CIVIL AIR TRANSPORT: THE EDWARDS REPORT

HL Deb 09 July 1969 vol 303 cc1056-107

2.50 p.m.

LORD BALFOUR OF INCHRYE rose to call attention to the Report of the Committee of Inquiry into Civil Air Transport; and to move for Papers. The noble Lord said: My Lords, this civil aviation Report of 394 pages is indeed a monumental document which reviews the past and the present of civil aviation and makes suggestions for its future. I know that the Government have stated that they are studying this Report, and a White Paper has been promised. I understand that the White Paper is not now likely to appear before the autumn. Nevertheless, to-day—which is the first occasion in either House of Parliament on which there has been any debate upon this Report—gives an opportunity for some exchange of views, as it were a two-way traffic. Also, we can express the hope that we shall hear some Government thinking on the main issues raised in the Report.

The first point that I would make is to urge the necessity and importance of speed by the Government in coming to their decisions. Since the publication of the Report a period of stagnation has descended on all initiative and adventure in civil aviation. Very understandably no one will enter into commitments, financial or otherwise, until the policy of Her Majesty's Government has been declared. This state of affairs is bad, and I urge a speeding up to the greatest possible degree of Government decisions and their subsequent publication.

In order to be brief and not to detain your Lordships unduly, I can only comment in broad terms on the main recommendations in the Report, many of which require study in depth and many of which I cannot even mention, important as they are. My first criticism of the proposals in the Report is the danger that civil aviation will become over-administered and over-centralised. It is an industry which is already weighed clown by both those characteristics. I think there is a danger in these proposals of unduly and needlessly tying up civil aviation in regulation, in control, and in direction by Government and Government-sponsored bodies. It seems to me rather curious that just as we are engaged in freeing the old form of transport, the railways, as much as we can from control as regards fares and operation, we should be engaged in tying up the new form of transport in so many different directions.

I do not like, and I do not believe your Lordships will like, the recommendation in the Report for periodic statements of Government policy by Statutory Instrument. I dislike that for two reasons. The first is that from the Parliamentary point of view a Statutory Instrument is not the appropriate body for promulgation of Government policy. Government policy should he by Statement and by Bill, and we do not want what I call "packets of instant policy" produced by Statutory Instruments. My second objection is that what civil aviation needs is not frequent change and frequent declarations of policy but a clear run on set policy lines for a period of years. Civil aviation over the past has been bedevilled by politics, and I want to see civil aviation fly above Party lines on a good long flight.

I must dwell for a moment on the very important proposal in the Report for a National Holdings Board. I will keep my quotations to the minimum, but I must make one quotation on this subject from paragraph 531, which says: … as trustee and controller of the public sector capital of the air industry,

this Board would concern itself with major strategy of the airlines, the quality of their management, financing and investment, diversification into new fields, and the monitoring of the results of the undertakings within the group.

That is quite a task. I believe, and I hope, that this proposal will find very few friends anywhere, within and without the air world.

Many objections could be raised but I stand on one main objection only. In a sentence it is this: I believe the functions of this proposed Board would be either a replacement or a duplication of the functions, duties and responsibilities of the existing Boards of the two nationalised Corporations. Really this proposal would reduce the functions of the Boards of B.O.A.C. and B.E.A. to those appropriate to a management committee. The proposal, I submit, cannot stand up to examination when the Report suggests that this Holdings Board will be analogous to a holdings board i1 the private sector of industry. As many of your Lordships know, in the private sector a holdings board of an industry is the ultimate authority. That can never be so in the case of a National Holdings Board because ultimate authority must rest with the responsible Minister, with the Treasury and finally with Parliament. I would summarise my objection to this proposal in that I see little merit in interposing an unneeded body between the Corporation Boards and the final authority of Parliament. The proposal renders impotent those appointed to carry responsibility, and I believe would result in a confusing dichotomy.

Of course, as the Report says, closer co-operation between B.O.A.C. and B.E.A. is needed. I do not think the cooperation in the past has been all that it might have been, but it is no good going over the past; what we have to look at is the present and the future. And I do not think the National Holdings Board is a solution as regards closer co-operation. In the final event, closer co-operation depends on human relations, and I believe that now there is being established between the leaders of the two Corporations a degree of relationship which will bring about that essential co-operation.

The next most important proposal is that for the creation of what the Report calls a "second force", which means putting on certain overseas routes covered at present by B.E.A. and B.O.A.C. a second operator from the independent sector. The Report suggests two such areas, the North Atlantic and London to Paris, as suitable. Quite bluntly, this means taking from the Corporations some of their present traffic and sharing out future traffic growth between them and private enterprise. I have read in the Press that the unions concerned are already strongly rejecting this proposal. Very understandably, the two Corporations also dislike it, and I think it will be a very hard proposal for a Labour Government to accept.

Like many noble Lords interested in these matters, I have tried to give the proposal a lot of consideration. I have had ten years' experience as a Board member of British European Airways and, naturally, I have what I would call a conservative outlook. But to set aside doctrinaire approach, either from the Left or from the Right, one can produce arguments on both sides and I think there must he a balance of considerations. A second force in the near future can be built only by diminishing the Corporation's present patterns of routes, and by restricting their share of future traffic growth.

The question which I put to myself, and I hope that the Minister may reply to it, is: Would a second force of independent competitors on scheduled routes, rather than the present policy of a single designated operator, be for the benefit of British civil aviation? Would Britain's traffic share overseas be increased? I do not mind who operates the designated body. I am not advocating a national or a private enterprise. But would two operators on any of these routes really be to Britain's advantage? In the case of the London to Paris route, British European Airways are restricted in frequency to match the French frequency. At the present time, you can put on a second operator only if you cut into the franchise of B.E.A.

We have had some experience of a second force on main domestic trunk routes from London to Glasgow, and from London to Edinburgh. The result has been a division of existing traffic and of growth traffic, between the private and public sectors. The final result has been two losers; both have been losing money, instead of one breaking even or possibly making a profit. On the other hand, I must say that the public has benefited from the competition of the independent. The public has had better, sharper service, and I believe that British European Airways would be the first to admit that the competition has been a spur to them and has caused them considerably to improve and polish up their services.

Again, in the case of overseas routes, if it had not been for the initiative of the independent British United Airways, there would to-day be no British aircraft flying on the South Atlantic. I believe that that example alone justifies the plea for the independents. But if the independents are to play a part, they must have a fair chance on scheduled routes as designated carriers. I hope that I have not wearied your Lordships by expressing my thinking. Thus, on balance, I would support a second force, but would give it designated scheduled overseas services away from London Airport, operating from Gatwick or from the future Third Airport, and operate from our great provincial cities to continental points; an area which, in some directions, I feel the Corporations have not been exactly energetic in developing.

As I see it, the question which arises about creating a second force on these lines is: Would it justify the financing of new equipment? I believe that it would, because it may he that in the future the money lies not in the scheduled services, but in the development of this great new method of holidays abroad on inclusive tours. While the Corporations must also be kept in the picture, as the Report recommends. I should like to see restrictions on inclusive tours lifted. Indeed, I heard on the radio early this morning that the Board of Trade has sanctioned tariffs for inclusive tours this winter which are approximately half the cost of the scheduled service fares. In doing so, it is overriding the International Air Transport Association, which exists to protect the airlines and their interests against inclusive travel. I hope that something on those lines might be developed, which would satisfy the desire, which many of us rightly have, to see private enterprise having a good chance, without at the same time diminishing the Corporations' existing services or future growth.

I pass from that for a moment to the proposal for British air services within Britain. The Report suggests that the present network should be enlarged and the present operators combined, but leaving the main trunk routes to the Corporations. This is an excellent proposition, if you can get the existing interests to combine; but sometimes it is not a very easy task to knock together the heads of people in the aircraft world. The Report also says that a considerable degree of subsidy will be required. Let private enterprise do this. I strongly support the view expressed in this document, that there should be no cross-subsidising; that is to say, the profitable London to Nice service should not be used to subsidise the Highlands and Islands. If a service will not stand on its own, and yet is required for social purposes, as is the case in the Highlands and Islands, let the Government come forward with a direct subsidy to make good the loss which they consider must be faced in order that those services can be provided.

I should like to say a special word about Scotland and the services in the Highlands and Islands. They are long-term, definite losers, and the inhabitants need services for which they will never he able to pay. I think we need a bold imaginative set-up for Scotland, and it is a wonderful area for a unique experiment in "bush" operations.

The Report says very little about vertical take-off aircraft, about helicopters. When I tell your Lordships that one 35-seater helicopter carried a total of 55,000 passengers, including the Prime Minister on several occasions, from Land's End to the Isles of Scilly and finally came out just on the right side financially as regards the operating account, one can see that the helicopter is already here and should be taken into account. I should like to see the fixed-wing aircraft going, as at present, from London to Aberdeen, to Inverness, to Edinburgh and to Glasgow. But I should then like to see 12 aerodromes to the North shut down. The economies would be tremendous—no great maintenance staffs, no fire engines on duty, probably for 24 hours, day and night, and no great radio control organisation. I should like to see the subsidy which the Government may have to give—say a quarter of a million pounds—added to the economies which would come from closing down the aerodromes; and then I think it would be justifiable to ask for a Treasury grant towards the technical development of vertical take-off machines. Add those three items together, and then use that sum of money to make up any deficiency which may occur in the operating costs of a fine, unique, helicopter network all over Scotland.

Take, for instance, a service from Inverness to Invergordon (where there is going to be a great new industrial development) stopping at Dingwall; then on to Dornoch and Brora, where the coalmine is; and then un North to Wick and Thurso, and around the Highlands. There need be no airports—just a concrete landing pad—and no large staffs. The pilot will land, there will be one man on the pad, the rotor will be kept going, off will come one set of people and on will go another, and then the pilot will take off again. That is a picture of the sort of service—what I call a "jump-bush" service—which I believe could be developed for Scotland.

I do not believe, as some noble Lords may, that a small aeroplane taking off on a short runway is the answer. Directly you put passengers in something which has to go forward at 150 miles an hour into the muck and bad weather you must have proper radar, proper radio aids and proper control—and then your economy goes. In the case of a helicopter, if you do not like the weather very much you put it down in somebody's football field, and there is no trouble. As to the regularity of service—and the Isles of Scilly have proved it—this, I believe, could be accepted. I have merely painted a word picture of something which I should like to see examined in depth by Her Majesty's Government when they consider this Report.

The last recommendation on which I should like to touch is this. This Report proposes a new Authority to take over the work on civil aviation of the Board of Trade, the Air Transport Licensing Board and the Air Registration Board. In general, I support the proposition, for I think the Air Transport Licensing Board needs revision, and I believe its members will be the first to admit that. What I do not like, however, is the proposal that the Air Registration Board—that independent body which is responsible for the safety of design and construction and for ensuring maintenance up to an airworthy condition—should be merged with this Authority, which would really be too close to it. It would be part of something which it should be judging. My noble friend Lord Kings Norton, whose work with his colleagues of the Air Registration Board has gained the complete confidence of the aircraft world, is, I know, going to speak to your Lordships on this subject a little later on.

Just a final word on airports. The British Airports Authority is doing a fine job, but with its capital of £60 million—rather more than £60 million—I believe that that body deserves the status of a corporation, and should not have a part-time chairman. The responsibilities are so great and the finance involved is so big that we should have someone employed whole-time on a salary scale comparable to that of a corporation; and let me say at once that I can think of no one better for such a position than the present part-time chairman, Mr. Peter Masefield.

Some rationalisation of ownership is needed in the interests of efficient economy. Again, take Scotland as an example. The position there is silly. There are Turnhouse, owned by the Board of Trade; Abbotsinch, owned by Glasgow Corporation, and Prestwick, owned by the British Airports Authority—three different owners, three different sets of facilities, three different sets of administration. That ought not to be allowed to go on a month longer. It is a waste of money, and I hope that as a result of this Report, and perhaps of the views which may be expressed to-day by other Members of your Lordships' House, the Government will realise that when they finally produce their White Paper they must put an end to that absurdity. Probably the end should be a Scottish Airports Authority allied to the British Airports Authority.

My Lords, I conclude my remarks with a warning and a tribute. Let the operators and the airport authorities, especially the big and privileged ones, remember that, particularly in their handling of passengers on the ground—I think that passengers are handled splendidly in the air, but I am referring now to the handling on the ground—their enterprises are run for the benefit of travellers, on whom they finally depend for economic survival. There is a menace, I believe, in an attitude that regards passengers as necessary bundles of humanity to be pushed around for the convenience of those operating the services. My Lords, my tribute is contained in paragraph 1057, which says: … there is nothing radically wrong in British civil aviation … calling for really urgent surgery".

My Lords, I beg to move for Papers.

3.18 p.m.

LORD BESWICK

My Lords, we are all indebted to the noble Lord, Lord Balfour of Inchrye, for introducing this Motion and for giving us an opportunity to discuss the Report of the Edwards Committee. I support what he said about the Report. It seems to me a splendid document—splendid in conception, in analysis and in presentation. From all those interested in aviation—and they are a critical lot of people—we have heard praise. It is readable, factual and fair. Its very fairness, indeed, may in one sense be its weak point, since it makes action on the recommendations that much more difficult to decide. I agree with the noble Lord that an early statement of Government policy is important, but I hope he will agree with me that it is never an advantage to arrive early at the wrong place. A few weeks longer, to allow for more adequate consultation and consideration, will be time well spent: and, of course, what is said to-day will also be studied. My right honourable friend the President of the Board of Trade intends to publish a White Paper on policy as soon as possible, but it will not now be before we rise for the Summer Recess. The timetable, I imagine, will provide for a debate on the White Paper after it is published and for any required legislation as early in the new Session as the legislative programme allows.

I expected to hear from the noble Lord. Lord Balfour of Inchyre, to-day, as we have heard over the years and from all sections of the industry, of the need for stability of policy and less interference from the politicians. The difficulty is that some want this stability but only after the politicians have made yet more changes which improve their own relative position. The degree of patience for change tends to be closely related to the position one holds in the aviation field. Indeed at times one is reminded of that famous bridge on which Those behind cried, 'Forward' And those in front cried, 'Back'."

On the other hand, there are many interested, informed and objective observers of the aviation scene who believe that, given certain changes, it will be possible to give the customers an even better service and gain for the country an even bigger percentage of international air traffic.

One truth is that there will always be change in civil air transport. An industry which will be three to four times its present size by the end of the next decade, cannot avoid change. It is estimated that over that same decade some £2,000 million will be invested: re-equipment on that scale, much of it embodying new technology, is certain to require administrative adjustments. What is now needed is a regulatory framework for the industry which will permit. indeed stimulate and encourage, maximum growth with a minimum of chopping and changing, a continuity of evolving policies and no sudden veering from one direction to another. The Government's ultimate decisions on the Edwards Committee Report will he judged, I suggest, by this criterion.

May I first deal with the recommendations for regulating the industry? The noble Lord was rather scathing about the regulations and the prospect of tying up the industry. I suggest that in this one particular at least he did not resist sufficiently strongly the temptation to exaggerate. The Edwards Committee recognise that, inescapably, this is a highly regulated industry, and I doubt whether any noble Lord who knows the facts of aviation life will wish to dispute that. It is true here; it is true elsewhere in the world. The Edwards Committee reappraise the whole of the present system. They lay great stress on the importance of the regulatory authority taking a comprehensive view. They point out that all aspects of an airline's activities have a bearing on the safety of its operations. Similarly, what is done to improve safety and reduce noise levels inevitably has financial and economic consequences. It follows, says the Committee, that decisions in one area should be taken with full knowledge of all the facts in related and adjacent areas. There is no suggestion that present arrangements are grossly inadequate. Indeed, the Report praises both the Air Registration Board and the Air Transport Licensing Board. I was particularly intrigued by the sentence referring to the A.T.L.B. which said: The longer this inquiry has gone on the less critical we have become of the existing Board". Nevertheless, the Report recommends the constitution of a new Authority with responsibility for both economic and safety regulatory functions. Most interested people will agree—and the noble Lord himself has already agreed—that there is a need for change. The question is, precisely what kind of change? The main issue before the Government is twofold. They have to weigh the very powerful arguments which are advanced that safety and economic regulations should be kept apart so that safety standards are not compromised in any way. As I understand what the noble Lord has said, he agrees with that viewpoint. On the other hand, if one accepts the Committee's view that overall responsibility is required, how should this be exercised? It would be helpful to have the views of other noble Lords on this subject. It would be quite feasible to bring all responsibility directly within a Government Department. Or there is the possibility of a completely new statutory Authority, separate from Government Departments but working to a policy directive which would be approved by Parliament.

The Report itself sets out four possible alternatives before coming to its own recommendation of a new, all-embracing Civil Aviation Authority. But there seems to me room for further consideration of the extent of the responsibilities to be placed on this new Authority. A dividing line could rationally be drawn between those safety functions now vested in the Board of Trade and those now fulfilled by the A R B. This would mean that the new Authority embraced responsibility for economic regulations; for those safety responsibilities now vested in the Board of Trade; for the planning of airports and for air traffic control, but leaving the Air Registration Board to carry on, at any rate until problems in the other sectors have been clarified. The argument for leaving the A.R.B., I suppose, is that their C. of G. is nearer the aircraft construction than the air transport operating industry. They could indeed be regarded as the bridge between the two complementary industries. There are arguments for all the permutations. I know that my right honourable friend the President of the Board of Trade is anxiously considering them all. I have no doubt that the noble Lord, Lord Kings Norton, will need no encouragement from me to give his views, and certainly with his long experience they will carry great weight.

There is one further point which I would make—and in this I follow what was said by the noble Lord, Lord Balfour. Practically throughout the development of this exciting air transport industry, certainly since 1945—and I think I am right in saying even in 1938 and 1939, when the noble Lord himself, in another sphere in another place, had particular responsibility for the implementation of another Report—we have had the conflict of ideas as between public ownership and private enterprise. In some respects this has been a good thing; in other respects, and as time went on, it became an infernal nuisance. The decisions which now have to be taken about the structure of Britain's air transport industry ought to be taken and can be taken quite separately from any ideological consideration. It is now possible to determine, in a way which it was not possible in the 1940s, whether airline A is more efficient than airline B. The question as to whether airline A should have a licence to operate a route rather than airline B or C should be and could be, determined on the basis of ascertainable data and not on political theory. As I said earlier, what is wanted is the best possible service for the customer consistent with fair conditions for the worker and the biggest possible percentage of international air traffic for the country. How these objectives can be achieved should, within a proper directive, be settled by an objective professional body. Such a body would not be a passive, licensing authority. It would be a positive, innovating body, actively engaged in securing that kind of industrial structure and route pattern which in its professional judgment we need.

Such an Authority, of course, would have to work within the framework of its directive. The noble Lord himself suggests that the Committee's proposal of a policy directive in the form of a Statutory Instrument as recommended by the Report is inappropriate. I am inclined to agree with that, since a Statutory Instrument must be legislative in character. What it seems to me would be more appropriate is a statement of the Government's policy in suitable formal terms, which had the approval of Parliament and was binding on the Authority. One way of doing this would be by laying a White Paper before Parliament and subsequently making this a Schedule to the Act setting out the new Authority's powers and functions. There is a precedent for this in the field of Prices and Incomes policy.

In its analysis of the public sector of the operating industry, the Committee support the judgment of the Select Committee on Nationalised Industries that the two Air Corporations are efficient organisations, and they emphasised, too, that there is value in retaining the identity of these two Corporations. But to meet the very cogent arguments of those who say that there are also benefits to be gained by merging the two Corporations they propose the creation of a National Air Holdings Board. This proposal, to put it mildly, has aroused some dissent. Many feel that the compromise would be the worst of all worlds, with the addition of one more layer in the chain of command as the price to be paid for uncertain benefits.

Conceivably, my Lords, there has been some misunderstanding as to what this proposal entails. On the one hand, the Committee did not want the Chairman of the Holding Board to become what they call an "airlines boss" and they suggest that at least six of the ten Board members should be directors from the two Corporations over which they were to be placed. They go on to say that the reins of control were to be held lightly. On the other hand, as the noble Lord himself said, the Committee were clearly thinking of the analogy with private business, where a holding company does not interfere with the day-to-day running of its subsidiaries but, if at the end of the year the results are bad, it sacks the managing director of the unsatisfactory subsidiary and starts the next year with a new team. At such a point of decision, it seems to me that the term "a light rein" is something of a euphemism.

The Committee stress that the kind of decision needed to effect economies and to gain benefits are best made by inside men with inside information. This was their idea of the working of the holding company composed of inside men. But since the initial decision to accept or not to accept this particular proposal must be made from outside the Corporations, it is, as noble Lords will agree, necessary to test very carefully the strength of available evidence before deciding that a different institutional framework is required for their realisation.

The Report also recommends that this Air Holdings Board should have a holding in a company created or initiated by Government action from the merging of existing independent companies. This idea of a so-called "second force" has also aroused criticism. It may be that this proposal, too, has been misunderstood. Its purpose here is more to do with the rationalisation of the private sector than with the dismemberment of the public sector. The fact is that regardless of the question of ownership, B.O.A.C. and B.E.A. are the country's principal airlines, and nobody in his senses, least of all the Edwards Committee, would wish to weaken them.

B.O.A.C. and B.E.A. will both continue to grow vigorously. The question now is: how best can the independent airlines also contribute to the balance of payments and to the strength of the economy? I am sure the Committee have made a good case for there being fewer and stronger airlines. But are they right in maintaining that there is room for only one independent scheduled international carrier? If this is so—and the Committee produce some strong arguments—it is impossible to lay down precisely and in advance how big the proposed second force airline would need to be in 1975, in order to be viable and to guarantee the route network that would achieve this. The airline, if it came into being would clearly have to prove itself and to evolve progressively. Much would depend on the actual rate of growth of traffic on particular routes and on the success of the airline in getting its share of the traffic. Much would depend on the particular routes it might have. I put it to your Lordships: ought these decisions to be taken at this stage even in principle, directly or indirectly by Parliament?

One possibility which the Report suggests (and the noble Lord referred to it) and which is now being looked at is dual designation on the North Atlantic. The argument here is that although a second British carrier would attract some traffic from B.O.A.C., in the longer run it would also win traffic from foreign airlines. This net gain in traffic would increase the aggregate contribution by British airlines to the balance of payments. It is conceivable that certain rationalisations of route structures of the British carriers, even if this involved some net transfer on a modest scale, might benefit both, or at least produce a better aggregate result for the balance of payments and for the economy. But these are propositions that need to be examined carefully in relation to particular routes, and it seems to me that a Civil Aviation Authority, constituted in the manner that I have indicated, if it is established, is precisely the point at which decisions on these propositions should be taken.

My Lords, the Report also makes proposals for strengthening that part of the industry that operates regional services, both through structural changes and through subsidies. Looking at this sector of the industry dispassionately, there certainly seems room for rationalisation of the route patterns and of the structure of the industry itself. Both have grown up haphazardly over the years. Changes could result in economies of scale and of specialisation. The noble Lord, as I understood him, spoke about "knocking heads together" in this sector. I am not sure to what extent it is preferable to have one's head knocked rather than to he tied by some regulation. But certain it is that a number of airlines engaged in regional services have made clear that they wish to retain their independence, although some would like more co-operation and would not be averse to an exchange of routes on a fair and reasonable basis. What they do not want is compulsory acquisition, or the imposition of a monopoly. Here is another example of an area in which the regulatory authority and the airlines might seek to work together.

The question of subsidies which the noble Lord has raised is a difficult one. Until now Governments have held firmly to the line that the decision whether or not to operate a service must rest with the airlines in the exercise of their commercial judgment. The Report recognises that the link between the existence of air services and the pace of regional development has yet to be demonstrated; and unless and until it has been demonstrated that there is such a link, it would be difficult to justify the giving of subsidies on these grounds. There is, of course, an exception (to which the noble Lord referred) in the case of the Scottish Highlands and Islands services. A special feature of this case is the fact that surface communications in the Scottish Highlands and Islands are particularly difficult. In other parts of the United Kingdom there are some quite good surface communications which, in many cases, have been greatly improved in recent years and are still being improved. There is an obvious need to guard against waste through the competitive subsidisation of air and surface transport, and especially do we need to study quite new technical possibilities.

The introduction of advanced passenger trains or guided hovercraft or new types of V/STOL aircraft could revolutionise the whole situation. Although one must consider what the noble Lord has said about helicopters, since he had such an active and intimate recent experience with them, I am not so sure as he is that V/STOL aircraft will not prove a more economic proposition, in the regions at any rate, although of course there is a difference when it comes to servicing certain islands or the oilrigs, and so on.

My Lords, there are other quite important aspects of the Report on which I have not touched. I should have liked, for example, to say something about industrial relations in this industry which, on occasions, seem to fall so far below the standard which we have a right to expect. I must also resist, at this point at any rate, the invitation to follow the noble Lord in the whole question of airport development. At this stage I think that the best service I can render to the House is to listen to what others have to say.

3.40 p.m.

EARL JELLICOE

My Lords, the House is indebted to my noble friend Lord Balfour of Inchrye for taking us aloft with Edwards to-day and for the very constructive way in which he did so. I am grateful, too, for the comments of the noble Lord, Lord Beswick, admittedly studiously "cagey" comments, on the subject of the Edwards Report. I join with him in saying that this is a remarkable document. I think that the highest compliment I can pay it—and I do so—is to say that it is as remarkable and as competent as one would expect, given its authorship. What particularly impressed me in reading the Report is its open-mindedness, the fact that its authors lay no claim to omniscience and that the structure for the aviation industry which they have suggested is one which has a built-in flexibility. I am sure that is wise.

Like other noble Lords, I shall try to be deliberately selective in my remarks and I should like to turn straight away to the objectives of our aviation policy. So far as these are concerned, the Report puts the emphasis where I believe it should be placed; namely, on the customer. I particularly like what they say about this and, if I may, I should like to quote their words: So let us say that in our view the primary long-term objective of a national policy towards commercial flying should be to see that our customer, be it for personal travel or freight, gets what he wants—not what somebody else thinks he ought to want—at the minimum economic price that can be contrived. Romantic, interesting and important though the airline business may be, it is, in the last analysis, there to do the same job as butchers, bakers and candlestick makers, i.e. to provide services for money. I do not think that these objectives could be better stated. I should like to add only one more. I am told that world air travel is likely to expand by a factor of four in the next decade, and clearly it should be a major objective of our national civil aviation policy that Britain should get its full share of that growth.

So far as the way in which these objectives should be embodied is concerned, I should like to say straight away that I share the doubts that have been expressed by my noble friend and by the noble Lord, Lord Beswick, about whether the Statutory Instrument is an appropriate vehicle for laying down policy guide lines. I find myself in entire agreement with the noble Lord, Lord Beswick, on this. So far as the statutory Authority is concerned, many different views have already been propounded and many different solutions are possible. But, equally, I think that most people will recognise that the present situation is messy. I believe that the Edwards Report has made out the case for a strong and independent regulatory body and personally I am rather taken with the solution which they propose. I believe that it has a great deal to commend it.

I have been impressed, for example, by what I have read and learned about the Civil Aeronautics Board in the United States, and I believe there is a great deal to be said for setting up a rather similar body, which would have a real measure of independence and which could evolve a steady forward-looking policy towards the industry and accumulate the corpus of knowledge and technique and other experience which is really required here. Because, as the noble Lord, Lord Beswick, has said, and I entirely agree, there are now objective criteria on which, if we ask the right questions we can judge the performances of individual airlines. I think that a body of this sort would give assurance both to the two nationalised Corporations and to the independent air companies. I believe in addition that there is a good deal to be said for the hiving off of Governmental functions in this way. It is, after all, what Fulton has recommended. In the words of their Report: It may well be that in modern political administration the machinery is so complex that immense departments of state may be made to work better if the agency device is used more freely. I believe strongly that that is the case. After all, it is what we have done with some of our ports, and we have the recent precedent of the Bill of the noble Baroness, Lady Llewelyn-Davies of Hastoe, for Lord Hall's Post Office Corporation.

The critics of the proposal have fastened, of course, on the view that it would be wrong to bring the A.R.B. under the wing of the proposed new Authority. Personally, I found the argument in Edwards about the main regulatory function of the Authority to be compelling, and I should have thought that we would get a read-across from the technical and the operational to the economic and vice versa. Nevertheless, like other noble Lords, I await with interest the comments of the noble Lord, Lord Kings Norton. If he is against this, and I understand that he might be, because the A.R.B. is rightly held in high regard both in this country and abroad—and I think much of that is due to its independence—I wonder whether he could tell us whether certain of the intermediate solutions we have heard suggested would not be perfectly feasible, like bringing the new Authority into being by stages or perhaps treating the A.R.B. as a separate division, with something of its own personality within it.

I now turn to the public sector—the Corporations. I think it is true to say that B.O.A.C. and B.E.A. receive a good chit from Edwards. As the Report states: B.O.A.C. and B.E.A. are both held in high esteem in the international airline community and have established reputations as innovators in technical and operational fields. I should like to endorse that. They point to the fact that the growth of the Corporations has been about par for the international course. On the whole, I believe these bouquets to be well deserved and, by and large, we can take a lot of pride as a country in the way these two Corporations are now running. Of course, by the same token, I do not think that we should overpaint the lily. For example, both Pan-American and B.O.A.C. are comparable in certain respects, as they are both basically long-haul operators, but so far as I know, whatever its financial difficulties, Pan-American have never had to write off £100 million plus of capital. But to that qualification, I should like to add one more, and dwell for a moment on a point on which my noble friend Lord Balfour of Inchrye touched; namely, the standard of service to the customer. I must say, particularly in the case of B.E.A., that this sometimes falls short of what one could reasonably desire. For one reason or another, I fly a good deal to Europe. So far as all the operational aspects of the flight are concerned—the plane, its punctuality, its safety and so on—I believe that B.E.A. has no peer in Europe. But on the little things, the petits soins, for travellers, especially on the ground, I believe that many of their European competitors order things rather better and I hope that attention will be given to this.

The Committee considered the whole question of ownership and came to the conclusion that: no indisputable case can he made for a policy of denationalisation. I, for one, would be prepared to try my hand at making an indisputable case for denationalisation, but I doubt whether I would persuade the noble Lord, Lord Beswick, and I do not think that I should detain your Lordships at the present moment with that argument. But let me say straight away that I believe that there is a far stronger case for the injection of private capital into the Corporations' capital structure than is suggested in the Edwards Report. They say that: they see little merit in artificially contriving a minority holding", and go on to say, But we would certainly not oppose private stakes should there be good practical reasons. I believe that a case can be made that there are good practical reasons for the participation of private equity in the Corporations. A private sector would, in my view, give the Corporations greater independence, and it would expose them even more directly than they are exposed at the moment to normal commercial competition, particularly if the private share were quite substantial. There is the point that a large number of European competitors of B.O.A.C. and B.E.A. now have considerable private stakes in their equity. With Swiss-Air, it is 70 per cent.; with K.L.M., 49.5 per cent., Lufthansa, 25 per cent., and with Sabena and Al Italia, 10 per cent. If this is considered sensible abroad it is at least arguable, proud and parochial though we British may be, that it is sensible here.

In any event, my Lords, although I do not go the whole way with the Edwards Committee on ownership, I go a long way with them on the organisation of the Corporations. The Committee considered the case for and against amalgamation, and they came down against it. I personally agree with that judgment. As they have pointed out, there is no clear advantage in sheer size. Indeed, the experience of the American airlines points the other way.

Next, I should like to turn to a point which has already been touched on by other noble Lords: the consideration by the Committee of the necessary cooperation between the two national Corporations and their judgment that, although there was co-operation in certain fields, this was insufficient; and from that their suggestion of the establishment of a National Air Holdings Board with an independent Chairman.

There is a great deal in this Report that I like, but I say at once that, with my noble friend, I do not like this suggestion one little bit. I am convinced that if we are to have nationalised bodies and national Corporations they must be allowed, once their targets and their strategical objectives are set by the Minister concerned, to get on with the job. The thing that is above all to be avoided in the public sector is "back-seat driving", whether by Ministers or by Committees. This would tend to weaken the authority of the organisation; it would be bound to blur responsibilities, and would be bound to act as a decelerator to decision-making in a field where urgent decisions are often required.

Mr. Michael Foot was kind enough the other day to describe all of your Lordships as "political castrata". I think the suggestion which has been advanced in the Edwards Report would turn those otherwise virile leaders of industry, Sir Anthony Milward and Mr. Hardie, into commercial castrata. I am not saying that there should not be closer co-operation in various common fields between the Corporations. There should be. It is insufficient, as I think they themselves recognise; but I really think that, on balance, I should prefer the unnecessary duplication which may exist at the present time to this unnecessary bureaucratic monster.

I should like to turn now to the private sector. Here I find myself largely in agreement with what the Report has suggested. In this respect I think it is a very impartial Report. It rightly recognises the enterprise which the independents have shown, for example. in making a success of the South American route when B.O.A.C., for understandable reasons, gave it up. The Edwards Committee also, quite rightly, paid tribute to the inventiveness which the independents have shown by, for example, the development of the inclusive tours—"I.T." traffic as it was called: as the Report puts it: One of the most important credit items in the performance of British civil aviation in the recent past…. I believe that these tributes not only are overdue, but give the independents their due. We on these Benches hold, and hold strongly, that whatever the right structure and ownership of the Corporations may be, there is not only a justification but also a real need for a strong private sector in the aviation industry. The alternative might very well be one single nationalised monolith. Edwards comes down very firmly against this; and that concept has been demolished, I think, in very telling language in two brief pages of the Report. But we also need an active private sector for other reasons. We need it since the industry as a whole, and those who regulate it, would benefit by an alternative yardstick to the nationalised concerns. We need, as the Report puts it: more than one source of expertise, judgment, experience and enterprise". Again, my Lords, the private sector can be justified by the contribution which it makes to our foreign exchange earnings. For example, British United Airways are not only making a profit now on the South American route, where B.O.A.C. were losing well over £1 million a year, but they are thereby also making a quite significant contribution to our foreign exchange earnings. But this is only one side of the coin. In South America, B.U.A. stepped into shoes which B.O.A.C. had discarded. The Edwards Committee, however, as I think the noble Lord, Lord Beswick, suggested, have argued that in the case of certain international routes—for example, the New York route—there is room for two major British airlines. I believe that this would be in the national interest from the standpoint of our balance of payments. It is interesting, for example, that the British share of this route has dropped from nearly 40 per cent. in 1962 to not much over 25 per cent. in 1967. May not a contributory reason for that be that there is only one British airline operating scheduled services on this route?

For example, it is significant that B.O.A.C.'s summer capacity on this route this year amounts only to 28 per cent., while T.W.A. and Pan American have 27 per cent. and 26 per cent. respectively, making a joint capacity of 53 per cent. The Bermuda statistics are even more striking. The British held 32.4 per cent. of this traffic for 1962, the year in which the Eagle licence was revoked. The percentage of this important route now held by this country has dropped to 16.4. That, of course, is quite apart from the question of the consumer choice. I accept that on many routes there is not scope for two operators, let alone two British operators; but where there is such scope, it is surely a good thing that the consumer should be offered as much choice as possible.

For all these reasons, my Lords, I am glad that the Edwards Committee attach so much importance to the private sector, which they believe may become by the 1970s perhaps one third of the civil aviation industry. They envisage also, as my noble friend has pointed out, a strong second force (why they call it a "second force", I am not certain: I should have thought that it would be a third force, given B.O.A.C. and B.E.A.), possibly built around B.U.A. and Caledonian as the main element here, operating a mix of long-distance and short-haul scheduled services, and active also in the I.T. and charter field.

Alongside that they think there is real scope—provided that there is the necessary rationalisation in the private sector—for other private operators in the domestic field, and in the internal inclusive tour, charter, air freight and air taxi business. I am sure that this is so, and that these rather specialised fields are really carved out, or almost carve themselves out, for the independent operator. But, my Lords, it is one thing for Edwards to express these views; it is another for the Government to accept them. I hope that in the months of summer cogitation on the Edwards Report they will move further forward in this respect.

Secondly, having accepted the principle, I trust that the Government will take the action which requires to flow from it. Much of course depends, as the Report points out, on pricing policy. For example, the Edwards Committee advocate a good deal more liberal policy towards inclusive tours and charters, and they make a very interesting suggestion that on certain routes, which they describe as "holiday routes"—I suppose that is the Minorcas of this world—the charter operators, the I.T. operators, should be given a free hand as an experiment. I think this would be well worth trying; it would be good for the operators and, more important, it would be good for the consumer.

Most important of all, if the Government decide to make this difficult choice for the second force—and I hope they will—they must have the courage of their convictions. There are two essentials here. The first is that the second force should have a really viable route I structure of scheduled services, including long-distance services. The Report has suggested that the airline, or agglomerate of airlines, would need to be provided with 4,000 seat miles by 1975 to have a really viable stable of aircraft to be able to support it. A layman like me would not dream of querying that estimate, or even of venturing an estimate of what route structure would be required. Clearly—and here I entirely agree with my noble friend Lord Balfour—it would mean that the second force would have either to replace or double up with the Corporations on some of their existing scheduled routes.

What does this mean? I have talked to one of the airlines which might be involved in the second force. All I can say is that they believe that they could be given a route structure which would enable them, for example, to go to the City and raise the money which they would need for this stable of aircraft. They could get a viable route structure without undue damage to the Corporation's prospects. They estimate that if they were given what they think they would need for a viable route structure, it might cut back B.O.A.C.'s growth rate from an estimated 12 per cent. per annum to something around 10 per cent. per annum. I am rather a new boy at business, but I should be perfectly happy to have an assured 10 per cent. per annum growth rate stretching out ahead of me. I am also extremely bad at compound interest, but I think it means you would double the size of your business within about seven years.

Secondly, it is important to remember that under the Edwards recommendations the Corporations themselves would stand to gain in a major way. They are now proposing to break in a big way into the I.T. trade, the trade which independents have pioneered. I understand, for example, that B.E.A. will be operating their Comet fleet from Gatwick next year. I think that this is a good thing and that Edwards thinks it is a good thing, because the distinctions between the scheduled services and the nonscheduled ones are becoming increasingly blurred. What seems to me reasonable is that if the Corporations are to be allowed to break into what has been up to now the preserve which has been pioneered by the independents, the in dependents should be enabled to make at least a small dent in what has hitherto been almost the preserve of the Corporations, the scheduled routes. If that is so, I should have thought that a bargain could be struck, and that with that in mind it would be wise that the decisions regarding the second force's entry on to the scheduled routes, and the Corporations' break into the I.T. market should be taken coincidentally.

Apart from that, two things seem clear to me. If the Government do opt for a second force concept, they must not be half-hearted about their choice. They must opt either for a proper second force, or against it. They should at all events avoid a "botched-up" compromise here, because if we are to have a second force, as Edwards recommends, we need one with two wings, not just one. I know this may be asking quite a lot of the Government, but I hope that they will not only say that they will grasp this rather difficult nettle, as they have said they will grasp one or two other difficult nettles recently, but that they will actually grasp it.

I hope it will be possible for these decisions to be taken reasonably quickly. I was a little worried about the tone of Lord Beswick's remarks here. As Edwards says, the independents are: urgently awaiting clear guidance from the Government on the future size and shape of the private sector. This, as I understand it, means that these decisions are in certain respects very urgent. For example, if the second force is going to be a viable one, it will need, first, supersonic aircraft, and secondly, large fuselage aircraft. It has to get into the queue for the purchase of those aircraft, and it cannot do it until it knows roughly what the future holds for it.

So far as the smaller domestic services are concerned, may I say that I agree that these services have an important part to play in regional economic development. I also agree that if they are to be subsidised the subsidy should be an honest and visible one. Let us not embark on regional airline services just "for the heck of it" and unless there is a real need for a competition with surface means of transport here.

There was one passage in the Edwards Report which I found particularly interesting. That was where it pointed out that at the present time we are spending in public funds something like £300 million a year in regional development. The Committee indicated their preference—a preference which I share—for a selective approach to regional development, the support of infrastructure at selected points rather than the more scatter-gun approach which we seem to be adopting at the present time. They pointed out that if we spent only one per cent. of £300 million on the development of regional airlines, that would amount to £3 million per annum and could make a very important contribution to the whole development of our regional airline network. So far as the area of the world so dear to my noble friend Lord Balfour is concerned—Scotland-I would support his plea for a deep examination of this problem, and I hope particularly that there will be a real examination of the proposal which he has put forward. I hope he will allow that examination—as I know he will—to include the small, fixed-wing, short-take-off aircraft, as well as his favourite helicopters.

In conclusion, may I say that although I have ventured one or two criticisms of one or two of the recommendations in the Edwards Report, I believe that taken in the large it is an admirable and, indeed, splendid document. I hope the Government will decide to carry out its main recommendations. Without wishing to press this unduly, I particularly hope that they will give free enterprise the fair crack of the whip which Edwards has asked for. My final hope is that their decision on this matter will not be unduly delayed. I trust that the promised White Paper will come before us at least in the autumn. Certain of these decisions are urgently required, and if it is not going to affect the main package of the decisions there is no reason why the Government should be inhibited from announcing individual decisions in advance of the White Paper. That could be really helpful in certain fields.

4.9 p.m.

LORD KINGS NORTON

My Lords, the noble Lord, Lord Beswick, gave your Lordships a most interesting commentary on the proposed Civil Aviation Authority, and the alternatives to it. I, too, should like to speak in particular about that proposal, and in some detail. The Edwards Committee propose that a single Authority should be: … responsible for almost all the technical and economic regulatory functions, now performed by the Board of Trade, the A.T.L.B. and A.R.B. for the civil side of the Joint National Air Traffic Control Services, for operational research, for long-term airport planning and for the main work of traffic rights negotiation. In speaking to-day I must declare an interest because, as I think many noble Lords know, I am the Chairman of the Air Registration Board. This interest which I declare is not a financial interest. The Chairman and the members of council of the Air Registration Board, eighteen in number, received no payment for their services. I should also like to emphasise what I am sure your Lordships would in any case assume, that I speak personally and not in an effort to represent the views of my A.R.B. colleagues, although I cannot help being aware of some similarities between their outlook and mine. The formal views of the Air Registration Board are of course in process of being made known to the President of the Board of Trade.

I should like to say something a bout the origins, the character and the past of the A.R.B. because I believe that all these are relevant to decisions on its future. We in the A.R.B. have al ways been conscious that there is something a little odd about us; and we have always been proud to feel that this oddity is something peculiarly British and, as time has shown, I believe, peculiarly good. The oddity is that we exhibit the unusual administrative pattern of a great industry regulating itself. A Minister is indeed always in the last analysis responsible for what we do. At present it is the President of the Board of Trade; in the past it has been at various times the Secretary of State for Air, the Minister of Civil Aviation, and the Minister of Aviation. But the President and his predecessors have depended for their formal actions in the field of airworthiness upon the A.R.B.'s advice, and I like to think not only that the A.R.B. has never let them down by giving them bad advice, but that the Minister has never let the A.R.B. down by rejecting the good advice it has given.

The organisation of this Board derives from the Report of the Committee which sat under the chairmanship of the late Lord Gorell, himself once the Minister responsible, inter alia, for civil aviation, and which reported in July, 1934. The other members of that Committee were also unusually distinguished and included not only the noble Lord to whom we are so indebted for initiating this debate to-day, then Captain Harold Balfour—whose views on the Air Registration Board I was so interested to hear—but Mr. Handley Page, Colonel Moore-Brabazon and Mr. Lindsay Everard, all of whom regrettably are no longer with us, and one other great pioneer, Mr. Gordon England, who is. At that time the civil aviation industry had become dissatisfied with the way airworthiness had been administered by Government. Government, on the recommendation of the Gorell Committee, had the great good sense to make the sweeping change by which the A.R.B. came into existence.

The report of that old Committee was followed by the work of a Committee under Handley Page, to draft the details of the new scheme for regulating airworthiness, and the outcome was seen in the Air Navigation Act 1936, which gave the Secretary of State powers to delegate his functions in respect of the airworthiness of civil aircraft to a Board, a Board ultimately defined—and this is extremely interesting—as consisting of four representatives of constructors of aircraft, four of operators of aircraft, four of insurers of aircraft, together with four co-opted members—to-day known as the independent members—and two more members appointed by the responsible Minister, not to represent him, but one to be a pilot and the other to represent the public interest. The Minister has no say in appointing the other 16 who are nominated by the interested sections they represent. The whole 18 choose one of themselves as Chairman. That is how the governing body of the A.R.B. is still constituted and what makes it a body of essentially independent character.

The A.R.B. Council, when it came into being in 1937, began the task of creating its executive: and I am proud to say that I was its first Chief Technical Officer. To-day it has a staff of well over 400. This organisation has stood the test of time, and when we of the A.R.B. consider ourselves dispassionately—and from time to time we do take a careful stock of ourselves—we conclude that the recommendations of the Gorell Committee, the work of the Handley Page drafting Committee and the Air Navigation Act 1936, produced an extraordinarily appropriate top administrative structure for aircraft, a structure which has itself created an excellent staff, high in morale, efficient and economical in character, and with the best possible relationship with the industry with which it has to work and which, indeed, in the matter of aircraft safety it has to control.

It is successful in this for a number of reasons, but two are outstanding. One is that, of all forms of control, the most effective and the least obnoxious is self-control. As I said earlier, the Air Registration Board is unusual, possibly unique, in manifesting a great industry regulating itself. The other outstanding reason is the A.R.B.'s financial independence. In its early days, and with diminution of civil aviation in the war, it had to depend on Government aid to make up its deficit. But for many years past it has enjoyed financial independence through its income from fees for certificates of airworthiness, from contracts proper to its duties, such as for aiding the airworthiness administration of Commonwealth countries, and from certain technical work for the United Kingdom Government. This financial independence has been a source of great strength to the A.R.B. An organisation which stands on its financial feet, like a man who stands on his, develops a different ethos from the recipient of aid, which, like an overdraft, is rarely without strings.

The proposed civil aviation Authority would not be in the enviable position the A.R.B. has achieved. The Edwards Report estimates that it would cost the Government £13 million a year. It is difficult to conceive an organisation such as the proposed C.A.A., in administering a deficit of this magnitude, organising financially self-sufficient units in its midst. It is difficult to conceive its administering a personnel policy which did not affect the development of the A.R.B. staff system, a system which has shown itself singularly well suited to the well defined, and wholly technological, functions of the Board.

But more important even than these considerations, in my opinion, is that in the C.A.A. there would be a mixture of economic and technical regulatory functions in that the working of the Air Transport Board and the working of the A.R.B. would be under the same direction. But I cannot believe that this is good, and in this I differ from the Edwards Report and, I think, from the noble Earl, Lord Jellicoe. The approach of the Air Registration Board in a spirit of creative collaboration with industry, and the approach of the Air Transport Board, essentially judicial and discriminatory, seem to me to be difficult to reconcile. It is this incompatibility which has kept these two functions of licensing and safety in different organisations in the United States of America. If I understood the noble Earl, Lord Jellicoe, correctly, I think he believed that these two functions in the U.S.A. were in the same Authority; but they are not.

EARL JELLICOE

My Lords, I apologise for being out of the Chamber during most of the speech made by the noble Lord, Lord Kings Norton, but I do not believe that. I know that the contrary is the truth.

LORD KINGS NORTON

Certainly they are not. In fact the technical function is in the F.A.A. which has not so far been mentioned, and the economic function is in the C.A.B. I know that it is unwise uncritically to copy, or to admire, arrangements in other countries, and I assure your Lordships that I point to the United States arrangement only after careful study. They have evolved their organisation in this field differently from us, but in the matter of principle, as I feel it is, of keeping these two functions apart, they have done as we have. I think we are both right, and that a revolutionary change, as the C.A.A. in this respect would be, is unwise. An evolutionary change which in this case would include a strengthened A.T.L.B. is in my view much to be preferred.

There is a good deal of consideration in the Report of the Edwards Committee of what they call "interfaces". Until I read their Report, I had managed quite well without ever using this word. Now I find that I cannot avoid it. They say clearly, on page 244, that there is no a priori case for reducing the number of interfaces. But they clearly believe, from the arguments they advance, that interfacial liquidation is a good thing.

On the whole I agree. As an engineer, I feel that the fewer moving parts there are in a machine the less likely it is to go wrong, and that is probably true of administrative machines as well But one has to be very careful. If at present there are seen to be interfaces between the A.R.B., the A.T.L.B. and the regulatory departments of the Board of Trade, have we reduced the interfaces by putting these bodies under the C.A.A., or have we increased the total number of interfaces by one? The right number of interfaces, as in an internal combustion engine, is that which gives maximum performance, if possible with minimum lubrication.

My Lords, I believe with other noble Lords that Sir Ronald Edwards and his team have done a remarkable job, and it would be more than remarkable—it would be miraculous—if everyone interested agreed with them. What I found particularly good about their Report was that they displayed alternative organisations before reaching a conclusion to support one of them.

In the matters to which I have been referring, it seems to me that they have done this displaying extremely well, but in my view they have not chosen the best of the possibilities they have outlined. At the risk of boring your Lordships by telling you what you have already read. I should like to recall, from page 245, that they define four possible schemes: (i) the economic regulation in an independent Air Transport Board on the lines of a strengthened Air Transport Licensing Board, the technical regulatory functions being disposed as at present; (ii) both economic and technical regulatory functions in two separate boards outside the Government service; (iii) all regulatory functions within the Government service; and (iv) all regulatory functions placed outside Government in one civil aviation Authority headed by a hoard appointed by the Minister. I am grateful to the noble Lord, Lord Beswick, for indicating the possibilities of other alternatives. Certainly one of his variants appeals to me very much.

In their subsequent argument in the Report the Committee dismissed (iii)—all regulatory functions under Government—and with this dismissal I agree. They plump for (iv) the Civil Aviation Authority—which is certainly preferable to (iii), but suffers from the disabilities which I have indicated. I do not say that it is unworkable, but I do say that for it to work well it would require continuing dispassionate judgment of a high order in the selection of its members and quite exceptional skill in administration on their part. Even then, I am sure that strains and stresses would develop. It represents a very big change, and it would have to deal with a future which I find difficult to visualise and assess. I should prefer—and I hope that when the Government have considered this, they will also—administrative evolution with natural selection, so to speak, by interested parties for the formation of the controlling bodies, rather than an inspired choice from above. So, in my view, the alternatives (i) and (ii) in the Report are better. Certainly, let us have an Air Transport Board on the lines of a strengthened A.T.L.B. That, with no other change, would be alternative (i). This would involve, as the Committee recognises, the minimum of change.

I believe we could stand a little more change than that, if it seemed desirable after examination. I believe we could stand a little more without too much upset or the danger of administrative indigestion. In other words, I believe, of all the Edwardian alternatives—and Sir Ronald, like me, believes that one can have more than two alternatives—(ii) is the best, and is worth detailed examination. This would give us the strengthened A.T.L.B. and an A.R.B. type of organisation in which the aircraft safety regulatory functions could be joined progressively by some of the operational safety functions performed by the Board of Trade and others. At a time when operational and aircraft safety considerations are increasingly interdependent—as, for example, in auto-land—it is obviously sensible to examine this. We could go, if necessary, step by step.

As I have said already, evolution is for us, in this country, generally better than revolution. The aftermath of the Gorell Committee was rather revolutionary but I think the circumstances were then more readily definable than they are now, and in the present circumstances I would recommend evolution. First, we could form the new Air Transport Board—the strengthened A.T.L.B. At the same time, a committee like the old Handley Page Committee I have referred to, which followed the Gorell Report, could scheme a developing combined airworthiness and operational safety organisation, taking account of the criticism which Edwards levels at the idea of two separate boards. I believe that two sensibly constituted boards, which I am sure would be sensibly constituted—a licensing board and a safety board—could readily evolve a method of communication which would ensure that there was no unnecessary duplication or overlapping in the inquiries they would undertake.

To sum up, my Lords, what I fear is my rather specialised view, I think it would be found to be quite satisfactory, whatever changes are made as a result of the Edwards Report, if the A.R.B. were left as it is. Conceivably, it might prove desirable to add to it some of the administrative operational safety functions of the Board of Trade, and this, I am sure, should be examined in detail, with the idea of a possible step by step process in mind. But whatever is done, the identity of the Air Registration Board should not be lost in a larger complex. If it were, I think much more would be lost as well.

4.29 p.m.

LORD TREFGARNE

My Lords, in rising to follow the noble Lord, Lord Kings Norton, I should like to add my own thanks to the noble Lord, Lord Balfour of Inchrye, for introducing this Motion, and to make a short contribution to your Lordships' deliberations. I am hound to say that I found this Report something of an anti-climax. Months, indeed years, of preparation went by. In fact I was one of those who at one stage brought pressure on your Lordships' House—a pressure which I think, in retrospect, the noble Lord, Lord Beswick, rightly resisted—for the Edwards Committee to produce an earlier Report than they were at that stage planning or, ultimately, did produce. However, when the Report was produced one rather felt as though one had been present while the elephant went into labour and gave birth to a mouse.

The Report calls itself, Air Transport in the 'Seventies, but I wonder whether it is not more of a historical examination of air transport in the '60s—indeed, I would pay tribute to the diligence of the Committee's research and to the vast mass of information that the Report gives. I am sure that it will be of great value to all of us in the industry, both now and in the years to come; and in that light perhaps my criticism of its title is unjustified. But I rather felt that the function of such a Committee is to produce concrete proposals, which to some extent surely they do. But I am hound to say that I find them disappointing.

I should like to consider these proposals shortly, and then to comment on one or two thoughts of my own. First, the proposal that aeronautical policy should be decreed periodically by Statutory Instrument I find, to put it bluntly, quite appalling—and perhaps I had better say no more, for fear of becoming un-Parliamentary. But the prospect of having every so often, a quite undefined period of time, suddenly to change course is to me quite unacceptable, and I hope the Government will resist that proposal when they come to publish their White Paper.

Secondly, there is the proposal to create a National Air Holdings Board which, in addition to controlling the bulk of the equity in the State Corporations, would apparently hold some of the equity in what they call a "second force" airline which they suggest should be created. Like other noble Lords, I can find little to recommend that proposal. It seems to me to be only a creation of bureaucracy for the sake of bureaucracy; and air transport has enough bureaucracy already. I do not suggest that we are at this stage overregulated. Of course we all accept that safety and traffic rights are matters which cannot be left to individual concern, to individual commercial judgment, although perhaps, in the last resort, in some cases they have to be. But, by and large, the present system, in which Lord Kings Norton's admirable organisation controls the safety of operations, or at least the safety of aircraft, the Board of Trade controls the safety of flight operations, as such, and the Air Transport Licensing Board controls the traffic rights and licensing of particular routes, is satisfactory. Those three elements in the system, although they may have individual defects, are quite acceptable at this stage, and ought to be allowed to continue. But to create a further vast monolithic organisation to have exclusive financial control of the State Corporations and an unspecified amount of financial control in the principal element of the independent sector seems to me unwise.

With regard to the Committee's suggestion to create this second force airline, I wonder whether "second force" is an entirety accurate description, since we already have three forces in the envisaged set-up; namely, B.O.A.C., B.E.A. and British Air Services. So I think perhaps it ought to be called the "fourth force". Whatever we call it, it seems to me to be perhaps less objectionable than the other two proposals, though it needs certain qualification. First, of course, the new force must have a viable route network; and this the Report accepts.

But secondly (and this I believe to be perhaps the most glaring omission from the Committee's Report), it must have access to sufficient funds. The noble Earl, Lord Jellicoe, said that he had been told that a possible candidate for the second force airline had told him that if they had a viable network they could go and get funds from the City. I have some experience of this, and I am hound to say that in general the institutions are unwilling to invest in aviation projects, particularly in the independent sector, although I accept that this may have been because hitherto, at least, a viable network has not been available to them. But there will need to be some radical changes of thinking in the City if a second force airline is to be able to obtain the very large quantities of money that will be required to purchase the new aircraft to meet the commitments which the force will be given on its creation. It may therefore be necessary for the second force airline, as it is called, to have access to Government money if it is to meet its obligations fully; and this, I should have thought, would make it so close to B.O.A.C. and B.E.A. as to call in question the need to create it at all.

The fourth proposal made by the Committee is for the creation of a Civil Aviation Authority, and this was dealt with at some length by the noble Lord, Lord Kings Norton. I am bound to say that I thought that what he said made excellent sense because, like him, I should regard with great concern any threat to the present independence of the Air Registration Board, one of the few elements of the bureaucratic side of civil aviation at the present time that does not make a loss. I think its profit is fairly modest, but at least it keeps in the black, which is more than can be said for the Board of Trade Aviation Department, with particular reference, of course, to their air navigation services.

I should like now to consider briefly the particular proposal made by the noble Lord, Lord Balfour of Inchrye, in relation to the Highlands and Islands. I am bound to say again that the suggestion to convert the whole operation away from fixed-wing aeroplanes to helicopters, with the apparent abandoning of all the radar and runway networks that have been created, sounds to me nonsense. I cannot imagine how we can operate without radar, what must be regular services, because the noble Lord, Lord Balfour, is surely deluding himself if he thinks that helicopters can operate in weather conditions in which fixed-wing aircraft cannot operate, or vice versa.

In my view, my Lords, the answer to this problem is to use short take-off aircraft, smaller aircraft than now in use, operating at a higher frequency, thus providing what I should have thought at present but spread out at more frequent intervals during the day, and so providing what I should have thought would be a better service than has hitherto been provided. B.E.A. have for years grumbled at having to continue the Highlands and Islands services at enormous loss, but one can understand their difficulties, because they are obliged to operate the services with the equipment they have, which I think is not really suitable for that sort of operation. There are a number of aeroplanes now being produced all of which, if operated correctly, could perhaps do a better job than is at present done by B.E.A. Viscounts. The Jetstream and Skyvan are obvious contenders.

Finally, I should like to make one further comment on the proposal that the State Corporations should be allowed to enter into the inclusive tour market. As we know. B.E.A. are about to operate a very substantial inclusive tour company from Gatwick, and for that purpose are proposing, we understand, to delegate their Comet fleet of aeroplanes and to start operations next summer. The Edwards Committee seem to accept this as a reasonable proposal but, like the noble Earl, Lord Jellicoe, I feel that this should be allowed only if the independents are given similar encouragement and additional licences on some of the cream of the scheduled routes. We know that B.E.A. have British United Airways as a competitor on the Belfast route and that until recently they had competition on the Glasgow route. I think competition remains on the Edinburgh route, but it is very restricted. British United and British Eagle (as they then were) had granted to them only a limited frequency for those operations, and it was hardly possible for them to operate a viable service on that basis. If now B.E.A. is going to branch out into the inclusive tour business on a substantial scale, it is only right that the independents should be given some encouragement on the cream of the scheduled services.

That is all I have to say. I was proposing to raise some query about the subsidy granted to B.E.A. and B.O.A.C. for the purchase of British aircraft. I understand, however, that the noble Lord, Lord Beswick, would prefer to deal with this matter on the Committee stage of the Air Corporations Bill, which we shall consider formally on Second Reading after this debate, and I will raise that matter then.

4.42 p.m.

LORD DONALDSON OF KINGSBRIDGE

My Lords, the greater part of the Edwards Report and the greater part of this debate have been spent, quite rightly, on an examination of the civil aviation industry and how to make it more efficient. I am not going to enter into that part of the argument, which has been so well discussed this afternoon, except to say that, like most members of the modern Labour Party, I am in favour of more competition wherever possible, and sometimes find that I am more in favour of it than noble Lords opposite. At any rate, I warmly welcome the suggested support given to the second force—that is a form of additional competition—and I warmly welcome some of the easing up of price restrictions which are referred to in the Report.

In particular, I want to talk about two paragraphs along these lines. The first, is the much vexed question of Provision I, under which inclusive tour operators are forced to charge more than they would want to, or need to, in order to protect the fares on scheduled flights which are agreed upon by the International Air Transport Association. It is clear to anybody who is trying to watch things from the point of view of the consumer that this is a blatantly restrictive practice which must be viewed with the greatest suspicion. Such attempts to avoid economic reality may often lead to sheer silliness, and this is no exception.

If you want to make up a group to charter an aeroplane at the reduced price which capacity allows, it is not enough to get together a number of people who all want to go to the same place; you must show that they have some other interest in common. You must show that they are what is called an "affinity group"—an archeological society, a women's institute or something of that kind, which has really nothing to do with the need to travel. Of course, the result is deceit and mockery, because the difference in fare is so big that people are prepared to go to great lengths to get the reduction. My daughter the other day went to the United States and back for £80. The scheduled flight fare is, I think, £170. I do not know what affinity she claimed, but any system which invites evasion in that way and ignores the realities of economic needs should, in my opinion, be looked at closely.

The Edwards Committee have looked closely at Provision 1, in paragraph 704 and the 30 paragraphs which follow. They explain why some protection and regulation is necessary if the regular scheduled flights which link the parts of the world together to-day are not to be undermined. As a farmer, I have a good deal of sympathy with managed markets and maintained prices, and I do not take the extreme view that regulation in certain circumstances of this kind is necessarily wrong. The Committee certainly have fully recognised the absurdity of the present rules, which may end, as they say, in people with blue eyes qualifying for reduced rates; and they poke quiet fun at the mystical definitions of distances which are elaborated in trying to define affinity groups.

Their final recommendation that such means of protecting scheduled services should be maintained only on routes where the scheduled services are worth protecting is admirable and I give it full support. The noble Earl, Lord Jellicoe, referred to it earlier. My only wonder is whether it might not have be en a stronger and more effective decision if they had recommended the abolition altogether of Provision 1, with the proviso that it would be reinstated on certain lines where the scheduled services were particularly vulnerable. It is extremely important that the huge economies which the coming of jumbo-jets ought to bring should be passed on to the traveller, and not dissipated in a vain attempt to protect existing fares.

The only other point I wish to refer to is the question of protecting the customer from the financial failure of tour promoters. The Committee refer to this in paragraph 719. They say, rightly that this protection need not depend on price regulation. The Association of British Travel Agents have a scheme called "Operation Stabiliser", and that has gone some way to meet the need, but I agree with the Committee that it is unlikely to be a complete answer to this problem, particularly as I understand that its funds have been severely eroded recently through a number of failures. The Committee say that it may be necessary for the Authority to require inclusive tour licence holders to put up a bond, regulated to the size of their tour programme. I feel certain that that is necessary, and I am sorry that the Committee said only that it may be. I should like to see such provision made compulsory and extended to all holiday travel, not only by air. A further possibility might be to set up a compulsory insolvency indemnity scheme for the whole travel trade. There are, I believe, firms in the City which do business of this kind, and the Consumer Council has been assured that there will be no particular difficulty in arranging it.

I do not apologise for bringing in these rather detailed matters to to-clay's debate, because I honestly think that this is what the whole subject is about. It is no good having a very elaborately organised and highly efficient industry if you do not leave enough competition to let the customer take advantage of the fact and of the possibilities of the savings through modern development. My Lords, apart from these two quite mild criticisms, I personally support the recommendations. I am glad that they have been so well received to-day, particularly by both Front Benches, and I hope that we shall shortly see Government action upon the Report.

4.48 p.m.

THE EARL OF KINNOULL

My Lords, I should like to add my thanks, along with other noble Lords, to the noble Lord, Lord Balfour of Inchrye, for moving his Motion to-day on the Edwards Report. I would also add my congratulations to him, both for the timing of this debate and for the clear, lucid and concise way in which he introduced it. Having listened to the other noble Lords who have followed him, I think that the noble Lord has some grounds for feeling a little satisfied with the way the debate has gone.

As we have already heard this afternoon, the eagerly awaited Edwards Report has been given, perhaps understandably, a mixed reception. Its recommendations cover a number of delicate areas of the industry, and for that reason have proved, not surprisingly, contentious. The trade union side of the N.J.C. has described it as "an old-fashioned" Report and a "doctrinaire document aimed at creating wasteful competition." The Chairman of B.E.A. has described it as "inconsistent", and (I think this was his personal view) has rejected outright two of its major recommendations. Others in the industry have been more welcoming.

But despite the mixed reception the Report has received, every shade of opinion, I am sure, will agree that the Edwards Report is a most valuable analysis and record of the industry, compiled by a Committee who have been shown to be extremely hardworking and thorough in their investigations; who have travelled the world in search of comparative industries; who have taken evidence from no fewer than 167 United Kingdom individual and corporate witnesses; from 37 foreign witnesses, from Government Departments to independent authorities, spreading over 10 countries, and who have clearly attempted to produce a Report balancing both the good of the industry, on the one hand, with the good of the country, on the other. For this reason I should like to join with other noble Lords in expressing our thanks to the Edwards Committee and to its Chairman, Sir Ronald Edwards.

Perhaps to some of us the most important general observation made early on in the Report (and I think the noble Lord, Lord Balfour of Inchrye, mentioned this) is that the industry at the present time is in a fairly healthy condition, and that nothing calls, we are told, for really urgent surgery. Having said that, the Report rightly warns us that the industry is bound up in a flexible and changing world, in a fast expanding and fiercely competitive market; and that if it is to retain its impetus and virility, and to hold on to, and even increase, its share of the world markets it must be given the right framework, to include both a clear policy and the right conditions in which to work. Both these prerequisites, of course, lie in the hands of the Government. The ball is now firmly in their court, along with the long-term future prosperity of the industry.

Other noble Lords have already touched on the four main recommendations of the Report: the National Air Holdings Board; the second force; the Civil Aviation Authority; and the domestic route operators under B.A.S. I think it would be true to say of the first of these principal recommendations, the setting up of this new National Air Holdings Board, that this concept has received, both from the industry and from many noble Lords to-day, very little enthusiasm—and indeed, from many quarters, positive hostility. In fairness to the Edwards Committee, I should say that when examining the problem in depth they gave three possible choices to achieve one essential objective, that of obtaining more co-operation between the two Air Corporations without actually merging them into one.

The choice the Committee selected, the National Air Holdings Board, did not by any means appear an automatic choice; in fact, the Committee themselves appeared to be somewhat diffident about it, saying that its success or failure rested largely upon the wisdom of the new Board's members; that is, the wisdom not to interfere with the existing management and yet at the same time to be directly concerned—and I quote here from paragraph 531: with major strategy of the airlines, the quality of their management, financing and investment … A slightly conflicting responsibility, many of us may feel. The reaction of the two Air Corporations, as we well know, is understandably critical on this recommendation. The Chairman of B.E.A. is on record as saying: Such new superstructure would create a serious weakening and undermining of the management of the Corporation". Others of us to-day see it perhaps as the first inevitable step to a merger between the two Corporations as surely as night follows day. Both these criticisms, to my mind, have weight, and the birth of the National Air Holdings Board seems a stiff price to pay for closer collaboration.

The problem of collaboration between the two Air Corporations is not, of course, a new one; indeed, as we see from the Report it has been with the Corporations for the last 24 years. The Airlines Joint Chairmen's Committee was set up many years ago to work out the areas of cooperation. Progress has not been barren and the result of their work, we see, has been the setting up of a joint medical centre, a joint pilot training college, a joint pensions scheme, and a joint hostels scheme, amongst other things. The question, of course, that strikes one forcibly on reading this Report is why, in practice, this Joint Chairmen's Committee could not now expand into further areas of co-operation, into the grassy fields which the Edwards Committee see are waiting to be grazed. Such areas as marketing, route patterns, computer programming, hotels—these are but a few examples the Report quoted. Is it a sound argument to say that, just because progress of co-operation over the past years has been slow, it could not be quickened if the Joint Committee were given the proper directive?

May I turn briefly to the question of a merger between the two Air Corporations? The Committee are, I think, to be congratulated on the clarity with which they set out the pros and cons of a merger. The fact that they came down firmly against a merger, and that this only confirmed what previous Committees had concluded in the past, will I hope convince the Government that more would be lost than would be gained by a merger. The two fundamental conclusions which the Committee reached on this point, and which must persuade many cirtics in this matter, are first, that size does not necessarily mean greater efficiency in the airline business, and, second, that the identities of both B.O.A.C. and B.E.A. are too valuable to be lost. I hope very much that the Government will reach an early decision on this point and so remove what must be a running sore for the Corporations.

The second major recommendation of the Report, the creation of a second force, has already been covered pretty fully in the debate. This proposition opens up the fundamental question of what is to be the future role of the independents in civil air transport. Are they to gain a more viable share of the scheduled services, while perhaps giving away a share of their inclusive tour market—a market, one must remember, which they created and built up so vigorously—or, as we have already heard, are the Corporations to be allowed to hang on to the 90 per cent. of the lucrative scheduled services whilst at the same time being allowed to enter vigorously into the charter market? Are the Edwards Committee right when they call for fair play between the two sections of the industry? In my view, they certainly are.

The recommendation by the Edwards Committee of the creation of a second force is, of course, entering into an area of sensitivity. The Committee in their Report built up, I believe, a pretty convincing case that the formation of a second force would be to the overall benefit, in both the short-term and the long-term future of the industry, and this surely is the ultimate criterion for judgment. They have reached the conclusion, with some confidence, that there is room now for this second force. And, who knows? in this fast expanding industry by the turn of the century there may well be room for yet a third force. The conclusion which the Committee reached cannot have been an easy one, in face of the opposition from the Air Corporations. The Committee have clearly studied the route patterns with some care; have assessed the minimum requirements that a viable second force would require, and have judged the effect it would have on the Air Corporations.

The success or failure of this second force, as my noble friend Lord Jellicoe has already said, lies partly in two areas: first, it must be granted a viable route structure, and secondly it must be in a position to invest in the new generation aircraft of the 1970's. As my noble friend has emphasised, this capital investment in these new generation aircraft amounts to a considerable sum: I believe that for the second force it has been estimated at between £70 million and £80 million. Clearly, such an investment can be attracted into this second force only if it can be shown that it is a viable proposition.

The recommendation of the creation of the second force was partly motivated, or so we are told in the Report, by a sense of fair play—fair play, that is to say, to those independents who have ventured in the past in British aviation; who have risked capital to pioneer and build up the charter market. Fair play between the Air Corporations and the independents is, of course, a matter of considerable concern among the independents. So far as the independents are concerned, the Air Corporations appear to be rapidly declaring war on them. Not only do they apparently wish to block any encroachment into the scheduled service market, but they are now setting up to compete in the hitherto independent field of the charter market. Fair competition is something to which few of us would object; but, to the independents, commercial competition with the Air Corporations is very much a one-sided affair.

It is pointed out that the Air Corporations have a considerable pecuniary advantage—an advantage, for instance, in the writing off of over £2 million of accumulated losses over the last five years; an advantage in receiving capital loans at 5½ per cent. instead of at the market rate of, say, 12 per cent.; an advantage of receiving subsidies for operating British aircraft similar to those operated by the independents. Such a situation, which in practice amounts to a commercial feather-bedding of the Air Corporations, must be one good and sound reason to support the creation of the second force.

The third major recommendation by the Committee, of the setting up of a Civil Aviation Authority, has already been dealt with in some detail. In general, the Committee's case for setting up this new central body to co-ordinate policy and prevent overlapping, appears, on the face of it, to be a very strong one. A strong aviation Authority, ready to negotiate international traffic rights, to promote British aviation, to co-ordinate the many and various airports and to include a strengthened independent A.T.L.B. within it, appears very attractive. The only doubt about this proposal which I now have, after listening to the noble Lord, Lord Kings Norton, and to his persuasive and powerful argument is whether the A.R.B. should be included in this new body.

The noble Lord's intervention this afternoon, which I am sure we all welcomed and valued, introduced what appeared to be two very powerful arguments in favour of retaining the A.R.B.'s independence. The first was its present financial independence and the value of that; and the second was the potential incompatibility between the technical and the economic functions. This latter argument is supported in practice by the Americans. I personally feel that both of those arguments have merit, and I trust that the Government will give careful consideration to what the noble Lord has said this afternoon.

The important and firm conclusions reached by the Edwards Committee about the charter market, the inclusive tour market, are obviously ones to which the Government must pay particular attention. As we see from various tables in the Report, the past growth rate in this area has been very rapid and the future growth looks all set to continue to spiral. If the Committee are right in their forecast this side of the industry will soon be vying with the scheduled services for a major role.

The Committee's proposals to allow a more liberal licensing policy while at the same time keeping out the undesirables by applying rigorously certain qualifications of financial strength and safety are, I believe, sound. The examination by the Committee of the workings of Provision I, as the noble Lord, Lord Donaldson of Kingsbridge, has mentioned, and the effect which it is now having on certain charter routes was perhaps a revelation to some of us who have never understood the finances of package tours. The suggestion to modify Provision I further, and even to abolish it on certain routes where the growth rate is at its greatest, is a suggestion which the Government must study with some care. The pitfalls of adopting such a course are obvious, but, equally, the benefits to the market and to the public will be very substantial.

The fourth major recommendation of the Committee, the development of the regional airlines for domestic routes under the umbrella of the B.A.S., is again a very important one. I like the concept of the regional airlines operating from local airports; but whether they should all be under the umbrella of the B.A.S. is, again, perhaps open to argument. I believe that the licensing must be strong, and a reasonable period of time—I suggest 10 years—is required in order to give the independent carrier a period of stability.

On the question of the unprofitable local services, the view of the Report that these should be operated with the help of an open subsidy from the public purse, and not hidden in cross-subsidies, will meet with many supporters. The noble Lord, Lord Balfour of Enchrye, mentioned specifically the Highlands and Islands services, and, as we all know, he is a great supporter of helicopters. If those could be proved economic—and I must say that I was a little surprised when he said that the Isles of Scilly service is economic, because I understood that the North Sea gas contract—

LORD BALFOUR OF INCHRYE

My Lords, I said that it made an operational profit, not an overall profit.

THE EARL OF KINNOULL

In any case, my Lords, if helicopters could be proved economic, I am sure they would act as a very good substitute. But I wonder how often those helicopters will be able to operate in the Scottish mists in winter. I would favour the use of the Britten-Norman Islander on some of those routes, rather than the Viscount which B.E.A. at present operates and which for most of the year must be operating with a very low load factor.

I shall conclude by saying that, however the critics may describe the Report, it must be considered a most valuable analysis of civil air transport. It weighs up for us most skilfully the balance of choices in the various fields. It reminds us that the industry is both competitive and expanding. It exhorts us to have a clear but flexible policy. It exposes certain weaknesses in the system at present, and it makes certain other recommendations. But, above all, it reminds us, as other noble Lords have said, that the principal objective of the industry is that you and I together should be the people who matter. Along with others, I think that that is a very worthy objective.

5.8 p.m.

LORD BESWICK

My Lords, I am sure that the Edwards Committee which laboured very hard and very intensively in this field, must be gratified at what has been said about the results of their labours; that is to say, of course. with the one possible exception of what was said by the noble Lord, Lord Trefgarne. We have had a useful discussion, and I thank all noble Lords for the constructive attitude which they have displayed. May I also take this opportunity of expressing appreciation at the ready agreement which I received before we started, to the proposal that we should take the Second Reading of the Air Corporations Bill formally, in order not to diffuse this debate, on the understanding, of course, that any particular points arising from that Bill can be raised at later stages.

As the noble Earl, Lord Kinnoull, said, I myself have every reason to be satisfied with the way the discussion—and it has been a discussion rather than a debate—has gone. There have been differences of detail, with a different point of view about certain parts of the Report, but by and large we have all had the same general approach. I am glad that the noble Earl, Lord Jellicoe, emphasised what he called the open-mindedness of the Edwards Committee, which I take it is another way of saying what I said, that it is a fair-minded Report. I hope, too, that he will accept my point, that the very fair-mindedness or open-mindedness of the Committee, and the careful balancing of the arguments, means that it is a little more difficult to come Sown on one side or the other. It is only right, because of the details which they have exposed and the very careful and fair way in which they have balanced all the arguments, that there should be proper consideration before coming to any final conclusion.

I was especially interested in the support which the noble Earl gave to the idea of a new statutory Authority for decision-taking in the future in this field. I only wish the noble Earl, Lord Jellicoe, had been here last night—if I may have the attention of the noble Lord, Lord Erroll of Hale, for one moment—when we were discussing the new statutory Authority which we propose to establish in the Post Office, so that he might have lent us the benefit of his very weighty support in the arguments which I tried to advance against those put forward by the noble Lord, Lord Erroll.

My Lords, the noble Earl, Lord Jellicoe, had something to say about the idea of back-seat driving in connection with this idea of a holding board over the present two Corporations. I quite agree with him. This is a criticism which can be sustained, and it is one which is now being put by a number of people and, of course, not least by the two Corporations themselves. On the other hand, I should have liked him to give some thought to the possibility of a holding board which was a true analogy to that existing in private enterprise: not back-seat driving by any means, not sitting in the sort of uncomfortable posture which he indicated, but quite potent people able to take decisions, able really to control the two executive divisions beneath them. This is another conception; this is a development of the idea of a holding authority. It is not one which necessarily commends itself to my right honourable friend the President of the Board of Trade, but it is one the merits of which I should have liked to have heard ventilated in this House.

The noble Earl looks rather puzzled. I was thinking of the possibility of a holding board composed in part of outside people, underneath which there would be two executive boards, two executive managerial teams, each with responsibility for a division which would be separately accountable and the results of whose work would be seen in the same clear way as that in which we can now judge the activities of B.E.A. or B.O.A.C. In this kind of set-up, the Hardies and the Milwards would sit on the holding board and not on the executive boards below.

EARL JELLICOE

My Lords, I apologise for interrupting the noble Lord, but he said I was looking puzzled. I am afraid that it was just the laborious process of thought working itself out. I had in fact given some consideration to the concept which he has advanced, but it seems to me that the analogy with private industry is not really accurate because if, in private industry, you have a set of companies with a holding company on top of it, that company is able to exercise authority. The trouble here is that there will be yet another authority on top of the holding board, and that will be the Minister. It will just be an extra washer, to use the term which I think Sir Anthony Milward has applied. But if it is not that, if it is going to be really potent, with potent people upon it, then I very much doubt that they will use the loose rein that Edwards has described; and it seems to me, then, that the logic of that would be working towards amalagamation—the amalgamation which Edwards has dismissed. It seems to me that there is a dilemma here, and you will sit on this dilemma as long as you have the board.

LORD BESWICK

There are complications here, I quite agree, and I am not suggesting that this is a proposal which is necessarily going to be followed up. I simply say that here is another possibility which one would have liked to have heard discussed in this House.

The noble Earl also had something to say about the possibility of the Corporations, in return for their stake in the inclusive tour field, giving up part of their scheduled routes. He seemed to think that it was proper, if the Corporations went into the I.T. field, that the tour operators should be allowed a share of the present or future traffic of the Corporations. I am not sure that this necessarily follows at all. Indeed, one of the points which comes out very clearly in the Report is that it is very difficult now to draw a clear dividing line between the charter field, the inclusive tour field, and the scheduled services. Another factor which also emerges from the Report is that those independent companies which concentrate exclusively on charter and inclusive tour work are in fact among the most profitable. So it is not necessary to compensate them, as it were, with scheduled services if the Corporations engage in the inclusive tour market.

But the point I make here—and it is one which I tried to make earlier—is that this is precisely the kind of thing which ought not to be decided in general in a Chamber of this kind, or even in a political assembly of any kind. This is precisely the sort of thing which ought to be looked at by professional people in the sort of atmosphere in which some people envisage the new Aviation Authority would operate. The decision should be taken on particular routes; not as a matter of political principle but as a matter of statistical judgment, as to what would benefit British air transport in relation to a given route.

My Lords, the noble Lord, Lord Kings Norton, missed out of his historical account of the Air Registration Board the Helmore Committee, which was established just after the war to review the constitution of the A.R.B. I was hoping that he might have made some reference to that because I have such happy memories of sitting on it for some weeks; and since that time I have paid particularly close attention to the work of the Board over which he now presides.

LORD KINGS NORTON

My Lords, may I interrupt the noble Lord to say that I had to leave out many things or I should have been too long-winded; but it was the Helmore Committee which really stimulated the Air Registration Board into financial independence.

LORD BESWICK

I thought we had improved it to some extent. I doubt whether I can say more about the future of the Air Registration Board, and the noble Lord will quite understand. I simply say again that the considerations he put forward are very much in the mind of my right honourable friend the President of the Board of Trade, and they will be taken into account before any decision is made.

The noble Lord, Lord Trefgarne, was not quite so happy about the Report as a whole. He said he found the prospect of a Statutory Instrument to deal with policy in the future as quite appalling, and he asked to be excused from not using stronger language. He had no need to use stronger language. Both the noble Lord, Lord Balfour, and myself had said that we thought there were better ways to deal with this, and I think that on that point, at any rate, the noble Lord can rest secure. I was a little surprised that he should have gone on to say that there is an advantage in an organisation of the A.R.B. type because it makes a profit, as distinct (he said) from the Board of Trade, which did not make a profit. We shall bear in mind what the noble Lord says when we come to consider in the future Orders relating to airport charges. My recollection is that every time we have discussed these matters in the past the noble Lord has criticised any increase in rates. I take it that from now on if there is a claim for an economic charge he will support it.

The noble Earl, Lord Kinnoull, put the Corporations' case for separate identity very persuasively. I am not sure whether he gave sufficient weight to the arguments advanced by the Committee for the holdings board. Nevertheless, what he said on this matter will certainly be considered. He emphasised very forcefully the need for fair competition as between private enterprise operators and publicly-owned operators. Certainly I should not try to argue in favour of unfair competition; but the difficulty here, in the context of the national interest and the customer's interest, is to decide in any given circumstance what is fair and what is unfair. Here again I suggest to him and to the House that these are questions which can beat be examined by the proposed civil aviation Authority.

I should have liked to have heard a little more about the possible directive which might be given to the proposed C.A.B. This seems to me an important factor and it would have been good to have had a little more guidance on that. I should have liked to have heard views expressed about that. But, apart from that, I think that we have covered most aspects of the Report very fully and very fairly. Again, I offer my thanks to all noble Lords who have taken part and especially to the noble Lord, Lord Balfour of Inchrye, who put down the Motion.

LORD BALFOUR OF INCHRYE

My Lords, I will not stand between the House and further business for more than one moment. I wish only to thank those noble Lords from various quarters of the House who have taken part in the debate to-day and to say that one of the purposes of the debate has been fulfilled: the noble Lord, Lord Beswick, has heard a lot of different views, which is what he asked for. With regard to the other purpose of the debate, hearing what the Government have to say, my mind can only go to the words of that great statesman the leader of the silent and absent Liberal Party to-day: "Wait and see". My Lords, we wait and we hope we shall see. I beg leave to withdraw my Motion.

Motion for Papers, by leave, withdrawn.