§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Chapman.]11.11 pm
§ Mr. Michael Bates (Langbaurgh)
I am delighted to have this opportunity to raise the future of Teesside international airport and its development and opportunities for development. In this debate I will seek to outline why the development of the airport goes hand in hand with the privatisation of the airport.
There are three reasons why this issue has taken on a new sense of urgency and vigour in recent days. First, at 11 am on Monday 10 May 1993—a date and time that will go down in history—an announcement was made by the Local Government Commission proposing the abolition of Cleveland county and the removal of Darlington from the county of Durham for administrative purposes.
The significance of this announcement is that Teesside international airport is owned jointly by Cleveland county council, with a majority stake of 60 per cent., and Durham county council, with a 40 per cent. stake. Hence, assuming that the Local Government Commission's proposals are accepted, the airport is heading for an uncertain period of transition as discussions take place with the new Durham authority and Darlington, Middlesbrough, Hartlepool, Stockton and Langbaurgh authorities to see whether they wish to take over the shareholding in the airport or to sell, and, if the latter, to whom.
The second reason stems from the decision of my right hon. Friend the Chancellor in his autumn statement to allow proceeds from capital assets disposed of in the current year by local authorities to be used for other capital projects in the county.
Call me an old-fashioned capitalist, Mr. Deputy Speaker, but I think that county councils such as Cleveland and Durham seem to find it difficult enough to maintain our schools and roads, and look after the police and the fire brigade, without dabbling in what is a highly sophisticated and competitive business of running an international airport. Indeed, how often do I receive a clarion call from those local authorities that they are starved of resources. Many of my constituents and council tax payers in Cleveland and Durham may therefore be bewildered as to why these councils wish to retain £20 million of their assets and money tied up in an airport when they have failed to see a dividend on those assets in the past 20 years, and when schools and roads remain in a state of disrepair. The Chancellor's window of opportunity will not be open for long. That is why I am calling on Cleveland and Durham to put the interest of the airport and their council tax payers first by commencing discussions that will lead to the immediate sale of the airport.
§ Mr. Tim Devlin (Stockton, South)
The control tower and the runway are in my constituency, whereas the reception buildings are in the neighbouring constituency of Sedgefield. The division between the two local authorities has been deleterious to the development of the airport which has amazing opportunities for developing the regional airport network around Europe, particularly with the growth of inter-regional links and the developing 913 northern arc within the European Community as markets develop directly between different parts of the nation states without going through the south-east of England.
The other opportunity open to us in the north-east is provided by the over-capacity of the London airports which are unable to service the aircraft and provide the incoming transatlantic routes with the capacity they need and could be serviced equally well by regional airports such as our excellent one in Teesside. We are missing that opportunity because of the short-sightedness of the blinkered socialist directors of the airport authority that we are saddled with.
§ Mr. Bates
My hon. Friend has taken an interest in the development of Teesside airport and has long supported its privatisation, and I am grateful for his comments tonight.
Having mentioned privatisation, let me explain what I have in mind. The indecision and uncertainty which are bound to result from changes in the ownership of the airport could not come at a worse time for the 140 management and staff at Teesside airport who, under the leadership of Bob Goldfield, their new managing director, have brought the airport back from pre-tax losses of £240,000 in the financial year to March 1992 to a modest pre-tax profit of £134,000 in the year to March 1993.
Although the profit has to be placed in context as it does not take account of debt charges and includes a substantial amount as a result of NATO exercises based at the airport last year, I believe that the management of the airport should be given the chance to take full financial control of the enterprise—in other words, a management buy-out. Such a move would end a period of uncertainty, allow access to the financial markets for development capital and would present the management and staff with a golden opportunity which I have every confidence in their ability to exploit outside the fetters of municipal control.
The third reason why the airport should be privatised is so that capital can be available for the development of the airport to ensure that it can take full advantage of the opportunities thrown up by the liberalisation of EC aviation through the European Community's historic aviation package which came into effect on 1 January 1993 and which will establish a single market in aviation.
§ Mr. William Hague (Richmond, Yorks)
I congratulate my hon. Friend on raising a matter which is or great interest to my constituents as well as to his. On EC liberalisation, does he agree that the end of the transitional arrangements of the liberalisation package will open up new opportunities for the airports to have routes from Belfast to Teesside and on to Brussels and that great opportunities are provided by the great demand for flights to the continent and that these opportunities can best be taken up if his proposals are put into effect in future?
§ Mr. Bates
I am grateful to my hon. Friend for raising that important point. It has long been the view of many of us who have taken an interest in the development of the airport. Of a passenger throughput of some 345,000, some 200,000 was due to the British Midland service to Heathrow. Clearly, if the airport is to have a prosperous future, it will have to diversify and expand its European routes. It is beginning to happen already with British Northern developing services to Brussels and the package tours which will be introduced from next year.
§ Mr. Nigel Evans (Ribble Valley)
Does my hon. Friend recognise that he is arguing not only for Teesside airport but for a principle? My area in the north-west contains Manchester airport—a leading regional airport which, even recently, has been given a second terminal following a £250 million investment. If released from local authority control, it too could take advantage of the liberalisation of the airways: it could expand far more, and serve people in the north-west—and even those further afield—better than it does now.
§ Mr. Bates
My hon. Friend makes a valid point. Nothing that I have said this evening applies exclusively to Teesside; it could apply equally to many regional airports. Indeed, it applies to every local authority, not just to Cleveland and Durham. Airports such as East Midlands and Leeds are currently going through the process that I am advocating. Air traffic competition could be liberated.
I believe that Teesside has the potential to rival Newcastle as the north-east's major airport. Indeed, that was the recommendation of the Stratford report, commissioned by the then Minister for Aviation and Shipping, Mr. Clinton Davis, in 1978. The report went into great detail about which of the three regional airports—Teesside, Newcastle and Carlisle—should be designated the growth airport. That was in the days when the Labour party still believed in a centrally planned economy. We have been denied the opportunity to find out whether they still do; the Opposition Benches are empty.
The Stratford report recommended Teesside airport because of the scope for extending the 7,500 ft runway to carry the new Boeing 747s; because it was less likely to be fog bound, which is why it was used by the RAF as a base for Vulcan bombers until 1962; because the majority of potential passengers lived nearer to Teesside than to Newcastle or Carlisle; and because it benefited from more available air space than either of its rivals. However, when the report was published, its recommendation was overturned, and the prestigious category B status was given to Newcastle. Teesside was banded in category C.
It is interesting to consider the fortunes of the two airports since 1978, when that decision was made. In 1978, Newcastle airport had 880,000 passengers; the figure for Teesside was 321,000. Last year, Teesside airport had a passenger throughput of 345,000—an increase of just 7.5 per cent. In contrast, Newcastle airport's throughput had increased to 2 million—an increase of 127 per cent., almost 17 times the growth in passenger numbers at Teesside. That is why Newcastle was able to deliver a £1.5 million dividend to its owners last year, which I do not resent.
I am pleased to see that my hon. Friend the Member for Hexham (Mr. Atkinson) is present, as I am sure that he takes a considerable interest in the matter. I do not begrudge that money to his authority; none the less, it will be a long time before Cleveland and Durham receive anything in return for their investment in Teesside airport. They have said that the prospect of a dividend remains "a long-term goal".
Another aspect of the airport that must be mentioned is the 250 acres of prime development land on the site. That land could be developed as a business or technology park were it not for planning restrictions which insist that any development should be airport related. Airport related! My only prerequisite is that any investment should be related to prosperity and jobs. If the councils will not make the decision to remove that restriction, Teesside 915 development corporation should be allowed to expand its area of operation to cover the airport and ensure that planning decisions are not political decisions, just business decisions.
Here we have an airport that has been a victim of 1970s-style central planning whose resources for development have been limited by local authorities but which serves a dynamic and developing area. Its management have the skills to turn the airport into a profitable venture within a year. The Chancellor has provided a golden opportunity for local authorities to sell their stake in the airport and to use the proceeds to benefit the communities that they serve. We have the third European Community aviation package which gives huge potential for the development of air traffic.
Our plea this evening is clear. For stability, for success, for Teesside, we appeal to Cleveland and Durham county councils to release this venture from the dead hand of municipal government and allow the professionals and private capital to develop the airport into a fitting gateway to the most dynamic industrial area in the country, Teesside.
§ The Parliamentary Under-Secretary of State for Transport (Mr. Steve Norris)
May I congratulate my hon. Friend the Member for Langbaurgh (Mr. Bates) on bringing forward this important subject this evening. I recall that he and I were denied a breakfast-time rendezvous on the Consolidated Fund Bill just before Christmas to discuss this issue and I fully recognise his concern about the airport and its future. I am delighted to see my hon. Friends the Members for Stockton, South (Mr. Devlin) and for Richmond, Yorks (Mr. Hague). My hon. Friend the Member for Richmond and I are somewhat of an endangered species these days as probably the only two living Tory by-election victors in existence or, should I say, not in captivity. Perhaps that is inappropriate. Perhaps I should have said "in captivity". Nevertheless, I am delighted to see him here and to welcome his contribution and also to see my hon. Friends the Members for Hexham (Mr. Atkinson) and for Ribble Valley (Mr. Evans), not forgetting the presence of my hon. Friend the Member for Chipping Barnet (Mr. Chapman) who, I know, takes a tremendous interest in all these matters.
Teesside airport operates as a public airport company, Teesside International Airport Ltd. The company acquired the airport undertaking, property and certain other assets and liabilities from Cleveland and Durham county councils on 1 April 1987 under part II of the Airports Act 1986. The company is therefore, as my hon. Friend says, wholly owned by the two county councils and it is very much a public sector entity.
Our general attitude towards regional airports is that we want them to develop and prosper, handling all the traffic that they can attract, not only for the benefits that they can bring for those who live in the regions but for the contribution that they can make to relieving pressure on the London airports.
The area in which Government are uniquely well placed to help is in international negotiation. For nearly a decade the United Kingdom has put the opening up of new routes 916 high on the agenda and major changes have been delivered, especially within the European Community. Since 1 January this year traffic rights have been available for all Community air carriers to operate air services on virtually any route within the Community, whether scheduled or charter, passenger or cargo. Complex procedures for approving fares have been swept away. We have created a climate in which air services and fares can become more competitive and more responsive to what the customer wants.
I am very proud of the role that my right hon. Friend the Secretary of State played during the time of the British presidency in pressing these important issues to the stage where the third liberalisation package represents a major advance in the progress of the single market and is an issue in which Britain has consistently been in the lead.
Coming closer to home, I wonder if I may detain my hon. Friends with just a word about the concern that I know the managers at Teesside airport feel over what they see as a risk to the continuation of services to London, particularly to Heathrow. I understand the desire of airports like Teesside to maintain strong air services with the capital—at the moment, Teesside has five flights to Heathrow each weekday—and I have no doubt that the local community, especially businesses, will do all that it can to support this provision of services. The management of the airport also has a role to play through the provision of good quality airport services for people to enjoy as they connect with their flights. But I am bound to say that I agree with the recent Civil Aviation Authority report which said that those sorts of service, although clearly important for the regions that they serve, must stand up commercially and that there are no grounds for distorting the air services market to "protect" those regional services to congested airports.
I want to make a number of points in the debate and I will, of necessity, cover them only briefly. First, the decision on which routes to serve is now very much one for the commercial decision of airlines. The present system of take-off and landing slot allocation and regulation at our busiest airports means that airlines can continue to operate their existing services for as long as they wish to, because the slots they hold and operate carry historic rights, sometimes referred to as "grandfather rights". I can assure my hon. Friend that British Midland can therefore continue to operate the service between Teesside and Heathrow for as long as it wishes. I have no reason to believe that British Midland has any intention of withdrawing that service.
Although some of our regional airports have seen their services to London cut, there is none the less a healthy market in the provision of air services between London and the regions. It must be for the providers of those services, the airlines themselves, to decide whether it is in their commercial interest to continue to do so. Certainly, it would not be right for me to dictate from Marsham street what level of services should be provided to each point or, as the Teesside airport managers suggested to the CAA, what level of subsidy should be paid to airlines to maintain those services. We have been down that path before and, frankly, it does not work. Unnecessary, artificial market constraints or supports inevitably lead to artificial and unsustainable markets. In a market-led air transport industry geared to meeting passenger needs carriers must retain the ability to adjust their services and schedules in response to changes in consumer demand.
§ Mr. Nigel Evans
Does my hon. Friend agree that it is important not only to maintain the links between the regional airports and London, but to establish and reinforce the links between regional airports and the international airports? I am thinking of Manchester here. There are many people who do not wish to travel from the regions down to London to take international flights. They would far prefer to take their flights from the areas in which they live to the destination to which they wish to go.
§ Mr. Norris
My hon. Friend is right. As I said at the beginning, the Government's attitude is very clear. First, passengers should dictate where air services are provided. I agree with my hon. Friend that there is a great deal of good sense in avoiding the congestion around the major London airports. Heathrow is not the only airport that serves London. None the less, my hon. Friend is entirely right that where there is an opportunity for passengers to travel via Manchester, and it is in the operators' interest therefore to provide those services, the present Government would certainly see no difficulty whatsoever in encouraging that and in a sense providing a regime in which British Midland or any other operator can build on those services and offer to service local businesses.
On that question—this is related somewhat to that issue—I know of suggestions that we should use article 9 of the EC regulations effectively to ring-fence slots for airports such as Teesside at Heathrow. I do not believe that that would be valuable. First, I do not believe that it could ensure the survival of a particular service. One can ring-fence the slot, but ring-fencing the slot in no sense guarantees that the service itself can continue. That must be a matter for the commercial decision of the operators. In any event, ring-fencing slots for specific services introduces the kind of rigidity into the slot allocation system that we believe would be wholly unwelcome.
I suspect that many regions would want the slots for their Heathrow services ring-fenced. My right hon. Friend the Secretary of State has already had representations from places other than Teesside wanting ring-fencing. Incidentally, ring-fencing relates to slots at particular, specified times and not just an overall daily total. Clearly, if we were to respond to all those demands we would impose an intolerably restrictive regime at Heathrow.
One point that I often make when we consider this subject is that British Midland, for example, has managed to increase the proportion of slots that it holds at Heathrow from 3 per cent. in 1979 to 14 per cent. now. That has happened despite the existence of grandfather rights. Grandfather rights, however much they may seem to entrench existing users of slots, none the less provide a regime in which there is a regular changeover of operators, as individual operators respond to where they think market opportunities are and withdraw capacity from certain routes to make it available to others. The less we do to make rigid slot allocations the better. That will ultimately help airports such as Teesside, which will not be disadvantaged.
Teesside is not an especially isolated area. I always point out that there is an excellent train service which takes only two and a half hours to King's Cross on the east coast main line which, as my hon. Friend will know, has recently been improved through electrification at a cost of £550 million. In addition, both Newcastle and Leeds-Bradford 918 airports are within 60 miles by road of the Teesside area and offer flights not only to Heathrow, but to other European destinations, such as Amsterdam or Paris.
It is too easy and too tempting to focus on Heathrow to the exclusion of all the facilities around London. Heathrow, as I said, is not the only London airport. Gatwick, Stansted and London City airport, which I always mention when I can, are excellent airports which offer excellent connecting flights to many international destinations.
My hon. Friend referred to the proposals for the demise of Cleveland county council—[HON. MEMBERS: "Hear, hear."] That is clearly a popular proposition in the House this evening. As my hon. Friend said, the Local Government Commission's draft recommendations for Cleveland and for Durham were put out to public consultation earlier this week. My right hon. Friend the Secretary of State and other Transport Ministers have foreseen some complications for transport if shire counties are abolished, although their retention is not necessarily the best solution. I understand that Teeside airport is not specifically mentioned in the draft recommendations. I anticipate that my right hon. and learned Friend the Secretary of State for the Environment will draft regulations to cover issues such as the transfer of property rights and liabilities of any authorities that cease to exist. There are well-tried arrangements for transfers to successor local authorities. Meanwhile, if the airport company has any views, it should make them known to the Local Government Commission as part of the public consultation process.
My hon. Friend spoke about privatisation. The thrust of what both he and our hon. Friends asked was why we did not require local authorities to dispose of their airport interests. I know that my hon. Friend is an assiduous reader of Hansard, so he will know that I answered a question tabled by our hon. Friend the Member for Bournemouth, East (Mr. Atkinson) on precisely that subject earlier this week. We have made no secret of the fact that we want to encourage local authorities to sell their airport interests. We believe that privatisation would bring benefits to local authority airports, as it has brought benefits elsewhere. We believe that it would encourage enterprise and efficiency and that it would enable airports to build on the advantages that the creation of the public airport companies provided. We believe, too, that the private sector has the resources and the willingness to invest in local authority airports on a far greater scale than we have seen so far. The British Airports Authority was privatised in 1987 and it has gone from strength to strength since. It has maintained a high level of investment, not just in the south-east, but in Scotland, too.
The Government have helped Teesside airport over the years by issuing borrowing approval to its controlling authorities for operational investment in the airport. However, with the increasing pressure on public expenditure, we are simply unable to maintain our support for investment in local authority airports on anything like the scale of recent years. My right hon. Friend the Secretary of State made it clear, in his announcement following the autumn statement, that the amount of public expenditure provision available for local authority airports in the future will be limited—only £12 million this year—and that his first priority will be to enable airports to make necessary safety and security-related investment. 919 My hon. Friend the Member for Langbaurgh referred to development proposals for the unused land at Teesside. My Department has not seen any development proposals involving opening access to the south side of the airport, and I can well understand that the cost of roads and other infrastructure there could be substantial. I know that the airport company is discussing with the county councils the possibility of their providing the access road and services. For the sort of scheme which the airport company is thinking about, the best course may be for a joint venture project to be established with the private sector to take that development project forward. In any event, there is no prospect of development of that sort being funded through supplementary credit approvals for the airport company.
We believe that it is for the local authorities which own airports to decide whether to dispose of their interests, taking into account the needs of those who live in the areas involved and the customers who use the airport. In taking those decisions, local authority shareholders will be aware that, if they want their airports to continue to develop, they will need to use internal resources or look to the 920 private sector to fund major expansion. We have talked on many occasions about joint venture companies. In other cases, the private sector may be able to provide a specific facility, instead of the airport company. In many cases, the best approach will be simply the sale of majority holdings in public airport companies.
My hon. Friend made the important point that there is the temporary relaxation in the rules for the use of capital receipts which applies to the proceeds of the sale of shares in public airport companies. That provides a particular attraction to them in selling now. We greatly welcome the fact that the major shareholders in East Midlands airport have decided to test the market for their shares.
I have a great deal of sympathy—as I know my hon. Friends have—with what my hon. Friend the Member for Langbaurgh said about Teesside airport. I pay tribute to the concern that he has expressed on this subject over a long period. I hope that Teesside and other airports will recognise the considerable opportunities and advantages that are available to them from pursuing the sort of policies which my hon. Friend has outlined this evening.
§ Question put and agreed to.
§ Adjourned accordingly at twenty minutes to Twelve midnight.