§ Order for Second Reading read.
§ Mr. Speaker: I must announce to the House that I have selected the amendment in the name of the leader of the Liberal party.6.47 pm
§ The Secretary of State for Transport (Mr. Nicholas Ridley)
I beg to move, That the Bill be now read a Second time.
The Bill fulfils the commitment to legislate that we made in the airports policy White Paper which was published last June and which the House then welcomed. It establishes a framework for the structure, ownership, operation and regulation of the United Kingdom's airports for the rest of this century and beyond.
The structure and ownership of airports has changed and evolved as necessary to meet the demands of the civil air transport industry which, over the past 50 years, has grown rapidly and become one of the most successful and dynamic sectors of the economy. I shall not go into the history of airports; I shall start with the 1961 White Paper "Civil Aerodromes and Air Navigational Services" which proposed the decentralisation of airport ownership. The principal airports serving London and Scotland —Heathrow, Gatwick, Stansted and Prestwick— were to be transferred to an airports authority while local ownership and control were to be further extended to a number of airports primarily serving local needs. Glasgow, Edinburgh and Aberdeen airports were later added to the four originally transferred to the British Airports Authority. Apart from this, the White Paper set the pattern of ownership that has existed to the present day.
The airports industry is now a mature and, in many cases, expanding and highly profitable sector of the economy. It is high time that we changed the regime under which it operates to liberate management from the constraints of public ownership. Our objective must be to remove the burden of political interference and state control so that airports, airlines and their customers can reap the benefits. The record of the 20 or so companies privatised since 1979 has proven the advantages of private ownership beyond doubt. We intend to add airports to that success story.
Part I of the Bill provides the powers to enable the privatisation of the British Airports Authority; it vests the industry's assets in a successor company as the first step towards privatisation. Clause I provides powers to require the BAA to be restructured while it is still a nationalised industry and before its assets are transferred to a successor company. The Bill does not specify how the BAA is to be restructured and offered for sale, but I want to tell the House what our intentions are in that respect.
We intend to privatise the BAA as a whole. Some of my hon. Friends think that each of the BAA's seven airports should be privatised separately. I, too, found that idea initially attractive. I believe in maximum competition. That, indeed, is one of the serious criticisms under which I labour. But I examined the structure of the airports industry in detail and I was forced to conclude that splitting up the airports would bring no real advantages 692 since it would be impossible to see any practical way to create effective competition between the individuial BAA airports in a system.
Not only would it be impossible to create competition, but there would be some important disadvantages. The Select Committee on Transport in its report on July 1984 and the Select Committee on Scottish Affairs in its subsequent report on airports in January 1985, took the same view. Where we have more than one airport in a system serving one area, they cannot effectively compete on price. Airlines will always seek to maximise their revenue by concentrating services at the most favoured airport. The economic benefits to airlines of such concentration are far greater than any direct competition between airports on airport charges could hope to match. Airport charges are, on average, only 3.5 per cent. of an international scheduled airline's costs. Our international obligations prevent airlines from raising charges to a level which would reflect the true value of access to the most favoured airports and thus preclude effective price competition.
Airports within a system cannot compete effectively on the facilities they offer—particularly in the south-east, where Heathrow and Gatwick are nearing the limits of their capacity and the scope for further development is strictly limited. If the airports were privatised separately, so that the BAA could not use Stansted to take the overflow front Heathrow and Gatwick and to enable new services to develop, the consequences for airline passengers and for airline competition would be disastrous. The tendency of any airport with little scope for expansion would be to maximise the profitability of the capacity it had, by encouraging more profitable traffic in the form of larger aircraft, and squeezing out airlines using smaller aircraft —in particular, domestic ad feeder services.
To correct this, the Government would have to take a strongly interventionist role to direct traffic to which airport it could use, thus effectively holding in their hands the prospects of profitability or otherwise of each airport That entirely frustrates the concept of equal, fair competing units. It makes the case for privatisation of the BAA as a whole. I am sure it is right to restructure the BAA into seven separate subsidiary companies under a holding company.
§ Mr. Bowen Wells (Hertford and Stortford)
The other side of the argument surely is that if the airports were denationalised separately, the most successful airport would expand to its full capacity, whereas, under the present arrangements, and if the BAA is denationalised as a whole, that incentive to maximise the efficiency and productivity of one unit will be sacrificed.
§ Mr. Ridley
First, Heathrow and Gatwick are close to their capacity. In a few years' time, I do not believe there will be room for any more services into those airports.
Secondly, the effect of privatising Heathrow and Gatwick separately would be that the managers of the airport would seek to exclude all the less profitable traffic. We should find that domestic and feeder routes were being excluded from the airport which Londoners believe is the one nearest to them and the one to which people from other parts of the country feel that they should have access when they visit London. Those would be undesirable results.
§ Dr. Alan Glyn (Windsor and Maidenhead)
My right hon. Friend mentioned the expansion of Heathrow. When 693 the airport is privatised, will there be anything to prevent it from being enlarged and the number of flights increased? Will the Secretary of State have any control over the number of flights? What will happen about Perry Oaks?
§ Mr. Ridley
I hope that my hon. Friend will forgive me if I do not go into the subject of Perry Oaks at length. It hardly arises under the Bill. The problems of Perry Oaks and whether it can be moved are being studied by the Thames water authority and the BAA. If there is a report, it will be made available. The problems there are great.
§ Mr. Ridley
May I just finish my answer to my hon. Friend the Member for Windsor and Maidenhead (Dr. Glyn)?
My hon. Friend asked about powers to control flights into Heathrow. The number of flights is limited by its physical capacity. We have no intention of allowing greatly different hours during the day or night. Moreover, if in the future it is felt desirable—I am not proposing this—the Bill contains powers which would enable an air transport movement limit to be imposed on Heathrow. I repeat that I have no present plans to do that.
§ Mr. Jessel
My hon. Friend the Member for Windsor and Maidenhead (Dr. Glyn) raised a serious point. People in many constituencies around Heathrow are worried about the environment and protection from aircraft noise. Can my right hon. Friend confirm that the Government's policy to protect the environment remains as stated in his White Paper last June? In particular, will he confirm that the Government do not intend to do anything which will increase the number of night flights allowed?
§ Mr. Ridley
I confirm that the section in the White Paper on the environment still applies. The points do not feature in the Bill because environmental considerations are taken care of in the Civil Aviation Act 1982. Arrangements for banning night flights are contained in that Act. The powers will remain. My hon. Friend is probably aware that a review of present night flight restrictions is taking place. When I receive the report from the consultants, it will be made public, and he may submit any views that he has on that report. That activity is taking place separately; it has nothing to do with the Bill.
§ Mr. Robert C. Brown (Newcastle upon Tyne, North)
The Secretary of State justifies denationalisation as a whole on the ground that it would be better and would prevent the owner of, for example, Heathrow freezing out less profitable flights. Whichever way the denationalisation is carried out, surely there is the shrine called market forces at which, I understand, the right hon. Gentleman worships. Market forces being what they are, is there not a grave danger that the present flights from Newcastle into Heathrow could be squeezed out to Stansted or Gatwick?
§ Mr. Ridley
The hon. Gentleman should listen to what I say. I said that it was important that we should not allow that to happen. That was one of the main reasons why it would not make good sense to privatise the airports separately, if the House, as I believe it does, wishes to have some control over traffic movement at the various airports. He will find that that philosophy is firmly advanced in the White Paper, the Bill and what I am 694 saying. I do not know why he thinks that I should worship at the shrine of free market forces when we are discussing which aircraft should land at which airport. A public interest is involved, which I intend to maintain.
§ Mr. Anthony Steen (South Hams)
As the Secretary of State knows, I am a great supporter of the Bill and would like to assist him if I can. Does he agree that we should get the most out of the existing system and that the national air traffic control services may well have more capacity than is presently being heard about? Is he aware that the Ministry of Defence is holding 30 per cent. of the air transport movements in and out of Gatwick and Heathrow and that that is preventing the natural expansion of more and quieter planes into Heathrow and Gatwick? The Secretary of State need not assume more centralised control of the movement of planes if he managed to have an inquiry into the operation of NATCS and how the Ministry of Defence is preventing the natural growth of Heathrow and Gatwick.
§ Mr. Ridley
I must leave such technical considerations to the responsibility of the Civil Aviation Authority because safety is involved. I am adamant that safety shall be the responsibility of the CAA and shall be paramount in the matter. I would not suggest that the House would wish to go beyond what the CAA believes to be the maximum technical number of flights landing at any airport at the present time.
I understand that the BAA may suggest an intermediate Scottish holding company to co-ordinate the management of the Scottish airports. Privatisation will open the door to a new future which will provide incentives for management in an increasingly commercial and competitive world. It will innovate, increase efficiency and provide the services that the customers want, at the right price and of the right quality. The offer of shares to employees will give them real involvement in their airport's performance and a stake in its future. I am confident that this is the way to provide better services for the airlines and for their customers. I am confident, having read the Leader of the Opposition's views on this, and despite what the hon. Member for Aberdeen, North (Mr. Hughes) is presumably about to say, that the Opposition really agree and that this will not be a matter to which they will wish to return if ever they had the opportunity to do so.
I recognise that the BAA will continue to have a near-monopoly position in the private sector. But customer preference is such that, even if the airports were privatised separately, Heathrow would enjoy a near-monopoly position. Accordingly, the Bill provides for a tough regulatory system that will protect airlines and their passengers and airport competitors from abuses of any airport's monopoly position. I shall come to that later.
Those thoughts apply equally to the major local authority airports. Over the past few years, traffic at regional airports has grown at similar rates, and at some airports at higher rates than the BAA's airports. The main regional airports are substantial businesses and they, too, should operate in a proper commercial environment. Part II of the Bill provides for the major local authority airports to be released into the commercial world in which they belong.
The Bill will enable me to require major local authority airports—those with a turnover of over £1 million—to 695 be reconstituted as public limited companies. They will continue to be wholly owned by the relevant local authorities. Clauses 12, 13 and 14 of the Bill provide the necessary powers. I would like to see local authorities introduce private capital into their airport companies, but I do not intend to oblige them to do so. I know that that disappoints some of my hon. Friends, particularly those from the north-west; but I ask them whether it would be right to compel local authorities to privatise. I hesitate to suggest support from the Labour party on this. It would create a dangerous precedent.
I hope instead that local authorities will come to see the advantages of privatisation. The Bill makes that possible, and clause 24 will prevent local authorities from placing restrictions on the disposal of shares.
The Bill also ensures that there is a proper arms length relationship between the new airport companies and their parent authorities so that airport companies will have proper commercial freedom. It provides for the boards of the airport companies to include full-time airport executives, and not simply to consist of local councillors. It limits the services that local authorities can provide to airport companies, and such services as may be provided will have to be at commercial rates. The Government believe that airport companies should be free to buy in services by competition in the best interests of the company. The directors of the airport company will have a duty under the Companies Acts to act in the best interests of the company, which may not necessarily coincide with the interests of their own local authority. I think that that is an important change which will lead to greater efficiency.
§ Mr. Tony Favell (Stockport)
Does my right hon. Friend consider that a municipal airport controlled by a local authority and subject to political control will be able to operate and compete fairly with the privatised airports of the south-east?
§ Mr. Ridley
I think that is doubtful. I agree with my hon. Friend, but it seems that that extremely pertinent and thrusting question should be addressed to local authorities rather than to me. I was in Luton today and made the same suggestion to the council there. I am sure that it is right to convince them of that rather than to use powers to force them.
§ Mr. John Carlisle (Luton, North)
We were pleased to see the Secretary of State in Luton today. Will he confirm that any councillors who might be elected to any privatised board will still be able to carry out their full council duties and be able to report on their activities to the council?
§ Mr. Ridley
Yes. I am not an expert on local authority rules, but I am sure that a councillor can be a director of an airport company. It might be, if there were some planning application from the airport, that the councillor would not be able to vote or be present on a matter where there is an inter-reaction between the two. However, in principle my hon. Friend is right.
§ Mr. David Ashby (Leicestershire, North-West)
Does my right hon. Friend consider that, since the ownership of the company is with the shareholders, the substitution of the local authority as shareholders for the present public ownership is no privatisation at all? It will give little satisfaction to people such as those in my area in the east midlands, who would like to see their airport privatised.
§ Mr. Ridley
I absolutely agree. I made it clear that we are not privatising local authority airports. We are making it easy for them to privatise if they see the advantages —as my hon. Friends the Members for Luton, North (Mr. Carlisle) and for Leicestershire, North-West (Mr. Ashby) and I clearly do.
§ Mr. Robert Hughes (Aberdeen, North)
In answer to the hon. Member for Luton, North (Mr. Carlisle), is it not the case that the Bill makes it clear that no paid director or any employee of the plc can be a member of or elected to the local authority? Does it also not make it clear that an unpaid director may be a member of the local authority but may not speak or vote in any of the proceedings relating to the airport, except by committing a criminal offence?
§ Mr. Ridley
That is right. However, my hon. Friend the Member for Luton, North asked whether a councillor could be a director of a privatised airport. That would be totally different.
§ Mr. Ridley
We are not privatising. The hon. Gentleman is thicker than usual tonight. Let me explain it for the benefit of the extremely thick hon. Gentleman.
The Bill allows for airports to be made into plcs. If they remain in the public sector, owned by the local authority, what the hon. Member for Aberdeen, North said applies. If a local authority sells its shares, the airport becomes privately owned. Even the hon. Member for West Bromwich, East (Mr. Snape) must understand that. In that case, when the airport is privatised, my answer to my hon. Friend the Member for Luton, North applies.
§ Mr. Ridley
Over 51 per cent.
As companies, major local authority airports will be required to produce and publish Companies Act accounts — a discipline which in itself will foster a more commercial and businesslike approach. The Bill also extends that businesslike approach to investment. Investments financed from an airport's undistributed surplus will no longer come within the capital control system and will no longer need Government approval. Investment financed from external sources will, of course, remain subject to the Government's capital expenditure controls whilst the company remains within the public sector. If, however, the local authority concerned chooses to privatise an airport, the investment will be free of those controls.
§ Mr. Alfred Morris (Manchester, Wythenshawe)
Following his extraordinary reply to the hon. Member for Stockport (Mr. Favell) about airports under local authority control, may I ask whether the Secretary of State is aware that Manchester international airport has always been under local authority control? Is he further aware that it has competed with great success against other airports, not least subsidised Stansted?
§ Mr. Ridley
The right hon. Gentleman must also consider whether the airport might have done better if it had been under private enterprise management. Those airport companies are now major concerns and the interests of the companies must take precedence over the interests of the council. That is a matter to be determined 697 locally, in each case, but the advantages of going into the private sector are clear. The disadvantages are beginning to come out from what I have been saying, including the point about capital control, which the right hon. Gentleman may have noticed.
The major airports, as near-monopolies, will be regulated in the future. Part IV of the Bill gives the Civil Aviation Authority powers to regulate airport charges and trading practices.
§ Mr. Robert McCrindle (Brentwood and Ongar)
Before my right hon. Friend floats on to part IV, may I ask whether he has anything to say about part III? Many promises have been given about the consultation with airlines and airport authorities that my right hon. Friend envisages. Is there any possibility of the creation of a more formal consultation procedure? Many people are worried that, with all the offers of informal consultation, there seems to be no end point. Will my right hon. Friend take that matter on board? Can we reconsider the matter in Committee and create a more formal consultation procedure under part III?
§ Mr. Ridley
I have to disappoint my hon. Friend. I shall come to part III at the end of my speech. I do not believe that the difference between formal and informal consultations is as important as the consultations themselves. However, if my hon. Friend has a problem with that, I shall be only too happy to see whether we can meet him in Committee or in any other manner.
Part IV of the Bill gives the CAA powers to regulate airport charges and trading practices. That is a natural extension of its existing role as regulator of civil air transport and airports for safety purposes. All airport activities will be subject to normal competition law. The CAA will exercise more specific regulatory functions over airport charges and core airport activities that are essential for the use of an airport for air transport, such as operating runways, aircraft servicing facilities and passenger and baggage handling facilities. Clauses 34 and 35 require operators of airports to obtain and retain the CAA's permission to levy airport charges, and the CAA will be able to attach conditions to any permission.
There will be two tiers of regulation. Airports with a turnover of over £1 million will automatically be subject to the first tier. The second tier will apply to the largest airports that enjoy a substantial amount of national or local monopoly. Those second-tier airports will be designated by order. At all airports, the CAA will have the power to impose the conditions described in clause 38—to require proper and separate accounts, to prevent or remedy any discriminatory charges or trading practices or abuse of a monopoly position, and to prevent predatory pricing. Clause 37 makes special additional provision for designated second-tier airports.
§ Mr. Favell
On this very important point, will my right hon. Friend state whether Stansted comes under the first or second tier? If my right hon. Friend remembers the debate on Stansted, he will realise that it is immensely important for regional airports to know whether Stansted will be subject to maximum supervision. Will he give an assurance tonight that Stansted will be subject to the maximum supervision?
§ Mr. Ridley
Yes, indeed. Stansted will be in the second tier and will be subject to further measures that I shall come to later.
No firm decisions have yet been taken, but it is my intention to designate at least the BAA's south-east airports, which include Stansted, and Manchester. At those airports, the CAA will have a duty to regulate airport charges through a price formula and to require transparency of accounts. Every five years, the Monopolies and Mergers Commission will carry out an investigation of a designated airport's business. It will make recommendations on any practices found to be against the public interest and also recommend what limit should apply to airport charges over the following five years.
We are the first country to privatise airports and therefore the first to set up a regulatory regime. I believe that it strikes the right balance between the need to ensure that airport companies can flourish within the private sector and the need for a fair deal for the customer. The CAA's new duties in clause 36 reflect that balance.
The Bill makes provision in part III for the regulation of airport use. We have to accept that airlines and airports do not operate in an entirely free market. International services are governed by international agreements between Governments within the framework of international conventions. The powers of direction in clause 27 are needed primarily to ensure that airports comply with the United Kingdom's international obligations — for example, in respect of landing charges. The other three provisions of part III deal respectively with traffic distribution rules, limits on air transport movements and slot allocation schemes. They recognise the limitations on airport capacity and merely acknowledge the Government's responsibility to ensure that powers exist for using that limited capacity in the most effective way.
§ Mr. Fred Silvester (Manchester, Withington)
My right hon. Friend said that the reason why he could not privatise the BAA as separate airports was to safeguard access from regional airports. Why can he not impose the necessary regulation under the powers that he is now describing, to protect regional airports, while privatising the BAA as separate airports?
§ Mr. Ridley
The traffic distribution powers, to which I shall refer, would not enable a positive policy to be applied, which I believe to be important in relation to domestic flights. We would be able to suggest a negative policy for containing excess demand. That is the point of all three measures. When Heathrow and Gatwick reach capacity, something must be done about that. One cannot just have more aircraft—[HON. MEMBERS: "That is the market."] If the market is allowed to do that, the domestic flights will have to go elsewhere.
§ Mr. Terry Dicks (Hayes and Harlington)
The logic of my right hon. Friend's argument is clear. In those circumstances, the market will dictate what happens. If airlines find that they cannot get the slot or the access to Heathrow, of their own volition they will move to Gatwick or Stansted. The Government are imposing something that takes the market away from its natural method.
§ Mr. Ridley
It is not a natural market, because Heathrow is the most attractive and is close to London, Gatwick is next and Stansted is third. The attraction of 699 Heathrow is so enormous that the pressures to get into it have always been the dominant factor. We have to take powers to ensure that there is public control over that.
§ Mr. Gerald Howarth (Cannock and Burntwood)
Like my right hon. Friend, I am a friend of the market. On what basis have the Government formed the view that a privately controlled Heathrow would seek to keep out the feeder services? They must realise that it is, in part, the feeder services that provide the strength of the interlining operations.
§ Mr. Ridley
Not only a privatised but a publicly owned Heathrow had those itchings in the past, and it has been necessary to frustrate them. That bears out what I said.
§ Mr. Roger Gale (Thanet, North)
My right hon. Friend referred to the free market. How free a market does he intend to permit in airport services? How heavy a hand is the Monopolies and Mergers Commission likely to apply to the relationship between the development of those services and what appears to be the hidden subsidy of landing fees?
§ Mr. Ridley
My hon. Friend will know that that is a complex matter and that there are international agreements about precisely what revenue from non-aviation enterprises may be devoted to the reduction of airport charges. Those are constrained by international obligation.
Within the aviation services, the runway, the baggage handling and the various services mentioned by my hon. Friend, the CAA will have the role of ensuring that the services are not used discriminatingly against the interests of any particular airline by charging twice as much for baggage handling for airline A as it charges for airline B. That is a necessary protection and the Monopolies and Mergers Commission can ensure that such services are provided efficiently. It would obviously be desirable for a privatised airport company to contract out such services in order to gain the maximum efficiency in performance.
First, clause 28 allows the Government to make traffic distribution rules that will set the strategic aims for the operations of airport systems within which those airports may develop. Rules may be made only after I have consulted and received advice from the CAA, which will be required to consult airport and airline operators that have an interest. I have already asked the CAA to review and advise on the current rules for traffic distribution in the London system. The CAA has undertaken a wide consultation exercise, involving airports, airlines and a range of other bodies. I expect to receive its final advice in the spring.
Secondly, clause 29 empowers me to set limits on air transport movements at airports, after consultation with the CAA, the airport operator and the airlines affected. This is not a power that can or should be used lightly, as we discovered last year. It is a tool intended to ensure that the development of our airports strikes the right balance between traffic growth and its effects on the surrounding area. I undertook last summer that in approving the development of Stansted to an eventual capacity of 15 million passengers per annum, I would seek the approval of the House to set an ATM limit which will enable the first phase of development to be limited to 7 million to 8 million passengers per annum. Thereafter, increases in the ATM limit and, therefore, decisions on the appropriate 700 rate of traffic growth at Stansted will be for Parliament to determine. I have no present intention to set ATM limits at any other airports.
Thirdly, clause 30 allows me to require the CAA to prepare schemes for allocating slots at individual airports again, in consultation with relevant airport and airline interests. I envisage no immediate need for this power to be used. The scheduling committee system is working well, but is undoubtedly coming under pressure. As airports such as Heathrow and Gatwick reach their full capacity, with demand still rising, the pressure upon slots continues to grow. There may well come a time when voluntary agreements among airlines cannot cope or begin to work in a way which is contrary to the national interest. I want this power to be in place to insure against that eventuality, but it is very much a reserve power.
The White Paper set out clearly our policy objectives for the future for the aviation industry as a whole and for airports in particular. This Bill provides for the implementation of that policy. It takes a radical step forward—one which other airports around the world are watching keenly. The Bill propels the ownership and structure of airports into a commercial and entrepreneurial future, while still providing the right degree of protection for airlines and passengers. It will bring profound and lasting benefits to airports, their customers and to the eĊonomy as a whole, thus ensuring that the United Kingdom remains a world leader in aviation. I commend it to the House.
§ Mr. Robert Hughes (Aberdeen, North)
I begin by paying a tribute to all those involved in the British Airports Authority, management and employees alike. It was distinctly uncivil of the Secretary of State to leave that out of his speech. A fulsome tribute ought to be paid to those people who have made a contribution to providing an efficient service catering for the transport needs of the airlines and the millions of customers who pass through the airports during the year.
Not for the first time, the Secretary of State for Transport is presenting to the House a Bill that is totally irrelevant to his departmental responsibilities. The Bill cannot be justified by any transport criteria, and indeed none has been advanced today. No criticism has been made of the British Airports Authority on the grounds of efficiency, however narrowly defined, because we all know that the BAA has been consistently profitable for a number of years. The BAA has not been criticised for its failure to meet its responsibilities to the airlines or to the travelling public. The only criticism that has been made of the BAA, not today but a couple of years ago, concerned the steep increase in landing charges that took place in 1979–80. That took place purely, simply and directly as a result of the Government setting very stiff financial controls.
No international experience is being prayed in aid; in fact, the Secretary of State made a virtue of the fact that no other country in the world has proceeded along the lines he is following in relation to privatising an airport system. No other country with a comparable number of airports of such strategic importance is proceeding in the way suggested by the Secretary of State.
Although it may be a contradiction in terms, the Secretary of State is driven both by sheer naked dogma and by expediency. The dogma is that private enterprise must 701 be given the chance to get its hands on the profits at the expense of the nation. I was surprised that the Secretary of State did not mention in his speech that he is writing off about £43 million of capital debt before the company is sold. That is a nice tidy sum and a nice tidy sweetener to the prospective new owners simply to write off £43 million.
That is, of course, in keeping with the character of the Government. Almost every privatisation project has allowed for massive sums of money to be written off. That is profligacy with the public purse, as it is the taxpayer's money that is being misused. The Secretary of State should be thoroughly ashamed of himself. Of course we know that he is not. He is the archetypal example of his master's voice. The Prime Minister tells him what to do and he does it. The Prime Minister has told him that it is expedient to raise as much cash as possible for the Treasury, to build up a kitty that can be used to give tax cuts to the Prime Minister's friends. Even if the Prime Minister were to succeed in doing that — and Treasury Ministers are busily back-pedalling as fast as they can about the promised tax cuts—she will not save the Government from defeat at the next election.
The Secretary of State said a lot in his speech but on the other hand he also left a great deal out. He did not say anything about how much money he expects to realise from the sale. That is a significant omission. We know that the fixed assets have been valued precisely at £1,179.2 million and that does not translate exactly into what might be raised from the sale. How much is the Secretary of State expecting to raise — £500 million or £700 million or some other figure? We have a right to know.
We also have a right to know how much the Secretary of State's agents will get from the sale. If there are any sure winners in the privatisation process, it is the agents who handle the sale.
There are many questions that still require an answer from the Secretary of State. He sought to give some answers but none of these were very satisfactory. He has the power under clause 1 to direct the British Airports Authority to submit proposals for the organisation of the new company. He has the power to agree these with or without modification. If he wishes to modify them he can secure modifications, in the words of the Bill, as "he thinks fit".
The Secretary of State has told us that he wishes to keep the British Airports Authority together. He said that there was some proposition that the Scottish airports would be under a separate holding company. It looks as though there will be a holding company for the British airports, a subsidiary holding company for Scottish airports and seven airports all as separate subsidiaries. That raises many questions. For example, how will the Secretary of State maintain the integrity of the whole system after privatisation?
§ Mr. Peter Fry (Wellingborough)
Why should the hon. Gentleman's constituents in Aberdeen pay ticket prices based on landing charges at Prestwick, thus subsidising an enormous loss-maker? Is it not time to change the organisation of the Scottish airports so that the future viability of Prestwick and whether it should be kept as an airport can be assessed?
§ Mr. Hughes
No doubt the hon. Gentleman's information is reliable and put forward in good faith, but I am advised that Prestwick is not a monumental loss-maker and that its problems are not a severe drain on BAA funds. I believe that the problems of Prestwick have been grossly exaggerated. No doubt my hon. Friend the Member for Cunninghame, South (Mr. Lambie) will wish to go into that in greater detail.
§ Mr. David Marshall (Glasgow, Shettleston)
Does my hon. Friend agree that for many years Prestwick subsidised the other Scottish airports until they were built up and able to make a profit?
§ Mr. Hughes
I accept that. We shall have to look very closely in Committee at the process of cross-subsidisation, and questions such as who is to pay for the development of Stansted will have to be asked.
Two matters relating to the conditions of sale are not mentioned at all in the Bill. First, as the Bill is drafted there is nothing to prevent shares being purchased by foreign interests which might seek to influence air traffic policy. I hope that no one will take this example as gospel, but the French have problems with Charles de Gaulle and Orly airports and might wish to take a substantial stake in the new British Airports Authority to exercise an influence and affect traffic movements. The Secretary of State will doubtless argue that under clause 27 he has powers of direction in the interests of national security and the discharging of international obligations, but I believe that it would be far better to write these matters into the Bill so that we know where we stand.
Secondly, nothing in the Bill inhibits airlines from buying a controlling share in the BAA and exercising an influence to protect their operations to the detriment of their competitors. The Secretary of State, who is taking remarkably little interest in what is going on, may be relying on references to the Monopolies and Megers Commission, but anyone who has had dealings with that machinery knows that it is extremely cumbersome and slow to react. Again, I believe that it would be much better to write this into the Bill, although I appreciate that there may be difficulties in defining an airport owner, as there may be all kinds of subsidiaries. Nevertheless, we must get this right and it should be done in the Bill.
§ Mr. Patrick Ground (Feltham and Heston)
What kind of limitation on shareholding does the hon. Gentleman propose? Would it be by numbers of shares or by reference to the identity of the shareholder, or would it be some other form of control?
§ Mr. Hughes
I much prefer to have no foreign ownership at all and no airline shareholdings in the BAA. The latter point could be solved by limiting the proportion of shares held by airlines to below that number that would allow them to nominate a director. I give notice that we shall wish to pursue those questions in detail in Committee.
Questions of accounting will also have to be probed in detail, especially the way in which the Government intend the transparency of accounting by subsidiaries to operate. If the Secretary of State is worried about cross-subsidisation, we need a much clearer idea both from him and in the Bill as to how the accounting procedures will operate.
A year ago the Secretary of State tried to introduce a Bill giving him powers over aircraft traffic movements, 703 without explaining his general policy. That Bill received a Second Reading and went into a Standing Committee which, in effect, threw it out. He has now come back with another Bill which, in essence, amounts to the same thing. We have been told no more and no less than we were told 12 months ago. The Secretary of State should write his policy clearly into the Bill and tell us exactly how much parliamentary scrutiny there will be.
Since I first read the Bill I have been asking why we need it at all. Sheer dogma has been the only believable explanation so far. The Secretary of State and others who wish to pursue privatisation say that it will achieve two things. First, it will remove the financial constraints exercised through the external financing limit. Secondly, it will allow the BAA to expand its business horizons. For example, the BAA could go in for hotel and recreational developments. It is not long since the Secretary of State's predecessor compelled British Rail to sell its hotels because they were not central to its operations, so there is inconsistency and hypocrisy, if nothing else, in the present proposal.
The objectives of access to external finance and wider business horizons could both have been achieved within the public sector. I have long believed that public industry has been unnecessarily constrained and restricted in its opportunities to compete with private enterprise. The solution proposed by the Secretary of State has nothing to do with the health and competitiveness of the industry and everything to do with dogma.
The same applies to the local authority airports. For 40 years the local authorities have shown dedication and far-sightedness in developing their airports policy. They have taken wise investment decisions and the benefits to our airports system should be welcomed. Now that they are beginning to see the fruits of their endeavours they find that the millions of pounds of investment are being set up for private companies to reap the profit. The Secretary of State can be motivated only by the Government's paranoid dislike for local democracy because the private companies that the Secretary of State seeks to establish for the local authority aiports will not be treated on all fours with the BAA. If the Secretary of State wishes the local airport authorities to become private limited companies, why has he so strongly and constantly resisted the proposals of Manchester council to do just that?
The plcs set up for the local authority airports will not receive equal treatment with the BAA. Their debts will not be written off before they go into the private sector and they will not be free to operate in the same way as the BAA in relation to finance. The Secretary of State has stated that so long as majority control in terms of share ownership is with the local authority the company and the local authority will be subject to tight financial constraints and will need the Secretary of State's permission for capital spending. All this is designed to compel them to privatise their shares. The Secretary of State says that his friends will be disappointed that the authorities are not being compelled to sell their shares, but he is trying to achieve that result by subterfuge because he and his colleagues in the Government will so operate the financial aspects as to stop or stultify developments so that authorities are compelled to sell their shares.
Why has the Secretary of State chosen £1 million as the threshold for bringing airports into economic regulation and forcing the formation of plcs by local authorities? What is magic about that figure? The Secretary of State 704 is taking powers in the Bill to revalue that figure as time goes by. Leaving aside the cost of inflation, the £1 million can change in relative importance simply by the passage of time, and even if the airports do not develop. It would have been more sensible to choose a figure based on the number of passengers using the airports. If that had been done it would have been a clear measure of how the airports were developing and whether it was necessary to bring them within the controls of the Bill. I have the impression that the Secretary of State has simply decided which authorities he wishes to deal with and has picked a number out of thin air to justify it. It is all arbitrary and we need an explanation.
The Secretary of State is not allowing the new plcs to expand their business horizons in the same way as the new British Airports Authority. What local authorities are not allowed to do now the plcs will not be able to do either. If it is good enough for private enterprise to expand into non-essential airport activities such as hotels, why is it not good enough for the plcs, with a local authority base? The Secretary of State has presented himself in the guise of a swashbuckling knight of free enterprise who will liberate public industry from the chains of state bureaucracy. [HON. MEMBERS: "Hear, hear."] But as is so often the case — the hon. Members who make baying noises will realise this if they read the Bill—the reality is nothing like the fictional account.
In parts III and IV of the Bill the Secretary of State, clearly and without equivocation, has said that private industry cannot be trusted to run an enterprise which is vital for the transport needs of the nation. I wholly agree with him on this. In clauses 26 to 48 the Secretary of State has resurrected and imposed a labyrinthine system of controls — controls on the total volume of traffic, the type of traffic, the distribution of traffic between airports, the power effectively to control landing charges and the power, which he has retained, to control investment policy through planning procedures. There is not much room for competition and free enterprise.
§ Mr. Hughes
I will not give way. If a Labour Government had produced legislation with such detailed control of private enterprise we would be attacked on the grounds of the tentacles of state bureaucracy reaching into every nook and cranny of the industry. Clause 58 would be cited in evidence.
§ Mr. McCrindle
Does it not occur to the hon. Gentleman that one of the reasons for requiring the continuation of the regulations which he effectively derides is that we are committed by international obligations to require them?
§ Mr. Hughes
Well, if that is the case why has the Secretary of State come before the House and pretended that he is freeing the industry from state bureaucracy? The Secretary of State has said that the Bill will liberate the British Airports Authority from the constraint of a public industry and let it loose in the private sector.
Clause 58 is an example of the control, and for greater clarity I will read it in full. Clause 58 states:.—(1) The Secretary of State may, in the case of any airport—
- (a) give the airport operator a direction requiring him to make available for the exclusive use of designated
705 persons using the airport such special accommodation and any associated facilities as may be specified in the direction;
- (b) where it appears to the Secretary of State that the airport lacks special accommodation and associated facilities suitable for being made so available, give the airport operator a direction requiring him to take such steps as may be specified in the direction for the purpose of, or in connection with, securing the provision at the airport of such accommodation and facilities.(2) In subsection (1) 'designated persons', in relation to an airport, means such persons, or classes of persons, as may from time to time be notified to the airport operator by the Secretary of State for the purposes of this section.I shall not read any further because I can see the embarrassment of the Government. What conclusions can we draw from this? I am tempted, having read clause 58, to reach the conclusion that the Government have surreptitiously privatised the parliamentary draftsman's department and contracted Frank Muir and Dennis Norden to write the script.
We all know what lies behind clause 58. It is a quarrel between the BAA and the Foreign Office about the cost of VIP facilities. To deal with such a situation in legislation with a catch-all clause is the height of absurdity and the Secretary of State knows this.
With regard to accountability, we can see all the details of the powers exercised directly by the Secretary of State, indirectly by the Secretary of State through the CAA and also through the Monopolies and Mergers Commission. I am not satisfied with the amount of parliamentary control and accountability which is in the Bill. It is especially inappropriate since the Secretary of State has not spelled out in detail his policy that we should not have detailed parliamentary control. We know that this Government hold Parliament in contempt. Our earlier debate confirms that. The whole of the Westland saga reinforces the need for parliamentary accountability and I give notice that we shall press hard for this in Committee.
Will this policy be a success? I am not sure that the Secretary of State will succeed in his aim of privatising British airports or, in the long term, privatising local authority airports. The tightness of the controls of the BAA does not make it an attractive proposition for investors. I do not think that there are big killings to be made in this area. There is no will within the local authorities to sell majority shareholdings of the local authority airports in the new plcs. Minority shareholdings will not be attractive because of the public expenditure constraints on capital development. In the case of British airports there is an external complication of which the Secretary of State has made no mention in his plans for privatisation. I call it the "Laker factor".
The privatisation of British airports has to be viewed in the context of other Government privatisation schemes —it cannot be viewed in isolation. The Government are intent on privatising the gas industry and proceeding with the flotation of British Airways. British Airways has been up and down the country, not of course selling shares—it is not empowered to do this — but making presentations in all sorts of places on British Airways. British Airways is preparing the climate for selling shares and there is nothing improper in that.
The Government hope that shares in British Airways will be floated in June or July this year. That is the date 706 that would-be investors should bear in mind. Frankly I cannot see that being achieved. Lawsuits are currently in progress in the United States on behalf of former Laker employees. It is hoped that these may be disposed of in the courts in March of this year. Beyond this there is a further threat of litigation by the travel agents and tour operators in the United States. As long as there is a threat of further litigation—even where cases have not yet been launched — British Airways' shares cannot be attractive to investors because no one will wish to buy shares in a company when potentially large damages have to be paid. This will push the programme back.
We have the prospect of the flotation of British Airways, British Gas and British airports at a time when the availability of finance is at a premium. If they all occur at about the same time it will cause a problem with the money that is available in the market. We also know—the Government cannot avoid this in their considerations—that when British Telecom shares were sold there was a severe drain on the resources of building societies. All these things will have to be taken into account when the Government decide on the flotation process.
It is quite possible that there will be only a partial flotation of those three companies. As shadow spokesman, I am interested only in British Airways and British airports. If I am right—only time will tell—the Labour Government, when it is returned to power, will still own a substantial proportion of those companies. That will give us greater freedom to achieve our overall objectives in transport policy. We shall ensure that British airports are publicly accountable and that they meet the needs of the economy, consumers and the workings of the industry. That will be achieved in a way consistent with our economic and democratic aims and priorities.
British airports are the subject of the Government's eighth privatisation measure. Some privatisation measures have been completed and some are only partially completed. We shall have to determine our priorities on terms of public acquisition, on terms of compensation and the rate of public ownership once the picture is clear when we are in Government. Above all else, we are determined that public assets transferred to the private sector on a beneficial prospectus should not be ruthlessly exploited by financiers and against the interests of the nation. In any case, we will not allow the privatisation of British airports to stand in the way of our civil aviation policy.
§ Mr. Ridley
I can only interpret what the hon. Gentleman is saying as meaning that he will not renationalise the airports. Shall I go and see the shadow Patronage Secretary and stand down the Whip for tonight, as it appears that the hon. Gentleman is not opposing the Bill?
§ Mr. Hughes
Having failed to listen to the debate, the Secretary of State has failed to listen to what I have said. I made it clear that our acquisition policy will be determined by what we find when we are returned to office. I do not believe that we need bother, as the airports will still be in public ownership then. I have made our pledge quite clear and we intend to keep it.
We oppose the Bill root and branch because it does nothing for the industry. It is pure dogma. I am not like those in the Liberal party or the Social Democratic party who have tabled an amendment. I know where I stand. I 707 oppose the Bill. They do not and are using weasel words to cover the fact. I shall not support their amendment and I invite my right hon. and hon. Friends to oppose the Bill.
§ Sir Fergus Montgomery (Altrincham and Sale)
The hon. Member for Aberdeen, North (Mr. Hughes) seems confident that we shall have a Labour Government. I do not share his confidence. Indeed, it is likely that most of us will be dead before another Labour Government is elected. To judge by the performances of Opposition Members today, they do not deserve to form a Government.
I shall try to be brief, as I realise that many of my hon. Friends wish to speak and there is nothing more frustrating than sitting in the Chamber all day without getting a chance to speak. I support the Bill in principle, because it follows the June 1985 White Paper. When we debated the White Paper, I paid tribute to the help that the Government have given regional airports, especially Manchester international airport. They have done a great deal to help us. One of their main objectives in airports policy has beento encourage the use and development of the regional airports so that they can meet the maximum demand they can attract".
What worries me most is the development of Manchester's role as the United Kingdom's second hub. Air service licensing policy is a vital ingredient. I am pleased with the progress so far, especially with the recent granting of an operating permit to American Airlines for its Chicago-to-Manchester service. I am aware that there were great difficulties. Some Jeremiahs in the Manchester area said that it would never go through. I am delighted that the difficulties were overcome and that the route will soon come into operation as it will be a boost to the north of England.
All we are asking for in the north is that any legislation sets a framework of fair competition between our regional airports, including the Manchester gateway, and those in the south. One of the things that has worried us in Manchester is the fact that the British Airports Authority has been able to subsidise landing rights at Stansted from profits at Heathrow. That was undoubtedly to the disadvantage of Manchester international airport.
Paragraph 9.8 of the White Paper says that BAA airports would be structured as a holding company with seven individual airport companies, each producing separate accounts. Perhaps my hon. Friend the Minister can explain why that seems to have been omitted from the Bill. I cannot understand that it should be left to the BAA, albeit with the Secretary of State's veto, to put forward its own scheme for organisational structure. The BAA has never made any secret of its philosophy that the London airports should operate as a system. I cannot accept that that is in the national interest.
By offering inducements to airports to operate services, initially from Gatwick and now from Stansted, the BAA has artificially deterred airlines from offering services from regional points to meet the true demand. The use of profits from Heathrow to that end has inhibited the development of a balanced national network of airports and air services.
I accepted limited development at Stansted on the basis that those discriminatory activities would stop and that, as a result, Stansted's charges would have to rise to commercial levels. Instead, there seems to be a view that 708 decisions are being taken prematurely about the development of Stansted and even about its rail connection. Any commitment to expenditure on Stansted's development would pre-empt the judgment of the successor company's board. There have even been rumours, which I hope will be denied, that there will be capacity for 15 million passengers a year at Stansted rather than the 8 million promised at the time. These issues must be debated publicly before any decisions are made and while the BAA remains in public ownership.
I am also worried about part IV, which empowers the CAA to regulate airport charges. There appear to be no safeguards to prevent cross-subsidies. Airport operators will be required to disclose subsidies to the CAA in the process of regulation of charges, but nothing in the procedures here outlined renders such subsidies illegal. The Bill merely provides for the CAA to set an upper limit on charges, taking subsidy into account. I am sorry to labour my argument about cross-subsidisation but it is vital to the future of Manchester international airport. The problems must be tackled.
I have already said that I am unhappy about how the Bill will deal with the control of the BAA's charging activities. I am also unhappy that the regulations are to be applied to local authority airports, as there is no evidence that local authority airports have acted outside the public interest, so safeguards involving maximum charging levels will be unnecessary.
I am also unhappy about part III, which allows the Secretary of State to control types of traffic using any airport. Such provisions could be used forcibly to transfer traffic to Stansted rather than to allow airlines freedom of choice between all United Kingdom airports.
As the White Paper made clear, there must be maximum reliance on market forces. That would lead to an increase in services from Manchester and other regional airports if they are allowed to operate unhindered by licensing restrictions. By further encouraging the development of direct regional services, a significant proportion of London's capacity problems could be solved.
My right hon. Friend the Secretary of State has apparently asked the CAA to advise him on the mechanics of traffic allocation to be adopted between airports.
The Bill says that we should consider the roles of two or more airports serving the same area in the United Kingdom. I draw attention to the fact that there is a substantial overlap of catchment areas between the London and Manchester hubs. At present a considerable number of northern passengers are, through lack of services at Manchester, forced to use London for scheduled international services. Any decisions relating to the London area will have substantial implications for the Manchester hub.
It is essential that traffic distribution policy should take on a national dimension. In particular, a policy that arbitrarily transfers traffic between airports regardless of the needs of the market must be rejected. I make no secret of the fact that my main concern is for Manchester international airport. It is the largest employer in my constituency, and the more prosperous that airport becomes, the better it will be for the north of England.
For the last few years it has been run perfectly amicably on a 50:50 basis between Manchester city and Greater Manchester. With the demise of the Greater Manchester council, a new formula will have to be devised. Again I 709 make no secret of the fact that I would favour a plc comprising Manchester city, the nine district councils comprising the rest of Greater Manchester and private capital, all three having a 33.3 per cent. stake. I am not in favour of Manchester city controlling the airport, and I therefore welcome clause 14 which empowers the Secretary of State to reject any scheme.
Manchester international airport is the largest asset in the north-west of England and it would be an act of unforgiveable folly to put it in the hands of the people who at present control Manchester city council.
I also welcome clause 19, which provides for setting up an employees' share scheme. That would give those who work at the airport a chance to share in the profits of the airport, and that would be an incentive.
§ Mr. Tony Lloyd (Stretford)
Does the hon. Gentleman also welcome and support clause 20, which will truncate the development of Manchester, as the ability to raise capital and finance will be subject to the strictures of local government financing? Indeed, the hon. Gentleman has said some unkind things about the Government's views on local government spending. Can we expect that on this issue he will at least join the Opposition to ensure that that does not prevent the further development of Manchester airport?
§ Sir Fergus Montgomery
The situation remains as it is now. I thought that the hon. Gentleman would interrupt me because of what I said about Manchester city council. He feels that the ratepayers of Trafford will not get a fair deal. I am also a Trafford ratepayer, and it is because I want to ensure that Trafford gets a fair deal that I want — [Interruption.] If only the hon. Member for Manchester, Central (Mr. Litherland) would shut up for a moment, I shall come on to the point that his hon. Friend made. I am surprised that not one Labour Member from the Manchester area has challenged me on that point. The hon. Member for Manchester, Central was a member of Manchester city council. Would he like to see the lion's share of this airport handed over to the people who are at present controlling the city council?
§ Mr. Robert Litherland (Manchester, Central)
The hon. Gentleman did not even answer the question asked by my hon. Friend the Member for Stretford (Mr. Lloyd). As a member of Manchester city council, I took a great pride in the airport. If the hon. Gentleman read the history of Manchester he would discover that when Alderman Tommy Regan cut the first sod he needed police protection because the Conservatives did not want the airport. There was a tremendous fight for the airport against the likes of the Tory party, but now that it is a success, the Conservatives again want to get their sticky fingers in the till. The argument about present control of the city council is merely an excuse. The Labour party will not always be in control, and the Conservatives or even the Liberals may take over. The hon. Gentleman's argument is nonsense. He is merely appeasing his conscience because he wants privatisation.
§ Sir Fergus Montgomery
I make no bones about the fact that I would like privatisation, but the hon. Gentleman's defence of those people now in control of the city council was not very convincing. Of course I hope that 710 they do not remain in control for much longer. I hope that they will be swept out in May, if not by the Conservatives and the Liberals, at least by the moderates in the Labour party for whom I have respect.
As to clause 20, there has always been control over local authorities by this Government and previous Governments. I therefore do not see the relevance of the point made by the hon. Member for Stretford (Mr. Lloyd).
§ Sir Fergus Montgomery
If that is so, there is no doubt about what the hon. Gentleman thought, because he seems to understand nothing at all. He gave a very unprepossessing defence of the people whom he is supposed to support.
§ Mr. Michael Meadowcroft (Leeds, West)
Perhaps I can assist. The argument is that, if the private sector companies have freer access to the market for capital, that will be unfair competition for those companies that are still in the hands of local government via shareholding in successor corporations, especially if they are still limited by the provisions of clause 20. The argument was that they would have a different basis for obtaining capital in the future.
§ Sir Fergus Montgomery
That is the point. Local government expenditure has always been controlled by this and previous Governments. If private capital is introduced, the situation will alter.
Perhaps I can finish—[Interruption.] I am glad that the hon. Member for West Bromwich, East (Mr. Snape) is much happier with his new sparring partner—
§ Mr. Snape
I need no encouragement from the hon. Gentleman about my relationship with my sparring partners. Will he address himself to the point put to him by the hon. Member for Leeds, West (Mr. Meadowcroft) and my hon. Friend the Member for Stretford (Mr. Lloyd)? Why discriminate against a public limited company created under the Bill in the way that clause 20 obviously does? Did not Trafford council originally second the proposal that the future of Manchester airport should lie in the direction that the Opposition have recommended? For what reason did Trafford council change its mind? Was it nobbled by the Secretary of State, who has not even bothered to listen to the hon. Gentleman's contribution?
§ Sir Fergus Montgomery
I come back to my point that local authority expenditure has always been controlled, and it always will be controlled. The leader of Trafford council is entitled to his opinion. I disagreed with him on this issue, as have many other people, because under the proposals Manchester city council would have 55 per cent. of the shareholding.
§ Mr. Favell
There is, of course, an argument between Manchester city council and the other councils that form part of Greater Manchester. Manchester city council behaves as if the only people who contribute towards the airport as those who come from Manchester city. This is a regional asset. It does not belong purely to Manchester city. Therefore, should not it be regarded as a regional asset and privatised if possible?
§ Sir Fergus Montgomery
I agree with my hon. Friend.
The Bill is good in parts, but there are other parts of it about which I have doubts. As it stands, it lacks the clarity 711 of purpose needed to implement the policies enshrined in the White Paper. By the time the Bill comes out of Committee, I hope that the principles embodied in the White Paper will have been enacted in the total national interest.
§ 8.8 pm
§ Mr. Michael Meadowcroft (Leeds, West)
I beg to move, to leave out from "That" to the end of the Question and to add instead thereof:this House declines to give a Second Reading to a Bill which, by requiring the profitable British Airports Authority to be sold outright, fails to appreciate the virtues of partnership between the public and private sectors, including the introduction of private capital into publicly owned companies, and which seeks to stifle municipal enterprise, which was responsible for the successful development of regional airports such as Manchester, Birmingham, Leeds/Bradford, Newcastle and Luton.
I first apologise for the absence of my hon. Friend the Member for Isle of Wight (Mr. Ross). He would normally be speaking on this subject and has a greater experience of it than I have, but because of the re-arranged time for the debate, my hon. Friend is unable to be present as he is attending the Council of Europe on parliamentary business.
We have tabled this reasoned amendment because in our view it sums up the three key reasons why the Bill as it stands is unsupportable. The amendment first refers to the ridiculous aim of trying to privatise the BAA, which at present is a highly profitable body. That is to be sold outright, yet it is a virtual monopoly. In our opinion, if it is to be a monopoly, it should be in the public sector rather than the private sector.
Indeed, paragraph 30 of the Select Committee report stated:We have noted that the Secretary of State has 'virtually' decided that, in the event of privatisation, the BAA's three South East airports will not be put under separate ownership but we are not convinced that privatising a monopoly, irrespective of safeguards, is in the best interests of the user.That Select Committee has an in-built Conservative majority, and it is interesting that it put the emphasis on those sentences at the end of the paragraph.
Secondly, the partnership between the public and private sectors, which could be enhanced by changes in the structure and management of airports, will be obviated by the Bill. There is no reason why there should not be public corporations with private finance, or why publicly owned bodies should not attract private capital. That is done elsewhere and in other spheres, and there is no reason why it should not be done in the United Kingdom. Yet the Government have turned their face against that for the airports.
Thirdly, the reasoned amendment refers to the strange desire to stifle municipal enterprise. I am always puzzled that Conservative Members believe that civic pride and municipal enterprise are bad. Our tremendous achievements throughout the centuries have not all been accomplished by national Government and private enterprise. Everywhere in our great cities one sees the results of municipal enterprise and civic pride, and rightly so. Indeed, we are arguing for spending public resources on infrastructure. The public sphere is belatedly trying to continue the work carried out with immense foresight 100 or more years ago. It is ridiculous to suggest that municipal enterprise in relation to the airports should be done away with.
712 As the hon. Member for Aberdeen, North (Mr. Hughes) said, the limit of £1 million turnover, which decides whether an airport should be taken into the restrictions of the Bill, could easily be lifted. There is a power to do so by order, no doubt intended simply to keep pace with inflation. If the sum were raised to £5 million many of the smaller civic airports would be excluded. That would be a small token act.
The Government's attitude to the management of airports shows yet again the triumph of ideology over reason. It is misguided and cynical to force the takeover of all but a handful of our smallest airports, whether or not they have genuine local accountability, and have been effectively developed and managed. The Leeds-Bradford airport is situated where it is because, at the beginning of the 1930s, Bradford city council made a strong plea that the airport should be put between the two cities, although the site was not the best available. The experts advised a site to the east of Leeds. Nevertheless, Bradford city council insisted that if the airport was to serve its city, it should he placed between the two cities. The council wanted to have some share, commitment and understanding of the problems that would arise.
It is important to recognise that what has happened in Leeds and Bradford is typical of other areas. Although in the past I have criticised the membership of the Leeds-Bradford airport committee and its lack of political balance—I shall continue to voice those criticisms—that is a local question and must be dealt with locally. If the airport is taken out of the hands of local government, it will certainly not help to bring wider local accountability.
§ Mr. Bill Walker (Tayside, North)
I am interested in what the hon. Gentleman says about the location of Yeadon airport. Will he confirm that it was put there by the Royal Air Force?
§ Mr. Meadowcroft
Yeadon airport existed as a private aerodrome long before it was opened as a public airport. The adviser recommended a site at Whinmoor, which would have been more suitable, especially in terms of altitude, but the airport was placed where it was because two cities were involved.
For many years, despite the efforts of the local authorities, Leeds-Bradford airport lost money, and those losses were met by local ratepayers. Recently, more than £20 million has been expended on extending the runway, and again local ratepayers bear the revenue implications. During the past few years the airport has been making a profit. Is it not right that that profit should be returned to the ratepayers? Why privatise the airport now, when it is making money? In any case no one knows how long that will continue. The extended runway is predicated on a high forecast of passengers coming through on package tours. It seems monstrous that the losses of the past should not be compensated by present, and possibly future, profits.
As municipal airports with a turnover of more than £1 million a year will be forced to become public limited companies, they may decide to take up all the shares. The provisions of clauses 20 and 59 show that consent for loan sanction and even for expenditure could be withheld by the Secretary of State. I agree with the hon. Member for Altrincham and Sale (Sir F. Montgomery) that there have been capital controls in the past, but then the airports were endeavouring to compete on the same basis. They had the 713 same restrictions because they were in the public sector. When they become plcs they will be able to look to the market to raise funds. However, airports whose shares are held by local authorities will not enjoy the same freedom, but will be constrained by the Secretary of State as if they were local authorities. They will have the worst of all worlds. Not only will they not be in the public sector, but they will not have the supposed benefit of freedom of access to the market by being in the private sector.
§ Sir Fergus Montgomery
Can the hon. Gentleman cite any aspect of local authority expenditure that is free from control? One facet of local authority expenditure cannot have complete freedom while all the others are controlled.
§ Mr. Meadowcroft
The hon. Gentleman still misunderstands the point. Under the Bill the airports will cease to be local authority airports. They will be plcs. As plcs why should they not, like other plcs, have access to capital funding? They will not be able to compete on equal terms.
§ Mr. Parris
The answer is that if Derbyshire county council decides to set up a social services department of the county council as Derbyshire social services plc, which is paid for entirely by a subvention from Derbyshire county council, it could not, by so doing, free its social services department from local authority control.
§ Mr. Meadowcroft
We now have an even more powerful argument against the Bill. It is now being suggested that if airports were allowed freedom by turning themselves into plcs, Derbyshire social services might do the same. That is nonsense. Local authorities do not want the Bill, or their municipal airports turned into plcs. They want to retain accountability and the present membership. They do not want the restrictions contained in the Bill. I hope that hon. Members will accept that the pride that has gone into the formation and development of the airports should be allowed to continue in future.
In reply to an intervention by the hon. Member for Luton, North (Mr. Carlisle) the Secretary of State suggested that the same possibilities of reporting back would exist as hitherto, but clause 62 suggests that that is not the case. It contains severe restrictions about the disclosure of information. Where the matter has arisen previously, for example over the new passenger transport authorities, a specific disclaimer has been inserted to avoid preventing local authority members from being permitted to report back to the constituent authorities. Clause 62 will prevent local authority councillors from reporting back to the bodies that put them in a position of authority. It is bad enough having delegated powers and indirect elections to the bodies, but then to say that the members should be prevented from reporting back to their constituent local authorities is ridiculous.
§ Mr. Patrick Thompson (Norwich, North)
Does the hon. Gentleman agree that if he checked on the matter as I have done, and found that the consultative committees that existed prior to the Bill could continue under the Bill, he would be satisfied that the Bill will not create the problems that he suggests and could be good from that point of view?
§ Mr. Meadowcroft
My experience of consultative committees is hardly as encouraging as the hon. 714 Gentleman suggests. I am not arguing for them, but for local councils to be able to have a report from the members that they put on the board of the new public limited companies. I am not arguing for a local consultative committee. Although that is a good thing, it does not have the teeth, the power and the forum of debate of the local authority. That is like saying that one supports the community health councils. They are of benefit, but they are no substitute for the proper accountability of the Health Service to locally elected members. They can snap at the heels of the authority like other consultative committees can, but they cannot bite. That is the difference. There must be accountability or the matter becomes staid and introverted. That is another difficulty in the Bill.
Other strange things suggest that the Bill does not deserve support. Clause 58 mentions the exclusive use of accommodation. Does that mean VIP accommodation or security accommodation or what? It is strange to include the power to direct an operator to provide the exclusive use of accommodation. Under clause 27 the Secretary of State is given the power to direct security. There is no suggestion in the Bill that there will be any public contribution towards the cost of any security. It is unfair that an airport could be told to provide X number of police with machine guns, but the state would be under no obligation to pay for them.
Regarding the writing-off of debts, there is different treatment of bodies under the Bill from that in other legislation. When the PTAs were set up, the accumulated losses of the bus authorities that were being taken into the PTAs were not written off. The ratepayers and bus passengers had to pay for them. It is unfair that, because ideology rules, losses and accumulated debts will be written off.
Employee share ownership was mentioned earlier. That applies to only part of the Bill. There is no suggestion that employee share ownership will apply to the body that will become the BAA plc, despite the fact that airlines will be able to participate. It will be a strange position when the airlines will be able to participate in the BAA plc, but not its own employees.
Not only do we have the triumph of ideology over reason, but reason is so curtailed as to be almost ridiculous. The Bill purports to place those bodies in the private sector and it suddenly allows them freedom—a freedom that does not occur anywhere else in the world. The United States of America is the land of the free, to which we are told to look for enterprise, job creation and buoyancy in the economy. From the Select Committee report, we see that there is no privately owned airport in the United States. That does not stop private funding coming in, but the corporations are publicly owned and able to raise bonds in the market.
§ Mr. Graham Bright (Luton, South)
The hon. Gentleman mentioned the United States. While I follow his argument, may I ask whether he would agree that in the United States the terminals, hangars and most of the facilities are funded and operated by private concerns?
§ Mr. Meadowcroft
I am grateful for the hon. Gentleman's support. That is exactly my point. Why cannot a public body contract out if it wishes? I believe that that would be of benefit. Anyone who has compared terminal 3 at Heathrow with American airports will see the benefit of that. 715 However, the Bill is in place of a public body being able to contract out and bring capital in. To do so, the body must be private. The Bill gives a long list of restrictions and immense controls over personnel, security, capital and revenue. In the end, the Bill hedges the proposed companies about with so many controls that the bodies might as well be nationalised. I do not believe that the Bill deserves support.
§ Mr. Richard Page (Hertfordshire, South-West)
In view of the tremendous interest and the numbers who wish to speak in the debate, I shall be brief.
The House will not be surprised that I enthusiastically support the Bill. I wish that it had been introduced earlier. I believe that it will be of more general benefit to the country the quicker it comes into operation.
The Bill covers several airports, but it deals mainly with how the British Airports Authority will be brought into the market. An interesting facet of the Government's privatisation programme is the ingenuity with which they produce some form of regulation on monopoly powers and introduce some form of competition into the market place. Inevitably, we make comparisons with British Telecom, which was the first to go down the privatisation chute. I do not dismiss the effectiveness or the splendid work of Mercury, but it takes only 2 per cent. of the market while British Telecom takes 98 per cent. Those who served on the Committee will remember that there was a great deal of discussion about the setting up of the regulatory body to ensure that Oftel would be independent, would have enough expertise and finance and would not be subject to agency capture. To date, that has not happened. In the case of the privatisation of the British Airports Authority, we are fortunate to have the CAA already in existence. It has a splendid independence and a well-known and proven record on matters such as safety control.
However, why is it necessary for the CAA to refer everything to the Monopolies and Mergers Commission every five years? That does not happen in other privately owned operations, so why should it happen in this case? I realise that this matter can be explored in Committee, but, on the face of it, the impression is left that the CAA will not have sufficient powers. That implies that it will not be able to do the job properly. Referring matters every five years will produce the tendency to say, "Look, there is a problem. We should hang on and wait for the commission to deal with it." A problem that could be tackled much sooner may be shoved into the background.
My hon. Friend the Member for Altrincham and Sale (Sir F. Montgomery) made some valid points about the ability to deal with cross-subsidisation of charges. It is important that we do not differentiate between charters and scheduled airlines. The Bill must be seen to cover all the airports. It cannot be hybrid. The House knows what happens when we run into the problems of a hybrid Bill.
§ Mr. Bright
My hon. Friend has mentioned cross-subsidisation in relation to the point made by my hon. Friend the Member for Altrincham and Sale (Sir F. Montgomery). Does he agree that it is more important that the question of cross-subsidisation should be completely nullified and that we should have clear and transparent accounts, especially in an airport such as Luton? Luton will be the only independent airport in the London region. The rest are owned by BAA. If we are to have competition, 716 it is important that Luton is free to have genuine competition, unlike the position at the moment with the effects of cross-subsidisation and the effect that Stansted has had on Luton's traffic.
§ Mr. Page
My hon. Friend makes the case for Luton very powerfully and he has made the position quite clear. Any rules of support finance must be clear, understood and above board. I do not believe that we can countenance any covert, under-the-counter, operations.
It is important that a balance should be struck between presenting the British Airports Authority to the market as attractively as possible in commercial terms and ensuring that there is fair play and no discrimination against smaller operators. That is why I support the proposal to make the BAA the holding company and to make each airport underneath it a separate subsidiary company. To quote the jargon of the day, it will provide financial transparency and show that fair play exists.
My right hon. Friend the Secretary of State mentioned fair play in reply to an intervention by my hon. Friend the Member for Hertford and Stortford (Mr. Wells). That definition will be expanded and debated in Committee.
The balance to which I referred earlier must be maintained, because the British Airports Authority must remain the world's most successful international airports system.
§ Mr. Page
I have no doubt that those fortunate enough to serve on the Committee will argue that point as they debate the Bill's 72 clauses and five schedules. I believe that the central expertise of BAA would benefit each operating company. Some services could be provided from the centre while each airport gets on with operating as a separate company. There should be no duplication of central costs.
An important factor in the success of an airport is why an airline and its customers choose to go there. There are many reasons, but the cost of landing fees is a major factor. Some might say that it creates the natural, but short-sighted, temptation to use the exceedingly strong market position of the monopoly, especially in the south, to advantage. I know that the BAA and its directors are far too careful to fall into that temptation. However, some regulation is necessary. When the formula of control is produced, I hope that it will be similar to the British Telecom formula. In the end, it might be an exotic formula, but essentially it should be the RPI minus x as the control, not a cost-plus exercise. The former would give benefits to customers, shareholders and employees, whereas the second would produce an atmosphere of complacency and no advantage to anyone.
We have all read the figures of passengers going through British airports—2 million in 1950, 67 million in 1984 and the various figures that are extrapolated into the 1990s. Whichever figure one takes, there will be a huge growth in the market and a tremendous opportunity. If we are to continue that growth, we must have the powerful stimulus of privatisation. It will bring efficiency and responsibility to customers' views, and management, especially in the British Airports Authority, will be 717 motivated. I hope that we shall create the opportunity for employees to have shareholdings, as we did with British Telecom, the National Freight Corporation and Jaguar. I welcome the Bill and wish it a speedy passage through the House.
§ Mr. Alfred Morris (Manchester, Wythenshawe)
As the House knows, I have two interests to declare in the debate. The first is that Manchester international airport, which is in my constituency, is much the biggest employer there. It employs more than 6,000 people and more than 20,000 others owe their livelihoods, wholly or in part, to the airport's existence. My second interest is that I have worked, in an honorary capacity since its inception, in close liaison with the North of England Regional Consortium, which speaks for local authorities all over the north on some of the most important issues to which the Bill is addressed.
When the House debated the airports White Paper in July last year, I warned that the Government's bold promises to support the regional airports sounded fine, but that there would be an early test of their sincerity. That warning is now fully vindicated. Since our debate last July, we have had the Civil Aviation Authority's consultation document on traffic distribution which, in the view of the North of England Regional Consortium, is primarily geared to forcing traffic to use the subsidised Stansted airport.
On 9 January, County Councillor John Gunnell of West Yorkshire, who is well regarded by hon. Members on both sides of the House, spoke for the consortium about the CAA's consultation document. He said:The Government in its White Paper … finally acknowledged that regional airports should be encouraged to realise their full potential … At the first test, the conspiracy of the London-based establishment has sought to ignore the major principles behind the White Paper, as though they did not exist. Every effort must be made to encourage the CAA to think again.Before the debate ends, I hope to hear how the Minister responds to that statement.
Since the publication of the White Paper, we have also had the Secretary of State's disputed decision not to publish the financing proposals put to him by the British Airports Authority and British Rail for Stansted's expansion and the provision of a rail link to that airport. Even more seriously, we now have this Bill, of which the Joint Airports Committee of Local Authorities says:As drafted, the Airports Bill will do little to assist and, indeed, is likely to hinder the development of Regional Airports.The Secretary of State's press statement on the day when the Bill was published said that it represented a new and enterprising deal for the airports industry. How can that possibly be said of a Bill that seeks to arm the Government with powers forcibly to distribute traffic and to regulate the pricing of airport services; that selectively denies the regional airports access to the open market; that provides for the effective "nationalisation" of the regional airports and for continuing and detailed central Government control over their funding; that proposes to write off the BAA's capital debts and therefore, effectively, provide a state subsidy for a capital programme which includes the expansion of Stansted; and 718 that fails to give details of the proposals for restructuring the London airports, thus adding to our concern that Stansted will, in practice, continue to be heavily subsidised?
Far from being an enterprising new deal for the airports industry, this Bill is an attempt to force most airports into a financial straitjacket. The Bill is basically about manipulation. It vividly demonstrates the Government's prejudices and their overt influence on the development of air transport policy. Yet even in the Government's own terms the Bill is a shambles. If parts I, II and III are allowed to stand in their present form, the dominance of the London airports will become absolute. Unfair competition between Stansted and other airports will continue.
The Secretary of State must be made to understand that making a subsidy transparent is not the same as securing its elimination. Equally, he must be made to understand that providing the CAA with powers forcibly to distribute traffic within the London airports system does nothing to encourage the meeting of demand for air travel in the region of its origin. That is the only effective way to ease congestion in London. The north's case against the southeast's dominance is strongly endorsed by the recent report of the Select Committee on Trade and Industry. Referring to the scope for a dispersal of tourist traffic, which now almost exclusively uses the London airports, the report states:We are concerned that it is too easily taken for granted that demand in the South East cannot be transferred elsewhere.The Select Committee report also says:The growth of Manchester Airport in particular provides perhaps the major way in which the tourist industry in the North of England will be stimulated.Right hon. and hon. Members from all parts of the House worked long and hard, entirely without party animus, to establish the case of our regional airports. We worked in close co-operation also to ensure that the subsidising of Stansted would cease. If that objective is now to be achieved, and the interests of the regional airports are to be adequately protected, substantial changes will have to be made to the Bill. For that to happen, all supporters of the regional airports must continue to work together.
I turn now, in particular, to part II of the Bill, which relates solely to the regional airports. Its proposals do not provide for companies of the kind indicated in the White Paper. They impose on the regional airports the Minister's own wholy political perception of a company. If the Minister is anxious to see airport companies at arm's length from their local authority owners, he would allow them to operate in the open market irrespective of who owns a majority shareholding in the company.
The fact that open market facilities are to be denied to companies if they are controlled by local authorities amply demonstrates the Government's total distaste for our democratically accountable system of local government in this country. What other interpretation can there be of the Government's approach? Part I of the Bill specifically allows the successor company to BAA, which initially at least will be wholly owned by the Government, to operate in the open market, and clause 34(4)(a) in part IV specifically excludes such a company from the economic regulation controls to be imposed on other airports.
Notwithstanding what the right hon. Gentleman said in opening the debate, many people will believe that the practical effect of the Bill will be to impose a privatised 719 framework on airports such as Manchester at the earliest opportunity. More than one way of achieving this is provided for in the Bill. The extensive powers that the Secretary of State will have to control the level of external and internal resources required for their development will give him more than ample scope to starve the regional airports of the resources they need if they resist private sector equity. It may be said that such action would be unreasonable, but I remind the House that it would be no worse than the Government's action in pressurising a Conservative-controlled local authority in Greater Manchester to back down from the agreement it assisted in writing to secure the early restructuring of Manchester international airport.
The Secretary of State must recognise that the people of Manchester will not simply lie down and allow their most valuable public asset to be handed over to asset strippers and profiteers. Manchester international airport enjoys its present status because of the commitment of the people of Manchester first to develop the airport and then to support its growth over a period spanning more than 50 years. After Heathrow, our airport is easily the most profitable in Britain. With over 6 million passengers last year, it is by a considerable margin Britain's third airport. In terms of quality of service, it is Britain's best.
There were many years when our airport did not make a profit. Only in recent years have the city and county taken a return on their ratepayers' investment. Moreover, all the return has been ploughed back into the regional economy. If by the enactment of the Bill the Government's wishes are met, there can be no guarantee whatever that the airport's profits will stay in the north-west. Nor is it likely that the airport will develop at a pace consistent with the needs of the region.
Now that the major risks have been taken by Manchester's ratepayers and an increasingly successful future for the airport beckons, the Government want to poach the north-west's premier public asset for private profit. That is why there is so much resentment in Manchester about the Government's approach and why there is such strong determination to keep the snouts of private speculators out of the trough.
Manchester international airport is the only growth point in a region devastated by unemployment and by both economic and social decline. It is by any standards already highly efficient. If anyone doubts that, let him name the private companies in the north-west that will show a profit of £16 million this year. It is one of the few institutions that gives us any cause for optimism for the future and is as important to the north-west today as the Manchester ship canal itself was earlier this century.
No other airport is promoted more vigorously than Manchester, and no organisation is more committed to its future success than Manchester city council. I know of no major issue affecting the airport which has created any conflict along party lines within Manchester town hall since I first had the privilege of representing my constituency 21 years ago. That is the definitive answer to the hon. Member for Altrincham and Sale (Sir F. Montgomery).
What Manchester international airport needs now is positive support from the Government. We seek support not in terms of handouts, but in the way airports policy is shaped and pursued. What we do not want is absolute authority for the Government to control the airport's activities. We not only question the Government's 720 motives, but are far from certain that they even understand the needs of the airport and the role it plays in the regional economy.
At the Stansted public inquiry, the Civil Service was totally dismissive of Manchester's case and that of the regional airports. Acting together on both sides of the House, it took us four years to persuade the Government publicly to acknowledge their role in the national airports system. Part II of the Bill is, at best, totally irrelevant to Manchester international airport's needs and the aspirations of both its work force and the people of the north-west region. At worst it could be positively damaging, and I urge the House to show its understanding of our grave anxieties about the Bill by rejecting it in the Lobby tonight.
§ Mr. Iain Mills (Meriden)
I support the Bill enthusiastically. Birmingham international airport, one of our most important regional airports, is in my constituency.
I should first like to talk about the part of the Bill that deals with the British Airports Authority. I ask my right hon. Friend to consider in his reply and in discussions with those of us who are fortunate enough to be chosen to serve on the Standing Committee, the continuing possible unfairness created by the cross-subsidy for Stansted airport. That worry has been voiced by a number of my hon. Friends and I do not intend to go into it in more detail.
Speaking on behalf of one of the municipal airports, I have to say that the cross-subsidy for Stansted and the write-off of the BAA debts must give rise to some anxiety among those who are also worried about regional airports. Is this fair to municipal airports?
I am puzzled about the need to provide for certain facilities at airports through legislation. I have talked to the British Airports Authority about this. I am surprised to find that in the Bill, and perhaps the Minister could outline why it was important to include it. If there is a good reason, as suggested by hon. Members, I should be interested to hear it, because it seems a slightly unusual precedent.
I shall also be grateful if my hon. Friend will comment on the need for protection against foreign ownership on privatisation of BAA in the way that has been proposed, which I fully support, and perhaps discuss whether the golden share solution would be one way in which that could be done. That was certainly the answer for Jaguar, which is also an important local employer of my constituents and a most successful company privatised by the Government in exactly the same way as the airports will be privatised by the Government with yet more benefits being offered. [Interruption.] I am sure that the hon. Member for West Bromwich, East (Mr. Snape) will have a full opportunity to make his views known in a way in which only he can.
I also urge my hon. Friend to do everything possible to ensure that wider share ownership, on which the Government have achieved so much, should be included for airports. I know that my hon. Friend is concerned about that. [Laughter.] I find it strange that Labour Members laugh when it is suggested that baggage handlers, pilots and people working in airport canteens could be offered shares in the place in which they work. It is a most important fundamental part of democracy that employees should have a share in their industry.
§ Mr. Snape
Labour Members invariably laugh at the suggestion that those who work in an industry should be given shares in it because, as we have seen recently in Westland—and it happens in every other company in Britain — the views of private shareholders count for naught when it comes to their future. More often than not the bulk of the shares, particularly under this Government, land up in foreign hands. That is why we laugh. It is an alternative to crying.
§ Mr. Mills
On a day like today, when we have heard my right hon. Friend the Prime Minister talk so well about her concern with that affair, it would be like taking the hon. Gentleman's helicopter up in an uncontrollable spin if I were distracted from the main point of the benefits of the privatisation of BAA. I urge the hon. Gentleman to watch his television set. He might emulate that gentleman who seems to have a most magical helicopter. It might help him and the Leader of the Opposition. They seem to need something to help them.
I do not understand the ideological reluctance of Labour Members when the privatisation of BAA is discussed. They talk of ideology as being the Government's reason for that, but the fact is that the Government have been successful in privatising so many concerns to the benefit of their employees and customers. British Telecom has been mentioned as one of the many examples. I am sure that those working in BAA will welcome the freedom and involvement that the measure will bring.
I said that I have Birmingham international airport in my constituency. That is a most important matter, but it is also a mixed blessing on which I must touch this evening. The economic activity and the jobs that it provides have to be balanced with the needs of those who live within hundreds of yards of the taxiways and landing ways with the noise and other effects of the airport. A clear role for Birmingham international airport in the region is to supply the region with what it needs—the facilities for Birmingham-based people and those who wish to come to Birmingham. The suggestion that there should be some sort of forced shift of passengers from the south-east to regional airports such as Birmingham is not music to my ears.
Birmingham has a role to play, and it is playing it. It has a new terminal. But to force people who wish to land in London or to leave from London to use the provincial airports would be singularly inappropriate for the Government. I am not sure whether Labour Members would wish to force more aeroplanes and more noise on the people of Biggin Hill, Marston Green and elsewhere. It might be interesting to ask them if we have the opportunity.
In privatising not just BAA but municipal airports, which I welcome, I hope that my hon. Friend will have a word with his right hon. and hon. Friends in the Treasury and the Home Office to ensure that our airports have facilities which are more customer friendly. I am thinking in terms of customs and excise and immigration. That is a most important matter. It will aid those privatised airports to be yet more successful in providing the friendly facilities that will encourage our tourist trade.
My hon. Friend knows from the discussions that we have had about my concern for the future of Birmingham international airport. It is most important that municipal airports which become plcs should truly become private enterprises. I know that my right hon. Friend is concerned 722 about the precedent. [Interruption.] I understand his concern about that when I see the hon. Member for West Bromwich, East. He is a man of great innovatory skill and talent. To give him a precedent to use would not be wise.
However, I urge my hon. Friend to consider amendments that may be proposed in Committee to ensure that the shareholdings in municipal airports are truly available to baggage handlers, canteen workers, pilots and others in the enterprise as well as a wider base in order to encourage the maximum investment of private capital to make the airports successful.
§ Mr. David Lambie (Cunninghame, South)
Like all my right hon. and hon. Friends I oppose the principles and aims of the Bill, which seeks to privatise a public asset and that is why I shall vote against it. Airports should be owned and controlled by public bodies—either in Government or local authorities.
First I want to deal with part III, which deals with the regulation and use of airports. That enables the Secretary of State to give general directions to airports in the interests of national security and international relations.
On 16 January 1985 the Select Committee on Scottish Affairs, of which I am Chairman, carried out an inquiry into the impact of airport privatisation on the Scottish lowlands airports policy. At the end of that inquiry we produced a very nearly unanimous report which made a series of recommendations, two of which I want to deal with tonight.
The Select Committee said:We therefore conclude that no change should be made to the existing policy in advance of privatisation, should privatisation eventually take place".The existing policy that we were talking about was the Scottish lowlands airports policy. We said that the BAA Scottish airports should be retained and privatised, if that were the Government's policy, as a single group. That was why I was glad to hear tonight the Secretary of State say that BAA plc would have a Scottish holding company dealing with the four Scottish airports. The Scottish lowlands airports policy regards Prestwick as an international gateway for north Atlantic traffic and long-haul services and considers that Glasgow and Edinburgh should cater for domestic and short-haul European services.
If we were starting afresh on a green field site, no one in Scotland would build three airports so close together, serving the same population area. However, we have Prestwick, Glasgow and Edinburgh airports and, as most speakers have said, airports are growth points, irrespective of their size. They are centres of activity and employment.
There is a large pool of unemployed people in central Scotland; every third man in my constituency is unemployed. Therefore, we must retain the airports and try to make them profitable, so that we maintain employment prospects.
That is why I am glad that, if BAA is privatised, there will be a Scottish holding company for the three lowlands airports in Scotland, plus Aberdeen airport.
§ Mr. Bill Walker
Will the hon. Gentleman confirm that when the Select Committee examined the lowlands airports, there was no disagreement about what the outcome of the report should be?
§ Mr. Lambie
I said earlier that the report was almost unanimous. I was glad that my hon. Friend the Member 723 for Glasgow, Shettleston (Mr. Marshall) pointed out in an intervention that the members of the Select Committee who represented all four airports were unanimous in supporting the Committee's recommendations.
Our second recommendation was:We agree with BAA that their London and Scottish airports should be privatised as two separate statutory undertakings wholly owned by a single holding company; this holding company would be publicly-quoted and provide the sole vehicle for private investment.We were saying that the Scottish lowlands airports should be privatised within the BAA. We believe that our future lies in tying ourselves not to Manchester, but to the London airports. In all friendliness to my colleagues from the north-west, I say that we object to those who speak on behalf of Manchester airport saying that that is the airport for north Britain. If they claim that that is the gateway to Scotland, they are proposing that Manchester should be built up at the expense of Prestwick, Glasgow and Edinburgh. Scottish Members cannot accept that.
As a Scottish Member and a member of the Select Committee, I see the future of the Scottish airports being aligned to that of the London airports. Some say that we should stop development in London to divert traffic to regional airports. From my experience and from my talks with those on the international airports scene, I know that we would divert traffic not to regional airports but to European airports. Instead of building up the British airline industry, we would be helping to build up the European industry.
No matter how the airports in the United Kingdom are organised, the fact that half the population of Britain lives in the south-east means that that region must be the centre of activity. All that we in Scotland are asking for is a share of that prosperity and that Scottish airports should be tied in with the London airports.
§ Mr. Robert C. Brown
I accept that the London airports must be the feeders for the north of England and Scotland. I would not worry too much about the utterances of Manchester Members. They are talking about the possibility of a transatlantic service, but Newcastle airport has had a transatlantic airport to Canada for the past three or four years. That is a help to Scotland, because Newcastle has a big catchment area and it is handy for Edinburgh and Glasgow.
§ Mr. Lambie
I take that point. My hon. Friend's argument about Newcastle is the same sort of argument that I am making about the Scottish airports. My hon. Friend is interested in the future of one airport and I am interested in the future of the three lowland, airports in Scotland.
§ Mr. Bowen Wells
When referring to London airports, does the hon. Member for Cunninghame, South (Mr. Lambie) include Stansted? Does he want Scottish traffic to be developed in relation to Stansted or to Heathrow and Gatwick?
§ Mr. Lambie
I see Scottish traffic relating only to Gatwick and Heathrow. I hope that the Scottish holding company will be able to negotiate slots at Gatwick and Heathrow. We should not consider Stansted. I am sure that that problem will be discussed in full in Committee.
I was disappointed when a Government Member said that Aberdeen airport should not be held back because of subsidies to help losses at Prestwick airport. It is bad 724 enough that Scottish Members should criticise one another about Scottish airports but I take exception to English Members interfering in the fight. We have enough problems without the enemy increasing them. That is why I was glad when I heard my hon. Friend the Member for Shettleston say that the profits from Prestwick had been used to develop other Scottish airports.
Prestwick, unlike most other airports, is fortunate. All developments there are completed. Its terminal building will see us into the next century without further capital expenditure. The airport is ready to take international, long-haul planes without further expenditure on runways. All that we need now is one scheduled service to fly from Prestwick and the airport will make a profit. If Randall Fields is successful in its highland express venture and is permitted to fly from Prestwick to north America the airport will become profit-making.
Major airports such as Gatwick and Heathrow could experience severe financial problems if the European Commission suddenly decides to abolish duty-free facilities. I should like to see the balance sheets for Heathrow and Gatwick without the income from duty-free sales. In two or three years Heathrow and Gatwick might have to rely on the profits from Scottish airports to help them to develop their own facilities and to develop Stansted.
As a Scottish Member I travel by air most of the time and so use airports. Most Scottish Members arrive at the House wearing a bright tie because every time that they go through an airport they buy a tie. There are shirt factories and ice cream parlours. The emphasis is on capitalising and making money. The passengers who want to catch the aeroplanes and the airline companies that are paid to get passengers and luggage on the aeroplanes as quickly as possible are hemmed in by these concession facilities. Instead of airports being for the benefit of passengers and airlines, they are becoming commercial ventures to maximise profits. If the European Commission stops the sale of duty-free goods in most of the airports in south-east England, the airports will face tremendous difficulties.
§ Sir Russell Johnston (Inverness, Nairn and Lochaber)
Does the hon. Gentleman agree that most of the so-called duty-free facilities are rip-offs?
§ Mr. Lambie
I do not want to go into that matter. It is another issue.
I hope that, even at this late stage, the Government will reconsider their policy of privatising airports. Airports are a national asset, which should he owned by the nation.
§ Mr. Terry Dicks (Hayes and Harlington)
I approve in general terms of the Government's approach to the Bill although I share, almost completely, the doubts of my hon. Friend the Member for Altrincham and Sale (Sir F. Montgomery). I do not believe that a London system, as outlined by my right hon. Friend the Secretary of State, is needed. I am worried about Government powers to regulate and constrain airline operations. I am worried also about the lack of consultation with concessionaires at airports and the lack of protection given to them in the Bill.
I must declare an interest because my wife works for one of the concessionaires at Heathrow. Although I see none of that income, I am told that it could be suggested that I benefit financially.
725 I am, as always, angry about the retention of the BAA's monopoly powers. My views on that organisation and those who run it, as distinct from those who work for it, are on the record. I think that almost everyone who is interested in airports policy knows how I feel.
The London system can only be justified—contrary to what my right hon. Friend the Secretary of State said —if we seek to protect Stansted. There can be no other reason for having a holding company covering Heathrow, Gatwick and Stansted unless it is to protect the loss-maker of Stansted and to continue the BAA's policy of developing that airport, contrary to commercial practice and the requirements of the people in the area. Switching resources between the airports also means putting money into Stansted.
We know that the holding company can invest in any of the three airports. It has to offer a competitive interest rate when lending money. I cannot for a minute envisage money from the holding company going into Heathrow, but I can imagine the holding company taking some of the profits from Heathrow and Gatwick and ploughing it into Stansted, even though its aim should be to get a reasonable rate of return. Heathrow profits will not necessarily go back to Heathrow. Those who create the profits at Heathrow will receive no benefit.
The Secretary of State has the power to set air traffic movement limits, to allocate slots at airports and to distribute traffic between London's airports. If it is decided that enough traffic is using Heathrow, the market will not be able to dictate, as it should and would do if it were allowed to operate properly. Because of aeroplane landing arrangements between countries, British Airways is the only airline to which the Secretary of State can say, "You must use Gatwick or Stansted." That power concerns me and Britain's — nay, the world's — leading airline. We must watch this aspect carefully if and when the Secretary of State uses his powers.
The Secretary of State can intervene in an airline's operations by redirecting it. He can affect the free market —that market that I thought my right hon. Friend so firmly advocated. I am worried about these powers to interfere. My right hon. Friend has said that he will use the powers if he sees a need, but I have great doubts about that. I am certain that there will come a time when either my right hon. Friend or his successor will use the powers to intervene in the market as they see fit.
§ Mr. Anthony Steen (South Hams)
Does my hon. Friend agree that the scheduling committees which have been at work at Heathrow and Gatwick for many years have done sterling work, that the airlines should be allowed to sort out the slots as they have done so successfully, and that central Government should not interfere with the process?
§ Mr. Dicks
I agree with my hon. Friend. There is nothing that I can add because, on this occasion, his words are mine.
The total income from concessionaires to the BAA in 1984–85 was £178 million. The net contribution was £123 million. That amounts to almost 33 per cent. of the BAA's income. The BAA had a net profit on commercial services in that year of £98 million. However, those concessionaires were not consulted about one dot or comma of what is contained in the Bill. I find it incredible that 726 civil servants and Ministers should decide to bring the Bill before us and say, "Despite earning 33 per cent. of the BAA's profit, we felt it completely unnecessary to consult concessionaires to see what they felt about what was going on and how they felt the Bill would interfere with their operations." I find that amazing.
It has been suggested that clause 33 might have an effect on concessionaires, but when one studies it one finds that the concessionaires are excluded from the operation of that clause.
It has been claimed that clause 39(2)(a)(ii) gives the Civil Aviation Authority power to refer the airport operator to the Monopolies and Mergers Commission when its conduct may be against the public interest. It has been suggested that concessionaires will be covered by the clause, but the BAA is clever. It would not push concessionaires to the point where the CAA would have to interfere. The fair trading legislation would not be contravened by the BAA, because it is far too subtle.
I shall give an example of the way that the BAA behaves. Until last year, a concessionaire had a concession from which the BAA took 10 per cent. of its turnover for five years. That concession came up for renewal and the BAA told the concessionaire that if he applied again it would take 12 per cent. of the turnover and for three years only. The concessionaire, reasonably, asked why. He was told, "Mind your own business. We do not have to tell you why. We will not tell you why. If you do not like the general terms, you can push off and go somewhere else." That is the BAA's attitude. It comes from the top, from Sir Norman Payne downwards.
§ Mr. Tony Lloyd
I am genuinely fascinated by this little exchange. The hon. Gentleman has been making what he would regard as a strong case in favour of allowing market mechanisms to operate, but when — I agree, completely ridiculously—the BAA allows that mechanism to operate, the hon. Gentleman complains bitterly about it. Which does he want? Does he want the free market mechanism or something that is rigged? He wants something that is rigged.
§ Mr. Dicks
The hon. Gentleman has missed the point. In a free market, there is some protection. Fair trading is generally carefully watched by the people within the organisations involved. They know what is going on.
I wish to give a further example of what I was describing. The same company was in the process of negotiating the concession and the MMC had started to look into the BAA. The company had made a planning application. The BAA's officers said to the concessionaire, "Get that MP"—that is, me—"off our backs while the MMC is studying us and we will push on with your planning application."
Understandably, the concessionaire thought that that was reasonable. He just wanted good will, to obtain the concession fairly and to succeed with the planning application. The minute that I backed off and the MMC finished with the BAA, what happened? The planning application has been delayed and pushed back.
Clause 39(2)(a)(ii) does not cover such circumstances. The BAA is too subtle to break the fair trading legislation or the provisions of that clause. I want a guarantee that the word "concessionaire" will be included in the Bill and that there will be adequate powers to ensure that the bullying monopoly tactics used by the BAA cannot continue.
727 The terms of reference include the public interest but they should also include power to consider the private interest of individuals and companies which depend on airports for their livelihood. That is an important aspect. We hear about public interest all the time, quite rightly, but some of the activities of the concessionaires have a private interest which is different from the public interest. An example is car hire. Most of the concessionaires on the airport have a monopoly position, whether it be a tea shop or the shirt and tie shop that we have heard about. The car hire companies of an airport have to compete with each other. There is not a monopoly. The BAA deliberately fails to recognise the difference between one concessionaire and another.
We must look carefully at the monopoly power of the BAA. I appeal to the Secretary of State not to have a holding company—let there be Heathrow Ltd., Gatwick Ltd. and Stansted Ltd. We know that Heathrow will make a fortune if it is sold, Gatwick will just about break even and nobody in his right mind will want to buy Stansted at the moment.
Therefore, I agree with the general approach. I accept the concerns expressed by my hon. Friend the Member for Altrincham and Sale (Sir F. Montgomery). I beg the Secretary of State to ensure that he protects the concessionaires on the airport and looks carefully at the powers to regulate airline operation, because I fear that he will interfere with market forces and the way in which the airports operate.
§ Mr. Frank Cook (Stockton, North)
I will detain the House only briefly because I know that the 72 clauses and five schedules and the nuts and bolts therein will be subjected to the flogging spanner and the swenchwrench of Committee. I must declare an interest in that, as a ratepayer of Cleveland, I hold a minor involvement in the affairs of one airport—Teesside. The Cleveland county authority controls its function together with Durham county council, so the remarks which follow are essentially based on that perspective.
Bearing that in mind, I suppose I must thank the Secretary of State on Teesside's behalf for effectively removing the somewhat artifical categorisation of airports which had previously condemned Teesside — quite wrongly in my opinion—to third-rate status, denying it access to the substantial financial support on offer to other regional airports.
Teesside airport can and does justifiably lay claim to be the regional airport at the centre of the north-east of England, with all the facilities, operational resources and expertise needed for its further development in terms of industrial investment, North sea gas and oil logistics, continental communication and holiday tour operations, and, allied to all of these, the job creation which is so desperately needed in an area which can, sadly, boast the highest levels of unemployment in the United Kingdom.
Given the new equality of status among regional airports, I ask the Minister whether he will ensure that future Teesside operations will receive the same level of financial support as has been accorded to other regional airports. Furthermore, will the Minister fully acknowledge the previous handicap experienced by Teesside and make some provision to ensure that ground lost in the past is recovered, and recovered quickly?
728 I have noted with interest the proposals in clause 3 to extinguish the accumulated debts of the British Airports Authority — an undisclosed sum, but one which doubtless runs into many millions of pounds. I am sure that that action will prove a great attraction to cronies of the Secretary of State—the vultures of the City—when they are finally allowed to prey upon another vibrant and vital piece of public enterprise.
A similarly juicy morsel is presently on offer, I understand, in the writing off of British Airways' financial liabilities. Is it intended to make provision for the extinguishing of all the debts of local authority airports, in similar fashion? Does the Secretary of State intend to write off the debt of Teesside airport and those moneys already committed for the next two years to provide for the latest updated radar equipment?
Furthermore, clause 13, in part II, restricts the Secretary of State's powers of compulsion on local authorities to privatise to those operating airports with an annual turnover exceeding £1 million. It empowers the Secretary of State to raise that level by order. Surely the Minister agrees that such a low figure is of such little significance as to be positively footling, and if the Bill were to be enacted, it must be re-examined.
I remind the Secretary of State that at the joint council meeting of the Joint Airports Committee of Local Authorities and the Airport Owners Association, held at Gatwick on 28 November, it was moved by Mr. Ian Crann of Cardiff and seconded by Mr. John Dyson, chairman of Teesside's airport committee, that that arbitrary annual. turnover trigger be raised from £l million to £10 million. That joint council represents every operational civil airport in the United Kingdom. All are represented on it and all. were present. There was no dissent to the motion that I outlined. It was carried nem con. Will the Secretary of State acknowledge that he should heed the formal and collective voice of that council, and as testimony to that acknowledgement, will he state his intention to amend that figure accordingly upwards to £10 million?
I note that, in part III of the Bill, clauses 28 and 29, already referred to by several right hon. and hon. Members, would empower the Secretary of State to make rules governing the distribution of air traffic among airports and to impose limits on numbers of aircraft using airports within a given period. So much for the Government's public pronouncements against state intervention and in support of freedom. As on so many issues, they say one thing and mean the opposite. They abuse the English language and defy sound logic.
Finally, I refer to the Minister's statement to the Joint Airports Committee of Local Authorities on 4 November, when he expressed support for the view that an airport system should be sufficiently mature to stand on its own feet and make its contribution to taxation. Is that what the Government have in mind following the enactment of the Bill, and if so, will the Minister say so tonight?
§ Mr. Graham Bright (Luton, South)
I welcome and support the Airports Bill, particularly the creation of public companies, open to external investment, to run the airports now run by local authorities.
I disagree with the Bill on one point — the privatisation of the BAA in the London region. The Secretary of State knows only too well that I should have liked those airports to be treated separately, in the interests 729 of fair competition. I say that against the background of my constituency interest. The airport in my constituency will be the only independent airport in the London region.
The Bill contains essential measures for loosening the direct control of central Government and local authorities over Britain's airports. The proposals are also a vindication, in part at least, of the arguments that I and my hon. Friend the Member for Romsey and Waterside (Mr. Colvin) have been putting forward for the past five years. I have no doubt that they will make our airports more responsive to passengers' needs and to airlines' requirements, as well as freeing them from some of the constraints of public finance.
I am conscious that my right hon. Friend the Secretary of State for Transport has had to frame the Bill with a number of considerations in mind. These go well beyond the provision of extra passenger capacity in the London area, the regions and Scotland. Problems connected with the role of Heathrow as the dominant airport at the centre of a network of international airline routes, the issue of air traffic distribution, the regulation of landing charges and the daunting problems of safety and security have inevitably had to be faced. The transfer of the BAA and local authority airports from direct public control also poses complex financial questions.
The strategic decision to place our major commercial airports in private ownership is clearly right. Passenger traffic at Heathrow and the other London airports has consistently grown more rapidly than the economy since 1960. There is no doubt that this growth was by itself more than sufficient to attract the investment needed to expand those airports.
With the greatest respect to Opposition Members, the record of the BAA in generating profits and providing new facilities since 1965 is irrelevant. Given the nature of the BAA's monopoly and the strength of passenger demand, it would have been amazing if the BAA had not done as well as it has. The profits and facilities would have been forthcoming anyway. There was never any justification for state ownership, and I am delighted that the Government have recognised the force of that argument and decided to act.
§ Mr. Bright
The point is that there has been a belief that the BAA was necessary to provide these airports. I believe that with its monopoly it was the easiest thing in the world to produce the sort of growth that has taken place. If there had been private operations, there would now be a much slimmer and fitter organisation.
§ Mr. Bright
I could not agree more with my hon. Friend. I shall deal with that later in my speech.
The form that privatisation takes will be crucial. Until the BAA comes forward with its proposals to the Secretary of State, it will not be possible to judge precisely how that 730 is likely to operate. I am sure that my hon. Friends will wish to know in detail about the relationship between the holding company that has been envisaged and its seven airport subsidiaries.
It is vital that transactions, particularly lending, between the holding company and its subsidiaries are transparent and on commercial terms. The problems that cross-subsidisation has caused to airports such as Luton, that are outside the BAA's empire, should not be allowed to recur and the damage that that has done in the past should not be under-estimated. Care must also be taken to ensure that no under-provision of capacity arises.
The Minister will be aware of these two technical points and they are capable of resolution in Committee. The sale of the BAA will provide a unique investment opportunity. There is nothing new about private investment in airport terminals and hangars or even in commercial concessions. They are common in the United States and even at some local authority airports in Britain. That is certainly the case at Luton where Monarch Airways, Britannia Airways, McAlpine and many others privide facilities at the airport. The transfer of an entire group of airports to the private sector will provide those who work at the airports and those who live near them with the opportunity to acquire shares in those airports. In my view, those people ought to be given generous preference in whatever scheme is decided upon.
There is no better barrier to the Opposition's threat of renationalisation than having public ownership by real people with a real stake in the success of these airports. There is also no better incentive to the work force than having a real stake in the airport at which they work, and that is often reflected in the service received by the public.
I appreciate that the sale will have features which make it rather different from previous disposals. It is entirely right that matters of security and safety should remain with the Secretary of State. Given the bilateral arrangements between Governments about international air routes, it is also inevitable that the licensing and control of air traffic distribution should remain with the Secretary of State. I see no realistic alternative to the regulation of charging policy and trading practices which might exploit airport users. If the CAA and the Monopolies and Mergers Commission did not exist, we should have to invent them or to devise substitutes for them.
The efforts of successive Governments to define airport policy have been complicated by the contrast between the shortage of passenger capacity in the London area and the evident surplus in the regions and in Scotland. The latter, I believe, is largely the result of over-optimistic assumptions by local authorities about traffic growth, and the consequent misinvestment has in many, although not all, cases been behind the pleas for forced redistribution of air traffic. I am glad that the Government have resisted those pressures and decided to open the way to much more commercial operation of local authority airports. The formation of public companies for municipal airports is a very welcome step forward.
I appreciate the reluctance of local authorities to give up part of their empires, especially when they have been responsible for the airports for many years, but I do not believe that the ownership and control of airports is the essential function of local government. If it were, there would be even more under-used airports. It would be especially unfortunate if attempts were made to frustrate 731 the purposes of the Bill in that area, and I am glad that my right hon. Friend the Secretary of State is taking powers to forestall such manoeuvres.
This aspect of the Bill directly affects my constituents as Luton airport is one of the town's two major employers and the only part of the London system not under the control of the BAA. We have had to compete against unfair subsidies paid to Stansted from the profits of Heathrow and Gatwick with the object of weaning away our traffic. Despite that, local airlines, with the support of the local council, have built up the passenger capacity to just under 2 million per year. We are aiming for 3.5 million as the next step, with an ultimate target of 5 million.
I know from conversations with constituents and with workers at the airport that there is a widespread desire to have the opportunity of a direct and personal stake in the airport. That is no reflection on the council, which has run the airport until now. It is a positive response to the success of the Government's privatisation programme. If the people of Luton can buy their council houses and shares in British Telecom, there is no reason why they should be denied the chance to own shares in the local airport.
§ Mr. Litherland
As a ratepayer to Manchester city council, I already have a share in Manchester airport. What good will issuing shares to other people do me?
§ Mr. Bright
In that sense, I am a shareholder in Luton airport as a ratepayer in Luton, but I know very well that if we had private capital in the airport and if I were a private shareholder there would be far more accountability. I believe that it would also be much more efficient.
§ Mr. Bright
If the local authority sells 51 per cent. of the shares in the airport, the local authority will benefit from the sale. It will have that cash to invest or spend as it wishes in the future, so no one is losing anything.
§ Mr. Bright
I see no reason why a scheme cannot be devised to enable a substantial proportion of the equity to pass into the hands of airport employees and local residents. It is very important to consider schemes of that kind while leaving the council with a sizeable stake. If the council retains 49 per cent., that is a sizeable stake and, to all intents and purposes, a major control in the airport. The proceeds of the sale would be available for other purposes in the town. Luton airport used to make £1 million a year, which helped to subsidise the rates. Unfortunately, at the moment the airport is not making money and it is forecasting a loss for next year.
If the council sold a 51 per cent. stake in the airport, that would probably raise enough money to make £1 million a year to subsidise the rates, yet the council would still have a 49 per cent. stake in the future profits of the airport.
For all those reasons, the Airports Bill is the most positive step forward in airport policy in the past 20 years. It removes unfair cross-subsidisation and exposes the airports to clear accounting procedures. Ownership by private investors and institutions will provide a more commercial approach to meet the requirements of the growing passenger demand. The commercial approach will also enable local authority airports, which are big 732 business—Luton is the second largest business in my constituency—to pay management at the going rate. At the moment the airport director is limited in his earnings by what the town clerk earns. A corporation of the size of Luton airport needs the right sort of person to run it, and one must go out to the market to find the right person and pay the right sum. This opportunity to acquire commercial management experienced in aviation will help to make local authority airports much more competitive than in the past. I congratulate my right hon. Friend on taking this step, and I look forward to the progressive evolution o airport policy once the Bill has passed into law.
§ Mr. Robert C. Brown (Newcastle upon Tyne, East)
It seems to me that we have had this Second Reading before. We have a number of major public assets, in the main making money for the taxpayer and ratepayer after huge investments of taxpayers' and ratepayers' money over a period of time. Why is this?
Tory doctrine holds that any publicly owned body which makes a profit is an evil concept and should not be allowed to continue other than in the private sector. Thai is the purpose of the Bill. I have never heard it suggested that all our loss-making pits should be sold to private enterprise or that rail services that lose money heavily but which are kept going because of social necessity, should be taken over by private entrepreneurs.
Clause 2 provides a lot of gravy for the private purchaser of BAA. From the appointed day all properties, rights and liabilities will belong to the new company while any debts owed to the state will be written off. That is not a bad deal—all the goodies, all the gravy but none of the debts. I would not mind getting into that sort of act myself.
§ Mr. Brown
I have never bought a share in my life and I will not start now.
My hon. Friend the Member for Stockton, North (Mr. Cook) was right to refer to clauses 12 and 13 as he did. In the debate on airports policy last June I asked why the ratepayers of Northumberland, Durham, North Tyneside, South Tyneside and Sunderland should be threatened with the privatisation of their airport. As ratepayers, they have poured many millions of pounds into the development of a first-class international airport at Newcastle. During the past three or four years, it has paid profits of £2 million or £3 million a year. Now we are told that it has to be privatised.
§ Mr. Brown
It has to be made into a plc. [HON. MEMBERS: "Ah!"]. I shall not be confused as I was on 17 June, When the Under-Secretary of State said:I suspect that there is a little confusion in the hon. Gentleman's mind.I must concede that there was. He continued:The distinction involves passing legislation to form plcs. My right hon. Friend the Secretary of State said that we would not force those plcs to be privatised."—[Official Report, 17 June 1985; Vol. 87, c. 70.]Everything hangs on the Secretary of State's word. With the best will in the world, I would not buy a second-hand car from the Secretary of State. We must be fair and honest. His treatment of Tyne and Wear's integrated 733 transport system does not fill me with any confidence that his word will stay good even for the lifetime of this Government.
§ Mr. Ridley
The hon. Gentleman says that he does not trust my word about whether local authorities will be forced to sell their airports. If he examines the Bill, he will find that there are no powers there to make them sell their shares in airports.
§ Mr. Ridley
My hon. Friend the Member for South Hams (Mr. Steen) says, "Shame," but the hon. Member for Newcastle upon Tyne, North (Mr. Brown) might at least acknowledge the truth and tell his authorities about that.
§ Mr. Brown
I am willing to concede the right hon. Gentleman's point, but it would not take long to introduce a simple amending Bill after this Bill has been on the statute book for 12 months or so.
I want to be as generous as possible, as I was last June. I thanked the Minister then for lifting the limitation on air transport movements at Heathrow, and I do so again today. I hope that he will give me the assurance for which I asked last June and never got—that there will be no question of aircraft movements from Newcastle to Heathrow being shunted off to Gatwick or, worse, to that other place, Stansted. I should dearly like that assurance. I back everything that my hon. Friend the Member for Cunninghame, South (Mr. Lambie) said about that.
During last June's debate, I asked the Under-Secretary of State whether he would give us that right to spend our own money on further improvements at Newcastle airport. He was unable to give any such assurance, but, surprise, surprise, shortly after that debate, Newcastle airport had its 50th anniversary celebrations and the Under-Secretary of State was the guest of honour. I was pleased to see him there and had a very good lunch with him. When he gets one of these plums, he likes to be able to say something. I was more than delighted when he was able to announce that he was giving the airport committee the right to bring forward to the current financial year improvements for next year. I pay tribute to the right hon. Gentleman and the Minister for giving us the year-early deal.
If I were a suspicious man I would have asked, "Why have they done this? Is it to make it more attractive for private investment?" However, I do not lay that suggestion at the door of the right hon. Gentleman as I am well aware that that would be unworthy. He knows that so long as the present consortium runs that airport, there is precious little danger of private capital being involved.
An article in this week's Airline World stated:Government plans to privatise UK regional airports have met with bitter condemnation—branded as 'draconian', 'illogical', 'devious' and 'lunatic'.I would not go that far. Nevertheless, the strongest reaction came from the North East Regional Airport Committee, whose spokesman said:Although the Airports Bill does not order local authorities to privatise their airports, NERAC claims the Government is 'using back door tactics' to pressurise councils into privatisation".I am sure that none of my hon. Friends would disagree with that. The article continues: 734Department of Transport demands for two sets of accounts to be produced by April—as a prelude to the conversion of airports into public limited companies — were described as 'quite horrific'.Whether or not it is horrific, it is a bit off that, before the Bill becomes law, the airport committee in the north-east is being dictated to by Department of Transport civil servants about how it should do its accounting.
The Association of District Councils, whose chairman is Jim Swanwick, said this week:Although there are aspects of national airports policy which would benefit from some of the proposals in the Bill, there is no evidence that any district council controlled airport, ranging from the smallest grass field to international centres such as Luton, has behaved in a way to inhibit competition or damage passengers' interests".
No hon. Member who is reasonable could dissent from that. Mr. Swanwick adds:There is no reason for them to be shackled by this Draconian legislation. Our airports have always been open to. and have welcomed, investment by the private sector.But there has been no rush by private investors to invest in Newcastle airport. He rightly adds:Ministers must listen to reason on this occasion".
I have news for Mr. Swanwick— he has far more optimism than I have. I do not believe that any Ministers in this Government will listen to reason. I commend to the Secretary of State the article by Bob Papworth on page 4 of Airline World. I doubt whether the right hon. Gentleman will sleep so well after he has read it, but it will do him good.
§ Mr. Matthew Parris (Derbyshire, West)
My right hon. Friend the Secretary of State would not describe himself as either a wet or timid man, but this is a remarkably cautious Bill. I imagine that the Opposition Front Bench must have tossed a coin before the debate to decide whether to castigate my right hon. Friend for his ambition or to mock him for his timidity.
§ Mr. Parris
I am not surprised that the hon. Gentleman is prepared to do both. I could compliment him on his fine head of hair and sympathise with his baldness, but there would be an inconsistency in doing so.
My right hon. Friend was almost too cautious in the claims that he made for the Bill. He said quite correctly that there were severe limits to the amount of competition that one could envisage taking place between the southeastern airports. That is true. There is a limit to the extent that airports can compete. However, I would not say that there was no scope for competition. There are three British Airports Authority airports - Gatwick, Heathrow and Stansted. There is already a measure of competition between Gatwick and Heathrow. Moreover, airports compete not merely for the total number of air transport movements, but for business with passengers who are attracted by the range of facilities on offer. They can compete for particular types of business and categories of passenger. Therefore, there is scope for competition.
No one has a kind word to say for Stansted, and I can understand why. However, sooner or later Gatwick and Heathrow will reach an absolute limit of ATMs, and there will be still more people who wish to fly to and from London. They will have to go somewhere. My right hon. 735 Friend the Secretary of State described modest plans for the expansion of business at Stansted. They must be modest, but there must also be expansion.
It is true that in the short term there is an element of cross-subsidy. The cost of developing Stansted is met from the profits from Heathrow and Gatwick. When International Stores opened a supermarket in Ashbourne, it probably took years for it to recoup the cost. Nevertheless, it opened that store because in the long term the supermarket could make a profit. In the long term Stansted could make a modest profit and be a helpful contribution to ATMs in the south-east.
The North of England Regional Consortium seemed to dither between two inconsistent arguments. It objects to forcing passengers to move around from one south-eastern airport to another by the subsidy of the latter at the expense of the former. Whether it objects to the idea of persuading, cajoling or bribing passengers to go to the northern airports is less clear. It is not right that passengers who may not wish to go to northern airports should be obliged or bribed to do so by Government or CAA policy.
§ Mr. Silvester
My hon. Friend should be clear that the North of England Regional Consortium has never suggested any form of bribery or cajoling to persuade anybody to go anywhere. Its policy is to ensure that the development of Stansted is done on a commercial basis, and that it competes fairly with other airports.
§ Mr. Parris
That is true. The consortium has probably been careful in its statements, but many of its supporters have been less careful. If the Bill becomes law, it will make it easier and more transparent for us to see how much Stansted is being subsidised, and to say whether it can be commercially justified. It would be difficult to do that at present.
One does not necessarily criticise the management of the BAA or local authority airports when one says that they would be better run in the private sector or, in the case of local authority airports, as plcs. On the whole, the BAA does a good job. The one local authority airport that I know is the East Midlands airport, which does an extremely good job. I do not necessarily criticise the councillors, who do a splendid job, nor the airport authority which runs an efficient little airport, when I say that the airport could be run even better, if it were organised as a plc, as I hope it will be.
I hope that some points relating to the Bill will be dealt with in Committee. Clause 27 gives the Secretary of State a power to issue directions of a general character where it isnecessary or expedient in the interests of national security or of relations with a country or territory outside the United Kingdom".
I remember from my days in the Foreign Office that foreign Governments would often bring pressure to bear on the British Government to arrange for a flight to be allowed in or a terminal to be made available. In the Foreign Office we had the convenient excuse that we did not control the British Airports Authority in that day-to-day sense. We could pass on representations. The clause will give the Government the right to make such things available, which could put the Government in a difficult position. There should be some mechanism whereby—
§ It being Ten o'clock, MR. SPEAKER interrupted the Business.