends to militate against the principal purpose of the Bill, which, as I see it, is to maximise competition and to ensure the best possible service to 100 the travelling public. If we are to have political considerations on airport policy superimposed, that will lead to difficulties. I wish to see airlines applying for licences according to their commercial judgment. That should be the primary criterion. If an airport is under-utilised and if a community is ill-served, I am sure that airlines will take note of that fact when submitting their applications.
I move on now to the role of the Civil Aviation Authority which has been at the centre of the debate. Funnily enough, I thought that the right hon. Member for Lanarkshire, North (Mr. Smith) had a point. It was a point that was also raised by my hon. Friend the Member for Brentwood and Ongar. There is cause for anxiety if we allow the CAA untrammelled freedom. After all, it has a licence not to print money but to allow a particular operator to run a successful business and to deny to another operator the chance of doing good business. That is an important power.
A regulatory system must be consistent, as has already been said. As my hon. Friend the Member for Woking emphasised airlines must be confident that consistency will be maintained, because their equipment programmes have to be planned literally decades ahead.
It is all very well for the draft guidelines to be published before Committee stage, and we welcome that. It is also good to know from clause 11 that CAA isto publish from time to time—in such manner as it thinks fit—a statement of the policies it intends to adopt in performing its functions.I suggest that the CAA should have an annual duty to publish its policy guidelines. In that way, the parameters and criteria on which the CAA was working would be made quite clear. I further suggest that the CAA should publish a yearly analysis of statistics and facts so that people know that a judgment of the CAA is sound and correct.
Finally, on the subject of the CAA, there is the matter of clause 13. I obviously welcome the concept of the Government distancing themselves from a body to which they have assigned certain responsibilities. In broad terms that 101 is welcome. But there are all sorts of aspects of the work of the CAA—not just route licensing, but other aspects—that need very careful examination, such as the issuing of airworthiness certificates for aircraft. That is a very expensive process at present and one needs to know why.
Another aspect is crew licensing. Aircrew very often have to pay for their own training and the cost of a professional licence at the end of it is not cheap. A further aspect is the validation of imported aircraft—that is, entering those aircraft on the British register. That is not an inexpensive process. For a new operator to acquire an air operator's certificate is also an expensive process.
One needs to be satisfied, therefore, that the CAA will not staff itself with lots of expensive bureaucrats. Although I think that the intention behind clause 13 is admirable, I should like it to be seen beyond peradventure that the CAA was operating commercially.
Finally, I turn to an aspect which was first referred to by my hon. Friend the Member for Woking—the emergency powers contained in clause 9—which is extremely important. I alluded to it in the debate on the Army, Air Force and Naval Discipline Acts (Continuation) on 28 June, when I said:I wish to ask whether the air crews of civil air transports—which can, under current legislation, be requisitioned in time of emergency or war—might be called upon to fly to war zones or operational areas, and, if so whether they would come under the discipline provisions of the Act relating to the Royal Air Force?" [Official Report. 28 June 1979: Vol. 969 c. 669.]I went on to say that this was particularly important because the transport force of the Royal Air Force had been drastically diminished.
What I say to my right hon. and hon. Friends is that it does not make practical sense to requisition, say, fleets of transport aeroplanes and their crews unless the crews, in time of emergency or war, will fulfil the functions imposed upon them. I was delighted to note the phrases "actual war" or "great national emergency", but I do not think that "imminent war" would stand up in Committee, though the intention is wholly right. I suggest to my right hon. and hon. Friends that they should make those air crews that have to fulfil this role members of 102 the Royal Air Force Volunteer Reserve so that if they are called upon to go to a war zone such as Belfast, or to some other unpleasant place, they are unable to invoke their rights under British Airline Pilots Association rules, or their consciences, and say that they will not do whatever the state of emergency demands. This is a most important matter. That would make sure that operators had greater confidence in this part of the legislation.
I should have liked to see a more effective consultation on this whole issue. I believe that the air transport operators would be glad of the chance to sit down with the Government—not just the Department of Trade but also the Ministry of Defence—to work out how best this very necessary emergency provision could be fulfilled. With that, I commend the Bill to the House.
§ Mr. S. C. Silkin (Dulwich)
I am sure the hon. Member for Ruislip-Northwood (Mr. Wilkinson) will forgive me if I do not follow his interesting points, most of which would seem more appropriate in Committee. I would not have dreamt of rising at all but for the fact that I came primarily to hear the justification by the Secretary of State for the introduction of the Bill and I was disappointed by what I heard.
During the general election campaign I heard a great deal—indeed I argued it myself—about hiving off in the British aerospace industry. I also heard, perhaps with a little scepticism, arguments about hiving off parts of the British shipbuilding industry. However, I heard nothing about hiving off parts of the British air transport industry.
When one has not had the opportunity to hear, in an election campaign, the arguments for such hiving off, and then suddenly an extremely important Bill, incorporating a new principle in relation to a fundamental part of our industry, is brought forward without warning and, apparently, without much, if any, consultation, one naturally wants to know why that has happened in the first Session of a new Parliament. What are the urgent justifications for so doing?
The very low-key speech of the Secretary of State certainly did not enlighten me. Indeed, some of the answers he gave 103 to questions put by my right hon. and hon. Friends and myself confused me further, as did the answers he gave Conservative Members including his answer to the very pertinent question put by the hon. Member for Brentwood and Ongar (Mr. McCrindle).
I looked at the explanatory memorandum, as one can sometimes be enlightened by reading the financial and manpower effects of a Bill. The memorandum refers to:The reduction of the public dividend"—a glimpse of the obvious if ever there was one. It also states:The eventual sale of shares in the successor company will bring receipts into the Consolidated Fund against which costs associated with the sale will be offset.That is a further glimpse of the obvious, though it does not take us much further on the question of justification.
I thought that at least in connection with the manpower effects of the Bill I would see a substantial cut in manpower requirements. However, I see that the memorandum states that:The abolition of the British Airways Board will eventually lead to a small decrease in manpower requirements in the Department of Trade.I do not know whether that is a justification for the Bill.
I listened to the latter part of the speech of the right hon. Member for Down, South (Mr. Powell) and it seemed to me that he put forward matters of great importance in relation to the general principle of the Bill. I cannot accept the suggestion that the purpose of the Bill is to create greater competition. In an industry such as air transport, such competition as is proper, fair, and safe exists already between the public and private air transport companies of this country and those of other countries. They are all competing within the limits of what is internationally considered to be safe, proper and fair.
I ask the Government how the disposal of a minority interest in the shares of a public corporation, which is competing with other organisations in air transport, adds at all to the competitive nature of the industry? How does it make this organisation more competitive or more efficient?
104 The hon. Member for Ruislip-Northwood made a very telling point when he said that he was by no means certain about the conflict in the Bill between the principle of commercial success on the one hand, and economic and social matters which are inherent in the concept of airport policy, which is enshrined in another part of the Bill, on the other. Clearly in this area we have a dichotomy. On one side there is a desire to make the industry as profitable as possible and to increase as much as possible the prospective receipts, the public dividends and, eventually, the private dividends. On the other side there is the need to serve the British and foreign public where airport policy so requires.
The hon. Member for Brentwood and Ongar put a number of pertinent questions on the detail of this matter. His points were unanswered, although he seemed to be satisfied, to some extent, with the Secretary of State's replies. I thought that the Secretary of State's answers showed how little thought had been given to the fundamental principles of the Bill, and also to the details.
For example, the hon. Member for Brentwood and Ongar was very concerned about when the shares would be offered to the public. He pointed out the important factors which are involved in that decision. He said that there was nothing in the Bill that gave any indication on this point and said that he could not be satisfied unless there was some idea of the policy to be adopted. He explained the pertinent reasons why this should be so. The Secretary of State got up and said that the whole point of the Bill was to give maximum flexibility. That sort of answer would not have satisfied me, had I been the hon. Member. I thought that that was the very thing about which he was complaining.
One then comes to the fundamental difficulty of the Bill which was mentioned by the right hon. Member for Down, South—the whole question of directors. In BP, one or two of the directors are appointed by the Government. They act as trustees for the shareholders as a whole, including the Government. In carrying out their duties to all the shareholders equally, subject to the exchange of letters which took place many years ago, they must have regard to the requirements of those who nominated them.
105 That is precisely what one finds when one has a company which owns the majority of shares in a subsidiary company. The company appoints the directors whose primary duty is to the shareholders of the subsidiary company, but whose main reason for being there is to watch the interests of the main company. Those directors must reconcile their two positions in that difficult situation. That is the whole point of their being there. Have the Government really thought this through? It is not just a question of the majority shareholder—that is the public—it is also a question of the other public considerations, such as the airport policy and matters of that kind. If there are Government directors at least they must bear such considerations in mind, while not allowing them to override their duties as trustees to the shareholders. Apparently none of this has been thought about by the Government. When questioned, the Secretary of State was quite unable to give any sort of reply. Yet this matter is fundamental to the basic principles of the Bill—a Bill which takes an industry which is now wholly publicly owned and alters the character of the corporation into a company, and plans to dispose of the major part of its capital. One would have thought that in such circumstances, matters of this kind would have been carefully thought about, clearly understood and placed before us, before the Bill was introduced.
I am in no way convinced of the necessity for the Bill. I am not convinced that it will create greater competitiveness. Neither am I convinced that there are any other justifications for introducing it in this way. In case I am accused of being one of the ju-jus of the Opposition, or something of that kind, perhaps I may say that I am not in any way dogmatic about this matter. I should like to see competition between public and private industry and experiments such as the BP experiment in companies which are partly in public ownership and partly in private ownership. But that is a very different thing from taking a corporation which is, I suppose, successful, and imposing this new form of approach upon it.
I want to make one further point upon which I touched in an intervention. In relation to the Laker case, I asked whether it was the Government's intention 106 to cure what seemed to me to be the major problem which arose out of that case. That was not the problem of interpretation of the statute and the question of guidance, and so on, but the fact that the Court of Appeal construed the Civil Aviation Act as removing a part of the Royal Prerogative and in so doing made it that much more difficult, as it seemed to me, for inter-governmental negotiations to take place freely where it was a question of bargaining between one Government and another so that we got as good a bargain as was being offered by us.
The Under-Secretary is perfectly entitled to make his comments about the Government of the day being defeated in regard to the Laker case, but on that principle, as a principle, I would very much have hoped that we would have been able to test that decision in the highest court of all. As it turned out, the Government of the day, in the form of my then right hon. Friend the Member for Birkenhead—Mr. Dell, as he now is—decided to alter the aeronautical policy and so there was no occasion for testing it. But it was a matter that I hoped would be put right whenever some new piece of legislation came before the House, so that there could be no doubt for the future that the Prerogative right of the Crown in that situation would be unaffected by any words, expressed or implied, within the statute which governs the powers of the CAA.
§ Mr. Tebbit
I think that the answer to the question which the right hon. and learned Gentleman posed earlier and which he re-poses slightly differently now is in the negative. As he recollects, the court found that the exercise of the Prerogative was fettered by the 1971 Act—and it will remain so. There is no proposition in the Bill to alter that state of affairs. Indeed, it has not seemed to be any undue limitation on our ability to bargain with foreign countries since then.
§ Mr. Silkin
I am grateful to the hon. Gentleman for giving me the answer to my question. I cannot say that the answer satisfies me. I must say, equally—to be entirely frank—that when I was dealing with the matter I was looking at it as a lawyer and I was obtaining instructions 107 on the other side from those who were experts in air transport. The impression that I then had was that this was a matter of importance. No doubt if my right hon. and hon. Friends take the view today that it is a matter of importance, they will wish to pursue it in Committee. I have heard nothing which shakes the view that I then formed that it was a matter of very considerable importance. Indeed, the less fettered powers that the CAA will now be getting under the Bill seem to increase rather than decrease the importance. My fears and anxieties are not in any way satisfied by knowing that there is the right of appeal, which is to be preserved, because the whole difficulty of the right of appeal, as I recollect it, is that the Minister has to exercise his powers under the right of appeal in accordance with exactly the same prinpies as apply to the CAA, so that he cannot take into account matters which the CAA cannot take into account, and the CAA cannot take into account these questions of bargaining between one State and another.
I have explained why I am not satisfied that the Bill is necessary. I am not satisfied that it is right that it should have been brought forward in the way in which it has, without the fanfare of trumpets that we had about other matters before the general election or, indeed, even a muted fanfare between the general election and now. In those circumstances, without far more explanation and far more satisfaction than I have had, I certainly could not find it right to advise the House that it should give the Bill its support.
§ 7.6 pm
§ Mr. Michael Colvin (Bristol, North-West)
It is a pleasure to speak following the right hon. and learned Member for Dulwich (Mr. Silkin), who may be a neighbour of mine domestically but is no neighbour politically. I think that it is the sign of a skilled advocate that he has been able to contribute so well to the debate in so impromptu a fashion and to grasp the brief so quickly.
Besides amending the law relating to civil aviation, the Bill is a very important piece of denationalisation. It is welcomed on the Conservative Benches and in the country at large. Although I accept what the right hon. Member for 108 Lanarkshire, North (Mr. Smith) said about the lack of a specific mandate in our general election manifesto for selling off British Airways shares to the public I must say that repeated surveys of public opinion through polls have shown that the vast majority of the British people are opposed to nationalisation or any further extension of nationalisation. When such questions have been directed specifically to workers in industry, results of these polls have shown that workers in British industry are opposed to the nationalisation of their firm. Although that is absolutely no mandate, it indicates that what the Government have in mind is very much in tune with public opinion in Britain.
One other fact is that there were many references in our manifesto to the reduction in the role of the State, and to handing back more responsibility to the people of this country. I suggest that the Bill is one more step in that direction.
The situation in civil air transport has changed radically since the oil crisis of 1973. We have seen air fares rocket, then the Skytrain revolution, followed by de-regulation in the United States and the collapse of the transatlantic charter market. Sir Freddie Laker has shown that air fares can be brought down without sacrificing safety and reliability. In short, he has succeeded in busting the system of State control that has existed in some form or another in this country since Imperial Airways first flew the flag in 1924. The Government have recognised and welcomed that fact and are now, through the Bill, helping the British civil aviation industry to adjust and to benefit from the new situation.
Some hon. Members have suggested that the Bill does not go far enough, that the Government should not only change the role of the Civil Aviation Authority but press for reform of the IATA rate-fixing and advisory body, review the role of the International Civil Aviation Organisation—ICAO—and call for an international conference to rewrite the 1944 Chicago convention, which set up the original structure of the international civil aviation industry.
I appreciate that these suggestions are outside the scope of the Bill, but I think that they merit consideration by the Government. This is a good opportunity to 109 air that opinion. I suggest that such action would allow each airline eventually to fix its own fares, to serve whatever routes it could obtain and to offer whatever level of service it could justify so long as safety regulations were maintained and the environment protected. Therefore, it would be in the interests of the consumer in the long run. But I question whether Britain is ready for such radical de-regulation, for that is what it would be, or whether we could ever get agreement from the United States for such a policy. I think that the renegotiation of the Bermuda 2 agreement may indicate the answer to that question.
The Government proposal to sell about half the shares in British Airways Ltd. to the public—the so-called BP solution—is by far the best method for returning this nationalised industry to free enterprise, and it should perhaps be used for other industries.
If workers in British Airways own shares, so much the better. Ownership gives power, but demands responsibility in return. Despite what has been said, if another Labour Government should try to repossess those shares without paying proper compensation they could be in for a rough time.
I suggest that selling about half the shares in British Airways will rid the public sector borrowing requirement of some of the burden of British Airways finance. That will not only help in the fight against inflation by reducing the Government's debt; it will relieve the corporation of the immediate effect of possible cuts in Government spending, as my right hon. Friend has already said, because British Airways will be more free to respond to market opportunities. Indeed, they will have to do that if they are to remain the market leader.
The Bill will help to remove the ministerial shackles that so dictatorially bound Sir Freddie Laker's Skytrain until he obtained justice from the Court of Appeal. Incidentally, where is the United States competitor to Skytrain that the Labour Government told us would emerge to seize £6 million worth of revenue from British Airways? It just has not materialised. United States operators have not shown much of the frontiersman enterprise for which their country is renowned. But they say that they have been over-regulated, too.
110 My right hon. Friend made the point that deregulation of the United States domestic market had been proceeding at a considerable pace. I think that we on this side of the Atlantic will look forward to the day when we see British companies obtaining fifth freedom or cabotage rights in the United States. If hon. Members think that suggestion is a little far fetched, I suggest that it will not be long before the United States seeks such rights in Europe.
Welcome though the Bill is, it raises several questions in my mind relating to the Civil Aviation Authority, three of which the Minister may care to answer in his summing-up at the end of the debate.
First, the CAA has made great progress in reducing its annual deficit, as requested in the Civil Aviation Act 1971, which called on the Authority to recover its costs as soon as possible from those who use, or benefit from, its services: and to aim to dispense with grant-in-aid after 1977–78.
The Authority has not quite hit that target. Nevertheless, this year it has reduced its annual deficit, for the fourth year running, to £14.9 million. That compares with £15.6 million in 1977–78, £44 million in 1976–77 and £53 million in 1975–76.
I suggest that there is one more way in which the CAA might be permitted to raise revenue to cut its deficit still further. We know that deregulation will see many more applications for routes. For example, that knight in Skytrain armour wants to operate among 37 new destinations in Europe. That is a total of 660 routes. Will the Government consider permitting the CAA to charge applicants the cost of hearings following applications in order to reduce what I can only describe as a blunderbuss as opposed to a rifle shot method of making applications?
My hon. Friend the Member for Woking (Mr. Onslow) has already asked whether the Government feel that it will take the CAA six months to prepare its policy for its air transport licensing function in clause 11. That is rather a long time. My right hon. Friend the Secretary of State said that the CAA would be asked to bring forward a draft policy statement by the Committee stage. I 111 understood that the Committee stage would not begin until after Christmas, and that seems a long time to wait. I should think that the draft, if it is to be a draft and therefore open to general discussion, could be prepared and produced at a much earlier date.
The Bill calls on the CAA to perform its functions in the manner whichit considers is best calculated…to secure the most effective use of airports within the United Kingdom.Perhaps the Minister will tell us in his winding-up speech when he proposes to bring forward proposals for the third London airport and, for that matter, a comprehensive strategy for airports generally in the United Kingdom and thus end the most appalling state of uncertainty that the Labour Government left on being defeated at the general election. That is required for the future development of airports, and airlines must know from where they will be able to operate.
I applaud the Secretary of State's determination to wait for the right time to launch a mixed economy British Airways Ltd. My hon. Friend the Member for Brentwood and Ongar (Mr. McCrindle), when discussing this matter, referred to the statement by British Airways.
British Airways have said about this important matter of timing:First, timing will be crucial. The shares will need to be offered at a time when British Airways' trading record and prospects enable it to write a prospectus that describes a strong business confident of healthy financial results in a favourable international environment. The company should have established a balance sheet demonstrably capable of supporting a very considerable capital investment programme. The timing will also, of course, need to take account of the climate and sentiment of the stock market.I agree with that statement and I am sure that the Government also agree. The Bill throws down the gauntlet to British Airways, and their greatest challenge over the next few months will be to increase the momentum towards greater productivity, thereby enabling that good prospectus to be written.
British Airways have two great assets that do not appear on their balance sheets—first, their route structure and, secondly, their determined and skilled work force. British Airways know that they will succeed 112 in keeping those routes only if they make better use of manpower. It is important to ensure that the Bill releases some of British Airways' birds from the cage of regulation. We shall then look forward to seeing pust how well those birds can fly.
§ Mr. Clinton Davis
British Airways would not dispute that they are overmanned, but it is a question of how one resolves that problem. Is the hon. Gentleman suggesting that British Airways should dismiss thousands of workers just like that? What does the hon. Gentleman suggest apart from slogans?
§ Mr. Colvin
I merely suggest that British Airways are capable of dealing with those problems. I would hate to think that any Government would try to dictate to British Airways how they can best improve productivity. The Government's object is to create an economic and political climate in which companies such as British Airways can improve their performance without need for Government intervention. That is one of the aims of the Bill—to create a climate and a new vehicle, British Airways Limited, which will succeed in doing that. British Airways have made progress towards obtaining a high rate of productivity because they know that it is essential to improve performance in order to maintain their position at the top of the international league table. The Bill is a move in the right direction and I recommend its acceptance by the House.
§ Mr. Russell Kerr (Feltham and Heston)
I have had a few nibbles at the cake today and therefore I shall make my intervention brief. I welcome the hon. Member for Ruislip-Northwood (Mr. Wilkinson) back to the House. He took—not wholly of his choosing—a four or five-year sabbatical in 1974, and, although I cross party boundaries to say so, I appreciate his knowledge of the aviation industry. I do not always agree with the hon. Gentleman but a debate is better informed when he participates in it. Therefore, on behalf of many hon. Members I welcome him back.
The hon. Member for Brentwood and Ongar (Mr. McCrindle) made an interesting and commendable speech about cheap fares. The subject of cheap fares has been something of a bee in my bonnet for a 113 long time, as some of the older aviation hands will know. The road to salvation for British civil aviation lies along the path of the mass market, not that of expensive business travellers, although they must be catered for as well. I wish to make it possible for a skilled worker from Coventry to contemplate taking his missus, or anyone else, to Paris for a long weekend a couple of times a year. When we have reached that happy state, we shall have begun on the path towards economic viability and prosperity and have gone a considerable way towards solving our civil aviation problems.
An unofficial arrangement between the hon. Member for Woking (Mr. Onslow) and myself has existed for the last 12 years. In every aviation debate, we guarantee, positively and without messing or delay, that we will insult each other. He has kept his part of the bargain, but I am put out because I do not have a suitable epithet to throw at him. I hope the hon. Gentleman will forgive me if I do not catch him as squarely as usual but in case it may be thought an offensive remark, I noted that he made a damned fool remark on the subject of competition. He referred to competition as something that British Airways should not be afraid of. That is a fine-sounding expression, but as he in his wisdom will reflect, British Airways face competition of a ferocious character every hour of their working existence. They face such competition not only from within, but once one moves beyond our shores, the competition is unrelenting and ferocious. That is my insult for today.
The hon. Gentleman at one point sent a chill down my spine when he gave the House a quick preview of the new-style abrasive industrial relations that might be found in the new company. For 14 years I was on the national executive of ASTMS, one of the main unions involved in civil aviation. I have other relevant experience in industrial relations generally, and, to quote the Duke of Wellington, it frightened me; I do not know about the enemy.
I totally support my hon. Friend the Member for Derby, South (Mr. Johnson) who is the new chairman, succeeding me, of the Labour Party aviation group. I particularly welcome his reply to the Secretary of State and his insistence that the Secretary of State is barking up the wrong 114 tree if he thinks that airline workers are a soft touch when it comes to selling considerable chunks of shares. Not only am I an active member of one of the main airline unions—ASTMS; I also represent one of the airline constituencies and one of the airport constituencies. My constituency adjoins the eastern and the northern fences of London airport, in case anyone wants to come out for a drink at Christmas.
§ Mr. Colvin
Supposing that the hon. Gentleman is badly informed and that shares in British Airways are sold to the workers. Since the main basis of his speech so far has been pure supposition, would he care to speculate on the reactions of the same people if the next Labour Government, if there is a future Labour Government, proposed to take those shares back without paying compensation?
§ Mr. Kerr
Let us be honest. If that hypothetical question were translated into political fact and a Labour Government proceeded to confiscate without compensating, no doubt the implication of the hon. Gentleman's question would come to pass. We are talking of ordinary aircraft workers, not angels or heroes or self-sacrificing great men of our time. Anyone who hits their pockets will not earn their plaudits. However, as things are—and as they are likely to remain—there is little enthusiasm for this idea. In fact, there is a strong current of resentment.
In case it is thought that I am concocting something out of nothing, I would point out that, almost uniquely in the nationalised sector—nowhere is this more true—the workers at British Airways are enormously proud of their success and their prowess. I could prove this to anyone in half an hour by informal contact. The success of British Airways over the last 25 or 30 years has been a matter of gratification not only to Governments—it is pleasant not to have another RollsRoyce—but also to the workers. They 115 take enormous pride in their job and in being part of a winning team. They have almost the "Liverpool feeling". This strikes someone such as me, an honorary member of the club, as their effective parliamentary spokesman.
The miracle of London airport is that, over many years, despite some derelictions of duty and occasional carelessness and mistaken policies, they have managed to maintain the steady upward progress of this great airline. As the Secretary of State said, this is the number one international airline—and no doubt both of us take pride in that fact. Both I and the workers want to see this continue. That is why I have talked of the "X" factor—the pride of these people.
They are offended that this great winning team should suddenly be sold over their heads without consultation. It offends their sense of professionalism, and many of them who are politically conscious are persuaded that it will not help the progress of the industry.
A number of things is involved, but that is not a nonsense factor. If the Secretary of State doubts what I say, I invite him to take an afternoon off as ordinary Joe Blow, not as the Secretary of State, and ask people in the pubs what they feel. There was—I use the past tense advisedly—a modest minority in favour of this proposal after the alleged leak of the Under-Secretary which broke the news to an unsuspecting nation. One or two people would be pointed out—"that bloke in the corner"—as supporting it. But that tiny trickle of support, which may have sustained the Secretary of State in his endeavours, has now, according to my observations, dried up.
I predict that the right hon. Gentleman and his colleagues will initially be on their own. They will have to find that out the hard way, unless we can persuade them tonight to see the folly of their ways, on the principle that repentance is better than a sore head in the morning.
When it comes to the CAA decisions—I liked what the hon. Member for Ruislip-Northwood said on this—is it only the interested airlines that will be able to make an appeal to the Minister? Or will their representatives or their unions be able to protest about, for example, a 116 shuttle service being suddenly cancelled or suddenly added? Will the consumers, the users' committees, be able to appeal to the Secretary of State?
As my right hon. and learned Friend the Member for Dulwich (Mr. Silkin) said, this debate is just beginning. It will go on past this Christmas and probably past next.
§ Mr. Clinton Davis
My hon. Friend and I have had many discussions over the years about the problems of aviation. He speaks with great knowledge as a constituency MP and as one who has taken a prominent role in this area. I have found—I wonder what his experience is—that one thing that trade unions would wish to see rectified in the Bill is the CAA's practice of refusing to recognise fair wages clauses in dealing with licensing applications. Does he find this feeling widespread among his union contacts?
§ Mr. Kerr
I am grateful to my hon. Friend for reminding us of an important point. Anyone who ignores that side of things and does not see the enormous potential for good in thus ironing out industrial ructions is missing a major trick. I have already taken this important point on board, and I hope that the Secretary of State will do so as well.
My other major point concerns the brief exchange that I had with the Secretary of State earlier, mainly from a sedentary position, on the question of the shareholdings, and particularly the director participation, in the proposed new company.
One puts on an act sometimes, but I was genuinely horrified when the right hon. Gentleman reminded me of what a total abdication of responsibility was being proposed in relation to the nation's equity in the new company. We are not talking about the structure of organisation. I understand and generally sympathise with the view that we do not want too many fingers in the pie or too much bureaucracy. However, the one thing that we cannot have is this cavalier, disregarding attitude towards a major say on behalf of the taxpayers in the proposed new company.
I earnestly suggest to the Secretary of State, not in a party political sense, that he should take himself off with one or two intimate friends and think again 117 It is so basic and such affront to our democratic and constitutional procedures that I am sure that the right hon. Gentleman is making a mistake which, from my knowledge of him over the past 10 or 12 years, I know that he would not want to make. The House and I will be grateful if he will look again at that matter.
I have said enough and I thank the House for its indulgence. I reiterate what my right hon. and learned Friend the Member for Dulwich said. This will be a long debate and I promise that there will be no lack of participants, not just here, where we have not done very well tonight, but at places such as Heathrow airport, which I have the honour to represent, and Gatwick airport and throughout our aviation industry. It behoves us all to hesitate a little before committing this country to a policy which, in the view of at least some of us, could be ruinous for British civil aviation.
§ Mr. Stephen Dorrell (Loughborough)
I listened with interest to the hon. Member for Feltham and Heston (Mr. Kerr). I do not share with him the distinction of having been an officer of the aviation group, but I share his interest in the matter, because the East Midlands airport, one of our second rank airports is in my constituency. I therefore have a fairly obvious personal interest in civil aviation matters.
I warmly welcome the Bill, particularly part I, and I congratulate the Government on bringing it forward. The Bill, coupled with the British Aerospace Bill, which we are to debate tomorrow, forms the beginnings of perhaps the most important steps that the Government will take to get to grips with one of the central problems that have been at the heart of the British economy for many years, namely how we are to deal in the next 20 years with nationalised industries which have so badly underperformed when compared with the rest of the economy in recent years.
The right hon. Member for Down, South (Mr. Powell) drew attention to the fact that almost all our nationalised industries were largely drawn up on the Morrison model that was legislated for in the late 1940s. He believes that the institutions of the House have been brought 118 to a point where we can say that adequate parliamentary scrutiny of those industries takes place. The right hon. Gentleman has been in the House a great deal longer than I, and I bow to his judgment on that matter. However, before May I looked at the nationalised industries from the point of view of one who had never sat in the House, and most people in that position believe that those industries have not adequately fulfilled the promise made of them when they were set up, mostly in the late 1940s. They represent about 30 per cent. of the output of the British economy and I do not believe that any Government have devoted serious thought to their development since the original idea was put forward.
It saddens me, and will sadden many others, not just in the Conservative Party, that Labour Members have taken such a negative line on the Government's approach. The right hon. and learned Member for Dulwich (Mr. Silkin) said that he had not heard any arguments in favour of pursuing the policy that the Government propose. But the right hon. and learned Gentleman went on to say that he was not dogmatic and believed in the idea of injecting private capital into the nationalised industries. That is precisely the proposition which the Government are putting before the House for the first time for 30 years, and it is extremely welcome.
We are following the example given to us by the previous Labour Government in relation to BP in 1976 and 1977. We are saying that when the industries in which the State has a stake can be profitable and private capital can be attracted into them, that is something which the Government should encourage and for which their policies should make provision.
We are putting British Airways on exactly the same basis as some of their major European competitors, particularly KLM and Lufthansa. Those airlines are majority Government-owned, with significant minority stakes which are quoted on their national stock exchanges. That imposes the market discipline on their trading activity without sacrificing the control of the commanding heights of the economy which Labour Members wish to exercise.
§ Mr. Clinton Davis
Is there not a substantial difference between the example of 119 Lufthansa, where there is an 18 per cent. private interest, or virtually every other example that the hon. Gentleman can cite, and the case of British Airways? The foreign nations concerned designate a single carrier for the servicing of international routes, namely their national airline. Our Government are walking away from that, and that is where the uncertainty and difference arise.
§ Mr. Dorrell
That is not true in the United States where TWA and Pan American are provided for on the basis that we shall be providing for British Airways, British Caledonian and other airlines.
If we accept that the discipline of the market is a valuable discipline on the operation of a commercial enterprise, that must apply not just to one company in a market, but to a series of companies. I do not see an important difference. The hon. Gentleman is drawing a distinction without a difference.
When Labour Members oppose the suggestion that private capital should be injected into nationalised industries, they are deserting their own often-proclaimed faith in the mixed market economy. No mixed economy can work if there is not a well developed market within that economy. The only basis on which it can work is if it accepts the disciplines of the market. The market discipline, rather than whether the State or the private sector owns 100 per cent. of the shares, is the important issue.
I hope that we will be reasonably open-minded and pragmatic on the management of the public sector and also, in certain instances, on the taking into the public sector of assets that have hitherto been in the private sector. We Conservatives were responsible for nationalising Rolls-Royce in 1971—quite rightly—and under the present Government we were also responsible for continuing the development of Inmos under the National Enterprise Board.
Those are examples of pragmatism from the Conservative Party. I hope that Labour Members will recognise that the only basis on which that approach can succeed is if they are prepared to see the public sector being a two-way street. We shall certainly take things into the public sector when the public interest demands 120 it, but we must also be prepared to let things out of the public sector when the public sector has performed its task.
§ Mr. Russell Kerr
I do not know on what authority the hon. Gentleman is offering us this deal, but perhaps he will see his Minister later. However, since he is so anxious to do this highly unofficial deal with Labour Members, may I suggest that he reads a little of the report of the all-party Select Committee on Nationalised Industries, because some of his ideas about how well or how badly nationalised industries have done over the past few years need bringing up to date?
§ Mr. Dorrell
I know that the hon. Gentleman was chairman of the Select Committee on nationalised industries, and he obviously knows a great deal about the subject. There are examples of highly succesful nationalised industries, of which British Airways, with one or two blurs on their reputation in respect of overmanning and so on, are a fairly conspicuous example. It is because I recognise that that I should like to see those successful parts of the public sector made available for private sector investment of the type to which I have referred. I offer no deal to the hon. Gentleman. I simply look at the track record of both Governments in office. I suggest that Conservative Governments have found themselves in the position of promoting State enterprise, but there has been only one example of a Labour Government accepting private sector investment in hitherto State enterprises, and that was the marginal example of BP.
§ Mr. Russell Kerr
What I had in mind was the total failure of the Conservative Party to recognise not merely the NEB as an investment agency but as a very important part of Government economic control. Week after lonely week I have been looking for signs, but there has been no sign at all that Conservative Members have come to understand this crucial role of the NEB in terms of our economic success.
§ Mr. Dorrell
With great respect, I have already quoted the example of Inmos, where the Government have made it abundantly clear that they intend to proceed with that initiative which was undertaken by the NEB. That is the kind of development that most hon. Members 121 would support. However, one cannot support that kind of development of the public sector and still believe in the mixed economy if one does not accept the possibility that, once those companies have been developed and can be self-financing, they can be floated off at a profit to the public sector back into the private sector. That is the principle to which I wish Labour Members would open their minds.
There is one clause in the Bill that has attracted almost no attention, although there can be few clearer or more expensive examples of the attraction of using the disciplines of the market as a control on the enthusiasm of Government Ministers. I refer to clause 1, which writes off £160 million as a result of the misjudgments of Governments of both political parties over a period of 15 years.
§ Mr. Dorrell
It was a long while ago that the original decision was taken, but there has been almost a conspiracy of silence about the justification for that £160 million write-off. As the hon. Gentleman well knows, the justification is the fact that in 1962 we decided to go ahead with the French on a proposal that no commercial backer would have supported, and which was supported purely on the political enthusiasm of Governments, to build a supersonic aircraft. We are now paying the price of £160 million on the operating costs, never mind the development costs, because we did not observe the disciplines of the market. It seems to me that that is the clearest possible example of why the disciplines of the market are important in the management of a commercial enterprise. That is important not only in regard to this Bill but in relation to the British Aerospace Bill that we shall discuss tomorrow.
One cannot possibly make out a case for saying that British Airways are a social service or that there is any reason for them to be making a loss. They carry people going on holiday, as well as businessmen, and neither of those groups is a conspicuously deserving case for subsidy. It is in sectors such as that that the market is the essential discipline on the enthusiasms of politicians and their bureaucratic advisers. I do not 122 think that there can be any clearer example in one Bill both of the idea that the Government want to pursue and the reasons for pursuing it. Therefore, I warmly welcome the terms of the Bill and the ideas that lie behind it.
I should like to make three brief points, one of which has already been fairly comprehensively discussed. That is the business of the timing of the sale of the shares. I seem to be unique in the House this afternoon in that I have not been circulated with a British Airways press release on the importance of timing the sale.
§ Mr. Dorrell
Perhaps I will, but by then it may be a bit late. I warmly welcome the statement of my hon. Friend the Under-Secretary of State that there will be maximum flexibility in the timing of the sale of the shares. It seems to me that the Bill is not primarily a financial measure. It is much more important in terms of the development of a proper management structure for British Airways than it is in regard to financing the Government's public sector borrowing requirement.
The argument for having the sale in one year rather than another in order to bring down the public sector borrowing requirement is rather a cosmetic one, because the funds to buy the shares in British Airways, and the funds to buy Government gilts, come from precisely the same investors. The financial argument is very slim indeed. It is the argument for getting a proper discipline on the development of British Airways that is the important one. That is why I warmly welcome the open-minded attitude that the Government have shown towards the timing of the share sales.
Secondly, I hope that the Government will develop a slightly more imaginative approach to the presentation of the effects of the Bill. At present it is being presented in terms that suggest that the Government will raise £200 million or whatever from selling shares in British Airways, and that that will reduce the amount that they have to raise in tax. There is scope for presenting the Bill in a much more attractive and realistic way. What the State is actually doing is taking its 123 capital resources out of airlines and making them available for other capital investments that are much more fitting for the State to undertake, such as schools and hospitals. The right hon. Member for Lanarkshire, North (Mr. Smith) looks puzzled.
§ Mr. Dorrell
This simply means making funds available for things that are much more properly done by the State than the operation of an airline. This is not unique in history. In my own constituency there is a grammar school called the Thomas Burton grammar school. It is named after Thomas Burton, because he took money out of the wool trade and put it into education. I am suggesting that when we start building schools and hospitals with the money that we realise out of British Airways, we should call those establishments "The British Airways school" and "The British Airways hospital", so that people who live down the road will understand that they have been made possible because the Government are prepared to sell their shareholdings in nationalised industries when those shareholdings serve no further useful purpose.
§ Mr. Dorrell
There is no reason at all why the profit level should not remain the same. There is a very good argument for saying that if the airline is operating within the disciplines of the market, and knows that it will be for the foreseeable future, it will be looking much more keenly to its own financial accounts because it will know that its survival lies within its own ambit and that no one will come in and save it from the effects of its own decision. If the Government are releasing capital funds from an airline and putting them into schools and hospitals, why do they not present that fact to the electorate in the starkest terms possible? In that way they are most likely to get support for what they are trying to do.
I warmly welcome the terms of section 10(3) of the Bill. I represent a constituency that contains an airport, and it will come as a surprise to my constituents to know that the Government are only 124 now placing a statutory obligation on the Civil Aviation Authority to take account of environmental considerations when licensing an airfield. Although belated. it is welcome. The people who live in Kegworth and Castle Donington under the flight path in and out of the airport will welcome the knowledge that when a new licence is granted or an existing licence continued or varied, direct environmental concerns will be considered.
I welcome the detail in the Bill in that sense and I welcome even more warmly the general commitment of the Government to opening the doors of the public sector to cash from the private sector.
§ 8.1 pm
§ Mr. Donald Dewar (Glasgow, Garscadden)
It was pleasant to hear the speech of the hon. Member for Loughborough (Mr. Dorrell) and it is good to come across a Tory who still believes in building hospitals and schools. Such Tories are rather rare, at least in my part of the world.
The Government's proposition is astonishing and extraordinary in every sense. What puzzles me more than anything is exactly what the proposals are intended to achieve. I have always totally failed to understand the philosophy behind the restructuring of British Airways, and having heard a number of speeches from the Government Benches I am still in considerable confusion and doubt.
I do not share the anxiety of my right hon Friend the Member for Lanarkshire, North (Mr. Smith) about the legitimacy of the Bill's pedigree, and the fact that it was not in the Conservative Party's election manifesto is not my principal concern. Governments are entitled to change their minds, but I am concerned that the change of mind appears to be totally illogical. Before we can discover from the Minister what he is trying to achieve, we shall have to do a great deal of investigation in Committee and elsewhere.
The fact that is an economy measure has come through in various speeches. It has been said that it is a matter of finding money at a time of national stringency. For example, it may reduce the public sector borrowing requirement and help to fund other sectors of the Government's programme which they 125 regard as a high priority. It is a matter of housekeeping, perhaps a pretty mean and dingy sort of housekeeping but no doubt the kind to which Governments have to pay attention. That is one theory.
The more ideological approach was taken by the hon. Member for Bristol, North-West (Mr. Colvin), who saw the measure as a splendid example of denationalisation. That is even more extraordinary.
I should make it clear that I believe in a mixed economy, but one that will work and where the various parts of the mix know how they are expected to operate and exactly what their objectives are. We are not getting that in this Bill.
There has been reference to hybrid legislation, and the word "hybrid" is relevant. We have here a horrible hybrid animal. We are laying in enormous problems, for example, about the duties of the directors of the successor company, its commercial freedom and its aims and objectives.
I would oppose the Bill if it were a denationalisation measure, but I do not believe that denationalisation would be suggested. The industry is peculiarly suitable for public ownership, at least in terms of this country's main flag carrier, and I believe that we all accept that there must be a measure of regulation. However, I should have better understood the new successor company had total denationalisation been proposed. That would mean maximisation of the company's profits, doing its best for shareholders and operating according to the market disciplines, which we have been told are absolutely necessary and admirable.
Instead of denationalisation we have an undefined, hardly described manoeuvre in which a certain proportion of equity—we do not know how much—on terms that are not clear, will be hived off to the private sector. We shall be left with a British Airways that will be some sort of abominable half-way house between a free enterprise company and a State-owned industry. It will be the pantomime horse of capitalism if it is anything at all.
§ Mr. Toby Jessel (Twickenham)
Does the hon. Gentleman regard British Petroleum as some sort of abominable halfway house?
§ Mr. Dewar
I accept that that parallel has been frequently drawn. However, British Petroleum is operating entirely as a private company. If that were the proposal for British Airways, it would remove some of my doubts, although it would make the proposition much more dangerous than that advanced by Government Ministers. If it were proposed to take the company back into the private sector and to sell a majority of the shareholding, and for the directors to work as ordinary directors of a limited company, such as in British Petroleum, we should at least know what we were discussing. However, that is not what the Minister said. He did not say that the Government would take a controlling interest, and even if the proposal were for a numerically controlling interest, it did not appear that that interest would be used.
As the right hon. Member for Down, South (Mr. Powell) said, the proposal is for some sort of slumbering giant. There will be potential control by Government but it will not be exercised. We are left in total confusion about the duties of the company with regard to market discipline and the shareholders.
The concept has been attacked from a variety of directions, and certainly from the Labour Benches. It was attacked by the right hon. Member for Down, South on the ground that it is nothing like an attempt to apply market strictures and disciplines to that area of industry. There is no doubt a fashionable theory that if a proposition offends everyone it must be right, but that is not necessarily true in politics. If both ends of the political spectrum say to the Government that they have it wrong it may well be that they do have it completely wrong.
I accept that the Minister will not give details of what proportion of the equity will be sold off, or details of the new structure, but will he say a little about the company law philosophy that will pertain in the new animal when finally it is born at some flexible point in the future, when he eventually gets round to hardening his plans? We are entitled to know a little, if not about the details of the share offer at least about how the company will operate.
How will we set the price? It is difficult to set the price for the company and 127 to calculate the likely yield. I would be interested to hear the Minister speculate how the prospectus will be drawn up and how we will decide the sort of return that will be given on the shares when we reach the market.
We are entitled to know more about the position of the shareholders. If I hold an equity in an ordinary industrial company in this country—any limited company—I expect the directors, as part of their duty to me, to try to maximise the profits for the shareholders and the return on the capital that is invested. They must attempt to ensure that the company is run efficiently, according to market disciplines and commercial crieria. If I put my money on the desk when these shares are offered I want to know that the same rules will apply. If not, why should I invest? Why should the market want to invest in the company? On 20 July the Minister said:British Airways … will in future satisfy its financial requirements from capital markets both at home and overseas."—[Official Report, 20 July 1979; Vol. 970, c. 2183.]Over the next five years about £2.4 billion must be found from the market. If there is to be investment on that scale, the shareholders will want to know what the directors are playing at and whether they are following commercial criteria or otherwise.
If the Government do not exercise control, what will happen to British Airways' assets? How can we be certain that the assets will not be alienated? If there is no Government control, let us suppose that the shareholders decide that in the interest of the minority—the private sector—they will switch money out of routes that are now maintained as a social service, for example, the Highlands of Scotland. Despite what has been said in the debate, there is a social service element in British Airways at the moment. The shareholders may decide to transfer their money into hotels in the sun, Associate Hotels in the Bahamas, Bermuda and the Costa del Sol. It might make splendid commercial sense if the duty of the company's directors is the normal one of maximising profit and running the business efficiently. However, it does not make sense in terms of the public duty of British Airways to maintain a proper network of services within 128 the United Kingdom. I am unclear as to which of the competing loyalties in the strange hybrid animal will dominate with the board of directors.
If, at some future time, the Government stop shareholders from investing in profitable hotels or helicopter services and tell them that they must keep their money in the basic passenger-carrying transport operations on a proportion of internal domestic routes the shareholders, by normal standards, are being victimised. That is totally unsatisfactory.
So far, the Conservatives have not been great friends of those who have invested in the Stock Exchange. In May of this year the FT index stood at about 530. The last time I checked it it was at 407. When we examine the new spirit of entrepreneurial enthusiasm and confidence that was to be produced by the Chancellor, his friends and his economic policy we are aware of a sad vacuum, a sad lack of confidence and a great deal of gloom and depression—indeed misery—for those who hoped for better from a Conservative Government.
The muddled concept of a strange amalgam company of the public and the private sector is nothing like BP. Continental parallels have been referred to. There, problems have been solved in ways that are not contemplated by the Government. For example, in Italy the private shareholders have no votes in Alitalia. I do not imagine that that would be contemplated by Government Ministers. By introducing this muddled concept, they do no favours to the private sector which they wish to expand and of which they are such hearty defenders.
I am worried about the philosophy of the successor company in a broad and general sense. I am anxious that in an area which is peculiarly sensitive in terms of public opinion we should have a British Airways that will do a better job in the future by paying attention to what the public wants. I refer to the general public and not just the airline passenger. That is a matter of great importance.
My constituency is very close to an important and busy Scottish airport—Glasgow airport. With the possible exception of the housing problems in my constituency—we have some of the most difficult housing problems in the West of Scotland, which are on a par with any 129 in Britain—the single most important constituency complaint, which is made again and again, is that of aircraft noise and its consequences. I am worried that if there are commercial criteria running within the new British Airways, even though there are other regulatory agencies, there may be an initiative from perhaps the most important operator on the internal routes—which I consider the most important routes—which has less regard to amenities in housing areas.
At Glasgow airport in 1978 there were 2.15 million passengers. It is estimated that in 1983 there will be 2.9 million. In 1988 the figure will be 3.53 million and, according to the British Airports Authority, in 1993 it will have risen to 4.3 million. Well before the end of the century, on present projections, there will be twice as many planes moving in and out of that airport as there are today.
Yoker, in my constituency, is only 1½ miles from the end of the main runway at Glasgow airport. We must give attention to the way in which people's lives are disrupted and made genuinely miserable by the problems created by airports. The importance of that is that at the moment, as my hon. Friend the Member for South Ayrshire (Mr. Foulkes) said earlier, there are presently heavy pressures to move many transatlantic and international flights from Prestwick up to Glasgow airport. The pressure for such movements, appears to be coming from British Airways, because that airline feels that it would be to its commercial advantage. Those moves will be resisted extremely strongly by local interests of every political persuasion. They will be resisted in Ayrshire because they would cost jobs in an area which can ill-afford them. They will be resisted in Glasgow because they would bring into the heart of a city an intolerable existence in terms of noise and disruption.
If we are to consider the disciplines of the market, and if that is the muddled message coming through about British Airways, designed somewhat sketchily in the Bill, it will be giving an added incentive and added drive to that kind of move, adding to the discomfort and difficulties already being experienced in my constituency.
§ Mr. Jessel
I am grateful to the hon. Gentleman for giving way, as I have 130 probably an even more severe airport noise problem in my constituency than the hon. Gentleman has in his—which is saying something. But has he not heard of noise certification?
§ Mr. Dewar
Indeed I have. I recognise that there are many kinds of regulatory methods that can be used. There can be many kinds of controls, monitoring, penalties for noisy aircraft, and so on. Many things can be done to mitigate the penalty. But if at the end of the day the number of aircraft movements into an inner urban airport are greatly increased, the discomfort will rise with the increase in those movements. I fear that the kind of commercial element that the Bill is trying to inject into British Airways will increase that danger. All the palliatives are no substitute for having airports in areas where such distortion would not be created. Residents in my constituency tried the palliative of double glazing and applied for double-glazing grants. There were long arguments about NNI contours. Anyone above the rating received a grant; anyone below it did not. In my experience, the people who received such grants still have the problem and are still unhappy. My constituency, which lies just below 55 NNI, is arbitrarily refused any help of that kind. I am clear—and Tories, Liberals and nationalists agree with me—that we need a reduction in the number of aircraft movements, which at the moment make conversation literally impossible even inside houses, let alone outside houses, in Yoker, Drumchapel and many other parts of my constituency.
I should like everything to be done to minimise and not to maximise the risks that this kind of development produces. I believe that the new structure of British Airways may, by introducing this philosophy, however muddled, into British Airways, be making the kind of public control that we would all like to have over that kind of pest that much harder to achieve.
The whole concept seems to me to be deeply mistaken and completely wrong. I shall oppose it with considerably more enthusiasm and fervour than I sometimes show in going into the Lobby.
§ Mr. Tristan Garel-Jones (Watford)
I am sorry that the hon. Member for Felt-ham and Heston (Mr. Kerr) is no longer 131 in his seat, because both he and I are members of the Association of Scientific, Technical and Managerial Staffs. My experience as a member of that union has taught me one thing at least. It is that as members of unions, and as active branch members, we have to be very careful before venturing to give an opinion as to the feelings of the rank and file of the work force in any industry. We have had a very significant example of that recently in British Leyland.
Others of my hon. Friends have already made reference to the fact that a great number of airlines in Western Europe have shareholdings by members of the public. British Airways owns shares in other companies.
My hon. Friend the Member for Woking (Mr. Onslow) pointed to the somewhat artificial indignation that we have been having from the Opposition Benches. I have been left with the feeling that, if there is any dogmatism in the debate, it is coming very much from the Opposition Benches rather than from the Government Benches.
§ Mr. Stephen Ross (Isle of Wight)
We on the Liberal Benches shall be supporting the Government tonight. We think that the Bill is worthy of a try as it is seeking to bring public interest into a public company.
§ Mr. Garel-Jones
I am very grateful to the hon. Gentleman for that intervention, because it illustrates, in a sense, the tragedy of Labour Members becoming increasingly victims of their own dogmatism.
The hon. Member for Derby, South (Mr. Johnson), who has now left us—I understand that he is chairman of the Labour Party's Back Bench aviation committee—seemed to be implying that the staff who worked for British Airways were in a state of frenzy about the Bill, and that pilots were contemplating kamikaze exercises while the cabin crew committed hari-kari. Yet my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson)—who probably has more people in his constituency working for BA than has any other hon. Member in this House—tells us that he has received no representations whatever from these supposedly indignant employees of British Airways.
132 I should like to quote very briefly from a leader in The Guardian, which is not reputed for being especially friendly to the Conservative Party. It says that this decision isbasically a sensible one, which the Labour Party ought to ponder rather than decry. To begin with the whole idea that State ownership of the commanding heights of the economy brings power to the people has been badly undermined by many years of practical experience. The nationalised industries have become bureaucratic monopolies, bullied by Ministers and exploited by their own workers. As most who manage them freely admit, they need a fresh, redefined role".I believe that the Bill gives the opportunity to provide such a role for British Airways. BA, as we know, is a fine company. It has done extremely well in the past. It is a company of which this country can be proud. But it has, and is known to have, as people in BA would be the first to admit, a very serious overmanning problem.
I draw to the attention of the House the evidence given by the Air Transport Users' Committee to the Expenditure Committee of this House in January of this year. Published in the report, there is a very interesting table which gives the number of passengers per employee carried by internal airlines in various parts of the world. I am sorry to say that British Airways are at the bottom of the table. At the top of the table is Pacific South West, of California, which carried 2,782 passengers per employee. In the middle of the list we find All Nippon, which carried 1,966 passengers per employee. British Airways, domestic, are estimated to carry 510 passengers per employee. It is significant that British Midland managed to carry 978 passengers per employee. There are some conclusions to be fairly drawn from that table.
I quote one other brief passage from the report which says:British Airways stated in their 1977–78 report that on the basis of available ton-kms per airline employee their staff productivity was 59 per cent. of that of eight foreign airlines it chose itself. Our fear is that in the case of specialised domestic operations, the figure may be as low as 25 to 30 per cent. and that this is a major reason for the appalling level of domestic fares.
§ Dr. M. S. Miller (East Kilbride)
Does not the hon. Member agree that one of the reasons for the low figure he has mentioned could well be that British Airways have social obligations as well as 133 an obligation to make a profit and that that constraint does not apply to some of the airlines quoted in that table?
§ Mr. Garel-Jones
I accept that British Airways have significant social obligations. The hon. Member for Glasgow, Garscadden (Mr. Dewar) referred to them. But however great the social obligation of British Airways may be—and they probably involve certain subsidies, for example, for services to the Orkney islands—I think the hon. Member would admit, in fairness, that the difference between 510 and 2,782 passengers per employee is significant. However, I take his point.
§ Mr. Clinton Davis
Does the hon. Gentleman accept that the British Airways board and the trade unions are making a determined effort to overcome these difficult problems? Will he indicate what advice he would give to the successor company? Does the hon. Member suggest that suddenly they can embark upon a policy of huge dismissals in order to deal with the situation? How would any reasonable person deal with the matter in a way different from that currently being tackled by the British Airways board and the unions?
That is a fair intervention. Nobody on the Government Benches would argue for a minute that by bringing in private shareholders all problems will go away. That would be a nonsense. We venture to suggest that the injection of a modest percentage of private capital will add an extra dimension to the approach of the company. That would correct the situation in British Airways where the more aeroplanes that are bought, the greater must be the size of the staff. That cannot be allowed to continue.
In fairness, it must be said that this plan has also been welcomed by British Airways themselves. I do not wish to give the impression to the House that British Airways do not recognise that there are serious problems and that the Government suggest that their proposals will solve those problems in two minutes. Not at all. It is worth quoting briefly what the chairman of British Airways wrote in the British Airways News on 2 November 1979:We shall welcome the loosening of Government apron strings, because it will bring us greater freedom in managing the airline.… 134 So far as the employees of British Airways are concerned I can see no reason for them to fear the consequences of the ownership changes proposed. Indeed, the proposals offer the opportunity for the staff to secure a stake in the success of the airline.I want finally to refer to a matter raised by Opposition Members about a possible future confiscation of shares taken up by private individuals. I do not want to add to the obvious difficulties which the Labour Party is undergoing. In a sense, its members are having to decide whether they are members of a Marxist party who regard property as theft or, as the hon. Member for Garscadden said, members of a party who accept the market economy and make up what I suppose should be called a Social Democrat party.
It may be that the hon Member for Hackney, Central (Mr. Davis) is not in a position at the moment to answer the question, but Opposition Members will be aware that at the Labour Party conference this year a motion was passed, which I believe then became party policy, undertaking to renationalise without compensation any private shares in the corporation which were taken up. The Daily Mirror, which again I do not think that many hon. Members regard as a friend of the Conservative Party, described this as "daylight robbery" and "theft".
I assure the hon. Member for Hackney, Central that I do not wish to embarrass him unduly. It may be that he is not in a position to answer my question.
Probably for perfectly good reasons, the hon. Gentleman was not here when my right hon. Friend the Member for Lanarkshire, North (Mr. Smith) dealt with this matter. The hon. Gentleman will be able to read what my right hon. Friend said tomorrow in Hansard.
§ Mr. Garel-Jones
I am grateful to the hon. Gentleman. When I read Hansard tomorrow, hope that I shall be reassured that this is no longer—[HON. MEMBERS: "No, you will not."] My hon. Friends are telling me that that is not a treat which is in store for me in tomorrow's Hansard. In view of that, I feel obliged to make one matter clear. It is not for me to enter the philosophical battles about the difference between a Social 135 Democrat and a Marxist. However, one of the acid tests, surely, is that Government supporters accept that a democratically-elected Social Democrat party has the right, when in Government, to nationalise assets if it takes the view that it is in the national interest to do so. Government supporters accept that. Social Democrats such as the hon. Member for Garscadden, who was telling us about the FT Index in which apparently he takes a close interest, will also accept that when nationalisation of this kind is contemplated and undertaken, it is vital that the owners of those assets should be compensated financially and that a respect for the concept of private property should be upheld.
I understand that some members of the Labour Party who usually sit below the Gangway regard the very possession of private property as theft. Therefore, in the peculiar world in which they live and according to their logic, it would not constitute theft to steal shares from the shareholders of the new British Airways.
I regret very much that the right hon. Member for Lanarkshire, North (Mr. Smith) is not yet in a position to give the House the reassurance that we have a Social Democratic party in opposition. I am sure that if we had such a party, we should not have heard the stream of dogmatic attack on this Bill that we have heard from the Opposition in this debate.
§ Mr. Norman Hogg (Dunbartonshire, East)
When I came into the Chamber this evening I had not thought that the debate was about the nature of capitalism or the nature of Socialism. We have just had some theories advanced, and I am wondering who the dogmatists are. It seems to me that they sit along the Front Bench below the Gangway on the Government side, not on this.
I support what was said by my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar). His comments about the Bill were absolutely right. It is a muddled Bill. We do not know exactly how it will work in practice. We are left with serious doubts about how the successor company will work. It is not clear what the functions of the directors will be. All in all, one is left with a feeling of dissatisfaction about 136 what the sensitivity of the successor company will be to public need.
I have some comments to make about that last matter because, just as my hon. Friend the Member for Garscadden, has in his area, I have a constituency problem in the Bearsden district. Aircraft come in very low and in large numbers, night after night, and an intolerable situation is created. What is more, as one wonders about the sensitivity of large institutions, whether State-owned or privately owned, the worry is whether they take account of public complaint of that kind. Nothing in the Bill leads me to believe that the sensitivity of the successor company will in any way look after the public interest in my constituency.
We have found that British Airways are a good company which operate in the public interest and in the interests of west central Scotland. The shuttle service, warts and all, is a good service which gives to the economic life of Scotland a new strength in that people are able to travel quickly between London and Glasgow.
§ Mr. Dewar
I agree with my hon. Friend about the shuttle in terms of the service provided, but would he not agree that the cost is becoming almost prohibitive? It is now £37 for the single journey, with an application in for it to go above £40 for the single journey. It is moving towards pricing itself out of the market. Does not my hon. Friend agree that that is something at which a successor company or any other company could look with advantage?
§ Mr. Hogg
It is certainly something which the successor company could look at with advantage, but my point was directed to the ease with which people are able to move from London to Glasgow, which is important in the general interest of the economy of west central Scotland. I am surprised that my hon. Friend interrupted a speech designed to support him—though I add that I would not make that comment if he were not a good friend.
I understand that the whole question of Prestwick vis-a-vis Glasgow has been discussed in the debate. I gather that my hon. Friend the Member for South Ayrshire (Mr. Foulkes) made some comments about that. I believe that he said 137 that those of us who represent Glasgow constituencies or constituencies on the periphery of the city are at one with the Members of Parliament for Ayrshire, who recognise the value of Prestwick airport.
I understand that the British Airports Authority is presently considering moving transatlantic flights from Prestwick into Glasgow, and I assure the House that if any such proposal is seriously put forward it will meet the united resistance of all of us who have these airports close to our constituencies.
Even if we recognise the value of Glasgow airport—I have made very plain that I do—there will be no public support for such a change. There is no economic case for it, because Prestwick airport can adequately provide the service. It provides an adequate terminal for all of Scotland's international flights—certainly the North Atlantic flights—and I believe that that should be recognised. There is easy access between Prestwick and Glasgow, although some improvement in that respect could be made, and I hope that it will be made.
I reiterate that if there were any proposal to alter the arrangements in a way that could put more traffic through Glasgow airport, that would meet with our total resistance. The successor company will have to show great sensitivity. It will not be alone, since that quality will have to be shown by the British Airports Authority. I hope that they will both have regard to the comments that have been made by my hon. Friends the Members for Garscadden and South Ayrshire.
§ Mr. Keith Wickenden (Dorking)
I, too, have a considerable constituency interest because the second London airport at Gatwick is within my constituency. The hon. Member for Glasgow, Garscadden (Mr. Dewar) commented that by 1993 Glasgow will be handling 4 million passengers a year. I only wish that Gatwick could be in the same position. It is expected that Gatwick airport, which is in a congested area of South-East England, will handle 16 million passengers by 1985. I know that my hon. Friend the Member for Twickenham (Mr. Jessel) will tell me how lucky we at Gatwick are compared with those living in the vicinity of Heathrow.
§ Mr. Wickenden
I am sure that that is so.
I give modest support to what appears to be a remarkably modest Bill. I understand that its two main objectives are, first, to sell off a substantial minority of the equity of British Airways and, secondly, to give a greater measure of freedom from Government control to the Civil Aviation Authority.
I find myself in a slightly surprising position when I come to consider the Bill's first objective. For the second time in the space of one week I am in a large measure of agreement with the hon. Member for Garscadden. I have no doubt that that will give him as much cause for concern as it gives me. I, too, am concerned about whether the market will wish to acquire a substantial minority of the equity.
Many splendid things have been said about British Airways. I do not wish to denigrate them for one moment. Many of us are aware that the aviation industry is a difficult one. However, over the next five years British Airways will have to fund a capital expenditure programme of about £2.4 billion. Of that programme, £1 billion will have to be funded externally and £1.4 billion will have to be funded internally from cash flow, depreciation and the like.
As I understand it, last year British Airways fell about 20 per cent. short of their profit target. I refer to the pretax and pre-interest profit target. They achieved a return on capital of 91 per cent. at a time when Government stocks are yielding between 12 per cent. and 13 per cent. They have a debt equity ratio of 44 to 56. That is good by the standards of the aviation industry but bad by the standards of industry generally. In the current year, in common with all other airlines, British Airways' fuel bill will increase by as much as 70 per cent.
These are not the best conditions under which to come to the market. As we have heard from my hon. Friends the Members for Bristol, North-West (Mr. Colvin) and for Watford (Mr. GarelJones), British Airways suffer in comparison with many other airlines from a significant degree of overmanning. On two 139 occasions the hon. Member for Hackney, Central (Mr. Davis) has intervened to suggest that it is all very well to talk about overmanning but that it is another matter to suggest how to set about putting things right. That typifies the attitude that is so often expressed about nationalised industries. The problem is stated but no effort is made to solve it.
§ Mr. Clinton Davis
That is most unfair. If the hon. Member for Dorking (Mr. Wickenden) had given the subject any thought, he would know that British Airways and the trade unions—as I said in my intervention—recognise this problem and are tackling it. The new equipment and new technology that will be available to British Airways will make a substantial difference. It is not as though they are averting their gaze from this problem.
§ Mr. Wickenden
That may be so, but I did not say that the trade unions and British Airways were not aware of the problem. I said that Opposition Members were not aware of the problem, which is a different matter.
However much British Airways and the trade unions may be aware of the problems, the fact is that, on the figures that we have heard tonight, British Airways is about 500 per cent. worse than the best company in aviation. I am delighted that their problems are being tackled, but it is not enough to say "How are we to do it? Are we going to suggest wholesale redundancies?" Of course we are not. In a modern industrial society such a thought is inconceivable.
Nevertheless, in any industry—I speak as one with some experience of industry and of competing directly with nationalised industries—there is a significant area where great savings can be made over a period of time through natural wastage.
The other matter about which we have heard a great deal tonight is the concept which seems to be coming from Opposition Members, that in some way, by placing a section of British Airways equity on the market, we are laying open this great company to the assault and attack of private speculators. Anyone who knows anything about the modern day stock market is aware that about 70 per cent. of all shares are held by institutions. 140 If this suggestion is to be followed, I am certain that British Airways are unlikely to attract a great deal of private support because of the factors that I have mentioned. If a share issue is to be a success, it is most likely that the shares will be taken up by institutions such as pension funds, insurance companies and, indeed, the trade unions. Far from private sector investment being in the hands of greedy capitalists, it is much more likely that it will be where it ought to be, which is in the hands of those institutions which benefit the ordinary man in the street.
I understand that the Bill will give a measure of freedom to the Civil Aviation Authority over and above that which it presently enjoys. I welcome that. In spite of all that is said about it, over the years, the CAA has consistently examined its own efficiency and sought to reduce overmanning in those areas where it existed. It provides an extremely good service. My hon. Friend the Under-Secretary of State is much more experienced in aviation matters than myself. However, I am fortunate enough to have a private pilot's licence, and I constantly try to improve my skill. I am delighted to pay tribute to the CAA and the air traffic controllers which that body employs.
The right hon. and learned Member for Dulwich (Mr. Silkin) asked a question which I thought was surprising coming from a member of the legal profession. He asked how disposal of British Airways shares would make that organisation more competitive. In the past I have not noticed members of the legal profession paying too much regard to competition from within their own ranks. The mere disposal of a minority interest will not, in itself, make the industry more competitive. That is why I should prefer to see the disposal of a majority interest. But what it may bring to British Airways—as, indeed, it does to any nationalised industry—is the understanding that industry of any kind, whether in the private or public sector, can operative effectively only if it is freed from the shackles of control of central Government bodies.
It really is absurd for hon. Members and civil servants to believe that they can sensibly intervene in, question and in some cases even control, the decisions of a board controlled by a man of the stature and experience of Ross Stainton. I hope 141 that we shall give this nationalised industry the freedom which it has not had in the past to operate as a business. So often it has had to look over its shoulder at its political and Whitehall masters, and that is no way to run a business.
I commented earlier on the speech of the hon. Member for Garscadden, who has the problem of Glasgow airport in his constituency. One of his hon. Friends said that it would be possible to increase the services to Prestwick and to improve the communications between Prestwick and other centres in Glasgow. If I may I add a word of warning, which I am sure will be endorsed by my hon. Friend the Member for Twickenham. Hon. Members should beware that they do not get a helicopter link. If anyone thinks that he has problems over the airfield in his constituency, it is as of nothing until he gets a helicopter link.
I agree that there is an element of political motivation in the Bill. It is not just a matter of wishing to improve the public sector borrowing requirement. I cannot do better than to quote the words of the right hon. Member for Stepney and Poplar (Mr. Shore) who said when he was in Government:I have accordingly decided that in future it should be our general policy not to permit competition between United Kingdom airlines on long-haul scheduled services and therefore not to license more than one United Kingdom airline on any given long-haul route."—[Official Report. 29 July 1975; Vol. 896, c. 1503.]There lies the difference between the two parties; and there lies the recipe for disaster in any business.
§ Mr. Toby Jessel (Twickenham)
I have a threefold interest in this very worthwhile Bill. First, my constituency is close to Heathrow airport, as my hon. Friend the Member for Dorking (Mr. Wickenden) has just implied. As acknowledged, Heathrow carries far more traffic than Gatwick or any other airport in Europe. A large minority of my constituents work at Heathrow, and a substantial proportion of these work for British Airways. They are very proud to do so because they see British Airways, as I do, as one of the finest airlines in the world, and many of them will welcome the chance to own shares in their organisation. I have said so before and I am glad to 142 repeat it tonight. I have not heard any argument that effectively contradicts that.
My second interest is that I travel frequently as a passenger on British Airways in connection with my duties at the Council of Europe and the Western European Union. From a passenger's point of view, British Airways' standards are very high but that does not mean that they cannot be higher still. It cannot do other than have a tonic effect on all British Airways staff, from aircraft captains to stewardesses and ground staff, if they never know when the passengers whom they are carrying include a shareholder who may well give any praise or blame direct to the board of British Airways. This is bound to have a healthy and beneficial effect upon the performance and morale of those working in this large organisation.
My third interest in this Bill is associated with aircraft noise. The Bill deals with this in its environmental aspects by implication in clause 10. Aircraft noise is the most acute and terrible problem for those who suffer from it. I shall not go into a lot of detail but I hope that no hon. Member who does not have an airport in or near his constituency will dream of belittling the amount of unhappiness and real distress that aircraft noise can cause to all sorts of people.
I believe that it is absolutely essential to ease the sufferings of the communities around Heathrow by bringing in a third London airport and announcing that without delay. If we do not do so, I fear not merely a fourth terminal at Heathrow but ultimately the risk of a fifth terminal there. My hon. Friend the Under-Secretary said last summer that a decision on the third London airport would not be needlessly delayed. I am sure that it is the Government's intention to stand by that. I hope that the Government will grasp this nettle soon.
I should like to refer briefly to the structure of the board of British Airways, which was discussed by the Secretary of State and a number of hon. Members who intervened during his speech. I hope that this matter will be very carefully considered in Committee. I tend to prefer the British Petroleum formula, under which two directors are nominated by the Government and the rest are elected by 143 the shareholders, and under which everyone knows where he stands. if the suggestion is that all of the directors are to be elected by the shareholders at large and the Government, who have a majority shareholding in the company, by some self-denying ordinance do not use that power to elect directors, it will mean that whenever the board acts in a manner slightly displeasing to the Government, dark hints will be dropped that the board ought to do what the Government want—or else. One then has a sort of indirect influence by the Government. It would be far better to split it, to have some Government nominees and some directors elected by the shareholders.
I wish the Bill well. I hope that it receives its Second Reading by a large majority.
§ Mr. Martin J. O'Neill (Clackmannan and East Stirlingshire)
In the short time that I have been in the Chamber this evening, I have listened to several speeches, including one which was as fallacious a speech and as mistaken a speech on doctrine as I have ever heard. The supposition that the doctrine that property is theft is the prerogative of Marx and of Socialists is utterly mistaken. It was that of Proudhon, who was an anarchist, and as such it has a respectable place in a libertarian tradition which is not necessarily shared by all that many of us on the Labour Benches.
Nevertheless, there is an element of truth in the suggestion that, if we have a transfer of shares to private hands, that could well be a form of theft, in so far as British taxpayers will have shares sold on the market, at a greatly reduced price, which shares, in years to come, will be extremely successful and will provide considerable dividends because of the investment which the British taxpayer has placed in British Airways over the last 10 years. Therefore, from the Labour Benches, we regard the possibility of the sale of shares as something tantamount to theft.
§ Dr. M. S. Miller
Does my hon. Friend agree, though, that the ordinary man or woman in the street has a right to invest in these shares in the same way as he or she has a right to send his or her 144 child to Eton or to go for a meal in the Ritz hotel?
§ Mr. O'Neill
I believe that the British taxpayer has already invested in these shares by putting money into and supporting British Airways over the years. We have now reached the stage at which British Airways can compete with any firm in the world and we would be throwing good money after bad. We would be subsidising interest groups in Britain which, frankly, do not now require subsidy.
I take up the point made by the hon. Member for Twickenham (Mr. Jessel) about shareholders being passengers and cast in the role of narks on the staff. This is a ridiculous situation. British Airways have an adequate system for consultation on consumer questions. The public take advantage of these facilities. One does not need to have a share in an airline before one may complain.
§ Mr. Jessel
The point is that, if a shareholder complains to a director about the way that something is being done, the director must pay attention because the shareholders collectively are in a position to dismiss him. That is not the situation at present.
§ Mr. O'Neill
The hon. Gentleman is really talking about the reselection of directors by the shareholders. A consumer is entitled to complain and to have his complaint heard and attended to in the same way as any shareholder. An attempt being made to create additional class differences between those who have shares and those who pay fares. That would be an intolerable burden on the staff and the organisation as a whole.
British Airways have served Britain well and have achieved considerable status throughout the world. It would be a shame to throw away the goose that could lay golden eggs for us as a community in the 1980s and 1990s.
§ 9.1 pm
§ Mr. Malcolm Thornton (Liverpool, Garston)
I say to those who have said that they wish to get rid of some of their air traffic that Speke airport, in my division, would be only too happy to take it over at any time.
The Edwards report of 1969 recommended a second force airline by the 145 private sector and that the private sector should be given a fair opportunity. Therefore, I welcome the stated duty of the Civil Aviation Authority, in clause 10(4),to ensure that British airlines compete as effectively as possible with other airlines in providing air transport services on international routes".That prompts me to emphasise the question of fair opportunity. I welcome the provision for airports, such as Speke, to take a greater share of the opportunities for line services in this country. The removal from the CAA of ministerial and Whitehall interference will allow airports such as Liverpool to compete more effectively.
I also welcome the general tenor of the Bill and refer to Speke as an example of what can be achieved by private enterprise. That airport had been run down. British Airways had not perhaps put into it the effort that we would have wished. Since an independent operator has been operating, traffic has increased considerably. The whole approach to that airport has given it a new lease of life. We hope that opportunities for regional airports, such as Speke and the East Midlands, to develop and expand will be made available. I welcome the opportunities that the Bill will provide and recommend my hon. Friends to support it.
§ 9.3 pm
§ Mr. Clinton Davis (Hackney, Central)
The probability is that the Government will secure a majority for this misbegotten Bill. I think that they expected a somewhat smoother passage from their own supporters. A number of hon. Members on both sides of the House, but notably on the Government side, have expressed great anxieties about certain aspects of the Bill. I believe those anxieties to be well founded. I refer notably to the hon. Member for Brentwood and Ongar (Mr. McCrindle) who, to his credit, has taken a consistent line on this matter going back to 1976 and to the right hon. Member for Down, South (Mr. Powell) who was very critical of the Government's role in terms of the successor company. The Secretary of State could hardly have allayed those anxieties by his contribution.
My hon. Friend the Member for Derby, South (Mr. Johnson) expressed the view that British Airways workers were anxious about the implementation of the 146 Bill. Some of the remarks that have been made from the Government Benches about over-manning during the debate have hardly allayed those anxieties. My hon. Friend the Member for Feltham and Heston (Mr. Kerr) said that he had been in favour of cheap fares and wished to encourage the mass market. However, the projections of British Airways in their last report are that in the 1980s, 80 per cent. of traffic will be leisure traffic and only 20 per cent. will be business traffic, compared with the situation some years ago. Therefore, there has been a reversal of the earlier roles.
A number of my hon. Friends who represent Scottish constituencies have expressed concern about airports close to, or within, their constituencies. They have made several criticisms of the Bill. My right hon. Friend the Member for Lanarkshire, North (Mr. Smith) inquired why the Bill had been introduced at all. The Bill was not a manifesto commitment—far from it. The Conservative Central Office went to extraordinary lengths to deny that British Airways would he dismembered in line 8 of that litany of alleged falsehoods—"Labour's Dirty Dozen". The trouble was that we took an unfair advantage of the Conservative Party and told the truth. Every one of those truths will come back to haunt the Conservatives again and again.
The Labour Party predicted that VAT would be doubled but the Conservatives denied it. We predicted that prescription charges would be increased and they denied that. They can deny as much as they like, but we have seen two increases in prescription charges within a few weeks. We predicted that they would do this sort of damage to British Airways, but they denied that, too. It is extraordinary that the Secretary of State has such a tenacious attachment to dogma that it has overcome any sense of judgment he might have had. The Secretary of State became committed to this "shambles of a policy", to quote the Minister of State today, without any form of consultation. He did not consult management, let alone the trade unions. The Secretary of State made that statement in July without any consultation—
§ Mr. Davis
Did the hon. Gentleman consult all the trade unions or carry out a full consultation with management before making that statement? He may deny that as much as he likes. Those denials bear as much credibility as those that appear in the Conservative document to which I referred. There was no consultation. As a result, the Secretary of State has done himself a grave disservice because he gave no one a chance to warn him of the pitfalls in his policy that were exemplified in the speech of the hon. Member for Brentwood and Ongar. Those pitfalls are now clearly apparent and today we have had an astonishing assertion from the Secretary of State—perhaps it came out of the top of his head because I cannot imagine that he had thought about the proposition—that the Government have no intention of mobilising the right to appoint directors in the successor company. Presumably he will bind the proposals of the rest of his right hon. Friends in a similar way.
The right hon. Gentleman is walking away from responsibility, but did he consult the British Airways Board about that proposition? Has he mentioned one word of it to the unions? Is that the way to encourage certainty in the industry—to get rid of some of the suspicions which the Bill has introduced, not only among the work force but among management? It is an extraordinary performance by the right hon. Gentleman—due, I suppose, to his approaching the problem with an open mouth.
The first ostensible purpose of the Bill, according to the right hon. Gentleman, is to reduce the public sector borrowing requirement. We all know that £1 billion needs to be borrowed from outside sources as part of British Airways' massive investment programme of £2.4 billion. They have to re-equip their fleet by 1986 and keep operating within the new noise limits.
Although British Airways are a fine airline of which we can be proud—the largest international airline in the world 148 —although their load factors are very high on any international comparisons, although they are profitable and have made and are making real efforts to improve productivity, and although under the Labour Government they could make purchasing decisions about the new fleet on commercial criteria, what is troubling hon. Members on both sides is whether their productivity record, coupled with the immediate outlook for the aviation industry in the fuel crisis, is sufficient to justify confidence that the airline can satisfy both its need for vast capital and the expectations of private shareholders.
A number of hon. Members have mentioned over-manning, and I intervened twice on that issue. How do they counsel British Airways or the successor company to overcome that very real problem apart from the steps that the airline is already taking? There has been a considerable attack on this problem already through joint efforts by unions and management, and the new aircraft, equipment and technology will improve productivity. But the company must be able to carry their work force with them in achieving that objective. What the right hon. Gentleman has done, both before the introduction of the Bill and in his speech today, is to imperil that objective.
British Airways, freed from the ideological fantasies of the Secretary of State, would be able to weather the tempests. In the past, they have managed to borrow from United States and Japanese banks, or they have entered into leasing arrangements backed by Treasury guarantees. There is no reason to suppose that that could not be done again. Indeed, all the evidence is that borrowing on that basis is not only easier but cheaper than this operation.
Enormous risks are involved in what the Secretary of State is trying to do. A wrongly timed issue which fails—many financial writers have stressed the problems and the dangers—will not only imperil the re-equipment programme of the airline on which their future depends, but will create immense damage to the morale of management and staff.
The Government must remember that they are a trustee of national assets. The matter was put very well in theFinancial Times on 23 July this year:… the Government must consider, in addition to its ideological inclinations, its duties as a trustee of the taxpayers' wealth.149 It went on:… If the Government sells its shares at a price that is bound to be based on current rather than prospective earnings, Britain's taxpayers will suffer a loss of several hundreds of millions of pounds. It makes little sense to sell a company at the start of its recovery.When we talk about the start of the recovery, we are talking about the implementation of the investment programme, and that will not be completed until 1986.
The Secretary of State said that the Government might postpone the issue. I hope that he will postpone it in order to give British Airways the opportunity to have a good track record in this respect. That can come about only after the investment programme has been implemented. I hope that there will be no issue. I hope that the Government will be out of office before then and that we can get rid of all the rubbish in the Bill.
If the Government simply wanted to achieve a reduction in the public sector borrowing requirement, there was a much easier way of doing it. They could have produced a Bill to take British Airways out of the public sector borrowing requirement.
§ Mr. Tebbit
Has the hon. Gentleman cleared that remark with his right hon. Friend the Member for Leeds, East (Mr. Healey), the former Chancellor of the Exchequer, or did he just invent it on his way here today?
§ Mr. Davis
All that the hon. Gentleman is doing is to create a paper transaction. That is what the Bill is all about.
What will the Government do if the new company is unable to borrow sufficient abroad to fulfil its investment requirements? Will they say "The company must forget the rest of the programme"? The House is entitled to an answer to that question.
What is to be the role of the Government in relation to the company? We must have more details than the Secretary of State gave us. He is characteristically inconsistent. He asserts that the Government are to stand back and to get off the backs of British Airways. If that happens, 150 there will be a risk that a substantial minority shareholder may fill the policy-making vacuum. That is fraught with danger to the airline and to the national interest.
On the other hand, the right hon. Gentleman asserted to the trade unions when he saw them, not in consultation, but after his statement, that the Government could control the level of foreign capital. That is a doubtful proposition, particularly as the Conservatives advised us during the passage of the Merchant Shipping Bill, when we were trying to stop undesirable foreign takeovers, that that was impossible, because it would offend the terms of the Treaty of Rome.
The Secretary of State also told the trade unions that the Government, with their majority holding, could effectively control the policies of the new company. That is in flagrant contradiction to what he said today.
The right hon. Gentleman must make up his mind about the role that he is taking. I have a record of the meeting that took place between him and the trade unions. They assert that he said what I claim. It will be interesting to know whether that is also denied. If the Government stand back, our national interest could be jeopardised. If the Government do not stand back, the major premise advanced for the Bill will be undermined.
Will the Under-Secretary give a categoric assurance that the Government will not cease to control a majority of the shares? I suppose that after what we have heard today, that makes little difference anyway.
Another reason advanced for the Bill by the Secretary of State is that:one of the principal purposes of the operation is to give the 57,000 employees of British Airways the opportunity to own shares in the airline."—[Official Report, 20 July 1979; Vol. 970, c. 2185.]It is not so much an operation as an amputation, but to suggest that that is one of the principal purposes of the Bill is, as Sam Goldwyn said, genuinely bogus. The truth is that this is an exercise in public pillage. What this bunch of strippers wants to do is to use this gimmick as a sort of fig leaf to reveal what is as enticing as possible while hiding that which is absolutely essential.
151 We must ask a number of questions of the Under-Secretary of State, and perhaps he will make a note of them. What proportion of shares is to be allotted to employees? What are the terms of the allotment? Are they to be offered at a discount? My understanding is that they cannot be, yet the hon. Gentleman is on record—perhaps he was misquoted by Lloyd's List—as saying that that is what the Government had in mind. What proportion of employees is likely to benefit? What effect is this likely to have on wage negotiations, not only within British Airways but on workers who are employed alongside those of British Airways? What calculations have been made about all these questions?
The Secretary of State has been completely equivocal about this, because he says that questions relating to the scheme of allotment are matters for consideration in a year or so. I say that he is asking for a blank cheque if that is his real answer to that question. We cannot amend a statutory instrument, and we are therefore entitled to know from him now what he has in mind, if indeed he has given it a moment's real thought.
I turn to the second aspect of the Bill—that dealing with the Civil Aviation Authority. The right hon. Gentleman again said a most extraordinary thing when introducing that part of the Bill. He said that it was the Government's way of taking both hands off the wheel. That can have some rather unpleasant consequences. I think that it is likely to have some pretty unpleasant consequences for the Secretary of State as driver. The truth is that in deciding to give much greater discretion to the Civil Aviation Authority, and in wholly dispensing with the 1976 guidance, the Government are abdicating all responsibility in this area to the CAA. No obligation is imposed on the CAA to observe the requirements of international obligations, including those imposed by air service agreements. Nothing is said about the CAA being required to insist on comparable wages and conditions of work as between British Airways and the independent carriers in operating their licensing functions. Nothing is said about parliamentary scrutiny.
We believe that the whole approach is misconceived and that the discretion that is being offered to the CAA is far too 152 wide. It is being allowed to be judge and jury in its own cause. The right of appeal to the Secretary of State will be wholly ineffective, having regard to the sort of guidance by which the CAA is to operate. Notwithstanding what the right hon. Gentleman said about the CAA publishing its guidance, I believe that the result—the airlines and the unions have both expressed this view—will be inconsistency in decision and uncertainty for the airlines.
The fact is that the CAA can change its policy as it thinks fit. It is not accountable to this House. We have no real way of being able to play a part in determining the CAA's policy. It can disregard any views that are put to it in consultation which it is bound to undertake with the airlines. I do not think that that is a very healthy state of affairs. What we need, and what the Bill denies, is:a framework within which the airlines can undertake investment, particularly in wide-bodied aircraft, which necessarily requires some political stability."—[Official Report, 26 February 1976; Vol. 906, c. 646.]Those were not my words, they were the words of the right hon. Member for Worthing (Mr. Higgins). He was right then, and if he still believes those words, he is right today. Indeed, the whole second force concept, to which we gave recognition in 1976, was widely welcomed by the then Conservative Opposition.
Dr. Bennett, who then represented Fareham, said:I welcome the chance for a symbiosis between British Caledonian and British Airways rather than the obliteration of one by the other in the fashion of the film 'Jaws'.The hon. Member for Chingford (Mr. Tebbit) objected to our policies of Sky-train, and went on to saywe accept the remainder of his—the then Secretary of State's—guidelines for what they are—a brave and honest attempt to stabilise the British air transport industry."—[Official Report, 26 February 1976; Vol. 906, c. 678 and 687.]He was talking of the policies of dual designation and spheres of interest. The hon. Gentleman has completely changed his mind and intends to overturn those policies. Nothing could be more calculated to destabilise an industry in trying times than the Government's proposals.
Our view on the Government's proposals is shared by British Caledonian 153 and British Airways. It is true that, with massive reservations, British Airways have said that they would like the Government to get off their back, which to some extent goes along with what the right hon. Gentleman is doing. However, they have massive qualifications about the policy.
We ask the Government to think again. The spheres of interest policy was right in 1976 and is necessary today in order to accommodate the needs of British Caledonian and British Airways.
It is necessary to provide a distinctive role for our national airlines and for our second major carrier. British aviation investment, skill and enterprise in building up and exploiting routes should not be dissipated by wasteful competition in a world of harsh international rivalry. The Germans have a distinctive role for Lufthansa, which is not subjected to double designation or competition from other German airlines. No other country in Europe has the policy that the Government are suggesting and that is somehow regarded by them as a panacea for this country.
It is necessary to have a firm policy on CAA guidance—one that is more firm than that which we suggested in 1976. The "ad hockery" that the Government seek to elevate to a principle is certainly wrong.
We seek an assurance on behalf of CAA employees that the link between the Civil Service and the CAA on pay and conditions will not be broken by the effect of clause 13. I do not think that it has that effect, but the work force is anxious about it. I hope that the Minister will confirm the position and give a cast-iron assurance to avoid that doubt.
But why was there no consultation by the CAA with the staff side? Under the provisions of the Civil Aviation Act 1971, I believe that the CAA was under a duty to do that, and even if it was not under a legal duty, the omission represents a breach of the functions of good management.
The Bill is yet another example of this Government's doctrinal spasms. It is an ill-conceived scheme. It does nothing to engender confidence in the airline, it provokes great anxiety, and it puts a question mark over the future of British Airways. It does nothing to ensure that 154 the investment programme of British Airways can be satisfactorily completed, which should be a condition precedent to any sensible aviation policy. It does nothing to ensure that British Airways' or British Caledonian's existing route structure will continue. On the contrary every indication was given by the right hon. Gentleman that they should not expect that. It does nothing to improve industrial relations. If anything, the right hon. Gentleman's failure to consult will have the opposite effect.
The Bill does nothing to improve productivity, to enable Britain to earn a greater share of international markets or to enhance our balance of payments programme. It is an abdication of responsibility. It indicates that there is a desire on the part of many Conservatives not so much to fly the flag as to fly it at half-mast. The proposal could lead to the destruction of British Airways.
I know that the Tory Party is going through a difficult time. From press reports, I know that some Conservative Members could not go back to their constituencies last weekend. However, one thing that we can count on is that there is always some principle that will get the Tory Party together. That basic principle is the cohesive power of public plunder. That is what the Bill is about, and that is why we shall vigorously oppose it at all stages.
§ The Under-Secretary of State for Trade (Mr. Norman Tebbit)
The quality of the speech of the hon. Member for Hackney, Central (Mr. Davis) was best exemplified by his suggestion that there should be a Bill to take British Airways out of the public sector borrowing requirement. Why not take British Rail out, too? Let us have them all out. We can solve all our financial problems by publishing Bills that say that things which are, are not. It was the most puerile and senseless suggestion that I have ever heard—even from the hon. Gentleman.
The hon. Gentleman continued to suggest that British Airways, under their new private ownership, would not find anyone willing to lend them the money for their investment. Does it not occur to the hon. Gentleman that, if nobody is willing to raise the money for investment, it calls the proposition into question? Does he 155 not recollect that the Treasury is supposed to lay down financial standards which must be met for investments in the nationalised industries? Does he not remember indulging in any of those discussions between British Airways and the Treasury when he was a Minister? Does he not remember that the Treasury expected a return on money? I am not saying that that always occurred, but the Treasury certainly asked for it.
Does not the hon. Gentleman believe that it is right and proper, when the public invest money, that they should be told that theirs will be a profitable investment? Such lack of realism as that displayed in the hon. Gentleman's mind was behind many of the disasters that we have had in the last few years.
In his usual way, the hon. Gentleman jabbered a long line of questions about employees' shares. In due course, the arrangements under which the employees will be offered shares and will receive shares will be made plain. The hon. Gentleman asked about the calculation of these matters. He might have done better to have made calculations when he was in office about where British Airways would land its aircraft. He never did get around to making a decision about airports policy.
The hon. Gentleman was most upset about our proposed repeal of section 15 of the 1949 Act. Why should British Airways be used as a chopping block for the trade unions to negotiate wages for everybody else in the industry? Most of all, why should that be so when it is a private-sector airline? Why should not the unions negotiate one by one with each of the airlines in the business? Is the hon. Gentleman in favour of monopolies in the supply of labour or not?
§ Mr. Clinton Davis
Is the hon. Gentleman suggesting that the appropriate section of the 1949 Act will be revoked by him? There is a fair wages provision in that Act, as he well knows, which does not apply to the licensing provisions that are undertaken by the Civil Aviation Authority.
§ Mr. Tebbit
Nor should it. It never did when the hon. Gentleman's Government were in office. He never put it in the guidelines or the statutes. What sudden need does he find for it now? He 156 not only expects British Airways to negotiate the wages for every other airline, but he expects the CAA to act as a prices and incomes board. What an absurd situation. Is the CAA supposed to be there to protect the customer and the airlines, or is it a negotiating body for wages? That is no way to run an airline business, and it is time that the hon. Gentleman realised that.
§ Mr. Tebbit
Yes, it is. Should there not be competition in wages as well as in other aspects of life? Or, as I said before, does the hon. Gentleman favour cartels and monopolies in the provision of labour? I suspect that he may well do.
I welcomed the last Government's policy, when it was presented by the right hon. Member for Stepney and Poplar (Mr. Shore), but I did so with a number of reservations. They are all in the Official Report, but I do not intend to go through the boring business of reading them out. I wanted to make it easier for the right hon. Gentleman, who had just done a splendid job in ratting on his own election commitment to rob British Caledonian of the routes which it had been given, and to bust the airline. That is why I was pleased that the right hon. Gentleman had had the courage to rat on his own election commitment. He seems to me to be a much stronger man for it.
The spheres of influence policy had its uses at the time. It has proved useful to some extent in helping to re-stabilise the relationship between British Caledonian and British Airways, and to get rid of some of the instability which was introduced by the election pledge that was broken subsequently by the Labour Government. But those days are over and we are now going on to a new matter. [Interruption.] I am answering the speech of the hon. Member for Hackney, Central. It may well be that the hon. Member for Derby, South (Mr. Johnson) dozed off during his hon. Friend's speech and did not hear the points to which I am replying, but I shall still reply to them. The hon. Member for Hackney, Central asked me about the effect of clause 13. I can tell him something about that and it will not make him any happier.
157 The repeal of sub-paragraph (ii) of paragraph 12 of schedule 1 to the 1977 Act has been regarded as affecting the rights of employees of the Civil Aviation Authority. This paragraph is a transitional provision, dealing with the offer of contracts of employment to staff seconded to the authority when it was set up. The contract of employment was approved by the Secretary of State in 1975. The hon. Gentleman should listen, because he was in the Department when it happened. I understand that it was only by an oversight that no date was set for the purposes of that paragraph. If a date had been set, it would have been some date in 1976, probably 31 March. I am reading this because I do not want to do the hon. Gentleman any injustice. It was while he was in office that his Government permitted us to do what was necessary or desirable, and that is why we are doing it in this Bill. That is the whole point of it.
I turn now to one or two of the more sensible points that were made in the debate. My hon. Friend the Member for Howden (Sir P. Bryan) asked about Hong Kong and about Cathay Pacific in relation to other British airlines. I understand the problem that he draws to my attention and I have given it a good deal of thought. It is not perhaps quite so straightforward as he might have hoped. No doubt hon. Members will consider how to table amendments to deal with the matter. We shall give those amendments the best consideration that we can in Committee, to see whether we can deal with the problems in a way that will be satisfactory to all concerned.
Opposition Members have suggested that there was something improper in the fact that the proposal to liberate British Airways from State control was not included in our election manifesto. I have always had some reservations about the idea that the British voter hungrily devours each word of the party manifestos before setting out to vote, or that he goes through them, ticking off the items, and eventually says "Well, Fred, that's the one." Having read some of the Labour Party's manifestos in the past, I have the feeling that some members of the Opposition Front Bench hope that the British voter does not act in that way. I know that manifestos have a sort of ritual significance for the Civil Service, and that the 158 manifesto is the focus of some strange tribal rites in what I am told is called "that great movement of ours".
I am surprised that the more perceptive of hon. Members did not receive the message which was very clearly signalled by my hon. Friend the present Minister for Trade as far back as the Second Reading debate on the Civil Aviation Bill, when he said:Perhaps the time is coming for the Government to examine the possibility of giving the British public the chance to have a real stake in the shareholding of British Airways … perhaps we should be giving British Airways the structure which will enable it to issue shares to the British public, including its employees."—[Official Report, 16 January 1978; Vol. 942, c. 85.]That is precisely what we are doing.
§ Mr. John Smith
Will the hon. Gentleman kindly explain why specific reference was made to aerospace, shipbuilding, the National Freight Corporation and the NEB when, as he is saying, it was the policy of the Conservative Party already announced? Would not two words in the election manifesto have cleared it up, rather than have it denied during the election by the Conservative Party as being one of its policies?
§ Mr. Tebbit
The word denied during the election campaign was "dismemberment", which is very different from what is happening now. The right hon. Gentleman spoke about the public losing hundreds of millions of pounds. Precisely which hundreds of millions of pounds will be lost? How will that money be lost? What does the right hon. Gentleman think the taxpayer will suddenly lose by the sale of part of the shares of British Airways? Where is the loss of money involved?
§ Mr. Smith
The hon. Gentleman may not pay the attention that he should to the Financial Times. That newspaper set the case out extremely clearly in an interesting article. The point arises simply. If the Government, foolishly, sell assets at the present stage in the development of British Airways, the taxpayer will lose several hundred million pounds. The assets wil be sold well below their real value. The hon. Gentleman must understand that quite clearly.
§ Mr. Tebbit
The real value of something in these terms is what it will fetch 159 in the market. If the right hon. Gentleman is so convinced that British Airways shares will be sold for less than they are worth, he is at liberty to buy them. A good many other people might take the same view. If he thinks, when the shares are launched, that they are under-valued, let him get out into the market place and buy shares himself and tell others to take full advantage of the situation.
§ Mr. Smith
If we are to accept this simplistic view that the value of the assets of British Airways is what the market says on any day, why is there such wriggling by the Government about when the issue is to be made to the public? If that is the hon. Gentleman's theory, why does he not name a specific day for the sale of the shares of British Airways?
§ Mr. Tebbit
The right hon. Gentleman is making an awful mountain out of a molehill over this. We would like to select our day and get a good price for the assets. From day to day, the price which the market will pay will vary. We will, therefore, select a suitable day and, if the right hon. Gentleman thinks that the public are in danger of losing hundreds of millions of pounds, he had best go out and buy some of the shares on the due day.
The right hon. Gentleman spoke of selling off the profitable assets of British Airways. We are not doing that. We are selling a share in a going concern. I suggest that Opposition Members engage for a few moments in the terrible struggle to allow what reason they possess to overcome their political prejudices. If we had wanted a quick cash-raising exercise, we could easily have sold off British Airways Helocopters, British Airways Hotels, International Aeradio and so on, down the line. We have not done that. [Interruption.] If the hon. Member for Nuneaton (Mr. Huckfield) can contain himself for a moment, I repeat that we are selling off a share in a going concern. We are not dismembering British Airways, we are selling the company as one shot.
We are doing it precisely in this way because it is not an asset-stripping exercise. My hon. Friend the Member for Romford (Mr. Neubert) discussed what he called British Airways' fringe activities. 160 He fears that those fringe activities will give British Airways in particular sectors, such as the hotel market, a dominant position. If those fears are very strong after the operation which we are discussing, it will be perfectly open under the Competition Bill to go to the Director General of Fair Trading and complain of a restriction of competition.
I want to try to get the Opposition to understand that we have taken a positive decision to free British Airways from Government control which has never brought any benefit other than the ability to borrow under Treasury guarantee but which has carried with it a very heavy burden of Government interference over the years—[Interruption.] The right hon. Member for Lanarkshire, North (Mr. Smith) laughs, but still he does not understand that if one can borrow only under a Treasury guarantee, that is probably not the best business proposition which could have been put on the table.
The form of our proposals for British Airways is designed now to get away from the sterile nationalise, denationalise type of political ping-pong battles which send industries flying back and forth over the net into and out of the private sector and into and out of the State-controlled sector. We need to get away from the tired nineteenth century idea which, if it is not too glamorous a word, inspired Clause Four of the Labour Party's constitution.
It was the former Minister of State, Department of Industry, the right hon. Member for Manchester, Ardwick (Mr. Kaufman), who so decried nationalisation. In the course of the consideration of the Aircraft and Shipbuilding Industries Bill—and I remember the occasion well—the right hon. Gentleman said in response to criticisms of nationalisationI concur absolutely … that previous forms of nationalisation are utterly unsatisfactory."—[Official Report, Standing Committee D, 16 December 1975, c. 96.]Then he went on to do it again.
The right hon. Member for Ardwick made plain that his nationalisation Bill in respect of the aerospace industry was designed to advance Socialism. Today, we have been told that we are politically prejudiced and bigoted for trying to sell rather less than half of British Airways in order to free up the corporation. We 161 are told that that is bigoted and unreasonable. But, of course, it is reasonable when the right hon. Gentleman proposes nationalising a great industry for the advance of Socialism.
Our proposal is designed to advance the interests of British Airways, its employees and its customers. It is not designed to carry on with this narrow-minded, old-fashioned claptrap of dogmatic Socialism.
I noticed that the hon. Member for Hackney, Central was shedding crocodile tears and saying how terrible it would be if the issue of shares went badly. He described how there would be a great many problems and that it would be bad for British Airways. That, somehow, goes ill with threats about the expropriation of the assets which people might buy legitimately when they buy shares in British Airways.
I noticed that the right hon. Member for Lanarkshire, North mumbled a form of words. He did so very swiftly, very unceremoniously and with very little enthusiasm. I have learnt already that if the right hon. Gentleman mumbles and tries not to be heard, it pays to listen, because it means that he is embarrassed, does not believe what he is saying and has been put up to say it.
I am told that what it really amounts to is that, if ever another Labour Government should come into office, they would do something terribly nasty to those who bought the shares. I understand that Ministers do not answer hypothetical questions, and another Labour Government is a hyper-hypothetical question, but I am entitled to say that such threats do a great disservice to democracy. To introduce the concept of economic crimes in which an individual would be found guilty without trial, with no defence, and fined without consideration of his ability to pay by the seizure of private assets legitimately and properly purchased without proper compensation is to take a far-reaching step, and I regret that the right hon. Member for Lanarkshire, North should have put his name to it.
Indeed, I wonder what some other right hon. and hon. Members think about it. I wonder, for instance, what the right hon. Member for Chesterfield (Mr. Varley), who is supposed to be a moderate, thinks of that way of approaching 162 matters. I know that the far Left is very pleased with it, but I beg those who have a more respectable credential to sit in the House to think of the consequences of what they have been saying tonight.
I noticed another occasion when the right hon. Member for Lanarkshire, North started mumbling. That was when he was worried about the prospect of minority shareholders influencing engine purchasing policy. He was mumbling again then, and he got through that bit pretty quickly because he did not want anyone to notice that he had not said anything about aircraft purchasing policy, either.
The right hon. Gentleman knows perfectly well that over the years Government interference in aircraft purchasing policy almost wrecked British Overseas Airways Corporation. I am not now discussing whether one party or another was better or worse in that respect. Probably over the years things have got a little better generally. But the right hon. Gentleman knows very well the pressures that were put on BOAC, BEA and British Airways from time to time to do things that were against their commercial interest.
Let me now deal as best I can with the main point raised by the right hon. Member for Lanarkshire, North, which was raised also by the right hon. Member for Down, South (Mr. Powell) and a number of others, including my hon. Friend the Member for Twickenham (Mr. Jessel). I refer to the role of the Government as a shareholder in the new company. I do not think that I can put it more clearly than this, and I hope that it will satisfy hon. Members.
The situation is not quite the same as that in British Petroleum. British Petroleum had a long track record of standing as an independent company before the Government became involved. In this case we are moving from a State corporation towards creating a company that will stand independently on its own feet, free of Government interference.
We have taken the view that although we cannot bind our successors in any way in what they do about the Government's shareholding, certainly for the time being at least Her Majesty's Government will continue to hold more than 50 per cent. of the shares. In these circumstances, 163 although it is our firm policy and our firm desire that we shall not interfere in the management of the company—indeed, the token of that is that we shall not seek to appoint Government directors—no majority shareholder can ignore, not least, the interests of minority shareholders if at some stage things go badly wrong in the company.
Let me take an extreme example. If a foreign airline should seek to exert control through a substantial interest—I wish that the hon. Member for Renfrewshire, West (Mr. Buchan) would not interrupt from a sedentary position—it is conceivable that Her Majesty's Government, as the main shareholder, would have to use their power. But it is not the policy of Her Majesty's Government to interfere in the running of the company.
§ Mr. Tebbit
It is conceivable that the minority shareholders could move, as they could in any company, to remove the board of directors that had been appointed. Of course, it is conceivable. That is perhaps the sort of extreme position that I should describe as one that could conceivably bring about Government intervention. However, that would depend upon the composition of the new board of directors.
§ Mr. John Smith
Does the hon. Gentleman understand that the public, through the Government's majority shareholding, will be left to pick up the majority of the bill? There will be a considerable bill for financing the development of British Airways, but control will be left in the hands of the minority, who will appoint the directors. Is that trusteeship for public wealth?
§ Mr. Tebbit
The right hon. Gentleman is totally and completely misunderstanding the position. The Government have made it plain on a number of occasions already today that they will not guarantee loans and have no power to make loans to the new corporation. If the new 164 corporation wants to raise money, it may do so by two methods. First, it may borrow money, as is done now, but without Treasury guarantee. Secondly, it may make a further issue of shares. As the right hon. Member for Down, South noted, there are powers in the Bill that will enable the Government to take up such a rights issue if they wish. The Government will not have to do so but they could do. They might do so if they thought fit, either to maintain a majority or conceivably because the rights issue was a good one to take up on purely commercial grounds.
The right hon. Member for Down, South spoke about the conditions in Ulster. As he knows, I have considered the problem. I am still considering whether we can find an answer that will satisfy the security services and at the same time satisfy the not unreasonable case of Ulstermen and those who do business in Ulster to be able to travel more freely and more quickly on the services. As the right hon. Gentleman knows, the paramount need is security. I hope that I shall be able to convince him of the rightness of our decision.
When the right hon. Gentleman said that fares to Ulster could be halved and that there was an unlimited demand for travel from Ulster, he could possibly have been overstating his case. However, I understand the direction in which he was pointing us.
My hon. Friend the Member for Dorking (Mr. Wickenden) was right to praise the Civil Aviation Authority. At times it seemed that certain hon. Members considered the board of the CAA to be self-elected and near certifiable. As my right hon. Friend said, the objectives that will be placed in the enlarged section of the 1971 Act will give ample guidance to the CAA on what it should do.
We are not talking about a golden age in which everything went well. It was an age in which Government guidance was overthrown by the courts as being ultra vires. Surely there could have been no greater cause of instability than that. We shall put the passengers further up in the pecking order. We believe that airlines exist for passengers. They do not exist for employees, or for shareholders.
I have consulted the unions on guidelines. The last letter that I received from the unions was on 16 October.
§ Mr. Tebbit
As usual, the hon. Gentleman is talking rubbish.
This is an occasion of some significance. As a former member of British Airways, I have longed for many years to introduce a Bill of this character.
§ Mr. Tebbit
It is part of the Government's programme to roll back the frontiers of State control. There is no case for having politicians and civil servants second guessing the men who run the industry. This action is long overdue. The turn away from corporate Socialism is long overdue.
§ Mr. Tebbit
The hon. Gentleman knows nothing about the airline business He did nothing to help it when he was a member of the previous Government but the Bill will.
§ The Parliamentary Secretary to the Treasury (Mr. Michael Jopling)
rose in his place and claimed to move. That the Question be now put.
§ Question, That the Question be now put, put and agreed to.
§ Question put accordingly, That the Bill be now read a Second time:—
§ The House divided: Ayes 311. Noes 247.167
|Division No. 107||AYES||10.00 pm|
|Aitken, Jonathan||Chapman, Sydney||Glyn, Dr Alan|
|Alexander, Richard||Churchill, W. S.||Goodhart, Philip|
|Amery, Rt Hon Julian||Clark, Hon Alan (Plymouth, Sutton)||Goodhew, Victor|
|Ancram, Michael||Clark, Dr William (Croydon South)||Goodlad, Alastair|
|Aspinwall, Jack||Clarke, Kenneth (Rushcliffe)||Gorst, John|
|Atkins, Robert (Preston North)||Cockeram, Eric||Gow, Ian|
|Atkinson, David (B'mouth, East)||Colvin, Michael||Gower, Sir Raymond|
|Baker, Nicholas (North Dorset)||Cope, John||Grant, Anthony (Harrow C)|
|Banks, Robert||Cormack, Patrick||Gray, Hamish|
|Beaumont-Dark, Anthony||Corrie, John||Greenway, Harry|
|Beith, A. J.||Costaln, A. P.||Grieve, Percy|
|Bell, Ronald||Cranborne, Viscount||Griffiths, Peter (Portsmouth N)|
|Bendall, Vivian||Critchley, Julian||Grist, Ian|
|Bennett, Sir Frederic (Torbay)||Crouch, David||Grylls, Michael|
|Benyon, Thomas (Abingdon)||Dickens, Geoffrey||Gummer, John Selwyn|
|Benyon, W. (Buckingham)||Dorrell, Stephen||Hamilton, Hon Archie (Eps m&Ew[...]|
|Best, Keith||Douglas-Hamilton, Lord James||Hamilton, Michael (Salisbury)|
|Bevan, David Gilroy||Dover, Denshore||Hampson, Dr Keith|
|Biffen, Rt Hon John||du Cann, Rt Hon Edward||Hannam, John|
|Biggs-Davison, John||Dunn, Robert (Dartford)||Haselhurst, Alan|
|Blackburn, John||Durant, Tony||Hastings, Stephen|
|Body, Richard||Dykes, Hugh||Havers, Rt Hon Sir Michael|
|Bonsor, Sir Nicholas||Eden, Rt Hon Sir John||Hawkins, Paul|
|Bottomley, Peter (Woolwich West)||Edwards, Rt Hon N. (Pembroke)||Hawksley, Warren|
|Bowden, Andrew||Eggar, Timothy||Hayhoe, Barney|
|Boyson, Dr Rhodes||Elliott, Sir William||Heath, Rt Hon Edwaro|
|Bradford, Rev. R.||Emery, Peter||Heddle, John|
|Braine, Sir Bernard||Eyre, Reginald||Henderson, Barry|
|Bright, Graham||Fairgrieve, Russell||Heseltine, Rt Hon Michael|
|Brinton, Tim||Faith, Mrs Sheila||Hicks, Robert|
|Brittan, Leon||Farr, John||Hill, James|
|Brocklebank-Fowler, Christopher||Fell, Anthony||Hogg, Hon Douglas (Grantham)|
|Brooke, Hon Peter||Fenner, Mrs Peggy||Holland, Philip (Carlton)|
|Brotherton, Michael||Finsberg, Geoffrey||Hooson, Tom|
|Brown, Michael (Brigg & Sc'thorpe)||Fisher, Sir Nigel||Hordern, Peter|
|Browne, John (Winchester)||Fletcher, Alexander (Edinburgh N)||Howe, Rt Hon Sir Geoffrey|
|Bryan, Sir Paul||Fletcher-Cooke, Charles||Howell, Rt Hon David (Guildtord)|
|Buchanan-Smith, Hon Alick||Fookes, Miss Janet||Howell, Ralph (North Norfolk)|
|Buck, Antony||Forman, Nigel||Howells, Geraint|
|Bulmer, Esmond||Fowler, Rt Hon Norman||Hunt, David (Wirral)|
|Burden, F. A.||Fox, Marcus||Hunt, John (Ravensbourne)|
|Butcher, John||Fraser, Rt Hon H. (Stafford & St)||Irving, Charles (Cheltenham)|
|Butler, Hon Adam||Fraser, Peter (South Angus)||Jenkin, Rt Hon Patrick|
|Cadbury, Jocelyn||Freud, Clement||Jessel, Toby|
|Carlisle, John (Luton West)||Fry, Peter||Johnson Smith, Geoffrey|
|Carlisle, Kenneth (Lincoln)||Galbraith, Hon T. G. D.||Jopling, Rt Hon Michael|
|Carlisle, Rt Hon Mark (Runcorn)||Gardiner, George (Reigate)||Joseph, Rt Hon Sir Keith|
|Chalker, Mrs. Lynda||Gardner, Edward (South Fylde)||Kaberry, Sir Donald|
|Channon, Paul||Garel-Jones, Tristan||Kellett-Bowman, Mrs Elaine|
|Kimball, Marcus||Myles, David||Spicer, Jim (West Dorset)|
|King, Rt Hon Tom||Neale, Gerrard||Spicer, Michael (S Worcestershire)|
|Knox, David||Needham, Richard||Sproat, Iain|
|Lamont, Norman||Nelson, Anthony||Squire, Robin|
|Lang, Ian||Neubert, Michael||Stanbrook, Ivor|
|Langford-Holt, Sir John||Newton, Tony||Stanley, John|
|Latham, Michael||Normanton, Tom||Steen, Anthony|
|Lawrence, Ivan||Nott, Rt Hon John||Stevens, Martin|
|Lawson, Nigel||Onslow, Cranley||Stewart, Ian (Hitchin)|
|Lee, John||Oppenheim, Rt Hon Mrs Sally||Stewart, John (East Renfrewshire)|
|Lennox-Boyd, Hon Mark||Osborn, John||Stokes, John|
|Lester, Jim (Beeston)||Page, Rt Hon R. Graham (Crosby)||Stradling Thomas, J.|
|Lewis. Kenneth (Rutland)||Parris, Matthew||Tapsell, Peter|
|Lloyd, Peter (Fareham)||Patten, Christopher (Bath)||Taylor, Robert (Croydon NW)|
|Loveridge, John||Patten, John (Oxford)||Tebbit, Norman|
|Luce, Richard||Pattie, Geoffrey||Temple-Morris, Peter|
|Lyell, Nicholas||Pawsey, James||Thomas, Rt Hon Peter (Hendon S)|
|McAdden, Sir Stephen||Percival, Sir Ian||Thompson, Donald|
|McCrindle, Robert||Peyton, Rt Hon John||Thorne, Neil (Ilford South)|
|Macfarlane, Neil||Pink, R. Bonner||Thornton, Malcolm|
|MacGregor, John||Pollock, Alexander||Townend, John (Bridlington)|
|MacKay, John (Argyll)||Porter, George||Townsend, Cyril D. (Bexleyheath)|
|Macmillan, Rt Hon M. (Farnham)||Powell, Rt Hon J. Enoch (S Down)||Trippler, David|
|McNair-Wilson, Michael (Newbury)||Prentice, Rt Hon Reg||Trotter, Neville|
|McNair-Wilson, Patrick (New Forest)||Price, David (Eastleigh)||van Straubenzee, W. R.|
|McQuarrie, Albert||Prior, Rt Hon James||Vaughan, Dr Gerard|
|Madel, David||Proctor, K. Harvey||Viggers, Peter|
|Major, John||Pym, Rt Hon Francis||Waddington, David|
|Marland, Paul||Rathbone, Tim||Wakeham, John|
|Marlow, Tony||Rees, Peter (Dover and Deal)||Waldegrave, Hon William|
|Marshall, Michael (Arundel)||Rees-Davies, W. R.||Walker, Rt Hon Peter (Worcester)|
|Mates, Michael||Renton, Tim||Walker, Bill (Perth & E Perthshire)|
|Mather, Carol||Rhodes James, Robert||Walker-Smith, Rt Hon Sir Derek|
|Maude, Rt Hon Angus||Rhys Williams, Sir Brandon||Wall, Patrick|
|Mawby, Ray||Ridley, Hon Nicholas||Waller, Gary|
|Mawhinney, Dr Brian||Ridsdale, Julian||Walters, Dennis|
|Maxwell-Hyslop, Robin||Rippon, Rt Hon Geoffrey||Ward, John|
|Mayhew, Patrick||Roberts, Michael (Cardiff NW)||Warren, Kenneth|
|Mellor, David||Roberts, Wyn (Conway)||Watson, John|
|Meyer, Sir Anthony||Ross, Stephen (Isle of Wight)||Wells, John (Maidstone)|
|Miller, Hal (Bromsgrove & Reddltch)||Rost, Peter||Wells, Bowen (Hert'rd & Stev'nage)|
|Mills, Iain (Meriden)||Royle, Sir Anthony||Wheeler, John|
|Mills, Peter (West Devon)||Sainsbury, Hon Timothy||Whitelaw, Rt Hon William|
|Miscampbell, Norman||St. John-Stevas, Rt Hon Norman||Whitney, Raymond|
|Mitchell, David (Basingstoke)||Scott, Nicholas||Wickenden, Keith|
|Moate, Roger||Shelton, William (Streatham)||Wiggin, Jerry|
|Molyneaux, James||Shepherd, Colin (Hereford)||Wilkinson, John|
|Monro, Hector||Shepherd, Richard (Aldridge-Br'hills)||Williams, Delwyn (Montgomery)|
|Montgomery, Fergus||Shersby, Michael||Winterton, Nicholas|
|Moore, John||Silvester, Fred||Wolfson, Mark|
|Morgan, Geraint||Sims, Roger||Young, Sir George (Acton)|
|Morris, Michael (Northampton, Sth)||Skeet, T. H. H.||Younger, Rt Hon George|
|Morrison, Hon Charles (Devizes)||Smith, Dudley (War. and Learn ton)|
|Morrison, Hon Peter (City of Chester)||Speed, Keith||TELLERS FOR THE AYES:|
|Mudd, David||Speller, Tony||Mr. Spencer Le Marchant and|
|Murphy, Christopher||Spence, John||Mr. Anthony Berry.|
|Adams, Allen||Cant, R. B.||Deakins, Eric|
|Allaun, Frank||Carmichael, Nell||Dean, Joseph (Leeds West)|
|Anderson, Donald||Carter-Jones, Lewis||Dempsey, James|
|Archer, Rt Hon Peter||Cartwright, John||Dewar, Donald|
|Ashley, Rt Hon Jack||Clark, Dr David (South Shields)||Dobson, Frank|
|Ashton, Joe||Cocks, Rt Hon Michael (Bristol S)||Dormand, Jack|
|Atkinson, Norman (H'gey, Tott'ham)||Cohen, Stanley||Douglas, Dick|
|Bagier, Gordon A. T.||Coleman, Donald||Douglas-Mann, Bruce|
|Barnett, Guy (Greenwich)||Concannon, Rt Hon J. D.||Dubs, Alfred|
|Barnett, Rt Hon Joel (Heywood)||Conlan, Bernard||Duffy, A. E. P.|
|Benn, Rt Hon Anthony Wedgwood||Cook, Robin F.||Dunn, James A. (Liverpool, Kirkdale)|
|Bennett, Andrew (Stockport N)||Cowans, Harry||Dunnett, Jack|
|Bidwell, Sydney||Cox, Tom (Wandsworth, Tooting)||Dunwoody, Mrs. Gwyneth|
|Booth, Rt Hon Albert||Craigen, J. M. (Glasgow, Maryhill)||Eadie, Alex|
|Boothroyd, Miss Betty||Crowther, J. S.||Eastham, Ken|
|Bottomley, Rt Hon Arthur (M'brough)||Cryer, Bob||Edwards, Robert (Wolv SE)|
|Bradley, Tom||Cunliffe, Lawrence||Ellis, Raymond (NE Derbyshire)|
|Bray, Dr Jeremy||Cunningham, George (Islington S)||Ellis, Tom (Wrexham)|
|Brown, Hugh D. (Provan)||Cunningham, Dr John (Whitehaven)||English, Michael|
|Brown, Robert C. (Newcastle W)||Dalyell, Tam||Ennals, Rt Hon David|
|Buchan, Norman||Davidson, Arthur||Evans, Ioan (Aberdare)|
|Callaghan, Rt Hon. J. (Cardiff SE)||Davies, Rt Hon Denzil (Llanelli)||Evans, John (Newton)|
|Callaghan, Jim (Middleton & P)||Davies, E. Hudson (Caerphilly)||Ewing, Harry|
|Campbell, Ian||Davies, Ifor (Gower)||Faulds, Andrew|
|Campbell-Savours, Dale||Davis, Clinton, (Hackney Central)||Field, Frank|
|Canavan, Dennis||Davis, Terry (B'rm'ham, Stechford)||Fitch, Alan|
|Flannery, Martin||Lyon, Alexander (York)||Ryman, John|
|Fletcher, L. R. (Ilkeston)||McDonald, Dr Oonagh||Sandelson, Neville|
|Fletcher, Ted (Darlington)||McElhone, Frank||Sever, John|
|Foot, Rt Hon Michael||McGuire, Michael (Ince)||Sheerman, Barry|
|Ford, Ben||McKay, Allen (Penistone)||Sheldon, Rt Hon Robert (A'ton-u-L)|
|Forrester, John||McKelvey, William||Shore, Rt Hon Peter (Step and Pop)|
|Foster, Derek||MacKenzie, Rt Hon Gregor||Short, Mrs Renée|
|Foulkes, George||Maclennan, Robert||Silkin, Rt Hon John (Deptford)|
|Fraser, John (Lambeth, Norwood)||McMillan, Tom (Glasgow, Central)||Silkin, Rt Hon S. C. (Dulwich)|
|Freeson, Rt Hon Reginald||McNally, Thomas||Silverman, Julius|
|Garrett, John (Norwich S)||McWilliam, John||Skinner, Dennis|
|Garrett, W. E. (Wallsend)||Magee, Bryan||Smith, Rt Hon J. (North Lanarkshire)|
|George, Bruce||Marshall, David (Gl'sgow, Shettles'n)||Snape, Peter|
|Gilbert, Rt Hon Dr John||Marshall, Dr Edmund (Goole)||Soley, Clive|
|Ginsburg, David||Marshall, Jim (Leicester South)||Spearing, Nigel|
|Golding, John||Martin, Michael (Gl'gow, Springb'rn)||Spriggs, Leslie|
|Gourlay, Harry||Mason, Rt Hon Roy||Stallard, A. W.|
|Graham, Ted||Meacher, Michael||Stewart, Rt Hon Donald (W Isles)|
|Grant, George (Morpeth)||Mellish, Rt Hon Robert||Stoddart, David|
|Grant, John (Islington C)||Mikardo, Ian||Stott, Roger|
|Hamilton, James (Bothwell)||Millan, Rt Hon Bruce||Strang, Gavin|
|Hamilton, W. W. (Central Fife)||Miller, Dr M. S. (East Kilbride)||Straw, Jack|
|Hardy, Peter||Mitchell, Austin (Grimsby)||Summerskill, Hon Dr Shirley|
|Harrison, Rt Hon Walter||Mitchell, R. C. (Soton, Itchen)||Taylor, Mrs Ann (Bolton West)|
|Hattersley, Rt Hon Roy||Morris, Rt Hon Charles (Openshaw)||Thomas, Jeffrey (Abertillery)|
|Haynes, Frank||Morris, Rt Hon John (Aberavon)||Thomas, Mike (Newcastle East)|
|Heffer, Eric S.||Morton, George||Thomas, Dr Roger (Carmarthen)|
|Hogg, Norman (E Dunbartonshire)||Moyle, Rt Hon Roland||Thorne, Stan (Preston South)|
|Holland, Stuart (L'beth, Vauxhall)||Newens, Stanley||Tilley, John|
|Home Robertson, John||Oakes, Rt Hon Gordon||Torney, Tom|
|Homewood, William||Ogden, Eric||Urwin, Rt Hon Tom|
|Hooley, Frank||O'Halloran, Michael||Varley, Rt Hon Eric G.|
|Horam, John||O'Neill, Martin||Walker, Rt Hon Harold (Doncaster)|
|Huckfield, Les||Orme, Rt Hon Stanley||Watkins, David|
|Hughes, Mark (Durham)||Owen, Rt Hon Dr David||Weetch, Ken|
|Hughes, Robert (Aberdeen North)||Palmer, Arthur||Wellbeloved, James|
|Hughes, Roy (Newport)||Park, George||Welsh, Michael|
|Janner, Hon Greville||Parker, John||White, Frank R. (Bury & Radcliffe)|
|Jay, Rt Hon Douglas||Parry, Robert||White, James (Glasgow, Pollok)|
|John, Brynmor||Pendry, Tom||Whitehead, Phillip|
|Johnson, James (Hull West)||Powell, Raymond (Ogmore)||Whitlock, William|
|Johnson, Walter (Derby South)||Prescott, John||Wigley, Dafydd|
|Jones, Rt Hon Alec (Rhondda)||Price, Christopher (Lewisham West)||Willey, Rt Hon Frederick|
|Jones, Barry (East Flint)||Race, Reg||Williams, Rt Hon Alan (Swansea W)|
|Jones, Dan (Burnley)||Radice, Giles||Williams, Sir Thomas (Warrington)|
|Kaufman, Rt Hon Gerald||Rees, Rt Hon Merlyn (Leeds South)||Wilson, Gordon (Dundee East)|
|Kerr, Russell||Richardson, Miss Jo||Wilson, Rt Hon Sir Harold (Huyton)|
|Kilroy-Silk, Robert||Roberts, Albert (Normanton)||Winnick, David|
|Kinnock, Neil||Roberts, Allan (Bootle)||Woodall, Alec|
|Lambie, David||Roberts, Ernest (Hackney North)||Woolmer, Kenneth|
|Lamborn, Harry||Roberts, Gwilym (Cannock)||Wrigglesworth, lan|
|Lamond, James||Robertson, George||Wright, Sheila|
|Leadbitter, Ted||Robinson, Geoffrey (Coventry NW)||Young, David (Bolton East)|
|Leighton, Ronald||Rodgars, Rt Hon William|
|Lestor, Miss Joan (Eton & Slough)||Rooker, J. W.||TELLERS FOR THE NOES:|
|Lewis, Ron (Carlisle)||Roper, John||Mr. Hugh McCartney and|
|Litherland, Robert||Ross, Ernest (Dundee West)||Mr. James Tinn|
|Lofthouse, Geoffrey||Rowlands, Tad|
§ Question accordingly agreed to.
§ Bill read a Second time.
§ Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).