NOMINATION OF SUCCESSOR COMPANY (Hansard, 30 June 1980)

§ Mr. Clinton Davis
I beg to move, That the clause be read a Second time.
I do not propose to take very long in moving this clause, but we feel that the way in which the Government have gone 1170 about the Bill represents what I was going to call a constitutional outrage. However, if I were to use such language I know that the hon. Gentleman would feel that I was introducing an unnecessary note of controversy. We feel that it is a questionable way of going about the business when the Government have declared that they will—at least in the foreseeable future—take the majority of the shares.
That being the case, the Minister has said, rightly, that this is a new design. It has not been tried before and we feel in that case that the memorandum and articles of association which govern the constitution of this company should, initially at least, be subject to parliamentary surveillance. The taxpayer will have a continuing interest in this company for some years ahead. While it is true that the memorandum and articles can be changed only by a special resolution of the company, which would require a 75 per cent. majority, if the Government are indefinite about the way in which they go about their duties and about their task of dealing and mobilising their shareholding, there is a real risk, as we see it, that they will decide not to intervene if the memorandum and articles were to be changed.
I should like to know from the Minister what undertakings he is prepared to give about the possibility of altering the memorandum and articles when those alterations are material. The Minister has been kind enough to let us have a copy of the draft memorandum and articles of association. He laid great stress on what he called the transparency provisions in what I concede are very well drafted memorandum and articles.
To some extent they deal with some of the anxieties that we expressed about foreign ownership. I am not convinced that they prescribe a sufficient way of dealing with the possibility of undesirable foreign ownership. The Minister has gone a long way to meet us on this. I concede that. The trouble is that if it were decided by some of the shareholders to seek an alteration in the memorandum and articles of association and the Government were to remain inert in the face of that challenge as far as this issue is concerned, I think that the Minister would concede that that would represent a thoroughly undesirable state of affairs.
1171 What I am inviting the Minister to say is that, if the situation arose, the Government would not hesitate to mobilise their power in order to protect the best interests of this country as far as its national flag carrier was concerned. That does not wholly dissolve my anxieties, because the fact remains that it is possible for the memorandum and articles of association that we have seen to be changed before the successor company is nominated.
I seek another undertaking from the Minister that as far as the transparency provisions are concerned there will be no change. I seek an undertaking that there will be no fundamental change in the document that has been put before us and which I am inviting the House to look at, though we may not debate its detailed provisions. That is quite absurd, though I mean no reflection upon you, Mr. Deputy Speaker. It is a strange state of affairs that when we embark on this novel enterprise we are not permitted to debate the memorandum and articles of association except in general terms.
Parliament should exercise a more positive role. For that reason, we have tabled the new clause. I suspect that the Minister will respond positively to the invitation. That will avoid a vote on the issue. In Committee the Minister gave some indication of how he felt. However, he must place on record precisely how the Government will respond when faced with the proposition that I have described. We must know whether the substance of the draft memorandum and articles of association will prevail.

§ Mr. Neubert
I shall speak on the new clause because of my interest in the articles of association and the character of the company which is to be created by the Bill. Complete denationalisation is not involved. A company will be created which will be part public and part private, although that definition might be too simple and be challenged. Under the articles of association is it intended to exclude any activities, or is the new company to be one of which there are many, engaged in speculative activity the articles of which allow any activity, bt it beekeeping, roof thatching or sheep shearing?
1172 I hope that the Minister will not think that I am gunning for him alone, because a point of principle is involved in connection with other Government policies. For example, British Rail proposes to invite private participation in some of its subsidiary activities. To judge from Sir William Barlow's statement, the Post Office is planning to set itself up in opposition to retail travel agencies by using Post Office branches for the sale of travel services.
I hope that the Minister will forgive me for raising this matter for a second time this evening. He replied in an earlier debate, but I should like to pursue some matters which are related to the new clause. The Minister said that the financial support which I claim will be given through the character of the company to its private activities will not be provided by the public purse. He chose to interpret that as meaning that in future the company's activities will have to look to private sources for future funding. I presume that that is written into the articles. However, the British taxpayer has created the assets of the company which is to be sold in part. The justification for creating the company is that an airline of such magnitude must have a monopoly. After all, a Conservative Government nationalised Imperial Airways and created the national airline. It became the flag carrier and needed public support on a par with other national airlines.
Another argument is that the airline will provide services to low-traffic, provincial destinations to give a regional social service rather than a commercial enterprise operating at a profit, as it will under the new constitution which I hope will come before Parliament for approval. It is significant that one of the first acts of British Airways after the Bill was introduced was to announce that it intended to abandon its less profitable provincial routes, thereby knocking away one of the justifications for its monopoly.
The Minister says that from the enactment of the Bill the new company under its new articles will in all respects, in relation to monopolies legislation, be the same as other airlines. He cited Laker and British Caledonian as illustrations. The new company will be substantially larger than either of those two airlines. I have only to cite the proportion of 1173 domestic operation which British Airways has to make that point. The Government are launching a monopoly on the market. For that reason, it is necessary to restrict its activities and not to allow the wide-ranging possibilities, either under the articles introduced at the outset or as amended later.
I am not sure about the United States. My impression is that there are restrictions on airlines, if not as to hotel keeping at least about engaging in retail travel and tour operating. I thank the Minister for his offer to write to me about that.
The new company will not be controlled effectively by monopolies legislation. It is inconceivable that a company with a 51 per cent. or more shareholding by the Government should be investigated. That is like asking us to believe that Buckingham Palace would be investigated for having a monopoly of royalty. An investigation is unlikely. My reasons are exemplified by the latest decision on the Hong Kong licence.

Mr. Deputy Speaker (Mr. Bryant Godman Irvine)
Order. The hon. Member is aware that we are dealing with new clause No. 7 which deals with the parliamentary control of the memorandum and articles.

§ Mr. Neubert
I am aware of that. I was seeking to advance reasons why the memorandum and articles of association should come before Parliament because of the monopoly domination of the market by British Airways Limited when it is constituted. I am almost at the end of my remarks, and I hope that I shall not incur your displeasure in the next few minutes, Mr. Deputy Speaker.
As a result of a decision to open up competition to four airlines, the present company has come forward with a fare of £99 to Hong Kong. That is substantially less than the fare suggested by Laker Airways which the Minister used as an example. Is that because British Airways—or the newly constituted company—is more efficient because it gives a more attentive service, because it has the lowest number of staff per air miles flown or because it can get a cheaper price for aviation fuel? It is not. It is because of its domination in the market. I hope that the articles of association will be subject to parliamentary approval. I 1174 hope that they will not be open to amendment without Parliament having control.
British Airways is running into declining profitability. The ultimate test for the Government is whether they are prepared to see British Airways go bankrupt. All the talk of articles of association and about its being a private sector company like any other is not reality. An effective public monopoly will remain.

§ Mr. Tebbit
I find it hard to relate what my hon. Friend said on the claim that an effective public monopoly will remain, given what has just happened on the Hong Kong routes hearing where an effective public monopoly—that of British Airways—has been effectively broken.
In referring to the domestic routes and the possibility of cross subsidy between the various activities of British Airways Limited, it must be accepted that the Civil Aviation Authority has a duty to ensure that the operators of those domestic routes do not take money from those profits to operate other activities. If they did so it would be fairly clear that other efficient operators could operate those routes at a lower fare or could offer a better service.
My hon. Friend must accept, therefore, that if this company is to be launched—and we concluded on Second Reading and in Committee that it should be—it must be launched as a private sector company. It would be totally incompatible with the whole thrust of the legislation for us to ask Parliament to assume responsibility for approving the memorandum and articles of association of the company. This is not the place for the articles of association of a company to be debated and possibly to be amended. Least of all does that apply when the Government may not at some time have a majority shareholding in that company and when the Government have quite clearly said that they will not seek to manage the company.
The objects of the company are set out in the memorandum, a draft of which is in the Library. It is perfectly open to the company to seek to amend those articles in the future. It would do so as would any other company, but since it is primarily in the airline business, and since that is what the investors will put their money into, it would be extraordinary if 1175 it deviated into unrelated activities or if it chose to throw away shareholders' profits so that it lost money in other areas. I do not think that my hon. Friend has voiced a reasonable fear.
The hon. Member for Hackney, Central raised a point to which I can respond to some extent. I have made it plain that the Government would be willing at any time to marshal their shareholding against any moves which were clearly against the interests of the company. That undertaking has been given and it remains.
The hon. Member asked also for an undertaking that the final article of the company would be in accordance with the draft that has been placed in the Library. The best assurance I can give is that the thrust and purpose of the final articles will be in accord with the draft. We would not seek to deviate from that draft in any material form.