HC Deb 09 April 1986 vol 95 cc242-56
Mr. Alfred Morris (Manchester, Wythenshawe)

I beg to move amendment No. 1, in page 1, line 14, at end insert— 'Provided that such proposals shall make provision for Stansted Airport to be operated as an independent free-standing company.'.

Mr. Deputy Speaker

With this it will be convenient to take the following amendments: No. 2, in page 2, line 17, at end insert—

'Provided that the Secretary of State shall not approve proposals in relation to Stansted Airport unless they provide for its operation as an independent free-standing company.'. No. 3, in line 17, at end insert— '(3A) The Secretary of State shall not approve proposals under subsection (3) if any company so nominated owns more than one airport serving the same area as defined by section 28(6) except that, for the purposes of this section, airports operating in Scotland shall not be regarded as serving the same area.'.

Mr. Morris

With very many others, I am most grateful to Mr. Speaker for selecting these important amendments. They have been signed by scores of hon. and right hon. Members from all parties and from every part of Great Britain over and above those whose names have appeared on the Amendment Paper today.

For several years Members from both sides of the House have fought long and hard to impress upon the Government the importance of Britain's airports outside the south-east. We did so not simply because of the stimulus that they bring to ailing regional economies in the regions devastated by unemployment, but also in the national interest, because of the way in which they can, given the growth of which they are capable, relieve pressure on the overburdened London airports.

Our demands were simple. We urged rejection of a massive expansion of Stansted airport. The decision to develop that airport to 15 million passengers per annum rising to 25 million passengers per annum was neither necessary nor desirable. We also urged the development of a coherent airport policy which would enable the regional airports to compete on equal terms with the London airports. Here I must emphasise that this did not, as some argued, involve the forced diversion of passengers.

What it required was a positive effort, first, to liberalise the network and make it easier for airlines to be allowed to operate direct to and from regions outside the southeast, and, secondly, to eliminate subsidy to Stansted. These demands were demonstrably reasonable. The Government endorsed them and, indeed, much to the credit of the all-party North of England Regional Consortium, they now form major tenets of Government policy, as explained in the 1985 White Paper.

The elimination of subsidy to Stansted is vital to airports outside the south-east. They have to operate as free-standing entities. Their charges have to reflect the cost of operating and developing their facilities. Stansted, on the other hand, is not subject to such disciplines. Charges at Stansted have been consistently low for some time, and are at their comparatively low level solely to attract traffic. In fact, charges at Stansted are, on average, four times lower than those employed at major airports like Manchester, Birmingham and Luton.

The Secretary of State suggested last year that he understood our concern. He promised that arrangements would be made to eliminate subsidy, so that if Stansted was to grow, the market alone would determine the pace of its development and not the motivations of the BAA to maximise the size of its asset base. These promises were generally welcomed by regional interests. Conservative Members from northern constituencies expressed their delight. Others were more cautious. They argued that promises were fine, but felt that action would be the test of the Government's sincerity. How wise they were.

The Government now seek to argue that subsidy to Stansted will, in the Secretary of State's own words, be "cut out", by ensuring that any transfer of funds between the holding company and its subsidiaries will take place only at the commercial rates of interest. This view is misconceived. Interest rates differ according to the risks involved. When capital is raised on the market by the holding company specifically for Stansted, the risks will not be attributable to Stansted, but will reflect the profitability of Heathrow. Therefore, the rate of interest will be lower than what it would otherwise be, and this will represent a hidden subsidy to Stansted—incapable of accurate definition. At the same time, there will be nothing to prevent the Stansted subsidiary not repaying the loan.

I fully understand that the Secretary of State will argue that the policing powers of the CAA will then come into play to combat predatory pricing behaviour. The central question here, however, is about the effectiveness of those powers and, more particularly, the extent to which it will be possible for all funding arrangements within the BAA group to be identified.

The North of England Regional Consortium asked independent accountants to examine part IV and to advise on whether the provisions were sufficient to achieve the objectives both of full transparency and resistance to predatory behaviour. I have to advise the Secretary of State that the Bill failed the test. His amendment, to be debated later, to clause 38 will improve the Bill, but it will still be riddled with deficiencies. The Government have shown no desire to correct them and tried to get by in Committee with assurances to the effect that we should not worry because the point is covered somewhere else or that everything will be all right on the night. That will no longer do. We are now at the Report stage and such empty assurances just will not wash.

9 pm

Let me make it clear that full transparency will not be achieved unless the following minimum changes are made to the Bill. The first is that there must be a specific and mandatory requirement for the holding company to produce detailed accounts for each of its subsidiary companies. The BAA can discharge its Companies Act obligations simply by producing group accounts. As the Bill is presently drafted, the CAA will have only a discretionary duty to seek detailed accounts. Unless separate accounts are produced, it will not be possible to identify contracts and accounting practices within the group, or to prevent a misuse of assets and resources. Subsidy to Stansted, as the Secretary of State knows only too well, will take place in forms other than inter-company loans.

The second minimum change required is the need to give the CAA a full picture of income and expenditure under all headings, yet clause 37(2) provides for only the production of "aggregate" information. There are many types of ancillary services subsidised at Stansted which would be concealed by such information. Examples are air traffic control, where Stansted records a loss of over £1 million, and central charges, where there are many staff based centrally serving all three London airports. Unless full details are available, it is simply not possible to ascertain a true picture.

The third and final minimum change required affects the power given to the CAA to insist upon minimum charges at the London airports. This does not go far enough. The CAA should be concerned to ensure not only that charges are reasonable, but that they are cost based. This, of course, has particular relevance to Stansted.

Our major concern with part IV, however, and indeed with the total arrangements for restructuring the London airports, is that subsidy will be perpetuated as clearly as night follows day. It will be for the CAA to try to ensure that it is kept to reasonable levels. This will be no easy task. Indeed, much of the damage will have been done before the CAA can act. The development of Stansted, which has now been approved for investment purposes, will be under way shortly and will be massively subsidised. despite the fact that the Government in their White Paper promised that charges would rise steeply in order to meet the cost of increasing capacity. In the peak period, the cost-based charge for a Boeing 747 should be £5,533. It is presently £1,422. That is a difference of £4,111, and a huge 75 per cent. reduction.

Mr. Adley

To confirm what the right hon. Gentleman says, is he aware that a major tour operator has told me that, if the charges remain as they are, once the motorway system is completed it will be able to tell the average family going to Majorca, presently flying from Manchester airport, that it can save them at least £15 per head on their package tour by putting them in a bus and taking them to Stansted? That will be at least £60 for a family of four. That is the sort of thing that will happen unless the right hon. Gentleman's points are met.

Mr. Morris

I much appreciate the hon. Gentleman's intervention. He will appreciate that I am trying to put the case in hard summary, since many other right hon. and hon. Members wish to speak.

Our concern in the House must increase when account is taken of the North of England Regional Consortium's most recent publication "Stansted and the Airports Bill", which I warmly commend to the House. It is a document which shows that there is no inherent reason why Stansted cannot operate on a free-standing basis. Indeed, there seems to be considerable scope for that airport to meet its own development costs. That must be so if traffic demand for Stansted grows at a pace which the Government believe to be reasonable.

The Government cannot have it both ways. They cannot argue that market forces will ensure that demand for Stansted will be so high as to make a development necessary, and at the same time argue that subsidy is required to ensure that demand is accommodated at the airport. The North of England Regional Consortium believes that a rate of return of at least 5 per cent. could be generated by a £200 million investment in the airport. Some will argue that that figure is too low, but I would ask the Government to show me what assumptions have been employed that can demonstrate that the approved strategy is economic. I admit that there may well have to be savings if Stansted is to be free standing. Sir Norman Payne's objective of building the most substantial and lavishly equipped airport possible may have to be modified in the face of the commercial disciplines of the market place.

The amendments are crucial to a balanced national airports policy. That is the core of our concern. The aviation system is already over-regulated. Market forces are already distorted. Subsidy would only intensify those anomalies to the detriment of regions outside the southeast, and it is all the more unacceptable when it is not economically or socially justified.

I hope that the Secretary of State will now find himself able to accept the amendment. We could then agree across the Floor of the House a detailed definition of a freestanding airport. As I see it, such a definition would at the very least limit investment funds for Stansted to those coming from retained earnings or borrowings direct from the capital market. Loans from the holding company for the Stansted subsidiary would not be allowed. Does the right hon. Gentleman accept that definition?

In January of last year right hon. and hon. Members from all parts of the House rejected the Eyre report and its proposals massively to expand and subsidise Stansted. We did so for a variety of reasons, not the least being the way in which such a proposal would prejudice the north of England, and indeed all the airports outside the south-east. The vote on the amendments under discussion is just as important. I urge hon. Members on both sides of the House to join forces in the Lobby in support of the amendments.

Mr. Fred Silvester (Manchester, Withington)

I support the amendment moved by the right hon. Member for Manchester, Wythenshawe (Mr. Morris), with which is grouped amendment No. 3. Amendment No. 1 would take Stansted out of the BAA's clutches; amendment No. 3 would remove Gatwick as well.

I am not perhaps the driest member of the Conservative party, in traditional terms, and it is perhaps curious that I should be making an appeal to a Secretary of State whose political reputation has been built on private enterprise and competition. My right hon. Friend was the scourge of monopoly in film distribution and, more recently, the lion of the buses. We need to know why, in the face of Norman Payne, he has become a lamb.

The situation is very odd. It is odder still because, according to the authority of my hon. Friend the Member for Worcestershire, South (Mr. Spicer), the original belief was that the best approach was to privatise the airports separately. In Committee, my hon. Friend said: my right hon. Friend the Secretary of State and I have an initial prejudice towards the separate privatisation of the British airport companies".—[Official Report, Standing Committee J, 20 February 1986, c. 200.] That is odd, too. The Secretary of State, who is by temperament in favour of separate companies, and the Minister originally believed that that was the best way to proceed.

A third curiosity to be added to the list is the undertaking given by the Minister many times that there will be no subsidies or special concessions given to Stansted which are bolstered by the operations at Heathrow and elsewhere. In Committee, my hon. Friend said: It is totally accepted by the Government that none of the three London airports should be able to develop or trade unfairly against other United Kingdom airports."—[Official Report, Standing Committee J, 20 February 1986; c. 204.] What is odd is that the most direct and simple way of achieving that would be to stick with the original proposition to treat Stansted as a separate airport. We would not then have to jump through so many hoops; it would have happened automatically.

Faced with those oddities, I looked carefully at my hon. Friend's speech to find an explanation. He gave various reasons why it was essential that the three airports should be privatised together. First, he said that there was no competition between the three airports in price, access or service. That is also an oddity. We, who believe in the drive towards free enterprise companies, are suggesting that, even within the constraints of civil aviation, there will be no difference between the management of differently owned companies, that somehow one company will not press for better access and that another will not offer different services.

Even that is not the key point. My hon. Friend was referring to competition between the three London airports. He forgets that there is wider competition—with Luton, Southend, Bristol. Manchester and other regional airports. My hon. Friend the Member for Christchurch (Mr. Adley) gave an example of how that would operate. It is not simply a carving up of those three airports; it would have a ricochet effect throughout Britain's airports.

Mr. Michael Spicer

Is not the greatest competition with Schiphol?

Mr. Silvester

That was my hon. Friend's second point in Committee. I am dealing with his points in order. He said that we must ensure that the 11 per cent. of passengers who interlink at Heathrow to continue their journey to other countries do not buzz off to Schiphol or Frankfurt. I do not want to go over the whole matter again. My hon. Friend has had many opportunities to explain what he means, but he has singularly failed to do so. The competition is between Heathrow and Schiphol, Heathrow and Frankfurt or Heathrow and somewhere else. It is not between Stansted and Schiphol or Gatwick and Schiphol. He has not explained why providing additional capacity at Stansted will save for the United Kingdom the traffic that is changing planes at Heathrow, which is the only place where passengers want to change planes.

My hon. Friend's third argument—he underlined it with some crossness—was that we should find ourselves in trouble with the small airlines and regional airports that would be gradually excluded because Heathrow was becoming too full and they would be the first to be booted out. Even if that were true, my hon. Friend is driving a coach and horses through the Bill. He is setting up a huge regulatory apparatus. He knows as well as I do that one of the primary considerations that the CAA would have to bear in mind is the proper servicing of the London system from the regional airports. The CAA is governed by regulations.

In Committee my hon. Friend said that regulations would have to be extended and would be more difficult. He did not elaborate on that. No evidence has been produced to show that that would be necessary. The regulations exist. I have been unable to determine why the smaller airports and the small airlines should be excluded under one system any more than under another.

We come at the end to the truth. The Minister makes no bones about it. It is all set out for us to read. He said: If the London airports were to be privatised separately, the development of Stansted might be delayed until a time beyond which the capacity was required … My hon. Friend— that is, my hon. Friend the Member for Saffron Walden (Mr. Haselhurst)— accepted that a separate developer at Stansted might wish to pace his development leaving aside the question of how long it would take to sell the airport to a separate developer and from then on proceed with development. It is our view that development of Stansted must begin almost immediately."—[Official Report, Standing Committee J, 20 February 1986; c. 203–4.] 9.15 pm

That is the core of the argument. The core of the objection is fear of delay—delay in selling off the airport, delay between the sale of Stansted and the beginning of development, and delay because, in my hon. Friend's curious phrase, a separate developer might want to pace himself.

Mr. Haselhurst

Is my hon. Friend aware that, so eager is the British Airports Authority that there should be no delay, it has already issued official invitations to a ceremony next Tuesday to mark the start of the work?

Mr. Silvester

The BAA has never been known for its modesty. Its assumption that it will get its way here is part of history, is it not?

Let us consider the objections. As regards delay in selling off the airport, some Members—there were some in Committee—question the viability of Stansted as a saleable asset in its own right. I doubt whether that argument can be sustained for long. The right hon. Member for Wythenshawe has already drawn attention to the analysis by Peat Marwick, which shows quite clearly that it is a viable proposition. The question of what price is paid for any proposition is for the market to determine. Members on the Government Benches believe that, given an opportunity, the private enterprise system will provide the means for such an organisation to develop and to flourish, provided that there are no public restraints upon it.

My right hon. Friend the Secretary of State has removed the main public restraints. He has got the planning permission that has dogged private enterprise. British Rail can hardly wait to start work on its railway line. The Government, as I understand it, have either approved or are prepared to approve the necessary infrastructure. The forward estimates for the market have been well underlined by the Secretary of State, aiming at £8 million. It is not a tenable argument to suggest that, given all that, Stansted is not a commercial proposition for a potential purchaser, particularly as it is in the south-east. Many companies, such as Manchester airport, have been making profits for many years. Stansted could easily do so, too. Nor do I think that the amount of money that we would get for Heathrow be much affected. I cannot believe that hiving off Stansted will stop someone buying Heathrow, with or without Gatwick.

Mr. Wilkinson

Is not a further significant argument the fact that the subsidising of Stansted by a privatised BAA could inhibit further development at Heathrow and the exploitation of that airport's full potential? We should bear that in mind.

Mr. Silvester

It is true that, in so far as the accounts become transparent, any subsidy to Stansted would be a charge against the profits of Heathrow, and that would have to be borne in mind by the shareholders.

The second point that my hon. Friend made was the delay between the sale of Stansted and the beginning of development. A lot of work has already been done, as my hon. Friend the Member for Saffron Walden well knows. There is no lack of enthusiasm or assistance in the Department of Transport to help this along. I have no doubt that if we were prepared to speed the thing along, we could get it moved in a way that everyone would find satisfactory. In passing, the disaster of British Airways may provide a window for the earlier launch of the British Airports Authority.

The last point that my hon. Friend made was that a separate developer might want to pace himself. That is where we should focus our attention. That is the nub; that is what it is all about. Pacing himself means responding to the market and not providing over-capacity, but Fully utilising the assets. It means considering the various alternatives. In this case, the capital market exercises a discipline. I give my right hon. Friend full credit for having sought to provide non-subsidisation within the limits that he has set himself. He has done that in good faith, but from an impossible starting point. I have met nobody who can show me how, given a group company structure, it is possible to prevent Norman Payne and his boys from controlling Stansted in the manner which they wish.

The difficulties of finding a commercial rate of interest on capital have been outlined. The ease of raising capital will be substantially affected. On this basis of expenditure, Stansted will lose money for many years and will be a loss-making airport attracting business from other airports. The only way that my right hon. Friend will be able to meet his obligation is by imposing an extraordinary level of regulation. The Bill is full of regulations to which we are adding tonight.

If we approach the matter more directly and simply say that all the airports should be dealt with separately, we will meet the problem immediately and in full. It mystifies me why my right hon. Friend has not done that. He may be worried that, when we get down to the nitty gritty, Stansted will not be big enough soon enough, but he is putting before us a dubious proposition which at best will mean a short-term gain. In return we will have a long-term problem in dealing with a growing and powerful monopoly which will sit upon British civil aviation for many generations.

Mr. Lewis Carter-Jones (Eccles)

I am delighted that the Secretary of State has returned to the Chamber. I cannot understand why he does not save the time of the House by accepting amendment No. 1. I shall read it out so that the House may agree that it accords totally with the political philosophy of the Secretary of State: Provided that such proposals shall make provision for Stansted Airport to be operated as an independent free-standing company. That is what the Secretary of State has been advocating year after year. Why does he not save time by interrupting me now to say, "Of course we accept it," so that we can get on to other issues of greater import?

The fact is that Payne's panzers have got at him. Payne has made a pre-emptive strike. The hon. Member for Saffron Walden (Mr. Haselhurst) said that, despite the fact that we have not yet completed consideration of the legislation, all the plans are laid and everything is ready. It is a classic pre-emptive strike in the true panzer sense. We are allegedly discussing a development which, in effect, is already taking place. The Secretary of State should in honesty accept the amendment or tell us clearly that he is Payne's man. What we have is the voice of the Secretary of State but the hand of the chairman of the British Airports Authority.

I would not have accepted a clause of this type if it had applied to Manchester airport. If support is to be given, it should be given to those parts of the country which are in the greatest need. In Manchester we have a superb airport, capable of reinvigorating a depressed region. If the Secretary of State has changed his mind and is prepared to accept subsidies, why is he prepared to allow Stansted to be subsidised but not Manchester, where the greatest need lies?

Mr. Haselhurst

I am well aware that the House has been tolerant with me on a number of occasions when I have spoken about airports and Stansted. I think I am able to say that this is positively the last occasion on which, in a major debate, I shall be heard pontificating on this subject.

This debate is not a rehash of the question of the third London airport. When all other arguments failed, the BAA believed, and I think persuaded my hon. Friend to some extent, that this was really an attempt to undo the decision on Stansted. I say again that that is certainly not the intention behind these amendments.

It could be said that Stansted, as a free-standing airport, might be rather more of a success, to the chagrin of at least some of my constituents. I am looking at this matter on the basis of what is right for civil aviation. I also support the amendments on the basis of the political philosophy that, on the whole, more competition is better than less competition.

The case for separate ownership and the maximisation of competition ought to be self-evident, at least to my right hon. and hon. Friends. My right hon. Friend the Secretary of State has confessed his attraction to it on a number of occasions. Indeed, one feels that my right hon. Friend is philosophically drenched in the doctrine of more competition and more adherence to market forces. Yet somehow he has allowed himself to be overborne and all his instincts to be suppressed by the argument, one suspects, of the British Airports Authority that it should maintain a monopoly in the London airports system.

The arguments that have apparently persuaded my right hon. Friend have been referred to already by my hon. Friend the Member for Manchester, Withington (Mr. Silvester). There is the argument that the three airports cannot really compete. That is a contestable proposition. It is true that there is not scope for competition over 100 per cent. of the activities, but there is still some scope for competition between the airports.

However, the real point, and the one that I do not believe my right hon. Friend has properly addressed, is that there would be a quite different approach to the running of the airports by an operator who had all three of them as compared with operators who had one each. The whole attitude would be bound to be different. The owner of all three would not be under any great pressure to maximise the improvement of services at Heathrow and Gatwick when he had plenty of spare capacity at his disposal at a third airport in the system.

Anyone can run airports in that situation; it is the easiest thing in the world. Any half dozen of us could take charge of an airports authority which was in that happy situation because it would be almost impossible to fail to make money. But if there is competition, one airport against another, it becomes a harder and tighter game. That is what it should be, and that is what Conservatives, on the whole, tend to believe is the right way of running almost any organisation. We are prepared to introduce competition into the supply of water, gas and so on, where it might be argued that there is quite limited scope for competition, because we believe that it is right to do so. Therefore, why we cannot do it with airports simply baffles me.

There is the international competition argument, that London needs to be a system in order to compete with Amsterdam. My hon. Friend the Member for Withington has referred to that. It is most misleading to argue that, in order to expand facilities in London, Stansted, in particular, is necessary so that London can retain its competitive position. London can be competitive only through the maximisation of facilities at Heathrow. That is the test. If an international business man travelling to Europe has to interline and can do so on the one route at Amsterdam, he will do that. He will look twice at anything that is not as good as that. Therefore, we must maximise the facilities at Heathrow. The idea that people should come on a bus from Stansted round the M25 in order to satisfy London's competitive position is both laughable and ludicrous. It is astonishing that my right hon. Friend the Secretary of State should use that as a serious argument.

9.30 pm

I now come to the hearts and flowers bit. It is said that if we do not go along with this monopoly, the small airlines—those dearest to our hearts—will be squeezed out. But I do not see why the operator at Heathrow should want to squeeze out small airlines which are a valuable source of his interlining business. Moreover, the charges for large and small aircraft can be, and are being, regulated in order to close the gap between them. But even if the operator at Heathrow wanted to behave like that, my right hon. Friend the Secretary of State would have the power to ensure that no such unfair or discriminatory policy was allowed.

The back-up to that argument is that it would be extremely complicated for my right hon. Friend the Secretary of State to use the powers in the Bill and that it would be difficult to write the prospectus. But there is no point in having powers if they are so complex that they cannot be used. Furthermore, in taking those powers, my right hon. Friend must have some idea of how he might use them.

In, I believe, its policy document CAP 517, the CAA has put forward a proposal for distributing the traffic round London's airports. It is not necessarily the last word on the subject, but it represents a sensible and coherent approach. My right hon. Friend the Secretary of State might favour another approach, but the CAA has shown that it is possible to produce a document explaining how the traffic could be distributed. Therefore, it is not impossible to get over the legal obstacles. The Secretary of State cannot say that he wants the powers but would not know how to use them.

There is then the argument over the delay in development. Whether someone believes that there is a risk of delay in development depends on whether he believes in the forecasts. The present forecast is that the London airports system will be saturated by 1991 unless extra capacity is provided, but if that is proved right it will be the first forecast to come true. I understand that Stansted is losing business on a year-on-year basis. For the sake of British avaiation, I hope that there will be a steady improvement in our position. However, it is unlikely that the forecast for 1991 will prove any more accurate than its predecessors.

Mr. Adley

Is not my hon. Friend perhaps a little too polite? He really means what many of us feel, which is that, regardless of transport and regional policy interests, the Government are trying to boost the notional value of Stansted as part of the privatisation of the BAA in order to achieve a quick return on capital regardless of the longterm effects on the country.

Mr. Haselhurst

My hon. Friend may be right about the intention, but it would be an extraordinary intention. It presupposes that people are incapable of reading a prospectus and do not understand what is happening about airports. They must know perfectly well the demand for the airports; and they must know the present profitable sectors in the London airport system. Stansted cannot be hidden if it is a loss maker. Its potential is the same under any ownership; it has a certain potential or no potential. It cannot be hidden in a basket of airports and flogged off to an unsuspecting customer.

Mr. Wilkinson

Does my hon. Friend agree that, if the privatised BAA operated entirely commercially, perhaps the most sensible thing it could do would be to sell Stansted as soon as it got it?

Mr. Haselhurst

That is possible but unlikely. The record of BAA shows that it has believed in building up its empire. I cannot believe that on the morrow of privatisation it will change its habits quite that quickly; in time it may do so, but not immediately. As my hon. Friend the Member of Withington pointed out, would anybody buy Stansted if it were offered separately? It is a commercial risk, but it is hardly for my right hon. Friend, on behalf of the Government, to try to argue that point, because he and the Government have convinced themselves that demand will be such that Stansted is vital to the capacity of the London system. If they believe that and know there will be this demand, and if we accept the forecast that Stansted will operate for 7 million to 8 million passengers per annum by 1995, it does not lie with them to argue that no one will buy an airport with that potential.

Mr. Dicks

Is it not shameful for the Government to support the BAA investment plans for Stansted by an input of many millions of pounds, when we have yet to get the Bill through the House?

Mr. Haselhurst

The BAA is ever hasty. It surprises me that the ceremonies should be going ahead so quickly. If the Government are right about the traffic forecast, Heathrow's ultimate capacity is 38 million to 40 million passengers per annum, and Gatwick may take as many as 25 million. However, thereafter any excess that wishes to go to London will have to go to the only other airport where capacity has been provided. It is the decision of the Government, endorsed by the House, that that capacity will be provided at Stansted. On that basis, people in private industry will be interested in taking the opportunity to exploit that potential and to make Stansted a successful airport.

The recurring point throughout our debates on this subject has been the question of cost subsidy, which was dealt with in some detail by the right hon. Member for Manchester, Wythenshawe (Mr. Morris). My hon. Friend the Under-Secretary has said that the Government are determined that there shall not be unfair trading between airports. Great efforts have been made—I am thankful for this—to put tighter clauses in the Bill to ensure full transparency. Transparency is one thing; effective prohibition of the practices is quite another. It may be perfectly all right to see something going on; the question is whether anything can be done about it in time. There will be a possibly destructive competitive effect on other airports in the meantime.

There is one sure way of dealing with the question of unfair trading without any ifs or buts and that is simply to have separate ownership of the airports in question; then unfair trading cannot happen. My right hon. Friend should trust his instincts and recognise that there is more than one way of effectively running an airport. We should not cut ourselves off from the possibility of an alternative method of management in the London system. This is an opportunity to create a regime which maximises competition instead of snuffing it out. We should not forgo it.

Mr. Litherland

To make blood curdle in the northwest of England one has only to mention subsidy to Stansted. There is a deep anxiety, especially in the north of England that, if Stansted is developed, it will be at the expense of regional airports. Many colleagues could speak on behalf of their regional airports, but I am most concerned with Manchester international airport, which is now known as Manchester airport since becoming a public limited company on 1 April.

There is a deep and widespread anxiety about the proposals to construct new rail links to Stansted, highway schemes costing about £30 million and infrastructure such as housing surrounding such a development as the extension of Stansted. With the Channel tunnel in the offing, a bright future is forecast for the south of England, but at whose expense?

Emotions are aroused on this subject. Investment in the south-east is viewed with scepticism as it is seen to prejudice jobs and prosperity in the regions. I refer to regions where closures in manufacturing have been relentless. Nearly 750,000 jobs have been lost in the north since 1977. The experience has been heartbreaking and demoralising. People in the regions want hope and a future.

I realise that we do not extend airports just to provide jobs. There must be a demand for the airport and its services. There is such demand at Manchester, so the airport acts as a catalyst in the region. Any diminution of the airport's role would be disastrous for the area. We have had today a lobby by trade unionists and workers from various airports. They told us in no uncertain terms of their prospects if there is any subsidy to Stansted. They fear for their jobs and their families. It is not that I or any of my colleagues oppose cross-subsidy. We made That clear in Committee. We oppose unfair and hidden subsidy that would create demand that is not true market demand. That is what will happen at Stansted.

It is feared that many regional airports are at a critical stage of redevelopment and that any massive subsidy to Stansted would create an imbalance. The Government have not reassured us that Stansted will not receive excessive subsidy. Emotions are aroused in the north because the issue is seen as another example of the great divide between the haves and the have-nots in the north and the south. The divide is getting wider. There is more deprivation in the area that I represent.

The North of England Regional Consortium can find no justification for supporting the continuation of any subsidy and argues most strongly that Stansted could stand on its own feet. We have heard from across the political spectrum that Stansted could and should stand alone. The consortium has led a campaign suggesting that Stansted should operate as a free-standing airport.

In that respect, there is great support from the Joint Airports Committee of Local Authorities and the Air Transport Users Committee. The need for Stansted to operate in that way relates to one objective—that of securing equal competition. We believe that, with subsidy to Stansted, there will be no equal competition. The throughput at Stansted, is about 500,000 passengers—well below the capacity of the existing terminal of 2 million passengers. Yet the terminal is to be expanded, initially to 7 to 8 million passengers, rising to 15 million passengers, at an initial capital cost of £200 million.

9.45 pm

Funding of that magnitude is incapable of being secured from surplus profits generated at Stansted. Therefore, we must conclude that the BAA approach is that cross-subsidy from profits generated at Heathrow airport must continue to support the operation of Stansted airport and to fund the development of Stansted's facilities.

The consortium accepts that there is a general case for subsidy in the transport sector. This acceptance is conditioned by two factors. The first is that it forms part of a coherent policy and the second is that it does not cause detrimental effects to the remainder of the system. The problem with subsidies to Stansted is that neither of those conditions is met.

Mr. Couchman

I shall detain the House only briefly. To judge from what my hon. Friend the Member for Saffron Walden (Mr. Haselhurst) said, it is clear that this is his last stand on the issue for some time. This is, indeed, the last battle by those who are against—[HON. MEMBERS: "No."]—the development of Stansted. They have realised that fact, and they have tabled the three amendments that we are discussing.

It is equally obvious from what the hon. Member for Manchester, Central (Mr. Litherland) said, that he believes this to be a battle between north and south over where investment should be directed. He talked of cross-subsidy and unfair trading, yet he will not acknowledge that the retained income from Heathrow should be used to invest in new facilities at Stansted.

It is obvious that the British Airports Authority, as it is constituted, and the future plc, would wish to be retained as an unfragmented whole, to be able to attract money from the market, to be able to retain greater income from the successful airports in the London hub to invest in Stansted, and to be able to create facilities which it believes to be necessary. I am persuaded of its arguments and from the beginning I have supported the development of Stansted.

My hon. Friend the Member for Manchester, Withington (Mr. Silvester) spoke of this being a case of Heathrow versus Schiphol, but if London is to maintain its pre-eminent position, it is more a case of the London hub versus Schiphol.

Mr. Silvester

I would genuinely like some information from my hon. Friend. No one has ever explained to me how expanding the capacity at Stansted will enable people wishing to interline at Heathrow to continue to do that rather than go to Schiphol. How will that happen?

Mr. Couchman

There will be some redistribution of traffic from Heathrow to Stansted. No one has suggested that that would not happen. That will create additional capacity at Heathrow, which will be necessary for the increasing interlining trade. I support Stansted and will vote against the amendments if they are put to the test.

As I have said, I do not wish to detain the House for very long. I understand that many hon. Members wish to contribute to the debate. I merely add that it is curious that the right hon. Member for Manchester, Wythenshawe (Mr. Morris), who asked for your judgment, Mr. Speaker, on whether the Bill was hybrid, should associate himself with amendments which make clear the degree of hybridity which those who are opposed to Stansted would wish to build into the Bill.

Mr. Robert N. Wareing (Liverpool, West Derby)

The hon. Member for Gillingham (Mr. Couchman) could not be further from the truth when he argues that the amendment is an attempt to prevent any progress being made with the development of Stansted airport. The hon. Member for Saffron Walden (Mr. Haselhurst) demonstrated that that is not the purpose of the amendment.

Some of us wonder whether the Secretary of State listens to the arguments of his hon. Friends, let alone of Opposition Members. The right hon. Gentleman is usually regarded as the high priest of free market economics, but he will not allow free market competition to stand in the way of the privatisation, as rapidly as possible, of all the London airports. That is the real reason for the Secretary of State having wandered away from his own theories. He has extolled the virtues of the free market economy so often in the House, yet he has succumbed to the pressures of the chairman of the BAA. It is unfortunate that he never succumbs to the democratic pressures of hon. Members in this place. He has decided to give way and to allow, albeit by artificial processes, the unfair subsidisation of the third London airport.

As my hon. Friend the Member for Manchester, Central (Mr. Litherland) has said, we are not against subsidy. Indeed, we often argue the need for subsidy as a vehicle for planning—in this case the planning of airport development. I am, however, against unfair subsidy. That is what is creating the divide between north and south in this instance.

We are often told that we cannot allow undue development of airports at the expense of the London airports and that Londoners must not be expected to go to Manchester or to regional airports to start their journeys, but that is the usual process for so many who reside in northern Britain. London airports are being subsidised, yet Liverpool faces the prospect of administration by a joint board over the next three years, and rate capping. Incidentally, we do not regard Liverpool airport as being in competition with Manchester airport. We consider the airports to be complementary and believe that their development must proceed hand in glove.

If a public limited company is created, it will be subjected to all the costs that such companies face, including corporation tax, VAT and stamp duties. I advanced this argument in Committee, but never received a proper answer from the Minister. It seems that the assistance given to Liverpool airport will be on nothing like the scale that is now being offered to Stansted and the other London airports.

There have been developments at Liverpool airport in recent times as a result of co-operation between the then Merseyside county council and central Government. The demise of the county council will be a sad loss to many in that part of the country. As I have said, we face the prospect of a joint board structure. Investment in Liverpool airport has resulted in a new runway, airport terminal, apron and air control tower. Those developments have been funded by taxpayers' money. We are bound to ask ourselves whether taxpayers' money is being wasted. Liverpool, along with Manchester and other regional airports, will now be asked to compete at an unfair disadvantage with the London airports. That is totally wrong, and it is seen to be totally wrong by Conservative as well as by Labour Members.

I believe that airports such as Liverpool are facing a major disaster because the legislation will deprive them of any democratic structure and will pass them into the private sector at a time when they will be most disadvantaged. The Bill should be allowed to pass only if the amendment moved by my right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris) is accepted.

In the north-west of England there is a strong feeling that the Government are biased towards the south. That feeling cuts right across party barriers.

In the area that I represent, 150,000 people are unemployed, of whom 54,000 are young people. We are seeing businesses disappear, but we are told by the Government that free enterprise zones and free ports are the way to the future. However, just, round the corner from the enterprise zone at Speke—not that I am a great supporter of enterprise zones—is Liverpool airport, now to be disadvantaged by the Bill.

I hope that Conservative Members will take into account not only this measure, but the burdens which are now being thrown on regional airports, such as Manchester and Liverpool, by other legislation, and that unfair competition is not what they were elected to pursue. I hope that they will join us in the Lobby on this group of amendments.

Mr. Adley

My hon. Friend the Member for Gillingham (Mr. Couchman) was not a Member some years ago. I think that it is now more than 13 years since, in the memory of some of my colleagues around me, the late Anthony Crosland, my right hon. Friend the Secretary of State for Transport and others of us took our decision on Maplin for many reasons, including the regional policy reasons. If my hon. Friend the Member for Gillingham and the BAA think that this is the last they have heard of the Maplin story, to paraphrase another politician, they ain't heard nothin' yet.

I intervened in the speech of the right hon. Member for Manchester, Wythenshawe (Mr. Morris) to recount the brief story of a conversation with a tour operator operating package tours to Majorca and elsewhere using Manchester and other northern airports. The effect of the development of Stansted is deliberately to drag business to the south of England. The dragging of the business will be aided and abetted by the Government's policy over Stansted unless these amendments are accepted.

I have to say to my right hon. Friend the Secretary of State that I regard this as little less than a piece of financial jiggery-pokery to maximise the value of the British Airports Authority in its immediate pre-privatisation period. I do not believe that the Government are honouring the spirit of the agreement that was reached with the House over the way to deal with Stansted. I regard the insult to the regions as something up with which I am not prepared to put as a Conservative Member. There is no doubt that what we are doing will disadvantage the northern regional airports. I regard it as shameful, and I shall certainly vote for the amendment.

Mr. Frank Cook

I am fairly confident that the words that I have to offer will not be taken well by the Secretary of State, nor even by the Under-Secretary, because they have been paying scant attention for the past 30 minutes. However, I hope that the hon. Member for Gillingham (Mr. Couchman) will pay close attention, because either he is incapable of understanding the points at issue, or he chooses deliberately to misrepresent them.

The point is not that Stansted might receive subsidy but that other airports throughout the provinces, which are already functioning effectively, have achieved that status and efficiency by dint of effort over previous years—

It being Ten o'clock, the debate stood adjourned.

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