§ 2.35 p.m.
VISCOUNT SWINTON rose to call attention to the policy of the Minister of Civil Aviation with regard to independent air operators and charter companies; and to move for Papers. The noble Viscount said: My Lords, in order to appreciate the situation in which the independent operators find themselves to-day, I feel it is necessary to review the changes in Government policy since the Civil Aviation Act was introduced. When the noble Lord, Lord Winster, introduced that Bill in this House, he held out fair hopes to the charter companies. He said that the Corporations' main function would be carrying out the scheduled services; that far from there being any hostility, there was every wish to encourage charter operators in their bona-fide sphere of work. When the noble Lord was pressed by my noble friend, Lord Balfour of Inchrye, he elaborated that and said that the Corporations should not be excluded from encouraging any charter work, because—and these are the noble Lord's own words—
there may be a demand for charters outside the powers of the charter firms to supply.
The noble Lord went on to add something which I thought was most interesting. He said:
It will enable interesting comparisons to be made between services run by the public Corporations and services run by private enterprise.
He thus gave us just that yardstick of comparison we so badly need in all the nationalised industries. I must say, looking back over the five years that have passed, that I regret that the noble Lord, Lord Winster, was not left to carry out his promises. In due course he was succeeded by the noble Lord, Lord Nathan. I do not think I have any criticism to
make of Lord Nathan on this subject, because I cannot find that he really did anything very much at all: in the best Gilbert tradition, he did nothing much, but I have no doubt that "he did it very well." In the meantime, under that benevolent neutrality, the independent operators developed their charter business. They also went on and provided services for the public which the Corporations were either unable or unwilling to undertake.
§ Then there came the noble Lord, Lord Pakenham, a more orthodox and sterner Socialist. I have heard it said—and certainly I believe Lord Pakenham bears it out—that political converts often incline to prove their orthodoxy by a measure of intolerance. Certainly in nationalised undertakings the appetite grows with eating. I will come in a moment or so to the interference of the Ministry of Civil Aviation, and their children, the Corporations, with the pure charter business which Lord Winster had promised for the independent operators. But the first thing that shocked the noble Lord, Lord Pakenham, was that the charter companies, at their own risk and with no cost to the taxpayer, were providing services which the public needed and which the Corporations, in spite of their vast subsidies, were unable to undertake. This appeared to be very shocking and heretical to the noble Lord, Lord Pakenham, and he was determined to stop it. So we had the famous directive of January, 1949-that one might almost call the "Pakenham Bull "—my metaphor is theological. Ne quis contendat—"Lest anyone should attempt to compete." That put a pretty damning ban upon competition.
§ The salient clauses of the Bull were the Government policy that scheduled British Air Services to and from the United Kingdom and internally shall normally be undertaken by British Corporations. As interim policy, in certain cases Corporations should appoint independent operators as associates to help them perform their functions. No subsidies would be granted. Another clause was that fares and freight rates on routes operated by the Corporations, or that might be held to compete with such routes, and the contention of what might be held to compete in the eyes of the Corporations tends to widen, should not be less than those charged by the Corporations, except in 769 agreement with them. Another clause was that the period of an associate agreement should not normally exceed two years. Then it was provided that associate arrangements should in general be in respect of the following types of service: internal ferry and cross-country services, and internal seasonal services. The final comprehensive clause was that those conditions might be varied by the Minister from time to time.
§ Your Lordships may remember that as soon as possible I voiced my criticisms and fears as to the consequences of this edict. In the first place, I suggested that the Air Transport Advisory Committee, to whom applications were to be made, is only advisory. The Minister, as is always the case with these nationalised industries, was to remain judge in his own cause. Then I asked: Why should these charter services not operate outside the United Kingdom if the Corporations cannot give adequate service? We then—or very soon afterwards—had the shocking case of the refusal to allow the Nigerian char-ter service. There, as your Lordships will remember, the Nigerian Government, under the noble Lord, Lord Milverton, who was then the Governor, wished to have an adequate service to their great Colony, without any cost to either their taxpayers or ours. The nationalised Corporations being unable or unwilling to undertake the service, the Nigerian Government arranged with a charter company to run a satisfactory regular charter service, with suitable aircraft, across the Sahara in twenty-four hours to Kano. And that service involved no sort of cost to the taxpayers of either country. That service, however, was forbidden; it was regarded as heretical. One of these Corporations—B.O.A.C, I suppose—put on unsuitable aircraft to do the job. It was stated at the time—and it was not challenged—that every one of their flights cost the taxpayer £10,000.
§ Why do the charter companies have to be associates? Why cannot they operate on their own? At one time I understood the difficulty. They were charged some-thing for the privilege of association. At first—and again this point was never challenged when I raised it—they were charged a "rake-off" of 10 per cent. Under protest that was reduced to 5 per cent., and was finally abolished. But, as I said at the time, what would be said 770 of a private business which, rendering no service whatever, imposed upon some rival firm, with Government connivance, a "rake-off" or an unearned increment of 10 per cent.? That has gone now, however.
§ Then I asked, if the charter companies can render services which the Corporation do not render, why should not these extend to freight as well as to passenger services? The question was asked by many of your Lordships: What is the justification for inserting in the conditions a clause that the charter companies are never to charge lower freights or fares than the nationalised Corporations charge? And remember, my Lords, they have no subsidy. They have to operate at their own risk. If they can make money whilst charging a lower fare than the subsidised nationalised Corporations, why on earth should they not do so? We have heard a good deal about iniquitous price rings. This is the most drastic and the most iniquitous price ring that I have yet come across.
§ I went on to say that two years as the period of an associate agreement was quite inadequate. The period should at least be enough, say five years, to enable a charter company to write off the life of an aircraft. It seemed to me, and I think to many of your Lordships, that those limitations with which the grudging permission to operate was hedged around were very unjust to the charter companies. I said at the time that it might well be that charter companies, at their own risk—for they were to get no subsidy—would develop a route which the Corporations had not thought worth undertaking, but which might prove successful, after some initial loss. In the early stages it would no doubt be developed at a loss. Then I said that, if that route proved successful under the Act the nationalised Corporations were entitled to come along and take it over. Your Lordships will see, if you bear with me, that that is exactly what has happened to-day. That seems a new application of the principle of the meek inheriting the earth! I said that no doubt they would leave to the charter companies the ventures which were not successful. That is exactly what has happened; that is "the new freedom." The Minister said that the charter com- 771 panies were very happy with this solution, though he was not encouraging them to come in. I must say I thought that the Minister overrated their contentment: and certainly their happiness has proved very short-lived.
Then we thought that the prospect was getting brighter, because the following year it appeared that the Ministry were taking a fairer attitude and one more in the interests of the general public. On July 6 this year the Parliamentary Secretary said in another place:
There is another field in which private operators have a part to play, and which my Department have encouraged under the system of associate agreements. There have been various criticisms against these associate agreements and in particular against the period for which the agreements have hitherto been granted.
Here again the viewpoint of the private companies has been listened to sympathetically, and my noble friend has decided to amend the directive to the Air Transport Advisory Council in one important respect. The general terms of the directive will be the same, but I can say that it will be possible to extend the period of the agreements in suitable cases up to a maximum of five years, which should make it a much more realistic pro-position, especially for those companies which may have to contemplate the purchase of new aircraft.
That looked like a great improvement, but, of course, all would depend on what were going to be regarded as "suitable cases."
§ Here I think it would be very desirable that the Advisory Council should have absolutely unfettered discretion to decide in the interest of the travelling and the freight-sending public what a suitable case would be. I read a few weeks ago, in a statement to the Press by the Charter Association, that after this announcement the Charter Association—that is, the association of independent operators—had met the Chief Executive of British European Airways and that this Chief Executive had said that he would support the Association's view that future agreements should be for a minimum of five years. But apparently that was not the master's voice. When B.E.A. showed their hand, I gather with the Minister's support, it was seen that the five years would be granted only for the less attractive routes and for those which B.E.A did not think worth while undertaking. The more popular and remunerative routes would 772 not be available to the independent operators although they had operated them, and in a number of cases initiated and developed them, with great success in the past.
§ These operators had earned the full approval of the Advisory Council. That Council stated in their Report for 1949 that the Minister's decision not to deny to the public the benefit of facilities which charter companies were prepared to provide was thoroughly well justified in the event. But now the routes offered to the charter companies exclude them from holiday resorts like the Channel Islands and the Isle of Man—routes which they have operated admirably in the past. These are to be taken over by B.E.A., and B.E.A. even propose to take over routes which the Government Corpora-tion had discarded but which charter companies had taken up and worked successfully. There is certainly one instance of that—namely, the service from Manchester to London. It would appear —I state this on the published authority of the independent operators—that in a year or two B.E.A. intend to take over something like 80 per cent. of this part of the independent operators' business. Of course, that would put them out of business entirely. They cannot carry on the completely unremunerative 20 per cent. if all the cream is skimmed by the Government Corporation.
What is even more extraordinary is this: that B.E.A. do not possess the air-craft with which to run these routes. They are going to filch them from the independent operators. They are pro-posing to acquire from charter companies aircraft belonging to the charter companies in order that B.E.A. may run these routes, having first of all made it impossible for the charter companies to use the aircraft on those routes. Supposing that were done in private big business—and there is no business so big as the nationalised businesses—what would be said? Of course, I know that the Minister can quite well say, "I am acting strictly in accordance with the letter of the law. Whatever hopes may have been held out to these people, I am"—and I do not deny this—"strictly within the letter of the law in the course of conduct I am pursuing." He is within the letter of the law, but
the letter killeth, but the spirit giveth life.
Then I come to what I think is really the gem of the whole collection. Following this the B.E.A. Press Branch issued a manifesto or a "hand-out" to the public, and I cull from it this "gem of purest ray serene":
A new era has opened to the private operators.
Well, I suppose in one sense it would be true to say that a new era opened for the early Christians when they were introduced to the lions. That seems to be the kind of new era that has been afforded to the independent operators by being introduced to B.E.A. Surely this is very unfair to the charter companies. It is equally damaging to the travelling public.
§ So much for the services. Not content with this, the Corporations are trying to muscle in on the pure charter work of the operators. This is charter work which Lord Winster said, or implied, the nationalised corporations would do only if there were a demand for charters out-side the powers of the charter companies to meet, There is no possible question that the charter companies can supply those charter services to-day. We know the sorry story of the Nigerian charter to which I have referred, but the story of the Overseas Food Corporation charters is equally illuminating. The matter was fully exposed in another place in December of last year, but perhaps I might recall the salient facts to your Lordships' attention. The Food Corporation entered into a contract with the charter firm of Hunting's for a period of a year. I believe it was entirely satisfactory. Hunting's tendered again, but B.O.A.C., the other national Corporation, wanted the job. Their offer was a good deal more expensive than that of Messrs. Hunting's.
§ What happened? The Ministry of Civil Aviation or the Food Ministry—I am not sure which; possibly both—dis-closed to B.O.A.C. what were the terms of Hunting's tender. If there is one practice which is quite intolerable and would not be undertaken by any decent business it is, having invited tenders, to disclose to one tenderer the offer of another tenderer in order that the first tenderer may alter his tender in order to get the job. Not only that, but they also refused to let any other firm tender. Another very reputable charter firm, Airwork, wished to tender. We all thought it was going to 774 be a fair field and no favour, and that the best offer would win. Airwork were told that their services would not be required. They were told the same thing again this year when again they offered to tender. B.O.A.C., having had the opportunity of amending their tender, got the contract, and I am informed (the noble Lord, Lord Pakenham, will correct me if I am wrong) that the accepted tender of B.O.A.C. is something like 10 per cent. higher than the Hunting offer. How does all that square with the assurances of the noble Lord, Lord Winster, that the Corporations would come in only where charter companies were unable to fulfil charters? I am sure the noble Lord, Lord Winster, would never have countenanced anything of the kind.
§ There came to my notice just before this debate another example of unfair com-petition in the charter field. The Air Ministry recently called for tenders for carrying the families of Service men to Egypt. Airwork, an independent operator, quoted a price, using Vikings, of approximately £50 per seat. All or part of that contract has been awarded to B.O.A.C. Although that was quite contrary to the principle laid down by Lord Winster, that the Corporations would not come in if a decent charter company could do the job, my criticism would not be so severe if it were all in a fair fight. Yet your Lordships will be amazed to learn that B.O.A.C. are carrying out this contract with Stratocruisers, American aircraft paid for in dollars. When the question of the purchase of these Stratocruisers was under discussion, we were assured that it was necessary to spend dollars on buying Stratocruisers because they would be used on the Atlantic services to earn more dollars. Now we see them carrying the wives of Service personnel to Egypt.
§ The operating cost of the Stratocruisers, we know, is high. The Chairman of B.O.A.C. has said that it is £200 an hour. Even that is not the whole story. B.O.A.C. carry Service personnel out in these dollar-purchased Stratocruisers. On the return journey, they advertise for fare-paying passengers back from Egypt.. Your Lordships may say that that is a business proposition. I am not quite sure-whether it is in the terms of I.A.T.A. or not, but, if they can do that, surely in common fairness the independent operators should have the same chance. 775 Yet they have not. The independent operator is forbidden by the Minister to take passengers back on the return journey. Does that not mean weighting the dice against the independent operator? Is this really fair competition?
§ I think I ought to raise this question, for it should be clarified. I am sure the Minister will enlighten us on it. It would appear to me, from such study as I and those who have been helping me are able to make of the Corporation's accounts, that B.O.A.C. are apparently being subsidised to compete with the charter companies. As I read their Report, it shows a profit only on non-scheduled services—that is, on charter work—by charging those charter services nothing for operating overheads. I shall be delighted to be corrected if I have wrongly read the Report. But if it is accepted, and it is not unreasonable to do so, that operating overheads in respect of charter operations are not less than the average for all operations—that is to say, 12.9 pence per capacity ton-mile, according to the B.O.A.C. Report—then a sum of £332,000 should be added to the operating costs of the charter services, making the total operating costs not £507,584, which is the figure given, but £839,584. The total revenue from charter services was £767,856, so that, if I am right in thinking that overheads have not been charged here, then the true balance of the account for charter flying is a loss of nearly £72,000, and not, as shown, a profit of some £250,000. I have tried my best to understand this matter, but I shall be only too pleased to be told that I have misunderstood the Report on this point.
§ I come now to what to me is the most serious side of this business. To-day, this attack on the independent operators transcends the issues of nationalisation and abrogated assurances. It raises grave defence issues. The charter companies, as your Lordships know, played a great part in the Berlin airlift. They earned the highest tributes from the Chief of the Air Staff and from the air officers in charge of that remarkable enterprise. In May, 1949, when that great enterprise came to an end, independent operators were providing forty-two four-engined transports, against five provided by the Corporations. I am not blaming the Corporations: they were running their regular services, as they 776 should be doing. But just look at the service that the independent operators rendered. Where should we have been in the Berlin airlift if we had not had those forty-two four-engined Transports?
Think of the training which that experience provides for any possible emergency. In any emergency, their aircraft and their experienced personnel will be needed. It really is folly, to put it at its lowest, to destroy this valuable and experienced defence reserve. The Air Ministry fully appreciate this. Only last September, in another place, the Under-Secretary of State for Air said this:
It is recognised that aircraft charter firms will play a valuable part in supplementing Transport Command in war time, and the British Air Charter Association were informed some time ago that their helpful suggestions had been taken into account in the general plans which have been drawn up. The formation of reserve transport squadrons from the resources of charter firms has been decided on in principle, and it is in fact hoped to make a start with the first of these squadrons in the near future.
The Air Ministry are absolutely right. There are many ways in which those charter companies can help us in defence. The varied flying of the charter companies is admirable training. There is no more valuable training for navigators and pilots than this flying all over the place, in all sorts of weathers. Of course, the work of their ground staffs is also admir-able training. What a help that will be to the Air Ministry—or will be if the noble Lord does not stop it—by releasing pilots for the fighting combat squadrons of the Royal Air Force, and releasing this experienced ground staff, of which we have been told, in debate after debate, the Air Ministry are terribly short!
§ Let me take another example. The charter companies can relieve the Royal Air Force of a great deal of Army co-operation work in the practice which Anti-Aircraft Command requires. They can fly the target 'planes for the anti-aircraft guns and the searchlights. All that can be done by these charter company pilots and navigators. Then there is the ferrying of aircraft. That was done in the last war by the Air Transport Auxil-iary and will, I hope, be increasingly necessary as the output of 'planes, to-day grievously short but I hope gathering momentum, increases. All these aircraft can be ferried by these companies. They could even help the Ministry of Civil Aviation, if it is not too proud to accept 777 help, by undertaking the management of smaller airfields which are used only by independent operators and not by the Corporations, and which I believe are very extravagantly managed to-day. They could perfectly well be managed by these independent companies, one of them prob-ably using the airfield, and with one resi-dent overseer from the Ministry to see that everything was properly done. With the millions that we are spending, and our "out-of-pockets" on civil aviation, I should have thought the Ministry would be on the look-out for possible economies.
§ Then, and perhaps the most important of all, there is the transport of troops and stores by air. I have already mentioned the Berlin airlift. In the Navy, we have the precedent of the Merchant Navy. How invaluable it was, both to the Royal Navy and to the Merchant Navy that the troop-ing was carried out by ships of the Mer-chant Navy! We should never have dreamed of doing anything else. In all the years that I was President of the Board of Trade, arranging trooping contracts, never did the Admiralty suggest that they should be taken away from the Merchant Navy. On the contrary, they always re-garded the Merchant Navy as a tremen-dous resource and ally, in ships and in men, should war come. However, in regard to this airlift of troops and stores, which will increase, are the charter com-panies to be invited to tender, or is it true that the Minister of Civil Aviation wants to seize all this for his own Corporations?
§ I ask specifically: Are B.E.A. being invited to tender for trooping? If they are, have they the aircraft? If they have the aircraft, why are they carrying aircraft which are surplus to requirements at the taxpayers' expense? Is it a fact that they are trying to get aircraft for this work from the independent operators? If these independent operators are to play the very valuable part they can and should play in defence, in war or emergency, they must have an opportunity to do enough business to carry on, otherwise they will be killed stone dead. Already the number of pilots with valid licences has fallen in three years from 2,493 to 1,616. These operators do not ask for subsidies, as the nationalised Corporations do. They ask only for a fair field and no favour in order that they shall be able to play their vital part in our scanty defences. I am going to ask this final question: Have the Minis- 778 ter of Defence and the Chiefs of Staff been consulted on the defence aspect of putting these independent operators out of busi-ness? My Lords, in these grave days when we all desire to he united in getting our defences right, I do beg those in charge of our defences not to let monopo-list prejudice or ideology deprive us of this line of defence. I beg to move for Papers.
§ 3.15 p.m.
THE MINISTER OF CIVIL AVIA-TION (LORD PAKENHAM)
My Lords, I believe it is the wish of the noble Vis-count and of the House generally that I should reply now, and perhaps the House will allow me to say a few words by way of further reply at the end of the debate. If that is so, it may be convenient if I do not deal during my present remarks with all the points that the noble Viscount has raised, but leave some of them, at any rate, for a later review. Even so, this is an important occasion, and the House will perhaps bear with me if I detain your Lordships for a considerable time. I am sure we are all grateful to the noble Vis-count for giving us this opportunity for a full-scale discussion of Government policy towards the charter companies. In my view, and I dare say in the view of others (this may be one of the few points on which I can agree with the noble Vis-count), this issue has suffered somewhat in the last few years, from the fact that, when it has been discussed in public, it has been discussed in a piecemeal fashion. It has arisen in connection with some par-ticular contract, or perhaps some mis-understanding. I think nothing but good can come of a wide and candid review and discussion, such as we are having to-day, which gives the Government every opportunity of restating our policy and, if necessary, of clarifying it.
The noble Viscount has stressed—and I know that it is very close to his heart— the need for unity in these times. I can-not feel that his speech to-day has assisted unity on this particular subject. The noble Viscount has been very frank and perfectly open, in a Parliamentary way, and has accused me of intolerance and many other offences, comparing me un-favourably with the noble Lord, Lord Winster. I have no recollection, however, that when he was in office the noble Lord. Lord Winster, found any favour in the noble Viscount's eyes. Perhaps it is only 779 too true that we are popular only when we are dead. However, we must earn what favour we can from the noble Vis-count, and from others still more quali-fied to judge of these matters.
My feelings towards the charter com-panies are those of good will. I enter-tain towards them nothing but feelings which are entirely Christian and humane, but I can never forget my responsibilities as a watchdog for the taxpayer. I should greatly dislike to appear churlish, or to appear to say anything which was dis-courteous to the charter companies—or, of course, to the noble Viscount; but really it would be particularly wrong— and I am afraid that events even since I have been in office have underlined this lesson—for me to say fair words which might afterwards be misunderstood, and which might create an impression that I was promising things that I never had any intention of promising. The noble Viscount attempted to belabour me, with all the ability of an old parliamentarian and a skilled speaker, but I think he will forgive me if I say that there was some-thing indescribably "ham" (if I may use a colloquialism which I submit can be used to this House) about some of his attacks. Frankly, the noble Viscount is quite disqualified from launching this sort of attack, although there may be some others present who would be in a position to do so. When one recalls the noble Viscount's own record, it would appear that he is the last person who should appear at all in this House on an occasion of this kind.
I have read the Daily Express for many years, and I have recharged my memory with a quotation from the Daily Express of March 2, 1945. We find there the headline:Airline woman challenges air plan.In the article the airline woman says:At a meeting called by Lord Swinton"—who was then of course the Minister—on February 14, an offer was made to the independent operators which amounted to what I consider would be their total extinc-tion.In the circumstances, in view of his rather peculiar past in this connection, perhaps the noble Viscount will allow me to hope that this war he has launched can be charitably regarded as a "phoney" war.
§ VISCOUNT SWINTON
Will the noble Lord ask the charter companies to-day whether, from their point of view, they consider my offer to them or the Minister's present conduct is preferable?
I know that the noble Viscount is in close touch with them, because I have here a delightful picture of the cocktail party given by the Charter Association. Here we find representatives of the charter companies standing by him, with admiration written all over their faces, while the noble Viscount seems to be almost indescribably happy—and, indeed, why not?—in their company. The smile of beatific satisfaction on the noble Viscount's visage is most affecting. In view of his past, I think he has every reason to be glad to be taken back into the fold, with this debate and other events impending. I may perhaps be allowed to hope that in years to come, I shall be treated similarly: that I, too, shall be regarded as an ally, and that I shall be allowed to meet these people on an equally hospitable basis.
The noble Viscount, however, has a long past in these matters. Frankly, I am surprised at the attack which he has made to-day. I will not weary your Lordships with many quotations, but I must give one more. It comes from a speech made by the noble Viscount in March, 1945, when, of course, he was Minister of Civil Aviation. And may I say here that I consider the noble Viscount's work for civil aviation was for the most part of lasting benefit to this country? This is what he said:Unless you give what you may call, if you please, a monopoly"—"monopoly" sounds strange after what we have been hearing; at any rate it was not a bad word five years ago, when the noble Viscount was Minister—upon the lucrative routes, what will happen will be that we as taxpayers will have to carry the unremunerative routes, while two companies divide a lucrative route between them.That is what the noble Viscount said. Really, the situation has changed much less than he would lead the House to suppose.
781 Very properly, in my opinion, he has called attention to the defence aspect of this matter. Though his Motion singles me out for particular censure, he will, I hope, agree that it is right that there should be a statement on behalf of the Government as a whole. He has attacked me in terms. May I say that we were in touch with the Defence Ministries before launching what he calls, I am afraid rather absurdly—if he will forgive me for the use of that word—an attack on the charter companies? I can assure him, that we are in the closest touch on all these matters with the various Defence Ministries. I share his feeling, and I know it is fairly widespread, that the charter companies, or at any rate the major ones —there are well over 100 known to my Ministry, and I am not talking of them all—represent a valuable war potential, and from the standpoint of defence, their state of health cannot be regarded with indifference. There has been a great deal of satisfaction at the fact that a Royal Auxiliary Air Transport Squadron is being formed from personnel of one of the major charter companies, who will undertake special training outside the company's normal range. It is a fact that the Air Ministry will be making available R.A.F. transport aircraft and equipment for this purpose. The Air Ministry are also discussing similar schemes with certain other companies.
I hope that the country and the House will judge the Government as a whole, and will assume that Ministers are in close touch with one another. It is not a question of the Minister of Civil Aviation trying to "do in" the charter companies while the Defence Ministers are trying to prop them up. That would be quite a distorted impression if it got abroad. But few members of the public, and few noble Lords in this House, perhaps, realise how much business already reaches the charter companies through Air Ministry channels. It is a much larger sum than I think most of us without special information would suppose. It has long been the practice of the Air Ministry to place contracts with civilian firms for reserve flying training, anti-aircraft co-operation and similar work. The value of these con-tracts has been running at a figure of about £1,200,000 a year. That is subject to qualification in connection with the charter companies, as a good many of 782 those contracts are held by firms in the aircraft industry or specialising in flying training—in other words, not charter companies—but I understand that the charter companies receive about half the total of £1,200,000 a year. The figure is somewhat higher if we include contracts that have been placed for the ad hoc carriage of Service personnel and Service families to overseas commands and for carriage of personnel and equipment to annual camps. Therefore the total which goes to the charter companies through Air Ministry channels is rather more than half the annual sum which I have mentioned.
I know, because I have talked to the charter companies—in fact, I have had many very agreeable talks with them— what it is that all charter companies particularly desire, and that is some kind of assurance about the future. It is inevitable in their line of business. They say: "On the whole, business is quite good." Some have spoken to me along the lines of the noble Viscount's remarks about the number of aeroplanes. His statement that in the last two months charter company business has been good is quite correct, but the companies say it is difficult to see clearly for some time ahead. I am still talking on the defence side. Speaking on behalf of my right honourable friend, the Secretary of State for Air, obviously 1 can-not give financial guarantees this afternoon, but I have been in close touch with my right honourable friend and what I am authorised to say will, I think, be encouraging to the charter companies. My right honourable friend informs me that the amount of business of this character will probably increase. For example, certain new contracts for flying training are being placed as a result of the expan-sion of the Royal Air Force. Much of this work is likely to be a firm requirement for some years to come. That, I imagine, is the kind of thing that the charter companies want to hear. I am assured that whenever possible long term contracts are being and will be placed. Before turning to my own direct responsibility, as defence is in the minds of us all I must leave no one under the delusion that the defence aspects of the charter companies is being neglected by any branch of the Government, least of all by the Ministries most immediately concerned.
And now for the civil side proper— though it is difficult to establish a strict 783 dichotomy between the civil and military aspects. The noble Viscount and I, I am sure, are anxious to seek agreement. Perhaps after this afternoon we shall come closer together—on his previous form there was not very much between us. The noble Viscount and I are in agreement in thinking that there is a section of our national air transport industry in which we can look forward to seeing the charter companies flourish. Where we may differ is over the size and scope of that section. What, then, is the role which one could envisage for the charter companies in British civil aviation? I hope that the House will bear with me if I answer that question with some reference to history and, of course, with particular reference to the Civil Aviation Act. I feel that although it is difficult it is not impossible to abstract this matter from Party politics and to regard it as a question of transport economics. After all, in any discussion of the present roles of the Corporations and the independent companies the fundamental question is not the relative merits of State-owned Corporations and privately-owned companies: the fundamental question is surely the form of organisation, the pattern best calculated to secure expansion of our national air transport effort with the efficiency, continuity and standard of service to which the public, both as traveller and as taxpayer, is entitled.
One could tackle this question either in the abstract or in comparison with other countries, and some noble Lords may wish to do the latter; but the House will forgive me for saying a few words about the history of this matter. One over-whelming lesson from the study of the history of British civil aviation stands out a mile—if I may be forgiven the colloquialism—and that is the impossibility, gradually recognised by all who have had to handle these questions at firsthand, of allowing within our own aviation effort unfettered freedom to compete, of per-mitting full license of the air. We must recognise the necessity of rationalising or regulating to a very great extent the num-ber and size of the units concerned.
In the reports of various committees (and there have been quite a number which considered these problems during the inter-war years), we find identity of viewpoint on at least two basic factors. The first is that where the main effort 784 of any industry such as civil aviation is supported by subsidy, competition from unsubsidised elements is not admissible, and the number of organisations charged with the development of the industry should be strictly limited. Secondly, adequate incentive to efficiency in this industry is provided by international com-petition. These considerations progress-ively impose themselves upon the makers of Government policy. They influenced the Hambling Committee of 1923 to recommend discontinuance of the policy of subsidising a number of small companies and concentration of responsibility in a new organisation "with a privileged position as regards subsidies." The emergence of Imperial Airways in the following year as the chosen instrument to develop international routes with subsidy assistance was the result. Again, much the same considerations appear to have influenced the Maybury Committee in 1937, which concluded that the development of successful internal services in this country was dependent on the need "to apply restrictions to avoid undue competition," and recommended an exclusive licence for five years to a single company, or to an integrated combination of companies, to operate certain important internal routes.
Again, in the following year, the Cadman Committee, which benefited from the membership of the noble Lord who is now Lord Woolton, whose absence we all regret so much today, endorsed the principle of concentrating subsidised air transport on two organisations. The Government of the day, however—and it was not a Labour Government—decided to carry the policy of concentration a stage further and to adopt a single chosen instrument, the B.O.A.C, with exclusive rights to subsidy. It is clear from the general tenor of these Reports—and I do not think the noble Viscount, Lord Swinton, will quarrel with this history, whether or not he thinks it bears on his own argument—that the prime consideration in their minds was the need for a policy of concentration on units of substantial size. By giving these units exclusive rights to subsidy in the pre-war years (I emphasise that my present remarks refer to the pre-war years) they secured the rights to exclusive operation —and one can have an exclusive right to subsidy without an exclusive right of 785 operation—in an industry which was still far from self-supporting.
During the war it became apparent that the monopoly of subsidy by itself was unlikely to secure to the chosen instrument protection from unsubsidised com-petition in the post-war period. The then Lord Privy Seal, Lord Beaverbrook, who was charged with the responsibility for post-war civil aviation policy, made it plain that any future policy would not allow freedom of competition on remunerative routes from unsubsidised companies, leaving the subsidised undertaking to provide services required in the public interest on the less remunerative routes. In his own picturesque words, there could be no "taking the eyes out of the carcase. "When the noble Viscount, Lord Swinton, was the first Minister of Civil Aviation, he found it necessary to protect his proposed three Corporations with exclusive rights on certain routes to be scheduled in any legislation. I readily admit he con-templated that two of his Corporations could operate without subsidy, but the significant point, as I see it, is that we witness for the first time in the proposal of the noble Viscount a structure founded on substantial units, with express provision—this is the point—for the protection of their exclusive rights on the routes allocated to them. I should add that charter services would have been open under this proposal to anyone wishing to compete.
§ VISCOUNT SWINTON
My Lords, in fairness, the noble Lord should complete the history which he has given so fairly. While the assigned routes, which were to be in the Schedule to the Bill, were to be operated by the Corporations, in which the independent operators would have been partners, as regards future routes, after the passage of the Act these were to be open to either the Corporations or the independent operators, whichever could best discharge them. The noble Lord will see that in a White Paper.
§ VISCOUNT SWINTON
It is in the Government White Paper, published by the National Government and promulgated as their policy and as the policy with regard to future routes. That is what we are discussing.
I have studied the White Paper carefully and I can only surmise what would follow from it, but I am glad that so far I have not distorted history. The noble Viscount will acquit me of any desire to misinterpret him. This left a residue of possible routes open to the Corporation and private companies alike, to be allocated under a licensing system. But I would venture to suggest that it is a permissible interpretation of his policy to say that the bulk of the main routes, operated by B.O.A.C. and B.E.A. to-day, both internal and external, would have been allocated to the Cor-porations.
§ VISCOUNT SWINTON
My Lords, we shall differ about some things vitally, but upon facts let us agree. The only routes which were going to be assigned to the Corporations were those routes which they were there and then prepared to operate. The other routes of the future, which is what we are now considering, were, as the noble Lord fairly said, to be the subject of a licensing authority which was to decide who would have them.
My Lords, I shall have the opportunity later, when I have the White Paper in hand, of replying to this point in detail, but I do not think there is any difference between the noble Viscount and myself. He has not challenged the accuracy of what I have said. But I go on to stress the close organisational similarity between the two policies. I do not think it is an unreasonable deduction that the noble Viscount's policy would have concentrated the main responsibility for scheduled services on the three Corporations, leaving only a marginal fringe available for licensing either to private companies or to the Corporations. That is the interpretation which is put by many excellent judges on the policy outlined by the noble Viscount, but of course, I must not press the point, because the noble Viscount had his own plans. He alone knew what he was in-tending to do. But that is the interpretation of the White Paper of many experts, and it is my own interpretation. While there may be differences of degree between the two policies as regards the marginal fringe, I doubt, after a good deal of study, whether those differences would have been of much significance.
I should like to say a few words at this point in vindication—though not, Heaven 787 knows, complacent vindication—of the policy of concentration on the two Corporations and on the grant to them of exclusive rights to operate scheduled ser-vices. We have not had a debate on civil aviation in your Lordships' House for about a year, and perhaps the House will bear with me while I give a few facts to illustrate these points. The monopolistic character of the present structure may be criticised, but when we look at the trend of progress I claim that whether we take the test of prices to the consumer or the test of economical operation, it is impossible to sustain a valid criticism. The fares and freight rates charged on the inter-national air routes, which account for the vast bulk of our effort, are regulated internationally through I.A.T.A. I felt that the noble Viscount failed to bring that out at the point in his speech when that might have been appropriate. There is thus no opportunity to pass on to the consumer the price of inefficiency, unless it is common to all international operators.
There is no question of the British operators "ganging up," having a little monopoly of their own and raising the prices—it is an international affair. In fact, the rise in air transport fare levels, as compared with pre-war rates, is less than the average rise in surface transport rates, and substantially less than the rise in wholesale prices. It is worth while pointing out that B.O.A.C.'s fares have risen only about 44 per cent. above their pre-war level, while wholesale prices have risen by about 168 per cent. I feel that that fact shows that monopoly has not led to an extortionate rise in fares. As regards efficiency and economy, there the international competition operates very strongly. And I would add that the very keen interest which the general public, and Parliament in particular, have taken in the fortunes of the Corporations has undoubtedly had a healthy and energising effect.
I should like briefly to give the House a few statistics. I know that they are difficult to follow when read out, but I think it will be agreed that it is worth putting them on record. Since 1946, when the present Corporations were formed, the capacity offered has been more than doubled—from 74,000,000 capacity ton-miles in 1946–47, to 159,000,000 capacity ton-miles in 1949–50. 788 Over the same period, the total number of passengers carried has increased from 208,000 to 907,000-that is by four and a half times. Side by side with this ex-pansion, the costs of providing the services have declined, down to March, 1950. from 71d. to 48d. per capacity ton-mile, in the case of B.O.A.C. (including B.S.A.A. in both periods), and from 143d. per capacity ton-mile to 53d. per capacity ton-mile, in the case of B.E.A.
I am glad to say that the most recent results—those during the first six months of this financial year—give renewed evidence of the fight of the Corporations to overcome post-war difficulties. In the first six months of the current financial year, B.O.A.C. flew 35 per cent. more passenger miles than in the corresponding period last year, and earned 21 per cent. more revenue, with an increase of only 2 per cent. in operating expenditure. B.E.A. flew 27 per cent. more passenger miles, and earned 33 per cent. more revenue, with an increase of 23 per cent. in operating expenditure. There was again a reduction in the unit operating costs. B.O.A.C.'s costs per ton-mile of capacity offered were cut by 10 per cent., and B.E.A.'s by 8 per cent., compared with the previous year. Productivity, as measured by capacity ton-miles offered per head of staff, was also much higher —by 35 per cent. for B.O.A.C. and by 27 per cent. for B.E.A. I know that these figures are difficult to absorb when handled rapidly, but I place them before the House as revealing a most encouraging trend.
Finally, let us have a glance at subsidies. Although the aggregate sums paid in subsidies in the post-war years may seem heavy, compared with pre-war payments, the actual rate of subsidy in terms of output has declined, being only about three-quarters of the pre-war figure—that is to say, 1s. 8d. against 2s. 3d. per load ton-mile. Nevertheless—and I do not want to fall into any conceivable error of com-placency—the burden on the taxpayer remains heavy. It must be brought down, and the Corporations are deter-mined to bring it down. They are deter-mined to make our great airlines pay, though no one in his senses pretends that that result is just round the corner. Last year, B.E.A. halved their deficit. B.O.A.C. were afflicted by many adverse factors. for the most part outside their control— above all by the Tudor disaster, but also 789 by aircraft delays and devaluation, which, of course, hit B.E.A. as well. In the event, the total reduction in subsidy over both Corporations was about £500,000, an appreciable amount, but much less than most of us had hoped. Nevertheless, it did represent, as everyone concerned with the Corporations knows, a vast amount of solid work and a real effort to cut costs wherever possible.
During the first six months of the current financial year we have seen some very encouraging improvements in this sphere—and these are figures that I would emphasise most of all. In the first six months of this financial year, B.E.A. made a net profit of £260,000, compared with a net loss of £52,000 for the same period of the previous year. B.O.A.C.'s net deficit was cut by 45 per cent., this year, compared with last year—that is, from £4,000,000 in period from April to September, 1949, to £2,200,000 in that from April to September, 1950. I hope the House, which is generous in its praise and sometimes generous in its censure, will wish to congratulate the Corporations on these results. But, of course, the lean winter months are with us now, and the outcome for the last half of the year is bound to be a good deal worse—I should not dream of disguising it—than that for the first half, for which I have just given the House the figures.
As the House is aware, B.O.A.C., the taxpayer and the general public are being severely damaged by a strike at London Airport. It would be out of place to inject a consideration of that matter into our discussions this afternoon, but I should be doing much less than my duty if I did not make it quite plain that the management of the British Overseas Air-ways Corporation—and, to avoid misunderstanding, let me add both Corporations—possess my entire confidence. I rely on them, with whatever assistance can be given by the Ministry of Labour, or other-wise, to make sure that counsels of good sense and patriotism prevail as rapidly as possible before still further loss is incurred. Nevertheless, it would surely be wrong to allow this temporary setback to obscure our view of all the cheering progress to which I have been referring. In the light of it, I believe that few unpre- 790 judiced people, whatever their Party, will question the soundness of the policy of the Government in reserving the scheduled services to the Corporations. In two and a half years as Minister, talking to many experts here and abroad, I can recall hardly a single expression of opinion in an opposite sense.
However, as I said earlier, and as Government spokesmen have always asserted, our policy recognises that there is a place in our air transport development for the independent private company. In the genuine charter field the companies are entirely free, and I should like to repeat and endorse what the noble Lord, Lord Winster—whose words, I father, this afternoon can be quoted as though they came from Sinai—said in your Lordships' House at the time of the Second Reading of the Civil Aviation Bill in July, 1946. He said—and I am following out the Winster policy, which was always the policy of His Majesty's Government:Legitimate and bona fide charter operators will be encouraged, not merely permitted but encouraged, to continue with charter flying.And, again, he said:I repeat that far from there being any hostility there is every wish to encourage the charter operators in their bona fide sphere of work.I fully endorse these two statements. Even though charter work, in common with other forms of air transport work generally—and this is a point that I think should be mentioned in the course of the discussion—has not provided the scope expected of it, it is certainly the field on which the charter companies must primarily rely.
It is worth noticing here that over the period April, 1949, to September of this year the Corporations have introduced to the charter companies business amounting to a total of £233,835. So we really must not carry away a picture of these wicked Corporations trying to sabotage the charter companies and preventing them from getting any business. The Corporations have introduced a great deal of solid business, amounting, as I say, to nearly a quarter of a million pounds. This figure includes both payments for aircraft chartered by the Corporations themselves, and contracts placed by the Corporation as agents. These sums, naturally, do not take account of the business which the charter companies 791 have obtained from the general public by their own independent efforts. I think it is fair to say, therefore, that possibilities in the genuine charter field are not lightly to be dismissed as negligible.
Turning for a moment to the rather different, though related, sphere of Government contracts, my Ministry alone have during the past fifteen months placed with the charter companies contracts to the value of £216,000 on behalf of other Government Departments, while, as I said earlier, the Air Ministry have also placed contracts to an annual value of some £600,000. The figures I gave for my own Ministry are for rather more than a year, but if your Lordships scale down those figures to an annual rate—I ask the House to dwell upon this figure perhaps more than any other that I am placing before your Lordships—it means that contracts worth over £900,000 a year have been given to the charter companies and, as I have already mentioned earlier, the amount of Air Ministry business is likely to increase. In the light of those figures I can only say—and I am not saying it ironically or in any provocative sense— that the Government have proved the most substantial customer and the most reliable which the charter companies possess.
At this point, however, I should make plain the position of the Corporations in relation to charter work. As Government spokesmen indicated at the time of the passing of the Act—and the noble Viscount has quoted some of their utterances —it has always been the intention that the Corporations should have the right, if they wish, to undertake genuine charter work. The only condition has been that they should not take unfair advantage of their subsidy in order to secure such work. That position holds good today. They still accept the condition that they should not take unfair advantage of their subsidy in order to secure this work. I would stress that in this charter field proper—which is the field which Government spokesmen had in mind when they were making statements on this subject at the time of the passing of the Act—the activities of the Corporations will be incidental to their main business. If that is of any comfort, as perhaps it may be, let me repeat that charter activities will be incidental to their main business.
792 There is however—and I wish to speak with absolute frankness—one field of activity in which the Corporations will certainly compete without any self-denying ordinance at all. A number of private companies to-day are engaged in offering services on a regular basis to particular classes of the community. These services do not constitute the normal type of charter operation, but they take on the character of regular services which represent the legitimate field of the Corporations. The Corporations regard these classes of traffic—I am not talking of charter traffic proper—as their lawful entitlement, and with my support and encouragement will not hesitate to use their resources in accordance with normal commercial practice to compete for such traffic.
§ VISCOUNT SWINTON
These so-called services are not services within the meaning of the Act, because otherwise the charter companies would not be able to have them.
As I have said, these operations take on the character of regular services and do not form part of the genuine field of charter operations to which any assurances given by my predecessors would apply.
§ VISCOUNT SWINTON
This is governed by an Act of Parliament—the Civil Aviation Act—which defined the sched-duled services which were to be the exclusive right of the Corporations in a certain way. Quite clearly, I suggest to the noble Lord that these things which he is calling services are not services as defined in the Act, because otherwise the charter companies would not have the right to engage in them, and they would be the property of his Corporation. Therefore, they are services which he is trying to seize.
I take the point which the noble Viscount has in mind. I would say only that these services are not charter operations as envisaged in the Act. May I now finish my sentence, because it is rather important that what I say should be quite clear and intelligible? I naturally speak with great caution in matters which approach the legal field, but I can say only—and I want this to be clearly understood—that if the inten-tion of the Act were persistently thwarted 793 in this way it would create a position which the Government could not accept indefinitely.
§ THE MARQUESS OF SALISBURY
My Lords, I rise merely on a point of information. The noble Lord, Lord Pakenham, and my noble friend Lord Swinton know exactly what these services arc, but most of us in the House have no notion of what Lord Pakenham is referring to. If he could explain in simple words the type of business he has in mind it would be helpful to the House.
I do not want to come too close to any particular example, because, as I say, one must be rather careful there. I am thinking, however, of the kind of services which would be run regularly, and which might in fact be run by a charter company, although they would be open to a very large section of the general public.
§ THE MARQUESS OF SALISBURY
With all respect, the noble Lord ought to tell us what he has in mind. This is Parliament, and we have a right to know. It appears to me that the noble Lord's hesitation and anxiety arise from the fact that he does not want to mention any of these particular cases, because that would be embarrassing to the Corporations.
It is not for that reason at ail. In all these matters, where the Act is not always very easy to interpret, the question of whether or not it is legally permissible for charter companies to run a particular service has to be very carefully considered on legal advice. I would not wish to prejudice any proceedings which might arise in any particular case. I hope the noble Marquess will accept that.
§ THE MARQUESS OF SALISBURY
I realise that I may have put the noble Lord in some embarrassment, but I want to know the type of business he has in mind. I have not a notion of it, and I am sure that other noble Lords are in exactly the same position.
Let us look at the Act. Section 24 of the Air Corpora-tions' Act, 1949, says:(l) Subject to the provisions of this section, it shall not be lawful for any person, other than the corporations, their associates, and the servants and agents of the corporations and their associates, to carry passengers or 794 goods by air for hire or reward upon any scheduled journey between two places of which at least one is in the United Kingdom.(2) In this Act the expression ' scheduled journey' means one of a series of journeys which are undertaken between the same two places and which together amount to a systematic service operated in such a manner that the benefits thereof are available to members of the public from time to time seeking to take advantage of it.An operator might run a regular service and it might be arguable as to whether it was open to the public, although in fact he was throwing it open to a very wide section of the public indeed.
§ VISCOUNT SWINTON
What the Act means, my Lords, can be construed only in a court of law, and if the Corporations felt that charter companies were doing something they ought not to do, I should have thought that the right thing was for them to take the matter to court. That is their perfectly clear remedy. I am quite clear as to what I had in mind when these Acts went through. I thought that "open to the public" meant that any member of the public could go and book on a scheduled service, just as any-body can go to King's Cross station and book on a train leaving there.
I cannot tell, of course, what is in the noble Viscount's mind, but the fact is that a class of service has arisen that was not foreseen when the Act was under discussion. Putting it quite simply, that is the case. It is a type of service which gives rise to con-siderable legal difficulties. That is putting the matter the simplest way.
§ THE MARQUESS OF SALISBURY
With deference to the noble Lord, this is an important point. The way that the Government, I understand, propose to deal with this difficulty is not to take action—that is to say, to limit themselves in no way in their competition with this service. But surely it would be far better to test the legality or non-legality of the matter in the courts. I do not think it is the right way to deal with the matter for the Government to run these people out of business by the whole weight of the Government machine. That does not seem to be the fair way to do it.
I am perfectly ready to attend to what all noble Lords say on this matter, and after to-day's debate I shall, of course, think over all 795 these matters very carefully. I cannot say more than that. The position is that this is a class of business which, clearly, was not envisaged at the time the Act was being passed, and it is certainly not the kind of business that was thought of as charter business by those who were drawing up the Act. That is the historical fact. It will be recalled that it was not the noble Viscount's Act but our Act; and our people, therefore, would know what was in their minds.
I would, however, say a few words about the associate agreements. It may be asked whether there is any scope at all for the charter companies in the field of what are indisputable scheduled services. My answer is, Yes, but only within the associate agreements scheme. I do ask the noble Lord who I think is to follow me to give me some share of his attention, because this part of my speech has been drafted with some care to tell him exactly what is in the mind of the Government. I can fairly claim to have taken the greatest personal interest in promoting and supporting this scheme. Frankly, I do, in a friendly way, resent the suggestion that I have attacked the charter companies or launched some kind of active aggression against them. I cannot help recalling what I said when the scheme was first introduced. I cannot help recalling the statement made by the British Air Charter Association when these associate agreements were brought in. So far from denouncing me, at that time they were kind enough to say, "The statement by the Minister of Civil Aviation to-day is welcomed by the British Air Charter Association"—and it is generally recognised that the present directive, whether or not it is perfect, is more friendly to the charter companies than the directive which was issued in January last year. If they welcomed it in January, I should feel it a little ungrateful if they began complaining about it when it was improved in their favour some time later. I must say those things, as the noble Viscount, I think, would leave a rather different impression on other people's minds.
I have taken the greatest personal interest in this associate agreement scheme. Soon after I became Minister, I asked my noble friend Lord Douglas, who was not at that time, of course, Chairman of 796 B.E.A., to look into the whole question of those sections of the Civil Aviation Act which enable the Air Corporations to appoint associates or agents, and I announced the scheme, it may be recalled, at the beginning of January last year. I still say—and I challenge anybody who has been into the matter to deny this—that the scheme, with all its limitations, has been of real assistance to the charter companies, and has been so regarded.
I would venture to remind the House, however, of the meticulous care that we took in our debate of February 2, 1949, to avoid saying anything on the Government side that would lead the charter companies "up the garden path." I am sure the noble Viscount will recall what happened, as will the noble Lord, Lord Balfour. The greatest possible pains were taken to avoid persuading these companies to commit their money to these ventures. I said, to quote my own words:I am not asking or encouraging these charter companies to step in.I was determined on the one hand to avoid a dog-in-the-manger policy, any sort of "We can't, so you shan't" conception. But I saw no reason, if a route was not being developed by the Corporations, why the charter companies should not try their luck at it. I also had in mind—and anybody who looks back to that debate cannot doubt it—that we in the Government had no intention (and we have no intention to-day) of altering the well-known policy whereby all scheduled services are reserved to the Corporations if they want to run them. The noble Viscount—I am afraid I am holding his attention very much less than usual, and I should be grateful for just a few minutes' personal interest on his part—has suggested that we have indulged in sharp practice by hounding these people off the routes, and that we have behaved in the most abominable fashion. If he looks at his words he will see that they are very strong. I told these companies at the beginning of 1949 that I was anxious to help them, but that I could not encourage them to spend a penny of their money on these routes. I made it clear that they would have to take all the risks themselves, and it is very misleading to say anything to the contrary.
What has happened to this scheme since February, 1949? The main thing that has happened is that I have tried to meet the 797 criticisms which have been voiced by— among others—the noble Viscount, Lord Swinton, and, even more, by the noble Lord, Lord Balfour of Inchrye, who has argued that two years is too short a period for the maximum for associate agreements. The noble Lord, Lord Balfour, particularly made a good deal of that point. He argued that there ought to be a considerably longer period, if it was to be made a business proposition. I have tried to meet that point. I have revised my directive this summer so as to permit, in suitable cases, the making of agreements for periods up to five years—that is to say, in cases where a five years' agreement will not cause overlapping or competition with the Corporations' planned programme. The revised directive also broadens somewhat the field available to associate companies, and I think this has gone, or should have gone, some way to meet the point in the mind of the noble Viscount, by providing for the approval of international services on the same conditions as internal services. That was a point in which he took a great deal of interest, I know. I should just add that I welcomed, and certainly do welcome, the initiative taken by B.E.A., who have gone out of their way to try to help the charter companies. B.E.A., for no selfish reason, have helped the charter companies; for patriotic reasons they have done all they can during the present year to see whether they can be of assistance within the terms of their own duties.
I would pause on that point. Lord Douglas, I believe, is here, but of course he cannot take part in the discussion. I pause on this, because no one would possibly judge from the statements issued by our friends the charter companies that B.E.A. had taken a great deal of trouble to help them. In the first place, the Corporations decided what internal routes they would operate over the next five years. Then they approached the charter companies and had meetings with them, and they tried to explain to the charter companies the way in which the B.E.A. routes were to be developed during that period. B.E.A. have also offered to form an association of associates to enable inter-line agreements to be made between B.E.A. and the charter companies running scheduled services, and they tried to help to rationalise fares and conditions of service. None of that is of any selfish interest to B.E.A. That is, if you like, 798 a patriotic duty that they have sought to perform. Finally, Lord Douglas has assured me that he has been at special pains to go over, again and yet again, the B.E.A. comments on the charter companies' applications to the Air Transport Advisory Council in order to make quite sure that B.E.A. have approached this whole matter in a spirit of liberality and breadth.
My Lords, we meet at a moment (it is perhaps not altogether fortunate that it should be so) when a good deal is happening on this particular front, and when it would be impossible, and indeed improper, to indicate the final decisions for the year. Last week the Air Transport Advisory Council—presided over with so much wisdom by noble friend, if I may so call him, across the House, Lord Terrington, and on which sits also the noble Viscount, Lord Runciman, who is I think a Liberal sitting in a different part of the House—completed its study under the new directive for applications for the next five years' services.
I would break off to emphasise the genuineness of these examinations of applications for associate agreements. The noble Viscount, with what authority I know not, gave us to understand what no doubt he sincerely believes, that the noble Lord, Lord Douglas, would be acting on my instructions in this matter. I would remind the noble Viscount that Lord Douglas is a virile gentleman who is no "stooge" of mine, although I hope he is my friend. The noble Lord, Lord Terrington, and the noble Viscount, Lord Runciman, are not going to play the rubber stamp either to myself or to the noble Lord, Lord Douglas.
§ VISCOUNT SWINTON
I never suggested that they would. I did say that I thought that certainly the policy of B.E.A. and the policy of the Minister was to "collar" all they could get, and in that they were together. But if the Minister differs front the noble Lord, Lord Douglas, of course I accept it.
My Lords, I am not very old, but I am not quite so young as that Because I said that the noble Lord, Lord Douglas, was not instructed by me, that does not drive a wedge between the noble Lord, Lord Douglas, and myself. He is acting on his own initiative in this matter, and very wisely, I am sure. The simple fact is that these 799 applications are made by charter companies. B.E.A. put forward their own views. Those views have been overruled on some occasions by the noble Lord, Lord Terrington, and his colleagues, and it is therefore a very independent and objective tribunal. If the noble Viscount says: "Ah, well, the Minister has the last word. The whole thing is nothing but a facade"—I hope the noble Viscount would not use such language about the conduct of the noble Lord, but if anybody less instructed than the noble Viscount suggested that, I would point out that nothing could be further from the truth. It is an absolutely genuine tribunal, and so far from my overruling them on a great many occasions there has been only one occasion when I did venture to over-rule them, which I think proves that the whole proceedings are entirely as we should wish them to be.
The recommendations for the present year I have received in the last day or two. Naturally we always give them very careful investigation before I approve them. I cannot give your Lordships statistics to-day, but I would say at this point that 109 applications have been received so far this year, that the pro-portion of applications turned down by the council is not a high one, and that a number of five-year agreements have been recommended. I should like to emphasise that point. The noble Lord, Lord Balfour of Inchrye, will pick it up. A number of five-year agreements have been recommended. The number of in-stances in which the Council have differed from B.E.A. is sufficient to indicate that kind of masculine independence which we associate with my noble friend Lord Terrington, while at the same time they are insufficient to suggest a whole series of irreconcilable conflicts. That is the position up to the moment. It would be imprudent to say more at this stage, except to re-emphasise my sense of good fortune and gratitude at having obtained the noble Lords, Lord Terrington and Lord Runciman, and their colleagues on the Air Transport Advisory Council, to undertake this invidious task.
I have said my say for the moment, though I understand that, with the leave of the House, I may be permitted to speak again. This question of the charter companies is not one in which all the facts 800 are easily come by. No one, I think, will accuse me or my officers of being unready to meet representatives of charter companies at any time. I have had a number of agreeable talks in particular with Mr. Rylands, the energetic chairman of the British Air Charter Association. I read in the Aeroplane of November 17 that large charter aircraft have come into their own for the past two months, but I am prepared to be told that this is a flash in the pan, and I appreciate that what they really want is some certainty about the future. There are at least three attitudes that could be assumed by a Minister towards a possible decline in the charter companies, which I should not wish to see: he could view it with positive enthusiasm, he could regard it with indifference or he could meet it and recognise in the face of it an unreserved responsibility for arresting it by governmental action, at the expense, it might well be, of the Corporations. My Lords, none of those three courses expresses my attitude or that of the Government. We regard the charter operators as honest citizens who have embarked, under a Government policy, repeatedly stated, on activities in the world of aviation, where, within the framework of existing policy, it is my own duty to assist wherever I can. That duty I endeavour to perform and find no difficulty in performing in a friendly and sym-pathetic spirit which, in personal dealings at least, I have always found reciprocated by the charter companies themselves. But I can never overlook, and I venture to say no Minister in my position, whatever his Party, could honourably overlook, my prime responsibilities for the Corporations, in whom so much of our national resources is invested and to whom falls inevitably by far the greater part of the great national task and challenge of giving us the same place in the air as we have so long possessed on the sea.
§ 4.17 p.m.
My Lords, I apologise to the House for addressing it twice in one week, but, as has been said, we have not had a debate on Civil Aviation for a long time, and very important things have been happening in that field. We have had two weighty speeches to-day from opposite sides of the House. It all seems to me to sum up to this: that the objects and the policy of both the noble Viscount, Lord Swinton, and the noble 801 Lord, Lord Pakenham, are in fact the same—to foster and support the independent charier companies. My only reason for intervening for a short time is that I have one or two constructive suggestions to offer which open up a new line of country altogether. I hope your Lordships will forgive me for putting them before you. With regard to the general attack on my noble friend, Lord Pakenham, I think it is perfectly true to say that it is really an attack on the Civil Aviation Act and the previous instruments of the present Government. My noble friend can do no other than carry out the objects of the Acts of Parliament.
No mention has so far been made in this debate—I would not have expected it from my noble friend—about the heavy burden which falls in this country on private flying, commercial flying, the charter companies and everyone else, and that is the increase in the tax on light hydro-carbon oils; in other words, aviation petrol. I believe I am right in saying that this is the only country in the world which puts a tax at all on aviation spirit. The way in which the tax works out in practice is absolutely grotesque. In the first place, the Corporations, who, after all, are the major users, are running at a reduced loss, but still at a loss; therefore what they pay in taxation on their petrol only adds to their deficit and is made up from another pocket, so to speak, of the Treasury. Therefore, what the Corporations pay back to the Exchequer or give to the Customs and Excise in tax on their petrol is made up again by my noble friend and the Treasury in a subsidy to them. The people most affected are the charter companies and the private owners.
I am informed that actually—I do not know whether my noble friend can throw light on this point, but this is my information and advice, which comes from a key source—in practice the cost of collecting this tax just about covers the amount of revenue derived from it. In short, the Exchequer makes little if anything out of it at all. Furthermore, 65 per cent. of the taxed aviation spirit last year was used in testing engines, trial flights and training, and therefore is a direct burden on the manufacturers who, after all, are competing in the export market. It is therefore an extra cost on manufacture. My noble friend will probably say that this is a matter for the Chancellor of the 802 Exchequer; that he is very sorry indeed, but he cannot anticipate the Budget. I do not ask for any anticipation of the Budget. This matter is so serious that there ought to be a special Bill brought in before the Budget. I think that Bill would pass through both. Houses without any opposition at all.
There is one other side-light on the curious way in which this business of the petrol tax works out. A concession has been given to the flying clubs, for which I am sure we have to thank my noble friend the Minister of Civil Aviation, but it has not been given to the private owners. It works in this way. Mr. Jones has to make a journey and, being a member of a flying club, he hires or borrows one of the club machines. In that case his petrol does not bear the increased tax. But if he uses his own private plane and happens to keep or hangar it at the club, then he is charged the higher tax. I think that situation is quite indefensible. My noble friend re-echoed what was said by Lord Swinton in stressing—I use my noble friend's words— "the valuable defence potential of the charter companies." Lord Swinton laid great and justifiable stress on the strategic aspect, and 1 should have thought that from that point of view alone it was necessary to encourage and foster private owners. The private owner is also an asset in time of emergency. He is usually his own pilot, and he knows the country. I suggest that an arrangement might be come to whereby he is exempted from the tax on aviation spirit, on condition that if he is otherwise fit he shall join the Reserve Forces. I think the whole case is a very strong one indeed, and I cannot imagine that my noble friend is unsympathetic towards it. Some pressure should be brought to bear in the way I suggest to put this matter right before the Budget.
I have what I hope is one other constructive suggestion. My noble friend spoke of about 100 charter companies doing charter work, but I suppose he was including some quite small companies. I think there are about forty major companies, and I am told that several of them are in a bad way and that at least fifteen are likely to go out of business before the end of the year. That is a very serious state of affairs. The last debate on air defence in your Lordships' House produced some warnings about the weak state of Trans- 803 port Command. It is notorious that Transport Command has not yet been built up again as part of the rearmament programme and is still in a very weak position. That being the case, the charter companies, and, for that matter, private flyers as well, are of great potential value in case of emergency. Why cannot we adopt some system such as the War Office adopted a few years ago, when they wanted a reserve of heavy commercial vehicles for the Army? They paid an annual subsidy—it was not very much, but it was valuable and produced the right results—for certain types of heavy commercial lorries, so long as they were kept in good order and were available in case of mobilisation. I suggest that some annual sum should be paid for every civil aeroplane, not in the Corporations of course, but belonging to either a private owner or to the charter companies, so long as it is airworthy and useful for service. There might also be an annual payment for every trained pilot or technician. I suggest that this payment should be justified on exactly the same ground as the War Office justified its payment to the owners of certain heavy commercial vehicles needed for the Army in case of mobilisation. I throw out that suggestion to my noble friend who, I am sure, is quite genuine in wishing to support private flying and the charter companies as well. I think it is worthy of consideration.
Having seen the documents, I entirely agree with my noble friend that the Corporations and of course the Ministry of Civil Aviation as well, have tried to play the game with the charter companies. I think the idea of stabilising for five years, presumably until the helicopter becomes more generally used and more advanced, is most valuable, and I suggest that the accusations, made in perfectly good humour by Lord Swinton, about attempting to squeeze out and crush these people are not well founded. As for the sup-posed tremendous extravagance of the Corporations, I have not the figures for B.O.A.C. but I have the overheads for B.E.A., and compared with the American private companies I think they make very interesting reading.
§ VISCOUNT SWINTON
I am sure it was my fault, but the noble Lord has misunderstood me. I was not discussing 804 at all whether the Corporations were or were not extravagant. I never mentioned that matter. The point I did ask to be enlightened upon was whether a share of the overheads was charged to charter work or whether those overheads were debited exclusively to the regular work.
I was particularly interested in the noble Viscount's speech but I was not addressing myself to his remarks on that point. I was referring to the general accusation of extravagance or bad management. In that connection I have four figures I should like to quote. The direct overheads in relation to B.E.A. are 44.4 per cent. The figures for the three great American air lines, run by private enterprise although indirectly heavily subsidised by the American Post-master-General, and so on, and not making much money either, are as follows: Western 50.1 per cent.; T.W.A., 53.3 per cent.; and the great Pan American air line, which we are always told is so wonderfully efficient (though I must say I have never noticed it, and I have flown a great many thousand miles with them), stands at 53.9 per cent. Comparing those figures with the B.E.A. overheads of 44.4 per cent., I do not think the charge of extravagance has been made out. In addition to that, my noble friend has given some very impressive figures of the cutting down of expenses and the increase of efficiency, and so on.
My last point is that this being a broad debate on civil aviation, we all have the same object in view—namely, to encourage British commercial aviation in every way we can and from every point of view. A great many complaints have reached me about certain of the air facilities on the air routes through the Colonies. Although this is a Colonial Office question more than a Civil Aviation matter. I hope my noble friend will forgive me if I ventilate these grievances because I think they are of some importance. With one or two exceptions on the more important Colonial routes there are still grave deficiencies in meteorological services, ground communications, navigation aids and so on; and perhaps the most notorious of all which I have had represented to me by recent visitors is the state of the aerodromes in Kenya, and particularly those at Eastleigh and Nairobi West. I am told that the aerodromes themselves are fairly good but that the accommodation for 805 passengers is particularly poor, out of date, and, indeed, in some cases insanitary. This has given a very bad impression. If in regard to these matters my noble friend can bring pressure to bear upon the Colonial Office and the Colonial Governments, civil aviation generally can be helped, indirectly but to a valuable extent.
On the other hand, I must take the opportunity of congratulating everyone concerned on the magnificent new aerodrome at Livingstone which my noble friend recently opened. That is a credit to the whole Commonwealth. I wish we had more Livingstones, expensive as they are. The sort of spirit that laid out, built and developed the Livingstone Aerodrome, applied to some of the other Colonial routes would be of great value to the Commonwealth and to civil aviation as a whole. As I understand it, noble Lords in all parts of the House wish only to assist civil aviation and to help and maintain commercial flying at the highest state of efficiency in every branch. Therefore I suggest that the proposals I have ventured to put before your Lordships' House should receive some consideration.
§ 4.30 p.m
§ LORD MONTAGU OF BEAULIEU
My Lords, many good reasons have been put forward this afternoon to show why the existence of air charter firms in this country should be encouraged. I think everyone is agreed that their existence is entirely necessary to the welfare of civil aviation. We have heard—and, again, I am sure everyone is agreed upon it—that the main reason is that their 'planes and staff form a valuable reservoir upon which the R.A.F. can draw in the event of an emergency. In this connection, the obvious example which can be quoted is that of the Berlin airlift. I believe that B.O.A.C. may have to charter some private 'planes in view of the present strike difficulties. I should like to mention one or two other respects in which I feel that air charter firms can be of enormous benefit to this country. One is the building up of an air merchant marine capable of carrying goods and earning foreign currency in all areas, thus spreading British trade, prestige and influence to the far corners of the earth. A second point I should make in this connection is that in my view air charter firms ought 806 to be allowed to develop and build up a second or tourist class of air travel.
Before I get on to that, however, I wish to make one or two comments about air charter work in general. I am sure the noble Lord, Lord Pakenham, will agree with me that it would be very unjust if the Government were to use air charter planes only in time of emergency—as in the case of the Berlin airlift—and during the rest of the year when the companies were not needed for such purposes, were to be hostile to them. In spite of the very attractive figures which the noble Lord gave us—figures designed to show how much business his Department gave to air charter firms last year—I would remind him that during the past year sixteen private air charter companies have "gone broke." In addition, it seems very significant that whereas in 1949–50 there were 231 applications for associate agreements, this year, so far, there have been only 109. I think it is agreed that air charter firms must be able to plan ahead.
May I break in for a moment? Can the noble Lord tell us up to what date he 230 applications which he has mentioned were received? As I understand it, they have not been received at this stage. I do not want to quibble, but perhaps the noble Lord can clear up that point.
§ LORD MONTAGU OF BEAULIEU
I think the noble Lord has told us that there have been 109 applications so far this year. Last year there were 231.
LORD MONTAGL OF BEAULIEU
The planning of a route and the development of it is a matter of great importance to air charter firms. I do not think any-thing has been said 10-day by the noble Lord which is calculated to alleviate the fears of the charter firms that they are to be used as stooges, to pioneer routes, to develop them and spend money advertising them, and then, after they have made a success of them, see those routes taken away. A question which arises in this connection is this. When routes are to be taken from private air charter firms will the routes only be taken, or will the services be acquired as well? In other words, are the 'planes which have been specially bought for the services, and the personnel which has been specially 807 trained, to be thrown out of work, or are they not?
I should now like to revert to the very important subject of the formation in this country of second-class air travel. That is not a new thing, but it would be new in this country. State airline services are quite rightly recognised as being really first-class, by reason of their efficiency and regular service. Everyone knows that they run scheduled services. But they charge first-class fares. I put it to your Lordships that one function of air charter firms is to provide tourist or second-class travel for people in this country, at second-class fares. This sort of service exists in America, in France and in many other countries, and it forms an important part of air travel facilities. In France, for instance, second-class facilities are set out in the official time-table alongside the details and fares of the first-class facilities. And it is a recognised fact that the intending passenger is at liberty to choose for himself which form of travel he prefers, having regard to what he can afford.
A further point which I should like to put is that the public which B.E.A. and B.O.A.C. cater for is a public of a completely different type to that which normally travels by charter planes. It seems strange, in view of the great levelling out and socialisation process which has taken place in this country, that the Government have created air services which cater entirely for the rich people, and that private enterprise firms, which are trying to run cheaper services for the ordinary people, should not be put in a position to operate as efficiently. I am not contending that these second-class services should run on scheduled routes. On the other hand, there is no reason why charter 'planes should not fly to the same countries as the scheduled services, though perhaps not to the same airports. Take the case of flights to Italy. It might be that the charter companies should fly not to Rome, but to some other place in Italy. Their object should be to take passengers on different routes at a lower fare, thus providing for the tourist just what he wants. It must be remembered that these people will never fly by B.E.A. They will travel, perhaps, by a charter 'plane run by a company that arranges for its clients to have holidays abroad at an inclusive fee.
808 I would now turn to another matter. As in the days of old, there is an enormous amount of business to be done in this country, and with other countries, in the carrying of freight to the far corners of the globe. We all know how the British merchant marine became famous for carrying not only British but foreign goods as well all over the world. I believe that the existence of a strong fleet of freight carriers of the air—rather like the tramp steamers of the sea—would ensure that the British sphere of influence would not be neglected, and that a steady stream of foreign currency continued to flow into Britain. In addition it would help to keep the British Empire and the Colonial Empire in touch with each other.
With regard to associate agreements, I should like to point out that firms which secure an associate agreement with B.E.A. sometimes find themselves forced to make higher profits than they would wish to make. Let me give one example to show how one British charter firm is losing business. Last year an Austrian travel agency—it is an Austrian State organisa-tion—used a British air charter company which had an associate agreement with B.E.A. to fly their passengers to Innsbruck. B.E.A. insisted that the company should charge a fare of £39. This year Swiss Air have undercut this fare by £10. Their method will be to fly people to Zurich and then send them on by chartered planes to Innsbrück. So it seems that a British firm will lose valuable business, and, of course, there will be a consequent loss of Swiss francs and other foreign currency to this country. I am sure we are all agreed that these are non-Party problems. No one is trying to make Party capital out of these matters. I submit that all interested parties should get together and discuss the whole matter properly. I am sure that the Air Ministry and the noble Lord, Lord Pakenham, are only too willing to help the air charter companies to carry on efficiently. But it seems to me that the Government are like a twin-engined aeroplane, with the starboard engine not knowing which way round the port engine turns. Let me hasten to add that, in saying that, I am not making any political analogy. I ask the Minister to use his influence to organise a round-table conference of interested parties at which these problems can be thoroughly threshed out.
§ 4.40 p.m
§ LORD BALFOUR OF INCHRYE
My Lords, the position of charter companies has been fully deployed during the debate, first by my noble friend Viscount Swinton, then by the noble Lord, Lord Strabolgi, and again in an able and interesting manner by the noble Lord, Lord Montagu of Beaulieu. I listened with great interest to the speech of the noble Lord, the Minister of Civil Aviation. He started off by expressing his good will, an admirable sentiment which I am sure is welcomed on all sides of the House, although good will does not necessarily mean that action will automatically follow. The noble Lord outlined as he saw it the best pattern for the air transport field. He justified the doctrine of large units, of the Corporations, their monopoly of operation on scheduled routes, their monopoly of subsidies, and the need for them to have freedom from competition on those scheduled routes. Those are very large questions, which are arguable, but they are not strictly germane to the main subject of our debate to-day, However, we are very glad to have those views and to hear of the progress of the Corporations, given in the interesting figures which I shall read in Hansard to-morrow and then be able to absorb, because it is difficult to take them all in during a debate.
In talking in general terms of the major policies, the noble Lord did not deal with the encroachment of the monopoly Corporations into fields which we have under-stood hitherto were primarily for private enterprise. That seems the point which was lacking in the noble Lord's speech. The real issue seems to me to be—and I do not think the noble Lord will disagree with me—the equitable apportionment between the Corporations and private enterprise of the air transport traffic which exists. The noble Lord him-self admitted that there is a field for private enterprise in charter work. The position is that, by Statute, the Corporations have exclusive rights to operate scheduled services which are available to the public—I stress the words, "available to the public." Any services not coming within this description have been normally regarded as non-scheduled or charter services. The declared policy of the previous Minister, and I think of the Corporations, has been that the Corporations did not in-tend to develop charter operations to a major extent. I would remind the noble 810 Lord of what the noble Lord, Lord Winster, said on July 23, 1946. He said:I do not think there is much between the noble Lord "—he was referring to me—and myself on this subject, because, broadly speaking, it is not my intention to allow the Corporations to have unfair advantage over charter companies. I do not intend that they should be able to use the resources of the State to the disadvantage of the charier operators.The mere fact of the Corporations going into these non-scheduled and charter services must mean that they are using the resources of the State in pursuit of this purpose, the operation of these services. Hitherto we have been always under the impression that although the Corporations had statutory liberty to execute charter work, nevertheless, it was not the intention of the Government that they should use any major portion of their resources upon charter and non-scheduled operations.
§ LORD BALFOUR OF INCHRYE
If that is the intention of the Government, then the value of that statement must depend upon the interpretation of the word "charter."
I do not wish to interrupt, the noble Lord but I am anxious to be fair. What I said in my intervention only repeated what I said in my speech, that this work would be incidental. I used the word "incidental" and I used it twice. It was a carefully chosen word.
§ LORD BALFOUR OF INCHRYE
I would put this to the noble Lord. If the Corporations undertook not to engage in charter operations which fell outside the description of scheduled services which are available to the public, there would be sufficient business left to the charter companies for them to lay the solid foundations of a valuable mercantile marine of the air in this country, and they would be able to do that without encroaching on the main preserves of the Corporations. The noble Lord says that that is the Government's general intention, but, if I may say so, he has to-day declared war upon the chartered companies in respect of all repetitive services, whether available to the public or not. If the noble Lord 811 will look at the 1946 Act, Section 23, sub-section (2), he will see this definition:In this Act the expression 'scheduled journey' means one of a series of journeys which are undertaken between the same two places and which together amount to a systematic service operated in such a manner that the benefits thereof are available to members of the public from time to time seeking to take advantage of it.The Corporations are contriving to tender, and to tender with the noble Lord's support, as he said to-day, for any repetitive service of a major character, even if such a service is not available to the public. He has not explained how he can get round the fact that the Act says that availability to the public is a necessary condition for a scheduled service. The noble Lord is encouraging the Corporations to undertake all repetitive services, even if they are not available to the public. If a repetitive service not available to the public is a scheduled service, then the people operating it are breaking the law. As the noble Marquess, Lord Salisbury, said, if people are breaking the law, take them to court, and let the judiciary deal with the matter, but do not try to con-duct a trial within the Department, find the operator of the service guilty, and then use the resources of the State to drive that operator out of business. It would be far better to take the case to court. If we have the position the noble Lord said we are to have, it is possible that the Corporations may tender for every repetitive service.
§ LORD BALFOUR OF INCHRYE
I understood the noble Lord to say that the Corporations could tender for all repetitive services, with his full support.
§ LORD BALFOUR OF INCHRYE
I should be glad if the noble Lord would correct me, because this is very important.
I do not want to delay the House, but I said actually that a number of private companies to-day are engaged in offering services on a regular basis to particular classes of the community. I further said that those services do not constitute the normal type 812 of charter operation, but take on the character of regular services. I was not referring under that head to, shall I say, the Anglo-Persian leave scheme. It would not cover a service run by a particular company for its employees. That would be pure charter work. But I give the example here of the Anglo-Persian contract as something to which I was not referring.
§ LORD BALFOUR OF INCHRYE
The noble Lord gives an example of something to which he is not referring, but may I ask him whether he would consider that the Sudan Government leave services come within the ambit of a scheduled service which the Corporations should run, even though that Sudan Government leave service is not available to the public, but only to Sudan Government employees? Which way does that go?
I certainly am not going to answer that question to-day. The noble Lord can wag his head, but I am not going to interpret the law this afternoon in relation to particular companies in any conceivable case of this sort. In my place the noble Lord would not dream of doing so.
§ LORD BALFOUR OF INCHRYE
The noble Lord says he is not going to interpret the law. I wish that he and his Department would not interpret the law. If they feel that these charter companies are encroaching on the field of scheduled services, let them take the charter companies to court, and let the court decide. They should not use the whole resources of the Corporations in an endeavour to substantiate the Government's and the Corporations' position. As things are going at the present time, if the policy of the Corporations in quoting for every repetitive service is to be executed, it will drive these charter companies right out of that particular market. The Corporations can always underquote a charter company, and justify themselves in so doing.
Let us assume for a moment that the prime cost of running an aircraft is £30 an hour, of which £20 goes in direct 813 operating costs and the other £10 in general administration, overheads, insurance, and other items. The Corporations could come along, and if they quoted £21 they would be £9 per hour under the economic price for running that aircraft. yet they could still make out a case that they were adding a £1 per hour contribution to their overheads, because they would be using the whole of their organisation. They could say that this was merely some extra work which they could take on at a cut rate, provided that the cut rate was slightly above the direct charge. I do not think it can be denied that this policy must eventually lead to the charter companies' being driven out of this repetitive service market. Maybe it is the Government's policy to do so. If so, I disagree with it. But let us face the fact that that will be the logical conclusion of the policy which the Minister is at the present moment following.
I have corrected the noble Lord once, and it is on the record. However. I would repeat that I do not accept his use of the word "repetitive" in that way.
§ LORD BALFOUR OF INCHRYE
Let me come to another proof of this under-standing which I put to the House, and with which the noble Lord was good enough to agree: that it was not the intention of the Corporations to engage in charter work, other than incidentally to their main task. Let us look at that matter again, in the light of what is happening. The charter companies have been energetic, full of initiative and have worked in co-operation with the Baltic Exchange air charter section built up by the charterers. Since the charterers built up their position there, the Corporations have come along and become members of the Baltic Exchange, and they have appointed, or are appointing, representatives on the Baltic Exchange, presumably in order to quote for all charter work which is going.
§ LORD DOUGLAS OF KIRTLESIDE
We are on the Baltic Exchange not in order to obtain charier work, but in order to obtain freights for our regular freight services.
§ LORD BALFOUR OF INCHRYE
Then I presume that a deaf ear will be turned by the Corporations' representa-tives on the Baltic Exchange (and let it 814 be on the record for all time that it is so) to any offer of charter work. They are there only to obtain freights for regular freight services. I am sure that, to that extent, we are relieved that the charter companies are not to be under-cut in the enterprise which they themselves set up.
The next proof that this understanding, that charter work was incidental to the Corporations, has not been carried out, lies in these associated agreements of British European Airways. The noble Lord, Lord Pakenham, made out that British European Airways were a sort of benevolent uncle to the charter companies, and that all they wanted to do was to help them. Of course, British European Airways have given a great deal of work to the charter companies. But was it not work which was surplus to the capacity of their own aircraft, and which they would have preferred to execute themselves? Here may I digress for a moment to say that I feel sorry for my very good friend Lord Douglas of Kirtleside, who has to sit here through the debate and hear this and that said, but who is unable to make any comment? We have other noble Lords in this House who are members of Boards, such as the B.B.C., the Colonial Development Corporation and the trans-port Corporations, who under the present Government directives are precluded from speaking on their own subject. I remember that Mr. Baldwin once defended his silence or. certain defence matters on grounds of security. If I remember rightly, he said that his lips were sealed. We sympathise with those noble Lords in their condition: their seats are sealed, and they are unable to rise and correct statements which are made with which they disagree.
I hope the noble Lord, Lord Douglas, will not take it amiss if I say that, in my view, there was a good deal of propaganda humbug in the Press announcement of B.E.A. that they were giving unprecedented opportunity to the charter companies by these associate agreements. No routes were left for five-year agreements which justified the purchase of new aircraft. It is true, as the noble Lord, Lord Pakenham, said, that I raised in a previous debate the need for a long-term agreement on any line which would allow an aircraft to be bought and to be written off over five years. True, the five-years' 815 agreement has come, but not on routes which are in any way economic for the purchase of new aircraft. My noble friend Lord Swinton spoke about the Channel Islands and the Isle of Man. Those routes have gone. I understand that the London to Manchester route cannot be given a five-year associate agreement because the Corporation at some time in the future may wish to run it themselves. The routes remaining, including the five-year routes, are irregular and light in traffic; and in the main they are not worth concentrating on for development.
§ LORD BALFOUR OF INCHRYE
Hoping to get a little milk—no cream— and in due course hoping that the Government will either change or relent in their present policy. An analogy is this. Sup-pose that a public bus transport runs from Salisbury to Winchester under private enterprise and along comes a nationalised bus corporation who say: "You must get off this route which you have built up, but we will give you an unprecedented opportunity of five years from Nether Wallop to Middle Wallop." That would not be a very attractive offer for the purchase of new buses. That seems to me not an unfair analogy to what is happening on these five-year associate agreements.
The result of Government policy is that non-scheduled services of any value, in the way of nourishment for private charter companies, are to be withheld from them, by reason of the ability of the Corporations always to undercut the charter company. Without such nourishment, the charter companies are bound, in due course, to die. Of course, as the noble Lord said, the Government give much work to the charter companies in many directions—Army co-operation work and special contracts. Nevertheless, a global figure of £600,000 a year does not really mean anything, unless one knows what is the size of the enterprises which are executing the work, how many aircraft they have, what their insurance total is and what their depreciation total is. The fact is that the charter companies are being reduced in number, and the number of commercial pilots is going down. That is because the policy which we all under- 816 stood was to be adopted is not being carried out—that is to say, that charter work would be incidental to the Corporations' main activities and that their principal resources should not be used for that purpose. In fact, just the opposite is happening. If it is the Minister's policy to allow the private charter industry to continue to exist, it is necessary that the present attitude to this problem should change.
I will conclude by saying a few words upon the defence aspect. We all welcome the contribution to national defence which these charter companies can make, and indeed could make to a greater extent in the future, if they were so permitted. In time of war—and my noble friend Lord Runciman knows this as well as I do, be-cause we were working together on this problem, although not always seeing eye to eye—the job of the Corporations is to keep open world communications; and, believe me, in war time that is a full-time job for any Corporation. The Corporations will not be able in time of war to contribute in man-power, in aircraft or in technical skill, in the way of auxiliary transport squadrons, to support the Royal Air Force. They will be fully occupied in keeping open the world's air routes. Therefore, if the Minister of Defence and the Air Ministry want a contribution from civil aviation for air transport in time of war—and Korea is certainly showing us the need for the maximum of air transport—it can come only from these charter companies.
The noble Lord, Lord Pakenham, said that his Department were in the closest touch with the Secretary of State for Air and the Ministry of Defence. Without prying into business which is purely Government business, may I ask him this question: Are the Secretary of State for Air and the Ministry of Defence in absolute agreement with the policy which the Ministry of Civil Aviation are following, and which must mean, in the long run, that these charter companies will be unable to make the contribution to auxiliary air force transport squadrons which they might make if they received a greater degree of encouragement from the Air Ministry in their permanent bread-and-butter work?
§ LORD BALFOUR OF INCHRYE
It is not usual, but there is never any harm in asking. One may not always receive a reply.
§ LORD BALFOUR OF INCHRYE
The issue is that the Minister must decide whether it is in the interests of the country that private air transport of the charter description survives, or whether he wishes his doctrinaire policy of public control to be continued to the point of elimination of this branch of private enterprise.
The Minister said in his concluding remarks that his primary duty was to the Corporation, May I, with great respect suggest to him that that is not so? I would say that his primary duty in this charter business at the present time is to the interests of national needs and national safety. I would say that his second duty is to air transport as a whole, and his third and last duty is to his nationalised Corporations. That is lie order in which I would put his duties, whereas he puts his duty primarily to the Corporations, I think he said his second duty was to be watchdog for the taxpayer. I would implore him to reconsider that allocation of priorities in his mind—to put national defence and national needs first; air transport as a whole second, and the Corporations third. If he will do that, then I think he may review his policy up to to-day—even some of the things that he said in his speech to-day—and civil aviation charter companies will then have a greater chance than they have at present.
§ 5.7 p.m.
My Lords, I always enjoy listening to the noble Lord, because he is hitting out the whole time and to-day has been no exception. He is essentially an aviation man—it is in his blood—and I know how deeply he feels about all these things. I consider that on the whole a very unfair line of criticism has been developed by the noble Lord. I feel that quite strongly, and I am sure that he will allow me to say so, because, to be quite frank, I have taken a good deal of trouble over the charter companies since I have been Minister. I know their opinions perhaps almost as well as noble Lords opposite know their contemporary opinions. Although they 818 obviously regret a number of things about the present Act, I should be amazed if they were, in fact, to regard it as casting the sort of doubt on my attitude towards the charter companies which has been presented to your Lordships.
I am bound to say that I think it is most unfair to treat me as somebody who has taken away something from these companies, because, honestly, I have in certain ways developed the Act and modified its workings so as to be of special assistance to the charter companies. That is the actual fact, and I must put it on record in view of what has been said. If any-body listened to the two noble Lords opposite without hearing the few remarks that I ventured to address to the House, they would think that the whole business was some effort to winkle away from the charter companies some business that has always belonged or has always been coming to them. That is wildly remote from any semblance of truth. It was business which was closed to them previously, and which after a start had been made by my predecessor I have opened to them to the fullest extent possible. I cannot help repeating, and repeating again, that they did welcome it when it came out, and it has been of assistance to them since.
The noble Lord actually said that the whole associate agreement, or my approach to it, was another proof that I was mistaken in saying that the charter business was incidental to the work of the Corporations. Although I know how acute minded he and the noble Viscount are, I noticed in both their speeches a complete confusion on this point. They talked as though associate agreements had some-thing to do with charter business. The associate agreements: are given for scheduled services and therefore cannot have anything to do with the suggestion that the noble Lord has made that the Corporations are muscling in on the charter business. It is something completely different, and I venture to suggest that when he reads his remarks in the Official Report on that point he will wish to redraft them—and if he does correct his remarks I shall not object in any-way at all.
We are told that the: charter companies are disappearing. It is not easy to get the facts, as I think noble Lords are aware. The best figures I can give the House—I give them with great reserve because there 819 are all sorts of different people who per-haps do not come very much into our review this afternoon, certainly when we are talking from the standpoint of defence —are that before the war there were fifty-three private companies, that after the war there was a considerable increase in the charter business (possibly under the inspiring influence of the noble Lord, Lord Winster) and on January 1, 1948, 105 charter companies were known to be operating. The number now is 146. Taking the numbers operating large or medium-sized aircraft, there were thirty-eight in 1948 and there are thirty-four now, so that in that section there is a slight decrease; but there is nothing very much in it on any figures available. I do not want to rest too much on the fact that the numbers do not point to any general disappearance or any all round decline in charter companies. I merely lay it before the House as a fact, to the best of my belief. I realise the anxiety, but I do not accept the suggestion that charter companies are disappearing while we are talking here.
My Lords, I have many faults, but one I do not possess is the fault of not listening to what your Lordships say. I have paid a great deal of attention to the arguments that have been advanced by the noble Viscount, and also by the noble Marquess in a series of interventions, and by the noble Lord, Lord Balfour, regarding a certain type of case which I mentioned had emerged since the Act was drafted. I think I can put the position with absolute frankness. If it does appear that a loophole has been discovered in the Act there may be three courses open to us: one is to test it in the courts; another is to bring forward new legislation; and the third is to go ahead and in a particular place compete according to the laws of the land. Those are three courses; there may be others. I lay that before the House with absolute frankness, because I want to make it plain that various perfectly honourable but ingenious gentlemen have naturally exerted themselves to the best of their ability to see whether there is any way of running regular services avail-able to large sections of the community without infringing the Act. That is the simple point, and I say nothing more about it except to repeat that I shall think very carefully and very long over what 820 has been said on that subject in this debate this afternoon.
May I turn back for a moment to one or two other points? The noble Lord, Lord Strabolgi, argued forcibly against the petrol tax. On that matter, of course, my lips must be sealed. It is not for me to comment on the dispensations of the Chancellor of the Exchequer, but no doubt what the noble Lord has said will be studied in the proper quarters. I do not find it in my heart to denounce him, at any rate, for mentioning the point this afternoon.
I do not know whether it is a Left wing or a Right wing deviation, but at any rate I feel that the noble Lord has shot an arrow which may land in some helpful spot, but none of us can say.
The noble Lord, Lord Montagu of Beaulieu, was full of very interesting ideas. I ventured to correct him on his suggestion that 109 associate applications had been put in this year as against 230 last year. I am told that up to this point in the year the figures are about the same as they were last time—that is putting it broadly. So he seems to be bringing in some later figures for last year. I am told there is not very much in it up to the present time; and, of course, this year there is no doubt at all—though I have not finally ratified the recommendations of the noble Lord, Lord Terrington, and his friends—that, unlike last year, there will be a number of five-year agreements granted, as I feel everyone would wish. The noble Lord, Lord Montagu of Beaulieu, suggested a round table conference. My door is always open to charter companies. I have never shown myself reluctant to see them. Some of them have been to see me, and I have visited one of them. So far as I am concerned I am ready for talks with any-body at any time. But perhaps if the noble Lord wishes to develop that thought a little more fully he will discuss it with me afterwards. I am not quite aware how it would serve a particular purpose at the moment.
There was one detailed point that the noble Viscount put to me, and I have sought the information. He asked about 821 the Stratocruiser service for the contract for carriage of families to the Middle East. This contract was placed by the Air Ministry, and it was awarded to B.O.A.C. after perfectly fair competition. The noble Viscount asked whether, if the Stratocruisers were being used for this kind of service, it was not a proof that they had been obtained, as one might say, for false purposes. The answer which will perhaps occur to the noble Viscount is that the frequency of the Stratocruiser service across the North Atlantic is reduced in the winter and the aircraft are therefore available for a job of that kind. That I should take as a rather good example of what is known as incidental business. Remembering the sums invested in the Corporations and the money spent on buying these aircraft, I do not think that anybody here could seriously think that the Corporations ought to lay the aircraft up for the winter and not try and use them on other work. Their use in this way would seem to me an eminently sensible and reasonable use of the nation's money. I was not aware of all the details and I am glad now to be able to inform the noble Viscount.
My Lords, I hope that in spite of any friendly acrimony—if the phrase is not a contradiction in terms—the general impression left will be one of the conviction of the Government that the principal or the important charter companies could be of real assistance as a war potential. In these times that should certainly be in the minds of all of us. But when people talk about our need to build up a merchant marine in the air, it seems to me rather unfair in that connection to forget the Corporations. After all, the Corporations have for the most part four-engined aircraft, and if we are building a reserve potential and thinking of a merchant marine in the air we need not entirely neglect the possibilities that the Corporations themselves offer. The noble Viscount asked me in terms whether when it came to air trooping the matter would be considered. I think it was in his mind to ask whether that would be considered in conjunction with the Service Departments.
The whole matter is under consideration but I should 822 be very much surprised if the answer to that particular question were, in the ultimate event, unsatisfactory to the noble Viscount. I am perfectly ready to give way to any noble Lord who feels that certain points that have been raised have not been answered.
I should like to ask the noble Lord whether any consideration can be given to he proposal to pay a modest annual sum for aeroplanes to be kept at the disposal of the Government in case of emergency.
I certainly will consider any scheme that the noble Lord has in mind. I am not quite sure to what he refers. Does he mean V.I.P. planes?
No. I mean some sort of scheme like that which existed under the War Office, who paid an annual subsidy for heavy commercial vehicles to be kept ready for mobilisation. I am suggesting the same sort of scheme for aeroplanes, which should be kept in a certain state of airworthiness and placed at the disposal of the Government in the event of an emergency
I will, of course, consider any scheme put forward by the noble Lord, but at the moment there is some danger of surplus aircraft from the commercial standpoint. Therefore, I do not think we need be too much worried about this matter at this particular moment of time. I conclude by saying to noble Lords that we all want the same thing. We want to see air transport succeed. There may be—in fact there are —some differences of opinion as to the precise place of the charter operators. I wish them well. I hope I can say that without being accused of sanctimonious-ness or, alternatively, some months later of having failed to honour these words. I wish them well. I hope that fortune will be kind to them and all I hope, still more prayerfully, is that we shall not need them in the particular way present to the minds of so many of your Lordships this afternoon.
§ 5.22 p.m.
§ VISCOUNT SWINTON
My Lords, we are much obliged to the noble Lord, Lord Pakenham, for having spoken so fully and having answered immediately, which has made the debate much more vital and 823 informative than it would otherwise have been. The noble Lord began, as is quite fair in debate, by an incursion into my lurid past. I will stand by my past, but I am always prepared to learn. The day on which one should get the sack is the day when one thinks one knows every-thing.
As the noble Viscount accuses me of the zeal of the convert, I hope he will not suffer from that particular vice, in view of his new-found knowledge.
§ VISCOUNT SWINTON
I hope that I shall apply it wisely and discreetly, but I have refreshed my memory now from the book. I find that I was right and, with great respect, the noble Lord was wrong. I said that under the National Government plans the services which were to be put into the Schedule to the Act were those to be operated at once (subject to there being a few services which the Corporations were prevented from operating be-cause the war was still on—for instance, the services into Germany which Trans-port Command had to operate for the time being). Those, and those alone, were the services which would be the monopoly of the Corporations, and all future services which would develop would be open to whoever would discharge them best. Let me have on record this extract from the White Paper (Cmd. 6605):In the future, as air traffic develops, the need for new routes will emerge. It is not intended to make any present commitment as to the right to operate new routes. The Government consider that any new routes should be left open to whatever operator—whether one of the main Corporations or some entirely new operator—can establish that he is best fitted to run them.Therefore, new routes were left completely open. I think—I am not sure about this; it was stated certainly in debate—that the decision as to how those subsequent routes should go was to be made by a licensing authority or the tribunal which was to be set up. That is only to verify the past.
On that point, I do not wish to interrupt the noble Viscount unnecessarily. I am not for a moment trying to dispute the noble Viscount in a recollection of his past, but I will not accept it that I am wrong. I put that on record. I have the opinions 824 of, and a great deal of advice from, those who were concerned with it at that time.
§ VISCOUNT SWINTON
Never make a mistake in your logic; the facts remain at your disposal. I am founding myself upon the White Paper—
§ VISCOUNT SWINTON
—which I, on behalf of the Government, presented to Parliament. For all the ingenuity of the noble Lord and his advisers—and I have never seen a more ingenious lot of people —I do not know how those words can bear any other possible interpretation than that which I have given them. At all events, that was what the Government meant at the time. I was a member of the Government and my noble friend was not. It was I who wrote the White Paper, and he did not. I presented it to the Cabinet and he did not. Perhaps if we could have an exegesis I may be regarded as something of a contemporary authority, not only on what was said but on what was meant.
Then there is the point about the fares which the charter companies must charge. The noble Lord said that that was governed by I.A.T.A.—which is an inter-national organisation of some kind. Surely he is wrong in that. Surely I.A.T.A., laying down the fares which are to be charged, applies only to the international routes, where a number of international companies all run airlines along the same route—for instance, between here and America or South America—and it does not apply to the internal services.
§ VISCOUNT SWINTON
Then, with great respect, the introduction of I.A.T.A. was rather a red herring, because the great bulk of nearly all these associate services are not services along competing international foreign routes; they are internal services in this country or to our internal dependencies—the Channel Islands and the Isle of Man. Upon reflection, the noble Lord will see that the I.A.T.A. argument is not a very sound one.
I was not altogether free from a certain amount of hustling myself, and for a time I had the 825 greatest difficulty in securing the attention of the noble Viscount during my prolonged remarks. If he will study my observations in the Official Report, the noble Viscount will see that I used the I.A.T.A. argument for a different purpose —to show that, in spite of the monopoly, we have not high rates and fares because we had this international competition, and in any case the fares were fixed by I.A.T.A. I was not dealing with the point mads by the noble Viscount. If I could have gained his attention a few minutes earlier, all would have been well.
§ VISCOUNT SWINTON
I apologise to the noble Lord. At that very moment, I was being asked by my noble Leader to try to explain what the noble Lord had just said! It is very difficult to play this sort of three-handed Canasta. One other point which has loomed large, but not too large, in the debate, is: When is a scheduled service not a scheduled ser-vice? It seems to me to be perfectly clear what the law is—I will not say what the interpretation of the law is. The Act of Parliament lays down and defines what is a scheduled service, and anything which is not a scheduled service within the definition laid down in the Act which Parliament has passed is obviously a charter service, for which independent operators are entitled to tender. If there is a dispute, and it is alleged that there is some service—I forget what it was called—
§ VISCOUNT SWINTON
—a repetitive service which the noble Lord and his Corporations contend ought to be their monopoly, but which the charter people say ought not to be their monopoly, it can be simply tested in a court of law. But what I understand—I do not at all want to misrepresent the noble Lord—is that he does not now propose to take that course; presumably he is not going to challenge because he does not think he would be successful if he went to a court of law.
§ VISCOUNT SWINTON
I know the noble Lord has not said so, but he is a pretty good fighter, and the noble Lord, Lord Douglas, fights like a tiger for his 826 Corporation. If he could find even a sporting chance of winning in a court of law, I am sure he would not hesitate to go there to justify himself.
May I just make one further point? Suppose that a particular type of service emerged—if you like, we will call it a borderline case, because this Act, in which I am bound to say I had no part, is not in all respects quite so clear as the noble Viscount imagines, in spite of the part he played in helping it through. But if we found a borderline case, and if a charter company were allowed to continue in that situation, the service that the charter company would run in that particular case would not be the kind of service that my colleagues had in mind when they made these remarks in Parliament. Their remarks in Parliament: were pledges about a charter service as they understood it. Now a new type of service has raised its head, a type of service which they had not in their minds and which no noble Lord in the House had in mind when those pledges were given.
§ VISCOUNT SWINTON
Either a service is within the Act, or it is not. If it is alleged that it can be Drought within the Act, the law courts would decide. If it is not, and the noble Lord wishes to treat the service as if it were within the Act, then the proper course is for him to come to Parliament and say "I want the Act amended"; then we could discuss it on its merits. Now what he is going to do is not to contest it in the courts, because presumably he does not think he would be successful—and, of course, he is quite right not to bring an action which might not succeed. But he says: "I shall encourage my Corporations to go in and compete and get these charters if they can." I want to ask the noble Lord a specific question. Until he has established in a court of law that these are scheduled services, forbidden to the charter companies, then the charier companies are entitled to undertake them; and the charter companies ought to do so on at. least equal terms with his Corporations. Is that going to be so in the spirit, as well as in the letter? In tendering, are overheads going to be properly made out?
There was the case of a Stratocruiser taking airmen or airwomen to Cairo. As I understand it, B.O.AC, were enabled to 827 give a special quotation for those Stratocruiser flights because they were able, having got their Stratocruiser to Cairo, to offer to bring back from Cairo any member of the public who wanted to make the return journey. Of course, you do not have to return empty but can get a load, and unless you manage your business very badly you can give a lower quotation than the man who has to return empty, unless he is lucky enough to get a charter back. The charter companies cannot do that because they cannot offer themselves to the general public. They would be running a scheduled ser-vice. It seems to me that it would be grossly unfair for the subsidised national Corporations on a charter tender to use their privileges and their privileged position under the Act. That would not be competition on a fair basis. If the noble Lord cannot answer now we will return to this matter at a later stage, by Question 828 and Answer. I am sure he wants to do the fair thing, but in the opinion of the House, as I sensed it during the earlier part of the debate and again now, I do not think he would be regarded by the House as treating the charter companies fairly unless he were able to give and to implement such an undertaking.
My Lords, I add only that I am glad to find that it is common ground that these companies are very valuable in defence. But the landscape does not get brighter, and they can be of value in defence only if they have enough business to carry on. I hope that that will be fully remembered and weighed in the balance when their fate is at stake. My Lords, I am much obliged to your Lordships for hearing me again. I beg leave to withdraw my Motion.
§ Motion for Papers, by leave, withdrawn.
§ House adjourned at twenty-four minutes before six o'clock.