§ Mr. Tony Blair (Sedgefield)(by private notice) asked the Chancellor of the Duchy of Lancaster what advice he has received from the Director General of Fair Trading regarding a reference to the Monopolies and Mergers Commission of the proposed merger of British Airways and British Caledonian Airways.
§ The Chancellor of the Duchy of Lancaster and Minister of Trade and Industry (Mr. Kenneth Clarke)None, Sir. The offer was announced only this morning. The Director General of Fair Trading will advise my right hon. and noble Friend the Secretary of State on the question of a reference to the Monopolies and Mergers Commission as soon as reasonably practicable.
§ Mr. BlairWill the right hon. and learned Gentleman confirm that the proposed merger unquestionably satisfies the criteria for investigation by the commission and that he can impose the time limit that he wants? Is he aware that the first the unions knew of this merger was hearing about it on their car radios this morning on their way to a meeting called late last night? What guarantees will he give on job losses in this industry and the other industries that depend upon it?
Most important of all, what has happened to the Government's policy of efficiency through competition? Is it not right that, in 1984, the Civil Aviation Authority specifically called for a multi-airline industry and warned that
otherwise this country might willy nilly find itself with one privately owned but less than efficient monolith at the end of the day"?Is he also aware that, in their response to that, the Government specifically agreed with the CAA and said that there must be a multi-airline industry? Is he further aware that, as late as April this year, the Secretary of State for Transport said that the Government were committedto a sound and competitive multi-airline industry"?Is it not a conspicuous irony that after years of public ownership, when merger was resisted and competition promoted, privatisation should within months lead to merger embraced and competition stifled? What will be the protection for consumers in this private monopoly? Is it not the case that, as with British Telecom, faced with a choice between private profit and the public's rights as consumers, the Government choose private profit every time?
§ Mr. ClarkeNone of that follows from the present position or from my answer to the hon. Gentleman's question. The legal position is that the Director General of Fair Trading has a duty to advise my right hon. and noble Friend the Secretary of State whether this matter should be referred to the Monopolies and Mergers Commission. That is the strict position and we must wait for that advice. It would be improper for me at this stage, before we have that advice, to give my opinion as to whether it satisfies the criteria for a reference. We must wait and see.
I am sure that the unions, in common with the rest of the public, heard about this proposed offer this morning. The correct steps for the trade unions or anyone else 1280 interested is to make representations to the director general as quickly as possible, who will, as quickly as possible, give his reaction to them. He will then give his opinion and advice to my right hon. and noble Friend the Secretary of State for Trade and Industry. Something to which the director general will obviously address himself is the effect of this proposed merger upon the competitive position in the airline industry. That is one of the matters upon which we now await his opinion. As the law provides, we must wait for that opinion.
I believe that the hon. Member is getting very hot under the collar and jumping the gun. We will have the advice of the director general as soon as he can reasonably provide it. Then my right hon. and noble Friend will decide whether to refer this offer to the Monopolies and Mergers Commission.
§ Mr. Nicholas Soames (Crawley)Will my right hon. and learned Friend take it from me that I believe that a decision to refer this offer would be a mistake and against the interests of British aviation? However, will he assure me that, whatever decisions are taken, they are taken speedily so that the many thousands of my constituents who work not only for British Caledonian but for British Airways may take advantage of the splendid opportunity that this merger represents?
§ Mr. ClarkeNo decisions will be taken by the Government until we have the advice of the Director General of Fair Trading. My hon. Friend's submission is the type of submission that should now be made to the director general so that he can give his advice to the Secretary of State as quickly as possible and as quickly as practicable in this rather complex case.
§ Mr. David Steel (Tweeddale, Ettrick and Lauderdale)How on earth can the Minister square what he has said with the 1984 Government White Paper? The hon. Member for Sedgefield (Mr. Blair) quoted part of that White Paper, but the full quotation reads that the Government's objective was
to encourage a sound and competitive multi-airline industry with a variety of airlines of different characteristicsSurely the proposed merger is inconsistent with that statement. Indeed, that statement was repeated in the prospectus for the British Airways privatisation.
§ Mr. ClarkeIt was a sound policy in 1984 and it may be that—[Interruption]—and it may be a sound policy now. The fact is that an offer has been made by British Airways upon which we have taken no decisions and have given no reaction. It is being assumed that a decision has been taken about whether or not to refer this merger. That is not so. That decision cannot be taken by the Secretary of State until he has the advice of the Director General of Fair Trading. Therefore, all that is happening is that hon. Members are beginning to ask hypothetical questions about events which may or may not arise when my right hon. and noble Friend is in a position to make a decision.
§ Mr. Michael Grylls (Surrey, North-West)If the Government have to consider this case later on, will my right hon. and learned Friend bear in mind that British Airways is not all that large in international terms? It has to compete with sizeable airlines overseas, many of which are much bigger than British Airways. Although we want to see as much competition as possible in Britain, probably on the domestic routes, an airline must be large to compete 1281 overseas. Perhaps British Caledonian is not big enough to compete on the international routes and that may be a very good reason for allowing this merger to go ahead. Presumably those factors will be taken into account.
§ Mr. ClarkeMy hon. Friend's arguments are extremely relevant. It is obvious that there will be a variety of opinions and submissions on this matter. Those opinions and submissions are best made, at this stage, to the Director General of Fair Trading. He will give his advice upon a bid by one private company to suggest a merger with another private company. My right hon. Friend the Secretary of State will take his decision about whether to refer this proposed merger to the Monopolies and Mergers Commission when he has had a chance to reflect upon the advice of the director general, who will listen to all the competing arguments. That is the only stage we have reached to date.
§ Mr. Doug Hoyle (Warrington, North)Does the Minister agree that the chaotic and anarchic situation in the industry is entirely due to the Government and the United States Government pressing for deregulation? That has led to the formation of mega airlines in the United States, six of which are bigger than British Airways. Does the Minister also agree that it is very bad industrial relations practice to announce this proposal on the same day that the unions got to know about it at 9.30 am? Surely the Minister cannot dodge his responsibilities by trying to skirt around that. Does the Minister also agree that, whatever happens, if the merger is referred, an early decision should be made because many jobs in the industry are at stake?
§ Mr. ClarkeIt sounds as though the director general will hear some conflicting opinions from Opposition as well as Conservative Members. The hon. Member for Sedgefield (Mr. Blair) sounded fairly passionate on the subject of competition. It is my opinion that deregulation and increased competition on the transatlantic routes in particular have been of great benefit to the industry, especially its passengers. This exchange is already revealing that this is a complex issue which ought to be dealt with, as it has to be dealt with by law, by the proper process of waiting for the advice of the Director General of Fair Trading. I suggest that hon. Members make their representations to the director general, stop getting so excited on the first day we have heard that the bid has been made and wait in due course for a considered decision by my right hon. and noble Friend the Secretary of State when he has the director general's advice on the public interest involved in this matter.
§ Mr. Anthony Steen (South Hams)Can my right hon. and learned Friend say whether the Government were also caught by surprise this morning or whether discussions were going on behind the scenes? Will he say one other thing to the director general when the time comes? Will he say that, if this merger goes ahead, some 90 per cent. of 1282 all airline licences will be in the hands of one company, that it will have further licences which belong to airlines in which it has an interest and that, therefore, the death knell will soon be heard for the future of independent airlines?
§ Mr. ClarkeWe have known within the Government about the possibility of this hid for about a week, but obviously we could not reveal that fact until the merger was announced at 8 o'clock this morning. That has enabled all these representations, including my hon. Friend's, to be made to the director general. He will weigh up all the competing considerations which have already been tumbling out within a few hours of the news going public. It will take perhaps a few weeks before he comes back with his advice to my right hon. and noble Friend the Secretary of State.
§ Mr. Alex Salmond (Banff and Buchan)I am interested in the right hon. and learned Gentleman's concept of the Government having no policy. Can he tell us exactly when the Government started to have no policy on competition in the airline industry and, when they last had a policy, what it was?
§ Mr. ClarkeI said nothing of the kind—[HON. MEMBERS: "Answer."] If I got up at the Dispatch Box and began, on the Government's behalf, to give instructions to the director general about what his opinion should be on this hid which he is now considering, the whole House would rightly be outraged. It is now the statutory duty of the director general to consider this bid. My right hon. and noble Friend the Secretary of State has no power to decide whether to refer this matter to the Monopolies and Mergers Commission until he has the director general's opinion. Certain sections of the House have reacted to what has been said in this moring's newspapers or on the radio and are already sounding off about a complex takeover bid which we have to consider in the correct way, which is the way laid down by statute. It would be improper for me to anticipate what my right hon. and noble Friend's decision might be.
§ Mr. John Wilkinson (Ruislip-Northwood)Does my right hon. and learned Friend agree that this worrying episode makes it absolutely clear that there is a need for harmonised company law within Europe and deregulation in air transport to allow the emergence of transnational airlines? As that is not the case, will my right hon. and learned Friend make it clear that a policy will be instituted which will permit genuine competition, at least on the domestic side, or the scheduled domestic carriers will soon be gobbled up?
§ Mr. ClarkeMy hon. Friend raises interesting points about transport and airline policy on which I am tempted to comment, but I suggest that he take the first suitable opportunity to raise them in the House with my right hon. Friend the Secretary of State for Transport, who takes a proper interest in this matter and, I think, shares many of my hon. Friend's views.