HL Deb 21 March 1972 vol 329 cc605-33

3.24 p.m.

LORD DRUMALBYN

My Lords, I beg to move, That the Draft Civil Aviation Policy Guidance, laid before the House on February 24, be approved. Your Lordships will recollect that the main objectives which the Civil Aviation Authority is required by the Civil Aviation Act 1971 to pursue in carrying out its functions under the Act are stated in Section 3(1), and that Section 3(2) enables the Secretary of State from time to time to give guidance to the Authority, subject to the approval of Parliament, under Section 3(3), on the performance of those functions. It is then the duty of the Authority to perform those functions in accordance with that guidance, The purpose of this Motion is to seek the approval of your Lordships for the guidance set out in White Paper, Cmnd. 4899.

The Civil Aviation Authority will start to exercise its functions on April 1. It will be taking over functions connected with aviation of a kind which are now being exercised by various bodies and by the Government themselves. There would therefore in any case be good reason to "amplify and supplement", as the White Paper says, what is contained in the Act, though your Lordships will observe that on most subjects the amplification is modest: in fact, it is confined to one paragraph per subject, except in the case of one subject. I do not want to imply in any way that the guidance given is unimportant; quite the contrary. But it is designedly expressed in broad terms so as to leave the Authority, as the Introduction says, "a wide measure of discretion". Thus, very little is said, for instance, about the extremely important functions of safety and air navigation services; but what is said is, I trust, clear, explicit and adequate.

The one exception I mentioned to this manner of treatment is to be found in paragraphs 10 to 20 of the White Paper, which deal with Air Transport Licensing. Experience has shown the need for more precise guidance than has hitherto been given. The Air Transport Licensing Board is to disappear: its functions are to be taken over by the Authority. When the Board was first set up under the Civil Aviation (Licensing) Act 1960, it was given the general duty of exercising its functions under that Act—mainly the granting, refusing, revoking, suspending and varying of air service licences—"in such a manner as to further the development of British civil aviation." The Act left the Board itself to interpret the principles set out in it without guidance from the Government. This approach may have been right, or at least inevitable, at the time. But valuable experience has been gained since then. It is also now clear that the development of British civil aviation requires policy objectives and guidance to be given to an independent decision-making body, and that responsibility for policy in granting air licences, as it affects that development, should rest with Government, subject to the approval of Parliament. The new Civil Aviation Authority should of course be responsible for the execution of that policy; and the Act requires that it must be consulted about the policy which is to be contained in the guidance—as indeed it should be; for it should make it its business to keep in close contact both with the industry and with the public, and so should be in a position to know their needs.

It is, of course, not only in the course of its licensing functions that the Authority will require to find out what the public really wants. It will also need to do so, for instance, in regard to pricing. I am sure noble Lords will welcome the prominence given to consumer needs in the opening words of the Guidance. The Authority will be well placed to investigate complaints about services from members of the public who travel on business or for social reasons, and thereby to learn both of all that the public wants and also where the strengths and weaknesses of industry are to be found. So far as consultation is concerned—whether of the travelling public, of operators of air and other transport services, of tour operators, forwarding agents or anyone else—the Guidance gives the Authority a completely free hand in the way in which it maintains and develops consultative arrangements over the whole range of its functions that are appropriate. In some cases formal arrangements already exist or are envisaged. For example, on the very important matter of the use of air space, there is already in existence the Civil Aircraft Control and Advisory Committee. Section 27 of the Act provides for an advisory Airworthiness Board to be set up. To meet the particular needs of the various parts of the country and to maintain a balance between them, the Authority will be able to have recourse to the Regional Economic Planning Councils and the Scottish, Welsh and Northern Irish counterparts for advice. Indeed the Guidance (paragraph 20) specifically requires the Authority to take account of the contribution which both international and domestic air services may make to regional economic and social development in the United Kingdom. It also requires the Authority, in regulating domestic air services to have regard to their place in the total transport system.

I should not like this occasion to pass without expressing on behalf of the Government our sincere gratitude to the members of the Boards which are to cease to exist. Times change and organisation must change to meet the times. But all concerned with flying have good reason to pay tribute to the work of the noble Lord, Lord Kings Norton, and the other members of the Air Registration Board, Mr. J. H. Lawrie and the Air Transport Licensing Board and also the members of the six Civil Aviation Advisory Committees.

As to aerodromes, the Authority is to advise the Secretary of State and others concerned as to their provision and development in such a way as to match the development of air services and general aviation. This brings me back to air transport licensing. It is here that more detailed guidance is needed to enable the Authority to act positively in the interests of British civil aviation. And it is here that the Authority will itself have to consider how far detailed control is needed.

Paragraph 13 states that the Authority should not reserve any particular type of operation exclusively to public or to private enterprises by reason of their being publicly owned. In other words, operators of scheduled services may break into the charter field, and operators of charter services into the scheduled field, subject to their having the necessary qualifications, experience and finance. But we must be careful not to waste effort, and, as paragraph 15 states, the British Airways Board—that is, B.O.A.C. and B.E.A.—should remain the principal pro- viders of scheduled services, and British Caledonian should be the principal independent scheduled air line.

In the light of the Edwards Report, which was accepted in principle both by the last and the present Government, it is difficult to see how anyone could disagree with these propositions. The Edwards Report recommended that there should be a new strong independent airline which would operate as a Second Force to compete in service and ideas. Where the difference arose was on how to bring an independent airline up to the minimum required strength in the first place. On taking Office, the present Government concluded that it would not be feasible to do so unless some routes were transferred from the public sector to provide the new airline with sufficient business from the start. This was announced on August 3, 1970. Subsequently arrangements were made for the transfer of licences and routes representing some 2½ per cent. or 3 per cent. of B.O.A.C.'s current revenue at the time of £200 million. Part of this package included the right for British Caledonian to run a service between Gatwick and Paris.

There is no question of any further transfer of routes in order to launch or sustain British Caledonian. For one thing, the Government will no longer have the powers to act as they did last year. For another, under paragraph 18 of the Guidance, adjustment on re-allocation of routes between airlines should take place only in order to further the rationalisation of route networks where transfer would be likely to promote the objectives and policies stated in paragraphs 10, 11 and 12—notably development of trade and tourism, strengthening the balance of payments, and suitability of particular airlines to engage in particular types of operations. So all that British Caledonian may expect is the limited degree of preference set out in paragraph 17, to enable it to develop its route network particularly during its formative years. But paragraph 17 makes it quite clear that this measure of preference is not to be interpreted as either automatic or complete, or necessarily permanent. On scheduled service routes the Authority is to give this preference when licensing an additional airline to serve an existing route or when allocating licences for new routes. B.E.A. and B.O.A.C. are well established and have entered the charter business as well as scheduled services, and it is surely not unreasonable that an independent airline should now be given this relatively small measure of preference in its formative years. For nonscheduled services the preference is limited to a case where the number or capacity of British airlines need for the time being to be restricted.

Noble Lords will have noted that the Air Transport Licensing Board have recently granted to British Caledonian licences to operate services to New York and to Los Angeles via Chicago. They propose to start to operate these services, I understand, in April, 1973, and April, 1975, respectively; in April, 1973, to New York and in April, 1975, to Los Angeles via Chicago. This is not a transferred route. It is an additional service. The Air Transport Licensing Board stated in their decision that they were in no doubt that their proper course was to grant the applications. Apart from the fact that they were satisfied that British Caledonian could finance the services and that they were most favourably impressed with the drive and skill of British Caledonian's management, they believed that the effect would be to increase the United Kingdom's share of the markets involved (which had been declining seriously) and that to some extent new traffic would be stimulated. I need hardly add that the Air Transport Licensing Board as an independent body were entirely free to grant or refuse the licences.

It is in the economic regulation of the industry that change is now so rapid and far-reaching. Nowhere is this more marked than in the increasing blurring of the distinctions between scheduled and non-scheduled traffic and in the growth of affinity group traffic, where the rules are proving to be unworkable and abuse is widespread. There are two things which need to be done: first, to endeavour to bring cheap air travel within reach of the widest possible public; second, to curtail the activities and the scope for the activities of the rogues and the "wide boys" who are putting the public at risk and bringing disrepute to the industry and the regulatory authorities throughout the world. The first point is being tackled by trying to bring about the introduction of a new charter concept based on an advance booking basis so that, in return for the benefits of cheap air travel such as can be achieved through charter arrangements, the individual member of the public commits himself to the booking some considerable time before the date he intends to travel. This objective is being pursued actively by the United Kingdom with the other countries principally concerned. We are making progress, but it is too soon to say when and to what extent we shall be successful.

The second point is being met by the introduction of the Civil Aviation (Air Travel Organisers Licensing) Regulations 1972. The prime purpose of these regulations is to ensure that the Authority has the power to regulate the organisers of air travel, whether of inclusive tours or affinity groups or any other form that may come to be adopted. The objective is to put a stop to the activities of the rogues and to ensure that the air transport industry as a whole is regulated in a positive and constructive manner. Because of the need to get international acceptance of the new concept and of the time that would be involved in introducing it, the interim measures announced by the Minister for Trade in November, 1971, will continue meantime. These will take the form of close vetting of the bona fides of groups which airlines wish to carry. Here, as in other areas, it will be necessary for the Department and the Authority to work closely together if the new arrangements are to be successful.

The Guidance is intended to indicate the strategy of civil aviation which the Authority is to implement for the benefit of British civil aviation as a whole and for the travelling public. I believe it succeeds in its intention, and I wish the Authority and its Chairman, whom most of us know very well, Mr. John Boyd-Carpenter, all success. I beg to move.

Moved, That the Draft Civil Aviation Policy Guidance, laid before the House on February 24, be approved.—(Lord Drumalbyn.)

3.40 p.m.

LORD BESWICK

My Lords, we are indebted to the noble Lord, Lord Drumalbyn, as we always are, for explaining whatever business we are dealing with in such a careful and thorough way. I am bound to say, however, that in connection with this Guidance I am reminded of an occasion before the Second World War when I took a German friend of mine to see cricket at Lord's. We had been sitting there for an hour or two, and I turned to him and said, "What do you think of it, Erwin?" and he said, "Oh, they do no harm." In much the same way I read this document. To a blind man it would make pretty poor guidance; to Mr. John Boyd-Carpenter, however, the generality and the platitudinous nature of its phrasing, together with the contradictions that are to be found in the document, can leave a scope which I am sure Mr. Boyd-Carpenter, with his keen mind and mature judgment, will use very well indeed. This is certainly the way in which I think the new Authority ought to be run, with a minimum of tight guidelines, and I take the opportunity of congratulating Mr. Boyd-Carpenter on the opportunity he has to serve the public in this way. He takes over at a fascinatingly formative period for civil aviation, and I wish him well.

It is, as I have said, possible to criticise the document. Why, for example, does the document use print to say that: the Authority shall discharge its functions efficiently and economically"? Does anyone imagine that it could be told to discharge its functions "inefficiently and extravagantly"? I am glad to see that at the outset it is stated, as the noble Lord said, that "Civil air transport exists by serving the public". This is a much better emphasis than the noble Lord was able to give when he was instructed, during the passage of the Bill in this House, to oppose certain of my Amendments to the Bill which would have given the public the right to make representations to the Authority. It is much better to say that at the outset of the Guidance than to say, as in the Bill, only, to further the reasonable interests of users of air transport services"— and then only subject to a good many qualifications.

However, under the heading "Consultation" the document allows only a line and a half for its guidance about appropriate consultative arrangements over the whole range of its activities. Nothing is said in that paragraph as to how the Authority shall take into account the public interest. I feel that a mistake has been made in not putting fairly and squarely, in terms, upon the Authority in the Bill a requirement to consider the public interest. Again, under the heading "Research" nothing is said of the public, or the user of air transport services. Is it intended that the Authority should engage in research of the public taste, reactions and trends? One would have hoped so. I believe it is possible, from at least one of the appointments recently made, that this may well be the case, but again I should have liked to see it spelt out in rather more detail. Of course, research on an adequate scale, and proper consultation, costs money; and that brings me to the next paragraph, No. 29, on finance.

Have the Government had no second thoughts at all about financing the Authority? Are they still saying that after 1977–78 all these activities—regulation of public services, enforcement of safety regulations, the necessary consultation and research—should be paid for directly by the industry? Why should a service provided by a Government Department be met out of Government revenues, and then, when this same service is placed over to a statutory authority, the costs be imposed upon the industry? Is not this a relic of the old outdated pre-Upper Clyde "lame duck" philosophy, when it was thought that everything ought to stand on its own two feet? Here we are talking about a public body which, by its very nature, cannot make profits and ought not to be expected, over the whole range of its activities, to pay its way. I make one prophecy here: that in due course the Authority will say that the financial obligations placed upon it cannot be met unless economy is practised, to the detriment of the air travelling public and to the national economy.

There is another contradiction inherent in the Guidance document. It is stated that civil air transport exists to serve the public, but it is also stated that in its direct or indirect planning of the scheduled operations special preference should be given to British Caledonian Airways. I was very grateful for what the noble Lord said about the background reasoning of this decision to give preference to Caledonian Airways. I said, both in this House and outside, that a measure of competition can be right.

I have always accepted the proposition that there could be occasion where private enterprise independent companies would have a part to play. I believe that the Government are entitled to say that a company other than those owned by the British Airways Board should be considered for scheduled service licences. Indeed, this is what the Government of which I was a member actually said, and I stand by what it put in the White Paper. But it is mistaken, not least in the interests of British Caledonian Airways itself, that this particular private company should be singled out in this way. I certainly have nothing against the company. It has an excellent reputation for service; and I add this comment—and I have some sadness in saying it because I suppose I can claim that I had a greater part to play in the establishment of the Airways Corporations possibly than anyone else in the House, with the conceivable exception of the noble Lord who now sits on the Liberal Benches. I sometimes feel nowadays that it can be said that those who serve Caledonian Airways think more of what they can put into the company than what they can take out, which sometimes is not the case with the employees of the two Corporations.

Nevertheless, my Lords, having said all that, I still say that the Government have made a mistake in enshrining in legislation, and in writing out in this document, the preference which should be given to a particular independent operator. I believe that Mr. Adam Thomson has brought a lively and original mind into aviation, but suppose (of course I have no reason to believe that there is any possibility of this) that Mr. Thomson decided to take his great ability to another company; and suppose that another company proved its capability of serving the country. Is the Authority then to be tied down to what is stated in this document or to what appears in the Act of Parliament? I hope that when the noble Lord conies to reply, as I expect he will, that he will be able to emphasise again that the overriding principle here shall be service to the public and not maintaining the viability of any particular operator.

I have already referred to the wonderful opportunity that Mr. Boyd-Carpenter and his colleagues now have in this formative period of air transport. I want to ask the noble Lord, Lord Drumalbyn, to give an assurance that the Authority will now be allowed to exercise its influence, within the widest interpretation of this document, without being pre-empted by Government decision on matters of importance. Among other things, I have in mind the question of airport planning. As the noble Lord said, the Authority now has some responsibility for airport planning. The reason this is stated in the Bill is because the noble Lord accepted an Amendment during the Committee stage in this House, and I was very pleased that he did. But may we take it that the Authority will he consulted before any irrevocable decision is now taken about Foulness? May I also ask whether it will be the Authority which will effectively take any decision about the future of Northolt? As the noble Lord knows, there has been a very interesting proposal made by B.E.A. which would enable Northolt to provide relief for Heathrow to give an excellent service for the short haul traveller in this part of the country, without adding to noise nuisance in the area. A decision here will mean an overall judgment which the Authority should be well able to make, and I ask the noble Lord whether the Authority will be permitted in effect to make the recommendation leading to this decision.

One is tempted to use this occasion to give advice to the new Authority. I shall not yield too completely to that temptation, but I should like to say, with the noble Lord, Lord Drumalbyn, that it has a great task before it in clearing up the mess which has arisen between the charter operator and the scheduled service operator. It is essential, in the interests of the travelling public and the economy of the country, that we should have from Britain a reliable, efficient scheduled service. But of course it is possible, and it has been proven possible, for the charter operators to come in and cream off a good deal of the traffic. If this process is allowed to continue too far, then it will be quite uneconomic to provide the sort of scheduled service which an industrialised country like our own will need. This, to some extent, is the fault of the airline operators themselves who charged too much for the regular fare and then found it necessary to resort to all these gimmicks in order to fill up the rest of the seats or else left it to the independent operator to undercut them with the charter services. This is a matter which I know is now receiving attention from those who will have responsibility in the future, and there I wish them well.

I should also like to say that I hope that full attention will be given to the need for planning airports. I think we made a mistake in the past in concentrating too much in Heathrow. It was always said that the needs of the interline passenger—the one who came over to this country from New York, possibly, and then wanted to go on to Paris—should be paramount and that therefore it was necessary to concentrate everything into the one airport. I am quite certain that that was a mistake. I am quite certain that in the future we have to develop the provincial airports; and I am quite certain that it will be necessary to enable Gatwick, for example, to develop its full potential. All these are matters which, in large part, will be the responsibility of the Authority in the future, and here again I wish it well.

3.55 p.m.

LORD TREFGARNE

My Lords, I must at the outset declare an interest, because I am employed by one of the smaller U.K. independent companies which are directly affected by the proposals in the White Paper. Like most people who work in the industry, I read the document before us to-day hoping, I suppose, to detect the promise of some bonanza in respect of licences, which are of course the lifeblood of the independent industry and without which most of us would wither away. Needless to say, I was disappointed. While it is true to say that the State Corporations will continue to enjoy a measure of protection particularly on the major trunk routes, and while it is also true that the new Second Force will enjoy protection though to a lesser extent, it seems to me that the position of the independent sector outside the Second Force has not been so clearly defined as one would have wished. However, there are some encouraging words and, maybe, after a period of adjustment following the birth of the C.A.A. in a few weeks' time, things will settle down and the independents will find themselves able to secure sufficient licences to operate profitably, without unduly diluting the traffic carried by the State Corporations or the Second Force. If that is so, perhaps the object of this first policy guidance document will have been fulfilled. However, there are a couple of points which I should like to mention.

Ever since the last war, no matter which Party has been in power, it has been the policy to support and protect the State Corporations especially on the major routes. This policy has generally commended itself both to the public and to the industry. During the 1950s, the growth of the charter inclusive tour traffic showed the Corporations that there was another market which they had hardly touched, and those new markets were largely developed by the independents. For ten or fifteen years that traffic continued to grow with no serious restraint by the licensing authorities, except in respect of tariffs. That development was confined almost exclusively to the independents and up till recently the Corporations took no part in it. By the late 1960s, the traffic carried, certainly on the major holiday routes, by charter airlines far exceeded the traffic carried by the State Corporations, and it was at that point that the Corporations—first of all, B.E.A. and, subsequently, B.O.A.C.—formed their own charter subsidiaries.

I am wondering whether the birth of the B.E.A. and B.O.A.C. charter companies has really been in the national interest, and whether some restraint ought even now to be placed on the charter activities of both State Corporations and perhaps also on the Second Force, British Caledonian. Of course we are all aware of the need for the major State airlines to secure a proper return on their investment. The taxpayer is just as exacting a shareholder as any other, and is entitled to see his money wisely invested and efficiently used. But the shareholders in independent airlines are also entitled to expect that the Government will not unfairly subsidise the State Corporations, particularly in a field of activity which has been traditionally theirs and which their companies have developed over a period of years.

The form of subsidy which causes me concern is perhaps indirect. But I submit that the subsidy which has been paid, particularly to B.E.A. in respect of the purchase by them some years ago of Trident aircraft, has a general effect on their activities and puts them in a specially advantageous position when they form their charter subsidiaries. Additionally, B.E.A. Airtours, which is the only major operating charter company among the State Corporations at this time, have the advantage of being within the B.E.A. group and thus derive special benefit from the purchasing power of B.E.A.; for example, in respect of their fuel supplies and also in the provision of ground equipment. They have thus been able to offer lower charter prices to tour organisers, and this has had a depressant effect upon charter rates generally. My own view is that B.E.A. Airtours should not have been allowed to encroach upon the charter business, traditionally the prerogative of the independents, unless at the same time the authorities had been willing to grant more scheduled services on major trunk routes to the independents. I believe that that in itself might have been undesirable. I think a better solution would have been to define more carefully the spheres of activity of the two sectors of the industry, thus preserving some degree of protection for the independents in the charter business while at the same time protecting the State Corporations on the scheduled business.

The B.O.A.C. charter company, which was more recently established, is also, I think, regrettable and less satisfactory. They must be the only United Kingdom airline ever to have been authorised to commence operations with no personnel, no aircraft, no crews and no work. I was present at the hearing for the "E licence, and it seemed inconceivable to me at that time that the A.T.L.B. would grant the application. But since they have done, one can only assume that there are two licensing laws, one for the independents and one for the Corporations. The independents have to work very hard to secure their licences, while the Corporations, it seems, have only to ask and they receive. I understand that the B.O.A.C. charter company recently suffered the ignomony of having turned down their application to the C.A.B. for approval to operate charter flights to the the United States, presumably because, as I have said, they have no aircraft, no crews and no personnel, though perhaps now they have some work.

As your Lordships will know, once a British airline has been licensed to operate an international route by the United Kingdom authorities it has then to secure traffic rights from the foreign Government involved, and this is usually done for the operator by the Department of Trade and Industry. I am concerned that the D.T.I. fail to take a sufficiently strong stand in these matters, and that United Kingdom airlines are tending to suffer thereby. In the case of my own company, we were licensed by the A.T.L.B. to operate a service between the United Kingdom and a destination in Northern France up to a maximum frequency of 21 services a week. The French authorities, in their wisdom, allowed us a total of only four, which makes a mockery of the licence granted to us by the United Kingdom authorities, and which of course makes it all the more difficult to develop a viable service. I sincerely hone that the new Authority will not hesitate to bring all proper pressure to hear upon foreign Governments in the matter of reciprocal traffic rights, including, if necessary, restriction upon the flag carriers, so that we may all be allowed to develop our services to the full.

Finally, my Lords, there is one special point which I hope that the noble Lord will be able to answer when he comes to reply, or, if not, perhaps he can write to me on it. The multilateral agreement on the commercial rights of nonscheduled air services has been ratified by almost all European authorities except Italy and Greece. This fact causes very considerable difficulties to the smaller independent carriers seeking to operate what we know as exempt charters to those countries. When we come to ratify the Treaty of Rome, I suggest that we ought at the same time to invite the Italians, especially, to ratify the multilateral agreement. I understand that the Italian Government in fact signed the agreement, but the Italian Parliament declined to ratify it. It is a bone of endless contention between the Italian Government and the British independent carriers, and it is a matter which ought to be resolved at an early date. I hope the noble Lord may be able to throw some encouraging light on this matter in due course. My Lords, with these qualifications I express the hope that your Lordships will approve this White Paper.

4.5 p.m.

THE EARL OF KINNOULL

My Lords, I should like to thank my noble friend Lord Drumalbyn for so clearly describing the use of this Guidance this afternoon. It seems to me that those responsible for producing this Policy Guidance faced a difficulty—the difficulty of either putting too much into it, and thus tying the hands of the Authority, or putting too little into it so that it is accused of being meaningless. I believe that this Guidance has in fact been drafted with a fair balance, and for that its authors are to be congratulated. The Guidance deals of course with an immensely important new Authority. Its success depends on the growth of our civil aviation. It has been set up as a bold concept, recommended originally by the Edwards Committee and based, I believe, very much on the lines of the Australian Civil Aeronautical Board. It is all-embracing; it grants licences, deals with safety, deals with airports and, above all, has a duty to the consumer. My Lords, although this Guidance is important, it is of course only a Guidance. I believe that many of the fears and anxieties that were expressed in another place will be found in practice to be unreal, for the success lies not in the words of this document but in its interpretation in practice. Success depends on the Chairman, on his board and his staff, and one naturally wishes them every success.

My Lords, from what one has read and from what one has heard—and particularly from what one has read of the proceedings in another place—there are two major, contentious points in the Guidance. The first is the future of the State airlines and the second is the future of the majority of the independents. I was glad this afternoon that the noble Lord, Lord Beswick, did not go hack to the old argument of the once-and-for-all transfer of routes; the "barefaced robbery and confiscation" argument that one had heard before. The acceptance of the transfer of the routes to the British Caledonian Airways is, I believe, a proper one, for any major independent must have a viable structure. I believe that the Government were right to take that decision, and are right now to leave the future of the licensing in the hands of the Authority. But, my Lords, the criticism I have of paragraph 17 is on the use of the word "preference" in relation to the British Caledonian Airways—preference over State airlines and also preference over other British independent airlines. I believe that there is a case for criticism of this word "preference". If we could strike out this word to-day, I believe that we should do so.

The case for the independents rests not only under paragaph 17 of the Guidance but also under paragraph 15. Many noble Lords will perhaps have received from the independents a memorandum setting out what they consider discrimination against them. The independents include such airlines as Britannia, Court line, Dan-Air, Laker Airways, Lloyd International and Donaldson International, and involve some 83 aircraft and some £73 million worth of investment; and last year they carried some 4.7 million passengers. They face not only the threat of what they consider is discrimination under paragraphs 15 and 17 but also the uncertainty in the charter market and uncertainty arising out of the affinity groups and, in the future, the exempt charter groups. Because it is known, though difficult to prove, that other countries do not in fact always follow the rules of the charter groups, I regard it as very important that both my noble friend's Department and the Authority should get together and work out as quickly as possible their advance charter plans, which one read about in another place. I hope that my noble friend may perhaps be able to touch on this question of the advance charter plans when he comes to reply. I believe this is very important, in order that the independents can remain competitive against the increasing world competition.

My Lords, I welcome many of the other paragraphs in the Guidance, particularly those dealing with the consumer interests, aviation safety, environment, information, and particularly paragraph 28, which deals with consultation—consultation with the users and consultation with the operatives. It is interesting to remember that when the Air Transport Licensing Board was in operation—it is still in operation—it received an average of from 6 to 12 letters a day which it termed its "consultation". It would be interesting to see what machinery will be set up by the Authority to deal with consultation, which I believe is a very important aspect of the Authority's work. My Lords, I will conclude by generally welcoming this Policy Guidance paper. I believe it essential that the Authority should be given this guidance. The document gives flexibility in independence, and I wish the Authority every success.

4.10 p.m.

LORD WYNNE-JONES

My Lords, this Policy Guidance Paper gives us an opportunity to discuss the way in which the Civil Aviation Authority is to operate. My noble friend Lord Beswick gave us a story about taking a German friend of his to watch a cricket match, and described his attitude to the game as being that "presumably it was not doing any harm". I am not quite certain about that remark in connection with this particular Paper. I am reminded of an anecdote by the late Lord Cherwell when he was Professor Lindemann in the University of Oxford in connection with his experiences during the World War. A consignment of shells had arrived at the Royal Aircraft Establishment and were carefully marked "Top" and "Bottom". There was an accompanying note which stated that in order to avoid confusion, the bottom had been labeled "Top". I rather feel that there are some matters in this Paper which are not quite as simple and clear. In fact, listening to the noble Lord, Lord Trefgarne, it has been made quite clear that the independents themselves do not feel that this Policy Guidance Paper is quite as helpful as they would have liked it to be. Naturally, he expressed himself with a certain amount of caution in this matter. I cannot help feeling that if he had been sitting on these Benches he would have expressed himself very much more forcibly.

I think that in this Paper there is a complete and basic failure to state what one is really expecting the national airlines and the independents to do. The independents are largely ignored; because reference is made almost entirely to the British Caledonian, which is treated almost as a new sacred cow, as something very special and which is to be given preference, even, in some cases, over the national airlines. This seems to be a most extraordinary attitude. It looks as though someone had said that at all costs one must provide a peculiar form of competition; that it is so important to have competition that one must subsidise this competition, one must set it up and nurture it. That is surely utterly and absolutely wrong. If there is any value in competition, it is that it does not require special nurturing. All that it requires is a free field in which to operate. That is not what is given in this Paper at all. So it seems to me astonishing that we have a Policy Guidance Paper which does not lay down any clear policy at all—except to say that British Caledonian is to be given preference. I find this a most extraordinary way of laying down policy.

We have all agreed that there should be a Civil Aviation Authority but, surely, we expect this Civil Aviation Authority to operate in its own way and to be able, once established, to lay down the terms under which things are done. This should not he a matter of taking a route from one airline and handing it to another. The noble Lord, Lord Drumalbyn, as he will recall, stated most emphatically in our previous debates that there was a package that was being negotiated; that a set of air routes was being handed over to British Caledonian and that that was the end of the package deal. Now we find that British Caledonian are to be allowed to operate on the Atlantic routes. Of course, the noble Lord may say that no actual transfer of routes is being made; but let us look at these Atlantic routes. I am not an expert in these matters but I have taken the trouble to inquire about it and I am informed that it is almost impossible to make a profit on the North Atlantic routes; that, in other words, if we allow British Caledonian to operate on the North Atlantic routes, all that we are doing is reducing the profitability of the others.

Are we then saying that it is reasonable and sensible at this time to set about making the State airlines less profitable than they now are by allowing British Caledonian to operate on the North Atlantic route? This seems madness. If, on the other hand, we are dealing with routes in those parts of the world which are not being operated by the State airlines, this is a perfectly legitimate field for the private airlines and I would accept the point made by Lord Trefgarne. I think there is a good deal to be said for allowing the independents to deal with the charter flight business. They have shown themselves capable of this and have developed it. We should, however, realise that if we want to maintain scheduled flights we must restrict, and not increase, the number undertaking them; for the more scheduled flights there are, the less profitable they will be. Therefore it becomes utter nonsense to allow British Caledonian to have scheduled flights across the Atlantic. I would say that the guidance in this Policy Guidance Paper is not worth anything to the Civil Aviation Authority. So far as the various independents are concerned, and so far as the national airlines are concerned, this Guidance Paper is something which one hopes will soon be scrapped.

4.20 p.m.

LORD BALFOUR OF INCHRYE

My Lords, I apologise to the Minister for having been at another meeting and for not being able to hear his opening speech. I should not like this guidance document to pass without wishing well to Mr. Boyd-Carpenter in his tremendously important new task. I was fascinated by the speech of the noble Lord who has just sat down because I think there is a great deal in what he says about the fallacy which exists over the use of the word "competition" in civil aviation operation. I do not dispute that Caledonian should have a place alongside the Corporations on scheduled routes; but not so much for the fact of competition as for the purpose of comparison. B.O.A.C. and B.E.A. on the international routes have all the competition that is required. Indeed, it is very hard to-day to compare a British Corporation scheduled service with the service rendered by a foreign company between London and the same destination; because the very slope of the seats you sit on, the degree of comfort afforded to your posterior, is controlled by IATA. The thickness of the sandwiches and the materials with which they are made are controlled by IATA. The competition between British and foreign airlines is already there. On the other hand, it is good that British Caledonian should operate scheduled services; because then we can get the comparison—not the com petition—with the State Corporations as regards statistical costs of operation per seat mile, engineering costs and all the other technical costs. Therefore I am disposed to support the conception of British Caledonian operating certain scheduled services.

When it comes to the North Atlantic I am afraid that I cannot differ very much from the noble Lord, Lord Wynne-Jones. All the operators on the North Atlantic are losing money at present. Jumbo-jets are flying with very low load factors and I cannot see that putting another operator alongside B.O.A.C. is going seriously to increase the British percentage of the total transatlantic traffic. Indeed, I believe that it may well reduce the individual percentages of the Corporation and the percentage which British Caledonian will need to make it a viable proposition.

I think the Authority has one tremendous task; it is to reconcile the conflict, which is growing all the time, between scheduled routes on the one hand, which cannot maintain viability if too many passengers are creamed off for passenger tours and charter work, and, on the other hand, the package tour which satisfies the public and gives cheap holidays, cheap transportation. If the Authority tries to maintain the viability of the scheduled services to too great an extent by pushing up the cost of the package tours to the public, I can assure the Minister and the Government that there will be such an outcry from the public that any such policy would not be maintained for very long. The public want cheap travel—and why not? They ought to have it. On the other hand, you have, I repeat, the task of keeping the scheduled services viable. It is a horrible conflict which the Authority has to reconcile, and I believe that the only avenue by which reconciliation may be achieved is by lowering costs, by a constant effort by all the operators of scheduled services—particularly scheduled services—and by package tour operators to lower costs so that the public will not be offended by the defence of the scheduled services which the Authority will have to give.

My Lords, I cannot agree with the noble Lord, Lord Trefgarne, that operations should, as it were, be made into compartments; that the State corporations and Caledonian should not be allowed to enter the package and charter field. Of course they must. Indeed, it is B.E.A. air tours which has been a strong supporting link for the Corporation and its ability to maintain unviable services, such as those in Scotland and other services which are maintained for social reasons.

When on the Board of B.E.A. I used to look at the results of subsidiary companies in which we had an interest. I can well remember seeing that the most comfortable investment that B.E.A. had at the time was a percentage holding in Malta Airways. They constantly paid a fine dividend and gave share bonuses. The reason was that they did not own any aircraft or operate any services at all; all they did was to take 10 per cent. off everything that B.E.A. did. Aviation is not really a very paying proposition unless it is carefully looked after and operated in the most economical way. I conclude, my Lords, by saying that I believe that this serious conflict between maintaining the viability of scheduled services and the very necessary expansion of charter and package touring which the public demand can be solved only by satisfying the public and maintaining viability with increased efficiency and ever-lowering costs.

LORD TREFGARNE

My Lords, before the noble Lord, Lord Balfour of Inchrye, sits down, would he confirm that he is saying that B.E.A. ought to be allowed to continue their charter operations in order to make sufficient profit to subsidise the Highlands and Islands services and other unprofitable services?

LORD BALFOUR OF INCHRYE

Certainly, my Lords, and in order to help keep going less profitable services of the scheduled variety. That would be eminently suitable and right.

LORD TREFGARNE

My Lords, is the noble Lord not aware that B.E.A. Air-tours have been constantly depressing charter rates on the basis of the great purchasing power which the Corporation has, particularly in respect of fuel and ground handling services?

LORD BALFOUR OF INCHRYE

Certainly, my Lords. Let them have every advantage and go to it, and good luck to them!

4.26 p.m.

VISCOUNT THURSO

My Lords, the noble Lord, Lord Beswick, has already drawn our attention to the ambiguity of much of this document. May I, therefore, ask for clarification of one sentence, the last sentence in paragraph 21, where it states that until the Authority has had time to make its report in seeking fuller recovery of its costs in the Highlands and Islands of Scotland it should be careful to avoid prejudice to the continued operation of those air services which are essential to the region's economic and social development. Does that mean that part of the air services are considered to be essential or that those air services which are in that region are all essential? I hope that the noble Lord, Lord Drumalbyn, will be able to recognise that there is no unessential service in the Highlands and Islands and that they are all essential to the economic and social development of the area. I hope that he will give that instruction and guidance to the Authority. We do not want a lessening of numbers or efficiency; we want more if we are to proceed with the development of the area for tourism, for oil, for industrial development or for any other purpose. Therefore I would ask for clarification of this sentence which, as written, seems utterly ambiguous.

4.28 p.m.

LORD DRUMALBYN

My Lords, I am grateful for the reception that the Policy Guidance has had. I think it inevitable that it should have been regarded as pretty obvious; the noble Lord said "platitudinous", but perhaps that was a bit harsh. But it would be a great mistake not to recognise that in fact it is a very complicated document. The paragraphs interlock, with different considerations which have to be taken into account; and they all have to be taken into account simultaneously on any case that they affect. I do not think that this has been sufficiently understood during the discussion on the document.

The noble Lord spoke of some of these as contradictions, but they are not; they are balancing factors which have to be taken into account in both cases. They are the realities of life in this sphere and are far from simple, as my noble friend Lord Balfour of Inchrye knows from experience, and as do those who have held office in the Ministry of Civil Aviation in the past: the noble Lord, Lord Beswick, the noble Lord, Lord Ogmore, and others. The noble Lord started by dealing with the question of consultation and the position of the consumer. On the matter of consultation, as I tried to indicate in my opening speech, there are many different kinds of bodies which have to be consulted. The attempt was made in the past to have one single, central, consultative body and that did not work very well because the interests were too divergent. But there are many different kinds. To be a consumer is one aspect of people's lives. Many people operate both as consumers and as producers. As the noble Lord has said, what the document seeks to give in a sentence and a half is the widest possible discretion—in fact complete discretion—to the Civil Aviation Authority in how it achieves consultation with the various interests, including of course the consumer interest. As I said, the consumer interest is placed right in the forefront of the Guidance, in the very first sentence. I should not have thought for a moment that someone like Mr. John Boyd-Carpenter would neglect that aspect in any way. Nobody could be Minister of Pensions and National Insurance for six and a half years and ignore the position of the ordinary man in the street: and in this case that means the travelling public.

We intend that the Authority should have flexible arrangements, and the Government have scrupulously avoided telling the Authority how to do its work. They have indicated what has to be done, but have not told the Authority how to do it. The important point is that the Authority should maintain and develop close consultations wherever that appears to be desirable. The Authority should be able to enjoy the confidence of those concerned and to develop and maintain consultative machinery appropriate to the particular functions and circumstances.

The new air transport licensing system provides an opportunity for revising the arrangement for consultations and air services to and from the regions. I do not know which of my noble friends it was who mentioned it, but the consultative body at the present time, so far as complaints are concerned, is the Air Transport Licensing Board, and the number of complaints that they have been receiving average a mere half dozen a year. The complaints tend to come to the Department of Trade and Industry, but in future the place for the complaints to go will plainly be the Authority. I daresay those complaints that come to the Department will be diverted to the Authority where appopriate.

My noble friend Lord Kinnoull also raised a point on consumer interests. Here I may say that complaints about individual airlines and air travel organisers should be addressed to the Authority. There will be nothing to prevent the Authority from investigating complaints and, in the light of its duties and functions, it will be expected to do so. We did not think it right to try to establish some body purporting to represent consumers as a whole in advance of the setting up of the Authority. I should say in parenthesis that a large number of bodies were consulted over the Guidance. The Act itself requires the Authority to be consulted before guidance is given and there are a great many other bodies of all sorts—local authorities and so on—which were consulted.

The Government believe that the best means of protecting the public is to ensure that, so far as possible, they are offered a choice. There has been a good deal of criticism on this matter, curiously enough the most severe—I might also say extreme—coming in the last two speeches. I think it has been generally accepted that it is in the public interest that there should be room for innovation, experiment and new ideas in competition, and that the public should have a choice between services offered to it wherever this is economically possible. Of course it is recognised, as my noble friend rightly said, that it is not possible in all cases, and it is expressed in that way in the Guidance.

The noble Lord, Lord Beswick, raised a point on finance. Grant will be paid to the Authority under a number of heads. One of these will cover all the Authority's regulatory activities—economic, safety and technical. It will in due course be expected to recover its costs under this head from its customers, including Government Departments, as it will under other heads, but within it it will be free to formulate its charging policy and settle the incidence of the charges of each activity. This does not mean that the Authority will automatically cross-subsidise within this head. In working out its charging policy it will obviously take into account the views of those from whom its revenue will derive. If the Civil Aviation Authority is to perform its functions adequately and achieve the degree of independence which both sides of the House regard as desirable, we must leave it free wherever possible to formulate its own charging policies.

LORD BESWICK

My Lords, if the noble Lord is finishing that point, does he really mean to say that the weights and measures officers are not independent and are not discharging their functions properly because they are paid for out of public funds? I cannot understand why he should say that to achieve independence it is necessary for them to pay their way.

LORD DRUMALBYN

My Lords, I hope the noble Lord will not think it irrelevant for me to say that the weights and measures authorities do not in the main make charges—I do not know to what extent they do—for their functions. There is a section in the Act—I think it is Section 6—which lays down that the Authority should pay its way, taking one year with another.

LORD BESWICK

My Lords, that is a point that we are criticising. The noble Lord is not entitled to say that both sides of the House are in agreement on this. They are not. I am saying that to enforce public regulations the cost should fall upon the public exchequer, and one should not extract it from the aircraft industry or the airline industry.

LORD DRUMALBYN

My Lords I am afraid that on that point we must agree to differ, because in this case the Government's policy is that in the long run—though not at once—the Civil Aviation Authority should pay its own way.

The noble Lord also raised the question of aerodrome planning. I think the important thing to mention here is that the Authority will be responsible for advising the Government, aerodrome owners and others concerned, as to the provision and development of aerodromes to match the development of air services and general aviation. The Authority will possess the main expertise in the field of aviation safety, and in consequence aerodromes will be looking to the Authority, as until now they have been looking to the Department of Trade and Industry, for technical advice on the development plans. The Authority, as the noble Lord knows, will also have the specific duty under Section 33(2) of the Civil Aviation Act to consider the requirements for the development of new and existing aerodromes and to make appropriate recommendations to the Secretary of State. We have been over the question of Foulness in a recent debate, and I do not think I should touch on that matter again. What the Civil Aviation Authority choose to recommend is a matter for them, but so far as the Government are concerned, they have taken a decision on this matter. As to Northolt, this is a military aerodrome and its future is therefore the responsibility of the Ministry of Defence. But again there is nothing to stop the Civil Aviation Authority from expressing opinions on this, although it has no power to determine the fate of an aerodrome owned by somebody else.

The noble Lord also referred to the preference for British Caledonian. I do not think I need say more than I said in my opening speech. As I said, the preference is neither automatic nor complete, and the decisions of the Authority are to be taken in each and every case in the context of paragraphs 10, 11 and 12, the main points of which I mentioned in my opening speech. The noble Lord also raised the question of research. Paragraph 27 of the White Paper requires the Civil Aviation Authority to "support an adequate programme of research and development on matters within its responsibility". It has the duty of ensuring that it has the knowledge, techniques and equipment to handle the problems presented to it by new and possibly unconventional types of aircraft, to control with safety the ever-increasing volume of traffic and to tackle the complex economic problems that arise. If there is any further point that the noble Lord wishes to take up I shall be glad to discuss the matter with him.

My noble friend Lord Trefgarne raised the question of the opportunities for the Corporations and other airlines. I do not think he is right in saying that paragraph 17 means that other independent airlines will be denied opportunities simply because a measure of preference—and it is only a measure—is to be given to British Caledonian. Paragraph 17 makes this clear by telling the Authority also to look at certain other paragraphs for guidance. For example, paragraph 13 makes it clear that British airlines should be free to compete in charter operations and the Government have not stood in the way of the British Overseas Air Charter Ltd., or B.E.A. Airtours. I understand the noble Lord's point of view on this matter; and of course, the Civil Aviation Authority is there to control civil aviation as a whole and to see that what is done within the civil aviation field is fair. Paragraph 11 tells the Authority to try and ensure that all efficient British airlines have the chance to operate profitably.

My noble friend mentioned the question of charter rates. This is something for which the Civil Aviation Authority will be responsible: it must satisfy itself as to the financial resources and arrangements for airlines and air travel organisers. It will be able to study charter rates, and to take such action as it thinks fit to safeguard both the public and the industry. My noble friend also raised the difficult question of the ratification by Italy of the multilateral European agreement. It is a fact that Italy has a perfect right not to ratify, if she wishes, and there is no way of compelling her to ratify; but this has no particular relevance to the E.E.C. The United Kingdom and others have expressed interest in Italian ratification. The Italian reply is that this matter awaits the decision of the Italian Parliament.

LORD TREFGARNE

My Lords, I apologise for interrupting my noble friend. Can he say whether there is a prospect of the Italian Parliament ratifying the multilateral agreement? A great burden would be lifted from our shoulders if they did.

LORD DRUMALBYN

My Lords, I should like to look into that further. I have not so far had a chance of looking at this point before, but I will do so and write to my noble friend. On the other point he raised, concerning licensing by the French licensing authority, this is of course, a governmental authority. Both the D.T.I. and the Civil Aviation Authority will be dealing with the foreign licensing bodies.

On the question of opportunities on the North Atlantic routes, which was raised by the noble Lord, Lord Wynne-Jones, and my noble friend Lord Balfour of Inchrye, the noble Lord, Lord Wynne-Jones, said that the Guidance was not as clear and helpful as it might have been. He seemed to imply that the only positive piece of policy was that British Caledonian should be given a preference. So far as the North Atlantic routes are concerned, the first point to consider is that British Caledonian had made an earlier application for this route which very nearly succeeded. The Air Transport Licensing Board said that it was not quite satisfied as to Caledonian's financial position. Since then the company has amalgamated with British United; it is going to operate from a separate aerodrome, and it is not going to start until April 1973. B.O.A.C. has not been developing as fast as was expected and until recently Britain has been, to some extent, losing its share of the traffic on the North Atlantic route. The reason for giving a preference here is to help with the balance of payments and also with the share that Britain has of the North Atlantic routes, as well as to give British Caledonian a chance. The company is of course familiar with the American market and itself runs charters on the West Coast.

LORD WYNNE-JONES

My Lords, would the noble Lord explain that a little further? Does he really mean that it is better to get something into the balance of payments even if there is a loss made on the routes concerned?—because it seems to me that it is almost inevitable.

LORD DRUMALBYN

My Lords, these are matters which the Air Transport Licensing Board have had to consider in the past and which in each case the Civil Aviation Authority will be considering in the future. The Air Transport Licensing Board gave very full consideration to this matter and has published its latest report. It concludes by saying: … we wish to record that our decision was based entirely on the commercial and other merits of the proposals placed before us". I hope that I have covered the various points which have been put to me.

THE EARL OF KINNOULL

My Lords, there was one further point which I raised with my noble friend, on advance charters.

LORD DRUMALBYN

Yes, I am obliged to my noble friend. My Lords, this is a point over which I passed lightly in the course of my opening speech because it is essentially a matter for the Civil Aviation Authority and the airlines to deal with. As I said, Britain has been doing all she can to persuade other countries of the advantages here. Some progress has been made, but I am afraid I am not in a position to go beyond saying that.

Finally, there was the point made by the noble Viscount, Lord Thurso. On this, as a purist in these matters, I agree. The sentence of which he speaks is this: Until that time …"— that is March 31, 1974, within which time the Authority is to look at the Scottish Highlands and Islands services— … the Authority, in seeking fuller recovery of its costs in this area, should be careful to avoid prejudice to the continued operation of those air services which are essential to the region's economic and social development. I am not certain myself whether a comma was intended to be put after "services". I do not think there is any indication that any of the present services is redundant. What is intended here is simply to give a warning to the Authority, that in spite of the need for it to make progress towards meeting its costs from its revenue, and in spite of the fact that of course the aerodromes and the national transport services are very costly in relation to transport in these areas and there is a heavy annual loss, those and similar considerations are not to prejudice the operation of the services in the next two years. With these explanations I hope that noble Lords will be willing to give their blessing to this Order. I am sure that the Chairman designate, Mr. John Boyd-Carpenter, will take the most careful account of all the helpful points that have been made in this interesting debate.

On Question, Motion agreed to.