HIGHLANDS AND ISLANDS AIR SERVICES (SCOTLAND) BILL (Hansard, 25 March 1980)

§ The Earl of MANSFIELD
My Lords, I beg to move that this Bill be now read a second time. I rise to commend to your Lordships a Bill which is not only short 697 and uncomplicated, but is also likely to receive your Lordships' full support. It is of course entirely a financial measure. Its whole purpose is to enable the Secretary of State for Scotland to continue to provide financial assistance to operators of air services. As such, it does not require detailed consideration by your Lordships. I should nevertheless like to explain to the House the proposals in the Bill and some of the historical background.
In a report to the Government of the day in 1974, the Civil Aviation Authority drew attention to the importance of air services to the social and economic wellbeing of the Highlands and Islands of Scotland. The report said that this was an area of the United Kingdom which, because of its remoteness and its difficult weather conditions and terrain, could not be served at an acceptable level by surface transport alone. I am sure that many of your Lordships are familiar with this geographical fact. Surface transport—that is, transport by land or sea—is not in itself a complete answer to the transport needs of many parts of the Highlands and Islands.
The CAA concluded from its study that the provision of air services in the Highlands and Islands should be governed as far as possible by normal commercial criteria but that there were certain routes where there was no possibility of providing air services profitably. The CAA called these routes "social routes" and recommended that they should be directly supported from public funds administered by the Secretary of State for Scotland.
The report helped to emphasise the need for changes aimed at improving services in the Highlands and Islands and making them viable. Discussions were already taking place with British Airways on the progressive transfer to Loganair of most of their "third level "services, on which they were making heavy losses. I should explain that "third level" is the term applied to services operated by aircraft with fewer than 20 seats. The Loganair aircraft (Britten-Norman Islanders and Trislanders) were much more suited to such short-haul local services, and the success of most of the routes which were transferred to Loganair under these arrangements has fully justified this policy. It was recognised however 698 that, as the CAA had reported, there were certain routes which could not make money even by using smaller aircraft, but that it was essential to maintain them for social and economic reasons. It was agreed therefore that from April 1975 Loganair should take from British Airways the Glasgow-Tiree and Glasgow-Barra services; and that Loganair should receive financial assistance towards operating those routes. With the transfer of the third level services it was decided that no subsidy should be paid to British Airways for any of their remaining routes.
That is the historical background. It led to the inclusion by the previous Government of the clause which became Section 21 of the Scottish Development Agency Act 1975. The section empowered the Secretary of State to pay subsidies to operators of air services in the Highlands and Islands. It is exercisable for only five years—that is, until December 1980—and it was the previous Government's intention that it should then be reviewed. This particular form of assistance was therefore an experiment; but, by undertaking to review it, the previous Government clearly had it in mind to extend the legislation if it proved to be successful.
When the present Government came into office, we immediately recognised the special problems of the Highlands and Islands, and I was given the task of coordinating Government action in relation to this part of Scotland. One of our first actions was to carry out the review of the subsidised air services which the previous Government had promised. We have concluded that the legislation was successful and, in this Bill, we seek to extend it indefinitely. We consulted all the local authorities, community councils and other bodies who have a direct interest in the air services which are at present assisted. There was general agreement that these air services are an essential and integral part of the transport provision for these communities and that the use made of the existing powers has successfully ensured their continuance.
The present powers were used sparingly. Only one operator—Loganair—has received subsidy and only towards a few services. Support is currently running at about £100,000 per annum, and in total the amount paid out to Loganair is less than £500,000. This selective use of the 699 powers is, in our view, correct. First, it would not be appropriate to pay subsidy on operations running at a loss when those operations could be run profitably without causing social hardship. Secondly, these are not the only powers available— or indeed being used— to subsidise air services: the Local Government (Scotland) Act gave wide powers to Regional and Islands Councils which complement the powers available to the Secretary of State at national level.
Subsidy has therefore a limited but important part to play in order to maintain vital air services to remote island communities. May I again remind your Lordships that the important factors are geographical ones. The aim is to provide essential services— not merely services which provide greater convenience. I should like to add that Loganair do try in their fare structures to help the islanders themselves to benefit most from the subsidy by providing concessions where the journey starts on an island. But the subsidy also helps those who have to travel from the mainland, for instance to provide necessary services, such as chiropody veterinary, agricultural or building services, to which mainland communities have easier access.
I should like now to turn to the detailed provisions of the Bill, which are brief and straightforward. Clause 1 authorises the Secretary of State to assist persons engaged in providing air services in the Highlands and Islands. It is widely drafted to allow it to be administered flexibly in the light of any future developments or eventualities. We intend however to continue the present policy of giving assistance selectively to certain socially necessary air services which are clearly going to remain unprofitable for some considerable time. We also intend that, in the main, local services wholly within the area of a regional or islands authority shall remain the responsibility of those authorities. In practice therefore we propose to continue the existing subsidy to Loganair in respect of the services which are at present designated as eligible for assistance.
These services are the services between Glasgow and Barra, Skye and Tiree. Tiree is of course within Strathclyde Region and the service to it could reasonably be regarded as the responsibility of that 700 authority. It receives central Government subsidy because for half the year it is only the first sector of the through service to Barra and its direct costs are relatively small. We do not therefore propose to ask the Strathclyde Regional Authority to take over responsibiltiy for assisting this service. On the other hand, there are no further services, existing or projected, which seem to be eligible for Central Government assistance under the criteria by which the currently assisted services were designated.
The other clauses, Nos. 2 to 5, are incidental. I wish only to draw the attention of the House to the commencement date in Clause 5(2). This is to be 15th December 1980. The Bill will therefore come into effect the day after the main provisions in the existing legislation cease to be exercisable, so that full continuity in the operation of the subsidy arrangements will be ensured. There is one further point which it might be helpful to explain to the House. Clause 4 provides that, when the Bill conies into operation on 15th December of this year, the existing provision in Section 21 of the Scottish Development Agency Act will be repealed. This is necessary because Section 21 contained a provision enabling the Secretary of State to give assistance by acquiring shares or stock in a company, in addition to or instead of giving assistance by grant or loan. This power was never used and we are not repeating it in this Bill. Section 21 provides however that after the five-year time limit the Secretary of State may still hold or dispose of shares or stock which he has acquired. Although no shares or stock have been acquired, or will be before December 1980, it is necessary for us to remove this continuing provision from the statute book by way of repeal.
As I have explained, the Bill is drafted in general terms, as indeed are the present powers, but its aims are modest. There are only a few air services which are both uneconomic to operate and vital to the communities they serve. They are vital because of the difficult terrain, the distances between communities and the long sea crossings, and they provide an essential component in the whole network of road, sea and air transport throughout the area. We have already recognised the transport difficulties in the Highland and Islands by increasing the grants to ferry operators, and the consultation paper on ferry 701 support, which we have recently issued, shows the seriousness of our intent. This Bill can therefore be seen in the context of our developing policy for the Highlands and Islands, and I commend it to the House.

§ Lord ROSS of MARNOCK
My Lords, as I was Secretary of State at the time when the original powers were given to the Secretary of State to assist air transport in the areas covered by the Bill, I am very glad that the Government have brought forward this Bill. The original experiment was expected to last five years and, if nothing were done, the power to assist was to lapse.
I noted the remarks of the noble Earl, Lord Mansfield, about the changes in the Bill. So far as I can sec, there are only about three such changes. First, the word, "establishing" has been included; secondly, the power in respect of an option to buy shares and stocks has been dropped; and thirdly I note that, for drafting reasons, the word "received" has replaced the word "receipts" to the Secretary of State. However, I do not quibble over that.
It is interesting, however, to note that we are making this payment of £ 100,000 to Loganair, because we all know that Loganair now has nothing to do with Logan. We remember that pioneer and what he did for the Highlands, much of which came from the original work carried out by Torn Johnson's Hydro-board. That enabled a firm in the Highlands to build itself up to be one of the finest in the country. That company suffered greatly when its senior partner, Mr. Logan, was killed in one of his own aircraft.
Perhaps that was when the change took place, because Loganair is now owned by the Royal Bank of Scotland. The House may wish to know that the Royal Bank of Scotland Group has just announced pretax profits for 1979 of £ 96 .6 million. It is a sobering thought that we are giving the Royal Bank of Scotland a sum of £ 100,000. It was as well that the Government decided to drop the transport provisions from the Education Bill or I might have made a few caustic comments on this Bill. En this respect we are not subsidising companies, 702 but services. Therefore, there is a justifiable reason for deleting the option in respect of shares and stocks because that does not apply in this case.
I am glad that the Government have taken this step. I had the privilege of putting through the other place the Highlands and Islands Development Board legislation. That is one of the other changes. We are redefining the area and going back to the Highlands and Islands Development (Scotland) Act 1965 rather than using the 1975 legislation relating to the Scottish Development Agency. Originally, we listed the seven crofter counties and included a power for the Secretary of State by regulation to extend the area, and that has been done. In the Scottish Development Agency Act we listed the areas that were to be covered according to regions and districts. I believe that it was sensible to return to the 1965 definition. The area was extended to include Bute and the Isle of Arran.
If I recollect correctly, we also extended the services to Morayshire which has been drawn into the Highlands and Islands area. Therefore, the return to the original power will make the whole matter much more comprehensive. The fact that we took the power to assist the people of the Highlands and Islands to improve economic and social conditions and to enable the Highlands and Islands to play a more effective part in the economic and social development of the nation was a sensible move.
I read the debates on this Bill in another place, and some honourable Members there did not appear to appreciate that these provisions were included in the Scottish Development Agency Act. They were put into that legislation because that Bill was available and about to go through the House. Although those provisions had nothing to do with the Scottish Development Authority, that legislation was thought to be appropriate and we took the opportunity to include these matters. It is not always the right thing to do to put an extra clause in a piece of legislation that is going through Parliament but, if I recollect correctly, this was done on that occasion and it made the Secretary of State responsible for these matters.
The Secretary of State also has the power to give other grants to the Civil 703 Aviation Authority. I was surprised that the Minister did not mention the fact that the present Government have upped by about £ 1 million the amount given to the CAA. The authority must be able to give a considerable amount of help not only to Logan-air but to the other airfields which are helped by the CAA. Indeed, I think that the total figure is about £ 2½ million, which will assist considerably with the increased land charges.
I am sure the Minister is aware that people in the Islands have a justifiable complaint about the cost of fares. The fares are getting beyond the reach of many people. I am worried more about Shetland than about Orkney. The Government have a special fund in respect of the Shetlands which is supported by legislation which passed through both Houses and which gave a certain amount of money to the island authority there. Therefore, if necessary, some of that money could be used. But when we consider the Western Isles and places such as Barra, Skye and Tiree, we all appreciate that one cannot run air services on an economic basis. They must be given support.
I do not know whether the Minister was concerned about the point raised in another place about the timetables of Loganair not always being of the best for the travelling public. The Minister has the right to lay down conditions in regard to the suitability of services for the travelling public in those areas. However, on the whole I think there is no reason for anybody to be other than glad that the Government have decided that this legislation should go forward. I have very great pleasure in supporting the Government on this Bill.

§ The EARL of MANSFIELD
My Lords, I am very glad that the noble Lord, Lord Ross of Marnock, has given the Bill a welcome. No one has more experience of trying to help the people in the Highlands and Islands than the noble Lord in his long term of office as Secretary of State for Scotland. All noble Lords are agreed that this beautiful but sadly deprived area needs all the help it can get. If I did not mention the very 704 recent help which the Government have been able to give in respect of airport charges, it was merely that I did not want to be accused of banging the party political drum on a matter which has nothing to do with this Bill.
As the noble Lord has raised the matter, I confirm his "guesstimate" that the subsidy amounts to £ 2.5 million for 1980– 81. It has enabled the Civil Aviation Authority to reduce from £ 3 to £ 1 its proposed passenger load charges for scheduled domestic flights at all of its eight aerodromes. This in turn has enabled the airlines to moderate their proposed fare increases; but the Scottish Office will be discussing with the Civil Aviation Authority the future operation of the aerodromes with a view to establishing a a long-term plan for financing them as regards charges and subsididy.
Turning briefly to the other matters raised by the noble Lord, the choice of language of the draftsman was purely for clarification. I am assured there is no sinister purpose in it. The pre-tax profits of the Royal Bank— of which I am not a shareholder, I regret to say— fall outside the consideration of this Bill, but, as the noble Lord was good enough to say eventually, this is a matter of services to the islanders and has really nothing to do with the Bank in its more ordinary character and operations.
I confirm, as the noble Lord said, that the area of the Highlands and Islands is within the area in relation to which the functions of the Highlands and Islands Development Board may be exercised by virtue of subsection (2) of Section 1 of the Highlands and Islands Development (Scotland) Act 1965. It means no more and no less than that. In the circumstances, I am glad that your Lordships have apparently given this modest measure your blessing.

§ Lord CULLEN of ASHBOURNE
My Lords, I beg to move that the House do now adjourn during pleasure until eight o'clock.