CIVIL AVIATION (Hansard, 17 June 1952)

HL Deb 17 June 1952 vol 177 cc196-222 196

§ 2.43 p.m.

§ LORD PAKENHAM rose to call attention to Civil Aviation with special reference to the proposals recently published by Her Majesty's Government with reference thereto; and to move for Papers The noble Lord said: My Lords, we have tabled a Motion that deals primarily with the recent Government statement concerning the proposed functions of the Corporations and the charter companies respectively, and we have done so in such a way as to allow complete freedom of discussion about all other aspects of civil aviation, most of them perhaps, happily, less controversial. I am afraid that I shall not be very brief. Even so, I shall take leave to confine myself almost entirely to the implications of the recent Government statement. Such highly interesting questions as the improvement of the rates received for air mail and the removal of the petrol tax, on which latter point I am sure the charter companies and the Corporations see eye to eye. I cannot even begin to deal with. Nor can I touch the still more vital issue of how we are to take advantage of our lead in civil aircraft to capture the export markets of the world. On these and other matters there are a number of noble Lords in this House who speak with much experience and no doubt a great deal better than I could.

§ I cannot, however, refrain from saying one deeply-felt word of congratulation. which I believe will be echoed throughout the House, to our national Corporations, to the managements, to the trade unions and to every member of the staffs on the immense strides made during the last few years. In 1947–48 the deficits amounted to about £11,000,000. Last year, 1951–52. they were just over £1,000,000, with B.O.A.C. showing a profit and the whole residual loss arising on the internal routes of B.E.A., in which, of course, a large element of social service is provided. In that period the output, judged in capacity ton miles, has more than doubled, and the output per employee (for there has been a big reduction in staff) has almost trebled. I should like to congratulate the charter companies and express my pleasure at the considerable improvement in their fortunes, which does them credit in every way. Finally, I hope that the debate will not be concluded without 197 the Secretary of State, who I am glad is going to reply, removing current misconceptions about the devoted work of the Ministry of Civil Aviation officials. I know, from past experience and, if you like, from past failures of my own, how difficult it is to remove these misconceptions; but where I have failed, perhaps the Secretary of State may succeed. I know that the noble Lord, Lord Clydesmuir (wherever he may be) is going to deal with this question much more authoritatively, but I cannot help saying one word at this stage to emphasise my continued interest in Prestwick, that glorious name written in letters of blood and tears on the heart of every Minister concerned with British aviation.

§ I propose to discuss the recent statement of the Government on civil air transport policy from one point of view only, if you like from a professional point of view—that of its effect on British civil aviation. I would only remind the House of what I said when we last debated this subject at length, on December 6, 1950. On that occasion I expressed my good will towards the charter companies. Speaking as Minister, I stated on behalf of the Government, our desire to assist them wherever we could within the framework of the existing policy, but I referred at the same time to our prime responsibility for the Corporations, in whom so much of our national resources is invested. That general attitude was reaffirmed, I submit, by the noble Lord, Lord Ogmore and myself, when for the first time we spoke in Opposition, in a general debate on civil aviation last December. I myself said on that occasion that I hoped that in an expanding era of civil aviation it would be possible to provide wider opportunities for the charter companies without damaging the Corporations, but that if the Corporations were damaged we on our side of the House would resist the proposals by every constitutional means in our power. It is in the light of criteria of that kind that we approach these recent proposals.

§ I have called this statement of the Government a statement of policy. In doing so I am paying it a compliment which perhaps it hardly deserves. Rather should I call it an attempt to ride two horses going in different directions—the horse which the present Government rode in Opposition, and the horse which they 198 are now beginning to realise is the essential one to ride: if our remarkable progress in civil aviation is to continue, and if, indeed, we are not to come crashing down at the very next fence in the international race. Let me say at once that we on this side of the House view this new statement of alleged policy with grave suspicion. I think it will hardly be disputed that no one can say, without further elucidation, what it amounts to. But it seems to us that it must he either eyewash or a splash of vitriol in the eyes; and on either hypothesis I am afraid we take a very poor view of it. However wisely it may be interpreted, it can do no good, and it may well do a great deal of harm—in the first place to the Corporations, and ultimately to the charter companies themselves. In the end, perhaps more harm may come to the charter companies than to the Corporations. I do not believe that the British people, who are becoming very proud of B.O.A.C. and B.E.A., will stand for it for long if they see them being ruined or (if I may use a colloquialism) "mucked about with" unnecessarily. If only in their own interest as well as in the national interest, which I know is as dear to them as to the rest of us, I beg the charter companies not to seek to make too much of what may seem a golden moment, and I beg them not to try to over-play their hand.

§ When we last discussed this matter the noble Marquess, Lord Salisbury, said, think with some justice, that much of my argument was no doubt intelligible to the noble Viscount, Lord Swinton. and to other experts, but that most members of the House had no idea what I was talking about. I am afraid there may have been an element of truth in that remark. At the risk, therefore, of delaying the House, I would venture to preface a close consideration of the Government's proposals with just a few words of historical background, but I shall not be anything like so long as on the last occasion. The Act of 1946 reserved all scheduled services to the Corporations, if they wished to run them. The charter companies were completely excluded from these scheduled services, unless the Corporations wished to use them as associates. That puts the matter quite broadly, but I think accurately. Again using broad terms which are fairly well understandable, 199 though I know that there are a great many legal complications behind them, I would explain that by a "scheduled service" I mean a service which is run at regular intervals, for instance once a week, and one which is also open to the public. I leave over the various legal arguments which might arise under that second consideration. By "charter services" I mean services such as you obtain when you hire a private car. Under the Act of 1946, they were thrown open to competition between the Corporations and the charter companies. Statements made by Ministers when the Act was being passed indicated that the Government intended not merely to permit but to encourage charter companies in that field, and indicated also that charter work of that kind was to be only incidental to the main work of the Corporations.

§ I am anxious to avoid historical controversy, if possible, and I will therefore say only that a steady development of British policy had nationalised B.O.A.C. in 1939, and by 1945 the Government of the day, the Conservative "Caretaker" Government, had concluded that it was necessary to give exclusive rights to three Corporations on the routes which they were immediately prepared to operate. There was a difference of degree between the two policies (the policy which I think the noble Viscount, Lord Swinton, would have operated as Minister and the policy which we introduced), but I would submit that that difference concerned the marginal fringe, and not the bulk of the routes. On the bulk of the routes the principle of monopoly was accepted by the Conservative "Caretaker" Government which preceded us. When I talk of "monopoly" I do not, of course, mean protection from international competition, I mean protection from domestic competition, for on the main routes international competition was expected to prove, and has proved, extremely severe, and indeed is increasing all the time.

§ I think I should here pay my tribute if I have not already paid it sufficiently before, to the noble Lord, Lord Nathan, for the work that he performed during the earlier part of the period, and to the work which the noble Lord, Lord Winster, did before him. But by the time I became Minister, in the summer of 1948, aviation, both in this country and elsewhere, had 200 proved much less profitable than expected. That was nothing to do with nationalisation or any thing else here; it was something that occurred everywhere. Charter work generally had been disappointing. B.E.A. had found themselves unable to operate a number of scheduled routes in which the charter companies expressed an interest. The Government did, in fact, preserve the framework of the Act, but they were not at all inclined to pursue a dog-in-the-manger attitude, such as "We cannot operate these routes, and you shall not." That was not at all in the mind of the Government. With the approval of my colleagues, therefore, I developed an idea which my predecessor, Lord Nathan, had initiated. We built up a system of associate agreements, of course within the framework of the Act, under which charter companies could operate scheduled services. They could operate such services on particular routes in association with the Corporations, provided that the Air Transport Advisory Council made a recommendation in their favour, and provided also that the Minister accepted it. That was the system which we established and operated.

§ The Air Transport Advisory Council had been presided over hitherto by the noble Lord, Lord Terrington. if I may say so, with much sagacity. I cannot see the noble Lord at the moment his famous sagacity may have led him to absent himself—on the contrary, I now notice that it has led him to endure my remarks. The noble Lord was assisted very effectively by his Council, including, in particular, the noble Viscount, Lord Runciman. I take this opportunity of tendering my sincere thanks to the noble Lords, Lord Terrington and Lord Runciman, and their distinguished colleagues. In doing so, I know that I shall be joined by the noble Lord, Lord Ogmore, in particular, who followed me, and indeed by my predecessors as Ministers of Civil Aviation. To secure recommendation from the Air Transport Advisory Council a charter company has hitherto had to satisfy certain all-important conditions. The first is that the associate must observe the safety standards with which the Corporations are required by the Minister to comply. I need not say any more about that, for I am sure that the force of it is obvious to every noble Lord 201 here. Secondly, terms and conditions of employment are closely safeguarded. I could talk for some time on that subject. It is not a very easy one in this connection, but, at any rate, there is safeguarding procedure in the directive.

§ Thirdly—and here I must ask your Lordships to notice the words rather carefully because their general purport is essential to the whole argument from this side of the House—to quote the words of the directive: The Associate arrangements should be in respect of services … which do not overlap or compete with existing services and planned programmes of services of the Corporations. There is a proviso which I will mention in a moment, but I venture to stress the words I have read, because they are all-important to the arguments which are to be submitted from here. There was added a proviso to the effect that services may be recommended on routes which the Corporations are not operating but intend to operate in the future for the period up to the planned date of the introduction of the services of the Corporation concerned. In other words, if a Corporation say: "We are not going to operate a service on that route for about five years," it is open to the Council to allow a charter company to operate the route for the five years in the meanwhile. There were other conditions, among which I would mention the limitation of the associate agreement to live years. But there was never anything at all rigid in my own mind about that limit, and after my time my noble friend Lord Ogmore granted at least one licence—and if I may say so, he was absolutely right in doing so—for ten years; that was to the Silver City Company for their admirable ferry service which some of your Lordships may have used.

§ Having disposed of history let me come to the present. How far do the proposals of the Government differ from the arrangements which we worked out and operated? Two points in the new statement I will not quarrel with, though they are capable of abuse. The first is the extension of the agreements to seven-year periods, or to ten-year periods in special cases, and the second is the restrictions on the charter activities of the Corporations, while maintaining their right to engage in charter work where they have special facilities. I do not quarrel with those points in principle. In regard to the first—the extension of agreements to 202 seven years, or in some cases to ten years—I must press the Secretary of State for an answer to the question which arose in our time and which becomes much more acute if the Government sign away a route for a period of anything up to ten years (I have given the noble Lord notice of this point), particularly if the route in question is not a luxury or an amenity service but one of real significance to the public. How is the Secretary of State going to satisfy himself that the charter company which obtains a route will be able and willing to operate it, not just at the beginning but over a long period like seven years? We ourselves had some disappointing results—which I need not specify unless am pressed to do so—in this connection. I must ask the Secretary of State to tell us whether the Government intend to impose an obligation of a legal character and, if so, how he proposes to see that that obligation is enforced?

§ So far, have not touched on a change of principle. When the Secretary of State made his statement on May 27 he was closely questioned by the noble Lord, Lord Ogmore, as to whether the Minister would retain the last word, or whether the new licensing authority would cease to be advisory and become executive. Neither in this House. nor in another place did the answer appear to be known at that lime. Certainly, if it was known it was not forthcoming; no answer was given. But since that time the Secretary of State has been courteous enough to write assuring Lord Ogmore that no change is contemplated at the present time in the relationship between the Minister and the A.T.A.C. I am sorry if I seem unduly suspicious, but I hope that the Secretary of State will be able to tell us to-day that that is not merely a transitional arrangement, pending legislation—the Secretary of State shakes his head, so I need go no further, because a shake of the head from him is equivalent to a long speech from some people. I need not press that point any further, for I gather that it is the firm intention of the Government. All I say to the Secretary of State is that there is nothing to which we should take stronger exception than the removal of the last word from the Minister.

§ In the same letter—to which the Secretary of State was good enough to say I could refer—he mentioned the revised 203 terms of reference given by the Minister to the A.T.A.C. to give effect to the new policy. He will not be surprised if he is called on insistently this afternoon to give us some idea of the nature of this new directive. That is clearly the central point of this discussion. Above all—and this is cardinal—how far will the provision be maintained, whatever the precise wording of the associate agreements, that the associate arrangements should not overlap or compete with existing services and planned programmes of the Corporations.

§ Let us have a look at these proposals for a few minutes, from the point of view of the Corporations, in order to appreciate how everything, or almost everything, depends upon the nature of the directive. I say "almost everything" because, whatever the directive, the proposed licensing system seems bound to be a considerable nuisance to the Corporations. So far as I can make out—the Secretary of State will correct me if I am wrong—the Corporations will have to plead their own case before the licensing authority whenever they want to start a new route, either passenger or freight. Perhaps the Secretary of State will deal with that point and tell us if that is so. I mention only one disadvantage of the arrangement: already, negotiations between B.O.A.C. and foreign operators, when brought up to Government level, for bilateral agreements are a complicated business. If a "licence" is to be negotiated publicly, before such bilateral discussions start, not only will a great deal of time be occupied but disclosure of the intention will certainly strengthen the hand of the foreigner. rather than the hand of our own people.

§ That seems bound to happen anyway, if B.O.A.C. and B.E.A. have to come before the licensing authority every time they want to start a new route, but for the rest, all is uncertainty of a most damaging and crippling kind—at any rate so long as the system endures. The Government say they are determined to see that the comparative strength of the Corporations to operate both first and second or tourist class services on their present established networks will not be impaired. They also add a statement—though this is slightly more cryptic—to the effect that they do not mean to increase the cost of civil aviation to the 204 taxpayer. That can be interpreted in various ways, because the cost of civil aviation is falling. I do not know whether they mean that they intend only to keep the cost at the level it is, or whether they mean that they will not interfere in any way which would increase the cost. At any rate, that is what they say: that they do not mean to increase the cost of civil aviation to the taxpayer. If civil aviation is still subsidised, this may be taken to mean that nothing will be done to impair the commercial success, actual or potential, of the Corporations. If so, that will be a most satisfactory statement. But is that the real meaning? I ask the noble Lord for an authoritative interpretation.

§ Three fields of new or wider opportunity are pointed out to the charter companies in the recent statement by the Minister in another place and by the Secretary of State here—first, new passenger routes; secondly, freight services (I am not clear whether the statement refers to all or only to a number) and, thirdly, third-class passenger services to the Colonies, so long as they are not directly competitive with the Corporations. The following considerations are only a few of those that arise. I cannot expect the Secretary of State to deal with every one of these points, though perhaps the noble Lord, Lord De L'Isle and Dudley, will round up the matter at the end. These are the questions that come into the mind of anybody looking at this from the angle of the Corporations. What is a new route? Does it involve the inability of the Corporation concerned to vary the sector call-points on an end-to-end route—for example on the London to Sydney route? Does it mean that the Corporation is bound to its present points of call in Europe on the way to Australia, or can they be varied according to the traffic from time to time? These are extremely practical points from the angle of the Corporations. If rigidity is imposed on the Corporations in this matter over a period of from seven to ten years, in order to give private operators the opportunity of running services over some of these London—European routes, with less modern equipment, then competition, vis-à-vis foreign operators is not likely to be effective, and in the end the result is bound to be that the British taxpayer will lose money. Is it forgotten that the forward equipment-ordering programme of the 205 Corporations, under which they are committed to an expenditure of over £20,000,000, was based on an expected policy of expansion? I feel that that fact may be lost sight of and perhaps the Secretary of State will comment on it.

§ As regards freight, is it intended that the existing freight services of the Corporations should be cut into and, in any case, that the Corporations should be restricted in their search of new freight business? As regards third-class services, no definition exists of a service of this kind, and I feel bound to conclude that they will drain off some of the traffic from the Corporations. On the Nairobi service, for instance, it is hard to see how this result can be avoided. In short, whatever the directive, the Corporations, and with them the taxpayers, are likely to suffer. But the damage may well be fundamental and lasting unless the Air Transport Advisory Council are given an overriding directive that it is to be their specific task in the future, as it has been hitherto, to see that the prospects of the Corporations are in no way prejudiced.

§ Before I conclude, I beg leave to touch briefly on three more points. The first is that the Government statement leaves the whole future of the internal services completely obscure. The House may be aware that after really heroic efforts our international services, both of B.O.A.C. and of B.E.A., are just about paying their way. The whole loss at the present time, speaking broadly, arises from the internal services, which include the services to the Channel Islands, Northern Ireland and Scotland. In these services, particularly in the case of the Scottish Islands, there is a strong social service element. No one in this House is sanguine enough to suppose that the internal services as a whole, and particularly those in Scotland, as we know them, can be run at a profit in the immediate future. On these Benches we consider that the internal services are public services which should be run, taking them as a whole and not tying myself to each one in detail, whether profitable or not, although great efforts have been made, and still greater efforts must be made, to reduce the loss. Taking these Scottish services as an example, there is in fact no private company whose qualifications and experience approach those of B.E.A. for a purpose of this kind, though I ant well aware that there is at least one charter company in Scotland of 206 the highest repute. Bat to a fair-minded person there is no operator to compare with the B.E.A. Leaving out any comparison of that sort, we regard it as unthinkable that a subsidy should be paid to a profit-making company under conditions of this kind. I must press the Secretary of State for an assurance in terms that the Government have no intention whatever of paying a subsidy to any charter company for running a scheduled service. I have given the noble Lord notice of this question, and we shall watch zealously for his answer.

§ Secondly, I would ask: can the Secretary of State say anything about the membership of the Air Transport Advisory Council and their staff? There is a certain air of mystery surrounding these distinguished gentlemen, some of them colleagues of ours. All the old members, including the Chairman, have been asked to resign. It is not known whether the resignations have been accepted or what has happened; all we know is that they have been asked to resign, for no reason known to me. Will the Secretary of State say why these gentlemen have been asked to resign? How will the new work differ in quantity and quality from that which they were doing so well? What type of work will it be? Is it beyond the capacity of these gentlemen, because we have a high opinion of the noble Lords concerned and their colleagues? Is it intended to increase the staff of the Air Transport Advisory Council? If so, I am hound to warn the Secretary of State of the obvious risk of duplication with the officials of the Ministry. The case might well become overwhelming for taking away the whole licensing machinery from the Council and handing it over to the Ministry, if only in the interests of economy. I assure the noble Lord that his reply will be closely studied to see whether, in fact, a new situation has arisen.

§ I have left to the last—but I certainly have no intention of missing it—the effect of the present policy or the morale of the Corporations. The achievements of the Corporations in the last three years have in my opinion, and in the opinion of better judges than myself, been all the more remarkable because of the reductions in staff that have been effected meanwhile. The strain on morale has been considerable, to put it mildly. I 207 think the morale in the Corporations is, or was, until recently, higher than it has ever been, thanks to the splendid team work of all concerned but, above all, to the policy of joint consultation so wisely pursued by managements and trade unions and, may I add, to the moral courage shown by both. I implore the Government, through the Secretary of State, to do nothing to disturb the enthusiasm and pride which were growing with success. I implore him at all costs not to introduce what I can only call a fugitive outlook in place of the feelings of stability, security and brotherhood.

§ As I conclude, I would address a final plea to noble Lords who are with us this afternoon, or who read these words, whose general bias is in favour of private enterprise as against State activity but who are fair-minded enough to realise that there may be special considerations in the field of civil aviation. Even after all I have said, and after all the debates we have had in recent years, noble Lords in that position may still not be quite clear as to what these special considerations are. Intelligent and well-meaning people sometimes come up and say something of this kind: "If the Corporations are as efficient as you say, surely with all the national resources behind them they can stand a measure of competition from a few little men?"—if I may use that term in no spirit of disrespect about the charter companies. To ask that question is to misconceive the whole character of the responsibility which successive Governments, including the present one, have cast on the national Corporations, a responsibility vastly different and vastly greater from any that falls on the charter companies—not that I wish to say a word to underestimate the national contribution of the latter.

§ The National Corporations have been called upon, are being called upon and will, I hope and believe, still be called upon, to operate a world-wide network. They will be compelled to perform that task under intensive and ever-growing international competition. They are called upon to operate that network as profitably as possible but, by and large, to operate it whether it loses money or not. They are called upon to go on operating it, day in and day out. year in and year out, in good times and in bad. There can 208 be no comparison between their position and that of a sharter company, which naturally wants to "nip in" on a particular route that seems profitable for the moment to skim the cream or, in a phrase once employed by that prince of phrase-makers, the noble Lord, Lord Beaver-brook, to "take the eyes out of the carcase." If the slogan of equality of opportunity were applied in practice without equality of responsibility, which is what would happen, I cannot say who would win. But one person would assuredly lose—namely, the British taxpayer; and, as I said earlier, he would not stand it for long.

§ I have put to the Secretary of State a number of questions, and of the most important I have given him notice. In particular, I would ask him once more—and I pool together these rather prolonged observations in putting these questions a second time: First, how will he ensure that charter companies actually operate for the full period the services allocated to them, and that they do not run out if they find them unprofitable? Secondly, will the new directive lay down in black and white that nothing must be done to impair the commercial prospects of the Corporations? Thirdly, will the Government guarantee that no subsidy will be paid at any time to the charter companies on scheduled routes? Fourthly, may we have an assurance that the final authority of the Minister will be preserved in relation to the recommendations of the A.T.A.C., or whomsoever considers the application? That assurance I have been given by the Secretary of State during the course of my speech. Fifthly, if it is intended, most unwisely, as we think, to extend the functions of the A.T.A.C., with what staff will they be equipped, and how will duplication with the staff of the Ministry be avoided'?

§ It would be humbug for me to suggest that it is within the power of the noble Lord who is to reply to give answers to all these questions which will avoid all criticism. Whether the new policy means much or little this seems to us a particularly ill-judged moment to establish a so-called licensing authority, and to cast a cloud over the prospects of our national Corporations, just when they are beginning, after struggling most gallantly in the face of many difficulties, to get their heads above water. But I assure the Secretary 209 of State—and I feel sure he will believe this—that it is no part of our purpose to manufacture a bogus difference, or to magnify it. It still lies within the power of the Secretary of State to-day to allay some of our more serious anxieties. He can still avert the development of a prolonged antagonism which may otherwise envelop British civil aviation, to the ultimate loss and sorrow of all concerned, and to the clear detriment of the British people whom, according to our different lights, we are all equally anxious to serve.

§ 3.26 p.m.

§ THE SECRETARY OF STATE FOR THE CO-ORDINATION OF TRANSPORT, FUEL AND POWER (LORD LEATHERS)
My Lords, it is less than a month ago since I stated in this House the policy which Her Majesty's Government proposed to adopt towards civil aviation, and I need not cover that ground again. In general, I think I can say that our proposals have been well received.

§ LORD OGMORE
I do not want to interrupt unduly. but this is an important point. By whom have the proposals been well received?

§ LORD LEATHERS
I have had evidence of that in a number of directions which satisfied me that where the contrary was being said it had little to support it. What I can perhaps do this afternoon is deal with one or two questions or misunderstandings to which our proposals may have given rise. The noble Lord, Lord Pakenham, was kind enough to let me know some of the points which he was proposing to raise, and I will deal with them as fully as I can and if I cannot cover them all, my noble friend the Secretary of State for Air will deal with them when he speaks later this afternoon. I suppose the biggest misunderstanding—for misunderstanding it certainly is—is that of certain noble Lords opposite and some of their colleagues elsewhere, who think—or profess to think—that Her Majesty's Government's policy represents a severe, if not a mortal blow at the airways Corporations. There is nothing in the Government's recent statement which could be so interpreted, and, indeed, it is a complete misrepresentation of our intentions or desire. I yield to no one in my admiration of the work of the Corporations, 210 or my conviction that they have a vital part to play in civil aviation in this country. I must confess that I rather resent any suggestion that the Labour Party have a proprietary interest in the Corporations' welfare.
In an attempt to understand the viewpoint of noble Lords opposite, I recently looked up a speech by the noble Lord, Lord Pakenham, in a debate in this House in December, 1950. The noble Lord stressed the point that in prescribing the respective roles of the Corporations and the independent companies the fundamental question was not the relative merits of State versus privately controlled air lines, but the form of organisation best calculated to secure expansion of our national air transport effort. He seemed to me to attach importance to a strong and prosperous private sector of the industry. In giving an account of the directions in which the Government had sought to assist the independent companies, the noble Lord was at pains to emphasise that he did not wholly exclude independent companies from participation in the operation of scheduled services, but that opportunities must be confined to routes outside the existing or planned networks of the Corporations.
Our policy, like that of the noble Lord, is to adopt a form of organisation best calculated to secure the expansion of our national air transport effort. But it is our view that the independent companies have a more important part to play, certainly than they have hitherto been accorded, in attaining that objective, without undermining the considerable international networks which the Corporations have established or impairing their international competitive strength. The policy of Her Majesty's Government will consolidate the position the Corporations have established, and will protect them in the expansion of the first-class and new tourist-class markets on the routes they have developed. We believe that the concentration necessary for these important tasks of expansion leaves room for other initiative in new development. Experience since the war has shown that exclusive monopoly does not allow enough flexibility.
Where, for example, independent companies have been admitted to certain Corporation routes for limited classes of 211 cheap travel, not only have the Corporations not suffered, but air transport development and the public have benefited. Then again, experience in the United States suggests that the development of all-freight services can best be undertaken by organisations which are not hampered by the need to develop a regular network of passenger services. In this country, the development of car-ferry services by a private company has shown how special classes of traffic can be built up by a skilled operator.
This drawing on experience is in no sense a criticism of the Corporations. It merely reinforces the wisdom of the Government in providing opportunities for the independent companies to engage in developing without subsidy new routes and specialised forms of operation such as all-freight services, third-class services and non-competitive inclusive tours. But if we are to reap the benefit of the contribution which the independent companies can make in these directions to the development of our air transport, they must have security of tenure of their rights, without being fettered by the longterm plans of the Corporations, which have discouraged their initiative in the past.
Turning to internal services, I stated on May 27 that these are still receiving our consideration. Our objective is to reduce and, in the long run, to eliminate the relatively high cost of these services to the taxpayer. The best means of achieving this, with the maximum advantage to the public, both as the taxpayer and consumer, requires more examination. For the time being, therefore, the British European Airways will continue to provide the services on their existing networks, but independent companies will be able to maintain long-term associate agreements on routes outside this network for which such agreements have not already been granted. If it could be shown, for example, that an independent company was in a position to take over under satisfactory terms and conditions a group of routes at present operated by the B.E.A. at a loss, and run them without subsidy, that is something which we should consider very carefully. Special considerations, however, apply to the Scottish social services. I do not feel able to go beyond this at the present time 212 since, as I say, the whole subject is wider consideration in the light of various factors to which I referred in my earlier statement.
An important question, and one which has been asked in a number of quarters, relates to the machinery for giving effect to our proposals. The independent companies will continue to be appointed as "Associates" of one of the Corporations for scheduled service operation. We accordingly envisage the continuance of the Associate Agreement Scheme introduced by Lord Pakenham in January, 1949. There will, of course, be modifications, about which I will say more in a moment, but in principle and constitution the new scheme will be similar to the old. The Air Transport Advisory Council will continue its task of considering applications and making recommendations to the Minister. We are not proposing to confer any statutory licensing duties on the Council or alter the statutory relationship between it and the Minister. The Council will continue to act in an advisory capacity and to make recommendations to the Minister under Section 12 of the Civil Aviation Act, 1949. Its functions and the Minister's responsibilities will remain as set out in that section. The Council will, however, be asked to make its recommendations in accordance with revised terms of reference which take account of the new policy. I cannot say in detail what the changes will be, but the significant points of difference between the new and the old scheme lie, first, in the wider scope which it is proposed to give to the independent operators. For example, the Corporations will no longer have the same protection on routes which they have not yet operated.

LORD PAKENHAM
Would the Secretary of State repeat those words, because they are so important?

§ VISCOUNT STANSGATE
And read them a little more slowly.

§ LORD LEATHERS
Certainly. The first is in the wider scope which it is proposed to give to the independent operators. For example, the Corporations will no longer have the same protection on routes which they have not yet operated.

§ LORD OGMORE
What protection have they now on routes that they have not yet operated?

213

§ LORD LEATHERS
They have a protection. It is that when the Council consider the application of other operators, if the Corporations have named the routes as some which they wish to develop, then they are given protection. Now they will have that protection only where they have actually operated the services. Secondly, the normal maximum period of associate agreements will be extended from five to seven years (or ten years in special cases), and, thirdly, the Corporations will be put on an equal footing with the independent companies in seeking permission to develop new routes. One thing I can assure your Lordships is that nothing will be done to impair the commercial prospects of the Corporations on the overseas routes they have developed. The new terms of reference will provide that on these routes the financial position of the Corporations should not be materially worsened. These changes will doubtless involve the Advisory Council in making certain changes in their procedure, but the resources of the Ministry will be used to obviate duplications of staffs. For example, the Ministry have technical and economic sections who can supply the Council with much of the necessary information required to examine applications.

LORD PAKENHAM
May I interrupt the Secretary of State on this very important point to ask whether or not it is contemplated that the Air Transport Advisory Council in the future will have a considerable staff? At present it has nothing but the Secretary.

§ LORD LEATHERS
I think it means a slightly increased staff, but there is much advice that the Council can obtain from the expert staff that the Ministry has within its own jurisdiction. I hope it will be clear from what I have said that the Minister will, as before, remain responsible for the decisions he takes as a result of the Council's recommendations. This is a procedure which has been found to work well in other fields and does not, I think, raise any novel questions of principle. There is no substance in the comment which I have seen made that our proposals will virtually take away from the Minister and from Parliament the control of the development of civil aviation in this country. That does not arise at all. At the same time, there is no doubt that the experience and advice 214 of the Air Transport Advisory Council will be of immense assistance to the Minister.
Another question that has been asked is whether independent operators who are given approval to operate scheduled services on a particular route will be required to give any form of guarantee that they will continue to operate the services. The answer is that there can, of course, be no guarantee in an absolute or binding sense. This would be the case even under a statutory licensing system, and seems to me to be inescapable. However, before the Minister approves an associate agreement between an independent operator and one of the Corporations, he will satisfy himself that in the case of routes of public importance the applicant has the necessary financial resources to fulfil his obligations to the public on an enduring basis. The matter must obviously be: judged in relation to the route and the circumstances. For example, a more rigorous test of financial stability would be applied where a route served an important public need than where the existence of a service was of less importance to the public. It is contemplated that the Air Transport Advisory Council shall examine whether an applicant will be able to provide a satisfactory service from the point of view of continuity, safety, regularity of operation, frequency, punctuality, reasonableness of charges and general efficiency. Naturally, the Council would also take into account the manner in which the applicant had performed any services for which he had previously been authorised. These arrangements should go a long way to ensuring continuity of operation where this is essential in the public interest. I need hardly say that an approved applicant who defaults is likely to prejudice his chances in any further application which he may make.
Possibly the most serious question which has been asked in connection with our recent statement of policy is whether sufficient numbers of suitable aircraft are available to enable independent operators to make the fullest use of the wider opportunities now offered. I must frankly admit that this does create some difficulty, since there is, unfortunately, a shortage of modern aircraft. The Ministry of Civil Aviation have available for disposal a small number of Tudor land-planes suitable for freight work, and of 215 Solent flying-boats. In addition the Air Ministry will have from time to time Dakota aircraft available for sale to suitable British operators. In accordance with the new policy for limiting the charter operations of the Corporations, the B.O.A.C. are already offering for sale two of their York freight aircraft. As far as more modern types are concerned, I am told that short or medium range aircraft can be supplied reasonably quickly. As I have said, we cannot deny that the supply of aircraft suitable for independent operators is not as good as we would wish; but the Government are examining, in conjunction with the aircraft industry, what measures can be taken to overcome these difficulties.
May I now turn to a different subject? The noble Lord invited me to say something on the question of the rates paid to the Corporations for the carriage of air mail. The reason why the air mail rates are fixed at their present level is, of course, that the noble Lord and his colleagues in the late Government decided last year that this was what the rates should be. As I understand this matter—though it is one on which I have no doubt the noble Lord knows much more than I do—the late Government gave careful consideration last year to a number of representations which have been made by the Corporations and in Parliament and elsewhere that the rates paid by the General Post Office to the Corporations for the carriage of air mail were unreasonably low. The noble Lord and his colleagues doubtless found this a most difficult question.
On the one hand, it can be argued that the rates should be based on what is loosely described as the Universal Postal Union international rate, as representing the value of the services rendered to the consumer. At the other end of the scale it can be argued that the rates should be based on the cost of conveyance, including an appropriate margin for profit. My impression, and I think it is confirmed by the results, is that the noble Lord and his colleagues did not feel that either of these principles was a satisfactory basis of settlement between the General Post Office and the Corporations; and they fell back on a more empirical method of approach. I think that this was probably the best way of 216 achieving a fair result, notwithstanding the drawback that whatever rates are fixed by such a method can obviously not be proved by any precise yardstick to be right. The present rates are, therefore, as I have explained, those which were fixed last year on the responsibility of the late Government. In the case of B.O.A.C. they represent an increase of 27 per cent. over the previous rates and are considerably more than the rates (weight for weight) that are paid for freight or by passengers. In the case of B.E.A. the same method of approach involved no concurrent increase in the rate, which had been more recently increased than that of B.O.A.C.
I believe that the late Government's intention, with which we fully agree, was that the rates then fixed should run for two years, subject only to review in the event of any substantial Change in circumstances during that period. I do not think that anything has occurred which makes it necessary to reopen this question at the present time. I make no secret of the fact that this is a difficult question. All one can try to do is to ensure that the rates are fair as between the Post Office and the Corporations and to the public who pay the air mail postage rates. In a country such as our own, parent to a widespread Commonwealth, and a great centre of world trade, it is obviously of enormous importance to thousands of people to be able to correspond quickly and cheaply with other parts of the world. However, as I say, the problem is one of keeping a fair balance between all these factors, and this we shall attempt to do.
As a final word, I would say that the prospects of the civil aviation industry seem to me to be bright. Under our policy, which has been framed only after consultation with many interests concerned, the public and private sectors can both make their best contributions to the development of air transport. We hope that the Corporations, at whose achievements in the international field we all look with pride, will continue to go from strength to strength. We hope that the independent companies, given more opportunity and more security, will at last take their place in British civil aviation, developing the services they already fly and having a fair opportunity to enter new fields. The working out of this policy 217 depends, of course, on the industry seizing its opportunity. We believe that it can and that it will.

§ 3.46 p.m.

§ LORD BALFOUR OF INCHRYE
My Lords, the statement which the noble Lord made on May 27 and the statement which he has made to-day have revived discussion as to the scope and opportunity that private enterprise should have in the field of British civil aviation. The debate to-day is distinguished by the fact that there are taking part in it no fewer than four members of this House who are ex-Ministers of Civil Aviation, all of whom have made their mark in varying degree on civil aviation—varying of course only with the time during which they held the office. I should like at the outset to associate myself with the opening words of the noble Lord, Lord Pakenham, in congratulating the Corporations on their achievements. Though some of us on this side of the House have criticised the broad national policy followed by the last Administration, never have we in any way denied full credit—indeed we have gladly given it, from the lowest to the highest—to those operating the air services for the great things they have accomplished.
I intend to follow the noble Lord, Lord Pakenham and discuss this question of the Government's new statement of policy from one angle only—the same angle as did the noble Lord himself: the effect on the well-being of British civil aviation. That is my yardstick, though the noble Lord discussed the matter from a rather narrower point of view. His yardstick was whether the nationalised Corporations would or would not be damaged by this policy. The noble Lord's condemnation of this policy was very severe. He found cause for grave suspicion and said it could do no good and was much more likely to do harm. He talked of the Corporations being ruined and being "mucked about"—that was his expression. He finally begged the charter companies, in practice, not to take full advantage of every opportunity which came before them as a result of this new policy.

LORD PAKENHAM
My Lords, there is an element of misunderstanding. I was not suggesting that the charter companies should not take advantage of every commercial opportunity offered 218 them under the new policy. I was saying that they would make a great mistake if they thought that now that the Conservative Government were in power they ought to take every possible political advantage.

§ LORD BALFOUR OF INCHRYE
The noble Lord has brought me to the very point I wished to make. He pressed the Secretary of State for the Co-ordination of Transport, Fuel and Power, or the Secretary of State for Air when he replies to the debate, for a reply to some question. Pressing is a two-way traffic, and I think we on this side are entitled to press for a statement by one of the noble Lords on the Front Bench speaking for the Opposition as to their int9ntions if and when they are returned to power as regards this civil aviation policy outlined by the present Administration. What we are entitled to press to know is this. Is there to be a reversal by the Socialist Party of the policy which is being enunciated to-day by Her Majesty's Government? Because, if so, if they made such a statement, from to-day on they would be doing a grave disservice to British civil aviation, in that they would be preventing an expansion of resources and skill which is absolutely necessary if we are to hold our own in a competitive air world. I do most earnestly urge (and in this I believe I have the support of noble Lords on this side of the House) that in all fairness we should have some clear, definite statement as to whether or not the Socialist Party would, in this case not of de-nationalising but of broadening the basis of approach to international aviation, walk backwards, as it were. Would they go back to a policy of restrictionism based on monopoly for the national Corporations alone in respect of the main scheduled routes?
In Britain, of course, the Corporations are here to stay, and we have an assurance from Her Majesty's Government that they will do everything in their power to foster the strength of the Corporations. I think our problem to-day is to consider private enterprise alongside the State Corporations, and how far prig ate enterprise can have a greater opportunity in the future than it has had in the past. The reason why personally, welcome these proposals of Her Majesty's Government is because to me they show that political dogma is not to be allowed to interfere 219 with the greatest possible economic development of British air transport, as has been the case for the last four years. Under the last Government—and a very interesting and accurate history was given by the noble Lord, Lord Pakenham, of the events in past years leading up to the statement of policy by the present Administration—all overseas scheduled services were reserved to the Corporations, and the noble Lord thinks that is right. The noble Lord may be young, but he has old ideas—he really has. He believes in the doctrine of artificial restriction of supply and that it can hold down an ever-increasing demand. That is not so. I think it is wrong to try to restrict to the Corporations all future development on scheduled routes. I take that view for two reasons. First, I think it is wrong because there is a size limit in any air transport organisation, as has been admitted by senior executives of the Government Corporations, beyond which efficiency and economy deteriorate. That is the first reason. The second reason is that potential air traffic is now so big that Britain cannot afford to have what I call a political grounding of aircraft that might be flying the world's routes. The Socialist theory, as applied to civil aviation, really does mean in practice that the public must be deprived of facilities, or should be deprived of facilities, that could be supplied and made available. They must be deprived unless those facilities are made available through the nationalised State instrument.

LORD PAKENHAM
On a point of elucidation—I know how generous the noble Lord is in giving way—would he suggest that there should be competition between the charter companies and the Corporations on existing routes? Because, if he thinks that, it rather seems to indicate from his remarks that he is opposed to his own Government's policy.

§ LORD BALFOUR OF INCHRYE
Not at all. I think the Government have made a most admirable compromise between uncontrolled competition, on the one hand, and absolutely unrestricted monopoly on the other. Let the Corporations continue their monopoly on existing routes but, where new routes are to be developed, let there then be a bidding, as it were, based on efficiency and economy, between private enterprise and 220 the State Corporations. I believe that the Corporations have on their plate all they can manage to develop their existing routes to cope with the potential traffic. The noble Lord has the idea that the State lines should be protected from actual or potential danger of traffic being removed from them on future scheduled routes. I believe that there is traffic for the Corporations, and that there is traffic for private enterprise—plenty of it. All over the world events are overtaking theory, and the efficacy of artificial restriction of supply in the interests of vested interest has been disproved on more than one occasion.
Let us look at two examples—and after all with this new business of civil aviation, we have to look at precedent where we can, because we have not much history behind us. We are all venturing into new realms of enterprise. Let us take Australia for a moment. For years the chief internal line of Australia was a private enterprise line, Australian National Airways. Along came a Labour Government in Australia—I am not criticising their actions; it is not for us to do so—who tried to nationalise that line. They failed to do so because of some legal constitutional difficulty, so what did they do? They set up a rival State line, to which they gave a most lucrative mail contract which the private enterprise concern had been enjoying for some time past. What was the result? Both the private enterprise firm and the State firm flourished. The traffic total of both those lines is to-day four times what it was when the State line was started as a rival to private enterprise. I think it would be a bold statement for anyone to make, that if the private enterprise line had been killed the State line would not have continued to hold to the past high traffic structure for years ahead; and the present growth of traffic would certainly not have taken place.
Let us turn for a moment to my second example, this time rather nearer home, in this country. About a year ago, B.O.A.C. protested, and protested in public, that certain charter lines were to be allowed to carry traffic from East Africa to Britain on a contract which was to carry Service families. The Corporation pleaded that this should not be allowed, and they said that, if it did happen, their traffic would be so hit that 221 they would have to reduce their frequency of regular services to, probably, once a week. In the event, the Corporation in question took competitive measures. They introduced family concessions, lowered their prices; and in the result the Corporation frequency is up, and the charter companies' expectations have been exceeded. That same outworn restrictionist outlook we have seen in this country in freight, as well as in passengers. As the Secretary of State said, in the United States independent operators, in the face of fierce opposition, have established lines and confounded the forecasts of the regular operators who said that they were going to ruin industry—and, incidentally, ruin themselves in their attempt to establish these lines. Now, the regular lines are carrying more and these private companies are carrying more. If the United Kingdom policy can be framed on the development of charter work in this new era of carriage of freight, and we can get rid of the present restrictions which Section 24 of the Air Corporations Act imposes upon freight-carrying companies, which prevent them from collecting a whole series of small loads from one place, because it then becomes a scheduled service, then there is freight not only for the Corporations but for all. This freight development is one which will help us to build up a world-wide mercantile marine of the air.
The policy of Her Majesty's Government first on new scheduled routes, then on freight and, thirdly, on trooping seems certain to me to be going to give enormous opportunities for private enterprise without damaging the State-owned and run monopolies. I think it will result in our getting a reserve in time of war which we have not got at present and which will go some way towards making up the deficiencies of Transport Command. I believe it will give us a mercantile fleet of the Air of which we can be proud. But I would ask the Secretary of State to take note of this. I think we can achieve these ends, given two things: first, a rather better tenure than the seven years proposed in his statement of policy. With the high capital cost of aircraft to-day one has to reckon that an aircraft will last ten years, and to write it off over that long period. It is doubtful whether such a period as seven years would be sufficiently long to attract the subscription 222 of capital which might have a chance of a reasonable return. The second requirement is that civil aircraft are made available, alongside our armaments programme. We should take full advantage of the golden opportunity that exists today with Britain in the forefront of jet development, a position we shall never occupy again. Let us take that opportunity now by giving a priority in construction to the Comet and the Viscount, just as high as to our combat aircraft.
Given those two things, I think this policy is a wise, reasonable and correct one. Some of us would like it to go a little further one way. The noble Lord opposite would like it not to go as far the other way as it does. But in the long run I believe it will prove to be a good policy. I only hope that we are going to receive the assurance that if and when they have the power and opportunity, the Opposition are not going to spoil the good work Her Majesty's Government have announced to-day.