§ Order for Second Reading read.5.12 pm
§ The Secretary of State for Trade (Mr. John Biffen)
I beg to move, That the Bill be now read a Second time.
This is not a legislative earthquake, but a straightforward Bill with only five clauses which should not be the subject of major controversy.
The Bill contains three main provisions. The first is to increase the statutory financial limit of the British Airports Authority. The second is to increase the statutory financial limit of British Airways and to clarify the application of this limit to British Airways foreign currency borrowings. I should like to make it clear at the outset that these provisions do not entail any automatic increase in external financing limits, public expenditure or the public sector borrowing requirement, as I shall shortly explain.
The third provision of the Bill accounts for by far the greatest part of its bulk, but will probably arouse somewhat less interest than the other two provisions because it deals with a highly technical matter—the consolidation of earlier civil aviation Acts. This provision is contained in clause 4 of the Bill, which gives effect to the amendments and repeals in the two schedules. It makes a range of amendments to existing civil aviation statutes, going back to 1949, to pave the way for their consolidation.
A consolidation Bill has been prepared by the Law Commission, which, if the House shows its approval of this Bill, will be introduced shortly afterwards. It will be taken, as is customary, by a Joint Committee of both Houses. But, because of certain inconsistencies of details, the present statutes are not easy to consolidate in their present state. Hence the need for the pre-consolidation amendments in the present Bill.
I now revert to this Bill's two more significant provisions. The first is clause 1, which proposes increases in the 13ritish Airports Authority's financial limit.
The British Airports Authority was created in 1966 to manage the aerodromes at Heathrow, Gatwick, Stansted and Prestwick and the the authority has since acquired those at Edinburgh, Glasgow and Aberdeen. The authority assumed at the outset a commencing capital debt of about £53 million, since when it has been consistently profitable and able to finance most of its capital expenditure from internal resources. In fact, for total capital expenditure of £400 million in the 15 years of its existence, the authority has sought loans totalling only £14 million.
Consequently, its capital base of £820 million is principally comprised of reserves which, at 21 March this year, amounted to £763 million. Compared with this sum, the amount of outstanding debt, at £61 million, is relatively small.
§ Mr. James Hill (Southampton, Test)
Does my right hon. Friend agree that some of the increases in airport charges appear to be very high? Will he confirm that they will be the highest airport charges in Western Europe?
§ Mr. Biffen
My hon. Friend, with the prescience for which he is renowned, has anticipated a section of my 42 speech, which was lovingly prepared by the Department of Trade. When I come to it I hope that I shall be seen to deal faithfully with the pertinent point raised by my hon. Friend.
The authority is now embarked on a major investment programme over the next six or seven years in line with Government policy to meet the forecast growth in air transport demand.
Where a nationalised industry's investment programme is singularly uneven, as is inevitably the case with large airport developments, we have always recognised that the industry's internal resources may sometimes have to be supplemented by external borrowing. The BAA's investment programme is currently expected to cost over £700 million at outturn prices over the next six to seven years. The authority will need to finance a proportion of this investment by new borrowings from the national loans fund. I expect the authority's cumulative debt, including its temporary borrowings, to reach £200 million in 1985.
§ Mr. John Wilkinson(Ruislip-Northwood)
Will my right hon. Friend explain why, as the British Airports Authority has been so profitable for so long—largely at the expense of civil air transport operators—it has not been denationalised or privatised long since? The capital programme could then have been funded out of loans or equity from the market.
§ Mr. Biffen
I cannot recollect that the Conservative Party manifesto gave any indication of a proposal to denationalise the British Airports Authority, but I am, as ever, very open-minded on these matters. Some of the good gifts must be put on the stall now and some must be left until a little later. I do not in any sense want to deter my hon. Friend's enthusiasm for denationalisation, but I have to say clearly and openly to the House that the proposals in the Bill predicate the continuation of the British Airports Authority as a public corporation. I emphasise that ours is an open-minded party, and no debate is ever terminated. That is not to say that the debate proceeds with the utmost acrimony, which would be true of the Labour Party; merely that the debate within the Conservative Party is eternal and productive.
I know that it has been argued that more of the authority's investments should be met through borrowings rather than out of internally-generated profits—a point raised by my hon. Friend the Member for Southampton, Test (Mr. Hill)—and that airport charges should therefore be lower. Hon. Members will be aware, however, that a number of foreign airlines have taken legal action against the Government and the BAA concerning the user charges at Heathrow and the financial target which, in line with the policy of successive Governments, we have agreed with the authority. The case is now before the courts and it would be improper for me to comment in detail on either of these topics at this stage.
§ Mr. Michael Grylls (Surrey, North-West)
Although I fully understand that my right hon. Friend does not wish to comment on the cases involved, the points raised by my hon. Friends the Members for Southampton, Test (Mr. Hill) and for Ruislip-Northwood (Mr. Wilkinson) about the BAA's lack of efficiency have some weight. Any fool can make massive profits if there is a monopoly and he can just jack up prices when he wants. After all, the Secretary of State is responsible and, with respect, he cannot go on ducking the issue by saying that there is a court case. Will 43 he instigate a thorough review [...] management of British airports to see if they can be [...] a more sensible footing that will allow foreign and British airlines to operate more efficiently?
§ Mr. Biffen
As I would rather see my hon. Friend the Member for Surrey, North-West[...] Grylls) in the Chamber than in Brixton gaol, I shall confine my remarks circumspectly and shall not comment on the matter before the courts. As regards the wider issue of the efficiency of the British Airports Authority, I hope [...] my hon. Friend will not join those who carelessly to around accusations about the efficiency of public sector corporations. At the conclusion of the debate, the Minister will be happy to share with the House the recent discussions that the Department has had with the BAA about the pursuit of financial objectives that pay regard to certain measurements of productivity and efficiency. I hope that that will contribute to the campaign that my hon. Friend is conducting in respect of the BAA. Indeed, if a politician cannot live with campaigns he should go off to a monastery. I am happy that my hon. Friend is pursuing his campaign but I am not immediately convinced. However, I should be happy to consider all the points that my hon. Friend might raise in his campaign. My hon. Friend and the Treasury Bench have one objective that is shared by Mr. Norman Payne—the most effective running and performance of the BAA.
The BAA's investment programme includes expansion of its airports in the South-East to meet the forecast growth in air transport demand, to which I have referred. However, the increase in borrowing limits provided by the Bill has no implications for the proposals for new developments at Gatwick and Stansted which are currently the subject of public inquiry. As far as Gatwick is concerned, the House will know that my right hon. Friend the Secretary of State for the Environment and I have written to the parties to the inquiry indicating that they are inclined to grant permission for the development in the light of the inspector's report, but inviting their views on whether the new traffic forecasts have implications for the inspector's conclusions, so that they can be taken into account before final decisions are reached.
It is not possible for me to go further at this stage into the developments at Gatwick and Stansted, since they are the subject of public inquiries. I know that the House will not expect me to prejudge the evidence by commenting on issues which are likely to be examined at the inquiry, although I fully recognise the deep public concerns that are aroused by airport development. Indeed, that was evidenced only this weekend by the large demonstrations in the Federal Republic of Germany. However, the point I want to stress is that an increase in the authority's borrowing limits does not mean that either the Gatwick or Stansted developments will go ahead. It merely makes it possible for them to be started should that be the outcome of the inquiries.
I should perhaps add that the authority's investment plans also cover a continuing programme to improve and modernise the existing airport facilities, including interim developments at both Heathrow and Gatwick to remove particular capacity constraints at those airports until such time as the new terminals are available.
§ Mr. Toby Jessel (Twickenham)
Will my right hon. Friend be kind enough to confirm, once again, that it remains the Government's policy that a fifth terminal at Heathrow should [...] be built?
§ Mr. Biffen
I am happy to confirm that the position is precisely as set out in a letter that I sent to my hon. Friend.
Finally, the BAA proposes to spend a further £10 million on essential improvements at Aberdeen to meet expected future demands for operational and support facilities as the result of the continued expansion of the North Sea oil industry.
The authority's present statutory borrowing limit, however, including its commencing capital debts and temporary borrowings, was set by the Airports Authority Act 1975 at £125 million. On the basis of its present investment profile, it would be in danger of breaching its present limit within a year or so. The Bill therefore proposes increasing the statutory borrowing limit of the authority to £200 million in the first instance, with a provision to extend this by order to £300 million when necessary. Unless there are some unexpected developments, I would not expect to have to seek the approval of the House for such an order before about 1985.
Clauses 2 and 3 deal with British Airways' borrowing powers. What we are proposing here is that British Airways' present financial limit of £1,000 million should be raised on Royal Assent to £1,200 million and that provision should be made for two further increases by order—subject to the approval of the House—to £1,400 million and £1,600 million.
An increase in British Airways' borrowing powers is necessary because their total outstanding borrowings is approaching the present limit of £1,000 million. The main reasons why British Airways need to go on increasing their borrowings is because of the heavy programme of aircraft investment to which it is committed. That is necessary if the airline is to have a modern and fuel-efficient fleet which can compete with other world airlines.
§ Mr. Anthony Steen (Liverpool, Wavertree)
If my right hon. Friend believes that British Airways should be allowed to compete in the world's markets, can he explain why the private sector is not allowed to compete with the national carrier on domestic trunk routes and so have a free market in Britain as well as internationally?
§ Mr. Biffen
I am sure that my hon. Friend appreciates that competition on domestic trunk routes is determined by the Civil Aviation Authority. Such matters are within its discipline. However, if my hon. Friend feels that the operation of the procedure is defective, I shall take account of his views. The House would be extremely ill-advised to move speedily from the determination of such matters by, on the whole, the Civil Aviation Authority.
This part of the Bill also deals with another problem to do with British Airways' borrowings. Most of British Airways' borrowings are taken in dollars. However, with the end last April of the Treasury exchange risk cover scheme, the value of British Airways' new and uncovered foreign currency borrowings is subject to fluctuations according to the day-to-day level of the pound against the dollar. The recent fall in the pound against the dollar has meant that the sterling value of British Airways' borrowings has increased even without any increase in the number of dollars borrowed. That means that in an extreme case British Airways could find themselves in 45 breach of their statutory borrowing limit through exchange rate fluctuations alone. That is obviously unsatisfactory. Clause 3 therefore aims to remove that uncertainty and to enable British Airways to know exactly where they stand from day to day in relation to the statutory limit.
I now wish to make one important point clear. The proposed new borrowing limits—for both British Airways and the British Airports Authority—have nothing whatever to do with external financing limits. They do not mean, therefore, that, as a result of the increase in borrowing limits, there will be any increase in public expenditure. Nor will the new borrowing limits give the industries the opportunity to borrow up to the new limits as soon as they like. They will continue to require my consent for particular borrowings.
In giving or refusing my consent, I shall, as in the past, continue to have regard to the external financing limits that are set for each industry from year to year. The increase in borrowing limits will also make no difference to present arrangements for controlling individual major items of capital expenditure. Those require the approval of the Department of Trade and the Treasury and are subject to the need to achieve an agreed rate of return on the investment.
This has been a valuable opportunity to cover the broad financial provisions of the Bill, and also to describe some of the current and prospective fortunes of the two public sector corporations whose finances are to be sustained by this measure.
The House is necessarily accustomed to granting substantial borrowing powers to the public sector, and I have no wish to understate the fiscal or the budgetary implications of providing for additional borrowing facilities of £175 million for the BAA and £600 million for British Airways.
However, as I have explained, the House will have the opportunity to sanction the allocation of much of the new capital through the order provisions specified in clauses 1 and 2. Moreover, the decisions and performance of both BA and BAA will remain subject to the scrutiny of the Select Committee on Industry and Trade, and other Committees with responsibilities for public finance.
Those two industries, the borrowing powers of which the House is invited to consider this evening, are central to the communications network of the United Kingdom. A country such as ours, which derives no less than 30 per cent. of its national wealth from overseas trade, requires and deserves an effective transport network, and foremost in that must be its aviation service. The Bill seeks to make its contribution to that aim, and I commend it to the House.
§ Mr. John Smith (Lanarkshire, North)
I do not intend to spend much time discussing the Bill. I hope that that sentiment is shared by the serried ranks of hobbyhorses that I see assembled before me on the Conservative Benches. No doubt this very simple Bill will give rise to some traversing of the countryside to decide where a certain airport may be situated.
§ Mr. Toby Jessel
On a point of order, Mr. Deputy Speaker. Is it in order for the right hon. Gentleman to refer to hon. Members, who are here to protect the interests of their constituents, as having hobbyhorses in such a disparaging, insulting and unnecessary way? Will the right hon. Gentleman withdraw his comment?
§ Mr. Deputy Speaker(Mr. Ernest Armstrong)
The right hon. Gentleman has already made his comment. It was not out of order.
§ Mr. Smith
I thought that I had a fairly wide range of insulting epithets at my command. Hobbyhorse is not one that I would have interpreted as being insulting. Perhaps I did not express myself clearly. I did not mean that the hon. Gentleman was a hobbyhorse. I thought that he might be riding one. As the debate goes on we shall see that he does. It is a familiar one, and we are used to his comments on the subject.
However, that is not the point of the Bill. The Bill increases the borrowing power of the British Airports Authority, and the Secretary of State has given good reasons why that should be done, but I believe that the time has come for us to look at the way in which we finance bodies such as the BAA. Too often we make the customer of today pay for the airports of tomorrow, when we should make the customer of tomorrow pay for the airports of tomorrow. The concept of the public sector borrowing requirement, which is the restraint on these matters, is due for some rethinking or revision. I hope that a Government will one day tackle the problem.
As to British Airways, on the previous Civil Aviation Bill we spent a long time discussing a Bill a great deal of which has not been brought into effect. We wasted much time, not only on the Floor of the House, but in Committee, by legislating for the scheme of privatisation that the Government then intended for British Airways. That has added to the uncertainties faced by the airline in recent years.
When we talk about British Airways, we should take into account the fierce international situation in which they have to operate. There has never been a time when international civil aviation has been more difficult for all operators, but especially difficult for a national carrier with such a wide network of routes as British Airways. The inevitable effects of the recession on any carrier have taken their toll on passenger traffic and, added to that, there have been steep increases in the price of oil, which has meant that the cost of oil has risen from 10 per cent. of the airline's expenditure to about 30 per cent.
British Airways have faced the complicated situation of deregulation. In Europe there is over-regulation, but there is possibly under-regulation in areas such as the Atlantic, where no carrier can conceivably make a profit in almost any circumstances. That situation appears to be so "shambolic" that someone will bite the dust in the near future. The airlines cannot continue to compete for ever at the present absurd levels. Even if the customer is the beneficiary from time to time, the customer also has an interest in the more stable future of international aviation.
British Airways have faced some of the painful changes very well. It would be helpful if Conservative Members, instead of sniping at every public industry—if they cannot complain about it, they wish to sell it off—would pay tribute to the skill of management shown in difficult circumstances by those who operate British Airways. Not all the decisions taken by the management—in present circumstances they are forced to make difficult decisions—will receive approval. I am sure that my hon. Friends representing Ayrshire will have something to say about the effect on Prestwick, so I shall not attempt to steal their thunder.
47 British Airways are entitled to support from the Government. They are an important national carrier. In the past they have not only had to make profits, but have had to carry national responsibilities in keeping open non-profitable international routes, which often had to be carried for what was thought to be the overriding national interest. Some of those routes will disappear as a result of decisions taken recently. However, we should take into account the fact that British Airways have had to take those national obligations into account, as well as take account of the obligations to make a profit.
§ Mr. James Hill
Does the right hon. Gentleman agree that, from time to time, British Airways—as far back as the British Overseas Airways network—have had to accept unsuitable aircraft because various Governments have thought that the airline should use them?
§ Mr. Smith
That is said with feeling so often by airline employees that I am inclined to agree. There is a substantial amount of truth in it, although I do not know the merits and demerits of past decisions.
British Airways are entitled to receive more handsome and substantial support from the Government than that which they have sometimes received. I hope that we shall see a change of attitude in that respect.
To relieve British Airways of some of their worries the Government should drop the privatisation scheme now, and say that they are going to drop it. Much time was taken to put those powers on to the statute book. Hardly was the ink dry on the Royal Assent than the now Secretary of State for Employment was rather shamefacedly saying at the Dispatch Box that, for the forthcoming year, it did not look as if the Government could launch the scheme.
We told the Government time and again that the scheme would not work, irrespective of the merits and demerits from a political point of view, but the Government did not take account of the objections. Indeed, the Secretary of State seemed to think that whether an item was in the Conservative Party manifesto was important. He sought to defend his decision not to privatise the British Airports Authority by arguing that such a proposal was not in the Conservative Party manifesto. There was no mention of British Airways in that manifesto either.
Not only would it be a recognition of what is practical in the lifetime of the Government, but it would be settling if the Minister were to make it clear that the privatisation scheme is now a dead duck and that British Airways can be funded properly as a public corporation without having to look over their shoulders at this unnecessary worry put there by the Government.
§ Mr. Smith
I have not finished. Hon. Members cannot complain about the length of my speech. If they showed more restraint and were not so impetuous in seeking to make their speeches I should reach my peroration more quickly. I am about to reach that stage since I see little point in detaining the House at length on such a remarkably simple Bill.
I approve of consolidating in advance. I believe in the consolidation programme. Our laws are more intelligible if they are contained in one Act rather than being distributed liberally throughout the statute book. 48 Unreservedly I support efforts to make consolidation more easily achieved. Since the Bill, unlike many proposed by the Government, will be of some benefit to publicly owned industries, we shall not oppose it.
§ Mr. Alan Haselhurst (Saffron Walden)
My constituents are bound to take a somewhat jaundiced look at any strengthening of the British Airports Authority's finances, as they are involved in a David and Goliath struggle over the proposals to develop Stansted airport. The BAA is not seen in a favourable light, since it has become the medium through which the third battle of Stansted is being fought.
I make no aplogy for raising the subject on the Second Reading of the Bill. I resent the disparaging remarks of the right hon. Member for Lanarkshire, North (Mr. Smith). He can have a smug detachment from these matters, but he should realise that hon. Members have to represent the vital interests of their constituents. A decision on airports policy can have devastating effects over a wide region according to how the decision goes. The right hon. Gentleman should not belittle hon. Members' attempts, on one of the too few occasions that they have, to make comments that are germane to their constituents on so great an issue.
§ Mr. John Smith
My words were meant as lighthearted banter. Perhaps they were too heavy for some over-pompous Conservative Members. If I had the opportunity to support such economic development in my constituency, I should not be choosy but would welcome it with open arms.
§ Mr. Haselhurst
If my powers of eloquence were great enough I should do all that that I could to ask the Government to shove the development in the right hon. Gentleman's direction.
I have a number of questions to ask about the purposes for which the BAA will use the extra finance which the Bill confers. I am not sanguine about whether I shall receive answers, let alone about what the answers will be. The Government seem to have invoked some type of sub judice rule and are refusing to answer questions by hon. Members to all Departments which have even the remotest connection with the airports issue. I am inclined to think that if one asked the Government what was the time of day at Stansted they would say that the matter had to be referred to the inspector for adjudication. The Government should not invoke such a rule to avoid answering questions about their policy or about facts which are part of the process of adjudication which a public inquiry entails. I hope that the Secretary of State will reconsider the position with his colleagues.
Have the financial arrangements, for Stansted, as originally anticipated, altered since the first announcement was made in December 1979? That is a legitimate question. What are the estimated costs today of proceeding with the development of Stansted airport? That is a straightforward question which needs to be answered and which should be put before the inquiry. I cannot understand why such questions are not being answered clearly in the House. I hope that the the matter will be reconsidered.
I should like to know the cost of the proposed development at Stansted. My right hon. Friend the 49 Secretary of State must know that there is growing concern about the level of expenditure involved. I am bound to be suspicious, when the BAA is seeking extra money, about whether there has been some growth in the estimates that were put before the House.
We were told that no public money would be involved. That was a clear statement by my right hon. Friend the Secretary of State for Defence when he, as Secretary of State for Trade, made the initial policy announcement in the House. There are now legitimate doubts, judging by what has been said during the public inquiry, about whether that statement can be factually upheld. It is reasonable that we should ask to know more about it.
§ Mr. Wilkinson
Does my hon. Friend agree that the comparison of capital costs between the development at Stansted and the development of the fifth terminal at Heathrow, as evidenced by British Airways—£869 million against £324 million respectively—although not perhaps absolutely accurate is broadly reasonable and should be taken as fair?
§ Mr. Haselhurst
I am obliged to my hon. Friend. There is no doubt in my constituency about various aspects of airport development, not all of which were fully costed in the first instance. That information should be put before the House as well as before the public inquiry.
A second anxiety about why the BAA wants a strengthening of its finances relates to the extremely sensitive matter of property and land purchase in the area of the proposed development. This is a difficult matter. It was determined that a compulsory purchase order should be published so that statutory blight conditions could apply. That meant that people who felt that they were prejudiced when the development was announced would be able to require the BAA, as the proposed developer, to purchase their property from them. I believed that that was right because I knew of many people being trapped in difficult personal circumstances.
The Department of Trade has confirmed that the intention of allowing that was to aid the affected and aggrieved people and not to strengthen the BAA's case at the public inquiry. Nevertheless, the BAA appears to have acquired a great deal of property. It will say—and it is probably fair for it to do so—that it was by agreement.
It is a delicate matter to decide whether the BAA is over-stepping the mark by advising people of their statutory rights to be able to require purchase by BAA and suggesting that it would be to their advantage to do so. I am not sure what nods and winks and pressures might have been involved. On the whole, I have tried to be fair to the BAA. However, I cannot remain deaf to the complaints that in some cases excess sums of money—it is alleged—have been used so that certain properties can he purchased.
The BAA is accountable for this money. I understand that its generalised policy is that it is not able to reveal the sums that it has paid in a particular transaction, on the grounds of private confidentiality. I understand thatt argument perfectly well, but it still leaves the unanswered fear that excess pressure is being applied on people to sell their properties. I therefore hope that we can find some way of clarifying the situation.
That would clear the air in a manner that would be helpful to the BAA, the Government and my constituents. It would enable us to know the sort of criteria that have 50 been used and whether or not we can be entirely satisfied that all the transactions have been accompanied by the same principles of objectivity. Without such clarification there is a continuing doubt in the area about the observance of fair play.
My right hon. Friend will be aware that the Government's policy is disagreeable enough to the majority of my constituents. It therefore does no good at all if claims about unfairness in the handling of this issue remain unanswered. I am as interested as anyone in seeing those matters dealt with once and for all, because the present atmosphere of speculation is most unfortunate.
I now address myself to the more fundamental question to which some of my hon. Friends have already referred in interventions. If we are considering an extension of the BAA's financial limits, it is right to ask whether we desire to maintain the BAA in existence in the future. I do not want to confine myself solely to the economic arguments about which I know many of my hon. Friends feel strongly. I share their feelings. However, generally speaking I have no complaint about the BAA's dealings with me as a Member of Parliament. But because of the way it is constituted, it cannot possibly put forward an objective national policy. How can any reasonable person suppose that a statutory body that has four airports in Scotland and three in the South-East can put forward any kind of policy that would mean the diversion of business to other airports in the country?
It defies credulity to suppose that people employed by the BAA should undertake any policy that does anything other than strengthen the BAA. I am sure that they are statutorily charged to make a success of the BAA. At present, it is a half way house, which is a nonsense. Either we should have a British airports authority that is truly a British airports authority or we should go for privatisation. I make no secret of the fact that I prefer the latter solution.
I realise that some hon. Members may feel that I have stretched the scope of the Bill to raise these questions. But this is a legitimate opportunity. We have too few opportunities to air these doubts, and that is even truer if the Government are extremely choosey about the parliamentary questions that they are prepared to answer.
I therefore hope that my right hon. Friend will understand the difficulties faced by my constituency over this enormous proposal that has far-reaching national implications whose very centre is in my constituency. It will be helpful to everyone if some of the doubts to which I have alluded can be clarified.
§ Mr. J. Grimond (Orkney and Shetland)
I assure the right hon. Member for Lanarkshire, North (Mr. Smith) that I have no objection to the charge of being on a hobbyhorse. That is a. perfectly respectable posture for hon. Members, and it is a great deal safer and more useful than being on a real horse.
I have a great constituency interest in air travel. At present, that largely relates to the price of air travel. In recent years, British Airways has come near to pricing itself out of the market. It is cheaper to fly to Italy, spend a week there and to fly back again than it is to fly to my constituency. Many of the passengers on the aircraft are people such as myself, who are paid for by the taxpayer, or others who are travelling on expense accounts. The ordinary family, to whom this travel ought to have brought a new era of satisfaction, cannot make use of it.
51 The Secretary of State will have noticed that, apart from Stansted, on which we have just heard an eloquent speech—to which he will no doubt give answers in due course—there is concern that the British Airports Authority should have paid for its capital expenditure almost exclusively up to now out of revenue. There is a justifiable feeling that it would be legitimate to borrow for that purpose.
During the earlier part of his speech I thought that the Secretary of State was terrified by the bogy of the PSBR rearing its ugly head. I was therefore glad when he said that the BAA would be allowed to borrow more. It is one thing to borrow for legitimate, profitable, capital purposes, but quite another to borrow to make up deficits in revenue. The former has always seemed to me to be quite respectable.
I have never quite understood why the BAA and British Airways should not go to the market for at least some of their capital. The Secretary of State's answer was "It was not in the manifesto". That is a good reason for doing it. After many years in this House, I have learnt that whenever a Minister finally falls back on the fatal phrase "It was in the manifesto", it means that he will do something quite disastrous. The fact that a Minister says that this was not in the manifesto, and therefore it may be rather sensible, if anything, prejudices me in favour of it.
If there is any question of hiving off any part of the BAA, I hope that the Secretary of State will encourage people working in it to make a bid. They have already shown some interest. It is therefore something that he should keep in mind.
As I have said, my constituency depends a great deal upon air transport. At present, it faces certain difficulties. British Airways has made a large loss on its Scottish services in recent years. I am glad to say that it has now produced a new scheme which gives hope of better things. Incidentally, that shows how some threatened competition and even a touch of stringency can occasionally concentrate the minds of public bodies. Having said, that, I would not like to see it go too far.
This matter is now before the CAA, because private airlines are applying for the routes. Like the Secretary of State, I shall take refuge in the fact that this important matter is sub judice. The right hon. Gentleman is a lucky Minister in that he is surrounded by so much sub judice, but, of course, he has always been an exceptionally skilled and well-advised Minister.
It is essential that these routes should be continued at a reasonable price. Undoubtedly, the cost of airport landing charges has greatly increased the price of air travel.
In his statement on 13 May, the Minister pointed out that Sumburgh and Aberdeen were the two main airports in the north of Scotland. They come under the control of different authorities—Sumburgh under the CAA and Aberdeen under the BAA. There is some competition between them. I am not altogether sure whether that is satisfactory so long as they depend on public finance. If the airlines were to leave Sumburgh it would create great difficulty. A large amount of employment in the south Shetlands is dependent on Sumburgh. It would mean that the recently-built terminal to serve the oil platforms would become redundant.
I do not know whether the Minister has examined the history of this terminal building. It was built by the CAA, I suspect at unnecessary expense. I am told that the private 52 charterers offered to build the terminal building but that that was rejected. I cannot vouch for that, but it is worth examining whether, if whole airports are not handed over to private operation, private operators and the work forces should not be brought in to take over particular parts.
As I have said, landing charges are a serious matter. It is not entirely satisfactory that the airports should be run by different bodies. Having said that, I should point out that Orkney and Shetland was anxious to remain under the control of the CAA because at one stage it could have come under the control of the BAA.
I want to touch on our policies towards aerodromes as the oil runs out. There are four aerodromes in Shetland and a number of air strips. It is important that air strips should be retained because they serve the islands and are in a different category. There is a danger that unduly onerous regulations and charges will seriously affect them. However, that is not absolutely germane to the debate.
There is also the question whether Shetland can afford four substantial landing places, one of which is a main aerodrome of the north. The Secretary of State for Trade is no doubt giving attention to that. It would be of advantage if he could soon amplify the statement of 13 May which was a little thin about Scotland. There is nothing sub judice now, except the determination of who is to carry on the flights. I do not believe that the question of aerodromes need be held up.
I ask the Secretary of State to bear my points in mind and to say a little more on why the BAA and the other authorities cannot borrow from the market. I ask him to reassure me on why the BAA needs an extension of credit and the CAA does not and that will not affect them adversely. The BAA has had no increase in its borrowing for some time for its aerodromes. I am not talking about other functions. Finally, I ask the Secretary of State to say a little more about why there should not be more money for perfectly sound capital purposes, and why that cannot be raised on the ordinary market.
§ 6.2 pm
§ Mr. John Wilkinson (Ruislip-Northwood)
I am glad of the chance to intervene briefly, because my constituency contains many people who work at British Airways and Heathrow airport and some who work for the BAA. I want to state my position clearly. I believe that civil air transport should be a growth industry in the United Kingdom and that the Government should do everything in their power to promote an expanding and prosperous civil air transport industry.
The United Kingdom, by virtue of geography, has great advantages. It is a natural entrepot and has a natural position at the crossroads of the world—the Atlantic meets Europe, the developed world meets the underdeveloped and North meets South—and we should capitalise on that unique advantage. We also have extensive experience of civil air transport.
I intervened earlier because I believe that it is unjustifiable for the British Airports Authority, as currently constituted, to remain in being. There is no way that the authority serves the interests of either the travelling public, as it should, or the operators. I envisage a regime of competition in which the various United Kingdom airports compete to secure for themselves the maximum amount of civil air transport traffic. They would thereby cut landing fees and do everything possible to provide a convenient service to the passenger and to look 53 after his interests. That is the right way forward. Therefore, I suggest that the British Airports Authority should be broken up and the constituent elements sold. In that way, British air transport would be best served.
We have to give sanctions for further borrowing for the BAA. I recognise that borrowing has not, in the past, been a feature of British Airports Authority financing. However, exorbitant landing fees which defy belief have been a feature. Most BAA airports operate night-time curfews and it really is a case of daylight robbery! That has driven carriers out of the United Kingdom to Schiphol, Frankfurt and other gateways to Europe. It is detrimental to the national interest and causes jobs to be lost.
I am sensitive on the issue of jobs, because in west London, Heathrow airport is by far the biggest single source of employment. The employment there is of a particular kind—highly skilled. Those skills do not exist in many other parts of the country. When airports policy is considered, it is considered not from a position which is partisan to the nation's economic interests, but from an environmental standpoint or from the point of view of conserving the countryside.
If the Stansted issue is considered rationally, one sees little merit in the proposal to develop the airport to the extent proposed by the BAA. Such a venture would be exceedingly costly. I gave the figures in the intervention to my hon. Friend the Member for Saffron Walden (Mr. Haselhurst). There is not exactly a wealth of civil aviation expertise skills in the Stansted area. Stansted has about 250,000 passengers a year. My hon. Friend will confirm or deny that.
I used to work at Stansted as a flying instructor and latterly, as a sales manager, established an air charter business there. Stansted has grave geographic disadvantages.
I do not foresee any harm in allowing Stansted to grow organically within its current limits—without putting down a new runway and terminal and without disturbing the beautiful nature of the magnificent surrounding Essex countryside. That would be sensible and it would not infringe on Luton. If Stansted were to be developed to the extent proposed by the BAA, it would ultimately interfere with air transport to Luton, and that would be regrettable from my point of view as I believe in airports such as Luton being encouraged.
There is the question of surface communications. Without the rail link and improved access from the end of the M11 to the City, it will remain exceedingly difficult to get to Stansted. I should like to see Stansted used more, but for goodness' sake, let us keep a sense of realism, which has been missing when we consider airport policy, as can be seen from the sorry Maplin fiasco. Anyone could have confirmed—as some of us did—how idiotic it was, in this day and age, to lay hundreds of millions of pounds worth of concrete on mud which was miles from the conurbation that the airport was intended to serve.
Technical developments make the question of noise no longer an overriding factor. From the late 1980's aeroplanes such as the Boeing 757 and 767, the British Aerospace 146 and further generations of airbuses will totally transform the picture.
Hon. Members, such as my hon. Friend the Member for Twickenham (Mr. Jessel), who so eloquently argued the case against the fifth terminal at Heathrow on the ground largely of noise, should consider the noise contours in the British Airways publication "Heathrow, the Right 54 Choice". That publication states that, even on the worst case—which is a take-off to the east on runway 10 right hand out of Heathrow, not by the quietest aeroplanes envisaged, but by either a Tristar or a DC-10—the high noise nuisance decibel contour does not even reach Twickenham. The 105 PNdB noise nuisance contour is the one that I am talking about.
We should worry not so much about noise as about maximising the investment which has been made over the years by the air transport operators in their west London facilities.
§ Mr. Jessel
The argument that my hon. Friend and British Airways rely on is a formula called the noise and number index, as a measurement of noise. It has components consisting of elements which allow for the average peak loudness of each flight and the number of flights. Far more weight is given in that formula to the average peak loudness of each flight than to the number of flights. Therefore, my constituents who are annoyed by the sheer frequency of flights—about 600 a day at Heathrow—are not considered adequately in that formula.
§ Mr. Wilkinson
I did not wish to provoke such an exchange. I am relying on the evidence that is heard by my own ears. I live at Richmond, which is under the flight path concerned, especially the take-off path, for runway 10 right hand. The noise level is greatly reduced by the wide-bodied aeroplanes that are now coming into service. Even if the worst assumptions are made, we can reasonably expect the number of movements not greatly to increase because of the ever-increasing size of modern aeroplanes, which is an economic necessity because of increased fuel costs apart from anything else.
If we accept that Stansted is idiotic and recognise that a chance was missed by failing to construct a second runway at Gatwick, which was the sensible thing to do from an aviation point of view, there is only one alternative. That alternative is to make the best possible use——
§ Mr. Wilkinson
Apart from Liverpool—of Heathrow. The Perry Oaks sewage farm is conveniently situated on the western side of the airfield. It could be the ideal place for the fifth terminal, provided that the surface infrastructure of the rail link to Feltham, the road extension to what I hope will become the M25 to the west of the airport and the extension of the underground are carried out first. If not, the traffic congestion in the area, which is already bad, will be made even worse.
My constituents have already suffered enough from the cutbacks in British Airways. I note that BA is expanding its redundancy scheme to about 10,000 because there have been many applicants for early retirement or redundancy. However, there is uncertainty in my constituency and jobs are at risk. If jobs are to be secure, it is important that British Airways are put on a sound financial and commercial footing.
I shall state my view categorically. Personalities do not enter into it. British Airways are of sufficient importance to justify a full-time chairman who is a professional in the airline industry. I have nothing against Sir John King. He is probably an admirable boss and he is realistic. I have no doubt that he is a good manager. However, the 55 principle should be established that such positions are for professionals and should not necessarily be political appointments.
We should do nothing to delay the carrying into effect of the provisions of the Civil Aviation Act 1980 to privatise British Airways. It seems that British Airways, under this Bill, are to be drip fed. I understand that there will be three loan instalments of £200 million each to finance their re-equipment programme, which consists largely of buying 757s from the Boeing company.
British Airways are being resolute in trying to tackle overmanning and to carry out certain restructuring. That is to be commended. However, I think that we need an even stricter regime if British Airways are not to continue to be a major loss maker. I was interested when my right hon. Friend the Secretary of State for Trade said that the Bill's provisions will not lead automatically to more public expenditure. They do not do so automatically, but the Government will have to guarantee the loans.
I have not known a Government allow a nationalised industry to default on its borrowing. It must be recognised that there are public expenditure implications. We should not merely set returns on capital for Britishs Airways. We should set a date by which we expect them to have their house sufficiently well organised and in order to enable the proportion of the equity capital that is envisaged in the 1980 Act to be sold off to the market.
This is rather a sorry Bill although it is a measure of importance. I hope that my right hon. Friend will not take it amiss when I say that the Bill is so important that it did not deserve to be taken as flippantly as it was. It is a serious measure. Although there may not be a commitment in the Conservative Party manifesto to sell off the British Airports Authority—I have worked professionally as a tenant of the authority—we should do so urgently in the interests of civil air transport operators. We should also set a date for another idea that was not set out in the manifesto, as the right hon. Member for Lanarkshire, North, (Mr. Smith) said, and that is to privatise British Airways. That will not occur of itself if we continue to drip feed British Airways. We must set a date for the sale of the equity.
§ Mr. J. Enoch Powell (Down, South)
Clause 5 and the first schedule bring Northern Ireland and civil aviation in Northern Ireland within the scope of the debate. I am sorry if notice to the Northern Ireland Office to that effect was given at a late stage; and if a Northern Ireland Minister is not able to be present, I am sure that the Secretary of State for Trade will ensure that my points are studied by his colleagues in the Northern Ireland Office.
What I have to say is not foreign to the generality of the debate as it turns upon airport charges, which have formed no small part of what is being said.
Northern Ireland is naturally sensitive about any limitation or obstacle placed in the way of transport between the Province and the mainland. The House will appreciate that at a time when one of the major surface links—the sea link between Liverpool and Belfast—has at least temporarily disappeared, we have been alarmed by the coincidental occurrence of two other limitations of Ulster's transport links—both affecting the air link. One is the further sharp increase in the real level of fares, 56 especially on the British Airways route to Heathrow. The second is the reduction of the British Midlands service from jet aircraft to turbo-prop aircraft.
The people of Northern Ireland are much indebted to British Midlands Airways for the steady competition which it has offered to British Airways and the way in which it and its crews have served the Province during times of considerable pressure and danger. It causes us anxiety to observe again an apparent limitation of the service to Gatwick offered by that firm.
One of the major causes of these threats to the air link between the mainland and Northern Ireland lies in the ever-rising toll of airport charges. I will illustrate that for Northern Ireland with one or two figures. During 1979 and 1980 the airport charges there rose by 38 per cent. more than the rate of inflation during those years—that was a sharp increase in the real incidence of airport charges—and the increase of over 20 per cent. in 1981 has again been substantially ahead of inflation. Thus, we have had three years in which airport charges have raced ahead both in money terms and in real terms. If rumour has it correctly, we may be facing yet a further increase in the next financial year.
This issue needs to be considered critically by the Government. The impact of these charges may be illustrated by comparing routes of similar distance within other European countries with the vital link between the capital city of the United Kingdom and the principal city of Northern Ireland.
The fixed charges for operating a Trident 3 under certain conditions this year between Heathrow and Belfast are £2,202—that is, with 125 passengers and two hours' parking at each end. I will now read to the House the figures, exactly comparable in terms of operation, for routes of similar length on the Continent. Between Bordeaux and Paris the comparable figure is £976 or less than half. Between Hamburg and Stuttgart it is £930. Between Rome and Milan it is £644—that is, one third of the incidence of airport charges which has to be borne by the service between London and Belfast.
What my colleagues and I are not asking for is consideration of an operating subsidy. However, we do believe that the relationship between the capital investment of the Northern Ireland Airports Authority and the landing charges has been misconceived and that a proper allocation of those costs in terms of charges—the Northern Ireland Airports Authority has been extremely coy as to the basis of calculation that led it from the one figure to the other—would reveal possibilities of avoiding a continuance into the future of the increase in burden that I have described.
The second consideration that I offer to the Government relates to phase 3 of the new Aldergrove airport. Phase 2 is now drawing to completion; and the airport is perfectly operable—and would be operable with a much larger throughput than is at present using it—with the existing phases 1 and 2. My hon. Friends and I would like to ask the Government: is it really right at this stage to go straight on, as one gathers is intended, with phase 3 of the development? If that will mean a proportionate further increase in the overheads—the fixed charges of operation—the new airport in its finished form will be not the blessing that it ought to be to Northern Ireland, but a curse. Naturally, one looks forward to seeing the total concept eventually realised that has been before us on the placards at the airport for so long. However, the 57 Government should surely be sensitive to the possibility of re-examining the capital programme, particularly when one realises the direct impact of this capital expenditure on the running of the service.
What is important to Northern Ireland is cheapness and frequency of transport between the capital and Belfast, not that in the foreseeable future we should have the completely laid-out international airport that is projected. It is bread and butter that we need in Northern Ireland; and the bread and butter is in danger of being taken out of our mouths. We would not like to see a new phase of capital development have that reality.
The Secretary of State has been good enough to say that he will ensure that those matters and all other factors which affect the burden of airport charges are considered by his colleagues in the Northern Ireland Office. I trust that he will do so.
§ Mr. Robert Atkins (Preston, North)
As many hon. Members have said, the Bill at least gives the House the opportunity to discuss a matter that is all too infrequently debated. I am therefore pleased to be able to debate the issue this evening.
I shall divide what I have to say into two; first, British Airways, and, secondly, the British Airports Authority. Hon. Members have confirmed that it is our commitment to put British Airways on the market as and when it is in a fit state. In my constituency I have seen the success of the British Aerospace sale, in which about 54,000 employees have bought shares—let alone anyone else, like myself, who managed to buy one or two shares—and that is to be encouraged. I hope that we shall be able to do that with British Airways and perhaps at a later stage with the British Airports Authority.
British Airways has had problems over recent years, culminating in the last year or so in problems which they are not alone in experiencing in the aviation industry. There is a new chairman. I disagree slightly with my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson), in that it is clear that although many senior managers in British Airways were doing an excellent job—I single out the deputy chairman and chief executive, Mr. Watts—the expertise and experience of Sir John King have added to that. They have done an amazing job in getting British Airways back on the road to recovery. They have a mandate to reform, which is being put into effect.
British Airways is not the only airline with problems. British Caledonian, for example, one of the most productive airlines in Europe, still made a loss this year. Pan Am, facing the biggest crisis of its career, was forced into a crisis sale of Inter-Continental Hotels. It was forced to change its management almost at gunpoint, and staff cuts were made at various levels. Braniff, another major company that has achieved much publicity in recent years, is reportedly having to pay for almost everything that it purchases in hard cash. Sir Freddie Laker, the man who has done so much to revolutionise flying in various parts of the world, and to whom we owe a great debt——
§ Mr. Atkins
Sir Freddie Laker is beginning to experience financial problems. He has suggested that he needs an increase in fares as soon as possible and perhaps a little protection in his operations across the Atlantic.
58 In addition to those problems, British Airways face the problems of fuel. Whereas before that represented only a percentage of its operating costs, it now represents probably the largest operating cost. The situation is not getting any better. British Airways have had problems with air traffic control. The cost to British Airways of the civil servants' strike recently was about £60 million out of its profits. The recent PATCO strike in the United States also caused problems. The most intractable difficulty in air traffic control, however, is that posed by Eurocontrol, an organisation that is supposed to act as the controlling operation for air traffic movements in European airspace.
Many criticisms have been made of the way in which Eurocontrol operates, not least the dog-legging that must go on, with diversions around various destinations and the taking up of much extra fuel and mileage in so doing. There have also been problems in avoiding military airspace. All that adds to costs. At the recent annual general meeting held by IATA the view was forcefully expressed that Eurocontrol needed a radical overhaul. People at the meeting pressed for direct routeing for all aircraft with inertial navigation systems. I have yet to hear a reason why that should not occur.
There is also the problem of artificially low fares. In whose long-term interest is the argument for continually reducing fares? Even Sir Freddie Laker wants an increase to cover his costs. IATA raised that at its annual general meeting as a matter of considerable concern. With regard to airport charges, a particular problem to be borne by British Airways is that of using Heathrow and Gatwick as their main home. I shall refer to that later when I discuss the British Airports Authority.
What have British Airways done to try to cope with the problems? Comparisons have been made between, for example, Delta Air Lines in the United States, one of the most productive and successful airlines, using the smallest number of staff of any airline in the world, and British Airways.
British Airways have reduced their operation at all levels. They have a scheme of voluntary redundancy which will find redundancies for 9,000 people by June 1982. That represents a 30 per cent. reduction in three years, which is a tribute to the work of the new radical management. As has been said, it has given a great deal of attention to overhauling its Scottish services. It has replaced the Viscounts with the Hawker Siddeley 748s. It is to turn the £5 million loss in that area to a £1 million profit next year. It has put its catering out to tender, leased out the West London air terminal, sold the Victoria terminal, sold five 707s and one 747, put aside the two 747s on order and sold its 747 freighter, and no directly operated cargo activities are now planned. It has introduced a new product in Europe, which has been extraordinarily successful. It has also instituted greater punctuality and staff productivity.
§ Mr. Atkins
No one disputes that, but it is a tribute to the management and the work force that those improvements have been made.
British Airways have introduced new computers on the flight deck and polished up the engines, which will save about £10 million in fuel costs next year alone. The new economical aircraft that British Airways are introducing—the 757—and the Vertol 234, together with 59 the Westland WG30 in the helicopter range, will all be more productive, more economical and more efficient and less noisy.
British Airways were in bad shape. They are still not 100 per cent., but they are perking up still further. As soon as the industry, of which British Airways are a large part, gets to grips with all its problems, under its new management and once properly privatised, with its shares owned by a variety of people inside and outside the company, British Airways will have a great deal of hope ahead.
I referred earlier to airport charges. I deal now with the operation of the BAA. My right hon. Friend the Secretary of State said that the increase in the BAA's borrowing requirements is only £75 million to £200 million, with power for £300 million later. If the increase had been in line with inflation, it would have been to £500 million.
The BAA runs seven airports, but the Heathrow-Gatwick-Stansted argument has inevitably focused attention on those three airports. Two of my hon. Friends have dealt with Stansted in detail and with cogency, so I shall not dwell on it. However, a pernicious argument abounds—that there is room for a Euromega—airport, as it could horribly be called, from Schiphol. I regret that one of my hon. Friends, who is not in the Chamber—I am sure for perfectly respectable reasons—argues that case, but it is not in the interests of Britain or of people working in avaiation in this country.
§ Mr. Wilkinson
My hon. Friend casts an aspersion on a colleague but does not name him. I believe that he is referring to one of our hon. Friends who represents Luton, who is putting forward an alternative to the Stansted proposal, which, if fully developed, would seriously degrade civil air transport services to Luton for air traffic control reasons.
§ Mr. Atkins
I was referring to my hon. Friend the Member for Luton, West (Mr. Carlisle). He believes that his argument is perfectly respectable, but I disagree with it. I contested the constituency in the 1974 elections and understood the problems and success stories of the airport. I agree with my hon. Friend the Member for Ruislip-Norwood (Mr. Wilkinson) that the argument is causing difficulty in the area.
If the London airports do not expand, the business will go to Europe. However, no British carrier operates on a long-haul route out of Schiphol—unless one counts the Dan-Air route to West Berlin as long haul. The only airline to benefit from a move to Holland would be KLM.
Politics is about perceptions, and so it is with airports and those who use them. Perhaps because of my interest in aviation I hear this more frequently than others, but people must also tell other hon. Members that Heathrow is the most awful airport that they have ever been to. I do not share that view. Bearing in mind what it has to do, Heathrow is remarkable.
One or two facts bear repeating. Heathrow is the busiest international airport on the world. About 55,000 people work there—more people than live in my constituency and those of many other hon. Members. On average, 100,000 people a day pass through Heathrow. Excluding the London railway termini, which do not have the problems of customs and immigration, no other site compares with that. Heathrow is a unique institution. About 10 per cent. 60 of the world's jumbo fleet lands at Heathrow in the early hours of every morning. My hon. Friend the Member for Bristol, North-West (Mr. Colvin) and I have seen that for ourselves. It is a remarkable experience.
§ Mr. Raymond Whitney (Wycombe)
Is not Heathrow also remarkable for the enormity of its landing charges, for its staffing levels and for pursuing a pay increase policy quite out of keeping with that of the airlines operating out of the airport?
§ Mr. Atkins
I do not dispute that Heathrow has its problems, but I was dealing with the pressures on an airport coping with such numbers. Many of us would like to see a radical overhaul of the way that airports operate, and I appreciate my hon. Friend's point about landing charges. However, the pressure on British airports is to break even or to make a profit, so we must bear with the airport charges for the short term, much as we may dislike them. Having heard the argument, no doubt my hon. Friend the Minister will deal with it.
One criticism that I hear is that there are insufficient trolleys at Heathrow, but I learnt the other day that Heathrow has more trolleys than any other airport in the world—4,500. I was told that Atlanta airport always has trolleys available, yet Atlanta has only 500. Although Members of Parliament clearly feel that sufficient trolleys are not always available, it is an indication of the number of passengers passing through that all those trolleys are always in use.
§ Mr. Wilkinson
Does my hon. Friend agree that the interesting and unique feature of Heathrow is that it not only has more trolleys, but has many more porters leaning on their elbows than any other airport in the world?
§ Mr. Atkins
As I never use porters, I cannot comment on that. I know that there are problems. I do not seek to hide that fact, but one must recognise the pressures on an airport as busy as Heathrow. Most of the problems arise because it is a fairly small and highly congested airport. This results from the piecemeal development over the years, on which the arguments about Manchester, terminal 5, Stansted and so on will centre during the next few months and years. Compared with airports such as Atlanta and Schiphol, Heathrow is an old airport, so clearly the pressures are far greater.
A major criticism of Heathrow, which should be cleared up, is the recent pejorative description of it as "thief row rather than Heathrow". I pay tribute to the BAA and to the police for the improvement that has taken place as a result of their attention to this matter in recent years. In 1976, for example, there were 876 cases of theft involving about £3,150,000. That is a massive sum by any standards. Last year, as a result of the work of the police and the BAA, the figures fell to 160 cases involving about £410,000. That is a great tribute to the detection work carried out in catching those responsible. Although the figures in 1976 were devastating, they were by no means dissimilar to those at Kennedy airport. Nevertheless, the figures have been reduced. That is a further success story which bears repeating.
In my parliamentary activities with regard to aviation, I have always found British Airways and BAA extremely responsive to the criticisms—constructive, and even at times destructive—that we have made. At Gatwick, for 61 instance, there have been complaints about the nonproductive use of the runways, taxi facilities and similar matters. The BAA has always been most helpful in trying to do something about matters of that kind. I shall not deal with the successes of the Scottish airports, as I am sure that my hon. Friends will wish to do that.
In conclusion, I wish, not exactly to welcome the Bill, but to welcome the chance that it has provided for us to highlight some very serious problems. I agree entirely with my hon. Friend the Member for Ruislip-Northwood that we should be able to debate these matters at greater length and depth so that instead of dealing with them in a shallow and trite way we can investigate them in more detail. I hope that there will be a further debate in the near future so that we may deal with the problems raised by my hon. Friends about the changes in the BAA and in airport policy generally. I wish the Bill well in so far as it meets that wish.
§ Mr. David Lambie (Central Ayrshire)
The hon. Member for Saffron Walden (Mr. Haselhurst) voiced his opposition to the proposed development at Stansted and suggested that the BAA should instead maximise its present capital resources at the existing airports. If the hon. Gentleman wants support against developments at Stansted, he will certainly receive it from a number of Opposition hon. Members, especially those from Scottish constituencies. They will also oppose the development of a fifth terminal at Heathrow, to which reference has already been made.
If international airport facilities are to be developed in the United Kingdom, we should get away from the London mentality and look to airports such as Prestwick in Scotland, the other international airport, but one that is being killed by the policies of the various groups associated with the British aircraft industry.
I do not accept the view that if we do not allow developments to take place in London they will be transferred to Europe. I believe that if we hold back developments in London they will go to other parts of the United Kingdom. I believe also that these developments should be directed to Prestwick, which should become the "third London airport" and one of the major international airports of the United Kingdom. If people are prepared to come from other parts of the Continent, or from the United States, to airports on the Continent, surely they could use the underdeveloped resources at Prestwick rather than the overdeveloped resources of other airports in Britain and, indeed, on the other side of the English Channel.
Three Labour Members from Ayrshire—my hon. Friends the Members for South Ayrshire (Mr. Foulkes) and for Kilmarnock (Mr. McKelvey) and I—have put forward a scheme to the BAA and to Ministers to develop a task force for Prestwick. I shall not deal with that in detail as I am sure that my hon. Friend the Member for South Ayrshire will do so, as it was on his initiative that the scheme and the demand for a task force were put forward. Not only does the BAA seem to have forgotten the size of its capital investment at Prestwick, but British Airways has decided to withdraw all its services from that airport. We now know that British Airways has not heeded the representations of Ayrshire Members to continue the services so that we could have further discussions with the 62 Government and with other airlines to replace the lost services. It would not listen to those arguments, and the services have been withdrawn.
There is also growing competition among the BAA airports of Edinburgh, Glasgow and Prestwick. Those of us who are interested in the development not just of Prestwick but of Glasgow and Edinburgh have noticed that one airport is being set against another. Some people argue for the development of Glasgow or Edinburgh while others argue for Prestwick when the real enemy is not other airports in the Lowlands of Scotland but the policies of the BAA and other agencies such as the CAA and British Airways.
I was interested to hear the right hon. Member for Down, South (Mr. Powell) state that not only were British airport charges higher than those at any other airport in the industrial world, but that there were plans to increase the charges still further. Throughout last year, those of us who are interested in airports and airlines received representations from the airline companies against the charges set by the CAA and BAA for using United Kingdom airports. They argued that they were being discriminated against and that instead of trying to develop their services to United Kingdom airports they were being diverted to other European airports where charges were much lower. At that time, a great deal of pressure was exerted upon the Government by hon. Members on both sides of the House to re-examine the policies being forced upon the BAA and CAA. We were unsuccessful, as there are now rumours that the BAA is once again looking for substantial increases. We are told that these might be along the lines of average inflation—say, 12 per cent. I am sorry that the right hon. Member for Down, South is not present. If he believes that these are the charges and percentages that the BAA is examining, he has another think coming.
The leaked consultative document from the Civil Aviation Authority relating to the air traffic charges that it will levy gives some idea how the two bodies, the Civil Aviation Authority and the British Airports Authority, are looking at charges. I should like to refer to what the CAA proposes because it is possible that the BAA is considering similar proposals. I am informed that the Civil Aviation Authority is treating each airport on its own. It is drawing up a balance sheet and saying "That is income. That is expenditure. That is a profit. That is a loss."
If the airport on its own is making a profit, there will be no increase in charges. If the airport is making a loss., the increase will be based on that loss. That would be acceptable if it were the only criterion to be used. Organisations such as British Airways, by withdrawing services from Prestwick, are creating a loss-making operation at Prestwick. One nationalised concern does that and then other nationalised concerns—the Civil Aviation Authority and the British Airports Authority—say that because the airport is making a loss, it will have to pay increased charges.
The leaked document shows that proposed increases in air traffic control charges from 1 April 1982 will be 18 per cent. for Glasgow airport, 16 per cent. for Edinburgh airport and 28 per cent. for Prestwick airport. This is discrimination against Prestwick and in favour of Edinburgh and Glasgow. However, when the percentage increases for Edinburgh, Glasgow and Prestwick are compared with those for the London airports at Gatwick; Heathrow and Stansted, it is found that the increase for the London airports is between 7 per cent. and 8 per cent. 63 London is receiving an advantage from the fact that traffic is being directed into London. As that happens, together with increased provision of facilities at London—whether a fifth terminal at Heathrow or a new international airport at Stansted—the discrimination in favour of London against regional and Scottish airports becomes greater.
The Minister who will reply represents a Scottish constituency. He must answer to the Scottish people for the difference in these airport charges. The figures from the Civil Aviation Authority have not been denied. If that line is followed by the British Airports Authority it will mean the death of regional airports and certainly the death of Prestwick airport. At the same time as we are trying to persuade the Government, through a task force, to develop facilities and utilise under-used resources at Prestwick, we find that Government policy, implemented through other organisations, is killing Prestwick. I plead with the Minister to give an answer to my hon. Friends the Members for Kilmarnock and South Ayrshire and me on our proposal that a task force should develop the facilities at Prestwick.
Conservative Members have spoken about the importance of Heathrow as a major employer of 53,000 people. The number working at Prestwick is 1,500. However, as a proportion of the working population, the effect is greater than in the London area. If resources and employment levels at Prestwick are allowed to decrease, this will be happening in an area where unemployment—taking my constituency as an example—is running at over 23 per cent. and where major closures are announced every week. If the Government do not take action, unemployment will be further increased. I hope that the Under-Secretary will speak up for Scotland and Scottish airports and provide the Scottish voice that has been lacking for the last two or three years in the Department of Trade and other Government circles.
§ Mr. Kenneth Warren (Hastings)
As an aeronautical engineer, I always view Bills about civil aviation with interest. Seeing a Bill that inclines towards improvement in its title—the Civil Aviation (Amendment) Bill—I have high hopes. It was only when I came to read through the Bill that I found it distinctly doubtful. But for the fact that the Bill is in the hands of my right hon. and hon. Friends on the Government Front Bench, I would consider it a dangerous Bill. Reading between the lines, I fear that I can almost hear the tramp of the Whitehall warriors as they come forward with begging bowls at the ready. For all the commendation of my right hon. Friend for the Bill, there was a clear statement that the extra £825 million that it is possible for the two authorities—the British Airports Authority and British Airways—to borrow can go against the public sector borrowing requirement. That means that the taxpayer has to pay.
With respect to my right hon. Friend, I should have thought that the best course would be to offload the British Airports Authority, as would be possible, and to get it to raise money in the market. Even if it remains nationalised, can we not get past the Treasury's reluctance to allow nationalised corporations to go into the market to borrow money without it being set against the public sector borrowing requirement? It is ridiculous. The result of this £825 million increase in borrowing will inevitably mean 64 that other Departments are required to cut expenditure. We shall end up with a Bill containing high-flown phrases about civil aviation but amounting simply to full begging bowls for people who spend the taxpayers' money.
I have a lot of time for Norman Payne, the chairman of the British Airports Authority. I am sorry that he has never been recognised, as I had hoped might happen. Sir John King is also a man who gives of his best to make British Airways a success. However, the money they will receive has to be seen in the light of the competition for money for other good works.
The British Airports Authority is allowed to borrow 140 per cent. more and British Airways 60 per cent. more than is allowed at present—despite the problems of air transport all over the world. After all, air transport is an international industry. In the current edition of Aviation Week, the chairman of the International Air Transport Association's finance committee, on which British Airways are represented, stated that airlines had committed far too much capacity last year during a period of recession, low traffic growth and inflation and that the error had been repeated this year.
I fear that British Airways have been encouraged by the Government to go out and buy aircraft that they will probably not want. The fact that they have the ability to borrow the money will make them buy the aircraft anyway. We shall end up not only with a commitment but with even more traffic having to be fought for at ever lower prices. I fought to the best of my advocacy for Freddie Laker and Skytrain. Freddie, talking about low fares, is the world authority. He described recently what was happening over the North Atlantic as suicidal marketing and totally irresponsible. We are encouraging British Airways to go out on a suicidal course. There is no chance that British Airways can compete better than Freddie Laker with much lower cost operations. The chief executive of British Airways, Roy Watts, to whom credit has correctly been paid in the House, was quoted in a report from the United States as saying that last year British Airways lost $261 million and that this year they would lose $180 million. He went on:No business can survive losses on this scale unless we take decisive action nowIn such circumstances, the corporation should not be asking for more money. The last thing that it wants to do is to increase its debt. Yet here are people speaking of allowing it to borrow more money, and we shall allow it to do so.
I question whether British Airways will get round the problems that they would have if they went into the market to borrow the money by getting Government backing for this loan. One of the biggest lenders in the world for air transport purchases is the Merrill Hill partnership in the United States. Last week, its vice-president said that he expected the capital market to be more selective than it had been in the past. The Bill is a passport giving British Airways the right to buy new aircraft. They would not be able to get the money if they went into the market without Government backing.
We shall have to test the Bill assiduously in Committee. We need to be told exactly what is to be done with the money which we are allowing to be borrowed. How can we stand in the way of a solution to London's air transport problems by turning down the British Airways' option, which is only 40 per cent. of the cost of that which the British Airports Authority wishes to propose, and at the 65 same time agree to let the BAA go out and borrow that money? We need a lot more explanation, and I am sure that it will come in Committee.
My final question to my hon. Friend the Under-Secretary is: when will the money be repaid?
§ 7.2 pm
§ Mr. George Foulkes (South Ayrshire)
There is another important debate to follow this one, so I shall not make a lengthy contribution. However we should not underestimate the importance of this debate not just to individual constituencies but to employment in both Scotland and England.
There seems to be a concerted, orchestrated campaign among Government supporters—no doubt it is orchestrated from Central Office—in favour of the privatisation of the British Airports Authority. The hon. Member for Saffron Walden (Mr. Haselhurst) at least had the courtesy to say that there was another "sensible option—the sensible option that the BAA should take over all the airports in Britain and work out a strategic plan for them. If that is not done, the magnet of the south-east of England—or, since aircraft know no national boundaries, it could be the magnet of Schiphol—will attract the traffic away from the other airports and result in a downward spiral of the provincial and Scottish airports.
It was interesting to hear the hon. Member for Ruislip-Northwood (Mr. Wilkinson) call upon the Minister to announce a date for the privatisation of British Airways. If it had been propitious for outside investors—the friends of Government supporters—to privatise British Airways, the Under-Secretary would have announced a date by now. However, what was said by my right hon. Friend the Member for Lanarkshire, North (Mr. Smith) and other Opposition Members in Committee was proved right. Again and again we said that the Government were foolish to push through their Civil Aviation Bill because there was no way in the immediate future that they could privatise British Airways. The same goes for the British Airports Authority. The suggestion is pie in the sky.
§ Mr. Wilkinson
There is no question of any Central Office orchestration. The truth is that Government supporters believed that it was in the interests of the travelling public that privatisation should occur as quickly as possible. I suggested a date so that British Airways might be set a target date by which they were required to put their house in order so that they could get on a footing similar to that of Delta Airways in the United States and become a first-class, competitive international operator.
§ Mr. Foulkes
We asked repeatedly in Committee for a date. We asked the Government to insert a date into the schedule to the Bill. The Government were not willing to do that in view of the circumstances then prevailing. But every word of the Opposition's was proved right, and every word of the now right hon. Member for Chingford (Mr. Tebbit) was proved wrong. It is obvious that in the Government there is no correlation between success and promotion. The right hon. Member was moved out of the Department of Trade before the consequences of his actions were seen. Then he was moved out of the Department of Industry before the consequences of his destructive actions there were seen. I do not know to where he will be moved next. The Prime Minister had better he careful: there seems to be no other place for the right hon. Gentleman to go.
66 Glowing tributes have been paid by Government supporters to British Airways, and I respect the corporation for some of its actions. However, the amazing decision to pull out of the services between Prestwick and Toronto and New York was unbelievable. How can British Airways, our national flag carrier, not operate from the second most important airport in the United Kingdom? It is inconceivable.
What is more, why cannot British Airways make a profit when CP Air, Air Canada and North-West Orient apparently can and when Laker is applying for the vacant licences? Incidentally, I hope that the Civil Aviation Authority will grant Laker the licences, despite all my reservations about Freddie Laker. However, he has changed his tune. He is no longer talking about the low fares bonanza. Now he says that fares cannot be quite as low as he thought originally. I understand that he is even reluctant to meet the press. That is quite a change of tune. He does not want to talk too much about the money that he has to repay. But it is ridiculous that British Airways cannot operate a transatlantic service out of Prestwick.
I come now to the increase in borrowing limits proposed for the British Airports Authority. People in Scotland—I hope not in any traditional way fulfilling other people's perception of us—ask what is in it for them and what will come out of it. Although the outcome of the inquiry at Stansted is awaited before the necessary money is allowed for Stansted, if we look at what is proposed for Stansted we see that £380 million must be spent on its development, and that is merely the current estimate. It makes no allowance for inflation and no allowance for the way costs escalate. The final sum will be many millions of pounds more than that.
In this huge inquiry, the British Airports Authority and British Airways seem to be locked in mortal combat, each of them spending taxpayers' money, with the inquiry itself costing a great deal of money. This amazing battle, which my hon. Friend the Member for Central Ayrshire (Mr. Lambie) described as futile, is being waged despite the view the air traffic should be redirected from the south-east of England, with Prestwick being developed as the third or fourth London airport. That may seem crazy geography, but it is sensible planning. It is not just saying that people from Scotland and the north of England who at present go through London should be redirected on flights out of Prestwick or any other Scottish airport.
I do not often welcome changes and promotions, but it is good to see a Scottish Member being appointed Under-Secretary of State for Trade, and I shall flatter him even more in a moment. I hope that he will give serious consideration to the possibility of encouraging, if not directing, some of the airlines to have most, if not all, of their transatlantic travel out of Prestwick instead of out of airports in the south-east of England and then having feeder services from the various provincial airports into Prestwick so that passengers do not have to endure the congestion of Heathrow. That would be sensible. We would then get not only a major influx of transatlantic flights out of Prestwick but an increase in domestic travel within the United Kingdom, and, I hope, a reduction in the cost. It would improve the internal services as well as the facilities at Prestwick and the transatlantic services.
§ Mr. Steen
The hon. Gentleman talks about improving the domestic services. Is he aware that British Midland has been trying to get a licence to compete with the national 67 carrier from London Heathrow to Glasgow and Edinburgh, but that the Civil Aviation Authority keeps turning it down? Does he support the idea that the national carrier should have a monopoly between London and Scotland?
§ Mr. Foulkes
It is clear that in present circumstances it is up to the CAA. The CAA makes the decision. But if more and more people based in England had to fly out of Scotland for transatlantic travel, there would be a much greater likelihood of that sort of request being granted. I also suggest that it is not inconceivable that United Kingdom-Scandinavia flights should go from Scotland, and that people from England should interlink in Scotland with flights from Scotland to Scandinavia. Flights to North America and Scandinavia could sensibly originate from Scotland, with feeder flights from England into Scotland. That would cause a major shift in a large percentage of travel out of south-east England and through Scotland.
As my hon. Friend the Member for Central Ayrshire said, my Ayrshire Labour colleagues and I have asked the Government and the British Airports Authority to take some positive action to stop Prestwick airport limping from crisis to crisis, as it is now. We have asked them to consider setting up a task force to look at the possibility of stopovers by the European carriers on their transatlantic routes at Prestwick airport before going on to Schiphol or to Kastrup, Copenhagen, Stockholm or elsewhere. We have asked for the task force to look at the improvement of the surface access to Prestwick airport. In that connection, we all hope that Strathclyde regional council will make an early decision on the electrification of the Ayrshire lines which will help to improve access.
We have also suggested that the task force, or the Government, might look at the possibility of setting up a duty-free zone based on Prestwick aiport. On this matter I pay tribute to the Under-Secretary, the hon. Member for Aberdeen, South (Mr. Sproat)—a most rare and fascinating and, in this case, pleasurable thing to be able to do. He has written to me, unsolicited—not even having had a prod from me—saying that, as the new Minister, he is very interested in the idea of a Prestwick free port and is considering it. I am encouraged by the fact that the new Minister has taken such a positive initiative at such an early stage in his job.
I hope that the Under-Secretary will recover from that compliment by an Opposition Member. What I am about to say to him may finish him off. I wish to goodness that he would get the same sort of urgency into the Secretary of State for Scotland, who ought to have rather more interest in the development of Prestwick airport, since he represents the constituency in which Prestwick is situated. It is not in central or south Ayrshire—although many constituents from those areas work there. It is in the Ayr burgh constituency. I hope that the Under-Secretary will galvanise his right hon. Friend.
§ Sir Hector Monro (Dumfries)
The hon. Gentleman is making quite unfair aspersions about my right hon. Friend the Secretary of State for Scotland. Over the last 16 years my right hon. Friend has represented Prestwick airport amazingly well and maintained employment there in very difficult circumstances.
§ Mr. Foulkes
I appreciate that. No doubt the Secretary of State for Scotland will appreciate even more what the 68 recently honoured Member for Dumfries (Sir H. Monro) said. However, there seems to have been a great deal more urgency put into this matter by Labour Members in Ayrshire in the last couple of years. Perhaps it is because the Secretary of State—the right hon. Member for Ayr (Mr. Younger)—is in a difficult position. I asked a question of the Secretary of State for Scotland last week, and his Under-Secretary gave me a very mealy-mouthed reply about the task force suggestion. In his response this evening, I hope that the Under-Secretary of State for Trade will follow his good example with regard to the free port and say that there will be a positive initiative by the Government—not waiting for the other multifarious bodies involved to get their acts together—making it clear that Prestwick will be developed upwards and will not be allowed to go downwards into the ever-decreasing spiral that we have seen over the last few years.
§ Mr. Michael Colvin (Bristol, North-West)
I am sure that the hon. Member for South Ayrshire (Mr. Foulkes) will forgive me for not being drawn into what looks like becoming a bit of a parliamentary dust-up between Scottish Opposition Members and my hon. Friend the new Under-Secretary.
I imagine that at this time of difficulty in civil aviation there are similar Bills to this one before other Parliaments around the world in countries where Governments play any part in the financing of airlines or airports.
This Bill is proof, if proof is still required, that there is a world recession, and that it is not something that has just been dreamt up by Government spokesmen in order to explain a lack of growth in our economy.
Civil aviation, since its birth at the beginning of this century, has thrived on the growth of the economies of the countries which it has served. Most airlines have survived not necessarily because they are profitable but simply by persuading the banks that cash flows will steadily increase, and the banks, because of Government participation and guarantees, have been happy to roll up interest payments—hardly the way to run a sound business. But sooner or later, the crunch has had to come. The world recession, with growth temporarily halted, has forced airlines to face up to their day of reckoning.
The international air industry is now facing a critical financial plight. According to the International Air Transport Association, whose membership includes the world's major airlines, its members face a collective deficit of some $2.1 billion in the current year, and a potential operating loss on international scheduled services alone of 900 million dollars in 1981. That is before taxes, interest or other non-operating items. Interest payments in 1981 will total a staggering $1.2 billion—an increase of one-third over. the 1980 figure. Drastic measures are required if enormous corporations, including British Airways, are not to be forced into liquidation.
We must view the proposals in the Bill in that very gloomy context. There is no realistic immediate alternative to what is proposed. If and when it is enacted, the Bill will enable British Airways to proceed with the measures which they already have in hand, to—in British Airways' words—reduce the flab in the corporation, so that they can regain competitiveness, because that is the only way to survive in the long term.
69 It is a lesson which the rest of British industry is now learning fast, as we fight our way back into international markets in the face of cut-throat competition.
I have referred to the measures taken by British Airways to reduce its flab. I know that comparisons are dangerous, but there is one airline to which previous speakers have referred and with which all other airlines should be compared—the American Delta company. For many reasons., that company is unarguably the most successful airline in the world. Even today it pays cash for new aircraft when other airlines are selling aircraft. Back in 1974 Delta's productivity was twice that of British Airways. Perhaps being non-unionised has something to do with that. But I remember the then chairman of British Airways saying that, provided British Airways did not increase their work force, thanks to the growth of business in civil aviation, productivity would double in 10 years.
Alas, the growth years are gone, and who knows if and when they will ever return? British Airways' record loss of £141 million in the financial year 1980–81 was no surprise, but the drastic action called for to bring the corporation back into profit was already well in hand under the leadership of the new chairman, Sir John King, and the deputy chairman and chief executive, Mr. Roy Watts. I should like to put on record our appreciation for the brave way that British Airways' problems have been tackled by all involved, from the chairman down.
In the most difficult area—staffing levels—great strides have been made in reducing costs. Staff are now down to below 50,000—fewer than there were in 1969—while production in terms of seat miles has doubled over the same period. British Airways are well on their way to achieving their 42,600 staff target through the success of their severance plan, for which there have been 12,800 applications.
The new plan for Scottish internal services, which has been referred to by earlier speakers, should turn a £5 million loss it that area into a £1 million profit.
Internationally, 16 routes have been suspended and eight international stations are to close.
Previous speakers referred to the sale of assets. Among those are some aircraft. Five of the old Boeing 707 aircraft, which are very thirsty on fuel and are out of date, are to go. One Boeing 747 which is in service is to go. Two more which have been ordered are not to be delivered. Another airline is interested in BA's Boeing 747 freighter.
The hon. Member for Hastings (Mr. Warren) raised the question of British Airways using their new borrowing powers to buy new aircraft, but if they are to stay in business they need new, fuel-efficient, quiet aircraft.
Every effort is being made to get agreement on lower fares in Europe. Hon. Members have said that air fares are too low, but surely Europe is the one area in which they are at present too high. I hope that my hon. Friend the new Under-Secretary of State—whom I congratulate on winning his parliamentary wings—will be successful in the series of meetings upon which he is currently engaged with our European Community partners to bring about lower fares.
All is not doom and gloom in British Airways. In Mr. Roy Watts' words in today's Daily Mail, they are not the whingers and whiners that that paper suggested that they were last week. British Airways grew fat in the good years and must now get fit or go under. They have shown that 70 they can rise to the challenge, and are worthy of our parliamentary support. The sooner the increased limits are available to them the happier I, as a taxpayer, shall be.
There is, of course, one other way in which British Airways' costs could be reduced. I refer to the very high cost of using airports. Earlier, I spoke of the success of the Delta airline in America. It uses Atlanta as the hub of its activities. In the same way, British Airways use Heathrow, where they are the biggest single user, with 14 million passengers a year using over half Heathrow's flights.
The public inquiry into the future development of Stansted to provide the additional terminal space for passengers travelling to and fro the South-East of the country is under way.
It has now been shown that the development of a fifth terminal at Heathrow might be cheaper by about £545 million. It is more popular with passengers, it is environmentally acceptable, and it could save British Airways the extra £150 million a year in costs if their overflow had to move to Stansted.
There is growing support for the idea of a fifth terminal at Heathrow. I remind hon. Members that the inspector who conducted the inquiry into a fourth terminal for Heathrow—which is only now starting to be built—pointed to the advantages of the Perry Oaks site, and described the failure to develop it as a saga of lost opportunities. However, I do not believe that the opportunity is lost. I hope that the Government have not closed their mind to the possibility of a fifth terminal at Heathrow.
With regard to the British Airports Authority, I accept that the higher financial limits are necessary, but I question whether more public sector borrowing is the best way to finance BAA's activities; nor do I accept that squeezing airport users until the pips squeak is any better, especially when coupled with the artificial and arbitrary return on capital called for by the Government.
Other alternatives are available. The sale and leaseback of capital assets such as buildings, the lease of commercial concessions at airports, and the issue of bonds paying tax-free interest, as in the United States, are all alternatives which should and must receive urgent consideration.
I should like to see the day when not only British Airways but the British Airports Authority is instructed by Parliament to prepare a prospectus for the sale of shares to the general public. We have seen the salutary effects which the need to prepare a prospectus has had on decision-making at all levels at British Airways. I am sure that the same could happen at BAA. We could then have in this country an airport system as well as a national flag-carrier airline that was really capable of meeting the challenges of the twenty-first century.
§ Sir Hector Monro (Dumfries)
I should like to speak from a different angle from the one that has been largely canvassed throughout the debate, and to say a word on behalf of general aviation. By that I mean executive aircraft and light aircraft, which have an important part to play in the general development of aviation.
We are, after all, supposed to be a nation of entrepreneurs. We should be encouraging light aviation, as we did in the 1930s. That encouragement enabled us to have a highly efficient auxiliary Air Force and reserve Air Force when war broke out. But now it is extremely 71 expensive to learn to fly and to keep a pilot's licence. That is partly due to landing costs, and it must be taken into account when we discuss a Bill which deals, in part, with the inevitability of increased airport charges.
I hope that the Minister will bear in mind the impact of the legislation on general aviation, which is often pushed to the side of an airport, far away from public transport, and is generally the Cinderella of aviation. General aviation should be encouraged to play a much more important part. Encouragement can come through fair treatment over costs and facilities and through fair treatment concerning the use of aviation fuel for light aircraft. At present, it costs about £1 plus VAT per gallon more than the equivalent octane of motor fuel, and that is totally unjustifiable.
Through the Civil Aviation Authority, the regulations should be examined from the point of view of engineering and engine use, but there is no reason why ordinary motor fuel—carefully checked for cleanliness—should not be used for light aircraft. I hope that the Minister will consider the proposal seriously, because at present there is a lot of red tape getting in the way of progress.
I am glad that Opposition Members have already mentioned Scotland, because the impact of the legislation on Scotland will be important. We want Scotland to receive its proper share of the money that is to be spent on developing airports.
It is right that we should speak in praise of Prestwick, which has such a remarkable record for serviceability—and of course, Edinburgh and Glasgow. We should look at the question again in the context of the possible use of Stansted. However, the adoption of Stansted is hard to justify. There is not much difference in the time that it takes to get from London to Manchester compared with the time that it takes from London to Stansted. When we have good airports such as Manchester and Prestwick we should, wherever possible, develop them.
Aircraft take off from London to go to Boston, Atlanta and many other cities. Therefore I cannot see why everyone should think that they must come to London. On the rare occasions that I fly in from overseas, I would be happy to land at Prestwick or Manchester instead of fighting my way through Heathrow airport. Therefore, we want a fair proportion of the development money—if that is what the Bill will eventually produce—to be spent on the Scottish airports for which the British Airports Authority is responsible. Allied to that, we want the maximum opportunity and assistance to be given to Scotland's internal airlines. There is no doubt that pioneers such as Loganair have done a magnificent job, not only in running air ambulances but in running fine internal air services. Such companies, allied with companies such as British Midland Airways and those that wish to develop in Scotland, should be given every encouragement.
Where there are sea crossings and difficult terrain to be covered, the better the air service is, the better it is in every way for productivity in Scotland. Transport equals time and productivity. We need every possible facility to improve our connections to major cities in the South and to help develop Scotland's economy. That point will not be lost on my hon. Friend the Minister, because every time he visits his constituency he will find that to be so.
72 By and large I welcome the Bill because it will help to develop aviation in the broadest possible sense of the word. However, I hope that my hon. Friend the Minister will think about the few points that I have put to him and that he will ensure that Scotland gets its fair share of such an important development.
§ Mr. James Hill (Southampton, Test)
The debate can be divided into two separate sections. I shall devote my initial remarks to the British Airports Authority. After the war I joined the British Overseas Airways Corporation and at that time, in 1947, Heathrow was already in being. When I started to fly aeroplanes out of Heathrow—after two years on flying boats—I used London airport as a permanent base. In those days the airport consisted of a series of caravans, a lot of mud and one runway, 280 degrees right. It is no longer a series of caravans, but a series of islands of almost bungaloid existence that are loosely connected with one another.
Heathrow—which was chosen then as an ideal site for a major London airport—is still the ideal site for such an airport. The argument has centred on whether the British Airports Authority should extend Heathrow—after the fourth terminal has come into existence—and build a fifth terminal. It is argued that Stansted should not be put forward as the third London airport. I was against the idea that Maplin should be the third London airport, because people, airlines and employees like convenience. Maplin would have necessitated not only a large airport and a seaport, but a city of 250,000 people. Therefore, we are not talking about Stansted in terms of the airport that exists now.
A B 17 squadron was based at Stansted during the war, and Stansted was an American base. The runways were in existence at the end of the war. When we talk about a major airport, we are talking not only about the building itself but about the build up round it and the 250,000 people that will live in the area. To build an airport vast areas of land have to be purchased and thousands of people have to be disturbed.
The alternative to Stansted is a fifth terminal at London airport. We have heard about noise and pollution of the environment. Indeed, my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson) said that he lived in Richmond and was on the right turn out of 010 degrees runway. All those in aviation know that the prevailing wind at London airport comes from the west. The runways most often in use are 28 left and 28 right. That helps those who want London airport to be extended by a fifth terminal, because from an aviator's point of view it is far better to take off to the west in a prevailing wind than to the east over a tremendously built-up area.
I happen to live just down the road from Parliament, and the early morning aeroplanes that come in on final for the 28 left and 28 right are often extremely noisy. However, at least the noise is contained within that area. My hon. Friend the Member for Twickenham (Mr. Jessel) should perhaps have a course on circuits and bumps at London airport to get a feel of where the noise patterns would create the most disturbance.
It can be seen that I am firmly against Stansted and in favour of an extension of London airport. I was against the idea of Maplin, and I am against a further extension of Gatwick. There are aviation problems, noise patterns and restrictions that the normal pilot will agree would put 73 Gatwick out of the contest if it came to a choice between another runway at Gatwick and an extension at Heathrow. I am sure that my hon. Friend the Member for Ruislip-Northwood will support the idea of Heathrow having a fifth terminal.
The British Airports Authority has been castigated for its charges. I recall that charges had to be increased to such an extent that the Secretary of State for Trade was presented with an order by the various airlines to the effect that such action was unlawful. It was claimed that the charges were far too high. That is true. As I said earlier, the charges at Heathrow are the highest in Western Europe. No hon. Member will contradict that. Those charges have an effect on the price of air tickets. Those who rent shops and the so-called duty-free stores have to pay extremely high rents. The small man does not even get a look in. At the big airports, there is no room for him.
I was chilled when I heard a remark to the effect that the British Airports Authority should take over all the United Kingdom's airports. Some airport authorities—I think, in particular, of a private one in Southampton do not inject enough capital into new buildings and facilities. Therefore, in certain cases the BAA would probably use the weight of its financial stability to produce a better service. However, the majority of airports are well run.
It would be impossible to call Prestwick the third London airport, but in my flying days we were happy, when the weather had closed in at London, to land there. It was a diversion airport then, but it is a perfect airport. It has great potential—if only we could see it—with excellent feeder services. It could be a force to be reckoned with in the aviation world.
I now deal with British Airways, which in my day was called British Overseas Airways and British European Airways. They had links with the Empire, and unprofitable routes had to be kept on. They then had links with the Commonwealth, and routes had to be kept open for political purposes.
There was no question of making profits. They have made a loss since they have been asked to operate unsuitable aircraft. We all remember the farce of the Princess flying boat—which resulted in the loss of a lot of money—the Brabazon and the Hermes aircraft that British Overseas Airways were forced to operate and which had to have a 115 per cent. payload in order to make money. Of course, no pilot, no matter how skilled, could make an aircraft with a 115 per cent. payload take off.
All those aircraft were forced on to the airline management at the time. How often those concerned must have said—especially an outspoken chairman such as Sir Miles Thomas—"God save me from politicians". Politicians were destroying the industry, even in those days. There were too many politicians with too many fixed ideas. They were trying to operate an airline as if it was the political arm of a party, consequently forcing upon the management decisions that would prove loss-makers long after the politicians had released their hold on the matter.
British Airways are trying very hard. They have an excellent chairman. I agree with my hon. Friend the Member for Ruislip-Northwood that the chairman is there on a part-time basis and is an expert in banking. At the time he was thought to be the ideal chairman because of his banking expertise. We all believed that the company was about to be floated on the market. That has not 74 happened yet, but it would seem that soon we shall find British Airways shares—it is a limited company—coming onto the market.
As there are no Ministers on the Front Bench, I must rely on those present to relay my message to the Secretary of State or the Under-Secretary of State. If my hon. Friend the Under-Secretary of State who will reply to the debate cannot privatise now and has to wait for a profit margin before he can offer the shares, in the light of the profit and loss accounts of British Airways, can he visualise those shares being offered on the market during the lifetime of the present Parliament? If British Airways do not make a profit they should be released from the dread, as they see it—not as I see it, as a Conservative—of hovering privatisation.
The threat of hovering privatisation is working on the staff. Many of them have taken redundancy because they feel that there is no future for them if the company is privatised. If the company can be made to run more efficiently, they will be considered the inefficient arm of it. I ask my hon. Friend the Under-Secretary of State to say categorically this evening whether he will issue the shares in the market place within the lifetime of the present Parliament.
If my hon. Friend will not issue those shares, careful consideration must be given in the Department to the release, on a time scale, of the effect of hovering privatisation. I wish desperately for the privatisation of British Airways. Many people—ex-employees such as myself and present employees—will see the romantic side of aviation and will buy those shares, although they may not give a very good return. Many colleagues have told me that they will buy British Airways shares when the Government release them. Why not put that to the test? We should not have hard-fought battles in the House of Commons to get privatisation and then take no action at all. No action is a sign of weakness. If British Airways make a profit, how will the matter be resolved in the Department? On the figures, a decision should be made to release staff from the anxiety of privatisation.
The great thing about British Airways is that they provide a first-class service throughout the world. They run many unprofitable routes. They are pruning 16 other routes now. Others—such as the Concorde route to Singapore—were unprofitable but were continued for some time. They are great entrepreneurs, although subject to political interference—rightly or wrongly. They should be given encouragement to replace some of their doddering old aircraft. For example, Tridents are unsuitable competition on the London to Paris route. There is no contest. British Airways wish to, and should, use much of the further financing to increase their fleet and, if necessary, buy the Boeing 757s and 767s. I would prefer them to buy the Airbus—the A320. If they want new aircraft they must spend money. That is what the Bill is about. I wish British Airways well.
§ Mr. Bill Walker (Perth and East Perthshire)
I agree with my hon. Friend the Member for Southampton, Test (Mr. Hill). The important thing in running any airline is to have the right aircraft doing the right job. A difficulty from which British Airways have suffered is that they have been flying the wrong aircraft from the wrong airports and doing the wrong job. No doubt some parts of the Bill will deal with that.
75 The hon. Member for South Ayrshire (Mr. Foulkes) referred to the Secretary of State for Scotland. That hon. Gentleman would be the first to agree that the Secretary of State for Scotland was instrumental, in no small measure, in bringing the Jetstream project to Prestwick. The hon. Gentleman knows that, because he and I were actively involved in the project.
§ Mr. Foulkes
Does the hon. Gentleman agree that there would be no Jetstream project at Prestwick or any Scottish division of British Aerospace if the Labour Government had not nationalised the industry—a move that was vigorously opposed by the present Secretary of State for Scotland?
§ Mr. Walker
I am sorry that I allowed the intervention, because, as ever, the hon. Gentleman is uncharitable enough not to recognise that we must often work together to achieve the best results for Scotland. It does not serve the best interests of Scotland to fight each other.
I fly as a passenger at least twice a week in and out of the two London airports now in use. When using the British Caledonian service—which is the regular one—I fly into Gatwick. Alternatively, I use the shuttle service to Heathrow. Therefore, I speak—like many of my colleagues—as a regular user of those services. In my spare time I fly machines of different types, some with engines and some without. I shall, therefore, take up later the argument expressed by my hon. Friend the Member for Dumfries (Sir H. Monro), who dealt with light aviation.
Clause 1 deals with the British Airports Authority's financial limits. I make a plea for some of the increased finance to be used to do something about the standards of facilities available to shuttle passengers. The standards fall far short of what we expect from a modern airport. The boarding gates are now open 25 minutes earlier, but there are still problems. On many occasions passengers are delayed because of technical problems. 'A technical problem on Friday evening was a strike by the Transport and General Workers Union, which delayed many people at Heathrow. We had to make use of the facilities, but they were not good enough. I refer in particular to the lounge and toilet facilities. Some of the money should be used to improve them.
In Scotland we are worried about the high cost of landing fees levied by the authority on the airports under its control. It has an adverse effect on civil aviation development in Scotland. I hope that the Minister will remember Scotland's problems when he is sitting in his office.
I am aware of the current litigation, which will affect BAA's charges and how they will be levied in the future. I understand that the BAA, in co-operation with the industry, has set up consultative machinery to deal with that and related matters. I stress that this is not the time to play about with structures and additional charges. I hope that the Minister will convey that to the BAA. Any increase in the near future must be on a basis that can be fully justified, instead of the across-the-board increases with which we have been faced. Until the litigation is completed, that is the way to handle any increases if they are contemplated.
When the litigation is concluded, consideration should be given to either privatising the BAA—breaking it up and giving it to the private sector to run, as has been done so 76 successfully elsewhere in the world—or transferring Scotland's airports to the Scottish Office so that it can look after the Scottish dimension, and in particular the tourist traffic which is so important to Scotland. That would remove Scotland from the constant bickering about the London airports problem, which has dominated today's debate.
Reference has been made to the British Midland Airways application. I believe that the Civil Aviation Authority came up with the right answer. There is no need for another operator on the Edinburgh to London or Glasgow to London routes. One can fly on British Caledonian aircraft without any trouble, because there are always plenty of seats. The shuttle service is a vital part of the Scottish business man's life. Anything that would put the shuttle in jeopardy would not be well received.
In clause 2 the financial limit for British Airways is increased by £200 million. I congratulate the chairman and board of British Airways on the way in which they have set about reducing the overmanning that has bedevilled management since the merger of BOAC and BEA. I trust that they will be successful in reaching the objective of a reduction of between 9,000 and 10,000 by 1982.
I am particularly interested in the Scottish internal plan. I congratulate managment and employees on their realistic approach to the introduction of new working methods. It is a major breakthrough, which should not be ignored. I hope that the Minister will note that. Some of the new working practices proposed might be said to turn the clock back. My hon. Friend the Member for Southampton, Test will remember when it was not unusual for air crew to help to refuel. I am pleased that at long last sanity is being applied to operations.
It will be no mean achievement if the number of staff is reduced from 600 to 180. Every air traveller in Scotland will wish the scheme well. I look forward to the introduction of aircraft that are more suited to the routes and more in keeping with the needs of the 1980s. Putting the right aircraft on the job and introducing work practices to suit the needs of the travelling public is the way forward.
I am sad that part of the British Airways recovery plan involves a loss of flights from Prestwick. However, I recognise that it is not possible for the airline to break even and continue to operate on routes and from airports that contribute to the airline's losses.
Reference has been made to the successful Delta operation. Delta is successful because it operates out of one airport on a spoke principle. If British Airways were capable of doing that, that would change dramatically the burden of financial involvement and costs. That is an argument for another terminal at Heathrow. It makes sense that the flight carrier should operate the bulk of its services in the way in which Delta operates in America.
I am saddened that British Airways have decided to pull out of Prestwick, but I am delighted that other operators are keen to get in there and take over the services. I hope that the Secretary of State will give every encouragement to the other operators who are trying to get into Prestwick.
§ Mr. Lambie
The hon. Gentleman has said that other operators are considering moving into Prestwick. Is he aware that Jetsave has applied for permission to operate a route from Edinburgh to Toronto from 1 April? Is he aware 77 also that instead of going to Prestwick the companies to which the hon. Gentleman refers are considering Glasgow and Edinburgh, because of lower charges?
§ Mr. Walker
I have no doubt that the Minister will have noted that. I have no wish to direct any airline to a particular airport in Scotland. The three airports have to be made as viable as possible. Our job is to try to keep all three going. I do not wish to argue the case for one against another. I am delighted that operators want to operate out of Prestwick. British Airways, in common with other United Kingdom airlines, are continuing to press for lower air fares on their European routes. That is an important aspect of the problems of modern aviation. The high charges in the EEC on routes within the EEC do nothing for the Community. They damage its interests. It is time that the Community came to terms with that and did something about it.
The two biggest problems facing airlines are the effects of the recession, which have reduced the number of passengers, and the cost of fuel. The light commerial side of the industry has suffered considerably. The cost of Avgas, which is now over £1 per gallon more expensive than motor fuel, is the principal fuel in use.
In my constituency, one of the country's leading training schools is suffering a massive reduction in revenue. Most of the students trained by Air Service Training at Scone aerodrome are from overseas. Flying training has already been reduced at the school by 50 per cent., and many instructors have been made redundant. That applies also to maintenance and engineering training. Unless remedial action is taken soon that flying school, which has contributed to the nation's overseas earnings since the end of the Second World War, might have to cut back even further on staff. The Minister is due to visit the school soon, and I hope that he will bear that in mind.
Clause 4 deals with statutes relating to civil aviation. I welcome the cleaning-up process, because one of the problems experienced by everybody in the flying business is the frightening array of regulations. I am delighted that we are trying to tidy things up.
I come now to the concern felt by light aviation users of airspace that is becoming increasingly controlled by the national air traffic services and the difficulty they are experiencing. I make a special plea on behalf of glider operators. Although gliders are allowed to fly through airways, they are not allowed to climb up airways. That makes it difficult, because it is now proposed to have a new airway between Edinburgh and Aberdeen.
The proposal is to take the airway over Portmoak, which is one of the finest gliding sites in the United Kingdom, if not in Europe. That site is ideal because of the wave lift—in other words, the lift that comes from the mountains to the north-west. If a glider climbs in a wave he climbs vertically, but under the rules that is not allowed. Therefore, the thought of putting an airway in the path of one of the finest gliding sites in Europe is frightening.
I refer next to the difficulty experienced by local authorities that operate airports. In the main, these authorities supply the facilities that are used by the light aircraft users. The Tayside region, which operates the Riverside airport at Dundee, has been actively involved in upgrading that airport in an effort to attract more business from oil-related industry. Rapid communications are an 78 essential part of that business. The airport at Dundee requires upgrading, which means that the local authority must borrow money.
Unfortunately, in this instance the Secretary of State for Scotland has not been as helpful as I would wish. I therefore hope that my hon. Friend the Under-Secretary of State for Trade will advise him of the importance of local authority airports operating to the maximum efficiency. To do so one must have the right aircraft doing the right job. If the runway happens to be short or too narrow it is impossible to fly the right aircraft for the right job. That situation exists at Dundee airport.
The EEC has already agreed to provide substantial funds. Once the Scottish Office has assisted in "topping up", the runway will be extended to 1,100 metres. That will enable the airport to operate the type of aircraft that will make it economically viable to offer a service from Dundee, via Carlisle, to London. It is important that such improvements take place, because without a feeder network there will be no future for our main airports.
§ 8.2 pm
§ Mr. Toby Jessel (Twickenham)
I listened with great interest to the speech by my hon. Friend the Member for Perth and East Perthshire (Mr. Walker). The debate has been noteworthy partly because such a large number of Scottish Members have taken part.
We would all like more tourists to visit Scotland, but, as in other countries, tourists seem to congregate at certain places that are of special attraction to them. I live just by Hampton Court in my constituency. That is the third most visited site in the country after the Tower of London and Stonehenge. I sometimes feel as if I see all the tourists at home in the morning; and again here at the Palace of Westminster in the afternoon.
One wishes that national airport policy could encourage tourists to travel around, because there are man, other places to be seen in Scotland and other parts of the United Kingdom from which they could derive much enjoyment without the overcrowding that takes place at the most popular places.
But the fact is that at present the overwhelming majority of tourists and, indeed, visiting business men come to London and the South-East, for one reason and another. We cannot make them go to Scotland, or even Liverpool for that matter—I notice my hon. Friend the Member for Liverpool, Wavertree (Mr. Steen) in the Chamber—simply by siting airports and operating aircraft to fly to those places. Therefore, the Government, the airlines and the airports authorities must decide whether to cater for the demand that actually exists.
I wonder how much that demand will increase in the future. I hope that in his reply my hon. Friend the Under-Secretary will make clear the assumptions on which the supposed unavoidable expansion in the number of tourists is based. The massive relative reduction in the real cost of air travel has been one of the major factors that has caused the enormous expansion in the number of passengers in and out of airports. Technological advance has also played a part—for example, the use of large aircraft that make each seat for each journey cheaper, especially over long distances.
About 20 years ago, I remember seeing a large placard on Cromwell Road out of London advertising BOAC economy class return fares to New York for about £200. Today, people can fly to New York for less than £100. 79 When inflation is taken into account, the real cost of visiting New York is now only about 10 per cent. or 15 per cent. of what it was then.
Another example of a price falling fast is that of ballpoint pens, which now cost about 20p whereas they were about £5 just after the war. There are few other examples of prices of commodities having fallen so sharply. That has happened with air travel, but I am not at all sure that it will continue in the future. I believe that costs will increase, and I doubt whether the major factor is airport landing charges, as some hon. Members seem to suggest. Oil price increases and other costs are likely to be bigger factors. The demand for air travel is elastic in its response to price. If the real price of air travel increases, the number of people wanting to travel in aeroplanes is likely to diminish.
I am not convinced that there will be a major growth in the number of air travellers in the mid-1980s and 1990s, as British Airways, other airlines, the airports authorities and the Government seem to assume. However, I am willing to be convinced on that point, and perhaps my hon. Friend will produce the arguments.
Until we are more certain about the number of future air travellers, I hope that we shall not proceed with any airport expansion at Stansted. I certainly hope that we shall not proceed with the fifth terminal at Heathrow.
From what the Government have said, both in the House and in letters, I understand that their policy is quite definitely that the fifth terminal at Heathrow should not be built. To dispose of any doubt, I quote from a letter from my right hon. Friend the Secretary of State which he sent to me on 4 August after I had seen him. He wrote:As you will recall, in his statement on airports policy on 17 December 1979, John Non said:—'We have also given careful consideration to the possibility of constructing a fifth Terminal at Heathrow, on the Perry Oaks site, in order to increase still further the capacity of that airport. However, we estimate that it would take at least 12 years to complete such a project, and it would impose added burdens on the surrounding area'—I have a great interest in trying to prevent that—'these considerations have led us to the view that a fifth Terminal should not be provided'. In his letter to you of 13 November 1980, which was issued as a Press Notice by my Department, Norman Tebbit, the then Parliamentary Under-Secretary of State for Trade, confirmed that the Government's view remained unchanged; and in reply to a Parliamentary Question by Kenneth Carlisle on 13 May 1981, I reaffirmed the Government's view that a fifth terminal at Heathrow should not be provided. I do not think this can leave you in any doubt about the Government's views on the matter.I congratulate the Government on making their position so clear, and I congratulate the BAA on the strong stand that it has taken to the same effect.
§ Mr. Colvin
If what my hon. Friend says is true, why are the Government wasting money on a public inquiry at Stansted at which the question of a fifth terminal at Heathrow will be one of the most important items on the agenda?
§ Mr. Jessel
I agree with my hon. Friend. It is a total waste of time and money for the Stansted inquiry to consider the fifth terminal. It should not have been allowed. It should be stopped at once. The inspector was right when he questioned whether, in the light of Government policy, his being allowed to inquire into the 80 fifth terminal was wasting time, because of the Government's clear policy that such a terminal should not be provided.
The problem arose when a local authority in Essex applied for planning permission for the fifth terminal at Heathrow, even though the airport is at least 50 miles outside that authority's territory. The London borough of Hillingdon, in which the relevant part of the airport is sited, decided that it could not, or would not, deal with the application. It referred the matter upwards to the Department of the Environment which, instead of taking a separate decision, said that the application could be considered at the Stansted inquiry.
The way in which all that has evolved suggests that coordination between the Department of the Environment and the Department of Trade is not what it might be. It would have been much better if the planning application for a fifth terminal had been considered separately instead of being rolled into the Stansted inquiry where it has caused a great deal of unnecessary confusion.
Aircraft noise is a highly sensitive subject in many constituencies near Heathrow. Aircraft noise interferes with people's lives in many ways. It affects work in offices, schools and hospitals and spoils people's private enjoyments, such as sitting in the garden or watching television. It must be said that some people do not seem to mind the noise and have become almost immune to the nuisance. But it is annoying to a large proportion of my constituents.
British Airways produce glossy leaflets at taxpayers' expense—I view that as an improper use of public money, because the airline is virtually running a political campaign in support of its views—but it is not enough for British Airways to say that, if a fifth terminal were built, there would be no increase in noise levels. We want not merely no increase, but a positive, substantial and permanent reduction in noise round Heathrow. We want to take advantage of the development of wide-bodied, quieter aircraft to get less noise near the airport.
As I made clear in an intervention during the speech of my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson), the noise "footprints" are based on the noise and number index which attaches more weight to the peak loudness of each flight than to the number of flights. The index was introduced 15 or 20 years ago when there were fewer flights—they now total 600 a day in and out of Heathrow—and my constituents are concerned less about peak loudness—except of the noisiest planes—than about the constant interruption of their lives every two or three minutes. We ought to take advantage of the increasing number of bigger, as well as quieter, planes to get fewer flights from Heathrow.
British Airways are one of the finest airlines in the world. I am second to none in my admiration of them. I often fly with British Airways. However, like other industries, the airlines must respect the health, peace and quiet of other people. We have health and safety legislation concerning industry, and it is up to society, expressing itself through Parliament, to make sure that airlines do not interfere unduly with the health, peace and quiet of the people.
British Airways blithely assume that the sewage works at Perry Oaks, which is one of the largest works in the country, could be resited, but they do not suggest where it would go. If there is any question of putting the works 81 in Twickenham, I shall fight like a tiger to stop it. I am sure that my lion. Friend the Member for Ruislip-Northwood would do likewise in Ruislip-Northwood. I see on the Government Front Bench my hon. Friend the Member for Putney (Mr. Mellor), who has been implacable in his opposition to aircraft noise and diligent in campaign against it. I am sure that he would not allow the sewage works to be resited in Putney. I am sure that the hon. Member for Feltham and Heston (Mr. Kerr) would not allow the works to be resited in his constituency. If British Airways imagine that the sewage works can be moved without a hell of a fight, they are making a serious and simplistic mistake.
I end where I began, with a reference to Scotland. At least the Scottish economy benefits from the operations of the BAA, because the authority makes a profit of £20 million on its sales of duty-free whisky.
§ Mr. Jessel
I thought that it was. It must be at least partly duty-free, because the BAA makes an enormous profit on its aircraft whisky sales. I should like to see that profit used to provide double glazing for the windows of the homes of my constituents who have to suffer from the noise round Heathrow.
I support the suggestion of my hon. Friend the Member for Harrow, Central (Mr. Grant) that it ought to be possible to buy duty-free drink at the end of a journey, not merely at the beginning or during a journey. The present system results in unnecessary effort for passengers and a waste of fuel; and safety considerations are also involved. I hope that the Government will enable passengers to buy duty-free drinks at the end of their journeys.
§ Mr. Anthony Steen (Liverpool, Wavertree)
After such a lengthy debate it would be wrong for me to detain the House for longer than necessary. I told Mr. Speaker that I would speak for no more that six or seven minutes, and I propose to keep to that.
By giving British Airways the opportunity to increase their borrowing requirement, the Government are increasing their commitment to the national carrier, which must have a detrimental effect when private airlines seek licences, through the CAA, on routes on which British Airways are currently enjoying a monopoly. I refer particularly to domestic flights.
It is true that the Government's policy has been to liberalise international routes by deregulating licences and lifting artificial contraints which, in the past, have prevented private enterprise from competing with the State airline. That is why Laker and British Caledonian fly to the United States and to Hong Kong, but the Hong Kong route was won only when the Secretary of State for Trade overturned a CAA decision. That was a landmark for private carriers who were at last given the opportunity to compete for a share of the international traffic on major trunk routes.
Unfortunately, the Secretary of State has yet to take the same enlightened entrepreneurial decision on the domestic trunk routes on which British Airways hold a monopoly. That is preventing the private sector from operating and is denying private airlines the opportunity to compete with the State airline, except in one or two cases.
That is rather odd, because when British Midland applied recently for a licence for the Belfast-London route, 82 the CAA said that British Airways had poor timekeeping and was unreliable. When British Midland's application for a share in the Glasgow-Edinburgh route was turned down a few months ago, British Airways were told by the CAA that their fares were too high. In spite of these criticisms and customer complaints, British Airways have been allowed, with one or two exceptions, to continue unchallenged on the London-Scotland routes. The Civil Aviation Authority has protected the State carrier's status. That is a further example of the way in which the Government are protecting State enterprises.
Why is the CAA turning down the private sector and favouring the public carrier on the principal domestic routes? I understand that it claims that it is the wrong time to introduce competition, especially as British Airways are in a bad way. If that is the reason for protecting the State carrier, there is a stronger case for refusing new licences to permit competition with existing private sector operations. However, the CAA has approved licences for non-regulated charter flights to the Channel Islands, and has allowed them to encroach on the established private sector scheduled air services, which flies throughout the year. I understand that only 100,000 use that service whereas 1 million use the Glasgow service.
The private carriers are being given the worst routes and are being made to fight one another for the crumbs while the State carrier is allowed to remain unchallenged on the principal routes.
When British Airways left Speke airport, Liverpool, about three years ago they were losing £1.6 million a year. British Midland applied to the authority to obtain the licence.
It has cut dramatically the losses of £1.6 million a year in spite of the recession and the ruinous three-month air traffic controllers' strike earlier this year. However, several million pounds will be lost on Merseyside and British Midland will, I am told, pull out if it is prevented from competing fairly with the major State airline on the major trunk routes. If the Government believe in contracting out local authority services to private enterprise, what have they against contracting out airline services to private enterprise? Why are we not prepared to do in the sky what we are prepared to do on the ground? It cannot be good policy for the Government to discriminate in favour of the State airline if that means putting private enterprise out of business.
What is the point of having a Minister responsible for Merseyside who is concerned to attract private enterprise to the region if, at the same time, existing private enterprise is caused to go out of business because of the direct intervention of Government policy? I ask the Minister to give these matters consideration when examining British Midland's appeal against the CAA's decision to refuse it a licence for the Glasgow-Edinburgh routes. Further, will he reaffirm that the Government will liberalise the domestic licence system from the top downwards—in other words, from the trunk routes to the small routes? Will that be done on lines similar to those that have been taken on the international routes?
If the Government continue to favour the monopoly of British Airways, British airlines and other entrepreneurial independent private airlines will be hammered into the ground. That will happen not because of free competition on the open market and not because other airlines are 83 running a better service, but because the Government are protecting the State monopoly and so prohibiting fair competition or, indeed, any competition.
§ The Under-Secretary of State for Trade (Mr. Iain Sproat)
I welcome the fact that the debate has been wide-ranging. As my hon. Friend the Member for Preston, North (Mr. Atkins) said, we do not have as many opportunities as we should like to debate these extremely important matters. I welcome the chance that we have been given this afternoon and evening to do so. I shall turn to some of the issues that have been raised that ranged rather wide of the fairly narrow contents of the Bill. Before I do so, I shall underline the essentials set out in the Bill from which, perhaps, some attention has been distracted during the debate.
The main purpose of the Bill is simply and straightforwardly to increase the borrowing limits of British Airways and the British Airports Authority. I say in response to my hon. Friend the Member for Hastings (Mr. Warren) that the BAA needs to have its limits raised because it has extensive plans for improving and extending facilities at the airports which it currently runs. I give the assurance to my hon. Friend the Member for Perth and East Perthshire (Mr. Walker) that some of the money that the authority will be seeking to borrow will be used to improve the facilities that he thinks are below standard.
Secondly, the authority needs the money to provide for terminal 4 at Heathrow and, subject to the relevant consents that have not yet been granted, terminal 2 at Gatwick. Those are in part the reasons for seeking to raise the authority's borrowing limits. However, the great majority of the money that will be spent on these projects will come from the authority's profits.
My hon. Friend the Member for Surrey, North-West (Mr. Grylls) drew the attention of the House to the authority's finances. He did so during the speech of my right hon. Friend the Secretary of State for Trade, who said that I would say something about them. I am extremely glad to do so. However, I am curtailed somewhat because the authority and the Government are being sued by several foreign airlines.
§ Mr. Robert Atkins
I recognise the pressures upon my hon. Friend, which determine what he can and cannot say. Will he bear in mind that, while we recognise and support the welcome decision that was published this morning about the terminal 2 inquiry at Gatwick, and the decision to consult further about flow forecasts and other matters, there is an urgent need to reach a decision as soon as possible so that people's minds can be put to rest, whatever side of the argument they favour?
§ Mr. Sproat
I am acutely aware of the importance of my hon. Friend's intervention. As I have said, I cannot say much about the authority at present. However, I can remind my hon. Friend the Member for Surrey, North-West that at least the authority has been consistently profitable over the years. That is an achievement for a nationalised industry that we should not underestimate. Off the top of my head, I cannot think of any other nationalised industry that has a similar record. In spite of that, successive Governments, and especially the present one, share the feeling of my hon. Friend and others that 84 the authority has not been doing all that it could by way of financial return. That is why the Government agreed with the BAA a specific target to get a real rate of return in cost accounting terms of 6 per cent. per year spread over three years. That has been agreed between the Government and the authority in the general interests of the taxpayer. We believe that it is absolutely right.
I make it clear that we have agreed not only a 6 per cent. real rate of return, but two performance criteria—I am sure that my hon. Friends will be glad to hear it—both with regard to the ratio of employees to passengers in BAA airports and the ratio of costs to passengers. I hope that, as I have said those few words about the financial targets that we have set the BAA, my hon. Friends will understand that I cannot say more because of the litigation currently before the courts.
I was saying why we need the increased limits. I have explained why the BAA needs them. British Airways need them because, if they are to reach profitability, it is essential for them to fund investment programmes to which they are already committed—for fuel—efficient aircraft and less noisy aircraft, particularly the Boeing 757. I emphasise the point strongly made by my right hon. Friend the Secretary of State—that every major new borrowing will require his consent. There is no question of British Airways or the BAA being able to race away with the money without parliamentary or governmental control. With regard to what we are discussing today, there is no necessary effect on the external financing limits.
The right hon. Member for Lanarkshire, North (Mr. Smith) invited me to say that we would forget the pledge that we made about the privatisation of British Airways. I am sure that he will not be surprised when I tell him that I have no intention of saying any such thing. I give a specific and immediate pledge that the Government intend to denationalise and privatise British Airways at the earliest practical moment.
§ Mr. Sproat
I do not want to go into that matter in great depth. My hon. Friend can raise it in Committee. Dan-Air has been on the London-Aberdeen route for almost exactly two years and has had the most beneficial effect on prices, the quality of the hot food and all the other frills that go with good aircraft service. Therefore, there is already competition from British Caledonian and Dan-Air, which has been extremely beneficial.
The right hon. Member for Lanarkshire, North also mentioned the North Atlantic. Although it is not central to the Bill, it is such an important matter that it is right to say a few words. It is an extremely good deal for the travelling public. The Government are dedicated to giving the best value for money to the air passenger. That is happening on the North Atlantic. It is worth reminding the House of this as there was so much criticism by the Opposition of the effect of low fares. That arrangement was negotiated under the Bermuda 2 Agreement. Before Bermuda 2 there was not one year before 1945 in which United Kingdom airlines out-earned United States airlines. Last year, for the first time, the three United Kingdom airlines out-earned the nine United States airlines. That is a splendid achievement for the British aviation industry. 85 It has come about under the competitive environment that we have fostered through Bermuda 2. We have no intention of going back on the spirit of that agreement.
However, I say to the right hon. Gentleman and several of my hon. Friends who mentioned the point, that, of course, there remains genuine concern about the financial stability of airlines on the North Atlantic route, as on others, in the midst of a world recession. We accept that it is vital to maintain a balance between consumer interests on the one hand and the long-term financial stability of the airlines on the other. For that good reason, officials from the Department of Trade were in Washington last week to discuss that point with their American opposite numbers. At the beginning of December, members of IATA are also meeting to discuss it. I assure both sides of the House that the Department is acutely aware of the need to keep a proper balance between consumer interests and airline stability.
My hon. Friend the Member for Saffron Walden (Mr. Haselhurst) raised a controversial topic. It is ludicruous to accuse him of riding a hobbyhorse. The House respects him for the strength and determination with which he is fighting the corner for his constituents who share his convictions. He accused my right hon. Friend and me of perhaps being a bit coy, and he asked why we did not say more. Department of Trade officials are ready at any time to appear before the inspectorate at the Stansted inquiry and give factual information, but that is a different matter from Ministers giving opinions. Later, it may be necessary for them to sit in a judicial capacity, so it would be wrong to go into detail over the questions of Stansted, and the capacity for the South-East. However, the Department's officials are ready at any time to give my hon. Friend any facts and figures that he requires.
§ Mr. Haselhurst
Is it not sometimes difficult in those circumstances to separate the role of protagonist from that of umpire? The Government have a declared policy, and at the same time they wish to be fair and neutral. At times there must be doubt about whether the line is maintained in the best way possible for my constituents.
§ Mr. Sproat
I shall do everything in my power to see that the proper line is maintained.
The right hon. Member for Orkney and Shetland (Mr. Grimond) said that fares are far too high. Many consumers would agree. However, fares on the North Atlantic routes have tumbled, largely thanks to the splendid efforts of Sir Freddie Laker. In addition, one of the main thrusts of Government aviation policy is to see fares tumble in Europe. We want the lowest fares possible consonant with the airlines' costs The third aspect of how we are enabling fares to be reduced on the North Atlantic routes, in Europe and internally is demonstrated by the famous flight that the right hon. Gentleman and I often share from London to Aberdeen. Dan-Air has sharpened British Airways' competitiveness and reduced prices.
§ Mr. Grimond
Fares across the North Atlantic have tumbled, which makes it particularly irritating to my constituents and others that fares are kept high in Europe by a monstrous cartel and that in Orkney and Shetland they are going steadily up.
§ Mr. Sproat
The right hon. Gentleman should give us credit for the successes which our competitive policy has made possible. If he gives us a wee bit more time, I dare say we may do the same for Orkney and Shetland.
86 At the beginning of his interesting speech, my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson) said that we should promote an expanding civil aviation industry. That is the prime aim of our aviation policy. He mentioned the fifth terminal, and I can say no more than I have. My hon. Friend the Member for Twickenham (Mr. Jessel) read out what the Government's views were before. Those views are being considered by the inspectorate of Stanstead.
§ Mr. Jessel
The letter that I read was from the Secretary of State for Trade and was dated 4 August. When I intervened my right hon. Friend said that he stood by what was in the letter, so will my hon. Friend withdraw the word "before"?
§ Mr. Sproat
No, I certainly will not withdraw the use of the word "before". I assure my hon. Friend that the Government have not changed their mind on this matter, but we await with great interest the findings of the Stansted inquiry. The Government's views on this matter have been well known for a long time and have not changed.
§ Mr. John Smith
If the Minister believes that there is no significance in the use of the word "before", why did he use it?
§ Mr. Sproat
I did not say that there was no significance in the use of the word. I said that I would not withdraw it, which implied that there was indeed significance in it.
We continue to hold the view which my hon. Friend the Member for Twickenham (Mr. Jessel) read out in the letter, but we are waiting with great interest to give careful consideration to the views expressed at the Stansted inquiry.
I turn with some interest to the speech of the right hon. Member for Down, South (Mr. Powell). As the right hon. Gentleman knows, Aldergrove is not a BAA airport and is not the responsibility of the Department of Trade, but I undertake to see that his remarks are brought to the attention of the Northern Ireland Office.
My hon. Friend the Member for Preston, North made an extremely well-informed and fair-minded speech. He said that certain areas of the aviation industry were experiencing problems as a result of the actions of Eurocontrol. I shall preside over a meeting of Eurocontrol later this week and I shall see that my hon. Friend's criticisms are specifically drawn to the attention of members of Eurocontrol on that occasion.
My hon. Friend also listed the details of the British Airways recovery plan. He and my hon. Friend the Member for Bristol, North-West (Mr. Colvin) spoke in support of that plan. The Government welcome their support. The Government wholeheartedly support the efforts of Sir John King and Mr. Roy Watts to bring British Airways back into profit. I should say at this stage, linking this with my remarks about privatisation, that Sir John King is convinced that British Airways will be in profit by the end of the financial year 1982–83 and that that will provide the base from which to launch British Airways privatisation. That is his view, which we look upon with great favour, as the House may well imagine.
The hon. Members for South Ayrshire (Mr. Foulkes) and Central Ayrshire (Mr. Lambie) referred to the difficult question of Prestwick. I can understand their deep worry for constituency reasons and reasons which affect the whole of Scotland. The Department of Trade appreciates 87 their concern, and my right hon. Friend the Secretary of State for Scotland, about whom some unworthy references were made, shares that concern. We give a 100 per cent. guarantee that we shall do everything realistically possible to see that Prestwick has a long and prosperous life and not the death to which the hon. Member for Central Ayrshire referred. Having said that, the decision to withdraw from Prestwick was made by the British Airways board because British Airways were making a substantial loss at Prestwick. Since we are backing the determination of Sir John King to bring British Airways back to profitability, it would be wrong for us to intervene. The Government therefore have no wish or intention to intervene over the British Airways decision at Prestwick.
Before I come to the good news, which I shall give in a moment, I should like hon. Members to get out of their minds the idea of Prestwick as a substitute for a London airport. As I have explained, I cannot comment on this in detail because of the Stansted inquiry, but the notion of Prestwick as a third London airport is too ludicrous and time-wasting for them to pursue. Let them fight for Prestwick by all means, but I beseech them not to fight on such absurd grounds. When 70 per cent. of passengers coming to the United Kingdom come to London and no fewer than 80 per cent. of them terminate their journeys in London or the South-East of England, it would be impossible and quite wrong for the Government to try to direct those flights to Prestwick. It is too absurd to contemplate that a person whose destination is Guildford in Surrey should be told that he must fly from Baltimore to Prestwick first. The Government will not contemplate direction of that kind.
Having said that, however, I should stress that I believe that there is a very bright future for Prestwick. As the hon. Members for Central Ayrshire and South Ayrshire will 88 know already, both Air Canada and North-West Orient have said that they intend to increase the frequency of their flights. Laker has already expressed the wish to fly from Prestwick to New York and Toronto. In addition, there is the extremely exciting prospect of Federal Express and Concorde which might come to Prestwick. Hon. Members would do far better to concentrate on those matters rather than on will o' the wisps about making Prestwick the third London airport. I promise them that in those matters, particularly in relation to Federal Express, the Department of Trade is 100 per cent. behind them in trying to achieve those services for Prestwick.
As I have said, we have had a very wide-ranging debate. No doubt we shall have the opportunity to return to some of these matters in Committee. I have replied as briefly as I can but, I hope, with some courtesy to the house. We have before us a modest, simple and straightforward Bill. I commend it to the House.
§ Question put and agreed to.
§ Bill accordingly read a Second time.
§ Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).